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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 COMMISSION FILE NUMBER 1-4858
INTERNATIONAL FLAVORS & FRAGRANCES INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 13-1432060
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(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
521 WEST 57TH STREET, NEW YORK, N.Y. 10019
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 765-5500
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, par value 12 1/2(cent) per share ....... New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
(TITLE OF CLASS)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ ]
The Registrant denies that any of its common stock is held by an
"affiliate" of the Registrant within the meaning of Rule 405 of the Securities
and Exchange Commission. See "Stock Ownership" in proxy statement incorporated
by reference herein. The aggregate market value of all of the outstanding voting
stock of Registrant as of March 21, 1997 was $4,898,697,609.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of March 21, 1997.
109,468,103 SHARES OF COMMON STOCK, PAR VALUE 12 1/2(CENT) PER SHARE
DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Part III [Items 10, 11, 12 and 13] is hereby
incorporated by reference from the Registrant's definitive proxy statement for
the 1997 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A.
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PART I
ITEM 1. BUSINESS.
International Flavors & Fragrances Inc., incorporated in New York in 1909,
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, soaps and detergents, and flavor products 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 combination in December 1958 of the business theretofore conducted
primarily in the United States by the Company under the name van
Ameringen-Haebler, Inc. ("VAH") with the business conducted 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.
The major manufacturing facilities of the Company are located in the United
States, Holland, France, Germany, Great Britain, Ireland, Spain, Switzerland,
Argentina, Brazil, Mexico, Australia, China, Hong Kong, Indonesia and Japan.
Manufacturing facilities are also located in seven other countries. The Company
maintains its own sales and distribution facilities in 33 countries and is
represented by sales agents in additional countries. The Company's principal
executive offices are located at 521 West 57th Street, New York, New York 10019
(Tel. No. 212-765-5500). Except as the context otherwise indicates, the term
"the Company" as used herein refers to the Registrant and its subsidiaries.
MARKETS
Fragrance products are used by customers in the manufacture of such
consumer products as soaps, detergents, cosmetic creams, lotions and powders,
lipsticks, after-shave lotions, deodorants, hair preparations and air
fresheners, 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 perfumes and toiletries, is one of the Company's two largest 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 customer group. Four of the largest
United States household product manufacturers are major customers of the
Company. In the five years ended December 31, 1996, sales of fragrance products
accounted for approximately 60%, 59%, 59%, 57% and 57%, respectively, of the
Company's total sales.
Flavor products are sold principally to the food and beverage industries
for use in such consumer products as soft drinks, candies, baked goods,
desserts, prepared foods, dietary foods, dairy products, drink powders,
pharmaceuticals 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 five years ended December 31, 1996, sales of flavor
products accounted for approximately 40%, 41%, 41%, 43% and 43%, respectively,
of the Company's total sales.
PRODUCTS
The Company's principal fragrance and flavor products consist of compounds
of large numbers of ingredients blended by it under formulas created by its
perfumers and flavorists. Most of these compounds contribute the total fragrance
or flavor to the consumer products in which they are used. This fragrance or
flavor characteristic is often a major factor in the public selection and
acceptance of the consumer end product. A smaller amount of compounds is sold to
manufacturers who further blend them to achieve the finished fragrance or flavor
in their consumer products. Thousands of compounds are produced by the Company,
and new compounds are constantly being created in order to meet the many and
changing characteristics of its customers' end products. Most of the fragrance
compounds and many of the flavor compounds are created and produced for the
exclusive use of particular customers. The Company's flavor products also
include extractives, concentrated juices and concentrates derived from various
fruits, vegetables, nuts, herbs and spices as well as microbiologically derived
ingredients. The Company's products are sold in solid and liquid forms and in
amounts ranging from a few pounds to many tons, depending upon the nature of the
product.
The ingredients used by the Company in its compounds are both synthetic and
natural. Most of the synthetic ingredients are manufactured by the Company.
While the major part of the Company's production of synthetic
1
ingredients is used by it in its compounds, a substantial portion is sold to
others. The natural ingredients are derived from flowers, fruits and other
botanical products as well as from animal products. They contain varying numbers
of organic chemicals, which are responsible for the fragrance or flavor of the
natural product. The natural products are purchased for the larger part in
processed or semi-processed form. Some are used in compounds in the state in
which they are purchased and others after further processing. Natural products,
together with various chemicals, are also used as raw materials for the
manufacture of synthetic ingredients by chemical processes.
MARKET DEVELOPMENTS
The demand for consumer products utilizing flavors and fragrances has been
stimulated and broadened by changing social habits resulting from such factors
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 colognes, toilet waters, deodorants, soaps with finer fragrance
quality, 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 such products as convenience foods, soft drinks and
low-cholesterol and low-fat food products that must conform to expected tastes.
New and improved methods of packaging, application and dispensing have been
developed for many consumer products which utilize some of the Company's flavor
or fragrance products. These developments have called for the creation by the
Company of many new compounds and ingredients compatible with the newly
introduced materials and methods of application used in consumer end products.
PRODUCT DEVELOPMENT AND RESEARCH
The development of new fragrance and flavor compounds is a complex artistic
and technical process calling upon the combined knowledge and talents of the
Company's creative perfumers and flavorists and its application chemists and
research chemists. Through long experience the perfumers and flavorists develop
and refine their skill for creating fragrances or flavors best suited to the
market requirements of the customers' products.
An important contribution to the creation of new fragrance and flavor
products is the development in the Company's research laboratories of new
ingredients having fragrance or flavor value. The principal functions of the
fragrance research program are to isolate and synthesize fragrance components
found in natural substances and through chemical synthesis to develop new
materials and better techniques for utilization of such materials. The principal
functions of the flavor research program are to isolate and produce natural
flavor ingredients utilizing improved processes.
The work of the perfumers and flavorists is conducted in 30 fragrance and
flavor laboratories in 24 countries. The Company maintains a research center at
Union Beach, New Jersey. The Company spent $93,545,000 in 1996, $90,846,000 in
1995 and $81,369,000 in 1994 on its research and development activities, all of
which were financed by the Company. These expenditures are expected to increase
in 1997 to approximately $100,000,000. Of the amount expended in 1996 on such
activities, 57% was for fragrances and the balance was for flavors. The Company
employed 778 persons in 1996 and 765 persons in 1995 in such activities.
The business of the Company is not materially dependent upon any patents,
trademarks or licenses.
DISTRIBUTION
Most of the Company's sales are made through its own sales force, operating
from eight sales offices in the United States and 42 sales offices in 32 foreign
countries. Sales in other countries are made through sales agencies. For the
year ended December 31, 1996, 30% of the Company's sales were to customers in
North America, 35% in Western Europe and 35% in the rest of the world. See Note
10 of the Notes to the Consolidated Financial Statements for other information
with respect to the Company's international operations.
The Company estimates that during 1996 its 30 largest customers accounted
for about 54% of its sales, its four largest customers and their affiliates
accounted for about 12%, 6%, 5% and 3%, 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 Alcohol, Tobacco and Firearms Bureau of the Treasury
2
Department, the Environmental Protection Agency, the Occupational Safety and
Health Administration and state authorities. The 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 1997 approximately
$4,500,000 in capital projects and $14,100,000 in operating expenses and
governmental charges for the purpose of complying with such requirements. The
Company expects that in 1998 capital expenditures, operating expenses and
governmental charges for such purpose will not be materially different.
RAW MATERIAL PURCHASES
Some 5,000 different raw materials are purchased from many sources all over
the world. The principal natural raw material purchases consist of essential
oils, extracts and concentrates derived from fruits, vegetables, flowers, woods
and other botanicals, animal products and raw fruits. The principal synthetic
raw material purchases consist of organic chemicals. The Company believes that
alternate sources of materials are available to enable it to maintain its
competitive position in the event of any interruption in the supply of raw
materials from present sources.
COMPETITION
The Company has more than 50 competitors in the United States and world
markets. While no single factor is responsible, the Company's competitive
position is based principally on the creative skills of its perfumers and
flavorists, the technological advances resulting from its research and
development and the customer service and support provided by its marketing and
application groups. Although statistics are not available, the Company believes
that it is one of the four largest companies producing and marketing on an
international basis a wide range of fragrance and flavor products of the types
manufactured by it for sale to manufacturers of consumer products. In particular
countries and localities, the Company faces the competition of numerous
companies specializing in certain product lines, among which are some 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, 1996 employed approximately 4,630 persons, of
whom about 1,510 were employed in the United States, 510 in Holland, 270 in
England, 260 in France and 2,080 elsewhere. The Company has never experienced a
work stoppage or strike and it considers that its employee relations are
satisfactory.
