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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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
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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
NAME OF EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $.10 par value New York Stock Exchange, Inc.
Associated Preferred Share Purchase Rights
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT
None
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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 3, 1999: 53,954,874 shares of Common Stock, $.10
par value, including 3,720,851 treasury shares.
Aggregate market value of Universal Foods Corporation Common Stock,
excluding treasury shares, held by non-affiliates as of December 3, 1999 was
$1,052,579,853. In determining who are affiliates of the 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, 1999 (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 17, 1999 (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.
DESCRIPTION OF BUSINESS
Universal Foods Corporation is an industrial marketer of high-performance
components that add functionality to foods, cosmetics, pharmaceuticals and other
products. The Company's principal products include:
- - flavors, flavor enhancers, and aroma chemicals for foods, beverages,
dairy/ice cream products, animal feed, personal care and household items;
- - certified synthetic and natural colors for foods, cosmetics, specialty inks
and pharmaceuticals;
- - dehydrated vegetable products sold primarily to food processors; and
- - a broad line of yeast products for commercial baking and other uses.
The Company's operations, except for the Asia Pacific Division, are managed
on a products and services basis. The Company's two reportable segments are the
Performance Products Group and the Natural Products Group.
PERFORMANCE PRODUCTS
The Company's Performance Products Group produces flavor and color products
that impart a desired taste, smell or color to a broad range of consumer
products.
FLAVOR DIVISION
The Company is a leading manufacturer and supplier of flavors, ingredient
systems and aroma chemicals to the dairy, food processing, beverage, personal
care and household products industries worldwide. The Company has 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.
During 1998 the Company combined its bioproducts business (which was
formerly operated as a separate division known as Red Star BioProducts) with its
Flavor Division. The bioproducts business served the food and animal feed
processing, as well as the bionutrient industries with a broad line of natural
extracts and specialty flavors. The Company produces various specialty extracts
from yeast, vegetable proteins, meat, milk protein and other natural products
which are used primarily as savory flavor, texture modifiers and enhancers in
processed foods. The nutritional and functional properties of these extracts
also make them useful in enzyme and pharmaceutical production. The Company
believes it is the leading supplier of yeast extracts and the second leading
supplier of hydrolized vegetable proteins in the U.S. market.
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
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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. In January 1998, the Company acquired Arancia
Ingredients Especiales, S.A. de C.V., a manufacturer of savory flavors and other
food ingredients, improving access to the rapidly growing Latin American savory
flavor market. In April 1998, the Company acquired an English savory and
seasonings flavor manufacturer, DC Flavours Ltd., which further expanded the
Company's technology and worldwide market presence and also gives the Company
access to the snack food market, the fastest growing segment in Europe's food
market. In May 1998, the acquisition of substantially all of the assets and
business of the beverage business of German flavor manufacturer Sundi GmbH, with
its emphasis on all-natural flavor ingredients, provided the Company with a
point of entry into Germany, Europe's largest flavor market.
The Flavor Division operates through the Company's subsidiary, Universal
Flavor Corporation and its subsidiaries, with plants in Illinois, Indiana,
Michigan, Missouri, Wisconsin, Belgium, Canada, France, Germany, Italy, Mexico,
Spain, and the United Kingdom.
COLOR DIVISION
The Company believes it is the world's leading manufacturer of certified
food colors. It makes certified synthetic and natural colors for domestic and
international producers of beverages, bakery products, processed foods,
confections, pet foods, cosmetics and pharmaceuticals. It also makes ink-jet
inks and other high-purity organic dyes. The Color Division operates through the
Company's subsidiary, Warner-Jenkinson Company Inc., which has its principal
manufacturing facility in Missouri and other subsidiaries with plants in New
Jersey, Canada, Mexico, France, Italy, the United Kingdom, and the Netherlands.
