Achieved strategic and financial progress in 2016
Expects growth rates in 2017 to accelerate versus prior year
Announces multi-year productivity program to selectively invest
& deliver long-term targets in 2018
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International Flavors & Fragrances Inc. (NYSE: IFF)
(Euronext Paris: IFF) reported financial results and strategic
achievements for the fourth quarter and full year ended December
30, 2016.
Q4 2016 Consolidated Summary: Change vs. Prior Year
Reported (GAAP) Adjusted (Non-GAAP)¹
Currency Neutral (Non-GAAP)¹ Sales
Operating Profit EPS Sales
Operating Profit EPS Sales
Operating Profit EPS Consolidated 7% (10)% 2%
7% 4% 17% 7% 6% 6% Acquisition Impact 3% 2% 0% 3%
2% 0% 3% 2% 2%
¹ Schedules at the end of this release contain reconciliations
of reported GAAP to non-GAAP metrics.
Full Year 2016 Consolidated Summary: Change vs. Prior
Year
Reported (GAAP) Adjusted (Non-GAAP)¹
Currency Neutral (Non-GAAP)¹ Sales
Operating Profit EPS Sales
Operating Profit EPS Sales
Operating Profit EPS Consolidated 3% (4)% (2)%
3% 2% 5% 5% 4% 6% Acquisition Impact 2% 2% 2% 2%
2% 2% 2% 2% 2%
¹ Schedules at the end of this release contain reconciliations
of reported GAAP to non-GAAP metrics
Management Commentary
“The fourth quarter of 2016 came in consistent with our
expectations, improving sequentially versus the third quarter,”
said Chairman and CEO Andreas Fibig. “We are pleased to report that
sales grew high-single-digits driven by strong new wins across both
businesses and the contribution of our recent acquisition of David
Michael. In terms of our bottom line, we continued to benefit from
volume growth as well as cost and productivity initiatives that
allowed us to selectively invest in strategic opportunities.
“On a full-year basis, we continued to make strategic and
financial progress while successfully navigating through a volatile
and challenging market environment. Growth in fragrance
encapsulation, sweetness and savory modulation, and in the Middle
East & Africa – all strategic priorities for us – continued in
2016. We also successfully commercialized four new captive
fragrance ingredients, expanded our core list participation with
several key customers and added approximately $160 million of
future annual revenue with the acquisitions of David Michael and
Fragrance Resources – the latter of which closed in January of
2017. We expect that these achievements should provide us with
opportunities to consistently grow our business in the future.
“In terms of financial performance, we achieved currency neutral
growth across all of our key metrics for the full year. Both
business units successfully delivered solid top and bottom-line
growth. Much of this can be attributed to winning new business,
executing on productivity initiatives and capitalizing on our
recent value-creating acquisitions.
“Thanks in large part to our industry-leading innovation and
ability to provide our customers with superior products, IFF has a
history of strong sales growth, proven profitability and
industry-leading returns. Over the past two years, however, we have
seen the global operating environment become more volatile as
global consumer staples volumes are soft, currencies are
fluctuating, and raw material costs are trending higher. Fully
recognizing the changing landscape, we are taking action to
continue to deliver winning solutions to our customers while
achieving sustainable profitable growth. This starts with the
launch of a multi-year productivity program, which we expect will
allow us the flexibility to invest in our business to drive greater
competitive advantage while still delivering our long-term
financial targets.
“In 2017 – recognizing the reality of today’s market environment
– we are optimistic that our financial growth rates should
accelerate versus our 2016 performance. We also expect to set a
stronger foundation, focusing on driving the long-term growth
prospects of our business – balancing levels of investment and our
profitability objectives. As we unlock savings through our
productivity program, we expect to be able to deliver our long-term
financial targets in 2018. We believe that we are taking the
appropriate steps to build a stronger, more successful company for
our customers, employees and shareholders.”
Full Year 2016 Consolidated Financial Highlights
- Reported net sales for the full year
totaled $3.1 billion, an increase of 3% from $3.0 billion for the
full year of 2015. Excluding the impact of foreign exchange,
currency neutral sales increased 5% over the prior year, including
approximately two percentage points related to our recent
acquisitions.
- Reported operating profit for the full
year was $567 million versus $588 million reported in 2015,
including a net charge in 2016 of $49 million related to
litigation. Excluding the impact of foreign exchange and those
items that affect comparability, currency neutral adjusted
operating profit grew 4% principally driven by volume growth,
acquisitions and the benefits associated with cost and productivity
initiatives.
- Reported earnings per share (EPS) for
the full year was $5.05 per diluted share versus $5.16 per diluted
share reported in 2015. Excluding the impact of foreign exchange
and those items that affect comparability, currency neutral
adjusted EPS improved 6%, driven by adjusted operating profit
growth, lower year-over-year shares outstanding, and a more
favorable year-over-year effective tax rate.
