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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2018
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
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NEW YORK
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13-1432060
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(State or other jurisdiction
of incorporation or organization)
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(I.R.S. Employer Identification No.)
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521 WEST 57TH STREET, NEW YORK, N.Y.
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10019
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(Address of principal executive offices)
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(Zip Code)
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, par value
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New York Stock Exchange
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12
1
/
2
¢ per share
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6.00% Tangible Equity Units
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New York Stock Exchange
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0.500% Senior Notes due 2021
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New York Stock Exchange
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1.800% Senior Notes due 2026
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New York Stock Exchange
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Large accelerated filer
þ
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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Emerging growth company
o
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PAGE
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PART I
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ITEM 1.
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ITEM 1A.
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ITEM 1B.
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ITEM 2.
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ITEM 3.
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ITEM 4.
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PART II
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ITEM 5.
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ITEM 6.
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ITEM 7.
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ITEM 7A.
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ITEM 8.
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ITEM 9.
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ITEM 9A.
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ITEM 9B.
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PART III
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ITEM 10.
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ITEM 11.
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ITEM 12.
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ITEM 13.
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ITEM 14.
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PART IV
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ITEM 15.
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ITEM 16.
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ITEM 1.
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BUSINESS.
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(1)
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Innovating Firsts
-
We seek to strengthen our position by driving differentiation in priority R&D platforms across both businesses. During 2018, we continued to grow in our Re-Imagine modulation and PowderPure clean label portfolios, developed two new molecules which will be launched in 2019 and continued research into olfactory receptors and maximizing the nutritional value of our naturals. In addition, we opened a naturals laboratory in China, our first outside of the United States, to capitalize on the biodiversity of the region in the development of new products.
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(2)
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Winning Where We Compete
-
Our goal is to achieve a #1 or #2 market leadership position in key markets and categories and with specific customers. In our Taste business, our Tastepoint initiative showed strong improvement, while our Scent business continued to achieve new wins.
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(3)
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Becoming Our Customers' Partner of Choice
-
Our goal is to attain commercial excellence by providing our customers with in-depth, local consumer understanding, industry-leading innovation, outstanding service and the highest quality products. During 2018, we continued to reflect our customers’ focus on naturals and environmental sustainability as IFF-LMR Naturals increased the number of our organic certified sites and have received the Expertise Vegan Europe (EVE) Vegan certification for a portfolio of 90 of our natural extracts. Consumers, and therefore our customers, are continuing to focus on sensorial products that are responsibly sourced. Consequently, an integral component of this pillar is our ongoing commitment to sustainability and i
n 2018, our efforts in this area led us to be named one of Barron’s 100 Most Sustainable Companies.
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(4)
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Strengthening and Expanding the Portfolio
-
We actively pursue value-creation through partnerships, collaborations, and acquisitions within Taste, Scent, Frutarom and adjacencies. We prioritize opportunities that provide (i) access to new technologies, (ii) the ability to increase our market share in key markets and with key customers or (iii) access to adjacent products or services that will position us to leverage our expertise in science and technology and our customer base. In addition to significantly expanding our customer base into the faster-growing midsize and smaller companies, the Frutarom acquisition allowed us to expand our cosmetic active ingredients business and enter into the attractive adjacent markets of savory solutions, natural colors, natural food protection and health and wellness products, including nutraceuticals and enzymes.
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i.
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Fabric Care - laundry detergents, fabric softeners and specialty laundry products;
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ii.
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Home Care - household cleaners, dishwashing detergents and air fresheners;
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iii.
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Personal Wash, including bar soap and shower gel;
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iv.
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Hair Care; and
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v.
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Toiletries.
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•
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Delivery Systems.
We continue to invest in our delivery system technologies, including expansion of our market-leading encapsulation technology, which we believe will allow us to differentiate our products and those of our customers. Our encapsulation technology extends, controls the release of and increases aromas in a variety of consumer products. We have expanded our portfolio to offer multi-functional delivery systems with cosmetic actives that work to enhance skin penetration, protect the cosmetic active ingredients against interactions with other ingredients, provide long-lasting release, facilitate formulation of challenging ingredients and allow a better-targeted action.
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•
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Consumer Demand for Natural and Organic Products
. Increased demand for natural ingredients is a primary driver of future growth in Fine Fragrances. We believe that our in-house naturals operations, led by Laboratoire Monique Rémy (“LMR”) in Grasse, France, are industry leading in the processing of quality materials and offer decades of experience understanding natural products and perfecting the process of transforming naturals, such as narcissus, jasmine and blackcurrant bud, into pure absolutes that retain the unique fragrance of their origin. Our objective is to expand our naturals capabilities by offering our clients natural and proprietary ingredients.
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•
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Transparency in Labeling
. As consumers worldwide seek to require transparency in labeling, our customers will progressively seek to differentiate their products through the inclusion of a natural ingredients and proprietary molecules. We believe our focus on innovation, including innovative delivery systems and our natural and proprietary ingredients will help our customers address these changing consumer demand.
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i.
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Savory, for use in soups, sauces, condiments, prepared meals, meat, fish and poultry, potato chips and other savory snacks;
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ii.
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Beverages, for use in juice drinks, carbonated beverages, flavored waters and spirits;
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iii.
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Sweet, for use in bakery products, candy, chewing gum and cereal; and
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iv.
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Dairy, for use in all dairy products such as yogurt, ice cream and cheese and other products that have a creamy flavor.
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(1)
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Savory Solutions
- Savory Solutions are blends of flavors, natural colors, seasonings, functional ingredients and natural anti-oxidants that are primarily designed for the meat and fish industry. Savory Solutions are inherently very market specific reflecting the taste and historic focus of each region. Through acquisitions and product development, Frutarom has developed an extensive product portfolio that seeks to address these customer needs.
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(2)
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Natural Product Solutions
- Natural Product Solutions include the use of natural health ingredients, colors and shelf life extenders.
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a.
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Natural Health Ingredients -
Natural functional food and supplement nutraceutical ingredients are derived from plants and herbs, which provide, or are perceived as providing, health benefits. In addition, these ingredients are used in dietary supplements, infant and elderly nutrition, cosmetics
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b.
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Natural Color -
Wide array of natural colors and fruit and vegetable concentrates for food, beverage, and cosmetics.
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c.
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Natural Food Protection -
Natural antioxidants and anti-microbials used for natural food preservation and shelf life extension to beverages, cosmetic and healthcare products, and pet food and feed additives. These ingredients reduce the oxidative deterioration that leads to rancidity or loss of flavor, color, and nutritional value.
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(3)
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Taste Solutions -
Flavor compounds and foods.
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(4)
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Specialty Fine Ingredients - specialty fine ingredients market include natural flavor extracts, specialty essential oils, citrus products, aromatic chemicals, and natural gums and resins. Fine ingredients are used for food, beverage, flavors and fragrances, and are often sold directly to food and beverage manufacturers who use them in producing consumer products. Flavor and fragrance manufacturers use fine ingredients products as a foundation in producing their flavor and fragrance substances.
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•
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discovery of new materials;
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•
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development of new technologies, such as delivery systems;
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•
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creation of new compounds; and
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•
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enhancement of existing ingredients and compounds.
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•
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Positive Principles
- We seek to embed the principles of eliminating the concept of waste, using clean renewable energy, and celebrating diversity into our company and culture.
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•
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Regenerative Products
- We strive to intentionally design our products to continuously support well-being and have a positive contribution to society and the environment in a circular economy.
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•
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Sensational People
- We seek to engage our employees and stakeholders to make a positive difference in the world.
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•
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After surpassing three of our four 2020 environmental targets, we launched new environmental goals focused on science based emission reductions, zero waste to landfill and water stewardship - an initiative known collectively as “EcoEffective+”;
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•
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Enhancing our tools and processes to incorporate the five aspects of circular design - material health, material recirculation, renewable energy, water and waste minimization, and responsible sourcing - in the very early stages of product development; and
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•
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Obtaining FairWild certification for Peru Balsam - the first ever FairWild-certified flavor and fragrance ingredient that is commercially available globally. In addition, we have a robust slate of For Life-certified ingredients. The FairWild and For Life certification systems encompass fair working conditions, transparent administration, good community relations and environmental performance monitoring.
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i.
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our in-depth understanding of consumers,
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ii.
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innovation and technological advances from our perfumers, flavorists and research and development
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iii.
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ability to tailor products to customer's needs, efficiency, product quality and
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iv.
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broad-based regulatory capabilities.
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Name
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Age
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Position
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Andreas Fibig
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57
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Chairman of the Board and Chief Executive Officer
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Richard A. O'Leary
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58
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Executive Vice President and Chief Financial Officer
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Nicolas Mirzayantz
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56
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Divisional Chief Executive Officer, Scent
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Matthias Haeni
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53
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Divisional Chief Executive Officer, Taste
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Gregory Yep
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54
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Executive Vice President, Chief Global Scientific & Sustainability Officer
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Susana Suarez-Gonzalez
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49
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Executive Vice President, Chief Human Resources Officer
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Anne Chwat
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59
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Executive Vice President, General Counsel and Corporate Secretary
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Francisco Fortanet
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50
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Executive Vice President, Operations
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Amos Anatot
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65
|
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President, Frutarom
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ITEM 1A.
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RISK FACTORS.
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•
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potential disruption of, or reduced growth in, our historical core businesses, due to diversion of management attention from our historical core business and uncertainty with our current customer and supplier relationships;
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•
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challenges arising from the expansion of our product offerings into adjacencies with which we have limited experience, including functional foods and nutraceuticals;
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•
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coordinating and integrating research and development teams across technologies and products to enhance product development while reducing costs;
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•
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consolidating and integrating corporate, information technology, finance and administrative infrastructures, and integrating and harmonizing business systems, which may be more difficult than anticipated due to the significant number of acquisitions completed by Frutarom over the past few years;
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•
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coordinating sales and marketing efforts to effectively position our capabilities and the direction of product development;
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•
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difficulties in achieving anticipated cost savings, synergies, business opportunities, cross-selling opportunities and growth prospects from combining Frutarom’s business with our business;
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•
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the increased scale, regulatory compliance costs and complexity of our operations;
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•
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retaining key employees, suppliers and other partners;
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•
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retaining and efficiently managing Frutarom’s significantly expanded and decentralized customer base;
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•
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difficulties in anticipating and responding to actions that may be taken by competitors in response to the transaction; and
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•
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the assumption of and exposure to unknown or contingent liabilities of Frutarom.
|
•
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governmental laws, regulations and policies adopted to manage national economic and macroeconomic conditions, such as increases in taxes, austerity measures that may impact consumer spending, monetary policies that may impact inflation rates, currency fluctuations and sustainability of resources;
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•
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changes in environmental, health and safety regulations, such as the continued implementation of the European Union’s REACH regulations and similar regulations that are being evaluated and adopted in other markets, and the burdens and costs of our compliance with such regulations;
|
•
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increased environmental, health and safety regulations or the loss of necessary environmental permits in certain countries, arising from growing consumer sensitivity concerning the inclusion of flavor additives in food products and the fact that regulators perceive nutraceuticals, medical food and functional food products as having medicinal attributes;
|
•
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the imposition of or changes in tariffs, quotas, trade barriers, other trade protection measures and import or export licensing requirements, by the U.S. or other Countries, which could adversely affect our cost or ability to import raw materials or export our flavors and fragrance products to surrounding markets;
|
•
|
risks and costs arising from language and cultural differences;
|
•
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changes in the laws and policies that govern foreign investment in the countries in which we operate, including the risk of expropriation or nationalization, and the costs and ability to repatriate the profit that we generate in these countries;
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•
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risks and costs associated with political and economic instability, bribery and corruption, anti-American sentiment, and social and ethnic unrest in the countries in which we operate;
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•
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difficulty in recruiting and retaining trained local personnel;
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•
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natural disasters, pandemics or international conflicts, including terrorist acts, or national and regional labor strikes in the countries in which we operate, which could interrupt our operations or endanger our personnel; or
|
•
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the risks of operating in developing or emerging markets in which there are significant uncertainties regarding the interpretation, application and enforceability of laws and regulations and the enforceability of contract rights and intellectual property rights.
|
•
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the risk that we may be unable to successfully and efficiently manufacture the relocated product lines at a different manufacturing facility;
|
•
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the risk that we may be unable to effectively reduce overhead and integrate and retain employees of the relocated operations;
|
•
|
the risk that we may face difficulties in implementing and maintaining consistent standards, controls, procedures, policies and information systems;
|
•
|
the risk that we may face integrating newly acquired manufacturing, distribution and technology facilities;
|
•
|
potential strains on our personnel, systems and resources and diversion of attention from other priorities; and
|
•
|
unforeseen or contingent liabilities of the relocated operations.
|
ITEM 1B.
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UNRESOLVED STAFF COMMENTS.
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ITEM 2.
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PROPERTIES.
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Location
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Operation
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United States
|
|
Carrollton, TX
(1)
|
Production of flavor compounds; flavor laboratories.
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Hazlet, NJ
(1)
|
Production of fragrance compounds; fragrance laboratories.
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Jacksonville, FL
|
Production of fragrance ingredients.
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New York, NY
(1)
|
Fragrance laboratories; corporate headquarters.
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South Brunswick, NJ
(1)
|
Production of flavor compounds and ingredients; flavor laboratories.
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Union Beach, NJ
|
Research and development center.
|
Winter Haven, FL
|
Frutarom production of citrus.
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Ridgefield, NJ
(1)
|
Frutarom production of health products.
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Corona, CA
(1)
|
Frutarom production of flavors powders and liquids.
|
Canada
|
|
Montreal
|
Frutarom production of savory solutions.
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Toronto
|
Frutarom production of savory solutions.
|
France
|
|
Neuilly
(1)
|
Fragrance laboratories.
|
Grasse
|
Production of fragrance compounds, and cosmetic ingredients.
|
Great Britain
|
|
Haverhill
|
Production of flavor compounds and ingredients, and fragrance ingredients; flavor laboratories.
|
Hartlepool
|
Frutarom production of specialty fine ingredients.
|
Netherlands
|
|
Hilversum
|
Flavor and fragrance laboratories, and administrative offices.
|
Tilburg
|
Production of flavor compounds and ingredients, and fragrance compounds.
|
Spain
|
|
Benicarló
|
Production of fragrance ingredients.
|
Cartagena Murcia
|
Frutarom production of colors, flavor extracts and food protection.
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Murcia
|
Frutarom production of health ingredients, flavor extracts and food protection.
|
Egypt
|
|
Cairo
|
Production of flavor compounds and manufacturing.
|
Argentina
|
|
Garin
|
Production of flavor and fragrance compounds; flavor and fragrance laboratories.
|
Brazil
|
|
Rio de Janeiro
|
Production of fragrance compounds.
|
São Paulo
|
Flavor and fragrance laboratories.
|
Taubate
|
Production of flavor compounds and ingredients.
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Minas Gerias
(1)
|
Frutarom production of taste solutions.
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Arroio Do Meio
|
Frutarom production of savory solutions.
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Palmeira de Goias
|
Frutarom production of savory solutions.
|
Mexico
|
|
Tlalnepantla
|
Production of flavor and fragrance compounds; flavor and fragrance laboratories.
|
Monterrey
|
Frutarom production of savory solutions.
|
San Louis Potosi
|
Frutarom production of savory solutions.
|
Location
|
Operation
|
Peru
|
|
Lima
(1)
|
Frutarom production of flavor and savory solutions and colors.
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Guatemala
|
|
Guatemala City
|
Frutarom production of flavor and savory solutions.
|
India
|
|
Mumbai
(2)
|
Flavor and fragrance laboratories.
|
Chennai
(2)
|
Production of flavor compounds and ingredients, and fragrance compounds; flavor laboratories.
|
New Zealand
|
|
Mut Maunganui
|
Frutarom production of taste solutions.
|
Australia
|
|
Dandenong
|
Production of flavor compounds and flavor ingredients.
|
China
|
|
Guangzhou
(3)
|
Production of flavor compounds.
|
Guangzhou
(3)
|
Production of fragrance compounds.
|
Shanghai
(4)
|
Flavor and fragrance laboratories.
|
Xin’anjiang
(5)
|
Production of fragrance ingredients.
|
Zhejiang
(3)
|
Production of fragrance ingredients.
|
Guang Dong
|
Frutarom production of taste solutions.
|
Shanghai
|
Frutarom production of flavors.
|
Pucheng
|
Frutarom production of specialty fine ingredients.
|
Indonesia
|
|
Jakarta
|
Production of flavor compounds and ingredients; flavor and fragrance laboratories.
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Vietnam
|
|
Ho Chi Minh
(1)
|
Frutarom production of flavors.
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Thailand
|
|
Bangkok
|
Frutarom production of savory solutions.
|
Japan
|
|
Gotemba
|
Production of flavor compounds.
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Tokyo
|
Flavor and fragrance laboratories.
|
Singapore
|
|
Jurong
(4)
|
Production of flavor and fragrance compounds.
|
Science Park
(1)
|
Flavor and fragrance laboratories.
|
Poland
|
|
Radzymin
|
Frutarom production of savory solutions.
|
Turkey
|
|
Gebze
|
Production of flavor compounds.
|
Slovania
|
|
Markovci
|
Frutarom production of health products.
|
Skofja
|
Frutarom production of flavor, food systems and savory powders.
|
Austria
|
|
Salzburg
(1)
|
Frutarom production of savory solutions.
|
Switzerland
|
|
Reinach
|
Frutarom production of food systems.
|
Niederuzwil
|
Frutarom production of savory solutions.
|
Location
|
Operation
|
Israel
|
|
Kibbutz Givat-Oz
(3)
|
Production of fragrance ingredients.
|
Migdal H'aemeq
|
Frutarom production of health products.
|
Akko
(1)
|
Frutarom production of savory solutions.
|
Gilat
(1)
|
Frutarom production of algea.
|
Belgium
|
|
Olen
|
Frutarom production of powders.
|
Germany
|
|
Hamburg
|
Production of fragrance compounds.
|
Stadthagen
|
Frutarom production of health products.
|
Emmerich
|
Frutarom production of food systems.
|
Stuttgart
(1)
|
Frutarom starter culture production for savory.
|
Sittensen
(1)
|
Frutarom production of savory solutions.
|
Freilassing
|
Frutarom production of savory solutions.
|
(1)
|
Leased.
|
(2)
|
We have a 93.4% interest in the subsidiary company that owns this facility.
|
(3)
|
Land is leased and building, machinery and equipment are owned.
|
(4)
|
Building is leased and machinery and equipment are owned.
|
(5)
|
We have a 90% interest in the subsidiary company that leases the land and owns the buildings and machinery.
|
ITEM 3.
|
LEGAL PROCEEDINGS.
|
ITEM 4.
|
MINE SAFETY DISCLOSURES.
|
Title of Class
|
Number of shareholders of record as of February 15, 2019
|
Common stock, par value 12
1
/
2
¢ per share
|
1,656
|
Peer Group Companies
|
|
Avon Products, Inc.
|
Hormel Foods Corporation
|
Campbell Soup Company
|
Kellogg Company
|
Church & Dwight Co., Inc.
|
The Estée Lauder Companies Inc.
|
The Clorox Company
|
McCormick & Company, Incorporated
|
The Coca-Cola Company
|
McDonald’s Corporation
|
Colgate-Palmolive Company
|
Nestle SA
|
ConAgra Brands, Inc.
|
PepsiCo, Inc.
|
Edgewell Personal Care Company
(1)
|
The Procter & Gamble Company
|
General Mills, Inc.
|
Revlon, Inc.
|
Heinz (HJ) Co.
(1)
|
Sensient Technologies Corporation
|
The Hershey Company
|
Unilever N.V.
|
Hillshire Brands Co.
(1)
|
YUM! Brands, Inc.
|
(1)
|
In July 2012, Sara Lee Corp. spun off certain of its businesses and changed its name to Hillshire Brands Co. Heinz (HJ) Co. was acquired by Hawk Acquisition Holding Corp on June 7, 2013 and has only been included through that date. Hillshire Brands Co. was acquired by Tyson Foods on August 28, 2014 and has only been included through that date. Edgewell Personal Care has been included starting from July 1, 2015 when it spun off from Energizer Holdings.
|
ITEM 6.
|
SELECTED FINANCIAL DATA.
|
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
|
|
Net Income (Loss) Per Share
|
|||||||||||||||||||||||||||||||||||||
|
Net Sales
|
|
Gross Profit
(a)
|
|
Net Income (Loss)
(b)
|
|
Basic
(e)
|
|
Diluted
(c)(d)
|
||||||||||||||||||||||||||||||
Quarter
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||||||||||
First
|
$
|
930,928
|
|
|
$
|
828,293
|
|
|
$
|
405,809
|
|
|
$
|
363,083
|
|
|
$
|
129,416
|
|
|
$
|
115,764
|
|
|
$
|
1.63
|
|
|
$
|
1.46
|
|
|
$
|
1.63
|
|
|
$
|
1.45
|
|
Second
|
920,016
|
|
|
842,861
|
|
|
398,717
|
|
|
372,984
|
|
|
99,149
|
|
|
109,795
|
|
|
1.25
|
|
|
1.39
|
|
|
1.25
|
|
|
1.38
|
|
||||||||||
Third
|
907,548
|
|
|
872,940
|
|
|
400,666
|
|
|
380,398
|
|
|
95,716
|
|
|
110,261
|
|
|
1.18
|
|
|
1.39
|
|
|
1.17
|
|
|
1.39
|
|
||||||||||
Fourth
|
1,219,047
|
|
|
854,625
|
|
|
477,515
|
|
|
355,998
|
|
|
15,500
|
|
|
(40,155
|
)
|
|
0.09
|
|
|
(0.51
|
)
|
|
0.09
|
|
|
(0.51
|
)
|
||||||||||
|
$
|
3,977,539
|
|
|
$
|
3,398,719
|
|
|
$
|
1,682,707
|
|
|
$
|
1,472,463
|
|
|
$
|
339,781
|
|
|
$
|
295,665
|
|
|
$
|
3.81
|
|
|
$
|
3.73
|
|
|
$
|
3.79
|
|
|
$
|
3.72
|
|
|
Footnotes
|
|
||||||||
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
|
Gross Profit
(a)
|
Net Income(b)
|
Diluted EPS
(c)
|
Description
|
||||||
Q1 2018
|
|
|
|
|
||||||
Operational Improvement Initiatives
|
453
|
|
732
|
|
0.01
|
|
Represents accelerated depreciation related to a plant relocation in India and a lab closure in Taiwan.
|
|||
Acquisition Related Costs
|
—
|
|
(380
|
)
|
—
|
|
Represents adjustments to the contingent consideration payable for PowderPure, and transaction costs related to Fragrance Resources and PowderPure within Selling and administrative expenses.
|
|||
Restructuring and Other Charges, net
|
—
|
|
548
|
|
0.01
|
|
Represents severance costs related to the 2017 Productivity Program and Taiwan lab closure.
|
|||
Gain on Sale of Assets
|
—
|
|
(52
|
)
|
—
|
|
Represents gains on sale of assets.
|
|||
FDA Mandated Product Recall
|
5,000
|
|
3,804
|
|
0.05
|
|
Represents management's best estimate of losses related to the previously disclosed FDA mandated recall.
|
|||
U.S. Tax Reform
|
—
|
|
649
|
|
0.01
|
|
Represents charges incurred related to enactment of certain U.S. tax legislation changes in December 2017.
|
|||
Q2 2018
|
|
|
|
|
||||||
Operational Improvement Initiatives
|
403
|
|
261
|
|
—
|
|
Represents accelerated depreciation related to a plant relocation in India.
