UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
June 5, 2013
Date of Report (Date of earliest event reported)
INTERNATIONAL FLAVORS & FRAGRANCES INC.
(Exact Name of Registrant as Specified in Charter)
| NEW YORK | 1-4858 | 13-1432060 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
521 WEST 57th STREET
NEW YORK, NEW YORK 10019
(Address of Principal Executive Offices) (Zip Code)
(212) 765-5500
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 7.01. | Regulation FD Disclosure. |
As previously announced, International Flavors & Fragrances Inc. (the “Company”) is holding its 2013 Investor Day on Wednesday, June 5, 2013 in New York, New York. Interested parties can access a live audio webcast within the Investor Relations section of the Company’s website at www.iff.com. For those unable to listen to the live audio webcast, a replay will be accessible on the Investor Relations section of the Company’s website approximately 48 hours after the event and will remain available for one year after the event. The presentations beginning at 8:00 a.m. EDT are being furnished as Exhibit 99.1 to this Current Report on Form 8-K.
Cautionary Statement Regarding Forward-Looking Information
The presentations furnished with this Current Report on Form 8-K include “forward-looking statements” under the Federal Private Securities Litigation Reform Act of 1995, including statements regarding the Company’s expectations concerning its future results, performance and the growth opportunities for the business, its product portfolio and R&D pipeline, the expected development of commercialization of sustainable, cost-effective ingredients, and its ability to execute on its long-term strategic plan and reach its long-term goals. These forward-looking statements are qualified in their entirety by cautionary statements and risk factor disclosures contained in the Company’s SEC filings, including the Company’s Annual Report on Form 10-K filed with the SEC on February 26, 2013. The Company wishes to caution readers that certain important factors may affect 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, the economic climate for the Company’s industry and demand for the Company’s products, fluctuations in the price, quality and availability of raw materials, changes in consumer preferences, the effects of any unanticipated costs and construction or start-up delays in the expansion of any of the Company’s facilities, the Company’s ability to implement its business strategy, including the achievement of anticipated cost savings, profitability, realization of growth targets, the Company’s ability to successfully develop new and competitive products and to enter and expand its sales in new and other emerging markets. 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 update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Non-GAAP Financial Measures
Certain of the presentations furnished with this Current Report on Form 8-K contain non-GAAP financial measures, including (i) adjusted EPS, (ii) adjusted operating profit, (iii) adjusted operating profit margin, (iv) local currency sales, (v) LFL, or like-for-like local currency sales, (vi) adjusted effective tax rate, (vii) adjusted segment profit, (viii) adjusted segment profit margin, (ix) adjusted return on invested capital, (x) core working capital and (xi) adjusted cash flow from operations. These measures are not intended to represent a presentation in accordance with GAAP. In discussing the Company’s historical and expected future results and financial condition, the Company believes it is meaningful for investors to be made aware of and to be
assisted in a better understanding of, on a period-to-period comparable basis, financial amounts both including and excluding identified items. The Company believes such non-GAAP measures provide investors with an overall perspective of the period-to-period performance of its business. In addition, management internally reviews each of these non-GAAP measures to evaluate performance on a comparative period-to-period basis in terms of absolute performance, trends and expected future performance with respect to our business. A material limitation of these non-GAAP measures is that such measures do not reflect actual GAAP amounts. The Company compensates for such limitations by presenting the reconciliations contained in the furnished presentations to the most directly comparable GAAP measure. These non-GAAP measures may not be comparable to similarly titled measures used by other companies.
| Item 9.01. | Financial Statements and Exhibits. |
| (d) | Exhibits. |
| Exhibit |
Description | |
| 99.1 | Investor Day Presentation Materials dated June 5, 2013. | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| INTERNATIONAL FLAVORS & FRAGRANCES INC. | ||||||
| Date: June 5, 2013 | By: | /s/ Kevin C. Berryman | ||||
| Name: | Kevin C. Berryman | |||||
| Title: | Executive Vice President | |||||
| and Chief Financial Officer | ||||||
EXHIBIT INDEX
| Exhibit |
Description | |
| 99.1 | Investor Day Presentation Materials dated June 5, 2013. | |
Exhibit 99.1
Exhibit 99.1
Investor Day
2013
Innovation
The Foundation of Our Success
Doug Tough
Chairman of the Board & Chief Executive Officer
June 5, 2013
Senior Leadership Team
Doug Tough Dr. Ahmet Baydar
Chairman of the Board & Chief Executive Officer Senior Vice President, Research & Development
Kevin Berryman Francisco Fortanet
Executive Vice President & Chief Financial Officer Senior Vice President, Operations
Nicolas Mirzayantz Anne Chwat
Group President, Fragrances Senior Vice President, General Counsel and Corporate Secretary
Hernan Vaisman
Group President, Flavors Angelica Cantlon
Senior Vice President, Human Resources
Meeting Agenda
Wednesday, June 5th
Meeting Time
Doug Tough 8:00 am 8:20 am Hernan Vaisman 8:20 am 8:40 am Nicolas Mirzayantz 8:40 am 9:00 am Dr. Ahmet Baydar 9:00 am 9:20 am Break 9:20 am 9:30 am Technology Demonstrations 9:30 am 11:00am Francisco Fortanet 11:00am 11:20am Kevin Berryman 11:20am 11:40 am Doug Tough 11:40 am 12:00 pm Q&A: Adjourn (Box Lunch) 12:00 pm 1:00 pm
Technology Demonstrations
Flavors (Upstairs)
FlavorFit™—satisfying consumers’ need for healthier choices, without compromising on taste
Citrus Toolbox unique and authentic citrus flavors for the most refreshing beverages
Fragrances (Downstairs)
Encapsulation encapsulated fragrances smell fresher longer
Acqua di Gioia Giorgio Armani birth of a Fine Fragrance, using Naturals and Consumer Insights (Scent Emotions)
