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, 2002 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
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Number of shares outstanding as of October 31, 2002: 94,339,096
PART I. FINANCIAL INFORMATION 1
ITEM 1. FINANCIAL STATEMENTS
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(Unaudited)
9/30/02 12/31/01
----------- ------------
Assets
- ------
Current Assets:
Cash & Cash Equivalents $ 23,144 $ 48,521
Short-term Investments 524 384
Trade Receivables 362,084 328,858
Allowance For Doubtful Accounts (12,067) (10,835)
Inventories: Raw Materials 206,277 212,270
Work in Process 6,179 10,853
Finished Goods 185,593 192,861
------------ ------------
Total Inventories 398,049 415,984
Deferred Income Taxes 61,628 77,449
Other Current Assets 48,789 36,000
------------ ------------
Total Current Assets 882,151 896,361
------------ ------------
Property, Plant & Equipment, At Cost 943,241 975,630
Accumulated Depreciation (434,626) (443,157)
------------ ------------
508,615 532,473
------------ ------------
Intangible Assets, net 780,126 795,920
Other Assets 54,628 43,297
------------ ------------
Total Assets $ 2,225,520 $ 2,268,051
============ ============
Liabilities and Shareholders' Equity
- ------------------------------------
Current Liabilities:
Bank Loans and Current Portion of Long-term Debt $ 6,712 $ 23,716
Commercial Paper 15,991 204,229
Accounts Payable-Trade 94,889 85,659
Dividends Payable 14,150 14,215
Income Taxes 63,552 49,841
Other Current Liabilities 168,829 182,554
------------ ------------
Total Current Liabilities 364,123 560,214
------------ ------------
Other Liabilities:
Deferred Income Taxes 6,113 44,553
Long-term Debt 1,053,708 939,404
Retirement and Other Liabilities 226,188 199,710
------------ ------------
Total Other Liabilities 1,286,009 1,183,667
------------ ------------
Shareholders' Equity:
Common Stock 12 1/2 cent par value; authorized
500,000,000 shares; issued 115,761,840 shares 14,470 14,470
Capital in Excess of Par Value 102,605 126,170
Restricted Stock (6,259) (1,440)
Retained Earnings 1,357,711 1,263,344
Accumulated Other Comprehensive Loss:
Cumulative Translation Adjustment (161,937) (156,266)
Accumulated Losses on Derivatives
Qualifying as Hedges (185) (2,261)
Minimum pension liability adjustment (20,009) (20,009)
------------ ------------
1,286,396 1,224,008
Treasury Stock, at cost - 21,422,003 shares in '02
and 20,996,954 in '01 (710,021) (698,851)
Note Receivable from Officer (987) (987)
------------ ------------
Total Shareholders' Equity 575,388 524,170
------------ ------------
Total Liabilities and Shareholders' Equity $ 2,225,520 $ 2,268,051
============ ============
See Notes to Consolidated Financial Statements
INTERNATIONAL FLAVORS & FRAGRANCES INC. 2
CONSOLIDATED STATEMENT OF INCOME
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(Unaudited)
3 Months Ended 9/30
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2002 2001
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Net Sales $ 462,777 $ 462,719
------------ ----------
Cost of Goods Sold 261,075 268,631
Research and Development Expenses 37,664 31,596
Selling and Administrative Expenses 75,142 72,545
Amortization of Goodwill and Other Intangibles 3,158 11,491
Nonrecurring Charges 2,495 8,869
Interest Expense 8,947 16,545
Other (Income) Expense, Net (561) (1,864)
------------ ----------
387,920 407,813
------------ ----------
Income Before Taxes on Income 74,857 54,906
Taxes on Income 25,258 21,351
------------ ----------
Net Income 49,599 33,555
Other Comprehensive Income:
Foreign Currency Translation Adjustments (17,265) (5,306)
Accumulated (Losses) Gains on Derivatives
Qualifying as Hedges (1,153) 2,676
------------ ----------
Comprehensive Income $ 31,181 $ 30,925
============ ==========
Net Income Per Share - Basic $0.52 $0.35
Net Income Per Share - Diluted $0.52 $0.35
Average Number of Shares Outstanding - Basic 94,628 95,467
Average Number of Shares Outstanding - Diluted 95,665 96,746
Dividends Paid Per Share $0.15 $0.15
9 Months Ended 9/30
---------------------------------------
2002 2001
------ ------
Net Sales $ 1,384,957 $ 1,424,596
------------ ------------
Cost of Goods Sold 793,551 822,276
Research and Development Expenses 107,856 102,504
Selling and Administrative Expenses 229,449 239,391
Amortization of Goodwill and Other Intangibles 9,474 34,246
Nonrecurring Charges 11,737 30,069
Interest Expense 28,668 56,479
Other (Income) Expense, Net (3,333) (1,098)
------------ ------------
1,177,402 1,283,867
------------ ------------
Income Before Taxes on Income 207,555 140,729
Taxes on Income 70,607 53,897
------------ ------------
Net Income 136,948 86,832
Other Comprehensive Income:
Foreign Currency Translation Adjustments (5,671) (82,892)
Accumulated Gains on Derivatives
Qualifying as Hedges 2,076 900
------------ ------------
Comprehensive Income $ 133,353 $ 4,840
============ ============
Net Income Per Share - Basic $1.45 $0.90
Net Income Per Share - Diluted $1.43 $0.89
Average Number of Shares Outstanding - Basic 94,578 96,069
Average Number of Shares Outstanding - Diluted 95,954 97,022
Dividends Paid Per Share $0.45 $0.45
See Notes to Consolidated Financial Statements
INTERNATIONAL FLAVORS & FRAGRANCES INC. 3
