Achieved strong first half financial results
Reconfirms full year 2018 currency neutral guidance
Regulatory News:
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Q2 2018 infographic (Photo: Business
Wire)
International Flavors & Fragrances Inc. (NYSE:IFF) (Euronext
Paris:IFF) reported financial results and strategic achievements
for the second quarter ended June 30, 2018.
First Half 2018 Consolidated Summary: Change vs. Prior
Year
Reported (GAAP) Adjusted
(Non-GAAP)¹ Currency Neutral
(Non-GAAP)¹ Sales Operating Profit
EPS Sales Operating Profit
EPS Sales Operating Profit
EPS Consolidated 11% 17% 1% 11% 9%
11% 6% 5% 10%
¹ Schedules at the end of this release contain reconciliations
of reported GAAP to non-GAAP metrics.
Second Quarter 2018 Consolidated Summary: Change vs. Prior
Year
Reported (GAAP) Adjusted
(Non-GAAP)¹ Currency Neutral
(Non-GAAP)¹ Sales Operating Profit
EPS Sales Operating Profit
EPS Sales Operating Profit
EPS Consolidated 9% 2% (10)% 9% 3%
11% 5% (2)% 8%
¹ Schedules at the end of this release contain reconciliations
of reported GAAP to non-GAAP metrics.
Management Commentary
“Top-line trends remained strong in the second quarter, marking
the fourth consecutive quarter of mid-single digit growth,” said
IFF Chairman and CEO Andreas Fibig. “Performance was broad-based,
as all regions and categories improved versus prior year, driven by
new wins and price increases needed to compensate for raw material
inflation. In particular, we continued to see robust growth with
our local and regional customers, as well as in the emerging
markets - both of which grew high-single digits. In terms of
bottom-line performance, we delivered a high-single digit
improvement in adjusted currency neutral EPS.
“Based on our strong year-to-date performance and our current
outlook for the balance of the year, we are reconfirming our
previously stated full year currency neutral guidance.
“We are progressing toward the
completion of our combination
with Frutarom announced during the second quarter.
We received Frutarom shareholder approval, as well
as antitrust approval in the United States and Israel
and we now expect to close in the fourth quarter - earlier
than our previously communicated timeline, pending the remaining
regulatory approvals. The integration planning process is well
underway and, after nearly three months, we are more
enthusiastic than ever about the opportunities ahead of
us.
“Together with Frutarom, IFF expects to
deliver accelerated growth and offer our customers a stronger,
more differentiated portfolio of integrated solutions, allowing us
to expand beyond our core taste and scent businesses into
nutrition. We continue to focus on driving differentiation via
R&D, balancing our customer base by emphasizing fast-growing
small and mid-sized customers and maximizing our portfolio by
expanding into fast-growing and diverse adjacencies. Our
combination, especially in the context of the strong performance
both companies continue to deliver, is expected to
result in significant value creation for our
shareholders. We could not be more excited about what the
future holds.”
Second Quarter 2018 Consolidated Financial Highlights
- Reported net sales for the second
quarter totaled $920 million, an increase of 9% from$843 million in
2017. Excluding the impact of foreign exchange, currency neutral
sales increased 5% over the prior year.
- Reported operating profit for the
second quarter was $155 million versus $152 million reported in
2017, an increase of 2%. Excluding the impact of foreign exchange
and those items that affect comparability, currency neutral
adjusted operating profit decreased by 2%.
- Reported earnings per share (EPS) for
the second quarter was $1.25 per diluted share versus $1.38 per
diluted share reported in 2017. Excluding the impact of foreign
exchange and those items that affect comparability, currency
neutral adjusted EPS improved 8%.
Second Quarter 2018 Segment Summary: Growth vs. Prior
Year
Reported (GAAP)
Currency Neutral
(Non-GAAP)
Sales
Segment
Profit
Sales
Segment
Profit
Flavors 9% 13% 6% 6%
Fragrances 10% 0%
5% (9)%
Flavors Business Unit
- On a reported basis, sales increased
9%, or $36.2 million, to $450.5 million. Currency neutral sales
grew 6% driven by growth in all categories and all regions.
- EAME increased 16% on a reported basis
and 5% on a currency neutral basis, led by strong double-digit
growth in Africa and the Middle East as well as mid-single digit
growth in Europe. Growth was achieved across all categories, led by
strong performances in Dairy, Beverage and Savory.
