þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
New York | 13-1432060 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer | þ | Accelerated filer | ¨ |
Non-accelerated filer | ¨ | Smaller reporting company | ¨ |
Emerging growth company | ¨ |
(DOLLARS IN THOUSANDS) | September 30, 2018 | December 31, 2017 | |||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 5,274,459 | $ | 368,046 | |||
Trade receivables (net of allowances of $13,762 and $13,392, respectively) | 701,111 | 663,663 | |||||
Inventories: Raw materials | 372,606 | 326,140 | |||||
Work in process | 26,297 | 16,431 | |||||
Finished goods | 320,605 | 306,877 | |||||
Total Inventories | 719,508 | 649,448 | |||||
Prepaid expenses and other current assets | 251,749 | 215,387 | |||||
Total Current Assets | 6,946,827 | 1,896,544 | |||||
Property, plant and equipment, at cost | 2,124,886 | 2,090,755 | |||||
Accumulated depreciation | (1,250,069 | ) | (1,210,175 | ) | |||
874,817 | 880,580 | ||||||
Goodwill | 1,152,864 | 1,156,288 | |||||
Other intangible assets, net | 385,575 | 415,787 | |||||
Deferred income taxes | 87,481 | 99,777 | |||||
Other assets | 167,978 | 149,950 | |||||
Total Assets | $ | 9,615,542 | $ | 4,598,926 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current Liabilities: | |||||||
Short term borrowings | $ | 45,985 | $ | 6,966 | |||
Accounts payable | 312,236 | 338,188 | |||||
Accrued payroll and bonus | 75,970 | 88,361 | |||||
Dividends payable | 66,901 | 54,420 | |||||
Other current liabilities | 257,364 | 280,833 | |||||
Total Current Liabilities | 758,456 | 768,768 | |||||
Long-term debt | 4,331,242 | 1,632,186 | |||||
Deferred gains | 33,867 | 37,344 | |||||
Retirement liabilities | 218,696 | 228,936 | |||||
Other liabilities | 235,332 | 242,398 | |||||
Total Other Liabilities | 4,819,137 | 2,140,864 | |||||
Commitments and Contingencies (Note 14) | |||||||
Shareholders’ Equity: | |||||||
Common stock 12 1/2¢ par value; 500,000,000 shares authorized; 128,526,137 and 115,858,190 shares issued as of September 30, 2018 and December 31, 2017, respectively; and 91,717,377 and 78,947,381 shares outstanding as of September 30, 2018 and December 31, 2017, respectively | 16,066 | 14,470 | |||||
Capital in excess of par value | 2,441,530 | 162,827 | |||||
Retained earnings | 4,021,172 | 3,870,621 | |||||
Accumulated other comprehensive loss | (715,105 | ) | (637,482 | ) | |||
Treasury stock, at cost (36,808,760 and 36,910,809 shares as of September 30, 2018 and December 31, 2017, respectively) | (1,731,849 | ) | (1,726,234 | ) | |||
Total Shareholders’ Equity | 4,031,814 | 1,684,202 | |||||
Noncontrolling interest | 6,135 | 5,092 | |||||
Total Shareholders’ Equity including noncontrolling interest | 4,037,949 | 1,689,294 | |||||
Total Liabilities and Shareholders’ Equity | $ | 9,615,542 | $ | 4,598,926 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net sales | $ | 907,548 | $ | 872,940 | $ | 2,758,492 | $ | 2,544,094 | |||||||
Cost of goods sold | 506,882 | 492,542 | 1,553,300 | 1,427,630 | |||||||||||
Gross profit | 400,666 | 380,398 | 1,205,192 | 1,116,464 | |||||||||||
Research and development expenses | 75,302 | 73,762 | 228,545 | 218,649 | |||||||||||
Selling and administrative expenses | 157,796 | 145,652 | 457,847 | 428,675 | |||||||||||
Amortization of acquisition-related intangibles | 9,003 | 8,766 | 27,772 | 24,327 | |||||||||||
Restructuring and other charges, net | 927 | 3,249 | 2,830 | 14,183 | |||||||||||
Gains on sales of fixed assets | (1,630 | ) | (31 | ) | (435 | ) | (120 | ) | |||||||
Operating profit | 159,268 | 149,000 | 488,633 | 430,750 | |||||||||||
Interest expense | 23,914 | 19,221 | 93,755 | 49,584 | |||||||||||
Loss on extinguishment of debt | 38,810 | — | 38,810 | — | |||||||||||
Other income, net | (4,158 | ) | (11,547 | ) | (25,389 | ) | (40,687 | ) | |||||||
Income before taxes | 100,702 | 141,326 | 381,457 | 421,853 | |||||||||||
Taxes on income | 4,986 | 31,065 | 57,176 | 86,033 | |||||||||||
Net income | 95,716 | 110,261 | 324,281 | 335,820 | |||||||||||
Other comprehensive (loss) income, after tax: | |||||||||||||||
Foreign currency translation adjustments | (27,587 | ) | 19,719 | (98,048 | ) | 29,809 | |||||||||
Gains (losses) on derivatives qualifying as hedges | 2,421 | (4,014 | ) | 12,347 | (17,533 | ) | |||||||||
Pension and postretirement net liability | 2,559 | 3,845 | 8,078 | 11,168 | |||||||||||
Other comprehensive (loss) income | (22,607 | ) | 19,550 | (77,623 | ) | 23,444 | |||||||||
Total comprehensive income | $ | 73,109 | $ | 129,811 | $ | 246,658 | $ | 359,264 | |||||||
Net income per share - basic | $ | 1.18 | $ | 1.39 | $ | 4.06 | $ | 4.24 | |||||||
Net income per share - diluted | $ | 1.17 | $ | 1.39 | $ | 4.04 | $ | 4.22 | |||||||
Average number of shares outstanding - basic | 81,263 | 79,063 | 79,783 | 79,072 | |||||||||||
Average number of shares outstanding - diluted | 81,647 | 79,362 | 80,115 | 79,353 |
Nine Months Ended September 30, | |||||||
(DOLLARS IN THOUSANDS) | 2018 | 2017 | |||||
Cash flows from operating activities: | |||||||
Net income | $ | 324,281 | $ | 335,820 | |||
Adjustments to reconcile to net cash provided by operating activities: | |||||||
Depreciation and amortization | 95,994 | 85,446 | |||||
Deferred income taxes | 20,623 | (3,439 | ) | ||||
Gains on sale of assets | (435 | ) | (120 | ) | |||
Stock-based compensation | 22,041 | 20,149 | |||||
Pension contributions | (15,983 | ) | (36,870 | ) | |||
Loss on extinguishment of debt | 38,810 | — | |||||
Gain on deal contingent derivatives | (12,505 | ) | — | ||||
Litigation settlement | — | (56,000 | ) | ||||
Product recall claim settlement, net of insurance proceeds received | (3,090 | ) | — | ||||
Foreign currency gain on liquidation of entity | — | (12,214 | ) | ||||
Changes in assets and liabilities, net of acquisitions: | |||||||
Trade receivables | (93,198 | ) | (94,945 | ) | |||
Inventories | (92,705 | ) | 6,211 | ||||
Accounts payable | (17,198 | ) | (20,560 | ) | |||
Accruals for incentive compensation | (10,753 | ) | 2,907 | ||||
Other current payables and accrued expenses | 386 | 9,423 | |||||
Other assets | (61,597 | ) | 3,824 | ||||
Other liabilities | 7,287 | (40,143 | ) | ||||
Net cash provided by operating activities | 201,958 | 199,489 | |||||
Cash flows from investing activities: | |||||||
Cash paid for acquisitions, net of cash received | (22 | ) | (191,304 | ) | |||
Additions to property, plant and equipment | (102,421 | ) | (77,318 | ) | |||
Proceeds from life insurance contracts | 1,837 | 1,941 | |||||
Maturity of net investment hedges | (2,642 | ) | 2,226 | ||||
Proceeds from disposal of assets | 961 | 1,275 | |||||
Net cash used in investing activities | (102,287 | ) | (263,180 | ) | |||
Cash flows from financing activities: | |||||||
Cash dividends paid to shareholders | (163,318 | ) | (151,678 | ) | |||
Increase in revolving credit facility and short term borrowings | 112,483 | 35,998 | |||||
Deferred financing costs | (21,944 | ) | (5,373 | ) | |||
Repayments on debt | (288,810 | ) | (250,000 | ) | |||
Proceeds from issuance of long-term debt | 2,926,414 | 498,250 | |||||
Proceeds from sales of equity securities, net of issuance costs | 2,268,965 | — | |||||
Gain (loss) on pre-issuance hedges | 12,505 | (5,310 | ) | ||||
Proceeds from issuance of stock in connection with stock options | — | 329 | |||||
Employee withholding taxes paid | (9,725 | ) | (11,509 | ) | |||
Purchase of treasury stock | (15,475 | ) | (53,211 | ) | |||
Net cash provided by financing activities | 4,821,095 | 57,496 | |||||
Effect of exchange rate changes on cash and cash equivalents | (14,353 | ) | (1,795 | ) | |||
Net change in cash and cash equivalents | 4,906,413 | (7,990 | ) | ||||
Cash and cash equivalents at beginning of year | 368,046 | 323,992 | |||||
Cash and cash equivalents at end of period | $ | 5,274,459 | $ | 316,002 | |||
Supplemental Disclosures: | |||||||
Interest paid, net of amounts capitalized | $ | 91,874 | $ | 48,485 | |||
Income taxes paid | $ | 86,672 | $ | 77,356 | |||
Accrued capital expenditures | $ | 18,247 | $ | 13,054 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(DOLLARS IN THOUSANDS) | 2018 | 2017(a) | 2018 | 2017(a) | |||||||||||
Flavor Compounds | $ | 436,214 | $ | 409,800 | $ | 1,335,773 | $ | 1,230,286 | |||||||
Fragrance Compounds | |||||||||||||||
Consumer Fragrances | 286,078 | 280,018 | 840,532 | 786,412 | |||||||||||
Fine Fragrances | 93,281 | 96,045 | 289,496 | 274,740 | |||||||||||
Fragrance Ingredients | 91,975 | 87,077 | 292,691 | 252,656 | |||||||||||
Total revenues | $ | 907,548 | $ | 872,940 | $ | 2,758,492 | $ | 2,544,094 |
(a) | Prior period amounts have not been adjusted based on the modified retrospective method. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(DOLLARS IN THOUSANDS) | 2018 | 2017(a) | 2018 | 2017(a) | |||||||||||
Europe, Africa and Middle East | $ | 285,519 | $ | 276,713 | $ | 887,680 | $ | 793,590 | |||||||
Greater Asia | 237,415 | 224,850 | 723,194 | 672,470 | |||||||||||
North America | 248,661 | 233,083 | 738,857 | 682,438 | |||||||||||
Latin America | 135,953 | 138,294 | 408,761 | 395,596 | |||||||||||
Total revenues | $ | 907,548 | $ | 872,940 | $ | 2,758,492 | $ | 2,544,094 |
(a) | Prior period amounts have not been adjusted based on the modified retrospective method. |
(DOLLARS IN THOUSANDS) | September 30, 2018 | At adoption | |||||
Receivables (included in Trade receivables) | $ | 714,873 | $ | 677,055 | |||
Contract asset - Short term | 1,126 | 4,449 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
(SHARES IN THOUSANDS) | 2018 | 2017 | 2018 | 2017 | |||||||
Basic(1) | 81,263 | 79,063 | 79,783 | 79,072 | |||||||
Effect of dilutive securities(2) | 384 | 299 | 332 | 281 | |||||||
Diluted | 81,647 | 79,362 | 80,115 | 79,353 |
(1) | For the three and nine months ended September 30, 2018, the tangible equity units (“TEUs”) were assumed to be outstanding at the minimum settlement amount for weighted-average shares for basic earnings per share. See below for details. |
(2) | Effect of dilutive securities includes dilution under stock plans and incremental impact of TEUs. See below for details. |
(DOLLARS IN THOUSANDS) | Employee-Related Costs | Other | Total | ||||||||
Balance at December 31, 2017 | $ | 7,539 | $ | 418 | $ | 7,957 | |||||
Additional charges, net | 2,830 | — | 2,830 | ||||||||
Payments | (6,396 | ) | — | (6,396 | ) | ||||||
Balance at September 30, 2018 | $ | 3,973 | $ | 418 | $ | 4,391 |
(DOLLARS IN THOUSANDS) | Goodwill | ||
Balance at December 31, 2017 | $ | 1,156,288 | |
Acquisitions | 22 | ||
Foreign exchange | (3,446 | ) | |
Balance at September 30, 2018 | $ | 1,152,864 |
September 30, | December 31, | ||||||
(DOLLARS IN THOUSANDS) | 2018 | 2017 | |||||
Asset Type | |||||||
Customer relationships | $ | 405,136 | $ | 407,636 | |||
Trade names & patents | 38,492 | 38,771 | |||||
Technological know-how | 161,622 | 161,856 | |||||
Other | 24,776 | 24,814 | |||||
Total carrying value | 630,026 | 633,077 | |||||
Accumulated Amortization | |||||||
Customer relationships | (122,001 | ) | (104,800 | ) | |||
Trade names & patents | (17,558 | ) | (15,241 | ) | |||
Technological know-how | (83,633 | ) | (76,766 | ) | |||
Other | (21,259 | ) | (20,483 | ) | |||
Total accumulated amortization | (244,451 | ) | (217,290 | ) | |||
Other intangible assets, net | $ | 385,575 | $ | 415,787 |
(IN MILLIONS, EXCEPT FAIR VALUE PER TEU) | SPC | Amortizing Note | Total | |||||||||
Fair Value per TEU | $ | 41.5 | $ | 8.5 | $ | 50.0 | ||||||
Gross Proceeds | $ | 685.5 | $ | 139.5 | $ | 825.0 | ||||||
Less: Issuance costs | 21.6 | 4.4 | 26.0 | |||||||||
Net Proceeds | $ | 663.9 | $ | 135.1 | $ | 799.0 |
VWAP of IFF Common Stock | Common Stock Issued | |
Equal to or greater than $159.54 | 0.3134 shares (minimum settlement rate) | |
Less than $159.54, but greater than $130.25 | $50 divided by VWAP | |
Less than or equal to $130.25 | 0.3839 shares (maximum settlement rate) |
(DOLLARS IN THOUSANDS) | Effective Interest Rate | September 30, 2018 | December 31, 2017 | |||||||
Senior notes - 2007(1)(4) | 6.40% - 6.82% | $ | — | $ | 249,765 | |||||
Senior notes - 2013(1) | 3.30 | % | 299,057 | 298,670 | ||||||
Euro Senior notes - 2016(1) | 1.88 | % | 583,049 | 589,848 | ||||||
Senior notes - 2017(1) | 4.44 | % | 493,046 | 492,819 | ||||||
2020 Notes(1) | 3.73 | % | 297,995 | — | ||||||
2021 Euro Notes(1) | 0.78 | % | 348,804 | — | ||||||
2026 Euro Notes(1) | 1.93 | % | 930,142 | — | ||||||
2028 Notes(1) | 4.57 | % | 395,940 | — | ||||||
2048 Notes(1) | 5.12 | % | 785,012 | — | ||||||
Amortizing Notes(1) | 5.83 | % | 133,096 | — | ||||||
Credit facility | LIBOR + 1.125% | (2) | 105,653 | — | ||||||
Bank overdrafts and other | 5,376 | 7,993 | ||||||||
Deferred realized gains on interest rate swaps | 57 | 57 | ||||||||
4,377,227 | 1,639,152 | |||||||||
Less: Short term borrowings(3) | (45,985 | ) | (6,966 | ) | ||||||
$ | 4,331,242 | $ | 1,632,186 |
(1) | Amount is net of unamortized discount and debt issuance costs. |
(2) | Represents the rate on drawn down and outstanding balances. Deferred debt issuance costs are immaterial. |
(3) | Includes bank borrowings, commercial paper, overdrafts and current portion of long-term debt. |
(4) | In connection with the acquisition of Frutarom and associated financing, the Company repaid the outstanding $250 million of its Senior Notes - 2007 on September 17, 2018, including accrued and unpaid interest of $7.7 million and the associated make whole payment of $34.9 million. Additionally, the Company incurred a loss of $3.9 million on the termination of a fair value hedge which was recognized in earnings for the three and nine months ended September 30, 2018. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(DOLLARS IN THOUSANDS) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Equity-based awards | $ | 6,867 | $ | 7,256 | $ | 22,041 | $ | 20,149 | |||||||
Liability-based awards | 1,545 | 1,396 | 1,942 | 4,447 | |||||||||||
Total stock-based compensation expense | 8,412 | 8,652 | 23,983 | 24,596 | |||||||||||
Less: Tax benefit | (1,422 | ) | (2,574 | ) | (4,320 | ) | (7,123 | ) | |||||||
Total stock-based compensation expense, after tax | $ | 6,990 | $ | 6,078 | $ | 19,663 | $ | 17,473 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
(DOLLARS IN THOUSANDS) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net sales: | |||||||||||||||
Flavors | $ | 436,214 | $ | 409,800 | $ | 1,335,773 | $ | 1,230,286 | |||||||
Fragrances | 471,334 | 463,140 | 1,422,719 | 1,313,808 | |||||||||||
Consolidated | $ | 907,548 | $ | 872,940 | $ | 2,758,492 | $ | 2,544,094 | |||||||
Segment profit: | |||||||||||||||
Flavors | $ | 96,497 | $ | 87,375 | $ | 317,666 | $ | 278,768 | |||||||
Fragrances | 87,488 | 88,959 | 261,545 | 247,824 | |||||||||||
Global expenses | (19,578 | ) | (17,693 | ) | (63,975 | ) | (47,472 | ) | |||||||
Operational Improvement Initiatives (a) | (344 | ) | (407 | ) | (1,773 | ) | (1,473 | ) | |||||||
Acquisition Related Costs (b) | 1 | (5,436 | ) | 519 | (20,502 | ) | |||||||||
Integration Related Costs (c) | (958 | ) | (580 | ) | (1,951 | ) | (2,501 | ) | |||||||
Legal Charges/Credits, net (d) | — | — | — | (1,000 | ) | ||||||||||
Tax Assessment (e) | — | — | — | (5,331 | ) | ||||||||||
Restructuring and Other Charges, net (f) | (927 | ) | (3,249 | ) | (1,837 | ) | (14,183 | ) | |||||||
Gains on Sale of Assets | 1,630 | 31 | 435 | 120 | |||||||||||
FDA Mandated Product Recall (g) | 9,800 | — | 4,800 | (3,500 | ) | ||||||||||
Frutarom Acquisition Related Costs (h) | (14,341 | ) | — | (26,796 | ) | — | |||||||||
Operating profit | 159,268 | 149,000 | 488,633 | 430,750 | |||||||||||
Interest expense | (23,914 | ) | (19,221 | ) | (93,755 | ) | (49,584 | ) | |||||||
Loss on extinguishment of debt | (38,810 | ) | — | (38,810 | ) | — | |||||||||
Other income (expense) | 4,158 | 11,547 | 25,389 | 40,687 | |||||||||||
Income before taxes | $ | 100,702 | $ | 141,326 | $ | 381,457 | $ | 421,853 |
(a) | For 2018, represents accelerated depreciation related to a plant relocation 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" related to the acquisitions of David Michael, Fragrance Resources and PowderPure, included in cost of goods sold, and transaction costs related to the acquisitions of David Michael, Fragrance Resources and PowderPure, included in Selling and administrative expenses. |
(c) | For 2018, represents costs related to the integration of David Michael and Frutarom. For 2017, represents costs related to the integration of David Michael and Fragrance Resources acquisitions. |
(d) | Represents 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 2018, represents severance costs related to the 2017 Productivity Program. For 2017, represents severance costs related to the 2017 Productivity Program which were partially offset by the reversal of 2015 severance charges that were no longer needed. |
(g) | For 2018, represents recoveries from the supplier for the third 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 transaction-related administrative costs and expenses related to the acquisition of Frutarom. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(DOLLARS IN THOUSANDS) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net sales related to the U.S. | $ | 238,342 | $ | 223,750 | $ | 703,272 | $ | 654,235 | |||||||
Net sales attributed to all foreign countries | 669,206 | 649,190 | 2,055,220 | 1,889,859 |
(DOLLARS IN THOUSANDS) | U.S. Plans | ||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Service cost for benefits earned(1) | $ | 596 | $ | 698 | $ | 1,788 | $ | 2,094 | |||||||
Interest cost on projected benefit obligation(2) | 4,790 | 4,561 | 14,370 | 13,682 | |||||||||||
Expected return on plan assets(2) | (7,740 | ) | (9,246 | ) | (23,219 | ) | (27,738 | ) | |||||||
Net amortization and deferrals(2) | 1,549 | 1,793 | 4,647 | 5,379 | |||||||||||
Net periodic benefit income | (805 | ) | (2,194 | ) | (2,414 | ) | (6,583 | ) | |||||||
Defined contribution and other retirement plans(1) | 2,396 | 1,939 | 8,167 | 6,718 | |||||||||||
Total expense | $ | 1,591 | $ | (255 | ) | $ | 5,753 | $ | 135 |
(DOLLARS IN THOUSANDS) | Non-U.S. Plans | ||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Service cost for benefits earned(1) | $ | 4,470 | $ | 5,956 | $ | 13,410 | $ | 17,080 | |||||||
Interest cost on projected benefit obligation(2) | 4,338 | 4,066 | 13,014 | 11,825 | |||||||||||
Expected return on plan assets(2) | (12,032 | ) | (12,873 | ) | (36,096 | ) | (37,340 | ) | |||||||
Net amortization and deferrals(2) | 2,972 | 4,185 | 8,916 | 12,096 | |||||||||||
Net periodic benefit (income) cost | (252 | ) | 1,334 | (756 | ) | 3,661 | |||||||||
Defined contribution and other retirement plans(1) | 1,644 | 1,470 | 4,901 | 4,383 | |||||||||||
Total expense | $ | 1,392 | $ | 2,804 | $ | 4,145 | $ | 8,044 |
(1) | Included as a component of Operating Profit. |
(2) | Included as a component of Other Income (Expense), net. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(DOLLARS IN THOUSANDS) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Service cost for benefits earned | $ | 196 | $ | 221 | $ | 587 | $ | 663 | |||||||
Interest cost on projected benefit obligation | 654 | 588 | 1,962 | 1,764 | |||||||||||
Net amortization and deferrals | (1,189 | ) | (1,046 | ) | (3,567 | ) | (3,138 | ) | |||||||
Total postretirement benefit income | $ | (339 | ) | $ | (237 | ) | $ | (1,018 | ) | $ | (711 | ) |
• | Level 1 — Quoted prices for identical instruments in active markets. |
• | Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. |
• | Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
September 30, 2018 | December 31, 2017 | ||||||||||||||
(DOLLARS IN THOUSANDS) | Principal(4) | Fair Value | Principal(4) | Fair Value | |||||||||||
LEVEL 1 | |||||||||||||||
TEUs | $ | 825,000 | $ | 948,750 | $ | — | $ | — | |||||||
Cash and cash equivalents(1) | $ | 5,274,459 | $ | 5,274,459 | $ | 368,046 | $ | 368,046 | |||||||
LEVEL 2 | |||||||||||||||
Credit facilities and bank overdrafts(2) | 111,029 | 111,029 | 7,993 | 7,993 | |||||||||||
Commercial paper (2) | — | — | — | ||||||||||||
Long-term debt:(3) | |||||||||||||||
Senior notes - 2007 | — | — | 250,000 | 293,232 | |||||||||||
Senior notes - 2013 | 300,000 | 292,870 | 300,000 | 304,219 | |||||||||||
Euro Senior notes - 2016 | 586,950 | 603,989 | 594,400 | 627,782 | |||||||||||
Senior notes - 2017 | 500,000 | 455,060 | 500,000 | 525,906 | |||||||||||
2020 Notes | 300,000 | 301,634 | — | — | |||||||||||
2021 Euro Notes | 352,170 | 352,691 | — | — | |||||||||||
2026 Euro Notes | 939,120 | 940,360 | — | — | |||||||||||
2028 Notes | 400,000 | 401,405 | — | — | |||||||||||
2048 Notes | 800,000 | 799,208 | — | — |
(1) | The carrying amount of cash and cash equivalents approximates fair value due to the short maturity of those instruments. |
(2) | The carrying amount approximates fair value as the interest rate is reset frequently based on current market rates as well as the short maturity of those instruments. |
