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 | ¨ |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value 12 1/2¢ per share | IFF | New York Stock Exchange | ||
6.00% Tangible Equity Units | IFFT | New York Stock Exchange | ||
0.500% Senior Notes due 2021 | IFF 21 | New York Stock Exchange | ||
1.750% Senior Notes due 2024 | IFF 24 | New York Stock Exchange | ||
1.800% Senior Notes due 2026 | IFF 26 | New York Stock Exchange |
(DOLLARS IN THOUSANDS) | March 31, 2019 | December 31, 2018 | |||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 483,504 | $ | 634,897 | |||
Restricted cash | 13,625 | 13,625 | |||||
Trade receivables (net of allowances of $8,815 and $9,173, respectively) | 1,003,965 | 937,765 | |||||
Inventories: Raw materials | 586,175 | 568,916 | |||||
Work in process | 52,033 | 48,819 | |||||
Finished goods | 476,280 | 460,802 | |||||
Total Inventories | 1,114,488 | 1,078,537 | |||||
Prepaid expenses and other current assets | 310,243 | 277,036 | |||||
Total Current Assets | 2,925,825 | 2,941,860 | |||||
Property, plant and equipment, at cost | 2,581,131 | 2,492,938 | |||||
Accumulated depreciation | (1,287,102 | ) | (1,251,786 | ) | |||
1,294,029 | 1,241,152 | ||||||
Goodwill | 5,434,000 | 5,378,388 | |||||
Other intangible assets, net | 2,974,177 | 3,039,322 | |||||
Other assets | 583,389 | 288,673 | |||||
Total Assets | $ | 13,211,420 | $ | 12,889,395 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current Liabilities: | |||||||
Bank borrowings, overdrafts, and current portion of long-term debt | $ | 84,003 | $ | 48,642 | |||
Accounts payable | 476,413 | 471,382 | |||||
Accrued payroll and bonus | 91,293 | 121,080 | |||||
Dividends payable | 77,799 | 77,779 | |||||
Other current liabilities | 414,626 | 409,428 | |||||
Total Current Liabilities | 1,144,134 | 1,128,311 | |||||
Long-term debt | 4,421,430 | 4,504,417 | |||||
Retirement liabilities | 225,834 | 227,172 | |||||
Deferred income taxes | 658,804 | 655,879 | |||||
Other liabilities | 492,029 | 248,436 | |||||
Total Other Liabilities | 5,798,097 | 5,635,904 | |||||
Commitments and Contingencies (Note 15) | |||||||
Redeemable noncontrolling interests | 114,711 | 81,806 | |||||
Shareholders’ Equity: | |||||||
Common stock 12 1/2¢ par value; 500,000,000 shares authorized; 128,526,137 shares issued as of March 31, 2019 and December 31, 2018; and 106,646,581 and 106,619,202 shares outstanding as of March 31, 2019 and December 31, 2018, respectively | 16,066 | 16,066 | |||||
Capital in excess of par value | 3,802,602 | 3,793,609 | |||||
Retained earnings | 4,011,326 | 3,956,221 | |||||
Accumulated other comprehensive loss | (657,354 | ) | (702,227 | ) | |||
Treasury stock, at cost (21,879,556 and 21,906,935 shares as of March 31, 2019 and December 31, 2018, respectively) | (1,029,429 | ) | (1,030,718 | ) | |||
Total Shareholders’ Equity | 6,143,211 | 6,032,951 | |||||
Noncontrolling interest | 11,267 | 10,423 | |||||
Total Shareholders’ Equity including noncontrolling interest | 6,154,478 | 6,043,374 | |||||
Total Liabilities and Shareholders’ Equity | $ | 13,211,420 | $ | 12,889,395 |
Three Months Ended | |||||||
March 31, | |||||||
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) | 2019 | 2018 | |||||
Net sales | $ | 1,297,402 | $ | 930,928 | |||
Cost of goods sold | 766,143 | 525,119 | |||||
Gross profit | 531,259 | 405,809 | |||||
Research and development expenses | 90,596 | 78,476 | |||||
Selling and administrative expenses | 213,182 | 142,644 | |||||
Amortization of acquisition-related intangibles | 47,625 | 9,185 | |||||
Restructuring and other charges, net | 16,174 | 717 | |||||
Gains on sales of fixed assets | (188 | ) | (69 | ) | |||
Operating profit | 163,870 | 174,856 | |||||
Interest expense | 36,572 | 16,595 | |||||
Other income, net | (7,278 | ) | (576 | ) | |||
Income before taxes | 134,576 | 158,837 | |||||
Taxes on income | 23,362 | 29,421 | |||||
Net income | 111,214 | 129,416 | |||||
Net income attributable to noncontrolling interests | 2,385 | — | |||||
Net income attributable to IFF stockholders | 108,829 | 129,416 | |||||
Other comprehensive income, after tax: | |||||||
Foreign currency translation adjustments | 42,377 | 14,803 | |||||
Losses on derivatives qualifying as hedges | (97 | ) | (529 | ) | |||
Pension and postretirement net liability | 2,593 | 2,629 | |||||
Other comprehensive income | 44,873 | 16,903 | |||||
Comprehensive income attributable to IFF stockholders | $ | 153,702 | $ | 146,319 | |||
Net income per share - basic | $ | 0.97 | $ | 1.63 | |||
Net income per share - diluted | 0.96 | 1.63 | |||||
Average number of shares outstanding - basic | 111,864 | 79,018 | |||||
Average number of shares outstanding - diluted | 113,389 | 79,393 |
Three Months Ended March 31, | |||||||
(DOLLARS IN THOUSANDS) | 2019 | 2018 | |||||
Cash flows from operating activities: | |||||||
Net income | $ | 111,214 | $ | 129,416 | |||
Adjustments to reconcile to net cash provided by (used in) operating activities | |||||||
Depreciation and amortization | 81,775 | 33,384 | |||||
Deferred income taxes | (12,389 | ) | 18,404 | ||||
Gains on sale of assets | (188 | ) | (69 | ) | |||
Stock-based compensation | 7,604 | 7,620 | |||||
Pension contributions | (3,956 | ) | (4,387 | ) | |||
Litigation settlement | — | (12,969 | ) | ||||
Changes in assets and liabilities, net of acquisitions: | |||||||
Trade receivables | (55,935 | ) | (61,301 | ) | |||
Inventories | (24,719 | ) | (30,185 | ) | |||
Accounts payable | 8,988 | (8,435 | ) | ||||
Accruals for incentive compensation | (36,969 | ) | (36,583 | ) | |||
Other current payables and accrued expenses | (11,321 | ) | (18,540 | ) | |||
Other assets | (9,978 | ) | (26,035 | ) | |||
Other liabilities | (6,894 | ) | (1,715 | ) | |||
Net cash provided by (used in) operating activities | 47,232 | (11,395 | ) | ||||
Cash flows from investing activities: | |||||||
Cash paid for acquisitions, net of cash received | (33,895 | ) | (22 | ) | |||
Additions to property, plant and equipment | (57,609 | ) | (33,105 | ) | |||
Proceeds from life insurance contracts | 1,890 | — | |||||
Maturity of net investment hedges | — | (2,405 | ) | ||||
Proceeds from disposal of assets | 3,970 | 293 | |||||
Contingent consideration paid | (4,655 | ) | — | ||||
Net cash used in investing activities | (90,299 | ) | (35,239 | ) | |||
Cash flows from financing activities: | |||||||
Cash dividends paid to shareholders | (77,779 | ) | (54,420 | ) | |||
Increase in revolving credit facility and short term borrowings | 2,895 | 53,688 | |||||
Repayments on debt | (36,156 | ) | — | ||||
Proceeds from issuance of stock in connection with stock options | 200 | — | |||||
Employee withholding taxes paid | (1,339 | ) | (3,266 | ) | |||
Purchase of treasury stock | — | (10,617 | ) | ||||
Net cash used in financing activities | (112,179 | ) | (14,615 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 3,853 | (1,521 | ) | ||||
Net change in cash and cash equivalents | (151,393 | ) | (62,770 | ) | |||
Cash and cash equivalents at beginning of year | 648,522 | 368,046 | |||||
Cash and cash equivalents at end of period | $ | 497,129 | $ | 305,276 | |||
Supplemental Disclosures: | |||||||
Interest paid, net of amounts capitalized | $ | 48,506 | $ | 20,236 | |||
Income taxes paid | 33,326 | 24,939 | |||||
Accrued capital expenditures | 14,241 | 18,868 |
(DOLLARS IN THOUSANDS) | Common stock | Capital in excess of par value | Retained earnings | Accumulated other comprehensive (loss) income | Treasury stock | Non-controlling interest | Total | |||||||||||||||||||||||
Shares | Cost | |||||||||||||||||||||||||||||
Balance at January 1, 2018 | $ | 14,470 | $ | 162,827 | $ | 3,870,621 | $ | (637,482 | ) | (36,910,809 | ) | $ | (1,726,234 | ) | $ | 5,092 | $ | 1,689,294 | ||||||||||||
Net income | 129,416 | 720 | 130,136 | |||||||||||||||||||||||||||
Adoption of ASU 2014-09 | 2,158 | 2,158 | ||||||||||||||||||||||||||||
Cumulative translation adjustment | 14,803 | 14,803 | ||||||||||||||||||||||||||||
Losses on derivatives qualifying as hedges; net of tax $106 | (529 | ) | (529 | ) | ||||||||||||||||||||||||||
Pension liability and postretirement adjustment; net of tax $1,894 | 2,629 | 2,629 | ||||||||||||||||||||||||||||
Cash dividends declared ($0.69 per share) | (54,404 | ) | (54,404 | ) | ||||||||||||||||||||||||||
Stock options/SSARs | (226 | ) | 15,678 | 736 | 510 | |||||||||||||||||||||||||
Treasury share repurchases | (73,154 | ) | (10,977 | ) | (10,977 | ) | ||||||||||||||||||||||||
Vested restricted stock units and awards | (3,704 | ) | 30,294 | 1,426 | (2,278 | ) | ||||||||||||||||||||||||
Stock-based compensation | 7,620 | 7,620 | ||||||||||||||||||||||||||||
Balance at March 31, 2018 | $ | 14,470 | $ | 166,517 | $ | 3,947,791 | $ | (620,579 | ) | (36,937,991 | ) | $ | (1,735,049 | ) | $ | 5,812 | $ | 1,778,962 |
(DOLLARS IN THOUSANDS) | Common stock | Capital in excess of par value | Retained earnings | Accumulated other comprehensive (loss) income | Treasury stock | Non-controlling interest | Total | |||||||||||||||||||||||
Shares | Cost | |||||||||||||||||||||||||||||
Balance at January 1, 2019 | $ | 16,066 | $ | 3,793,609 | $ | 3,956,221 | $ | (702,227 | ) | (21,906,935 | ) | $ | (1,030,718 | ) | $ | 10,423 | $ | 6,043,374 | ||||||||||||
Net income | 108,829 | 844 | 109,673 | |||||||||||||||||||||||||||
Adoption of ASU 2016-02 | 23,094 | 23,094 | ||||||||||||||||||||||||||||
Adoption of ASU 2017-12 | 981 | 981 | ||||||||||||||||||||||||||||
Cumulative translation adjustment | 42,377 | 42,377 | ||||||||||||||||||||||||||||
Losses on derivatives qualifying as hedges; net of tax $44 | (97 | ) | (97 | ) | ||||||||||||||||||||||||||
Pension liability and postretirement adjustment; net of tax $836 | 2,593 | 2,593 | ||||||||||||||||||||||||||||
Cash dividends declared ($0.73 per share) | (77,799 | ) | (77,799 | ) | ||||||||||||||||||||||||||
Stock options/SSARs | 3,424 | 13,978 | 660 | 4,084 | ||||||||||||||||||||||||||
Vested restricted stock units and awards | (2,405 | ) | 13,401 | 629 | (1,776 | ) | ||||||||||||||||||||||||
Stock-based compensation | 7,604 | 7,604 | ||||||||||||||||||||||||||||
Redeemable NCI | 370 | 370 | ||||||||||||||||||||||||||||
Balance at March 31, 2019 | $ | 16,066 | $ | 3,802,602 | $ | 4,011,326 | $ | (657,354 | ) | (21,879,556 | ) | $ | (1,029,429 | ) | $ | 11,267 | $ | 6,154,478 |
(DOLLARS IN THOUSANDS) | March 31, 2019 | December 31, 2018 | |||||
Receivables (included in Trade receivables) | $ | 1,012,780 | $ | 946,938 | |||
Contract asset - Short term | 2,149 | 487 |
Three Months Ended | |||||||
March 31, | |||||||
(DOLLARS IN THOUSANDS) | 2019 | 2018 | |||||
Flavor Compounds | $ | 713,560 | $ | 449,019 | |||
Fragrance Compounds | 389,111 | 378,633 | |||||
Ingredients | 194,731 | 103,276 | |||||
Total revenues | $ | 1,297,402 | $ | 930,928 |
Three Months Ended March 31, | |||||||
(SHARES IN THOUSANDS) | 2019 | 2018 | |||||
Net Income | |||||||
Net income attributable to IFF stockholders | $ | 108,829 | $ | 129,416 | |||
Add: Decrease in redemption value of redeemable noncontrolling interests in excess of earnings allocated | 370 | — | |||||
Net income available to IFF stockholders | $ | 109,199 | $ | 129,416 | |||
Shares | |||||||
Weighted average common shares outstanding (basic)(1) | 111,864 | 79,018 | |||||
Adjustment for assumed dilution(2): | |||||||
Stock options and restricted stock awards | 362 | 375 | |||||
SPC portion of TEUs | 1,163 | — | |||||
Weighted average shares assuming dilution (diluted) | 113,389 | 79,393 | |||||
Net Income per Share | |||||||
Net income per share - basic | $ | 0.97 | $ | 1.63 | |||
Net income per share - dilutive | 0.96 | 1.63 |
