International Flavors & Fragrances Inc. (NYSE: IFF) reported financial results for the first quarter ended March 31, 2022.

First Quarter 2022 Consolidated Summary:

Reported

(GAAP)

 

Adjusted

(Non-GAAP)1

Sales

 

Income Before

Taxes

 

EPS

 

Operating

EBITDA

 

Operating

EBITDA Margin

 

EPS ex

Amortization

$3.2 B

 

$285 M

 

$0.96

 

$702 M

 

21.8%

 

$1.69

Management Commentary

“We are pleased with our strong start to 2022 led by broad-based growth across our entire portfolio,” said IFF CEO Frank Clyburn. “Our pricing actions, in combination with our diligent focus on cost discipline, have helped offset the inflationary pressures felt across the global economy. Given our performance to date and reflecting additional inflation throughout the year, we have increased our sales expectation to include incremental pricing actions to fully recover our cost exposure as we remain committed to delivering our full year profit objective. At the same time, we are also sharpening our execution rigor, enhancing our focus on productivity, and investing to strengthen our business as we position the company to deliver sustainable, profitable growth for our shareholders.”

First Quarter 2022 Consolidated Financial Results

  • Reported net sales for the first quarter were $3.23 billion, an increase of 31% compared to the prior year period, driven primarily by the incremental sales related to the merger with Nutrition & Biosciences ("N&B"). On a comparable basis2, currency neutral sales increased 13%, led by double-digit growth in Nourish, Health & Biosciences and Pharma Solutions. In the first quarter, pricing increased approximately 8% and volume grew approximately 5%.
  • Income before taxes on a reported basis for the first quarter was $285 million. Adjusted operating EBITDA for the first quarter was $702 million, an increase of 23% from $569 million in the prior year period principally driven by the incremental profit related to the merger with N&B. On a comparable basis2, currency neutral adjusted operating EBITDA increased 9%, driven by pricing actions, volume growth and productivity gains.
  • Reported earnings per share (EPS) for the first quarter was $0.96. Adjusted EPS excluding amortization was $1.69 per diluted share.
  • Cash flow from operations for the first quarter was $(4) million, and free cash flow defined as cash flow from operations less capital expenditures totaled $(136) million. Net debt to credit adjusted EBITDA at the end of the first quarter was 4.2x.
____________________

1 Schedules at the end of this release contain reconciliations of reported GAAP to Non-GAAP metrics. See Use of Non-GAAP Financial Measures for explanations of our Non-GAAP metrics.

2 Comparable results for the first quarter is defined as 3 months (January, February and March) of legacy IFF and N&B results, in both the 2021 and 2022 periods, and exclude the impact of divestitures in the prior year period and acquisitions in the current year period.

First Quarter 2022 Segment Summary: Growth vs. Prior Year

 

Reported

(GAAP)

 

Adjusted

(Non-GAAP)

 

Comparable

Currency

Neutral

(Non-GAAP)2

 

Comparable

Currency Neutral

Adjusted

(Non-GAAP)2

 

Sales

 

Operating

EBITDA

 

Sales

 

Operating

EBITDA

Nourish

32%

 

22%

 

16%

 

14%

Health & Biosciences

55%

 

50%

 

10%

 

8%

Scent

3%

 

(9)%

 

6%

 

(2)%

Pharma Solutions

54%

 

51%

 

10%

 

10%

Nourish Segment

  • On a reported basis, first quarter sales were $1.73 billion. On a comparable basis2, currency neutral sales grew 16% with double-digit growth in Food Designs and Ingredients and high single digit growth in Flavors.
  • Nourish adjusted operating EBITDA was $329 million and adjusted operating EBITDA margin was 19.0% in the first quarter. On a comparable basis2, currency neutral adjusted operating EBITDA grew 14% driven by strong pricing actions, volume growth and productivity gains.

Health & Biosciences Segment

  • On a reported basis, first quarter sales were $661 million. On a comparable basis2, currency neutral sales increased 10% with growth across all segments led by a double-digit growth in Health, Microbial Control and Grain Processing as well as high single digit increases in Cultures & Food Enzymes and Animal Nutrition.
  • Health & Biosciences adjusted operating EBITDA was $192 million and adjusted operating EBITDA margin was 29.0% in the first quarter. On a comparable basis2, currency neutral adjusted operating EBITDA grew 8% led by volume growth, price increases and productivity gains.

Scent Segment

  • On a reported basis, first quarter sales were $585 million versus $569 million in the prior year period. Currency neutral sales increased 6% led by double-digit growth in Fine Fragrances, and solid growth in Cosmetic Actives and Fragrance Ingredients.
  • Scent adjusted operating EBITDA was $116 million versus $128 million in the prior year period. Adjusted operating EBITDA margin was 19.8% in the first quarter. On a currency neutral basis, adjusted operating EBITDA declined 2% as the Company continues to implement price increases in collaboration with customers to fully offset inflationary pressures.

