10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                         

Commission file number 1-4858

 INTERNATIONAL FLAVORS & FRAGRANCES INC.

(Exact name of registrant as specified in its charter)

New York	13-1432060
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

521 West 57th Street, New York, NY 10019-2960

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (212) 765-5500

 Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value 12 1/2¢ per share	IFF	New York Stock Exchange
6.00% Tangible Equity Units	IFFT	New York Stock Exchange
0.500% Senior Notes due 2021	IFF 21	New York Stock Exchange
1.750% Senior Notes due 2024	IFF 24	New York Stock Exchange
1.800% Senior Notes due 2026	IFF 26	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No   ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒   No   ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes   ☐ No  ☒ 

Number of shares outstanding as of May 1, 2020: 106,851,144

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

INTERNATIONAL FLAVORS & FRAGRANCES INC.

CONSOLIDATED BALANCE SHEET

(Unaudited)

(DOLLARS IN THOUSANDS)	March 31, 2020			December 31, 2019
ASSETS
Current Assets:
Cash and cash equivalents	$	433,246		$	606,823
Restricted cash	9,699			17,122
Trade receivables (net of allowances of $18,728 and $16,428, respectively)	943,114			876,197
Inventories: Raw materials	553,433			565,071
Work in process	48,297			44,532
Finished goods	474,183			513,465
Total Inventories	1,075,913			1,123,068
Prepaid expenses and other current assets	356,322			319,334
Total Current Assets	2,818,294			2,942,544
Property, plant and equipment, at cost	2,632,441			2,690,768
Accumulated depreciation	(1,293,317		)	(1,303,848		)
	1,339,124			1,386,920
Goodwill	5,267,559			5,497,596
Other intangible assets, net	2,677,446			2,851,935
Other assets	586,653			608,416
Total Assets	$	12,689,076		$	13,287,411
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Bank borrowings, overdrafts, and current portion of long-term debt	$	385,569		$	384,958
Accounts payable	456,156			510,372
Accrued payroll and bonus	87,083			102,704
Dividends payable	80,062			80,038
Other current liabilities	418,125			474,118
Total Current Liabilities	1,426,995			1,552,190
Long-term debt	3,946,905			3,997,438
Retirement liabilities	261,512			265,370
Deferred income taxes	616,084			641,456
Other liabilities	494,193			502,366
Total Other Liabilities	5,318,694			5,406,630
Commitments and Contingencies (Note 15)
Redeemable noncontrolling interests	102,713			99,043
Shareholders’ Equity:
Common stock 12 1/2¢ par value; 500,000,000 shares authorized; 128,526,137 shares issued as of March 31, 2020 and December 31, 2019; and 106,812,257 and 106,787,299 shares outstanding as of March 31, 2020 and December 31, 2019, respectively	16,066			16,066
Capital in excess of par value	3,835,265			3,823,152
Retained earnings	4,162,347			4,117,804
Accumulated other comprehensive loss	(1,164,208		)	(716,894		)
Treasury stock, at cost (21,713,880 and 21,738,838 shares as of March 31, 2020 and December 31, 2019, respectively)	(1,021,620		)	(1,022,824		)
Total Shareholders’ Equity	5,827,850			6,217,304
Noncontrolling interest	12,824			12,244
Total Shareholders’ Equity including Noncontrolling interest	5,840,674			6,229,548
Total Liabilities and Shareholders’ Equity	$	12,689,076		$	13,287,411

See Notes to Consolidated Financial Statements

1

INTERNATIONAL FLAVORS & FRAGRANCES INC.

CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE (LOSS) INCOME

(Unaudited)

	Three Months Ended
	March 31,
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)	2020			2019
Net sales	$	1,347,317		$	1,297,402
Cost of goods sold	781,450			766,143
Gross profit	565,867			531,259
Research and development expenses	85,909			90,596
Selling and administrative expenses	229,714			213,182
Amortization of acquisition-related intangibles	48,350			47,625
Restructuring and other charges, net	4,918			16,174
Losses (gains) on sales of fixed assets	754			(188		)
Operating profit	196,222			163,870
Interest expense	32,140			36,572
Other loss (income), net	10,574			(7,278		)
Income before taxes	153,508			134,576
Taxes on income	26,297			23,362
Net income	127,211			111,214
Net income attributable to noncontrolling interests	2,604			2,385
Net income attributable to IFF stockholders	124,607			108,829
Other comprehensive (loss) income, after tax:
Foreign currency translation adjustments	(452,278		)	42,377
Gains (losses) on derivatives qualifying as hedges	1,447			(97		)
Pension and postretirement net liability	3,517			2,593
Other comprehensive (loss) income	(447,314		)	44,873
Comprehensive (loss) income attributable to IFF stockholders	$	(322,707	)	$	153,702
Net income per share - basic	$	1.16		$	0.97
Net income per share - diluted	$	1.15		$	0.96
Average number of shares outstanding - basic	112,082			111,864
Average number of shares outstanding - diluted	113,594			113,389

See Notes to Consolidated Financial Statements

2

INTERNATIONAL FLAVORS & FRAGRANCES INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020			2019
Cash flows from operating activities:
Net income	$	127,211		$	111,214
Adjustments to reconcile to net cash provided by operating activities
Depreciation and amortization	80,595			81,775
Deferred income taxes	2,221			(12,389		)
Losses (gains) on sale of assets	754			(188		)
Stock-based compensation	8,624			7,604
Pension contributions	(5,397		)	(3,956		)
Changes in assets and liabilities, net of acquisitions:
Trade receivables	(133,291		)	(55,935		)
Inventories	(568		)	(24,719		)
Accounts payable	(31,635		)	8,988
Accruals for incentive compensation	(19,340		)	(36,969		)
Other current payables and accrued expenses	(65,158		)	(11,321		)
Other assets	42,462			(9,978		)
Other liabilities	10,467			(6,894		)
Net cash provided by operating activities	16,945			47,232
Cash flows from investing activities:
Cash paid for acquisitions, net of cash received	—			(33,895		)
Additions to property, plant and equipment	(48,294		)	(57,609		)
Proceeds from life insurance contracts	1,739			1,890
Proceeds from disposal of assets	3,806			3,970
Contingent consideration paid	—			(4,655		)
Net cash used in investing activities	(42,749		)	(90,299		)
Cash flows from financing activities:
Cash dividends paid to shareholders	(80,038		)	(77,779		)
Increase in revolving credit facility and short term borrowings	169			2,895
Repayments on debt	(11,584		)	(36,156		)
Contingent consideration paid	(327		)	—
Purchases of redeemable noncontrolling interest	(14,173		)	—
Proceeds from issuance of stock in connection with stock options	—			200
Employee withholding taxes paid	(1,275		)	(1,339		)
Net cash used in financing activities	(107,228		)	(112,179		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(42,529		)	3,853
Net change in cash, cash equivalents and restricted cash	(175,561		)	(151,393		)
Cash, cash equivalents and restricted cash at beginning of year	623,945			648,522
Cash, cash equivalents and restricted cash at end of period	$	448,384		$	497,129
Supplemental Disclosures:
Interest paid, net of amounts capitalized	$	41,755		$	48,506
Income taxes paid	32,636			33,326
Accrued capital expenditures	19,013			14,241

See Notes to Consolidated Financial Statements

3

INTERNATIONAL FLAVORS & FRAGRANCES INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(Unaudited)

(DOLLARS IN THOUSANDS)	Common stock		Capital in excess of par value			Retained earnings			Accumulated  other comprehensive (loss) income			Treasury stock					Non-controlling interest		Total
												Shares		Cost
Balance at January 1, 2019	$	16,066	$	3,793,609		$	3,956,221		$	(702,227	)	(21,906,935	)	$	(1,030,718	)	$	10,423	$	6,043,374
Net income						108,829											844		109,673
Adoption of ASU 2016-02						23,094													23,094
Adoption of ASU 2017-12						981													981
Cumulative translation adjustment									42,377										42,377
Losses on derivatives qualifying as hedges; net of tax $44									(97		)								(97		)
Pension liability and postretirement adjustment; net of tax $836									2,593										2,593
Cash dividends declared ($0.73 per share)						(77,799		)											(77,799		)
Stock options/SSARs			3,424									13,978		660					4,084
Vested restricted stock units and awards			(2,405		)							13,401		629					(1,776		)
Stock-based compensation			7,604																7,604
Redeemable NCI			370																370
Balance at March 31, 2019	$	16,066	$	3,802,602		$	4,011,326		$	(657,354	)	(21,879,556	)	$	(1,029,429	)	$	11,267	$	6,154,478

(DOLLARS IN THOUSANDS)	Common stock		Capital in excess of par value			Retained earnings			Accumulated  other comprehensive (loss) income			Treasury stock					Non-controlling interest			Total
												Shares		Cost
Balance at January 1, 2020	$	16,066	$	3,823,152		$	4,117,804		$	(716,894	)	(21,738,838	)	$	(1,022,824	)	$	12,244		$	6,229,548
Net income						124,607											617			125,224
Cumulative translation adjustment									(452,278		)									(452,278		)
Gains on derivatives qualifying as hedges; net of tax $(176)									1,447											1,447
Pension liability and postretirement adjustment; net of tax $(1,022)									3,517											3,517
Cash dividends declared ($0.75 per share)						(80,062		)												(80,062		)
Stock options/SSARs			(490		)							13,763		672						182
Vested restricted stock units and awards			(1,827		)							11,195		532						(1,295		)
Stock-based compensation			8,624																	8,624
Redeemable NCI			5,806																	5,806
Dividends paid on noncontrolling interest and Other						(2		)									(37		)	(39		)
Balance at March 31, 2020	$	16,066	$	3,835,265		$	4,162,347		$	(1,164,208	)	(21,713,880	)	$	(1,021,620	)	$	12,824		$	5,840,674

See Notes to Consolidated Financial Statements

4

INTERNATIONAL FLAVORS & FRAGRANCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.    NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These interim statements and related management’s discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the related notes and management’s discussion and analysis of results of operations, liquidity and capital resources included in our 2019 Annual Report on Form 10-K (“2019 Form 10-K”). These interim statements are unaudited. The year-end balance sheet data included in this Form 10-Q was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles in the United States of America. We have historically operated and continue to operate on a 52/53 week fiscal year ending on the Friday closest to the last day of the quarter. For ease of presentation, March 31 and December 31 are used consistently throughout this Form 10-Q and these interim financial statements and related notes to represent the period-end dates. For the 2020 and 2019 quarters, the actual closing dates were April 3 and March 29, respectively. The unaudited interim financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair statement of the results for the periods presented. When used herein, the terms “IFF,” the “Company,” “we,” “us” and “our” mean International Flavors & Fragrances Inc. and its consolidated subsidiaries.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. The inputs into our judgments and estimates consider the current economic implications of COVID-19 on our critical and significant accounting estimates, including estimates associated with future cash flows that are used in assessing the risk of impairment of certain long lived assets. Actual results could differ from those estimates.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Company's statement of cash flows periods ended March 31, 2020 and March 31, 2019 to the amounts reported in the Company's balance sheet as at March 31, 2020, December 31, 2019, March 31, 2019 and December 31, 2018.

(DOLLARS IN THOUSANDS)	March 31, 2020		December 31, 2019		March 31, 2019		December 31, 2018
Current assets
Cash and cash equivalents	$	433,246	$	606,823	$	483,504	$	634,897
Restricted cash	9,699		17,122		13,625		13,625
Noncurrent assets
Restricted cash included in Other assets	5,439		—		—		—
Cash, cash equivalents and restricted cash	$	448,384	$	623,945	$	497,129	$	648,522

Accounts Receivable

The Company has various factoring agreements in the U.S. and The Netherlands under which it can factor up to approximately $100 million in receivables. In addition, the Company has factoring agreements sponsored by certain customers. Under all of the arrangements, the Company sells the receivables on a non-recourse basis to unrelated financial institutions and accounts for the transactions as a sale of receivables. The applicable receivables are removed from the Company's Consolidated Balance Sheet when the cash proceeds are received by the Company.

Through these factoring programs, the Company removed $200.3 million and $205.7 million of receivables from its balance sheet for the periods ended March 31, 2020 and December 31, 2019, respectively.

The impact on cash provided by operations from participating in these programs was a decrease of $5.4 million for the three months ended March 31, 2020 and an increase of $5.2 million for the three months ended March 31, 2019.

The cost of participating in these programs was $1.2 million for both of the periods ending March 31, 2020 and 2019.

5

Revenue Recognition

The Company recognizes revenue when control of the promised goods is transferred to its customers in an amount that reflects the consideration it expects to be entitled to in exchange for those goods. Sales, value added, and other taxes the Company collects are excluded from revenues. The Company receives payment in accordance with standard customer terms.

The following table presents the Company's revenues disaggregated by product categories:

	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020		2019
Taste
Flavor compounds	$	576,368	$	567,314
Savory solutions	155,764		136,337
Inclusions	30,146		28,633
Nutrition and specialty ingredients	43,955		44,208
Flavor ingredients	24,089		28,310
Total Taste	830,322		804,802
Scent
Fine fragrances	94,150		106,074
Consumer fragrance	314,028		283,221
Fragrance ingredients	108,817		103,305
Total Scent	516,995		492,600
Total revenues	$	1,347,317	$	1,297,402

Contract Assets

With respect to a small number of contracts for the sale of compounds, the Company has an “enforceable right to payment for performance to date” and as the products do not have an alternative use, the Company recognizes revenue for these contracts over time and records a contract asset using the output method. The output method recognizes revenue on the basis of direct measurements of the value to the customer of the goods or services transferred to date relative to the remaining goods or services promised under the contract.

The following table reflects the balances in the Company's accounts receivable, contract assets, and contract liabilities for the periods ended March 31, 2020 and December 31, 2019:

(DOLLARS IN THOUSANDS)	March 31, 2020		December 31, 2019
Receivables (included in Trade receivables)	$	961,842	$	892,625
Contract asset - Short term	1,951		2,736
Contract liabilities - Short term	11,379		11,107

Recent Accounting Pronouncements

In March 2020, the FASB issued Accounting Standards Update ("ASU") 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU is intended to simplify various aspects related to the cessation of reference rates in certain financial markets that would otherwise create modification accounting or changes in estimate. This guidance is effective for March 12, 2020 through December 31, 2022. The Company has not adopted any of the optional expedients or exceptions through March 31, 2020 but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The ASU is intended to simplify various aspects related to accounting for income taxes. This guidance is effective for fiscal years beginning after December 15, 2020, and for interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, “Intangibles - Goodwill and Other - Internal - Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service

6

Contract (a consensus of the FASB Emerging Issues Task Force).” The ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This guidance is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years, with early adoption permitted. The Company adopted the guidance effective the first day of its 2020 fiscal year. The adoption did not have an impact on its consolidated financial statements but may impact the Company in the future as and when it enters into cloud computing arrangements.

In August 2018, the FASB issued ASU 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans (Subtopic 715-20)", which modifies the disclosure requirements on company-sponsored defined benefit plans. The ASU is effective for fiscal years beginning after December 15, 2020 on a retrospective basis to all periods presented. Early adoption is permitted. The Company adopted the guidance effective the first day of its 2020 fiscal year. The adoption did not have an impact on its Consolidated Financial Statements and will have a minimal impact on its disclosures in future periods.

Adoption of Standard Related to Expected Credit Losses

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", with subsequent amendments, which requires issuers to measure expected credit losses for financial assets based on historical experience, current conditions and reasonable and supportable forecasts. As such, an entity will use forward-looking information to estimate credit losses, which may result in earlier recognition of losses.

The Company adopted the guidance effective the first day of its 2020 fiscal year and performed an evaluation of the applicable criteria, including the aging of its trade receivables, recent write-off history and other factors related to future macroeconomic conditions. As a result of the evaluation, the Company determined that no adjustment would be required to the level of its allowances for bad debts or to the carrying value of any other financial asset.

The Company is exposed to credit losses primarily through its sales of products. To determine the appropriate allowance for expected credit losses, the Company considers certain credit quality indicators, such as aging, collection history, and creditworthiness of debtors. Regional and Global Credit committees review and approve specific customer allowance reserves. The allowance for expected credit losses is primarily based on two primary factors: i) the aging of the different categories of trade receivables, and ii) a specific reserve for accounts identified as uncollectable.

The Company also considers current and future economic conditions in the determination of the allowance. At March 31, 2020, the Company reported $961.8 million of trade receivables, net of allowances of $18.7 million. Based on an aging analysis at March 31, 2020, approximately 87% of our accounts receivable were current based on the payment terms of the invoice. Receivables that are past due by over 365 days account for less than 1% of our accounts receivable.

The following is a rollforward of the Company's allowances for bad debts for the three months ended March 31, 2020:

(DOLLARS IN THOUSANDS)	Allowances for Bad Debts
Balance at December 31, 2019	$	16,428
Bad debt expense	4,751
Write-offs	(1,301		)
Foreign exchange	(1,150		)
Balance at March 31, 2020	$	18,728

The Company adjusted the amount of the allowances for bad debts as of December 31, 2019 to reflect the correct classification of amounts between the allowances for bad debts and Trade Receivables. The adjustment was for $8.2 million and had the effect of increasing both the allowances for bad debts and Trade Receivables.

During the first quarter of 2020, the Company increased its allowances for bad debts by approximately $3.0 million to reflect higher expected future write-offs of receivables due to the impact of the COVID-19 pandemic and its impact on the liquidity of certain customers.

7

NOTE 2. NET INCOME PER SHARE

A reconciliation of the shares used in the computation of basic and diluted net income per share is as follows: 

	Three Months Ended March 31,
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)	2020		2019
Net Income
Net income attributable to IFF stockholders	$	124,607	$	108,829
Add: Reduction in redemption value of redeemable noncontrolling interests in excess of earnings allocated	5,806		370
Net income available to IFF stockholders	$	130,413	$	109,199
Shares
Weighted average common shares outstanding (basic)(1)	112,082		111,864
Adjustment for assumed dilution(2):
Stock options and restricted stock awards	349		362
SPC portion of TEUs	1,163		1,163
Weighted average shares assuming dilution (diluted)	113,594		113,389
Net Income per Share
Net income per share - basic	$	1.16	$	0.97
Net income per share - diluted	1.15		0.96

_______________________ 

(1) For the three months ended March 31, 2020 and 2019, the tangible equity units (“TEUs”) were assumed to be outstanding at the minimum settlement amount 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.

The Company declared a quarterly dividend to its shareholders of $0.75 and $0.73 for the three months ended March 31, 2020 and 2019, respectively.

There were no stock options or stock-settled appreciation rights (“SSARs”) excluded from the computation of diluted net income per share for the three months ended March 31, 2020 and 2019.

The Company issued 16,500,000 TEUs, consisting of a prepaid stock purchase contract ("SPC") and a senior amortizing note, for net proceeds of $800.2 million on September 17, 2018. For purposes of calculating basic net income per share, the SPCs were assumed to be settled at the minimum settlement amount of 0.3134 shares per SPC for March 31, 2020 and 2019, respectively. For purposes of calculating diluted earnings per share, the SPCs were assumed to be settled at a conversion factor not to exceed 0.3839 on March 31, 2020 and 2019, respectively. The SPC conversion factor is based on the 20 day volume-weighted average price (“VWAP”) per share of the Company’s common stock. Per the TEU agreement, the maximum settlement amount is 0.3839 shares per SPC.

The Company has issued shares of purchased restricted common stock and purchased restricted common stock units (collectively “PRSUs”) which contain rights to nonforfeitable dividends while these shares are outstanding and thus are considered participating securities. Such securities are required to be included in the computation of basic and diluted earnings per share pursuant to the two-class method. The Company did not present the two-class method since the difference between basic and diluted net income per share for both unrestricted common shareholders and PRSU shareholders was less than $0.01 per share for each period presented, and the number of PRSUs outstanding as of March 31, 2020 and 2019 was immaterial. Net income allocated to such PRSUs was $0.2 million for both the three months ended March 31, 2020 and 2019.

NOTE 3.    ACQUISITIONS

Pending Transaction with Nutrition & Biosciences, Inc.

On December 15, 2019, the Company entered into definitive agreements with DuPont de Nemours, Inc. (“DuPont”), including an Agreement and Plan of Merger, pursuant to which DuPont will transfer its nutrition and biosciences business to Nutrition & Biosciences, Inc., a Delaware corporation and wholly owned subsidiary of DuPont (“N&B”), and N&B will merge with and into a wholly owned subsidiary of IFF in exchange for a number of shares of IFF common stock, par value $0.125 per

8

share (“IFF Common Stock”) (collectively, the “DuPont N&B Transaction”). In connection with the transaction, DuPont will receive a one-time $7.3 billion special cash payment (the “Special Cash Payment”), subject to certain adjustments. As a result of the DuPont N&B Transaction, holders of DuPont’s common stock will own approximately 55.4% of the outstanding shares of IFF on a fully diluted basis.

Completion of the DuPont N&B Transaction is subject to various closing conditions, including, among other things, (1) approval by IFF’s shareholders of the issuance of IFF Common Stock in connection with the transaction; (2) the effectiveness of the registration statements to be filed with the Securities and Exchange Commission pursuant to the Merger Agreement; and (3) the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (which waiting period has expired), and obtaining certain other consents, authorizations, orders or approvals from governmental authorities. We expect that the transaction will close in early 2021.

On December 15, 2019, IFF and N&B entered into a commitment letter which provides $7.5 billion in an aggregate principal amount of senior unsecured bridge term loans (the "Bridge Loans"). On January 17, 2020, N&B entered into a term loan credit agreement providing for unsecured term loan facilities in an aggregate principal amount of $1.25 billion (the “Term Loan Facilities”), which reduced the commitments under the Bridge Loans commitment letter by a corresponding amount. N&B will be the initial borrower under the remaining $6.25 billion tranche of the 364-day senior unsecured bridge facility (the “Bridge Facility”) (or, if applicable, any replacement debt financing), which, together with the Term Loan Facilities, will be used to finance the Special Cash Payment and to pay related fees and expenses. Following the consummation of the merger, all obligations of N&B with respect to the Term Loan Facilities and the Bridge Facility (if any) or, if applicable, the replacement debt financing, will be guaranteed by IFF (or at the election of N&B and IFF, assumed by IFF).

2019 Acquisition Activity

During the second quarter of 2019, the Company acquired the remaining 50% interest in an equity method investee located in Canada. The purchase of the additional interest increased the Company's ownership of the investee to 100%. The purchase price for the remaining 50% was approximately $37 million, including cash and an accrual for the amount expected to be paid in contingent consideration. The Company began to consolidate the results of the acquired entity from the date on which it acquired the remaining 50% interest during the second quarter of 2019. Goodwill of approximately $30 million and intangible assets of $20 million were recorded in connection with the acquisition.

During the first quarter of 2019, the Company acquired 70% of a company in Europe and increased its ownership of an Asian company from 49% to 60%. The total purchase price for the two acquisitions made in the first quarter of 2019 was $52 million, excluding cash acquired and including $19 million of contingent consideration and deferred payments. The purchase price allocations have been performed and resulted in goodwill of approximately $47 million and intangible assets of $28 million.

