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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 | |
---|---|---|---|---|---|---|---|---|
-0.17 | -0.20% | 86.64 | 87.71 | 85.91 | 87.09 | 1,501,753 | 01:00:00 |
þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
New York
|
|
13-1432060
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
Large accelerated filer
|
|
þ
|
Accelerated filer
|
¨
|
|
|
|
|
|
Non-accelerated filer
|
|
¨
|
Smaller reporting company
|
¨
|
|
|
|
Emerging growth company
|
¨
|
|
|
September 30, 2017
|
|
December 31, 2016
|
||||
ASSETS
|
|
|
|
|
||||
Current Assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
316,002
|
|
|
$
|
323,992
|
|
Trade receivables (net of allowances of $14,258 and $9,995, respectively)
|
|
691,239
|
|
|
550,658
|
|
||
Inventories: Raw materials
|
|
303,296
|
|
|
288,629
|
|
||
Work in process
|
|
15,724
|
|
|
13,792
|
|
||
Finished goods
|
|
300,496
|
|
|
289,596
|
|
||
Total Inventories
|
|
619,516
|
|
|
592,017
|
|
||
Prepaid expenses and other current assets
|
|
222,990
|
|
|
142,347
|
|
||
Total Current Assets
|
|
1,849,747
|
|
|
1,609,014
|
|
||
Property, plant and equipment, at cost
|
|
2,073,149
|
|
|
1,913,333
|
|
||
Accumulated depreciation
|
|
(1,244,557
|
)
|
|
(1,137,617
|
)
|
||
|
|
828,592
|
|
|
775,716
|
|
||
Goodwill
|
|
1,153,619
|
|
|
1,000,123
|
|
||
Other intangible assets, net
|
|
424,138
|
|
|
365,783
|
|
||
Deferred income taxes
|
|
158,094
|
|
|
138,636
|
|
||
Other assets
|
|
106,248
|
|
|
127,712
|
|
||
Total Assets
|
|
$
|
4,520,438
|
|
|
$
|
4,016,984
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
||||
Current Liabilities:
|
|
|
|
|
||||
Bank borrowings and overdrafts and current portion of long-term debt
|
|
$
|
7,888
|
|
|
$
|
258,516
|
|
Commercial paper
|
|
39,957
|
|
|
—
|
|
||
Accounts payable
|
|
271,194
|
|
|
274,815
|
|
||
Accrued payroll and bonus
|
|
74,488
|
|
|
64,357
|
|
||
Dividends payable
|
|
54,440
|
|
|
50,678
|
|
||
Other current liabilities
|
|
248,160
|
|
|
249,931
|
|
||
Total Current Liabilities
|
|
696,127
|
|
|
898,297
|
|
||
Long-term debt
|
|
1,625,502
|
|
|
1,066,855
|
|
||
Deferred gains
|
|
37,975
|
|
|
39,816
|
|
||
Retirement liabilities
|
|
241,563
|
|
|
243,407
|
|
||
Other liabilities
|
|
156,783
|
|
|
137,475
|
|
||
Total Other Liabilities
|
|
2,061,823
|
|
|
1,487,553
|
|
||
Commitments and Contingencies (Note 13)
|
|
|
|
|
||||
Shareholders’ Equity:
|
|
|
|
|
||||
Common stock 12 1/2¢ par value; authorized 500,000,000 shares; issued 115,858,190 shares as of September 30, 2017 and December 31, 2016 and outstanding 78,977,158 and 79,213,037 shares as of September 30, 2017 and December 31, 2016
|
|
14,470
|
|
|
14,470
|
|
||
Capital in excess of par value
|
|
155,843
|
|
|
152,481
|
|
||
Retained earnings
|
|
3,965,133
|
|
|
3,818,535
|
|
||
Accumulated other comprehensive loss
|
|
(656,651
|
)
|
|
(680,095
|
)
|
||
Treasury stock, at cost - 36,881,032 shares as of September 30, 2017 and 36,645,153 shares as of December 31, 2016
|
|
(1,721,482
|
)
|
|
(1,679,147
|
)
|
||
Total Shareholders’ Equity
|
|
1,757,313
|
|
|
1,626,244
|
|
||
Noncontrolling interest
|
|
5,175
|
|
|
4,890
|
|
||
Total Shareholders’ Equity including noncontrolling interest
|
|
1,762,488
|
|
|
1,631,134
|
|
||
Total Liabilities and Shareholders’ Equity
|
|
$
|
4,520,438
|
|
|
$
|
4,016,984
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net sales
|
$
|
872,940
|
|
|
$
|
777,001
|
|
|
$
|
2,544,094
|
|
|
$
|
2,353,790
|
|
Cost of goods sold
|
490,884
|
|
|
430,733
|
|
|
1,422,783
|
|
|
1,281,673
|
|
||||
Gross profit
|
382,056
|
|
|
346,268
|
|
|
1,121,311
|
|
|
1,072,117
|
|
||||
Research and development expenses
|
70,932
|
|
|
64,415
|
|
|
210,963
|
|
|
191,052
|
|
||||
Selling and administrative expenses
|
141,473
|
|
|
152,046
|
|
|
417,713
|
|
|
408,372
|
|
||||
Amortization of acquisition-related intangibles
|
8,766
|
|
|
5,468
|
|
|
24,327
|
|
|
16,659
|
|
||||
Restructuring and other charges, net
|
3,249
|
|
|
—
|
|
|
14,183
|
|
|
—
|
|
||||
Gain on sales of fixed assets
|
(31
|
)
|
|
(87
|
)
|
|
(120
|
)
|
|
(2,998
|
)
|
||||
Operating profit
|
157,667
|
|
|
124,426
|
|
|
454,245
|
|
|
459,032
|
|
||||
Interest expense
|
19,221
|
|
|
13,111
|
|
|
49,584
|
|
|
40,649
|
|
||||
Other (income) expense, net
|
(2,880
|
)
|
|
(2,075
|
)
|
|
(17,192
|
)
|
|
(1,954
|
)
|
||||
Income before taxes
|
141,326
|
|
|
113,390
|
|
|
421,853
|
|
|
420,337
|
|
||||
Taxes on income
|
31,065
|
|
|
23,613
|
|
|
86,033
|
|
|
95,223
|
|
||||
Net income
|
110,261
|
|
|
89,777
|
|
|
335,820
|
|
|
325,114
|
|
||||
Other comprehensive income (loss), after tax:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments
|
19,719
|
|
|
(6,191
|
)
|
|
29,809
|
|
|
3,198
|
|
||||
(Losses) gains on derivatives qualifying as hedges
|
(4,014
|
)
|
|
268
|
|
|
(17,533
|
)
|
|
(9,124
|
)
|
||||
Pension and postretirement net liability
|
3,845
|
|
|
2,586
|
|
|
11,168
|
|
|
7,719
|
|
||||
Other comprehensive income (loss)
|
19,550
|
|
|
(3,337
|
)
|
|
23,444
|
|
|
1,793
|
|
||||
Total comprehensive income
|
$
|
129,811
|
|
|
$
|
86,440
|
|
|
$
|
359,264
|
|
|
$
|
326,907
|
|
|
|
|
|
|
|
|
|
||||||||
Net income per share - basic
|
$
|
1.39
|
|
|
$
|
1.13
|
|
|
$
|
4.24
|
|
|
$
|
4.07
|
|
Net income per share - diluted
|
$
|
1.39
|
|
|
$
|
1.12
|
|
|
$
|
4.22
|
|
|
$
|
4.05
|
|
Average number of shares outstanding - basic
|
79,063
|
|
|
79,580
|
|
|
79,072
|
|
|
79,727
|
|
||||
Average number of shares outstanding - diluted
|
79,362
|
|
|
79,935
|
|
|
79,353
|
|
|
80,067
|
|
||||
Dividends declared per share
|
$
|
0.69
|
|
|
$
|
0.64
|
|
|
$
|
1.97
|
|
|
$
|
1.76
|
|
|
|
Nine Months Ended September 30,
|
||||||
|
|
2017
|
|
2016
|
||||
Cash flows from operating activities:
|
|
|
|
|
||||
Net income
|
|
$
|
335,820
|
|
|
$
|
325,114
|
|
Adjustments to reconcile to net cash provided by operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
85,446
|
|
|
75,109
|
|
||
Deferred income taxes
|
|
(3,439
|
)
|
|