Pharma Solutions Segment

  • On a reported basis, first quarter sales were $249 million. On a comparable basis2, currency neutral sales increased 10% with double-digit growth in Pharma and Industrial.
  • Pharma Solutions adjusted operating EBITDA was $65 million and adjusted operating EBITDA margin was 26.1% in the first quarter. On a comparable basis2, currency neutral adjusted operating EBITDA grew 10% led by price increases, volume growth and productivity gains.

Financial Guidance

The Company expects full year 2022 sales to be approximately $12.6 billion to $13.0 billion (versus previous guidance of $12.3 billion to $12.7 billion), with an expected full year 2022 adjusted operating EBITDA of approximately $2.5 billion to $2.6 billion (no change). The Company's updated full year guidance reflects the expected Microbial Control divestiture, which is anticipated to be complete on July 1, 2022 (versus June 1, 2022 previously), as well as the addition of the Health Wright Products acquisition, which closed on April 1, 2022.

The Company expects to deliver comparable currency neutral sales growth of approximately 9% to 12% (versus 6 to 9% previously) for the full year 2022. The Company continues to expect comparable currency neutral adjusted operating EBITDA growth for 2022 to be approximately 4% to 8% (no change).

Based on current market foreign exchange rates, the Company expects that foreign exchange will negatively impact sales growth in 2022 by approximately 4 percentage points (versus 2 previously) and adjusted operating EBITDA growth by approximately 5 percentage points (versus 4 previously).

Audio Webcast

A live webcast to discuss the Company’s first quarter 2022 financial results will be held on May 10, 2022, at 9:00 a.m. ET. The webcast and accompanying slide presentation may be accessed on the Company's IR website at ir.iff.com. For those unable to listen to the live webcast, a recorded version will be made available on the Company's website approximately one hour after the event and will remain available on IFF’s website for one year.

Cautionary Statement Under The Private Securities Litigation Reform Act of 1995

Statements in this press 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 including those concerning the impacts of COVID-19 and our plans to respond to its implications; the expected impact of global supply chain challenges; expectations regarding sales and profit for the fiscal year 2022, including the impact of foreign exchange, pricing actions, raw materials, and sourcing, logistics and manufacturing costs; expectations of the impact of inflationary pressures and the pricing actions to offset exposure to such impacts; the impact of higher input costs, including raw materials and energy; our ability to drive cost discipline measures and the ability to recover margin to pre-inflation levels; the divestiture of our microbial control business and the progress of our portfolio optimization strategy, through non-core business divestitures; our combination with N&B, including the expected cost benefits and synergies of the N&B Transaction, the success of our integration efforts and ability to deliver on our synergy commitments as well as future opportunities for the combined company; the success of our optimization of our portfolio; the growth potential of the markets in which we operate, including the emerging markets, expected capital expenditures, the expected costs and benefits of our ongoing optimization of our manufacturing operations, including the expected number of closings, expected cash flow and availability of capital resources to fund our operations and meet our debt service requirements; our ability to drive reductions in expenses; our strategic investments in capacity and increasing inventory to drive improved profitability; the impact of inflation and other macroeconomic factors; our ability to innovate and execute on specific consumer trends and demands; and our ability to continue to generate value for, and return cash to, our shareholders.

These forward-looking statements should be evaluated with consideration given to the many risks and uncertainties inherent in our business that could cause actual results and events to differ materially from those in the forward-looking statements. Certain of such forward-looking information may be identified by such terms as “expect”, “anticipate”, “believe”, “intend”, “outlook”, “may”, “estimate”, “should”, “predict” and similar terms or variations thereof. Such forward-looking statements are based on a series of expectations, assumptions, estimates and projections about the Company, are not guarantees of future results or performance, and involve significant risks, uncertainties and other factors, including assumptions and projections, for all forward periods. Our actual results may differ materially from any future results expressed or implied by such forward-looking statements.

