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, 2002 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
--------------------------------------------- ---------------------
(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 _________
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Number of shares outstanding as of May 3, 2002: 94,245,851
PART I. FINANCIAL INFORMATION 1
Item 1. Financial Statements
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
(Unaudited)
3/31/02 12/31/01
----------- -----------
Assets
- ------
Current Assets:
Cash & Cash Equivalents $ 34,472 $ 48,521
Short-term Investments 396 384
Trade Receivables 350,295 328,858
Allowance For Doubtful Accounts (10,667) (10,835)
Inventories: Raw Materials 205,270 212,270
Work in Process 10,217 10,853
Finished Goods 192,761 192,861
----------- -----------
Total Inventories 408,248 415,984
Deferred Income Taxes 57,168 77,449
Other Current Assets 44,644 36,000
----------- -----------
Total Current Assets 884,556 896,361
----------- -----------
Property, Plant & Equipment, At Cost 961,599 975,630
Accumulated Depreciation (434,715) (443,157)
----------- -----------
526,884 532,473
----------- -----------
Intangible Assets, net 786,442 795,920
Other Assets 41,466 43,297
----------- -----------
Total Assets $ 2,239,348 $ 2,268,051
=========== ===========
Liabilities and Shareholders' Equity
- ------------------------------------
Current Liabilities:
Bank Loans and Current Portion of Long-term Debt $ 27,337 $ 23,716
Commercial Paper 195,244 204,229
Accounts Payable-Trade 101,875 85,659
Dividends Payable 14,188 14,215
Income Taxes 53,829 49,841
Other Current Liabilities 161,730 182,554
----------- -----------
Total Current Liabilities 554,203 560,214
----------- -----------
Other Liabilities:
Deferred Income Taxes 18,789 44,553
Long-term Debt 930,728 939,404
Retirement and Other Liabilities 197,979 199,710
----------- -----------
Total Other Liabilities 1,147,496 1,183,667
----------- -----------
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 119,961 126,170
Restricted Stock (624) (1,440)
Retained Earnings 1,291,103 1,263,344
Accumulated Other Comprehensive Income (Loss):
Cumulative Translation Adjustment (166,224) (156,266)
Accumulated Gains/(Losses) on Derivatives
Qualifying as Hedges 2,135 (2,261)
Minimum pension liability adjustment (20,009) (20,009)
----------- -----------
1,240,812 1,224,008
Treasury Stock, at cost - 21,148,751 shares in '02
and 20,996,954 in '01 (702,176) (698,851)
Note Receivable from Officer (987) (987)
----------- -----------
Total Shareholders' Equity 537,649 524,170
----------- -----------
Total Liabilities and Shareholders' Equity $ 2,239,348 $ 2,268,051
=========== ===========
See Notes to Consolidated Financial Statements
2
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands except per share amounts)
(Unaudited)
3 Months Ended 3/31
-----------------------
2002 2001
---- ----
Net Sales $ 445,844 $ 483,661
--------- ---------
Cost of Goods Sold 259,864 284,139
Research and Development Expenses 35,170 35,406
Selling and Administrative Expenses 75,386 85,845
Amortization of Goodwill and Other Intangibles 3,158 11,355
Nonrecurring Charges - 12,420
Interest Expense 10,427 22,300
Other (Income) Expense, Net (1,965) (240)
--------- ---------
382,040 451,225
--------- ---------
Income Before Taxes on Income 63,804 32,436
Taxes on Income 21,857 12,164
--------- ---------
Net Income 41,947 20,272
Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustments (9,958) (68,793)
Accumulated Gains (Losses) on Derivatives
Qualifying as Hedges 4,396 (1,597)
--------- ---------
Comprehensive Income $ 36,385 $ (50,118)
========= =========
Net Income Per Share - Basic $ 0.44 $ 0.21
Net Income Per Share - Diluted $ 0.44 $ 0.21
Average Number of Shares Outstanding - Basic 94,534 96,984
Average Number of Shares Outstanding - Diluted 96,182 97,586
Dividends Paid Per Share $ 0.15 $ 0.15
See Notes to Consolidated Financial Statements
INTERNATIONAL FLAVORS & FRAGRANCES INC. 3
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
3 Months Ended 3/31
------------------------------
2002 2001
---------- --------
Cash Flows From Operating Activities:
- ------------------------------------
Net Income $ 41,947 $ 20,272
Adjustments to Reconcile to Net Cash
Provided by Operations:
Depreciation and Amortization 20,474 29,413
Deferred Income Taxes 1,889 (1,606)
Changes in Assets and Liabilities:
Current Receivables (29,923) (25,641)
Inventories 5,877 5,456
Current Payables 1,483 (33,470)
Other, Net (5,093) (17,496)
------- -------
Net Cash Provided by (Used in) Operations 36,654 (23,072)
------- -------
Cash Flows From Investing Activities:
- ------------------------------------
Proceeds from Investments - 328
Purchases of Investments (14) (5,492)
Additions to Property, Plant and Equipment (19,605) (9,353)
Proceeds from Disposal of Assets 5,064 1,474
------- -------
Net Cash Used in Investing Activities (14,555) (13,043)
------- -------
Cash Flows From Financing Activities:
- ------------------------------------
Cash Dividends Paid to Shareholders (14,215) (14,614)
Net Change in Bank Loans 851 (12,445)
Net Change in Commercial Paper Outstanding (8,985) (391,474)
Proceeds from Long-term Debt - 429,208
Repayments of Long-term Debt (4,409) (2,869)
Proceeds From Issuance of Stock Under Stock Option Plans 8,294 -
Purchase of Treasury Stock (17,031) (34,109)
------- -------
Net Cash Used in Financing Activities (35,495) (26,303)
------- -------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (653) (517)
------- -------
Net Change in Cash and Cash Equivalents (14,049) (62,935)
Cash and Cash Equivalents at Beginning of Year 48,521 128,869
------- -------
Cash and Cash Equivalents at End of Period $ 34,472 $ 65,934
======= =======
Interest Paid $ 3,287 $ 21,844
Income Taxes Paid $ 12,491 $ 35,379
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 2001 Annual Report to
Shareholders. These interim statements are unaudited. In the opinion of the
Company's management, all normal recurring adjustments necessary for a fair
presentation of the results for the interim periods have been made.
Derivative Instruments and Hedging Activities:
The Company has entered into a series of swaps for a $700.0 million notional
amount which effectively converts the 6.45% coupon interest rate on the Notes to
a short-term rate based upon the London InterBank Offered Rate (LIBOR) plus an
interest markup. These swaps are designated as qualified cash flow hedges. The
Company had no ineffective interest rate swaps at March 31, 2002.