Classics —creating the classic scents of yesterday, today and tomorrow
“We create unique scent and taste experiences people love”
Member of S&P 500
Listed on NYSE
Market cap of ~$6.5 billion
$2.8 billion in sales and $488 million in adjusted operating profit (FY 2012)
Leading innovator
Create flavors & fragrances for the food, beverage and beauty industries
Company Overview
Geographic Global Reach
5,700 Employees
Serving Consumers in 100 Countries
Operating in 32 Countries
47% sales to Emerging Markets
Product Diversified Portfolio
49% Flavors
51% Fragrances
Multiple End-Use Categories
Naturals
Customer Outstanding Base
Strong Multinationals
Leading Regionals
Stable Customer Base Committed to Growing
IFF’s Business Model A Holistic Chain
Consumer Creative Operational Customer
R&D
Insight Centers Excellence Intimacy
Based on rigorous Discovery of Commercializing Efficiency in all Increase
consumer new materials innovative we do participation on
research Development of solutions Internal margin core supplier lists
400,000 consumer new technologies Network of 22 improvement Deep
interviews Creation of new creative centers initiatives understanding of
every year compounds around the world Productivity our customers’
Understand trends Work with our and efficiency brands and goals
Enhance existing
in all parts of ingredients and customers’ drive profitability Knowledge
world; e.g., compounds product of customers’
China, India development market positioning
and Indonesia +235 patents since groups
2000; 11 in 2012
Successfully Creating Consumer-Preferred Products
2010 Strategic Initiatives
Introduced Economic Profit to prioritize investments
Developed a process for prioritizing R&D programs/investment
Ingrained philosophy of investing resources behind advantaged categories
Created a roadmap for achieving strong financial results
Allows us to track and measure progress
Goal is to maximize returns on investments
Results of 2011 Strategic Assessment
Flavors & Fragrances are both attractive
Bulk of portfolio is EP positive
Some categories and customers needed remediation
We have substantial organic growth opportunities
M&A could be used to accelerate organic growth
Three Strategic Pillars
Leverage Geographic Reach
Strengthen Innovation Platform
Maximize Portfolio
Leverage Geographic Reach
Sales Profile
43% 49%
57% 51%
Q1-2010 Q1-2013
Developed Emerging
Markets Markets
Revenues by Region (1)
Latin Europe,
America Africa and
16% Middle East
32%
25%
North
America 27%
Greater Asia
75% of our Sales are
Outside North America
1.Chart above based on 2012 total revenue of $2.8 billion
Strengthen Innovation Platform
Our Innovations, such as Health & Wellness, or Encapsulated Fragrances, or other modulators such as malodor, deliver:
Customer Benefit drives market share
Consumer Benefit meets an unmet need
IFF Benefit innovation drives gross margin
Innovation is our life-blood
Maximize Portfolio: Consolidated Portfolio Impact
Leveraging Geographical Reach, Our Innovation Platforms and the Profitability Initiatives Have Led to Substantial Improvement in Our Portfolio Performance Since 2010
2010 Portfolio Value Breakdown
% Capital Employed
15%
EP Positive
20% EP Break-even
65% EP Negative
Focus on profitable categories, customers and regions
Exit of low-margin sales activities
New plants are state-of-the-art
Plant closings to drive operating efficiencies
% of capital employed that is generating returns above cost of capital
Investment in Our People
We have Focused on Attraction,
Development and Retention of Our Talent
Regional Recruiter Model
3 Pronged Development Approach
Management tools/employee transparency
Retention of Critical Talent
Creating a Competitive Advantage
Increase R&D Investments to Improve Innovation
Develop superior products and delivery systems that address consumer needs
Deepen understanding of customers’ brands
Use innovation to drive continuous margin improvement
Invest in facilities, creative centers, and people to support growth
Investor Day
2013
Innovation
The Foundation of Our Success
Investor Day
2013
Innovation
The Foundation of Our Success
Hernan Vaisman
Group President, Flavors
June 5, 2013
Global Flavors Market Potential
IFF Flavors Estimated Market Share Increased 2 ppts to14% Since 2007
Global Flavors Market Breakdown
by Category
Other
Dairy 3%
8%
Beverage
Sweet 35%
21%
Savory
33%
Global Flavors Market Breakdown
by Region
Latin
America
11%
EAME
33%
North
America
27%
Greater
Asia
29%
Total Flavors Market Estimated at: $9.6B*
(3-5% CAGR since 2007)
Source: IAL Consultants & Internal Estimates *2011
Progress Since 2010
Average local currency sales LFL growth of 9% with a quarterly range of 6% to 12%
Emerging markets account for 50% of Q1-2013 sales, up from 47% in Q1-2010
Health & Wellness and Naturals platforms are significant contributors to current portfolio strength
Segment profit increased 13% 3-Year CAGR to $298 million for full year 2012
Local Currency Sales Growth
LFL Sales Growth has Accelerated
Over Past 3 Years
9%
6%
2007—2009 2010—2012
Enlarged footprint in emerging markets of Asia and Middle East
Invested in profitable categories and customers to drive continued growth
Increased R&D investment to improve innovation and deliver superior products
Emerging Market Presence
2010—Q1 2013 Expanding Emerging Market Sales
55%
53% 52% 51% 50%
50% FY FY FY Q1 ’13
47% 48% 49% 50%
45%
Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013
Developed Emerging
Flavors Segment Profit Drivers
Segment Margin
(2010-2012—Percent)
2.0 21.6
20.2 0.6
FY 2010 Net Price and Strategic FY 2012
Input Costs Initiatives
Segment profit increased $55 million since 2010, despite pressure from increased raw material input costs
Profit expansion due to exit of low-margin sales activities, positive mix, operating efficiencies, and other cost-savings initiatives
Consistent Growth & Profitability
Double-digit adjusted segment profit growth accelerated
Improved adjusted segment profit due to consistent sales growth, ongoing innovations and targeted focus on higher-margin business opportunities
Ongoing innovations and market coverage initiatives should drive future growth
Adjusted Segment Profit
21.6%
$300 21.1%
$250 20.2%
18.4% 19.3%
$200 18.6%
16.7%
$150 $284 $298
$243
$100 $187 $201 $209
$149
$50
$-
2006 2007 2008 2009 2010 2011 2012
Execution on Strategic Growth Pillars
Strengthen Innovation Platform
Leverage Geographic Reach
Maximize Portfolio
Leverage Geographic Reach
Aligning Our Investments in Manufacturing Capacity and Labs with Fast-Growing Markets
