EXHIBIT 99.2
INTERNATIONAL FLAVORS & FRAGRANCE
Moderator: Doug Wetmore
February 20, 2001
9:00 am CT
Operator: Good day everyone and welcome to the International Flavors &
Fragrance conference call regarding integration and reorganization,
update and comments on 2001. Today's conference is being recorded.
For opening remarks and introductions I would like to turn the
conference over to the Chairman and Chief Executive Officer, Mr.
Richard Goldstein. Please go ahead sir.
Richard Goldstein: Thank you. Good morning ladies and gentlemen and thank
you for joining us this morning. I am here with Doug Wetmore, IFF's
Chief Financial Officer.
On this call we want to provide you with an update regarding the
integration of Bush Boake Allen and the progress of the reorganization
plan we announced on October 5 of last year. I will also share with you
some perspectives on 2001.
Before I begin I must read you some cautionary remarks as dictated by
the lawyers. This conference call may contain statements that are
considered quote forward-looking unquote within the meaning of the
Private Securities Litigation Reform Act of 1995. The complete
forward-looking statement is in our press release and is updated from
time to time in the company's SEC filings.
As you know IFF began 2001 with two main priorities. We were focused on
the integration of BBA and we were committed to further implementing
our reorganization. As a result we have streamlined the company,
strengthened relationships with our key customers through enhanced
customer service, invested in business development and implemented
programs to retain and incentivize key employees.
We are confident that this back to basics approach will enable IFF to
return to the path of growth, both in terms of sales and earnings, that
has been the hallmark of IFF's history, and to achieve superior
long-term operating results with enhanced shareholder value.
Now I would like to discuss our progress in several important areas
including costs savings, the ongoing review of IFF's business portfolio
and finally our outlook for 2001.
As you already know, IFF expects to achieve cost savings of
approximately $70 million as a result of the acquisition and
integration of BBA. We expect approximately half of those savings to be
realized in 2001. IFF also anticipated additional cost savings of
approximately $25 million to $30 million by 2003 as a result of the
reorganization we announced on October 5, 2000.
I am pleased to report that as of March 31, 2001, IFF will have
achieved, on an annual run rate, cost savings of approximately $30
million. This $30 million of run rate cost savings relates in large
measure to 56 locations we have identified around the world in which
there are duplicate operating facilities and sales offices.
Decisions have made and action plans have been developed with respect
to the consolidation and elimination of a substantial portion of these
duplicate sites. To date, the integration process has affected
approximately 120 positions. Roughly 270 positions are to be eliminated
by March 31 of this year.
The balance of the anticipated integration savings relates primarily to
the consolidation and streamlining of larger manufacturing locations.
They take a little longer to achieve because capital must be invested
in the surviving plants and production processes must be transferred,
all seamlessly and while maintaining a constant level of customer
service. These savings will accelerate in late 2001 and be largely
realized in 2002.
Based on the information and plans we have formulated to date we expect
the integration to incur approximately $75 million to $80 million in
implementation costs relating to employee separation and facility
closures as well as approximately $40 million to $50 million of
capital.
These expenditures will take place primarily in 2001 and 2002. Further
details as to the nature and extent of these charges and expenditures
will be provided each quarter.
With respect to all of the savings and synergies, it remains our
intention to reinvest a part back into the business. Those funds will
be invested to drive business development, enhance strategic
relationships with our existing customers and support comprehensive
employee training and management development programs. And a
significant portion will flow through to our shareholders in the form
of increased earnings.
Let me now take a moment to elaborate on the compensation programs we
recently implemented. These new programs directly link compensation for
all coworkers worldwide to clearly defined operating targets. Annual
incentive plans will embrace all co-workers from the executive suite to
the factory floor.
A long-term incentive plan will initially be available to 30 senior IFF
colleagues around the world although it is anticipated that
participation will be expanded as we gain experience with the program.
Under the annual incentive plan, co-workers' bonuses are payable on
meeting established targets for sales growth, improvement in gross
margin and improvement in operating cash flow. The longer-term plan is
based on growth in earnings per share and returns on net assets. We
believe that these plans will not only motivate all co-workers but will
also fully align everyone's interest with those of our shareholders.