- North America improved 9% driven by
high-single-digit growth at Tastepoint℠ and strong new wins in
Beverage, Dairy and Sweet.
- Latin America increased 5% on a
reported basis and 8% on a currency neutral basis led by strong
double-digit growth in Argentina and Mexico. On a category basis,
strong double-digit growth was achieved in Savory and Dairy as well
as mid-single digit growth in Beverage.
- Greater Asia increased 5% on a reported
basis and 2% on a currency neutral basis, as strong double-digit
growth in China and India was largely offset by softness in
Indonesia and Thailand. On a category basis, growth was strongest
in Savory, Sweet and Dairy.
- Flavors segment profit increased 13% on
a reported basis and 6% on a currency neutral basis, driven
primarily by volume growth and the benefits from productivity
initiatives.
Fragrances Business Unit
- On a reported basis, sales increased
10%, or $40.9 million, to $469.5 million. Currency neutral sales
improved 5%, with broad-based growth from all categories and nearly
all regions.
- Fine Fragrances increased 7% on a
reported basis and 1% on a currency neutral basis led by
double-digit growth in LATAM and low-single-digit growth in North
America.
- Consumer Fragrances grew 8% on a
reported basis and 5% on a currency neutral basis with growth
achieved in all categories. Performance was led by double-digit
growth in Hair Care as well as mid-single-digit increases in
Toiletries, Home Care & Fabric Care. On a geographic basis,
growth was broad-based, with all regions contributing positively to
the results.
- Fragrance Ingredients grew 16% on a
reported basis and 10% on a currency neutral basis, with increases
in three of the four regions.
- Fragrances segment profit was flat on a
reported basis and decreased 9% on a currency neutral basis as
volume growth and the benefits from productivity initiatives were
more than offset by the impact of higher raw material costs, net of
price increases, including the previously announced citral supply
issue.
The Company’s full year 2018 guidance:
Currency Neutral FX Impact1
Adjusted2 Sales 3.0% - 5.0%
~2.0% 5.0% - 7.0%
Operating Profit 5.0% - 7.0% ~1.5% 6.5% -
8.5%
EPS 4.0% - 6.0% ~1.5% 5.5% - 7.5%
1 See Use of Non-GAAP Financial Measures2 Excludes items
impacting comparability* Excludes the impact of potential Frutarom
transaction
A copy of the Company’s Quarterly Report on Form 10-Q will be
available on its website at www.iff.com or at www.sec.gov by August
8, 2018.
Audio Webcast
A live webcast to discuss the Company’s second quarter 2018
financial results will be held on August 8, 2018, at 10:00 a.m. ET.
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 in our full year 2018
guidance, the expected timeline for completion and impact of the
combination with Frutarom,
including our focus to drive differentiation, balance our
customer base, maximize our portfolio and our ability to deliver
growth across all of our key financial metrics, and the impact of
our actions on value creation for our 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 27, 2018 and subsequent filings with the SEC, including
the Company’s Quarterly Reports on Form 10-Q. 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) the inability to obtain
required regulatory approvals for the Frutarom acquisition, the
timing of obtaining such approvals and the risk that such approvals
may result in the imposition of conditions that could adversely
affect the combined company or the expected benefits of the
acquisition; (2) the risk that a condition to closing of the
Frutarom acquisition may not be satisfied on a timely basis or at
all; (3) the failure of the proposed Frutarom transaction to close
for any other reason; (4) uncertainties as to access to available
financing (including financing for the acquisition or refinancing
of Company or Frutarom debt) on a timely basis and on reasonable
terms; (5) the impact of the Company’s proposed financing on its
liquidity and flexibility to respond to other business
opportunities; (6) whether the acquisition will have the accretive
effect on the Company’s earnings or cash flows that it expects; (7)
the inability to obtain, or delays in obtaining, cost savings and
synergies from the Frutarom acquisition; (8) costs and difficulties
related to the integration of Frutarom’s businesses and operations
with the Company’s businesses and operations; (9) unexpected costs,
liabilities, charges or expenses resulting from the Frutarom
acquisition; (10) adverse effects on the Company’s stock price
resulting from the Frutarom acquisition; (11) the inability to
