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 11:00 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
Operations
Francisco Fortanet
SVP, Operations
June 5, 2013
Operations Strategy
Reliable Service and Quality
#1 Priority is Customer Satisfaction
Reduce Cost and Optimize
Cash Flow
Productivity and Quality Agenda driven by Continuous Improvement
Manufacturing Footprint Strategy
Support growth of the business in all regions; focus on emerging markets
Reduce cost in all geographies; with emphasis in mature markets
29 Manufacturing Sites
Manufacturing Footprint Strategy:
Leverage Geographic Reach
Capex as % of Sales
5%
4%
3%
2% 4.4% 4-5%
3.1% ~3%
1%
0%
2003 - 2009 2010 - 2012 2013 - 2015 2016 - 2018
Singapore
2012
China
2013
Turkey
2015
Manufacturing Footprint Strategy:
Maximize Our Portfolio
Revenue in the Mature Markets is Now < 50% of the Global Compounds Business, while Labor Cost is ~ 75%
Europe – From 10 to 7 plants*, including Sweden
USA – From 7 to 4 plants*, including Augusta
Oceania – from 2 to 1 plants
Move activities to lower labor cost geographies leveraging the IT platform
*Since 2004
Capital Deployment Benchmarks
Fixed Asset Turnover
4.5 X
3.5 x
IFF Peers*
Best-in-class efficiency versus peers
Highest published ROIC relative to industry
Source: Stifel Nicolaus Analyst Report - FY 2012
* Peers include Givaudan, Symrise, China F&F, Frutarom, Sensient, T. Hasegawa and Takasago
Productivity and Quality:
The Cornerstone of Our Operations Strategy
Innovation in Operations = Finding a Better Way
People
Tools
Processes
Productivity = Shareholder Value
% Growth (CAGR) 2008 to 2012
7.0%
6.0% 5.8%
5.0%
4.0% 3.7%
3.0%
2.0%
1.0%
0.0%
Sales Mfg. Cost
Quality = Customer Trust
Over 60% Reduction in External Defect Rate
% External Defect Rate
0.27 0.22 0.17 0.12 0.07 0.02
2006 2007 2008 2009 2010 2011 2012 2013
Global Procurement Strategy
Our Approach…
People
Processes and Systems
~70% of COGS is Raw Materials
Sourcing Strategies
IFF’s Sustainability Strategy
Our Products:
Creating Innovative Customer Solutions
Our Impact:
Strengthening Eco-Efficiency
& Community Relationships
Our Sources:
Sourcing Responsibly
Our People:
Engaging & Inspiring Our Employees
Sustainability Performance 2010-2012
Eco-efficiency
-11.4 % Scope 1 & 2 carbon emissions
-9.1 % Energy use
-27.4 % Water use
-29.2 % Hazardous waste
Right Direction!
