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, 2000 Commission file number 1-4858
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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 incorporation (IRS Employer
or organization) identification No.)
521 West 57th Street, New York, N.Y. 10019-2960
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 765-5500
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------------ ------------
Number of shares outstanding as of November 6, 2000: 97,737,044
<PAGE>
PART I. FINANCIAL INFORMATION 1
ITEM 1. FINANCIAL STATEMENTS
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
9/30/00 12/31/99
----------- -----------
<S> <C> <C>
Assets
Current Assets:
Cash & Cash Equivalents $ 106,820 $ 62,135
Short-term Investments 324 836
Trade Receivables 283,592 290,118
Allowance For Doubtful Accounts (10,193) (10,013)
Inventories: Raw Materials 201,829 229,896
Work in Process 9,659 7,423
Finished Goods 146,875 177,950
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Total Inventories 358,363 415,269
Other Current Assets 87,437 77,069
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Total Current Assets 826,343 835,414
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Property, Plant & Equipment, At Cost 944,855 948,920
Accumulated Depreciation (438,162) (425,004)
----------- -----------
506,693 523,916
Other Assets 33,902 42,165
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Total Assets $ 1,366,938 $ 1,401,495
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities:
Bank Loans $ 43,841 $ 29,274
Commercial Paper 207,095 63,200
Accounts Payable-Trade 48,714 71,989
Dividends Payable 37,902 39,882
Income Taxes 55,816 54,497
Other Current Liabilities 138,836 110,860
----------- -----------
Total Current Liabilities 532,204 369,702
----------- -----------
Other Liabilities:
Deferred Income Taxes 28,572 32,785
Long-term Debt 15,617 3,832
Retirement and Other Liabilities 144,947 136,679
----------- -----------
Total Other Liabilities 189,136 173,296
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Shareholders' Equity:
Common Stock (115,761,840 shares issued) 14,470 14,470
Capital in Excess of Par Value 133,113 134,480
Retained Earnings 1,217,789 1,211,790
Accumulated Other Comprehensive Income:
Cumulative Translation Adjustment (100,278) (57,135)
----------- -----------
1,265,094 1,303,605
Treasury Stock, at cost - 17,020,496 shares in '00
and 10,939,915 in '99 (619,496) (445,108)
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Total Shareholders' Equity 645,598 858,497
----------- -----------
Total Liabilities and Shareholders' Equity $ 1,366,938 $ 1,401,495
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
2
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
3 Months Ended 9/30
-------------------------------
2000 1999
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<S> <C> <C>
Net Sales $ 339,591 $ 364,674
----------- -----------
Cost of Goods Sold 187,475 199,432
Research and Development Expenses 28,666 25,124
Selling and Administrative Expenses 66,205 61,764
Nonrecurring Charges 7,685 710
Interest Expense 4,195 1,362
Other (Income) Expense, Net 2,614 2,365
----------- -----------
296,840 290,757
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Income Before Taxes on Income 42,751 73,917
Taxes on Income 13,824 24,762
----------- -----------
Net Income 28,927 49,155
Other Comprehensive Income:
Foreign Currency Translation Adjustments (27,915) 19,478
----------- -----------
Comprehensive Income $ 1,012 $ 68,633
=========== ===========
Net Income Per Share - Basic $0.29 $0.46
Net Income Per Share - Diluted $0.29 $0.46
Average Number of Shares Outstanding - Basic 99,833 106,003
Average Number of Shares Outstanding - Diluted 99,833 106,271
Dividends Paid Per Share $0.38 $0.38
<CAPTION>
9 Months Ended 9/30
-------------------------------
2000 1999
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<S> <C> <C>
Net Sales $ 1,078,262 $ 1,103,518
----------- -----------
Cost of Goods Sold 587,852 611,111
Research and Development Expenses 82,423 76,992
Selling and Administrative Expenses 197,570 189,558
Nonrecurring Charges 17,039 29,468
Interest Expense 9,406 3,561
Other (Income) Expense, Net 2,488 4,410
----------- -----------
896,778 915,100
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Income Before Taxes on Income 181,484 188,418
Taxes on Income 59,865 63,049
----------- -----------
Net Income 121,619 125,369