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(Unaudited)
9 Months Ended 9/30
--------------------------------------
2002 2001
---------- -----------
Cash Flows From Operating Activities:
- -------------------------------------
Net Income $ 136,948 $ 86,832
Adjustments to Reconcile to Net Cash
Provided by Operations:
Depreciation and Amortization 63,391 93,183
Deferred Income Taxes (16,167) (8,381)
Changes in Assets and Liabilities:
Current Receivables (28,814) (40,191)
Inventories 26,594 3,543
Current Payables 11,165 (11,963)
Other, Net (11,452) (6,324)
------------ ------------
Net Cash Provided by Operations 181,665 116,699
------------ ------------
Cash Flows From Investing Activities:
- -------------------------------------
Proceeds from Short-term Investments 33 8,229
Purchases of Short-term Investments (176) (19,786)
Acquisition of Minority Interest (7,922) -
Additions to Property, Plant and Equipment (59,010) (33,893)
Proceeds from Disposal of Assets 56,724 5,718
------------ ------------
Net Cash Used in Investing Activities (10,351) (39,732)
------------ ------------
Cash Flows From Financing Activities:
- -------------------------------------
Cash Dividends Paid to Shareholders (42,646) (43,336)
(Decrease) Increase in Bank Loans (18,774) 1,171
Net Decrease in Commercial Paper Outstanding (188,238) (541,677)
Net Proceeds from Long-term Debt 261,513 549,379
Repayments of Long-term Debt (169,580) (48,679)
Proceeds From Issuance of Stock Under Stock Option
and Employee Stock Purchase Plans 28,305 2,494
Purchase of Treasury Stock (67,948) (55,954)
------------ ------------
Net Cash Used in Financing Activities (197,368) (136,602)
------------ ------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents 677 (2,850)
------------ ------------
Net Change in Cash and Cash Equivalents (25,377) (62,485)
Cash and Cash Equivalents at Beginning of Year 48,521 128,869
------------ ------------
Cash and Cash Equivalents at End of Period $ 23,144 $ 66,384
============ ============
Interest Paid $ 34,332 $ 48,717
Income Taxes Paid $ 63,329 $ 75,737
See Notes to Consolidated Financial Statements
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 2001 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.
NEW ACCOUNTING PRONOUNCEMENTS:
In June 2002, SFAS No. 146, "Accounting for Costs Associated with Exit or
Disposal Activities" was issued. This statement requires the recording of costs
associated with exit or disposal activities at their fair values only once a
liability exists. Under previous guidance, certain exit costs were accrued when
management committed to an exit plan, which may have been before an actual
liability arose. SFAS No. 146 is effective for exit or disposal activities
initiated after December 31, 2002.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES:
The Company has entered into a series of swaps effectively converting the fixed
6.45% coupon interest rate on $700 million of outstanding debt to a variable
short-term rate based upon the London InterBank Offered Rate (LIBOR) plus an
interest markup. Periodically, the Company has amended the swaps, changing the
short-term LIBOR basis and the related spread. As a result of these amendments
and changes, the counter-party has paid the Company a total of $68.4 million
including accrued swap interest of $8.0 million. Of the $68.4 million, the
counter-party has paid the Company $48.5 million, including accrued swap
interest of $5.2 million this year; in the third quarter the counter-party paid
$47.3 million including accrued swap interest of $4.8 million. The net realized
gains on the swaps have been deferred, classified as a separate component of
debt, and are being amortized to income as a reduction in interest expense over
the remaining term of the debt; at September 30, 2002, the remaining deferred
balance of the gains totaled $54.9 million. In addition, the Company entered
into a series of swaps in the third quarter to convert its long-term Japanese
Yen borrowings from fixed rate to short-term Japanese Yen LIBOR rates. To the
extent the Company has not received cash or otherwise amended or settled any
swap agreements, any applicable mark-to-market adjustment relating to that swap
is included as a separate component of debt. These swaps are designated as
qualified cash flow hedges. The Company had no ineffective interest rate swaps
at September 30, 2002.
The Company enters into foreign currency forward contracts with the objective of
reducing exposure to cash flow volatility associated with foreign currency
receivables and payables, and with anticipated purchases of certain raw
materials used in operations. The notional amount and maturity dates of such
contracts match those of the underlying transactions. At September 30, 2002, the
Company had outstanding foreign currency forward contracts of approximately
$98.0 million. The Company has designated these contracts as qualified fair
value and cash flow hedges. Accordingly, the effective portion of the gain or
loss on the derivative instrument is reported as a component of other
comprehensive income and recognized in earnings in the same period or periods
during which the hedged transaction affects earnings. The Company had no
ineffective foreign currency forward contracts at September 30, 2002.