retain key personnel; (12) potential adverse reactions, changes to
business relationships or competitive responses resulting from the
Frutarom acquisition; (13) macroeconomic trends affecting the
emerging markets; (14) 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; (15) the Company’s ability to realize the benefits of
its cost and productivity initiatives; (16) the impact of the
disruption in supply of citral from BASF on the price and
availability of citral in 2018; (17) the Company’s ability to
effectively compete in its market, and to successfully develop new,
cost-effective and competitive products that appeal to its
customers and consumers; (18) changes in consumer preferences and
demand for the Company’s products or a decline in consumer
confidence and spending; (19) the Company’s ability to benefit from
its investments and expansion in emerging markets; (20) the impact
of currency fluctuations or devaluations in the principal foreign
markets in which it operates; (21) the economic and political risks
associated with the Company’s international operations, including
challenging economic conditions in China and Latin America; (22)
the impact of any failure or interruption of the Company’s key
information technology systems or a breach of information security;
(23) the Company’s ability to comply with, and the costs associated
with compliance with U.S. and foreign environmental protection
laws; (24) the Company’s ability to realize expected cost savings
and efficiencies from its profitability improvement initiative and
other optimization activities; (25) volatility and increases in the
price of raw materials, energy and transportation; (26) price
realization in a rising input cost environment; (27) fluctuations
in the quality and availability of raw materials; (28) the impact
of a disruption in the Company’s supply chain or its relationship
with its suppliers; (29) any adverse impact on the availability,
effectiveness and cost of the Company’s hedging and risk management
strategies; (30) the Company’s ability to successfully manage its
working capital and inventory balances; (31) 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; (32) 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 (33) 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 (1) Currency Neutral Sales, (2)
Adjusted Operating Profit and Currency Neutral Adjusted Operating
Profit and (3) Adjusted EPS and Currency Neutral Adjusted EPS,
which exclude restructuring costs and other significant items of a
non-recurring and/or nonoperational nature such as legal
charges/credits, losses (gains) on sale of assets, tax assessment,
operational improvement initiatives, integration costs, FDA
mandated product recall costs, acquisition related costs, CTA
realization, Frutarom pre-acquisition costs and U.S. Tax reform
(often referred to as “Items Impacting Comparability”) and, with
respect to the currency neutral items, the impact of foreign
currency movements. We provide these metrics as we believe that
they are useful in providing period to period comparisons of the
results of our operational performance. When we provide our
expectations for our currency neutral metrics in our full year 2018
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
2018 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 7,300
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, 2018
2017 % Change
2018 2017 % Change
Net sales $ 920,016 $ 842,861 9 % $ 1,850,944 $
1,671,154 11 % Cost of goods sold 521,299
469,877 11 % 1,046,419 935,088
12 % Gross profit 398,717 372,984 7 % 804,525 736,066 9 % Research
and development expenses 74,767 72,761 3 % 153,244 144,887 6 %
Selling and administrative expenses 157,407 139,319 13 % 300,051
283,023 6 % Amortization of acquisition-related intangibles 9,584
8,494 13 % 18,769 15,561 21 % Restructuring and other charges, net
1,186 791 50 % 1,903 10,934 -83 % Losses (gains) on sales of fixed
assets 1,264 (68 ) N/A 1,195
(89 ) N/A Operating profit 154,509 151,687 2 % 329,363
281,750 17 % Interest expense 53,246 17,556 203 % 69,841 30,363 130
% Other (income), net (20,655 ) (7,909 ) 161 %
(21,232 ) (29,140 ) -27 % Income before taxes 121,918
142,040 -14 % 280,754 280,527 0 % Taxes on income 22,769
32,245 -29 % 52,190
54,968 -5 % Net income $ 99,149 $ 109,795 -10
% $ 228,564 $ 225,559 1 % Earnings per share -
basic $ 1.25 $ 1.39 $ 2.89 $ 2.85 Earnings per share - diluted $
1.25 $ 1.38 $ 2.87 $ 2.84 Average shares outstanding Basic
79,065 79,072 79,041 79,088 Diluted 79,303 79,305 79,347 79,360
International Flavors & Fragrances
Inc.
