Filing pursuant to Rule 425 under the
Securities Act of 1933, as amended
Filer: International Flavors & Fragrances Inc.
Subject Companies: International Flavors & Fragrances Inc.; Frutarom Industries Ltd.
Filers Commission File Number:
1-4858
Date: September 7, 2018
Barclays Global Consumer Staples Conference September 6, 2018
Cautionary Statement This presentation contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements regarding IFFs or Frutaroms expected future financial position, results of operations,
cash flows, financing plans, business strategy, budgets, capital expenditures, competitive positions, growth opportunities, plans and objectives of management and statements containing the words such as anticipate,
approximate, believe, plan, estimate, expect, project, could, should, will, intend, may and other similar
expressions, are forward-looking statements. Statements in this presentation concerning IFFs or Frutaroms 2018 outlook or future economic performance, anticipated profitability, revenues, expenses or other financial items, and product or
services line growth, together with other statements that are not historical facts, are forward-looking statements that are estimates reflecting managements best judgment based upon currently available information. IFF can give no assurance
that its estimates will be attained. Accordingly, you should not place undue reliance on any forward-looking statements contained in this presentation. Forward-looking statements speak only as of the date(s) indicated in this presentation.
IFFs results may be materially affected by factors such as, but not limited to: (1) the inability to obtain required regulatory approvals for the Frutarom acquisition (the acquisition), the timing of obtaining such approvals
and the risk that such approvals may result in the imposition of adverse conditions; (2) the risk that a closing condition to the acquisition may not be satisfied on a timely basis or at all or that the acquisition may not close for any reason;
(3) uncertainties as to access to financing on a timely basis and on reasonable terms or at all; (4) the impact of IFFs proposed financing on its liquidity and flexibility to respond to other opportunities; (5) whether the
acquisition will have the accretive effect on IFFs earnings or cash flows that it expects; (6) the inability to obtain, or delays in obtaining, cost savings and synergies from the acquisition; (7) business and operations integration
costs and difficulties; (8) unexpected costs, liabilities, charges or expenses relating to the acquisition; (9) adverse effects on IFFs stock price resulting from the acquisition; (10) adverse effects on business relationships
or competitive responses resulting from the acquisition; (11) the inability to compete in the markets in which IFF operates; (12) the inability to retain existing and win new customers; (13) the inability to develop and introduce new
products that appeal to IFFs customers; (14) disruptions in IFFs manufacturing or supply chain; (15) the inability to obtain raw materials of quality, on cost-effective terms or at all, including citral; (16) the inability
to successfully implement IFFs Vision 2020 strategy, including its acquisition strategy; (17) the risk of information technology failure or interruption, of information security breaches, and risks relating to intellectual property
rights; (18) adverse currency fluctuations or devaluations; (19) the regulatory, political, economic, social and other risks of international operations, including in emerging markets; (20) adverse changes in customer preferences or a
decrease in consumer spending; (21) the inability to attract or retain key personnel; (22) the inability to realize the benefits of IFFs cost and productivity initiatives; (23) the cost and difficulty of complying with, and risk
of adverse changes to, domestic, foreign and international laws, regulations and rules, including regarding taxation; (24) volatility and increases in the price of raw materials, energy and transportation; (25) price realization in a
rising input cost environment; and (26) the risk of adverse legal or regulatory proceedings. For a discussion of risks and important factors that could cause actual results to differ from expectations, projections and forward-looking
statements, see the risks and other factors and information in IFFs filings with the Securities and Exchange Commission, including IFFs Annual Report on Form
10-K,
Quarterly Reports on Form
10-Q
and other filings available on IFFs website (www.iff.com). 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 IFFs business. IFF disclaims any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments. This presentation does not
constitute an offer to sell, or a solicitation of an offer to buy, any security and may not be relied upon in connection with the purchase or sale of any security. Any such offer would only be made by means of formal offering documents, the terms of
which would govern in all respects. You are cautioned against using this information as the basis for making a decision to purchase any security. You should not rely exclusively on this presentation as the basis upon which to make an investment
decision. The information in this presentation is provided to you as of the dates indicated and IFF does not intend to update the information after its distribution, even in the event that the information becomes materially inaccurate. Certain
information contained in this presentation includes calculations or figures that have been prepared internally and have not been audited or verified by a third party. Use of different methods for preparing, calculating or presenting information may
lead to different results and such differences may be material. In addition, in all cases where historical performance is presented, please note that past performance is not a reliable indicator of future results and should not be relied upon as the
basis for making an investment decision. These materials are not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use is contrary to local law or regulation. This presentation
includes
Non-GAAP
metrics, such as Currency Neutral Sales, Currency Neutral Adjusted Operating Profit, Currency Neutral Adjusted EPS, Adjusted Operating Profit, EBITDA, and Net Debt to EBITDA. See
Appendix in this presentation for information regarding certain
Non-GAAP
metrics, including reconciliations to the most directly comparable GAAP metric.
