At this time, I would like to welcome everyone to the International Flavors & Fragrances Fourth Quarter and Full Year 2012 Earnings Conference Call. [Operator Instructions] I would now like to introduce Shelley Young, Director of Investor Relations. You may begin.

Thank you, Jennifer. Good morning, and good afternoon, everyone, and welcome to IFF's fourth quarter and full year 2012 conference call. Earlier today, we issued a press release announcing our fourth quarter and full year 2012 financial results. A copy of the release can be found on our website at ir.iff.biz. Please note that this call is being recorded live and will be available for replay for up to 1 year on our website. Before turning the call over to Doug Tough and our senior management team, I'd like to read our forward-looking statement. Please keep in mind that during this call, we will be making forward-looking statements about the company's performance, particularly with regard to the fourth quarter and full year 2012 and our outlook for 2013. These statements are based on how we see things today and contain elements of uncertainty. For additional information concerning factors that could cause actual results to differ materially from forward-looking statements, please refer to our forward-looking statements and risk factors contained in our 2011 10-K filed on February 28, 2012, and the press release filed this morning, all of which are available on our website. Today's presentation will include non-GAAP financial measures, which exclude those items that we believe affect comparability. Reconciliation of these non-GAAP financial measures to their respective GAAP measures is set forth in our press release that we issued earlier today and on our website. For those of you who are new to our conference calls, I'd like to introduce the participants on today's call. With me on the call is Doug Tough, our Chairman and CEO; Nicolas Mirzayantz, our President of Fragrances; Hernan Vaisman, our President of Flavors; and Kevin Berryman, our Executive Vice President and CFO. Now I'd like to turn the call over to Doug Tough.

Thank you, Shelley, and good morning and good afternoon to everyone. Our focus on the call this morning is to provide an overview of our fourth quarter and full year operating performance, give you an update on our strategy, take you through a review of each of our business units and provide our current outlook on 2013. After the prepared remarks, we will leave time for your questions. Turning to the fourth quarter. We achieved local currency sales growth of 8%, which continues the accelerating growth momentum we have seen in each quarter this year. If we exclude the impact of the exit of low-margin Flavors businesses to get a more consistent year-over-year comparison, then on a like-for-like basis, we achieved 10% growth, which is the highest we have achieved since the third quarter of 2010. This broad-based growth across all categories and regions was due to strong new customer wins in both business units, as well as growth in our base business, owing to our ability to create consumer-preferred flavors and fragrances. Once again, our growth was buoyed by double-digit growth of 11% in the emerging markets, which accounted for 49% of sales in this quarter, up from 47% last year, as well as 6% growth in the developed markets. If we exclude the impact of the exit of low-margin Flavors business to get a more consistent year-over-year comparison, then on a like-for-like basis, we achieved 10% growth, making this the highest performance we have achieved since Q3 of 2010. Looking at our growth by business unit. Our Fragrance business delivered 13% growth this quarter, and our Flavors segment achieved 7% like-for-like growth. Our top line performance says a lot about the progress we have made this year, in finding new and better ways to serve our customers and…

Thank you, Doug, and good morning and afternoon, everyone. Fragrance performance was very strong in the fourth quarter, with double-digit sales growth and improving profits. Due to record-breaking new wins in Fragrance Compounds, including Fine & Beauty Care and Functional Fragrance, combined with a strong underlying growth in the base business, fourth quarter reported sales increased 10%. Excluding the impact of local currency, Fragrance growth was 13% and was the highest local currency sales growth we have achieved in any quarter, since the third quarter of 2010. In line with our strategy of leveraging our geographic reach, 53% of our fourth quarter Fragrance Compound sales were from the emerging markets, which grew at 17%. Brazil continues to be one of our leading markets and had a strong double-digit growth this year. Excluding Ingredients, Fragrance Compounds grew 15% this quarter, due to strong growth in every region led by Latin America. Globally, we have strengthened our [indiscernible] participation and are very well-positioned for new business growth. Our innovation platforms, including our encapsulation technology, drove double-digit growth this quarter in Fabric Care. We were a pioneer in developing this technology, and continue to strengthen our leadership by leading the charge in term of exploring new application for its use. We are working with our customers to introduce encapsulation in other categories and regions. In total, products using our encapsulation technology had double-digit growth this quarter, and we have a very strong pipeline of new wins. Our Fine & Beauty Care category, which includes Fine Fragrance, Toiletries and Hair Care, grew by 19% this quarter, driven by strong growth in Latin America, North America and EAME. Fine Fragrance had double-digit growth due to continued success in driving new launches in Latin America, North America and Europe, including Lancome, La Vie Est Belle, Bath…