Summary
Our #1 job is to satisfy our customers
Productivity and quality are the cornerstone of the operations strategy
Our best asset is our people
We are delivering results – strong manufacturing leverage, excellent reduction in waste and highest published industry ROIC
Well-Positioned to Capture Future Growth
Investor Day
2013
Operations
Investor Day 2013
Innovation
The Foundation of our Success
Kevin Berryman
EVP & CFO
June 5, 2013
Execution on Strategic Growth Pillars
Leverage
Geographic Reach
Strengthen
Innovation Platform
Maximize
Portfolio
Accelerating Top-Line Growth
8%
9% Based on Local Currency Sales Growth
6%
7%
3%
4%
5% IFF Long-term
Targets
1%
2%
0%
2004-2006
2007-2009
2010-2012
Emerging Market Presence is Building
60%
Nearly 50% of Sales to Emerging Markets
56% FY 54% FY 53% FY 51% Q1
55%
45%
50%
40%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 44% FY 46% FY 47% FY 49% Q1
2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013
Developed Emerging
Emerging Market Presence is Building
55%
Over 50% of Flavor and Fragrance Compound Sales to Emerging Markets
53% FY 52% FY 50% FY 48% Q1
50%
45%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 47% FY 48% FY 50% FY 52% Q1
2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013
Developed Emerging
Gross Margin Impact (2011-2012) of Input Cost Pressure
Gross Margin Enhancement
Gross Margin
(FY 2010-2012 - %)
Gross Margin
(Q1 2010-2013 - %)
41.7 2.7 2.7 41.7 3.3 42.9
41.3 1.7
FY 2010 Net Price and
Input Costs
Strategic
Initiatives
FY 2012 Q1 2010 Net Price and
Input Costs
Strategic
Initiatives
Adj. Q1 2013
Maximize Portfolio – Improved EP
94% of Portfolio is now EP neutral or Positive
2010 Portfolio Value Breakdown 2012 Portfolio Value Breakdown
% Capital Employed % Capital Employed
15%
15%
6%
65%
20%
79%
EP Positive EP Break-even EP Negative EP Positive EP Break-even EP Negative
Adjusted Operating Profit Growth
12%
8%
10%
IFF Long-term
Targets
4%
6%
g
2%
7-9%
0%
2004-2006
2007-2009
2010-2012
2013-2015
Adjusted Effective Tax Rate
32%
Below the Line Leverage
30%
28%
26% <26.5%
24%
2004 - 2006 2007 - 2009 2010 - 2012 2013 - 2015
2013 – 2015 = Company Estimates
Adjusted EPS Growth (3-Year CAGR)
4%
16%
10%
12%
14%
IFF Long-term
Targets
6%
8%
2%
4%
10+%
0%
2004-2006
2007-2009
2010-2012
2013-2015
Increased Working Capital Efficiency
%
35%
Core Working Capital as a % of Net Sales
32%
33%
34%
30%
31%
28%
29%
<31%
27%
2008 2009 2010 2011 2012 2013 - 2015
2013 – 2015 = Company Estimates
Adjusted Return on Invested Capital
20%
3-Year Average
15%
14%
16% 18% 10% 18+%
5%
0%
2004 - 2006 2007 - 2009 2010 - 2012 2013 - 2015
2013 – 2015 = Company Estimates
Adjusted Operating Cash Flow
1,200
In $ Millions 3-Year Cumulative
800
1,000
600
$1B +
200
400
0
2004 - 2006 2007 - 2009 2010 - 2012 2013 - 2015
2013 – 2015 = Company Estimates
Uses of Cash
Allocation based on principles of Financial Flexibility
Capital
Expenditures
Financial
Acquisition/ Flexibility
Development
Opportunities
Cash
Returned to
shareholders
Capital Expenditures
5%
Increased Investment in Capacity and Technology in Emerging Markets
4%
4.4% 4-5%
2%
3%
3.4% ~3%
1%
%
0%
2003 - 2009 2010 - 2012 2013 - 2015 2016 - 2018
2013 – 2018 = Company Estimates
Cash Returned to Shareholders
• Strong Track Record of
Returning Cash to Shareholders
Annual Cash
Dividend Declared
$1.30
• Increased dividend
9 times in 10 years
$
0.88
$0.96
$1.00
$1.04
$1.16
• Historical dividend payout
$0.60 $0.63 ratio of 30-35%
$0.69
$0.73
$0.77
• Authorized $250 million
share buyback
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013+
M&A Activity
• Routinely evaluate M&A opportunities
Augment our Organic Growth Strategy
– F&F companies participating in attractive markets
– F&F companies operating in geographies
where we are under- represented
– F&F companies with differentiated technology
• Evaluate consistent with principles
of Economic Profit
• Will consider adjacencies that bolster long-term growth prospects
Reconfirming Our Long-Term Financial Targets
Local Currency
Sales Growth
Adjusted Operating
Profit Growth
Adjusted EPS
Growth
4- 6% 7- 9% 10+%
Total Shareholder Return
60%
Five-Year Total Shareholder Return*
(December 31, 2007 – December 31, 2012) • Returns greatly exceeds
