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IFF Second Quarter Sales Higher Than Expected; Earnings For Second Quarter at High End of Expectations

07/24/02
NEW YORK, Jul 24, 2002 /PRNewswire-FirstCall via COMTEX/ -- International Flavors & Fragrances Inc. (NYSE: IFF) ("IFF" or "the Company") reported sales for the second quarter 2002 exceeded previously announced expectations. Sales totaled $476.3 million for the second quarter 2002, increasing 3% over the comparable 2001 results; second quarter 2001 sales, excluding sales attributable to non-core businesses disposed of during 2001, were $462.9 million. Prior year sales as reported were $478.2 million.

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.

About IFF

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.

Conference call

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 
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