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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 25, 1996
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[ ] 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 1-13030
Bush Boake Allen Inc.
(Exact Name of Registrant as Specified in Its Charter)
Virginia 13-2560391
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation of Organization) Identification No.)
7 Mercedes Drive, Montvale, New Jersey 07645
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(Address of Principal Executive Offices) (Zip Code)
(201) 391-9870
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(Registrant's Telephone Number, Including Area Code)
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, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
----- -------
19,222,200 shares of Registrant's Common Stock, Par Value $1 Per Share, were
outstanding as of the close of business on June 25, 1996.
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BUSH BOAKE ALLEN INC.
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
Part I. FINANCIAL INFORMATION*
Item 1. Financial Statements 2
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 6
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
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*A summary of the Registrant's significant accounting policies is contained in
the Registrant's Form 10-K for the year ended December 25, 1995 which has
previously been filed with the Commission.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except per share)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 25, JUNE 25,
------------------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $113,539 $107,662 $220,428 $205,000
Costs and other charges:
Cost of goods sold 71,898 66,306 139,441 127,124
Selling and administrative expenses 23,599 22,329 45,667 42,812
Research and development expenses 5,642 5,099 11,037 9,919
----- ----- ------ -----
Income from operations 12,400 13,928 24,283 25,145
------ ------ ------ ------
Interest expense 657 775 1,377 1,659
Other (income) expense, net (3,758) 49 (3,139) (572)
------ -- ------ ----
Income before income taxes 15,501 13,104 26,045 24,058
------ ------ ------ ------
Income taxes 5,481 4,607 9,087 8,661
----- ----- ----- -----
Net Income $10,020 $8,497 $16,958 $15,397
======= ====== ======= =======
Net income per share $0.52 $0.44 $0.88 $0.80
===== ===== ===== =====
Weighted average number of
shares outstanding 19,218,548 19,215,000 19,218,268 19,215,000
========== ========== ========== ==========
</TABLE>
See accompanying notes to the Consolidated Financial Statements.
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BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands)
<TABLE>
<CAPTION>
JUNE 25, DECEMBER 25,
1996 1995
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<S> <C> <C>
ASSETS
Cash and cash equivalents $5,197 $4,966
Receivables, net 88,363 82,538
Inventories 92,771 94,742
Other 10,204 8,449
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Total current assets 196,535 190,695
Property, plant and equipment, net 143,322 131,203
Other assets 30,301 27,955
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Total Assets $370,158 $349,853
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current installments of long-term debt $24 $442
Notes payable 33,718 34,052
Accounts payable 35,615 34,315
Accrued liabilities 19,109 22,825
Income and other taxes 10,031 5,358
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Total current liabilities 98,497 96,992
Long-term debt 3,996 3,731
Deferred income taxes 18,519 17,231
Other long-term liabilities 10,165 10,117
Stockholders' equity (Shares outstanding
1996: 19,222,200; 1995: 19,218,000) 238,981 221,782
-------- --------
Total Liabilities and Stockholders' Equity $370,158 $349,853
======== ========
</TABLE>
See accompanying notes to the Consolidated Financial Statements.
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BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 25,
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1996 1995
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<S> <C> <C>
Cash provided by (used for) operations:
Net income $16,958 $15,397
Adjustments to reconcile net income
to cash provided by operations:
Depreciation and amortization 6,406 6,223
Deferred income taxes 1,110 751
Other (4,325) 167
Changes in operational assets and liabilities:
Receivables, net (6,607) (11,399)
Inventories 1,144 (11,244)
Other assets (3,294) (2,381)
Accounts payable, taxes and other liabilities 1,868 15,362
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Cash provided by operations 13,260 12,876
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Cash provided by (used for) investment activities:
Capital expenditures (17,649) (8,360)
Other 4,969 (3,002)
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Cash used for investment activities (12,680) (11,362)
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Cash provided by (used for) financing activities:
Change in notes payable, net (318) 855
Other (86) (581)
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Cash provided by (used for)
financing activities (404) 274
---- ---
Effect of exchange rate changes on cash 55 41
-- --
Increase in cash and cash equivalents 231 1,829
Balance at beginning of period 4,966 2,010
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Balance at end of period $5,197 $3,839
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</TABLE>
See accompanying notes to the Consolidated Financial Statements.
