<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 25, 2000
---------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________to______________________________
Commission file number 1-13030
Bush Boake Allen Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Virginia 13-2560391
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation of Organization) Identification No.)
7 Mercedes Drive, Montvale, New Jersey 07645
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(Address of Principal Executive Offices) (Zip Code)
(201) 391-9870
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(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
-------- --------
19,322,704 shares of Registrant's Common Stock, par value $1 per share, were
outstanding as of the close of business on June 25, 2000.
<PAGE>
BUSH BOAKE ALLEN INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION*
Item 1. Financial Statements 2
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
</TABLE>
-------------------------------------------
*A summary of the Registrant's significant accounting policies is contained in
the Registrant's Form 10-K for the year ended December 25, 1999 which has
previously been filed with the Securities and Exchange Commission.
-1-
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except per share)
(unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 25, JUNE 25,
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
(restated) (restated)
<S> <C> <C> <C> <C>
Net Sales $123,565 $127,223 $240,906 $248,593
Costs and other charges:
Cost of goods sold 79,583 86,035 154,488 168,695
Selling and administrative expenses 24,435 24,881 48,865 48,466
Research and development expenses 6,886 6,088 13,991 12,282
-------- -------- -------- --------
Income from operations 12,661 10,219 23,562 19,150
-------- -------- -------- --------
Interest expense 465 537 1,001 1,087
Other (income) expense, net 614 825 1,267 2,452
-------- -------- -------- --------
Income before income taxes 11,582 8,857 21,294 15,611
-------- -------- -------- --------
Income taxes 4,401 3,405 8,092 5,824
-------- -------- -------- --------
Net Income $7,181 $5,452 $13,202 $9,787
====== ======= ======== ========
Net income per share:
- Basic $0.37 $0.28 $0.68 $0.51
===== ====== ====== ======
- Diluted $0.37 $0.28 $0.68 $0.50
===== ====== ====== ======
Weighted average number of shares outstanding:
- Basic 19,319,536 19,293,712 19,313,301 19,292,059
========== =========== =========== ===========
- Diluted 19,494,449 19,394,324 19,419,596 19,411,163
========== =========== =========== ===========
</TABLE>
See accompanying notes to the Consolidated Financial Statements.
-2-
<PAGE>
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands)
<TABLE>
<CAPTION>
JUNE 25, DECEMBER 25,
2000 1999
---- ----
(unaudited) (restated)
<S> <C> <C>
ASSETS
Cash and cash equivalents $13,665 $9,338
Receivables, net 92,007 93,370
Inventories 108,776 100,374
Other 8,220 11,255
-------- --------
Total current assets 222,668 214,337
Property, plant and equipment, net 184,243 194,999
Other assets 54,612 54,684
-------- --------
Total Assets $461,523 $464,020
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable and current maturities $7,509 $9,551
Accounts payable 38,203 37,689
Accrued liabilities 31,478 31,248
Income and other taxes 225 3,954
-------- --------
Total current liabilities 77,415 82,442
Long-term debt 9,578 8,003
Deferred income taxes 23,305 24,794
Other long-term liabilities 11,085 10,212
Stockholders' equity:
Common stock - (Shares outstanding:
2000: 19,322,704 and 1999: 19,299,534) 19,323 19,300
Additional paid-in capital 169,161 168,680
Retained earnings 182,791 169,589
Accumulated other comprehensive income/(loss) (31,135) (19,000)
-------- --------
Total stockholders' equity 340,140 338,569
-------- --------
Total Liabilities and Stockholders' Equity $461,523 $464,020
======== ========
</TABLE>
See accompanying notes to the Consolidated Financial Statements.