(1) | For the three months ended March 31, 2019, 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. |
As reported in the fourth quarter of 2018 | Measurement period adjustments | As reported in the first quarter of 2019 | ||||||||
Cash and cash equivalents | $ | 140,747 | $ | 140,747 | ||||||
Other current assets | 699,627 | 699,627 | ||||||||
Identifiable intangible assets | 2,690,000 | (21,700 | ) | 2,668,300 | ||||||
Other assets | 353,710 | 43,200 | 396,910 | |||||||
Equity method investments | 25,791 | 25,791 | ||||||||
Current liabilities | (311,325 | ) | (311,325 | ) | ||||||
Debt assumed | (77,037 | ) | (77,037 | ) | ||||||
Other liabilities | (632,488 | ) | (12,221 | ) | (644,709 | ) | ||||
Redeemable noncontrolling interest | (97,510 | ) | (5,700 | ) | (103,210 | ) | ||||
Noncontrolling interest | (3,700 | ) | (3,700 | ) | ||||||
Goodwill | 4,243,079 | (3,579 | ) | 4,239,500 | ||||||
Total Purchase Consideration | $ | 7,030,894 | $ | 7,030,894 |
(IN THOUSANDS) | Estimated Amounts | Weighted-Average Useful Life | |||
Product formula | $ | 290,000 | 10 to 12 years | ||
Customer relationships | 2,230,000 | 18 to 23 years | |||
Trade names | 140,000 | 23 to 26 years | |||
Favorable/Unfavorable Leases, net | 8,300 | 5 to 15 years | |||
Total | $ | 2,668,300 |
(IN THOUSANDS) | Three Months Ended March 31, 2018 | ||
Unaudited pro forma net sales | $ | 1,315,733 | |
Unaudited pro forma net income attributable to the Company | 112,620 |
(DOLLARS IN THOUSANDS) | Employee-Related Costs | Other | Total | ||||||||
Balance at December 31, 2018 | $ | 4,125 | $ | 1,075 | $ | 5,200 | |||||
Additional charges, net | 16,174 | — | 16,174 | ||||||||
Payments | (1,393 | ) | — | (1,393 | ) | ||||||
Balance at March 31, 2019 | $ | 18,906 | $ | 1,075 | $ | 19,981 |
(DOLLARS IN THOUSANDS) | Goodwill | ||
Balance at December 31, 2018 | $ | 5,378,388 | |
Acquisitions(1) | 61,711 | ||
Frutarom measurement period adjustment | (3,579 | ) | |
Foreign exchange | (2,520 | ) | |
Balance at March 31, 2019 | $ | 5,434,000 |
(1) | Additions relate to the 2019 acquisition activity. See Note 3 for details. |
March 31, | December 31, | ||||||
(DOLLARS IN THOUSANDS) | 2019 | 2018 | |||||
Asset Type | |||||||
Customer relationships | $ | 2,638,998 | $ | 2,658,659 | |||
Trade names & patents | 177,566 | 177,770 | |||||
Technological know-how | 463,989 | 451,016 | |||||
Other | 33,009 | 43,766 | |||||
Total carrying value | 3,313,562 | 3,331,211 | |||||
Accumulated Amortization | |||||||
Customer relationships | (193,263 | ) | (156,906 | ) | |||
Trade names & patents | (21,760 | ) | (19,593 | ) | |||
Technological know-how | (106,181 | ) | (93,051 | ) | |||
Other | (18,181 | ) | (22,339 | ) | |||
Total accumulated amortization | (339,385 | ) | (291,889 | ) | |||
Other intangible assets, net | $ | 2,974,177 | $ | 3,039,322 |
(DOLLARS IN THOUSANDS) | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||||||
Estimated future intangible amortization expense | $ | 190,281 | $ | 185,492 | $ | 180,661 | $ | 176,734 | $ | 176,621 |
(DOLLARS IN THOUSANDS) | March 31, 2019 | December 31, 2018 | |||||
Operating lease right-of-use assets | $ | 300,888 | $ | — | |||
Deferred income taxes | 82,928 | 89,000 | |||||
Overfunded pension plans | 79,122 | 75,158 | |||||
Cash surrender value of life insurance contracts | 45,444 | 43,179 | |||||
Equity method investments | 26,735 | 31,470 | |||||
Other(a) | 48,272 | 49,866 | |||||
Total | $ | 583,389 | $ | 288,673 |
(a) | Includes land usage rights in China and long term deposits. |
(DOLLARS IN THOUSANDS) | Effective Interest Rate | March 31, 2019 | December 31, 2018 | |||||||
2020 Notes(1) | 3.69 | % | $ | 298,743 | $ | 298,499 | ||||
2021 Euro Notes(1) | 0.82 | % | 334,486 | 337,704 | ||||||
2023 Notes(1) | 3.30 | % | 298,774 | 298,698 | ||||||
2024 Euro Notes(1) | 1.88 | % | 558,869 | 564,034 | ||||||
2026 Euro Notes(1) | 1.93 | % | 891,757 | 899,886 | ||||||
2028 Notes(1) | 4.57 | % | 396,460 | 396,377 | ||||||
2047 Notes(1) | 4.44 | % | 493,256 | 493,151 | ||||||
2048 Notes(1) | 5.12 | % | 785,838 | 785,788 | ||||||
Term Loan(1) | 3.65 | % | 324,295 | 349,163 | ||||||
Amortizing Notes(1) | 6.09 | % | 114,667 | 125,007 | ||||||
Bank overdrafts and other | 8,231 | 4,695 | ||||||||
Deferred realized gains on interest rate swaps | 57 | 57 | ||||||||
4,505,433 | 4,553,059 | |||||||||
Less: Short term borrowings(3) | (84,003 | ) | (48,642 | ) | ||||||
$ | 4,421,430 | $ | 4,504,417 |
(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, overdrafts and current portion of long-term debt. |
Three Months Ended | |||
(DOLLARS IN THOUSANDS) | March 31, 2019 | ||
Operating lease cost | $ | 12,469 |
Three Months Ended | |||
(DOLLARS IN THOUSANDS) | March 31, 2019 | ||
Cash paid for amounts included in the measurement of lease liabilities: | |||
Operating cash flows from operating leases | $ | 11,076 |
(DOLLARS IN THOUSANDS) | March 31, 2019 | ||
Operating Leases | |||
Operating lease right of use assets | $ | 300,888 | |
Other current liabilities | 37,198 | ||
Operating lease liabilities | 266,569 | ||
Total operating lease liabilities | $ | 303,767 |
Weighted Average Remaining Lease Term (in years) | Weighted Average Discount Rate | |||
Operating leases | 11.9 | 3.75 | % |
(DOLLARS IN THOUSANDS) | March 31, 2019 | ||
Less than 1 Year | $ | 37,680 | |
1-3 Years | 77,037 | ||
3-5 Years | 65,087 | ||
After 5 years | 211,387 | ||
Less: Imputed Interest | (87,424 | ) | |
Total | $ | 303,767 |
(DOLLARS IN THOUSANDS) | December 31, 2018 | ||
Less than 1 Year | $ | 49,350 | |
1-3 Years | 78,600 | ||
3-5 Years | 60,672 | ||
After 5 years | 201,079 | ||
Total | $ | 389,701 |
(DOLLARS IN THOUSANDS) | March 31, 2019 | ||
North America | $ | 142,748 | |
Europe, Africa and Middle East | 120,785 | ||
Greater Asia | 23,151 | ||
Latin America | 14,204 | ||
Consolidated | $ | 300,888 |
Three Months Ended March 31, | |||||||
(DOLLARS IN THOUSANDS) | 2019 | 2018 | |||||
Equity-based awards | $ | 7,604 | $ | 7,620 | |||
Liability-based awards | 730 | 155 | |||||
Total stock-based compensation expense | 8,334 | 7,775 | |||||
Less: Tax benefit | (1,382 | ) | (1,563 | ) | |||
Total stock-based compensation expense, after tax | $ | 6,952 | $ | 6,212 |
Three Months Ended | |||||||
March 31, | |||||||
(DOLLARS IN THOUSANDS) | 2019 | 2018 | |||||
Net sales: | |||||||
Taste | $ | 444,602 | $ | 449,019 | |||
Scent | 488,352 | 481,909 | |||||
Frutarom | 364,448 | — | |||||
Consolidated | $ | 1,297,402 | $ | 930,928 | |||
Segment profit: | |||||||
Taste | $ | 108,455 | $ | 111,564 | |||
Scent | 85,815 | 93,277 | |||||
Frutarom | 29,091 | — | |||||
Global expenses | (18,673 | ) | (23,825 | ) | |||
Operational Improvement Initiatives (a) | (406 | ) | (1,026 | ) | |||
Acquisition Related Costs (b) | — | 514 | |||||
Integration Related Costs (c) | (14,897 | ) | — | ||||
Restructuring and Other Charges, net (d) | (16,174 | ) | (717 | ) | |||
Gains on Sale of Assets | 188 | 69 | |||||
FDA Mandated Product Recall (e) | — | (5,000 | ) | ||||
Frutarom Acquisition Related Costs (f) | (9,529 | ) | — | ||||
Operating profit | 163,870 | 174,856 | |||||
Interest expense | (36,572 | ) | (16,595 | ) | |||
Other income (expense) | 7,278 | 576 | |||||
Income before taxes | $ | 134,576 | $ | 158,837 |
(a) | Represents accelerated depreciation related to a plant relocation in India, as well as a lab closure in Taiwan for 2018. |
(b) | Represents adjustments to the contingent consideration payable for PowderPure, and transaction costs related to Fragrance Resources and PowderPure within Selling and administrative expenses. |
(c) | Represents costs related to the integration of the Frutarom acquisition, principally advisory expenses. |
(d) | For 2019, represents severance costs related primarily to Scent. For 2018, represents severance costs related to the 2017 Productivity Program and Taiwan lab closure. |
(e) | Represents losses related to the FDA mandated recall. |
(f) | Represents transaction-related costs and expenses related to the acquisition of Frutarom. Amount primarily includes $7.9 million of amortization for inventory "step-up" costs and $1.7 million of transaction costs included in Selling and administrative expenses. |
Three Months Ended | |||||||
March 31, | |||||||
(DOLLARS IN THOUSANDS) | 2019 | 2018 | |||||
Europe, Africa and Middle East | $ | 529,606 | $ | 309,312 | |||
Greater Asia | 287,962 | 243,557 | |||||
North America | 301,059 | 241,146 | |||||
Latin America | 178,775 | 136,913 | |||||
Consolidated | $ | 1,297,402 | $ | 930,928 |
(DOLLARS IN THOUSANDS) | U.S. Plans | ||||||
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Service cost for benefits earned(1) | $ | 474 | $ | 596 | |||
Interest cost on projected benefit obligation(2) | 5,453 | 4,790 | |||||
Expected return on plan assets(2) | (6,983 | ) | (7,739 | ) | |||
Net amortization and deferrals(2) | 1,275 | 1,549 | |||||
Net periodic benefit (income) cost | $ | 219 | $ | (804 | ) |
(DOLLARS IN THOUSANDS) | Non-U.S. Plans | ||||||
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Service cost for benefits earned(1) | $ | 4,873 | $ | 4,470 | |||
Interest cost on projected benefit obligation(2) | 4,435 | 4,338 | |||||
Expected return on plan assets(2) | (10,904 | ) | (12,032 | ) | |||
Net amortization and deferrals(2) | 2,922 | 2,972 | |||||
Net periodic benefit (income) cost | $ | 1,326 | $ | (252 | ) |
(1) | Included as a component of Operating Profit. |
(2) | Included as a component of Other Income (Expense), net. |
Three Months Ended March 31, | |||||||
(DOLLARS IN THOUSANDS) | 2019 | 2018 | |||||
Service cost for benefits earned | $ | 148 | $ | 195 | |||
Interest cost on projected benefit obligation | 578 | 654 | |||||
Net amortization and deferrals | (1,194 | ) | (1,189 | ) | |||
Total postretirement benefit income | $ | (468 | ) | $ | (340 | ) |
• | 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. |
March 31, 2019 | December 31, 2018 | ||||||||||||||
(DOLLARS IN THOUSANDS) | Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||
LEVEL 1 | |||||||||||||||
Cash and cash equivalents(1) | $ | 483,504 | $ | 483,504 | $ | 634,897 | $ | 634,897 | |||||||
LEVEL 2 | |||||||||||||||
Credit facilities and bank overdrafts(2) | 8,231 | 8,231 | 4,695 | 4,695 | |||||||||||
Derivatives(3) | |||||||||||||||
Derivative assets | — | 21,296 | — | 7,229 | |||||||||||
Derivative liabilities | — | 3,220 | — | 6,907 | |||||||||||
Long-term debt:(3) | |||||||||||||||
2020 Notes | 298,743 | 299,291 | 298,499 | 300,356 | |||||||||||
2021 Euro Notes | 334,486 | 340,073 | 337,704 | 341,094 | |||||||||||
2023 Notes | 298,774 | 298,642 | 298,698 | 293,017 | |||||||||||
2024 Euro Notes | 558,869 | 596,056 | 564,034 | 584,129 | |||||||||||
2026 Euro Notes | 891,757 | 934,385 | 899,886 | 909,439 | |||||||||||
2028 Notes | 396,460 | 414,879 | 396,377 | 401,231 | |||||||||||
2047 Notes | 493,256 | 472,958 | 493,151 | 446,725 | |||||||||||
2048 Notes | 785,838 | 828,682 | 785,788 | 783,925 | |||||||||||
Term Loan(2) | 324,295 | 325,000 | 349,163 | 350,000 | |||||||||||
Amortizing Notes(4) | 114,667 | 117,579 | 125,007 | 127,879 |
(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) | The fair value of the Amortizing Notes of the TEUs is based on the most recently quoted price for the outstanding securities, adjusted for any known significant deviation in value. The estimated fair value of these long-term obligations is not necessarily indicative of the amount that would be realized in a current market exchange. |
(DOLLARS IN THOUSANDS) | March 31, 2019 | December 31, 2018 | |||||
Foreign currency contracts | $ | 460,758 | $ | 585,581 | |||
Cross currency swaps | 600,000 | 600,000 |
March 31, 2019 | |||||||||||
(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 | $ | 3,926 | $ | 1,001 | $ | 4,927 | |||||
