-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
UaIb9fc5lPTJVwzJuKyY1E+Vd7ln72bOT9BB5y0p9MPUcysy35s+XGWj7W9wD+Lc
pjoGt5335uKjX79GKsLHhw==
<SEC-DOCUMENT>0000950136-03-000643.txt : 20030325
<SEC-HEADER>0000950136-03-000643.hdr.sgml : 20030325
<ACCEPTANCE-DATETIME>20030325132132
ACCESSION NUMBER: 0000950136-03-000643
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 9
CONFORMED PERIOD OF REPORT: 20021231
FILED AS OF DATE: 20030325
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: 03615456
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
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>file001.txt
<DESCRIPTION>FORM 10-K
<TEXT>
<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2002 Commission File Number 1-4858
INTERNATIONAL FLAVORS & FRAGRANCES INC.
(Exact name of Registrant as specified in its charter)
NEW YORK 13-1432060
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
521 WEST 57TH STREET, NEW YORK, N.Y. 10019
(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
12 1/2(cent) 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. [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act) Yes [X] No [ ].
For the purpose of reporting the following market value of Registrant's
outstanding common stock, the term "affiliate" refers to persons, entities or
groups which directly or indirectly control, are controlled by, or are under
common control with the Registrant and does not include individual executive
officers or directors or under 10% shareholders. The aggregate market value of
Registrant's common stock not held by affiliates as of June 28, 2002 was
$3,080,187,516.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of March 1, 2003:
93,869,384 shares of Common Stock, par value 12 1/2 (cent) per share
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal
year ended December 31, 2002 (the "IFF 2002 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 to shareholders in
connection with the 2003 Annual Meeting (the "IFF 2003 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 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.
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.
In November 2000, the Company acquired Bush Boake Allen Inc. ("BBA"), an
international flavor, fragrance and aroma chemical company with worldwide
annual sales of $499 million. This acquisition enhanced the Company's position
as a global leader in flavor markets, strengthened the Company's already
leading global fragrance position, expanded the Company's product line and
customer base, particularly in certain emerging markets, and broadened and
enhanced the Company's management pool.
The Company currently has 35 manufacturing facilities with the major
manufacturing facilities being located in the United States, The Netherlands,
France, Great Britain, Ireland, Spain, Switzerland, 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 34 countries and
is represented by sales agents in other countries. The Company's principal
executive offices are located at 521 West 57th Street, New York, New York 10019
(212-765-5500). Except as the context otherwise indicates, the term "the
Company" as used in this report 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 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, 2002, sales of fragrance products accounted for
approximately 55%, 55% and 59%, respectively, of the Company's total sales on a
reported basis.
2
<PAGE>
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, 2002
sales of flavor products accounted for approximately 45%, 45% 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 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 number of compounds is sold
to manufacturers who further blend them to achieve the finished fragrance or
flavor in their products. The Company produces thousands of compounds, 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 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. The Company manufactures most of the synthetic ingredients and key
strategic natural ingredients. 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. The Company's
flavor products also include extracts and seasonings derived from various
fruits, vegetables, nuts, herbs and spices as well as microbiologically-derived
ingredients.
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 that utilize some
of the Company's flavor or fragrance products. These developments have called
for the 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 skills for creating fragrances or flavors best suited
to the market requirements of the customers' products.
3
<PAGE>
An important contribution to the creation of new fragrance and flavor
products is the development 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 synthesize flavor components found in natural
substances and to isolate and produce natural flavor ingredients utilizing
improved processes.
The work of the perfumers and flavorists is conducted in 37 fragrance and
flavor laboratories in 27 countries. The Company maintains a research center at
Union Beach, New Jersey. The Company spent $144,027,000 in 2002, $135,248,000
in 2001 and $112,671,000 in 2000 on its research and development activities.
These expenditures are expected to increase in 2003 to approximately
$160,000,000. Of the amount expended in 2002 on such activities, 64% was for
fragrances and the balance was for flavors. The Company employed 1097 persons
in 2002 and 1060 persons in 2001 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 through its own sales force, operating
from 7 sales offices in the United States and 52 sales offices in 33 foreign
countries. Sales in other countries are made through sales agents and
distributors. For the year ended December 31, 2002, 32% of the Company's sales
were to customers in North America, 37% in Europe, 16% in Asia-Pacific, 12% in
Latin America and 3% in the India Region. For additional information with
respect to the management of the Company's operations by major geographical
region, see Note 13 of the Notes to the Company's Consolidated Financial
Statements on pages 46-47 of the IFF 2002 Annual Report.
During 2002 the Company's 30 largest customers accounted for approximately
52% of its sales, its four largest customers and their affiliates accounted for
about 9%, 8%, 6% and 4%, 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 2003 approximately
$3,800,000 in capital projects and $13,500,000 in operating expenses and
governmental charges for the purpose of complying with such requirements. The
Company expects that in 2004 capital expenditures, operating expenses and
governmental charges for such purpose will not be materially different.
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
4
<PAGE>
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. 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 for sale to manufacturers of consumer
products. In particular countries and localities, the Company faces competition
from 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, 2002 employed 5,728 persons, of whom 1,656
were employed in the United States. The Company has never experienced a work
stoppage or strike and considers that its employee relations are satisfactory.
AVAILABLE INFORMATION
The Company makes available free of charge through its website,
www.iff.com, all materials that it files electronically with the SEC, including
its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as
reasonably practicable after electronically filing such materials with, or
furnishing them to, the SEC. During the period covered by this Form 10-K, the
Company made all such materials available through its website as soon as
reasonably practicable after filing such materials with the SEC.
You may also read and copy any materials filed by the Company with the SEC
at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, DC
20549, and you may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an
Internet website, www.sec.gov, that contains reports, proxy and information
statements and other information that the Company files electronically with the
SEC.
CAUTIONARY STATEMENT
Statements in this Annual Report on Form 10-K (including information
incorporated by reference from the IFF 2002 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. Such
forward-looking statements are based on management's reasonable current
assumptions and expectations. Such forward-looking statements involve risks,
uncertainties and other factors, which may cause the actual results of the
Company to be materially different from any future results expressed or implied
by such forward-looking statements, and there can be no assurance that actual
results will not differ materially from management's expectations. Such factors
include, among others, the following: general economic and business conditions
in the Company's markets, including economic and political uncertainties;
interest rates; the price and availability of raw materials; the Company's
ability to implement its business strategy, including the achievement of
anticipated cost savings, profitability and growth targets; the impact of
currency fluctuation or devaluation in the Company's principle foreign markets
and the success of the Company's hedging and risk management strategies; the
impact of possible pension funding obligations and increased pension expense on
the Company's cash flow and results of operations; and the effect of legal and
regulatory proceedings, as well as restrictions imposed on the Company, its
operations or its representatives by foreign governments.
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 or to reflect changes in expectations,
assumptions or results.
5
<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 (1) ................. Production of fragrance compounds; fragrance laboratories.
South Brunswick, NJ(1) ......... Production of flavor ingredients and compounds;
flavor laboratories.
Union Beach, NJ ................ Research and development center.
Carrollton, TX(1) .............. Production of seasonings.
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.
IRELAND
Drogheda ....................... Production of fragrance compounds.
SPAIN
Benicarlo ...................... Production of fragrance chemical ingredients.
SWITZERLAND
Reinach-Aargau ................. Production of fruit preparations.
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.
Sao Paulo ...................... Fragrance laboratories.
MEXICO
Tlalnepantla ................... Production of flavor and fragrance compounds; flavor and fragrance
laboratories.
CHINA
Guangzhou(1) ................... Production of flavor and fragrance compounds; flavor laboratories.
Shanghai(1) .................... Flavor and fragrance laboratories.
Xin'anjiang .................... Production of fragrance chemical ingredients.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
LOCATION OPERATION
- -------- ---------
<S> <C>
INDIA
Chennai(2) ............... Production of flavor and fragrance compounds and flavor ingredients.
SINGAPORE
Jurong(3) ................ Production of flavor and fragrance compounds.
Science Park (1) ......... Flavor and fragrance laboratories.
PHILIPPINES
Manila(1) ................ Production of flavor 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.
Tokyo .................... Flavor and fragrance laboratories.
AUSTRALIA
Melbourne ................ Production of flavor compounds and flavor ingredients.
Sydney ................... Production of seasonings.
</TABLE>
- ----------
(1) Leased.
(2) The Company has approximately a 93.1% interest in the subsidiary company
that owns this facility.
(3) Land is leased and building is partially leased and partially owned.
The principal executive offices of the Company and its New York laboratory
facilities are located at 521 West 57th Street, New York City.
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 currently in discovery. 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 20 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
7
<PAGE>
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 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 61 2000
Officer since June 2000; President and Chief
Executive Officer of Unilever United States,
Inc. and Business Group President of Unilever
North American Foods, a home, personal care
and food products company, 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, New Business 58 2000
Development since November 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 47 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, prior
thereto.
Stephen A. Block ................ Senior Vice President, General Counsel and 58 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.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
YEAR
FIRST
BECAME
NAME OFFICE AND OTHER BUSINESS EXPERIENCE(2) AGE OFFICER
----- -------------------------------------------------- ----- --------
<S> <C> <C> <C>
Clint D. Brooks ............ Senior Vice President, Research and 51 2000
Development since December 2002; Vice
President, Research and Development from
October 2000 to December 2002; Director of
Chemical Sciences, Abbott Laboratories, a
pharmaceutical company, prior thereto.
Steven J. Heaslip .......... Senior Vice President, Human Resources since 45 2001
December 2002; Vice President, Human
Resources from September 2001 to December
2002; Senior Vice President, Human
Resources, Elizabeth Arden, a manufacturer
of prestige beauty products, prior thereto.
Douglas J. Wetmore ......... Senior Vice President and Chief Financial 45 1992
Officer since September 2000; Vice President
and Chief Financial Officer from April 1998 to
September 2000; Controller prior thereto.
Gail S. Belmuth ............ Vice President, Corporate Communications since 39 2001
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, prior thereto.
Arun Bewoor ................ Vice President, India Region since January 2003; 58 2003
Managing Director of IFF India Ltd and
Regional Vice President, India Region from
June 2002 to January 2003; Managing
Director, Bush Boake Allen India Ltd., prior
thereto.
Robert Burns ............... Vice President, Asia Pacific Region since 45 2003
January 2003; Regional Vice President, Asia
Pacific from January 2001 to January 2003;
Managing Director, IFF Australia from
January 1999 to December 2000; Managing
Director/Vice President Flavors, IFF
Indonesia, prior thereto.
James H. Dunsdon ........... Vice President, North America Region since 56 2003
January 2003; Regional Vice President, North
America from January 2001 to January 2003;
Executive Vice President BBA, prior thereto.
Rob J. M. Edelman .......... Vice President, Europe Region since January 41 2003
2003; Regional Vice President, Europe from
January 2001 to January 2003; Vice President
and Director of Marketing and Sales, Aroma
Chemicals from July 1999 to December 2000;
Managing Director, PFW Aroma Chemicals
B.V., an aroma chemicals manufacturing
company, prior thereto.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
YEAR
FIRST
BECAME
NAME OFFICE AND OTHER BUSINESS EXPERIENCE(2) AGE OFFICER
---- ----------------------------------------------- ----- --------
<S> <C> <C> <C>
Graciela M. Ferro .......... Vice President, Latin America Region since 48 2003
January 2003; Regional Vice President, Latin
America from October 2000 to January 2003;
Vice President, Latin America, LATAM Area
Manager, Fragrance Division and IFF
Argentina affiliate Manager from October
1999 to October 2000; Vice President, Latin
America, IFF Argentina Affiliate Manager
from August 1998 to October 1999; Regional
Account Manager for the Unilever, Latin
America Account, prior thereto.
Robert J. Gordon ........... Vice President, Sales, Global Accounts since 50 2002
December 2002; Vice President, Global
Business Development, Functional Products,
Fragrances from January 2001 to December
2002; Regional Vice President, EAME from
January 2000 to January 2001; Regional Vice
President, Latin America, prior thereto.
Neil Humphreys ............. Vice President, Global Business Development, 56 2002
Flavors and Functional Fragrances since
December 2002; Vice President, Global
Business Development, Flavors from January,
2001 until December 2002; Vice President,
Regional Manager, Asia-Pacific, Flavors from
July 1998 to January 2001; Senior Vice
President, Asia-Pacific, Givaudan-Roure, a
flavor, fragrance and aroma chemical
manufacturing company, prior thereto.
Nicolas Mirzayantz ......... Vice President, Global Business Development, 40 2002
Fine Fragrance and Toiletries since December
2002; Vice President, Global Business
Development, Fine Fragrances and Toiletries
since January 2001; Fragrances General
Manager, IFF France from January 1999 to
January 2001; Vice President, Commercial and
Creative Director, IFF France, 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.
10
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS.
(a) Market Information.
Information concerning where the Company's common stock is traded and the
high and low stock prices for each quarter during the last two years appears
under the caption "Stock Prices" on page 51 of the IFF Annual Report and such
information is incorporated by reference herein.
(b) Approximate Number of Equity Security Holders.
(B)
(A) NUMBER OF RECORD HOLDERS AS
TITLE OF CLASS OF DECEMBER 31, 2002
-------------- -----------------------------
Common stock, par value 12 1/2 (cent) per share 3,875
(c) Dividends.
Cash dividends declared per share for each quarter since January 2001 were
as follows:
2003 2002 2001
--------- --------- ---------
First ............................ $.15 $.15 $.15
Second ........................... .15 .15
Third ............................ .15 .15
Fourth ........................... .15 .15
ITEM 6. SELECTED FINANCIAL DATA.
Information setting forth the selected financial data required by this
Item 6 appears on page 52 of the IFF 2002 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 under the
caption "Management's Discussion and Analysis of Results of Operations and
Financial Condition" on pages 25 to 32 of the IFF 2002 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 15 on page 50 of the IFF 2002 Annual
Report. Such information is incorporated by reference in this Item 7A.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of the Company and its subsidiaries
and the notes thereto, listed in Item 15(a)(1) and included in the IFF 2002
Annual Report on pages 34 through 50, together with the report thereon of
PricewaterhouseCoopers LLP dated January 27, 2003 on page 33 of the IFF 2002
Annual Report, and quarterly financial information on page 51 of the IFF 2002
Annual Report, are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
11
<PAGE>
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 2003 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 2003 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 2002," "Aggregated Option
Exercises in 2002 and Option Values at December 31, 2002," "Directors'
Compensation," "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements," "Executive Separation Policy" and "Pension
Plans" in the IFF 2003 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 2003 Proxy Statement and such information is
incorporated by reference herein. The information relating to the Company's
equity plans is set forth under the caption "Equity Compensation Plan
Information" in the IFF 2003 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 2003 Proxy Statement and
such information is incorporated by reference herein.
ITEM 14. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures. The Company's Chief
Executive Officer and Chief Financial Officer, with the assistance of other
members of the Company's management, have evaluated the effectiveness of the
Company's disclosure controls and procedures (as such term is defined in Rules
13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"). Based on such evaluation, the
Company's Chief Executive Officer and Chief Financial Officer have concluded
that, as of the Evaluation Date, the Company's disclosure controls and
procedures are effective in alerting them on a timely basis to material
information relating to the Company (including its consolidated subsidiaries)
required to be included in the Company's filings under the Exchange Act.
(b) Changes in the Internal Controls. Since the Evaluation Date, there
have not been any significant changes in the Company's internal controls or in
other factors that could significantly affect such controls.
12
<PAGE>
PART IV
ITEM 15. 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 2002
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>
Report of Independent Accountants ....................................................... 33
Consolidated Statement of Income for the three years ended December 31, 2002 ............ 34
Consolidated Balance Sheet--December 31, 2002 and 2001 .................................. 35
Consolidated Statement of Cash Flows for the three years ended December 31, 2002 ........ 36
Consolidated Statement of Shareholders' Equity for the three years ended December 31,
2002 .................................................................................. 37
Notes to Consolidated Financial Statements .............................................. 38
(a)(2) FINANCIAL STATEMENT SCHEDULES. The following schedule is included in Part IV of
this Annual Report on Form 10-K:
Schedule II--Valuation and Qualifying Accounts and Reserves for the three years ended
December 31, 2002 ....................................................................... S-1
Report of Independent Accountants on Financial Statement Schedule ....................... 17
</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
------
<S> <C>
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 10(g) to Registrant's Report on Form 10-Q dated August 12, 2002.
3(ii) By-laws of Registrant, as amended through March 11, 2003.
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.
4.1b Letter Agreement between the Registrant and Wachovia Bank, National Association
("Wachovia") dated as of October 31, 2002 appointing Wachovia as Successor Rights
Agent pursuant to the Shareholder Protection Rights Agreement dated as of March 21,
2000 and amended as of September 26, 2000, incorporated by reference to Exhibit 4(a) to
Registrant's Report on Form 10-Q dated November 12, 2002.
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).
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NUMBER
-------
<S> <C>
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).
*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 Promissory Note dated June 29, 1999 between Registrant and Nicolas Mirzayantz, Vice
President, Global Business Development, Fine Fragrance and Toiletries.
*10.4 Performance Incentive Award Agreement in respect of a performance incentive award of
200,000 restricted shares of Company Common Stock approved by the Company's Board
of Directors on August 1, 2002, granted to Richard A. Goldstein, Chairman of the Board
and Chief Executive Officer of the Company, incorporated by reference to Exhibit 10(a)
to Registrant's Report on Form 10-Q dated November 12, 2002.
*10.5 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.
*10.6 2000 Stock Award and Incentive Plan adopted by the Registrant's Board of Directors on
March 9, 2000, as amended and restated through May 7, 2002, incorporated by reference
to Exhibit 10(d) to Registrant's Report on Form 10-Q dated August 12, 2002.
*10.7 2000 Supplemental Stock Award Plan adopted by the Registrant's Board of Directors on
November 14, 2000, as amended and restated through March 12, 2002, incorporated by
reference to Registrant's Report on Form 10-Q dated August 12, 2002.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
NUMBER
-----
<S> <C>
*10.8 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.
*10.9 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.
*10.10 Registrant's Executive Separation Policy, as amended through February 13, 2001,
incorporated by reference to Registrant's Report on Form 10-Q dated August 12, 2002.
*10.11 Registrant's Employee Stock Option Plan adopted in 1992.
*10.12 1997 Employee Stock Option Plan as amended by Registrant's Board of Directors on
February 8, 2000, incorporated by reference to Exhibit 10(11) to Registrant's Report on
Form 10-K for the fiscal year ended December 31, 1999.
*10.13 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.
*10.14 Registrant's Senior Officer Stock Exercise Loan Program adopted by Registrant's Board
of Directors on November 13, 2001, incorporated by reference to Exhibit 10.19 to
Registrant's Report on Form 10-K for fiscal year ended December 31, 2001.
*10.15 Deferred Compensation Plan adopted by the Company's Board of Directors on
December 12, 2000, incorporated by reference to Exhibit 99 to the Company's
Registration Statement on Form S-8 dated May 16, 2001 (Reg. No. 333-61072).
10.16 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.
*10.17 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.
*10.18 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.
*10.19 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.
*10.20 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).
10.21 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.