The Company enters into foreign currency forward contracts with the objective of
reducing exposure to cash flow volatility associated with foreign currency
receivables and payables, and with anticipated purchases of certain raw
materials used in operations. The notional amount and maturity dates of such
contracts match those of the underlying receivables, payables and anticipated
purchases. At March 31, 2002, the Company had outstanding foreign currency
forward contracts of approximately $267.0 million. The Company has designated
these contracts as qualified fair value and cash flow hedges. Accordingly, the
effective portion of the gain or loss on the derivative instrument is reported
as a component of other comprehensive income and recognized in earnings in the
same period or periods during which the hedged transaction affects earnings. The
Company had no ineffective foreign currency forward contracts at March 31, 2002.
Net Income Per Share:
Options to purchase 2,721,001 shares and 4,549,224 shares were outstanding for
the first quarter of 2002 and 2001, respectively, but were not included in the
computation of diluted net income per share because the options' exercise prices
were greater than the average market price of the common shares in the
respective periods.
5
Segment Information:
Effective January 1, 2001 the Company was reorganized into five geographic
regions with an individual manager responsible for each region. The five regions
established were North America, Latin America, Asia-Pacific, Europe and Central
Asia, Middle East ("CAME"). During the course of 2001, as the integration of BBA
progressed, the Company refined the CAME region further to reflect the current
organization and management structure. The CAME region was reconstituted as, and
renamed the "Indian Subcontinent" (India, Pakistan and other countries in the
Indian Subcontinent). The Central Asia and Middle East operations formerly
included in CAME will, from January 1, 2002 be included with Europe. North and
Latin America and Asia-Pacific were unaffected by the geographic reorganization.
The Company's reportable segment information, based on geographic region,
follows. Certain prior year amounts have been reclassified for comparative
purposes to reflect the geographic alignment. The Company evaluates the
performance of its geographic areas based on operating profit, excluding
interest expense, other income and expense, certain unallocated expenses,
amortization of goodwill and other intangibles, the effects of nonrecurring
items and accounting changes, and income tax expense.
- ------------------------------------ ------------ ------------ ------------- ----------- ------------ ---------------- -------------
North Indian Latin
2002 (Dollars in thousands) America Europe Sub-continent America Asia-Pacific Eliminations Consolidated
- ------------------------------------ ------------ ------------ ------------- ----------- ------------ ---------------- -------------
Sales to unaffiliated customers $148,604 $165,985 $ 8,725 $57,240 $65,290 $ -- $445,844
Transfers between areas 21,193 27,412 49 160 3,441 (52,255) --
- ------------------------------------ ------------ ------------ ------------- ----------- ------------ ---------------- -------------
Total sales $169,797 $193,397 $ 8,774 $57,400 $68,731 $(52,255) $445,844
==================================== ============ ============ ============= =========== ============ ================ =============
Segment profit $ 16,257 $ 39,855 $ 2,016 $14,090 $15,557 $ (400) $ 87,375
==================================== ============ ============ ============= =========== ============ ================
Corporate and other unallocated
expenses (11,951)
Amortization of other intangibles (3,158)
Interest expense (10,427)
Other income (expense), net 1,965
------------
Income before taxes on income $ 63,804
==================================== ============ ============ ============ =========== ============ ================ ============
- ------------------------------------ ------------ ------------ ------------ ------------ ------------ ---------------- ------------
North Indian Latin
2001 (Dollars in thousands) America Europe Sub-continent America Asia-Pacific Eliminations Consolidated
- ------------------------------------ ------------ ------------ ------------- ----------- ------------ ---------------- ------------
Sales to unaffiliated customers $157,582 $187,125 $ 8,056 $61,490 $ 69,408 $ -- $ 483,661
Transfers between areas 23,365 33,066 261 385 3,909 (60,986) --
- ------------------------------------ ------------ ------------ ------------- ----------- ------------ ---------------- ------------
Total sales $180,947 $220,191 $ 8,317 $61,875 $ 73,317 $ (60,986) $ 483,661
==================================== ============ ============ ============= =========== ============ ================ ============
Segment profit $ 18,708 $ 43,259 $ 2,040 $13,422 $ 15,560 $ (738) $ 92,251
==================================== ============ ============ ============= =========== ============ ================
Corporate and other unallocated
expenses (13,980)
Amortization of goodwill and
other intangibles (11,355)
Nonrecurring charges (12,420)
Interest expense (22,300)
Other income (expense), net 240
------------
Income before taxes on income $ 32,436
==================================== ============ ============ ============= =========== ============ ================ ============
6
Nonrecurring and Other Charges:
As described in Note 2 of the Notes to the Consolidated Financial Statements
included in the Company's 2001 Annual Report to Shareholders, in October 2000,
the Company announced a reorganization, including management changes, further
consolidation of production facilities and related actions. The total pretax
cost of actions taken in connection with the reorganization, including $31.9
million and $30.1 million recorded in 2000 and 2001, respectively, is expected
to approximate $90.0 million to $100.0 million through the end of 2002. Certain
costs associated with the merger and the integration of Bush Boake Allen Inc.
("BBA") operations were accounted for as part of the acquisition cost, and did
not affect current earnings.
Movements in the liabilities related to the nonrecurring charges were as follows
(in millions):
Employee- Asset-Related
Related And Other Total
---------------------------------
Balance December 31, 2001 $ 7.0 $ .7 $ 7.7
Utilized in 2002 (.7) (.4) (1.1)
---- --- ----
Balance March 31, 2002 $ 6.3 $ .3 $ 6.6
==== === ====
The balance of the liabilities will be utilized by early 2003 in connection with
the final decommissioning and disposal of affected equipment and as severance
and other benefit obligations to affected employees are satisfied.
The Company has established accruals relating primarily to employee separation
costs, facility closure costs and other actions relating to the integration of
certain BBA operations into IFF. Costs associated with these integration actions
were recognized as a component of the purchase accounting which resulted in an
adjustment to goodwill; such costs did not directly impact current earnings.
Movements in acquisition accounting accruals were as follows (in millions):
Employee- Asset-Related
Related And Other Total
---------------------------------
Balance December 31, 2001 $ 13.8 $ 9.9 $ 23.7
Utilized in 2002 (2.0) (1.4) (3.4)
----- ---- -----
Balance March 31, 2002 $ 11.8 $ 8.5 $ 20.3
===== ==== =====
Restricted Stock:
In January 2001, the Company awarded approximately 190,000 IFF Stock Units
("Units") to eligible employees in exchange for surrender of their "under water"
stock options. The Units vest, in four equal installments, over not more than a
seven-year period, upon the Company's Common Stock attaining successively higher
market price targets beginning at $22.50 per share, and earn dividend
equivalents as and when cash dividends are paid. Compensation expense is
recognized over the Unit's vesting period. In the first quarter 2002, the third
price target of $31.50 was achieved and the Company recognized expense of $.8
million which is included in operating expenses. The remaining unvested Units
are reported as Restricted Stock on the Company's Consolidated Balance Sheet.
