Achieved strong sales performance in Q2; Reconfirms full year
2017 financial guidance
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International Flavors & Fragrances Inc. (NYSE:IFF) (Euronext
Paris: IFF), a leading innovator of sensory experiences that move
the world, reported financial results and strategic achievements
for the second quarter ended June 30, 2017.
Q2 2017 Consolidated Summary: Change vs. Prior Year
Reported (GAAP)
Adjusted (Non-GAAP)¹ Currency Neutral (Non-GAAP)¹
Sales
OperatingProfit
EPS Sales
OperatingProfit
EPS Sales
OperatingProfit
EPS Consolidated 6% (3)% (5)% 6% 4% 2% 8% 6% 8%
Acquisition Impact 6% 4% 5% 6% 4% 5% 6%
4% 4%
¹ Schedules at the end of this release contain reconciliations
of reported GAAP to non-GAAP metrics.
Management Commentary
“Our second quarter results finished in line with our
expectations, with improved trends across several of our key
financial metrics,” said IFF Chairman and CEO Andreas Fibig. “We
continued to advance our strategy as we drove innovation, executed
our productivity programs, and benefited from acquisitions. These
improvements reflect significant efforts across our entire
organization as we implement our long-term strategy and generate
strong returns for our shareholders.”
Mr. Fibig continued, “Looking forward, we expect second half
performance to see improved year-over-year organic sales growth and
additional savings related to the productivity program we announced
earlier this year. For the full year, we remain optimistic that we
can achieve our previously stated currency neutral guidance.”
Second Quarter 2017 Consolidated Financial Highlights
- Reported net sales for the second
quarter totaled $842.9 million, an increase of 6% from $793.5
million for the second quarter of 2016. Excluding the impact of
foreign exchange, currency neutral sales increased 8% over the
prior year, including approximately six percentage points related
to our recent acquisitions.
- Reported operating profit for the
second quarter was $159.1 million versus $164.7 million reported in
2016. Excluding the impact of foreign exchange and those items that
affect comparability, currency neutral adjusted operating profit
grew 6%, to $171.8 million, principally driven by acquisitions,
volume growth, and productivity initiatives.
- Reported earnings per share (EPS) for
the second quarter was $1.38 per diluted share versus $1.46 per
diluted share reported in 2016. Excluding the impact of foreign
exchange and those items that affect comparability, currency
neutral adjusted EPS improved 8%, to $1.50 per diluted share,
benefiting from a year-over-year reduction in shares
outstanding.
Second Quarter 2017 Strategic Highlights
Innovating Firsts: strengthen position and drive
differentiation in priority R&D platforms
- Sweetness and savory modulation
portfolio sales improved strong double-digits
- Flavors Latin America grew strong
double-digits led by our proprietary delivery system
- Rolled out new flavor modulator for our
flavorists’ to use in formulation development
- Launched new fragrance ingredient,
Veraspice™, to further drive differentiation
- IFF | Lucas Meyer Cosmetics won Bronze
at In-Cosmetics Global 2017 for Siligel™
Win Where We Compete: achieve market leadership position
in key markets, categories & customers
- North America sales +19%, inclusive of
our recent acquisitions
- Middle East & Africa up strong
double-digits led by growth in both Flavors & Fragrances
Become Our Customers’ Partner of Choice: attain
commercial excellence
- Launched TastepointSM by IFF to serve
dynamic mid-tier customers
- First and only F&F house to sign
the World Business Council for Sustainable Development’s (WBCSD)
new publication, The CEO Guide to the Circular Economy
Strengthen and Expand the Portfolio: pursue value
creation through collaborations & acquisitions
- David Michael, Fragrance Resources and
PowderPure acquisitions contributed approximately 6 percentage
points of sales growth and 4 percentage points of operating profit
growth in Q2 2017
- Cosmetic Active Ingredients grew strong
double-digits
- Joined MIT Media Lab to Accelerate
Sensorial Open Innovation
Second Quarter 2017 Segment Summary: Growth vs. Prior
Year
Reported
(GAAP) Currency Neutral (Non-GAAP) Sales
Segment Profit Sales Segment Profit
Fragrances: 4% (3)% 5% (3)% Acquisition Impact 4% 0% 4% 0%
Flavors: 9% 11% 11% 14% Acquisition Impact 7%
7% 8% 8%
Fragrances Business Unit
- On a reported basis, sales increased
4%, or $14.6 million, to $428.5 million while currency neutral
sales improved 5%. This increase was driven by the benefit of
acquisitions as well as growth in Fine Fragrances, Fabric Care and
Fragrance Ingredients.
- Fine Fragrances improved 10% on a
reported basis and 11% on a currency neutral basis, inclusive of
additional sales related to the acquisition of Fragrance Resources.
Performance was driven by double-digit growth in Greater Asia, EAME
and North America, more than offsetting softness in Latin
America.
- Consumer Fragrances was flat on a
reported basis and improved 1% on a currency neutral basis
principally driven by the additional sales related to the
acquisition of Fragrance Resources and low-single-digit
improvements in Fabric Care and Home Care.