During the first quarter of 2020, the Company completed the purchase price allocations for all three of the transactions that were made during 2019. As a result of finalizing the purchase price allocations, adjustments were recorded to increase fixed assets by $13 million and customer relationships and other intangible assets by $5 million and to decrease goodwill by $15 million. The income statement impact of the finalization of purchase accounting was not material.

Pro forma information has not been presented as the entities acquired in 2019 were not material.

NOTE 4.    RESTRUCTURING AND OTHER CHARGES, NET

Restructuring and other charges primarily consist of separation costs for employees including severance, outplacement and other benefit ("Severance") costs as well as costs related to plant closures, the costs of accelerated depreciation of fixed assets associated with plants ("Fixed asset write-down") and all other related restructuring ("Other") costs. All restructuring and other charges, net expenses are separately stated on the Consolidated Statement of Comprehensive (Loss) Income.

9

Frutarom Integration Initiative

In connection with the acquisition of Frutarom, the Company began to execute an integration plan that, among other initiatives, seeks to optimize its manufacturing network. As part of the Frutarom Integration Initiative, the Company expects to close approximately 35 manufacturing sites over the next twelve months with most of the closures targeted to occur before the end of fiscal 2021. During 2019, the Company announced the closure of ten facilities, of which six facilities are in Europe, Africa and Middle East, two facilities in Latin America, and one facility in each North America and Greater Asia regions. During the three months ended March 31, 2020, the Company announced the closure of four facilities, of which two facilities are in Europe, Africa and Middle East, one facility in Latin America, and one facility in North America. Since the inception of the initiative to date, the Company has expensed $15.3 million. Total costs for the program are expected to be approximately $60 million including cash and non-cash items.

2019 Severance Program

During the year ended December 31, 2019, the Company incurred severance charges related to approximately 190 headcount reductions, excluding those previously mentioned under the Frutarom Integration Initiative. The headcount reductions primarily related to the Scent business unit with additional amounts related to headcount reductions in all business units associated with the establishment of a new shared service center in Europe. Since the inception of the program, the Company has expensed $21.3 million to date. Total costs for the program are expected to be approximately $25 million.

2017 Productivity Program

In connection with the 2017 Productivity Program, the Company recorded $24.5 million of charges related to personnel costs and lease termination costs since the program's inception to date. Total costs for the program are expected to be approximately $25 million.

Changes in Restructuring Liabilities

Changes in restructuring liabilities by program during the three months ended March 31, 2020 were as follows:

(DOLLARS IN THOUSANDS)	Balance at December 31, 2019		Additional Charges (Reversals), Net			Non-Cash Charges			Cash Payments			Balance at March 31, 2020
2017 Productivity Program
Severance	$	1,106	$	—		$	—		$	(146	)	$	960
Other(1)	88		—			—			—			88
Frutarom Integration Initiative
Severance	4,038		1,869			—			(928		)	4,979
Fixed asset write down	—		3,366			(3,366		)	—			—
Other(1)	2,485		(317		)	—			1			2,169
2019 Severance Plan
Severance	12,897		—			—			(1,048		)	11,849
Other(1)	471		—			—			—			471
Total restructuring	$	21,085	$	4,918		$	(3,366	)	$	(2,121	)	$	20,516

_______________________ 

(1) Other includes supplier contract termination costs, consulting and advisory fees.

10

Charges by Segment

The following table summarizes the total amount of costs incurred in connection with these restructuring programs by segment:

	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020		2019
Taste	$	4,918	$	2,553
Scent	—		10,900
Shared IT & Corporate Costs	—		2,721
Total Restructuring and other charges, net	$	4,918	$	16,174

NOTE 5. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Goodwill

Movements in goodwill during 2020 were as follows:

(DOLLARS IN THOUSANDS)	Goodwill
Balance at December 31, 2019	$	5,497,596
Measurement period adjustments(1)	(15,283		)
Foreign exchange	(214,754		)
Balance at March 31, 2020	$	5,267,559

_______________________ 

(1) Measurement period adjustments relate to adjustments recorded in connection with completing the purchase price allocation related to the 2019 Acquisition Activity. See Note 3 for details.

Reallocation of goodwill

In the first quarter of 2020, in connection with the reorganization of the Company's reporting structure, certain entities were moved between reporting units. As a result of the movements, Goodwill was reallocated between reporting units as follows:

(DOLLARS IN THOUSANDS)	Increase (decrease) to Goodwill
Cosmetic active ingredients	$	110,788
Natural Product Solutions	(78,945		)
Fine Ingredients	(29,221		)
Taste	(2,622		)
Total	$	—

See Note 11 for further information on the reorganization.

11

Other Intangible Assets

Other intangible assets, net consisted of the following amounts: 

	March 31,			December 31,
(DOLLARS IN THOUSANDS)	2020			2019
Asset Type
Customer relationships	$	2,561,536		$	2,653,446
Trade names & patents	174,134			178,968
Technological know-how	455,226			468,256
Other	22,410			40,362
Total carrying value	3,213,306			3,341,032
Accumulated Amortization
Customer relationships	(348,509		)	(302,047		)
Trade names & patents	(30,595		)	(27,213		)
Technological know-how	(137,162		)	(135,269		)
Other	(19,594		)	(24,568		)
Total accumulated amortization	(535,860		)	(489,097		)
Other intangible assets, net	$	2,677,446		$	2,851,935

Amortization

Amortization expense was $48.4 million and $47.6 million for the three months ended March 31, 2020 and 2019, respectively.

Amortization expense for the next five years is expected to be as follows:

(DOLLARS IN THOUSANDS)	2020		2021		2022		2023		2024
Estimated future intangible amortization expense	$	135,577	$	178,000	$	174,245	$	174,135	$	174,135

NOTE 6.     OTHER ASSETS

Other assets consisted of the following amounts: 

(DOLLARS IN THOUSANDS)	March 31, 2020		December 31, 2019
Operating lease right-of-use assets	$	287,301	$	287,870
Deferred income taxes	96,109		125,552
Overfunded pension plans	89,819		85,657
Cash surrender value of life insurance contracts	43,694		47,578
Other(a)	69,730		61,759
Total	$	586,653	$	608,416

_______________________ 

(a) Includes finance lease right-of-use assets, restricted cash, land usage rights in China and long term deposits.

12

NOTE 7.    DEBT

Debt consisted of the following:

(DOLLARS IN THOUSANDS)	Effective Interest Rate		March 31, 2020			December 31, 2019
2020 Notes(1)	3.69	%	$	299,598		$	299,381
2021 Euro Notes(1)	0.82	%	327,408			334,561
2023 Notes(1)	3.30	%	299,080			299,004
2024 Euro Notes(1)	1.88	%	546,009			558,124
2026 Euro Notes(1)	1.93	%	870,689			890,183
2028 Notes(1)	4.57	%	396,766			396,688
2047 Notes(1)	4.44	%	493,676			493,571
2048 Notes(1)	5.12	%	786,050			785,996
Term Loan(1)	3.65	%	239,665			239,621
Amortizing Notes(1)	6.09	%	70,882			82,079
Bank overdrafts and other			2,594			3,131
Deferred realized gains on interest rate swaps			57			57
Total debt			4,332,474			4,382,396
Less: Short-term borrowings(2)			(385,569		)	(384,958		)
Total Long-term debt			$	3,946,905		$	3,997,438

_______________________ 

(1) Amount is net of unamortized discount and debt issuance costs.

(2) Includes bank borrowings, overdrafts and current portion of long-term debt.

NOTE 8.  LEASES

The Company has operating leases for corporate offices, manufacturing facilities, research and development facilities, and certain transportation and office equipment, all of which are operating leases. The Company's leases have remaining lease terms of up to 40 years, some of which include options to extend the leases for up to 5 years.

The components of lease expense were as follows:

	Three Months Ended		Three Months Ended
(DOLLARS IN THOUSANDS)	March 31, 2020		March 31, 2019
Operating lease cost	$	12,443	$	12,469
Finance lease cost	753		—

Supplemental cash flow information related to leases was as follows:

	Three Months Ended		Three Months Ended
(DOLLARS IN THOUSANDS)	March 31, 2020		March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	12,331	$	11,076
Operating cash flows for finance leases	33		—
Financing cash flows for finance leases	721		—
Right-of-use assets obtained in exchange for lease obligations
Operating leases	10,968		9,249
Finance leases	1,930		452

13

NOTE 9. INCOME TAXES

Uncertain Tax Positions

As of March 31, 2020, the Company had $71.4 million of unrecognized tax benefits recorded in Other liabilities and $0.7 million recorded to Other current liabilities. If these unrecognized tax benefits were recognized, the effective tax rate would be affected.

At March 31, 2020, the Company had accrued interest and penalties of $14.2 million classified in Other liabilities and less than $0.1 million classified in Other current liabilities.

As of March 31, 2020, the Company’s aggregate provisions for uncertain tax positions, including interest and penalties, was $86.4 million associated with tax positions asserted in various jurisdictions, none of which is individually material.

The Company regularly repatriates earnings from non-U.S. subsidiaries. As the Company repatriates these funds to the U.S., they will be required to pay income taxes in certain U.S. states and applicable foreign withholding taxes during the period when such repatriation occurs. Accordingly, as of March 31, 2020, the Company had a deferred tax liability of $42.6 million for the effect of repatriating the funds to the U.S., attributable to various non-U.S. subsidiaries. There is no deferred tax liability associated with non-U.S. subsidiaries where we intend to indefinitely reinvest the earnings to fund local operations and/or capital projects.

The Company has ongoing income tax audits and legal proceedings which are at various stages of administrative or judicial review. In addition, the Company has open tax years with various taxing jurisdictions that range primarily from 2010 to 2019. Based on currently available information, the Company does not believe the outcome of any of these tax audits and other tax positions related to open tax years, when finalized, will have a material impact on its results of operations.

The Company also has other ongoing tax audits and legal proceedings that relate to indirect taxes, such as value-added taxes, sales and use taxes and property taxes, which are discussed in Note 15.

Effective Tax Rate

The effective tax rate for the three months ended March 31, 2020 was 17.1% compared with 17.4% for the three months ended March 31, 2019. The quarter-over-quarter decrease is primarily due to lower repatriation costs and the reversal of loss provisions, partially offset by an unfavorable mix of earnings.

NOTE 10.    STOCK COMPENSATION PLANS

The Company has various plans under which its officers, senior management, other key employees and directors may be granted equity-based awards. Equity awards outstanding under the plans include PRSUs, restricted stock units ("RSUs"), SSARs and Long-Term Incentive Plan awards. Liability-based awards outstanding under the plans are cash-settled RSUs.

Stock-based compensation expense and related tax benefits were as follows:

	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020			2019
Equity-based awards	$	8,624		$	7,604
Liability-based awards	(639		)	730
Total stock-based compensation expense	7,985			8,334
Less: Tax benefit	(1,394		)	(1,382		)
Total stock-based compensation expense, after tax	$	6,591		$	6,952

NOTE 11. SEGMENT INFORMATION

During the first quarter of 2020, the Company reorganized its reporting structure and combined substantially all of the components of the former Frutarom reportable operating segment into the former Taste reportable operating segment. Prior year amounts have been recast to conform to the current year reporting structure. As a result of the reorganization, the Company is now organized into two reportable operating segments, Taste and Scent; these segments align with the internal structure used to manage these businesses.

Taste is comprised of a diversified portfolio across flavor compounds, savory solutions, inclusions and nutrition and specialty ingredients. Flavor compounds provide unique flavors that are ultimately used by IFF's customers in savory products,

14

beverages, sweets, and dairy products. Savory solutions include marinades or powder blends of flavors, natural colors, seasonings, functional ingredients and natural anti-oxidants that are primarily designed for the meat and fish industry. Inclusions provide taste and texture by, among other things, combining flavorings with fruit, vegetables, and other natural ingredients for a wide range of food products, such as health snacks, baked goods, cereals, pastries, ice cream and other dairy products. Nutrition and specialty ingredients primarily consist of natural health ingredients, natural food protection, natural colors and flavor ingredients. The flavor ingredients market includes natural flavor extracts, specialty botanical extracts, distillates, essential oils, citrus products, aroma chemicals, and natural gums and resins. Such ingredients are used for food, beverage, and flavors and are often sold directly to food and beverage manufacturers who use them in producing consumer products.

Scent is comprised of (1) Fragrance Compounds, which are ultimately used by our customers in two broad categories: Fine Fragrances, including perfumes and colognes, and Consumer Fragrances, including fragrance compounds for personal care (e.g., soaps), household products (e.g., detergents and cleaning agents) and beauty care, including toiletries; (2) Fragrance Ingredients, consisting of synthetic and natural ingredients that can be combined with other materials to create unique fine fragrance and consumer compounds; and (3) Cosmetic Active Ingredients, consisting of active and functional ingredients, botanicals and delivery systems to support our customers’ cosmetic and personal care product lines. Major fragrance customers include the cosmetics industry, including perfume and toiletries manufacturers, and the household products industry, including manufacturers of soaps, detergents, fabric care, household cleaners and air fresheners.

The Company's Chief Operating Decision Maker evaluates the performance of these reportable operating segments based on segment profit which is defined as operating profit before restructuring, global expenses (as discussed below) and certain non-recurring items, Interest expense, Other income (expense), net and Taxes on income.

The Global expenses caption represents corporate and headquarter-related expenses which include legal, finance, human resources, certain incentive compensation expenses and other R&D and administrative expenses that are not allocated to individual reportable operating segments.

Reportable segment information was as follows:

	Three Months Ended
	March 31,
(DOLLARS IN THOUSANDS)	2020			2019
Net sales:
Taste	$	830,322		$	804,802
Scent	516,995			492,600
Consolidated	$	1,347,317		$	1,297,402
Segment profit:
Taste	$	137,347		$	131,402
Scent	105,395			89,953
Global expenses	(20,393		)	(16,667		)
Operational Improvement Initiatives (a)	—			(406		)
Frutarom Integration Related Costs (b)	(3,650		)	(14,897		)
Restructuring and Other Charges, net (c)	(4,918		)	(16,174		)
(Losses) gains on sale of assets	(754		)	188
Frutarom Acquisition Related Costs (d)	(813		)	(9,529		)
Compliance Review & Legal Defense Costs (e)	(649		)	—
N&B Transaction Related Costs (f)	(5,199		)	—
N&B Integration Related Costs (g)	(10,144		)	—
Operating profit	196,222			163,870
Interest expense	(32,140		)	(36,572		)
Other (loss) income, net	(10,574		)	7,278
Income before taxes	$	153,508		$	134,576

(a) Represents accelerated depreciation related to a plant relocation in India.

15

(b)	Represents costs related to the integration of the Frutarom acquisition. For 2020, costs primarily related to advisory services, retention bonuses and performance stock awards. For 2019, costs principally related to advisory services.
(c)	For 2020, represents costs primarily related to the Frutarom Integration Initiative. For 2019, represents costs primarily related to the Frutarom Integration Initiative and the 2019 Severance Charges program.
(d)	Represents transaction-related costs and expenses related to the acquisition of Frutarom. For 2020, amount primarily includes earn-out payments, net of adjustments, amortization for inventory "step-up" costs and transaction costs principally related to the 2019 Acquisition Activity. For 2019, amount primarily includes amortization for inventory "step-up" costs and transaction costs.
(e)	Costs related to reviewing the nature of inappropriate payments and review of compliance in certain other countries. In addition, includes legal costs for related shareholder lawsuits.
(f)	Represents transaction costs and expenses related to the pending transaction with Nutrition & Biosciences Inc.
(g)	Represents costs related to the integration of the pending transaction with Nutrition & Biosciences Inc.

Net sales, which are attributed to individual regions based upon the destination of product delivery, were as follows:

	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020		2019
Europe, Africa and Middle East	$	543,130	$	529,606
Greater Asia	309,508		287,962
North America	303,387		301,059
Latin America	191,292		178,775
Consolidated	$	1,347,317	$	1,297,402

	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020		2019
Net sales related to the U.S.	$	270,686	$	272,803
Net sales attributed to all foreign countries	1,076,631		1,024,599

No non-U.S. country had net sales in any period presented greater than 6% of total consolidated net sales.

NOTE 12. EMPLOYEE BENEFITS

Pension and other defined contribution retirement plan expenses included the following components:

(DOLLARS IN THOUSANDS)	U.S. Plans
	Three Months Ended March 31,
	2020			2019
Service cost for benefits earned(1)	$	400		$	474
Interest cost on projected benefit obligation(2)	4,263			5,453
Expected return on plan assets(2)	(7,083		)	(6,983		)
Net amortization and deferrals(2)	1,858			1,275
Net periodic benefit (income) cost	$	(562	)	$	219

(DOLLARS IN THOUSANDS)	Non-U.S. Plans
	Three Months Ended March 31,
	2020			2019
Service cost for benefits earned(1)	$	5,940		$	4,873
Interest cost on projected benefit obligation(2)	3,245			4,435
Expected return on plan assets(2)	(11,614		)	(10,904		)
Net amortization and deferrals(2)	3,834			2,922
Net periodic benefit (income) cost	$	1,405		$	1,326

16

_______________________ 

(1) Included as a component of Operating profit.

(2) Included as a component of Other loss (income), net.

The Company expects to contribute a total of $4.4 million to its U.S. pension plans and a total of $20.9 million to its Non-U.S. Plans during 2020. During the three months ended March 31, 2020, no contributions were made to the qualified U.S. pension plans, $3.9 million of contributions were made to the non-U.S. pension plans, and $1.5 million of benefit payments were made with respect to the Company's non-qualified U.S. pension plan.

Expense recognized for postretirement benefits other than pensions included the following components: 

	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020			2019
Service cost for benefits earned	$	143		$	148
Interest cost on projected benefit obligation	474			578
Net amortization and deferrals	(1,153		)	(1,194		)
Total postretirement benefit income	$	(536	)	$	(468	)

The Company expects to contribute $3.8 million to its postretirement benefits other than pension plans during 2020. In the three months ended March 31, 2020, $1 million of contributions were made.

NOTE 13. FINANCIAL INSTRUMENTS

Fair Value

Accounting guidance on fair value measurements specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs create the following fair value hierarchy:

• 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.

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The Company determines the fair value of structured liabilities (where performance is linked to structured interest rates, inflation or currency risks) using the London Interbank Offer Rate ("LIBOR") swap curve and forward interest and exchange rates at period end. Such instruments are classified as Level 2 based on the observability of significant inputs to the model. The Company does not have any instruments classified as Level 3, other than those included in pension asset trusts as discussed in Note 16 of our 2019 Form 10-K.

These valuations take into consideration the Company's credit risk and its counterparties’ credit risk. The estimated change in the fair value of these instruments due to such changes in its own credit risk (or instrument-specific credit risk) was immaterial as of March 31, 2020.

The carrying values and the estimated fair values of financial instruments at March 31, 2020 and December 31, 2019 consisted of the following: 

17

	March 31, 2020				December 31, 2019
(DOLLARS IN THOUSANDS)	Carrying Value		Fair Value		Carrying Value		Fair Value
LEVEL 1
Cash and cash equivalents(1)	$	433,246	$	433,246	$	606,823	$	606,823
LEVEL 2
Credit facilities and bank overdrafts(2)	2,594		2,594		3,131		3,131
Derivatives
Derivative assets(3)	32,892		32,892		3,575		3,575
Derivative liabilities(3)	5,631		5,631		7,415		7,415
Long-term debt:(4)
2020 Notes	299,598		301,191		299,381		302,700
2021 Euro Notes	327,408		327,667		334,561		338,244
2023 Notes	299,080		303,381		299,004		305,580
2024 Euro Notes	546,009		549,159		558,124		586,825
2026 Euro Notes	870,689		822,800		890,183		945,306
2028 Notes	396,766		418,176		396,688		441,500
2047 Notes	493,676		446,510		493,571		526,106
2048 Notes	786,050		823,569		785,996		919,040
Term Loan(2)	239,665		240,000		239,621		240,000
Amortizing Notes(5)	70,882		71,810		82,079		84,430

_______________________

(1) The carrying amount of cash and cash equivalents approximates fair value due to the short maturity of those instruments.

(2) The carrying amount approximates fair value as the interest rate is reset frequently based on current market rates as well as the short maturity of those instruments.

(3) The carrying amount approximates fair value as the instruments are marked-to-market and held at fair value on the Consolidated Balance Sheet.

(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.

Derivatives

Forward Currency Forward Contracts

The Company periodically enters into foreign currency forward contracts with the objective of reducing exposure to cash flow volatility associated with its intercompany loans, foreign currency receivables and payables and anticipated purchases of certain raw materials used in operations. These contracts generally involve the exchange of one currency for a second currency at a future date, have maturities not exceeding twelve months and are with counterparties which are major international financial institutions.

Cash Flow Hedges

The Company maintains several forward currency contracts which qualified as cash flow hedges. The objective of these hedges is to protect against the currency risk associated with forecasted U.S. dollar ("USD") denominated raw material purchases made by Euro ("EUR") functional currency entities which result from changes in the EUR/USD exchange rate. The effective portions of cash flow hedges are recorded in OCI as a component of Gains (losses) on derivatives qualifying as hedges in the accompanying Consolidated Statement of Income and Comprehensive (Loss) Income. Realized gains/(losses) in AOCI related to cash flow hedges of raw material purchases are recognized as a component of Cost of goods sold in the

18

accompanying Consolidated Statement of Income and Comprehensive (Loss) Income in the same period as the related costs are recognized.

Hedges Related to Issuances of Debt

Subsequent to the issuance of the 2021 Euro Notes and 2026 Euro Notes during the third quarter of 2018, the Company designated the debt as a hedge of a portion of its net European investments. Accordingly, the change in the value of the debt that is attributable to foreign exchange movements is recorded in OCI as a component of foreign currency translation adjustments in the accompanying Consolidated Statement of Income and Comprehensive (Loss) Income.

Subsequent to the issuance of the 2024 Euro Notes during the first quarter of 2016, the Company designated the debt as a hedge of a portion of its net European investments. Accordingly, the change in the value of the debt that is attributable to foreign exchange movements is recorded in OCI as a component of foreign currency translation adjustments in the accompanying Consolidated Statement of Income and Comprehensive (Loss) Income.

Cross Currency Swaps

During the third quarter of 2019, the Company entered into four new EUR/USD cross currency swaps that mature through May 2023 covering the same notional amounts of debt. The new swaps qualified as net investment hedges in order to mitigate a portion of the Company's net European investments from foreign currency risk. As of March 31, 2020, these swaps were in a net asset position with an aggregate fair value of $27.7 million which was classified as other current assets. Changes in fair value related to cross currency swaps are recorded in OCI.

