IFF (NYSE: IFF) reported financial results for the third quarter
ended September 30, 2022.
Third Quarter 2022 Consolidated Summary:
Reported
(GAAP)
Adjusted
(Non-GAAP)1
Sales
Loss Before
Taxes
EPS
Operating
EBITDA
Operating
EBITDA Margin
EPS ex
Amortization
$3.1 B
$(2.0) B
$(8.60)
$612 M
20.0%
$1.36
First Nine Months 2022 Consolidated Summary:
Reported
(GAAP)
Adjusted
(Non-GAAP)1
Sales
Loss Before
Taxes
EPS
Operating
EBITDA
Operating
EBITDA Margin
EPS ex
Amortization
$9.6 B
$(1.6) B
$(7.22)
$2.0 B
21.0%
$4.59
Impairment of Goodwill
The Company has determined that for the third quarter of 2022
the carrying value of the Health & Biosciences reporting unit
exceeded its fair value and recorded a goodwill impairment charge
of $2.25 billion in the Consolidated Statements of (Loss) Income
and Comprehensive Loss for the three and nine months ended
September 30, 2022. The primary drivers of the goodwill impairment
are related to on-going increases in interest rates and lower
business projections due to adverse macroeconomic impacts on
volume, continued cost inflation, and unfavorable foreign exchange
rate fluctuations.
Management Commentary
“We delivered solid results in the third quarter in the context
of a challenging operating environment," said IFF CEO Frank
Clyburn. “Through the ongoing efforts of our teams around the
world, we successfully implemented pricing actions and generated
strong productivity that drove our top and bottom-line performance.
On a year-to-date basis, we are executing on our pricing,
productivity and divestiture objectives, which has led to strong
sales momentum, steady advancements in profitability and an overall
improvement in our leverage profile. As we begin working through
the fourth quarter, we are proceeding cautiously as market
conditions have become more challenging. In this context, we are
keenly focused on the items under our control, including advancing
our innovation efforts to support our customers and driving greater
cost efficiencies, to ensure we deliver on our commitments and
maximize value for our shareholders.”
Third Quarter 2022 Consolidated Financial Results
- Reported net sales for the third quarter were $3.06 billion,
flat versus the prior-year period. On a comparable basis2, currency
neutral sales increased 10% versus the prior-year period, led by
double-digit growth in Nourish and Pharma Solutions.
- Loss before taxes on a reported basis for the third quarter was
$(2.04) billion. Adjusted operating EBITDA for the third quarter
was $612 million. On a comparable basis2, currency neutral adjusted
operating EBITDA grew 3% versus the prior-year period, as strong
pricing actions and productivity gains more than offset lower
volumes.
- Reported earnings per share (EPS) for the third quarter was
$(8.60). Adjusted EPS excluding amortization was $1.36 per diluted
share.
- Cash flows from operations at the end of the third quarter was
$189 million, and free cash flow defined as cash flows from
operations less capital expenditures totaled $(155) million, as
higher inventory value as a result of inflationary pressures more
than offset strong improvements in accounts payable. Net debt to
credit adjusted EBITDA at the end of the third quarter improved to
3.9x versus 4.4x in the second quarter of 2022.
______________________________ 1 Schedules at the end of this
release contain reconciliations of reported GAAP to Non-GAAP
metrics. See Use of Non-GAAP Financial Measures for explanations of
our Non-GAAP metrics. 2 Comparable results for the third quarter
exclude the impact of divestitures in the prior and current year
periods and acquisitions in the current year period.
Third Quarter 2022 Segment Summary: Growth vs. Prior
Year
Reported
(GAAP)
Adjusted
(Non-GAAP)
Comparable
Currency
Neutral
(Non-GAAP)2
Comparable
Currency Neutral
Adjusted
(Non-GAAP)2
Sales
Operating
EBITDA
Sales
Operating
EBITDA
Nourish
2%
(12)%
10%
(4)%
Health & Biosciences
(17)%
(9)%
3%
(1)%
Scent
2%
(8)%
9%
3%
Pharma Solutions
22%
73%
28%
76%
Nourish Segment
- On a reported basis, third quarter sales were $1.70 billion. On
a comparable basis2 , currency neutral sales grew 10% led by
double-digit growth in Food Designs and Ingredients.
- Nourish adjusted operating EBITDA was $287 million and adjusted
operating EBITDA margin was 16.9% in the third quarter. On a
comparable basis2, currency neutral adjusted operating EBITDA
declined 4% as strong price increases and productivity gains were
offset by lower volumes.
Health & Biosciences Segment
- On a reported basis, third quarter sales were $512 million. On
a comparable basis2 , currency neutral sales increased 3% with
growth in Cultures & Food Enzymes, Health, Home & Personal
Care and Animal Nutrition.
- Health & Biosciences adjusted operating EBITDA was $137
million and adjusted operating EBITDA margin was 26.8% in the third
quarter. On a comparable basis2, currency neutral adjusted
operating EBITDA declined 1% as price increases and productivity
gains were principally offset by lower volumes.
Scent Segment
- On a reported basis, third quarter sales were $591 million. On
a comparable basis2, currency neutral sales increased 9% with
mid-teen growth in Fine Fragrance and Fragrance Ingredients and a
high single-digit increase in Consumer Fragrance.
- Scent adjusted operating EBITDA was $119 million and adjusted
operating EBITDA margin was 20.1% in the third quarter. On a
comparable basis2, currency neutral adjusted operating EBITDA grew
3% led by volume growth, price increases and productivity
gains.
Pharma Solutions Segment
- On a reported basis, third quarter sales were $257 million. On
a comparable basis2, currency neutral sales increased 28% with
strong double-digit growth in Pharma and Industrial.