Other Comprehensive Income:
Foreign Currency Translation Adjustments (43,143) (28,523)
----------- -----------
Comprehensive Income $ 78,476 $ 96,846
=========== ===========
Net Income Per Share - Basic $1.19 $1.18
Net Income Per Share - Diluted $1.19 $1.18
Average Number of Shares Outstanding - Basic 102,152 105,946
Average Number of Shares Outstanding - Diluted 102,169 106,175
Dividends Paid Per Share $1.14 $1.14
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
INTERNATIONAL FLAVORS & FRAGRANCES INC. 3
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
9 Months Ended 9/30
---------------------------
2000 1999
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<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 121,619 $ 125,369
Adjustments to Reconcile to Net Cash
Provided by Operations:
Depreciation 44,732 39,830
Deferred Income Taxes (12,743) 4,189
Changes in Assets and Liabilities:
Current Receivables (14,694) (52,117)
Inventories 37,947 (16,925)
Current Payables 16,424 47,404
Other, Net 17,939 8,458
--------- ---------
Net Cash Provided by Operations 211,224 156,208
--------- ---------
Cash Flows From Investing Activities:
Proceeds From Sales/Maturities of Short-term Investments 1,614 971
Purchases of Short-term Investments (1,111) (828)
Additions to Property, Plant & Equipment,
Net of Minor Disposals (44,729) (81,089)
--------- ---------
Net Cash Used in Investing Activities (44,226) (80,946)
--------- ---------
Cash Flows From Financing Activities:
Cash Dividends Paid to Shareholders (117,600) (120,915)
Increase in Bank Loans 18,257 27,036
Proceeds from Issuance of Commercial Paper 143,895 --
Increase in Long-term Debt 13,747 --
Decrease in Long-term Debt (1,538) (628)
Proceeds From Issuance of Stock Under Stock Option Plans 1,319 3,643
Purchase of Treasury Stock (177,074) (2,574)
--------- ---------
Net Cash Used in Financing Activities (118,994) (93,438)
--------- ---------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (3,319) (5,419)
--------- ---------
Net Change in Cash and Cash Equivalents 44,685 (23,595)
Cash and Cash Equivalents at Beginning of Year 62,135 114,960
--------- ---------
Cash and Cash Equivalents at End of Period $ 106,820 $ 91,365
========= =========
Interest Paid $ 7,238 $ 3,558
Income Taxes Paid $ 68,502 $ 53,586
</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 1999 Annual Report to
Shareholders. These interim statements are unaudited. In the opinion of the
Company's management, all normal recurring adjustments necessary for a fair
presentation of the results for the interim periods have been made.
Statement of Financial Accounting Standards No. 133 (FAS 133), Accounting for
Derivative Instruments and Hedging Activities, issued in June 1998, is effective
for fiscal years beginning after June 15, 2000. 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 believes that adoption of this Standard, given the
Company's current level of relevant activity, will not have a material effect on
the Company's consolidated financial position or results of operations.
NONRECURRING AND OTHER CHARGES:
As described in Note 2 of the Notes to the Consolidated Financial Statements
included in the Company's 1999 Annual Report to Shareholders, in June 1999, the
Company announced a program to streamline the Company's operations worldwide by
improving operating efficiencies and asset utilization, enabling significant
cost savings and enhanced profitability. The program includes the closure of
selected manufacturing, distribution and sales facilities in all geographic
areas in which the Company operates.
In connection with this program, in January 2000, the Company initiated a
voluntary early retirement incentive program for United States-based employees
meeting certain eligibility requirements. The nonrecurring charge of $9.4
million ($6.2 million after tax) in the first quarter 2000 represents the costs
associated with approximately 70 employees who elected to participate in the
early retirement program. There were no significant non-cash related elements
included in the first quarter charge. The Company has recorded no additional
charges under this program.
At June 30, 2000, the Company had substantially completed the restructuring
program. Since the program's inception, total nonrecurring and other one-time
pretax charges of approximately $50.3 million have been recorded ($40.9 million
of pretax charges were recorded in 1999); non-cash charge amounts approximated
$11.7 million.