(3) | The fair value of the Company's long-term debt was calculated using discounted cash flows applying current interest rates and current credit spreads based on its own credit risk. |
(4) | See Note 7 for carrying amounts. |
(DOLLARS IN THOUSANDS) | September 30, 2018 | December 31, 2017 | |||||
Foreign currency contracts | $ | 411,788 | $ | 896,947 | |||
Interest rate swaps | — | 150,000 |
September 30, 2018 | |||||||||||
(DOLLARS IN THOUSANDS) | Fair Value of Derivatives Designated as Hedging Instruments | Fair Value of Derivatives Not Designated as Hedging Instruments | Total Fair Value | ||||||||
Derivative assets (a) | |||||||||||
Foreign currency contracts | $ | 2,644 | $ | 7,689 | $ | 10,333 | |||||
Derivative liabilities (b) | |||||||||||
Foreign currency contract | 371 | 4,400 | 4,771 |
December 31, 2017 | |||||||||||
(DOLLARS IN THOUSANDS) | Fair Value of Derivatives Designated as Hedging Instruments | Fair Value of Derivatives Not Designated as Hedging Instruments | Total Fair Value | ||||||||
Derivative assets (a) | |||||||||||
Foreign currency contracts | $ | 1,159 | $ | 3,978 | $ | 5,137 | |||||
Derivative liabilities (b) | |||||||||||
Foreign currency contracts | 7,842 | 4,344 | 12,186 | ||||||||
Interest rate swaps | 1,369 | — | 1,369 | ||||||||
Total derivative liabilities | $ | 9,211 | $ | 4,344 | $ | 13,555 |
(a) | Derivative assets are recorded to Prepaid expenses and other current assets in the Consolidated Balance Sheet. |
(b) | Derivative liabilities are recorded as Other current liabilities in the Consolidated Balance Sheet. |
Amount of Gain (Loss) | Location of Gain (Loss) Recognized in Income on Derivative | ||||||||
(DOLLARS IN THOUSANDS) | Three Months Ended September 30, | ||||||||
2018 | 2017 | ||||||||
Foreign currency contracts | $ | 8,277 | $ | 4,024 | Other income, net | ||||
Deal contingent swaps | |||||||||
Foreign currency contract | 1,175 | — | Other income, net | ||||||
Interest rate swaps | 25,289 | — | Interest expense | ||||||
$ | 34,741 | $ | 4,024 |
Amount of Gain (Loss) | Location of Gain (Loss) Recognized in Income on Derivative | ||||||||
Nine Months Ended September 30, | |||||||||
(DOLLARS IN THOUSANDS) | 2018 | 2017 | |||||||
Foreign currency contracts (1) | $ | 9,347 | $ | (9,157 | ) | Other income, net | |||
Deal contingent swaps | |||||||||
Foreign currency contract | 12,154 | — | Other income, net | ||||||
Interest rate swaps | 352 | — | Interest expense | ||||||
$ | 21,853 | $ | (9,157 | ) |
(1) | Most of these net gains (losses) offset any recognized gains (losses) arising from the revaluation of the related intercompany loans during the same respective periods. |
Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion) | Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion) | Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | |||||||||||||||
Three Months Ended September 30, | Three Months Ended September 30, | ||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||
Derivatives in Cash Flow Hedging Relationships: | |||||||||||||||||
Foreign currency contracts | $ | 2,206 | $ | (4,229 | ) | Cost of goods sold | $ | (2,848 | ) | $ | 1,815 | ||||||
Interest rate swaps (1) | 216 | 216 | Interest expense | (216 | ) | (216 | ) | ||||||||||
Derivatives in Net Investment Hedging Relationships: | |||||||||||||||||
Foreign currency contracts | (1,130 | ) | N/A | — | — | ||||||||||||
Euro Senior notes - 2016 | (7,104 | ) | (11,861 | ) | N/A | — | — | ||||||||||
2021 Euro Notes & 2026 Euro Notes | 705 | — | N/A | — | — | ||||||||||||
Total | $ | (3,977 | ) | $ | (17,004 | ) | $ | (3,064 | ) | $ | 1,599 | ||||||
Amount of (Loss) Gain Recognized in OCI on Derivative (Effective Portion) | Location of (Loss) Gain Reclassified from AOCI into Income (Effective Portion) | Amount of (Loss) Gain Reclassified from Accumulated OCI into Income (Effective Portion) | |||||||||||||||
Nine Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||
Derivatives in Cash Flow Hedging Relationships: | |||||||||||||||||
Foreign currency contracts | $ | 11,704 | $ | (13,505 | ) | Cost of goods sold | $ | (7,371 | ) | $ | 4,062 | ||||||
Interest rate swaps (1) | 648 | (4,027 | ) | Interest expense | (648 | ) | (573 | ) | |||||||||
Derivatives in Net Investment Hedging Relationships: | |||||||||||||||||
Foreign currency contracts | (518 | ) | (4,258 | ) | N/A | — | — | ||||||||||
Euro Senior notes - 2016 | 5,601 | (43,050 | ) | N/A | — | — | |||||||||||
2021 Euro Notes & 2026 Euro Notes | 705 | — | N/A | — | — | ||||||||||||
Total | $ | 18,140 | $ | (64,840 | ) | $ | (8,019 | ) | $ | 3,489 |
(1) | Interest rate swaps were entered into as pre-issuance hedges for bond offerings. |
(DOLLARS IN THOUSANDS) | Foreign Currency Translation Adjustments | (Losses) Gains on Derivatives Qualifying as Hedges | Pension and Postretirement Liability Adjustment | Total | |||||||||||
Accumulated other comprehensive (loss) income, net of tax, as of December 31, 2017 | $ | (297,416 | ) | $ | (10,332 | ) | $ | (329,734 | ) | $ | (637,482 | ) | |||
OCI before reclassifications | (98,048 | ) | 4,328 | 185 | (93,535 | ) | |||||||||
Amounts reclassified from AOCI | — | 8,019 | 7,893 | 15,912 | |||||||||||
Net current period other comprehensive income (loss) | (98,048 | ) | 12,347 | 8,078 | (77,623 | ) | |||||||||
Accumulated other comprehensive (loss) income, net of tax, as of September 30, 2018 | $ | (395,464 | ) | $ | 2,015 | $ | (321,656 | ) | $ | (715,105 | ) |
(DOLLARS IN THOUSANDS) | Foreign Currency Translation Adjustments | (Losses) Gains on Derivatives Qualifying as Hedges | Pension and Postretirement Liability Adjustment | Total | |||||||||||
Accumulated other comprehensive (loss) income, net of tax, as of December 31, 2016 | $ | (352,025 | ) | $ | 7,604 | $ | (335,674 | ) | $ | (680,095 | ) | ||||
OCI before reclassifications | 42,023 | (14,044 | ) | — | 27,979 | ||||||||||
Amounts reclassified from AOCI | (12,214 | ) | (a) | (3,489 | ) | 11,168 | (4,535 | ) | |||||||
Net current period other comprehensive income (loss) | 29,809 | (17,533 | ) | 11,168 | 23,444 | ||||||||||
Accumulated other comprehensive (loss) income, net of tax, as of September 30, 2017 | $ | (322,216 | ) | $ | (9,929 | ) | $ | (324,506 | ) | $ | (656,651 | ) |
Nine Months Ended September 30, | Affected Line Item in the Consolidated Statement of Income and Comprehensive Income | ||||||||
(DOLLARS IN THOUSANDS) | 2018 | 2017 | |||||||
(Losses) gains on derivatives qualifying as hedges | |||||||||
Foreign currency contracts | $ | (8,424 | ) | $ | 4,642 | Cost of goods sold | |||
Interest rate swaps | (648 | ) | (573 | ) | Interest expense | ||||
Tax | 1,053 | (580 | ) | Provision for income taxes | |||||
Total | $ | (8,019 | ) | $ | 3,489 | Total, net of income taxes | |||
(Losses) gains on pension and postretirement liability adjustments | |||||||||
Prior service cost | $ | 5,315 | $ | 5,304 | (a) | ||||
Actuarial losses | (15,309 | ) | (20,097 | ) | (a) | ||||
Tax | 2,101 | 3,625 | Provision for income taxes | ||||||
Total | $ | (7,893 | ) | $ | (11,168 | ) | Total, net of income taxes |
(a) | The amortization of prior service cost and actuarial loss is included in the computation of net periodic benefit cost. Refer to Note 14 of our 2017 Form 10-K for additional information regarding net periodic benefit cost. |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) | 2018 | 2017 | Change | 2018 | 2017 | Change | |||||||||||||||
Net sales | $ | 907,548 | $ | 872,940 | 4 | % | $ | 2,758,492 | $ | 2,544,094 | 8 | % | |||||||||
Cost of goods sold | 506,882 | 492,542 | 3 | % | 1,553,300 | 1,427,630 | 9 | % | |||||||||||||
Gross profit | 400,666 | 380,398 | 1,205,192 | 1,116,464 | |||||||||||||||||
Research and development (R&D) expenses | 75,302 | 73,762 | 2 | % | 228,545 | 218,649 | 5 | % | |||||||||||||
Selling and administrative (S&A) expenses | 157,796 | 145,652 | 8 | % | 457,847 | 428,675 | 7 | % | |||||||||||||
Amortization of acquisition-related intangibles | 9,003 | 8,766 | 3 | % | 27,772 | 24,327 | 14 | % | |||||||||||||
Restructuring and other charges, net | 927 | 3,249 | (71 | )% | 2,830 | 14,183 | (80 | )% | |||||||||||||
Gains on sales of fixed assets | (1,630 | ) | (31 | ) | 5,158 | % | (435 | ) | (120 | ) | 263 | % | |||||||||
Operating profit | 159,268 | 149,000 | 488,633 | 430,750 | |||||||||||||||||
Interest expense | 23,914 | 19,221 | 24 | % | 93,755 | 49,584 | 89 | % | |||||||||||||
Loss on extinguishment of debt | 38,810 | — | N/A | 38,810 | — | N/A | |||||||||||||||
Other income, net | (4,158 | ) | (11,547 | ) | (64 | )% | (25,389 | ) | (40,687 | ) | (38 | )% | |||||||||
Income before taxes | 100,702 | 141,326 | 381,457 | 421,853 | |||||||||||||||||
Taxes on income | 4,986 | 31,065 | (84 | )% | 57,176 | 86,033 | (34 | )% | |||||||||||||
Net income | $ | 95,716 | $ | 110,261 | (13 | )% | $ | 324,281 | $ | 335,820 | (3 | )% | |||||||||
Diluted EPS | $ | 1.17 | $ | 1.39 | (16 | )% | $ | 4.04 | $ | 4.22 | (4 | )% | |||||||||
Gross margin | 44.1 | % | 43.6 | % | 57 | 43.7 | % | 43.9 | % | (19 | ) | ||||||||||
R&D as a percentage of sales | 8.3 | % | 8.4 | % | (15 | ) | 8.3 | % | 8.6 | % | (31 | ) | |||||||||
S&A as a percentage of sales | 17.4 | % | 16.7 | % | 70 | 16.6 | % | 16.8 | % | (25 | ) | ||||||||||
Operating margin | 17.5 | % | 17.1 | % | 48 | 17.7 | % | 16.9 | % | 78 | |||||||||||
Adjusted operating margin (1) | 18.1 | % | 18.2 | % | (6 | ) | 18.7 | % | 18.8 | % | (15 | ) | |||||||||
Effective tax rate | 5.0 | % | 22.0 | % | (1,703 | ) | 15.0 | % | 20.4 | % | (541 | ) | |||||||||
Segment net sales | |||||||||||||||||||||
Flavors | $ | 436,214 | $ | 409,800 | 6 | % | $ | 1,335,773 | $ | 1,230,286 | 9 | % | |||||||||
Fragrances | 471,334 | 463,140 | 2 | % | 1,422,719 | 1,313,808 | 8 | % | |||||||||||||
Consolidated | $ | 907,548 | $ | 872,940 | $ | 2,758,492 | $ | 2,544,094 |
(1) | Adjusted operating margin excludes $5.1 million of charges related to operational improvement initiatives, integration related costs, restructuring and other charges, net, and Frutarom acquisition related costs which were partially offset by acquisition related costs, gains on sale of assets and insurance recoveries from an FDA mandated product recall for the three months ended September 30, 2018, and excludes $9.6 million operational improvement initiatives, acquisition related costs, integration related costs, and restructuring and other charges, net. which were partially offset by gains on sale of assets for the three months ended September 30, 2017. For the nine months ended September 30, 2018, adjusted operating margin excludes $26.6 million of charges related to operational improvement initiatives, integration related costs, restructuring and other charges, net, and Frutarom acquisition related costs were partially offset by acquisition related costs, gains on sale of assets and insurance recoveries from an FDA mandated product recall, compared to the nine months ended September 30, 2017 adjusted operating margin which excludes $48.4 million consisting of operational improvement initiatives, acquisition related costs, integration related costs, legal charges/credits, net, tax |
% Change in Sales - Third Quarter 2018 vs. Third Quarter 2017 | ||||||||||||||||||
Fine Fragrances | Consumer Fragrances | Ingredients | Total Fragrances | Flavors | Total | |||||||||||||
NOAM | Reported | -13 | % | 1 | % | 23 | % | 3 | % | 10 | % | 7 | % | |||||
EAME | Reported | 3 | % | 2 | % | -4 | % | 1 | % | 7 | % | 3 | % | |||||
Currency Neutral (1) | 2 | % | 2 | % | -5 | % | 0 | % | 6 | % | 3 | % | ||||||
LA | Reported | -7 | % | -4 | % | -12 | % | -6 | % | 6 | % | -2 | % | |||||
Currency Neutral (1) | -3 | % | -3 | % | -11 | % | -4 | % | 12 | % | 1 | % | ||||||
GA | Reported | 21 | % | 8 | % | 14 | % | 9 | % | 3 | % | 6 | % | |||||
Currency Neutral (1) | 20 | % | 8 | % | 14 | % | 9 | % | 4 | % | 7 | % | ||||||
Total | Reported | -3 | % | 2 | % | 6 | % | 2 | % | 6 | % | 4 | % | |||||
Currency Neutral (1) | -2 | % | 2 | % | 5 | % | 2 | % | 7 | % | 4 | % |
(1) | Currency neutral sales growth is calculated by translating prior year sales at the exchange rates for the corresponding 2018 period. |
• | NOAM Flavors sales growth primarily reflected double-digit growth in Dairy and Sweet, and low single-digit growth in Savory, which more than offset low single-digit declines in Beverage. Total Fragrances sales growth reflected double-digit gains in Home Care and Ingredients, and high single-digit gains in Personal Wash. These gains were offset by double-digit declines in Fine Fragrances and Toiletries, and low single-digit declines in Hair Care and Fabric Care. |
• | EAME Flavors sales experienced double-digit gains in Dairy and Sweet and high single-digit gains in Beverage. Total Fragrances sales growth was driven mainly by double-digit growth in Hair Care, high single-digit gains in Fabric Care and low single-digit growth in Personal Wash. These gains were partially offset by mid single-digit declines in Ingredients and low single-digit declines in Toiletries and Home Care. |
• | LA Flavors sales included double-digit gains in Savory and Dairy and high single-digit gains in Beverage, which were partially offset by mid single-digit declines in Sweet. Total Fragrances sales declines reflected double-digit declines in Toiletries, Personal Wash, and Ingredients, and low single-digit declines in Fine Fragrances and Home Care. These declines were partially offset by double-digit gains in Hair Care and low single-digit gains in Fabric Care. |
• | GA Flavors sales growth primarily reflected double-digit gains in Beverage, mid single-digit gains in Sweet, and low single-digit gains in Savory, which more than offset low single-digit declines in Dairy. Total Fragrances sales growth was principally driven by double-digit gains in Fine Fragrances, Hair Care, Toiletries, and Ingredients, high single-digit gains in Home Care, mid single-digit growth in Personal Wash, and low single-digit gains in Fabric Care. |
Three Months Ended September 30, | |||||||
(DOLLARS IN THOUSANDS) | 2018 | 2017 | |||||
Segment profit: | |||||||
Flavors | $ | 96,497 | $ | 87,375 | |||
Fragrances | 87,488 | 88,959 | |||||
Global expenses | (19,578 | ) | (17,693 | ) | |||
Operational Improvement Initiatives | (344 | ) | (407 | ) | |||
Acquisition Related Costs | 1 | (5,436 | ) | ||||
Integration Related Costs | (958 | ) | (580 | ) | |||
Restructuring and Other Charges, net | (927 | ) | (3,249 | ) | |||
Gains on Sale of Assets | 1,630 | 31 | |||||
FDA Mandated Product Recall | 9,800 | — | |||||
Frutarom Acquisition Related Costs | (14,341 | ) | — | ||||
Operating profit | $ | 159,268 | $ | 149,000 | |||
Profit margin: | |||||||
Flavors | 22.1 | % | 21.3 | % | |||
Fragrances | 18.6 | % | 19.2 | % | |||
Consolidated | 17.5 | % | 17.1 | % |
% Change in Sales - First Nine Months 2018 vs. First Nine Months 2017 | ||||||||||||||||||
Fine Fragrances | Consumer Fragrances | Ingredients | Total Fragrances | Flavors | Total | |||||||||||||
NOAM | Reported | -2 | % | 6 | % | 16 | % | 7 | % | 9 | % | 8 | % | |||||
EAME | Reported | 7 | % | 11 | % | 10 | % | 10 | % | 15 | % | 12 | % | |||||
Currency Neutral (1) | -1 | % | 3 | % | 3 | % | 2 | % | 7 | % | 4 | % | ||||||
LA | Reported | 10 | % | 1 | % | 6 | % | 4 | % | 3 | % | 3 | % | |||||
Currency Neutral (1) | 13 | % | 1 | % | 5 | % | 4 | % | 6 | % | 5 | % | ||||||
GA | Reported | 1 | % | 8 | % | 35 | % | 12 | % | 5 | % | 8 | % | |||||
Currency Neutral (1) | -2 | % | 6 | % | 32 | % | 10 | % | 3 | % | 6 | % | ||||||
Total | Reported | 5 | % | 7 | % | 16 | % | 8 | % | 9 | % | 8 | % | |||||
Currency Neutral (1) | 1 | % | 4 | % | 11 | % | 5 | % | 6 | % | 6 | % |
(1) | Currency neutral sales growth is calculated by translating prior year sales at the exchange rates for the corresponding 2017 period. |
• | NOAM Flavors sales growth primarily reflected double-digit growth in Dairy and Sweet, mid single-digit growth in Beverage and low single-digit growth in Savory. Total Fragrances sales growth reflected double-digit gains in Hair Care, Home Care, and Ingredients, mid single-digit growth in Fabric Care, and low single-digit gains in Toiletries and Personal Wash. |
• | EAME Flavors sales experienced double-digit gains in Beverage and Dairy, mid single-digit gains in Savory and Sweet. Total Fragrances sales growth was driven mainly by double-digit growth in Hair Care, mid single-digit gains in Toiletries and Ingredients, and low single-digit gains in Fabric Care, Home Care and Personal Wash. These gains more than offset low single-digit declines in Fine Fragrances. |
• | LA Flavors sales growth was driven by double-digit gains in Savory and Dairy, and low single-digit growth in Beverage, which were partially offset by mid single-digit declines in Sweet. Total Fragrances sales growth reflected double-digit gains in Fine Fragrances, high single-digit gains in Hair Care, and mid single-digit growth in Fabric Care and Ingredients. These gains were offset by double-digit declines in Personal Wash and high single-digit declines in Toiletries. |
• | GA Flavors sales experienced mid single-digit gains in Savory and Sweet and low single-digit gains in Dairy and Beverage. Total Fragrances sales growth was driven by double-digit gains in Toiletries, Home Care, and Ingredients, high single-digit gains in Hair Care, mid single-digit gains in Fabric Care and low single-digit gains in Personal Wash, which more than offset mid single-digit declines in Fine Fragrances. |
Nine Months Ended | |||||||
September 30, | |||||||
(DOLLARS IN THOUSANDS) | 2018 | 2017 | |||||
Segment profit: | |||||||
Flavors | $ | 317,666 | $ | 278,768 | |||
Fragrances | 261,545 | 247,824 | |||||
Global expenses | (63,975 | ) | (47,472 | ) | |||
Operational Improvement Initiatives | (1,773 | ) | (1,473 | ) | |||
Acquisition Related Costs | 519 | (20,502 | ) | ||||
Integration Related Costs | (1,951 | ) | (2,501 | ) | |||
Legal Charges/Credits, net | — | (1,000 | ) | ||||
Tax Assessment | — | (5,331 | ) | ||||
Restructuring and Other Charges, net | (1,837 | ) | (14,183 | ) | |||
Gains on Sale of Assets | 435 | 120 | |||||
FDA Mandated Product Recall | 4,800 | (3,500 | ) | ||||
Frutarom Acquisition Related Costs | (26,796 | ) | — | ||||
Operating profit | $ | 488,633 | $ | 430,750 | |||
Profit margin: | |||||||
Flavors | 23.8 | % | 22.7 | % | |||
Fragrances | 18.4 | % | 18.9 | % | |||
Consolidated | 17.7 | % | 16.9 | % |
(1) | Adjusted EBITDA and Net Debt, which are non-GAAP measures used for these covenants, are calculated in accordance with the definition in the debt agreements. In this context, these measures are used solely to provide information on the extent to which we are in compliance with debt covenants and may not be comparable to adjusted EBITDA and Net Debt used by other companies. Reconciliations of adjusted EBITDA to net income and net debt to total debt are as follows: |
(DOLLARS IN MILLIONS) | Twelve Months Ended September 30, 2018 | ||
Net income | $ | 284.0 | |
Interest expense | 148.3 | ||
Income taxes | 212.6 | ||
Depreciation and amortization | 128.6 | ||
Specified items (1) | 109.9 | ||
Non-cash items (2) | 28.0 | ||
Adjusted EBITDA | $ | 911.4 |
(1) | Specified items for the 12 months ended September 30, 2018 of $109.9 million consisted of operational improvement initiatives, acquisition related costs, integration related costs, restructuring and other charges, net, FDA mandated product recall, UK pension settlement charges and Frutarom acquisition 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 gain on disposal of assets and stock-based compensation. |
(DOLLARS IN MILLIONS) | September 30, 2018 | ||
Total debt | $ | 4,377.2 | |
Adjustments: | |||
Deferred gain on interest rate swaps | 2.1 | ||
Cash and cash equivalents | (5,274.5 | ) | |
Net debt | $ | (895.2 | ) |
Reconciliation of Gross Profit | |||||||
Three Months Ended September 30, | |||||||
(DOLLARS IN THOUSANDS) | 2018 | 2017 | |||||
Reported (GAAP) | $ | 400,666 | $ | 380,398 | |||
Operational Improvement Initiatives (a) | 398 | 407 | |||||
Acquisition Related Costs (b) | — | 5,147 | |||||
Integration Related Costs (c) | 18 | 131 | |||||
FDA Mandated Product Recall (e) | (9,800 | ) | — | ||||
Adjusted (Non-GAAP) | $ | 391,282 | $ | 386,083 |
Reconciliation of Selling and Administrative Expenses | |||||||
Three Months Ended September 30, | |||||||
(DOLLARS IN THOUSANDS) | 2018 | 2017 | |||||
Reported (GAAP) | $ | 157,796 | $ | 145,652 | |||
Acquisition Related Costs (b) | 1 | (289 | ) | ||||
Integration Related Costs (c) | (915 | ) | (383 | ) | |||
Frutarom Acquisition Related Costs (g) | (14,341 | ) | — | ||||
Adjusted (Non-GAAP) | $ | 142,541 | $ | 144,980 |
Reconciliation of Operating Profit | |||||||
Three Months Ended September 30, | |||||||
(DOLLARS IN THOUSANDS) | 2018 | 2017 | |||||
Reported (GAAP) | $ | 159,268 | $ | 149,000 | |||
Operational Improvement Initiatives (a) | 344 | 407 | |||||
Acquisition Related Costs (b) | (1 | ) | 5,436 | ||||
Integration Related Costs (c) | 958 | 580 | |||||
Restructuring and Other Charges, net (d) | 927 | 3,249 | |||||
Gains on Sale of Assets | (1,630 | ) | (31 | ) | |||
FDA Mandated Product Recall (e) | (9,800 | ) | — | ||||