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BUSH BOAKE ALLEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The information furnished in this report is unaudited but includes
all adjustments which, in the opinion of management, are necessary
for a fair presentation of results for the interim periods reported.
The adjustments made were of a normal recurring nature.
Note 2. Inventories
<TABLE>
<CAPTION>
June 25, 1996 December 25, 1995
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($ in thousands)
<S> <C> <C>
Finished goods $27,974 $32,720
Raw materials 49,045 47,028
Work in process 11,757 10,749
Supplies 3,995 4,245
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Total $92,771 $94,742
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</TABLE>
Note 3. Stockholders' Equity ($ in thousands)
<TABLE>
<CAPTION>
Additional Cumulative Total
Common Stock Paid-In Retained Translation Stockholders'
Shares Amounts Capital Earnings Adjustment Equity
<S> <C> <C> <C> <C> <C> <C>
Balance December 25, 1995 19,218,000 $19,218 $167,337 $47,546 $(12,319) $221,782
Net Income 16,958 16,958
Issuance of Stock for Options 4,200 4 63 67
Foreign Currency
Translation 174 174
Balance June 25, 1996 19,222,200 $19,222 $167,400 $64,504 $(12,145) $238,981
========== ======= ======== ======= ======== ========
</TABLE>
Note 4. "Other (income) expense, net" for the second quarter 1996
includes a non-recurring pre-tax gain of $4.2 million related to the
sale of excess Company land adjacent to the Widnes, England aroma
chemical plant.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Quarter Ended June 25, 1996 Compared to Quarter Ended June 25, 1995
Net Sales
Net sales for the quarter ended June 25, 1996 increased 5.5% to $113.5
million from $107.6 million for the quarter ended June 25, 1995. The primary
reason for the increase in sales was the aroma chemicals segment, which recorded
growth in second quarter sales of 12.8% over the second quarter of 1995. This
growth mainly reflects increased volume of chemical shipments under a long-term
supply agreement with a major customer. The flavor and fragrance segment
recorded growth in second quarter sales of 3.8% over the second quarter of 1995
with the largest increase being in the Asia Pacific region. Net sales in both
product segments were adversely affected by the movement in foreign currency
exchange rates, primarily the Pound Sterling and currencies in India, Turkey and
Japan versus the U.S. dollar. If exchange rates had remained unchanged from the
second quarter 1995 to the second quarter 1996, the increase in total net sales
would have been approximately 10%.
Cost of Goods Sold
Cost of goods sold in the second quarter of 1996 increased to $71.9
million from $66.3 million in the second quarter of 1995 due primarily to
increased sales. Cost of goods sold as a percentage of net sales increased to
63.3% from 61.6% reflecting significantly higher raw material turpentine costs.
Selling and Administrative Expenses
Selling and administrative expenses in second quarter of 1996 increased
to $23.6 million from $22.3 million in the second quarter of 1995. This increase
includes the effect of additional sales and marketing personnel for the flavor
and fragrance segment. Selling and administrative expenses as a percentage of
net sales increased slightly to 20.8% from 20.7%.
Research and Development Expenses
Research and development expenses in the second quarter of 1996
increased to $5.6 million from $5.1 million in the second quarter of 1995. The
increase is due primarily to additional creative and technical personnel for the
flavor and fragrance segment, and for services performed by Union Camp at its
research facility in Princeton, New Jersey. Research and development expenses as
a percentage of net sales increased to 5.0% from 4.7%.
Income from Operations
Income from operations in the second quarter of 1996 decreased to $12.4
million from $13.9 million in the second quarter of 1995. Adverse foreign
currency exchange rate movements account for approximately 4% of the 11%
decrease in operating income.
