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Share Name | Share Symbol | Market | Type |
---|---|---|---|
International Flavors and Fragrances Inc | NYSE:IFF | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-1.11 | -1.29% | 84.65 | 85.90 | 84.50 | 85.30 | 1,669,501 | 01:00:00 |
Achieved strong sales performance in Q2; Reconfirms full year 2017 financial guidance
Regulatory News:
This Smart News Release features multimedia. View the full release here: http://www.businesswire.com/news/home/20170808006434/en/
International Flavors & Fragrances Inc. (NYSE:IFF) (Euronext Paris: IFF), a leading innovator of sensory experiences that move the world, reported financial results and strategic achievements for the second quarter ended June 30, 2017.
Q2 2017 Consolidated Summary: Change vs. Prior Year
Reported (GAAP) Adjusted (Non-GAAP)¹ Currency Neutral (Non-GAAP)¹ SalesOperatingProfit
EPS SalesOperatingProfit
EPS SalesOperatingProfit
EPS Consolidated 6% (3)% (5)% 6% 4% 2% 8% 6% 8% Acquisition Impact 6% 4% 5% 6% 4% 5% 6% 4% 4%¹ Schedules at the end of this release contain reconciliations of reported GAAP to non-GAAP metrics.
Management Commentary
“Our second quarter results finished in line with our expectations, with improved trends across several of our key financial metrics,” said IFF Chairman and CEO Andreas Fibig. “We continued to advance our strategy as we drove innovation, executed our productivity programs, and benefited from acquisitions. These improvements reflect significant efforts across our entire organization as we implement our long-term strategy and generate strong returns for our shareholders.”
Mr. Fibig continued, “Looking forward, we expect second half performance to see improved year-over-year organic sales growth and additional savings related to the productivity program we announced earlier this year. For the full year, we remain optimistic that we can achieve our previously stated currency neutral guidance.”
Second Quarter 2017 Consolidated Financial Highlights
Second Quarter 2017 Strategic Highlights
Innovating Firsts: strengthen position and drive differentiation in priority R&D platforms
Win Where We Compete: achieve market leadership position in key markets, categories & customers
Become Our Customers’ Partner of Choice: attain commercial excellence
Strengthen and Expand the Portfolio: pursue value creation through collaborations & acquisitions
Second Quarter 2017 Segment Summary: Growth vs. Prior Year
Reported (GAAP) Currency Neutral (Non-GAAP) Sales Segment Profit Sales Segment Profit Fragrances: 4% (3)% 5% (3)% Acquisition Impact 4% 0% 4% 0% Flavors: 9% 11% 11% 14% Acquisition Impact 7% 7% 8% 8%Fragrances Business Unit
Flavors Business Unit
FY 2017 Financial Guidance: Percent Change vs. Prior Year
The Company’s current full year 2017 guidance:
Currency Neutral FX Impact1 Adjusted2 Sales 7.5% - 8.5% ~(1.0)% 6.5% - 7.5% Operating Profit 5.5% - 6.5% ~(1.5)% 4.0% - 5.0% EPS 6.5% - 7.5% ~(2.5)% 4.0% - 5.0%1 See Use of Non-GAAP Financial Measures2 Excludes items impacting comparability
A copy of the Company’s Quarterly Report on Form 10-Q will be available on its website at www.iff.com or at sec.gov by August 9, 2017.
Audio Webcast
A live webcast to discuss the Company’s second quarter financial results will be held on August 9, 2017, at 10:00 a.m. EDT. Investors may access the webcast and accompanying slide presentation on the Company's IR website at ir.iff.com. For those unable to listen to the live webcast, a recorded version will be made available on the Company's website approximately one hour after the event and will remain available on IFF’s website for one year.