Full Year 2016 Strategic Highlights:
Innovating Firsts: strengthen position and drive
differentiation in priority R&D platforms
- Encapsulation-related sales grew
high-single-digits led by Fabric Care
- Sweetness and savory modulation
portfolio sales improved strong double-digits
- Launched & commercialized four new
natural flavor modulators
- Commercialized four new captive
fragrance ingredients to drive further differentiation
- Created first-ever Cradle to Cradle
Certified™ Fragrance: PuraVita™
- IFF | Lucas Meyer Cosmetics won two
silver innovation awards
Win Where We Compete: achieve market leadership position
in key markets, categories & customers
- Middle East & Africa sales were
strong led by growth in both Flavors & Fragrances
- North America Consumer Fragrance +8%
driven by double-digit growth in Fabric Care
- Home Care improved mid-single-digits
led by a strong performance in North America
- Strengthened #2 position in Flavors
North America with the acquisition of David Michael
Become Our Customers’ Partner of Choice: attain
commercial excellence
- Expanded business access through core
list status with two multinational customers
- Received several business excellence
awards from top customers
- CEO elected to World Business Council
for Sustainable Development Executive Committee
- First flavor and fragrance company to
join the World Economic Forum
- Deployed industry-first on-site wind
turbine at Tilburg, Netherlands facility
- Partnered with Unilever to improve the
lives of vetiver farming communities in Haiti
- IFF rated gold by EcoVadis for
sustainability; ranked top supplier
- Achieved CDP “A” List Rating for second
consecutive year
Strengthen and Expand the Portfolio: pursue value
creation through collaborations & acquisitions
- Acquired David Michael to reinforce our
differentiated service model in the US for middle-market customers,
with a focus on innovation, agility and enhanced collaboration
- Announced the purchase of Fragrance
Resources – closed in January 2017 – to further penetrate regional
customers and improve our market position in specialty fine
fragrances
- IFF | Lucas Meyer Cosmetics invested in
Bio ForeXtra to expand raw material access
Productivity Program Designed to Drive Long-Term Value
Creation
We expect the productivity program will include the application
of enterprise-wide zero-based budgeting, elimination of open
positions, streamlining of organizational structures and the
optimization of our global network. This is expected to result in a
reduction of approximately 5% of the Company’s global
workforce.
Once fully implemented, the company expects savings from this
productivity program to reach an annual run-rate of between $40
million and $45 million by the end of 2019. The program is expected
to result in total cumulative, pre-tax charge of between $35
million and $40 million in 2017 and 2018, of which we expect to
take approximately $10 million in the first quarter of 2017.
Full Year 2016 Segment Summary: Growth vs. Prior Year
Reported (GAAP)
Currency Neutral (Non-GAAP) Sales
SegmentProfit
Sales
SegmentProfit
Fragrances: 3% 4% 4% 3% Acquisition Impact 2% 2% 2% 2%
Flavors: 4% 6% 6% 7% Acquisition Impact 3% 2%
3% 2%
Fragrances Business Unit
- On a reported basis, sales increased
3%, or $39.6 million, to $1.6 billion, while currency neutral sales
improved 4%, with two percentage points of growth contribution from
the organic business and two percentage points related to the
acquisition of IFF | Lucas Meyer Cosmetics.
- Fine Fragrances declined 2% on a
reported basis and 1% on a currency neutral basis as new win
contribution was more than offset by high volume erosion,
principally due to weak economic dynamics in key Latin America
markets as well as the portfolio transition between two large
customers within the category.
- Consumer Fragrances grew 2% on a
reported basis and 3% on a currency neutral basis led by
mid-single-digit growth in Fabric Care, Home Care and Personal
Wash. On a geographic basis, growth was achieved across three of
the four regions, led by high-single- digit growth in North America
and Greater Asia.
- Fragrance Ingredients grew 9% on a
reported basis and 10% on a currency neutral basis, driven by the
contribution of sales related to the IFF | Lucas Meyer Cosmetics
acquisition and improved performance in our organic business.
- Fragrances segment profit increased 4%
on a reported basis and 3% on a currency neutral basis principally
attributable to volume growth and the benefits from cost and
productivity initiatives.
Flavors Business Unit
- On a reported basis, sales increased
4%, or $53.6 million, to $1.5 billion, while currency neutral sales
grew 6% driven by growth in all categories, and the contribution of
sales related to the Ottens Flavors and David Michael
acquisitions.
- EAME increased 1% on a reported basis
and 5% on a currency neutral basis led by strong double-digit
growth in the Middle East and Africa as well as mid-single-digit
growth in Central, Southern and Eastern Europe.
- North America improved 8% driven by the
contribution of additional sales related to the acquisition of
Ottens Flavors and David Michael. Organic growth rates improved
over the course of the year to finish flat as new wins remained
strong and volume erosion on existing business normalized.
- Latin America increased 1% on a
reported basis and 5% on a currency neutral basis led by
double-digit growth in Mexico and a high-single-digit increase in
Brazil.
