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IFF reported third quarter results in the line with previous guidance
New York, N.Y., October 24, 2002 --- International Flavors & Fragrances Inc. (NYSE: IFF) (“IFF” or “the Company”) reported third quarter results in line with previous guidance, and confirmed guidance for the full year 2002.
Third quarter 2002 sales totaled $462.8 million, increasing 5% over comparable 2001 results; third quarter 2001 sales excluding sales attributable to non-core businesses disposed of were $442.0 million. Prior year sales as reported were $462.7 million.
Earnings per share for the third quarter 2002, excluding nonrecurring charges, were $.54 compared to $.41 per share for the prior year quarter. Third quarter earnings per share including nonrecurring charges were $.52 in 2002, compared to $.35 in the prior year. Nonrecurring charges in both years relate to the Company's previously announced reorganization plan. The 2001 reported results also include amortization expense associated with goodwill and indefinite life intangibles ($.08 per share); excluding such amortization, third quarter 2001 earnings per share were $.49 before nonrecurring charges and $.43 after such charges.
Excluding sales attributable to businesses disposed of during 2001:
- Local currency fragrance sales in Europe increased 8% resulting in a 20% increase in dollar sales due to the stronger than expected Euro. Flavor sales in Europe declined 1% in local currency, resulting in a 10% increase in dollar sales.
- The North America region grew 3% in total, led by 5% growth in flavors. North America fragrance sales increased 2%, mainly due to the benefit of new fine fragrance launches.
- India flavor sales increased 17% in local currency (18% in dollars) and fragrance sales increased 11% (14% in dollars).
- Asia-Pacific grew 2% in local currency and 5% in reported dollars. Flavors grew by 6% in local currency in the region (9% in dollars); fragrances declined 3% in local currency and were essentially flat on a dollar basis.
- Latin America dollar sales declined 13% for the quarter, mainly due to weak economic conditions prevailing throughout much of the region.
Richard A. Goldstein, Chairman and Chief Executive Officer of IFF, said, “We continue to be pleased with the progress made this year, particularly in view of the weak economic conditions in every region in which we operate.”
“Our focus on successfully completing the integration of BBA combined with our commitment to top-line growth continues to pay off. We achieved solid earnings growth while at the same time increasing spending on research and development to our targeted level of 8% of sales. We also made substantial progress in reducing our debt, enabled by our very strong cash flow, contributing to substantially lower interest expense.
While we must remain cautious in the near term due to uncertainties in the global economy, we are confident that IFF is on the path to growth and superior long-term operating results.”
Outlook for Fourth Quarter 2002 and Full Year 2002 Confirmed
For the fourth quarter 2002, IFF expects reported dollar sales to increase approximately 2-4%, excluding for comparative purposes approximately $14 million of sales attributable to non-core businesses the Company disposed of in the fourth quarter 2001 and in the second quarter 2002. On the same basis, local currency sales are expected to be flat to up in the low-single digits. Expected sales reflect persistent weakness in many of the markets and geographic regions that the Company serves.
Consistent with guidance previously provided, IFF expects 2002 local currency sales growth in the low single digits, excluding for comparative purposes approximately $83 million of 2001 sales related to the aforementioned non-core businesses. Full year 2002 earnings per share are expected to be between $1.89 and $1.96, excluding nonrecurring charges.
Expected 2002 earnings reflect the elimination of approximately $.35 per share of amortization of goodwill in accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, which the Company adopted effective January 1, 2002. This Standard eliminates the amortization of goodwill and other indefinite life intangibles, and requires an evaluation of goodwill impairment on adoption, and annually thereafter. The Company has completed its assessment of the impact of adopting the impairment provisions of this Standard, and has concluded that it has no impairment of goodwill at this time. Under this Standard, for comparative purposes, 2001 full year earnings excluding nonrecurring charges would have approximated $1.75 per share.
On October 5, 2000, the Company announced a significant reorganization, including management changes, consolidation of production facilities and related actions. The total cost of these actions is expected to approximate $90 million - $100 million through the end of 2002, and the reorganization is expected to yield annual savings by the year 2003 in the range of $25 million - $30 million. The Company expects a large portion of these savings to contribute to improving net earnings. To date, the Company has recorded approximately $74 million of the expected pretax charges. Certain costs associated with the merger and integration of BBA operations were accounted for as part of the acquisition and did not affect current earnings.
IFF is the world's leading creator and manufacturer of flavors and fragrances used in a wide variety of consumer products—from fine fragrances and toiletries, to soaps, detergents and other household products, to beverages and food products. IFF is dedicated to The Pursuit of Excellence in every area of its business, using knowledge, creativity, innovation and technology to continually provide customers with the highest quality products and service and superior consumer understanding.
IFF has sales, manufacturing and creative facilities in 37 countries worldwide and annual sales exceeding $1.8 billion. For more information, please visit our Web site at www.iff.com.
Cautionary Statement Under the Private Securities Litigation Reform Act of 1995
Statements in this release which are not historical facts or information are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, and are subject to risks and uncertainties that could cause IFF's actual results to differ materially from those expressed or implied by such forward-looking statements. Risks and uncertainties with respect to IFF's business include general economic and business conditions, interest rates, the price and availability of raw materials, and political and economic uncertainties, including the fluctuation or devaluation of currencies in countries in which IFF does business. The Company intends its forward-looking statements to speak only as of the time of such statements, and does not undertake to update or revise them as more information becomes available.
A replay of the conference call will be available from 1:00 PM Eastern Time on October 24, 2002 through 12:00 AM on November 15, 2002. The dial in number for the replay for U.S.-based listeners is 888-203-1112; for international listeners, the number is 719-457-0820. The replay pass code is 578491.
Douglas J. Wetmore