Further to the point of enhancing shareholder value, we are currently
evaluating the entire business portfolio to refocus IFF on its core
strategic areas. As a first step, the board has authorized management
to divest of a significant portion of the aroma chemicals business
acquired as part of the BBA transaction.
IFF has entered into preliminary discussions with potential third
parties. However we do not intend to comment further with respect to
the sale of this business until a definitive agreement is reached.
For reference, the BBA chemicals business had full year sales of
approximately $100 million for the year ended December 31, 2000.
IFF will continue to evaluate the remainder of this portfolio on an
ongoing basis.
We intend to use the proceeds from the sale of the BBA chemical
business and the sale of any other non-core segments of our business to
pay down debt. As of December 31, 2000, IFF had approximately $1.25
Billion debt outstanding.
Now I'd like to turn to our outlook to 2001. The 2001 sales and
earnings targets we set for ourselves in September last year continue
to be in line with our expectations. We expect total revenue growth in
the low single digits for 2001.
In percentage terms sales growth is expected to be strongest in the
Asia Pacific and Latin America regions where growth is expected in the
mid to high single digits. Growth in North America, Europe and Central
Asia Middle East (or CAME) is expected to be in the low single digits.
Exchange is expected to be slightly unfavorable for the full year 2001
based on current exchange rates. We expect exchange to be most
unfavorable in the first quarter, diminishing in the second and third
quarters and turning somewhat favorable in the fourth quarter.
IFF expects earnings per share for 2001, excluding any non-recurring
charges related to the acquisition of BBA and the reorganization, to
approximate $1.42 per share.
That concludes our prepared remarks. And Doug and I will now be happy
to answer any questions that you may have. Operator?
Operator: Thank you gentlemen. Today's question and answer session will be
conducted electronically. If you would like to ask a question you may
do so by pressing the star key followed by the digit 1 on your
touch-tone telephone. Once again star 1 for questions. We'll pause just
a moment to assemble our question roster.
We'll go first to Amy Chasen with Goldman Sachs.
Amy Chasen: Good morning.
Richard Goldstein: Good morning Amy.
Amy Chasen: A couple of things. First of all Dick at our conference in
January you had indicated that the cost savings from Bush Boake Allen
were ahead of plans. And based on your comments this morning it sounds
like they are in line with your plan. Can you talk about what has
changed since January?
Richard Goldstein: I don't think that my comments at the conference were
any different than my comments this morning. I think that we are saying
nothing different. And that is that we are completely in line with our
expectations and with the achievement of the savings.
What we may have been - what may have been inferred - was that we were
running ahead of schedule with respect to the implementation of the
integration. And that part is absolutely true. We were delighted by the
fast start that we achieved following the acquisition.
But with respect to the recognition of the savings - we continue to be
in line with expectations and pleased with the progress.
Amy Chasen: Okay but if the implementation is going ahead of schedule, why
wouldn't the savings be ahead of schedule?
Doug Wetmore: Amy I think what we are saying in the first quarter - as of
March 31 - we'll be at an annual run rate of $30 million for the full
year 2001. But we expect that to ramp up as the year progresses.
And we are still confident that we are in line with the overall targets
that we talked about last year. We are just trying to give you a
perspective of the decisions and the actions that have been implemented
as of today's release and call.
Amy Chasen: Okay. Can you talk a little bit about this $1.42 number just
for a second? I guess it strikes me as being very, very specific, you
know, not a particularly round number. So there must be some specific
assumptions that you've made.
And I'm wondering whether you are still sticking by your 13% to 14%
dilution from the deal that you had expected at the time that you
announced it?
Richard Goldstein: Well let me start with the $1.42. It is not designed to
be precise. It's approximate, as we said in the press release. And it
is in line with what we have been saying. But it is an approximate
number. I don't mean to ever suggest that we are able to be that
precise at this stage of a year.
With respect to the issue on dilution, Doug?
Doug Wetmore: I think it is generally in line with what we talked about in
late September Amy. I think the key things that have changed - that
affect the earnings- are interest rates that have come down so the cost
of borrowing is different. The purchase accounting is different. Our
amortization is several cents higher per share than had been forecast
at the time that we announced the deal.
