-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SgcOXCnCDoLwSoSA6/CAo7o6DCQ/jfFEkghA0HWT4sS+wHhq1pLvJfks+Jqe5a9Y +6epwSX5GXjP+z5ai4HeMQ== 0000051253-06-000023.txt : 20060726 0000051253-06-000023.hdr.sgml : 20060726 20060725173438 ACCESSION NUMBER: 0000051253-06-000023 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20060630 ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060726 DATE AS OF CHANGE: 20060725 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL FLAVORS & FRAGRANCES INC CENTRAL INDEX KEY: 0000051253 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL ORGANIC CHEMICALS [2860] IRS NUMBER: 131432060 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04858 FILM NUMBER: 06979949 BUSINESS ADDRESS: STREET 1: 521 W 57TH ST CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2127655500 MAIL ADDRESS: STREET 1: 521 W 57TH ST CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: VANAMERIGEN HAEBLER INC DATE OF NAME CHANGE: 19680426 8-K 1 a8k2q200607252006.txt SECOND QUARTER 2006 EARNINGS RELEASE SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ____________ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) July 26, 2006 ----------------------------- INTERNATIONAL FLAVORS & FRAGRANCES INC. - ------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) New York 1-4858 13-1432060 - ------------------------------------------------------------------------------- (State or Other Jurisdiction (Commission (I.R.S. Employer of Incorporation) File Number) Identification No.) 521 West 57th Street, New York, New York 10019 - ------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (212) 765-5500 ---------------------------- Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02. Results of Operations and Financial Condition Attached and being furnished hereby as Exhibit 99.1 is a copy of a press release of International Flavors & Fragrances Inc. ("IFF" or the "Company") dated July 26, 2006 reporting IFF's financial results for the second quarter and six months ended June 30, 2006. Non-GAAP financial measures: To supplement the Company's financial results presented in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), the Company uses, and has included in the attached press release, certain non-GAAP financial measures. 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. These non-GAAP financial measures as disclosed by the Company may also be calculated differently from similar measures disclosed by other companies. To ease the use and understanding of our supplemental non-GAAP financial measures, the Company includes the most directly comparable GAAP financial measure. The Company uses the non-GAAP financial measure which excludes restructuring and other charges for preparing financial targets, internal budgets and operating plans, evaluating actual performance against targets and budget, assessing historical performance over reporting periods, assessing management performance and assessing operating performance against other companies. This information has also aided the Company's management and its Board of Directors in decision-making and allocation of resources. A material limitation of this financial measure is that some or all of such special charges represent actual cash outlays and that such measure does not reflect actual GAAP expense. Management compensates for such limitations by clarifying that this measure is only one operating metric used for internal financial analysis and planning purposes and should not be considered in isolation, and by providing the corresponding GAAP financial measure. The Company also discloses, and management internally monitors, the sales performance of international operations on a basis that eliminates the positive or negative effects that result from translating foreign currency sales into U.S. dollars. Management uses this measure because it believes that it enhances the assessment of the sales performance of its international operations and the comparability between reporting periods. Item 9.01. Financial Statements and Exhibits. (d) Exhibits 99.1 Press Release of International Flavors & Fragrances Inc., dated July 26, 2006. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. INTERNATIONAL FLAVORS & FRAGRANCES INC. Dated: July 26, 2006 By: /s/ Douglas J. Wetmore ------------------------------------- Name: Douglas J. Wetmore Title: Senior Vice President and Chief Financial Officer FOR IMMEDIATE RELEASE --------------------- IFF REPORTS SECOND QUARTER RESULTS ---------------------------------- EARNINGS PER SHARE INCREASE 12% ON HIGHER SALES AND LOWER COSTS --------------------------------------------------------------- REAFFIRMS 2006 GUIDANCE ----------------------- New York, N.Y., July 26, 2006 ... International Flavors & Fragrances Inc. (NYSE: IFF) ("IFF" or the "Company") reported earnings per share for the second quarter 2006 of $.67 compared to $.60 in the prior year quarter, an increase of 12%. Second quarter 2006 sales totaled $531 million, increasing 3% over the prior year quarter; fragrance