The Company became a supplier of ink-jet inks for the ink-jet printer
market with the acquisition of Tricon Colors, Inc. in 1997. It produces
pharmaceutical colors, ink-jet inks and other high-purity organic dyes in the
Tricon plant, which is located in New Jersey. In September 1997, the Company
strengthened its presence in Latin America by acquiring certain assets of the
food color business of Pyosa, S.A. de C.V., which is located in Monterrey,
Mexico. In September 1998, the Company acquired Italian natural color producer
Reggiana Antociani S.R.L., a company which specializes in the production of
anthocyanin, which is extracted from grape skins for use in fruit juices,
flavored teas, wine coolers and fruit fillings, strengthening the Company's
offerings in natural colors, the fastest growing segment of the worldwide food
colors market. In February 1999, the Company expanded its cosmetics business
through the purchase of Les Colorants Wackherr, a Paris-based producer of colors
for major cosmetics houses throughout Europe, Asia and North America. Also in
February 1999, the Company further developed its natural colors offerings by
acquiring certain assets of Quimica Universal, a Peruvian producer of carminic
acid and annatto, natural colors used in food and other applications. The
Company acquired Pointing Holdings Limited, a manufacturer of food colors,
flavors and specialty chemicals located in the United Kingdom in April 1999. The
Pointing international color business significantly strengthened the Company's
worldwide color capabilities. In August 1999, the Company acquired certain
assets of Nino Fornaciari fu Riccardo SNC, an Italian producer of natural colors
for the food and beverage industries.
NATURAL PRODUCTS GROUP
The Natural Products Group produces dehydrated vegetable and yeast products
which are used as ingredients in the manufacture of various food products.
DEHYDRATED PRODUCTS DIVISION
The Company believes it is the third largest producer of dehydrated onion
and garlic products in the United States. The Company is also one of the largest
producers and distributors of chili powder, paprika, chili pepper and dehydrated
vegetables such as parsley, celery and spinach. Domestically, the Company sells
dehydrated products 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. The Dehydrated Products Division operates in the United States
through the Company's subsidiary, Rogers Foods Inc., which has its processing
facilities in California.
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The Company believes it is one of the leading dehydrators of specialty
vegetables in Europe. During 1994 and 1995, the Company acquired three European
dehydrated vegetable processors. The acquisitions gave the Company a base from
which to expand its dehydrated products business internationally, as the
acquisitions included processing facilities in the Netherlands, France and
Ireland. These acquisitions also expanded the Company's dehydrated technology
base to include puffed drying, freeze drying and vacuum drying. Vegetables
processed using these technologies rehydrate faster and absorb water more
effectively than vegetables processed using straight heat drying methods. This
is a benefit with today's convenience foods such as soups, snacks and other dry
foods.
RED STAR YEAST & PRODUCTS DIVISION
The Company believes it is the largest North American supplier of yeast to
the commercial bakery market. It also exports yeast and related products
throughout the world. The Company specializes in the production of baker's yeast
in cream (liquid), compressed (semi-solid), and active dry form, as well as
nutritional yeast and yeast used in the wine-making process, which are all sold
under the RED STAR trademark. The Company sells active dry yeast to food
processors for inclusion in bread, pizza and similar mixes.
The Company also manufactures compressed, active dry and fast-acting dry
yeast products in ready-to-use packages which are sold on grocery store shelves
and in convenient packages for food service use. The Company believes it is the
second largest supplier of yeast to the domestic retail market. In 1994, the
Company purchased a 20% interest in and entered into an agreement with Minn-Dak
Yeast Company, located in North Dakota, for contract manufacturing under the Red
Star label and to supply molasses, a major raw material in yeast production.
Red Star Yeast & Product's yeast plants are located in Wisconsin, Maryland
and California.
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ASIA PACIFIC DIVISION
In 1997, the Company established the Asia Pacific Division as a separate
operating Division to focus on marketing its diverse product line in the Pacific
Rim under one unified name. Through the Asia Pacific Division, the Company
offers a full range of products from its other four divisions as well as
products developed by regional technical teams to appeal to local preferences.
Sales, marketing and technical functions previously directed by U.S. based
divisions are managed through the Asia Pacific Division's headquarters in
Singapore. Manufacturing operations are located in Australia, Hong Kong, New
Zealand, and the Philippines.