8,323
|
|
||
Gain on disposal of assets
|
|
(120
|
)
|
|
(2,998
|
)
|
||
Stock-based compensation
|
|
20,149
|
|
|
19,471
|
|
||
Pension contributions
|
|
(36,870
|
)
|
|
(44,356
|
)
|
||
Litigation settlement
|
|
(56,000
|
)
|
|
—
|
|
||
Foreign currency gain on liquidation of entity
|
|
(12,214
|
)
|
|
—
|
|
||
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
|
||||
Trade receivables
|
|
(94,945
|
)
|
|
(36,070
|
)
|
||
Inventories
|
|
6,211
|
|
|
(160
|
)
|
||
Accounts payable
|
|
(20,560
|
)
|
|
(29,523
|
)
|
||
Accruals for incentive compensation
|
|
2,907
|
|
|
3,012
|
|
||
Other current payables and accrued expenses
|
|
9,423
|
|
|
30,663
|
|
||
Other assets
|
|
3,824
|
|
|
(10,704
|
)
|
||
Other liabilities
|
|
(40,143
|
)
|
|
3,956
|
|
||
Net cash provided by operating activities
|
|
199,489
|
|
|
341,837
|
|
||
Cash flows from investing activities:
|
|
|
|
|
||||
Cash paid for acquisitions, net of cash received
|
|
(191,304
|
)
|
|
—
|
|
||
Additions to property, plant and equipment
|
|
(77,318
|
)
|
|
(70,179
|
)
|
||
Proceeds from life insurance contracts
|
|
1,941
|
|
|
292
|
|
||
Maturity of net investment hedges
|
|
2,226
|
|
|
(12
|
)
|
||
Proceeds from disposal of assets
|
|
1,275
|
|
|
3,664
|
|
||
Net cash used in investing activities
|
|
(263,180
|
)
|
|
(66,235
|
)
|
||
Cash flows from financing activities:
|
|
|
|
|
||||
Cash dividends paid to shareholders
|
|
(151,678
|
)
|
|
(134,051
|
)
|
||
Decrease in revolving credit facility borrowings and overdrafts
|
|
(3,952
|
)
|
|
(128,324
|
)
|
||
Increase in commercial paper
|
|
39,950
|
|
|
—
|
|
||
Deferred financing costs
|
|
(5,373
|
)
|
|
(4,780
|
)
|
||
Repayments of debt
|
|
(250,000
|
)
|
|
(125,000
|
)
|
||
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
|
|
|
594
|
|
||
Employee withholding taxes paid
|
|
(11,509
|
)
|
|
(13,315
|
)
|
||
Purchase of treasury stock
|
|
(53,211
|
)
|
|
(94,148
|
)
|
||
Net cash provided by financing activities
|
|
57,496
|
|
|
53,291
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
|
(1,795
|
)
|
|
(12,151
|
)
|
||
Net change in cash and cash equivalents
|
|
(7,990
|
)
|
|
316,742
|
|
||
Cash and cash equivalents at beginning of year
|
|
323,992
|
|
|
181,988
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
316,002
|
|
|
$
|
498,730
|
|
Interest paid, net of amounts capitalized
|
|
$
|
38,634
|
|
|
$
|
45,008
|
|
Income taxes paid
|
|
$
|
77,356
|
|
|
$
|
80,050
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
(SHARES IN THOUSANDS)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
Basic
|
79,063
|
|
|
79,580
|
|
|
79,072
|
|
|
79,727
|
|
Assumed dilution under stock plans
|
299
|
|
|
355
|
|
|
281
|
|
|
340
|
|
Diluted
|
79,362
|
|
|
79,935
|
|
|
79,353
|
|
|
80,067
|
|
(DOLLARS IN THOUSANDS)
|
Employee-Related Costs
|
|
Other
|
|
Total
|
||||||
Balance at December 31, 2016
|
$
|
3,277
|
|
|
$
|
—
|
|
|
$
|
3,277
|
|
Additional charges (reversals), net
|
13,233
|
|
|
950
|
|
|
14,183
|
|
|||
Non-cash charges
|
—
|
|
|
(950
|
)
|
|
(950
|
)
|
|||
Payments
|
(10,267
|
)
|
|
—
|
|
|
(10,267
|
)
|
|||
Balance at September 30, 2017
|
$
|
6,243
|
|
|
$
|
—
|
|
|
$
|
6,243
|
|
(DOLLARS IN THOUSANDS)
|
Goodwill
|
||
Balance at December 31, 2016
|
$
|
1,000,123
|
|
Acquisitions
|
93,223
|
|
|
Foreign exchange
|
21,784
|
|
|
Other
|
38,489
|
|
|
Balance at September 30, 2017
|
$
|
1,153,619
|
|
|
September 30,
|
|
December 31,
|
||||
(DOLLARS IN THOUSANDS)
|
2017
|
|
2016
|
||||
Cost
|
|
|
|
||||
Customer relationships
|
$
|
414,045
|
|
|
$
|
371,270
|
|
Trade names & patents
|
38,503
|
|
|
30,679
|
|
||
Technological know-how
|
153,410
|
|
|
119,544
|
|
||
Other
|
24,777
|
|
|
24,470
|
|
||
Total carrying value
|
630,735
|
|
|
545,963
|
|
||
Accumulated Amortization
|
|
|
|
||||
Customer relationships
|
(99,300
|
)
|
|
(82,555
|
)
|
||
Trade names & patents
|
(14,436
|
)
|
|
(12,198
|
)
|
||
Technological know-how
|
(73,289
|
)
|
|
(68,292
|
)
|
||
Other
|
(19,572
|
)
|
|
(17,135
|
)
|
||
Total accumulated amortization
|
(206,597
|
)
|
|
(180,180
|
)
|
||
|
|
|
|
||||
Other intangible assets, net
|
$
|
424,138
|
|
|
$
|
365,783
|
|
(DOLLARS IN THOUSANDS)
|
Rate
|
|
Maturities
|
|
September 30, 2017
|
|
December 31, 2016
|
|||||
Senior notes - 2007
(1)
|
6.55
|
%
|
|
2019-27
|
|
249,765
|
|
|
499,676
|
|
||
Senior notes - 2013
(1)
|
3.20
|
%
|
|
2023
|
|
298,594
|
|
|
297,986
|
|
||
Euro Senior notes - 2016
(1)
|
1.75
|
%
|
|
2024
|
|
582,514
|
|
|
512,764
|
|
||
Senior notes - 2017
(1)
|
4.38
|
%
|
|
2047
|
|
492,653
|
|
|
—
|
|
||
Commercial paper
|
1.191
|
%
|
|
2017
|
|
39,957
|
|
|
—
|
|
||
Bank overdrafts and other
|
|
|
|
|
9,807
|
|
|
13,599
|
|
|||
Deferred realized gains on interest rate swaps
|
|
|
|
|
57
|
|
|
1,346
|
|
|||
|
|
|
|
|
1,673,347
|
|
|
1,325,371
|
|
|||
Less: Current portion of debt
|
|
|
|
|
(47,845
|
)
|
|
(258,516
|
)
|
|||
|
|
|
|
|
$
|
1,625,502
|
|
|
$
|
1,066,855
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(DOLLARS IN THOUSANDS)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Equity-based awards
|
$
|
7,256
|
|
|
$
|
5,697
|
|
|
$
|
20,149
|
|
|
$
|
19,471
|
|
Liability-based awards
|
1,396
|
|
|
1,836
|
|
|
4,447
|
|
|
4,168
|
|
||||
Total stock-based compensation expense
|
8,652
|
|
|
7,533
|
|
|
24,596
|
|
|
23,639
|
|
||||
Less: tax benefit
|
(2,574
|
)
|
|
(2,174
|
)
|
|
(7,123
|
)
|
|
(6,963
|
)
|
||||
Total stock-based compensation expense, after tax
|
$
|
6,078
|
|
|
$
|
5,359
|
|
|
$
|
17,473
|
|
|
$
|
16,676
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(DOLLARS IN THOUSANDS)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net sales:
|
|
|
|
|
|
|
|
||||||||
Flavors
|
$
|
409,800
|
|
|
$
|
366,857
|
|
|
$
|
1,230,286
|
|
|
$
|
1,118,869
|
|
Fragrances
|
463,140
|
|
|
410,144
|
|
|
1,313,808
|
|
|
1,234,921
|
|
||||
Consolidated
|
$
|
872,940
|
|
|
$
|
777,001
|
|
|
$
|
2,544,094
|
|
|
$
|
2,353,790
|
|
Segment profit:
|
|
|
|
|
|
|
|
||||||||
Flavors
|
$
|
91,378
|
|
|
$
|
77,512
|
|
|
$
|
