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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
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(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 25, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________________ to ________________
Commission File Number 1-13030
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BUSH BOAKE ALLEN INC.
(Exact name of registrant as specified in its charter)
Virginia 13-2560391
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7 Mercedes Drive, Montvale, New Jersey 07645
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 201-391-9870
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Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
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Common Stock, $1 par value New York Stock Exchange
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 for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for 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. [X]
On March 1, 1997, 19,222,200 shares of Registrant's Common Stock, $1 par
value, were outstanding. On March 1, 1997, the closing price per share for the
Common Stock as reported on the Composite Tape for issues listed on the New York
Stock Exchange was $25.125 and the aggregate market value of the Common Stock
held by non-affiliates of the Registrant was $152,438,400.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Annual Report to Stockholders for the fiscal
year ended December 25, 1996 (the "Bush Boake Allen 1996 Annual Report") are
incorporated by reference in Parts I, II and IV of this Form 10-K.
Portions of Registrant's Proxy Statement, dated March 22, 1997 (the
"Bush Boake Allen 1997 Proxy Statement"), are incorporated by reference in Part
III of this Form 10-K.
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COPIES OF THE EXHIBITS MAY BE OBTAINED BY STOCKHOLDERS UPON
WRITTEN REQUEST DIRECTED TO THE SECRETARY, BUSH BOAKE ALLEN
INC., 7 MERCEDES DRIVE, MONTVALE, NEW JERSEY 07645, ACCOMPANIED
BY A CHECK IN THE AMOUNT OF $10.00 PAYABLE TO BUSH BOAKE ALLEN
INC. TO COVER PROCESSING AND MAILING COSTS. COSTS OF INDIVIDUAL
EXHIBITS ARE AVAILABLE UPON REQUEST TO THE SECRETARY.
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PART I
Item 1. Business
General
Bush Boake Allen Inc., a Virginia corporation ("BBA" or the
"Company") or its predecessors have been in the flavor and fragrance business
since the mid-1800s. In 1966, Albright & Wilson, a United Kingdom company,
formed BBA as an independent integrated flavor and fragrance business through
the merger of W. J. Bush Limited ("Bush"), A. Boake Roberts Limited ("Boake")
and Stafford Allen Limited ("Allen"), each based in the United Kingdom. Bush
produced liquid flavors and historically conducted business throughout the
former British Empire. Boake produced aroma chemicals and fragrances and Allen
produced spices and seasonings.
Union Camp Corporation ("Union Camp"), which manufactures paper,
paperboard, packaging, wood and chemical products, acquired BBA in 1982 from
Albright & Wilson which was then a wholly-owned subsidiary of Tenneco, Inc. In
June 1994, the Company completed an initial public offering of 6,065,000 shares
of its Common Stock, $1 par value (the "Common Stock") which resulted in 31.6%
of its outstanding Common Stock being publicly held, with the remaining 68.4%
held by Union Camp. Prior to the initial public offering, the Company was
reincorporated from New York to Virginia.
BBA's business is organized into two operating segments: (i) flavor
(including essential oils, seasonings and spice extracts) and fragrance and (ii)
aroma chemicals. In 1996, flavor and fragrance and aroma chemicals accounted for
approximately 80% and 20%, respectively, of the Company's total net sales. The
Company's flavor products impart a desired taste and smell to a broad range of
consumer products including soft drinks, confections, dietary foods, snack
foods, dairy products, pharmaceuticals and alcoholic beverages. The Company's
fragrance products are used in a wide variety of household products including
soaps, detergents, air fresheners, toiletries and related products. The
Company's flavor and fragrance compounds are sold primarily to consumer products
companies which use these products in conjunction with other natural and
synthetic ingredients to make their products more appealing to consumers.
Included within the flavor and fragrance segment is the Company's natural
extracts and seasonings business which consists of essential oils and spice
extracts that are sold primarily to manufacturers of food and beverage products.
BBA is also a major producer of aroma chemicals, products which are
primarily used as raw materials in fragrance compounds. Aroma chemicals are
derived primarily from turpentine, a by-product of the wood pulping process, and
from certain petroleum-based products. The Company sells the majority of its
aroma chemicals directly to major
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multinational consumer products manufacturers and other fragrance and flavor
compounders who use them as fragrance raw materials. The remainder are sold to
agrichemical and specialty chemical manufacturers and used internally by BBA in
its production of fragrance compounds. The Company's aroma chemicals are
produced at highly efficient, automated facilities located in Jacksonville,
Florida (terpene-based aroma chemicals) and Widnes, United Kingdom (terpene- and
petrochemical-based aroma chemicals).
The Company has operations in 41 countries in North and South America,
Europe, Asia, Australia, the Middle East and Africa. BBA's flavor and fragrance
business is separately managed in four geographic regions: the Americas (North
and South America and Caribbean operations); Europe (United Kingdom and Western
Europe), Asia Pacific (East Asia, Southeast Asia, Australia and New Zealand) and
International (India, Middle East, Eastern Europe, Africa and Russia).
Technical, production, sales and customer service capabilities are located in
each region which enhance the Company's focus on individual market and customer
preferences. The Company's aroma chemicals business is managed globally from
Jacksonville. The Company's New Jersey Headquarters and London office provide
administrative and technical support worldwide.
Revenue, operating profits and other financial data for the principal
business segments and for regional operations for the years ended December 25,
1996, 1995 and 1994 appear in Note 12 of Notes to Consolidated Financial
Statements on pages 35 to 37 of the Bush Boake Allen 1996 Annual Report and are
incorporated by reference in this Item 1.
The Company's principal executive offices are located at 7
Mercedes Drive, Montvale, New Jersey 07645 (Tel. No. (201) 391-9870).
Industry Overview
Flavor and fragrance compounds are used in numerous end products.
Fragrance compounds may be single-ingredient or highly complex blends of
essential oils, natural extracts or aroma chemicals. These compounds are sold
primarily to manufacturers of consumer products, including perfumes, cosmetics,
personal care products, soaps, detergents, household cleaners and ambient
deodorizers. Flavor compounds also may be single-ingredient, such as menthol or
vanillin, or complex blends of natural and synthetic materials. These compounds
are sold primarily to manufacturers of beverages, confections, dairy and meat
products, snack foods, baked goods and other food products. Pharmaceuticals,
oral care products and pet food are also significant end-use categories.
Essential oils (such as citrus and mint) and natural extracts (such as vanilla
and fruit extracts) are key components of flavor and fragrance end products.
Aroma chemicals are organic chemicals derived from either conversion of
turpentine or petrochemical raw materials, or isolation from natural sources.
More than
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3,000 of these chemicals are used by flavor and fragrance companies, which both
use aroma chemicals as raw materials for their compound products and sell them
directly to others. Certain of the larger volume aroma chemicals are generally
considered commodity products, with price and customer relationships
constituting the key selling factors.
Products
The Company's principal flavor and fragrance products consist of
compounds of large numbers of ingredients blended under proprietary formulas
created by its perfumers and flavorists. Most of these compounds contribute
substantially all of the flavor or fragrance to the consumer end products in
which they are incorporated. Numerous compounds are produced by the Company, and
new compounds are constantly being created in order to meet the many and
changing characteristics of its customers' end products. The Company's flavor
products also include essential oils, natural extracts, spice extracts and
seasonings derived from various fruits, vegetables, nuts, herbs and spices as
well as enzymatically enhanced ingredients. The Company's products are sold in
liquid, powder and paste forms in volumes ranging from a few kilograms to
several tons, depending on the nature of the customer's finished product. The
Company also produces aroma chemicals for use in its own flavor and fragrance
compounds as well as for sale directly to other flavor and fragrance consumer
product manufacturers.
Flavor Products
The Company produces flavor compounds which are sold primarily to
the food, beverage, and pharmaceutical industries and include (i) compounds
typically consisting of natural and synthetic substances, (ii) reaction or
process flavors, which are substances that enhance flavor when heat or pressure
cooking is applied and (iii) enzymatically enhanced flavors. Flavor compounds
typically consist of either sweet or savory flavors. Sweet flavors include
various fruits as well as vanilla, coffee, chocolate and cola. The Company's
sweet flavor compounds are used in such consumer products as soft drinks,
candies, baked goods, desserts, prepared foods, dietary foods, dairy products
and drink powders. Savory flavors are composed of spices and herbs and include
primarily meat, fish and cheese flavors. The Company's savory flavor compounds
are used in snack products of all kinds as well as processed foods, such as
prepared meals, soups and sauces. In addition to sweet and savory flavors, the
Company produces flavors for specific applications, such as oral hygiene and
pharmaceutical products. In 1994, 1995 and 1996, sales of flavor compounds
accounted for approximately 38%, 37% and 37%, respectively, of the Company's
total net sales.
The Company produces natural products which are sold primarily to the
food industry and consist of essential oils, natural extracts, spices and
seasonings. Essential oils are mixtures of natural aroma chemicals typically
obtained by steam distillation or expression from plants, fruits, seeds, barks,
leaves and berries. Essential oils and natural extracts are used as flavoring
items in their own right and also as raw materials for compounding
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flavors, as well as fragrances. In addition to selling such products to
customers, the Company uses them to produce its own flavor and fragrance
compounds. Spices are dried plant products which, due to their high content of
essential oils, are highly aromatic. In 1994, 1995 and 1996, sales of natural
products accounted for approximately 17%, 21% and 21%, respectively, of the
Company's total net sales.
Fragrance Products
The Company produces a broad range of fragrance compounds which are sold
primarily to manufacturers of cosmetics and toiletries, household cleaners, and
personal care products. The Company has also been successful in promoting the
use of deodorants in a variety of applications such as masking diesel automotive
fuel odor. In addition, the Company has devoted substantial research and
development activity toward developing malodor counteractive fragrances for use
in laundry and air freshener applications. The Company is also promoting a new
line of fragrance compounds based on extensive analysis of scents from living
plants and flowers. These fragrances are being marketed by the Company under the
GENERESSENCE'r' trade name. In 1994, 1995 and 1996, sales of fragrances
(excluding the resale of aroma chemicals purchased from BBA's Aroma Chemical
Division) accounted for approximately 18%, 17% and 17%, respectively, of the
Company's total net sales.
Aroma Chemicals
The Company produces aroma chemicals for use in its own flavor
and fragrance compounds as well as for sale directly to other flavor and
fragrance and consumer product manufacturers, which, in turn, use them as raw
materials in their own formulations and products. The Company obtains
approximately 15% of its crude turpentine needs from Union Camp operations and
also uses procurement services provided by Union Camp for other external
purchases of turpentine, in each case at approximately fair market value. The
Company is a major supplier of terpene-based aroma chemicals throughout the
world. The Company's aroma chemical products include geraniol, citral,
citronellol, linalol, terpineol, ionones and various synthetic musks, including
ABBALIDE'tm' and TETRALIDE'r'. The Company also manufactures LILESTRALIS'tm', a
well-known petrochemical-based product with lily-type floral aroma. A different
grade of LILESTRALIS is sold by the Company to agrichemical manufacturers for
use as an intermediate in certain fungicides. In 1994, 1995 and 1996, sales of
aroma chemicals (including the resale of aroma chemicals by BBA's Fragrance
business) accounted for approximately 27%, 25% and 25%, respectively, of the
Company's total net sales.
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Marketing and Customers
The Company sells flavor and fragrance compounds to major
international food, beverage and other consumer product manufacturers. BBA
regards these large multinational consumer products companies as a key customer
segment and manages business development for these accounts ("international
target accounts") on an integrated, worldwide basis. The Company often
cooperates with these customers in the development of specific flavors or
fragrances for a particular end product. The Company also sells its products to
a large number of regional and local customers. The Company's approach to
servicing regional and local customers is similar to that for its international
target accounts; however, the flavor or fragrance products offered typically
reflect the tastes and preferences of the specific region.
The Company's aroma chemical products are sold primarily to major
manufacturers of household products, including soaps and detergents, fabric
conditioners, cosmetics and toiletries for incorporation in fragrances
compounded by these customers and other fragrance and flavor compounders. During
1996, the Company's ten largest external aroma chemical customers accounted for
approximately 55% of the Company's total aroma chemicals sales. Product quality,
product consistency, timely delivery and overall service are important factors
in successfully maintaining aroma chemical accounts.
During 1996, the Company's ten largest customers accounted for an
aggregate of approximately 23% of its total net sales, its three largest
customers and their affiliates accounted for approximately 5%, 4% and 3%
respectively, of its total net sales, and no other single customer accounted for
more than 3% of total net sales.
Research and Development
The work of the Company's perfumers and flavorists is conducted
in the Company's three major regional creative and technical centers located in
Montvale, New Jersey (for the Americas region), London (for the Europe and
International regions), and Singapore (for the Asia Pacific region). Ideas and
products generated in these creative and technical centers are made available to
the Company's regional centers for further development. In addition, the Company
maintains 37 laboratories located throughout the world which support technical
and development efforts in local markets. The Company's flavor and fragrance
research is conducted at its facility in London and at Union Camp's research
facility in Princeton, New Jersey. The Company continues to contract for
services from Union Camp's Princeton facility. See "Certain Relationships and
Related Transactions". The Company also has extensive analytical capabilities at
its London facilities which aid in the isolation and identification of flavor
and fragrance ingredients.
Research and development for the Company's aroma chemicals
business is conducted principally in advanced technical centers in Widnes,
United Kingdom and Jacksonville, Florida, with strong support from the central
laboratories in London and
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from Union Camp's research facility in Princeton. See "Certain Relationships and
Related Transactions".
The Company spent a total of approximately $22.5 million, $19.9
million and $18.5 million in 1996, 1995 and 1994, respectively, on research and
development activities. The Company expects these expenditures to increase in
1997 to an aggregate of approximately $24 million.
Manufacturing and Distribution
The major manufacturing and compounding facilities of the Company
are located in Australia, Canada, China, India, New Zealand, Singapore, South
Africa, the United Kingdom and the United States.
BBA's aroma chemicals manufacturing facility in the United
Kingdom is located in Widnes. Operations began at Widnes in 1958 and, following
expansions in 1964, 1988, 1992 and 1993, the facility now includes highly
automated, versatile and sophisticated processing equipment. During 1995 and
1996, an annual amount of approximately 6,000 tons of terpene- and
petroleum-based aroma chemicals as well as technical grade LILESTRALIS, an
intermediate used in the production of agricultural fungicides, were produced at
Widnes and sold to customers including the manufacturers of soaps, detergents,
cleaners, and other fragrance products.
In the U. S., the Jacksonville facility processes approximately
ten million gallons per year of turpentine through high-efficiency distillation
columns. Beta pinene, one of the distillation products, is further processed
through versatile batch equipment to produce a broad range of aroma chemicals
including geraniol, citral, citronellol, and ionones. The Jacksonville facility
also supplies aroma chemical intermediates to Widnes for further processing.
BBA's flavor and fragrance compounding facilities, as well as
those of the other major producers, are primarily batch weighing and blending
and liquid packaging facilities that are operated manually. Given the complexity
of most flavor and fragrance compounds, small quantities of the various
components are dispensed, weighed and added to a mixing unit by hand. BBA has
begun to automate its compounding processes, starting with its raw material
delivery system. Automated carousels which deliver numerous small-scale
ingredients to the compounder have been installed at the London and Norwood, New
Jersey fragrance compounding facilities.
BBA's major essential oil production facility is located in Long
Melford, United Kingdom.
The Company's two major production centers for seasonings are
located at Long Melford, United Kingdom and Carrollton, Texas. At both
facilities, various spices, flavors
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and essential oils are dry mixed with salt, flour or other carriers to produce a
finished seasoning. As with flavor and fragrance compounding, the weighing and
adding of raw materials to the blending process is mostly manual.
The Company's products are primarily distributed through its own
sales force, operating from 5 sales offices in the United States and 56 sales
offices in 40 other countries. In addition, the Company currently markets its
products through sales agencies in countries in which it does not have a direct
sales force. Most of the Company's 61 sales facilities around the world stock
inventory of the Company's products.
Raw Material Purchases; Suppliers
The Company purchases more than 1,000 different raw materials
from many sources throughout the world. The principal natural raw material
purchases consist of essential oils, extracts and concentrates derived from
fruits, vegetables, flowers, woods and other botanicals. The Company's principal
raw material purchases consist of organic chemicals, primarily turpentine. No
single supplier accounted for more than 3% of the Company's raw material
requirements in 1995 and 1996. 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.
Competition
The Company has more than 300 competitors worldwide,
approximately 15 of which the Company believes have significant international
operations. The Company's competitive position is based principally on the
creative skills of its perfumers and flavorists, technological advances
resulting from its research and development and customer service and support
provided by its marketing and application groups, as well as product quality
and, to a lesser extent, price. The Company believes it is one of the ten
largest manufacturers of flavors and fragrances and aroma chemicals, as measured
by revenues, in the world. In particular countries and localities, the Company
competes with numerous companies specializing in certain product lines, some of
which are larger than the Company and some stronger in a particular product line
or lines. Most of the Company's customers do not buy all of their flavor and/or
fragrance products from a single supplier, and some customers make their own
flavor or fragrance compounds with ingredients supplied by the Company or
others.
Employees
As of December 25, 1996, the Company had 2,103 full-time
equivalent employees.
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Governmental Regulation
Manufacture and sale of the Company's products are subject to
regulation in the United States by federal regulatory agencies, including the
Food and Drug Administration, the Alcohol, Tobacco and Firearms Bureau of the
Treasury Department, the Environmental Protection Agency, the Occupational
Safety and Health Administration, and by various state and local authorities.
The Company's operations outside the United States are subject to similar
regulation in a number of countries. Compliance with existing governmental
requirements of such bodies has not materially affected the Company's
operations, earnings or competitive position. The Company is subject to various
United States federal, state and local environmental laws and regulations
concerning emissions to the air, discharges to waterways, the release of
materials into the environment, or otherwise relating to the protection of the
environment. In addition, a number of local communities and countries other than
the United States have enacted, or have under consideration, laws and
regulations relating to the use and disposal of materials relating to the
production of flavors and fragrances. The Company's capital expenditures
relating to environmental projects totaled $0.8 million in 1996. In addition,
the Company estimates capital expenditures relating to environmental projects
will be approximately $1.5 million in 1997.
Item 2. Properties
The following table sets forth the locations of the Company's
principal properties, all of which are owned, unless otherwise indicated:
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Location Nature of Property
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Auckland, New Zealand Manufacturing (Flavors, fragrances and seasonings)
Carrollton, Texas (1) Manufacturing (Seasonings)
Chicago, Illinois Manufacturing (Flavors)
Guangzhou, Peoples Republic of China Manufacturing (Flavors and fragrances)
Jacksonville, Florida Manufacturing (Terpene derivatives and aroma chemicals)
Johannesburg, South Africa Manufacturing (Flavors, fragrances and seasonings)
Jurong, Singapore(2) Manufacturing (Flavors and fragrances)
London, United Kingdom Regional headquarters, manufacturing (Flavors and fragrances)
Long Melford, United Kingdom Manufacturing (Spices, essential oils and seasonings)
Madras, India(3) Manufacturing (Flavors and fragrances)
Melbourne, Australia Manufacturing (Flavors, fragrances and seasonings)
Montreal, Canada Manufacturing (Flavors, fragrances, spices, essential oils and
seasonings)
Montvale, New Jersey(1) Corporate administrative headquarters and technical center
Norwood, New Jersey(1) Manufacturing (Fragrances and essential oils)
Sydney, Australia(1) Manufacturing (Flavors)
Widnes, United Kingdom Manufacturing (Aroma chemicals)
Witham, United Kingdom Manufacturing (Flavors)
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(1) Leased.
(2) Land is leased and buildings are owned.
(3) The Company has approximately a 70% interest in the subsidiary company which
owns this facility.
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Item 3. Legal Proceedings
The Company is a party to various legal proceedings arising in
the ordinary course of business. Based upon the information presently available
and the Company's evaluation of the pending proceedings and applicable
enforcement and penalty policies and practices, management believes that the
adverse determination of any such proceeding or all of them combined would not
have a material adverse effect on the Company's business or financial position
or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Executive Officers of Bush Boake Allen Inc.
Set forth below are the names, ages and positions of the
executive officers of the Company as of March 1, 1997.
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Name Age Position
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Julian W. Boyden .......... 52 Chairman, President and Chief Executive Officer
Fred W. Brown ............. 50 Vice President, Finance and Chief Financial Officer
T. John Dunlea ............ 51 Vice President, Asia Pacific Region
James H. Dunsdon .......... 50 Executive Vice President
Bruce J. Edwards .......... 50 Vice President, International Region
Johannes Kleppers ......... 40 Vice President, Europe Region
John J. Lawless ........... 63 Vice President, Human Resources & Safety
P. C. Mathew .............. 46 Vice President, Aroma and Terpene Chemicals
Kenneth M. McHugh ......... 45 Controller
Dennis M. Meany ........... 49 Vice President, General Counsel and Secretary
Peter A. Thorburn ......... 54 Vice President, Chemical Sales
Charles D. Weller ......... 49 Treasurer
John R. Wright ............ 50 Vice President, Commerce and Technology
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Set forth below is a description of the backgrounds of the executive
officers of the Company. As used in such description, the term "Company" means
BBA or one or more of BBA's predecessors.
Julian W. Boyden was named Chairman of the Board of Directors of the
Company effective January 1, 1997 and has been President and Chief Executive
Officer since February 1994. Mr. Boyden was a Vice President of Union Camp since
January 1991 and the General Manager of the Company since January 1989. Mr.
Boyden has been a Director of the Company since 1994 and has been associated
with the Company since 1968.
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Fred W. Brown was named Vice President, Finance in February 1994. Mr.
Brown was Controller of the Company from January 1990 until February 1994. From
1978 to January 1990 he was Controller of Union Camp's kraft linerboard mill in
Prattville, Alabama. Mr. Brown has been associated with the Company or Union
Camp since 1971.
T. John Dunlea has been Vice President, Asia Pacific Region since
February 1992. From February 1987 to February 1992 Mr. Dunlea was the U.K.
Natural Products Manager. Mr. Dunlea has been associated with the Company since
1969.
James H. Dunsdon has been Executive Vice President of the Company since
August 1996. Prior to that he was Vice President, Europe Region since July 1990.
From February 1987 to June 1990 he was Business Manager of the Flavors Division.
Mr. Dunsdon has been associated with the Company since 1969.
Bruce J. Edwards has been Vice President, International Region of the
Company since December 1993. From 1980 to November 1993 Mr. Edwards was employed
as Sales Director by Borthwicks Plc, a U.K.-based producer of flavor compounds.
Mr. Edwards was previously associated with the Company from 1965 until 1980.
Johannes Kleppers was elected Vice President, Europe Region in November
1996. From January 1995 to November 1996 he was General Manager of BBA's Flavor
Division in the United Kingdom. From 1988 to January 1995 he was Flavor Sales
Manager of such Flavor Division.
John J. Lawless has been Vice President, Human Resources & Safety since
December 1978. Mr. Lawless has been associated with the Company since 1954.
P. C. Mathew has been Vice President, Aroma and Terpene Chemicals since
January 1994. From April 1989 to January 1994 he was Vice President,
Administration. Prior to that time he was Managing Director of BBA India. Mr.
Mathew has been associated with the Company since 1984.
Kenneth M. McHugh was named Controller of the Company in February 1994.
From August 1986 to January 1994 he was Regional Controller for BBA's Americas
Region. Mr. McHugh has been associated with the Company or Union Camp since
1976.
Dennis M. Meany was named Vice President, General Counsel and Secretary
in February 1994. From May 1986 to February 1994 Mr. Meany was Associate General
Counsel and Assistant Secretary of Union Camp Corporation. He has been
associated with the Company or Union Camp since 1977.
Peter A. Thorburn has been Vice President, Chemical Sales since January
1994. From January 1992 to December 1993 he was Vice President, International
Region. From July 1990 to January 1992 he was Vice President, with
responsibility for the Middle East
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and Africa. From September 1981 to June 1990 he was Vice President with
responsibility for Western Europe. Mr. Thorburn has been associated with the
Company since 1981.
Charles D. Weller was named Treasurer of the Company in October 1994.
From 1988 to 1994 Mr. Weller was Assistant Treasurer of Duracell International.
John R. Wright was named Vice President, Commerce and Technology in
January 1995. From September 1993 to December 1994 Mr. Wright was General
Manager of BBA's Flavor Division in the United Kingdom. From January 1991 until
September 1993 he was Customer Service Manager of such Flavor Division and prior
thereto Technical Manager of BBA's Europe Region. Mr. Wright has been associated
with the Company since 1973.
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
The Common Stock began trading on the New York Stock Exchange under the
symbol BOA on May 12, 1994. The following table sets forth for the fiscal
periods indicated the high and low sales prices of the Common Stock.
