IFF Reports Third Quarter 2017 Results
Achieved strong financial performance in Q3; Reconfirms full year currency neutral guidance
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Q3 2017 Consolidated Summary: Change vs. Prior Year
Reported (GAAP) | Adjusted (Non-GAAP)¹ | Currency Neutral (Non-GAAP)¹ | ||||||||||||||||||||
Sales |
Operating |
EPS | Sales |
Operating |
EPS | Sales |
Operating |
EPS | ||||||||||||||
Consolidated | 12% | 27% | 24% | 12% | 11% | 10% | 12% | 7% | 5% | |||||||||||||
Acquisition Impact | 6% | 6% | 7% | 6% | 5% | 5% | 6% | 5% | 5% | |||||||||||||
¹ Schedules at the end of this release contain reconciliations of reported GAAP to non-GAAP metrics.
Management Commentary
“We are pleased to report strong financial results in the third
quarter,” said IFF Chairman and CEO
Mr. Fibig continued, “Based on our year-to-date performance and our current outlook for the fourth quarter, we remain optimistic that we can achieve our previously stated full year currency neutral guidance. We continue to focus on the execution of our strategy to drive growth, increase differentiation, and generate return to deliver sustainable, profitable growth and maximize shareholder value.”
Third Quarter 2017 Consolidated Financial Highlights
-
Reported net sales for the third quarter totaled
$872.9 million , an increase of 12% from$777.0 million for the third quarter of 2016. Excluding the impact of foreign exchange, currency neutral sales increased 12% over the prior year, including approximately six percentage points related to recent acquisitions. -
Reported operating profit for the third quarter was
$157.7 million versus$124.4 million reported in 2016. Excluding the impact of foreign exchange and those items that affect comparability, currency neutral adjusted operating profit grew 7%, to$167.3 million , principally driven by volume growth, acquisitions and productivity initiatives which more than offset weaker sales mix, incentive compensation and price to input costs. -
Reported earnings per share (EPS) for the third quarter was
$1.39 per diluted share versus$1.12 per diluted share reported in 2016. Excluding the impact of foreign exchange and those items that affect comparability, currency neutral adjusted EPS improved 5%, to$1.47 per diluted share, as currency neutral operating profit growth, a lower effective tax rate and year-over-year reduction in shares outstanding more than offset higher interest expense.
Third Quarter 2017 Strategic Highlights
- Sweetness and savory modulation portfolio sales continued to grow double-digits, with strong growth across all categories, led by Sweet and Dairy
- Encapsulation related sales grew high-single-digits led by Fabric Care and Personal Wash
- Tastepoint℠ – focused on mid-tier flavor customers – grew strong double-digits
- Cosmetic Active Ingredients continued its strong growth, growing double-digits
-
Middle East &Africa improved high-single-digits, with growth in both flavors and fragrances; Expanded Flavors site inCairo to support growth in this key market - Launched Re-Imagine… program to accelerate flavor innovation and increase agility to capture unmet opportunities in the changing food and beverage market
-
Joined FReSH initiative, a project of the
World Business Council on Sustainable Development , designed to accelerate transformational change in global food systems
Third Quarter 2017 Segment Summary: Growth vs. Prior Year
Reported (GAAP) | Currency Neutral (Non-GAAP) | |||||||||
Sales |
Segment |
Sales |
Segment |
|||||||
Fragrances: | 13% | 10% | 12% | 6% | ||||||
Acquisition Impact | 5% | 4% | 5% | 4% | ||||||
Flavors: | 12% | 18% | 12% | 19% | ||||||
Acquisition Impact | 7% | 5% | 7% | 5% | ||||||
Fragrances Business Unit
-
On a reported basis, sales increased 13%, or
$53.0 million , to$463.1 million while currency neutral sales improved 12%. Overall growth was broad-based, with a balanced contribution between organic and acquired business. Regionally, growth was strongest in EAME andLatin America – increasing double-digits – followed by mid-single-digit growth inGreater Asia . -
Fine Fragrances improved 20% on a reported basis and 18% on a currency
neutral basis, inclusive of additional sales related to the
acquisition of Fragrance Resources. Performance was driven by strong
new wins in EAME,
Greater Asia andNorth America as well as improved volume trends inLatin America . - Consumer Fragrances grew 12% on a reported basis and 11% on a currency neutral basis, with a balanced contribution from organic business and additional sales related to the acquisition of Fragrance Resources. Within Consumer Fragrance, nearly all categories achieved growth, led by double-digit growth in Home Care and high-single-digit growth in Fabric Care.
-
Fragrance Ingredients grew 9% on a reported basis and 8% on a currency
neutral basis, with double-digit growth in
Latin America and EAME as well as double-digit growth in cosmetic active ingredients. - Fragrances segment profit increased 10% on a reported basis and 6% on a currency neutral basis led by volume growth, the contribution of acquisitions and the benefits from productivity initiatives.