Amy Chasen: Can you just talk about that specifically? Why is that?
Doug Wetmore: Well as we go through the purchase accounting and value the
assets acquired, valuation estimates change- we had to do preliminary
evaluation for purposes of the September call. But now that we are
looking at it in more detail the valuation of certain assets other than
goodwill -- and remember that goodwill is just the derivative at the
end - has changed. BBA has various intangibles such as trademarks and
the value of their formula library. Those have to be separately valued
and those assets are amortized over a shorter life period than good
will.
Amy Chasen: So at the time you had said about, you know, 13% to 14% percent
diluted which was about 20 to 22 cents. What would the new numbers be
now that you've worked all these details out?
Doug Wetmore: Well, we are talking about a range around $1.42 and compare
that to what we reported for the full year 2000, which if memory serves
was $1.56 for IFF standalone. So you are looking at roughly 10%.
Amy Chasen: I'm sorry but I thought that the amortization is coming in
higher than you thought.
Doug Wetmore: Yes but - remember the cost of borrowing is lower. The
interest cost has come down from the model we discussed in September
2000.
Richard Goldstein: You've got a change in mix Amy.
Doug Wetmore: There are a number of factors. Plus we have also gone though
and done the budgeting process for 2001. We have full year actual 2000
results for both IFF and then IFF and BBA combined on a pro forma
basis. And now we are dealing with the best information that we have
and recognize that it is an evolutionary process and that we have
better information now than we did at the end of the September.
Amy Chasen: Okay just last question on this topic. Not to beat a dead
horse but if you say that it is 10% dilutive because you are saying you
reported $1.56 and it's going to be $1.42 so that's 14 cents, that
implies that you are not expecting any increase in the core IFF
earnings. Is that a fair assumption?
Doug Wetmore: Amy there are a number of variables- we'll have $42 million
of amortization. We'll have the interest costs associated with it. And
it's offset by synergistic savings and other actions taken in
association with the reorganization.
I recognize that it is very difficult because we are comparing apples
and oranges. But what we are trying to do is give you the best
information we have as of this point in time. And that approximate
$1.42 combined with the top line growth and the low single digits is
really what we are looking at right now.
Amy Chasen: On a net net basis when you take into account all the factors
that have changed, is the dilution less or more than what you had
originally thought?
Doug Wetmore: I don't think it is markedly different with all the factors
taken into account. At the September conference call I think we were
talking about a range of $1.45 per share give or take. But now we have
better information.
Amy Chasen: Okay. And then can you just comment on the flow of earnings
throughout the year? I have in my model, you know, a down - a very
significantly down first two quarters, you know, at least 20%, 30% EPS
in the first quarter. Does that make sense relative to what you are
saying about currency and any of the other factors that may go into the
model?
Doug Wetmore: Let me give you an idea of where we see the quarters
building up but recognizing that there may be a penny or two shift in
the quarters.
Right now we would look at the first quarter being approximately 28
cents a share, the second quarter being approximately 41 cents a share,
the third quarter approximately 42 cents a share and the fourth quarter
being approximately 31 cents a share.
Amy Chasen: That first quarter number is well below what I had expected.
Can you talk about what the factors are that are impacting that flow?
Because it is dramatically different than what I have.
Doug Wetmore: We have - as we talked about - the savings are the lowest in
the first quarter. It is hard for me to talk about your model per se
but this is really our model in terms of where we expect the
approximate EPS figures to be. And they build up to the $1.42 for the
full year. I can't really comment on your model Amy.
Amy Chasen: No but then can you just talk about what your assumptions are
in terms of driving what is a clear dramatic acceleration throughout
the year?
Doug Wetmore: Well as Dick mentioned during the conference call, the
synergistic savings accelerate markedly in the second quarter and that
pace accelerates in the third and fourth quarter. That's the biggest
factor.
Meanwhile we have in the first half of the year or the first quarter of
the year, the onset of the full amount of amortization of the goodwill
and other intangibles. And we still have the duplicate costs as we run
dual facilities. Because some of the actions associated with closing
down those facilities will take place during Q1, and at an accelerated
pace in Q2 and further on in the third and fourth quarters.