10.21a Amendment No. 1 dated as of June 10, 2002 to the Five Year Credit Agreement dated as
of September 26, 2001 among the Company, as Borrower, certain Initial Lenders and
Citibank N.A., as Administration Agent, incorporated by reference to Exhibit 10 (c) to
Registrant's Report on Form 10-Q dated August 12, 2002.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
NUMBER
------
<S> <C>
10.22 Multi-currency Revolving Credit Facility Agreement dated July 19, 2002, among
International Flavor & Fragrances (Luxembourg) S.A.R.L., as Borrower, the Company, as
Guarantor, certain Original Lenders, Barclays Bank PLC, as Agent, ABN AMRO Bank
NV and Barclays Capital, as Arrangers, incorporated by references to Exhibit 10(b) to
Registrant's Report on Form 10-Q dated August 12, 2002.
13 Registrant's 2002 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.
21 List of Principal Subsidiaries.
23 Consent of PricewaterhouseCoopers LLP.
24 Powers of Attorney authorizing Richard A. Goldstein, Douglas J. Wetmore and Stephen
A. Block to sign this report and amendments thereto on behalf of certain directors and
officers of the Registrant.
99.1 Registrant's Board of Directors' Corporate Governance Guidelines adopted by the Board
of Directors on May 7, 2002, incorporated by reference to Exhibit 99(a) to Registrant's
Report on Form 10-Q dated May 10, 2002.
99.2 Registrant's Charter of the Nominating and Governance Committee of the Company's
Board of Directors adopted by the Board of Directors on May 7, 2002, incorporated by
reference to Exhibit 99 (b) to Registrant's Report on Form 10-Q dated May 10, 2002.
99.3 Registrant's Charter of the Compensation Committee of the Company's Board of
Directors adopted by the Board of Directors on May 7, 2002, incorporated by reference
to Exhibit 99 (c) to Registrant's report on Form 10-Q dated May 10, 2002.
99.4 Registrant's Charter of the Executive Committee of the Company's Board of Directors
adapted by the Board of Directors on May 7, 2002, incorporated by reference to
Exhibit 99 (d) to Registrant's Report of Form 10-Q dated May 10, 2002.
99.5 Certification pursuant to 18 US. C. Section 1350, as adopted pursuant to Section 906 of
The Sarbanes-Oxley Act of 2002, signed by Richard A. Goldstein, Chairman of the Board
and Chief Executive Officer of the Registrant and Douglas J. Wetmore, Senior Vice
President and Chief Financial Officer of the Registrant.
</TABLE>
- ----------
* Management contract or compensatory plan or arrangement.
(b) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the last quarter
of the fiscal year ended December 31, 2002.
16
<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 27, 2003 appearing in the 2002 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 15(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 27, 2003
17
<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 25, 2003
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:
Principal Executive Officer:
/s/ Richard A. Goldstein
-------------------------
Richare A. Goldstein
Chairman of the Board
and
Chief Executive Officer
Principal Financial and Accounting Officer:
/s/ Douglas J. Wetmore
-------------------------
Douglas J. Wetmore
Senior Vice President
and
Chief Financial Officer
Directors:
/s/ Richard A. Goldstein
------------------------
RICHARD A. GOLDSTEIN
MARGARET HAYES ADAME* ]
GUNTER BLOBEL* ]
J. MICHAEL COOK* ] *By /s/ STEPHEN A. BLOCK
PETER A. GEORGESCU* } ------------------------
ARTHUR C. MARTINEZ* ] Stephen A. Block
HENRY P. VAN AMERINGEN* ] Attorney in fact
WILLIAM D. VAN DYKE, III* ] March 25, 2003
Original powers of attorney authorizing Richard A. Goldstein, 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.
18
<PAGE>
CERTIFICATION
I, Richard A. Goldstein, certify that:
1. I have reviewed this annual report on Form 10-K of International Flavors &
Fragrances Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure control and
procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weakness.
Dated: March 25, 2003 By: /s/ Richard A. Goldstein
------------------------
Name: Richard A. Goldstein
Title: Chairman of the Board and
Chief Executive Officer
<PAGE>
CERTIFICATION
I, Douglas J. Wetmore, certify that:
1. I have reviewed this annual report on Form 10-K of International Flavors &
Fragrances Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure control and
procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weakness.
Dated: March 25, 2003 By: /s/ Douglas J. Wetmore
----------------------
Name: Douglas J. Wetmore
Title: Senior Vice President and
Chief Financial Officer
<PAGE>
INTERNATIONAL FLAVORS & FRAGRANCES INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In thousands)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 2002
----------------------------------------------
BALANCE AT ADDITIONS CHARGED
BEGINNING TO COSTS AND ACCOUNTS TRANSLATION BALANCE AT THE
OF PERIOD EXPENSES WRITTEN OFF ADJUSTMENTS END OF PERIOD
----------- ------------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts ....... $10,835 $4,067 $2,707 $738 $12,933
======= ====== ====== ==== =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 2001
----------------------------------------------
BALANCE AT ADDITIONS CHARGED
BEGINNING TO COSTS AND ACCOUNTS TRANSLATION BALANCE AT THE
OF PERIOD EXPENSES WRITTEN OFF ADJUSTMENTS END OF PERIOD
----------- ------------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts ....... $11,074 $2,947 $2,306 $ (880) $10,835
======= ====== ====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 2000
----------------------------------------------
BALANCE AT ADDITIONS CHARGED
BEGINNING TO COSTS AND ACCOUNTS TRANSLATION BALANCE AT THE
OF PERIOD EXPENSES WRITTEN OFF ADJUSTMENTS END OF PERIOD
----------- ------------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts ....... $10,013 $2,359 $963 $ (335) $11,074
======= ====== ==== ====== =======
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER
------
<S> <C>
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 10(g) to Registrant's Report on Form 10-Q dated August 12, 2002.
3(ii) By-laws of Registrant, as amended on March 11, 2003.
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.
4.1b Letter Agreement between the Registrant and Wachovia Bank, National Association
("Wachovia") dated as of October 31, 2002 appointing Wachovia as Successor Rights
Agent pursuant to the Shareholder Protection Rights Agreement dated as of March 21,
2000 and amended as of September 26, 2000, incorporated by reference to Exhibit 4(a)
to Registrant's Report on Form 10-Q dated November 12, 2002.
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).
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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER
------
<S> <C>
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 Promissory Note dated June 29, 1999 between Registrant and Nicolas Mirzayantz, Vice
President, Global Business Development, Fine Fragrance and Toiletries.
10.4 Performance Incentive Award Agreement in request of a performance incentive award
of 200,000 restricted shares of Company Common stock approved by the Company's
Board of Directors on August 1, 2002, granted to Richard A. Goldstein, Chairman of
the Board and Chief Executive Officer of the Company, incorporated by reference to
Exhibit 10(a) to Registrant's Report on Form 10-Q dated November 12, 2002.
10.5 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.
10.6 2000 Stock Award and Incentive Plan adopted by the Registrant's Board of Directors on
March 9, 2000, as amended and restated through May 7, 2002, incorporated by reference
to Exhibit 10(d) to Registrant's Report on Form 10-Q dated August 12, 2002.
10.7 2000 Supplemental Stock Award Plan adopted by the Registrant's Board of Directors on
November 14, 2000, as amended and restated through March 12, 2002, incorporated by
reference to Registrant's Report on Form 10-Q dated August 12, 2002.
10.8 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.
10.9 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.
10.10 Registrant's Executive Separation Policy, as amended through February 13, 2001,
incorporated by reference to Registrant's Report on Form 10-Q dated August 12, 2002.
10.11 Registrant's Employee Stock Option Plan adopted in 1992.
10.12 1997 Employee Stock Option Plan as amended 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.
10.13 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.
10.14 Registrant's Senior Officer Stock Exercise Loan Program adopted by Registrant's Board
of Directors on November 13, 2001, incorporated by reference to Exhibit 10.19 to
Registrant's Report on Form 10-K for fiscal year ended December 31, 2001.
10.15 Deferred Compensation Plan adopted by the Company's Board of Directors on
December 12, 2000, incorporated by reference to Exhibit 99 to the Company's
Registration Statement on Form S-8 dated May 16, 2001 (Reg. No. 333-61072).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER
------
<S> <C>
10.16 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.
10.17 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.
10.18 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.
10.19 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.
10.20 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).
10.21 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.
10.21a Amendment No. 1 dated as of June 10, 2002 to the Five Year Credit Agreement dated
as of September 26, 2001 among the Company, as Borrower, certain Initial Lenders and
Citibank N.A., as Administrative Agent, incorporated by reference to Exhibit 10(c) to
Registrant's Report on Form 10-Q dated August 12, 2002.
10.22 Multi-currency Revolving Credit Facility Agreement dated July 19, 2002 among
International Flavor & Fragrances (Luxembourg) S.A.R.L., as Borrower, the Company,
as Guarantor, certain Original Lenders, Barclays Bank PLC, as Agent, ABN AMRO
Bank NV and Barclays Capital, as Arrangers, incorporated by reference to Exhibit 10(b)
to Registrant's Report on Form 10-Q dated August 12, 2002.
13 Registrant's 2002 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.
21 List of Principal Subsidiaries.
23 Consent of PricewaterhouseCoopers LLP.
24 Powers of Attorney authorizing Richard A. Goldstein, Douglas J. Wetmore and Stephen
A. Block to sign this report and amendments thereto on behalf of certain directors and
officers of the Registrant.
99.1 Registrant's Board of Directors' Corporate Governance Guidelines adopted by the
Board of Directors on May 7, 2002, incorporated by reference to Exhibit 99(a) to
Registrant's Report on Form 10-Q dated May 10, 2002.
99.2 Registrant's Charter of the Nominating and Governance Committee of the Company's
Board of Directors adopted by the Board of Directors on May 7, 2002, incorporated by
reference to Exhibit 99 (b) to Registrant's Report on Form 10-Q dated May 10, 2002.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER
-----
<S> <C>
99.3 Registrant's Charter of the Compensation Committee of the Company's Board of
Directors adopted by the Board of Directors on May 7, 2002, incorporated by reference
to Exhibit 99 (c) to Registrant's report on Form 10-Q dated May 10, 2002.
99.4 Registrant's Charter of the Executive Committee of the Company's Board of Directors
adapted by the Board of Directors on May 7, 2002, incorporated by reference to
Exhibit 99 (d) to Registrant's Report of Form 10-Q dated May 10, 2002.
99.5 Certification pursuant to 18 US. C. Section 1350, as adopted pursuant to Section 906 of
The Sarbanes-Oxley Act of 2002, signed by Richard A. Goldstein, Chairman of the
Board and Chief Executive Officer of the Registrant and Douglas J. Wetmore, Senior
Vice President and Chief Financial Officer of the Registrant.
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.(II)
<SEQUENCE>3
<FILENAME>file002.txt
<DESCRIPTION>BY-LAWS
<TEXT>
<PAGE>
EXHIBIT 3(ii)
INTERNATIONAL FLAVORS & FRAGRANCES INC.
BY-LAWS
(as adopted March 10, 1964, including all amendments
made through March 11, 2003)
<PAGE>
BY-LAWS
of
INTERNATIONAL FLAVORS & FRAGRANCES INC.
(a New York corporation)
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the
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
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.
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,
2
<PAGE>
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 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.
3
<PAGE>
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
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
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
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,
4
<PAGE>
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
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 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
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.
5
<PAGE>
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. Except as otherwise provided in
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 eight(+)
but 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
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
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
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
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.
- ----------
(+) Amended from "nine" to "eight" effective May 14, 2003, by action of the
Board of Directors at its March 11, 2003 meeting. Prior amendments changed
the number of directors from "eleven" to "nine" (effective May 7, 2002),
"ten" to "eleven" (December 11, 2001) and "twelve" to "ten" (May 16, 2001).
6
<PAGE>
SECTION 7. ORGANIZATION MEETING. After each annual election of
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
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, 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
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.
(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
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
7
<PAGE>
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
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.
SECTION 13. COMPENSATION. The directors and the members of any
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.
(a) RIGHT TO INDEMNIFICATION. The Corporation shall indemnify
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.
8
<PAGE>
(b) RIGHT OF CLAIMANT TO SUE. If a claim under paragraph (a)
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.
9
<PAGE>
ARTICLE III
OFFICERS
SECTION 1. NUMBER. The principal officers of the Corporation
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
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
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
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
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,
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
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.
10
<PAGE>
SECTION 8. THE EXECUTIVE VICE-PRESIDENT. The Executive
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
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.
SECTION 10. THE TREASURER. The Treasurer shall have the care
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
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
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.
11
<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.
12
<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
13
<PAGE>
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.
14
<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.
15
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>file003.txt
<DESCRIPTION>PROMISSORY NOTE
<TEXT>
<PAGE>
EXHIBIT 10.3
New York, NY
June 29, 1999
$300,00000
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, NICOLAS MIRZAYANTZ, now or
formerly residing at 174 W. 79TH St., New York, NY 10024, U.S.A., promises to
pay on June 30, 2004, to the order of International Flavors & Fragrances Inc., a
New York corporation (hereinafter called "IFF"), at IFF's offices, 600 State
Highway No. 36, Hazlet, New Jersey 07730, the principal sum of THREE HUNDRED
THOUSAND DOLLARS (U.S. $300,000.00), with interest thereon from July 1, 1999 at
the rate of seven and twenty-one one hundredths percent (7.21%) per year, which
the undersigned hereby agrees to pay through payment of 20 quarterly
installments, each in the amount of Eighteen Thousand Dollars and seven cents
(U.S. $18,000.07), payable on the last day of each calendar quarter beginning
September 30, 1999 and continuing thereafter to be payable through and including
June 30, 2004, all in lawful money of the United States of America. The
undersigned hereby consents that IFF may withhold the amount of such
installments from each of the undersigned's periodic IFF paychecks for salary,
bonus, vacation and/or sick pay as the same become due, but IFF's failure to do
so shall not affect or modify the obligation of the undersigned to pay any such
instalment when due.
The entire unpaid principal of this Note and any accrued and unpaid
interest thereon shall, at the option of IFF, become immediately due and payable
prior to June 30, 2004, without notice or demand, upon the happening of any one
or more of the following specified events of default by or with respect to the
undersigned: (i) death of the undersigned, (ii) the insolvency (however
evidenced) of, or the commission of any act of insolvency by, the undersigned,
(iii) the filing of any petition or the commencement of any proceeding by or
against the undersigned for the relief under any bankruptcy or insolvency laws
or any laws relating to the relief of debtors, readjustment of indebtedness,
reorganizations, compositions or extensions, (iv) the appointment or a receiver
of, or the issuance or making of a writ of order of attachment or garnishment
against, any of the property or assets of the undersigned, (v) the termination
in any manner of the undersigned's employment with IFF, or (vi) the failure of
the undersigned to pay any instalment due upon this Note when the same shall
have become payable. If IFF shall elect to accelerate the unpaid principal and
any accrued and unpaid interest of this Note upon the occurrence of any such
event or default, then the undersigned hereby agrees and consents that IFF may
withhold an amount equivalent to said unpaid principal and interest, from any
accrued and unpaid salary bonus, vacation or sick pay or severance payment
otherwise due payable to IFF to him.
As security for this Note, IFF shall have the right (unless precluded
by the terms of any prior mortgage thereon) to have the undersigned and/or the
undersigned's spouse make a mortgage or second mortgage in favor of IFF or IFF's
affiliated company in France, in form suitable for recording, on any real
property, located in France, now owned or hereafter purchased by the undersigned
and/or the undersigned's spouse so long as this Note shall be outstanding, and
the undersigned and/or the undersigned's spouse hereby agrees to execute any
such mortgage or second mortgage and deliver the same to IFF or IFFs affiliated
company in France at IFFs request. It is hereby expressly agreed that, upon the
execution of any such mortgage or
<PAGE>
second mortgage, all of the covenants, terms, conditions and agreements
contained therein shall become a part of this Note to the same extent and with
the same effect as if fully set forth herein, and also that, upon such
execution, IFF in its discretion, shall have the right to demand that the
undersigned and/or the undersigned's spouse execute and deliver to IFF a new
mortgage note, in similar principal amount and bearing interest at the same rate
as herein provided and in form acceptable to counsel for IFF, to replace this
Note. The preceding provisions of this paragraph shall not be construed to
modify or limit in any way the undersigned's obligation to make, and IFF's right
to enforce, full payment of the principal amount hereof upon acceleration.
The undersigned hereby waives presentment, protest, notice of protest
and notice of dishonor and any and all other notices or demands in connection
with the delivery, acceptance, payment, performance, default or enforcement of
this Note.
In case any action shall be brought for the collection of this Note, or
the same must be collected upon demand of an attorney, the undersigned hereby
agrees to pay reasonable attorney's fees for making such collection.
This Note shall be construed in accordance with, and all matters in
connection with its validity, payment and/or enforcement shall be governed by,
the laws of the State of New York, excluding its conflict of law principles,
except that enforcement of any mortgage or second mortgage in IFF's favor shall
be governed by French law.
/s/ NICOLAS MIRZAYANTZ
----------------------------
Nicolas Mirzayantz
By her signature below, Nicolas Mirzayantz's spouse agrees to be
legally bound by and perform those provisions of the above Note that refer to or
require action by her.
----------------------------
(spouse)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.11
<SEQUENCE>5
<FILENAME>file004.txt
<DESCRIPTION>EMPLOYEE STOCK OPTION PLAN OF 1992
<TEXT>
<PAGE>
EXHIBIT 10.11
INTERNATIONAL FLAVORS & FRAGRANCES INC.
EMPLOYEE STOCK OPTION PLAN OF 1992
INTERNATIONAL FLAVORS & FRAGRANCES INC., a New York corporation (herein
called "IFF"), hereby establishes the Employee Stock Option Plan of 1992 (herein
called the "Plan") on the following terms and conditions:
1. Purpose: To promote the best interests of IFF and its shareholders
by providing methods by which key employees and officers of IFF and its
subsidiaries may acquire a proprietary interest in IFF, thus identifying their
interests with those of the shareholders and encouraging them to make greater
efforts on behalf of IFF.
2. Method of Adoption: By the favorable vote of at least two-thirds of
the Board of Directors of IFF (herein called the "Board") subject to the
approval of the holders of a majority of IFF shares.
3. Term: Options may be granted at any time and from time to time, from
the date of adoption of the Plan by the Board, subject to the approval of the
Plan by the shareholders of IFF within 12 months after the Plan is adopted, to
February 11, 2002, but no stock option shall extend for a term of more then ten
years from the date of its grant.
4. Number of Shares: The Plan shall cover an aggregate of 750,000
shares of Common Stock of IFF of the par value of $.12 1/2 each. Either
authorized and unissued shares or treasury shares may be used.
If any options expire or terminate without being exercised in full,
including options voluntarily surrendered for cancellation, the shares subject
thereto which have not been purchased in accordance with the terms of such
options shall be available for the grant of new options under the Plan.
5. Purchase Price: The purchase price per share for any stock optioned
at any time under this Plan shall be such price as shall be fixed by the Board,
but not less than the fair market value thereof at the time of granting the
option. Upon exercise of any stock option the employee may pay for the stock
covered by the stock option by delivery of Common Stock of IFF, providing the
employee has held such Common Stock for at least six months, or such longer
period as determined by the Board.
6. Eligibility: Any key employee or officer of IFF or one of its
subsidiaries (including subsidiaries which may become such after adoption of
this Plan) as designated by the Board.
