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International Flavors & Fragrances Annual Report, Year Ended Dec 31, 2003

Filing Date
Filed March 11, 2004
Period End
December 31, 2003
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 11, 2004. Cited figures are marked; the original filing is the authoritative source.

International Flavors & Fragrances Inc. (IFF) reported net sales of $1,901.5 milliona for 2003, up from $1,809.2 million in 2002, and net income of $172.6 million, or $1.83 diluted EPS, compared with $175.9 million in 2002.

The filing attributes sales growth partly to the weaker U.S. dollar, and states that on a constant-currency basis net sales would have declined 2%. Operating profit was $285.8 millionb versus $299.9 million in 2002, with restructuring and other charges of $42.4 million in 2003 and $11.7 million in 2002. The company states that it completed its reorganization program in 2003, eliminating 321 positions, and that the Bush Boake Allen integration was completed quickly with savings exceeding the $70 million anticipated.

The balance sheet strengthened over the year. Long-term debt fell to $690.2 millionc from $1,007.1 million, as the company repurchased $200.7 million of its 6.45% Notes due 2006, funded with commercial paper. Shareholders' equity rose to $742.6 million from $574.7 million.

Cash and short-term investments were $12.6 milliond at year-end, and the company expects to reduce borrowings by approximately $100.0 million in 2004. Capital expenditures were $66.0 million in 2003, with about $90.0 million expected for 2004. Management expects 2004 research and development spending of approximately $179 million, and an effective tax rate near 31.5%.

The filing discloses ongoing respiratory-injury lawsuits related to flavor products, including a Missouri class action that was denied class status, with individual cases now heard separately, and an Ohio popcorn-factory suit. Management does not expect these matters to have a material adverse effect, citing the merits of its defenses and available insurance. The company also disclosed a $0.16 quarterly dividend for the first quarter of 2004, and a share repurchase authorization with $42.0 million remaining at year-end.

02—Key points

Key Highlights

  1. Net sales of $1,901.5 million in 2003, up from $1,809.2 million in 2002, with the filing stating a 5% increase in reported terms
  2. Net income of $172.6 million, or $1.83 diluted EPS, versus $175.9 million, or $1.84, in 2002
  3. Operating profit of $285.8 million in 2003 versus $299.9 million in 2002, with restructuring charges of $42.4 million
  4. Long-term debt reduced to $690.2 million from $1,007.1 million after $200.7 million of 6.45% Notes were repurchased
  5. Fragrance sales of $1,035.0 million and flavor sales of $866.5 million in 2003; Europe was the largest region at 40% of sales
  6. Shareholders' equity increased to $742.6 million from $574.7 million; the company completed its reorganization program in 2003
  7. Research and development expenses of $159.3 million in 2003, with approximately $179 million expected in 2004

03—Questions

Frequently Asked Questions

  1. How did IFF's sales and profitability trend in 2003?

    Net sales rose to $1,901.5 million from $1,809.2 million, and the filing states that the weaker U.S. dollar favorably affected reported results; at constant exchange rates, sales would have declined 2%. Net income was $172.6 million compared with $175.9 million in 2002, and operating profit fell to $285.8 million from $299.9 million. Higher restructuring charges of $42.4 million, against $11.7 million in 2002, contributed to the decline.

  2. Why did IFF's debt decline in 2003?

    The company repurchased $200.7 million of its 6.45% Notes due May 2006 in open-market transactions, funded with commercial paper. Long-term debt fell to $690.2 million from $1,007.1 million. The filing expects interest expense savings of approximately $4.0 million annually from replacing the Notes with commercial paper, and anticipates reducing borrowings by about $100.0 million in 2004.

  3. What were the main sources of IFF's revenue by product line and region?

    Fragrance products generated $1,035.0 million and flavor products $866.5 million in 2003. By destination, Europe accounted for 40% of sales, North America 29%, Asia Pacific 16%, Latin America 12% and India 3%. The 30 largest customers accounted for approximately 53% of sales.

  4. Are there material legal risks disclosed in the filing?

    The filing describes respiratory-injury lawsuits involving flavor products, including a Missouri class action in which class status was denied, with individual cases now heard separately, and an Ohio popcorn-factory suit. The company states that, given the merits of its defenses and available insurance, it does not expect these cases to have a material adverse effect on its financial condition, results of operations or liquidity. The filing also notes potentially responsible party claims at waste sites, which it also considers not material.

04—Continue

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