The following table shows the notional amount of the Company’s derivative instruments outstanding as of March 31, 2020 and December 31, 2019: 

(DOLLARS IN THOUSANDS)	March 31, 2020		December 31, 2019
Foreign currency contracts	$	242,904	$	473,600
Cross currency swaps	600,000		600,000

The following tables show the Company’s derivative instruments measured at fair value (Level 2 of the fair value hierarchy), as reflected in the Consolidated Balance Sheet as of March 31, 2020 and December 31, 2019: 

	March 31, 2020
(DOLLARS IN THOUSANDS)	Fair Value of Derivatives Designated as Hedging Instruments		Fair Value of Derivatives Not Designated as Hedging Instruments		Total Fair Value
Derivative assets(a)
Foreign currency contracts	$	2,803	$	2,421	$	5,224
Cross currency swaps	27,668		—		27,668
	$	30,471	$	2,421	$	32,892
Derivative liabilities(b)
Foreign currency contract	$	—	$	5,631	$	5,631

	December 31, 2019
(DOLLARS IN THOUSANDS)	Fair Value of Derivatives Designated as Hedging Instruments		Fair Value of Derivatives Not Designated as Hedging Instruments		Total Fair Value
Derivative assets(a)
Foreign currency contracts	$	1,310	$	2,265	$	3,575
Derivative liabilities(b)
Foreign currency contracts	$	797	$	2,431	$	3,228
Interest rate swaps	4,187		—		4,187
Total derivative liabilities	$	4,984	$	2,431	$	7,415

 _______________________

19

(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.

The following table shows the effect of the Company’s derivative instruments which were not designated as hedging instruments in the Consolidated Statement of Income and Comprehensive (Loss) Income for the three months ended March 31, 2020 and 2019 (in thousands): 

	Amount of Gain (Loss)					Location of Gain (Loss) Recognized in Income on Derivative
(DOLLARS IN THOUSANDS)	Three Months Ended March 31,
	2020			2019
Foreign currency contracts(1)	$	(7,663	)	$	926	Other (income) expense, net

 _______________________

(1) The foreign currency contract net gains (losses) offset any recognized gains (losses) arising from the revaluation of the related intercompany loans during the same respective periods.

The following table shows the effect of the Company’s derivative and non-derivative instruments designated as cash flow and net investment hedging instruments, net of tax, in the Consolidated Statement of Income and Comprehensive (Loss) Income for the three months ended March 31, 2020 and 2019 (in thousands): 

	Amount of Gain (Loss)  Recognized in OCI on Derivative					Location of Gain (Loss) Reclassified from AOCI into Income	Amount of Gain (Loss)  Reclassified from Accumulated OCI into Income
	Three Months Ended March 31,						Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020		2019				2020			2019
Derivatives in Cash Flow Hedging Relationships:
Foreign currency contracts	$	1,231	$	(312	)	Cost of goods sold	$	2,069		$	2,372
Interest rate swaps (1)	216		216			Interest expense	(216		)	(216		)
Derivatives in Net Investment Hedging Relationships:
Cross currency swaps	21,351		10,667			N/A	—			—
Non-Derivatives in Net Investment Hedging Relationships:
2024 Euro Notes	9,569		4,206			N/A	—			—
2021 Euro Notes & 2026 Euro Notes	21,052		9,253			N/A	—			—
Total	$	53,419	$	24,030			$	1,853		$	2,156

 _______________________

(1) Interest rate swaps were entered into as pre-issuance hedges for bond offerings.

The ineffective portion of the above noted cash flow hedges were not material during the three months ended March 31, 2019.

The Company expects that $4.8 million (net of tax) of derivative gain included in AOCI at March 31, 2020, based on current market rates, will be reclassified into earnings within the next 12 months. The majority of this amount will vary due to fluctuations in foreign currency exchange rates.

20

NOTE 14.    ACCUMULATED OTHER COMPREHENSIVE LOSS

The following tables present changes in the accumulated balances for each component of other comprehensive (loss) income, including current period other comprehensive (loss) income and reclassifications out of accumulated other comprehensive loss:

(DOLLARS IN THOUSANDS)	Foreign Currency Translation Adjustments			Gains on Derivatives Qualifying as Hedges			Pension and Postretirement Liability Adjustment			Total
Accumulated other comprehensive (loss) income, net of tax, as of December 31, 2019	$	(373,043	)	$	2,068		$	(345,919	)	$	(716,894	)
OCI before reclassifications	(452,278		)	3,300			—			(448,978		)
Amounts reclassified from AOCI	—			(1,853		)	3,517			1,664
Net current period other comprehensive income (loss)	(452,278		)	1,447			3,517			(447,314		)
Accumulated other comprehensive (loss) income, net of tax, as of March 31, 2020	$	(825,321	)	$	3,515		$	(342,402	)	$	(1,164,208	)

(DOLLARS IN THOUSANDS)	Foreign Currency Translation Adjustments			Losses  on Derivatives Qualifying as Hedges			Pension and Postretirement Liability Adjustment			Total
Accumulated other comprehensive (loss) income, net of tax, as of December 31, 2018	$	(396,996	)	$	4,746		$	(309,977	)	$	(702,227	)
OCI before reclassifications	42,377			2,059			—			44,436
Amounts reclassified from AOCI	—			(2,156		)	2,593			437
Net current period other comprehensive income (loss)	42,377			(97		)	2,593			44,873
Accumulated other comprehensive (loss) income, net of tax, as of March 31, 2019	$	(354,619	)	$	4,649		$	(307,384	)	$	(657,354	)

The following table provides details about reclassifications out of Accumulated other comprehensive loss to the Consolidated Statement of Income and Comprehensive (Loss) Income: 

	Three Months Ended March 31,						Affected Line Item in the Consolidated Statement of Income and Comprehensive Income
(DOLLARS IN THOUSANDS)	2020			2019
Gains (losses) on derivatives qualifying as hedges
Foreign currency contracts	$	2,364		$	2,711		Cost of goods sold
Interest rate swaps	(216		)	(216		)	Interest expense
Tax	(295		)	(339		)	Provision for income taxes
Total	$	1,853		$	2,156		Total, net of income taxes
Losses on pension and postretirement liability adjustments
Prior service cost	$	(4,348	)	$	2,836		(a)
Actuarial losses	(191		)	168			(a)
Tax	1,022			(5,597		)	Provision for income taxes
Total	$	(3,517	)	$	(2,593	)	Total, net of income taxes

 _______________________

(a) The amortization of prior service cost and actuarial loss is included in the computation of net periodic benefit cost. Refer to Note 16 of our 2019 Form 10-K for additional information regarding net periodic benefit cost.

21

NOTE 15.    COMMITMENTS AND CONTINGENCIES

Guarantees and Letters of Credit

The Company has various bank guarantees and letters of credit which are available for use to support its ongoing business operations and to satisfy governmental requirements associated with pending litigation in various jurisdictions.

At March 31, 2020, the Company had total bank guarantees and standby letters of credit of $47.8 million with various financial institutions. Included in the above aggregate amount was a total of $13.8 million for other assessments in Brazil for various income tax and indirect tax disputes related to fiscal years 1998-2011. There were no material amounts utilized under the standby letters of credit as of March 31, 2020.

In order to challenge the assessments in these cases in Brazil, the Company has been required to, and has separately pledged assets, principally property, plant and equipment, to cover assessments in the amount of $7.7 million as of March 31, 2020.

On December 15, 2019, IFF and N&B entered into a commitment letter which provides $7.5 billion in an aggregate principal amount of senior unsecured bridge term loans. On January 17, 2020, N&B entered into a term loan credit agreement providing for unsecured term loan facilities in an aggregate principal amount of $1.25 billion, which reduced the commitments under the Bridge Loans commitment letter by a corresponding amount. N&B will be the initial borrower under the remaining $6.25 billion tranche of the 364-day senior unsecured bridge facility (or, if applicable, any replacement debt financing), which, together with the Term Loan Facilities, will be used to finance the Special Cash Payment and to pay related fees and expenses. Following the consummation of the merger, all obligations of N&B with respect to the Term Loan Facilities and the Bridge Facility (if any) or, if applicable, the replacement debt financing, will be guaranteed by IFF (or at the election of N&B and IFF, assumed by IFF).

Lines of Credit

The Company has various lines of credit which are available to support its ongoing business operations. As of March 31, 2020, the Company had available lines of credit of $97.4 million with various financial institutions, in addition to the $789.7 million of capacity under the Credit Facility. There were no material amounts drawn down pursuant to these lines of credit as of March 31, 2020.

Litigation

The Company assesses contingencies related to litigation and/or other matters to determine the degree of probability and range of possible loss. A loss contingency is accrued in the Company’s consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly sensitive and requires judgments about future events. On at least a quarterly basis, the Company reviews contingencies related to litigation to determine the adequacy of accruals. The amount of ultimate loss may differ from these estimates and further events may require the Company to increase or decrease the amounts it has accrued on any matter.

Periodically, the Company assesses its insurance coverage for all known claims, where applicable, taking into account aggregate coverage by occurrence, limits of coverage, self-insured retentions and deductibles, historical claims experience and claims experience with its insurance carriers. The liabilities are recorded at management’s best estimate of the probable outcome of the lawsuits and claims, taking into consideration the facts and circumstances of the individual matters as well as past experience on similar matters. At each balance sheet date, the key issues that management assesses are whether it is probable that a loss as to asserted or unasserted claims has been incurred and if so, whether the amount of loss can be reasonably estimated. The Company records the expected liability with respect to claims in Other liabilities and expected recoveries from its insurance carriers in Other assets. The Company recognizes a receivable when it believes that realization of the insurance receivable is probable under the terms of the insurance policies and its payment experience to date.

Litigation Matters

On August 12, 2019, Marc Jansen filed a putative securities class action against IFF, its Chairman and CEO, and its CFO, in the United States District Court for the Southern District of New York. The lawsuit was filed after IFF disclosed that preliminary results of investigations indicated that Frutarom businesses operating principally in Russia and Ukraine had made improper payments to representatives of customers. On December 26, 2019, the Court appointed a group of six investment funds as lead plaintiff and Pomerantz LLP as lead counsel. On March 16, 2020, lead plaintiff filed an amended complaint, which added Frutarom and certain former officers of Frutarom as defendants. The amended complaint alleges, among other things, that defendants made materially false and misleading statements or omissions concerning IFF’s acquisition of Frutarom,

22

the integration of the two companies, and the companies’ financial reporting and results. The amended complaint asserts claims under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, and under the Israeli Securities Act-1968, against all defendants, and under Section 20(a) of the Securities Exchange Act of 1934 against the individual defendants, on behalf of a putative class of persons and entities who purchased or otherwise acquired IFF securities on the New York Stock Exchange between May 7, 2018 and August 12, 2019 and persons and entities who purchased or otherwise acquired IFF securities on the Tel Aviv Stock Exchange between October 9, 2018 and August 12, 2019. The amended complaint seeks an award of unspecified compensatory damages, costs, and expenses.

Two motions to approve securities class actions were filed in the Tel Aviv District Court, Israel, in August 2019, similarly alleging, among other things, false and misleading statements largely in connection with IFF’s acquisition of Frutarom and the above-mentioned improper payments.  Both assert claims under the U.S. federal securities laws against IFF, its Chairman and CEO, and its former CFO. One also asserts claims under the Israeli Securities Act-1968 against IFF, as well as against Frutarom and certain former Frutarom officers and directors, and asserts claims under the Israeli Companies Act-1999 against certain former Frutarom officers and directors.

On October 29, 2019, IFF and Frutarom filed a claim in the Tel Aviv District Court, Israel, against Ori Yehudai, the former President and CEO of Frutarom, and against certain former directors of Frutarom, challenging the bonus of US $20 million granted to Yehudai in 2018.  IFF and Frutarom allege, among other things, that Yehudai was not entitled to receive the bonus because he breached his fiduciary duty by, among other things, knowing of the above-mentioned improper payments and failing to prevent them from being made.

On March 11, 2020, an IFF shareholder filed a motion to approve a class action in Israel against, among others, Frutarom, Yehudai, and Frutarom’s former board of directors, alleging that former minority shareholders of Frutarom were harmed as a result of the US $20 million bonus paid to Yehudai.

China Facilities

Guangzhou Taste plant

During the fourth quarter of 2016, the Company was notified that certain governmental authorities have begun to evaluate a change in the zoning of the Guangzhou Taste plant. The zoning, if changed, would prevent the Company from continuing to manufacture product at the existing plant. The ultimate outcome of any change that the governmental authorities may propose, the timing of such a change, and the nature of any compensation arrangements that might be provided to the Company are uncertain. To address the governmental authorities' requirements, the Company has begun to transfer certain production capabilities from the Guangzhou Taste plant to a newly built facility in Zhangjiagang.

The net book value of the plant in Guangzhou was approximately $59 million as of March 31, 2020.

Guangzhou Scent plant

During the second quarter of 2019, the Company was notified that certain governmental authorities had changed the zoning where the Guangzhou Scent plant is located. The zoning change did not affect the current operations but prevents expansions or other increases in the operating capacity of the plant. The Company believes that it is possible that the zoning may be enforced in the future such that it would not be able to continue manufacturing at the existing site. The ultimate outcome of any change that the governmental authorities may propose, the timing of such a change, and the nature of any compensation arrangements that might be provided to the Company are uncertain.

The net book value of the existing plant was approximately $9 million as of March 31, 2020.

Zhejiang Ingredients plant

In the fourth quarter of 2017, the Company concluded discussions with the government regarding the relocation of its Fragrance Ingredients plant in Zhejiang and, based on the agreements reached, expects to receive total compensation payments up to approximately $50 million. The relocation compensation will be paid to the Company over the period of the relocation which is expected to be through the end of 2021. The Company received a payment of $15 million in both the fourth quarter of 2017 and the second quarter of 2019. The third payment of $13.8 million is expected in the second quarter of 2020 with the fourth and final payment expected in the second half of 2020 upon the final environmental inspection.

Production at the facility ceased during 2019. The net book value of the current plant was approximately $10 million as of March 31, 2020.

23

Total China Operations

The total net book value of all eight plants in China was approximately $199 million as of March 31, 2020.

If the Company is required to close a plant, or operate one at significantly reduced production levels on a permanent basis, the Company may be required to record charges that could have a material impact on its consolidated financial results of operations, financial position and cash flows in future periods.

Other Contingencies

The Company has contingencies involving third parties (such as labor, contract, technology or product-related claims or litigation) as well as government-related items in various jurisdictions in which it operates pertaining to such items as value-added taxes, other indirect taxes, customs and duties and sales and use taxes. It is possible that cash flows or results of operations, in any period, could be materially affected by the unfavorable resolution of one or more of these contingencies.

The most significant government-related contingencies exist in Brazil. With regard to the Brazilian matters, the Company believes it has valid defenses for the underlying positions under dispute; however, in order to pursue these defenses, the Company is required to, and has provided, bank guarantees and pledged assets in the aggregate amount of $21.5 million. The Brazilian matters take an extended period of time to proceed through the judicial process and there are a limited number of rulings to date.

Pending Transaction with Nutrition & Biosciences, Inc.

The Merger Agreement governing the DuPont N&B Transaction, subjects IFF to various contingent payments to the extent that the transaction is not consummated. Specifically, the Merger Agreement provides DuPont the right to receive a termination fee of $521.5 million, in certain circumstances, including if the agreement is terminated due to the IFF Board changing its recommendation and to reimburse DuPont’s transaction-related expenses in an amount up to $75 million if the Merger Agreement is terminated because IFF’s shareholders do not approve the issuance of IFF Common Stock in connection with the transaction.

Brazil Tax Credits

In early January 2020, the Company was informed of a favorable ruling from the Brazilian tax authorities confirming that the Company was entitled to recover the overpayments of certain indirect taxes (known as PIS/COFINS) for the period from November 2011 to December 2018, plus interest on the amount of the overpayments. The overpayments arose from the inclusion of a value added tax known as ICMS in the calculation of the PIS/COFINS tax. The ruling did not, however, settle the question of whether the Company is eligible to recover overpayments based on the gross or the net amount of ICMS amounts paid on PIS/COFINS. The Company calculated the amount of overpayments using the gross method which yields a higher amount than the application of the net method. A final ruling on the gross versus net amount issued is still pending.

In addition to the $8.0 million recognized in the fourth quarter of 2019, during the first quarter of 2020 the Company recognized $3.5 million as an additional recovery on the existing claim. During the first quarter of 2020, the Company also recognized $2.2 million related to a claim from another of its subsidiaries in Brazil. The income is recognized as a reduction in Selling and administrative expenses.

Other

The Company determines estimates of reasonably possible losses or ranges of reasonably possible losses in excess of related accrued liabilities, if any, when it has determined that either a loss is reasonably possible or a loss in excess of accrued amounts is reasonably possible and the amount of losses or range of losses is determinable. For all third party contingencies (including labor, contract, technology, tax, product-related claims and business litigation), the Company currently estimates that the aggregate range of reasonably possible losses in excess of any accrued liabilities is $0 to approximately $10 million. The estimates included in this amount are based on the Company’s analysis of currently available information and, as new information is obtained, these estimates may change. Due to the inherent subjectivity of the assessments and the unpredictability of outcomes of legal proceedings, any amounts accrued or included in this aggregate amount may not represent the ultimate loss to the Company from the matters in question. Thus, the Company’s exposure and ultimate losses may be higher or lower, and possibly significantly so, than the amounts accrued or the range disclosed above.

24

NOTE 16.     REDEEMABLE NONCONTROLLING INTERESTS

Through certain subsidiaries of our Frutarom acquisition, there are certain noncontrolling interests that carry redemption features. The noncontrolling interest holders have the right, over a stipulated period of time, to sell their respective interests to Frutarom, and Frutarom has the option to purchase these interests (subject to the same timing). These options carry identical price and conditions of exercise, and will be settled based on the multiple of the average EBITDA of consecutive quarters to be achieved during the period ending prior to the exercise date. 

The following table sets forth the details of the Company's redeemable noncontrolling interests:

(DOLLARS IN THOUSANDS)	Redeemable Noncontrolling Interests
Balance at December 31, 2018	$	81,806
Acquired through acquisitions during 2019	26,224
Impact of foreign exchange translation	(190		)
Share of profit or loss attributable to redeemable noncontrolling interests	1,541
Redemption value adjustment for the current period	(370		)
Dividends paid	5,700
Balance at March 31, 2019	$	114,711
Balance at December 31, 2019	$	99,043
Impact of foreign exchange translation	19,255
Share of profit or loss attributable to redeemable noncontrolling interests	1,987
Redemption value adjustment for the current period	(5,806		)
Measurement period adjustments	(1,426		)
Exercises of redeemable noncontrolling interests	(10,340		)
Balance at March 31, 2020	$	102,713

For 2019, the increase in redeemable noncontrolling interests was primarily due to the interests acquired through acquisitions during the first quarter of 2019, as discussed in Note 3.

For 2020, the increase in redeemable noncontrolling interests was primarily due to the impact of foreign exchange translation offset by the exercise of options.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

(UNLESS INDICATED OTHERWISE, DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

OVERVIEW

Company background

We are a leading innovator of sensory experiences that move the world. Our creative capabilities, global footprint, regulatory and technological know-how provide us a competitive advantage in meeting the demands of our global, regional and local customers around the world. The 2018 acquisition of Frutarom solidified our position as an industry leader across an expanded portfolio of products, resulting in a broader customer base across small, mid-sized and large companies and an expansion to new adjacencies that provides a platform for significant cross-selling opportunities.

In the first quarter of fiscal year 2020, we began operating our business across two segments, Taste and Scent. As part of this new operating model, nearly all of the former Frutarom business segment was consolidated with the Taste segment.

As a leading creator of flavor offerings, we help our customers deliver on the promise of delicious and healthy foods and drinks that appeal to consumers. Our Taste business comprises a diversified portfolio across flavor compounds, savory solutions, inclusions and nutrition and specialty ingredients. While we are a global leader, our flavor compounds are more regional in nature, with different formulas that reflect local taste preferences. Consequently, we manage our flavor compounds geographically, creating products in our regional creative centers which allow us to satisfy local taste preferences, while also helping to ensure regulatory compliance and production standards. The savory solutions, inclusions and nutrition and specialty

25

ingredients products were included in the legacy Frutarom businesses during 2019 and are managed globally under the Taste business segment beginning in the first quarter of 2020.

Our global Scent business creates fragrance compounds and fragrance ingredients that are integral elements in the world’s finest perfumes and best-known household and personal care products. We believe our unique portfolio of natural and synthetic ingredients, global footprint, innovative technologies and know-how, deep consumer insight and customer intimacy make us a market leader in scent.

Impact of COVID-19 Pandemic

On March 11, 2020, the World Health Organization designated the recent novel coronavirus ("COVID-19") as a global pandemic. Various policies and initiatives have been implemented around the world to reduce the global transmission of COVID-19, including the closure of non-essential businesses, reduced travel, the closure of retail establishments, the promotion of social distancing and remote working policies. IFF has been designated an essential business in most locations given that both its Taste and Scent products are used in the manufacture of food products as well as the manufacture of a range of cleaning and hygiene products. Accordingly, although there have been minimal disruptions, most of IFF’s manufacturing facilities remain open and continue to manufacture products.

Health and Safety of our People and Consumers

Employee safety is our first priority, and as a result, we executed our preparedness plans at our manufacturing facilities. We have taken several measures to protect our people, including upgrading cleaning protocols, remote working arrangements, temperature screenings, the use of personal protective equipment including face masks, increased sanitization measures, imposing visitor and travel restrictions, and taking precautions to minimize contact among employees, as part of social distancing, by grouping our professionals into smaller pods and separating their work shifts.

We have implemented other contingency plans, with office-based employees working remotely where possible. We have crisis management teams in place monitoring the rapidly evolving situation and recommending risk mitigation actions as deemed necessary. We are also working closely with our contract manufacturers, distributors, contractors and other external business partners.

Customer Demand

In the first quarter of 2020, we experienced increased demand in our flavors compounds and consumer fragrance product categories in response to COVID-19. Two areas where demand has declined significantly starting in March 2020 are: 1) flavors used in retail food services, and 2) our fine fragrances and cosmetic actives product categories. These declines are primarily a result of travel and shelter-in-place restrictions and the closure of retail outlets. Operating profit margin is expected to decline year-over-year in the second quarter of 2020 as a result of decreased sales in these higher margin categories and incremental costs in all categories related to COVID-19. We expect demand to return for fine fragrances and cosmetic actives but the timing is uncertain and depends on how the COVID-19 situation evolves. The ultimate timing and impact of this demand volatility will depend on the duration and scope of the COVID-19 pandemic, overall economic conditions and consumer preferences.

Facilities and Supply Chain

To date, we have incurred some additional costs but there has been minimal disruption to our supply chain network, including the supply of our ingredients, raw materials or other sourced materials. It is possible that more significant disruptions could occur if the COVID-19 pandemic continues to impact markets around the world. The disruption we continue to experience primarily relates to distribution of certain raw materials and transport logistics in markets where governments have implemented the strictest regulations including Italy, Spain and India. As a result, some shipments for some orders have been delayed.