Condensed Consolidated Balance
Sheet
(Amounts in thousands)
(Unaudited)
June 30, December 31,
2018 2017 Cash and cash equivalents $ 322,423
$ 368,046 Receivables 723,855 663,663 Inventories 695,192 649,448
Other current assets 285,110 215,387 Total current
assets 2,026,580 1,896,544 Property, plant and equipment,
net 867,629 880,580 Goodwill and other intangibles, net 1,540,012
1,572,075 Other assets 239,221 249,727 Total assets $
4,673,442 $ 4,598,926 Bank borrowings, commercial paper,
overdrafts and current portion of long-term debt $ 6,500 $ 6,966
Other current liabilities 692,870 761,802 Total
current liabilities 699,370 768,768 Long-term debt 1,717,189
1,632,186 Non-current liabilities 500,680 508,678
Shareholders' equity 1,756,203 1,689,294 Total
liabilities and shareholders' equity $ 4,673,442 $ 4,598,926
International Flavors & Fragrances
Inc.
Consolidated Statement of Cash
Flows
(Amounts in thousands)
(Unaudited)
Six Months Ended June 30, 2018
2017 Cash flows from operating
activities: Net income $ 228,564 $ 225,559 Adjustments to
reconcile to net cash provided by operating activities:
Depreciation and amortization 64,968 55,805 Deferred income taxes
14,342 1,505
Loss (gain) on disposal of assets
1,195 (89 ) Stock-based compensation 15,173 12,893 Pension
contributions (9,963 ) (31,557 ) Litigation settlement - (56,000 )
Product recall claim settlement
(12,969
) - Foreign currency gain on liquidation of entity - (12,214 )
Changes in assets and liabilities, net of acquisitions: Trade
receivables (99,963 ) (77,580 ) Inventories (67,940 ) (4,228 )
Accounts payable (7,139 ) (23,479 ) Accruals for incentive
compensation (25,158 ) (12,316 ) Other current payables and accrued
expenses 11,028 (3,099 ) Other assets (65,620 ) 18,007 Other
liabilities 8,651 (35,286 ) Net cash provided
by operating activities 55,169 57,921
Cash flows from investing activities: Cash paid for
acquisitions, net of cash received (22 ) (191,304 ) Additions to
property, plant and equipment (67,421 ) (46,153 ) Proceeds from
life insurance contracts - 1,941 Maturity of net investment hedges
(2,642 ) 3,016 Proceeds from disposal of assets 618
473 Net cash used in investing activities
(69,467 ) (232,027 )
Cash flows from financing
activities: Cash dividends paid to shareholders (108,824 )
(101,184 ) Increase in revolving credit facility borrowings and
overdrafts 110,259 21,595 Deferred financing costs (1,401 ) (5,373
) Proceeds from issuance of long-term debt - 498,250 (Loss) on
pre-issuance hedges - (5,310 ) Proceeds from issuance of stock
under stock plans - 329 Employee withholding taxes paid (9,096 )
(11,485 ) Purchase of treasury stock (15,475 )
(53,211 ) Net cash (used in) provided by financing activities
(24,537 ) 343,611 Effect of exchange rates
changes on cash and cash equivalents (6,788 ) (2,111
)
Net change in cash and cash equivalents (45,623 ) 167,394
Cash and cash equivalents at beginning of year
368,046 323,992
Cash and cash equivalents
at end of period $ 322,423 $ 491,386
International Flavors & Fragrances
Inc.
Business Unit Performance
(Amounts in thousands)
(Unaudited)
Three Months Ended June 30, Six Months
Ended June 30, 2018
2017 2018
2017 Net Sales Flavors $ 450,540 $ 414,323 $
899,559 $ 820,487 Fragrances 469,476 428,538
951,385 850,667
Consolidated 920,016 842,861 1,850,944 1,671,154
Segment Profit Flavors 109,605 96,840 221,169 191,395
Fragrances 80,780 80,993 174,056 158,867 Global Expenses (20,572 )
(13,488 ) (44,398 ) (29,781 ) Operational Improvement Initiatives
(403 ) (445 ) (1,429 ) (1,066 ) Acquisition Related Costs 4 (6,278
) 518 (15,066 ) Integration Related Costs (993 ) (731 ) (993 )
(1,923 ) Legal Charges/Credits, net - (1,000 ) - (1,000 ) Tax
Assessment - 19 - (5,331 ) Restructuring and Other Charges, net
(193 ) (791 ) (910 ) (10,934 ) (Losses) Gains on Sale of Assets
(1,264 ) 68 (1,195 ) 89 FDA Mandated Product Recall - (3,500 )
(5,000 ) (3,500 ) Frutarom Acquisition Related Costs (12,455
) - (12,455 ) -
Operating
profit 154,509 151,687 329,363 281,750 Interest Expense
(53,246 ) (17,556 ) (69,841 ) (30,363 ) Other income (expense), net
20,655 7,909 21,232
29,140
Income before taxes $ 121,918 $
142,040 $ 280,754 $ 280,527
Operating Margin Flavors 24.3 % 23.4 % 24.6 % 23.3 %
Fragrances 17.2 % 18.9 % 18.3 % 18.7 % Consolidated 16.8 % 18.0 %
17.8 % 16.9 %
International Flavors & Fragrances
Inc.