Important Information & Where to Find It The issuer has filed a registration statement (including a
prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed with the SEC for more complete information about
the issuer and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in the offering will arrange to send you the prospectus
if you request it by contacting Morgan Stanley & Co. LLC, Prospectus Department, 180 Varick Street, 2nd Floor, New York, New York 10014; Citigroup Global Markets Inc. toll-free at
1-800-831-9146,
or by mail at Citigroup, c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, NY 11717; or J.P. Morgan Securities LLC, c/o Broadridge
Financial Solutions 1155 Long Island Avenue, Edgewood, NY 11717, or via telephone:
1-866-803-9204.
Agenda 1. IFF & Frutarom Introduction 2. Strategic Rationale & Value Creation 3. Integration
Progress 4. 2018 Performance: IFF & Frutarom 5. Summary 6. Q&A
Leading Global Flavor & Fragrance Company Strong heritage as an innovation leader with global CPGs PR
OFI LE Innovation driven global organization known for core list representation with global CPGs Founded 1889, Listed on NYSE & in S&P 500 Annual R&D spend ~8% of sales Serving 3,000 customers in 162 countries
~50% sales to the emerging markets Flavors Fragrance Fragrance Cosmetic Ingredients Actives As of Dec 31, 2017 Source: Annual filings & management reports PER FOR MAN CE Amount in $M Adjusted 647 Revenue Operating 3,399 Profit * 488
2,821 329 2,095 2006 2012 2017 * Adjusted Operating Profit is a
Non-GAAP
metric, please see our GAAP to
Non-GAAP
Reconciliation in Appendix of this
presentation.
Rapidly Growing Flavor & Specialty Ingredient House Leading naturals portfolio servicing
small &
mid-sized
customers PR OFI LE Suite of natural product offerings serving fast-growing small,
mid-sized &
private label customers Founded
1933, Listed on TASE & in TASE 35 Acquisitive organization focused on naturals Serving 30,000 customers in >150 countries ~43% sales to the emerging markets Flavors Savory Natural Natural Health Solutions Colors Food
Protection Ingredients As of Dec 31, 2017 Source: Annual Filings PER FOR MAN CE Amount in $M Adjusted 268 Revenue EBITDA* 1,362 100 618 49 287 2006 2012 2017 * Adjusted EBITDA is a
Non-GAAP
metric, please see
our GAAP to
Non-GAAP
Reconciliation in Appendix of this presentation.