-3-
<PAGE>
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 25,
--------
2000 1999
---- ----
(restated)
<S> <C> <C>
Cash provided by (used for) operations:
Net income $13,202 $9,787
Adjustments to reconcile net income
to cash provided by operations:
Depreciation and amortization 10,428 9,890
Deferred income taxes 542 (239)
Other 1,028 618
Changes in operational assets and liabilities:
Receivables, net (1,752) (8,635)
Inventories (12,073) (656)
Other assets (1,428) (6,687)
Accounts payable, taxes and other liabilities 677 2,208
-------- --------
Cash provided by operations 10,624 6,286
-------- --------
Cash provided by (used for) investment activities:
Capital expenditures (6,702) (14,729)
Other 56 215
-------- --------
Cash used for investment activities (6,646) (14,514)
-------- --------
Cash provided by (used for) financing activities:
Proceeds from issuance of common stock, net 467 169
Change in notes payable, net (1,579) 7,128
Proceeds from issuance of long-term debt 3,203 --
Repayments of long-term debt (1,801) (659)
-------- --------
Cash provided by financing activities 290 6,638
-------- --------
Effect of exchange rate changes on cash 59 (857)
-------- --------
Increase (decrease) in cash and cash equivalents 4,327 (2,447)
Balance at beginning of period 9,338 11,072
-------- --------
Balance at end of period $13,665 $8,625
======== ======
</TABLE>
See accompanying notes to the Consolidated Financial Statements.
-4-
<PAGE>
BUSH BOAKE ALLEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in thousands)
(unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 25, JUNE 25,
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
(restated) (restated)
<S> <C> <C> <C> <C>
NET INCOME $7,181 $5,452 $13,202 $9,787
Other comprehensive income/(loss), net of tax:
Foreign currency translation adjustments (10,434) (4,956) (12,135) (11,880)
-------- ------- -------- --------
Total other comprehensive income/(loss) (10,434) (4,956) (12,135) (11,880)
-------- ------- -------- --------
COMPREHENSIVE INCOME/(LOSS) ($3,253) $496 $1,067 ($2,093)
======== ===== ======= ========
</TABLE>
See accompanying notes to the Consolidated Financial Statements.
-5-
<PAGE>
BUSH BOAKE ALLEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Interim Reporting
The information furnished in this report is unaudited but includes all
adjustments which, in the opinion of management, are necessary for a fair
presentation of results for the interim periods reported. The adjustments made
were of a normal recurring nature. Results for the interim periods are not
necessarily indicative of results for the full period or for any other interim
period.
Note 2. Change in Accounting
Effective December 26, 1999, the Company changed its method of determining the
cost of its United States aroma chemicals inventory from a last-in, first-out
(LIFO) method to a first-in, first-out (FIFO) method. The change was made
because the Company has begun to realize and expects to continue to experience
operating efficiencies as a result of process improvements from several capital
investment initiatives at its United States aroma chemicals facility. The
Company believes that the FIFO method is preferable to the LIFO method as the
change conforms the inventories of all operations to the same methodology,
inventories are reflected in the Company's balance sheet at their most recent
value, the FIFO or average cost methods are the predominant method used in the
Company's industry and the FIFO method also results in a better matching of
revenues and expenses.
This change in accounting method has been applied retroactively and financial
information for all periods presented has been restated to apply the FIFO cost
method. As a result of the change, net income was decreased by $300,000
(approximately $.02 per share basic and diluted) in the second quarter of 1999
and $500,000 (approximately $.03 per share basic and diluted) in the six months
ended June 25, 1999. As a result of the retroactive application of the new
method, retained earnings were increased by $1.8 million and inventories were
increased by $3.0 million as of December 25, 1999. The effect of the accounting
change on the second quarter and the six months ended June 25, 2000 was not
material.