289,723
|
|
|
$
|
259,662
|
|
Fragrances
|
93,528
|
|
|
85,010
|
|
|
260,085
|
|
|
261,843
|
|
||||
Global expenses
|
(17,598
|
)
|
|
(11,405
|
)
|
|
(47,193
|
)
|
|
(37,544
|
)
|
||||
Restructuring and other charges, net
(1)
|
(3,249
|
)
|
|
(190
|
)
|
|
(14,183
|
)
|
|
(473
|
)
|
||||
Acquisition-related costs
(2)
|
(5,436
|
)
|
|
(786
|
)
|
|
(20,502
|
)
|
|
(2,035
|
)
|
||||
Operational improvement initiative costs
(3)
|
(407
|
)
|
|
(802
|
)
|
|
(1,473
|
)
|
|
(1,901
|
)
|
||||
Legal (charges) credits
(4)
|
—
|
|
|
(25,000
|
)
|
|
(1,000
|
)
|
|
(23,518
|
)
|
||||
Gain on sales of assets
(5)
|
31
|
|
|
87
|
|
|
120
|
|
|
2,998
|
|
||||
Tax assessment
(6)
|
—
|
|
|
—
|
|
|
(5,331
|
)
|
|
—
|
|
||||
Integration-related costs
(7)
|
(580
|
)
|
|
—
|
|
|
(2,501
|
)
|
|
—
|
|
||||
FDA mandated product recall
(8)
|
—
|
|
|
—
|
|
|
(3,500
|
)
|
|
—
|
|
||||
Operating profit
|
157,667
|
|
|
124,426
|
|
|
454,245
|
|
|
459,032
|
|
||||
Interest expense
|
(19,221
|
)
|
|
(13,111
|
)
|
|
(49,584
|
)
|
|
(40,649
|
)
|
||||
Other income (expense)
|
2,880
|
|
|
2,075
|
|
|
17,192
|
|
|
1,954
|
|
||||
Income before taxes
|
$
|
141,326
|
|
|
$
|
113,390
|
|
|
$
|
421,853
|
|
|
$
|
420,337
|
|
(1)
|
In 2017, charges represent severance costs related to the 2017 Productivity Program. In 2016, charges relate to accelerated depreciation which were recorded in Cost of goods sold.
|
(2)
|
Represents transaction costs related to the acquisitions of Fragrance Resources and PowderPure as well as the amortization of inventory "step-up" related to David Michael, Fragrance Resources and PowderPure in the 2017 period, and expense related to the amortization of inventory "step-up" and additional transaction costs related to the acquisition of Lucas Meyer in the 2016 period.
|
(3)
|
Represents accelerated depreciation in Hangzhou, China in both the 2017 and 2016 periods.
|
(4)
|
Represents additional charges related to litigation settlement in the 2017 period and reserve for litigation settlement in the 2016 period.
|
(5)
|
Represents gains on sale of assets in Latin America in the 2017 period and in Europe in the 2016 period.
|
(6)
|
Represents the reserve for a tax assessment related to commercial rent for prior periods.
|
(7)
|
Represents costs related to the integration of the David Michael and Fragrance Resources acquisitions.
|
(8)
|
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. (As discussed in Note 13, 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.
|
U.S. Plans
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(DOLLARS IN THOUSANDS)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Service cost for benefits earned
|
$
|
698
|
|
|
$
|
771
|
|
|
$
|
2,093
|
|
|
$
|
2,314
|
|
Interest cost on projected benefit obligation
|
4,561
|
|
|
6,007
|
|
|
13,683
|
|
|
18,020
|
|
||||
Expected return on plan assets
|
(9,246
|
)
|
|
(8,069
|
)
|
|
(27,737
|
)
|
|
(24,208
|
)
|
||||
Net amortization and deferrals
|
1,793
|
|
|
1,387
|
|
|
5,377
|
|
|
4,159
|
|
||||
Net periodic benefit (income) cost
|
(2,194
|
)
|
|
96
|
|
|
(6,584
|
)
|
|
285
|
|
||||
Defined contribution and other retirement plans
|
1,939
|
|
|
1,211
|
|
|
6,718
|
|
|
5,823
|
|
||||
Total (income) expense
|
$
|
(255
|
)
|
|
$
|
1,307
|
|
|
$
|
134
|
|
|
$
|
6,108
|
|
|
|
|
|
|
|
|
|
||||||||
Non-U.S. Plans
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(DOLLARS IN THOUSANDS)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Service cost for benefits earned
|
$
|
5,956
|
|
|
$
|
3,863
|
|
|
$
|
17,867
|
|
|
$
|
11,443
|
|
Interest cost on projected benefit obligation
|
4,066
|
|
|
6,372
|
|
|
12,198
|
|
|
18,890
|
|
||||
Expected return on plan assets
|
(12,873
|
)
|
|
(11,985
|
)
|
|
(38,618
|
)
|
|
(35,526
|
)
|
||||
Net amortization and deferrals
|
4,185
|
|
|
3,286
|
|
|
12,554
|
|
|
9,738
|
|
||||
Net periodic benefit cost
|
1,334
|
|
|
1,536
|
|
|
4,001
|
|
|
4,545
|
|
||||
Defined contribution and other retirement plans
|
1,470
|
|
|
1,705
|
|
|
4,383
|
|
|
5,175
|
|
||||
Total expense
|
$
|
2,804
|
|
|
$
|
3,241
|
|
|
$
|
8,384
|
|
|
$
|
9,720
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(DOLLARS IN THOUSANDS)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Service cost for benefits earned
|
$
|
221
|
|
|
$
|
214
|
|
|
$
|
663
|
|
|
$
|
644
|
|
Interest cost on projected benefit obligation
|
588
|
|
|
787
|
|
|
1,764
|
|
|
2,360
|
|
||||
Net amortization and deferrals
|
(1,046
|
)
|
|
(1,355
|
)
|
|
(3,138
|
)
|
|
(4,065
|
)
|
||||
Total postretirement benefit income
|
$
|
(237
|
)
|
|
$
|
(354
|
)
|
|
$
|
(711
|
)
|
|
$
|
(1,061
|
)
|
•
|
Level 1–Quoted prices for
identical
instruments in active markets.
|
•
|
Level 2–Quoted prices for
similar
instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
|
•
|
Level 3–Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable
.
|
|
September 30, 2017
|
|
December 31, 2016
|
||||||||||||
(DOLLARS IN THOUSANDS)
|
Carrying
Amount |
|
Fair
Value |
|
Carrying
Amount |
|
Fair
Value |
||||||||
Cash and cash equivalents
(1)
|
$
|
316,002
|
|
|
$
|
316,002
|
|
|
$
|
323,992
|
|
|
$
|
323,992
|
|
Credit facilities and bank overdrafts
(2)
|
9,807
|
|
|
9,807
|
|
|
13,599
|
|
|
13,599
|
|
||||
Commercial paper
(2)
|
39,957
|
|
|
39,957
|
|
|
—
|
|
|
—
|
|
||||
Long-term debt:
(3)
|
|
|
|
|
|
|
|
||||||||
Senior notes - 2007
|
249,765
|
|
|
297,010
|
|
|
499,676
|
|
|
556,222
|
|
||||
Senior notes - 2013
|
298,594
|
|
|
307,675
|
|
|
297,986
|
|
|
302,376
|
|
||||
Euro Senior notes - 2016
|
582,514
|
|
|
614,498
|
|
|
512,764
|
|
|
546,006
|
|
||||
Senior notes - 2017
|
492,653
|
|
|
497,998
|
|
|
—
|
|
|
—
|
|
(1)
|
The carrying amount of cash and cash equivalents approximates fair value due to the short maturity of those instruments.
|
(2)
|
The carrying amount of our credit facilities, bank overdrafts and commercial paper approximates fair value as the interest rate is reset frequently based on current market rates as well as the short maturity of those instruments.
