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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1998
Commission file number 1-4858
INTERNATIONAL FLAVORS & FRAGRANCES INC.
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(Exact Name of Registrant as specified in its charter)
NEW YORK 13-1432060
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(State or other jurisdiction of (IRS Employer
incorporation 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 November 6, 1998: 106,107,545
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1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
9/30/98 12/31/97
----------- -----------
<S> <C> <C>
Assets
Current Assets:
Cash & Cash Equivalents $ 142,138 $ 216,994
Short-term Investments 912 43,452
Trade Receivables 296,461 242,791
Allowance For Doubtful Accounts (8,504) (8,101)
Inventories: Raw Materials 233,736 193,136
Work in Process 7,267 13,593
Finished Goods 161,074 153,345
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Total Inventories 402,077 360,074
Other Current Assets 67,184 80,249
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Total Current Assets 900,268 935,459
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Property, Plant & Equipment, At Cost 878,923 810,901
Accumulated Depreciation (404,155) (364,392)
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474,768 446,509
Other Assets 42,056 40,293
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Total Assets $ 1,417,092 $ 1,422,261
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities:
Bank Loans $ 28,572 $ 10,490
Accounts Payable-Trade 63,830 57,832
Dividends Payable 39,448 40,407
Income Taxes 59,929 56,070
Other Current Liabilities 106,006 100,062
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Total Current Liabilities 297,785 264,861
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Other Liabilities:
Deferred Income Taxes 23,102 23,139
Long-term Debt 3,131 5,114
Retirement and Other Liabilities 135,068 128,659
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Total Other Liabilities 161,301 156,912
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Shareholders' Equity:
Common Stock (115,761,840 shares issued) 14,470 14,470
Capital in Excess of Par Value 136,406 137,418
Restricted Stock (7,312) (9,000)
Retained Earnings 1,215,918 1,166,348
Accumulated Other Comprehensive Income:
Cumulative Translation Adjustment (13,468) (36,851)
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1,346,014 1,272,385
Treasury Stock, at cost - 9,388,545 shares in '98
and 6,630,911 in '97 (388,008) (271,897)
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Total Shareholders' Equity 958,006 1,000,488
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Total Liabilities and Shareholders' Equity $ 1,417,092 $ 1,422,261
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
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<TABLE>
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2
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
3 Months Ended 9/30
----------------------------
1998 1997
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<S> <C> <C>
Net Sales $349,846 $356,242
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Cost of Goods Sold 193,176 191,978
Research and Development Expenses 24,655 23,068
Selling and Administrative Expenses 58,256 54,913
Interest Expense 477 737
Other (Income) Expense, Net (1,447) (2,349)
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275,117 268,347
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Income Before Taxes on Income 74,729 87,895
Taxes on Income 24,480 31,180
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Net Income 50,249 56,715
Other Comprehensive Income:
Foreign Currency Translation Adjustments 38,661 (17,801)
-------- --------
Comprehensive Income $ 88,910 $ 38,914
======== ========
Earnings Per Share - Basic $0.47 $0.52
Earnings Per Share - Diluted $0.47 $0.52
Average Number of Shares Outstanding - Basic (000's) 106,872 109,113
Average Number of Shares Outstanding - Diluted (000's) 107,054 109,844
Dividends Paid Per Share $0.37 $0.36
<CAPTION>
9 Months Ended 9/30
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1998 1997
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<S> <C> <C>
Net Sales $1,088,510 $1,120,525
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Cost of Goods Sold 586,653 603,326
Research and Development Expenses 72,950 70,137
Selling and Administrative Expenses 176,149 168,244
Interest Expense 1,395 1,914
Other (Income) Expense, Net (6,303) (8,917)
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830,844 834,704
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Income Before Taxes on Income 257,666 285,821
Taxes on Income 88,884 102,553
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Net Income 168,782 183,268
Other Comprehensive Income:
Foreign Currency Translation Adjustments 23,383 (61,073)
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Comprehensive Income $ 192,165 $ 122,195
========== ==========
Earnings Per Share - Basic $1.57 $1.68
Earnings Per Share - Diluted $1.57 $1.67
Average Number of Shares Outstanding - Basic (000's) 107,507 109,113
Average Number of Shares Outstanding - Diluted (000's) 107,845 109,844
Dividends Paid Per Share $1.11 $1.08
</TABLE>
See Notes to Consolidated Financial Statements
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3
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
9 Months Ended 9/30
----------------------------
1998 1997
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<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 168,782 $ 183,268
Adjustments to Reconcile to Net Cash
Provided by Operations:
Depreciation 36,291 37,511
Deferred Income Taxes 5,350 2,285
Changes in Assets and Liabilities:
Current Receivables (39,841) (64,215)
Inventories (29,178) (8,489)
Current Payables 13,616 25,716
Other, Net 3,260 6,096
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Net Cash Provided by Operations 158,280 182,172
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Cash Flows From Investing Activities:
Proceeds From Sales/Maturities of Short-term Investments 41,896 17,691
Purchases of Short-term Investments 0 (8,341)
Additions to Property, Plant & Equipment,
Net of Minor Disposals (56,651) (37,101)
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Net Cash Used in Investing Activities (14,755) (27,751)
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Cash Flows From Financing Activities:
Cash Dividends Paid to Shareholders (120,171) (118,321)
Increase in Bank Loans 17,038 166
Decrease in Long-term Debt (1,888) (1,908)
Proceeds From Issuance of Stock Under Stock Option Plans 3,899 14,124
Purchase of Treasury Stock (121,022) (63,689)
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Net Cash Used in Financing Activities (222,144) (169,628)
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Effect of Exchange Rate Changes on Cash and Cash Equivalents 3,763 (12,704)
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Net Change in Cash and Cash Equivalents (74,856) (27,911)
Cash and Cash Equivalents at Beginning of Year 216,994 261,370
--------- ---------
Cash and Cash Equivalents at End of Period $ 142,138 $ 233,459
========= =========
Interest Paid $ 1,284 $ 1,814
Income Taxes Paid $ 75,243 $ 83,821
</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 1997 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.
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 (FAS 130), Reporting Comprehensive Income, which is effective
for both interim and annual periods ending after December 15, 1997. FAS 130
establishes standards for the reporting and display of comprehensive income and
its components, and requires that an enterprise classify items of other
comprehensive income by their nature in a financial statement, and display the
accumulated balance of other comprehensive income separately in the statement of
financial position. Taxes which would result from dividend distributions by
subsidiary companies are provided to the extent such dividends are anticipated;
no provision is made for additional taxes on undistributed earnings of
subsidiary companies which are intended to be permanently invested. As a result,
no income tax effect is attributable to the currency translation component of
Comprehensive Income. Prior year amounts have been reclassified for
comparability purposes.
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 131 (FAS 131), Disclosures about Segments of an Enterprise and
Related Information, which is effective for periods ending after December 15,
1997. This statement need not be applied to interim financial statements in the
initial year of application. FAS 131 establishes standards for the way public
business enterprises report information about operating segments in reports to
shareholders. The Company's 1998 Annual Report to Shareholders will reflect the
adoption of this standard.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (FAS 133), Accounting for Derivative
Instruments and Hedging Activities, which is effective for fiscal years
beginning after June 15, 1999. FAS 133 establishes accounting and reporting
standards for derivative instruments, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. The
Company is currently studying the implications of FAS 133.
As described in Note 2 of the Notes to the Consolidated Financial Statements
included in the Company's 1997 Annual Report to Shareholders, the Company
undertook a program to expand and streamline its aroma chemical production
facilities during 1996. The aroma chemical streamlining resulted in a
nonrecurring pretax charge to second quarter 1996 earnings of $49,707,000
($31,315,000 after tax or $.29 per share). Utilization of the reserve in 1998
and the remaining reserve balance at September 30, 1998 were as follows:
<PAGE>
5
BALANCE AT UTILIZED BALANCE AT
12/31/97 IN 1998 9/30/98
----------- ----------- -----------
Employee related $ 2,024,000 $ 1,288,000 $ 736,000
Closing manufacturing plants 15,978,000 10,853,000 5,125,000
----------- ----------- -----------
Total $18,002,000 $12,141,000 $ 5,861,000
=========== =========== ===========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
OPERATIONS
Worldwide net sales for the third quarter of 1998 were $349,846,000, compared to
$356,242,000 in the 1997 third quarter. For the first nine months of 1998, net
sales totaled $1,088,510,000, compared to $1,120,525,000 for the nine month
period in 1997. In the current quarter, the Company achieved solid growth in
fragrance sales in North America, and double-digit sales growth in Latin America
fragrances. North America flavor sales rebounded sharply with an 11% sales
increase. These strong sales gains, however, were not sufficient to offset the
effects of the ongoing economic slowdown in the Far East and economic
difficulties in Russia and Latin America; the economic difficulties in Latin
America primarily impacted flavor sales. As a result, local currency sales for
the third quarter, as well as the nine months, were flat with the previous year.
