IFF Reports Strong First Quarter 2015 Results
Currency Neutral Sales Grew 6%; Currency Neutral Adjusted EPS Increased 13%
First Quarter 2015 Results
- Currency neutral sales increased 6% reflecting broad-based growth in both businesses and across all regions. Sales to the emerging markets, which now represent 51% of total company sales, grew 9% on a currency neutral basis.
-
Currency neutral adjusted operating profit increased 10% versus the
prior year quarter driven by strong sales growth, and manufacturing
and RSA cost leverage. The net impact on adjusted earnings per share
(EPS) was positive, increasing 13% on a currency neutral basis to
$1.45 per share in the quarter.
-
Reported sales increased
$4.7 million , or 1%, to$774.9 million from$770.2 million in the prior year quarter. On a reported basis, operating profit rose$5.7 million , or 4%, to$161.8 million from$156.1 million in the prior year quarter and reported diluted EPS rose 21% to$1.57 from$1.30 .
Schedules at the end of this release contain reconciliations of reported GAAP to non-GAAP financial metrics.
Beginning this quarter, we refer to “currency neutral,” instead of “local currency.” The change is solely a change in terminology and the underlying calculation of the measure remains the same.
Management Commentary
“We are pleased with our performance in the first quarter.” said IFF
Chairman and CEO
First Quarter 2015 Segment Results
Fragrances Business Unit
- Currency neutral sales growth was 5% as nearly all regions delivered mid to high single-digit growth.
-
Fine Fragrances currency neutral sales declined by 2%, against very
strong 10% growth reported in the year-ago period. A double-digit
increase in
Greater Asia was more than offset by softness inNorth America and EAME, both of which compared to double-digit growth in the prior-year period. - Consumer Fragrances delivered strong currency neutral sales growth of 9% led by double-digit growth in Fabric Care and Home Care, as well as mid-single digit growth in Hair Care.
- Fragrance Ingredients currency neutral sales declined 2% compared to high double-digit gains in the prior year quarter.
-
Reported sales decreased 1% to
$397.8 million in the first quarter of 2015 compared with$403.7 million in the prior year quarter. -
Fragrances segment profit decreased 6%, or
$5.6 million , to$81.6 million in the first quarter of 2015. Segment profit margin decreased to 20.5%, down 110 basis points from 21.6% in the prior year quarter as unfavorable net impact of price to input costs and a negative impact from currency more than offset continued cost control discipline and productivity programs.
Flavors Business Unit
-
Currency neutral sales grew 9% in the first quarter, against a 5%
year-ago comparison, with growth across all regions led by
double-digit growth in
Latin America andNorth America and high single-digit growth in EAME. - On a category basis, Beverages grew high double-digits with growth across all regions driven by new win performance and strong innovative solutions for better-for-you products. Growth was also achieved in all other categories including Dairy, Sweet and Savory.
-
Reported sales increased 3%, or
$10.6 million , to$377.1 million from$366.5 million in the prior year quarter. -
Flavors segment profit increased 5%, or
$4.7 million , to$92.7 million in the first quarter of 2015. Segment profit margin improved 60 basis points to 24.6% from 24.0% in the prior year quarter, reflecting topline growth, mix benefits, productivity initiatives and disciplined cost control that more than offset the negative impact of currency.
Management Commentary
Mr. Fibig continued, “Looking to the balance of year, we continue to believe we can deliver attractive returns to our shareholders. On a currency neutral basis, we expect all of our key financial metrics to be in line with our long-term targets in 2015. Yet, if global currencies remain where they are today throughout the rest of the year, we expect adjusted operating profit and adjusted EPS to grow low to mid-single-digits.”