RESEARCH AND DEVELOPMENT/QUALITY ASSURANCE
The development of specialized products and services is a complex,
technical process calling upon the combined knowledge and talents of the
Company's research, development and quality assurance personnel. The Company
believes that its competitive advantage lies in its ability to work with its
customers to develop and deliver high-performance products which address the
broad, but unique and distinct, needs of those customers.
The Company's research, development and quality assurance personnel make
significant contributions toward improving existing products and developing new
products tailored to its customer's needs, while providing on-going technical
support and know-how to the Company's manufacturing activities. The Company
employs approximately 220 people in research, development and quality assurance.
Expenditures for research, development and quality assurance in 1999 were $29.5
million compared with $29.4 million in 1998 and $31.5 million in 1997. Of the
foregoing amounts, approximately $20.5 million in 1999, $18.7 million in 1998
and $19.7 million in 1997 were research and development expenses.
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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. Facilities
currently certified include Universal Flavors facilities in the United States,
Spain, Italy, Mexico, Belgium, Germany, the United Kingdom and Canada;
Warner-Jenkinson facilities in the United States, the Netherlands and United
Kingdom; Dehydrated Products facilities in the United States, France and the
Netherlands; and Asia Pacific facilities in the Philippines.
COMPETITION
All Company products are sold in highly competitive markets. While no
single factor is determinative, the Company's competitive position is based
principally on process and applications expertise, quality, technological
advances resulting from its research and development, and customer service and
support. Because of its highly differentiated products, the Company competes
with only a few companies across multiple ingredient lines, and is more likely
to encounter competition specific to an individual product.
- Flavor. Competition to supply the flavor industry has taken on an
increasingly global nature. Most of the Company's customers do not buy
all their flavor products from a single supplier. As a result, the
Company does not compete with a single company in all product
categories. Competition for the supply of flavors is based on the
development of customized ingredients for new and reformulated
customer products, as well as on quality, customer service and price.
- Color. Although statistics are not available, the Company believes
that it is one of the world's largest producers of synthetic and
natural colors. 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. Strategic acquisitions
continue to enhance product and process technology synergies, as well
as a growing international presence.
- Dehydrated. Competition for dehydrated onion, garlic, capsicums,
carrots and parsley products, the main products of the Dehydrated
Products Division, is limited to three main competitors. Competition
for other dehydrated business is limited to single, as opposed to
multiple, product lines. State-of-the-art dehydration technology,
extensive plant breeding and seed development programs, and
comprehensive crop management techniques produce consistent,
top-quality dehydrated products which helps the Company maintain its
competitive position. Competition for dehydrated business is on the
basis of quality, customer service and price.
- Yeast. The Company believes that it is the largest supplier of
commercial baker's yeast and the second largest supplier of retail
yeast in North America. In both the commercial and retail yeast areas,
the Company competes with several yeast producers. Competition for the
supply of yeast is on the basis of quality, customer service and
price.
- Asia Pacific. Because of the broad array of products available to
customers of the Asia Pacific Division, the Company is able to offer a
wider product base than many of its competitors. Competition is based
upon reliability in product quality, service and price as well as
technical support available to customers.
PRODUCTS AND APPLICATION ACTIVITIES
With the Company's strategic focus on high-performance ingredients and
ingredient systems, the Company's emphasis is in application activities and
processing improvements in the support of its
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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.
Lower calorie ingredients and non-nutritive sweeteners for dairy, food and
beverage applications are a focus of development activity for Universal Flavors.
Formulations for functional and textured beverages and flavors for snack and
main meal items offer opportunities as well. Development of savory flavors has
accelerated with the integration of the Company's BioProducts Division in 1998.
The development of natural food colors remains a growth opportunity for the
Color Division. With the 1997 acquisition of Tricon Colors, Inc., the Color
Division expanded its purification technology, with the primary opportunity in
colors for ink-jet printers.
European acquisitions in 1994 and 1995 expanded the Dehydrated Products
product line to include peas, carrots, beans, potatoes and other specialty
vegetables.