Greater China
~7%
Expected Market Growth
India
~9%
Expected Market Growth
Indonesia
~5%
Expected Market Growth
Turkey
~5%
Expected Market Growth
Source: IAL Consultants & Internal Estimates
Strengthen Innovation Platform
Consumer Drivers
Naturalness Health & Wellness Taste Affordability
vity
Acti Naturals Flavor Encapsulation & High-Impact
of Modulators Delivery Molecules
s Freshness Mitigate effects of Flavor release Cost reduction /
Pillar Authenticity reduction Sodium, sugar, fat Longer-lasting taste concentrated flavors
Flavor masking
IFF
Maximize Portfolio
In 2012 All Categories are EP Positive
Negative
~20%
Positive
Positive 100%
~80%
2010 2012
Almost all categories and regions showed significant improvement vs. 2009; all are EP positive
Q2 ’13 will be the last quarter with impact from the exit of low-margin sales activities
Expect to have cumulatively exited approximately $55 million since 2010
Strategic Priorities Going Forward
Leverage Geographic Reach
Additional investment in targeted developing markets in Africa, Middle East, Central and Southeast Asia
Exploring additional opportunities in largest developing countries where different ethnic/religious groups demand specific tastes
Improving market coverage in developed countries where we have underdeveloped market share
Strategic Priorities Going Forward
Strengthen Innovation Platform
Natural Flavors ingredients
New game-changing Flavor modulators and existing tool box
High-impact molecules through analytical and organic chemistry
Delivery Systems
Strategic Priorities Going Forward
Maximize Portfolio
Focus on profitable sub-categories where IFF has currently significant opportunities for growth
Target technology-driven taste solutions instead of commodities
Cost-savings and margin expansion through manufacturing efficiencies
Summary
Strategic Priorities
Enlarge Footprint
Continue alignment of innovation activities to consumer needs
Pursue opportunities to better position IFF in more profitable categories
Financial Long Expectations -Term
Sales growth of 2 to 3 percentage points above industry
Improve gross margin
Segment profit growth of high single-digits
Investor Day
2013
Innovation
The Foundation of Our Success
Investor Day
2013
Innovation
The Foundation of our Success
Nicolas Mirzayantz
Group President, Fragrances
June 5, 2013
Global Fragrance Compound Market
IFF Fragrance Compound Market Share Increased 2 ppts to19% Since 2009
Global Fragrance Compound Market
by Category
Personal
Wash Fine
15% Fragrance
27%
Home
Care
16%
Beauty Fabric
Care Care
17% 25%
Global Fragrance Compound Market
by Region
Latin
America
17% Europe,
Africa,
Middle
East
Asia 40%
20%
North
America
23%
Total Fragrance Compounds Market Estimated at $6B and Growing 2-3% Per Year
Source:
2011 IAL Consultants & Internal Estimates
Performance Update
8% average (2010-2012) local currency sales growth for Fragrance Compounds due to strong win rates, increased core list participation, innovation and emerging markets growth
Innovation (e.g., encapsulation) driving sales & profitability
Emerging markets growing importance
Ingredients sales declined due to competitors’ penetration in high volume, low value product portfolio
Actions taken to rationalize portfolio (including Augusta closing)
8% 3-Year CAGR Adjusted Segment Profit thru 2012
Local Currency Sales Growth
Acceleration in Fragrance Compounds
Competitive Pressure in Ingredients
Ingredients 8%
Compounds
1%
0% 0%
2007-2009 2010-2012
More than 80% of IFF Fragrance sales are Fragrance Compounds
Strengthening resources in emerging markets
Investment in higher profit categories and customers to drive continued growth
Increased R&D investment to improve innovation and deliver superior products
Leverage Geographic Reach
Emerging Market Sales: 48% of Total Fragrance Sales and 54% of Compound Sales
60%
58% 56% 54% 52%
50% FY FY FY Q1
42% 44% 46% 48%
40%
Q1 2010Q2 2010Q3 2010Q4 2010Q1 2011Q2 2011Q3 2011Q4 2011Q1 2012Q2 2012Q3 2012Q4 2012Q1 2013
Developed Emerging
Adjusted Segment Profit Drivers
Adjusted Segment Margin
(2010-2012—Percent)
| 17.3% |
|
2.8% |
| 2.0% |
|
16.5% |
FY 2010 Net Price and Strategic FY 2012
Input Costs Initiatives
280 bps reduction due to unprecedented input cost increases
200 bps improvement from strategy execution
Resources focused on higher profit businesses is improving mix
Corrective actions to improve negative EP businesses
Adjusted Segment Profit Growth
2007-2009 2010-2012
3-Year CAGR
8%
-5%
8% CAGR adjusted segment profit under new strategy execution, reversing downward trend; despite substantial input cost increases
Investing in and successfully growing higher profit businesses
Innovation / encapsulation technology key sales growth driver
Fixing unprofitable businesses and streamlining manufacturing footprint
Execution on Strategic Growth Pillars
Leverage Strengthen Maximize
Geographic Reach Innovation Platform Portfolio
Leverage Geographic Reach
Of Our Top 10 Markets, 5 are in Emerging Markets; $54 Million in Capital Spending Since 2010
Greater Asia
$1.2 Billion Market Potential > 5% Growth
New technology center in Mumbai
Expanded C&A Resources in Singapore
New Singapore plant
Latin America
$1 Billion Market Potential > 4.5% Growth
2009 Investment in Sao Paulo Creative Center Leveraged
Expanded C&A Resources in Mexico
Source: IAL Consultants & Internal Estimates
Strengthen Innovation Platform
Consumer Drivers
Multi-Sensorial
Experience Health & Wellness Sustainability Affordability
s
Platform “I enjoy “I take care “I take care
every moment” of myself” of our Planet” “I can afford it”
R&D New Molecules New Molecules New Molecules New Molecules
IFF Naturals Naturals Naturals Process Engineering
Delivery Systems Delivery Systems Process Engineering Performance Insight
Performance Insight Performance Insight
Malodor
Maximize Portfolio
Economic Profit
Analysis of Portfolio
10% 11% Negative
11% Neutral
40% Positive
78%
50%
2010 2012
Good progress in improving economic profit performance
Executed strategic alignment program in 2012
Profitability restored through pricing & margin initiatives
Fact-based analysis indicates fixing remaining unprofitable portfolio creates more value than exiting
Fragrance Ingredients Overview
Ingredients is Primarily Focused on Supplying Cost Advantaged Ingredients to IFF Fragrances Compounds; Excess Capacity is Sold; External Ingredients Sales Continue to Generate Positive EP
> 50% of Fragrance Compound Raw
Materials Supplied by IFF Ingredients
0
IFF
Ingredients