- Pharma Solutions adjusted operating EBITDA was $69 million and
adjusted operating EBITDA margin was 26.8% in the third quarter. On
a comparable basis2, currency neutral adjusted operating EBITDA
grew 76% led by volume growth, price increases and productivity
gains.
Financial Guidance
The Company expects full year 2022 sales to be approximately
$12.4 billion to $12.5 billion (versus $12.6 billion to $13.0
billion previously), with an expected full year 2022 adjusted
operating EBITDA to be in line and at the low-end of the Company's
previous $2.5 billion to $2.6 billion range. The change in sales
guidance is principally due to an unfavorable impact from foreign
exchange and a more challenging operating environment.
The Company expects to deliver comparable currency neutral sales
growth of 9% to 10% (versus 9% to 12% previously) for the full year
2022, with comparable currency neutral adjusted operating EBITDA
growth to be in line and at the low-end of the Company's previous
4% to 8% range.
Based on current market foreign exchange rates, the Company
expects that foreign exchange will negatively impact sales growth
in 2022 by approximately 5 percentage points and adjusted operating
EBITDA growth by approximately 6 percentage points.
Audio Webcast
A live webcast to discuss the Company’s third quarter 2022
financial results will be held on November 8, 2022, at 9:00 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
Statements in this press release, which are not historical facts
or information, are “forward-looking statements” within the meaning
of The Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based on management’s current
assumptions, estimates and expectations including those concerning
the impacts of COVID-19 and our plans to respond to its
implications; the expected impact of global supply chain
challenges; expectations regarding sales and profit for the fiscal
year 2022, including the impact of foreign exchange, pricing
actions, raw materials, energy and sourcing, logistics and
manufacturing costs; expectations of the impact of inflationary
pressures and the pricing actions to offset exposure to such
impacts; the impact of high input costs, including commodities, raw
materials, transportation and energy; our ability to drive cost
discipline measures and the ability to recover margin to
pre-inflation levels; the divestiture of our Microbial Control
business and the progress of our portfolio optimization strategy,
through non-core business divestitures and acquisitions, such as
the Health Wright acquisition; our combination with N&B,
including the expected benefits and synergies of the N&B
Transaction and future opportunities for the combined company, the
success of our integration efforts and ability to deliver on our
synergy commitments as well as future opportunities for the
combined company; the impact of global economic uncertainty on
demand for consumer products; the growth potential of the markets
in which we operate, including the emerging markets, expected
capital expenditures in 2022, the expected costs and benefits of
our ongoing optimization of our manufacturing operations, including
the expected number of closings, expected cash flow and
availability of capital resources to fund our operations and meet
our debt service requirements; our ability to innovate and execute
on specific consumer trends and demands; our ability enhance our
innovation efforts and drive cost efficiencies; our ability to
continue to generate value for, and return cash to, our
shareholders.
These forward-looking statements should be evaluated with
consideration given to the many risks and uncertainties inherent in
our business that could cause actual results and events to differ
materially from those in the forward-looking statements. Certain of
such forward-looking information may be identified by such terms as
“expect,” “anticipate,” “believe,” “intend,” “outlook,” “may,”
“estimate,” “should,” “predict” and similar terms or variations
thereof. Such forward-looking statements are based on a series of
expectations, assumptions, estimates and projections about the
Company, are not guarantees of future results or performance, and
involve significant risks, uncertainties and other factors,
including assumptions and projections, for all forward periods. Our
actual results may differ materially from any future results
expressed or implied by such forward-looking statements.
Such risks, uncertainties and other factors include, among
others, the following: (1) inflationary trends in the price of our
input costs, such as raw materials, transportation and energy; (2)
supply chain disruptions, geopolitical developments, including the
Russia-Ukraine conflict, or climate-change related events
(including severe weather events) that may affect our suppliers or
procurement of raw materials; (3) disruption in the development,
manufacture, distribution or sale of our products from COVID-19 and
other public health crises; (4) risks related to the integration of
the N&B business, including whether we will realize the
benefits anticipated from the merger in the expected time frame;
(5) our ability to successfully establish and manage acquisitions,
collaborations, joint ventures or partnerships, or the failure to
close strategic transactions or divestments; (6) our ability to
successfully market to our expanded and diverse customer base; (7)
our substantial amount of indebtedness and its impact on our
liquidity and ability to return capital to its shareholders; (8)
our ability to effectively compete in our market and develop and
introduce new products that meet customers’ needs; (9) our ability
to retain key employees; (10) changes in demand from large
multi-national customers due to increased competition and our
ability to maintain “core list” status with customers; (11) our
ability to successfully develop innovative and cost-effective
products that allow customers to achieve their own profitability
expectations; (12) disruption in the development, manufacture,
distribution or sale of our products from natural disasters, public
health crises, international conflicts, terrorist acts, labor
strikes, political crisis, accidents and similar events; (13) the
impact of a significant data breach or other disruption in our
information technology systems, and our ability to comply with data
protection laws in the U.S. and abroad; (14) volatility and
increases in the price of raw materials, energy and transportation;
(15) our 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; (16) our ability to meet increasing customer,
consumer, shareholder and regulatory focus on sustainability; (17)
defect, quality issues (including product recalls), inadequate
disclosure or misuse with respect to the products and capabilities;
(18) our ability to react in a timely and cost-effective manner to
changes in consumer preferences and demands, including increased
awareness of health and wellness; (19) our ability to benefit from
our investments and expansion in emerging markets; (20) the impact
of currency fluctuations or devaluations in the principal foreign
markets in which we operate; (21) economic, regulatory and
political risks associated with our international operations; (22)
the impact of global economic uncertainty on demand for consumer
products; (23) our ability to comply with, and the costs associated
with compliance with, U.S. and foreign environmental protection
laws; (24) our ability to successfully manage our 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)
any impairment on our tangible or intangible long lived assets,
including goodwill associated with the N&B merger and the
acquisition of Frutarom; (27) our ability to protect our
intellectual property rights; (28) the impact of the outcome of
legal claims, regulatory investigations and litigation; (29)
changes in market conditions or governmental regulations relating
to our pension and postretirement obligations; (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 impact of the United Kingdom’s
departure from the European Union; (32) the impact of the phase out
of the London Interbank Offered Rate (LIBOR) on interest expense;
and (33) risks associated with our CEO transition, including the
impact of employee hiring and retention.