Cautionary Statement Under The Private Securities Litigation Reform Act of 1995
This press release includes “forward-looking statements” under the Federal Private Securities Litigation Reform Act of 1995, including statements regarding our outlook for fiscal year 2017, the expected impact of and benefits from productivity initiatives and the impact of our actions on long-term value creation for our customers and shareholders. These forward-looking statements are qualified in their entirety by cautionary statements and risk factor disclosures contained in the Company’s Securities and Exchange Commission filings, including the Company’s Annual Report on Form 10-K filed with the Commission on February 28, 2017. The Company wishes to caution readers that certain important factors may have affected and could in the future affect the Company’s actual results and could cause the Company’s actual results for subsequent periods to differ materially from those expressed in any forward-looking statements made by or on behalf of the Company. With respect to the Company’s expectations regarding these statements, such factors include, but are not limited to: (1) macroeconomic trends affecting the emerging markets; (2) the Company’s ability to implement and adapt its Vision 2020 strategy; (3) the Company’s ability to successfully identify and complete acquisitions in line with its Vision 2020 strategy, and to realize the anticipated benefits of those acquisitions; (4) the Company’s ability to realize the benefits of its productivity initiatives and other optimization activities, (5) the Company’s ability to effectively compete in its market, and to successfully develop new and competitive products that appeal to its customers and consumers; (6) changes in consumer preferences and demand for the Company’s products or a decline in consumer confidence and spending; (7) the Company’s ability to benefit from its investments and expansion in emerging markets; (8) the impact of currency fluctuations or devaluations in the principal foreign markets in which it operates, including the devaluation of the Euro and certain emerging market currencies; (9) the economic and political risks associated with the Company’s international operations, including challenging economic conditions in China and Latin America; (10) the impact of any failure of the Company’s key information technology systems or costs that could be incurred due to a breach of data privacy or information security; (11) the Company’s ability to attract and retain talented employees; (12) the Company’s ability to comply with, and the costs associated with compliance with U.S. and foreign environmental protection laws; (13) volatility and increases in the price of raw materials, energy and transportation; (14) price realization in a rising input cost environment (15) fluctuations in the quality and availability of raw materials; (16) the impact of a disruption in the Company’s supply chain or its relationship with its suppliers; (17) the impact of customer claims or product recalls; (18) any adverse impact on the availability, effectiveness and cost of the Company’s hedging and risk management strategies; (19) the Company’s ability to successfully manage its working capital and inventory balances; (20) uncertainties regarding the outcome of, or funding requirements related to litigation or settlement of pending litigation uncertain tax positions or other contingencies; (21) the effect of legal and regulatory developments, as well as restrictions or costs that may be imposed on the Company or its operations by U.S. and foreign governments; (22) adverse changes in federal, state, local and international tax legislation or policies, including with respect to transfer pricing and state aid, and adverse results of tax audits, assessments, or disputes; and (23) changes in market conditions or governmental regulations relating to our pension and postretirement obligations. New risks emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risks on the Company’s business. Accordingly, the Company undertakes no obligation to publicly revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Use of Non-GAAP Financial Measures
We provide in this press release (i) Currency Neutral Sales, (ii) Adjusted Operating Profit and Currency Neutral Adjusted Operating Profit and (iii) Adjusted EPS and Currency Neutral Adjusted EPS. Currency Neutral Sales eliminate the effects that result from translating its international sales in U.S. dollars. Adjusted Operating Profit and Adjusted EPS exclude (a) restructuring costs, (b) certain other non-operational significant items such as legal charges/credits, gain on sale of assets, operational improvement initiatives, acquisition related costs, integration-related costs and CTA realization and (c) costs associated with product recalls (often referred to as “Items Impacting Comparability”). When we provide our expectations for our currency neutral metrics in our full year 2017 guidance, we estimate the anticipated FX impact by comparing prior year results to the prior year results restated at exchange rates in effect for the current year based on the currency of the underlying transaction. When we provide our expectations for our Adjusted Operating Profit and our Adjusted EPS in our full year 2017 guidance, the closest corresponding GAAP measures (expected reported Operating Profit and EPS) and a reconciliation of the differences between the non-GAAP expectation and the corresponding GAAP measure generally are not available without unreasonable effort due to inherent difficulty of forecasting the timing and amount of reconciling items that would be excluded from the GAAP measure in the relevant future period and the relevant tax impact of such reconciling items on EPS. The variability of the excluded items may have a significant, and potentially unpredictable, impact on our future GAAP results. Currency Neutral Sales, Adjusted Operating Profit, Currency Neutral Adjusted Operating Profit, Adjusted EPS and Currency Neutral Adjusted EPS should not be considered in isolation or as substitutes for analysis of the Company’s results under GAAP and may not be comparable to other companies’ calculation of such metrics.