|
|||
Acquisition Related Costs
|
—
|
|
(3
|
)
|
—
|
|
Represents adjustments to the contingent consideration payable for PowderPure, and transaction costs related to Fragrance Resources and PowderPure within Selling and administrative expenses.
|
|||
Integration Related Costs
|
—
|
|
993
|
|
0.01
|
|
Represents costs related to the integration of David Michael.
|
|||
Restructuring and Other Charges, net
|
—
|
|
147
|
|
—
|
|
Represents severance costs related to the 2017 Productivity Program.
|
|||
Gain on Sale of Assets
|
—
|
|
1,001
|
|
0.01
|
|
Represents gains on sale of assets.
|
|||
Frutarom Acquisition Related Costs
|
—
|
|
30,446
|
|
0.38
|
|
Represents transaction-related costs and expenses related to the acquisition of Frutarom. Amount includes $10.6 million of bridge loan commitment fees included in Interest expense, $25.0 million mark-to-market loss adjustment on an interest rate derivative and an $11.0 million mark-to-market gain adjustment on a foreign currency derivative, and $12.5 million of transaction costs included in administrative expenses.
|
|||
Q3 2018
|
|
|
|
|
||||||
Operational Improvement Initiatives
|
398
|
|
220
|
|
—
|
|
Represents accelerated depreciation related to a plant relocation in India and Taiwan asset write off.
|
|||
Acquisition Related Costs
|
—
|
|
(2
|
)
|
—
|
|
Represents adjustments to the contingent consideration payable for PowderPure, and transaction costs related to Fragrance Resources and PowderPure within Selling and administrative expenses.
|
|||
Integration Related Costs
|
18
|
|
722
|
|
0.01
|
|
Represents costs related to the integration of Frutarom.
|
|||
Restructuring and Other Charges, net
|
—
|
|
699
|
|
0.01
|
|
Represents severance costs related to the 2017 Productivity Program.
|
|||
Gain on Sale of Assets
|
—
|
|
(1,243
|
)
|
(0.02
|
)
|
Represents gains on sale of assets.
|
|||
FDA Mandated Product Recall
|
(9,800
|
)
|
(7,456
|
)
|
(0.09
|
)
|
Represents recoveries from the supplier related to the previously disclosed FDA mandated recall.
|
|||
U.S. Tax Reform
|
—
|
|
(8,151
|
)
|
(0.10
|
)
|
Represents charges incurred related to enactment of certain U.S. tax legislation changes in December 2017.
|
|||
Frutarom Acquisition Related Costs
|
—
|
|
45,433
|
|
0.56
|
|
Represents transaction-related costs and expenses related to the acquisition of Frutarom. Amount primarily includes $28.8 million of bridge loan commitment fees partially offset by $25.3 million net mark-to-market gains on deal-contingent interest rate derivatives included in Interest expense; $34.9 million make whole payment on the Senior Notes - 2007 and $3.9 million realized loss on a fair value hedge included in Loss on extinguishment of debt; $1.9 million realized gain on a foreign currency derivative included in Other income; and $14.3 million of transaction costs included in administrative expenses.
|
|||
Q4 2018
|
|
|
|
|
||||||
Operational Improvement Initiatives
|
396
|
|
262
|
|
—
|
|
Represents accelerated depreciation related to a plant relocation in India.
|
|||
Acquisition Related Costs
|
—
|
|
(593
|
)
|
(0.01
|
)
|
Represents adjustments to the contingent consideration payable for PowderPure, and transaction costs related to Fragrance Resources and PowderPure within Selling and administrative expenses
|
|||
Integration Related Costs
|
84
|
|
4,076
|
|
0.04
|
|
Represents costs related to the integration of the Frutarom acquisition.
|
|||
Restructuring and Other Charges, net
|
—
|
|
1,672
|
|
0.01
|
|
Represents severance costs related to the 2017 Productivity Program and costs associated with the termination of agent relationships in a subsidiary.
|
|||
Gain on Sale of Assets
|
—
|
|
(531
|
)
|
—
|
|
Represents gains on sale of assets.
|
|||
FDA Mandated Product Recall
|
(2,325
|
)
|
(1,872
|
)
|
(0.02
|
)
|
Principally represents recoveries from our insurance in the fourth quarter.
|
|
Footnotes
|
|
||||||||
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
|
Gross Profit
(a)
|
Net Income(b)
|
Diluted EPS
(c)
|
Description
|
||||||
U.S. Tax Reform
|
—
|
|
32,847
|
|
0.30
|
|
Represents additional expense based on updated repatriation plans requiring accruals for withholding taxes on deemed repatriation.
|
|||
Frutarom Acquisition Related Costs
|
23,550
|
|
51,200
|
|
0.46
|
|
Represents transaction-related costs and expenses related to the acquisition of Frutarom. Amount primarily includes $23.5 million of amortization for inventory "step-up" costs and $39.2 million of transaction costs included in Selling and administrative expenses.
|
|||
Redemption value adjustment to EPS
|
—
|
|
—
|
|
0.03
|
|
Represents the adjustment to EPS related to the excess of the redemption value of certain redeemable noncontrolling interests over their existing carrying value.
|
|||
Q1 2017
|
|
|
|
|
||||||
Operational Improvement Initiatives
|
$
|
621
|
|
$
|
466
|
|
$
|
0.01
|
|
Represents accelerated depreciation in Hangzhou, China.
|
Acquisition Related Costs
|
5,301
|
|
5,650
|
|
0.07
|
|
Represents the amortization of inventory "step-up" related to the acquisitions of David Michael and PowderPure, included in Cost of goods sold and transaction costs related to the acquisitions of Fragrance Resources and PowderPure, included in Selling and administrative expenses.
|
|||
Integration Related Costs
|
88
|
|
829
|
|
0.01
|
|
Represents costs related to the integration of the David Michael and Fragrance Resources acquisitions.
|
|||
Tax Assessment
|
—
|
|
3,458
|
|
0.04
|
|
Represents the reserve for payment of a tax assessment related to commercial rent for prior periods.
|
|||
Restructuring and Other Charges, net
|
—
|
|
7,176
|
|
0.09
|
|
Represents severance costs related to the 2017 Productivity Program.
|
|||
Gain on Sale of Assets
|
—
|
|
(14
|
)
|
—
|
|
Represents gains on sale of assets.
|
|||
CTA Realization
|
—
|
|
(12,214
|
)
|
(0.15
|
)
|
Represents the release of CTA related to the liquidation of a foreign entity.
|
|||
Q2 2017
|
|
|
|
|
||||||
Operational Improvement Initiatives
|
445
|
|
334
|
|
—
|
|
Represents accelerated depreciation in Hangzhou, China.
|
|||
Acquisition Related Costs
|
5,606
|
|
4,806
|
|
0.06
|
|
Represents the amortization of inventory "step-up" related to the acquisitions of David Michael, Fragrance Resources and PowderPure, included in Cost of goods sold and transaction costs related to the acquisitions of Fragrance Resources and PowderPure, included in Selling and administrative expenses.
|
|||
Integration Related Costs
|
98
|
|
488
|
|
0.01
|
|
Represents costs related to the integration of the David Michael and Fragrance Resources acquisitions.
|
|||
Legal Charges/Credits, net
|
—
|
|
646
|
|
0.01
|
|
Represents additional charge related to litigation settlement.
|
|||
Tax Assessment
|
—
|
|
(12
|
)
|
—
|
|
Represents the reversal of a portion of the reserve for payment of a tax assessment related to commercial rent for prior periods.
|
|||
Restructuring and Other Charges, net
|
—
|
|
866
|
|
0.01
|
|
Represents severance costs related to the 2017 Productivity Program.
|
|||
Gain on Sale of Assets
|
—
|
|
(46
|
)
|
—
|
|
Represents gains on sale of assets.
|
|||
FDA Mandated Product Recall
|
3,500
|
|
2,262
|
|
0.03
|
|
Represents additional charges recognized to accrue for an estimate of the Company's incremental direct costs and customer reimbursement obligations, in excess of the Company's sales value of the recalled products, arising from an FDA mandated recall of consumer products as a result of raw material received and identified by the Company as containing contamination.
|
|||
Q3 2017
|
|
|
|
|
||||||
Operational Improvement Initiatives
|
407
|
|
305
|
|
—
|
|
Represents accelerated depreciation in Hangzhou, China.
|
|||
Acquisition Related Costs
|
5,147
|
|
3,487
|
|
0.04
|
|
Represents the amortization of inventory "step-up" related to the acquisitions of David Michael, Fragrance Resources and PowderPure, included in Cost of goods sold and transaction costs related to the acquisitions of Fragrance Resources and PowderPure, included in Selling and administrative expenses.
|
|||
Integration Related Costs
|
131
|
|
428
|
|
0.01
|
|
Represents costs related to the integration of the David Michael and Fragrance Resources acquisitions.
|
|||
Restructuring and Other Charges, net
|
—
|
|
2,237
|
|
0.03
|
|
Represents severance costs related to the 2017 Productivity Program.
|
|||
Gain on Sale of Assets
|
—
|
|
(21
|
)
|
—
|
|
Represents gains on sale of assets.
|
|||
Q4 2017
|
|
|
|
|
||||||
Operational Improvement Initiatives
|
329
|
|
247
|
|
—
|
|
Represents accelerated depreciation in Hangzhou, China.
|
|||
Acquisition Related Costs
|
(194
|
)
|
(68
|
)
|
|
Represents the amortization of inventory "step-up" related to the acquisitions of David Michael and Fragrance Resources, included in Cost of goods sold and transaction costs related to the acquisitions of David Michael and Fragrance Resources, included in Selling and administrative expenses.
|
||||
Integration Related Costs
|
163
|
|
1,102
|
|
0.01
|
|
Represents costs related to the integration of the David Michael.
|
|||
Restructuring and Other Charges, net
|
—
|
|
3,967
|
|
0.05
|
|
Represents severance costs related to the 2017 Productivity Program.
|
|||
Gain on Sale of Assets
|
—
|
|
(44
|
)
|
—
|
|
Represents gains on sale of property in Brazil.
|
|
Footnotes
|
|
||||||||
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
|
Gross Profit
(a)
|
Net Income(b)
|
Diluted EPS
(c)
|
Description
|
||||||
FDA Mandated Product Recall
|
7,500
|
|
4,848
|
|
0.06
|
|
Represents additional charges recognized to accrue for an estimate of the Company's incremental direct costs and customer reimbursement obligations, in excess of the Company's sales value of the recalled products, arising from an FDA mandated recall of consumer products as a result of raw material received and identified by the Company as containing contamination.
|
|||
UK Pension Settlement Charges
|
—
|
|
2,243
|
|
0.03
|
|
Represents pension settlement charges related to one of the Company's UK plans.
|
|||
U.S. Tax Reform
|
—
|
|
139,172
|
|
1.76
|
|
Represents charges incurred related to enactment of certain U.S. tax legislation changes in December 2017. The amount includes approximately $38.6 million related to adjustments to net deferred tax assets and $100.6 million related to a liability for taxes on deemed repatriation of earnings.
|
(d)
|
The sum of the 2018 and 2017 Net Income per diluted share by quarter does not equal the earnings per share for the full year due to rounding.
|
(e)
|
The sum of the 2018 Net Income per basic share by quarter does not equal the earnings per share for the full year due to the impact of higher shares in the third and fourth quarters.
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2018
|
|
2017 (j)
|
|
2016 (j)
|
|
2015
|
|
2014
|
||||||||||
Consolidated Statement of Income Data
|
|
|
|
|
|
|
|
|
|
||||||||||
Net sales
|
$
|
3,977,539
|
|
|
$
|
3,398,719
|
|
|
$
|
3,116,350
|
|
|
$
|
3,023,189
|
|
|
$
|
3,088,533
|
|
Cost of goods sold
(a)
|
2,294,832
|
|
|
1,926,256
|
|
|
1,720,787
|
|
|
1,672,308
|
|
|
1,725,823
|
|
|||||
Gross profit
|
1,682,707
|
|
|
1,472,463
|
|
|
1,395,563
|
|
|
1,350,881
|
|
|
1,362,710
|
|
|||||
Research and development expenses
|
311,583
|
|
|
295,469
|
|
|
258,863
|
|
|
245,605
|
|
|
249,173
|
|
|||||
Selling and administrative expenses
(b)
|
707,461
|
|
|
570,144
|
|
|
572,518
|
|
|
494,097
|
|
|
502,121
|
|
|||||
Restructuring and other charges, net
(c)
|
5,079
|
|
|
19,711
|
|
|
(1,700
|
)
|
|
7,594
|
|
|
1,298
|
|
|||||
Amortization of acquisition-related intangibles
|
75,879
|
|
|
34,693
|
|
|
23,763
|
|
|
15,040
|
|
|
7,328
|
|
|||||
Gain on sales of fixed assets
|
(1,177
|
)
|
|
(184
|
)
|
|
(10,836
|
)
|
|
—
|
|
|
—
|
|
|||||
Operating profit
|
583,882
|
|
|
552,630
|
|
|
552,955
|
|
|
588,545
|
|
|
602,790
|
|
|||||
Interest expense
|
132,558
|
|
|
65,363
|
|
|
52,989
|
|
|
46,062
|
|
|
46,067
|
|
|||||
Loss on extinguishment of debt
(d)
|
38,810
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Other (income) expense, net
(e)
|
(35,243
|
)
|
|
(49,778
|
)
|
|
(23,751
|
)
|
|
3,382
|
|
|
7,662
|
|
|||||
Income before taxes
|
447,757
|
|
|
537,045
|
|
|
523,717
|
|
|
539,101
|
|
|
549,061
|
|
|||||
Taxes on income
(f)
|
107,976
|
|
|
241,380
|
|
|
118,686
|
|
|
119,854
|
|
|
134,518
|
|
|||||
Net income
|
339,781
|
|
|
295,665
|
|
|
405,031
|
|
|
419,247
|
|
|
414,543
|
|
|||||
Net income attributable to noncontrolling interests
|
2,479
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Net income attributable to IFF stockholders
|
$
|
337,302
|
|
|
$
|
295,665
|
|
|
$
|
405,031
|
|
|
$
|
419,247
|
|
|
$
|
414,543
|
|
Percentage of net sales
|
8.5
|
|
|
8.7
|
|
|
13.0
|
|
|
13.9
|
|
|
13.4
|
|
|||||
Percentage of average shareholders’ equity
|
8.8
|
|
|
17.8
|
|
|
26.0
|
|
|
26.9
|
|
|
27.7
|
|
|||||
Net income per share — basic
|
$
|
3.81
|
|
|
$
|
3.73
|
|
|
$
|
5.07
|
|
|
$
|
5.19
|
|
|
$
|
5.09
|
|
Net income per share — diluted
|
$
|
3.79
|
|
|
$
|
3.72
|
|
|
$
|
5.05
|
|
|
$
|
5.16
|
|
|
$
|
5.06
|
|
Average number of diluted shares (thousands)
|
88,121
|
|
|
79,370
|
|
|
79,981
|
|
|
80,891
|
|
|
81,494
|
|
|||||
Consolidated Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
634,897
|
|
|
$
|
368,046
|
|
|
$
|
323,992
|
|
|
$
|
181,988
|
|
|
$
|
478,573
|
|
Receivables, net
|
937,765
|
|
|
663,663
|
|
|
550,658
|
|
|
537,896
|
|
|
493,768
|
|
|||||
Inventories
|
1,078,537
|
|
|
649,448
|
|
|
592,017
|
|
|
572,047
|
|
|
568,729
|
|
|||||
Property, plant and equipment, net
|
1,241,152
|
|
|
880,580
|
|
|
775,716
|
|
|
732,794
|
|
|
720,268
|
|
|||||
Goodwill and intangible assets, net
(g)
|
8,417,710
|
|
|
1,572,075
|
|
|
1,365,906
|
|
|
1,247,393
|
|
|
752,041
|
|
|||||
Total assets
|
12,889,395
|
|
|
4,598,926
|
|
|
4,016,984
|
|
|
3,702,010
|
|
|
3,494,621
|
|
|||||
Bank borrowings, overdrafts and current portion of long-term debt
|
48,642
|
|
|
6,966
|
|
|
258,516
|
|
|
132,349
|
|
|
8,090
|
|
|||||
Long-term debt
|
4,504,417
|
|
|
1,632,186
|
|
|
1,066,855
|
|
|
935,373
|
|
|
934,232
|
|
|||||
Redeemable noncontrolling interests
|
81,806
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total Shareholders’ equity
(h)
|
6,043,374
|
|
|
1,689,294
|
|
|
1,631,134
|
|
|
1,594,989
|
|
|
1,522,689
|
|
|||||
Other Data
|
|
|
|
|
|
|
|
|
|
||||||||||
Current ratio
(i)
|
2.6
|
|
|
2.5
|
|
|
1.8
|
|
|
2.0
|
|
|
3.3
|
|
|||||
Additions to property, plant and equipment
|
$
|
170,094
|
|
|
$
|
128,973
|
|
|
$
|
126,412
|
|
|
$
|
101,030
|
|
|
$
|
143,182
|
|
Depreciation and amortization expense
|
173,792
|
|
|
117,967
|
|
|
102,469
|
|
|
89,597
|
|
|
89,354
|
|
|||||
Cash dividends declared per share
|
$
|
2.84
|
|
|
$
|
2.66
|
|
|
$
|
2.40
|
|
|
$
|
2.06
|
|
|
$
|
1.72
|
|
Number of shareholders of record at year-end
|
1,276
|
|
|
1,735
|
|
|
1,892
|
|
|
2,013
|
|
|
2,105
|
|
|||||
Number of employees at year-end
|
13,209
|
|
|
7,299
|
|
|
6,932
|
|
|
6,732
|
|
|
6,211
|
|
(a)
|
The 2018 amount includes
$23.6 million
of costs related to the fair value step-up for the Frutarom acquisition,
$7.1 million
of net reimbursements from suppliers related to the previously disclosed FDA mandated recall,
$1.7 million
of operational improvement initiative costs consisting of accelerated depreciation and asset write-offs, and
$0.1 million
of integration costs related to the David Michael and Frutarom acquisitions
.
The 2017 amount includes
$15.9 million
of costs related to the fair value step-up for the Fragrance Resources and PowderPure acquisitions,
$1.8 million
of operational improvement initiative costs consisting of accelerated depreciation, FDA mandated product recall costs of
$11.0 million
, and
$0.5 million
of integration costs related to the 2017 Productivity Program. The 2016 amount includes
$7.6 million
of costs related to the fair value step-up for the David Michael and Lucas Meyer acquisitions,
$2.4 million
of operational improvement initiative costs consisting of accelerated depreciation and
$0.7 million
of accelerated depreciation related to restructuring activities. The 2015 amount includes
$6.8 million
of costs related to the fair value step-up of inventory for the Ottens Flavors and Lucas Meyer acquisitions and
$1.1 million
of operational improvement initiative costs in Europe and Asia. The 2014 amount includes
$7.6 million
of accelerated depreciation associated with the Fragrance Ingredients rationalization and operational improvement initiative costs in Europe and Asia.
|
(b)
|
The 2018 amount includes
$66.1 million
of transaction costs related to acquisition of Frutarom,
$6.1 million
of integration costs related to the David Michael and Frutarom acquisitions, and
$1.3 million
of transaction costs related to the acquisitions of
Fragrance Resources and PowderPure
.
The 2017 amount includes
$4.5 million
of costs related to the Fragrance Resources and PowderPure acquisitions,
$3.3 million
of integration costs related to the 2017 Productivity Program,
$1.0 million
of additional charge related to litigation settlement,
$5.3 million
of reserve for payment of a tax assessment related to commercial rent for prior periods and
$1.9 million
of UK pension settlement charges. The 2016 amount includes
$48.5 million
of legal charges/credits principally related to litigation accrual,
$4.5 million
of acquisition-related costs related to the acquisitions of Lucas Meyer, David Michael and Fragrance Resources and
$1.4 million
of severance costs related to the termination of a former executive officer. The 2015 amount includes
$10.5 million
of reversal of the previously recorded provision for the Spanish capital tax case,
$7.2 million
of expense for the acceleration of the contingent consideration payments related to the Aromor acquisition and
$11.5 million
of acquisition-related costs for the Ottens and Lucas Meyer acquisitions.
|
(c)
|
For 2018, represents severance costs related to the 2017 Productivity Program and costs associated with the termination of agent relationships in a subsidiary. For 2017, represents severance costs related to the 2017 Productivity Program.