IFF Strategic Vision Roadmap for accelerated profitable growth Vision 2020 We are the catalyst for discoveries
that spark the senses and transform the everyday Innovating Win Where Become Customers Strengthen & Firsts We Compete Partner of Choice Expand the Portfolio Drive differentiation Lead in key markets Actively
support our Strengthen the F&F core in key technologies customers success Close gaps across value Stretch into adjacencies Develop responsible products enhancing categories Achieve commercial
Pursue partnerships & to meet the future needs of excellence & service Achieve #1 position with collaborations our customers & consumers leadership targeted customers Balance Customers Drive Maximize Portfolio
Maximize Portfolio Differentiation Building Our Talent and Organization Generate Return Continuously Improving Creating a Sustainable Future
IFF & Frutarom Transaction Compelling combination IFF & Frutarom combination creates a
global leader in natural taste, scent and nutrition with expected 2018
pro-forma
sales of $5.3 billion Enriches portfolio for a stronger product offering, broadens access in attractive
adjacencies & strengthens exposure to fast-growing customers Expect to generate significant cost synergies of $145 million by the third full year after the completion of the merger Accelerating financial performance, with
sales growing 5 to 7% and adjusted cash EPS 10%+ between 2019 and 2021, on a currency neutral basis, including the contribution of acquisitions
Strong Strategic Alignment Broad-based benefits across all four priorities S TR A TEG IC PR I OR I TY FR UTA R
OM I MPA C T DRIVE Drive enhancements in key R&D platforms: naturals, modulation, DIFFERENTIATION delivery, ingredients, active cosmetics and health & nutrition BALANCE Accelerate growth with regional & local customers, while
CUSTOMERS strengthening IFFs position with key large multinationals MAXIMIZE Execute superior management of category mix & expand PORTFOLIO into adjacent categories to support margin expansion GENERATE Pursue continuous improvement,
with a focus on cost productivity & RETURN reallocation of resources to efforts that drive the greatest returns
Stronger Product Offering Enriching our portfolio to provide more comprehensive solutions I FF C OMPETEN CY FR
UTA R OM C OMPETEN CY
More Comprehensive Offering Uniquely positioned by combining innovation of both companies Aroma (Delivery)
Fresh Herbs / Fruits Mouthfeel (Natural Flavors) Taste Profile (Natural Flavors) Premium Spirits (Modulation) Syrup (Modulation) Fresh Citrus (Specialty Citrus) Natural Colors Natural / Botanical Extracts Antioxidants Natural Food Protection Legacy
IFF capabilities New Frutarom capabilities
Small Customers Growing Fastest Small & private label own share of spend; Focused on clean label CPG
CUSTOMER DYNAMICS Brand share of spend by sector Smallest companies capturing more clean label1 growth 20% 27% 38% Clean Conventional 9.0% Dairy Food Beverage 7.2% 5.0% 47% 58% 3.1% 2.6% Beauty & Home Care 0.4% Personal Care
-1.7%
-0.5%
Largest Middle Smallest Private Label Global Local Note: 1 Clean label products are free of artificial flavors, colors, preservatives and sweeteners in
all food and beverage categories, and free of hormones and 12 antibiotics in applicable categories, and also contain a specific marketing claim. Source: Kantar Worldpanel May 2018 Report. Nielsen 2017 U.S. FMCG Report.
Strengthens Exposure To Fast-Growing Customers Small &
mid-sized
customers growing at an accelerated rate I FF FR UTA R OM I FF+FR UTAR O M ~30% ~40% ~50% Flavors + Flavors ~50% ~70% ~60% Global Small &
Mid-Sized
Global Small &
Mid-Sized
Global Small &
Mid-Sized
Broadens Access In Attractive Adjacencies Expanding into rapidly growing & profitable markets C OR E
1 A DJ A C ENT C A TEG OR IES 2 Estimated 2017 Market Size & Growth
5-Year
Projected CAGR 6% 6% 6% 7% 5% 3% 3% 2% Fragrance Fragrance Flavors Cosmetic Savory Natural Natural
Food Health Ingredients Actives Solutions Colors Protection Ingredients ~$10B $3.9B ~$12B $2.5B $2.2B $1.3B ~$1B $6.5B Source: (1) IFF Market analysis; Markets and Markets. 14 (2) Estimates from Frutarom January 2018