1
<PAGE>
7. Employment at the Time of Each Purchase: Any stock option may be
exercised by any employee only so long as he or she remains in the employ of IFF
or one of its subsidiaries (including subsidiaries which became such after his
or her option was granted); provided that if an employee voluntarily resigns
with the consent of the Board, if he becomes totally disabled or if he or she
retires, he or she may exercise within 3 months thereafter (but not later than
the expiration date of the option) the option as to the balance, if any, of the
shares which the employee was entitled to purchase under the terms of the option
at the date of such resignation, disability or retirement. Authorized leaves of
absence for military or governmental service or other purposes approved by the
Board will be deemed a continuation of employment for purposes of the Plan, and
modifications or extensions of the periods of the option agreement or otherwise
may be made by the Board. If an employee dies while employed by IFF or one of
its subsidiaries, his or her legal representatives, distributees or legatees, as
the case may be, may exercise within 3 months thereafter (but not later than the
expiration date of the option) the option as to the balance, if any, of the
shares which the employee was entitled to purchase under the terms of the option
at the date of his or her death or, in case such death occurs less than 48
months from the date of the grant of the option, that proportion of the shares
covered by the option which the number of days in the period from the date of
grant to the date of the employee's death bears to the number 1460, less any
shares previously purchased under the option.
8. Individual Options: Notwithstanding any other provision hereof, the
selection of the officers and directors of IFF for participation in the Plan and
decisions concerning the timing, pricing, and the number of shares covered by
individual stock options shall be made solely by the Stock Option and
Compensation Committee of the Board (herein called the "Committee"), the members
of which shall be "disinterested persons" as that term is defined in Rule
16(b)-3 under the Securities Exchange Act of 1934, as amended. Unless otherwise
determined by the Committee at the time of grant, options granted hereunder to
employees subject to United States taxation shall be deemed to be "incentive
stock options" to the extent permitted under section 422 of the Internal Revenue
Code of 1986 and the balance of such options shall be deemed not to be incentive
stock options.
9. Exercise of Options: The stock options may be exercised as follows:
up to one-third of the shares covered at any time after 24 months from the date
of grant; up to two-thirds of such shares at any time after 36 months from such
date; and all the shares at any time after 48 months from such date. Stock
certificates will be issued as the stock options are exercised and the shares
are paid for.
10. Rights of Employees Before Issuance of Stock Certificates: No
employee shall have any rights as a stockholder with respect to any shares
covered by his or her stock option until the date of the issuance of the stock
certificate to him or her for such shares following his or her exercise of the
options. No adjustment shall be made for dividends or other rights for which the
record date is prior to the date such stock certificate is issued.
11. Anti-Dilution Provisions: Each option agreement shall contain such
provisions as the Board or the Committee shall deem to be appropriate, including
provisions for appropriate
2
<PAGE>
adjustment of the option price and the number of shares covered, or both, to
protect the optionee in the event of a reorganization, recapitalization, stock
split, stock dividend, combination of shares, merger or consolidation (except as
otherwise stated below) or in the event of any other change in the corporate
capital structure of IFF. In the event of any such adjustment, the aggregate
number and class of shares available under the Plan and the maximum number of
shares as to which options may be granted to any employee may also be
appropriately adjusted.
12. Nonassignability: No option shall be assignable or transferable by
an optionee except by will or by the laws of descent and distribution, and an
option shall be exercisable during his or her lifetime only by him or her.
13. Administration: The Plan shall be administered by vote of a
majority of the Board, or by the majority of the Committee, but no Board member
who is to be considered as a participant in the Plan shall take part in the
deliberations or vote with respect to his own participation.
14. Merger or Consolidation: In the event of the merger or
consolidation of IFF with or into another corporation as a result of which IFF
is not the surviving corporation, then on written notice to the optionee given
by the surviving corporation, the option may be exercised, as to the entire
number of shares subject thereto, on and after the effective date of such merger
or consolidation and the option shall cease and terminate as to any shares as to
which it has not been exercised on a date 180 days after the effective date of
such merger or consolidation or on the expiration date of such option, whichever
is earlier.
15. Agreements: Options issued under the Plan shall be evidenced by
agreements in such form as the Board or the Committee may approve. The terms of
such agreements shall comply with the applicable terms of the Plan outlined
herein.
16. Interpretation: In the event of any difference of opinion between
an optionee and IFF or its subsidiaries concerning the meaning or effect of the
Plan, such difference shall be resolved by the Board.
17. Compliance with Applicable Laws: No shares shall be offered under
the Plan and no stock certificate shall be delivered upon exercise of options
until such offering has been registered under the Securities Act of 1933, as
amended, and any other applicable governmental laws and regulations, unless in
the opinion of counsel such offering is exempt from registration under such Act,
and until IFF shall have complied with any applicable provisions of the
Securities Exchange Act of 1934, as amended.
18. Amendment and Termination of the Plan: The Board may from time to
time, with respect to any shares at the time not subject to options, suspend or
discontinue the Plan or amend it in any respect, provided that it may not,
without the approval of the holders of a majority of outstanding shares of IFF
(except as provided in paragraph 11 above), increase the aggregate number of
shares available for options, change the employees or class of employees
eligible to receive options or reduce the option price below that provided for
hereunder.
3
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>6
<FILENAME>file005.txt
<DESCRIPTION>20020 ANNUAL REPORT
<TEXT>
<PAGE>
essence
-------
IFF International Flavors & Fragrances Inc. Annual Report
2002
<PAGE>
What is the essence of IFF?
It's not just capturing an emotion, a memory.
Pinpointing the indispensable nature of a sensory experience.
It's not just a purely visceral, personal reaction.
It's sustaining that ideal moment,
just for a moment, time and again.
It's also business and science.
Proprietary molecules and practical applications.
It's people, relationships.
The perfect combination of creativity and precision.
It's finding a better way.
It's the pursuit of excellence.
<PAGE>
[GRAPHICS OMITTED]
> Table of contents
CHAIRMAN'S MESSAGE > 9
FINANCIAL REVIEW > 24
BOARD OF DIRECTORS
AND OFFICERS > 53
LOCATIONS > Back Flap
> I like working at IFF
because this is where
creativity residers." >
> "The biggest improvement
I have seen lately at IFF is the
way our processes are being
harmonized and standardized
and communicated to the
teams in the different areas." >
> "IFF is unique because what
we create becomes part of
everyone's life." >
> "IFF is unique because it beings
together unique personalities,
which together create the
magic of IFF." >
> "The biggest improvement
I have been see lately at IFF
is how succesfullt it has
reinvented itself." >
> "IFF is unique because like
every snowflake, no two days
at work are ever the same." >
> "I like working at IFF because
each day is different and
challenging, with never-ending
learning due to the dynamics
of our industry." >
> "I like working at IFF
because I do it with freedom
and creativity." >
> "When people ask me what
IFF does, I tell them we create
the tastes and smells of
our lives." >
<PAGE>
The essence of innovation
-------------------------
1
<PAGE>
2:12
AUGUSTA, GEORGIA
My mom says I'll never be able to finish this, but she doesn't know me as well
as she thinks. She still treats me like a little kid, which gets me really mad.
My secret sauce has ketchup, mustard, relish and mayonnaise in it. You have to
mix everything together before you put it on the bun.
2
<PAGE>
10:22
PARIS, FRANCE
Est-elle plus belle que moi? Est-ce que c'est important? Est-ce qu'on ne peut
pas etre belles toutes les deux? Pourquoi ont-ils pris la photo alors que
j'avais la bouche pleine? Je parie que ma mere n'a jamais mis de vernis a ongle
rouge. Et je sais qu'elle n'a jamais garde ses gants pour manger.
3
<PAGE>
7:32
RIO DE JANEIRO, BRAZIL
A Sensacao do sol nascente em meus cabelos...o sabor de um novo dia...um soho,
um momento especial...somente para mim. Adoro minhas sardas.
4
<PAGE>
11:19
CALCUTTA, INDIA
[FOREIGN LANGUAGE]
5
<PAGE>
Where does the essence of flavor and fragrance come from?
Not complex calculations, or scientific formulas.
It's not buried deep in computer code,
or planted in a greenhouse.
It comes from ice cream, and mowing the lawn.
A first date, a first dance.
Summer vacations and a winter's night.
It comes from the imagination,
triggering your memory.
It takes you here and me there.
It's your personality.
How do we know?
We've dedicated ourselves
to understanding every facet of sensory experience.
Understanding our customers,
and their customers.
We understand you.
Our perfumers and flavorists live and breathe
scents and tastes.
Call it a sixth sense,
or a green thumb.
It's our passion.
6
<PAGE>
[GRAPHICS OMITTED]
7
<PAGE>
The essence of people
--------------------- > >
8
<PAGE>
TO OUR SHAREHOLDERS
I will look back on 2002 as a year in which IFF delivered on its promises
to customers and shareholders alike, despite unprecedented and often unforeseen
challenges around the globe. Chief among our accomplishments were successfully
completing the integration of Bush Boake Allen (BBA), quickly realizing the
aggressive savings targets we had set for ourselves, reorganizing globally into
One IFF and improving all aspects of customer service.
2002 HIGHLIGHTS - THE FOUNDATION IS IN PLACE
Before the end of 2002, we disbanded our last integration team. By every
key measure, the integration and reorganization were successful. Many in the
financial community doubted we could achieve so much in so short a time, but
even the skeptics seem to have come around. Our stock price at the end of 2002
was virtually double what it had been when we announced the acquisition, and we
outperformed the S&P 500 by about 33%. Fortune placed us squarely on its "Most
Admired" list, BusinessWeek named us one of their "Nifty Fifty" for our solid
stock market performance and Forbes counted us on its "Platinum List of Best
Companies in America."
While the task of turning our Company around is far from over, we are
firmly on the path to sustainable, long-term growth. Our win rate continues to
improve across categories and geographies, the best indicator of customer
satisfaction. Even in a sector such as Fine Fragrance that has been broadly
impacted by the global economic slowdown, IFF continues to grow in comparison
with its competitors.
CONTINUING OUR REINVENTION -
THE PURSUIT OF EXCELLENCE
What IFF has accomplished in the last two years convinces me that we have
the ability to reclaim undisputed industry leadership. Our commitment to
continuous improvement has only intensified. Through a range of "Business
Excellence" initiatives, we are ensuring a more disciplined, forward-looking and
globally consistent approach to sales and operations planning. Everyone in our
organization -- whether they be in business development, operations or our staff
functions -- is aligned and coordinated in their efforts to deliver to our
customers what they want...when, where and how they want it.
It is clear that neither IFF nor any other company can cost cut its way to
growth. So, at the same time as we are diligently working to become more
efficient and effective, we are also focusing on avenues for sustainable
top-line growth. To that end, we have been increasing our investment in Research
and Development, with a particular emphasis on what I call capital "R" Research
- -- the kind that gives us proprietary molecules and technology. The kind that
made IFF the industry standard in the first place.
9
<PAGE>
Through our Natural Products group, including the Laboratoire Monique Remy
in Grasse, France, we have an excellent pipeline of new, high quality natural
flavor and fragrance ingredients. Our Sensory and Consumer Science group helps
strengthen our consumer insight through industry-leading programs in fragrance
profiling, sensory perception, the genetics of flavor and fragrance preference
and the emotional effects of aromas on mood, performance, health and well-being.
We link these sensory methodologies with the best from our Analytical Science
group for an understanding of flavor and fragrance preference that is
second-to-none. And with key breakthroughs in material science technology, we
ensure that our research discoveries have practical applications in the
marketplace.
IFF's reinvention, reawakening and re-establishment will continue. Everyone
at our Company should take great pride in our success to date.
OLD ECONOMY COMPANY - OLD WORLD VALUES
IFF is prepared for continued tough times throughout 2003. Given the
extreme tension in the Middle East and parts of Asia, I do not anticipate a
swift economic recovery. If anything, the global economic and political picture
could worsen this year, escalating the deflationary cycle we are already
experiencing. In times such as these, our various stakeholders benefit from the
fact that 85% of our activity is in recession-resistant businesses. After the
meteoric boom and even more meteoric bust of the dot-com era, I am pleased that
IFF is often referred to as an "old economy company." IFF makes real products
that enhance real people's lives every day...in good times and not so good
times. And we do it "the old fashioned way" - with integrity, honesty,
creativity and hard work as our cornerstones.
The basic business foundation on which IFF first achieved preeminence
remains rock solid. Similarly, the basic values set forth by our founding
Chairmen are the same ones that continue to guide us today. Throughout this
Report, you will see the faces and words of IFF co-workers around the world. I
can think of no better way to exemplify IFF in Pursuit of Excellence than
through snapshots of our people at work. Throughout 2003 and beyond, all of us
at IFF renew the following commitments:
> To our customers: to bring you outstanding service, innovation and insight;
> To our shareholders: to pursue top-line growth and bottom-line improvement
in profits and earnings per share;
> To our co-workers: to work together in order to win as a team and benefit
as individuals.
Finally, no summary of 2002 would be complete without mention of a great
loss in the IFF family. In December 2002, Dr. Braja D. Mookherjee -- IFF's
Director of Natural Products Research -- passed away. Many of you had the good
fortune to meet or work with Braja during his 38 years with our Company. Braja's
hand touched nearly everything at IFF, from the major impact chemicals we use to
key technologies such as Living Flavor(R), Living Flower(R), Aura of Aroma(TM)
and hydroponics.
More than perhaps anyone I know, Braja embodied the idea of finding the
place where art and science meet and using it to create magic for our customers
and consumers. My colleagues tell me that they feel Braja's presence in our
greenhouse, and I am sure they are right. His spirit will live on at IFF.
Sincerely,
/s/ Richard A. Goldstein
Richard A. Goldstein
Chairman of the Board and Chief Executive Officer
10
<PAGE>
[GRAPHICS OMITTED]
11
<PAGE>
How will we respond to today's market demands,
and anticipate trends on the horizon?
Market insight?
Scientific expertise?
Yes, and an influx of new molecules that broaden our palettes.
It's customer service and technological superiority.
Built on a solid foundation of integrity, honesty and hard work.
It's finding the perfect mix.
The exchange of information is vital to our success.
Leveraging our varied expertise.
We are in active pursuit.
Defining tomorrow's market, today.
Going anywhere that flavors and fragrances play a role,
or could in the future.
This is visionary.
This is how leaders think.
12
<PAGE>
[GRAPHICS OMITTED]
13
<PAGE>
> Through ConsumerEdge, IFF's
team of qualitative research
experts brings unique insights
about fragrance, concept and
brand development to our
customers. >
[GRAPHICS OMITTED]
> A powerful moral and ethical
core runs through our Company.
Our values...our Code of
Conduct...our environmental
and philanthropic efforts...
our understanding that nothing
is so important that it
cannot be done safely. >
> IFF's Perfumery School
recognizes that what we
do is both art and science.
In Grasse, Hilversum and
New York, the next generation
of leading perfumers learns
the tools of the trade. >
[GRAPHICS OMITTED]
> Making IFF a great place to
work means continual learning,
practical training, management
development, Rewarding
Results, opportunities for
growth. Understanding the
Company's vision and one's
role in achieving it. The
encour- agement to take
prudent risks. >
> 70% of IFF's business comes
from outside the United
States. The emerging market
areas of China, India and
Latin America are key to our
strategy moving forward. >
[GRAPHICS OMITTED]
> iPlot(TM). Living Flower(R).
Living Fruits(R).
Generessence(R). Ultra
Natural(TM). Hydroponics.
Dried, chilled, coated,
encapsulated, water soluble,
liquid and granu- lated
delivery platforms. The
Consumer Fragrance Thesaurus.
Pheromones. CoolTek(TM). If it
differentiates our customers'
products, we've got it. >
14
<PAGE>
The essence of excellence
------------------------- > >
15
<PAGE>
MEXICO CITY, MEXICO
2002 was a year of unprecedented economic, social and political turmoil for
Latin America. The challenges confronting our region will continue in 2003. The
only way for IFF Latin America to achieve our goals and satisfy our customers
moving forward is by working together as a dedicated, focused and passionate
team...always looking for the better way...always striving to drive top-line
growth. Our team is committed to this.
Graciela Ferro, VP and Regional Manager, Latin America
------------------------------------------------------
SEOUL, SOUTH KOREA
For IFF Asia Pacific, the customer is the first and last word. We are
focused on providing product and service excellence to our cus-tomers and
thereby adding value to their businesses. It is through close partnership with
our customers that we will gain their confidence. And it is through close
partnership with our customers that IFF can, in turn, achieve sustainable
growth. 2003 will be a key measuring stick in terms of our ability to deliver.
Robert Burns, VP and Regional Manager, Asia Pacific
---------------------------------------------------
SOUTH BRUNSWICK , NEW JERSEY
In North America, IFF knows what it needs to do...and we're doing it. In
2002, we met all of our integration targets at the same time as we provided
seamless and even improved service to our customers. We completed the
divestiture of all non-core businesses and our entire team is now involved in
increasing our efficiency and effectiveness through Business Excellence. Through
it all, we maintain our commitment - internally and externally - to open
communication, transparency and corporate social responsibility.
Jim Dunsdon, VP and Regional Manager, North America
---------------------------------------------------
16
<PAGE>
[GRAPHICS OMITTED]
17
<PAGE>
[GRAPHICS OMITTED]
18
<PAGE>
< HILVERSUM, THE NETHERLANDS
In 2002, with the successful integration of BBA into IFF, we have
strengthened the foundation on which to accelerate our business performance. IFF
is well positioned to grow in the region, despite predictions of a weak
European economy overall. Our business development and operations teams are
seamlessly aligned and uniformly focused on bringing first-class, cutting edge
creations and services to consumers today...and for years to come.
Rob J. M. Edelman, VP and Regional Manager, Europe
--------------------------------------------------
BOCA RATON, FLORIDA
In 2002, IFF made great strides in terms of aligning and unifying business
development and operations in the best interest of our customers. Key 2002
accomplishments include completing the closure or consolidation of 26 facilities
as part of our integration, the rationalization and simplification of our
ingredients catalogue, improvements in aroma chemicals customer service, the
successful implementation of SAP in several of our manufacturing facilities,
and progress on our e-business initiative. Through a coordinated and disciplined
approach to Business Excellence and sales and operations planning, we are making
significant progress in our reinvention.
D. Wayne Howard, Executive Vice President, Global Operations
------------------------------------------------------------
19
<PAGE>
CHENNAI, INDIA
A year after the integration of Bush Boake Allen India Ltd., the new IFF
India is now a more comprehensive and cohesive organization... better able to
understand our customers' needs and deliver on them. Our 2002 results in terms
of both sales and profits reflect our enhanced effectiveness. Improved
technology in most disciplines and continued knowledge and skills training
enabled us to grow faster than the market. IFF India is the leader in both
flavors and fragrances.
Arun Bewoor, VP and Regional Manager, India Region
--------------------------------------------------
20
<PAGE>
The essence of growth
---------------------
21
<PAGE>
What makes us the industry leader?
Is it outstanding customer service,
or our undying pursuit of excellence?
Our motivation?
Innovation.
Leading our field on every continent,
and in space.
We have the resources to serve you anywhere in the world.
We are a partner, an intellectual resource.
We understand you.
We're in the business of harnessing the intangible,
transforming the properties of nature into product.