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1994 1995 1996
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High Low High Low High Low
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1st Quarter -- -- $27.125 $23.375 $30.875 $26.25
2nd Quarter (In 1994, $17.75 $15.25 31.25 26.12 28.125 24.00
from May 12, 1994)
3rd Quarter 22.00 17.00 30.875 28.50 24.125 20.50
4th Quarter 25.375 19.625 32.75 26.375 26.75 23.625
</TABLE>
The approximate number of stockholders of record at December 25, 1996 was 327.
Since its initial public offering, the Company has not declared any
dividends on its Common Stock. The Company currently intends to retain all
future earnings to finance the operations and expansion of the Company's
business.
Item 6. Selected Financial Data
Information in response to the disclosure requirements specified by this
Item 6 appears on page 39 of the Bush Boake Allen 1996 Annual Report and is
incorporated by reference in this Item 6.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Information in response to the disclosure requirements specified by this
Item 7 appears in the text under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 20 to 24 of
the Bush Boake Allen 1996 Annual Report and is incorporated by reference in this
Item 7.
Item 8. Financial Statements and Supplementary Data
Information in response to the disclosure requirements specified by this
Item 8 appears on pages 25 to 37 of the Bush Boake Allen 1996 Annual Report and
is incorporated by reference in this Item 8.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information in response to the disclosure requirements specified by this
Item 10, with respect to (i) the directors of Bush Boake Allen Inc., appears
under the caption "Proposal 1 - Election of Directors" on pages 1 and 2 of the
Bush Boake Allen 1997 Proxy Statement and (ii) the executive officers of Bush
Boake Allen Inc., appear under the caption "Executive Officers of Bush Boake
Allen Inc." in Part I of this Form 10-K. Such information is incorporated by
reference in this Item 10.
Item 11. Executive Compensation
Information in response to the disclosure requirements specified by this
Item 11 appears under the captions "Board of Directors and Committees",
"Executive Compensation", and "Retirement Plans" on pages 2 to 3, 4 to 5, and 9
to 11 respectively, of the Bush Boake Allen 1997 Proxy Statement. Such
information is incorporated by reference in this Item 11.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information in response to the disclosure requirements specified by this
Item 12 appears under the captions "Security Ownership of Certain Beneficial
Owners" and "Security Ownership of Management as of December 25, 1996" on pages
3 to 4 of the Bush Boake Allen 1997 Proxy Statement and is incorporated by
reference in this Item 12.
-12-
<PAGE>
<PAGE>
Item 13. Certain Relationships and Related Transactions
Information in response to the disclosure requirements specified by this
Item 13 appears under the caption "Certain Relationships and Related Party
Transactions" on pages 11 to 13 of the Bush Boake Allen 1997 Proxy Statement and
is incorporated by reference in this Item 13.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) Index to financial statements
The following financial statements are included at the
indicated page in the Bush Boake Allen 1996 Annual Report and are
incorporated by reference in this Annual Report on Form 10-K:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Statements of Income
for the three years ended
December 25, 1996 ................................... 25
Consolidated Balance Sheets - December 25, 1996
and 1995 ............................................ 26
Consolidated Statements of Cash Flows for the three
years ended December 25, 1996 ....................... 27
Notes to Consolidated Financial Statements ............. 28 -37
Report of Independent Accountants ...................... 38
</TABLE>
(2) All exhibits, including those incorporated by reference.
<TABLE>
<CAPTION>
No. Description
- --- -----------
<C> <S>
* 3.1 Articles of Incorporation of the Company.
** 3.2 Bylaws of the Company.
* 4.1 Specimen Common Stock Certificate of the Company.
* 10.1 Services Agreement, dated May 19, 1994, between Union
Camp Corporation and the Company.
</TABLE>
-13-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
No. Description
- --- -----------
<C> <S>
* 10.2 Technology Cross-License Agreement, dated May 19, 1994, between
Union Camp Corporation and the Company.
* 10.3 Separation Agreement, dated May 19, 1994, between Union Camp
Corporation and the Company.
* 10.4 Assumption of Liabilities and Cross-Indemnification Agreement,
dated May 19, 1994, between Union Camp Corporation and the
Company.
* 10.5 Registration Rights Agreement, dated May 19, 1994, between Union
Camp Corporation and the Company.
* 10.6 Supply Agreement, dated May 19, 1994, between Union Camp
Corporation and the Company.
* 10.7 Tax Allocation Agreement, dated April 6, 1994, between Union Camp
Corporation and the Company.
10.8 Stock Option and Stock Award Plan, as amended.
* 10.9 Employment Agreement, dated April 11, 1994, between the Company and
Julian Boyden.
10.10 Form Executive Severance Agreement approved by Registrant's Board
of Directors effective December 1, 1996.
10.11 Form Director Indemnity Agreement approved by Registrant's Board of
Directors on November 19, 1996.
11.1 Statement re: computation of pro forma per share net income.
13.1 1996 Annual Report; except for those portions thereof that are
expressly incorporated by reference in this Form 10-K, this
exhibit is furnished for the information of the Commission and is
not deemed to be filed as part of this Form 10-K.
21.1 Subsidiaries of the registrant.
23.1 Consent of Price Waterhouse LLP.
27 Financial Data Schedule
</TABLE>
- -----------
* Incorporated by reference to identically numbered exhibits filed in response
to Item 16(a), "Exhibits" of the Company's Registration Statement Form S-1,
as amended (File No. 33-76180), which became effective May 12, 1994.
** Incorporated by reference to Exhibit 3(ii)(b) filed in response to Item 6(a)
"Exhibits and Reports on Form 8-K" of the Company's Form 10-Q (File No.
1-(3030), for the quarterly period ended September 25, 1994.
(b) Reports on Form 8-K.
-14-
<PAGE>
<PAGE>
No Current Report on Form 8-K was filed by the Registrant during the
quarter ended December 25, 1996.
-15-
<PAGE>
<PAGE>
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, IN
MONTVALE, NEW JERSEY, ON THE 19TH DAY OF MARCH, 1997.
BUSH BOAKE ALLEN INC.
By /s/ Julian W. Boyden
_________________________________________
JULIAN W. BOYDEN
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities stated below on March 19, 1997.
<TABLE>
<CAPTION>
Signatures Title
---------- -----
<S> <C>
/s/ Julian W. Boyden Chairman of the Board, President and Chief
- ------------------------------- Executive Officer (Principal Executive
Julian W. Boyden Officer)
/s/ Fred W. Brown, Jr. Vice President, Finance (Principal
- ------------------------------- Financial Officer)
Fred W. Brown, Jr.
/s/ Kenneth M. McHugh Controller (Principal Accounting
- ------------------------------- Officer)
Kenneth M. McHugh
/s/ Peter L. Acton Director
- -------------------------------
Peter L. Acton
/s/ Thomas R. Crane, Jr. Director
- -------------------------------
Thomas R. Crane, Jr.
</TABLE>
-16-
<PAGE>
<PAGE>
<TABLE>
<S> <C>
/s/ L. Robert Pfund Director
- -------------------------------
L. Robert Pfund
/s/ James M. Reed Director, Vice Chairman of the Board
- -------------------------------
James M. Reed
/s/ George J. Sella, Jr. Director
- -------------------------------
George J. Sella, Jr.
/s/ William H. Trice Director
- -------------------------------
William H. Trice
</TABLE>
-17-
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
No. Description Page
- --- ----------- ----
<C> <S> <C>
* 3.1 Articles of Incorporation of the Company.
** 3.2 Bylaws of the Company.
* 4.1 Specimen Common Stock Certificate of the Company.
* 10.1 Services Agreement, dated May 19, 1994, between Union Camp
Corporation and the Company.
* 10.2 Technology Cross-License Agreement, dated May 19, 1994, between
Union Camp Corporation and the Company.
* 10.3 Separation Agreement, dated May 19, 1994, between Union Camp
Corporation and the Company.
* 10.4 Assumption of Liabilities and Cross-Indemnification Agreement,
dated May 19, 1994, between Union Camp Corporation and the
Company.
* 10.5 Registration Rights Agreement, dated May 19, 1994, between Union
Camp Corporation and the Company.
* 10.6 Supply Agreement, dated May 19, 1994, between Union Camp
Corporation and the Company.
* 10.7 Tax Allocation Agreement, dated April 6, 1994, between Union Camp
Corporation and the Company.
10.8 Stock Option and Stock Award Plan, as amended.
* 10.9 Employment Agreement, dated April 11, 1994, between the Company
and Julian Boyden.
10.10 Form Executive Severance Agreement approved by Registrant's Board
of Directors effective December 1, 1996.
10.11 Form Director Indemnity Agreement approved by Registrant's Board
of Directors on November 19, 1996.
11.1 Statement re: computation of pro forma per share net income. 1996
Annual Report; except for those portions thereof that are
expressly incorporated by reference in this Form 10-K, this
exhibit is furnished for the information of the Commission and
is not deemed to be filed as part of this Form 10-K.
21.1 Subsidiaries of the registrant.
23.1 Consent of Price Waterhouse LLP.
27 Financial Data Schedule
</TABLE>
- -----------
* Incorporated by reference to identically numbered exhibits filed in
response to Item 16(a), "Exhibits" of the Company's Registration Statement
Form S-1, as amended (File No. 33-76180), which became effective May 12,
1994.
** Incorporated by reference to Exhibit 3(ii)(b) filed in response to Item
6(a) "Exhibits and Reports on Form 8-K" of the Company's Form 10-Q (File
No. 1-(3030), for the quarterly period ended September 25, 1994.
<PAGE>
<PAGE>
GRAPHIC APPENDIX
----------------
The paper format Annual Report corresponding to Exhibit 13.1 filed herein
includes the graphic material described below.
On the inside front cover
- -------------------------
A map of the world with Bush Boake Allen locations indicated.
Graphs expressing sale in millions:
American Region
1994 - 93
1995 - 108
1996 - 116
European Region
1994 - 89
1995 - 103
1996 - 108
Asia Pacific Region
1994 - 65
1995 - 73
1996 - 79
International Region
1994 - 46
1995 - 53
1996 - 55
Aroma Chemicals
1994 - 83
1995 - 88
1996 - 92
<PAGE>
<PAGE>
Graphs expressing 1996 worldwide sales by end use:
Bush Boake Allen
Aroma Chemicals - 25%
Fragrance - 17%
Flavor - 58%
The World Market
Aroma Chemicals - 16%
Fragrance - 31%
Flavor - 53%
Graphs expressing 1996 worldwide sales by category:
BBA Flavors
Oral Hygiene - 3%
Other - 7%
Beverages - 19%
Confectionary/Bakery - 23%
Dairy/Ice Cream - 11%
Snacks/Processed Foods - 37%
BBA Fragrances
Colognes/Perfumes - 8%
Cosmetics/Toiletries - 23%
Soaps/Detergents - 30%
Cleaners/Air Fresheners - 39%
BBA Aroma Chemicals
Intermediates - 2%
Agrichemicals - 18%
Fragrances - 80%
<PAGE>
<PAGE>
On page 1
- ---------
A graph that visually approximates sales in millions from 1992 through 1996.
A graph that visually approximates earnings in millions from 1992 through 1996.
On page 3
- ---------
A photo of William H. Trice and Julian W. Boyden accompanied by the caption
"At the regular August 1996 meeting of Bush Boake Allen's Board of Directors Mr.
William H. Trice announced his decision to retire as Chairman, effective
December 31, 1996. Mr. Julian W. Boyden, President and Chief Executive Officer
was elected to the additional position of Chairman of the Board, succeeding Mr.
Trice, effective January 1st 1997."
On page 4
- ---------
A pie chart expressing percent of total company flavor and fragrance sales in
the American region as 25% and 8% respectively.
A promotional product photo accompanied by the caption "Bush Boake Allen flavors
help add strong consumer taste appeal to a wide variety of popular food
products."
<PAGE>
<PAGE>
On page 5
- ---------
Various promotional product photos.
On page 6
- ---------
A promotional product photo accompanied by the caption "Fragrances compounded
by BBA are increasingly employed in popular cosmetic and personal care products
(right)."
A promotional product photo accompanied by the caption "BBA is one of the
world's largest producers of high quality vanilla and vanilla based flavors
used in premium consumer products (above)."
A promotional product photo accompanied by the caption "Household products
comprise a growing major market for BBA fragrances."
On page 7
- ---------
A pie chart expressing total company flavor and fragrance sales in the Europe
region as 24% and 5% respectively.
A promotional product photo accompanied by the caption "Bush Boake Allen flavors
help a wide variety of beverages bring good taste to life. (right)."
<PAGE>
<PAGE>
On page 8
- ---------
Two promotional product photos, one in which is accompanied by the caption
"Pleasant memories are often associated with a specific flavor or the taste of
a particular food. (below)."
A caption referring to promotional product photos on page 9 reading "Household
products and cleaners comprise a large growing market for BBA fragrances.
(facing page)."
On page 9
- ---------
Various promotional product photos.
On page 10
- ----------
A pie chart expressing total percent of company flavor and fragrance sales in
the Asia Pacific region as 17% and 5% respectively.
A promotional photo accompanied by the caption "The company's new flavor and
fragrance plant is now in production in Guangzhou, China. (above)."
A caption referring to various promotional product photos on page 11 reading
"Indonesia, is a growing market for BBA natural products and seasonings as
consumption of snack foods continues to rise. (facing page)"
<PAGE>
<PAGE>
On page 11
- -----------
Various promotional product photos.
On page 12
- -----------
Three promotional product photos accompanied by the caption "A wide variety of
convenience food, confections and beverages comprise strong markets for BBA
flavors and seasonings throughout the Asia Pacific Region."
On page 13
- ----------
A pie chart expressing total company flavor and fragrance sales in the
international region as 12% and 4% respectively.
A promotional product photo accompanied by the caption "Polish school children
enjoy some yogurt containing a BBA flavor during a pause in class. (right)."
On page 14
- ----------
Three promotional product photos accompanied by the caption "Rising living
standards and greater freedom seem to go hand in hand with increasing demand for
processed convenience foods and beverages as well as attractively fragranced
products that please consumers."
<PAGE>
<PAGE>
On page 15
- ----------
Various promotional product photos.
On page 16
- ----------
A pie chart expressing total company sales of aroma chemicals as 20%.
A promotional photo accompanied by the caption "A new distillation column is
part of the recently completed expansion at Jacksonsville. (above)."
A promotional product photo accompanied by the caption "Fabric softeners often
contain a fragrance based upon a BBA aroma chemical. (right)."
A caption referring to various promotional product photos on page 17 reading
"Terpene hydrocarbons produced during distillation of terpentine are a source
of pine oil widely used in household cleaners. (facing page)."
<PAGE>
<PAGE>
On page 17
- ----------
Various promotional product photos.
On page 18
- ----------
A graph expressing research and development expenditures in millions:
1994 - 18.5
1995 - 19.9
1996 - 22.5
A promotional product photo accompanied by the caption "Notwithstanding highly
sophisticated analytical instrumentation, the human nose still remains a
uniquely sensitive instrument in judging the organoleptic qualities of a
fragrance. (right)."
A caption referring to various promotional product photos on page 19 reading
"Scientists at the Princeton Technology Center investigate an improved
extraction process for vanilla. (facing page)."
On page 19
- ----------
Various promotional product photos.
<PAGE>
<PAGE>
On page 20
- ----------
A graph expressing the percent of BBA operating margin:
1994 - 11.1%
1995 - 11.8%
1996 - 10.4%
On page 21
- ----------
A graph expressing BBA operating income in millions:
1994 - 41.8
1995 - 50.2
1996 - 46.5
STATEMENT OF DIFFERENCES
The registered trademark symbol shall be expressed as...................... 'r'
The trademark symbol shall be expressed as................................. 'tm'
The section symbol shall be expressed as................................... 'SS'
The dagger symbol shall be expressed as ....................................`D'
<PAGE>
<PAGE>
EXHIBIT 10.8
BUSH BOAKE ALLEN INC.
1994 STOCK OPTION AND STOCK AWARD PLAN
1. Purpose
The purpose of this 1994 Stock Option and Stock Award Plan (the
"Plan") is to encourage and enable selected officers and other key employees of
Bush Boake Allen Inc. (the "Company") and its subsidiaries to acquire a
proprietary interest in the Company through the ownership of common stock of the
Company. Such ownership will provide such employees with a more direct stake in
the future welfare of the Company, and encourage them to remain with the Company
and its subsidiaries. It is also expected that the Plan will encourage qualified
persons to seek and accept employment with the Company and its subsidiaries.
Pursuant to the Plan, such employees will be offered the opportunity to acquire
such common stock through the grant of options, the award of restricted stock
under the Plan, bonuses payable in stock or a combination thereof.
As used herein, the term "subsidiary" shall mean any present or
future corporation which is or would be a "subsidiary corporation" of the
Company as the term is defined in Section 424(f) of the Internal Revenue Code of
1986, as amended (the "Code").
2. Administration of the Plan
The Plan shall be administered by the Board of Directors of the
Company or a Compensation Committee as appointed from time to time by the Board
of Directors of the Company, which Compensation Committee shall consist of not
less than two (2) members of such Board of Directors and shall be constituted so
far as possible to permit the Plan to comply with the administration
requirements of Rule 16b-3 (c) (2) (i) of the Securities Exchange Act of 1934,
as it may be amended from time to time (the "Exchange Act"); none of the members
of the Compensation Committee shall be eligible to be granted options or awarded
restricted stock under the Plan or receive bonuses payable in stock. No member
of the Board of Directors shall be appointed to the Compensation Committee who
has been granted an option, awarded restricted stock or received a bonus payment
in stock under the Plan within one year prior to appointment. As used
hereinafter the term "Committee" shall mean (i) the Board of Directors of the
Company at all times that a Compensation Committee is not in existence or (ii)
the Compensation Committee at all times that a Compensation Committee is in
existence.
In administering the Plan, the Committee may adopt rules and
regulations for carrying out the Plan. The interpretation and decision with
regard to any question arising under the Plan made by the Committee shall be
final and conclusive on all employees of the Company and its subsidiaries
participating or eligible to participate in the Plan. The Committee may consult
with counsel, who may be of counsel to the
<PAGE>
<PAGE>
Company, and shall not incur any liability for any action taken in good faith in
reliance upon the advice of counsel.
The Committee shall determine the employees to whom, and the time
or times at which, grants or awards shall be made and the number of shares to be
included in the grants or awards.
Each option granted pursuant to the Plan shall be evidenced by an
Option Agreement (the "Agreement") . The Agreement shall not be a precondition
to the granting of options; however, no person shall have any rights under any
option granted under the Plan unless and until the optionee to whom such option
shall have been granted shall have executed and delivered to the Company an
Agreement. The Committee shall prescribe the form of the Agreement. A fully
executed original of the Agreement shall be provided to both the Company and the
optionee.
3. Shares of Stock Subject to the Plan
The total number of shares that may be optioned or awarded under
the Plan is 750,000 shares of the $1.00 par value common stock of the Company
(the "Common Stock") plus an additional amount of shares on May 1 each year,
from May 1, 1995 to May 1, 2003, inclusive, equal to one percent (1%) of the
number of shares of Common Stock outstanding on the immediately preceding April
30 (the "Additional Annual Increment") , of which (i) 150,000 shares plus shares
equal to twenty percent (20%) of each Additional Annual Increment may be awarded
as restricted stock and (ii) no more than one million (1,000,000) shares may be
awarded as Incentive Stock Options, as defined in Section 422 of the Code,
except that, notwithstanding any of the foregoing limitations set forth in this
Paragraph 3, said numbers of shares shall be adjusted as provided in Paragraph
12. Any shares subject to an option which for any reason expires or is
terminated unexercised and any restricted stock which is forfeited may again be
optioned or awarded under the Plan; provided, however, that forfeited shares
shall not be available for further awards if the employee has realized any
benefits of ownership from such shares. Shares subject to the Plan may be either
authorized and unissued shares or issued shares acquired by the Company or its
subsidiaries.
No employee shall receive, over the term of the Plan, awards in
the form of options, whether incentive stock options or options other than
incentive stock options, to purchase more than 500,000 shares of Common Stock.
4. Eligibility
Key employees, including officers, of the Company and its subsidiaries (but
excluding members of the Committee) are eligible to be granted options and
awarded restricted stock under the Plan and to have their bonuses payable in
stock. The
-2-
<PAGE>
<PAGE>
employees who shall receive awards or options under the Plan shall be selected
from time to time by the committee, in its sole discretion, from among those
eligible, and the Committee shall determine, in its sole discretion, the number
of shares to be covered by the award or awards and by the options or options
granted to each such employee selected.
5. Duration of the Plan
The Plan shall be adopted by the Board as of the date on which it
is approved by a majority of the Company's stockholders, which approval must
occur within the period ending twelve months after the date the Plan is adopted.
The Plan shall terminate upon the earlier of the following dates or events to
occur:
(a) upon the adoption of a resolution of the Board terminating
the Plan; or
(b) ten years from the date of adoption of the Plan by the Board;
or
(c) the date all shares of Common Stock subject to the Plan shall
have been purchased according to the Plan's provisions.
No such termination of the Plan shall affect the rights of any
Participant hereunder and all options previously granted and restricted stock
and stock bonus awarded hereunder shall continue in force and in operation after
the termination of the Plan, except as they may be otherwise terminated in
accordance with the terms of the Plan.
6. Terms and Conditions of Stock Options
All options granted under this Plan shall be either Incentive
Stock Options as defined in Section 422 of the Code or options other than
Incentive Stock Options. Each such option shall be subject to all the applicable
provisions of the Plan, including the following terms and conditions, and to
such other terms and conditions not inconsistent therewith as the Committee
shall determine.
(a) The option price per share shall be determined by the
Committee. However, the option price shall not be less than 100% of the
fair market value at the time the option is granted, except, that, the
initial grant of options may be at the initial public offering price of
the Common Stock. The fair market value shall be the mean of the high
and low sales prices f or the Common Stock as reported on the Composite
Tape for New York Stock Exchange issues for the day on which the option
is granted. If there is no sale of the shares reported on such Tape on
the date the option is granted, the mean of the bid and asked prices
reported on such Tape at the close of the market on such date shall be
deemed to be the fair market value of the shares. In the event that the
Common Stock is not listed on the New
-3-
<PAGE>
<PAGE>
York Stock Exchange or the method for determining the fair market value
of the shares provided for in this Paragraph 6(a) shall not for any
reason be practicable, then the fair market value per share shall be
determined by such other reasonable method as the Committee shall, in
its discretion, select and apply at the time of grant of the option
concerned.
(b) Each option shall be exercisable during and over such period
ending not later than ten years from the date it was granted, as may be
determined by the Committee and stated in the option.
(c) No option shall be exercisable prior to the expiration of the
period specified by the Committee at the time of grant (the "vesting
period"), which period shall not be less than six (6) months, except as
provided in Paragraphs 6(j), 9 and 12 of the Plan.
(d) Each option shall state whether it will or will not be
treated as an Incentive Stock Option.
(e) Each option may be exercised by giving written notice to the
Company specifying the number of shares to be purchased, which shall be
accompanied by payment in full including applicable taxes, if any.
Payment shall be (i) in cash, or (ii) in shares of Common Stock of the
Company already owned by the optionee (the value of such stock shall be
its fair market value on the date of exercise as determined under
Paragraph 6 (a) , or (iii) by a combination of cash and shares of Common
Stock of the Company. No option shall be exercised for less than the
lesser of 50 shares or the full number of shares for which the option is
then exercisable. No optionee shall have any rights to dividends or
other rights of a shareholder with respect to shares subject to his
option until he has given written notice of exercise of his option and
paid in full for such shares. Payment of taxes, if any, shall be in cash
at time of exercise or on the applicable tax date under Section 83 of
the Code, if later, provided, however, tax withholding obligations may
be met by the withholding of Common Stock otherwise deliverable to the
optionee pursuant to procedures approved by the Committee. In no event
shall Common Stock be delivered to any optionee until he has paid to the
Company in cash the amount of tax required to be withheld by the Company
or has elected to have his tax withholding obligations met by the
withholding of Common Stock in accordance with the procedures approved
by the Committee, except that in the case of later tax dates under
Section 83 of the Code, the Company may deliver Common Stock prior to
the optionee's satisfaction of tax withholding obligations if the
optionee makes arrangements satisfactory to the Company that such
obligations will be met on the applicable tax date.
(f) Notwithstanding the foregoing Paragraph 6(e) of the Plan,
each option granted hereunder may provide, or be amended to provide, the
right either (i) to exercise such option in whole or in part without any
payment of the option
-4-
<PAGE>
<PAGE>
price, or (ii) to request the Committee to permit, in its sole
discretion, such exercise without any payment of the option price. If an
option is exercised without a payment of the option price, the optionee
shall be entitled to receive that number of whole shares as is
determined by dividing (a) an amount equal to the fair market value per
share on the date of exercise as determined under Paragraph 6(a) into
(b) an amount equal to the excess of the total fair market value of the
shares on such date as so determined with respect to which the option is
being exercised over the total cash purchase price of such shares as set
forth in the option. Fractional shares will be rounded to the next
lowest number and the optionee will receive cash in lieu thereof. At the
sole discretion of the Committee, or as specified in the option, the
settlement of all or part of an optionee's rights under this Paragraph
6(f) may be made in cash in an amount equal to the fair market value of
the shares otherwise payable hereunder. The number of shares with
respect to which any option is exercised under this Paragraph 6(f) shall
reduce the number of shares thereafter available for exercise under the
option, and such shares thereafter may not again be optioned under the
Plan.