Sales Performance by Region and
Category
(Unaudited)
Second Quarter 2018 vs. 2017 Percentage
Change in Sales by Region of Destination Fine
Consumer Fragrances Ingredients
Total Frag. Flavors Total
North America Reported
2% 4% 20% 7% 9% 8%
EAME Reported 8% 15% 7%
11% 16% 13% Currency Neutral -2%
4% -2% 1% 5% 2% Latin
America Reported 8% 6% 6% 6%
5% 6% Currency Neutral 10% 6%
5% 7% 8% 7% Greater Asia
Reported -5% 7% 39% 12%
5% 8% Currency Neutral -9% 5%
34% 9% 2% 5% Total
Reported 7% 8% 16% 10% 9%
9% Currency Neutral 1% 5%
10% 5% 6% 5%
First Six Months 2018 vs. First Six Months
2017 Percentage Change in Sales by Region of Destination
Fine Consumer Fragrances
Ingredients Total Frag. Flavors
Total North America Reported
6% 8% 13% 9% 9% 9%
EAME Reported 8% 17% 18%
14% 20% 16% Currency Neutral -3%
4% 7% 3% 8% 5% Latin
America Reported 21% 4% 16%
9% 2% 6% Currency Neutral 21%
4% 14% 9% 3% 7%
Greater Asia Reported -10% 8%
47% 13% 5% 9% Currency Neutral
-13% 5% 41% 10% 2% 5%
Total Reported 9% 10% 21%
12% 10% 11% Currency Neutral 3%
5% 14% 6%
6% 6%
Currency neutral growth is calculated by translating prior year
sales at the exchange rates used for the corresponding 2018
period.
International Flavors & Fragrances
Inc.
GAAP to Non-GAAP Reconciliation
Foreign Exchange Impact
(Unaudited)
Q2 Consolidated
Sales
Operating
Profit
EPS % Change - Reported (GAAP) 9%
2% -10% Items Impacting Comparability 0% 1% 20%
%
Change - Adjusted (Non-GAAP) 9% 3% 11%*
Currency Impact -4% -6% -3%
% Change - Currency Neutral
(Adjusted) 5% -2%* 8%
Q2 Flavors Sales
Segment
Profit
% Change - Reported (GAAP) 9% 13% Currency
Impact -3% -7%
% Change - Currency Neutral 6%
6% Q2 Fragrances
Sales
Segment
Profit
% Change - Reported (GAAP) 10% 0% Currency
Impact -5% -9%
% Change - Currency Neutral 5%
-9% 1H
Consolidated Sales
Operating
Profit
EPS % Change - Reported (GAAP) 11%
17% 1% Items Impacting Comparability 0% -7% 10%
%
Change - Adjusted (Non-GAAP) 11% 9%* 11%
Currency Impact -5% -5% -1%
% Change - Currency Neutral
(Adjusted) 6% 5%* 10%
*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.