We live in the moment where art meets science.
We love what we do.
In essence >
22
<PAGE>
[GRAPHICS OMITTED]
23
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INTERNATIONAL FLAVORS & FRAGRANCES INC.
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) 2002 2001 2000
- ------------------------------------------------------------- --------- -----------------------
<S> <C> <C> <C>
Net sales - as reported $1,809.2 $ 1,843.8 $ 1,462.8
Net sales - pro-forma(a) $1,799.8 $ 1,760.0 $ 1,777.3
Net income(b) $ 175.9 $ 116.0 $ 123.0
Income excluding nonrecurring charges(b) $ 183.7 $ 135.1 $ 149.8
Diluted net income per share(b) $ 1.84 $ 1.20 $ 1.22
Diluted per share results excluding nonrecurring charges(b) $ 1.92 $ 1.40 $ 1.48
Research and development expense $ 144.0 $ 135.2 $ 112.7
Research and development expense as a % of sales 8.0% 7.3% 7.7%
Net cash provided by operating activities $ 243.3 $ 181.5 $ 269.1
Working capital $ 507.3 $ 336.1 $ (160.1)
Current ratio 2.4 1.6 0.9
Debt(c) $ 993.2 $ 1,159.0 $ 1,270.4
Return on average shareholders' equity 32.0% 20.1% 16.5%
Closing stock price $ 35.10 $ 29.71 $ 20.30
--------- -----------------------
</TABLE>
NET SALES
(IN BILLIONS)
00 01 02
$1.46 NSAS $1.84 NSAS $1.81 NSAS
$1.78 NSPF $1.76 NSPF $1.80 NSPF
NSAS = NET SALES - AS REPORTED
NSAP = NET SALES - PRO-FORMA
DILUTED NET INCOME PER SHARE
00 01 02
$1.22 AS $1.20 AS $1.84 AS
$1.48 ENC $1.40 ENC $1.92 ENC
AS = DILUTED NET INCOME PER SHARE AS REPORTED
ENC = DILUTED NET INCOME PER SHARE EXCLUDING NONRECURRING CHARGES
RETURN ON AVERAGE SHAREHOLDERS' EQUITY (PERCENT)
00 01 02
16.5% 20.1% 32.0%
DEBT(C) (IN MILLIONS)
00 01 02
$1,270.4 $1,159.0 $ 993.2
(a) Prepared as though the Company and BBA were combined as of January 1, 2000
and excluding sales associated with non-core businesses disposed of in 2001
and 2002.
(b) FAS 142 adopted January 1, 2002, eliminating amortization of goodwill and
indefinite-lived intangibles. Reported results reflect amortization expense
of $33.0 million or $0.34 per share in 2001, and $5.0 million or $0.05 per
share in 2000 that would have been eliminated had FAS 142 been applied for
all periods presented.
(c) Excludes deferred gains on interest rate swaps of $63.5 million, $8.3
million, and $0, in 2002, 2001 and 2000, respectively.
FINANCIALS
25 Management's Discussion and Analysis of Results of Operations and Financial
Condition
33 Report of Management
33 Report of Independent Accountants
34 Consolidated Statement of Income
35 Consolidated Balance Sheet
36 Consolidated Statement of Cash Flows
37 Consolidated Statement of Shareholders' Equity
38 Notes to Consolidated Financial Statements
51 Quarterly Financial Data
51 Stock Prices
52 Five-Year Summary
24
<PAGE>
INTERNATIONAL FLAVORS & FRAGRANCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(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.
Net sales for 2002, 2001 and 2000 were as follows:
PERCENT PERCENT
NET SALES 2002 CHANGE 2001 CHANGE 2000
- ------------------------------------------ ---------------------------------
Flavors $ 809.0 (3%) $ 835.7 40% $ 597.7
Fragrances 1,000.2 (1%) 1,008.1 17% 865.1
------------------- ---------------------------------
Total net sales $1,809.2 (2%) $1,843.8 26% $1,462.8
=================== =================================
In 2002, net sales declined 2% in comparison to 2001. Sales were favorably
affected by the weakening of the U.S. dollar, most notably against the Euro, the
Japanese Yen and the Australian dollar; had exchange rates remained the same
during 2002 and 2001, sales would have decreased 3%.
In 2001, net sales increased 26% in comparison to 2000, with the increase
being primarily due to the inclusion of sales attributable to the BBA business.
Sales were unfavorably impacted by the stronger U.S. dollar, most notably
against the Euro and the Japanese Yen; had exchange rates remained the same
during 2001 and 2000, sales would have increased 28%.
In conjunction with the integration of IFF and BBA, and as part of a
restructuring of the Company's operations, certain non-core businesses
(hereinafter referred to as the "non-core businesses") were disposed of during
2001 and 2002. These non-core businesses included the Company's fruit
preparations businesses in North and Latin America, its North American
concentrates business and a portion of the aroma chemicals business acquired in
the BBA transaction. The non-core businesses had combined net sales of $103.3 in
2000; in 2001 and 2002, the non-core businesses had sales of $83.8 and $9.4,
respectively, in the periods they were owned by the Company. The non-core
businesses were disposed of in a series of separately negotiated transactions
with third parties; disposal of these businesses did not materially impact the
Company's operating results.
Pro-forma sales, prepared as though the Company and BBA had been combined
as of January 1, 2000 and excluding all sales associated with the non-core
businesses, would have been as follows:
PRO-FORMA PERCENT PRO-FORMA PERCENT PRO-FORMA
NET SALES 2002 CHANGE 2001 CHANGE 2000
- ------------------------------------------ -----------------------------------
Flavors $ 799.6 1% $ 788.7 -- $ 788.1
Fragrances 1,000.2 3% 971.3 (2%) 989.2
---------------- -----------------------------------
Total net sales $1,799.8 2% $1,760.0 (1%) $1,777.3
================ ===================================
Approximately 70% of the Company's sales are outside the United States.
The following table summarizes sales on a geographic basis:
PERCENT PERCENT
SALES BY DESTINATION 2002 CHANGE 2001 CHANGE 2000
- -------------------------------------------- -----------------------------------
North America $ 570.9 (4%) $ 597.1 31% $ 455.4
Europe 671.4 2% 658.1 23% 536.4
Asia Pacific 290.9 2% 286.2 30% 220.7
Latin America 227.5 (11%) 256.5 9% 234.9
India Region 48.5 6% 45.9 198% 15.4
------------------- -----------------------------------
Total net sales $1,809.2 (2%) $1,843.8 26% $1,462.8
=================== ===================================
25
<PAGE>
Pro-forma sales on a geographic basis, prepared as though the Company
and BBA had been combined as of January 1, 2000 and excluding all sales
associated with the non-core businesses, would have been as follows:
<TABLE>
<CAPTION>
PRO-FORMA PERCENT PRO-FORMA PERCENT PRO-FORMA
SALES BY DESTINATION 2002 CHANGE 2001 CHANGE 2000
- -------------------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C>
North America $ 561.7 1% $ 554.9 2% $ 542.4
Europe 671.4 7% 627.8 (4%) 650.7
Asia Pacific 290.8 3% 283.7 (3%) 293.3
Latin America 227.4 (9%) 249.4 -- 249.1
India Region 48.5 10% 44.2 6% 41.8
---------------------- ------------------------------------
Total net sales $1,799.8 2% $1,760.0 (1%) $1,777.3
====================== ====================================
</TABLE>
In 2002, pro-forma sales increased 2% in comparison to the comparable 2001
sales; had exchange rates remained the same during 2002 and 2001, such
pro-forma sales would have increased 1%. Regional sales performance for 2002 was
as follows:
> Sales in North America increased by 1% led by a 4% increase in flavor
sales; North American fragrance sales were flat for the year.
> Local currency sales in Europe increased 3%, resulting in a dollar increase
of 7% due to the stronger Euro. Local currency fragrance sales in Europe
increased 7%, resulting in an increase of 12% in dollars. Flavor sales in
Europe declined 3% in local currency although this resulted in a 1%
increase in dollar sales.
> Asia Pacific flavor sales increased 4% in both local currency and dollars
while fragrance sales were flat in local currency with an increase of 1% in
dollars. Asia Pacific results in both flavors and fragrances were
influenced by ongoing weakness in the Japanese economy as well as the
Philippines and Indonesia. Overall, sales in the region increased 2% in
local currency and 3% in dollars.
> Latin America sales declined 9% for the year, mainly due to persistent
economic weakness throughout much of the region. Latin America fragrance
sales declined 6% while flavor sales declined 16%.
> India sales increased 9% in local currency, resulting in a 10% increase in
dollars. The performance was led by an 11% local currency increase in
fragrance sales; local currency flavor sales grew 7%.
In 2001, pro-forma sales decreased 1% in comparison to the comparable 2000
sales; had exchange rates remained the same during 2001 and 2000, such
pro-forma sales would have been flat. Regional sales performance for 2001 was as
follows:
> Sales in North America increased 2% in comparison to the prior year
comparable sales. Flavor sales increased 7% over 2000 levels while
fragrance sales declined 3%.
> Local currency sales in Europe decreased 1%, resulting in a dollar decrease
of 4% due to the stronger U.S. dollar. Local currency fragrance sales in
Europe decreased 3%, resulting in a dollar decrease of 5%. Flavor sales in
Europe were flat in local currency although this resulted in a 3% decrease
in dollar sales.
> Sales in Asia Pacific increased 2% in local currency; however, on
translation, dollar sales declined 3%. Asia Pacific flavor sales increased
3% in local currency although this resulted in a dollar decline of 3%.
Fragrance sales were flat in local currency with a 5% decrease in dollars.
> Latin America sales were flat for the year, mainly due to economic
weakness in Brazil and Argentina. In the region, fragrance sales increased
2% although this growth was offset by a decline of 6% in flavor sales.
> India sales increased 6% in both local currency and dollars. Fragrance
sales increased 14% in local currency and 12% in dollars while flavor sales
were flat in both local currency and dollars.
Although the Company's reported sales and earnings are affected by the
weakening or strengthening of the U.S. dollar, this has not had a long-term
effect on the underlying strength of the Company's business.
The percentage relationship of cost of goods sold and other operating
expenses to reported sales is detailed in the following table.
2002 2001 2000
- -----------------------------------------------------------------
Cost of goods sold 57.3% 57.7% 56.9%
Research and development
expenses 8.0% 7.3% 7.7%
Selling and administrative
expenses 16.9% 17.0% 17.7%
==== ===================
26
<PAGE>
Cost of goods sold, which includes cost of materials and internal
manufacturing expenses, declined slightly in 2002 from 2001 levels. This decline
is a result of improvement in product mix, mainly due to the disposal of the
non-core businesses, partially offset by increased manufacturing expenses
related to the Company's implementation of SAP and related initiatives, and the
impact of the economic and currency disruption in Latin America which impacted
profitability in that region. Total SAP-related costs included in manufacturing
expenses approximated $1.7 in 2002; there were no similar expenses in 2001 or
2000. The increase in cost of sales in 2001 compared to 2000 is primarily
attributable to the acquisition of BBA and unfavorable absorption of
manufacturing costs in North America due to poor 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 increased as a
percentage of sales in 2002, consistent with the Company's plans to increase its
investment in new research initiatives; the Company anticipates these expenses
will approximate 8% of sales for the next several years. Research and
development expenses declined slightly as a percentage of sales in 2001 as a
result of the integration of the IFF and BBA research efforts and facilities.
Selling and administrative expenses are necessary to support the Company's
sales and operating levels. Selling and administrative expenses as a percentage
of sales declined compared to both 2001 and 2000 levels. The decline is a result
of the savings attributable to the integration of the Company's sales and
administrative functions with those of BBA. In 2002, selling and
administrative expenses includes approximately $2.9 related to the Company's
implementation of SAP and related initiatives; there were no such expenses in
2001 or 2000.
SAP costs included in manufacturing and selling and administrative
expenses are expected to continue at approximately the same level in 2003-2004
as the Company completes its implementation. These costs relate primarily to
training and data conversion and are expensed as incurred.
The percentage relationship of pro-forma cost of goods sold and other
operating expenses to pro-forma sales is detailed in the following table. The
pro-forma information is prepared as though the Company and BBA had been
combined as of January 1, 2000 and reflects the elimination of sales and
operating results of the non-core businesses.
PRO-FORMA PRO-FORMA PRO-FORMA
2002 2001 2000
- --------------------------------------------------------------------
Cost of goods sold 57.1% 56.1% 56.4%
Research and development
expenses 8.0% 7.6% 7.6%
Selling and administrative
expenses 16.9% 17.6% 18.6%
==== ====================
Pro-forma cost of sales as a percentage of pro-forma sales increased in
2002 in comparison to 2001 as a result of a combination of product mix, the
aforementioned SAP implementation costs and the impact of the economic and
currency disruption in Latin America. Pro-forma cost of sales decreased as a
percentage of pro-forma sales in 2001 primarily as a result of savings on
integration and closure of certain BBA manufacturing facilities.
Pro-forma research and development expenses as a percentage of pro-forma
sales increased in 2002 in relation to both 2001 and 2000 as a result of the
Company's announced plans to increase its investment in research initiatives.
Pro-forma selling and administrative expenses declined as a percentage of
pro-forma sales in each of the years due to savings attributable to the
integration of IFF and BBA selling and administrative functions.
Segment profit, excluding corporate and other unallocated expenses,
amortization of goodwill, and the effect of nonrecurring charges, was $355.1 in
2002, $367.4 in 2001 and $289.7 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. Pro-forma segment profit for IFF
and BBA combined in 2000 was $348.9. The Company recorded nonrecurring charges
of $11.7, $30.1, and $41.3 in 2002, 2001 and 2000, respectively. Operating
profit totaled $299.9, $255.6 and $211.5 in 2002, 2001 and 2000, respectively.
Interest expense totaled $37.0, $70.4 and $25.1 in 2002, 2001 and 2000,
respectively. Pro-forma interest expense for 2000 was $81.2. Interest expense
declined in 2002 as a result of lower effective interest rates and reduced
borrowing levels. Interest expense in 2001 increased over 2000 and is directly
related to the debt incurred for the BBA acquisition. In 2000, interest expense
incurred in connection with the acquisition of BBA was $10.6.
27
<PAGE>
Other (income) expense, net was $3.6 income in 2002, $2.6 income in 2001
and $2.3 expense in 2000. The increases in other income in 2002 compared to
2001, and 2001 compared to 2000 were principally due to favorable exchange
results; exchange gains were $2.3 and $1.9 in 2002 and 2001, respectively,
compared to exchange losses of $1.9 in 2000.
The worldwide effective tax rate for 2002 was 34.0%, com-pared to 38.2% for
2001 and 33.2% for 2000. The lower effective tax rate in 2002 principally
results from the discontinuance of goodwill amortization, which was not
deductible for purposes of determination of the Company's taxable income. 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 Company anticipates that its effective tax rate in
2003 will be in the range of 32.0%-32.5%.
On November 3, 2000, the Company acquired BBA; total consideration paid,
including transaction costs, was $970.0.
The acquisition was accounted for as a purchase business combination; the
purchase price has been allocated to assets acquired and liabilities assumed
based on their fair values at the date of acquisition. The excess of the
purchase price over the estimated value of tangible and identified intangible
assets acquired was recorded as goodwill. The Company completed final
determination of the purchase price during 2001 when it established accruals
relating to employee separation costs, facility closure costs and other actions
relating to the integration of BBA into IFF. Such costs are a component of the
purchase accounting and 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 accounted for at December 31, 2000. More details on
the BBA acquisition are contained in Note 3 of the Notes to the Consolidated
Financial Statements.
At December 31, 2002 and 2001, goodwill and other intangible assets, net
of accumulated amortization, totaled $782.7 and $795.9, respectively.
Amortization expense was $12.6 and $46.1 in 2002 and 2001, respectively.
Effective January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 142 (FAS 142), Goodwill and Other Intangible Assets. FAS 142
eliminates the amortization of goodwill and indefinite-lived intangibles and
requires an evaluation of potential impairment upon adoption, and at least
annually thereafter. FAS 142 also prescribes that other indefinite-lived
intangibles be included with goodwill. In 2002, certain intangibles were
reclassified as indefinite-lived intangibles in accordance with the provisions
of FAS 142. Adoption of FAS 142 eliminated annual goodwill amortization expense
of $33.0. The Company completed its assessments during 2002 and concluded it has
no impairment of goodwill or other intangible assets on adoption or at December
31, 2002. Additional details are contained in Note 7 of the Notes to the
Consolidated Financial Statements.
Movements in acquisition accounting accruals were as follows:
EMPLOYEE- ASSET-RELATED
RELATED AND OTHER TOTAL
- -------------------------------------------------------------------------
Balance January 1, 2001 $4.1 $6.2 $10.3
Additional charges 41.0 25.0 66.0
Cash and other costs (31.3) (21.3) (52.6)
-----------------------------------
Balance December 31, 2001 13.8 9.9 23.7
Cash and other costs (7.8) (8.8) (16.6)
-----------------------------------
Balance December 31, 2002 $6.0 $1.1 $7.1
===================================
The BBA acquisition was initially financed through the issuance of
commercial paper. During 2001, the Company put in place permanent debt
financing. In 2002, the Company modified portions of its debt structure.
Additional details on borrowing are contained in Note 9 of the Notes to the
Consolidated Financial Statements.
In October 2000, the Company announced a reorganization, including
management changes, consolidation of production facilities and related actions.
The pretax cost of actions taken in connection with the reorganization,
including $11.7, $30.1 and $41.3 in 2002, 2001 and 2000, respectively, is
expected to approximate $90.0 to $100.0 through the end of 2003. On completion,
the reorganization is expected to yield annual savings approximating $25.0 to
$30.0. A portion 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 undertook to close certain manufacturing,
distribution and sales facilities in all geographic regions in which the Company
operates. In connection with these actions, 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. During 2000, approximately 150
employees accepted enhanced retirement benefits under these two programs,
resulting in nonrecurring pretax charges of $23.8. 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.
28
<PAGE>
Nonrecurring charges by region were as follows:
2002 2001
- ---------------------------------------------
North America $5.6 $14.7
Europe 5.8 4.2
Asia Pacific .3 8.6
Latin America -- 2.6
India Region -- --
----- -------
$11.7 $30.1
===== =======
Nonrecurring charges recorded in 2000 were $41.3, essentially all of which
related to United States-based operations. There were no significant non-cash
related elements in the 2002, 2001 or 2000 charges. Approximately 700 employees
have been affected by the programs.
Movements in accruals related to nonrecurring charges were as follows:
EMPLOYEE- ASSET-RELATED
RELATED AND OTHER TOTAL
- -----------------------------------------------------------------------
Balance January 1, 2000 $9.6 $1.6 $11.2
Additional charges 37.1 4.2 41.3
Cash and other costs (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 (27.5) (21.3) (48.8)
------------------------------------
Balance December 31, 2001 7.0 .7 7.7
Additional charges 4.3 7.4 11.7
Cash and other costs (7.9) (7.7) (15.6)
------------------------------------
Balance December 31, 2002 $3.4 $.4 $3.8
====================================
The balance of the accruals relating to acquisition accounting and the
nonrecurring charges is expected to be utilized in 2003 in connection with the
final decommissioning and disposal of affected equipment and as severance
obligations to affected employees are satisfied.