Flavors Business Unit
-
On a reported basis, sales increased 12%, or
$42.9 million , to$409.8 million while currency neutral sales grew 12%. Overall growth was driven by additional sales related to the acquisition ofDavid Michael , as well as mid-single-digit organic growth, where all categories improved year-over-year. -
EAME increased 12% on both a reported and currency neutral basis,
inclusive of additional sales related to the acquisition of
David Michael , with the strongest growth in Beverage, Savory and Dairy. On a geographic basis, Western, Central andSoutheast Europe as well asAfrica and theMiddle East all reported strong growth. -
North America grew 28% reflecting additional sales related to the acquisition ofDavid Michael and PowderPure as well as high-single-digit growth on an organic basis. Growth was strongest in Savory and Beverage, both driven by new win performance. -
Latin America remained constant on a reported basis and increased 1% on a currency neutral basis, as growth inColombia andArgentina more than offset softness inBrazil . -
Greater Asia grew 2% on both a reported and currency neutral basis, principally driven by growth inIndia andThailand with Savory being the strongest category. - Flavors segment profit grew 18% on a reported basis and 19% on a currency neutral basis, driven by volume growth, the contribution of acquisitions, and the benefits from productivity initiatives.
FY 2017 Financial Guidance: Percent Change vs. Prior Year
The Company’s current full year 2017 guidance:
Currency Neutral | FX Impact1 | Adjusted2 | ||||||||
Sales | 7.5% - 8.5% | ~0.0% | 7.5% - 8.5% | |||||||
Operating Profit | 5.5% - 6.5% | ~(1.0)% | 4.5% - 5.5% | |||||||
EPS | 6.5% - 7.5% | ~(2.0)% | 4.5% - 5.5% | |||||||
1 |
See Use of Non-GAAP Financial Measures |
|
2 |
Excludes items impacting comparability |
|
A copy of the Company’s Quarterly Report on Form 10-Q will be available
on its website at www.iff.com
or at sec.gov by
Audio Webcast
A live webcast to discuss the Company’s third quarter financial results
will be held on
Cautionary Statement Under The Private Securities Litigation Reform Act of 1995
This press release includes “forward-looking statements” under the
Federal Private Securities Litigation Reform Act of 1995, including
statements regarding our outlook for fiscal year 2017. These
forward-looking statements are qualified in their entirety by cautionary
statements and risk factor disclosures contained in the Company’s
Use of Non-GAAP Financial Measures
We provide in this press release (i) Currency Neutral Sales, (ii) Adjusted Operating Profit and Currency Neutral Adjusted Operating Profit and (iii) Adjusted EPS and Currency Neutral Adjusted EPS. Currency Neutral Sales eliminate the effects that result from translating its international sales in U.S. dollars. Adjusted Operating Profit and Adjusted EPS exclude (a) restructuring costs, (b) certain other non-operational significant items such as legal charges/credits, gain on sale of assets, operational improvement initiatives, acquisition related costs, integration-related costs and CTA realization and (c) costs associated with product recalls (often referred to as “Items Impacting Comparability”). When we provide our expectations for our currency neutral metrics in our full year 2017 guidance, we estimate the anticipated FX impact by comparing prior year results to the prior year results restated at exchange rates in effect for the current year based on the currency of the underlying transaction. When we provide our expectations for our Adjusted Operating Profit and our Adjusted EPS in our full year 2017 guidance, the closest corresponding GAAP measures (expected reported Operating Profit and EPS) and a reconciliation of the differences between the non-GAAP expectation and the corresponding GAAP measure generally are not available without unreasonable effort due to inherent difficulty of forecasting the timing and amount of reconciling items that would be excluded from the GAAP measure in the relevant future period and the relevant tax impact of such reconciling items on EPS. The variability of the excluded items may have a significant, and potentially unpredictable, impact on our future GAAP results. Currency Neutral Sales, Adjusted Operating Profit, Currency Neutral Adjusted Operating Profit, Adjusted EPS and Currency Neutral Adjusted EPS should not be considered in isolation or as substitutes for analysis of the Company’s results under GAAP and may not be comparable to other companies’ calculation of such metrics.