- Fragrance Ingredients grew 7% on a
reported basis and 9% on a currency neutral basis, led by
double-digit growth in EAME and Latin America and double-digit
growth in cosmetic active ingredients.
- Fragrances segment profit decreased 3%
on a reported basis and currency neutral basis, as volume growth
and the benefits from productivity initiatives were more than
offset by unfavorable price to input costs and weaker sales
mix.
Flavors Business Unit
- On a reported basis, sales increased
9%, or $34.8 million, to $414.3 million while currency neutral
sales grew 11%. This increase was driven by organic growth coming
from three of the four regions, as well as a strong contribution of
sales related to the David Michael acquisition.
- EAME increased 2% on a reported basis
and 9% on a currency neutral basis, led by broad-based growth,
particularly in Western Europe and Central, Southern and Eastern
Europe as well as additional sales related to the acquisition of
David Michael.
- North America grew 30% reflecting
additional sales related to the acquisition of David Michael and
PowderPure, as well as broad-based category growth led by
double-digit growth in Dairy and high-single-digit growth in
Savory.
- Latin America increased 13% on a
reported basis and 11% on a currency neutral basis, led by strong
double-digit growth in Argentina and Colombia.
- Greater Asia decreased 3% on a reported
basis and 2% on a currency neutral basis, as double-digit growth in
Thailand and India plus low-single-digit growth in China was more
than offset by challenging conditions in Indonesia.
- Flavors segment profit grew 11% on a
reported basis and 14% on a currency neutral basis, driven by the
contribution of acquisitions, the benefits from productivity
initiatives and volume growth.
FY 2017 Financial Guidance: Percent Change vs. Prior
Year
The Company’s current full year 2017 guidance:
Currency Neutral FX
Impact1 Adjusted2 Sales 7.5%
- 8.5% ~(1.0)% 6.5% - 7.5%
Operating Profit 5.5% - 6.5%
~(1.5)% 4.0% - 5.0%
EPS 6.5% - 7.5% ~(2.5)% 4.0% - 5.0%
1 See Use of Non-GAAP Financial Measures2 Excludes items
impacting comparability
A copy of the Company’s Quarterly Report on Form 10-Q will be
available on its website at www.iff.com or at sec.gov by August 9,
2017.
Audio Webcast
A live webcast to discuss the Company’s second quarter financial
results will be held on August 9, 2017, at 10:00 a.m. EDT.
Investors may access the webcast and accompanying slide
presentation on the Company's IR website at ir.iff.com. For those
unable to listen to the live webcast, a recorded version will be
made available on the Company's website approximately one hour
after the event and will remain available on IFF’s website for one
year.
Cautionary Statement Under The Private
Securities Litigation Reform Act of 1995
This press release includes “forward-looking statements” under
the Federal Private Securities Litigation Reform Act of 1995,
including statements regarding our outlook for fiscal year 2017,
the expected impact of and benefits from productivity initiatives
and the impact of our actions on long-term value creation for our
customers and shareholders. These forward-looking statements are
qualified in their entirety by cautionary statements and risk
factor disclosures contained in the Company’s Securities and
Exchange Commission filings, including the Company’s Annual Report
on Form 10-K filed with the Commission on February 28, 2017. The
Company wishes to caution readers that certain important factors
may have affected and could in the future affect the Company’s
actual results and could cause the Company’s actual results for
subsequent periods to differ materially from those expressed in any
forward-looking statements made by or on behalf of the Company.
With respect to the Company’s expectations regarding these
statements, such factors include, but are not limited to: (1)
macroeconomic trends affecting the emerging markets; (2) the
Company’s ability to implement and adapt its Vision 2020 strategy;
(3) the Company’s ability to successfully identify and complete
acquisitions in line with its Vision 2020 strategy, and to realize
the anticipated benefits of those acquisitions; (4) the Company’s
ability to realize the benefits of its productivity initiatives and
other optimization activities, (5) the Company’s ability to
effectively compete in its market, and to successfully develop new
and competitive products that appeal to its customers and
consumers; (6) changes in consumer preferences and demand for the
Company’s products or a decline in consumer confidence and
spending; (7) the Company’s ability to benefit from its investments
and expansion in emerging markets; (8) the impact of currency
fluctuations or devaluations in the principal foreign markets in
which it operates, including the devaluation of the Euro and
certain emerging market currencies; (9) the economic and political
risks associated with the Company’s international operations,
including challenging economic conditions in China and Latin
America; (10) the impact of any failure of the Company’s key
information technology systems or costs that could be incurred due
to a breach of data privacy or information security; (11) the
Company’s ability to attract and retain talented employees; (12)
the Company’s ability to comply with, and the costs associated with
compliance with U.S. and foreign environmental protection laws;
(13) volatility and increases in the price of raw materials, energy
and transportation; (14) price realization in a rising input cost
environment (15) fluctuations in the quality and availability of
raw materials; (16) the impact of a disruption in the Company’s
supply chain or its relationship with its suppliers; (17) the
impact of customer claims or product recalls; (18) any adverse
impact on the availability, effectiveness and cost of the Company’s
hedging and risk management strategies; (19) the Company’s ability
to successfully manage its working capital and inventory balances;
(20) uncertainties regarding the outcome of, or funding
requirements related to litigation or settlement of pending
litigation uncertain tax positions or other contingencies; (21) the
effect of legal and regulatory developments, as well as
restrictions or costs that may be imposed on the Company or its
operations by U.S. and foreign governments; (22) adverse changes in
federal, state, local and international tax legislation or
policies, including with respect to transfer pricing and state aid,
and adverse results of tax audits, assessments, or disputes; and
(23) changes in market conditions or governmental regulations
relating to our pension and postretirement obligations. New risks
emerge from time to time and it is not possible for management to
predict all such risk factors or to assess the impact of such risks
on the Company’s business. Accordingly, the Company undertakes no
obligation to publicly revise any forward-looking statements,
whether as a result of new information, future events, or
otherwise.