Such risks, uncertainties and other factors include, among others, the following: (1) inflationary trends in the price of our input costs, such as raw materials, transportation and energy; (2) supply chain disruptions, geopolitical developments, including the Russia-Ukraine conflict, or climate-change related events (including severe weather events) that may affect our suppliers or procurement of raw materials; (3) disruption in the development, manufacture, distribution or sale of our products from COVID-19 and other public health crises; (4) risks related to the integration of N&B and the Frutarom business, including whether we will realize the synergies and benefits anticipated from the acquisitions in the expected time frame; (5) failure to successfully establish and manage acquisitions, collaborations, joint ventures or partnerships, or the failure to close strategic transactions or divestments; (6) our ability to successfully market to our expanded and diverse customer base; (7) our substantial amount of indebtedness and its impact on our liquidity and ability to return capital to its shareholders; (8) our ability to effectively compete in our market and develop and introduce new products that meet customers’ needs; (9) our ability to retain key employees; (10) changes in demand from large multi-national customers due to increased competition and our ability to maintain “core list” status with customers; (11) our ability to successfully develop innovative and cost-effective products that allow customers to achieve their own profitability expectations; (12) disruption in the development, manufacture, distribution or sale of our products from natural disasters, public health crises, international conflicts, terrorist acts, labor strikes, political crisis, accidents and similar events; (13) the impact of a significant data breach or other disruption in our information technology systems, and our ability to comply with data protection laws in the U.S. and abroad; (14) unprecedented increases and volatility in sourcing and logistics costs; (15) our ability to comply with, and the costs associated with compliance with, regulatory requirements and industry standards, including regarding product safety, quality, efficacy and environmental impact; (16) our ability to meet increasing customer, consumer, shareholder and regulatory focus on sustainability; (17) defect, quality issues (including product recalls), inadequate disclosure or misuse with respect to the products and capabilities; (18) our ability to react in a timely and cost-effective manner to changes in consumer preferences and demands, including increased awareness of health and wellness; (19) our ability to benefit from our investments and expansion in emerging markets; (20) the impact of currency fluctuations or devaluations in the principal foreign markets in which we operate; (21) economic, regulatory and political risks associated with our international operations; (22) the impact of global economic uncertainty on demand for consumer products; (23) our ability to comply with, and the costs associated with compliance with, U.S. and foreign environmental protection laws; (24) our ability to successfully manage our working capital and inventory balances; (25) the impact of the failure to comply with U.S. or foreign anti-corruption and anti-bribery laws and regulations, including the U.S. Foreign Corrupt Practices Act; (26) our ability to protect our intellectual property rights; (27) the impact of the outcome of legal claims, regulatory investigations and litigation, including current and future developments involving tax matters in Brazil; (28) changes in market conditions or governmental regulations relating to our pension and postretirement obligations; (29) the impact of changes in federal, state, local and international tax legislation or policies, including the Tax Cuts and Jobs Act, with respect to transfer pricing and state aid, and adverse results of tax audits, assessments, or disputes; (30) the impact of the United Kingdom’s departure from the European Union; (31) the impact of the phase out of the London Interbank Offered Rate (LIBOR) on interest expense; and (32) risks associated with our CEO transition, including the impact on employee hiring and retention.

The foregoing list of important factors does not include all such factors, nor necessarily present them in order of importance. In addition, you should consult other disclosures made by the Company (such as in our other filings with the SEC or in company press releases) for other factors that may cause actual results to differ materially from those projected by the Company. Please refer to Part I. Item 1A., Risk Factors, of the Company’s Annual Report on Form 10-K filed with the SEC on February 28, 2022 for additional information regarding factors that could affect our results of operations, financial condition and liquidity.

We intend our forward-looking statements to speak only as of the time of such statements and do not undertake or plan to update or revise them as more information becomes available or to reflect changes in expectations, assumptions or results. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this press release or included in our other periodic reports filed with the SEC could materially and adversely impact our operations and our future financial results. Any public statements or disclosures made by us following this press release that modify or impact any of the forward-looking statements contained in or accompanying this press release will be deemed to modify or supersede such outlook or other forward-looking statements in or accompanying this press release.

Use of Non-GAAP Financial Measures

We provide in this press release non-GAAP financial measures, including: (i) comparable currency neutral sales; (ii) adjusted operating EBITDA and comparable currency neutral adjusted operating EBITDA; (iii) adjusted EBITDA margin; (iv) adjusted EPS ex amortization; (v) free cash flow; and (vi) net debt to credit adjusted EBITDA.

Our non-GAAP financial measures are defined below.

Currency Neutral metrics eliminate the effects that result from translating non-U.S. currencies to U.S. dollars. We calculate currency neutral numbers by translating current year invoiced sale amounts at the exchange rates used for the corresponding prior year period. We use currency neutral results in our analysis of subsidiary or segment performance. We also use currency neutral numbers when analyzing our performance against our competitors.

Adjusted operating EBITDA and adjusted operating EBITDA margin exclude depreciation and amortization expense, interest expense, other income (expense), net, restructuring and other charges and certain non-recurring items such as gains (losses) on sale of assets, shareholder activism related costs, business divestiture costs, employee separation costs, Frutarom acquisition related costs, N&B inventory step-up costs, N&B transaction related costs, integration related costs and the impact of the merger with N&B.

Adjusted EPS ex Amortization excludes the impact of non-operational items including restructuring and other charges, gains (losses) on sale of assets, shareholder activism related costs, business divestiture costs, employee separation costs, Frutarom acquisition related costs, N&B inventory step-up costs, N&B transaction related costs, integration related costs, redemption value adjustment to EPS, the impact of the merger with N&B and non-cash items including the amortization of acquisition related intangible assets.

Free Cash Flow is operating cash flow (i.e. cash flow from operations) less capital expenditures.