- Greater Asia increased 4% on a reported
basis and 6% on a currency neutral basis, with strong growth in
India, ASEAN and Indonesia.
- Flavors segment profit increased 6% on
a reported basis and 7% on a currency neutral basis, driven by
volume growth, the benefits from productivity initiatives and the
contribution of acquisitions.
Fourth Quarter 2016 Segment Summary: Growth vs. Prior
Year
Reported
(GAAP) Currency Neutral (Non-GAAP) Sales
SegmentProfit
Sales
SegmentProfit
Fragrances: 1% 4% 1% 0% Acquisition Impact 0% 0% 0% 0%
Flavors: 13% 25% 14% 27% Acquisition Impact 5%
4% 5% 4%
Fragrances Business Unit
- On a reported basis, sales increased
1%, or $3.5 million, to $384.9 million, while currency neutral
sales improved 1% driven by continued growth in Fabric Care, Home
Care and Fragrance Ingredients.
- Fine Fragrances declined 6% on a
reported basis and 8% on a currency neutral basis as
mid-single-digit growth in EAME was more than offset by ongoing
challenges in North America and weak demand in Latin America.
- Consumer Fragrances improved 3% on a
reported and currency neutral basis led by double-digit growth in
Home Care and high-single-digit growth in Fabric Care which was
offset by Personal Wash. On a geographic basis, double-digit growth
in North America and high-single-digit increase in EAME more than
offset challenges in Latin America.
- Fragrance Ingredients grew 3% on a
reported basis and 2% on a currency neutral basis, as strong growth
in EAME was offset by softness in North America and Latin
America.
- Fragrances segment profit increased 4%
on a reported basis, and was flat on a currency neutral basis as
volume growth and the benefits from productivity initiatives offset
softer mix and unfavorable price to input costs.
Flavors Business Unit
- On a reported basis, sales increased
13%, or $43.4 million, to $377.7 million, while currency neutral
sales grew 14% driven by double-digit growth in Sweet and
high-single-digit increases in Beverage, Dairy and Savory, as well
as the contribution of sales related to the David Michael
acquisition.
- EAME increased 8% on a reported basis
and 12% on a currency neutral basis led by strong double-digit
growth in the Middle East and Africa and a mid-single-digit
increase in Western Europe.
- North America grew 22% reflecting
additional sales related to the acquisition of David Michael as
well as strong double-digit growth in Dairy.
- Latin America increased 13% on a
reported and currency neutral basis as Brazil and Mexico both grew
strong double-digits.
- Greater Asia increased 10% on a
reported and currency neutral basis led by double-digit growth in
India, ASEAN, and Indonesia.
- Flavors segment profit grew 25% on a
reported basis and 27% on a currency neutral basis, due to volume
growth, the benefits from productivity initiatives and the
contribution of the David Michael acquisition.
FY 2017 Financial Guidance: Percent Change vs. Prior
Year
The Company’s full year 2017 guidance:
Currency
Neutral FX Impact1 Adjusted2
Organic M&A Total
Sales 3.0%
- 4.0% ~4.5% 7.5% - 8.5% ~(2.5)% 5.0% - 6.0%
Operating
Profit 4.0% - 5.0% ~1.5% 5.5% - 6.5% ~(2.0)% 3.5% - 4.5%
EPS 5.0% - 6.0% ~1.5% 6.5% - 7.5% ~(2.5)% 4.0% - 5.0%
1 See Use of Non-GAAP Financial Measures2 Excludes items
impacting comparability
A copy of the Company’s Annual Report on Form 10-K will be
available on its website at www.iff.com or at sec.gov by February
28, 2017.
Audio Webcast
A live webcast to discuss the Company’s fourth quarter and full
year 2016 financial results will be held on February 16, 2017, at
10:00 a.m. EST. Investors may access the webcast and accompanying
slide presentation on the Company's IR website at ir.iff.com. For
those unable to listen to the live webcast, a recorded version will
be made available on the Company's website approximately one hour
after the event and will remain available on IFF’s website for one
year.
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,
revenue expectations from our acquisitions of David Michael and
Fragrance Resources, the expected impact of and benefits from
productivity initiatives, long-term growth opportunities, long-term
profitable growth in 2018 and the impact of our actions on value
creation for our customers and shareholders. These forward-looking
statements are qualified in their entirety by cautionary statements
and risk factor disclosures contained in the Company’s Securities
and Exchange Commission filings, including the Company’s Annual
Report on Form 10-K filed with the Commission on March 1, 2016. The
Company wishes to caution readers that certain important factors
may have affected 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: (1)
macroeconomic trends affecting the emerging markets; (2) the
Company’s ability to implement and adapt its Vision 2020 strategy;
(3) the Company’s ability to successfully identify and complete
acquisitions in line with its Vision 2020 strategy, and to realize
the anticipated benefits of those acquisitions; (4) the Company’s
ability to realize the benefits of its productivity initiatives,
(5) the Company’s ability to effectively compete in its market, and
to successfully develop new and competitive products that appeal to
its customers and consumers; (6) changes in consumer preferences
and demand for the Company’s products or a decline in consumer
confidence and spending; (7) the Company’s ability to benefit from
its investments and expansion in emerging markets; (8) the impact
of currency fluctuations or devaluations in the principal foreign
markets in which it operates, including the devaluation of the
Euro; (9) the economic and political risks associated with the
Company’s international operations, including challenging economic
conditions in China and Latin America; (10) the impact of any
failure of the Company’s key information technology systems or a
breach of information security; (11) the Company’s ability to
attract and retain talented employees; (12) the Company’s ability
to comply with, and the costs associated with compliance with U.S.
