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IFF Reports Solid Fourth Quarter and Full-Year Results for 2007
Reported EPS up 9% in Fourth Quarter, up 14% for the Year
Adjusted EPS up 18% in Fourth Quarter, up 15% for the Year
Sales up 8% in Fourth Quarter, up 9% for the Year
NEW YORK, Jan. 30 /PRNewswire-FirstCall/ -- International Flavors & Fragrances Inc. (NYSE: IFF), a leading global creator of flavors and fragrances for consumer products, today announced results for the fourth quarter and full year 2007. Earnings per share (EPS) as reported were $.58 in the 2007 fourth quarter, versus $.53 in the prior year quarter. For the full year, earnings per share were $2.82, compared to $2.48 in 2006, an increase of 14 percent.
"I am pleased with our 2007 financial performance, which reflects strong top line and EPS growth," said Robert M. Amen, Chairman and Chief Executive Officer. "We met or exceeded our financial goals and delivered our second consecutive year of increased earnings.
"Our full-year financial results demonstrate that our strategies are working. Specifically, we increased sales, grew market share and built a stronger organization. While we still have opportunities for improvement, our 2007 accomplishments provide a sound foundation for continued growth in sales and EPS in 2008 and beyond."
Excluding non-recurring items, fourth quarter adjusted EPS ("Adjusted EPS") was $.53, up 18 percent over the comparable fourth quarter 2006 results. The 2007 fourth quarter reported EPS included a gain on the disposition of land of $.05; the 2006 reported EPS included restructuring charges of $.02, a gain on disposition of assets of $.06, and a one-time tax benefit of $.04 relating to years prior to 2006.
On a comparable basis, excluding non-recurring items from both years, the 2007 Adjusted EPS of $2.66 represents a 15 percent improvement over the full year 2006 adjusted EPS of $2.32. The full year 2007 reported EPS included a pension curtailment loss of $.04 resulting from the freezing of the Company's defined benefit pension plan for the majority of U.S. employees, gains on disposition of assets of $.09, and a one-time tax benefit of $.11 relating to years prior to 2007. The 2006 reported EPS included restructuring charges of $.02, gains on disposition of assets of $.11, an insurance recovery of $.03 related to a 2005 product contamination issue, and a one-time tax benefit of $.04 relating to prior years.
FOURTH QUARTER 2007
Sales were $553 million, up 8 percent from the prior year quarter; Flavor and Fragrance sales increased 16 percent and 2 percent, respectively. Sales for the 2007 quarter benefited from the generally weaker U.S. dollar; at comparable exchange rates, sales would have increased 2 percent in comparison to the 2006 quarter.
Flavors Business Unit
The significant increase in Flavor sales of 16 percent was driven primarily by new wins and increased volume in Europe and the emerging markets of Asia and Latin America. Flavor compound sales increased in each region in both local currency and dollars.
Fragrance Business Unit
Total Fragrance sales were driven by a 4 percent increase in Ingredient sales and a 3 percent increase in functional, offset by a decline in fine fragrance of 2 percent. Ingredient sales were strongest in Asia as a result of a strong demand for compounds and production shifting to the region. Sales in Fine and Beauty Care weakened in the fourth quarter; most notably in North America and Europe.
Sales performance by region and product category follows: Fourth Quarter 2007 vs. 2006 Percent Change in Sales by Region of Destination Fine & Beauty Functional Ingredients Total Flavors Total Care Frag. North America Reported -12% -12% -2% -10% 1% -5% Europe Reported -1% 16% 5% 6% 20% 11% Local Currency -12% 4% -5% -5% 8% - Latin America Reported 4% -1% -3% - 42% 12% Greater Asia Reported 22% 4% 24% 12% 19% 16% Local Currency 19% 3% 22% 10% 12% 11% Total Reported -2% 3% 4% 2% 16% 8% Local Currency -7% -1% -1% -3% 10% 2% Fourth Quarter 2007 Highlights -- Net income was $47 million compared to $48 million in 2006. -- Gross profit, as a percentage of sales, was 40.7 percent compared with 41.0 percent in the prior year quarter. The decline was mainly due to lower selling prices for Ingredients and some impact of higher material costs as well as lower fragrance volumes. -- Research and Development expense, as a percentage of sales, was 9.7 percent, representing a 12 percent increase compared to 2006; the 2006 quarter was low by historical comparisons, at 9.3 percent of sales. -- Selling and Administrative expense, as a percentage of sales, was 17.8 percent, in line with the 17.6 percent in the 2006 quarter. -- Other income (expense), net in the 2007 fourth quarter increased $8 million over the prior year quarter, mainly due to the gain on sale of land as well as lower exchange losses. -- Interest expense totaled $16 million, increasing 119 percent compared to the 2006 quarter, primarily due to higher borrowings incurred in connection with the Company's accelerated share repurchase activities. -- The effective tax rate of 26.2 percent compared to 23.1 percent in 2006; excluding the one-time tax benefit, the effective tax rate in the 2006 quarter would have been 28.8 percent. The lower effective tax rate for the current quarter resulted from a greater percentage of consolidated pre-tax earnings in lower tax jurisdictions. -- Average number of diluted shares (in thousands) of 81,694 compared to 90,602 in the prior year quarter. FULL YEAR 2007
Sales totaled $2,277 million, up 9 percent from 2006; flavor and fragrance sales increased 12 percent and 6 percent, respectively. 2007 sales benefited from the generally weaker U.S. dollar and at comparable exchange rates would have increased 5 percent over the prior year.