Income from operations, exclusive of corporate items, for the flavor
and fragrance segment was $12.9 million compared to $12.4 million in the second
quarter of 1995. A decrease in operating income was reported in all regions
except the Americas.
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The Company's aroma chemical segment recorded second quarter operating income
(exclusive of corporate items) of $5.1 million in 1996, compared to $6.2 million
in the second quarter of 1995. Reduced sales volume and continuing cost pressure
affecting turpentine-based products were the primary reasons for the decrease in
operating income.
Other (Income) Expense, Net
Other income for the second quarter of 1996 was $3.8 million income
compared to $50,000 expense in the second quarter of 1995. The primary reason
for the increase in other income was a $4.2 million non-recurring pre-tax gain
on the sale of excess Company land adjacent to the Widnes, England aroma
chemical plant during the second quarter of 1996.
Interest Expense
Interest expense for the second quarter of 1996 decreased to $700,000
from $800,000 in the second quarter of 1995. The decrease in interest expense is
primarily due to capitalized interest on a manufacturing facility being
constructed in China.
Income Taxes
Income tax expense in the second quarter of 1996 increased to $5.5
million from $4.6 million in the second quarter of 1995 primarily as a result of
higher pre-tax income. The Company's effective tax rate in the second quarter of
1996 increased slightly to 35.4% from 35.2% for the second quarter of 1995.
Six Months Ended June 25, 1996 Compared to Six Months Ended June 25, 1995
Net Sales
Net sales for the six months ended June 25, 1996 increased 7.5% to
$220.4 million from $205.0 million in the comparable prior year period. Net
sales of aroma chemicals increased 19.9% to $46.4 million from $38.7 million
primarily due to the increased volume of shipments under a long-term supply
agreement with a major customer. Net sales of the flavor and fragrance segment
increased 4.6% to $174.0 million from $166.3 million with market growth in all
regions except International. Net sales in both product segments were adversely
affected by the movement in foreign currency exchange rates, primarily the Pound
Sterling and currencies in India, Turkey and Japan versus the U.S. dollar. If
exchange rates had remained unchanged from the first half of 1995 to the first
half of 1996, the increase in total net sales would have been approximately 11%.
Cost of Goods Sold
Cost of goods sold for the six months ended June 25, 1996 increased
9.7% to $139.4 million from $127.1 million in the comparable prior year period.
The Company's cost of goods sold as a percentage of net sales increased to 63.3%
from 62.0% in the prior year primarily due to significantly higher raw material
turpentine costs.
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Selling and Administrative Expenses
Selling and administrative expenses for the six months ended June 25,
1996 increased to $45.7 million from $42.8 million in the comparable prior year
period. This increase includes the effect of additional sales and marketing
personnel for the flavor and fragrance segment. Selling and administrative
expenses as a percentage of net sales decreased slightly to 20.7% from 20.9%.
Research and Development Expenses
Research and development expenses for the six months ended June 25,
1996 increased to $11.0 million from $9.9 million in the comparable prior year
period. This increase is due primarily to additional creative and technical
personnel for the flavor and fragrance segment, and for services performed by
Union Camp at its research facility in Princeton, New Jersey. Research and
development expenses as a percentage of net sales increased to 5.0% from 4.8%.
Income From Operations
Income from operations for the six months ended June 25, 1996 decreased
3.4% to $24.3 million from $25.1 million in the comparable prior year period.
Adverse foreign exchange rate movements account for approximately 3% of the
decrease.
Income from operations, exclusive of corporate items, for the flavor
and fragrance segment decreased 1% to $22.9 million from $23.1 million in the
prior year first half. The Company's aroma chemical segment recorded first half
operating income (exclusive of corporate items) of $12.2 million in 1996,
compared to $10.9 million in the first half of 1995. Improved product mix
resulting from large volume contract sales and operating efficiencies in the
Company's non-terpene chemical business were the primary reasons for the
increase in operating income.
Other (Income) Expense, Net
Other income for the six months ended June 25, 1996 increased to $3.1
million from $600,000 in the comparable prior year period. The increase in other
income was primarily attributable to a gain on the sale of excess Company land
in Widnes, England during the second quarter of 1996.