Movements in reserves resulting from nonrecurring charges under this program
were as follows (in thousands):
EMPLOYEE- ASSET-
RELATED RELATED TOTAL
-------- ------- --------
Balance December 31, 1999 $ 9,622 $ 1,586 $ 11,208
Additional Reserves 9,354 -- 9,354
Utilized in 2000 (13,795) (745) (14,540)
-------- ------- --------
Balance September 30, 2000 $ 5,181 $ 841 $ 6,022
======== ======= ========
The balance of the reserve is to be utilized upon final decommissioning and
disposal of affected equipment, and as employee separation costs and other
benefit obligations to affected employees are satisfied.
In October 2000, the Company announced a reorganization, which included
management changes, further consolidation of production facilities and related
actions. Over the course of the next 18 to 24 months, the Company expects to
take charges related to the reorganization of approximately $90 million - $100
million. In
<PAGE>
5
the third quarter 2000, the Company recorded approximately $7.7 million of
nonrecurring charges relating primarily to employee separation costs incurred
during the quarter in connection with the reorganization. At September 30, 2000,
the Company has utilized approximately $1.4 million of these reserves.
In connection with this reorganization, in October 2000, the Company initiated a
voluntary retirement incentive program for United States-based employees meeting
certain eligibility requirements. Those eligible employees electing to take the
incentive will receive additional credit, for pension purposes, in terms of age
and service, as well as certain other benefits. It is expected that the early
retirement program will result in a charge to fourth quarter 2000 earnings of
approximately $21 million; approximately 145 employees are eligible under this
program.
SEGMENT INFORMATION:
The Company's reportable segment information, based on geographic area, for the
first nine months 2000 and 1999 follows. Certain prior year amounts have been
reclassified for comparative purposes.
<TABLE>
<CAPTION>
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North Latin Asia-
2000 (Dollars in thousands) America EAME America Pacific Eliminations Consolidated
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales to unaffiliated customers $348,940 $418,029 $160,547 $150,746 $ -- $1,078,262
Transfers between areas 40,520 86,224 1,323 10,346 (138,413) --
---------------------------------------------------------------------------------------------------------------------------
Total sales $389,460 $504,253 $161,870 $161,092 $(138,413) $1,078,262
===========================================================================================================================
Operating profit $ 46,272 $132,024 $ 30,417 $ 31,361 $ 537 $ 240,611
========================================================================================================
Corporate and other unallocated
expenses (30,194)
Nonrecurring charges (17,039)
Interest expense (9,406)
Other income (expense), net (2,488)
----------
Income before taxes on income $ 181,484
===========================================================================================================================
<CAPTION>
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North Latin Asia-
1999 (Dollars in thousands) America EAME America Pacific Eliminations Consolidated
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales to unaffiliated customers $369,965 $446,098 $154,014 $133,441 $ -- $1,103,518
Transfers between areas 44,925 95,752 498 10,379 (151,554) --
---------------------------------------------------------------------------------------------------------------------------
Total sales $414,890 $541,850 $154,512 $143,820 $(151,554) $1,103,518
===========================================================================================================================
Operating profit $ 58,243 $139,909 $ 27,184 $ 24,576 $ 804 $ 250,716
========================================================================================================
Corporate and other unallocated
expenses (24,859)
Nonrecurring charges (29,468)
Interest expense (3,561)
Other income (expense), net (4,410)
----------
Income before taxes on income $ 188,418
===========================================================================================================================
</TABLE>
Included in the 1999 operating profit for EAME are one-time charges totaling
$3,237,000 for accelerated depreciation on assets to be disposed.
NET INCOME PER SHARE:
Options to purchase 6,047,955 and 5,181,829 shares were outstanding for the
third quarter and first nine months of 2000, respectively, but were not included
in the computation of diluted net income per share because the options' exercise
prices were greater than the average market price of the common shares in the
respective periods. Options to purchase 2,719,500 and 2,758,810 shares were
outstanding for the third quarter and first nine months of
<PAGE>
6
1999, respectively, but were not included in the computation of diluted net
income per share because the options' exercise prices were greater than the
average market price of the common shares in the respective periods.
COMPREHENSIVE INCOME:
The accumulated comprehensive income component of Shareholders' Equity,
comprised principally of the cumulative translation adjustment, at September 30,
2000, was ($100,278,000) compared to ($57,135,000) at December 31, 1999. 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.