Use of Non-GAAP Financial
Measures
We provide in this press release (i) Currency Neutral Sales,
(ii) Adjusted Operating Profit and Currency Neutral Adjusted
Operating Profit and (iii) Adjusted EPS and Currency Neutral
Adjusted EPS. Currency Neutral Sales eliminate the effects that
result from translating its international sales in U.S. dollars.
Adjusted Operating Profit and Adjusted EPS exclude (a)
restructuring costs, (b) certain other non-operational significant
items such as legal charges/credits, gain on sale of assets,
operational improvement initiatives, acquisition related costs,
integration-related costs and CTA realization and (c) costs
associated with product recalls (often referred to as “Items
Impacting Comparability”). When we provide our expectations for our
currency neutral metrics in our full year 2017 guidance, we
estimate the anticipated FX impact by comparing prior year results
to the prior year results restated at exchange rates in effect for
the current year based on the currency of the underlying
transaction. When we provide our expectations for our Adjusted
Operating Profit and our Adjusted EPS in our full year 2017
guidance, the closest corresponding GAAP measures (expected
reported Operating Profit and EPS) and a reconciliation of the
differences between the non-GAAP expectation and the corresponding
GAAP measure generally are not available without unreasonable
effort due to inherent difficulty of forecasting the timing and
amount of reconciling items that would be excluded from the GAAP
measure in the relevant future period and the relevant tax impact
of such reconciling items on EPS. The variability of the excluded
items may have a significant, and potentially unpredictable, impact
on our future GAAP results. Currency Neutral Sales, Adjusted
Operating Profit, Currency Neutral Adjusted Operating Profit,
Adjusted EPS and Currency Neutral Adjusted EPS should not be
considered in isolation or as substitutes for analysis of the
Company’s results under GAAP and may not be comparable to other
companies’ calculation of such metrics.
Meet IFF
International Flavors & Fragrances Inc. (NYSE:IFF) (Euronext
Paris: IFF) is a leading innovator of sensorial experiences that
move the world. At the heart of our company, we are fueled by a
sense of discovery, constantly asking “what if?”. That passion for
exploration drives us to co-create unique products that consumers
taste, smell, or feel in fine fragrances and beauty, detergents and
household goods, as well as beloved foods and beverages. Our 7,400
team members globally take advantage of leading consumer insights,
research and development, creative expertise, and customer intimacy
to develop differentiated offerings for consumer products. Learn
more at www.iff.com, Twitter , Facebook, Instagram, and
LinkedIn.
International Flavors & Fragrances Inc. Consolidated
Income Statement (Amounts in thousands except per share
data) (Unaudited)
Three Months Ended
June 30, Six Months Ended June 30, 2017 2016 %
Change 2017 2016 % Change Net sales $
842,861 $ 793,478 6 % $ 1,671,154 $ 1,576,789 6 % Cost of goods
sold 468,272 427,837 9 % 931,899
850,940 10 % Gross profit 374,589 365,641 2 %
739,255 725,849 2 % Research and development expenses 70,320 63,252
11 % 140,031 126,637 11 % Selling and administrative expenses
135,910 132,784 2 % 276,240 256,327 8 % Amortization of
acquisition-related intangibles 8,494 5,130 66 % 15,561 11,191 39 %
Restructuring and other charges, net 791 — 100 % 10,934 — 100 %
Gain on sales of fixed assets (68 ) (197 ) (65 )%
(89 ) (2,910 ) (97 )% Operating profit 159,142
164,672 (3 )% 296,578 334,604 (11 )% Interest expense 17,556 15,060
17 % 30,363 27,539 10 % Other (income) expense, net (454 )
(2,438 ) (81 )% (14,312 ) 118 (12,229
)% Income before taxes 142,040 152,050 (7 )% 280,527 306,947 (9 )%
Taxes on income 32,245 35,317 (9 )%
54,968 71,610 (23 )% Net income $
109,795 $ 116,733 (6 )% $ 225,559 $ 235,337
(4 )% Earnings per share - basic $ 1.39
$ 1.46 $ 2.85 $ 2.94 Earnings per share - diluted $ 1.38 $ 1.46 $
2.84 $ 2.93 Average shares outstanding Basic 79,072 79,764
79,088 79,809 Diluted 79,305 80,040 79,360 80,141
International Flavors & Fragrances Inc. Condensed