Flavors Business Unit
Flavors delivered strong sales performance across all regions-most notably in Latin America, Greater Asia and Europe-and in virtually all categories, particularly beverages and savory.
Fragrance Business Unit
Total Fragrance sales for the year were driven by continued growth in Fine and Beauty Care of 8 percent and Ingredients of 9 percent. Foreign exchange accounted for 4 percent of the sales increase.
Sales performance by region and product category follows: 2007 vs. 2006 Percent Change in Sales by Region of Destination Fine & Beauty Functional Ingredients Total Flavors Total Care Frag. North America Reported 4% -1% 1% 2% 4% 3% Europe Reported 8% 12% 17% 12% 13% 12% Local Currency - 4% 8% 3% 5% 4% Latin America Reported 11% -7% 3% -1% 27% 7% Greater Asia Reported 16% 2% 4% 6% 16% 12% Local Currency 13% 1% 4% 4% 12% 9% Total Reported 8% 3% 9% 6% 12% 9% Local Currency 4% - 5% 2% 9% 5% Full Year 2007 Highlights -- Net income of $247 million, up 9 percent compared to 2006. -- Gross profit, as a percentage of sales, was 41.8 percent compared with 42.2 percent in 2006. The decline was mainly due to lower selling prices for Ingredients and some impact of higher material costs. -- Research and Development expense, as a percentage of sales, was 8.7 percent, comparable to the prior year. -- Selling and Administrative expense, as a percentage of sales, declined to 16.5 percent compared to 16.8 percent in 2006. -- Other income (expense), net in 2007 increased $4 million over the prior year, mainly due to the gain on sale of land as well as favorable exchange results. -- Interest expense totaled $42 million, increasing 63 percent compared to 2006, due to higher borrowings incurred in connection with the Company's accelerated share repurchase activities. Average cost of debt was 4.5 percent for 2007 compared to 3.3 percent in 2006. -- The effective tax rate of 24.8 percent compared to a rate of 27.7 percent in the prior year. Both the 2007 and 2006 rates benefited from favorable tax rulings with respect to prior years; excluding the benefit of these rulings from both years, the 2007 effective tax rate would have been 27.9 percent compared to a rate of 28.8 percent for 2006. The lower effective tax rate for the current year was the result of a greater percentage of consolidated pre-tax earnings in lower tax jurisdictions. -- Average number of diluted shares (in thousands) of 87,633 compared to 91,369 in 2006. About IFF
International Flavors & Fragrances Inc. (NYSE: IFF), is a leading creator of flavors and fragrances used in a wide variety of consumer products. Consumers experience these unique scents and tastes in fine fragrances and beauty care, detergents and household goods, as well as beverages, confectionary and food products. The Company leverages its competitive advantages of brand understanding and consumer insight combined with its focus on R&D and innovation, to provide customers with differentiated product offerings. A member of the S&P 500 Index, IFF has sales, manufacturing and creative facilities in 30 countries worldwide. For more information, please visit our Web site at www.iff.com.
Individuals interested in receiving future updates on IFF via e-mail can register at http://ir.iff.biz.
Audio Web Cast
An audio Web cast, to discuss the Company's fourth quarter and full year 2007 financial results and outlook, will be held today at 10:00 a.m. ET. Interested parties can access the Web cast and accompanying slide presentation on the Company's Web site at www.iff.com, under the Investor Relations section. For those unable to listen to the live broadcast, a replay will be available on the Company's Web site approximately one hour after the event and will remain available on the IFF Web site until 12:00 p.m. on February 13, 2008.