For 2016, represents accelerated depreciation related to restructuring initiatives and severance costs related to the termination of a former executive officer and partial reversal of restructuring accruals recorded in the prior year. For 2015 and 2014, restructuring and other charges were the result of various restructuring and reorganization programs of the Company.
|
(d)
|
For 2018, represents a
$34.9 million
make whole payment on the Senior Notes - 2007 and a
$3.9 million
realized loss on the termination of a fair value hedge in connection with the acquisition financing of Frutarom.
|
(e)
|
The 2017 amount includes
$12.2 million
from the release of CTA related to the liquidation of a foreign entity.
|
(f)
|
The 2018 amount includes an additional charge based on updated repatriation plans requiring a
$32.8 million
accrual of a deferred tax liability for foreign withholding and other taxes, including state taxes, on deemed repatriation. For 2017, represents charges incurred related to enactment of certain U.S. tax legislation changes in December 2017, including
$38.6 million
related to net adjustments on deferred tax assets, and
$100.6 million
related to taxes on deemed repatriation of earnings. The 2015 amount includes
$10.5 million
of settlements due to favorable tax rulings in jurisdictions for which reserves were previously recorded for ongoing tax disputes.
|
(g)
|
The 2018 amount includes
$6.9 billion
in identifiable intangible assets and goodwill related to our acquisition of Frutarom.
|
(h)
|
Includes noncontrolling interests for all periods presented.
|
(i)
|
Current ratio is equal to current assets divided by current liabilities.
|
(j)
|
The amounts for 2017 and 2016 have been adjusted to reflect the adoption of ASU 2017-07, which required that employers who present a measure of operating income in their statement of income to include only the service cost component of net periodic pension cost and postretirement costs in operating expenses. The impact of the adoption of this standard was a decrease in operating profit by approximately
$28.8 million
and
$14.4 million
for the fiscal year 2017 and 2016, respectively, and corresponding increases in Other (income) expense, net.
|
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|
|
Year Ended December 31,
|
|
Change
|
||||||||||||||
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
|
2018
|
|
2017
|
|
2016
|
|
2018 vs. 2017
|
|
2017 vs. 2016
|
||||||||
Net sales
|
$
|
3,977,539
|
|
|
$
|
3,398,719
|
|
|
$
|
3,116,350
|
|
|
17.0
|
%
|
|
9.1
|
%
|
Cost of goods sold
|
2,294,832
|
|
|
1,926,256
|
|
|
1,720,787
|
|
|
19.1
|
%
|
|
11.9
|
%
|
|||
Gross profit
|
1,682,707
|
|
|
1,472,463
|
|
|
1,395,563
|
|
|
|
|
|
|||||
Research and development (R&D) expenses
|
311,583
|
|
|
295,469
|
|
|
258,863
|
|
|
5.5
|
%
|
|
14.1
|
%
|
|||
Selling and administrative (S&A) expenses
|
707,461
|
|
|
570,144
|
|
|
572,518
|
|
|
24.1
|
%
|
|
(0.4
|
)%
|
|||
Restructuring and other charges, net
|
5,079
|
|
|
19,711
|
|
|
(1,700
|
)
|
|
(74.2
|
)%
|
|
NMF
|
|
|||
Amortization of acquisition-related intangibles
|
75,879
|
|
|
34,693
|
|
|
23,763
|
|
|
118.7
|
%
|
|
46.0
|
%
|
|||
Gain on sale of fixed assets
|
(1,177
|
)
|
|
(184
|
)
|
|
(10,836
|
)
|
|
NMF
|
|
|
(98.3
|
)%
|
|||
Operating profit
|
583,882
|
|
|
552,630
|
|
|
552,955
|
|
|
|
|
|
|||||
Interest expense
|
132,558
|
|
|
65,363
|
|
|
52,989
|
|
|
102.8
|
%
|
|
23.4
|
%
|
|||
Loss on extinguishment of debt
|
38,810
|
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
—
|
%
|
|||
Other income, net
|
(35,243
|
)
|
|
(49,778
|
)
|
|
(23,751
|
)
|
|
(29.2
|
)%
|
|
109.6
|
%
|
|||
Income before taxes
|
447,757
|
|
|
537,045
|
|
|
523,717
|
|
|
|
|
|
|||||
Taxes on income
|
107,976
|
|
|
241,380
|
|
|
118,686
|
|
|
(55.3
|
)%
|
|
103.4
|
%
|
|||
Net income
|
$
|
339,781
|
|
|
$
|
295,665
|
|
|
$
|
405,031
|
|
|
|
|
|
||
Net income attributable to non-controlling interest
|
2,479
|
|
|
—
|
|
|
—
|
|
|
NMF
|
|
|
NMF
|
|
|||
Net income attributable to IFF stockholders
|
337,302
|
|
|
295,665
|
|
|
405,031
|
|
|
|
|
|
|||||
Net income per share — diluted
|
$
|
3.79
|
|
|
$
|
3.72
|
|
|
$
|
5.05
|
|
|
1.8
|
%
|
|
(26.3
|
)%
|
Gross margin
|
42.3
|
%
|
|
43.3
|
%
|
|
44.8
|
%
|
|
(101.9
|
)
|
|
(145.8
|
)
|
|||
R&D as a percentage of sales
|
7.8
|
%
|
|
8.7
|
%
|
|
8.3
|
%
|
|
(86.0
|
)
|
|
38.7
|
|
|||
S&A as a percentage of sales
|
17.8
|
%
|
|
16.8
|
%
|
|
18.4
|
%
|
|
101.1
|
|
|
(159.6
|
)
|
|||
Operating margin
|
14.7
|
%
|
|
16.3
|
%
|
|
17.7
|
%
|
|
(158.0
|
)
|
|
(148.4
|
)
|
|||
Adjusted operating margin
(1)
|
17.0
|
%
|
|
18.2
|
%
|
|
20.2
|
%
|
|
(117.2
|
)
|
|
(199.8
|
)
|
|||
Effective tax rate
|
24.1
|
%
|
|
44.9
|
%
|
|
22.7
|
%
|
|
NMF
|
|
|
NMF
|
|
|||
Segment net sales
|
|
|
|
|
|
|
|
|
|
||||||||
Taste
|
$
|
1,737,349
|
|
|
$
|
1,632,166
|
|
|
$
|
1,496,525
|
|
|
6.4
|
%
|
|
9.1
|
%
|
Scent
|
1,880,630
|
|
|
1,766,553
|
|
|
1,619,825
|
|
|
6.5
|
%
|
|
9.1
|
%
|
|||
Frutarom
|
359,560
|
|
|
—
|
|
|
—
|
|
|
NMF
|
|
|
NMF
|
|
|||
Consolidated
|
$
|
3,977,539
|
|
|
$
|
3,398,719
|
|
|
$
|
3,116,350
|
|
|
|
|
|
(1)
|
Adjusted operating margin for the year ended
December 31, 2018
excludes Frutarom acquisition related costs of
$89.6 million
, integration related costs of
$7.2 million
, restructuring and other charges of
$4.1 million
, and operational improvement initiatives of
$2.2 million
, partially offset by FDA mandated product recall of
$7.1 million
, acquisition related costs of
$1.3 million
, and gain on sale of assets of
$1.2 million
.
|
(1)
|
Currency neutral sales growth is calculated by translating prior year sales at the exchange rates for the corresponding
2018
period.
|
|
For the Year Ended
December 31, |
||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
||||
Taste
|
$
|
1,646
|
|
|
$
|
4,505
|
|
Scent
|
3,433
|
|
|
13,077
|
|
||
Global
|
—
|
|
|
2,129
|
|
||
Total
|
$
|
5,079
|
|
|
$
|
19,711
|
|
|
For the Year Ended
December 31, |
||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
||||
Segment profit:
|
|
|
|
||||
Taste
|
$
|
395,190
|
|
|
$
|
360,483
|
|
Scent
|
329,548
|
|
|
318,954
|
|
||
Frutarom
|
27,358
|
|
|
—
|
|
||
Global Expenses
|
(74,730
|
)
|
|
(60,810
|
)
|
||
Operational Improvement Initiatives
|
(2,169
|
)
|
|
(1,802
|
)
|
||
Acquisition Related Costs
|
1,289
|
|
|
(20,389
|
)
|
||
Integration Related Costs
|
(7,188
|
)
|
|
(4,179
|
)
|
||
Legal Charges/Credits, net
|
—
|
|
|
(1,000
|
)
|
||
Tax Assessment
|
—
|
|
|
(5,331
|
)
|
||
Restructuring and Other Charges, net
|
(4,086
|
)
|
|
(19,711
|
)
|
||
Gain on Sale of Assets
|
1,177
|
|
|
184
|
|
||
FDA Mandated Product Recall
|
7,125
|
|
|
(11,000
|
)
|
||
UK Pension Settlement Charges
|
—
|
|
|
(2,769
|
)
|
||
Frutarom Acquisition Related Costs
(1)
|
(89,632
|
)
|
|
—
|
|
||
Operating Profit
|
$
|
583,882
|
|
|
$
|
552,630
|
|
Profit margin
|
|
|
|
||||
Taste
|
22.7
|
%
|
|
22.1
|
%
|
||
Scent
|
17.5
|
%
|
|
18.1
|
%
|
||
Frutarom
|
7.6
|
%
|
|
NMF
|
|
||
Consolidated
|
14.7
|
%
|
|
16.3
|
%
|
(1)
|
Includes $23.6 million related to amortization of inventory "step-up" costs.
|
|
% Change in Sales — 2017 vs. 2016
|
||||
|
Reported
|
|
Currency Neutral
(1)
|
||
Taste
|
9
|
%
|
|
10
|
%
|
Scent
|
9
|
%
|
|
9
|
%
|
Total
|
9
|
%
|
|
9
|
%
|
(1)
|
Currency neutral sales growth is calculated by translating prior year sales at the exchange rates for the corresponding
2018
period.
|
|
For the Year Ended
December 31, |
||||||
(DOLLARS IN THOUSANDS)
|
2017
|
|
2016
|
||||
Taste
|
$
|
4,505
|
|
|
$
|
(1,119
|
)
|
Scent
|
13,077
|
|
|
(581
|
)
|
||
Global
|
2,129
|
|
|
—
|
|
||
Total
|
$
|
19,711
|
|
|
$
|
(1,700
|
)
|
|
For the Year Ended
December 31,
|
||||||
(DOLLARS IN THOUSANDS)
|
2017
|
|
2016
|
||||
Segment profit:
|
|
|
|
||||
Taste
|
$
|
360,483
|
|
|
$
|
330,221
|
|
Scent
|
318,954
|
|
|
326,705
|
|
||
Global expenses
|
(60,810
|
)
|
|
(48,352
|
)
|
||
Operational Improvement Initiatives
|
(1,802
|
)
|
|
(2,402
|
)
|
||
Acquisition Related Costs
|
(20,389
|
)
|
|
(12,195
|
)
|
||
Integration Related Costs
|
(4,179
|
)
|
|
—
|
|
||
Legal Charges/Credits, net
|
(1,000
|
)
|
|
(48,518
|
)
|
||
Tax Assessment
|
(5,331
|
)
|
|
—
|
|
||
Restructuring and Other Charges, net
|
(19,711
|
)
|
|
(322
|
)
|
||
Gain on Sale of Assets
|
184
|
|
|
7,818
|
|
||
FDA Mandated Product Recall
|
(11,000
|
)
|
|
—
|
|
||
UK Pension Settlement Charges
|
(2,769
|
)
|
|
—
|
|
||
Operating Profit
|
$
|
552,630
|
|
|
$
|
552,955
|
|
Profit margin
|
|
|
|
||||
Taste
|
22.1
|
%
|
|
22.1
|
%
|
||
Scent
|
18.1
|
%
|
|
20.2
|
%
|
||
Consolidated
|
16.3
|
%
|
|
17.7
|
%
|
(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)
|
Year Ended December 31, 2018
|
||
Net income
|
$
|
432.0
|
|
Interest expense
|
148.4
|
|
|
Income taxes
|
140.2
|
|
|
Depreciation and amortization
|
226.8
|
|
|
Specified items
(1)
|
123.4
|
|
|
Non-cash items
(2)
|
29.6
|
|
|
Adjusted EBITDA
|
$
|
1,100.4
|
|
(1)
|
Specified items for the 12 months ended
December 31, 2018
of
$123.4 million
consist of acquisition related costs, operational improvement initiatives, integration related costs, restructuring and other charges, net, FDA mandated product recall, 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 stock-based compensation and gain on sale of assets.
|
(DOLLARS IN MILLIONS)
|
December 31, 2018
|
||
Total debt
|
$
|
4,553.1
|
|
Adjustments:
|
|
||
Cash and cash equivalents
|
(634.9
|
)
|
|
Net debt
|
$
|
3,918.2
|
|
|
Payments Due
|
||||||||||||||||||
|
Total
|
|
Less than 1 Year
|
|
1-3 Years
|
|
3-5 Years
|
|
After 5 Years
|
||||||||||
(Dollars In Millions)
|
|
|
2019
|
|
2020 - 2021
|
|
2022 - 2023
|
|
2024 and thereafter
|
||||||||||
Borrowings
(1)
|
$
|
4,595
|
|
|
$
|
45
|
|
|
$
|
1,074
|
|
|
$
|
300
|
|
|
$
|
3,176
|
|
Interest on borrowings
(1)
|
2,273
|
|
|
144
|
|
|
268
|
|
|
226
|
|
|
1,635
|
|
|||||
Operating leases
(2)
|
390
|
|
|
49
|
|
|
79
|
|
|
61
|
|
|
201
|
|
|||||
Pension funding obligations
(3)
|
70
|
|
|
23
|
|
|
47
|
|
|
—
|
|
|
—
|
|
|||||
Postretirement obligations
(4)
|
60
|
|
|
4
|
|
|
8
|
|
|
8
|
|
|
40
|
|
|||||
Purchase commitments
(5)
|
136
|
|
|
126
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|||||
U.S. tax reform toll-charge
(6)
|
53
|
|
|
5
|
|
|
9
|
|
|
13
|
|
|
26
|
|
|||||
Total
|
$
|
7,577
|
|
|
$
|
396
|
|
|
$
|
1,495
|
|
|
$
|
608
|
|
|
$
|
5,078
|
|
(1)
|
See
Note 10
to the Consolidated Financial Statements for a further discussion of our various borrowing facilities.
|
(2)
|
Operating leases include facility and other lease commitments executed in the normal course of the business, including sale leaseback obligations included in
Note 8
of the Notes to the Consolidated Financial Statements. Further details concerning worldwide aggregate operating leases are contained in Note 18 of the Notes to the Consolidated Financial Statements.
|
(3)
|
See
Note 16
of the Notes to the Consolidated Financial Statements for a further discussion of our retirement plans. Anticipated funding obligations are based on current actuarial assumptions. The projected contributions beyond fiscal year
2021
are not currently determinable.
|
(4)
|
Amounts represent expected future benefit payments for our postretirement benefit plans.
|
(5)
|
Purchase commitments include agreements for raw material procurement and contractual capital expenditures. Amounts for purchase commitments represent only those items which are based on agreements that are enforceable and legally binding.
|
(6)
|
This amount represents the cash portion of the “toll charge” that is payable in installments over
eight
years beginning in 2018. This amount represents the seven remaining installments.
|
|
Sensitivity of Disclosures to Changes in Selected Assumptions
|
||||||||||||||
|
25 BP Decrease in
Discount Rate
|
|
25 BP Decrease in
Discount Rate
|
|
25 BP Decrease in
Long-Term Rate
of Return
|
||||||||||
(DOLLARS IN THOUSANDS)
|
Change in
PBO
|
|
Change in
ABO
|
|
Change in
pension expense
|
|
Change in
pension expense
|
||||||||
U.S. Pension Plans
|
$
|
14,603
|
|
|
$
|
14,524
|
|
|
$
|
(102
|
)
|
|
$
|
1,248
|
|
Non-U.S. Pension Plans
|
46,475
|
|
|
44,628
|
|
|
2,710
|
|
|
1,911
|
|
||||
Postretirement Benefit Plan
|
N/A
|
|
|
1,638
|
|
|
44
|
|
|
N/A
|
|
|
December 31,
|
||||||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
(a)
|
|
2016(a)
|
||||||
Flavor Compounds
|
$
|
1,990,985
|
|
|
$
|
1,632,166
|
|
|
$
|
1,496,525
|
|
Fragrance Compounds
|
1,496,493
|
|
|
1,424,612
|
|
|
1,303,653
|
|
|||
Ingredients
|
490,061
|
|
|
341,941
|
|
|
316,172
|
|
|||
Total revenues
|
$
|
3,977,539
|
|
|
$
|
3,398,719
|
|
|
$
|
3,116,350
|
|
(a)
|
Prior period amounts have not been adjusted based on the modified retrospective method.
|
|
December 31,
|
||||||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
(a)
|
|
2016
(a)
|
||||||
Europe, Africa and Middle East
|
$
|
1,396,315
|
|
|
$
|
1,065,596
|
|
|
$
|
964,931
|
|
Greater Asia
|
991,015
|
|
|
903,546
|
|
|
880,040
|
|
|||
North America
|
1,010,126
|
|
|
901,821
|
|
|
769,081
|
|
|||
Latin America
|
580,083
|
|
|
527,756
|
|
|
502,298
|
|
|||
Total revenues
|
$
|
3,977,539
|
|
|
$
|
3,398,719
|
|
|
$
|
3,116,350
|
|
(a)
|
Prior period amounts have not been adjusted based on the modified retrospective method.
|
|
|
December 31,
|
||||
(DOLLARS IN THOUSANDS)
|
|
2018
|
|
2017
|
||
Receivables (included in Trade receivables)
|
|
946,938
|
|
|
677,055
|
|
Contract asset - Short term
|
|
487
|
|
|
4,499
|
|
Reconciliation of Gross Profit
|
|||||||
|
Year Ended December 31,
|
||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
||||
Reported (GAAP)
|
$
|
1,682,707
|
|
|
$
|
1,472,463
|
|
Operational Improvement Initiatives (a)
|
1,650
|
|
|
1,802
|
|
||
Acquisition Related Costs (b)
|
—
|
|
|
15,860
|
|
||
Integration Related Costs (c)
|
102
|
|
|
480
|
|
||
FDA Mandated Product Recall (h)
|
(7,125
|
)
|
|
11,000
|
|
||
Frutarom Acquisition Related Costs (k)
|
23,550
|
|
|
—
|
|
||
Adjusted (Non-GAAP)
|
$
|
1,700,884
|
|
|
$
|
1,501,605
|
|
Reconciliation of Net Income and EPS
|
|||||||||||||||||||||||||||||||
|
Year Ended December 31,
|
||||||||||||||||||||||||||||||
|
2018
|
|
2017
|
||||||||||||||||||||||||||||
(DOLLARS IN THOUSANDS)
|
Income before taxes
|
|
Taxes on income (m)
|
|
Net Income Attribut-able to IFF
(n)
|
|
Diluted EPS
(o)
|
|
Income before taxes
|
|
Taxes on income (m)
|
|
Net Income Attribut-able to IFF
|
|
Diluted EPS
|
||||||||||||||||
Reported (GAAP)
|
$
|
447,757
|
|
|
$
|
107,976
|
|
|
$
|
337,302
|
|
|
$
|
3.79
|
|
|
$
|
537,045
|
|
|
$
|
241,380
|
|
|
$
|
295,665
|
|
|
$
|
3.72
|
|
Operational Improvement Initiatives (a)
|
2,169
|
|
|
694
|
|
|
1,475
|
|
|
0.02
|
|
|
1,802
|
|
|
450
|
|
|
1,352
|
|
|
0.02
|
|
||||||||
Acquisition Related Costs (b)
|
(1,289
|
)
|
|
(311
|
)
|
|
(978
|
)
|
|
(0.01
|
)
|
|
20,389
|
|
|
6,514
|
|
|
13,875
|
|
|
0.17
|
|
||||||||
Integration Related Costs (c)
|
7,188
|
|
|
1,397
|
|
|
5,791
|
|
|
0.07
|
|
|
4,179
|
|
|
1,331
|
|
|
2,848
|
|
|
0.03
|
|
||||||||
Legal Charges/Credits, net (d)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,000
|
|
|
354
|
|
|
646
|
|
|
0.01
|
|
||||||||
Tax Assessment (e)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,331
|
|
|
1,885
|
|
|
3,446
|
|
|
0.04
|
|
||||||||
Restructuring and Other Charges, net (f)
|
4,086
|
|
|
1,020
|
|
|
3,066
|
|
|
0.03
|
|
|
19,711
|
|
|
5,465
|
|
|
14,246
|
|
|
0.17
|
|
||||||||
Gains on Sale of Assets
|
(1,177
|
)
|
|
(352
|
)
|
|
(825
|
)
|
|
(0.01
|
)
|
|
(184
|
)
|
|
(59
|
)
|
|
(125
|
)
|
|
—
|
|
||||||||
CTA Realization (g)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,217
|
)
|
|
—
|
|
|
(12,217
|
)
|
|
(0.15
|
)
|
||||||||
FDA Mandated Product Recall (h)
|
(7,125
|
)
|
|
(1,601
|
)
|
|
(5,524
|
)
|
|
(0.06
|
)
|
|
11,000
|
|
|
3,890
|
|
|
7,110
|
|
|
0.09
|
|
||||||||
UK Pension Settlement Charges (i)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,769
|
|
|
526
|
|
|
2,243
|
|
|
0.03
|
|
||||||||
U.S. Tax Reform (j)
|
—
|
|
|
(25,345
|
)
|
|
25,345
|
|
|
0.29
|
|
|
—
|
|
|
(139,172
|
)
|
|
139,172
|
|
|
1.76
|
|
||||||||
Frutarom Acquisition Related Costs (k)
|
155,569
|
|
|
28,490
|
|
|
127,079
|
|
|
1.44
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Redemption value adjustment to EPS (l)
|
—
|
|
|
—
|
|
|
—
|
|
|
0.03
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Adjusted (Non-GAAP)
|
$
|
607,178
|
|
|
$
|
111,968
|
|
|
$
|
492,731
|
|
|
$
|
5.58
|
|
|
$
|
590,825
|
|
|
$
|
122,564
|
|
|
$
|
468,261
|
|
|
$
|
5.89
|
|
(a)
|
For 2018, represents accelerated depreciation related to a plant relocation in India and Taiwan asset write off. For 2017, represents accelerated depreciation and idle labor costs in Hangzhou, China.
|
(b)
|
For 2018, represents adjustments to the contingent consideration payable for PowderPure, and transaction costs related to Fragrance Resources and PowderPure within Selling and administrative expenses. For 2017, represents the amortization of inventory "step-up" included in Cost of goods sold and transaction costs related to the acquisitions of Fragrance Resources and PowderPure within Selling and administrative expenses.
|
(c)
|
For 2018, represents costs related to the integration of the Frutarom acquisition. For 2017, represents costs related to the integration of the David Michael and Fragrance Resources acquisitions.
|
(d)
|
Represents additional charge related to litigation settlement.
|
(e)
|
Represents the reserve for payment of a tax assessment related to commercial rent for prior periods.
|
(f)
|
For 2018, represents severance costs related to the 2017 Productivity Program and costs associated with the termination of agent relationships in a subsidiary. For 2017, represents severance costs related to the 2017 Productivity Program.
|
(g)
|
Represents the release of CTA related to the liquidation of a foreign entity.
|
(h)
|
For 2018, principally represents recoveries from the supplier for the third and fourth quarter, partially offset by final payments to the customer made for the effected product in the first quarter. For 2017, represents management's best estimate of losses related to the previously disclosed FDA mandated recall.
|
(i)
|
Represents pension settlement charges incurred in one of the Company's UK pension plans.
|
(j)
|
For 2017, represents charges incurred related to enactment of certain U.S. tax legislation changes in December 2017, including $38.6 million related to net adjustments on deferred tax assets, and $100.6 million related to taxes on deemed repatriation of earnings. For 2018, represents additional expense based on updated repatriation plans requiring accruals for withholding taxes on deemed repatriation.
|
(k)
|
Represents transaction-related costs and expenses related to the acquisition of Frutarom. Amount primarily includes $23.5 million of amortization for inventory "step-up" costs, $39.4 million of bridge loan commitment fees included in Interest expense; $34.9 million make whole payment on the Senior Notes - 2007 and $3.9 million realized loss on a fair value hedge included in Loss on extinguishment of debt; $12.5 million realized gain on a foreign currency derivative included in Other income; and $66.0 million of transaction costs included in Selling and administrative expenses.
|
(l)
|
Represents the adjustment to EPS related to the excess of the redemption value of certain redeemable noncontrolling interests over their existing carrying value.
|
(m)
|
Except for amortization, 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 2018, 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). For amortization, the tax benefit has been calculated based on the Company's adjusted worldwide effective tax rate.
|
(n)
|
For 2018, net income is reduced by income attributable to noncontrolling interest of $2.5M.
|
(o)
|
The sum of these items does not foot due to rounding.
|
Operating Profit
|
|||
|
Year Ended December 31,
|
||
|
2018
|
|
2017
|
% Change - Reported (GAAP)
|
6%
|
|
2%
|
Items impacting comparability
(1)
|
4%
|
|
2%
|
% Change - Adjusted (Non-GAAP)
|
10%
|
|
4%
|
Currency Impact
|
(3)%
|
|
1%
|
% Change Year-over-Year - Currency Neutral Adjusted (Non-GAAP)**
|
7%
|
|
5%
|
•
|
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 recently 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.
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
|
ITEM 9A.
|
CONTROLS AND PROCEDURES.
|
ITEM 11.
|
EXECUTIVE COMPENSATION.
