Management's Discussion and
Analysis of Financial Condition and Results of Operations (cont.)
European Economic and Monetary Union
We conduct business in many of the 12 countries that have agreed
to join the European Economic and Monetary Union and, among
other things, adopt a single currency called the euro. On January
1, 1999, a three-year transition period for the euro began and
the conversion rates between the euro and the national currencies
were fixed. Business enterprises have the option of switching
to the single currency at any time prior to January 1, 2002.
In connection with the upgrade of our management information
systems, we incorporated the necessary changes to allow us to
conduct business in euros and the national currencies during
the transition period and entirely in euros thereafter. We are
not able to estimate or segregate the costs relating to the
conversion to the euro, but management does not believe that
such costs were material. We do not anticipate that the conversion
to the euro will have a material impact on our future results
of operations.
Accounting Pronouncements
We adopted the Financial Accounting Standards Board’s ("FASB")
Emerging Issues Task Force Consensus 00-10 "Accounting
for Shipping and Handling Fees and Costs," in the fourth
quarter of 2000. Application of this consensus resulted in the
reclassification of prior period financial results to reflect
shipping and handling fees as revenue, and shipping and handling
costs as cost of sales. These amounts were previously recorded
in selling, general and administrative expense. The reclassifications
had no effect on operating or net income.
In December 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101 ("SAB 101"),
"Revenue Recognition in Financial Statements." SAB
101 summarizes certain of the SEC’s views in applying generally
accepted accounting principles to revenue recognition in financial
statements. Our adoption of SAB 101 in the fourth quarter of
fiscal 2000 did not have a material effect on our financial
position or results of operations.
In June 1998, the FASB issued Statement No. 133 "Accounting
for Derivative Instruments and Hedging Activities," subsequently
amended by SFAS No. 137 and SFAS No. 138, which will be effective
for us beginning January 1, 2001. SFAS 133 requires us to record
all derivatives on the balance sheet at fair value. Changes
in derivative fair values will either be recognized in earnings
as offsets to the changes in fair value of related hedged assets,
liabilities and firm commitments or, for forecasted transactions,
deferred and recorded as a component of other accumulated comprehensive
income until the hedged transactions occur and are recognized
in earnings. The ineffective portion of a hedging derivative’s
change in fair value will be immediately recognized in earnings.
The adoption of SFAS 133, as amended by SFAS 138, as of January
1, 2001 resulted in a transition adjustment of approximately
$1 million as a reduction in other comprehensive income.
Control of the Company
As a result of the Recapitalization, certain affiliates of THL
("THL Entities"); JP Morgan Partners (BHCA) ( "JP
Morgan"), Merrill Lynch & Co. ("Merrill Lynch"
) and Credit Suisse First Boston (USA), Inc. formerly known
as Donaldson, Lufkin and Jenrette, Inc., ("CSFB" and,
together with the THL Entities, JP Morgan and Merrill Lynch,
the "Equity Investors") own 78.3% of our issued and
outstanding common stock with the THL Entities owning 50.1%
of such outstanding stock. Accordingly, the Equity Investors
have significant control over us and have the power to elect
a majority of our directors, appoint new management and approve
any action requiring the approval of the holders of our common
stock, including adopting amendments to our certificate of incorporation
and approving mergers or sales of substantially all of our assets.
These Equity Investors and certain members of management entered
into an Investor’s Agreement dated January 21, 1998, as
amended (the "Investor’s Agreement"). The Investor’s
Agreement provides that our Board of Directors will comprise
at least 9, but not more than 10 directors, four of whom will
be appointed by the THL Entities, one of whom will be appointed
by DLJ Merchant Banking Partners II, L.P., one of whom will
be Mr. Paul M. Montrone and one of whom will be Mr. Paul M.
Meister. The directors elected pursuant to the Investors’
Agreement will have the authority to make decisions affecting
our capital structure, including the issuance of additional
capital stock, the implementation of stock repurchase programs
and the declaration of dividends. There can be no assurance
that the interests of the Equity Investors will not conflict
with the interests of our other shareholders.
Cautionary Factors Regarding Forward-Looking
Statements
This annual report includes forward-looking statements. All
statements other than statements of historical facts included
in this annual report may constitute forward-looking statements.
We have based these forward-looking statements on our current
expectations and projections about future events.
|