3
ITEM 2. PROPERTIES.
The principal manufacturing and research properties of the Company are as
follows:
LOCATION OPERATION
-------- ---------
UNITED STATES
New York, NY ............. Fragrance laboratories.
Augusta, GA .............. Production of fragrance chemical ingredients.
Union Beach, NJ .......... Production of fragrance chemical ingredients
(through December 1997); research and
development center.
Hazlet, NJ ............... Production of fragrance compounds; fragrance
laboratories.
South Brunswick, NJ ...... Production of flavor ingredients and compounds
and fruit preparations; flavor laboratories.
Salem, OR ................ Production of fruit and vegetable concentrates,
fruit and vegetable preparations and flavor
ingredients.
Menomonee Falls, WI ...... Production of flavor compounds, flavor
ingredients, bacterial cultures and fruit
preparations.
HOLLAND
Hilversum ................ Flavor and fragrance laboratories.
Tilburg .................. Production of flavor and fragrance compounds and
flavor ingredients.
FRANCE
Bois-Colombes ............ Fragrance laboratories; flavor laboratories.
Dijon .................... Production of fragrance compounds, flavor
ingredients and compounds and fruit
preparations.
GERMANY
Emmerich/Rhein ........... Production of fruit preparations and flavor
ingredients and compounds; flavor laboratories.
GREAT BRITAIN
Haverhill ................ Production of flavor compounds and ingredients,
fruit preparations 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 and flavor
ingredients and compounds; flavor laboratories.
ARGENTINA
Garin .................... Production of fruit preparations and flavor
ingredients and compounds; production of
fragrance compounds; flavor laboratories.
BRAZIL
Rio de Janeiro ........... Production of flavor ingredients and compounds,
fruit preparations and fragrance compounds,
flavor laboratories.
Sao Paulo ................ Fragrance laboratory.
Taubate .................. Production of flavor compounds.
MEXICO
Tlalnepantla ............. Production of flavor compounds, fruit
preparations and fragrance compounds; flavor
and fragrance laboratories.
AUSTRALIA
Dee Why .................. Production of flavor compounds; flavor and
fragrance laboratories.
4
LOCATION OPERATION
-------- ---------
CHINA
Guangzhou ................ Production of flavor and fragrance compounds;
flavor laboratories.
Xin'anjiang .............. Production of fragrance chemical ingredients.
HONG KONG .................. Production of fragrance compounds; fragrance
laboratories.
INDONESIA
Jakarta .................. Production of flavor and fragrance compounds and
ingredients; flavor and fragrance laboratories.
JAPAN
Tokyo .................... Flavor and fragrance laboratories.
Gotemba .................. Production of flavor and fragrance compounds.
The principal executive offices of the Company and its New York laboratory
facilities are located at 521 West 57th Street, New York City. Such offices and
all of the above facilities of the Company are owned in fee, except those in
Wisconsin, China, Hong Kong, and the Indonesian landsite, which are leased. The
Company believes that the remaining facilities meet its present needs, but that
additional facilities will be required to meet anticipated growth in sales.
ITEM 3. LEGAL PROCEEDINGS.
Various Federal and State authorities and private parties claim that the
Company is a potentially responsible party as a generator of waste materials for
alleged pollution at a total of 11 waste sites operated by third parties located
principally in New Jersey and Pennsylvania. The governmental authorities seek to
recover costs incurred and to be incurred to clean up the sites. The private
suits generally seek damages for alleged injuries and, in one case, a waste
site's owners/operators seek contribution and indemnification for their share of
remedial action costs incurred and to be incurred at the site.
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.
The Company believes that the amounts it probably will have to pay for
clean-up costs and damages at all sites 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.
5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
EXECUTIVE OFFICERS OF REGISTRANT:
YEAR
FIRST
BECAME
NAME OFFICE AND OTHER BUSINESS EXPERIENCE(2) AGE OFFICER
---- --------------------------------------- --- -------
Eugene P. Grisanti(1) .. President; Chairman of the Board 67 1964
Brian D. Chadbourne .... Senior Vice-President and Director 44 1996
since January 1997; Vice-President
September-December 1996; President
and Chief Executive Officer, Keebler
Company, a baked goods manufacturer,
a subsidiary of United Biscuits plc
1993-1996; Managing Director, United
Biscuits plc prior thereto
Hendrik C. van Baaren .. Senior Vice-President; Director 57 1983
Stephen A. Block ....... Vice-President and Secretary since 52 1993
1993; Senior Vice President, General
Counsel, Secretary and Director,
International Specialty Products Inc.
from 1991 to 1992 and GAF Corporation
from 1990 to 1992
Eric Campbell .......... Vice-President; Director, Human 50 1996
Resources, Avon Products, Inc.
from 1991 to 1995
Ronald S. Fenn ......... Vice-President 59 1986
Thomas H. Hoppel ....... Vice-President and Chief Financial 66 1976
Officer; Director
Ira Katz ............... Vice-President 63 1987
Carlos A. Lobbosco ..... Vice-President 57 1993
Lewis G. Lynch, Jr. .... Vice-President 61 1975
Stuart R. Maconochie ... Vice-President 57 1989
Rudolf Merz ............ Vice-President 57 1982
Michael D. Sweeney ..... Vice-President 53 1994
Douglas J. Wetmore ..... Controller 39 1992
James P. Huether ....... Treasurer 40 1996
- ----------
(1) Chairman 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.
6
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SECURITY HOLDER MATTERS.
(a) Market Information.
The Company's common stock is traded principally on the New York Stock
Exchange. The high and low stock prices for each quarter during the last two
years were:
1996 1995
---------------- ----------------
QUARTER HIGH LOW HIGH LOW
- ------- ------ ------ ------ ------
First ............................... $51.88 $47.13 $53.13 $45.13
Second .............................. 50.75 44.63 53.63 45.63
Third ............................... 47.88 41.00 53.38 46.38
Fourth .............................. 47.13 40.75 55.88 45.88
(b) Approximate Number of Equity Security Holders.
(A) (B)
NUMBER OF RECORD HOLDERS AS
TITLE OF CLASS OF DECEMBER 31, 1996
-------------- ---------------------------
Common stock, par value 12 1/2(cent)per share ...... 5,611
(c) Dividends.
Cash dividends declared per share for each quarter since January 1995 were
as follows:
1997 1996 1995
---- ---- ----
First .................. $.36 $.34 $.31
Second ................. .34 .31
Third .................. .34 .31
Fourth ................. .36 .34
ITEM 6. SELECTED FINANCIAL DATA.
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Net sales ............................... $1,436,053 $1,439,487 $1,315,237 $1,188,645 $1,126,446
========== ========== ========== ========== ==========
Income before accounting changes(a)(b) .. $ 189,894 $ 248,817 $ 226,022 $ 202,471 $ 176,683
Accounting changes, net of tax(c) ....... -- -- -- -- (6,089)
---------- ---------- ---------- ---------- ----------
Net income .............................. $ 189,894 $ 248,817 $ 226,022 $ 202,471 $ 170,594
========== ========== ========== ========== ==========
Earnings per share(d):
Income before accounting changes(a)(b) .. $1.71 $2.24 $2.03 $1.78 $1.53
Accounting changes(c) ................... -- -- -- -- (0.05)
---------- ---------- ---------- ---------- ----------
Net income .............................. $1.71 $2.24 $2.03 $1.78 $1.48
========== ========== ========== ========== ==========
Total assets ............................ $1,506,913 $1,534,269 $1,399,725 $1,225,257 $1,267,594
========== ========== ========== ========== ==========
Long-term debt .......................... $ 8,289 $ 11,616 $ 14,342 -- --
========== ========== ========== ========== ==========
Cash dividends declared per share(d) .... $1.38 $1.27 $1.12 $1.02 $0.93
========== ========== ========== ========== ==========
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(a) Reflects nonrecurring charge ($31,315 after tax) in 1996 resulting from the Registrant's plan to expand
and streamline its worldwide aroma chemical production facilities.
(b) Reflects nonrecurring charge ($13,021 after tax) in 1992 resulting from the Registrant's plan to
consolidate European aroma chemical production.