SALE AND LEASEBACK TRANSACTION:
During June 2002, the Company entered into agreements for the sale and leaseback
of its Hazlet and South Brunswick, New Jersey facilities. Under the terms of the
sale agreement, the Company sold the land, building and associated improvements
at these facilities to an unrelated third party for $48.0 million in cash. The
leases are classified as operating leases in accordance with Statement of
Financial Accounting Standards No. 13, "Accounting for Leases." The net book
value of these assets approximated $20.3 million. The book value and associated
depreciation of the related assets have been removed from the Company's accounts
and the gain realized on the sale, approximating $26.7 million, has been
deferred. The deferred gain will be credited to income over the 22-year
operating lease term. At September 30, 2002, the unamortized portion of the
deferred gain is included in the balance sheet captions "Retirement and Other
Liabilities" in the amount of $25.1 million and "Other Current Liabilities" in
the amount of $1.2 million. The operating lease agreements provide for renewal
options of up to 30 years. Payments under the leases approximate $4.2 million
annually and commenced in July 2002. Total lease obligations for 2002 are $2.1
million and for 2003 to 2006 are $4.2 million annually and the aggregate lease
obligation is $92.4 million.
5
NET INCOME PER SHARE:
Stock options to purchase 5,526,317 and 3,641,384 shares were outstanding for
the third quarter and the first nine months of 2002, respectively, and 3,404,047
and 4,414,882 shares for the third quarter and first nine months of 2001,
respectively, but were not included in the computation of diluted net income per
share for the respective periods because the options' exercise prices were
greater than the average market price of the common shares in the respective
periods.
SEGMENT INFORMATION:
Effective January 1, 2001, the Company was reorganized into five geographic
regions with a single manager responsible for each region. The five regions
were: North America, Latin America, Asia-Pacific, Europe and Central Asia,
Middle East ("CAME"). Effective January 1, 2002, the CAME region was
reconstituted and renamed the "India Region" (India, Pakistan and other
countries in the Indian Subcontinent). Certain operations formerly included in
CAME are, from January 1, 2002, included with Europe. North and Latin America
and Asia-Pacific were unaffected by the geographic reorganization.
The Company's reportable segment information, based on geographic region,
follows. Certain prior year amounts have been reclassified for comparative
purposes to reflect the geographic alignment and adoption of FAS 142. The
Company evaluates the performance of its geographic regions based on segment
operating profit, excluding interest expense, other income and expense, certain
unallocated expenses, amortization of goodwill, the effects of nonrecurring
items and accounting changes, and income tax expense.
Three Months Ended September 30, 2002
- -----------------------------------------------------------------------------------------------------------------------------------
North India Latin Asia-
2002 (Dollars in thousands) America Europe Region America Pacific Eliminations Consolidated
- -----------------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers $153,603 $181,523 $ 9,975 $51,256 $66,420 $ -- $462,777
Transfers between areas 21,236 33,277 878 367 5,414 (61,172) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total sales $174,839 $214,800 $10,853 $51,623 $71,834 $(61,172) $462,777
===================================================================================================================================
Segment profit $ 29,916 $ 40,320 $ 2,540 $11,359 $10,718 $ 693 $ 95,546
====================================================================================================================
Corporate and other
unallocated expenses (9,808)
Nonrecurring charges (2,495)
Interest expense (8,947)
Other income (expense), net 561
--------------
Income before taxes on income $ 74,857
===================================================================================================================================
Three Months Ended September 30, 2001
- -----------------------------------------------------------------------------------------------------------------------------------
North India Latin Asia-
2001 (Dollars in thousands) America Europe Region America Pacific Eliminations Consolidated
- -----------------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers $160,050 $165,968 $8,042 $63,978 $64,681 $ -- $462,719
Transfers between areas 21,421 33,619 186 590 4,210 (60,026) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total sales $181,471 $199,587 $8,228 $64,568 $68,891 $(60,026) $462,719
===================================================================================================================================
Segment profit $ 25,768 $ 38,397 $1,557 $14,692 $15,197 $ (92) $ 95,519
====================================================================================================================
Corporate and other
unallocated expenses (8,853)
Amortization of goodwill (8,210)
Nonrecurring charges (8,869)
Interest expense (16,545)
Other income (expense), net 1,864
-------------
Income before taxes on income $ 54,906
===================================================================================================================================
6
Nine Months Ended September 30, 2002
- -----------------------------------------------------------------------------------------------------------------------------------
North India Latin Asia-
2002 (Dollars in thousands) America Europe Region America Pacific Eliminations Consolidated
- -----------------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers $462,042 $528,381 $28,862 $165,861 $199,811 $ -- $1,384,957
Transfers between areas 63,514 96,411 1,675 723 12,437 (174,760) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total sales $525,556 $624,792 $30,537 $166,584 $212,248 $(174,760) $1,384,957
===================================================================================================================================
Segment profit $ 68,227 $126,892 $ 7,231 $ 37,757 $ 38,870 $ 542 $ 279,519
====================================================================================================================
Corporate and other
unallocated expenses (34,892)
Nonrecurring charges (11,737)
Interest expense (28,668)
Other income (expense), net 3,333
--------------
Income before taxes on income $ 207,555
===================================================================================================================================
Nine Months Ended September 30, 2001
- -----------------------------------------------------------------------------------------------------------------------------------
North India Latin Asia-
2001 (Dollars in thousands) America Europe Region America Pacific Eliminations Consolidated
- -----------------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers $481,813 $527,777 $25,039 $187,226 $202,741 $ -- $1,424,596
Transfers between areas 65,423 103,379 2,573 1,247 12,777 (185,399) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total sales $547,236 $631,156 $27,612 $188,473 $215,518 $(185,399) $1,424,596
===================================================================================================================================
Segment profit $ 67,620 $123,474 $ 6,519 $ 41,485 $ 47,015 $ (731) $ 285,382
====================================================================================================================
Corporate and other
unallocated expenses (34,802)
Amortization of goodwill (24,401)
Nonrecurring charges (30,069)
Interest expense (56,479)
Other income (expense), net 1,098
--------------
Income before taxes on income $ 140,729
===================================================================================================================================
NONRECURRING AND OTHER CHARGES:
As described in Note 2 of the Notes to the Consolidated Financial Statements
included in the Company's 2001 Annual Report to Shareholders, in October 2000,
the Company announced a reorganization, including management changes, further
consolidation of production facilities and related actions. The total pretax
cost of actions taken in connection with the reorganization, including $31.9
million and $30.1 million recorded in 2000 and 2001, respectively, is expected
to approximate $90.0 million to $100.0 million. In connection with this program,
the Company recorded nonrecurring charges of $2.5 million ($1.7 million after
tax) and $11.7 million ($7.7 million after tax) in the three-month and
nine-month periods ended September 30, 2002, respectively, related primarily to
employee separation costs and other reorganization activities. The pretax
nonrecurring charges recorded for the third quarter 2002 relate to operations in
North America ($.8 million), Europe ($1.6 million) and Asia-Pacific ($.1
million). The pretax nonrecurring charges recorded for the nine month period
ended September 30, 2002 relate to operations in North America ($5.6 million),
Europe ($5.8 million) and Asia-Pacific ($.3 million). Of the North American
charges, $4.0 million related to a non-cash asset write-off associated with the
disposition of the Company's fruit concentrates business.