Consolidated Balance Sheet (Amounts in thousands)
(Unaudited) June
30, December 31, 2017 2016 Cash and cash equivalents $ 491,386 $
323,992 Receivables 665,511 550,658 Inventories 623,762 592,017
Other current assets 213,267 142,347 Total current
assets 1,993,926 1,609,014 Property, plant and equipment,
net 811,826 775,716 Goodwill and other intangibles, net 1,571,229
1,365,906 Other assets 241,894 266,348 Total assets $
4,618,875 $ 4,016,984 Bank borrowings and overdrafts,
commercial paper and current portion of long-term debt $ 257,873 $
258,516 Other current liabilities 603,350 639,781
Total current liabilities 861,223 898,297 Long-term debt
1,636,338 1,066,855 Non-current liabilities 441,228 420,698
Shareholders' equity 1,680,086 1,631,134 Total
liabilities and shareholders' equity $ 4,618,875 $ 4,016,984
International Flavors & Fragrances Inc. Consolidated
Statement of Cash Flows (Amounts in thousands)
(Unaudited) Six Months Ended June 30,
2017 2016
Cash flows from operating
activities: Net income $ 225,559 $ 235,337 Adjustments to
reconcile to net cash provided by operating activities:
Depreciation and amortization 55,805 49,743 Deferred income taxes
1,505 16,543 Gain on disposal of assets (89 ) (2,910 ) Stock-based
compensation 12,893 13,774 Pension contributions (31,557 ) (39,510
) Litigation settlement (56,000 ) — Foreign currency gain on
liquidation of entity (12,214 ) — Changes in assets and
liabilities, net of acquisitions: Trade receivables (77,580 )
(70,361 ) Inventories (4,228 ) (7,271 ) Accounts payable (23,479 )
(29,167 ) Accruals for incentive compensation (12,316 ) (2,001 )
Other current payables and accrued expenses (3,099 ) 13,400 Other
assets 18,007 4,054 Other liabilities (35,286 )
(9,335 ) Net cash provided by operating activities 57,921
172,296
Cash flows from investing
activities: Cash paid for acquisitions, net of cash received
(191,304 ) — Additions to property, plant and equipment (46,153 )
(43,236 ) Proceeds from life insurance contracts 1,941 — Maturity
of net investment hedges 3,016 (641 ) Proceeds from disposal of
assets 473 3,630 Net cash used in
investing activities (232,027 ) (40,247 )
Cash flows from financing activities: Cash dividends paid to
shareholders (101,184 ) (89,463 ) Increase (decrease) in revolving
credit facility borrowings and overdrafts 21,595 (138,142 )
Deferred financing costs (5,373 ) (4,796 ) Proceeds from issuance
of long-term debt 498,250 555,559 Loss on pre-issuance hedges
(5,310 ) (3,244 ) Proceeds from issuance of stock under stock plans
329 494 Employee withholding taxes paid (11,485 ) (13,315 )
Purchase of treasury stock (53,211 ) (71,714 ) Net
cash provided by financing activities 343,611
235,379 Effect of exchange rates changes on cash and cash
equivalents (2,111 ) (9,424 )
Net change in cash
and cash equivalents 167,394 358,004
Cash and cash
equivalents at beginning of year 323,992
181,988
Cash and cash equivalents at end of period $
491,386 $ 539,992
International Flavors
& Fragrances Inc. Business Unit Performance
(Amounts in thousands) (Unaudited)
Three Months Ended
June 30, Six Months Ended June 30, 2017 2016
2017 2016
Net Sales Flavors $ 414,323 $ 379,504 $ 820,487 $
752,012 Fragrances 428,538 413,974
850,667 824,777
Consolidated
842,861 793,478 1,671,154 1,576,789
Segment Profit
Flavors 100,338 90,337 198,346 182,151 Fragrances 84,860 87,596
166,557 176,833 Global Expenses (13,398 ) (12,268 ) (29,594 )
(26,141 ) Restructuring and other charges, net (791 ) (182 )
(10,934 ) (283 ) Acquisition and related costs (6,278 ) (213 )
(15,066 ) (1,249 ) Operational improvement initiative costs (445 )
(831 ) (1,066 ) (1,099 ) Legal (charges) credits (1,000 ) 36 (1,000
) 1,482 Gain on sales of assets 68 197 89 2,910 Tax assessment 19 —
(5,331 ) — Integration-related costs (731 ) — (1,923 ) — Product
liability charge (3,500 ) — (3,500 )
—
Operating profit 159,142 164,672 296,578
334,604 Interest Expense (17,556 ) (15,060 ) (30,363 )
(27,539 ) Other income (expense), net 454
2,438 14,312 (118 )
Income before
taxes $ 142,040 $ 152,050 $ 280,527 $
306,947
Operating Margin Flavors 24.2 % 23.8 %
24.2 % 24.2 % Fragrances 19.8 % 21.2 % 19.6 % 21.4 % Consolidated
18.9 % 20.8 % 17.7 % 21.2 %