report
Creates A Global Leader In Taste, Scent & Nutrition Estimated 2018 total sales ($B) $6 5.3 $4 3.7 $2
1.6 $0 +
Generates Significant Cost Synergies Unlocking incremental shareholder value C UMUL A TI VE S A VI N GS EX PEC
TED TI MI N G $145M $145M Streamline G&A ~30% 2021 ~100% Overhead Expenses Optimize Operations ~30% Global Footprint 2020 ~70% Accelerate Procurement ~40% Rationalization & Harmonization 2019 ~25%
Rationalize Procurement Leveraging the best of both supply chains MA K E VS B UY Citrus Specialties
Antioxidants Colors Botanicals Flavors Vanilla Extracts Modulators Aroma Chemicals PUR C HA S IN G POW ER Texturizers Spices Flavor Enhancers Sweeteners
Extracts & Oils Dairy Products Colors Yeasts Functional Ingredients
Optimize Global Footprint IFA & Frutarom global manufacturing sites IFF sites Frutarom sites
Accelerating Financial Performance Average currency neutral growth targets for the 2019 to 2021 period S A L ES
EPS 10%+ CAGR** 5% - 7% 6% CAGR** CAGR* Pro- 3% Forma CAGR* Pro- Forma 2015-2017A 2019-2021E 2015-2017A 2019-2021E * Currency Neutral Sales and Currency Neutral Adjusted EPS are Non-GAAP metrics; Organic results ** Currency
Neutral Sales and Currency Neutral Adjusted CASH EPS are Non-GAAP metrics; Includes acquisitions 19 Please see our GAAP to Non-GAAP Reconciliation in Appendix of this presentation
Capital Allocation Strategy Disciplined uses of cash 1 Primary focus on debt repayment to maintain
investment grade rating 2 Reinvest in business via capex for long-term future growth 3 Pursue value-enhancing M&A 4 Maintain current dividend status
Drive Debt Repayment Achieving Net Debt to EBITDA* target to retain investment grade rating N ET DEB T / EB I
TDA * FOC US ~3.7x Managing leverage to retain investment grade rating is critical focus <3.0x to Committed to be <3.0x net debt EBITDA* between
18-24
months Management incentives
will be aligned with repayment of debt metrics 2018E 2019E 2020E *Net Debt to EBITDA is a Non-GAAP metric. Please see our GAAP to
Non-GAAP
Reconciliation in Appendix of this presentation 21
Process Update Tracking ahead of schedule Frutarom shareholders approved transaction with IFF by a
majority of ~95% Comprehensive
pre-close
discussions on talent, R&D, adjacencies & business and functional integration Committed to Tel Aviv Stock listing upon completion of
transaction Close expected in early October pending antitrust approvals
Antitrust Process
On-track,
with all applications submitted &
approvals in 6 of 8 jurisdictions C OUNTR Y FI L ED APPR OVED United States Israel Turkey Mexico Ukraine South Africa Russia Pending European Union Pending
Day 1
Go-To-Market
Positioning
for strong execution & sustainable, profitable growth ENSUR I NG SUC C ESS Frutarom to remain a standalone unit; Maintain current
go-to-market
strategy
Leverage global expertise across
back-end
functions to unlock value Drive cross-selling via sharing of vast technologies & categories expertise Selectively lift &
shift as appropriate based on long-term strategy DAY 1 MODEL Fragrances Flavors Frutarom Cross-Selling R&D Procurement Manufacturing Support functions
IFF 1H 2018 Financial Review Strong performance across all financial metrics Currency neutral sales growth*
Currency neutral adjusted operating profit growth* +6% +5% +10% Currency neutral adjusted EPS growth* * Currency Neutral Sales, Currency Neutral Adjusted Operating Profit & Currency Neutral EPS are Non-GAAP metrics, please see our GAAP to
Non-GAAP Reconciliation in Appendix of this presentation.
Frutarom 1H 2018 Performance Record revenues & profitability margin FI NANC IALS C OMMENTAR Y +22%
Achieved record quarterly revenue, with constant currency growth on a
pro-forma
basis of 6.0% $786M $646M Flavors sales improved 7% & Specialty Fine Ingredients sales grew 9%, both on 21.9% a
constant currency
pro-forma
basis 19.3% EBITDA EBITDA EBITDA grew by ~39% led by strong gross margin improvement; Core EBITDA margin now at 23.0% 1H 2017 1H 2018 * Sales on a constant currency a pro
forma basis and EBITDA, are Non-GAAP metrics, please see our GAAP to Non-GAAP Reconciliation 26 in Appendix of this presentation.