Net income for the third quarter of 1998 totaled $50,249,000 compared to
$56,715,000 in the prior year third quarter; net income for the first nine
months of 1998 totaled $168,782,000 compared to $183,268,000 for the comparable
1997 period. Basic and diluted earnings per share for the current quarter were
both $.47, compared to $.52 in the prior year third quarter. Basic and diluted
earnings per share for the first nine months of 1998 both totaled $1.57,
compared to $1.68 and $1.67, respectively, for the comparable 1997 period.
The percentage relationship of cost of goods sold and other operating expenses
to sales for the first half 1998 and 1997 are detailed below.
FIRST NINE MONTHS
-----------------------
1998 1997
---- ----
Cost of Goods Sold 53.9% 53.8%
Research and Development Expenses 6.7% 6.3%
Selling and Administrative Expenses 16.2% 15.0%
Cost of goods sold and Research and Development expenses, as a percentage of net
sales, remained comparable over the two periods. Selling and
Administrative expenses increased as a percentage of sales primarily due to
costs of the Company's Year 2000 program, as well as certain costs incurred in
connection with preparation for the conversion to the Euro currency, effective
January 1, 1999, and the Company's ongoing project to implement the enterprise
requirements planning ("ERP") software package, SAP.
<PAGE>
6
As described in Note 2 of the Notes to the Consolidated Financial Statements
included in the Company's 1997 Annual Report to Shareholders, the Company
undertook a program to expand and streamline its aroma chemical production
facilities during 1996. The aroma chemical streamlining resulted in a
nonrecurring pretax charge to second quarter 1996 earnings of $49,707,000
($31,315,000 after tax or $.29 per share). Utilization of the reserve in 1998
and the remaining reserve balance at September 30, 1998 were as follows:
BALANCE AT UTILIZED BALANCE AT
12/31/97 IN 1998 9/30/98
----------- ----------- -----------
Employee related $ 2,024,000 $ 1,288,000 $ 736,000
Closing manufacturing plants 15,978,000 10,853,000 5,125,000
----------- ----------- -----------
Total $18,002,000 $12,141,000 $ 5,861,000
=========== =========== ===========
The effective tax rates for the third quarter and first nine months of 1998 were
32.8% and 34.5%, respectively, as compared to 35.5% and 35.9% for the comparable
periods in 1997. The lower effective 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. Cash, cash
equivalents and short-term investments totaled $143,050,000 at September 30,
1998. At September 30, 1998, working capital was $602,483,000 compared to
$670,598,000 at December 31, 1997. Gross additions to property, plant and
equipment during the first nine months of 1998 were $58,074,000.
In the first nine months of 1998, the Company repurchased approximately 2.9
million shares of common stock under its existing share repurchase program. At
September 30, 1998, approximately 4.0 million shares of common stock had been
repurchased under the plan authorized in September 1996.
In January 1998, the Company's cash dividend was increased to an annual rate of
$1.48 per share from $1.44 in 1997, and $.37 per share was paid to shareholders
in each of the first three quarters of 1998. The Company anticipates that its
growth, capital expenditure programs and share repurchase program will be funded
from internal sources.
The accumulated comprehensive income component of Shareholders' Equity,
comprised principally of the cumulative translation adjustment, at September 30,
1998, was ($13,468,000) compared to ($36,851,000) at December 31, 1997. 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>
7
YEAR 2000
The Company has instituted a comprehensive program to address its "Year 2000"
needs (the "Y2K Program"). The Y2K Program is currently on schedule to be
completed prior to January 1, 2000, and in most cases no later than September
30, 1999. The Y2K Program has been designed to evaluate and, if necessary, to
repair or replace those computer programs and embedded computer chips that are
significant to the Company and that use only the last two digits to refer to a
year ("Y2K Code"), so that such Y2K Code will be "Year 2000 Compliant," that is,
will recognize dates beginning in the Year 2000. For purposes of the Y2K
Program, Y2K Code is that which the Company concludes could, if not made Year
2000 Compliant, materially affect the Company's operations and ability to
service its customers, or create a safety or environmental risk. In addition to
dealing with the Company's Y2K Code, the Y2K Program also is designed to
identify and evaluate the Year 2000 readiness of the Company's key suppliers of
inventory and non-inventory goods and services, and of the Company's significant
customers.
The Y2K Program as it relates to the Company's computer programs and embedded
technology has five phases: (1) assessing computer programs and embedded
technology to identify Y2K Code; (2) assigning priorities to the identified Y2K
Code; (3) repairing or replacing Y2K Code to make such Y2K Code Year 2000
Compliant; (4) testing the repaired or replaced Y2K Code; and (5) developing and
implementing, if necessary, contingency plans to address the possibility that
the Company or third parties, whose operations or business could affect the
Company, do not become Year 2000 Compliant. The Company has engaged certain
outside consultants with recognized expertise in assessing and dealing with Year
2000 needs, principally Computer Sciences Corporation, to assist in the
management of the Y2K Program and in the repair and testing of certain Y2K Code.
The Y2K Program focuses on Y2K Code in three principal areas: (1)
infrastructure; (2) applications software; and (3) facility operations, where
the great majority of embedded technology is found. The infrastructure area
involves hardware and systems software other than applications software. As
hardware and systems software is repaired, upgraded or replaced, it is tested
to assure that it is Year 2000 Compliant. The Company expects the
infrastructure portion of the Y2K Program to be completed by June 1999.
Significant portions of the Company's application software will be replaced by
new software, principally SAP, an ERP software package. At September 30, 1998,
the global design for the SAP project was substantially complete, and the first
implementation, encompassing the Company's North American operations, is
anticipated to take place on May 1, 1999, its scheduled date under the SAP
project plans. Applications software Y2K Code not being replaced as part of the
SAP project is being repaired, upgraded or replaced (where an upgrade or
replacement is available from the supplier of such software) to make such Y2K
Code Year 2000 Compliant. This portion of the Y2K Program is expected to be
completed by September 30, 1999, consistent with the schedule established by the
Y2K Program.
Facility operations include hardware, software and associated embedded computer
chips used in the operation of facilities owned by the Company, including,
but not limited to, equipment used in manufacturing and research and
development, as well as security and other systems that may have
<PAGE>
8
date sensitive operating controls. The Company is currently completing the
assessment of these systems to identify Y2K Code. This portion of the Y2K
Program is on schedule, and the Company expects it to be completed in the fourth
quarter of 1999.
The Company has identified its key suppliers of inventory and non-inventory
goods and services and has contacted them, in writing and in some cases through
face-to-face discussions, to ascertain the extent of their Year 2000 Compliance.
Similarly, the Company has also been communicating with significant customers
about their and the Company's Year 2000 Compliance plans and progress. This
portion of the Y2K Program is expected to be completed in the third quarter of
1999.
The total cost to the Company of the Y2K Program is expected to approximate $45
million of which $17 million has been expended at September 30, 1998. Of the Y2K
Program costs, approximately $21 million represents capital expenditures
associated with replacement hardware, software and associated items. The
remaining amount, approximately $24 million, represents the costs of
repair, testing and related efforts, and is being expensed as incurred. Of the
$17 million spent as of September 30, 1998, $8 million related to capital and
the balance of $9 million was expensed. These amounts do not include the
estimated cost of the SAP project.
The failure to make Y2K Code Year 2000 Compliant could result in an interruption
in, or failure of, certain business activities or operations, which could
materially and adversely affect the Company's results of operations, liquidity
and/or financial condition. The Company currently expects that the Company's Y2K
Code will be Year 2000 Compliant on or before December 31, 1999. Due to the
general uncertainty about the overall extent of the Year 2000 problem, however,
including, but not limited to, uncertainty about the extent of Year 2000
Compliance of the Company's suppliers and customers, the Company is unable
currently to determine whether the consequences of the failure of entities other
than the Company to be Year 2000 Compliant will have a material impact on the
Company's results of operations, liquidity or financial condition.