Meet IFF
International Flavors & Fragrances Inc. | ||||||||||||||||||||||||
Consolidated Income Statement | ||||||||||||||||||||||||
(Amounts in thousands except per share data) | ||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||
2017 | 2016 |
% |
2017 | 2016 |
% |
|||||||||||||||||||
Net sales | $ | 872,940 | $ | 777,001 | 12 | % | $ | 2,544,094 | $ | 2,353,790 | 8 | % | ||||||||||||
Cost of goods sold | 490,884 | 430,733 | 14 | % | 1,422,783 | 1,281,673 | 11 | % | ||||||||||||||||
Gross profit | 382,056 | 346,268 | 10 | % | 1,121,311 | 1,072,117 | 5 | % | ||||||||||||||||
Research and development expenses | 70,932 | 64,415 | 10 | % | 210,963 | 191,052 | 10 | % | ||||||||||||||||
Selling and administrative expenses | 141,473 | 152,046 | (7 | )% | 417,713 | 408,372 | 2 | % | ||||||||||||||||
Amortization of acquisition-related intangibles | 8,766 | 5,468 | 60 | % | 24,327 | 16,659 | 46 | % | ||||||||||||||||
Restructuring and other charges, net | 3,249 | — | 100 | % | 14,183 | — | 100 | % | ||||||||||||||||
Gain on sales of fixed assets | (31 | ) | (87 | ) | (64 | )% | (120 | ) | (2,998 | ) | (96 | )% | ||||||||||||
Operating profit | 157,667 | 124,426 | 27 | % | 454,245 | 459,032 | (1 | )% | ||||||||||||||||
Interest expense | 19,221 | 13,111 | 47 | % | 49,584 | 40,649 | 22 | % | ||||||||||||||||
Other (income) expense, net | (2,880 | ) | (2,075 | ) | 39 | % | (17,192 | ) | (1,954 | ) | 780 | % | ||||||||||||
Income before taxes | 141,326 | 113,390 | 25 | % | 421,853 | 420,337 | 0 | % | ||||||||||||||||
Taxes on income | 31,065 | 23,613 | 32 | % | 86,033 | 95,223 | (10 | )% | ||||||||||||||||
Net income | $ | 110,261 | $ | 89,777 | 23 | % | $ | 335,820 | $ | 325,114 | 3 | % | ||||||||||||
Earnings per share - basic | $ | 1.39 | $ | 1.13 | $ | 4.24 | $ | 4.07 | ||||||||||||||||
Earnings per share - diluted | $ | 1.39 | $ | 1.12 | $ | 4.22 | $ | 4.05 | ||||||||||||||||
Average shares outstanding | ||||||||||||||||||||||||
Basic | 79,063 | 79,580 | 79,072 | 79,727 | ||||||||||||||||||||
Diluted | 79,362 | 79,935 | 79,353 | 80,067 | ||||||||||||||||||||
International Flavors & Fragrances Inc. | ||||||||||
Condensed Consolidated Balance Sheet | ||||||||||
(Amounts in thousands) | ||||||||||
(Unaudited) | ||||||||||
September 30, | December 31, | |||||||||
2017 | 2016 | |||||||||
Cash and cash equivalents | $ | 316,002 | $ | 323,992 | ||||||
Receivables | 691,239 | 550,658 | ||||||||
Inventories | 619,516 | 592,017 | ||||||||
Other current assets | 222,990 | 142,347 | ||||||||
Total current assets | 1,849,747 | 1,609,014 | ||||||||
Property, plant and equipment, net | 828,592 | 775,716 | ||||||||
Goodwill and other intangibles, net | 1,577,757 | 1,365,906 | ||||||||
Other assets | 264,342 | 266,348 | ||||||||
Total assets | $ | 4,520,438 | $ | 4,016,984 | ||||||
Bank borrowings and overdrafts, commercial paper and current portion | ||||||||||
of long-term debt | $ | 47,845 | $ | 258,516 | ||||||
Other current liabilities | 648,282 | 639,781 | ||||||||
Total current liabilities | 696,127 | 898,297 | ||||||||
Long-term debt | 1,625,502 | 1,066,855 | ||||||||
Non-current liabilities | 436,321 | 420,698 | ||||||||
Shareholders' equity | 1,762,488 | 1,631,134 | ||||||||
Total liabilities and shareholders' equity | $ | 4,520,438 | $ | 4,016,984 | ||||||
International Flavors & Fragrances Inc. | ||||||||||||
Consolidated Statement of Cash Flows | ||||||||||||
(Amounts in thousands) | ||||||||||||
(Unaudited) | ||||||||||||
Nine Months Ended September 30, | ||||||||||||
2017 | 2016 | |||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 335,820 | $ | 325,114 | ||||||||
Adjustments to reconcile to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 85,446 | 75,109 | ||||||||||
Deferred income taxes | (3,439 | ) | 8,323 | |||||||||
Gain on disposal of assets | (120 | ) | (2,998 | ) | ||||||||
Stock-based compensation | 20,149 | 19,471 | ||||||||||