3rd Party
Suppliers
< 20% of Total Fragrance
Sales are External Ingredients
External
Ingredients
Fragrance
Compounds
Strategic Initiatives/Realignment—Ingredients
Increased use of IFF ingredients in Fragrance Compounds
? Increased pipeline of new molecules for internal use
Rationalizing portfolio of ingredients and manufacturing assets
Augusta plant closure planned for mid 2014
Long-term Amyris Biotechnology collaboration
Investing in new pilot plant to increase speed to market for internally-used innovative and low cost molecules
Strategic Priorities Going Forward
Leverage Geographic Reach
Continuing our investments in fast growing emerging markets
? India
? China & South East Asia
? Brazil & Mexico
? Middle East
Strengthening our consumer insight leadership in emerging markets
Gain market share in developed markets
Strategic Priorities Going Forward
Strengthen Innovation Platform
New Molecules
– Create unique and differentiated fragrance experiences
– Provide low cost, high impact solutions for emerging markets
Naturals – differentiated & unique fragrance experiences
Delivery Systems – strengthening encapsulation leadership
Process Engineering – cost innovation and sustainability
Performance Insight – leverage modeling capabilities
Malodor – develop new malodor coverage systems
Strategic Priorities Going Forward
Maximize Portfolio
Leverage innovation to support margin enhancement
Accelerate growth in higher margin businesses
Continue to improve profitability of negative economic profit businesses
Execute Fragrance Ingredients strategy
Continue to drive proven productivity programs
Summary
Strategic Pillars
Leverage Geographic Reach
Strengthen Innovation Platform
Maximize Portfolio
Financial Long Expectations -Term
Compounds sales growth of 2% to 3% above industry
Stabilize external Fragrance Ingredients sales
Improve Gross Margin
Segment Profit growth of high single-digits
Investor Day
2013
Innovation
The Foundation of Our Success
Investor Day
2013
Research & Development
Ahmet Baydar
SVP, Research & Development
June 5, 2013
IFF Strategic Pillars
R&D Drives Progress Across Our 3 Strategic Pillars
Strategy
Leverage Strengthen
Geographic Innovation Maximize
Reach Platform Portfolio
R&D
R&D Strategy
Introduced Our Refreshed Research Strategy at 2011 Investor Day
Create Ingredients and Technologies to drive product superiority and differentiation
Focus Research Platforms on customer and consumer needs
Improve consumer preference, cost-efficiency, and drive growth
Broaden internal research capabilities and open innovation
Customer and Consumer Needs
Strengthened Consumer Insights and Customer Intimacy…
1Health Wellness & 3Taste Preferred or Scent 5Performance & Diffusion 7Compliance Regulatory
2Sustainability 4Naturals 6Malodor 8CostInnovation
Research Platforms
… to Direct Our 10 Research Platforms
Flavor Fragrance
1Flavor Modulation 3Delivery 5Fragrance Molecules 7Delivery 9Malodor Systems Systems
2FlavorNaturals 4High Impact 6Naturals Fragrance 8ProcessResearch 10Modeling
Portfolio Management Approach
Utilize an Economic Profit-Based Process to Prioritize Investment
2of Likelihood Success 4Prioritization Resource &
1Opportunity Market 3Value to IFF 5Execution
Progress on Innovation Strategy
Our Strategic Approach Is Accelerating the Rate and Impact of Innovation
Flavor Molecule Pipeline
Fragrance New Molecule Pipeline
Delivery Systems Portfolio
Cost Innovation
Total Innovation Pipeline
Flavor Modulation
Developing Next Generation of Flavor Modulation Technologies
Launched portfolio of exclusive healthy flavor technologies
Creating novel flavor modulators via isolates from biodiversity and receptor research
Flavor Naturals
Providing Healthier, Cost-Effective, Authentic Taste Solutions
Created robust pipeline of novel natural flavors, targeting:
Natural versions of existing molecules
Extracts with unique performance
Leveraging biotechnology to create sustainable, cost-effective naturals
Flavor Delivery Systems
Extending Our Flavor Encapsulation Solutions
Launched superior encapsulation technologies to deliver specific flavor attributes; e.g.:
Physical form
Protection
Time release
Creating pipeline of novel delivery technologies for challenging applications
Fragrance Molecules
Strengthening Portfolio and Providing Creative Teams with a Winning Edge
Launching strong portfolio of new molecules
Over short-, mid-, and long-term
Competitive edge for Compounds
Long-term value for Ingredients
Fragrance Naturals
Introducing Novel Naturals to Differentiate Our Fine Fragrance Creation
Leveraging sustainable cultivation, extraction, and cultivation techniques
Higher-impact unique naturals
Superior olfactive profiles
Expanding global sourcing and synergies between Flavors & Fragrances
Fragrance Delivery Systems
Creating the Next Generation of Encapsulation for New Category Applications
Built market leadership in Fabric Care; adapting for Personal Wash and Hair Care
Creating proprietary delivery systems to:
Expand into additional categories Drive breakthrough performance
Strengthen our IP
Sustainability: Green Chemistry
Ensuring Our Products and Processes Set Industry-Standard in Sustainability
Reducing energy use and waste via microreactors and proprietary catalysts
New ingredients and processes are eco-efficient and “green by design”
Renewable raw materials
Energy-efficient pathways
Biodegradable
Open Innovation: Value Drivers
External Collaborations Drive Value in 3 Key Ways
| 1 |
|
2 3 |
Provide Augment & Expand
Accelerate Innovation
Guidance Internal Innovation Horizons
Open Innovation: Scientific Advisory Board
Expert Guidance and Insight on Technical Approach
Steven V. Ley, Leslie B. Vosshall, Cheryl Perkins, Brian J. Willis, Thomas D. Sharkey,
Ph.D. Ph.D. M.S. Ph.D. Ph.D.
Professor of Professor of President, Former SVP of Professor and
Organic Chemistry, Molecular and Innovationedge; R&D and Department Chair
Cambridge Receptor Biology, Former CIO, Board Member, of Biochemistry,
University, UK; The Rockefeller Kimberly-Clark Quest F&F Michigan State
Commander of University University
British Empire
Open Innovation: Biotechnology
Building Biotechnology Expertise with Industry Leaders
Natural vanillin through biotechnology
Broad collaboration to pursue other targets
Focused on sustainable, cost-stable route to key IFF Fragrance ingredients
Key Takeaways
Accelerating rate and impact of innovation
R&D well-aligned to address key customer and consumer needs
Open Innovation becoming critical driver of progress