ACQUISITION OF BUSH BOAKE ALLEN INC.:
In a joint press release issued by the Company and Bush Boake Allen Inc. ("BBA")
dated September 25, 2000, the Boards of Directors of both companies announced
approval of a definitive merger agreement under which the Company would acquire
all of the outstanding shares of BBA for $48.50 per share, in cash. On November
8, 2000, the Company completed the acquisition of BBA at a total purchase price
of approximately $970 million. The acquisition has been financed initially
through a combination of short-term debt and bank borrowings. The acquisition
will be accounted for as a purchase.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
OPERATIONS
Worldwide net sales for the third quarter of 2000 were $339,591,000, compared to
$364,674,000 in the 1999 third quarter, a decrease of 7%. On a country of
destination basis, sales for the quarter were strongest in the Asia=Pacific
region where local currency sales increased by 8%. Local currency sales in
Europe, Africa and the Middle East ("EAME") increased 4%, although such local
currency growth was unfavorably affected by translation into the stronger U.S.
dollar. North America sales declined by 8% mainly due to weak performance in the
Company's North America Flavor operations reflecting the continued slow business
conditions facing many of the Company's food customers. Latin American sales
declined by 13%. On a consolidated basis, local currency sales declined
approximately 2% in comparison to the third quarter 1999.
For the first nine months of 2000, worldwide net sales totaled $1,078,262,000,
compared to $1,103,518,000 for the comparable 1999 period. On a country of
destination basis, local currency sales for the nine months ended September 30,
2000 were strongest in Asia-Pacific, where sales increased 9% over 1999. Local
currency sales in EAME increased 4% in comparison to the prior year period,
while sales in Latin America increased 1%. Sales in North America declined 4% in
comparison to the prior year, mainly as a result of the continued weak business
conditions facing many of the Company's flavor customers. For the nine-month
period ended September 30, 2000, the local currency growth was mitigated on
translation into the stronger U.S. dollar. Had exchange rates been the same
during 2000 and 1999, consolidated sales for the nine-month period ended
September 30, 2000 would have increased approximately 2% in comparison to the
prior year period.
The percentage relationship of cost of goods sold and other operating expenses
to sales for the first nine months 2000 and 1999 are detailed below.
FIRST NINE MONTHS
----------------------
2000 1999
----- -----
Cost of Goods Sold 54.5% 55.4%
Research and Development Expenses 7.6% 7.0%
Selling and Administrative Expenses 18.3% 17.2%
<PAGE>
7
Cost of goods sold, as a percentage of net sales, decreased from the prior year
primarily due to improved economic and pricing conditions in Latin America,
principally Brazil, and stabilized pricing conditions for aroma chemicals. In
1999, the impact of the currency devaluation and economic disruption in Brazil
affected the Company's near-term ability to pass on price increases to its
customers in that market.
Research and development expenses were somewhat higher due to increased
activities in this area. Selling and administrative expenses were somewhat
higher in 2000 due to increased depreciation and other costs associated with new
computer systems and equipment, as well as certain costs incurred in connection
with an employment contract. These costs were partially offset by elimination of
costs incurred in 1999 in connection with the Company's Y2K program.
Net income for the third quarter of 2000, totaled $28,927,000 compared to
$49,155,000 in the prior year third quarter; net income for the first nine
months of 2000 totaled $121,619,000 compared to $125,369,000 for the comparable
1999 period. The amounts for the first nine months of 2000 and 1999 include the
effects of the nonrecurring charges discussed below. Excluding these charges,
income for the third quarter and nine months ended September 30, 2000 was
$33,692,000 and $132,632,000, respectively, compared to $50,902,000 and
$150,262,000 for the comparable periods in 1999.
The effective tax rates for the third quarter and first nine months of 2000 were
32.3% and 33.0%, respectively, compared to 33.5% for the comparable periods in
1999. The lower effective rate reflects the effects of lower tax rates in
various tax jurisdictions in which the Company operates.
NONRECURRING AND OTHER CHARGES:
As described in Note 2 of the Notes to the Consolidated Financial Statements
included in the Company's 1999 Annual Report to Shareholders, in June 1999, the
Company announced a program to streamline the Company's operations worldwide by
improving operating efficiencies and asset utilization, enabling significant
cost savings and enhanced profitability. The program includes the closure of
selected manufacturing, distribution and sales facilities in all geographic
areas in which the Company operates.