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
|
ITEM 14.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
|
(a)(1) FINANCIAL STATEMENTS: The following consolidated financial statements, related notes, and independent registered public accounting firm’s report are included in this Form 10-K:
|
|
|
|
|
|
(a)(2) FINANCIAL STATEMENT SCHEDULES
|
|
/s/ PricewaterhouseCoopers LLP
|
New York, New York
|
February 26, 2019
|
|
Year Ended December 31,
|
||||||||||
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
|
2018
|
|
2017
|
|
2016
|
||||||
Net sales
|
$
|
3,977,539
|
|
|
$
|
3,398,719
|
|
|
$
|
3,116,350
|
|
Cost of goods sold
|
2,294,832
|
|
|
1,926,256
|
|
|
1,720,787
|
|
|||
Gross Profit
|
1,682,707
|
|
|
1,472,463
|
|
|
1,395,563
|
|
|||
Research and development expenses
|
311,583
|
|
|
295,469
|
|
|
258,863
|
|
|||
Selling and administrative expenses
|
707,461
|
|
|
570,144
|
|
|
572,518
|
|
|||
Restructuring and other charges, net
|
5,079
|
|
|
19,711
|
|
|
(1,700
|
)
|
|||
Amortization of acquisition-related intangibles
|
75,879
|
|
|
34,693
|
|
|
23,763
|
|
|||
Gains on sale of assets
|
(1,177
|
)
|
|
(184
|
)
|
|
(10,836
|
)
|
|||
Operating Profit
|
583,882
|
|
|
552,630
|
|
|
552,955
|
|
|||
Interest expense
|
132,558
|
|
|
65,363
|
|
|
52,989
|
|
|||
Loss on extinguishment of debt
|
38,810
|
|
|
—
|
|
|
—
|
|
|||
Other income, net
|
(35,243
|
)
|
|
(49,778
|
)
|
|
(23,751
|
)
|
|||
Income before taxes
|
447,757
|
|
|
537,045
|
|
|
523,717
|
|
|||
Taxes on income
|
107,976
|
|
|
241,380
|
|
|
118,686
|
|
|||
Net income
|
339,781
|
|
|
295,665
|
|
|
405,031
|
|
|||
Net income attributable to noncontrolling interests
|
2,479
|
|
|
—
|
|
|
—
|
|
|||
Net income attributable to IFF stockholders
|
337,302
|
|
|
295,665
|
|
|
405,031
|
|
|||
Other comprehensive income (loss):
|
|
|
|
|
|
||||||
Foreign currency translation adjustments
|
(99,580
|
)
|
|
54,609
|
|
|
(54,526
|
)
|
|||
Gains (losses) on derivatives qualifying as hedges
|
15,078
|
|
|
(17,936
|
)
|
|
(1,797
|
)
|
|||
Pension and postretirement liability adjustment
|
19,757
|
|
|
5,940
|
|
|
(10,332
|
)
|
|||
Comprehensive income attributable to IFF stockholders
|
272,557
|
|
|
338,278
|
|
|
338,376
|
|
|||
|
|
|
|
|
|
||||||
Net income per share — basic
|
$
|
3.81
|
|
|
$
|
3.73
|
|
|
$
|
5.07
|
|
Net income per share — diluted
|
$
|
3.79
|
|
|
$
|
3.72
|
|
|
$
|
5.05
|
|
Average number of shares outstanding - basic
|
87,551
|
|
|
79,070
|
|
|
79,648
|
|
|||
Average number of shares outstanding - diluted
|
88,121
|
|
|
79,370
|
|
|
79,981
|
|
|
December 31,
|
||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
||||
ASSETS
|
|
|
|
||||
Current Assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
634,897
|
|
|
$
|
368,046
|
|
Restricted cash
|
13,625
|
|
|
—
|
|
||
Receivables:
|
|
|
|
||||
Trade
|
946,938
|
|
|
677,055
|
|
||
Allowance for doubtful accounts
|
(9,173
|
)
|
|
(13,392
|
)
|
||
Inventories
|
1,078,537
|
|
|
649,448
|
|
||
Prepaid expenses and other current assets
|
277,036
|
|
|
215,387
|
|
||
Total Current Assets
|
2,941,860
|
|
|
1,896,544
|
|
||
Property, plant and equipment, net
|
1,241,152
|
|
|
880,580
|
|
||
Goodwill
|
5,378,388
|
|
|
1,156,288
|
|
||
Other intangible assets, net
|
3,039,322
|
|
|
415,787
|
|
||
Other assets
|
288,673
|
|
|
249,727
|
|
||
Total Assets
|
$
|
12,889,395
|
|
|
$
|
4,598,926
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
||||
Current Liabilities:
|
|
|
|
||||
Bank borrowings, overdrafts and current portion of long-term debt
|
$
|
48,642
|
|
|
$
|
6,966
|
|
Accounts payable
|
471,382
|
|
|
338,188
|
|
||
Dividends payable
|
77,779
|
|
|
54,420
|
|
||
Other current liabilities
|
530,508
|
|
|
369,194
|
|
||
Total Current Liabilities
|
1,128,311
|
|
|
768,768
|
|
||
Other Liabilities:
|
|
|
|
||||
Long-term debt
|
4,504,417
|
|
|
1,632,186
|
|
||
Deferred gains
|
31,366
|
|
|
37,344
|
|
||
Retirement liabilities
|
227,172
|
|
|
228,936
|
|
||
Deferred income taxes
|
655,879
|
|
|
51,104
|
|
||
Other liabilities
|
217,070
|
|
|
191,294
|
|
||
Total Other Liabilities
|
5,635,904
|
|
|
2,140,864
|
|
||
Commitments and Contingencies (Note 20)
|
|
|
|
||||
Redeemable non-controlling interests
|
81,806
|
|
|
—
|
|
||
Shareholders’ Equity:
|
|
|
|
||||
Common stock 12 1/2¢ par value; 500,000,000 shares authorized; 128,526,137 and 115,858,190 shares issued as of December 31, 2018 and December 31, 2017, respectively; and 106,619,202 and 78,947,381 shares outstanding as of December 31, 2018 and December 31, 2017, respectively
|
16,066
|
|
|
14,470
|
|
||
Capital in excess of par value
|
3,793,609
|
|
|
162,827
|
|
||
Retained earnings
|
3,956,221
|
|
|
3,870,621
|
|
||
Accumulated other comprehensive loss:
|
|
|
|
||||
Cumulative translation adjustments
|
(396,996
|
)
|
|
(297,416
|
)
|
||
Accumulated gains (losses) on derivatives qualifying as hedges
|
4,746
|
|
|
(10,332
|
)
|
||
Pension and postretirement liability adjustment
|
(309,977
|
)
|
|
(329,734
|
)
|
||
Treasury stock, at cost (21,906,935 and 36,910,809 shares as of December 31, 2018 and December 31, 2017, respectively)
|
(1,030,718
|
)
|
|
(1,726,234
|
)
|
||
Total Shareholders’ Equity
|
6,032,951
|
|
|
1,684,202
|
|
||
Noncontrolling interests
|
10,423
|
|
|
5,092
|
|
||
Total Shareholders’ Equity including noncontrolling interests
|
6,043,374
|
|
|
1,689,294
|
|
||
Total Liabilities and Shareholders’ Equity
|
$
|
12,889,395
|
|
|
$
|
4,598,926
|
|
|
Year Ended December 31,
|
||||||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
|
2016
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income
|
$
|
339,781
|
|
|
$
|
295,665
|
|
|
$
|
405,031
|
|
Adjustments to reconcile to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
173,792
|
|
|
117,967
|
|
|
102,469
|
|
|||
Deferred income taxes
|
19,402
|
|
|
58,889
|
|
|
14,350
|
|
|||
Gains on sale of assets
|
(1,177
|
)
|
|
(184
|
)
|
|
(10,836
|
)
|
|||
Stock-based compensation
|
29,401
|
|
|
26,567
|
|
|
24,587
|
|
|||
Loss on extinguishment of debt
|
38,810
|
|
|
—
|
|
|
—
|
|
|||
Gain on deal contingent derivatives
|
(12,505
|
)
|
|
—
|
|
|
—
|
|
|||
Pension contributions
|
(22,433
|
)
|
|
(39,298
|
)
|
|
(46,347
|
)
|
|||
Litigation settlement
|
—
|
|
|
(56,000
|
)
|
|
—
|
|
|||
Product recall claim settlement, net of insurance proceeds received
|
235
|
|
|
—
|
|
|
—
|
|
|||
Foreign currency gain on liquidation of entity
|
—
|
|
|
(12,217
|
)
|
|
—
|
|
|||
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
|
|
||||||
Trade receivables
|
(49,958
|
)
|
|
(68,851
|
)
|
|
(21,544
|
)
|
|||
Inventories
|
(117,641
|
)
|
|
(18,911
|
)
|
|
15,452
|
|
|||
Accounts payable
|
55,136
|
|
|
29,114
|
|
|
(7,642
|
)
|
|||
Accruals for incentive compensation
|
(2,289
|
)
|
|
19,144
|
|
|
12,133
|
|
|||
Other current payables and accrued expenses
|
(5,279
|
)
|
|
22,679
|
|
|
49,103
|
|
|||
Other assets
|
(19,219
|
)
|
|
(3,866
|
)
|
|
(1,067
|
)
|
|||
Other liabilities
|
11,519
|
|
|
20,058
|
|
|
14,450
|
|
|||
Net cash provided by operating activities
|
437,575
|
|
|
390,756
|
|
|
550,139
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Cash paid for acquisitions, net of cash received
|
(4,857,343
|
)
|
|
(192,328
|
)
|
|
(236,836
|
)
|
|||
Additions to property, plant and equipment
|
(170,094
|
)
|
|
(128,973
|
)
|
|
(126,412
|
)
|
|||
Additions to intangible assets
|
(3,326
|
)
|
|
—
|
|
|
—
|
|
|||
Proceeds from disposal of assets
|
8,176
|
|
|
16,139
|
|
|
6,856
|
|
|||
Proceeds from disposal of subsidiaries, net of cash held
|
10,157
|
|
|
—
|
|
|
—
|
|
|||
Maturity of net investment hedges
|
(2,642
|
)
|
|
1,434
|
|
|
637
|
|
|||
Proceeds from life insurance contracts
|
1,837
|
|
|
3,798
|
|
|
292
|
|
|||
Net cash used in investing activities
|
(5,013,235
|
)
|
|
(299,930
|
)
|
|
(355,463
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Cash dividends paid to shareholders
|
(230,218
|
)
|
|
(206,118
|
)
|
|
(184,897
|
)
|
|||
Decrease in revolving credit facility and short term borrowing
|
(927
|
)
|
|
(4,499
|
)
|
|
(131,074
|
)
|
|||
Deferred financing costs
|
(33,668
|
)
|
|
(5,373
|
)
|
|
(5,788
|
)
|
|||
Repayments of debt
|
(376,625
|
)
|
|
(250,000
|
)
|
|
(125,000
|
)
|
|||
Proceeds from issuance of long-term debt
|
3,256,742
|
|
|
498,250
|
|
|
555,559
|
|
|||
Proceeds from sales of equity securities, net of issuance costs
|
2,268,094
|
|
|
—
|
|
|
—
|
|
|||
Gain (loss) on pre-issuance hedges
|
12,505
|
|
|
(5,310
|
)
|
|
(3,244
|
)
|
|||
Proceeds from issuance of stock in connection with stock plans
|
—
|
|
|
329
|
|
|
813
|
|
|||
Employee withholding taxes paid
|
(9,725
|
)
|
|
(11,768
|
)
|
|
(13,353
|
)
|
|||
Purchase of treasury stock
|
(15,475
|
)
|
|
(58,069
|
)
|
|
(127,443
|
)
|
|||
Net cash provided by (used in) financing activities
|
4,870,703
|
|
|
(42,558
|
)
|
|
(34,427
|
)
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
(14,567
|
)
|
|
(4,214
|
)
|
|
(18,245
|
)
|
|||
Net change in cash, cash equivalents and restricted cash
|
280,476
|
|
|
44,054
|
|
|
142,004
|
|
|||
Cash, cash equivalents and restricted cash at beginning of year
|
368,046
|
|
|
323,992
|
|
|
181,988
|
|
|||
Cash, cash equivalents and restricted cash at end of year
|
$
|
648,522
|
|
|
$
|
368,046
|
|
|
$
|
323,992
|
|
Cash paid for:
|
|
|
|
|
|
||||||
Interest, net of amounts capitalized
|
$
|
117,581
|
|
|
$
|
55,440
|
|
|
$
|
50,576
|
|
Income taxes
|
116,138
|
|
|
107,390
|
|
|
107,898
|
|
|||
Noncash investing activities:
|
|
|
|
|
|
||||||
Accrued capital expenditures
|
$
|
33,844
|
|
|
$
|
37,556
|
|
|
$
|
26,049
|
|
Treasury stock issued in the Frutarom acquisition
|
701,111
|
|
|
—
|
|
|
—
|
|
(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 December 31, 2015
|
$
|
14,470
|
|
|
$
|
140,802
|
|
|
$
|
3,604,254
|
|
|
$
|
(613,440
|
)
|
|
(35,835,899
|
)
|
|
$
|
(1,555,769
|
)
|
|
$
|
4,672
|
|
|
$
|
1,594,989
|
|
Net income
|
|
|
|
|
405,031
|
|
|
|
|
|
|
|
|
218
|
|
|
405,249
|
|
||||||||||||
Cumulative translation adjustment
|
|
|
|
|
|
|
(54,526
|
)
|
|
|
|
|
|
|
|
(54,526
|
)
|
|||||||||||||
Losses on derivatives qualifying as hedges; net of tax $(227)
|
|
|
|
|
|
|
(1,797
|
)
|
|
|
|
|
|
|
|
(1,797
|
)
|
|||||||||||||
Pension liability and postretirement adjustment; net of tax $3,049
|
|
|
|
|
|
|
(10,332
|
)
|
|
|
|
|
|
|
|
(10,332
|
)
|
|||||||||||||
Cash dividends declared ($2.40 per share)
|
|
|
|
|
(190,750
|
)
|
|
|
|
|
|
|
|
|
|
(190,750
|
)
|
|||||||||||||
Stock options
|
|
|
8,952
|
|
|
|
|
|
|
30,015
|
|
|
1,335
|
|
|
|
|
10,287
|
|
|||||||||||
Treasury share repurchases
|
|
|
|
|
|
|
|
|
(1,058,018
|
)
|
|
(127,443
|
)
|
|
|
|
(127,443
|
)
|
||||||||||||
Vested restricted stock units and awards
|
|
|
(21,860
|
)
|
|
|
|
|
|
218,749
|
|
|
2,730
|
|
|
|
|
(19,130
|
)
|
|||||||||||
Stock-based compensation
|
|
|
24,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,587
|
|
|||||||||||
Balance at December 31, 2016
|
$
|
14,470
|
|
|
$
|
152,481
|
|
|
$
|
3,818,535
|
|
|
$
|
(680,095
|
)
|
|
(36,645,153
|
)
|
|
$
|
(1,679,147
|
)
|
|
$
|
4,890
|
|
|
$
|
1,631,134
|
|
Net income
|
|
|
|
|
295,665
|
|
|
|
|
|
|
|
|
202
|
|
|
295,867
|
|
||||||||||||
Cumulative adjustment relating to the adoption of ASC 2016-16
|
|
|
|
|
(33,719
|
)
|
|
|
|
|
|
|
|
|
|
|
(33,719
|
)
|
||||||||||||
Cumulative translation adjustment
|
|
|
|
|
|
|
54,609
|
|
|
|
|
|
|
|
|
54,609
|
|
|||||||||||||
Losses on derivatives qualifying as hedges; net of tax $2,017
|
|
|
|
|
|
|
(17,936
|
)
|
|
|
|
|
|
|
|
(17,936
|
)
|
|||||||||||||
Pension liability and postretirement adjustment; net of tax ($1,583)
|
|
|
|
|
|
|
|
5,940
|
|
|
|
|
|
|
|
|
5,940
|
|
||||||||||||
Cash dividends declared ($2.66 per share)
|
|
|
|
|
|
(209,860
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(209,860
|
)
|
||||||||||
Stock options
|
|
|
4,558
|
|
|
|
|
|
|
24,423
|
|
|
1,208
|
|
|
|
|
5,766
|
|
|||||||||||
Treasury share repurchases
|
|
|
|
|
|
|
|
|
|
(459,264
|
)
|
|
(58,069
|
)
|
|
|
|
(58,069
|
)
|
|||||||||||
Vested restricted stock units and awards
|
|
|
(20,779
|
)
|
|
|
|
|
|
169,185
|
|
|
9,774
|
|
|
|
|
(11,005
|
)
|
|||||||||||
Stock-based compensation
|
|
|
26,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,567
|
|
|||||||||||
Balance at December 31, 2017
|
$
|
14,470
|
|
|
$
|
162,827
|
|
|
$
|
3,870,621
|
|
|
$
|
(637,482
|
)
|
|
(36,910,809
|
)
|
|
$
|
(1,726,234
|
)
|
|
$
|
5,092
|
|
|
$
|
1,689,294
|
|
Net income
|
|
|
|
|
337,302
|
|
|
|
|
|
|
|
|
1,631
|
|
|
338,933
|
|
||||||||||||
Cumulative adjustment relating to the adoption of ASC 2014-09
|
|
|
|
|
2,068
|
|
|
|
|
|
|
|
|
|
|
2,068
|
|
|||||||||||||
Cumulative translation adjustment
|
|
|
|
|
|
|
(99,580
|
)
|
|
|
|
|
|
|
|
(99,580
|
)
|
|||||||||||||
Gains on derivatives qualifying as hedges; net of tax $2,011
|
|
|
|
|
|
|
15,078
|
|
|
|
|
|
|
|
|
15,078
|
|
|||||||||||||
Pension liability and postretirement adjustment; net of tax ($5,052)
|
|
|
|
|
|
|
19,757
|
|
|
|
|
|
|
|
|
19,757
|
|
|||||||||||||
Cash dividends declared ($2.84 per share)
|
|
|
|
|
(253,577
|
)
|
|
|
|
|
|
|
|
|
|
(253,577
|
)
|
|||||||||||||
Stock options
|
|
|
2,152
|
|
|
|
|
|
|
46,474
|
|
|
2,188
|
|
|
|
|
4,340
|
|
|||||||||||
Impact of Frutarom acquisition
|
|
|
1,346,229
|
|
|
|
|
|
|
14,901,445
|
|
|
701,111
|
|
|
3,700
|
|
|
2,051,040
|
|
||||||||||
Vested restricted stock units and awards
|
|
|
(10,650
|
)
|
|
|
|
|
|
164,064
|
|
|
7,692
|
|
|
|
|
(2,958
|
)
|
|||||||||||
Stock-based compensation
|
|
|
29,401
|
|
|
|
|
|
|
|
|
|
|
|
|
29,401
|
|
|||||||||||||
Treasury share repurchases
|
|
|
|
|
|
|
|
|
(108,109
|
)
|
|
(15,475
|
)
|
|
|
|
(15,475
|
)
|
||||||||||||
Issuance of equity
|
1,596
|
|
|
2,266,498
|
|
|
|
|
|
|
|
|
|
|
|
|
2,268,094
|
|
||||||||||||
Redeemable NCI
|
|
|
(2,848
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(2,848
|
)
|
|||||||||||||
Other
|
|
|
|
|
(193
|
)
|
|
|
|
|
|
|
|
|
|
(193
|
)
|
|||||||||||||
Balance at December 31, 2018
|
$
|
16,066
|
|
|
$
|
3,793,609
|
|
|
$
|
3,956,221
|
|
|
$
|
(702,227
|
)
|
|
(21,906,935
|
)
|
|
$
|
(1,030,718
|
)
|
|
$
|
10,423
|
|
|
$
|
6,043,374
|
|
|
December 31,
|
||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
||||
Raw materials
|
$
|
568,916
|
|
|
$
|
326,140
|
|
Work in process
|
48,819
|
|
|
16,431
|
|
||
Finished goods
|
460,802
|
|
|
306,877
|
|
||
Total
|
$
|
1,078,537
|
|
|
$
|
649,448
|
|
|
December 31,
|
||||||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
(a)
|
|
2016(a)
|
||||||
Flavor Compounds
|
$
|
1,990,985
|
|
|
$
|
1,632,166
|
|
|
$
|
1,496,525
|
|
Fragrance Compounds
|
1,496,493
|
|
|
1,424,612
|
|
|
1,303,653
|
|
|||
Ingredients
|
490,061
|
|
|
341,941
|
|
|
316,172
|
|
|||
Total revenues
|
$
|
3,977,539
|
|
|
$
|
3,398,719
|
|
|
$
|
3,116,350
|
|
(a)
|
Prior period amounts have not been adjusted based on the modified retrospective method.
|
|
December 31,
|
||||||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
(a)
|
|
2016
(a)
|
||||||
Europe, Africa and Middle East
|
$
|
1,396,315
|
|
|
$
|
1,065,596
|
|
|
$
|
964,931
|
|
Greater Asia
|
991,015
|
|
|
903,546
|
|
|
880,040
|
|
|||
North America
|
1,010,126
|
|
|
901,821
|
|
|
769,081
|
|
|||
Latin America
|
580,083
|
|
|
527,756
|
|
|
502,298
|
|
|||
Total revenues
|
$
|
3,977,539
|
|
|
$
|
3,398,719
|
|
|
$
|
3,116,350
|
|
(a)
|
Prior period amounts have not been adjusted based on the modified retrospective method.
|
|
|
December 31,
|
||||
(DOLLARS IN THOUSANDS)
|
|
2018
|
|
2017
|
||
Receivables (included in Trade receivables)
|
|
946,938
|
|
|
677,055
|
|
Contract asset - Short term
|
|
487
|
|
|
4,499
|
|
(DOLLARS IN THOUSANDS)
|
Employee-Related Costs
|
|
Other
|
|
Total
|
||||||
Balance at January 1, 2016
|
$
|
7,882
|
|
|
$
|
—
|
|
|
$
|
7,882
|
|
Additional charges (reversals), net
|
(1,700
|
)
|
|
658
|
|
|
(1,042
|
)
|
|||
Non-cash charges
|
—
|
|
|
(658
|
)
|
|
(658
|
)
|
|||
Payments
|
(2,905
|
)
|
|
—
|
|
|
(2,905
|
)
|
|||
Balance at December 31, 2016
|
3,277
|
|
|
—
|
|
|
3,277
|
|
|||
Additional charges (reversals), net
|
18,309
|
|
|
1,402
|
|
|
19,711
|
|
|||
Non-cash charges
|
—
|
|
|
(528
|
)
|
|
(528
|
)
|
|||
Payments
|
(14,047
|
)
|
|
(456
|
)
|
|
(14,503
|
)
|
|||
Balance at December 31, 2017
|
7,539
|
|
|
418
|
|
|
7,957
|
|
|||
Additional charges (reversals), net
|
3,884
|
|
|
1,195
|
|
|
5,079
|
|
|||
Non-cash charges
|
—
|
|
|
(418
|
)
|
|
(418
|
)
|
|||
Payments
|
(7,298
|
)
|
|
(120
|
)
|
|
(7,418
|
)
|
|||
Balance at December 31, 2018
|
$
|
4,125
|
|
|
$
|
1,075
|
|
|
$
|
5,200
|
|
Frutarom’s shares outstanding as of the Closing
|
59,576,323
|
|
|
Cash consideration per share
|
71.19
|
|
|
Total cash paid to shareholders of Frutarom
|
$
|
4,241,238
|
|
|
|
||
Cash paid to vested stock option holders
|
19,229
|
|
|
Cash in escrow for unvested stock option holders
|
7,048
|
|
|
Cash paid for closing dividend
|
21,065
|
|
|
Cash in lieu of fractional shares
|
15
|
|
|
Cash portion of the purchase consideration
|
$
|
4,288,595
|
|
|
|
||
Frutarom’s shares outstanding as of the Closing
|
59,576,323
|
|
|
Exchange ratio
|
0.249
|
|
|
Total common shares of IFF issued
|
14,834,504
|
|
|
IFF’s share price as of the Closing
|
137.39
|
|
|
Total equity consideration paid to shareholders of Frutarom
|
2,038,113
|
|
|
Equity consideration paid to vested stock Frutarom option holders (representing 67,046 shares)
|
9,211
|
|
|
Equity portion of purchase consideration
|
$
|
2,047,324
|
|
|
|
||
Repayment of existing credit facilities of Frutarom
|
694,975
|
|
|
|
|
||
Total purchase consideration
|
$
|
7,030,894
|
|
Cash and cash equivalents
|
$
|
140,747
|
|
Other current assets
|
699,627
|
|
|
Identifiable intangible assets
|
2,690,000
|
|
|
Other assets
|
353,710
|
|
|
Equity method investments
|
25,791
|
|
|
Current liabilities
|
(311,325
|
)
|
|
Debt assumed
|
(77,037
|
)
|
|
Other liabilities
|
(632,488
|
)
|
|
Redeemable noncontrolling interest
|
(97,510
|
)
|
|
Noncontrolling interest
|
(3,700
|
)
|
|
Excess attributable to Goodwill
|
4,243,079
|
|
|
Total Purchase Consideration
|
$
|
7,030,894
|
|
(IN THOUSANDS)
|
Estimated Amounts
|
|
Weighted-Average Useful Life
|
||
Intangible assets with finite lives:
|
|
|
|
||
Product formula
|
$
|
290,000
|
|
|
10 to 12 years
|
Customer relationships
|
2,260,000
|
|
|
18 to 23 years
|
|
Trade names
|
140,000
|
|
|
23 to 26 years
|
|
Total
|
$
|
2,690,000
|
|
|
|
|
Year Ended December 31,
|
||||||
(IN THOUSANDS)
|
2018
|
|
2017
|
||||
Unaudited pro forma net sales
|
$
|
5,135,906
|
|
|
$
|
4,761,115
|
|
Unaudited pro forma net income attributable to the Company
|
474,498
|
|
|
240,784
|
|
(DOLLARS IN THOUSANDS)
|
December 31,
|
||||||
2018
|
|
2017
|
|||||
Asset Type
|
|
|
|
||||
Land
|
$
|
75,528
|
|
|
$
|
39,006
|
|
Buildings and improvements
|
760,783
|
|
|
560,939
|
|
||
Machinery and equipment
|
1,342,881
|
|
|
1,162,164
|
|
||
Information technology
|
179,876
|
|
|
186,891
|
|
||
Construction in process
|
133,870
|
|
|
141,755
|
|
||
Total Property, Plant and Equipment
|
2,492,938
|
|
|
2,090,755
|
|
||
Accumulated depreciation
|
(1,251,786
|
)
|
|
(1,210,175
|
)
|
||
Total Property, Plant and Equipment, Net
|
$
|
1,241,152
|
|
|
$
|
880,580
|
|
(DOLLARS IN THOUSANDS)
|
Goodwill
|
||
Balance at January 1, 2016
|
$
|
941,389
|
|
Acquisitions
|
67,480
|
|
|
Foreign exchange
|
(8,746
|
)
|
|
Balance at December 31, 2016
|
1,000,123
|
|
|
Acquisitions
|
87,865
|
|
|
Foreign exchange
|
32,920
|
|
|
Other
(a)
|
35,380
|
|
|
Balance at December 31, 2017
|
1,156,288
|
|
|
Acquisitions
(b)
|
4,253,541
|
|
|
Disposals
|
(19,069
|
)
|
|
Foreign exchange
|
(12,372
|
)
|
|
Balance at December 31, 2018
|
$
|
5,378,388
|
|
(a)
|
Other above principally represents the increase to Goodwill associated with the update of certain customer relationship assumptions in the final purchase price allocation of David Michael, as disclosed in
Note 3
.