Strong innovation pipeline building IFF’s long-term competitive advantage
Investor Day
2013
Research & Development
| ANNUAL REVENUE GROWTH |
||||||||||||||||||||||||||||||||||||||||||||||||
| 2004 | 2005 | 2006 | 3-Year | 2007 | 2008 | 2009 | 3-Year | 2010 | 2011 | 2012 | 3-Year | |||||||||||||||||||||||||||||||||||||
| Total Company |
||||||||||||||||||||||||||||||||||||||||||||||||
| Reported Sales Growth |
7 | % | -2 | % | 5 | % | 3 | % | 9 | % | 5 | % | -3 | % | 4 | % | 13 | % | 6 | % | 1 | % | 7 | % | ||||||||||||||||||||||||
| Currency Impact |
-5 | % | -1 | % | 0 | % | -4 | % | -3 | % | 3 | % | 0 | % | -2 | % | 3 | % | ||||||||||||||||||||||||||||||
| Local Currency Sales Growth |
2 | % | -3 | % | 5 | % | 1 | % | 5 | % | 2 | % | 0 | % | 2 | % | 13 | % | 4 | % | 4 | % | 7 | % | ||||||||||||||||||||||||
| Flavors |
||||||||||||||||||||||||||||||||||||||||||||||||
| Reported Sales Growth |
12 | % | 9 | % | -1 | % | 7 | % | 11 | % | 12 | % | 2 | % | 8 | % | ||||||||||||||||||||||||||||||||
| Currency Impact |
-3 | % | -3 | % | 3 | % | -1 | % | -3 | % | 3 | % | ||||||||||||||||||||||||||||||||||||
| Local Currency Sales Growth |
9 | % | 6 | % | 2 | % | 6 | % | 10 | % | 9 | % | 5 | % | 8 | % | ||||||||||||||||||||||||||||||||
| Exit of Flavors Low Margin Sales Activities |
0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 3 | % | ||||||||||||||||||||||||||||||||||||
| Like-For-Like Local Currency Sales Growth |
9 | % | 6 | % | 2 | % | 6 | % | 10 | % | 9 | % | 8 | % | 9 | % | ||||||||||||||||||||||||||||||||
| Fragrance Compounds |
||||||||||||||||||||||||||||||||||||||||||||||||
| Reported Sales Growth |
5 | % | 1 | % | -4 | % | 1 | % | 14 | % | 4 | % | 3 | % | 7 | % | ||||||||||||||||||||||||||||||||
| Currency Impact |
-4 | % | -2 | % | 3 | % | 1 | % | -3 | % | 4 | % | ||||||||||||||||||||||||||||||||||||
| Local Currency Sales Growth |
1 | % | -1 | % | -1 | % | 0 | % | 15 | % | 1 | % | 7 | % | 8 | % | ||||||||||||||||||||||||||||||||
| Ingredients |
||||||||||||||||||||||||||||||||||||||||||||||||
| Reported Sales Growth |
9 | % | 5 | % | -4 | % | 3 | % | 15 | % | -6 | % | -12 | % | -1 | % | ||||||||||||||||||||||||||||||||
| Currency Impact |
-4 | % | -4 | % | 2 | % | 3 | % | -3 | % | 2 | % | ||||||||||||||||||||||||||||||||||||
| Local Currency Sales Growth |
5 | % | 1 | % | -2 | % | 1 | % | 18 | % | -9 | % | -10 | % | 0 | % | ||||||||||||||||||||||||||||||||
| QUARTERLY REVENUE GROWTH |
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| Q1 2010 | Q2 2010 | Q3 2010 | Q4 2010 | Q1 2011 | Q2 2011 | Q3 2011 | Q4 2011 | Q1 2012 | Q2 2012 | Q3 2012 | Q4 2012 | |||||||||||||||||||||||||||||||||||||
| Flavors |
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| Reported Sales Growth |
13 | % | 13 | % | 9 | % | 10 | % | 13 | % | 14 | % | 13 | % | 8 | % | 3 | % | 5 | % | 0 | % | 1 | % | ||||||||||||||||||||||||
| Currency Impact |
-5 | % | -2 | % | 1 | % | 1 | % | -1 | % | -6 | % | -5 | % | 0 | % | 2 | % | 3 | % | 6 | % | 2 | % | ||||||||||||||||||||||||
| Local Currency Sales Growth |
8 | % | 11 | % | 10 | % | 11 | % | 12 | % | 8 | % | 8 | % | 8 | % | 5 | % | 8 | % | 6 | % | 3 | % | ||||||||||||||||||||||||
| Exit of Flavors Low Margin Sales Activities |
0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 1 | % | 1 | % | 3 | % | 4 | % | ||||||||||||||||||||||||
| Like-For-Like Local Currency Sales Growth |
8 | % | 11 | % | 10 | % | 11 | % | 12 | % | 8 | % | 8 | % | 8 | % | 6 | % | 9 | % | 9 | % | 7 | % | ||||||||||||||||||||||||
The Company uses non-GAAP financial measures such as (i) local currency sales (which eliminates the effects that result from translating its international sales in U.S. dollars) and (ii) like-for-like sales (which excludes the impact of exiting low-margin sales activities, the impact of selling the Company’s fruit preparations business in Europe and foreign exchange) as the Company believes that these non-GAAP financial measures provide investors with an overall perspective of the period-to-period performance of our core business. Such information is supplemental to information presented in accordance with GAAP and is not intended to represent a presentation in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures used by other companies.
Adjusted Gross Margin
| (IN THOUSANDS U.S. $) |
FY 2010 | Q1 2013 | Margin Improvement | |||||||||
| As Reported Gross Profit |
1,092,602 | 311,360 | ||||||||||
| Operational Improvement Initiative Costs |
— | 1,198 | ||||||||||
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| Adjusted Gross Profit |
1,092,602 | 312,558 | ||||||||||
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| Net Sales |
2,622,862 | 727,836 | ||||||||||
| Adjusted Gross Margin |
41.7 | % | 42.9 | % | 1.2 | % | ||||||
The Company uses non-GAAP financial measures such as Adjusted Gross Profit and Adjusted Gross Margin (which exclude operational improvement initiative costs) as the Company believes that these non-GAAP financial measures provide investors with an overall perspective of the period-to-period performance of our core business. Such information is supplemental to information presented in accordance with GAAP and is not intended to represent a presentation in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures used by other companies.
ADJUSTED OPERATING PROFIT
| (IN THOUSANDS U.S. $) |
2003 | 2006 | 3-Year CAGR | 2009 | 3-Year CAGR | 2012 | 3-Year CAGR | |||||||||||||||||||||
| As Reported Operating Profit |
285,774 | 331,173 | 5.0 | % | 340,288 | 0.9 | % | 486,618 | 12.7 | % | ||||||||||||||||||
| Restructuring and Other Charges |
42,421 | 2,680 | 18,301 | 1,668 | ||||||||||||||||||||||||
| Employee Separation Costs |
— | — | 6,320 | — | ||||||||||||||||||||||||
| Insurance Recovery |
— | (3,565 | ) | — | — | |||||||||||||||||||||||
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| Adjusted Operating Profit |
328,195 | 330,288 | 0.2 | % | 364,909 | 3.4 | % | 488,286 | 10.2 | % | ||||||||||||||||||
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| ADJUSTED EARNINGS PER SHARE (EPS) | ||||||||||||||||||||||||||||
| (PER SHARE DATA U.S. $) |
2003 | 2006 | 3-Year CAGR | 2009 | 3-Year CAGR | 2012 | 3-Year CAGR | |||||||||||||||||||||
| As Reported EPS |
1.83 | 2.48 | 10.7 | % | 2.46 | -0.3 | % | 3.09 | 7.9 | % | ||||||||||||||||||
| Restructuring and Other Charges |
0.29 | 0.02 | 0.19 | 0.01 | ||||||||||||||||||||||||
| Employee Separation Costs |
— | — | 0.05 | — | ||||||||||||||||||||||||
| Insurance Recovery |
— | (0.03 | ) | — | — | |||||||||||||||||||||||