The Red Star Yeast & Products Division has been producing baker's yeast for
over 115 years, serving the commercial and consumer markets. The move to cream
yeast and the development of cream yeast delivery systems has revolutionized the
commercial baking industry, improving efficiencies and increasing productivity.
The development of yeast derivatives and other specialty ingredients provide
growth opportunities in bionutrients and biotechnology markets such as
pharmaceuticals, vitamins, vaccines and bioremediation.
In addition, the discussion of operational activities in the "Business
Profile" on Pages 4 and 5 of the 1999 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 soybean. The acquisition of the Biolux Group in 1994
provides long-term supply arrangements for brewer's yeast to be used 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, readily available substrates for use if
molasses supplies should become limited. In 1994, the Company entered into a
supply agreement with Minn-Dak Yeast Company, a major North American molasses
supplier, to provide additional assurances of adequate supplies of molasses.
The Company believes that alternate sources of materials are available to
enable it to maintain its competitive position in the event of an interruption
in the supply of raw materials from a single supplier.
FOREIGN OPERATIONS
Note 12 of the Consolidated Financial Statements of the Company contained
in the Universal Foods Corporation 1999 Annual Report is incorporated herein by
reference.
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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, 1999, the Company employed 4,252 persons in the U.S.
and worldwide. A total of 652 U.S. employees are represented by one of the three
unions with which the Company has collective bargaining relationships pursuant
to eleven collective bargaining agreements.
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 16 manufacturing and processing plants
in eight states as of September 30, 1999. Three plants produced yeast, two
facilities produced flavor enhancers and other bioproducts, three produced
dehydrated products, five plants produced colors and related products, and three
plants produced flavors. None of these properties are held subject to any
material encumbrances. At September 30, 1999, the Company operated 32 foreign
manufacturing facilities located in 14 foreign countries. Of these facilities,
five produced flavor enhancers and other bioproducts, three manufactured
dehydrated and frozen vegetables, eight produced colors, 15 produced or
distributed flavors and aroma chemicals, and one produced both flavors and
colors. In addition, the Company has minority interests in seven companies
located in the U.S. and five foreign countries.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings related to its
business. The Company believes that adverse decisions in these proceedings would
not, in the aggregate, 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 1999.
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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,
1999 are as follows:
EXECUTIVE OFFICERS
Name Age Position
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Kenneth P. Manning 57 Chairman, President and Chief Executive Officer
Patrick R. Bartling 43 Vice President and Group Executive - Natural Products
Richard Carney 49 Vice President - Human Resources
Steven O. Cordier 43 Vice President and Treasurer
Michael DuBois 53 President - Flavor
Michael Fung 49 Vice President and Chief Financial Officer
John L. Hammond 53 Vice President, Secretary and General Counsel
Michael L. Hennen 46 Vice President and Controller
Richard F. Hobbs 52 Vice President - Administration
R. Steven Martin 43 Vice President and Group Executive -
Performance Products
James F. Palo 59 President - Dehydrated Products
Jorge Slater 52 President - Asia Pacific
K.T. Thomas Tchang 48 President - Red Star Yeast & Products
William Tesch 49 Vice President; Vice President - Operations, Red Star
Yeast & Products
Michael A. Wick 56 President - Color
Dr. Ho-Seung Yang 51 Vice President - Technologies
Messrs. Bartling, Cordier, DuBois, Fung, Hammond, Hennen, Martin, Slater,
Tchang, Tesch and Yang have been employed by the Company in an executive
capacity for less than five years. All of the other individuals named above have
been employed by the Company for at least five years.
Mr. Bartling joined the Company in January 1999 as Vice President and Group
Executive. From 1995 to 1999, he served as General Manager of the Automotive
Division of Modine Manufacturing Company, a leading manufacturer of automotive
parts. Prior to that Mr. Bartling served as Vice President - Operations of
MagneTek, a manufacturer of drive systems.
Mr. Cordier joined the Company in October 1995 as Treasurer. In September
1999, Mr. Cordier was elected a Vice President of the Company. From 1990 until
joining the Company he was Director of Financial Planning at International
Flavors and Fragrances, Inc.
