At this time, I would like to welcome everyone to the International Flavors & Fragrances fourth quarter and full year 2008 Earnings Conference Call. Today’s call is being recorded. All participants will be on a listen-only mode until the formal question-and-answer portion of the call. Participants will be announced by their name and company and in order to give all participants an opportunity to ask their questions, we request a limit of one question per person. I would now like to introduce Richard O'Leary, Interim Chief Financial Officer. You may begin.

Good morning everybody, and welcome to the IFF fourth quarter and full year conference call. With me is Rob Amen, Chairman and Chief Executive Officer. Our earnings release was filed this morning and it is available on our website, iff.com, in the Investor Relations section. As you know, during this call, we may make forward-looking statements about the company's performance. These statements are based on how we see things today, so they contain elements of uncertainty. For additional information concerning factors that could cause actual results to differ materially from the forward-looking statements, I ask that you refer to the cautionary statement and risk factors contained in today’s earnings release and in IFF’s filings with the Securities and Exchange Commission, available on our website. Some of today's prepared remarks will exclude those items that effect comparability. These excluded items are captured in our GAAP to non-GAAP reconciliations available on our website. Now here is what we are going to cover on today's call. Rob will open with an overview of the fourth quarter performance, then I will provide a review of our fourth quarter and full year financial results. And following closing comments from Rob, we will then take your questions. Now, let me turn it over to Rob.

Thanks Rich. Good morning everyone. Hopefully, by now you had the opportunity to see the press release and you share my impression. I'm generally pleased with our performance in the fourth quarter, especially in light of the global economy. Fourth-quarter earnings per share, adjusted for non-recurring items, was $0.50 a share, down $0.03 from last year's fourth quarter. Rich will provide you an analysis of the key drivers to this earnings per share change. Our local currency sales were up 2%, a bit above my expectations. I will comment on the regional performances when I address the business units in a few moments. Operating margins were at 12.3%, below last year's fourth quarter of 12.8%. The gap of 50 basis points in margins actually shows real progress in recovering from the cost escalation in materials and input costs and the gap that we have seen it prior quarters this year. Currency parities shifted a great deal. In the fourth quarter, the dollar versus the pound was 18% stronger than the third quarter of ‘08 and 20% stronger than the fourth quarter of ‘07. The euro or the dollar, I should say, was stronger versus the euro by about 13% versus the third quarter this year, and about 10% stronger than the fourth quarter of last year. Blended together, currency parity changes were about a 5% drag on revenue, and hit us for about $0.02 per share. Rich will give you a much more detailed analysis of the translation of balance sheet items that impacted this later on. In the quarter, our interest expense was again higher. You'll recall, in our October call I spoke to you about the interest-rate swap that was causing our interest rate – interest expense to be higher and it was higher this fourth quarter by…

Thanks Rob, and good morning to all of you. Now let's start with a look at consolidated sales in slide 11. We did have good results in quite a challenging environment. Fourth quarter sales decreased 3% as the stronger dollar more than offset 2% local currency growth. As Rob said, our Flavors business continues to perform well reporting 3% growth in local currency, while the Fragrance sales were flat in local currency for the quarter. For the year, we have seen a softening in demand in the second half of the year. Overall, local currency sales increased by 2% with Flavors performing well in all regions throughout the entire year. As Rob said, Fragrances climbed back from a disappointing first-quarter and in the year down only 1% in local currency. Emerging markets were key drivers of growth for both businesses. The recent strengthening of the dollar represents an important shift in the operating environment compared to the first nine months of the year. During the quarter, the dollar appreciated about 11% against the basket of sales currencies. With about 40% of revenues effectively priced in US dollars, the impact on reported sales was 5% unfavorable. Still, this equates to about $27 million decline in net sales, more than offsetting favorable volume, price, and mix impacts for the quarter. In terms of profitability on slide 13, gross margin was down 90 basis points for the quarter, and represents a significant improvement compared to the third quarter gap of 190 basis points. Input costs continued to rise during the quarter. We made good progress in price realization, cost reduction, and margin improvement efforts. And we are not positive yet in terms of input cost recovery, while we have closed the gap in the fourth quarter. Operating margin is down sequentially, but the…