| Tax Settlement |
— | (0.04 | ) | — | — | |||||||||||||||||||||||
| Other Income (Primarily Asset Gains) |
— | (0.11 | ) | — | — | |||||||||||||||||||||||
| Spanish Tax Settlement |
— | — | — | 0.88 | ||||||||||||||||||||||||
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| Adjusted EPS |
2.12 | 2.32 | 3.1 | % | 2.69 | ¹ | 5.1 | % | 3.98 | 13.9 | % | |||||||||||||||||
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| 1 | The sum of Reported EPS plus the per share effects of items added back to reconcile to Adjusted EPS may not equal the total Adjusted EPS due to rounding differences. |
ADJUSTED EFFECTIVE TAX RATE
| 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | ||||||||||||||||||||||||||||
| As Reported Effective Tax Rate |
30.2 | % | 21.6 | % | 28.2 | % | 25.3 | % | 19.1 | % | 29.3 | % | 26.7 | % | 28.6 | % | 42.7 | % | ||||||||||||||||||
| Restructuring and Other Charges Tax Benefit |
0.6 | % | 1.0 | % | 0.0 | % | — | 0.7 | % | -0.6 | % | -0.4 | % | 0.0 | % | 0.0 | % | |||||||||||||||||||
| AJCA Tax Benefit |
— | 9.3 | % | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Tax Settlements |
— | — | 1.2 | % | 3.0 | % | 7.6 | % | — | — | — | — | ||||||||||||||||||||||||
| Curtailment Tax Benefit |
— | — | — | 0.2 | % | — | — | — | — | — | ||||||||||||||||||||||||||
| Asset Gain Tax Expense |
— | — | — | -0.1 | % | — | — | — | — | — | ||||||||||||||||||||||||||
| Employee Separation Costs Tax Benefit |
— | — | — | — | 0.2 | % | 0.1 | % | — | — | — | |||||||||||||||||||||||||
| Shared Service Implementation Tax Benefit |
— | — | — | — | 0.1 | % | — | — | — | — | ||||||||||||||||||||||||||
| Insurance Recovery Tax Expense |
— | — | 0.0 | % | — | -0.2 | % | — | — | — | — | |||||||||||||||||||||||||
| Other Income (Primarily Asset Gains) |
— | — | -0.3 | % | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Patent Litigation Settlement Benefit |
— | — | — | — | — | — | — | -1.5 | % | — | ||||||||||||||||||||||||||
| Spanish Tax Settlement |
— | — | — | — | — | — | — | — | -16.3 | % | ||||||||||||||||||||||||||
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| Adjusted Effective Tax Rate |
30.8 | % | 31.9 | % | 29.1 | % | 28.4 | % | 27.5 | % | 28.8 | % | 26.3 | % | 27.1 | % | 26.4 | % | ||||||||||||||||||
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The Company uses non-GAAP financial measures such as Adjusted Operating Profit, Adjusted Effective Tax Rate and Adjusted EPS (which excludes the impact of our restructuring and strategic initiatives, the AJCA tax benefit, tax settlements, curtailments, gains on asset sales, employee separation costs, cost associated with the implementation of our shared services, insurance recoveries, the Mane patent litigation settlement and the Spanish tax settlement) as the Company believes that these non-GAAP financial measures provide investors with an overall perspective of the period-to-period performance of our core business. Such information is supplemental to information presented in accordance with GAAP and is not intended to represent a presentation in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures used by other companies.
| FLAVORS |
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| (IN THOUSANDS U.S. $) |
2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2006 - 2009 CAGR | Since 2009 | |||||||||||||||||||||||||||
| As Reported Segment Profit* |
153,099 | 187,275 | 197,838 | 208,966 | 242,528 | 284,246 | 298,326 | 10.9 | % | 12.6 | % | |||||||||||||||||||||||||
| Insurance Recovery |
(3,565 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||||
| Restructuring and Other Charges |
(463 | ) | — | 3,538 | — | — | — | — | ||||||||||||||||||||||||||||
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| Adjusted Segment Profit |
149,071 | 187,275 | 201,376 | 208,966 | 242,528 | 284,246 | 298,326 | 11.9 | % | 12.6 | % | |||||||||||||||||||||||||
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| Net Sales |
894,775 | 1,005,544 | 1,092,544 | 1,081,488 | 1,203,274 | 1,347,340 | 1,378,377 | |||||||||||||||||||||||||||||
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| Adjusted Segment Margin |
16.7 | % | 18.6 | % | 18.4 | % | 19.3 | % | 20.2 | % | 21.1 | % | 21.6 | % | ||||||||||||||||||||||
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| FRAGRANCES |
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| (IN THOUSANDS U.S. $) |
2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2006 - 2009 CAGR | 2009 - 2012 CAGR | |||||||||||||||||||||||||||
| As Reported Segment Profit* |
212,240 | 211,942 | 202,081 | 188,561 | 244,966 | 226,560 | 238,379 | -3.9 | % | 8.1 | % | |||||||||||||||||||||||||
| R&D Tax Credit |
2,180 | — | — | — | — | — | — | |||||||||||||||||||||||||||||
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| Revised Reported Segment Profit |
214,420 | 211,942 | 202,081 | 188,561 | 244,966 | 226,560 | 238,379 | |||||||||||||||||||||||||||||
| Restructuring and Other Charges |
2,639 | — | 4,396 | — | — | — | — | |||||||||||||||||||||||||||||
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| Adjusted Segment Profit |
217,059 | 211,942 | 206,477 | 188,561 | 244,966 | 226,560 | 238,379 | -4.6 | % | 8.1 | % | |||||||||||||||||||||||||
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| Net Sales |
1,200,615 | 1,271,094 | 1,296,828 | 1,244,670 | 1,419,588 | 1,440,678 | 1,443,069 | |||||||||||||||||||||||||||||
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| Adjusted Segment Margin |
18.1 | % | 16.7 | % | 15.9 | % | 15.1 | % | 17.3 | % | 15.7 | % | 16.5 | % | ||||||||||||||||||||||
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| * | In the 2009 period, segment profit was referred to as adjusted operating profit and excluded amounts related to restructuring and other costs. In the 2006 - 2008 periods, segment profit was referred to as operating income and included restructuring and other costs as well as insurance recoveries. |
The Company uses non-GAAP financial measures such as Adjusted Segment Profit (which excludes the impact of our restructuring and strategic initiatives and insurance recoveries) as the Company believes that these non-GAAP financial measures provide investors with an overall perspective of the period-to-period performance of our core business. Such information is supplemental to information presented in accordance with GAAP and is not intended to represent a presentation in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures used by other companies.
