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International Flavors & Fragrances Inc. (IFF - Analyst Report) reported second quarter 2013 adjusted earnings per share of $1.14, up 5.6% from a year-ago earnings of $1.08. Results, however, were four cents below the Zacks Consensus Estimate of $1.18.

Including one-time items, the company reported GAAP earnings per share of $1.24, up 15% year over year.

Revenue

International Flavors & Fragrances generated net sales of $757.6 million in the reported quarter, up 5% year over year and above the Zacks Consensus Estimate of $753.0 million. On a constant currency basis, revenue inched up 6% year over year.

The company operates in two segments: Flavors and Fragrances.

In the second quarter 2013, revenue from the Flavors business increased 5.0% year over year, on a constant currency basis, to $374.0 million and accounted for 49% of total revenue. Revenue from the Fragrances business was roughly 51.0% of total revenue amounting to $383.6 million, up 8% on a constant currency basis.

From a geographical perspective, revenue from North America increased 2% year over year, while results from EAME were up 5%, or up 6% on a constant currency basis. Revenue from Latin America increased 7% or 10% on a constant currency basis and from Greater Asia revenue was up 7% or 8% on a constant currency basis.

Margins

International Flavors & Fragrances’ gross margin in the second quarter increased by 230 basis points to 44.1% based on new business wins, effective product mix, decline in raw materials costs and exit from unprofitable businesses. Research and development expense, as a percentage of sales, increased by 70 basis points to settle at 8.5% while selling and administrative expense increased by 90 basis points to 16.5%.

Adjusted operating margin in the quarter was 19.2% compared with 18.3% in the year-ago quarter. Interest expense plummeted 21.2% to $12.9 million in the quarter.

Balance Sheet

Exiting the second quarter of 2013, International Flavors & Fragrances’ cash and cash equivalents stood at $365.9 million, up 22% from $300.0 million in the previous quarter. Long-term debt, net of current portions, increased 1.9% sequentially to $932.8 million.

Cash Flow

In the second quarter 2013, International Flavors & Fragrances generated $99.3 million, up from $82.7 million in the year-ago quarter. Capital spending also escalated and totalled $30.8 million in the second quarter versus $25.1 million in the year-ago quarter.

During the second quarter 2013, International Flavors & Fragrances paid dividends amounting to $27.7 million.

International Flavors & Fragrances is one of the leading companies engaged in the creation and manufacture of fragrance and flavoring products in the United States and internationally. The company currently has a $6.8 billion market capitalization.

The stock currently carries a Zacks Rank #3 (Hold). Other stocks to watch out for in the industry are Inter Parfums Inc. (IPAR - Snapshot Report) and Nu Skin Enterprises Inc. (NUS - Snapshot Report), each with a Zacks Rank #1 (Strong Buy) while The Female Health Company , comes with a Zacks Rank #2 (Buy).
 

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