Thanks Rich. In the fall of 2006, I set out a series of strategic goals for revenue, margins, and earnings per share. And since then we over delivered in 2008, pardon me over delivered in 2007; and in 2008 came in below our plan. I'm pleased with the progress IFF has made but I'm not satisfied. Given the external environment, we will face in 2009, weaker economies, currency parity shifts and the other burdens that Rich outlined it is going to be particularly challenging to meet our three-year goals. That said, our executive team remains committed to growing our sales faster than our market growth, improving operating margins by reducing cost, leveraging volume, and growing EPS. 2009 will be a very challenging year in which to operate. We will, however, continue to pursue these goals. Now, let us look ahead. As I said, we will continue to pursue our growth strategy because we believe in the long-term growth potential of the global economy. It is likely we will see some below trend line growth in the periods ahead, but I believe in time the developed world will recover, and the emerging world will regain its growth rates of 6% to 8%. That said, it is unusually difficult to forecast the first quarter. Given what I see today in our forecasts an order book, it appears to me that we are on track to have local currency sales to be roughly in line with the first quarter of 2008, perhaps, a little bit lower, perhaps a little bit above. The currency shifts that Rich outlined will be a drag on the top line of about 5%, and that will likely impact our earnings per share by $0.04 to $0.06 in the quarter. We will continue to pursue our improvement initiatives. Raw materials will likely still be high in Q1 because of the way the cost flowed through our inventory. I believe that raw material costs will begin to abate and we will see a benefit of that starting in the second quarter. In 2008, IFF continued to progress. Sales and earnings per share were both records. We strengthened our company and certainly the future presents many challenges. However, I have remained very confident that IFF will grow faster than our markets and improve its profitability. Now Rich and I will be very happy to answer questions. Sunny, if you could manage the flow of questions.

Erik Sjogren – Morgan Stanley: Yes, good morning.

Good morning Erik. Glad you are here. Erik Sjogren – Morgan Stanley: Good morning. I have just one question, I mean a lot of the staples companies have now in the fourth quarter been talking about significant destocking will retailers et cetera. Has this impacted order sizes, order volumes, frequencies et cetera on your end too or –

As I mentioned when I commented about North America, we are seeing I think many cycles at varying places, reducing orders, and then catching up, and I think that is going to be highly likely that in the quarters ahead were going to see those short-term volatility. In the end, when I take a look at some of these – our customers announcing, you know, they are still anticipating volume to be plus or minus 0% to 1% or so, but I think the way they managed the order flow will present some quarterly challenges. As I pointed out in the third quarter, North America where we saw the early destocking, our sales were flat year-over-year. That turned around and sales in North America were up a strong 4%, well faster than the economy because the destocking had gotten too far. So, I think we will see that volatility on a go forward basis.

And our next question comes from the line of Lauren Lieberman with Barclays. Ryan Bennett – Barclays: Hi, good morning. This is actually Ryan Bennett here for Lauren today.

Hi, Ryan, how are you today? Ryan Bennett – Barclays: Doing well, good morning. So, I guess, one very quick question and then a broader one, first just on the pension expense, can you give us a sense of how much of a hit that will be in ‘09?

Like I said incrementally ‘09 versus ’08, it is in the range I would say between $5 million and $10 million incrementally. Ryan Bennett – Barclays: And perhaps everybody would benefit Rich, if you just explained what is the source of that? Why is pension expense up in ‘09 versus prior period?

There is really – the biggest component of that is the decrease in pension assets across the spectrum of the US and European plants. And while the assets from a performance standpoint, we had much less exposure than the board of markets because the mix of our investments in stocks and – bonds versus stocks, there still is a significant impact year-over-year in terms of the erosion in the assets. And there has been some changes in terms of interest rates, some slight modifications in the interest rates and the discount rates that we used year-over-year.