and flavor sales increased 3% and 2%, respectively. Reported sales for the 2006 period were affected by the strength of the U.S. dollar; had exchange rates remained constant, sales would have been one percentage point higher. Fragrance sales were led by fine fragrance, which increased 9%; much of the growth resulted from new product introductions. Sales of functional fragrances increased 1% while fragrance ingredient sales declined 3%. The flavor sales performance benefited from new wins as well as from ease of comparison with the prior year quarter, when flavor sales were affected by a vendor-supplied raw material contamination issue, the impact of which approximated $5.0 million in the 2005 quarter. "The improvements in sales and costs are very encouraging. The IFF team will continue to focus on customers, innovation and people to drive our growth," said Robert Amen, Chairman and Chief Executive Officer of IFF. "We continue to perform very well in fine fragrances, and in many of the markets we've targeted for growth - notably Eastern Europe, India and Latin America. Near term, our emphasis is on meeting or exceeding our 2006 targets for growth and profitability. The Fine Fragrance team is executing its strategy of building customer brands around the world very well. We need to build on this strength. We are assessing our Company plan and performance to determine what adjustments are needed to accelerate our growth in sales and profitability." "IFF is an outstanding company that is differentiated by its innovation, strong customer base, quality management team and dedicated employees. I am pleased to have the opportunity to lead IFF through its next stage of growth and look forward to leveraging our strengths as we work to accelerate IFF's value creation." Second Quarter 2006 - -------------------- Sales performance by region and product category in comparison to the prior year quarter follows: Second Quarter 2006 vs. 2005 % Change in Sales by Region of Destination
------------------------------------------------------------------------ Fine Func'l. Ingr. Total Frag. Flavors Total ----------------------------------------------------------------------- N. America Reported 18% 1% 13% 10% 4% 7% Europe Reported 3% 3% -13% -1% -3% -2% Local Currency 5% 5% -11% 1% -1% - L. America Reported 17% -4% -2% 1% 15% 5% Asia Pacific Reported 2% 10% -4% 5% 1% 2% Local Currency 2% 10% -1% 6% 3% 4% India Reported 8% -8% 18% -1% 9% 4% Local Currency 8% -8% 20% - 9% 5% Total Reported 9% 1% -3% 3% 2% 3% Local Currency 10% 2% -2% 4% 3% 4% ------------------------------------------------------------------------
- - North America fine fragrance and flavor growth was driven mainly by new product introductions while increases in ingredients and functional fragrances were primarily volume related. - - European growth was strongest in Eastern Europe, Africa and the Middle East, collectively increasing 15% over the 2005 quarter; a 2% decline in Western Europe offset this growth. Fine and functional fragrance growth was mainly the result of new product introductions while the decline in ingredients and flavor sales was mainly volume related. - - Latin America fine fragrance sales growth resulted from new product introductions while declines in functional fragrance and ingredients were primarily volume related. Flavor sales were strong throughout the region; this growth was mainly the result of new product introductions. - - Asia Pacific fine and functional fragrance sales growth resulted mainly from new product introductions, while volume declines negatively impacted ingredient sales. Flavor sales growth was mainly the result of new product introductions. - - India fragrance sales performance in all product categories resulted primarily from volume fluctuations while flavor sales increased due to the combined benefit of new product introductions and volume growth. Net income for the 2006 quarter increased 8% compared with the prior year quarter. - - Gross profit, as a percentage of sales, improved nearly 1% compared to the prior year quarter. The improvement resulted mainly from the local currency sales performance, improved manufacturing expense absorption and favorable product mix. The 2005 margin was unfavorably impacted by costs attributable to the raw material contamination matter. - - Research and Development ("R&D") expenses totaled 8.6% of sales, consistent with the prior year quarter. - - Selling, General and Administrative ("SG&A") expenses, as a percentage of sales, increased to 16.5% from 16.1%, mainly as a result of higher incentive plan accruals and equity compensation expense than the 2005 quarter. - - Interest expense increased 4% from the prior year, primarily due to higher average levels of debt in the quarter and slightly higher interest rates. - - The effective tax rate was 28.0% compared to 30.8% in the prior year quarter; variations in the effective rate are mainly attributable to fluctuations in earnings in the countries in which the Company operates. First Half 2006 - --------------- For the six-month period ended June 30, 2006, sales totaled $1,042 million, essentially flat with the 2005 period. Reported sales for the 2006 period were affected by the strength of the U.S. dollar; had exchange rates remained constant, sales would have been three percentage points higher. Sales performance by region and product category in comparison to the prior year period follows:
Six Months 2006 vs. 2005 % Change in Sales by Region of Destination ------------------------------------------------------------------------ Fine Func'l. Ingr. Total Frag. Flavors Total ------------------------------------------------------------------------ N. America Reported 20% -3% 13% 8% 4% 6% Europe Reported -2% -2% -16% -6% -5% -6% Local Currency 4% 4% -12% -1% - - L. America Reported 13% 1% 4% 4% 17% 8% Asia Pacific Reported 2% -1% -5% -1% -1% -1% Local Currency 2% - -1% - 2% 1% India Reported 14% 4% 16% 8% 10% 9% Local Currency 15% 5% 20% 10% 11% 10% Total Reported 6% -1% -4% - 1% - Local Currency 9% 1% -1% 3% 4% 3% ------------------------------------------------------------------------
- - North America fine fragrance and flavor growth resulted mainly from new product introductions while the decline in functional fragrances was volume related. Ingredients sales growth was due to a combination of volume and price. - - European growth was strongest in Eastern Europe, Africa and the Middle East, which was offset by an overall sales decline in Western Europe. Fine and functional fragrance growth resulted from new product introductions while the decline in ingredients was volume related, as was the decline in flavor sales. - - Latin America fine fragrance sales growth resulted from new product introductions while increases in functional fragrance and ingredients were primarily volume related. Flavor sales were strong throughout the region, mainly benefiting from new product introductions. - - Asia Pacific fine fragrance sales growth resulted mainly from new product introductions, while volume declines unfavorably impacted functional fragrance and ingredients. Flavor sales growth was mainly the result of new product introductions. - - India fragrance sales performance in all product categories resulted primarily from volume growth while flavor sales increased due to the combined benefit of new product introductions and volume growth. Outlook for 2006 Reaffirmed - --------------------------- Consistent with prior guidance, IFF currently expects 2006 sales to increase in the low single digits in both local currency and reported dollars, in comparison to 2005. Based on the foregoing and consistent with previous guidance, IFF currently expects earnings per share for 2006 to be in the range of $2.20 to $2.28. About IFF - --------- IFF is a 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 30 countries worldwide. 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 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", "outlook", "guidance" and similar terms or variations thereof. All information concerning future revenues, tax rates or benefits, interest 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 others, the following: general economic and business conditions in the Company's markets, including economic, population health and political uncertainties; 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 outcome of uncertainties related to litigation; uncertainties related to any potential claims and rights of indemnification or other recovery for customer and consumer reaction to its earlier contamination issue; 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. Conference call There will be a conference call today at 10:00 AM Eastern Time, at which time the Company will discuss operating results for the second quarter 2006, and its current expectations for 2006. The dial in number for U.S.-based participants is 1-877-704-5381; for international participants, the number is 1-913-312-1295. The pass code will be 4210967. A replay of the call will be available from 1:00 PM Eastern Time beginning Wednesday, July 26, 2006 and ending at Midnight Wednesday, August 9. The dial in number for the replay for U.S.-based listeners is 1-888-203-1112; for international listeners, the number is 1-719-457-0820. The replay pass code will be 4210967. The call can also be monitored via the World Wide Web at www.iff.com. Real Network's Real Player or Microsoft Media Player is required to access the webcast. They can be downloaded from www.real.com or www.microsoft.com/windows/mediaplayer. A replay of the conference call will be available on the Company's website for twelve months. Contact - ------- Douglas J. Wetmore Senior Vice President and Chief Financial Officer Phone: 212-708-7145 ******************** International Flavors & Fragrances Inc. Consolidated Income Statement (Amounts in thousands except per share data) (Unaudited)
