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Segment Information
 12 Months Ended
Dec. 31, 2019
Segment Reporting [Abstract]  
Segment Information SEGMENT INFORMATION
The Company is organized into three reportable operating segments, Taste, Scent and Frutarom; these segments align with the internal structure used to manage these businesses.
Taste is comprised of Flavor Compounds which are sold to the food and beverage industries for use in consumer products such as prepared foods, beverages, dairy, food and sweet products.
Scent is comprised of (1) Fragrance Compounds, which are ultimately used by our customers in two broad categories: Fine Fragrances, including perfumes and colognes, and Consumer Fragrances, including fragrance compounds for personal care (e.g., soaps), household products (e.g., detergents and cleaning agents) and beauty care, including toiletries; (2) Fragrance Ingredients, consisting of synthetic and natural ingredients that can be combined with other materials to create unique fine fragrance and consumer compounds; and (3) Cosmetic Active Ingredients, consisting of active and functional ingredients, botanicals and delivery systems to support our customers’ cosmetic and personal care product lines. Major fragrance customers include the cosmetics industry, including perfume and toiletries manufacturers, and the household products industry, including manufacturers of soaps, detergents, fabric care, household cleaners and air fresheners.
Frutarom creates and manufactures a naturals-focused suite of flavor compounds, functional foods and specialty fine ingredients, largely targeting small, local and regional customers. Frutarom’s products are focused on the following principal areas: Taste, Savory Solutions, Inclusions, Fine Ingredients, and Natural Product Solutions.
The Company's Chief Operating Decision Maker evaluates the performance of these reportable operating segments based on segment profit which is defined as operating profit before restructuring, global expenses (as discussed below) and certain non-recurring items, Interest expense, Other income (expense), net and Taxes on income.
The Global expenses caption represents corporate and headquarter-related expenses which include legal, finance, human resources, certain incentive compensation expenses and other R&D and administrative expenses that are not allocated to individual reportable operating segments.
Reportable segment information is as follows:
 
December 31,
(DOLLARS IN THOUSANDS)
2019
 
2018
 
2017
Net sales
 
 
 
 
 
Taste
$
1,731,919

 
$
1,737,349

 
$
1,632,166

Scent
1,922,717

 
1,880,630

 
1,766,553

Frutarom
1,485,448

 
359,560

 
N/A

Consolidated
$
5,140,084

 
$
3,977,539

 
$
3,398,719

 
December 31,
(DOLLARS IN THOUSANDS)
2019
 
2018
Segment assets
 
 
 
Taste
$
2,222,154

 
$
2,024,573

Scent
2,549,113

 
2,340,131

Frutarom
8,306,003

 
7,961,538

Global assets
210,141

 
563,153

Consolidated
$
13,287,411

 
$
12,889,395

 
December 31,
(DOLLARS IN THOUSANDS)
2019
 
2018
 
2017
Segment profit:
 
 
 
 
 
Taste
$
382,590

 
$
395,190

 
$
360,483

Scent
333,522

 
329,548

 
318,954

Frutarom
126,804

 
27,358

 
N/A

Global expenses
(49,836
)
 
(74,730
)
 
(60,810
)
Operational Improvement Initiatives (a)
(2,267
)
 
(2,169
)
 
(1,802
)
Acquisition Related Costs (b)
—

 
1,289

 
(20,389
)
Integration Related Costs (c)
(55,160
)
 
(7,188
)
 
(4,179
)
Legal Charges/Credits, net (d)
—

 
—

 
(1,000
)
Tax Assessment (e)
—

 
—

 
(5,331
)
Restructuring and Other Charges, net (f)
(29,765
)
 
(4,086
)
 
(19,711
)
(Losses) gains on Sale of Assets
(2,367
)
 
1,177

 
184

FDA Mandated Product Recall (g)
(250
)
 
7,125

 
(11,000
)
UK Pension Settlement Charges (h)
—

 
—

 
(2,769
)
Frutarom Acquisition Related Costs (i)
(5,940
)
 
(89,632
)
 
—

Compliance Review & Legal Defense Costs (j)
(11,314
)
 
—

 
—

N&B Transaction Related Costs (k)
(20,747
)
 
—

 
—

Operating Profit
665,270

 
583,882

 
552,630

Interest expense
(138,221
)
 
(132,558
)
 
(65,363
)
Loss on extinguishment of debt
—

 
(38,810
)
 
—

Other income, net
30,403

 
35,243

 
49,778

Income before taxes
$
557,452

 
$
447,757

 
$
537,045

Profit margin
 
 
 
 
 