|
(b)
|
In 2018,
$4.2 billion
primarily relates to our acquisition of Frutarom and is subject to change upon completion of the purchase price allocation.
|
|
December 31,
|
||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
||||
Taste
|
$
|
525,060
|
|
|
$
|
525,038
|
|
Scent
|
618,878
|
|
|
631,250
|
|
||
Frutarom
|
4,224,010
|
|
|
—
|
|
||
Unallocated
|
10,440
|
|
|
—
|
|
||
Total
|
$
|
5,378,388
|
|
|
$
|
1,156,288
|
|
|
December 31,
|
||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
||||
Asset Type
|
|
|
|
||||
Customer relationships
|
$
|
2,658,659
|
|
|
$
|
407,636
|
|
Technological know-how
|
451,016
|
|
|
161,856
|
|
||
Trade names & patents
|
177,770
|
|
|
38,771
|
|
||
Other
|
43,766
|
|
|
24,814
|
|
||
Total carrying value
|
3,331,211
|
|
|
633,077
|
|
||
Accumulated Amortization
|
|
|
|
||||
Customer relationships
|
(156,906
|
)
|
|
(104,800
|
)
|
||
Technological know-how
|
(93,051
|
)
|
|
(76,766
|
)
|
||
Trade names & patents
|
(19,593
|
)
|
|
(15,241
|
)
|
||
Other
|
(22,339
|
)
|
|
(20,483
|
)
|
||
Total accumulated amortization
|
(291,889
|
)
|
|
(217,290
|
)
|
||
Other intangible assets, net
|
$
|
3,039,322
|
|
|
$
|
415,787
|
|
|
December 31,
|
||||||||||||||||||
(DOLLARS IN THOUSANDS)
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
||||||||||
Estimated future intangible amortization expense
|
$
|
191,175
|
|
|
$
|
187,034
|
|
|
$
|
182,203
|
|
|
$
|
178,250
|
|
|
$
|
178,137
|
|
|
December 31,
|
||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
||||
Deferred income taxes
|
$
|
89,000
|
|
|
$
|
99,777
|
|
Overfunded pension plans
|
$
|
75,158
|
|
|
$
|
70,792
|
|
Cash surrender value of life insurance contracts
|
43,179
|
|
|
45,216
|
|
||
Equity method investments
|
31,470
|
|
|
—
|
|
||
Other
(a)
|
49,866
|
|
|
33,942
|
|
||
Total
|
$
|
288,673
|
|
|
$
|
249,727
|
|
(a)
|
Includes land usage rights in China and long term deposits.
|
|
December 31,
|
||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
||||
Accrued payrolls and bonuses
|
$
|
121,080
|
|
|
$
|
88,361
|
|
Rebates and incentives payable
|
44,175
|
|
|
37,218
|
|
||
Value-added tax payable
|
23,253
|
|
|
17,856
|
|
||
Interest payable
|
36,823
|
|
|
15,863
|
|
||
Current pension and other postretirement benefit obligation
|
11,528
|
|
|
12,866
|
|
||
Accrued insurance (including workers’ compensation)
|
9,447
|
|
|
10,771
|
|
||
Earn outs payable
|
29,974
|
|
|
—
|
|
||
Restructuring and other charges
|
5,200
|
|
|
7,957
|
|
||
Accrued income taxes
|
24,356
|
|
|
22,190
|
|
||
Other
|
224,672
|
|
|
156,112
|
|
||
Total
|
$
|
530,508
|
|
|
$
|
369,194
|
|
(IN MILLIONS, EXCEPT FAIR VALUE PER TEU)
|
|
SPC
|
|
Amortizing Note
|
|
Total
|
||||||
Fair Value per TEU
|
|
$
|
41.5
|
|
|
$
|
8.5
|
|
|
$
|
50.0
|
|
|
|
|
|
|
|
|
||||||
Gross Proceeds
|
|
$
|
685.5
|
|
|
$
|
139.5
|
|
|
$
|
825.0
|
|
Less: Issuance costs
|
|
20.4
|
|
|
4.4
|
|
|
24.8
|
|
|||
Net Proceeds
|
|
$
|
665.1
|
|
|
$
|
135.1
|
|
|
$
|
800.2
|
|
VWAP of IFF Common Stock
|
|
Common Stock Issued
|
Equal to or greater than $159.54
|
|
0.3134 shares (minimum settlement rate)
|
Less than $159.54, but greater than $130.25
|
|
$50 divided by VWAP
|
Less than or equal to $130.25
|
|
0.3839 shares (maximum settlement rate)
|
(DOLLARS IN THOUSANDS)
|
Effective Interest Rate
|
|
2018
|
|
2017
|
|||||
Senior notes - 2007
(1)
|
6.40% - 6.82%
|
|
|
$
|
—
|
|
|
$
|
249,765
|
|
2020 Notes
(1)
|
3.69
|
%
|
|
298,499
|
|
|
—
|
|
||
2021 Euro Notes
(1)
|
0.82
|
%
|
|
337,704
|
|
|
—
|
|
||
2023 Notes
(1)
|
3.30
|
%
|
|
298,698
|
|
|
298,670
|
|
||
2024 Euro Notes
(1)
|
1.88
|
%
|
|
564,034
|
|
|
589,848
|
|
||
2026 Euro Notes
(1)
|
1.93
|
%
|
|
899,886
|
|
|
—
|
|
||
2028 Notes
(1)
|
4.57
|
%
|
|
396,377
|
|
|
—
|
|
||
2047 Notes
(1)
|
4.44
|
%
|
|
493,151
|
|
|
492,819
|
|
||
2048 Notes
(1)
|
5.12
|
%
|
|
785,788
|
|
|
—
|
|
||
Term Loan
(1)
|
3.65
|
%
|
|
349,163
|
|
|
—
|
|
||
Amortizing Notes
(1)
|
5.81
|
%
|
|
125,007
|
|
|
—
|
|
||
Amended Credit Facility
|
LIBOR + 1.125%
|
|
(2)
|
—
|
|
|
—
|
|
||
Bank overdrafts and other
|
|
|
4,695
|
|
|
7,993
|
|
|||
Deferred realized gains on interest rate swaps
|
|
|
57
|
|
|
57
|
|
|||
|
|
|
$
|
4,553,059
|
|
|
$
|
1,639,152
|
|
|
Less: Short term borrowings
(3)
|
|
|
(48,642
|
)
|
|
(6,966
|
)
|
|||
|
|
|
$
|
4,504,417
|
|
|
$
|
1,632,186
|
|
(1)
|
Amount is net of unamortized discount and debt issuance costs.
|
(2)
|
Represents the rate on drawn down and outstanding balances. Deferred debt issuance costs are immaterial.
|
(3)
|
Includes bank borrowings, commercial paper, overdrafts and current portion of long-term debt.
|
Note
|
|
Redemption Date
|
2020 Notes
|
|
September 25, 2020
|
2021 Euro Notes
|
|
August 25, 2021
|
2023 Notes
|
|
February 1, 2023
|
2024 Euro Notes
|
|
December 14, 2023
|
2026 Euro Notes
|
|
June 25, 2026
|
2028 Notes
|
|
June 26, 2028
|
2047 Notes
|
|
December 1, 2046
|
2048 Notes
|
|
March 26, 2048
|
|
Payments Due by Period
|
||||||||||||||||||
(DOLLARS IN THOUSANDS)
|
Total
|
|
Less than 1 Year
|
|
1-3 Years
|
|
3-5 Years
|
|
After 5 Years
|
||||||||||
2020 Notes
|
300,000
|
|
|
—
|
|
|
300,000
|
|
|
—
|
|
|
—
|
|
|||||
2021 Euro Notes
|
340,590
|
|
|
—
|
|
|
340,590
|
|
|
—
|
|
|
—
|
|
|||||
2023 Notes
|
300,000
|
|
|
—
|
|
|
—
|
|
|
300,000
|
|
|
—
|
|
|||||
2024 Euro Notes
|
567,650
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
567,650
|
|
|||||
2026 Euro Notes
|
908,240
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
908,240
|
|
|||||
2028 Notes
|
400,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
400,000
|
|
|||||
2047 Notes
|
500,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
500,000
|
|
|||||
2048 Notes
|
800,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
800,000
|
|
|||||
Term Loan
|
350,000
|
|
|
—
|
|
|
350,000
|
|
|
—
|
|
|
—
|
|
|||||
Amortizing Notes
|
$
|
128,694
|
|
|
$
|
45,261
|
|
|
$
|
83,433
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total
|
$
|
4,595,174
|
|
|
$
|
45,261
|
|
|
$
|
1,074,023
|
|
|
$
|
300,000
|
|
|
$
|
3,175,890
|
|
|
December 31,
|
||||||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
|
2016
|
||||||
U.S. (loss) income before taxes
|
$
|
(99,125
|
)
|
|
$
|
(24
|
)
|
|
$
|
9,078
|
|
Foreign income before taxes
|
546,882
|
|
|
537,069
|
|
|
514,639
|
|
|||
Total income before taxes
|
$
|
447,757
|
|
|
$
|
537,045
|
|
|
$
|
523,717
|
|
|
December 31,
|
||||||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
|
2016
|
||||||
Current tax provision
|
|
|
|
|
|
||||||
Federal
|
$
|
(11,568
|
)
|
|
$
|
68,886
|
|
|
$
|
(2,920
|
)
|
State and local
|
1,709
|
|
|
137
|
|
|
1,383
|
|
|||
Foreign
|
98,433
|
|
|
113,468
|
|
|
105,873
|
|
|||
|
88,574
|
|
|
182,491
|
|
|
104,336
|
|
|||
Deferred tax provision
|
|
|
|
|
|
||||||
Federal
|
(8,287
|
)
|
|
74,446
|
|
|
8,838
|
|
|||
State and local
|
(7,092
|
)
|
|
(11,537
|
)
|
|
(631
|
)
|
|||
Foreign
|
34,781
|
|
|
(4,020
|
)
|
|
6,143
|
|
|||
|
19,402
|
|
|
58,889
|
|
|
14,350
|
|
|||
Total income taxes
|
$
|
107,976
|
|
|
$
|
241,380
|
|
|
$
|
118,686
|
|
|
December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
Statutory tax rate
|
21.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
Difference in effective tax rate on foreign earnings and remittances
|
(6.1
|
)
|
|
(12.6
|
)
|
|
(12.6
|
)
|
Tax benefit from supply chain optimization
|
(3.0
|
)
|
|
(2.3
|
)
|
|
(0.7
|
)
|
Unrecognized tax benefit, net of reversals
|
2.9
|
|
|
2.3
|
|
|
0.6
|
|
U.S. tax reform
|
(1.8
|
)
|
|
26.5
|
|
|
—
|
|
Deferred taxes on deemed repatriation
|
10.1
|
|
|
0.3
|
|
|
1.1
|
|
Global intangible low-taxed income (GILTI)
|
1.8
|
|
|
—
|
|
|
—
|
|
Acquisition costs
|
1.3
|
|
|
—
|
|
|
—
|
|
Release of valuation allowance on state deferred
|
(1.5
|
)
|
|
(1.7
|
)
|
|
—
|
|
State and local taxes
|
0.6
|
|
|
0.1
|
|
|
0.1
|
|
Other, net
|
(1.2
|
)
|
|
(2.7
|
)
|
|
(0.8
|
)
|
Effective tax rate
|
24.1
|
%
|
|
44.9
|
%
|
|
22.7
|
%
|
|
December 31,
|
||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
||||
Employee and retiree benefits
|
$
|
80,382
|
|
|
$
|
87,400
|
|
Credit and net operating loss carryforwards
(a)
|
225,152
|
|
|
218,933
|
|
||
Intangible assets
|
12,489
|
|
|
13,622
|
|
||
Gain on foreign currency translation
|
—
|
|
|
10,885
|
|
||
Interest limitation
|
19,380
|
|
|
1,120
|
|
||
Inventory
|
13,308
|
|
|
4,428
|
|
||
Other, net
|
18,009
|
|
|
7,103
|
|
||
Gross deferred tax assets
|
368,720
|
|
|
343,491
|
|
||
|
|
|
|
||||
Property, plant and equipment, net
|
(22,511
|
)
|
|
(11,745
|
)
|
||
Intangible assets
|
(616,333
|
)
|
|
(73,979
|
)
|
||
Loss on foreign currency translation
|
(7,717
|
)
|
|
—
|
|
||
Deferred taxes on deemed repatriation
|
(88,759
|
)
|
|
(1,610
|
)
|
||
Gross deferred tax liabilities
|
(735,320
|
)
|
|
(87,334
|
)
|
||
Valuation allowance
(a)
|
(200,280
|
)
|
|
(207,483
|
)
|
||
Total net deferred tax (liabilities)/assets
|
$
|
(566,880
|
)
|
|
$
|
48,674
|
|
(a)
|
During
2018
and
2017
, the Company increased its deferred tax assets by
$5.9 million
and by
$58.8 million
, respectively, relating to an adjustment to the 2017 and 2016 foreign net operating loss carryforwards, respectively. The entire adjustments of
$5.9 million
and
$58.8 million
were offset by corresponding adjustments in valuation allowances. These adjustments are not considered material to the previously issued financial statements.
|
|
December 31,
|
||||||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
|
2016
|
||||||
Balance of unrecognized tax benefits at beginning of year
|
$
|
38,162
|
|
|
$
|
26,428
|
|
|
$
|
24,198
|
|
Gross amount of increases in unrecognized tax benefits as a result of positions taken during a prior year
|
9,751
|
|
|
1,169
|
|
|
1,254
|
|
|||
Gross amount of decreases in unrecognized tax benefits as a result of positions taken during a prior year
|
(5,362
|
)
|
|
(268
|
)
|
|
(3
|
)
|
|||
Gross amount of increases in unrecognized tax benefits as a result of positions taken during the current year
|
14,677
|
|
|
13,191
|
|
|
8,131
|
|
|||
The amounts of decreases in unrecognized benefits relating to settlements with taxing authorities
|
(4,550
|
)
|
|
—
|
|
|
(6,075
|
)
|
|||
Reduction in unrecognized tax benefits due to the lapse of applicable statute of limitation
|
(1,725
|
)
|
|
(2,358
|
)
|
|
(1,077
|
)
|
|||
Balance of unrecognized tax benefits at end of year
|
$
|
50,953
|
|
|
$
|
38,162
|
|
|
$
|
26,428
|
|
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
|
2016
|
||||||
Net Income
|
|
|
|
|
|
||||||
Net income attributable to IFF stockholders
|
$
|
337,302
|
|
|
$
|
295,665
|
|
|
$
|
405,031
|
|
Less: Increase in redemption value of redeemable noncontrolling interests in excess of earnings allocated
|
(2,848
|
)
|
|
—
|
|
|
—
|
|
|||
Net income available to IFF stockholders
|
$
|
334,454
|
|
|
$
|
295,665
|
|
|
$
|
405,031
|
|
Shares
|
|
|
|
|
|
||||||
Weighted average common shares outstanding (basic)
(1)
|
87,551
|
|
|
79,070
|
|
|
79,648
|
|
|||
Adjustment for assumed dilution
(2)
:
|
|
|
|
|
|
||||||
Stock options and restricted stock awards
|
303
|
|
|
300
|
|
|
333
|
|
|||
SPC portion of the TEUs
|
267
|
|
|
—
|
|
|
—
|
|
|||
Weighted average shares assuming dilution (diluted)
|
88,121
|
|
|
79,370
|
|
|
79,981
|
|
|||
Net Income per Share
|
|
|
|
|
|
||||||
Net income per share - basic
|
$
|
3.81
|
|
|
$
|
3.73
|
|
|
$
|
5.07
|
|
Net income per share - dilutive
|
3.79
|
|
|
3.72
|
|
|
5.05
|
|
(1)
|
For the twelve months ended
December 31, 2018
, the TEUs were assumed to be outstanding at the minimum settlement amount for weighted-average shares for basic earnings per share. See below for details.
|
(2)
|
Effect of dilutive securities includes dilution under stock plans and incremental impact of TEUs. See below for details.
|
(DOLLARS IN THOUSANDS)
|
|
Shares Repurchased
|
|
Weighted-
Average Price
per Share
|
|
Dollar Amount Repurchased
|
||||
Year Ended December 31, 2018
|
|
108,109
|
|
|
$
|
143.15
|
|
|
15,475
|
|
Year Ended December 31, 2017
|
|
459,264
|
|
|
126.44
|
|
|
58,069
|
|
|
Year Ended December 31, 2016
|
|
1,058,018
|
|
|
124.01
|
|
|
127,443
|
|
|
December 31,
|
||||||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
|
2016
|
||||||
Equity-based awards
|
$
|
29,401
|
|
|
$
|
26,567
|
|
|
$
|
24,587
|
|
Liability-based awards
|
2,517
|
|
|
6,014
|
|
|
3,884
|
|
|||
Total stock-based compensation
|
31,918
|
|
|
32,581
|
|
|
28,471
|
|
|||
Less tax benefit
|
(6,556
|
)
|
|
(5,659
|
)
|
|
(7,375
|
)
|
|||
Total stock-based compensation, net of tax
|
$
|
25,362
|
|
|
$
|
26,922
|
|
|
$
|
21,096
|
|
(SHARE AMOUNTS IN THOUSANDS)
|
Shares Subject to
SSARs/Options
|
|
Weighted
Average Exercise
Price
|
|
SSARs/
Options
Exercisable
|
||||
December 31, 2017
|
4
|
|
|
$
|
64.25
|
|
|
4
|
|
Granted
|
9
|
|
|
$
|
140.10
|
|
|
|
|
Exercised
|
(1
|
)
|
|
60.39
|
|
|
|
||
Canceled
|
—
|
|
|
—
|
|
|
|
||
Balance at December 31, 2018
|
12
|
|
|
$
|
117.21
|
|
|
4
|
|
Price Range
|
Number
Outstanding
(in thousands)
|
|
Weighted Average
Remaining
Contractual Life
(in years)
|
|
Weighted
Average
Exercise Price
|
|
Aggregate
Intrinsic Value
(in thousands)
|
|||||
$51 – $60
|
3
|
|
|
0.34
|
|
$
|
60.39
|
|
|
|
||
Over $65
|
9
|
|
|
6.25
|
|
139.36
|
|
|
|
|||
Total
|
12
|
|
|
|
|
$
|
117.21
|
|
|
$
|
177
|
|
Price Range
|
Number
Exercisable
(in thousands)
|
|
Weighted Average
Remaining
Contractual Life
(in years)
|
|
Weighted
Average
Exercise Price
|
|
Aggregate
Intrinsic Value
(in thousands)
|
|||||
$51 – $60
|
3
|
|
|
0.34
|
|
$
|
60.39
|
|
|
|
||
Over $65
|
1
|
|
|
3.36
|
|
118.10
|
|
|
|
|||
|
4
|
|
|
|
|
$
|
64.96
|
|
|
$
|
242
|
|
|
Number of Shares
(in thousands)
|
|
Weighted Average
Grant Date Fair
Value Per Share
|
|||
December 31, 2017
|
441
|
|
|
$
|
119.45
|
|
Granted
|
169
|
|
|
132.70
|
|
|
Vested
|
(145
|
)
|
|
113.89
|
|
|
Forfeited
|
(17
|
)
|
|
125.30
|
|
|
Balance at December 31, 2018
|
448
|
|
|
$
|
125.99
|
|
(DOLLARS IN MILLIONS)
|
Issued Shares
|
|
Aggregate Purchase Price
|
|
Covered Shares
|
||||
|
PRSU
|
|
PRSU
|
|
|
||||
2018
|
66,674
|
|
|
$
|
9.3
|
|
|
33,337
|
|
2017
|
41,801
|
|
|
5.8
|
|
|
20,901
|
|
|
2016
|
58,629
|
|
|
7.0
|
|
|
29,315
|
|
(SHARE AMOUNTS IN THOUSANDS)
|
Number of
Shares
|
|
Weighted Average
Grant Date Fair
Value Per Share
|
|||
December 31, 2017
|
159
|
|
|
$
|
124.15
|
|
Granted
|
67
|
|
|
140.10
|
|
|
Vested
|
(61
|
)
|
|
118.05
|
|
|
Forfeited
|
(3
|
)
|
|
129.77
|
|
|
Balance at December 31, 2018
|
162
|
|
|
$
|
132.96
|
|
(SHARE AMOUNTS IN THOUSANDS)
|
Cash RSUs
|
|
Weighted Average Fair
Value Per Share
|
|||
December 31, 2017
|
95
|
|
|
$
|
152.61
|
|
Granted
|
31
|
|
|
132.23
|
|
|
Vested
|
(30
|
)
|
|
125.38
|
|
|
Forfeited
|
(4
|
)
|
|
137.83
|
|
|
Balance at December 31, 2018
|
92
|
|
|
$
|
132.23
|
|
|
December 31,
|
||||||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
|
2016
|
||||||
Net sales
|
|
|
|
|
|
||||||
Taste
|
$
|
1,737,349
|
|
|
$
|
1,632,166
|
|
|
$
|
1,496,525
|
|
Scent
|
1,880,630
|
|
|
1,766,553
|
|
|
1,619,825
|
|
|||
Frutarom
|
$
|
359,560
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Consolidated
|
$
|
3,977,539
|
|
|
$
|
3,398,719
|
|
|
$
|
3,116,350
|
|
|
December 31,
|
||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
||||
Segment assets
|
|
|
|
||||
Taste
|
$
|
2,024,573
|
|
|
$
|
1,929,005
|
|
Scent
|
2,340,131
|
|
|
2,284,309
|
|
||
Frutarom
|
7,961,538
|
|
|
—
|
|
||
Global assets
|
563,153
|
|
|
385,612
|
|
||
Consolidated
|
$
|
12,889,395
|
|
|
$
|
4,598,926
|
|
|
December 31,
|
||||||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
|
2016
|
||||||
Segment profit:
|
|
|
|
|
|
||||||
Taste
|
$
|
395,190
|
|
|
$
|
360,483
|
|
|
$
|
330,221
|
|
Scent
|
329,548
|
|
|
318,954
|
|
|
326,705
|
|
|||
Frutarom
|
27,358
|
|
|
—
|
|
|
—
|
|
|||
Global expenses
|
(74,730
|
)
|
|
(60,810
|
)
|
|
(48,352
|
)
|
|||
Operational Improvement Initiatives (a)
|
(2,169
|
)
|
|
(1,802
|
)
|
|
(2,402
|
)
|
|||
Acquisition Related Costs (b)
|
1,289
|
|
|
(20,389
|
)
|
|
(12,195
|
)
|
|||
Integration Related Costs (c)
|
(7,188
|
)
|
|
(4,179
|
)
|
|
—
|
|
|||
Legal Charges/Credits, net (d)
|
—
|
|
|
(1,000
|
)
|
|
(48,518
|
)
|
|||
Tax Assessment (e)
|
—
|
|
|
(5,331
|
)
|
|
—
|
|
|||
Restructuring and Other Charges, net (f)
|
(4,086
|
)
|
|
(19,711
|
)
|
|
(322
|
)
|
|||
Gain on Sale of Assets
|
1,177
|
|
|
184
|
|
|
7,818
|
|
|||
FDA Mandated Product Recall (g)
|
7,125
|
|
|
(11,000
|
)
|
|
—
|
|
|||
UK Pension Settlement Charges (h)
|
—
|
|
|
(2,769
|
)
|
|
—
|
|
|||
Frutarom Acquisition Related Costs (i)
|
(89,632
|
)
|
|
—
|
|
|
—
|
|
|||
Operating Profit
|
583,882
|
|
|
552,630
|
|
|
552,955
|
|
|||
Interest expense
|
(132,558
|
)
|
|
(65,363
|
)
|
|
(52,989
|
)
|
|||
Loss on extinguishment of debt
|
(38,810
|
)
|
|
—
|
|
|
—
|
|
|||
Other income (expense), net
|
35,243
|
|
|
49,778
|
|
|
23,751
|
|
|||
Income before taxes
|
$
|
447,757
|
|
|
$
|
537,045
|
|
|
$
|
523,717
|
|
Profit margin
|
|
|
|
|
|
||||||
Taste
|
22.7
|
%
|
|
22.1
|
%
|
|
22.1
|
%
|
|||
Scent
|
17.5
|
%
|
|
18.1
|
%
|
|
20.2
|
%
|
|||
Frutarom
|
7.6
|
%
|
|
—
|
%
|
|
—
|
%
|
|||
Consolidated
|
14.7
|
%
|
|
16.3
|
%
|
|
17.7
|
%
|
(a)
|
For 2018, represents accelerated depreciation related to a plant relocation in India and Taiwan asset write off. For 2017, represents accelerated depreciation and idle labor costs in Hangzhou, China.
