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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 September 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.
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(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
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19,222,200 shares of Registrant's Common Stock, Par Value $1 Per Share, were
outstanding as of the close of business on September 25, 1996.
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BUSH BOAKE ALLEN INC.
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PART I. FINANCIAL INFORMATION*
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Item 1. Financial Statements 2
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 6
PART II. OTHER INFORMATION
-----------------
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
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*A summary of the Registrant's significant accounting policies is contained in
the Registrant's Form 10-K for the year ended December 25, 1995 which has
previously been filed with the Commission.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except per share)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 25, SEPTEMBER 25,
---------------------------- ----------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales .................................................. $ 112,463 $ 111,939 $ 332,891 $ 316,939
Costs and other charges:
Cost of goods sold ................................ 71,734 70,186 211,175 197,310
Selling and administrative expenses ............... 23,431 22,602 69,098 65,414
Research and development expenses ................. 5,390 4,863 16,427 14,782
------------ ------------ ------------ ------------
Income from operations ..................................... 11,908 14,288 36,191 39,433
------------ ------------ ------------ ------------
Interest expense ........................................... 522 1,048 1,899 2,707
Other (income) expense, net ................................ (9) 224 (3,148) (348)
------------ ------------ ------------ ------------
Income before income taxes ................................. 11,395 13,016 37,440 37,074
------------ ------------ ------------ ------------
Income taxes ............................................... 3,511 4,566 12,598 13,227
------------ ------------ ------------ ------------
Net Income ................................................. $ 7,884 $ 8,450 $ 24,842 $ 23,847
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income per share ....................................... $ 0.41 $ 0.44 $ 1.29 $ 1.24
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average number of
shares outstanding ...................................... 19,222,200 19,215,000 19,219,588 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>
SEPTEMBER 25, DECEMBER 25,
1996 1995
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<S> <C> <C>
ASSETS
Cash and cash equivalents ............................ $ 3,780 $ 4,966
Receivables, net ..................................... 90,138 82,538
Inventories .......................................... 94,737 94,742
Other ................................................ 9,862 8,449
-------- --------
Total current assets ........................... 198,517 190,695
Property, plant and equipment, net ................... 152,787 131,203
Other assets ......................................... 31,352 27,955
-------- --------
Total Assets ................................... $382,656 $349,853
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current installments of long-term debt ............... $ 12 $ 442
Notes payable ........................................ 34,784 34,052
Accounts payable ..................................... 35,616 34,315
Accrued liabilities .................................. 22,617 22,825
Income and other taxes ............................... 9,180 5,358
-------- --------
Total current liabilities ...................... 102,209 96,992
Long-term debt ....................................... 1,995 3,731
Deferred income taxes ................................ 19,374 17,231
Other long-term liabilities .......................... 10,365 10,117
Stockholders' equity (Shares outstanding
1996: 19,222,200; 1995: 19,218,000) ............... 248,713 221,782
-------- --------
Total Liabilities and Stockholders' Equity ........ $382,656 $349,853
-------- --------
-------- --------
</TABLE>
See accompanying notes to the Consolidated Financial Statements.
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BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 25,
1996 1995
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<S> <C> <C>
Cash provided by (used for) operations:
Net income ......................................... $ 24,842 $ 23,847
Adjustments to reconcile net income
to cash provided by operations:
Depreciation and amortization ............... 9,753 9,399
Deferred income taxes ....................... 1,838 1,194
Other ....................................... (4,644) 118
Changes in operational assets and liabilities:
Receivables, net ............................ (7,634) (11,323)
Inventories ................................. (4) (13,375)
Other assets ................................ (3,848) (1,297)
Accounts payable, taxes and other liabilities 3,047 14,655
-------- --------
Cash provided by operations ............. 23,350 23,218
-------- --------
Cash provided by (used for) investment activities:
Capital expenditures ............................... (28,962) (14,503)
Other .............................................. 6,322 (1,634)
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Cash used for investment activities ..... (22,640) (16,137)
-------- --------
Cash provided by (used for) financing activities:
Change in notes payable, net ....................... (27) (85)
Repayments of long-term debt ....................... (2,166) (547)
Other .............................................. 67 0
-------- --------