Audio Webcast
A live webcast to discuss the Company's first quarter 2015 financial
results will be held today,
About IFF
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 the second quarter and full year
2015, and our ability to generate shareholder returns and sustain our
long-term growth performance. These forward-looking statements are
qualified in their entirety by cautionary statements and risk factor
disclosures contained in the Company’s
International Flavors & Fragrances Inc. |
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Consolidated Income Statement |
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(Amounts in thousands except per diluted share data) |
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(Unaudited) |
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Three Months Ended March 31, | ||||||||||||
2015 | 2014 | % Change | ||||||||||
Net sales | $ | 774,907 | $ | 770,224 | 1 | % | ||||||
Cost of goods sold | 428,630 | 428,812 | (0 | )% | ||||||||
Gross profit | 346,277 | 341,412 | 1 | % | ||||||||
Research and development | 63,462 | 61,504 | 3 | % | ||||||||
Selling and administrative | 120,835 | 123,733 | (2 | )% | ||||||||
Restructuring and other charges | 187 | 122 | ||||||||||
Operating Profit | 161,793 | 156,053 | ||||||||||
Interest expense | 11,095 | 11,677 | ||||||||||
Other (income) expense, net |
(5,710 | ) | 1,443 | |||||||||
Pretax income | 156,408 | 142,933 | 9 | % | ||||||||
Income taxes | 28,150 | 36,226 | (22 | )% | ||||||||
Net income | $ | 128,258 | $ | 106,707 | 20 | % | ||||||
Earnings per share - basic | $ | 1.58 | $ | 1.31 | ||||||||
Earnings per share - diluted | $ | 1.57 | $ | 1.30 | ||||||||
Average shares outstanding | ||||||||||||
Basic | 80,654 | 81,053 | ||||||||||
Diluted | 81,195 | 81,732 | ||||||||||
International Flavors & Fragrances Inc. |
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Condensed Consolidated Balance Sheet |
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(Amounts in thousands) |
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(Unaudited) |
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March 31, | December 31, | |||||||
2015 | 2014 | |||||||
Cash & cash equivalents | $ | 443,689 | $ | 478,573 | ||||
Receivables | 525,260 | 493,768 | ||||||
Inventories | 536,465 | 568,729 | ||||||
Other current assets | 249,696 | 168,957 | ||||||
Total current assets | 1,755,110 | 1,710,027 | ||||||
Property, plant and equipment, net | 692,008 | 720,268 | ||||||
Goodwill and other intangibles, net | 750,201 | 752,041 | ||||||
Other assets | 309,853 | 312,285 | ||||||
Total assets | $ | 3,507,172 | $ | 3,494,621 | ||||
Bank borrowings and overdrafts, and | ||||||||
current portion of long-term debt | $ | 8,379 | $ | 8,090 | ||||
Other current liabilities | 478,941 | 510,718 | ||||||
Total current liabilities | 487,320 | 518,808 | ||||||
Long-term debt | 935,170 | 934,232 | ||||||
Non-current liabilities | 512,585 | 518,892 | ||||||
Shareholders' equity | 1,572,097 | 1,522,689 | ||||||
Total liabilities and shareholders' equity | $ | 3,507,172 | $ | 3,494,621 | ||||
International Flavors & Fragrances Inc. |
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Consolidated Statement of Cash Flows |
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(Amounts in thousands) |
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(Unaudited) |
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Three Months Ended March 31, | |||||||||||
2015 | 2014 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 128,258 | $ | 106,707 | |||||||
Adjustments to reconcile to net cash provided by operations: | |||||||||||
Depreciation and amortization | 19,985 | 22,830 | |||||||||
Deferred income taxes | 13,932 | 8,246 | |||||||||
(Gain) loss on disposal of assets | 34 | (811 | ) | ||||||||
Stock-based compensation | 5,387 | 4,695 | |||||||||
Pension contributions | (54,048 | ) | (5,316 | ) | |||||||
Changes in assets and liabilities, net of Aromor acquisition: | |||||||||||
Current receivables | (62,891 | ) | (41,569 | ) | |||||||
Inventories | 13,172 | (591 | ) | ||||||||
Accounts payable | (3,061 | ) | (11,989 | ) | |||||||
Accruals for incentive compensation | (27,675 | ) | (62,282 | ) | |||||||
Other current payables and accrued expenses | 20,264 | 1,096 | |||||||||
Changes in other assets/liabilities | (21,881 | ) | 13,977 | ||||||||
Net cash provided by operating activities | 31,476 | 34,993 | |||||||||
Cash flows from investing activities: | |||||||||||
Cash paid for acquisition, net of cash received |
— | (102,400 | ) | ||||||||
Additions to property, plant and equipment | (19,381 | ) | (33,836 | ) | |||||||