Some of you may recall, we actually froze a US pension plan more than a year ago. And this incremental charge is really related to the decline in the equities market, and that decline has to be recognized over a period of time. So, I suspect IFF will be one of many companies facing this added burden, and it is a non-cash charge in the short run, we don't have to add – we don't make cash contributions but it is going to be a burden and that will be over the next several years. Correct?

Yes, depending upon the recovery in the assets, but there is amortization in the spreading mechanism that does – the impact is not felt immediately but if the equities and the planned assets stay where they are today there is going to be an increase in burning over the next five years.

Okay, Ryan. Now, you brought a question. Hello?

Your line is open. Ryan Bennett – Barclays: Okay, great. So Rob when you're thinking about 2009 broadly, it is sort of an unfair question because there is not that much visibility. In fact I think you know, (inaudible) didn’t even provide guidance this morning for 2009. So just in very loose terms, if volumes were to come in much lower than you expected, what sort of flexibility are you building into the P&L to be able to absorb some of that.

Yes, that is a hypothetical question and really isn't a good one to handle because, you know, we are not seeing it globally. We are going to be agile where we are really committed to delivering on our plan and growing and we will adapt it. We are shifting our investments in people and assets. We have clearly cut back a little bit more in the developed countries but we will continue to invest where we see the market opportunities. And I want you to remember that our ‘09 isn't just going to be defined by the market. I believe we grew faster than the market distinctly in Flavors and I believe, in a large number of segments in fragrances because we have got really winning fragrances and winning flavors. And we are going to continue to press that. If we see volumes deteriorate we will have to make adjustments, but I don't want to theorize on where or how we will do that. We have ongoing things. We want to improve our footprint, our supply chain, but that we are going to do because it is the right thing to do. We might accelerate it in certain areas but we are going to continue to pursue our internal initiatives and that is what is really behind this improvement plan to have a leaner, more focused, more effective organization.

(Operator instructions) Moving on to Mike Sison with KeyBanc. Mike Sison – KeyBanc: Hi, guys.

Hi, Mike. Mike Sison – KeyBanc: When you take a look at ’09, maybe you can just give us a feel for, you know, in total what you're doing internally that you know can keep earnings on an uptrend and given, you know, assuming foreign currency holds where it is now and, you know, what type of volume or market demand backdrop would you need to see to keep your earnings sort of on that positive trend in ‘09 versus ‘08. Is there enough there internally and what may be new product wins that could offset the foreign currency and some other negatives that you have to grow earnings?

Mike, good question, tough question. Let me see how best I can answer it. First of all, if the dollar stays where it is and it's about a 5% drag all year, that's a $0.20 to $0.25 drag on the potential for the year. Mike Sison – KeyBanc: Okay.

And that if it just stays, you know, where it is for the entirety of the year and doesn't come back and certainly forecasting the dollar is something I don't feel we have the expertise to be able to pull off. The internal initiatives are those that, you know, and some additional, you know, we finished our outsourcing of the back office of finance that will have a benefit next year. We have a number of initiatives. We have talked to you about the businesses of extenders and materials, lower cost. We are working with our customers. If we get all of our internal initiatives achieved and that is, you know, that's not entirely locked down. I mean there is always a risk to timing and to the magnitude and volume was roughly flat I think we, you know, we would deliver an increase in earnings. So you know, we don't believe this year is, you know a year where it has only got a downside. We've got to do a lot of things right to be able to deliver an increase in earnings, but it is extraordinarily difficult to trust or forecast the circumstances of our customers and the currency markets. We are going to stay as I indicated, we are committing to a long-term plan and that's what we're holding ourselves accountable to. Mike Sison – KeyBanc: So I guess the way to look at it Rob, is that you are looking for market demand to be down, you know, 1% to 3% and then you would all perform to get the flat volumes for the full year.