Movements in the liabilities related to the nonrecurring charges were as follows
(in millions):
EMPLOYEE- ASSET-RELATED
RELATED AND OTHER TOTAL
----------- --------------- -------
Balance December 31, 2001 $ 7.0 $ .7 $ 7.7
Additional charges 4.3 7.4 11.7
Utilized in 2002 (5.5) (5.4) (10.9)
----- ----- -----
Balance September 30, 2002 $ 5.8 $ 2.7 $ 8.5
===== ===== =====
7
The Company has established accruals relating primarily to employee separation
costs, facility closure costs and other actions relating to the integration of
certain BBA operations into IFF. Costs associated with these integration actions
were recognized as a component of the purchase accounting which resulted in an
adjustment to goodwill; such costs did not directly impact current earnings.
Movements in these acquisition accounting accruals were as follows (in
millions):
EMPLOYEE- ASSET-RELATED
RELATED AND OTHER TOTAL
----------- --------------- -------
Balance December 31, 2001 $13.8 $ 9.9 $23.7
Utilized in 2002 (5.9) (4.7) (10.6)
----- ----- -----
Balance September 30, 2002 $ 7.9 $ 5.2 $13.1
===== ===== =====
The balance of the restructuring and integration related liabilities will be
utilized by the end of 2003 in connection with the final dismantling and
disposal of affected equipment and as severance and other benefit obligations
to affected employees are satisfied.
RESTRICTED STOCK:
In January 2001, the Company awarded approximately 190,000 IFF Stock Units
("Units") to eligible employees in exchange for surrender of their "under water"
stock options. The Units vest, in four equal installments, over not more than a
seven-year period, upon the Company's Common Stock attaining successively higher
market price targets beginning at $22.50 per share, and earn dividend
equivalents as and when cash dividends are paid. Compensation expense is
recognized over the Unit's vesting period. In the first quarter of 2002, the
third price target of $31.50 was achieved and the Company recognized
compensation expense of $.8 million which is included in operating expenses. The
remaining unvested Units are reported as Restricted Stock on the Company's
Consolidated Balance Sheet.
On August 1, 2002, the Company's Board of Directors granted an award of 200,000
restricted shares of the Company's common stock. Entitlement to all or a
portion of the restricted award is subject to the Company's achieving certain
levels of shareholder return, compared to those of a specified group of
companies, over the three, four and five year periods commencing August 1, 2002.
Compensation expense relating to the award is recognized over the restriction
period.
8
COMPREHENSIVE INCOME:
Changes in the accumulated other comprehensive income component of shareholders'
equity were as follows:
- --------------------------------------------------------------------------------------------------------------------------
Accumulated gains
(losses) on
2002 (Dollars in thousands) derivatives Minimum Pension
Translation qualifying as Obligation, net of
adjustments hedges tax Total
-----------------------------------------------------------------------------------
Balance December 31, 2001 $(156,266) $(2,261) $(20,009) $(178,536)
Change (5,671) 2,076 -- (3,595)
-----------------------------------------------------------------------------------
Balance September 30, 2002 $(161,937) $ (185) $(20,009) $(182,131)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Accumulated gains
(losses) on
2001 (Dollars in thousands) derivatives Minimum Pension
Translation qualifying as Obligation, net of
adjustments hedges tax Total
-----------------------------------------------------------------------------------
Balance December 31, 2000 $ (77,578) $ -- $ -- $ (77,578)
Change (82,892) 900 -- (81,992)
-----------------------------------------------------------------------------------
Balance September 30, 2001 $(160,470) $ 900 $ -- $(159,570)
- --------------------------------------------------------------------------------------------------------------------------
BORROWINGS:
Debt consists of the following (Dollars in thousands):
Rate Maturities September 30, 2002 December 31, 2001
---- ---------- ------------------ -----------------
Commercial paper (U.S.) $ 15,991 $ 204,229
Bank loans 5,205 21,916
Current portion of long-term debt 1,507 1,800
---------------------------------------
Total current debt 22,703 227,945
---------------------------------------
U.S. dollars 6.45% 2006 699,046 698,800
Euro facility 4.79% 2005-06 162,064 101,500
Japanese Yen notes 2.45% 2008-11 122,783 115,300
Japanese Yen notes 1.74% 2005 8,190 9,100
Other 2003-05 1,749 6,404
---------------------------------------
993,832 931,104
Deferred realized gains on interest
rate swaps 54,922 15,571
FAS 133 mark-to-market adjustment 4,954 (7,271)
---------------------------------------
Total long-term debt 1,053,708 939,404
---------------------------------------
Total debt $1,076,411 $1,167,349
=======================================
At September 30, 2002, commercial paper maturities did not extend beyond October
9, 2002. The weighted average interest rate on total borrowings was 3.4%
compared to 4.1% at December 31, 2001. The Company capitalizes interest on all
projects with a total project value greater than $1.0 million. In the third
quarter and the nine months period ended September 30, 2002, $.8 million and
$1.5 million, respectively, was capitalized.