(g) Each option may provide, or be amended to provide, that the
optionee may exercise the option without payment of the option price by
delivery to the Company of an exercise notice and irrevocable
instructions to deliver shares of Common Stock directly to the stock
broker named therein in exchange for payment of the option price and
withholding taxes by such broker to the Company.
(h) If an optionee's employment by the Company or a subsidiary
terminates by reason of his retirement under a retirement plan of the
Company or a subsidiary, his option may thereafter be exercised whenever
the vesting period has elapsed until the expiration of the stated
period of the option; provided, however, that if the optionee dies
after such termination of employment, any unexercised option may
thereafter be immediately exercised in full by the legal representative
of his estate or by the legatee of the optionee under his last will
until the expiration of the stated period of the option; provided,
further, that any right granted to such an optionee pursuant to
Paragraph 6(f) of the Plan, shall terminate on the date of such
termination of employment.
(i) If an optionee's employment by the Company or a subsidiary
terminates by reason of permanent disability, as determined by the
Committee, his option may thereafter be exercised whenever the vesting
period has elapsed until the expiration of the stated period of the
option; provided, however, that if the optionee dies after such
termination of employment, any unexercised option may thereafter be
immediately exercised in full by the legal representative of his estate
or by the legatee of the optionee under his last will until the
expiration of the stated period of the option; provided, further, that
any right granted to such an
-5-
<PAGE>
<PAGE>
optionee pursuant to Paragraph 6(f) of the Plan, shall terminate on the
date of such termination of employment.
(j) If an optionee's employment by the Company or a subsidiary
terminates by reason of his death, his option may thereafter be
immediately exercised in full by the legal representative of his estate
or by the legatee of the optionee under his last will until the
expiration of the stated period of the option; provided, however, that
any right granted to such an optionee pursuant to Paragraph 6(f) of the
Plan, shall terminate on the date of his death.
(k) Unless otherwise determined by the Committee, if an
optionee's employment terminates for any reason other than death,
retirement or permanent disability, his option shall thereupon
terminate.
(l) The option by its terms shall be personal and shall not be
transferable by the optionee otherwise than by will or by the laws of
descent and distribution. During the lifetime of an optionee, the option
shall be exercisable only by him.
(m) Notwithstanding any intent to grant Incentive Stock Options,
an option granted will not be considered an Incentive Stock Option to
the extent that it together with any earlier Incentive Stock Options
permits the exercise for the first time in any calendar year of more
than $100,000 in value of Common Stock (determined at the time of
grant).
(n) In the event any option is exercised by the executors,
administrators, heirs or distributees of the estate of a deceased
optionee, the Company shall be under no obligation to issue Common Stock
thereunder unless and until the Company is satisfied that the person or
persons exercising the option are the duly appointed legal
representative of the deceased optionee's estate or the proper legatees
or distributees thereof.
(o) No incentive stock option shall be granted to an employee who
owns immediately before the grant of such option, directly or
indirectly, stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company. This restriction does not
apply if, at the time such incentive stock option is granted, the option
price is at least 110% of the fair market value of one share of Common
Stock, as determined in Paragraph 6(a), on the date of grant and the
incentive stock option by its terms is not exercisable after the
expiration of five years from the date of grant.
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7. Terms and conditions of Restricted Stock Awards
All awards of restricted stock under the Plan shall be subject to
all the applicable provisions of the Plan, including the following terms and
conditions, and to such other terms and conditions not inconsistent therewith,
as the Committee shall determine.
(a) Awards of restricted stock may be in addition to or in lieu
of option grants.
(b) During a period set by the Committee at the time of each
award of restricted stock (the "restriction period"), the recipient
shall not be permitted to sell, transfer, pledge, or assign the shares
of restricted stock.
(c) Shares of restricted stock shall become free of all
restrictions if the recipient dies or his employment terminates by
reason of permanent disability, as determined by the Committee, during
the restriction period and, to the extent set by the Committee at the
time of the award or later, if the recipient retires under a retirement
plan of the Company or a subsidiary during such period. The Committee
may require medical evidence of permanent disability, including medical
examinations by physicians selected by it. If the Committee determines
that any such recipient is not permanently disabled or that a retiree's
restricted stock is not to become free of restrictions, the restricted
stock held by either such recipient, as the case may be, shall be
forfeited and revert to the Company.
(d) Shares of restricted stock shall be forfeited and revert to
the Company upon the recipient's termination of employment during the
restriction period for any reason other than death, permanent disability
or retirement under a retirement plan of the Company or a subsidiary
except to the extent the Committee, in its sole discretion, finds that
such forfeiture might not be in the best interest of the Company and,
therefore, waives all or part of the application of this provision to
the restricted stock held by such recipient.
(e) Stock certificates for restricted stock shall be registered
in the name of the recipient but shall be appropriately legended and
returned to the Company by the recipient, together with a stock power,
endorsed in blank by the recipient. The recipient shall be entitled to
vote shares of restricted stock and shall be entitled to all dividends
paid thereon, except that dividends paid in Common Stock or other
property shall also be subject to the same restrictions.
(f) Restricted stock shall become free of the foregoing
restrictions upon expiration of the applicable restriction period and
the Company shall deliver Common Stock certificates evidencing such
stock.
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(g) Recipients of restricted stock shall be required to pay taxes
to the Company upon the expiration of restriction periods or such
earlier dates as elected pursuant to Section 83 of the Code; provided,
however, tax' withholding obligations may be met by the withholding of
Common Stock otherwise deliverable to the recipient pursuant to
procedures approved by the Committee. In no event shall Common Stock be
delivered to any awardee until he has paid to the Company in cash the
amount of tax required to be withheld by the Company or has elected to
have his withholding obligations met by the withholding of Common Stock
in accordance with the procedures approved by the Committee.
8. Bonuses Payable in Stock
In lieu of cash bonuses otherwise payable under the Company's
compensation practices to employees eligible to participate in the Plan, the
Committee, in its sole discretion, may determine that such bonuses shall be
payable in stock or partly in stock and partly in cash. Such bonuses shall be in
consideration of services previously performed and shall consist of shares of
Common Stock free of any restrictions imposed by the Plan. The number of shares
of Common Stock payable in lieu of an amount of each bonus otherwise payable
shall be determined by dividing such amount by the fair market value of one
share of Common Stock on the date the bonus is payable, with the fair market
value determined in accordance with Paragraph 6(a). The Company shall withhold
from any such bonus an amount of cash sufficient to meet its tax withholding
obligations.
9. Limited Rights
Any option granted under the Plan may, at the discretion of the
Committee, contain provisions for limited rights, as described herein. A limited
right shall be exercisable upon the occurrence of an event specified in the
option as an exercise event, and shall expire thirty (30) days after the
occurrence of such event. Exercise events may include, at the discretion of the
Committee and as specified in the option, consummation of a tender or exchange
offer for at least 20% of the Company's Common Stock outstanding at the
commencement of such offer or a proxy contest the result of which is the
replacement of a majority of the members of the Company's Board of Directors, or
consummation of a merger or reorganization of the Company in which the Company
does not survive or in which the shareholders of the Company receive stock or
securities of another corporation or cash, or a liquidation or dissolution of
the Company or other similar events. Limited rights shall permit optionees to
receive in cash either (i) the highest market price per share for each share
covered by an option, without regard to the date on which the option otherwise
would be exercisable, which the Company's Common Stock traded on the New York
Stock Exchange for the sixty days immediately preceding the exercise event or
(ii) if provided by the Committee in its discretion at the time of grant, the
highest market price per share for each share covered by the option which the
Company's Common Stock traded on the New York Stock Exchange on the date of
exercise, less the option price per share specified in the option. In the event
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the exercise event is consummation of a tender or exchange offer, the value per
share set by the tenderor or offeror shall be substituted for the highest market
price per share provided in clause (i) in the preceding sentence. Limited rights
shall not extend the exercise period of any option and, to the extent exercised,
shall reduce the shares of Company Common Stock available under the Plan and the
shares of such Stock covered by the options to which the limited rights relate.
10. Transfer, Leave of Absence, Etc.
For the purpose of the Plan: (a) a transfer of an employee from
the Company to a subsidiary, or vice versa, or from one subsidiary to another,
and (b) a leave of absence, duly authorized in writing by the Company, shall not
be deemed a termination of employment.
11. Rights of Employees
(a) No person shall have any rights or claims under the Plan
except in accordance with the provisions of the Plan.
(b) Nothing contained in the Plan shall be deemed to give any
employee the right to be retained in the service of the Company or its
subsidiaries.
12. Changes in Capital
Upon changes in the Common Stock by a stock dividend,
extraordinary dividend payable in cash or property, stock split, reverse split,
subdivision, recapitalization, merger, consolidation (whether or not the Company
is a surviving corporation), combination or exchange of shares, separation,
reorganization or liquidation, the number and class of shares available under
the Plan as to which stock options and restricted stock may be awarded, the
number and class of shares under each option and the option price per share
shall be correspondingly adjusted by the Committee, such adjustments to be made
in the case of outstanding options without change in the total price applicable
to such options; provided, however, no such adjustments shall be made in the
case of stock dividends aggregating in any fiscal year of the Company not more
than 10% of the Common Stock issued and outstanding at the beginning of such
year or in the case of one or more splits, subdivisions or combinations of the
Common Stock during any fiscal year of the Company resulting in an increase or
decrease of not more than 10% of the Common Stock issued and outstanding at the
beginning of such year.
In the event of a "Change of Control of the Company" or a "Change
in Control of Union Camp" (as hereinafter defined) (i) all restrictions on
restricted stock previously awarded to recipients under the Plan shall lapse and
(ii) all stock options and stock appreciation rights which are outstanding shall
become immediately exercisable in full without regard to any limitations of time
or amount otherwise contained in the Plan,
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the options or the rights. Further, in the event of a Change in Control of the
Company, the Committee may determine that the options shall be adjusted and make
such adjustments by substituting for Common Stock subject to options, stock or
other securities of any successor corporation to the Company that may be
issuable by another corporation that is a party to such Change in Control of the
Company if such stock or other securities are publicly traded or, if such stock
or other securities are not publicly traded, by substituting stock or other
securities of a parent or affiliate of such corporation if the stock or other
securities of such parent or affiliate are publicly traded, in which event the
aggregate option price shall remain the same and the amount of shares or other
securities subject to option shall be the amount of shares or other securities
which could have been purchased on the day of the Change in Control of the
Company with the proceeds which would have been received by the optionee if the
option had been exercised in full prior to such Change in Control of the Company
and the optionee had exchanged all of such share in the Change in Control
transaction. No optionee shall have any right to prevent the consummation of any
of the foregoing acts affecting the number of shares available to the optionee.
For purposes of the foregoing, "Union Camp" shall mean Union Camp
Corporation, a Virginia corporation and a Change in Control of the Company or
Union Camp shall include either a "Change in Control of the Company" or a
"Change in Control of Union Camp" (as each is hereafter defined) or both.
I. For purposes of the foregoing, a "Change in Control of the Company"
shall be deemed to have occurred upon the occurrence of one of the
following events:
(a) "any person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (other than the Company, any employee benefit plan sponsored
by the Company, any trustee or other fiduciary holding securities
under an employee benefit plan of the Company, or any corporation
owned, directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of stock
of the Company, or Union Camp or any subsidiary of Union Camp in
which Union Camp's ownership is greater than 50% of the combined
voting power of such subsidiary's then outstanding securities
eligible to vote for the election of its board of directors (a
"Union Camp Subsidiary")), is or becomes (other than pursuant to a
transaction which is deemed to be a "Non-Qualifying Transaction"
under Subsection 12.I.(c)) the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined
voting power of the Company's then outstanding securities eligible
to vote for the election of the Board of Directors of the Company
(the "Company Voting Securities");
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(b) individuals who, on December 1, 1996, constitute the Board of
Directors of the Company (the "Incumbent Directors") cease for any
reason to constitute at least a majority of the Board of Directors
of the Company, provided that any person becoming a director
subsequent to December 1, 1996, whose election or nomination for
election was approved by a vote of at least two-thirds of the
Incumbent Directors then on the Board of Directors of the Company
(either by a specific vote or by approval of the proxy statement
of the Company in which such person is named as a nominee for
director, without written objection to such nomination) shall be
an Incumbent Director; provided, however, that no individual
initially elected or nominated as a director of the Company as a
result of an actual or threatened election contest with respect to
directors (including without limitation in order to settle any
such contest) or any other actual or threatened solicitation of
proxies by or on behalf of any person other than the Board of
Directors of the Company shall be an Incumbent Director;
(c) the stockholders of the Company approve a merger, consolidation,
statutory share exchange or similar form of corporate transaction
involving the Company or any of its subsidiaries that requires
such approval, whether for such transaction or the issuance of
securities in the transaction (a "Business Combination"), unless
immediately following such Business Combination: (i) more than 50%
of the total voting power of (x) the corporation resulting from
such Business Combination (the "Surviving Corporation"), or (y) if
applicable, the ultimate parent corporation that directly or
indirectly has beneficial ownership of 100% of the voting
securities eligible to elect directors of the Surviving
Corporation (the "Parent Corporation"), will be represented by
Company Voting Securities that were outstanding immediately prior
to such Business Combination (or, if applicable, shares into which
such Company Voting Securities were converted pursuant to such
Business Combination), (ii) no person (other than Union Camp, any
Union Camp Subsidiary, any employee benefit plan sponsored or
maintained by the Surviving Corporation or the Parent Corporation)
will be or becomes the beneficial owner, directly or indirectly,
of 25 % or more of the total voting power of the outstanding
voting securities eligible to elect directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving
Corporation) and (iii) at least a majority of the members of the
board of directors of the Parent Corporation (or, if there is no
Parent Corporation, the Surviving Corporation) following the
consummation of the Business Combination were Incumbent Directors
at the time of the approval of the Board of Directors of the
Company of the execution of the initial agreement providing for
such Business Combination (any Business Combination which
satisfies all of the criteria specified in (i), (ii) and (iii)
above shall be deemed to be a "Non-Qualifying Transaction"); or
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(d) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of
the Company's assets.
II. For purposes of the foregoing, a "Change in Control of Union Camp"
shall be deemed to have occurred upon the occurrence of one of the
following events when, immediately prior thereto, Union Camp is the
beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company
Voting Securities:
(a) any person (other than Union Camp, any employee benefit plan
sponsored by Union Camp, any trustee or other fiduciary holding
securities under an employee benefit plan of Union Camp, or any
corporation owned, directly or indirectly, by the stockholders of
Union Camp in substantially the same proportions as their
ownership of stock of Union Camp), is or becomes (other than
pursuant to a transaction which is deemed to be a UC-Involved
Non-Qualifying Transaction under Subsection 12. II.(c)) the
beneficial owner, directly or indirectly, of securities of Union
Camp representing 50% or more of the combined voting power of
Union Camp's then outstanding securities eligible to vote for the
election of the Board of Directors of Union Camp (the "UC Voting
Securities");
(b) individuals who, on October 29, 1996, constitute the Board of
Directors of Union Camp (the "Incumbent UC Directors") cease for
any reason to constitute at least a majority of the Board of
Directors of Union Camp, provided that any person becoming a
director subsequent to October 29, 1996, whose election or
nomination for election was approved by a vote of at least
two-thirds of the Incumbent UC Directors then on the Board of
Directors of Union Camp (either by a specific vote or by approval
of the proxy statement of Union Camp in which such person is named
as a nominee for director, without written objection to such
nomination) shall be an Incumbent UC Director; provided, however,
that no individual initially elected or nominated as a director of
Union Camp as a result of an actual or threatened election contest
with respect to directors (including without limitation in order
to settle any such contest) or any other actual or threatened
solicitation of proxies by or on behalf of any person other than
the Board of Directors of Union Camp shall be an incumbent UC
Director;
(c) the stockholders of Union Camp approve a merger, consolidation,
statutory share exchange or similar form of corporate transaction
involving Union Camp or any of its subsidiaries that requires such
approval, whether for such transaction or the issuance of
securities in the transaction (a "UC-Involved Business
Combination"), unless immediately following such UC-Involved
Business Combination: (i) more than 50% of the total voting power
of (x) the corporation resulting from such UC-Involved
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Business Combination (the "UC-Involved Surviving Corporation"), or
(y) if applicable, the ultimate parent corporation that directly
or indirectly has beneficial ownership of 100% of the voting
securities eligible to elect directors of the UC-Involved
Surviving Corporation (the "UC-Involved Parent Corporation"), will
be represented by UC Voting Securities that were outstanding
immediately prior to such UC-Involved Business Combination (or, if
applicable, shares into which such UC Voting Securities were
converted pursuant to such UC-Involved Business Combination), (ii)
no person (other than any employee benefit plan sponsored or
maintained by the UC-Involved Surviving Corporation or the
UC-Involved Parent Corporation) will be or becomes the beneficial
owner, directly or indirectly, of 25% or more of the total voting
power of the outstanding voting securities eligible to elect
directors of the UC-Involved Parent Corporation (or, if there is
no UC-Involved Parent Corporation, the UC-Involved Surviving
Corporation) and (iii) at least a majority of the members of the
board of directors of the UC-Involved Parent Corporation (or, if
there is no UC-Involved Parent Corporation, the UC-Involved
Surviving Corporation) following the consummation of the
UC-Involved Business Combination were Incumbent UC Directors at
the time of the Board of Directors of Union Camp's approval of the
execution of the initial agreement providing for such UC-Involved
Business Combination (any UC-Involved Business Combination which
satisfies all of the criteria specified in (i), (ii) and (iii)
above shall be deemed to be a "UC-Involved Non-Qualifying
Transaction"); or
(d) the stockholders of Union Camp approve a plan of complete
liquidation or dissolution of Union Camp or an agreement for the
sale or disposition by Union Camp of all or substantially all of
Union Camp's assets.
Anything contained herein to the contrary notwithstanding, a
Change in Control of the Company or Union Camp shall be deemed not to have
occurred with respect to any optionee who participates as an investor in the
acquiring entity (which shall include the Parent Corporation or the UC-Involved
Parent Corporation, when and as applicable) in any such Change in Control
transaction unless such acquiring entity is a publicly-traded corporation and
the optionee's interest in such acquiring entity immediately prior to the
acquisition constitutes less than one percent (1 %) of both (1) the combined
voting power of such entity's outstanding securities and (2) the aggregate fair
market value of such entity's outstanding equity securities. For this purpose
the optionee's interest in any equity securities shall include any such interest
of which such optionee is a beneficial owner.
13. Use of Proceeds
Proceeds from the sale of shares pursuant to options granted
under this Plan shall constitute general funds of the Company.
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14. Amendments
The Board of Directors may amend, alter or discontinue the Plan,
. including without limitation any amendment considered to be advisable by
reason of changes to the United States Internal Revenue Code, but no amendment,
alteration or discontinuation shall be made which would impair the rights of any
holder of an award of restricted stock or option or stock bonus theretofore
granted, without his consent, or which, without the approval of the
shareholders, would:
(a) Except as is provided in Paragraph 12 of the Plan, increase
the total number of shares reserved for the purpose of the Plan.
(b) Except as is provided in Paragraphs 6(f) and 12 of the Plan,
decrease the option price of an option to less than 100% of the fair
market value on the date of the granting of the option.
(c) change the class of persons eligible to receive an award of
restricted stock or options under the Plan; or
(d) Extend the duration of the Plan.
The Committee may amend the terms of any award of restricted
stock or option theretofore granted, retroactively or prospectively, but no such
amendment shall impair the rights of any holder without his consent.
15. Miscellaneous Provisions
(a) The Plan shall be unfunded. The Company shall not be required
to establish any special or separate fund or to make any other segregation of
assets to assure the issuance of shares upon exercise of any option under the
Plan.
(b) It is understood that the Committee may, at any time and from
time to time after the granting of an option or the award of restricted stock or
bonuses payable in Common Stock hereunder, specify such additional terms,
conditions and restrictions with respect to such option or stock as may be
deemed necessary or appropriate to ensure compliance with any and all applicable
laws, including, but not limited to, terms, restrictions and conditions for
compliance with federal and state securities laws and methods of withholding or
providing for the payment of required taxes.
(c) If at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of shares of Common
Stock upon any national securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the sale or purchase of
shares of Common Stock hereunder, no option or
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stock appreciation right may be exercised or restricted stock or stock bonus may
be transferred in whole or in part unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained, or
otherwise provided for, free of any conditions not acceptable to the Committee.
(d) The Plan shall be governed by and construed in accordance
with the laws of the Commonwealth of Virginia.
16. Limits of Liability
(a) Any liability of the Company or a subsidiary of the Company
to any Participant with respect to an option or stock or other award shall be
based solely upon contractual obligations created by the Plan and the Agreement.
(b) Neither the Company nor a subsidiary of the Company, nor any
member of the Committee or the Board, nor any other person participating in any
determination of any question under the Plan, or in the interpretation,
administration or application of the Plan, shall have any liability to any party
for any action taken or not taken in connection with the Plan, except as may
expressly be provided by statute.
Amended January 2, 1997
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EXHIBIT 10.10
[Date]
Mr. __________________
Bush Boake Allen Inc.
7 Mercedes Drive
Montvale, NJ 07645
Dear ________________:
Bush Boake Allen Inc. (the "Company") considers it essential to the best
interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the Company
(the "Board") recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control of the Company or its
majority stockholder, Union Camp Corporation ("Union Camp"), may exist and that
such possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company's
management, including yourself, to their assigned duties without distraction in
the face of potentially disturbing circumstances arising from the possibility of
a change in control of the Company or Union Camp.
In order to induce you to remain in the employ of the Company, the Company
agrees that you shall receive the severance benefits set forth in this letter
agreement (the "Agreement") in the event your employment with the Company is
terminated under the circumstances described below subsequent to a "change in
control of the Company or Union Camp", as described in Section 2 below.
1 . Term of Agreement. This Agreement shall commence on December 2, 1996,
and shall continue in effect until the date specified in a written
notice of termination of this Agreement given not less than 30 months
prior to such date; provided that if a change in control of the
Company and/or Union Camp occurs prior to the date of termination of
this Agreement, but subsequent to such written notice of termination,
this Agreement shall continue in effect for 30 months after the date
such change in control occurs (or, in the event any other changes in
control occur during such new 30 month period, then
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for 30 months after the date(s) of such subsequent changes(s) in
control), notwithstanding that notice of termination of this Agreement
has previously been given. The foregoing notwithstanding, this
Agreement is subject to earlier termination as provided in Subsection
3(ii).
2. Change in Control. No benefits shall be payable hereunder unless there
shall have been a change in control of the Company or Union Camp, as
set forth below. For purposes of this Agreement, a change in control of
the Company or Union Camp shall include either a "change in control of
the Company" or a "change in control of Union Camp" (as each is
hereafter defined) or both.
I. For purposes of this Agreement, a "change in control of the Company"
shall be deemed to have occurred upon the occurrence of one of the
following events:
(i) "any person," as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (other than the Company, any employee benefit
plan sponsored by the Company, any trustee or other fiduciary
holding securities under an employee benefit plan of the
Company, or any corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, or
Union Camp or any subsidiary of Union Camp in which Union
Camp's ownership is greater than 50% of the combined voting
power of such subsidiary's then outstanding securities
eligible to vote for the election of its board of directors (a
"Union Camp Subsidiary")), is or becomes (other than pursuant
to a transaction which is deemed to be a "Non-Qualifying
Transaction" under Subsection 2.I.(iii)) the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the
Company's then outstanding securities eligible to vote for the
election of the Board of Directors of the Company (the
"Company Voting Securities");
(ii) individuals who, on December 1, 1996, constitute the Board
(the "Incumbent Directors") cease for any reason to constitute
at least a majority of the Board, provided that any person
becoming a director subsequent to December 1, 1996, whose
election or nomination for election was approved by a vote of
at least two-thirds of the Incumbent Directors then on the
Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a
nominee for director, without written objection to such
nomination) shall be an Incumbent Director; provided, however,
that no individual initially elected or nominated as a
director of the Company as a result of an actual or threatened
election contest with respect to directors (including without
limitation in order to settle any such contest) or any other
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actual or threatened solicitation of proxies by or on behalf
of any person other than the Board shall be an Incumbent
Director;
(iii) the consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving
the Company or any of its subsidiaries that requires the
approval of the Company's stockholders, whether for such
transaction or the issuance of securities in the transaction
(a "Business Combination"), unless immediately following such
Business Combination: (A) more than 50% of the total voting
power of (x) the corporation resulting from such Business
Combination (the "Surviving Corporation"), or (y) if
applicable, the ultimate parent corporation that directly or
indirectly has beneficial ownership of 100% of the voting
securities eligible to elect directors of the Surviving
Corporation (the "Parent Corporation"), is represented by
Company Voting Securities that were outstanding immediately
prior to such Business Combination (or, if applicable, shares
into which such Company Voting Securities were converted
pursuant to such Business Combination), (B) no person (other
than Union Camp, any Union Camp Subsidiary, any employee
benefit plan sponsored or maintained by the Surviving
Corporation or the Parent Corporation) is or becomes the
beneficial owner, directly or indirectly, of 25 % or more of
the total voting power of the outstanding voting securities
eligible to elect directors of the Parent Corporation (or, if
there is no Parent Corporation, the Surviving Corporation) and
(C) at least a majority of the members of the board of
directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) following the
consummation of the Business Combination were Incumbent
Directors at the time of the Board's approval of the execution
of the initial agreement providing for such Business
Combination (any Business Combination which satisfies all of
the criteria specified in (A), (B) and (C) above shall be
deemed to be a "Non-Qualifying Transaction"); or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or an agreement for
the sale or disposition by the Company of all or substantially
all of the Company's assets.