|
(b)
|
For 2018, represents adjustments to the contingent consideration payable for PowderPure, and transaction costs related to Fragrance Resources and PowderPure within Selling and administrative expenses. For 2017, represents the amortization of inventory "step-up" included in Cost of goods sold and transaction costs related to the acquisitions of Fragrance Resources and PowderPure within Selling and administrative expenses.
|
(c)
|
For 2018, represents costs related to the integration of the Frutarom acquisition. For 2017, represents costs related to the integration of the David Michael and Fragrance Resources acquisitions.
|
(d)
|
Represents additional charge related to litigation settlement.
|
(e)
|
Represents the reserve for payment of a tax assessment related to commercial rent for prior periods.
|
(f)
|
For 2018, represents severance costs related to the 2017 Productivity Program and costs associated with the termination of agent relationships in a subsidiary. For 2017, represents severance costs related to the 2017 Productivity Program.
|
(g)
|
For 2018, principally represents recoveries from the supplier for the third and fourth quarter, partially offset by final payments to the customer made for the effected product in the first quarter. For 2017, represents management's best estimate of losses related to the previously disclosed FDA mandated recall.
|
(h)
|
Represents pension settlement charges incurred in one of the Company's UK pension plans.
|
(i)
|
Represents transaction-related costs and expenses related to the acquisition of Frutarom. Amount primarily includes $23.5 million of amortization for inventory "step-up" costs, $39.4 million of bridge loan commitment fees included in Interest expense; $34.9 million make whole payment on the Senior Notes - 2007 and $3.9 million realized loss on a fair value hedge included in Loss on extinguishment of debt; $12.5 million realized gain on a foreign currency derivative included in Other income; and $66.0 million of transaction costs included in Selling and administrative expenses.
|
|
Capital Expenditures
|
|
Depreciation and Amortization
|
||||||||||||||||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
|
2016
|
||||||||||||
Taste
|
$
|
70,028
|
|
|
$
|
68,937
|
|
|
$
|
47,064
|
|
|
$
|
72,474
|
|
|
$
|
53,534
|
|
|
$
|
47,705
|
|
Scent
|
82,206
|
|
|
53,089
|
|
|
73,345
|
|
|
85,078
|
|
|
59,951
|
|
|
50,724
|
|
||||||
Frutarom
|
12,878
|
|
|
—
|
|
|
—
|
|
|
8,738
|
|
|
—
|
|
|
—
|
|
||||||
Unallocated assets
|
4,982
|
|
|
6,947
|
|
|
6,003
|
|
|
7,502
|
|
|
4,482
|
|
|
4,040
|
|
||||||
Consolidated
|
$
|
170,094
|
|
|
$
|
128,973
|
|
|
$
|
126,412
|
|
|
$
|
173,792
|
|
|
$
|
117,967
|
|
|
$
|
102,469
|
|
|
Net Sales by Geographic Area
|
||||||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
|
2016
|
||||||
Europe, Africa and Middle East
|
$
|
1,396,316
|
|
|
$
|
1,065,596
|
|
|
$
|
964,931
|
|
Greater Asia
|
991,015
|
|
|
903,546
|
|
|
880,040
|
|
|||
North America
|
1,010,126
|
|
|
901,821
|
|
|
769,081
|
|
|||
Latin America
|
580,082
|
|
|
527,756
|
|
|
502,298
|
|
|||
Consolidated
|
$
|
3,977,539
|
|
|
$
|
3,398,719
|
|
|
$
|
3,116,350
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
||||||||||||||||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
|
2016
|
||||||||||||
Components of net periodic benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service cost for benefits earned
|
$
|
1,971
|
|
|
$
|
2,175
|
|
|
$
|
2,497
|
|
|
$
|
18,738
|
|
|
$
|
18,652
|
|
|
$
|
15,210
|
|
Interest cost on projected benefit obligation
|
19,393
|
|
|
20,075
|
|
|
24,096
|
|
|
17,704
|
|
|
17,116
|
|
|
24,413
|
|
||||||
Expected return on plan assets
|
(30,994
|
)
|
|
(35,577
|
)
|
|
(33,988
|
)
|
|
(50,546
|
)
|
|
(50,626
|
)
|
|
(45,865
|
)
|
||||||
Net amortization of deferrals
|
6,592
|
|
|
5,424
|
|
|
5,821
|
|
|
11,798
|
|
|
14,403
|
|
|
12,802
|
|
||||||
Settlements and curtailments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,746
|
|
|
—
|
|
||||||
Net periodic benefit cost
|
(3,038
|
)
|
|
(7,903
|
)
|
|
(1,574
|
)
|
|
(2,306
|
)
|
|
2,291
|
|
|
6,560
|
|
||||||
Defined contribution and other retirement plans
|
10,527
|
|
|
8,604
|
|
|
8,404
|
|
|
6,859
|
|
|
5,681
|
|
|
6,304
|
|
||||||
Total expense
|
$
|
7,489
|
|
|
$
|
701
|
|
|
$
|
6,830
|
|
|
$
|
4,553
|
|
|
$
|
7,972
|
|
|
$
|
12,864
|
|
Changes in plan assets and benefit obligations recognized in OCI
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net actuarial (gain) loss
|
$
|
21,050
|
|
|
$
|
(12,145
|
)
|
|
|
|
$
|
11,937
|
|
|
$
|
(20,557
|
)
|
|
|
||||
Recognized actuarial loss
|
(6,549
|
)
|
|
(5,383
|
)
|
|
|
|
(12,590
|
)
|
|
(17,895
|
)
|
|
|
||||||||
Prior service cost
|
—
|
|
|
93
|
|
|
|
|
2,776
|
|
|
—
|
|
|
|
||||||||
Recognized prior service (cost) credit
|
(43
|
)
|
|
(41
|
)
|
|
|
|
792
|
|
|
747
|
|
|
|
||||||||
Currency translation adjustment
|
—
|
|
|
—
|
|
|
|
|
(16,978
|
)
|
|
36,722
|
|
|
|
||||||||
Total recognized in OCI (before tax effects)
|
$
|
14,458
|
|
|
$
|
(17,476
|
)
|
|
|
|
$
|
(14,063
|
)
|
|
$
|
(983
|
)
|
|
|
|
Postretirement Benefits
|
||||||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
|
2016
|
||||||
Components of net periodic benefit cost
|
|
|
|
|
|
||||||
Service cost for benefits earned
|
$
|
755
|
|
|
$
|
718
|
|
|
$
|
852
|
|
Interest cost on projected benefit obligation
|
2,460
|
|
|
2,710
|
|
|
3,326
|
|
|||
Net amortization and deferrals
|
(5,497
|
)
|
|
(4,913
|
)
|
|
(5,088
|
)
|
|||
(Credit) Expense
|
$
|
(2,282
|
)
|
|
$
|
(1,485
|
)
|
|
$
|
(910
|
)
|
Changes in plan assets and benefit obligations recognized in OCI
|
|
|
|
|
|
||||||
Net actuarial loss
|
$
|
(6,677
|
)
|
|
$
|
2,895
|
|
|
|
||
Recognized actuarial loss
|
(1,506
|
)
|
|
(1,421
|
)
|
|
|
||||
Prior service credit
|
(14,862
|
)
|
|
—
|
|
|
|
||||
Recognized prior service credit
|
7,003
|
|
|
6,334
|
|
|
|
||||
Total recognized in OCI (before tax effects)
|
$
|
(16,042
|
)
|
|
$
|
7,808
|
|
|
|
(DOLLARS IN THOUSANDS)
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Postretirement
Benefits
|
||||||
Actuarial loss recognition
|
$
|
5,060
|
|
|
$
|
12,336
|
|
|
$
|
1,274
|
|
Prior service cost (credit) recognition
|
43
|
|
|
(647
|
)
|
|
(6,051
|
)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
||||||||||||||
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
|
2016
|
|||||||
Discount rate
|
3.69
|
%
|
|
4.19
|
%
|
|
4.20
|
%
|
|
2.15
|
%
|
|
2.14
|
%
|
|
3.03
|
%
|
Expected return on plan assets
|
6.20
|
%
|
|
7.30
|
%
|
|
7.30
|
%
|
|
5.19
|
%
|
|
5.95
|
%
|
|
6.40
|
%
|
Rate of compensation increase
|
3.25
|
%
|
|
3.25
|
%
|
|
3.25
|
%
|
|
1.98
|
%
|
|
1.97
|
%
|
|
1.98
|
%
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Postretirement Benefits
|
||||||||||||||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||
Benefit obligation at beginning of year
|
$
|
602,783
|
|
|
$
|
577,332
|
|
|
$
|
973,061
|
|
|
$
|
895,566
|
|
|
$
|
82,714
|
|
|
$
|
79,845
|
|
Service cost for benefits earned
|
1,971
|
|
|
2,175
|
|
|
18,738
|
|
|
18,652
|
|
|
755
|
|
|
718
|
|
||||||
Interest cost on projected benefit obligation
|
19,393
|
|
|
20,075
|
|
|
17,704
|
|
|
17,116
|
|
|
2,460
|
|
|
2,710
|
|
||||||
Actuarial (gain) loss
|
(33,284
|
)
|
|
33,808
|
|
|
(29,433
|
)
|
|
(28,552
|
)
|
|
(6,677
|
)
|
|
2,895
|
|
||||||
Plan amendments
|
—
|
|
|
93
|
|
|
2,776
|
|
|
—
|
|
|
(14,862
|
)
|
|
—
|
|
||||||
Adjustments for expense/tax contained in service cost
|
—
|
|
|
—
|
|
|
(1,290
|
)
|
|
(1,287
|
)
|
|
—
|
|
|
—
|
|
||||||
Plan participants’ contributions
|
—
|
|
|
—
|
|
|
2,047
|
|
|
1,700
|
|
|
435
|
|
|
457
|
|
||||||
Benefits paid
|
(32,093
|
)
|
|
(30,700
|
)
|
|
(33,862
|
)
|
|
(28,943
|
)
|
|
(5,200
|
)
|
|
(3,911
|
)
|
||||||
Curtailments / settlements
|
—
|
|
|
—
|
|
|
(2,751
|
)
|
|
(6,787
|
)
|
|
—
|
|
|
—
|
|
||||||
Translation adjustments
|
—
|
|
|
—
|
|
|
(49,027
|
)
|
|
105,596
|
|
|
—
|
|
|
—
|
|
||||||
Acquisitions/Transferred Liabilities
|
3,273
|
|
|
—
|
|
|
48,356
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
11,616
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Benefit obligation at end of year
|
$
|
562,043
|
|
|
$
|
602,783
|
|
|
$
|
957,935
|
|
|
$
|
973,061
|
|
|
$
|
59,625
|
|
|
$
|
82,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fair value of plan assets at beginning of year
|
$
|
581,917
|
|
|
$
|
525,964
|
|
|
$
|
929,810
|
|
|
$
|
792,138
|
|
|
|
|
|
||||
Actual return on plan assets
|
(23,339
|
)
|
|
81,530
|
|
|
6,699
|
|
|
39,423
|
|
|
|
|
|
||||||||
Employer contributions
|
3,524
|
|
|
5,123
|
|
|
18,238
|
|
|
36,645
|
|
|
|
|
|
||||||||
Participants’ contributions
|
—
|
|
|
—
|
|
|
2,047
|
|
|
1,700
|
|
|
|
|
|
||||||||
Benefits paid
|
(32,093
|
)
|
|
(30,700
|
)
|
|
(33,862
|
)
|
|
(28,943
|
)
|
|
|
|
|
||||||||
Settlements
|
—
|
|
|
—
|
|
|
(1,564
|
)
|
|
(6,787
|
)
|
|
|
|
|
||||||||
Translation adjustments
|
—
|
|
|
—
|
|
|
(47,247
|
)
|
|
95,634
|
|
|
|
|
|
||||||||
Acquisitions/Transferred Assets
|
2,372
|
|
|
—
|
|
|
21,672
|
|
|
—
|
|
|
|
|
|
||||||||
Other
|
—
|
|
|
—
|
|
|
989
|
|
|
—
|
|
|
|
|
|
||||||||
Fair value of plan assets at end of year
|
$
|
532,381
|
|
|
$
|
581,917
|
|
|
$
|
896,782
|
|
|
$
|
929,810
|
|
|
|
|
|
||||
Funded status at end of year
|
$
|
(29,662
|
)
|
|
$
|
(20,866
|
)
|
|
$
|
(61,153
|
)
|
|
$
|
(43,251
|
)
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
||||||||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Other assets
|
$
|
20,949
|
|
|
$
|
33,164
|
|
|
$
|
54,434
|
|
|
$
|
38,095
|
|
Other current liabilities
|
(4,092
|
)
|
|
(4,049
|
)
|
|
(882
|
)
|
|
(652
|
)
|
||||
Retirement liabilities
|
(46,519
|
)
|
|
(49,981
|
)
|
|
(114,705
|
)
|
|
(80,694
|
)
|
||||
Net amount recognized
|
$
|
(29,662
|
)
|
|
$
|
(20,866
|
)
|
|
$
|
(61,153
|
)
|
|
$
|
(43,251
|
)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Postretirement Benefits
|
||||||||||||||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||
Net actuarial loss
|
$
|
151,389
|
|
|
$
|
136,888
|
|
|
$
|
321,144
|
|
|
$
|
338,916
|
|
|
$
|
12,627
|
|
|
$
|
20,810
|
|
Prior service cost (credit)
|
151
|
|
|
194
|
|
|
(3,926
|
)
|
|
(7,635
|
)
|
|
(33,189
|
)
|
|
(25,330
|
)
|
||||||
Total AOCI (before tax effects)
|
$
|
151,540
|
|
|
$
|
137,082
|
|
|
$
|
317,218
|
|
|
$
|
331,281
|
|
|
$
|
(20,562
|
)
|
|
$
|
(4,520
|
)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
||||||||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Accumulated Benefit Obligation — end of year
|
$
|
562,043
|
|
|
$
|
600,634
|
|
|
$
|
957,935
|
|
|
$
|
941,158
|
|
Information for Pension Plans with an ABO in excess of Plan Assets:
|
|
|
|
|
|
|
|
||||||||
Projected benefit obligation
|
$
|
52,714
|
|
|
$
|
54,030
|
|
|
$
|
582,466
|
|
|
$
|
542,843
|
|
Accumulated benefit obligation
|
52,690
|
|
|
54,030
|
|
|
548,116
|
|
|
510,939
|
|
||||
Fair value of plan assets
|
2,103
|
|
|
—
|
|
|
466,878
|
|
|
461,496
|
|
||||
Weighted-average assumptions used to determine obligations at December 31
|
|
|
|
|
|
|
|
||||||||
Discount rate
|
4.31
|
%
|
|
3.68
|
%
|
|
2.22
|
%
|
|
2.15
|
%
|
||||
Rate of compensation increase
|
3.25
|
%
|
|
3.25
|
%
|
|
1.91
|
%
|
|
1.98
|
%
|
(DOLLARS IN THOUSANDS)
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Postretirement
Benefits
|
||||||
Estimated Future Benefit Payments
|
|
|
|
|
|
||||||
2019
|
$
|
35,742
|
|
|
$
|
26,342
|
|
|
$
|
3,881
|
|
2020
|
36,918
|
|
|
25,991
|
|
|
3,940
|
|
|||
2021
|
37,710
|
|
|
27,270
|
|
|
4,014
|
|
|||
2022
|
38,823
|
|
|
27,589
|
|
|
4,081
|
|
|||
2023
|
38,449
|
|
|
28,843
|
|
|
4,085
|
|
|||
2024 - 2028
|
190,164
|
|
|
165,681
|
|
|
20,449
|
|
|||
Contributions
|
|
|
|
|
|
||||||
Required Company Contributions in Following Year (2019)
|
$
|
4,207
|
|
|
$
|
19,258
|
|
|
$
|
3,882
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||
Cash and cash equivalents
|
1
|
%
|
|
1
|
%
|
|
3
|
%
|
|
4
|
%
|
Equities
|
25
|
%
|
|
28
|
%
|
|
12
|
%
|
|
27
|
%
|
Fixed income
|
74
|
%
|
|
71
|
%
|
|
36
|
%
|
|
40
|
%
|
Property
|
—
|
%
|
|
—
|
%
|
|
8
|
%
|
|
4
|
%
|
Alternative and other investments
|
—
|
%
|
|
—
|
%
|
|
41
|
%
|
|
25
|
%
|
|
U.S. Plans for the Year Ended
|
||||||||||||||
|
December 31, 2018
|
||||||||||||||
(DOLLARS IN THOUSANDS)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Cash Equivalents
|
$
|
—
|
|
|
$
|
3,490
|
|
|
$
|
—
|
|
|
$
|
3,490
|
|
Fixed Income Securities
|
|
|
|
|
|
|
|
||||||||
Government & Government Agency Bonds
|
—
|
|
|
17,827
|
|
|
—
|
|
|
17,827
|
|
||||
Corporate Bonds
|
—
|
|
|
96,566
|
|
|
—
|
|
|
96,566
|
|
||||
Municipal Bonds
|
—
|
|
|
8,138
|
|
|
—
|
|
|
8,138
|
|
||||
Assets measured at net asset value
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
404,895
|
|
||||
Total
|
$
|
—
|
|
|
$
|
126,021
|
|
|
$
|
—
|
|
|
$
|
530,916
|
|
Receivables
|
|
|
|
|
|
|
$
|
1,465
|
|
||||||
Total
|
|
|
|
|
|
|
$
|
532,381
|
|
|
U.S. Plans for the Year Ended
|
||||||||||||||
|
December 31, 2017
|
||||||||||||||
(DOLLARS IN THOUSANDS)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Cash Equivalents
|
$
|
—
|
|
|
$
|
7,138
|
|
|
$
|
—
|
|
|
$
|
7,138
|
|
Fixed Income Securities
|
|
|
|
|
|
|
|
||||||||
Government & Government Agency Bonds
|
—
|
|
|
16,118
|
|
|
—
|
|
|
16,118
|
|
||||
Corporate Bonds
|
—
|
|
|
100,478
|
|
|
—
|
|
|
100,478
|
|
||||
Municipal Bonds
|
—
|
|
|
8,982
|
|
|
—
|
|
|
8,982
|
|
||||
Assets measured at net asset value
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
447,847
|
|
||||
Total
|
$
|
—
|
|
|
$
|
132,716
|
|
|
$
|
—
|
|
|
$
|
580,563
|
|
Receivables
|
|
|
|
|
|
|
$
|
1,354
|
|
||||||
Total
|
|
|
|
|
|
|
$
|
581,917
|
|
(1)
|
Investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the table above are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Balance Sheet. The total amount measured at net asset value includes approximately
$133.1 million
and
$159.6 million
in pooled equity funds and
$271.8 million
and
$288.2 million
in fixed income mutual funds for the years ended
December 31, 2018
and
2017
, respectively.