Amy Chasen: Okay and just I'm sorry, last question Dick. Can you give us
some idea of specifically, you know, what you've done on the
relationship side? You mentioned oftentimes improving your relationship
with your customers.
Richard Goldstein: Amy, as I think you know, I have spent an enormous
amount of time since I've been in the job meeting with key customers
literally around the world at this point and spent time listening to
what they currently had been receiving from us in terms of service.
I've also been paying attention to what it is they were asking us to do
in the context of being their preferred supplier.
The reality is that we had forgotten an awful lot about the
fundamentals -- customer service. And we have spent a considerable
amount of time explaining to our colleagues around the world the
critical importance of getting back to basics in meeting our customers'
expectations. This has been received extraordinarily well by global
customers around the world.
The universality of the comments I received really underscored the fact
that the problems that we had were not many. They were actually quite
few. But they all related to the same thing. And that was delivering on
what the customers were expecting.
More and more what I heard was that we simply were too difficult to do
business with. And as a result they were turning to the competition.
More and more I am hearing today that they are delighted that we have -
if you will - that we are getting religion, that we are understanding
that the customers' needs are critical. And we are reverting to
fundamentally making sure that we do not disappoint our customers.
Service levels have improved in many locations and people are
understanding that we need to be easy to do business with, not
difficult.
And that's what I mean by improvement of relations. And this has been
rewarded by the fact that we are hearing more and more that the
relationships are improving and that our customers are looking forward
to having us back as a supplier that once again fully understands what
their needs are.
They have always by the way in virtually every discussion recognized
and understood that IFF has a cadre of extraordinarily talented people
and from a technology standpoint historically has always been first of
class. And with that set of fundamentals, repairing the damage with
respect to customer service should stand us in good stead with respect
to rebuilding our business in certain regions where we had been
heretofore deficient.
Amy Chasen: Okay, thank you.
Operator: We'll go next to Alice Longley with Credit Suisse First Boston.
Alice Longley: Hi, good morning.
Doug Wetmore: Hi Alice.
Alice Longley: Hi, just some specifics with numbers again. So you said
amortization of goodwill annually is now going to be $42 million?
Doug Wetmore: Well actually no. Total amortization is $42 million Alice.
The amortization of the goodwill is based on current purchase
accounting. And remember we have until the end of this year to finalize
it.
The amortization of the goodwill is roughly $29 million. I think 28.8.
And that is being amortized over 20 years.
As you probably know there is an exposure draft that was just issued
last week by the (FASB) regarding the cessation of amortization. But at
this point of time since that exposure draft is just an exposure draft
and the accounting hasn't been finalized we continue to amortize.
The balance of the intangibles relates to, as I mentioned earlier,
trademarks and other intangibles. And those are being amortized over a
period of 10 to 20 years depending on the category. And that represents
the balance of the amortization of $13.4 million.
Alice Longley: And this 42 relates to a former estimate of $30 million?
DougWetmore: No the former estimate was $32 million. Remember it changed
for a number of reasons. One is that we were looking at a snapshot of
BBA as of June 30 at the time because we had no subsequent financial
information to assess the acquisition accounting.
Alice Longley: No, no. I understand why it happened. I am just looking for
the numbers.
Doug Wetmore: The previous amortization was $32 million to $33 million.
Alice Longley: Okay and then interest expense for the year is going to
work out to - well I used to have 116. What is it going to be now?
Doug Wetmore: We haven't finalized the financing so it is a bit of a
guesstimate. But probably in the range of $90 million to $95 million.
Alice Longley: All right. That helps. And then tax rate for the year?
Doug Wetmore: About 37-1/2 to 38 -- somewhere in that range. As you know
the goodwill and the other intangibles are not deductible for tax
purposes.
Alice Longley: Right. Okay well those seem to be sort of washes. So then I
get to my next question, which is relative to when you first gave us
your guidance in September the economy has weakened pretty
dramatically. Now the currency has gone some in your favor.
But I know your sector personal and household products is somewhat
recession resistant. But everybody is going to be vulnerable to some
extent.
Why do you - do you think you are not going to be affected by the
economy? Or how have you adjusted for a new environment? And maybe how
are you offsetting any pressures that you might factor in now?