7
Comprehensive Income:
Changes in the accumulated other comprehensive income component of shareholders'
equity were as follows:
- --------------------------------------------------------------------------------------------------------------------------
Accumulated
gains(losses) on
2002 (Dollars in thousands) derivatives Minimum Pension
Translation qualifying as Obligation, net of
adjustments hedges tax Total
-------------------- -------------------- -------------------- --------------------
Balance December 31, 2001 $(156,266) $ (2,261) $(20,009) $(178,536)
Change (9,958) 4,396 -- (5,562)
--------- --------- -------- ---------
Balance March 31, 2002 $(166,224) $ 2,135 $(20,009) $(184,098)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Accumulated
gains(losses) on
2001 (Dollars in thousands) derivatives Minimum Pension
Translation qualifying as Obligation, net of
adjustments hedges tax Total
-------------------- -------------------- -------------------- --------------------
Balance December 31, 2000 $ (77,578) $ -- -- $ (77,578)
Change (68,793) (1,597) -- (70,390)
--------- --------- -------- ---------
Balance March 31, 2001 $(146,371) $ (1,597) -- $(147,968)
- --------------------------------------------------------------------------------------------------------------------------
Borrowings:
Debt consists of the following (Dollars in thousands):
Rate Maturities March 31, 2002 December 31, 2001
---- ---------- -------------- -----------------
Commercial paper (U.S.) $ 195,244 $ 204,229
Bank loans 26,574 21,916
Current portion of long-term debt 763 1,800
------------------------------------------
Total current debt 222,581 227,945
------------------------------------------
U.S. dollars 6.45% 2006 698,914 698,800
Euro facility 4.79% 2005-06 100,602 101,500
Japanese Yen notes 2.45% 2008-11 115,590 115,300
Japanese Yen notes 1.74% 2005 9,125 9,100
Other 2003 1,981 6,404
------------------------------------------
926,212 931,104
Interest rate swaps 4,516 8,300
------------------------------------------
Total long-term debt 930,728 939,404
------------------------------------------
Total debt $1,153,309 $1,167,349
==========================================
At March 31, 2002, commercial paper maturities did not extend beyond May 3,
2002. The weighted average interest rate on total borrowings was 3.7% compared
to 4.1% at December 31, 2001. The Company records capitalized interest on all
projects with a total project value greater than $1.0 million. In the first
quarter $.2 million was capitalized which reduced interest expense and increased
fixed asset additions.
8
Intangible Assets, net:
Effective January 1, 2002 the Company adopted Statement of Financial Accounting
Standards No. 142 (FAS 142), Goodwill and Other Intangible Assets. FAS 142
eliminates goodwill amortization and requires an evaluation of potential
goodwill impairment upon adoption, as well as subsequent annual valuations, or
more frequently if circumstances indicate a possible impairment. The standard
also prescribes that other indefinite lived intangibles be included with
goodwill. Adoption of FAS 142 eliminated annual goodwill amortization expense of
approximately $33 million. The following tables reflect the reclassification of
other indefinite lived intangibles from Trademarks and other to Goodwill at
adoption of FAS 142 and the Earnings per share effect of this change for the
first quarter 2002 and 2001. The amortization for the first quarter 2002 was
$3.2 million and the estimated amortization for 2002 and the subsequent four
years is $12.6 million per year. The Company is in the process of evaluating the
impact of adopting FAS 142 but does not believe it has a material impairment of
goodwill at adoption.
March 31, 2002 March 31, 2002
Gross Carrying Value Accumulated Amortization
-------------------- ------------------------
Goodwill $684,189 $41,534
Other indefinite lived intangibles 19,200 1,184
Trademarks and other 144,051 18,280
-------- -------
Total $847,440 $60,998
======== =======
December 31, 2001 December 31, 2001
Gross Carrying Value Accumulated Amortization
-------------------- ------------------------
Goodwill $690,509 $41,534
Other indefinite lived intangibles - -
Trademarks and other 163,251 16,306
-------- -------
Total $853,760 $57,840
======== =======
9
For the three months ended March 31,
------------------------------------
($000's except per share amounts) 2002 2001
- --------------------------------- ---- ----
Reported net income $ 41,947 $ 20,272
Add back: Goodwill amortization - 7,875
Add back: Assembled workforce amortization - 128
---------- ----------
Adjusted net income $ 41,947 $ 28,275
========== ==========
Basic Earnings Per Share
- ------------------------
Reported net income $ 0.44 $ 0.21
Goodwill amortization - 0.08
Assembled workforce amortization - -
---------- ----------
Adjusted net income $ 0.44 $ 0.29
========== ==========
Diluted Earnings Per Share
- --------------------------
Reported net income $ 0.44 $ 0.21
Goodwill amortization - 0.08
Assembled workforce amortization - -
---------- ----------
Adjusted net income $ 0.44 $ 0.29
========== ==========
Reclassifications:
Certain reclassifications have been made to the prior year's financial
statements to conform to fiscal 2002 classifications.
10
Item 2. Management's Discussion and Analysis of Results of Operations and
- -------------------------------------------------------------------------
Financial Condition
- -------------------
Operations
- ----------
Worldwide net sales for the first quarter of 2002 were $445.8 million, compared
to reported sales in the first quarter 2001 of $483.7 million. The Company
disposed of certain non-core businesses in the fourth quarter 2001. On a
pro-forma basis reflecting the businesses disposed of, first quarter 2001 sales
were $464.0 million.
Excluding sales from non-core businesses disposed of during 2001, local currency
sales for the first quarter 2002 decreased 1.6% in comparison to the 2001
quarter, in line with the Company's expectations. On a similar basis, reported
sales declined 3.9%. Translation was unfavorable due to the relative strength of
the U.S. dollar versus the Euro, the Japanese Yen and the Australian dollar;
these currencies declined versus the U.S. dollar by approximately 4%, 12% and
6%, respectively, in comparison to the prior year.
Excluding sales associated with those businesses disposed of during 2001:
... First quarter sales performance was strongest in North America where
flavors sales increased by 2% and fragrances were flat;
... Local currency fragrance sales in Europe increased 3% although this
increase was offset by a 7% local currency decline in flavors with the
overall region declining by 1%;
... Asia-Pacific was flat and the Indian sub-continent declined 3% in local
currency reflecting continued weak economic conditions throughout each of
these regions;
... Latin America declined by 9% mainly due to Argentina but also slowing
economies in both Brazil and Mexico.