II. For purposes of this Agreement, a "change in control of Union Camp"
shall be deemed to have occurred upon the occurrence of one of the
following events when, immediately prior thereto, Union Camp is the
beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company
Voting Securities:
(i) any person (other than Union Camp, any employee benefit plan
sponsored by Union Camp, any trustee or other fiduciary
holding securities under an employee benefit plan of Union
Camp, or any corporation owned, directly or
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indirectly, by the stockholders of Union Camp in substantially
the same proportions as their ownership of stock of Union
Camp), is or becomes (other than pursuant to a transaction
which is deemed to be a UC-Involved Non-Qualifying Transaction
under Subsection 2. II.(iii)) the beneficial owner, directly
or indirectly, of securities of Union Camp representing 50% or
more of the combined voting power of Union Camp's then
outstanding securities eligible to vote for the election of
the Board of Directors of Union Camp (the "UC Voting
Securities");
(ii) individuals who, on October 29, 1996, constitute the Board of
Directors of Union Camp (the "Incumbent UC Directors") cease
for any reason to constitute at least a majority of the Board
of Directors of Union Camp, provided that any person becoming
a director subsequent to October 29, 1996, whose election or
nomination for election was approved by a vote of at least
two-thirds of the Incumbent UC Directors then on the Board of
Directors of Union Camp (either by a specific vote or by
approval of the proxy statement of Union Camp in which such
person is named as a nominee for director, without written
objection to such nomination) shall be an Incumbent UC
Director; provided, however, that no individual initially
elected or nominated as a director of Union Camp as a result
of an actual or threatened election contest with respect to
directors (including without limitation in order to settle any
such contest) or any other actual or threatened solicitation
of proxies by or on behalf of any person other than the Board
of Directors of Union Camp shall be an incumbent UC Director;
(iii) the consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving
Union Camp or any of its subsidiaries that requires the
approval of Union Camp's stockholders, whether for such
transaction or the issuance of securities in the transaction
(a "UC-Involved Business Combination"), unless immediately
following such UC-Involved Business Combination: (A) more than
50% of the total voting power of (x) the corporation resulting
from such UC-Involved Business Combination (the "UC-Involved
Surviving Corporation"), or (y) if applicable, the ultimate
parent corporation that directly or indirectly has beneficial
ownership of 100% of the voting securities eligible to elect
directors of the UC-Involved Surviving Corporation (the
"UC-Involved Parent Corporation"), is represented by UC Voting
Securities that were outstanding immediately prior to such
UC-Involved Business Combination (or, if applicable, shares
into which such UC Voting Securities were converted pursuant
to such UC-Involved Business Combination), (B) no person
(other than any employee benefit plan sponsored or maintained
by the UC-Involved Surviving Corporation or the UC-Involved
Parent Corporation) is or becomes the beneficial owner,
directly or indirectly, of 25% or more of the total voting
power of the outstanding voting securities
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eligible to elect directors of the UC-Involved Parent
Corporation (or, if there is no UC-Involved Parent
Corporation, the UC-Involved Surviving Corporation) and (C) at
least a majority of the members of the board of directors of
the UC-Involved Parent Corporation (or, if there is no
UC-Involved Parent Corporation, the UC-Involved Surviving
Corporation) following the consummation of the UC-Involved
Business Combination were Incumbent UC Directors at the time
of the Board of Directors of Union Camp's approval of the
execution of the initial agreement providing for such
UC-Involved Business Combination (any UC-Involved Business
Combination which satisfies all of the criteria specified in
(A), (B) and (C) above shall be deemed to be a "UC-Involved
Non-Qualifying Transaction"); or
(iv) the stockholders of Union Camp approve a plan of complete
liquidation or dissolution of Union Camp or an agreement for
the sale or disposition by Union Camp of all or substantially
all of Union Camp's assets.
Anything in this Agreement to the contrary notwithstanding, a change in control
of the Company or Union Camp shall be deemed not to have occurred with respect
to you if you participate as an investor in the acquiring entity (which shall
include the Parent Corporation or the UC-Involved Parent Corporation, when
applicable) in any such change in control transaction unless such acquiring
entity is a publicly-traded corporation and your interest in such acquiring
entity immediately prior to the acquisition constitutes less than one percent (1
%) of both (1) the combined voting power of such entity's outstanding securities
and (2) the aggregate fair market value of such entity's outstanding equity
securities. For this purpose your interest in any equity securities shall
include any such interest of which you are a beneficial owner.
3. Termination Following Change in Control.
(i) General. If any of the events described in Section 2
constituting a change in control of the Company or Union Camp
shall have occurred, you shall be entitled to the benefits
provided in Subsection 4(iii) upon the subsequent termination
of your employment during the term of this Agreement unless
such termination is (a) because of your death, (b) by the
Company for Cause, or (c) by you other than for Good Reason.
Except as set forth below, in the event your employment with
the Company is terminated for any reason and subsequently a
change in control of the Company or Union Camp shall have
occurred, you shall not be entitled to any benefits hereunder.
Notwithstanding anything in this Agreement to the contrary, if
(i) your employment terminates prior to a change in control of
the Company or Union Camp under circumstances that would have
entitled you to the benefits under Subsection 4 (iii) if they
had occurred following a change in control of the Company or
Union Camp; (ii) you reasonably demonstrate that such
termination of
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employment (or Good Reason event leading to your termination)
was at the request or suggestion of a third party who had
indicated an intention or taken steps reasonably calculated to
effect a change in control of the Company or Union Camp; and
(iii) a change in control of the Company or Union Camp
involving such third party (or a party competing with such
third party to effectuate a change in control) does occur,
then for purposes of this Agreement the date immediately prior
to the date of your termination of employment shall be deemed
to be the date of a change in control of the Company or Union
Camp. If a termination of your employment occurs pursuant to
the circumstances described in the immediately preceding
sentence, then for purposes of determining the timing of
payments and benefits to you under Section 4, the date of the
actual change in control of the Company or Union Camp shall be
treated as your Date of Termination under Subsection 3(vi).
(ii) Disability. Notwithstanding anything in this Agreement to the
contrary, if, as a result of your incapacity due to physical
or mental condition or illness, you shall have been absent
from the full-time performance of your duties with the Company
for six (6) consecutive months and such period of absence
commenced prior to a change in control of the Company or Union
Camp, the Company may give you at least thirty (30) days prior
written notice of termination of this Agreement and if you
shall not have returned to the full-time performance of your
duties by the date of termination specified in such notice,
this Agreement shall terminate on such date and no benefit
shall be payable hereunder.
(iii) Cause. Termination by the Company of your employment for
"Cause" shall mean termination (a) upon the willful and
continued failure by you to substantially perform your duties
with the Company (other than any such failure resulting from
your incapacity due to physical or mental condition or illness
or any such actual or anticipated failure after the issuance
of a Notice of Termination by you for Good Reason), after a
written demand for substantial performance is delivered to you
by the Board, which demand specifically identifies the manner
in which the Board believes that you have not substantially
performed your duties, or (b) the willful engaging by you in
conduct which is demonstrably and materially injurious to the
Company, monetarily or otherwise. For purposes of this
Subsection, no act, or failure to act, on your part shall be
deemed "willful" unless done, or omitted to be done, by you
not in good faith and without reasonable belief that your
action or omission was in the best interest of the Company.
Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have
been delivered to you a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters (3/4) of
the entire membership of the Board at a meeting of the Board
(after reasonable
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notice to you and an opportunity for you, together with your
counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of conduct set
forth above in this Subsection and specifying the particulars
thereof in detail.
(iv) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean, without your express written
consent, the occurrence after a change in control of the
Company or Union Camp (or as provided in Subsection 3(i),
prior to a change in control of the Company or Union Camp) of
any of the following circumstances unless, in the case of
paragraphs (a), (e), (f) or (g), such circumstances are fully
corrected prior to the Date of Termination specified in the
Notice of Termination given in respect thereof:
(a) the assignment to you of any duties inconsistent with
the position in the Company that you held immediately
prior to the change in control of the Company or Union
Camp (other than in the nature of a promotion), or a
diminution in your duties, responsibilities, employment
status or authority as compared to your duties,
responsibilities, employment status or authority in
effect immediately prior to such change in control;
(b) a reduction by the Company in your annual base salary as
in effect on the date hereof or as the same may be
increased from time to time except for across-the-board
salary reductions similarly affecting all management
personnel of the Company and all management personnel of
any person in control of the Company;
(c) the relocation of the Company's offices at which you are
principally employed immediately prior to the date of
the change in control of the Company or Union Camp to a
location more than twenty-five (25) miles from such
location, or the Company's requiring you to be based
anywhere other than the Company's offices at such
location except for required travel on the Company's
business to an extent substantially similar to your
business travel obligations immediately prior to the
change in control;
(d) the failure by the Company to pay to you any portion of
your current compensation or to pay to you any portion
of an installment of deferred compensation under any
deferred compensation program of the Company within
seven (7) days of the date such compensation is due;
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(e) the failure by the Company to continue to provide
substantially the same compensation plans in which you
participated immediately prior to the change in control
of the Company or Union Camp, including without
limitation as of the date hereof, a savings and
investment plan, a stock option and stock award plan,
and an annual incentive compensation plan, unless an
equitable arrangement (embodied in an ongoing substitute
or alternative plan) has been made with respect to each
such plan, or the failure by the Company to continue
your participation therein (or in any such substitute or
alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits
provided and the level of your participation relative to
other participants, than that which existed at the time
of the change in control of the Company or Union Camp;
(f) the failure by the Company to continue to provide you
with benefits and coverage substantially similar to
those provided to you under any of the Company's
pension, life insurance, medical, accident, or
disability plans in which you were participating at the
time of the change in control of the Company or Union
Camp, the taking of any action by the Company which
would directly or indirectly materially reduce any of
such benefits or the failure by the Company to provide
you with the number of paid vacation days to which you
are entitled on the basis of years of service with the
Company in accordance with the Company's vacation policy
for salaried employees in effect at the time of the
change in control of the Company or Union Camp; or
(g) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying
the requirements of Subsection (3)(v) (and, if
applicable, the requirements of Subsection (3)(iii)),
which purported termination shall not be effective for
purposes of this Agreement.
Your right to terminate your employment pursuant to this
Subsection 3(iv) shall not be affected by your incapacity due
to physical or mental condition or illness. Your continued
employment shall not constitute consent to, or a waiver of
rights with respect to, any circumstance constituting Good
Reason hereunder.
(v) Notice of Termination. Any purported termination of your
employment by the Company or by you after a change in control
of the Company or Union Camp shall be communicated by written
Notice of Termination to the other party hereto in accordance
with Section 6. "Notice of Termination" shall mean a notice
that shall indicate the specific termination provision in this
Agreement
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relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination
of your employment under the provision so indicated.
(vi) Date of Termination, Etc, "Date of Termination" shall mean if
your employment is terminated pursuant to Subsections (3)(iii)
or (3)(iv) hereof or for any other reason, the date specified
in the Notice of Termination (which, in the case of a
termination for Cause shall not be less than thirty (30) days
from the date such Notice of Termination is given, and in the
case of a termination for Good Reason shall not be less than
fifteen (15) nor more than sixty (60) days from the date such
Notice of Termination is given (provided, that no advance
notice is required in the case of a termination of employment
for Good Reason as a result of events occurring prior to a
change in control of the Company or Union Camp)); provided,
however, that if prior to the Date of Termination (as
determined without regard to this provision), the party
receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination under the
terms of this Agreement, then the Date of Termination shall be
the date on which the dispute is finally resolved (provided,
that, notwithstanding when the dispute is finally resolved,
your Date of Termination shall be deemed to occur for purposes
of Section 4 during the term of this Agreement), either by
mutual written agreement of the parties, by a binding
arbitration award, or by a final judgment, order or decree of
a court of competent jurisdiction (which is not appealable or
with respect to which the time for appeal therefrom has
expired and no appeal has been perfected); and provided,
further, that the Date of Termination shall be extended by a
notice of dispute only if such notice is given in good faith
and the party giving such notice pursues the resolution of
such dispute with reasonable diligence. Any such notice of
dispute must be in writing and delivered or mailed to the
other party, and such notice shall set forth the specific
reasons for the dispute. You shall have the right to appeal to
the Board or its delegate in writing any notice of dispute
given by the Company within sixty (60) days of your receipt
thereof. Within sixty (60) days thereafter, you shall be given
a written decision of your appeal from the Board or its
delegate, which decision shall clearly set forth the specific
reasons for the decision, including specific references to
pertinent provisions of this Agreement. If you dispute the
decision, such dispute shall be resolved by arbitration as
provided in Section 10 hereof. Notwithstanding the pendency of
any such dispute, the Company will continue to pay you your
full compensation in effect immediately prior to when the
Notice of Termination giving rise to the dispute was given
(including, but not limited to, base salary) and continue you
as a participant in all compensation, benefit and insurance
plans in or by which you were participating or were covered
immediately prior to when the Notice of Termination giving
rise to the dispute was given, until
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the dispute is finally resolved in accordance with this
Subsection. Amounts paid under this Subsection are in
addition to all other amounts due under this Agreement, and
shall not be offset against or reduce any other amounts due
under this Agreement. No amount payable hereunder shall be
reduced by any compensation earned by you as the result of
employment by another employer. This Subsection 3(vi) shall
not apply to any termination of your employment prior to a
change in control of the Company or Union Camp as described in
Subsection 3(i).
4. Compensation Upon Termination or During Disability. Following a change
in control of the Company or Union Camp, you shall be entitled to the
following benefits during a period of disability, or upon termination of
your employment, as the case may be, provided that such period commences
or termination occurs during the term of this Agreement:
(i) During any period that you fail to perform your full-time
duties with the Company as a result of incapacity due to
physical or mental condition or illness, you shall receive all
compensation payable to you under the Company's disability
plan or program or other similar plan during such period. In
the event your employment is terminated by reason of your
death, your benefits shall be determined under the Company's
retirement, insurance and other compensation plans then in
effect in accordance with the terms of such plans.
(ii) Except as otherwise provided in Subsection 3(vi), if
applicable, if your employment shall be terminated by the
Company for Cause or by you other than for Good Reason, the
Company shall pay you your full base salary through the Date
of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are
entitled under any compensation or benefit plan of the Company
at the time such payments are due, and the Company shall have
no further obligations to you under this Agreement.
(iii) If your employment by the Company is terminated by the Company
other than for Cause or if you terminate your employment for
Good Reason, you shall be entitled to the benefits provided
below:
(a) the Company shall pay to you (i) your full base salary
through the Date of Termination at the rate in effect at
the time Notice of Termination is given and the value of
your accrued and "banked" vacation as of the Date of
Termination, no later than the fifth day following the
Date of Termination, (ii) any outstanding amounts due
and owing to you as of the Date of Termination under any
compensation or benefit plan or
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policy of the Company (or any successor, substitute or
additional plans), no later than the fifth day following
the Date of Termination (or, if later, such date by
which such amounts may reasonably be calculated), plus
all other amounts to which you are entitled under any
compensation or benefit plan or policy of the Company,
at the time such payments are due, and (iii) if such
termination of employment occurs during the remainder of
the calendar year in which the change in control of the
Company or Union Camp occurs, no later than the fifth
day following the Date of Termination, a pro rata annual
target award (payable in cash) under the BBA Incentive
Scheme (or any successor plans thereto), to the extent
you are a participant in such plans immediately prior to
the date of the change in control (and such pro rata
payment is not made thereunder). Such pro rata payments
shall be equal to the product(s) of (i) the quotient
resulting from dividing the number of days you were
employed during such year through the Date of
Termination by three hundred and sixty-five (365) and
(ii) your annual target incentive under the BBA
Incentive Scheme (or any successor plans thereto) for
such year;
(b) in lieu of any further salary and bonus payments to you
for periods subsequent to the Date of Termination and in
lieu of other severance benefits, the Company shall pay
as severance pay to you, at the time specified in
Subsection 4(v), a lump sum severance payment, in cash,
equal to (i) 250% of the greater of (A) your annual rate
of base salary in effect immediately prior to the Date
of Termination and (B) your annual rate of base salary
in effect immediately prior to the change in control of
the Company or Union Camp, plus (ii) 250% of the greater
of (x) the amount of your annual target incentive in
effect immediately prior to the date on which the change
in control occurs and (y) your annual target incentive
with respect to the year in which the Date of
Termination occurs;
(c) the Company shall pay to you all legal fees and expenses
incurred by you in connection with the interpretation or
enforcement of this Agreement (including all such fees
and expenses, if any, incurred in contesting or
disputing any termination hereunder or in seeking to
obtain or enforce any right or benefit provided by this
Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application
of section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), to any payment or benefit provided
hereunder);
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(d) for a thirty (30) month period after such termination,
the Company shall arrange to provide you with life,
disability, accident and health insurance benefits
equivalent to those which you were receiving immediately
prior to the Notice of Termination (provided, that, any
reduction of benefits which constituted a basis for your
termination of employment for Good Reason pursuant to
Subsection 3(iv) shall not be taken into account for
purposes of determining your continued benefits under
this Subsection 4(iii)(d)). Notwithstanding the
foregoing, the Company shall not provide a benefit
otherwise receivable by you pursuant to this paragraph
(d) during any period in which an equivalent benefit is
actually provided to you during the thirty (30) month
period following your termination, and you must report
to the Company any such benefit actually received by
you; and
(e) notwithstanding any election you may have made under any
of the applicable plans, and any provisions to the
contrary in any such plans, the Company shall pay to
you, at the time specified in Subsection 4(v), a lump
sum amount, in cash, equal to the sum of (i) all amounts
credited to your book account described in Article V,
Section 3 of the Supplemental Retirement Plan of Bush
Boake Allen Inc. (the "ERISA Excess Plan"), and (ii) the
actuarial equivalent of the supplemental pension benefit
(determined as a straight life annuity commencing at the
greater of age sixty-two (62) or your age at the Date of
Termination) that you have accrued under Article IV,
Section 1 of the ERISA Excess Plan as of the Date of
Termination (for this purpose, "actuarial equivalent"
shall be determined using the same assumptions utilized
under the Pension Plan for Eligible Employees of Bush
Boake Allen Inc. immediately prior to the change in
control).
Notwithstanding anything in this Agreement to the contrary, if
you are over age sixty-two and one-half (62 1/2) years as of
your Date of Termination, (i) the 250% multiplier set forth in
paragraph (b) above to determine your severance benefit shall
be reduced by 8.33 % for each full month that your age is in
excess of sixty-two and one-half (62 1/2) years as of your
Date of Termination and (ii) your continued benefits pursuant
to paragraph (d) above shall cease at age sixty-five (65).
(iv) Notwithstanding anything in this Agreement to the contrary, in
the event it shall be determined that any payment, award,
benefit or distribution (or any acceleration of any payment,
award, benefit or distribution) by the Company (or any of its
affiliated entities) or any entity which effectuates a change
in control of the Company (or any of its affiliated entities)
to or for your benefit (whether pursuant to the terms of this
Agreement or otherwise, but excluding
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any Gross-Up Payments (as defined below)) (the "Payments"),
would be subject to the excise tax imposed by section 4999 of
the Code (the "Excise Tax"), then the Company shall pay to you
an additional payment (a "Gross-Up Payment") in an amount such
that after payment by you of all taxes (including any Excise
Tax) imposed upon the Gross-Up Payment, you retain an amount
of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments. For purposes of determining the amount of the
Gross-Up Payment, you shall be deemed to (i) pay federal
income taxes at the highest marginal rates of federal income
taxation for the calendar year in which the Gross-Up Payment
is to be made and (ii) pay applicable state and local income
taxes at the highest marginal rate of taxation for the
calendar year in which the Gross-Up Payment is to be made, net
of the maximum reduction in federal income taxes could be
obtained from deduction of such state and local taxes. In the
event that the Excise Tax is subsequently determined (by a
final determination by a court or an Internal Revenue Service
proceeding which has been finally and conclusively resolved or
by mutual agreement of the parties hereto) to be less than the
amount taken into account hereunder at the time of termination
of your employment, you shall repay to the Company at the time
that the amount of such reduction in Excise Tax is finally
determined the portion of the Gross-Up Payment which would not
have been paid to you had the Gross-Up Payment calculation
been based upon such reduced Excise Tax, plus interest on the
amount of such repayment at the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder
at the time of the termination of your employment (including
by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect
of such excess (plus interest payable at the rate provided in
section 1274(b)(2)(B) of the Code with respect to such excess)
at the time that the amount of such excess is finally
determined. Notwithstanding the foregoing provisions of this
Subsection 4(iv), if it shall be determined that you are
entitled to a Gross-Up Payment, but that the Payments would
not be subject to the Excise Tax if the Payments were reduced
by an amount that is less than 10% of the portion of the
Payments that would be treated as "parachute payments" under
Section 28OG of the Code, then the amounts payable to you
under this Agreement shall be reduced (but not below zero) to
the maximum amount that could be paid to you without giving
rise to the Excise Tax (the "Safe Harbor Cap"), and no
Gross-Up Payment shall be made to you. The reduction of the
amounts payable hereunder, if applicable, shall be made by
reducing first the payments under Section 4(iii)(b), unless an
alternative method of reduction is elected by you. For
purposes of reducing the Payments to the Safe Harbor Cap, only
amounts payable under this Agreement (and no other Payments)
shall be reduced. If the reduction of the amounts payable
hereunder would not result in
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a reduction of the Payments to the Safe Harbor Cap, no amounts
payable under this Agreement shall be reduced pursuant to this
provision.
(v) The payments provided for in Subsections 4(iii)(b), 4(iii)(e)
and 4(iv) hereof shall be made not later than the thirtieth
day following the Date of Termination; provided, however, that
if the amounts of such payments cannot be finally determined
on or before such day, the Company shall pay to you on such
day an estimate, as determined in good faith by the Company,
of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code) as soon as the
amount thereof can be determined. In the event that the amount
of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a
loan by the Company to you, payable on the fifth day after
demand by the Company (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code). All
determinations required to be made under Subsection 4(iv),
including whether and when a Gross-Up Payment is required, the
amount of such Gross-Up Payment, the reduction of the Payments
to the Safe Harbor Cap and the assumptions to be utilized in
arriving at such determinations, shall be made by the public
accounting firm that is retained by the Company as of the date
immediately prior to the change in control of the Company or
Union Camp (the "Accounting Firm") which shall provide for
review detailed supporting calculations both to the Company
and you within fifteen (15) business days following the
receipt of notice from the Company or you that a Notice of
Termination has been provided under this Agreement, or such
earlier time as is requested by the Company (collectively, the
"Determination"). In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or
group effecting the change in control (or does not undertake
to provide the Determination), the Company shall appoint
another "big six" public accounting firm to make the
Determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm incurred with respect
to the Determination shall be borne solely by the Company and
the Company shall enter into any agreement requested by the
Accounting Firm in connection with the performance of the
services hereunder.
(vi) Except as provided in Subsection 4(iii)(d), you shall not be
required to mitigate the amount of any payment provided for in
this Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in
this Section 4 be reduced by any compensation earned by you as
the result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owned by
you to the Company, or otherwise.
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5. Successors; Binding Agreement.
(i) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any
such succession which constitutes a change in control of the
Company shall be a breach of this Agreement and shall entitle
you to compensation and benefits from the Company in the same
amount and on the same terms to which you would be entitled
hereunder if you terminate your employment for Good Reason
following a change in control of the Company, except that for
purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" and "Union
Camp" shall mean the Company and Union Camp, respectively, as
each is hereinbefore defined, and any successors to their
respective businesses and/or assets as aforesaid, or
otherwise.
