Regulatory News:
International Flavors & Fragrances Inc. (NYSE: IFF)
(Euronext Paris: IFF) (TASE: IFF) reported financial results for
the first quarter ended March 31, 2020.
First Quarter 2020 Consolidated Summary:
Reported
(GAAP)
Adjusted
(Non-GAAP)1
Sales
Operating Profit
EPS
Sales
Operating Profit
EPS
EPS ex Amortization
$1.3 B
$196 M
$1.15
$1.3 B
$222 M
$1.30
$1.62
¹ Schedules at the end of this release contain reconciliations
of reported GAAP to non-GAAP metrics.
Management Commentary
“I am incredibly proud of how everyone at IFF has delivered for
our customers around the world through the most challenging of
circumstances," said Andreas Fibig, IFF Chairman and CEO. "Our
strong first quarter performance is a testament to the strength of
our business and IFF’s role as an essential partner in the global
consumer product supply chain. We realized strong top and
bottom-line growth, which reflects the breadth of our diverse
portfolio as well as the important role we play in the everyday
life of consumers. Even in the midst of increased demand and a
challenging operating environment, our teams continued to deliver
solid synergies related to the Frutarom acquisition, advanced our
DuPont Nutrition & Biosciences integration planning and helped
to support those protecting our communities, including through the
creation of more than 65 tons of hand sanitizer and the development
of a new scent, ‘HOPE 2020,’ in record time.
“Our ability to pivot quickly and adapt our daily operations has
enabled us to responsibly operate our business while continuing to
meet customer demand, despite a few logistics hurdles around the
world. As regulatory restrictions aimed at protecting public health
shifted worldwide through the quarter, we have worked through these
challenges to realize minimal disruption across our production and
supply chain. Protecting the health and safety of our colleagues,
especially those still coming to our facilities, continues to be
paramount as we navigate the challenges presented by COVID 19."
IFF Executive Vice President and CFO, Rustom Jilla commented,
“We leveraged our mid-single digit sales growth to deliver solid
adjusted operating margin expansion in the first quarter. Now more
than ever, IFF's broad based exposure across regions, categories
and customers positions us to remain resilient through these
uncertain times. We are fortunate that the majority of our revenue
comes from packaged food, beverage and personal care and hygiene
products, where there is relative strength. Having said that, we
are not entirely immune as categories such as Fine Fragrances,
Cosmetic Actives, Fragrance Ingredients and Food Service are
exhibiting challenges and we are seeing additional costs related to
COVID-19. It also is clear that in the near-term, global conditions
will be extraordinarily volatile and unpredictable, leading us to
withdraw our full year financial guidance. We will continue to
effectively manage our balance sheet by taking actions to generate
strong cash flow, and to maintain ample liquidity even through a
prolonged global downturn."
Mr. Fibig continued, “As we gain more visibility in the second
quarter and beyond, we expect to share additional updates on the
performance and outlook for our business. We’ve been through
challenging and uncertain times before as a company and believe
that we're well positioned to successfully manage through this and
emerge as an even stronger company.”
First Quarter 2020 Consolidated Financial Results
- Reported net sales for the first quarter totaled $1.35 billion,
an increase of 4% from $1.30 billion in 2019. Currency neutral
sales increased 6% driven by broad-based growth in Scent and
Taste.
- Reported operating profit for the first quarter was $196.2
million, an increase of 20% from $163.9 million in 2019. Excluding
those items that affect comparability, adjusted operating profit
excluding amortization increased 9% on a currency neutral basis led
by volume growth, productivity initiatives and integration related
synergies.
- Reported earnings per share (EPS) for the first quarter was
$1.15 per diluted share versus $0.96 per diluted share reported in
2019. Excluding those items that affect comparability, adjusted EPS
excluding amortization was $1.62 per diluted share in 2020 versus
$1.57 in the year-ago period. On a currency neutral basis, adjusted
EPS excluding amortization increased 13% driven by adjusted
operating profit growth, lower year-over-year interest expense and
a more favorable effective tax rate.