In October 2001, the Company sold its formulated fruit and vegetable
preparation businesses in the United States and Brazil. Sales for the business
up to the date of disposition were approximately $23.0 with operating profit of
approximately $2.2. In connection with this transaction the Company recorded a
non-recurring charge of $7.4 related to employee separation and other disposal
costs. 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. No final
decision has been made 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 the business up to the date of disposition were $36.7 with
operating profit of approximately $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.
The Company sold its concentrate business based in Oregon in June 2002.
Sales for the business up to the date of disposition were $9.4; operating profit
was not significant. In connection with this transaction, the Company recorded a
nonrecurring charge of $4.3 related to employee separation and other disposal
costs. Proceeds from the sale, which were not material, were used to reduce
current borrowings.
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.
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. FAS 144 is effective for fiscal years beginning after
December 15, 2001 and in 2002, the Company adopted this standard without
material impact to reported results.
Statement of Financial Accounting Standards No. 146 (FAS 146), Accounting
for Costs Associated with Exit or Disposal Activities was issued in June 2002.
FAS 146 establishes accounting and reporting standards for exit or disposal
activities initiated after December 31, 2002, and requires such costs to be
recognized when the liability is incurred and not at project initiation. The
Company will comply with the provisions of FAS 146.
Statement of Financial Accounting Standards No. 148 (FAS 148), Accounting
for Stock-Based Compensation - Transition and Disclosure was issued in December
2002. FAS 148 provides alternate methods of transition for a voluntary change to
the fair value based method of accounting for stock-based employee
compensation. The Company has elected to continue to use the intrinsic method
of accounting for stock-based awards to employees.
29
<PAGE>
No compensation expense has been recognized other than for restricted stock
awards.
The Financial Accounting Standards Board issued Interpretation No. 45,
Guarantor's Accounting and Disclosure Requirements for Guarantees, and No. 46,
Consolidation of Variable Interest Entities. The Company has evaluated these
interpretations and does not believe they apply to the Company.
FINANCIAL CONDITION
Cash, cash equivalents and short-term investments totaled $15.2 at December
31, 2002 compared to $48.9 and $129.2 at December 31, 2001 and 2000,
respectively. Short-term investments are high-quality, readily marketable
instruments. Working capital totaled $507.3 at year-end 2002, compared to $336.1
and $409.9 at December 31, 2001 and 2000, respectively; the 2000 amount excludes
commercial paper borrowings used to finance the BBA acquisition to the extent
they were later refinanced with long-term debt. Gross additions to property,
plant and equipment were $81.8, $52.0 and $60.7 in 2002, 2001 and 2000,
respectively, and are expected to approximate $85.0 in 2003.
Long-term debt was $1,007.1 and $939.4 at December 31, 2002 and December
31, 2001, respectively. Long-term debt includes $63.5 and $8.3 of deferred
interest rate swap gains at December 31, 2002 and 2001, respectively. In July
2002, the Company entered into a five-year Euro 350.0 (approximately $350.0 at
December 31, 2002) multi-currency revolving credit agreement. The Company
cancelled and repaid all borrowings under an existing Euro 140.0 facility. Also
in July 2002, the Company exercised an option under its $500.0 U.S. dollar
revolving credit facility and cancelled the $200.0 364 day portion of that
agreement. The remaining portion of the facility, which serves as backstop for
the Company's commercial paper program, continues until September 2006. There
have been no borrowings under this facility. The Company compensates the banks
participating in this credit facility in the form of fees, the amounts of which
are not significant. At December 31, 2002, the Company's outstanding commercial
paper totaled $38.0 at an average interest rate of 1.6% compared to $204.2 at
December 31, 2001 at an average interest rate of 2.9%. Commercial paper
maturities did not extend beyond January 21, 2003.
During 2002, the Company entered into agreements for the sale and leaseback
of its Hazlet and South Brunswick, New Jersey facilities. Under the terms of the
sale, the Company sold the land, building and associated improvements at these
facilities to an unrelated third party for $48.0 in cash. The net book value of
these assets approximated $20.3. The gain realized on the sale, approximating
$26.7, has been deferred and will be credited to income over the 22-year lease
term. At December 31, 2002, the unamortized portions of the deferred gain of
$24.8 and $1.2 are included in the balance sheet captions Retirement and other
liabilities and Other current liabilities, respectively. The lease agreements
provide for renewal options of up to 30 years. Payments under the leases
approximate $4.2 annually and commenced in July 2002. Total lease payments for
2002 were $2.1 and for 2003 to 2007 are $4.2 annually; the aggregate lease
obligation is $92.4. The leases are classified as operating leases.
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 a plan to
increase its share repurchase program by $100.0. The Company completed the April
2000 program during 2001 and the September 2000 program during 2002. On October
22, 2002, the Company's Board of Directors authorized a new share repurchase
program of $100.0, which is expected to be completed over the next two years.
Under these plans, the Company purchased $72.3, $71.2 and $201.0 of treasury
stock in 2002, 2001 and 2000, respectively. Repurchases were made from time to
time on the open market or through private transactions. The repurchased shares
are available for use in connection with the Company's employee benefit plans
and for other general corporate purposes.
The Company anticipates that all financing requirements will be funded from
operations and credit facilities currently in place. Cash flows from operations
are sufficient to fund the Company's anticipated capital spending, dividends and
other requirements including debt reduction; the Company anticipates reducing
debt by approximately $100.0 in 2003. The Company may dispose of additional
non-core assets; any related proceeds will be used primarily to reduce debt.
The dividend per share in 2002, 2001 and 2000 was, respectively, $.60,
$.60 and $1.29. In September 2000, the Board of Directors reduced the Company's
quarterly dividend by 60%, to $.15 per share, beginning with the fourth quarter
2000 dividend. The dividend per share has not changed since that date. The
Company paid dividends totaling $56.8, $57.6 and $155.5 in 2002, 2001 and 2000,
respectively.
The cumulative translation adjustment component of Accumulated other
comprehensive income was ($138.2) at December 31, 2002, compared to ($156.3) at
December 31, 2001. The change results principally from the weakening of the U.S.
dollar
30
<PAGE>
against the Euro. The Minimum pension liability adjustment component of
Accumulated other comprehensive income was ($75.0) at December 31, 2002 compared
to ($20.0) at December 31, 2001. This change reflects lower pension asset values
coupled with a reduction in the discount rate assumptions used to calculate
pension liabilities. The Accumulated gain on derivatives qualifying as hedges
was $0.7 at December 31, 2002 compared to an Accumulated loss of ($2.3) at
December 31, 2001.
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 2002, the Company
spent approximately $2.7 on capital projects and about $13.4 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 judgments 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 is exposed to market risk from foreign currency exchange rates,
interest rates and commodity price fluctuations. The Company evaluates and
manages volatility relating to these exposures on a global basis to take
advantage of netting opportunities that may exist. Identified net exposures are
managed employing a number of techniques including but not limited to borrowings
in local currencies and the use of certain derivative instruments.
The Company operates on a global basis and, accordingly, is exposed to
currency fluctuation related to the manufacture and sale of its products in
currencies other than the U.S. dollar. The major foreign currencies involve the
markets in the European Union, Mexico, Brazil, China, Indonesia and Japan,
although all regions in the world are subject to foreign currency fluctuations
versus the U.S. dollar and other cross-currency rates. The Company actively
monitors its foreign currency exposures in all major markets in which it
operates, and employs a variety of techniques to mitigate the impact of
exchange rate fluctuations, including foreign currency hedging activities. The
Company enters into foreign currency forward contracts with the objective of
reducing exposure to cash flow volatility associated with foreign currency
receivables and payables, and with anticipated purchases of certain raw
materials used in operations. The notional amount and maturity dates of such
contracts match those of the underlying transactions. At December 31, 2002 and
2001, the Company had outstanding foreign currency forward contracts with
notional amounts approximating $131.4 and $97.3, respectively. The Company has
designated these contracts as qualified fair value and cash flow hedges as
appropriate. Accordingly, the effective portion of any gain or loss on a
derivative instrument reported as a cash flow hedge is reported as a component
of Accumulated 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,
2002 or 2001.
The Company employs various interest rate swaps and debt issuances with the
objective of managing and optimizing its interest rate exposure. The Company
has entered into a series of swaps for a $700.0 notional amount which
effectively converts the fixed 6.45% coupon interest rate to a variable
short-term rate based upon the London InterBank Offered Rate (LIBOR) plus an
interest markup. During 2001 and 2002, the Company periodically amended the
swaps, which changed the short-term LIBOR basis and the related spread. As a
result of market conditions and changes in the value of the swaps, the
counterparty paid the Company $56.5, including accrued interest of $6.5 in 2002,
and $19.9, including accrued interest of $3.3 in 2001. The swap gains are
deferred, classified as a separate element of long-term debt and amortized to
income as a reduction in interest expense over the remaining term of the debt.
As a result of these transactions, at December 31, 2002, the effective interest
rate on the 6.45% Notes approximated 3.4% compared to 3.7% at December 31, 2001.
In 2002, the Company entered into a series of swaps to convert its long-term
Japanese Yen borrowings from fixed-rate to short-term Japanese Yen LIBOR rates.
There was no cash settlement for these swaps, which effectively convert the
1.74% and 2.45% long-term Yen notes to a blended effective rate of 1.7%. All
interest rate swaps are designated as qualified fair value hedges; there were no
ineffective interest rate swaps at December 31, 2002 or December 31, 2001.
31
<PAGE>
CRITICAL ACCOUNTING POLICIES AND
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to use judgement and 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, for which all costs are expensed as
incurred.
Those areas requiring the greatest degree of management judgement or deemed
most critical to the Company's financial reporting involve:
> The periodic assessment of potential impairment of intangible assets
acquired in business combinations;
> 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;
> 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;
> The determination of financial instruments employed as effective hedges of
cash flows or market risk exposures; and
> The evaluation of potential 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.
CAUTIONARY STATEMENT UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Statements in this 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. Such forward-looking statements are
based on management's reasonable current assumptions and expectations. Such
forward-looking statements involve risks, uncertainties and other factors, which
may cause the actual results of the Company to be materially different from any
future results expressed or implied by such forward-looking statements, and
there can be no assurance that actual results will not differ materially from
management's expectations. Such factors include, among others, the following:
general economic and business conditions in the Company's markets, including
economic and political uncertainties; interest rates; the price and availability
of raw materials; the Company's ability to implement its business strategy,
including the achievement of anticipated cost savings, profitability and growth
targets; the impact of currency fluctuation or devaluation in the Company's
principal foreign markets and the success of the Company's hedging and risk
management strategies; the impact of possible pension funding obligations and
increased pension expense on the Company's cash flow and results of operations;
and effect of legal and regulatory proceedings, as well as restrictions imposed
on the Company, its operations or its representatives by foreign governments.
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 or to reflect changes in expectations,
assumptions or results.
32
<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.
/s/ Richard A. Goldstein
Richard A. Goldstein
Chairman of the Board and Chief Executive Officer
/s/ Douglas J. Wetmore
Douglas J. Wetmore
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 statement of income, cash flows and shareholders' equity present
fairly, in all material respects, the financial position of International
Flavors & Fragrances Inc. and its subsidiaries at December 31, 2002 and 2001,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2002 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 to the consolidated financial statements, the
Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill
and Other Intangible Assets," effective January 1, 2002 and Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," effective January 1, 2001.
/s/ PricewaterhouseCoopers LLP
New York, New York
January 27, 2003
33
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME INTERNATIONAL FLAVORS & FRAGRANCES INC.
YEAR ENDED DECEMBER 31,
------------------------------------------------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 2002 2001 2000
- ------------------------------------------------------------- -----------------------------------------
<S> <C> <C> <C>
Net sales $1,809,249 $1,843,766 $1,462,795
---------- -----------------------------------------
Cost of goods sold 1,035,835 1,063,433 831,653
Research and development expenses 144,027 135,248 112,671
Selling and administrative expenses 305,156 313,335 258,653
Amortization 12,632 46,089 7,032
Nonrecurring charges 11,737 30,069 41,273
Interest expense 37,036 70,424 25,072
Other (income) expense, net (3,591) (2,609) 2,314
---------- -----------------------------------------
1,542,832 1,655,989 1,278,668
---------- -----------------------------------------
Income before taxes on income 266,417 187,777 184,127
Taxes on income 90,473 71,775 61,122
---------- -----------------------------------------
NET INCOME $ 175,944 $ 116,002 $ 123,005
========== ==========================================
2002 2001 2000
- ------------------------------------------------------------- -----------------------------------------
NET INCOME PER SHARE - BASIC $1.86 $1.21 $1.22
---------- -----------------------------------------
NET INCOME PER SHARE - DILUTED $1.84 $1.20 $1.22
========== ==========================================
</TABLE>
See Notes to Consolidated Financial Statements
34
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET INTERNATIONAL FLAVORS & FRAGRANCES INC.
(DOLLARS IN THOUSANDS) DECEMBER 31,
-------------------------------
ASSETS 2002 2001
- ------------------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 14,858 $ 48,521
Short-term investments 307 384
Receivables:
Trade 327,306 328,858
Allowance for doubtful accounts (12,933) (10,835)
Other 24,234 22,335
Inventories 421,603 415,984
Deferred income taxes 67,176 77,449
Prepaid expenses 24,198 13,665
---------- --------------------
Total Current Assets 866,749 896,361
PROPERTY, PLANT AND EQUIPMENT, NET 520,499 532,473
GOODWILL, NET 642,655 648,975
INTANGIBLE ASSETS, NET 140,048 146,945
OTHER ASSETS 62,743 43,297
---------- --------------------
Total Assets $2,232,694 $2,268,051
========== ====================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY 2002 2001
- ------------------------------------------------------------------------------------------------------------- --------------------
<S> <C> <C>
CURRENT LIABILITIES:
Bank loans and current portion of long-term debt $ 11,684 $ 23,716
Commercial paper 37,979 204,229
Accounts payable 104,007 85,659
Accrued payrolls and bonuses 36,250 39,227
Dividends payable 14,138 14,215
Income taxes 38,496 49,841
Other current liabilities 116,943 143,327
---------- --------------------
Total Current Liabilities 359,497 560,214
---------- --------------------
OTHER LIABILITIES:
Long-term debt 1,007,085 939,404
Deferred income taxes -- 44,553
Retirement and other liabilities 291,434 199,710
---------- --------------------
Total Other Liabilities 1,298,519 1,183,667
---------- --------------------
COMMITMENTS AND CONTINGENCIES (NOTE 17)
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 109,735 126,170
Restricted stock (5,723) (1,440)
Retained earnings 1,382,539 1,263,344
Accumulated other comprehensive income:
Cumulative translation adjustment (138,175) (156,266)
Accumulated gains/(losses) on derivatives qualifying as hedges (net of tax) 733 (2,261)
Minimum pension liability adjustment (net of tax) (75,038) (20,009)
---------- --------------------
1,288,541 1,224,008
Treasury stock, at cost - 21,507,668 shares in 2002 and 20,996,954 shares in 2001 (712,876) (698,851)
Note receivable from officer (987) (987)
---------- --------------------
Total Shareholders' Equity 574,678 524,170
---------- --------------------
Total Liabilities and Shareholders' Equity $2,232,694 $2,268,051
========== ====================
See Notes to Consolidated Financial Statements
35
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS INTERNATIONAL FLAVORS & FRAGRANCES INC.
YEAR ENDED DECEMBER 31,
---------------------------------------------------
(DOLLARS IN THOUSANDS) 2002 2001 2000
- ----------------------------------------------------------------------------------------- -----------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $175,944 $116,002 $123,005
Adjustments to reconcile to net cash provided by operations:
Depreciation and amortization 84,458 123,493 69,344
Deferred income taxes (6,381) (18,113) (30,496)
Changes in assets and liabilities:
Current receivables 15,452 8,925 15,261
Inventories 17,259 (1,207) 64,591
Current payables (27,623) (20,076) 22,017
Other, net (15,765) (27,519) 5,388
-------- -----------------------------------------
Net cash provided by operations 243,344 181,505 269,110
-------- -----------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investments 257 8,250 1,566
Purchases of investments (176) (19,786) (1,111)
Acquisition of minority interest (11,791) -- --
Investments in acquired businesses, net of cash received -- -- (953,295)
Additions to property, plant and equipment (81,815) (52,016) (60,696)
Proceeds from disposal of assets 64,634 14,900 11,301
-------- -----------------------------------------
Net cash used in investing activities (28,891) (48,652) (1,002,235)
-------- -----------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid to shareholders (56,826) (57,618) (155,502)
Net change in bank loans (14,774) (13,088) 5,164
Net change in commercial paper outstanding (166,250) (605,123) 746,152
Proceeds from long-term debt 282,329 580,545 413,747
Repayments of long-term debt (251,837) (49,705) (1,903)
Proceeds from issuance of stock under stock option and
employee stock purchase plans 29,579 6,842 1,387
Purchase of treasury stock (72,273) (71,234) (200,953)
-------- -----------------------------------------
Net cash provided by (used in) financing activities (250,052) (209,381) 808,092
-------- -----------------------------------------
Effect of exchange rate changes on cash and cash equivalents 1,936 (3,820) (8,233)
-------- -----------------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (33,663) (80,348) 66,734
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 48,521 128,869 62,135
-------- -----------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 14,858 $ 48,521 $128,869
======== =========================================
</TABLE>
See Notes to Consolidated Financial Statements
36
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY INTERNATIONAL FLAVORS & FRAGRANCES INC.
ACCUMULATED NOTE
CAPITAL IN OTHER TREASURY STOCK RECEIVABLE TOTAL
COMMON EXCESS OF RESTRICTED RETAINED COMPREHENSIVE ----------------------- FROM COMPREHENSIVE
(DOLLARS IN THOUSANDS) STOCK PAR VALUE STOCK EARNINGS INCOME SHARES COST OFFICER INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
JANUARY 1, 2000 $14,470 $134,480 $ -- $1,211,790 $(57,135) (10,939,915) $(445,108) $ --
Net income 123,005 $123,005
Cumulative translation
adjustment (20,443) (20,443)
--------
Total comprehensive
income $102,562
========
Cash dividends declared (130,234)
Stock options (1,439) 79,297 2,826
Reacquired shares (7,475,178) (200,953)
--------------------------------------------------------------------------------------------
BALANCE AT
DECEMBER 31, 2000 14,470 133,041 -- 1,204,561 (77,578) (18,335,796) (643,235) --
--------------------------------------------------------------------------------------------
Net income 116,002 $116,002
Cumulative translation
adjustment (78,688) (78,688)
Accumulated losses on
derivatives qualifying
as hedges (net of tax) (2,261) (2,261)
Minimum pension
liability adjustment
(net of tax) (20,009) (20,009)
--------
Total comprehensive
income $ 15,044
========
Cash dividends declared (57,219)
Stock options (3,941) 187,056 9,623 (987)
Reacquired shares (3,019,100) (71,234)
Restricted stock award (2,930) (3,065) 170,886 5,995
Amortization 1,625
--------------------------------------------------------------------------------------------
BALANCE AT
DECEMBER 31, 2001 14,470 126,170 (1,440) 1,263,344 (178,536) (20,996,954) (698,851) (987)
--------------------------------------------------------------------------------------------
Net income 175,944 $175,944
Cumulative translation
adjustment 18,091 18,091
Accumulated gains on
derivatives qualifying
as hedges (net of tax) 2,994 2,994
Minimum pension
liability adjustment
(net of tax) (55,029) (55,029)
--------
Total comprehensive
income $142,000
========
Cash dividends declared (56,749)
Stock options (15,652) 1,582,486 51,581
Reacquired shares (2,293,200) (72,273)
Restricted stock award (783) (5,884) 200,000 6,667
Amortization 1,601
---------------------------------------------------------------------------------------------
BALANCE AT
DECEMBER 31, 2002 $14,470 $109,735 $(5,723) $1,382,539 $(212,480) (21,507,668) $(712,876) $(987)
=============================================================================================
See Notes to Consolidated Financial Statements
37
</TABLE>
<PAGE>
INTERNATIONAL FLAVORS & FRAGRANCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF OPERATIONS AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES Preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the Consolidated Financial Statements and accompanying disclosures.