Cross currency swaps | 16,369 | — | 16,369 | ||||||||
$ | 20,295 | $ | 1,001 | $ | 21,296 | ||||||
Derivative liabilities (b) | |||||||||||
Foreign currency contract | $ | 90 | $ | 3,130 | $ | 3,220 |
December 31, 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 | $ | 4,122 | $ | 2,020 | $ | 6,142 | |||||
Cross currency swaps | 1,087 | — | 1,087 | ||||||||
$ | 5,209 | $ | 2,020 | $ | 7,229 | ||||||
Derivative liabilities (b) | |||||||||||
Foreign currency contracts | $ | 205 | $ | 6,702 | $ | 6,907 |
(a) | Derivative assets are recorded to Prepaid expenses and Other 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 March 31, | ||||||||
2019 | 2018 | ||||||||
Foreign currency contracts | $ | 926 | $ | (3,615 | ) | Other (income) expense, net |
Amount of Gain (Loss) Recognized in OCI on Derivative | Location of Gain (Loss) Reclassified from AOCI into Income | Amount of Gain (Loss) Reclassified from Accumulated OCI into Income | |||||||||||||||
Three Months Ended March 31, | Three Months Ended March 31, | ||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||
Derivatives in Cash Flow Hedging Relationships: | |||||||||||||||||
Foreign currency contracts | $ | (312 | ) | $ | (743 | ) | Cost of goods sold | $ | 2,372 | $ | (2,193 | ) | |||||
Interest rate swaps (1) | 216 | 216 | Interest expense | (216 | ) | (216 | ) | ||||||||||
Derivatives in Net Investment Hedging Relationships: | |||||||||||||||||
Foreign currency contracts | — | (696 | ) | N/A | — | — | |||||||||||
Cross currency swaps | 10,667 | — | N/A | — | — | ||||||||||||
Non-Derivatives in Net Investment Hedging Relationships: | |||||||||||||||||
2024 Euro Notes | 4,206 | (15,977 | ) | N/A | — | — | |||||||||||
2021 Euro Notes & 2026 Euro Notes | 9,253 | — | N/A | — | — | ||||||||||||
Total | $ | 24,030 | $ | (17,200 | ) | $ | 2,156 | $ | (2,409 | ) |
(1) | Interest rate swaps were entered into as pre-issuance hedges for bond offerings. |
(DOLLARS IN THOUSANDS) | Foreign Currency Translation Adjustments | Gains on Derivatives Qualifying as Hedges | Pension and Postretirement Liability Adjustment | Total | |||||||||||
Accumulated other comprehensive (loss) income, net of tax, as of December 31, 2018 | $ | (396,996 | ) | $ | 4,746 | $ | (309,977 | ) | $ | (702,227 | ) | ||||
OCI before reclassifications | 42,377 | 2,059 | — | 44,436 | |||||||||||
Amounts reclassified from AOCI | — | (2,156 | ) | 2,593 | 437 | ||||||||||
Net current period other comprehensive income (loss) | 42,377 | (97 | ) | 2,593 | 44,873 | ||||||||||
Accumulated other comprehensive (loss) income, net of tax, as of March 31, 2019 | $ | (354,619 | ) | $ | 4,649 | $ | (307,384 | ) | $ | (657,354 | ) |
(DOLLARS IN THOUSANDS) | Foreign Currency Translation Adjustments | Losses 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 | 14,803 | (2,938 | ) | — | 11,865 | ||||||||||
Amounts reclassified from AOCI | — | 2,409 | 2,629 | 5,038 | |||||||||||
Net current period other comprehensive income (loss) | 14,803 | (529 | ) | 2,629 | 16,903 | ||||||||||
Accumulated other comprehensive (loss) income, net of tax, as of March 31, 2018 | $ | (282,613 | ) | $ | (10,861 | ) | $ | (327,105 | ) | $ | (620,579 | ) |
Three Months Ended March 31, | Affected Line Item in the Consolidated Statement of Income and Comprehensive Income | ||||||||
(DOLLARS IN THOUSANDS) | 2019 | 2018 | |||||||
Gains (losses) on derivatives qualifying as hedges | |||||||||
Foreign currency contracts | $ | 2,711 | $ | (2,506 | ) | Cost of goods sold | |||
Interest rate swaps | (216 | ) | (216 | ) | Interest expense | ||||
Tax | (339 | ) | 313 | Provision for income taxes | |||||
Total | $ | 2,156 | $ | (2,409 | ) | Total, net of income taxes | |||
Losses on pension and postretirement liability adjustments | |||||||||
Prior service cost | $ | 2,836 | $ | 1,772 | (a) | ||||
Actuarial losses | 168 | (5,103 | ) | (a) | |||||
Tax | (5,597 | ) | 702 | Provision for income taxes | |||||
Total | $ | (2,593 | ) | $ | (2,629 | ) | 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 16 of our 2018 Form 10-K for additional information regarding net periodic benefit cost. |
(DOLLARS IN THOUSANDS) | Redeemable Noncontrolling Interests | ||
Balance at December 31, 2018 | $ | 81,806 | |
Acquired through acquisitions during 2019 | 26,224 | ||
Impact of foreign exchange translation | (190 | ) | |
Share of profit or loss attributable to redeemable noncontrolling interests | 1,541 | ||
Redemption value mark-up for the current period | (370 | ) | |
Measurement period adjustments | 5,700 | ||
Balance at March 31, 2019 | $ | 114,711 |
Three Months Ended | ||||||||||
March 31, | ||||||||||
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) | 2019 | 2018 | Change | |||||||
Net sales | $ | 1,297,402 | $ | 930,928 | 39 | % | ||||
Cost of goods sold | 766,143 | 525,119 | 46 | % | ||||||
Gross profit | 531,259 | 405,809 | ||||||||
Research and development (R&D) expenses | 90,596 | 78,476 | 15 | % | ||||||
Selling and administrative (S&A) expenses | 213,182 | 142,644 | 49 | % | ||||||
Amortization of acquisition-related intangibles | 47,625 | 9,185 | NMF | |||||||
Restructuring and other charges, net | 16,174 | 717 | NMF | |||||||
Gains on sales of fixed assets | (188 | ) | (69 | ) | 172 | % | ||||
Operating profit | 163,870 | 174,856 | ||||||||
Interest expense | 36,572 | 16,595 | 120 | % | ||||||
Other income, net | (7,278 | ) | (576 | ) | NMF | |||||
Income before taxes | 134,576 | 158,837 | ||||||||
Taxes on income | 23,362 | 29,421 | (21 | )% | ||||||
Net income | $ | 111,214 | $ | 129,416 | ||||||
Net income attributable to noncontrolling interests | 2,385 | — | — | % | ||||||
Net income attributable to IFF stockholders | $ | 108,829 | $ | 129,416 | (16 | )% | ||||
Diluted EPS | $ | 0.96 | $ | 1.63 | (41 | )% | ||||
Gross margin | 40.9 | % | 43.6 | % | (264 | ) | ||||
R&D as a percentage of sales | 7.0 | % | 8.4 | % | (145 | ) | ||||
S&A as a percentage of sales | 16.4 | % | 15.3 | % | 111 | |||||
Operating margin | 12.6 | % | 18.8 | % | (615 | ) | ||||
Adjusted operating margin (1) | 15.8 | % | 19.4 | % | (367 | ) | ||||
Effective tax rate | 17.4 | % | 18.5 | % | (116 | ) | ||||
Segment net sales | ||||||||||
Taste | $ | 444,602 | $ | 449,019 | (1 | )% | ||||
Scent | 488,352 | 481,909 | 1 | % | ||||||
Frutarom | 364,448 | — | — | % | ||||||
Consolidated | $ | 1,297,402 | $ | 930,928 |
(1) | Adjusted operating margin excludes $40.8 million of charges related to operational improvement initiatives, integration related costs, restructuring and other charges, net, and Frutarom acquisition related costs for the three months ended March 31, 2019, and excludes $6.2 million of charges related to operational improvement initiatives, restructuring and other charges, net, acquisition related costs, gain on sale of assets and an FDA mandated product recall for the three months ended March 31, 2018. See "Non-GAAP Financial Measures" below. |
% Change in Sales - First Quarter 2019 vs First Quarter 2018 | ||||||
Reported | Currency Neutral | |||||
Taste | -1 | % | 2 | % | ||
Scent | 1 | % | 4 | % | ||
Frutarom | N/A | N/A | ||||
Total | 39 | % | 44 | % |
(1) | Currency neutral sales growth is calculated by translating prior year sales at the exchange rates for the corresponding 2019 period. |
Three Months Ended March 31, | |||||||
(DOLLARS IN THOUSANDS) | 2019 | 2018 | |||||
Segment profit: | |||||||
Taste | $ | 108,455 | $ | 111,564 | |||
Scent | 85,815 | 93,277 | |||||
Frutarom | 29,091 | — | |||||
Global expenses | (18,673 | ) | (23,825 | ) | |||
Operational Improvement Initiatives | (406 | ) | (1,026 | ) | |||
Acquisition Related Costs | — | 514 | |||||
Integration Related Costs | (14,897 | ) | — | ||||
Restructuring and Other Charges, net | (16,174 | ) | (717 | ) | |||
Gains on Sale of Assets | 188 | 69 | |||||
FDA Mandated Product Recall | — | (5,000 | ) | ||||
Frutarom Acquisition Related Costs | (9,529 | ) | — | ||||
Operating profit | $ | 163,870 | $ | 174,856 | |||
Profit margin: | |||||||
Taste | 24.4 | % | 24.8 | % | |||
Scent | 17.6 | % | 19.4 | % | |||
Frutarom | 8.0 | % | N/A | ||||
Consolidated | 12.6 | % | 18.8 | % |
(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 March 31, 2019 | ||
Net income | $ | 365.7 | |
Interest expense | 162.6 | ||
Income taxes | 123.3 | ||
Depreciation and amortization | 257.7 | ||
Specified items (1) | 158.1 | ||
Non-cash items (2) | 29.1 | ||
Adjusted EBITDA | $ | 1,096.5 |
(1) | Specified items for the 12 months ended March 31, 2019 of $158.1 million consisted of operational improvement initiatives, integration related costs, restructuring and other charges, net,, 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) | March 31, 2019 | ||
Total debt | $ | 4,505.4 | |
Adjustments: | |||
Cash and cash equivalents | 483.5 | ||
Net debt | $ | 4,021.9 |
Reconciliation of Gross Profit | |||||||
Three Months Ended March 31, | |||||||
(DOLLARS IN THOUSANDS) | 2019 | 2018 | |||||
Reported (GAAP) | $ | 531,259 | $ | 405,809 | |||
Operational Improvement Initiatives (a) | 406 | 453 | |||||
Integration Related Costs (c) | 156 | — | |||||
FDA Mandated Product Recall (e) | — | 5,000 | |||||
Frutarom Acquisition Related Costs (g) | 7,850 | — | |||||
Adjusted (Non-GAAP) | $ | 539,671 | $ | 411,262 |
Reconciliation of Selling and Administrative Expenses | |||||||
Three Months Ended March 31, | |||||||
(DOLLARS IN THOUSANDS) | 2019 | 2018 | |||||
Reported (GAAP) | $ | 213,182 | $ | 142,644 | |||
Acquisition Related Costs (b) | — | 514 | |||||
Integration Related Costs (c) | (14,557 | ) | — | ||||
Frutarom Acquisition Related Costs (g) | (1,679 | ) | — | ||||
Adjusted (Non-GAAP) | $ | 196,946 | $ | 143,158 |
Reconciliation of Operating Profit | |||||||
Three Months Ended March 31, | |||||||
(DOLLARS IN THOUSANDS) | 2019 | 2018 | |||||
Reported (GAAP) | $ | 163,870 | $ | 174,856 | |||
Operational Improvement Initiatives (a) | 406 | 1,026 | |||||
Acquisition Related Costs (b) | — | (514 | ) | ||||
Integration Related Costs (c) | 14,897 | — | |||||
Restructuring and Other Charges, net (d) | 16,174 | 717 | |||||
Gains on Sale of Assets | (188 | ) | (69 | ) | |||
FDA Mandated Product Recall (e) | — | 5,000 | |||||
Frutarom Acquisition Related Costs (g) | 9,529 | — | |||||
Adjusted (Non-GAAP) | $ | 204,688 | $ | 181,016 |
Reconciliation of Net Income | |||||||||||||||||||||||||||||||
Three Months Ended March 31, | |||||||||||||||||||||||||||||||
2019 | 2018 | ||||||||||||||||||||||||||||||
Income before taxes | Taxes on income (h) | Net Income Attributable to IFF (i) | Diluted EPS | Income before taxes | Taxes on income (h) | Net Income Attributable to IFF | Diluted EPS (j) | ||||||||||||||||||||||||
Reported (GAAP) | $ | 134,576 | $ | 23,362 | $ | 108,829 | $ | 0.96 | $ | 158,837 | $ | 29,421 | $ | 129,416 | $ | 1.63 | |||||||||||||||
Operational Improvement Initiatives (a) | 406 | 142 | 264 | — | 1,026 | 294 | 732 | 0.01 | |||||||||||||||||||||||
Acquisition Related Costs (b) | — | — | — | — | (514 | ) | (134 | ) | (380 | ) | — | ||||||||||||||||||||
Integration Related Costs (c) | 14,897 | 3,349 | 11,548 | 0.10 | — | — | — | — | |||||||||||||||||||||||
Restructuring and Other Charges, net (d) | 16,174 | 4,031 | 12,143 | 0.11 | 717 | 169 | 548 | 0.01 | |||||||||||||||||||||||
Gains on Sale of Assets | (188 | ) | (43 | ) | (145 | ) | — | (69 | ) | (17 | ) | (52 | ) | — | |||||||||||||||||
FDA Mandated Product Recall (e) | — | — | — | — | 5,000 | 1,196 | 3,804 | 0.05 | |||||||||||||||||||||||
U.S. Tax Reform (f) | — | — | — | — | — | (649 | ) | 649 | 0.01 | ||||||||||||||||||||||
Frutarom Acquisition Related Costs (g) | 9,529 | 1,530 | 7,999 | 0.07 | — | — | — | — | |||||||||||||||||||||||