and foreign environmental protection laws; (13) the Company’s
ability to realize expected cost savings and efficiencies from its
profitability improvement initiative and other optimization
activities; (14) volatility and increases in the price of raw
materials, energy and transportation; (15) price realization in a
rising input cost environment (16) fluctuations in the quality and
availability of raw materials; (17) the impact of a disruption in
the Company’s supply chain or its relationship with its suppliers;
(18) any adverse impact on the availability, effectiveness and cost
of the Company’s hedging and risk management strategies; (19) the
Company’s ability to successfully manage its working capital and
inventory balances; (20) uncertainties regarding the outcome of, or
funding requirements related to litigation or settlement of pending
litigation uncertain tax positions or other contingencies; (21) the
effect of legal and regulatory developments, as well as
restrictions or costs that may be imposed on the Company or its
operations by U.S. and foreign governments; (22) adverse changes in
federal, state, local and international tax legislation or
policies, including with respect to transfer pricing and state aid,
and adverse results of tax audits, assessments, or disputes; and
(23) changes in market conditions or governmental regulations
relating to our pension and postretirement obligations. 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 revise any forward-looking statements,
whether as a result of new information, future events, or
otherwise.
Use of Non-GAAP Financial
Measures
We provide in this press release (1) Currency Neutral Sales, (2)
Adjusted Operating Profit and Currency Neutral Adjusted Operating
Profit and (3) Adjusted EPS and Currency Neutral Adjusted EPS,
which exclude restructuring costs and other significant items of a
non-recurring and/or nonoperational nature such as legal
charges/credits, gain on sale of assets, operational improvement
initiatives and acquisition related costs (often referred to as
“Items Impacting Comparability”) and, with respect to the currency
neutral items, the impact of foreign currency movements. We provide
these metrics as we believe that they are useful in providing
period to period comparisons of the results of our operational
performance. 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. (NYSE:IFF) (Euronext
Paris: IFF) is a leading innovator of sensorial experiences that
move the world. At the heart of our company, we are fueled by a
sense of discovery, constantly asking “what if?”. That passion for
exploration drives us to co-create unique products that consumers
taste, smell, or feel in fine fragrances and beauty, detergents and
household goods, as well as beloved foods and beverages. Our 7,300
team members globally take advantage of leading consumer insights,
research and development, creative expertise, and customer intimacy
to develop differentiated offerings for consumer products. Learn
more at www.iff.com, Twitter , Facebook, Instagram, and
LinkedIn.
International Flavors & Fragrances
Inc.
Consolidated Income Statement
(Amounts in thousands except per share
data)
(Unaudited)
Three Months Ended December 31, Twelve
Months Ended December 31,
2016 2015 % Change 2016
2015 % Change Net sales $ 762,559 $ 715,649 7 % $ 3,116,350
$ 3,023,189 3 % Cost of goods sold 435,607 402,493 8 % 1,717,280
1,671,590 3 % Gross profit 326,952 313,156 4 % 1,399,070 1,351,599
4 % Research and development 63,210 57,376 10 % 254,263 246,101 3 %
Selling and administrative 157,851 122,250 29 % 566,224 494,517 15
% Restructuring and other charges (1,700) 7,764 (122)% (1,700)
7,594 (122)% Amortization of acquisition-related intangibles 7,105
4,747 50 % 23,763 15,040 58 % Gain on the sale of fixed assets
(7,839) — 100 % (10,836) — 100 % Operating profit 108,325 121,019
567,356 588,347 Interest expense 12,339 11,705 5 % 52,989 46,062 15
% Other (income) expense, net (7,395) 6,498 (214)% (9,350) 3,184
(394)% Pretax income 103,381 102,816 1 % 523,717 539,101 (3)%
Income taxes 23,463 23,648 (1)% 118,686 119,854 (1)% Net income $
79,918 $ 79,168 1 % $ 405,031 $ 419,247 (3)% Earnings per
share - basic $ 1.00 $ 0.99 $ 5.07 $ 5.19 Earnings per share -
diluted $ 1.00 $ 0.98 $ 5.05 $ 5.16 Average shares
outstanding Basic 79,399 79,978 79,648 80,449 Diluted 79,713 80,400
79,981 80,891
International Flavors & Fragrances
Inc.