Pension contributions | (36,870 | ) | (44,356 | ) | ||||||||
Litigation settlement | (56,000 | ) | — | |||||||||
Foreign currency gain on liquidation of entity | (12,214 | ) | — | |||||||||
Changes in assets and liabilities, net of acquisitions: | ||||||||||||
Trade receivables | (94,945 | ) | (36,070 | ) | ||||||||
Inventories | 6,211 | (160 | ) | |||||||||
Accounts payable | (20,560 | ) | (29,523 | ) | ||||||||
Accruals for incentive compensation | 2,907 | 3,012 | ||||||||||
Other current payables and accrued expenses | 9,423 | 30,663 | ||||||||||
Other assets | 3,824 | (10,704 | ) | |||||||||
Other liabilities | (40,143 | ) | 3,956 | |||||||||
Net cash provided by operating activities | 199,489 | 341,837 | ||||||||||
Cash flows from investing activities: | ||||||||||||
Cash paid for acquisitions, net of cash received | (191,304 | ) | — | |||||||||
Additions to property, plant and equipment | (77,318 | ) | (70,179 | ) | ||||||||
Proceeds from life insurance contracts | 1,941 | 292 | ||||||||||
Maturity of net investment hedges | 2,226 | (12 | ) | |||||||||
Proceeds from disposal of assets | 1,275 | 3,664 | ||||||||||
Net cash used in investing activities | (263,180 | ) | (66,235 | ) | ||||||||
Cash flows from financing activities: | ||||||||||||
Cash dividends paid to shareholders | (151,678 | ) | (134,051 | ) | ||||||||
Increase (decrease) in revolving credit facility borrowings and overdrafts | (3,952 | ) | (128,324 | ) | ||||||||
Increase in commercial paper | 39,950 | — | ||||||||||
Deferred financing costs | (5,373 | ) | (4,780 | ) | ||||||||
Repayments of debt | (250,000 | ) | (125,000 | ) | ||||||||
Proceeds from issuance of long-term debt | 498,250 | 555,559 | ||||||||||
Loss on pre-issuance hedges | (5,310 | ) | (3,244 | ) | ||||||||
Proceeds from issuance of stock under stock plans | 329 | 594 | ||||||||||
Employee withholding taxes paid | (11,509 | ) | (13,315 | ) | ||||||||
Purchase of treasury stock | (53,211 | ) | (94,148 | ) | ||||||||
Net cash provided by financing activities | 57,496 | 53,291 | ||||||||||
Effect of exchange rates changes on cash and cash equivalents | (1,795 | ) | (12,151 | ) | ||||||||
Net change in cash and cash equivalents | (7,990 | ) | 316,742 | |||||||||
Cash and cash equivalents at beginning of year | 323,992 | 181,988 | ||||||||||
Cash and cash equivalents at end of period | $ | 316,002 | $ | 498,730 | ||||||||
International Flavors & Fragrances Inc. | ||||||||||||||||||
Business Unit Performance | ||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||
Net Sales | ||||||||||||||||||
Flavors | $ | 409,800 | $ | 366,857 | $ | 1,230,286 | $ | 1,118,869 | ||||||||||
Fragrances | 463,140 | 410,144 | 1,313,808 | 1,234,921 | ||||||||||||||
Consolidated | 872,940 | 777,001 | 2,544,094 | 2,353,790 | ||||||||||||||
Segment Profit | ||||||||||||||||||
Flavors | 91,378 | 77,512 | 289,723 | 259,662 | ||||||||||||||
Fragrances | 93,528 | 85,010 | 260,085 | 261,843 | ||||||||||||||
Global Expenses | (17,598 | ) | (11,405 | ) | (47,193 | ) | (37,544 | ) | ||||||||||
Restructuring and other charges, net | (3,249 | ) | (190 | ) | (14,183 | ) | (473 | ) | ||||||||||
Acquisition and related costs | (5,436 | ) | (786 | ) | (20,502 | ) | (2,035 | ) | ||||||||||
Operational improvement initiative costs | (407 | ) | (802 | ) | (1,473 | ) | (1,901 | ) | ||||||||||
Legal (charges) credits | — | (25,000 | ) | (1,000 | ) | (23,518 | ) | |||||||||||
Gain on sales of assets | 31 | 87 | 120 | 2,998 | ||||||||||||||
Tax assessment | — | — | (5,331 | ) | — | |||||||||||||
Integration-related costs | (580 | ) | — | (2,501 | ) | — | ||||||||||||
FDA mandated product recall | — | — | (3,500 | ) | — | |||||||||||||
Operating profit | 157,667 | 124,426 | 454,245 | 459,032 | ||||||||||||||
Interest Expense | (19,221 | ) | (13,111 | ) | (49,584 | ) | (40,649 | ) | ||||||||||
Other income (expense), net | 2,880 | 2,075 | 17,192 | 1,954 | ||||||||||||||