Frutarom Acquisition Related Costs (g) | 14,341 | — | |||||
Adjusted (Non-GAAP) | $ | 164,407 | $ | 158,641 |
Reconciliation of Net Income | |||||||||||||||||||||||||||||||
Three Months Ended September 30, | |||||||||||||||||||||||||||||||
2018 | 2017 | ||||||||||||||||||||||||||||||
Income before taxes | Taxes on income (h) | Net income | Diluted EPS | Income before taxes | Taxes on income (h) | Net income | Diluted EPS | ||||||||||||||||||||||||
Reported (GAAP) | $ | 100,702 | $ | 4,986 | $ | 95,716 | $ | 1.17 | $ | 141,326 | $ | 31,065 | $ | 110,261 | $ | 1.39 | |||||||||||||||
Operational Improvement Initiatives (a) | 345 | 125 | 220 | — | 407 | 102 | 305 | — | |||||||||||||||||||||||
Acquisition Related Costs (b) | (1 | ) | 1 | (2 | ) | — | 5,436 | 1,949 | 3,487 | 0.04 | |||||||||||||||||||||
Integration Related Costs (c) | 959 | 237 | 722 | 0.01 | 580 | 152 | 428 | 0.01 | |||||||||||||||||||||||
Restructuring and Other Charges, net (d) | 927 | 228 | 699 | 0.01 | 3,249 | 1,012 | 2,237 | 0.03 | |||||||||||||||||||||||
Gains on Sale of Assets | (1,630 | ) | (387 | ) | (1,243 | ) | (0.02 | ) | (31 | ) | (10 | ) | (21 | ) | — | ||||||||||||||||
FDA Mandated Product Recall (e) | (9,800 | ) | (2,344 | ) | (7,456 | ) | (0.09 | ) | — | — | — | — | |||||||||||||||||||
U.S. Tax Reform (f) | — | 8,151 | (8,151 | ) | (0.10 | ) | — | — | — | — | |||||||||||||||||||||
Frutarom Acquisition Related Costs (g) | 54,994 | 9,561 | 45,433 | 0.56 | — | — | — | — | |||||||||||||||||||||||
Adjusted (Non-GAAP) | $ | 146,496 | $ | 20,558 | $ | 125,938 | $ | 1.54 | $ | 150,967 | $ | 34,270 | $ | 116,697 | $ | 1.47 |
(a) | For 2018, represents accelerated depreciation related to a plant relocation in India and Taiwan asset write off. For 2017, represents accelerated depreciation and idle labor costs in Hangzhou, China. | ||||||||||||
(b) | For 2017, represents the amortization of inventory "step-up" related to the acquisitions of David Michael, Fragrance Resources and PowderPure, included in cost of goods sold, and transaction costs related to the acquisitions of David Michael, Fragrance Resources and PowderPure, included in Selling and administrative expenses. | ||||||||||||
(c) | For 2018, represents costs related to the integration of Frutarom. For 2017, represents costs related to the integration of David Michael and Fragrance Resources acquisitions. | ||||||||||||
(d) | For 2018, represents severance costs related to the 2017 Productivity Program. For 2017, represents severance costs related to the 2017 Productivity Program which were partially offset by the reversal of 2015 severance charges that were no longer needed. | ||||||||||||
(e) | Represents recoveries from the supplier related to the previously disclosed FDA mandated recall. | ||||||||||||
(f) | Represents charges incurred related to enactment of certain U.S. tax legislation changes in December 2017. | ||||||||||||
(g) | Represents transaction-related costs and expenses related to the acquisition of Frutarom. Amount primarily includes $28.8 million of bridge loan commitment fees partially offset by $25.3 million net mark-to-market gains on deal-contingent interest rate derivatives included in Interest expense; $34.9 million make whole payment on the Senior Notes - 2007 and $3.9 million realized loss on a fair value hedge included in Loss on extinguishment of debt; $1.9 million realized gain on a foreign currency derivative included in Other income; and $14.3 million of transaction costs included in administrative expenses. | ||||||||||||
(h) | The income tax expense (benefit) on non-GAAP adjustments is computed in accordance with ASC 740 using the same methodology as the GAAP provision of income taxes. Income tax effects of non-GAAP adjustments are calculated based on the applicable statutory tax rate for each jurisdiction in which such charges were incurred, except for those items which are non-taxable for which the tax expense (benefit) was calculated at 0%. For third quarter of 2018, certain non-GAAP adjustments were subject to valuation allowances and therefore was calculated at 0%. |
Reconciliation of Gross Profit | |||||||
Nine Months Ended September 30, | |||||||
(DOLLARS IN THOUSANDS) | 2018 | 2017 | |||||
Reported (GAAP) | $ | 1,205,192 | $ | 1,116,464 | |||
Operational Improvement Initiatives (a) | 1,254 | 1,473 | |||||
Acquisition Related Costs (b) | — | 16,055 | |||||
Integration Related Costs (c) | 18 | 316 | |||||
FDA Mandated Product Recall (h) | (4,800 | ) | 3,500 | ||||
Adjusted (Non-GAAP) | $ | 1,201,664 | $ | 1,137,808 |
Reconciliation of Selling and Administrative Expenses | |||||||
Nine Months Ended September 30, | |||||||
(DOLLARS IN THOUSANDS) | 2018 | 2017 | |||||
Reported (GAAP) | $ | 457,847 | $ | 428,675 | |||
Acquisition Related Costs (b) | 519 | (4,447 | ) | ||||
Integration Related Costs (c) | (915 | ) | (1,867 | ) | |||
Legal Charges/Credits, net (d) | — | (1,000 | ) | ||||
Tax Assessment (e) | — | (5,331 | ) | ||||
Frutarom Acquisition Related Costs (j) | (26,796 | ) | — | ||||
Adjusted (Non-GAAP) | $ | 430,655 | $ | 416,030 |
Reconciliation of Operating Profit | |||||||
Nine Months Ended September 30, | |||||||
(DOLLARS IN THOUSANDS) | 2018 | 2017 | |||||
Reported (GAAP) | $ | 488,633 | $ | 430,750 | |||
Operational Improvement Initiatives (a) | 1,773 | 1,473 | |||||
Acquisition Related Costs (b) | (519 | ) | 20,502 | ||||
Integration Related Costs (c) | 1,951 | 2,501 | |||||
Legal Charges/Credits, net (d) | — | 1,000 | |||||
Tax Assessment (e) | — | 5,331 | |||||
Restructuring and Other Charges, net (f) | 1,837 | 14,183 | |||||
Gains on Sale of Assets | (435 | ) | (120 | ) | |||
FDA Mandated Product Recall (h) | (4,800 | ) | 3,500 | ||||
Frutarom Acquisition Related Costs (j) | 26,796 | — | |||||
Adjusted (Non-GAAP) | $ | 515,236 | $ | 479,120 |
Reconciliation of Net Income | |||||||||||||||||||||||||||||||
Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
2018 | 2017 | ||||||||||||||||||||||||||||||
(DOLLARS IN THOUSANDS) | Income before taxes | Taxes on income (k) | Net income | Diluted EPS (l) | Income before taxes | Taxes on income (k) | Net income | Diluted EPS | |||||||||||||||||||||||
Reported (GAAP) | $ | 381,457 | $ | 57,176 | $ | 324,281 | $ | 4.04 | $ | 421,853 | $ | 86,033 | $ | 335,820 | $ | 4.22 | |||||||||||||||
Operational Improvement Initiatives (a) | 1,774 | 561 | 1,213 | 0.02 | 1,473 | 368 | 1,105 | 0.01 | |||||||||||||||||||||||
Acquisition Related Costs (b) | (519 | ) | (134 | ) | (385 | ) | — | 20,502 | 6,559 | 13,943 | 0.18 | ||||||||||||||||||||
Integration Related Costs (c) | 1,952 | 237 | 1,715 | 0.02 | 2,501 | 757 | 1,744 | 0.02 | |||||||||||||||||||||||
Legal Charges/Credits, net (d) | — | — | — | — | 1,000 | 354 | 646 | 0.01 | |||||||||||||||||||||||
Tax Assessment (e) | — | — | — | — | 5,331 | 1,885 | 3,446 | 0.04 | |||||||||||||||||||||||
Restructuring and Other Charges, net (f) | 1,837 | 443 | 1,394 | 0.02 | 14,183 | 3,904 | 10,279 | 0.13 | |||||||||||||||||||||||
Gains on Sale of Assets | (435 | ) | (141 | ) | (294 | ) | — | (120 | ) | (39 | ) | (81 | ) | — | |||||||||||||||||
CTA Realization (g) | — | — | — | — | (12,214 | ) | — | (12,214 | ) | (0.15 | ) | ||||||||||||||||||||
FDA Mandated Product Recall (h) | (4,800 | ) | (1,148 | ) | (3,652 | ) | (0.05 | ) | 3,500 | 1,238 | 2,262 | 0.03 | |||||||||||||||||||
U.S. Tax Reform (i) | — | 7,502 | (7,502 | ) | (0.09 | ) | — | — | — | — | |||||||||||||||||||||
Frutarom Acquisition Related Costs (j) | 91,983 | 16,104 | 75,879 | 0.95 | — | — | — | — | |||||||||||||||||||||||
Adjusted (Non-GAAP) | $ | 473,249 | $ | 80,600 | $ | 392,649 | $ | 4.89 | $ | 458,009 | $ | 101,059 | $ | 356,950 | $ | 4.49 |
(a) | For 2018, represents accelerated depreciation related to a plant relocation 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" related to the acquisitions of David Michael, Fragrance Resources and PowderPure, included in cost of goods sold, and transaction costs related to the acquisitions of David Michael, Fragrance Resources and PowderPure, included in Selling and administrative expenses. |
(c) | For 2018, represents costs related to the integration of David Michael and Frutarom. For 2017, represents costs related to the integration of David Michael and Fragrance Resources acquisitions. |
(d) | Represents 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 2018, represents severance costs related to the 2017 Productivity Program. For 2017, represents severance costs related to the 2017 Productivity Program which were partially offset by the reversal of 2015 severance charges that were no longer needed. |
(g) | Represents the release of CTA related to the liquidation of a foreign entity. |
(h) | For 2018, represents recoveries from the supplier for the third 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. |
(i) | Represents charges incurred related to enactment of certain U.S. tax legislation changes in December 2017. |
(j) | Represents transaction-related costs and expenses related to the acquisition of Frutarom. Amount primarily includes $39.4 million of bridge loan commitment fees included in Interest expense; $34.9 million make whole payment on the Senior Notes - 2007 and $3.9 million realized loss on a fair value hedge included in Loss on extinguishment of debt; $12.5 million realized gain on a foreign currency derivative included in Other income; and $26.8 million of transaction costs included in administrative expenses. |
(k) | The income tax expense (benefit) on non-GAAP adjustments is computed in accordance with ASC 740 using the same methodology as the GAAP provision of income taxes. Income tax effects of non-GAAP adjustments are calculated based on the applicable statutory tax rate for each jurisdiction in which such charges were incurred, except for those items which are non-taxable for which the tax expense (benefit) was calculated at 0%. For third quarter of 2018, certain non-GAAP adjustments were subject to valuation allowances and therefore was calculated at 0%. |
(l) | The sum of these items does not foot due to rounding. |
Three Months Ended | Nine Months Ended | ||||||
September 30, | September 30, | ||||||
2018 | 2017 | 2018 | 2017 | ||||
Operating Profit: | |||||||
% Change - Reported (GAAP) | 6.9% | 23.3% | 13.4% | (3.9)% | |||
Items impacting comparability (1) | (3.3)% | (15.8)% | (5.9)% | 5.2% | |||
% Change - Adjusted (Non-GAAP) | 3.6% | 7.5% | 7.5% | 1.2% | |||
Currency Impact | (0.3)% | (3.8)% | (3.3)% | 1.5% | |||
% Change Year-over-Year - Currency Neutral Adjusted (Non-GAAP)** | 3.3% | 3.7% | 4.2% | 2.7% |
Three Months Ended | Nine Months Ended | ||||||
September 30, | September 30, | ||||||
(DOLLARS IN THOUSANDS) | 2018 | 2017 | 2018 | 2017 | |||
PowderPure | $690 | $640 | $2,069 | $1,226 | |||
Fragrance Resources | 1,670 | 1,627 | 5,598 | 4,411 | |||
David Michael | 1,131 | 1,131 | 3,392 | 2,860 | |||
Lucas Meyer | 2,081 | 2,015 | 6,418 | 5,765 | |||
Ottens Flavors | 1,571 | 1,571 | 4,714 | 4,714 |
• | our ability to integrate of the Frutarom business with our existing operations; |
• | whether the Frutarom acquisition will have the expected accretive effect on the Company’s earnings and cash flows; |
• | whether we are able to realize anticipated cost savings and synergies from the Frutarom acquisition at all, or within the expected time frame; |
• | unexpected costs, liabilities, charges or expenses resulting from the Frutarom acquisition; |
• | adverse effects on our stock price resulting from the Frutarom acquisition; |
• | our ability to retain key personnel; |
• | potential adverse reactions, changes to business relationships or competitive responses resulting from the Frutarom acquisition; |
• | our ability to effectively compete in our market, and to successfully develop new products that appeal to our customers and consumers; |
• | our ability to provide our customers with innovative, cost-effective products; |
• | the impact of a disruption in our manufacturing operations, our supply chain or our relationship with our suppliers; |
• | the impact of the BASF supply chain disruption on the supply and price of a key ingredient in 2018; |
• | the impact of the recently-enacted Tax Act on our effective tax rate in 2018 and beyond; |
• | our ability to react in a timely manner to changes in the consumer products industry related to health and wellness; |
• | our ability to benefit from our investments and expansion in emerging markets; |
• | our ability to comply with, and the costs associated with compliance with, U.S. and foreign environmental protection laws; |
• | our ability to realize the expected cost savings and efficiencies from our profitability improvement initiatives and other optimization activities; |
• | volatility and increases in the price of raw materials, energy and transportation; |
• | our ability to maintain the integrity of our raw materials, supply chain and finished goods, and comply with applicable regulations; |
• | any adverse impact on the availability, effectiveness and cost of our hedging and risk management strategies; |
• | uncertainties regarding the outcome of, or funding requirements, related to litigation or settlement of pending litigation, uncertain tax positions or other contingencies; |
• | the impact of changes in our tax rates, tax liabilities, the adoption of new United States or international tax legislation, or changes in existing tax laws; and |
• | our ability to successfully estimate the impact of certain accounting and tax matters. |
2.1 | ||
4.1 | ||
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32 | ||
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extensions Schema | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase | |
101.LAB | XBRL Taxonomy Extension Label Linkbase | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
Dated: | November 5, 2018 | By: | /s/ Andreas Fibig | ||
Andreas Fibig | |||||
Chairman of the Board and Chief Executive Officer | |||||
Dated: | November 5, 2018 | By: | /s/ Richard A. O'Leary | ||
Richard A. O'Leary | |||||
Executive Vice President and Chief Financial Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of International Flavors & Fragrances Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
By: | /s/ Andreas Fibig | ||
Name: | Andreas Fibig | ||
Title: | Chairman of the Board and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of International Flavors & Fragrances Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
By: | /s/ Richard A. O'Leary | |
Name: | Richard A. O'Leary | |
Title: | Executive Vice President and Chief Financial Officer |
By: | /s/ Andreas Fibig |
Name: | Andreas Fibig |
Title: | Chairman of the Board and Chief Executive Officer |
Dated: | November 5, 2018 |
By: | /s/ Richard A. O'Leary |
Name: | Richard A. O'Leary |
Title: | Executive Vice President and Chief Financial Officer |
Dated: | November 5, 2018 |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Oct. 24, 2018 |
|
Document And Entity Information [Abstract] | ||
Entity Registrant Name | INTERNATIONAL FLAVORS & FRAGRANCES INC | |
Entity Central Index Key | 0000051253 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 106,619,224 |
Consolidated Balance Sheet (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Trade receivables allowances | $ 13,762 | $ 13,392 |
Common stock, par value, in dollars per share | $ 0.125 | $ 0.125 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 115,858,190 | 115,858,190 |
Common stock, shares outstanding | 91,717,377 | 78,947,381 |
Treasury stock, shares at cost | 36,808,760 | 36,910,809 |
Consolidated Statement Of Income and Comprehensive Income - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Income Statement [Abstract] | ||||
Net sales | $ 907,548 | $ 872,940 | $ 2,758,492 | $ 2,544,094 |
Cost of goods sold | 506,882 | 492,542 | 1,553,300 | 1,427,630 |
Gross profit | 400,666 | 380,398 | 1,205,192 | 1,116,464 |
Research and development expenses | 75,302 | 73,762 | 228,545 | 218,649 |
Selling and administrative expenses | 157,796 | 145,652 | 457,847 | 428,675 |
Amortization of acquisition-related intangibles | 9,003 | 8,766 | 27,772 | 24,327 |
Restructuring and other charges, net | 927 | 3,249 | 2,830 | 14,183 |
Gains on sales of fixed assets | (1,630) | (31) | (435) | (120) |
Operating profit | 159,268 | 149,000 | 488,633 | 430,750 |
Interest expense | 23,914 | 19,221 | 93,755 | 49,584 |
Other income, net | (4,158) | (11,547) | (25,389) | (40,687) |
Income before taxes | 100,702 | 141,326 | 381,457 | 421,853 |
Taxes on income | 4,986 | 31,065 | 57,176 | 86,033 |
Net income | 95,716 | 110,261 | 324,281 | 335,820 |
Other comprehensive income, after tax: | ||||
Foreign currency translation adjustments | (27,587) | 19,719 | (98,048) | 29,809 |
Gains (losses) on derivatives qualifying as hedges | 2,421 | (4,014) | 12,347 | (17,533) |
Pension and postretirement net liability | 2,559 | 3,845 | 8,078 | 11,168 |
Net current period other comprehensive income (loss) | (22,607) | 19,550 | (77,623) | 23,444 |
Total comprehensive income | $ 73,109 | $ 129,811 | $ 246,658 | $ 359,264 |
Net income per share - basic, in dollars per share | $ 1.18 | $ 1.39 | $ 4.06 | $ 4.24 |
Net income per share - diluted, in dollars per share | $ 1.17 | $ 1.39 | $ 4.04 | $ 4.22 |
Average number of shares outstanding - basic | 81,263 | 79,063 | 79,783 | 79,072 |
Average number of shares outstanding - diluted | 81,647 | 79,362 | 80,115 | 79,353 |
Dividends declared per share, in dollars per share | $ 0.73 | $ 0.69 | $ 2.11 | $ 1.97 |
Consolidated Financial Statements |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated Financial Statements | f Presentation These interim statements and related management’s discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the related notes and management’s discussion and analysis of results of operations, liquidity and capital resources included in our 2017 Annual Report on Form 10-K (“2017 Form 10-K”). These interim statements are unaudited. The year-end balance sheet data included in this Form 10-Q was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles in the United States of America. We have historically operated and continue to operate on a 52/53 week fiscal year ending on the Friday closest to the last day of the quarter. For ease of presentation, September 30 and December 31 are used consistently throughout this Form 10-Q and these interim financial statements and related notes to represent the period-end dates. For the 2018 and 2017 quarters, the actual closing dates were September 28 and September 29, respectively. The unaudited interim financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair statement of the results for the periods presented. When used herein, the terms “IFF,” the “Company,” “we,” “us” and “our” mean International Flavors & Fragrances Inc. and its consolidated subsidiaries. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Reclassifications and Revisions Certain prior year amounts have been reclassified and revised to conform to current year presentation. As discussed below and in conformity with the Financial Accounting Standards Board's ("FASB") amendments to the Compensation - Retirement Benefits guidance, the Company has reclassified certain components of net periodic benefit expense (income) to Other income (expense), net. Adoption of Highly Inflationary Accounting in Argentina U.S. GAAP requires the use of highly inflationary accounting for countries whose cumulative three-year inflation rate exceeds 100 percent. In the second quarter of 2018, the Argentine peso rapidly devalued relative to the U.S. dollar, which along with increased inflation, indicated that the three-year cumulative inflation rate in that country exceeded 100 percent as of July 1, 2018. As a result, the Company has elected to adopt highly inflationary accounting as of the beginning of the third quarter of 2018 for its subsidiary in Argentina. Under highly inflationary accounting, the functional currency of the subsidiary in Argentina became the U.S. dollar, and its results for the third quarter have been recorded on that basis. The net effect of the adoption of the U.S. dollar as the functional currency did not result in a material change to the Company's Consolidated Balance Sheet or the Consolidated Statement of Income and Comprehensive Income. For the three months ended September 30, 2018, the Company's Argentina subsidiary represented less than 3% of the Company’s consolidated net sales and less than 1% of its consolidated total assets as of September 30, 2018. U.S. Tax Reform On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) that significantly revised the U.S. tax code effective January 1, 2018 by, among other things, lowering the corporate income tax rate from a top marginal rate of 35% to a flat 21%, limiting deductibility of interest expense and performance based incentive compensation, transitioning to a territorial system and creating new taxes associated with global operations. In the fourth quarter of 2017, the Company recorded approximately $139.2 million in charges related to the impact of the Tax Act. Given the significant complexity of the Tax Act, anticipated guidance from the U.S. Treasury about implementing the Tax Act and the potential for additional guidance from the SEC or the FASB, the amount recorded by the Company in the fourth quarter of 2017 was provisional and will continue to be adjusted during 2018. The impact of the Tax Act is expected to be finalized no later than the fourth quarter of 2018. The aforementioned guidance and additional information regarding the Tax Act may also impact the Company's 2018 effective income tax rate, exclusive of any adjustment to the provisional charge. Any material revisions in our computations could adversely affect our cash flows and results of operations. During the nine months ended September 30, 2018, the Company recorded an additional benefit of $8.0 million to adjust the provisional “toll charge” required from the transition to the new territorial tax system, and a benefit of $0.2 million to adjust the remeasurement of net deferred tax assets as a result of U.S. tax reform. These benefits were partially offset by an additional charge of $0.6 million to adjust an accrual related to withholding taxes on planned repatriations. Accounts Receivable The Company sells certain accounts receivable on a non-recourse basis to unrelated financial institutions under “factoring” agreements that are sponsored, solely and individually, by certain customers. The Company accounts for these transactions as sales of receivables, removes the receivables sold from its financial statements, and records cash proceeds when received by the Company. The beneficial impact on cash provided by operations from participating in these programs decreased approximately $11.4 million for the nine months ended September 30, 2018 compared to an increase of approximately $12.1 million for the nine months ended September 30, 2017. The cost of participating in these programs was immaterial to our results in all periods. Recent Accounting Pronouncements In August 2018, the FASB issued Accounting Standards Update ("ASU") 2018-15, “Intangibles – Goodwill and Other – Internal – Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force).” The ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This guidance is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on its Consolidated Financial Statements, but does not expect this guidance to have a material impact on its Consolidated Financial Statements. In August 2018, the FASB issued ASU 2018-14, "Compensation – Retirement Benefits – Defined Benefit Plans", which modifies the disclosure requirements on company-sponsored defined benefit plans. The ASU is effective for fiscal years beginning after December 15, 2020 on a retrospective basis to all periods presented. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its Consolidated Financial Statements, but does not expect this guidance to have a material impact on its Consolidated Financial Statements. In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820)", which modifies, removes and adds certain disclosure requirements on fair value measurements. The ASU is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its Consolidated Financial Statements, but does not expect this guidance to have a material impact on its Consolidated Financial Statements. In June 2018, the FASB issued ASU 2018-07, "Compensation – Stock Compensation (Topic 718)" intended to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments. This guidance expands the scope of Topic 718, Compensation-Stock Compensation which currently only includes share-based payments to employees to include share-based payments issued to nonemployees for goods or services. This guidance is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company is currently evaluating the impact this guidance will have on its Consolidated Financial Statements, but does not expect this guidance to have a material impact on its Consolidated Financial Statements. In February 2018, FASB issued ASU 2018-02, "Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" which allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act, in addition to requiring certain disclosures about stranded tax effects. This guidance is effective for periods beginning after December 15, 2018, with an election to adopt early. The Company is currently evaluating the impact this guidance may have on its Consolidated Financial Statements. In August 2017, FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities" which eliminates the requirement to separately measure and present hedge ineffectiveness and aligns the presentation of hedge gains and losses with the underlying hedge item. This guidance is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The amended presentation and disclosure requirements are to be applied prospectively while the amendments to cash flow and net investment hedge relationships are to be applied on a modified retrospective basis. The Company is currently evaluating the impact this guidance will have on its Consolidated Financial Statements, but does not expect this guidance to have a material impact on its Consolidated Financial Statements. In May 2017, the FASB issued ASU 2017-09, "Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting" which clarifies changes to the terms or conditions of a share-based payment award that require an entity to apply modification accounting. This guidance is effective for the current year. The Company has determined that this guidance does not have an impact on its Consolidated Financial Statements as it is not the Company's practice to modify the terms or conditions of a share-based payment award after it has been granted. In March 2017, the FASB issued ASU 2017-07, "Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" which requires employers who present a measure of operating income in their statement of income to include only the service cost component of net periodic pension cost and postretirement costs in operating expenses. This guidance is effective for 2018, and as required, has been applied on a full retrospective basis. The impact of the adoption of this standard on January 1, 2018 was a decrease in operating profit by approximately $8.7 million in the three months ended September 30, 2017 and by approximately $23.6 million in the nine months ended September 30, 2017, and corresponding increases in Other (income) expense, net as presented in the Company's Consolidated Statement of Income and Comprehensive Income for the respective periods. There was no impact to Net income or Net Income per share in either period. See Note 11 of the Consolidated Financial Statements for further details. The new guidance also limits the amount of net periodic benefit cost eligible for capitalization to assets. The new guidance permits only the service cost component of net periodic benefit cost to be eligible for capitalization. The Company applied the practical expedient that permits the use of amounts previously disclosed as the basis for retrospective application and, as provided under the practical expedient, has not presented the income statement impact based on the capitalization of the applicable costs. In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments" which requires changes to the classification of certain activities within the statement of cash flows. This guidance is effective for the current year, and the Company has determined that this adoption does not have an impact on its Consolidated Statement of Cash Flows. In June 2016, the FASB issued ASU 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" which requires issuers to measure expected credit losses for financial assets based on historical experience, current conditions and reasonable and supportable forecasts. As such, an entity will use forward-looking information to estimate credit losses. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements, but does not expect this guidance to have a material impact on its Consolidated Financial Statements. In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)", with subsequent amendments, which requires changes to the accounting for leases. The new guidance establishes a new lease accounting model that requires entities to record assets and liabilities related to leases on the balance sheet for certain types of leases. The guidance will be effective for annual and interim periods beginning after December 15, 2018. The Company expects to adopt this guidance effective December 29, 2018, the first day of the Company’s 2019 fiscal year, and that the adoption of this guidance will result in significant increases to assets and liabilities on its Consolidated Balance Sheet. The Company is still evaluating the impact of this guidance on its Consolidated Statement of Income and Comprehensive Income and Consolidated Statement of Cash Flows. The Company is evaluating the nature of its leases and has compiled a preliminary analysis of the type and location of its leases. The Company expects that the significant portion of its lease liabilities and right of use assets will relate to real estate, with additional lease and corresponding right of use assets in existence that relate to vehicles and machinery. Adoption of ASC Topic 606, Revenue from Contracts with Customers In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers", with subsequent amendments, that provides for a comprehensive model to be used in accounting for revenue arising from contracts with customers (ASC Topic 606, Revenue from Contracts with Customers) (the “Revenue Standard”). Under the Revenue Standard, revenue is recognized to reflect the transfer of goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Companies have the option to apply the new guidance under a retrospective approach to each prior reporting period presented or a modified retrospective approach with the cumulative effect of initially applying the new guidance recognized at the date of initial application within the Consolidated Balance Sheet. The new Revenue Standard became effective for annual reporting periods beginning after December 15, 2017, and the Company has adopted the new revenue standard using the modified retrospective approach on December 30, 2017, the first day of the Company’s 2018 fiscal year. The Company creates and manufactures flavors and fragrances. Approximately 90% of its products, principally Flavors compounds and Fragrances compounds, are customized to customer specifications and have no alternative use other than the sale to the specific customer (“Compounds products”). The remaining revenue is derived largely from Fragrance Ingredients products that, generally, are commodity products with alternative uses and not customized (“Ingredients products”). With respect to the vast majority of the Company’s contracts for Compounds products, the Company currently recognizes revenue on the transfer of control of the product at a point in time as the Company does not have an “enforceable right to payment for performance to date” (as set out in the Revenue Standard). With respect to a small number of contracts for the sale of Compounds, the Company has an “enforceable right to payment for performance to date” and as the products do not have an alternative use, the Company recognizes revenue for these contracts over time and records a contract asset using the output method. The output method recognizes revenue on the basis of direct measurements of the value to the customer of the goods or services transferred to date relative to the remaining goods or services promised under the contract. With respect to the Company’s contracts related to Ingredients products, the Company currently recognizes revenue on the transfer of control of the product at a point in time as such products generally have alternative uses and the Company does not have an “enforceable right to payment for performance to date.” As the Company adopted the Revenue Standard using the modified retrospective method effective the first day of its 2018 fiscal year, results for its 2018 fiscal year are presented under the Revenue Standard while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC Topic 605, which required that revenue was accounted for when the earnings process was complete. The Company recorded a net increase to retained earnings of $2.1 million as of the first day of its 2018 fiscal year due to the cumulative impact of adopting the Revenue Standard. In connection with the adjustment to retained earnings, the Company also recorded an increase of $4.4 million in contract assets (which are included in Prepaid expenses and other assets), a decrease of $1.7 million in inventory, and an increase in taxes payable of $0.6 million. The impact to revenues, gross profit and net income for the three months ended September 30, 2018 were reductions of $0.8 million, $0.6 million and $0.5 million, respectively, and for the nine months ended September 30, 2018 were reductions of $3.3 million, $2.2 million and $1.6 million, respectively, as a result of applying the Revenue Standard as compared to the amounts that would have been recognized under ASC Topic 605. Revenue Recognition The Company recognizes revenue when control of the promised goods is transferred to its customers in an amount that reflects the consideration it expects to be entitled to in exchange for those goods. Sales, value add, and other taxes the Company collects are excluded from revenues. The Company receives payment in accordance with standard customer terms. The following table presents the Company's revenues disaggregated by business unit:
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The following table presents our revenues disaggregated by region, based on the region of our customers:
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Flavors and Fragrances Compounds Revenues The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties and payment terms (which vary by customer) are identified, the contract has commercial substance, and collectability of consideration is probable. Consistent with our past practice, the amount of revenue recognized is adjusted at the time of sale for expected discounts and rebates (“Variable Consideration”). The Company generates revenues primarily by manufacturing customized Flavor compounds and Fragrance compounds for the exclusive use of our customers. The Company combines the shipment of goods with their manufacture to account for both shipment and manufacture as the sole performance obligation. With respect to the vast majority of the Company’s contracts for Compounds products, the Company recognizes a sale at the point in time when it ships the product from its manufacturing facility to its customer, as this is the time when control of the goods has transferred to the customer. The amount of consideration received and revenue recognized is impacted by the Variable Consideration the Company has agreed with its customers. The Company estimates Variable Consideration amounts for each customer based on the specific agreement, an analysis of historical volumes and the current activity with that customer. The Company reassesses its estimates of Variable Consideration at each reporting date throughout the contract period and updates the estimate until the uncertainty is resolved. During the current period, changes to estimates of Variable Consideration have been immaterial. With respect to a small number of contracts for the sale of Compounds products, the Company recognizes revenue over time as it manufactures customized compounds that do not have an alternative use and for which the contracts provide the Company with an enforceable right to payment, including a reasonable profit, at all times during the contract term commencing with the manufacturing of the goods. When revenue is recognized over time, the amount of revenue recognized is based on the extent of progress towards completion of the promised goods. The Company generally uses the output method to measure progress for its contracts as this method reflects the transfer of goods to the customer. Once customization begins, the manufacturing process is generally completed within a two week period. Due to the short time frame for production, there is little estimation uncertainty in the process. In addition, due to the customized nature of our products, our returns are not material. Fragrance Ingredients Revenues The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties and payment terms (which vary by customer) are identified, the contract has commercial substance, and collectability of consideration is probable. The Company generates revenues primarily by manufacturing Ingredients products for the use of our customers. The Company combines the shipment of goods with their manufacture to account for both shipment and manufacture as the sole performance obligation. Generally, the Company recognizes a sale at the time when it ships the product from their manufacturing facility to their customer, as this is the point when control of the goods or services has transferred to the customer. The amount of consideration received and revenue recognized is impacted by discounts offered to its customers. The Company estimates discounts based on an analysis of historical experience and current activity. The Company assesses its estimates of discounts at each reporting date throughout the contract period and updates its estimates until the uncertainty has been resolved. During the current period, changes to estimates of discounts have been immaterial. Contract Asset and Accounts Receivable The following table reflects the balances in our contract assets and accounts receivable for the nine months ended September 30, 2018 and December 31, 2017:
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Net Income Per Share | NET INCOME PER SHARE A reconciliation of the shares used in the computation of basic and diluted net income per share is as follows:
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On September 17, 2018, the Company issued and sold 12,667,947 shares of its common stock in an underwritten public offering for net proceeds of approximately $1.6 billion. The Company declared a quarterly dividend to its shareholders of $0.73 and $0.69 for the three months ended September 30, 2018 and 2017, respectively. For the nine months ended September 30, 2018 and 2017, the Company declared a quarterly dividend to its shareholders of $2.11 and $1.97, respectively. There were no stock options or stock-settled appreciation rights (“SSARs”) excluded from the computation of diluted net income per share for the three and nine months ended September 30, 2018 and 2017. As discussed in Note 6, the Company issued 16,500,000 TEUs, consisting of a prepaid stock purchase contract ("SPC") and a senior amortizing note, for net proceeds of approximately $799.0 million on September 17, 2018. For the periods outstanding, the SPC portion of the TEUs were assumed to be settled at the minimum settlement amount of 0.3134 shares per SPC for weighted-average shares for basic earnings per share. For diluted earnings per share, the shares were assumed to be settled at a conversion factor based on the 20 day volume-weighted average price (“VWAP”) per share of the Company’s common stock not to exceed 0.3720 shares per SPC. The Company has issued shares of purchased restricted common stock and purchased restricted common stock units (collectively “PRSUs”) which contain rights to nonforfeitable dividends while these shares are outstanding and thus are considered participating securities. Such securities are required to be included in the computation of basic and diluted earnings per share pursuant to the two-class method. The Company did not present the two-class method since the difference between basic and diluted net income per share for both unrestricted common shareholders and PRSU shareholders was less than $0.01 per share for each period presented, and the number of PRSUs outstanding as of September 30, 2018 and 2017 was immaterial. Net income allocated to such PRSUs was $0.1 million for the three months ended September 30, 2018 and $0.2 million for the three months ended September 30, 2017, and $0.6 million for the nine months ended September 30, 2018 and $0.8 million for the nine months ended September 30, 2017. |
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Business Combinations [Abstract] | |