Richard Goldstein: Well Alice I don't think that we are being overly
optimistic in the context of our growth rates and given the nature of
the economy. What we have said is that we expect to see top line grow
in low single digits. I don't think that that's overly aggressive. And
that - we are taking account of the fact that the US is currently in a
no growth mode.
Having said that, if you to take a look at our situation in - last year
with respect to the flavors division in particular we actually had some
considerable erosion. And therefore if we are able to simply build back
a bit in that area through the strength of the BBA acquisition,
particularly in North America, then I think that we ought to be able to
hold to the estimates we are talking about.
We are not unmindful of what is happening in the economy nor are we
unmindful about what our customers are saying with respect to their
growth rates.
Alice Longley: Well a number of your customers have lower guidance for 2001
and yet you are not doing that. And I am wondering what the offset is
for you.
Richard Goldstein: Well I just tried to explain that to you in North
America as far as the flavors area is concerned. We also still believe
that there will be growth opportunities in some of the overseas regions
particularly Southeast Asia and Latin America.
Alice Longley: So are you saying that Southeast Asia, Latin America and US
flavors are coming through better than you expected in September?
Doug Wetmore: No Alice, not North America flavors. We are looking at North
America flavors to be just up slightly. But in Latin America and Asia
Pacific, as Dick mentioned in his remarks, we expect to be in the mid
to high single digit growth. And North America, Europe and as a matter
of fact, Central Asia and Middle East will be in the low single digits.
And that is line with our expectations and the detailed budget that we
built up. And it's the best information we have at this point in time.
Alice Longley: And when you said Europe will be up low single digits is
that local currencies or dollars?
Doug Wetmore: That's in local currency. As Dick mentioned the exchange
effect on a consolidated basis will be slightly unfavorable.
As you know, it is most unfavorable in the first quarter. First quarter
of 2000 the Euro was roughly at parity with the dollar, and I think the
Euro is at about 92 cents right now.
Alice Longley: Oh so when you said revenues up low single digits for the
company overall for the year, was that in dollars?
Doug Wetmore: That is in dollars.
Alice Longley: Okay. And my final thing is sales in the first quarter
excluding the acquisition, will they be up low single digits?
Doug Wetmore: I know you will have to be patient. We will file an 8-K with
the pro forma results for BBA and IFF combined retroactive to January 1
2000. That will be filed in the latter stages of March based on our
current timeframe. So we are looking at everything compared to a 2000
IFF and BBA combined.
In the first quarter we are roughly looking at sales to be down in
dollars about 4% to 5% principally because we have very unfavorable
exchange as I just mentioned in Europe and Eastern Europe as well as
some in Asia Pacific. In local currency we are basically looking at
sales to be flattish in the first quarter.
Alice Longley: Okay and then you - somehow you are going to have to get
sales and dollars up quite a lot in order to be up low single digits
for the year. So how much do you - what do you think sales will look
like in the second quarter?
Doug Wetmore: Well you know what? Let's make it through the first quarter
Alice. I prefer to focus on the first quarter and the full year.
We are making every effort to improve our forecasting abilities. The
full year we are looking at the low single digits. There is some
improvement as the year goes on because of currency. But also we are
getting the local currency growth.
And remember some of the countries are still recovering. Such as some
of the countries in Latin America which are still recovering from some
economic disruption. Those areas grow a little bit as the year
progresses.
Alice Longley: So you've got Latin America accelerating through the year in
your model?
Doug Wetmore: Yes.
Alice Longley: Okay. And then I do have a question on cash. I think you
said that there will be $75 million to $80 million in implementation
costs and then another $40 million to $50 million capital costs. Is the
75, 80 million the cash portion of your restructuring? Is that an
update on the cash portion of all of your restructuring?
Doug Wetmore: That's both integration and restructuring.
Alice Longley: So that covers both the $70 million in - well I'm confused.
Because - we've got what's coming to help margins will be $70 million
in cost savings plus $25 million to $30 million benefits from
restructuring.
Doug Wetmore: And the reorganization benefits.
Alice Longley: Right.
Doug Wetmore: First of all the $40 million to $50 million of capital
spending that Dick mentioned in his comments earlier is part of the
capital spending that will take place over the course of the next two
years.