Cautionary Statement Under The Private Securities Litigation Reform Act of 1995
Statements in this report, which are not historical facts or information, are "forward-looking statements" within the meaning of The Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management's current assumptions, estimates and expectations. Certain of such forward-looking information may be identified by such terms as "expect," "believe," "outlook," "guidance," "may," and similar terms or variations thereof. All information concerning future revenues, tax rates or benefits, savings, earnings and other future financial results or financial position, constitutes forward-looking information. Such forward-looking statements involve significant risks, uncertainties and other factors. Actual results of the Company may differ materially from any forward-looking information or results expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions in the Company's markets, including economic, population health and political uncertainties; interest rates; the price, quality and availability of raw materials; the Company's ability to implement its business strategy, including the achievement of anticipated cost savings, profitability and growth targets; the impact on cash and the impact of increased borrowings related to the July 2007 share repurchase program; the impact of currency fluctuation or devaluation in the Company's principal foreign markets and the success of the Company's hedging and risk management strategies; the outcome of uncertainties related to litigation; the impact of possible pension funding obligations and increased pension expense on the Company's cash flow and results of operations; and the effect of legal and regulatory proceedings, as well as restrictions imposed on the Company, its operations or its representatives by U.S. and foreign governments. The Company intends its forward-looking statements to speak only as of the time of such statements and does not undertake or plan to update or revise them as more information becomes available or to reflect changes in expectations, assumptions or results.
Any public statements or disclosures by IFF following this report that modify or impact any of the forward-looking statements contained in or accompanying this report will be deemed to modify or supersede such outlook or other forward-looking statements in or accompanying this report.
International Flavors & Fragrances Inc. Consolidated Income Statement (Amounts in thousands except per share data) (Unaudited) Quarter Ended December 31, 2006 2007 % Change Net sales $514,318 $553,498 8% Cost of goods sold 303,403 328,199 8% Gross margin 210,915 225,299 7% Research & development 48,031 53,898 12% Selling and administrative 90,559 98,354 9% Amortization 3,709 2,212 -40% Restructuring and other charges 2,007 - Interest expense 7,401 16,229 119% Other expense (income), net (3,208) (9,389) Pretax income 62,416 63,995 3% Income taxes 14,434 16,772 16% Net income 47,982 47,223 -2% Earnings per share - basic $0.54 $0.59 9% Earnings per share - diluted $0.53 $0.58 9% Average shares outstanding (in thousands): Basic 89,416 80,550 -10% Diluted 90,602 81,694 -10% Twelve Months Ended December 31, 2006 2007 % Change Net sales $2,095,390 $2,276,638 9% Cost of goods sold 1,211,259 1,324,424 9% Gross margin 884,131 952,214 8% Research & development 185,692 199,023 7% Selling and administrative 351,923 375,287 7% Amortization 14,843 12,878 -13% Curtailment Loss - 5,943 Restructuring and other charges 2,680 - Interest expense 25,549 41,535 63% Other expense (income), net (9,838) (11,136) Pretax income 313,282 328,684 5% Income taxes 86,782 81,556 -6% Net income 226,500 247,128 9% Earnings per share - basic $2.50 $2.86 14% Earnings per share - diluted $2.48 $2.82 14% Average shares outstanding (in thousands): Basic 90,443 86,541 -4% Diluted 91,369 87,633 -4% International Flavors & Fragrances Inc. Consolidated Condensed Balance Sheet (Amounts in thousands) (Unaudited) December 31, December 31, 2006 2007 Cash & cash equivalents $114,508 $151,471 Short-term - investments 604 604 Receivables 405,302 450,579 Inventories 446,606 484,222 Other current assets 112,783 109,489 Total current assets 1,079,803 1,196,365 Property, plant and equipment, net 495,124 508,820 Goodwill and other intangibles, net 745,716 732,836 Other assets 158,261 261,656 Total assets $2,478,904 $2,699,677 Bank borrowings, overdrafts $15,897 $35,671 Other current liabilities 430,874 359,312 Total current liabilities 446,771 394,983 Long-term debt 791,443 1,176,970 Non-current liabilities 335,522 510,527 Shareholders' equity 905,168 617,197 Total liabilities and shareholders' equity $2,478,904 $2,699,677 International Flavors & Fragrances Inc. Consolidated Statement of Cash Flows (Amounts in thousands) (Unaudited) December 31, December 