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<SEC-DOCUMENT>0000950130-02-002044.txt : 20020415
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ACCESSION NUMBER: 0000950130-02-002044
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 20011231
FILED AS OF DATE: 20020327
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: INTERNATIONAL FLAVORS & FRAGRANCES INC
CENTRAL INDEX KEY: 0000051253
STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL ORGANIC CHEMICALS [2860]
IRS NUMBER: 131432060
STATE OF INCORPORATION: NY
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-04858
FILM NUMBER: 02588126
BUSINESS ADDRESS:
STREET 1: 521 W 57TH ST
CITY: NEW YORK
STATE: NY
ZIP: 10019
BUSINESS PHONE: 2127655500
MAIL ADDRESS:
STREET 1: 521 W 57TH ST
STREET 2: 521 W 57TH ST
CITY: NEW YORK
STATE: NY
ZIP: 10019
FORMER COMPANY:
FORMER CONFORMED NAME: VANAMERIGEN HAEBLER INC
DATE OF NAME CHANGE: 19680426
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>d10k.txt
<DESCRIPTION>ANNUAL REPORT
<TEXT>
<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 of
The Securities Exchange Act of 1934
For the fiscal year ended Commission File Number
December 31, 2001 1-4858
International Flavors & Fragrances Inc.
(Exact name of Registrant as specified in its charter)
New York 13-1432060
(State or other (IRS
jurisdiction Employer Identification
of incorporation or No.)
organization)
521 West 57th Street, New 10019
York, N.Y.
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (212) 765-5500
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
Common Stock, par value New York Stock Exchange
121/2c per share
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
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 [_]
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
amendments to this Form 10-K. [_]
The Registrant does not believe any of its common stock is held by
"affiliates" of the Registrant within the meaning of Rule 405 of the Securities
and Exchange Commission. See "Stock Ownership" in proxy statement incorporated
by reference herein. The aggregate market value of all of the outstanding
voting stock of Registrant as of March 1, 2002 was $3,297,099,666.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of March 1, 2002.
94,445,708 shares of Common Stock, par value 121/2c per share
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal
year ended December 31, 2001 (the "IFF 2001 Annual Report") are incorporated by
reference in Parts I, II and IV of this Form 10-K.
Portions of the Registrant's Proxy Statement to be sent in connection with
the 2002 Annual Meeting (the "IFF 2002 Proxy Statement") are incorporated by
reference in Part III of this Form 10-K.
================================================================================
<PAGE>
PART I
ITEM 1. BUSINESS.
International Flavors & Fragrances Inc., incorporated in New York in 1909
(the "Company"), is a leading creator and manufacturer of flavor and fragrance
products used by other manufacturers to impart or improve flavor or fragrance
in a wide variety of consumer products. Fragrance products are sold principally
to manufacturers of perfumes, cosmetics, toiletries, hair care products,
deodorants, soaps, detergents and air care products; flavor products are sold
principally to manufacturers of prepared foods, beverages, dairy foods,
pharmaceuticals and confectionery products.
The present world-wide scope of the Company's business is in part the result
of the 1958 combination of (i) the business conducted prior to the combination
primarily in the United States by the Company under the name van
Ameringen-Haebler, Inc. ("VAH") with (ii) the business conducted prior to the
combination primarily in Europe by N. V. Polak & Schwarz's Essencefabrieken, a
Dutch corporation ("P & S"). The P & S enterprise, founded in Holland in 1889,
was also engaged in the manufacture and sale of flavor and fragrance products,
with operations in a number of countries where VAH was not an important factor.
In November 2000, the Company acquired Bush Boake Allen Inc. ("BBA"), an
international flavor, fragrance and aroma chemical company with worldwide sales
of $499 million. This acquisition established the Company as the global leader
in flavor markets where BBA was an important factor, strengthened the Company's
already leading global fragrance position, enhanced the Company's product line
and customer base, particularly in certain emerging markets, and broadened and
enhanced the Company's management pool. During 2001, the Company made
significant progress in integrating the Company and BBA, leading to cost
savings, more efficient operations, and enhanced profitability. Integration
activities will continue through 2002.
In October 2000, the Company implemented a global reorganization under the
broad umbrellas of Business Development and Operations, rather than separate
divisions for flavors and fragrances. The responsibilities of Business
Development, whose purpose is to drive top line growth of the Company, include
category strategy, consumer research, product development, global sales and
marketing, research and development coordination and technical application. The
responsibilities of Operations, whose focus is on product delivery, product
planning and increasing productivity, include global supply chain,
manufacturing, customer service, quality control, logistics and distribution.
This reorganization is providing better support and service to the Company's
customers, many of whom require uniform global support to match their global
businesses, while enhancing Company productivity, from the supply chain through
manufacturing to product delivery and customer service. The Company has a
Regional Manager covering each major geographical region of the world. The
Regional Managers work with and are supported by both Business Development and
Operations.
The Company currently has 40 manufacturing facilities with the major
manufacturing facilities being located in the United States, The Netherlands,
France, Great Britain, Ireland, Spain, Switzerland, Germany, Argentina, Brazil,
Mexico, China, Singapore, Philippines, Indonesia, Japan, India and Australia.
The remaining manufacturing facilities are located in 8 other countries. The
Company maintains its own sales and distribution facilities in 36 countries and
is represented by sales agents in a few additional countries. The Company's
principal executive offices are located at 521 West 57th Street, New York, New
York 10019 (Tel. No. 212-765-5500). Except as the context otherwise indicates,
the term "the Company" as used herein refers to the Registrant and its
subsidiaries.
Markets
Fragrance products are used by customers in the manufacture of consumer
products such as soaps, detergents, cosmetic creams, lotions and powders,
lipsticks, after-shave lotions, deodorants, hair preparations, candles, air
fresheners and all-purpose cleaners, as well as in other consumer products
designed solely to appeal to the sense of smell, such as perfumes and colognes.
The cosmetics industry, including perfume and toiletries
1
<PAGE>
manufacturers, is one of the Company's two largest fragrance customer groups.
Most of the major United States companies in this industry are customers of the
Company, and five of the largest United States cosmetics companies are among
its principal customers. The household products industry, including soaps and
detergents, is the other important fragrance customer group. Four of the
largest United States household product manufacturers are major customers of
the Company. In the three years ended December 31, 2001, 2000 and 1999 sales of
fragrance products accounted for approximately 55%, 59% and 59%, respectively,
of the Company's total sales on a reported basis.
Flavor products are sold principally to the food and beverage industries for
use in consumer products such as soft drinks, candies, baked goods, desserts,
prepared foods, dietary foods, dairy products, drink powders, pharmaceuticals,
snack foods and alcoholic beverages. Two of the Company's largest customers for
flavor products are major producers of prepared foods and beverages in the
United States. In the three years ended December 31, 2001, 2000 and 1999 sales
of flavor products accounted for approximately 45%, 41% and 41%, respectively,
of the Company's total sales on a reported basis.
Products
The Company's principal fragrance and flavor products consist of compounds
of large numbers of ingredients blended by it under formulas created by its
perfumers and flavorists. Most of these compounds contribute the total
fragrance or flavor to the consumer products in which they are used. This
fragrance or flavor characteristic is often a major factor in the public
selection and acceptance of the consumer end product. A smaller amount of
compounds is sold to manufacturers who further blend them to achieve the
finished fragrance or flavor in their consumer products. Thousands of 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. Most of the fragrance and flavor compounds are created and produced
for the exclusive use of particular customers. The Company's flavor products
also include extracts, concentrated juices, seasonings and concentrates derived
from various fruits, vegetables, nuts, herbs and spices as well as
microbiologically-derived ingredients. The Company's products are sold in solid
and liquid forms and in amounts ranging from a few pounds to many tons,
depending upon the nature of the product.
The ingredients used by the Company in its compounds are both synthetic and
natural. Most of the synthetic ingredients and key strategic natural
ingredients are manufactured by the Company. While the major part of the
Company's production of synthetic ingredients is used by it in its compounds, a
substantial portion is sold to others. The natural ingredients are derived from
flowers, fruits and other botanical products as well as from animal products.
They contain varying numbers of organic chemicals, which are responsible for
the fragrance or flavor of the natural product. The natural products are
purchased for the larger part in processed or semi-processed form. Some are
used in compounds in the state in which they are purchased and others after
further processing. Natural products, together with various chemicals, are also
used as raw materials for the manufacture of synthetic ingredients by chemical
processes.
Market Developments
The demand for consumer products utilizing flavors and fragrances has been
stimulated and broadened by changing social habits resulting from various
factors such as increases in personal income, employment of women, teen-age
population, leisure time, health concerns and urbanization and by the continued
growth in world population. In the fragrance field, these developments have
expanded the market for hair care, candles and air care products and deodorant
and personal wash products with finer fragrance quality, as well as the market
for colognes, toilet waters, men's toiletries and other products beyond
traditional luxury items such as perfumes. In the flavor field, similar market
characteristics have stimulated the demand for products such as convenience
foods, soft drinks and low-cholesterol and low-fat food products that must
conform to expected tastes. New and improved methods of packaging, application
and dispensing have been developed for many consumer products which utilize
some of the Company's flavor or fragrance products. These developments have
called for the
2
<PAGE>
creation by the Company of many new compounds and ingredients compatible with
the newly introduced materials and methods of application used in consumer end
products.
Product Development and Research
The development of new fragrance and flavor compounds is a complex artistic
and technical process calling upon the combined knowledge and talents of the
Company's creative perfumers and flavorists and its application chemists and
research chemists. Through long experience, the perfumers and flavorists
develop and refine their skill for creating fragrances or flavors best suited
to the market requirements of the customers' products.
An important contribution to the creation of new fragrance and flavor
products is the development in the Company's research laboratories of new
ingredients having fragrance or flavor value. The principal functions of the
fragrance research program are to isolate and synthesize fragrance components
found in natural substances and through chemical synthesis in order to develop
new materials and better techniques for utilization of such materials. The
principal functions of the flavor research program are to isolate and produce
natural flavor ingredients utilizing improved processes.
The work of the perfumers and flavorists is conducted in 38 fragrance and
flavor laboratories in 27 countries. The Company maintains a research center at
Union Beach, New Jersey. The Company spent $135,248,000 in 2001, $112,671,000
in 2000 and $103,794,000 in 1999 on its research and development activities.
These expenditures are expected to increase in 2002 to approximately
$149,000,000. Of the amount expended in 2001 on such activities, 63% was for
fragrances and the balance was for flavors. The Company employed 1,060 persons
in 2001 and 1,186 persons in 2000 in such activities.
The business of the Company is not materially dependent upon any patents,
trademarks or licenses.
Distribution
Most of the Company's sales are made through its own sales force, operating
from 8 sales offices in the United States and 53 sales offices in 35 foreign
countries. Sales in other countries are made through sales agents. For the year
ended December 31, 2001, 32% of the Company's sales were to customers in North
America, 31% in Europe, 16% in Asia-Pacific, 14% in Latin America and 7% in
Central Asia, Middle East. For other information with respect to the management
of the Company's operations by major geographical region, see Note 12 of the
Notes to the Company's Consolidated Financial Statements on pages 43-45 of the
IFF 2001 Annual Report. Such Consolidated Financial Statements are incorporated
by reference herein.
The Company estimates that during 2001 its 30 largest customers accounted
for about 48% of its sales, its four largest customers and their affiliates
accounted for about 7%, 7%, 5% and 5%, respectively, of its sales, and no other
single customer accounted for more than 3% of sales.
Governmental Regulation
Manufacture and sale of the Company's products are subject to regulation in
the United States by the Food and Drug Administration, the Agriculture
Department, the Bureau of Alcohol, Tobacco and Firearms, the Environmental
Protection Agency, the Occupational Safety and Health Administration, the Drug
Enforcement Administration and state authorities. Foreign subsidiaries are
subject to similar regulation in a number of countries. Compliance with
existing governmental requirements regulating the discharge of materials into
the environment has not materially affected the Company's operations, earnings
or competitive position. The Company expects to spend in 2002 approximately
$6,100,000 in capital projects and $12,300,000 in operating expenses and
governmental charges for the purpose of complying with such requirements. The
Company expects that in 2003 capital expenditures, operating expenses and
governmental charges for such purpose will not be materially different.
3
<PAGE>
Raw Material Purchases
More than 5,000 different raw materials are purchased from many sources all
over the world. The principal natural raw material purchases consist of
essential oils, extracts and concentrates derived from fruits, vegetables,
flowers, woods and other botanicals, animal products and raw fruits. The
principal synthetic raw material purchases consist of organic chemicals. The
Company believes that alternate sources of materials are available to enable it
to maintain its competitive position in the event of any interruption in the
supply of raw materials from present sources.
Competition
The Company has more than 50 competitors in the United States and world
markets. While no single factor is responsible, the Company's competitive
position is based principally on the creative skills of its perfumers and
flavorists, the technological advances resulting from its research and
development, the quality of its customer service and the support provided by
its marketing and application groups, and its understanding of consumers.
Although statistics are not available, the Company believes that it is the
largest company producing and marketing on an international basis a wide range
of fragrance and flavor products of the types manufactured by it for sale to
manufacturers of consumer products. In particular countries and localities, the
Company faces the competition of numerous companies specializing in certain
product lines, among which are some companies larger than the Company and some
more important in a particular product line or lines. Most of the Company's
customers do not buy all their fragrance or flavor products from the same
supplier, and some customers make their own fragrance or flavor compounds with
ingredients supplied by the Company or others.
Employee Relations
The Company at December 31, 2001 employed 5,929 persons, of whom 1,770 were
employed in the United States. The Company has never experienced a work
stoppage or strike and it considers that its employee relations are
satisfactory.
Cautionary Statement
Statements in this Annual Report on Form 10-K (including information
incorporated herein by reference from the IFF 2001 Annual Report) which are not
historical facts or information are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995, and are
subject to risks and uncertainties that could cause the Company's actual
results to differ materially from those expressed or implied by such
forward-looking statements. Risks and uncertainties with respect to the
Company's business include general economic and business conditions, interest
rates, the price and availability of raw materials, and political and economic
uncertainties, including the fluctuation or devaluation of currencies in
countries in which the Company does business. The Company intends its
forward-looking statements to speak only as of the time of such statements, and
does not undertake to update or revise them as more information becomes
available.
4
<PAGE>
ITEM 2. PROPERTIES.
The principal manufacturing and research properties of the Company are as
follows:
<TABLE>
<CAPTION>
Location Operation
-------- ---------
<S> <C>
United States
New York, NY....... Fragrance laboratories.
Augusta, GA........ Production of fragrance chemical ingredients.
Hazlet, NJ......... Production of fragrance compounds; fragrance laboratories.
South Brunswick, NJ Production of flavor ingredients and compounds; flavor laboratories.
Union Beach, NJ.... Research and development center.
Menomonee Falls, WI Production of flavor compounds, flavor ingredients and bacterial
cultures.
Carrollton, TX(1).. Production of seasonings.
Chicago, IL........ Production of flavor ingredients and compounds.
Jacksonville, FL... Production of fragrance chemical ingredients.
Netherlands
Hilversum.......... Flavor and fragrance laboratories.
Tilburg............ Production of flavor and fragrance compounds and flavor ingredients.
France
Bois-Colombes...... Fragrance laboratories.
Dijon.............. Production of fragrance ingredients and compounds, flavor ingredients
and compounds and fruit preparations; flavor laboratories.
Grasse............. Production of fragrance and flavor ingredients; fragrance laboratories.
Great Britain
Haverhill.......... Production of flavor compounds and ingredients, and fragrance
chemical ingredients; flavor laboratories.
Long Melford....... Production of seasonings.
Witham............. Production of flavor ingredients and compounds.
Ireland
Drogheda........... Production of fragrance compounds.
Spain
Benicarlo.......... Production of fragrance chemical ingredients.
Switzerland
Reinach-Aargau..... Production of fruit preparations and flavor ingredients and
compounds; flavor laboratories.
Germany
Emmerich/Rhein..... Production of fruit preparations and flavor ingredients and
compounds; flavor laboratories.
Argentina
Garin.............. Production of flavor ingredients and compounds; production of
fragrance compounds; flavor laboratories.
Brazil
Rio de Janeiro..... Production of fragrance compounds.
Taubate............ Production of flavor ingredients and compounds; flavor laboratories.
Mexico
Tlalnepantla....... Production of flavor compounds, fruit preparations and fragrance
compounds; flavor and fragrance laboratories.
China
Guangzhou(1)....... Production of flavor and fragrance compounds; flavor laboratories.
Shanghai(1)........ Flavor and fragrance laboratories.
India
Chennai(2)......... Production of flavor and fragrance compounds and flavor ingredients.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Location Operation
-------- ---------
<S> <C>
Singapore
Jurong(3)... Production of flavor and fragrance compounds and flavor ingredients.
Science Park Flavor and fragrance laboratories.
Philippines
Manila(1)... Production of flavor and fragrance compounds and flavor ingredients.
Indonesia
Jakarta(3).. Production of flavor and fragrance compounds and ingredients; flavor
and fragrance laboratories.
Japan
Gotemba..... Production of flavor compounds.
Australia
Melbourne... Production of flavor and fragrance compounds and flavor ingredients.
Sydney...... Production of seasonings.
</TABLE>
- --------
(1) Leased.
(2) The Company has approximately a 75% interest in the subsidiary company
which owns this facility.
(3) Land is leased and building is owned.
The principal executive offices of the Company and its New York laboratory
facilities are located at 521 West 57th Street, New York City. As a result of
the acquisition of BBA, the Company is currently in the process of
consolidating or eliminating duplicate facilities. The Company believes that
the facilities that will remain following this consolidation process will meet
its present needs and anticipated needs for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS.
On September 7, 2001, the Company was named as a defendant in a purported
class action brought against it in the Circuit Court of Jasper County,
Missouri, on behalf of employees of a plant owned and operated by Gilster-Mary
Lee Corp. in Jasper, Missouri. The plaintiffs are alleging that they sustained
respiratory injuries in the workplace due to the use by Gilster-Mary Lee of a
BBA flavor. All BBA and IFF flavors meet the requirements of the U. S. Food and
Drug Administration and are safe for handling and use by workers in food
manufacturing plants when used according to specified safety procedures. Based
on the preliminary report issued by the National Institute for Occupational
Safety and Health (NIOSH), it appears any injuries the plaintiffs may have
suffered are related to inadequate workplace conditions.
This case is in its preliminary stages. The Company does not expect this
litigation to have a material adverse effect on the Company's financial
condition, results of operations or liquidity.
Over the past twenty years, various Federal and State authorities and
private parties have claimed that the Company is a potentially responsible
party as a generator of waste materials for alleged pollution at a number of
waste sites operated by third parties located principally in New Jersey and
seek to recover costs incurred and to be incurred to clean up the sites.
The waste site claims and suits usually involve million dollar amounts, and
most of them are asserted against many potentially responsible parties.
Remedial activities typically consist of several phases carried out over a
period of years. Most site remedies begin with investigation and feasibility
studies, followed by physical removal, destruction, treatment or containment of
contaminated soil and debris, and sometimes by groundwater monitoring and
treatment. To date, the Company's financial responsibility for some sites has
been settled through agreements granting the Company, in exchange for one or
more cash payments made or to be made, either complete release of liability or,
for certain sites, release from further liability for early and/or later
remediation phases, subject to certain "re-opener" clauses for later-discovered
conditions. Settlements in respect of some sites
6
<PAGE>
involve, in part, payment by the Company, and other parties, of a percentage of
the site's future remediation costs over a period of years. At present, only
three sites remain the subject of significant unsettled claims.
The Company believes that the amounts it has paid and anticipates paying in
the future for clean-up costs and damages at all sites are not and will not be
material to the Company's financial condition, results of operations or
liquidity, because of the involvement of other large potentially responsible
parties at most sites, because payment will be made over an extended time
period and because, pursuant to an agreement reached in July 1994 with three of
the Company's liability insurers, defense costs and indemnity amounts payable
by the Company in respect of the sites will be shared by the insurers up to an
agreed amount.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
Executive Officers of Registrant:
<TABLE>
<CAPTION>
Year
First
Became
Name Office and Other Business Experience(2) Age Officer
---- --------------------------------------- --- -------
<S> <C> <C> <C>
Richard A. Goldstein(1) Chairman of the Board and Chief Executive 60 2000
Officer since June 2000; President and
Chief Executive Officer of Unilever United
States, Inc. and Business Group President of
Unilever North American Foods, home,
personal care and food products companies,
prior thereto; Director, Legacy Hotels;
Director, Fiduciary Trust Company
International; Director, The Interpublic
Group of Companies, Inc.; Director,
Continuum Health Partners, Inc.
Julian W. Boyden....... Executive Vice President since November 57 2000
2000; Chairman of the Board, President and
Chief Executive Officer of Bush Boake
Allen Inc., a flavor and fragrance company,
prior thereto.
D. Wayne Howard........ Executive Vice President, Global Operations 46 2000
since September 2000; Vice President,
Supply Chain Strategy of Nordstrom, Inc., a
retailer, from January 2000 to August 2000;
Vice President, Strategic Sourcing, North
America of Unilever North American
Foods, a home, personal care and food
products company, from January 1998 to
December 1999; Vice President, Sourcing
of Lipton, division of Unilever, from
February 1997 to December 1997; Vice
President, Supply Chain of Thomas J.
Lipton Company, a food products company,
prior thereto.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Year
First
Became
Name Office and Other Business Experience(2) Age Officer
---- --------------------------------------- --- -------
<S> <C> <C> <C>
Carlos A. Lobbosco Executive Vice President, Global Business 62 1993
Development since September 2000; Vice
President prior thereto; Director.
Stephen A. Block.. Senior Vice President, General Counsel and 57 1993
Secretary since February 2000; Senior Vice
President, Law & Regulatory Affairs, and
Secretary from May 1999 to February
2000; Vice President, Law & Regulatory
Affairs, and Secretary prior thereto.
Douglas J. Wetmore Senior Vice President and Chief Financial 44 1992
Officer since September 2000; Vice
President and Chief Financial Officer from
April 1998 to September 2000; Controller
prior thereto; Director.
Gail S. Belmuth... Vice President, Corporate Communications 38 2001
since June 2001; President and COO of
Banner McBride North America, a change
management consulting firm, from May
2000 to May 2001; Managing Director,
Burson-Marsteller, a public relations firm,
from December 1997 to May 2000; Vice
President, Shepardson Stern and Kaminsky,
an advertising and management consulting
firm, prior thereto.
Clint D. Brooks... Vice President, Research and Development 50 2000
since October 2000; Director of Chemical
Sciences, Abbott Laboratories, a
Pharmaceutical company, prior thereto.
Steven J. Heaslip. Vice President, Global Human Resources 44 2001
since September 2001; Senior Vice
President, Human Resources, Elizabeth
Arden, a manufacturer of prestige beauty
products, prior thereto.
</TABLE>
- --------
(1) Member of Executive Committee of the Board of Directors.
(2) Employed by the Company or an affiliated company for the last five years,
except as otherwise indicated.
8
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS.
(a) Market Information.
The Company's common stock is traded principally on the New York Stock
Exchange. The high and low stock prices for each quarter during the last two
years were:
<TABLE>
<CAPTION>
2001 2000
---- ----
Quarter High Low High Low
------- ---- --- ---- ---
<S> <C> <C> <C> <C>
First.. $22.76 $19.75 $37.94 $28.75
Second. 28.20 21.25 37.81 28.81
Third.. 31.60 24.97 30.94 17.38
Fourth. 31.69 24.10 20.81 14.69
</TABLE>
(b) Approximate Number of Equity Security Holders.
<TABLE>
<CAPTION>
(B)
(A) Number of record holders as
Title of Class of December 31, 2001
-------------- ---------------------------
<S> <C>
Common stock, par value 12 1/2c per share 3,394
</TABLE>
(c) Dividends.
Cash dividends declared per share for each quarter since January 2000 were
as follows:
<TABLE>
<CAPTION>
2002 2001 2000
- ---- ---- ----
<S> <C> <C> <C>
First. $.15 $.15 $.38
Second .15 .38
Third. .15 .38
Fourth .15 .15
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA.
Information setting forth the selected financial data required by this Item
6 appears on page 50 of the IFF 2001 Annual Report. Such information is
incorporated by reference in this Item 6. The BBA operating results are
included in the Company's consolidated results from November 3, 2000, the date
of the acquisition of BBA.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
The Company's Management's Discussion and Analysis of Results of Operations
and Financial Condition required by this Item 7 appears in the text under the
caption "Management's Discussion and Analysis of Results of Operations and
Financial Condition" on pages 25 to 31 of the IFF 2001 Annual Report. Such
information is incorporated by reference in this Item 7.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Information on quantitative and qualitative disclosures about market risk
required by this Item 7A appears in Note 14 on page 48 of the IFF 2001 Annual
Report. Such information is incorporated by reference in this Item 7A.
9
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of the Company and its subsidiaries
and the notes thereto, listed in Item 14(a)(1) and included in the IFF 2001
Annual Report on pages 33 through 48, together with the report thereon of
PricewaterhouseCoopers LLP dated January 28, 2002 on page 32 of the IFF 2001
Annual Report, and quarterly financial information on page 49 of the IFF 2001
Annual Report, are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information relating to directors and nominees of the Company is set
forth under the caption "Election of Directors" in the IFF 2002 Proxy Statement
and is incorporated by reference herein. The information under the heading
"Section 16(a) Beneficial Ownership Reporting Compliance" that appears in the
IFF 2002 Proxy Statement is also incorporated by reference herein. See Part I,
Item 4 for the Company's Executive Officers.
ITEM 11. EXECUTIVE COMPENSATION.
The information relating to executive compensation is set forth under the
captions "Summary Compensation," "Option Grants in 2001," "Aggregated Option
Exercises in 2001 and Option Values at December 31, 2001," "Directors'
Compensation," "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements," "Executive Separation Policy" and "Pension
Plans" in the IFF 2002 Proxy Statement and such information is incorporated by
reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information relating to security ownership of management and certain
beneficial owners is set forth under the captions "Election of Directors" and
"Security Ownership" in the IFF 2002 Proxy Statement and such information is
incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information regarding certain relationships and related transactions is
set forth under the captions "Compensation Committee Interlocks and Insider
Participation" and "Additional Information" in the IFF 2002 Proxy Statement and
such information is incorporated by reference herein.
10
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) FINANCIAL STATEMENTS. The following consolidated financial
statements, related notes and independent accountants' report from the IFF 2001
Annual Report are incorporated by reference into Item 8 of Part II of this
Annual Report on Form 10-K:
<TABLE>
<CAPTION>
Page
No.
----
<S> <C>
Consolidated Statements of Income and Retained Earnings for the three years
ended December 31, 2001.................................................. 33
Consolidated Balance Sheet--December 31, 2001 and 2000..................... 34
Consolidated Statement of Cash Flows for the three years ended December 31,
2001..................................................................... 35
Notes to Consolidated Financial Statements................................. 36
Report of Independent Accountants.......................................... 32
</TABLE>
(a)(2) FINANCIAL STATEMENT SCHEDULES. The following schedule is included in
Part IV of this Annual Report on Form 10-K:
<TABLE>
<S> <C>
Schedule II--Valuation and Qualifying Accounts and Reserves for the three
years ended December 31, 2001.......................................... S-1
Report of Independent Accountants on Financial Statement Schedule........ 18
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
(a)(3) EXHIBITS.
<TABLE>
<CAPTION>
Number
- ------
<C> <S>
2 Agreement and Plan of Merger dated as of September 25, 2000 among Registrant, Bush Boake Allen
Inc. and B Acquisition Corp. incorporated by reference to Exhibit 2.1 to Registrant's Report on Form
8-K dated September 25, 2000.
3 (i ) Restated Certificate of Incorporation of Registrant, incorporated by reference to Exhibit 3 to
Registrant's Report on Form 10-K for fiscal year ended December 31, 1993.
3 (ii) By-laws of Registrant, as amended through March 12, 2002.
4.1 Shareholders Protection Rights Agreement dated as of March 21, 2000 between Registrant and The
Bank of New York, as Rights Agent, incorporated by reference to Exhibit 4 to Registrant's Report on
Form 8-K dated March 22, 2000.
