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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 September 30, 1995 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 (IRS Employer
of incorporation 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 November 7, 1995: 110,966,260
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<PAGE>
1
PART. I FINANCIAL INFORMATION
Item 1. Financial Statements
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
9/30/95 12/31/94
------- --------
Assets
Current Assets:
Cash & Cash Equivalents ........................... $ 150,672 $ 230,581
Short-term Investments ............................ 134,696 71,227
Trade Receivables ................................. 287,788 228,434
Allowance For Doubtful Accounts ................... (8,368) (7,448)
Inventories: Raw Materials ....................... 237,516 211,071
Work in Process ..................... 29,104 25,600
Finished Goods ...................... 138,615 125,434
---------- ----------
Total Inventories ................... 405,235 362,105
Other Current Assets .............................. 77,695 79,587
---------- ----------
Total Current Assets .............................. 1,047,718 964,486
---------- ----------
Property, Plant & Equipment, At Cost ................. 811,621 736,912
Accumulated Depreciation ............................. (369,756) (331,182)
---------- ----------
441,865 405,730
Other Assets ......................................... 27,533 29,509
---------- ----------
Total Assets ......................................... $1,517,116 $1,399,725
========== ==========
Liabilities and Shareholders' Equity
Current Liabilities:
Bank Loans ........................................ $ 11,618 $ 9,740
Accounts Payable-Trade ............................ 55,055 56,861
Dividends Payable ................................. 34,402 34,554
Income Taxes ...................................... 75,849 70,505
Other Current Liabilities ......................... 83,982 88,063
---------- ----------
Total Current Liabilities ......................... 260,906 259,723
---------- ----------
Other Liabilities:
Deferred Income Taxes ............................. 11,751 14,350
Long-term Debt .................................... 12,089 14,342
Other ............................................. 111,938 103,231
---------- ----------
Total Other Liabilities .............................. 135,778 131,923
---------- ----------
Shareholders' Equity:
Common Stock (115,761,840 shares issued in '95
and in '94) ...................................... 14,470 14,470
Capital in Excess of Par Value .................... 143,324 146,022
Retained Earnings ................................. 1,067,337 961,847
Cumulative Translation Adjustment ................. 78,452 41,798
---------- ----------
1,303,583 1,164,137
Treasury Stock, at cost - 4,787,180 shares in '95
and 4,297,540 in '94 ....................... (183,151) (156,058)
---------- ----------
Total Shareholders' Equity ........................ 1,120,432 1,008,079
---------- ----------
Total Liabilities and Shareholders' Equity ........... $1,517,116 $1,399,725
========== ==========
See Notes to Consolidated Financial Statements
<PAGE>
2
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands except per share amounts)
3 Months Ended 9/30
----------------------
1995 1994
---------- ----------
Net Sales ........................................... $ 360,083 $ 341,684
---------- ----------
Cost of Goods Sold .................................. 186,705 176,565
Research and Development Expenses ................... 22,741 20,501
Selling and Administrative Expenses ................. 52,671 52,632
Interest Expense .................................... 932 1,359
Other (Income) Expense, Net ......................... (2,617) (3,322)
---------- ----------
260,432 247,735
---------- ----------
Income Before Taxes on Income ....................... 99,651 93,949
Taxes on Income ..................................... 36,325 35,043
---------- ----------
Net income .......................................... $ 63,326 $ 58,906
========== ==========
Earnings Per Share .................................. $ 0.57 $ 0.53
Dividends Paid Per Share ............................ $ 0.31 $ 0.27
9 Months Ended 9/30
-----------------------
1995 1994
---------- ----------
Net Sales ........................................... $1,127,983 $1,010,431
---------- ----------
Cost of Goods Sold .................................. 575,400 515,792
Research and Development Expenses ................... 67,611 59,777
Selling and Administrative Expenses ................. 161,836 151,593
Interest Expense .................................... 2,544 12,903
Other (Income) Expense, Net ......................... (10,151) (21,132)
---------- ----------
797,240 718,933
---------- ----------
Income Before Taxes on Income ....................... 330,743 291,498
Taxes on Income ..................................... 121,759 108,735
---------- ----------
Net income .......................................... $ 208,984 $ 182,763
========== ==========
Earnings Per Share .................................. $ 1.88 $ 1.64
Dividends Paid Per Share ............................ $ 0.93 $ 0.81
Average Number of Shares Outstanding (000's) ........ 111,359 111,553
See Notes to Consolidated Financial Statements
<PAGE>
3
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
9 Months Ended 9/30
----------------------
1995 1994
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income ................................................. $ 208,984 $ 182,763
Adjustments to Reconcile to Net Cash
Provided by Operations:
Depreciation ......................................... 31,070 26,689
Deferred Income Taxes ................................ 6,581 1,567
Changes in Assets and Liabilities:
Current Receivables ............................... (51,687) (53,360)
Inventories ....................................... (33,568) (27,185)
Current Payables .................................. (4,793) 40,739
Other, Net ....................................... 671 (2,309)
--------- ---------
Net Cash Provided by Operations ............................ 157,258 168,904
--------- ---------
Cash Flows From Investing Activities:
Proceeds From Sales/Maturities of Short-Term Investments ... 69,861 103,443
Purchases of Short-Term Investments ........................ (130,780) (68,679)
Additions to Property, Plant & Equipment,
Net of Minor Disposals ................................. (56,079) (73,535)
--------- ---------
Net Cash Used in Investing Activities ...................... (116,998) (38,771)
--------- ---------
Cash Flows From Financing Activities:
Cash Dividends Paid to Shareholders ........................ (103,637) (90,432)
Increase (Decrease) in Bank Loans .......................... 1,641 (21,132)
Increase (Decrease) in Long-Term Debt ...................... (2,423) 12,622
Proceeds From Issuance of Stock Under Stock Option Plans ... 6,812 4,954
Purchase of Treasury Stock ................................. (36,949) (32,433)
--------- ---------
Net Cash Used In Financing Activities ...................... (134,556) (126,421)
--------- ---------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents ................................... 14,387 13,482
--------- ---------
Net Change in Cash and Cash Equivalents .................... (79,909) 17,194
Cash and Cash Equivalents at Beginning of Year ............. 230,581 187,205
--------- ---------
Cash and Cash Equivalents at End of Period ................. $ 150,672 $ 204,399
========= =========
Interest Paid .............................................. $ 3,105 $ 13,172
Income Taxes Paid .......................................... $ 109,398 $ 88,924
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
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 third quarter of 1995 increased 5% over the prior
year to $360,083,000. For the first nine months of 1995, net sales increased 12%
over the prior year to $1,127,983,000. Sales increases were recorded in flavor
and fragrance products in both the third quarter and nine month periods. The
sales increase in the third quarter and the first nine months of 1995 was
favorably affected by translating stronger foreign currencies into the U.S.
dollar.
Net income for the third quarter of 1995 was $63,326,000, an increase of 8% from
the 1994 third quarter. Net income for the first nine months of 1995 was
$208,984,000, an increase of 14% 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 third quarter and first nine months
in 1995 were $.57 and $1.88, as compared to $.53 and $1.64 in the prior year
quarter and nine month periods, respectively.
The percentage relationship of cost of goods sold and other operating expenses
to sales for the first nine months of 1995 and 1994 remained fairly constant,
especially on an overall basis.
First Nine Months
-----------------
1995 1994
----- -----
Cost of Goods Sold ..................... 51.0% 51.0%
Research and Development Expense ....... 6.0% 5.9%
Selling and Administrative Expense ..... 14.3% 15.0%
Interest expense was $932,000 for the third quarter of 1995, compared to
$1,359,000 for the third quarter 1994. For the first nine months of 1995,
interest expense amounted to $2,544,000 compared to $12,903,000 in the first
nine 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 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 was $2,617,000 for the third quarter 1995, and $10,151,000 for the first
<PAGE>
5
nine months of 1995, compared to $3,322,000 and $21,132,000 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 third quarter and first nine months of 1995 were
36.5% and 36.8%, 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 third
quarter. Cash, cash equivalents and short-term investments totaled $285,368,000
at September 30, 1995. At September 30, 1995, working capital was $786,812,000
compared to $704,763,000 at December 31, 1994. Gross additions to property,
plant and equipment during the first nine months of 1995 were $57,080,000. 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 each of the
first three quarters of 1995. 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
September 30, 1995 was $78,452,000 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.
<PAGE>
6
PART II. OTHER INFORMATION
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.
<PAGE>
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: November 10, 1995 By:____________________________________________
Thomas H. Hoppel, Vice-President & Treasurer
Dated: November 10, 1995 By:____________________________________________
Stephen A. Block, Vice-President Law
and Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
Consolidated Balance Sheet & Consolidated Statement of Income and is qualified
in its entirety by reference to such financial statements. Amounts in thousands
of dollars, except per share amounts.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 150,672
<SECURITIES> 134,696
<RECEIVABLES> 287,788
<ALLOWANCES> (8,368)
<INVENTORY> 405,235
<CURRENT-ASSETS> 1,047,718
<PP&E> 811,621
<DEPRECIATION> (369,756)
<TOTAL-ASSETS> 1,517,116
<CURRENT-LIABILITIES> 260,906
<BONDS> 12,089
<COMMON> 14,470
0
0
<OTHER-SE> 1,105,962
<TOTAL-LIABILITY-AND-EQUITY> 1,517,116
<SALES> 1,127,983
<TOTAL-REVENUES> 1,127,983
<CGS> 575,400
<TOTAL-COSTS> 804,847
<OTHER-EXPENSES> (10,151)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,544
<INCOME-PRETAX> 330,743
<INCOME-TAX> 121,759
<INCOME-CONTINUING> 208,984
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 208,984
<EPS-PRIMARY> $1.88
<EPS-DILUTED> $1.88
</TABLE>