These estimates are based on management's best knowledge of current events and
actions the Company may undertake in the future. Actual results may ultimately
differ from estimates, although management does not believe such changes will
materially affect the financial statements in any individual year.
NATURE OF OPERATIONS The Company is a 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.
FOREIGN CURRENCY TRANSLATION The assets and liabilities of non-U.S.
subsidiaries 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.
Through December 31, 2000, for 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. Gains and
losses as a result of remeasurements were included in income.
RESEARCH AND DEVELOPMENT All costs associated with research and
development are expensed as incurred.
INVENTORIES Inventories are stated at the lower of cost (generally on
an average basis) or market.
CASH EQUIVALENTS Cash equivalents include highly liquid investments
with maturities of three months or less at date of purchase.
PROPERTY, PLANT AND EQUIPMENT 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 estimated life of the improvements or the
remaining term of the lease, whichever is shorter.
The Company reviews its long-lived assets 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.
GOODWILL AND OTHER INTANGIBLE ASSETS Identifiable intangible assets
include patents, trademarks and other intellectual property valued at
acquisition through independent appraisals, and are amortized on a straight-line
basis over periods ranging from 7 to 20 years. Through December 31, 2001,
goodwill arising from business acquisitions was amortized on a straight-line
basis over its estimated useful life, which was generally 20 years.
Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards No. 142 (FAS 142), Goodwill and Other Intangible Assets.
FAS 142 eliminates the amortization of goodwill and indefinite-lived intangibles
and requires an evaluation of potential impairment upon adoption, and at least
annually thereafter. FAS 142 also prescribes that other indefinite-lived
intangibles be included with goodwill.
Fair values for goodwill and indefinite-lived intangibles are
determined based on discounted cash flows, market multiples or appraised values,
as appropriate.
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.
38
<PAGE>
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 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, as amended, requires
that every derivative instrument be recorded in the balance sheet as either an
asset or liability, measured at its fair value. The cumulative effect of
adoption of FAS 133 did not result in a material impact on the Company's
financial position, results of operations or cash flows.
It is the Company's policy to enter into derivative instruments with
terms that match the underlying exposure being hedged. As such, the Company's
derivative instruments are considered highly effective and the net gain or loss
from hedge ineffectiveness was not material.
The Company's derivative instruments that qualify for hedge accounting
are primarily designated as either fair value hedges or cash flow hedges. For
fair value hedges, changes in fair value of the derivative as well as the
offsetting changes in fair value of the hedged item are recognized in earnings
each period. For cash flow hedges, changes in fair value of the derivative are
recorded in other comprehensive income and are recognized in earnings when the
offsetting effect of the hedged item is also recognized in earnings.
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.
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 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. FAS 144 is effective for fiscal
years beginning after December 15, 2001. The Company adopted this standard
without material impact to reported results.
Statement of Financial Accounting Standards No. 146 (FAS 146),
Accounting for Costs Associated with Exit or Disposal Activities was issued in
June 2002. FAS 146 establishes accounting and reporting standards for exit or
disposal activities initiated after December 31, 2002, and requires such costs
to be recognized when the liability is incurred and not at project initiation.
The Company will comply with the provisions of FAS 146.
Statement of Financial Accounting Standards No. 148 (FAS 148),
Accounting for Stock-Based Compensation - Transition and Disclosure was issued
in December 2002. FAS 148 provides alternate methods of transition for a
voluntary change to fair value based method of accounting for stock-based
employee compensation. The Company has elected to continue to use the intrinsic
method of accounting for stock-based awards to employees. No compensation
expense has been recognized other than for restricted stock awards
The Financial Accounting Standards Board issued Interpretation No. 45,
Guarantor's Accounting and Disclosure Requirements for Guarantees, and No. 46,
Consolidation of Variable Interest Entities. The Company has evaluated these
interpretations and does not believe they apply to the Company.
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:
NUMBER OF SHARES
----------------------------------
(SHARES IN THOUSANDS) 2002 2001 2000
- ---------------------------------------------------- -----------------------
Basic 94,511 95,770 101,073
Dilution under stock plans 1,362 1,049 20
------ -----------------------
Diluted 95,873 96,819 101,093
====== =======================
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 3,505,414, 4,138,020, and 5,430,857 shares were
outstanding in 2002, 2001 and 2000, 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.
STOCK PLANS At December 31, 2002, the Company had stock-based
compensation plans which are described more fully in Note 12. The Company
applies the recognition and measurement principles of Accounting Principles
Board Opinion No. 25,
39
<PAGE>
Accounting for Stock Issued to Employees, and related Interpretations
in accounting for these plans. No compensation expense for
employee stock options is reflected in net earnings, as all options
granted under such plans had an exercise price not less than the
market value of the common stock on the date of the grant. Net
income includes compensation expense related to restricted stock.
The following table illustrates the effect on net income and net
income per share if the Company had applied the fair value recognition
provisions of Statement of Financial Accounting Standards
No. 123 for the years ended December 31, 2002, 2001 and 2000:
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE AMOUNTS) 2002 2001 2000
- -------------------------------------------------- -----------------------
Net income, as reported $175,944 $116,002 $123,005
Deduct:
Total stock-based employee
compensation expense
determined under fair
value method for all
stock option awards, net
of related tax effects 16,008 14,092 11,957
-------- -----------------------
Pro-forma net income $159,936 $101,910 $111,048
======== =======================
Net income per share:
Basic - as reported $1.86 $1.21 $1.22
Basic - pro-forma $1.69 $1.06 $1.10
Diluted - as reported $1.84 $1.20 $1.22
Diluted - pro-forma $1.67 $1.05 $1.10
----- --------------------
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.
RECLASSIFICATIONS Certain reclassifications have been made to
the prior years' financial statements to conform to 2002 classifications.
NOTE 2. NONRECURRING CHARGES
In October 2000, the Company announced a reorganization including
management changes, consolidation of production facilities and related actions.
In June 1999, the Company undertook to close certain manufacturing,
distribution and sales facilities in all geographic regions in which the Company
operates.
In connection with these actions, the Company initiated two separate
voluntary retirement incentive programs for United States-based employees
meeting certain eligibility requirements. During 2000, approximately 150
employees accepted enhanced retirement benefits under these two programs,
resulting in nonrecurring pretax charges of $23.8 million. 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.
Nonrecurring charges by region were as follows:
(DOLLARS IN THOUSANDS) 2002 2001
- -------------------------------------------------------------- -------
North America $ 5,565 $14,722
Europe 5,814 4,172
Asia Pacific 358 8,542
Latin America -- 2,633
India Region -- --
------- -------
$11,737 $30,069
======= =======
Nonrecurring charges in 2000 were $41.3 million, essentially all of
which related to United States-based operations. There were no significant
non-cash related elements in the 2002, 2001 or 2000 charges.
Movements in accruals related to these charges were as follows:
ASSET-
EMPLOYEE- RELATED
(DOLLARS IN THOUSANDS) RELATED AND OTHER TOTAL
- --------------------------------------------------------------------------------
Balance January 1, 2000 $ 9,622 $ 1,586 $ 11,208
Additional charges 37,095 4,178 41,273
Cash and other costs (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 (27,474) (21,294) (48,768)
---------------------------------------
Balance December 31, 2001 6,988 745 7,733
Additional charges 4,340 7,397 11,737
Cash and other costs (7,899) (7,721) (15,620)
---------------------------------------
Balance December 31, 2002 $ 3,429 $ 421 $ 3,850
=======================================
The balance of the accruals is expected to be utilized in 2003 in
connection with the final decommissioning and disposal of affected equipment and
as severance obligations to affected employees are satisfied. Approximately 700
employees have been affected by the programs.
NOTE 3. ACQUISITIONS AND DIVESTITURES
On November 3, 2000, the Company acquired BBA; 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;
the purchase price has been allocated to assets acquired and liabilities assumed
based on their fair values at the date of acquisition. The excess of the
purchase price over the estimated
40
<PAGE>
value of tangible and identified intangible assets acquired was recorded as
goodwill. Other intangible assets include patents, trademarks and other
intellectual property owned or developed by BBA. The Company completed final
determination of the purchase price during 2001 when it established accruals
relating to employee separation costs, facility closure costs and other actions
relating to the integration of BBA into IFF. Such costs are a component of the
purchase accounting and do not directly impact current earnings.
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 January 1, 2000 and results
reflect the final acquisition accounting adjustments completed in 2001.
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 2000
- --------------------------------------------------------------------------------
Net sales $1,880,612
Net income 80,953
Net income per share - basic $0.80
Net income per share - diluted $0.80
-----------
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
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
==========
Movements in acquisition accounting accruals were as follows:
ASSET-
EMPLOYEE- RELATED
(DOLLARS IN THOUSANDS) RELATED AND OTHER TOTAL
- --------------------------------------------------------------------------------
Balance January 1, 2001 $ 4,103 $ 6,230 $ 10,333
Additional charges 41,012 24,961 65,973
Cash and other costs (31,259) (21,325) (52,584)
---------------------------------------
Balance December 31, 2001 13,856 9,866 23,722
Cash and other costs (7,850) (8,797) (16,647)
---------------------------------------
Balance December 31, 2002 $ 6,006 $ 1,069 $ 7,075
=======================================
The balance of the accruals is expected to be utilized in 2003 in
connection with the disposal of affected equipment and facilities, and as
severance obligations to affected employees are satisfied.
In October 2001, the Company sold its formulated fruit and vegetable
preparation businesses in the United States and Brazil. Sales for the business
up to the date of disposition were approximately $23.0 million with operating
profit of approximately $2.2 million. In connection with this transaction the
Company recorded a nonrecurring charge of $7.4 million related to employee
separation and other disposal costs. Proceeds from the sale, which were not
material, were used to reduce current borrowings.
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 the business up to the date of disposition were $36.7
million with operating profit of approximately $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.
The Company sold its concentrate business based in Oregon in June 2002.
Sales for the business up to the date of disposition were $9.4 million;
operating profit was not significant. In connection with this transaction, the
Company recorded a nonrecurring charge of $4.3 million related to employee
separation and other disposal costs. Proceeds from the sale, which were not
material, were used to reduce current borrowings.
NOTE 4. MARKETABLE SECURITIES
Marketable securities are included in cash equivalents or short-term
investments, as appropriate. At both December 31, 2002 and 2001, marketable
securities totaling $0.1 million 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
DECEMBER 31,
----------------------------
(DOLLARS IN THOUSANDS) 2002 2001
- ------------------------------------------------------------------ ------------
Raw materials $222,161 $212,270
Work in process 12,680 10,853
Finished goods 186,762 192,861
-------- --------
$421,603 $415,984
======== ========
NOTE 6. PROPERTY, PLANT AND EQUIPMENT, NET
DECEMBER 31,
----------------------------
(DOLLARS IN THOUSANDS) 2002 2001
- ------------------------------------------------------------------ ------------
Land $ 35,249 $ 36,747
Buildings and improvements 221,899 278,603
Machinery, equipment and software 630,252 620,116
Construction in progress 62,814 40,164
-------- --------
950,214 975,630
Accumulated depreciation 429,715 443,157
-------- --------
$520,499 $532,473
======== ========
41
<PAGE>
NOTE 7. INTANGIBLE ASSETS, NET
Effective January 1, 2002, the Company adopted FAS 142; adoption
eliminated annual goodwill amortization expense of approximately $33.0 million.
FAS 142 also prescribes that other indefinite-lived intangibles be included with
goodwill. In 2002, certain intangibles were reclassified as indefinite-lived
intangibles in accordance with the provisions of FAS 142. The following tables
reflect the reclassification of other indefinite-lived intangibles from
Trademarks and other to Goodwill on adoption of FAS 142 and the net income per
share effect of this change for the years ended December 31, 2002 and 2001.
Amortization expense for the year ended December 31, 2002 was $12.6 million;
estimated annual amortization from 2003 to 2006 is $12.6 million and $11.3
million in 2007.
During 2002, the Company completed its assessment of the impact of
adopting the impairment provisions of this standard, and concluded it has no
impairment of goodwill at this time.
DECEMBER 31, 2002
------------------------------
GROSS ACCUMULATED
(DOLLARS IN THOUSANDS) CARRYING VALUE AMORTIZATION
- --------------------------------------------------------------------------------
Goodwill $684,189 $41,534
Other indefinite-lived intangibles 19,200 1,184
Trademarks and other 149,786 27,754
------------------------
Total $853,175 $70,472
========================
DECEMBER 31, 2001
------------------------------
GROSS ACCUMULATED
(DOLLARS IN THOUSANDS) CARRYING VALUE AMORTIZATION
- --------------------------------------------------------------------------------
Goodwill $690,509 $41,534
Trademarks and other 163,251 16,306
---------------------------
Total $853,760 $57,840
===========================
YEAR ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS -----------------------------
EXCEPT PER SHARE AMOUNTS) 2002 2001
- -------------------------------------------------------------- -----------
Reported net income $175,944 $116,002
Add back: Goodwill amortization -- 32,774
-------- --------
Adjusted net income $175,944 $148,776
======== ========
BASIC NET INCOME PER SHARE
Reported net income $1.86 $1.21
Goodwill amortization -- 0.34
----- -----
Adjusted net income $1.86 $1.55
===== =====
DILUTED NET INCOME PER SHARE
Reported net income $1.84 $1.20
Goodwill amortization -- 0.34
----- -----
Adjusted net income $1.84 $1.54
===== =====
NOTE 8. SALE AND LEASEBACK TRANSACTION
During 2002, the Company entered into agreements for the sale and
leaseback of its Hazlet and South Brunswick, New Jersey facilities. Under the
terms of the sale, the Company sold the land, building and associated
improvements at these facilities to an unrelated third party for $48.0 million
in cash. The net book value of these assets approximated $20.3 million. The gain
realized on the sale, approximating $26.7 million, has been deferred and will be
credited to income over the 22-year lease term. At December 31, 2002, the
unamortized portions of the deferred gain of $24.8 million and $1.2 million are
included in the balance sheet captions Retirement and other liabilities and
Other current liabilities, respectively. The lease agreements provide for
renewal options of up to 30 years. Payments under the leases approximate $4.2
million annually and commenced in July 2002. Total lease payments for 2002 were
$2.1 million and for 2003 to 2007 are $4.2 million annually; the aggregate lease
obligation is $92.4 million. The leases are classified as operating leases.
NOTE 9. BORROWINGS
Debt consists of the following at December 31:
(DOLLARS IN THOUSANDS) RATE MATURITIES 2002 2001
- ------------------------------------------------------------------ ------------
Commercial paper (U.S.) $ 37,979 $ 204,229
Bank loans 10,979 21,916
Current portion of
long-term debt 705 1,800
----------- -----------
Total current debt 49,663 227,945
----------- -----------
U.S. dollars 6.45% 2006 699,112 698,800
Euro facility 4.79% 2005-06 106,018 101,500
Japanese Yen notes 2.45% 2008-11 126,824 115,300
Japanese Yen notes 1.74% 2005 10,012 9,100
Other 2004-06 1,587 6,404
----------- -----------
943,553 931,104
Deferred realized
gains on interest
rate swaps 57,868 15,571
FAS 133 adjustment 5,664 (7,271)
----------- -----------
Total long-term debt 1,007,085 939,404
----------- -----------
Total debt $ 1,056,748 $ 1,167,349
=========== ===========
The Company utilizes commercial paper to supplement long-term
borrowings. At December 31, 2002, outstanding commercial paper had an effective
interest rate of 1.6% compared to 2.9% at December 31, 2001. Commercial paper
maturities did not extend beyond January 21, 2003.
42
<PAGE>
In July 2002, the Company entered into a five-year Euro 350 million
(approximately $350.0 million at December 31, 2002), multi-currency revolving
credit facility agreement. The Company cancelled and repaid all borrowings under
an existing Euro 140 million credit facility.
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.
The Company reduced its U.S. revolving credit agreement to $500.0
million at December 31, 2001 from $1,300.0 million at December 31, 2000. This
revolving credit agreement was composed of a $200.0 million 364-day facility
and a $300.0 million five-year facility. On July 31, 2002, the Company exercised
an option under this U.S. revolving credit facility and cancelled the $200.0
million 364-day portion of the agreement; there were no borrowings under this
agreement. The remaining $300.0 million revolving credit facility extends to
September 2006. The revolving credit agreement is used as backstop for the U.S.
commercial paper program; there have been no borrowings under this agreement.
The Company compensates the banks participating in these credit facilities in
the form of fees, the amounts of which are not material.
Short-term bank loans were outstanding in several foreign countries and
averaged $16.7 million in 2002, compared with $36.4 million in 2001. The highest
levels were $52.2 million in 2002, $69.0 million in 2001 and $55.3 million in
2000, respectively. The 2002 weighted average interest rate of these foreign
bank loans, based on balances outstanding at the end of each month, was 5% and
the average rate on loans outstanding at December 31, 2002 was 4%. These rates
compare with 7% and 5%, respectively, in 2001 and 8% and 8% in 2000,
respectively.
Annual maturities on long-term debt outstanding at December 31, 2002
are as follows: 2003, $0.7 million; 2004, $1.0 million; 2005, $45.0 million;
2006, $770.0 million. At December 31, 2002, the estimated fair value of the
$700.0 million 6.45% Notes, including the interest rate swaps, was $761.6
million. The estimated fair value of the remaining long-term debt at December
31, 2002 and 2001, based on borrowing rates currently available to the Company
with similar terms and maturities, approximated the recorded amount.
Cash payments for interest were $61.6 million in 2002, $77.2 million in
2001 and $19.6 million in 2000.
At December 31, 2002, the Company and its subsidiaries had unused lines
of credit approximating $368.0 million in addition to the facility serving as
backstop to the Company's commercial paper program.