Adjusted (Non-GAAP) | $ | 175,394 | $ | 32,371 | $ | 140,638 | $ | 1.24 | $ | 164,997 | $ | 30,280 | $ | 134,717 | $ | 1.69 |
(a) | Represents accelerated depreciation related to a plant relocation in India, as well as a lab closure in Taiwan for 2018. | ||||||||||||
(b) | Represents adjustments to the contingent consideration payable for PowderPure, and transaction costs related to Fragrance Resources and PowderPure within Selling and administrative expenses. | ||||||||||||
(c) | For 2019, represents costs related to the integration of the Frutarom acquisition, principally advisory services. For 2018, represents costs related to the integration of the David Michael and Fragrance Resources acquisitions. | ||||||||||||
(d) | For 2019, represents severance costs related primarily to Scent. For 2018, represents severance costs related to the 2017 Productivity Program and Taiwan lab closure. | ||||||||||||
(e) | Represents losses related to the 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 $7.9 million of amortization for inventory "step-up" costs and $1.7 million of transaction costs included in Selling and 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 fiscal year 2019, these non-GAAP adjustments were not subject to foreign tax credits or valuation allowances, but to the extent that such factors are applicable to any future non-GAAP adjustments we will take such factors into consideration in calculating the tax expense (benefit). | ||||||||||||
(i) | For 2019, net income is reduced by income attributable to noncontrolling interest of $2.4M. | ||||||||||||
(j) | The sum of these items does not foot due to rounding. |
Three Months Ended | |||
March 31, | |||
2019 | 2018 | ||
Operating Profit: | |||
% Change - Reported (GAAP) | (6.3)% | 34.0% | |
Items impacting comparability (1) | 19.4% | (19.0)% | |
% Change - Adjusted (Non-GAAP) | 13.1% | 16.0% | |
Currency Impact | 1.3% | (4.0)% | |
% Change Year-over-Year - Currency Neutral Adjusted (Non-GAAP)* | 14.4% | 12.0% |
• | risks related to the integration of the Frutarom business, including whether we will realize the benefits anticipated from the acquisition in the expected time frame; |
• | unanticipated costs, liabilities, charges or expenses resulting from the Frutarom acquisition; |
• | the increase in our leverage resulting from the additional debt incurred to pay a portion of the consideration for Frutarom and its impact on our liquidity and ability to return capital to its shareholders; |
• | our ability to successfully market to its expanded and decentralized Taste and Frutarom customer base; |
• | our ability to effectively compete in its market and develop and introduce new products that meet customers’ needs; |
• | our ability to successfully develop innovative and cost-effective products that allow customers to achieve their own profitability expectations; |
• | the impact of the disruption in our manufacturing operations; |
• | the impact of a disruption in our supply chain, including the inability to obtain ingredients and raw materials from third parties; |
• | volatility and increases in the price of raw materials, energy and transportation; |
• | our ability to comply with, and the costs associated with compliance with, regulatory requirements and industry standards, including regarding product safety, quality, efficacy and environmental impact; |
• | the impact of any failure or interruption of our key information technology systems or a breach of information security; |
• | our ability to react in a timely and cost-effective manner to changes in consumer preferences and demands; |
• | our ability to establish and manage collaborations, joint ventures or partnership that lead to development or commercialization of products; |
• | our ability to benefit from its investments and expansion in emerging markets; |
• | the impact of currency fluctuations or devaluations in the principal foreign markets in which it operates; |
• | economic, regulatory and political risks associated with our international operations; |
• | the impact of global economic uncertainty on demand for consumer products; |
• | the inability to retain key personnel; |
• | our ability to comply with, and the costs associated with compliance with, U.S. and foreign environmental protection laws; |
• | our ability to realize the benefits of its cost and productivity initiatives; |
• | our ability to successfully manage its working capital and inventory balances; |
• | the impact of the failure to comply with U.S. or foreign anti-corruption and anti-bribery laws and regulations, including the U.S. Foreign Corrupt Practices Act; |
• | our ability to protect its intellectual property rights; |
• | the impact of the outcome of legal claims, regulatory investigations and litigation; |
• | changes in market conditions or governmental regulations relating to our pension and postretirement obligations; |
• | the impact of future impairment of our tangible or intangible long-lived assets; |
• | the impact of changes in federal, state, local and international tax legislation or policies, including the enacted Tax Cuts and Jobs Act, with respect to transfer pricing and state aid, and adverse results of tax audits, assessments, or disputes; |
• | the effect of potential government regulation on certain product development initiatives, and restrictions or costs that may be imposed on the Company or its operations as a result; and |
• | the impact of the United Kingdom’s expected departure from the European Union in 2019. |
31.1 | ||
31.2 | ||
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: | May 6, 2019 | By: | /s/ Andreas Fibig | ||
Andreas Fibig | |||||
Chairman of the Board and Chief Executive Officer | |||||
Dated: | May 6, 2019 | 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: | May 6, 2019 |
By: | /s/ Richard A. O'Leary |
Name: | Richard A. O'Leary |
Title: | Executive Vice President and Chief Financial Officer |
Dated: | May 6, 2019 |
Document and Entity Information - shares |
3 Months Ended | |
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Mar. 31, 2019 |
Apr. 24, 2019 |
|
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 | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 106,691,137 |
CONSOLIDATED BALANCE SHEET (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
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Statement of Financial Position [Abstract] | ||
Trade receivables allowances | $ 8,815 | $ 9,173 |
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 | 128,526,137 | 128,526,137 |
Common stock, shares outstanding | 106,646,581 | 106,619,202 |
Treasury stock, shares at cost | 21,879,556 | 21,906,935 |
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2019 |
Mar. 31, 2018 |
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Statement of Stockholders' Equity [Abstract] | ||
Tax effect of gain (losses) on derivatives qualifying as hedges | $ 44 | $ 732 |
Tax effect of pension liability and postretirement adjustment | $ 836 | $ 1,894 |
Cash dividends declared, per share | $ 0.73 | $ 0.69 |
Nature of Operations and Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature of Operations and Summary of Significant Accounting Policies | NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 2018 Annual Report on Form 10-K (“2018 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, March 31 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 2019 and 2018 quarters, the actual closing dates were March 29 and March 30, 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. 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 $0.3 million for the three months ended March 31, 2019 compared to a decrease of approximately $11.0 million for the three months ended March 31, 2018. The cost of participating in these programs was immaterial to our results in all periods. Contract Assets 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. The following table reflects the balances in our contract assets and accounts receivable for the three months ended March 31, 2019 and December 31, 2018:
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 product categories:
Recent Accounting Pronouncements In October 2018, the FASB issued Accounting Standards Update ("ASU") 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate ("SOFR") Overnight Index Swap ("OIS") Rate as a Benchmark Interest Rate for Hedge Accounting Purposes." The ASU allows for the use of the OIS rate based on the SOFR as a U.S. benchmark interest rate for purposes of applying hedge accounting under ASC 815, Derivatives and Hedging. The Company applied this new guidance as of December 29, 2018, the first day of the Company’s 2019 fiscal year. The adoption of the guidance did not have a material impact on the Consolidated Financial Statements. In August 2018, the FASB issued 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. In August 2018, the FASB issued ASU 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans (Subtopic 715-20)", 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. 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. 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. The Company applied this new guidance as of December 29, 2018, the first day of the Company’s 2019 fiscal year. The adoption of the guidance did not have a material impact on the 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. The guidance was effective as of December 29, 2018, the first day of the Company's fiscal year. The Company has elected to not reclassify any stranded tax effects to retained earnings. 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, and as required, has been applied on a modified retrospective basis. The impact of the adoption of this standard on December 29, 2018 was a decrease in the beginning balance of the currency translation adjustment component of Accumulated other comprehensive loss of $1.0 million, and an increase in Retained Earnings, as presented in the Company's Consolidated Balance Sheet. See Note 13 of the Consolidated Financial Statements for further details. In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", with subsequent amendments, 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. The Company is currently evaluating the impact this guidance will have 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 and supersedes existing lease guidance, including ASC 840 - Leases. See Note 8 for further details. |
Net Income Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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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The Company declared a quarterly dividend to its shareholders of $0.73 and $0.69 for the three months ended March 31, 2019 and 2018, 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 months ended March 31, 2019 and 2018. 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 $800.2 million on September 17, 2018. For the periods outstanding, the SPC portion of the TEUs was 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 0.3839 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 March 31, 2019 and 2018 was immaterial. Net income allocated to such PRSUs was $0.1 million for the three months ended March 31, 2019 and $0.3 million for the three months ended March 31, 2018. |
Acquisitions |