Condensed Consolidated Balance
Sheet
(Amounts in thousands)
(Unaudited)
December 31, 2016
December 31, 2015 Cash & cash equivalents $ 323,992 $ 181,988
Receivables 550,658 537,896 Inventories 592,017 572,047 Other
current assets 142,347 145,178 Total current assets
1,609,014 1,437,109 Property, plant and equipment, net
775,716 732,794 Goodwill and other intangibles, net 1,365,906
1,247,393 Other assets 266,348 284,714 Total assets $
4,016,984 $ 3,702,010 Bank borrowings and overdrafts, and
current portion of long-term debt $ 258,516 $ 132,349 Other current
liabilities 639,781 592,807 Total current liabilities
898,297 725,156 Long-term debt 1,066,855 935,373 Non-current
liabilities 420,698 446,492 Shareholders' equity
1,631,134 1,594,989 Total liabilities and shareholders'
equity $ 4,016,984 $ 3,702,010
International Flavors & Fragrances
Inc.
Consolidated Statement of Cash
Flows
(Amounts in thousands)
(Unaudited)
Twelve Months Ended December 31, 2016
2015
Cash flows from operating activities: Net
income $ 405,031 $ 419,247 Adjustments to reconcile to net cash
provided by operations: Depreciation and amortization 102,469
89,597 Deferred income taxes 14,350 13,043 Gain on disposal of
assets (10,836 ) (622 ) Stock-based compensation 24,587 23,160
Pension contributions (46,347 ) (67,897 ) Changes in assets and
liabilities, net of acquisitions: Trade receivables (21,544 )
(91,712 ) Inventories 15,452 (37,628 ) Accounts payable (7,642 )
89,273 Accruals for incentive compensation 12,133 (17,399 ) Other
current payables and accrued expenses 49,103 29,124 Other assets
(2,442 ) 46,862 Other liabilities 1,092
(61,470 ) Net cash provided by operating activities 535,406
433,578
Cash flows from investing
activities: Cash paid for acquisitions, net of cash
received (236,836 ) (493,424 ) Additions to property, plant and
equipment (126,412 ) (101,030 ) Proceeds from disposal of assets
6,856 4,302 Maturity of net investment hedges 637 12,128 Proceeds
from life insurance contracts 292 868
Net cash used in investing activities (355,463 )
(577,156 )
Cash flows from financing activities: Cash
dividends paid to shareholders (184,897 ) (158,870 ) Increase
(decrease) in revolving credit facility borrowings and overdrafts
(134,344 ) 136,826 Proceeds from issuance of long-term debt 555,559
— Deferred financing costs (5,788 ) — Repayments of debt (125,000 )
— Loss on pre-issuance hedges (3,244 ) — Proceeds from issuance of
stock under stock plans 813 886 Excess tax benefits on stock-based
payments 4,650 12,055 Purchase of treasury stock (127,443 )
(122,193 ) Net cash used in financing activities
(19,694 ) (131,296 ) Effect of exchange rates changes on
cash and cash equivalents (18,245 ) (21,711 )
Net
change in cash and cash equivalents 142,004 (296,585 )
Cash
and cash equivalents at beginning of year 181,988
478,573
Cash and cash equivalents at end of
period $ 323,992 $ 181,988
International Flavors & Fragrances
Inc.
Business Unit Performance
(Amounts in thousands)
(Unaudited)
Three Months EndedDecember 31,
Twelve Months EndedDecember 31,
2016 2015 2016
2015
Net Sales Flavors $ 377,656 $ 334,262 $ 1,496,525 $
1,442,951 Fragrances 384,903 381,387 1,619,825 1,580,238
Consolidated 762,559 715,649 3,116,350 3,023,189
Segment Profit Flavors 77,579 61,931 337,242 318,476
Fragrances 72,376 69,348 334,220 321,764 Global Expenses (13,936)
(1,115) (48,487) (28,180) Restructuring and other charges, net 151
(7,764) (322) (7,594) Gain on the sale of fixed asset 7,818 — 7,818
— Spanish capital tax charge reversal — 10,530 — 10,530 Operational
improvement initiative costs (502) (274) (2,402) (1,115)
Acquisition related costs (10,161) (4,445) (12,195) (18,342)
Accelerated contingent consideration — (7,192) — (7,192) Legal
charges/credits (25,000) — (48,518) —
Operating profit
108,325 121,019 567,356 588,347 Interest Expense (12,339)
(11,705) (52,989) (46,062) Other income (expense), net 7,395
(6,498) 9,350 (3,184)
Income before taxes $ 103,381 $
102,816 $ 523,717 $ 539,101
Operating Margin Flavors
20.5 % 18.5 % 22.5 % 22.1 % Fragrances 18.8 % 18.2 % 20.6 % 20.4 %
Consolidated 14.2 % 16.9 % 18.2 % 19.5 %
International Flavors & Fragrances
Inc.