Mr. DuBois joined the Company in May 1998 as President of the Flavor
Division. From 1994 until joining Universal Foods, Mr. DuBois was employed by
Bush Boake Allen, Inc., a food technology company, first as Vice President Sales
and Marketing, Flavors North America, and, beginning in 1996 as Vice President
and General Manager, Seasonings Division. From 1992 to 1994 he served as Vice
President - Sales and Marketing, Flavor and Fruit Division for Sanofi
Bio-Industries, a flavor company. Prior to joining Sanofi Bio-Industries, Mr.
DuBois held several positions with Firmenich, Incorporated, a fragrance and
flavor company.
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
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Bass Pro Shops and Tracker Marine Corporation, privately held companies operated
under common ownership involved in the manufacture and marketing of outdoor
sporting goods. From 1977 to 1988, Mr. Fung was employed by the Beatrice Company
in various positions, ultimately as Vice President and Controller.
Mr. Hammond joined the Company in January 1998, as Vice President,
Secretary and General Counsel. From 1992 to 1997, Mr. Hammond was employed by
The Providence Journal Company, a newspaper, cable and broadcast television
company, initially as Vice President - Legal, and subsequently as Vice
President, General Counsel and Chief Administrative Officer. From 1989 to 1992,
Mr. Hammond was Vice President, General Counsel and Secretary of Landstar
System, Inc., a trucking company. Prior to that, Mr. Hammond was employed by The
Singer Company for ten years and was Deputy General Counsel at the time of his
departure.
Mr. Hennen joined the Company in January 1995 as Controller. In September
1999, Mr. Hennen was elected a Vice President of the Company. 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, now operating as Solutia, a chemical company, since
1978 in various management positions.
Mr. Slater was elected President - Asia Pacific Division in April 1998. Mr.
Slater was hired by the Company in August of 1996 and served as Vice President
and Managing Director of the Asia Pacific Division prior to being elected its
President. From 1994 to 1996, Mr. Slater worked at McCormick & Company, Inc., a
spice and seasonings company, as Vice President and Managing Director Asia
Pacific. Prior to joining McCormick & Company, Inc., Mr. Slater worked for Dole
Packaged Foods Company and, prior to that, for International Flavors and
Fragrances, Inc.
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. Prior to joining the Company,
he was Marketing Director of Huntsman Specialty Chemicals Corp., a chemical
company, which purchased the Maleic Anhydride business of the specialty
chemicals division of the Monsanto Company. Prior to such purchase, Mr. Tchang
was employed by the Monsanto Company for 20 years in various manufacturing, and
later sales and marketing positions.
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. From 1994 to 1996, he served as Vice
President, Manufacturing Operations of the Red Star BioProducts Division, and in
April 1996, Mr. Tesch was elected President of the Red Star BioProducts
Division, a position he held until the completion of the consolidation of the
Flavor and BioProducts Divisions in January 1998. From January 1998 until July
1998, Mr. Tesch was the Vice President of Corporate Engineering. Mr. Tesch is
currently a corporate Vice President, and the Vice President of Operations for
Red Star Yeast & Products.
Dr. Yang was elected Vice President - Technologies in January 1998. From
1990 to 1998, Dr. Yang was employed by Sunkyong Industries in Seoul, Korea,
where he held the positions of managing director of corporate planning and
development, managing director, group chairman's office and director, life
science and development.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The only 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 1999 appearing under
"Common Stock prices and dividends" on Page 34 of the 1999 Annual Report to
Shareholders are incorporated by reference. In fiscal 1999, 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 Amended and 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, 1999, $18,740,000 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 5 million shares. As of
September 30, 1999, 4,145,096 shares had been repurchased under that program.
On June 25, 1998, the Board of Directors of the Company adopted a preferred
stock shareholder rights plan which is described at Note 7 of Notes to
Consolidated Financial Statements - "Shareholders' Equity" on Pages 25 and 26 of
the 1999 Annual Report to Shareholders and which is incorporated by reference.
The number of shareholders of record on December 3, 1999 was 5,121.