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Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | ACQUISITIONS 2019 Acquisition Activity During the three months ended March 31, 2019, the Company acquired 70% of a company in Europe and increased its ownership of an Asian company from 49% to 60% after receipt of previously pending regulatory approvals in Thailand. The two acquired entities, which manufacture flavor products, will be managed under the Frutarom segment. The total purchase price for the acquisitions was $46.3 million, excluding cash acquired and including $12.4 million of contingent consideration and deferred payments. A preliminary purchase price allocation has been performed giving rise to goodwill of approximately $55.4 million and intangible assets of $18.4 million. The purchase price allocation is expected to be completed within the measurement period. Pro forma information has not been presented as the two acquired entities are not material. Frutarom On October 4, 2018, the Company completed its acquisition of 100% of the equity of Frutarom Industries Ltd. (“Frutarom”). Purchase Price Allocation The Company allocated the purchase consideration to the tangible net assets and identifiable intangible assets acquired based on estimated fair values at the acquisition date, and recorded the excess of consideration over the fair values of net assets acquired as goodwill. During the first quarter of 2019, the Company updated the purchase price allocation, principally to reflect updated values for certain entities' fixed assets. The purchase price allocation is preliminary and subject to change. The Company is currently finalizing the valuation of fixed assets, goodwill and intangible assets (trade names, product formulas, customer relationships and favorable/unfavorable leases and the related estimated useful lives). Additionally, the Company is finalizing the projected combined future tax rate to be applied to the valuation of assets, which could impact the valuation of goodwill and intangible assets. The determination of the fair value of assets and liabilities, including those related to leases, will be finalized as soon as the valuation is completed which is expected to be during the third quarter of 2019. The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed (in thousands) as of October 4, 2018:
The preliminary fair value purchase price allocation of the assets and liabilities acquired in the acquisition of Frutarom as reported in the fourth quarter of 2018 were updated during the quarter ended March 31, 2019 primarily due to: (i) a $21.7 million decrease in the fair value of identifiable intangible assets (principally customer relationships and arising from the updated valuations for certain entities' fixed assets), (ii) a $43.2 million increase to property, plant and equipment (related to certain Frutarom entities), included in Other assets in the accompanying table, (iii) a $1.5 million increase to the noncurrent portion of earn-outs and a $10.7 million increase to deferred income tax liabilities, (iv) a $5.7 million decrease to redeemable noncontrolling interest. The cumulative impact of the adjustment resulted in a $3.6 million decrease to goodwill. The measurement period adjustments did not have a material impact on the Company's Statement of Comprehensive Income for the first quarter of 2019. The preliminary amounts of the components of intangible assets with finite lives that have been recorded are as follows:
Pro forma financial information The following unaudited pro forma financial information presents the combined results of operations of IFF and Frutarom as if the acquisition had been completed as of the beginning of the prior fiscal year, or January 1, 2018. The unaudited pro forma financial information is presented for informational purposes and is not indicative of the results of operations that would have been achieved if the acquisition and related borrowings had taken place on January 1, 2018, nor are they indicative of future results. The unaudited pro forma financial information for the three months ended March 31, 2018 included the pre-acquisition results of Frutarom for that period. The unaudited pro forma results for the three months ended March 31, 2018 were as follows:
The unaudited pro forma results for all periods presented include adjustments made to account for certain costs and transactions that would have been incurred had the acquisition been completed as of January 1, 2018, including amortization charges for acquired intangibles assets, adjustments for acquisition transaction costs, adjustments for depreciation expense for property, plant, and equipment, and adjustments to interest expense. These adjustments are net of any applicable tax impact and were included to arrive at the pro forma results above. |
Goodwill and Other Intangible Assets, Net Goodwill and Other Intangible Assets, Net (Notes) |
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Goodwill and Other Intangible Assets, Net | GOODWILL AND OTHER INTANGIBLE ASSETS, NET Goodwill Movements in goodwill during 2019 were as follows:
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Other Intangible Assets Other intangible assets, net consisted of the following amounts:
Amortization Amortization expense was $47,625 and $9,185 for the three months ended March 31, 2019 and 2018, respectively. Amortization expense for the next five years and thereafter, based on preliminary valuations and determinations of useful lives, is expected to be as follows:
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Restructuring and Other Charges, Net |
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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. 2019 Severance Charges During the first quarter of 2019, the Company incurred severance charges of $16.2 million related to approximately 190 headcount reductions. The headcount reductions primarily related to the Scent business unit with additional amounts related to headcount reductions in all business units associated with the establishment of a new shared service center in Europe. The Company made payments of $0.9 million related to personnel costs during the three months ended March 31, 2019. 2017 Productivity Program In connection with 2017 Productivity Program, 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 $24.5 million of charges related to personnel costs and lease termination costs through the first quarter of 2019. The Company made payments of $0.5 million and $1.7 million related to personnel costs during the three months ended March 31, 2019 and 2018, as well as lease termination costs for March 31, 2018. The overall charges were split approximately evenly between Taste and Scent. 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 three months ended March 31, 2019, including both the 2019 severance charges and the 2017 Productivity Program, were as follows:
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Other Assets |
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Other Assets | OTHER ASSETS Other assets consisted of the following amounts:
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Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | DEBT Debt consisted of the following:
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Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | LEASES During the quarter ended March 31, 2019, the Company adopted ASU No. 2016-02, “Leases (Topic 842),” which requires most leases to be recognized on the balance sheet. The Company adopted the standard using the modified retrospective approach with an effective date of December 29, 2018, the beginning of its 2019 fiscal year. Prior year financial statements were not recast. The Company elected various transition provisions available for expired or existing contracts, which allows the Company to carryforward historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. The Company leases property and equipment, principally under operating leases. In accordance with ASU 2016-02, the Company records a right of use asset and related obligation at the present value of lease payments and, over the term of the lease, depreciates the right of use asset and accretes the obligation to future value. Some of the leases include rental escalation clauses, renewal options and/or termination options that are factored into the determination of lease payments when appropriate. The Company does not separate lease and nonlease components of contracts. When available, the Company uses the rate implicit in the lease to discount lease payments to present value, however, most of the Company's leases do not provide a readily determinable implicit rate and the Company calculates the applicable incremental borrowing rate to discount the lease payments based on the term of the lease at lease commencement. The incremental borrowing rate is determined based on currency and lease terms. Certain leases contain variable payments which are periodically adjusted for changes in an index or rate. Such payments are initially measured using the index or rate at the commencement date and are included in the measurement of the lease liability. Subsequent changes in variable payments are not included in the lease liability, but are recognized in profit and loss during the period in which the obligation for those payments is incurred. The Company has leases for corporate offices, manufacturing facilities, research and development facilities, and certain transportation and office equipment, all of which are operating leases. The Company has no finance leases. The Company's leases have remaining lease terms of up to 40 years, some of which include options to extend the leases for up to 5 years. Upon adoption of the new guidance, the Company recorded a right of use asset of $308.3 million and total operating lease liabilities of $313.3 million. Additionally, the Company recorded a net increase to retained earnings of approximately $23.1 million related to the elimination of deferred gains on certain sale-leaseback transactions that occurred in prior years. The components of lease expense were as follows:
Supplemental cash flow information related to leases was as follows:
Supplemental balance sheet information related to leases was as follows:
Weighted average remaining lease term and discount rate were as follows:
Maturities of lease liabilities were as follows:
Maturities of lease liabilities, as calculated prior to the adoption of ASU 2016-02, were as follows:
Right of use assets by region were as follows:
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Income Taxes |
3 Months Ended |
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Income Tax Disclosure [Abstract] | |
Income Taxes | Uncertain Tax Positions At March 31, 2019, the Company had $46 million of unrecognized tax benefits recorded in Other liabilities. If these unrecognized tax benefits were recognized, the effective tax rate would be affected. At March 31, 2019, the Company had accrued interest and penalties of $3.2 million classified in Other liabilities. As of March 31, 2019, the Company’s aggregate provisions for uncertain tax positions, including interest and penalties, was $49.2 million associated with various tax positions asserted in various jurisdictions, none of which is individually material. The Company regularly repatriates earnings from non-U.S. subsidiaries. In the fourth quarter of 2018, the Company changed its assertion as part of its final analysis under SAB 118, consistent with the Company’s need to repatriate funds for debt repayment purposes. As the Company repatriates these funds to the U.S., they will be required to pay income taxes in certain U.S. states and applicable foreign withholding taxes during the period when such repatriation occurs. Accordingly, as of March 31, 2019, the Company had a deferred tax liability of $87.2 million for the effect of repatriating the funds to the U.S. This balance consisted of $42.8 million attributable to IFF non-U.S. subsidiaries, and $44.4 million associated with Frutarom which is still preliminary and will be refined through the purchase accounting measurement period. 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 2009 to 2018. 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 results of operations. 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 15. Effective Tax Rate The effective tax rate for the three months ended March 31, 2019 was 17.4% compared with 18.5% for the three months ended March 31, 2018. The quarter-over-quarter decrease was largely due to a more favorable mix of earnings (including the impact of integration related costs, restructuring charges and Frutarom acquisition related costs), partially offset by higher repatriation costs, and the absence of the remeasurement of loss provisions and the release of a State valuation allowance which benefited the first quarter of 2018. |
