-----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, ETeaoKq2o6VLBDvkY3sp62RoQFwNIQe48Hp5vnCqzv5TmHJeCMM/XJzZHfV29qrs o5kWtyqpiFxhTrHV2enahQ== 0000950110-96-000907.txt : 19960816 0000950110-96-000907.hdr.sgml : 19960816 ACCESSION NUMBER: 0000950110-96-000907 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NYSE 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04858 FILM NUMBER: 96614026 BUSINESS ADDRESS: STREET 1: 521 W 57TH ST CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2127655500 MAIL ADDRESS: STREET 2: 521 W 57TH ST CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: VANAMERIGEN HAEBLER INC DATE OF NAME CHANGE: 19680426 10-Q 1 QUARTERLY REPORT ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended June 30, 1996 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 of (IRS Employer incorporation or organization) identification No.) 521 West 57th Street, New York, N.Y. 10019-2960 ---------------------------------------- ------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 765-5500 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing for the past 90 days. Yes X No ----- ----- Number of shares outstanding as of August 7, 1996: 110,724,373 ================================================================================ 1 PART I. FINANCIAL INFORMATION Item 1. Financial Statements INTERNATIONAL FLAVORS & FRAGRANCES INC. CONSOLIDATED BALANCE SHEET (Dollars in thousands) 6/30/96 12/31/95 Assets ---------- ----------- Current Assets: Cash & Cash Equivalents ......................... $ 226,800 $ 251,430 Short-term Investments .......................... 75,670 45,503 Trade Receivables ............................... 299,154 253,913 Allowance For Doubtful Accounts ................. (8,334) (8,602) Inventories: Raw Materials ...................... 220,889 233,759 Work in Process .................... 27,080 27,739 Finished Goods ..................... 128,463 153,049 ---------- ---------- Total Inventories .................. 376,432 414,547 Other Current Assets ............................ 89,258 79,186 ---------- ---------- Total Current Assets ............................ 1,058,980 1,035,977 ---------- ---------- Property, Plant & Equipment, At Cost .............. 857,623 839,206 Accumulated Depreciation .......................... (399,039) (370,621) ---------- ---------- 458,584 468,585 Other Assets ...................................... 30,168 29,707 ---------- ---------- Total Assets ...................................... $1,547,732 $1,534,269 ========== ========== Liabilities and Shareholders' Equity Current Liabilities: Bank Loans ...................................... $ 16,978 $ 12,185 Accounts Payable-Trade .......................... 53,249 63,282 Dividends Payable ............................... 37,773 37,749 Income Taxes .................................... 87,784 70,471 Other Current Liabilities ....................... 96,030 92,714 ---------- ---------- Total Current Liabilities ....................... 291,814 276,401 ---------- ---------- Other Liabilities: Deferred Income Taxes ........................... 13,937 13,420 Long-term Debt .................................. 9,892 11,616 Other ........................................... 118,765 116,272 ---------- ---------- Total Other Liabilities ........................... 142,594 141,308 ---------- ---------- Shareholders' Equity: Common Stock (115,761,840 shares issued in '96 and in '95) ................................... 14,470 14,470 Capital in Excess of Par Value .................. 139,144 142,476 Retained Earnings ............................... 1,089,761 1,069,421 Cumulative Translation Adjustment ............... 50,274 75,049 ---------- ---------- 1,293,649 1,301,416 Treasury Stock, at cost -- 4,664,567 shares in '96 and 4,808,005 in '95 ...................... (180,325) (184,856) ---------- ---------- Total Shareholders' Equity ...................... 1,113,324 1,116,560 ---------- ---------- Total Liabilities and Shareholders' Equity ........ $1,547,732 $1,534,269 ========== ========== See Notes to Consolidated Financial Statements 2 INTERNATIONAL FLAVORS & FRAGRANCES INC. CONSOLIDATED STATEMENT OF INCOME (Dollars in thousands except per share amounts) 3 Months Ended 6/30 ----------------------- 1996 1995 -------- -------- Net Sales ........................................ $374,397 $394,306 -------- -------- Cost of Goods Sold ............................... 201,807 197,911 Research and Development Expenses ................ 23,096 22,729 Selling and Administrative Expenses .............. 55,355 55,603 Nonrecurring Charge .............................. 49,707 -- Interest Expense ................................. 747 1,047 Other (Income) Expense, Net ...................... (2,699) (3,034) -------- -------- 328,013 274,256 -------- -------- Income Before Taxes on Income .................... 46,384 120,050 Taxes on Income .................................. 