Note 3. Inventories
<TABLE>
<CAPTION>
(Restated)
June 25, 2000 December 25, 1999
------------- -----------------
($ in thousands)
<S> <C> <C>
Finished goods $37,706 $36,484
Raw materials 51,936 49,498
Work in process 15,792 11,530
Supplies 3,342 2,862
------- ---------
Total $108,776 $100,374
======== ========
</TABLE>
-6-
<PAGE>
Note 4. Stockholders' Equity (in thousands)
<TABLE>
<CAPTION>
ADDITIONAL ACCUMULATED OTHER TOTAL
COMMON STOCK PAID-IN RETAINED COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNTS CAPITAL EARNINGS INCOME (LOSS) EQUITY
------ ------- ------- -------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Restated
Balance December 25, 1999 19,300 $19,300 $168,680 $169,589 $(19,000) $338,569
Net Income 13,202 13,202
Issuance of Stock for Options 23 23 481 504
Foreign Currency Translation (12,135) (12,135)
------- ------- -------- -------- -------- --------
Balance June 25, 2000 19,323 $19,323 $169,161 $182,791 $(31,135) $340,140
======= ======= ======== ======== ========= ========
</TABLE>
Note 5. Other Comprehensive Income
The components of Other Comprehensive Income consist entirely of the Foreign
Currency Translation Adjustments as reported in the Consolidated Statement of
Comprehensive Income for the periods ending June 25, 2000 and 1999, and as
reported in the Consolidated Balance Sheets as of June 25, 2000 and December 25,
1999. Bush Boake Allen Inc. does not provide any Federal or State deferred
income taxes on the cumulative undistributed earnings of foreign subsidiaries
including cumulative translation adjustments with respect to such foreign
subsidiaries, because the earnings have been reinvested in the businesses of
those companies.
Note 6. Subsequent Event
On July 25, 2000, the Company sold a parcel of surplus land and buildings
adjacent to our Walthamstow, England site, resulting in a net gain of
approximately $1.9 million (approximately $.10 per share).
-7-
<PAGE>
Note 7. Segment Information
The following chart sets forth sales and operating profit for the principal
business segments of the Company for the quarters ended June 25, 2000 and 1999
and for the six months ended June 25, 2000 and 1999. There has not been a
material change in total assets from the amounts disclosed in the 1999 annual
report, except for the restatement due to the accounting change as described in
Note 2. The basis of segmentation and the measurement of segment operating
profit has been consistently applied.
<TABLE>
<CAPTION>
CORPORATE
FLAVOR & AROMA ITEMS AND
FRAGRANCE CHEMICALS UNALLOCATED CONSOLIDATED
--------- --------- ----------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
QUARTER ENDED
JUNE 25, 2000
Net sales to customers $103,609 $19,956 -- $123,565
Intersegment sales -- 5,675 $(5,675) --
-------- ------- -------- --------
Total net sales 103,609 25,631 (5,675) 123,565
Operating profit 13,307 3,679 (4,325) 12,661
JUNE 25, 1999 (RESTATED)
Net sales to customers $105,372 $21,851 -- $127,223
Intersegment sales -- 7,226 $(7,226) --
-------- ------- --------- --------
Total net sales 105,372 29,077 (7,226) 127,223
Operating profit 13,386 2,046 (5,213) 10,219
<CAPTION>
CORPORATE
FLAVOR & AROMA ITEMS AND
FRAGRANCE CHEMICALS UNALLOCATED CONSOLIDATED
--------- --------- ----------- ------------
($ IN THOUSANDS)
SIX MONTHS ENDED
JUNE 25, 2000
Net sales to customers $200,708 $40,198 -- $240,906
Intersegment sales -- 10,602 $(10,602) --
-------- ------- --------- --------
Total net sales 200,708 50,800 (10,602) 240,906
Operating profit 23,182 8,848 (8,468) 23,562
JUNE 25, 1999 (RESTATED)
Net sales to customers $203,124 $45,469 -- $248,593
Intersegment sales -- 13,761 $(13,761) --
-------- ------- --------- --------
Total net sales 203,124 59,230 (13,761) 248,593
Operating profit 24,162 5,310 (10,322) 19,150
</TABLE>
-8-
<PAGE>
Reconciliation of reportable segment sales and income before taxes:
<TABLE>
<CAPTION>
QUARTER ENDED
JUNE 25,
--------
2000 1999 (RESTATED)
---- ----
($ IN THOUSANDS)
<S> <C> <C>
NET SALES
Total net sales for reportable segments $129,240 $134,449
Elimination of intersegment sales (5,675) (7,226)
--------- ---------
Total consolidated net sales $123,565 $127,223
--------- ---------
INCOME BEFORE INCOME TAXES
Total operating profit for reportable segments $ 16,986 $15,432
Elimination of intersegment profits (930) (1,646)
Unallocated amounts:
Corporate administration expenses (3,395) (3,567)
Interest expense (465) (537)
Other income (expense) (614) (825)
--------- ---------