Proceeds from life insurance contracts | — | 12,308 | |||||||||
Maturity of net investment hedges | — | (472 | ) | ||||||||
Proceeds from disposal of assets | 1,450 | 2,042 | |||||||||
Net cash used in investing activities | (17,931 | ) | (122,358 | ) | |||||||
Cash flows from financing activities: | |||||||||||
Cash dividends paid to shareholders | (37,971 | ) | (31,743 | ) | |||||||
Net change in revolving credit facility borrowings and overdrafts | 265 | 1,309 | |||||||||
Proceeds from issuance of stock under stock plans | 227 | 913 | |||||||||
Excess tax benefits on stock-based payments | 8,597 | 315 | |||||||||
Purchase of treasury stock | (10,660 | ) | (20,122 | ) | |||||||
Net cash used in financing activities | (39,542 | ) | (49,328 | ) | |||||||
Effect of exchange rates changes on cash and cash equivalents | (8,887 | ) | (228 | ) | |||||||
Net change in cash and cash equivalents | (34,884 | ) | (136,921 | ) | |||||||
Cash and cash equivalents at beginning of year | 478,573 | 405,505 | |||||||||
Cash and cash equivalents at end of period | $ | 443,689 | $ | 268,584 | |||||||
International Flavors & Fragrances Inc. |
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Business Unit Performance |
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(Amounts in thousands) |
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(Unaudited) |
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Three Months Ended March 31, | ||||||||||
2015 | 2014 | |||||||||
Net Sales | ||||||||||
Flavors | $ | 377,108 | $ | 366,505 | ||||||
Fragrances | 397,799 | 403,719 | ||||||||
Consolidated | 774,907 | 770,224 | ||||||||
Segment Profit | ||||||||||
Flavors | 92,727 | 88,063 | ||||||||
Fragrances | 81,598 | 87,166 | ||||||||
Global Expenses | (11,564 | ) | (16,435 | ) | ||||||
Restructuring and other charges, net | (187 | ) | (122 | ) | ||||||
Acquisition and related costs | (500 | ) | — | |||||||
Operational improvement initiative costs | (281 | ) | (2,619 | ) | ||||||
Operating profit | 161,793 | 156,053 | ||||||||
Interest Expense | (11,095 | ) | (11,677 | ) | ||||||
Other income, net | 5,710 | (1,443 | ) | |||||||
Income before taxes | $ | 156,408 | $ | 142,933 | ||||||
Operating Margin | ||||||||||
Flavors | 24.6 | % | 24.0 | % | ||||||
Fragrances | 20.5 | % | 21.6 | % | ||||||
Consolidated | 20.9 | % | 20.3 | % | ||||||
International Flavors & Fragrances Inc. |
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Sales Performance by Region and Category |
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(Unaudited) |
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First Quarter 2015 vs. 2014 | |||||||||||||||||
Percentage Change in Sales by Region of Destination | |||||||||||||||||
Fine |
Consumer |
Ingredients | Total Frag. | Flavors | Total | ||||||||||||
North America | Reported | -14% | 5% | -20% | -6% | 10% | 2% | ||||||||||
EAME | Reported | -13% | -1% | -8% | -7% | -4% | -6% | ||||||||||
Currency Neutral | -1% | 13% | 0% | 6% | 9% | 7% | |||||||||||
Latin America | Reported | -1% | 13% | 1% | 9% | 15% | 11% | ||||||||||
Currency Neutral | 2% | 16% | -4% | 11% | 21% | 14% | |||||||||||
Greater Asia | Reported | 36% | 2% | 8% | 3% | 0% | 2% | ||||||||||
Currency Neutral | 38% | 3% | 17% | 6% | 4% | 5% | |||||||||||
Total | Reported | -10% | 4% | -8% | -1% | 3% | 1% | ||||||||||
Currency Neutral | -2% | 9% | -2% | 5% | 9% | 6% | |||||||||||
Note: Beginning this quarter, we refer to “currency neutral,” instead of “local currency.” The change is solely a change in terminology and the underlying calculation of the measure remains the same.
Currency neutral sales growth is calculated by translating prior year sales at the exchange rates used for the corresponding 2015 period.
International Flavors & Fragrances Inc. |
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GAAP to Non-GAAP Reconciliation |
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Foreign Exchange Impact |
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(Unaudited) |
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Sales |
Operating |
EPS | ||||||
% Change - Reported (GAAP) | 1% | 4% | 21% | |||||
Items Impacting Comparability | 0% | -2% | -11% | |||||
% Change - Adjusted (Non-GAAP) | 1% | 2% | 10% | |||||
Currency Impact | 5% | 7% | 3% | |||||
% Change - Currency Neutral (Adjusted) | 6% | 10%* | 13% | |||||
* The sum of these items do not foot due to rounding. | ||||||||
Note: Beginning this quarter, we refer to “currency neutral,” instead of “local currency.” The change is solely a change in terminology and the underlying calculation of the measure remains the same.