|
(3)
|
The fair value of our long-term debt was calculated using discounted cash flows applying current interest rates and current credit spreads based on our own credit risk.
|
(DOLLARS IN THOUSANDS)
|
September 30, 2017
|
|
December 31, 2016
|
||||
Foreign currency contracts
|
$
|
756,631
|
|
|
$
|
527,500
|
|
Interest rate swaps
|
150,000
|
|
|
412,500
|
|
|
September 30, 2017
|
||||||||||
(DOLLARS IN THOUSANDS)
|
Fair Value of
Derivatives Designated as Hedging Instruments |
|
Fair Value of
Derivatives Not Designated as Hedging Instruments |
|
Total Fair
Value |
||||||
Derivative assets
(a)
|
|
|
|
|
|
||||||
Foreign currency contracts
|
$
|
1,171
|
|
|
$
|
14,335
|
|
|
$
|
15,506
|
|
|
$
|
1,171
|
|
|
$
|
14,335
|
|
|
$
|
15,506
|
|
Derivative liabilities
(b)
|
|
|
|
|
|
||||||
Foreign currency contracts
|
$
|
9,942
|
|
|
$
|
2,016
|
|
|
$
|
11,958
|
|
Interest rate swaps
|
604
|
|
|
—
|
|
|
604
|
|
|||
|
$
|
10,546
|
|
|
$
|
2,016
|
|
|
$
|
12,562
|
|
|
December 31, 2016
|
||||||||||
(DOLLARS IN THOUSANDS)
|
Fair Value of
Derivatives Designated as Hedging Instruments |
|
Fair Value of
Derivatives Not Designated as Hedging Instruments |
|
Total Fair
Value |
||||||
Derivative assets
(a)
|
|
|
|
|
|
||||||
Foreign currency contracts
|
$
|
13,765
|
|
|
$
|
7,737
|
|
|
$
|
21,502
|
|
Interest rate swaps
|
335
|
|
|
—
|
|
|
335
|
|
|||
|
$
|
14,100
|
|
|
$
|
7,737
|
|
|
$
|
21,837
|
|
Derivative liabilities
(b)
|
|
|
|
|
|
||||||
Foreign currency contracts
|
$
|
46
|
|
|
$
|
2,209
|
|
|
$
|
2,255
|
|
Interest rate swaps
|
725
|
|
|
—
|
|
|
725
|
|
|||
|
$
|
771
|
|
|
$
|
2,209
|
|
|
$
|
2,980
|
|
(a)
|
Derivative assets are recorded to Prepaid expenses and other current assets in the Consolidated Balance Sheet.
|
(b)
|
Derivative liabilities are recorded as Other current liabilities in the Consolidated Balance Sheet.
|
|
Amount of (Loss) Gain
Recognized in OCI on
Derivative (Effective
Portion)
|
|
Location of (Loss) Gain
Reclassified from AOCI into
Income (Effective Portion)
|
|
Amount of (Loss) Gain
Reclassified from
Accumulated OCI into
Income (Effective
Portion)
|
||||||||||||
|
Three Months Ended September 30,
|
|
|
|
Three Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
|
|
2017
|
|
2016
|
||||||||
Derivatives in Cash Flow Hedging Relationships:
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency contracts
|
$
|
(4,229
|
)
|
|
$
|
98
|
|
|
Cost of goods sold
|
|
$
|
1,815
|
|
|
$
|
(544
|
)
|
Interest rate swaps
(1)
|
216
|
|
|
171
|
|
|
Interest expense
|
|
(216
|
)
|
|
(171
|
)
|
||||
Derivatives in Net Investment Hedging Relationships:
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency contracts
|
(1,130
|
)
|
|
(224
|
)
|
|
N/A
|
|
—
|
|
|
—
|
|
||||
Euro Senior notes - 2016
|
(11,861
|
)
|
|
(2,856
|
)
|
|
N/A
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
(17,004
|
)
|
|
$
|
(2,811
|
)
|
|
|
|
$
|
1,599
|
|
|
$
|
(715
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Amount of (Loss) Gain
Recognized in OCI on
Derivative (Effective
Portion)
|
|
Location of (Loss) Gain
Reclassified from AOCI into
Income (Effective Portion)
|
|
Amount of (Loss) Gain
Reclassified from
Accumulated OCI into
Income (Effective
Portion)
|
||||||||||||
|
Nine Months Ended September 30,
|
|
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
|
|
2017
|
|
2016
|
||||||||
Derivatives in Cash Flow Hedging Relationships:
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency contracts
|
$
|
(13,505
|
)
|
|
$
|
(6,293
|
)
|
|
Cost of goods sold
|
|
$
|
4,062
|
|
|
$
|
4,808
|
|
Interest rate swaps
(1)
|
(4,027
|
)
|
|
(2,830
|
)
|
|
Interest expense
|
|
(573
|
)
|
|
(428
|
)
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
Derivatives in Net Investment Hedging Relationships:
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency contracts
|
(4,258
|
)
|
|
(694
|
)
|
|
N/A
|
|
—
|
|
|
—
|
|
||||
Euro Senior notes - 2016
|
(43,050
|
)
|
|
6,793
|
|
|
N/A
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
(64,840
|
)
|
|
$
|
(3,024
|
)
|
|
|
|
$
|
3,489
|
|
|
$
|
4,380
|
|
|
Foreign
Currency
Translation
Adjustments
|
|
(Losses) Gains on
Derivatives
Qualifying as
Hedges
|
|
Pension and
Postretirement
Liability
Adjustment
|
|
Total
|
||||||||
(DOLLARS IN THOUSANDS)
|
|
|
|
|
|
|
|
||||||||
Accumulated other comprehensive (loss) income, net of tax, as of December 31, 2016
|
$
|
(352,025
|
)
|
|
$
|
7,604
|
|
|
$
|
(335,674
|
)
|
|
$
|
(680,095
|
)
|
OCI before reclassifications
|
42,023
|
|
|
(14,044
|
)
|
|
—
|
|
|
27,979
|
|
||||
Amounts reclassified from AOCI
|
(12,214
|
)
|
*
|
(3,489
|
)
|
|
11,168
|
|
|
(4,535
|
)
|
||||
Net current period other comprehensive income (loss)
|
29,809
|
|
|
(17,533
|
)
|
|
11,168
|
|
|
23,444
|
|
||||
Accumulated other comprehensive (loss) income, net of tax, as of September 30, 2017
|
$
|
(322,216
|
)
|
|
$
|
(9,929
|
)
|
|
$
|
(324,506
|
)
|
|
$
|
(656,651
|
)
|
|
Foreign
Currency
Translation
Adjustments
|
|
(Losses) Gains on
Derivatives
Qualifying as
Hedges
|
|
Pension and
Postretirement
Liability
Adjustment
|
|
Total
|
||||||||
(DOLLARS IN THOUSANDS)
|
|
|
|
|
|
|
|
||||||||
Accumulated other comprehensive (loss) income, net of tax, as of December 31, 2015
|
$
|
(297,499
|
)
|
|
$
|
9,401
|
|
|
$
|
(325,342
|
)
|
|
$
|
(613,440
|
)
|
OCI before reclassifications
|
3,198
|
|
|
(4,744
|
)
|
|
—
|
|
|
(1,546
|
)
|
||||
Amounts reclassified from AOCI
|
—
|
|
|
(4,380
|
)
|
|
7,719
|
|
|
3,339
|
|
||||
Net current period other comprehensive income (loss)
|
3,198
|
|
|
(9,124
|
)
|
|
7,719
|
|
|
1,793
|
|
||||
Accumulated other comprehensive (loss) income, net of tax, as of September 30, 2016
|
$
|
(294,301
|
)
|
|
$
|
277
|
|
|
$
|
(317,623
|
)
|
|
$
|
(611,647
|
)
|
|
Nine Months Ended September 30, 2017
|
|
Nine Months Ended September 30, 2016
|
|
Affected Line Item in the
Consolidated Statement of Comprehensive Income |
||||
(DOLLARS IN THOUSANDS)
|
|
|
|
|
|
||||
(Losses) gains on derivatives qualifying as hedges
|
|
|
|
|
|
||||
Foreign currency contracts
|
$
|
4,642
|
|
|
$
|
5,495
|
|
|
Cost of goods sold
|
Interest rate swaps
|
(573
|
)
|
|
(428
|
)
|
|
Interest expense
|
||
|
(580
|
)
|
|
(687
|
)
|
|
Provision for income taxes
|
||
|
$
|
3,489
|
|
|
$
|
4,380
|
|
|
Total, net of income taxes
|
(Losses) gains on pension and postretirement liability adjustments
|
|
|
|
|
|
||||
Prior service cost
|
$
|
5,304
|
|
|
$
|
5,602
|
|
|
(a)
|
Actuarial losses
|
(20,097
|
)
|
|
(15,434
|
)
|
|
(a)
|
||
|
3,625
|
|
|
2,113
|
|
|
Provision for income taxes
|
||
|
$
|
(11,168
|
)
|
|
$
|
(7,719
|
)
|
|
Total, net of income taxes
|
(a)
|
The amortization of prior service cost and actuarial loss is included in the computation of net periodic benefit cost. Refer to Note 14 of our
2016
Form 10-K for additional information regarding net periodic benefit cost.