Taste
22.1
%
 
22.7
%
 
22.1
%
Scent
17.3
%
 
17.5
%
 
18.1
%
Frutarom
8.5
%
 
7.6
%
 
N/A

Consolidated
12.9
%
 
14.7
%
 
16.3
%

(a)
For 2019, represents accelerated depreciation related to plant relocations in India and China. For 2018, represents accelerated depreciation in India and Taiwan asset write off. For 2017, represents accelerated depreciation and idle labor costs in Hangzhou, China.
(b)
For 2018, represents adjustments to the contingent consideration payable for PowderPure, and transaction costs related to Fragrance Resources and PowderPure within Selling and administrative expenses. For 2017, represents the amortization of inventory "step-up" included in Cost of goods sold and transaction costs related to the acquisition of Fragrance Resources and PowderPure within Selling and administrative expenses.
(c)
For 2019 and 2018, represents costs related to the integration of the Frutarom acquisition, principally advisory services. For 2017, represents costs related to the integration of the David Michael and Fragrance Resources acquisitions.
(d)
Represents an additional charge related to litigation settlement.
(e)
Represents the reserve for payment of a tax assessment related to commercial rent for prior periods.
(f)
For 2019, represents costs primarily related to the Frutarom Integration Initiative, the 2019 Severance Program, including severance related to outsourcing the IT function. For 2018, represents severance costs related to the 2017 Productivity Program and costs associated with the termination of agent relationships in a subsidiary. For 2017, represents severance costs related to the 2017 Productivity Program.
(g)
For 2019, represents additional claims that management will pay to co-packers. For 2018, principally represents recoveries from the supplier for the third and fourth quarter, partially offset by final payments to the customer made for the effected product in the first quarter. For 2017, represents management's best estimate of losses related to the previously disclosed FDA mandated recall.
(h)
Represents pension settlement charges incurred in one of the Company's UK pension plans.
(i)
Represents transaction-related costs and expenses related to the acquisition of Frutarom. For 2019, amount primarily includes amortization for inventory "step-up" costs and transaction costs. For 2018, amount primarily includes $23.5 million of amortization for inventory "step-up" costs and $66.0 million of transaction costs included in Selling and administrative expenses.
(j)
Costs related to reviewing the nature of inappropriate payments and review of compliance in certain other countries. In addition, includes legal costs for related shareholder lawsuits.
(k)
Represents costs and expenses related to the pending transaction with Nutrition & Biosciences Inc.
The Company has not disclosed revenues at a lower level than provided herein, such as revenues from external customers by product, as it is impracticable for it to do so.
The Company had no customers that accounted for greater than 10% of consolidated net sales in 2019 and 2018. The Company had one customer that accounted for greater than 10% of consolidated net sales in 2017. The Company's largest customer had net sales of $336.1 million, $356.8 million and $358.5 million in 2019, 2018 and 2017, respectively. The majority of these sales were in the Scent reportable operating segment.
Long-lived assets, net, by country, consisted as follows:
 
December 31,
(DOLLARS IN THOUSANDS)
2019
 
2018
United States
$
382,659

 
$
315,320

Netherlands
91,313

 
103,997

Singapore
68,751

 
73,544

China
188,194

 
178,502

Other
656,003

 
569,789

Consolidated
$
1,386,920

 
$
1,241,152

Segment capital expenditures and depreciation and amortization consisted as follows:
 
 
Capital Expenditures
 
Depreciation and Amortization
(DOLLARS IN THOUSANDS)
2019
 
2018
 
2017
 
2019
 
2018
 
2017
Taste
$
80,267

 
$
70,028

 
$
68,937

 
$
56,674

 
$
54,534

 
$
53,534

Scent
92,077

 
82,206

 
53,089

 
65,386

 
64,018

 
59,951

Frutarom
55,356

 
12,878

 
N/A

 
194,956

 
47,738

 
N/A

Global assets
8,278

 
4,982

 
6,947

 
6,314

 
7,502

 
4,482

Consolidated
$
235,978

 
$
170,094

 
$
128,973

 
$
323,330

 
$
173,792

 
$
117,967


Net sales are attributed to individual regions based upon the destination of product delivery and are as follows:
 
Net Sales by Geographic Area
(DOLLARS IN THOUSANDS)
2019
 
2018
 
2017
Europe, Africa and Middle East
$
2,081,758

 
$
1,396,316

 
$
1,065,596

Greater Asia
1,162,992

 
991,015

 
903,546

North America
1,170,497

 
1,010,126

 
901,821

Latin America
724,837

 
580,082

 
527,756

Consolidated
$
5,140,084

 
$
3,977,539

 
$
3,398,719



 
Net Sales by Geographic Area
(DOLLARS IN THOUSANDS)
2019
 
2018
 
2017
Net sales related to the U.S.
$
1,052,654

 
$
952,550

 
$
864,050

Net sales attributed to all foreign countries
4,087,430

 
3,024,989

 
2,534,669


No non-U.S. country had net sales in any period presented greater than 6% of total consolidated net sales.
Pending change in Reportable Operating Segments
As part of the Company's Frutarom Integration Initiative, the reportable operating segments have been realigned such that beginning in fiscal year 2020 there will be two reportable operating segments: Scent and Taste. The financial results presented in this Form 10-K reflect the Scent, Taste and Frutarom business segments prior to the realignment.