SEC Filing Summary: Universal Foods Corporation (10-Q)
Business Context and Reporting Period
This is a Quarterly Report (Form 10-Q) for Universal Foods Corporation for the period ended December 31, 1997. The company operates in the food ingredients sector, with divisions including Color and Dehydrated products. The filing covers the first quarter of fiscal 1998.
Key Financial Metrics
| Metric | Q1 1998 (Dec 31, 1997) | Q1 1997 (Dec 31, 1996) |
|---|---|---|
| Revenue | $208,889,000 | $193,484,000 |
| Net Earnings | $15,271,000 | $13,883,000 |
| Earnings Per Share (Diluted) | $0.59 | $0.54 |
| Gross Profit Margin | 34.4% | 34.0% |
| Operating Cash Flow | $4,610,000 | $12,171,000 |
| Total Debt (Short + Long Term) | $289,255,000 | $N/A (Prior period not fully detailed) |
| Current Ratio | 2.2 | 1.9 (Sep 30, 1997) |
| Cash and Equivalents | $1,743,000 | $6,726,000 |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 8% year-over-year, driven by a 33% increase in the Color division and an 11% increase in the Dehydrated division.
- Profitability: Gross profit margins improved to 34.4% due to a sales mix shift toward higher-margin Color products. Selling and administrative expenses decreased as a percentage of revenue (20.9% vs. 21.2%).
- Interest Expense: Increased to $4,966,000 from $3,687,000 due to higher average borrowings.
- Cash Flow: Operating cash flow decreased significantly to $4.61 million from $12.17 million, attributed to funding benefit plan contributions and increased income tax payments.
- Debt Structure: The company issued a $30 million senior note (7.06% interest, due 2002) to refinance existing debt and fund general corporate purposes.
Outlook, Risks, and Unusual Items
- Acquisition: On January 6, 1998, the company announced the acquisition of Arancia Ingredientes Especiales, S.A. de C.V. for approximately $24.8 million. This target generates roughly $16 million in annual revenue and aims to improve market access and synergies in North America.
- Capital Expenditures: Investing activities used $15.1 million, primarily for $14.8 million in property, plant, and equipment to enhance automation and product quality.
- Share Repurchases: The company repurchased 165,111 shares of common stock for $6.83 million during the quarter.
- Risks: Forward-looking statements are subject to risks including new product introduction by customers, execution of acquisition programs, international economic factors, and the success of cost-reduction efforts.
Investor Verification Checklist
- Verify the integration and financial impact of the Arancia Ingredientes Especiales acquisition announced post-period.
- Monitor the sustainability of the 34.4% gross margin given the reliance on the Color division's performance.
- Assess the impact of increased interest expense on future net earnings as debt levels remain elevated.
- Review the cash flow trend, specifically the decline in operating cash flow, to ensure liquidity remains sufficient for capital expenditures and dividends.
- Confirm the adoption timeline and financial impact of new accounting standards (SFAS No. 130 and No. 131) effective in fiscal 1999.