Attached files
file | filename |
---|---|
EX-99.2 - EX-99.2 - INTERNATIONAL FLAVORS & FRAGRANCES INC | d912342dex992.htm |
8-K - FORM 8-K - INTERNATIONAL FLAVORS & FRAGRANCES INC | d912342d8k.htm |
1
2
3
4
5
International Flavors & Fragrances Inc.
Consolidated Income Statement
(Amounts in thousands except per share data)
(Unaudited)
Three Months Ended March 31, | ||||||||||||
2020 | 2019 | % Change |
||||||||||
Net sales |
$ | 1,347,317 | $ | 1,297,402 | 4 | % | ||||||
Cost of goods sold |
781,450 | 766,143 | 2 | % | ||||||||
|
|
|
|
|||||||||
Gross profit |
565,867 | 531,259 | 7 | % | ||||||||
Research and development expenses |
85,909 | 90,596 | (5 | )% | ||||||||
Selling and administrative expenses |
229,714 | 213,182 | 8 | % | ||||||||
Amortization of acquisition-related intangibles |
48,350 | 47,625 | 2 | % | ||||||||
Restructuring and other charges, net |
4,918 | 16,174 | (70 | )% | ||||||||
Losses (gains) on sales of fixed assets |
754 | (188 | ) | NMF | ||||||||
|
|
|
|
|||||||||
Operating profit |
196,222 | 163,870 | 20 | % | ||||||||
Interest expense |
32,140 | 36,572 | (12 | )% | ||||||||
Other loss (income), net |
10,574 | (7,278 | ) | NMF | ||||||||
|
|
|
|
|||||||||
Income before taxes |
153,508 | 134,576 | 14 | % | ||||||||
Taxes on income |
26,297 | 23,362 | 13 | % | ||||||||
|
|
|
|
|||||||||
Net income |
127,211 | 111,214 | 14 | % | ||||||||
|
|
|
|
|||||||||
Net income attributable to noncontrolling interest |
2,604 | 2,385 | 9 | % | ||||||||
|
|
|
|
|||||||||
Net income attributable to IFF |
124,607 | 108,829 | 14 | % | ||||||||
|
|
|
|
|||||||||
Net income per share - basic (1) |
$ | 1.16 | $ | 0.97 | ||||||||
Net income per share - diluted (1) |
$ | 1.15 | $ | 0.96 | ||||||||
Average number of shares outstanding - basic |
112,082 | 111,864 | ||||||||||
Average number of shares outstanding - diluted |
113,594 | 113,389 |
(1) | For 2020 and 2019, net income per share reflects adjustments related to the redemption value of certain redeemable noncontrolling interests. |
NMF Not meaningful
6
International Flavors & Fragrances Inc.
Condensed Consolidated Balance Sheet
(Amounts in thousands)
(Unaudited)
March 31, | December 31, | |||||||
2020 | 2019 | |||||||
Cash, cash equivalents, and restricted cash |
$ | 442,945 | $ | 623,945 | ||||
Receivables |
943,114 | 876,197 | ||||||
Inventories |
1,075,913 | 1,123,068 | ||||||
Other current assets |
356,322 | 319,334 | ||||||
|
|
|
|
|||||
Total current assets |
2,818,294 | 2,942,544 | ||||||
Property, plant and equipment, net |
1,339,124 | 1,386,920 | ||||||
Goodwill and other intangibles, net |
7,945,005 | 8,349,531 | ||||||
Other assets |
586,653 | 608,416 | ||||||
|
|
|
|
|||||
Total assets |
12,689,076 | 13,287,411 | ||||||
|
|
|
|
|||||
Short term borrowings |
$ | 385,569 | $ | 384,958 | ||||
Other current liabilities |
1,041,426 | 1,167,232 | ||||||
|
|
|
|
|||||
Total current liabilities |
1,426,995 | 1,552,190 | ||||||
Long-term debt |
3,946,905 | 3,997,438 | ||||||
Non-current liabilities |
1,371,789 | 1,409,192 | ||||||
Redeemable noncontrolling interests |
102,713 | 99,043 | ||||||
Shareholders equity |
5,840,674 | 6,229,548 | ||||||
|
|
|
|
|||||
Total liabilities and shareholders equity |
$ | 12,689,076 | $ | 13,287,411 | ||||
|
|
|
|
7
International Flavors & Fragrances Inc.