16,681 44,348 -------- -------- Net Income ....................................... $ 29,703 $ 75,702 ======== ======== Earnings Per Share ............................... $0.26 $0.68 Dividends Paid Per Share ......................... $0.34 $0.31 6 Months Ended 6/30 ----------------------- 1996 1995 -------- -------- Net Sales ........................................ $757,164 $767,900 -------- -------- Cost of Goods Sold ............................... 405,878 388,695 Research and Development Expenses ................ 46,045 44,870 Selling and Administrative Expenses .............. 110,676 109,165 Nonrecurring Charge .............................. 49,707 -- Interest Expense ................................. 1,293 1,612 Other (Income) Expense, Net ...................... (7,113) (7,534) -------- -------- 606,486 536,808 -------- -------- Income Before Taxes on Income .................... 150,678 231,092 Taxes on Income .................................. 54,811 85,434 -------- -------- Net Income ....................................... $ 95,867 $145,658 ======== ======== Earnings Per Share ............................... $0.86 $1.31 Average Number of Shares Outstanding (000's) ..... 111,032 111,492 Dividends Paid Per Share ......................... $0.68 $0.62 See Notes to Consolidated Financial Statements 3 INTERNATIONAL FLAVORS & FRAGRANCES INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in thousands) 6 Months Ended 6/30 --------------------- 1996 1995 -------- -------- Cash Flows From Operating Activities: Net Income ......................................... $ 95,867 $145,658 Adjustments to Reconcile to Net Cash Provided by Operations: Nonrecurring Charge ............................. 49,707 -- Depreciation .................................... 23,078 20,446 Deferred Income Taxes ........................... (11,263) 5,126 Changes in Assets and Liabilities: Current Receivables ............................ (51,696) (71,083) Inventories .................................... 25,410 (30,265) Current Payables ............................... 99 11,735 Other, Net ..................................... (444) (6,129) -------- -------- Net Cash Provided by Operations .................... 130,758 75,488 -------- -------- Cash Flows From Investing Activities: Proceeds From Sales/Maturities of Short-term Investments ...................................... 12,424 49,115 Purchases of Short-term Investments ................ (43,830) (69,342) Additions to Property, Plant & Equipment, Net of Minor Disposals ........................... (45,278) (37,018) -------- -------- Net Cash Used in Investing Activities .............. (76,684) (57,245) -------- -------- Cash Flows From Financing Activities: Cash Dividends Paid to Shareholders ................ (75,503) (69,157) Increase in Bank Loans ............................. 4,937 3,395 Decrease in Long-term Debt ......................... (1,138) (1,237) Proceeds From Issuance of Stock Under Stock Option Plans ............................... 6,288 5,293 Purchase of Treasury Stock ......................... (5,319) (21,037) -------- -------- Net Cash Used In Financing Activities .............. (70,735) (82,743) -------- -------- Effect of Exchange Rate Changes on Cash and Cash Equivalents ............................. (7,969) 17,269 -------- -------- Net Change in Cash and Cash Equivalents ............ (24,630) (47,231) Cash and Cash Equivalents at Beginning of Year ..... 251,430 230,581 -------- -------- Cash and Cash Equivalents at End of Period ......... $226,800 $183,350 ======== ======== Interest Paid ...................................... $ 1,263 $ 2,004 Income Taxes Paid .................................. $ 48,451 $ 69,463 See Notes to Consolidated Financial Statements 4 Notes to Consolidated Financial Statements These interim statements and management's related discussion and analysis should be read in conjunction with the consolidated financial statements and their related notes, and management's discussion and analysis of results of operations and financial condition included in the Company's 1995 Annual Report to Shareholders. In the opinion of the Company's management, all normal recurring adjustments necessary for a fair statement of the results for the interim periods have been made. Statement of Financial Accounting Standard No. 121, Accounting For The Impairment Of Long-Lived Assets And For Long-Lived Assets To Be Disposed Of, is effective for fiscal years beginning after December 15, 1995. The standard requires that long-lived assets and certain identifiable intangibles held by an entity be reviewed for impairment whenever events or circumstances indicate that the carrying value of an asset may not be recoverable. The effect of this standard was not material to the Company. In June 1996, the Company announced the final phase of its program to expand and streamline its worldwide aroma chemical production facilities. This program will include the phase out of aroma chemical production at the Company's Union Beach, New Jersey plant over the 18 month period ending December 31, 1997, and the