|
|
Three Months Ended September 30,
|
|
|
|
Nine Months Ended September 30,
|
|
|
||||||||||||||
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE AMOUNTS)
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||
Net sales
|
$
|
872,940
|
|
|
$
|
777,001
|
|
|
12
|
%
|
|
$
|
2,544,094
|
|
|
$
|
2,353,790
|
|
|
8
|
%
|
Cost of goods sold
|
490,884
|
|
|
430,733
|
|
|
14
|
%
|
|
1,422,783
|
|
|
1,281,673
|
|
|
11
|
%
|
||||
Gross profit
|
382,056
|
|
|
346,268
|
|
|
|
|
1,121,311
|
|
|
1,072,117
|
|
|
|
||||||
Research and development (R&D) expenses
|
70,932
|
|
|
64,415
|
|
|
10
|
%
|
|
210,963
|
|
|
191,052
|
|
|
10
|
%
|
||||
Selling and administrative (S&A) expenses
|
141,473
|
|
|
152,046
|
|
|
(7
|
)%
|
|
417,713
|
|
|
408,372
|
|
|
2
|
%
|
||||
Amortization of acquisition-related intangibles
|
8,766
|
|
|
5,468
|
|
|
60
|
%
|
|
24,327
|
|
|
16,659
|
|
|
46
|
%
|
||||
Restructuring and other charges, net
|
3,249
|
|
|
—
|
|
|
100
|
%
|
|
14,183
|
|
|
—
|
|
|
100
|
%
|
||||
Gain on sales of fixed assets
|
(31
|
)
|
|
(87
|
)
|
|
(64
|
)%
|
|
(120
|
)
|
|
(2,998
|
)
|
|
(96
|
)%
|
||||
Operating profit
|
157,667
|
|
|
124,426
|
|
|
|
|
454,245
|
|
|
459,032
|
|
|
|
||||||
Interest expense
|
19,221
|
|
|
13,111
|
|
|
47
|
%
|
|
49,584
|
|
|
40,649
|
|
|
22
|
%
|
||||
Other (income) expense, net
|
(2,880
|
)
|
|
(2,075
|
)
|
|
39
|
%
|
|
(17,192
|
)
|
|
(1,954
|
)
|
|
780
|
%
|
||||
Income before taxes
|
141,326
|
|
|
113,390
|
|
|
|
|
421,853
|
|
|
420,337
|
|
|
|
||||||
Taxes on income
|
31,065
|
|
|
23,613
|
|
|
32
|
%
|
|
86,033
|
|
|
95,223
|
|
|
(10
|
)%
|
||||
Net income
|
$
|
110,261
|
|
|
$
|
89,777
|
|
|
23
|
%
|
|
$
|
335,820
|
|
|
$
|
325,114
|
|
|
3
|
%
|
Diluted EPS
|
$
|
1.39
|
|
|
$
|
1.12
|
|
|
24
|
%
|
|
$
|
4.22
|
|
|
$
|
4.05
|
|
|
4
|
%
|
Gross margin
|
43.8
|
%
|
|
44.6
|
%
|
|
(80
|
)
|
|
44.1
|
%
|
|
45.5
|
%
|
|
(140
|
)
|
||||
R&D as a percentage of sales
|
8.1
|
%
|
|
8.3
|
%
|
|
(20
|
)
|
|
8.3
|
%
|
|
8.1
|
%
|
|
20
|
|
||||
S&A as a percentage of sales
|
16.2
|
%
|
|
19.6
|
%
|
|
(340
|
)
|
|
16.4
|
%
|
|
17.3
|
%
|
|
(90
|
)
|
||||
Operating margin
|
18.1
|
%
|
|
16.0
|
%
|
|
210
|
|
|
17.9
|
%
|
|
19.5
|
%
|
|
(160
|
)
|
||||
Adjusted operating margin
(1)
|
19.2
|
%
|
|
19.4
|
%
|
|
(20
|
)
|
|
19.8
|
%
|
|
20.6
|
%
|
|
(80
|
)
|
||||
Effective tax rate
|
22.0
|
%
|
|
20.8
|
%
|
|
120
|
|
|
20.4
|
%
|
|
22.7
|
%
|
|
(230
|
)
|
||||
Segment net sales
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Flavors
|
$
|
409,800
|
|
|
$
|
366,857
|
|
|
12
|
%
|
|
$
|
1,230,286
|
|
|
$
|
1,118,869
|
|
|
10
|
%
|
Fragrances
|
463,140
|
|
|
410,144
|
|
|
13
|
%
|
|
1,313,808
|
|
|
1,234,921
|
|
|
6
|
%
|
||||
Consolidated
|
$
|
872,940
|
|
|
$
|
777,001
|
|
|
|
|
$
|
2,544,094
|
|
|
$
|
2,353,790
|
|
|
|
(1)
|
Adjusted operating margin excludes
$9.6 million
consisting of acquisition-related costs, restructuring, integration-related and operational improvement initiative costs as well as gains on sales of fixed assets for the
three months ended September 30, 2017
and excludes
$26.7 million
related to legal charges, operational improvement initiative, acquisition-relation and restructuring costs which were partially offset by gains on sales of fixed assets for the
three months ended September 30, 2016
. For the
nine
months ended
September 30, 2017
adjusted operating margin excludes
$48.4 million
consisting of acquisition-related costs, costs associated with product recalls, tax assessment, legal charges, restructuring, integration-related and operational improvement initiative costs as well as gains on sales of fixed assets and excludes
$24.9 million
related to legal charges, operational improvement initiative, acquisition-relation and restructuring costs which were partially offset by gains on sales of fixed assets for the
nine
months ended
September 30, 2016
. See "Non-GAAP Financial Measures" below.
|
|
|
% Change in Sales - Third Quarter 2017 vs. Third Quarter 2016
|
||||||||||||||||
|
|
Fine Fragrances
|
|
Consumer Fragrances
|
|
Ingredients
|
|
Total Frag.
|
|
Flavors
|
|
Total
|
||||||
NOAM
|
Reported
|
12
|
%
|
|
10
|
%
|
|
-4
|
%
|
|
7
|
%
|
|
28
|
%
|
|
18
|
%
|
EAME
|
Reported
|
28
|
%
|
|
17
|
%
|
|
18
|
%
|
|
20
|
%
|
|
12
|
%
|
|
17
|
%
|
|
Currency Neutral
(1)
|
25
|
%
|
|
14
|
%
|
|
16
|
%
|
|
18
|
%
|
|
12
|
%
|
|
15
|
%
|
LA
|
Reported
|
14
|
%
|
|
13
|
%
|
|
37
|
%
|
|
15
|
%
|
|
0
|
%
|
|
9
|
%
|
|
Currency Neutral
(1)
|
10
|
%
|
|
13
|
%
|
|
37
|
%
|
|
14
|
%
|
|
1
|
%
|
|
9
|
%
|
GA
|
Reported
|
13
|
%
|
|
8
|
%
|
|
-1
|
%
|
|
6
|
%
|
|
2
|
%
|
|
4
|
%
|
|
Currency Neutral
(1)
|
14
|
%
|
|
8
|
%
|
|
0
|
%
|
|
7
|
%
|
|
2
|
%
|
|
4
|
%
|
Total
|
Reported
|
20
|
%
|
|
12
|
%
|
|
9
|
%
|
|
13
|
%
|
|
12
|
%
|
|
12
|
%
|
|
Currency Neutral
(1)
|
18
|
%
|
|
11
|
%
|
|
8
|
%
|
|
12
|
%
|
|
12
|
%
|
|
12
|
%
|
(1)
|
Currency neutral sales growth is calculated by translating prior year sales at the exchange rates for the corresponding
2017
period.