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 33 of the
1999 Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The information required by this item is set forth under "Management's
Analysis of Operations and Financial Condition" on Pages 13 through 17 of the
1999 Annual Report to Shareholders and is incorporated by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is set forth under "Market Risk
Factors" on Page 15 of the 1999 Annual Report to Shareholders and is
incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this item are
set forth on Pages 18 through 32 and Page 34 of the 1999 Annual Report to
Shareholders and are incorporated by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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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 6 and Page 28, respectively, of the Notice of Annual
Meeting and Proxy Statement of the Company dated December 17, 1999, 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,"
"Compensation and Development Committee Report" and "Executive Compensation" on
Pages 7 and 8 and Pages 9 through 16 of the Notice of Annual Meeting and Proxy
Statement of the Company dated December 17, 1999.
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 17,
1999, 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, 1998 through September
30, 1999, 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.
12
13
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 following this report.)
(Other than Exhibit 10.1(a), 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:
No reports on Form 8-K were required to be filed during the quarter ended
September 30, 1999.
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
PAGE REFERENCE IN
1999 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, 1999.
Independent Auditors' Report 32
Consolidated Balance Sheets - September 30, 1999 and 1998 19
Consolidated Statements of Earnings - Years ended September 30, 1999, 18
1998 and 1997
Consolidated Statements of Shareholders' Equity - Years ended September
30, 1999, 1998 and 1997 20
Consolidated Statements of Cash Flows - Years ended September 30, 1999, 1998
and 1997 21
Notes to Consolidated Financial Statements 22 - 31
13
14
PAGE REFERENCE IN
2. FINANCIAL STATEMENT SCHEDULES FORM 10-K
---------------------
Independent Auditors' Report 14
Schedule II - Valuation and Qualifying Accounts and Reserves 15
All other schedules are omitted because they are inapplicable, not required
by the instructions or the information is included in the consolidated financial
statements or notes thereto.
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
of Universal Foods Corporation:
We have audited the consolidated financial statements of Universal Foods
Corporation and subsidiaries as of September 30, 1999 and 1998, and for each of
the three years in the period ended September 30, 1999, and have issued our
report thereon dated November 11, 1999. Such consolidated financial statements
and report are included in your 1999 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.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
November 11, 1999
14
15
SCHEDULE II
UNIVERSAL FOODS CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING
ACCOUNTS AND RESERVES
(IN THOUSANDS)
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
VALUATION ACCOUNTS DEDUCTED IN THE BALANCE AT ADDITIONS CHARGED BALANCE
BALANCE SHEET FROM THE ASSETS TO BEGINNING OF TO COSTS AND AT END OF
WHICH THEY APPLY PERIOD EXPENSES DEDUCTIONS(A) PERIOD
- ---------------------------------- ------------ ----------------- ------------- ----------
1997
Allowance for losses: $ 3,509 $ 572 $ 47 $ 4,034
Trade accounts receivable ======= ======= ====== =======
1998
Allowance for losses: $ 4,034 $ 1,245 $ 731 $ 4,548
Trade accounts receivable ======= ======= ====== =======
1999
Allowance for losses: $ 4,548 $ 431 $ 900 $ 4,079
Trade accounts receivable ======= ====== ====== =======
(A) Accounts written off, less recoveries.