closure of smaller capacity aroma chemical facilities in Mexico City, Mexico and Rio de Janeiro, Brazil by the end of 1996. Most of the aroma chemical volume currently produced at Union Beach will be transferred to the Company's newly constructed, state-of-the-art facility in Augusta, Georgia. In addition, aroma chemical production capacity in Benicarlo, Spain will be expanded. The closure of the three facilities will affect approximately 220 employees associated with aroma chemical manufacturing at these locations, including 170 jobs at the Union Beach facility. The aroma chemical streamlining resulted in a one-time pretax charge to second quarter 1996 earnings of $49,707,000 ($31,315,000 after tax or $.29 per share). Cost savings from this program have been specifically identified and are expected to ultimately increase pretax earnings by $20,000,000 annually, on completion of the phase-out of Union Beach operations. The reserve established as a result of the one-time charge consists of the following components: Employee related ......................... $10,629,000 Closing manufacturing plants ............. 39,078,000 ----------- Total nonrecurring charge ............. $49,707,000 =========== Utilization of the reserve since the June 1996 announcement has not been material. Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition Operations Worldwide net sales for the second quarter of 1996 were $374,397,000, compared to $394,306,000 in the 1995 second quarter. For the first six months of 1996, net sales totaled $757,164,000, compared to $767,900,000 for the six month period in 1995. Sales in the second quarter and the first six months of 1996 were unfavorably impacted by translation of European currencies into a stronger U.S. dollar. Net income for the second quarter of 1996, including the one-time charge discussed below, totaled $29,703,000 compared to $75,702,000 in the prior year second quarter. On the same basis, net income for the first six months of 1996 totaled $95,867,000, compared to $145,658,000 for the comparable 1995 5 period. Net income for the second quarter and six month period ended June 30, 1996, excluding the one-time charge, was $61,018,000 and $127,182,000, respectively. The Company's sales and earnings for the first half of 1996 were affected by slow customer reordering patterns for fragrances, both in Europe and the United States. The disruption of reorder patterns began with sluggish retail sales during the 1995 holiday season, and continued during the first half of 1996. During the first half of 1996, margins were unfavorably affected by the low volume of sales in the period. Sales, earnings and margins are also being impacted by highly competitive conditions for aroma chemicals, which have caused the Company to lower prices for certain aroma chemicals. The Company expects stronger sales and earnings during the second half of the year. The percentage relationship of cost of goods sold and other operating expenses to sales for the first half 1996 and 1995 are detailed below. First Half ----------------- 1996 1995 ---- ---- Cost of Goods Sold .......................... 53.6% 50.6% Research and Development Expense ............ 6.1% 5.8% Selling and Administrative Expense .......... 14.6% 14.2% In June 1996, the Company announced the final phase of its program to expand and streamline its worldwide aroma chemical production facilities. This program will include the phase out of aroma chemical production at the Company's Union Beach, New Jersey plant over the 18 month period ending December 31, 1997, and the closure of smaller capacity aroma chemical facilities in Mexico City, Mexico and Rio de Janeiro, Brazil by the end of 1996. Most of the aroma chemical volume currently produced at Union Beach will be transferred to the Company's newly constructed, state-of-the-art facility in Augusta, Georgia. In addition, aroma chemical production capacity in Benicarlo, Spain will be expanded. These steps are intended to improve the Company's production capabilities, to achieve cost efficiencies in the United States as well as internationally, and to maintain and extend the Company's leadership position in the aroma chemical market. They will also assure that the Company will have sufficient aroma chemical supply to meet its own and its customers' needs for the foreseeable future. The closure of the three facilities will affect approximately 220 employees associated with aroma chemical manufacturing at these locations, including 170 jobs at the Union Beach facility. The aroma chemical streamlining resulted in a one-time pretax charge to second quarter 1996 earnings of $49,707,000 ($31,315,000 after tax or $.29 per share). Cost savings from this program have been specifically identified and are expected to increase pretax earnings by $20,000,000 annually, on completion of the phase-out of Union Beach operations. The reserve established as a result of the one-time charge consists of the following components: Employee related .......................... $10,629,000 Closing manufacturing plants .............. 