that of the S&P Index
Group
40%
50%
and Peer • Performance driven by both
share price 20%
30%
appreciation
and payout of dividends
10%
0%
IFF S&P 500 Index Peer Group
*Includes the reinvestment of dividends. Please refer to the Company’s Form 10-K as filed with the SEC on February 26, 2013 for further information on the above chart
Summary
Geographically Diversified Company with Steady Growth
Partnered with Leading Global Consumer Companies
Strong Innovation Platforms – Focused on Consumer
Strong Financial Performance and Cash Flow
Abilityto Deliver Strong Returns Longer-Term
Investor Day 2013
Innovation
The Foundation of our Success
Investor Day
2013
Closing Remarks
Doug Tough
Chairman of the Board & Chief Executive Officersw
June 5, 2013
Innovation - Foundation for Our Success
Allocate resources to seize growth opportunities in emerging markets Align R&D Spend with Opportunities – in terms of category growth and EP profile Use EP principles to develop a stronger portfolio to deliver a higher ROIC
Invest behind advantaged businesses and remediate less profitable areas
Innovation - discovering new ways to create unique experiences that enhance consumers’ lives
Strategy Recap
Leverage Geographic Reach
Growth rates in emerging markets are 2-3x developed markets
New manufacturing capacity being added
Increase regional coverage via labs & commercial offices
Strengthen Innovation Platform
R&D pipeline has significantly strengthened
Research programs are well aligned with BU strategies
Align research spend with opportunities
Maximize Portfolio
Exiting of cumulative $55 million of Flavors sales
Significant progress made in driving EP improvements
Adjusted ROIC has improved
basis points over last
years
Strategic Priorities Going Forward
Leverage Geographic Reach
Increasing investments in emerging markets to support growth
$50 investment in Turkey to serve customers in Africa, Eastern Europe and Middle East and Central Asia
Leverage Singapore liquid Fragrances & Flavors plant, and ensure Southeast Asia capacity needs are met
China plant fully operational in 2013; leverage Satellite Labs in Chengdu and Beijing
Strategic Priorities Going Forward
Strengthen Innovation Platform
Build strong molecule pipeline
Continue to develop High-impact molecules
Extend encapsulation to other categories
Leverage expertise in Natural Ingredients
Leverage Flavors modulation tool-box
Enhance Delivery Systems in Flavors and Fragrances
Leverage experience and relationships of SAB to support R&D
Strategic Priorities Going Forward
Maximize Portfolio
Improve Economic Profile of business
Realize remaining $25 million operating profit opportunity
Focus on innovation, profitability and return on investment
Apply a disciplined approach to investing
Leverage strong margin profile and cash flow generation
Summary
Strategic Priorities
Invest in Innovation
Grow Footprint in Emerging Markets and Improve Coverage
Improve Value of Portfolio by Prioritizing Higher Margin Businesses
Drive Greater Efficiency to Gain Operational Leverage
Long-Term Financial Expectations
Local currency sales growth of 4% to 6%
Adjusted Operating Profit growth of 7 – 9%
Adjusted EPS growth of 10+%
Through Portfolio Mix, Product
Innovation & Manufacturing Leverage
Investor Day
2013
Innovation
The Foundation of Our Success
| 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 |
||||||||||||||||||||||||||||||||||||||||||||||||
| 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 |
||||||||||||||||||||||||||||||||||||||||||||||||
| 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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|
|
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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) |
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| (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 |
||||||||||||||||||||||||||||||||||||
| (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 |
||||||||||||||||||||||||||||||||||||
| (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 Implementation, net of tax |
— | — | — | — | — | 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 |
||||||||||||||||||||||||||||||||||||||||||||||||
| (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.