15
16
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/ John L. Hammond
---------------------------
John L. Hammond, Vice President
Secretary & General Counsel
Dated: December 28, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below as of December 28, 1999, 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 Vice President and Controller
- ------------------------------
Michael L. Hennen
/s/ Richard A. Abdoo Director
- ------------------------------
Richard A. Abdoo
/s/ Michael E. Batten Director
- ------------------------------
Michael E. Batten
/s/ John F. Bergstrom Director
- ------------------------------
John F. Bergstrom
/s/ Dr. Fergus M. Clydesdale Director
- ------------------------------
Dr. Fergus M. Clydesdale
/s/ James A.D. Croft Director
- ------------------------------
James A.D. Croft
/s/ Alberto Fernandez Director
- ------------------------------
Alberto Fernandez
/s/ James L. Forbes Director
- ------------------------------
James L. Forbes
/s/ Dr. Carol I. Waslien Ghazaii Director
- --------------------------------
Dr. Carol I. Waslien Ghazaii
/s/ William V. Hickey Director
- ------------------------------
William V. Hickey
/s/ Essie Whitelaw Director
- ------------------------------
Essie Whitelaw
S-1
17
UNIVERSAL FOODS CORPORATION
EXHIBIT INDEX
1999 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 by Filed
Number Description Reference From Herewith
--------- --------------------------------------- ------------------------------------ ---------
3.1 Universal Foods Corporation Amended Exhibit 3.1 to Annual Report on
and Restated Articles of Incorporation, Form 10-K for the fiscal year ended
adopted November 12, 1998 September 30, 1998 (Commission
File No. 1-7626)
3.2 Universal Foods Corporation Amended X
and Restated Bylaws, adopted
November 11, 1999
4.1 Rights Agreement, dated as of August Exhibit 1.1 to Registration
6, 1998, between Registrant and Statement on Form 8-A dated
Firstar Trust Company July 20, 1998 (Commission File
No. 1-7626)
10.1 Material Contracts
10.1(a) Indenture between Registrant and The Exhibit 4.1 to Registration
First National Bank of Chicago, as Statement on Form S-3 dated
Trustee November 9, 1998 (Commission
File 333-67015)
10.2 Management Contracts or
Compensatory Plans
10.2(a) Executive Employment Contract X
between Registrant and
Kenneth P. Manning dated
November 11, 1999
10.2(b) Amended and Restated Change of X
Control Employment and Severance
Agreement between Registrant and
Kenneth P. Manning dated
November 11, 1999
10.2(c) 1985 Stock Plan for Executive Exhibit 10.2(c) to Annual Report on
Employees Form 10-K for the fiscal year ended
September 30, 1998 (Commission
File No. 1-7626)
Exhibit Index -- 1
18
UNIVERSAL FOODS CORPORATION
EXHIBIT INDEX
1999 ANNUAL REPORT ON FORM 10-K
Exhibit Incorporated by Filed
Number Description Reference From Herewith
--------- --------------------------------------- ------------------------------------ ---------
10.2(d) Universal Foods Corporation 1990 Exhibit 10.2(d) to Annual Report on
Employee Stock Plan, as amended Form 10-K for the fiscal year ended
September 10, 1998 September 30, 1998 (Commission File
No. 1-7626)
10.2(e) Universal Foods Corporation 1994 Exhibit 10.2(f) Annual Report on
Employee Stock Plan, as amended Form 10-K for the fiscal year ended
September 10, 1998 September 30, 1998 (Commission File
No. 1-7626)
10.2(f) Universal Foods Corporation 1998 Exhibit 10.2(h) to Annual Report on
Stock Option Plan, as amended Form 10-K for the fiscal year ended
September 10, 1998 September 30, 1998 (Commission File
No. 1-7626)
10.2(g) 1999 Non-Employee Director Stock Appendix A to Registrant's
Option Plan definitive Proxy Statement for its
Annual Meeting of Shareholders to
be held on January 27, 2000 filed
with the Commission on Schedule 14A
on December 17, 1999.
10.2(h) Amended and Restated Directors Appendix B to Registrant's
Deferred Compensation Plan definitive Proxy Statement for its
Annual Meeting of Shareholders to
be held on January 27, 2000 filed
with the Commission on Schedule 14A
on December 17, 1999.