In connection with this program, in January 2000, the Company initiated a
voluntary early retirement incentive program for United States-based employees
meeting certain eligibility requirements. The nonrecurring charge of $9.4
million ($6.2 million after tax) in the first quarter 2000 represents the costs
associated with approximately 70 employees who elected to participate in the
early retirement program. There were no significant non-cash related elements
included in the first quarter charge. The Company has recorded no additional
charges under this program.
In the third quarter and nine month periods ended September 30, 1999, the
Company recorded charges of $2.6 million ($1.7 million after tax, or
approximately $.02 per share), and $37.5 million ($25 million after tax, or
approximately $.24 per share), respectively. Certain elements of those charges,
relating primarily to accelerated depreciation on assets to be disposed of, were
recognized in cost of goods sold ($.7 million in the third quarter and $1.3
million year to date) and selling and administrative expenses ($1.3 million in
the third quarter and $2.2 million year to date). In addition, $4.5 million
associated primarily with facility closure was included in other income and
expense. The balance of the charges, representing employee separation and
asset=related costs, were recorded as nonrecurring charges in the Consolidated
Statement of Income.
Charges for the third quarter 1999 and first nine months 1999 totaled
approximately $2.2 million and $27.6 million, respectively, in EAME, and related
principally to employee separation costs associated with the rationalization and
closure of certain operations and facilities.
For North America and Latin America, charges for the third quarter totaled $0.3
million and $0.1 million,
<PAGE>
8
respectively. For the nine months, charges for North America, Latin America and
Asia=Pacific totaled $3.5 million, $3.4 million and $3.0 million, respectively.
Charges for North America, Latin America and Asia-Pacific related to employee
separations and closure of operations.
At June 30, 2000, the Company had substantially completed the restructuring
program. Since the program's inception, total nonrecurring and other one-time
pretax charges of approximately $50.3 million have been recorded ($40.9 million
of pretax charges were recorded in 1999); non-cash charge amounts approximated
$11.7 million.
Movements in reserves resulting from nonrecurring charges under this program
were as follows (in thousands):
EMPLOYEE- ASSET-
RELATED RELATED TOTAL
-------- ------- --------
Balance December 31, 1999 $ 9,622 $ 1,586 $ 11,208
Additional Reserves 9,354 -- 9,354
Utilized in 2000 (13,795) (745) (14,540)
-------- ------- --------
Balance September 30, 2000 $ 5,181 $ 841 $ 6,022
======== ======= ========
The balance of the reserve is to be utilized upon final decommissioning and
disposal of affected equipment, and as employee separation costs and other
benefit obligations to affected employees are satisfied.
In October 2000, the Company announced a reorganization, which included
management changes, further consolidation of production facilities and related
actions. Over the course of the next 18 to 24 months, the Company expects to
take charges related to the reorganization of approximately $90 million - $100
million. The actions to which these charges relate are expected to yield annual
savings by the year 2003 in the range of $25 million - $30 million. A portion of
these savings will be reinvested in the business; however, the Company expects a
large portion to contribute to improving net earnings. In the third quarter
2000, the Company recorded approximately $7.7 million ($.05 per share) of
nonrecurring charges relating primarily to employee separation costs incurred
during the quarter in connection with the reorganization. At September 30, 2000,
the Company has utilized approximately $1.4 million of these reserves.
In connection with this reorganization, in October 2000, the Company initiated a
voluntary retirement incentive program for United States-based employees meeting
certain eligibility requirements. Those eligible employees electing to take the
incentive will receive additional credit, for pension purposes, in terms of age
and service, as well as certain other benefits. It is expected that the early
retirement program will result in a charge to fourth quarter 2000 earnings of
approximately $21 million; approximately 145 employees are eligible under this
program.
ACQUISITION OF BUSH BOAKE ALLEN INC.:
In a joint press release issued by the Company and Bush Boake Allen Inc. ("BBA")
dated September 25, 2000, the Boards of Directors of both companies announced
approval of a definitive merger agreement under which the Company would acquire
all of the outstanding shares of BBA for $48.50 per share, in cash. On November
8, 2000, the Company completed the acquisition of BBA at a total purchase price
of approximately $970 million. The acquisition has been financed initially
through a combination of short-term debt and bank borrowings. The acquisition
will be accounted for as a purchase.