Consolidated Statement of Cash Flows
(Amounts in thousands)
(Unaudited)
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 127,211 | $ | 111,214 | ||||
Adjustments to reconcile to net cash provided by operating activities |
||||||||
Depreciation and amortization |
80,595 | 81,775 | ||||||
Deferred income taxes |
2,221 | (12,389 | ) | |||||
Losses (gains) on sale of assets |
754 | (188 | ) | |||||
Stock-based compensation |
8,624 | 7,604 | ||||||
Pension contributions |
(5,397 | ) | (3,956 | ) | ||||
Changes in assets and liabilities, net of acquisitions: |
||||||||
Trade receivables |
(133,291 | ) | (55,935 | ) | ||||
Inventories |
(568 | ) | (24,719 | ) | ||||
Accounts payable |
(31,635 | ) | 8,988 | |||||
Accruals for incentive compensation |
(19,340 | ) | (36,969 | ) | ||||
Other current payables and accrued expenses |
(65,158 | ) | (11,321 | ) | ||||
Other assets |
42,462 | (9,978 | ) | |||||
Other liabilities |
10,467 | (6,894 | ) | |||||
|
|
|
|
|||||
Net cash provided by operating activities |
16,945 | 47,232 | ||||||
|
|
|
|
|||||
Cash flows from investing activities: |
||||||||
Cash paid for acquisitions, net of cash received |
| (33,895 | ) | |||||
Additions to property, plant and equipment |
(48,294 | ) | (57,609 | ) | ||||
Proceeds from life insurance contracts |
1,739 | 1,890 | ||||||
Proceeds from disposal of assets |
3,806 | 3,970 | ||||||
Contingent consideration paid |
| (4,655 | ) | |||||
|
|
|
|
|||||
Net cash used in investing activities |
(42,749 | ) | (90,299 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities: |
||||||||
Cash dividends paid to shareholders |
(80,038 | ) | (77,779 | ) | ||||
Increase in revolving credit facility and short term borrowings |
169 | 2,895 | ||||||
Repayments on debt |
(11,584 | ) | (36,156 | ) | ||||
Purchases of redeemable noncontrolling interest |
(14,173 | ) | | |||||
Contingent consideration paid |
(327 | ) | | |||||
Proceeds from issuance of stock in connection with stock options |
| 200 | ||||||
Employee withholding taxes paid |
(1,275 | ) | (1,339 | ) | ||||
|
|
|
|
|||||
Net cash used in financing activities |
(107,228 | ) | (112,179 | ) | ||||
|
|
|
|
|||||
Effect of exchange rates changes on cash, cash equivalents and restricted cash |
(42,529 | ) | 3,853 | |||||
|
|
|
|
|||||
Net change in cash, cash equivalents and restricted cash |
(175,561 | ) | (151,393 | ) | ||||
Cash, cash equivalents and restricted cash at beginning of year |
623,945 | 648,522 | ||||||
|
|
|
|
|||||
Cash, cash equivalents and restricted cash at end of period |
$ | 448,384 | $ | 497,129 | ||||
|
|
|
|
The following table reconciles cash, cash equivalents and restricted cash between the Companys statement of cash flows for the periods ended March 31, 2020 and March 31, 2019 to the amounts reported in the Companys balance sheet:
March 31, 2020 | December 31, 2019 | March 31, 2019 | December 31, 2018 | |||||||||||||
Current assets |
||||||||||||||||
Cash and cash equivalents |
$ | 433,246 | $ | 606,823 | $ | 483,504 | $ | 634,897 | ||||||||
Restricted cash |
9,699 | 17,122 | 13,625 | 13,625 | ||||||||||||
Noncurrent assets |
||||||||||||||||
Restricted cash included in Other assets |
5,439 | | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash, cash equivalents and restricted cash |
$ | 448,384 | $ | 623,945 | $ | 497,129 | $ | 648,522 | ||||||||
|
|
|
|
|
|
|
|
8
International Flavors & Fragrances Inc.