Net debt to credit adjusted EBITDA is the leverage ratio used in our credit agreement and defined as Net debt (which is long-term debt less cash and cash equivalents) divided by the trailing 12-month credit adjusted EBITDA. Credit adjusted EBITDA is defined as income (loss) before income taxes, depreciation and amortization expense, interest expense, specified items and non-cash items.

Comparable results for the first quarter is defined as 3 months (January, February and March) of legacy IFF and N&B results in the 2021 period and for the full company in the current 2022 period, and exclude the impact of divestitures in the prior year period and acquisitions in the current year period.

These non-GAAP measures are intended to provide additional information regarding our underlying operating results and comparable year-over-year performance. Such information is supplemental to information presented in accordance with GAAP and is not intended to represent a presentation in accordance with GAAP. In discussing our historical and expected future results and financial condition, we believe it is meaningful for investors to be made aware of and to be assisted in a better understanding of, on a period-to-period comparable basis, financial amounts both including and excluding these identified items, as well as the impact of exchange rate fluctuations. These non-GAAP measures should not be considered in isolation or as substitutes for analysis of the Company’s results under GAAP and may not be comparable to other companies’ calculation of such metrics.

The Company cannot reconcile its expected Adjusted Operating EBITDA and expected annual effective tax rate under "Financial Guidance" without unreasonable effort because certain items that impact net income and other reconciling metrics are out of the Company's control and/or cannot be reasonably predicted at this time. These items include but are not limited to gains (losses) on sale of assets, shareholder activism related costs, business divestiture costs, employee separation costs, N&B inventory step-up costs, N&B transaction related costs, integration related costs and the impact of the merger with N&B.

Welcome to IFF

At IFF (NYSE: IFF), an industry leader in food, beverage, scent, health and biosciences, science and creativity meet to create essential solutions for a better world – from global icons to unexpected innovations and experiences. With the beauty of art and the precision of science, we are an international collective of thinkers who partners with customers to bring scents, tastes, experiences, ingredients and solutions for products the world craves. Together, we will do more good for people and planet. Learn more at iff.com, Twitter, Facebook, Instagram, and LinkedIn.

International Flavors & Fragrances Inc.
Consolidated Income (Loss) Statements
(Amounts in millions except per share data)
(Unaudited)

 

Three Months Ended March 31,

 

 

2022

 

 

 

2021

 

 

% Change

Net sales

$

3,226

 

 

$

2,465

 

 

31

%

Cost of goods sold

 

2,081

 

 

 

1,711

 

 

22

%

Gross profit

 

1,145

 

 

 

754

 

 

52

%

Research and development expenses

 

157

 

 

 

143

 

 

10

%

Selling and administrative expenses

 

459

 

 

 

451

 

 

2

%

Amortization of acquisition-related intangibles

 

186

 

 

 

152

 

 

22

%

Restructuring and other charges

 

2

 

 

 

4

 

 

(50

)%

Operating profit

 

341

 

 

 

4

 

 

NMF

Interest expense

 

72

 

 

 

65

 

 

11

%

Other income, net

 

(16

)

 

 

(7

)

 

129

%

Income (loss) before taxes

 

285

 

 

 

(54

)

 

NMF

Provision for (benefit from) income taxes

 

39

 

 

 

(14

)

 

NMF

Net income (loss)

 

246

 

 

 

(40

)

 

NMF

Net income attributable to noncontrolling interests

 

2

 

 

 

2

 

 

%

Net income (loss) attributable to IFF stockholders

 

244

 

 

 

(42

)

 

NMF

 

 

 

 

 

 

Net income (loss) per share - basic (1)

$

0.96

 

 

$

(0.21

)

 

 

Net income (loss) per share - diluted (1)

$

0.96

 

 

$

(0.21

)

 

 

 

 

 

 

 

 

Average number of shares outstanding - basic

 

255

 

 

 

206

 

 

 

Average number of shares outstanding - diluted

 

255

 

 

 

206

 

 

 

(1)

For 2022 and 2021, net income (loss) per share reflects adjustments related to the redemption value of certain redeemable noncontrolling interests.

NMF

Not meaningful

 

International Flavors & Fragrances Inc.
Condensed Consolidated Balance Sheets
(Amounts in millions)
(Unaudited)

 

March 31,

 

December 31,

 

2022

 

2021

Cash, cash equivalents, and restricted cash

$

661

 

$

715

Receivables, net

 

2,160

 

 

1,906

Inventories

 

2,795

 

 

2,516

Other current assets

 

1,891

 

 

1,850

Total current assets

 

7,507

 

 

6,987

 

 

 

 

Property, plant and equipment, net

 

4,295

 

 

4,368

Goodwill and other intangibles, net

 

26,548

 

 

26,920

Other assets

 

1,397

 

 

1,383

Total assets

$

39,747

 

$

39,658

 

 

 

 

Short-term borrowings

$

939

 

$

632

Other current liabilities

 

3,093

 

 

3,001

Total current liabilities

 

4,032

 

 

3,633

 

 

 

 

Long-term debt

 

10,738

 

 

