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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1994 Commission file number 1-4858
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INTERNATIONAL FLAVORS & FRAGRANCES INC.
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(Exact Name of Registrant as specified in its charter)
New York 13-1432060
____________________________________________ ___________________
(State or other jurisdiction of incorporation (IRS Employer
or organization) identification No.)
521 West 57th Street, New York, N.Y. 10019-2905
____________________________________________ ___________________
(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 requirements for the past 90 days.
Yes X No
_______ ________
Number of shares outstanding as of May 6, 1994: 111,369,893
1
PART. I FINANCIAL INFORMATION
Item 1. Financial Statements
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
3/31/94 12/31/93
------- --------
Assets
- - ------
Current Assets:
Cash & Cash Equivalents $ 218,777 $ 187,205
Short-term Investments 69,214 124,073
Trade Receivables 249,539 203,088
Allowances For Doubtful Accounts (6,515) (6,314)
Inventories: Raw Materials 179,946 175,269
Work in Process 25,590 26,902
Finished Goods 100,210 100,755
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Total Inventories 305,746 302,926
Other Current Assets 71,479 68,045
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Total Current Assets 908,240 879,023
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Property, Plant & Equipment, At Cost 637,568 610,629
Accumulated Depreciation (298,899) (287,212)
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338,669 323,417
Other Assets 22,378 22,817
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Total Assets $1,269,287 $1,225,257
========== ==========
Liabilities and Shareholders' Equity
- - ------------------------------------
Current Liabilities:
Bank Loans $ 14,118 $ 30,937
Accounts Payable-Trade 50,539 43,771
Dividends Payable 30,116 30,259
Income Taxes 58,583 45,512
Other Current Liabilities 74,230 76,108
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Total Current Liabilities 227,586 226,587
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Other Liabilities:
Deferred Income Taxes 11,292 11,099
Long Term Debt 18,035 -
Other 99,438 95,702
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Total Other Liabilities 128,765 106,801
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Shareholders' Equity:
Common Stock(115,761,840 shares issued in'94
and 115,761,240 in '93) 14,470 14,470
Capital in Excess of Par Value 148,433 150,114
Retained Earnings 889,465 860,640
Cumulative Translation Adjustment 13,809 448
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1,066,177 1,025,672
Treasury Stock, at cost - 4,221,428 shares
in '94 and 3,701,259 in '93 (153,241) (133,803)
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Total Shareholders' Equity 912,936 891,869
---------- ----------
Total Liabilities and Shareholders' Equity $1,269,287 $1,225,257
========== ==========
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 3/31
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1994 1993
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Net Sales $ 323,537 $ 309,144
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Cost of Goods Sold 165,620 159,095
Research and Development Expenses 19,353 18,758
Selling and Administrative Expenses 48,845 48,198
Interest Expense 6,165 3,226
Other (Income) Expense, Net (10,454) (9,542)
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229,529 219,735
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Income Before Taxes on Income 94,008 89,409
Taxes on Income 35,067 33,182
--------- ---------
Net Income $ 58,941 $ 56,227
========= =========
Earnings Per Share * $0.53 $0.49
Average Number of Shares Outstanding (000) 111,883 114,807
Dividends Paid Per Share * $0.27 $0.25
* Reflects three-for-one stock split, distributed on January 19, 1994 to
shareholders of record on December 28, 1993
See Notes to Consolidated Financial Statements
3
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
3 Months Ended 3/31
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1994 1993
--------- ---------
Cash Flows From Operating Activities:
- - -------------------------------------
Net Income $ 58,941 $ 56,227
Adjustments to Reconcile to Net Cash
Provided by Operations:
Depreciation 8,673 8,817
Deferred Income Taxes 7,533 (1,420)
Changes in Assets and Liabilities:
Current Receivables (45,100) (48,309)
Inventories 3,045 (739)
Current Payables 15,869 22,887
Other, Net (5,529) (1,812)
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Net Cash Provided by Operations 43,432 35,651
--------- ---------
Cash Flows From Investing Activities:
- - -------------------------------------
Proceeds From Sale/Maturities Short-term
Investments 64,852 103,322
Purchases of Short-term Investments (9,389) (66,918)
Additions to Property, Plant & Equipment,
Net of Minor Disposals (16,081) (11,346)
--------- ---------
Net Cash Provided by (Used in) Investing
Activities 39,382 25,058
--------- ---------
Cash Flows From Financing Activities:
- - -------------------------------------
Cash Dividends Paid (30,260) (28,843)
Increase (Decrease) in Bank Loans (2,734) (959)
Proceeds From Issuance of Stock Under
Stock Option Plans 1,708 1,400
Purchase of Treasury Stock (22,942) (20,949)
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Net Cash Used In Financing Activities (54,228) (49,351)
--------- ---------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents 2,986 (8,373)
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Net Change in Cash and Cash Equivalents 31,572 2,985
Cash and Cash Equivalents at Beginning of Year 187,205 210,798
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Cash and Cash Equivalents at End of Period $ 218,777 $ 213,783
========= =========
Interest Paid $ 5,950 $ 3,247
Income Taxes Paid $ 28,661 $ 19,946
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 1993 Annual
Report to Shareholders.