Sales Performance by Region and
Category
(Unaudited)
Fourth Quarter 2016 vs. 2015 Percentage Change in
Sales by Region of Destination Fine
ConsumerFragrances
Ingredients Total Frag.
Flavors Total North
America Reported -20% 12% -13%
-2% 22% 10% EAME Reported
5% 6% 14% 8% 8% 8%
Currency Neutral 6% 7% 15% 9%
12% 10% Latin America Reported
-17% -8% -10% -10% 13%
-2% Currency Neutral -22% -8%
-10% -12% 13% -3% Greater
Asia Reported -5% 3% 6% 3%
10% 7% Currency Neutral -3% 3%
3% 3% 10% 7% Total
Reported -6% 3% 3% 1% 13%
7% Currency Neutral -8%
3%
2% 1% 14%
7% Full Year 2016 vs. Full Year 2015
Percentage Change in Sales by Region of Destination
Fine
ConsumerFragrances
Ingredients Total Frag.
Flavors Total North America
Reported -2% 8% 10% 6% 8%
7% EAME Reported -1% 1%
13% 3% 1% 2% Currency Neutral
0% 2% 14% 4% 5% 4%
Latin America Reported -6% -5%
-15% -6% 1% -3% Currency Neutral
-3% -3% -13% -4% 5% -1%
Greater Asia Reported 0% 6%
13% 7% 4% 5% Currency Neutral
2% 7% 11% 8% 6% 6%
Total Reported -2% 2% 9%
3% 4% 3% Currency Neutral -1%
3% 10% 4%
6% 5%
Currency neutral growth is calculated by translating prior year
sales at the exchange rates used for the corresponding 2016
period.
International Flavors & Fragrances
Inc.
GAAP to Non-GAAP Reconciliation
Foreign Exchange Impact
(Unaudited)
Q4
Consolidated
Sales
OperatingProfit
EPS % Change - Reported (GAAP)
7% -10% 2% Items
Impacting Comparability 0% 15%* 15%
% Change - Adjusted
(Non-GAAP) 7% 4% 17% Currency Impact 0%
1%* -11%
% Change - Currency Neutral (Adjusted) 7%
6% 6%
Q4
Flavors
Sales
SegmentProfit
% Change - Reported (GAAP) 13% 25% Currency
Impact 1% 2%
% Change - Currency Neutral 14%
27%
Q4
Fragrances
Sales
SegmentProfit
% Change - Reported (GAAP) 1% 4% Currency
Impact 0% -5%*
% Change - Currency Neutral 1%
0%
FY 2016
Consolidated
Sales
OperatingProfit
EPS % Change - Reported (GAAP)
3% -4% -2% Items Impacting Comparability 0%
5%* 7%
% Change - Adjusted (Non-GAAP) 3% 2%
5% Currency Impact 2% 2% 1%
% Change - Currency Neutral
(Adjusted) 5% 4%
6%
FY 2016
Flavors
Sales
SegmentProfit
% Change - Reported (GAAP) 4% 6% Currency
Impact 2% 1%
% Change - Currency Neutral 6%
7%
FY 2016
Fragrances
Sales
SegmentProfit
% Change - Reported (GAAP) 3% 4% Currency
Impact 1% -1%
% Change - Currency Neutral 4%
3%
*Item does not foot due to rounding
International Flavors & Fragrances
Inc.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.
Fourth
Quarter 2016 Reconcilation of Non-GAAP Metrics
Reconciliation of Gross Profit
Reported(GAAP)
Restructuringand
OtherCharges (a)
OperationalImprovementInitiativeCosts
(b)
Acquisition andRelated Costs
(c)
Adjusted(Non-GAAP)
Gross profit 326,952 185 502 6,759
334,398
Reconciliation of Selling and Administrative Expenses
Reported(GAAP)
Restructuringand
OtherCharges (a)
Acquisitionand
RelatedCosts (c)
LegalCharges/Credits(d)
Adjusted(Non-GAAP)
Selling and Administrative Expenses 157,851 (1,364) (3,402)
(25,000)
128,085 Reconciliation of Operating
Profit
Reported(GAAP)
Restructuringand
OtherCharges (a)
OperationalImprovementInitiativeCosts
(b)
AcquisitionRelated
Costs(c)
LegalCharges/Credits (d)
Gain on Saleof Asset (e)
Adjusted(Non-GAAP)
Operating profit 108,325 (151) 502 10,161 25,000 (7,818)
136,019 Reconciliation of Net Income
Reported(GAAP)
Restructuringand
OtherCharges (a)
OperationalImprovementInitiativeCosts
(b)
AcquisitionRelated
Costs(c)
LegalCharges/Credits (d)
Gain on Saleof Asset (e)
Adjusted(Non-GAAP)
Income before taxes 103,381 (151) 502 10,161 25,000 (7,818)
131,075 Taxes on income (f) 23,463 7 123 3,575 8,750 (2,658)
33,260 Net income 79,918 (158) 379 6,586 16,250
(5,160)
97,815 Diluted EPS $ 1.00 — — 0.08 0.20 (0.06)
1.22 (a) Accelerated depreciation related to
restructuring initiatives, severance costs related to the
termination of a former executive officer and the partial reversal
of restructuring accruals recorded in the prior year. (b)
Accelerated depreciation, dismantling and idle labor costs in
Hangzhou, China and the partial reversal of severance accruals
related to prior year operational initiatives in Europe. (c)
Transaction costs related to the acquisition of David Michael and
Fragrance Resources as well as expense related to the fair value
step up of inventory on the David Michael acquisition. (d) Legal
charge related to reserve for the ZoomEssence litigation. (e) Gain
from sale of property in Brazil. (f) The tax effects are calculated
based upon the specific rate of the applicable jurisdiction of the
items. * 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: $1.7M related to David Michael,
$2.0M related to Lucas Meyer Cosmetics and $1.6M related to Ottens
Flavors.
