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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1995 Commission file number 1-4858
INTERNATIONAL FLAVORS & FRAGRANCES INC.
(Exact Name of Registrant as specified in its charter)
New York 13-1432060
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(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
521 West 57th Street, New York, N.Y. 10019-2960
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(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 August 9, 1995: 111,282,278
1
PART. I FINANCIAL INFORMATION
Item 1. Financial Statements
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
6/30/95 12/31/94
---------- ----------
Assets
Current Assets:
Cash & Cash Equivalents .................... $ 183,350 $ 230,581
Short-term Investments ..................... 94,193 71,227
Trade Receivables .......................... 303,235 228,434
Allowances For Doubtful Accounts ........... (8,413) (7,448)
Inventories: Raw Materials ................ 239,217 211,071
Work in Process .............. 25,907 25,600
Finished Goods ............... 139,927 125,434
---------- ----------
Total Inventories ............ 405,051 362,105
Other Current Assets ....................... 88,452 79,587
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Total Current Assets ....................... 1,065,868 964,486
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Property, Plant & Equipment, At Cost ........ 805,146 736,912
Accumulated Depreciation .................... (363,704) (331,182)
---------- ----------
441,442 405,730
Other Assets ................................ 27,881 29,509
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Total Assets ................................ $1,535,191 $1,399,725
========== ==========
Liabilities and Shareholders' Equity
Current Liabilities:
Bank Loans ................................. $ 13,811 $ 9,740
Accounts Payable-Trade ..................... 62,662 56,861
Dividends Payable .......................... 34,480 34,554
Income Taxes ............................... 83,780 70,505
Other Current Liabilities .................. 86,542 88,063
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Total Current Liabilities ................... 281,275 259,723
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Other Liabilities:
Deferred Income Taxes ...................... 10,870 14,350
Long-term Debt ............................. 15,603 14,342
Other ...................................... 108,205 103,231
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Total Other Liabilities ..................... 134,678 131,923
---------- ----------
Shareholders' Equity:
Common Stock(115,761,840 shares issued in
'95 and in '94) ........................... 14,470 14,470
Capital in Excess of Par Value ............. 143,923 146,022
Retained Earnings .......................... 1,038,422 961,847
Cumulative Translation Adjustment .......... 91,895 41,798
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1,288,710 1,164,137
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Treasury Stock, at cost--4,518,091 shares
in '95 and 4,297,540 in '94 ............... (169,472) (156,058)
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Total Shareholders' Equity ................. 1,119,238 1,008,079
---------- ----------
Total Liabilities and Shareholders' Equity .. $1,535,191 $1,399,725
========== ==========
See Notes to Consolidated Financial Statements
2
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands except per share amounts)
3 Months Ended 6/30
-------------------------
1995 1994
-------- --------
Net Sales ...................................... $394,306 $345,210
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Cost of Goods Sold ............................. 197,911 173,607
Research and Development Expenses .............. 22,729 19,923
Selling and Administrative Expenses ............ 55,603 50,116
Interest Expense ............................... 1,047 5,379
Other (Income) Expense, Net .................... (3,034) (7,356)
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274,256 241,669
-------- --------
Income Before Taxes on Income .................. 120,050 103,541
Taxes on Income ................................ 44,348 38,625
-------- --------
Net Income ..................................... $ 75,702 $ 64,916
======== ========
Earnings Per Share ............................. $0.68 $0.58
Dividends Paid Per Share ....................... $0.31 $0.27
6 Months Ended 6/30
-------------------------
1995 1994
-------- --------
Net Sales ...................................... $767,900 $668,747
-------- --------
Cost of Goods Sold ............................. 388,695 339,227
Research and Development Expenses .............. 44,870 39,276
Selling and Administrative Expenses ............ 109,165 98,961
Interest Expense ............................... 1,612 11,544
Other (Income) Expense, Net .................... (7,534) (17,810)
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536,808 471,198
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Income Before Taxes on Income .................. 231,092 197,549
Taxes on Income ................................ 85,434 73,692
-------- --------
Net Income ..................................... $145,658 $123,857
======== ========
Earnings Per Share ............................. $1.31 $1.11
Dividends Paid Per Share ....................... $0.62 $0.54
Average Number of Shares Outstanding (000's) ... 111,492 111,642
See Notes to Consolidated Financial Statements
3
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
6 Months Ended 6/30
-------------------------
1995 1994
-------- --------
Cash Flows From Operating Activities:
Net Income ...................................... $145,658 $123,857
Adjustments to Reconcile to Net Cash
Provided by Operations:
Depreciation .................................. 20,446 17,790
Deferred Income Taxes ......................... 5,126 3,639
Changes in Assets and Liabilities:
Current Receivables .......................... (71,083) (67,240)
Inventories .................................. (30,265) (11,411)
Current Payables ............................. 11,735 29,629
Other, Net ................................... (6,129) (3,850)
-------- --------
Net Cash Provided by Operations ................. 75,488 92,414
-------- --------
Cash Flows From Investing Activities:
Proceeds From Sale/Maturities Short-Term
Investments .................................... 49,115 92,966
Purchases of Short-Term Investments ............. (69,342) (49,664)
Additions to Property, Plant & Equipment,
Net of Minor Disposals ......................... (37,018) (44,169)
-------- --------
Net Cash Provided by (Used in) Investing
Activities ..................................... (57,245) (867)
-------- --------
Cash Flows From Financing Activities:
Cash Dividends Paid to Shareholders ............. (69,157) (60,374)
Increase (Decrease) in Bank Loans ............... 3,395 (21,829)
Increase (Decrease) in Long-Term Debt ........... (1,237) 16,137
Proceeds From Issuance of Stock Under Stock
Option Plans ................................... 5,293 2,755
Purchase of Treasury Stock ...................... (21,037) (32,433)
-------- --------
Net Cash Used In Financing Activities ........... (82,743) (95,744)
-------- --------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents ............................... 17,269 10,383
-------- --------
Net Change in Cash and Cash Equivalents ......... (47,231) 6,186
Cash and Cash Equivalents at Beginning of Year .. 230,581 187,205
-------- --------
Cash and Cash Equivalents at End of Period ...... $183,350 $193,391
======== ========
Interest Paid ................................... $ 2,004 $ 11,673
Income Taxes Paid ............................... $ 69,463 $ 54,263
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 1994 Annual Report
to Shareholders.