In effected locations, we continue to receive shipments from our suppliers and are taking steps to minimize any disruptions on this segment of our supply chain including increasing inventory levels to meet anticipated customer demand in the second and third quarters of 2020. Although almost all of our manufacturing facilities remain operational, we anticipate additional costs to be incurred from labor, shipping, and cleaning as well as higher raw material costs, related to potential COVID-19 supply chain disruptions.

Our manufacturing plants continue to operate world-wide in compliance with the orders and restrictions imposed by government authorities in each of our locations, and we are working with our customers to meet their specific shipment needs. Our manufacturing plants and offices in China were required to close for a limited period of time in February 2020, and a portion of our manufacturing plants in India, Vietnam, and Israel and offices in India, Vietnam, Malaysia and Canada were required to reduce operations as a result of government measures taken to contain the outbreak. All of IFF’s other

26

manufacturing facilities are currently operational. However, some of IFF’s R&D and creative applications centers are closed or operating on limited schedules. To provide for business continuity, we have contracts with third party laboratories that can conduct adequate testing.

The overall impact of COVID-19 on our consolidated results of operations for the first quarter of 2020 was not significant and primarily limited to increased demand in our flavors compounds and consumer fragrance product categories partially offset by declines in flavors used in retail food services and our fine fragrances and cosmetic actives product categories. However, the impact that COVID-19 will have on our consolidated results of operations throughout 2020 remains uncertain. Based on the length and severity of COVID-19, we may experience continued volatility as a result of retail and travel, consumer shopping and consumption behavior. We will continue to evaluate the nature and extent of these potential impacts to our business, consolidated results of operations, segment results, liquidity and capital resources.

Pending Transaction with Nutrition & Biosciences, Inc.

On December 15, 2019, we entered into definitive agreements with DuPont de Nemours, Inc. (“DuPont”), including an Agreement and Plan of Merger, pursuant to which DuPont will transfer its nutrition and biosciences business (the “N&B Business”) to Nutrition & Biosciences, Inc., a Delaware corporation and wholly owned subsidiary of DuPont (“N&B”), and N&B will merge with and into a wholly owned subsidiary of IFF in exchange for a number of shares of IFF common stock, par value $0.125 per share (“IFF Common Stock”) (collectively, the “DuPont N&B Transaction”). In connection with the transaction, DuPont will receive a one-time $7.3 billion special cash payment (the “Special Cash Payment”), subject to certain adjustments. As a result of the DuPont N&B Transaction, holders of DuPont’s common stock will own approximately 55.4% of the outstanding shares of IFF on a fully diluted basis. We believe that the combination of IFF and the N&B Business will create a global leader in high-value ingredients and solutions in the global Food & Beverage, Home & Personal Care and Health & Wellness markets. We expect that the companies' complementary product portfolios will give the combined company leadership positions across key Taste, Texture, Scent, Nutrition, Enzymes, Cultures, Soy Proteins and Probiotics categories.

Completion of the DuPont N&B Transaction is subject to various closing conditions, including, among other things, (1) approval by IFF’s shareholders of the issuance of IFF Common Stock in connection with the transaction; (2) the effectiveness of the registration statements to be filed with the Securities and Exchange Commission pursuant to the Merger Agreement; and (3) the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (which waiting period has expired), and obtaining certain other consents, authorizations, orders or approvals from governmental authorities. We expect that the transaction will close in early 2021.

Financial Performance Overview

Sales

Sales in the first quarter of 2020 increased 4% on a reported basis and 6% on a currency neutral basis (which excludes the effects of changes in currency). Taste sales increased 3% on a reported basis and 5% on a currency neutral basis. Scent achieved sales growth of 5% on a reported basis and 7% on a currency neutral basis in the first quarter of 2020. Consolidated reported and currency neutral sales growth was driven by new wins (net of losses) and volume increases in both Taste and Scent, including increased shipments in certain product categories to support customer demand related to the COVID-19 pandemic, partially offset by Fine Fragrances sales declines in March 2020 due to global stay-at-home and travel restrictions.

Exchange rate variations had an unfavorable impact on net sales for the first quarter of 2020 of 2%. The effect of exchange rates can vary by business and region, depending upon the mix of sales priced in U.S. dollars as compared to other currencies.

Gross Margin

Gross margin increased to 42.0% in the first quarter of 2020 from 40.9% in the 2019 period, principally driven by increased volumes on existing business, new wins (net of losses) and the impact of cost savings and productivity initiatives, partially offset by higher raw materials costs.

Operating profit

Operating profit increased $32.4 million to $196.2 million (14.6% of sales) in the 2020 first quarter compared to $163.9 million (12.6% of sales) in the comparable 2019 period. Foreign currency had a 2.0% unfavorable impact on operating profit in the first quarter of 2020 compared to a 1.3% unfavorable impact on operating profit in the 2019 period. Adjusted operating profit was $222.3 million (16.5% of sales) for the first quarter of 2020, an increase from $204.7 million (15.8% of sales) for the first quarter of 2019, principally driven by increased volumes on existing business, new wins (net of losses) and cost saving and productivity initiatives, partially offset by higher raw materials costs.

27

Cash flows

Cash, cash equivalents and restricted cash decreased $175.6 million in the three months ended March 31, 2020, as compared to a decrease of $151.4 million in the three months ended March 31, 2019.

Cash flows provided by operations for the three months ended March 31, 2020 was $16.9 million or 1.3% of sales, compared to cash flows provided by operations of $47.2 million or 3.6% of sales for the three months ended March 31, 2019. The decrease in cash provided by operating activities during 2020 was principally driven by higher net working capital (principally related to accounts receivable and accounts payable).

Overall cash, cash equivalents and restricted cash were also affected by exchange rates changes, which resulted in a $42.5 million reduction in cash for the three months ended March 31, 2020 compared to an increase of $3.9 million for the three months ended March 31, 2019. The impact of exchange rate fluctuations was partially offset by lower capital expenditures in the current year and the 2019 Acquisition Activity.

RESULTS OF OPERATIONS

	Three Months Ended
	March 31,
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)	2020			2019			Change
Net sales	$	1,347,317		$	1,297,402		4	%
Cost of goods sold	781,450			766,143			2	%
Gross profit	565,867			531,259
Research and development (R&D) expenses	85,909			90,596			(5	)%
Selling and administrative (S&A) expenses	229,714			213,182			8	%
Amortization of acquisition-related intangibles	48,350			47,625			2	%
Restructuring and other charges, net	4,918			16,174			(70	)%
Losses (gains) on sales of fixed assets	754			(188		)	NMF
Operating profit	196,222			163,870
Interest expense	32,140			36,572			(12	)%
Other loss (income), net	10,574			(7,278		)	NMF
Income before taxes	153,508			134,576
Taxes on income	26,297			23,362			13	%
Net income	$	127,211		$	111,214
Net income attributable to noncontrolling interests	2,604			2,385			9	%
Net income attributable to IFF stockholders	$	124,607		$	108,829		14	%
Diluted EPS	$	1.15		$	0.96		19	%
Gross margin	42.0		%	40.9		%
R&D as a percentage of sales	6.4		%	7.0		%
S&A as a percentage of sales	17.0		%	16.4		%
Operating margin	14.6		%	12.6		%
Adjusted operating margin	16.5		%	15.8		%
Effective tax rate	17.1		%	17.4		%
Segment net sales
Taste	$	830,322		$	804,802		3	%
Scent	516,995			492,600			5	%
Consolidated	$	1,347,317		$	1,297,402

NMF: Not meaningful

Cost of goods sold includes the cost of materials and manufacturing expenses. R&D includes expenses related to the development of new and improved products and technical product support. S&A expenses include expenses necessary to

28

support our commercial activities and administrative expenses supporting our overall operating activities including compliance with governmental regulations.

FIRST QUARTER 2020 IN COMPARISON TO FIRST QUARTER 2019

Sales

Sales for the first quarter of 2020 totaled $1.3 billion, an increase of 4% on a reported basis and 6% on a currency neutral basis as compared to the prior year quarter. The 2019 Acquisition Activity contributed 1% on both a reported and currency neutral basis. Sales growth was primarily driven by new wins (net of losses) and volume increases in both Taste and Scent, including increased shipments to support customer demand related to the COVID-19 pandemic, partially offset by Fine Fragrances sales declines in March 2020 due to global stay-at-home and travel restrictions.

Sales Performance by Segment

 

	% Change in Sales - First Quarter 2020 vs. First Quarter 2019
	Reported		Currency Neutral
Taste	3	%	5	%
Scent	5	%	7	%
Total	4	%	6	%

_______________________

(1) Currency neutral sales growth is calculated by translating prior year sales at the exchange rates for the corresponding 2020 period.

Taste

Taste sales in 2020 increased 3% on a reported basis and 5% on a currency neutral basis versus the prior year period. Performance was driven by sales growth in Savory Solutions primarily from new wins (net of losses), and growth in Flavors across all regions.

Scent

Scent sales in 2020 increased 5% on a reported basis and 7% on a currency neutral basis. Sales growth in the Scent business unit was led by Consumer Fragrances primarily driven by new wins (net of losses), followed by Fragrance Ingredients primarily driven by volume increases on existing business. Fine Fragrance declined versus the prior year period, as the temporary disruption of consumer access to retail markets due to COVID-19 led to a deceleration in performance late in the quarter.

Cost of Goods Sold

Cost of goods sold, as a percentage of sales, decreased 110 bps to 58.0% in the first quarter of 2020 compared to 59.1% in the first quarter of 2019, principally driven by increased volumes on existing business and the impact of cost savings and productivity initiatives, partially offset by higher raw material prices.

Research and Development (R&D) Expenses

Overall R&D expenses, as a percentage of sales, decreased to 6.4% in the first quarter of 2020 versus 7.0% in the first quarter of 2019. The decrease as a percentage of sales in 2020 was principally due to an increase in sales over the prior year and a reduction in employee related expenses.

Selling and Administrative (S&A) Expenses

S&A expenses increased $16.5 million to $229.7 million (17.0% of sales), in the first quarter of 2020 compared to $213.2 million (16.4% of sales) in the first quarter of 2019. Adjusted S&A expense increased by $13.2 million to $210.1 million (15.6% of sales) in 2020 compared to $196.9 million (15.2% of sales) in 2019. The increase in S&A expenses and adjusted S&A expenses was due to employee related expenses, including incentive compensation. During the first quarter of 2020, we recognized $5.7 million in income related to the expected recoveries of previously paid indirect taxes in Brazil. The income was recorded as a reduction in S&A expenses.

29

Restructuring and Other Charges

Frutarom Integration Initiative

In connection with the acquisition of Frutarom, we began to execute an integration plan that, among other initiatives, seeks to optimize its manufacturing network. As part of the Frutarom Integration Initiative, we expect to close approximately 35 manufacturing sites over the next twelve months with most of the closures targeted to occur before the end of fiscal 2021. During the three months ended March 31, 2020, we announced the closure of four facilities, of which two facilities are in Europe, Africa and Middle East, one facility in Latin America, and one facility in North America. Since the inception of the initiative to date, the Company has expensed $15.3 million. Total costs for the program are expected to be approximately $60 million including cash and non-cash items.

Amortization of Acquisition-Related Intangibles

Amortization expenses increased to $48.4 million in the first quarter of 2020 compared to $47.6 million in the first quarter of 2019 principally due to the 2019 Acquisition Activity.

Operating Results by Business Unit

We evaluate the performance of business units based on segment profit which is defined as operating profit before Restructuring and other charges, net; Global expenses (as discussed in Note 11 to the Consolidated Financial Statements) and certain non-recurring items, net; Interest expense; Other (expense) income, net; and Taxes on income. See Note 9 to the Consolidated Financial Statements for the reconciliation to Income before taxes. 

	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020			2019
Segment profit:
Taste	$	137,347		$	131,402
Scent	105,395			89,953
Global expenses	(20,393		)	(16,667		)
Operational Improvement Initiatives	—			(406		)
Frutarom Integration Related Costs	(3,650		)	(14,897		)
Restructuring and Other Charges, net	(4,918		)	(16,174		)
(Losses) gains on sale of assets	(754		)	188
Frutarom Acquisition Related Costs	(813		)	(9,529		)
Compliance Review & Legal Defense Costs	(649		)	—
N&B Transaction Related Costs	(5,199		)	—
N&B Integration Related Costs	(10,144		)	—
Operating profit	$	196,222		$	163,870
Profit margin:
Taste	16.5		%	16.3		%
Scent	20.4		%	18.3		%
Consolidated	14.6		%	12.6		%

Taste Segment Profit

Taste segment profit increased $5.9 million to $137.3 million in the first quarter of 2020 (16.5% of segment sales) from $131.4 million (16.3% of sales) in the comparable 2019 period. The increase principally reflected volume increases on existing business, new wins (net of losses), and the impact of cost savings initiatives, partially offset by higher raw materials costs.

Scent Segment Profit

Scent segment profit increased $15.4 million to $105.4 million in the first quarter of 2020 (20.4% of segment sales) from $90.0 million (18.3% of sales) in the comparable 2019 period. The increase principally reflected volume increases on existing business and the impact of cost savings and productivity initiatives, partially offset by price increases on raw materials.

30

Global Expenses

Global expenses represent corporate and headquarters-related expenses which include legal, finance, human resources and R&D and other administrative expenses that are not allocated to an individual business unit. In the first quarter of 2020, Global expenses were $20.4 million compared to $16.7 million during the first quarter of 2019. The increase was principally driven by lower gains from our currency hedging program, and to a lesser extent, higher incentive compensation expense in 2019.

Interest Expense

Interest expense decreased to $32.1 million in the first quarter of 2020 compared to $36.6 million in the 2019 period. This decrease was primarily driven by repayments on the Term Loan and TEUs. Average cost of debt was 2.9% for the 2020 period compared to 3.2% for the 2019 period.

Income Taxes

The effective tax rate for the three months ended March 31, 2020 was 17.1% compared with 17.4% for the three months ended March 31, 2019. Adjusted effective tax rate for the three months ended March 31, 2020 was 16.2%. compared to 18.5% for the first quarter of 2019. The decrease in the both the effective tax rate and the adjusted effective tax rate was largely due to lower repatriation costs and the reversal of loss provisions, partially offset by an unfavorable mix of earnings.

Liquidity and Capital Resources

Cash and Cash Equivalents

We had cash and cash equivalents of $433.2 million at March 31, 2020 compared to $606.8 million at December 31, 2019, of which $323.0 million of the balance at March 31, 2020 was held outside the United States. Cash balances held in foreign jurisdictions are, in most circumstances, available to be repatriated to the United States.

Effective utilization of the cash generated by our international operations is a critical component of our strategy. We regularly repatriate cash from our non-U.S. subsidiaries to fund financial obligations in the U.S. As we repatriate these funds to the U.S. we will be required to pay income taxes in certain U.S. states and applicable foreign withholding taxes during the period when such repatriation occurs. Accordingly, as of March 31, 2020, we had a deferred tax liability of $42.6 million for the effect of repatriating the funds to the U.S., attributable to various non-U.S. subsidiaries. There is no deferred tax liability associated with non-U.S. subsidiaries where we intend to indefinitely reinvest the earnings to fund local operations and/or capital projects.

Restricted Cash

Restricted cash of $15.1 million relates, principally, to amounts escrowed related to certain payments to be made to former Frutarom option holders in future periods. As of March 31, 2020, a portion of this balance, $5.4 million, is classified as a noncurrent asset.

Cash Flows Provided By Operating Activities

Cash flows provided by operations for the three months ended March 31, 2020 was $16.9 million or 1.3% of sales, compared to cash provided by operations of $47.2 million or 3.6% of sales for the three months ended March 31, 2019. The decrease in cash provided by operating activities during 2020 was principally driven by higher net working capital (principally related to accounts receivable and accounts payable).

Working capital (current assets less current liabilities) totaled $1.4 billion at both March 31, 2020 and December 31, 2019.

During the quarter, we have received requests from certain customers for extensions in payment terms. As a result, we have increased our allowances for bad debts and will continue to monitor the reserve.

We have various factoring agreements in the U.S. and The Netherlands under which we can factor up to approximately $100 million in receivables. Under all of the arrangements, we sell the receivables on a non-recourse basis to unrelated financial institutions and account for the transactions as a sale of receivables. The applicable receivables are removed from our Consolidated Balance Sheet when the cash proceeds are received.

31

As of March 31, 2020, the Company had removed approximately $200 million of receivables. The impact on cash provided by operations from participating in these programs decreased approximately $5 million for the three months ended March 31, 2020. The cost of participating in these programs was approximately $1 million for the three months ended March 31, 2020.

Cash Flows Used In Investing Activities

Net investing activities during the first three months of 2020 used $42.7 million compared to $90.3 million in the prior year period. Additions to property, plant and equipment were $48.3 million during the first three months of 2020 compared to $57.6 million in the first three months of 2019. The decrease in cash used in investing activities was attributable to acquisition activities in the 2019 period.

In light of the logistical difficulties resulting from the COVID-19 pandemic and to preserve our liquidity, where possible we have evaluated and re-prioritized our capital projects. We expect that capital spending in 2020 will be about 4% of sales (net of potential grants and other reimbursements from government authorities), down from 5% in 2019.

Frutarom Integration Initiative

We expect to incur costs related to the Frutarom Integration Initiative. Initially, integration projects will primarily be focused on driving cost synergies in the manufacturing and creative networks, procurement and overhead functions. Restructuring costs associated with these initiatives are expected to include employee-related cash costs, including severance, retirement and other termination benefits, fixed asset write-downs and contract termination and other costs. In addition, other costs associated with the Frutarom Integration Initiative are expected to include advisory and personnel costs for managing and implementing integration projects.

Total restructuring costs for the program are expected to be approximately $60 million including cash and non-cash items. During the first three months of 2020, we incurred $4.9 million in costs related to the closure of 4 sites. The costs principally related to severance and fixed asset write-downs, with the remainder comprising costs such as contract termination and relocation.

Additionally, during the first three months of 2020, we recorded $3.6 million in advisory services, retention bonuses and performance stock awards costs related to the integration of the Frutarom acquisition.

As a result of the outbreak of COVID-19 and the related uncertainty and complexity of the environment, we now expect that some restructuring activities and their related charges will extend into 2021 rather than being completed at the end of 2020 as previously planned. We continue to target to achieve those savings by the end of 2021, although it is possible the full realization could occur in 2022 because of the impact of COVID-19.

We expect to achieve $145 million of synergy targets, and realized approximately $50 million of cost synergies in 2019. As of the first quarter 2020, we have realized approximately $15 million of cost synergies year-to-date.

Cash Flows Used In Financing Activities

Cash used in financing activities in the first three months of 2020 was $107.2 million compared to $112.2 million in the prior year period. The decrease in cash used in financing activities was principally driven by lower repayments of debt, offset by purchases of redeemable noncontrolling interests in the current year.

We paid dividends totaling $80.0 million in the 2020 period. We declared a cash dividend per share of $0.75 in the first quarter of 2020 that was paid on April 6, 2020 to all shareholders of record as of March 26, 2020.

Our capital allocation strategy seeks to maintain our investment grade rating while investing in the business and continuing to pay dividends and repaying debt. We make capital investments in our businesses to support our operational needs and strategic long term plans. We are committed to maintaining our history of paying a dividend to investors which is determined by our Board of Directors at its discretion based on various factors.

We currently have a board approved stock repurchase program with a total remaining value of $279.7 million. As of May 7, 2018, we have suspended our share repurchases.

32

Effect of exchange rate changes on cash, cash equivalents and restricted cash

Overall cash, cash equivalents and restricted cash were also affected by exchange rates changes, which resulted in a $42.5 million reduction in cash for the three months ended March 31, 2020 compared to an increase of $3.9 million for the three months ended March 31, 2019.

Capital Resources

Operating cash flow provides the primary source of funds for capital investment needs, dividends paid to shareholders and debt service repayments. We anticipate that cash flows from operations and availability under our existing credit facilities will be sufficient to meet our investing and financing needs. We regularly assess our capital structure, including both current and long-term debt instruments, as compared to our cash generation and investment needs in order to provide ample flexibility and to optimize our leverage ratios. We believe our existing cash balances are sufficient to meet our debt service requirements.

Pending Transaction with Nutrition & Biosciences, Inc.

In conjunction with the DuPont N&B Transaction, IFF and N&B have engaged Morgan Stanley Senior Funding, Inc. and Credit Suisse Loan Funding LLC as joint lead arrangers and bookrunners to structure, arrange and syndicate the financings that will be required to close the transaction. Specifically, N&B will be the initial borrower under a $1.25 billion 3-year/5-year senior unsecured term loan facility and, to the extent necessary, a $6.25 billion tranche of the 364-Day senior unsecured bridge facility, which will be used to finance the Special Cash Payment to DuPont in connection with the separation and to pay related fees and expenses. N&B may access the bond markets in advance of closing the merger to pre-fund the transaction and replace all or a portion of the Bridge Facility. Following the consummation of the DuPont N&B Transaction, all obligations of N&B will be guaranteed by IFF, or at the election of N&B and IFF, assumed by IFF.

Upon completion of our combination with N&B, DuPont shareholders will own approximately 55.4% of the shares of IFF, and existing IFF shareholders will own approximately 44.6% of the shares of IFF. A proxy statement is expected to be filed with the SEC pursuant to which IFF shareholders will be asked to approve the share issuance required to effect the N&B Transaction.

The Credit Facility and Term Loan contain various covenants, limitations and events of default customary for similar facilities for similarly rated borrowers, including the requirement for us to maintain, at the end of each fiscal quarter, a ratio of net debt for borrowed money to adjusted EBITDA in respect of the previous 12-month period, of not more than 4.5 to 1.0, which shall be reduced to 4.25 to 1.0 as of the end of September 30, 2019, 4.0 to 1.0 as of the end of March 31, 2020 and to 3.5 to 1.0 as of the end of March 31, 2021. After the expected closing date of the pending N&B transaction in the first quarter of 2021, the Company’s maximum permitted ratio of Net Debt to Consolidated EBITDA shall be 4.50 to 1.0, stepping down to 3.50 to 1.0 over time (with a step-up if the Company consummates certain qualified acquisitions).

As of March 31, 2020 we had no outstanding borrowings under our $1 billion Credit Facility and $240 million outstanding for the Term Loan. The amount that we are able to draw down under the Credit Facility is limited by financial covenants as described in more detail below. As of March 31, 2020, our draw down capacity was $790 million under the Credit Facility.

At March 31, 2020, we were in compliance with all financial and other covenants, including the net debt to adjusted EBITDA ratio. At March 31, 2020 our Net Debt/adjusted EBITDA⁽¹⁾ ratio was 3.33 to 1.0 as defined by the credit facility agreements, well below the financial covenants of existing outstanding debt.

_______________________ 

(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:

33

(DOLLARS IN MILLIONS)	Twelve Months Ended March 31, 2020
Net income	$	471.7
Interest expense	133.7
Income taxes	100.1
Depreciation and amortization	322.1
Specified items (1)	105.8
Non-cash items (2)	38.9
Adjusted EBITDA	$	1,172.3

(1) Specified items for the 12 months ended March 31, 2020 of $105.8 million, consisted of operational improvement initiatives, acquisition related costs, Frutarom integration related costs, restructuring and other charges, net, FDA mandated product recall, Frutarom acquisition related costs, compliance review & legal defense costs, N&B transaction related costs and N&B integration related costs.