Income before taxes | $ | 141,326 | $ | 113,390 | $ | 421,853 | $ | 420,337 | ||||||||||
Operating Margin | ||||||||||||||||||
Flavors | 22.3 | % | 21.1 | % | 23.5 | % | 23.2 | % | ||||||||||
Fragrances | 20.2 | % | 20.7 | % | 19.8 | % | 21.2 | % | ||||||||||
Consolidated | 18.1 | % | 16.0 | % | 17.9 | % | 19.5 | % | ||||||||||
International Flavors & Fragrances Inc. | ||||||||||||||||
Sales Performance by Region and Category | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Third Quarter 2017 vs. Third Quarter 2016 | ||||||||||||||||
Percentage Change in Sales by Region of Destination | ||||||||||||||||
Fine |
Consumer |
Ingredients | Total Frag. | Flavors | Total | |||||||||||
North America | Reported | 12% | 10% | -4% | 7% | 28% | 18% | |||||||||
EAME | Reported | 28% | 17% | 18% | 20% | 12% | 17% | |||||||||
Currency Neutral | 25% | 14% | 16% | 18% | 12% | 15% | ||||||||||
Latin America | Reported | 14% | 13% | 37% | 15% | 0% | 9% | |||||||||
Currency Neutral | 10% | 13% | 37% | 14% | 1% | 9% | ||||||||||
Greater Asia | Reported | 13% | 8% | -1% | 6% | 2% | 4% | |||||||||
Currency Neutral | 14% | 8% | 0% | 7% | 2% | 4% | ||||||||||
Total | Reported | 20% | 12% | 9% | 13% | 12% | 12% | |||||||||
Currency Neutral | 18% | 11% | 8% | 12% | 12% | 12% | ||||||||||
First Nine Months 2017 vs. First Nine Months 2016 | ||||||||||||||||
Percentage Change in Sales by Region of Destination | ||||||||||||||||
Fine |
Consumer |
Ingredients | Total Frag. | Flavors | Total | |||||||||||
North America | Reported | 11% | 7% | -4% | 5% | 28% | 17% | |||||||||
EAME | Reported | 21% | 9% | 12% | 13% | 5% | 10% | |||||||||
Currency Neutral | 22% | 10% | 13% | 14% | 9% | 12% | ||||||||||
Latin America | Reported | -1% | -1% | 30% | 1% | 7% | 3% | |||||||||
Currency Neutral | -5% | -1% | 29% | 0% | 6% | 2% | ||||||||||
Greater Asia | Reported | 19% | 3% | -4% | 2% | 0% | 1% | |||||||||
Currency Neutral | 20% | 3% | -3% | 3% | 1% | 2% | ||||||||||
Total | Reported | 13% | 4% | 5% | 6% | 10% | 8% | |||||||||
Currency Neutral | 13% | 5% | 6% | 7% | 11% | 9% | ||||||||||
Currency neutral growth is calculated by translating prior year sales at the exchange rates used for the corresponding 2017 period.
International Flavors & Fragrances Inc. | ||||||||||||
GAAP to Non-GAAP Reconciliation | ||||||||||||
Foreign Exchange Impact | ||||||||||||
(Unaudited) | ||||||||||||
Q3 Consolidated |
Sales |
Operating |
EPS | |||||||||
% Change - Reported (GAAP) | 12% | 27% | 24% | |||||||||
Items Impacting Comparability | 0% | -16% | -14% | |||||||||
% Change - Adjusted (Non-GAAP) | 12% | 11% | 10% | |||||||||
Currency Impact | 0% | -4% | -5% | |||||||||
% Change - Currency Neutral (Adjusted) | 12% | 7% | 5% | |||||||||
Q3 Flavors |
Sales |
Segment |
||||||||||
% Change - Reported (GAAP) | 12% | 18% | ||||||||||
Currency Impact | 0% | 1% | ||||||||||
% Change - Currency Neutral | 12% | 19% | ||||||||||
Q3 Fragrances |
Sales |
Segment |
||||||||||
% Change - Reported (GAAP) | 13% | 10% | ||||||||||
Currency Impact | -1% | -4% | ||||||||||
% Change - Currency Neutral | 12% | 6% | ||||||||||
|
||||||||||||
YTD Consolidated |
Sales |
Operating |
EPS | |||||||||
% Change - Reported (GAAP) | 8% | -1% | 4% | |||||||||
Items Impacting Comparability | 0% | 5% | 1% | |||||||||
% Change - Adjusted (Non-GAAP) | 8% | 4% | 6%* | |||||||||
Currency Impact | 1% | 2%* | 2% | |||||||||
% Change - Currency Neutral (Adjusted) | 9% | 5% | 8% | |||||||||
*Item does not foot due to rounding
GAAP to
Non-GAAP Reconciliation
(Amounts in thousands)
(Unaudited)
The following information and schedules provide reconciliation information between reported GAAP amounts and non-GAAP certain adjusted amounts. This information and schedules are not intended as, and should not be viewed as, a substitute for reported GAAP amounts or financial statements of the Company prepared and presented in accordance with GAAP.