4.1a First Amendment dated as of September 26, 2000, to Shareholder Protection Rights Agreement,
incorporated by reference to Exhibit 4 to Registrant's Report on Form 8-K dated September 26, 2000.
4.2 Specimen Certificates of Registrant's Common Stock bearing legend notifying of Shareholder
Protection Rights Agreement, incorporated by reference to Exhibit 4(b) to Registrant's Registration
Statement on Form S-3 filed on September 29, 2000 (Reg. No. 333-46932).
4.3 Indenture, dated as of May 1, 2001, between International Flavors & Fragrances Inc. and Bank One
Trust Company, N. A., as Trustee, incorporated by reference to Exhibit 4.1 to Registrant's
Registration Statement on Form S-4 dated June 26, 2001 (Reg. No. 333-63910).
4.4 First Supplemental Indenture, dated as of May 7, 2001, between International Flavors & Fragrances
Inc. and Bank One Trust & Company, N. A., as Trustee, incorporated by reference to Exhibit 4.2 to
Registrant's Registration Statement on Form S-4 dated June 26, 2001 (Reg. No. 333-63910).
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Number
- ------
<C> <S>
4.5 Form of 6.45% Note due 2006 (included in 4.4), incorporated by reference to Exhibit 4.2.1 to
Registrant's Registration Statement on Form S-4 dated June 26, 2001 (Reg. No. 333-63910).
4.6 Registration Rights Agreement, dated May 7, 2001, among International Flavors & Fragrances Inc.
and Salomon Smith Barney Inc., Banc One Capitals Markets, Inc., First Union Securities, Inc. and
Tokyo-Mitsubishi International plc, as representatives of the Initial Purchasers, incorporated by
reference to Exhibit 4.3 to Registrant's Registration Statement on Form S-4 dated June 26, 2001 (Reg.
No. 333-63910).
9 Not applicable.
* 10.1 Memorandum of Understanding between Registrant and Richard A. Goldstein, Chairman of the Board
and Chief Executive Officer of Registrant, approved by Registrant's Board of Directors on April 13,
2000, incorporated by reference to Exhibit 10(a) to Registrant's Report on Form 10-Q dated August
14, 2000.
*10.2 Agreement dated June 23, 1998 between Registrant and Carlos A. Lobbosco, Executive Vice
President of Registrant, incorporated by reference to Exhibit 10(a) to Registrant's Report on Form
10-Q dated November 13, 1998.
*10.2a Agreement dated as of October 1, 1999 between Registrant and Carlos A. Lobbosco, Executive Vice
President of Registrant, incorporated by reference to Exhibit 10(o) to Registrant's Report on Form
10-K for fiscal year ended December 31, 1999.
*10.2b Agreement dated July 25, 2001 between Registrant and Carlos A. Lobbosco, Executive Vice
President, Business Development, incorporated by reference to Exhibit 10(b) to Registrant's Report on
Form 10-Q dated August 14, 2001.
*10.3 Separation Agreement dated as of July 16, 2001 between Registrant and William S. Kane, Vice
President, Human Resources of Registrant, incorporated by reference to Exhibit 10(c) to Registrant's
Report on Form 10-Q dated August 14, 2001.
*10.4 Supplemental Retirement Plan adopted by Board of Directors on October 29, 1986, incorporated by
reference to Exhibit 10(e) to Registrant's Report on Form 10-Q dated May 14, 1997.
*10.5 Registrant's Supplemental Retirement Investment Plan adopted by Registrant's Board of Directors on
November 14, 1989, as amended through June 30, 2000, incorporated by reference to Exhibit 10(f) to
Registrant's Report on Form 10-K for the fiscal year ending December 31, 2000.
*10.6 Registrant's 2000 Stock Award and Incentive Plan adopted by Registrant's Board of Directors on
March 9, 2000, as amended by the Board on November 14, 2000, incorporated by reference to Exhibit
10(g) to Registrant's Report on Form 10-K for the fiscal year ending December 31, 2000.
*10.7 2000 Supplemental Stock Award Plan adopted by Registrant's Board of Directors on November 14,
2000, incorporated by reference to Exhibit 99.1 to Registrant's Registration Statement on Form S-8
filed on December 7, 2000 (Reg. No. 333-51436).
*10.8 Restated Management Incentive Compensation Plan of Registrant, incorporated by reference to
Exhibit A to the Registrant's Proxy Statement dated March 28, 1995.
*10.9 Registrant's Executive Death Benefit Plan effective July 1, 1990, incorporated by reference to Exhibit
10(c) to Registrant's Report on Form 10-Q dated May 14, 1997.
*10.10 Registrant's "Vision 2001 Compensation Program" adopted by Registrant's Board of Directors on
December 12, 2000, incorporated by reference to Exhibit 10(k) to Registrant's Report on Form 10-K
for the fiscal year ended December 31, 2000.
*10.11 Registrant's Executive Separation Policy, approved by Registrant's Board of Directors on October 10,
2000, incorporated by reference to Exhibit 10(l) to Registrant's Report on Form 10-K for the fiscal
year ended December 31, 2000.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Number
- ------
<C> <S>
10.12 Trust Agreement dated October 4, 2000 among Registrant, First Union National Bank and Buck
Consultants Inc. approved by Registrant's Board of Directors on September 12, 2000, incorporated
by reference to Exhibit 10(b) to Registrant's Report on Form 10-Q dated November 14, 2000.
*10.13 Stock Option Plan for Non-Employee Directors, incorporated by reference to Exhibit 10(h) to
Registrant's Report on Form 10-Q dated May 14, 1997.
*10.13a 2000 Stock Option Plan for Non-Employee Directors adopted by Registrant's Board of Directors on
February 8, 2000, incorporated by reference to the Registrant's Proxy Statement dated March 29,
2000.
*10.14 Director Charitable Contribution Program adopted by the Board of Directors on February 14, 1995,
incorporated by reference to Exhibit 10(j) to Registrant's Report on Form 10-K for the fiscal year
ended December 31, 1994.
*10.15 Resolutions approving Non-Employee Directors' Annual Stock Grant Program adopted by
Registrant's Board of Directors on September 12, 2000, incorporated by reference to Exhibit 99(c) to
Registrant's Registration Statement on Form S-3 filed on September 29, 2000 (Reg. No. 333-46932).
*10.16 Registrant's Directors' Deferred Compensation Plan adopted by Registrant's Board of Directors on
September 15, 1981 as amended through September 1, 2000, incorporated by reference to Exhibit
99(d) to Registrant's Registration Statement on Form S-3 filed on September 29, 2000 (Reg. No. 333-
46932).
*10.17 Registrant's 1997 Employee Stock Option Plan, incorporated by reference to Exhibit A to the
Registrant's Proxy Statement dated March 27, 1997.
*10.17a Amendments to 1997 Employee Stock Option Plan adopted by Registrant's Board of Directors on
February 8, 2000, incorporated by reference to Exhibit 10(ll) to Registrant's Report on Form 10-K for
the fiscal year ended December 31, 1999.
*10.18 Registrant's Global Employee Stock Purchase Plan adopted by Registrant's Board of Directors on
November 14, 2000, incorporated by reference to Exhibit B to Registrant's Proxy Statement dated
March 30, 2001.
*10.19 Registrant's Senior Officer Stock Exercise Loan Program adopted by Registrant's Board of Directors
on November 13, 2001.
10.20 Amended and Restated 364-day Credit Agreement dated as of May 30, 2000 among Registrant, as
Borrower, certain Initial Lenders, Citibank, N.A., as Agent, and Salomon Smith Barney Inc., as
Arranger, incorporated by reference to Exhibit 10(c) to Registrant's Report on Form 10-Q dated
August 14, 2000.
10.21 180-day Credit Agreement dated as of November 2, 2000 among Registrant, as Borrower, certain
Initial Lenders, Citibank, N.A. as Agent and Salomon Smith Barney Inc. as Arranger, incorporated by
reference to Exhibit 10(v) to Registrant's Report on Form 10-K for the fiscal year ending December
31, 2000.
10.22 364-day Credit Agreement dated as of November 28, 2000 among Registrant as Borrower, certain
Initial Lenders, Citibank, N.A. as Agent, First Union National Bank and Bank of Tokyo-Mitsubishi
Trust Company, as Syndication Agents, Fortis (USA) Finance LLC., as Co-Agent, and Salomon
Smith Barney Inc. as Arranger, incorporated by reference to Exhibit 10(w) to Registrant's Report on
Form 10-K for the fiscal year ending December 31, 2000.
10.22a Letter Amendment dated as of December 31, 2000 to the 364-day Credit Agreement dated as of
November 28, 2000 among Registrant, as Borrower, certain Initial Lenders, Citibank, N.A., as Agent,
First Union National Bank and Bank of Tokyo-Mitsubishi Trust Company, as Syndication Agents,
Fortis (USA) Finance LLC., as Co-Agent, and Salomon Smith Barney Inc., as Arranger, incorporated
by reference to Exhibit 10(a) to Registrant's Report on Form 10-Q dated August 14, 2001.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Number
- ------
<C> <S>
10.23 364-day Credit Agreement dated as of September 26, 2001 among the Company, as Borrower, certain
Initial Lenders, Citibank N.A., as Administrative Agent, and Salomon Smith Barney Inc., as Arranger,
incorporated by reference to Exhibit 10(a) to Registrant's Report on Form 10-Q dated November 14,
2001.
10.24 Five Year Credit Agreement dated as of September 26, 2001 among the Company, as Borrower,
certain Initial Lenders, Citibank N.A., as Administrative Agent, and Salomon Smith Barney Inc., as
Arranger, incorporated by reference to Exhibit 10(b) to Registrant's Report on Form 10-Q dated
November 14, 2001.
10.25 Credit Agreement dated as of September 27, 2001 by and between the Company and Bank of Tokyo-
Mitsubishi Trust Company, incorporated by reference to Exhibit 10(c) to Registrant's Report on Form
10-Q dated November 14, 2001.
11 Not applicable.
12 Not applicable.
13 Registrant's 2001 Annual Report; except for those portions thereof that are expressly incorporated by
reference in this Form 10-K, this exhibit is furnished only for the information of the Commission and
is not deemed to be filed as part of this Form 10-K.
16 Not applicable.
18 Not applicable.
21 List of Principal Subsidiaries.
22 Not applicable.
23 Consent of PricewaterhouseCoopers LLP.
24 Powers of Attorney authorizing Douglas J. Wetmore and Stephen A. Block to sign this report and
amendments thereto on behalf of certain directors and officers of the Registrant.
28 Not applicable.
99 None.
</TABLE>
- --------
* Management contract or compensatory plan or arrangement.
(b) REPORTS ON FORM 8-K
The Company filed the following report on Form 8-K during the last quarter
of the fiscal year ended December 31, 2001.
. Report on Form 8-K dated October 5, 2001 and filed October 5, 2001,
describing in Item 5 a purported class action law suit brought against the
Company in Circuit Court of Jasper County, Missouri by the employees of a
microwave popcorn plant owned and operated by Gilster-Mary Lee Corp.
14
<PAGE>
Report of Independent Accountants on Financial Statement Schedule
To the Board of Directors of International Flavors & Fragrances Inc.
Our audits of the consolidated financial statements referred to in our report
dated January 28, 2002 appearing in the 2001 Annual Report to Shareholders of
International Flavors & Fragrances Inc. (which report and consolidated
financial statements are incorporated by reference in this Annual Report on
Form 10-K) also included an audit of the financial statement schedule listed in
Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement
schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
PRICEWATERHOUSECOOPERS LLP
New York, New York
January 28, 2002
15
<PAGE>
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
INTERNATIONAL FLAVORS
& FRAGRANCES INC.
(Registrant)
By /s/ DOUGLAS J. WETMORE
-----------------------------------
Douglas J. Wetmore
Senior Vice President and
Chief Financial Officer
Dated: March 28, 2002
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 and on the date indicated:
<TABLE>
<S> <C> <C>
]
]
Principal Executive Officer: ]
]
RICHARD A. GOLDSTEIN ]
]
Chairman of the Board and ]
Chief Executive Officer ]
]
Principal Financial and Accounting Officer: ]
]
DOUGLAS J. WETMORE ]
]
Senior Vice President and }
Chief Financial Officer ]
]
Directors: ]
]
MARGARET HAYES ADAME ]
GUNTER BLOBEL ]
JAMES R. CANTALUPO ] By /s/ STEPHEN A. BLOCK
J. MICHAEL COOK ] ---------------------------
PETER A. GEORGESCU ] Stephen A. Block
RICHARD A. GOLDSTEIN ] Attorney in fact
CARLOS A. LOBBOSCO ]
ARTHUR C. MARTINEZ ] March 28, 2002
HENRY P. VAN AMERINGEN ]
WILLIAM D. VAN DYKE, III ]
DOUGLAS J. WETMORE ]
</TABLE>
Original powers of attorney authorizing Douglas J. Wetmore and Stephen A.
Block, and each of them, to sign this report on behalf of certain directors and
officers of the Registrant have been filed with the Securities and Exchange
Commission.
16
<PAGE>
SCHEDULE II
INTERNATIONAL FLAVORS & FRAGRANCES INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In thousands)
<TABLE>
<CAPTION>
For the Year Ended
December 31, 2001
-------------------------
Additions
charged Trans-
Balance at to costs Accounts lation Balance
beginning and written adjust- at end of
of period expenses off ments period
---------- --------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts $11,074 $2,947 $2,306 $(880) $10,835
======= ====== ====== ===== =======
For the Year Ended
December 31, 2000
-------------------------
Additions
charged Trans-
Balance at to costs Accounts lation Balance
beginning and written adjust- at end of
of period expenses off ments period
---------- --------- -------- ------- ---------
Allowance for doubtful accounts $10,013 $2,359 $ 963 $(335) $11,074
======= ====== ====== ===== =======
For the Year Ended
December 31, 1999
-------------------------
Additions
charged Trans-
Balance at to costs Accounts lation Balance
beginning and written adjust- at end of
of period expenses off ments period
---------- --------- -------- ------- ---------
Allowance for doubtful accounts $ 9,517 $1,645 $ 668 $(481) $10,013
======= ====== ====== ===== =======
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number
- ------
<C> <S>
2 Agreement and Plan of Merger dated as of September 25, 2000 among Registrant, Bush Boake Allen
Inc. and B Acquisition Corp. incorporated by reference to Exhibit 2.1 to Registrant's Report on Form
8-K dated September 25, 2000.
3 (i) Restated Certificate of Incorporation of Registrant, incorporated by reference to Exhibit 3 to
Registrant's Report on Form 10-K for fiscal year ended December 31, 1993.
3 (ii) By-laws of Registrant, as amended on March 12, 2002.
4.1 Shareholders Protection Rights Agreement dated as of March 21, 2000 between Registrant and The
Bank of New York, as Rights Agent, incorporated by reference to Exhibit 4 to Registrant's Report on
Form 8-K dated March 22, 2000.
4.1a First Amendment dated as of September 26, 2000, to Shareholder Protection Rights Agreement,
incorporated by reference to Exhibit 4 to Registrant's Report on Form 8-K dated September 26,
2000.
4.2 Specimen Certificates of Registrant's Common Stock bearing legend notifying of Shareholder
Protection Rights Agreement, incorporated by reference to Exhibit 4(b) to Registrant's Registration
Statement on Form S-3 filed on September 29, 2000 (Reg. No. 333-46932).
4.3 Indenture, dated as of May 1, 2001, between International Flavors & Fragrances Inc. and Bank One
Trust Company, N. A., as Trustee, incorporated by reference to Exhibit 4.1 to Registrant's
Registration Statement on Form S-4 dated June 26, 2001 (Reg. No. 333-63910).
4.4 First Supplemental Indenture, dated as of May 7, 2001, between International Flavors & Fragrances
Inc. and Bank One Trust & Company, N. A., as Trustee, incorporated by reference to Exhibit 4.2 to
Registrant's Registration Statement on Form S-4 dated June 26, 2001 (Reg. No. 333-63910).
4.5 Form of 6.45% Note due 2006 (included in 4.4), incorporated by reference to Exhibit 4.2.1 to
Registrant's Registration Statement on Form S-4 dated June 26, 2001 (Reg. No. 333-63910).
4.6 Registration Rights Agreement, dated May 7, 2001, among International Flavors & Fragrances Inc.
and Salomon Smith Barney Inc., Banc One Capitals Markets, Inc., First Union Securities, Inc. and
Tokyo-Mitsubishi International plc, as representatives of the Initial Purchasers, incorporated by
reference to Exhibit 4.3 to Registrant's Registration Statement on Form S-4 dated June 26, 2001
(Reg. No. 333-63910).
9 Not applicable.
10.1 Memorandum of Understanding between Registrant and Richard A. Goldstein, Chairman of the
Board and Chief Executive Officer of Registrant, approved by Registrant's Board of Directors on
April 13, 2000, incorporated by reference to Exhibit 10(a) to Registrant's Report on Form 10-Q dated
August 14, 2000.
10.2 Agreement dated June 23, 1998 between Registrant and Carlos A. Lobbosco, Executive Vice
President of Registrant, incorporated by reference to Exhibit 10(a) to Registrant's Report on Form
10-Q dated November 13, 1998.
10.2a Agreement dated as of October 1, 1999 between Registrant and Carlos A. Lobbosco, Executive Vice
President of Registrant, incorporated by reference to Exhibit 10(o) to Registrant's Report on Form
10-K for fiscal year ended December 31, 1999.
10.2b Agreement dated July 25, 2001 between Registrant and Carlos A. Lobbosco, Executive Vice
President, Business Development, incorporated by reference to Exhibit 10(b) to Registrant's Report
on Form 10-Q dated August 14, 2001.
10.3 Separation Agreement dated as of July 16, 2001 between Registrant and William S. Kane, Vice
President, Human Resources of Registrant, incorporated by reference to Exhibit 10(c) to Registrant's
Report on Form 10-Q dated August 14, 2001.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number
- ------
<C> <S>
10.4 Supplemental Retirement Plan adopted by Board of Directors on October 29, 1986, incorporated by
reference to Exhibit 10(e) to Registrant's Report on Form 10-Q dated May 14, 1997.
10.5 Registrant's Supplemental Retirement Investment Plan adopted by Registrant's Board of Directors
on November 14, 1989, as amended through June 30, 2000, incorporated by reference to Exhibit
10(f) to Registrant's Report on Form 10-K for the fiscal year ending December 31, 2000.
10.6 Registrant's 2000 Stock Award and Incentive Plan adopted by Registrant's Board of Directors on
March 9, 2000, as amended by the Board on November 14, 2000, incorporated by reference to
Exhibit 10(g) to Registrant's Report on Form 10-K for the fiscal year ending December 31, 2000.
10.7 2000 Supplemental Stock Award Plan adopted by Registrant's Board of Directors on November 14,
2000, incorporated by reference to Exhibit 99.1 to Registrant's Registration Statement on Form S-8
filed on December 7, 2000 (Reg. No. 333-51436).
10.8 Restated Management Incentive Compensation Plan of Registrant, incorporated by reference to
Exhibit A to the Registrant's Proxy Statement dated March 28, 1995.
10.9 Registrant's Executive Death Benefit Plan effective July 1, 1990, incorporated by reference to
Exhibit 10(c) to Registrant's Report on Form 10-Q dated May 14, 1997.
10.10 Registrant's "Vision 2001 Compensation Program" adopted by Registrant's Board of Directors on
December 12, 2000, incorporated by reference to Exhibit 10(k) to Registrant's Report on Form 10-K
for the fiscal year ended December 31, 2000.
10.11 Registrant's Executive Separation Policy, approved by Registrant's Board of Directors on October
10, 2000, incorporated by reference to Exhibit 10(l) to Registrant's Report on Form 10-K for the
fiscal year ended December 31, 2000.
10.12 Trust Agreement dated October 4, 2000 among Registrant, First Union National Bank and Buck
Consultants Inc. approved by Registrant's Board of Directors on September 12, 2000, incorporated
by reference to Exhibit 10(b) to Registrant's Report on Form 10-Q dated November 14, 2000.
10.13 Stock Option Plan for Non-Employee Directors, incorporated by reference to Exhibit 10(h) to
Registrant's Report on Form 10-Q dated May 14, 1997.
10.13a 2000 Stock Option Plan for Non-Employee Directors adopted by Registrant's Board of Directors on
February 8, 2000, incorporated by reference to the Registrant's Proxy Statement dated March 29,
2000.
10.14 Director Charitable Contribution Program adopted by the Board of Directors on February 14, 1995,
incorporated by reference to Exhibit 10(j) to Registrant's Report on Form 10-K for the fiscal year
ended December 31, 1994.
10.15 Resolutions approving Non-Employee Directors' Annual Stock Grant Program adopted by
Registrant's Board of Directors on September 12, 2000, incorporated by reference to Exhibit 99(c) to
Registrant's Registration Statement on Form S-3 filed on September 29, 2000 (Reg. No. 333-46932).
10.16 Registrant's Directors' Deferred Compensation Plan adopted by Registrant's Board of Directors on
September 15, 1981 as amended through September 1, 2000, incorporated by reference to Exhibit
99(d) to Registrant's Registration Statement on Form S-3 filed on September 29, 2000 (Reg. No.
333-46932).
10.17 Registrant's 1997 Employee Stock Option Plan, incorporated by reference to Exhibit A to the
Registrant's Proxy Statement dated March 27, 1997.
10.17a Amendments to 1997 Employee Stock Option Plan adopted by Registrant's Board of Directors on
February 8, 2000, incorporated by reference to Exhibit 10(ll) to Registrant's Report on Form 10-K
for the fiscal year ended December 31, 1999.
10.18 Registrant's Global Employee Stock Purchase Plan adopted by Registrant's Board of Directors on
November 14, 2000, incorporated by reference to Exhibit B to Registrant's Proxy Statement dated
March 30, 2001.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number
- ------
<C> <S>
10.19 Registrant's Senior Officer Stock Exercise Loan Program adopted by Registrant's Board of Directors
on November 13, 2001.
10.20 Amended and Restated 364-day Credit Agreement dated as of May 30, 2000 among Registrant, as
Borrower, certain Initial Lenders, Citibank, N.A., as Agent, and Salomon Smith Barney Inc., as
Arranger, incorporated by reference to Exhibit 10(c) to Registrant's Report on Form 10-Q dated
August 14, 2000.
10.21 180-day Credit Agreement dated as of November 2, 2000 among Registrant, as Borrower, certain
Initial Lenders, Citibank, N.A. as Agent and Salomon Smith Barney Inc. as Arranger, incorporated
by reference to Exhibit 10(v) to Registrant's Report on Form 10-K for the fiscal year ending
December 31, 2000.
10.22 364-day Credit Agreement dated as of November 28, 2000 among Registrant as Borrower, certain
Initial Lenders, Citibank, N.A. as Agent, First Union National Bank and Bank of Tokyo-Mitsubishi
Trust Company, as Syndication Agents, Fortis (USA) Finance LLC., as Co-Agent, and Salomon
Smith Barney Inc. as Arranger, incorporated by reference to Exhibit 10(w) to Registrant's Report on
Form 10-K for the fiscal year ending December 31, 2000.
10.22a Letter Amendment dated as of December 31, 2000 to the 364-day Credit Agreement dated as of
November 28, 2000 among Registrant, as Borrower, certain Initial Lenders, Citibank, N.A., as
Agent, First Union National Bank and Bank of Tokyo-Mitsubishi Trust Company, as Syndication
Agents, Fortis (USA) Finance LLC., as Co-Agent, and Salomon Smith Barney Inc., as Arranger,
incorporated by reference to Exhibit 10(a) to Registrant's Report on Form 10-Q dated August 14,
2001.
10.23 364-day Credit Agreement dated as of September 26, 2001 among the Company, as Borrower,
certain Initial Lenders, Citibank N. A., as Administrative Agent, and Salomon Smith Barney Inc., as
Arranger, incorporated by reference to Exhibit 10(a) to Registrant's Report on Form 10-Q dated
November 14, 2001.
10.24 Five Year Credit Agreement dated as of September 26, 2001 among the Company, as Borrower,
certain Initial Lenders, Citibank N.A., as Administrative Agent, and Salomon Smith Barney Inc., as
Arranger, incorporated by reference to Exhibit 10(b) to Registrant's Report on Form 10-Q dated
November 14, 2001.
10.25 Credit Agreement dated as of September 27, 2001 by and between the Company and Bank of Tokyo-
Mitsubishi Trust Company, incorporated by reference to Exhibit 10(c) to Registrant's Report on
Form 10-Q dated November 14, 2001.
11 Not applicable.
12 Not applicable.
13 Registrant's 2001 Annual Report; except for those portions thereof that are expressly incorporated by
reference in this Form 10-K, this exhibit is furnished only for the information of the Commission and
is not deemed to be filed as part of this Form 10-K.
16 Not applicable.
18 Not applicable.
21 List of Principal Subsidiaries.
22 Not applicable.
23 Consent of PricewaterhouseCoopers LLP.
24 Powers of Attorney authorizing Douglas J. Wetmore and Stephen A. Block to sign this report and
amendments thereto on behalf of certain directors and officers of the Registrant.
28 Not applicable.
99 None.
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.(II)
<SEQUENCE>3
<FILENAME>dex3ii.txt
<DESCRIPTION>BY-LAWS OF REGISTRANT
<TEXT>
<PAGE>
Exhibit 3(ii)
INTERNATIONAL FLAVORS & FRAGRANCES INC.
BY-LAWS
(as adopted March 10, 1964, including all amendments
made through March 12, 2002)
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BY-LAWS
of
INTERNATIONAL FLAVORS & FRAGRANCES INC.
(a New York corporation)
ARTICLE I
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Meetings of Stockholders
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SECTION 1. Annual Meeting. The annual meeting of the
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stockholders of the Corporation for the election of directors and for the
transaction of such other business as may properly come before the meeting shall
be held at such place, on such date and at such time as shall be designated from
time to time by the Board of Directors.
SECTION 2. Special Meeting. Special meetings of the
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stockholders, unless otherwise prescribed by statute, may be called at any time
by the Chairman of the Board, the President or the Board of Directors.
SECTION 3. Notice of Meetings. (a) Nomination of Directors.
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Only persons who are nominated in accordance with the following procedures shall
be eligible for election as directors of the Corporation. Nominations of persons
for election to the Board of Directors may be made at any annual meeting of
stockholders, or at any special meeting of stockholders called for the purpose
of electing directors, (i) by or at the direction of the Board of Directors (or
any duly authorized committee thereof) or (ii) by any stockholder of the
Corporation (A) who is a stockholder of record on the date of the giving of the
notice provided for in this Section 3(a) and on the record date for the
determination of stockholders entitled to vote at such meeting and (B) who
complies with the notice procedures set forth in this Section 3(a).
In addition to any other applicable requirements, for a
nomination to be made by a stockholder, such stockholder must have given timely
notice thereof in proper written form to the Secretary of the Corporation. To be
timely, a stockholder's notice to the Secretary must be delivered to or mailed
and received at the principal executive offices of the Corporation (i) in the
case of an annual meeting, not less than sixty (60) days nor more than ninety
(90) days prior to the anniversary date of the immediately preceding annual
meeting of stockholders; provided, however, that in the event that the annual
meeting is called for a date that is not within thirty (30) days before or after
such anniversary date, notice by the stockholder in order to be timely must be
so received not later than the close of business on the tenth (10th) day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure of the date of the annual meeting was made,
whichever first occurs; and (ii) in the case of a special meeting of
stockholders called for the purpose of electing directors, not later than the
close of business on the tenth (10th) day following the day on which notice of
the date of the special meeting was mailed or public disclosure of the date of
the special meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth (i) as to each person whom the stockholder proposes to
nominate for election as a director (A) the name, age, business address and
residence address of the person, (B) the principal occupation or employment of
the person, (C) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by the person and (D) any
other information relating to the person that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder; and (ii) as to the stockholder giving
the notice (A) the name and record address of such stockholder, (B) the class or
series and number of shares of capital stock of the Corporation which are owned
beneficially or of record by such stockholder, (C) a description of all
arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder, (D) a representation
that such stockholder intends to appear in person or by proxy at the meeting to
nominate the persons named in its notice and (E) any other information relating
to such stockholder that would be required to be disclosed in a proxy statement
or other filings required to be made in connection with solicitations of proxies
for election of directors pursuant to Section 14 of the Exchange Act and the
rules and regulations promulgated thereunder. Such notice must be
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accompanied by a written consent of each proposed nominee to being named as a
nominee and to serve as a director if elected. The Corporation may require any
proposed nominee to furnish such other information as may reasonably be required
by the Corporation to determine the eligibility of such proposed nominee to
serve as director of the Corporation.