Thank you, Nicolas. Good morning and good afternoon, everyone. Flavors had a nice quarter of growth, marking our 28th consecutive quarter of local currency sales growth. On a like-for-like basis, which excludes the impact of exiting low-margin sales activities, we generated a strong local currency sales growth of 7%. Our growth this quarter was reduced by 3.5 percentage points, due to the exit of low-margin sales activities. Although this put continued pressure on our top line growth, it had a favorable impact on gross margin for both Flavors and for the total company, and has helped us to improve the profitability of our overall portfolio, in line with our strategy. This quarter, our performance was supported by strong growth in North America, which delivered like-for-like local currency sales growth of nearly 15%, as well as strength in emerging markets. Greater Asia, Latin America and EAME delivered solid growth this quarter. Our like-for-like growth in North America of 15% was, once again, led by double-digit growth in Beverage. In EAME, we grew by 6% due to moderate growth in Beverage and Savory. Greater Asia, our largest region, delivered 5% like-for-like local currency sales growth, led by double-digit growth in Dairy and high single-digit growth in Savory. In Latin America, local currency growth on a like-for-like basis was 6%, led by double-digit growth in Beverage and positive growth in Savory. We continue to make progress in this region, working with our regional customers to improve sales momentum in Latin America. Turning to the full year. We delivered strong local currency sales growth of 8% on a like-for-like basis. This marks our third consecutive year of high single-digit sales growth, contributing to the consolidated company's ability to deliver growth in line with our stated consolidated growth target of 4% to 6%. Flavors growth…

Thank you, Hernan, and good morning and good afternoon, everyone. Turning to our quarter results, reported revenues for the fourth quarter totaled $681 million, compared with $644 million in the prior year quarter, or an increase of 6%. Our local currency sales growth increased 8%, as currency translation reduced our reported sales by 200 basis points in the quarter. On a like-for-like basis, our sales growth was 10% in the quarter. Our gross margins were 42.2% this quarter, up from 37.9% in the prior year, or an increase of 430 basis points. The improved performance was due to favorable manufacturing leverage supported by strong volume growth; ongoing cost-savings initiatives; an improved sales mix, including the benefits of exiting low-margin sales activities in Flavors; and the continued benefits of pricing, which helped to offset the continued high level of input costs. The strong sales and gross margin improvement in the quarter also resulted in higher levels of incentive compensation provisions in the quarter, resulting in research, selling and administrative expenses being higher than normal levels and certainly, well above last year, when incentive compensation provisions were abnormally low. Our sales strength and gross margin expansion, however, more than offset these increases. As a result, our adjusted operating profit increased 9% or $8 million, to $99 million in the quarter. With interest expense down slightly year-over-year and a lower effective tax rate due to a lower cost of repatriation and reductions in tax provisions, we were able to drive a 12% increase in adjusted EPS growth to $0.83, up from $0.74 in the fourth quarter of 2011. To provide additional perspective on the underlying sales growth momentum in our business, we are including a graph of our quarterly like-for-like growth by business unit and for the total consolidated company. This graph highlights…

Thank you, Nicolas, Hernan and Kevin. We are pleased with the progress we've made over the past few years in driving growth across both businesses based on our technology. While the business is both diverse and stable, reflecting its focus on consumer products, it is also growing as the emerging markets' middle-class population expands and increases their use of consumer products. The defensive and growing nature of our business, combined with our customer intimacy, innovation and consumer insights, enabled us to deliver solid results in a challenged environment. Although we are mindful of economic volatility in various parts of the world, we are confident that based on our diversification, we will be able to offset softness in one part of our business, with strengths in another. The accelerated momentum we see in the Flavor and Fragrance Compounds business is fueled by the strategic investments we have made in the emerging markets over many years, combined with our ability to provide customers with products that meet and surpass consumer expectations and lead to market share growth for both our customers and for us. We are committed to driving the business for the long-term, creating new and innovative products that will appeal to consumers all over the world, and collaborating with global and local customers to bring these products to market. Given our progress on a number of value-enhancing initiatives, we expect our gross margins will continue to trend above year-ago levels. We have a committed and a dedicated group of people whose mission is to see the company succeed. We are pushing ahead to meet our internal financial objectives and have been able to deliver top line growth in line with our long-term targets, due to our diversity and our ability to provide value to consumers year after year in every…

[Operator Instructions] Your first question comes from the line of Mark Astrachan with Stifel, Nicolaus. Mark S. Astrachan - Stifel, Nicolaus & Co., Inc., Research Division: I guess maybe just a couple of questions for Nicolas and Hernan, just in broader strokes in terms of thoughts about what they're seeing in specific regions around the world, in terms of pockets of strength, weakness. And then specifically for Nicolas, there was a big increase in Latin America Fragrances in the quarter, if you can maybe talk a bit about what contributed to that, and how much of that should or will continue to be helpful?