Subject to the above uncertainties, however, the Company believes that, with the
completion of the Y2K Program as scheduled, and with the implementation of SAP,
the likelihood of material interruptions of the Company's normal business should
be reduced. Notwithstanding the Company's belief, the Company is currently
unable to predict, and thus to describe, its most likely worst case Year 2000
scenario. To address the possibility that the Company or its suppliers,
customers, or other third parties are not successful in becoming Year 2000
Compliant, the Company has commenced development of contingency plans for the
critical aspects of its operations. Such plans will be designed to avoid or
mitigate potential serious disruptions in the Company's business and will be
refined and modified as the Company monitors and evaluates the progress of its
Y2K Program.
EURO CURRENCY ADOPTION
As part of the European Economic and Monetary Union (EMU), a single currency
(the "Euro") will replace the national currencies of most of the European
countries in which the Company conducts business. The conversion rates between
the Euro and the participating nations' currencies will be fixed irrevocably as
of January 1, 1999, with the participating national currencies being removed
<PAGE>
9
from circulation between January 1, and June 30, 2002 and replaced by Euro notes
and coinage. During the "transition period" from January 1, 1999 through
December 31, 2001, public and private entities as well as individuals may pay
for goods and services using either checks, drafts, or wire transfers
denominated in Euro or the participating country's national currency.
The Company expects its systems and processes to be Euro "compliant" (able to
receive Euro denominated payments and able to invoice in Euro as requested by
suppliers and customers, respectively) by January 1, 1999 in the affected
countries. Conversion of its systems and processes to the Euro is currently
underway. The effects of the Euro conversion on the Company's revenues, costs
and competitive position, while currently still being assessed, are not expected
to be significant. The cost of systems and business process conversion is not
expected to be material.
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 IFF's actual results to differ materially from
those expressed or implied by such forward-looking statements. Risks and
uncertainties with respect to IFF's business include general economic and
business conditions, the price and availability of raw materials, the ability of
the Company and third parties, including customers or suppliers, to adequately
address the Year 2000, and political and economic uncertainties, including the
fluctuation or devaluation of currencies in countries in which IFF does
business.
<PAGE>
10
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number
10(a) Agreement dated June 23, 1998 between Registrant and
Carlos A. Lobbosco, Vice-President of Registrant.
10(b) Agreement dated July 27, 1998 between Registrant and
Stuart R. Maconochie, Vice-President of Registrant.
10(c) Agreement dated September 2, 1998 between Registrant and
David G. Bluestein, former director and Senior
Vice-President of Registrant.
27 Financial Data Schedule (EDGAR version only).
(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>
11
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 13, 1998 By: /s/ DOUGLAS J. WETMORE
---------------------------------------------
Douglas J. Wetmore, Vice-President and Chief
Financial Officer
Dated: November 13, 1998 By: /s/ STEPHEN A. BLOCK
---------------------------------------------
Stephen A. Block, Vice-President Law and Secretary
IFF [LETTERHEAD LOGO]
JUNE 23, 1998
Mr. Carlos A. Lobbosco
Alvear Avenue 1654
4th Floor
Buenos Aires, Argentina
Dear Carlos,
This letter will outline the understandings you and International Flavors &
Fragrances Inc. ("IFF") have reached in respect of your assignment, effective
July 1, 1998, to Europe as the Fragrance Area Manager, EAME (the "Assignment").
We have agreed as follows:
1. Effective July 1, 1998, your annual base salary will be the local
currency equivalent of US$385,000, converted at official exchange
rates. Your salary will be reviewed annually in accordance with IFF
policy for officers of IFF.
2. IFF will cause to be leased for your use during the Assignment, in the
name of the appropriate IFF subsidiary, an apartment in the
metropolitan area of London, England or such other city in Europe in
which you and IFF agree you will reside (the "Apartment"). IFF will
cause the rent and utilities (other than telephone) to be paid on the
Apartment. The initial monthly rent for the Apartment may not exceed
US $5,000 without my prior written approval. Any taxable income that
you are required to recognize as a result of the Company's leasing the
Apartment for your use will be considered "Other Assignment Income",
as defined in Section 5 below. You will be responsible for all costs
related to any housing that you continue to maintain in Argentina
during the Assignment.
3. During the Assignment you will continue to participate in the IFF
Management Incentive Compensation Plan ("MICP") on the same terms as
you currently
<PAGE>
MR. CARLOS A. LOBBOSCO
JUNE 23, 1998
PAGE 2 OF 7 PAGES
participate in the MICP. Your MICP award will continue to be based on
a combination of the performance of IFF as well as your own. MICP will
be paid to you in US Dollars. MICP for 1998 will be calculated as a
percentage of your 1998 year-end salary (US$385,000).
4. You acknowledge that, on June 15, 1998, you were granted a stock
option award of 35,000 shares of IFF Common Stock under, and subject
to the terms and conditions of, the IFF 1997 Employee Stock Option
Plan. Two copies of a Stock Option Agreement are enclosed with this
letter. Please execute and return one copy to Steve Block in New York.
5. To the extent that the effective aggregate income tax rate on your
annual base salary and MICP during and relating to the Assignment
("Assignment Salary and Bonus") exceeds 26%, IFF will reimburse you,
on a fully "grossed up" basis, for all taxes in excess of 26% in
respect of such taxable Assignment Salary and Bonus. IFF will fully
"gross up" any other taxable income relating to the Assignment that
you are required to recognize ("Other Assignment Income"). Assignment
Salary and Bonus and Other Compensation Income are sometimes
collectively referred to as "Assignment Compensation." The effective
aggregate income tax rate on your Assignment Salary and Bonus, and the
tax due on Other Assignment Income, will be determined by considering
taxes owed on the Assignment Salary and Bonus and Other Assignment
Income in any country in which such taxes are required to be paid, and
will be calculated by Price Waterhouse LLP or such other independent
public accountants whom IFF may elect to retain to prepare your income
tax returns related to Assignment Compensation (the "Accountant"). IFF
will pay that percentage of the cost of having your taxes prepared by
the Accountant that Assignment Compensation bears to total taxable
income reported in returns prepared for you by the Accountant (the
"Assignment Compensation Percentage"). The determination by the
Accountant of (a) the effective aggregate income tax rate in respect
of Assignment Salary and Bonus, (b) taxes owed on Other Assignment
Income, and (c) the Assignment Compensation Percentage will be binding
on both you and IFF. You will be fully and solely responsible for all
taxes due in any
<PAGE>
MR. CARLOS A. LOBBOSCO
JUNE 23, 1998
PAGE 3 OF 7 PAGES
country in respect of any income (whether or not compensation from
IFF) other than Assignment Compensation. Any taxable income that you
are required to recognize as a result of the Company's payment of the
Assignment Compensation Percentage will be considered Other Assignment
Income.
6. During the Assignment you will continue to participate in the IFF TCN
Pension Plan (the "TCN Plan"). IFF agrees to assure that, upon your
retirement from the Company, you will receive an aggregate minimum
monthly pension, expressed as a 60-month annuity certain (the
"Pension"), of at least the amount in respect of the various
retirement dates set forth in the schedule below (the "Pension
Schedule"). The Pension will be paid in US Dollars. If your actual
retirement date (the "Retirement Date") falls between any two dates in
the Pension Schedule, the Pension will be adjusted accordingly.
The amount of the Pension will first be calculated by aggregating the
retirement benefits which you have or will have earned at your actual
retirement date from all sources in which you currently participate or
have participated during your IFF service, including but not limited
to the TCN Plan, pension plans of other IFF entities, and the
Argentina social security/retirement system. The amount of the Pension
will be calculated in accordance with the terms of the TCN Plan. If
for any reason, the Pension as calculated under the TCN Plan does not
provide the minimum Pension required by the Pension Schedule, IFF will
pay you a monthly supplement amount so that your aggregate retirement
benefit equals the Pension required by the Pension Schedule for the
applicable retirement date. You will have the right to elect to
receive the Pension in such a way that, rather than receiving a
60-month annuity certain (which provides no benefit for your surviving
spouse beyond the fifth anniversary after the Retirement Date), your
surviving spouse, upon your death, will continue to receive a benefit
equal to 50% of the benefit you were receiving at your death. You
acknowledge, however, that should you elect such a "joint and 50%"
option, the amount to be paid to you at your retirement will be
reduced actuarially from that set forth in the Pension Schedule.