10,768

Non-current liabilities

 

3,911

 

 

4,035

 

 

 

 

Redeemable noncontrolling interests

 

101

 

 

105

 

 

 

 

Shareholders' equity

 

20,965

 

 

21,117

Total liabilities and shareholders' equity

$

39,747

 

$

39,658

 

International Flavors & Fragrances Inc.
Consolidated Statements of Cash Flows
(Amounts in millions)
(Unaudited)

 

Three Months Ended March 31,

 

 

2022

 

 

 

2021

 

Cash flows from operating activities:

 

 

 

Net income (loss)

$

246

 

 

$

(40

)

Adjustments to reconcile to net cash (used in) provided by operating activities

 

 

 

Depreciation and amortization

 

303

 

 

 

242

 

Deferred income taxes

 

(65

)

 

 

(86

)

Stock-based compensation

 

9

 

 

 

11

 

Pension contributions

 

(8

)

 

 

(9

)

Amortization of inventory step-up

 

 

 

 

182

 

Changes in assets and liabilities, net of acquisitions:

 

 

 

Trade receivables

 

(272

)

 

 

(175

)

Inventories

 

(311

)

 

 

(64

)

Accounts payable

 

178

 

 

 

250

 

Accruals for incentive compensation

 

(101

)

 

 

(22

)

Other current payables and accrued expenses

 

39

 

 

 

48

 

Other assets/liabilities, net

 

(22

)

 

 

21

 

Net cash (used in) provided by operating activities

 

(4

)

 

 

358

 

Cash flows from investing activities:

 

 

 

Additions to property, plant and equipment

 

(132

)

 

 

(93

)

Additions to intangible assets

 

(2

)

 

 

 

Proceeds from disposal of assets

 

2

 

 

 

1

 

Cash provided by the Merger with N&B

 

11

 

 

 

207

 

Net cash (used in) provided by investing activities

 

(121

)

 

 

115

 

Cash flows from financing activities:

 

 

 

Cash dividends paid to shareholders

 

(201

)

 

 

(82

)

Increase (decrease) in revolving credit facility and short-term borrowings

 

1

 

 

 

(104

)

Proceeds from issuance of commercial paper (maturities after three months)

 

155

 

 

 

 

Repayments of commercial paper (maturities after three months)

 

(75

)

 

 

 

Net borrowings of commercial paper (maturities less than three months)

 

227

 

 

 

 

Repayments of long-term debt

 

 

 

 

(12

)

Contingent consideration paid

 

 

 

 

(14

)

Purchases of noncontrolling interest

 

(6

)

 

 

 

Proceeds from issuance of stock in connection with stock options

 

7

 

 

 

3

 

Employee withholding taxes paid

 

(13

)

 

 

(6

)

Net cash provided by (used in) financing activities

 

95

 

 

 

(215

)

Effect of exchange rates changes on cash, cash equivalents and restricted cash

 

(24

)

 

 

(37

)

Net change in cash, cash equivalents and restricted cash

 

(54

)

 

 

221

 

Cash, cash equivalents and restricted cash at beginning of year

 

716

 

 

 

660

 

Cash, cash equivalents and restricted cash at end of period

$

662

 

 

$

881

 

The following table reconciles cash, cash equivalents and restricted cash between the Company's statement of cash flows for the periods ended March 31, 2022 and March 31, 2021 to the amounts reported in the Company's balance sheet:

AMOUNTS IN MILLIONS

March 31, 2022

 

December 31, 2021

 

March 31, 2021

 

December 31, 2020

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

657

 

$

711

 

$

872

 

$

650

Restricted cash

 

4

 

 

4

 

 

7

 

 

7

Noncurrent assets

 

 

 

 

 

 

 

Restricted cash included in Other assets

 

1

 

 

1

 

 

2

 

 

3

Cash, cash equivalents and restricted cash

$

662

 

$

716

 

$

881

 

$

660

 

International Flavors & Fragrances Inc.
Reportable Segment Performance
(Amounts in millions)
(Unaudited)

 

Three Months Ended March 31,

 

 

2022

 

 

 

2021

 

Net Sales

 

 

 

Nourish

$

1,731

 

 

$

1,308

 

Health & Biosciences

 

661

 

 

 

426

 

Scent

 

585

 

 

 

569

 

Pharma Solutions

 

249

 

 

 

162

 

Consolidated

$

3,226

 

 

$

2,465

 

Segment Adjusted Operating EBITDA

 

 

 

Nourish

$

329

 

 

$

270

 

Health & Biosciences

 

192

 

 

 

128

 

Scent

 

116

 

 

 

128

 

Pharma Solutions

 

65

 

 

 

43

 

Total

 

702

 

 

 

569

 

Depreciation & Amortization

 

(303

)

 

 

(242

)

Interest Expense

 

(72

)

 

 

(65

)

Other income, net

 

16

 

 

 

7

 

Restructuring and Other Charges

 

(2

)

 

 