Summary IFF & Frutarom transaction a compelling combination ES TA B L ISHED Leader in
natural taste, scent & nutrition L EA DER SHI P with expected 2018
pro-forma
sales of $5.3B Stronger product offering G R OW TH Access to fast-growing small &
mid-sized
customers A C C EL ER A TION Enter attractive adjacencies PR OFI T Expect to generate cost synergies of $145M by the EN HA N C EMENT third full year after the completion of the merger
Accelerate financial results, with sales* +5 to +7% VA L UE & adjusted cash EPS* 10%+ from 2019 2021, excluding C R EA TI ON currency; <3.0x net debt to EBITDA* in
18-24
months POS I TI ON
Strong start in 2018 for both IFF & Frutarom; OF S TR EN G TH with robust top and bottom-line performance * Currency Neutral Sales, Currency Neutral Adjusted Cash EPS & Net Debt to EBITDA are Non-GAAP metrics Please see our
GAAP to Non-GAAP Reconciliation in Appendix of this presentation
INTERNATIONAL FLAVORS & FRAGRANCES Q&A
INTERNATIONAL FLAVORS & FRAGRANCES Appendix
GAAP &
Non-GAAP
Financial Measures We provide in this
presentation certain
non-GAAP
financial measures, including (1) Currency Neutral Sales, (2) Adjusted Operating Profit and Currency Neutral Adjusted Operating Profit (3) Adjusted EPS and Currency
Neutral Adjusted EPS, and (4) Compound Average Currency Neutral Growth Rate (CAGR), which exclude restructuring costs and other significant items of a
non-recurring
and/or nonoperational
nature such as legal charges/credits, losses 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. 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 Companys results under GAAP and may not be comparable to other companies calculation of such metrics. 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, 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. We also provide forward-looking CAGR and net debt to EBITDA amounts in the form of guidance in this presentation. This guidance is provided on a
non-GAAP
basis and cannot be reconciled to the closest
GAAP measures without unreasonable effort because of the unpredictability of the amounts and timing of events affecting the items we exclude from
non-GAAP
measures. For example, acquisition-related costs,
restructuring and other charges, net, and integration costs are all impacted by the timing and size of potential future actions, which are difficult to predict. In addition, from time to time, we exclude certain items that occur infrequently, which
are also inherently difficult to predict and estimate. It is also difficult to predict the tax effect of the items we exclude and to estimate certain discrete tax items, like the resolution of tax audits or changes to tax laws. As such, the costs
that are being excluded from
non-GAAP
guidance are difficult to predict and a reconciliation or a range of results could lead to disclosure that would be imprecise or potentially misleading. Material changes
to any one of the exclusions could have a significant effect on our guidance and future GAAP results.
IFF Reconciliation of GAAP &
Non-GAAP
Financial Measures
Adjusted Operating Profit Year Ended December 31, (Dollars in Millions) 2006 2012 2017 Reported (GAAP) 329.2 486.6 581.4 Operational Improvement Initiatives (a) 1.8 Acquisition Related Costs (b) 20.4 Integration Related Costs (c)
4.2 Legal Charges/Credits, net (d) 1.0 Tax Assessment (e) 5.3 Restructuring and Other Charges, net (f)1.7 19.7 Gain on Sale of Assets (g) (.2) FDA Mandated Product Recall (h) 11.0 UK Pension Settlement
Charges (i) 2.8 Adjusted
(Non-GAAP)
329.2 488.3 647.4
IFF Reconciliation of GAAP &
Non-GAAP
Financial Measures
(contd) (a) Represents accelerated depreciation and idle labor costs in Hangzhou, China. (b) Represents the amortization of inventory
step-up
included in Cost of goods sold and
transaction costs related to the acquisitions of Fragrance Resources and PowderPure within 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) For 2017, 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. For 2012, represents restructuring charges related to the 2011 strategic initiative. (g) Represents gains on sale of assets.
(h) Represents an estimate of the Companys incremental direct costs and customer reimbursement obligations, in excess of the Companys sales value of the recalled products, arising from an FDA mandated recall. (i) Represents
pension settlement charges incurred in one of the Companys UK pension plans.