The percentage relationship of cost of goods sold and other operating expenses
to sales for the first three months 2002 and 2001 are detailed below. The
pro-forma information presented in the table below reflects operating expenses
as a percent of sales excluding the non-core businesses disposed of in the
fourth quarter of 2001.
First Three Months
------------------
Reported Pro-Forma
2002 2001 2001
---- ---- ----
Cost of Goods Sold 58.3% 58.7% 57.2%
Research and Development Expenses 7.9% 7.3% 7.6%
Selling and Administrative Expenses 16.9% 17.7% 18.3%
Cost of goods sold, as a percentage of net sales, increased from the prior year
pro-forma percentage primarily due to the unfavorable mix related to weakness in
the North America and Europe fine fragrance business.
Research and development expenses were somewhat higher due to increased
activities in this area. Selling and administrative expenses are substantially
reduced due to the integration and reorganization savings achieved during the
quarter.
Other income in the quarter amounted to $2.0 million primarily related to
exchange gains most significantly in Argentina. Interest expense declined from
2001 levels due to the interest rate swap entered into in 2001, reduced
borrowing levels and a general decline in interest rates.
11
Net income for the first quarter of 2002, totaled $41.9 million compared to
reported net income in the first quarter 2001 of $20.3 million. The amount for
the first three months of 2001 includes the effects of the nonrecurring charge
discussed below. Excluding this charge, net income for the first quarter 2001
was $28.0 million. On a pro-forma basis excluding the businesses disposed of in
the fourth quarter 2001 and the effects of adopting FAS 142 which reduced
amortization expense, first quarter 2001 net income totaled $27.5 million
including nonrecurring charges, and $35.3 million excluding such charges.
The effective tax rate for the first quarter of 2002 was 34.3% compared to 37.5%
for the comparable period in 2001. The lower effective rate in 2002 principally
results from the discontinuance of goodwill amortization, which was not
deductible for purposes of determination of the Company's taxable income.
Nonrecurring and Other Charges:
As described in Note 2 of the Notes to the Consolidated Financial Statements
included in the Company's 2001 Annual Report to Shareholders, in October 2000,
the Company announced a reorganization, including management changes, further
consolidation of production facilities and related actions. In connection with
this program, the Company recorded a nonrecurring charge of $12.4 million ($7.8
million after tax) in the first quarter 2001, related primarily to employee
separation costs and other reorganization activities. There were no significant
non-cash related elements included in the first quarter 2001 charge. The
majority of the pretax nonrecurring charges recorded in the first quarter 2001
relate to operations in Asia-Pacific ($4.5 million) and North America, including
corporate ($4.2 million). For Europe and Latin America, first quarter 2001
charges totaled $2.5 million and $1.2 million, respectively. The total pretax
cost of actions taken in connection with the reorganization, including $31.9
million and $30.1 million recorded in 2000 and 2001, respectively, is expected
to approximate $90.0 million to $100.0 million through the end of 2002. There
were no nonrecurring charges in the first quarter of 2002.
Movements in the liabilities related to the nonrecurring charges were as follows
(in millions):
Employee- Asset-Related
Related and Other Total
---------------------------------------
Balance December 31, 2001 $ 7.0 $ .7 $ 7.7
Utilized in 2002 ( .7) ( .4) (1.1)
------ ------- -----
Balance March 31, 2002 $ 6.3 $ .3 $ 6.6
====== ======= =====
The balance of the liabilities will be utilized by early 2003 in connection with
the final decommissioning and disposal of affected equipment and as severance
and other benefit obligations to affected employees are satisfied.
The Company has established accruals relating primarily to employee separation
costs, facility closure costs and other actions relating to the integration of
certain BBA operations into IFF. Costs associated with these integration actions
were recognized as a component of the purchase accounting which resulted in an
adjustment to goodwill; such costs did not directly impact current earnings.
Movements in acquisition accounting accruals were as follows (in millions):
Employee- Asset-Related
Related and Other Total
---------------------------------------
Balance December 31, 2001 $ 13.8 $ 9.9 $ 23.7
Utilized in 2002 (2.0) (1.4) (3.4)
----- ----- ------
Balance March 31, 2002 $ 11.8 $ 8.5 $ 20.3
===== ===== ======
12
Financial Condition
- -------------------
Cash, cash equivalents and short-term investments totaled $34.9 million at March
31, 2002. Working capital, at March 31, 2002 was $330.4 million compared to
$336.1 million at December 31, 2001. Gross additions to property, plant and
equipment during the first three months of 2002 were $19.6 million.
At March 31, 2002, the Company's outstanding commercial paper had an average
interest rate of 2.34%. Commercial paper maturities did not extend beyond May 3,
2002. Bank borrowings were $27.3 million and long-term debt, including $4.5
million related to the interest rate swaps totaled $930.7 million. The weighted
average interest rate on total borrowings was 3.7%.
In January 2002, the Company paid a quarterly cash dividend of $.15 per share to
shareholders. This amount is unchanged from the 2001 dividend. The Company
repurchased approximately 0.6 million shares in the first quarter 2002.
Repurchases will be made from time to time on the open market or through private
transactions as market and business conditions warrant. The repurchased shares
will be available for use in connection with the Company's employee benefit
plans and for other general corporate purposes. At March 31, 2002, the Company
had approximately $53.0 million authorized under its September 2000 repurchase
plan.
The Company anticipates that its financing requirements will be funded from
internal sources and credit facilities currently in place.
Cautionary Statement Under the Private Securities Litigation Reform Act of 1995
- -------------------------------------------------------------------------------
Statements in this Management's Discussion and Analysis which are not historical
facts or information are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, and are subject to risks and
uncertainties that could cause the Company's actual results to differ materially
from those expressed or implied by such forward-looking statements. Risks and
uncertainties with respect to the Company's business include general economic
and business conditions, interest rates, the price and availability of raw
materials, and political and economic uncertainties, including the fluctuation
or devaluation of currencies in countries in which the Company does business.
The Company intends its forward-looking statements to speak only as of the time
of such statements, and does not undertake to update or revise them as more
information becomes available.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
- ------------------------------------------------------------------
There are no material changes from the disclosures in Form 10-K filed with the
Securities and Exchange Commission as of December 31, 2001.
13
PART II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
--------
99(a) International Flavors & Fragrances Inc. Board of Directors
Corporate Governance Guidelines adopted by the Board of
Directors of the Company on May 7, 2002.