|
|
Non-U.S. Plans for the Year Ended
|
||||||||||||||
|
December 31, 2018
|
||||||||||||||
(DOLLARS IN THOUSANDS)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Cash
|
$
|
25,386
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25,386
|
|
Equity Securities
|
|
|
|
|
|
|
|
||||||||
U.S. Large Cap
|
35,929
|
|
|
11,340
|
|
|
—
|
|
|
47,269
|
|
||||
U.S. Mid Cap
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
U.S. Small Cap
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Non-U.S. Large Cap
|
30,841
|
|
|
8,381
|
|
|
—
|
|
|
39,222
|
|
||||
Non-U.S. Mid Cap
|
905
|
|
|
—
|
|
|
—
|
|
|
905
|
|
||||
Non-U.S. Small Cap
|
628
|
|
|
—
|
|
|
—
|
|
|
628
|
|
||||
Emerging Markets
|
22,608
|
|
|
—
|
|
|
—
|
|
|
22,608
|
|
||||
Fixed Income Securities
|
|
|
|
|
|
|
|
||||||||
U.S. Treasuries/Government Bonds
|
131
|
|
|
—
|
|
|
—
|
|
|
131
|
|
||||
U.S. Corporate Bonds
|
—
|
|
|
29,682
|
|
|
—
|
|
|
29,682
|
|
||||
Non-U.S. Treasuries/Government Bonds
|
137,267
|
|
|
5,494
|
|
|
—
|
|
|
142,761
|
|
||||
Non-U.S. Corporate Bonds
|
30,893
|
|
|
85,841
|
|
|
—
|
|
|
116,734
|
|
||||
Non-U.S. Asset-Backed Securities
|
—
|
|
|
32,587
|
|
|
—
|
|
|
32,587
|
|
||||
Non-U.S. Other Fixed Income
|
2,324
|
|
|
—
|
|
|
—
|
|
|
2,324
|
|
||||
Alternative Types of Investments
|
|
|
|
|
|
|
|
||||||||
Insurance Contracts
|
—
|
|
|
152,947
|
|
|
254
|
|
|
153,201
|
|
||||
Other
|
—
|
|
|
123,786
|
|
|
25,913
|
|
|
149,699
|
|
||||
Absolute Return Funds
|
3,584
|
|
|
61,211
|
|
|
—
|
|
|
64,795
|
|
||||
Real Estate
|
|
|
|
|
|
|
|
||||||||
Non-U.S. Real Estate
|
—
|
|
|
—
|
|
|
68,850
|
|
|
68,850
|
|
||||
Total
|
$
|
290,496
|
|
|
$
|
511,269
|
|
|
$
|
95,017
|
|
|
$
|
896,782
|
|
|
Non-U.S. Plans for the Year Ended
|
||||||||||||||
|
December 31, 2017
|
||||||||||||||
(DOLLARS IN THOUSANDS)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Cash
|
$
|
33,146
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
33,146
|
|
Equity Securities
|
|
|
|
|
|
|
|
||||||||
U.S. Large Cap
|
86,921
|
|
|
19,710
|
|
|
—
|
|
|
106,631
|
|
||||
U.S. Mid Cap
|
623
|
|
|
—
|
|
|
—
|
|
|
623
|
|
||||
U.S. Small Cap
|
474
|
|
|
—
|
|
|
—
|
|
|
474
|
|
||||
Non-U.S. Large Cap
|
84,898
|
|
|
17,117
|
|
|
—
|
|
|
102,015
|
|
||||
Non-U.S. Mid Cap
|
577
|
|
|
—
|
|
|
—
|
|
|
577
|
|
||||
Non-U.S. Small Cap
|
422
|
|
|
—
|
|
|
—
|
|
|
422
|
|
||||
Emerging Markets
|
43,706
|
|
|
1,296
|
|
|
—
|
|
|
45,002
|
|
||||
Fixed Income Securities
|
|
|
|
|
|
|
|
||||||||
U.S. Treasuries/Government Bonds
|
94
|
|
|
—
|
|
|
—
|
|
|
94
|
|
||||
U.S. Corporate Bonds
|
—
|
|
|
39,647
|
|
|
—
|
|
|
39,647
|
|
||||
Non-U.S. Treasuries/Government Bonds
|
129,494
|
|
|
7,492
|
|
|
—
|
|
|
136,986
|
|
||||
Non-U.S. Corporate Bonds
|
26,212
|
|
|
128,121
|
|
|
—
|
|
|
154,333
|
|
||||
Non-U.S. Asset-Backed Securities
|
—
|
|
|
34,350
|
|
|
—
|
|
|
34,350
|
|
||||
Non-U.S. Other Fixed Income
|
2,116
|
|
|
—
|
|
|
—
|
|
|
2,116
|
|
||||
Alternative Types of Investments
|
|
|
|
|
|
|
|
||||||||
Insurance Contracts
|
—
|
|
|
146,998
|
|
|
270
|
|
|
147,268
|
|
||||
Hedge Funds
|
—
|
|
|
—
|
|
|
33,593
|
|
|
33,593
|
|
||||
Other
|
—
|
|
|
29,133
|
|
|
—
|
|
|
29,133
|
|
||||
Absolute Return Funds
|
3,314
|
|
|
21,191
|
|
|
—
|
|
|
24,505
|
|
||||
Real Estate
|
|
|
|
|
|
|
|
||||||||
Non-U.S. Real Estate
|
—
|
|
|
—
|
|
|
38,895
|
|
|
38,895
|
|
||||
Total
|
$
|
411,997
|
|
|
$
|
445,055
|
|
|
$
|
72,758
|
|
|
$
|
929,810
|
|
|
Non-U.S. Plans
|
||||||||||
(DOLLARS IN THOUSANDS)
|
Real
Estate
|
|
Hedge
Funds
|
|
Total
|
||||||
Ending balance as of December 31, 2017
|
$
|
39,165
|
|
|
$
|
33,593
|
|
|
$
|
72,758
|
|
Actual return on plan assets
|
(2,155
|
)
|
|
(1,377
|
)
|
|
(3,532
|
)
|
|||
Purchases, sales and settlements
|
32,094
|
|
|
(6,303
|
)
|
|
25,791
|
|
|||
Ending balance as of December 31, 2018
|
$
|
69,104
|
|
|
$
|
25,913
|
|
|
$
|
95,017
|
|
|
Expense
|
|
Liability
|
||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||
Discount rate
|
3.70
|
%
|
|
4.20
|
%
|
|
4.30
|
%
|
|
3.70
|
%
|
Current medical cost trend rate
|
7.75
|
%
|
|
8.00
|
%
|
|
7.50
|
%
|
|
7.75
|
%
|
Ultimate medical cost trend rate
|
4.75
|
%
|
|
4.75
|
%
|
|
4.75
|
%
|
|
4.75
|
%
|
Medical cost trend rate decreases to ultimate rate in year
|
2030
|
|
|
2030
|
|
|
2030
|
|
|
2030
|
|
(DOLLARS IN THOUSANDS)
|
U.S. Pension Plans
|
|
Non-U.S. Pension Plans
|
|
Postretirement Benefit Plan
|
|||
25 Basis Point Decrease in Discount Rate
|
|
|
|
|
|
|||
Change in PBO
|
14,603
|
|
|
46,475
|
|
|
N/A
|
|
Change in ABO
|
14,524
|
|
|
44,628
|
|
|
1,638
|
|
Change in pension expense
|
(102
|
)
|
|
2,710
|
|
|
44
|
|
25 Basis Point Decrease in Long-Term Rate of Return
|
|
|
|
|
|
|||
Change in pension expense
|
1,248
|
|
|
1,911
|
|
|
N/A
|
|
•
|
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
.
|
|
2018
|
|
2017
|
||||||||||||
(DOLLARS IN THOUSANDS)
|
Carrying Value
|
|
Fair
Value
|
|
Carrying Value
|
|
Fair
Value |
||||||||
LEVEL 1
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
(1)
|
$
|
634,897
|
|
|
$
|
634,897
|
|
|
$
|
368,046
|
|
|
$
|
368,046
|
|
LEVEL 2
|
|
|
|
|
|
|
|
||||||||
Credit facilities and bank overdrafts
(2)
|
4,695
|
|
|
4,695
|
|
|
7,993
|
|
|
7,993
|
|
||||
Derivatives
(3)
|
|
|
|
|
|
|
|
||||||||
Derivative assets
|
—
|
|
|
7,229
|
|
|
—
|
|
|
5,137
|
|
||||
Derivative liabilities
|
—
|
|
|
6,907
|
|
|
—
|
|
|
13,555
|
|
||||
Long-term debt:
(4)
|
|
|
|
|
|
|
|
||||||||
Senior notes - 2007
|
—
|
|
|
—
|
|
|
249,765
|
|
|
293,232
|
|
||||
2020 Notes
|
298,499
|
|
|
300,356
|
|
|
—
|
|
|
—
|
|
||||
2021 Euro Notes
|
337,704
|
|
|
341,094
|
|
|
—
|
|
|
—
|
|
||||
2023 Notes
|
298,698
|
|
|
293,017
|
|
|
298,670
|
|
|
304,219
|
|
||||
2024 Euro Notes
|
564,034
|
|
|
584,129
|
|
|
589,848
|
|
|
627,782
|
|
||||
2026 Euro Notes
|
899,886
|
|
|
909,439
|
|
|
—
|
|
|
—
|
|
||||
2028 Notes
|
396,377
|
|
|
401,231
|
|
|
—
|
|
|
—
|
|
||||
2047 Notes
|
493,151
|
|
|
446,725
|
|
|
492,819
|
|
|
525,906
|
|
||||
2048 Notes
|
785,788
|
|
|
783,925
|
|
|
—
|
|
|
—
|
|
||||
Term Loan
(2)
|
349,163
|
|
|
350,000
|
|
|
—
|
|
|
|
|||||
Amortizing Notes
(5)
|
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)
|
Derivative instruments include foreign currency contracts and cross currency swaps for 2018, and foreign currency contracts and interest rate swaps for 2017.
|
(4)
|
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.
|
(5)
|
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. See
Note 9
for additional information on the TEUs.
|
|
December 31,
|
||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
||||
Foreign currency contracts
|
$
|
585,581
|
|
|
$
|
896,947
|
|
Cross currency swaps
|
1,087
|
|
|
—
|
|
||
Interest rate swaps
|
—
|
|
|
150,000
|
|
|
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
|
|
Total derivative assets
|
$
|
5,209
|
|
|
$
|
2,020
|
|
|
$
|
7,229
|
|
Derivative liabilities
(b)
|
|
|
|
|
|
||||||
Foreign currency contracts
|
205
|
|
|
6,702
|
|
|
6,907
|
|
|
December 31, 2017
|
||||||||||
(DOLLARS IN THOUSANDS)
|
Fair Value of Derivatives Designated as Hedging Instruments
|
|
Fair Value of Derivatives Not Designated as Hedging Instruments
|
|
Total Fair Value
|
||||||
Derivative assets
(a)
|
|
|
|
|
|
||||||
Foreign currency contracts
|
$
|
1,159
|
|
|
$
|
3,978
|
|
|
$
|
5,137
|
|
Derivative liabilities
(b)
|
|
|
|
|
|
||||||
Foreign currency contracts
|
7,842
|
|
|
4,344
|
|
|
12,186
|
|
|||
Interest rate swaps
|
1,369
|
|
|
—
|
|
|
1,369
|
|
|||
Total derivative liabilities
|
$
|
9,211
|
|
|
$
|
4,344
|
|
|
$
|
13,555
|
|
(a)
|
Derivative assets are recorded to Prepaid expenses and other current assets in the Consolidated Balance Sheet.
|
(b)
|
Derivative liabilities are recorded as Other current liabilities in the Consolidated Balance Sheet.
|
(DOLLARS IN THOUSANDS)
|
Amount of Gain (Loss)
For the years ended
December 31,
|
|
Location of Gain (Loss)
Recognized in
Income on Derivative
|
||||||
2018
|
|
2017
|
|
||||||
Foreign currency contracts
|
$
|
1,999
|
|
|
$
|
(10,057
|
)
|
|
Other (income) expense, net
|
Deal contingent swaps
|
|
|
|
|
|
||||
Foreign currency contracts
|
12,154
|
|
|
—
|
|
|
Other income, net
|
||
Interest rate swaps
|
352
|
|
|
—
|
|
|
Interest expense
|
||
|
$
|
14,505
|
|
|
$
|
(10,057
|
)
|
|
|
|
Amount of Gain(Loss)
Recognized in OCI on Derivative
(Effective Portion)
|
|
Location of Gain
(Loss) Reclassified
from AOCI into Income
(Effective Portion)
|
|
Amount of Gain (Loss) Reclassified from AOCI
into Income
(Effective Portion)
|
||||||||||||
|
For the years ended
December 31,
|
|
|
For the years ended
December 31,
|
|||||||||||||
|
2018
|
|
2017
|
|
|
2018
|
|
2017
|
|||||||||
Derivatives in Cash Flow Hedging Relationships:
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency contracts
|
$
|
14,220
|
|
|
$
|
(14,121
|
)
|
|
Cost of goods sold
|
|
$
|
(6,203
|
)
|
|
$
|
3,943
|
|
Interest rate swaps
(1)
|
864
|
|
|
(3,811
|
)
|
|
Interest expense
|
|
(864
|
)
|
|
(789
|
)
|
||||
Derivatives or debt instruments in Net Investment Hedging Relationships:
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency contracts
|
(518
|
)
|
|
(4,239
|
)
|
|
N/A
|
|
—
|
|
|
—
|
|
||||
2024 Euro Notes
|
20,539
|
|
|
(47,672
|
)
|
|
N/A
|
|
—
|
|
|
—
|
|
||||
2021 Euro Notes & 2026 Euro Notes
|
30,390
|
|
|
—
|
|
|
N/A
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
65,495
|
|
|
$
|
(69,843
|
)
|
|
|
|
$
|
(7,067
|
)
|
|
$
|
3,154
|
|
(1)
|
Interest rate swaps were entered into as pre-issuance hedges for our bond offerings.
|
(DOLLARS IN THOUSANDS)
|
Foreign
Currency
Translation
Adjustments
|
|
(Losses) Gains on Derivatives
Qualifying as
Hedges
|
|
Pension and
Postretirement
Liability
Adjustment
|
|
Total
|
||||||||
Accumulated other comprehensive loss, net of tax, as of December 31, 2017
|
$
|
(297,416
|
)
|
|
$
|
(10,332
|
)
|
|
$
|
(329,734
|
)
|
|
$
|
(637,482
|
)
|
OCI before reclassifications
|
(99,580
|
)
|
|
8,011
|
|
|
9,717
|
|
|
(81,852
|
)
|
||||
Amounts reclassified from AOCI
|
—
|
|
|
7,067
|
|
|
10,040
|
|
|
17,107
|
|
||||
Net current period other comprehensive income (loss)
|
(99,580
|
)
|
|
15,078
|
|
|
19,757
|
|
|
(64,745
|
)
|
||||
Accumulated other comprehensive loss, net of tax, as of December 31, 2018
|
$
|
(396,996
|
)
|
|
$
|
4,746
|
|
|
$
|
(309,977
|
)
|
|
$
|
(702,227
|
)
|
(DOLLARS IN THOUSANDS)
|
Foreign
Currency
Translation
Adjustments
|
|
(Losses) Gains on Derivatives
Qualifying as
Hedges
|
|
Pension and
Postretirement
Liability
Adjustment
|
|
Total
|
||||||||
Accumulated other comprehensive (loss) income, net of tax, as of December 31, 2016
|
$
|
(352,025
|
)
|
|
$
|
7,604
|
|
|
$
|
(335,674
|
)
|
|
$
|
(680,095
|
)
|
OCI before reclassifications
|
66,826
|
|
|
(14,782
|
)
|
|
(7,941
|
)
|
|
44,103
|
|
||||
Amounts reclassified from AOCI
|
(12,217
|
)
|
(a)
|
(3,154
|
)
|
|
13,881
|
|
|
(1,490
|
)
|
||||
Net current period other comprehensive income (loss)
|
54,609
|
|
|
(17,936
|
)
|
|
5,940
|
|
|
42,613
|
|
||||
Accumulated other comprehensive loss, net of tax, as of December 31, 2017
|
$
|
(297,416
|
)
|
|
$
|
(10,332
|
)
|
|
$
|
(329,734
|
)
|
|
$
|
(637,482
|
)
|
(DOLLARS IN THOUSANDS)
|
Foreign
Currency
Translation
Adjustments
|
|
(Losses) Gains on Derivatives
Qualifying as
Hedges
|
|
Pension and
Postretirement
Liability
Adjustment
|
|
Total
|
||||||||
Accumulated other comprehensive (loss) income, net of tax, as of December 31, 2015
|
$
|
(297,499
|
)
|
|
$
|
9,401
|
|
|
$
|
(325,342
|
)
|
|
$
|
(613,440
|
)
|
OCI before reclassifications
|
(54,526
|
)
|
|
2,334
|
|
|
(21,111
|
)
|
|
(73,303
|
)
|
||||
Amounts reclassified from AOCI
|
—
|
|
|
(4,131
|
)
|
|
10,779
|
|
|
6,648
|
|
||||
Net current period other comprehensive income (loss)
|
(54,526
|
)
|
|
(1,797
|
)
|
|
(10,332
|
)
|
|
(66,655
|
)
|
||||
Accumulated other comprehensive (loss) income, net of tax, as of December 31, 2016
|
$
|
(352,025
|
)
|
|
$
|
7,604
|
|
|
$
|
(335,674
|
)
|
|
$
|
(680,095
|
)
|
|
Year Ended December 31,
|
|
|
||||||||||
(DOLLARS IN THOUSANDS)
|
2018
|
|
2017
|
|
2016
|
|
Affected Line Item in the Consolidated Statement of Comprehensive Income
|
||||||
(Losses) gains on derivatives qualifying as hedges
|
|
|
|
|
|
|
|
||||||
Foreign currency contracts
|
$
|
(7,089
|
)
|
|
$
|
4,506
|
|
|
$
|
5,401
|
|
|
Cost of goods sold
|
Interest rate swaps
|
(864
|
)
|
|
(789
|
)
|
|
(595
|
)
|
|
Interest expense
|
|||
Tax
|
886
|
|
|
(563
|
)
|
|
(675
|
)
|
|
Provision for income taxes
|
|||
Total
|
$
|
(7,067
|
)
|
|
$
|
3,154
|
|
|
$
|
4,131
|
|
|
Total, net of income taxes
|
(Losses) gains on pension and postretirement liability adjustments
|
|
|
|
|
|
|
|
||||||
Prior service cost
|
$
|
7,752
|
|
|
$
|
7,040
|
|
|
$
|
7,469
|
|
|
(a)
|
Actuarial losses
|
(20,645
|
)
|
|
(24,699
|
)
|
|
(21,103
|
)
|
|
(a)
|
|||
Tax
|
2,853
|
|
|
3,778
|
|
|
2,855
|
|
|
Provision for income taxes
|
|||
Total
|
$
|
(10,040
|
)
|
|
$
|
(13,881
|
)
|
|
$
|
(10,779
|
)
|
|
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
to the Consolidated Financial Statements for additional information regarding net periodic benefit cost.
|
(DOLLARS IN THOUSANDS)
|
|
Redeemable
Noncontrolling Interests
|
||
Balance at December 31, 2017
|
|
$
|
—
|
|
Acquired through acquisitions during 2018
|
|
97,510
|
|
|
Share of profit or loss attributable to noncontrolling interests
|
|
2,196
|
|
|
Redemption value mark-up for the current period
|
|
2,848
|
|
|
Sale of a subsidiary with redeemable noncontrolling interests
|
|
(14,673
|
)
|
|
Exercises of redeemable noncontrolling interests
|
|
(6,075
|
)
|
|
Balance at December 31, 2018
|
|
81,806
|
|
Exhibit Number
|
|
Description
|
2.1
|
|
|
2.2
|
|
|
3.1
|
|
|
3.2
|
|
|
4.1
|
|
|
4.2
|
|
|
4.3
|
|
|
4.4
|
|
|
4.5
|
|
|
4.6
|
|
|
4.7
|
|
|
4.8
|
|
|
4.9
|
|
|
4.10
|
|
|
4.11
|
|
|
4.12
|
|
|
4.13
|
|
|
4.14
|
|
|
4.15
|
|
|
4.16
|
|
|
*10.1
|
|
Exhibit Number
|
|
Description
|
*10.2
|
|
|
*10.3
|
|
|
*10.4
|
|
|
*10.5
|
|
|
*10.6
|
|
|
*10.7
|
|
|
*10.8
|
|
|
*10.9
|
|
|
*10.10
|
|
|
*10.11
|
|
|
*10.12
|
|
|
*10.13
|
|
|
*10.14
|
|
|
*10.15
|
|
|
*10.16
|
|
|
*10.17
|
|
|
*10.18
|
|
|
*10.19
|
|
|
*10.20
|
|
|
*10.21(i)
|
|
Exhibit Number
|
|
Description
|
10.21(ii)
|
|
|
10.21(iii)
|
|
|
10.21(iv)
|
|
|
10.22(i)
|
|
|
10.22(ii)
|
|
Amendment No 1 to Term Loan Credit Agreement, dated as of July 13, 2018, among the Registrant, as borrower, the lenders signatory thereto and Morgan Stanley Senior Funding, Inc. as administrative agent, incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q filed on August 7, 2018.
|
21.1
|
|
|
23
|
|
|
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
|
*
|
Management contract or compensatory plan or arrangement
|
ITEM 16.
|
FORM 10-K SUMMARY.
|
|
INTERNATIONAL FLAVORS & FRAGRANCES INC.
|
|
|
|
|
|
By:
|
/s/ Richard A. O'Leary
|
|
Name:
|
Richard A. O'Leary
|
|
Title:
|
Executive Vice President and Chief Financial Officer
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Andreas Fibig
|
|
Chairman of the Board, Chief Executive Officer and Director (Principal Executive Officer)
|
|
February 26, 2019
|
Andreas Fibig
|
|
|
|
|
|
|
|
|
|
/s/ Richard A. O'Leary
|
|
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
|
|
February 26, 2019
|
Richard A. O'Leary
|
|
|
|
|
|
|
|
|
|
/s/ Marcello V. Bottoli
|
|
Director
|
|
February 26, 2019
|
Marcello V. Bottoli
|
|
|
|
|
|
|
|
|
|
/s/ Linda B. Buck
|
|
Director
|
|
February 26, 2019
|
Linda B. Buck
|
|
|
|
|
|
|
|
|
|
/s/ Michael Ducker
|
|
Director
|
|
February 26, 2019
|
Michael Ducker
|
|
|
|
|
|
|
|
|
|
/s/ David R. Epstein
|
|
Director
|
|
February 26, 2019
|
David R. Epstein
|
|
|
|
|
|
|
|
|
|
/s/ Roger W. Ferguson, Jr.
|
|
Director
|
|
February 26, 2019
|
Roger W. Ferguson, Jr.
|
|
|
|
|
|
|
|
|
|
/s/ John F. Ferraro
|
|
Director
|
|
February 26, 2019
|
John F. Ferraro
|
|
|
|
|
|
|
|
|
|
/s/ Christina Gold
|
|
Director
|
|
February 26, 2019
|
Christina Gold
|
|
|
|
|
|
|
|
|
|
/s/ Katherine M. Hudson
|
|
Director
|
|
February 26, 2019
|
Katherine M. Hudson
|
|
|
|
|
|
|
|
|
|
/s/ Dale F. Morrison
|
|
Director
|
|
February 26, 2019
|
Dale F. Morrison
|
|
|
|
|
|
|
|
|
|
/s/ Stephen Williamson
|
|
Director
|
|
February 26, 2019
|
Stephen Williamson
|
|
|
|
|
|
For the Year Ended December 31, 2018
|
||||||||||||||||||||||
|
Balance at
beginning
of period
|
|
Additions charged to costs and expenses
|
|
Acquisitions
|
|
Accounts
written off
|
|
Translation
adjustments
|
|
Balance at end of period
|
||||||||||||
Allowance for doubtful accounts
|
$
|
13,392
|
|
|
$
|
1,286
|
|
|
$
|
—
|
|
|
$
|
(4,642
|
)
|
|
$
|
(863
|
)
|
|
$
|
9,173
|
|
Valuation allowance on credit and operating loss carryforwards and other net deferred tax assets
|
207,483
|
|
|
(1,821
|
)
|
(1)
|
3,887
|
|
|
—
|
|
|
(9,269
|
)
|
|
200,280
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
For the Year Ended December 31, 2017
|
||||||||||||||||||||||
|
Balance at
beginning
of period
|
|
Additions (deductions) charged to costs and expenses
|
|
Acquisitions
|
|
Accounts
written off |
|
Translation
adjustments
|
|
Balance at
end of
period
|
||||||||||||
Allowance for doubtful accounts
|
$
|
9,995
|
|
|
$
|
3,798
|
|
|
$
|
—
|
|
|
$
|
(1,496
|
)
|
|
$
|
1,095
|
|
|
$
|
13,392
|
|
Valuation allowance on credit and operating loss carryforwards and other net deferred tax assets
|
152,752
|
|
|
35,646
|
|
(2)
|
—
|
|
|
—
|
|
|
19,085
|
|
|
207,483
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
For the Year Ended December 31, 2016
|
||||||||||||||||||||||
|
Balance at
beginning
of period
|
|
Additions charged to costs and expenses
|
|
Acquisitions
|
|
Accounts
written off |
|
Translation
adjustments
|
|
Balance at
end of
period
|
||||||||||||
Allowance for doubtful accounts
|
$
|
8,229
|
|
|
$
|
2,452
|
|
|
$
|
—
|
|
|
$
|
(225
|
)
|
|
$
|
(461
|
)
|
|
$
|
9,995
|
|
Valuation allowance on credit and operating loss carryforwards and other net deferred tax assets
|
339,395
|
|
|
(171,408
|
)
|
(3)(4)
|
—
|
|
|
—
|
|
|
(15,235
|
)
|
|
152,752
|
|
(1)
|
The
2018
amount includes an adjustment to the
2017
foreign net operating loss carryforwards in the amount of
$5.9 million
, as discussed in
Note 11
of the Consolidated Financial Statements.