The foregoing list of important factors does not include all
such factors, nor necessarily present them in order of importance.
In addition, you should consult other disclosures made by the
Company (such as in our other filings with the SEC or in company
press releases) for other factors that may cause actual results to
differ materially from those projected by the Company. Please refer
to Part I. Item 1A., Risk Factors, of the Company’s Annual Report
on Form 10-K filed with the SEC on February 28, 2022 for additional
information regarding factors that could affect our results of
operations, financial condition and liquidity.
We intend our forward-looking statements to speak only as of the
time of such statements and do not undertake or plan to update or
revise them as more information becomes available or to reflect
changes in expectations, assumptions or results. We can give no
assurance that such expectations or forward-looking statements will
prove to be correct. An occurrence of, or any material adverse
change in, one or more of the risk factors or risks and
uncertainties referred to in this press release or included in our
other periodic reports filed with the SEC could materially and
adversely impact our operations and our future financial results.
Any public statements or disclosures made by us following this
press release that modify or impact any of the forward-looking
statements contained in or accompanying this press release will be
deemed to modify or supersede such outlook or other forward-looking
statements in or accompanying this press release.
Use of Non-GAAP Financial
Measures
We provide in this press release non-GAAP financial measures,
including: (i) comparable currency neutral sales; (ii) adjusted
operating EBITDA and comparable currency neutral adjusted operating
EBITDA; (iii) adjusted operating EBITDA margin; (iv) adjusted EPS
ex amortization; (v) free cash flow; and (vi) net debt to credit
adjusted EBITDA.
Our non-GAAP financial measures are defined below.
Currency Neutral metrics eliminate the effects that result from
translating non-U.S. currencies to U.S. dollars. We calculate
currency neutral numbers by translating current year invoiced sale
amounts at the exchange rates used for the corresponding prior year
period. We use currency neutral results in our analysis of
subsidiary or segment performance. We also use currency neutral
numbers when analyzing our performance against our competitors.
Adjusted operating EBITDA and adjusted operating EBITDA margin
exclude depreciation and amortization expense, interest expense,
other income, net, restructuring and other charges and certain
non-recurring items such as acquisition related costs, gains on
sale of assets, impairment of goodwill, impairment of long-lived
assets, shareholder activism related costs, business divestiture
costs, employee separation costs, Global Shared Services
implementation costs, Frutarom acquisition related costs, N&B
inventory step-up costs, N&B transaction related costs and
integration related costs.
Adjusted EPS ex Amortization excludes the impact of
non-operational items including, acquisition related costs,
restructuring and other charges, gains on sale of assets,
impairment of goodwill, impairment of long-lived assets,
shareholder activism related costs, business divestiture costs,
gains on business disposal, employee separation costs, Global
Shared Services implementation costs, pension income adjustment,
Frutarom acquisition related costs, N&B inventory step-up
costs, N&B transaction related costs, integration related
costs, redemption value adjustment to EPS and non-cash items
including the amortization of acquisition related intangible
assets.
Free Cash Flow is operating cash flow (i.e. cash flow from
operations) less capital expenditures.
Net debt to credit adjusted EBITDA is the leverage ratio used in
our credit agreements and defined as net debt (which is debt for
borrowed money less cash and cash equivalents) divided by the
trailing 12-month credit adjusted EBITDA. Credit adjusted EBITDA is
defined as income (loss) before income taxes, depreciation and
amortization expense, interest expense, specified items and
non-cash items.
Comparable results for the third quarter excludes the impact of
divestitures in the prior year period and acquisitions in the
current year period.
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.
The Company cannot reconcile its expected Adjusted Operating
EBITDA under "Financial Guidance" without unreasonable effort
because certain items that impact net income and other reconciling
metrics are out of the Company's control and/or cannot be
reasonably predicted at this time. These items include but are not
limited to gains (losses) on sale of assets, shareholder activism
related costs, business divestiture costs, employee separation
costs, N&B inventory step-up costs, N&B transaction related
costs, integration related costs and the impact of the merger with
N&B.
Welcome to IFF
At IFF (NYSE: IFF), an industry leader in food, beverage, scent,
health and biosciences, science and creativity meet to create
essential solutions for a better world – from global icons to
unexpected innovations and experiences. With the beauty of art and
the precision of science, we are an international collective of
thinkers who partners with customers to bring scents, tastes,
experiences, ingredients and solutions for products the world
craves. Together, we will do more good for people and planet. Learn
more at iff.com, Twitter, Facebook, Instagram, and LinkedIn.