First Quarter 2020 Segment Summary¹ : Growth vs. Prior
Year
Reported
(GAAP)
Currency Neutral
(Non-GAAP)
Sales
Segment
Profit
Sales
Segment
Profit
Scent
5%
17%
7%
19%
Taste
3%
5%
5%
6%
¹ Starting this quarter, IFF reports financial results in two
segments, Taste and Scent, incorporating nearly all of the Frutarom
business into the Taste segment.
Scent Segment
- On a reported basis, sales increased 5%, or $24.4 million, to
$517.0 million. Currency neutral sales improved 7%, with growth in
nearly all regions and all categories. Performance was driven by
double-digit growth in Consumer Fragrance and high single-digit
growth in Fragrance Ingredients. Fine Fragrance declined versus the
prior year period, as the temporary closure of retail sites due to
COVID-19 led to a deceleration in performance late in the
quarter.
- Scent segment profit increased 17% on a reported basis and grew
19% on a currency neutral basis driven by volume growth and the
benefits of productivity initiatives.
Taste Segment
- On a reported basis, sales increased 3%, or $25.5 million, to
$830.3 million. Currency neutral sales increased approximately 5%
with growth in all regions and nearly all categories. Performance
was driven by double-digit growth in Savory Solutions and
Inclusions as well as low single digit growth in Flavors and
Natural Products Solutions. Standalone legacy Frutarom sales growth
in the quarter would have been approximately 4%.
- Taste segment profit increased 5% on a reported basis and 6% on
a currency neutral basis led by volume growth and
integration-related synergies.
Business Environment Update Amid COVID-19
As the COVID-19 pandemic has spread globally, IFF is
experiencing significant demand for ingredients and solutions used
in certain consumer products, including packaged food, beverage and
hygiene and disinfection, which represents approximately 85% of the
Company’s total 2019 revenue. At the same time, IFF is seeing
weakness across other offerings exposed to temporary disruptions of
consumer access to retail markets, such as Fine Fragrance and
Cosmetic Actives, and away-from-home channels, such as Food
Service.
IFF continues to adapt quickly to the current environment, with
a focus on mitigating the near-term impact while positioning for
continued long-term success following the crisis and remains
optimistic on seeing improvement as the pandemic abates.
2020 Full Year Financial Guidance:
As the COVID-19 pandemic continues to evolve, there is
uncertainty around its ultimate impact; therefore, the Company's
full year financial results cannot be reasonably estimated at this
time and have been withdrawn.
Audio Webcast
A live webcast to discuss the Company’s first quarter 2020
financial results will be held on May 12, 2020, at 10:00 a.m. ET.
The webcast and accompanying slide presentation may be accessed 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 the expected impact of the COVID 19
pandemic on the Company’s near term results, including sales and
profit in the second quarter of 2020, and revenue from its
categories with retail channel exposure, such as Fine Fragrance,
Cosmetic Actives and Food Service; the expected impact of the COVID
19 pandemic on the global economy; the Company’s expectations with
respect to generating cash flow and its liquidity position to
manage a prolonged global economic downturn; anticipated increased
costs relating to managing through the COVID 19 pandemic; expected
updates from the Company on future performance and outlook for the
business in 2020; the Company’s ability to manage through the COVID
19 pandemic and to mitigate the near-term impact; and the Company’s
belief that it will see improvement in its business as the pandemic
abates. 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 March 3, 2020 and subsequent filings with
the SEC. 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 effect of economic conditions in the industries and markets in
which IFF operates in the U.S. and globally and any changes
therein, including financial market conditions, fluctuations in
commodity prices, interest rates and foreign currency exchange
rates, levels of end market demand, the impact of weather
conditions, natural disasters, public health issues, epidemics and
pandemics, including the novel coronavirus (COVID-19), or the fear
of such events, and the financial condition of IFF’s customers and
suppliers; (2) the risks to the Company’s business from the COVID
19 pandemic, including operational risks, supply chain risks, and
customer related-risks; (3) risks related to the integration of the
Frutarom business, including whether we will realize the benefits
anticipated from the acquisition in the expected time frame; (4)
unanticipated costs, liabilities, charges or expenses resulting
from the Frutarom acquisition, (5) the impact of the outcome of
legal claims, regulatory investigations and litigation, (6) the