Interest Expense
Interest expense for the six months ended June 25, 1996 decreased to
$1.4 million from $1.7 million in the comparable prior year period. The decrease
in interest expense is primarily attributable to capitalized interest on a
manufacturing facility being constructed in China.
Income Taxes
Income tax expense for the six months ended June 25, 1996 increased to $9.1
million from $8.7 million in the comparable prior year period primarily as a
result of higher pre-tax income. The Company's effective tax rate decreased to
34.9% from 36.0% in the prior year first half, primarily due to higher foreign
tax credits realized during the first quarter of 1996.
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Liquidity and Capital Resources
Cash flows provided by operations for the six months ended June 25,
1996 were $13.3 million compared to $12.9 million for the six months ended June
25, 1995. The increase is primarily due to higher net income, less the
adjustment for the gain on land sale and changes in operational assets and
liabilities.
At June 25, 1996, working capital of the Company was $98.0 million, a
$4.3 million increase from $93.7 million at December 25, 1995. The change in
working capital is primarily due to the increase in trade receivables partially
offset by an increase in income and other taxes payable.
As of June 25, 1996, the Company had cash and cash equivalents of $5.2
million. The Company believes that its available cash, funds provided by
operations and available borrowing capacity under its credit facilities will be
sufficient to support its debt service, working capital and capital expenditure
requirements for the foreseeable future, including implementation of its
strategy to strengthen its position as a leading producer of flavors, fragrances
and aroma chemicals and for long-term growth.
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PART II.
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
No. Description
11 Statement regarding computation of
per share earnings
27 Financial Data Schedule
b) Reports on Form 8-K
No current Report on Form 8-K was filed by the Registrant during
the second quarter of 1996.
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SIGNATURES
Pursuant to the requirements 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.
BUSH BOAKE ALLEN INC.
Date: August 6, 1996 FRED W. BROWN, JR.
------------------------- ----------------------------------
Fred W. Brown, Jr.
Vice President Finance and
Chief Financial Officer
Date: August 6, 1996 DENNIS M. MEANY
------------------------- ----------------------------------
Dennis M. Meany
Vice President, General Counsel
and Secretary
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EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Quarter Ended Six Months
June 25, June 25,
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1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Net Income $10,020,000 $8,497,000 $16,958,000 15,397,000
Shares used to compute
earnings per share 19,218,548 19,215,000 19,218,268 19,215,000
Earnings Per Share $0.52 $0.44 $0.88 $0.80
Shares used to compute
earnings per share including
common stock equivalents - Primary Basis 19,362,676 19,410,451 19,380,606 19,392,070
Primary Earnings Per Share $0.52 $0.44 $0.87 $0.79
Shares used to compute
earnings per share including
common stock equivalents - Fully Diluted Basis 19,380,886 19,420,135 19,380,606 19,420,135
Fully Diluted Earnings Per Share $0.52 $0.44 $0.87 $0.79
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 919998
<NAME> BOA
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-25-1996
<PERIOD-START> DEC-26-1995
<PERIOD-END> JUN-25-1996
<CASH> 5,197
<SECURITIES> 0
<RECEIVABLES> 88,363
<ALLOWANCES> 0
<INVENTORY> 92,771
<CURRENT-ASSETS> 196,535
<PP&E> 143,322
<DEPRECIATION> 0
<TOTAL-ASSETS> 370,158
<CURRENT-LIABILITIES> 98,497
<BONDS> 3,996
<COMMON> 238,981
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 370,158
<SALES> 220,428
<TOTAL-REVENUES> 220,428
<CGS> 139,441
<TOTAL-COSTS> 196,145
<OTHER-EXPENSES> (3,139)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,377
<INCOME-PRETAX> 26,045
<INCOME-TAX> 9,087
<INCOME-CONTINUING> 16,958
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,958
<EPS-PRIMARY> 0.87
<EPS-DILUTED> 0.87
</TABLE>