|
•
|
NOAM Flavors sales growth included the impact of acquisitions and primarily reflected double-digit growth in Savory and low single-digit growth in Beverage, which more than offset mid to high single-digit declines in Sweet and Dairy categories. Total Fragrances sales growth included the impact of acquisitions and reflected double-digit gains in Fine Fragrances and high single-digit gains in Fabric Care and Home Care which more than offset double-digit declines in Personal Wash and mid single-digit declines in Fragrance Ingredients.
|
•
|
EAME Flavors sales experienced double-digit gains in Beverage and Dairy and mid single-digit gains in Savory and Sweet. Total Fragrances sales growth included the impact of acquisitions and was driven mainly by double-digit growth in Fine Fragrances, Home Care and Fragrance Ingredients as well as mid single-digit growth in Fabric Care which more than offset high single-digit declines in Hair Care and low single-digit declines in Personal Wash and Toiletries.
|
•
|
LA Flavors sales included double-digit gains in Dairy and high single-digit gains in Savory which were offset by low single-digit declines in Beverage. Total Fragrances sales growth included the impact of acquisitions and reflected double-digit gains in Fragrance Ingredients, Home Care, Personal Wash and Fine Fragrances as well as high single-digit gains in Fabric Care.
|
•
|
GA Flavors sales growth was driven by mid to high single-digit growth in Savory and Sweet, which were only partially offset by mid to low single-digit declines in Beverage and Dairy. Total Fragrances sales growth included the impact of acquisitions and was principally driven by double-digit gains in Fine Fragrances, Fabric Care and Home Care and high single-digit gains in Toiletries, which more than offset mid single-digit declines in Hair Care and low single-digit declines in Fragrance Ingredients.
|
|
Three Months Ended September 30,
|
||||||
(DOLLARS IN THOUSANDS)
|
2017
|
|
2016
|
||||
Segment profit:
|
|
|
|
||||
Flavors
|
$
|
91,378
|
|
|
$
|
77,512
|
|
Fragrances
|
93,528
|
|
|
85,010
|
|
||
Global expenses
|
(17,598
|
)
|
|
(11,405
|
)
|
||
Restructuring and other charges, net
|
(3,249
|
)
|
|
(190
|
)
|
||
Acquisition and related costs
|
(5,436
|
)
|
|
(786
|
)
|
||
Operational improvement initiative costs
|
(407
|
)
|
|
(802
|
)
|
||
Legal (charges) credits
|
—
|
|
|
(25,000
|
)
|
||
Gain on sales of assets
|
31
|
|
|
87
|
|
||
Integration-related costs
|
(580
|
)
|
|
—
|
|
||
Operating profit
|
157,667
|
|
|
124,426
|
|
||
Profit margin:
|
|
|
|
||||
Flavors
|
22.3
|
%
|
|
21.1
|
%
|
||
Fragrances
|
20.2
|
%
|
|
20.7
|
%
|
||
Consolidated
|
18.1
|
%
|
|
16.0
|
%
|
|
|
% Change in Sales - First Nine Months 2017 vs. First Nine Months 2016
|
||||||||||||||||
|
|
Fine Fragrances
|
|
Consumer Fragrances
|
|
Ingredients
|
|
Total Frag.
|
|
Flavors
|
|
Total
|
||||||
NOAM
|
Reported
|
11
|
%
|
|
7
|
%
|
|
-4
|
%
|
|
5
|
%
|
|
28
|
%
|
|
17
|
%
|
EAME
|
Reported
|
21
|
%
|
|
9
|
%
|
|
12
|
%
|
|
13
|
%
|
|
5
|
%
|
|
10
|
%
|
|
Currency Neutral
(1)
|
22
|
%
|
|
10
|
%
|
|
13
|
%
|
|
14
|
%
|
|
9
|
%
|
|
12
|
%
|
LA
|
Reported
|
-1
|
%
|
|
-1
|
%
|
|
30
|
%
|
|
1
|
%
|
|
7
|
%
|
|
3
|
%
|
|
Currency Neutral
(1)
|
-5
|
%
|
|
-1
|
%
|
|
29
|
%
|
|
0
|
%
|
|
6
|
%
|
|
2
|
%
|
GA
|
Reported
|
19
|
%
|
|
3
|
%
|
|
-4
|
%
|
|
2
|
%
|
|
0
|
%
|
|
1
|
%
|
|
Currency Neutral
(1)
|
20
|
%
|
|
3
|
%
|
|
-3
|
%
|
|
3
|
%
|
|
1
|
%
|
|
2
|
%
|
Total
|
Reported
|
13
|
%
|
|
4
|
%
|
|
5
|
%
|
|
6
|
%
|
|
10
|
%
|
|
8
|
%
|
|
Currency Neutral
(1)
|
13
|
%
|
|
5
|
%
|
|
6
|
%
|
|
7
|
%
|
|
11
|
%
|
|
9
|
%
|
(1)
|
Currency neutral sales growth is calculated by translating prior year sales at the exchange rates for the corresponding 2017 period.
|
•
|
NOAM Flavors sales growth, which included the impact of acquisitions, was led by double-digit growth in Savory and mid single-digit growth in Dairy. Total Fragrances sales growth included the impact of acquisitions and reflected double-digit gains in Fine Fragrances, mid to high single-digit gains in Home Care and Fabric Care which more than offset double-digit declines in Personal Wash, high single-digit declines in Hair Care and mid single-digit declines in Fragrance Ingredients.
|
•
|
EAME Flavors sales experienced mid to high single-digit gains in all categories. Total Fragrances sales growth included the impact of acquisitions and was driven mainly by double-digit growth in Fine Fragrances and Fragrance Ingredients as well as mid single-digit growth in Home Care.
|
•
|
LA Flavors sales growth was driven by double-digit gains in Savory and Dairy and mid to low single-digit gains in Sweet and Beverage. Total Fragrances sales growth reflected double-digit gains in Fragrance Ingredients and mid single-digit gains in Home Care, which more than offset by double-digit declines in Hair Care and low single-digit declines in Fine Fragrances.
|
•
|
GA Flavors sales experienced low single-digit gains in Savory and Beverage which were offset by mid single-digit declines in Dairy. Total Fragrances sales growth included the impact of acquisitions and principally reflected double-digit gains in Fine Fragrances and mid single-digit gains in Fabric Care and Home Care, which more than offset mid single-digit declines in Fragrance Ingredients and Hair Care.
|
|
Nine Months Ended September 30,
|
||||||
(DOLLARS IN THOUSANDS)
|
2017
|
|
2016
|
||||
Segment profit:
|
|
|
|
||||
Flavors
|
$
|
289,723
|
|
|
$
|
259,662
|
|
Fragrances
|
260,085
|
|
|
261,843
|
|
||
Global expenses
|
(47,193
|
)
|
|
(37,544
|
)
|
||
Restructuring and other charges, net
|
(14,183
|
)
|
|
(473
|
)
|
||
Acquisition and related costs
|
(20,502
|
)
|
|
(2,035
|
)
|
||
Operational improvement initiative costs
|
(1,473
|
)
|
|
(1,901
|
)
|
||
Legal (charges) credits
|
(1,000
|
)
|
|
(23,518
|
)
|
||
Gain on sales of assets
|
120
|
|
|
2,998
|
|
||
Tax assessment
|
(5,331
|
)
|
|
—
|
|
||
Integration-related costs
|
(2,501
|
)
|
|
—
|
|
||
FDA mandated product recall
|
(3,500
|
)
|
|
—
|
|
||
Operating profit
|
454,245
|
|
|
459,032
|
|
||
Profit margin:
|
|
|
|
||||
Flavors
|
23.5
|
%
|
|
23.2
|
%
|
||
Fragrances
|
19.8
|
%
|
|
21.2
|
%
|
||
Consolidated
|
17.9
|
%
|
|
19.5
|
%
|
(1)
|
Adjusted EBITDA and Net Debt, which are non-GAAP measures used for these covenants, are calculated in accordance with the definition in the debt agreements. In this context, these measures are used solely to provide information on the extent to which we are in compliance with debt covenants and may not be comparable to adjusted EBITDA and Net Debt used by other companies. Reconciliations of adjusted EBITDA to net income and net debt to total debt are as follows:
|
|
Twelve Months Ended September 30,
|
||
(DOLLARS IN MILLIONS)
|
2017
|
||
Net income
|
$
|
415.8
|
|
Interest expense
|
61.9
|
|
|
Income taxes
|
109.5
|
|
|
Depreciation and amortization
|
112.5
|
|
|
Specified items
(1)
|
71.8
|
|
|
Non-cash items
(2)
|
17.3
|
|
|
Adjusted EBITDA
|
$
|
788.8
|
|
(1)
|
Specified items for the 12 months ended
September 30, 2017
of
$71.8 million
consist of legal charges/credits, acquisition-related costs, costs associated with product recalls, operational improvement initiative costs, restructuring and other charges, gains on sales of fixed assets, integration-related costs, tax assessment and CTA realization.