International Flavors & Fragrances
Inc. Consolidated Statements of (Loss) Income
(Amounts in millions except per share data)
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
%
Change
2022
2021
%
Change
Net sales
$
3,063
$
3,071
—
%
$
9,596
$
8,625
11
%
Cost of goods sold
2,062
1,981
4
%
6,314
5,871
8
%
Gross profit
1,001
1,090
(8
) %
3,282
2,754
19
%
Research and development expenses
145
156
(7
) %
460
463
(1
) %
Selling and administrative expenses
413
436
(5
) %
1,328
1,299
2
%
Amortization of acquisition-related
intangibles
182
195
(7
) %
552
547
1
%
Impairment of goodwill
2,250
—
NMF
2,250
—
NMF
Impairment of long-lived assets
—
—
NMF
120
—
NMF
Restructuring and other charges
(4
)
6
(167
) %
5
34
(85
) %
Gains on sales of fixed assets
—
(1
)
(100
) %
(2
)
(1
)
100
%
Operating (loss) profit
(1,985
)
298
NMF
(1,431
)
412
NMF
Interest expense
83
74
12
%
232
216
7
%
Other income, net
(33
)
(26
)
27
%
(43
)
(44
)
(2
) %
(Loss) Income before taxes
(2,035
)
250
NMF
(1,620
)
240
NMF
Provision for income taxes
160
53
202
%
220
53
NMF
Net (loss) income
(2,195
)
197
NMF
(1,840
)
187
NMF
Net income attributable to noncontrolling
interests
2
3
(33
) %
6
7
(14
) %
Net (loss) income attributable to IFF
shareholders
$
(2,197
)
$
194
NMF
$
(1,846
)
$
180
NMF
Net (loss) income per share - basic
(1)
$
(8.60
)
$
0.76
$
(7.22
)
$
0.75
Net (loss) income per share - diluted
(1)
$
(8.60
)
$
0.76
$
(7.22
)
$
0.75
Average number of shares outstanding -
basic
255
254
255
239
Average number of shares outstanding -
diluted
255
255
255
239
(1)
For 2022 and 2021, net (loss) 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 Sheets (Amounts
in millions) (Unaudited)
September 30,
December 31,
2022
2021
Cash, cash equivalents, and restricted
cash
$
548
$
715
Receivables, net
2,031
1,906
Inventories
3,122
2,516
Other current assets
793
1,850
Total current assets
6,494
6,987
Property, plant and equipment, net
4,055
4,368
Goodwill and other intangibles, net
22,691
26,920
Other assets
1,297
1,383
Total assets
$
34,537
$
39,658
Short-term borrowings
$
512
$
632
Other current liabilities
3,114
3,001
Total current liabilities
3,626
3,633
Long-term debt
10,260
10,768
Non-current liabilities
3,662
4,035
Redeemable noncontrolling interests
68
105
Shareholders' equity
16,921
21,117
Total liabilities and shareholders'
equity
$
34,537
$
39,658
International Flavors & Fragrances
Inc. Consolidated Statements of Cash Flows (Amounts
in millions) (Unaudited)
Nine Months Ended September
30,
2022
2021
Cash flows from operating
activities:
Net (loss) income
$
(1,840
)
$
187
Adjustments to reconcile to net cash
provided by operating activities
Depreciation and amortization
897
861
Deferred income taxes
(222
)
(148
)
Gains on sales of fixed assets
(2
)
(1
)
Gain on business divestiture
(14
)
—
Stock-based compensation
37
44
Pension contributions
(25
)
(21
)
Amortization of inventory step-up
—
363
Impairment of goodwill
2,250
—
Impairment of long-lived assets
120
—
Changes in assets and liabilities, net of
acquisitions:
Trade receivables
(309
)
(214
)
Inventories
(808
)
(230
)
Accounts payable
111
256
Accruals for incentive compensation
(56
)
43
Other current payables and accrued
expenses
202
99
Other assets/liabilities, net
(152
)
(113
)
Net cash provided by operating
activities
189
1,126
Cash flows from investing
activities:
Cash paid for acquisitions, net of cash
received
(110
)
—
Additions to property, plant and
equipment
(344
)
(242
)
Additions to intangible assets
(2
)
(4
)
Proceeds from disposal of assets
1
13
Cash provided by the Merger with
N&B
11
193
Proceeds from unwinding of derivative
instruments
173
—
Net proceeds received from business
divestiture
1,158
115
Net cash provided by investing
activities
887
75
Cash flows from financing
activities:
Cash dividends paid to shareholders
(604
)
(466
)
Increase (decrease) in revolving credit
facility and short-term borrowings
2
(105
)
Proceeds from issuance of commercial paper
(maturities after three months)
160
—
Repayments of commercial paper (maturities
after three months)
(235
)
—
Net (repayments) borrowings of commercial
paper (maturities less than three months)
(52
)
200
Repayments of long-term debt
(300
)
(628
)
Contingent consideration paid
—
(14
)
Purchases of redeemable noncontrolling
interest
(39
)
—
Purchases of noncontrolling interest
(6
)
—
Proceeds from issuance of long-term
debt
—
3
Proceeds from issuance of stock in
connection with stock options
7
8
Employee withholding taxes paid
(20
)
(20
)
Net cash used in financing activities
(1,087
)
(1,022
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(150
)
(44
)
Net change in cash, cash equivalents
and restricted cash
(161
)
135
Cash, cash equivalents and restricted cash
at beginning of year
716
660
Cash, cash equivalents and restricted