31, 2006 2007 Cash flows from operating activities: Net income $226,500 $247,128 Adjustments to reconcile to net cash provided by operations: Depreciation and amortization 89,733 82,788 Deferred income taxes (12,423) (6,343) Gain on disposal of assets (22,836) (13,791) Equity based compensation 18,185 18,168 Curtailment loss - 5,943 Changes in assets and liabilities Current receivables (27,153) (32,974) Inventories 9,492 (12,406) Current payables 38,087 22,298 Changes in other assets/liabilities (37,966) 3,251 Net cash provided by operations (1) 281,619 314,062 Cash flows from investing activities: Net change in short-term investments (240) (311) Additions to property, plant and equipment (58,282) (65,614) Net, purchase of investments (17,355) (2,699) Proceeds from disposal of assets 27,235 16,959 Net cash used in investing activities (48,642) (51,665) Cash flows from financing activities: Cash dividends paid to shareholders (67,381) (76,600) Net change in bank borrowings and overdrafts (48,714) (129,648) Proceeds from long-term debt 373,637 498,569 Repayments of long-term debt (499,300) - Proceeds from issuance of stock under stock plans 110,867 50,116 Excess tax benefits on stock options exercised 4,653 6,568 Purchase of treasury stock (270,998) (577,001) Net cash used in financing activities (397,236) (227,996) Effect of exchange rates changes on cash and cash equivalents 6,222 2,562 Net change in cash and cash equivalents (158,037) 36,963 Cash and cash equivalents at beginning of year 272,545 114,508 Cash and cash equivalents at end of period $114,508 $151,471 (1) Operating cash flows for 2006 increased by $18.7 million from the amount reported in 2006 as a result of including the purchase of investments of $17.3 million in investing activities and $1.4 million of deferred financing costs in financing activities. International Flavors & Fragrances Inc. Business Unit Performance (Amounts in thousands) (Unaudited) Three Months Ended December 31, 2007 Global (Dollars in thousands) Flavor Fragrance Expenses Consolidated Net sales $253,138 $300,360 $ - $553,498 Operating profit $41,770 $36,892 $(2,065) 76,597 Interest expense (16,229) Other income (expense), net 3,627 Income before taxes on income $63,995 Three Months Ended December 31, 2006 Global (Dollars in thousands) Flavor Fragrance Expenses Consolidated Net sales $218,611 $295,707 $ - $514,318 Operating profit $30,952 $47,054 $(3,747) 74,259 Interest expense (7,401) Other income (expense), net (4,442) Income before taxes on income $62,416 International Flavors & Fragrances Inc. Business Unit Performance (Amounts in thousands) (Unaudited) Twelve Months Ended December 31, 2007 Global (Dollars in thousands) Flavor Fragrance Expenses Consolidated Net sales $1,005,544 $1,271,094 $ - $2,276,638 Operating profit $187,275 $209,812 $(26,976) 370,111 Interest expense (41,535) Other income (expense), net 108 Income before taxes on income $328,684 Twelve Months Ended December 31, 2006 Global (Dollars in thousands) Flavor Fragrance Expenses Consolidated Net sales $894,775 $1,200,615 $ - $2,095,390 Operating profit $153,099 $212,240 $(18,485) 346,854 Interest expense (25,549) Other income (expense), net (8,023) Income before taxes on income $313,282 International Flavors & Fragrances Inc. Regulation G Reconciliation Schedule Fourth Quarter and Full Year 2007 2006 Fourth Quarter Full Year EPS Reported $0.53 $2.48 Restructuring Charges 0.02 0.02 Insurance Recovery -0.03 Other Income -0.06 -0.11 Tax Adjustment (1) -0.04 -0.04 EPS as Adjusted $0.45 $2.32 2007 Q4 Full Year EPS Reported $0.58 $2.82 Loss on Curtailment 0.04 Gain on Asset Sales -0.05 -0.09 Tax Adjustment (1) -0.11 EPS as Adjusted $0.53 $2.66 (1) Favorable tax ruling benefit
This supplemental schedule provides adjusted non-GAAP financial information and a quantitative reconciliation of the difference between the non-GAAP financial measure and the financial measure calculated and reported in accordance with GAAP
These non-GAAP financial measures should not be considered in isolation, or as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company believes that it is meaningful for investors to be made aware of and to be assisted in a better understanding of, on a period to period comparative basis, the relative impact of restructuring charges and the other income that primarily consists of gains on asset disposals, the benefit of tax rulings relating to 2006 and prior years, and the pension curtailment charge. The adjusted information is intended to be more indicative of the Company's core operating results.
SOURCE International Flavors & Fragrances Inc.
CONTACT: Investor: Yvette Rudich, Director of Corporate Communications,
+1-212-708-7164, Media: Melissa Sachs, Manager, Corporate Communications, +1-
212-708-7278, both of International Flavors & Fragrances Inc./