Acquisitions | Pure On April 7, 2017, the Company completed the acquisition of 100% of the outstanding shares of Columbia PhytoTechnology, LLC d/b/a PowderPure ("PowderPure"), a privately-held flavors company with facilities in North America. The acquisition was accounted for under the purchase method. PowderPure was acquired to expand expertise in, and product offerings of, clean label solutions within the Flavors business. The Company paid approximately $54.6 million, including $0.4 million of cash acquired for this acquisition, which was funded from existing resources. Additionally, the Company recorded an accrual of approximately $1.4 million representing the estimate at acquisition of additional contingent consideration payable to the former owners of PowderPure (the maximum earnout payable is $10 million upon satisfaction of certain performance metrics). The purchase price exceeded the preliminary fair value of existing net assets by approximately $48.0 million. The excess was allocated principally to identifiable intangible assets including approximately $27.5 million to proprietary technology, approximately $4.5 million to trade name, approximately $0.8 million to customer relationships, and approximately $15.2 million of goodwill which is deductible for tax purposes. Goodwill is the excess of the purchase price over the fair value of net assets acquired and represents the value the Company expects to achieve from its increased exposure to clean label products within the existing Flavors business. The intangible assets are being amortized over the following estimated useful lives: proprietary technology, 14 years; trade name, 14 years; and customer relationships, 2 years. The purchase price allocation was completed in the first quarter of 2018. No material adjustments have been made to the purchase price allocation since the preliminary valuation performed in the second quarter of 2017. The estimated amount of the contingent consideration payable was adjusted during the first quarter of 2018 and resulted in a decrease in administrative expense of approximately $0.6 million. Fragrance Resources On January 17, 2017, the Company completed the acquisition of 100% of the outstanding shares of Fragrance Resources, Inc., Fragrance Resources GmbH, and Fragrance Resources SAS (collectively "Fragrance Resources"), a privately-held fragrance company with facilities in Germany, North America, France, and China. The acquisition was accounted for under the purchase method. Fragrance Resources was acquired to strengthen the North American and German Fragrances business. The Company paid approximately €143.4 million (approximately $151.9 million) including approximately €13.7 million (approximately $14.4 million) of cash acquired for this acquisition, which was funded from existing resources including use of its revolving credit facility. Of the total paid, approximately €142.0 million (approximately $150.5 million) was paid at closing and an additional €1.4 million (approximately $1.5 million) was paid in connection with the finalization of the working capital adjustment. The purchase price exceeded the fair value of existing net assets by approximately $122.0 million. The excess was allocated principally to identifiable intangible assets including approximately $51.7 million related to customer relationships, approximately $13.6 million related to proprietary technology and trade name, and approximately $72.0 million of goodwill (which is not deductible for tax purposes) and approximately $15.3 million of net deferred tax liability. Goodwill is the excess of the purchase price over the fair value of net assets acquired and represents synergies from the addition of Fragrance Resources to the Company's existing Fragrances business. The intangible assets are being amortized over the following estimated useful lives: trade name, 2 years; proprietary technology, 5 years; and customer relationships, 12 - 16 years. The purchase price allocation was finalized in the fourth quarter of 2017. Certain measurement period adjustments were made subsequent to the initial purchase price allocation including adjustments related to the finalization of the purchase price, the allocation of certain intangibles and the calculation of applicable deferred taxes. The additional amortization of intangibles required as a result of the measurement period adjustments was not material. |
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Goodwill and Other Intangible Assets, Net | GOODWILL AND OTHER INTANGIBLE ASSETS, NET Goodwill Movements in goodwill during 2018 were as follows:
Other Intangible Assets Other intangible assets, net consisted of the following amounts:
Amortization Amortization expense was $9,003 and $8,766 for the three months ended September 30, 2018 and 2017, respectively and $27,772 and $24,327 for the nine months ended September 30, 2018 and 2017, respectively. Annual amortization, excluding the impact of the Frutarom acquisition, is expected to be $36.2 million for the full year 2018, $34.8 million for the year 2019, $34.1 million for the year 2020, $29.3 million for the year 2021, $25.2 million for the year 2022 and $25.1 million for the year 2023. |
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Restructuring and Other Charges, Net | RESTRUCTURING AND OTHER CHARGES, NET Restructuring and other charges primarily consist of separation costs for employees including severance, outplacement and other benefit costs. 2017 Productivity Program On February 15, 2017, the Company announced that it was adopting a multi-year productivity program designed to improve overall financial performance, provide flexibility to invest in growth opportunities and drive long-term value creation. In connection with this program, the Company expects to optimize its global footprint and simplify its organizational structures globally. In connection with this initiative, the Company expects to incur cumulative, pre-tax cash charges of between $30-$35 million, consisting primarily of $24-$26 million in personnel-related costs and an estimated $6 million in facility-related costs, such as lease termination, and integration-related costs. The Company recorded $23.4 million of charges related to personnel costs and lease termination costs through the third quarter of 2018, with the remainder of the personnel related and other costs expected to be recognized by the end of 2018. The Company recorded $0.9 million and $3.2 million of charges related to personnel costs and lease termination costs during the three months ended September 30, 2018 and 2017, respectively, and $2.8 million and $14.2 million of charges related to personnel costs and lease termination costs during the nine months ended September 30, 2018 and 2017, respectively. The Company made payments of $6.4 million related to severance in 2018. The overall charges were split approximately evenly between Flavors and Fragrances. This initiative is expected to result in the reduction of approximately 370 members of the Company’s global workforce, including acquired entities, in various parts of the organization. Changes in restructuring liabilities during the nine months ended September 30, 2018, were as follows:
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Tangible Equity Units | TANGIBLE EQUITY UNITS On September 17, 2018, the Company issued and sold 16,500,000, 6.00% TEUs at $50 per unit and received proceeds of $799.0 million, net of discounts and issuance costs of $26.0 million. Each TEU is comprised of: (i) a prepaid stock purchase contract (“SPC”) to be settled by delivery of a specified number of shares of the Company's common stock, and (ii) a senior amortizing note (“Amortizing Note”), with an initial principal amount of $8.4529 and a final installment payment date of September 15, 2021. The Company will pay equal quarterly cash installments of $0.75 per Amortizing Note on March 15, June 15, September 15, and December 15 of each year, with the exception of the first installment payment of $0.7333 per Amortizing Note due on December 15, 2018. In the aggregate, the annual quarterly cash installments will be equivalent to 6.00% per year. Each installment payment constitutes a payment of interest and a partial repayment of principal, computed at an annual rate of 3.79%. Each TEU may be separated by a holder into its constituent SPC and Amortizing Note after the initial issuance date of the TEUs, and the separate components may be combined to create a TEU after the initial issuance date, in accordance with the terms of the SPC. The TEUs are listed on the New York Stock Exchange under the symbol “IFFT”. The proceeds from the issuance of the TEUs were allocated to equity and debt based on the relative fair value of the respective components of each TEU as follows:
The net proceeds of the SPCs were recorded as additional paid in capital, net of issuance costs. The net proceeds of the Amortizing Notes were recorded as debt, with deferred financing costs recorded as a reduction of the carrying amount of the debt in our unaudited consolidated balance sheet. Deferred financing costs related to the Amortizing Notes will be amortized through the maturity date using the effective interest rate method. Unless settled early at the holder’s or the Company's election, each SPC will automatically settle on September 15, 2021 for a number of shares of common stock per SPC based on the 20 day volume-weighted average price (“VWAP”) of our common stock as follows:
At any time prior to the second scheduled trading day immediately preceding September 15, 2021, any holder of an SPC may settle any or all of its SPCs early, and the Company will deliver 0.3134 shares of its common stock for each SPC, subject to adjustment. Additionally, the SPCs may be redeemed in the event of a fundamental change as defined in the SPC. |
Borrowings |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Borrowings | Debt consists of the following:
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Commercial Paper Commercial paper issued by the Company generally has terms of 90 days or less. As of September 30, 2018 and December 31, 2017, there was no commercial paper outstanding. The revolving credit facility is used as a backstop for the Company's commercial paper program. There was no issuances or repayments of commercial paper for the nine months ended September 30, 2018. The maximum amount of commercial paper outstanding for the nine months ended September 30, 2017 was $40 million. Financing of the Acquisition of Frutarom Bridge Loan Facility In connection with entering into the merger agreement with Frutarom in May 2018, the Company entered into a debt commitment letter for up to a $5.45 billion 364-day unsecured bridge loan facility to the extent the Company has not received $5.45 billion of net cash proceeds (and/or qualified bank commitments) from a combination of (a) the issuance by the Company of a combination of equity securities, equity-linked securities and/or unsecured debt securities and/or (b) unsecured term loans, in each case, at or prior to completion of the acquisition. On May 21, 2018, the Company, Morgan Stanley Senior Funding, Inc. and certain other financial institutions entered into a bridge joinder agreement to the commitment letter to provide for additional bridge commitment parties. As a result of the Company's entering into the debt and equity financing as discussed in Note 3, the bridge loan facility was terminated on September 26, 2018. In connection with the bridge loan commitment, the Company incurred $28.8 million and $39.4 million of fees which are included in Interest expense in the Consolidated Statement of Income and Comprehensive Income in the three and nine months ended September 30, 2018, respectively. Term Facility On June 6, 2018, the Company entered into a term loan credit agreement to replace a portion of the bridge loan facility, reducing the amount of the bridge loan commitments by $350 million. Under the term loan credit agreement, the lenders thereunder committed to provide, subject to certain conditions, a senior unsecured term loan facility (as amended, "Term Facility") in an original aggregate principal amount of up to $350.0 million, maturing three years after the funding date thereunder. The debt was funded on October 3, 2018. The Term Facility bears interest, at the Company’s option, at a per annum rate equal to either (x) an adjusted LIBOR rate plus an applicable margin varying from 0.75% to 2.00% or (y) a base rate plus an applicable margin varying from 0.00% to 1.00%, in each case depending on the public debt ratings for non-credit enhanced long-term senior unsecured debt issued by the Company. Loans under the Term Facility will amortize quarterly at a per annum rate of 10.0% of the aggregate principal amount of the loans made under the Term Facility on the funding date, commencing December 31, 2018, with the balance payable on October 3, 2021. The Company may voluntarily prepay the term loans without premium or penalty. The term loan credit agreement contains various covenants, limitations and events of default customary for similar facilities for similarly rated borrowers, including a maximum ratio of net debt to EBITDA of 4.50x with step-downs over time. Amended Credit Facility On May 21, 2018, June 6, 2018 and July 13, 2018, the Company and certain of its subsidiaries amended and restated the Company’s existing amended and restated credit agreement with Citibank, N.A., as administrative agent (as amended, the “Amended Credit Facility”) in connection with the acquisition of Frutarom, to, among other things (i) extend the maturity date of the Amended Credit Facility until December 2, 2023, (ii) increase the maximum ratio of net debt to EBITDA on and after the closing date of the acquisition and (iii) increase the drawn down capacity to $1.0 billion, consisting of a $585 million tranche A revolving credit facility (which provides for borrowings available in U.S. dollars, euros, Swiss francs, Japanese yen and/or British pounds sterling, with a sublimit of $25 million for swing line borrowings) (“Tranche A”) and a $415 million tranche B revolving credit facility (which provides for borrowings available in U.S. dollars, euros, Swiss francs, Japanese yen and/or British pounds sterling, with sublimits of €50 million and $25 million for swing line borrowings) (“Tranche B” and, together with Tranche A, the “Revolving Facility”). The interest rate on the Revolving Facility will be, at the applicable borrower’s option, a per annum rate equal to either (x) an adjusted LIBOR rate plus an applicable margin varying from 0.75% to 1.75% or (y) a base rate plus an applicable margin varying from 0.00% to 0.750%, in each case depending on the public debt ratings for non-credit enhanced long-term senior unsecured debt issued by the Company. Other terms and covenants under the Amended Credit Facility remain substantially unchanged. In connection with the Amended Credit Facility, the Company incurred $0.7 million of debt issuance costs. As of September 30, 2018, total availability under the Amended Credit Facility was $1.0 billion, with no outstanding borrowings. Senior Unsecured Notes On September 25, 2018 the Company issued €300 million aggregate principal amount of senior unsecured notes that mature on September 25, 2021 (the “2021 Euro Notes”). The 2021 Notes bear interest at a rate of 0.5% per year, payable annually on September 25 of each year, beginning September 25, 2019. Total proceeds from the issuance of the 2021 Notes, net of underwriting discounts and offering costs, were €297.7 million ($349.5 million in USD). On September 25, 2018, the Company issued €800 million aggregate principal amount of senior unsecured notes that mature on September 25, 2026 (the “2026 Euro Notes”). The 2026 Notes bear interest at a rate of 1.8% per year, payable annually on September 25 of each year, beginning September 25, 2019. Total proceeds from the issuance of the 2026 Notes, net of underwriting discounts and offering costs, were €794.1 million ($932.2 million in USD). On September 26, 2018, the Company issued $300 million aggregate principal amount of senior unsecured notes that mature on September 25, 2020 (the “2020 Notes”). The 2020 Notes bear interest at a rate of 3.4% per year, payable semi-annually on March 25 and September 25 of each year, beginning March 25, 2019. Total proceeds from the issuance of the 2020 Notes, net of underwriting discounts and offering costs, were $298.9 million. On September 26, 2018, the Company issued $400 million aggregate principal amount of senior unsecured notes that mature on September 26, 2028 (the “2028 Notes”). The 2028 Notes bear interest at a rate of 4.45% per year, payable semi-annually on March 26 and September 26 of each year, beginning March 26, 2019. Total proceeds from the issuance of the 2028 Notes, net of underwriting discounts and offering costs, were $397.0 million. On September 26, 2018, the Company issued $800 million aggregate principal amount of senior unsecured notes that mature on September 26, 2048 (the “2048 Notes” and collectively with the 2021 Euro Notes, 2026 Euro Notes, 2020 Notes, 2028 Notes, the "2018 Senior Unsecured Notes"). The 2048 Notes bear interest at a rate of 5.0% per year, payable semi-annually on March 26 and September 26 of each year, beginning March 26, 2019. Total proceeds from the issuance of the 2048 Notes, net of underwriting discounts and offering costs, were $787.2 million. Tangible Equity Units - Senior Unsecured Amortizing Notes On September 17, 2018, in connection with the issuance of the TEUs, the Company issued $139.5 million aggregate principal amount of Amortizing Notes. The Amortizing Notes mature on September 15, 2021. Each quarterly cash installment payment of $0.75 (or, in the case of the installment payment due on December 15, 2018, $0.73333) per Amortizing Note will constitute a partial repayment of principal and a payment of interest, computed at an annual rate of 3.79%. Interest will be calculated on the basis of a 360 day year consisting of twelve 30 day months. Payments will be applied first to the interest due and payable and then to the reduction of the unpaid principal amount, allocated as set forth in the amortization schedule in the indenture governing the Amortizing Notes. See Note 6 for further information on the TEUs. There are no covenants or provisions in the indenture related to the TEUs that would afford the holders of the amortizing notes protection in the event of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction involving the Company that may adversely affect such holders. If a fundamental change occurs, or if the Company elects to settle the SPCs early, then the holders of the Amortizing Notes will have the right to require the Company to repurchase the Amortizing Notes at a repurchase price equal to the principal amount of the Amortizing Notes as of the repurchase date plus accrued and unpaid interest. The indenture also contains customary events of default which would permit the holders of the Amortizing Notes to declare the notes to be immediately due and payable if not cured within applicable grace periods, including the failure to make timely installment payments on the notes or other material indebtedness, failure to give notice of a fundamental change and specified events of bankruptcy and insolvency. |
Income Taxes |
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Income Tax Disclosure [Abstract] | |
Income Taxes | U.S. Tax Reform In the fourth quarter of 2017, the Company recorded approximately $139.2 million in charges related to the impact of the Tax Act. Given the significant complexity of the Tax Act, anticipated guidance from the U.S. Treasury about implementing the Tax Act and the potential for additional guidance from the SEC or the FASB, the amount recorded by the Company in the fourth quarter of 2017 was provisional and will continue to be adjusted during 2018. The impact of the Tax Act is expected to be finalized no later than the fourth quarter of 2018. The aforementioned guidance and additional information regarding the Tax Act may also impact the Company's 2018 effective income tax rate, exclusive of any adjustment to the provisional charge. Any material revisions in our computations could adversely affect our cash flows and results of operations. During the first quarter of 2018, the Company recorded an additional charge of $0.6 million to adjust an accrual related to withholding taxes on planned repatriations. During the third quarter of 2018, the Company recorded a benefit of $8.0 million to adjust the provisional “toll charge” required from the transition to the new territorial tax system, and a benefit of $0.2 million to adjust the remeasurement of net deferred tax assets as a result of U.S. tax reform. Uncertain Tax Positions At September 30, 2018, the Company had $32.2 million of unrecognized tax benefits recorded in Other liabilities and $1.2 million in Other current liabilities. If these unrecognized tax benefits were recognized, the effective tax rate would be affected. At September 30, 2018, the Company had accrued interest and penalties of $2.8 million classified in Other liabilities and $0.1 million in Other current liabilities. As of September 30, 2018, the Company’s aggregate provisions for uncertain tax positions, including interest and penalties, was $36.3 million associated with various tax positions asserted in various jurisdictions, none of which is individually material. The Company regularly repatriates a portion of current year earnings from select non–U.S. subsidiaries. No provision is made for additional withholding taxes on undistributed earnings of subsidiary companies that are intended and planned to be indefinitely invested in such subsidiaries. The Company intends to, and has plans to, reinvest these earnings indefinitely in its foreign subsidiaries to fund local operations and/or capital projects. The Company has ongoing income tax audits and legal proceedings which are at various stages of administrative or judicial review. In addition, the Company has open tax years with various taxing jurisdictions that range primarily from 2008 to 2017. Based on currently available information, the Company does not believe the ultimate outcome of any of these tax audits and other tax positions related to open tax years, when finalized, will have a material impact on its financial position. The Company also has other ongoing tax audits and legal proceedings that relate to indirect taxes, such as value-added taxes, sales and use taxes and property taxes, which are discussed in Note 14. Effective Tax Rate The effective tax rate for the three months ended September 30, 2018 was 5.0% compared with 22.0% for the three months ended September 30, 2017. The quarter-over-quarter decrease was largely due to the benefit recorded to reduce amounts accrued in connection with U.S. tax reform, lower cost of repatriation of earnings, the release of valuation allowances on certain State credits and a more favorable mix of earnings, and other items (including the impact of current year transaction costs). The effective tax rate for the nine months ended September 30, 2018 was 15.0% compared with 20.4% for the nine months ended September 30, 2017. The year-over-year decrease was largely due to a more favorable mix of earnings, a lower cost of repatriation, the re-measurement of loss provisions, the release of State valuation allowances and the impact of U.S. tax reform, partially offset by other items (including the impact of certain non-taxable gains on foreign currency in the prior year). |