Currency neutral sales growth is calculated by translating prior year sales at the exchange rates used for the corresponding 2015 period.
International Flavors & Fragrances Inc. |
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GAAP to Non-GAAP Reconciliation |
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(Amounts in thousands) |
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(Unaudited) |
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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.
First Quarter 2015 | ||||||||||||||||||||||||||||||||
Items Impacting Comparability | ||||||||||||||||||||||||||||||||
Reported |
Restructuring |
Operational |
Tax |
Acquisition |
Adjusted |
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Net Sales | 774,907 | |||||||||||||||||||||||||||||||
Cost of Goods Sold | 428,630 | (281 | ) | (b) | ||||||||||||||||||||||||||||
Gross Profit | 346,277 | 281 | 346,558 | |||||||||||||||||||||||||||||
Research and Development | 63,462 | |||||||||||||||||||||||||||||||
Selling and Administrative | 120,835 | (500 | ) | (d) | 120,335 | |||||||||||||||||||||||||||
RSA Expense | 184,297 | |||||||||||||||||||||||||||||||
Restructuring and other charges, net | 187 | (187 | ) | (a) | ||||||||||||||||||||||||||||
Operating Profit | 161,793 | 187 | 281 | 500 | 162,761 | |||||||||||||||||||||||||||
Interest Expense | 11,095 | |||||||||||||||||||||||||||||||
Other Income, net | (5,710 | ) | ||||||||||||||||||||||||||||||
Income before taxes | 156,408 | 187 | 281 | 500 | ||||||||||||||||||||||||||||
Taxes on Income | 28,150 | 66 | 70 | 10,478 | (c) | 175 | 38,939 | |||||||||||||||||||||||||
Net Income | 128,258 | 121 | 211 | (10,478 | ) | 325 | 118,437 | |||||||||||||||||||||||||
Earnings per share - diluted | $ | 1.57 | $ | — | $ | — | $ | (0.13 | ) | $ | — | $ | 1.45 | (e) | ||||||||||||||||||
(a) | Costs related to the Fragrance Ingredients Rationalization. | |||||||||||||||||||||||||||||||
(b) | Related to a partial plant closing in Asia. | |||||||||||||||||||||||||||||||
(c) |
Settlements due to favorable tax rulings in jurisdictions for
which reserves were previously |
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(d) | Related to the acquisition of Henry H. Ottens Manufacturing Co., Inc. Ottens Flavors. | |||||||||||||||||||||||||||||||
(e) | The sum of these items do not foot due to rounding. |
First Quarter 2014 | ||||||||||||||||||||
Items Impacting Comparability | ||||||||||||||||||||
Reported |
Restructuring |
Operational |
Adjusted |
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Net Sales | 770,224 | |||||||||||||||||||
Cost of Goods Sold | 428,812 | (2,250 | ) | (a) | (369 | ) | (b) | |||||||||||||
Gross Profit | 341,412 | 2,250 | 369 | 344,031 | ||||||||||||||||
Research and Development | 61,504 | |||||||||||||||||||
Selling and Administrative | 123,733 | |||||||||||||||||||
RSA Expense | 185,237 | |||||||||||||||||||
Restructuring and other charges, net | 122 | (122 | ) | |||||||||||||||||
Operating Profit | 156,053 | 2,372 | 369 | 158,794 | ||||||||||||||||
Interest Expense | 11,677 | |||||||||||||||||||
Other Income, net | 1,443 | |||||||||||||||||||
Income before taxes | 142,933 | 2,372 | 369 | |||||||||||||||||
Taxes on Income | 36,226 | 831 | 90 | 37,147 | ||||||||||||||||
Net Income | 106,707 | 1,541 | 279 | 108,527 | ||||||||||||||||
Earnings per share - diluted | $ | 1.30 | $ | 0.02 | $ | — | $ | 1.32 | ||||||||||||
(a) | Costs related to the Fragrance Ingredients Rationalization. | |||||||||||||||||||
(b) | Related to plant closing in Europe and partial closing in Asia. |
Source:
International Flavors & Fragrances Inc.
VP, Global Corporate
Communications & Investor Relations:
Michael DeVeau,
212-708-7164