Business Unit Performance
(Amounts in thousands)
(Unaudited)
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Net Sales |
||||||||
Taste |
$ | 830,322 | $ | 804,802 | ||||
Scent |
516,995 | 492,600 | ||||||
|
|
|
|
|||||
Consolidated |
$ | 1,347,317 | $ | 1,297,402 | ||||
|
|
|
|
|||||
Segment Profit |
||||||||
Taste |
$ | 137,347 | $ | 131,402 | ||||
Scent |
105,395 | 89,953 | ||||||
Global Expenses |
(20,393 | ) | (16,667 | ) | ||||
Operational Improvement Initiatives |
| (406 | ) | |||||
Frutarom Integration Related Costs |
(3,650 | ) | (14,897 | ) | ||||
Restructuring and Other Charges, net |
(4,918 | ) | (16,174 | ) | ||||
(Losses) gains on sale of assets |
(754 | ) | 188 | |||||
Frutarom Acquisition Related Costs |
(813 | ) | (9,529 | ) | ||||
Compliance Review & Legal Defense Costs |
(649 | ) | | |||||
N&B Transaction Related Costs |
(5,199 | ) | | |||||
N&B Integration Related Costs |
(10,144 | ) | | |||||
|
|
|
|
|||||
Operating profit |
196,222 | 163,870 | ||||||
Interest Expense |
(32,140 | ) | (36,572 | ) | ||||
Other loss (income), net |
(10,574 | ) | 7,278 | |||||
|
|
|
|
|||||
Income before taxes |
$ | 153,508 | $ | 134,576 | ||||
|
|
|
|
|||||
Operating Margin |
||||||||
Taste |
17 | % | 16 | % | ||||
Scent |
20 | % | 18 | % | ||||
Consolidated |
15 | % | 13 | % |
9
International Flavors & Fragrances Inc.
GAAP to Non-GAAP Reconciliation
Foreign Exchange Impact
(Unaudited)
Q1 Taste |
Sales | Segment Profit |
||||||
% Change - Reported |
3% | 5% | ||||||
Currency Impact |
2% | 1% | ||||||
% Change - Currency Neutral |
5% | 6% | ||||||
Q1 Scent |
Sales | Segment Profit |
||||||
% Change - Reported |
5% | 17% | ||||||
Currency Impact |
2% | 2% | ||||||
% Change - Currency Neutral |
7% | 19% | ||||||
Q1 Consolidated |
EPS ex. Amortization |
Adjusted Operating Profit |
||||||
% Change - Adjusted (Non-GAAP) |
3% | 7% | ||||||
Currency Impact |
10% | 2% | ||||||
% Change - Currency Neutral |
13% | 9% |
10
International Flavors & Fragrances Inc.
GAAP to Non-GAAP Reconciliation
(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.