NOTE 10. INCOME TAXES
The following tables show the components of consolidated income before
taxes, and current and deferred income tax expense by taxing jurisdiction, both
domestic and foreign:
(DOLLARS IN THOUSANDS) 2002 2001 2000
- ------------------------------------------------- -------------------------
U.S. loss before taxes $ (8,918) $(59,390) $(33,183)
Foreign income before taxes 275,335 247,167 217,310
--------- -------------------------
Total income before taxes $266,417 $187,777 $184,127
========= =========================
(DOLLARS IN THOUSANDS) 2002 2001 2000
- ------------------------------------------------- -------------------------
Current
Federal $ 18,452 $ 7,507 $ (640)
State and local 1,884 3,816 381
Foreign 76,518 78,565 91,877
--------- -------------------------
96,854 89,888 91,618
--------- -------------------------
Deferred
Federal (19,496) (17,836) (20,543)
State and local (2,591) (5,821) (1,484)
Foreign 15,706 5,544 (8,469)
--------- -------------------------
(6,381) (18,113) (30,496)
--------- -------------------------
Total income taxes $ 90,473 $ 71,775 $ 61,122
========= =========================
At December 31, 2002 and 2001, gross deferred tax assets were $146.8
million and $115.7 million, respectively; gross deferred tax liabilities were
$77.2 million and $82.8 million, respectively. No valuation allowance was
required for deferred tax assets. At December 31, 2002, noncurrent deferred tax
assets of $2.5 million were included in Other assets. The principal components
of deferred tax assets (liabilities) were:
(DOLLARS IN THOUSANDS) 2002 2001
- ----------------------------------------------------------------- ------------
Employee and retiree benefits $ 71,700 $ 69,000
Inventory 5,800 2,500
Tax credit carryforwards 13,800 5,200
Property, plant and equipment (8,200) (8,000)
Trademarks and other (41,500) (52,400)
Interest 17,400 6,000
Foreign earnings (19,400) (17,600)
Other, net 30,000 28,200
-------- --------
$ 69,600 $ 32,900
======== ========
Of the Company's tax credit carryforwards, $6.3 million will expire, if
unused, beginning in 2005; the remaining $7.5 million can be carried forward
indefinitely.
43
<PAGE>
A reconciliation between the U.S. federal income tax rate and the
effective tax rate is:
2002 2001 2000
- ----------------------------------------------------- ------------------------
Statutory tax rate 35.0% 35.0% 35.0%
Difference in effective tax
rate on foreign earnings
and remittances 0.1 (1.4) (0.3)
State and local taxes (0.2) (0.7) (0.4)
Goodwill -- 6.0 0.9
Other, net (0.9) (0.7) (2.0)
----- --------------------
Effective tax rate 34.0% 38.2% 33.2%
===== =====================
Income taxes paid were $100.3 million in 2002, $88.6 million in
2001 and $81.0 million in 2000.
Undistributed earnings of foreign subsidiaries for which no deferred
taxes have been provided totaled $576.6 million at December 31, 2002. Any
additional U.S. taxes payable on these foreign earnings, if remitted, would be
substantially offset by credits for foreign taxes already paid.
NOTE 11. SHAREHOLDERS' EQUITY
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 50% of such Units vested; compensation expense of $1.7
million was recognized and included in operating expenses. In 2002, the third
price target of $31.50 was achieved and the Company recognized compensation
expense of $0.8 million which is included in operating expenses. The remaining
unvested Units are reported as Restricted stock on the Company's Consolidated
Balance Sheet.
On August 1, 2002, the Company's Board of Directors granted an award of
200,000 restricted shares of the Company's common stock. Entitlement to all or a
portion of the restricted award is subject to the Company's achieving certain
levels of shareholder return compared to those of a specified group of
companies, over the three, four and five year periods commencing August 1,
2002. Compensation expense relating to the award is recognized over the
restriction period.
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, $0.60, and $1.29, in 2002, 2001
and 2000, respectively.
The Accumulated other comprehensive income balance includes Cumulative
translation adjustments of ($138.2) million and ($156.3) million, Accumulated
gains or (losses) on derivatives qualifying as hedges of $0.7 million and ($2.3)
million, and Minimum pension liability of ($75.0) million and ($20.0) million,
in 2002 and 2001, respectively. Amounts are shown net of tax, where appropriate.
NOTE 12. STOCK PLANS
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 ten years after the
date of grant, except for options granted to two senior executives in 2000 and
certain other options granted to foreign employees, which may be exercised
immediately. Options granted in November 2000, however, constituting
approximately 17% of options outstanding (as of December 31, 2002), generally
become exercisable in four equal installments as corresponding
44
<PAGE>
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 grant
date, except for options granted to certain foreign employees, which may be
exercised immediately.
During 2002, options to purchase common stock were granted at exercise
prices ranging from $28.77 to $34.22 per share. At December 31, 2002, the price
range for shares under option was $17.94 to $49.88; options for 4,292,202 shares
were exercisable at that date.
Stock plan transactions were:
SHARES OF COMMON STOCK WEIGHTED
-------------------------- AVERAGE
AVAILABLE UNDER EXERCISE
FOR GRANT OPTION PRICE
- --------------------------------------------------------------------------------
Balance January 1, 2000 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
Granted (2,899,950) 2,899,950 32.19
Exercised -- (1,356,964) 18.42
Terminated 154,947 (154,947) 31.40
Lapsed (1,735,856) (87,500) 34.57
Reserved for Units (50,710) -- --
Increase under existing plans 4,500,000 -- --
Restricted Stock award (200,000) -- --
--------------------------------------
Balance December 31, 2002 6,480,012 9,661,908 $30.66
======================================
The following table summarizes information concerning currently
outstanding and exercisable options:
RANGE OF EXERCISE PRICES
-------------------------------
$10-$30 $30-$50
- --------------------------------------------------------------------------------
Number outstanding 4,131,339 5,530,569
Weighted average remaining contractual
life, in years 8.2 7.4
Weighted average exercise price $23.47 $36.04
-------------------------------
Number exercisable 1,868,978 2,423,224
Weighted average exercise price $21.72 $39.65
===============================
Using the Black-Scholes option valuation model, the estimated fair
values of options granted during 2002, 2001 and 2000 were $10.07, $8.09, and
$5.50, 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:
2002 2001 2000
- ----------------------------------------------------- ---------------------
Risk-free interest rate 4.5% 4.6% 6.2%
Expected life, in years 5 5 5
Expected volatility 33.7% 32.2% 26.9%
Expected dividend yield 1.8% 2.2% 3.8%
===== ===================
NOTE 13. 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 identical to
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, 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 and other corporate assets.
The Company is divided into five geographic regions for management
purposes: North America, Latin America, Europe, Asia Pacific and India Region.
The Company's reportable segment information, based on geographic
region, follows. Certain prior year amounts have been reclassified for
comparative purposes to reflect geographic alignment and the adoption of FAS
142.
45
<PAGE>
<TABLE>
<CAPTION>
2002 NORTH INDIA LATIN ASIA
(DOLLARS IN THOUSANDS) AMERICA EUROPE REGION AMERICA PACIFIC ELIMINATIONS CONSOLIDATED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales to unaffiliated customers $ 592,974 $ 695,384 $ 37,626 $ 216,938 $ 266,327 $ -- $ 1,809,249
Transfers between areas 86,089 127,830 1,766 1,022 17,126 (233,833) --
-------------------------------------------------------------------------------------------------
Total sales $ 679,063 $ 823,214 $ 39,392 $ 217,960 $ 283,453 $ (233,833) $ 1,809,249
=================================================================================================
Segment profit $ 81,888 $ 161,720 $ 9,311 $ 48,596 $ 52,619 $ 983 $ 355,117
=================================================================================
Corporate and other
unallocated expenses (43,518)
Nonrecurring charges (11,737)
Interest expense (37,036)
Other income (expense), net 3,591
-----------
Income before taxes on income $ 266,417
===========
Segment assets $ 789,642 $ 883,050 $ 55,088 $ 159,425 $ 357,908 $ (67,265) $ 2,177,848
=================================================================================
Unallocated assets 54,846
-----------
Total assets $ 2,232,694
===========
</TABLE>
<TABLE>
<CAPTION>
2001 NORTH INDIA LATIN ASIA
(DOLLARS IN THOUSANDS) AMERICA EUROPE REGION AMERICA PACIFIC ELIMINATIONS CONSOLIDATED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales to unaffiliated customers $ 616,806 $ 682,574 $ 32,684 $ 245,517 $ 266,185 $ -- $ 1,843,766
Transfers between areas 83,115 134,862 2,698 1,678 16,620 (238,973) --
-------------------------------------------------------------------------------------------------
Total sales $ 699,921 $ 817,436 $ 35,382 $ 247,195 $ 282,805 $ (238,973) $ 1,843,766
=================================================================================================
Segment profit $ 86,928 $ 158,175 $ 7,857 $ 52,907 $ 58,798 $ 2,691 $ 367,356
=================================================================================
Corporate and other
unallocated expenses (48,624)
Amortization of goodwill (33,071)
Nonrecurring charges (30,069)
Interest expense (70,424)
Other income (expense), net 2,609
-----------
Income before taxes on income $ 187,777
===========
Segment assets $ 836,208 $ 803,011 $ 55,572 $ 197,365 $ 340,134 $ (41,916) $ 2,190,374
=================================================================================
Unallocated assets 77,677
-----------
Total assets $ 2,268,051
===========
</TABLE>
<TABLE>
<CAPTION>
2000 NORTH INDIA LATIN ASIA
(DOLLARS IN THOUSANDS) AMERICA EUROPE REGION AMERICA PACIFIC ELIMINATIONS CONSOLIDATED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales to unaffiliated customers $ 470,953 $ 560,803 $ 4,069 $ 220,287 $ 206,683 $ -- $ 1,462,795
Transfers between areas 55,610 117,528 63 1,936 13,779 (188,916) --
-------------------------------------------------------------------------------------------------
Total sales $ 526,563 $ 678,331 $ 4,132 $ 222,223 $ 220,462 $ (188,916) $ 1,462,795
=================================================================================================
Segment profit $ 47,846 $ 161,126 $ 425 $ 38,914 $ 39,664 $ 1,762 $ 289,737
=================================================================================
Corporate and other
unallocated expenses (31,919)
Amortization of goodwill (5,032)
Nonrecurring charges (41,273)
Interest expense (25,072)
Other income (expense), net (2,314)
-----------
Income before taxes on income $ 184,127
===========
Segment assets $ 845,378 $ 883,614 $ 51,850 $ 231,455 $ 355,287 $ (31,737) $ 2,335,847
=================================================================================
Unallocated assets 153,186
-----------
Total assets $ 2,489,033
===========
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES DEPRECIATION AND AMORTIZATION
---------------------------------------- ----------------------------------------
(DOLLARS IN THOUSANDS) 2002 2001 2000 2002 2001 2000
- ---------------------------------------------------- ------------------------ -------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
North America $ 23,129 $ 18,531 $ 30,586 $ 33,782 $ 33,784 $ 26,691
Europe 29,688 20,441 14,628 21,919 27,616 21,247
India Region 555 491 196 534 533 142
Latin America 3,206 1,559 4,806 3,067 4,628 5,154
Asia Pacific 8,445 4,571 7,500 7,447 7,749 5,975
Unallocated assets 16,792 6,423 2,980 5,078 49,183 10,135
-------- ------------------------ -------- ------------------------
Consolidated $ 81,815 $ 52,016 $ 60,696 $ 71,827 $123,493 $ 69,344
======== ======================== ======== ========================
</TABLE>
Sales of fragrance products were $1,000.2 million, $1,008.1 million,
and $865.1 million in 2002, 2001 and 2000, respectively. Sales of flavor
products were $809.0 million, $835.7 million, $597.7 million in 2002, 2001 and
2000, respectively. Sales in the United States, based on the final country of
destination of the Company's products, were $544.3 million, $570.5 million,
$435.1 million in 2002, 2001 and 2000, respectively. No other individual country
of destination exceeded 8% of consolidated sales. No customer accounted for 10%
or more of sales in 2002 or 2001; the Company's largest customer accounted for
10% of sales in 2000. Total long-lived assets consists of net property, plant
and equipment and net intangible assets and amounted to $1,303.0 million,
$1,328.4 million, and $1,435.8 million at December 31, 2002, 2001 and 2000,
respectively; of the respective totals, $1,029.6 million, $1,071.1 million,
$1,055.5 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 $2.3 million in 2002 and $1.9 million in
2001, and losses of $1.9 million in 2000 are included in other income.
NOTE 14. 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 pretax 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) 2002 2001 2000 2002 2001 2000
- ----------------------------------------------------------------------- -------------------- -------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost for benefits earned $ 7,874 $ 7,293 $ 5,104 $ 7,327 $ 9,552 $ 6,051
Interest cost on projected benefit obligation 19,091 18,351 14,151 21,339 24,306 9,471
Expected return on plan assets (23,506) (23,082) (16,757) (23,455) (27,691) (10,688)
Net amortization and deferrals (306) (1,347) (1,414) 2,923 679 777
-------- -------------------- -------- --------------------
Defined benefit plans 3,153 1,215 1,084 8,134 6,846 5,611
Defined contribution and other retirement plans 3,121 2,368 2,386 3,227 2,425 3,173
-------- -------------------- -------- --------------------
Total pension expense $ 6,274 $ 3,583 $ 3,470 $ 11,361 $ 9,271 $ 8,784
======== ==================== ======== =====================
</TABLE>
47
<PAGE>
Expense recognized for postretirement benefits included the following
components:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) 2002 2001 2000
- ------------------------------------------------------------------------------------------ ---------------------------
<S> <C> <C> <C>
Service cost for benefits earned $2,034 $1,722 $1,500
Interest on benefit obligation 5,545 5,377 4,104
Net amortization and deferrals 532 508 13
------ ---------------------------
Total postretirement benefit expense $8,111 $7,607 $5,617
====== ===========================
</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) 2002 2001 2002 2001 2002 2001
- ------------------------------------------------------------------ --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Benefit obligation at beginning of year $ 256,647 $ 250,354 $ 351,390 $ 333,691 $ 83,506 $ 68,832
Service cost for benefits earned 7,874 7,293 7,327 9,552 2,034 1,722
Interest cost on projected benefit obligation 19,091 18,351 21,339 24,306 5,545 5,377
Actuarial (gain) loss 18,934 (8,027) 7,921 (6,476) 6,488 9,651
Plan amendments 631 -- -- -- -- --
Plan participants' contributions -- -- 106 90 165 105
Benefits paid (15,400) (13,572) (18,025) (13,336) (5,455) (4,083)
Acquisitions -- -- -- 16,496 -- 1,902
Special termination benefits -- 2,248 -- 382 -- --
Translation adjustments -- -- 44,719 (13,315) -- --
--------- --------- --------- --------- --------- ---------
Benefit obligation at end of year $ 287,777 $ 256,647 $ 414,777 $ 351,390 $ 92,283 $ 83,506
========= ========= ========= ========= ========= =========
</TABLE>
Changes in pension plan assets were:
<TABLE>
<CAPTION>
U.S. PLANS NON-U.S. PLANS
-------------------------- ---------------------------
(DOLLARS IN THOUSANDS) 2002 2001 2002 2001
- -------------------------------------------------------------------------------- --------- --------- ----------
<S> <C> <C> <C> <C>
Fair value of plan assets at beginning of year $ 256,189 $ 287,375 $ 294,993 $ 347,346
Actual return on plan assets (31,143) (19,487) (34,702) (34,497)
Employer contributions 10,310 1,873 35,792 8,729
Plan participants' contributions -- -- 106 90
Benefits paid (15,400) (13,572) (18,025) (13,336)
Translation adjustments -- -- 36,001 (13,339)
--------- --------- --------- ---------
Fair value of plan assets at end of year $ 219,956 $ 256,189 $ 314,165 $ 294,993
========= ========= ========= =========
</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) 2002 2001 2002 2001 2002 2001
- ------------------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Plan assets (less than) projected
benefit obligation $ (67,821) $ (458) $(100,612) $ (56,397) $ (92,283) $ (83,506)
Remaining balance of unrecognized net (asset)
liability established at adoption of FAS 87 (286) (928) 676 811 -- --
Unrecognized prior service cost 8,867 9,101 3,861 3,802 (1,700) (1,842)
Unrecognized net (gain) loss 49,458 (24,654) 128,115 53,421 29,250 23,540
--------- --------- --------- --------- --------- ---------
Net asset (liability) $ (9,782) $ (16,939) $ 32,040 $ 1,637 $ (64,733) $ (61,808)
========= ========= ========= ========= ========= =========
</TABLE>
48
<PAGE>
Pension assets and liabilities included in the Consolidated Balance
Sheet at December 31 were:
U.S. PLANS NON-U.S. PLANS
-------------------- ----------------------
(DOLLARS IN THOUSANDS) 2002 2001 2002 2001
- ---------------------------------------- -------- -------- ---------
Prepaid benefit cost $ -- $ 6,408 $ 30,950 $ 281
Accrued benefit
liability (41,289) (23,650) (86,413) (30,869)
Accumulated other
comprehensive
income 23,301 303 85,693 27,940
Intangible asset 8,206 -- 1,810 4,285
======= ======== ======== ========
Principal weighted average actuarial assumptions used to determine the
above pension data were:
U.S. PLANS NON-U.S. PLANS
-------------------- ----------------------
2002 2001 2002 2001
- ---------------------------------------- -------- -------- ---------
Discount rate 6.7% 7.2% 5.5% 5.9%
Weighted average
rate of
compensation
increase 4.0% 4.5% 2.8% 3.2%
Long-term rate of
return on
plan assets 9.0% 9.0% 7.5% 7.5%
=== === === ===
Discount rates used for determining future pension obligations of
individual plans are based on a review of long-term bonds that receive a high
rating by a recognized rating agency. The weighted average rates of compensation
increase were determined based on actual data for the individual plans. For
purposes of determining the 2003 results for the U.S.-based plans, the long-term
rate of return will be 8.5%; this rate of return is based on an asset allocation
of approximately 35% fixed income, corporate and government bonds expected to
yield 5-7%, and 65% in equity investments that are expected to yield 9-11% in
the long term. The plan has employed a similar asset allocation strategy for the
prior fifteen-year period and has achieved a compound annual return of
approximately 9.4%. Similar assessments were made for all non-U.S. plans.
Principal actuarial assumptions used to determine the above
postretirement data were:
2002 2001
- ---------------------------------------------------------------- -----
Discount rate 6.7% 7.2%
Current medical cost trend rate 10.0% 10.0%
Ultimate medical cost trend rate 5.0% 5.0%
Medical cost trend rate decreases to
ultimate rate in year 2009 2007
==== ====
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 $15.7 million and $1.6 million,
respectively; a 1% decrease in the rate would decrease the obligation and
expense by approximately $12.5 million and $1.3 million, respectively.
As described in Note 2, 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 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 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 $94.2 million and
$27.0 million at December 31, 2002 and 2001, respectively, as required by
Financial Accounting Standards Board Statement No. 87. The adjustment is
reflected in Accumulated other comprehensive income and Retirement and other
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 to plans in the
United States, the United Kingdom, and Japan.
49
<PAGE>
NOTE 15. FINANCIAL INSTRUMENTS
The Company has entered into a series of swaps effectively converting
the fixed $700.0 million 6.45% Notes coupon interest rate to a variable
short-term rate based upon the London InterBank Offered Rate (LIBOR) plus an
interest markup. Periodically, the Company has amended the swaps, changing the
short-term LIBOR basis and the related spread. As a result of these amendments
and changes, the counter-party paid the Company $56.5 million in 2002 and $19.9
million in 2001, including accrued swap interest of $6.5 million and $3.3
million, respectively. The net realized gains on the swaps have been deferred,
classified as a separate component of debt, and are being amortized to income
as a reduction in interest expense over the remaining term of the debt. In
addition, in 2002, the Company entered into a series of swaps to convert its
long-term Japanese Yen borrowings from fixed rate to short-term Japanese Yen
LIBOR rates. To the extent the Company has not received cash or otherwise
amended or settled any swap agreements, any applicable mark-to-market adjustment
relating to that swap is included as a separate component of debt and is
amortized over the remaining term of the underlying swap. These swaps are
designated as qualified fair value hedges. The Company had no ineffective
interest rate swaps at December 31, 2002.