<PAGE>
MR. CARLOS A. LOBBOSCO
JUNE 23, 1998
PAGE 4 OF 7 PAGES
PENSION SCHEDULE
----------------
---------------------------------------------------
MINIMUM GUARANTEED
RETIREMENT DATE MONTHLY PENSION (US$)
--------------- ---------------------
July 1, 1998 7,365
---------------------------------------------------
July 1, 1999 10,400
---------------------------------------------------
July 1, 2000 13,400
---------------------------------------------------
July 1, 2001 16,500
---------------------------------------------------
On or After 19,600
December 31, 2002
---------------------------------------------------
7. It is currently anticipated that the Assignment will terminate as of
July 1, 2001. IFF may elect in its sole discretion to cause the
Assignment to terminate earlier, and the Assignment may be extended
upon mutual agreement between you and IFF. After the termination of
the Assignment, you intend to return to Argentina. From the
termination of the Assignment until the Retirement Date, which is
currently anticipated to be December 31, 2002, you will remain an
employee of IFF, based in Buenos Aires, Argentina, and will perform
such services for IFF as the Chairman of the Board of Directors of the
Company may request. During this period your base salary will not be
lower than that at the end of the Assignment, and you will continue to
participate in the TCN Plan and have the same other benefits from IFF
as you had in Argentina prior to the Assignment.
8. During the Assignment, you will be eligible, as part of your paid
vacation, for annual home leave to Argentina. IFF will pay for up to
eight round trip business class airfares between Argentina and Europe,
which may be used by you and members of your family. Any taxable
income that you are required to recognize as a result of the Company's
payment of any such airfares will not be considered Assignment
Compensation, and will be your sole responsibility.
9. Until the Retirement Date you will be covered for life, disability and
travel insurance under those programs--including but not limited to
life insurance
<PAGE>
MR. CARLOS A. LOBBOSCO
JUNE 23, 1998
PAGE 5 OF 7 PAGES
under IFF's basic and supplemental programs, of $900,000-maintained by
IFF for its employees in the United States. You and your family will
continue to be covered by the IFF Argentina medical scheme. You will
also be included in the IFF global medical and dental program,
currently administered by CIGNA.
10. You may elect to have IFF provide you with an automobile (the
"European Company Car") for your business and personal use in your
city of residence during the Assignment. In that event, insurance,
maintenance and other expenses in connection with the use of such at
automobile will be paid and/or reimbursed in accordance with IFF
policy. Any taxable income that you are required to recognize as a
result of the provision or your use of the European Company Car will
be considered Other Assignment Income. Should you elect to have IFF
provide the European Company Car, then, within thirty (30) days after
delivery of the European Company Car, you will either (a) purchase the
automobile currently provided to you by IFF in Argentina (the
"Argentine Company Car") at its then value, calculated in accordance
with usual IFF practice, or (b) you will return the Argentine Company
Car to IFF Argentina. Until and unless you elect to have IFF provide
you with the European Company Car, you may retain the use of the
Argentine Company Car on the same terms and conditions as it is now
provided. If you have not previously purchased or returned the
Argentine Company Car, on the Retirement Date you may purchase it at
its then value, calculated in accordance with usual IFF practice.
11. IFF Argentina will continue to pay your annual membership fees, up to
a maximum of the equivalent in Argentine Pesos of US$9,000 per year
(the "Club Fees"), in the Argentine Club in Buenos Aires. Should you
elect to join a social/sport club in Europe, all fees and expenses of
joining and/or maintaining your membership in such club will be your
sole responsibility. Any taxable income that you are required to
recognize as a result of IFF's payment of the Club Fees will not be
considered Assignment Compensation, and will be your sole
responsibility.
12. IFF will pay on your behalf the out-of-pocket expenses associated with
the shipment of your personal goods to
<PAGE>
MR. CARLOS A. LOBBOSCO
JUNE 23, 1998
PAGE 6 OF 7 PAGES
Europe at the commencement, and from Europe to Argentina at the
termination, of the Assignment, in each case in accordance with the
IFF Corporate Relocation Policy then in effect. The Company will
also pay or reimburse you for all fees and expenses needed to obtain
any visa other travel documents and/or work permits that may be
required. You acknowledge that the effectiveness and continuing
enforceability of this Agreement is conditioned upon your obtaining
all authorizations necessary to enable you to undertake and to
continue in the Assignment. IFF will assist you in obtaining and
keeping all such authorizations. Finally, the Company acknowledges
that, at the commencement of the Assignment you will initially work
and reside in London. In accordance with the IFF Corporate
Relocation Policy IFF will pay or reimburse you for your temporary
living expenses in London until you move into your permanent
residence, which you intend will occur within four months (by
October 31, 1998). Any taxable income that you are required to
recognize as a result of IFF's payment or reimbursement of any cost
or expense contemplated by this Section 12 will be considered Other
Assignment income.
13. In the event your employment with IFF is terminated by IFF for any
reason other than for "Cause" prior to December 31, 2002, and in
connection with such termination you are not entitled to the benefits
under the Executive Severance Agreement between you and the Company
dated December 14, 1993, you will retire from IFF employment as of the
termination date, which will be deemed the Retirement Date. In such
event, you may elect (a) to commence receiving the Pension commencing
immediately after the Retirement Date, or (b) in lieu of commencing to
receive the Pension at the Retirement Date, to receive "Salary
Continuation Payments" equal to your monthly base salary at the
Retirement Date, for the shorter of (i) eighteen (18) months or (ii)
if the Retirement Date occurs after July 1, 2001, the number of months
between the Retirement Date and December 31, 2002, after which the
Pension will commence (with the amount of the Pension-including the
guaranteed minimum-computed based on your years of Service through the
Retirement Date but with a commencement date based on your age on the
actual date on which the Pension commences). After the Retirement
<PAGE>
MR. CARLOS A. LOBBOSCO
JUNE 23, 1998
PAGE 7 OF 7 PAGES
Date, you will be entitled to all other benefits then granted by IFF
to retired employees of IFF Argentina. "Cause" will have the same
meaning in this Agreement as in the Executive Severance Agreement.
14. Should you die during the Assignment, IFF will assist your family in
arranging for, and will pay all reasonable costs of, the repatriation
of your remains and personal effects from Europe to Argentina.
Carlos, if the terms set forth above accurately reflect our understanding,
please sign and return the extra copy of this letter and return it to Steve
Block. If you have any questions, please feel free to contact Bill Myers,
Steve Block or me.
Sincerely,
INTERNATIONAL FLAVORS &
FRAGRANCES INC.
By: /s/ EUGENE P. GRISANTI
------------------------
Eugene P. Grisanti
Chairman & President
AGREED AND ACCEPTED:
/s/ CARLOS A. LOBBOSCO
------------------
Carlos A. Lobbosco
IFF (LOGO)
[LETTERHEAD]
July 27, 1998
Mr. Stuart R. Maconochie
110 a Cranmer Court
Whiteheads Grove
London, SW3 3HJ
England
Dear Stuart,
This letter will outline the understandings you and International Flavors &
Fragrances Inc. ("IFF") have reached in respect of your assignment, effective
June 1, 1998, as Senior Vice-President and President, Fragrance Division, of IFF
(the "Assignment"). We have agreed as follows:
1. Effective June 1, 1998, your annual base salary has been increased to
$475,000. Your salary will be reviewed annually in accordance with IFF
policy for officers of IFF.
2. Effective July 13, 1998, IFF has entered into a six (6) month lease in
its name for a furnished two-bedroom, two-bath apartment at Bristol
Plaza, 210 East 65th Street, New York, New York (the "Short-Term
Apartment"), for your use while you look for more permanent
accommodations. After the expiration of the lease of the Short-Term
Apartment, IFF, at its option will lease or purchase in its name, for
your use during the remainder of the Assignment, an accommodation
reasonably suited to your needs at the time, which will be either a
furnished or unfurnished apartment in New York City or a house in a
community within commuting distance of New York City ("Long-Term
Accommodations"). The location and rental or purchase cost of the
Long-Term Accommodations will be subject to my prior written approval.
The Short-Term Apartment and the Long-Term Accommodations are
sometimes hereinafter collectively referred to as the
"Accommodations".