increase in the Company’s leverage resulting from the additional
debt incurred to pay a portion of the consideration for Frutarom
and its impact on the Company’s liquidity and ability to return
capital to its shareholders, (7) the Company’s ability to
successfully market to its expanded and decentralized Taste and
Frutarom customer base, (8) the Company’s ability to effectively
compete in its market and develop and introduce new products that
meet customers’ needs, (9) the Company’s ability to successfully
develop innovative and cost-effective products that allow customers
to achieve their own profitability expectations, (10) the impact of
the disruption in the Company’s manufacturing operations, (11) the
impact of a disruption in the Company’s supply chain, including the
inability to obtain ingredients and raw materials from third
parties, (12) volatility and increases in the price of raw
materials, energy and transportation, (13) the Company’s ability to
comply with, and the costs associated with compliance with,
regulatory requirements and industry standards, including regarding
product safety, quality, efficacy and environmental impact, (14)
the impact of any failure or interruption of the Company’s key
information technology systems or a breach of information security,
(15) the Company’s ability to react in a timely and cost-effective
manner to changes in consumer preferences and demands, (16) the
Company’s ability to establish and manage collaborations, joint
ventures or partnership that lead to development or
commercialization of products, (17) the Company’s ability to
benefit from its investments and expansion in emerging markets;
(18) the impact of currency fluctuations or devaluations in the
principal foreign markets in which it operates; (19) economic,
regulatory and political risks associated with the Company’s
international operations, (20) the impact of global economic
uncertainty on demand for consumer products, (21) the inability to
retain key personnel; (22) the Company’s ability to comply with,
and the costs associated with compliance with, U.S. and foreign
environmental protection laws, (23) the Company’s ability to
realize the benefits of its cost and productivity initiatives, (24)
the Company’s ability to successfully manage its working capital
and inventory balances, (25) the impact of the failure to comply
with U.S. or foreign anti-corruption and anti-bribery laws and
regulations, including the U.S. Foreign Corrupt Practices Act, (26)
the Company’s ability to protect its intellectual property rights,
(27) the impact of the outcome of legal claims, regulatory
investigations and litigation, (28) changes in market conditions or
governmental regulations relating to our pension and postretirement
obligations, (29) the impact of future impairment of our tangible
or intangible long-lived assets, (30) the impact of changes in
federal, state, local and international tax legislation or
policies, including the Tax Cuts and Jobs Act, with respect to
transfer pricing and state aid, and adverse results of tax audits,
assessments, or disputes, (31) the effect of potential government
regulation on certain product development initiatives, and
restrictions or costs that may be imposed on the Company or its
operations as a result, and (32) the impact of the United Kingdom’s
departure from the European Union. 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 non-GAAP financial measures,
including: (i) currency neutral sales; (ii) adjusted operating
profit; (iii) adjusted operating profit (margin) ex. amortization;
(iv) adjusted EPS; (v) adjusted EPS ex. amortization and (vi)
currency neutral adjusted EPS ex amortization.
Our non-GAAP financial measures are defined below.
Currency Neutral metrics eliminate the effects that result from
translating international currency to U.S. dollars. We calculate
currency neutral numbers by comparing current 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.
Adjusted Operating Profit excludes the impact of operational
improvement initiatives, integration related costs, restructuring
and other charges, net, losses (gains) on sale of assets, Frutarom
acquisition related costs, compliance review & legal defense
costs, and N&B transaction related costs ("Operating Profit
Items Impacting Comparability").
Adjusted Operating Profit (Margin) ex. Amortization excludes the
impact of Operating Profit Items Impacting Comparability and the
amortization of acquisition related intangible assets.
Adjusted EPS excludes the impact of operational improvement
initiatives, integration related costs, restructuring and other
charges, net, losses (gains) on sale of assets, Frutarom
acquisition related costs, compliance review & legal defense
costs, N&B transaction related costs, and redemption value
adjustment to EPS (often referred to as “Items Impacting
Comparability”).