Stock Compensation Plans |
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Stock Compensation Plans | STOCK COMPENSATION PLANS The Company has various plans under which its officers, senior management, other key employees and directors may be granted equity-based awards. Equity awards outstanding under the plans include PRSUs, restricted stock units (RSUs), SSARs and Long-Term Incentive Plan awards. Liability-based awards outstanding under the plans are cash-settled RSUs. Stock-based compensation expense and related tax benefits were as follows:
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Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | SEGMENT INFORMATION The Company is organized into two operating segments: Flavors and Fragrances. These segments align with the internal structure of the Company used to manage these businesses. Performance of these operating segments is evaluated based on segment profit which is defined as operating profit before Restructuring and other charges, net; Global expenses and certain non-recurring items; Interest expense; Other income (expense), net; and Taxes on income. The Global expenses caption below represents corporate and headquarters-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 operating segments. Reportable segment information is as follows:
Net sales are attributed to individual regions based upon the destination of product delivery are as follows:
No country other than the U.S. had net sales in any period presented greater than 6% of total consolidated net sales. |
Employee Benefits |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Employee Benefits | EMPLOYEE BENEFITS Pension and other defined contribution retirement plan expenses included the following components:
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The Company expects to contribute a total of approximately $4.1 million to its U.S. pension plans and a total of $17.1 million to its Non-U.S. Plans during 2018. During the nine months ended September 30, 2018, no contributions were made to the qualified U.S. pension plans, $12.7 million of contributions were made to the non-U.S. pension plans, and $3.3 million of benefit payments were made with respect to the Company's non-qualified U.S. pension plan. Expense recognized for postretirement benefits other than pensions included the following components:
The components of net periodic benefit (income) other than the service cost component are included in Other (income) expense, net in the Consolidated Statement of Income and Comprehensive Income. Beginning in 2018, under the revised FASB guidance adopted in the first quarter of 2018, only the service cost component of net periodic benefit (income) cost is a component of operating profit in the Consolidated Statements of Income and Comprehensive Income and the other components of net periodic benefit cost are now included in Other (income), net. As a result of this change, Other income increased by approximately $6.7 million and $8.7 million in the three months ended September 30, 2018 and 2017, respectively, and by approximately $20.0 million and $23.6 million in the nine months ended September 30, 2018 and 2017, respectively, compared to what the Other (income) expense, net would have been under the previous method. The retroactive $8.7 million reduction in operating profit for the three months ended September 30, 2017 was reflected as a $1.7 million increase in cost of goods sold, a $2.8 million increase in research and development expenses, and a $4.2 million increase in selling and administrative expenses. The retroactive $23.6 million reduction in operating profit for the nine months ended September 30, 2017 was reflected as a $4.8 million increase in cost of goods sold, a $7.7 million increase in research and development expenses, and a $11.0 million increase in selling and administrative expenses. The Company expects to contribute approximately $5.0 million to its postretirement benefits other than pension plans during 2018. In the nine months ended September 30, 2018 $3.1 million of contributions were made. |
Financial Instruments |
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Investments, All Other Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments | FINANCIAL INSTRUMENTS Fair Value Accounting guidance on fair value measurements specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs create the following fair value hierarchy:
This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The Company determines the fair value of structured liabilities (where performance is linked to structured interest rates, inflation or currency risks) using the London Interbank Offer Rate ("LIBOR") swap curve and forward interest and exchange rates at period end. Such instruments are classified as Level 2 based on the observability of significant inputs to the model. The Company does not have any instruments classified as Level 3, other than those included in pension asset trusts as discussed in Note 14 of our 2017 Form 10-K. These valuations take into consideration the Company's credit risk and its counterparties’ credit risk. The estimated change in the fair value of these instruments due to such changes in its own credit risk (or instrument-specific credit risk) was immaterial as of September 30, 2018. The principal amounts and the estimated fair values of financial instruments at September 30, 2018 and December 31, 2017 consisted of the following:
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Derivatives The Company periodically enters into foreign currency forward contracts with the objective of reducing exposure to cash flow volatility associated with its intercompany loans, foreign currency receivables and payables, and anticipated purchases of certain raw materials used in operations. These contracts generally involve the exchange of one currency for a second currency at a future date, have maturities not exceeding twelve months and are with counterparties which are major international financial institutions. During the year ended December 31, 2017, the Company entered into several forward currency contracts which qualified as net investment hedges, in order to mitigate a portion of its net European investments from foreign currency risk. The effective portions of net investment hedges are recorded in other comprehensive income (“OCI”) as a component of Foreign currency translation adjustments in the accompanying Consolidated Statement of Income and Comprehensive Income. Realized gains/(losses) are deferred in accumulated other comprehensive income (loss) ("AOCI") where they will remain until the net investments in the Company's European subsidiaries are divested. Four of these forward currency contracts matured during the nine months ended September 30, 2018 and as of September 30, 2018, there were no remaining contracts outstanding. Subsequent to the issuance of the Euro Senior Notes - 2016 during the first quarter of 2016, the Company designated the debt as a hedge of a portion of its net European investments. Accordingly, the change in the value of the debt that is attributable to foreign exchange movements is recorded in OCI as a component of Foreign currency translation adjustments in the accompanying Consolidated Statement of Income and Comprehensive Income. During the year ended December 31, 2017, the Company entered into several forward currency contracts which qualified as cash flow hedges. The objective of these hedges is to protect against the currency risk associated with forecasted U.S. dollar ("USD") denominated raw material purchases made by Euro ("EUR") functional currency entities which result from changes in the EUR/USD exchange rate. The effective portions of cash flow hedges are recorded in OCI as a component of gains/(losses) on derivatives qualifying as hedges in the accompanying Consolidated Statement of Income and Comprehensive Income. Realized gains/(losses) in AOCI related to cash flow hedges of raw material purchases are recognized as a component of Cost of goods sold in the accompanying Consolidated Statement of Income and Comprehensive Income in the same period as the related costs are recognized. In the second quarter of 2018, the Company entered into a foreign currency contract and two interest rate swap agreements (collectively, the "Deal Contingent Swaps"), which were contingent upon the closing of the Frutarom acquisition, for a total notional amount of $1.9 billion. In the third quarter of 2018, the Company completed the offering and sale of the 2018 Senior Unsecured Notes (see Note 7 for additional information) and settled the Deal Contingent Swaps. The Company received $12.2 million for the foreign currency contract and $0.4 million for the two interest rate swap agreements which is included in Other income, net and Interest Expense, respectively, in the accompanying Consolidated Statement of Income and Comprehensive Income for the nine months ended September 30, 2018. In prior years, the Company has entered into interest rate swap agreements to hedge the anticipated issuance of fixed-rate debt, which are designated as cash flow hedges. The amount of gains and losses realized upon termination of these agreements is amortized over the life of the corresponding debt issuance. The following table shows the notional amount of the Company’s derivative instruments outstanding as of September 30, 2018 and December 31, 2017:
The following tables show the Company’s derivative instruments measured at fair value (Level 2 of the fair value hierarchy), as reflected in the Consolidated Balance Sheet as of September 30, 2018 and December 31, 2017:
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The following table shows the effect of the Company’s derivative instruments which were not designated as hedging instruments in the Consolidated Statement of Income and Comprehensive Income for the three and nine months ended September 30, 2018 and 2017 (in thousands):
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The following table shows the effect of the Company’s derivative instruments designated as cash flow and net investment hedging instruments, net of tax, in the Consolidated Statement of Income and Comprehensive Income for the three and nine months ended September 30, 2018 and 2017 (in thousands):
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The ineffective portion of the above noted cash flow hedges and net investment hedges were not material during the three and nine months ended September 30, 2018 and 2017. The Company expects that approximately $6.9 million (net of tax) of derivative loss included in AOCI at September 30, 2018, based on current market rates, will be reclassified into earnings within the next 12 months. The majority of this amount will vary due to fluctuations in foreign currency exchange rates. |
Accumulated Other Comprehensive Income (Loss) |
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Accumulated Other Comprehensive Income (Loss) | following tables present changes in the accumulated balances for each component of other comprehensive income, including current period other comprehensive income and reclassifications out of accumulated other comprehensive income:
_______________________ (a) Represents a foreign currency exchange gain from the release of a currency translation adjustment upon the liquidation of a foreign entity in 2017. The following table provides details about reclassifications out of accumulated other comprehensive income to the Consolidated Statement of Income and Comprehensive Income:
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Commitments and Contingencies |
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Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | arantees and Letters of Credit The Company has various bank guarantees and letters of credit which are available for use to support its ongoing business operations and to satisfy governmental requirements associated with pending litigation in various jurisdictions. At September 30, 2018, the Company had total bank guarantees and standby letters of credit of approximately $49.6 million with various financial institutions. Included in the above aggregate amount is a total of $13.5 million for other assessments in Brazil for various income tax and indirect tax disputes related to fiscal years 1998-2011. There were no material amounts utilized under the standby letters of credit as of September 30, 2018. In order to challenge the assessments in these cases in Brazil, the Company has been required to, and has separately pledged assets, principally property, plant and equipment, to cover assessments in the amount of approximately $10.5 million as of September 30, 2018. Lines of Credit The Company has various lines of credit which are available to support its ongoing business operations. As of September 30, 2018, the Company had available lines of credit of approximately $102.8 million with various financial institutions, in addition to the $1.0 billion of capacity under the Amended Credit Facility discussed in Note 7 of the Consolidated Financial Statements. There were no material amounts drawn down pursuant to these lines of credit as of September 30, 2018. Litigation The Company assesses contingencies related to litigation and/or other matters to determine the degree of probability and range of possible loss. A loss contingency is accrued in the Company’s Consolidated Financial Statements if it is probable that a liability will be incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly sensitive and requires judgments about future events. On at least a quarterly basis, the Company reviews contingencies related to litigation to determine the adequacy of accruals. The amount of ultimate loss may differ from these estimates and further events may require the Company to increase or decrease the amounts it has accrued on any matter. Periodically, the Company assesses its insurance coverage for all known claims, where applicable, taking into account aggregate coverage by occurrence, limits of coverage, self-insured retentions and deductibles, historical claims experience and claims experience with its insurance carriers. The liabilities are recorded at management’s best estimate of the probable outcome of the lawsuits and claims, taking into consideration the facts and circumstances of the individual matters as well as past experience on similar matters. At each balance sheet date, the key issues that management assesses are whether it is probable that a loss as to asserted or unasserted claims will be incurred and if so, whether the amount of loss can be reasonably estimated. The Company records the expected liability with respect to claims in Other liabilities and expected recoveries from its insurance carriers in Other assets. The Company recognizes a receivable when it believes that realization of the insurance receivable is probable under the terms of the insurance policies and its payment experience to date. Environmental Over the past 20 years, various federal and state authorities and private parties have claimed that the Company is a Potentially Responsible Party (“PRP”) as a generator of waste materials for alleged pollution at a number of waste sites operated by third parties located principally in New Jersey and have sought to recover costs incurred and to be incurred to clean up the sites. The Company has been identified as a PRP at eight facilities operated by third parties at which investigation and/or remediation activities may be ongoing. The Company analyzes potential liability on at least a quarterly basis and accrues for environmental liabilities when they are probable and estimable. The Company estimates its share of the total future cost for these sites to be less than $5 million. While joint and several liability is authorized under federal and state environmental laws, the Company believes the amounts it has paid and anticipates paying in the future for clean-up costs and damages at all sites are not and will not have a material adverse effect on its financial condition, results of operations or liquidity. This assessment is based upon, among other things, the involvement of other PRPs at most of the sites, the status of the proceedings, including various settlement agreements and consent decrees, and the extended time period over which payments will likely be made. There can be no assurance, however, that future events will not require the Company to materially increase the amounts it anticipates paying for clean-up costs and damages at these sites, and that such increased amounts will not have a material adverse effect on its financial condition, results of operations or cash flows. China Facilities Guangzhou Flavors plant During the fourth quarter of 2016, the Company was notified that certain governmental authorities have begun to evaluate a change in the zoning of the Guangzhou Flavors plant. The zoning, if changed, would prevent the Company from continuing to manufacture product at the existing plant. The ultimate outcome of any change that the governmental authorities may propose, the timing of such a change, and the nature of any compensation arrangements that might be provided to the Company are uncertain. The net book value of the existing plant was approximately $67 million as of September 30, 2018. Zhejiang Ingredients plant In the fourth quarter of 2017, the Company concluded discussions with the government regarding the relocation of its Fragrance Ingredients plant in Zhejiang and, based on the agreements reached, expects to receive total compensation payments up to approximately $50 million. The relocation compensation will be paid to the Company over the period of the relocation which is expected to be through the end of 2020. The Company received the first payment of $15 million in the fourth quarter of 2017. No additional amounts have been received since the fourth quarter of 2017. The net book value of the current plant was approximately $21 million as of September 30, 2018. The Company expects to relocate approximately half of production capacity of the facility by the middle of 2019 and the remainder of the production capacity of the facility by the middle of 2020. Total China Operations The total net book value of all five plants in China (one of which is currently under construction) was approximately $162 million as of September 30, 2018. If the Company is required to close a plant, or operate one at significantly reduced production levels on a permanent basis, the Company may be required to record charges that could have a material impact on its consolidated financial results of operations, financial position and cash flows in future periods. Other Contingencies The Company has contingencies involving third parties (such as labor, contract, technology or product-related claims or litigation) as well as government-related items in various jurisdictions in which it operates pertaining to such items as value-added taxes, other indirect taxes, customs and duties and sales and use taxes. It is possible that cash flows or