99(b) International Flavors & Fragrances Inc. Charter of the
Nominating and Governance Committee of the Board of
Directors adopted by the Board of Directors of the Company
on May 7, 2002.
99(c) International Flavors & Fragrances Inc. Charter of the
Compensation Committee of the Board of Directors adopted by
the Board of Directors of the Company on May 7, 2002.
99(d) International Flavors & Fragrances Inc. Charter of the
Executive Committee of the Board of Directors adopted by the
Board of Directors of the Company on May 7, 2002.
(b) Reports on Form 8-K
-------------------
Registrant filed the following reports on Form 8-K since the beginning
of the quarter for which this report on Form 10-Q is filed:
. Report on Form 8-K dated April 24, 2002 containing a
description of, and certain unaudited pro-forma financial
statements relating to, the reorganization of Registrant's
geographic reporting regions effective January 1, 2002,
businesses disposed of during 2001 and the effects of
adopting FAS 142, Goodwill and Other Intangible Assets.
14
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 10, 2002 By: /S/ DOUGLAS J. WETMORE
-----------------------------------------
Douglas J. Wetmore, Senior Vice President
and Chief Financial Officer
Dated: May 10, 2002 By: /S/ STEPHEN A. BLOCK
-----------------------------------------
Stephen A. Block, Senior Vice President,
General Counsel and Secretary
Exhibit Index
- -------------
Number Description
- ------ -----------
99(a) International Flavors & Fragrances Inc. Board of Directors Corporate
Governance Guidelines adopted by the Board of Directors of the Company
on May 7, 2002
99(b) International Flavors & Fragrances Inc. Charter of the Nominating and
Governance Committee of the Board of Directors adopted by the Board of
Directors of the Company on May 7, 2002
99(c) International Flavors & Fragrances Inc. Charter of the Compensation
Committee of the Board of Directors adopted by the Board of Directors
of the Company on May 7, 2002
99(d) International Flavors & Fragrances Inc. Charter of the Executive
Committee of the Board of Directors adopted by the Board of Directors
of the Company on May 7, 2002
Exhibit 99(a)
-------------
INTERNATIONAL FLAVORS & FRAGRANCES INC.
BOARD OF DIRECTORS
CORPORATE GOVERNANCE GUIDELINES
-------------------------------
(as adopted May 7, 2002)
1. Role of the Board
The Board of Directors (the "Board") of International Flavors & Fragrances Inc.
(together with its subsidiaries, the "Company") represents the interests of the
Company's shareholders in maintaining and enhancing the success of the Company's
business, including optimizing long-term returns to increase shareholder value.
The Board has responsibility for overseeing the management of the Company. In
fulfilling this obligation the Board regularly monitors the development and
execution of management's strategies and the effectiveness of its policies and
decisions, including the identification and evaluation of its strengths,
weaknesses, opportunities and risks.
In addition to its duty to the Company's shareholders, the Board also considers
the interests of the Company's other stakeholders, including customers,
employees and suppliers and the communities in which the Company operates, all
of whom are essential to the success of the Company's business. The Board
fulfills these responsibilities by overseeing the successful perpetuation of the
Company's business.
2. Board Membership Criteria
The Nominating and Governance Committee, with the input of the Chief Executive
Officer, is responsible for recommending to the Board (a) nominees for Board
membership to fill vacancies or newly created positions and (b) the persons to
be nominated by the Board for election by shareholders at the Company's Annual
Meeting of Shareholders. The Nominating and Governance Committee and the Board
also consider recommendations made by shareholders. In connection with the
selection process, and at least on an annual basis, the Nominating and
Governance Committee reviews the desired experience, mix of skills and other
qualities to assure appropriate Board composition, taking into account the
current Board members and the specific needs of the Company and the Board. This
process is designed to assure that the Board includes members with diverse
backgrounds, skills and experience, including appropriate technical and
financial expertise relevant to the business of the Company. Each Director is
required to notify the Chair of the Nominating and Governance Committee of
changes in his or her status. The Nominating and Governance Committee is
responsible for facilitating Board discussion and dialogue with respect to these
matters.
3. Director Independence
It is the Board's policy that the members of the Board other than the Chief
Executive Officer and up to one other director be "Independent." For this
purpose a Director is deemed to be "Independent" if he or she: (a) is not and
has not been employed by the Company; (b) is not (and is not affiliated with a
company or firm that is) a significant advisor or consultant to the Company; (c)
is not affiliated with a significant customer or supplier of the Company; (d)
does not have significant personal services contract(s) with the Company; (e) is
not affiliated with a tax-exempt entity that has received significant
contributions from the Company; and (f) receives no compensation from the
Company other than as a Director.
It is also Board policy that interlocking directorates--where an officer of the
Company serves on the board of a company an executive of which serves on the
Board--should be discouraged. In addition, as a general rule, former executives
of the Company should not serve on the Board.
4. Selection of the Chair of the Board and Chief Executive Officer
The Board is free to choose its Chair in any way that seems best for the Company
at any time. As a result, the Board does not have a policy that requires the
roles of Chair of the Board and Chief Executive Officer should be separate and,
if the Board determines at any time that they should be separate, whether the
Chair of the Board should be selected from the non-employee directors or be an
employee of the Company.
5. Board Size
To ensure independence and to provide the breadth of needed expertise and
diversity on the Board, the Board is to be comprised of between 7 and 12
members. Directors are selected on the basis of their qualifications and the
needs of the Company. The Board periodically reviews its size and makes
appropriate adjustments.
6. Term Limits/Mandatory Retirement
The Board does not believe that it should establish term limits for Directors.
Although term limits can promote the inclusion on the Board of people with new
perspectives, the process described in Section 2 can achieve the same result.
Moreover, term limits have the disadvantage of arbitrarily causing the Company
to lose the contributions of Directors who have been able to develop, over a
period of time, increasing insight into the Company and its operations, thereby
increasing their contributions to the Board and the Company.
The Board has determined, however, that Directors must retire at the Annual
Meeting of Shareholders following their 72nd birthdays.
The Board does not believe that non-employee Directors who retire or change the
positions they held when they became members of the Board should necessarily
leave the Board. In that event, the Nominating and Governance Committee will
review the continued appropriateness of Board membership and the affected
Director will be requested and expected to act in accordance with the Nominating
and Governance Committee's recommendation.
2
7. Executive Sessions of Independent Directors
The Independent Directors of the Board meet in Executive Session at such times
as they may determine. The Chair of any Board Committee may call such a meeting
if he or she concludes it is appropriate. The Chair of the Committee calling the
meeting is responsible for developing the agenda and chairing such session of
the Independent Directors.