(ii) This Agreement is personal to you and shall not be assigned by
you (other than as a result of your death), except that any
rights that shall have accrued prior to your death shall inure
to the benefit of and be enforceable by you and your personal
or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees, to the
extent any such persons succeed to your interests hereunder
from time to time. If you should die while any amount would
still be payable to you hereunder had you continued to live,
all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to such
person or persons appointed in writing by you (provided you
have delivered a copy of such appointment to the Company) or,
if no such person is appointed, to your estate.
6. Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by
United States certified or registered mail, return receipt requested or
by reputable overnight courier, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement,
provided that
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all notice to the Company shall be directed to the attention of the
Board with a copy to the Secretary of the Company, or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon receipt. Notwithstanding the foregoing, any notice
actually received by the other party shall be deemed to have been duly
given.
7. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing and signed by you and a duly authorized officer of the Company.
No waiver by either party hereto at any time of any breach by the other
party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. Similarly, no such waiver of compliance with any
condition or provision of this Agreement shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of New Jersey
without regard to its conflicts of law principles. All references to
sections of the Exchange Act, the Code or the ERISA Excess Plan shall be
deemed also to refer to any successor provisions to such sections. Any
payments provided for hereunder shall be paid net of any applicable
withholding required under foreign, federal, state or local law. The
obligations of the Company under Subsection 3(vi) and Sections 4 and 5
shall survive the expiration of the term of this Agreement, with respect
to Subsection 3(vi) and Section 4, to the extent benefits become due and
owing under such provisions and, with respect to Section 5, to the
extent the Company continues to have obligations under this Agreement.
8. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and
effect.
9. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in
Montvale, New Jersey or such
-16-
<PAGE>
<PAGE>
other location as the parties agree, in accordance with the commercial
rules of the American Arbitration Association then in effect. The
Company shall bear all costs and expenses arising in connection with any
arbitration proceeding pursuant to this Section 10. Judgment may be
entered on the arbitrator's award in any court having jurisdiction;
provided, however, that you shall be entitled to seek specific
performance of your right to be paid pursuant to Subsection 3(vi) until
the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
11. Entire Agreement. This Agreement sets forth the entire agreement of the
parties hereto with respect to severance benefits payable to you after a
change in control of the Company or Union Camp, and during the term of
the Agreement supersedes the provisions of all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or
representative of any party hereto with respect to such subject matter.
If this letter sets forth our agreement on the subject matter hereof, kindly
sign and return to the Company the enclosed copy of this letter, which will then
constitute our agreement on this subject.
Sincerely,
BUSH BOAKE ALLEN INC.
By
________________________________
Julian W. Boyden
President and
Chief Executive Officer
Agreed to as of the date set forth above.
________________________________
[Typed Name]
-17-
<PAGE>
<PAGE>
INDEX OF DEFINED TERMS
Defined Term Where Defined
------------ -------------
Accounting Firm 'SS' 4(v)
actuarial equivalent 'SS' 4(iii)(e)
Agreement Introduction
banked 'SS' 4(iii)(a)
beneficial owner 'SS' 2.I.(i)
Board Introduction
Business Combination 'SS' 2.I.(iii)
Cause 'SS' 3(iii)
change in control of the Company or
Union Camp 'SS' 2
Code 'SS' 4(iii)(c)
Company Introduction, 5(i)
Company Voting Securities 'SS' 2.I.(i)
Date of Termination 'SS' 3(vi)
Determination 'SS' 4(v)
ERISA Excess Plan 'SS' 4(iii)(e)
Exchange Act 'SS' 2.I.(i)
Excise Tax 'SS' 4(iv)
Good Reason 'SS' 3(iv)
Incumbent Directors 'SS' 2.I.(ii)
Non-Qualifying Transaction 'SS' 2.I.(iii)
Notice of Termination 'SS' 3(v)
parachute payments 'SS' 4(iv)
Parent Corporation 'SS' 2.I.(iii)
Payments 'SS' 4(iv)
any person 'SS' 2.I.(i)
Safe Harbor Cap 'SS' 4(iv)
Surviving Corporation 'SS' 2.I.(iii)
Union Camp Introduction
Union Camp Subsidiary 'SS' 2.I.(i)
UC Voting Securities 'SS' 2.II.(i)
Incumbent UC Director 'SS' 2.II.(ii)
UC-Involved Business Combination 'SS' 2.II.(iii)
UC-Involved Surviving Corporation 'SS' 2.II.(iii)
UC-Involved Parent Corporation 'SS' 2.II.(iii)
UC-Involved Non-Qualified Transaction 'SS' 2.II.(iii)
willful 'SS' 3(iii)
-18-
<PAGE>
<PAGE>
INDEMNITY AGREEMENT
THIS AGREEMENT, made and entered into this day of November, 1996,
is between ("Director"), and BUSH BOAKE ALLEN INC., a
Virginia corporation (the "Corporation").
RECITALS
WHEREAS, Director has experience and expertise that are valuable to the
Corporation.
WHEREAS, the Corporation desires that Director continue to serve as a
director, and Director is willing to so serve provided the Corporation gives
Director specific assurances concerning indemnification against his liability
for actions taken on behalf of the Corporation.
WHEREAS, the Corporation is entitled to act pursuant to Section 13.1-697
of the Virginia Stock Corporation Act to indemnify Director against liability.
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the parties hereto agree as follows:
(1) In this Agreement:
"Expenses" includes counsel fees.
"Liability" means the obligation to pay a judgment, settlement,
penalty, fine, including any excise tax assessed with respect to an employee
benefit plan, or reasonable expenses incurred with respect to a proceeding.
"Official capacity" means service by the Director in his capacity as
a director of the Corporation. "Official capacity" does not include service for
any other foreign or domestic corporation or any partnership, joint venture,
trust, employee benefit plan, or other enterprise.
"Party" includes an individual who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.
"Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative or investigative
and whether formal or informal.
(2) Subject to the terms and conditions herein set forth, the Director
hereby agrees to serve as a director of the Corporation until his successor
shall have been duly elected and in that capacity to exercise his good faith
business judgment of the best interests of the Corporation.
<PAGE>
<PAGE>
(3) The Corporation hereby agrees to indemnify the Director if he
becomes a party to any proceeding by reason of the fact that he is or was a
director of the Corporation, or is or was serving at the request of the
Corporation as a director, trustee, partner or officer of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against any liability incurred by him in connection with such proceeding if (i)
he believed, in the case of conduct in his official capacity, that his conduct
was in the best interests of the Corporation, and in all other cases that his
conduct was at least not opposed to its best interests, and, in the case of any
criminal proceeding, had no reasonable cause to believe his conduct was
unlawful, (ii) in connection with a proceeding by or in the right of the
Corporation, he was not adjudged liable to the Corporation, and (iii) in
connection with any proceeding charging improper benefit to him, whether or not
involving action in his official capacity, he was not adjudged liable on the
basis that personal benefit was improperly received by him. The Director shall
be considered to be serving an employee benefit plan at the Corporation's
request if his duties to the Corporation also impose duties on, or otherwise
involve services by, him to the plan or to participants in or beneficiaries of
the plan. The Director's conduct with respect to an employee benefit plan for a
purpose he believed to be in the interests of the participants and beneficiaries
of the plan is conduct that satisfies the requirements of this section.
(4) The termination of any proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not of
itself create a presumption that the Director did not meet the standard of
conduct described in section (3) of this Agreement.
(5) To the extent that the Director has been successful on the merits or
otherwise in defense of any proceeding referred to in Section (3) of this
Agreement, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses actually and reasonably incurred by him in
connection therewith.
(6) Any indemnification under Section (3) of this Agreement (unless
ordered by a court) shall be made by the Corporation only upon a determination
that indemnification of the Director is proper in the circumstances because he
has met the applicable standard of conduct set forth in Section (3). The
determination shall be made:
(a) By the Board of Directors by a majority vote of a quorum
consisting of directors not at the time parties to the proceeding;
-2-
<PAGE>
<PAGE>
(b) If a quorum cannot be obtained under subsection (a) of this
section, by majority vote of a committee duly designated by the Board of
Directors (in which designation directors who are parties may participate),
consisting solely of two or more directors not at the time parties to the
proceeding;
(c) By special legal counsel:
(i) Selected by the Board of Directors or its committee in the
manner prescribed in subsection (a) or (b) of this section; or
(ii) If a quorum of the Board of Directors cannot be obtained
under subsection (a) of this section and a committee cannot be designated under
subsection (b) of this section, selected by majority vote of the full Board of
Directors, in which selection directors who are parties may participate; or
(d) By the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the proceeding may not be
voted on the determination.
Notwithstanding the foregoing provisions of this section (6), in the
event that there has been a change in the composition of a majority of the
directors of the Corporation between the date of this Agreement and the date
that the claim for indemnification is made (other than changes in the make-up of
the Board which have been approved by not less than 2/3 of the directors then
serving), then the determination whether indemnification is permissible shall be
made by special legal counsel to be selected by the Director from among the
following law firms or other law firms of comparable size and experience:
(i) White & Case, New York, New York:
(ii) King & Spalding, Atlanta, Georgia; or
(iii) Hunton & Williams, Richmond, Virginia
Evaluation as to reasonableness of expenses shall be made in the same manner as
the determination that indemnification is permissible, except that if the
determination is made by special legal counsel, evaluation as to reasonableness
of expenses shall be made by those entitled under subsection (c) of this section
to select counsel.
(7) (a) The Corporation shall pay for or reimburse the reasonable
expenses incurred by the Director in advance of final disposition of a
proceeding if:
-3-
<PAGE>
<PAGE>
(i) The Director furnishes the Corporation a written statement
of his good faith belief that he has met the standard of conduct described in
Section (3);
(ii) The Director furnishes the Corporation a written
undertaking, executed personally or on his behalf, to repay the advance if it is
ultimately determined that he did not meet the standard of conduct; and
(iii) A determination is made that the facts then known to those
making the determination would not preclude indemnification under this
Agreement.
(b) The undertaking required by paragraph (ii) of subsection (a) of
this section shall be an unlimited general obligation of the Director but need
not be secured and may be accepted without reference to financial ability to
make repayment.
(8) The obligations of the Corporation hereunder shall survive the
termination of this Agreement and any termination of the Director as a director
of the Corporation. The indemnification hereby provided and provided hereafter
shall not be exclusive of any other rights to which any person may be entitled,
including any right under policies of insurance that may be purchased and
maintained by the Corporation or others, with respect to claims, issues or
matters in relation to which the Corporation would not have the power to
indemnify the Director under the provisions of this Agreement.
(9) If at any time subsequent to the date hereof, any provision of this
Agreement shall be held by any court of competent jurisdiction to be illegal,
void or unenforceable, such provision shall be of no force and effect, but the
illegality or unenforceability of such provision shall have no effect upon and
shall not impair the enforceability of any other provision of this Agreement.
(10) Any notice required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been given if delivered by hand
or sent by certified or registered mail, postage prepaid, as follows:
If to the Corporation:
Bush Boake Allen Inc.
7 Mercedes Drive
Montvale, NJ 07645
Attention: Corporate Secretary
-4-
<PAGE>
<PAGE>
If to Director:
_________________________________
_________________________________
_________________________________
or such other address or addresses as may be specified from time to time in a
written notice given by the party entitled to receive any such notice.
(11) In the event that after the date of this Agreement the Director is
reelected to serve as a director of the Corporation, then the term of this
Agreement shall automatically be extended for the duration of his service as a
director unless either party elects to terminate this Agreement by delivery of
written notice to the other party at least 90 days prior to the annual meeting
at which the director stands for reelection.
(12) Notwithstanding any changes in the Articles of Incorporation or
Bylaws of the Corporation after the date of this Agreement, this Agreement
cannot be amended or revoked except with the prior written approval of both
parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the date first above written.
BUSH BOAKE ALLEN INC.
By:
______________________________________
Dennis M. Meany
Secretary
______________________________________
[Typed Name]
Director
-5-
<PAGE>
<PAGE>
EXHIBIT 11.1
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Quarter Ended Year Ended
December 25, December 25,
----------------------------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $6,713,000 $6,599,000 $31,555,000 $30,446,000
Shares used to compute
earnings per share 19,222,200 19,215,626 19,220,238 19,215,156
Earnings Per Share $0.35 $0.34 $1.64 $1.58
Shares used to compute
earnings per share including
common stock equivalents - Primary Basis 19,378,513 19,395,283 19,377,981 19,388,838
Primary Earnings Per Share $0.35 $0.34 $1.63 $1.57
Shares used to compute
earnings per share including
common stock equivalents - Fully Diluted Basis 19,391,620 19,395,283 19,389,658 19,388,838
Fully Diluted Earnings Per Share $0.35 $0.34 $1.63 $1.57
</TABLE>
<PAGE>
<PAGE>
[LOGO]
BUSH BOAKE ALLEN INC.
1996 Annual Report
SERVING GROWING
GLOBAL MARKETS
FOR FLAVORS...
FRAGRANCES &
AROMA CHEMICALS
<PAGE>
<PAGE>
ON THE COVER:
Among consumers of all ages, taste is always a key factor in assuring the
success of most food products. Helping satisfy the flavor requirements of
China's Food Products Industry is a major objective of BBA's new flavor and
fragrance plant at Guangzhou in the Peoples Republic of China.
Bush Boake Allen is a major, international producer of a diverse line of
flavors, fragrances and aroma chemicals as well as chemical intermediates for
industrial and agricultural applications.
The company conducts operations on six continents and has 64 locations in
41 countries worldwide. BBA is a highly respected global supplier to an
estimated $12 billion world-wide market.
Flavors and fragrances created by BBA help provide a broad range of
consumer products with a more compelling and unique character through either
a pleasant, satisfying taste or a distinctive, pleasing aroma.
Flavors produced by Bush Boake Allen are used in beverages, dairy products,
baked goods, confectionery items and processed foods.
BBA fragrance compounds are used by consumer product manufacturers in
perfumes and colognes, soaps, detergents and cleansers, air fresheners,
cosmetics and a variety of personal care products.
The company's aroma chemicals, natural extracts and essential oils
serve as raw materials for a wide range of compounded flavors and
fragrances.
<PAGE>
<PAGE>
BUSH BOAKE ALLEN WORLDWIDE
<TABLE>
<CAPTION>
Americas Europe Asia Pacific International Aroma
Region Region Region Region Chemicals
<S> <C> <C> <C> <C>
ARGENTINA BENELUX AUSTRALIA BULGARIA UNITED KINGDOM
Buenos Aires Capelle Aan Den Ijssel Adelaide Sofia Widnes
BRAZIL DENMARK Brisbane CZECH REPUBLIC UNITED STATES
Sao Paulo Birkerod Melbourne Prague Jacksonville, FL
CANADA FRANCE Perth INDIA
Montreal Paris Sydney Bangalore
Toronto GERMANY CHINA Bombay
CHILE Kreuzau-Stockheim Guangzhou Calcutta
Santiago IRELAND Shanghai Chittoor
COLOMBIA Clonee, Co. Meath HONG KONG Delhi
Bogota ITALY Tsuen Wan Madras
JAMAICA Mantova INDONESIA KENYA
Kingston SPAIN Bogor, West Java Nairobi
MEXICO Barcelona JAPAN PAKISTAN
Tlalnepantla SWEDEN Tokyo Karachi
UNITED STATES Knislinge MALAYSIA POLAND
Black Creek, WI SWITZERLAND Selangor Warsaw
Carrollton, TX Lausanne NEW ZEALAND RUSSIA
Chicago, IL UNITED KINGDOM Auckland Moscow
Montvale, NJ Glasgow PHILIPPINES SLOVAKIA
Norwood, NJ London Manila Bratislava
Long Melford SINGAPORE SOUTH AFRICA
Witham Jurong Cape Town
THAILAND Durban
Bangkok Johannesburg
TURKEY
Bursa
Istanbul
UKRAINE
Kiev
UNITED ARAB
EMIRATES
Dubai
ZIMBABWE
Harare
</TABLE>
<PAGE>
<PAGE>
FINANCIAL HIGHLIGHTS
($ in thousands, except per share)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
1996 1995 % Change
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales and Earnings:
Net Sales $449,365 $424,616 6
Income From Operations 46,531 50,197 (7)
Income Before Income Taxes 46,761 46,918 --
Net Income 31,555 30,446 4
- -----------------------------------------------------------------------------------------------------------
Per Share:
Net Income $ 1.64 $ 1.58 4
Stockholders' Equity 13.69 11.54 19
- -----------------------------------------------------------------------------------------------------------
Ratios:
Net Income to Net Sales 7.0% 7.2%
Long-Term Debt to Total Capital 0.8 1.7
- -----------------------------------------------------------------------------------------------------------
Financial Position at Year-End:
Total Assets $407,799 $349,853 17
Long-Term Debt 2,009 3,731 (46)
Stockholders' Equity 263,133 221,782 19
- -----------------------------------------------------------------------------------------------------------
Additional Information:
Cash Provided by Operations $ 34,807 $ 23,102 51
Capital Expenditures $ 39,629 $ 25,044 58
Number of Employees 2,103 2,004 5
- -----------------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
<PAGE>
Dear Stockholder:
Not only was 1996 a year of challenge and change, it was also a year of growth
as Bush Boake Allen's sales and net income again reached record highs and we
continued our progress in building for the future.
The company earned $1.64 per share in 1996 compared to $1.58 per share in
1995. Net income increased 3.6% to $31.6 million from $30.4 million the prior
year. Net sales for 1996 were $449.4 million compared to $424.6 million in 1995,
an increase of 5.8%.
BUSH BOAKE ALLEN GAINED MARKET SHARE AS WORLDWIDE SALES OF FLAVORS AND
FRAGRANCES INCREASED MORE THAN 6%.
Worldwide demand for flavors and fragrances was noticeably softer throughout
most of 1996 and markets were highly competitive. Bush Boake Allen gained market
share as worldwide sales of the company's flavors and fragrances increased more
than 6% with each of our operating regions participating in that growth.
In the Americas Region the company's U.S. flavor and fragrance business
improved its position and ended the year with a strong increase in sales and
operating income in compounded flavors and fragrances. Apart from a modest sales
decline in BBA's natural products and seasonings business, after several years
of strong growth, every operating unit in the Americas Region from Canada to
Latin America increased its sales in 1996.
Looking at BBA's other operations, the Europe Region's results were dampened
by uncertain economic conditions in Germany and France and by currency exchange
disadvantages due to the strong Pound Sterling and weakness of the Deutchmark
and DM Block currencies. Still, Europe increased its sales, helped by double
digit growth in Spain and Sweden. Adverse foreign currency exchange rates also
had a strong negative impact in our International Region which nevertheless
generated increased sales with India and Eastern Europe scoring double digit
growth.
The Asia Pacific Region continued its progress in 1996 with double digit
sales growth in Australia, Singapore, Thailand and Indonesia. In addition, the
company strengthened its position in Southeast Asia, with the January 1997
opening of a new $12 million flavor and fragrance plant in Guangzhou, The
Peoples Republic of China. Ideally located to provide both multinational and
local Chinese consumer products manufacturers with a wide range of high quality
flavors and fragrances, the new plant helps strengthen our overall service
capability throughout the region.
In our aroma chemical business sales rose modestly, in 1996, for both terpene
and non terpene based chemicals. However, the strong Pound Sterling made it more
difficult to be competitive on aroma chemicals exported from the Widnes, England
plant. In the U.S. the lag in recovering higher turpentine raw material costs
also contributed to the pressure on aroma chemical margins.
THE FUNDAMENTALS OF OUR BUSINESS REMAIN FIRM WITH MARKETS THAT HAVE POTENTIAL
FOR STRONG GROWTH.
As we view the company overall, and BBA's position relative to our peer group
in the industry, we believe that our organization performed well in a difficult
year. We also know that we can do better. The fundamentals of our business
remain firm with markets that have attractive potential for strong growth.
Therefore, our strategy for the future is an even stronger focus on these key
elements of the growth plan we established when we became a public company in
1994;
DEVELOPING NEW PRODUCTS...BBA has been successful in the development of an
array of new products such as reaction flavors, new vanilla materials, enzyme
modified dairy products, and a range of aroma chemicals including several
resulting from our Generessence'r' program for which patents are being sought.
2
<PAGE>
<PAGE>
IMPROVING OUR MIX...The increase in the percent of BBA's business represented
by compounded flavors and fragrances slowed somewhat in 1996 but we are placing
increased emphasis on this important objective. Overall, the flavor and
fragrance segment of our business has grown to nearly 80% of the company's total
sales.
EXPAND IN HIGH GROWTH MARKETS...The company has made significant progress as
evidenced by the opening of the new China flavor and fragrance plant. In
addition, we further strengthened BBA's position in Latin America by acquiring a
fragrance company in Argentina as well as acquiring the remaining portions of
joint venture companies in Italy and the Philippines. Plans are also underway
for new facilities in Turkey and Thailand as well as further expansion in India.
IMPROVE MARGINS...Ongoing investments for automation, efficiency and higher
productivity will work to help the company's momentum in margin improvement. We
have invested $170 million since 1991 on automating, modernizing and expanding
our facilities. In aroma chemicals, for example, the recently completed
upgrading of the Jacksonville plant coupled with reconfiguration of certain
processes, now underway, at Widnes will provide many of the efficiencies
necessary to move toward improved margins.
We are confident that Bush Boake Allen is prepared to compete anywhere in the
world. The company has the resources, the facilities and a group of creative,
dedicated people who have the will to get the job done.
In August 1996, William H. Trice announced his intention to retire, at year
end, as Chairman of Bush Boake Allen's Board of Directors and as Executive Vice
President of Union Camp. In that latter capacity Mr. Trice had management
responsibility for technology, environmental activities and Union Camp's
Chemical Group, including BBA, which he guided since 1986.
In a very direct way Bill Trice has been a steady supporter in helping shape
the present dimensions of Bush Boake Allen. A forthright man of rock solid
integrity, he has been a good friend and wise counselor to many of us. His
advice and support during the period when BBA became a public company has helped
us get our organization off to a good start to the benefit of all our
stockholders. We are pleased that Bill has agreed to remain on our Board and
that we will continue to have the advantage of his advice and counsel.
To all our stockholders, directors and fellow employees we extend our thanks
for your efforts in a very challenging year.
/s/ J.W. BOYDEN
J.W. Boyden
Chairman, President and
Chief Executive Officer
March 5, 1997
3
<PAGE>
<PAGE>
AMERICAS REGION
For most of 1996, U.S. markets for flavors and fragrances were sluggish with
very little resiliency. The lingering effects of consolidation among some
customers along with product line rationalization and delays in a number of new
product introductions added further to market uncertainty.
Nevertheless, in spite of hesitant markets Bush Boake Allen's overall U.S.
flavor and fragrance operations continued to grow during 1996. Although the
company's seasonings business had a more difficult year with moderately lower
sales, compounded flavors grew strongly with rising sales and a double-digit
increase in operating income.
The company's U.S. flavor business succeeded in generating a great many new
flavor wins during 1996. Some of these wins produced immediate business. Most,
however, have a longer timeline as products are test marketed and finally find
their way into retail distribution. Consequently, much of the growth potential
from these new wins will be realized in the future. Nevertheless, flavor sales
advanced 9% in the U.S. and operating income increased substantially.
In addition, we also experienced significant improvement in the company's
U.S. fragrance business in 1996 with operations growing stronger as the year
progressed. Given the soft market environment for fragrances early in the year,
a concerted effort was made to further reduce our costs and improve efficiency
without sacrificing any aspect of creative effort, applications work or customer
service. We exercised even tighter control over production planning and our
entire marketing organization reviewed its procedures. These efforts resulted in
improved internal efficiency and lower costs. At the same time our fragrance
4
<PAGE>
<PAGE>
AMERICAS REGION (continued)
business secured some significant new wins which have the potential for
substantial additional sales over time. As a result, not only did the company's
U.S. fragrance sales increase, operating income also grew strongly, rising
nearly 50%.
BBA has made significant investments in the Americas to modernize and
upgrade the region's facilities. The recent, major expansion of the Montvale,
New Jersey, flavor and fragrance creative and technical center has increased the
level and quality of support we are able to provide to operating units
throughout the region.
The company is also adding strength in other areas as well. In late 1996, a
modernization of Bush Boake Allen Canada's dry blending plant was completed. BBA
Canada also had an excellent year in 1996 with strong, double-digit growth in
both sales and operating income.
Operations in Latin America and the Caribbean also experienced growth in
1996 with BBA companies in Jamaica, Chile, Colombia and Brazil all reporting a
double-digit increase in sales. In addition, we continued to add resources and
strengthen our presence in important, growing markets in Latin America. In
November 1996, BBA acquired Aromatica Industrial Sudamericana SA, a small
fragrance compounding operation in Buenos Aires, Argentina. BBA plans to expand
capacity at this location and add facilities for flavor production as well. This
will enhance the company's ability to serve fast growing markets in Argentina
and also provide flavors and fragrances to the Mercosur trading block as well.