International Flavors &
Fragrances Inc. Sales Performance by Region and Category
(Unaudited)
Second Quarter 2017 vs. Second Quarter 2016 Percentage
Change in Sales by Region of Destination Fine
ConsumerFragrances
Ingredients
Total Frag. Flavors
Total
North
America Reported 12% 7% 2%
7% 30% 19% EAME Reported
15% 4% 8% 8% 2% 6%
Currency Neutral 19% 8% 11% 12%
9% 11% Latin America Reported
-5% -5% 35% -2% 13% 3%
Currency Neutral -7% -6% 34% -4%
11% 1% Greater Asia Reported
23% -3% 1% -2% -3% -3%
Currency Neutral 25% -2% 3% -1%
-2% -1% Total Reported
10% 0% 7% 4% 9% 6%
Currency Neutral 11% 1%
9% 5%
11% 8%
First Six Months 2017 vs. First Six Months
2016 Percentage Change in Sales by Region of Destination
Fine
ConsumerFragrances
Ingredients
Total Frag. Flavors
Total North America
Reported 10% 6% -4% 4%
28% 17% EAME Reported 18%
4% 10% 10% 1% 6% Currency
Neutral 22% 8% 13% 13% 7%
11% Latin America Reported -9%
-7% 25% -5% 11% 0% Currency
Neutral -14% -7% 24% -7% 8%
-1% Greater Asia Reported 18%
0% -6% 0% -1% 0% Currency
Neutral 20% 1% -4% 1% 0%
0% Total Reported 10% 1%
4% 3% 9% 6% Currency Neutral
11% 2%
5% 4%
11% 7%
Currency neutral growth is calculated by translating prior year
sales at the exchange rates used for the corresponding 2017
period.
International Flavors & Fragrances Inc. GAAP to
Non-GAAP Reconciliation Foreign Exchange Impact
(Unaudited)
Q2
Consolidated
Sales
OperatingProfit
EPS % Change - Reported (GAAP)
6 % -3 % -5 % Items
Impacting Comparability 0 % 7 % 7 %
% Change - Adjusted
(Non-GAAP) 6 % 4 % 2
% Currency Impact 2 % 3 % 6 %
% Change - Currency Neutral
(Adjusted) 8 % 6%*
8 %
Q2
Flavors
Sales
SegmentProfit
% Change - Reported (GAAP) 9 % 11
% Currency Impact 2 % 3 %
% Change - Currency Neutral
11 % 14 %
Q2
Fragrances
Sales
SegmentProfit
% Change - Reported (GAAP) 4 % -3
% Currency Impact 1 % 0 %
% Change - Currency Neutral
5 % -3 %
1H
Consolidated
Sales
OperatingProfit
EPS % Change - Reported (GAAP)
6 % -11 % -3 % Items
Impacting Comparability 0 % 12 % 7 %
% Change - Adjusted
(Non-GAAP) 6 % 1 % 4
% Currency Impact 1 % 4 % 5 %
% Change - Currency Neutral
(Adjusted) 7 % 5
% 9 %
*Item does not foot due to rounding
International Flavors & Fragrances
Inc.GAAP to Non-GAAP Reconciliation(Amounts in
thousands)(Unaudited)
The following information and schedules provide
reconciliation information between reported GAAP amounts and
non-GAAP certain adjusted amounts. This information and schedules
are not intended as, and should not be viewed as, a substitute for
reported GAAP amounts or financial statements of the Company
prepared and presented in accordance with GAAP.
Second Quarter 2017 Reconciliation of Non-GAAP
Metrics
Reconciliation of Gross Profit
Reported(GAAP)
OperationalImprovement
InitiativeCosts (a)
Acquisition andRelated
Costs(b)
Integration related
costs(c)
FDA mandatedproduct
recall(h)
Adjusted(Non-GAAP)
Gross profit $ 374,589 445 5,606 98 3,500
$ 384,238
Reconciliation of Selling and Administrative Expenses
Reported(GAAP)
Acquisition andRelated
Costs(b)
Integration relatedcosts
(c)
LegalCharges/Credits(d)
Tax Assessment(e)
Adjusted(Non-GAAP)
Selling and Administrative Expenses $ 135,910 (672 ) (542 ) (1,000
) 19
$ 133,715 Reconciliation of Operating
Profit
Reported(GAAP)
OperationalImprovement
InitiativeCosts (a)
Acquisition
RelatedCosts(b)
Integrationrelated
costs(c)
LegalCharges/Credits(d)
Tax Assessment(e)
Restructuringand
OtherCharges(f)
Gain on Sale
ofAsset(g)
FDA mandatedproduct
recall(h)
Adjusted(Non-GAAP)
Operating profit $ 159,142 445 6,278 731 1,000 (19 ) 791 (68 )
3,500
$ 171,800 Reconciliation of Net
Income
Reported(GAAP)
OperationalImprovement
InitiativeCosts (a)
Acquisition
RelatedCosts(b)
Integrationrelated
costs(c)
LegalCharges/Credits(d)
Tax Assessment(e)
Restructuringand
OtherCharges(f)
Gain on Sale
ofAsset(g)
FDA mandatedproduct
recall(h)
Adjusted(Non-GAAP)
Income before taxes $ 142,040 445 6,278 731 1,000 (19 ) 791 (68 )
3,500
$ 154,698 Taxes on income (i) $ 32,245
111 1,472 243 354
(7 ) (75 ) (22 ) 1,238
$
35,559 Net income $ 109,795 334 4,806 488 646 (12 )
866 (46 ) 2,262
$ 119,139 Diluted EPS $ 1.38 — 0.06
0.01 0.01 — 0.01 — 0.03
$ 1.50 (a) Represents
accelerated depreciation and idle labor costs in Hangzhou, China.