Notwithstanding anything in these By-Laws to the contrary, no person
shall be eligible for election as a director of the Corporation unless
nominated in accordance with the procedures set forth in this Section 3(a).
If the Chairman of the meeting determines that a nomination was not made in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the nomination was defective and such defective nomination
shall be disregarded.
(b) Nature of Business at Meetings of Stockholders. No
business may be transacted at an annual meeting of stockholders, other than
business that is either (i) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors (or
any duly authorized committee thereof), (ii) otherwise properly brought before
an annual meeting, by or at the direction of the Board of Directors (or any duly
authorized committee thereof) or (iii) otherwise properly brought before an
annual meeting by any stockholder of the Corporation (A) who is a stockholder of
record on the date of the giving of the notice provided for in this Section 3(b)
and on the record date for the determination of stockholders entitled to vote at
such meeting and (B) who complies with the notice procedures set forth in this
Section 3(b).
In addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written form to
the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than sixty (60) days nor more than ninety (90) days prior
to the anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the annual meeting is
called for a date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth (10th) day following
the day on which such notice of the date of the annual meeting was mailed or
such public disclosure of the date of the annual meeting was made, whichever
first occurs.
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To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to bring
before an annual meeting, (i) a brief description of the business desired to be
brought before such meeting and the reasons for conducting such business at such
meeting, (ii) the name and record address of such stockholder, (iii) the class
or series and number of shares of capital stock of the Corporation which are
owned beneficially or of record by such stockholder, (iv) a description of all
arrangements or understandings between such stockholder and any other person or
persons (including their names) in connection with the proposal of such business
by such stockholder and any material interest of such stockholder in such
business and (v) a representation that such stockholder intends to appear in
person or by proxy at the meeting to bring such business before such meeting.
Notwithstanding the foregoing provisions of this Section, a stockholder seeking
to have a proposal included in the Corporation's proxy statement shall comply
with the requirements of Section 14 of the Exchange Act, including, but not
limited to, Rule 14a-8 promulgated thereunder or its successor provision. The
Corporation may require any stockholder to furnish such other information as may
reasonably be required by the Corporation to determine if the business shall be
properly brought before an annual meeting of the stockholders.
Notwithstanding anything in these By-Laws to the contrary, no
business shall be conducted at an annual meeting of stockholders except business
brought before such meeting in accordance with the procedures set forth in this
Section; provided, however, that, once business has been properly brought before
the meeting in accordance with such procedures, nothing in this Section 3(b)
shall be deemed to preclude discussion by any stockholder of any such business.
If the Chairman of an annual meeting determines that business was not properly
brought before such meeting in accordance with the foregoing procedures, the
Chairman shall declare to the meeting that the business was not properly brought
before the meeting and such business shall not be transacted.
SECTION 4. Quorum. At all meetings of the stockholders of the
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Corporation, the holders of a majority of the stock of the Corporation entitled
to vote thereat, present in person or by proxy, shall constitute a quorum for
the transaction of any business except as otherwise provided by law.
SECTION 5. Order of Business. The order of business at all
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meetings of the stockholders shall be as determined by the Chairman of the
meeting, but the order of business to be followed at any meeting at which a
quorum is present may be changed by a majority in voting interest of the
stockholders present at the meeting in person or by proxy and entitled to vote
thereat.
SECTION 6. Organization; Adjournment. At each meeting of the
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stockholders, the Chairman of the Board of the Corporation, or, if he shall be
absent therefrom, the President of the Corporation, or, if he shall be absent
therefrom, the Executive Vice-President, or, if he shall be absent therefrom,
any other Vice-President of the Corporation, or, if the Chairman of the Board,
the President, the Executive Vice-President and all the other Vice-Presidents
shall be absent from such meeting, then some other officer of the Corporation,
or, if all its officers shall be absent therefrom, a stockholder holding of
record shares of stock of the Corporation having voting powers, or the proxy of
such a stockholder, who is chosen chairman of such meeting, shall act as
chairman thereof and preside thereat; and the Secretary of the Corporation, or,
if he shall be absent from such meeting, or, if he shall be required or chosen
pursuant to the provisions of this Section 6 to act as chairman of such meeting,
the person (who shall be an Assistant Secretary of the Corporation, if any of
them shall be present thereat) whom the chairman of such meeting shall appoint
secretary of such meeting, shall act as secretary of such meeting and keep the
minutes thereof.
If a quorum, determined in accordance with Article I, Section 4 hereof,
shall not be present or represented at any meeting of the stockholders, the
Chairman of the meeting, or if so requested by the Chairman, the
stockholders present in person or represented by proxy, shall have the
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or
represented. In addition, the Chairman of any meeting of stockholders shall
have the power to adjourn the meeting at the request of the Board of
Directors if the Board of Directors determines that adjournment is
necessary or appropriate to enable stockholders to consider fully
information which the Board of Directors determines has not been made
sufficiently or timely available to stockholders.
SECTION 7. Voting. When a quorum is present or represented at
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any meeting, the vote of the holders of a majority of the stock having voting
power present in person or represented by proxy shall decide any question
brought before such meeting, except as otherwise expressly provided by the
Certificate of Incorporation or by Law. At each meeting of the stockholders
every stockholder of record of the Corporation entitled to vote at such meeting
shall be entitled to one vote for each share of Common Stock standing in his
name on the books of the Corporation; provided, however, that the Board of
Directors may fix, in advance, a date not more than sixty nor less than ten days
prior to the date of such meeting as the date as of which
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stockholders entitled to notice of, and to vote at, such meeting shall be
determined, and in case the Board of Directors shall fix a date, only
stockholders of record on such date shall be entitled to notice of, and to vote
at, such meeting. The vote of stock of the Corporation may be given by the
stockholder entitled thereto in person or by proxy duly appointed by an
instrument in writing subscribed by such stockholder or by his attorney
thereunto duly authorized, and delivered to the Secretary of the meeting. Unless
demanded by a stockholder of the Corporation present in person or by proxy at
any meeting of the stockholders and entitled to vote thereat or so directed by
the chairman of the meeting, the vote thereat on any question need not be by
ballot. Upon a demand of any such stockholder for a vote by ballot on any
question or at the direction of such chairman that a vote by ballot be taken on
any question, such vote shall be taken by ballot. On a vote by ballot each
ballot shall be signed by the stockholder voting, or in his name by his proxy,
if there be such proxy, and it shall show the number of shares voted by him.
SECTION 8. Inspectors of Election. At any meeting of the
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stockholders, an inspector or inspectors of election may be appointed as
provided in the Business Corporation Law and shall have duties as provided in
said Law. An inspector of election need not be a stockholder of the Corporation,
and any officer of the Corporation may be an inspector of election on any
question other than a vote for or against his election to any position with the
Corporation or any other question in which he may be directly interested.
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ARTICLE II
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Board of Directors
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SECTION 1. General Powers. Except as otherwise provided in
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these By-laws or in the Certificate of Incorporation, the property, business and
affairs of the Corporation shall be managed by the Board of Directors.
SECTION 2. Number. The number of directors shall be nine but
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the number thereof may, from time to time, be diminished to not less than six by
amendment of these By-laws. As used in these By-laws, the term "whole Board of
Directors" shall mean the total number of directors which the Corporation would
have at the time if there were no vacancies.
SECTION 3. Election of Directors. At each meeting of the
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stockholders for the election of directors at which a quorum is present, the
persons receiving a plurality of the votes cast by the holders of stock entitled
to vote thereat shall be the directors. No person shall be eligible to serve as
director of the Corporation after the date of, or stand for the re-election at,
the annual meeting of stockholders which follows the date of his or her 72nd
birthday, except that persons serving as directors on February 8, 2000 who are
re-elected at the annual meeting held on May 18, 2000 (or any adjournment
thereof) may continue to serve as directors until the date of the annual meeting
of stockholders held in 2001.
SECTION 4. Organization. The Board of Directors may choose one
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of their number as Chairman of the Board. At each meeting of the Board of
Directors, the Chairman of the Board, or, if there shall be no Chairman or if he
shall be absent, the President of the Corporation, or in case of his absence,
the Executive Vice-President, or in case of his absence, a chairman who shall be
any director chosen by a majority of the directors present thereat, shall act as
chairman of such meeting and preside thereat. The Secretary of the Corporation,
or in the case of his absence, any person (who shall be an Assistant Secretary
of the Corporation, if an Assistant Secretary of the Corporation shall be
present at such meeting) whom the chairman shall appoint secretary of such
meeting, shall act as secretary of such meeting and keep the minutes thereof.
SECTION 5. Resignations. Any director of the Corporation may
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resign at any time by giving written notice of his resignation to the Board of
Directors, the President or the Secretary of the Corporation. Any such
resignation shall take effect at the time specified therein, then it shall take
effect immediately upon its receipt by such Board of Directors, President or
Secretary; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 6. Vacancies. Vacancies occurring in the Board of
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Directors for any reason, except the removal of directors without cause by the
stockholders, may be filled by the affirmative vote of at least two-thirds (2/3)
of the whole Board of Directors. A director elected to fill a vacancy shall be
elected to hold office for the unexpired term of his predecessor. Newly-created
directorships resulting from an increase in the number of directors may be
filled by vote of a majority of the directors then in office, although less than
a quorum exists.
SECTION 7. Organization Meeting. After each annual election of
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directors, the Board of Directors may hold a regular meeting for the purpose of
organization and the transaction of other business as soon as practicable on the
same day, at the place where other regular meetings of the Board of Directors
are held. Notice of such meeting need not be given. Such meeting may be held at
any other time or place which shall be specified in a notice given as
hereinafter provided for special meetings of the Board or in a consent and
waiver of notice thereof signed by all the directors.
SECTION 8. Regular Meetings. Regular meetings of the Board of
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Directors shall be held at such other times and at such places within or without
the State of New York or the United States as the Board shall from time to time
by resolution determine. If any day fixed for a regular meeting shall be a legal
holiday at the place where the meeting is to be held,
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*Amended from "twelve" to "ten," effective May 16, 2001, by action of the Board
of Directors at its March 13, 2001 meeting. Further amended from "ten" to
"eleven" effective at the December 11, 2001 meeting. Further amended from
"eleven" to "nine" effective May 7, 2002, by action of the Board of Directors at
its March 12, 2002 meeting.
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then the meeting which otherwise would be held on that day shall be held at the
same hour on the next succeeding business day. Notice of regular meetings need
not be given.
SECTION 9. Special Meetings; Notice. Special meetings of the
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Board of Directors shall be held whenever called by the Chairman of the Board,
the President of the Corporation, the Executive Vice-President of the
Corporation, or by any two (2) of the directors at the time in office. A notice
shall be given as hereinafter in this Section provided of each such special
meeting, stating the time and place thereof. Except as otherwise provided by
law, notice of each meeting shall be given by mail, telegraph, cable, wireless,
telephone or personal delivery to each director, at his residence or usual place
of business at least two (2) days before the day on which such meeting is to be
held; provided, however, in the case of any director residing outside the United
States, such notice shall be sent addressed to him at such place by telegraph,
cable or wireless, or be delivered personally or by telephone not later than
five (5) days before the day on which such meeting is to be held. Notice of any
meeting of the Board need not, however, be given to any director, if waived by
him in writing before or after the meeting or if he shall attend the meeting
without protesting, prior thereto or at its commencement, the lack of notice to
him.
SECTION 10. Quorum and Manner of Acting.
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(a) A majority of the whole Board of Directors shall be
present in person at any meeting of the Board in order to constitute a quorum
for the transaction of business at such meeting and, except as otherwise
specifically provided by the Certificate of Incorporation, these By-laws or by
law, the act of a majority of the directors present at any such meeting, at
which quorum is present, shall be the act of the Board. In the absence of a
quorum from any such meeting, a majority of the directors present thereat may
adjourn such meeting from time to time until a quorum shall be present thereat.
Notice of any adjourned meeting need not be given.
(b) Unless otherwise restricted by the Certificate of
Incorporation or these By-laws, any one or more members of the Board or any
committee thereof may participate in a meeting of the Board or committee by
means of a conference telephone or similar communications equipment allowing all
persons participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at a meeting.
SECTION 11. Committees. There may be an Executive Committee
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consisting of three or more directors as may be designated from time to time by
a majority of the whole Board of Directors. The Chairman of the Board shall be a
member ex officio of the Executive Committee. Such Committee may meet at stated
times or on notice to all by any of their number. During the intervals between
the meetings of the Board of Directors, the Executive Committee shall possess
and may exercise, to the extent provided in the resolution of the Board of
Directors appointing such committee, all the powers of the Board of Directors,
except as otherwise provided in the Business Corporation Law, in the management
and direction of the business and affairs of the Corporation in such manner as
the Executive Committee shall deem for the best interest of the Corporation. The
Executive Committee shall keep regular minutes of its proceedings and report the
same to the Board of Directors when required, but no approval by the Board of
Directors of the actions taken by the Executive Committee shall be required.
A majority of the whole Board of Directors may also designate
directors to constitute one or more other committees, which shall in each case
consist of such number of directors and shall have such duties and may exercise
such powers as the Board of Directors may determine.
A majority of the whole Board may designate one or more
directors as alternate members of any such committee, including the Executive
Committee, who may replace any absent member or members at any meeting of such
committee.
Each committee, including the Executive Committee and each
member thereof, shall serve at the pleasure of the Board.
SECTION 12 Removal. Any director may be removed with cause by
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the affirmative vote of at least two-thirds of the whole Board of Directors or
with or without cause by vote of the stockholders at a regular or special
meeting, subject to the provisions of the Business Corporation Law.
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SECTION 13. Compensation. The directors and the members of any
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committee of the Corporation provided for by resolution of the Board of
Directors shall be entitled to be reimbursed for any expenses, including all
travel expenses, incurred by them on account of their attendance at any regular
or special meeting of the Board of Directors or of such committee, and the Board
of Directors may at any time or from time to time by resolution provide that the
Corporation shall pay each such director or member of such committee such
compensation for his services as may be specified in such resolution. Nothing in
this Section shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
SECTION 14. Indemnification.
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(a) Right to indemnification. The Corporation shall indemnify
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any person made, or threatened to be made, a party to an action or proceeding,
whether civil or criminal, by reason of the fact that he, or a person of whom he
is the legal representative, is or was a director or officer of the Corporation,
or, while serving as director or officer of the Corporation, is or was serving
in any capacity, at the request of the Corporation, any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise,
against judgments, fines, amounts paid in settlement and reasonable expenses,
including attorney's fees, incurred by such person as a result of such action or
proceeding, or any appeal therein, unless a judgment or other final adjudication
adverse to such person establishes that his acts, or the acts of the person of
whom he is the legal representative, were committed in bad faith or were the
result of active and deliberate dishonesty and were material to the cause of
action so adjudicated, or that he, or the person of whom he is the legal
representative, personally gained in fact a financial profit or other advantage
to which he, or the other person of whom he is the legal representative, was not
legally entitled. The Corporation shall advance to such person funds to pay for
such expenses, including attorney's fees, incurred by such person in defending
against any such action or proceeding, or any appeal therein, upon receipt of an
undertaking by or on behalf of such person to repay such funds to the
Corporation if a judgment or other final adjudication adverse to such person
establishes that his acts, or the acts of the person of whom he is the legal
representative, were committed in bad faith or were the result of active and
deliberate dishonesty and were material to the cause of action so adjudicated,
or that he, or the person of whom he is the legal representative, personally
gained in fact a financial profit or other advantage to which he, or such
person, was not legally entitled.
(b) Right of claimant to sue. If a claim under paragraph (a)
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is not paid in full by the Corporation within thirty days after a written claim
has been received by the Corporation, the claimant may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim
and, if successful in whole or in part, the claimant shall be entitled to be
paid also the expenses of the prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any is required, has been tendered to the
Corporation) that the claimant, or the person of whom he is the legal
representative, has not met the standard of conduct established in paragraph
(a), but the burden of proving such defense shall be on the Corporation. Neither
the failure of the Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper
because the claimant or such person has met the said standard of conduct, nor an
actual determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant or such person
has not met such applicable standard of conduct, shall be a defense to action or
create a presumption that the claimant or such person has not met such standard
of conduct.
(c) Non-exclusivity of rights. Subject to the limitations
contained in paragraph (a), the right to indemnification and the payment of
expenses conferred in this Section shall not be deemed exclusive of any other
right to which any person seeking indemnification or advancement or payment of
expenses may be entitled, whether under any statute, provision of the
Certification of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
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ARTICLE III
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Officers
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SECTION 1. Number. The principal officers of the Corporation
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shall include a President, an Executive Vice-President, one or more other
Vice-Presidents, a Treasurer, a Controller and a Secretary. Any two or more
offices may be held by the same person, except the offices of President and
Secretary.
SECTION 2. Election, Term of Office and Qualifications. The
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principal officers of the Corporation shall be chosen annually by the Board of
Directors. Each principal officer shall hold office until his successor shall
have been duly chosen and shall qualify, or until his death or until he shall
resign, or shall have been removed in the manner hereinafter provided.
SECTION 3. Additional Officers. In addition to the principal
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officers mentioned in Section 1 of this Article III, the Board of Directors may
appoint such other officers as the Board may determine, each of which officers
shall hold office for such period, have such authority and perform such duties
as are provided in these By-laws or as the Board of Directors may from time to
time determine.
SECTION 4. Removal. Any officer of the Corporation elected or
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appointed by the Board of Directors may be removed by the Board of Directors
with or without cause at any time.
SECTION 5. Resignations. Any officer of the Corporation may
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resign at any time by giving written notice of his resignation to the Board of
Directors or to the President or Secretary of the Corporation. Any such
resignation shall take effect at the time specified therein, or, if the time
when it shall become effective shall not be specified therein, then it shall
take effect immediately upon its receipt by such Board of Directors, President
or Secretary; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 6. Vacancies. A vacancy in any office due to death,
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resignation, removal, disqualification or any other cause shall be filled for
the unexpired portion of the term in the manner prescribed in these By-laws for
regular appointments or elections to such office.
SECTION 7. The President. The President shall be the chief
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executive officer of the Corporation and shall have general supervision of the
business of the Corporation and over its several officers, subject, however, to
the control of the Board of Directors. He shall in the absence of the Chairman
of the Board preside at all meetings of the stockholders and at all meetings of
the Board of Directors. He shall see that all orders and resolutions of the
Board of Directors are carried into effect. He may sign, execute and deliver in
the name of the Corporation all deeds, mortgages, bonds, contract or other
instruments authorized by the Board of Directors except where the signing,
execution or delivery thereof shall be expressly delegated by the Board of
Directors or by these By-laws to some other officer or agent of the Corporation
or where any of them shall be required by law to be otherwise signed, executed
or delivered, and he may affix the seal of the Corporation to any instrument
which shall require it. He shall perform all duties incident to the office of
President and such other duties as from time to time may be assigned to him by
the Board of Directors.
SECTION 8. The Executive Vice-President. The Executive
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Vice-President shall have such powers and perform such duties as the Board of
Directors may from time to time prescribe and shall perform such other duties as
may be prescribed by these By-laws. At the request of the President or, in the
case of his inability to act, he shall have all the powers of, and be subject to
all the restrictions upon, the President.
SECTION 9. The Vice-Presidents. Each Vice-President shall have
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such powers and perform such duties as the Board of Directors may from time to
time prescribe and shall perform such other duties as may be prescribed by these
By-laws. At the request of the President, or, in case of the inability of the
President and the Executive Vice-President to act, any of the Vice-Presidents
may perform the duties of the President, and when so acting shall have all the
powers of, and be subject to all the restrictions upon, the President.
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SECTION 10. The Treasurer. The Treasurer shall have the care
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and custody of the books of account and of all the funds and securities of the
Corporation, and deposit the funds in the name of the Corporation in such bank
or trust company as the directors may designate. If required by the Board of
Directors, the Treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such surety or sureties as the Board of Directors
shall determine. He shall perform all the duties incidental to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the President or the Board of Directors.
SECTION 11. The Controller. The Controller shall maintain
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adequate records of all assets, liabilities and transactions of the Corporation,
and have adequate audits thereof currently and regularly made. In addition, he
shall perform such other duties relating to the finances of the Corporation or
otherwise, as may be prescribed by the Board of Directors, the President or the
Treasurer.
SECTION 12. The Secretary. The Secretary shall attend all
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meetings of the Board of Directors and of the stockholders and record all votes
and the minutes of all proceedings in a book to be kept for that purpose and
shall perform like duties for the standing committees when required. He shall
give, or cause to be given, notice of all meeting of the stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or President, under whose
supervision he shall be. he shall keep or cause to be kept a stock-book,
containing the names, alphabetically arranged, of all persons who are
stockholders of the Corporation, showing their places of residence, the number
of shares of stock owned by them respectively, the times when they respectively
became the owners thereof and the amount paid thereon. He shall keep in safe
custody the seal of the Corporation and, when properly authorized, affix the
same to any instrument requiring it and, when so affixed, it shall be attested
by his signature or by the signature of the Treasurer or an Assistant Secretary.
SECTION 13. Salaries. The salaries of the officers of the
--------
Corporation shall be fixed from time to time by the Board of Directors, and none
of such officers shall be prevented from receiving a salary by reason of the
fact that he is also a member of the Board.
9
<PAGE>
ARTICLE IV
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 1. Execution of Contracts, etc. Except as otherwise
---------------------------
required by law or by these By-laws, the Board of Directors may authorize any
officer or officers, agent or agents, to execute and deliver any contract or
other instrument in the name of the Corporation and on its behalf.
SECTION 2. Checks, Drafts, etc. All checks, drafts and other
-------------------
orders for the payment of money, bills of lading, warehouse receipts,
obligations, bills of exchange and insurance certificates shall be signed or
endorsed, except endorsements for collection for the account of the Corporation
or for deposit to its credit, by such officer or officers, agent or agents of
the Corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
SECTION 3. Deposits. All funds of the Corporation not
--------
otherwise employed shall be deposited from time to time to the credit of the
Corporation or otherwise as the Board of Directors, or any officer of the
Corporation to whom power in that respect shall have been delegated by the Board
of Directors, shall direct in such banks, trust companies or other depositories
as said Board may select or as may be selected by any officer or officers or
agent or agents of the Corporation to whom power in that respect shall have been
delegated by the Board of Directors. For the purpose of deposit and for the
purpose of collection for the account of the Corporation, checks, drafts and
other orders for the payment of money which are payable to the order of the
Corporation may be endorsed, assigned and delivered by any officer or agent of
the Corporation.
SECTION 4. General and Special Bank Accounts. The Board of
---------------------------------
Directors may from time to time authorize the opening and keeping of general and
special bank accounts with such banks, trust companies or other depositaries as
the Board of Directors may select, or as may be selected by any officer or
officers, agent or agents of the Corporation to whom power in that respect shall
have been delegated by the Board of Directors. The Board of Directors may make
such special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these By-laws, as it may deem expedient.
10
<PAGE>
ARTICLE V
Shares and Their Transfer
SECTION 1 Certificates for Stock. Every owner of shares of
----------------------
stock of the Corporation shall be entitled to have a certificate therefor, in
such form as the Board of Directors shall prescribe, certifying the number and
class of shares thereof owned by him. The certificates representing such shares
shall be numbered in the order in which they shall be issued and shall be signed
in the name of the Corporation by the President, the Executive Vice-President or
a Vice-President, and by the Treasurer or the Secretary or an Assistant
Treasurer or Assistant Secretary of the Corporation and its seal shall be
affixed thereto; provided, however, that where such certificate is signed by a
transfer agent or registered by a registrar other than the Corporation itself or
its employee, if the Board of Directors shall by resolution so authorize, the
signatures of such President, Executive Vice-President, Vice-President,
Treasurer, Secretary, Assistant Treasurer or Assistant Secretary and the seal of
the Corporation may be facsimile. In case any officer or officers of the
Corporation who shall have signed, or whose facsimile signature or signatures
has been placed upon a certificate or certificates shall cease to be such
officer or officers, whether by reason of death, resignation or otherwise,
before such certificate or certificates shall have been delivered by the
Corporation, such certificate or certificates may nevertheless be adopted by the
Corporation and be issued and delivered as if the person or persons who signed
such certificate or certificates had not ceased to be such officer or officers.
A record shall be kept of the respective names of the persons, firms or
corporations owning the shares represented by certificates for stock of the
Corporation, the number of shares represented by such certificates,
respectively, and the respective dates thereof, and in case of cancellation, the
respective dates of cancellation. Every certificate surrendered to the
Corporation for exchange or transfer shall be canceled and a new certificate or
certificates shall not be issued in exchange for any existing certificate, until
such existing certificate shall have been so canceled except in cases provided
for in Section 4 of this Article V.
SECTION 2. Transfers of Stock. Transfers of shares of the
------------------
stock of the Corporation shall be made on the books of the Corporation only by
the registered holder thereof, or by his attorney thereunto authorized by power
of attorney duly executed and filed with the Secretary of the Corporation or
with a transfer clerk or transfer agent appointed as in Section 3 of this
Article V provided, and on surrender of the certificate or certificates for such
shares properly endorsed and the payment of all taxes thereon. The person in
whose name shares of stock stand on the books of the Corporation shall be deemed
the owner thereof for all purposes as regards the Corporation.
SECTION 3. Regulations. The Board of Directors may make such
-----------
rules and regulations, as it may be deem expedient, not inconsistent with these
By-laws, concerning the issue, transfer and registration of certificates for
shares of the stock of the Corporation. It may appoint, or authorize any
principal officer or officers to appoint, one or more Transfer Clerks or one or
more Transfer Agents or one or more Registrars, and may require all certificates
of stock to bear the signature or signatures of any of them.
SECTION 4. Lost, Destroyed and Mutilated Certificates. The
------------------------------------------
holder of any share of stock of the Corporation shall immediately notify the
Corporation of any loss, destruction or mutilation of the certificate therefor,
and the Corporation may issue a new certificate of stock in the place of any
certificate theretofore issued by it, alleged to have been lost or destroyed,
and the Board of Directors may, in its discretion, require the owner of the lost
or destroyed certificate or his legal representatives to give the Corporation a
bond in such sum, limited or unlimited, and in such form and with such surety or
sureties, as the Board shall in its uncontrolled discretion determine, to
indemnify the Corporation against any claim that may be made against it on
account of the alleged loss or destruction of any such certificate, or the
issuance of such new certificate. The Board of Directors, however, may in its
discretion refuse to issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of New York in such case made and
provided.
11
<PAGE>
ARTICLE VI
----------
Seal
----
The seal of the Corporation shall be in the form of a circle,
and shall bear the full name of the Corporation and the year of its
incorporation.
ARTICLE VII
Fiscal Year
The fiscal year of the Corporation shall end with the
thirty-first day of December in each year.
ARTICLE VIII
------------
Amendments
The Board of Directors shall have the power to amend, repeal
or adopt the By-laws of the Corporation, and the By-laws may be amended,
repealed or adopted by the stockholders entitled at the time to vote in the
election of directors.
12
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.19
<SEQUENCE>4
<FILENAME>dex1019.txt
<DESCRIPTION>STOCK EXERCISE LOAN PROGRAM
<TEXT>
<PAGE>
Exhibit 10.19
================================================================================
Senior Officer Stock Exercise Loan Program
------------------------------------------
(Adopted by the Board of Directors on November 13, 2001)
The Share Value Options ("SVOs") granted to certain employees of the
Company, including five of the Company's executive officers--Stephen A. Block,
Richard A. Goldstein, D. Wayne Howard, Carlos A. Lobbosco and Douglas J.