Total consolidated income before
income taxes $11,582 $8,857
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 25,
--------
2000 1999 (RESTATED)
---- ----
($ IN THOUSANDS)
<S> <C> <C>
NET SALES
Total net sales for reportable segments $251,508 $262,354
Elimination of intersegment sales (10,602) (13,761)
--------- ---------
Total consolidated net sales $240,906 $248,593
--------- ---------
INCOME BEFORE INCOME TAXES
Total operating profit for reportable segments $ 32,030 $29,472
Elimination of intersegment profits (1,859) (3,240)
Unallocated amounts:
Corporate administration expenses (6,609) (7,082)
Interest expense (1,001) (1,087)
Other income (expense) (1,267) (2,452)
--------- ---------
Total consolidated income before
income taxes $21,294 $15,611
========= =========
</TABLE>
-9-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
QUARTER ENDED JUNE 25, 2000 COMPARED TO QUARTER ENDED JUNE 25, 1999
NET SALES
Net sales for the second quarter ended June 25, 2000 decreased 2.9% to
$123.6 million from $127.2 million for the quarter ended June 25, 1999. The
aroma chemicals segment reported a decrease in sales of 8.7% compared with the
second quarter of 1999. The decrease reflects lower sales volume and prices.
Average selling prices were down approximately 4% primarily due to continued
market pressure on terpene-based products, the strength of the Pound Sterling
versus the Euro, and increased volumes of Chinese material becoming available
for domestic use and for exports. Sales volumes for major chemical products
declined approximately 7% from the second quarter of 1999. The flavor and
fragrance segment recorded a decrease in second quarter sales of 1.7% compared
with the second quarter of 1999. The European region and the Asia Pacific region
sales decreased 9.4% and 3.9%, respectively, from the second quarter of 1999
partially offset by increases of 3.1% in the International region and 3.0% in
the Americas region. Net sales were adversely affected by the movement in
foreign currency exchange rates, especially in the European and International
regions. If exchange rates had remained unchanged from the second quarter 1999
to the second quarter 2000, total net sales would have increased approximately
1%.
COST OF GOODS SOLD
Cost of goods sold in the second quarter of 2000 decreased to $79.6 million
from $86.0 million in the second quarter of 1999 due primarily to lower aroma
chemical materials costs and manufacturing cost efficiency gains generated from
improved yields and process improvements in both chemical plants, together with
some rebuilding of inventories of key products that were sold out at the end of
1999 due to Y2K demands. Cost of goods sold as a percentage of net sales
decreased to 64.4% from 67.6%.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses in the second quarter of 2000 decreased
to $24.4 million from $24.9 million in the second quarter of 1999. Selling and
administrative expenses as a percentage of net sales increased slightly to 19.8%
from 19.6%.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses in the second quarter of 2000 increased
to $6.9 million from $6.1 million in the second quarter of 1999. Research and
development expenses as a percentage of net sales increased to 5.6% from 4.8%
reflecting additional technical staff and a new technical and creative center
that was opened late last year near Rotterdam to support future growth in the
European flavor business on the continent.
-10-
<PAGE>
INCOME FROM OPERATIONS
Income from operations in the second quarter of 2000 increased 23.9% to
$12.7 million from $10.2 million in the second quarter of 1999. Operating
margins increased to 10.2% from 8.0% in the second quarter of 2000 due primarily
to lower material costs and operating efficiencies in the aroma chemicals
segment.
Income from operations, exclusive of corporate items, for the flavor and
fragrance segment was $13.3 million compared to $13.4 in the second quarter of
1999. A decrease in operating income was reported in the European region offset
by increases in the Asia Pacific and International regions. The Company's aroma
chemical segment recorded second quarter operating income, exclusive of
corporate items, of $3.7 million in 2000, compared to $2.0 million in the second
quarter of 1999.
OTHER (INCOME) EXPENSE, NET
Other (income) expense for the second quarter of 2000 was $600,000 expense
compared to $800,000 expense in the second quarter of 1999 which included some
losses on minor asset disposals.