On July 19, 2002, the Company entered into a five-year EURO 350 million, which
approximates $350 million, multi-currency revolving credit facility agreement.
The Company cancelled and repaid all borrowings under an existing EURO 140
million-credit facility. On July 31, 2002 the Company exercised an option under
its $500 million US revolving credit facility and cancelled the $200 million
364-day portion of that agreement; there were no borrowings under this
agreement.
9
INTANGIBLE ASSETS, NET:
Effective January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 142 (FAS 142), Goodwill and Other Intangible Assets. FAS 142
eliminates goodwill amortization and requires an evaluation of potential
goodwill impairment upon adoption, as well as subsequent annual valuations, or
more frequently if circumstances indicate a possible impairment. The standard
also prescribes that other indefinite lived intangibles be included with
goodwill. Adoption of FAS 142 eliminated annual goodwill amortization expense of
approximately $33 million. The following tables reflect the reclassification of
other indefinite lived intangibles from Trademarks and other to Goodwill at
adoption of FAS 142 and the earnings per share effect of this change for the
third quarter and nine months ended September 30, 2002 and 2001. Amortization
expense for the quarter and nine months ended September 30, 2002 was $3.2
million and $9.5 million, respectively, and the estimated amortization for 2002
and subsequent four years is $12.6 million per year. The Company has completed
its assessment of the impact of adopting the impairment provisions of this
standard, and has concluded it has no impairment of goodwill at this time.
September 30, 2002 September 30, 2002
Gross Carrying Value Accumulated Amortization
-------------------- ------------------------
Goodwill $684,189 $41,534
Other indefinite lived intangibles 19,200 1,184
Trademarks and other 144,051 24,596
-------- -------
Total $847,440 $67,314
======== =======
December 31, 2001 December 31, 2001
Gross Carrying Value Accumulated Amortization
-------------------- ------------------------
Goodwill $690,509 $41,534
Other indefinite lived intangibles -- --
Trademarks and other 163,251 16,306
-------- -------
Total $853,760 $57,840
======== =======
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
($000's except per share amounts) 2002 2001 2002 2001
- --------------------------------- ---- ---- ---- ----
Reported net income $49,599 $33,555 $136,948 $ 86,832
Add back: Goodwill amortization -- 8,140 -- 24,193
------- ------- -------- --------
Adjusted net income $49,599 $41,695 $136,948 $111,025
======= ======= ======== ========
BASIC EARNINGS PER SHARE
- ------------------------
Reported net income $0.52 $0.35 $1.45 $0.90
Goodwill amortization -- 0.09 -- 0.25
----- ----- ----- -----
Adjusted net income $0.52 $0.44 $1.45 $1.16
===== ===== ===== =====
DILUTED EARNINGS PER SHARE
- --------------------------
Reported net income $0.52 $0.35 $1.43 $0.89
Goodwill amortization -- 0.08 -- 0.25
----- ----- ----- -----
Adjusted net income $0.52 $0.43 $1.43 $1.14
===== ===== ===== =====
Note: Rounding differences of individual components may cause the total figures
to be off by $.01.
10
CONTINGENCIES:
There are various lawsuits and claims pending against the Company. Management
believes that any liability resulting from those actions or claims will not have
a material adverse effect on the Company's financial condition, results of
operations or liquidity.
RECLASSIFICATIONS:
Certain reclassifications have been made to the prior year's financial
statements to conform to fiscal 2002 classifications.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
- --------------------------------------------------------------------------
FINANCIAL CONDITION
-------------------
OPERATIONS
- ----------
Net sales for the third quarter 2002 were $462.8 million, compared to reported
sales in the third quarter 2001 of $462.7 million. The Company disposed of
certain non-core businesses in November 2001 and June 2002. On a pro-forma
basis, excluding sales associated with the non-core businesses disposed of,
third quarter 2001 sales were $442.0 million.
Excluding all sales related to the non-core businesses disposed of, local
currency sales for the third quarter 2002 increased 2% in comparison to the 2001
third quarter. On a similar basis, reported dollar sales increased 5%.
Translation of local currency results was favorable due to the relative strength
of the Euro, and to a lesser extent, the Japanese Yen and the Australian dollar
versus the U.S. dollar.
