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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 March 31, 1996 Commission file number 1-4858
INTERNATIONAL FLAVORS & FRAGRANCES INC.
(Exact Name of Registrant as specified in its charter)
New York 13-1432060
- ---------------------------------------------- -------------------
(State or other jurisdiction of incorporation (IRS Employer
or organization) identification No.)
521 West 57th Street, New York, N.Y. 10019-2960
- ----------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 765-5500
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Number of shares outstanding as of May 6, 1996: 111,022,501
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
3/31/96 12/31/95
---------- ----------
Assets
Current Assets:
Cash & Cash Equivalents ...................... $ 230,246 $ 251,430
Short-term Investments ....................... 54,882 45,503
Trade Receivables ............................ 294,164 253,913
Allowance For Doubtful Accounts .............. (8,027) (8,602)
Inventories: Raw Materials ................... 228,101 233,759
Work in Process ................. 25,059 27,739
Finished Goods .................. 146,509 153,049
---------- ----------
Total Inventories ............... 399,669 414,547
Other Current Assets ......................... 72,022 79,186
---------- ----------
Total Current Assets ......................... 1,042,956 1,035,977
---------- ----------
Property, Plant & Equipment, At Cost ........... 847,469 839,206
Accumulated Depreciation ....................... (375,751) (370,621)
---------- ----------
471,718 468,585
Other Assets ................................... 30,325 29,707
---------- ----------
Total Assets ................................... $1,544,999 $1,534,269
========== ==========
Liabilities and Shareholders' Equity
Current Liabilities:
Bank Loans ................................... $ 15,055 $ 12,185
Accounts Payable-Trade ....................... 63,215 63,282
Dividends Payable ............................ 37,754 37,749
Income Taxes ................................. 76,717 70,471
Other Current Liabilities .................... 79,870 92,714
---------- ----------
Total Current Liabilities .................... 272,611 276,401
---------- ----------
Other Liabilities:
Deferred Income Taxes ........................ 13,596 13,420
Long-term Debt ............................... 10,283 11,616
Other ........................................ 117,252 116,272
---------- ----------
Total Other Liabilities ........................ 141,131 141,308
---------- ----------
Shareholders' Equity:
Common Stock (115,761,840 shares issued
in '96 and in '95) ......................... 14,470 14,470
Capital in Excess of Par Value ............... 141,447 142,476
Retained Earnings ............................ 1,097,831 1,069,421
Cumulative Translation Adjustment ............ 58,330 75,049
---------- ----------
1,312,078 1,301,416
Treasury Stock, at cost--4,702,539 shares
in '96 and 4,808,005 in '95 ................ (180,821) (184,856)
---------- ----------
Total Shareholders' Equity ................... 1,131,257 1,116,560
---------- ----------
Total Liabilities and Shareholders' Equity ..... $1,544,999 $1,534,269
========== ==========
See Notes to Consolidated Financial Statements
2
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands except per share amounts)
3 Months Ended 3/31
------------------------
1996 1995
-------- --------
Net Sales ......................................... $382,767 $373,594
-------- --------
Cost of Goods Sold ................................ 204,071 190,784
Research and Development Expenses ................. 22,949 22,141
Selling and Administrative Expenses ............... 55,321 53,562
Interest Expense .................................. 546 565
Other (Income) Expense, Net ....................... (4,414) (4,500)
-------- --------
278,473 262,552
-------- --------
Income Before Taxes on Income ..................... 104,294 111,042
Taxes on Income ................................... 38,130 41,086
-------- --------
Net Income ........................................ $ 66,164 $ 69,956
======== ========
Earnings Per Share ................................ $0.60 $0.63
Average Number of Shares Outstanding (000) ........ 111,000 111,531
Dividends Paid Per Share .......................... $0.34 $0.31
See Notes to Consolidated Financial Statements
3
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
3 Months Ended 3/31
--------------------
1996 1995
-------- --------
Cash Flows From Operating Activities:
Net Income ............................................ $ 66,164 $ 69,956
Adjustments to Reconcile to Net Cash
Provided by Operations:
Depreciation ...................................... 11,660 9,724
Deferred Income Taxes ............................. 7,301 1,350
Changes in Assets and Liabilities:
Current Receivables ............................. (42,780) (53,797)
Inventories ..................................... 10,179 (21,384)
Current Payables ................................ (5,168) 27,168
Other, Net ...................................... (341) (6,436)
-------- --------
Net Cash Provided by Operations ....................... 47,015 26,581