6
<PAGE>
<PAGE>
EUROPE REGION
Markets for flavors and fragrances in Europe were characterized by softness
in 1996. This contributed to a highly competitive environment for BBA'S
products. Nevertheless, the Europe Region made further progress with several
areas of strong growth helping to boost overall sales in spite of weakness in
some major markets.
Operating results in France and Germany were disappointing as sales and
operating income declined due primarily to lingering, weak economic conditions
in those countries. This was offset, however, by growth in Benelux and Denmark
and a very strong, double digit advance in Spain and Sweden.
The company has been investing to strengthen its strategic position in
Europe as well as to modernize and automate its production facilities. Within
the last two years a new essential oil plant was installed at Long Melford,
England, as well as new blending and packaging equipment for
7
<PAGE>
<PAGE>
EUROPE REGION (continued)
spices and seasonings. The improvements in both operations have helped
strengthen the company's ability to serve our growing markets for natural
flavors ingredients.
In addition, new spray drying equipment was installed at the Witham,
England plant that is helping triple that facilities production of encapsulated
flavors and significantly improving quality and productivity.
In mid 1995 the company started work on a large scale modernization and
upgrading of our flavor compounding operations at Walthamstow, England. This
upgrade included equipment to automatically blend both liquid and solid flavor
ingredients. The first unit has been operating for little over one year and now
handles more than half of all small batch flavor blending at Walthamstow. A
second larger unit for bulk shipments is now undergoing trials at that plant.
In late 1996 BBA acquired, from Albright and Wilson, the remaining portion
of its former joint venture operation in Italy. The company sees significant,
additional growth for this business operation serving flavor and fragrance
markets in Italy but also, as an important strategic part of BBA's Pan European
strategy of continually upgrading our service to customers.
The Europe Region comprises BBA's second largest market accounting for
nearly a quarter of the company's total sales. By the end of 1997 every one of
the region's plants will have been modernized or expanded in order to better
serve this large, vibrant market. In addition, plans are underway to construct a
new facility for the production of process reaction flavors at our Long Melford,
England site and to expand and upgrade our flavor and natural products plant at
Knislinge, Sweden. The reaction flavors plant will help open new markets for BBA
flavor systems throughout Europe. The expanded Swedish plant will greatly
enhance BBA's position in the Scandinavian market. Together, both plants magnify
and extend the company's creative and service capabilities in Europe.
8
<PAGE>
<PAGE>
ASIA PACIFIC REGION
Company sales in the Asia Pacific Region rose solidly in 1996 increasing more
than 8% in a year of slower economic growth for many countries in Southeast
Asia. Led by a double digit sales increase in Australia, Singapore, Thailand and
Indonesia, all of BBA's operating units participated in the growth.
Weakness in Japan's economy persisted in 1996 with the Japanese Yen weaker
against a strong Singapore Dollar. Since BBA Japan primarily uses materials
imported from the company's Singapore production facility, the adverse currency
exchange added to a much more competitive environment for BBA flavors and
fragrances in Japanese markets.
For the most part, this was offset by strong growth in Australia. Bush
Boake Allen has been operating there for more than a century and has a strong
position in Australian markets with creative, technical and production
facilities in Melbourne and Sydney. Other service and technical capabilities are
located in Adelaide, Brisbane and Perth. In 1996, Australia accounted for over
one-third of the Asia Pacific Region's sales and operating income.
Moreover, the company has continued to strengthen its ability to serve this
important market. In late 1995 BBA Australia moved its headquarters into a new
flavor and fragrance creative center and production facility at Dandenong near
Melbourne. In addition, new spray dryers were installed during the year to
replace older equipment and are helping meet growing demand for encapsulated
flavors.
The prospects for continued strong growth in markets for flavors and
fragrances in the Asia Pacific Region continues to be encouraging. Recent
projections by The International Monetary Fund estimate that 65% of the growth
in the world economy will come from the developing world,
10
<PAGE>
<PAGE>
ASIA PACIFIC REGION (continued)
compared to 25% at the present time. The region contains nearly half the
worlds population and there can be no doubt that with the rapid improvement in
per capita income, expectations for a better quality of life are also growing.
Bush Boake Allen is making significant investments in the Asia Pacific
Region to position the company for the growth that has been forecast for the
future. China, for example, is a vast, growing market for the household products
and processed convenience foods that very often use Bush Boake Allen flavors and
fragrances.
BBA has marketed its products in China through our Hong Kong facility for
more than a decade. The company strengthened its position there with the January
1997 official opening of a new $12 million flavor and fragrance production and
technical center at Guangzhou in the Peoples Republic of China. The new plant is
already in production helping both international and local Chinese consumer
products manufacturers meet the demand for convenience goods for the more than
350 million people living in the coastal region of China between Shanghai and
the Pearl River Delta.
We are also strengthening the Region in other areas as well. For example,
BBA has acquired the outstanding portion of its former joint venture company in
the Philippines, which also serves a strong and growing market. In addition,
plans are underway for the construction of a totally new, modern production
facility in Thailand. This will not only strengthen the company's ability to
serve growing markets for natural products, it will also add to the flexibility
of our marketing and service capabilities throughout the region.
At Bush Boake Allen, our forecasts indicate a future potential for
continued strong growth in flavor and fragrance markets in Asia and the Pacific
Rim. We are structuring BBA to be better prepared to meet that future demand.
12
<PAGE>
<PAGE>
INTERNATIONAL REGION
Adverse currency exchange had a greater impact on operating results in the
International Region, than any other area of the company in 1996. Although
growth was strong in South Africa and Turkey as measured in their local
currencies, comparisons were unfavorable when their operating results were
translated into U.S. Dollars.
In another example, sales in the company's operations in India as reported in
U.S. dollars, reflected double-digit growth for 1996. However, when measured in
Indian Rupees, the local currency, BBA India's growth in sales and operating
income was even substantially stronger.
Bush Boake Allen has a long history of supplying flavors and fragrances to
markets in India. Today, BBA has grown to be the largest flavor company in India
with locations in six cities. The company is continuing to upgrade its
facilities in India and invest for productivity, quality, service and growth.
<PAGE>
<PAGE>
INTERNATIONAL REGION (continued)
In 1997 BBA India will take another forward step as it sets up a new flavor
and fragrance creative center in Bombay. The new center will help to provide
more efficient service to the increasing number of potential customers who are
locating in northern and western India.
Turkey is another large, growing and important market for Bush Boake Allen,
sitting as it does, astride both the continents of Europe and Asia. Operations
in Turkey were strong in 1996 and BBA's business there has grown tenfold, since
1991. Now the Turkish economy has been transformed from primarily agricultural
commodities to a much more diverse economic base involving manufacturing,
construction, and the production of food, and beverages as well as household
products. To accommodate future growth a new plant for the production of
compounded flavors and seasonings is under construction in the Gebze Organized
Area near Istanbul. Comprising two buildings with a total floor space of 36,000
square feet, the plant is scheduled for completion in late 1997. The
International Region also includes locations in many of the nations of Eastern
Europe including some that were part of the former USSR. Sales from these
operations grew strongly in 1996 with a double-digit increase in both revenue
and operating income. To a great extent, the breakup of the former Soviet Union
has led to the abandonment of the concept of state planning. Today more activity
and production is being devoted to the needs of a rising middle class.
With more women in the workforce and a rising level of disposable income,
greater demand is being generated for household products, cleaners, cosmetics,
and a range of processed convenience foods and beverages. These are all fertile
markets for Bush Boake Allen flavors and fragrances.
14
<PAGE>
<PAGE>
AROMA CHEMICALS
Functioning primarily as building blocks for fragrances, aroma chemicals are
sold to consumer products manufacturers and other fragrance compounders for use
in household products... soaps, detergents, cleansers, toiletries and cosmetics.
They are also used captively in BBA's own compounded fragrances. Still others
are produced exclusively for BBA's perfumers.
Along with some natural materials such as essential oils and extracts,
aroma chemicals are the principal ingredient in most of today's fragrances. As
many as three thousand of these chemicals are in use and available as a palette
from which a perfumer may choose in creating a new fragrance. Bush Boake Allen
produces aroma chemicals at two, large-scale ISO certified plants, one at
Jacksonville, Florida in the U.S., the other at Widnes near Liverpool, England.
The Jacksonville plant utilizes turpentine as its feedstock while Widnes
primarily employs non terpene raw materials to produce a range of specialized
chemicals including Lilestralis'tm' which is used in a broad range of fragranced
products. A technical grade of Lilestralis'tm' is also produced for use as an
intermediate in the production of agrichemical products.
The company has steadily invested to expand, modernize and automate
both plants. Approximately $25 million was earmarked to complete major
reconfigurations at Jacksonville and Widnes during 1996 and 1997. The major
work at Jacksonville was completed in late 1996. The Widnes modernization
is now underway.
These investments will permit much greater flexibility in balancing
production at both plants and facilitate production of some new products at
Widnes. The upgrading of equipment at both facilities will also help advance the
quality of materials produced and provide much higher levels of efficiency and
productivity in a highly competitive business.
16
<PAGE>
<PAGE>
RESEARCH & DEVELOPMENT
Bush Boake Allen's principal research and technical development activities
are conducted at four sophisticated, well equipped research and creative centers
located at Montvale, New Jersey in the United States and at London, England,
Singapore and Madras, India.
These centers are supported by 36 other strategically located development and
application laboratories around the world. Longer range, more strategic research
projects are pursued at Union Camp's Corporate Technology Center in Princeton,
New Jersey. In 1996, BBA invested $22.5 million in research and development, a
13% increase over 1995's total.
Research and development activities comprise a critical underpinning that
helps accelerate the company's ability to develop new products, seek patents
where applicable, and bring a steady flow of new and specialized products to
market.
For example, through advanced research in our Generessence'r' program BBA
scientists have isolated and synthesized a number of totally new aroma chemicals
for which patents are being sought. These new chemicals will eventually be
reproduced in small quantities for the exclusive use of Bush Boake Allen's own
perfumers and flavorists in creating new products for our customers.
In other studies, extensive work has been directed to the successful
development of a range of reaction flavors which are now available from Bush
Boake Allen in commercial quantities. In addition, major advances in the
production of enzyme modified dairy products are also being pursued, as well as
several programs designed to enhance the company's position as an integrated
producer of vanilla. BBA is presently growing vanilla beans on plantations in
India utilizing Union Camp's vast experience in techniques of advanced
bio-technology to optimize the yield and quality of the vanilla beans.
18
<PAGE>
<PAGE>
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Overview
Bush Boake Allen Inc. (BBA) is a global producer of flavors and fragrances and
aroma chemicals. The Company believes it is one of the ten largest manufacturers
of flavors (including essential oils, seasonings and spice extracts) and
fragrances and aroma chemicals in the world, as measured by revenues, and its
products are sold to many of the leading multinational consumer product
companies throughout the world. BBA's business is organized into two operating
segments: (i) flavor and fragrance and (ii) aroma chemicals, which accounted for
80% and 20%, respectively, of total 1996 net sales. The Company conducts its
operations in 41 countries. BBA's sales in the Americas, Europe, Asia Pacific
and International regions accounted for 35%, 36%, 17% and 12%, respectively, of
total 1996 net sales. See Note 12 to Consolidated Financial Statements.
The Company operates in competitive markets where product quality, integrity,
innovation and customer service and support, in addition to price, are critical
factors. During 1996, the Company's three largest customers accounted for
approximately 5%, 4%, and 3%, respectively, of its total sales and no other
single customer accounted for more than 3% of total sales.
The following table sets forth the percentage relationship to net sales of
certain income statement items for the periods presented:
Year Ended December 25,
1996 1995 1994
Net sales ................................. 100.0% 100.0% 100.0%
Costs and other charges:
Cost of goods sold. ....................... 64.0 62.9 63.0
Selling and administrative expenses ....... 20.6 20.6 21.0
Research and development expenses ......... 5.0 4.7 4.9
Income from operations .................... 10.4 11.8 11.1
Net income ................................ 7.0 7.2 6.8
Year Ended December 25, 1996 Compared to Year Ended December 25, 1995
Net Sales
Net Sales for the year ended December 25, 1996 increased 5.8% to $449.4 million
from $424.6 million in the prior year. Net sales of flavor and fragrance
compounds increased 6.3% to $357.8 million from $336.5 million due to market
growth in all operating regions, with sales increase percentages ranging from
4.2% to 8.2%. Net sales of aroma chemicals increased 4.0% to $91.6 million from
$88.1 million as a result of improved product mix and higher pricing on certain
commodity aroma chemicals. 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 1995 to 1996, the increase in total
net sales would have been approximately 9%.
Cost of Goods Sold
Cost of goods sold in 1996 increased 7.7% to $287.8 million from $267.1 million
in the prior year due primarily to increased sales. Also contributing was an
increase in raw material costs, particularly turpentine, and higher depreciation
expense. The Company's cost of goods sold as a percentage of net sales increased
to 64.0% from 62.9% in the prior year.
Selling and Administrative Expenses
Selling and administrative expenses in 1996 increased 5.9% to $92.6 million from
$87.4 million in the prior year. 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 was 20.6% for both years.
20
<PAGE>
<PAGE>
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Research and Development Expenses
Research and development expenses increased 13.2% to $22.5 million from $19.9
million in the prior year 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. The Company
contracts for research services from Union Camp at rates that are intended to
approximate the fair value of the services provided. The total charges in 1996
and 1995 were approximately $3.7 million and $2.9 million, respectively.
Income from Operations
Income from operations in 1996 decreased 7.3% to $46.5 million from $50.2
million in the prior year. Adverse foreign exchange rate movements account for
approximately 2% of the decrease. As a percentage of net sales, income from
operations decreased to 10.4% from 11.8% due primarily to reduced gross profit
margins in the aroma chemicals segment. Income from operations, exclusive of
corporate items, for the flavor and fragrance segment increased 5.9% to $46.2
million from $43.7 million in the prior year primarily due to growth in the
Americas region, India and Eastern Europe. In the aroma chemicals segment,
income from operations, exclusive of corporate items, decreased 8.5% to $22.7
million from $24.8 million in the prior year. 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 in 1996 increased to $2.6 million from $300,000 in the prior year
due primarily to a gain on the sale of excess Company land in Widnes, England
during the second quarter of 1996. Partially offsetting the increase in other
income was a higher loss on foreign exchange in 1996 compared to 1995.
Interest Expense
Interest expense in 1996, decreased to $2.4 million from $3.6 million in the
prior year. The decrease in interest expense was primarily attributable to the
repayment of debt payable to Union Camp during 1995 and capitalized interest
during 1996 on a manufacturing facility constructed in China and a chemical
plant expansion in Jacksonville, Florida.
Income Taxes
Income tax expense decreased in 1996 to $15.2 million from $16.5 million in the
prior year primarily due to reduced capital gains taxes on property dispositions
in the UK and Australia. The Company's effective tax rate decreased to 32.5%
from 35.1% in the prior year.
Year Ended December 25, 1995 Compared to Year Ended December 25, 1994
Net Sales
Net Sales for the year ended December 25, 1995 increased 13.2% to $424.6 million
from $375.0 million in the prior year. Net sales of flavor and fragrance
compounds increased 15.2% to $336.5 million from $292.1 million due to market
growth in all operating regions, with sales increase percentages ranging from
12.2% to 16.5%. Net sales of aroma chemicals increased 6.3% to $88.1 million
from $82.9 million as a result of increased sales volumes and higher pricing on
certain commodity aroma chemicals. The net effect of foreign currency exchange
rate fluctuations during the year did not have a material impact on 1995 net
sales for the Company.
21
<PAGE>
<PAGE>
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
- --------------------------------------------------------------------------------
Cost of Goods Sold
Cost of goods sold in 1995 increased 13.1% to $267.1 million from $236.1 million
in the prior year due primarily to increased sales. Also contributing was an
increase in depreciation and amortization expense of approximately $2.0 million
as well as higher raw material turpentine costs. The Company's cost of goods
sold as a percentage of net sales improved slightly to 62.9% from 63.0% in the
prior year.
Selling and Administrative Expenses
Selling and administrative expenses in 1995 increased 11.1% to $87.4 million
from $78.7 million in the prior year. This increase includes the effect of
additional personnel and higher costs associated with being a public company
related to general management and other administrative services. Selling and
administrative expenses as a percentage of net sales decreased to 20.6% from
21.0% in the prior year.
Research and Development Expenses
Research and development expenses increased 7.5% to $19.9 million from $18.5
million in the prior year 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. The Company
contracts for research services from Union Camp at rates that are intended to
approximate the fair value of the services provided. The total charges in 1995
and 1994 were approximately $2.9 million and $2.5 million, respectively.
Income from Operations
Income from operations in 1995 increased 20.2% to $50.2 million from $41.8
million in the prior year. As a percentage of net sales, income from operations
increased to 11.8% from 11.1% due primarily to improved leveraging of selling
and technical resources. Income from operations, exclusive of corporate items,
for the flavor and fragrance segment increased 21.6% to $43.7 million from $35.9
million in the prior year primarily due to growth in Europe and the Americas
region (particularly in the U.S. seasonings business). In the aroma chemicals
segment, income from operations, exclusive of corporate items, increased 20.2%
to $24.8 million from $20.6 million in the prior year due primarily to operating
efficiencies, higher selling prices and improved product mix.
Other (Income) Expense, Net
Other income in 1995 decreased to $300,000 from $500,000 in the prior year and
reflects the net change in interest income, loss on foreign exchange, gain on
asset disposals and income applicable to minority interests.
Interest Expense
Interest expense in 1995, decreased to $3.6 million from $4.3 million in the
prior year primarily due to the reduced level of debt payable to Union Camp
partially offset by lower capitalized interest.
Income Taxes
Income tax expense increased in 1995 to $16.5 million from $12.5 million in the
prior year primarily as a result of higher pretax income. The Company's
effective tax rate increased to 35.1% from 32.9% in the prior year which
included a non-taxable gain on the sale of assets in Australia and foreign tax
credits related to research and development expenditures.
Foreign Currency
Operations outside the United States represent a significant portion of the
Company's business. The Company operates in a global marketplace and,
accordingly, is subject to
22
<PAGE>
<PAGE>
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
foreign exchange restrictions and currency fluctuations. Currency fluctuations
impact the company in several ways, including (i) the translation of the
Company's results of operations and balance sheet initially recorded in foreign
currencies into U.S. dollars, (ii) the Company's ability to offer products
manufactured in foreign markets at competitive prices in local markets and (iii)
the settlement of cross-border transactions in foreign currencies. In order to
mitigate the impact of currency fluctuations relating to cross-border
transactions, the Company, when appropriate, enters into foreign currency
hedging transactions. The Company's hedging activities have not had a material
impact on the Company's results of operations.
Environmental
The Company is subject to various United States federal, state and local
environmental laws and regulations as well as those in the countries outside the
United States in which it operates. The Company believes that it is in
compliance in all material respects with applicable laws and regulations. The
Company has invested approximately $800,000, $1.4 million and $2.3 million in
1996, 1995 and 1994, respectively, for environmental projects and expects to
make total capital expenditures of $1.5 million for environmental projects in
1997. The Company does not believe that environmental matters currently relevant
to its business, taken individually or in the aggregate, will have a material
adverse effect on its financial position or results of operations.
Acquisitions
During the fourth quarter of 1996, the Company completed three small
acquisitions for a combined purchase price of $10.8 million. BBA acquired the
remaining shares of our joint venture operations in Italy and the Philippines
and purchased a small fragrance compounding company in Argentina. These
acquisitions are a strategic step forward in the Company's plan for
strengthening our ability to serve important flavor and fragrance markets in
Latin America, Southeast Asia and the European continent. The impact of these
acquisitions on 1996 results of operations was not significant.
Liquidity and Capital Resources
Cash flow provided by operations in 1996 was $34.8 million, an increase of $11.7
million from the prior year due primarily to improved working capital management
of inventory levels and receivable collections. Cash flow provided by operations
decreased $6.8 million in the year ended December 25, 1995 to $23.1 million from
$29.9 million in the prior year due primarily to the increase in inventories and
changes in other working capital accounts.
Capital expenditures were $39.6 million, $25.0 million and $18.3 million for
1996, 1995 and 1994 respectively. The aroma chemicals segment, which requires a
relatively large investment in chemical processing plants, is more capital
intensive than the flavor and fragrance segment, which is engaged in less
capital-intensive mixing and blending operations. Capital expenditures in 1994
consisted primarily of routine property, plant and equipment replacements.
During 1995, construction began on a new $12 million manufacturing facility in
the People's Republic of China and the Company purchased land for possible
future expansion plans in its flavor and fragrance segment in Turkey and Mexico.
Capital expenditures in 1996 include the completion of the China facility and
the expansion of aroma chemical production capacity. The Company plans to spend
a total of approximately $36 million in 1997 for capital improvements.
23
<PAGE>
<PAGE>
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
- --------------------------------------------------------------------------------
During 1996, working capital decreased $3.6 million to $90.1 million from
$93.7 million in the prior year due primarily to increases in notes payable,
accounts payable and accrued liabilities partially offset by increases in trade
receivables and inventories. During 1995, working capital increased $12.1
million to $93.7 million from $81.6 million in the prior year due primarily to
increases in trade receivables and inventories partially offset by increases in
notes and accounts payable.
The Company has revolving credit facilities in numerous countries other than
the United States which provide for aggregate availability of $88.6 million. At
December 25, 1996 approximately $41.0 million was outstanding under these
facilities and included in notes payable ($32.5 million as of December 25,
1995). Commitment fees are either nominal or zero. Covenants, to the extent they
exist, are presently being met. Borrowings under these agreements bear interest
at local market rates which ranged from 1.9% to 16.9% in local currencies during
1996.
During 1995, the Company established revolving bank credit facilities under
which the Company may obtain unsecured borrowings up to $25.0 million in the
United States. Any borrowings under these facilities would incur interest at the
prevailing prime rate or U.S. dollar LIBOR rate. As of December 25, 1996, $2.2
million was outstanding and included in notes payable ($1.6 million as of
December 25, 1995). There are no commitment fees or borrowing covenants.
The Company believes that its available cash, funds provided by operations
and available borrowing capacity under its credit facilities will be sufficient
to support its debt service, working capital and capital expenditure
requirements for the foreseeable future, including implementation of its
strategy to strengthen its position as a leading producer of flavors, fragrances
and aroma chemicals and for long-term growth.
- --------------------------------------------------------------------------------
Quarterly Information (Unaudited)
<TABLE>
<CAPTION>
Net
Gross Net Income
Net Sales Profit Income Per Share(1)
- ----------------------------------------------------------------------------------------------------------
($ in thousands, except per share)
<S> <C> <C> <C> <C>
1996
Fourth Quarter.................................. $116,474 $39,869 $6,713 $.35
Third Quarter................................... 112,463 40,729 7,884 .41
Second Quarter.................................. 113,539 41,641 10,020 .52
First Quarter................................... 106,889 39,346 6,938 .36
- ----------------------------------------------------------------------------------------------------------
1995
Fourth Quarter.................................. $107,677 $37,844 $6,599 $.34
Third Quarter................................... 111,939 41,753 8,450 .44
Second Quarter.................................. 107,662 41,356 8,497 .44
First Quarter................................... 97,338 36,520 6,900 .36
- ----------------------------------------------------------------------------------------------------------
1994
Fourth Quarter.................................. $98,574 $37,734 $5,954 $.31
Third Quarter................................... 96,970 36,622 7,152 .37
Second Quarter.................................. 92,826 33,327 7,192 .37
First Quarter................................... 86,621 31,227 5,245 .28
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) All periods prior to the third quarter of 1994 are based on pro forma shares
outstanding of 19,215,000.
24
<PAGE>
<PAGE>
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except per share)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Year Ended December 25, 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales............................... $449,365 $424,616 $374,991
Costs and other charges:
Cost of goods sold................... 287,780 267,143 236,081
Selling and administrative expenses.. 92,573 87,412 78,682
Research and development expenses.... 22,481 19,864 18,470
- --------------------------------------------------------------------------------
Income from operations.................. 46,531 50,197 41,758
Interest expense........................ 2,417 3,597 4,258
Other (income) expense, net............. (2,647) (318) (544)
- --------------------------------------------------------------------------------
Income before income taxes.............. 46,761 46,918 38,044
Income taxes............................ 15,206 16,472 12,501
- --------------------------------------------------------------------------------
Net income.............................. $ 31,555 $ 30,446 $ 25,543
================================================================================
Net income per share(1)................. $1.64 $1.58 $1.33
================================================================================
</TABLE>
(1) 1994 is based on pro forma shares outstanding of 19,215,000.
See the accompanying notes to the Consolidated Financial Statements.