Mark, good morning. It's Nicolas, how are you? Mark, just for your comments in Latin America, I think it is fair to say that we continue to strengthen our leadership in the markets. And as the market is growing, a significant number of new consumers coming to the markets and entering these categories, so we see an increased activity in terms of the retail markets increasing, players going -- entering new categories, new channel of distributions. So we should combine all this momentum and all strong strategic partnership we have in the region. We're enjoying more than our fair share of the growth of the market, so we continue to strengthen our leadership. Obviously, the growth was more significant than we expected in the fourth quarter. But right now, the pipeline of new wins and the continued activity in the market would indicate that we will continue to see a good momentum going into 2013.

Mark, this is Hernan. I mean, we have a kind of a mixed bag situation. We started the year, I mean, in -- with Greater Asia, delivering good growth in this point in time, but we're seeing other areas like Western Europe and even -- I mean, Eastern Europe, that this kind of production platform for Western Europe, some kind of a slowdown, some softness there. In U.S., we still see good growth. And in Latin America, gaining momentum. So I mean, we are continuing that the -- why we believe that this is kind of moderate growth due to the discontinue of business. We are in the right path. And I think that really makes us very confident, is that we have a strong pipeline of projects in-house.

Mark, this is Kevin. Just one quick additional comment. I think that if we looked at the broad portfolio across a lot of different regions, there was actually good solid growth in a lot of countries. So there was some standouts, obviously, you picked one of them, but we saw some good solid growth across a broad swell of countries and regions. So we were pleased with that performance in the fourth quarter.

Your next question comes from the line of Lauren Lieberman with Barclays Capital.

I just wanted to know if you guys could talk a little bit about the Evolva partnership. Just, I guess, a little bit of why it's important with this particular ingredient? Is it a bit of a particular source of inflation? Has quality been an issue? Have there been shortages? And then when you expect -- presumably, if the scaling up goes well, when that will be commercialized and start to impact your business?

Lauren, I mean, you explained pretty well all. I mean, basically it's a very important Flavor ingredient. Just to give you a kind of magnitude, I mean, if you're thinking that we're -- potential, I mean, of the market is 10 billion [ph], the first 4, 5 Flavors, 1 is vanilla. So I mean, this is one of the component of this kind of Flavors profile. It's a very expensive raw material, has a high volatility in the market. You have always problems in sourcing. So by doing that, I mean, we will be able to, first, I mean, have a very sustainable way of getting this product, in a very cost-effective and sustainable way. So I think that this is the key element of this partnership. We are really, very, very exciting, and we are very close to get, I mean, the things done. If we can -- if we will be able to be successfully, I mean, to scale-up manufacture, we will have the first, so let's say, samples in the market by the end of this year. So it goes as we expect, Lauren. I think that we will see some -- I mean, good results by early or mid-2014.

And is that -- is it the assumption that this will happen early in your numbers for the end of this year, or no?

No. I think that it's too early to say because, I mean, whenever go to the market, Lauren, you have to go to samples, I mean, customers need to test in their products, and only just after that, I mean, it'll start to -- going to launch in a new or next environment. So that's why we're not contemplating in our numbers in 2013.

Okay. And then, I still had a question on incentive compensation. And I know, Kevin, this is something we've gone a bit back and forth on before. But it was granted, it's all because the revenue growth came in so strongly, but the way that it works for you guys, it's sort of a circular reference. I mean, at least in terms of what I believe your long-term operating goals are, it's not just revenue, there's also an operating profit element to it. And because of the step-up in compensation above getting to normalized levels this quarter, you didn't hit your full year operating margin target. So I know it's tough, I understand it's a good thing, because everyone's getting paid and the top line is there. But it is frustrating from an external standpoint to say the business is in such a good shape, and then so much of it gets given back in a not terribly predictable way. So I don't really -- is there a thought process going forward, and how that can be managed differently, the formula could be shifted? Anything you can offer would be great.