Adjusted EPS ex. Amortization excludes the impact of Items
Impacting Comparability and the amortization of acquisition related
intangible assets.
These non-GAAP measures are intended to provide additional
information regarding our underlying operating results and
comparable year-over-year performance. Such information is
supplemental to information presented in accordance with GAAP and
is not intended to represent a presentation in accordance with
GAAP. In discussing our historical and expected future results and
financial condition, we believe it is meaningful for investors to
be made aware of and to be assisted in a better understanding of,
on a period-to-period comparable basis, financial amounts both
including and excluding these identified items, as well as the
impact of exchange rate fluctuations. These non-GAAP measures
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.
In the fourth quarter of fiscal year 2018, we began including
Adjusted EPS ex. Amortization as a key non-GAAP financial measure
of our business. Full amortization expense of intangible assets
acquired in connection with acquisitions will be excluded from
Adjusted EPS ex. Amortization calculation. The exclusion of
amortization expense allows comparison of operating results that
are consistent over time for newly and long-held businesses and
with both acquisitive and non-acquisitive peer companies. We
believe this calculation will provide a more accurate presentation
in this and in future periods in the event of additional
acquisitions. Further, this allows the investors to evaluate and
understand operating trends excluding the impact on operating
income and earnings per diluted share. In addition, the Frutarom
acquisition related costs and N&B transaction related costs
have been separated from costs related to prior acquisitions. The
Frutarom acquisition related costs and N&B transaction related
costs represent a significant balance and we believe this amount
should be shown separately to provide an accurate presentation of
the acquisition related costs. Our GAAP results and GAAP metrics do
not change, and this change has no effect on day to day business
operations, or how we manage our business.
Welcome to IFF
At IFF (NYSE:IFF) (Euronext Paris: IFF) (TASE: IFF), we’re using
Uncommon Sense to create what the world needs. As a collective of
unconventional thinkers and creators, we put science and artistry
to work to create unique and unexpected scents, tastes, experiences
and ingredients for the products our world craves. 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 March
31,
2020
2019
% Change
Net sales
$
1,347,317
$
1,297,402
4
%
Cost of goods sold
781,450
766,143
2
%
Gross profit
565,867
531,259
7
%
Research and development expenses
85,909
90,596
(5
)%
Selling and administrative expenses
229,714
213,182
8
%
Amortization of acquisition-related
intangibles
48,350
47,625
2
%
Restructuring and other charges, net
4,918
16,174
(70
)%
Losses (gains) on sales of fixed
assets
754
(188
)
NMF
Operating profit
196,222
163,870
20
%
Interest expense
32,140
36,572
(12
)%
Other loss (income), net
10,574
(7,278
)
NMF
Income before taxes
153,508
134,576
14
%
Taxes on income
26,297
23,362
13
%
Net income
127,211
111,214
14
%
Net income attributable to noncontrolling
interest
2,604
2,385
9
%
Net income attributable to IFF
124,607
108,829
14
%
Net income per share - basic (1)
$
1.16
$
0.97
Net income per share - diluted (1)
$
1.15
$
0.96
Average number of shares outstanding -
basic
112,082
111,864
Average number of shares outstanding -
diluted
113,594
113,389
(1) For 2020 and 2019, net income per share reflects adjustments
related to the redemption value of certain redeemable
noncontrolling interests. NMF Not meaningful
International Flavors & Fragrances Inc.