cash at end of period
$
555
$
795
The following table reconciles cash, cash equivalents and
restricted cash between the Company's statement of cash flows for
the periods ended September 30, 2022 and September 30, 2021 to the
amounts reported on the Company's balance sheet:
AMOUNTS IN MILLIONS
September 30, 2022
December 31, 2021
September 30, 2021
December 31, 2020
Current assets
Cash and cash equivalents
$
538
$
711
$
672
$
650
Restricted cash
10
4
122
7
Noncurrent assets
Restricted cash included in Other
assets
7
1
1
3
Cash, cash equivalents and restricted
cash
$
555
$
716
$
795
$
660
International Flavors & Fragrances
Inc. Reportable Segment Performance (Amounts in
millions) (Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Net Sales
Nourish
$
1,703
$
1,662
$
5,252
$
4,638
Health & Biosciences
512
618
1,838
1,683
Scent
591
580
1,756
1,699
Pharma Solutions
257
211
750
605
Consolidated
$
3,063
$
3,071
$
9,596
$
8,625
Segment Adjusted Operating
EBITDA
Nourish
$
287
$
327
$
981
$
921
Health & Biosciences
137
151
513
469
Scent
119
130
328
375
Pharma Solutions
69
40
192
131
Total
612
648
2,014
1,896
Depreciation & Amortization
(293
)
(297
)
(897
)
(861
)
Interest Expense
(83
)
(74
)
(232
)
(216
)
Other Income, net
33
26
43
44
Acquisition Related Costs
(1
)
—
(2
)
—
Restructuring and Other Charges
4
(6
)
(5
)
(34
)
Gains on sales of fixed assets
—
1
2
1
Impairment of Goodwill
(2,250
)
—
(2,250
)
—
Impairment of Long-Lived Assets
—
—
(120
)
—
Shareholder Activism Related Costs
—
—
(3
)
(7
)
Business Divestiture Costs
(31
)
(16
)
(91
)
(21
)
Employee Separation Costs
—
(22
)
(4
)
(28
)
Global Shared Services Implementation
Costs
(1
)
—
(1
)
—
Frutarom Acquisition Related Costs
—
—
(1
)
—
N&B Inventory Step-Up Costs
—
14
—
(363
)
N&B Transaction Related Costs
—
—
—
(91
)
Integration Related Costs
(25
)
(24
)
(73
)
(80
)
(Loss) Income Before Taxes
$
(2,035
)
$
250
$
(1,620
)
$
240
Segment Adjusted Operating EBITDA
Margin
Nourish
16.9
%
19.7
%
18.7
%
19.9
%
Health & Biosciences
26.8
%
24.4
%
27.9
%
27.9
%
Scent
20.1
%
22.4
%
18.7
%
22.1
%
Pharma Solutions
26.8
%
19.0
%
25.6
%
21.7
%
Consolidated
20.0
%
21.1
%
21.0
%
22.0
%
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
Third Quarter
(DOLLARS IN
MILLIONS)
2022
2021
Reported (GAAP)
$
1,001
$
1,090
Employee Separation Costs (d)
—
1
N&B Inventory Step-Up Costs
—
(14
)
Integration Related Costs (g)
—
3
Adjusted (Non-GAAP)
$
1,001
$
1,080
Reconciliation of Selling and
Administrative Expenses
Third Quarter
(DOLLARS IN
MILLIONS)
2022
2021
Reported (GAAP)
$
413
$
436
Acquisition Related Costs (a)
(1
)
—
Business Divestiture Costs (c)
(31
)
(16
)
Employee Separation Costs (d)
—
(20
)
Global Shared Services Implementation
Costs (e)
(1
)
—
Integration Related Costs (g)
(25
)
(21
)
Adjusted (Non-GAAP)
$
355
$
379
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 (Loss)
Income and EPS
Third Quarter
2022
2021
(DOLLARS IN MILLIONS
EXCEPT PER SHARE AMOUNTS)
(Loss)
Income
before
taxes
Provision
for income
taxes (i)
Net (Loss)
Income
Attributable
to IFF (j)
Diluted
EPS (k)
Income
before
taxes
Provision
for income
taxes (i)
Net Income
Attributable
to IFF (j)
Diluted
EPS (k)
Reported (GAAP)
$
(2,035
)
$
160
$
(2,197
)
$
(8.60
)
$
250
$
53
$
194
$
0.76
Acquisition Related Costs (a)
1
1
—
—
—
—
—
—
Restructuring and Other Charges
(4
)
(1
)
(3
)
(0.01
)
6
1
5
0.02
Gains on Sale of Assets
—
—
—
—
(1
)
—
(1
)
—
Impairment of Goodwill (b)
2,250
—
2,250
8.81
—
—
—
—
Business Divestiture Costs (c)
31
(12
)
43
0.16
16
4
12
0.05
Gains on Business Disposal
(14
)
(110
)
96
0.38
—
—
—
—
Employee Separation Costs (d)
—
—
—
—
22
1
21
0.08
Global Shared Services Implementation
Costs (e)
1
—
1
—
—
—
—
—
Pension Income Adjustment (f)
—
—
—
—
(17
)
(4
)
(13
)
(0.05
)
N&B Inventory Step-Up Costs
—
—
—
—
(14
)
(3
)
(11
)
(0.04
)
Integration Related Costs (g)
25
6
19
0.07
24
5
19
0.07
Redemption value adjustment to EPS (h)
—
—
—
(0.01
)
—
—
—
—
Adjusted (Non-GAAP)
$
255
$
44
$
209
$
0.82
$
286
$
57
$
226
$
0.88
Reconciliation of Adjusted
(Non-GAAP) EPS ex. Amortization
Third Quarter
(DOLLARS AND SHARE
AMOUNTS IN MILLIONS)
2022
2021
Numerator
Adjusted (Non-GAAP) Net Income
$
209
$
226
Amortization of Acquisition related
Intangible Assets
182
195
Tax impact on Amortization of Acquisition
related Intangible Assets (i)
44
44
Amortization of Acquisition related
Intangible Assets, net of tax (l)
138
151
Adjusted (Non-GAAP) Net Income ex.
Amortization
$
347
$
377
Denominator
Weighted average shares assuming dilution
(diluted)
255
255
Adjusted (Non-GAAP) EPS ex.
Amortization
$
1.36
$
1.47
(a)
Represents costs related to the
acquisition of Health Wright Products, primarily consulting and
legal fees.
(b)
Represents costs related to the
impairment of goodwill in the Health & Biosciences reporting
unit.