25
<PAGE>
<PAGE>
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
As of December 25, 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and cash equivalents ................................ $ 4,330 $ 4,966
Receivables, net ......................................... 91,404 82,538
Inventories .............................................. 102,217 94,742
Other .................................................... 3,623 8,449
- --------------------------------------------------------------------------------
Total current assets ................................. 201,574 190,695
Property, plant and equipment, net ....................... 165,577 131,203
Other assets ............................................. 40,648 27,955
- --------------------------------------------------------------------------------
Total Assets ......................................... $407,799 $349,853
================================================================================
Liabilities and Stockholders' Equity
Current installments of long-term debt ................... $ 8 $ 442
Notes payable ............................................ 43,172 34,052
Accounts payable ......................................... 38,322 34,315
Accrued liabilities ...................................... 28,553 22,825
Income and other taxes ................................... 1,462 5,358
- --------------------------------------------------------------------------------
Total current liabilities ............................ 111,517 96,992
Long-term debt ........................................... 2,009 3,731
Deferred income taxes .................................... 20,323 17,231
Other long-term liabilities ............................. 10,817 10,117
Stockholders' equity (Shares outstanding 1996: 19,222,200;
1995: 19,218,000) .................................... 263,133 221,782
- --------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity ........... $407,799 $349,853
================================================================================
</TABLE>
See accompanying notes to the Consolidated Financial Statements.
26
<PAGE>
<PAGE>
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 25, 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash provided by (used for) operations:
Net income ........................................................... $ 31,555 $ 30,446 $ 25,543
Adjustments to reconcile net income to
cash provided by operations:
Depreciation and amortization .................................... 13,445 12,661 10,678
Deferred income taxes ............................................ 2,702 2,637 2,842
Gain on sale of assets ........................................... (4,646) (603) (1,169)
Other ............................................................ (126) (565) 400
Changes in operational assets and liabilities,
net of acquisitions:
Receivables, net ................................................. (4,723) (10,516) (6,801)
Inventories ...................................................... (1,923) (13,890) (3,414)
Other assets ..................................................... (5,072) (5,427) (7,124)
Accounts payable, taxes and
other liabilities .............................................. 3,595 8,359 8,903
- ------------------------------------------------------------------------------------------------------------------------------------
Cash provided by operations ...................................... 34,807 23,102 29,858
- ------------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used for) investment activities:
Capital expenditures ................................................. (39,629) (25,044) (18,250)
Proceeds on sale of assets ........................................... 5,198 883 2,032
Payments for acquisitions ............................................ (6,036) -- --
Collection of note receivable from affiliate ......................... -- -- 14,496
Other ................................................................ 74 (1,836) (754)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash used for investment activities ............................... (40,393) (25,997) (2,476)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used for) financing activities:
Proceeds from issuance of common stock, net .......................... 67 48 88,983
Payment of dividend promissory note .................................. -- -- (90,000)
Change in notes payable, net ......................................... 7,212 8,742 (8,845)
Proceeds from issuance of long-term debt ............................. -- 292 3,152
Repayments of long-term debt ......................................... (2,420) (2,953) (2,478)
Advances to Union Camp, net .......................................... -- -- (9,298)
Payment of debt payable to Union Camp ................................ -- -- (20,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used for) financing
activities ...................................................... 4,859 6,129 (38,486)
- ------------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash ................................ 91 (278) 149
- ------------------------------------------------------------------------------------------------------------------------------------
Increases (decreases) in cash and cash equivalents ..................... (636) 2,956 (10,955)
Balance at beginning of period ......................................... 4,966 2,010 12,965
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of period ............................................... $ 4,330 $ 4,966 $ 2,010
====================================================================================================================================
</TABLE>
See the accompanying notes to the Consolidated Financial Statements.
27
<PAGE>
<PAGE>
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. Formation and Basis of Presentation
Reorganization
Bush Boake Allen Inc. ("BBA" or the "Company"), was a wholly-owned subsidiary of
Union Camp Corporation ("Union Camp") prior to an initial public offering
("IPO") of the Company's stock in May 1994. As a result of a recapitalization,
the Company's authorized capital stock consists of 5,000,000 shares of preferred
stock, par value $1.00 per share, and 50,000,000 shares of common stock, par
value $1.00 per share. Union Camp owns 13,150,000 shares of common stock. In
connection with the IPO, the Company issued 5,600,000 shares of its common stock
at a price of $16.00 per share. The IPO resulted in net proceeds to the Company
of approximately $82.7 million. In June 1994, the underwriters of the IPO
exercised their option to purchase an additional 465,000 shares of the Company's
common stock resulting in net proceeds to the Company of approximately $6.3
million. No shares of preferred stock have been issued.
The accompanying consolidated financial statements and related notes reflect
the historical operating results and financial position of the Company and all
of its subsidiaries during the periods presented. All significant intercompany
transactions are eliminated.
For the periods prior to the May 1994 IPO, operating expenses reflected in
the consolidated financial statements include charges for certain corporate
expenses from Union Camp representing research and development, general
management and other administrative services. These costs were based on
approximate actual usage of services. Management believes the allocations were
made on a reasonable basis; however, they may not approximate the costs that
would have been incurred by the Company on a stand-alone basis.
The Board of Directors of the Company declared a $90 million dividend to the
stockholder of record (a subsidiary of Union Camp) on October 27, 1993. The
distribution of the dividend was made through the issuance of a Dividend
Promissory Note payable on demand, which carried interest at a rate equal to the
lower of the "prime rate" publicly announced from time to time by Citibank, N.A.
(6.0% at December 25, 1993) or the highest rate permitted by applicable law. The
Dividend Promissory Note was repaid with the proceeds from the Offerings.
2. Significant Accounting Policies
Income Taxes
The Company was included in the consolidated U.S. federal income tax return of
Union Camp for all periods prior to the IPO. It was generally the policy of the
Company to determine its income tax provision on a separate company basis. Under
a Tax Allocation Agreement, income taxes of the consolidated group were
allocated as if the Company had filed a separate tax return. For all periods
subsequent to the IPO, the Company files consolidated U.S. federal income tax
returns separate from Union Camp's.
Deferred taxes represent liabilities to be paid or assets to be received in
the future and tax rate changes would immediately affect those liabilities or
assets.
Foreign Currency
The assets and liabilities of the Company's foreign subsidiaries and affiliates
are translated into U.S. dollars at year-end exchange rates, while income and
expense accounts are translated at average annual rates. Gains and losses
resulting from foreign currency translation are reflected in a separate
component of Stockholders' Equity entitled Cumulative Translation Adjustments.
The primary factor used to determine the functional currency of the Company's
foreign subsidiaries is the local currency cash flows resulting from
manufacturing, sales and financing activities. The U.S. dollar is the functional
currency for subsidiaries with material activities in hyperinflationary
economies.
The Company hedges foreign currency transactions by entering into forward
foreign exchange contracts. Gains and losses associated with currency rate
changes on forward contracts hedging foreign currency transactions are recorded
to other income/expense as incurred. These gains and losses are matched with the
offsetting exchange gains and losses recorded for exchange rate fluctuations on
the underlying assets and liabilities.
Revenue Recognition
Revenues are recognized upon the passage of title, which is generally at the
time of shipment.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investment instruments with
an original maturity of three months or less.
28
<PAGE>
<PAGE>
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Inventories
Inventories are stated at the lower of cost or market and include the cost of
materials, labor and manufacturing overhead. Finished goods, work in process and
raw materials of domestic operations are valued principally at last in, first
out (LIFO) cost. Supplies and all inventories of foreign operations are valued
at first in, first out (FIFO) or average costs.
Property, Plant, Equipment and Depreciation
Property, plant and equipment is recorded at cost, less accumulated
depreciation. The Company reviews long-lived assets for impairment whenever
events or circumstances indicate that the carrying value of an asset may not be
recoverable. Upon sale or retirement, the asset value and related depreciation
are removed from the balance sheet and the resulting gain or loss is included in
income. The straight-line method is used with factory equipment depreciated over
10 to 15 years and buildings over 33 to 40 years.
Goodwill
The excess of the cost over the fair value of net assets of acquired businesses
is recorded as goodwill and is generally amortized on a straight-line basis over
appropriate periods not to exceed 20 years. The Company reviews the goodwill
recoverability period on a regular basis.
Research and Development Costs
Research and development expenditures are expensed as incurred.
Capitalized Interest
Interest is capitalized on major capital expenditures during the period of
construction.
Environmental Liabilities
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Liabilities are recorded when remedial efforts are
probable and the costs can be reasonably estimated. The timing of these accruals
generally coincides with the completion of a feasibility study or the Company's
commitment to a formal plan of action.
Earnings Per Share
As the historical capital structure of the Company during a portion of 1994,
while the Company was a wholly-owned subsidiary of Union Camp Corporation, is
not indicative of the ongoing capital structure of the Company, historical per
share data would not be meaningful and, accordingly, have not been presented. As
such, pro forma net income per share information presented assumes that the
common stock issued as a result of the IPO had been issued at the beginning of
1994.
Stock-Based Compensation
The Company accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees," and related Interpretations. Under
APB No. 25, compensation cost is measured as the excess, if any, of the quoted
market price of the Company's stock at the date of grant over the exercise price
of the option granted. Compensation cost for stock options, if any, is
recognized ratably over the vesting period. The Company's policy is to grant
options with an exercise price equal to the quoted market price of the Company's
stock on the grant date. Accordingly, no compensation cost has been recognized
for its stock option plan. The Company provides additional pro forma disclosures
as required under Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation."
Estimates
In accordance with generally accepted accounting principles, the preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts of some assets and liabilities and, in some
instances, the reported amounts of revenues and expenses during the reporting
period.
3. Related Party Transactions
The Company enters into various operating transactions with Union Camp and its
subsidiaries. These transactions include trade purchases of raw materials to be
used in certain of the Company's manufacturing processes. The net trade
purchases from Union Camp for 1996, 1995 and 1994 were $1.5 million, $1.0
million and $700,000, respectively. Concurrent with the May 1994 IPO, the
Company and Union Camp entered into a Supply Agreement relating to the terms and
conditions pursuant to which the Company purchases, at approximate fair market
value, turpentine from Union Camp as well as turpentine procured by Union Camp
from other sources for sale to the Company.
As of December 25, 1993, the Company had an out-standing note receivable from
a subsidiary of Union Camp of approximately $14.5 million. The note was payable
on
29
<PAGE>
<PAGE>
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(continued)
- --------------------------------------------------------------------------------
demand with interest at 1% over the Standard Bank Rate, which was 6.0% at
December 25, 1993. This note was repaid prior to the IPO.
Concurrent with the IPO, the Company entered into a Service Agreement with
Union Camp under which Union Camp provides the Company with certain
administrative services, including environmental, tax, risk management, legal,
accounting, certain treasury activities, employee benefit administration, human
resource administration, safety and health administration, transportation
logistics, corporate communications and research and development activities.
Union Camp or BBA may terminate any or all of the services covered by the
Services Agreement upon ninety days prior written notice, except for research
and development services which will require two years prior written notice. The
rates charged by Union Camp to the Company are intended to approximate the fair
value of the services provided to the Company. The rates may not necessarily
approximate the historical cost allocations prior to the IPO. The total charges
approximated $4.0 million, $3.5 million and $3.4 million in 1996, 1995 and 1994,
respectively. At December 25, 1996 and 1995, the net payable to Union Camp was
approximately $1.1 million and $600,000, respectively, which is payable on
demand.
Effective December 26, 1993, the Company converted $20.0 million of
intercompany debt to Union Camp into a note payable to Union Camp with interest
at 0.5% over the thirty-day U.S. dollar LIBOR rate. This debt was repaid by the
Company during 1994.
There was no interest expense to Union Camp in 1996. Interest expense to
Union Camp was approximately $500,000 and $3.1 million in 1995 and 1994,
respectively.
4. Supplemental Information
Statements of Income
Total interest costs incurred and amounts capitalized for each of the years
ended December 25 were:
1996 1995 1994
($ in thousands)
-----------------------------
Total interest .............................. $3,062 $3,637 $5,486
Interest capitalized ........................ (645) (40) (1,228)
-----------------------------
Net interest expense ..................... $2,417 $3,597 $4,258
=============================
Total other (income) expense, net includes loss from foreign exchange of $1.5
million in 1996, $300,000 in 1995 and $1.4 million in 1994.
Balance Sheets
As of December 25,
------------------
1996 1995
------------------
($ in thousands)
Receivables, net
Trade ................................... $86,028 $77,148
Other ................................... 7,676 7,438
------------------
93,704 84,586
Less allowance for doubtful accounts .... 2,300 2,048
------------------
Total ................................. $91,404 $82,538
==================
There were no significant uncollectible accounts written off during either
year that were not previously reserved.
As of December 25,
------------------
1996 1995
------------------
($ in thousands)
Inventories
Finished goods .......................... $ 30,156 $32,720
Raw materials ........................... 55,077 47,028
Work in process ......................... 12,579 10,749
Supplies ................................ 4,405 4,245
-------------------
Total ................................. $102,217 $94,742
===================
As of December 25, 1996 and 1995, finished goods, work in process and raw
materials totaling $25.6 million and $26.7 million, respectively, were valued at
LIFO cost. The excess of current cost over LIFO value was $7.9 million and $7.0
million in 1996 and 1995, respectively.
As of December 25,
------------------
1996 1995
------------------
($ in thousands)
Other current assets
Prepayments ............................. $ 3,623 $ 3,575
Other ................................... - 4,874
-------------------
Total ................................. $ 3,623 $ 8,449
===================
Property, plant and equipment
Land .................................... $ 5,374 $ 4,907
Buildings and improvements .............. 45,589 35,904
Machinery and equipment ................. 198,752 172,725
Construction in progress ................ 31,000 16,521
-------------------
280,715 230,057
Less accumulated depreciation ........... 115,138 98,854
-------------------
Property, plant and equipment, net ......... $165,577 $131,203
===================
30
<PAGE>
<PAGE>
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
The Company's capital spending backlog under approved projects was
approximately $42.9 million at year-end 1996.
As of December 25,
------------------
1996 1995
------------------
($ in thousands)
Other non-current assets
Pension asset ........................... $27,000 $22,055
Intangible assets ....................... 12,272 4,420
Other ................................... 1,376 1,480
------------------
Total ................................. $40,648 $27,955
==================
Included within intangible assets as of December 25, 1996 and 1995 was
goodwill of $11.5 million and $3.0 million, respectively.
As of December 25,
------------------
1996 1995
------------------
($ in thousands)
Accrued liabilities
Payroll ................................. $ 7,148 $ 6,006
Payable to Union Camp ................... 1,140 572
Deferred payments on acquisitions ....... 4,784 -
Other ................................... 15,481 16,247
------------------
Total ................................. $28,553 $22,825
==================
Other long-term liabilities
Postretirement benefits ................. $ 2,854 $ 2,412
Deferred revenue ........................ 3,350 4,163
Other ................................... 4,613 3,542
------------------
Total ................................. $10,817 $10,117
==================
Statements of Cash Flows
Cash paid for income taxes was $12.3 million in 1996, $8.9 million in 1995 and
$10.3 million in 1994. Cash paid for interest, net of amounts capitalized, was
$2.5 million in 1996, $3.5 million in 1995 and $5.2 million in 1994. Income
taxes paid prior to 1995 include amounts paid by the Company to Union Camp
relating to the domestic tax liabilities of the Company. In 1996, the Company
completed three small acquisitions for a combined purchase price of $10.8
million. In connection with these acquisitions, the Company paid $6.0 million in
cash and incurred fixed deferred payments of $4.8 million.
Fair Value Disclosures of Financial Instruments
The carrying amounts of certain financial instruments (cash, short-term
investments, trade receivables and payables, long-term debt and forward foreign
exchange contracts) approximate their fair values. The carrying values of cash,
short-term investments and trade receivables and payables approximate fair value
because of the short maturity of these instruments. The fair values of long-term
debt and forward foreign exchange contracts vary with market conditions and are
estimated based on current rates for similar financial instruments offered to
the Company.
Derivative Financial Instruments
The Company's use of derivatives is restricted to those instruments which hedge
the risk associated with underlying business transactions such as existing
foreign currency commitments. Derivatives are not used for trading or
speculative purposes.
At December 25, 1996, the Company had outstanding foreign exchange contracts
valued at $29.4 million, primarily denominated in European currencies. These
contracts mature in the first half of 1997. The purpose of these contracts is to
neutralize foreign currency transaction risk generated by the company's firm
foreign currency business commitments. The change in value of the contracts
resulting from changes in the respective foreign currency rates versus the U.S.
dollar is accrued monthly and credited or charged to foreign exchange gain or
loss. Foreign currency commitment exposures are evaluated on an ongoing basis
and foreign contracts are adjusted as required to match cover with existing
commitments. Currently, contracts are limited to currencies with established
forward markets and counterparties, which meet Moody's credit rating of A1 or
better.
5. Debt
The Company had outstanding debt comprised as follows:
As of December 25,
------------------
1996 1995
------------------
($ in thousands)
Notes payable................................ $43,172 $34,052
Current installments of long-term debt....... 8 442
Long-term debt............................... 2,009 3,731
The Company has revolving local bank credit facilities in numerous countries
outside the United States which provide for aggregate borrowing availability,
expressed in U.S. dollars, of approximately $88.6 million. As of December 25,
1996, $41.0 million was outstanding and included in notes payable, compared with
$32.5 million as of December 25, 1995. Commitment or facility fees are either
nominal or zero. Borrowing covenants, to the extent they exist, are presently
being met.
31
<PAGE>
<PAGE>
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(continued)
- --------------------------------------------------------------------------------
Borrowings under bank agreements bear interest at local market rates, which
ranged from 1.9% to 16.9% in local currencies during 1996.
The Company has revolving bank credit facilities under which the Company may
obtain unsecured borrowings up to $25.0 million in the United States. Any
borrowings under these facilities would incur interest at the prevailing prime
rate or other market rates. As of December 25, 1996, $2.2 million was
outstanding and included in notes payable, compared with $1.6 million as of
December 25, 1995. There are no commitment fees or borrowing covenants.
The Company's $2.0 million in long-term debt, payable in 1998, has been
issued in Australia to satisfy the Company's financing needs, at an interest
rate of 7.28%.
6. Income Taxes
The components of income before income taxes were:
Year Ended December 25,
-----------------------------
1996 1995 1994
-----------------------------
($ in thousands)
Domestic ................................... $ 4,733 $ 3,274 $ 9,651
Foreign .................................... 42,028 43,644 28,393
-----------------------------
Income before
income taxes........................... $46,761 $46,918 $38,044
=============================
The provision for income taxes is comprised of the following:
Year Ended December 25,
-----------------------------
1996 1995 1994
-----------------------------
($ in thousands)
Current
Federal ................................. $ 2,254 $ 889 $ 2,973
State and local ......................... 382 199 414
Foreign ................................. 9,868 12,747 6,272
-----------------------------
$12,504 $13,835 $ 9,659
-----------------------------
Deferred
Federal ................................. $ (675) $ 655 $ 313
State and local ......................... (93) (9) 43
Foreign ................................. 3,470 1,991 2,486
-----------------------------
2,702 2,637 2,842
-----------------------------
Total ................................. $15,206 $16,472 $12,501
=============================
The significant components of the cumulative deferred tax liability are as
follows:
As of December 25,
------------------
1996 1995
------------------
($ in thousands)
Deferred federal taxes
Depreciation ............................ $ 5,103 $ 4,526
Other ................................... (3,637) (2,291)
Deferred foreign taxes
Pensions ................................ 8,412 7,314
Other ................................... 10,445 7,682
------------------
Total ................................. $20,323 $17,231
==================
A detailed analysis of the effective tax rate is as follows:
Year Ended December 25,
-----------------------------
1996 1995 1994
-----------------------------
Statutory federal tax rate ................. 35.0% 35.0% 35.0%
State taxes (net of federal
tax impact) ............................. 0.4 0.3 0.8
Foreign income taxes ....................... (3.7) (0.2) (2.4)
Other ...................................... 0.8 - (0.5)
-----------------------------
Effective rate ............................. 32.5% 35.1% 32.9%
=============================
Federal and state income taxes are not accrued on the cumulative
undistributed earnings of foreign subsidiaries because the earnings have been
reinvested in the business of those companies. As of December 25, 1996, the
total of all such undistributed earnings amounts to $116.2 million.
Taxable income of the Company's U.S. operations was included in the
consolidated U.S. federal income tax return of Union Camp for all periods prior
to the IPO. Under a Tax Allocation Agreement, income taxes were allocated as if
the Company filed a separate tax return. The provision for income taxes was
prepared as if the consolidated U.S. federal income tax return had been filed
separately by the Company and its subsidiaries. For all periods subsequent to
the IPO, the Company files consolidated U.S. federal income tax returns separate
from Union Camp.
Under the terms of the Company's Tax Allocation Agreement with Union Camp,
parties to the agreement have agreed to mutually indemnify each other against
potential claims, assessments or adjustments made by any taxing authority with
respect to any tax position taken by the Company or Union Camp for all periods
prior to the IPO.
32
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
7. STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Pre- Additional Cumulative Total
Offering Common Stock Paid-In Retained Translation Stockholders'
Equity Shares Amounts Capital Earnings Adjustments Equity
- ------------------------------------------------------------------------------------------------------------------------------------
($ in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 25, 1993 ............... $ 105,679 $ (20,388) $ 85,291
Net income ............................ 8,443 $ 17,100 -- 25,543
Union Camp investment activity ........ (16,598) -- -- (16,598)
Issuance of Common Stock at Offering .. (97,524) 19,215 $ 19,215 $ 167,292 -- -- 88,983
Foreign currency translation .......... -- -- -- -- -- 10,624 10,624
---------------------------------------------------------------------------------------
Balance, December 25, 1994 ............... -- 19,215 19,215 167,292 17,100 (9,764) 193,843
Net income ............................ -- -- -- -- 30,446 -- 30,446
Issuance of stock for options ......... -- 3 3 45 -- -- 48
Foreign currency translation .......... -- -- -- -- -- (2,555) (2,555)
---------------------------------------------------------------------------------------
Balance, December 25, 1995 ............... -- 19,218 19,218 167,337 47,546 (12,319) 221,782
---------------------------------------------------------------------------------------
Net income ............................ -- -- -- -- 31,555 -- 31,555
Issuance of stock for options ......... -- 4 4 63 -- -- 67
Foreign currency translation .......... -- -- -- -- -- 9,729 9,729
---------------------------------------------------------------------------------------
Balance, December 25, 1996 ............... $ -- 19,222 $ 19,222 $ 167,400 $ 79,101 $ (2,590) $ 263,133
====================================================================================================================================
</TABLE>
8. PENSION PLANS
The Company and certain foreign subsidiaries have non-contributory defined
benefit pension plans covering substantially all of their employees. Benefits
are based on years of service and, for salaried employees, final average
earnings. The Company funds these plans annually based upon a consistently
applied formula which amortizes the unfunded liability adjusted for actuarial
gains or losses. Assets of the plans are primarily fixed income instruments and
publicly traded stocks.
The following tables set forth the funded status of all the Company's pension
plans for 1996 and 1995 and the components of pension expense of all pension
plans in 1996, 1995 and 1994:
<TABLE>
<CAPTION>
December 25, 1996 December 25, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign Foreign
U.S. Plans Plans U.S. Plans Plans
- ------------------------------------------------------------------------------------------------------------------------------------
($ in thousands)
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation ........................... $ 13,249 $ 112,257 $ 12,781 $ 91,427
===================================================================
Accumulated benefit obligation ..................... $ 15,083 $ 113,211 $ 14,034 $ 92,226
===================================================================
Projected benefit obligation ........................... $ 18,969 $ 134,784 $ 18,623 $ 123,561
Plan assets at fair value .............................. 19,702 146,511 15,476 126,271
-------------------------------------------------------------------
Projected benefit obligation in excess
of (less than) plan assets ......................... (733) (11,727) 3,147 (2,710)
Unrecognized net gain (loss) ........................... 2,015 (17,535) (1,892) (22,021)
Unrecognized prior service cost ........................ (115) 73 (127) (6)
Unrecognized transition asset .......................... 389 2,189 489 2,682
-------------------------------------------------------------------
Pension liability (asset) recorded on
balance sheet ...................................... $ 1,556 $ (27,000) $ 1,617 $ (22,055)
===================================================================
</TABLE>
33
<PAGE>
<PAGE>
Notes to Consolidated Financial Statements (continued)
- --------------------------------------------------------------------------------
The pension expense for these plans included the following components:
<TABLE>
<CAPTION>
Year Ended December 25,
----------------------------------------
1996 1995 1994
----------------------------------------
($ in thousands)
<S> <C> <C> <C>
Service cost-benefits earned
during the period ............... $ 5,400 $ 4,622 $ 4,834
Interest cost on projected
benefit obligation .............. 10,878 10,916 9,375
Actual return on assets .............. (16,034) (18,762) 8,410
Net amortization and deferral ........ (557) 3,789 (23,879)
-------------------------------------
Total pension expense (gain) ......... $ (313) $ 565 $ (1,260)
=====================================
</TABLE>
The assumptions used in determining the pension expense for these plans were:
<TABLE>
<CAPTION>
Year Ended December 25,
--------------------------------------------------
1996 1995 1994
--------------------------------------------------
U.S. Foreign U.S. Foreign U.S. Foreign
Plans Plans Plans Plans Plans Plans
--------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rate of salary
progression ............ 4.75% 6.0% 4.75% 7.0% 4.75% 5.5%
Expected long-term
rate of return on
plan assets ............ 9.5% 11.5% 9.5% 11.5% 9.5% 11.5%
</TABLE>
At December 25, 1996 and 1995, the discount rates used to determine the
pension benefit obligation were 7.5% and 7.0%, respectively, for the U.S. plans
and 8.0% both periods for the foreign plans.