39,078,000 ----------- Total nonrecurring charge .............. $49,707,000 =========== 6 Of the charge, approximately $33,000,000 represents asset writedowns and other non-cash related costs. Usage of the reserve since the June 1996 announcement has not been material. The phased transfer of production from Union Beach to Augusta will result, until the full closure of Union Beach, in some duplication of operating expenses which will affect both operating margins and earnings. However, the cost savings from the Company's program to streamline its worldwide aroma chemical facilities will more than offset the effect of these conditions when the program is fully implemented. The effective tax rates for the second quarter and first six months 1996 were 36.0% and 36.4%, respectively, as compared to 36.9% and 37.0% for the comparable periods in 1995. The lower effective tax rate reflects the effects of lower tax rates in various tax jurisdictions in which the Company operates. Statement of Financial Accounting Standard No. 121, Accounting For The Impairment Of Long-Lived Assets And For Long-Lived Assets To Be Disposed Of, is effective for fiscal years beginning after December 15, 1995. The standard requires that long-lived assets and certain identifiable intangibles held by an entity be reviewed for impairment whenever events or circumstances indicate that the carrying value of an asset may not be recoverable. The effect of this standard was not material to the Company. Financial Condition The financial condition of the Company continued to be strong. Cash, cash equivalents and short-term investments totaled $302,470,000 at June 30, 1996. At June 30, 1996, working capital was $767,166,000 compared to $759,576,000 at December 31, 1995. Gross additions to property, plant and equipment during the first half of 1996 were $45,688,000. In January 1996, the Company's cash dividend was increased 9.7% to an annual rate of $1.36 per share, and $.34 per share was paid to shareholders in both the first and second quarters of 1996. The Company anticipates that its growth, capital expenditure programs and share repurchase program will be funded from internal sources. The cumulative translation adjustment component of Shareholders' Equity at June 30, 1996 was $50,274,000 compared to $75,049,000 at December 31, 1995. Changes in the component result from translating the net assets of the majority of the Company's foreign subsidiaries into U.S. dollars at current exchange rates as required by the Statement of Financial Accounting Standards No. 52 on accounting for foreign currency translation. 7 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders At the annual meeting of Registrant's shareholders held Thursday, May 9, 1996, at which 94,048,305 shares, or 84.8%, of Registrant's Common Stock were represented in person or by proxy, the 12 nominees for director of Registrant, as listed in Registrant's proxy statement dated March 28, 1996 previously filed with the Commission, were duly elected to Registrant's Board of Directors. There was no solicitation of proxies in opposition to these nominees. At such annual meeting, the shareholders also voted with respect to the other matter submitted for shareholder consideration as follows, the vote being legally sufficient to adopt the proposal: Proposal to approve alternative performance goals in connection with the grant of a restricted stock award to the Registrant's Chairman under a proposed new employment contract, in order to preserve the deductibility under the Internal Revenue Code of such award. No. of Shares Voted ------------------- FOR ......................... 90,951,816 AGAINST ..................... 2,610,282 ABSTAIN ..................... 486,207 8 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27 -- Financial Data Schedule (b) Reports on Form 8-K Registrant filed no report on Form 8-K during the quarter for which this report on Form 10-Q is filed. 9 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INTERNATIONAL FLAVORS & FRAGRANCES INC. Dated: August 14, 1996 By: /s/ THOMAS H. HOPPEL ------------------------------------------ Thomas H. Hoppel, Vice-President and Chief Financial Officer Dated: August 14, 1996 By: /s/ STEPHEN A. BLOCK ------------------------------------------ Stephen A. Block, Vice-President Law and Secretary EX-27 2 FINANCIAL DATA SCHEDULE
5 The schedule contains summary financial information extracted from the Consolidated Balance Sheet & Consolidated Statement of Income and is qualified in its entirety by reference to such financial statements. Amounts in thousands of dollars, except per share amounts. 1000 6-MOS DEC-31-1996 JUN-30-1996 226,800 75,670 299,154 (8,334) 376,432 1,058,980 857,623 (399,039) 1,547,732 291,814 9,892 14,470 0 0 1,098,854 1,547,732 757,164 757,164 405,878 562,599 42,594 0 1,293 150,678 54,811 95,867 0 0 0 95,867 0.86 0.86
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