Reconciliation of Gross Profit Second Quarter
2018 2017 Reported
(GAAP) $ 398,717 $ 372,984 Operational Improvement Initiatives (a)
403 445 Acquisition Related Costs (b) - 5,606 Integration Related
Costs (c) - 98 FDA Mandated Product Recall (g) -
3,500 Adjusted (Non-GAAP) $ 399,120 $ 382,633
Reconciliation of Selling and Administrative Expenses
Second Quarter 2018 2017
Reported (GAAP) $ 157,407 $ 139,319 Acquisition Related
Costs (b) 4 (672 ) Integration Related Costs (c) - (542 ) Legal
Charges/Credits, net (d) - (1,000 ) Tax Assessment (e) - 19
Frutarom Acquisition Related Costs (h) (12,455 ) -
Adjusted (Non-GAAP) $ 144,956 $ 137,124
Reconciliation of Operating Profit Second Quarter
2018 2017 Reported (GAAP)
$ 154,509 $ 151,687 Operational Improvement Initiatives (a) 403 445
Acquisition Related Costs (b) (4 ) 6,278 Integration Related Costs
(c) 993 731 Legal Charges/Credits, net (d) - 1,000 Tax Assessment
(e) - (19 ) Restructuring and Other Charges, net (f) 193 791 Losses
(Gains) on Sale of Assets 1,264 (68 ) FDA Mandated Product Recall
(g) - 3,500 Frutarom Acquisition Related Costs (h) 12,455
- Adjusted (Non-GAAP) $ 169,813 $ 164,345
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.
Reconciliation of Net Income
Second Quarter 2018 2017
Income before taxes
Taxes on
income (i)
Net income EPS (j) Income before
taxes
Taxes on
income (i)
Net income EPS Reported (GAAP) $
121,918 $ 22,769 $ 99,149 $ 1.25 $ 142,040 $
32,245 $ 109,795 $ 1.38 Operational Improvement Initiatives
(a) 403 142 261 - 445 111 334 - Acquisition Related Costs (b) (4 )
(1 ) (3 ) - 6,278 1,472 4,806 0.06 Integration Related Costs (c)
993 - 993 0.01 731 243 488 0.01 Legal Charges/Credits, net (d) - -
- - 1,000 354 646 0.01 Tax Assessment (e) - - - - (19 ) (7 ) (12 )
- Restructuring and Other Charges, net (f) 193 46 147 - 791 (75 )
866 0.01 Losses (Gains) on Sale of Assets 1,264 263 1,001 0.01 (68
) (22 ) (46 ) - FDA Mandated Product Recall (g) - - - - 3,500 1,238
2,262 0.03 Frutarom Acquisition Related Costs (h) 36,989
6,543 30,446 0.38
- - - - Adjusted
(Non-GAAP) $ 161,756 $ 29,762 $ 131,994 $ 1.66 $ 154,698 $ 35,559 $
119,139 $ 1.50 (a) For 2018, represents accelerated
depreciation related to a plant relocation in India. For 2017,
represents accelerated depreciation and idle labor costs in
Hangzhou, China. (b) For 2017, 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 David Michael,
Fragrance Resources and PowderPure, included in Selling and
administrative expenses. (c) For 2018, represents costs related to
the integration of David Michael. For 2017, represents costs
related to the integration of 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. (g) Represents management's best estimate of losses
related to the previously disclosed FDA mandated recall. (h)
Represents transaction-related costs and expenses related to the
pending acquisition of Frutarom. Amount includes $10.6 million of
bridge loan commitment fees included in Interest expense, $25.0
million mark-to-market loss adjustment on an interest rate
derivative and an $11.0 million mark-to-market gain adjustment on a
foreign currency derivative, and $12.5 million of transaction costs
included in administrative expenses. (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, except for those items which are
non-taxable for which the tax expense (benefit) was calculated at
0%. For second quarter of 2018, certain non-GAAP adjustments were
subject to valuation allowances and therefore was calculated at 0%.
(j) The sum of these items 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: $0.7M related to PowderPure, $2.0M related
to Fragrance Resources, $1.1M related to David Michael, $1.6M
related to Ottens Flavors, and $2.0M related to Lucas Meyer
Cosmetics.
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.