Wetmore--have a unique feature that may require these executive officers to
exercise their SVOs in their entirety prior to the expiration of the seven-year
option period. It is Company policy that executive officers align their
interests with those of shareholders generally by owning significant amounts of
IFF Common Stock. To accomplish this objective will require that these executive
officers be able to pay for their exercised SVOs without having to sell all or
the great majority of the shares resulting from the exercise to pay the purchase
price and the tax liability due on the exercise. The need to deal with this
issue now arises because holders of SVOs are required to exercise those SVOs in
their entirety within six months and one day after the closing price of the
Company's Common Stock reaches the "weighted average exercise price" of the
holder's options outstanding on November 14, 2000 prior to the SVO grant. Mr.
Howard will reach that deadline on November 23, 2001. Mr. Block, Mr. Howard, Mr.
Lobbosco and Mr. Wetmore (to the extent that, when they elect to exercise
options, Mr. Lobbosco and Mr. Wetmore are not directors of the Company and Mr.
Lobbosco is still an executive officer of the Company1), and any other person
who holds an unexercised SVO and who hereafter becomes an executive officer of
the Company are hereinafter referred to as the "Eligible Executive Officers."
Under the New York Business Corporation Law, loans (or guarantees of loans) to
Company directors are prohibited. As a result, the Program will not be
applicable to any Eligible Executive Officer who is serving on the Board,
including Richard A. Goldstein. Management is exploring other avenues that will
allow Mr. Goldstein and any other executive officer-directors to keep the
largest number of shares possible after exercise.
Senior management explored mechanisms that will enable Eligible
Executive Officers to keep their exercised shares concluded that the only
reasonable approach is the institution of a Company loan program to allow the
Eligible Executive Officers to exercise their SVOs and hold the purchased shares
(the "Program"). The Compensation Committee of the Board (the "Committee") and
the other non-employee directors have agreed and have determined that the
Program have the following features.
o Subject to the approval of the Committee, which will have sole
discretion in any case to decide whether to approve a loan to
any Eligible Executive Officer, the Company will loan to
Eligible Executive Officers exercising their SVOs an amount up
to the aggregate price of the option shares being exercised.
For example, assuming that an Eligible Executive Officer was
exercising an option to purchase 100,000 shares at an exercise
price of $17.9375--which is the exercise price of the
SVOs--the Company would loan that Eligible Executive Officer
up to $1,793,750, the total purchase price of those option
shares./2/
o The Program could provide loans covering both the exercise
price of the SVO and the income tax liability of the Eligible
Executive Officer in connection with the exercise of an SVO
(that tax liability is the difference between the market price
of IFF Common Stock on the date of exercise and the exercise
price (the "Spread")). Management recommended and the
Committee agreed, however, that the Program not authorize
loans for the payment of taxes, but that, to the extent the
Eligible Executive Officer is not able or elects not to pay
applicable income taxes on the Spread from his or her personal
funds, he or she sell a sufficient number of shares from the
SVO exercise to fulfill the tax obligation. In the example
above, assuming a total tax liability (Federal and State) of
45% of the Spread, and assuming that the average of the high
and low market prices on the date of exercise (the price at
which the tax liability would be determined) were $28 per
share, the tax liability would be 45% of $10.0625 per share,
or $452,812, which would result in the Eligible Executive
Officer's selling 16,172 of the shares, which would still
leave him or her with 83,828 shares, clearly a significant
ownership position.
- -------------------------------
/1/Under the July 25, 2001 agreement between Mr. Lobbosco and the Company, Mr.
Lobbosco will resign as Executive Vice President, Global Business Development
effective May 2002. Thereafter, because he will no longer be an executive
officer of the Company, he will no longer be eligible to participate in the
Program. Mr. Wetmore will not stand for re-election as a director in May 2002 so
that after the 2002 Annual Meeting of Shareholders Mr. Goldstein will be the
only employee member of the Board of the Company.
/2/Shares issued on the exercise of options paid for with funds borrowed from
the Company under the Program will all be Treasury shares, so long as the
Company has sufficient Treasury shares to cover the exercise and other
applicable obligations. Using Treasury shares will avoid officers' having to pay
the $.125 (the par value of IFF common stock) per share on the issuance of the
shares, which by law would have to be paid on newly issued shares.
1
<PAGE>
o Without the Program or other assistance, upon exercise of the
SVO option the Eligible Executive Officer would owe to the
Company the $1,793,750 and would have an additional $452,812
in tax obligations, and would thereby have to come up with
$2,246,562 in cash to cover both. He would then have to sell
80,235 of the 100,000 shares to raise that cash, leaving him
with only 19,765 shares.
o In order to provide Eligible Executive Officers with the
incentive to hold their IFF shares for the long-term and to
give them a reasonable time to repay the loans without having
to sell the shares purchased with the borrowed funds, loans
under the Program will have the following features:
1. Loans approved by the Committee will have a maturity
date of between five and ten years from the loan date.
The Committee will establish the actual maturity
period. No principal will have to be repaid until the
maturity date, except that, if any Eligible Executive
Officer ceases to be an Eligible Executive Officer,
including but not limited to a change in his employment
status with the Company or the termination of his
Company employment for any reason, the loan will have
to be repaid at the time of termination. The Company
will have full recourse against Eligible Executive
Officers for payment of all interest and repayment of
loan principal under the Program. The purchased shares
will be pledged to the Company to secure the loans, but
the Eligible Executive Officers will have voting rights
and will receive dividends. Neither the principal nor
any interest payable on loans under the Program will be
forgivable by the Company.
2. To assure that the Program is cost neutral to the
Company and does not give rise to a charge to the
profit and loss statement of the Company, the interest
rate on Program loans must be a "market" rate, that is
a rate that would be charged for such a loan by a third
party lender. Management recommended and the Committee
agreed that the rate to be charged by the Company be
the higher of (a) such a "market" rate and (b) the
Company's weighted average cost of borrowed funds on
the date the loans are extended. Management will inform
the Committee of the appropriate rate at the time the
Committee is considering a loan to an Eligible
Executive Officer. The interest rate will be adjusted
quarterly to continue to reflect the higher of the two
measurement standards.
3. Interest will be payable quarterly, in arrears, on
the unpaid balance. Dividends on the shares purchased
with funds borrowed under the Program will be credited
automatically to offset the interest expense. Moreover,
for tax purposes the interest cost can be used to
offset the dividend income, thereby substantially
reducing any tax impact of the dividend on the
executive officer.
4. In the event that, for a period of seven (7) out of
twenty (20) consecutive trading days, the market value,
as determined by the closing price of the Company's
common stock on the New York Stock Exchange, of the SVO
shares pledged to secure the loan is less than 110% of
the outstanding principal balance of the loan, the loan
will become immediately due and payable. Unless the
Eligible Executive Officer pays the principal of, and
all interest due on, the loan within five business days
after the applicable date, the Company will be
authorized to sell the pledged shares on behalf of the
Eligible Executive Officer. Proceeds of the sale will
be applied first to cover (in the following order) all
interest and principal due on the loan, all fees in
respect of the sale transaction, and all withholding
taxes for which the Eligible Executive Officer is
responsible as a result of the sale of the pledged
shares. The Company will pay to the Eligible Executive
Officer any balance. To the extent that the sale price
of the pledged shares is not sufficient to cover fully
all principal, interest, fees and withholding taxes,
any deficiency will remain the sole responsibility of
the Eligible Executive Officer.
Loans to Eligible Executive Officers will be required to be
disclosed in the Company's proxy statement, most likely in the
Stock Options Grant Table and in the Committee's report. The
loan documentation will be filed as exhibits to the Company's
Forms 10-Q and 10-K. Because the loans will be issued under a
stock option plan--the 2000 Stock Award and Incentive
Plan--that had been approved by shareholders, these loans will
not be subject to any margin limitations.
2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>5
<FILENAME>dex13.txt
<DESCRIPTION>ANNUAL REPORT FOR 2001
<TEXT>
<PAGE>
Exhibit 13
----------
ANNUAL REPORT FOR 2001
<PAGE>
Relationships.
2001 Annual Report
IFF International Flavors & Fragrances Inc.
<PAGE>
IFF. Reinvention.
- --------------------------------------------------------------------------------
Industry leaders reach and remain at the top of their businesses through a
process of constant reinvention. They know that true leadership means never
being satisfied with the status quo. Never resting on one's laurels. Always
staying a few steps ahead of consumers' changing tastes and preferences.
Maintaining the relationships - inside and outside the company - that will
ensure their innovations have the desired impact in the marketplace. At IFF, our
continuous renewal is built on four strategic cornerstones: Creativity;
Innovation; Global, Regional and Local Expertise; and Customer Service.
Excellence in all four of these areas is what will allow us to reaffirm our
place as the undisputed leader in the flavors and fragrances industry. It is
also the foundation for our future growth.
<PAGE>
Innovation.
- --------------------------------------------------------------------------------
At IFF, we are in the business of making magic. Of finding that precise place
where art and science meet to create something that captivates the senses,
energizes the body and soothes the soul. What's more, we know that magic can
happen anywhere. In water. In space. And everywhere in between. If it's out
there, we'll find it. And we'll find a way to bring it to consumers the world
over.
- --------------------------------------------------------------------------------
<PAGE>
Global...
- --------------------------------------------------------------------------------
With IFF's new organizational structure, no customer is too big or too small.
Wherever our customers want and need us to be, that's where we'll be.
- --------------------------------------------------------------------------------
<PAGE>
Regional...
- --------------------------------------------------------------------------------
It is not enough to provide seamless, efficient, consistent service worldwide.
We also need deep insight into the vastly differing tastes and habits of
consumers in each of the markets we serve.
- --------------------------------------------------------------------------------
<PAGE>
Local expertise.
- --------------------------------------------------------------------------------
IFF understands that even in a global company, all business is local. That is
why we live and work in the communities we serve. And that is why we're
committed corporate citizens. After all, our colleagues are also our consumers.
- --------------------------------------------------------------------------------
<PAGE>
Creativity.
- --------------------------------------------------------------------------------
Creativity hardly ever happens in a vacuum. The greatest ideas may take seed in
the mind of an individual, but they bloom best when nurtured by others. Teamwork
and collaboration are at the heart of IFF's success. That means scientists
partnering with perfumers and flavorists. Living legends coaching our newcomers.
Relationships built across oceans, time zones, languages barriers and cultures.
IFF working hand in glove with customers from idea generation to marketplace
launch.
- --------------------------------------------------------------------------------
<PAGE>
Service.
- --------------------------------------------------------------------------------
Superior service is absolutely fundamental to IFF's success. When we talk about
getting back to the basics that made us industry pioneers, customer service is
the first and last word. What constitutes service excellence? On-time delivery,
to be sure. But just as important are innovation, consumer insight, efficiency
and true creative partnership.
- --------------------------------------------------------------------------------
<PAGE>
IFF. Reinvention.
Creativity:
Vision. Consumer insights and benefits. Health and well-being. Raising the bar.
Trend-setting leadership. Rising stars. Sensory science. Strategic alliances.
Research and development. Value added. Mentors, teachers and partners. Winning
together in the marketplace. Reinvention.
Innovation:
Hydroponics. Botanical collection. Naturals. Training and development. Perfumery
school. Project Foresight. Open communication. Teamwork. One IFF. Space rose.
Technology. Enhancing the senses. Reinvention.
Global, Regional and Local Expertise:
Environmental, health and safety leadership. Regional creativity centers.
Developed and emerging markets. Corporate philanthropy. Global sourcing and
supply chain. Delivering consumer preferences. Reinvention.
Customer Service:
Operational excellence. Satisfaction levels. Creative partnerships. The Pursuit
of Excellence. Integration. Leadership. Continuous improvement. Celebrating our
successes. Keeping our promises. Rewarding Results. Reinvention.
- --------------------------------------------------------------------------------
<PAGE>
To Our Shareholders:
2001 was a year of tremendous change for IFF. After announcing a global
reorganization and the acquisition of Bush Boake Allen (BBA) nearly
simultaneously in the fall of 2000, many wondered if we had bitten off more than
we could chew. I must say that the same concern crossed my mind as well.
But the truth is that we needed to reinvent IFF if we were to reaffirm our
industry preeminence. Even if we could have selected an "easier" time to merge
with BBA, that is not how acquisitions work. We took advantage of an excellent
opportunity to strengthen our business and, frankly, the task of integrating two
large organizations has been an ideal catalyst for change that was long overdue
at our Company.
2001 Achievements - Making Progress
IFF had three critical goals for 2001:
- -- To successfully reorganize our Company and integrate BBA.
- -- To improve customer service and increase our win rate.
- -- To implement company-wide incentive plans that align co-worker and
shareholder interests.
I am happy to report that we have made significant progress on all fronts.
<PAGE>
Reorganization and Integration
We are on track to deliver our anticipated reorganization and integration
savings. We have taken great strides toward rationalizing our global facilities
and have consolidated 16 operations during the year. Production been transferred
as planned with virtually no disruption in service and no diminution in quality.
Indeed, many locations are already showing the benefits expected from our
stronger operational team. This process will accelerate in 2002, and surviving
operations will be more productive, with capacity utilization and return on
assets improving markedly.
We have already seen substantial savings from our efforts through the year and
continued progress is expected in 2002. Achieving these savings is critical,
particularly given the difficult global economic climate. Even more important,
however, is the fact that our reorganization and integration have enabled us to
go to market and service our customers as One IFF.
Customer Service - Winning in the Marketplace
Professionally speaking, 2001 will stand out for me as the year IFF got back to
basics and remembered that "The Customer is King." And the proof is in the
pudding. Service levels are up dramatically. Satisfaction levels are way up,
too.
It is important to note that there was nothing inherent in our business model
that was preventing us from providing excellent service. It's all about
attitude. And it's all about understanding that it is the customer that counts.
Our customers have noticed our change in attitude, our team spirit, and they
like what they see.
Is our customer service as good as it needs to be? Not yet. But our improved
record, combined with a renewed focus on Research & Development, is leading to
increased win rates - especially in those parts of the business that needed it
most - North American Flavors and global Fine Fragrances.
Aligning Co-worker and Shareholder Interests
For the first time ever, through a global initiative we rolled out called
Rewarding Results, every one of our co-workers is focused on delivering
shareholder value. From the factory floor to the executive suite, everyone has a
chance to earn a bonus based on a combination of individual and company-wide
performance. This year's incentive compensation has been tied to three
fundamental metrics - underlying volume growth, gross profit improvement, and
improved operating cash flow - all of which help drive shareholder value.
We also launched our Global Employee Stock Purchase Plan. Response has been
quite strong, and more of our colleagues than ever are now shareholders.
The Road Ahead - Moving in the Right Direction
Despite a global recession, the effects of which were exacerbated by the
terrible events of September 11, 2001, IFF delivered on its promises and
finished out the year on solid footing. We saw very modest underlying volume
growth, but we did deliver an impressive 25%+ increase in earnings over 2000 pro
forma results.
<PAGE>
When we set out to rebuild IFF, we know the process would take three to five
years. With that as a reference, I look at 2001 as a very good beginning. Our
improved win rate and increased customer satisfaction levels bode well for IFF.
What's more, we are confident that the actions we have been taking to streamline
our business and realize operational efficiencies will provide a solid
foundation on which to chart our future success.
For 2002, our critical objectives will be completing our reorganization and
integration and redoubling efforts to drive top-line growth. These tasks
certainly will not be easy. Ongoing weakness in the global economy will continue
to have an impact on our Fine Fragrances business, at least through the first
half of the year. But, let's remember that two-thirds of our business is in
everyday household, personal care and packaged food products that are impacted
much less in recessionary times.
2002 will bring still more change to IFF, but I am confident that our Company is
headed in the right direction. And I am confident that we are up to the task.
As we move forward, I make the following committments:
- - To our customers: to make further progress on delivering the best products
and services you need to drive your own success, and to deliver them when,
where and how you want them.
- - To our co-workers: to reaffirm our preeminence through The Pursuit of
Excellence.
- - To our shareholders: to maximize value by completing our integration at the
same time as we aggressively explore traditional and nontraditional avenues
to drive top-line growth.
Together, I know we can reach our goals. Thank you for your support.
Finally, Carlos Lobbosco, our Executive Vice President of Global Business
Development and Board member, is retiring after 27 years of outstanding service
to IFF. While IFF will not be the same after Carlos leaves, it is a testimony to
his management strength and long-term planning that he is leaving behind such a
capable team of Global Category and Regional Managers. On behalf of the Company
and all of its shareholders, I express our deep gratitude to Carlos Lobbosco for
his distinguished service to IFF.
Sincerely,
/s/ Richard A. Goldstein
Richard A. Goldstein
Chairman of the Board and
Chief Executive Officer
<PAGE>
IFF. Teams.
[ 1 ] [ 2 ]
[ 3 ] [ 4 ]
[ 5 ] [ 6 ]
1. (from left to right)
Stephen A. Block
Senior Vice President
General Counsel and Secretary
Douglas J. Wetmore
Senior Vice President and
Chief Financial Officer
2. (from left to right)
Roberto J. Gordon
Vice President
Global Business Development -
Fragrances
Neil Humphreys
Vice President
Global Business Development -
Flavors
Nicolas Mirzayantz
Vice President
Global Business Development -
Fine Fragrances and Toiletries
3. (from left to right)
Clint D. Brooks, Ph.D.
Vice President
Research & Development
pictured with a senior perfumer
4. (from left to right)
Gail S. Belmuth
Vice President
Corporate Communications
Steven J. Heaslip
Vice President
Global Human Resources
5. (from left to right)
Richard A. Goldstein
Chairman and
Chief Executive Officer
D. Wayne Howard
Executive Vice President
Global Operations
6. (from left to right)
Carlos A. Lobbosco
Executive Vice President
Global Business Development
Julian W. Boyden
Executive Vice President
<PAGE>
[ 1 ]
[ 2 ]
[ 3 ]
1. (from left to right)
Yves Calderone Junior Perfumer
Lois Evans Vice President and Senior Perfumer
Bruno Jovanovic Apprentice Perfumer
Christine Baillifard Perfumer
Sophie Walster Apprentice Perfumer
Carlos Benaim Vice President and Senior Perfumer
Jean-Marc Chaillan Perfumer
Sherri Sebastian Apprentice Perfumer
Mary Shroff Perfumer
Pascal Gaurin Junior Perfumer
Sophia Grojsman Corporate Vice President and Senior Perfumer
Yves Cassar Perfumer
Dennis Maroney Perfumer
Joe Ramasammy Junior Perfumer
2. (from left to right)
Bob Peterson Manager Process Flavor Creation
Brian Grainger Director, Flavor Creation
Gary Conklin Senior Flavorist
Carmellita Ventura Perez Flavorist
Dave Heltzel Flavorist
Dennis Kujawski Senior Flavorist
John Yurecko Senior Flavorist
Richard Bobula Flavorist
John Wright VP Global Technical Business Development
Richard Vuich Senior Process Flavorist
Marion Sudol Senior Flavorist
Patty Valente Senior Flavorist
Marie Wright Senior Flavorist
Tobjy Thompson Senior Flavorist
Pei Fen Wu Flavorist
Mario Grabowski Trainee Flavorist
Martin Ongteco Trainee Flavorist
Kevin Miller Senior Flavorist
3. (back row from left to right)
Lynne Pipe Senior Perfumer
Veronique Tropini Trainee Perfumer
Fred Tabak Vice President and Senior Perfumer
Remco de Meijiere Senior Perfumer
Philip Hausel Vice President and Senior Perfumer
Hubert Smyrek Perfumer
Jan van Elst Vice President and Senior Perfumer
Jan Fockenbrock Perfumer
(in front from left to right)
Gaby Joustra Perfumer
Nathalie Le Cann Perfumer
<PAGE>
- -------------------------------------------------------------------------------
IFF WORLDWIDE LOCATIONS
- --------------------------------------------------------------------------------
Sales Creative
Office Manufacturing Laboratory
- -------------------------------------------------------------------------------
NORTH AMERICA
Canada/Toronto o o o
USA/Augusta, GA o
USA/Carrollton, TX o o o
USA/Chicago, IL o o o
USA/Hazlet, NJ o o o
USA/Jacksonville, FL o o o
USA/Menomonee Falls, WI o
USA/New York, NY* o o
USA/Salem, OR o o
USA/South Brunswick, NJ o o o
USA/Union Beach, NJ o o
LATIN AMERICA
Argentina/Garin o o o
Brazil/Rio de Janeiro o
Brazil/Sao Paulo o o
Brazil/Taubate o o
Columbia/Bogota o o
Mexico/Tlalnepantla (Mexico City) o o o
ASIA-PACIFIC
Australia/Melbourne o o o
Australia/Castle Hill (Sydney) o o
China/Beijing o
China/Guangzhou o o o
China/Hong Kong o
China/Shanghai o o
China/Xin'anjiang (Hangzhou) o o
Indonesia/Jakarta o o o
Japan/Gotemba o
Japan/Osaka o
Japan/Tokyo o o
Korea/Seoul o o
New Zealand/Auckland o o o
Phillippines/Manila o o o
Singapore o o
Singapore/Jurong o o
Thailand/Bangkok o o o
INDIAN SUBCONTINENT
India/Bangalore o
India/Calcutta o
India/Chennai o o o
India/Chittoor o
India/Delhi o
India/Mumbai o o
Pakistan/Karachi o o o
EUROPE
Bulgaria/Sofia o
Czech Republic/Prague o
Egypt/Cairo o o o
France/Bois-Colombes (Paris) o o
France/Dijon o o o
France/Grasse o o o
Germany/Emmerich/Rhein o o o
Germany/Hamburg o
Ireland/Drogheda o
Israel/Tel Aviv o
Italy/Milan o o
The Netherlands/Hilversum o o
The Netherlands/Tilburg o
Norway/Oslo o
Poland/Warsaw o o
Russia/Moscow o
Slovakia/Bratislava o
South Africa/Johannesburg o o o
Spain/Barcelona o o
Spain/Benicarlo o o
Spain/Madrid o
Sweden/Knislinge o o
Switzerland/Reinach-Aargau o o o
Turkey/Istanbul o o
United Kingdom/Haverhill o o o
United Kingdom/London o
United Kingdom/Long Melford o o
United Kingdom/Witham o o
Zimbabwe/Harare o
*Global Headquarters
Names in () indicate nearest large city
<PAGE>
IFF International Flavors & Fragrances Inc.
Global Headquarters
521 West 57th Street New York, NY 10019
T 212 765 5500 www.iff.com
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
International Flavors & Fragrances Inc.
(All dollars in millions except per share amounts)
OPERATIONS
The Company acquired Bush Boake Allen (BBA) effective November 3, 2000; BBA
operating results are included in the Company's consolidated results from that
date. Consolidated sales as reported and pro-forma sales for IFF and BBA
combined, as applicable, for 2001, 2000 and 1999 were as follows (pro-forma
sales are prepared as though the Company and BBA had been combined on January
1,1999):
<TABLE>
<CAPTION>
Reported Percent Reported Percent Reported
Consolidated sales 2001 Change 2000 Change 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Flavors $ 835.7 40% $ 597.7 1% $ 590.3
Fragrances 1,008.1 17% 865.1 2% 849.2
----------------------------------------------------------------------------------
Total net sales $ 1,843.8 26% $ 1,462.8 2% $ 1,439.5
==================================================================================
</TABLE>
<TABLE>
<CAPTION>
Reported Percent Pro-forma Percent Pro-forma
Consolidated sales 2001 Change 2000 Change 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Flavors $ 835.7 (1%) $ 846.7 (4%) $ 879.0
Fragrances 1,008.1 (2%) 1,033.9 (2%) 1,052.4
----------------------------------------------------------------------------------
Total net sales $ 1,843.8 (2%) $ 1,880.6 (3%) $ 1,931.4
==================================================================================
</TABLE>
Excluding BBA, 2000 flavor, fragrance and worldwide net sales were
$558.6, $838.3 and $1,396.9, respectively.
Sales outside the United States represented approximately 70% of total
sales in 2001, 2000 and 1999. The following table shows sales on a geographic
basis, including BBA from date of acquisition:
<TABLE>
<CAPTION>
Percent Percent
Sales by Destination 2001 Change 2000 Change 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
North America $ 597.1 31% $ 455.4 1% $ 452.6
Europe 576.6 22% 471.7 (4%) 492.4
Central Asia, Middle East (CAME) 127.4 59% 80.1 10% 72.8
Latin America 256.5 9% 234.9 1% 232.9
Asia-Pacific 286.2 30% 220.7 17% 188.8
----------------------------------------------------------------------------------
Total net sales $ 1,843.8 26% $ 1,462.8 2% $ 1,439.5
==================================================================================
</TABLE>
During 2001, the Company's sales increased 26% in comparison to 2000
reported sales. Sales for 2001 declined 2% in comparison to 2000 pro-forma
sales. Reported sales were unfavorably impacted by the continuing strong U.S.
dollar, most notably against the Euro and the major European currencies, the
Japanese Yen and the Australian dollar. Had dollar exchange rates remained the
same during 2001 and 2000, sales would have increased 1% for the full year 2001
in comparison to the prior year pro-forma sales.
Reported sales for 2001 were also impacted by the disposition of
certain non-core operations, specifically the Company's North American and
Brazilian fruit preparations businesses, and a portion of the aroma chemicals
business acquired in the BBA transaction. These dispositions, part of IFF's
previously announced reorganization plan, occurred during the fourth quarter
2001. In 2000, these businesses had net sales of $81.0; in 2001, for the period
owned by the Company, sales were $61.0. Excluding revenue from these busi-
nesses in both 2000 and 2001, sales growth for the full year 2001 would have
been approximately 1% higher. Disposal of these businesses did not materially
impact the Company's earnings.
Compared to 2000 pro-forma results, 2001 fragrance sales were led by
Latin America, with an increase of 2%. Asia-Pacific fragrance sales were flat in
local currency while North America, Europe and CAME reported local currency
sales declines of 3%, 2% and 8%, respectively. The global economic environment,
further aggravated by the events of September 11, 2001, impacted fine fragrance
sales. Fragrance sales were also impacted by lower global demand for aroma
chemicals. Flavor sales, in local currency, were strongest in North America,
Asia-Pacific and Europe, with respective increases of 3%, 3% and 2%. Flavor
sales in Latin America declined 9% from the prior year, while CAME flavor sales
were down 4% for the year. The North America performance reflects the benefits
of the IFF/BBA integration and improved demand for our products. The Europe
increase is a result of new wins and a stable performance in our existing prod-
uct portfolio. Latin America declined as a result of double-digit decreases in
Brazil and Argentina, reflecting the weak economic conditions in these
countries. Excluding the fruit preparation and aroma chemicals businesses
disposed of during the year from both 2001 and 2000 sales, North America flavor
sales in 2001 would have increased approximately 6% in comparison to 2000, Latin
America flavors would have decreased 6% and Europe fragrances would have
decreased 1% in local currency in relation to 2000.
Excluding BBA, 2000 sales by destination and related comparison to
1999 were: North America $433.1 (4% decline), Europe $451.1
<PAGE>
(8% decline), CAME $72.9 (flat), Latin America $231.3 (1% decline) and
Asia-Pacific $208.5 (10% increase).
During 2000, excluding BBA, the Company's sales declined 3% in
comparison to 1999. Reported sales were unfavorably impacted by the strong U.S.
dollar, most notably against the Euro and the major Western European currencies;
had dollar exchange rates remained the same during 2000 and 1999, reported sales
would have increased 2% for the full year 2000. Local currency fragrance sales
growth was strongest in North America, Europe, Asia-Pacific and CAME with 3%,
6%, 8% and 14% increases, respectively. Latin America sales declined 2%
reflecting the slow economic environment in much of that region. Europe,
Asia-Pacific, Latin America and CAME flavors reported local currency sales
increases of 2%, 9%, 2% and 10%, respectively. North America flavor sales
declined 12% reflecting the slow business conditions facing many of the
Company's customers in that region.
Although the Company's reported sales and earnings are affected by the
weakening or strengthening of the U.S. dollar, this has no long-term effect on
the underlying strength of our business.
The percentage relationship of cost of goods sold and other oper-
ating expenses to sales was as follows. The pro-forma information presented
reflects the final acquisition accounting adjustments completed in 2001.