INTEREST EXPENSE
Interest expense, net was $500,000 for the second quarter of 2000 and 1999.
INCOME TAXES
Income tax expense in the second quarter of 2000 increased to $4.4 million
from $3.4 million in the second quarter of 1999 primarily as a result of higher
pre-tax earnings. The Company's effective tax rate in the second quarter of 2000
decreased to 38.0% from 38.4% for the second quarter of 1999.
SIX MONTHS ENDED JUNE 25, 2000 COMPARED TO SIX MONTHS ENDED JUNE 25, 1999
NET SALES
Net sales for the six months ended June 25, 2000 decreased 3.1% to $240.9
million from $248.6 million in the comparable prior period. Net sales of aroma
chemicals decreased 11.6% to $40.2 million from $45.5 million primarily due to a
reduction in sales volume and prices. Average selling prices were down
approximately 9% primarily due to a sharp decline in crude sulfate turpentine
costs and competitive market pressure in Europe resulting from a strong Pound
Sterling versus the Euro. Sales volumes for major chemical products declined
approximately 5% reflecting the loss of business in the Asian market due to
lower priced Chinese material and some year-end Y2K buying. Net sales of the
flavor and fragrance segment decreased 1.2% to $200.7 million from $203.1
million. The European region and the Asia Pacific region sales decreased 10.6%
and 1.2%, respectively from the six months ended June 25, 1999 partially offset
by increases of 5.7% in the International region and 2.7% in the Americas
region. Net sales were adversely affected by the movement in foreign currency
exchange rates, especially in the European and International regions. If
exchange rates had remained unchanged from the first half of 1999 to the first
half of 2000, total net sales would have been level with last year.
-11-
<PAGE>
COST OF GOODS SOLD
Cost of goods sold for the six months ended June 25, 2000 decreased to
$154.5 million from $168.7 million in the comparable prior year period due
primarily to lower aroma chemical materials costs and manufacturing cost
efficiency gains generated from improved yield and higher throughput as both
chemical plants ran near capacity with some rebuilding of key products that were
diminished as a result of Y2K demands at the end of 1999. Cost of goods sold as
a percentage of net sales decreased to 64.1% from 67.9%.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses for the six months ended June 25, 2000
increased to $48.9 million from $48.5 million in the comparable prior year
period. Selling and administrative expenses as a percentage of net sales
increased to 20.3% from 19.5% reflecting increased resources in sales and
marketing aimed at enhancing growth in the flavor and fragrance segment.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses for the six months ended June 25, 2000
increased to $14.0 million from $12.3 million in the comparable prior year
period. Research and development expenses as a percentage of net sales increased
to 5.8% from 5.0% reflecting additional technical staff and a new technical and
creative center that was opened late last year near Rotterdam to support future
growth in the European flavor business on the continent.
INCOME FROM OPERATIONS
Income from operations for the six months ended June 25, 2000 increased
23.0% to $23.6 million from $19.2 million in the comparable prior year period.
Operating margins increased to 9.8% from 7.7% in the prior year due primarily to
lower material costs and operating efficiencies in the aroma chemicals segment.
Income from operations, exclusive of corporate items, for the flavor and
fragrance segment decreased 4.1% to $23.2 million from $24.2 million in the
prior year first half. The Company's aroma chemical segment recorded first half
operating income, exclusive of corporate items, of $8.8 million in 2000,
compared to $5.3 million in the first half of 1999.
OTHER (INCOME) EXPENSE, NET
Other (income) expense for the six months ended June 25, 2000 was $1.3
million expense compared to $2.5 million expense for the six months ended June
25, 1999. The decline is primarily due to a decrease in losses on asset
disposals and lower foreign exchange losses compared to the prior year.
INTEREST EXPENSE
Interest expense, net, for the six months ended June 25, 2000 decreased to
$1.0 million from $1.1 million in the comparable prior year period primarily due
to lower average borrowings.
