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|IFF Reports First Quarter 2010 Results|
Adjusted EPS Increased 42%, Reported EPS up 33%
NEW YORK, May 06, 2010 (BUSINESS WIRE) --International Flavors & Fragrances Inc. (NYSE: IFF), a leading global creator of flavors and fragrances for consumer products, today reported first quarter 2010 revenue of $654 million, 17 percent higher than the prior year quarter. Excluding the impact of foreign currency, revenue in local currency increased 13 percent. Reported earnings per share (EPS) were $0.80, compared to $0.60 for the first quarter 2009. Excluding an expense of $0.05 per share in the first quarter 2010 related to ongoing restructuring efforts in Europe, adjusted EPS for the quarter increased 42 percent to $0.85 versus $0.60 in the prior year quarter.
"We are very pleased to report financial results that are strong and slightly above the preliminary projections we announced in March," said Doug Tough, Chairman and Chief Executive Officer. "We continued to see solid momentum throughout the quarter as both our Flavor and Fragrance teams did an excellent job capitalizing on new business opportunities. The combination of this strong commercial performance as well as some elements of customer restocking and favorable year-over-year comparisons, allowed us to deliver strong local currency sales growth that resulted in a substantial increase in our adjusted EPS."
Mr. Tough added, "We continue to be mindful that economic conditions remain fluid and that a portion of our success can be attributed to the benefits of customer restocking as well as favorable comparisons versus a soft year-ago period. Nonetheless, we feel confident that the underlying health of our commercial performance is strong and as a result, we will continue to monitor our performance throughout the balance of the year as we look to make targeted investments to strengthen our marketplace position."
Flavor Business Unit
Local currency sales in the first quarter increased eight percent over the comparable 2009 period. Growth was led by a double-digit performance in Europe, Africa and Middle East (EAME) and Greater Asia as increased volumes and new business drove results. In North America, sales declined one percent as our success in Dairy was more than offset by Confectionery challenges. Latin American sales increased six percent as new business and volume recovery in Savory, Confectionery and Dairy offset the loss of non-strategic business that began in the third quarter of 2009.
Operating profit was very strong, increasing 17 percent, or $9 million, to $62 million in the first quarter. This increase was driven by accelerated sales growth, improving input costs and our continued success in disciplined cost management. As a result, operating profit margin improved to 20.5 percent versus 19.9 percent in the prior year period.
Fragrance Business Unit
Local currency sales in the first quarter increased 18 percent over the prior-year period as all categories reported strong results. The accelerated performance in the emerging markets continued, particularly Greater Asia, where every Fragrance Compound category experienced double-digit growth. In the Fine Fragrance and Beauty Care category, Fine Fragrance reversed its recent trends, growing at a very strong double-digit rate. While new business gains helped support the strong Fine Fragrance results, a portion of the improvement can be attributed to favorable comparisons as well as some elements of customer restocking. Beauty Care performance continued to build momentum, growing at a double-digit rate, as both Hair Care and Toiletries drove results. Functional Fragrance once again performed very well as Fabric Care performance continued to accelerate. Fragrance Ingredients sales also improved, as local currency sales increased 21 percent, reflecting an underlying improvement in demand and favorable comparison versus the year-ago period.
Operating profit increased by $19 million to $56 million in the first quarter, including a $5 million expense related to ongoing restructuring efforts in Europe. Excluding this item, adjusted operating profit grew an impressive 66 percent, or $24 million, to $61 million. As a result, adjusted operating profit margin for the quarter increased 470 bps to 17.2 percent, as higher volumes, moderating input costs and benefits from previous cost reduction initiatives drove results.
Sales performance by region and product category follows:
First Quarter 2010 Highlights
International Flavors & Fragrances Inc. (NYSE: IFF), is a leading global creator of flavors and fragrances used in a wide variety of consumer products and packaged goods. Consumers experience these unique scents and tastes in fine fragrances and beauty care, detergents and household goods, as well as beverages, confectionery 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 32 countries worldwide. For more information, please visit our website at http://www.iff.com.
An audio webcast to discuss the Company's first quarter 2010 financial results and outlook will be held today at 10:00 a.m. EST May 6, 2010. Interested parties can access the webcast and accompanying slide presentation on the Company's website at http://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 website approximately one hour after the event and will remain available on the IFF website until May 20, 2010.
Cautionary Statement Under The Private Securities Litigation Reform Act of 1995
Statements in this quarterly release, 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", "anticipate", "believe", "outlook", "guidance", "may" and similar terms or variations thereof. All information concerning future revenues, tax rates or benefits, interest and other 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 future results expressed or implied by such forward-looking statements. Such factors include, among othersthe following: general economic and business conditions in the Company's markets, including economic and recessionary pressures; energy and commodity prices; decline in consumer confidence and spending; the impact of currency fluctuation or devaluation in the Company's principal foreign markets and the impact on the availability, effectiveness and cost of the Company's hedging and risk management strategies; population health and political uncertainties; fluctuating interest rates; continued volatility of the capital and credit markets and any adverse impact on our cost of and access to capital and credit; fluctuations in 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 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.
Certain other factors which may impact our financial results or which may cause actual results to differ from such forward-looking statements are also discussed in the Company's periodic reports filed with the Securities and Exchange Commission and available on the IFF website at http://www.iff.com under "Investor Relations". You are urged to carefully consider all such factors.
(1) Includes the following reclasses to conform to current year presentation: Cost of goods sold $0.1 million; Research and development (R&D) $(2.8) million; Selling and administrative $1.9 million. The adjustment to R&D also includes $(0.8) million related to the reclass of excess foreign R&D credits from income tax expense.
Certain reclassifications have been made to the prior year's operating activities to conform to the 2010 presentation.
(1) Includes $(0.8) million for three months ended March 31, 2009 related to the reclass of excess foreign R&D credits from income tax expense to conform to current year presentation.
(a) Entirely related to the Fragrance European facilities rationalization
(a) Certain reclassifications have been made to 2009 amount in order to conform with 2010 presentation
The sum of EPS Reported, plus the per share effects of items added back to reconcile to EPS as Adjusted, may not equal the total EPS as Adjusted, due to rounding differences.
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. The adjusted information is intended to be more indicative of the Company's core operating results.
At times, the Company may disclose free cash flow because the Company believes it is a measurement of cash flow that may be available for investing and financing activities. We define free cash flow as net cash provided from operations less capital expenditures and cash dividends. The calculation of free cash flow does not reflect the residual cash flow available for discretionary expenditures since non-discretionary items such as debt repayments are not deducted in determining such measure and as such, should not be considered a substitute for cash provided by operating activities or other cash flow statement data prepared in accordance with GAAP. Free cash flow, as we define it, may differ from similarly named measures used by other entities.
SOURCE: International Flavors & Fragrances Inc.
International Flavors & Fragrances Inc.