Condensed Consolidated Balance Sheet (Amounts in thousands)
(Unaudited)
March 31,
December 31,
2020
2019
Cash, cash equivalents, and restricted
cash
$
442,945
$
623,945
Receivables
943,114
876,197
Inventories
1,075,913
1,123,068
Other current assets
356,322
319,334
Total current assets
2,818,294
2,942,544
Property, plant and equipment,
net
1,339,124
1,386,920
Goodwill and other intangibles,
net
7,945,005
8,349,531
Other assets
586,653
608,416
Total assets
12,689,076
13,287,411
Short term borrowings
$
385,569
$
384,958
Other current liabilities
1,041,426
1,167,232
Total current liabilities
1,426,995
1,552,190
Long-term debt
3,946,905
3,997,438
Non-current liabilities
1,371,789
1,409,192
Redeemable noncontrolling interests
102,713
99,043
Shareholders' equity
5,840,674
6,229,548
Total liabilities and shareholders'
equity
$
12,689,076
$
13,287,411
International Flavors & Fragrances Inc.
Consolidated Statement of Cash Flows (Amounts in thousands)
(Unaudited)
Three Months Ended March
31,
2020
2019
Cash flows from operating
activities:
Net income
$
127,211
$
111,214
Adjustments to reconcile to net cash
provided by operating activities
Depreciation and
amortization
80,595
81,775
Deferred income taxes
2,221
(12,389
)
Losses (gains) on sale of
assets
754
(188
)
Stock-based compensation
8,624
7,604
Pension contributions
(5,397
)
(3,956
)
Changes in assets and
liabilities, net of acquisitions:
Trade receivables
(133,291
)
(55,935
)
Inventories
(568
)
(24,719
)
Accounts payable
(31,635
)
8,988
Accruals for incentive
compensation
(19,340
)
(36,969
)
Other current payables and
accrued expenses
(65,158
)
(11,321
)
Other assets
42,462
(9,978
)
Other liabilities
10,467
(6,894
)
Net cash provided by operating
activities
16,945
47,232
Cash flows from investing
activities:
Cash paid for acquisitions, net
of cash received
—
(33,895
)
Additions to property, plant
and equipment
(48,294
)
(57,609
)
Proceeds from life insurance
contracts
1,739
1,890
Proceeds from disposal of
assets
3,806
3,970
Contingent consideration
paid
—
(4,655
)
Net cash used in investing
activities
(42,749
)
(90,299
)
Cash flows from financing
activities:
Cash dividends paid to
shareholders
(80,038
)
(77,779
)
Increase in revolving credit
facility and short term borrowings
169
2,895
Repayments on debt
(11,584
)
(36,156
)
Purchases of redeemable
noncontrolling interest
(14,173
)
—
Contingent consideration
paid
(327
)
—
Proceeds from issuance of stock
in connection with stock options
—
200
Employee withholding taxes
paid
(1,275
)
(1,339
)
Net cash used in financing activities
(107,228
)
(112,179
)
Effect of exchange rates changes on cash,
cash equivalents and restricted cash
(42,529
)
3,853
Net change in cash, cash equivalents
and restricted cash
(175,561
)
(151,393
)
Cash, cash equivalents and restricted cash
at beginning of year
623,945
648,522
Cash, cash equivalents and restricted
cash at end of period
$
448,384
$
497,129
The following table reconciles cash, cash equivalents and
restricted cash between the Company's statement of cash flows for
the periods ended March 31, 2020 and March 31, 2019 to the amounts
reported in the Company's balance sheet:
March 31, 2020
December 31, 2019
March 31, 2019
December 31, 2018
Current assets
Cash and cash equivalents
$
433,246
$
606,823
$
483,504
$
634,897
Restricted cash
9,699
17,122
13,625
13,625
Noncurrent assets
Restricted cash included in
Other assets
5,439
—
—
—
Cash, cash equivalents and restricted
cash
$
448,384
$
623,945
$
497,129
$
648,522
International Flavors & Fragrances Inc.