(c)
Represents costs related to the
Company's planned sales of businesses, primarily legal and
professional fees.
(d)
Represents costs related to
severance, including accelerated stock compensation expense, for
certain employees and executives who have been separated or will
separate from the Company.
(e)
Represents costs related to the
Company's efforts of restructuring the Global Shared Services
Centers, primarily consulting fees.
(f)
Represents catch-up of net
pension income from prior periods that had been excluded from their
respective periods.
(g)
Represents costs related to
integration activities since 2018, primarily for Frutarom and
N&B. For 2022, represents costs primarily related to external
consulting fees and internal integration costs, including salaries
of individuals who are fully dedicated to integration efforts. For
2021, represents costs primarily related to performance stock
awards and consulting fees for advisory services.
(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 effects of
non-GAAP adjustments are calculated based on the applicable
statutory tax rate for the relevant jurisdiction, except for those
items which are non-taxable or subject to valuation allowances for
which the tax expense (benefit) was calculated at 0%. The tax
benefit for amortization is calculated in a similar manner as the
tax effects of the non-GAAP adjustments.
(j)
For 2022, net loss is increased
by income attributable to noncontrolling interest of $2 million.
For 2021, net income is reduced by income attributable to
noncontrolling interest of $3 million.
(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.
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
Third Quarter
Year-to-Date
(DOLLARS IN
MILLIONS)
2022
2021
Reported (GAAP)
$
3,282
$
2,754
Employee Separation Costs (f)
—
1
N&B Inventory Step-Up Costs
—
363
Integration Related Costs (k)
2
3
Adjusted (Non-GAAP)
$
3,284
$
3,121
Reconciliation of Selling and
Administrative Expenses
Third Quarter
Year-to-Date
(DOLLARS IN
MILLIONS)
2022
2021
Reported (GAAP)
$
1,328
$
1,299
Acquisition Related Costs (a)
(2
)
—
Restructuring and Other Charges
—
(1
)
Shareholder Activism Related Costs (d)
(3
)
(7
)
Business Divestiture Costs (e)
(91
)
(21
)
Employee Separation Costs (f)
(4
)
(26
)
Global Shared Services Implementation
Costs (g)
(1
)
—
Frutarom Acquisition Related Costs (i)
(1
)
—
N&B Transaction Related Costs (j)
—
(91
)
Integration Related Costs (k)
(71
)
(76
)
Adjusted (Non-GAAP)
$
1,155
$
1,077
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 (Loss)
Income and EPS
Third Quarter
Year-to-Date
2022
2021
(DOLLARS IN MILLIONS
EXCEPT PER SHARE AMOUNTS)
(Loss)
Income
before
taxes
Provision
for income
taxes (m)
Net (Loss)
Income
Attributable
to IFF (n)
Diluted
EPS (o)
Income
before
taxes
Provision
for income
taxes (m)
Net Income
Attributable
to IFF (n)
Diluted
EPS (o)
Reported (GAAP)
$
(1,620
)
$
220
$
(1,846
)
$
(7.22
)
$
240
$
53
$
180
$
0.75
Acquisition Related Costs (a)
2
1
1
—
—
—
—
—
Restructuring and Other Charges
5
1
4
0.02
34
7
27
0.11
Gains on Sale of Assets
(2
)
(1
)
(1
)
(0.01
)
(1
)
—
(1
)
—
Impairment of Goodwill (b)
2,250
—
2,250
8.81
—
—
—
—
Impairment of Long-Lived Assets (c)
120
24
96
0.38
—
—
—
—
Shareholder Activism Related Costs (d)
3
1
2
0.01
7
2
5
0.02
Business Divestiture Costs (e)
91
3
88
0.34
21
5
16
0.07
Gains on Business Disposal
(14
)
(110
)
96
0.38
—
—
—
—
Employee Separation Costs (f)
4
1
3
0.01
28
2
26
0.11
Global Shared Services Implementation
Costs (g)
1
—
1
—
—
—
—
—
Pension Income Adjustment (h)
—
—
—
—
(17
)
(4
)
(13
)
(0.05
)
Frutarom Acquisition Related Costs (i)
1
—
1
—
—
—
—
—
N&B Inventory Step-Up Costs
—
—
—
—
363
79
284
1.19
N&B Transaction Related Costs (j)
—
—
—
—
91
19
72
0.30
Integration Related Costs (k)
73
18
55
0.21
80
18
62
0.26
Redemption value adjustment to EPS (l)
—
—
—
(0.01
)
—
—
—
0.01
Adjusted (Non-GAAP)
$
914
$
158
$
750
$
2.94
$
846
$
181
$
658
$
2.75
Reconciliation of Adjusted
(Non-GAAP) EPS ex. Amortization
Third Quarter
Year-to-Date
(DOLLARS AND SHARE
AMOUNTS IN MILLIONS)
2022
2021
Numerator
Adjusted (Non-GAAP) Net Income
$
750
$
658
Amortization of Acquisition related
Intangible Assets
552
547
Tax impact on Amortization of Acquisition
related Intangible Assets (m)
130
113
Amortization of Acquisition related
Intangible Assets, net of tax (p)
422
434
Adjusted (Non-GAAP) Net Income ex.
Amortization
$
1,172
$
1,092
Denominator
Weighted average shares assuming dilution
(diluted)
255
239
Adjusted (Non-GAAP) EPS ex.
Amortization
$
4.59
$
4.56
(a)
Represents costs related to the
acquisition of Health Wright Products, primarily consulting and
legal fees.
(b)
Represents costs related to the
impairment of goodwill in the Health & Biosciences reporting
unit.
(c)
Represents costs related to the
impairment of intangible and fixed assets of an asset group that
operates primarily in Russia.