IFF will pay all costs associated with the lease of the Short-Term
Apartment and with the lease or
<PAGE>
MR. STUART R. MACONOCHIE
JULY 27, 1998
PAGE 2 OF 5 PAGES
purchase of the Long-Term Accommodations, including rent, rental/real
estate agent's fees, customary closing costs, and utilities (other
than telephone). The Accommodations will be reserved exclusively for
you, except that, if for any reason you will not be using the
Accommodations for a period of at least one week, IFF in its sole
discretion may use the Accommodations to accommodate others during
that period. Any taxable income that you are required to recognize as
a result of the Company's leasing or purchasing the Accommodations for
your use will be considered "Other Assignment Income", as defined in
Section 5 below. You will be responsible for all costs related to any
housing that you continue to maintain in the United Kingdom during the
Assignment.
3. During the Assignment you will continue to participate in the IFF
Management Incentive Compensation Plan ("MICP"). Your MICP award will
continue to be based on a combination of the performance of IFF as
well as your own. MICP for 1998 will be calculated as a percentage of
your 1998 year-end salary ($475,000).
4. You acknowledge that, on June 15, 1998, you were granted a stock
option award of 30,000 shares of IFF Common Stock under, and subject
to the terms and conditions of, the IFF 1997 Employee Stock Option
Plan. Two copies of a Stock Option Agreement are enclosed with this
letter. Please execute and return one copy to Steve Block in New York.
5. All taxes on your base salary, MICP, in respect of your exercise of
stock options (including any Alternative Minimum Tax preference), any
other income that for United States tax purposes is considered
"compensation income" within the meaning of the United States Internal
Revenue Code, and any other income in any country that is not
considered "Other Assignment Income", as defined hereinbelow
(collectively "Non-Grossable Income") will be your sole
responsibility. IFF will fully "gross up" other taxable income
relating to the Assignment that you are required to recognize ("Other
Assignment Income"). The tax due on Non-Grossable Income and Other
Assignment Income will be determined by considering taxes owed on
Non-Grossable Income and Other Assignment Income in any country in
which such taxes are required to be paid, and will be calculated by
Price Waterhouse LLP or such other independent public accountants whom
IFF may
<PAGE>
MR. STUART R. MACONOCHIE
JULY 27, 1998
PAGE 3 OF 5 PAGES
elect to retain to provide you with tax advice and to prepare your
income tax returns (the "Accountant"). IFF will pay that percentage of
the costs for tax advice and for having your taxes prepared by the
Accountant that Other Assignment Income bears to the aggregate of
Non-Grossable Income and Other Assignment Income reported in returns
prepared for you by the Accountant (the "Assignment Compensation
Percentage"). The determination by the Accountant of (a) taxes owed on
Other Assignment Income and (b) the Assignment Compensation Percentage
will be binding on both you and IFF. Any taxable income that you are
required to recognize as a result of the Company's payment of the
Assignment Compensation Percentage will be considered Other Assignment
Income.
6. During the Assignment, to the extent legally permissible IFF will take
such steps as may be necessary to enable you to continue to
participate in the United Kingdom Social Security System and United
Kingdom Private Health System. You will also continue to accrue a
pension (the "Pension") in accordance with the March 31, 1990 letter
agreement between you and IFF (Great Britain), a copy of which is
annexed to this agreement as Exhibit A. You understand and acknowledge
that you will not participate in any other pension plan maintained by
IFF anywhere in the world.
7. During the Assignment, you will be eligible for four (4) weeks of paid
vacation per year. In addition, as part of your paid vacation, you
will be eligible for annual home leave to the United Kingdom. IFF will
pay for one round trip business class airfare between New York City
and London, England for you, a spouse, and any members of your (or
your spouse's) family who are then living with you permanently in the
United States and who at the time of any such trip are no older than
full-time undergraduate college students. Any taxable income that you
are required to recognize as a result of the Company's payment of any
of such airfares will be considered Other Assignment Income.
8. You and your family will continue to be covered by the IFF (Great
Britain) medical scheme. In addition, you personally, and any members
of your (or your spouse's) family who qualify for coverage under the
terms of the IFF United States medical and dental program, currently
administered by CIGNA, will be included in such program.
<PAGE>
MR. STUART R. MACONOCHIE
JULY 27, 1998
PAGE 4 OF 5 PAGES
9. IFF will provide you with an automobile (the "United States Company
Car") for your business and personal use in your city of residence
during the Assignment, in accordance with the IFF automobile program
for corporate officers stationed in the United States. Any taxable
income that you are required to recognize as a result of the provision
or your use of the United States Company Car will not be considered
Other Assignment Income. Within thirty (30) days after delivery of the
United States Company Car, you will either (a) purchase the automobile
currently provided to you by IFF in the United Kingdom (the "UK
Company Car") at its then value, calculated in accordance with usual
IFF practice, or (b) you will return the UK Company Car to IFF (Great
Britain).
10. IFF (Great Britain) will continue to pay your annual membership fees
in Harry's Bar and Annabelle's, both in London, England ("the "UK"
Club Fees"), up to a maximum aggregate of (pound)1,500 per year.
Consideration will also be given to IFF's paying for an appropriate
country club membership in your name, to be used for business
purposes, in the United States (the "US Club Fees"). Any taxable
income that you are required to recognize as a result of IFF's payment
of the UK Club Fees and/or US Club Fees (should IFF agree to a country
club membership in the United States) will not be considered Other
Assignment Income, and will be your sole responsibility.
11. IFF will pay on your behalf the out-of-pocket expenses associated with
the shipment of your personal goods to the United States at the
commencement, and from the United States to the United Kingdom at the
termination, of the Assignment, in each case in accordance with the
IFF Corporate Relocation Policy then in effect. The Company will also
pay or reimburse you for all fees and expenses needed to obtain any
visa other travel documents and/or work permits that may be required.
You acknowledge that the effectiveness and continuing enforceability
of this Agreement is conditioned upon your obtaining all
authorizations necessary to enable you to undertake and to continue in
the Assignment. IFF will assist you in obtaining and keeping all such
authorizations. Any taxable income that you are required to recognize
as a result of IFF's payment or reimbursement of any
<PAGE>
MR. STUART R. MACONOCHIE
JULY 27, 1998
PAGE 5 OF 5 PAGES
cost or expense contemplated by this Section 11 will be considered
Other Assignment Income.
12. In the event your employment with IFF is terminated by IFF for any
reason other than for "cause" prior to June 30, 2005 and in connection
with such termination you are not entitled to the benefits under the
Executive Severance Agreement between you and the Company dated
December 14, 1993, you will retire from IFF employment as of the
termination date, which is hereinafter referred to as the "Retirement
Date." In such event, and in addition to the Pension, you will receive
(a) "Salary Continuation Payments" equal to your monthly base salary
at the Retirement Date, for the shorter of (i) eighteen (18) months or
(ii) if the Retirement Date occurs after December 31, 2003, the number
of months between the Retirement Date and June 30, 2005, and (b) a
prorated MICP award in respect of the year in which the termination
occurs. After the Retirement Date, you will be entitled to all other
benefits then granted by IFF to retired employees of IFF (Great
Britain). "Cause" will have the same meaning in this Agreement as in
the Executive Severance Agreement.
Stuart, if the terms set forth above accurately reflect our understanding,
please sign and return the extra copy of this letter and return it to Steve
Block. If you have any questions, please feel free to contact Bill Myers, Steve
Block or me.
Sincerely,
INTERNATIONAL FLAVORS &
FRAGRANCES, INC.
By: /s/ EUGENE P. GRISANTI
-----------------------
Eugene P. Grisanti
Chairman & President
AGREED AND ACCEPTED:
/s/ STUART R. MACONOCHIE
- ------------------------
Stuart R. Maconochie
<PAGE>
EXHIBIT A
IFF (LOGO)
[LETTERHEAD]
S.R. Maconochie, Esq., 31st March 1990
Badger's Wood,
Kimbers Lane,
Maidenhead,
Berkshire.
SL6 2QP
Dear Mr. Maconochie,
Your retirement benefits
The Finance Act 1989 introduced restrictions on the benefits that can be
provided under pension schemes approved by the Inland Revenue.
We set out in our letter of 31st March 1990 the arrangements designed to
provide you with the maximum benefits approvable by the Inland Revenue for tax
purposes.
However, we appreciate that the benefits provided under the tax approvable
schemes may not provide the desired levels of benefits.
Therefore, we set out below the benefits that we will provide in addition
to the benefits provided under the approvable schemes, should those approvable
schemes benefits fall short of the desired amounts.
1. Definitions
"Salary" means your basic salary over the period of twelve months
immediately prior to your date of retirement, death or leaving service plus
the yearly average of your other earnings subject to Schedule E income tax
in the 36 months immediately prior to your retirement, death or leaving
service.