Stock Compensation Plans |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 Information | SEGMENT INFORMATION The Company is organized into three reportable operating segments, Taste, Scent and Frutarom; these segments align with the internal structure used to manage these businesses. Taste is comprised of Flavor Compounds which are sold to the food and beverage industries for use in consumer products such as prepared foods, beverages, dairy, food and sweet products. Scent is comprised of (1) Fragrance Compounds, which are ultimately used by our customers in two broad categories: Fine Fragrances, including perfumes and colognes, and Consumer Fragrances, including fragrance compounds for personal care (e.g., soaps), household products (e.g., detergents and cleaning agents) and beauty care, including toiletries; (2) Fragrance Ingredients, consisting of synthetic and natural ingredients that can be combined with other materials to create unique fine fragrance and consumer compounds; and (3) Cosmetic Active Ingredients, consisting of active and functional ingredients, botanicals and delivery systems to support our customers’ cosmetic and personal care product lines. Major fragrance customers include the cosmetics industry, including perfume and toiletries manufacturers, and the household products industry, including manufacturers of soaps, detergents, fabric care, household cleaners and air fresheners. Frutarom creates and manufactures a naturals-focused suite of flavor compounds, functional foods and specialty fine ingredients, largely targeting small, local and regional customers. Frutarom’s products are focused on three principal areas: (1) Savory Solutions, (2) Natural Product Solutions, which includes natural health ingredients, natural color and natural food protection, and (3) Taste Solutions. The Company's Chief Operating Decision Maker evaluates the performance of these reportable operating segments based on segment profit which is defined as operating profit before restructuring, global expenses (as discussed below) and certain non-recurring items, Interest expense, Other income (expense), net and Taxes on income. The Global expenses caption represents corporate and headquarter-related expenses which include legal, finance, human resources, certain incentive compensation expenses and other R&D and administrative expenses that are not allocated to individual reportable operating segments. Reportable segment information was as follows:
Net sales are attributed to individual regions based upon the destination of product delivery are as follows:
Net sales are attributed to individual regions based upon the destination of product delivery. Net sales related to the U.S. for the three months ended March 31, 2019 and 2018 were $272.8 million and $230.2 million, respectively. Net sales attributed to all foreign countries in total for the three months ended March 31, 2019 and 2018 were $1.0 billion and $700.7 million, respectively. No non-U.S. country had net sales in any period presented greater than 7% 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 $4.2 million to its U.S. pension plans and a total of $19.3 million to its Non-U.S. Plans during 2019. During the three months ended March 31, 2019, no contributions were made to the qualified U.S. pension plans, $2.7 million of contributions were made to the non-U.S. pension plans, and $1.1 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 Company expects to contribute approximately $3.9 million to its postretirement benefits other than pension plans during 2019. In the three months ended March 31, 2019 $1.1 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 16 of our 2018 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 March 31, 2019. The carrying values and the estimated fair values of financial instruments at March 31, 2019 and December 31, 2018 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. In prior years, 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 change in the value of the cash flow hedges is 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 prior years, the Company designated the 2021 Euro Notes, 2024 Euro Notes and 2026 Euro Notes as a hedge of a portion of its net investment in Euro functional currency subsidiaries. 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. In prior years, the Company entered into certain cross currency swaps which qualified as net investment hedges in order to mitigate a portion of its net European investments from foreign currency risk. Changes in fair value related to cross currency swaps are recorded in OCI as a component of the Foreign currency translation adjustments. In prior years, the Company 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 March 31, 2019 and December 31, 2018:
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 March 31, 2019 and December 31, 2018:
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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 months ended March 31, 2019 and 2018 (in thousands):
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. The following table shows the effect of the Company’s derivative and non-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 months ended March 31, 2019 and 2018 (in thousands):
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The ineffective portion of the above noted cash flow hedges were not material during the three months ended March 31, 2018. The Company expects that approximately $6.2 million (net of tax) of derivative gain included in AOCI at March 31, 2019, 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:
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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Mar. 31, 2019 | |
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 March 31, 2019, the Company had total bank guarantees and standby letters of credit of approximately $58.5 million with various financial institutions. Included in the above aggregate amount was a total of $17.9 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 March 31, 2019. 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 $10.3 million as of March 31, 2019. Lines of Credit The Company has various lines of credit which are available to support its ongoing business operations. As of March 31, 2019, the Company had available lines of credit of approximately $107.7 million with various financial institutions, in addition to the $912.3 million of capacity under the Amended Credit Facility. There were no material amounts drawn down pursuant to these lines of credit as of March 31, 2019. 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 seven 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 $3 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 Taste 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 Taste 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 $66 million as of March 31, 2019. 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 $20 million as of March 31, 2019. 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 $199 million as of March 31, 2019. 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 $28.2 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. 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 March 31, 2019, 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 $1.0 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. 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 $10 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. |
Redeemable Noncontrolling Interests |
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Noncontrolling Interest [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Redeemable Noncontrolling Interests | REDEEMABLE NONCONTROLLING INTERESTS Through certain subsidiaries of Frutarom, there are certain noncontrolling interests that carry redemption features. The noncontrolling interest holders have the right, over a stipulated period of time, to sell their respective interests to Frutarom, and Frutarom has the option to purchase these interests (subject to the same timing). These options carry identical price and conditions of exercise, and will be settled in accordance with the multiple of the average EBITDA of consecutive quarters to be achieved during the period ending prior to the exercise date. The following table sets forth the details of the Company's redeemable noncontrolling interests:
The increase in redeemable noncontrolling interests is primarily due to the interests acquired through acquisitions during the first quarter of 2019, as discussed in Note 3. |
Nature of Operations and Summary of Significant Accounting Policies (Policies) |
3 Months Ended |
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Mar. 31, 2019 | |
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 2018 Annual Report on Form 10-K (“2018 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, March 31 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 2019 and 2018 quarters, the actual closing dates were March 29 and March 30, 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 | 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. |
Revenue Recognition | 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. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In October 2018, the FASB issued Accounting Standards Update ("ASU") 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate ("SOFR") Overnight Index Swap ("OIS") Rate as a Benchmark Interest Rate for Hedge Accounting Purposes." The ASU allows for the use of the OIS rate based on the SOFR as a U.S. benchmark interest rate for purposes of applying hedge accounting under ASC 815, Derivatives and Hedging. The Company applied this new guidance as of December 29, 2018, the first day of the Company’s 2019 fiscal year. The adoption of the guidance did not have a material impact on the Consolidated Financial Statements. In August 2018, the FASB issued 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. In August 2018, the FASB issued ASU 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans (Subtopic 715-20)", 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. 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. 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. The Company applied this new guidance as of December 29, 2018, the first day of the Company’s 2019 fiscal year. The adoption of the guidance did not have a material impact on the 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. The guidance was effective as of December 29, 2018, the first day of the Company's fiscal year. The Company has elected to not reclassify any stranded tax effects to retained earnings. 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, and as required, has been applied on a modified retrospective basis. The impact of the adoption of this standard on December 29, 2018 was a decrease in the beginning balance of the currency translation adjustment component of Accumulated other comprehensive loss of $1.0 million, and an increase in Retained Earnings, as presented in the Company's Consolidated Balance Sheet. See Note 13 of the Consolidated Financial Statements for further details. In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", with subsequent amendments, 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. The Company is currently evaluating the impact this guidance will have 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 and supersedes existing lease guidance, including ASC 840 - Leases. See Note 8 for further details. |