8. Board Meetings and Agendas
The Chairman of the Board establishes the agenda for each Board Meeting. Each
Board member is free to suggest the inclusion of item(s) on the agenda. The
Board meets at least six times each year.
9. Board Materials and Presentations
Information that is important to the Board's understanding of the business to be
conducted at the meeting should be distributed in writing or electronically to
the Board before each Board meeting. In addition, presentations on specific
subjects should generally be sent to Directors in advance to allow Directors to
familiarize themselves with the subject matter before the Board meeting, thus
conserving Board meeting time and allowing discussion time to focus on questions
that the Directors have about the matters that are the subject of the
presentations.
10. Attendance of Non-Directors at Board Meetings
It is Board policy that executive officers and other members of senior
management who report directly to the Chief Executive Officer be present at
Board meetings. The Board encourages such executive officers and senior
management to cause to make presentations, or to include in discussions at Board
meetings managers and other employees who (a) can provide insight into the
matters being discussed because of their functional expertise and/or personal
involvement in such matters, and/or (b) are individuals with high potential whom
such executive officers and senior management believe the Directors should meet
and have the opportunity to evaluate.
11. Number, Structure and Independence of Committees
The current Committees of the Board are the Executive Committee, the Nominating
and Governance Committee, the Audit Committee and the Compensation Committee.
The Board evaluates and determines the circumstances under which to form new
Committees. Committee membership consists only of Independent Directors, except
that (a) in all cases the Chairman of the Board is a member of the Executive
Committee, and (b) in appropriate circumstances the Board may determine
otherwise. The Chief Executive Officer recommends the Chairs of Board Committees
to the Nominating and Governance Committee, which, after consideration of such
recommendations, makes recommendations for approval by the Board.
3
12. Rotation and Assignment of Committee Members
It is the sense of the Board that consideration should be given to rotating
Committee Chairs and members periodically at approximately five-year intervals,
except where a Director's specific expertise or the requirements of applicable
rules or regulations of the Internal Revenue Service, the United States
Securities and Exchange Commission or any exchange on which shares of the common
stock of the Company are traded require otherwise. Notwithstanding the
foregoing, the Board has not made rotation a mandated policy since circumstances
may warrant a Director's serving on a Committee for a different period.
13. Committee Meeting Frequency, Length and Agenda
Unless otherwise provided in the Charter of a Committee, each Committee Chair,
in consultation with his or her Committee's members, determines the frequency
and length of the meetings of the Committee. The Chair of the Committee, in
consultation with appropriate members of management, develops the Committee's
agenda. Each Committee periodically reports to the full Board on its actions and
recommendations.
14. Internal Controls
The Board has overall responsibility for overseeing management's reporting of
operating and other results of the Company. In order effectively to fulfill this
responsibility the Board, through the Audit Committee, monitors the
effectiveness of the Company's financial and reporting systems and internal
controls. Senior management of the Company, with the review of the Audit
Committee and the Board, is responsible for the design of systems and controls
that provide reasonable assurance against material misstatement or loss. These
systems and controls are intended to enable the timely identification of
problems that require the attention of senior management, the Audit Committee
and/or the Board.
The performance of the Company is monitored through annual operating and capital
budgets established by management and reviewed by the Board. Management also
provides reports to the Audit Committee on a basis established by the Audit
Committee with respect to issues affecting the Company in areas such as legal
and regulatory compliance and tax matters. The Company's independent accountants
review and test the Company's systems and controls to the extent necessary to
render opinions on the Company's financial statements.
15. Evaluation of Board Performance
The Board assesses its performance periodically but no less than biennially.
This assessment includes an evaluation of the Board's performance as a whole and
with respect to specific areas that the Board and/or senior management has
previously identified. The Board's assessment is designed to increase the
effectiveness of the Board. The Nominating and Governance Committee is
responsible for establishing procedures for conducting this evaluation.
4
16. Evaluation of Committee Performance
Each Committee should annually assess its performance to confirm that it is
meeting its responsibilities under its Charter. In this review, the Committee
should consider, among other things, (a) the appropriateness of the scope and
content of its Charter, (b) the appropriateness of matters presented for
information and approval, (c) the sufficiency of time for consideration of
agenda items, (d) frequency and length of meetings, and (f) the quality of
written materials and presentations.
17. Board Compensation
In order to align the interests of the Directors and the shareholders of the
Company, a meaningful portion of each Director's compensation should be provided
in shares of common stock of the Company. The Board believes that management is
an effective monitor of trends and changes in board compensation practices, and
thus management presents recommendations for changes in Board compensation to
the Nominating and Governance and Compensation Committees. Either management or
either of such Committees may retain an experienced independent compensation
consultant to assist it in developing or evaluating management recommendations.
Changes in Board compensation are recommended to the Board by the Compensation
Committee and may only take place after full discussion and concurrence by the
Board. Only non-employee Directors receive payment for Board service.
18. Board Relationship with/Access to Management
The management of the business of the Company is conducted by or under the
supervision of the Chief Executive Officer. In order for the Board to fulfill
its oversight responsibilities, Directors have access to the Company's
management, including the Chief Executive Officer, and to information about the
operations and business of the Company.
19. Board Communication with Third Parties
The Board believes that management speaks for the Company. Directors receiving
inquiries from third parties with respect to the business or activities of the
Company are to refer them to the Chief Executive Officer or his designee.
20. Evaluation of the Chief Executive Officer
The Independent Directors evaluate the Chief Executive Officer annually. The
Nominating and Governance Committee establishes the procedure to be used each
year for such evaluation. That process includes a self-assessment written by the
Chief Executive Officer and provided to all of the Independent Directors as part
of their evaluation. The Independent Directors' evaluation is based on objective
criteria including the performance of the business, accomplishment of annual and
long-term strategic objectives, development of management, and other criteria
established by the Independent Directors and communicated to the Chief Executive
Officer at or near the beginning of the period being evaluated. The Chairs of
the Nominating and Governance and Compensation Committees communicate the
results of the evaluation to the Chief Executive
5
Officer. The Compensation Committee uses the completed evaluation when
considering the compensation of the Chief Executive Officer.
21. Succession Planning/Management Development
The Chief Executive Officer submits reports to the Board at least annually on
succession planning and management development, particularly with respect to the
executive officers and other senior managers who report to him or her. The Chief
Executive Officer should at all times have identified to the Board a recommended
successor should the Chief Executive Officer be unable to fulfill his or her
responsibilities. The selection of the Chief Executive is the responsibility of
the Independent Directors based on a procedure, including a succession plan,
developed and recommended to the Board by the Nominating and Governance
Committee.