10.2(i) Director Stock Grant Plan, as Exhibit 10.2(j) to Annual Report on
amended November 14, 1991 Form 10-K for the fiscal year ended
September 30, 1998 (Commission File
No. 1-7626)
10.2(j) Management Income Deferral Plan, Exhibit 10.2(k) to Annual Report on
including Amendment No. 1 thereto Form 10-K for the fiscal year ended
dated September 10, 1998 September 30, 1998 (Commission File
No. 1-7626)
10.2(k) Executive Income Deferral Plan, Exhibit 10.2(l) to Annual Report on
including Amendment No. 1 thereto Form 10-K for the fiscal year ended
dated September 10, 1998 September 30, 1998 (Commission File
No. 1-7626)
10.2(l) Form of Amended and Restated Exhibit 10.2(n) to Annual Report on
Change of Control Employment and Form 10-K for the fiscal year ended
Severance Agreement for Executive September 30, 1998 (Commission File
Officers. No. 1-7626)
10.2(m) Amended and Restated Trust Exhibit 10.2(o) to Annual Report on
Agreement dated September 10, 1998 Form 10-K for the fiscal year ended
between the Registrant and Firstar September 30, 1998 (Commission
Bank, Milwaukee, N.A. File No. 1-7626)
("Rabbi Trust A")
Exhibit Index -- 2
19
UNIVERSAL FOODS CORPORATION
EXHIBIT INDEX
1999 ANNUAL REPORT ON FORM 10-K
Exhibit Incorporated by Filed
Number Description Reference From Herewith
--------- ------------------------------------------- ------------------------------------ ---------
10.2(n) Trust Agreement, including Changes Exhibit 10.2(p) to Annual Report on
upon Appointment of Successor Form 10-K for the fiscal year ended
Trustee dated as of February 1, 1998 September 30, 1998 (Commission
between the Registrant and Firstar File No. 1-7626)
Bank, Milwaukee, N.A.
("Rabbi Trust B")
10.2(o) Trust Agreement, including Changes Exhibit 10.2(q) to Annual Report on
upon Appointment of Successor Form 10-K for the fiscal year ended
Trustee dated as of February 1, 1998 September 30, 1998 (Commission
between the Registrant and Firstar File No. 1-7626)
Bank, Milwaukee, N.A.
("Rabbi Trust C")
10.2(p) Incentive Compensation Plan for Elected Appendix C to Registrant's
Corporate Officers definitive Proxy Statement for its
Annual Meeting of Shareholders to
be held on January 27, 2000 filed
with the Commission on Schedule 14A
on December 17, 1999.
10.2(q) Form of Management Incentive Plan for Division Exhibit 10.2(s) to Annual Report on
Presidents Form 10-K for the fiscal year ended
September 30, 1998 (Commission File
No. 1-7626)
10.2(r) Form of Management Incentive Plan for Corporate Exhibit 10.2(t) to Annual Report on
Management Form 10-K for the fiscal year ended
September 30, 1998 (Commission File
No. 1-7626)
10.2(s) Form of Management Incentive Plan for Division Exhibit 10.2(u) to Annual Report on
Management Form 10-K for the fiscal year ended
September 30, 1998 (Commission File
No. 1-7626)
10.2(t) Form of Agreement for Executive Exhibit 10.2(v) to Annual Report on
Officers (Supplemental Executive Form 10-K for the fiscal year ended
Retirement Plan A), including September 30, 1998 (Commission File
Amendment No.1 thereto dated No. 1-7626)
September 10, 1998
10.2(u) Universal Foods Corporation Supplemental Exhibit 10.2(w) to Annual Report on
Benefit Plan, including Amendment No. 1 Form 10-K for the fiscal year ended
thereto dated September 10, 1998 September 30, 1998 (Commission File
No. 1-7626)
10.2(v) Universal Foods Corporation Transition Exhibit 10.2(x) to Annual Report on
Retirement Plan, including Amendment No. 1 Form 10-K for the fiscal year ended
thereto dated September 10, 1998 September 30, 1998 (Commission File
No. 1-7626)
Exhibit index -- 3
20
UNIVERSAL FOODS CORPORATION
EXHIBIT INDEX
1999 ANNUAL REPORT ON FORM 10-K
Exhibit Incorporated by Filed
Number Description Reference From Herewith
--------- --------------------------------------- ------------------------------------ ---------
13.1 Portions of Annual Report to Shareholders X
for the year ending September 30, 1999
that are incorporated by reference
21 Subsidiaries of the Registrant X
23 Consent of Deloitte & Touche LLP X
27 Financial Data Schedule X
99 Notice of Annual Meeting and Proxy Previously filed on Schedule 14A
Statement dated December 17, 1999 dated December 17, 1999
(Commission File No. 1-7626)
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
Exhibit Index -- 4