I don't think we are seeing market demand being down 1% to 3%. I mean I – I mean just take a look at the Flavors business over the course of 2008. We said was up 6. Yes it was up roughly 3 in the second half. The second half was as tough as second-half with the sharp reduction in the US GDP. So, in our fragrance business, which really started out with the burden in the first half recovered and was down a fraction of 1%. So I mean we're looking and believing that things are to be, you know, as I said very close to 0 maybe a little above, maybe a little below on a global basis. If we do well we can be above that. There is always a risk that the markets will be weaker than that and there is the potential that they be somewhat stronger. But this is not a year that is a wipe out by any means. I think we can do well and with the platforms of excellence, the product introductions, I think we're winning a lot. You know, I'm very impressed with what our fine fragrance team has done. You know the fourth quarter was probably a tougher consumer spending quarter as anybody can recall and our fine fragrance sales were up nicely because we had enough new wins to overcome whatever the market did and we are seeing that functional fragrance did a nice job. The fragrance ingredients really varies along with the overall market and as I said I think our Flavors team is just on a roll and continues to win for lots of good reasons. So, you know, we are still looking to try to make 2009 positive. Mike Sison – KeyBanc: Right thank you.

(Operator instructions). We'll take our next question from Jeff Zekauskas with JP Morgan. Jeff Zekauskas – JP Morgan: Hi, good morning.

Jeff, it is nice to see you over here. Jeff Zekauskas – JP Morgan: Good. In your press release in one part you say that the unusual tax benefit was $17 million and then in the fourth quarter highlights, you say excluding tax benefits of $20 million. What is the difference between the 17 and the 20.

Jeff, there are small items that when pulled together don't have a significant impact on a net income basis, but in looking and trying what a normalized effective tax rate we wanted to highlight the difference. But did the one transaction itself was the $17 million and then we had some small adjustments to pluses and minuses to our deferred tax balances and our accruals that on a cumulative basis was another $3 million bucks. Jeff Zekauskas – JP Morgan: Okay, and second Richard, do you have that helpful slide very you show your input costs hurting you by $0.47, and I think you said that the net detriment for the year was about a dime, and so you know, if you make a couple of calculations what that would point to is your prices being up about a couple of percent this year, is that correct?

Yes that is in that range. I mean it is in the range of 2% pricing. Jeff Zekauskas – JP Morgan: Okay, I guess just a general question for Rob, when you look at 2009 do you think the Flavor business will be stronger of the Fragrance business or do you think that there will be a different pattern in terms of quarters?

Pardon me as I put my car-neck [ph] hat on Jeff. Jeff Zekauskas – JP Morgan: Thank you. Or if you can’t tell that is fine too just, you know, if –

Sitting here today I would believe that our Flavors business will probably have more favorable comparisons to our fragrance business, given that risks, you know this downturn we are now seeing accelerated in Europe. I think it will impact fine fragrance in Europe. Jeff Zekauskas – JP Morgan: Yes.

You know, it is not clear. We are seeing good stability in functional fragrance, but I think that the burden for fragrance business is really going to be consumer discretionary, and that is possible for me to forecast. The Flavors business they've just done a good job, their broad-based. I think they've got a lot of good things going on there, maybe a little bit better market dynamics. So, I would anticipate flavors being a little plus up to the fragrances. That is helpful and then lastly in the quarter you said in the release that your compensation expense in the fragrance unit was lowered by about $10 million versus the previous year. A sort of – can you talk about the magnitude of that charge, and why wasn’t there any comparable charge in flavor unit. There was a decrease of about $10 million related to incentive with the fragrance business, and there was about as I mentioned earlier in the comments about (inaudible) in Flavors for the quarter. So it was a reallocation between the corporate component of it and the two business units when we made the adjustments in the third quarter, and we reallocated. We did it at about a global level, but we at that point in time hadn't gone back and said this is the piece business by business and the corporate component of it. So, we're shifting just internal costs between the three components. Jeff Zekauskas – JP Morgan: And Richard, what you think your tax rate will be next year?