results of operations, in any period, could be materially affected by the unfavorable resolution of one or more of these contingencies. The most significant government-related contingencies exist in Brazil. With regard to the Brazilian matters, the Company believes it has valid defenses for the underlying positions under dispute; however, in order to pursue these defenses, the Company is required to, and has provided, bank guarantees and pledged assets in the aggregate amount of $24.0 million. The Brazilian matters take an extended period of time to proceed through the judicial process and there are a limited number of rulings to date. During 2018, the Company received an unfavorable ruling with respect to a claim related to potentially unpaid excise taxes from 1993. Based on the revised ruling, the Company has determined that it is now probable that it will have to pay the original claim in addition to penalties and interest. The total amount of the claim that has been recorded is $4.8 million. ZoomEssence As previously disclosed, in March 2012, ZoomEssence, Inc. filed a complaint against the Company in the U.S. District Court for the District of New Jersey alleging trade secret misappropriation, breach of contract and unjust enrichment in connection with certain spray dry technology disclosed to the Company. ZoomEssence sought an injunction and monetary damages. In November 2014, the Company filed a counterclaim against ZoomEssence alleging trade secret misappropriation, breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, misappropriation of confidential and proprietary information, common law unfair competition, tortious interference with contractual relations, and conversion. During the second quarter of 2017, the Company and ZoomEssence mutually agreed to settle all claims and counterclaims. The parties agreed to dismiss their claims against one another, with prejudice and without any admission of liability or wrongful conduct, to avoid any further expense and disruption from the litigation. The complaint was dismissed, with prejudice, on July 5, 2017. Under the settlement agreement, the Company made a one-time payment to ZoomEssence of $56 million during the second quarter of 2017 and the parties exchanged full mutual releases. Accordingly, the Company recorded an additional charge of $1.0 million during the second quarter of 2017. FDA-Mandated Product Recall The Company periodically incurs product liability claims based on product that is sold to customers that may be defective or otherwise not in accordance with the customer’s requirements. In the first quarter of 2017, the Company was made aware of a claim for product that was subject to an FDA-mandated product recall. As of September 30, 2018, the Company had recorded total charges of approximately $17.5 million with respect to this claim, of which $5.0 million was recorded in the three months ended March 31, 2018. The Company settled the claim with the customer in the first quarter of 2018 for a total of $16.0 million, of which $3.0 million was paid in the fourth quarter of 2017 and $13.0 million was paid during the three months ended March 31, 2018. The remaining accrual of approximately $1.5 million represents management's best estimate of losses related to claims from other affected parties. The Company does not believe that the ultimate settlement of the claim will have a material impact on its financial condition. In the third quarter of 2018, the Company received $9.8 million in full and final settlement of its claim from the supplier for the affected product, which has been recorded as a reduction of cost of sales on the Consolidated Statement of Income and Comprehensive Income. The Company continues to pursue reimbursement of all or a portion of costs, once incurred, from other parties including its insurance company; however, the nature, timing and amount of any additional such reimbursement cannot be determined at this time. Other The Company determines estimates of reasonably possible losses or ranges of reasonably possible losses in excess of related accrued liabilities, if any, when it has determined that either a loss is reasonably possible or a loss in excess of accrued amounts is reasonably possible and the amount of losses or range of losses is determinable. For all third party contingencies (including labor, contract, technology, tax, product-related claims and business litigation), the Company currently estimates that the aggregate range of reasonably possible losses in excess of any accrued liabilities is $0 to approximately $12 million. The estimates included in this amount are based on the Company’s analysis of currently available information and, as new information is obtained, these estimates may change. Due to the inherent subjectivity of the assessments and the unpredictability of outcomes of legal proceedings, any amounts accrued or included in this aggregate amount may not represent the ultimate loss to the Company from the matters in question. Thus, the Company’s exposure and ultimate losses may be higher or lower, and possibly significantly so, than the amounts accrued or the range disclosed above. |
Consolidated Financial Statements (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | Basis of Presentation These interim statements and related management’s discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the related notes and management’s discussion and analysis of results of operations, liquidity and capital resources included in our 2017 Annual Report on Form 10-K (“2017 Form 10-K”). These interim statements are unaudited. The year-end balance sheet data included in this Form 10-Q was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles in the United States of America. We have historically operated and continue to operate on a 52/53 week fiscal year ending on the Friday closest to the last day of the quarter. For ease of presentation, September 30 and December 31 are used consistently throughout this Form 10-Q and these interim financial statements and related notes to represent the period-end dates. For the 2018 and 2017 quarters, the actual closing dates were September 28 and September 29, respectively. The unaudited interim financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair statement of the results for the periods presented. When used herein, the terms “IFF,” the “Company,” “we,” “us” and “our” mean International Flavors & Fragrances Inc. and its consolidated subsidiaries. |
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Reclassifications and Revisions | Reclassifications and Revisions Certain prior year amounts have been reclassified and revised to conform to current year presentation. As discussed below and in conformity with the Financial Accounting Standards Board's ("FASB") amendments to the Compensation - Retirement Benefits guidance, the Company has reclassified certain components of net periodic benefit expense (income) to Other income (expense), net. |
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Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2018, the FASB issued Accounting Standards Update ("ASU") 2018-15, “Intangibles – Goodwill and Other – Internal – Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force).” The ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This guidance is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on its Consolidated Financial Statements, but does not expect this guidance to have a material impact on its Consolidated Financial Statements. In August 2018, the FASB issued ASU 2018-14, "Compensation – Retirement Benefits – Defined Benefit Plans", which modifies the disclosure requirements on company-sponsored defined benefit plans. The ASU is effective for fiscal years beginning after December 15, 2020 on a retrospective basis to all periods presented. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its Consolidated Financial Statements, but does not expect this guidance to have a material impact on its Consolidated Financial Statements. In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820)", which modifies, removes and adds certain disclosure requirements on fair value measurements. The ASU is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its Consolidated Financial Statements, but does not expect this guidance to have a material impact on its Consolidated Financial Statements. In June 2018, the FASB issued ASU 2018-07, "Compensation – Stock Compensation (Topic 718)" intended to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments. This guidance expands the scope of Topic 718, Compensation-Stock Compensation which currently only includes share-based payments to employees to include share-based payments issued to nonemployees for goods or services. This guidance is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company is currently evaluating the impact this guidance will have on its Consolidated Financial Statements, but does not expect this guidance to have a material impact on its Consolidated Financial Statements. In February 2018, FASB issued ASU 2018-02, "Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" which allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act, in addition to requiring certain disclosures about stranded tax effects. This guidance is effective for periods beginning after December 15, 2018, with an election to adopt early. The Company is currently evaluating the impact this guidance may have on its Consolidated Financial Statements. In August 2017, FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities" which eliminates the requirement to separately measure and present hedge ineffectiveness and aligns the presentation of hedge gains and losses with the underlying hedge item. This guidance is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The amended presentation and disclosure requirements are to be applied prospectively while the amendments to cash flow and net investment hedge relationships are to be applied on a modified retrospective basis. The Company is currently evaluating the impact this guidance will have on its Consolidated Financial Statements, but does not expect this guidance to have a material impact on its Consolidated Financial Statements. In May 2017, the FASB issued ASU 2017-09, "Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting" which clarifies changes to the terms or conditions of a share-based payment award that require an entity to apply modification accounting. This guidance is effective for the current year. The Company has determined that this guidance does not have an impact on its Consolidated Financial Statements as it is not the Company's practice to modify the terms or conditions of a share-based payment award after it has been granted. In March 2017, the FASB issued ASU 2017-07, "Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" which requires employers who present a measure of operating income in their statement of income to include only the service cost component of net periodic pension cost and postretirement costs in operating expenses. This guidance is effective for 2018, and as required, has been applied on a full retrospective basis. The impact of the adoption of this standard on January 1, 2018 was a decrease in operating profit by approximately $8.7 million in the three months ended September 30, 2017 and by approximately $23.6 million in the nine months ended September 30, 2017, and corresponding increases in Other (income) expense, net as presented in the Company's Consolidated Statement of Income and Comprehensive Income for the respective periods. There was no impact to Net income or Net Income per share in either period. See Note 11 of the Consolidated Financial Statements for further details. The new guidance also limits the amount of net periodic benefit cost eligible for capitalization to assets. The new guidance permits only the service cost component of net periodic benefit cost to be eligible for capitalization. The Company applied the practical expedient that permits the use of amounts previously disclosed as the basis for retrospective application and, as provided under the practical expedient, has not presented the income statement impact based on the capitalization of the applicable costs. In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments" which requires changes to the classification of certain activities within the statement of cash flows. This guidance is effective for the current year, and the Company has determined that this adoption does not have an impact on its Consolidated Statement of Cash Flows. In June 2016, the FASB issued ASU 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" which requires issuers to measure expected credit losses for financial assets based on historical experience, current conditions and reasonable and supportable forecasts. As such, an entity will use forward-looking information to estimate credit losses. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements, but does not expect this guidance to have a material impact on its Consolidated Financial Statements. In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)", with subsequent amendments, which requires changes to the accounting for leases. The new guidance establishes a new lease accounting model that requires entities to record assets and liabilities related to leases on the balance sheet for certain types of leases. The guidance will be effective for annual and interim periods beginning after December 15, 2018. The Company expects to adopt this guidance effective December 29, 2018, the first day of the Company’s 2019 fiscal year, and that the adoption of this guidance will result in significant increases to assets and liabilities on its Consolidated Balance Sheet. The Company is still evaluating the impact of this guidance on its Consolidated Statement of Income and Comprehensive Income and Consolidated Statement of Cash Flows. The Company is evaluating the nature of its leases and has compiled a preliminary analysis of the type and location of its leases. The Company expects that the significant portion of its lease liabilities and right of use assets will relate to real estate, with additional lease and corresponding right of use assets in existence that relate to vehicles and machinery. Adoption of ASC Topic 606, Revenue from Contracts with Customers In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers", with subsequent amendments, that provides for a comprehensive model to be used in accounting for revenue arising from contracts with customers (ASC Topic 606, Revenue from Contracts with Customers) (the “Revenue Standard”). Under the Revenue Standard, revenue is recognized to reflect the transfer of goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Companies have the option to apply the new guidance under a retrospective approach to each prior reporting period presented or a modified retrospective approach with the cumulative effect of initially applying the new guidance recognized at the date of initial application within the Consolidated Balance Sheet. The new Revenue Standard became effective for annual reporting periods beginning after December 15, 2017, and the Company has adopted the new revenue standard using the modified retrospective approach on December 30, 2017, the first day of the Company’s 2018 fiscal year. The Company creates and manufactures flavors and fragrances. Approximately 90% of its products, principally Flavors compounds and Fragrances compounds, are customized to customer specifications and have no alternative use other than the sale to the specific customer (“Compounds products”). The remaining revenue is derived largely from Fragrance Ingredients products that, generally, are commodity products with alternative uses and not customized (“Ingredients products”). With respect to the vast majority of the Company’s contracts for Compounds products, the Company currently recognizes revenue on the transfer of control of the product at a point in time as the Company does not have an “enforceable right to payment for performance to date” (as set out in the Revenue Standard). With respect to a small number of contracts for the sale of Compounds, the Company has an “enforceable right to payment for performance to date” and as the products do not have an alternative use, the Company recognizes revenue for these contracts over time and records a contract asset using the output method. The output method recognizes revenue on the basis of direct measurements of the value to the customer of the goods or services transferred to date relative to the remaining goods or services promised under the contract. With respect to the Company’s contracts related to Ingredients products, the Company currently recognizes revenue on the transfer of control of the product at a point in time as such products generally have alternative uses and the Company does not have an “enforceable right to payment for performance to date.” As the Company adopted the Revenue Standard using the modified retrospective method effective the first day of its 2018 fiscal year, results for its 2018 fiscal year are presented under the Revenue Standard while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC Topic 605, which required that revenue was accounted for when the earnings process was complete. |
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Revenue Recognition | The Company recognizes revenue when control of the promised goods is transferred to its customers in an amount that reflects the consideration it expects to be entitled to in exchange for those goods. Sales, value add, and other taxes the Company collects are excluded from revenues. The Company receives payment in accordance with standard customer terms. The following table presents the Company's revenues disaggregated by business unit:
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The following table presents our revenues disaggregated by region, based on the region of our customers:
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Flavors and Fragrances Compounds Revenues The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties and payment terms (which vary by customer) are identified, the contract has commercial substance, and collectability of consideration is probable. Consistent with our past practice, the amount of revenue recognized is adjusted at the time of sale for expected discounts and rebates (“Variable Consideration”). The Company generates revenues primarily by manufacturing customized Flavor compounds and Fragrance compounds for the exclusive use of our customers. The Company combines the shipment of goods with their manufacture to account for both shipment and manufacture as the sole performance obligation. With respect to the vast majority of the Company’s contracts for Compounds products, the Company recognizes a sale at the point in time when it ships the product from its manufacturing facility to its customer, as this is the time when control of the goods has transferred to the customer. The amount of consideration received and revenue recognized is impacted by the Variable Consideration the Company has agreed with its customers. The Company estimates Variable Consideration amounts for each customer based on the specific agreement, an analysis of historical volumes and the current activity with that customer. The Company reassesses its estimates of Variable Consideration at each reporting date throughout the contract period and updates the estimate until the uncertainty is resolved. During the current period, changes to estimates of Variable Consideration have been immaterial. With respect to a small number of contracts for the sale of Compounds products, the Company recognizes revenue over time as it manufactures customized compounds that do not have an alternative use and for which the contracts provide the Company with an enforceable right to payment, including a reasonable profit, at all times during the contract term commencing with the manufacturing of the goods. When revenue is recognized over time, the amount of revenue recognized is based on the extent of progress towards completion of the promised goods. The Company generally uses the output method to measure progress for its contracts as this method reflects the transfer of goods to the customer. Once customization begins, the manufacturing process is generally completed within a two week period. Due to the short time frame for production, there is little estimation uncertainty in the process. In addition, due to the customized nature of our products, our returns are not material. Fragrance Ingredients Revenues The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties and payment terms (which vary by customer) are identified, the contract has commercial substance, and collectability of consideration is probable. The Company generates revenues primarily by manufacturing Ingredients products for the use of our customers. The Company combines the shipment of goods with their manufacture to account for both shipment and manufacture as the sole performance obligation. Generally, the Company recognizes a sale at the time when it ships the product from their manufacturing facility to their customer, as this is the point when control of the goods or services has transferred to the customer. The amount of consideration received and revenue recognized is impacted by discounts offered to its customers. The Company estimates discounts based on an analysis of historical experience and current activity. The Company assesses its estimates of discounts at each reporting date throughout the contract period and updates its estimates until the uncertainty has been resolved. During the current period, changes to estimates of discounts have been immaterial. |
