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International Flavors & Fragrances Annual Report, Year Ended Dec 31, 1998

Filing Date
Filed March 30, 1999
Period End
December 31, 1998
Security
IFF
In the record · 2016–202610-K1110-Q338-K151

IFF filed 11 annual reports (10-K), 33 quarterly reports (10-Q) and 151 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · May ’17May ’17
  2. Material agreement8-K · Jan ’20Jan ’20
  3. Leadership change8-K · Feb ’22Feb ’22
  4. Leadership change8-K · Oct ’25Oct ’25

01—Abstract

Summary

Summary of the 10-K filed March 30, 1999. Cited figures are marked; the original filing is the authoritative source.

International Flavors & Fragrances Inc. reported net sales of $1.407 billiona for 1998, down from $1.427 billion in 1997, and net income of $203.8 million, a decrease of $14.4 million or 7% from the prior year.

Diluted earnings per share were $1.90b, compared with $1.99 in 1997. Fragrance products accounted for about 59% of 1998 sales and flavor products about 41%. Sales were flat for fragrances at $820.1 million, while flavor sales fell 3% to $587.2 million.

Sales in the Far East dropped 20%c, affected by economic disruption in Japan and Southeast Asia, and the stronger U.S. dollar reduced reported sales. Sales in North America rose 6%, and Latin America rose 8%. The company described its financial condition as strong.

Cash, cash equivalents and short-term investments totaled $116.0 milliond at year-end 1998, compared with $260.4 million a year earlier. Working capital was $575.1 million and long-term debt was only $4.3 million. Shareholders' equity fell to $945.1 million from $1.000 billion, mainly because of $134.4 million of treasury stock purchases.

The company paid $159.6 million in dividends in 1998 and, in January 1999, raised the annual cash dividend rate to $1.52 per share from $1.48. Cost of goods sold held at 54.2% of sales, while selling and administrative expenses rose to 17.0% of sales, including about $12.5 million of Year 2000 expense. Looking ahead, the company's Year 2000 program has a total estimated cost of about $45 million, with $24 million spent at December 31, 1998, and is expected to be completed by December 31, 1999.

The company is also evaluating its selling, administrative, manufacturing and distribution functions, and the filing says this may lead to nonrecurring charges in 1999 whose extent is not yet quantifiable. Research and development spending was $98.4 million in 1998 and is expected to rise to about $106 million in 1999.

Capital expenditures are expected to be about $90 million in 1999. The company states that the Euro conversion is not expected to have a significant effect on its revenues, costs or competitive position.

02—Key points

Key Highlights

  1. Net sales were $1.407 billion in 1998, down from $1.427 billion in 1997, with the stronger U.S. dollar reducing reported sales, which would have been about 2% higher at constant exchange rates.
  2. Net income was $203.8 million, down $14.4 million or 7%, and diluted EPS was $1.90 versus $1.99 in 1997.
  3. Far East sales fell 20% in 1998 due to economic disruption in Japan and Southeast Asia, while North America sales rose 6% and Latin America sales rose 8%.
  4. Cash and short-term investments fell to $116.0 million from $260.4 million, while long-term debt remained minimal at $4.3 million and working capital was $575.1 million.
  5. The company spent $134.4 million repurchasing treasury stock in 1998 and raised its annual cash dividend rate to $1.52 per share in January 1999 from $1.48.
  6. Year 2000 program costs are estimated at about $45 million, of which $24 million was spent by December 31, 1998, and a company-wide streamlining review may produce nonrecurring charges in 1999.
  7. The company's 30 largest customers accounted for about 54% of 1998 sales, and no single customer other than the four largest exceeded 3% of sales.

03—Questions

Frequently Asked Questions

  1. Why did International Flavors & Fragrances' earnings decline in 1998?

    Net income fell $14.4 million, or 7%, to $203.8 million. The filing attributes the reported sales decline mainly to the stronger U.S. dollar and to a 20% drop in Far East sales caused by economic disruption in Japan and Southeast Asia. Selling and administrative expenses rose to 17.0% of sales from 15.9%, including about $12.5 million of Year 2000 costs.

  2. How strong is the company's balance sheet?

    The filing describes the financial condition as strong. Long-term debt was $4.3 million at year-end 1998, and working capital was $575.1 million. Cash and short-term investments declined to $116.0 million from $260.4 million, and shareholders' equity was $945.1 million, down from $1.000 billion after share repurchases and dividends.

  3. What returns is the company providing to shareholders?

    Dividends paid totaled $159.6 million in 1998. In January 1999 the annual cash dividend rate was increased to $1.52 per share from $1.48. The company also bought $134.4 million of its common stock in 1998 under its 1996 repurchase program, which had about 4.3 million shares repurchased at year-end 1998.

  4. Are there additional costs or risks expected in 1999?

    The company expects Year 2000 program costs of about $45 million in total, with $24 million spent by December 31, 1998, and expects the program to be completed by December 31, 1999. It is evaluating its operations to reduce costs, and any resulting actions may cause nonrecurring charges in 1999 whose size is not yet determined. Research and development spending is expected to increase to about $106 million, and the company expects the Euro conversion to have no significant effect.

04—Continue

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