(c) The accounting changes, net of tax, in 1992 represent the effects of adopting required accounting
standards for income taxes and postretirement benefits other than pensions.
(d) Per share amounts reflect three-for-one stock split distributed on January 19, 1994 to shareholders of
record on December 28, 1993.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
Operations
In 1996, worldwide net sales were $1,436,053,000 compared to
$1,439,487,000 and $1,315,237,000 in 1995 and 1994, respectively. Sales of
fragrance products were $813,918,000, $819,263,000 and $772,786,000 in 1996,
1995 and 1994, respectively. Fragrance sales decreased 1% in 1996 in
comparison to 1995, following an increase of 6% in 1995 over 1994. Flavor
sales were $622,135,000, $620,224,000 and $542,451,000 in 1996, 1995 and 1994,
respectively. Flavor sales were essentially flat in 1996 in comparison to
1995; in 1995, flavor sales increased 14% over 1994.
Sales outside the United States represented approximately 70% of total
sales in 1996, 1995 and 1994. The following table shows net sales on a
geographic basis:
SALES BY DESTINATION PERCENT PERCENT
(DOLLARS IN THOUSANDS) 1996 CHANGE 1995 CHANGE 1994
---------------------- ---------- ------ ---------- ------ ----------
North America ........... $ 427,219 -2% $ 437,227 4% $ 418,565
Western Europe .......... 501,166 -4% 520,382 11% 470,281
Other Areas ............. 507,668 5% 481,878 13% 426,391
---------- ---------- ----------
Total net sales ....... $1,436,053 0% $1,439,487 9% $1,315,237
========== ========== ==========
In 1996, fragrance sales were affected by slow customer reordering
patterns in Europe and the United States, as well as a temporary slowdown in
new product introductions. Flavor sales were affected by the downsizing and
restructuring of some of the Company's major U.S. food customers, as well as
the unusually cool and wet summer in Europe and the United States which
resulted in lower flavor sales to the beverage, ice cream and yogurt
industries. The Company believes these circumstances to be temporary. Both
fragrance and flavor sales were strongest in the Far East and Latin America.
Sales were unfavorably impacted by translation of European currencies into a
stronger U.S. dollar; if the dollar exchange rate remained the same during
1996 and 1995, sales would have increased approximately 1% worldwide.
In 1995, the Company achieved solid growth in sales with increases in all
geographic areas. Fragrance sales were strongest in Europe and the Far East.
Flavor sales were strong in all areas of the world, with exceptional gains
achieved in Latin America. Sales were favorably affected by translating
stronger foreign currencies into the U.S. dollar; if the dollar exchange rate
remained the same during 1995 and 1994, sales would have increased
approximately 5% worldwide.
Although the Company's reported sales and earnings are affected by the
weakening or strengthening of the U.S. dollar, this has no long-term effect on
the underlying strength of our business.
The percentage relationship of cost of goods sold and other operating
expenses to sales were as follows:
1996 1995 1994
---- ---- ----
Cost of goods sold ............... 54.2% 51.9% 51.5%
Research and development
expenses ........................ 6.5% 6.3% 6.2%
Selling and administrative
expenses ........................ 15.6% 15.1% 15.8%
Cost of goods sold includes the cost of materials purchased and internal
manufacturing expenses. In 1996, margins on sales and cost of goods sold were
unfavorably affected by moderated sales of higher margin fine fragrances. In
addition, highly competitive conditions for aroma chemicals caused the Company
to reduce selling prices for certain aroma chemicals in order to maintain its
markets. As noted below, the Company incurred certain duplicate manufacturing
costs in 1996 in connection with the phasing out of its Union Beach production
facility.
Research and development expenses have consistently been between 6% and 7%
of sales. These activities contribute in a significant way to the Company's
business. The expenses are for the development of new and improved products,
technical product support, compliance with governmental regulations and help
in maintaining our relationships with our customers who are often dependent on
technical advances.
8
Selling and administrative expenses are necessary to support the Company's
sales and operating levels and have remained relatively constant as a
percentage of net sales.
Operating profit, as shown in Note 10 of the Notes to the Consolidated
Financial Statements, was $296,456,000 in 1996, $390,702,000 in 1995 and
$354,425,000 in 1994. In 1996, operating profit included a nonrecurring charge
of $49,707,000. Operating profit was also unfavorably affected by the lower
margins on sales. In 1995, the profit growth was primarily the result of the
sales growth for the period.
Interest expense amounted to $2,740,000, $3,160,000 and $13,470,000 in
1996, 1995 and 1994, respectively. This expense relates primarily to bank
loans taken out by some of the Company's subsidiaries and may be significantly
affected by very high interest rates in hyperinflationary countries where
local bank borrowing is used as a hedge against devaluations. Interest expense
decreased in 1996 due to lower average interest rates on borrowings, partially
offset by somewhat higher average bank loans outstanding during the year.
Interest expense decreased in 1995 primarily due to lower average interest
rates, mainly in Brazil. The borrowings in Brazil were intended to serve as
hedges against the devaluations which occurred in that country, particularly
during the first half of 1994. In 1994, substantial offsetting exchange gains,
included in other income, were generated in Brazil. More details on bank loans
and long-term debt are contained in Note 6 of the Notes to the Consolidated
Financial Statements.
Other income was $11,405,000 in 1996, compared to $12,871,000 in 1995 and
$25,213,000 in 1994. In 1996, other income decreased primarily as a result of
lower interest income, due to lower average interest rates, partially offset
by lower exchange losses. The decrease in other income in 1995 was primarily
due to lower exchange gains attributable to the hedging activities in Brazil
mentioned above.
Net income in 1996, including the nonrecurring charge, totaled
$189,894,000. Excluding the nonrecurring charge, net income was $221,209,000,
a decrease of $27,608,000 or 11% from the prior year. Net income in 1995 was
$248,817,000, an increase of $22,795,000 or 10% over 1994. Net income in 1994
was $226,022,000.
During 1996, the Company undertook a program to expand and streamline its
worldwide aroma chemical production facilities. This program includes the
phase-out of production at the Company's Union Beach, New Jersey plant by
December 31, 1997, and the closure of smaller capacity facilities in Mexico
City, Mexico and Rio de Janeiro, Brazil during 1996. Most of the volume
currently produced at Union Beach will be transferred to the Company's
state-of-the-art facility in Augusta, Georgia. In addition, 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. These steps 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 closures will affect approximately 220 employees associated with aroma
chemical manufacturing at these locations. At December 31, 1996, 50 employees
had been terminated in connection with this program.
The aroma chemical streamlining resulted in a nonrecurring pretax charge
to second quarter 1996 earnings of $49,707,000 ($31,315,000 after tax or $.29
per share). Of the charge, approximately $33,000,000 represents asset
writedowns and other non-cash related costs. Cost savings from this program
have been specifically identified and are expected to increase annual pretax
earnings by $20,000,000, on completion of the phase-out of Union Beach
operations.
The reserve established as a result of the nonrecurring charge, and
movements therein during 1996, are as follows:
BALANCE
ORIGINAL UTILIZED AT END
(DOLLARS IN THOUSANDS) RESERVE IN 1996 OF YEAR
---------------------- ------- ------ -------
Employee related ................... $10,629 $ 560 $10,069
Closing manufacturing plants ....... 39,078 6,446 32,632
------- ------ -------
Total ............................ $49,707 $7,006 $42,701
======= ====== =======
Until the closure of Union Beach, the phased transfer of production to
Augusta will result in some duplication of operating expenses which will
affect both operating margins and earnings.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121 (FAS 121), Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of.
9
Under FAS 121, long-lived assets and certain identifiable intangibles are
reviewed for impairment whenever events or circumstances indicate that their
carrying value may not be recoverable. The effect of adopting this standard
was not material to the Company.
Under Statement of Financial Accounting Standards No. 123 (FAS 123),
Accounting for Stock-Based Compensation, companies can elect, but are not
required, to recognize compensation expense for all stock-based awards using a
fair-value methodology. The Company adopted the disclosure-only provisions of
this standard in 1996. More details on the Company's stock-based compensation
are contained in Note 9 of the Notes to the Consolidated Financial Statements.