Reconciliation of Gross Profit
|
||||||||
First Quarter | ||||||||
(DOLLARS IN THOUSANDS) | 2020 | 2019 | ||||||
Reported (GAAP) |
$ | 565,867 | $ | 531,259 | ||||
Operational Improvement Initiatives (a) |
| 406 | ||||||
Frutarom Integration Related Costs (b) |
149 | 156 | ||||||
Frutarom Acquisition Related Costs (d) |
513 | 7,850 | ||||||
|
|
|
|
|||||
Adjusted (Non-GAAP) |
$ | 566,529 | $ | 539,671 | ||||
|
|
|
|
|||||
Reconciliation of Selling and Administrative Expenses
|
||||||||
First Quarter | ||||||||
(DOLLARS IN THOUSANDS) | 2020 | 2019 | ||||||
Reported (GAAP) |
$ | 229,714 | $ | 213,182 | ||||
Frutarom Integration Related Costs (b) |
(3,279 | ) | (14,557 | ) | ||||
Frutarom Acquisition Related Costs (d) |
(300 | ) | (1,679 | ) | ||||
Compliance Review & Legal Defense Costs (e) |
(649 | ) | | |||||
N&B Transaction Related Costs (f) |
(5,199 | ) | | |||||
N&B Integration Related Costs (g) |
(10,144 | ) | | |||||
|
|
|
|
|||||
Adjusted (Non-GAAP) |
$ | 210,143 | $ | 196,946 | ||||
|
|
|
|
|||||
Reconciliation of Operating Profit
|
||||||||
First Quarter | ||||||||
(DOLLARS IN THOUSANDS) | 2020 | 2019 | ||||||
Reported (GAAP) |
$ | 196,222 | $ | 163,870 | ||||
Operational Improvement Initiatives (a) |
| 406 | ||||||
Frutarom Integration Related Costs (b) |
3,650 | 14,897 | ||||||
Restructuring and Other Charges, net (c) |
4,918 | 16,174 | ||||||
Losses (Gains) on Sale of Assets |
754 | (188 | ) | |||||
Frutarom Acquisition Related Costs (d) |
813 | 9,529 | ||||||
Compliance Review & Legal Defense Costs (e) |
649 | | ||||||
N&B Transaction Related Costs (f) |
5,199 | | ||||||
N&B Integration Related Costs (g) |
10,144 | | ||||||
|
|
|
|
|||||
Adjusted (Non-GAAP) |
$ | 222,349 | $ | 204,688 | ||||
|
|
|
|
11
Reconciliation of Adjusted (Non-GAAP) Operating Profit Margin ex. Amortization
|
||||||||
(DOLLARS IN THOUSANDS) |
First Quarter | |||||||
Numerator | 2020 | 2019 | ||||||
Adjusted (Non-GAAP) Operating Profit |
$ | 222,349 | $ | 204,688 | ||||
Amortization of Acquisition related Intangible Assets |
48,350 | 47,625 | ||||||
|
|
|
|
|||||
Adjusted (Non-GAAP) Operating Profit ex. Amortization |
270,699 | 252,313 | ||||||
Denominator |
||||||||
Sales |
1,347,317 | 1,297,402 | ||||||
|
|
|
|
|||||
Adjusted (Non-GAAP) Operating Profit Margin ex. Amortization |
20.1 | % | 19.4 | % | ||||
|
|
|
|
12
International Flavors & Fragrances Inc.
GAAP to Non-GAAP Reconciliation
(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.
Reconciliation of Net Income | ||||||||||||||||||||||||||||||||
First Quarter | ||||||||||||||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||||||||||||
(DOLLARS IN THOUSANDS) | Income before taxes |
Taxes on income (i) |
Net Income Attributable to IFF (j) |
Diluted EPS (k) |
Income before taxes |
Taxes on income (i) |
Net Income Attributable to IFF (j) |
Diluted EPS |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Reported (GAAP) |
$ | 153,508 | $ | 26,297 | $ | 124,607 | $ | 1.15 | $ | 134,576 | $ | 23,362 | $ | 108,829 | $ | 0.96 | ||||||||||||||||
Operational Improvement Initiatives (a) |
| | | | 406 | 142 | 264 | | ||||||||||||||||||||||||
Frutarom Integration Related Costs (b) |
3,650 | 815 | 2,835 | 0.02 | 14,897 | 3,349 | 11,548 | 0.10 | ||||||||||||||||||||||||
Restructuring and Other Charges, net (c) |
4,918 | 1,034 | 3,884 | 0.03 | 16,174 | 4,031 | 12,143 | 0.11 | ||||||||||||||||||||||||
Losses (Gains) on Sale of Assets |
754 | 189 | 565 | | (188 | ) | (43 | ) | (145 | ) | | |||||||||||||||||||||
Frutarom Acquisition Related Costs (d) |
213 | (1,634 | ) | 1,847 | 0.02 | 9,529 | 1,530 | 7,999 | 0.07 | |||||||||||||||||||||||