International Flavors & Fragrances
Inc.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.
Fourth Quarter
2015 Reconciliation of Non-GAAP Metrics
Reconciliation of Gross Profit
Reported(GAAP)
OperationalImprovementInitiative
Costs(a)
Acquisition andRelated Costs
(b)
Adjusted(Non-GAAP)
Gross profit 313,156 274 3,515
316,945
Reconciliation of Selling and Administrative Expenses
Reported (GAAP)
Acquisitionand
RelatedCosts (b)
AcceleratedContingentConsideration (c)
LegalCharges/Credits (d)
Adjusted(Non-GAAP)
Selling and Administrative Expenses 122,250 (930) (7,192) 10,530
124,658 Reconciliation of Operating Profit
Reported (GAAP) Operational Improvement Initiative Costs
(a) Acquisition Related Costs (b) Accelerated
Contingent Consideration (c) Legal Charges/Credits (d)
Restructuring and Other Charges (e) Adjusted
(Non-GAAP) Operating profit 121,019 274 4,445 7,192 (10,530)
7,764
130,164 Reconciliation of Net Income
Reported(GAAP)
OperationalImprovementInitiative Costs (a)
AcquisitionRelated Costs
(b)
AcceleratedContingentConsideration (c)
LegalCharges/Credits (d)
Restructuringand
OtherCharges (e)
Adjusted(Non-GAAP)
Income before taxes 102,816 274 4,445 7,192 (10,530) 7,764
111,961 Taxes on income (f) 23,648 69 4,346 — (2,948) 2,362
27,477 Net income 79,168 205 99 7,192 (7,582) 5,402
84,484 Diluted EPS 0.98 — — 0.09 (0.09) 0.07
1.05
(a) Related to plant closings in Europe and partial closing
in Asia. (b) Transaction costs related to acquisitions (Ottens
Flavors and Lucas Meyer) as well as expense related to the fair
value step up of inventory for Lucas Meyer. (c) Represents the
acceleration of the contingent consideration payment related to the
Aromor acquisition. (d) Represents the reversal of the previously
recorded provision related to the Spanish capital tax case as a
result of a favorable ruling. (e) Restructuring costs related to Q4
2015 Profit Improvement Initiative. (f) The tax effects are
calculated based upon the specific rate of the applicable
jurisdiction of the items. * 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: $2.9M.
International Flavors & Fragrances
Inc.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.
