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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 March 25, 1997
[ ] 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_____
19,222,200 shares of Registrant's Common Stock, Par Value $1 Per Share, were
outstanding as of the close of business on March 25, 1997.
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BUSH BOAKE ALLEN INC.
INDEX
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<CAPTION>
PAGE
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<S> <C> <C>
PART I. FINANCIAL INFORMATION*
Item 1. Financial Statements 2
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 6
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders 8
Item 6. Exhibits and Reports on Form 8-K 9
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*A summary of the Registrant's significant accounting policies is contained in
the Registrant's Form 10-K for the year ended December 25, 1996 which has
previously been filed with the Commission.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except per share)
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<CAPTION>
THREE MONTHS ENDED
MARCH 25,
--------------------------
1997 1996
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<S> <C> <C>
Net Sales $118,407 $106,889
Costs and other charges:
Cost of goods sold 77,045 67,543
Selling and administrative expenses 23,761 22,068
Research and development expenses 5,752 5,395
-------- --------
Income from operations 11,849 11,883
-------- --------
Interest expense 580 720
Other (income) expense, net 124 619
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Income before income taxes 11,145 10,544
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Income taxes 3,903 3,606
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Net Income $7,242 $6,938
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-------- --------
Net income per share $0.38 $0.36
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-------- --------
Weighted average number of
shares outstanding 19,222,200 19,218,000
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See accompanying notes to the Consolidated Financial Statements.
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BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands)
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<CAPTION>
MARCH 25, DECEMBER 25,
1997 1996
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<S> <C> <C>
ASSETS
Cash and cash equivalents $ 5,335 $ 4,330
Receivables, net 93,801 91,404
Inventories 102,464 102,217
Other 3,746 3,623
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Total current assets 205,346 201,574
Property, plant and equipment, net 164,323 165,577
Other assets 42,528 40,648
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Total Assets $412,197 $407,799
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-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current installments of long-term debt $ 7 $ 8
Notes payable 48,361 43,172
Accounts payable 38,596 38,322
Accrued liabilities 21,677 28,553
Income and other taxes 2,891 1,462
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Total current liabilities 111,532 111,517
Long-term debt 1,993 2,009
Deferred income taxes 20,547 20,323
Other long-term liabilities 10,891 10,817
Stockholders' equity (Shares outstanding
1997 and 1996: 19,222,200) 267,234 263,133
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Total Liabilities and Stockholders' Equity $412,197 $407,799
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See accompanying notes to the Consolidated Financial Statements.
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BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
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<CAPTION>
THREE MONTHS ENDED
MARCH 25,
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1997 1996
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<S> <C> <C>
Cash provided by (used for) operations:
Net income $ 7,242 $ 6,938
Adjustments to reconcile net income
to cash provided by operations:
Depreciation and amortization 4,177 3,157
Deferred income taxes 530 605
Other (61) (38)
Changes in operational assets and liabilities:
Receivables, net (4,557) 390
Inventories (2,493) (330)
Other assets (874) (1,335)
Accounts payable, taxes and other liabilities 44 (4,902)
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Cash provided by operations 4,008 4,485
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Cash provided by (used for) investment activities:
Capital expenditures (5,780) (6,780)
Payments for acquisitions (3,859) 0
Other 25 488
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Cash used for investment activities (9,614) (6,292)
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Cash provided by (used for) financing activities:
Change in notes payable, net 6,685 1,619
Other (1) (231)
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Cash provided by financing activities 6,684 1,388
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Effect of exchange rate changes on cash (73) 0
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Increase (decrease) in cash and cash equivalents 1,005 (419)
Balance at beginning of period 4,330 4,966
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Balance at end of period $ 5,335 $ 4,547
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See accompanying notes to the Consolidated Financial Statements.
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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. In February 1997, the Financial Accounting Standards Board issued SFAS
128, "Earnings per Share" which must be adopted in fiscal year 1997.
This statement establishes standards for computing and presenting
earnings per share (EPS) and is comparable to international EPS
standards. The Company does not expect the adoption of this standard to
materially affect its computation and presentation of EPS.
Note 3. Inventories
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<CAPTION>
March 25, 1997 December 25, 1996
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($ in thousands)
<S> <C> <C>
Finished goods $31,605 $30,156
Raw materials 52,454 55,077
Work in process 14,163 12,579
Supplies 4,242 4,405
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Total $102,464 $102,217
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Note 4. 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, 1996 19,222 $ 19,222 $167,400 $ 79,101 $ (2,590) $263,133
Net Income 7,242 7,242
Foreign Currency Translation (3,141) (3,141)
Balance March 25, 1997 19,222 $ 19,222 $167,400 $ 86,343 $ (5,731) $267,234
====== ======== ======== ======== ======== ========
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NET SALES
Net sales for the first quarter ended March 25, 1997 increased 10.8% to
$118.4 million from $106.9 million for the quarter ended March 25, 1996. The
primary reason for the increase in sales was the flavor and fragrance segment,
which recorded growth in sales of 13.4% over the first quarter of 1996. The
sales increase also reflects the impact of three acquisitions made during the
fourth quarter of 1996 which added approximately $4.2 million of incremental
flavor and fragrance sales in the first quarter of 1997. The Americas and
International regions had the highest internal growth rates with sales increases
of 15% and 21%, respectively. Net sales of the aroma chemicals segment increased
only 1.9% over the first quarter of 1996 reflecting competitive pricing pressure
in Europe due to the strengthening of the Pound Sterling. Net sales in both
product segments were moderately affected by the movement in foreign currency
exchange rates. If exchange rates had remained unchanged from the first quarter
1996 to the first quarter 1997, the increase in total net sales would have been
approximately 12%.
