Why did reported sales rise 26% while pro-forma sales fell 2%?

The 26% increase reflects the November 3, 2000 acquisition of Bush Boake Allen, which is included in reported results only from that date. Measured against pro-forma sales, which treat the two companies as combined from January 1, 1999, 2001 sales declined 2%. The filing attributes the decline to a strong U.S. dollar, weak economic conditions in Latin America, weakness in fine fragrances after September 11, 2001, and the disposition of certain non-core businesses.

How much did the BBA acquisition cost, and how is it being financed?

The company acquired all outstanding shares of Bush Boake Allen for $48.50 per share in cash, for total consideration of $970.0 million including transaction costs. It was initially financed with commercial paper and bridge borrowings, which were later replaced with permanent debt in 2001, including the $700.0 million 6.45% notes due 2006, a Euro 140.0 million credit facility, and Yen 15.15 billion of Japanese subsidiary notes.

What restructuring costs and savings does the company expect?

The company expects annual integration savings of approximately $70.0 million, with about $40.0 million realized in 2001 and the remainder in 2002. Integration implementation costs are expected to total $75.0 million to $80.0 million, primarily for employee separation and facility closure, with $45.0 million to $50.0 million of related capital spending. The 2000 reorganization is expected to cost $90.0 million to $100.0 million through the end of 2002 and to yield annual savings of $25.0 million to $30.0 million by 2003.

Will the company's shareholder dividend change?

The quarterly dividend was reduced by 60% to $0.15 per share beginning with the fourth quarter of 2000, and it remained at $0.15 per share through 2001. Total dividends paid were $57.6 million in 2001, compared with $155.5 million in 2000.

What is the outlook for 2002?

Management's stated priorities for 2002 are completing the reorganization and integration and driving top-line growth. The filing says ongoing weakness in the global economy will continue to affect the Fine Fragrances business at least through the first half of 2002, and that about two-thirds of the business is in household, personal care and packaged food products, which are less affected by recessions. Research and development spending is expected to increase to about $149.0 million in 2002.

IFF 10-K FY2001 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 27, 2002. Cited figures are marked; the original filing is the authoritative source.

International Flavors & Fragrances Inc. (IFF) reported net sales of $1,843.8 million^a for fiscal 2001, up 26% from $1,462.8 million in 2000 on a reported basis, though the filing notes that sales declined 2% against 2000 pro-forma sales of $1,880.6 million.

The increase reflects the November 2000 acquisition of Bush Boake Allen (BBA). Net income was $116.0 million^b, or $1.20 per diluted share, versus $123.0 million ($1.22 per diluted share) in 2000. The filing states that nonrecurring charges were $30.1 million in 2001, and that the company expects about $70.0 million in annual integration savings, with approximately $40.0 million realized in 2001.

Operating profit was $255.6 million, and segment profit rose to $380.4 million^c from $291.7 million, which management attributes to integration savings. The balance sheet shows total assets of $2,268.1 million and long-term debt rising to $939.4 million from $417.4 million, largely from a $700.0 million 6.45% note due 2006 and yen notes issued in 2001. Commercial paper fell to $204.2 million from $809.4 million, and shareholders' equity declined to $524.2 million from $631.3 million.

Cash dividends were cut to $0.15^d per quarter in 2000 and remained at that level through 2001. Management expects 2002 to focus on completing the reorganization and integration and on driving top-line growth, and notes that Fine Fragrances will remain weak at least through the first half of the year.

The company expects 2002 research and development expenses of about $149.0 million, and it has facility consolidation plans, including the closure or consolidation of 16 operations during 2001. The filing describes the Jasper, Missouri class action as preliminary and not expected to be material, and it states that waste-site liabilities are not expected to be material.

02—Key points

Key Highlights

Net sales were $1,843.8 million, up 26% reported, but down 2% versus 2000 pro-forma sales of $1,880.6 million
Net income was $116.0 million, or $1.20 per diluted share, compared with $123.0 million, or $1.22 per diluted share, in 2000
Segment profit rose to $380.4 million from $291.7 million, driven by BBA integration savings
Approximately $40.0 million of the expected $70.0 million in annual BBA integration savings was realized in 2001
Long-term debt increased to $939.4 million from $417.4 million, including a $700.0 million 6.45% note due 2006
Shareholders' equity fell to $524.2 million from $631.3 million, and treasury stock purchases were $71.2 million in 2001
The company expects 2002 R&D spending of about $149.0 million, and expects Fine Fragrances to stay weak at least through the first half of 2002

03—Questions

Frequently Asked Questions

Why did reported sales rise 26% while pro-forma sales fell 2%?
The 26% increase reflects the November 3, 2000 acquisition of Bush Boake Allen, which is included in reported results only from that date. Measured against pro-forma sales, which treat the two companies as combined from January 1, 1999, 2001 sales declined 2%. The filing attributes the decline to a strong U.S. dollar, weak economic conditions in Latin America, weakness in fine fragrances after September 11, 2001, and the disposition of certain non-core businesses.
How much did the BBA acquisition cost, and how is it being financed?
The company acquired all outstanding shares of Bush Boake Allen for $48.50 per share in cash, for total consideration of $970.0 million including transaction costs. It was initially financed with commercial paper and bridge borrowings, which were later replaced with permanent debt in 2001, including the $700.0 million 6.45% notes due 2006, a Euro 140.0 million credit facility, and Yen 15.15 billion of Japanese subsidiary notes.
What restructuring costs and savings does the company expect?
The company expects annual integration savings of approximately $70.0 million, with about $40.0 million realized in 2001 and the remainder in 2002. Integration implementation costs are expected to total $75.0 million to $80.0 million, primarily for employee separation and facility closure, with $45.0 million to $50.0 million of related capital spending. The 2000 reorganization is expected to cost $90.0 million to $100.0 million through the end of 2002 and to yield annual savings of $25.0 million to $30.0 million by 2003.
Will the company's shareholder dividend change?
The quarterly dividend was reduced by 60% to $0.15 per share beginning with the fourth quarter of 2000, and it remained at $0.15 per share through 2001. Total dividends paid were $57.6 million in 2001, compared with $155.5 million in 2000.
What is the outlook for 2002?
Management's stated priorities for 2002 are completing the reorganization and integration and driving top-line growth. The filing says ongoing weakness in the global economy will continue to affect the Fine Fragrances business at least through the first half of 2002, and that about two-thirds of the business is in household, personal care and packaged food products, which are less affected by recessions. Research and development spending is expected to increase to about $149.0 million in 2002.

04—Continue

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