The Company enters into foreign currency forward contracts with the
objective of reducing exposure to cash flow volatility associated with foreign
currency receivables and payables, and with anticipated purchases of certain raw
materials used in operations. These contracts, the counterparties to which are
major international financial institutions, generally involve the exchange of
one currency for a second currency at a future date, and have maturities which
do not exceed six months. The notional amount and maturity dates of such
contracts match those of the underlying transactions. At December 31, 2002 and
2001, the Company had outstanding foreign currency forward contracts with
notional amounts approximating $131.4 million and $97.3 million, respectively.
The Company has designated these contracts as qualified fair value and cash flow
hedges as appropriate. Accordingly, the effective portion of any gain or loss on
a derivative instrument reported as a cash flow hedge is reported as a component
of Accumulated 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,
2002 or 2001.
NOTE 16. CONCENTRATIONS OF CREDIT RISK
The Company has no significant concentrations of risk in financial
instruments. Temporary 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 regions.
NOTE 17. COMMITMENTS AND CONTINGENCIES
Minimum rental commitments under noncancellable operating leases for
office and warehouse facilities are $8.9 million in 2003, $7.9 million in 2004,
$6.5 million in 2005, $5.2 million in 2006, $4.4 million in 2007 and $4.2
million thereafter to 2024; the aggregate lease obligations are $102.3 million.
The corresponding rental expense amounted to $12.1 million and $2.2 million in
2002 and 2001, respectively; rental expense was not significant in 2000.
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 18. RELATED-PARTY TRANSACTIONS
At December 31, 2002 and 2001, the Company held a note receivable from
an executive officer, resulting from the exercise of a stock option. This note
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, 2002 and 2001 was 3.3%
and 4.1%, respectively. 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.
50
<PAGE>
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS NET INCOME PER SHARE(b)
EXCEPT PER ---------------------------------
SHARE AMOUNTS) NET SALES GROSS PROFIT NET INCOME(a) BASIC DILUTED
- -------------------------------------------- ----------------------- ----------------------- ------------- -----------------
Quarter 2002 2001 2002 2001 2002 2001 2002 2001 2002 2001
- ------------------------------- ---------- ---------- ---------- ---------- ---------- ----- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First $ 445,844 $ 483,661 $ 185,980 $ 199,522 $ 41,947 $ 20,272 $0.44 $0.21 $0.44 $ 0.21
Second 476,336 478,216 203,724 208,710 45,401 33,005 0.48 0.34 0.47 0.34
Third 462,777 462,719 201,702 194,088 49,599 33,555 0.52 0.35 0.52 0.35
Fourth 424,292 419,170 182,008 178,013 38,997 29,170 0.41 0.31 0.41 0.30
---------- ---------- ---------- ---------- ---------- ---------- ----- ----- ----- --------
$1,809,249 $1,843,766 $ 773,414 $ 780,333 $ 175,944 $ 116,002 $1.86 $1.21 $1.84 $ 1.20
========== ========== ========== ========== ========== ========== ===== ===== ===== ========
</TABLE>
(a) Net income for the 2002 second and third quarters includes the after-tax
effects of certain charges of $6,091 and $1,654, respectively. 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. See
Note 2 of the Notes to Consolidated Financial Statements for further
discussion.
(b) The sum of the 2002 quarters' basic net income per share does not equal the
earnings per share for the full year 2002 due to changes in average shares
outstanding.
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>
2002 2001
- ------------------------------------------------------- ------------------------
Quarter High Low High Low
- ------------------------------------------------------- ------------------------
<S> <C> <C> <C> <C>
First $35.95 $27.33 $22.76 $19.75
Second 37.45 30.61 28.20 21.25
Third 32.90 26.05 31.60 24.97
Fourth 35.90 32.08 31.69 24.10
========= ========= ========= =========
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
FIVE-YEAR SUMMARY INTERNATIONAL FLAVORS & FRAGRANCES INC.
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------ --------------------------------------------------------
CONSOLIDATED STATEMENT OF INCOME DATA
<S> <C> <C> <C> <C> <C>
Net sales $ 1,809,249 $ 1,843,766 $ 1,462,795 $ 1,439,499 $ 1,407,349
----------- --------------------------------------------------------
Cost of goods sold 1,035,835 1,063,433 831,653 806,382 777,764
Research and development expenses 144,027 135,248 112,671 103,794 98,438
Selling and administrative expenses 305,156 313,335 258,653 248,047 224,393
Amortization of goodwill and other intangibles 12,632 46,089 7,032 -- --
Nonrecurring charges(a)(b)(c)(d) 11,737 30,069 41,273 32,948 --
Interest expense 37,036 70,424 25,072 5,154 2,042
Other (income) expense, net (3,591) (2,609) 2,314 (291) (6,356)
----------- --------------------------------------------------------
1,542,832 1,655,989 1,278,668 1,196,034 1,096,281
----------- --------------------------------------------------------
Income before taxes on income 266,417 187,777 184,127 243,465 311,068
Taxes on income 90,473 71,775 61,122 81,465 107,283
----------- --------------------------------------------------------
Net income $ 175,944 $ 116,002 $ 123,005 $ 162,000 $ 203,785
----------- --------------------------------------------------------
% of net sales 9.7 6.3 8.4 11.3 14.5
% of average shareholders' equity 32.0 20.1 16.5 18.0 20.9
Net income per share - basic $1.86 $1.21 $1.22 $1.53 $1.90
Net income per share - diluted $1.84 $1.20 $1.22 $1.53 $1.90
----------- --------------------------------------------------------
Average number of shares (thousands) 94,511 95,770 101,073 105,748 107,122
----------- --------------------------------------------------------
CONSOLIDATED BALANCE SHEET DATA
Cash and short-term investments $ 15,165 $ 48,905 $ 129,238 $ 62,971 $ 115,999
Receivables, net 338,607 340,358 364,314 303,418 283,480
Inventories 421,603 415,984 435,312 415,269 403,961
Property, plant and equipment, net 520,499 532,473 679,874 523,916 498,784
Intangible assets, net 782,703 795,920 755,923 -- --
Total assets 2,232,694 2,268,051 2,489,033 1,401,495 1,388,064
Bank loans and commercial paper 49,663 227,945 852,985 92,474 29,072
Long-term debt 1,007,085 939,404 417,402 3,832 4,341
Shareholders' equity 574,678 524,170 631,259 858,497 945,051
----------- --------------------------------------------------------
OTHER DATA
CURRENT RATIO 2.4 1.6 0.9 2.3 3.1
Gross additions to property, plant and equipment $ 81,815 $ 52,016 $ 60,696 $ 103,835 $ 91,690
Depreciation and amortization expense 84,458 123,493 69,344 56,369 49,006
Cash dividends declared 56,749 57,219 130,234 160,830 159,513
Per share $0.60 $0.60 $1.29 $1.52 $1.49
Number of shareholders of record at year-end 3,875 3,394 3,741 4,209 4,653
Number of employees at year-end 5,728 5,929 6,614 4,682 4,669
=========== ========================================================
</TABLE>
(a) Nonrecurring charges ($7,745 after tax) in 2002 resulted from the Company's
reorganization program.
(b) Nonrecurring charges ($19,101 after tax) in 2001 resulted from the
Company's reorganization program.
(c) Nonrecurring charges ($26,765 after tax) in 2000 resulted from the
Company's reorganization program.
(d) Nonrecurring charges ($21,910 after tax) in 1999 resulted from the
Company's program to streamline its operations worldwide.
52
<PAGE>
DIRECTORS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MARGARET HAYES ADAME J. MICHAEL COOK RICHARD A. GOLDSTEIN HENRY P. VAN AMERINGEN
President Chairman and Chairman of the Board and President
Fashion Group International Chief Executive Officer Emeritus Chief Executive Officer van Ameringen Foundation, Inc.
Deloitte & Touche, LLP Chairman,
GUNTER BLOBEL, M.D., PH.D. Chairman, Executive Committee WILLIAM D. VAN DYKE, III
Nobel Prize-winning Audit Committee Senior Vice President
Rockefeller University Professor ARTHUR C. MARTINEZ Salomon Smith Barney Inc.
associated with Howard PETER A. GEORGESCU Chairman and
Hughes Medical Institute Chairman Emeritus Chief Executive Officer Emeritus
Young & Rubicam Inc. Sears, Roebuck and Company
JAMES R. CANTALUPO* Chairman, Chairman, Nominating and
President and Compensation Committee Governance Committee
Vice Chairman Emeritus
McDonald's Corporation
*Retired from the board December 2002
OFFICERS AND SENIOR MANAGEMENT
RICHARD A. GOLDSTEIN CLINT D. BROOKS, PH.D. SOPHIA GROJSMAN NICOLAS MIRZAYANTZ
Chairman of the Board and Senior Vice President Vice President Vice President
Chief Executive Officer Research & Development Global Business Development -
STEVEN J. HEASLIP Fine Fragrances and Toiletries
GAIL S. BELMUTH ROBERT BURNS Senior Vice President
Vice President Vice President and Human Resources JOEL W. SHANE
Corporate Communications Regional Manager Vice President
Asia Pacific D. WAYNE HOWARD Global Business Development -
DEREK J. BENNETT Executive Vice President Aroma Chemicals and
Vice President JAMES H. DUNSDON Global Operations Ingredients
Global Operations - Vice President and
Fragrances Regional Manager STEVE HUANG, PH.D. THOMAS J. SKATRUD, PH.D.
North America Vice President Vice President
ARUN BEWOOR Global Operations - Global Operations -
Vice President and ROB J. M. EDELMAN Aroma Chemicals and Flavors
Regional Manager Vice President and Ingredients
India Region Regional Manager CHARLES D. WELLER
Europe JAMES P. HUETHER Treasurer
STEPHEN A. BLOCK Controller
Senior Vice President GRACIELA M. FERRO DOUGLAS J. WETMORE
General Counsel and Secretary Vice President and NEIL HUMPHREYS Senior Vice President and
Regional Manager Vice President Chief Financial Officer
JULIAN W. BOYDEN Latin America Global Creative & Application
Executive Vice President
New Business Development ROBERTO J. GORDON BRUCE S. LESKANIC
Vice President Vice President
Sales, Global Accounts Supply Chain Strategy
</TABLE>
53
<PAGE>
INVESTOR INFORMATION
ANNUAL MEETING
The Annual Meeting of Shareholders will be held at the offices of the
Company, 521 West 57th Street, New York, New York, on Tuesday, May 14, 2003 at
10:00 a.m., EDT.
A proxy statement and form of proxy will be mailed to each shareholder
on or about March 28, 2003.
FORM 10-K
A copy of the Company's report to the Securities and Exchange
Commission on Form 10-K will be available on or about March 28, 2003.
TRANSFER AGENT AND REGISTRAR
Wachovia Bank, National Association
Shareholder Services Group
1525 West W.T. Harris Boulevard, 3C3
Charlotte, NC 28288-1153
800-829-8432
equityservices@wachovia.com
www.wachovia.com/shareholderservices
LISTED
New York Stock Exchange
[GRAPHIC OMITTED]
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
WEB SITE
www.iff.com
54
<PAGE>
[GRAPHICS OMITTED]
In December 2002, after
38 years at IFF, Dr. Braja D.
Mookherjee - one of our best -
passed away. He embodied
everything our Company strives
for and his effect on IFF
reached much farther than the
greenhouse he ran. His spirit
and inspiration live on at IFF,
and can be seen throughout
the pages of this book.
"When people ask me what
IFF is, I tell them that it is
a combination of very different
people with the same
objective: to wake up the
senses, to provoke emotions,
to liberate the inner magic."
"The biggest improvement
I have seen lately at IFF is that
we are getting more organ-
ized and better prepared to
face stiffer competition and
new challenges."
"I like working at IFF because
we work as a team; we are
full of passion, enthusiasm,
excitement, commitment, and
action that we all put into our
everyday tasks."
"When people ask me what IFF
is, I tell them imagine a flavor
or a fragrance and you will
have it in your hand."
"When people ask me what IFF
does, I tell them we influence
people's taste buds."
"IFF is unique because we
create, and creating is the
essence of evolution."
"We might be an international
Company but we're still allowed
to have an Australian style."
"I like working at IFF because
there is always a new chal-
lenge to face. It's learning from
successes and sometimes the
failures in these challenges
that help both the individual
and the Company to continue
to strive for excellence."
55
<PAGE>
IFF WORLDWIDE LOCATIONS
SALES MANUFACTURING CREATIVE
OFFICE LABORATORY
- --------------------------------------------------------------------------------
NORTH AMERICA
Canada/Toronto O O O
USA/Augusta, GA O
USA/Carrollton, TX O O O
USA/Chicago, IL O
USA/Hazlet, NJ O O O
USA/Jacksonville, FL O O
USA/Menomonee Falls, WI O
USA/New York, NY* 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
Colombia/Bogota O O
Mexico/Tlalnepantla (Mexico City) O O O
ASIA PACIFIC
Australia/Melbourne O O O
Australia/Castle Hill (Sydney) O O O
China/Beijing O
China/Guangzhou 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
Philippines/Manila O O O
Singapore O O
Singapore/Jurong O O
Thailand/Bangkok O O O
SALES MANUFACTURING CREATIVE
OFFICE LABORATORY
- --------------------------------------------------------------------------------
INDIA REGION
India/Bangalore O
India/Calcutta O
India/Chennai O O O
India/Chittoor O
India/Delhi O
India/Mumbai 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 O O O
Germany/Hamburg O
Germany/Oberhausen O O
Ireland/Drogheda O 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
Slovakia/Bratislava O
South Africa/Johannesburg O O O
Spain/Barcelona O O
Spain/Benicarlo O O
Spain/Madrid O
Sweden/Knislinge O O O
Switzerland/Reinach-Aargau O O O
Turkey/Gebze O O O
Turkey/Istanbul O
United Kingdom/Haverhill O O O
United Kingdom/London 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
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>7
<FILENAME>file006.txt
<DESCRIPTION>SUBSIDIARIES OF IFF
<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 Place of Incorporation
- ----------------- ----------------------
<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
International Flavors & Fragrances (Caribe) Inc. Delaware
<PAGE>
Sabores y Fragrancias S.A. Colombia
IFF Sabores y Fragrancias de Chile Ltda. Chile
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 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
Speciality 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
Laboratoire Monique Remy SAS 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 (Luxembourg) Holding 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
IFF (Gibraltar) Holdings Gibraltar
IFF Mexico Holdings LLC Delaware
IFF Latin American Holdings (Espana) SL Spain
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
<PAGE>
Bush Boake Allen Controladora S.A. de C.V. Mexico
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 (Guangzhou) Co. Ltd. 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 (2) Turkey
PT Bush Boake Allen Indonesia (3) Indonesia
Bush Boake Allen (New Zealand) Limited New Zealand
International Flavors & Fragrances 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
International Flavours & Fragrances (India) Limited (4) India
Hindustan Flavours and Fragrances (International) Limited (5) India
Bush Boake Allen (Jamaica) Limited (6) Jamaica
Bush Boake Allen (SA) (Proprietary) Limited South Africa
Bush Boake Allen (Thailand) Limited Thailand
Bush Boake Allen Deutschland GmbH West Germany
Bush Boake Allen, Moscow, Ltd. Russia
Bush Boake Allen Benelux B.V. Netherlands
International Flavors & Fragrances I.F.F. (Norden) AB Sweden
Bush Boake Allen (C.R.) s.r.o. Czech Republic
Stafford Specialty Ingredients Limited England
Bush Boake Allen Pakistan (Private) Limited (7) Pakistan
Asian Investments, Inc. Delaware
<PAGE>
Fragrance Holdings Private Limited India
Essence Scientific Research Private Limited India
Jamaica Extracts Limited (8) Jamaica
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) 99.9% of the voting stock of Bush Boake Allen Esans ve Aromatik Urunler
Sanayi AS is owned, directly or indirectly, by the Company.
(3) 60% of the voting stock of PT Bush Boake Allen Indonesia is owned, directly
or indirectly, by the Company.
(4) 93.1% of the voting stock of International Flavours & Fragrances (India)
Limited is owned, directly or indirectly, by the Company.
(5) 93.1% of the voting stock of Hindustan Flavours and Fragrances
(International) Limited is owned, directly or indirectly, by the Company.
(6) 70% of the voting stock of Bush Boake Allen (Jamaica) Limited is owned,
directly or indirectly, by the Company.
(7) 50% of the voting stock of Bush Boake Allen Pakistan (Private) Limited is
owned, directly or indirectly, by the Company.
(8) 58% of the voting stock of Jamaica Extracts Limited is owned, directly or
indirectly, by the Company.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>8
<FILENAME>file007.txt
<DESCRIPTION>CONSENT OF INDEPENDENT ACCOUNTANTS
<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 Form S-8 (No.
333-102825, No. 333-61072, No. 333-51436, No. 333-50752 and No. 33-54423) of
International Flavors & Fragrances Inc. of our report dated January 27, 2003
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 27, 2003
relating to the financial statement schedule, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
New York, New York
March 25, 2003
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-24
<SEQUENCE>9
<FILENAME>file008.txt
<DESCRIPTION>POWERS 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, 2002, hereby constitutes and appoints Richard A.
Goldstein, 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 11th
day of March 2003.
/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, 2002, hereby constitutes and appoints Richard A.
Goldstein, 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 11th
day of March 2003.
/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, 2002, hereby constitutes and appoints Richard A.
Goldstein, 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 11th
day of March 2003.
/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, 2002, hereby constitutes and appoints Richard A.
Goldstein, 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 11th
day of March 2003.
/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, 2002, hereby constitutes and appoints Richard A.
Goldstein, 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 11th
day of March 2003.
/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, 2002, hereby constitutes and appoints Richard A.
Goldstein, 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 11th
day of March 2003.
/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, 2002, hereby constitutes and appoints Richard A.
Goldstein, 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 11th
day of March 2003.
/s/ WILLIAM D. VAN DYKE, III
----------------------------
William D. Van Dyke, III
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.5
<SEQUENCE>10
<FILENAME>file009.txt
<DESCRIPTION>CERTIFICATION OF CEO AND CFO
<TEXT>
<PAGE>
EXHIBIT 99.5
CERTIFICATION OF CEO AND CFO PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of International Flavors &
Fragrances Inc. (the "Company") for the fiscal year ended December 31, 2002 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), Richard A. Goldstein, as Chief Executive Officer of the Company, and
Douglas J. Wetmore, as Chief Financial Officer of the Company, each hereby
certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the
Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ Richard A. Goldstein
- ------------------------
Name: Richard A. Goldstein
Title: Chairman of the Board and
Chief Executive Officer
Date: March 25, 2003
/s/ Douglas J. Wetmore
- ----------------------
Name: Douglas J. Wetmore
Title: Senior Vice President and
Chief Financial Officer
Date: March 25, 2003
This certification accompanies the Report pursuant to 906 of the Sarbanes-Oxley
Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley
Act of 2002, be deemed filed by the Company for purposes of 18 of the Securities
Exchange Act of 1934, as amended.
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----