"Normal Pension Age" means your 65th birthday.
<PAGE>
"Personal Pension Plan" means the arrangement approvable under Chapter IV
Part XIV of the Income and Corporation Taxes Act 1988, to which the
Employer is contributing.
"Personal Plans" means the Personal Pension Plan and the arrangement
approvable under Chapter IV Part XIV of the Income and Corporation Taxes
Act 1988 established to accept the transfer value from your pension
arrangement with R.P. Scherer.
"Employer" means IFF(GB) Limited.
"Maximum Approvable Remuneration" means the best definition allowable by
the Inland Revenue for the purposes of calculating approvable benefits,
subject always to an earnings ceiling set by the Inland Revenue, which for
the year ending 31st March 1990 is (Pound)60,000. This ceiling will
increase
on 1st April each year in line with the movement in the General Index of
Retail Prices for the year 1st January to 31st December (inclusive)
immediately preceding the 1st April of determination.
"Widow" means the wife to whom you are married at the date of death.
"Retained Lump Sum Death Benefit" means the total value of any lump sum
death benefits that, for the purposes of calculating the Inland Revenue
Maximum approvable lump sum death benefit, have to be taken into
consideration.
2. Retirement at Normal Pension Age
On your retirement at Normal Pension Age you will be entitled to a yearly
pension for life calculated as (A) below, less (B) below:
(A) 2/3rds of your Salary at Normal Pension Age.
(B) the pension payable (or prospectively payable) from Normal Pension Age
in respect of the Personal Plans.
<PAGE>
The pension under (B) above shall be calculated as if the benefits were
taken wholly in the form of pension of the same type and subject to the
same conditions as apply under this letter. The amount of such pension
shall include the pension equivalent of any benefits payable to you other
than in pension form and shall be determined as if no cash would be taken
as an alternative to pension. The amount of pension shall be calculated
where necessary using such estimates of policy proceeds, annuity rates and
any other relevant matters as we shall determine to be appropriate.
3. Early Retirement
You may, with our consent, retire early on grounds other than Ill-health at
any time on or after age 50.
On early retirement, if the pension secured by your Personal Pension Plan
is insufficient, you will be entitled to a yearly pension payable for life
calculated in accordance with the following formula
N x P
--
NS
Where N = the number of years of service completed at the date of
retirement with a proportionate amount for each complete
month.
NS = total service that would have been completed at Normal
Pension Age with a proportionate amount for each complete
month.
P = 2/3rds of your Salary at the date of retirement less the
pension value of your Personal Plans as calculated in
accordance with 2 above.
If you have not attained age 63 at retirement this pension will then be
reduced by 1/4% for each complete month between your retirement date and
your 63rd birthday to take into account its payment from a date earlier
than Normal Pension Age.
<PAGE>
4. Leaving Service
In the event that you leave our service you will be entitled to a yearly
pension payable for life, commencing at Normal Pension Age, equal to the
pension calculated as in 3 above but with no reduction for early payment.
This pension will be increased between your date of leaving service and
Normal Pension Age by the lesser of 5% per annum compound (with a
proportionate amount of a part-year) and the increase in the General Index
of Retail Prices for the period.
5. Lump sum death in service benefit
If you die while in our employment and before taking any benefits described
in this letter, there will be payable a lump sum calculated as (A) below,
less (B) below:
(A) a lump sum of three times your Salary at date of death less any lump
sum death benefits payable under the Personal Plans.
(B) The lesser of:
(i) three times your Salary less the Retained Lump Sum Death Benefit,
and
(ii) four times your Maximum Approvable Renumeration less the Retained
Lump Sum Death Benefit.
The lump sum will be payable in accordance with the attached Appendix.
<PAGE>
6. Widow's pension
(i) Death in service:
In the event of your death in service, there will be payable a yearly
pension to your widow for life calculated as (A) below, less (B)
below:
(A) 4/9ths of your Salary less any widow's pension payable under the
Personal Plans.
(B) The lesser of
(i) 4/9ths of your Salary less any widow's pension payable under
the Personal Plans.
and
(ii) the lesser of:
(a) 37/108ths of your Maximum Approvable Remuneration and
(b) 4/9ths of your Maximum Approvable Remuneration less any
widow's Pensions payable under the Personal Plans (if
any).
(ii) Death in retirement
In the event of your death in retirement, there will be payable to
your widow, a yearly pension for life of an amount equal to 2/3rds of
your pension (if any) payable in accordance with this letter.
<PAGE>
7. Increases to pension in payment
Your pension payable under this letter (if any) will increase in payment at
the rate of 3% per annum compound on each anniversary of your retirement or
death. Any widow's pension payable under this letter will increase at the
same rate from your date of retirement, or date of death if earlier.
8. Amendment or discontinuance
Whilst we fully intend to maintain the benefits described in this letter we
reserve the right to amend or discontinue any, or all of the above
provisions.
Please sign, date and return to us the attached duplicate of this letter to
confirm your agreement to the above benefits.
Yours sincerely,
/s/ P.G. MAJOR
--------------------------------------
(for and on behalf of IFF (GB) Limited)
I hereby confirm my agreement to the above terms and conditions.
Signed /s/ S.R. MACONOCHIE Date 2nd July 1990
------------------- -------------
(S.R. Maconochie)
<PAGE>
APPENDIX
PROVISIONS RELATING TO PAYMENT OF DEATH BENEFITS
Any benefit arising under paragraph 5 of the attached letter shall be payable in
accordance with the following terms and conditions:
Subject to no such amount being held by the Employer for more than two years
following the date of death of the Member the Employer shall have power to pay
or apply any such amount at such time or times to or for the benefit of such one
or more of your Beneficiaries in such shares proportions and manner and for such
interests as the Employer having absolute discretion may within six months of
your death direct (including and without prejudice to the generality of the
foregoing the transfer of the whole or part of such amount to trustees to be
held by such trustees for such Beneficiaries upon such trusts and powers
(including discretionary trusts or powers exercisable by such trustees as the
Employer shall decide)) and all or any expenses fees stamp duty or other
outgoings incurred for the purpose of or in connection with any such payment or
application no matter in what manner such amount be applied may if the Employer
so decide be deducted from or paid out of the said amount.
PROVIDED THAT in default of exercise of the foregoing power within a period of
two years from the date of your death the Employer shall pay the whole or such
part of the amount not so paid or applied as aforesaid to your Personal
Representatives except that if such amount would vest in the Crown the Duchy of
Lancaster or the Duke of Cornwall as bona vacantia or in a creditor such amount
shall be retained by the Employer.
In making any such transfer as aforesaid the Employer shall be entitled to rely
upon the certificate of any Solicitor or firm of Solicitors to the effect that
the trusts upon which any amount so transferred will be held are such that the
said amount must necessarily be paid to or applied for the benefit of one or
more of the Beneficiaries.
<PAGE>
"Beneficiaries" means and includes the following:
(i) your spouse or any ancestor or descendant (however remote the
relationship) of you or of your spouse and the spouse of any such ancestor
or descendant,
(ii) any brother or sister of you or of your spouse (whether of the whole or
half-blood) and any descendant of any such brother or sister and the
spouse of any such brother or sister or of any such descendant of any such
brother of sister,
(iii) any step-brother or step-sister of you or of your spouse and any
descendant of any such step-brother or step-sister and the spouse of any
such step-brother or step-sister or of any such descendant of any such
step-brother or step-sister,
(iv) Any uncle or aunt of you or of your spouse and any descendant of any such
uncle or aunt and the spouse of any such uncle or aunt or of any such
descendant of any such uncle or aunt,
whether in any of the aforesaid cases (i) (ii) (iii) and (iv) you were or
were not liable for or to contribute to their maintenance or support and
including any such person related by adoption
(v) any other natural person who in the opinion of the Employer has been
dependent or partly dependent on you for maintenance or support,
(vi) any beneficiary entitled to any interest in your estate under any
testamentary disposition made by you and in respect of which a grant
of representation has been obtained; and
(vii) any nominee of yours whom you wish to be treated as a Beneficiary for this
purpose and whose name and address you have notified to the Employer in
writing
<PAGE>
and for the purposes of this definition:
I. "Spouse" includes wife husband widow widower and any former wife
or husband and a person with whom you or other relevant person has
gone through any lawful ceremony of marriage.
II. "descendant" shall include step-children.
III. the class of Beneficiaries shall be closed at your death except that
it shall include persons then en ventre sa mere who if born would
have been Beneficiaries.