<TABLE>
<CAPTION>
Pro-forma
2001 2000 1999 2000
<S> <C> <C> <C> <C>
Cost of goods sold 57.7% 56.9% 56.0% 58.5%
Research and
development
expenses 7.3% 7.7% 7.2% 7.3%
Selling and
administrative
expenses 17.0% 17.7% 17.2% 18.1%
=========================================
</TABLE>
The increases in cost of sales in 2001 compared to 2000, and 2000
compared to 1999, are primarily attributable to the acquisition of BBA and
unfavorable absorption of manufacturing costs in North America due to poor sales
performance in that region. Excluding BBA, cost of goods sold would have
represented approximately 56.4% of sales in 2000. The improvement in 2001 in
comparison to 2000 pro-forma cost of sales reflects cost savings resulting from
the integration of the Company's operations with those acquired in the BBA
transaction, as well as improved expense absorption in North America flavors
reflecting the stronger sales performance in that region.
Research and development expenses are for the development of new and
improved products, technical product support, compliance with governmental
regulations and help in maintaining relationships with customers who are often
dependent on technical advances. These activities contribute in a significant
way to the Company's business. Research and development expenses declined
slightly as a percentage of sales in 2001 as a result of the integration of the
Company's and BBA's research efforts and facilities. Notwithstanding the
decrease in 2001, the Company anticipates these expenses to approximate 8% of
sales in 2002 as new research initiatives are undertaken. Excluding BBA,
research and development expenses would have represented approximately 7.8% of
sales in 2000.
Selling and administrative expenses are necessary to support the
Company's sales and operating levels. In 2001, selling and administrative
expenses decreased as a percentage of sales resulting from savings attributable
to the integration of the Company's sales and administrative functions with
those of BBA.
In 2000, selling and administrative expenses increased primarily due
to increased depreciation and other costs associated with new computer systems
and equipment, as well as certain costs incurred in connection with an
employment contract. These additional costs were partially offset by elimination
of $14.2 of costs incurred in 1999 in connection with the Company's Y2K program.
In 1999, administrative expenses also included approximately $6.0 in costs
associated with the final settlement of certain employment contracts and $2.3
relating to nonrecurring charges (discussed below). Administrative expenses for
1999 also included certain costs incurred in connection with the Company's
project to implement the enterprise requirements planning (ERP) software
package, SAP. Excluding BBA, selling and administrative expenses would have
represented approximately 17.8% of sales in 2000.
Segment profit, excluding corporate and other unallocated expenses,
amortization of goodwill and other intangibles, and the effect of nonrecurring
charges, was $380.4 in 2001, $291.7 in 2000 and $321.4 in 1999. Pro-forma
segment profit for IFF and BBA combined for 2000 was $348.9. In 2001, segment
profit increased primarily due to savings resulting from the integration of
BBA in all expense categories. In 2000, segment profit declined primarily due to
the decline in gross margin on sales, and increased selling and adminis-
tration, and research and development expenditures. In 1999, segment profit
reflected the effects of the Y2K-related expenses. The Company recorded
nonrecurring charges totaling $30.1, $41.3 and $32.9 in 2001, 2000 and 1999,
respectively. In 2000, BBA operations contributed $9.3 to segment profit, before
amortization of goodwill and other intangibles, for the period from November 3,
2000 through year-end. Operating profit totaled $255.6, $211.5 and $248.3 in
2001, 2000 and 1999, respectively.
Interest expense totaled $70.4, $25.1 and $5.2 in 2001, 2000 and 1999,
respectively. Pro-forma interest expense totaled $81.2 in 2000. The increase in
interest expense in 2001 in comparison to 2000 is directly attributable to the
debt incurred for the BBA acquisition. Interest expense in 2001 decreased
compared to the pro-forma 2000
<PAGE>
figures, reflecting the downward trend in interest rates during 2001 and
reduction in overall debt outstanding. Interest expense in 2000 attributable to
the acquisition of BBA approximated $10.6. Interest expense in 2000, excluding
interest cost arising on the BBA acquisition, increased in comparison to 1999
mainly due to the higher level of borrowings incurred in connection with the
Company's share repurchase programs.
Other (income) expense, net was $2.6 income in 2001, $2.3 expense in
2000, and $0.3 income in 1999. The increase in other income in 2001 is primarily
the result of favorable exchange gains in comparison to 2000. The decrease in
other income in 2000 compared to 1999 was primarily due to lower interest
income and lower exchange gains.
The worldwide effective tax rate for 2001 was 38.2%, compared to 33.2%
for 2000 and 33.5% for 1999. The pro-forma effective tax rate for 2000 was
39.5%. The higher effective tax rate in 2001 compared to 2000 primarily results
from the non-deductibility of the goodwill amortization for purposes of
determining the Company's taxable income. The 2001 effective tax rate declined
from the 2000 pro-forma rate primarily due to higher than anticipated tax
benefits associated with reorganization costs in 2001.
On November 3, 2000, the Company acquired all of the outstanding
shares of BBA for $48.50 per share in cash; total consideration paid, including
transaction costs, was $970.0. The transaction was accounted for as a purchase
business combination.
The purchase price has been allocated to the assets acquired and
liabilities assumed based on their fair values at the date of acquisition.
Other intangible assets include patents, trademarks and other intellectual
property owned or developed by BBA, the value of which is being amortized over
periods ranging from 7 to 20 years. The excess of the purchase price over the
estimated value of tangible and identified intangible assets acquired is
recorded as goodwill, and was amortized on a straight-line basis over 20 years
for periods through December 31, 2001. At December 31, 2001 and 2000, goodwill
and other intangible assets, net of accumulated amortization, totaled $795.9 and
$755.9, respectively. Amortization of goodwill and other intangibles in 2001 was
$46.1 and $7.0 in 2000.
The Company has established accruals relating primarily to employee
separation costs, facility closure costs and other actions relating to the
integration of certain BBA operations into IFF. Costs associated with these
integration actions are recognized as a component of the purchase accounting
resulting in an adjustment to goodwill; such costs do not directly impact
current earnings. The increase in goodwill and other intangible assets between
2000 and 2001 resulted from further quantification of certain liabilities
assumed in connection with the merger, primarily those associated with the
integration of the BBA operations into the Company; such costs were not yet
quantified nor accounted for at December 31, 2000.
Movements in acquisition accounting accruals were as follows:
<TABLE>
<CAPTION>
Asset-
Employee- Related
Related and Other Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance December 31, 2000 $ 4.1 $ 6.2 $ 10.3
Additional charges 41.0 25.0 66.0
Cash and other costs in 2001 (31.3) (21.3) (52.6)
---------------------------------
Balance December 31, 2001 $ 13.8 $ 9.9 $ 23.7
==================================
</TABLE>
The BBA acquisition was initially financed through the issuance of
commercial paper. During 2001, the Company put in place permanent debt
financing. At December 31, 2001, long-term debt includes $700.0 of 6.45% Notes
due May 15, 2006. The Company also put in place a five-year Euro 140.0 million
credit facility underwritten by a major European financial institution. The
facility has four-year and five-year fixed term components and a five-year
revolving credit component; during its term, interest on this debt will not
exceed the applicable London InterBank Offered Rate (LIBOR) base rate plus 1.4%.
At December 31, 2001, long-term debt includes $101.5 (Euro 115.0 million) under
this facility. In November 2001, the Company's Japanese subsidiary issued $115.3
(Yen 15.15 billion) in seven-year and ten-year senior guaranteed notes bearing
interest of 2.4% per year. At December 31, 2001, the Company had $204.2 of
commercial paper outstanding. Additional details on borrowings are contained in
Note 8 of the Notes to the Consolidated Financial Statements.
The Company expects to achieve annual cost savings of approximately
$70.0 as a result of synergies and efficiencies to be generated in connection
with the integration of BBA and IFF. Approximately $40.0 of these savings were
realized in 2001, with the remainder to be realized in 2002.
These savings will be achieved primarily through the consolidation
of facilities, optimization of capacity, reduced selling, general and
administrative expenses, and supply chain rationalization. Based on information
and plans formulated to date, the Company expects the integration to result in
approximately $75.0 to $80.0 in implementation costs, relating primarily to
employee separation and facility closure costs, and approximately $45.0 to $50.0
of capital spending associated with the consolidation of manufacturing facili-
ties. A substantial portion of these implementation costs have been reflected as
an adjustment to the cost of the BBA acquisition.
In October 2000, the Company announced a reorganization, including
management changes, further consolidation of production facilities and related
actions. Henceforth, the Company will be organized under two global umbrellas of
business development and operations. Business development will drive the top
line growth of the Company and will include consumer and market research,
<PAGE>
product category strategy, product development, global sales and marketing, and
technical application. Operations will be responsible for effective utilization
of capital, increasing productivity and managing inventory levels and cycle
times. In addition, effective January 1, 2001, the Company assigned a single
manager responsibility for each of its major geographical regions - North
America, Europe, Asia-Pacific, Latin America and the newly constituted Central
Asia and Middle East.
The total pretax cost of actions taken in connection with the 2000
reorganization is expected to approximate $90.0 to $100.0 through the end of
2002. The reorganization is expected to yield annual savings by the year 2003
in the range of $25.0 to $30.0. An element of the savings is expected to be
reinvested in the business, although a substantial portion is expected to
contribute to improved earnings.
In June 1999, the Company announced a program to streamline its
operations worldwide by improving operating efficiencies and asset utilization.
The program included the closure of selected manufacturing, distribution and
sales facilities in all geographic areas in which the Company operates. In
addition, the Company planned to consolidate and align production in its
remaining manufacturing locations. Under this program, the Company achieved
annualized savings of approximately $15.0; a portion of the savings was
reinvested in the business.
In connection with the 2000 reorganization and the 1999 program, the
Company initiated two separate voluntary retirement incentive programs for
United States-based employees meeting certain eligibility requirements. Those
eligible employees who elected to take the incentive received additional credit,
for pension purposes, in terms of age and service, as well as other benefits.
Approximately 150 employees accepted enhanced retirement benefits under these
two programs, resulting in nonrecurring pretax charges of $23.8 in 2000. In
addition, during 2000, the Company recognized additional nonrecurring charges
of $17.5, essentially all of which related to employee separation costs and
other reorganization activities.
Total nonrecurring charges recorded in 2001 and 2000 were $30.1 ($19.1
after tax, or approximately $.20 per share) and $41.3 ($26.8 after tax, or
approximately $.27 per share), respectively. The 2001 nonrecurring charges by
region were: North America (including corporate) $14.7, Asia-Pacific $8.6,
Europe $2.0, CAME $2.2 and Latin America $2.6. Essentially all of the pretax
charges recorded in 2000 related to United States-based operations. There were
no significant non-cash related elements of the 2001 or 2000 charges.
In 1999, in connection with the program to streamline operations, the
Company recorded total pretax charges of $40.9 ($27.2 after tax, or
approximately $.26 per share); non-cash charges approximated $11.7. Certain
elements of these charges, relating primarily to accelerated depreciation on
assets to be disposed of, were recognized in cost of goods sold ($1.2) and
selling and administrative expenses ($2.3). In addition, $4.5 associated
primarily with facility closure was included in other income and expense. The
balance of the charges, representing employee separation and asset-related
costs, were recorded as nonrecurring charges in the Consolidated Statement of
Income.
Movements in liabilities related to nonrecurring charges were as
follows:
<TABLE>
<CAPTION>
Asset-
Employee- Related
Related and Other Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Original liabilities $ 22.9 $ 10.0 $ 32.9
Cash and other costs in 1999 (13.3) (8.4) (21.7)
----------------------------------
Balance December 31,1999 9.6 1.6 11.2
Additional charges 37.1 4.2 41.3
Cash and other costs in 2000 (22.3) (3.8) (26.1)
----------------------------------
Balance December 31, 2000 24.4 2.0 26.4
Additional charges 10.1 20.0 30.1
Cash and other costs in 2001 (27.5) (21.3) (48.8)
----------------------------------
Balance December 31, 2001 $ 7.0 $ .7 $ 7.7
==================================
</TABLE>
The balance of the liabilities is expected to be utilized in 2002 in
connection with the final decommissioning and disposal of affected equipment
and as severance obligations to affected employees are satisfied. Approximately
700 employees will be affected by the programs.
In October 2001, the Company sold its formulated fruit and vegetable
preparation businesses in the United States and Brazil. Sales for the business
in the United States and Brazil up to the October sale date were approximately
$23.0 with operating profit of less than $3.0. The products are sold primarily
to bakeries and dairies for the manufacture of yogurts and baked goods. Proceeds
from the sale, which were not material, were used to reduce current borrowings.
In October 2001, the Company announced its intention to explore
strategic alternatives for its fruit and vegetable preparation business in
Europe. This business manufactures processed fruit and other natural
preparations used in a wide variety of foods, including baked goods and dairy
products. Annual sales and operating profit approximate $70.0 and $7.0,
respectively. As of March 21, 2002, the Company has made no final decision as to
which strategic alternative to pursue.
In December 2001, the Company sold its aroma chemicals business
located in Widnes, the United Kingdom. This business was acquired as part of the
BBA purchase. Sales for this unit up to the December sale date were $36.7 and 80
employees were affected by the sale. Operating profit for the unit in 2001 was
less than $1.5. Proceeds from the sale, which were not material, were used to
reduce current borrowings. No gain or loss was recognized as a result of this
transaction.
<PAGE>
NEW ACCOUNTING STANDARDS
Effective January 1, 2001, the Company adopted Statement of Financial Accounting
Standards No.133 (FAS 133), Accounting for Derivative Instruments and Hedging
Activities. FAS 133 establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. The effect of
adopting this Standard was not material to reported results.
In December 1999, the Securities and Exchange Commission issued SEC
Staff Accounting Bulletin No.101 (SAB 101), "Revenue Recognition in Financial
Statements." SAB 101 summarizes certain of the Staff's views regarding revenue
recognition. The Company adopted the guidelines of SAB 101 in 2000 without
material effect.
Statement of Financial Accounting Standards No.141 (FAS 141), Business
Combinations, was issued in June 2001. FAS 141 establishes accounting and
reporting standards for business combinations. The provisions of FAS 141, which
eliminate pooling of interests accounting, apply to all business combinations
initiated after June 30, 2001.
Statement of Financial Accounting Standards No.142 (FAS 142), Goodwill
and Other Intangible Assets, was issued in June 2001 and is effective for fiscal
years beginning after December 15, 2001. FAS 142 eliminates goodwill
amortization and requires an evaluation of goodwill impairment upon adoption of
the Standard, as well as subsequent annual valuations, or more frequently if
circumstances indicate a possible impairment. Impairment, if any, resulting from
the initial application of the new Standard will be classified as a cumulative
effect of a change in accounting principle. Subsequent impairments, if any,
would be classified as an operating expense. Under this Standard, other
intangible assets that meet certain criteria will qualify for recognition on the
balance sheet and will continue to be amortized in the income statement.
Adoption of FAS 142 will eliminate annual goodwill amortization
expense of approximately $33.0 (approximately $0.35 per share). Although this
Standard will increase the Company's results of operations in the future due to
the elimination of goodwill amortization, any impairment would result in a
charge as discussed above. The Company is in the process of assessing the impact
of adopting FAS 142 but does not believe it has a material impairment of
goodwill upon adoption.
Statement of Financial Accounting Standards No.143 (FAS 143),
Accounting for Asset Retirement Obligations, was issued in June 2001. FAS 143
establishes accounting and reporting standards for obligations associated with
the retirement of tangible long-lived assets. FAS 143 is effective for fiscal
years beginning after June 15, 2002. The Company is evaluating the impact, if
any, of adopting this Standard but does not believe the effect of adoption of
this Standard will be material.
Statement of Financial Accounting Standards No.144 (FAS 144),
Accounting for the Impairment or Disposal of Long-Lived Assets, was issued in
August 2001. FAS 144 establishes accounting and reporting standards for
impairment of long-lived assets to be disposed of. FAS 144 is effective for
fiscal years beginning after December 15, 2001. The Company is evaluating the
impact, if any, of adopting this Standard but does not believe the effect of
adoption will be material to reported results.
FINANCIAL CONDITION
Cash, cash equivalents and short-term investments totaled $48.9 at December 31,
2001, compared to $129.2 and $63.0 at December 31, 2000 and 1999, respectively.
Short-term investments are high-quality, readily marketable instruments. Working
capital, excluding in 2000 the commercial paper used to finance the BBA
acquisition which was later refinanced with long-term debt, totaled $336.1 at
year-end 2001, compared to $409.9 and $465.7 at December 31, 2000 and 1999,
respectively. Gross additions to property, plant and equipment were $52.0, $60.7
and $103.8 in 2001, 2000 and 1999, respectively, and are expected to approximate
$90.0 in 2002.
During 2001, the Company reduced its debt outstanding by approximately
$110.0. At December 31, 2001, the Company's outstanding commercial paper
totaled $204.2 at an average interest rate of 2.9%, compared to $1,209.4 at
December 31, 2000 at an average interest rate of 7.4%. Commercial paper
maturities did not extend beyond January 24, 2002. All commercial paper is
classified as short-term at December 31, 2001. The Company reduced its U.S.
revolving credit agreement to $500.0 at December 31, 2001 from $1,300.0 at
December 31, 2000. This revolving credit agreement is composed of a $200.0
364-day facility and a $300.0 five-year facility. The revolving credit agreement
is used as a backstop for the U.S. commercial paper program; there were no
borrowings under this agreement in 2001. The Company compensates the banks
participating in these credit facilities in the form of fees, the amounts of
which are not material.
At December 31, 2000, $300.0 of the then $1,300.0 credit facility was
available to be extended as long-term debt at the election of the Company.
Accordingly, $300.0 of commercial paper outstanding was classified as long-term
debt at December 31, 2000. In addition, the Company had entered into a financing
agreement with a major European financial institution that, in part, provided
for $100.0 of long-term debt to be issued with maturities in 2005 and 2006.
Proceeds from this financing agreement were used to reduce outstanding
<PAGE>
commercial paper. In 2000, to reflect this intent the Company classified $100.0
of commercial paper as noncurrent in the December 31, 2000 consolidated balance
sheet.
In April 2000, the Company announced a plan to repurchase up to 7.5
million shares of its common stock. In September 2000, the Company announced an
additional plan to increase its existing share repurchase program by an
additional $100.0. Repurchases will be made from time to time on the open market
or through private transactions as market and business conditions warrant. The
repurchased shares will be available for use in connection with the Company's
employee benefit plans and for other general corporate purposes. The Company
completed the April 2000 program during 2001. At December 31, 2001,
approximately 1.1 million shares of common stock had been repurchased under the
September 2000 program. Under these plans, the Company purchased $71.2, $201.0
and $46.3 of treasury stock in 2001, 2000 and 1999, respectively. At December
31, 2001, the Company had a remaining share repurchase authorization of
approximately $70.0.
The Company anticipates that its financing requirements will be funded
from internal sources and credit facilities currently in place.
The Company paid dividends to shareholders totaling $57.6, $155.5 and
$161.2 in 2001, 2000 and 1999, respectively. The dividend rate per share in
2001, 2000 and 1999 was, respectively, $0.60, $1.29 and $1.52. In September
2000, the Board of Directors authorized a reduction in the Company's quarterly
dividend by 60%, to $0.15 per share, beginning with the fourth quarter 2000
dividend. The dividend amount per share remains unchanged from that date.
The Cumulative translation adjustment component of Accumulated other
comprehensive income was ($156.3) at December 31, 2001, compared to ($77.6) at
December 31, 2000. This decrease results primarily from the change to local
currency reporting effective January 1, 2001 for certain subsidiaries that
operated in U.S. dollars or which operated in a highly inflationary environment.
The decrease also resulted from the continued strength of the U.S. dollar
against other currencies.
Compliance with existing governmental requirements regulating the
discharge of materials into the environment has not materially affected the
Company's operations, earnings or competitive position. In 2001, the Company
spent approximately $4.0 on capital projects and about $12.3 in operating
expenses and governmental charges for the purpose of complying with such
regulations. Expenditures for these purposes will continue for the foreseeable
future. In addition, the Company is party to a number of proceedings brought
under the Comprehensive Environmental Response, Compensation and Liability Act
or similar state statutes. It is expected that the impact of any judgements in
or voluntary settlements of such proceedings will not be material to the
Company's financial condition, results of operations or liquidity.
MARKET RISK
The Company enters into various interest rate swaps to manage its
interest rate exposure. The Company realized a net gain of $3.5 on a $700.0
notional amount of U.S. Treasury lock hedges, taken out in anticipation of the
issuance of the 6.45% Notes due 2006. These swaps were designated as qualified
cash flow hedges and the net gain is being amortized over the life of the Notes.
Following the five-year Notes offering, the Company entered into a $700.0
notional amount swap to effectively convert the 6.45% coupon interest rate on
the Notes to a short-term rate based upon LIBOR plus an interest markup. The
swap was designated as a fully effective, qualified fair value hedge. During the
year, the Company amended the swap on four occasions, which changed the LIBOR
basis and the related spread. As a result of market conditions and these changes
in the swaps, the counterparty paid the Company $19.9, including accrued swap
interest of $3.3. The net gains on settlement are being amortized over the
remaining term of the Notes. As a result of these transactions, the effective
interest rate at December 31, 2001 on the 6.45% Notes approximated 3.7%. The
Company has recorded the swap and the debt at fair value resulting in an
increase to long-term debt of $8.3 and the recognition of a corresponding swap
asset.
The Company enters into foreign currency forward contracts with the
objective of reducing exposure to cash flow volatility arising from foreign
currency fluctuations associated with certain foreign currency receivables and
payables and anticipated purchases of raw materials. The notional amount and
maturity dates of these contracts match those of the underlying transactions. At
December 31, 2001, the Company had outstanding foreign currency forward
contracts of approximately $97.3. The Company has designated these contracts as
qualified fair value and cash flow hedges. Accordingly, the effective portion
of the gain or loss on the derivative instrument is reported as a component of
other comprehensive income and recognized in earnings in the same period or
periods during which the hedged transaction affects earnings. The Company had no
ineffective foreign currency forward contracts at December 31, 2001.
<PAGE>
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported assets, liabilities, revenues and expenses; actual results may
differ from such estimates. The diversity of the Company's products, customers,
geographic operations, sources of supply and markets reduces the risk that any
one event would have a severe impact on the Company's operating results. The
Company recognizes revenue when products are shipped and title and risk of loss
transfer to the customer. The greatest complexity of the Company's business is
in the area of the research and development and creation of new products, all
costs for which are expensed as incurred.
Those areas that require the greatest degree of management judgement or
deemed most critical to the Company's financial reporting involve:
o The ongoing assessment of the valuation of inventory, given the large
number of natural ingredients employed, the quality of which may be
diminished over time, if not used;
o The valuation of tangible and intangible assets acquired in business
combinations;
o Recoverability and realization of assets, most notably in lesser developed
areas of the world where fluctuating currencies and frequently unsettled
economic conditions can create uncertainty;
o The determination of financial instruments employed as effective hedges of
cash flows or market risk exposures; and
o The areas of environmental liabilities, where frequently changing rules
and regulations require constant reassessment of related practices as well
as underlying costs.
Management believes that full consideration has been given to all relevant
circumstances that the Company may be currently subject to, and the financial
statements accurately reflect management's best estimate of the results of
operations, financial condition and cash flows of the Company for the years
presented.
EURO CURRENCY ADOPTION
As part of the European Economic and Monetary Union, a single currency (the
"Euro") has replaced the national currencies of many of the European countries
in which the Company conducts business. The conversion rates between the Euro
and the participating nations' currencies were fixed irrevocably as of January
1,1999, with the participating national currencies scheduled to be removed from
circulation between January 1, and June 30, 2002, and replaced by Euro notes and
coinage. During the transition period, from January 1,1999 through December 31,
2001, public and private entities as well as individuals paid for goods and
services using either checks, drafts, or wire transfers denominated in Euros or
the participating country's national currency. The Company's systems and
processes were "Euro Capable" (able to enter into Euro-denominated transactions)
on January 1,1999. The effects of the Euro conversion on the Company's revenues,
costs and competitive position have not been significant. The costs of the
systems and business process conversions were not material.
CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements in this Management's Discussion and Analysis which are not historical
facts or information are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, and are subject to risks and
uncertainties that could cause the Company's actual results to differ materially
from those expressed or implied by such forward-looking statements. Risks and
uncertainties with respect to the Company's business include general economic
and business conditions, interest rates, the price and availability of raw
materials, and political and economic uncertainties, including the fluctuation
or devaluation of currencies in countries in which the Company does business.
The Company intends its forward-looking statements to speak only as of the time
of such statements, and does not undertake to update or revise them as more
information becomes available.
<PAGE>
REPORT OF MANAGEMENT
The accompanying consolidated financial statements of International Flavors &
Fragrances Inc. have been prepared by management in conformity with accounting
principles generally accepted in the United States of America and necessarily
include amounts that are based on management's best estimates and judgement.
The audit report on the Company's financial statements by PricewaterhouseCoopers
LLP, independent accountants, is based on the result of their audits, which were
performed in accordance with generally accepted auditing standards.
The Company maintains an internal control structure and related
systems, policies and procedures designed to provide reasonable assurance that
assets are safeguarded and transactions are properly recorded and executed in
accordance with management's authorization so that the accounting records can be
relied upon for the preparation of financial statements. The Company's control
system is enhanced through a formal Code of Conduct that establishes standards
for professional conduct and integrity for employees worldwide. The Company also
has an internal audit function that evaluates and formally reports to management
and the Audit Committee of the Board of Directors on the adequacy and
effectiveness of controls, policies and procedures.
The Audit Committee of the Board of Directors is composed entirely of
non-employee directors. The Committee meets periodically and independently
throughout the year with management, the internal auditors and the independent
accountants to discuss the Company's internal accounting controls, auditing
and financial reporting matters. The internal auditors and independent
accountants have unrestricted access to the Audit Committee.
It is management's opinion that IFF's policies and procedures and the
system of internal controls currently in place provide reasonable assurance that
operations are managed in a responsible and professional manner and with the
highest standard of business conduct.
[SIGNATURE] [SIGNATURE]
Richard A. Goldstein Douglas J. Wetmore
Chairman of the Board and Chief Executive Officer Senior Vice President
and Chief Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of International Flavors & Fragrances
Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and retained earnings and of cash flows
present fairly, in all material respects, the financial position of
International Flavors & Fragrances Inc. and its subsidiaries at December 31,
2001 and 2000, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States of America. 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
auditing standards generally accepted in the United States of America, 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 our opinion.
As discussed in Note 1, the Company changed its method of accounting
for derivative instruments and hedging activities effective January 1, 2001.
[SIGNATURE]
New York, New York
January 28, 2002
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
International Flavors & Fragrances Inc.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------
(Dollars in thousands except per share amounts) 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consolidated Statement of Income
Net sales $ 1,843,766 $ 1,462,795 $ 1,439,499
-------------------------------------------------------
Cost of goods sold 1,063,433 831,653 806,382
Research and development expenses 135,248 112,671 103,794
Selling and administrative expenses 313,335 258,653 248,047
Amortization of goodwill and other intangibles 46,089 7,032 --
Nonrecurring charges 30,069 41,273 32,948
Interest expense 70,424 25,072 5,154
Other (income) expense, net (2,609) 2,314 (291)
-------------------------------------------------------
1,655,989 1,278,668 1,196,034
-------------------------------------------------------
Income before taxes on income 187,777 184,127 243,465
Taxes on income 71,775 61,122 81,465
-------------------------------------------------------
Net income 116,002 123,005 162,000
Other comprehensive income:
Foreign currency translation adjustments (78,688) (20,443) (48,005)
Accumulated losses on derivatives qualifying as hedges (2,261) -- --
Minimum pension liability adjustment (20,009) -- --
-------------------------------------------------------
Comprehensive income $ 15,044 $102,562 $ 113,995
=======================================================
</TABLE>
<TABLE>
<CAPTION>
2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income per share - basic $ 1.21 $ 1.22 $ 1.53
-------------------------------------------------------
Net income per share - diluted $ 1.20 $ 1.22 $ 1.53
=======================================================
</TABLE>
<TABLE>
<CAPTION>
(Dollars in thousands) 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consolidated Statement of Retained Earnings
At beginning of year $ 1,204,561 $ 1,211,790 $ 1,210,620
Net income 116,002 123,005 162,000
-------------------------------------------------------
1,320,563 1,334,795 1,372,620
Cash dividends declared 57,219 130,234 160,830
-------------------------------------------------------
At end of year $ 1,263,344 $ 1,204,561 $ 1,211,790
=======================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
CONSOLIDATED BALANCE SHEET
International Flavors & Fragrances Inc.