In October 1996, the American Institute of Certified Public Accountants
issued the Statement of Position 96-1 (SOP 96-1), Accounting for Environmental
Remediation Liabilities. SOP 96-1 establishes guidance for when environmental
remediation liabilities should be recorded and the factors to be considered in
determining amounts recognized. This standard is effective for years beginning
after December 15, 1996. The Company is studying the implications of SOP 96-1
but does not believe the impact on operating results or financial condition
will be material.
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 1996, the Company
spent approximately $3,800,000 on capital projects and about $15,300,000 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.
Financial Condition
The financial condition of the Company continued to be strong during 1996.
Cash, cash equivalents and short-term investments totaled $317,983,000 at
December 31, 1996, compared to $296,933,000 and $301,808,000 at December 31,
1995 and 1994, respectively. Short-term investments held by the Company are
high-quality, readily marketable instruments. Working capital totaled
$725,892,000 at year-end 1996, compared to $759,576,000 and $704,763,000 at
December 31, 1995 and 1994, respectively. Gross additions to property, plant
and equipment were $80,782,000, $96,196,000 and $103,019,000 in 1996, 1995 and
1994, respectively, and are expected to approximate $85,000,000 in 1997.
In September 1992, the Board of Directors authorized the repurchase of up
to 7.5 million shares of the Company's common stock on the open market or
through private transactions, as market and business conditions warrant. In
September 1996, the Board of Directors authorized the repurchase of an
additional 7.5 million shares. The reacquired shares will be available for use
under the Company's employee benefit plans and for general corporate purposes.
At December 31, 1996, the 1992 repurchase program was virtually complete.
The Company has almost no long-term debt and anticipates that its growth
and capital expenditure programs, and the above share repurchase plans will
continue to be funded from internal sources.
During 1996, the Company paid dividends to shareholders totaling
$150,864,000, while $138,048,000 was paid in 1995, and $120,520,000 in 1994.
In January 1997, the cash dividend was increased 5.9% to an annual rate of
$1.44 per share. This increase follows an increase of 9.7% in January 1996 and
14.8% in January 1995. The Company believes these increases in dividends to
its shareholders can be made without limiting future growth and expansion.
10
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS:
PAGE NO.
--------
Consolidated Statements of Income and Retained Earnings
for the three years ended December 31, 1996 12
Consolidated Balance Sheet--December 31, 1996 and 1995 13
Consolidated Statement of Cash Flows for the three years
ended December 31, 1996 14
Notes to Consolidated Financial Statements 15
Report of Independent Accountants 25
Financial Statement Schedules:
VIII -- Valuation and Qualifying Accounts and Reserves
for the three years ended December 31, 1996 S-1
All other schedules are omitted because they are not applicable
or the required information is shown in the financial statements or notes
thereto.
QUARTERLY FINANCIAL DATA (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
NET INCOME
NET SALES GROSS PROFIT NET INCOME PER SHARE
----------------------- ------------------- ------------------- -------------
QUARTER 1996 1995 1996 1995 1996 1995 1996 1995
------- ---------- ---------- -------- -------- -------- -------- ----- -----
First ........ $ 382,767 $ 373,594 $178,696 $182,810 $ 66,164 $ 69,956 $0.60 $0.63
Second ....... 374,397 394,306 172,590 196,395 29,703 75,702 0.26 0.68
Third ........ 354,865 360,083 161,097 173,378 53,115 63,326 0.48 0.57
Fourth ....... 324,024 311,504 144,854 139,933 40,912 39,833 0.37 0.36
---------- ---------- -------- -------- -------- -------- ----- -----
$1,436,053 $1,439,487 $657,237 $692,516 $189,894 $248,817 $1.71 $2.24
========== ========== ======== ======== ======== ======== ===== =====
The second quarter of 1996 reflects a nonrecurring charge to expand and
streamline the Company's worldwide aroma chemical production facilities, as
discussed in Note 2 of the Notes to the Consolidated Financial Statements.
11
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED STATEMENT OF INCOME
Net sales ................................ $ 1,436,053 $ 1,439,487 $ 1,315,237
----------- ----------- -----------
Cost of goods sold ....................... 778,816 746,971 677,826
Research and development expenses ........ 93,545 90,846 81,369
Selling and administrative expenses ...... 223,547 217,658 207,429
Nonrecurring charge ...................... 49,707 -- --
Interest expense ......................... 2,740 3,160 13,470
Other (income) expense, net .............. (11,405) (12,871) (25,213)
----------- ----------- -----------
1,136,950 1,045,764 954,881
----------- ----------- -----------
Income before taxes on income ............ 299,103 393,723 360,356
Taxes on income .......................... 109,209 144,906 134,334
----------- ----------- -----------
NET INCOME .............................. $ 189,894 $ 248,817 $ 226,022
=========== =========== ===========
NET INCOME PER SHARE .................... $ 1.71 $ 2.24 $ 2.03
=========== =========== ===========
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
At beginning of year ..................... $ 1,069,421 $ 961,847 $ 860,640
Net income ............................... 189,894 248,817 226,022
----------- ----------- -----------
1,259,315 1,210,664 1,086,662
Cash dividends declared .................. 152,743 141,243 124,815
----------- ----------- -----------
At end of year ........................... $ 1,106,572 $ 1,069,421 $ 961,847
=========== =========== ===========
See Notes to Consolidated Financial Statements
12
CONSOLIDATED BALANCE SHEET
ASSETS
DECEMBER 31,
------------------------
1996 1995
---------- ----------
(DOLLARS IN THOUSANDS)
CURRENT ASSETS:
Cash and cash equivalents ............................. $ 261,370 $ 251,430
Short-term investments ................................ 56,613 45,503
Receivables:
Trade ................................................ 253,484 253,913
Allowance for doubtful accounts ...................... (8,733) (8,602)
Other ................................................ 24,557 28,881
Inventories ........................................... 369,078 414,547
Prepaid and deferred charges .......................... 49,987 50,305
---------- ----------
Total Current Assets ................................. 1,006,356 1,035,977
PROPERTY, PLANT AND EQUIPMENT .......................... 467,797 468,585
OTHER ASSETS ........................................... 32,760 29,707
---------- ----------
Total Assets ........................................... $1,506,913 $1,534,269
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank loans ............................................ $ 18,929 $ 12,185
Accounts payable ...................................... 57,681 63,282
Accrued payrolls and bonuses .......................... 19,565 17,571
Dividends payable ..................................... 39,628 37,749
Income taxes .......................................... 56,832 70,471
Other current liabilities ............................. 87,829 75,143
---------- ----------
Total Current Liabilities ............................ 280,464 276,401
---------- ----------
OTHER LIABILITIES:
Long-term debt ........................................ 8,289 11,616
Deferred income taxes ................................. 16,941 13,420
Retirement and other liabilities ...................... 124,682 116,272
---------- ----------
Total Other Liabilities .............................. 149,912 141,308
---------- ----------
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 ........................ 138,480 142,476
Retained earnings ..................................... 1,106,572 1,069,421
Cumulative translation adjustment ..................... 47,555 75,049
---------- ----------
1,307,077 1,301,416
Treasury stock, at cost -- 5,790,323 shares in
1996 and 4,808,005 shares in 1995 .................... (230,540) (184,856)
---------- ----------
Total Shareholders' Equity ........................... 1,076,537 1,116,560
---------- ----------
Total Liabilities and Shareholders' Equity ............. $1,506,913 $1,534,269
========== ==========
See Notes to Consolidated Financial Statements
13
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
(DOLLARS IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................. $189,894 $248,817 $226,022
Adjustments to reconcile to net cash
provided by operations:
Nonrecurring charge ........................ 49,707 -- --
Depreciation ............................... 47,764 40,702 36,358
Deferred income taxes ...................... (2,271) 6,444 (3,809)
Changes in assets and liabilities:
Current receivables ....................... (2,433) (16,475) (14,040)
Inventories ............................... 30,179 (43,505) (45,950)
Current payables .......................... (14,530) 6,121 47,669
Other, net ................................ 9,689 2,234 (6,719)
-------- -------- --------
Net cash provided by operations .............. 307,999 244,338 239,531
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales/maturities of short-term
investments ................................ 44,646 160,128 165,387
Purchases of short-term investments ......... (57,289) (130,780) (111,763)
Additions to property, plant and equipment,
net of minor disposals ..................... (79,425) (94,483) (101,135)
-------- -------- --------
Net cash used in investing activities ........ (92,068) (65,135) (47,511)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid to shareholders ......... (150,864) (138,048) (120,520)
Increase (decrease) in bank loans ........... 7,144 2,246 (24,791)
(Decrease) increase in long-term debt ....... (2,230) (2,571) 13,392
Proceeds from issuance of stock under stock
option plans ............................... 9,622 8,581 5,622
Purchase of treasury stock .................. (59,763) (41,386) (32,433)
-------- -------- --------
Net cash used in financing activities ........ (196,091) (171,178) (158,730)
-------- -------- --------
Effect of exchange rate changes on cash and
cash equivalents ............................ (9,900) 12,824 10,086
-------- -------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS ...... 9,940 20,849 43,376
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 251,430 230,581 187,205
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR ..... $261,370 $251,430 $230,581
======== ======== ========
See Notes to Consolidated Financial Statements
14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Company is the leading creator and manufacturer of flavors and
fragrances used by others to impart or improve flavor or fragrance in a wide
variety of consumer products. Fragrance products are sold principally to makers
of perfumes and cosmetics, hair and other personal care products, soaps and
detergents, household and other cleaning products and area fresheners. Flavors
are sold primarily to makers of dairy, meat and other processed foods,
beverages, snacks and savory foods, confectionery, sweet and baked goods,
pharmaceutical and oral care products and animal foods.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and all subsidiaries.