(2) Non-cash items represent all other adjustments to reconcile net income to net cash provided by operations as presented on the Statement of Cash Flows, including gain on disposal of assets and stock-based compensation.

(DOLLARS IN MILLIONS)	March 31, 2020
Total debt	$	4,332.5
Adjustments:
Cash and cash equivalents	433.2
Net debt	$	3,899.3

Senior Notes

As of March 31, 2020, we had $4.05 billion aggregate principal amount outstanding in senior unsecured notes, with $1.75 billion principal amount denominated in EUR and $2.30 billion principal amount denominated in USD. The notes bear interest ranging from 0.50% per year to 5.00% per year, with maturities from September 2020 to September 2048. Of these notes, $300 million in aggregate principal amount of our 3.40% senior notes will mature in September 2020.

Contractual Obligations

We expect to contribute a total of $4.4 million to our U.S. pension plans and a total of $20.9 million to our Non-U.S. plans during 2020. During the three months ended March 31, 2020, there were no contributions made to the qualified U.S. pension plans, $3.9 million of contributions were made to the non-U.S. pension plans, and $1.5 million of benefit payments were made with respect to our non-qualified U.S. pension plan. We also expect to contribute $3.8 million to our postretirement benefits other than pension plans during 2020. During the three months ended March 31, 2020, $1.0 million of contributions were made to postretirement benefits other than pension plans.

As discussed in Note 15 to the Consolidated Financial Statements, at March 31, 2020, we had entered into various guarantees and had undrawn outstanding letters of credit from financial institutions. These arrangements reflect ongoing business operations, including commercial commitments, and governmental requirements associated with audits or litigation that are in process with various jurisdictions. Based on the current facts and circumstances, these arrangements are not reasonably likely to have a material impact on our consolidated financial condition, results of operations, or cash flows.

New Accounting Standards

Please refer to Note 1 to the Consolidated Financial Statements for a discussion of recent accounting pronouncements.

Non-GAAP Financial Measures

We use non-GAAP financial measures in this Form 10-Q, including: (i) currency neutral metrics, (ii) adjusted gross margin, (iii) adjusted operating profit and adjusted operating margin, (iv) adjusted selling and administrative expenses, and (v) adjusted effective tax rate. We also provide the non-GAAP measures adjusted EBITDA and net debt solely for the purpose of providing information on the extent to which the Company is in compliance with debt covenants contained in its debt agreements. Our non-GAAP financial measures are defined below.

These non-GAAP financial measures are intended to provide additional information regarding our underlying operating results and comparable year-over-year performance. Such information is supplemental to information presented in accordance

34

with GAAP and is not intended to represent a presentation in accordance with GAAP. In discussing our historical and expected future results and financial condition, we believe it is meaningful for investors to be made aware of and to be assisted in a better understanding of, on a period-to-period comparable basis, financial amounts both including and excluding these identified items, as well as the impact of exchange rate fluctuations. These non-GAAP measures should not be considered in isolation or as substitutes for analysis of the Company’s results under GAAP and may not be comparable to other companies’ calculation of such metrics.

Currency neutral metrics eliminate the effects that result from translating international currency to U.S. dollars. We calculate currency neutral numbers by comparing current year results to the prior year results restated at exchange rates in effect for the current year based on the currency of the underlying transaction.

Adjusted gross margin exclude operational improvement initiatives, Frutarom integration related costs, and Frutarom acquisition related costs.

Adjusted selling and administrative expenses exclude Frutarom integration related costs, Frutarom acquisition related costs, compliance review & legal defense costs, N&B transaction related costs, and N&B integration related costs.

Adjusted operating profit and adjusted operating margin exclude operational improvement initiatives, Frutarom integration related costs, restructuring and other charges, net, losses (gains) on sale of assets, Frutarom acquisition related costs, compliance review & legal defense costs, N&B transaction related costs, and N&B integration related costs.

Adjusted effective tax rate exclude operational improvement initiatives, Frutarom integration related costs, restructuring and other charges, net, losses (gains) on sale of assets, Frutarom acquisition related costs, compliance review & legal defense costs, N&B transaction related costs, and N&B integration related costs .

Net Debt to Combined Adjusted EBITDA is the leverage ratio used in our credit agreement and defined as Net Debt (which is long-term debt less cash and cash equivalents) divided by Combined Adjusted EBITDA. However, as Adjusted EBITDA for these purposes was calculated in accordance with the provisions of the credit agreement, it may differ from the calculation used for other purposes.

A. Reconciliation of Non-GAAP Metrics

Reconciliation of Gross Profit
	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020		2019
Reported (GAAP)	$	565,867	$	531,259
Operational Improvement Initiatives (a)	—		406
Frutarom Integration Related Costs (b)	149		156
Frutarom Acquisition Related Costs (d)	513		7,850
Adjusted (Non-GAAP)	$	566,529	$	539,671

Reconciliation of Selling and Administrative Expenses
	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020			2019
Reported (GAAP)	$	229,714		$	213,182
Frutarom Integration Related Costs (b)	(3,279		)	(14,557		)
Frutarom Acquisition Related Costs (d)	(300		)	(1,679		)
Compliance Review & Legal Defense Costs (e)	(649		)	—
N&B Transaction Related Costs (f)	(5,199		)	—
N&B Integration Related Costs (g)	(10,144		)	—
Adjusted (Non-GAAP)	$	210,143		$	196,946

35

Reconciliation of Operating Profit
	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020		2019
Reported (GAAP)	$	196,222	$	163,870
Operational Improvement Initiatives (a)	—		406
Frutarom Integration Related Costs (b)	3,650		14,897
Restructuring and Other Charges, net (c)	4,918		16,174
Losses (Gains) on Sale of Assets	754		(188		)
Frutarom Acquisition Related Costs (d)	813		9,529
Compliance Review & Legal Defense Costs (e)	649		—
N&B Transaction Related Costs (f)	5,199		—
N&B Integration Related Costs (g)	10,144		—
Adjusted (Non-GAAP)	$	222,349	$	204,688

Reconciliation of Net Income
	Three Months Ended March 31,
	2020										2019
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)	Income before taxes		Taxes on income (i)			Net Income Attributable to IFF (j)		Diluted EPS (k)			Income before taxes			Taxes on income (i)			Net Income Attributable to IFF (j)			Diluted EPS
Reported (GAAP)	$	153,508	$	26,297		$	124,607	$	1.15		$	134,576		$	23,362		$	108,829		$	0.96
Operational Improvement Initiatives (a)	—		—			—		—			406			142			264			—
Frutarom Integration Related Costs (b)	3,650		815			2,835		0.02			14,897			3,349			11,548			0.10
Restructuring and Other Charges, net (c)	4,918		1,034			3,884		0.03			16,174			4,031			12,143			0.11
Losses (Gains) on Sale of Assets	754		189			565		—			(188		)	(43		)	(145		)	—
Frutarom Acquisition Related Costs (d)	213		(1,634		)	1,847		0.02			9,529			1,530			7,999			0.07
Compliance Review & Legal Defense Costs (e)	649		135			514		—			—			—			—			—
N&B Transaction Related Costs (f)	5,199		—			5,199		0.05			—			—			—			—
N&B Integration Related Costs (g)	10,144		2,168			7,976		0.07			—			—			—			—
Redemption value adjustment to EPS (h)	—		—			—		(0.05		)	—			—			—			—
Adjusted (Non-GAAP)	$	179,035	$	29,004		$	147,427	$	1.30		$	175,394		$	32,371		$	140,638		$	1.24

36

(a)	Represents accelerated depreciation related to a plant relocation in India.
(b)	Represents costs related to the integration of the Frutarom acquisition. For 2020, costs primarily related to advisory services, retention bonuses and performance stock awards. For 2019, costs principally related to advisory services.
(c)	For 2020, represents costs primarily related to the Frutarom Integration Initiative. For 2019, represents costs primarily related to the Frutarom Integration Initiative and the 2019 Severance Charges program.
(d)	Represents transaction-related costs and expenses related to the acquisition of Frutarom. For 2020, amount primarily includes earn-out payments, net of adjustments, amortization for inventory "step-up" costs and transaction costs principally related to the 2019 Acquisition Activity. For 2019, amount primarily includes amortization for inventory "step-up" costs and transaction costs.
(e)	Costs related to reviewing the nature of inappropriate payments and review of compliance in certain other countries. In addition, includes legal costs for related shareholder lawsuits.
(f)	Represents transaction costs and expenses related to the pending transaction with Nutrition & Biosciences Inc.
(g)	Represents costs related to the integration of the pending transaction with Nutrition & Biosciences Inc.
(h)	Represents the adjustment to EPS related to the excess of the redemption value of certain redeemable noncontrolling interests over their existing carrying value.
(i)	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 or are subject to a valuation allowance for which the tax expense (benefit) was calculated at 0%. For fiscal years 2020 and 2019, these non-GAAP adjustments were not subject to foreign tax credits, 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).
(j)	For 2020 and 2019, net income is reduced by income attributable to noncontrolling interest of $2.6M and $2.4M, respectively.
(k)	The sum of these items does not foot due to rounding.

B. Foreign Currency Reconciliation                        

	Three Months Ended
	March 31,
	2020	2019
Operating Profit:
% Change - Reported (GAAP)	19.7%	(6.3)%
Items impacting comparability	(11.1)%	19.4%
% Change - Adjusted (Non-GAAP)	8.6%	13.1%
Currency Impact	2.0%	1.3%
% Change Year-over-Year - Currency Neutral Adjusted (Non-GAAP)*	10.6%	14.4%

_______________________ 

* Currency neutral amount is calculated by translating prior year amounts at the exchange rates used for the corresponding 2020 period. Currency neutral operating profit also eliminates the year-over-year impact of cash flow hedging.

37

Cautionary Statement Under the Private Securities Litigation Reform Act of 1995

Statements in this Form 10-Q, that are not historical facts or information, are “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management’s current assumptions, estimates and expectations and include statements concerning (i) the impacts of COVID-19 and our plans to respond to its implications, (ii) the proposed combination with DuPont’s Nutrition & Biosciences business (“N&B”), (iii) our ability to achieve the anticipated benefits of the Frutarom acquisition, including $145 million of expected synergies,, (iv), (v) expected capital expenditures in 2020, (vi) expected costs associated with our various restructuring activities, (vii) our margin expectations for 2020, (viii) expected cash flow and availability of capital resources to fund our operations and meet our debt service requirements, (ix) our ability to continue to generate value for, and return cash to, our shareholders, and (x) anticipated contributions to our pension plans and other post-retirement programs in 2020. These forward-looking statements should be evaluated with consideration given to the many risks and uncertainties inherent in our business that could cause actual results and events to differ materially from those in the forward-looking statements. Certain of such forward-looking information may be identified by such terms as “expect”, “anticipate”, “believe”, “intend”, “outlook”, “may”, “estimate”, “should”, “predict” and similar terms or variations thereof. Such forward-looking statements are based on a series of expectations, assumptions, estimates and projections about the Company, are not guarantees of future results or performance, and involve significant risks, uncertainties and other factors, including assumptions and projections, for all forward periods. Our actual results may differ materially from any future results expressed or implied by such forward-looking statements. Such factors include, among others, the following:

• disruption in the development, manufacture, distribution or sale of our products from Covid-19 and other public health crises;

• 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;

• our ability to realize expected cost savings and increased efficiencies of the Frutarom integration and our ongoing optimization of our manufacturing facilities;

• our ability to successfully establish and manage acquisitions, collaborations, joint ventures or partnership;

• 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 our expanded and diverse Taste customer base;

• our ability to effectively compete in our market and develop and introduce new products that meet customers’ needs;

• our ability to retain key employees;

• changes in demand from large multi-national customers due to increased competition and our ability to maintain “core list” status with customers;

• our ability to successfully develop innovative and cost-effective products that allow customers to achieve their own profitability expectations;

• disruption in the development, manufacture, distribution or sale of our products from natural disasters, international conflicts, terrorist acts, labor strikes, political crisis, accidents and similar events;

• 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;

• the impact of a significant data breach or other disruption in our information technology systems, and our ability to comply with data protection laws in the U.S. and abroad;

• 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;

• our ability to react in a timely and cost-effective manner to changes in consumer preferences and demands, including increased awareness of health and wellness;

• our ability to meet consumer, customer and regulatory sustainability standards;

• our ability to benefit from our investments and expansion in emerging markets;

38

• the impact of currency fluctuations or devaluations in the principal foreign markets in which we operate;

• economic, regulatory and political risks associated with our international operations;

• the impact of global economic uncertainty on demand for consumer products;

• our ability to comply with, and the costs associated with compliance with, U.S. and foreign environmental protection laws;

• our ability to successfully manage our 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;

• any impairment on our tangible or intangible long-lived assets, including goodwill associated with the acquisition of Frutarom;

• our ability to protect our 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 changes in federal, state, local and international tax legislation or policies, including the Tax Cuts and Jobs Act, with respect to transfer pricing and state aid, and adverse results of tax audits, assessments, or disputes;

• the impact of the United Kingdom’s expected departure from the European Union;

• the impact of the phase out of the London Interbank Office Rate (LIBOR) on interest expense;

• risks associated with our pending combination with N&B, including business uncertainties and contractual restrictions while the transaction is pending, costs incurred in connection with the transaction, our ability to pursue alternative transactions, and the impact if we fail to complete the transaction; and

• risks associated with the integration of N&B if we are successful in completing the transaction, including whether we will realize the anticipated synergies and other benefits of the transaction.

We intend our forward-looking statements to speak only as of the time of such statements and do not undertake or plan to update or revise them as more information becomes available or to reflect changes in expectations, assumptions or results. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this report or included in our other periodic reports filed with the SEC could materially and adversely impact our operations and our future financial results.

Any public statements or disclosures made by us following this report that modify or impact any of the forward-looking statements contained in or accompanying this report will be deemed to modify or supersede such outlook or other forward-looking statements in or accompanying this report.

The foregoing list of important factors does not include all such factors, nor necessarily present them in order of importance. In addition, you should consult other disclosures made by the Company (such as in our other filings with the SEC or in company press releases) for other factors that may cause actual results to differ materially from those projected by the Company. Please refer to Part I. Item 1A., Risk Factors of the 2019 Form 10-K for additional information regarding factors that could affect our results of operations, financial condition and cash flow.

39

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

There are no material changes in market risk from the information provided in our 2019 Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES.

(a) Disclosure Controls and Procedures

The Chief Executive Officer and Chief Financial Officer, with the assistance of other members of our management, have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

We have established controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to management, including the principal executive officer and the principal financial officer, to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control over Financial Reporting

The Chief Executive Officer and Chief Financial Officer have also concluded that there have not been any changes in our internal control over financial reporting during the quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

40

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We are subject to various claims and legal actions in the ordinary course of our business.

Litigation Matters

On August 12, 2019, Marc Jansen filed a putative securities class action against IFF, its Chairman and CEO, and its CFO, in the United States District Court for the Southern District of New York. The lawsuit was filed after IFF disclosed that preliminary results of investigations indicated that Frutarom businesses operating principally in Russia and Ukraine had made improper payments to representatives of customers. On December 26, 2019, the Court appointed a group of six investment funds as lead plaintiff and Pomerantz LLP as lead counsel. On March 16, 2020, lead plaintiff filed an amended complaint, which added Frutarom and certain former officers of Frutarom as defendants. The amended complaint alleges, among other things, that defendants made materially false and misleading statements or omissions concerning IFF’s acquisition of Frutarom, the integration of the two companies, and the companies’ financial reporting and results. The amended complaint asserts claims under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, and under the Israeli Securities Act-1968, against all defendants, and under Section 20(a) of the Securities Exchange Act of 1934 against the individual defendants, on behalf of a putative class of persons and entities who purchased or otherwise acquired IFF securities on the New York Stock Exchange between May 7, 2018 and August 12, 2019 and persons and entities who purchased or otherwise acquired IFF securities on the Tel Aviv Stock Exchange between October 9, 2018 and August 12, 2019. The amended complaint seeks an award of unspecified compensatory damages, costs, and expenses.

 Two motions to approve securities class actions were filed in the Tel Aviv District Court, Israel, in August 2019, similarly alleging, among other things, false and misleading statements largely in connection with IFF’s acquisition of Frutarom and the above-mentioned improper payments.  Both assert claims under the U.S. federal securities laws against IFF, its Chairman and CEO, and its former CFO. One also asserts claims under the Israeli Securities Act-1968 against IFF, as well as against Frutarom and certain former Frutarom officers and directors, and asserts claims under the Israeli Companies Act-1999 against certain former Frutarom officers and directors.

 On October 29, 2019, IFF and Frutarom filed a claim in the Tel Aviv District Court, Israel, against Ori Yehudai, the former President and CEO of Frutarom, and against certain former directors of Frutarom, challenging the bonus of US $20 million granted to Yehudai in 2018. IFF and Frutarom allege, among other things, that Yehudai was not entitled to receive the bonus because he breached his fiduciary duty by, among other things, knowing of the above-mentioned improper payments and failing to prevent them from being made.

On March 11, 2020, an IFF shareholder filed a motion to approve a class action in Israel against, among others, Frutarom, Yehudai, and Frutarom’s former board of directors, alleging that former minority shareholders of Frutarom were harmed as a result of the US $20 million bonus paid to Yehudai.

ITEM 1a. RISK FACTORS.

The following additional risk factor relating to COVID-19 should be read in conjunction with the risk factors previously disclosed in Part I, Item 1A, “Risk Factors,” of our 2019 Annual Report on Form 10-K (the "2019 Form 10-K") and the information contained in this Quarterly Report on Form 10-Q and our other reports and registration statements filed with the SEC. The developments described in this additional risk factor have heightened, or in some cases manifested, certain of the risks disclosed in the risk factor section of our 2019 Form 10-K, and such risk factors are further qualified by the information relating to COVID-19 that is described in this Quarterly Report on Form 10-Q, including in the additional risk factor below. Except as described herein, there have been no material changes with respect to the risk factors disclosed in our 2019 Form 10-K.

Supplemental Risk Factor:

The COVID-19 pandemic may materially and adversely impact IFF’s operations, financial condition, results of operations and cash flows.

COVID-19 was identified in China in late 2019 and has spread globally. Government authorities, including those in countries where IFF has manufacturing and other operations, have taken various measures to try to contain this spread, such as the closure of non-essential businesses, reduced travel, the closure of retail establishments, the promotion of social distancing and remote working policies. These measures have impacted and may further impact IFF's workforce and operations, and the operations of its customers, vendors and suppliers.

The COVID-19 pandemic has subjected IFF’s operations, financial condition and results of operations to a number of risks, including, but not limited to, those discussed below:

41

•Operations-related risks: As a result of government measures taken to contain the outbreak, IFF’s manufacturing plants and offices in China were required to close for a limited period of time in February 2020, and a portion of IFF’s manufacturing plants in India, Vietnam and Israel were required to reduce operations. Substantially all of IFF’s manufacturing facilities are currently operational. In addition, some of IFF’s R&D and creative applications centers are operating on limited schedules or with a reduced workforce comprised of essential employees as a result of certain safety measures implemented by IFF to limit the number of the on-site workforce.

The ability of IFF to continue to supply its products is highly dependent on its ability to maintain the safety of its workforce. The ability of employees to work may be significantly impacted by individuals contracting or being exposed to COVID-19, and IFF’s operations and financial results may be negatively affected as a result. While IFF is following the requirements of governmental authorities and taking additional preventative and protective measures to ensure the safety of its workforce, there can be no assurance that these measures will be successful, and to the extent that employees in IFF’s manufacturing or distribution centers contract COVID-19, IFF may be required to temporarily close those facilities, which may result in reduced production hours, more rigorous cleaning processes and other preventative and protective measures for employees. Workforce disruptions of this nature may significantly impact IFF’s ability to maintain its operations and may adversely impact its financial results.

Resolving such operational challenges has increased certain costs, such as labor, shipping, and cleaning, and the failure to resolve such challenges may result in our inability to deliver products to our customers and reduce sales.

•Supply chain-related risks: IFF has experienced some disruption primarily regarding distribution of certain raw materials and transport logistics in markets where governments have implemented the strictest regulations. More significant disruptions may occur if the COVID-19 pandemic continues to impact markets around the world. In addition, as a result of disruptions to IFF’s supply chain, IFF is experiencing, and may continue to experience, increased costs for raw materials, shipping and transportation resources, which has negatively impacted, and may continue to negatively impact, IFF’s margins and operating results.

•Customer-related risks: IFF is experiencing, and may continue to experience, changes in the demand and volume for certain of its products, including due to consumption or stocking behavior changes. For example, ingredients used in products sold mainly in retail outlets, such as fine fragrances or flavors used in retail food services, have seen a decrease in demand as these outlets have closed due to COVID-19 related restrictions. In addition, IFF has received requests for extensions in payment terms from some customers in select markets whose products are experiencing reduced demand.

Although IFF do not currently anticipate any impairment charges related to COVID-19, the continuing effects of a prolonged pandemic could result in increased risk of asset write-downs and impairments, including, but not limited to, equity investments, goodwill and intangibles. Any of these events could potentially result in a material adverse impact on the IFF’s business and results of operations.

•Market-related risks: The funding obligations for IFF’s pension plans will be impacted by the performance of the financial markets, particularly the equity markets and interest rates. Lower interest rates and lower expected asset valuations and returns can materially impact the calculation of long-term liabilities such as pension liabilities. In addition, the volatility in financial and commodities markets may have adverse impacts on other asset valuations such as the value of the investment portfolios supporting pension obligations. If the financial markets do not provide the long-term returns that are expected, IFF could be required to make larger contributions.

In addition to the risks noted above, COVID-19 may also heighten other risks described in our 2019 Form 10-K, including, but not limited to, risks related to a decrease in global demand for consumer products, manufacturing disruptions, disruption in the supply chain, price volatility for raw materials, level of indebtedness, currency fluctuations and impairment of long-lived assets. Further, the magnitude of the impact of the COVID-19 pandemic, including the extent of its impact on IFF’s operating and financial results, will be determined by the length of time that the pandemic continues, and while government authorities’ measures relating to COVID-19 may be relaxed if and when COVID-19 abates, these measures may be reinstated as the pandemic continues to evolve. The scope and timing of any such reinstatements are difficult to predict and may materially impact IFF’s operations in the future. As COVID-19 continues to adversely impact the broader global economy, including negatively impacting economic growth and creating disruption and volatility in the global financial and capital markets, which increases the cost of capital and adversely impacts the availability of and access to capital, this could negatively affect IFF’s liquidity, which could in turn negatively affect IFF’s business, results of operations and financial condition. The COVID-19 pandemic may also affect IFF’s operating and financial results in a manner that is not presently known to us or that we currently do not expect to present significant risks.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

42

ITEM 6. EXHIBITS.