Third Quarter 2017 | |||||||||||||||||||||
Reconciliation of Non-GAAP Metrics | |||||||||||||||||||||
Reconciliation of Gross Profit | |||||||||||||||||||||
Reported |
Operational |
Acquisition and |
Integration |
Adjusted |
|||||||||||||||||
Gross profit | $ | 382,056 | 407 | 5,147 | 131 | $ | 387,741 | ||||||||||||||
Reconciliation of Selling and Administrative Expenses | |||||||||||||||||||||
Reported |
Acquisition and |
Integration related |
Adjusted |
||||||||||||||||||
Selling and administrative expenses | $ | 141,473 | (289 | ) | (383 | ) | $ | 140,801 | |||||||||||||
Reconciliation of Operating Profit | |||||||||||||||||||||
Reported |
Operational |
Acquisition Related |
Integration |
Restructuring |
Gain on Sale of |
Adjusted |
|||||||||||||||
Operating profit | $ | 157,667 | 407 | 5,436 | 580 | 3,249 | (31 | ) | $ | 167,308 | |||||||||||
Reconciliation of Net Income | |||||||||||||||||||||
Reported |
Operational |
Acquisition Related |
Integration |
Restructuring |
Gain on Sale of |
Adjusted |
|||||||||||||||
Income before taxes | $ | 141,326 | 407 | 5,436 | 580 | 3,249 | (31 | ) | $ | 150,967 | |||||||||||
Taxes on income (f) | $ | 31,065 | 102 | 1,949 | 152 | 1,012 | (10 | ) | $ | 34,270 | |||||||||||
Net income | $ | 110,261 | 305 | 3,487 | 428 | 2,237 | (21 | ) | $ | 116,697 | |||||||||||
Diluted EPS | $ | 1.39 | — | 0.04 | 0.01 | 0.03 | — | $ | 1.47 | ||||||||||||
(a) | Represents accelerated depreciation and idle labor costs in Hangzhou, China. | |
(b) | Represents the amortization of inventory "step-up" related to the acquisitions of David Michael, Fragrance Resources and PowderPure, included in Cost of goods sold and transaction costs related to the acquisitions of David Michael, Fragrance Resources and PowderPure, included in Selling and administrative expenses. | |
(c) | Represents costs related to the integration of the David Michael and Fragrance Resources acquisitions. | |
(d) |
Represents severance costs related to the 2017 Productivity Program. |
|
(e) | Represents gains on sale of assets. | |
(f) | The income tax expense (benefit) on non-GAAP adjustments is computed in accordance with ASC 740 using the same methodology as the GAAP provision of income taxes. Income tax effects of non-GAAP adjustments are calculated based on the applicable statutory tax rate for each jurisdiction in which such charges were incurred. For the third quarter of 2017, these non-GAAP adjustments were not subject to foreign tax credits or valuation allowances, but to the extent that such factors are applicable to any future non-GAAP adjustments we will take such factors into consideration in calculating the tax expense (benefit). | |
The Company tracks the amount of amortization recorded on recent acquisitions in order to monitor its progress with respect to its Vision 2020 goals. The following amounts were recorded with respect to recent acquisitions: $0.6M related to PowderPure, $1.6M related to Fragrance Resources, $1.1M related to David Michael, $2.0M related to Lucas Meyer and $1.6M related to Ottens Flavors. | ||
GAAP to
Non-GAAP Reconciliation
(Amounts in thousands)
(Unaudited)
The following information and schedules provide reconciliation information between reported GAAP amounts and non-GAAP certain adjusted amounts. This information and schedules are not intended as, and should not be viewed as, a substitute for reported GAAP amounts or financial statements of the Company prepared and presented in accordance with GAAP.
Third Quarter 2016 | ||||||||||||||||||||||
Reconciliation of Non-GAAP Metrics | ||||||||||||||||||||||
Reconciliation of Gross Profit | ||||||||||||||||||||||
Reported |
Restructuring and |
Operational |
Adjusted |
|||||||||||||||||||
Gross profit | $ | 346,268 | 190 | 791 | $ | 347,249 | ||||||||||||||||
Reconciliation of Selling and Administrative Expenses | ||||||||||||||||||||||
Reported |
Operational |
Acquisition and |
Legal |
Adjusted |
||||||||||||||||||
Selling and administrative expenses | $ | 152,046 | (11 | ) | (786 | ) | (25,000 | ) | $ | 126,249 | ||||||||||||
Reconciliation of Operating Profit | ||||||||||||||||||||||
Reported |
Restructuring and |
Operational |
Acquisition |
Legal |
Gain on Sale of |
Adjusted |
||||||||||||||||
Operating profit | $ | 124,426 | 190 | 802 | 786 | 25,000 | (87 | ) | $ | 151,117 | ||||||||||||
Reconciliation of Net Income | ||||||||||||||||||||||
Reported |
Restructuring and |
Operational |
Acquisition |
Legal |
Gain on Sale of |
Adjusted |
||||||||||||||||
Income before taxes | $ | 113,390 | 190 | 802 | 786 | 25,000 | (87 | ) | $ | 140,081 | ||||||||||||
Taxes on income (f) | $ | 23,613 | 36 | 200 | 276 | 8,750 | (29 | ) | $ | 32,846 | ||||||||||||
Net income | $ | 89,777 | 154 | 602 | 510 | 16,250 | (58 | ) | $ | 107,235 | ||||||||||||
Diluted EPS | $ | 1.12 | — | 0.01 | 0.01 | 0.20 | — | $ | 1.34 | |||||||||||||
(a) | Accelerated depreciation related to restructuring activities. | |
(b) | Accelerated depreciation and severance costs in Hangzhou, China. | |
(c) | Transaction costs related to the acquisition of David Michael. | |
(d) | Legal charge related to litigation accrual. | |
(e) | Principally related to gain on sale of property in Europe. | |
(f) | The income tax expense (benefit) on non-GAAP adjustments is computed in accordance with ASC 740 using the same methodology as the GAAP provision of income taxes. Income tax effects of non-GAAP adjustments are calculated based on the applicable statutory tax rate for each jurisdiction in which such charges were incurred. For the third quarter of 2016, these non-GAAP adjustments were not subject to foreign tax credits or valuation allowances, but to the extent that such factors are applicable to any future non-GAAP adjustments we will take such factors into consideration in calculating the tax expense (benefit). | |
The Company tracks the amount of amortization recorded on recent acquisitions in order to monitor its progress with respect to its Vision 2020 goals. The following amounts were recorded with respect to recent acquisitions: $2.0M related to Lucas Meyer and $1.6M related to Ottens Flavors. | ||
GAAP to
Non-GAAP Reconciliation
(Amounts in thousands)
(Unaudited)
The following information and schedules provide reconciliation information between reported GAAP amounts and non-GAAP certain adjusted amounts. This information and schedules are not intended as, and should not be viewed as, a substitute for reported GAAP amounts or financial statements of the Company prepared and presented in accordance with GAAP.