22. Oversight of the Board
The Board is responsible for assuring that it complies with, and performs its
duties in accordance with, the foregoing Guidelines. The Nominating and
Governance Committee reviews these Guidelines annually and makes any suggested
changes to the Independent Directors, who consider such recommendations and make
such changes as they deem appropriate.
6
Exhibit 99(b)
-------------
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CHARTER OF THE NOMINATING AND GOVERNANCE COMMITTEE
OF THE BOARD OF DIRECTORS
-------------------------
(as adopted May 7, 2002)
1. Purpose.
The Nominating and Governance Committee (the "Committee") of the Board of
Directors (the "Board") of International Flavors & Fragrances Inc. (together
with its subsidiaries, the "Company") is responsible for (i) assisting the Board
in determining the desired experience, mix of skills and other qualities to
assure appropriate Board composition, taking into account the current Board
members and the specific needs of the Company and the Board; (ii) identifying
highly qualified individuals meeting those criteria to serve on the Board; (iii)
proposing to the Board a slate of nominees for election by the shareholders at
the Annual Meeting of Shareholders and prospective director candidates in the
event of the resignation, death or retirement of directors or a change in Board
composition requirements; (iv) reviewing candidates recommended by shareholders
for election to the Board; (v) developing plans regarding the size and
composition of the Board and its Committees; (vi) reviewing management
succession plans; and (vii) monitoring and making recommendations to the Board
with respect to corporate governance issues.
In performing its duties, the Committee maintains effective working
relationships with the Board and the Company's management.
2. Membership.
The Committee is comprised of at least three members, including a Chair, all of
whom are "Independent Directors", as defined in the Board's Corporate Governance
Guidelines, and selected by and serve at the pleasure of the Board. The Board
may designate one or more Directors as alternate members of the Committee, who
may replace any absent or disqualified member or members at any meetings of the
Committee. No person may be made a member of the Committee if his or her service
on the Committee would violate any restriction on service imposed by any rule or
regulation of the United States Securities and Exchange Commission or any
exchange on which shares of the common stock of the Company are traded.
3. Meetings.
The Committee meets as necessary, but at least once each year, to enable it to
fulfill its responsibilities. The Committee may ask members of management or
others whose advice and counsel are relevant to the issues then being considered
by the Committee, to attend any meetings and to provide such pertinent
information as the Committee may request. The
Committee reports its actions to the Board, and keeps written minutes of its
meetings, and the minutes are recorded or filed with the books and records of
the Company.
4. Committee Responsibilities.
The Committee has the following responsibilities:
Board Candidates and Nominees
a. To develop criteria for the selection of new directors and nominees
for vacancies on the Board, including procedures for reviewing
potential nominees proposed by shareholders;
b. To review with the Board the desired experience, mix of skills and
other qualities to assure appropriate Board composition, taking into
account the current Board members and the specific needs of the
Company and the Board;
c. with the input of the Chief Executive Officer, to recommend to the
Board qualified candidates for the Board who bring the backgrounds,
knowledge, experience, skill sets and expertise that would strengthen
and increase the diversity of the Board;
d. To review the suitability for continued service as a Director of each
Board member when he or she has a significant change in status, such
as an employment change, and recommending whether or not the Director
should be re-nominated;
e. To review and consider the compensation and benefits of Directors who
are not employees of the Company and to recommend to the Compensation
Committee any changes that the Committee deems appropriate;
f. To consider the recommendations of the Chief Executive Officer for the
appointment of the other executive officers, including any
replacements between annual appointment dates, and to recommend to the
Board the appointment of the executive officers other than the Chief
Executive Officer; and
g. To work with senior management to provide an orientation and education
program for Directors.
Board and Committees
a. To review periodically the size of the Board and recommend to the
Board changes as appropriate;
b. To establish and review policies pertaining to the roles,
responsibilities, retirement age, tenure and removal of directors;
c. To review periodically, with the participation of the Chief Executive
Officer, all Board Committees and recommend to the Board changes, as
appropriate, in the number, responsibilities, membership and Chairs of
the Committees; and
d. To recommend that the Board establish such special committees as may
be necessary or appropriate to address ethical, legal or other matters
that may arise.
2
Board and Chief Executive Officer Evaluation and Management Development
a. To develop and review periodically a process for and to conduct, not
less frequently than biennially, an evaluation of the effectiveness of
the Board as a whole;
b. To develop and review periodically a process for an annual evaluation
by the Board of the performance of the Chief Executive Officer and to
have the Committee Chair review with the Chief Executive Officer,
together with the Chair of the Compensation Committee, the results of
the Board evaluation of the performance of the Chief Executive
Officer;.
c. To review the Company's management development program to help assure
proper management succession planning; and
d. To review the Chief Executive Officer's recommendations, and to make
recommendations to the Board, for elected officer positions.
Corporate Governance
To review periodically the Company's Corporate Governance Guidelines
to assure that they reflect best practices and are appropriate for the
Company, and to assist the Board in achieving such best practices.
The Committee annually assesses its performance to confirm that it is meeting
its responsibilities under this Charter. In this review, the Committee
considers, among other things, (a) the appropriateness of the scope and content
of this Charter, (b) the appropriateness of matters presented for information
and approval, (c) the sufficiency of time for consideration of agenda items, (d)
frequency and length of meetings, and (f) the quality of written materials and
presentations. The Committee recommends to the Board such changes to this
Charter as the Committee deems appropriate.
5. Investigations and Studies.
The Committee may conduct or authorize investigations into or studies of matters
within the Committee's scope of responsibilities as described above, and may
retain, at the expense of the Company, independent counsel or other consultants
necessary to assist in any such investigation or study.
3
Exhibit 99(c)
-------------
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CHARTER OF
THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
----------------------------------------------------
(as adopted May 7, 2002)
1. Purpose.
The Compensation Committee (the "Committee") of the Board of Directors (the
"Board") of International Flavors & Fragrances Inc. (together with its
subsidiaries, the "Company") assists the Board in ensuring that a proper system
of long-term and short-term compensation is in place to provide
performance-oriented incentives to management, and that compensation plans are
appropriate and competitive and properly reflect the objectives and performance
of management and the Company. In performing its duties, the Committee maintains
effective working relationships with the Board and the Company's management.
2. Membership.
The Committee is comprised of at least three members, including a Chair, all of
whom are selected by, and who serve at the pleasure of, the Board. All members
of the Committee must qualify as "non-employee" directors within the meaning of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended and must meet
the "outside director" requirements of Section 162(m) of the Internal Revenue
Code of 1986, as amended, and the regulations thereunder. In addition, no person
may be made a member of the Committee if his or her service on the Committee
would violate any restriction on service imposed by any rule or regulation of
any exchange on which shares of the common stock of the Company are traded.