<TABLE>
<CAPTION>
(Dollars in thousands) December 31,
----------------------------------
Assets 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 48,521 $ 128,869
Short-term investments 384 369
Receivables:
Trade 328,858 343,294
Allowance for doubtful accounts (10,835) (11,074)
Other 22,335 32,094
Inventories 415,984 435,312
Deferred income taxes 77,449 62,057
Prepaid expenses 13,665 28,019
----------------------------------
Total Current Assets 896,361 1,018,940
Property, Plant and Equipment, net 532,473 679,874
Intangible Assets, net 795,920 755,923
Other Assets 43,297 34,296
----------------------------------
Total Assets $ 2,268,051 $ 2,489,033
==================================
</TABLE>
<TABLE>
<CAPTION>
December 31,
----------------------------------
Liabilities and Shareholders' Equity 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Liabilities:
Bank loans and current portion of long-term debt $ 23,716 $ 43,633
Commercial paper 204,229 809,352
Accounts payable 85,659 75,021
Accrued payrolls and bonuses 39,227 43,375
Dividends payable 14,215 14,614
Income taxes 49,841 61,073
Other current liabilities 143,327 131,949
----------------------------------
Total Current Liabilities 560,214 1,179,017
----------------------------------
Other Liabilities:
Long-term debt 939,404 417,402
Deferred income taxes 44,553 103,151
Retirement and other liabilities 199,710 158,204
----------------------------------
Total Other Liabilities 1,183,667 678,757
----------------------------------
Shareholders' Equity:
Common stock 12 1/2(cent)par value; authorized 500,000,000 shares;
issued 115,761,840 shares 14,470 14,470
Capital in excess of par value 126,170 133,041
Restricted stock (1,440) --
Retained earnings 1,263,344 1,204,561
Accumulated other comprehensive income:
Cumulative translation adjustment (156,266) (77,578)
Accumulated losses on derivatives qualifying as hedges (2,261) --
Minimum pension liability adjustment (20,009) --
----------------------------------
1,224,008 1,274,494
Treasury stock, at cost - 20,996,954 shares in 2001 and (698,851) (643,235)
18,335,796 shares in 2000
Note receivable from officer (987) --
----------------------------------
Total Shareholders' Equity 524,170 631,259
----------------------------------
Total Liabilities and Shareholders' Equity $ 2,268,051 $ 2,489,033
==================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
International Flavors & Fragrances Inc.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------
(Dollars in thousands) 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 116,002 $ 123,005 $ 162,000
Adjustments to reconcile to net cash provided by operations:
Depreciation and amortization 123,493 69,344 56,369
Deferred income taxes (18,113) (30,496) (4,191)
Changes in assets and liabilities:
Current receivables 8,925 15,261 (35,354)
Inventories (1,207) 64,591 (33,955)
Current payables (20,076) 22,017 40,719
Other, net (27,519) 5,388 10,230
-------------------------------------------------
Net cash provided by operations 181,505 269,110 195,818
-------------------------------------------------
Cash flows from investing activities:
Proceeds from investments 8,250 1,566 1,073
Purchases of investments (19,786) (1,111) (955)
Investments in acquired businesses, net of cash received -- (953,295) --
Additions to property, plant and equipment (52,016) (60,696) (103,835)
Proceeds from disposal of assets 14,900 11,301 1,925
-------------------------------------------------
Net cash used in investing activities (48,652) (1,002,235) (101,792)
-------------------------------------------------
Cash flows from financing activities:
Cash dividends paid to shareholders (57,618) (155,502) (161,249)
Net change in bank loans (13,088) 5,164 1,599
Net change in commercial paper outstanding (605,123) 746,152 63,200
Proceeds from long-term debt 580,545 413,747 --
Repayments of long-term debt (49,705) (1,903) (859)
Proceeds from issuance of stock under stock option plans 6,842 1,387 4,290
Purchase of treasury stock (71,234) (200,953) (46,298)
-------------------------------------------------
Net cash provided by (used in) financing activities (209,381) 808,092 (139,317)
-------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents (3,820) (8,233) (7,534)
-------------------------------------------------
Net change in cash and cash equivalents (80,348) 66,734 (52,825)
Cash and cash equivalents at beginning of year 128,869 62,135 114,960
-------------------------------------------------
Cash and cash equivalents at end of year $ 48,521 $ 128,869 $ 62,135
=================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
International Flavors & Fragrances Inc.
NOTE 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The Company is the leading creator and manufacturer of flavors and fragrances
used by others to impart or improve flavor or fragrance in a wide variety of
consumer products. The Company's products are sold principally to manufacturers
of perfumes and cosmetics, hair and other personal care products, soaps and
detergents, cleaning products, dairy, meat and other processed foods, beverages,
snacks and savory foods, confectionery, sweet and baked goods, and
pharmaceutical and oral care products.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
all subsidiaries.
Revenue Recognition
Revenue is recognized when products are shipped and title and risk of loss
transfer to the customer.
Currency Translation
The assets and liabilities of non-U.S. subsidiaries that operate in a local
currency environment are translated into U.S. dollars at year-end exchange
rates. Income and expense items are translated at average exchange rates during
the year. Cumulative translation adjustments are shown as a separate component
of shareholders' equity.
For periods through December 31, 2000, certain subsidiaries that
operated in U.S. dollars, or that operated in a highly inflationary environment,
inventory and property, plant and equipment were translated using the exchange
rates at the time of acquisition. All other assets and liabilities were
translated at year-end exchange rates. Except for inventories charged to cost of
goods sold and depreciation, which were remeasured for historical rates of
exchange, all income and expense items were translated at average exchange rates
during the year. Gains and losses as a result of remeasurements were included in
income.
Effective January 1, 2001, substantially all subsidiaries operate in a
local currency environment.
Research and Development
All costs associated with research and development are charged to expense as
incurred.
Inventories
Inventories are stated at the lower of cost (generally on an average basis) or
market.
Cash Equivalents
Highly liquid investments with maturities of three months or less at date of
purchase are considered to be cash equivalents.
Long-Lived Assets
Property, plant and equipment are recorded at cost. Depreciation is calculated
on a straight-line basis, principally over the following estimated useful
lives: buildings and improvements, 10 to 40 years; machinery, equipment and
software, 3 to 10 years; and leasehold improvements, the shorter of 10 years or
the remaining life of the lease.
When properties are retired or otherwise disposed of, the asset and
related accumulated depreciation are removed from the accounts with any
resultant gain or loss included in income.
Identifiable intangible assets include patents, trademarks and other
intellectual property that are valued at acquisition through independent
appraisals, and are amortized on a straight-line basis over periods ranging from
7 to 20 years. Goodwill arising from business acquisitions is amortized
through December 31, 2001 on a straight-line basis over its estimated useful
life, generally 20 years.
Long-lived assets, including intangibles, are periodically reviewed
for impairment when events or changes in business conditions indicate that
their full carrying value may not be recovered. An estimate of undiscounted
future cash flows produced by an asset or group of assets is compared to the
carrying value to determine whether an impairment exists. If assets are
determined to be impaired, the loss is measured based on an estimate of fair
value using various valuation techniques, including a discounted estimate of
future cash flows.
Income Taxes
Deferred income taxes reflect the impact of temporary differences between the
amount of assets and liabilities recognized for financial reporting purposes and
such amounts recognized for tax purposes, based on tax laws as currently
enacted. Additional taxes which would result from distributions by subsidiary
companies to the parent are provided to the extent such dividends are
anticipated. No provision is made for additional taxes on undistributed earnings
of subsidiary companies that are intended to be permanently invested in such
subsidiaries. As a result, no income tax is attributable to the currency
translation component of other comprehensive income.
Retirement Benefits
Current service costs of retirement plans and postretirement health care and
life insurance benefits are accrued currently. Prior service costs resulting
from improvements in these plans are amortized over periods ranging from 10 to
20 years.
Financial Instruments
The fair value of financial instruments is determined by reference to various
market data and other valuation techniques, as appropriate.
<PAGE>
Unless otherwise disclosed, the fair values of financial instruments approximate
their recorded values.
Risk Management Contracts
In the normal course of business, the Company uses forward exchange contracts to
manage its exposure to fluctuations in foreign currency exchange rates. The
Company also enters into various interest rate swaps with the objective of
managing its interest rate exposure.
The Company designates and assigns the financial instruments as hedges
of forecasted transactions, specific assets, or specific liabilities. When
hedged assets or liabilities are sold or extinguished or the hedged forecasted
transactions are no longer expected to occur, the Company recognizes the gain or
loss on the designated hedging financial instruments.
Unrealized losses on forward contracts are recorded as other current
liabilities and the accrued differential for interest rate swaps is recorded as
other assets in the balance sheet. Unrealized gains on forward contracts and the
accrued differential for interest rate swaps to be paid under the agreements are
included in other current liabilities. Realized gains and losses from hedges
are classified in the income statement consistent with the accounting treatment
of the items hedged. The Company accrues the differential for interest rate
swaps to be paid or received under the agreements as adjustments to net interest
expense over the lives of the swaps. Gains and losses on the termination of
effective swap agreements, prior to their original maturity, are deferred and
amortized to net interest expense over the remaining term of the underlying
hedged transactions.
Risks and Uncertainties
The diversity of the Company's products, customers and geographic operations
significantly reduces the risk that a severe impact will occur in the near term
as a result of changes in its customer base, competition, sources of supply or
markets. It is unlikely that any one event would have a severe impact on the
Company's operating results.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses. Actual results may differ from those estimates.
Software Costs
The Company capitalizes direct internal and external development costs
associated with internal-use software. Neither preliminary evaluation costs nor
costs associated with the software after implementation are capitalized.
Shipping and Handling Costs
Net sales include shipping and handling charges billed to customers. Cost of
goods sold include all costs incurred in connection with shipping and
handling.
New Accounting Standards
In December 1999, the Securities and Exchange Commission issued SEC Staff
Accounting Bulletin No.101 (SAB 101), "Revenue Recognition in Financial
Statements." SAB 101 summarizes certain of the Staff's views regarding revenue
recognition. The Company adopted the guidelines of SAB 101 in 2000 without
material effect.
Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133 (FAS 133), Accounting for Derivative Instruments
and Hedging Activities. FAS 133 establishes accounting and reporting standards
for derivative instruments and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
The effect of adopting this Standard was not material to reported results.
Statement of Financial Accounting Standards No.141 (FAS 141), Business
Combinations, was issued in June 2001. FAS 141 establishes accounting and
reporting standards for business combinations. The provisions of FAS 141,
which eliminate pooling of interests accounting, apply to all business
combinations initiated after June 30, 2001.
Statement of Financial Accounting Standards No.142 (FAS 142), Goodwill
and Other Intangible Assets, was issued in June 2001 and is effective for fiscal
years beginning after December 15, 2001. FAS 142 eliminates goodwill
amortization and requires an evaluation of goodwill impairment upon adoption
of the Standard, as well as subsequent annual valuations, or more frequently
if circumstances indicate a possible impairment. Impairment, if any, resulting
from the initial application of the new Standard will be classified as a
cumulative effect of a change in accounting principle. Subsequent impairments,
if any, would be classified as an operating expense. Under this Standard, other
intangible assets that meet certain criteria will qualify for recognition on
the balance sheet and will continue to be amortized in the income statement.
Adoption of FAS 142 will eliminate annual goodwill amortization
expense of approximately $33.0 million. Although this Standard will increase the
Company's results of operations in the future due to the elimination of goodwill
amortization, any impairment would result in a charge as discussed above. The
Company is in the process of assessing the impact of adopting FAS 142 but does
not believe it has a material impairment of goodwill upon adoption.
Statement of Financial Accounting Standards No. 143 (FAS 143),
Accounting for Asset Retirement Obligations, was issued in June 2001. FAS 143
establishes accounting and reporting standards
<PAGE>
for obligations associated with the retirement of tangible long-lived assets.
FAS 143 is effective for fiscal years beginning after June 15, 2002. The Company
is evaluating the impact, if any, of adopting this Standard, but does not
believe the effect of adoption of this Standard will be material.
Statement of Financial Accounting Standards No.144 (FAS 144),
Accounting for the Impairment or Disposal of Long-Lived Assets, was issued in
August 2001. FAS 144 establishes accounting and reporting standards for
impairment of long-lived assets to be disposed of. FAS 144 is effective for
fiscal years beginning after December 15, 2001. The Company is evaluating the
impact, if any, of adopting this Standard, but does not believe the effect of
adoption will be material to reported results.
Net Income Per Share
Net income per share is based on the weighted average number of shares
outstanding. A reconciliation of the number of shares used in the computations
of basic and diluted net income per share is as follows:
<TABLE>
<CAPTION>
Number of Shares
------------------------------------
(Shares in thousands) 2001 2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic EPS 95,770 101,073 105,748
Dilution under stock plans 1,049 20 195
------------------------------------
Diluted EPS 96,819 101,093 105,943
====================================
</TABLE>
Net income used in the computation of basic and diluted net income per
share is not affected by the assumed issuance of stock under the Company's stock
plans.
Options to purchase 4,138,020, 5,430,857 and 2,946,607 shares were
outstanding in 2001, 2000 and 1999, respectively, but were not included in the
computation of diluted net income per share because the options' exercise prices
were greater than the average market price of the common shares in the
respective years.
Reclassifications
Certain reclassifications have been made to the prior years' financial
statements to conform to 2001 classifications.
NOTE 2. NONRECURRING AND OTHER CHARGES
In October 2000, the Company announced a reorganization, including
management changes, further consolidation of production facilities and related
actions. Henceforth, the Company will be organized under two global umbrellas of
business development and operations. Business development will drive the top
line growth of the Company and will include consumer and market research,
product category strategy, product development, global sales and marketing, and
technical application. Operations will be responsible for effective utilization
of capital, increasing productivity and managing inventory levels and cycle
times. In addition, effective January 1, 2001, the Company assigned a single
manager responsibility for each of its major geographical regions - North
America, Europe, Asia-Pacific, Latin America and the newly constituted Central
Asia and Middle East.
The total pretax cost of actions taken in connection with the 2000
reorganization is expected to approximate $90.0 million to $100.0 million
through the end of 2002. The reorganization is expected to yield annual savings
by the year 2003 in the range of $25.0 million to $30.0 million. An element of
the savings is expected to be reinvested in the business, although a substantial
portion is expected to contribute to improved earnings.
In June 1999, the Company announced a program to streamline its
operations worldwide by improving operating efficiencies and asset utilization.
The program included the closure of selected manufacturing, distribution and
sales facilities in all geographic areas in which the Company operates. In
addition, the Company planned to consolidate and align production in its
remaining manufacturing locations. Under this program, the Company achieved
annualized savings of approximately $15.0 million; a portion of the savings was
reinvested in the business.
In connection with the 2000 reorganization and the 1999 program, the
Company initiated two separate voluntary retirement incentive programs for
United States-based employees meeting certain eligibility requirements. Those
eligible employees who elected to take the incentive received additional credit,
for pension purposes, in terms of age and service, as well as other benefits.
Approximately 150 employees accepted enhanced retirement benefits under these
two programs, resulting in nonrecurring pretax charges of $23.8 million in
2000. In addition, during 2000, the Company recognized additional nonrecurring
charges of $17.5 million, essentially all of which related to employee
separation costs and other reorganization activities.
Total nonrecurring charges recorded in 2001 and 2000 were $30.1
million ($19.1 million after tax) and $41.3 million ($26.8 million after tax),
respectively. The 2001 nonrecurring charges by region were: North America
(including corporate) $14.7 million, Asia-Pacific $8.6 million, Europe $2.0
million, CAME $2.2 million and Latin America $2.6 million. Essentially all of
the pretax charges recorded in 2000 related to United States-based operations.
There were no significant non-cash related elements of the 2001 or 2000
charges.
In 1999, in connection with the program to streamline operations, the
Company recorded total pretax charges of $40.9 million ($27.2 million after
tax); non-cash charges approximated $11.7 million. Certain elements of these
charges, relating primarily to accelerated depreciation on assets to be disposed
of, were recognized in cost of goods sold ($1.2 million) and selling and
administrative expenses ($2.3 million). In addition, $4.5 million associated
primarily with facility closure was included in other income and expense. The
balance
<PAGE>
of the charges, representing employee separation and asset-related costs, were
recorded as nonrecurring charges in the Consolidated Statement of Income.
Movements in liabilities related to nonrecurring charges were as
follows:
<TABLE>
<CAPTION>
Asset-
Employee- Related
(Dollars in thousands) Related and Other Total
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Original liabilities $ 22,951 $ 9,997 $ 32,948
Cash and other costs in 1999 (13,329) (8,411) (21,740)
------------------------------------------
Balance December 31,1999 9,622 1,586 11,208
Additional charges 37,095 4,178 41,273
Cash and other costs in 2000 (22,338) (3,711) (26,049)
------------------------------------------
Balance December 31, 2000 24,379 2,053 26,432
Additional charges 10,083 19,986 30,069
Cash and other costs in 2001 (27,474) (21,294) (48,768)
------------------------------------------
Balance December 31, 2001 $ 6,988 $ 745 $ 7,733
==========================================
</TABLE>
The balance of the liabilities is expected to be utilized in 2002 in
connection with the final decommissioning and disposal of affected equipment
and as severance obligations to affected employees are satisfied. Approximately
700 employees will be affected by the programs.
NOTE 3. ACQUISITIONS AND DIVESTITURES
On November 3, 2000, the Company acquired all of the outstanding shares of Bush
Boake Allen Inc. (BBA) for $48.50 per share in cash; total consideration paid,
including transaction costs, approximated $970.0 million. BBA operating results
are included in the Company's consolidated results from November 3, 2000.
The acquisition was accounted for as a purchase business combination
and, accordingly, the purchase price has been allocated to the assets acquired
and liabilities assumed based on their fair values at the date of acquisition.
The Company completed the final determination of the purchase price during 2001.
The excess of the purchase price over the estimated value of tangible and
identified intangible assets acquired is recorded as goodwill. Other intangible
assets include patents, trademarks and other intellectual property owned or
developed by BBA, the value of which is being amortized over periods ranging
from 7 to 20 years.
As a result of finalizing acquisition accounting during 2001, the
Company increased tangible assets by $5.2 million, goodwill by $105.0 million
and decreased intangible assets by $22.8 million.
The following unaudited pro-forma results of operations give effect to
the BBA acquisition as if it had occurred as of the beginning of each of the
periods presented. These pro-forma results reflect the final acquisition
accounting adjustments completed in 2001.
<TABLE>
<CAPTION>
(Dollars in thousands except per share amounts) 2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 1,880,612 $ 1,931,380
Net income 80,953 95,364
Net income per share - basic $ 0.80 $ 0.90
Net income per share - diluted $ 0.80 $ 0.90
================================
</TABLE>
<TABLE>
<CAPTION>
(Dollars in thousands) 2001
- --------------------------------------------------------------------------------
<S> <C>
Allocation of purchase price:
Fair value of assets acquired,
including goodwill, net of cash $1,253,044
Cash paid for common stock and transaction costs (970,000)
----------
Liabilities assumed $ 283,044
==========
</TABLE>
The Company has established accruals relating primarily to employee
separation costs, facility closure costs and other actions relating to the
integration of certain BBA operations into IFF. Costs associated with these
integration actions are recognized as a component of the purchase accounting
resulting in an adjustment to goodwill; such costs do not directly impact
current earnings.
Movements in acquisition accounting accruals were as follows:
<TABLE>
<CAPTION>
Asset-
Employee- Related
(Dollars in thousands) Related and Other Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance December 31, 2000 $ 4,103 $ 6,230 $ 10,333
Additional charges 41,012 24,961 65,973
Cash and other costs in 2001 (31,259) (21,325) (52,584)
--------------------------------------
Balance December 31, 2001 $ 13,856 $ 9,866 $ 23,722
======================================
</TABLE>
In April 2000, the Company acquired Laboratoire Monique Remy (LMR), a
leader in the creation and commercialization of natural raw materials for
fragrances and flavors. Results of LMR are included in the consolidated results
of the Company from acquisition date. Neither the acquisition nor financial
results of LMR were material to the Company's consolidated operating results,
financial position or cash flows.
In October 2001, the Company sold its formulated fruit and vegetable
preparation businesses in the United States and Brazil. Sales for the business
in the United States and Brazil up to the October sale date were approximately
$23.0 million with operating profit of less than $3.0 million. The products are
sold primarily to bakeries and dairies for the manufacture of yogurts and baked
goods. Proceeds from the sale, which were not material, were used to reduce
current borrowings.
In October 2001, the Company announced its intention to explore
strategic alternatives for its fruit and vegetable preparation business
<PAGE>
in Europe. This business manufactures processed fruit and other natural
preparations used in a wide variety of foods, including baked goods and dairy
products. Annual sales and operating profit approximate $70.0 million and $7.0
million, respectively. As of March 21, 2002, the Company has made no final
decision as to which strategic alternative to pursue.
In December 2001, the Company sold its aroma chemicals business
located in Widnes, the United Kingdom. This business was acquired as part of the
BBA purchase. Sales for this unit up to the December sale date were $36.7
million and 80 employees were affected by the sale. Operating profit for the
unit in 2001 was less than $1.5 million. Proceeds from the sale, which were not
material, were used to reduce current borrowings. No gain or loss was recognized
as a result of this transaction.
NOTE 4. MARKETABLE SECURITIES
Marketable securities are included in cash equivalents and short-term
investments, as appropriate. At December 31, 2001 and 2000, marketable
securities totaling $0.1 million and $9.9 million, respectively, were
available for sale and recorded at fair value that approximated cost. Realized
gains and losses on the sale of marketable securities were not material.
NOTE 5. INVENTORIES
<TABLE>
<CAPTION>
December 31,
---------------------------
(Dollars in thousands) 2001 2000
- --------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 212,270 $ 243,327
Work in process 10,853 21,212
Finished goods 192,861 170,773
---------------------------
$ 415,984 $ 435,312
===========================
</TABLE>
NOTE 6. PROPERTY, PLANT AND EQUIPMENT, NET
<TABLE>
<CAPTION>
December 31,
---------------------------
(Dollars in thousands) 2001 2000
- --------------------------------------------------------------------------------
<S> <C> <C>
Land $ 36,747 $ 35,416
Buildings and improvements 278,603 345,070
Machinery, equipment and software 620,116 709,315
Construction in progress 40,164 51,500
---------------------------
975,630 1,141,301
Accumulated depreciation 443,157 461,427
---------------------------
$ 532,473 $ 679,874
===========================
</TABLE>
NOTE 7. INTANGIBLE ASSETS, NET
<TABLE>
<CAPTION>
December 31,
---------------------------
(Dollars in thousands) 2001 2000
- --------------------------------------------------------------------------------
<S> <C> <C>
Goodwill $690,509 $563,897
Trademarks and other 163,251 199,058
---------------------------
853,760 762,955
Accumulated amortization 57,840 7,032
---------------------------
$795,920 $755,923
===========================
</TABLE>
NOTE 8. BORROWINGS
Debt consists of the following at December 31:
<TABLE>
<CAPTION>
Rate Maturities 2001 2000
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial paper (U.S.) $ 204,229 $ 809,352
Bank loans 21,916 43,633
Current portion of
long-term debt 1,800 --
---------------------------
Total current debt 227,945 852,985
---------------------------
U.S. dollars 6.45% 2006 698,800 300,000
Euro facility 4.79% 2005-06 101,500 100,000
Japanese Yen notes 2.45% 2008-11 115,300 --
Japanese Yen notes 1.74% 2005 9,100 10,600
Other 2003 6,404 6,802
---------------------------
931,104 417,402
Interest rate swap 8,300 --
---------------------------
Total long-term debt 939,404 417,402
---------------------------
Total debt $1,167,349 $1,270,387
===========================
</TABLE>
The Company uses commercial paper to supplement long-term borrowings.
At December 31, 2001, outstanding commercial paper had an effective interest
rate of 2.9% compared to 7.4% at December 31, 2000. Commercial paper maturities
did not extend beyond January24, 2002. Commercial paper usage in 2001 decreased
as long-term financing was put in place and as debt was reduced.
The Euro borrowings are under a Euro 140.0 million facility that has
four-year and five-year fixed term components and a five-year revolving credit
component. In May 2001, the Company issued $700.0 million of 6.45% notes; the
notes mature May 15, 2006. In November 2001, the Company issued Yen 15.15
billion in seven-year and ten-year notes. Long-term debt was increased by $8.3
million for adjustments related to the amortization of swap gains and the
mark-to-market valuation of certain interest rate swaps the Company has
entered into.
The Company reduced its U.S. revolving credit agreement to $500.0
million at December 31, 2001from $1,300.0 million at December 31, 2000. This
revolving credit agreement is composed of a $200.0 million 364-day facility and
a $300.0 million five-year facility.
<PAGE>
The revolving credit agreement is used as a backstop for the U.S. commercial
paper program; there were no borrowings under this agreement in 2001. The
Company compensates the banks participating in these credit facilities in the
form of fees, the amounts of which are not material.
Of the Company's revolving credit facilities available at December 31,
2000, $300.0 million was available to be extended as long-term debt at the
Company's election. Accordingly, the Company classified this as long-term at
December 31, 2000. In addition, the Company classified $100.0 million as
long-term at December 31, 2000 representing the Euro facility entered into in
the first quarter 2001.
Short-term bank loans were outstanding in several foreign countries
and averaged $36.4 million in 2001, compared with $31.7 million in 2000 and
$58.0 million in 1999. The highest levels were $69.0 million in 2001, $55.3
million in 2000 and $84.9 million in 1999. This excludes $970.0 million of
short-term U.S. bank bridge financing used solely for the November 3, 2000
acquisition of BBA and replaced by commercial paper before December 31, 2000.
The 2001 weighted average interest rate of these foreign bank loans, based on
balances outstanding at the end of each month, was 7% and the average rate on
loans outstanding at December 31, 2001 was 5%. These rates compare with 8% and
8%, respectively, in 2000 and 9% and 8%, respectively, in 1999.
Annual maturities on long-term debt outstanding at December 31, 2001
are as follows: 2002, $1.8 million; 2003, $6.4 million; 2005, $76.0 million;
2006, $734.6 million. At December 31, 2001, the estimated fair value of the
$700.0 million 6.45% notes, including the interest rate swaps, was $708.3
million. The estimated fair value of the remaining long-term debt at December
31, 2001 and 2000, based on borrowing rates currently available to the Company
with similar terms and maturities, approximated the recorded amount.
Cash payments for interest were $77.2 million in 2001, $19.6 million
in 2000 and $4.6 million in 1999. At December 31, 2001, the Company and its
subsidiaries had unused lines of credit approximating $106.0 million in addition
to those credit facilities serving as backstop to the Company's commercial paper
program.
NOTE 9. INCOME TAXES
<TABLE>
<CAPTION>
(Dollars in thousands) 2001 2000 1999
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. income (loss) before taxes $ (59,390) $ (33,183) $ 19,061
Foreign income before taxes 247,167 217,310 224,404
------------------------------------
Total income before taxes $ 187,777 $ 184,127 $ 243,465
====================================
</TABLE>
The following table shows the components of current and deferred
income tax expense by taxing jurisdiction, both domestic and foreign:
<TABLE>
<CAPTION>
(Dollars in thousands) 2001 2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $ 7,507 $ (640) $ 5,064
State and local 3,816 381 204
Foreign 78,565 91,877 80,388
------------------------------------
89,888 91,618 85,656
------------------------------------
Deferred
Federal (17,836) (20,543) (8,773)
State and local (5,821) (1,484) 546
Foreign 5,544 (8,469) 4,036
------------------------------------
(18,113) (30,496) (4,191)
------------------------------------
Total income taxes $ 71,775 $ 61,122 $ 81,465
====================================
</TABLE>
At December 31, 2001 and 2000, gross deferred tax assets were $115.7
million and $113.5 million, respectively; gross deferred tax liabilities were
$82.8 million and $154.6 million, respectively. No valuation allowance was
required for deferred tax assets. The principal components of deferred tax
assets (liabilities) were:
<TABLE>
<CAPTION>
(Dollars in thousands) 2001 2000
- -------------------------------------------------------------------------------
<S> <C> <C>
Employee and retiree benefits $ 69,000 $ 52,300
Inventory 2,500 12,700
Tax credit carryforwards 5,200 13,200
Property, plant and equipment (8,000) (47,600)
Trademarks and other (52,400) (65,700)
Other, net 16,600 (6,000)
---------------------
$ 32,900 $(41,100)
=====================
</TABLE>
The Company's tax credit carryforwards consist primarily of foreign
tax credits that will expire, if unused, beginning in 2005.
