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IFF Second Quarter Sales Higher Than Expected; Earnings For Second Quarter at High End of Expectations
Earnings for the second quarter 2002, excluding nonrecurring charges, were at the high end of expectations, reaching $.54 per share in comparison to $.40 per share for the prior year quarter. Reported second quarter earnings including nonrecurring charges were $.47 per share in 2002, compared to $.34 in the prior year. Nonrecurring charges in both years relate to the Company's previously announced reorganization plan. The 2001 reported results also include amortization expense associated with goodwill and indefinite life intangibles ($.08 per share); excluding such amortization, second quarter 2001 earnings per share were $.48 before charges and $.42 after.
Excluding sales attributable to businesses disposed of during 2001: * Second quarter sales performance was strongest in India where fragrance sales jumped 27% in local currency (29% in dollars) and flavor sales increased a solid 7%. * Local currency fragrance sales in Europe increased 11% resulting in a 14% increase in dollar sales due to the stronger than expected Euro. The fragrance increase was somewhat offset by expected weakness in Europe flavors, where local currency sales declined 3%, resulting in flat dollar sales for flavors. * Asia-Pacific grew 2% in local currency and 3% in reported dollars, despite persistent weakness in the Japanese economy. * The North America region grew 1%, led by a strong 4% growth in flavors. Flavor sales for the 2002 second quarter include only two months of sales attributable to the fruit concentrates business the Company disposed of in the quarter. Excluding fruit concentrates from both 2001 and 2002 second quarter sales, flavor sales would have increased 9% and the region would have increased 3% compared to the prior year quarter. * Latin America declined 6% for the quarter, mainly due to Argentina as well as slow economies elsewhere in the region.Richard A. Goldstein, Chairman and Chief Executive Officer of IFF, said, "We are very pleased with the progress we have made during the quarter and year to date. Our focus on successfully completing the integration of BBA combined with our commitment to improved customer service and top-line growth is beginning to pay off. While we must remain cautious due to the uncertain strength of the global economy, we are confident that IFF is on the path to growth and superior long-term operating results."
Third Quarter 2002
For the third quarter 2002, IFF expects reported dollar sales to increase approximately 3-4%, excluding approximately $20 million of sales attributable to those non-core businesses sold in 2001 and in June 2002. On the same basis, local currency sales are expected to increase in the low single digits. Expected sales reflect persistent weakness in many of the markets and geographic regions that the Company serves.
IFF expects third quarter 2002 earnings, excluding nonrecurring charges, in the range of $.52-$.55 per share. For comparative purposes, 2001 third quarter earnings would have approximated $.49 per share excluding nonrecurring charges ($.06 per share) and reflecting the elimination of goodwill amortization ($.08 per share).
Outlook for 2002 Confirmed
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 non-core businesses disposed of during 2001 and during June 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 $71 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 http://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.
There will be a conference call today at 10:00 AM Eastern Time; the dial in number for U.S.-based participants is 800-500-0311; for international participants, the number is 719-457-2698.
A replay of the conference call will be available from 1:00 PM Eastern Time on July 24, 2002 through 12:00 AM on August 16, 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 295426.
The call can also be monitored via the World Wide Web at http://www.iff.com. Real Network's Real Player or Microsoft Media Player is required to access the webcast. They can be downloaded from http://www.real.com or http://www.microsoft.com/windows/mediaplayer.
International Flavors & Fragrances Inc. Consolidated Income Statement (Amounts in thousands except per share data) Quarter Ended June 30, As reported Pro-Forma (A) 2001 2001 2002 Net Sales $478,216 $462,890 $476,336 Cost of goods sold 269,506 256,737 272,612 Gross margin on sales 208,710 206,153 203,724 Research & development 35,502 35,284 35,022 Selling and administrative 81,001 80,410 78,921 Amortization 11,400 3,158 3,158 80,807 87,301 86,623 Nonrecurring charges (8,780) (8,780) (9,242) Interest expense (17,634) (17,634) (9,294) Other income (expense), net (1,006) (1,006) 807 Pretax income 53,387 59,881 68,894 Income taxes 20,382 19,461 23,493 Net income $33,005 $40,420 $45,401 Including nonrecurring charges Net income $33,005 $40,420 $45,401 Earnings per share - basic $.34 $.42 $.48 Earnings per share - diluted $.34 $.42 $.47 Excluding nonrecurring charges Net income $38,668 $46,083 $51,492 Result per share - basic $.40 $.48 $.54 Result per share - diluted $.40 $.48 $.54 A. Pro-Forma 2001 reflects: * Elimination of sales and operating results of non-core businesses sold during the course of the fourth quarter 2001, namely the North American and Brazilian fruit preparations business and the United Kingdom based portion of the aroma chemicals business acquired in the BBA transaction; * The effect of adoption of FAS 142 resulting in the discontinuance of amortization of goodwill and indefinite life intangibles, effective January 1, 2002. Goodwill amortization of $8.2 million recognized in the 2001 reported results has been eliminated in the 2001 pro-forma results; and * Application of the full year 2001 effective tax rate to the quarter. International Flavors & Fragrances Inc. Consolidated Income Statement (Amounts in thousands except per share data) Six Months Ended June 30, As reported Pro-Forma (A) 2001 2001 2002 Net Sales $961,877 $926,863 $922,180 Cost of goods sold 553,645 522,272 532,476 Gross margin on sales 408,232 404,591 389,704 Research & development 70,908 70,333 70,192 Selling and administrative 166,846 165,395 154,307 Amortization 22,755 6,316 6,316 147,723 162,547 158,889 Nonrecurring charges (21,200) (21,200) (9,242) Interest expense (39,934) (39,934) (19,721) Other income (expense), net (766) (766) 2,772 Pretax income 85,823 100,647 132,698 Income taxes 32,546 32,709 45,350 Net income $53,277 $67,938 $87,348 Including nonrecurring charges Net income $53,277 $67,938 $87,348 Earnings per share - basic $.55 $.70 $.92 Earnings per share - diluted $.55 $.70 $.91 Excluding nonrecurring charges Net income $66,702 $81,363 $93,439 Result per share - basic $.69 $.84 $.99 Result per share - diluted $.69 $.84 $.97 A. Pro-Forma 2001 reflects: * Elimination of sales and operating results of non-core businesses sold during the course of the fourth quarter 2001, namely the North American and Brazilian fruit preparations business and the United Kingdom based portion of the aroma chemicals business acquired in the BBA transaction; * The effect of adoption of FAS 142 resulting in the discontinuance of amortization of goodwill and indefinite life intangibles, effective January 1, 2002. Goodwill amortization of $16.4 million recognized in the 2001 reported results has been eliminated in the 2001 pro- forma results; and * Application of the full year 2001 effective tax rate to the six months ended June 30, 2001. International Flavors & Fragrances Inc. Consolidated Condensed Balance Sheet (Amounts in thousands) December 31, June 30, 2001 2002 Cash & short-term investments $48,905 $34,476 Receivables 318,023 366,827 Inventories 415,984 409,495 Other current assets 113,449 114,585 Total current assets 896,361 925,383 Property, plant and equipment, net 532,473 520,732 Goodwill and other intangibles, net 795,920 783,284 Other assets 43,297 56,305 Total assets $2,268,051 $2,285,704 Commercial paper/notes payable - bank $227,945 $162,901 Other current liabilities 332,269 326,663 Total current liabilities 560,214 489,564 Long-term debt 939,404 978,837 Non-current liabilities 244,263 235,562 Shareholders' equity 524,170 581,741 Total liabilities and shareholders' equity $2,268,051 $2,285,704 Capital spending in quarter: $22,000 Depreciation in quarter: $18,800 Average Shares Outstanding (in thousands) 2001 2002 Second quarter: Basic 95,756 94,752 Diluted 96,735 96,029 Year-to-date Basic 96,370 94,553 Diluted 97,161 96,106 Quarter ended June 30, 2002 As Reported % Change in Sales by Area of Destination Fragrances Flavors Total North America (4) (3) (4) Europe - Reported 5 -- 3 Europe - Local Currency 2 (3) -- Latin America (4) (19) (8) Asia-Pacific - Reported -- 4 2 Asia-Pacific - Local Currency -- 3 2 India 18 7 13 India- Local Currency 17 7 12 Total - Reported -- (2) -- Total - Local Currency (1) (3) (2) Quarter ended June 30, 2002 Pro-Forma to Reflect Businesses Disposed of during 2001 % Change in Sales by Area of Destination Fragrances Flavors Total North America (2) 4 1 Europe - Reported 14 -- 7 Europe - Local Currency 11 (3) 5 Latin America (3) (14) (6) Asia-Pacific - Reported 2 4 3 Asia-Pacific - Local Currency 2 3 2 India 29 7 17 India- Local Currency 27 7 17 Total - Reported 4 1 3 Total - Local Currency 3 -- 2 Six months ended June 30, 2002 As Reported % Change in Sales by Area of Destination Fragrances Flavors Total North America (2) (5) (3) Europe - Reported (3) (6) (4) Europe - Local Currency (2) (5) (3) Latin America (7) (19) (10) Asia-Pacific - Reported (3) -- (1) Asia-Pacific - Local Currency (1) 2 -- India -- 2 1 India- Local Currency 1 2 1 Total - Reported (3) (5) (4) Total - Local Currency (3) (5) (4) Six months ended June 30, 2002 Pro-Forma to Reflect Businesses Disposed of During 2001 % Change in Sales by Area of Destination Fragrances Flavors Total North America (1) 3 1 Europe - Reported 6 (6) 1 Europe - Local Currency 7 (5) 2 Latin America (6) (12) (7) Asia-Pacific - Reported (1) -- -- Asia-Pacific - Local Currency -- 2 1 India 12 2 7 India- Local Currency 12 2 7 Total - Reported 1 (2) (1) Total - Local Currency 1 (1) --SOURCE International Flavors & Fragrances Inc.
CONTACT: Douglas J. Wetmore of International Flavors & Fragrances Inc., +1-212-708-7145 URL: http://www.iff.com http://www.prnewswire.com
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