Meet IFF
International Flavors & Fragrances Inc. (NYSE:IFF) (Euronext Paris: IFF) is a leading innovator of sensorial experiences that move the world. At the heart of our company, we are fueled by a sense of discovery, constantly asking “what if?”. That passion for exploration drives us to co-create unique products that consumers taste, smell, or feel in fine fragrances and beauty, detergents and household goods, as well as beloved foods and beverages. Our 7,400 team members globally take advantage of leading consumer insights, research and development, creative expertise, and customer intimacy to develop differentiated offerings for consumer products. Learn more at www.iff.com, Twitter , Facebook, Instagram, and LinkedIn.
International Flavors & Fragrances Inc. Consolidated Income Statement (Amounts in thousands except per share data) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2017 2016 % Change 2017 2016 % Change Net sales $ 842,861 $ 793,478 6 % $ 1,671,154 $ 1,576,789 6 % Cost of goods sold 468,272 427,837 9 % 931,899 850,940 10 % Gross profit 374,589 365,641 2 % 739,255 725,849 2 % Research and development expenses 70,320 63,252 11 % 140,031 126,637 11 % Selling and administrative expenses 135,910 132,784 2 % 276,240 256,327 8 % Amortization of acquisition-related intangibles 8,494 5,130 66 % 15,561 11,191 39 % Restructuring and other charges, net 791 — 100 % 10,934 — 100 % Gain on sales of fixed assets (68 ) (197 ) (65 )% (89 ) (2,910 ) (97 )% Operating profit 159,142 164,672 (3 )% 296,578 334,604 (11 )% Interest expense 17,556 15,060 17 % 30,363 27,539 10 % Other (income) expense, net (454 ) (2,438 ) (81 )% (14,312 ) 118 (12,229 )% Income before taxes 142,040 152,050 (7 )% 280,527 306,947 (9 )% Taxes on income 32,245 35,317 (9 )% 54,968 71,610 (23 )% Net income $ 109,795 $ 116,733 (6 )% $ 225,559 $ 235,337 (4 )% Earnings per share - basic $ 1.39 $ 1.46 $ 2.85 $ 2.94 Earnings per share - diluted $ 1.38 $ 1.46 $ 2.84 $ 2.93 Average shares outstanding Basic 79,072 79,764 79,088 79,809 Diluted 79,305 80,040 79,360 80,141International Flavors & Fragrances Inc. Condensed Consolidated Balance Sheet (Amounts in thousands) (Unaudited) June 30, December 31, 2017 2016 Cash and cash equivalents $ 491,386 $ 323,992 Receivables 665,511 550,658 Inventories 623,762 592,017 Other current assets 213,267 142,347 Total current assets 1,993,926 1,609,014 Property, plant and equipment, net 811,826 775,716 Goodwill and other intangibles, net 1,571,229 1,365,906 Other assets 241,894 266,348 Total assets $ 4,618,875 $ 4,016,984 Bank borrowings and overdrafts, commercial paper and current portion of long-term debt $ 257,873 $ 258,516 Other current liabilities 603,350 639,781 Total current liabilities 861,223 898,297 Long-term debt 1,636,338 1,066,855 Non-current liabilities 441,228 420,698 Shareholders' equity 1,680,086 1,631,134 Total liabilities and shareholders' equity $ 4,618,875 $ 4,016,984
International Flavors & Fragrances Inc. Consolidated Statement of Cash Flows (Amounts in thousands) (Unaudited) Six Months Ended June 30, 2017 2016 Cash flows from operating activities: Net income $ 225,559 $ 235,337 Adjustments to reconcile to net cash provided by operating activities: Depreciation and amortization 55,805 49,743 Deferred income taxes 1,505 16,543 Gain on disposal of assets (89 ) (2,910 ) Stock-based compensation 12,893 13,774 Pension contributions (31,557 ) (39,510 ) Litigation settlement (56,000 ) — Foreign currency gain on liquidation of entity (12,214 ) — Changes in assets and liabilities, net of acquisitions: Trade receivables (77,580 ) (70,361 ) Inventories (4,228 ) (7,271 ) Accounts payable (23,479 ) (29,167 ) Accruals for incentive compensation (12,316 ) (2,001 ) Other current payables and accrued expenses (3,099 ) 13,400 Other assets 18,007 4,054 Other liabilities (35,286 ) (9,335 ) Net cash provided by operating activities 57,921 172,296 Cash flows from investing activities: Cash paid for acquisitions, net of cash received (191,304 ) — Additions to property, plant and equipment (46,153 ) (43,236 ) Proceeds from life insurance contracts 1,941 — Maturity of net investment hedges 3,016 (641 ) Proceeds from disposal of assets 473 3,630 Net cash used in investing activities (232,027 ) (40,247 ) Cash flows from financing activities: Cash dividends paid to shareholders (101,184 ) (89,463 ) Increase (decrease) in revolving credit facility borrowings and overdrafts 21,595 (138,142 ) Deferred financing costs (5,373 ) (4,796 ) Proceeds from issuance of long-term debt 498,250 555,559 Loss on pre-issuance hedges (5,310 ) (3,244 ) Proceeds from issuance of stock under stock plans 329 494 Employee withholding taxes paid (11,485 ) (13,315 ) Purchase of treasury stock (53,211 ) (71,714 ) Net cash provided by financing activities 343,611 235,379 Effect of exchange rates changes on cash and cash equivalents (2,111 ) (9,424 ) Net change in cash and cash equivalents 167,394 358,004 Cash and cash equivalents at beginning of year 323,992 181,988 Cash and cash equivalents at end of period $ 491,386 $ 539,992
International Flavors & Fragrances Inc. Business Unit Performance (Amounts in thousands) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Net Sales Flavors $ 414,323 $ 379,504 $ 820,487 $ 752,012 Fragrances 428,538 413,974 850,667 824,777 Consolidated 842,861 793,478 1,671,154 1,576,789 Segment Profit Flavors 100,338 90,337 198,346 182,151 Fragrances 84,860 87,596 166,557 176,833 Global Expenses (13,398 ) (12,268 ) (29,594 ) (26,141 ) Restructuring and other charges, net (791 ) (182 ) (10,934 ) (283 ) Acquisition and related costs (6,278 ) (213 ) (15,066 ) (1,249 ) Operational improvement initiative costs (445 ) (831 ) (1,066 ) (1,099 ) Legal (charges) credits (1,000 ) 36 (1,000 ) 1,482 Gain on sales of assets 68 197 89 2,910 Tax assessment 19 — (5,331 ) — Integration-related costs (731 ) — (1,923 ) — Product liability charge (3,500 ) — (3,500 ) — Operating profit 159,142 164,672 296,578 334,604 Interest Expense (17,556 ) (15,060 ) (30,363 ) (27,539 ) Other income (expense), net 454 2,438 14,312 (118 ) Income before taxes $ 142,040 $ 152,050 $ 280,527 $ 306,947 Operating Margin Flavors 24.2 % 23.8 % 24.2 % 24.2 % Fragrances 19.8 % 21.2 % 19.6 % 21.4 % Consolidated 18.9 % 20.8 % 17.7 % 21.2 %
International Flavors & Fragrances Inc. Sales Performance by Region and Category (Unaudited) Second Quarter 2017 vs. Second Quarter 2016 Percentage Change in Sales by Region of Destination Fine
ConsumerFragrances
Ingredients Total Frag. Flavors Total North America Reported 12% 7% 2% 7% 30% 19% EAME Reported 15% 4% 8% 8% 2% 6% Currency Neutral 19% 8% 11% 12% 9% 11% Latin America Reported -5% -5% 35% -2% 13% 3% Currency Neutral -7% -6% 34% -4% 11% 1% Greater Asia Reported 23% -3% 1% -2% -3% -3% Currency Neutral 25% -2% 3% -1% -2% -1% Total Reported 10% 0% 7% 4% 9% 6% Currency Neutral 11% 1% 9% 5% 11% 8% First Six Months 2017 vs. First Six Months 2016 Percentage Change in Sales by Region of Destination FineConsumerFragrances
Ingredients Total Frag. Flavors Total North America Reported 10% 6% -4% 4% 28% 17% EAME Reported 18% 4% 10% 10% 1% 6% Currency Neutral 22% 8% 13% 13% 7% 11% Latin America Reported -9% -7% 25% -5% 11% 0% Currency Neutral -14% -7% 24% -7% 8% -1% Greater Asia Reported 18% 0% -6% 0% -1% 0% Currency Neutral 20% 1% -4% 1% 0% 0% Total Reported 10% 1% 4% 3% 9% 6% Currency Neutral 11% 2% 5% 4% 11% 7%Currency neutral growth is calculated by translating prior year sales at the exchange rates used for the corresponding 2017 period.