You know, on a normalized basis we were at about 27 1/2% this year. I would expect that inch downward next year. You know, in the range of, you know (inaudible) would be maybe 27, but it is going to go down you know, a couple of basis points.

Jeff, let me come back. You raised a good point of incentive comp. Our pay for performance system here, you know, we adjusted, we made a big point of what we are doing with incentive comp, overall, but it also varies by the performance of the business unit and that is all you are doing as we were allocating as Rich says. Incentive comp is down in a way from ‘07. If we achieve our full plans next year, incentive comp would go back up, which is we assume in our planning that (inaudible) we will in fact achieve the plan and then we would make target incentive comp, and that would be a delta of something between $15 million and $20 million. Jeff Zekauskas – JP Morgan: That is helpful. Okay thank you very much.

(Operator instructions) We will take a follow-up from Lauren Lieberman with Barclays. Ryan Bennett – Barclays: Hi. Just a very couple of quick ones actually, I just wanted to circle back on some comments that were made on the fine fragrance segment. As I understood it, it was beauty care and toiletries that was weak and not the perfume and cologne piece of that business.

That is true on our performance not the market comment – that is our performance. Ryan Bennett – Barclays: On your performance, I guess what I'm trying to understand maybe just that one segment alone, given the pretty significant declines we are seeing in that category now. Is it that you're not seeing destocking because you already had it earlier in ‘08, and that you are not going to see an additional wave. Are you actually seeing some changes in your order rates in January based on how the holiday season was. I just, may be trying to get an understanding of how that businesses is looking.

Very good and fair question. You know, I think there is no topic we have spoken of more than fine fragrance. That was a massive inventory correction that occurred in the first half of the year and, you know, we thought we would see it play out pretty much by the end of the third quarter. We think that is what happened. There might have been a little bit within the normal bands in the fourth quarter. We may see a little bit more. It maybe in Europe a little bit more than the United States, but the real reason on our fragrance folks are doing better is because they have won more business. We had a much better win rate and that and we knew that starting early in ‘08, and that is why over the course of the year we were optimistic and said we believe the comparability numbers we're going to start to look good. I am not aware – we are not seeing anything right now that suggests there is any kind of repeat on the inventory correction that we saw a year ago. The first-quarter ‘09 numbers look to be more stable. Ryan Bennett – Barclays: Okay, and then to the functional side where you said there might be more of a challenge for the Fragrances business this year. Are you seeing, it's just because it sounds there is pantry deloading and then retail destocking and then who really knows what is happening with the distributors and the manufacturers themselves have inventory to work through. Have you really not seen any changes there in reorder rates from your customers yet, or how should we think about that business in ‘09. Is that something that it will be down maybe?

Be more challenging. I said the challenge is going to be in fine because of the uncertainty. Functional has been very steady and if you look at the quarter, the sequential comparisons as we went through the year, functional fragrance has been very stable, you know, it was up 3% in the first quarter versus the prior year, then it was down 1% on the second, flat in the third, and up 1% in the fourth. So, it has actually been fairly stable and that's the kind of put it takes. We – there are at any given time somebody doing, you know, product changes so they destock or they are stocking up and we have seen a little bit of that amongst the majors, but we haven't seen a massive destocking by the – our customers for whatever reason. There has been some normal typical surprises up and down, but nothing significantly and at this stage as we look out we don't see it in the immediate future. Ryan Bennett – Barclays: Got it, okay. And then just two very quick questions. One, now that some global cost savings are clearly coming through and the pricing seems to be sticking, and the raw material picture is beginning to look better, I understand of the benefits we won’t be seeing until the second quarter. Thinking about ’09, even if volumes are weak, do you think that we could see year-over-year margin improvement?

I think if on operating margins, yes, because most of the problem is, you know, pension expense, incentive comp is going to be below line. If we get our margin initiatives underway, gross margins – yes, gross margins I think we are looking to head up, you know, head up. Ryan Bennett – Barclays: And that the 18% operating margin target.