ADJUSTED RETURN ON AVERAGE INVESTED CAPITAL
| (IN THOUSANDS U.S. $) | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | ||||||||||||||||||||||||||||||
| Debt |
884,535 | 684,926 | 950,673 | 807,340 | 1,212,641 | 1,255,654 | 1,011,529 | 921,567 | 894,936 | 1,031,175 | ||||||||||||||||||||||||||||||
| Deferred gain on interest rate swaps |
(39,685 | ) | (24,104 | ) | (2,296 | ) | (817 | ) | (151 | ) | (16,893 | ) | (14,953 | ) | (12,897 | ) | (10,965 | ) | (9,028 | ) | ||||||||||||||||||||
| Cash and cash equivalents |
(12,081 | ) | (32,596 | ) | (272,545 | ) | (114,508 | ) | (151,471 | ) | (178,467 | ) | (80,135 | ) | (131,332 | ) | (88,279 | ) | (324,422 | ) | ||||||||||||||||||||
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| Net Debt |
832,769 | 628,226 | 675,832 | 692,015 | 1,061,019 | 1,060,294 | 916,441 | 777,338 | 795,692 | 697,725 | ||||||||||||||||||||||||||||||
| Equity |
742,631 | 910,487 | 915,347 | 916,056 | 626,359 | 580,642 | 771,910 | 1,003,155 | 1,107,407 | 1,252,555 | ||||||||||||||||||||||||||||||
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| Total Invested Capital |
1,575,400 | 1,538,713 | 1,591,179 | 1,608,071 | 1,687,378 | 1,640,936 | 1,688,351 | 1,780,493 | 1,903,099 | 1,950,280 | ||||||||||||||||||||||||||||||
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| Restructuring and Other Charges, net of tax |
27,514 | 20,370 | 15,857 | 1,982 | — | 12,543 | 14,763 | 8,928 | 9,444 | 1,047 | ||||||||||||||||||||||||||||||
| AJCA Tax Benefit |
— | — | (25,000 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Tax Settlements |
— | — | — | (3,511 | ) | (9,718 | ) | (23,070 | ) | — | — | — | — | |||||||||||||||||||||||||||
| Curtailment, net of tax |
— | — | — | — | 3,685 | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Asset Gain, net of tax |
— | — | — | — | (7,719 | ) | — | — | — | — | — | |||||||||||||||||||||||||||||
| Employee Separation Costs, net of tax |
— | — | — | — | — | 2,217 | 4,028 | — | — | — | ||||||||||||||||||||||||||||||
| Shared Service |
— | — | — | — | — | 1,377 | — | — | — | — | ||||||||||||||||||||||||||||||
| Insurance Recovery, net of tax |
— | — | — | (2,496 | ) | — | (1,612 | ) | — | — | — | — | ||||||||||||||||||||||||||||
| Other Income (Primarily Asset Gains), net of tax |
— | — | — | (10,068 | ) | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Patent Litigation Settlement, net of tax |
— | — | — | — | — | — | — | — | 29,846 | — | ||||||||||||||||||||||||||||||
| Spanish Tax Settlement |
— | — | — | — | — | — | — | — | — | 72,362 | ||||||||||||||||||||||||||||||
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| Total Non-recurring Items |
27,514 | 20,370 | (9,143 | ) | (14,093 | ) | (13,752 | ) | (8,545 | ) | 18,791 | 8,928 | 39,290 | 73,409 | ||||||||||||||||||||||||||
| Cumulative Non-recurring Items |
27,514 | 47,884 | 38,741 | 24,648 | 10,896 | 2,351 | 21,142 | 30,070 | 69,360 | 142,769 | ||||||||||||||||||||||||||||||
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| Adjusted Total Invested Capital |
1,602,914 | 1,586,597 | 1,629,920 | 1,632,719 | 1,698,274 | 1,643,287 | 1,709,493 | 1,810,563 | 1,972,459 | 2,093,049 | ||||||||||||||||||||||||||||||
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| As Reported Operating Profit |
310,279 | 266,876 | 331,173 | 361,213 | 355,133 | 340,288 | 416,361 | 427,729 | 486,618 | |||||||||||||||||||||||||||||||
| Restructuring and Other Charges |
31,830 | 23,319 | 2,680 | — | 18,212 | 18,301 | 10,077 | 13,172 | 1,668 | |||||||||||||||||||||||||||||||
| Curtailment |
— | — | — | 5,943 | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Employee Separation Costs |
— | — | — | — | 3,391 | 6,320 | — | — | — | |||||||||||||||||||||||||||||||
| Shared Service Implementation |
— | — | — | — | 2,079 | — | — | — | — | |||||||||||||||||||||||||||||||
| Insurance Recovery |
— | — | (3,565 | ) | — | (2,600 | ) | — | — | — | — | |||||||||||||||||||||||||||||
| Patent Litigation Settlement |
— | — | — | — | — | — | — | 33,495 | — | |||||||||||||||||||||||||||||||
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| Adjusted Operating Profit |
342,109 | 290,195 | 330,288 | 367,156 | 376,215 | 364,909 | 426,438 | 474,396 | 488,286 | |||||||||||||||||||||||||||||||
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| As Reported Effective Tax Rate |
30.2 | % | 21.6 | % | 28.2 | % | 25.3 | % | 19.1 | % | 29.3 | % | 26.7 | % | 28.6 | % | 42.7 | % | ||||||||||||||||||||||
| Restructuring and Other Charges Tax Benefit |
0.6 | % | 1.0 | % | 0.0 | % | — | 0.7 | % | -0.6 | % | -0.4 | % | 0.0 | % | 0.0 | % | |||||||||||||||||||||||
| AJCA Tax Benefit |
— | 9.3 | % | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Tax Settlements |
— | — | 1.2 | % | 3.0 | % | 7.6 | % | — | — | — | — | ||||||||||||||||||||||||||||
| Curtailment Tax Benefit |
— | — | — | 0.2 | % | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Asset Gain Tax Expense |
— | — | — | -0.1 | % | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Employee Separation Costs Tax Benefit |
— | — | — | — | 0.2 | % | 0.1 | % | — | — | — | |||||||||||||||||||||||||||||
| Shared Service Implementation Tax Benefit |
— | — | — | — | 0.1 | % | — | — | — | — | ||||||||||||||||||||||||||||||
| Insurance Recovery Tax Expense |
— | — | 0.0 | % | — | -0.2 | % | — | — | — | — | |||||||||||||||||||||||||||||
| Other Income (Primarily Asset Gains) |
— | — | -0.3 | % | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Patent Litigation Settlement Benefit |
— | — | — | — | — | — | — | -1.5 | % | — | ||||||||||||||||||||||||||||||
| Spanish Tax Settlement |
— | — | — | — | — | — | — | — | -16.3 | % | ||||||||||||||||||||||||||||||
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| Adjusted Effective Tax Rate |
30.8 | % | 31.9 | % | 29.1 | % | 28.4 | % | 27.5 | % | 28.8 | % | 26.3 | % | 27.1 | % | 26.4 | % | ||||||||||||||||||||||
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| Adjusted Operating Profit After Tax |
236,739 | 197,623 | 234,174 | 262,884 | 272,756 | 259,815 | 314,285 | 345,835 | 359,378 | |||||||||||||||||||||||||||||||
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| Adjusted Return on Invested Capital * |
14.8 | % | 12.3 | % | 14.4 | % | 15.8 | % | 16.3 | % | 15.5 | % | 17.9 | % | 18.3 | % | 17.7 | % | ||||||||||||||||||||||
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| * | Return on average invested capital is defined as adjusted operating profit after tax divided by 2-year average adjusted invested capital. |
The Company uses non-GAAP financial measures such as Adjusted Return on Invested Capital (ROIC) (which excludes the net impact of our restructuring and strategic initiatives, the AJCA tax benefit, tax settlements, curtailments, gains on asset sales, employee separation costs, cost associated with the implementation of our shared services, insurance recoveries, the Mane patent litigation settlement and the Spanish tax settlement) as the Company believes that these non-GAAP financial measures provide investors with an overall perspective of the period-to-period performance of our core business. Such information is supplemental to information presented in accordance with GAAP and is not intended to represent a presentation in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures used by other companies.