International Flavors & Fragrances Inc. GAAP to Non-GAAP Reconciliation Foreign Exchange Impact (Unaudited)Q2 Consolidated
SalesOperatingProfit
EPS % Change - Reported (GAAP) 6 % -3 % -5 % Items Impacting Comparability 0 % 7 % 7 % % Change - Adjusted (Non-GAAP) 6 % 4 % 2 % Currency Impact 2 % 3 % 6 % % Change - Currency Neutral (Adjusted) 8 % 6%* 8 %Q2 Flavors
SalesSegmentProfit
% Change - Reported (GAAP) 9 % 11 % Currency Impact 2 % 3 % % Change - Currency Neutral 11 % 14 %Q2 Fragrances
SalesSegmentProfit
% Change - Reported (GAAP) 4 % -3 % Currency Impact 1 % 0 % % Change - Currency Neutral 5 % -3 %1H Consolidated
SalesOperatingProfit
EPS % Change - Reported (GAAP) 6 % -11 % -3 % Items Impacting Comparability 0 % 12 % 7 % % Change - Adjusted (Non-GAAP) 6 % 1 % 4 % Currency Impact 1 % 4 % 5 % % Change - Currency Neutral (Adjusted) 7 % 5 % 9 %*Item does not foot due to rounding
International Flavors & Fragrances Inc.GAAP to Non-GAAP Reconciliation(Amounts in thousands)(Unaudited)
The following information and schedules provide reconciliation information between reported GAAP amounts and non-GAAP certain adjusted amounts. This information and schedules are not intended as, and should not be viewed as, a substitute for reported GAAP amounts or financial statements of the Company prepared and presented in accordance with GAAP.
Second Quarter 2017 Reconciliation of Non-GAAP Metrics Reconciliation of Gross ProfitReported(GAAP)
OperationalImprovement InitiativeCosts (a)
Acquisition andRelated Costs(b)
Integration related costs(c)
FDA mandatedproduct recall(h)
Adjusted(Non-GAAP)
Gross profit $ 374,589 445 5,606 98 3,500 $ 384,238 Reconciliation of Selling and Administrative ExpensesReported(GAAP)
Acquisition andRelated Costs(b)
Integration relatedcosts (c)
LegalCharges/Credits(d)
Tax Assessment(e)
Adjusted(Non-GAAP)
Selling and Administrative Expenses $ 135,910 (672 ) (542 ) (1,000 ) 19 $ 133,715 Reconciliation of Operating ProfitReported(GAAP)
OperationalImprovement InitiativeCosts (a)
Acquisition RelatedCosts(b)
Integrationrelated costs(c)
LegalCharges/Credits(d)
Tax Assessment(e)
Restructuringand OtherCharges(f)
Gain on Sale ofAsset(g)
FDA mandatedproduct recall(h)
Adjusted(Non-GAAP)
Operating profit $ 159,142 445 6,278 731 1,000 (19 ) 791 (68 ) 3,500 $ 171,800 Reconciliation of Net IncomeReported(GAAP)
OperationalImprovement InitiativeCosts (a)
Acquisition RelatedCosts(b)
Integrationrelated costs(c)
LegalCharges/Credits(d)
Tax Assessment(e)
Restructuringand OtherCharges(f)
Gain on Sale ofAsset(g)
FDA mandatedproduct recall(h)
Adjusted(Non-GAAP)
Income before taxes $ 142,040 445 6,278 731 1,000 (19 ) 791 (68 ) 3,500 $ 154,698 Taxes on income (i) $ 32,245 111 1,472 243 354 (7 ) (75 ) (22 ) 1,238 $ 35,559 Net income $ 109,795 334 4,806 488 646 (12 ) 866 (46 ) 2,262 $ 119,139 Diluted EPS $ 1.38 — 0.06 0.01 0.01 — 0.01 — 0.03 $ 1.50 (a) Represents accelerated depreciation and idle labor costs in Hangzhou, China. (b) Represents the amortization of inventory "step-up" related to the acquisitions of David Michael, Fragrance Resources and PowderPure, included in Cost of goods sold and transaction costs related to the acquisitions of Fragrance Resources and PowderPure, included in Selling and administrative expenses. (c) Represents costs related to the integration of the David Michael and Fragrance Resources acquisitions. (d) Represents additional charge related to litigation settlement. (e) Represents the reversal of a portion of the reserve for payment of a tax assessment related to commercial rent for prior periods. (f) Represents severance costs related to the 2017 Productivity Program which were partially offset by the reversal of 2015 severance charges that were no longer needed. (g) Represents gains on sale of assets. (h) Represents an estimate of the Company's incremental direct costs and customer reimbursement obligations, in excess of the Company's sales value of the recalled products, arising from an FDA mandated recall of consumer products as a result of raw material received and identified by the Company as containing contamination. (The sales value of the recalled products was reserved in the first quarter of 2017). While the Company does not believe that any of the affected raw material