9. POSTRETIREMENT BENEFITS
The Company has a contributory postretirement health care plan covering
primarily its U.S. salaried employees. Employees become eligible for these
benefits when they meet minimum age and service requirements. The Company funds
its plans on a "pay-as-you-go" basis in an amount equal to the retirees' medical
claims paid.
The components of the APBO as of December 25, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------
($ in thousands)
<S> <C> <C>
Retirees ............................................. $ 180 $ 86
Fully eligible active plan participants .............. 316 166
Other active plan participants ....................... 2,246 1,489
Unrecognized net gain ................................ 112 671
--------------------
Accrued postretirement benefits
obligation ........................................ $2,854 $2,412
===================
</TABLE>
This obligation includes the estimated postretirement obligation of all
active employees as of December 25, 1996 and 1995.
The components of the net periodic expense for the years ended December 25,
1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------------------
($ in thousands)
<S> <C> <C> <C>
Service cost-benefits earned
during period ............................. $ 315 $ 155 $ 203
Interest cost on accumulated benefit
obligation ................................ 221 136 187
Net amortization and deferral ................ -- (131) --
----------------------------
Net periodic postretirement
benefit expense ........................... $ 536 $ 160 $ 390
============================
</TABLE>
At December 25, 1996 and 1995, the discount rates used to determine the
accumulated postretirement benefit obligation were 7.5% and 7.0%, respectively.
For measurement purposes, a 9.0% increase in the medical cost trend rate was
assumed for 1996. This rate decreases incrementally to 5.0% after eight years
and will remain at that level thereafter. It is estimated that a 1% increase in
the medical cost trend rate would increase the accumulated postretirement
benefit obligation as of December 25, 1996 by $454,000 and the net periodic
expense for 1996 by $99,000.
10. EMPLOYEE STOCK OPTION PLAN
In February 1994, the Company adopted the BBA Stock Option and Stock Award Plan
(the "Plan"). The Plan provides for the grant of options or awards to officers
and key employees of the Company and its subsidiaries at prices not less than
100% of the fair market value at the date of grant. Such options and awards
generally become exercisable two years after the date of grant and expire ten
years from that date. The Plan initially makes available up to 750,000 shares of
Common Stock, increased on May 1 of each year from May 1, 1995 to May 1, 2003,
inclusive, by one percent of the number of shares of Common Stock outstanding on
the immediately preceding April 30 (the "Annual Increment"). Under the Plan,
150,000 shares plus 20% of the Annual Increment may be awarded as restricted
stock and no more than 1,000,000 shares in the aggregate may be awarded as
incentive stock options. Recipients of restricted stock are entitled to receive
cash dividends, if any, and to vote their respective shares. Certain
restrictions will limit the sale or transfer of these shares during the
specified restriction period. Concurrent with the IPO, the Company granted
options to purchase approximately 500,000 shares
34
<PAGE>
<PAGE>
of Common Stock to officers and key employees of the Company which will become
exercisable at a rate of 20% per year.
At the end of 1996, 563,610 shares were available for future grants under the
1994 plan. The options outstanding at December 25, 1996 do not have stock
appreciation rights attached.
The Company has adopted the disclosure provisions of SFAS No. 123.
Accordingly, no compensation cost has been recognized for the stock option plan.
Had compensation cost for the Company's stock option plan been determined based
on the fair value at the grant date for awards in 1996 and 1995 consistent with
the provisions of SFAS No. 123, total compensation cost recognized in income for
stock-based compensation would have been $516,000 in 1996 and $67,000 in 1995 on
a pro forma basis. Also, if SFAS No. 123 had been adopted, pro forma net income
and earnings per share would have been $31.2 million or $1.63 per share in 1996
and $30.4 million or $1.58 per share in 1995. The related tax effects that would
have been recognized were not materially different from those booked.
The following table summarizes activity in the Company's stock option plan
during 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
------------------------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding
at beginning of year ......... 544,707 $19.07 453,500 $16.46
Granted ......................... 33,428 $25.00 94,207 $31.58
Exercised ....................... (4,200) $16.00 (3,000) $16.00
Forfeited ....................... (10,415) $27.84 -- --
------------------------------------------
Options outstanding
at end of year ............... 563,520 $19.28 544,707 $19.07
------------------------------------------
Options exercisable
at end of year ............... 192,500 $17.08 87,600 $16.00
==========================================
</TABLE>
For options outstanding as of the end of 1996, the range of exercise prices
was $25.00 to $32.25 per share and the weighted average remaining contractual
life was 7.8 years. The weighted average fair value on the date of grant was
$9.37 for options granted in 1996 and $11.31 for options granted in 1995.
Fair value was determined through the use of the Black--Scholes options
pricing formula. For options granted in 1996, the risk--free interest rate was
6.0%, the expected life was 6 years, the expected volatility was 23% and the
expected dividend yield was zero, all calculated on a weighted average basis.
For options granted in 1995, the risk--free interest rate was 5.8%, the expected
life was 6 years, the expected volatility was 22% and the expected dividend
yield was zero, all calculated on a weighted average basis.
11. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is involved in various legal proceedings arising in the ordinary
course of business. Based upon the information presently available and the
Company's evaluation of the proceedings pending, management believes that the
adverse determination of any such proceedings or all of them combined will not
have a material adverse effect on the Company's business or financial position
or results of operations.
12. SEGMENT AND GEOGRAPHIC INFORMATION
Operating results and other financial data are presented for the principal
business segments of the Company for the years ended December 25, 1996, 1995 and
1994.
Total revenue and operating profit by business segment and geographic region
include both sales to customers, as reported in the Company's consolidated
income statement, and intersegment sales, which are accounted for at prices
charged to customers and eliminated in consolidation. Operating profit by
business segment and geographic region is total revenue less operating expenses.
In computing operating profit by business segment and geographic region, none of
the following items has been added or deducted: other income, interest expense
or income taxes. The amount of the elimination of intersegment profit on any
product that remains in inventory at the end of the period is determined by
changes in quantities of inventory and changes in the margins of profit.
Identifiable assets by business segment and geographic region are those
assets used in company operations in each segment and geographic region.
Corporate assets principally include property and investments in unconsolidated
affiliates. Capital expenditures are reported exclusive of acquisitions.
The following chart sets forth operating results and other financial data for
the principal business segments of the Company for the years ended December 25,
1996, 1995 and 1994.
35
<PAGE>
<PAGE>
Notes to Consolidated Financial Statements (continued)
- --------------------------------------------------------------------------------
12. SEGMENT AND GEOGRAPHIC INFORMATION (CONTINUED)
SEGMENT INFORMATION
The Company's business is organized into two operating segments: flavor and
fragrance and aroma chemicals. The Company's flavor and fragrance products
impart a desired taste or smell to a broad range of consumer products. The
Company manufactures its flavors and fragrance products at 19 compounding
facilities in 14 countries and maintains sales offices in 41 countries. The
Company's aroma chemicals are primarily used as raw materials in fragrance
compounds. The Company manufactures its aroma chemicals products primarily at
its Jacksonville, Florida and its Widnes, United Kingdom plants.
<TABLE>
<CAPTION>
Corporate
Flavor & Aroma Items and
Fragrance Chemicals Unallocated Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
($in thousands)
<S> <C> <C> <C>
1996
Net sales to customers .................... $357,772 $ 91,593 -- $449,365
Intersegment sales ........................ -- 25,088 $(25,088) --
-------------------------------------------------------------------------
Total net sales ........................... 357,772 116,681 (25,088) 449,365
Operating profit .......................... 46,239 22,666 (22,374) 46,531
Identifiable assets ....................... 272,270 129,455 6,074 407,799
Depreciation .............................. 6,349 5,510 266 12,125
Capital expenditures ...................... 28,298 10,616 715 39,629
1995
Net sales to customers .................... $336,541 $ 88,075 -- $424,616
Intersegment sales ........................ -- 22,965 $(22,965) --
------------------------------------------------------------------------
Total net sales ........................... 336,541 111,040 (22,965) 424,616
Operating profit .......................... 43,653 24,770 (18,226) 50,197
Identifiable assets ....................... 234,272 110,650 4,931 349,853
Depreciation .............................. 5,897 5,186 302 11,385
Capital expenditures ...................... 18,649 5,878 517 25,044
1994
Net sales to customers .................... $292,111 $ 82,880 -- $374,991
Intersegment sales ........................ -- 18,648 $(18,648) --
------------------------------------------------------------------------
Total net sales ........................... 292,111 101,528 (18,648) 374,991
Operating profit .......................... 35,888 20,601 (14,731) 41,758
Identifiable assets ....................... 199,103 102,851 5,614 307,568
Depreciation .............................. 5,172 3,876 358 9,406
Capital expenditures ...................... 8,194 9,125 931 18,250
</TABLE>
36
<PAGE>
<PAGE>
12. SEGMENT AND GEOGRAPHIC INFORMATION (CONTINUED)
OPERATIONS BY GEOGRAPHIC AREAS
The Company has operations in 41 countries in North and South America, Europe,
Asia, Australia, the Middle East and Africa. The Company's flavor and fragrance
business is separately managed in four geographic regions: Americas, Europe,
Asia Pacific and International. The aroma chemicals business is managed globally
from Jacksonville, Florida and Widnes, United Kingdom. The operations of the
Americas region outside of the United States for the purpose of this table are
included as a component of "Other".
<TABLE>
<CAPTION>
Corporate
Asia Items and
U.S.A. Europe Pacific Other Unallocated Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
($ in thousands)
<S> <C> <C> <C> <C> <C>
1996
Net sales to customers ........ $135,789 $160,135 $ 78,778 $ 74,663 -- $449,365
Sales between areas ........... 25,604 30,669 25 275 $(56,573) --
-----------------------------------------------------------------------------------------
Total net sales ............... 161,393 190,804 78,803 74,938 (56,573) 449,365
Operating profit .............. 19,812 29,136 11,093 8,605 (22,115) 46,531
Identifiable assets ........... 89,271 184,198 81,277 46,979 6,074 407,779
1995
Net sales to customers ........ $130,024 $154,280 $ 72,839 $ 67,473 -- $424,616
Sales between areas ........... 22,471 28,457 188 274 $(51,390) --
-----------------------------------------------------------------------------------------
Total net sales ............... 152,495 182,737 73,027 67,747 (51,390) 424,616
Operating profit .............. 16,873 32,076 11,300 8,245 (18,297) 50,197
Identifiable assets ........... 80,387 163,755 60,661 40,119 4,931 349,853
1994
Net sales to customers ........ $119,875 $132,057 $ 64,915 $ 58,144 -- $374,991
Sales between areas ........... 16,927 26,276 6 474 $(43,683) --
-----------------------------------------------------------------------------------------
Total net sales ............... 136,802 158,333 64,921 58,618 (43,683) 374,991
Operating profit .............. 18,845 21,158 10,139 6,186 (14,570) 41,758
Identifiable assets ........... 72,831 147,983 51,920 29,220 5,614 307,568
</TABLE>
37
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Stockholders of
Bush Boake Allen Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and of cash flows present fairly, in all
material respects, the financial position of Bush Boake Allen Inc. and its
subsidiaries at December 25, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
25, 1996, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Morristown, New Jersey
January 30, 1997
38
<PAGE>
<PAGE>
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
FIVE-YEAR SUMMARY
($ in thousands, except per share)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Operating Results 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales................................ $449,365 $424,616 $374,991 $336,333 $330,740
Costs and Other Charges.................. 402,834 374,419 333,233 302,558 301,100
- ----------------------------------------------------------------------------------------------------------------
Income From Operations................. 46,531 50,197 41,758 33,775 29,640
- ----------------------------------------------------------------------------------------------------------------
Interest Expense......................... 2,417 3,597 4,258 2,338 1,959
Other (Income) Expense-Net............... (2,647) (318) (544) (1,295) (3,068)
- ----------------------------------------------------------------------------------------------------------------
Income Before Income Taxes and Cumulative
Effect of Accounting Change......... 46,761 46,918 38,044 32,732 30,749
Income Taxes............................. 15,206 16,472 12,501 12,175 11,820
Effect of Accounting Change, net of tax.. - - - - 1,836
- -----------------------------------------------------------------------------------------------------------------
Net Income............................. 31,555 30,446 25,543 20,557 17,093
- -----------------------------------------------------------------------------------------------------------------
Per Share(1)
Net Income............................... 1.64 1.58 1.33 1.07 .89
Stockholders' Equity..................... 13.69 11.54 10.09 4.44 8.47
- ------------------------------------------------------------------------------------------------------------------
Financial Position at Year-End
Current Assets........................... 201,574 190,695 162,516 172,882 164,078
Current Liabilities...................... 111,517 96,992 80,895 169,515 66,864
- ------------------------------------------------------------------------------------------------------------------
Working Capital.......................... 90,057 93,703 81,621 3,367 97,214
Total Assets............................. 407,799 349,853 307,568 303,415 269,452
- ------------------------------------------------------------------------------------------------------------------
Long-Term Debt........................... 2,009 3,731 6,554 5,846 2,704
Debt Payable to Union Camp............... - - - 20,000 20,000
Stockholders' Equity..................... 263,133 221,782 193,843 85,291 162,817
- ------------------------------------------------------------------------------------------------------------------
Percent of Long-Term Debt to Total Capital 0.8% 1.7% 3.3% 23.3% 12.2%
- ------------------------------------------------------------------------------------------------------------------
Additional Data
Gross Profit Margin...................... 36.0% 37.1% 37.0% 35.7% 34.4%
Operating Margin......................... 10.4% 11.8% 11.1% 10.0% 9.0%
Depreciation and Amortization............ $13,445 $12,661 $10,678 $10,900 $12,153
Capital Expenditures (excluding acquisitions) $39,629 $25,044 $18,250 $36,603 $24,079
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Net Income Per Share prior to 1995 and Stockholders' Equity Per Share prior
to 1994 are based on pro forma shares outstanding of 19,215,000.
39
<PAGE>
<PAGE>
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
DIRECTORS AND OFFICERS
- --------------------------------------------------------------------------------
Board of Directors
Board of Directors (left to right): George J. Sella, Jr., James M. Reed,
L. Robert Pfund, William H. Trice, Peter L. Acton, Thomas R. Crane, Jr.,
Julian W. Boyden.
William H. Trice'D'
Chairman of the Board,
Executive Vice President of
Union Camp Corporation
(a manufacturer of paper,
paperboard, packaging, wood
and chemical products)
Julian W. Boyden**
Chairman, President and
Chief Executive Officer
Peter L. Acton
Vice President and General Manager, Union Camp
Chemical Products Division
Thomas R. Crane, Jr.
President, Chief Executive Officer
and a Director of Castrol North
America Holdings Inc.
(a manufacturer and marketer of motor oil
and other lubricants)
L. Robert Pfund
Retired Corporate Group
Vice President of Avon
Products, Inc. (a manufacturer and marketer of fragrances
and cosmetics)
James M. Reed
Vice Chairman of the Board,
Vice Chairman of the Board
and Chief Financial Officer of Union Camp Corporation
George J. Sella, Jr.
Retired Chairman of the Board
and Chief Executive Officer
of American Cyanamid Company
(a research-based biotechnology
company)
Corporate Officers
Julian W. Boyden
Chairman, President and
Chief Executive Officer
James H. Dunsdon
Executive Vice President
Fred W. Brown
Vice President and
Chief Financial Officer
T. John Dunlea
Vice President
Asia Pacific Region
Bruce J. Edwards
Vice President
International Region
Jos Kleppers
Vice President
Europe Region
John J. Lawless*
Vice President
Personnel and Safety
P. C. Mathew
Vice President
Aroma and Terpene Chemicals
Dennis M. Meany
Vice President
General Counsel and
Secretary
Peter A. Thorburn
Vice President
Chemical Sales
John R. Wright
Vice President
Commerce and Technology
Kenneth M. McHugh
Controller
Charles D. Weller
Treasurer
Richard J. Aiello
Assistant Controller
Robert E. Holewinski
Assistant Controller
Alan R. Kelsey
Assistant Secretary
James M. Brannick
Assistant Treasurer
* Retiring March 31, 1997
'D' Retired as Chairman, December 31, 1996
** Elected Chairman, effective January 1, 1997
40
<PAGE>
<PAGE>
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
Shareholder Information
- -------------------------------------------------------------------------------
Corporate Headquarters
7 Mercedes Drive
Montvale, New Jersey 07645
(201) 391-9870
Annual Meeting
The 1997 Annual Meeting will be held at 11:00 am (EST) on May 7, 1997 at the
Woodcliff Lake Hilton, Woodcliff Lake, New Jersey.
Stock Exchange Listing
The common stock of Bush Boake Allen Inc. is traded on the New York Stock
Exchange (ticker symbol BOA).
Stockholder Records
Transfer Agent is The Bank of New York, 101 Barclay Street, 12 W, New York,
New York 10286
Inquiries relating to change of registered ownership or change of address
should be forwarded to:
The Bank of New York
P.O. Box 11258
Church Street Station
New York, New York 10286-1258
(800) 524-4458 or (212) 815-5800
Quarterly Earnings Reports
The company has decided to discontinue production of printed Quarterly Reports
to Shareholders since we believe they are no longer timely or cost effective.
Quarterly earnings are disseminated regularly and widely through news wire
services and the media.
Stockholders desiring copies of these earnings releases as well as
individuals or organizations seeking further information about the company
should write to Stewart J. Phelps, Director Corporate Communications at the
corporate headquarters address.
SEC Form 10-K
A copy of the annual report on Form 10-K for 1996 as filed with the Securities
and Exchange Commission may be obtained without charge by writing to
Stewart J. Phelps, Director Corporate Communications, at the corporate
headquarters address.
BOA
Listed
NYSE
Statements in this report that are not historical are forward-looking statements
which are subject to risks and uncertainties that could cause actual results to
differ materially. Such risks and uncertainties with respect to Bush Boake
Allen's businesses include general economic conditions, customers changing
flavor and/or fragrance formulations, pricing and availability of raw materials
and political and economic uncertainties including currency fluctuations in
the many countries in which we operate.
<PAGE>
<PAGE>
[LOGO] Bush Boake Allen Inc.
GLOBAL PRESENCE
local service
Argentina Indonesia
Brazil Japan
Canada Malaysia
Chile New Zealand
Colombia Philippines
Jamaica Singapore
Mexico Thailand
United States Bulgaria
Benelux Czech Republic
Denmark India
France Kenya
Germany Pakistan
Ireland Poland
Italy Russia
Spain Slovakia
Sweden South Africa
Switzerland Turkey
United Kingdom Ukraine
Australia United Arab Emirates
China Zimbabwe
Hong Kong
<PAGE>
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF BUSH BOAKE ALLEN INC.
<TABLE>
<CAPTION>
Percentage of
Place of Voting Stock
Subsidiary Incorporation Owned
- ---------- ------------- ------
<S> <C> <C>
Bush Boake Allen Canada Inc. Canada 100%
Bush Boake Allen (Chile) S.A. Chile 100%
Bush Boake Allen Asset Management Limited England 100%
Bush Boake Allen Industria E Commercial DO
Brasil Limitada Brazil 100%
Bush Boake Allen Colombia S.A. Colombia 100%
Bush Boake Allen Mexico, S.A. de C.V. Mexico 100%
Bush Boake Allen Controladora S.A. de C.V. Mexico 100%
Bush Boake Allen Servicios S.A. de C.V. Mexico 100%
Bush Boake Allen (Nominees) Limited England 100%
Bush Boake Allen International Inc. Delaware 100%
Bush Boake Allen Holdings (U.K.) Limited England 100%
Bush Boake Allen Pension Investments Limited England 100%
Bush Boake Allen (Executive Pension England 100%
Trustees) Limited
Bush Boake Allen (Pension Trustees) Limited England 100%
Bush Boake Allen (Works Pension England 100%
Trustees) Limited
Bush Boake Allen Limited England 100%
W.J. Bush & Co., Inc. Delaware 100%
GMB Proteins Limited England 100%
Bush Boake Allen Australia Ltd. Australia 100%
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 21.1
Page 2
<TABLE>
<CAPTION>
Percentage of
Place of Voting Stock
Subsidiary Incorporation Owned
- ---------- ------------- ------
<S> <C> <C>
Bush Boake Allen Espana S.A. Spain 100%
Bush Boake Allen Morimura Limited Japan 65%
Bush Boake Allen (Guangzhou) Co. Ltd. China 95%
Bush Boake Allen (Hong Kong) Limited Hong Kong 100%
A. Boake, Roberts And Company (Holding), England 100%
Limited
Bush Boake Allen Esans ve Aromatik Turkey 99.9%
Urunler Sanayi AS
PT Bush Boake Allen Indonesia Indonesia 60%
Bush Boake Allen (New Zealand) Limited New Zealand 100%
Bush Boake Allen Singapore Pte. Ltd. Singapore 100%
Bush Boake Allen (Malaysia) SDN. BHD. Malaysia 100%
(Kuala Lumpur)
Bush Boake Allen Denmark ApS. Denmark 100%
Bush Boake Allen France France 100%
Bush Boake Allen Zimbabwe (Private) Zimbabwe 100%
Limited
Bush Boake Allen (India) Limited India 70%
Hindustan Flavours and Fragrances (Inter- India 70%
national) Limited
Bush Boake Allen (Jamaica) Limited Jamaica 70%
</TABLE>
-2-
<PAGE>
<PAGE>
EXHIBIT 21.1
Page 3
<TABLE>
<CAPTION>
Percentage of
Place of Voting Stock
Subsidiary Incorporation Owned
- ---------- ------------- ------
<S> <C> <C>
Bush Boake Allen (SA) (Proprietary) Limited South Africa 100%
Bush Boake Allen (Thailand) Limited Thailand 60%
Bush Boake Allen Deutschland GmbH West Germany 100%
Bush Boake Allen, Moscow, Ltd. Russia 100%
Bush Boake Allen Benelux B.V. Netherlands 100%
Bush Boake Allen Scandinavia Aktielbolag Sweden 100%
Bush Boake Allen (C.R.) s.r.o. Czech Republic 100%
W.J. Bush & Co. Limited England 100%
Stafford Specialty Ingredients Limited England 100%
Bush Boake Allen Italia S.P.A. Italy 100%
Bush Boake Allen Pakistan (Private) Limited Pakistan 50%
Bush Boake Allen Philippines, Inc. Philippines 100%
Asian Investments, Inc. Delaware 100%
Fragrance Holdings Private Limited India 40%
Essence Scientific Research Private Limited India 40%
Jamaica Extracts Limited Jamaica 58%
Thai Flavour & Fragrance Co. Limited Thailand 49%
Aromatica Industrial Suramericana, S.A. Argentina 100%
PT Bebea Nusa Indonesia 100%
</TABLE>
-3-
<PAGE>
<PAGE>
[PRICE WATERHOUSE LETTERHEAD]
EXHIBIT 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-93084 and No. 33-86588) of Bush Boake Allen Inc.
of our report dated January 30, 1997 appearing on page 38 of the 1996 Annual
Report to Shareholders which is incorporated in this Annual Report on Form 10-K.
Price Waterhouse LLP
Morristown, New Jersey
March 19, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-25-1996
<PERIOD-START> DEC-26-1995
<PERIOD-END> DEC-25-1996
<CASH> 4,330
<SECURITIES> 0
<RECEIVABLES> 91,404
<ALLOWANCES> 0
<INVENTORY> 102,217
<CURRENT-ASSETS> 201,574
<PP&E> 165,577
<DEPRECIATION> 0
<TOTAL-ASSETS> 407,799
<CURRENT-LIABILITIES> 111,517
<BONDS> 2,009
<COMMON> 263,133
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 407,799
<SALES> 449,365
<TOTAL-REVENUES> 449,365
<CGS> 287,780
<TOTAL-COSTS> 402,834
<OTHER-EXPENSES> (2,647)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,417
<INCOME-PRETAX> 46,761
<INCOME-TAX> 15,206
<INCOME-CONTINUING> 31,555
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,555
<EPS-PRIMARY> 1.63
<EPS-DILUTED> 1.63
</TABLE>