CURRENCY TRANSLATION
The assets and liabilities of non-U.S. subsidiaries which operate in a
local currency environment are translated into U.S. dollars at year-end exchange
rates. Income and expense items are translated at average exchange rates during
the year. Accumulated translation adjustments are shown as a separate component
of shareholders' equity.
For those subsidiaries which operate in U.S. dollars, or which operate in a
highly inflationary environment, inventory and property, plant and equipment are
translated using the approximate exchange rates at the time of acquisition. All
other assets and liabilities are translated at year-end exchange rates. Except
for inventories charged to cost of goods sold and depreciation, which are
remeasured for historical rates of exchange, all income and expense items are
translated at average exchange rates during the year. Gains and losses as a
result of remeasurements are included in income.
CASH EQUIVALENTS
Highly liquid investments with maturities of three months or less at date
of purchase are considered to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost (generally on an average basis)
or market.
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
lives: buildings and improvements, 10 to 30 years; machinery and equipment, 3 to
10 years; and leasehold improvements, the shorter of 10 years or the remaining
life of the lease.
When properties are retired or otherwise disposed of, the asset and related
accumulated depreciation are removed from the accounts and the resultant gain or
loss is included in income.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121 (FAS 121), Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of. Under FAS 121,
long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or circumstances indicate that their carrying value
may not be recoverable. The effect of adopting this standard was not material to
the Company.
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 dividend distributions by
subsidiary companies to the parent company are provided to the extent such
dividends are anticipated. No provision is made for additional taxes on
undistributed earnings of subsidiary companies which are intended to be
permanently invested in such subsidiaries.
15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
RETIREMENT BENEFITS
Current service costs of retirement plans and post-retirement health care
and life insurance benefits are accrued currently. Prior service costs resulting
from improvements in these plans are amortized over periods ranging from 10 to
20 years.
FINANCIAL INSTRUMENTS
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques, as appropriate. Unless
otherwise disclosed, the fair values of financial instruments approximate their
recorded values.
RISKS AND UNCERTAINTIES
The diversity of the Company's products, customers and geographic
operations significantly reduces the risk that a severe impact will occur in the
near term as a result of changes in its customer base, competition, sources of
supply or markets. It is unlikely that any one event would have a severe impact
on the Company's operating results.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses. Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS
In October 1996, the American Institute of Certified Public Accountants
issued the Statement of Position 96-1 (SOP 96-1), Accounting for Environmental
Remediation Liabilities. SOP 96-1 establishes guidance for when environmental
remediation liabilities should be recorded and the factors to be considered in
determining amounts recognized. This standard is effective for years beginning
after December 15, 1996. The Company is studying the implications of SOP 96-1
but does not believe the impact on operating results or financial condition will
be material.
NET INCOME PER SHARE
Net income per share is based on the weighted average number of shares
outstanding. The number of shares used in the computations were 110,773,000,
111,262,000 and 111,527,000 in 1996, 1995 and 1994, respectively.
NOTE 2. NONRECURRING CHARGE
During 1996, the Company undertook a program to expand and streamline its
worldwide aroma chemical production facilities. This program includes the
phase-out of production at the Company's Union Beach, New Jersey plant by
December 31, 1997, and the closure of smaller capacity facilities in Mexico
City, Mexico and Rio de Janeiro, Brazil during 1996. Most of the volume
currently produced at Union Beach will be transferred to the Company's
state-of-the-art facility in Augusta, Georgia. In addition, production capacity
in Benicarlo, Spain will be expanded.
The closures will affect approximately 220 employees associated with aroma
chemical manufacturing at these locations. At December 31, 1996, 50 employees
had been terminated in connection with this program.
The aroma chemical streamlining resulted in a nonrecurring pretax charge to
second quarter 1996 earnings of $49,707,000 ($31,315,000 after tax or $.29 per
share). Of the charge, approximately $33,000,000 represents asset writedowns and
other non-cash related costs.
The reserve established as a result of the nonrecurring charge, and
movements therein during 1996, are as follows:
BALANCE
ORIGINAL UTILIZED AT END
(DOLLARS IN THOUSANDS) RESERVE IN 1996 OF YEAR
- ---------------------- ------- ------- -------
Employee related ........................ $10,629 $ 560 $10,069
Closing manufacturing plants ............ 39,078 6,446 32,632
------- ------- -------
Total ................................. $49,707 $ 7,006 $42,701
======= ======= =======
16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3. MARKETABLE SECURITIES
Marketable securities are included in cash equivalents and short-term
investments, as appropriate.
At December 31, 1996 and 1995, marketable securities totaling $177,868,000
and $120,230,000, respectively, were available for sale and recorded at fair
value which approximated cost. Realized gains and losses on the sale of
marketable securities were not material.
NOTE 4. INVENTORIES
DECEMBER 31,
----------------------------
1996 1995
---------- --------
(DOLLARS IN THOUSANDS)
Raw materials .................................... $211,124 $233,759
Work in process .................................. 24,644 27,739
Finished goods ................................... 133,310 153,049
-------- --------
$369,078 $414,547
======== ========
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
DECEMBER 31,
----------------------------
1996 1995
---------- --------
(DOLLARS IN THOUSANDS)
Land ............................................. $ 34,965 $ 36,219
Buildings and improvements ....................... 283,016 264,462
Machinery and equipment .......................... 511,271 470,680
Construction in progress ......................... 48,972 67,845
-------- --------
878,224 839,206
Accumulated depreciation ......................... 410,427 370,621
-------- --------
$467,797 $468,585
======== ========
NOTE 6. BORROWINGS
Bank loans (all foreign) averaged $15,007,000 in 1996, $12,124,000 in 1995
and $15,937,000 in 1994. The highest levels were $18,925,000 in 1996,
$17,131,000 in 1995 and $28,677,000 in 1994. The 1996 weighted average annual
interest rate on these loans (based on balances outstanding at the end of each
month) was approximately 9% and the average rate on loans outstanding at
December 31, 1996 was 7%. These rates compare to 13% and 8%, respectively, in
1995, and 92% and 16%, respectively, in 1994. In 1994, the interest rates were
substantially affected by very high rates in hyperinflationary countries,
principally Brazil, where local borrowing was used as a hedge against
devaluations. Excluding these countries, the weighted average annual interest
rate and the average rate on loans outstanding at December 31, 1994 would have
been 6% and 7%, respectively.
Long-term debt (all foreign) consists of various loans from financial
institutions, with interest rates ranging between 2.1% to 3.5%, and with terms
of between five and fifteen years. Aggregate payments for the next five years of
long-term debt outstanding at December 31, 1996 are $2,072,000 annually in 1997
through 1998, $1,295,000 in 1999, $518,000 in 2000, and $489,000 in 2001. At
December 31, 1996 and 1995, the estimated fair value of long-term debt, based on
borrowing rates currently available to the Company with similar terms and
maturities, approximated the recorded amount.
Cash payments for interest were $2,688,000 in 1996, $3,326,000 in 1995 and
$13,743,000 in 1994.
At December 31, 1996, the Company and its subsidiaries had available unused
lines of bank credit aggregating approximately $77,200,000.