(b) Represents the amortization of inventory "step-up" related to
the acquisitions of David Michael, Fragrance Resources and
PowderPure, included in Cost of goods sold and transaction costs
related to the acquisitions of Fragrance Resources and PowderPure,
included in Selling and administrative expenses. (c) Represents
costs related to the integration of the David Michael and Fragrance
Resources acquisitions. (d) Represents additional charge related to
litigation settlement. (e) Represents the reversal of a portion of
the reserve for payment of a tax assessment related to commercial
rent for prior periods. (f) Represents severance costs related to
the 2017 Productivity Program which were partially offset by the
reversal of 2015 severance charges that were no longer needed. (g)
Represents gains on sale of assets. (h) Represents an estimate of
the Company's incremental direct costs and customer reimbursement
obligations, in excess of the Company's sales value of the recalled
products, arising from an FDA mandated recall of consumer products
as a result of raw material received and identified by the Company
as containing contamination. (The sales value of the recalled
products was reserved in the first quarter of 2017). While the
Company does not believe that any of the affected raw material was
included in its finished products delivered to the customer, as the
delivered product included raw material of the same vendor lot that
tested positive, the FDA, after being notified by the Company,
initiated a recall of all consumer products including raw material
from the affected vendor lot due to the potential for product
contamination. (i) The income tax expense (benefit) on non-GAAP
adjustments is computed in accordance with ASC 740 using the same
methodology as the GAAP provision of income taxes. Income tax
effects of non-GAAP adjustments are calculated based on the
applicable statutory tax rate for each jurisdiction in which such
charges were incurred. For the second quarter of 2017, these
non-GAAP adjustments were not subject to foreign tax credits or
valuation allowances, but to the extent that such factors are
applicable to any future non-GAAP adjustments we will take such
factors into consideration in calculating the tax expense
(benefit). The Company tracks the amount of amortization recorded
on recent acquisitions in order to monitor its progress with
respect to its Vision 2020 goals. The following amounts were
recorded with respect to recent acquisitions: $0.6M related to
PowderPure, $1.5M related to Fragrance Resources, $1.1M related to
David Michael, $1.9M related to Lucas Meyer and $1.6M related to
Ottens Flavors.
International Flavors & Fragrances
Inc.GAAP to Non-GAAP Reconciliation(Amounts in
thousands)(Unaudited)
The following information and schedules provide
reconciliation information between reported GAAP amounts and
non-GAAP certain adjusted amounts. This information and schedules
are not intended as, and should not be viewed as, a substitute for
reported GAAP amounts or financial statements of the Company
prepared and presented in accordance with GAAP.
Second Quarter 2016 Reconciliation of Non-GAAP
Metrics
Reconciliation of Gross Profit
Reported(GAAP)
Restructuring andOther
Charges(a)
OperationalImprovement
InitiativeCosts (b)
Adjusted(Non-GAAP)
Gross profit $ 365,641 182 831
$ 366,654
Reconciliation of Selling and Administrative Expenses
Reported(GAAP)
Acquisition andRelated
Costs(c)
LegalCharges/Credits(d)
Adjusted(Non-GAAP)
Selling and Administrative Expenses $ 132,784 (213 ) 36
$
132,607 Reconciliation of Operating Profit
Reported(GAAP)
Restructuring andOther
Charges(a)
OperationalImprovement
InitiativeCosts(b)
AcquisitionRelated
Costs(c)
LegalCharges/Credits(d)
Gain on Sale
ofAsset(e)
Adjusted(Non-GAAP)
Operating profit $ 164,672 182 831 213 (36 ) (197 )
$
165,665 Reconciliation of Net Income
Reported(GAAP)
Restructuring andOther
Charges(a)
OperationalImprovement
InitiativeCosts(b)
AcquisitionRelated
Costs(c)
LegalCharges/Credits(d)
Gain on Sale
ofAsset(e)
Adjusted(Non-GAAP)
Income before taxes $ 152,050 182 831 213 (36 ) (197 )
$
153,043 Taxes on income (f) $ 35,317 35
208 (102 ) (9 ) (65 )
$
35,384 Net income $ 116,733 147 623 315 (27 ) (132 )
$ 117,659 Diluted EPS $ 1.46 — 0.01 — — —
$
1.47 (a) Accelerated depreciation related to
restructuring activities. (b) Accelerated depreciation and
severance costs in Hangzhou, China. (c) Additional transaction
costs related to the acquisition of Lucas Meyer, included in
Selling and administrative expenses. (d) Principally related to
favorable tax rulings. (e) Principally related to gain on sale of
property in Europe. (f) The income tax expense (benefit) on
non-GAAP adjustments is computed in accordance with ASC 740 using
the same methodology as the GAAP provision of income taxes. Income
tax effects of non-GAAP adjustments are calculated based on the
applicable statutory tax rate for each jurisdiction in which such
charges were incurred. For the second quarter of 2016, these
non-GAAP adjustments were not subject to foreign tax credits or
valuation allowances, but to the extent that such factors are
applicable to any future non-GAAP adjustments we will take such
factors into consideration in calculating the tax expense
(benefit). The Company tracks the amount of amortization recorded
on recent acquisitions in order to monitor its progress with
respect to its Vision 2020 goals. The following amounts were
recorded with respect to recent acquisitions: $1.7M related to
Lucas Meyer and $1.6M related to Ottens Flavors.