Full Year 2016 Reconciliation of Non-GAAP
Metrics Reconciliation of Gross
Profit
Reported(GAAP)
Restructuring and Other Charges (a) Operational
Improvement Initiative Costs (b) Acquisition and Related
Costs (c)
Adjusted(Non-GAAP)
Gross profit 1,399,070 658 2,391 7,648
1,409,767
Reconciliation of Selling and Administrative Expenses
Reported(GAAP)
Restructuringand
OtherCharges (a)
OperationalImprovementInitiativeCosts
(b)
Acquisition andRelated Costs
(c)
Legal Charges/Credits (d)
Adjusted(Non-GAAP)
Selling and Administrative Expenses 566,224 (1,364) (11) (4,547)
(48,518)
511,784 Reconciliation of Operating
Profit
Reported(GAAP)
Restructuringand
OtherCharges (a)
Operational Improvement Initiative Costs (b) Acquisition
Related Costs (c) Legal Charges/Credits (d)
Gain onSale ofAsset
(e)
Adjusted(Non-GAAP)
Operating profit 567,356 322 2,402 12,195 48,518 (7,818)
622,975
Reconciliation of Net Income
Reported(GAAP)
Restructuringand
OtherCharges (a)
Operational Improvement Initiative Costs (b)
AcquisitionRelatedCosts
(c)
Legal Charges/Credits(d)
Gain onSale ofAsset
(e)
Adjusted(Non-GAAP)
Income before taxes 523,717 322 2,402 12,195 48,518 (7,818)
579,336
Taxes on income (f) 118,686 97 599 4,117
17,089 (2,658)
137,930
Net income 405,031 225 1,803 8,078 31,429
(5,160)
441,406
Diluted EPS $ 5.05 — 0.02 0.10 0.39 (0.06)
5.51
(g) (a) Accelerated depreciation related to
restructuring initiatives, severance costs related to the
termination of a former executive officer and the partial reversal
of restructuring accruals recorded in the prior year. (b)
Accelerated depreciation, dismantling and idle labor costs in
Hangzhou, China and the partial reversal of severance accruals
related to prior year operational initiatives in Europe. There was
approximately $0.4 million of idle labor costs in Hangzhou, China
recorded during the third quarter of 2016 that were not excluded
from Adjusted Non-GAAP metrics. (c) Expense related to the fair
value step up of inventory and transaction costs related to
acquisition of Lucas Meyer and David Michael as well as transaction
costs related to the acquisition of Fragrance Resources. (d)
Includes legal charges related to reserve for the ZoomEssence
litigation offset by settlements due to favorable tax rulings in
jurisdictions for which reserves were previously recorded for
ongoing tax disputes. (e) Represents the gain from sale of property
in Brazil during the fourth quarter of 2016. Beginning in the
fourth quarter of 2016, we reclassified all gains/losses from the
sale of fixed assets during 2016 from Other (income) expense to a
component of Operating profit. We do not consider gains or losses
from the sale of fixed assets to be an operating activity and
therefore have excluded this gain from Adjusted Non-GAAP metrics
and will in future periods exclude any such gain or loss from
Adjusted Non-GAAP metrics. During the first quarter of 2016, we
previously recognized approximately $3 million of gains related to
the sale of fixed assets. We have not retrospectively adjusted
these amounts out of our Adjusted Non-GAAP metrics. (f) The tax
effects are calculated based upon the specific rate of the
applicable jurisdiction of the items. (g) The sum of these items
does not foot due to rounding. * 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: $1.7M
related to David Michael, $8.3M related to Lucas Meyer Cosmetics
and $6.3M related to Ottens Flavors.
International Flavors & Fragrances
Inc.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.
Full
Year 2015 Reconciliation of Non-GAAP Metrics
Reconciliation of Gross Profit Reported
(GAAP) Operational Improvement Initiative Costs (a)
Acquisition and Related Costs (b) Adjusted (Non-GAAP)
Gross profit 1,351,599 1,115 6,825
1,359,539
Reconciliation of Selling and Administrative Expenses
Reported (GAAP) Acquisition and Related Costs (b)
Accelerated Contingent Consideration (c) Legal
Charges/Credits (d) Adjusted (Non-GAAP) Selling and
Administrative Expenses 494,517 (11,517) (7,192) 10,530
486,338 Reconciliation of Operating Profit
Reported(GAAP)
OperationalImprovementInitiative Costs (a)
AcquisitionRelated Costs
(b)
AcceleratedContingentConsideration (c)
LegalCharges/Credits (d)
Restructuringand
OtherCharges (e)
Adjusted(Non-GAAP)
Operating profit 588,347 1,115 18,342 7,192 (10,530) 7,594
612,060 Reconciliation of Net Income
Reported(GAAP)
OperationalImprovementInitiative Costs (a)
AcquisitionRelated Costs
(b)
AcceleratedContingentConsideration (c)
LegalCharges/Credits (d)
Restructuringand
OtherCharges (e)
Tax Settle-ments (f)
Adjusted(Non-GAAP)
Income before taxes 539,101 1,115 18,342 7,192 (10,530) 7,594 —
562,814 Taxes on income (g) 119,854 279 6,225 — (2,948)
2,302 10,478
136,190 Net income 419,247 836
12,117 7,192 (7,582) 5,292 (10,478)
426,624 Diluted EPS 5.16
0.01 0.14 0.09 (0.09) 0.07 (0.13)
5.25 (a) Related to
plant closings in Europe and partial closing in Asia. (b)
Transaction costs related to acquisitions (Ottens Flavors and Lucas
Meyer) as well as expense related to the fair value step up of
inventory for both acquisitions. (c) Represents the acceleration of
the contingent consideration payment related to the Aromor
acquisition. (d) Represents the reversal of the previously recorded
provision related to the Spanish capital tax case as a result of a
favorable ruling. (e) Restructuring costs related to Q4 2015 Profit
Improvement Initiative. (f) Settlements due to favorable tax
rulings in jurisdictions for which reserves were previously
recorded for ongoing tax disputes. (g) The tax effects are
calculated based upon the specific rate of the applicable
jurisdiction of the items. * 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: $7.6M.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170215006306/en/
International Flavors & Fragrances Inc.Michael DeVeau,
212-708-7164VP, Global Corporate Communications & Investor
RelationsMichael.DeVeau@iff.com
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