Excluding sales attributable to non-core businesses disposed of:
o Local currency fragrance sales in Europe increased 8% resulting in a 20%
increase in dollar sales due to the strength of the Euro. Flavor sales in
Europe declined 1% in local currency, resulting in a 10% increase in dollar
sales.
o The North America region grew 3% in total, led by 5% growth in flavors. North
America fragrance sales increased 2%, mainly due to the benefit of new fine
fragrance launches.
o India flavor sales increased 17% in local currency (18% in dollars) and
fragrance sales increased 11% (14% in dollars).
o Asia-Pacific grew 2% in local currency and 5% in reported dollars. Flavors
grew by 6% in local currency (9% in dollars); fragrances declined 3% in local
currency and were essentially flat on a dollar basis.
o Latin America dollar sales declined 13% for the quarter, mainly due to weak
economic conditions prevailing throughout much of the region.
For the first nine months of 2002, sales totaled $1,385.0 million compared to
$1,424.6 million for the comparable 2001 period. Comparable pro-forma sales for
the nine-month period ended September 30, 2001 were $1,368.8 million. For the
nine-month period, the currency translation effect on sales was not significant.
Excluding sales attributable to non-core businesses disposed of:
o Local currency sales growth for the nine months ended September 30, 2002 was
strongest in India where fragrance sales increased 12% in local currency (13%
in dollars) and flavors increased 7% in local currency (7% in dollars).
o The European region increased 3% in local currency (5% in dollars) led by an
8% local currency increase in fragrances (10% in dollars). European flavor
sales declined 3% in local currency (down 1% in dollars).
o North America grew 1%, led by a 3% increase in flavors. Fragrance sales were
flat for the nine-month period due principally to weakness in fine fragrance
sales in the nine-month period.
o Asia-Pacific grew 1% in local currency and 1% in reported dollars. Flavors
grew by 3% in local currency (3% in dollars); fragrances declined 1% in both
local currency and dollars.
o Latin America sales declined 9%, with flavors and fragrances declining by 16%
and 7%, respectively. The results were mainly due to weak economic conditions
prevailing throughout much of the region.
11
The percentage relationship of cost of goods sold and other operating expenses
to sales for the third quarter 2002 and 2001 are detailed below. The pro-forma
information presented in the table below reflects operating expenses as a
percent of sales excluding the non-core businesses disposed in the fourth
quarter of 2001 and the second quarter 2002.
THIRD QUARTER
------------------------------------
REPORTED PRO-FORMA
2002 2001 2001
---- ---- ----
Cost of Goods Sold 56.4% 58.1% 56.5%
Research and Development Expenses 8.1% 6.8% 7.1%
Selling and Administrative Expenses 16.2% 15.7% 16.3%
The decrease in cost of sales in 2002 compared to 2001, as reported, is
primarily attributable to cost savings resulting from the integration of the
Company's operations with those acquired in the BBA transaction as well as the
disposition of lower margin, non-core businesses. Cost of goods sold as a
percentage of net sales remained essentially unchanged from the prior year
pro-forma percentage.
Research and development expenses increased to 8.1% of sales. As disclosed in
the Company's 2001 annual report, research and development expenditures are
expected to approximate 8% of sales as the Company expands its various research
and development initiatives.
Selling and administrative expenses as a percentage of net sales remained
essentially unchanged from the prior year pro-forma. Such expenses increased in
relation to the 2001 third quarter as reported primarily due to the sale of
non-core businesses; such businesses involved relatively lower selling and
administrative expense in relation to the corresponding sales value.
Other income in the quarter amounted to approximately $.6 million. Interest
expense declined from 2001 levels due to the general decline in interest rates
as well as reduced borrowing levels.
Net income for the third quarter of 2002, totaled $49.6 million compared to
reported net income in the third quarter 2001 of $33.6 million. The amounts for
the third quarter of 2002 and 2001 include the effects of nonrecurring charges
discussed below. Excluding these charges, net income for the third quarter 2002
and 2001 was $51.3 million and $39.2 million, respectively. On a pro-forma basis
excluding the businesses disposed of in 2001 and the effects of adopting FAS 142
which reduced amortization expense, third quarter 2001 net income totaled $41.9
million including nonrecurring charges, and $47.7 million excluding such
charges.
The effective tax rate for the third quarter of 2002 was 33.7% compared to 38.9%
for the comparable period in 2001. The lower effective rate in 2002 principally
results from the discontinuance of goodwill amortization, which was not
deductible for purposes of determination of the Company's taxable income in
2001.
The percentage relationship of cost of goods sold and other operating expenses
to sales for the first nine months 2002 and 2001 are detailed below. The
pro-forma information presented in the table below reflects operating expenses
as a percent of sales excluding the non-core businesses disposed of in the
fourth quarter of 2001 and the second quarter 2002.
12
FIRST NINE MONTHS
------------------------------------
REPORTED PRO-FORMA
2002 2001 2001
---- ---- ----
Cost of Goods Sold 57.3% 57.7% 56.4%
Research and Development Expenses 7.8% 7.2% 7.4%
Selling and Administrative Expenses 16.6% 16.8% 17.3%
The decrease in cost of sales in 2002 compared to 2001, as reported, is
primarily attributable to cost savings resulting from the integration of the
Company's operations with those acquired in the BBA transaction as well as the
disposition of lower margin, non-core businesses. These benefits were partially
offset by unfavorable product mix, primarily related to weakness in the higher
margin North America and Europe fine fragrance business. Cost of goods sold, as
a percentage of net sales, increased from the prior year pro-forma primarily due
to the unfavorable mix related to the weakness in the fine fragrance business.
Research and development expenses were in line with expectations. As disclosed
in the Company's 2001 annual report, research and development expenditures are
expected to grow to 8% of sales as the Company expands its various research and
development efforts.