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, Accounting For Certain Debt and Equity
Securities, classifying all marketable securities as available for sale. The
effect of adopting this standard was not material.
The financial statements at and for the period ended March 31, 1994 include
the balances and results of operations of the Company's 80% owned joint
venture, International Flavors & Fragrances (Hangzhou) Co., Ltd. The
inclusion of these accounts was not material to the Company's financial
condition and results of operations.
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.
Earnings per share were calculated on the basis of the average number of
shares of common stock outstanding during the applicable period. Earnings per
share amounts reflect the three-for-one split distributed on January 19, 1994
to shareholders of record on December 28, 1993.
Item 2. Management's Discussion and Analysis of Results of Operations and
- - --------------------------------------------------------------------------
Financial Condition
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Operations
Worldwide net sales for the first quarter of 1994 increased 5% over the prior
year to $323,537,000 with sales increases in both flavor and fragrance
products. The sales increase in the first quarter of 1994 was unfavorably
affected by translating European currencies into the stronger U.S. dollar; if
the dollar exchange rate had remained the same during 1994 and 1993, the sales
increase for the quarter would have approximated 8%.
Earnings per share for the first quarter of 1994 increased 8% to $.53 from
$.49 in the prior year quarter. Average shares of common stock outstanding in
the first quarter of 1994 were 111,883,000, compared with 114,807,000 for the
same period in 1993. This reduction was mainly a result of the Company's
share repurchase program. Net income for the first quarter 1994 was
$58,941,000, an increase of 5% from 1993. The profit growth recorded by the
Company was primarily the result of the sales increase for the period.
5
The percentage relationship of cost of goods sold and other operating expenses
to sales for the first quarter 1994 and 1993 remained fairly constant,
especially on an overall basis:
First Quarter
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1994 1993
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Cost of Goods Sold 51.2% 51.5%
Research and Development Exp. 6.0% 6.1%
Selling and Administrative Exp. 15.1% 15.6%
Interest expense was $6,165,000 for the first quarter of 1994, compared to
$3,226,000 for the same period in 1993. The higher interest expense in 1994
resulted mainly from the higher level of borrowings and higher interest rates
in Brazil. In both 1994 and 1993, the borrowing levels in Brazil generated
significant offsetting exchange gains which were included in Other Income.
The effective tax rate for the first quarter 1994 was 37.3% as compared to
37.1% for the same period in 1993.
Financial Condition
The financial condition of the Company continued to be strong during the first
quarter. Cash, cash equivalents and short-term investments totalled
$287,991,000 at March 31, 1994. At March 31, 1994, working capital was
$680,654,000 compared to $652,436,000 at December 31, 1993. Gross additions
to property, plant and equipment during the first quarter of 1994 were
$16,200,000. In January 1994, the Company's cash dividend was increased 8% to
an annual rate of $1.08 per share, and $.27 per share was paid to shareholders
in the first quarter. 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
March 31, 1994 was $13,809,000 compared to $448,000 at December 31, 1993.
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.
6
PART II.
OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(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.
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: May 11, 1994 By: /s/ Thomas H. Hoppel
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Thomas H. Hoppel, Vice President
& Treasurer
Dated: May 11, 1994 By: /s/ Stephen A. Block
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Stephen A. Block, Vice-President
Law and Secretary