Third Quarter Year-to-Date 2017 | ||||||||||||||||||||||||||||||||
Reconciliation of Non-GAAP Metrics | ||||||||||||||||||||||||||||||||
Reconciliation of Gross Profit | ||||||||||||||||||||||||||||||||
Reported |
Operational |
Acquisition and |
Integration |
FDA mandated |
Adjusted |
|||||||||||||||||||||||||||
Gross profit | $ | 1,121,311 | 1,473 | 16,055 | 316 | 3,500 | $ | 1,142,655 | ||||||||||||||||||||||||
Reconciliation of Selling and Administrative Expenses | ||||||||||||||||||||||||||||||||
Reported |
Acquisition and |
Integration related |
Legal |
Tax Assessment |
Adjusted |
|||||||||||||||||||||||||||
Selling and administrative expenses | $ | 417,713 | (4,447 | ) | (1,867 | ) | (1,000 | ) | (5,331 | ) | $ | 405,068 | ||||||||||||||||||||
Reconciliation of Operating Profit | ||||||||||||||||||||||||||||||||
Reported |
Operational |
Acquisition Related |
Integration |
Legal |
Tax Assessment |
Restructuring |
Gain on Sale |
FDA mandated |
Adjusted |
|||||||||||||||||||||||
Operating profit | $ | 454,245 | 1,473 | 20,502 | 2,501 | 1,000 | 5,331 | 14,183 | (120 | ) | 3,500 | $ | 502,615 | |||||||||||||||||||
Reconciliation of Net Income | ||||||||||||||||||||||||||||||||
Reported |
Operational |
Acquisition Related |
Integration |
Legal |
Tax Assessment |
Restructuring |
Gain on Sale |
CTA |
FDA mandated |
Adjusted |
||||||||||||||||||||||
Income before taxes | $ | 421,853 | 1,473 | 20,502 | 2,501 | 1,000 | 5,331 | 14,183 | (120 | ) | (12,217 | ) | 3,500 | $ | 458,006 | |||||||||||||||||
Taxes on income (j) | $ | 86,033 | 368 | 6,559 | 757 | 354 | 1,885 | 3,904 | (39 | ) | — | 1,238 | $ | 101,059 | ||||||||||||||||||
Net income | $ | 335,820 | 1,105 | 13,943 | 1,744 | 646 | 3,446 | 10,279 | (81 | ) | (12,217 | ) | 2,262 | $ | 356,947 | |||||||||||||||||
Diluted EPS | $ | 4.22 | 0.01 | 0.18 | 0.02 | 0.01 | 0.04 | 0.13 | — | (0.15 | ) | 0.03 | $ | 4.49 | ||||||||||||||||||
(a) | Represents accelerated depreciation and idle labor costs in Hangzhou, China. | |
(b) | Represents the amortization of inventory "step-up" related to the acquisitions of David Michael, Fragrance Resources and PowderPure, included in Cost of goods sold and transaction costs related to the acquisitions of David Michael, Fragrance Resources and PowderPure, included in Selling and administrative expenses. | |
(c) | Represents costs related to the integration of the David Michael and Fragrance Resources acquisitions. | |
(d) | Represents additional charge related to litigation settlement. | |
(e) | Represents the reserve for payment of a tax assessment related to commercial rent for prior periods. | |
(f) | Represents severance costs related to the 2017 Productivity Program which were partially offset by the reversal of 2015 severance charges that were no longer needed. | |
(g) | Represents gains on sale of assets. | |
(h) | Represents the release of CTA related to the liquidation of a foreign entity. | |
(i) |
Represents an estimate of the Company's incremental direct costs and customer reimbursement obligations, in excess of the Company's sales value of the recalled products, arising from an FDA mandated recall of consumer products as a result of raw material received and identified by the Company as containing contamination. (As discussed in Note 13 of the Consolidated Financial Statements, the sales value of the recalled products was reserved in the first quarter of 2017). While the Company does not believe that any of the affected raw material was included in its finished products delivered to the customer, as the delivered product included raw material of the same vendor lot that tested positive, the FDA, after being notified by the Company, initiated a recall of all consumer products including raw material from the affected vendor lot due to the potential for product contamination. |
|
(j) |
The income tax expense (benefit) on non-GAAP adjustments is computed in accordance with ASC 740 using the same methodology as the GAAP provision of income taxes. Income tax effects of non-GAAP adjustments are calculated based on the applicable statutory tax rate for each jurisdiction in which such charges were incurred, except for those items which are non-taxable for which the tax expense (benefit) was calculated at 0%. For the first nine months of 2017, these non-GAAP adjustments were not subject to foreign tax credits or valuation allowances, but to the extent that such factors are applicable to any future non-GAAP adjustments we will take such factors into consideration in calculating the tax expense (benefit). |
|
The Company tracks the amount of amortization recorded on recent acquisitions in order to monitor its progress with respect to its Vision 2020 goals. The following amounts were recorded with respect to recent acquisitions: $1.2M related to PowderPure, $4.4M related to Fragrance Resources, $2.9M related to David Michael, $5.8M related to Lucas Meyer and $4.7M related to Ottens Flavors. | ||
GAAP to
Non-GAAP Reconciliation
(Amounts in thousands)
(Unaudited)
The following information and schedules provide reconciliation information between reported GAAP amounts and non-GAAP certain adjusted amounts. This information and schedules are not intended as, and should not be viewed as, a substitute for reported GAAP amounts or financial statements of the Company prepared and presented in accordance with GAAP.