|
(2)
|
Non-cash items represent all other adjustments to reconcile net income to net cash provided by operations as presented on the Statement of Cash Flows, including gain on disposal of assets and stock-based compensation.
|
|
September 30,
|
||
(DOLLARS IN MILLIONS)
|
2017
|
||
Total debt
|
$
|
1,673.3
|
|
Adjustments:
|
|
||
Deferred gain on interest rate swaps
|
(0.1
|
)
|
|
Cash and cash equivalents
|
(316.0
|
)
|
|
Net debt
|
$
|
1,357.2
|
|
•
|
macroeconomic trends affecting the emerging markets;
|
•
|
our ability to implement and adapt our Vision 2020 strategy;
|
•
|
our ability to successfully identify and complete acquisitions in line with our Vision 2020 strategy, and to realize the anticipated benefits of those acquisitions;
|
•
|
our ability to effectively compete in our market, and to successfully develop new and competitive products that appeal to our customers and consumers;
|
•
|
changes in consumer preferences and demand for our products or a decline in consumer confidence and spending;
|
•
|
our ability to benefit from our investments and expansion in emerging markets;
|
•
|
the impact of currency fluctuations or devaluations in the principal foreign markets in which we operate, including the devaluation of the Euro;
|
•
|
the impact of customer claims or product recalls;
|
•
|
the potential adverse impact of Brexit on currency exchange rates, global economic conditions and cross-border agreements that affect our business;
|
•
|
the economic and political risks associated with our international operations, including challenging economic conditions in China and Latin America;
|
•
|
the impact of any failure of our key information technology systems or costs that could be incurred due to a breach of data privacy or information security;
|
•
|
our ability to attract and retain talented employees;
|
•
|
our ability to comply with, and the costs associated with compliance, with U.S. and foreign environmental protection laws;
|
•
|
our ability to realize expected cost savings and efficiencies from our profitability improvement initiatives and other optimization activities;
|
•
|
volatility and increases in the price of raw materials, energy and transportation;
|
•
|
fluctuations in the quality and availability of raw materials;
|
•
|
the impact of a disruption in our supply chain or our relationship with our suppliers;
|
•
|
any adverse impact on the availability, effectiveness and cost of our hedging and risk management strategies;
|
•
|
our ability to successfully manage our working capital and inventory balances;
|
•
|
uncertainties regarding the outcome of, or funding requirements, related to litigation or settlement of pending litigation, uncertain tax positions or other contingencies;
|
•
|
the effect of legal and regulatory proceedings, as well as restrictions imposed on us, our operations, or our representatives by U.S. and foreign governments;
|
•
|
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
|
•
|
changes in market conditions or governmental regulations relating to our pension and postretirement obligations.
|
(DOLLARS IN THOUSANDS)
|
Reconciliation of Gross Profit
|
|||||||||||
|
Reported (GAAP)
|
Operational Improvement Initiative Costs (a)
|
Acquisition and Related Costs (b)
|
Integration related costs (c)
|
Adjusted (Non-GAAP)
|
|||||||
Gross profit
|
$
|
382,056
|
|
407
|
|
5,147
|
|
131
|
|
$
|
387,741
|
|
(DOLLARS IN THOUSANDS)
|
Reconciliation of Selling and Administrative Expenses
|
|||||||||
|
Reported (GAAP)
|
Acquisition and Related Costs (b)
|
Integration related costs (c)
|
Adjusted (Non-GAAP)
|
||||||
Selling and administrative expenses
|
$
|
141,473
|
|
(289
|
)
|
(383
|
)
|
$
|
140,801
|
|
(DOLLARS IN THOUSANDS)
|
Reconciliation of Operating Profit
|
|||||||||||||||
|
Reported (GAAP)
|
Operational Improvement Initiative Costs (a)
|
Acquisition Related Costs (b)
|
Integration related costs (c)
|
Restructuring and Other Charges (d)
|
Gain on Sale of Asset (e)
|
Adjusted (Non-GAAP)
|
|||||||||
Operating profit
|
$
|
157,667
|
|
407
|
|
5,436
|
|
580
|
|
3,249
|
|
(31
|
)
|
$
|
167,308
|
|
(DOLLARS IN THOUSANDS)
|
Reconciliation of Net Income
|
|||||||||||||||
|
Reported (GAAP)
|
Operational Improvement Initiative Costs (a)
|
Acquisition Related Costs (b)
|
Integration related costs (c)
|
Restructuring and Other Charges (d)
|
Gain on Sale of Asset (e)
|
Adjusted (Non-GAAP)
|
|||||||||
Income before taxes
|
$
|
141,326
|
|
407
|
|
5,436
|
|
580
|
|
3,249
|
|
(31
|
)
|
$
|
150,967
|
|
Taxes on income (f)
|
$
|
31,065
|
|
102
|
|
1,949
|
|
152
|
|
1,012
|
|
(10
|
)
|
$
|
34,270
|
|
Net income
|
$
|
110,261
|
|
305
|
|
3,487
|
|
428
|
|
2,237
|
|
(21
|
)
|
$
|
116,697
|
|
(DOLLARS IN THOUSANDS)
|
Reconciliation of Gross Profit
|
||||||||
|
Reported (GAAP)
|
Restructuring and Other Charges (a)
|
Operational Improvement Initiative Costs (b)
|
Adjusted (Non-GAAP)
|
|||||
Gross profit
|
$
|
346,268
|
|
190
|
|
791
|
|
347,249
|
|
(DOLLARS IN THOUSANDS)
|
Reconciliation of Operating Profit
|
||||||||||||||
|
Reported (GAAP)
|
Restructuring and Other Charges (a)
|
Operational Improvement Initiative Costs (b)
|
Acquisition Related Costs (c)
|
Legal Charges/Credits (d)
|
Gain on Sale of Asset (e)
|
Adjusted (Non-GAAP)
|
||||||||
Operating profit
|
$
|
124,426
|
|
190
|
|
802
|
|
786
|
|
25,000
|
|
(87
|
)
|
151,117
|
|
(DOLLARS IN THOUSANDS)
|
Reconciliation of Net Income
|
|||||||||||||||
|
Reported (GAAP)
|
Restructuring and Other Charges (a)
|
Operational Improvement Initiative Costs (b)
|
Acquisition Related Costs (c)
|
Legal Charges/Credits (d)
|
Gain on Sale of Asset (e)
|
Adjusted (Non-GAAP)
|
|||||||||
Income before taxes
|
$
|
113,390
|
|
190
|
|
802
|
|
786
|
|
25,000
|
|
(87
|
)
|
$
|
140,081
|
|
Taxes on income (f)
|
$
|
23,613
|
|
36
|
|
200
|
|
276
|
|
8,750
|
|
(29
|
)
|
$
|
32,846
|
|
Net income
|
$
|
89,777
|
|
154
|
|
602
|
|
510
|
|
16,250
|
|
(58
|
)
|
$
|
107,235
|
|
(DOLLARS IN THOUSANDS)
|