Selling and administrative expenses decreased in relation to the 2001
comparable period, as reported, primarily due to cost savings resulting from the
integration of the Company's operations with those acquired in the BBA
transaction. These benefits were partially offset by the effects of the sale of
non-core businesses; such businesses involved relatively lower selling and
administrative expense in relation to the corresponding sales value. Selling and
administrative expenses as a percentage of net sales declined from the prior
year pro-forma percentage mainly due to integration savings.
Other income for the first nine months 2002 of $3.3 million primarily related to
exchange gains. Interest expense declined from 2001 levels due to the general
decline in interest rates as well as reduced borrowing levels.
Net income for the first nine months of 2002, totaled $136.9 million compared to
reported net income in the first nine months 2001 of $86.8 million. The amounts
for the first nine months of 2002 and 2001 include the effects of the
nonrecurring charges discussed below. Excluding these charges, net income for
the first nine months 2002 and 2001 was $144.7 million and $105.9 million,
respectively. On a pro-forma basis, excluding the businesses disposed in the
fourth quarter 2001 and the second quarter 2002, and the effects of adopting FAS
142, which reduced amortization expense, nine months 2001 net income totaled
$109.9 million including nonrecurring charges, and $129.0 million excluding such
charges.
The effective tax rate for the first nine months of 2002 was 34.0% compared to
38.3% for the comparable period in 2001. The lower effective rate in 2002
principally results from the discontinuance of goodwill amortization, which was
not deductible for purposes of determination of the Company's taxable income in
2001.
NONRECURRING AND OTHER CHARGES
- ------------------------------
As described in Note 2 of the Notes to the Consolidated Financial Statements
included in the Company's 2001 Annual Report to Shareholders, in October 2000,
the Company announced a reorganization, including management changes, further
consolidation of production facilities and related actions. The total pretax
cost of actions taken in connection with the reorganization, including $31.9
million and $30.1 million recorded in 2000 and 2001, respectively, is expected
to approximate $90.0 million to $100.0 million. In connection with this program,
the Company recorded nonrecurring charges of $2.5 million ($1.7 million after
tax) and $11.7 million ($7.7 million after tax) in the three-month and
nine-month periods ended September 30, 2002, respectively, related primarily to
employee separation costs and other reorganization activities. The pretax
nonrecurring charges recorded for the third quarter 2002 relate to operations in
North America ($.8 million), Europe ($1.6 million) and Asia-Pacific ($.1
million).
13
The pretax nonrecurring charges recorded for the nine month period ended
September 30, 2002 relate to operations in North America ($5.6 million), Europe
($5.8 million) and Asia-Pacific ($.3 million). Of the North American charges,
$4.0 million related to a non-cash asset write-off associated with the
disposition of the Company's fruit concentrates business.
Movements in the liabilities related to the nonrecurring charges were as follows
(in millions):
EMPLOYEE- ASSET-RELATED
RELATED AND OTHER TOTAL
----------- --------------- -------
Balance December 31, 2001 $ 7.0 $ .7 $ 7.7
Additional charges 4.3 7.4 11.7
Utilized in 2002 (5.5) (5.4) (10.9)
----- ----- -----
Balance September 30, 2002 $ 5.8 $ 2.7 $ 8.5
===== ===== =====
The Company has established accruals relating primarily to employee separation
costs, facility closure costs and other actions relating to the integration of
certain BBA operations into IFF. Costs associated with these integration actions
were recognized as a component of the purchase accounting which resulted in an
adjustment to goodwill; such costs did not directly impact current earnings.
Movements in these acquisition accounting accruals were as follows (in
millions):
EMPLOYEE- ASSET-RELATED
RELATED AND OTHER TOTAL
----------- --------------- -------
Balance December 31, 2001 $13.8 $ 9.9 $23.7
Utilized in 2002 (5.9) (4.7) (10.6)
----- ----- -----
Balance September 30, 2002 $ 7.9 $ 5.2 $13.1
===== ===== =====
The balance of the restructuring and integration related liabilities will be
utilized by the end of 2003 in connection with the final dismantling and
disposal of affected equipment and as severance and other benefit obligations to
affected employees are satisfied.
NEW ACCOUNTING PRONOUNCEMENTS
- -----------------------------
In June 2002, SFAS No. 146, "Accounting for Costs Associated with Exit or
Disposal Activities" was issued. This statement requires the recording of costs
associated with exit or disposal activities at their fair values only once a
liability exists. Under previous guidance, certain exit costs were accrued when
management committed to an exit plan, which may have been before an actual
liability arose. SFAS No. 146 is effective for exit or disposal activities
initiated after December 31, 2002.
FINANCIAL CONDITION
- -------------------
Cash, cash equivalents and short-term investments totaled $23.7 million at
September 30, 2002. Working capital, at September 30, 2002 was $518.0 million
compared to $336.1 million at December 31, 2001.
Gross additions to property, plant and equipment during the third quarter and
first nine months of 2002 were $17.3 million and $59.0 million, respectively.
In the third quarter 2002, the Company acquired a significant portion of the
minority interest in the former BBA operations in India.
14
At September 30, 2002, the Company's outstanding commercial paper had an average
interest rate of 2.09%. Commercial paper maturities did not extend beyond
October 9, 2002 and amounted to $16.0 million. Bank borrowings and the current
portion of long-term debt were $6.7 million and long-term debt, including $59.9
million related to the interest rate swaps totaled $1,053.7 million. The
weighted average interest rate on total borrowings was 3.4%.