IFF Reconciliation of GAAP &
Non-GAAP
Financial Measures
(contd) Adjusted Operating Profit 6 Months Ended June 30, (Dollars in Millions) 2018 2017 Reported Operating Profit (GAAP) 329.4 281.8 Operational Improvement Initiatives (a) 1.4 1.0 Acquisition Related Costs (b) (0.5) 15.1 Integration
Related Costs (c) 1.0 1.9 Legal Charges / Credits, net (d)1.0 Tax Assessment (e)5.3 Restructuring and Other Charges, net (f) 0.9 10.9 Losses (Gains) on Sale of Assets 1.2 (0.0) FDA Mandated Product Recall (h) 5.0 3.5 Frutarom Acquisition
Related Costs (j) 12.4Adjusted Operating Profit
(Non-GAAP)
350.8 320.5
IFF Reconciliation of GAAP &
Non-GAAP
Financial Measures
(contd) Adjusted Earnings Per Share 6 Months Ended June 30, (Dollars in Millions) 2018 2017 Reported EPS(GAAP) $2.87 $2.84 Operational Improvement Initiatives (a) 0.01 0.01 Acquisition Related Costs (b)0.13 Integration Related Costs
(c) 0.01 0.02 Legal Charges / Credits, net (d)0.01 Tax Assessment (e)0.04 Restructuring and Other Charges, net (f) 0.01 0.10 Losses on Sale of Assets 0.01
-CTA
Realization (g)(0.15) FDA
Mandated Product Recall (h) 0.05 0.03 U.S. Tax Reform (i) 0.01 -Frutarom Acquisition Related Costs (j) 0.38Adjusted EPS
(Non-GAAP)
$3.35 $3.02 (k)
IFF Reconciliation of GAAP &
Non-GAAP
Financial Measures
(contd) (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 managements 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 sum of these items does not foot due to rounding.
IFF Reconciliation of GAAP &
Non-GAAP
Financial Measures
(contd) Currency Neutral Sales Growth for the Six Months Ended June 30, 2018 Total Reported Sales Growth 11% Currency Impact (5%) Currency Neutral Sales Growth 6% Currency Neutral Adj. Operating Profit Growth for the Six Months Ended
June 30, 2018 Total Adjusted Operating Profit Growth 9%* Currency Impact (5%) Currency Neutral Adj. Operating Profit Growth 5% Currency Neutral Adj. EPS Growth for the Six Months Ended June 30, 2018 Total Adjusted EPS Growth 11% Currency
Impact (1%) Currency Neutral Adj. EPS Growth 10% * Does not foot due to rounding
IFF Reconciliation of GAAP &
Non-GAAP
Financial Measures
(contd) Currency Neutral Sales Year ended December 31, 2015 2016 2017 Reported Sales Growth 0% 3% 9% Acquisition Impact (2)% (2)% (5)% Reported Organic Sales Growth (2)% 1% 4% Currency Impact 5% 2% 0% Currency Neutral Adjusted Organic
Sales Growth 3% 2%* 4% 3 Year CAGR: 3% Currency Neutral EPS Year ended December 31, 2015 2016 2017 Reported Organic EPS Growth 0% (4)% (30)% Adjustments 3% 7% 34% Adjusted Organic EPS Growth 2%* 3% 5%* Currency Impact 7% 0% 2% Currency Neutral
Adjusted Organic EPS Growth 9% 3% 6%* 3 Year CAGR: 6% * Does not foot due to rounding
Frutarom Reconciliation of
Non-GAAP
Financial Measures (contd)
Adjusted EBITDA Year ended December 31, (Dollars in Millions) 2006 2012 2017 Operating Profit 37.1 72.8 211.0 Non recurring expenses1.5 7.9 Adjusted Operating Profit74.3 218.9 Depreciation and Amortization 11.5 26.1 48.6 Adjusted
EBITDA 48.6 100.4 267.5
Frutarom Reconciliation of
Non-GAAP
Financial Measures (contd)
Adjusted EBITDA 6 Months Ended June 30, (Dollars in Millions) 2018 Operating Profit 134.9 Non recurring expenses 1.7 Adjusted Operating Profit 136.6 Depreciation and Amortization 35.8 Adjusted EBITDA 172.4 Sales 786.1 Adjusted EBITDA Margin
21.9%
Frutarom Reconciliation of
Non-GAAP
Financial Measures (contd)
Adjusted Core EBITDA 6 Months Ended June 30, (Dollars in Millions) 2018 2017 Core Operating Profit 134.6 99.7 Non recurring expenses 1.7 2.0 Adjusted Core Operating Profit 136.3 101.7 Depreciation and Amortization 35.3 21.8 Adjusted Core EBITDA
171.6 123.5 Core sales 746.1 601.8 Adjusted Core EBITDA Margin 23.0% 20.5%
Frutarom Reconciliation of
Non-GAAP
Financial Measures (contd)
Flavors Currency Neutral Pro Forma Sales Growth for the Six Months Ended June 30, 2018 Total Reported Sales Growth 22% Impact (15%) Currency Neutral Pro Forma Sales Growth 7% Specialty Fine Ingredients Currency Neutral Pro Forma Sales Growth
for the Six Months Ended June 30, 2018 Total Reported Sales Growth 32% Impact (23%) Currency Neutral Pro Forma Sales Growth 9%
Cautionary Statement Regarding Forward Looking Statements
This communication contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. All statements regarding IFFs expected future financial position, results of operations, cash flows, financing plans, business strategy, budgets, capital expenditures, competitive positions,
