01—Abstract
Summary
Summary of the 10-K filed February 25, 2010. Cited figures are marked; the original filing is the authoritative source.
International Flavors & Fragrances Inc. (IFF), incorporated in New York in 1909, is a creator and manufacturer of flavor and fragrance products sold to other manufacturers.
Flavors accounted for 46% of 2009 sales and fragrances 54%. Net sales were $2,326,158 thousanda in 2009, down from $2,389,372 thousand in 2008, while net income fell to $195,526 thousand from $229,628 thousand. Diluted earnings per share were $2.46, versus $2.86 in 2008.
Management noted that foreign exchange had a 3%b negative impact on reported sales, and local currency sales increased over 2% in both the third and fourth quarters after a 3% decline in the first half. The company undertook a leadership transition: Robert Amen resigned as Chairman and CEO effective September 30, 2009, and Douglas D. Tough became non-executive Chairman on October 1, 2009, with a planned move to executive Chairman and CEO on March 1, 2010.
A temporary Office of the CEO comprising Kevin Berryman, Nicolas Mirzayantz and Hernan Vaisman is in place until then. Restructuring charges of $18,301 thousandc were recorded in 2009, primarily tied to closing the Drogheda, Ireland fragrance compounding facility and partially closing the Haverhill, UK ingredients plant, with total expected costs of approximately $22-$29 million and estimated annual savings of $17-$20 million not fully realized until 2011. Balance sheet and cash flow were stable.
Operating cash flow was $291,637 thousand, and long-term debt was reduced to $934,749 thousandd from $1,153,672 thousand. Total debt was $1,011,529 thousand at year-end 2009, and the company reported a Net Debt/adjusted EBITDA ratio of 2.08 to 1 against a covenant maximum of 3.25 to 1. The company also disclosed that one customer accounted for 11% of 2009 sales and that its 30 largest customers accounted for 57% of sales.
02—Key points
Key Highlights
- Net sales declined 3% to $2,326 million in 2009 from $2,389 million in 2008, with Flavors sales down 1% and Fragrances sales down 4%.
- Net income was $195.5 million, or $2.46 diluted EPS, compared with $229.6 million, or $2.86 diluted EPS, in 2008.
- Restructuring and other charges of $18.3 million were recorded in 2009, including the closure of the Drogheda, Ireland compounding facility and partial closure of the Haverhill, UK ingredients plant.
- Leadership transition: Douglas D. Tough became non-executive Chairman on October 1, 2009 and is scheduled to become executive Chairman and CEO on March 1, 2010, with a temporary Office of the CEO in place until then.
- Operating cash flow rose to $291.6 million from $220.6 million in 2008, and long-term debt was reduced to $934.7 million from $1,153.7 million.
- Net Debt/adjusted EBITDA was 2.08 to 1 at December 31, 2009, well below the 3.25 to 1 maximum under the revolving credit facility covenant.
- Customer concentration: one customer accounted for 11% of 2009 sales, and the 30 largest customers accounted for 57%.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, International Flavors & Fragrances kept $0.08.
- Revenue$2.33B100.0%
- Cost of revenue−$1.39B59.8%
- Gross profit$934.2M40.2%
- Operating costs−$594.0M25.5%
- Operating income$340.3M14.6%
- Interest, other & tax−$144.8M6.2%
- Net income$195.5M8.4%
Where FY2009 revenue went
$2.33B- Cost of revenue: $1.39B, 60% of revenue
- SG&A: $390.9M, 17% of revenue
- Net income: $195.5M, 8.4% of revenue
- R&D: $184.8M, 7.9% of revenue
- Other operating costs: $18.3M, 0.8% of revenue
- Interest, other & tax: $144.8M, 6.2% of revenue
Kept 8.4% as net incomeOther operating costs $18.3M · 0.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 25, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $2.33B$2.39B | −2.6% |
| Cost of Revenue | $1.39B$1.42B | −1.9% |
| Gross Profit | $934.25M$970.93M | −3.8% |
| R&D Expenses | $184.77M$196.86M | −6.1% |
| SG&A Expenses | $390.88M$400.72M | −2.5% |
| Operating Expenses | $2.05B$2.11B | −2.7% |
| Operating Income | $340.29M— | — |
| Interest Expense | $61.82M$74.01M | −16.5% |
| Net Income | $195.53M$229.63M | −14.9% |
| EPS (Basic) | $2.48$2.89 | −14.2% |
| EPS (Diluted) | $2.46$2.86 | −14.0% |
| Shares Outstanding (Basic) | 78.40M— | — |
| Shares Outstanding (Diluted) | 79.09M— | — |
05—Questions
Frequently Asked Questions
How did IFF perform financially in 2009?
Net sales were $2,326,158 thousand, down from $2,389,372 thousand in 2008, and net income was $195,526 thousand versus $229,628 thousand. Foreign exchange had a 3% negative impact on reported sales, while local currency sales grew over 2% in the third and fourth quarters.
Who leads IFF after the 2009 change in management?
Robert Amen resigned as Chairman and CEO effective September 30, 2009. Douglas D. Tough became non-executive Chairman on October 1, 2009 and will assume the executive Chairman and CEO roles on March 1, 2010. Until then, a temporary Office of the CEO made up of Kevin Berryman, Nicolas Mirzayantz and Hernan Vaisman oversees operations.
What restructuring actions did IFF take in 2009?
The company is rationalizing its European fragrance manufacturing footprint by closing its Fragrances compounding facility in Drogheda, Ireland and partially closing its Fragrance Ingredients plant in Haverhill, UK, affecting approximately 140 employees. Total expected costs are about $22-$29 million, with estimated annual savings of $17-$20 million not fully realized until 2011.
How strong is IFF's balance sheet and debt position?
Total debt was $1,011.5 million at December 31, 2009, down from $1,255.7 million a year earlier. Cash and cash equivalents were $80,135 thousand, and the Net Debt/adjusted EBITDA ratio was 2.08 to 1, versus a covenant maximum of 3.25 to 1. The company stated its revolving facility provides about $500 million of drawdown capacity.
What are the main risks IFF highlighted?
Risks include continued volatility in global economic and credit markets, customer concentration (one customer at 11% of sales), price and availability of raw materials (natural products about 50% of raw material purchases), currency fluctuations, litigation related to flavor ingredient respiratory claims, and future pension funding obligations.
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