BBA, which conducts operations on six continents, has 60 locations in 38
countries worldwide and supplies flavors and fragrances to the world's leading
consumer products companies for use in foods, beverages, soaps and detergents,
cosmetics, toiletries, personal care items and related products. Its aroma
chemicals, natural extracts
<PAGE>
9
and essential oils serve as raw materials for a wide range of compounded flavors
and fragrances. BBA had 1999 worldwide sales of $499 million.
FINANCIAL CONDITION
Cash, cash equivalents and short-term investments totaled $107,144,000 at
September 30, 2000, and working capital was $294,139,000 compared to
$465,712,000 at December 31, 1999. Gross additions to property, plant and
equipment during the first nine months of 2000 were $49,426,000.
At September 30, 2000, the Company's outstanding commercial paper had an average
interest rate of 6.7%. Commercial paper maturities did not extend beyond January
31, 2000. Long-term debt increased $13,747,000 in the first nine months of 2000
due to a loan in Japan; the loan is payable in full in 2005 and bears interest
at a rate of 1.74%. Proceeds from the loan were used to repay certain short-term
borrowings and for general corporate purposes.
In each of January, April and July 2000, the Company paid a quarterly cash
dividend of $.38 per share to shareholders. In September 2000, the Company
announced a reduction in its quarterly dividend to $.15 per share, beginning
with the fourth quarter 2000 dividend. In April 2000, the Company announced a
plan to repurchase up to an additional 7.5 million shares of its common stock.
In September 2000, the Company announced a plan to increase its current share
repurchase program by an additional $100 million, or approximately 5.9 million
shares at the current share price. A program to repurchase 7.5 million shares,
which had been in effect since 1996, was completed in the first quarter of 2000.
Repurchases will be made from time to time on the open market or through private
transactions as market and business conditions warrant. The repurchased shares
will be available for use in connection with the Company's employee benefit
plans and for other general corporate purposes.
As noted, the Company completed its acquisition of BBA on November 8, 2000. The
acquisition has been initially financed through a combination of bank borrowings
and short-term debt. The Company anticipates having in place permanent financing
for the acquisition over the course of the next 12 months.
The Company anticipates that its financing requirements will be funded from
internal sources and credit facilities currently in place.
CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements in this Management's Discussion and Analysis which are not historical
facts or information are "forward=looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, and are subject to risks and
uncertainties that could cause the Company's actual results to differ materially
from those expressed or implied by such forward=looking statements. Risks and
uncertainties with respect to the Company's business include general economic
and business conditions, interest rates, the price and availability of raw
materials, and political and economic uncertainties, including the fluctuation
or devaluation of currencies in countries in which the Company does business.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There are no material changes from the disclosures in Form 10-K filed with the
Securities and Exchange Commission as of December 31, 1999.
<PAGE>
10
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number
3 By-laws of Registrant as amended through September 30, 2000.
10(a) Separation Agreement dated as of June 15, 2000 between
Registrant and Stuart R. Maconochie, former Vice-President and
Director of Registrant.
10(b) Trust Agreement dated October 4, 2000 among Registrant, First
Union National Bank and Buck Consultants Inc.
27 Financial Data Schedule (EDGAR version only).
(b) Reports on Form 8-K
Registrant filed the following reports on Form 8-K in respect of the
quarter for which this report on Form 10-Q is filed:
o Report on Form 8-K dated September 25, 2000 describing in Item 5
the Registrant's entering into an Agreement and Plan of Merger
dated as of September 25, 2000 for the purpose of acquiring all
of the issued and outstanding shares of Bush Boake Allen Inc., a
Virginia corporation.
o Report on Form 8-K dated September 26, 2000 describing in Item 5
the Registrant's entering into a First Amendment to its
Shareholder Protection Rights Agreement dated as of March 31,
2000.
<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 14, 2000 By: /s/ DOUGLAS J. WETMORE
------------------------------------
Douglas J. Wetmore, Senior
Vice-President and Chief
Financial Officer
Dated: November 14, 2000 By: /s/ STEPHEN A. BLOCK
------------------------------------
Stephen A. Block, Senior
Vice-President, General Counsel
and Secretary