Quarter Ended June 30, Six Months Ended June 30, ------------------------------------- -------------------------------------- 2005 2006 2005 2006 ------------------ ------------------ ------------------- ------------------ Net Sales $515,578 $530,505 $1,038,630 $1,041,937 Cost of goods sold 299,065 302,889 607,462 597,707 ------------------ ------------------ ------------------- ------------------ Gross margin on sales 216,513 227,616 431,168 444,230 Research & development 44,380 45,588 89,133 91,190 Selling and administrative 82,866 87,684 167,610 173,272 Amortization 3,767 3,711 7,535 7,421 Restructuring and other charges (income) - (304) - 357 ------------------ ------------------ ------------------- ------------------ 85,500 90,937 166,890 171,990 Interest expense (6,062) (6,300) (11,638) (11,673) Other income (expense), net 2,558 286 3,114 (153) ------------------ ------------------ ------------------- ------------------ Pretax income 81,996 84,923 158,366 160,164 Income taxes 25,283 23,741 49,110 45,292 ------------------ ------------------ ------------------- ------------------ Net income $56,713 $61,182 $109,256 $114,872 ------------------ ------------------ ------------------- ------------------ Including restructuring and other charges (income): - --------------------------------------------------- Net income Earnings per share - basic $56,713 $61,182 $109,256 $114,872 Earnings per share - diluted $0.60 $0.67 $1.16 $1.26 $0.60 $0.67 $1.14 $1.25 ------------------ ------------------ ------------------- ------------------ Excluding restructuring and other charges (income): - --------------------------------------------------- Net income Results per share - basic $56,713 $61,085 $109,256 $115,236 Results per share - diluted $0.60 $0.67 $1.16 $1.26 $0.60 $0.67 $1.14 $1.25 ------------------ ------------------ ------------------- ------------------ Average shares outstanding (in thousands): - ------------------------------------------ Basic 93,876 90,869 94,100 91,202 Diluted 95,255 91,787 95,640 91,997 ------------------ ------------------ ------------------- ------------------
International Flavors & Fragrances Inc. Consolidated Condensed Balance Sheet (Amounts in thousands) (Unaudited)
------------------- ------------------ December 31, June 30, 2005 2006 ------------------ ------------------- Cash & short-term investments $ 272,897 $ 30,152 Receivables 368,519 419,397 Inventories 430,794 443,339 Other current assets 119,064 102,646 ------------------- ------------------ Total current assets 1,191,274 995,534 Property, plant and equipment, net 499,145 487,631 Goodwill and other intangibles, net 772,651 765,230 Other assets 175,126 204,185 ------------------- ------------------ Total assets $2,638,196 $2,452,580 ------------------- ------------------ Bank borrowings, overdrafts and current portion of long-term debt $ 819,392 $ 308,936 Other current liabilities 383,304 395,525 ------------------- ------------------ Total current liabilities 1,202,696 704,461 Commercial paper and long-term debt 131,281 415,791 Non-current liabilities 388,872 386,330 Shareholders' equity 915,347 945,998 ------------------- ------------------ Total liabilities and shareholders' equity $2,638,196 $2,452,580 ------------------- ------------------
International Flavors & Fragrances Inc. Consolidated Statement of Cash Flows (Amounts in thousands) (Unaudited)
Six Months Ended June 30, --------------- --------------- 2005 2006 --------------- --------------- Cash flows from operating activities: Net Income $109,256 $114,872 Adjustments to reconcile to net cash provided by operations: Depreciation and amortization 46,429 44,602 Deferred income taxes 17,488 329 Gain on disposal of assets (1,520) (3,881) Changes in assets and liabilities Current receivables (50,426) (60,327) Inventories 1,192 1,163 Current payables (40,524) (2,336) Others, net (24,354) 26,543 --------------- --------------- Net cash provided by operations 57,541 120,965 --------------- --------------- Cash flows from investing activities: Net change in short-term investments 35 25 Additions to property, plant and equipment (38,149) (19,806) Proceeds from disposal of assets 433 6,504 --------------- --------------- Net cash used in investing activities (37,681) (13,277) --------------- --------------- Cash flows from financing activities: Cash dividends paid to shareholders (33,104) (33,990) Net change in bank loans 7,852 (32,508) Net change in commercial paper outstanding 91,891 281,521 Repayments of long-term debt (11,655) (499,306) Proceeds from issuance of stock under stock option and employee stock purchase plans 17,764 23,146 Purchase of treasury stock (60,988) (91,315) --------------- --------------- Net cash (used in) provided by financing activities 11,760 (352,452) --------------- --------------- Effect of exchange rates changes on cash and cash equivalents (4,352) 2,052 Net change in cash and cash equivalents 27,268 (242,712) Cash and cash equivalents at beginning of year 32,596 272,545 --------------- --------------- Cash and cash equivalents at end of period $59,864 $29,833 --------------- ---------------
-----END PRIVACY-ENHANCED MESSAGE-----