COST OF GOODS SOLD
Cost of goods sold in the first quarter of 1997 increased to $77.0
million from $67.5 million in the first quarter of 1996 due primarily to
increased sales. Cost of goods sold as a percentage of net sales increased to
65.1% from 63.2% reflecting significantly higher raw material turpentine costs,
and additional depreciation and amortization expenses resulting from the
completion of major capital projects and recent acquisitions.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses in first quarter of 1997 increased
to $23.8 million from $22.1 million in the first quarter of 1996. This increase
includes the effect of acquisitions made during the fourth quarter of 1996.
Selling and administrative expenses as a percentage of net sales decreased to
20.1% from 20.6%.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses in the first quarter of 1997 increased
to $5.8 million from $5.4 million in the first quarter of 1996. The increase is
due primarily to additional creative and technical resources 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 decreased to 4.9% from 5.0%.
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INCOME FROM OPERATIONS
Income from operations in the first quarter of 1997 was $11.8 million,
flat with the first quarter of 1996. Income from operations, exclusive of
corporate items, for the flavor and fragrance segment was $10.8 million compared
to $10.1 million in the first quarter of 1996. An increase in operating income
was reported in all regions except Asia Pacific, which was adversely impacted
with the start-up of the new plant in China. The Company's aroma chemical
segment recorded first quarter operating income (exclusive of corporate items)
of $5.9 million in 1997, compared to $7.1 million in the first quarter of 1996.
The decrease in operating income was primarily due to continuing cost pressure
affecting turpentine-based products and competitive pricing pressure in Europe
resulting from the strong Pound Sterling.
OTHER (INCOME) EXPENSE, NET
Other (income) expense for the first quarter of 1997 was $100,000
expense compared to $600,000 expense in the first quarter of 1996 primarily due
to lower foreign exchange losses and higher rental income over the prior year.
INTEREST EXPENSE
Interest expense for the first quarter of 1997 decreased to $600,000
from $700,000 in the first quarter of 1996 primarily due to higher capitalized
interest.
INCOME TAXES
Income tax expense in the first quarter of 1997 increased to $3.9
million from $3.6 million in the first quarter of 1996 as a result of higher
pre-tax income. The Company's effective tax rate in the first quarter of 1997
increased to 35.0% from 34.2% for the first quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows provided by operations for the three months ended March 25,
1997 were $4.0 million compared to $4.5 million for the three months ended March
25, 1996. The decrease is primarily due to changes in operational assets and
liabilities, mainly from an increase in trade receivables during the first
quarter of 1996.
At March 25, 1997, working capital of the Company was $93.8 million, a
$3.7 million increase from $90.1 million at December 25, 1996. The change in
working capital is primarily due to the increase in accounts receivable. Total
current liabilities remained unchanged at $111.5 million.
As of March 25, 1997, the Company had cash and cash equivalents of $5.3
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The Company's annual meeting of its stockholders was held on May 7,
1997.
At the annual meeting the Company's stockholders voted on two proposals:
(1) the election of seven nominees to serve as directors until the next
annual meeting of stockholders; and (2) the ratification of the
appointment of Price Waterhouse LLP as independent accountants for the
year 1997. The voting of the Company's stockholders as to these matters
was as follows:
1. ELECTION OF DIRECTORS
NOMINEES VOTES FOR VOTES WITHHELD
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Peter L. Acton 18,266,082 73,867
Julian W. Boyden 18,259,922 80,027
Thomas R. Crane, Jr. 18,303,974 35,975
L. Robert Pfund 18,305,750 34,199
James M. Reed 18,262,205 77,744
George J. Sella, Jr. 18,305,630 34,319
William H. Trice 18,266,550 73,399
2. RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
VOTES FOR VOTES AGAINST ABSTENTIONS
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18,332,006 4,957 2,986
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS
No. Description
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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
first quarter of 1997.
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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.
5/8/97 Fred W. Brown, Jr.
Date: __________________ ________________________________________
Fred W. Brown, Jr.
Vice President Finance and
Chief Financial Officer
5/8/97 Dennis M. Meany
Date: __________________ ________________________________________
Dennis M. Meany
Vice President, General Counsel
and Secretary
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EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
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<CAPTION>
Three Months Ended
March 25, 1997 March 25, 1996
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<S> <C> <C>
Net Income $ 7,242,000 $ 6,938,000
Shares used to compute
earnings per share 19,222,200 19,218,000
Earnings Per Share $0.38 $0.36
Shares used to compute
earnings per share including
common stock equivalents - Primary Basis 19,381,039 19,398,927
Primary Earnings Per Share $0.37 $0.36
Shares used to compute
earnings per share including
common stock equivalents - Fully Diluted Basis 19,382,377 19,398,927
Fully Diluted Earnings Per Share $0.37 $0.36
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000919998
<NAME> BOA
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-25-1997
<PERIOD-START> DEC-26-1996
<PERIOD-END> MAR-25-1997
<CASH> 5,335
<SECURITIES> 0
<RECEIVABLES> 93,801
<ALLOWANCES> 0
<INVENTORY> 102,464
<CURRENT-ASSETS> 205,346
<PP&E> 164,323
<DEPRECIATION> 0
<TOTAL-ASSETS> 412,197
<CURRENT-LIABILITIES> 111,532
<BONDS> 1,993
<COMMON> 267,234
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 412,197
<SALES> 118,407
<TOTAL-REVENUES> 118,407
<CGS> 77,045
<TOTAL-COSTS> 106,558
<OTHER-EXPENSES> 124
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 580
<INCOME-PRETAX> 11,145
<INCOME-TAX> 3,903
<INCOME-CONTINUING> 7,242
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,242
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.37
</TABLE>