Thanks for the question, Lauren. We are always thinking about ways to have an incentive compensation program that is directly aligned with performance and, effectively, we do. And that has resulted, given some of the variability in our performance and different levels of incentive comp and certainly, that occurred in Q4 of this year. I think the specifics, as it relates to Q4, was that the top line performance really was stronger than we expected. And our local currency sales growth jumped up above 4%. We talked to the 4% number, but it's almost close to rounding to 5. So it's a big number. So it's bigger than what our expectations were and it's relative to a strong November and December. Growth is a big part of our incentive comp dynamic, and so that translated into us having to increase our provisions for the quarter. Having said all of that, at the end of the day, we didn't hit our profit objectives, and so consequently, the impact on our incentive comp was more about our growth and less about our profitability. And I would also remind you, as it relates to 2011, we had very strong levels of operating profit growth in 2011, where we grew more than 10%. I believe, the number was 11% in 2011. And our incentive comp was quite low because we underperformed versus our expectations internally. So there is the resetting of the comp, which ultimately has an impact on a comparable basis, and ultimately, as we look to drive incremental growth and innovation into our portfolio, we continue to see a greater stability in the top line, which will translate into greater stability of our incentive comp levels.

And your next question comes from the line of Edward Aaron from RBC Capital Markets.

It sounds like you're maybe expecting a little bit slower growth in Fine & Beauty in Q1, just wondering if that's just a reflection of the comparison getting a little bit tougher? Or if there is maybe some factors, kind of more specific to Q4 inventory, restocking or whatnot, that, yes, you don't expect to continue?

Edward, it's Nicolas. First of all, as you say, we saw very, very strong Q4 coming from the strength of the existing business and brands having more confidence in the Christmas season as well as the strong momentum in new wins. And it was really across the different regions, but mostly, also driven by the strength in Lat Am and North America. So Christmas was positive in the U.S, mixed in Europe and strong in Latin America. The fact that most of the strength came from Latin America, and we see continued momentum, this will be a good balance to offset what could come as pressure points in Europe or the markets. So right now, it's too soon for us to understand the inventory level. One thing which is fair to say, that it will not be the same pressure point that we saw in 2009, when you had a lot of inventories throughout the entire supply chain at the retail level and the customer level. So it's a bit too early to say at the moment. But obviously, a strong Q4 put some tough comparison with Q1.

And just a quick follow-up on the previous question regarding incentive comp. If you kind of look at the full year provision, the Q4 provision, where does that take you on a full year basis, kind of relative to target for 2012?

Say again, Ed.

I'm just wondering what the incentive comp shook out on a full year basis, relative to a kind of target in 2012. With a bigger Q4 provision, did that take you, just kind of back up to target? Or did it take you above your incentive comp target for the full year?

It's slightly above.

Your next question comes from Jeffrey Zekauskas from JPMorgan. Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division: This is Silke Kueck for Jeff. My recollection is that the Beverage business used to be more seasonal, where really, it would pick up like in the second and third quarter. And so, what led to the strength in the Beverage business in the fourth quarter? And why is North America up 15%?

Silke, I mean, basically, what I've mentioned is, I mean, this remarkable growth in Beverages was being brought by new wins we haven't had before. I mean, we are making great inroads in North America in very important brands in the still beverage. So this has been the main reason that you have this -- such a big increase. Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division: Okay. In -- or you also ask a Fragrance question. In Fine Fragrances, the local currency comparisons are very, very good, both for IFF and Givaudan, so I think like up 19% and 15%. So who's losing share? Or were the -- or the comparison's just so easy?

Look, it's very difficult to comment on the competition. The only thing, as I said before, was a very strong for us is the strength of our existing portfolio where you have a lot of classics and which are well-positioned in many markets, but also we had a significant number of new wins. But more importantly, this when [ph] you are successful in the marketplace and provided market share gain for the brands we partnered with. So we don't have the industry data, so it's difficult to comment on this, but I just want to provide you some insights on our performance. Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division: And if I can ask the last question on R&D. As a percentage of sales, R&D went up, and I understand some of this due to incentive compensation. But does the higher level of R&D also reflect more development expenses as a function of winning new business? Or does it include like milestone payments to Evolva? What else is in that R&D expense that it's so high?

Well, I mean, we've been targeting that 8% level anyway, and the fact we're a little bit higher, I view is a good thing. You've touched upon some of the items, such as the Evolva payment, but it's really the recognition that we're going to win through technology, win through investments. So it's a continued push we have on a lot of agreed internal platforms, Silke.