It is going to be impacted by the mix. It is going to be by region in some currency but over time I think we're going to trend higher. It won't be a smooth line. Ryan Bennett – Barclays: Okay, and then in terms of the 18% operating margin target, is that still something that seems feasible for you today?

Well, you know, it's a long way from where we are today and I'm not going to tell you we are going to make it no matter what, but we're not quitting on it. That is our goal. We are going to get there and I think I said as much as a year ago we don't get there by the end of the year, we will continue to push on it but we believe we can get there and that is important for our business to provide the kinds of profitability we need to invest in people and technology and facilities going forward. So, we want to get up above 18%. Ryan Bennett – Barclays: Great. And the very last question is just if you could provide an update on how the CFOs are just going.

It is going. Ryan Bennett – Barclays: Right okay.

(inaudible) Ryan Bennett – Barclays: Got it. Okay, thank you so much.

And we'll take our final question from John Roberts with Buckingham Research. John Roberts – Buckingham Research: Good morning guys.

Good morning John. How are you? John Roberts – Buckingham Research: I wanted to understand the compensation allocation on accounting process, so it doesn't affect the bottom line but your crew at the overall company level and then late in the year, the fourth quarter, you figure out what the allocation is going to be between Fragrance and Flavors depending on their relative performance for the year.

We try to do it as we move through the year. If you recall, we made a major shift in the third quarter, which we took at the corporate line and all this is okay now. We are going to push it down from the corporate to the two businesses. That's – it was simply that. John Roberts – Buckingham Research: Okay. So it is just affecting the presentation of the two segment results.

Yes, it is correct. John Roberts – Buckingham Research: Secondly, I think you said first-quarter ‘09 at current currency rates you might have a $0.04 to $0.06 earnings headwind and then I think, you said at current rates it might be $0.25 for the full year ‘09. I would expect by the fourth quarter of ’09, you kind of anniversary the current rate. So, you would have a very small effect if any in the fourth quarter ‘09. How do we – in the first three quarters here how do we go from 4 to 6 in the first quarter to 25?

Had a significant impact in the second and third quarters, which is when the dollars weakened the most during 2008. John Roberts – Buckingham Research: So it will be high single digits to approaching $0.10 in the second and third quarter at current rates, meaning if you are 4 to 6, midpoint is 5, we are talking close to $0.20 in the second and third.

We haven't done that detail and I probably shouldn't have – I was just, you know, just sort of extending the $0.04 to $0.06 over the course of the year, which probably was not the most accurate way to do it. It is going to be a drag and I think it is going to be most pronounced in the first half and a little bit less on the second half, but it will still be there.

I still think it'll be most pronounced in the second and third quarters. John Roberts – Buckingham Research: Okay.

Weakened the most, I think (inaudible) significantly in the fourth quarter. So –

But as we are not going to – we will keep you posted on that as we progress, but we're not going to be forecasting the quarters ahead. John Roberts – Buckingham Research: Lastly, when raw materials spiked upon your customers they did some reformulation to try to lower their base material costs and that gave you an opportunity to go in and adjust the fragrance package to match the new base materials. With raw materials coming down is there a reformulation that occurs again at the customers that may be allows you to get in and change your products and give you some mix effect here.

You know, our customers are always looking to improve the effectiveness. I don’t know that they are going to want to go back and reformulate to a higher cost, because the materials, if it is – if the product is performing with the consumers and they are happy in a commercial sense, I don’t think they are going to mess with it. They are always after us for ideas on how do we improve the effectiveness and the cost of their products. So that is an ongoing part of our business. I think we have already started to see some of that reformulation benefits flow through. There will be more of that in 2009. That is an ongoing part of the business.

And it appears there are no further questions at this time.

Well, thank you all very much for taking the time and we look forward to speaking with you in the future, and should you have any issues, feel free to call Rich or me, and good luck to you.

This concludes today's conference. We appreciate your participation.

Thank you Sunny.

Thanks Sunny.