A reconciliation between the U.S. federal income tax rate and the
effective tax rate is:
<TABLE>
<CAPTION>
2001 2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory tax rate 35.0% 35.0% 35.0%
Difference in effective tax rate on
foreign earnings and remittances (1.4) (0.3) (1.0)
State and local taxes (0.7) (0.4) 0.2
Goodwill 6.0 0.9 --
Other, net (0.7) (2.0) (0.7)
-------------------------------
Effective tax rate 38.2% 33.2% 33.5%
===============================
</TABLE>
Income taxes paid were $88.6 million in 2001, $81.0 million in 2000
and $74.8 million in 1999.
Undistributed earnings of foreign subsidiaries for which no deferred
taxes have been provided totaled $587.7 million at December 31, 2001. Any
additional U.S. taxes payable on these foreign earnings, if remitted, would be
substantially offset by credits for foreign taxes already paid.
<PAGE>
NOTE 10. SHAREHOLDERS' EQUITY
Net charges to capital in excess of par value resulted from the exercise of
stock options, the return of restricted stock and the award of IFF Stock Units.
Transactions in treasury shares resulted in net charges to capital in excess of
par value of $2.0 million, $1.4 million and $6.9 million in 1999, 2000 and 2001,
respectively.
The following table shows treasury shares acquired and, as
appropriate, the use of treasury shares for stock plans:
<TABLE>
<CAPTION>
Number
(Dollars in thousands) of Shares Amount
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance January 1, 1999 9,715,775 $ 400,602
Acquisitions 1,268,633 46,473
Used for stock plans (144,493) (5,948)
Return of restricted stock 100,000 3,981
------------------------------
Balance December 31, 1999 10,939,915 445,108
Acquisitions 7,475,178 201,251
Used for stock plans (79,297) (3,124)
------------------------------
Balance December 31, 2000 18,335,796 643,235
Acquisitions 3,019,100 71,653
Used for stock plans (357,942) (16,037)
------------------------------
Balance December 31, 2001 20,996,954 $ 698,851
==============================
</TABLE>
Under an employment contract dated January 1,1997, the Company awarded
250,000 restricted shares of the Company's common stock. Under that contract,
the restrictions would expire, subject to performance goals, over a five-year
period; compensation expense was recognized over the restricted period. As a
result of the termination of that contract, those shares for which restrictions
would have lapsed in 2000-2001 were forfeited and have been returned to treasury
stock. The amount shown for common stock used for stock plans in 2000 and 2001
includes 4,000 shares and 3,750 shares issued, respectively, as annual
compensation awards to non-employee directors of the Company.
In January 2001, the Company awarded approximately 190,000 IFF Stock
Units ("Units") to eligible employees in exchange for surrender of their "under
water" stock options. The Units vest, in four equal installments, over not more
than a seven-year period, upon the Company's Common Stock attaining successively
higher market price targets beginning at $22.50 per share, and earn dividend
equivalents as and when cash dividends are paid. Compensation expense is
recognized over the Units' vesting period. In 2001, the first two market price
targets were achieved and, accordingly, 50% of such Units vested. On vesting,
compensation expense of $1.7 million was recognized and included in operating
expenses. The remaining unvested Units are reported as Restricted Stock on the
Company's Consolidated Balance Sheet.
Changes in other comprehensive income were (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
Balance January 1, 1999 $ (9,130)
Translation adjustments (48,005)
---------
Balance December 31, 1999 (57,135)
Translation adjustments (20,443)
---------
Balance December 31, 2000 (77,578)
Translation adjustments (78,688)
Accumulated losses on derivatives
qualifying as hedges (2,261)
Minimum pension liability adjustment (net of tax) (20,009)
---------
Balance December 31, 2001 $(178,536)
=========
</TABLE>
On March 9, 2000, the Company adopted a shareholder protection
rights agreement (the "Rights Agreement") and declared a dividend of one right
on each share of common stock outstanding on March 24, 2000 or issued
thereafter.
Under the Rights Agreement, as amended, until a person or group
acquires 15% or more of the Company's common stock or commences a tender offer
that would result in such person's or group's owning 15% or more, the rights are
evidenced by the common stock certificates, automatically trade with the
common stock and are not exercisable.
Thereafter, if the Company is involved in a merger or sells more than
50% of its assets or earning power, each right entitles its holder to purchase a
certain number of shares for a specified exercise price. Also, under certain
circumstances, the Company's Board of Directors has the option to redeem or
exchange one share of common stock for each right. Finally, in the event a new
Board of Directors is elected in a successful proxy contest, (i) the rights may
not be redeemed and no business combination with the Company can be effected for
180 days thereafter unless certain procedures are followed to ensure (A) that
steps are taken to maximize shareholder value, or (B) that any decision to
redeem the rights, if challenged, would meet an "entire fairness" test; and
(ii) the Rights Agreement may not be amended during such 180-day period. To
establish "entire fairness" in connection with a redemption, the new Board must
be able to demonstrate that all aspects of the redemption decision were fair,
including the redemption procedure and the financial terms of the redemption.
The Rights Agreement expires in March 2010.
Dividends paid per share were $0.60, $1.29 and $1.52 in 2001, 2000 and
1999, respectively.
NOTE 11. STOCK OPTIONS
The Company has various stock option plans under which the Company's
officers, directors and key employees may be granted options to purchase the
Company's common stock at 100% of the market price on the day the option is
granted.
Options granted prior to May 2001 generally become exercisable no
earlier than two years after the date of grant and expire 10 years after the
date of grant, except for options granted to two senior
<PAGE>
executives in 2000 and certain other options granted to foreign employees, which
may be exercised immediately. Options granted in November 2000, however,
constituting approximately 35% of options outstanding (as of December 31, 2001),
generally become exercisable in four equal installments as corresponding market
price targets for the Company's Common Stock of $22.50, $27.00, $31.50 and
$36.00 are attained, and expire seven years after the date of grant or sooner if
certain price levels (which differ among individuals) are achieved.
Options granted after May 1, 2001 generally become exercisable no
earlier than one year from the date of grant and expire 10 years after the date
of grant, except for options granted to certain foreign employees, which may be
exercised immediately.
During 2001, options to purchase common stock were granted at exercise
prices ranging from $21.03 to $30.87 per share. At December 31, 2001, the price
range for shares under option was $17.94 to $49.88; options for 3,465,760 shares
were exercisable at that date. During 2001, 288,400 shares of common stock under
option were exercised at a price of $17.94. During 2001, eligible employees
surrendered 989,100 options in exchange for IFF Stock Units. The options
surrendered are a component of the 2001 options terminated figure in the table
below.
Stock option transactions were:
<TABLE>
<CAPTION>
Shares of Common Stock Weighted
-------------------------- Average
Available Under Exercise
for Option Option Price
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance January 1, 1999 2,507,048 4,035,919 $ 43.21
Granted (846,000) 846,000 38.99
Exercised -- (144,493) 30.89
Terminated 157,252 (157,252) 45.36
Lapsed (160,296) -- --
---------------------------------------
Balance December 31, 1999 1,658,004 4,580,174 42.69
Granted (5,761,502) 5,761,502 24.13
Exercised -- (75,297) 21.46
Terminated 661,422 (661,422) 43.85
Lapsed (54,500) -- --
Increase under 2000 plans 9,450,000 -- --
---------------------------------------
Balance December 31, 2000 5,953,424 9,604,957 31.55
Granted (2,042,000) 2,042,000 27.06
Exercised -- (288,400) 17.94
Terminated 2,997,188 (2,997,188) 38.00
Lapsed (113,143) -- --
Reserved for Units (83,888) -- --
---------------------------------------
Balance December 31, 2001 6,711,581 8,361,369 $ 28.37
=======================================
</TABLE>
The following table summarizes information concerning currently
outstanding and exercisable options:
<TABLE>
<CAPTION>
Range of Exercise Prices
------------------------
$10-$30 $30-$50
- --------------------------------------------------------------------------------
<S> <C> <C>
Number outstanding 5,058,001 3,303,368
Weighted average remaining contractual
life, in years 7.4 6.5
Weighted average exercise price $21.72 $38.55
----------------------
Number exercisable 1,361,848 2,103,912
Weighted average exercise price $17.96 $39.97
======================
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations in
accounting for its plans. Had compensation cost for the Company's stock option
plans been determined based upon the fair value at the grant date, consistent
with the methodology prescribed under Statement of Financial Accounting
Standards No.123, Accounting for Stock-Based Compensation, the Company's net
income and basic earnings per share would have been reduced by approximately
$14.1 million ($.15 per share) in 2001, $12.0 million ($.12 per share) in 2000
and $5.4 million ($.05 per share) in 1999. These pro-forma amounts may not be
representative of future disclosures because the estimated fair value of stock
options is amortized to expense over the vesting period, and additional options
may be granted in future years.
Using the Black-Scholes option valuation model, the estimated fair
values of options granted during 2001, 2000 and 1999 were $8.09, $5.50 and
$7.65, respectively. The Black-Scholes model was developed for use in estimating
the fair value of traded options that have no vesting restrictions. In addition,
such models require the use of subjective assumptions, including expected stock
price volatility. In management's opinion, such valuation models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options.
Principal assumptions used in applying the Black-Scholes model were as
follows:
<TABLE>
<CAPTION>
2001 2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Risk-free interest rate 4.6% 6.2% 5.7%
Expected life, in years 5 5 5
Expected volatility 32.2% 26.9% 22.5%
Expected dividend yield 2.2% 3.8% 3.8%
==============================
</TABLE>
NOTE 12. SEGMENT INFORMATION
The Company manages its operations by major geographical region. Flavors and
fragrances have similar economic and operational characteristics including
research and development, the nature of the creative and production processes,
the type of customers, and the methods by which products are distributed.
Accounting policies used for segment reporting are the same as those described
in Note 1. The Company evaluates the performance of its geographic regions based
on operating profit, excluding interest expense, other income and expense,
certain unallocated expenses, amortization of goodwill and other intangibles,
the effects of nonrecurring items and accounting changes, and income tax expense
("segment profit"). Transfers between geographic areas are accounted for at
prices that approximate arm's length market prices. Unallocated assets are
principally cash, short-term investments, intangible assets, including goodwill,
and other corporate assets.
Effective January 1, 2001, the Company was reorganized into five
geographic regions with an individual manager responsible for
<PAGE>
each region. The five regions are: North America, Europe, Central Asia, Middle
East (CAME), Latin America and Asia-Pacific; previously Europe and CAME had been
combined as one geographic region. North and Latin America and Asia-Pacific were
unaffected by the geographic reorganization. The North America region includes
the United States and Canada.
<TABLE>
<CAPTION>
North Latin Asia-
2001 (Dollars in thousands) America Europe CAME America Pacific Eliminations Consolidated
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales to unaffiliated customers $ 616,806 $639,500 $75,758 $245,517 $ 266,185 $ -- $1,843,766
Transfers between areas 83,115 140,290 2,623 1,678 16,620 (244,326) --
----------------------------------------------------------------------------------------
Total sales $ 699,921 $779,790 $78,381 $247,195 $ 282,805 $(244,326) $1,843,766
========================================================================================
Segment profit $ 91,208 $157,199 $14,339 $ 53,876 $ 60,975 $ 2,777 $ 380,374
========================================================================
Corporate and other
unallocated expenses (48,624)
Amortization of goodwill and
other intangibles (46,089)
Nonrecurring charges (30,069)
Interest expense (70,424)
Other income (expense), net 2,609
----------
Income before taxes on income $ 187,777
==========
Segment assets $ 588,187 $492,958 $42,227 $139,359 $ 207,647 $ (46,581) $1,423,797
========================================================================
Unallocated assets 844,254
----------
Total assets $2,268,051
==========
</TABLE>
<TABLE>
<CAPTION>
North Latin Asia-
2000 (Dollars in thousands) America Europe CAME America Pacific Eliminations Consolidated
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales to unaffiliated customers $ 470,953 $542,729 $22,143 $220,287 $ 206,683 $ -- $1,462,795
Transfers between areas 55,610 122,948 4 1,936 13,779 (194,277) --
----------------------------------------------------------------------------------------
Total sales $ 526,563 $665,677 $22,147 $222,223 $ 220,462 $(194,277) $1,462,795
========================================================================================
Segment profit $ 48,503 $158,080 $ 4,330 $ 39,063 $ 39,999 $ 1,762 $ 291,737
========================================================================
Corporate and other
unallocated expenses (31,919)
Amortization of goodwill and
other intangibles (7,032)
Nonrecurring charges (41,273)
Interest expense (25,072)
Other income (expense), net (2,314)
----------
Income before taxes on income $ 184,127
==========
Segment assets $ 600,007 $570,435 $51,564 $175,161 $ 228,901 $ (31,737) $1,594,331
========================================================================
Unallocated assets 894,702
----------
Total assets $2,489,033
==========
</TABLE>
<TABLE>
<CAPTION>
North Latin Asia-
1999 (Dollars in thousands) America Europe CAME America Pacific Eliminations Consolidated
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales to unaffiliated customers $ 476,496 $550,342 $24,493 $212,770 $ 175,398 $ -- $1,439,499
Transfers between areas 62,432 124,924 3 756 13,540 (201,655) --
----------------------------------------------------------------------------------------
Total sales $ 538,928 $675,266 $24,496 $213,526 $ 188,938 $(201,655) $1,439,499
========================================================================================
Segment profit $ 69,555 $171,831 $ 5,812 $ 41,288 $ 31,503 $ 1,439 $ 321,428
========================================================================
Corporate and other
unallocated expenses (40,152)
Nonrecurring charges (32,948)
Interest expense (5,154)
Other income (expense), net 291
----------
Income before taxes on income $ 243,465
==========
Segment assets $ 519,054 $463,675 $23,586 $194,140 $ 176,222 $ (61,314) $1,315,363
========================================================================
Unallocated assets 86,132
----------
Total assets $1,401,495
==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Capital Expenditures Depreciation and Amortization
----------------------------------------------------------------------------------------
(Dollars in thousands) 2001 2000 1999 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
North America $18,531 $30,586 $ 57,306 $ 33,784 $26,691 $16,811
Europe 19,452 14,030 19,607 26,740 20,626 24,890
CAME 1,480 794 1,620 1,409 763 384
Latin America 1,559 4,806 14,585 4,628 5,154 6,322
Asia-Pacific 4,571 7,500 7,595 7,749 5,975 5,353
Unallocated assets 6,423 2,980 3,122 49,183 10,135 2,609
----------------------------------------------------------------------------------------
Consolidated $52,016 $60,696 $103,835 $123,493 $69,344 $56,369
========================================================================================
</TABLE>
Europe operating profit for 1999 includes charges totaling $3.5
million relating to accelerated depreciation on assets to be disposed. In
1999, corporate and other unallocated expenses include approximately $6.0
million in costs associated with the final settlement of certain employment
contracts.
Sales of fragrance products were $1,008.1 million, $865.1 million and
$849.2 million in 2001, 2000 and 1999, respectively. Sales of flavor products
were $835.7 million, $597.7 million and $590.3 million in 2001, 2000 and 1999,
respectively. Sales in the United States, based on the final country of
destination of the Company's products, were $570.5 million, $435.1 million and
$434.6 million in 2001, 2000 and 1999, respectively. No other individual country
of destination exceeded 8% of consolidated sales. Sales to the Company's largest
customer accounted for 10% and 11% in 2000 and 1999. No customer accounted for
10% or more of sales in 2001. Total long-lived assets consists of net property,
plant and equipment and net intangible assets and amounted to $1,328.4 million,
$1,435.8 million and $523.9 million at December 31, 2001, 2000 and 1999,
respectively; of the respective totals, $1,071.1 million, $1,055.5 million and
$238.8 million were located in the United States. No other individual country
had long-lived assets that exceeded 10% of total long-lived assets.
Net foreign exchange gains of $1.9 million in 2001, losses of $1.9
million in 2000 and gains of $0.6 million in 1999 are included in other income.
NOTE 13. RETIREMENT BENEFITS
The Company and most of its subsidiaries have pension and/or other retirement
benefit plans covering substantially all employees. Pension benefits are
generally based on years of service and on compensation during the final years
of employment. Plan assets consist primarily of equity securities and corporate
and government fixed income securities. Substantially all pension benefit
costs are funded as accrued; however, such funding is limited, where applicable,
to amounts deductible for income tax purposes. Certain other retirement benefits
are provided by balance sheet accruals. Contributions to defined contribution
plans are mainly determined as a percentage of profits. Effective January 1,
2001, contributions to the Company's United States defined contribution plan
match 50% of the employee's pre-tax contributions, up to plan limits.
In addition to pension benefits, certain health care and life
insurance benefits are provided to qualifying United States employees upon
retirement from the Company. Such coverage is provided through insurance plans
with premiums based on benefits paid. The Company does not generally provide
health care and life insurance coverage for retired employees of foreign
subsidiaries; however, such benefits are provided in most foreign countries by
government-sponsored plans, and the cost of these programs is not significant to
the Company.
Pension expense included the following components:
<TABLE>
<CAPTION>
U.S. Plans Non-U.S. Plans
--------------------------------------------------------------------
(Dollars in thousands) 2001 2000 1999 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost for benefits earned $ 7,293 $ 5,104 $ 6,384 $ 9,552 $ 6,051 $ 6,687
Interest cost on projected benefit obligation 18,351 14,151 12,832 24,306 9,471 9,084
Expected return on plan assets (23,082) (16,757) (14,614) (27,691) (10,688) (11,086)
Net amortization and deferrals (1,347) (1,414) (15) 679 777 665
--------------------------------------------------------------------
Defined benefit plans 1,215 1,084 4,587 6,846 5,611 5,350
Defined contribution and other retirement plans 2,368 2,386 2,386 2,425 3,173 2,357
--------------------------------------------------------------------
Total pension expense $ 3,583 $ 3,470 $ 6,973 $ 9,271 $ 8,784 $ 7,707
====================================================================
</TABLE>
<PAGE>
Expense recognized for postretirement benefits included the following
components:
<TABLE>
<CAPTION>
(Dollars in thousands) 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost for benefits earned $1,722 $1,500 $1,832
Interest on benefit obligation 5,377 4,104 3,672
Net amortization and deferrals 508 13 33
-------------------------------------------------
Total postretirement benefit expense $7,607 $5,617 $5,537
=================================================
</TABLE>
Changes in pension and postretirement benefit obligations were:
<TABLE>
<CAPTION>
U.S. Pension Plans Non-U.S. Pension Plans Postretirement Benefits
------------------------------------------------------------------------
(Dollars in thousands) 2001 2000 2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Benefit obligation at beginning of year $ 250,354 $ 174,235 $ 333,691 $ 173,756 $ 68,832 $ 50,345
Service cost for benefits earned 7,293 5,104 9,552 6,051 1,722 1,500
Interest cost on projected benefit obligation 18,351 14,151 24,306 9,471 5,377 4,104
Actuarial (gain) loss (8,027) 15,230 (6,476) (781) 9,651 16,501
Plan amendments -- 6,199 -- -- -- (2,132)
Plan participants' contributions -- -- 90 88 105 1
Benefits paid (13,572) (9,705) (13,336) (7,076) (4,083) (3,933)
Acquisitions -- 30,910 16,496 167,853 1,902 1,505
Special termination benefits 2,248 14,230 382 -- -- 941
Translation adjustments -- -- (13,315) (15,671) -- --
------------------------------------------------------------------------
Benefit obligation at end of year $ 256,647 $ 250,354 $ 351,390 $ 333,691 $ 83,506 $ 68,832
========================================================================
</TABLE>
Changes in pension plan assets were:
<TABLE>
<CAPTION>
U.S. Plans Non-U.S. Plans
------------------------------------------------------------
(Dollars in thousands) 2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fair value of plan assets at beginning of year $ 287,375 $ 267,484 $ 347,346 $ 164,912
Actual return on plan assets (19,487) (389) (34,497) 13,695
Employer contributions 1,873 1,293 8,729 5,724
Plan participants' contributions -- -- 90 88
Acquisitions -- 28,692 -- 185,236
Benefits paid (13,572) (9,705) (13,336) (7,076)
Translation adjustments -- -- (13,339) (15,233)
------------------------------------------------------------
Fair value of plan assets at end of year $ 256,189 $ 287,375 $ 294,993 $ 347,346
============================================================
</TABLE>
The funded status of pension and postretirement plans at December 31 was:
<TABLE>
<CAPTION>
U.S. Pension Plans Non-U.S. Pension Plans Postretirement Benefits
-------------------------------------------------------------------------
(Dollars in thousands) 2001 2000 2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Plan assets in excess of (less than)
projected benefit obligation $ (458) $ 37,021 $(56,397) $ 13,655 $(83,506) $(68,832)
Remaining balance of unrecognized net (asset)
liability established at adoption of FAS 87 (928) (1,571) 811 1,046 -- --
Unrecognized prior service cost 9,101 9,908 3,802 4,397 (1,842) (1,984)
Unrecognized net (gain) loss (24,654) (60,707) 53,421 (2,032) 23,540 14,575
-------------------------------------------------------------------------
Net asset (liability) $(16,939) $(15,349) $ 1,637 $ 17,066 $(61,808) $(56,241)
=========================================================================
</TABLE>
<PAGE>
Pension assets and liabilities included in the Consolidated Balance Sheet at
December 31 were:
<TABLE>
<CAPTION>
U.S. Plans Non-U.S. Plans
-----------------------------------------------------------------
(Dollars in thousands) 2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prepaid benefit cost $ 6,408 $ 7,170 $ 281 $ 23,450
Accrued benefit liability (23,650) (22,519) (30,869) (6,384)
Accumulated other comprehensive income 303 -- 27,940 --
Intangible asset -- -- 4,285 --
=================================================================
</TABLE>
Principal weighted average actuarial assumptions used to determine the above
pension data were:
<TABLE>
<CAPTION>
U.S. Plans Non-U.S. Plans
-----------------------------------------------------------------
2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Discount rate 7.2% 7.5% 5.9% 6.2%
Weighted average rate of compensation increase 4.5% 4.5% 3.2% 3.1%
Long-term rate of return on plan assets 9.0% 9.0% 7.5% 8.3%
=================================================================
</TABLE>
Principal actuarial assumptions used to determine the above postretirement data
were:
<TABLE>
<CAPTION>
2001 2000
- ----------------------------------------------------------------------------------
<S> <C> <C>
Discount rate 7.2% 7.5%
Current medical cost trend rate 10.0% 8.0%
Ultimate medical cost trend rate 5.0% 5.0%
Medical cost trend rate decreases to
ultimate rate in year 2007 2007
====================
</TABLE>
The effect of a 1% increase in the assumed medical rate of inflation
would increase the accumulated postretirement benefit obligation, and the
annual postretirement expense, by approximately $12.6 million and $1.3 million,
respectively; a 1% decrease in the rate would decrease the obligation and
expense by approximately $9.4 million and $0.9 million, respectively.
During 2000, the Company initiated two separate voluntary retirement
incentive programs for United States-based employees meeting certain eligibility
requirements. Those eligible employees who elected to take the incentive will
receive additional credit, for pension purposes, in terms of age and service, as
well as other benefits. Approximately 150 employees accepted enhanced retirement
benefits under these two programs and costs relating thereto are reflected as
special termination benefits above. The special termination benefit of $2.2
million recognized during 2001 represents the liability on account of social
security supplemental benefit payments to be made to those participants who
elected to retire under the most recent window program implemented during 2001.
The Company recorded a minimum pension liability of $27.0 million at
December 31, 2001, as required by Financial Accounting Standards Board Statement
No. 87. The adjustment is reflected in other comprehensive income and other
long-term liabilities, as appropriate, and is prescribed when the accumulated
benefit obligation in the plan exceeds the fair value of the underlying
pension plan assets and accrued pension liabilities. The adjustment relates
entirely to foreign plans in the United Kingdom, the Netherlands and Japan.
<PAGE>
NOTE 14. FINANCIAL INSTRUMENTS
The Company enters into various interest rate swaps to manage its interest rate
exposure. The Company realized a net gain of $3.5 million on a $700.0 million
notional amount of U.S. Treasury lock hedges, taken out in anticipation of the
issuance of the 6.45% Notes due 2006. These swaps were designated as qualified
cash flow hedges and the net gain is being amortized over the life of the Notes.
Following the five-year Notes offering, the Company entered into a $700.0
million notional amount swap to effectively convert the 6.45% coupon interest
rate on the Notes to a short-term rate based upon LIBOR plus an interest markup.
The swap was designated as a fully effective, qualified fair value hedge. During
the year, the Company amended the swap on four occasions, which changed the
LIBOR basis and the related spread. As a result of market conditions and these
changes in the swaps, the counterparty paid the Company $19.9 million, including
accrued swap interest of $3.3 million. The net gains on settlement are being
amortized over the remaining term of the Notes. As a result of these
transactions, the effective interest rate at December 31, 2001 on the 6.45%
Notes approximated 3.7%. The Company has recorded the swap and the debt at fair
value resulting in an increase to long-term debt of $8.3 million and the
recording of a corresponding swap asset.
The Company enters into foreign currency forward contracts with the
objective of reducing exposure to cash flow volatility arising from foreign
currency fluctuations associated with certain foreign currency receivables and
payables and anticipated purchases of raw materials. The notional amount and
maturity dates of these contracts match those of the underlying transactions. At
December 31, 2001, the Company had outstanding foreign currency forward
contracts of approximately $97.3 million. The Company has designated these
contracts as qualified fair value and cash flow hedges. Accordingly, the
effective portion of the gain or loss on the derivative instrument is reported
as a component of other comprehensive income and recognized in earnings in the
same period or periods during which the hedged transaction affects earnings. The
Company had no ineffective foreign currency forward contracts at December 31,
2001.
NOTE 15. CONCENTRATIONS OF CREDIT RISK
The Company has no significant concentrations of risk in financial instruments.
Temporary cash investments are made in a well-diversified portfolio of
high-quality, liquid obligations of government, corporate and financial
institutions. There are also limited concentrations of credit risk with
respect to trade receivables because of the large number of customers spread
across many industries and geographic areas.
NOTE 16. COMMITMENTS AND CONTINGENCIES
Minimum rental commitments under noncancellable operating leases for office and
warehouse facilities are $2.2 million in 2002, $2.1 million in 2003, $1.1
million in 2004, $0.9 million in 2005 and nothing thereafter. The
corresponding rental expense amounted to $2.2 million in 2001; rental expense
was not significant in 2000 and 1999.
There are various lawsuits and claims pending against the Company.
Management believes that any liability resulting from those actions or claims
will not have a material adverse effect on the Company's financial condition,
results of operations or liquidity.
NOTE 17. RELATED-PARTY TRANSACTIONS
At December 31, 2001, the Company held a note receivable from an officer of the
Company. This note receivable bears interest, determined and payable
quarterly, at the higher of a market rate for such a loan by a third-party
lender or the Company's weighted average cost of borrowed funds. The applicable
rate as of December 31, 2001 was 4.1%. The note is collateralized by 55,000
shares of common stock and is due in full on the earlier of November 14, 2007,
termination of employment as an executive officer, or when and if the market
value of the collateral is less than 110% of the outstanding principal balance
of the loan. This note receivable is reflected as a reduction of stockholders'
equity.