(4

)

Shareholder Activism Related Costs

 

(3

)

 

 

(7

)

Business Divestiture Costs

 

(30

)

 

 

 

Employee Separation Costs

 

(4

)

 

 

(3

)

Frutarom Acquisition Related Costs

 

(1

)

 

 

 

N&B Inventory Step-Up Costs

 

 

 

 

(182

)

N&B Transaction Related Costs

 

 

 

 

(89

)

Integration Related Costs

 

(18

)

 

 

(38

)

Income (Loss) Before Taxes

$

285

 

 

$

(54

)

Segment Adjusted Operating EBITDA Margin

 

 

 

Nourish

 

19.0

%

 

 

20.6

%

Health & Biosciences

 

29.0

%

 

 

30.0

%

Scent

 

19.8

%

 

 

22.5

%

Pharma Solutions

 

26.1

%

 

 

26.5

%

Consolidated

 

21.8

%

 

 

23.1

%

 

International Flavors & Fragrances Inc.
GAAP to Non-GAAP Reconciliation
(Unaudited)

The following information and schedules provide reconciliation information between reported GAAP amounts and non-GAAP certain adjusted amounts. This information and schedules are not intended as, and should not be viewed as, a substitute for reported GAAP amounts or financial statements of the Company prepared and presented in accordance with GAAP.

Reconciliation of Gross Profit

 

First Quarter

(DOLLARS IN MILLIONS)

2022

 

2021

Reported (GAAP)

$

1,145

 

$

754

N&B Inventory Step-Up Costs

 

 

 

182

Integration Related Costs (f)

 

1

 

 

Adjusted (Non-GAAP)

$

1,146

 

$

936

Reconciliation of Selling and Administrative Expenses

 

First Quarter

(DOLLARS IN MILLIONS)

 

2022

 

 

 

2021

 

Reported (GAAP)

$

459

 

 

$

451

 

Shareholder Activism Related Costs (a)

 

(3

)

 

 

(7

)

Business Divestiture Costs (b)

 

(30

)

 

 

 

Employee Separation Costs (c)

 

(4

)

 

 

(3

)

Frutarom Acquisition Related Costs (d)

 

(1

)

 

 

 

N&B Transaction Related Costs (e)

 

 

 

 

(89

)

Integration Related Costs (f)

 

(17

)

 

 

(38

)

Adjusted (Non-GAAP)

$

404

 

 

$

314

 

International Flavors & Fragrances Inc.
GAAP to Non-GAAP Reconciliation
(Unaudited)

The following information and schedules provide reconciliation information between reported GAAP amounts and non-GAAP certain adjusted amounts. This information and schedules are not intended as, and should not be viewed as, a substitute for reported GAAP amounts or financial statements of the Company prepared and presented in accordance with GAAP.

Reconciliation of Net Income (Loss) and EPS

 

First Quarter

 

2022

 

2021

(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

Income

before

taxes

 

Provision

for income

taxes (h)

 

Net Income

Attributable

to IFF (i)

 

Diluted

EPS

 

(Loss)

Income

before

taxes

 

(Benefit

from)

Provision

for income

taxes (h)

 

Net (Loss)

Income

Attributable

to IFF (i)

 

Diluted

EPS (j)

Reported (GAAP)

$

285

 

$

39

 

$

244

 

$

0.96

 

$

(54

)

 

$

(14

)

 

$

(42

)

 

$

(0.21

)

Restructuring and Other Charges

 

2

 

 

 

 

2

 

 

0.01

 

 

4

 

 

 

1

 

 

 

3

 

 

 

0.02

 

Shareholder Activism Related Costs (a)

 

3

 

 

1

 

 

2

 

 

0.01

 

 

7

 

 

 

2

 

 

 

5

 

 

 

0.03

 

Business Divestiture Costs (b)

 

30

 

 

7

 

 

23

 

 

0.09

 

 

 

 

 

 

 

 

 

 

 

 

Employee Separation Costs (c)

 

4

 

 

1

 

 

3

 

 

0.01

 

 

3

 

 

 

 

 

 

3

 

 

 

0.01

 

Frutarom Acquisition Related Costs (d)

 

1

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

N&B Inventory Step-Up Costs

 

 

 

 

 

 

 

 

 

182

 

 

 

37

 

 

 

145

 

 

 

0.70

 

N&B Transaction Related Costs (e)

 

 

 

 

 

 

 

 

 

89

 

 

 

18

 

 

 

71

 

 

 

0.34

 

Integration Related Costs (f)

 

18

 

 

5

 

 

13

 

 

0.05

 

 

38

 

 

 

9

 

 

 

29

 

 

 

0.14

 

Redemption value adjustment to EPS (g)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.01

 

Adjusted (Non-GAAP)

$

343

 

$

53

 

$

288

 

$

1.13

 

$

269

 

 

$

53

 

 

$

214

 

 

$

1.03

 

Reconciliation of Adjusted (Non-GAAP) EPS ex. Amortization

 