Business Unit Performance (Amounts in thousands)
(Unaudited)
Three Months Ended March
31,
2020
2019
Net Sales
Taste
$
830,322
$
804,802
Scent
516,995
492,600
Consolidated
$
1,347,317
$
1,297,402
Segment Profit
Taste
$
137,347
$
131,402
Scent
105,395
89,953
Global Expenses
(20,393
)
(16,667
)
Operational Improvement Initiatives
—
(406
)
Frutarom Integration Related Costs
(3,650
)
(14,897
)
Restructuring and Other Charges, net
(4,918
)
(16,174
)
(Losses) gains on sale of assets
(754
)
188
Frutarom Acquisition Related Costs
(813
)
(9,529
)
Compliance Review & Legal Defense
Costs
(649
)
—
N&B Transaction Related Costs
(5,199
)
—
N&B Integration Related Costs
(10,144
)
—
Operating profit
196,222
163,870
Interest Expense
(32,140
)
(36,572
)
Other loss (income), net
(10,574
)
7,278
Income before taxes
$
153,508
$
134,576
Operating Margin
Taste
17
%
16
%
Scent
20
%
18
%
Consolidated
15
%
13
%
International Flavors & Fragrances Inc.
GAAP to Non-GAAP Reconciliation Foreign Exchange Impact
(Unaudited)
Q1 Taste
Sales
Segment
Profit
% Change - Reported
3%
5%
Currency Impact
2%
1%
% Change - Currency Neutral
5%
6%
Q1 Scent
Sales
Segment
Profit
% Change - Reported
5%
17%
Currency Impact
2%
2%
% Change - Currency Neutral
7%
19%
Q1
Consolidated
EPS ex. Amortization
Adjusted Operating
Profit
% Change - Adjusted (Non-GAAP)
3%
7%
Currency Impact
10%
2%
% Change - Currency Neutral
13%
9%
International Flavors & Fragrances Inc.
GAAP to Non-GAAP Reconciliation (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
First Quarter
(DOLLARS IN
THOUSANDS)
2020
2019
Reported (GAAP)
$
565,867
$
531,259
Operational Improvement Initiatives
(a)
—
406
Frutarom Integration Related Costs (b)
149
156
Frutarom Acquisition Related Costs (d)
513
7,850
Adjusted (Non-GAAP)
$
566,529
$
539,671
Reconciliation of Selling and
Administrative Expenses
First Quarter
(DOLLARS IN
THOUSANDS)
2020
2019
Reported (GAAP)
$
229,714
$
213,182
Frutarom Integration Related Costs (b)
(3,279
)
(14,557
)
Frutarom Acquisition Related Costs (d)
(300
)
(1,679
)
Compliance Review & Legal Defense
Costs (e)
(649
)
—
N&B Transaction Related Costs (f)
(5,199
)
—
N&B Integration Related Costs (g)
(10,144
)
—
Adjusted (Non-GAAP)
$
210,143
$
196,946
Reconciliation of Operating
Profit
First Quarter
(DOLLARS IN
THOUSANDS)
2020
2019
Reported (GAAP)
$
196,222
$
163,870
Operational Improvement Initiatives
(a)
—
406
Frutarom Integration Related Costs (b)
3,650
14,897
Restructuring and Other Charges, net
(c)
4,918
16,174
Losses (Gains) on Sale of Assets
754
(188
)
Frutarom Acquisition Related Costs (d)
813
9,529
Compliance Review & Legal Defense
Costs (e)
649
—
N&B Transaction Related Costs (f)
5,199
—
N&B Integration Related Costs (g)
10,144
—
Adjusted (Non-GAAP)
$
222,349
$
204,688
Reconciliation of Adjusted
(Non-GAAP) Operating Profit Margin ex. Amortization
(DOLLARS IN
THOUSANDS)
First Quarter
Numerator
2020
2019
Adjusted (Non-GAAP) Operating
Profit
$
222,349
$
204,688
Amortization of Acquisition
related Intangible Assets
48,350
47,625
Adjusted (Non-GAAP) Operating
Profit ex. Amortization
270,699
252,313
Denominator
Sales
1,347,317
1,297,402
Adjusted (Non-GAAP) Operating Profit
Margin ex. Amortization
20.1
%
19.4
%
International Flavors & Fragrances Inc.