Alice Longley: So that is over two years.
Doug Wetmore: Based on what we know right now...
Alice Longley: Is that in addition to a normal level of cap ex?
Doug Wetmore: No.
Alice Longley: Oh that's the total cap ex?
Doug Wetmore: No it's not the total. We will have some other capital
spending. It's the capital spending associated with the integration and
reorganization.
Based on the information I have right now, all capital spending for the
year 2001 will probably be in the range of $65 million to $70 million.
And that is the combined entity. And that is pretty much consistent
with what we talked about earlier.
The integration costs which we mentioned of the $70 million to $80
million is head count related as well as other costs associated with
the closure of facilities. And that will also be incurred probably more
in 2001 than in 2002.
Some of that will flow into the acquisition accounting because it is a
BBA facility that is affected. Some of it will flow through as a
non-recurring charge because it is an IFF facility. And that's just
following the accounting guidelines.
Alice Longley: Okay but most of it is going to be 2001 and the rest will be
2002?
Doug Wetmore: Based on what I see right now I'd say a majority of it will
be in 2001. The exact parameters I think maybe 2/3 to 3/4 would be this
year. We'll keep updating on a quarterly basis.
Alice Longley: Thank you. That was helpful.
Operator: We'll go next to Catherine Lewis of Morgan Stanley.
(Laetitia Delaye): Hi this is (Laetitia Delaye) speaking. Good morning. I
have two questions. The first one is a follow up on top line growth. I
was wondering if you could expand a little bit on how you expect to get
sales to grow again going forward looking beyond 2001.
Doug Wetmore: Could you repeat that again, just that last bit?
(Laetitia Delaye): Yeah I'm wondering how technically you can expect to get
sales to grow again beyond 2001, you know, going forward.
Richard Goldstein: Well to tell you the truth I am taking it one year at a
time at this point. We do expect to see service levels improve during
the year and therefore meet our customers expectations.
We do expect that many of the acquisitions that have been made by our
customers during the year, while there is some disruption during the
acquisition period, in order to make those acquisitions pay for
themselves they are going to have to accelerate their own new product
introductions into the marketplace. And that should provide opportunity
for us in terms of growth with those customers.
We are partnering continuously with our customers in the endeavor of
bringing new products to market. Again this reverts to doing a better
job at meeting our customers' needs and expectations. And we have found
that this has hit a vibrant cord with our customers.
And again it relates to the fact that over the last several years we
have acted more as a fulfillment house than as a true partner with our
customers in developing new products for the marketplace. And I think
that as we return to doing what I call back to basics, it should be to
our benefit over the next several years.
But I certainly am not going to be in a position at this point to talk
to specific growth rates. Although we would anticipate that in the out
years we would be looking to low to medium, low to middle single digit
growth as opposed to in 2001 where we are calling for low single digit
growth. Is that helpful?
(Laetitia Delaye): Yes. Also can you talk a little bit about how you are
reorganizing your sales force with the integration of BBA?
Richard Goldstein: Yes. First of all, what we have decided to do as you
know from our earlier conference call, is we have collapsed the two
structures -- flavors and fragrances -- into one business development
group. And at the same time we are integrating the best of the BBA
people within the organization into that structure.
So from a sales standpoint, region by region we really have three
pieces to the integration process. There is the old IFF fragrance sales
group, the old IFF flavors group and then you have the BBA flavors and
fragrance group. And all of that comes together. And out of it emerges
-- and that work already has been done -- a new sales structure within
each of our five regions around the world.
Is that helpful?
(Laetitia Delaye): Yeah, thank you very much Richard.
Operator: We'll go next to Jeff Zekauskas with JP Morgan.
Jeff Zekauskas: Hi good morning. Just I guess a couple of issues of
clarification. The run rate savings is $30 million. Can you kind of
just aggregate the individual components of that savings? And if you
have already achieved 30 why is it that only two are coming out in the
first quarter?
Doug Wetmore: That's more along the lines of having to have the proper
notification to and consultation with employees. As we've discussed
before, we wanted to review the integration plans with the steering
committee that is responsible for the integration as well as with our
board of directors. But those steps have been taken and the savings
will accelerate as we proceed from the first to the second quarter.