Cash used for financing activities ...... (2,126) (632)
-------- --------
Effect of exchange rate changes on cash .................... 230 (71)
-------- --------
Increase (decrease) in cash and cash equivalents ........... (1,186) 6,378
Balance at beginning of period ............................. 4,966 2,010
-------- --------
Balance at end of period ................................... $ 3,780 $ 8,388
-------- --------
-------- --------
</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>
September 25, 1996 December 25, 1995
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($ in thousands)
<S> <C> <C>
Finished goods .................... $29,422 $32,720
Raw materials ..................... 49,421 47,028
Work in process ................... 11,543 10,749
Supplies .......................... 4,351 4,245
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Total ............................. $94,737 $94,742
======= =======
</TABLE>
Note 3. Stockholders' Equity ($ in thousands)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE TOTAL
----------------------- 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 .................. 24,842 24,842
Issuance of Stock for Options 4,200 4 63 67
Foreign Currency Translation 2,022 2,022
Balance September 25, 1996 .. 19,222,200 $ 19,222 $ 167,400 $ 72,388 $ (10,297) $ 248,713
========== ========== ========== ========== ========== ==========
</TABLE>
Note 4. "Other (income) expense, net" for the nine months ended September 25,
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 during the second quarter.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 25, 1996 COMPARED TO QUARTER ENDED SEPTEMBER 25, 1995
NET SALES
Net sales for the quarter ended September 25, 1996 increased 0.5% to
$112.5 million from $111.9 million for the quarter ended September 25, 1995. The
flavor and fragrance segment recorded growth in third quarter sales of 4.6% over
the third quarter of 1995 with the largest increase being in the Asia Pacific
region. In the aroma chemicals segment, sales declined 13.5% in third quarter
1996 compared to the third quarter of 1995 primarily due to a reduced contract
price for chemical shipments under a long-term supply agreement with a major
customer. 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 third quarter 1995 to the third quarter 1996,
the increase in total net sales would have been approximately 4%.
COST OF GOODS SOLD
Cost of goods sold in the third quarter of 1996 increased to $71.7
million from $70.2 million in the third quarter of 1995 due primarily to
increased raw material costs, particularly turpentine, and higher depreciation
expense. Cost of goods sold as a percentage of net sales increased to 63.8% from
62.7% in the third quarter of 1995.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses in third quarter of 1996 increased
to $23.4 million from $22.6 million in the third quarter of 1995. This increase
includes the effect of additional sales and marketing personnel for the flavor
and fragrance segment to increase growth in market areas in Southeast Asia and
Latin America. Selling and administrative expenses as a percentage of net sales
increased to 20.8% from 20.2%.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses in the third quarter of 1996 increased
to $5.4 million from $4.9 million in the third 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 4.8% from 4.3%.
INCOME FROM OPERATIONS
Income from operations in the third quarter of 1996 decreased to $11.9
million from $14.3 million in the third quarter of 1995. Adverse foreign
currency exchange rate movements account for approximately 3% of the 16.7%
decrease in operating income.
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Income from operations, exclusive of corporate items, for the flavor and
fragrance segment was $12.0 million compared to $11.6 million in the third
quarter of 1995. This increase was primarily due to growth in the flavor
business in the United States. The Company's aroma chemical segment recorded
third quarter operating income (exclusive of corporate items) of $5.1 million in
1996, compared to $7.3 million in the third quarter of 1995. Reduced sales
volumes, continuing cost pressure affecting turpentine-based products and a
lower contracted selling price under a long-term supply agreement with a major
customer were the primary reasons for the decrease in operating income.
OTHER (INCOME) EXPENSE, NET
Other income, net for the third quarter of 1996 was $9,000 compared to
$200,000 of other expense, net in the third quarter of 1995.
INTEREST EXPENSE
Interest expense for the third quarter of 1996, decreased to $500,000
from $1.0 million in the third quarter of 1995, which included $300,000 of
interest on funds owed to Union Camp Corporation. Interest expense for the third
quarter of 1996 is also lower due to capitalized interest.
INCOME TAXES
Income tax expense in the third quarter of 1996 decreased to $3.5
million from $4.6 million in the third quarter of 1995 primarily as a result of
lower pre-tax income. The Company's effective tax rate in the third quarter of
1996 decreased to 30.8% from 35.1% for the third quarter of 1995 reflecting the
final valuation of reduced capital gains taxes on property dispositions in the
UK and Australia.
NINE MONTHS ENDED SEPTEMBER 25, 1996 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 25, 1995
NET SALES
Net sales for the nine months ended September 25, 1996 increased 5.0% to
$332.9 million from $316.9 million in the comparable prior year period. Net
sales of flavor and fragrance compounds increased 4.6% to $264.3 million from
$252.5 million with market growth in all regions except International. Net sales
of aroma chemicals increased 6.6% to $68.6 million from $64.4 million due to the
increased volume of shipments year to date under a long-term supply agreement
with a major customer. 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 nine months of 1995 to the
first nine month of 1996, the increase in total net sales would have been
approximately 8%.