Nature of Operations and Summary of Significant Accounting Policies (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 three months ended March 31, 2019 and December 31, 2018:
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Disaggregation of Revenue | The following table presents the Company's revenues disaggregated by product categories:
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Net Income Per Share (Tables) |
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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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Acquisitions (Tables) |
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Schedule of assets acquired and liabilities assumed | The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed (in thousands) as of October 4, 2018:
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Schedule of intangible assets acquired | The preliminary amounts of the components of intangible assets with finite lives that have been recorded are as follows:
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Unaudited pro forma information | The unaudited pro forma results for the three months ended March 31, 2018 were as follows:
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Goodwill and Other Intangible Assets, Net (Tables) |
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Schedule of Movements in Goodwill | Movements in goodwill during 2019 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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Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | Amortization expense for the next five years and thereafter, based on preliminary valuations and determinations of useful lives, is expected to be as follows:
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Restructuring and Other Charges, Net (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Employee-Related Restructuring Liabilities | Changes in restructuring liabilities during the three months ended March 31, 2019, including both the 2019 severance charges and the 2017 Productivity Program, were as follows:
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Other Assets (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Assets [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Assets | Other assets consisted of the following amounts:
_______________________
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Debt (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Debt | Debt consisted of the following:
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Leases (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease cost and other information |
The components of lease expense were as follows:
Supplemental cash flow information related to leases was as follows:
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Supplemental balance sheet information and leases by region | Supplemental balance sheet information related to leases was as follows:
by region were as follows:
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Maturities of lease liabilities | Maturities of lease liabilities were as follows:
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Maturities of lease liabilities, prior to adoption | Maturities of lease liabilities, as calculated prior to the adoption of ASU 2016-02, were as follows:
|
Stock Compensation Plans (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reportable Segment Information |
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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:
Net sales are attributed to individual regions based upon the destination of product delivery. Net sales related to the U.S. for the three months ended March 31, 2019 and 2018 were $272.8 million and $230.2 million, respectively. Net sales attributed to all foreign countries in total for the three months ended March 31, 2019 and 2018 were $1.0 billion and $700.7 million, respectively. No non-U.S. country had net sales in any period presented greater than 7% of total consolidated net sales. |
Employee Benefits (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, All Other Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying Amount and Estimated Fair Values of Financial Instruments | The carrying values and the estimated fair values of financial instruments at March 31, 2019 and December 31, 2018 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 March 31, 2019 and December 31, 2018:
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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 March 31, 2019 and December 31, 2018:
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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 months ended March 31, 2019 and 2018 (in thousands):
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. |
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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 and non-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 months ended March 31, 2019 and 2018 (in thousands):
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Accumulated Other Comprehensive Income (Loss) (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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:
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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:
_______________________
|
Redeemable Noncontrolling Interests (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||
Noncontrolling Interest [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Schedule of Redeemable Noncontrolling Interest | The following table sets forth the details of the Company's redeemable noncontrolling interests:
|
Nature of Operations and Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 29, 2018 |
|
Accounting Policies [Abstract] | |||
Decrease in receivables due to factoring | $ 300 | $ 11,000 | |
Accounting Standards Update 2017-12 | |||
New Accounting Pronouncement, Early Adoption [Line Items] | |||
Cumulative effect | $ 981 | ||
Accounting Standards Update 2017-12 | Retained earnings | |||
New Accounting Pronouncement, Early Adoption [Line Items] | |||
Cumulative effect | $ 981 |
Nature of Operations and Summary of Significant Accounting Policies - Contract Assets, Receivables, and Disaggregation of Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Disaggregation of Revenue [Line Items] | |||
Receivables (included in Trade receivables) | $ 1,012,780 | $ 946,938 | |
Contract asset - Short term | 2,149 | $ 487 | |
Revenues | 1,297,402 | $ 930,928 | |
Flavor Compounds | |||
Disaggregation of Revenue [Line Items] | |||
Revenues | 713,560 | 449,019 | |
Fragrance Compounds | |||
Disaggregation of Revenue [Line Items] | |||
Revenues | 389,111 | 378,633 | |
Ingredients | |||
Disaggregation of Revenue [Line Items] | |||
Revenues | $ 194,731 | $ 103,276 |
Net Income Per Share - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Dividends declared per share, in dollars per share | $ 0.73 | $ 0.69 |
Net income allocated to PRS | $ 0.1 | $ 0.3 |
Employee Stock Option | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Stock excluded from computation of diluted net income per share | 0 | 0 |
Stock-Settled Appreciation Rights (SARs) | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Stock excluded from computation of diluted net income per share | 0 | 0 |
Net Income Per Share (TEU) (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | ||
---|---|---|---|
Sep. 17, 2018 |
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Earnings Per Share [Abstract] | |||
Tangible equity units proceeds | $ 800.2 | ||
Price for basic share (usd per share) | $ 0.3134 | ||
Price for shares diluted (usd per share) | $ 0.3839 | ||
Difference amount between basic and diluted net income per share | $ 0.01 | $ 0.01 | |
Net income allocated to PRS | $ 0.1 | $ 0.3 |
Acquisitions - 2019 Acquisitions (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 29, 2019 |
Dec. 31, 2018 |
|
Business Acquisition [Line Items] | |||
Percentage of interests acquired | 70.00% | ||
Payments to acquire businesses | $ 46,300 | ||
Goodwill | $ 5,434,000 | $ 5,378,388 | |
Intangible assets acquired | $ 18,400 | ||
The Additive Advantage, LLC [Member] | |||
Business Acquisition [Line Items] | |||
Goodwill, expected tax deductible amount | $ 55,400 | ||
Minimum | |||
Business Acquisition [Line Items] | |||
Percentage of interests acquired | 49.00% | ||
Maximum | |||
Business Acquisition [Line Items] | |||
Percentage of interests acquired | 60.00% |
Acquisitions - Frutarom Narrative (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Mar. 29, 2019 |
Dec. 31, 2018 |
Oct. 04, 2018 |
---|---|---|---|---|
Business Acquisition [Line Items] | ||||
Percentage of voting interest acquired | 70.00% | |||
Intangible assets acquired | $ 18,400 | |||
Goodwill | $ 5,434,000 | $ 5,378,388 | ||
Frutarom | ||||
Business Acquisition [Line Items] | ||||
Percentage of voting interest acquired | 100.00% | |||
Intangible assets acquired | 2,668,300 | 2,690,000 | ||
Other assets | 396,910 | 353,710 | ||
Redeemable noncontrolling interest | (103,210) | (97,510) | ||
Goodwill | 4,239,500 | $ 4,243,079 | ||
Measurement period adjustments | Frutarom | ||||
Business Acquisition [Line Items] | ||||
Intangible assets acquired | (21,700) | |||
Other assets | 43,200 | |||
Earn out payable | 1,500 | |||
Deferred income tax liabilities | 10,700 | |||
Redeemable noncontrolling interest | (5,700) | |||
Goodwill | $ (3,579) |
Acquisitions - Unaudited pro forma information (Details) - Frutarom $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2018
USD ($)
| |
Business Acquisition [Line Items] | |
Unaudited pro forma net sales | $ 1,315,733 |
Unaudited pro forma net income attributable to the Company | $ 112,620 |
Goodwill and Other Intangible Assets, Net - Schedule of Movements in Goodwill (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Goodwill [Roll Forward] | |
Balance at December 31, 2018 | $ 5,378,388 |
Acquisitions(1) | 61,711 |
Frutarom measurement period adjustment | (3,579) |
Foreign exchange | (2,520) |
Balance at March 31, 2019 | $ 5,434,000 |
Goodwill and Other Intangible Assets, Net - Schedule of Other Intangible Assets, Net (Detail) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||
Total carrying value | $ 3,313,562 | $ 3,331,211 |
Total accumulated amortization | (339,385) | (291,889) |
Other intangible assets, net | 2,974,177 | 3,039,322 |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total carrying value | 2,638,998 | 2,658,659 |
Total accumulated amortization | (193,263) | (156,906) |
Trade names & patents | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total carrying value | 177,566 | 177,770 |
Total accumulated amortization | (21,760) | (19,593) |
Technological know-how | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total carrying value | 463,989 | 451,016 |
Total accumulated amortization | (106,181) | (93,051) |
Other | ||
Finite-Lived Intangible Assets [Line Items] | ||