Reconciliation of Gross Profit Second Quarter
Year-to-Date 2018
2017 Reported (GAAP) $ 804,525 $ 736,066 Operational
Improvement Initiatives (a) 856 1,066 Acquisition Related Costs (b)
- 10,907 Integration Related Costs (c) - 186 FDA Mandated Product
Recall (h) 5,000 3,500 Adjusted
(Non-GAAP) $ 810,381 $ 751,725
Reconciliation of Selling
and Administrative Expenses Second Quarter Year-to-Date
2018 2017 Reported (GAAP)
$ 300,051 $ 283,023 Acquisition Related Costs (b) 518 (4,159 )
Integration Related Costs (c) - (1,485 ) Legal Charges/Credits, net
(d) - (1,000 ) Tax Assessment (e) - (5,331 ) Frutarom Acquisition
Related Costs (j) (12,455 ) - Adjusted
(Non-GAAP) $ 288,114 $ 271,048
Reconciliation of
Operating Profit Second Quarter Year-to-Date
2018 2017 Reported (GAAP) $
329,363 $ 281,750 Operational Improvement Initiatives (a) 1,429
1,066 Acquisition Related Costs (b) (518 ) 15,066 Integration
Related Costs (c) 993 1,923 Legal Charges/Credits, net (d) - 1,000
Tax Assessment (e) - 5,331 Restructuring and Other Charges, net (f)
910 10,934 Losses (Gains) on Sale of Assets 1,195 (89 ) FDA
Mandated Product Recall (h) 5,000 3,500 Frutarom Acquisition
Related Costs (j) 12,455 - Adjusted
(Non-GAAP) $ 350,827 $ 320,481
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.
Reconciliation of Net Income Second Quarter
Year-to-Date 2018 2017
Income
before taxes
Taxes on
income (k)
Net income EPS
Income before
taxes
Taxes on
income (k)
Net income EPS (l) Reported (GAAP) $
280,754 $ 52,190 $ 228,564 $ 2.87 $ 280,527 $
54,968 $ 225,559 $ 2.84 Operational Improvement Initiatives
(a) 1,429 436 993 0.01 1,066 266 800 0.01 Acquisition Related Costs
(b) (518 ) (135 ) (383 ) - 15,066 4,610 10,456 0.13 Integration
Related Costs (c) 993 - 993 0.01 1,922 605 1,317 0.02 Legal
Charges/Credits, net (d) - - - - 1,000 354 646 0.01 Tax Assessment
(e) - - - - 5,331 1,885 3,446 0.04 Restructuring and Other Charges,
net (f) 910 215 695 0.01 10,934 2,892 8,042 0.10 Losses (Gains) on
Sale of Assets 1,195 246 949 0.01 (89 ) (29 ) (60 ) - CTA
Realization (g) - - - - (12,214 ) - (12,214 ) (0.15 ) FDA Mandated
Product Recall (h) 5,000 1,196 3,804 0.05 3,500 1,238 2,262 0.03
U.S. Tax Reform (i) - (649 ) 649 0.01 - - - - Frutarom Acquisition
Related Costs (j) 36,989 6,543
30,446 0.38 - - -
- Adjusted (Non-GAAP) $ 326,752 $ 60,042 $
266,710 $ 3.35 $ 307,043 $ 66,789 $ 240,254 $ 3.02 (a)
For 2018, represents accelerated depreciation related to a
plant relocation in India. For 2017, represents accelerated
depreciation and idle labor costs in Hangzhou, China. (b) For 2018,
represents adjustments to the contingent consideration payable for
PowderPure, and transaction costs related to Fragrance Resources
and PowderPure within Selling and administrative expenses. For
2017, 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 David Michael, Fragrance Resources
and PowderPure, included in Selling and administrative expenses.
(c) For 2018, represents costs related to the integration of David
Michael. For 2017, represents costs related to the integration of
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 and Taiwan lab closure. (g)
Represents the release of CTA related to the liquidation of a
foreign entity. (h) Represents management's best estimate of losses
related to the previously disclosed FDA mandated recall. (i)
Represents charges incurred related to enactment of certain U.S.
tax legislation changes in December 2017. (j) Represents
transaction-related costs and expenses related to the pending
acquisition of Frutarom. Amount includes $10.6 million of bridge
loan commitment fees included in Interest expense, $25.0 million
mark-to-market loss adjustment on an interest rate derivative and
an $11.0 million mark-to-market gain adjustment on a foreign
currency derivative, and $12.5 million of transaction costs
included in administrative expenses. (k) 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 second quarter of 2018, certain non-GAAP adjustments were
subject to valuation allowances and therefore was calculated at 0%.
(l) The sum of these items 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: $1.4M related to PowderPure, $4.0M related
to Fragrance Resources, $2.3M related to David Michael, $3.1M
related to Ottens Flavors, and $4.3M related to Lucas Meyer
Cosmetics.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180807005861/en/
IFFMichael DeVeau, 212-708-7164VP, Corporate Strategy, Investor
Relations & CommunicationsMichael.DeVeau@iff.com
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