Compliance Review & Legal Defense Costs (e) |
649 | 135 | 514 | | | | | | ||||||||||||||||||||||||
N&B Transaction Related Costs (f) |
5,199 | | 5,199 | 0.05 | | | | | ||||||||||||||||||||||||
N&B Integration Related Costs (g) |
10,144 | 2,168 | 7,976 | 0.07 | | | | | ||||||||||||||||||||||||
Redemption value adjustment to EPS (h) |
| | | (0.05 | ) | | | | | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Adjusted (Non-GAAP) |
$ | 179,035 | $ | 29,004 | $ | 147,427 | $ | 1.30 | $ | 175,394 | $ | 32,371 | $ | 140,638 | $ | 1.24 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted (Non-GAAP) EPS ex. Amortization | ||||||||
First Quarter | ||||||||
(DOLLARS AND SHARE AMOUNTS IN THOUSANDS) |
2020 | 2019 | ||||||
|
|
|
|
|||||
Numerator |
||||||||
Adjusted (Non-GAAP) Net Income |
$ | 147,427 | $ | 140,638 | ||||
Amortization of Acquisition related Intangible Assets |
48,350 | 47,625 | ||||||
Tax impact on Amortization of Acquisition related Intangible Assets (i) |
10,966 | 10,196 | ||||||
|
|
|
|
|||||
Amortization of Acquisition related Intangible Assets, net of tax (l) |
37,384 | 37,429 | ||||||
|
|
|
|
|||||
Adjusted (Non-GAAP) Net Income ex. Amortization |
184,811 | 178,067 | ||||||
Denominator |
||||||||
Weighted average shares assuming dilution (diluted) |
113,594 | 113,389 | ||||||
|
|
|
|
|||||
Adjusted (Non-GAAP) EPS ex. Amortization |
$ | 1.62 | $ | 1.57 | ||||
|
|
|
|
13
(a) | Represents accelerated depreciation related to a plant relocation in India. |
(b) | Represents costs related to the integration of the Frutarom acquisition. For 2020, costs primarily related to advisory services, retention bonuses and performance stock awards. For 2019, costs principally related to advisory services. |
(c) | For 2020, represents costs primarily related to the Frutarom Integration Initiative. For 2019, represents costs primarily related to the Frutarom Integration Initiative and the 2019 Severance Charges program. |
(d) | Represents transaction-related costs and expenses related to the acquisition of Frutarom. For 2020, amount primarily includes earn-out payments, net of adjustments, amortization for inventory step-up costs and transaction costs principally related to the 2019 Acquisition Activity. For 2019, amount primarily includes amortization for inventory step-up costs and transaction costs. |
(e) | Costs related to reviewing the nature of inappropriate payments and review of compliance in certain other countries. In addition, includes legal costs for related shareholder lawsuits. |
(f) | Represents transaction costs and expenses related to the pending transaction with Nutrition & Biosciences Inc. |
(g) | Represents costs related to the integration of the pending transaction with Nutrition & Biosciences Inc. |
(h) | Represents the adjustment to EPS related to the excess of the redemption value of certain redeemable noncontrolling interests over their existing carrying value. |
(i) | 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 or are subject to a valuation allowance for which the tax expense (benefit) was calculated at 0%. For fiscal years 2020 and 2019, these non-GAAP adjustments were not subject to foreign tax credits, 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). |
(j) | For 2020 and 2019, net income is reduced by income attributable to noncontrolling interest of $2.6M and $2.4M, respectively. |
(k) | The sum of these items does not foot due to rounding. |
(l) | Represents all amortization of intangible assets acquired in connection with acquisitions, net of tax. |
14