Reconciliation of Gross Profit
|
|||||||||||||
|
Reported (GAAP)
|
Operational Improvement Initiative Costs (a)
|
Acquisition and Related Costs (b)
|
Integration related costs (c)
|
FDA mandated product recall
(i)
|
Adjusted (Non-GAAP)
|
||||||||
Gross profit
|
$
|
1,121,311
|
|
1,473
|
|
16,055
|
|
316
|
|
3,500
|
|
$
|
1,142,655
|
|
(DOLLARS IN THOUSANDS)
|
Reconciliation of Selling and Administrative Expenses
|
|||||||||||||
|
Reported (GAAP)
|
Acquisition and Related Costs (b)
|
Integration related costs (c)
|
Legal Charges/Credits (d)
|
Tax Assessment (e)
|
Adjusted (Non-GAAP)
|
||||||||
Selling and administrative expenses
|
$
|
417,713
|
|
(4,447
|
)
|
(1,867
|
)
|
(1,000
|
)
|
(5,331
|
)
|
$
|
405,068
|
|
(DOLLARS IN THOUSANDS)
|
Reconciliation of Operating Profit
|
|||||||||||||||||||||
|
Reported (GAAP)
|
Operational Improvement Initiative Costs (a)
|
Acquisition Related Costs (b)
|
Integration related costs (c)
|
Legal Charges/Credits (d)
|
Tax Assessment (e)
|
Restructuring and Other Charges (f)
|
Gain on Sale of Asset (g)
|
FDA mandated product recall
(i)
|
Adjusted (Non-GAAP)
|
||||||||||||
Operating profit
|
$
|
454,245
|
|
1,473
|
|
20,502
|
|
2,501
|
|
1,000
|
|
5,331
|
|
14,183
|
|
(120
|
)
|
3,500
|
|
$
|
502,615
|
|
(DOLLARS IN THOUSANDS)
|
Reconciliation of Net Income
|
|||||||||||||||||||||||
|
Reported (GAAP)
|
Operational Improvement Initiative Costs (a)
|
Acquisition Related Costs (b)
|
Integration related costs (c)
|
Legal Charges/Credits (d)
|
Tax Assessment (e)
|
Restructuring and Other Charges (f)
|
Gain on Sale of Asset (g)
|
CTA Realization (h)
|
FDA mandated product recall
(i)
|
Adjusted (Non-GAAP)
|
|||||||||||||
Income before taxes
|
$
|
421,853
|
|
1,473
|
|
20,502
|
|
2,501
|
|
1,000
|
|
5,331
|
|
14,183
|
|
(120
|
)
|
(12,217
|
)
|
3,500
|
|
$
|
458,006
|
|
Taxes on income (j)
|
$
|
86,033
|
|
368
|
|
6,559
|
|
757
|
|
354
|
|
1,885
|
|
3,904
|
|
(39
|
)
|
—
|
|
1,238
|
|
$
|
101,059
|
|
Net income
|
$
|
335,820
|
|
1,105
|
|
13,943
|
|
1,744
|
|
646
|
|
3,446
|
|
10,279
|
|
(81
|
)
|
(12,217
|
)
|
2,262
|
|
$
|
356,947
|
|
(DOLLARS IN THOUSANDS)
|
Reconciliation of Gross Profit
|
||||||||||
|
Reported (GAAP)
|
Restructuring and Other Charges (a)
|
Operational Improvement Initiative Costs (b)
|
Acquisition and Related Costs (c)
|
Adjusted (Non-GAAP)
|
||||||
Gross profit
|
$
|
1,072,117
|
|
473
|
|
1,890
|
|
889
|
|
1,075,369
|
|
(DOLLARS IN THOUSANDS)
|
Reconciliation of Selling and Administrative Expenses
|
|||||||||||
|
Reported (GAAP)
|
Operational Improvement Initiative Costs (b)
|
Acquisition and Related Costs (c)
|
Legal Charges/Credits (d)
|
Adjusted (Non-GAAP)
|
|||||||
Selling and Administrative Expenses
|
$
|
408,372
|
|
(11
|
)
|
(1,146
|
)
|
(23,518
|
)
|
$
|
383,697
|
|
(DOLLARS IN THOUSANDS)
|
Reconciliation of Operating Profit
|
||||||||||||||
|
Reported (GAAP)
|
Restructuring and Other Charges (a)
|
Operational Improvement Initiative Costs (b)
|
Acquisition Related Costs (c)
|
Legal Charges/Credits (d)
|
Gain on Sale of Asset (e)
|
Adjusted (Non-GAAP)
|
||||||||
Operating profit
|
$
|
459,032
|
|
473
|
|
1,901
|
|
2,035
|
|
23,518
|
|
(2,998
|
)
|
483,961
|
|
(DOLLARS IN THOUSANDS)
|
Reconciliation of Net Income
|
|||||||||||||||
|
Reported (GAAP)
|
Restructuring and Other Charges (a)
|
Operational Improvement Initiative Costs (b)
|
Acquisition Related Costs (c)
|
Legal Charges/Credits (d)
|
Gain on Sale of Asset (e)
|
Adjusted (Non-GAAP)
|
|||||||||
Income before taxes
|
$
|
420,337
|
|
473
|
|
1,901
|
|
2,035
|
|
23,518
|
|
(2,998
|
)
|
$
|
445,266
|
|
Taxes on income (f)
|
$
|
95,223
|
|
90
|
|
475
|
|
542
|
|
8,339
|
|
(666
|
)
|
$
|
104,003
|
|
Net income
|
$
|
325,114
|
|
383
|
|
1,426
|
|
1,493
|
|
15,179
|
|
(2,332
|
)
|
$
|
341,263
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Operating Profit:
|
|
|
|
|
|
|
|
% Change - Reported (GAAP)
|
27%
|
|
(21)%
|
|
(1)%
|
|
(2)%
|
Items impacting comparability
(1)
|
(16)%
|
|
13%
|
|
5%
|
|
3%
|
% Change - Adjusted (Non-GAAP)
|
11%
|
|
(8)%
|
|
4%
|
|
—%
|
Currency Impact
|
(4)%
|
|
4%
|
|
2%
|
|
3%
|
% Change Year-over-Year - Currency Neutral Adjusted (Non-GAAP)**
|
7%
|
|
(4)%
|
|
5%
|
*
|
3%
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||
(DOLLARS IN MILLIONS)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Amortization Expense:
|
|
|
|
|
|
|
|
PowderPure
|
$0.6
|
|
$—
|
|
$1.2
|
|
$—
|
Fragrance Resources
|
1.6
|
|
—
|
|
4.4
|
|
—
|
David Michael
|
1.1
|
|
—
|
|
2.9
|
|
—
|
Lucas Meyer
|
2.0
|
|
2.0
|
|
5.8
|
|
6.3
|
Ottens Flavors
|
1.6
|
|
1.6
|
|
4.7
|
|
4.8
|
3(ii)
|
|
Bylaws of International Flavors & Fragrances Inc., effective as of August 1, 2017, incorporated by reference to Exhibit 3(ii) to the Registrant's Current Report on Form 8-K filed on August 1, 2017.
|
12
|
|
Statement re: Computation of Ratios
|
31.1
|
|
Certification of Andreas Fibig pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
|
Certification of Richard A. O'Leary pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32
|
|
Certification of Andreas Fibig and Richard A. O'Leary pursuant to 18 U.S.C. Section 1350 as adopted pursuant to the Sarbanes-Oxley Act of 2002.
|
101.INS
|
|
XBRL Instance Document
|
101.SCH
|
|
XBRL Taxonomy Extensions Schema
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
Number
|
|
Description
|
12
|
|
|
31.1
|
|
|
31.2
|
|
|
32
|
|
|
101.INS
|
|
XBRL Instance Document
|
101.SCH
|
|
XBRL Taxonomy Extensions Schema
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
Dated:
|
|
November 6, 2017
|
By:
|
|
/s/ Andreas Fibig
|
|
|
|
|
|
Andreas Fibig
|
|
|
|
|
|
Chairman of the Board and Chief Executive Officer
|
|
|
|
|
|
|
Dated:
|
|
November 6, 2017
|
By:
|
|
/s/ Richard A. O'Leary
|
|
|
|
|
|
Richard A. O'Leary
|
|
|
|
|
|
Executive Vice President and Chief Financial Officer
|
1 Year International Flavors an... Chart |
1 Month International Flavors an... Chart |
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