<PAGE>
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
Net Income Per Share(b)
--------------------------------
(Dollars in thousands
except per share amounts) Net Sales Gross Profit Net Income(a) Basic Diluted
- -----------------------------------------------------------------------------------------------------------------------------------
Quarter 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First $ 483,661 $ 369,912 $199,522 $165,235 $ 20,272 $ 43,776 $ 0.21 $ 0.42 $ 0.21 $ 0.42
Second 478,216 368,759 208,710 165,197 33,005 48,916 0.34 0.48 0.34 0.48
Third 462,719 339,591 194,088 148,092 33,555 28,927 0.35 0.29 0.35 0.29
Fourth(c) 419,170 384,533 178,013 152,618 29,170 1,386 0.31 0.01 0.30 0.01
-----------------------------------------------------------------------------------------------------
$1,843,766 $1,462,795 $780,333 $631,142 $116,002 $123,005 $ 1.21 $ 1.22 $ 1.20 $ 1.22
=====================================================================================================
</TABLE>
(a) Net income for the 2001 first, second and third quarters includes the
after-tax effects of certain charges of $7,762, $5,663 and $5,676,
respectively. Net income for the 2000 first, third and fourth quarters
includes the after-tax effects of certain charges of $6,248, $4,765 and
$15,752, respectively. See Note 2 of the Notes to Consolidated Financial
Statements for further discussion.
(b) The sum of the 2000 quarters' earnings per share does not equal the
year-to-date earnings per share due to changes in average share
calculations. This is in accordance with prescribed reporting requirements.
(c) The Company acquired Bush Boake Allen (BBA) effective November 3, 2000, and
the BBA operating results are included in the Company's consolidated
results from that date.
STOCK PRICES
The Company's common stock is traded principally on the New York Stock Exchange.
The high and low stock prices for each quarter during the last two years were:
<TABLE>
<CAPTION>
2001 2000
--------------------------------------------------------------------------
Quarter High Low High Low
<S> <C> <C> <C> <C>
First $ 22.76 $ 19.75 $ 37.94 $ 28.75
Second 28.20 21.25 37.81 28.81
Third 31.60 24.97 30.94 17.38
Fourth 31.69 24.10 20.81 14.69
==========================================================================
</TABLE>
<PAGE>
FIVE-YEAR SUMMARY
International Flavors & Fragrances Inc.
<TABLE>
<CAPTION>
(Dollars in thousands except per share amounts) 2001 2000 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Consolidated Statement of Income Data
Net sales $ 1,843,766 $1,462,795 $ 1,439,499 $ 1,407,349 $ 1,426,791
---------------------------------------------------------------------
Cost of goods sold 1,063,433 831,653 806,382 777,764 787,533
Research and development expenses 135,248 112,671 103,794 98,438 94,411
Selling and administrative expenses 313,335 258,653 248,047 224,393 212,678
Amortization of goodwill and other intangibles 46,089 7,032 -- -- --
Nonrecurring charges(a)(b)(c) 30,069 41,273 32,948 -- --
Interest expense 70,424 25,072 5,154 2,042 2,420
Other (income) expense, net (2,609) 2,314 (291) (6,356) (10,442)
---------------------------------------------------------------------
1,655,989 1,278,668 1,196,034 1,096,281 1,086,600
---------------------------------------------------------------------
Income before taxes on income 187,777 184,127 243,465 311,068 340,191
Taxes on income 71,775 61,122 81,465 107,283 121,962
---------------------------------------------------------------------
Net income $ 116,002 $ 123,005 $ 162,000 $ 203,785 $ 218,229
---------------------------------------------------------------------
% of net sales 6.3 8.4 11.3 14.5 15.3
% of average shareholders' equity 20.1 16.5 18.0 20.9 21.0
Net income per share - basic $ 1.21 $ 1.22 $ 1.53 $ 1.90 $ 2.00
Net income per share - diluted $ 1.20 $ 1.22 $ 1.53 $ 1.90 $ 1.99
---------------------------------------------------------------------
Average number of shares (thousands) 95,770 101,073 105,748 107,122 109,065
---------------------------------------------------------------------
Consolidated Balance Sheet Data
Cash and short-term investments $ 48,905 $ 129,238 $ 62,971 $ 115,999 $ 260,446
Receivables, net 340,358 364,314 303,418 283,480 268,534
Inventories 415,984 435,312 415,269 403,961 360,074
Property, plant and equipment, net 532,473 679,874 523,916 498,784 446,509
Intangible assets, net 795,920 755,923 -- -- --
Total assets 2,268,051 2,489,033 1,401,495 1,388,064 1,422,261
Bank loans and commercial paper 227,945 852,985 92,474 29,072 10,490
Long-term debt 939,404 417,402 3,832 4,341 5,114
Shareholders' equity 524,170 631,259 858,497 945,051 1,000,488
---------------------------------------------------------------------
Other Data
Current ratio 1.6 0.9 2.3 3.1 3.5
Gross additions to property, plant and equipment $ 52,016 $ 60,696 $ 103,835 $ 91,690 $ 59,284
Depreciation and amortization charged to income 123,493 69,344 56,369 49,006 50,278
Cash dividends declared 57,219 130,234 160,830 159,513 158,453
Per share $ 0.60 $ 1.29 $ 1.52 $ 1.49 $ 1.45
Number of shareholders of record at year-end 3,394 3,741 4,209 4,653 4,991
Number of employees at year-end 5,929 6,614 4,682 4,669 4,639
=====================================================================
</TABLE>
(a) Nonrecurring charges ($19,101 after tax) in 2001 resulted from the
Company's reorganization program as well as certain costs associated with
the integration of BBA.
(b) Nonrecurring charges ($26,765 after tax) in 2000 resulted from the
Company's reorganization program as well as certain costs associated with
the integration of BBA.
(c) Nonrecurring charges ($21,910 after tax) in 1999 resulted from the
Company's program to streamline its operations worldwide.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
DIRECTORS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Margaret Hayes Adame J. Michael Cook Carlos A. Lobbosco William D. Van Dyke, III
President Chairman and Executive Vice President Senior Vice President
Fashion Group International Chief Executive Officer Emeritus Global Business Development Salomon Smith Barney Inc.
Deloitte & Touche, LLP
Gunter Blobel, M.D., Ph.D. Arthur C. Martinez Douglas J. Wetmore
Nobel Prize-winning Peter A. Georgescu Chairman and Senior Vice President and
Rockefeller University Professor Chairman Emeritus Chief Executive Officer Emeritus Chief Financial Officer
associated with Howard Young & Rubicam, Inc. Sears, Roebuck and Co.
Hughes Medical Institute
Richard A. Goldstein Henry P. van Ameringen
James R. Cantalupo Chairman of the Board and President
President and Chief Executive Officer van Ameringen Foundation, Inc.
Vice Chairman Emeritus
McDonald's Corporation
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS GLOBAL VICE PRESIDENTS AND
REGIONAL MANAGERS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Richard A. Goldstein Clint D. Brooks, Ph.D. GLOBAL Joel W. Shane
Chairman of the Board Vice President VICE PRESIDENTS Vice President
and Chief Executive Officer Research & Development Derek J. Bennett Global Business
Vice President Development - Aroma
Julian W. Boyden Steven J. Heaslip Global Operations - Chemicals and Ingredients
Executive Vice President Vice President Fragrances
Global Human Resources Thomas J. Skatrud
D. Wayne Howard Roberto J. Gordon Vice President
Executive Vice President James P. Huether Vice President Global Operations - Flavors
Global Operations Controller Global Business
Development - Fragrances REGIONAL MANAGERS
Carlos A. Lobbosco Charles D. Weller Arun Bewoor
Executive Vice President Treasurer Steve Huang, Ph.D. Group Country Manager
Global Business Vice President Indian Subcontinent
Development VICE PRESIDENTS Global Operations - Aroma
Sophia Grojsman Chemicals and Ingredients Robert Burns
Stephen A. Block Jose A. Rodriguez Vice President
Senior Vice President Neil Humphreys Asia-Pacific
General Counsel and Vice President
Secretary Global Business James H. Dunsdon
Development - Flavors Vice President
Douglas J. Wetmore North America
Senior Vice President and Bruce S. Leskanic
Chief Financial Officer Vice President Robert J. Edelman
Supply Chain Strategy Vice President
Gail S. Belmuth Europe
Vice President Nicolas Mirzayantz
Corporate Communications Vice President Graciela M. Ferro
Global Business Vice President
Development - Fine Latin America
Fragrances and Toiletries
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>6
<FILENAME>dex21.txt
<DESCRIPTION>LIST OF PRINCIPAL SUBSIDIARIES
<TEXT>
<PAGE>
Exhibit 21
LIST OF SUBSIDIARIES OF INTERNATIONAL FLAVORS & FRAGRANCES INC.
------------------------------------------------------
Below is a list of the subsidiaries of the Company. Each subsidiary does
business under the name identified below. All of the voting stock of each
subsidiary is owned, either directly or indirectly, by the Company, except where
noted and except, in certain instances for directors' qualifying shares.
<TABLE>
<CAPTION>
Name of Subsidary
Incorporation Place of
- ----------------- --------
- ----
<S> <C>
International Flavors & Fragrances I.F.F. (Nederland) B.V. The Netherlands
Aromatics Holdings Limited Ireland
IFF-Benicarlo, S.A. Spain
International Flavours & Fragrances (China) Ltd. China
Irish Flavours and Fragrances Limited Ireland
International Flavours & Fragrances I.F.F. (Great Britain) Ltd. England
International Flavors & Fragrances I.F.F. (Italia) S.r.l. Italy
International Flavors & Fragrances I.F.F. (Deutschland) G.m.b.H. Germany
International Flavors & Fragrances I.F.F. (Switzerland) A.G. Switzerland
International Flavors & Fragrances I.F.F. (France) S.a.r.l. France
International Flavors & Fragrances (Hong Kong) Ltd. Hong Kong
International Flavors & Fragrances (Japan) Ltd. Japan
International Flavors & Fragrances S.A.C.I. Argentina
I.F.F. Essencias e Fragrancias Ltda. Brazil
International Flavours & Fragrances (Australia) Pty. Ltd. Australia
P.T. Essence Indonesia Indonesia
International Flavors & Fragrances (Mexico) S.A. de C.V. Mexico
IFF Mexico Manufactura, S.A. de C.V. Mexico
International Flavors & Fragrances I.F.F. (Espana) S.A. Spain
International Flavors & Fragrances (Poland) Sp.z.o.o. Poland
IFF Trading Company B.V. The Netherlands
International Flavors & Fragrances (Hangzhou) Co. Ltd (1) China
International Flavors & Fragrances I.F.F. (S.A.) (Pty) Ltd. South Africa
The PAKS Corporation New York
International Flavors & Fragrances I.F.F. (Canada) Ltd. Canada
IFF FSC Inc. U.S. Virgin Islands
Alva Insurance Ltd. Bermuda
van Ameringen-Haebler, Inc. New York
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
Name of Subsidiary
Incorporation Place of
- ------------------ --------
- -----
<S> <C>
International Flavors & Fragrances (Caribe) Inc. Delaware
Sabores y Fragrancias S.A. Colombia
IFF Sabores y Fragrancias de Chile Ltda. Chile
International Flavors & Fragrances I.F.F. (East Africa) Ltd. Kenya
International Flavors & Fragrances I.F.F. (Sverige) A.B. Sweden
International Flavors & Fragrances I.F.F. (Norge) A.S. Norway
IFF (Near East) Flavors & Fragrances Company A.S. Turkey
International Flavors & Fragrances IFF (Hungary)
Kereskedelmi es Szolgaltato K.F.T. Hungary
International Flavors & Fragrances I.F.F. (Israel) Ltd. Israel
Misr Co. for Aromatic Products (MARP) S.A.E. Egypt
International Flavors & Fragrances I.F.F. (Portugal) Lds. Portugal
International Flavors & Fragrances (Zimbabwe) (Private) Ltd. Zimbabwe
International Flavours & Fragrances (Mauritius) Ltd. Mauritius
International Flavours & Fragrances (India) Private Limited India
International Flavors & Fragrances (Philippines) Inc. Philippines
International Flavors & Fragrances (Asia Pacific) Pte. Ltd. Singapore
International Flavours & Fragrances (Thailand) Ltd. Thailand
International Flavors & Fragrances (Korea) Inc. Korea
Laboratoires Monique Remy S.a.r.l. France
International Flavors & Fragrances (Nederland) Holding B.V. The Netherlands
International Flavors & Fragrances Ardenne S.a.r.l. Luxembourg
International Flavors & Fragrances (Luxembourg) S.a.r.l. Luxembourg
International Flavors & Fragrances Global S.a.r.l. Luxembourg
International Flavours & Fragrances (GB) Holdings Limited United Kingdom
IFF International Inc. New York
IFF Financial Services Ireland
International Flavors & Fragrances Global Holding S.a.r.l. Luxembourg
IFF Capital Services Ireland
IFF (Gibraltar) Limited Gibraltar
IFF Australia Holdings Pty Limited Australia
IFF Chemical Holdings Inc. Delaware
Bush Boake Allen Inc. Virginia
Bush Boake Allen (Chile) S.A. Chile
Bush Boake Allen Industria E Commercial do Brasil Limitada Brazil
Bush Boake Allen Colombia S.A. Colombia
Bush Boake Allen Mexico, S.A. de C.V. Mexico
Bush Boake Allen Controladora S.A. de C.V. Mexico
Bush Boake Allen Servicios S.A. de C.V. Mexico
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Name of Subsidary
Incorporation Place of
- ----------------- --------
- -----
<S> <C>
Bush Boake Allen (Nominees) Limited England
Bush Boake Allen Holdings (U.K.) Limited England
Bush Boake Allen Pension Investments Limited England
Bush Boake Allen (Executive Pension Trustees) Limited England
Bush Boake Allen (Pension Trustees) Limited England
Bush Boake Allen (Works Pension Trustees) Limited England
Bush Boake Allen Limited England
W.J. Bush & Co., Inc. Delaware
GMB Proteins Limited England
Bush Boake Allen Australia Pty Ltd. Australia
Bush Boake Allen Morimura Limited Japan
Bush Boake Allen (Guangzhou) Co. Ltd. (2) China
Bush Boake Allen (Hong Kong) Limited Hong Kong
A. Boake, Roberts And Company (Holding), Limited England
Bush Boake Allen Esans ve Aromatik Urunler Sanayi AS (3) Turkey
PT Bush Boake Allen Indonesia (4) Indonesia
Bush Boake Allen (New Zealand) Limited New Zealand
Bush Boake Allen Singapore Pte. Ltd. Singapore
Bush Boake Allen (Malaysia) SDN. BHD. (Kuala Lumpur) Malaysia
Bush Boake Allen Denmark ApS. Denmark
Bush Boake Allen France France
Bush Boake Allen Zimbabwe (Private) Limited Zimbabwe
Bush Boake Allen (India) Limited (5) India
Hindustan Flavours and Fragrances (International) Limited (6) India
Bush Boake Allen (Jamaica) Limited (7) Jamaica
Bush Boake Allen (SA) (Proprietary) Limited South Africa
Bush Boake Allen (Thailand) Limited (8) Thailand
Bush Boake Allen Deutschland GmbH West Germany
Bush Boake Allen, Moscow, Ltd. Russia
Bush Boake Allen Benelux B.V. Netherlands
Bush Boake Allen Scandinavia Aktielbolag Sweden
Bush Boake Allen (C.R.) s.r.o. Czech Republic
Stafford Specialty Ingredients Limited England
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Name of Subsidary
Incorporation Place of
- ----------------- --------
- -----
<S> <C>
Bush Boake Allen Pakistan (Private) Limited (9) Pakistan
Bush Boake Allen Philippines, Inc. Philippines
Asian Investments, Inc. Delaware
Fragrance Holdings Private Limited India
Essence Scientific Research Private Limited India
Jamaica Extracts Limited (10) Jamaica
Thai Flavour & Fragrance Co. Limited (11) Thailand
Bush Boake Allen Aromatica S. A. Argentina
Bush Boake Allen Barbados Inc. Barbados
Bush Boake Allen Enterprises Ltd. England
Bush Boake Allen Holdings I B.V. The Netherlands
Bush Boake Allen Holdings II B.V. The Netherlands
</TABLE>
- ------------------------------------------------
(1) 90% of the voting stock of International Flavors & Fragrances (Hangzhou)
Co. Ltd., is owned, directly or indirectly, by the Company.
(2) 98% of the voting stock of Bush Boake Allen (Guangzhou) Co. Ltd. is owned,
directly or indirectly, by the Company.
(3) 99.9% of the voting stock of Bush Boake Allen Esans ve Aromatik Urunler
Sanayi AS is owned, directly or indirectly, by the Company.
(4) 60% of the voting stock of PT Bush Boake Allen Indonesia is owned, directly
or indirectly, by the Company.
4
<PAGE>
(5) 75% of the voting stock of Bush Boake Allen (India) Limited is owned,
directly or indirectly, by the Company.
(6) 75% of the voting stock of Hindustan Flavours and Fragrances
(International) Limited is owned, directly or indirectly, by the Company.
(7) 70% of the voting stock of Bush Boake Allen (Jamaica) Limited is owned,
directly or indirectly, by the Company.
(8) 60% of the voting stock of Bush Boake Allen (Thailand) Limited is owned,
directly or indirectly, by the Company.
(9) 50% of the voting stock of Bush Boake Allen Pakistan (Private) Limited is
owned, directly or indirectly, by the Company.
(10) 58% of the voting stock of Jamaica Extracts Limited is owned, directly or
indirectly, by the Company.
(11) 49% of the voting stock of Thai Flavour & Fragrance Co. Limited is owned,
directly or indirectly, by the Company.
5
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>7
<FILENAME>dex23.txt
<DESCRIPTION>CONSENT OF PRICEWATERHOUSECOOPER LLP.
<TEXT>
<PAGE>
Exhibit 23
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (No. 333-46932 and No. 333-59689)and the Registration
Statements on Form S-8 (No. 333-61072, No. 333-51436, No. 333-50752 and
No. 33-54423) of International Flavors & Fragrances Inc. of our report dated
January 28, 2002 relating to the financial statements, which appears in the
Annual Report to Shareholders, which is incorporated in this Annual Report on
Form 10-K. We also consent to the incorporation by reference of our report dated
January 28, 2002 relating to the financial statement schedule, which appears in
this Form 10-K.
PricewaterhouseCoopers LLP
New York, New York
March 27, 2002
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-24
<SEQUENCE>8
<FILENAME>dex24.txt
<DESCRIPTION>POWER OF ATTORNEY
<TEXT>
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
The undersigned director and/or officer of International Flavors &
Fragrances Inc., a New York corporation, which is about to file with the
Securities and Exchange Commission, under the provisions of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K for the Year Ended December 31, 2001, hereby constitutes and appoints
Stephen A. Block and Douglas J. Wetmore his (her) attorneys, and each of them
his (her) attorney with power to act without the other, with full power of
substitution and resubstitution, for him (her) and in his (her) name, place and
stead to sign in any and all capacities such Annual Report, and any and all
amendments thereto, and to file the same with all exhibits thereto and other
documents in connection therewith, granting unto said attorneys, and each of
them, full power and authority to do so and to perform all and every act
necessary to be done in connection therewith, as fully to all intents and
purposes as he (she) might or could do if personally present, hereby ratifying
the acts of his (her) said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has hereunto set his (her) hand this
12th day of March 2002.
/s/ MARGARET HAYES ADAME
--------------------------
Margaret Hayes Adame
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned director and/or officer of International Flavors &
Fragrances Inc., a New York corporation, which is about to file with the
Securities and Exchange Commission, under the provisions of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K for the Year Ended December 31, 2001, hereby constitutes and appoints
Stephen A. Block and Douglas J. Wetmore his (her) attorneys, and each of them
his (her) attorney with power to act without the other, with full power of
substitution and resubstitution, for him (her) and in his (her) name, place and
stead to sign in any and all capacities such Annual Report, and any and all
amendments thereto, and to file the same with all exhibits thereto and other
documents in connection therewith, granting unto said attorneys, and each of
them, full power and authority to do so and to perform all and every act
necessary to be done in connection therewith, as fully to all intents and
purposes as he (she) might or could do if personally present, hereby ratifying
the acts of his (her) said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has hereunto set his (her) hand this
12th day of March 2002.
/s/GUNTER BLOBEL
------------------
Gunter Blobel
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned director and/or officer of International Flavors &
Fragrances Inc., a New York corporation, which is about to file with the
Securities and Exchange Commission, under the provisions of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K for the Year Ended December 31, 2001, hereby constitutes and appoints
Stephen A. Block and Douglas J. Wetmore his (her) attorneys, and each of them
his (her) attorney with power to act without the other, with full power of
substitution and resubstitution, for him (her) and in his (her) name, place and
stead to sign in any and all capacities such Annual Report, and any and all
amendments thereto, and to file the same with all exhibits thereto and other
documents in connection therewith, granting unto said attorneys, and each of
them, full power and authority to do so and to perform all and every act
necessary to be done in connection therewith, as fully to all intents and
purposes as he (she) might or could do if personally present, hereby ratifying
the acts of his (her) said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has hereunto set his (her) hand this
12th day of March 2002.
/s/ JAMES R. CANTALUPO
------------------------
James R. Cantalupo
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned director and/or officer of International Flavors &
Fragrances Inc., a New York corporation, which is about to file with the
Securities and Exchange Commission, under the provisions of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K for the Year Ended December 31, 2001, hereby constitutes and appoints
Stephen A. Block and Douglas J. Wetmore his (her) attorneys, and each of them
his (her) attorney with power to act without the other, with full power of
substitution and resubstitution, for him (her) and in his (her) name, place and
stead to sign in any and all capacities such Annual Report, and any and all
amendments thereto, and to file the same with all exhibits thereto and other
documents in connection therewith, granting unto said attorneys, and each of
them, full power and authority to do so and to perform all and every act
necessary to be done in connection therewith, as fully to all intents and
purposes as he (she) might or could do if personally present, hereby ratifying
the acts of his (her) said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has hereunto set his (her) hand this
12th day of March 2002.
/s/ J. MICHAEL COOK
---------------------
J. Michael Cook
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned director and/or officer of International Flavors &
Fragrances Inc., a New York corporation, which is about to file with the
Securities and Exchange Commission, under the provisions of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K for the Year Ended December 31, 2001, hereby constitutes and appoints
Stephen A. Block and Douglas J. Wetmore his (her) attorneys, and each of them
his (her) attorney with power to act without the other, with full power of
substitution and resubstitution, for him (her) and in his (her) name, place and
stead to sign in any and all capacities such Annual Report, and any and all
amendments thereto, and to file the same with all exhibits thereto and other
documents in connection therewith, granting unto said attorneys, and each of
them, full power and authority to do so and to perform all and every act
necessary to be done in connection therewith, as fully to all intents and
purposes as he (she) might or could do if personally present, hereby ratifying
the acts of his (her) said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has hereunto set his (her) hand this
12th day of March 2002.
/s/ PETER A. GEORGESCU
------------------------
Peter A. Georgescu
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned director and/or officer of International Flavors &
Fragrances Inc., a New York corporation, which is about to file with the
Securities and Exchange Commission, under the provisions of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K for the Year Ended December 31, 2001, hereby constitutes and appoints
Stephen A. Block and Douglas J. Wetmore his (her) attorneys, and each of them
his (her) attorney with power to act without the other, with full power of
substitution and resubstitution, for him (her) and in his (her) name, place and
stead to sign in any and all capacities such Annual Report, and any and all
amendments thereto, and to file the same with all exhibits thereto and other
documents in connection therewith, granting unto said attorneys, and each of
them, full power and authority to do so and to perform all and every act
necessary to be done in connection therewith, as fully to all intents and
purposes as he (she) might or could do if personally present, hereby ratifying
the acts of his (her) said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has hereunto set his (her) hand this
12th day of March 2002.
/s/ RICHARD A. GOLDSTEIN
--------------------------
Richard A. Goldstein
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned director and/or officer of International Flavors &
Fragrances Inc., a New York corporation, which is about to file with the
Securities and Exchange Commission, under the provisions of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K for the Year Ended December 31, 2001, hereby constitutes and appoints
Stephen A. Block and Douglas J. Wetmore his (her) attorneys, and each of them
his (her) attorney with power to act without the other, with full power of
substitution and resubstitution, for him (her) and in his (her) name, place and
stead to sign in any and all capacities such Annual Report, and any and all
amendments thereto, and to file the same with all exhibits thereto and other
documents in connection therewith, granting unto said attorneys, and each of
them, full power and authority to do so and to perform all and every act
necessary to be done in connection therewith, as fully to all intents and
purposes as he (she) might or could do if personally present, hereby ratifying
the acts of his (her) said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has hereunto set his (her) hand this
12th day of March 2002.
/s/ CARLOS A. LOBBOSCO
------------------------
Carlos A. Lobbosco
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned director and/or officer of International Flavors &
Fragrances Inc., a New York corporation, which is about to file with the
Securities and Exchange Commission, under the provisions of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K for the Year Ended December 31, 2001, hereby constitutes and appoints
Stephen A. Block and Douglas J. Wetmore his (her) attorneys, and each of them
his (her) attorney with power to act without the other, with full power of
substitution and resubstitution, for him (her) and in his (her) name, place and
stead to sign in any and all capacities such Annual Report, and any and all
amendments thereto, and to file the same with all exhibits thereto and other
documents in connection therewith, granting unto said attorneys, and each of
them, full power and authority to do so and to perform all and every act
necessary to be done in connection therewith, as fully to all intents and
purposes as he (she) might or could do if personally present, hereby ratifying
the acts of his (her) said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has hereunto set his (her) hand this
12th day of March 2002.
/s/ ARTHUR C. MARTINEZ
------------------------
Arthur C. Martinez
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned director and/or officer of International Flavors &
Fragrances Inc., a New York corporation, which is about to file with the
Securities and Exchange Commission, under the provisions of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K for the Year Ended December 31, 2001, hereby constitutes and appoints
Stephen A. Block and Douglas J. Wetmore his (her) attorneys, and each of them
his (her) attorney with power to act without the other, with full power of
substitution and resubstitution, for him (her) and in his (her) name, place and
stead to sign in any and all capacities such Annual Report, and any and all
amendments thereto, and to file the same with all exhibits thereto and other
documents in connection therewith, granting unto said attorneys, and each of
them, full power and authority to do so and to perform all and every act
necessary to be done in connection therewith, as fully to all intents and
purposes as he (she) might or could do if personally present, hereby ratifying
the acts of his (her) said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has hereunto set his (her) hand this
12th day of March 2002.
/s/ HENRY P. VAN AMERINGEN
----------------------------
Henry P. van Ameringen
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned director and/or officer of International Flavors &
Fragrances Inc., a New York corporation, which is about to file with the
Securities and Exchange Commission, under the provisions of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K for the Year Ended December 31, 2001, hereby constitutes and appoints
Stephen A. Block and Douglas J. Wetmore his (her) attorneys, and each of them
his (her) attorney with power to act without the other, with full power of
substitution and resubstitution, for him (her) and in his (her) name, place and
stead to sign in any and all capacities such Annual Report, and any and all
amendments thereto, and to file the same with all exhibits thereto and other
documents in connection therewith, granting unto said attorneys, and each of
them, full power and authority to do so and to perform all and every act
necessary to be done in connection therewith, as fully to all intents and
purposes as he (she) might or could do if personally present, hereby ratifying
the acts of his (her) said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has hereunto set his (her) hand this
12th day of March 2002.
/s/ WILLIAM D. VAN DYKE, III
----------------------------
William D. Van Dyke, III
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned director and/or officer of International Flavors &
Fragrances Inc., a New York corporation, which is about to file with the
Securities and Exchange Commission, under the provisions of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K for the Year Ended December 31, 2001, hereby constitutes and appoints
Stephen A. Block and Douglas J. Wetmore his (her) attorneys, and each of them
his (her) attorney with power to act without the other, with full power of
substitution and resubstitution, for him (her) and in his (her) name, place and
stead to sign in any and all capacities such Annual Report, and any and all
amendments thereto, and to file the same with all exhibits thereto and other
documents in connection therewith, granting unto said attorneys, and each of
them, full power and authority to do so and to perform all and every act
necessary to be done in connection therewith, as fully to all intents and
purposes as he (she) might or could do if personally present, hereby ratifying
the acts of his (her) said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has hereunto set his (her) hand this
12th day of March 2002.
/S/ DOUGLAS J. WETMORE
------------------------
Douglas J. Wetmore
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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