10.1	Amendment No. 4 to Credit Agreement, dated as of January 17, 2020 among International Flavors & Fragrances Inc., International Flavors & Fragrances (Nederland) Holding B.V., International Flavors & Fragrances I.F.F. (Nederland) B.V. and International Flavors & Fragrances (Greater Asia) PTE. Ltd., as borrowers, the lenders signatory thereto and Citibank, N.A. as administrative agent, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 22, 2020.
10.2	Amendment No. 2 to Term Loan Credit Agreement, dated as of January 17, 2020 among International Flavors & Fragrances Inc., as borrower, the lenders signatory thereto and Morgan Stanley Senior Funding, Inc. as administrative agent, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 22, 2020.
31.1	Certification of Andreas Fibig pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Rustom Jilla pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Andreas Fibig and Rustom Jilla pursuant to 18 U.S.C. Section 1350 as adopted pursuant to the Sarbanes-Oxley Act of 2002.
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
104	Cover Page Interactive File (formatted as Inline XBRL and contained in Exhibit 101)

43

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated:	May 11, 2020	By:	/s/ Andreas Fibig
			Andreas Fibig
			Chairman of the Board and Chief Executive Officer
Dated:	May 11, 2020	By:	/s/ Rustom Jilla
			Rustom Jilla
			Executive Vice President and Chief Financial Officer

44

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Andreas Fibig, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of International Flavors & Fragrances Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: May 11, 2020

By:	/s/ Andreas Fibig
Name:	Andreas Fibig
Title:	Chairman of the Board and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Rustom Jilla, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of International Flavors & Fragrances Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: May 11, 2020

By:	/s/ Rustom Jilla
Name:	Rustom Jilla
Title:	Executive Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION OF CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of International Flavors & Fragrances Inc. (the "Company") for the quarterly period ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Andreas Fibig, as Chief Executive Officer, and Rustom Jilla, as Chief Financial Officer, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934;

and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Andreas Fibig
Name:	Andreas Fibig
Title:	Chairman of the Board and Chief Executive Officer
Dated:	May 11, 2020

By:	/s/ Rustom Jilla
Name:	Rustom Jilla
Title:	Executive Vice President and Chief Financial Officer
Dated:	May 11, 2020

XML

CONSOLIDATED BALANCE SHEET (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Trade receivables allowances	$ 18,728	$ 16,428
Common stock, par value, in dollars per share	$ 0.125	$ 0.125
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	128,526,137	128,526,137
Common stock, shares outstanding	106,812,257	106,787,299
Treasury stock, shares at cost	21,713,880	21,738,838

XML

Goodwill and Other Intangible Assets, Net Goodwill and Other Intangible Assets, Net (Notes)

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets, Net

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Goodwill

Movements in goodwill during 2020 were as follows:

(DOLLARS IN THOUSANDS)	Goodwill
Balance at December 31, 2019	$	5,497,596
Measurement period adjustments(1)	(15,283		)
Foreign exchange	(214,754		)
Balance at March 31, 2020	$	5,267,559

_______________________ 

(1) Measurement period adjustments relate to adjustments recorded in connection with completing the purchase price allocation related to the 2019 Acquisition Activity. See Note 3 for details.

Reallocation of goodwill

In the first quarter of 2020, in connection with the reorganization of the Company's reporting structure, certain entities were moved between reporting units. As a result of the movements, Goodwill was reallocated between reporting units as follows:

(DOLLARS IN THOUSANDS)	Increase (decrease) to Goodwill
Cosmetic active ingredients	$	110,788
Natural Product Solutions	(78,945		)
Fine Ingredients	(29,221		)
Taste	(2,622		)
Total	$	—

See Note 11 for further information on the reorganization.

Other Intangible Assets

Other intangible assets, net consisted of the following amounts: 

	March 31,			December 31,
(DOLLARS IN THOUSANDS)	2020			2019
Asset Type
Customer relationships	$	2,561,536		$	2,653,446
Trade names & patents	174,134			178,968
Technological know-how	455,226			468,256
Other	22,410			40,362
Total carrying value	3,213,306			3,341,032
Accumulated Amortization
Customer relationships	(348,509		)	(302,047		)
Trade names & patents	(30,595		)	(27,213		)
Technological know-how	(137,162		)	(135,269		)
Other	(19,594		)	(24,568		)
Total accumulated amortization	(535,860		)	(489,097		)
Other intangible assets, net	$	2,677,446		$	2,851,935

Amortization

Amortization expense was $48.4 million and $47.6 million for the three months ended March 31, 2020 and 2019, respectively.

Amortization expense for the next five years is expected to be as follows:

(DOLLARS IN THOUSANDS)	2020		2021		2022		2023		2024
Estimated future intangible amortization expense	$	135,577	$	178,000	$	174,245	$	174,135	$	174,135

XML

Income Taxes

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Uncertain Tax Positions

As of March 31, 2020, the Company had $71.4 million of unrecognized tax benefits recorded in Other liabilities and $0.7 million recorded to Other current liabilities. If these unrecognized tax benefits were recognized, the effective tax rate would be affected.

At March 31, 2020, the Company had accrued interest and penalties of $14.2 million classified in Other liabilities and less than $0.1 million classified in Other current liabilities.

As of March 31, 2020, the Company’s aggregate provisions for uncertain tax positions, including interest and penalties, was $86.4 million associated with tax positions asserted in various jurisdictions, none of which is individually material.

The Company regularly repatriates earnings from non-U.S. subsidiaries. As the Company repatriates these funds to the U.S., they will be required to pay income taxes in certain U.S. states and applicable foreign withholding taxes during the period when such repatriation occurs. Accordingly, as of March 31, 2020, the Company had a deferred tax liability of $42.6 million for the effect of repatriating the funds to the U.S., attributable to various non-U.S. subsidiaries. There is no deferred tax liability associated with non-U.S. subsidiaries where we intend to indefinitely reinvest the earnings to fund local operations and/or capital projects.

The Company has ongoing income tax audits and legal proceedings which are at various stages of administrative or judicial review. In addition, the Company has open tax years with various taxing jurisdictions that range primarily from 2010 to 2019. Based on currently available information, the Company does not believe the outcome of any of these tax audits and other tax positions related to open tax years, when finalized, will have a material impact on its results of operations.

The Company also has other ongoing tax audits and legal proceedings that relate to indirect taxes, such as value-added taxes, sales and use taxes and property taxes, which are discussed in Note 15.

Effective Tax Rate

The effective tax rate for the three months ended March 31, 2020 was 17.1% compared with 17.4% for the three months ended March 31, 2019. The quarter-over-quarter decrease is primarily due to lower repatriation costs and the reversal of loss provisions, partially offset by an unfavorable mix of earnings.

XML

CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Statement of Stockholders' Equity [Abstract]
Tax effect of gain (losses) on derivatives qualifying as hedges	$ (176)	$ 44
Tax effect of pension liability and postretirement adjustment	$ (1,022)	$ 836
Cash dividends declared, per share	$ 0.75	$ 0.73

XML

Nature of Operations and Summary of Significant Accounting Policies - Contract Assets, Receivables, and Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Disaggregation of Revenue [Line Items]
Revenues	$ 1,347,317	$ 1,297,402
Receivables (included in Trade receivables)	961,842		$ 892,625
Contract asset - Short term	1,951		2,736
Contract liabilities - Short term	11,379		$ 11,107
Flavor Compounds
Disaggregation of Revenue [Line Items]
Revenues	830,322	804,802
Fragrance Compounds
Disaggregation of Revenue [Line Items]
Revenues	516,995	492,600
Flavor compounds | Flavor Compounds
Disaggregation of Revenue [Line Items]
Revenues	576,368	567,314
Savory solutions | Flavor Compounds
Disaggregation of Revenue [Line Items]
Revenues	155,764	136,337
Inclusions | Flavor Compounds
Disaggregation of Revenue [Line Items]
Revenues	30,146	28,633
Nutrition and specialty ingredients | Flavor Compounds
Disaggregation of Revenue [Line Items]
Revenues	43,955	44,208
Flavor ingredients | Flavor Compounds
Disaggregation of Revenue [Line Items]
Revenues	24,089	28,310
Fine fragrances | Fragrance Compounds
Disaggregation of Revenue [Line Items]
Revenues	94,150	106,074
Consumer fragrance | Fragrance Compounds
Disaggregation of Revenue [Line Items]
Revenues	314,028	283,221
Fragrance ingredients | Fragrance Compounds
Disaggregation of Revenue [Line Items]
Revenues	$ 108,817	$ 103,305

XML

Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2020

Investments, All Other Investments [Abstract]

Carrying Amount and Estimated Fair Values of Financial Instruments

The carrying values and the estimated fair values of financial instruments at March 31, 2020 and December 31, 2019 consisted of the following: 

	March 31, 2020				December 31, 2019
(DOLLARS IN THOUSANDS)	Carrying Value		Fair Value		Carrying Value		Fair Value
LEVEL 1
Cash and cash equivalents(1)	$	433,246	$	433,246	$	606,823	$	606,823
LEVEL 2
Credit facilities and bank overdrafts(2)	2,594		2,594		3,131		3,131
Derivatives
Derivative assets(3)	32,892		32,892		3,575		3,575
Derivative liabilities(3)	5,631		5,631		7,415		7,415
Long-term debt:(4)
2020 Notes	299,598		301,191		299,381		302,700
2021 Euro Notes	327,408		327,667		334,561		338,244
2023 Notes	299,080		303,381		299,004		305,580
2024 Euro Notes	546,009		549,159		558,124		586,825
2026 Euro Notes	870,689		822,800		890,183		945,306
2028 Notes	396,766		418,176		396,688		441,500
2047 Notes	493,676		446,510		493,571		526,106
2048 Notes	786,050		823,569		785,996		919,040
Term Loan(2)	239,665		240,000		239,621		240,000
Amortizing Notes(5)	70,882		71,810		82,079		84,430

_______________________

(1) The carrying amount of cash and cash equivalents approximates fair value due to the short maturity of those instruments.

(2) The carrying amount approximates fair value as the interest rate is reset frequently based on current market rates as well as the short maturity of those instruments.

(3) The carrying amount approximates fair value as the instruments are marked-to-market and held at fair value on the Consolidated Balance Sheet.

(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.

Derivative Instruments Notional Amount Outstanding

The following table shows the notional amount of the Company’s derivative instruments outstanding as of March 31, 2020 and December 31, 2019: 

(DOLLARS IN THOUSANDS)	March 31, 2020		December 31, 2019
Foreign currency contracts	$	242,904	$	473,600
Cross currency swaps	600,000		600,000

Derivative Instruments Measured at Fair Value

The following tables show the Company’s derivative instruments measured at fair value (Level 2 of the fair value hierarchy), as reflected in the Consolidated Balance Sheet as of March 31, 2020 and December 31, 2019: 

	March 31, 2020
(DOLLARS IN THOUSANDS)	Fair Value of Derivatives Designated as Hedging Instruments		Fair Value of Derivatives Not Designated as Hedging Instruments		Total Fair Value
Derivative assets(a)
Foreign currency contracts	$	2,803	$	2,421	$	5,224
Cross currency swaps	27,668		—		27,668
	$	30,471	$	2,421	$	32,892
Derivative liabilities(b)
Foreign currency contract	$	—	$	5,631	$	5,631

	December 31, 2019
(DOLLARS IN THOUSANDS)	Fair Value of Derivatives Designated as Hedging Instruments		Fair Value of Derivatives Not Designated as Hedging Instruments		Total Fair Value
Derivative assets(a)
Foreign currency contracts	$	1,310	$	2,265	$	3,575
Derivative liabilities(b)
Foreign currency contracts	$	797	$	2,431	$	3,228
Interest rate swaps	4,187		—		4,187
Total derivative liabilities	$	4,984	$	2,431	$	7,415

 _______________________

(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

Derivative Instruments Which Were Not Designated as Hedging Instruments

The following table shows the effect of the Company’s derivative instruments which were not designated as hedging instruments in the Consolidated Statement of Income and Comprehensive (Loss) Income for the three months ended March 31, 2020 and 2019 (in thousands): 

	Amount of Gain (Loss)					Location of Gain (Loss) Recognized in Income on Derivative
(DOLLARS IN THOUSANDS)	Three Months Ended March 31,
	2020			2019
Foreign currency contracts(1)	$	(7,663	)	$	926	Other (income) expense, net

 _______________________

(1)

The foreign currency contract net gains (losses) offset any recognized gains (losses) arising from the revaluation of the related intercompany loans during the same respective periods.

Derivative Instruments Designated as Cash Flow and Net Investment Hedging Instruments

The following table shows the effect of the Company’s derivative and non-derivative instruments designated as cash flow and net investment hedging instruments, net of tax, in the Consolidated Statement of Income and Comprehensive (Loss) Income for the three months ended March 31, 2020 and 2019 (in thousands): 

	Amount of Gain (Loss)  Recognized in OCI on Derivative					Location of Gain (Loss) Reclassified from AOCI into Income	Amount of Gain (Loss)  Reclassified from Accumulated OCI into Income
	Three Months Ended March 31,						Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020		2019				2020			2019
Derivatives in Cash Flow Hedging Relationships:
Foreign currency contracts	$	1,231	$	(312	)	Cost of goods sold	$	2,069		$	2,372
Interest rate swaps (1)	216		216			Interest expense	(216		)	(216		)
Derivatives in Net Investment Hedging Relationships:
Cross currency swaps	21,351		10,667			N/A	—			—
Non-Derivatives in Net Investment Hedging Relationships:
2024 Euro Notes	9,569		4,206			N/A	—			—
2021 Euro Notes & 2026 Euro Notes	21,052		9,253			N/A	—			—
Total	$	53,419	$	24,030			$	1,853		$	2,156

 _______________________

(1)

Interest rate swaps were entered into as pre-issuance hedges for bond offerings

XML

Leases (Tables)

3 Months Ended

Mar. 31, 2020

Leases [Abstract]

Lease cost and other information

The components of lease expense were as follows:

	Three Months Ended		Three Months Ended
(DOLLARS IN THOUSANDS)	March 31, 2020		March 31, 2019
Operating lease cost	$	12,443	$	12,469
Finance lease cost	753		—

Supplemental cash flow information related to leases was as follows:

	Three Months Ended		Three Months Ended
(DOLLARS IN THOUSANDS)	March 31, 2020		March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	12,331	$	11,076
Operating cash flows for finance leases	33		—
Financing cash flows for finance leases	721		—
Right-of-use assets obtained in exchange for lease obligations
Operating leases	10,968		9,249
Finance leases	1,930		452

XML

Goodwill and Other Intangible Assets, Net - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of acquisition-related intangibles	$ 48,350	$ 47,625

XML

Leases - Narrative (Details)	3 Months Ended
	Mar. 31, 2020
Leases [Abstract]
Remaining lease term	40 years
Option to extend lease term	5 years

XML

Stock Compensation Plans - Stock-Based Compensation Expense and Related Tax Benefits (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	$ 7,985	$ 8,334
Less: Tax benefit	(1,394)	(1,382)
Total stock-based compensation expense, after tax	6,591	6,952
Equity-based awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	8,624	7,604
Liability-based awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	$ (639)	$ 730

XML

Commitments and Contingencies - Additional Information (Detail)			3 Months Ended
	Mar. 11, 2020 USD ($)	Oct. 29, 2019 USD ($)	Mar. 31, 2020 USD ($) Facility	Dec. 31, 2019 USD ($)	Dec. 31, 2017 USD ($)	Dec. 15, 2019 USD ($)
Commitments And Contingencies [Line Items]
Bank guarantees related to appeals on income tax and indirect tax cases			$ 13,800,000
Available lines of credit			97,400,000
Property, Plant and Equipment, Net			1,339,124,000	$ 1,386,920,000
Bank guarantees and pledged assets to pursue defenses related to other contingencies			21,500,000
Bank guarantees and standby letters of credit
Commitments And Contingencies [Line Items]
Bank guarantees and letters of credit outstanding			47,800,000
Pledged assets
Commitments And Contingencies [Line Items]
The amount of pledged assets, principally PP&E to cover income tax and indirect tax assessments			7,700,000
Zhejiang Ingredients Plant
Commitments And Contingencies [Line Items]
Gain Contingency, Expected Relocation Payments			13,800,000		$ 50,000,000
Gain Contingency, Relocation Payments Received					$ 15,000,000
Minimum
Commitments And Contingencies [Line Items]
Estimation of possible loss			0
Maximum
Commitments And Contingencies [Line Items]
Estimation of possible loss			10,000,000
Amended credit facility | Citibank, N.A.
Commitments And Contingencies [Line Items]
Line of credit facility, maximum borrowing capacity			789,700,000
CHINA
Commitments And Contingencies [Line Items]
Property, Plant and Equipment, Net			$ 199,000,000
Number of facilities | Facility			8
CHINA | Guangzhou Flavors Plant
Commitments And Contingencies [Line Items]
Property, Plant and Equipment, Net			$ 59,000,000
CHINA | Guangzhou Fragrance Plant
Commitments And Contingencies [Line Items]
Property, Plant and Equipment, Net			9,000,000
CHINA | Zhejiang Ingredients Plant
Commitments And Contingencies [Line Items]
Property, Plant and Equipment, Net			10,000,000
Nutrition & Biosciences, Inc | Senior Unsecured Bridge Term Loan | Unsecured Debt
Commitments And Contingencies [Line Items]
Debt face amount						$ 7,500,000,000
Nutrition & Biosciences, Inc | Senior Unsecured Term Loan Facilities | Unsecured Debt
Commitments And Contingencies [Line Items]
Debt face amount						1,250,000,000
Nutrition & Biosciences, Inc | Three Hundred Sixty Four Day Senior Unsecured Bridge Facility | Unsecured Debt
Commitments And Contingencies [Line Items]
Debt face amount						$ 6,250,000,000
BRAZIL | Foreign Tax Authority
Commitments And Contingencies [Line Items]
Proceeds from Income Tax Refunds			3,500,000	$ 8,000,000.0
BRAZIL | Foreign Tax Authority | BRAZIL
Commitments And Contingencies [Line Items]
Proceeds from Income Tax Refunds			$ 2,200,000
Chief Executive Officer
Commitments And Contingencies [Line Items]
Deferred Compensation Arrangement with Individual, Compensation Expense	$ 20,000,000	$ 20,000,000

XML

Goodwill and Other Intangible Assets, Net - Schedule of Other Intangible Assets, Net (Detail) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Finite-Lived Intangible Assets [Line Items]
Total carrying value	$ 3,213,306	$ 3,341,032
Total accumulated amortization	(535,860)	(489,097)
Other intangible assets, net	2,677,446	2,851,935
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Total carrying value	2,561,536	2,653,446
Total accumulated amortization	(348,509)	(302,047)
Trade names & patents
Finite-Lived Intangible Assets [Line Items]
Total carrying value	174,134	178,968
Total accumulated amortization	(30,595)	(27,213)
Technological know-how
Finite-Lived Intangible Assets [Line Items]
Total carrying value	455,226	468,256
Total accumulated amortization	(137,162)	(135,269)
Other
Finite-Lived Intangible Assets [Line Items]
Total carrying value	22,410	40,362
Total accumulated amortization	$ (19,594)	$ (24,568)

XML

Restructuring and Other Charges, Net - Additional Information (Detail) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2020 USD ($) Facility	Mar. 31, 2019 USD ($)	Dec. 31, 2019 USD ($) Facility Position	Dec. 31, 2017 USD ($)
Restructuring Cost and Reserve [Line Items]
Restructuring charge	$ 4,918	$ 16,174
Frutarom Integration Initiative
Restructuring Cost and Reserve [Line Items]
Expected number of sites closed | Facility	35
Expected number of sites closed, period	12 months
Number of facilities closed | Facility	4		10
2017 Productivity Program
Restructuring Cost and Reserve [Line Items]
Restructuring charge				$ 24,500
Employee Severance | Frutarom Integration Initiative
Restructuring Cost and Reserve [Line Items]
Restructuring charge	$ 15,300
Payments for restructuring	$ 60,000
Employee Severance | 2019 Severance Initiatives
Restructuring Cost and Reserve [Line Items]
Restructuring charge			$ 21,300
Number of positions expected to be eliminated | Position			190
Payments for restructuring			$ 25,000
Employee Severance | 2017 Productivity Program
Restructuring Cost and Reserve [Line Items]
Payments for restructuring				$ 25,000
Greater Asia | Frutarom Integration Initiative
Restructuring Cost and Reserve [Line Items]
Number of facilities closed | Facility			1
Europe, Africa and Middle East | Frutarom Integration Initiative
Restructuring Cost and Reserve [Line Items]
Number of facilities closed | Facility	2		6
Latin America | Frutarom Integration Initiative
Restructuring Cost and Reserve [Line Items]
Number of facilities closed | Facility	1		2
North America | Frutarom Integration Initiative
Restructuring Cost and Reserve [Line Items]
Number of facilities closed | Facility	1		1

XML

Nature of Operations and Summary of Significant Accounting Policies - Schedule of Bad Debt Reserve (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($)
Accounts Receivable, Allowance for Credit Loss [Roll Forward]
Balance at December 31, 2019	$ 16,428
Bad debt expense	4,751
Write-offs	(1,301)
Foreign exchange	(1,150)
Balance at March 31, 2020	18,728
Measurement period adjustments
Accounts Receivable, Allowance for Credit Loss [Roll Forward]
Balance at December 31, 2019	$ 16,428

XML

Employee Benefits - Pension and Other Defined Contribution Retirement Plan Expenses (Detail) - Pension Plans - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
U.S. Plans
Defined Benefit Plan Disclosure [Line Items]
Service cost for benefits earned	$ 400	$ 474
Interest cost on projected benefit obligation	4,263	5,453
Expected return on plan assets	(7,083)	(6,983)
Net amortization and deferrals	1,858	1,275
Net periodic benefit (income) cost	(562)	219
Non-U.S. Plans
Defined Benefit Plan Disclosure [Line Items]
Service cost for benefits earned	5,940	4,873
Interest cost on projected benefit obligation	3,245	4,435
Expected return on plan assets	(11,614)	(10,904)
Net amortization and deferrals	3,834	2,922
Net periodic benefit (income) cost	$ 1,405	$ 1,326

XML

Financial Instruments - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Derivative [Line Items]
Amount of Ineffectiveness on Net Investment Hedges		$ 0
Total Fair Value, Derivative Assets	$ 32,892,000
Derivative losses included in AOCI	4,800,000
Designated as Hedging Instrument [Member]
Derivative [Line Items]
Total Fair Value, Derivative Assets	30,471,000
Designated as Hedging Instrument [Member] | Interest rate swaps
Derivative [Line Items]
Total Fair Value, Derivative Assets	$ 27,668,000

XML

Financial Instruments

3 Months Ended

Mar. 31, 2020

Investments, All Other Investments [Abstract]

Financial Instruments

FINANCIAL INSTRUMENTS

Fair Value

Accounting guidance on fair value measurements specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs create the following fair value hierarchy:

• 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.