IV. "ancestor" shall include parents.
"Dependants" means the following:
(i) your wife widow child or children, and
(ii) any natural person who in the opinion of the Employer is financially
dependent upon you or was so dependent at the date of your death.
A child, unless mentally or physically incapacitated shall not be a Dependant
after attaining the age of 18 years or ceasing to receive full-time education
or vocational training, if later, (but not later than age 21 years).
For the purposes of this definition "child" shall include adopted and
step-chidren of you or your spouse.
IFF (LOGO)
[LETTERHEAD]
September 2, 1998
Mr. David G. Bluestein
25 Wild Turkey Court
Ridgefield, Connecticut 06877
Dear David,
You have informed me that you will resign from the employ of International
Flavors & Fragrances Inc. ("IFF" or the "Company"), effective September 18,
1998 (the "Resignation Date"), to accept another position. This letter (this
"Agreement") will set forth the terms of our understanding in connection with
your resignation as an employee and Director of IFF.
1. In connection with your resignation, please execute the letter of
resignation as a Senior Vice-President and a director of IFF attached
to this letter as Exhibit A. You also agree to execute such other
resignations as an officer, director and/or trustee of IFF
subsidiaries or of IFF benefit plans as may be requested of you.
2. Within thirty (30) days after the date of your execution of this
Agreement and Exhibits A and C, ownership of the IFF-provided
automobile presently in your possession (the "Company Car") will be
transferred to you. If you are required to recognize any compensation
resulting from the transfer, that compensation will be included in
your Form W-2 in respect of 1998.
3. You will be eligible to receive a prorated incentive compensation
award in respect of the portion of 1998 through the Resignation Date
under the IFF Management Incentive Compensation Plan ("MICP"). Your
actual incentive compensation award for 1998 will be based on the
performance of the IFF Flavor Division for such
<PAGE>
Mr. David G. Bluestein
September 2, 1998
Page 2 of 5 Pages
year and will be determined and awarded in early 1999 together with
the awards to all other 1998 MICP participants.
4. Except as provided in the next sentence, you agree that the prorated
MICP award for 1998 and transfer to you of the Company Car will be in
lieu of all other monetary compensation to which you may be otherwise
entitled in respect of your employment, including but not limited to
any further payment of base salary or payment of vacation pay. The IFF
Compensation and Benefits Department will contact you with respect to
the disposition of your Retirement Investment Fund Plan (including
supplemental plan) accounts.
5. On the Resignation Date, the life insurance coverage (including any
coverage under the IFF Executive Death Benefit Plan) with which you
have been provided as an active IFF employee will terminate. You will
have the right to convert such group life insurance into individual
coverage without the need for a medical history or examination by
contacting a Prudential agent of your choice within thirty-one (31)
days after the Resignation Date. In addition, in accordance with the
Consolidated Omnibus Budget Reconciliation Act of 1986 ("COBRA"),
after the Resignation Date you and your eligible dependents will have
the opportunity to continue medical and dental coverage under the IFF
Group Health Plan for up to eighteen (18) months by paying the
applicable monthly premiums for such coverage.
6. You agree and acknowledge that, as of the Resignation Date, the
Executive Severance Agreement dated November 11, 1997 between you and
IFF will terminate.
7. You agree that until September 30, 1999, you will neither solicit for
employment by nor hire any IFF employee for, and you will not, either
directly or indirectly, encourage or advise any IFF employee to leave
the employ of IFF and/or accept any position with, any business,
whether or not competitive with IFF and whether or not you are
engaging or intend to engage in such business. For the purpose of this
Section 7, an "IFF employee" is any person who at the relevant time
either is an active employee of IFF or within the preceding twelve
(12) months, whether or not an active employee, has been paid any
<PAGE>
Mr. David G. Bluestein
September 2, 1998
Page 3 of 5 Pages
compensation, whether as salary, consulting fee or severance or salary
continuation, by IFF (for the purpose of this Section 7 pension or
other retirement benefits will not be considered compensation).
8. Under your Security Agreement with IFF, a copy of which is attached to
this Agreement as Exhibit B, and under applicable trade secret law,
you are obliged to keep in confidence all IFF proprietary and
confidential information, including that described above, and not to
divulge it to others or to use it for your own purposes or in the
service of any new employer. Both under your Security Agreement and
under applicable law, this obligation continues not only while you are
employed by IFF, but after cessation of that employment. In that
connection, you acknowledge that during your IFF service, you have
acquired proprietary and confidential knowledge and information of
IFF, including, but not limited to business, technical, human
resources and legal strategies, and the identity of IFF customers and
suppliers and the quantities of products ordered by or from and the
prices paid by or to those customers and suppliers. In addition, you
have also acquired similar confidential knowledge and information
belonging to IFF's customers and provided to IFF in confidence under
written and oral secrecy agreements. You agree to abide by the terms
and conditions of the Security Agreement both before and after the
Resignation Date, but such obligations will in no way be construed as
a continuation of your IFF employment, which will terminate on the
Resignation Date.
9. Upon your leaving the employ of IFF you are also required to deliver
to IFF all notes, memoranda, records, files or other papers, including
all copies thereof, in your custody or control and relating to any IFF
proprietary and confidential knowledge or information, or any such
information of IFF customers or suppliers (collectively, "IFF
Documents"). You hereby acknowledge that on or before the Resignation
Date you will have delivered all to IFF all IFF documents.
10. You and IFF agree:
(a) At no time will you in any way denigrate, demean or otherwise say
or do anything, whether in
<PAGE>
Mr. David G. Bluestein
September 2, 1998
Page 4 of 5 Pages
oral discussions or in writing, (i) that would cause any
director, officer, employee or representative of IFF, or any
third party, including but not limited to suppliers, customers
and competitors of IFF, to lower his, her or its perception about
the integrity, public or private image, professional competence,
or quality of products or service, of IFF or of any officer,
director, employee or other representative of IFF, or (ii) that
might suggest, directly or indirectly, or cause any such person
or entity to conclude that your resignation from the employ
and/or as a director of IFF was the result of any disagreement
with IFF on any matter relating to the Company's operations,
policies or practices. You hereby acknowledge that your breach of
any of Sections 7, 8 or 9 or of this Section 10(a) will entitle
the Company (i) immediately to withhold any payment or other
benefit due to you at any time thereafter under this Agreement
(except for any amounts then due to you in respect of your RIFP
accounts) and (ii) to injunctive relief.
(b) At no time will any director, officer, employee or other
representative of IFF in any way denigrate, demean or otherwise
say or do anything, whether in oral discussions or in writing,
that would cause any other director, officer, employee or
representative of IFF, or any third party, including but not
limited to suppliers, customers and competitors of IFF, to lower
his, her or its perception about your integrity, public or
private image or professional competence.
11. Please sign and return the Release attached to this Agreement as
Exhibit C. This Agreement will take effect only upon your execution of
this Agreement and Exhibits A and C.
12. This Agreement will be governed by and interpreted in accordance with
New York law.
<PAGE>
Mr. David G. Bluestein
September 2, 1998
Page 5 of 5 Pages
Please sign and date both copies of this letter in the space provided below
and return one fully executed copy, together with the executed letter of
resignation and the Release. The other copy is for your records.
David, we appreciate your service to IFF and wish you the best in your new
position
Sincerely yours,
INTERNATIONAL FLAVORS &
FRAGRANCES INC.
By: /s/ EUGENE P. GRISANTI
----------------------
Eugene P. Grisanti
Chairman and
President
AGREED AND ACCEPTED
/s/ DAVID G. BLUESTEIN
- ----------------------
David G. Bluestein
September 3, 1998
<PAGE>
EXHIBIT A
September 2, 1998
Stephen A. Block, Esq.
Vice-President and Secretary
International Flavors & Fragrances Inc.
521 West 57th Street
New York, New York 10019
Dear Mr. Block:
I hereby resign as Senior Vice-President and President, Flavor Division,
and as a member of the Board of Directors of International Flavors & Fragrances
Inc., effective immediately.
/s/ DAVID G. BLUESTEIN
----------------------
David G. Bluestein
<PAGE>
EXHIBIT B
IFF SECURITY AGREEMENT
International Flavors & Fragrances Inc.