|
(2)
|
The
2017
amount includes an adjustment to the
2016
foreign net operating loss carryforwards in the amount of
$58.8 million
, as discussed in
Note 11
of the Consolidated Financial Statements.
|
(3)
|
The
2016
amount includes an adjustment to the
2015
foreign net operating loss carryforwards in the amount of
$7.6 million
,
as discussed in
Note 11
of the Consolidated Financial Statements.
|
(4)
|
The Company executed a legal entity restructuring that resulted in a significant reduction of fully valued deferred tax assets.
|
Name of Entity
|
Jurisdiction
|
International Flavors & Fragrances S.R.L.
|
Argentina
|
Bush Boake Allen Australia Pty Ltd
|
Australia
|
IFF Australia Holdings Pty Ltd
|
Australia
|
International Flavours & Fragrances (Australia) Pty Ltd
|
Australia
|
Lucas Meyer Cosmetics Australia Pty Ltd
|
Australia
|
Southern Cross Botanicals Pty Ltd
|
Australia
|
Enzymotec Australia PTY LTD
|
Australia
|
Taura Natural Ingredients (Australia) Pty Limited
|
Australia
|
Taura Natural Ingredients Holdings Pty Limited
|
Australia
|
Frutarom GmbH
|
Austria
|
Frutarom Savory Solutions Austria GmbH
|
Austria
|
world wide WIBERG GmbH
|
Austria
|
PTI-BEL TUE
|
Belarus
|
Frutarom Belgium N.V.
|
Belgium
|
Taura Natural Ingredients NV
|
Belgium
|
TNI Investments NV
|
Belgium
|
IFF Essências e Fragrâncias Ltda.
|
Brazil
|
Bush Boake Allen do Brasil Indústria e Comércio Ltda.
|
Brazil
|
BREMIL INDÚSTRIA E COMÉRCIO DE INGREDIENTES ALIMENTÍCIOS LTDA
|
Brazil
|
BREMIL S/A INDÚSTRIA DE PRODUTOS ALIMENTÍCIOS
(1)
|
Brazil
|
ENVOLTEC INDÚSTRIA DE EMBALAGENS LTDA
|
Brazil
|
Frutarom do Brasil GRU Indsutria e Conercio Ltad (formely Citromax Essências Ltda)
|
Brazil
|
Frutarom Do Brazil Industria E Comercio Ltda.
|
Brazil
|
NARDI AROMAS LTDA.
|
Brazil
|
SABORMAX INDÚSTRIA DE ALIMENTOS E REPRESENTAÇÃO LTDA
|
Brazil
|
SDFLC Brasil Industria E Comercio Ltda
(2)
|
Brazil
|
Fragrance Resources Asia Pacific Ltd.
|
British Virgin Islands
|
IFF (BVI) Limited
|
British Virgin Islands
|
International Flavors & Fragrances (Canada) Ltd.
|
Canada
|
Lucas Meyer Cosmetics Canada Inc.
|
Canada
|
Les Laboratories Bio ForeXtra Inc.
|
Canada
|
David Michael & Company (Canada) 1986 Ltd.
|
Canada
|
Les Ingrédients Alimentaires BSA Inc.
|
Canada
|
1456111 Ontario Limited
|
Canada
|
Distribution Dan-Hel Inc.
(3)
|
Canada
|
Via Viateur Inc.
(4)
|
Canada
|
WIBERG CANADA Inc.
|
Canada
|
WIBERG Corporation Inc.
(5)
|
Canada
|
Bush Boake Allen Chile S.A.
|
Chile
|
IFF Sabores y Fragancias de Chile Ltda.
|
Chile
|
International Flavors & Fragrances I.F.F. (Chile) Limitada
|
Chile
|
Frutarom Chile S.A. (former name: Montana Chile S.A.)
|
Chile
|
International Flavors & Fragrances (Hangzhou) Co., Ltd.
(6)
|
China
|
IFF Flavors & Fragrances (Hangzhou) Trading Co., Ltd.
|
China
|
International Flavors & Fragrances (Zhejiang) Co., Ltd.
|
China
|
International Flavors & Fragrances (China) Ltd.
|
China
|
International Flavors & Fragrances (ZhangJiagang) Co., Ltd.
|
China
|
Fragrance Resources (Shanghai) Co. Ltd.
|
China
|
IFF Bio-Technology (Nanjing) Co., Ltd.
|
China
|
Frutarom Flavors (Kushan) Co Ltd.
|
China
|
Frutarom F&F Trading (Shanghai) Co.
|
China
|
Frutarom Flavors and ingredients (shanghai) Co., Ltd.
|
China
|
Inventive Food Technology (ZQ) Ltd.
|
China
|
Pucheng Yongfang Fragrance Technology Co., Ltd.
(7)
|
China
|
International Flavors and Fragrances Colombia S.A.S.
|
Colombia
|
Frutarom Flavor and Fragrance Costa Rica Sociedad de Responsabilidad Limitada
|
Costa Rica
|
Alpris Ltd.
|
Cyprus
|
Vantodio Holdings Limited
|
Cyprus
|
Frutarom Czech Republic S.r.o
|
Czech Republic
|
Frutarom Nordic A/S Flachsmann Scandinavia A/S Aksel Holm-Essensfabrik A / S
|
Denmark
|
FYMSA del Caribe, S.R.L (dormant)
(8)
|
Dominican Republic
|
MISR Company for Aromatic products (S.A.E.)
|
Egypt
|
A. Boake, Roberts And Company (Holding), Limited
|
England
|
International Flavours & Fragrances (CIL) Limited
|
England
|
Bush Boake Allen Enterprises Limited
|
England
|
Bush Boake Allen Limited
|
England
|
Bush Boake Allen (Pension Trustees) Limited
|
England
|
Bush Boake Allen Pension Investments Limited
|
England
|
Bush Boake Allen Holdings (U.K.) Limited
|
England
|
International Flavours & Fragrances (GB) Holdings Limited
|
England
|
International Flavours & Fragrances I.F.F. (Great Britain) Limited
|
England
|
International Flavours & Fragrances (Pension Trustees) Limited
|
England
|
Dandy Lions Limited
|
England
|
Frutarom (UK) Holdings Limited
|
England
|
Frutarom (UK) Ltd.
|
England
|
Frutarom UK Investments Limited
|
England
|
Hagelin Flv (UK) Ltd.
|
England
|
Redbrook (UK) Limited
|
England
|
Savoury Flavours (Holding) Limited
|
England
|
Savoury Flavours Ltd.
|
England
|
Unique Ingredients Limited
|
England
|
Aromco Ltd.
|
England
|
Flavors and Essences UK Limited
|
England
|
FoodBlenders Limited
|
England
|
Frutarom - Etol (UK) Limited
(9)
|
England
|
International Flavors & Fragrances IFF (France) SAS
|
France
|
International Flavors & Fragrances France Holding I SAS
|
France
|
International Flavors & Fragrances France Holding II SAS
|
France
|
International Flavors & Fragrances France Holding III SAS
|
France
|
Lucas Meyer Cosmetics
|
France
|
Institut Européen de Biologie Cellulaire
|
France
|
David Michael Europe S.A.S.
|
France
|
Fragrance Resources SAS
|
France
|
Frutarom France S.A.R.L
|
France
|
Rene Laurent, a Société par Actions Simplifiée
|
France
|
International Flavors & Fragrances IFF (Deutschland) GmbH
|
Germany
|
IFF Fragrance GmbH
|
Germany
|
Dr. Bruno Stellmach Verwaltungsgesellschaft GmbH
|
Germany
|
extrakt Chemie Dr. Bruno Stellmach GmbH & Co. KG
|
Germany
|
Frutarom Germany GmbH
|
Germany
|
Frutarom Germany GMP GmbH
|
Germany
|
Frutarom Production GmbH
|
Germany
|
Frutarom Savory Solutions Germany GmbH
|
Germany
|
Aroma S.A.
|
Guatemala
|
Hexachem, Sociedad Anónima
|
Guatemala
|
Manseg S.A.
|
Guatemala
|
International Flavors & Fragrances (Hong Kong) Limited
|
Hong Kong
|
David Michael Hong Kong Limited
|
Hong Kong
|
Frutarom (Asia Pacific) Limited
|
Hong Kong
|
Inventive Technology Ltd.
|
Hong Kong
|
Prowin International Ltd.
|
Hong Kong
|
VAYA PHARMA HONKG LTD
|
Hong Kong
|
International Flavors & Fragrances I.F.F. (Hungary) Korlátolt Felelõsségû Társaság
|
Hungary
|
Essence Scientific Research Private Limited
|
India
|
Fragrance Holdings Private Limited
|
India
|
International Flavours & Fragrances India Private Limited
(10)
|
India
|
BSA India Food Ingr. P. Ltd.
(11)
|
India
|
Frutarom Flavours (India) Private Limited
(12)
|
India
|
Sonarome Private Limited
(13)
|
India
|
P.T. Essence Indonesia
|
Indonesia
|
IFF Capital Services
|
Ireland
|
IFF Financial Services
|
Ireland
|
Irish Flavours and Fragrances Limited
|
Ireland
|
Aromatics Holdings Limited
|
Ireland
|
International Flavors & Fragrances Irish Acquisition Company Limited
|
Ireland
|
Redbrook Blentech Limited
|
Ireland
|
Redbrook Ingredient Services Limited
|
Ireland
|
International Flavors and Fragrances Ingredients Ltd
|
Israel
|
BKF Vision Ltd
|
Israel
|
K-Vision Consulting and Investments Ltd
|
Israel
|
M.P. Equity Holdings Ltd
|
Israel
|
International Flavors and Fragrances I.F.F. (Israel) Ltd.
|
Israel
|
Icon Newco Ltd.
|
Israel
|
Icon Palate Ltd.
|
Israel
|
Frutarom Industries Ltd.
|
Israel
|
Frutarom Ltd.
|
Israel
|
Nutra-Lease Ltd.
(14)
|
Israel
|
Enzymotec Ltd
|
Israel
|
Algalo Industries Ltd.
(15)
|
Israel
|
Frutarom Trade & Marketing (1990) Ltd.
|
Israel
|
International Flavors e Fragrances IFF (Italia) S.r.l.
|
Italy
|
Frutarom Italy S.r.l
|
Italy
|
WIBERG Italia S.r.l.
|
Italy
|
International Flavors & Fragrances (Japan) Ltd.
|
Japan
|
PTI Astana LLC
|
Kazakhstan
|
Frutarom Kenya Limited
|
Kenya
|
IFF (Korea) Inc.
|
Korea
|
Frutarom Finance EUR AG
|
Lichtenstein
|
International Flavors & Fragrances (Luxembourg) S.à r.l.
|
Luxembourg
|
International Flavors & Fragrances Ardenne S.à r.l.
|
Luxembourg
|
Etol Skopje DRUŠTVO ZA TRGOVIJA ETOL UVOZ-IZVOZ DOOEL
|
Macedonia
|
Ingrediants dooel Skopje
|
Macedonia
|
International Flavors & Fragrances (Malaysia) Sdn. Bhd.
|
Malaysia
|
International Flavours & Fragrances (Mauritius) Ltd
|
Mauritius
|
Bush Boake Allen Controladora, S.A. de C.V.
|
Mexico
|
IFF Mexico Manufactura, S.A. de C.V.
|
Mexico
|
International Flavors & Fragrances (Mexico), S. de R.L. de C.V.
|
Mexico
|
Frutarom Flavors Mexico S.A. de C.V.
|
Mexico
|
Frutarom Mexico S.A.
(16)
|
Mexico
|
Proveedores de Ingeniería Alimentaria, S.A. de C.V. ("PIASA")
(17)
|
Mexico
|
Representaciones FYMSA, S.A. de C.V (FYMSA)
|
Mexico
|
PTI-MOL LLC
|
Moldova
|
ERELEM
|
Morocco
|
International Flavors & Fragrances (Myanmar) Limited
|
Myanmar
|
Bush Boake Allen Benelux B.V.
|
Netherlands
|
International Flavors & Fragrances (Nederland) Holding B.V.
|
Netherlands
|
International Flavors & Fragrances I.F.F. (Nederland) B.V.
|
Netherlands
|
IFF Luxar C.V.
|
Netherlands
|
IFF Worldwide C.V.
|
Netherlands
|
Daivd Michael Netherlands B.V.
|
Netherlands
|
Frutarom Netherlands B.V.
|
Netherlands
|
Taura Natural Ingredients Ltd.
|
New Zealand
|
International Flavours & Fragrances (NZ) Limited
|
New Zealand
|
Bush Boake Allen (New Zealand) Limited
|
New Zealand
|
IFF West Africa Limited
|
Nigeria
|
Frutarom Nigeria Limited
|
Nigeria
|
Frutarom Norway A.S
|
Norway
|
Frutarom Perú S.A. (Montana Food activity)
|
Peru
|
International Flavors & Fragrances (Philippines), Inc.
|
Philippines
|
International Flavors & Fragrances (Poland) Sp. z o.o.
|
Poland
|
Amco SP Z.O.O
(18)
|
Poland
|
Frutarom Polska Sp. Z o.o. (Former name: Etol Polska SP.z.o.o.)
|
Poland
|
Chemical Process Materials and Equipment S.A.
|
Republic of Panama
|
International Aroma Group
|
Republic of Panama
|
Mark Services Holdings Inc.
|
Republic of Panama
|
Frutarom (Marketing) S.R.L.
|
Romania
|
Frutarom Etol RO SRL
|
Romania
|
International Flavors & Fragrances I.F.F. (Rus)
|
Russia
|
PTI Group of Companies LLC (GK PTI)
|
Russia
|
Frutarom Russia Ltd.
|
Russia
|
ETOL-RUS, Ltd.
|
Russia
|
OOO WIBERG Rus
|
Russia
|
Platinum Absolut LLC
|
Russia
|
PTI Center LLC
|
Russia
|
PTI-NN LLC
|
Russia
|
Tekhnomol Soya Products LLC
|
Russia
|
Etol JVE d.o.o.
|
Serbia
|
International Flavors & Fragrances (Greater Asia) Pte. Ltd
|
Singapore
|
Lucas Meyer Cosmetics Asia Pte. Ltd.
|
Singapore
|
ENZYMOTEC SINGAPORE PTE LTD
|
Singapore
|
VAYA PHARMA PTE LTD
(19)
|
Singapore
|
ETOL SK, s.r.o.
|
Slovakia
|
FRUTAROM ETOL Tovarna arom in eteriènih olj d.o.o.
|
Slovenia
|
Etol Proizvodnja Arom D.O.O
|
Slovenia
|
VITIVA proizvodnja in storitve d.d. (Short name: VITIVA d.d.)
|
Slovenia
|
International Flavors and Fragrances IFF (South Africa)
|
South Africa
|
Aromco South Africa (PTY) Limited
|
South Africa
|
Frutarom South Africa (Proprietary) Limited
(20)
|
South Africa
|
Unique Flavors Proprietary Limited
|
South Africa
|
Unique Food Solutions Proprietary Limited
|
South Africa
|
International Flavors & Fragrances I.F.F. (España), S.A.
|
Spain
|
IFF Latin American Holdings (España), S.L.
|
Spain
|
IFF Benicarló, S.L.
|
Spain
|
Frutarom Spain, S.L.
|
Spain
|
Ingredientes Naturales Seleccionados, S.L.
|
Spain
|
Nutrafur S.A
|
Spain
|
International Flavors & Fragrances I.F.F. (Norden) AB
|
Sweden
|
Advanced Lipid AB
(21)
|
Sweden
|
Frutarom Switzerland Finance GBP AG
|
Switzerland
|
Frutarom Switzerland Ltd.
|
Switzerland
|
Frutarom Switzerland Finance CHF AG
|
Switzerland
|
Frutarom Switzerland Finance MXN AG
|
Switzerland
|
Frutarom Switzerland Finance USD AG
|
Switzerland
|
Muhlehof Gewurze AG
|
Switzerland
|
WIBERG Swiss GmbH
|
Switzerland
|
International Flavours & Fragrances (Thailand) Limited
|
Thailand
|
Maharej Food Company Limited
|
Thailand
|
IFF Aroma Esans Sanayi Ve Ticaret Anonim ªirketi
|
Turkey
|
IFF Turkey Aroma Ve Esans Ürünleri Satiº Ticaret Anonim Sirketi
|
Turkey
|
ETOL AROMA VE BAHARAT GIDA ÜRÜNLERI SAN.VE TIC.A.Þ.
(22)
|
Turkey
|
FRUTAROM GIDA ÜRÜNLERI SANAYI VE TICARET LIMITED SIRKETI
|
Turkey
|
Wiberg Baharat San.Tic.A.S
|
Turkey
|
Frutarom Etol Ukraine LLC.
|
Ukraine
|
PARMA FA
|
Ukraine
|
PTI-Ukraine LLC
|
Ukraine
|
TUV WIBERG Ukraine
|
Ukraine
|
International Flavors & Fragrances (Middle East) FZ-LLC
|
United Arab Emirates
|
International Flavors & Fragrances (Vietnam) Limited Liability Company
|
Vietnam
|
Western Flavors Fragrances Production Joint Stock Company
(23)
|
Vietnam
|
Bush Boake Allen Zimbabwe (Private) Limited
|
Zimbabwe
|
International Flavors & Fragrances (Zimbabwe) (Private) Ltd.
|
Zimbabwe
|
Asian Investments, Inc.
|
Delaware
|
Tastepoint Inc.
|
Delaware
|
IFF Augusta Holdings LLC
|
Delaware
|
IFF Chemical Holdings Inc.
|
Delaware
|
IFF Delaware Holdings, LLC
|
Delaware
|
IFF USA LLC
|
Delaware
|
IFF Worldwide LLC
|
Delaware
|
International Flavors & Fragrances (Caribe) Inc.
|
Delaware
|
International Flavors & Fragrances Holdings, LLC
|
Delaware
|
The Additive Advantage, LLC
|
Massachusetts
|
IFF International Inc.
|
New York
|
van Ameringen-Haebler, Inc.
|
New York
|
Bush Boake Allen Inc.
|
Virginia
|
Columbia PhytoTechnology LLC
|
Washington
|
Flavor Systems International, Inc.
|
Ohio
|
Frutarom USA Holding, Inc.
|
Delaware
|
Frutarom USA Inc.
|
New Jersey
|
International Frutarom Corporation
|
Delaware
|
Taura Natural Ingredients (North America) Inc.
|
Delaware
|
CitraSource Holdings, L.L.C.
|
Florida
|
Crestmont Investment Co.
|
Delaware
|
Eden Essentials, Inc.
|
New Jersey
|
FYMSA Real Estate LLC
|
Texas
|
Grow Company Inc.
|
New Jersey
|
PIASA USA
|
Texas
|
The Foote & Jenks Corporation
|
New Jersey
|
UFC America Inc.
|
Florida
|
W.W. Holdings Inc.
|
California
|
WIBERG Corporation of California
|
California
|
Enzymotec USA Inc.
|
New Jersey
|
VAYA PHARMA INC
|
Delaware
|
(1)
|
51% of the voting stock of BREMIL S/A INDÚSTRIA DE PRODUTOS ALIMENTÍCIOS is owned indirectly by the Company.
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(2)
|
80% of the voting stock of SDFLC Brasil Industria E Comercio Ltda is owned indirectly by the Company.
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(3)
|
50% of the voting stock of Distribution Dan-Hel Inc. is owned indirectly by the Company.
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(4)
|
33.3% of the voting stock of Via Viateur Inc is owned indirectly by the Company.
|
(5)
|
50% of the voting stock of WIBERG Corporation Inc. is owned indirectly by the Company.
|
(6)
|
93.2% of the voting stock of International Flavors & Fragrances (Hangzhou) Co., Ltd. is owned indirectly by the Company.
|
(7)
|
62.3% of the voting stock of Pucheng Yongfang Fragrance Technology Co., Ltd. is owned indirectly by the Company.
|
(8)
|
99.8% of the voting stock of FYMSA del Caribe, S.R.L (dormant) is owned indirectly by the Company.
|
(9)
|
55% of the voting stock of Frutarom - Etol (UK) Limited is owned indirectly by the Company.
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(10)
|
93.36% of the voting stock of International Flavours & Fragrances India Private Limited is owned indirectly by the Company.
|
(11)
|
90% of the voting stock of BSA India Food Ingr. P. Ltd. is owned indirectly by the Company.
|
(12)
|
99.99% of the voting stock of Frutarom Flavours (India) Private Limited is owned indirectly by the Company.
|
(13)
|
70% of the voting stock of Sonarome Private Limited is owned indirectly by the Company.
|
(14)
|
56.89% of the voting stock of Nutra-Lease Ltd. is owned indirectly by the Company.
|
(15)
|
50% of the voting stock of Algalo Industries Ltd. is owned indirectly by the Company.
|
(16)
|
98% of the voting stock of Frutarom Mexico S.A. is owned indirectly by the Company.
|
(17)
|
75% of the voting stock of Proveedores de Ingeniería Alimentaria, S.A. de C.V. ("PIASA") is owned indirectly by the Company.
|
(18)
|
75% of the voting stock of Amco SP Z.O.O is owned indirectly by the Company.
|
(19)
|
80% of the voting stock of VAYA PHARMA PTE LTD is owned indirectly by the Company.
|
(20)
|
95% of the voting stock of Frutarom South Africa (Proprietary) Limited is owned indirectly by the Company.
|
(21)
|
50% of the voting stock of Advanced Lipid AB is owned indirectly by the Company.
|
(22)
|
65% of the voting stock of ETOL AROMA VE BAHARAT GIDA ÜRÜNLERI SAN.VE TIC.A.Þ. is owned indirectly by the Company.
|
(23)
|
60% of the voting stock of Western Flavors Fragrances Production Joint Stock Company. is owned indirectly by the Company.
|
/s/ PricewaterhouseCoopers LLP
|
New York, New York
|
February 26, 2019
|
1.
|
I have reviewed this Annual Report on Form 10-K 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(s) 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(s) 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 Annual Report on Form 10-K 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(s) 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(s) 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
|
By:
|
/s/ Richard A. O'Leary
|
Name:
|
Richard A. O'Leary
|
Title:
|
Executive Vice President and Chief Financial Officer
|