was included in its finished products delivered to the customer, as the delivered product included raw material of the same vendor lot that tested positive, the FDA, after being notified by the Company, initiated a recall of all consumer products including raw material from the affected vendor lot due to the potential for product contamination. (i) The income tax expense (benefit) on non-GAAP adjustments is computed in accordance with ASC 740 using the same methodology as the GAAP provision of income taxes. Income tax effects of non-GAAP adjustments are calculated based on the applicable statutory tax rate for each jurisdiction in which such charges were incurred. For the second quarter of 2017, these non-GAAP adjustments were not subject to foreign tax credits or valuation allowances, but to the extent that such factors are applicable to any future non-GAAP adjustments we will take such factors into consideration in calculating the tax expense (benefit). The Company tracks the amount of amortization recorded on recent acquisitions in order to monitor its progress with respect to its Vision 2020 goals. The following amounts were recorded with respect to recent acquisitions: $0.6M related to PowderPure, $1.5M related to Fragrance Resources, $1.1M related to David Michael, $1.9M related to Lucas Meyer and $1.6M related to Ottens Flavors.
International Flavors & Fragrances Inc.GAAP to Non-GAAP Reconciliation(Amounts in thousands)(Unaudited)
The following information and schedules provide reconciliation information between reported GAAP amounts and non-GAAP certain adjusted amounts. This information and schedules are not intended as, and should not be viewed as, a substitute for reported GAAP amounts or financial statements of the Company prepared and presented in accordance with GAAP.
Second Quarter 2016 Reconciliation of Non-GAAP Metrics Reconciliation of Gross ProfitReported(GAAP)
Restructuring andOther Charges(a)
OperationalImprovement InitiativeCosts (b)
Adjusted(Non-GAAP)
Gross profit $ 365,641 182 831 $ 366,654 Reconciliation of Selling and Administrative ExpensesReported(GAAP)
Acquisition andRelated Costs(c)
LegalCharges/Credits(d)
Adjusted(Non-GAAP)
Selling and Administrative Expenses $ 132,784 (213 ) 36 $ 132,607 Reconciliation of Operating ProfitReported(GAAP)
Restructuring andOther Charges(a)
OperationalImprovement InitiativeCosts(b)
AcquisitionRelated Costs(c)
LegalCharges/Credits(d)
Gain on Sale ofAsset(e)
Adjusted(Non-GAAP)
Operating profit $ 164,672 182 831 213 (36 ) (197 ) $ 165,665 Reconciliation of Net IncomeReported(GAAP)
Restructuring andOther Charges(a)
OperationalImprovement InitiativeCosts(b)
AcquisitionRelated Costs(c)
LegalCharges/Credits(d)
Gain on Sale ofAsset(e)
Adjusted(Non-GAAP)
Income before taxes $ 152,050 182 831 213 (36 ) (197 ) $ 153,043 Taxes on income (f) $ 35,317 35 208 (102 ) (9 ) (65 ) $ 35,384 Net income $ 116,733 147 623 315 (27 ) (132 ) $ 117,659 Diluted EPS $ 1.46 — 0.01 — — — $ 1.47 (a) Accelerated depreciation related to restructuring activities. (b) Accelerated depreciation and severance costs in Hangzhou, China. (c) Additional transaction costs related to the acquisition of Lucas Meyer, included in Selling and administrative expenses. (d) Principally related to favorable tax rulings. (e) Principally related to gain on sale of property in Europe. (f) The income tax expense (benefit) on non-GAAP adjustments is computed in accordance with ASC 740 using the same methodology as the GAAP provision of income taxes. Income tax effects of non-GAAP adjustments are calculated based on the applicable statutory tax rate for each jurisdiction in which such charges were incurred. For the second quarter of 2016, these non-GAAP adjustments were not subject to foreign tax credits or valuation allowances, but to the extent that such factors are applicable to any future non-GAAP adjustments we will take such factors into consideration in calculating the tax expense (benefit). The Company tracks the amount of amortization recorded on recent acquisitions in order to monitor its progress with respect to its Vision 2020 goals. The following amounts were recorded with respect to recent acquisitions: $1.7M related to Lucas Meyer and $1.6M related to Ottens Flavors.