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7. INCOME TAXES
1996 1995 1994
-------- -------- --------
(DOLLARS IN THOUSANDS)
U.S. income before taxes ................... $ 19,860 $101,764 $ 98,122
Foreign income before taxes ................ 279,243 291,959 262,234
-------- -------- --------
Total income before taxes .................. $299,103 $393,723 $360,356
======== ======== ========
The following table shows the components of current and deferred income tax
expense by taxing jurisdiction, both domestic and foreign:
1996 1995 1994
-------- -------- --------
(DOLLARS IN THOUSANDS)
Current
Federal ....................... $ 15,138 $ 26,806 $ 40,737
State and local ............... 2,835 5,600 7,155
Foreign ....................... 93,507 106,056 90,251
-------- -------- --------
111,480 138,462 138,143
-------- -------- --------
Deferred
Federal ........................ (10,640) 1,418 (4,063)
State and local ................ (2,356) (339) (304)
Foreign ........................ 10,725 5,365 558
-------- -------- --------
(2,271) 6,444 (3,809)
-------- -------- --------
Total income taxes ............. $109,209 $144,906 $134,334
======== ======== ========
At December 31, 1996 and 1995, gross deferred tax assets were $67,100,000
and $52,300,000, respectively; gross deferred tax liabilities were $55,200,000
and $43,200,000, respectively. No valuation allowance was required for deferred
tax assets. The principal components of deferred tax assets (liabilities) were:
1996 1995
-------- --------
(DOLLARS IN THOUSANDS)
Employee and retiree benefits ......................... $ 33,000 $ 30,000
Inventory ............................................. 10,700 9,500
Property, plant and equipment ......................... (24,100) (24,400)
Other, net ............................................ (7,700) (6,000)
-------- --------
$ 11,900 $ 9,100
======== ========
A reconciliation between the U.S. federal income tax rate and the effective
tax rate is:
1996 1995 1994
---- ---- ----
Statutory tax rate .................................. 35.0% 35.0% 35.0%
Difference in effective tax rate on foreign earnings
and remittances .................................... 1.8 2.1 1.4
State and local taxes ............................... 0.1 0.9 1.2
Other, net .......................................... (0.4) (1.2) (0.3)
---- ---- ----
Effective tax rate .................................. 36.5% 36.8% 37.3%
==== ==== ====
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income taxes paid were $124,435,000 in 1996, $139,523,000 in 1995 and
$107,347,000 in 1994.
Undistributed earnings of foreign subsidiaries for which no deferred taxes
have been provided approximated $438,000,000 at December 31, 1996. Any
additional U.S. taxes payable on these foreign earnings, if remitted, would be
substantially offset by credits for foreign taxes already paid.
NOTE 8. SHAREHOLDERS' EQUITY
The following table shows treasury shares acquired and, as appropriate, the
use of treasury shares for stock plans:
NUMBER AMOUNT
OF (IN
SHARES THOUSANDS)
---------- ----------
Balance January 1, 1994 .............. 3,701,259 $ 133,803
Acquisitions ......................... 888,583 32,920
Used for stock plans ................. (292,302) (10,665)
--------- ---------
Balance December 31, 1994 ............ 4,297,540 156,058
Acquisitions ......................... 877,738 42,251
Used for stock plans ................. (367,273) (13,453)
--------- ---------
Balance December 31, 1995 ............ 4,808,005 184,856
Acquisitions ......................... 1,407,667 62,815
Used for stock plans ................. (425,349) (17,131)
--------- ---------
Balance December 31, 1996 ............ 5,790,323 $ 230,540
========= =========
Transactions in treasury shares resulted in net charges to Capital in
excess of par value of $4,092,000, $3,546,000 and $3,996,000 in 1994, 1995 and
1996, respectively.
Changes in the cumulative translation adjustment were (in thousands):
Balance January 1, 1994 ............................ $ 448
Translation adjustments ............................ 41,350
--------
Balance December 31, 1994 .......................... 41,798
Translation adjustments ............................ 33,251
--------
Balance December 31, 1995 .......................... 75,049
Translation adjustments ............................ (27,494)
--------
Balance December 31, 1996 .......................... $ 47,555
========
On February 13, 1990, 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 February 28, 1990 or issued
thereafter.
Until a person or group acquires 20% or more of the Company's common stock
or commences a tender offer that will result in such person or group owning
20% or more, the rights will be evidenced by the common stock certificates,
will automatically trade with the common stock and will not be exercisable.
Thereafter, separate rights certificates will be distributed and each right
will entitle its holder to purchase one share of common stock for an exercise
price of $66.67.
If any person or group acquires 20% or more of the Company's common stock,
then 10 business days thereafter (the "Flip-in Date") each right (other than
rights beneficially owned by holders of 20% or more of the common stock or
transferees thereof, which rights become void) will entitle its holder to
purchase, for the exercise price, a number of shares of common stock having a
market value of twice the exercise price.
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
If the Company is involved in a merger or sells more than 50% of its assets
or earning power, each right will entitle its holder to purchase, for the
exercise price, a number of shares of common stock of the acquiring company
having a market value of twice the exercise price. If any person or group
acquires between 20% and 50% of common stock, the Company's Board of Directors
may, at its option, exchange one share of common stock for each right. The
rights may be redeemed by the Board of Directors for $0.0033 per right prior to
the Flip-in Date. The rights will expire on February 28, 2000, unless previously
redeemed by the Board in accordance with the terms of the Rights Agreement.
Dividends paid per share were $1.36, $1.24 and $1.08 in 1996, 1995 and
1994, respectively.
NOTE 9. STOCK OPTIONS
The Company has various stock option plans under which the Company's
officers, directors and key employees may be granted options to purchase the
Company's common stock at 100% of the market price on the day the option is
granted.
Stock option transactions were:
WEIGHTED
SHARES OF COMMON STOCK AVERAGE OF
------------------------ EXERCISE PRICE
AVAILABLE UNDER OF SHARES
FOR OPTION OPTION UNDER PLAN
---------- --------- --------------
Balance January 1, 1994 ........... 2,367,339 2,459,655 $29.64
Granted ........................... (790,500) 790,500 36.12
Exercised ......................... -- (292,302) 20.84
Terminated ........................ 51,149 (51,149) 27.89
Lapsed ............................ (18,621) -- --
--------- ---------
Balance December 31, 1994 ......... 1,609,367 2,906,704 32.24
Granted ........................... (804,500) 804,500 49.88
Exercised ......................... -- (367,273) 27.08
Terminated ........................ 58,299 (58,299) 34.40
--------- ---------
Balance December 31, 1995 ......... 863,166 3,285,632 37.09
Granted ........................... (639,500) 639,500 48.06
Exercised ......................... -- (425,349) 29.78
Terminated ........................ 13,428 (13,428) 38.21
--------- ---------
Balance December 31, 1996 ......... 237,094 3,486,355 $39.98
========= =========
The following table summarizes information concerning currently outstanding
and exercisable options:
RANGE OF EXERCISE PRICES
------------------------
$10-$30 $30-$50
------- ----------
Number outstanding ........................................ 370,688 3,115,667
Weighted average remaining contractual life, in years ..... 3.6 7.6
Weighted average exercise price ........................... $23.73 $41.92
Number exercisable ........................................ 370,688 1,038,295
Weighted average exercise price ........................... $23.73 $36.37
During 1996, options to purchase common stock were granted at exercise
prices ranging from $43.38 to $48.13 per share. At December 31, 1996, the price
range for shares under option was $13.67 to $49.88; options for 1,408,983 shares
were exercisable at that date. During 1996, 425,349 shares of common stock under
option were exercised at prices ranging from $13.67 to $38.17.
Except for certain options granted to foreign employees which can be
exercised immediately, options generally become exercisable no earlier than two
years from the date of grant. All options expire ten years after date of grant.
20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company applies Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations in accounting for its
plans. Had compensation cost for the Company's stock option plans been
determined based upon the fair value at the grant date, consistent with the
methodology prescribed under Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation, the Company's net income and
earnings per share would have been reduced by approximately $2,700,000, or $.02
per share in 1996, and $1,200,000, or $.01 per share, in 1995. These pro forma
amounts may not be representative of future disclosures because the estimated
fair value of stock options is amortized to expense over the vesting period, and
additional options may be granted in future years.