-12-
<PAGE>
INCOME TAXES
Income tax expense for the six months ended June 25, 2000 increased to $8.1
million from $5.8 million in the comparable prior year period primarily as a
result of higher pre-tax earnings. The Company's effective tax rate increased to
38.0% from 37.3% in the comparable prior year period reflecting a change in the
mix of earnings to higher taxed locations.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows provided by operations for the six months ended June 25, 2000
were $10.6 million compared to $6.3 million for the six months ended June 25,
1999. The increase is primarily due to higher net income.
At June 25, 2000, working capital of the Company was $145.3 million, a
$13.4 million increase from $131.9 million at December 25, 1999. The change in
working capital is primarily due to the increase in inventory, mainly from the
rebuilding of key aroma chemical products that were diminished as a result of
Y2K demands at the end of 1999.
As of June 25, 2000, the Company had cash and cash equivalents of $13.7
million. The Company believes that its available cash, funds provided by
operations and available borrowing capacity under its credit facilities will be
sufficient to support its debt service, working capital and capital expenditure
requirements for the foreseeable future, including implementation of its
strategy to strengthen its position as a leading producer of flavors, fragrances
and aroma chemicals and for long-term growth.
ACCOUNTING MATTERS
During the first quarter of 2000, the Company changed its method of
accounting for its domestic aroma chemicals inventory from a last-in, first-out
(LIFO) method to a first-in, first-out (FIFO) method. This change standardizes
the method of accounting for all Company inventories. As required by generally
accepted accounting principles, the Company has retroactively adjusted prior
year financial statements for the change. See Note 2 of the Notes to the
Consolidated Financial Statements for a discussion of this accounting change and
its effect.
In 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments. The
statement, which is effective for the first quarter of 2001, requires all
derivatives to be measured at fair value and recognized as either assets or
liabilities. Management does not expect adoption of this statement to have a
material effect on the Company's consolidated financial position or results of
operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements,"
which provides guidance and interpretations of the application of generally
accepted accounting principles to revenue recognition. Adoption of this bulletin
is not expected to have a material effect on the Company's consolidated
financial position or results of operations.
-13-
<PAGE>
EURO CONVERSION
On January 1, 1999 certain member nations of the European Economic and
Monetary Union (EMU) adopted a common currency, the "Euro". For a three-year
transition period, both the Euro and the members' national currencies will
remain in circulation. After June 30, 2002, the Euro will be the sole legal
tender for EMU countries. The Company does not expect that the adoption of the
Euro currency unit will have a material impact on its operations, financial
condition or liquidity. The costs of addressing the Euro conversion are not
expected to be material and will be charged to operations as incurred.
OTHER MATTERS
As announced in a press release dated June 20, 2000, the Company has
engaged Credit Suisse First Boston Corporation to help explore various strategic
alternatives, including a possible sale of the Company. This process is
progressing.
SUBSEQUENT EVENT
On July 25, 2000, the Company sold a parcel of surplus land and buildings
adjacent to our Walthamstow, England site, resulting in a net gain of
approximately $1.9 million (approximately $.10 per share).
--------------------------------------------------------------------------------
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 business include general economic conditions, customers changing flavor
and/or fragrance formulations, pricing and availability of raw materials, the
effect of the transition to the Euro and political and economic uncertainties
including currency fluctuations in the many countries in which we operate.
--------------------------------------------------------------------------------
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See the Company's most recent Annual Report filed on Form 10-K (Item
7a). There has been no material change in this information.
-14-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
No. Description
--- -----------
27 Financial Data Schedule
b) REPORTS ON FORM 8-K
A current Report on Form 8-K was filed by the Company on June 20, 2000
reporting that it had engaged Credit Suisse First Boston Corporation
to help explore various strategic alternatives to enhance shareholder
value, including the possible sale or merger of the Company.
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUSH BOAKE ALLEN INC.
<TABLE>
<S> <C>
Date: August 4, 2000 By: /s/ Fred W. Brown
-------------------------------------- --------------------------
Fred W. Brown, Jr.
Vice President Finance and
Chief Financial Officer
Date: August 4, 2000 By: /s/ Dennis M. Meany
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Dennis M. Meany
Vice President, General Counsel
and Secretary
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