International Flavors & Fragrances Inc.GAAP to Non-GAAP Reconciliation(Amounts in thousands)(Unaudited)
The following information and schedules provide reconciliation information between reported GAAP amounts and non-GAAP certain adjusted amounts. This information and schedules are not intended as, and should not be viewed as, a substitute for reported GAAP amounts or financial statements of the Company prepared and presented in accordance with GAAP.
Second Quarter Year-to-Date 2017 Reconciliation of Non-GAAP Metrics Reconciliation of Gross ProfitReported(GAAP)
OperationalImprovementInitiative Costs (a)
Acquisition andRelated Costs(b)
IntegrationRelated costs(c)
FDA mandatedproduct recall (i)
Adjusted(Non-GAAP)
Gross profit $ 739,255 1,066 10,908 186 3,500 $ 754,915 Reconciliation of Selling and Administrative ExpensesReported(GAAP)
Acquisition andRelated Costs(b)
IntegrationRelated costs(c)
LegalCharges/Credits(d)
Tax Assessment(e)
Adjusted(Non-GAAP)
Selling and Administrative Expenses $ 276,240 (4,158 ) (1,485 ) (1,000 ) (5,331 ) $ 264,266 Reconciliation of Operating ProfitReported(GAAP)
OperationalImprovementInitiative Costs(a)
AcquisitionRelated Costs(b)
IntegrationRelated costs(c)
LegalCharges/Credits(d)
Tax Assessment(e)
Restructuringand OtherCharges(f)
Gain on Saleof Asset(g)
FDAmandatedproductrecall (i)
Adjusted(Non-GAAP)
Operating profit $ 296,578 1,066 15,066 1,923 1,000 5,331 10,934 (89 ) 3,500 $ 335,309 Reconciliation of Net IncomeReported(GAAP)
OperationalImprovementInitiative Costs(a)
AcquisitionRelated Costs(b)
IntegrationRelated costs(c)
LegalCharges/Credits(d)
Tax Assessment(e)
Restructuringand OtherCharges(f)
Gain on Saleof Asset(g)
CTARealization(h)
FDA mandatedproduct recall(i)
Adjusted(Non-GAAP)
Income before taxes $ 280,527 1,066 15,066 1,922 1,000 5,331 10,934 (89 ) (12,217 ) 3,500 $ 307,040 Taxes on income (j) $ 54,968 266 4,610 606 354 1,885 2,892 (29 ) — 1,238 $ 66,790 Net income $ 225,559 800 10,456 1,316 646 3,446 8,042 (60 ) (12,217 ) 2,262 $ 240,250 Diluted EPS $ 2.84 0.01 0.13 0.02 0.01 0.04 0.10 — (0.15 ) 0.03 $3.02
*
(a) Represents accelerated depreciation and idle labor costs in Hangzhou, China. (b) Represents the amortization of inventory "step-up" related to the acquisitions of David Michael, Fragrance Resources and PowderPure, included in Cost of goods sold and transaction costs related to the acquisitions of Fragrance Resources and PowderPure, included in Selling and administrative expenses. (c) Represents costs related to the integration of the David Michael and Fragrance Resources acquisitions. (d) Represents additional charge related to litigation settlement. (e) Represents the reserve for payment of a tax assessment related to commercial rent for prior periods. (f) Represents severance costs related to the 2017 Productivity Program which were partially offset by the reversal of 2015 severance charges that were no longer needed. (g) Represents gains on sale of assets. (h) Represents the release of CTA related to the liquidation of a foreign entity. (i) Represents an estimate of the Company's incremental direct costs and customer reimbursement obligations, in excess of the Company's sales value of the recalled products, arising from an FDA mandated recall of consumer products as a result of raw material received and identified by the Company as containing contamination. (The sales value of the recalled products was reserved in the first quarter of 2017). While the Company does not believe that any of the affected raw material was included in its finished products delivered to the customer, as the delivered product included raw material of the same vendor lot that tested positive, the FDA, after being notified by the Company, initiated a recall of all consumer products including raw material from the affected vendor lot due to the potential for product contamination. (j) The income tax expense (benefit) on non-GAAP adjustments is computed in accordance with ASC 740 using the same methodology as the GAAP provision of income taxes. Income tax effects of non-GAAP adjustments are calculated based on the applicable statutory tax rate for each jurisdiction in which such charges were incurred, except for those items which are non-taxable for which the tax expense (benefit) was calculated at 0%. For the first six months of 2017, these non-GAAP adjustments were not subject to foreign tax credits or valuation allowances, but to the extent that such factors are applicable to any future non-GAAP adjustments we will take such factors into consideration in calculating the tax expense (benefit). * Item does not foot due to rounding The Company tracks the amount of amortization recorded on recent acquisitions in order to monitor its progress with respect to its Vision 2020 goals. The following amounts were recorded with respect to recent acquisitions: $0.6M related to PowderPure, $2.8M related to Fragrance Resources, $1.7M related to David Michael, $3.8M related to Lucas Meyer and $3.1M related to Ottens Flavors.