Total carrying value | 33,009 | 43,766 |
Total accumulated amortization | $ (18,181) | $ (22,339) |
Goodwill and Other Intangible Assets, Net - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization of acquisition-related intangibles | $ 47,625 | $ 9,185 |
Goodwill and Other Intangible Assets, Net - Future Estimated Amortization Expense (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
Estimated future intangible amortization expense, 2019 | $ 190,281 |
Estimated future intangible amortization expense, 2020 | 185,492 |
Estimated future intangible amortization expense, 2021 | 180,661 |
Estimated future intangible amortization expense, 2022 | 176,734 |
Estimated future intangible amortization expense, 2023 | $ 176,621 |
Restructuring and Other Charges, Net - Changes in Employee-Related Restructuring Liabilities (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Restructuring Reserve [Roll Forward] | ||
Additional charges, net | $ 16,174 | $ 717 |
Fragrance Ingredients Rationalization [Member] | ||
Restructuring Reserve [Roll Forward] | ||
Beginning Balance | 5,200 | |
Additional charges, net | 16,174 | |
Payments | (1,393) | |
Ending Balance | 19,981 | |
Fragrance Ingredients Rationalization [Member] | Employee-Related Costs | ||
Restructuring Reserve [Roll Forward] | ||
Beginning Balance | 4,125 | |
Payments | (1,393) | |
Ending Balance | 18,906 | |
Fragrance Ingredients Rationalization [Member] | Other | ||
Restructuring Reserve [Roll Forward] | ||
Beginning Balance | 1,075 | |
Additional charges, net | 0 | |
Payments | 0 | |
Ending Balance | $ 1,075 |
Other Assets - Schedule of Other Assets (Detail) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Other Assets [Abstract] | ||
Operating lease right-of-use assets | $ 300,888 | |
Deferred income taxes | 82,928 | $ 89,000 |
Overfunded pension plans | 79,122 | 75,158 |
Cash surrender value of life insurance contracts | 45,444 | 43,179 |
Equity method investments | 26,735 | 31,470 |
Other | 48,272 | 49,866 |
Total | $ 583,389 | $ 288,673 |
Leases - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Dec. 29, 2018 |
|
Lessee, Lease, Description [Line Items] | ||
Remaining lease term | 40 years | |
Option to extend lease term | 5 years | |
Operating lease right-of-use assets | $ 300,888 | |
Total | $ 303,767 | |
Accounting Standards Update 2016-02 | ||
Lessee, Lease, Description [Line Items] | ||
Operating lease right-of-use assets | $ 308,300 | |
Total | 313,300 | |
Cumulative effect | 23,094 | |
Retained earnings | Accounting Standards Update 2016-02 | ||
Lessee, Lease, Description [Line Items] | ||
Cumulative effect | $ 23,094 |
Leases - Lease expenses (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Leases [Abstract] | |
Operating lease cost | $ 12,469 |
Leases - Supplemental cash flow information (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Leases [Abstract] | |
Operating cash flows from operating leases | $ 11,076 |
Leases - Supplemental balance sheet information (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
|
---|---|
Leases [Abstract] | |
Operating lease right-of-use assets | $ 300,888 |
Other current liabilities | 37,198 |
Operating lease liabilities | 266,569 |
Total operating lease liabilities | $ 303,767 |
Leases - Other information (Details) |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Leases [Abstract] | |
Weighted Average Remaining Lease Term (in years) | 11 years 10 months 25 days |
Weighted Average Discount Rate | 3.75% |
Leases - Maturities of lease liabilities (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
|
---|---|
Leases [Abstract] | |
Less than 1 Year | $ 37,680 |
1-3 Years | 77,037 |
3-5 Years | 65,087 |
After 5 years | 211,387 |
Less: Imputed Interest | (87,424) |
Total | $ 303,767 |
Leases - Maturities of lease liabilities prior to adoption (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
|
---|---|
Leases [Abstract] | |
Less than 1 Year | $ 49,350 |
1-3 Years | 78,600 |
3-5 Years | 60,672 |
After 5 years | 201,079 |
Total | $ 389,701 |
Leases - Leases by region (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
|
---|---|
Lessee, Lease, Description [Line Items] | |
Consolidated | $ 300,888 |
North America | |
Lessee, Lease, Description [Line Items] | |
Consolidated | 142,748 |
Europe, Africa and Middle East | |
Lessee, Lease, Description [Line Items] | |
Consolidated | 120,785 |
Greater Asia | |
Lessee, Lease, Description [Line Items] | |
Consolidated | 23,151 |
Latin America | |
Lessee, Lease, Description [Line Items] | |
Consolidated | $ 14,204 |
Income Taxes - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Income Taxes [Line Items] | ||
Domestic earnings repatriated | $ 87.2 | |
Undistributed foreign earnings | $ 42.8 | |
Spanish tax settlement | ||
Income Taxes [Line Items] | ||
Effective tax rate | 17.40% | 18.52276% |
Foreign Tax Authority | ||
Income Taxes [Line Items] | ||
Provision for uncertain tax positions | $ 49.2 | |
2007-2012 | Minimum | ||
Income Taxes [Line Items] | ||
Income tax examination, years under examination | 2009 | |
2007-2012 | Maximum | ||
Income Taxes [Line Items] | ||
Income tax examination, years under examination | 2018 | |
Other Liabilities | ||
Income Taxes [Line Items] | ||
Unrecognized tax benefits that would impact effective tax rate | $ 46.0 | |
Accrued interest and penalties | 3.2 | |
Frutarom | ||
Income Taxes [Line Items] | ||
Undistributed foreign earnings | $ 44.4 |
Stock Compensation Plans - Stock-Based Compensation Expense and Related Tax Benefits (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock-based compensation expense | $ 8,334 | $ 7,775 |
Less: Tax benefit | (1,382) | (1,563) |
Total stock-based compensation expense, after tax | 6,952 | 6,212 |
Equity-based awards | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock-based compensation expense | 7,604 | 7,620 |
Liability-based awards | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock-based compensation expense | $ 730 | $ 155 |
Segment Information - Additional Information (Detail) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019
USD ($)
segment
category
|
Mar. 31, 2018
USD ($)
|
|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Number of segments | segment | 3 | |
Number of categories | category | 2 | |
Revenues | $ | $ 1,297,402 | $ 930,928 |
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 | 6.60% |
Segment Information Segment Information - Net Sales by Destination of Product Delivery (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Net sales | $ 1,297,402 | $ 930,928 |
Europe, Africa and Middle East | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Net sales | 529,606 | 309,312 |
Greater Asia | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Net sales | 287,962 | 243,557 |
North America | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Net sales | 301,059 | 241,146 |
Latin America | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Net sales | $ 178,775 | $ 136,913 |
Employee Benefits - Pension and Other Defined Contribution Retirement Plan Expenses (Detail) - Pension Plans - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
U.S. Plans | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Service cost for benefits earned | $ 474 | $ 596 |
Interest cost on projected benefit obligation | 5,453 | 4,790 |
Expected return on plan assets | (6,983) | (7,739) |
Net amortization and deferrals | 1,275 | 1,549 |
Net periodic benefit (income) cost | 219 | (804) |
Non-U.S. Plans | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Service cost for benefits earned | 4,873 | 4,470 |
Interest cost on projected benefit obligation | 4,435 | 4,338 |
Expected return on plan assets | (10,904) | (12,032) |
Net amortization and deferrals | 2,922 | 2,972 |
Net periodic benefit (income) cost | $ 1,326 | $ (252) |
Employee Benefits - Additional Information (Detail) |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Defined Contribution and Other Retirement Plans | |
Defined Benefit Plan Disclosure [Line Items] | |
Contribution to the plans | $ 1,100,000 |
Expected contribution to the plan | 3,900,000 |
U.S. Plans | Pension Plans | |
Defined Benefit Plan Disclosure [Line Items] | |
Expected contribution to the plan | 4,200,000 |
Contribution to the plans | 0 |
Non-U.S. Plans | Pension Plans | |
Defined Benefit Plan Disclosure [Line Items] | |
Expected contribution to the plan | 19,300,000 |
Contribution to the plans | 2,700,000 |
Benefit payments | $ 1,100,000 |
Employee Benefits - Postretirement Benefits Other Than Pension Expenses (Detail) - Defined Contribution and Other Retirement Plans - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Defined Benefit Plan Disclosure [Line Items] | ||
Service cost for benefits earned | $ 148 | $ 195 |
Interest cost on projected benefit obligation | 578 | 654 |
Net amortization and deferrals | (1,194) | (1,189) |
Net periodic benefit (income) cost | $ (468) | $ (340) |
Financial Instruments - Additional Information (Detail) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019
USD ($)
|
Mar. 31, 2018
swap
|
|
Derivative [Line Items] | ||
Derivative losses included in AOCI | $ 6,200,000 | |
Net investment hedge ineffectiveness | 0 | |
Cash flow hedge ineffectiveness | $ 0 | |
Foreign currency contract | ||
Derivative [Line Items] | ||
Term of derivative | 12 months | |
Interest rate swaps | ||
Derivative [Line Items] | ||
Number of instruments terminated (swap) | swap | 2 |
Financial Instruments - Derivative Instruments Notional Amount Outstanding (Detail) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Forward Contracts [Member] | ||
Schedule Of Information By Major Category Of Credit Derivatives Contracts [Line Items] | ||
Derivative instruments outstanding | $ 460,758 | $ 585,581 |
Currency Swap [Member] | ||
Schedule Of Information By Major Category Of Credit Derivatives Contracts [Line Items] | ||
Derivative instruments outstanding | $ 600,000 | $ 600,000 |
Financial Instruments - Derivative Instruments Which Were Not Designated as Hedging Instruments (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Foreign currency contracts | Other Nonoperating Income (Expense) [Member] | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Derivative, Gain (Loss) on Derivative, Net | $ 926 | $ (3,615) |
Redeemable Noncontrolling Interests (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Stockholders' Equity Attributable to Noncontrolling Interest [Roll Forward] | ||
Balance at December 31, 2018 | $ 10,423 | |
Share of profit or loss attributable to redeemable noncontrolling interests | 2,385 | $ 0 |
Balance at March 31, 2019 | 11,267 | |
Redeemable Noncontrolling Interest [Member] | ||
Stockholders' Equity Attributable to Noncontrolling Interest [Roll Forward] | ||
Balance at December 31, 2018 | 81,806 | |
Acquired through acquisitions during 2019 | 26,224 | |
Impact of foreign exchange translation | (190) | |
Share of profit or loss attributable to redeemable noncontrolling interests | 1,541 | |
Redemption value mark-up for the current period | (370) | |
Measurement period adjustments | 5,700 | |
Balance at March 31, 2019 | $ 114,711 |
Label | Element | Value |
---|---|---|
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents | us-gaap_CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents | $ 368,046,000 |
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents | us-gaap_CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents | 648,522,000 |
Accounting Standards Update 2014-09 [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 2,158,000 |
Accounting Standards Update 2014-09 [Member] | Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 2,158,000 |
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