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The Company determines the fair value of structured liabilities (where performance is linked to structured interest rates, inflation or currency risks) using the London Interbank Offer Rate ("LIBOR") swap curve and forward interest and exchange rates at period end. Such instruments are classified as Level 2 based on the observability of significant inputs to the model. The Company does not have any instruments classified as Level 3, other than those included in pension asset trusts as discussed in Note 16 of our 2019 Form 10-K.

These valuations take into consideration the Company's credit risk and its counterparties’ credit risk. The estimated change in the fair value of these instruments due to such changes in its own credit risk (or instrument-specific credit risk) was immaterial as of March 31, 2020.

The carrying values and the estimated fair values of financial instruments at March 31, 2020 and December 31, 2019 consisted of the following: 

	March 31, 2020				December 31, 2019
(DOLLARS IN THOUSANDS)	Carrying Value		Fair Value		Carrying Value		Fair Value
LEVEL 1
Cash and cash equivalents(1)	$	433,246	$	433,246	$	606,823	$	606,823
LEVEL 2
Credit facilities and bank overdrafts(2)	2,594		2,594		3,131		3,131
Derivatives
Derivative assets(3)	32,892		32,892		3,575		3,575
Derivative liabilities(3)	5,631		5,631		7,415		7,415
Long-term debt:(4)
2020 Notes	299,598		301,191		299,381		302,700
2021 Euro Notes	327,408		327,667		334,561		338,244
2023 Notes	299,080		303,381		299,004		305,580
2024 Euro Notes	546,009		549,159		558,124		586,825
2026 Euro Notes	870,689		822,800		890,183		945,306
2028 Notes	396,766		418,176		396,688		441,500
2047 Notes	493,676		446,510		493,571		526,106
2048 Notes	786,050		823,569		785,996		919,040
Term Loan(2)	239,665		240,000		239,621		240,000
Amortizing Notes(5)	70,882		71,810		82,079		84,430

_______________________

(1) The carrying amount of cash and cash equivalents approximates fair value due to the short maturity of those instruments.

(2) The carrying amount approximates fair value as the interest rate is reset frequently based on current market rates as well as the short maturity of those instruments.

(3) The carrying amount approximates fair value as the instruments are marked-to-market and held at fair value on the Consolidated Balance Sheet.

(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.

Derivatives

Forward Currency Forward Contracts

The Company periodically enters into foreign currency forward contracts with the objective of reducing exposure to cash flow volatility associated with its intercompany loans, foreign currency receivables and payables and anticipated purchases of certain raw materials used in operations. These contracts generally involve the exchange of one currency for a second currency at a future date, have maturities not exceeding twelve months and are with counterparties which are major international financial institutions.

Cash Flow Hedges

The Company maintains several forward currency contracts which qualified as cash flow hedges. The objective of these hedges is to protect against the currency risk associated with forecasted U.S. dollar ("USD") denominated raw material purchases made by Euro ("EUR") functional currency entities which result from changes in the EUR/USD exchange rate. The effective portions of cash flow hedges are recorded in OCI as a component of Gains (losses) on derivatives qualifying as hedges in the accompanying Consolidated Statement of Income and Comprehensive (Loss) Income. Realized gains/(losses) in AOCI related to cash flow hedges of raw material purchases are recognized as a component of Cost of goods sold in the

accompanying Consolidated Statement of Income and Comprehensive (Loss) Income in the same period as the related costs are recognized.

Hedges Related to Issuances of Debt

Subsequent to the issuance of the 2021 Euro Notes and 2026 Euro Notes during the third quarter of 2018, the Company designated the debt as a hedge of a portion of its net European investments. Accordingly, the change in the value of the debt that is attributable to foreign exchange movements is recorded in OCI as a component of foreign currency translation adjustments in the accompanying Consolidated Statement of Income and Comprehensive (Loss) Income.

Subsequent to the issuance of the 2024 Euro Notes during the first quarter of 2016, the Company designated the debt as a hedge of a portion of its net European investments. Accordingly, the change in the value of the debt that is attributable to foreign exchange movements is recorded in OCI as a component of foreign currency translation adjustments in the accompanying Consolidated Statement of Income and Comprehensive (Loss) Income.

Cross Currency Swaps

During the third quarter of 2019, the Company entered into four new EUR/USD cross currency swaps that mature through May 2023 covering the same notional amounts of debt. The new swaps qualified as net investment hedges in order to mitigate a portion of the Company's net European investments from foreign currency risk. As of March 31, 2020, these swaps were in a net asset position with an aggregate fair value of $27.7 million which was classified as other current assets. Changes in fair value related to cross currency swaps are recorded in OCI.

The following table shows the notional amount of the Company’s derivative instruments outstanding as of March 31, 2020 and December 31, 2019: 

(DOLLARS IN THOUSANDS)	March 31, 2020		December 31, 2019
Foreign currency contracts	$	242,904	$	473,600
Cross currency swaps	600,000		600,000

The following tables show the Company’s derivative instruments measured at fair value (Level 2 of the fair value hierarchy), as reflected in the Consolidated Balance Sheet as of March 31, 2020 and December 31, 2019: 

	March 31, 2020
(DOLLARS IN THOUSANDS)	Fair Value of Derivatives Designated as Hedging Instruments		Fair Value of Derivatives Not Designated as Hedging Instruments		Total Fair Value
Derivative assets(a)
Foreign currency contracts	$	2,803	$	2,421	$	5,224
Cross currency swaps	27,668		—		27,668
	$	30,471	$	2,421	$	32,892
Derivative liabilities(b)
Foreign currency contract	$	—	$	5,631	$	5,631

	December 31, 2019
(DOLLARS IN THOUSANDS)	Fair Value of Derivatives Designated as Hedging Instruments		Fair Value of Derivatives Not Designated as Hedging Instruments		Total Fair Value
Derivative assets(a)
Foreign currency contracts	$	1,310	$	2,265	$	3,575
Derivative liabilities(b)
Foreign currency contracts	$	797	$	2,431	$	3,228
Interest rate swaps	4,187		—		4,187
Total derivative liabilities	$	4,984	$	2,431	$	7,415

 _______________________

(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.

The following table shows the effect of the Company’s derivative instruments which were not designated as hedging instruments in the Consolidated Statement of Income and Comprehensive (Loss) Income for the three months ended March 31, 2020 and 2019 (in thousands): 

	Amount of Gain (Loss)					Location of Gain (Loss) Recognized in Income on Derivative
(DOLLARS IN THOUSANDS)	Three Months Ended March 31,
	2020			2019
Foreign currency contracts(1)	$	(7,663	)	$	926	Other (income) expense, net

 _______________________

(1) The foreign currency contract net gains (losses) offset any recognized gains (losses) arising from the revaluation of the related intercompany loans during the same respective periods.

The following table shows the effect of the Company’s derivative and non-derivative instruments designated as cash flow and net investment hedging instruments, net of tax, in the Consolidated Statement of Income and Comprehensive (Loss) Income for the three months ended March 31, 2020 and 2019 (in thousands): 

	Amount of Gain (Loss)  Recognized in OCI on Derivative					Location of Gain (Loss) Reclassified from AOCI into Income	Amount of Gain (Loss)  Reclassified from Accumulated OCI into Income
	Three Months Ended March 31,						Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020		2019				2020			2019
Derivatives in Cash Flow Hedging Relationships:
Foreign currency contracts	$	1,231	$	(312	)	Cost of goods sold	$	2,069		$	2,372
Interest rate swaps (1)	216		216			Interest expense	(216		)	(216		)
Derivatives in Net Investment Hedging Relationships:
Cross currency swaps	21,351		10,667			N/A	—			—
Non-Derivatives in Net Investment Hedging Relationships:
2024 Euro Notes	9,569		4,206			N/A	—			—
2021 Euro Notes & 2026 Euro Notes	21,052		9,253			N/A	—			—
Total	$	53,419	$	24,030			$	1,853		$	2,156

 _______________________

(1) Interest rate swaps were entered into as pre-issuance hedges for bond offerings.

The ineffective portion of the above noted cash flow hedges were not material during the three months ended March 31, 2019.

The Company expects that $4.8 million (net of tax) of derivative gain included in AOCI at March 31, 2020, based on current market rates, will be reclassified into earnings within the next 12 months. The majority of this amount will vary due to fluctuations in foreign currency exchange rates.

XML

Nature of Operations and Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

These interim statements and related management’s discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the related notes and management’s discussion and analysis of results of operations, liquidity and capital resources included in our 2019 Annual Report on Form 10-K (“2019 Form 10-K”). These interim statements are unaudited. The year-end balance sheet data included in this Form 10-Q was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles in the United States of America. We have historically operated and continue to operate on a 52/53 week fiscal year ending on the Friday closest to the last day of the quarter. For ease of presentation, March 31 and December 31 are used consistently throughout this Form 10-Q and these interim financial statements and related notes to represent the period-end dates. For the 2020 and 2019 quarters, the actual closing dates were April 3 and March 29, respectively. The unaudited interim financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair statement of the results for the periods presented. When used herein, the terms “IFF,” the “Company,” “we,” “us” and “our” mean International Flavors & Fragrances Inc. and its consolidated subsidiaries.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. The inputs into our judgments and estimates consider the current economic implications of COVID-19 on our critical and significant accounting estimates, including estimates associated with future cash flows that are used in assessing the risk of impairment of certain long lived assets. Actual results could differ from those estimates.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In March 2020, the FASB issued Accounting Standards Update ("ASU") 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU is intended to simplify various aspects related to the cessation of reference rates in certain financial markets that would otherwise create modification accounting or changes in estimate. This guidance is effective for March 12, 2020 through December 31, 2022. The Company has not adopted any of the optional expedients or exceptions through March 31, 2020 but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The ASU is intended to simplify various aspects related to accounting for income taxes. This guidance is effective for fiscal years beginning after December 15, 2020, and for interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, “Intangibles - Goodwill and Other - Internal - Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service

Contract (a consensus of the FASB Emerging Issues Task Force).” The ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This guidance is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years, with early adoption permitted. The Company adopted the guidance effective the first day of its 2020 fiscal year. The adoption did not have an impact on its consolidated financial statements but may impact the Company in the future as and when it enters into cloud computing arrangements.

In August 2018, the FASB issued ASU 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans (Subtopic 715-20)", which modifies the disclosure requirements on company-sponsored defined benefit plans. The ASU is effective for fiscal years beginning after December 15, 2020 on a retrospective basis to all periods presented. Early adoption is permitted. The Company adopted the guidance effective the first day of its 2020 fiscal year. The adoption did not have an impact on its Consolidated Financial Statements and will have a minimal impact on its disclosures in future periods.

Adoption of Standard Related to Expected Credit Losses

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", with subsequent amendments, which requires issuers to measure expected credit losses for financial assets based on historical experience, current conditions and reasonable and supportable forecasts. As such, an entity will use forward-looking information to estimate credit losses, which may result in earlier recognition of losses.

The Company adopted the guidance effective the first day of its 2020 fiscal year and performed an evaluation of the applicable criteria, including the aging of its trade receivables, recent write-off history and other factors related to future macroeconomic conditions. As a result of the evaluation, the Company determined that no adjustment would be required to the level of its allowances for bad debts or to the carrying value of any other financial asset.

The Company is exposed to credit losses primarily through its sales of products. To determine the appropriate allowance for expected credit losses, the Company considers certain credit quality indicators, such as aging, collection history, and creditworthiness of debtors. Regional and Global Credit committees review and approve specific customer allowance reserves. The allowance for expected credit losses is primarily based on two primary factors: i) the aging of the different categories of trade receivables, and ii) a specific reserve for accounts identified as uncollectable.

The Company also considers current and future economic conditions in the determination of the allowance. At March 31, 2020, the Company reported $961.8 million of trade receivables, net of allowances of $18.7 million. Based on an aging analysis at March 31, 2020, approximately 87% of our accounts receivable were current based on the payment terms of the invoice. Receivables that are past due by over 365 days account for less than 1% of our accounts receivable.

The following is a rollforward of the Company's allowances for bad debts for the three months ended March 31, 2020:

(DOLLARS IN THOUSANDS)	Allowances for Bad Debts
Balance at December 31, 2019	$	16,428
Bad debt expense	4,751
Write-offs	(1,301		)
Foreign exchange	(1,150		)
Balance at March 31, 2020	$	18,728

The Company adjusted the amount of the allowances for bad debts as of December 31, 2019 to reflect the correct classification of amounts between the allowances for bad debts and Trade Receivables. The adjustment was for $8.2 million and had the effect of increasing both the allowances for bad debts and Trade Receivables.

During the first quarter of 2020, the Company increased its allowances for bad debts by approximately $3.0 million to reflect higher expected future write-offs of receivables due to the impact of the COVID-19 pandemic and its impact on the liquidity of certain customers.

XML

Goodwill and Other Intangible Assets, Net (Tables)

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Movements in Goodwill

Movements in goodwill during 2020 were as follows:

(DOLLARS IN THOUSANDS)	Goodwill
Balance at December 31, 2019	$	5,497,596
Measurement period adjustments(1)	(15,283		)
Foreign exchange	(214,754		)
Balance at March 31, 2020	$	5,267,559

_______________________ 

(1)

Measurement period adjustments relate to adjustments recorded in connection with completing the purchase price allocation related to the 2019 Acquisition Activity. See Note 3 for details.

As a result of the movements, Goodwill was reallocated between reporting units as follows:

(DOLLARS IN THOUSANDS)	Increase (decrease) to Goodwill
Cosmetic active ingredients	$	110,788
Natural Product Solutions	(78,945		)
Fine Ingredients	(29,221		)
Taste	(2,622		)
Total	$	—

See Note 11 for further information on the reorganization.

Schedule of Other Intangible Assets, Net

Other intangible assets, net consisted of the following amounts: 

	March 31,			December 31,
(DOLLARS IN THOUSANDS)	2020			2019
Asset Type
Customer relationships	$	2,561,536		$	2,653,446
Trade names & patents	174,134			178,968
Technological know-how	455,226			468,256
Other	22,410			40,362
Total carrying value	3,213,306			3,341,032
Accumulated Amortization
Customer relationships	(348,509		)	(302,047		)
Trade names & patents	(30,595		)	(27,213		)
Technological know-how	(137,162		)	(135,269		)
Other	(19,594		)	(24,568		)
Total accumulated amortization	(535,860		)	(489,097		)
Other intangible assets, net	$	2,677,446		$	2,851,935

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

Amortization expense for the next five years is expected to be as follows:

(DOLLARS IN THOUSANDS)	2020		2021		2022		2023		2024
Estimated future intangible amortization expense	$	135,577	$	178,000	$	174,245	$	174,135	$	174,135

XML

Acquisitions - Narrative (Details) - USD ($)		3 Months Ended
	Dec. 15, 2019	Jun. 30, 2019	Mar. 31, 2019	Mar. 31, 2020	Dec. 31, 2019
Business Acquisition [Line Items]
Goodwill				$ 5,267,559,000	$ 5,497,596,000
Nutrition & Biosciences, Inc
Business Acquisition [Line Items]
Business Acquisition, Share Price	$ 0.125
Payments to acquire businesses	$ 7,300,000,000
Wiburg Canada
Business Acquisition [Line Items]
Percentage of interests acquired		50.00%
Payments to acquire businesses		$ 37,000,000
Goodwill, expected tax deductible amount		30,000,000
Intangible assets acquired		$ (20,000,000)
Mighty and Leagel
Business Acquisition [Line Items]
Percentage of interests acquired			70.00%
Payments to acquire businesses			$ 52,000,000
Goodwill, expected tax deductible amount			47,000,000
Intangible assets acquired			(28,000,000)
Contingent consideration, liability			$ 19,000,000
Minimum | Mighty and Leagel
Business Acquisition [Line Items]
Percentage of interests acquired			49.00%
Maximum | Mighty and Leagel
Business Acquisition [Line Items]
Percentage of interests acquired			60.00%
Frutarom | Wiburg Canada
Business Acquisition [Line Items]
Percentage of interests acquired		100.00%
International Flavors & Fragrances Inc | DuPont de Nemours, Inc | Nutrition & Biosciences, Inc
Business Acquisition [Line Items]
Percentage of interests acquired	55.40%
Unsecured Debt | Senior Unsecured Bridge Term Loan | Nutrition & Biosciences, Inc
Business Acquisition [Line Items]
Debt face amount	$ 7,500,000,000
Unsecured Debt | Senior Unsecured Term Loan Facilities | Nutrition & Biosciences, Inc
Business Acquisition [Line Items]
Debt face amount	1,250,000,000
Unsecured Debt | Three Hundred Sixty Four Day Senior Unsecured Bridge Facility | Nutrition & Biosciences, Inc
Business Acquisition [Line Items]
Debt face amount	$ 6,250,000,000
Measurement period adjustments | 2019 Acquisitions
Business Acquisition [Line Items]
Goodwill				15,000,000
Intangible assets acquired				5,000,000
Fixed assets increase				$ 13,000,000

XML

Nature of Operations and Summary of Significant Accounting Policies - Reconciliation of Cash (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2019	Dec. 31, 2018
Accounting Policies [Abstract]
Cash and cash equivalents	$ 433,246	$ 606,823	$ 483,504	$ 634,897
Restricted cash	9,699	17,122	13,625	13,625
Restricted cash included in Other assets	5,439	0	0	0
Cash, cash equivalents and restricted cash	$ 448,384	$ 623,945	$ 497,129	$ 648,522

XML

Goodwill and Other Intangible Assets, Net - Reallocation of Goodwill (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($)
Goodwill [Line Items]
Reallocation of goodwill	$ (15,283)
Cosmetic Actives
Goodwill [Line Items]
Reallocation of goodwill	110,788
NPS
Goodwill [Line Items]
Reallocation of goodwill	(78,945)
F&F
Goodwill [Line Items]
Reallocation of goodwill	(29,221)
Taste
Goodwill [Line Items]
Reallocation of goodwill	$ (2,622)

XML

Employee Benefits - Additional Information (Detail) $ in Millions	3 Months Ended
	Mar. 31, 2020 USD ($)
Defined Contribution and Other Retirement Plans
Defined Benefit Plan Disclosure [Line Items]
Contribution to the plans	$ 1.0
Expected contribution to the plan	3.8
U.S. Plans | Pension Plans
Defined Benefit Plan Disclosure [Line Items]
Expected contribution to the plan	4.4
Non-U.S. Plans | Pension Plans
Defined Benefit Plan Disclosure [Line Items]
Expected contribution to the plan	20.9
Contribution to the plans	3.9
Benefit payments	$ 1.5

XML

Financial Instruments - Derivative Instruments Notional Amount Outstanding (Detail) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Forward Contracts
Schedule Of Information By Major Category Of Credit Derivatives Contracts [Line Items]
Derivative instruments outstanding	$ 242,904	$ 473,600
Currency Swap
Schedule Of Information By Major Category Of Credit Derivatives Contracts [Line Items]
Derivative instruments outstanding	$ 600,000	$ 600,000

XML

Other Assets (Tables)

3 Months Ended

Mar. 31, 2020

Other Assets [Abstract]

Schedule of Other Assets

Other assets consisted of the following amounts: 

(DOLLARS IN THOUSANDS)	March 31, 2020		December 31, 2019
Operating lease right-of-use assets	$	287,301	$	287,870
Deferred income taxes	96,109		125,552
Overfunded pension plans	89,819		85,657
Cash surrender value of life insurance contracts	43,694		47,578
Other(a)	69,730		61,759
Total	$	586,653	$	608,416

_______________________ 

(a)

Includes finance lease right-of-use assets, restricted cash, land usage rights in China and long term deposits.

XML

Accumulated Other Comprehensive Income (Loss)

3 Months Ended

Mar. 31, 2020

Equity [Abstract]

Accumulated Other Comprehensive Income (Loss)

ACCUMULATED OTHER COMPREHENSIVE LOSS

The following tables present changes in the accumulated balances for each component of other comprehensive (loss) income, including current period other comprehensive (loss) income and reclassifications out of accumulated other comprehensive loss:

(DOLLARS IN THOUSANDS)	Foreign Currency Translation Adjustments			Gains on Derivatives Qualifying as Hedges			Pension and Postretirement Liability Adjustment			Total
Accumulated other comprehensive (loss) income, net of tax, as of December 31, 2019	$	(373,043	)	$	2,068		$	(345,919	)	$	(716,894	)
OCI before reclassifications	(452,278		)	3,300			—			(448,978		)
Amounts reclassified from AOCI	—			(1,853		)	3,517			1,664
Net current period other comprehensive income (loss)	(452,278		)	1,447			3,517			(447,314		)
Accumulated other comprehensive (loss) income, net of tax, as of March 31, 2020	$	(825,321	)	$	3,515		$	(342,402	)	$	(1,164,208	)

(DOLLARS IN THOUSANDS)	Foreign Currency Translation Adjustments			Losses  on Derivatives Qualifying as Hedges			Pension and Postretirement Liability Adjustment			Total
Accumulated other comprehensive (loss) income, net of tax, as of December 31, 2018	$	(396,996	)	$	4,746		$	(309,977	)	$	(702,227	)
OCI before reclassifications	42,377			2,059			—			44,436
Amounts reclassified from AOCI	—			(2,156		)	2,593			437
Net current period other comprehensive income (loss)	42,377			(97		)	2,593			44,873
Accumulated other comprehensive (loss) income, net of tax, as of March 31, 2019	$	(354,619	)	$	4,649		$	(307,384	)	$	(657,354	)

The following table provides details about reclassifications out of Accumulated other comprehensive loss to the Consolidated Statement of Income and Comprehensive (Loss) Income: 

	Three Months Ended March 31,						Affected Line Item in the Consolidated Statement of Income and Comprehensive Income
(DOLLARS IN THOUSANDS)	2020			2019
Gains (losses) on derivatives qualifying as hedges
Foreign currency contracts	$	2,364		$	2,711		Cost of goods sold
Interest rate swaps	(216		)	(216		)	Interest expense
Tax	(295		)	(339		)	Provision for income taxes
Total	$	1,853		$	2,156		Total, net of income taxes
Losses on pension and postretirement liability adjustments
Prior service cost	$	(4,348	)	$	2,836		(a)
Actuarial losses	(191		)	168			(a)
Tax	1,022			(5,597		)	Provision for income taxes
Total	$	(3,517	)	$	(2,593	)	Total, net of income taxes

 _______________________

(a)

The amortization of prior service cost and actuarial loss is included in the computation of net periodic benefit cost. Refer to Note 16 of our 2019 Form 10-K for additional information regarding net periodic benefit cost.

XML

Nature of Operations and Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Reconciliation of Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Company's statement of cash flows periods ended March 31, 2020 and March 31, 2019 to the amounts reported in the Company's balance sheet as at March 31, 2020, December 31, 2019, March 31, 2019 and December 31, 2018.