Also, in terms of avoiding disruption to customer service and
disruption to the operations we had to make sure that this was done in
a very timely and effective manner. And that is what we are doing. That
basically speaks to the timing of the savings.
Jeff Zekauskas: What about the components of the $30 million in cost
savings?
Doug Wetmore: In terms of - early on as Dick alluded to in his remarks, the
early on is more along the lines of sales and admin, the corporate
functions.
Richard Goldstein: They are people savings Jeff. And in terms of the timing
of them I think we are actually doing quite well in terms of the pace
that we are moving. And the achievement of the savings of course speaks
to the fact that we have an obligation to treat the people who are
leaving in a fair fashion by giving them appropriate notice.
Jeff Zekauskas: No, I think I am aware of that. I was just wondering is the
people component of the $30 million very, very large? The $30 million
in cost savings looks like it doesn't really reflect much savings that
you will achieve from when your volumes increase.
Doug Wetmore: The people savings are the biggest chunk of the early on
savings. As Dick mentioned the manufacturing savings that comes from
better capacity utilization and so forth as we consolidate plants
accelerates in the second half of 2001 and really comes full force in
2002.
Jeff Zekauskas: Okay. Just a couple other small items. In addition to the
possible sale of the BBA aroma chemicals business there was the mention
of the sale of any other non-core segments of the business to pay down
debt.
Richard Goldstein: Yes.
Jeff Zekauskas: I would imagine that there is sort of either land or
sale-leaseback transactions that you can do. Sort of if you add up all
of the stuff other than BBA's aroma chemicals business, how much can
you sell?
Richard Goldstein: I don't know specifically Jeff. There is a full analysis
going on right now. My comments today were really addressed to specific
product categories that we might find to be less attractive now that we
are taking the time to review the entire portfolio.
With respect to excess land or potential for sales and lease back
certainly those are valid points for consideration. They have not
escaped our attention. But at the moment I've got nothing to say
publicly with respect to anything that we might be doing.
Jeff Zekauskas: Okay. I guess lastly -- and this question is for Doug --
how much amortization attaches to the BBA aroma chemicals business?
Doug Wetmore: To a certain extent everything associated with the potential
sales of BBA chemicals will flow through the purchase accounting. And
to a great extent it is impacted by the amount of the ultimate proceeds
that are realized.
It is an attractive business. But I think discussing anything other
than that would be premature at this time.
Jeff Zekauskas: All things being equal, will it be a dilutive transaction
to sell it?
Doug Wetmore: As I said Jeff it is premature to talk about it any further
at this point in time because there are discussions taking place.
Jeff Zekauskas: Okay thank you very much.
Operator: We'll take our final question from Bob Koort with Deutsche Bank.
Bob Koort: Thanks very much. I was wondering if you could give me some
more longer range perspective. You had mentioned trying to retain your
historic growth rate, which I guess by that you mean maybe double digit
earnings growth. And you attributed some of the recent history problems
to self-inflicted wounds.
But it seems to me the industry generally has been in a secular decline
for several years here. So I am wondering for you to resuscitate growth
at IFF do you need the entire industry to be - to experience some pick
up or can you do it all alone and just outsmart or outservice your
competitors? Thank you.
Richard Goldstein: A rising tide raises all boats. But I think to a large
extent the expectations we have talked about are really predicated on
things and actions that we believe we can do unilaterally.
We are not talking about targets at this point in terms of what I call
mid-range targets that are going to be overly ambitious for us to try
and achieve on our own. And they do not have built in to them the
necessity that the entire industry also meets those types of growth
rates.
Now part of that of course reflects the fact that over the last several
years we have not enjoyed top line growth and that has not been a
consistent performance of the rest of the industry.
Bob Koort: Okay, thank you.
Operator: Gentlemen at this time we have no further questions. I'd like to
turn the call back over to you for any additional or closing remarks.
Richard Goldstein: Thank you very much for joining us. Doug will be
available by phone to answer any additional questions that you may
have. And thanks very much.
Operator: This does conclude today's conference call. We thank you for your
participation. You may disconnect at this time.
END