First Quarter

(DOLLARS AND SHARE AMOUNTS IN MILLIONS)

2022

 

2021

Numerator

 

 

 

Adjusted (Non-GAAP) Net Income

$

288

 

$

214

Amortization of Acquisition related Intangible Assets

 

186

 

 

152

Tax impact on Amortization of Acquisition related Intangible Assets (h)

 

43

 

 

34

Amortization of Acquisition related Intangible Assets, net of tax (k)

 

143

 

 

118

Adjusted (Non-GAAP) Net Income ex. Amortization

$

431

 

$

332

 

 

 

 

Denominator

 

 

 

Weighted average shares assuming dilution (diluted)

 

255

 

 

207

Adjusted (Non-GAAP) EPS ex. Amortization

$

1.69

 

$

1.60

(a)

Represents shareholder activist related costs, primarily professional fees.

(b)

Represents costs related to the Company's planned sales of businesses, primarily legal and professional fees.

(c)

Represents costs related to severance, including accelerated stock compensation expense, for certain employees and executives who have been separated or will separate from the Company.

(d)

Represents transaction-related costs and expenses related to the acquisition of Frutarom.

(e)

Represents transaction costs and expenses related to the transaction with N&B, primarily includes legal and professional fees.

(f)

Represents costs related to integration activities since 2018, primarily for Frutarom and N&B. For 2022, represents costs primarily related to external consulting fees and internal integration costs, including salaries. For 2021, represents costs primarily related to performance stock awards and consulting fees for advisory services.

(g)

Represents the adjustment to EPS related to the excess of the redemption value of certain redeemable noncontrolling interests over their existing carrying value.

(h)

The income tax effects of non-GAAP adjustments are calculated based on the applicable statutory tax rate for the relevant jurisdiction, except for those items which are non-taxable or subject to valuation allowances for which the tax expense (benefit) was calculated at 0%. The tax benefit for amortization is calculated in a similar manner as the tax effects of the non-GAAP adjustments.

(i)

For 2022, net income is reduced by income attributable to noncontrolling interest of $2 million. For 2021, net loss is increased by income attributable to noncontrolling interest of $2 million.

(j)

The sum of these items does not foot due to rounding.

(k)

Represents all amortization of intangible assets acquired in connection with acquisitions, net of tax.

 

International Flavors & Fragrances Inc.
Debt Covenants
(Amounts in millions)
(Unaudited)

The following information and schedules provide reconciliation information between reported GAAP amounts and non-GAAP certain adjusted amounts. This information and schedules are not intended as, and should not be viewed as, a substitute for reported GAAP amounts or financial statements of the Company prepared and presented in accordance with GAAP.

Reconciliation of Credit Adjusted EBITDA to Net Income

(DOLLARS IN MILLIONS)

Twelve Months Ended March 31, 2022

Net income

$

556

Interest expense

 

296

Income taxes

 

128

Depreciation and amortization

 

1,217

Specified items(1)

 

405

Non-cash items(2)

 

38

Credit Adjusted EBITDA

$

2,640

____________________

(1)

Specified items for the 12 months ended March 31, 2022 of $405 million, consisted of restructuring and other charges, shareholder activism related costs, business divestiture costs, employee separation costs, pension income adjustment, pension settlement, Frutarom acquisition related costs, N&B inventory step-up costs, N&B transaction related costs and integration related costs.

(2)

Non-cash items represent all other adjustments to reconcile net income to net cash provided by operations as presented on the Statement of Cash Flows, including gains on disposal of assets, gains on business disposal and stock-based compensation.

Net Debt to Total Debt

(DOLLARS IN MILLIONS)

March 31, 2022

Total debt(1)

$

11,695

Adjustments:

 

Cash and cash equivalents

 

657

Net debt

$

11,038

____________________

(1)

Total debt used for the calculation of Net debt consists of short-term debt, long-term debt, short-term finance lease obligations and long-term finance lease obligations.

 

International Flavors & Fragrances Inc.
Comparable Reportable Segment Performance
(Amounts in millions)
(Unaudited)

The following information and schedule provides reconciliation information between reported GAAP amounts and non-GAAP certain adjusted amounts. This information and schedule is not intended as, and should not be viewed as, a substitute for reported GAAP amounts or financial statements of the Company prepared and presented in accordance with GAAP.