growth opportunities, plans and objectives of management and statements containing the words such as anticipate, approximate, believe, plan, estimate, expect,
project, could, should, will, intend, may and other similar expressions, are forward-looking statements. Statements in this communication concerning IFFs business outlook
or future economic performance, anticipated profitability, revenues, expenses or other financial items, and product or services line growth, together with other statements that are not historical facts, are forward-looking statements that are
estimates reflecting the best judgment of IFF based upon currently available information. Such forward-looking statements are inherently uncertain, and stockholders and other potential investors must recognize that actual results may differ
materially from IFFs expectations as a result of a variety of factors, including, without limitation, those discussed below. Such forward-looking statements are based upon managements current expectations and include known and unknown
risks, uncertainties and other factors, many of which IFF is unable to predict or control, that may cause IFFs actual results, performance or plans to differ materially from any future results, performance or plans expressed or implied by such
forward-looking statements. These statements involve risks, uncertainties and other factors discussed below and detailed from time to time in IFFs filings with the Securities and Exchange Commission (the SEC).
Risks and uncertainties related to IFFs proposed acquisition of Frutarom include, but are not limited to, the inability to obtain required regulatory
approvals for the 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, the risk
that a condition to closing of the acquisition may not be satisfied on a timely basis or at all, the failure of the proposed transaction to close for any other reason, uncertainties as to access to available financing (including financing for the
acquisition or refinancing of IFF or Frutarom debt) on a timely basis and on reasonable terms, the impact of IFFs proposed financing on its liquidity and flexibility to respond to other business opportunities, whether the acquisition will have
the accretive effect on IFFs earnings or cash flows that it expects, the inability to obtain, or delays in obtaining, cost savings and synergies from the acquisition, costs and difficulties related to the integration of Frutaroms
businesses and operations with IFF businesses and operations, unexpected costs, liabilities, charges or expenses resulting from the acquisition, adverse effects on IFFs stock price resulting from the acquisition, the inability to retain key
personnel, and potential adverse reactions, changes to business relationships or competitive responses resulting from the acquisition.
In addition to the factors set forth above, other factors that may affect IFFs plans, results or stock
price are set forth in IFFs Annual Report on Form
10-K,
Quarterly Reports on Form
10-Q
and Current Reports on Form
8-K.
Many of these factors are beyond IFFs control and IFF cautions investors that any forward-looking statements made by IFF are not guarantees of
future performance. IFF disclaims any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments.
Important Additional Information and Where to Find It
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor
shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. In connection with the proposed merger,
IFF has filed with the SEC a registration statement on Form
S-4
(File
No. 333-225728),
including Amendment No.1 thereto, that constitutes a prospectus of IFF and
attaches as an exhibit a proxy statement of Frutarom. The registration statement was declared effective by the SEC on July 3, 2018, and IFF commenced mailing the definitive prospectus to Frutarom shareholders of record on July 6, 2018.
INVESTORS AND SECURITY HOLDERS OF FRUTAROM ARE URGED TO READ THE DEFINITIVE PROSPECTUS AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. Investors and
security holders are able to obtain free copies of the registration statement and other documents filed with the SEC by the parties through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with the SEC by IFF
will be available free of charge on IFFs internet website at ir.iff.com.
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