Third Quarter Year-to-Date 2016 | |||||||||||||||||||||
Reconciliation of Non-GAAP Metrics | |||||||||||||||||||||
Reconciliation of Gross Profit | |||||||||||||||||||||
Reported |
Restructuring and |
Operational |
Acquisition and |
Adjusted |
|||||||||||||||||
Gross profit | $ | 1,072,117 | 473 | 1,890 | 889 | $ | 1,075,369 | ||||||||||||||
Reconciliation of Selling and Administrative Expenses | |||||||||||||||||||||
Reported |
Operational |
Acquisition and |
Legal |
Adjusted |
|||||||||||||||||
Selling and Administrative Expenses | $ | 408,372 | (11 | ) | (1,146 | ) | (23,518 | ) | $ | 383,697 | |||||||||||
Reconciliation of Operating Profit | |||||||||||||||||||||
Reported |
Restructuring and |
Operational |
Acquisition |
Legal |
Gain on Sale of |
Adjusted |
|||||||||||||||
Operating profit | $ | 459,032 | 473 | 1,901 | 2,035 | 23,518 | (2,998 | ) | $ | 483,961 | |||||||||||
Reconciliation of Net Income | |||||||||||||||||||||
Reported |
Restructuring and |
Operational |
Acquisition |
Legal |
Gain on Sale of |
Adjusted |
|||||||||||||||
Income before taxes | $ | 420,337 | 473 | 1,901 | 2,035 | 23,518 | (2,998 | ) | $ | 445,266 | |||||||||||
Taxes on income (f) | $ | 95,223 | 90 | 475 | 542 | 8,339 | (666 | ) | $ | 104,003 | |||||||||||
Net income | $ | 325,114 | 383 | 1,426 | 1,493 | 15,179 | (2,332 | ) | $ | 341,263 | |||||||||||
Diluted EPS | $ | 4.05 | — | 0.02 | 0.02 | 0.19 | (0.03 | ) | $ | 4.25 | |||||||||||
(a) | Accelerated depreciation related to restructuring activities. | |
(b) | Accelerated depreciation and severance costs in Hangzhou, China. | |
(c) | Expense related to the amortization of inventory step-up, included in Cost of goods sold, and additional transaction costs related to the acquisition of Lucas Meyer and David Michael, included in Selling and administrative expenses. | |
(d) |
Legal charges related to litigation accrual partially offset by a favorable tax rulings in jurisdictions for which reserves were previously recorded for ongoing tax disputes. |
|
(e) | Principally related to gain on sale of property in Europe. | |
(f) | The income tax expense (benefit) on non-GAAP adjustments is computed in accordance with ASC 740 using the same methodology as the GAAP provision of income taxes. Income tax effects of non-GAAP adjustments are calculated based on the applicable statutory tax rate for each jurisdiction in which such charges were incurred. For the first six months of 2016, these non-GAAP adjustments were not subject to foreign tax credits or valuation allowances, but to the extent that such factors are applicable to any future non-GAAP adjustments we will take such factors into consideration in calculating the tax expense (benefit). | |
The Company tracks the amount of amortization recorded on recent acquisitions in order to monitor its progress with respect to its Vision 2020 goals. The following amounts were recorded with respect to recent acquisitions: $6.3M related to Lucas Meyer and $4.8M related to Ottens Flavors. |
View source version on businesswire.com: http://www.businesswire.com/news/home/20171106006362/en/
Source:
International Flavors & Fragrances Inc.
Michael DeVeau,
212-708-7164
VP, Corporate Strategy, Investor Relations &
Communications
Michael.DeVeau@iff.com