 

Three Months Ended March 31,

 

 

2022

 

 

 

2021

 

Net Sales

 

 

 

Nourish(1)

$

1,731

 

 

$

1,537

 

Health & Biosciences

 

661

 

 

 

615

 

Scent

 

585

 

 

 

569

 

Pharma Solutions

 

249

 

 

 

233

 

Consolidated

$

3,226

 

 

$

2,954

 

Segment Adjusted Operating EBITDA

 

 

 

Nourish

$

329

 

 

$

304

 

Health & Biosciences

 

192

 

 

 

181

 

Scent

 

116

 

 

 

128

 

Pharma Solutions

 

65

 

 

 

60

 

Total

 

702

 

 

 

673

 

Depreciation & Amortization

 

(303

)

 

 

(242

)

Interest Expense

 

(72

)

 

 

(65

)

Other income, net

 

16

 

 

 

7

 

Restructuring and Other Charges

 

(2

)

 

 

(4

)

Shareholder Activism Related Costs

 

(3

)

 

 

(7

)

Business Divestiture Costs

 

(30

)

 

 

 

Employee Separation Costs

 

(4

)

 

 

(3

)

Frutarom Acquisition Related Costs

 

(1

)

 

 

 

N&B Inventory Step-Up Costs

 

 

 

 

(182

)

N&B Transaction Related Costs

 

 

 

 

(89

)

Integration Related Costs

 

(18

)

 

 

(38

)

Divestiture of Businesses(2)

 

 

 

 

3

 

Impact of Merger with N&B(3)

 

 

 

 

(107

)

Income (Loss) Before Taxes

$

285

 

 

$

(54

)

Segment Adjusted Operating EBITDA Margin

 

 

 

Nourish

 

19.0

%

 

 

19.8

%

Health & Biosciences

 

29.0

%

 

 

29.4

%

Scent

 

19.8

%

 

 

22.5

%

Pharma Solutions

 

26.1

%

 

 

25.8

%

Consolidated

 

21.8

%

 

 

22.8

%

____________________

(1)

Nourish sales information for the three months ended March 31, 2021 excludes the results of the Fruit Preparation business to present fully comparable scenarios of the Company due to divestiture of the business in the fourth quarter of 2021. As a result, there is no impact of the Fruit Preparation business for the 2022 period.

(2)

Information related to the amounts exclude the results of the Fruit Preparation business to present fully comparable scenarios of the Company due to divestiture of the business in the fourth quarter of 2021.

(3)

Information related to the amounts included from merger with N&B was received directly from DuPont and management believes such information is reliable. DuPont has not provided the underlying adjustments for the amounts included, but based on management's review of financial statement and other scheduled information provided, we believe the amounts reflected are reasonable. For the three months ended March 31, 2021, amounts include N&B results for January to reflect the same period N&B is included in IFF results in 2022.

 
 

The pro forma historical segment information has been presented for informational purposes only and is not necessarily indicative of what IFF's results of operations actually would have been, had the N&B transaction occurred on the date indicated below. In addition, the pro forma historical segment information does not purport to project the future operating results of the Company, shown below:

 

(DOLLARS IN MILLIONS)

January 2021

 

 

Pro Forma Sales

 

Pro Forma Adjusted

Operating EBITDA

 

Nourish

$

247

 

$

37

 

Health & Biosciences

 

189

 

 

53

 

Scent

 

 

 

 

Pharma Solutions

 

71

 

 

17

 

International Flavors & Fragrances Inc.
GAAP to Non-GAAP Reconciliation
Comparable Foreign Exchange Impact
(Unaudited)

Q1 Nourish

 

Sales

 

Segment Adjusted

Operating EBITDA

 

Segment Adjusted

Operating EBITDA Margin

% Change - Comparable

 

13%

 

8%

 

(0.8)%

Currency Impact

 

3%

 

6%

 

0.4%

% Change - Currency Neutral

 

16%

 

14%

 

(0.4)%

 

 

 

 

 

 

 

Q1 Health & Biosciences

 

Sales

 

Segment Adjusted

Operating EBITDA

 

Segment Adjusted

Operating EBITDA Margin

% Change - Comparable

 

7%

 

6%

 

(0.4)%

Currency Impact

 

3%

 

2%

 

(0.2)%

% Change - Currency Neutral

 

10%

 

8%

 

(0.6)%

 

 

 

 

 

 

 

Q1 Scent

 

Sales

 

Segment Adjusted

Operating EBITDA

 

Segment Adjusted

Operating EBITDA Margin

% Change - Comparable

 

3%

 

(9)%

 

(2.7)%

Currency Impact

 

3%

 

7%

 

1.0%

% Change - Currency Neutral

 

6%

 

(2)%

 

(1.7)%

 

 

 

 

 

 

 

Q1 Pharma Solutions

 

Sales

 

Segment Adjusted

Operating EBITDA

 

Segment Adjusted

Operating EBITDA Margin

% Change - Comparable

 

7%

 

8%

 

0.3%

Currency Impact

 

3%

 

2%

 

(0.3)%

% Change - Currency Neutral

 

10%

 

10%

 

0.0%

 

 

 

 

 

 

 

Q1 Consolidated

 

Sales

 

Segment Adjusted

Operating EBITDA

 

Segment Adjusted

Operating EBITDA Margin

% Change - Comparable

 

9%

 

4%

 

(1.0)%

Currency Impact

 

4%

 

5%

 

0.3%

% Change - Currency Neutral

 

13%

 

9%

 

(0.7)%