Your next question is a follow-up question from Lauren Lieberman with Barclays.

Just pretty clearly, you guys are talking down revenue expectations for Q1, and I just -- I mean, I had already assumed that Q1 would become as slower than this great number in Q4, but are you thinking about it as being a low point for the year? And I mean, how down or how much lower are we talking? Is it a kind of slowest growth in the year, or just slower versus Q4 and you want to make sure people don't assume that what you saw in Q4, maybe boost a little bit by some sales around the holiday, doesn't continue per se into Q1?

Lauren, it's Doug. I mean it's really a reference point. It's Q4 of 2012, it will be lower off that level. I think from the comments we made a few minutes ago, the year we're expecting to be in line with the long-term targets that we've said, so I wouldn't read a lot into a lower level other than managing expectations against the plus 8 or the plus 10 year like-for-like. I would just pick up, though, on something that Hernan said, which was the discontinued part of the low sales volume in Flavors is going to run through the first half and end at the end of the first half, and there will be, I would say, a significant part in Q1 that will affect Flavors. But it will still be positive, clearly, for the first half quarter.

Your next question is a follow-up question from Jeffrey Zekauskas with JPMorgan. Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division: If I can ask like 2 more questions of clarification. Is -- does the expansion into the emerging markets, is that a benefit or a headwind to your operating margin, or it's doesn't make a difference at all?

Silke, this is Kevin. Clearly, margin profiles by either customers or regions or whatever, they're not all exactly the same. But we do not see a reduction in our margin profile as it relates to our drive to have incremental business in the emerging markets. Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division: Okay. And secondly, I was wondering what the order of magnitude of sales are now for encapsulation technologies, and there was the comment made that you expanded the encapsulation product lines from Fabric Care into other end-markets and into other regions, and so I was wondering whether -- where you expanded and which regions, and whether it's now part of shampoos or soaps, or lotions, maybe? Can you just expand a little bit?

Yes, Silke, it's Nicolas. So we are very pleased with the progress we're making as some customers are going into market test with our new encapsulation systems, into new categories. Obviously, Asia is one area where we're rolling out even further the technology and which is good as seed [ph] where we're able to enter new countries, and even to enter new customers with the technology. So we are pleased with this additional growth potential that we're developing at the moment. Silke Kueck-Valdes - JP Morgan Chase & Co, Research Division: Can you explain which product categories you're expanding into outside of Fabric Care?

Right now it's confidential. I would like our customers to have the privilege to do their market test in full confidence and then to be able to roll it out. So we'll leave that privilege to our customers that we partner with.

Your next question comes from Mark Astrachan with Stifel, Nicolaus. Mark S. Astrachan - Stifel, Nicolaus & Co., Inc., Research Division: A follow-up on the guidance for '13, relative to long-term expectation. Does that include any benefit from what you talked about on the Ingredients-related restructuring that you said you'll comment on in the second quarter? And then, just a broader question about operating margins. So you saw a big increase in the Fragrance business for the year. Flavors didn't quite see the same increase that it's seen in recent years. I guess maybe a bit of directional color on how you see, A, the gap narrowing between the 2; and just sort of directional growth in profit in each of the business units going forward?

Yes, Mark, we'll be continuing to provide -- this is Kevin. We'll continue to provide you some insights as we are ready to disclose publicly what efforts are being executed in the Fragrance Ingredients. As we've said in the past, it's a fairly complex process, and the things that are being thought about have a lot of tentacles into our internal supply of products and across our facilities. So it is complex. Likely, when we decide to do something, it's going to be impacting largely 2014 as opposed to 2013. So the answer, just a quick answer to your question is, you would not have to assume benefits as it relates to that, for us to be getting to guidelines that have been established in terms of our objectives for the year. In terms of Fragrance and Flavors, we continue to believe that there's opportunities to improve the gross margin profile due to all the things we talked about over the course of this morning, innovation, continuing to drive the mix on the portfolio, to areas where we are advantaged, improving the margin profile for those areas which are less advantaged, all of those things, we think, have an opportunity for us to be able to drive incremental margin profile in both businesses. So that's a critical part of our strategy. As you know, it's one of the pillars of our strategy, and we'll continue to execute against it.

At this time there are no further questions. Do you have any closing remarks?

We'd like to thank all on the call today for their participation, particularly the questions that came at the end, and we look forward to talking with you in 3 months. Thank you, kindly.

Thank you for joining today's International Flavors & Fragrances conference call. You may now disconnect.