Using the Black-Scholes option valuation model, the estimated fair values
of options granted during 1996 and 1995 were $9.98 and $10.89, respectively. The
Black-Scholes model was developed for use in estimating the fair value of traded
options which 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:
1996 1995
----- -----
Risk-free interest rate .......................... 6.6% 6.4%
Expected life, in years .......................... 5 5
Expected volatility .............................. 16.8% 17.6%
Expected dividend yield .......................... 2.8% 2.5%
NOTE 10. INTERNATIONAL OPERATIONS
1996 (DOLLARS IN THOUSANDS)
--------------------------------------------------------------
UNITED WESTERN OTHER
STATES EUROPE FOREIGN ELIMINATIONS CONSOLIDATED
-------- -------- -------- ------------ ------------
Sales to unaffiliated customers .... $439,695 $589,279 $407,079 $ -- $1,436,053
Transfers between areas ............ 65,020 101,122 12,745 (178,887) --
-------- -------- -------- --------- ----------
Total sales ...................... $504,715 $690,401 $419,824 $(178,887) $1,436,053
======== ======== ======== ========= ==========
Operating profit ................... $ 29,984 $189,263 $ 78,616 $ (1,407) $ 296,456
======== ======== ======== =========
Unallocated expenses ............... (6,018)
Interest expense ................... (2,740)
Other income (expense), net ........ 11,405
----------
Income before taxes on income .... $ 299,103
==========
Identifiable assets ................ $449,124 $463,892 $351,628 $ (63,086) $1,201,558
======== ======== ======== =========
Unallocated assets ................. 305,355
----------
Total assets ..................... $1,506,913
==========
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1995 (DOLLARS IN THOUSANDS)
--------------------------------------------------------------
UNITED WESTERN OTHER
STATES EUROPE FOREIGN ELIMINATIONS CONSOLIDATED
------ ------- ------- ------------ ------------
Sales to unaffiliated customers ... $450,644 $604,036 $384,807 $ -- $1,439,487
Transfers between areas ........... 72,959 96,642 15,143 (184,744) --
-------- -------- -------- --------- ----------
Total sales ..................... $523,603 $700,678 $399,950 $(184,744) $1,439,487
======== ======== ======== ========= ==========
Operating profit .................. $106,739 $203,131 $ 84,269 $ (3,437) $ 390,702
======== ======== ======== =========
Unallocated expenses .............. (6,690)
Interest expense .................. (3,160)
Other income (expense), net ....... 12,871
----------
Income before taxes on income ... $ 393,723
==========
Identifiable assets ............... $492,751 $437,589 $378,209 $ (58,753) $1,249,796
======== ======== ======== =========
Unallocated assets ................ 284,473
----------
Total assets .................... $1,534,269
==========
1994 (DOLLARS IN THOUSANDS)
--------------------------------------------------------------
UNITED WESTERN OTHER
STATES EUROPE FOREIGN ELIMINATIONS CONSOLIDATED
-------- -------- --------- ------------ ------------
Sales to unaffiliated customers ... $428,156 $537,258 $349,823 $ -- $1,315,237
Transfers between areas ........... 69,969 76,442 10,488 (156,899) --
-------- -------- -------- -------- ----------
Total sales ..................... $498,125 $613,700 $360,311 $(156,899) $1,315,237
======== ======== ======== ========= ==========
Operating profit .................. $105,903 $167,483 $ 83,554 $ (2,515) $ 354,425
======== ======== ======== =========
Unallocated expenses .............. (5,812)
Interest expense .................. (13,470)
Other income (expense), net ....... 25,213
----------
Income before taxes on income ... $ 360,356
==========
Identifiable assets ............... $428,539 $423,807 $286,724 $ (31,984) $1,107,086
======== ======== ======== =========
Unallocated assets ................ 292,639
----------
Total assets .................... $1,399,725
==========
In 1996, operating profit (United States, Other Foreign and Consolidated)
reflects the nonrecurring charge of $49,707,000 for expanding and streamlining
the Company's aroma chemical production facilities.
Transfers between geographic areas are accounted for at prices which
approximate arm's length market prices. Unallocated assets are principally cash
and short-term investments. Net foreign exchange losses of $668,000 in 1996,
$2,535,000 in 1995, and net gains of $13,543,000 in 1994 are included in other
income.
Worldwide sales to the Company's largest customer amounted to 12%, 11% and
13% of worldwide net sales in 1996, 1995 and 1994, respectively.
NOTE 11. 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.
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Pension expense included the following components:
U.S. PLANS NON-U.S. PLANS
-------------------------------- --------------------------------
1996 1995 1994 1996 1995 1994
-------- -------- --------- -------- --------- --------
(DOLLARS IN THOUSANDS)
Service cost for benefits earned . $ 4,516 $ 4,449 $ 4,784 $ 5,379 $ 4,993 $ 4,078
Interest cost on projected benefit
obligation ...................... 10,180 8,954 8,210 10,572 10,333 8,658
Actual return on plan assets ..... (22,871) (24,674) 676 (11,128) (9,769) (8,576)
Net amortization and deferrals ... 11,916 14,700 (9,982) 312 348 261
-------- -------- -------- -------- -------- --------
Defined benefit plans ............ 3,741 3,429 3,688 5,135 5,905 4,421
Defined contribution and other
retirement plans ................ 2,297 2,288 2,165 3,447 2,332 2,761
-------- -------- -------- -------- -------- --------
Total pension expense ............ $ 6,038 $ 5,717 $ 5,853 $ 8,582 $ 8,237 $ 7,182
======== ======== ======== ======== ======== ========
The funded status of pension plans at December 31 was:
U.S. PLANS NON-U.S. PLANS
------------------------ ---------------------
1996 1995 1996 1995
-------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
Actuarial present value of benefit obligation:
Vested benefit obligation ...................................... $ 105,921 $ 98,059 $ 113,370 $ 101,764
Non-vested benefit obligation .................................. 6,604 5,227 4,587 7,003
--------- --------- --------- ---------
Accumulated benefit obligation ................................. $ 112,525 $ 103,286 $ 117,957 $ 108,767
========= ========= ========= =========
Projected benefit obligation .................................... $ 133,968 $ 126,330 $ 156,827 $ 148,324
Plan assets at fair value ....................................... 164,334 145,785 148,094 137,239
--------- --------- --------- ---------
Plan assets in excess of (less than) projected benefit obligation 30,366 19,455 (8,733) (11,085)
Unrecognized net (gain) loss .................................... (23,232) (5,677) 4,999 4,461
Remaining balance of unrecognized net (asset) liability
established at adoption of FAS 87 .............................. (3,897) (4,461) 2,042 2,658
--------- --------- --------- ---------
Net pension asset (liability) ............................... $ 3,237 $ 9,317 $ (1,692) $ (3,966)
========= ========= ========= =========
Principal actuarial assumptions used to determine the above data were:
U.S. PLANS NON-U.S. PLANS
--------------------- ---------------------
1996 1995 1996 1995
-------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
Discount rate ............................................. 8.0% 7.5% 4.5%-8.0% 5.0%-8.5%
Weighted average rate of compensation increase ............ 4.5% 4.5% 3.0%-6.0% 3.0%-6.0%
Long-term rate of return on plan assets ................... 8.0% 8.0% 3.5%-8.0% 4.5%-8.0%
In addition to pension benefits, certain health care and life insurance
benefits are provided to all 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.
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Expense recognized for postretirement benefits other than pensions included
the following components:
1996 1995 1994
------ ------ ------
(DOLLARS IN THOUSANDS)
Service cost for benefits earned ........ $1,368 $1,176 $1,189
Interest on benefit obligation .......... 3,377 3,079 3,110
Net amortization and deferrals .......... 138 -- --
------ ------ ------
Total benefit expense ................. $4,883 $4,255 $4,299
====== ====== ======
The components of the benefit obligation of the U.S. plan, included in
Retirement and other liabilities, at December 31 were:
1996 1995
------- -------
(DOLLARS IN THOUSANDS)
Retirees $18,204 $18,685
Active employees eligible to retire 9,948 8,519
Other active employees 17,787 18,130
------- -------
Accumulated benefit obligation 45,939 45,334
Unrecognized net loss (2,858) (7,344)
------- -------
Net benefit liability $43,081 $37,990
======= =======
Principal actuarial assumptions used to determine the above data were:
1996 1995
------ ------
Discount rate ................................................ 8.0% 7.5%
Initial medical cost trend rate .............................. 8.8% 9.5%
Ultimate medical cost trend rate ............................. 5.0% 5.0%
Medical cost trend rate decreases to ultimate rate in year.... 2001 2001
The effect of a one percent increase in the assumed medical rate of
inflation would increase the accumulated postretirement benefit obligation by
approximately $7,000,000; the annual service and interest cost would not be
materially affected.