International Flavors & Fragrances Inc.GAAP to Non-GAAP Reconciliation(Amounts in thousands)(Unaudited)
The following information and schedules provide reconciliation information between reported GAAP amounts and non-GAAP certain adjusted amounts. This information and schedules are not intended as, and should not be viewed as, a substitute for reported GAAP amounts or financial statements of the Company prepared and presented in accordance with GAAP.
Second Quarter Year-to-Date 2016 Reconciliation of Non-GAAP Metrics Reconciliation of Gross ProfitReported(GAAP)
Restructuring andOther Charges(a)
OperationalImprovementInitiative Costs(b)
Acquisition andRelated Costs(c)
Adjusted(Non-GAAP)
Gross profit $ 725,849 283 1,099 889 $ 728,120 Reconciliation of Selling and Administrative ExpensesReported(GAAP)
Acquisition andRelated Costs(c)
LegalCharges/Credits(d)
Adjusted(Non-GAAP)
Selling and Administrative Expenses $ 256,327 (360 ) 1,482 $ 257,449 Reconciliation of Operating ProfitReported(GAAP)
Restructuring andOther Charges(a)
OperationalImprovementInitiative Costs(b)
AcquisitionRelated Costs(c)
LegalCharges/Credits(d)
Gain on Sale ofAsset(e)
Adjusted(Non-GAAP)
Operating profit $ 334,604 283 1,099 1,249 (1,482 ) (2,910 ) $ 332,843 Reconciliation of Net IncomeReported(GAAP)
Restructuring andOther Charges(a)
OperationalImprovementInitiative Costs(b)
AcquisitionRelated Costs(c)
LegalCharges/Credits(d)
Gain on Sale ofAsset(e)
Adjusted(Non-GAAP)
Income before taxes $ 306,947 283 1,099 1,249 (1,482 ) (2,910 ) $ 305,186 Taxes on income (f) $ 71,610 54 275 266 (411 ) (637 ) $ 71,157 Net income $ 235,337 229 824 983 (1,071 ) (2,273 ) $ 234,029 Diluted EPS $ 2.93 — 0.01 0.01 (0.01 ) (0.03 ) $ 2.91 (a) Accelerated depreciation related to restructuring activities. (b) Accelerated depreciation and severance costs in Hangzhou, China. (c) Expense related to the amortization of inventory step-up, included in Cost of goods sold, and additional transaction costs related to the acquisition of Lucas Meyer, included in Selling and administrative expenses. (d) Settlements due to favorable tax rulings in jurisdictions for which reserves were previously recorded for ongoing tax disputes. (e) Principally related to gain on sale of property in Europe. (f) The income tax expense (benefit) on non-GAAP adjustments is computed in accordance with ASC 740 using the same methodology as the GAAP provision of income taxes. Income tax effects of non-GAAP adjustments are calculated based on the applicable statutory tax rate for each jurisdiction in which such charges were incurred. For the first six months of 2016, these non-GAAP adjustments were not subject to foreign tax credits or valuation allowances, but to the extent that such factors are applicable to any future non-GAAP adjustments we will take such factors into consideration in calculating the tax expense (benefit). The Company tracks the amount of amortization recorded on recent acquisitions in order to monitor its progress with respect to its Vision 2020 goals. The following amounts were recorded with respect to recent acquisitions: $4.3M related to Lucas Meyer and $3.2M related to Ottens Flavors.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170808006434/en/
International Flavors & Fragrances Inc.Michael DeVeau, 212-708-7164VP, Corporate Strategy, Investor Relations & CommunicationsMichael.DeVeau@iff.com
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