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International Flavors & Fragrances Inc. (“IFF” or “the Company”) recently learned that it was one of a number of companies to receive, from a Spanish supplier, paprika that contained low levels of non-food grade coloring.
The Company has experienced a slowdown in order and sales activity for products which include this raw material, primarily due to delayed shipments which were quarantined while materials were tested. As a result, the Company's second quarter sales could be negatively impacted by as much as $10 million (approximately 2% of the quarter's expected sales). In addition, the Company has expensed approximately $5 million in costs related to the contaminated raw material, comprised mainly of the write-off of affected materials and additional cost of testing incurred. The Company will seek full indemnification from its supplier, the supplier's insurers and, to the extent required, its own insurers with regard to any potential customer claims. There can be no assurance, however, of the final outcome of any claims made, or of the timing or extent of indemnification from the supplier and its insurers.
Based on the foregoing, the Company expects earnings per share in the 2005 second quarter to be reduced by approximately $.06 - $.07. The Company will release its second quarter results on July 27, 2005 at which time it will provide updated guidance on its sales and earnings per share expectations for the full year 2005.
Protecting the integrity of the food chain is of paramount concern to IFF. It is IFF policy to comply with all applicable laws and regulations in all areas where it does business. The Company has a comprehensive program in place to help ensure it delivers safe, high-quality products to its customers. This program includes, among other things, a supplier qualification process, periodic inspection of the facilities of new and existing suppliers, and programs to test for non-food grade colorants and other irregularities in its raw materials.
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 reasonable current assumptions and expectations. Certain of such forward-looking information may be identified by such terms as "expect", "believe", "may", "will be", "anticipates" and similar terms or variations thereof. All information concerning future revenues, costs, earnings and other future financial results or financial position, constitutes forward-looking information. Such forward-looking statements involve significant risks, uncertainties and other factors, which may cause the actual results of the Company to be materially different from any future results expressed or implied by such forward-looking statements, and there can be no assurance that actual results will not differ materially from management's expectations. Such factors include, among others, the following: general economic and business conditions in the Company's markets, including economic, population health and political uncertainties; uncertainties related to the outcome of litigation, claims and rights to indemnification and consumer/customer response and reaction to the events described in this release; 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 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 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 foreign governments. 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 or to reflect changes in expectations, assumptions or results.