3. Meetings.
The Committee meets at least four times each year and more frequently if
circumstances warrant. The Committee may ask members of management or others
whose advice and counsel are relevant to the issues then being considered by the
Committee to attend any meetings and to provide such pertinent information as
the Committee may request. The Committee keeps written minutes of its meetings,
and the minutes are recorded or filed with the books and records of the Company.
4. Committee Responsibilities.
The Committee has responsibility for oversight of the determination,
implementation and administration of remuneration, including compensation,
benefits and perquisites, of all executive officers and other members of senior
management whose remuneration is the
responsibility of the Board under the Company's global authorization limits or
whose remuneration the Chief Executive Officer requests the Committee to review
and affirm. Such responsibility includes:
a. To review and to make periodic recommendations to the Board as to the
general compensation and benefits policies and practices of the
Company;
b. To review and adopt, and to recommend for Board and /or shareholder
approval where required by applicable law, the Certificate of
Incorporation, as amended, of the Company, or the Board's Corporate
Governance Guidelines, compensation and benefits policies, plans and
programs and amendments thereto, determining eligible employees and
the type, amount and timing of such compensation and benefits;
c. To oversee the administration of such policies, plans and programs
and, on an ongoing basis to monitor them to assure that they remain
competitive and within the Board's compensation objectives for
executive officers and such other members of senior management;
d. To review and affirm contractual employment and compensation
arrangements with executive officers and other members of senior
management who are the responsibility of the Board under the Company's
global authorization limits or whose compensation the Chief Executive
Officer requests the Committee to review and affirm;
e. Pursuant to the procedure established by the Nominating and Governance
Committee, and after completion of the annual Chief Executive Officer
performance evaluation by the Board, to have the Committee Chair,
together with the Chair of the Nominating and Governance Committee,
review with the Chief Executive Officer the results of the Board
evaluation of the performance of the Chief Executive Officer;
f. To review and to make recommendations to the Board at least annually
with respect to the base salary and annual and long-term incentive
compensation of (i) the Chief Executive Officer, after taking into
account the annual evaluation of the Chief Executive Officer referred
to in clause e. above, and (ii) (upon the recommendation of the Chief
Executive Officer) the other executive officers and other members of
senior management who are the responsibility of the Board under the
Company's global authorization limits or whose compensation the Chief
Executive Officer requests the Committee to review and affirm;
g. To report annually to the shareholders of the Company in accordance
with the rules and regulations of the United States Securities and
Exchange Commission;
h. To review and consider recommendations from the Nominating and
Governance Committee with respect to the compensation and benefits of
Directors who are not employees of the Company and to recommend any
changes to the Board that the Committee deems appropriate; and
i. To perform such other duties as the Board may assign to the Committee.
In discharging the foregoing responsibilities, the Committee considers, as
appropriate and as contemplated by Company policies, plans and programs,
individual, team, business unit, regional and Company-wide performance against
applicable pre-established annual and long-term
2
performance goals, results taking into account economic and business conditions,
and comparative/competitive compensation and benefit performance levels.
The Committee annually assesses its performance to confirm that it is meeting
its responsibilities under this Charter. In this review, the Committee
considers, among other things, (a) the appropriateness of the scope and content
of this Charter, (b) the appropriateness of matters presented for information
and approval, (c) the sufficiency of time for consideration of agenda items, (d)
frequency and length of meetings, and (e) the quality of written materials and
presentations. The Committee recommends to the Board such changes to this
Charter as the Committee deems appropriate.
5. Surveys Investigations and Studies.
The Committee may conduct or authorize investigations into or studies of matters
within the Committee's scope of responsibilities as described above, including
but not limited to surveys and compensation practices in relevant industries to
maintain the Company's competitiveness and ability to recruit and retain highly
qualified personnel, and may retain, at the expense of the Company, independent
counsel or other consultants necessary to assist in any such investigation or
study. The Committee must, not less frequently than biennially, conduct, with
the assistance of an experienced independent compensation consultant, a survey
of comparative/competitive executive officer compensation.
3
Exhibit 99(d)
-------------
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CHARTER OF
THE EXECUTIVE COMMITTEE OF THE BOARD OF DIRECTORS
-------------------------------------------------
(as adopted May 7, 2002)
1. Purpose.
The Executive Committee (the "Committee") of the Board of Directors (the
"Board") of International Flavors & Fragrances Inc. (together with its
subsidiaries the "Company") may exercise all of the powers of the Board when
such action is required to be taken between regular meetings of the Board and
time is of the essence, as a result of which it is not practicable to convene a
Special Meeting of the Board. Notwithstanding the foregoing, the Executive
Committee may not exercise any power of the Board if applicable law, the
Certificate of Incorporation or the By-laws of the Company or any of the
provisions of this Charter prohibit the exercise of such power.
2. Membership.
The Committee is comprised of the Chairman and Chief Executive Officer, who is
Chair of the Committee, and the Chairs of each of the standing Committees of the
Board, currently the Audit Committee, the Compensation Committee and the
Nominating and Governance Committee. The Board may designate one or more
Directors as alternate members of the Committee, who may replace any absent or
disqualified member or members at any meetings of the Committee. No person may
be a member of the Committee if his or her service on the Committee would
violate any restriction on service imposed by any rule or regulation of the
United States Securities and Exchange Commission or any exchange on which shares
of the common stock of the Company are traded.
3. Meetings.
The Committee meets at such times as is necessary to fulfill the Committee's
purpose. Committee meetings are convened by the Chair of the Committee, in
consultation with Committee members. The Committee may ask members of
management, or others whose advice and counsel are relevant to the issues then
being considered by the Committee, to attend any meeting and to provide such
pertinent information as the Committee may request. The Committee keeps written
minutes of its meetings, and the minutes are recorded or filed with the books
and records of the Company.
4. Committee Responsibilities.
The Committee has all the authority of the Board; provided, however, that the
Committee does not have authority with respect to the following matters:
a. The submission to shareholders of the Company of any matter requiring
shareholder approval under the New York Business Corporation Law;
b. The filling of vacancies in the Board of Directors or in any
Committee;
c. The fixing of compensation of the Directors for serving on the Board
or on any Committee;
d. The amendment or repeal of any By-law, or the adoption of any new
By-law; or
e. The amendment or repeal of any resolution of the Board that by its
terms is not so amendable or repealable.
The Committee reviews this Charter not less often than annually and recommends
to the Board such changes as the Committee deems appropriate.
5. Investigations and Studies.
The Committee may conduct or authorize investigations into or studies of matters
within the Committee's scope of responsibilities as described above, and may
retain, at the expense of the Company, independent counsel or other consultants
necessary to assist in any such investigation or study.
2