(d)
Represents shareholder activist
related costs, primarily professional fees.
(e)
Represents costs related to the
Company's planned sales of businesses, primarily legal and
professional fees.
(f)
Represents costs related to
severance, including accelerated stock compensation expense, for
certain employees and executives who have been separated or will
separate from the Company.
(g)
Represents costs related to the
Company's efforts of restructuring the Global Shared Services
Centers, primarily consulting fees.
(h)
Represents catch-up of net
pension income from prior periods that had been excluded from their
respective periods.
(i)
Represents transaction-related
costs and expenses related to the acquisition of Frutarom.
(j)
Represents transaction costs and
expenses related to the transaction with N&B, primarily legal
and professional fees.
(k)
Represents costs related to
integration activities since 2018, primarily for Frutarom and
N&B. For 2022, represents costs primarily related to external
consulting fees and internal integration costs, including salaries
of individuals who are fully dedicated to integration efforts. For
2021, represents costs primarily related to performance stock
awards and consulting fees for advisory services.
(l)
Represents the adjustment to EPS
related to the excess of the redemption value of certain redeemable
noncontrolling interests over their existing carrying value.
(m)
The income tax effects of
non-GAAP adjustments are calculated based on the applicable
statutory tax rate for the relevant jurisdiction, except for those
items which are non-taxable or subject to valuation allowances for
which the tax expense (benefit) was calculated at 0%. The tax
benefit for amortization is calculated in a similar manner as the
tax effects of the non-GAAP adjustments.
(n)
For 2022, net loss is increased
by income attributable to noncontrolling interest of $6 million.
For 2021, net income is reduced by income attributable to
noncontrolling interest of $7 million.
(o)
The sum of these items does not
foot due to rounding.
(p)
Represents all amortization of
intangible assets acquired in connection with acquisitions, net of
tax.
International Flavors & Fragrances
Inc. Debt Covenants (Amounts in millions)
(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 Credit
Adjusted EBITDA to Net Loss
(DOLLARS IN
MILLIONS)
Twelve Months Ended
September 30, 2022
Net loss
$
(1,756
)
Interest expense
305
Income taxes
242
Depreciation and amortization
1,192
Specified items(1)
2,613
Non-cash items(2)
18
Credit Adjusted EBITDA
$
2,614
_______________________
(1)
Specified items for the 12 months ended September 30, 2022 of
$2.613 billion consisted of acquisition related costs,
restructuring and other charges, impairment of goodwill, impairment
of long-lived assets, shareholder activism related costs, business
divestiture costs, employee separation costs, Global Shared
Services implementation costs, pension settlement, Frutarom
acquisition related costs, N&B inventory step-up costs and
integration related costs.
(2)
Non-cash items represent all other adjustments to reconcile net
(loss) income to net cash provided by operations as presented on
the Statements of Cash Flows, including gains on disposal of
assets, gains on business disposal and stock-based
compensation.
Net Debt to Total Debt
(DOLLARS IN
MILLIONS)
September 30, 2022
Total debt(1)
$
10,812
Adjustments:
Cash and cash equivalents
538
Net debt
$
10,274
_______________________
(1)
Total debt used for the
calculation of net debt consists of short-term debt, long-term
debt, short-term finance lease obligations and long-term finance
lease obligations.
International Flavors & Fragrances
Inc. Comparable Reportable Segment Performance
(Amounts in millions) (Unaudited)
The following information and schedule provides
reconciliation information between reported GAAP amounts and
non-GAAP certain adjusted amounts. This information and schedule is
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.
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Net Sales
Nourish(1)
$
1,703
$
1,645
$
5,252
$
4,832
Health & Biosciences(2)
495
510
1,795
1,764
Scent
591
580
1,756
1,699
Pharma Solutions
257
211
750
676
Consolidated
$
3,046
$
2,946
$
9,553
$
8,971
Segment Adjusted Operating
EBITDA
Nourish(1)
$
287
$
325
$
981
$
950
Health & Biosciences(2)
139
149
513
520
Scent
119
130
328
375
Pharma Solutions
69
40
192
148
Total
614
644
2,014
1,993
Depreciation & Amortization
(293
)
(297
)
(897
)
(861
)
Interest Expense
(83
)
(74
)
(232
)
(216
)
Other Income, net
33
26
43
44
Acquisition Related Costs
(1
)
—
(2
)
—
Restructuring and Other Charges
4
(6
)
(5
)
(34
)
Gains on sales of fixed assets
—
1
2
1
Impairment of Goodwill
(2,250
)
—
(2,250
)
—
Impairment of Long-Lived Assets
—
—
(120
)
—
Shareholder Activism Related Costs
—
—
(3
)
(7
)
Business Divestiture Costs
(31
)
(16
)
(91
)
(21
)
Employee Separation Costs
—
(22
)
(4
)
(28
)
Global Shared Services Implementation
Costs
(1
)
—
(1
)
—
Frutarom Acquisition Related Costs
—
—
(1
)
—
N&B Inventory Step-Up Costs
—
14
—
(363
)
N&B Transaction Related Costs
—
—
—
(91
)
Integration Related Costs
(25
)
(24
)
(73
)
(80
)
Impact of Business Divestitures(3)
—
4
—
10
Impact of Business Acquisitions(4)
(2
)
—
—
—
Impact of Merger with N&B(5)
—
—
—
(107
)
(Loss) Income Before Taxes
$
(2,035
)
$
250
$
(1,620
)
$
240
Segment Adjusted Operating EBITDA
Margin
Nourish
16.9
%
19.8
%
18.7
%
19.7
%
Health & Biosciences
28.1
%
29.2
%
28.6
%
29.5
%
Scent
20.1
%
22.4
%
18.7
%
22.1
%
Pharma Solutions
26.8
%
19.0
%
25.6
%
21.9
%
Consolidated
20.2
%
21.9
%
21.1
%
22.2
%
______________________
(1)
Nourish sales and segment
adjusted operating EBITDA information for the three and nine months
ended September 30, 2021 exclude the results of the Fruit
Preparation business to present fully comparable scenarios of the
Company due to divestiture of the business in the fourth quarter of
2021. As a result, there is no impact of the Fruit Preparation
business for the 2022 period.