COST OF GOODS SOLD
Cost of goods sold for the nine months ended September 25, 1996
increased 7.0% to $211.2 million from $197.3 million in the comparable prior
year period. The Company's cost of goods sold as a percentage of net sales
increased to 63.4% from 62.3% 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 nine months ended September
25, 1996 increased 5.6% to $69.1 million from $65.4 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 increased slightly to 20.8%
from 20.6%.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses for the nine months ended September
25, 1996 increased to $16.4 million from $14.8 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 4.9% from 4.7%.
INCOME FROM OPERATIONS
Income from operations for the nine months ended September 25, 1996
decreased 8.2% to $36.2 million from $39.4 million in the comparable prior year
period. Adverse foreign exchange rate movements account for approximately 2% of
the decrease.
Income from operations, exclusive of corporate items, for the flavor and
fragrance segment increased 1% to $35.0 million from $34.7 million in the
comparable prior year period. The Company's aroma chemical segment recorded nine
months operating income (exclusive of corporate items) of $17.3 million in 1996,
compared to $18.3 million in the comparable prior year period. This decrease in
operating income reflects continuing raw material cost increases, particularly
turpentine, that have not been fully recovered in selling prices due mainly to
the timing of expiration dates on customer supply agreements.
OTHER (INCOME) EXPENSE, NET
Other income for the nine months ended September 25, 1996 increased to
$3.1 million from $300,000 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 nine months ended September 25, 1996 decreased
to $1.9 million from $2.7 million in the comparable prior year period. The
decrease in interest expense was primarily attributable to the repayment of debt
payable to Union Camp Corporation during 1995 and capitalized interest during
1996 on a manufacturing facility being constructed in China and a chemical plant
expansion in Jacksonville, Florida.
INCOME TAXES
Income tax expense for the nine months ended September 25, 1996
decreased to $12.6 million from $13.2 million in the comparable prior year
period primarily as a result of the final valuation of reduced capital gains
taxes on property dispositions in the UK and Australia. The Company's effective
tax rate decreased to 33.6% from 35.7% in the comparable prior year period.
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LIQUIDITY AND CAPITAL RESOURCES
Cash flows provided by operations for the nine months ended September
25, 1996 were $23.4 million compared to $23.2 million for the comparable prior
year period. 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 September 25, 1996, working capital of the Company was $96.3 million,
a $2.6 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 accounts payable and income and other taxes payable.
As of September 25, 1996, the Company had cash and cash equivalents of
$3.8 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
<TABLE>
<CAPTION>
No. Description
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<C> <S>
11 Statement regarding computation of
per share earnings
27 Financial Data Schedule
</TABLE>
b) REPORTS ON FORM 8-K
No current Report on Form 8-K was filed by the Registrant during the
third 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:________________________ ______________________________
Fred W. Brown, Jr.
Vice President Finance and
Chief Financial Officer
Date:________________________ ______________________________
Dennis M. Meany
Vice President, General Counsel
and Secretary
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EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 25, September 25,
------------------------- -------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income ..................................... $7,884,000 $8,450,000 $24,842,000 $23,847,000
Shares used to compute
earnings per share ........................... 19,222,200 19,215,000 19,219,588 19,215,000
Earnings Per Share ............................. $0.41 $0.44 $1.29 $1.24
Shares used to compute
earnings per share including
common stock equivalents - Primary Basis ..... 19,293,877 19,418,328 19,356,351 19,401,394
Primary Earnings Per Share ..................... $0.41 $0.44 $1.28 $1.23
Shares used to compute
earnings per share including
common stock equivalents - Fully Diluted Basis 19,332,662 19,418,328 19,356,351 19,412,370
Fully Diluted Earnings Per Share ............... $0.41 $0.44 $1.28 $1.23
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<RESTATED>
<CIK> 0000919998
<NAME> BOA
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-25-1996
<PERIOD-START> DEC-26-1995
<PERIOD-END> SEP-25-1996
<CASH> 3,780
<SECURITIES> 0
<RECEIVABLES> 90,138
<ALLOWANCES> 0
<INVENTORY> 94,737
<CURRENT-ASSETS> 198,517
<PP&E> 152,787
<DEPRECIATION> 0
<TOTAL-ASSETS> 382,656
<CURRENT-LIABILITIES> 102,209
<BONDS> 1,995
<COMMON> 248,713
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 382,656
<SALES> 332,891
<TOTAL-REVENUES> 332,891
<CGS> 211,175
<TOTAL-COSTS> 296,700
<OTHER-EXPENSES> (3,148)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,899
<INCOME-PRETAX> 37,440
<INCOME-TAX> 12,598
<INCOME-CONTINUING> 24,842
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,842
<EPS-PRIMARY> 1.28
<EPS-DILUTED> 1.28
</TABLE>