-------- --------
Cash Flows From Investing Activities:
Proceeds From Sales/Maturities of
Short-term Investments .............................. 2,033 19,473
Purchases of Short-term Investments ................... (12,336) (25,051)
Additions to Property, Plant & Equipment,
Net of Minor Disposals ............................ (20,915) (18,059)
-------- --------
Net Cash Used in Investing Activities ................. (31,218) (23,637)
-------- --------
Cash Flows From Financing Activities:
Cash Dividends Paid to Shareholders ................... (37,749) (34,554)
Increase in Bank Loans ................................ 2,986 820
Decrease in Long-term Debt ............................ (998) (1,054)
Proceeds From Issuance of Stock Under Stock
Option Plans ........................................ 2,987 3,852
Purchase of Treasury Stock ............................ (96) 0
-------- --------
Net Cash Used In Financing Activities ................. (32,870) (30,936)
-------- --------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents .................................... (4,111) 17,063
-------- --------
Net Change in Cash and Cash Equivalents ............... (21,184) (10,929)
Cash and Cash Equivalents at Beginning of Year ........ 251,430 230,581
-------- --------
Cash and Cash Equivalents at End of Period ............ $230,246 $219,652
======== ========
Interest Paid ......................................... $ 572 $ 717
Income Taxes Paid ..................................... $ 23,279 $ 27,121
See Notes to Consolidated Financial Statements
4
Note to Consolidated Financial Statements
These interim statements and management's related discussion and analysis should
be read in conjunction with the consolidated financial statements and their
related notes, and management's discussion and analysis of results of operations
and financial condition included in the Company's 1995 Annual Report to
Shareholders.
In the opinion of the Company's management, all normal recurring adjustments
necessary for a fair statement of the results for the interim periods have been
made.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Operations
Worldwide net sales for the first quarter of 1996 increased 2% over the prior
year to $382,767,000. The Company's first quarter sales reached a new high
against a record performance in the first quarter of 1995. The sales increase in
the first quarter of 1996 was not significantly affected by translation. Net
income for the first quarter of 1996 totaled $66,164,000 compared to $69,956,000
in the prior year first quarter. Earnings per share for the quarter were $.60,
as compared to $.63 in the prior year quarter.
Sales and earnings were affected by slow reordering patterns for fragrances,
resulting from sluggish retail sales during the 1995 holiday season, both in
Europe and the United States. The resumption of normal fragrance reordering
patterns, as well as the introduction of several new fragrance products, will
result in stronger sales and earnings during the second half of the year.
The percentage relationship of cost of goods sold and other operating expenses
to sales for the first quarter 1996 and 1995 are as detailed below.
First Quarter
------------------------
1996 1995
----- -----
Cost of Goods Sold 53.3% 51.1%
Research and Development Expense 6.0% 5.9%
Selling and Administrative Expense 14.5% 14.3%
The effective tax rate for the first quarter 1996 was 36.6% as compared to 37.0%
for the same period in 1995. The lower effective tax rate reflects the effects
of lower tax rates in various tax jurisdictions in which the Company operates.
Financial Condition
The financial condition of the Company continued to be strong during the first
quarter. Cash, cash equivalents and short-term investments totaled $285,128,000
at March 31, 1996. At March 31, 1996, working capital was $770,345,000 compared
to $759,576,000 at December 31, 1995. Gross additions to property, plant and
equipment during the first quarter of 1996 were $21,239,000.
5
In January 1996, the Company's cash dividend was increased 9.7% to an annual
rate of $1.36 per share, and $.34 per share was paid to shareholders in the
first quarter of 1996. The Company anticipates that its growth, capital
expenditure programs and share repurchase program will be funded from internal
sources.
The cumulative translation adjustment component of Shareholders' Equity at March
31, 1996 was $58,330,000 compared to $75,049,000 at December 31, 1995. Changes
in the component result from translating the net assets of the majority of the
Company's foreign subsidiaries into U.S. dollars at current exchange rates as
required by the Statement of Financial Accounting Standards No. 52 on accounting
for foreign currency translation.
6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
Registrant filed no report on Form 8-K during the quarter
for which this report on Form 10-Q is filed.
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: May 14, 1996 By:____________________________________________________
Thomas H. Hoppel, Vice-President and Chief
Financial Officer
Dated: May 14, 1996 By:____________________________________________________
Stephen A. Block, Vice-President Law and Secretary