In each of January, April, and October of 2002, the Company paid a quarterly
cash dividend of $.15 per share to shareholders. This amount is unchanged from
the 2001 dividend. The Company repurchased approximately 0.8 million shares in
the third quarter and approximately 2.2 million shares for the first nine months
of 2002. 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. At September
30, 2002, the Company had approximately $2 million remaining under its
authorized September 2000 repurchase plan. On October 22, 2002, the Company's
Board of Directors authorized a new share repurchase program of $100 million,
which is expected to be completed over the next two years.
On July 19, 2002, the Company entered into a five-year EURO 350 million, which
approximates $350 million, multi-currency revolving credit facility agreement.
The Company cancelled and repaid all borrowings under an existing EURO 140
million-credit facility. On July 31, 2002 the Company exercised an option under
its $500 million US revolving credit facility and cancelled the $200 million
364-day portion of that agreement; there were no borrowings under this
agreement.
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.
The Company intends its forward-looking statements to speak only as of the time
of such statements, and does not undertake to update or revise them as more
information becomes available.
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, 2001.
15
ITEM 4. CONTROLS AND PROCEDURES
- -------------------------------
(a) Evaluation of Disclosure Controls and Procedures. The Company's Chief
Executive Officer and Chief Financial Officer, with the assistance of other
members of the Company's management, have evaluated the effectiveness of the
Company's disclosure controls and procedures (as such term is defined in Rules
13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"). Based on such evaluation, the
Company's Chief Executive Officer and Chief Financial Officer have concluded
that, as of the Evaluation Date, the Company's disclosure controls and
procedures are effective in alerting them on a timely basis to material
information relating to the Company (including its consolidated subsidiaries)
required to be included in the Company's filings under the Exchange Act.
(b) Changes in Internal Controls. Since the Evaluation Date, there have not been
any significant changes in the Company's internal controls or in other factors
that could significantly affect such controls.
16
PART II. OTHER INFORMATION
- ---------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits.
---------
4(a) Letter Agreement between the Company and Wachovia Bank,
National Association ("Wachovia") dated as of October 31, 2002
appointing Wachovia as Successor Rights Agent pursuant to the
Shareholder Protection Rights Agreement dated as of March 21,
2000 and amended as of September 26, 2000.
10(a) Performance Incentive Award Agreement in respect of a
performance incentive award of 200,000 restricted shares of
the Company's Common Stock, approved by the Board on August 1,
2002, granted to Richard A. Goldstein, Chairman of the Board
and Chief Executive Officer of the Company.
99(a) Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of The Sarbanes-Oxley Act Of 2002,
signed by Richard A. Goldstein, Chairman of the Board and
Chief Executive Officer of the Company and Douglas J. Wetmore,
Senior Vice President and Chief Financial Officer of the
Company.
(b) Reports on Form 8-K.
--------------------
The Company filed the following reports on Form 8-K during the quarter
for which this report on Form 10-Q is filed:
Report on Form 8-K dated August 12, 2002 providing a sworn statement
under oath from both Richard A. Goldstein, Chief Executive Officer of
the Company (the Company's principal executive officer), and Douglas J.
Wetmore, Chief Financial Officer of the Company (the Company's
principal financial officer). On August 12, 2002, the Chief Executive
Officer and Chief Financial Officer also provided the certification
required pursuant to 18 U.S.C. Section 1350 (Section 906 of the
Sarbanes-Oxley Act of 2002).
17
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 12, 2002 By: /S/ DOUGLAS J. WETMORE
--------------------------
Name: Douglas J. Wetmore
Title: Senior Vice President and
Chief Financial Officer
Dated: November 12, 2002 By: /S/ STEPHEN A. BLOCK
------------------------
Name: Stephen A. Block
Title: Senior Vice President,
General Counsel and Secretary
18
CERTIFICATION
I, Richard A. Goldstein, certify that:
1. I have reviewed this quarterly report on Form 10-Q of International
Flavors & Fragrances Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Dated: November 12, 2002 By: /S/ RICHARD A. GOLDSTEIN
------------------------------
Name: Richard A. Goldstein
Title: Chairman of the Board and
Chief Executive Officer
19
CERTIFICATION
I, Douglas J. Wetmore, certify that:
1. I have reviewed this quarterly report on Form 10-Q of International
Flavors & Fragrances Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Dated: November 12, 2002 By: /S/ DOUGLAS J. WETMORE
--------------------------------
Name: Douglas J. Wetmore
Title: Senior Vice President and
Chief Financial Officer
20
EXHIBIT INDEX
Number Description
- ------ -----------
4(a) Letter Agreement between the Company and Wachovia Bank, National
Association ("Wachovia") dated as of October 31, 2002 appointing
Wachovia as Successor Rights Agent pursuant to the Shareholder
Protection Rights Agreement dated as of March 21, 2000 and amended as
of September 26, 2000.
10(a) Performance Incentive Award Agreement in respect of a performance
incentive award of 200,000 restricted shares of the Company's Common
Stock, approved by the Board on August 1, 2002, granted to Richard A.
Goldstein, Chairman of the Board and Chief Executive Officer of the
Company.
99(a) Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of The Sarbanes-Oxley Act Of 2002, signed by Richard A.
Goldstein, Chairman of the Board and Chief Executive Officer of the
Company and Douglas J. Wetmore, Senior Vice President and Chief
Financial Officer of the Company.