GAAP to Non-GAAP Reconciliation (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
First Quarter
2020
2019
(DOLLARS IN
THOUSANDS)
Income before taxes
Taxes on income (i)
Net Income Attributable to IFF
(j)
Diluted EPS (k)
Income before taxes
Taxes on income (i)
Net Income Attributable to IFF
(j)
Diluted EPS
Reported (GAAP)
$
153,508
$
26,297
$
124,607
$
1.15
$
134,576
$
23,362
$
108,829
$
0.96
Operational Improvement Initiatives
(a)
—
—
—
—
406
142
264
—
Frutarom Integration Related Costs (b)
3,650
815
2,835
0.02
14,897
3,349
11,548
0.10
Restructuring and Other Charges, net
(c)
4,918
1,034
3,884
0.03
16,174
4,031
12,143
0.11
Losses (Gains) on Sale of Assets
754
189
565
—
(188
)
(43
)
(145
)
—
Frutarom Acquisition Related Costs (d)
213
(1,634
)
1,847
0.02
9,529
1,530
7,999
0.07
Compliance Review & Legal Defense
Costs (e)
649
135
514
—
—
—
—
—
N&B Transaction Related Costs (f)
5,199
—
5,199
0.05
—
—
—
—
N&B Integration Related Costs (g)
10,144
2,168
7,976
0.07
—
—
—
—
Redemption value adjustment to EPS (h)
—
—
—
(0.05
)
—
—
—
—
Adjusted (Non-GAAP)
$
179,035
$
29,004
$
147,427
$
1.30
$
175,394
$
32,371
$
140,638
$
1.24
Reconciliation of Adjusted
(Non-GAAP) EPS ex. Amortization
First Quarter
(DOLLARS AND SHARE
AMOUNTS IN THOUSANDS)
2020
2019
Numerator
Adjusted (Non-GAAP) Net
Income
$
147,427
$
140,638
Amortization of Acquisition
related Intangible Assets
48,350
47,625
Tax impact on Amortization of
Acquisition related Intangible Assets (i)
10,966
10,196
Amortization of Acquisition
related Intangible Assets, net of tax (l)
37,384
37,429
Adjusted (Non-GAAP) Net Income
ex. Amortization
184,811
178,067
Denominator
Weighted average shares
assuming dilution (diluted)
113,594
113,389
Adjusted (Non-GAAP) EPS ex.
Amortization
$
1.62
$
1.57
(a)
Represents accelerated depreciation
related to a plant relocation in India.
(b)
Represents costs related to the
integration of the Frutarom acquisition. For 2020, costs primarily
related to advisory services, retention bonuses and performance
stock awards. For 2019, costs principally related to advisory
services.
(c)
For 2020, represents costs primarily
related to the Frutarom Integration Initiative. For 2019,
represents costs primarily related to the Frutarom Integration
Initiative and the 2019 Severance Charges program.
(d)
Represents transaction-related costs and
expenses related to the acquisition of Frutarom. For 2020, amount
primarily includes earn-out payments, net of adjustments,
amortization for inventory "step-up" costs and transaction costs
principally related to the 2019 Acquisition Activity. For 2019,
amount primarily includes amortization for inventory "step-up"
costs and transaction costs.
(e)
Costs related to reviewing the nature of
inappropriate payments and review of compliance in certain other
countries. In addition, includes legal costs for related
shareholder lawsuits.
(f)
Represents transaction costs and expenses
related to the pending transaction with Nutrition & Biosciences
Inc.
(g)
Represents costs related to the
integration of the pending transaction with Nutrition &
Biosciences Inc.
(h)
Represents the adjustment to EPS related
to the excess of the redemption value of certain redeemable
noncontrolling interests over their existing carrying value.
(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
or are subject to a valuation allowance for which the tax expense
(benefit) was calculated at 0%. For fiscal years 2020 and 2019,
these non-GAAP adjustments were not subject to foreign tax credits,
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).
(j)
For 2020 and 2019, net income is reduced
by income attributable to noncontrolling interest of $2.6M and
$2.4M, respectively.
(k)
The sum of these items does not foot due
to rounding.
(l)
Represents all amortization of intangible
assets acquired in connection with acquisitions, net of tax.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200511005880/en/
Michael DeVeau Head of Investor Relations and Communications
212.708.7164 Michael.DeVeau@iff.com
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