WORKING CAPITAL EFFEICIENCY
| (IN THOUSANDS U.S. $) | Q4 2011 | Q1 2012 | Q2 2012 | Q3 2012 | Q4 2012 | |||||||||||||||
| Trade Receivables (1) |
478,177 | 527,709 | 523,389 | 543,133 | 508,736 | |||||||||||||||
| Inventories |
544,439 | 555,017 | 539,267 | 547,676 | 540,658 | |||||||||||||||
| Accounts Payable |
(208,759 | ) | (189,223 | ) | (169,673 | ) | (160,956 | ) | (199,272 | ) | ||||||||||
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| Core Working Capital |
813,857 | 893,503 | 892,983 | 929,853 | 850,122 | |||||||||||||||
| FY 2012 Net Sales |
2,821,446 | |||||||||||||||||||
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| Core Working Capital as a % of Net Sales* |
31.1 | % | ||||||||||||||||||
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| (IN THOUSANDS U.S. $) | Q4 2010 | Q1 2011 | Q2 2011 | Q3 2011 | Q4 2011 | |||||||||||||||
| Trade Receivables (1) |
460,274 | 528,541 | 553,335 | 524,893 | 478,177 | |||||||||||||||
| Inventories |
531,675 | 559,550 | 568,162 | 534,765 | 544,439 | |||||||||||||||
| Accounts Payable |
(200,153 | ) | (185,205 | ) | (166,438 | ) | (180,931 | ) | (208,759 | ) | ||||||||||
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| Core Working Capital |
791,796 | 902,886 | 955,059 | 878,727 | 813,857 | |||||||||||||||
| FY 2011 Net Sales |
2,788,018 | |||||||||||||||||||
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| Core Working Capital as a % of Net Sales* |
31.1 | % | ||||||||||||||||||
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| (IN THOUSANDS U.S. $) | Q4 2009 | Q1 2010 | Q2 2010 | Q3 2010 | Q4 2010 | |||||||||||||||
| Trade Receivables (1) |
456,674 | 480,553 | 486,638 | 521,524 | 460,274 | |||||||||||||||
| Inventories |
444,977 | 446,912 | 454,608 | 503,991 | 531,675 | |||||||||||||||
| Accounts Payable |
(161,027 | ) | (154,451 | ) | (155,056 | ) | (169,652 | ) | (200,153 | ) | ||||||||||
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| Core Working Capital |
740,624 | 773,014 | 786,190 | 855,863 | 791,796 | |||||||||||||||
| FY 2010 Net Sales |
2,622,862 | |||||||||||||||||||
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| Core Working Capital as a % of Net Sales* |
30.1 | % | ||||||||||||||||||
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| (IN THOUSANDS U.S. $) | Q4 2008 | Q1 2009 | Q2 2009 | Q3 2009 | Q4 2009 | |||||||||||||||
| Trade Receivables (1) |
412,127 | 430,219 | 484,550 | 490,549 | 456,674 | |||||||||||||||
| Inventories |
479,567 | 452,282 | 441,007 | 435,744 | 444,977 | |||||||||||||||
| Accounts Payable |
(114,997 | ) | (95,303 | ) | (117,892 | ) | (140,597 | ) | (161,027 | ) | ||||||||||
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| Core Working Capital |
776,697 | 787,198 | 807,665 | 785,696 | 740,624 | |||||||||||||||
| FY 2009 Net Sales |
2,326,158 | |||||||||||||||||||
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| Core Working Capital as a % of Net Sales* |
33.5 | % | ||||||||||||||||||
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| (IN THOUSANDS U.S. $) | Q4 2007 | Q1 2008 | Q2 2008 | Q3 2008 | Q4 2008 | |||||||||||||||
| Trade Receivables |
412,221 | 464,251 | 477,195 | 470,363 | 412,127 | |||||||||||||||
| Inventories |
484,222 | 512,034 | 525,651 | 509,281 | 479,567 | |||||||||||||||
| Accounts Payable |
(130,992 | ) | (133,236 | ) | (137,178 | ) | (115,511 | ) | (114,997 | ) | ||||||||||
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| Core Working Capital |
765,451 | 843,049 | 865,668 | 864,133 | 776,697 | |||||||||||||||
| FY 2008 Net Sales |
2,389,372 | |||||||||||||||||||
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| Core Working Capital as a % of Net Sales* |
34.4 | % | ||||||||||||||||||
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| * | Core working capital as a % of net sales is defined as 5-quarter average core working capital divided by full year net sales |
| (1) | Q1 2013, Q1 - Q3 2011, Q1 - Q4 2010 and Q4 2009 have been revised to be consistent with other periods presented. |
| ADJUSTED CASH FLOWS FROM OPERATIONS |
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| (IN THOUSANDS U.S. $) | 2004 | 2005 | 2006 | 2004 - 2006 | 2007 | 2008 | 2009 | 2007 - 2009 | 2010 | 2011 | 2012 | 2010 - 2012 | ||||||||||||||||||||||||||||||||||||
| Cash Flows Provided By Operating Activities |
295,847 | 177,160 | 281,619 | 754,626 | 314,062 | 220,613 | 291,637 | 826,312 | 315,136 | 189,190 | 323,796 | 828,122 | ||||||||||||||||||||||||||||||||||||
| Payments Pursuant To Patent Litigation Settlement |
— | — | — | — | — | — | — | 39,995 | — | |||||||||||||||||||||||||||||||||||||||
| Payments Pursuant To Spanish Tax Settlement |
— | — | — | — | — | — | — | — | 105,503 | |||||||||||||||||||||||||||||||||||||||
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| Adjusted Cash Flows Provided By Operating Activities |
295,847 | 177,160 | 281,619 | 754,626 | 314,062 | 220,613 | 291,637 | 826,312 | 315,136 | 229,185 | 429,299 | 973,620 | ||||||||||||||||||||||||||||||||||||
The Company uses non-GAAP financial measures such as adjusted cash flows provided by operations (which excludes payments made related to the Mane patent litigation settlement an Spanish tax settlement) as the Company believes that these non-GAAP financial measures provide investors with an overall perspective of the period-to-period performance of our core business. Such information is supplemental to information presented in accordance with GAAP and is not intended to represent a presentation in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures used by other companies.