(2)
Health & Biosciences sales
and segment adjusted operating EBITDA information for the three and
nine months ended September 30, 2022 exclude the results of Health
Wright Products and for the three and nine months ended September
30, 2021 exclude the results of the Microbial Control business unit
to present fully comparable scenarios of the Company as the
acquisition of Health Wright Products was completed on April 1,
2022 and the divestiture of the Microbial Control business unit was
completed on July 1, 2022. As a result, there was no impact from
Health Wright Products and the Microbial Control business unit for
the 2021 and 2022 periods, respectively.
(3)
Information related to the
amounts exclude the results of the Fruit Preparation business and
Microbial Control business unit to present fully comparable
scenarios of the Company due to divestiture of the businesses in
the fourth quarter of 2021 and third quarter of 2022,
respectively.
(4)
Information related to the
amounts exclude the results of Health Wright Products to present
fully comparable scenarios of the Company as the acquisition of
Health Wright Products was completed on April 1, 2022.
(5)
Information related to the
amounts included from merger with N&B was received directly
from DuPont and management believes such information is reliable.
DuPont has not provided the underlying adjustments for the amounts
included, but based on management's review of financial statement
and other scheduled information provided, we believe the amounts
reflected are reasonable. For the nine months ended September 30,
2021, amounts include N&B results for January 2021 to reflect
the same period N&B is included in IFF results in 2022.
The pro forma historical segment information has been presented
for informational purposes only and is not necessarily indicative
of what IFF's results of operations actually would have been, had
the N&B transaction occurred on the date indicated below. In
addition, the pro forma historical segment information does not
purport to project the future operating results of the Company,
shown below:
(DOLLARS IN
MILLIONS)
January 2021
Pro Forma Sales
Pro Forma Adjusted
Operating EBITDA
Nourish
$
247
$
37
Health & Biosciences
189
53
Scent
—
—
Pharma Solutions
71
17
International Flavors & Fragrances
Inc. GAAP to Non-GAAP Reconciliation Comparable
Foreign Exchange Impact (Unaudited)
Q3
Nourish
Sales
Segment Adjusted
Operating EBITDA
Segment Adjusted
Operating EBITDA
Margin
% Change - Comparable
4%
(12)%
(2.9)%
Currency Impact
6%
8%
0.4%
% Change - Currency Neutral
10%
(4)%
(2.5)%
Q3 Health &
Biosciences
Sales
Segment Adjusted
Operating EBITDA
Segment Adjusted
Operating EBITDA
Margin
% Change - Comparable
(3)%
(7)%
(1.1)%
Currency Impact
6%
6%
0.0%
% Change - Currency Neutral
3%
(1)%
(1.1)%
Q3 Scent
Sales
Segment Adjusted
Operating EBITDA
Segment Adjusted
Operating EBITDA
Margin
% Change - Comparable
2%
(8)%
(2.3)%
Currency Impact
7%
11%
1.2%
% Change - Currency Neutral
9%
3%
(1.1)%
Q3 Pharma
Solutions
Sales
Segment Adjusted
Operating EBITDA
Segment Adjusted
Operating EBITDA
Margin
% Change - Comparable
22%
73%
7.9%
Currency Impact
6%
3%
(0.7)%
% Change - Currency Neutral
28%
76%
7.2%
Q3
Consolidated
Sales
Adjusted Operating
EBITDA
Adjusted Operating
EBITDA Margin
% Change - Comparable
3%
(5)%
(1.7)%
Currency Impact
7%
8%
0.4%
% Change - Currency Neutral
10%
3%
(1.3)%
YTD
Nourish
Sales
Segment Adjusted
Operating EBITDA
Segment Adjusted
Operating EBITDA
Margin
% Change - Comparable
9%
3%
(1.0)%
Currency Impact
4%
6%
0.2%
% Change - Currency Neutral
13%
9%
(0.8)%
YTD Health &
Biosciences
Sales
Segment Adjusted
Operating EBITDA
Segment Adjusted
Operating EBITDA
Margin
% Change - Comparable
2%
(1)%
(0.9)%
Currency Impact
4%
3%
(0.1)%
% Change - Currency Neutral
6%
2%
(1.0)%
YTD Scent
Sales
Segment Adjusted
Operating EBITDA
Segment Adjusted
Operating EBITDA
Margin
% Change - Comparable
3%
(13)%
(3.4)%
Currency Impact
5%
8%
0.7%
% Change - Currency Neutral
8%
(5)%
(2.7)%
YTD Pharma
Solutions
Sales
Segment Adjusted
Operating EBITDA
Segment Adjusted
Operating EBITDA
Margin
% Change - Comparable
11%
30%
3.7%
Currency Impact
4%
3%
(0.4)%
% Change - Currency Neutral
15%
33%
3.3%
YTD
Consolidated
Sales
Adjusted Operating
EBITDA
Adjusted Operating
EBITDA Margin
% Change - Comparable
6%
1%
(1.1)%
Currency Impact
5%
5%
0.2%
% Change - Currency Neutral
11%
6%
(0.9)%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221107005814/en/
Michael DeVeau Chief Investor Relations & Communications
Officer 212.708.7164 Michael.DeVeau@iff.com
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