NOTE 12. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
The Company sometimes uses forward exchange contracts to reduce its
exposure to fluctuations in foreign currency exchange rates. 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. Gains and losses on
such contracts are recognized in income as incurred, effectively offsetting the
losses and gains on the foreign currency transactions that are hedged. At
December 31, 1996 and 1995, the value of outstanding foreign currency exchange
contracts was not material.
The Company has no significant concentrations of risk in financial
instruments. Temporary cash investments are made in a well-diversified portfolio
of high-quality, liquid obligations of government, corporate and financial
institutions. There are also limited concentrations of credit risk with respect
to trade receivables because of the large number of customers spread across many
industries and geographic areas.
NOTE 13. CONTINGENT LIABILITIES
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.
24
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of INTERNATIONAL FLAVORS & FRAGRANCES
INC.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 8 on page 11 present fairly, in all material respects, the
financial position of International Flavors & Fragrances Inc. and its
subsidiaries at December 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1996, in conformity with generally accepted accounting principles. 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
generally accepted auditing standards 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 the opinion expressed
above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
January 30, 1997
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
25
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) See Item 8 on page 11.
(b) No reports on Form 8-K were filed during the last quarter of
the year ended December 31, 1996.
(c) Exhibits.
(d) Not applicable.
NUMBER
------
3 Restated Certificate of Incorporation of Registrant, incorporated
by reference to Exhibit 3 to Registrant's Report on Form 10-K for
fiscal year ended December 31, 1993 (File No. 1-4858).
3(b) By-laws of Registrant, incorporated by reference to Exhibit
3(b) to Registrant's Report on Form 10-K for fiscal year ended
December 31, 1993 (File No. 1-4858).
3(c) Amendment to By-laws adopted December 12, 1996.
4(a) Shareholder Protection Rights Agreement dated as of February
20, 1990 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 February 13, 1990 (File No. 1-4858).
4(b) Amendment No. 1 dated as of April 6, 1990 to Shareholder
Protection Rights Agreement, incorporated by reference to
Exhibit 4 to Registrant's Report on Form 10-Q dated May 14,
1990 (File No. 1-4858).
4(c) Amendment No. 2 dated as of March 8, 1994 to Shareholder
Protection Rights Agreement, incorporated by reference to
Exhibit 4(c) to Registrant's Report on Form 10-K for fiscal
year ended December 31, 1993 (File No. 1-4858).
4(d) 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 Report on Form 10-K
for fiscal year ended December 31, 1989 (File No. 1-4858).
9 Not applicable.
10(a) Agreement dated as of January 1, 1992 between Registrant and
Eugene P. Grisanti, Chairman and President of Registrant,
incorporated by reference to Exhibit 10(a) to Registrant's Report
on Form 10-K for fiscal year ended December 31, 1991 (File No.
1-4858).
10(b) Form of Executive Severance Agreement approved by Registrant's
Board of Directors on February 14, 1989 incorporated by reference
to Exhibit 28(b) to Registrant's Report on Form 10-K for fiscal
year ended December 31, 1988 (File No. 1-4858).
10(c) Registrant's Executive Death Benefit Plan effective July 1, 1990,
incorporated by reference to Exhibit 28 to Registrant's Report on
Form 10-K for fiscal year ended December 31, 1990 (File No.
1-4858).
10(d) Supplemental Retirement Investment Plan adopted by Registrant's
Board of Directors on November 14, 1989 incorporated by reference
to Exhibit 28 to Registrant's Report on Form 10-K for fiscal year
ended December 31, 1989 (File No. 1-4858).
10(e) Supplemental Retirement Plan adopted by Board of Directors on
October 29, 1986, incorporated by reference to Exhibit 10(b) to
Registrant's Report on Form 10-K for fiscal year ended December
31, 1986 (File No. 1-4858).
10(f) Restated Management Incentive Compensation Plan of Registrant,
incorporated by reference to Exhibit A to the Registrant's
Proxy Statement dated March 28, 1995 (File No. 1-4858).
10(h) Stock Option Plan for Non-Employee Directors, incorporated by
reference to Exhibit A to the Proxy Statement of Registrant
dated April 3, 1990 (File No. 1-4858).
10(i) Registrant's Directors' Deferred Compensation Plan adopted by
Registrant's Board of Directors on September 15, 1981,
incorporated by reference to Exhibit 10-A to Registrant's Report
on Form 10-Q dated November 12, 1981 (File No. 1-4858).
26
NUMBER
------
10(j) 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 (File No. 1-4858).
10(k) Agreement dated as of July 22, 1996 between Registrant and
Hugh R. Kirkpatrick, former Senior Vice-President and Director
of Registrant.
11 Not applicable.
12 Not applicable.
13 Not applicable.
16 Not applicable.
18 Not applicable.
21 List of Principal Subsidiaries. See page E-1 of this Form 10-K.
22 Not applicable.
23 Consent of Price Waterhouse LLP. See page 29 of this Form 10-K.
24 Powers of Attorney authorizing George Rowe, Jr. and Stephen A.
Block to sign this report and amendments thereto on behalf of
certain directors and officers of the Registrant.
27 Financial Data Schedule (EDGAR version only).
28 Not applicable.
99 None.
27
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/ THOMAS H. HOPPEL
-----------------------------------------
THOMAS H. HOPPEL
VICE-PRESIDENT AND CHIEF FINANCIAL OFFICER
Dated: March 27, 1997
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:
EUGENE P. GRISANTI
President and Chairman of the Board
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
THOMAS H. HOPPEL By /s/ GEORGE ROWE, JR.
--------------------------
Vice-President and Chief Financial Officer and Director GEORGE ROWE, JR.
ATTORNEY-IN-FACT
DIRECTORS:
MARGARET HAYES ADAME
BRIAN D. CHADBOURNE
ROBIN CHANDLER DUKE
RICHARD M. FURLAUD
HERBERT G. REID March 27, 1997
GEORGE ROWE, JR.
STANLEY M. RUMBOUGH, JR.
HENRY P. VAN AMERINGEN
HENDRIK C. VAN BAAREN
WILLIAM D. VAN DYKE, III
ORIGINAL POWERS OF ATTORNEY AUTHORIZING GEORGE ROWE, JR. 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.
28
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (No. 33-66756 and
No. 33-47856) and the Registration Statement on Form S-8 (No. 33-54423) of
International Flavors & Fragrances Inc. of our report dated January 30, 1997
appearing on page 25 of this Form 10-K.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
March 27, 1997
29
SCHEDULE VIII
INTERNATIONAL FLAVORS & FRAGRANCES INC. AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS OF DOLLARS)
FOR THE YEAR ENDED DECEMBER 31, 1996
ADDITIONS TRANS-
BALANCE AT CHARGED TO LATION BALANCE
BEGINNING COSTS AND ACCOUNTS ADJUST- AT END
OF PERIOD EXPENSES WRITTEN OFF MENTS OF PERIOD
---------- ---------- ----------- ------- ---------
Allowance for doubtful accounts ...... $8,602 $1,564 $1,290 ($143) $8,733
====== ====== ====== ===== ======
FOR THE YEAR ENDED DECEMBER 31, 1995
ADDITIONS TRANS-
BALANCE AT CHARGED TO LATION BALANCE
BEGINNING COSTS AND ACCOUNTS ADJUST- AT END
OF PERIOD EXPENSES WRITTEN OFF MENTS OF PERIOD
---------- ---------- ----------- ------- ---------
Allowance for doubtful accounts ...... $7,448 $1,632 $ 700 $ 222 $8,602
====== ====== ====== ===== ======
FOR THE YEAR ENDED DECEMBER 31, 1994
ADDITIONS TRANS-
BALANCE AT CHARGED TO LATION BALANCE
BEGINNING COSTS AND ACCOUNTS ADJUST- AT END
OF PERIOD EXPENSES WRITTEN OFF MENTS OF PERIOD
---------- ---------- ----------- ------- ---------
Allowance for doubtful accounts ...... $6,314 $1,599 $ 724 $ 259 $7,448
====== ====== ====== ===== ======
S-1