In the opinion of the Company's management, all normal recurring
adjustments necessary for a fair statement of the results for the interim
periods have been made.
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
Operations
Worldwide net sales for the second quarter of 1995 increased 14% over the
prior year to $394,306,000. For the first six months of 1995, net sales
increased 15% over the prior year to $767,900,000. Sales increases were recorded
in flavor and fragrance products in both the second quarter and six month
periods. The sales increase in the second quarter and the first six months of
1995 was favorably affected by translating stronger foreign currencies into the
U.S. dollar.
Net income for the second quarter of 1995 was $75,702,000, an increase of
17% from the 1994 second quarter. Net income for the first six months of 1995
was $145,658,000, an increase of 18% over the comparable 1994 period. The profit
growth recorded by the Company was primarily the result of the sales increase
for the period. Earnings per share for the second quarter and first six months
in 1995 were $.68 and $1.31, as compared to $.58 and $1.11 in the prior year
quarter and six month periods, respectively.
The percentage relationship of cost of goods sold and other operating
expenses to sales for the first half 1995 and 1994 remained fairly constant,
especially on an overall basis.
First Six Months
-------------------
1995 1994
---- ----
Cost of Goods Sold ............................... 50.6% 50.7%
Research and Development Expense ................. 5.8% 5.9%
Selling and Administrative Expense ............... 14.2% 14.8%
Interest expense was $1,047,000 for the second quarter of 1995, compared to
$5,379,000 for the second quarter 1994. For the first six months of 1995,
interest expense amounted to $1,612,000 compared to $11,544,000 in the first six
months of 1994. The lower interest expense in 1995 resulted primarily from the
lower average level of borrowings and lower interest rates in Brazil, where such
5
borrowings were used as hedges against devaluations in that country. In 1994,
the higher borrowing levels and interest rates in Brazil generated significant
offsetting exchange gains which were included in Other Income. Other Income for
the second quarter 1995 was $3,034,000 and was $7,534,000 for the first six
months of 1995, compared to $7,356,000 and $17,810,000 for the corresponding
periods in 1994; the decline in 1995 was primarily due to lower exchange gains
resulting from the hedging activities in Brazil mentioned above.
The effective tax rates for the second quarter and first six months of 1995
were 36.9% and 37.0%, respectively, as compared to 37.3% for the comparable
periods in 1994.
Financial Condition
The financial condition of the Company continued to be strong during the
second quarter. Cash, cash equivalents and short-term investments totaled
$277,543,000 at June 30, 1995. At June 30, 1995, working capital was
$784,593,000 compared to $704,763,000 at December 31, 1994. Gross additions to
property, plant and equipment during the first half of 1995 were $37,439,000. In
January 1995, the Company's cash dividend was increased 14.8% to an annual rate
of $1.24 per share, and $.31 per share was paid to shareholders in both the
first and second quarters. The Company anticipates that its growth, capital
expenditure programs and share repurchase program will be funded from internal
sources.
The cumulative translation adjustment component of Shareholders' Equity at
June 30, 1995 was $91,895,000 compared to $41,798,000 at December 31, 1994.
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 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of Registrant's shareholders held Thursday May 11,
1995, at which 96,641,018 shares, or 86.6%, of Registrant's Common Stock were
represented in person or by proxy, the 12 nominees for director of Registrant,
as listed in Registrant's proxy statement dated March 28, 1995 previously filed
with the Commission, were duly elected to Registrant's Board of Directors. There
was no solicitation of proxies in opposition to these nominees.
At such annual meeting, the shareholders also voted with respect to the
other matter submitted for shareholder consideration as follows, the vote being
legally sufficient to adopt the proposal:
Proposal to amend the Registrant's Management Incentive
Compensation Plan to preserve the deductibility under the
Internal Revenue Code of compensation paid under the Plan.
No. of Shares Voted
-------------------
FOR ........................ 94,357,879
AGAINST .................... 1,379,383
ABSTAIN .................... 353,980
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27--Financial Data Schedule
(b) Reports on Form 8-K
Registrant filed no report on Form 8-K during the quarter for which this
report on Form 10-Q is filed.
7
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERNATIONAL FLAVORS & FRAGRANCES INC.
Dated: August 11, 1995 By:__________________________________________________
Thomas H. Hoppel, Vice-President & Treasurer
Dated: August 11, 1995 By:__________________________________________________
Stephen A. Block, Vice-President Law and Secretary