International Flavors & Fragrances
Inc.GAAP to Non-GAAP Reconciliation(Amounts in
thousands)(Unaudited)
The following information and schedules provide
reconciliation information between reported GAAP amounts and
non-GAAP certain adjusted amounts. This information and schedules
are not intended as, and should not be viewed as, a substitute for
reported GAAP amounts or financial statements of the Company
prepared and presented in accordance with GAAP.
Second Quarter Year-to-Date 2017 Reconciliation of
Non-GAAP Metrics
Reconciliation of Gross Profit
Reported(GAAP)
OperationalImprovementInitiative Costs (a)
Acquisition andRelated
Costs(b)
IntegrationRelated
costs(c)
FDA mandatedproduct recall
(i)
Adjusted(Non-GAAP)
Gross profit $ 739,255 1,066 10,908 186 3,500
$
754,915 Reconciliation of Selling and
Administrative Expenses
Reported(GAAP)
Acquisition andRelated
Costs(b)
IntegrationRelated
costs(c)
LegalCharges/Credits(d)
Tax Assessment(e)
Adjusted(Non-GAAP)
Selling and Administrative Expenses $ 276,240 (4,158 ) (1,485 )
(1,000 ) (5,331 )
$ 264,266 Reconciliation
of Operating Profit
Reported(GAAP)
OperationalImprovementInitiative
Costs(a)
AcquisitionRelated
Costs(b)
IntegrationRelated
costs(c)
LegalCharges/Credits(d)
Tax Assessment(e)
Restructuringand
OtherCharges(f)
Gain on Saleof
Asset(g)
FDAmandatedproductrecall (i)
Adjusted(Non-GAAP)
Operating profit $ 296,578 1,066 15,066 1,923 1,000 5,331 10,934
(89 ) 3,500
$ 335,309 Reconciliation of Net
Income
Reported(GAAP)
OperationalImprovementInitiative
Costs(a)
AcquisitionRelated
Costs(b)
IntegrationRelated
costs(c)
LegalCharges/Credits(d)
Tax Assessment(e)
Restructuringand
OtherCharges(f)
Gain on Saleof
Asset(g)
CTARealization(h)
FDA mandatedproduct
recall(i)
Adjusted(Non-GAAP)
Income before taxes $ 280,527 1,066 15,066 1,922 1,000 5,331 10,934
(89 ) (12,217 ) 3,500
$ 307,040 Taxes on income (j) $
54,968 266 4,610 606
354 1,885 2,892 (29 )
— 1,238
$ 66,790
Net income $ 225,559 800 10,456 1,316 646 3,446 8,042 (60 )
(12,217 ) 2,262
$ 240,250 Diluted EPS $ 2.84 0.01
0.13 0.02 0.01 0.04 0.10 — (0.15 ) 0.03
$
3.02
*
(a) Represents accelerated depreciation and idle labor costs
in Hangzhou, China. (b) Represents the amortization of inventory
"step-up" related to the acquisitions of David Michael, Fragrance
Resources and PowderPure, included in Cost of goods sold and
transaction costs related to the acquisitions of Fragrance
Resources and PowderPure, included in Selling and administrative
expenses. (c) Represents costs related to the integration of the
David Michael and Fragrance Resources acquisitions. (d) Represents
additional charge related to litigation settlement. (e) Represents
the reserve for payment of a tax assessment related to commercial
rent for prior periods. (f) Represents severance costs related to
the 2017 Productivity Program which were partially offset by the
reversal of 2015 severance charges that were no longer needed. (g)
Represents gains on sale of assets. (h) Represents the release of
CTA related to the liquidation of a foreign entity. (i) Represents
an estimate of the Company's incremental direct costs and customer
reimbursement obligations, in excess of the Company's sales value
of the recalled products, arising from an FDA mandated recall of
consumer products as a result of raw material received and
identified by the Company as containing contamination. (The sales
value of the recalled products was reserved in the first quarter of
2017). While the Company does not believe that any of the affected
raw material was included in its finished products delivered to the
customer, as the delivered product included raw material of the
same vendor lot that tested positive, the FDA, after being notified
by the Company, initiated a recall of all consumer products
including raw material from the affected vendor lot due to the
potential for product contamination. (j) The income tax expense
(benefit) on non-GAAP adjustments is computed in accordance with
ASC 740 using the same methodology as the GAAP provision of income
taxes. Income tax effects of non-GAAP adjustments are calculated
based on the applicable statutory tax rate for each jurisdiction in
which such charges were incurred, except for those items which are
non-taxable for which the tax expense (benefit) was calculated at
0%. For the first six months of 2017, these non-GAAP adjustments
were not subject to foreign tax credits or valuation allowances,
but to the extent that such factors are applicable to any future
non-GAAP adjustments we will take such factors into consideration
in calculating the tax expense (benefit). * Item does not foot due
to rounding The Company tracks the amount of amortization recorded
on recent acquisitions in order to monitor its progress with
respect to its Vision 2020 goals. The following amounts were
recorded with respect to recent acquisitions: $0.6M related to
PowderPure, $2.8M related to Fragrance Resources, $1.7M related to
David Michael, $3.8M related to Lucas Meyer and $3.1M related to
Ottens Flavors.