Consolidated Financial Statements (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Contract Asset and Accounts Receivable | The following table reflects the balances in our contract assets and accounts receivable for the nine months ended September 30, 2018 and December 31, 2017:
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Net Income Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Shares Used in Computation of Basic and Diluted Net Income Per Share | A reconciliation of the shares used in the computation of basic and diluted net income per share is as follows:
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On September 17, 2018, the Company issued and sold 12,667,947 shares of its common stock in an underwritten public offering for net proceeds of approximately $1.6 billion. |
Goodwill and Other Intangible Assets, Net (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Movements in Goodwill | Movements in goodwill during 2018 were as follows:
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Schedule of Other Intangible Assets, Net | Other intangible assets, net consisted of the following amounts:
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Restructuring and Other Charges, Net (Tables) |
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Changes in Employee-Related Restructuring Liabilities | Changes in restructuring liabilities during the nine months ended September 30, 2018, were as follows:
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Tangible Equity Units (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Allocation of Tangible Equity Units | The proceeds from the issuance of the TEUs were allocated to equity and debt based on the relative fair value of the respective components of each TEU as follows:
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Schedule of Stock Purchase Contract | Unless settled early at the holder’s or the Company's election, each SPC will automatically settle on September 15, 2021 for a number of shares of common stock per SPC based on the 20 day volume-weighted average price (“VWAP”) of our common stock as follows:
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Borrowings (Tables) |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Debt | Debt consists of the following:
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Stock Compensation Plans (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation Expense and Related Tax Benefits | Stock-based compensation expense and related tax benefits were as follows:
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Segment Information (Tables) |
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reportable Segment Information | Reportable segment information is as follows:
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Net Sales by Destination of Product Delivery | Net sales are attributed to individual regions based upon the destination of product delivery are as follows:
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Employee Benefits (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pension and Other Defined Contribution Retirement Plan Expenses | Pension and other defined contribution retirement plan expenses included the following components:
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Postretirement Benefits Other Than Pension Expenses | Expense recognized for postretirement benefits other than pensions included the following components:
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Financial Instruments (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, All Other Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying Amount and Estimated Fair Values of Financial Instruments | The principal amounts and the estimated fair values of financial instruments at September 30, 2018 and December 31, 2017 consisted of the following:
_______________________
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Derivative Instruments Notional Amount Outstanding | The following table shows the notional amount of the Company’s derivative instruments outstanding as of September 30, 2018 and December 31, 2017:
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Derivative Instruments Measured at Fair Value | The following tables show the Company’s derivative instruments measured at fair value (Level 2 of the fair value hierarchy), as reflected in the Consolidated Balance Sheet as of September 30, 2018 and December 31, 2017:
_______________________
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Derivative Instruments Which Were Not Designated as Hedging Instruments | The following table shows the effect of the Company’s derivative instruments which were not designated as hedging instruments in the Consolidated Statement of Income and Comprehensive Income for the three and nine months ended September 30, 2018 and 2017 (in thousands):
_______________________
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Derivative Instruments Designated as Cash Flow and Net Investment Hedging Instruments | The following table shows the effect of the Company’s derivative instruments designated as cash flow and net investment hedging instruments, net of tax, in the Consolidated Statement of Income and Comprehensive Income for the three and nine months ended September 30, 2018 and 2017 (in thousands):
_______________________
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Accumulated Other Comprehensive Income (Loss) (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Changes in Accumulated Other Comprehensive Income (Loss) | The following tables present changes in the accumulated balances for each component of other comprehensive income, including current period other comprehensive income and reclassifications out of accumulated other comprehensive income:
_______________________ (a) Represents a foreign currency exchange gain from the release of a currency translation adjustment upon the liquidation of a foreign entity in 2017. |
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Reclassifications of Accumulated Other Comprehensive Income to Consolidated Statement of Comprehensive Income | The following table provides details about reclassifications out of accumulated other comprehensive income to the Consolidated Statement of Income and Comprehensive Income:
_______________________
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Net Income Per Share - Reconciliation of Shares Used in Computation of Basic and Diluted Net Income Per Share (Detail) - USD ($) $ in Billions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 17, 2018 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Earnings Per Share [Abstract] | |||||
Basic (shares) | 81,263,000 | 79,063,000 | 79,783,000 | 79,072,000 | |
Assumed dilution under stock plans (shares) | 384,000 | 299,000 | 332,000 | 281,000 | |
Diluted (shares) | 81,647,000 | 79,362,000 | 80,115,000 | 79,353,000 | |
Public Offering | |||||
Subsidiary, Sale of Stock [Line Items] | |||||
Shares issued | 12,667,947 | ||||
Consideration received on transaction | $ 1.6 |
Net Income Per Share - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Dividends declared per share, in dollars per share | $ 0.73 | $ 0.69 | $ 2.11 | $ 1.97 |
Difference amount between basic and diluted net income per share | $ 0.01 | $ 0.01 | $ 0.01 | $ 0.01 |
Net income allocated to PRS | $ 0.1 | $ 0.2 | $ 0.6 | $ 0.8 |
Employee Stock Option [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Stock excluded from computation of diluted net income per share | 0 | 0 | 0 | 0 |
Stock-Settled Appreciation Rights (SARs) [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Stock excluded from computation of diluted net income per share | 0 | 0 | 0 | 0 |
Net Income Per Share (TEU) (Details) $ / shares in Units, $ in Millions |
Sep. 17, 2018
USD ($)
$ / shares
shares
|
---|---|
Earnings Per Share [Abstract] | |
Tangible equity units issued | shares | 16,500,000 |
Tangible equity units proceeds | $ | $ 799.0 |
Price for basic share (usd per share) | $ 0.3134 |
Tangible Equity Units, Price for Shares Diluted | $ 0.3720 |
Goodwill and Other Intangible Assets, Net - Schedule of Movements in Goodwill (Details) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2018
USD ($)
| |
Goodwill [Roll Forward] | |
Balance at December 31, 2017 | $ 1,156,288 |
Acquisitions | 22 |
Foreign exchange | (3,446) |
Balance at September 30, 2018 | $ 1,152,864 |
Goodwill and Other Intangible Assets, Net - Schedule of Other Intangible Assets, Net (Detail) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||
Total carrying value | $ 630,026 | $ 633,077 |
Total accumulated amortization | (244,451) | (217,290) |
Other intangible assets, net | 385,575 | 415,787 |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total carrying value | 405,136 | 407,636 |
Total accumulated amortization | (122,001) | (104,800) |
Trade names & patents | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total carrying value | 38,492 | 38,771 |
Total accumulated amortization | (17,558) | (15,241) |
Technological know-how | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total carrying value | 161,622 | 161,856 |
Total accumulated amortization | (83,633) | (76,766) |
Other | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total carrying value | 24,776 | 24,814 |
Total accumulated amortization | $ (21,259) | $ (20,483) |
Restructuring and Other Charges, Net - Changes in Employee-Related Restructuring Liabilities (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Restructuring Reserve [Roll Forward] | ||||
Additional charges, net | $ 927 | $ 3,249 | $ 2,830 | $ 14,183 |
Fragrance Ingredients Rationalization [Member] | ||||
Restructuring Reserve [Roll Forward] | ||||
Beginning Balance | 7,957 | |||
Additional charges, net | 2,830 | |||
Payments | (6,396) | |||
Ending Balance | 4,391 | 4,391 | ||
Fragrance Ingredients Rationalization [Member] | Employee-Related Costs | ||||
Restructuring Reserve [Roll Forward] | ||||
Beginning Balance | 7,539 | |||
Additional charges, net | 2,830 | |||
Payments | (6,396) | |||
Ending Balance | 3,973 | 3,973 | ||
Fragrance Ingredients Rationalization [Member] | Other | ||||
Restructuring Reserve [Roll Forward] | ||||
Beginning Balance | 418 | |||
Additional charges, net | 0 | |||
Payments | 0 | |||
Ending Balance | $ 418 | $ 418 |
Goodwill and Other Intangible Assets, Net - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization of acquisition-related intangibles | $ 9,003 | $ 8,766 | $ 27,772 | $ 24,327 |
Estimated annual amortization, 2018 | 36,200 | 36,200 | ||
Estimated annual amortization, 2019 | 34,800 | 34,800 | ||
Estimated annual amortization, 2020 | 34,100 | 34,100 | ||
Estimated annual amortization, 2021 | 29,300 | 29,300 | ||
Estimated annual amortization, 2022 | 25,200 | 25,200 | ||
Estimated annual amortization, 2023 | $ 25,100 | $ 25,100 |
Tangible Equity Units (Details) |
Sep. 17, 2018
USD ($)
$ / shares
shares
|
---|---|
Equity [Abstract] | |
Tangible equity units issued | shares | 16,500,000 |
Stated rate | 6.00% |
Price per unit | $ 50 |
Tangible equity units proceeds | $ | $ 799,000,000 |
Less: Issuance costs | $ | 26,000,000 |
Fair Value per TEU | $ | $ 8.4529 |
Quarterly installments | $ 0.75 |
Initial installment | $ 0.73333 |
Interest and partial repayment of principal | 3.79% |
Price for basic share (usd per share) | $ 0.3134 |
Tangible Equity Units (Allocation of TEU) (Details) |
Sep. 17, 2018
USD ($)
|
---|---|
Tangible Equity Units [Line Items] | |
Fair Value per TEU | $ 8.4529 |
Gross Proceeds | 825,000,000 |
Less: Issuance costs | 26,000,000 |
Net Proceeds | 799,000,000 |
SPC | |
Tangible Equity Units [Line Items] | |
Fair Value per TEU | 0 |
Gross Proceeds | 685,500,000 |
Less: Issuance costs | 21,600,000 |
Net Proceeds | 663,900,000 |
Amortizing Note | |
Tangible Equity Units [Line Items] | |
Fair Value per TEU | 0 |
Gross Proceeds | 139,500,000 |
Less: Issuance costs | 4,400,000 |
Net Proceeds | $ 135,100,000 |
Tangible Equity Units (Settlement conditions) (Details) |
Sep. 30, 2018
$ / shares
|
---|---|
Condition One | |
Tangible Equity Units [Line Items] | |
Share price (usd per share) | $ 159.54 |
Condition One | Minimum | |
Tangible Equity Units [Line Items] | |
Tangible Equity Rate, Settlement Rate | 0.3134 |
Condition Two | |
Tangible Equity Units [Line Items] | |
Tangible Equity Units, Conditional Value | 50 |
Condition Two | Minimum | |
Tangible Equity Units [Line Items] | |
Share price (usd per share) | 130.25 |
Condition Two | Maximum | |
Tangible Equity Units [Line Items] | |
Share price (usd per share) | 159.54 |
Condition Three | |
Tangible Equity Units [Line Items] | |
Share price (usd per share) | 130.25 |
Condition Three | Maximum | |
Tangible Equity Units [Line Items] | |
Tangible Equity Rate, Settlement Rate | $ 0.3839 |
Stock Compensation Plans - Stock-Based Compensation Expense and Related Tax Benefits (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | $ 8,412 | $ 8,652 | $ 23,983 | $ 24,596 |
Less: Tax benefit | (1,422) | (2,574) | (4,320) | (7,123) |
Total stock-based compensation expense, after tax | 6,990 | 6,078 | 19,663 | 17,473 |
Equity-based awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 6,867 | 7,256 | 22,041 | 20,149 |
Liability-based awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | $ 1,545 | $ 1,396 | $ 1,942 | $ 4,447 |
Segment Information - Additional Information (Detail) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 30, 2018
USD ($)
|
Jun. 30, 2018
USD ($)
|
Sep. 30, 2017
USD ($)
|
Jun. 30, 2017
USD ($)
|
Sep. 30, 2018
USD ($)
segment
|
Sep. 30, 2017
USD ($)
|
|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||||
Number of segments | segment | 2 | |||||
Revenues | $ 907,548 | $ 872,940 | $ 2,758,492 | $ 2,544,094 | ||
Net sales related to the U.S. | ||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||||
Revenues | $ 238,342 | $ 223,750 | 703,272 | 654,235 | ||
Net sales attributed to all foreign countries | ||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||||
Revenues | $ 669,206 | $ 649,190 | $ 2,055,220 | $ 1,889,859 | ||
Net sales attributed to all foreign countries | Sales | ||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||||
Maximum percentage of total consolidated net sales attributed to any non-U.S. country | 5.80% |
Segment Information Segment Information - Net Sales by Destination of Product Delivery (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 30, 2018 |
Jun. 30, 2018 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||||
Net sales | $ 907,548 | $ 872,940 | $ 2,758,492 | $ 2,544,094 | ||
Net sales related to the U.S. | ||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||||
Net sales | $ 238,342 | $ 223,750 | 703,272 | 654,235 | ||
Net sales attributed to all foreign countries | ||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||||
Net sales | $ 669,206 | $ 649,190 | $ 2,055,220 | $ 1,889,859 |
Employee Benefits - Postretirement Benefits Other Than Pension Expenses (Detail) - Defined Contribution and Other Retirement Plans [Member] - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost for benefits earned | $ 196 | $ 221 | $ 587 | $ 663 |
Interest cost on projected benefit obligation | 654 | 588 | 1,962 | 1,764 |
Net amortization and deferrals | (1,189) | (1,046) | (3,567) | (3,138) |
Net periodic benefit income | $ (339) | $ (237) | $ (1,018) | $ (711) |
Financial Instruments - Derivative Instruments Notional Amount Outstanding (Detail) - Non-Deal Contingent Swaps - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Foreign currency contracts | ||
Schedule Of Information By Major Category Of Credit Derivatives Contracts [Line Items] | ||
Derivative instruments outstanding | $ 411,788 | $ 896,947 |
Interest rate swaps | ||
Schedule Of Information By Major Category Of Credit Derivatives Contracts [Line Items] | ||
Derivative instruments outstanding | $ 0 | $ 150,000 |
Financial Instruments - Derivative Instruments Which Were Not Designated as Hedging Instruments (Detail) - Not Designated as Hedging Instrument [Member] - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Foreign currency contracts | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Derivative, Gain (Loss) on Derivative, Net | $ 34,741 | $ 4,024 | $ 21,853 | $ (9,157) |
Non-Deal Contingent Swaps | Foreign currency contracts | Other income (expense), net | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Derivative, Gain (Loss) on Derivative, Net | 8,277 | 4,024 | 9,347 | (9,157) |
Deal Contingent Swaps | Foreign currency contracts | Other income (expense), net | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Derivative, Gain (Loss) on Derivative, Net | 1,175 | 0 | 12,154 | 0 |
Deal Contingent Swaps | Interest rate swaps | Interest expense | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Derivative, Gain (Loss) on Derivative, Net | $ 25,289 | $ 0 | $ 352 | $ 0 |
Commitments and Contingencies - Additional Information (Detail) |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 30, 2018
USD ($)
Facility
|
Mar. 31, 2018
USD ($)
|
Dec. 31, 2017
USD ($)
|
Sep. 30, 2017
USD ($)
|
Sep. 30, 2018
USD ($)
Facility
property
|
Jun. 06, 2018
USD ($)
|
|
Commitments And Contingencies [Line Items] | ||||||
Bank guarantees related to appeals on income tax and indirect tax cases | $ 13,500,000 | |||||
Available lines of credit | $ 102,800,000 | $ 102,800,000 | ||||
Duration as potentially responsible party, years | 20 years | |||||
Number of facilities under potentially responsible party investigation | property | 8 | |||||
Property, Plant and Equipment, Net | 874,817,000 | $ 880,580,000 | $ 874,817,000 | |||
Bank guarantees and pledged assets to pursue defenses related to other contingencies | 24,000,000 | |||||
Loss contingency accrual for the period | 4,800,000 | |||||
Additional litigation reserve | $ 1,000,000 | |||||
Product liability | 5,000,000 | |||||
Settlement of claim | 3,000,000 | 16,000,000 | ||||
Product Liability Contingency, Loss Exposure in Excess of Accrual, Amount Paid | $ 13,000,000 | |||||
Product Liability Contingency, Loss Exposure in Excess of Accrual, Best Estimate | 1,500,000 | |||||
Reimbursement to supplier | 9,800,000 | |||||
Bank guarantees and standby letters of credit [Member] | ||||||
Commitments And Contingencies [Line Items] | ||||||
Bank guarantees and letters of credit outstanding | 49,600,000 | |||||
Pledged assets [Member] | ||||||
Commitments And Contingencies [Line Items] | ||||||
The amount of pledged assets, principally PP&E to cover income tax and indirect tax assessments | 10,500,000 | |||||
Reserve for Environmental Costs [Member] | ||||||
Commitments And Contingencies [Line Items] | ||||||
Estimation of possible loss | 5,000,000 | 5,000,000 | ||||
Damages from Product Defects [Member] | ||||||
Commitments And Contingencies [Line Items] | ||||||
Additional litigation reserve | 17,500,000 | 17,500,000 | ||||
CHINA | ||||||
Commitments And Contingencies [Line Items] | ||||||
Property, Plant and Equipment, Net | $ 162,000,000 | $ 162,000,000 | ||||
Number of facilities | Facility | 5 | 5 | ||||
Number of facilities under construction | Facility | 1 | 1 | ||||
Guangzhou Flavors Plant [Member] | CHINA | ||||||
Commitments And Contingencies [Line Items] | ||||||
Property, Plant and Equipment, Net | $ 67,000,000 | $ 67,000,000 | ||||
Zhejiang Ingredients Plant [Member] | ||||||
Commitments And Contingencies [Line Items] | ||||||
Gain Contingency, Expected Relocation Payments | 50,000,000 | |||||
Gain Contingency, Relocation Payments Received | 0 | 15,000,000 | ||||
Zhejiang Ingredients Plant [Member] | CHINA | ||||||
Commitments And Contingencies [Line Items] | ||||||
Property, Plant and Equipment, Net | $ 21,000,000 | $ 21,000,000 | ||||
Minimum | ||||||
Commitments And Contingencies [Line Items] | ||||||
Estimation of possible loss | 0 | |||||
Maximum | ||||||
Commitments And Contingencies [Line Items] | ||||||
Estimation of possible loss | $ 12,000,000 | |||||
ZoomEssence [Member] | ||||||
Commitments And Contingencies [Line Items] | ||||||
Payments for legal settlements | $ 56,000,000 | |||||
Amended credit facility | Citibank, N.A. | ||||||
Commitments And Contingencies [Line Items] | ||||||
Line of credit facility, maximum borrowing capacity | $ 1,000,000,000 |
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