521 West 57th St., New York, N.Y. 10019
In consideration of my employment by IFF or any of its subsidiaries
(herein together called IFF), I hereby agree as follows:
1. I acknowledge that in the course of my employment by IFF, I may have
access to, acquire or gain confidential knowledge or information (i) with
respect to formulae, secret processes, plans, devices, products, computer
programs and other intangible property, know-how and other data belonging or
relating to IFF or belonging to a customer or supplier of IFF, or (ii) with
respect to the identity of customers of IFF, and the identity of products and
the quantity and prices of the same ordered by such customers. I acknowledge
that all such information is the sole property of IFF or its customer or
supplier, and I shall treat it as set forth below.
2. I shall keep confidential all such knowledge or information described
above and shall not divulge it to others nor use it for my own private purposes
or personal gain, without the express written consent of IFF. This obligation on
my part shall continue during and after the period of my employment by IFF.
3. Upon Termination of my employment, or at any time IFF may request, I
shall deliver to IFF all notes, memoranda, formulae, records, files or other
papers, tapes, discs or programs, and copies thereof, in my custody relating to
any such knowledge or information described above to which I have had access or
which I may have developed during the term of my employment.
4. I shall not, without the prior written permission of IFF, after leaving
the employ of IFF for any reason, work for others, or for my own account, on any
of the secret processes, formulae or programs on which I have worked or to which
I have had access while in the employ of IFF.
5. Any invention, formula, process, product, program, idea, discovery and
improvement conceived or developed by me within the period of my employment,
relating to any activity engaged in by IFF, shall be the sole and exclusive
property of IFF and I shall promptly communicate to IFF full information with
respect to any of the foregoing conceived or developed by me. I shall execute
and deliver all documents and do all other things as shall be deemed by IFF to
be necessary and proper to effect the assignment to IFF of the sole and
exclusive right, title and interest in and to all such inventions, formulae,
processes, products, programs, ideas, discoveries and improvements, and patent
applications and patents thereon.
6. I understand and agree that IFF has no interest in and will not accept
divulgence to it of any confidential knowledge or information which is the
property of any previous employer or third party. Notwithstanding any other
paragraph of this agreement, I shall not communicate any such confidential
knowledge or information to IFF nor use the same during the course of my
employment.
9/22/97 /s/ DAVID G. BLUESTEIN
.................................... .....................................
(date) (signature)
<PAGE>
EXHIBIT C
RELEASE
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned, David G.
Bluestein, 25 Wild Turkey Court, Ridgefield, Connecticut 06877 (hereinafter
referred to as "Employee"), for and in consideration of certain benefits
heretofore paid or to be paid or provided to him by International Flavors &
Fragrances Inc., a New York corporation with a place of business located at 521
West 57th Street, New York, New York 10019 (hereinafter referred to as "IFF
Inc."), as such benefits are set forth in an Agreement dated September 2, 1998,
a copy of which is annexed hereto as Annex A, DOES HEREBY AGREE TO RELEASE and
DOES HEREBY RELEASE IFF Inc. and all of its subsidiaries and affiliates and
their respective directors, officers and employees (hereinafter referred to as
"Releasees") from all "Claims", as hereinafter defined, and Employee agrees
never to file any lawsuit or any claim with any Federal, state or local
administrative agency asserting or in respect of any of such Claims.
As used in this Release, the term "Claims" means and includes all charges,
complaints, claims, liabilities, obligations, promises, agreements, damages,
actions, causes of action, rights, costs, losses and expenses (including
attorneys' fees and costs actually incurred) of any nature whatsoever, known or
unknown, suspected or unsuspected, which Employee now has, or claims to have, or
which Employee at any earlier time had, or claimed to have had, or which
<PAGE>
Employee at any future time may have, or claim to have, against each or any
of the Releasees as to any matters occurring or arising on or before the date
this Release is executed by Employee. The claims Employee is releasing under
this Release include, but are not limited to, rights arising out of alleged
violations of any contracts, express or implied, written or oral, and any Claims
for wrongful discharge, fraud, misrepresentation, infliction of emotional
distress, or any other tort, and any other Claims relating to or arising out of
Employee's employment with IFF Inc. or the termination thereof, and any Claim
for violation of any Federal, state or other governmental statute, regulation or
ordinance including, but not limited to, the following, each as amended to date:
(1) Title VII of the Civil Rights Act of 1964, 42 U.S.C. (Sections)2000e et
seq.. (race, color, religion, sex and national origin discrimination); (2)
Section 1981 of the Civil Rights Act of 1866, 42 U.S.C. (Section 1981) (race
discrimination); (3) the Age Discrimination in Employment Act, 29 U.S.C.
(Sections)621-634 (age discrimination; (4) the Equal Pay Act of 1963, 29 U.S.C.
(Section)206 (equal pay); (5) Executive Order 11246 (race, color, religion, sex
and national origin discrimination); (6) Executive Order 11141 (age
discrimination); (7) Section 503 of the Rehabilitation Act of 1973, 29 U.S.C.
(Sections)701 et seq. (handicap discrimination); (8) the Employee Retirement
Income Security Act of 1974, 29 U.S.C. (Sections)1001 et seq. (retirement
matters); and (9) any applicable New York, New Jersey or Connecticut state or
local law relating to employment termination that may be discriminatory or
otherwise in contravention of public policy.
Employee hereby represents that he has not filed any complaints, charges,
or lawsuits against any Releasee with any governmental agency or any court; that
he will not file
2
<PAGE>
or pursue any at any time hereafter; and that if any such agency or court
assumes jurisdiction of any complaint, charge or lawsuit against any Releasee on
behalf of Employee, he will request such agency or court to withdraw from the
matter. Neither this Release nor the undertaking in this paragraph shall limit
Employee from pursuing Claims for the sole purpose of enforcing his rights under
Annex A or under any employment or retiree benefit plan or program of IFF Inc.
Employee hereby represents that he has been given a period of twenty-one
(21) days to review and consider this Release before signing it. Employee
further understands that he may use none or as much of this 21-day period as he
wishes prior to signing.
Employee is advised that he has the right to and should consult with an
attorney before signing this Release. Employee understands that whether or not
to do so is Employee's decision. Employee has exercised his right to consult
with an attorney to the extent, if any, that he desired.
Employee may revoke this Release within seven (7) days after he signs it.
Revocation can be made by delivering a written notice of revocation to
Vice-President and Secretary, IFF Inc., 521 West 57th Street, New York, New York
10019. For such revocation to be effective, written notice must be received by
such Vice-President, Human Resources, not later than the close of business on
the seventh day after the day on which Employee executes this Release. If
Employee revokes this Release, it shall not be effective and the Letter
Agreement described in Annex A shall be null and void.
3
<PAGE>
Employee understands and acknowledges that IFF Inc. has not made any
promises or representations to Employee other than those in Annex A.
EMPLOYEE ACKNOWLEDGES THAT HE HAS READ THIS RELEASE, UNDERSTANDS IT AND IS
VOLUNTARILY EXECUTING IT.
[PLEASE READ THIS RELEASE CAREFULLY. IT COVERS ALL KNOWN AND UNKNOWN
CLAIMS.]
Executed at New York City, NY, on September 3, 1998
/s/ DAVID G. BLUESTEIN
----------------------
David G. Bluestein
STATE OF NEW YORK
COUNTY OF NEW YORK ss:
Subscribed and sworn to before
me this 3rd day of September, 1998
by the said David G. Bluestein
known to me.
/s/ MARA DUMSKI
-----------------
Notary Public
Mara Dumski
Notary Public, State of New York
No. 01DU4944307
Qualified in New York County
Commission Expires November 21, 1998
4
<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-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 142,138
<SECURITIES> 912
<RECEIVABLES> 296,461
<ALLOWANCES> 8,504
<INVENTORY> 402,077
<CURRENT-ASSETS> 900,268
<PP&E> 878,923
<DEPRECIATION> 404,155
<TOTAL-ASSETS> 1,417,092
<CURRENT-LIABILITIES> 297,785
<BONDS> 3,131
0
0
<COMMON> 14,470
<OTHER-SE> 943,536
<TOTAL-LIABILITY-AND-EQUITY> 1,417,092
<SALES> 1,088,510
<TOTAL-REVENUES> 1,088,510
<CGS> 586,653
<TOTAL-COSTS> 835,752
<OTHER-EXPENSES> (6,303)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,395
<INCOME-PRETAX> 257,666
<INCOME-TAX> 88,884
<INCOME-CONTINUING> 168,782
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 168,782
<EPS-PRIMARY> 1.57
<EPS-DILUTED> 1.57
</TABLE>