International Flavors & Fragrances
Inc.GAAP to Non-GAAP Reconciliation(Amounts in
thousands)(Unaudited)
The following information and schedules provide
reconciliation information between reported GAAP amounts and
non-GAAP certain adjusted amounts. This information and schedules
are not intended as, and should not be viewed as, a substitute for
reported GAAP amounts or financial statements of the Company
prepared and presented in accordance with GAAP.
Second Quarter Year-to-Date 2016 Reconciliation of
Non-GAAP Metrics
Reconciliation of Gross Profit
Reported(GAAP)
Restructuring andOther
Charges(a)
OperationalImprovementInitiative
Costs(b)
Acquisition andRelated
Costs(c)
Adjusted(Non-GAAP)
Gross profit $ 725,849 283 1,099 889
$ 728,120
Reconciliation of Selling and Administrative Expenses
Reported(GAAP)
Acquisition andRelated
Costs(c)
LegalCharges/Credits(d)
Adjusted(Non-GAAP)
Selling and Administrative Expenses $ 256,327 (360 ) 1,482
$
257,449 Reconciliation of Operating Profit
Reported(GAAP)
Restructuring andOther
Charges(a)
OperationalImprovementInitiative
Costs(b)
AcquisitionRelated
Costs(c)
LegalCharges/Credits(d)
Gain on Sale
ofAsset(e)
Adjusted(Non-GAAP)
Operating profit $ 334,604 283 1,099 1,249 (1,482 ) (2,910 )
$ 332,843 Reconciliation of Net Income
Reported(GAAP)
Restructuring andOther
Charges(a)
OperationalImprovementInitiative
Costs(b)
AcquisitionRelated
Costs(c)
LegalCharges/Credits(d)
Gain on Sale
ofAsset(e)
Adjusted(Non-GAAP)
Income before taxes $ 306,947 283 1,099 1,249 (1,482 ) (2,910 )
$ 305,186 Taxes on income (f) $ 71,610 54
275 266 (411 )
(637 )
$ 71,157 Net income $ 235,337
229 824 983 (1,071 ) (2,273 )
$ 234,029 Diluted EPS $
2.93 — 0.01 0.01 (0.01 ) (0.03 )
$ 2.91 (a)
Accelerated depreciation related to restructuring activities. (b)
Accelerated depreciation and severance costs in Hangzhou, China.
(c) Expense related to the amortization of inventory step-up,
included in Cost of goods sold, and additional transaction costs
related to the acquisition of Lucas Meyer, included in Selling and
administrative expenses. (d) Settlements due to favorable tax
rulings in jurisdictions for which reserves were previously
recorded for ongoing tax disputes. (e) Principally related to gain
on sale of property in Europe. (f) The income tax expense (benefit)
on non-GAAP adjustments is computed in accordance with ASC 740
using the same methodology as the GAAP provision of income taxes.
Income tax effects of non-GAAP adjustments are calculated based on
the applicable statutory tax rate for each jurisdiction in which
such charges were incurred. For the first six months of 2016, these
non-GAAP adjustments were not subject to foreign tax credits or
valuation allowances, but to the extent that such factors are
applicable to any future non-GAAP adjustments we will take such
factors into consideration in calculating the tax expense
(benefit). The Company tracks the amount of amortization recorded
on recent acquisitions in order to monitor its progress with
respect to its Vision 2020 goals. The following amounts were
recorded with respect to recent acquisitions: $4.3M related to
Lucas Meyer and $3.2M related to Ottens Flavors.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170808006434/en/
International Flavors & Fragrances Inc.Michael
DeVeau, 212-708-7164VP, Corporate Strategy, Investor Relations
& CommunicationsMichael.DeVeau@iff.com
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