(DOLLARS IN THOUSANDS)	March 31, 2020		December 31, 2019		March 31, 2019		December 31, 2018
Current assets
Cash and cash equivalents	$	433,246	$	606,823	$	483,504	$	634,897
Restricted cash	9,699		17,122		13,625		13,625
Noncurrent assets
Restricted cash included in Other assets	5,439		—		—		—
Cash, cash equivalents and restricted cash	$	448,384	$	623,945	$	497,129	$	648,522

Disaggregation of Revenue

The following table presents the Company's revenues disaggregated by product categories:

	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020		2019
Taste
Flavor compounds	$	576,368	$	567,314
Savory solutions	155,764		136,337
Inclusions	30,146		28,633
Nutrition and specialty ingredients	43,955		44,208
Flavor ingredients	24,089		28,310
Total Taste	830,322		804,802
Scent
Fine fragrances	94,150		106,074
Consumer fragrance	314,028		283,221
Fragrance ingredients	108,817		103,305
Total Scent	516,995		492,600
Total revenues	$	1,347,317	$	1,297,402

Contract Asset and Accounts Receivable

March 31, 2020 and December 31, 2019:

(DOLLARS IN THOUSANDS)	March 31, 2020		December 31, 2019
Receivables (included in Trade receivables)	$	961,842	$	892,625
Contract asset - Short term	1,951		2,736
Contract liabilities - Short term	11,379		11,107

Schedule of Bad Debt Reserve

The following is a rollforward of the Company's allowances for bad debts for the three months ended March 31, 2020:

(DOLLARS IN THOUSANDS)	Allowances for Bad Debts
Balance at December 31, 2019	$	16,428
Bad debt expense	4,751
Write-offs	(1,301		)
Foreign exchange	(1,150		)
Balance at March 31, 2020	$	18,728

XML

CONSOLIDATED BALANCE SHEET - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Current Assets:
Cash and cash equivalents	$ 433,246	$ 606,823
Restricted cash	9,699	17,122
Trade receivables (net of allowances of $18,728 and $16,428, respectively)	943,114	876,197
Inventories:
Raw materials	553,433	565,071
Work in process	48,297	44,532
Finished goods	474,183	513,465
Total Inventories	1,075,913	1,123,068
Prepaid expenses and other current assets	356,322	319,334
Total Current Assets	2,818,294	2,942,544
Property, plant and equipment, at cost	2,632,441	2,690,768
Accumulated depreciation	(1,293,317)	(1,303,848)
Total Property Plant and Equipment	1,339,124	1,386,920
Goodwill	5,267,559	5,497,596
Other intangible assets, net	2,677,446	2,851,935
Other assets	586,653	608,416
Total Assets	12,689,076	13,287,411
Current Liabilities:
Bank borrowings, overdrafts, and current portion of long-term debt	385,569	384,958
Accounts payable	456,156	510,372
Accrued payroll and bonus	87,083	102,704
Dividends payable	80,062	80,038
Other current liabilities	418,125	474,118
Total Current Liabilities	1,426,995	1,552,190
Long-term debt	3,946,905	3,997,438
Retirement liabilities	261,512	265,370
Deferred income taxes	616,084	641,456
Other liabilities	494,193	502,366
Total Other Liabilities	5,318,694	5,406,630
Commitments and Contingencies
Redeemable noncontrolling interests	102,713	99,043
Shareholders' Equity:
Common stock 12 1/2¢ par value; 500,000,000 shares authorized; 128,526,137 shares issued as of March 31, 2020 and December 31, 2019; and 106,812,257 and 106,787,299 shares outstanding as of March 31, 2020 and December 31, 2019, respectively	16,066	16,066
Capital in excess of par value	3,835,265	3,823,152
Retained earnings	4,162,347	4,117,804
Accumulated other comprehensive loss	(1,164,208)	(716,894)
Treasury stock, at cost (21,713,880 and 21,738,838 shares as of March 31, 2020 and December 31, 2019, respectively)	(1,021,620)	(1,022,824)
Total Shareholders’ Equity	5,827,850	6,217,304
Noncontrolling interest	12,824	12,244
Total Shareholders’ Equity including Noncontrolling interest	5,840,674	6,229,548
Total Liabilities and Shareholders’ Equity	$ 12,689,076	$ 13,287,411

XML

Other Assets

3 Months Ended

Mar. 31, 2020

Other Assets [Abstract]

Other Assets

 OTHER ASSETS

Other assets consisted of the following amounts: 

(DOLLARS IN THOUSANDS)	March 31, 2020		December 31, 2019
Operating lease right-of-use assets	$	287,301	$	287,870
Deferred income taxes	96,109		125,552
Overfunded pension plans	89,819		85,657
Cash surrender value of life insurance contracts	43,694		47,578
Other(a)	69,730		61,759
Total	$	586,653	$	608,416

_______________________ 

(a)

Includes finance lease right-of-use assets, restricted cash, land usage rights in China and long term deposits.

XML

Stock Compensation Plans

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Stock Compensation Plans

STOCK COMPENSATION PLANS

The Company has various plans under which its officers, senior management, other key employees and directors may be granted equity-based awards. Equity awards outstanding under the plans include PRSUs, restricted stock units ("RSUs"), SSARs and Long-Term Incentive Plan awards. Liability-based awards outstanding under the plans are cash-settled RSUs.

Stock-based compensation expense and related tax benefits were as follows:

	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020			2019
Equity-based awards	$	8,624		$	7,604
Liability-based awards	(639		)	730
Total stock-based compensation expense	7,985			8,334
Less: Tax benefit	(1,394		)	(1,382		)
Total stock-based compensation expense, after tax	$	6,591		$	6,952

XML

CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY - USD ($) $ in Thousands	Total	Common stock	Capital in excess of par value	Retained earnings	Accumulated other comprehensive (loss) income	Treasury stock	Non-controlling interest
Beginning Balance at Dec. 31, 2018	$ 6,043,374	$ 16,066	$ 3,793,609	$ 3,956,221	$ (702,227)	$ (1,030,718)	$ 10,423
Beginning Balance, shares at Dec. 31, 2018						21,906,935
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	109,673			108,829			844
Cumulative translation adjustment	42,377				42,377
Gains (losses) on derivatives qualifying as hedges; net of tax	(97)				(97)
Pension and postretirement net liability	2,593				2,593
Cash dividends declared	(77,799)			(77,799)
Stock options/SSARs	4,084		3,424			$ 660
Stock options, shares						13,978
Vested restricted stock units and awards	(1,776)		(2,405)			$ 629
Vested restricted stock units and awards, shares						13,401
Stock-based compensation	7,604		7,604
Redeemable NCI	370		370
Ending Balance at Mar. 31, 2019	6,154,478	16,066	3,802,602	4,011,326	(657,354)	$ (1,029,429)	11,267
Ending Balance, shares at Mar. 31, 2019						21,879,556
Beginning Balance at Dec. 31, 2019	$ 6,229,548	16,066	3,823,152	4,117,804	(716,894)	$ (1,022,824)	12,244
Beginning Balance, shares at Dec. 31, 2019	(21,738,838)					21,738,838
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	$ 125,224			124,607			617
Cumulative translation adjustment	(452,278)				(452,278)
Gains (losses) on derivatives qualifying as hedges; net of tax	1,447				1,447
Pension and postretirement net liability	3,517				3,517
Cash dividends declared	(80,062)			(80,062)
Stock options/SSARs	182		(490)			$ 672
Stock options, shares						13,763
Vested restricted stock units and awards	(1,295)		(1,827)			$ 532
Vested restricted stock units and awards, shares						11,195
Stock-based compensation	8,624		8,624
Redeemable NCI	5,806		5,806
Dividends paid on noncontrolling interest and other	(39)			(2)			(37)
Ending Balance at Mar. 31, 2020	$ 5,840,674	$ 16,066	$ 3,835,265	$ 4,162,347	$ (1,164,208)	$ (1,021,620)	$ 12,824
Ending Balance, shares at Mar. 31, 2020	(21,713,880)					21,713,880

XML

Employee Benefits (Tables)

3 Months Ended

Mar. 31, 2020

Retirement Benefits [Abstract]

Pension and Other Defined Contribution Retirement Plan Expenses

Pension and other defined contribution retirement plan expenses included the following components:

(DOLLARS IN THOUSANDS)	U.S. Plans
	Three Months Ended March 31,
	2020			2019
Service cost for benefits earned(1)	$	400		$	474
Interest cost on projected benefit obligation(2)	4,263			5,453
Expected return on plan assets(2)	(7,083		)	(6,983		)
Net amortization and deferrals(2)	1,858			1,275
Net periodic benefit (income) cost	$	(562	)	$	219

(DOLLARS IN THOUSANDS)	Non-U.S. Plans
	Three Months Ended March 31,
	2020			2019
Service cost for benefits earned(1)	$	5,940		$	4,873
Interest cost on projected benefit obligation(2)	3,245			4,435
Expected return on plan assets(2)	(11,614		)	(10,904		)
Net amortization and deferrals(2)	3,834			2,922
Net periodic benefit (income) cost	$	1,405		$	1,326

_______________________ 

(1) Included as a component of Operating profit.

(2)

Included as a component of Other loss (income), net.

Postretirement Benefits Other Than Pension Expenses

Expense recognized for postretirement benefits other than pensions included the following components: 

	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020			2019
Service cost for benefits earned	$	143		$	148
Interest cost on projected benefit obligation	474			578
Net amortization and deferrals	(1,153		)	(1,194		)
Total postretirement benefit income	$	(536	)	$	(468	)

XML

Debt (Tables)

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Components of Debt

Debt consisted of the following:

(DOLLARS IN THOUSANDS)	Effective Interest Rate		March 31, 2020			December 31, 2019
2020 Notes(1)	3.69	%	$	299,598		$	299,381
2021 Euro Notes(1)	0.82	%	327,408			334,561
2023 Notes(1)	3.30	%	299,080			299,004
2024 Euro Notes(1)	1.88	%	546,009			558,124
2026 Euro Notes(1)	1.93	%	870,689			890,183
2028 Notes(1)	4.57	%	396,766			396,688
2047 Notes(1)	4.44	%	493,676			493,571
2048 Notes(1)	5.12	%	786,050			785,996
Term Loan(1)	3.65	%	239,665			239,621
Amortizing Notes(1)	6.09	%	70,882			82,079
Bank overdrafts and other			2,594			3,131
Deferred realized gains on interest rate swaps			57			57
Total debt			4,332,474			4,382,396
Less: Short-term borrowings(2)			(385,569		)	(384,958		)
Total Long-term debt			$	3,946,905		$	3,997,438

_______________________ 

(1) Amount is net of unamortized discount and debt issuance costs.

(2)

Includes bank borrowings, overdrafts and current portion of long-term debt.

XML

Nature of Operations and Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
New Accounting Pronouncement, Early Adoption [Line Items]
Receivables (included in Trade receivables)	$ 961,842		$ 892,625
Trade receivables before allowance for credit loss	961,800
Trade receivables allowances	$ 18,728		16,428
Percentage of outstanding receivables less than 90 days	87.00%
Trade receivables	$ 943,114		876,197
Allowance for bad debt expense	4,751
Accounting Standards Update 2016-13
New Accounting Pronouncement, Early Adoption [Line Items]
Trade receivables allowances			8,200
Trade receivables			8,200
Trade Accounts Receivable With Factoring Agreements [Member]
New Accounting Pronouncement, Early Adoption [Line Items]
Receivables (included in Trade receivables)	200,300		$ 205,700
Proceeds From Sale Of Accounts Receivable	(5,400)	$ 5,200
Payments To Participate In Factoring Receivable Program	1,200	$ 1,200
Pandemic
New Accounting Pronouncement, Early Adoption [Line Items]
Allowance for bad debt expense	$ 3,000

XML

Segment Information - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2020 segment category
Revenues from External Customers and Long-Lived Assets [Line Items]
Number of segments | segment	2
Number of categories | category	2
Net sales attributed to all foreign countries | Sales
Revenues from External Customers and Long-Lived Assets [Line Items]
Maximum percentage of total consolidated net sales attributed to any non-U.S. country	6.00%

XML

Goodwill and Other Intangible Assets, Net - Future Estimated Amortization Expense (Details) $ in Thousands	Mar. 31, 2020 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Estimated future intangible amortization expense, 2020	$ 135,577
Estimated future intangible amortization expense, 2021	178,000
Estimated future intangible amortization expense, 2022	174,245
Estimated future intangible amortization expense, 2023	174,135
Estimated future intangible amortization expense, 2024	$ 174,135

XML

Leases - Lease expenses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Leases [Abstract]
Operating lease cost	$ 12,443	$ 12,469
Finance Lease, Cost	$ 753	$ 0

XML

Accumulated Other Comprehensive Income (Loss) - Reclassifications of Accumulated Other Comprehensive Income to Consolidated Statement of Comprehensive Income (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Schedule Of Reclassification Of Accumulated Other Comprehensive Income Loss [Line Items]
Foreign currency contracts	$ 781,450	$ 766,143
Interest Expense	(32,140)	(36,572)
Tax	26,297	23,362
Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges
Schedule Of Reclassification Of Accumulated Other Comprehensive Income Loss [Line Items]
Tax	295	339
Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges | Foreign currency contracts
Schedule Of Reclassification Of Accumulated Other Comprehensive Income Loss [Line Items]
Foreign currency contracts	2,364	2,711
Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges | Interest rate swaps
Schedule Of Reclassification Of Accumulated Other Comprehensive Income Loss [Line Items]
Interest Expense	(216)	(216)
Accumulated Defined Benefit Plans Adjustment, Net Prior Service Attributable to Parent [Member]
Schedule Of Reclassification Of Accumulated Other Comprehensive Income Loss [Line Items]
Reclassification from Accumulated Other Comprehensive Income, Current Period, before Tax	(4,348)	2,836
Accumulated Defined Benefit Plans Adjustment, Net Gain (Loss) Attributable to Parent [Member]
Schedule Of Reclassification Of Accumulated Other Comprehensive Income Loss [Line Items]
Reclassification from Accumulated Other Comprehensive Income, Current Period, before Tax	(191)	168
Accumulated Defined Benefit Plans Adjustment
Schedule Of Reclassification Of Accumulated Other Comprehensive Income Loss [Line Items]
Tax	1,022	(5,597)
Reclassification out of Accumulated Other Comprehensive Income | Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges
Schedule Of Reclassification Of Accumulated Other Comprehensive Income Loss [Line Items]
Total	1,853	2,156
Reclassification out of Accumulated Other Comprehensive Income | Accumulated Defined Benefit Plans Adjustment
Schedule Of Reclassification Of Accumulated Other Comprehensive Income Loss [Line Items]
Total	$ (3,517)	$ (2,593)

XML

Segment Information Segment Information - Net Sales by Destination of Product Delivery (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	$ 1,347,317	$ 1,297,402
Europe, Africa and Middle East
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	543,130	529,606
Greater Asia
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	309,508	287,962
North America
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	303,387	301,059
Latin America
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	191,292	178,775
Geographic Concentration Risk | Net sales related to the U.S.
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	270,686	272,803
Geographic Concentration Risk | Net sales attributed to all foreign countries
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	$ 1,076,631	$ 1,024,599

XML

Financial Instruments - Carrying Amount and Estimated Fair Values of Financial Instruments (Detail) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Reported Value Measurement
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and Cash Equivalents, Fair Value Disclosure	$ 433,246	$ 606,823
Credit facilities and bank overdrafts	2,594	3,131
Derivative Asset	32,892	3,575
Derivative Liability	5,631	7,415
Reported Value Measurement | 2020 Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes, Noncurrent	299,598	299,381
Reported Value Measurement | 2023 Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes, Noncurrent	299,080	299,004
Reported Value Measurement | 2021 Euro Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes, Noncurrent	327,408	334,561
Reported Value Measurement | 2024 Euro Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes, Noncurrent	546,009	558,124
Reported Value Measurement | 2026 Euro Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes, Noncurrent	870,689	890,183
Reported Value Measurement | 2028 Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes, Noncurrent	396,766	396,688
Reported Value Measurement | 2048 Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes, Noncurrent	786,050	785,996
Reported Value Measurement | 2047 Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes, Noncurrent	493,676	493,571
Reported Value Measurement | Term loan credit agreement
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes, Noncurrent	239,665	239,621
Reported Value Measurement | Amortizing Note
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes, Noncurrent	70,882	82,079
Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and Cash Equivalents, Fair Value Disclosure	433,246	606,823
Credit facilities and bank overdrafts	2,594	3,131
Derivative Asset	32,892	3,575
Derivative Liability	5,631	7,415
Estimate of Fair Value Measurement [Member] | 2020 Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes, Noncurrent	301,191	302,700
Estimate of Fair Value Measurement [Member] | 2023 Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes, Noncurrent	303,381	305,580
Estimate of Fair Value Measurement [Member] | 2021 Euro Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes, Noncurrent	327,667	338,244
Estimate of Fair Value Measurement [Member] | 2024 Euro Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes, Noncurrent	549,159	586,825
Estimate of Fair Value Measurement [Member] | 2026 Euro Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes, Noncurrent	822,800	945,306
Estimate of Fair Value Measurement [Member] | 2028 Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes, Noncurrent	418,176	441,500
Estimate of Fair Value Measurement [Member] | 2048 Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes, Noncurrent	823,569	919,040
Estimate of Fair Value Measurement [Member] | 2047 Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes, Noncurrent	446,510	526,106
Estimate of Fair Value Measurement [Member] | Term loan credit agreement
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes, Noncurrent	240,000	240,000
Estimate of Fair Value Measurement [Member] | Amortizing Note
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes, Noncurrent	$ 71,810	$ 84,430

XML

Financial Instruments - Derivative Instruments Which Were Not Designated as Hedging Instruments (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Foreign currency contracts | Other Nonoperating Income (Expense) [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative, Gain (Loss) on Derivative, Net	$ (7,663)	$ 926

XML

Restructuring and Other Charges, Net - Changes in Employee-Related Restructuring Liabilities (Detail) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019	Dec. 31, 2017
Restructuring Reserve [Roll Forward]
Beginning Balance	$ 21,085
Additional Charges (Reversals), Net	4,918
Non-Cash Charges	(3,366)
Additional charges, net	4,918	$ 16,174
Payments	(2,121)
Ending Balance	20,516		$ 21,085
2017 Productivity Program
Restructuring Reserve [Roll Forward]
Additional charges, net				$ 24,500
2017 Productivity Program | Employee Severance
Restructuring Reserve [Roll Forward]
Beginning Balance	1,106
Additional Charges (Reversals), Net	0
Non-Cash Charges	0
Payments	(146)
Ending Balance	960		1,106
2017 Productivity Program | Other
Restructuring Reserve [Roll Forward]
Beginning Balance	88
Additional Charges (Reversals), Net	0
Non-Cash Charges	0
Payments	0
Ending Balance	88		88
Frutarom Integration Initiative | Employee Severance
Restructuring Reserve [Roll Forward]
Beginning Balance	4,038
Additional Charges (Reversals), Net	1,869
Non-Cash Charges	0
Additional charges, net	15,300
Payments	(928)
Ending Balance	4,979		4,038
Frutarom Integration Initiative | Fixed Asset Write Down [Member]
Restructuring Reserve [Roll Forward]
Beginning Balance	0
Additional Charges (Reversals), Net	3,366
Non-Cash Charges	(3,366)
Payments	0
Ending Balance	0		0
Frutarom Integration Initiative | Other
Restructuring Reserve [Roll Forward]
Beginning Balance	2,485
Additional Charges (Reversals), Net	(317)
Non-Cash Charges	0
Payments	1
Ending Balance	2,169		2,485
2019 Severance Initiatives | Employee Severance
Restructuring Reserve [Roll Forward]
Beginning Balance	12,897
Additional Charges (Reversals), Net	0
Non-Cash Charges	0
Additional charges, net			21,300
Payments	(1,048)
Ending Balance	11,849		12,897
2019 Severance Initiatives | Other
Restructuring Reserve [Roll Forward]
Beginning Balance	471
Additional Charges (Reversals), Net	0
Non-Cash Charges	0
Payments	0
Ending Balance	471		$ 471
Taste
Restructuring Reserve [Roll Forward]
Additional charges, net	4,918	2,553
Scent [Member]
Restructuring Reserve [Roll Forward]
Additional charges, net	0	10,900
Shared IT & Corporate Costs [Member]
Restructuring Reserve [Roll Forward]
Additional charges, net	$ 0	$ 2,721

XML

Net Income Per Share - Reconciliation of Shares Used in Computation of Basic and Diluted Net Income Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Net income attributable to IFF stockholders	$ 124,607	$ 108,829
Add: Reduction in redemption value of redeemable noncontrolling interests in excess of earnings allocated	5,806	370
Net income available to IFF stockholders	$ 130,413	$ 109,199
Weighted average common shares outstanding (basic) (in shares)	112,082	111,864
Weighted average shares assuming dilution (diluted) (in shares)	113,594	113,389
Net income per share - basic (in dollars per share)	$ 1.16	$ 0.97
Net income per share - diluted (in dollars per share)	$ 1.15	$ 0.96
Stock options and restricted stock awards
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Adjustment for assumed dilution (in shares)	349	362
SPC portion of TEUs
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Adjustment for assumed dilution (in shares)	1,163	1,163

XML

Redeemable Noncontrolling Interests

3 Months Ended

Mar. 31, 2020

Noncontrolling Interest [Abstract]

Redeemable Noncontrolling Interests

REDEEMABLE NONCONTROLLING INTERESTS

Through certain subsidiaries of our Frutarom acquisition, there are certain noncontrolling interests that carry redemption features. The noncontrolling interest holders have the right, over a stipulated period of time, to sell their respective interests to Frutarom, and Frutarom has the option to purchase these interests (subject to the same timing). These options carry identical price and conditions of exercise, and will be settled based on the multiple of the average EBITDA of consecutive quarters to be achieved during the period ending prior to the exercise date. 

The following table sets forth the details of the Company's redeemable noncontrolling interests:

(DOLLARS IN THOUSANDS)	Redeemable Noncontrolling Interests
Balance at December 31, 2018	$	81,806
Acquired through acquisitions during 2019	26,224
Impact of foreign exchange translation	(190		)
Share of profit or loss attributable to redeemable noncontrolling interests	1,541
Redemption value adjustment for the current period	(370		)
Dividends paid	5,700
Balance at March 31, 2019	$	114,711
Balance at December 31, 2019	$	99,043
Impact of foreign exchange translation	19,255
Share of profit or loss attributable to redeemable noncontrolling interests	1,987
Redemption value adjustment for the current period	(5,806		)
Measurement period adjustments	(1,426		)
Exercises of redeemable noncontrolling interests	(10,340		)
Balance at March 31, 2020	$	102,713

For 2019, the increase in redeemable noncontrolling interests was primarily due to the interests acquired through acquisitions during the first quarter of 2019, as discussed in Note 3.

For 2020, the increase in redeemable noncontrolling interests was primarily due to the impact of foreign exchange translation offset by the exercise of options.

XML

Restructuring and Other Charges, Net (Tables)

3 Months Ended

Mar. 31, 2020

Restructuring and Related Activities [Abstract]

Changes in Employee-Related Restructuring Liabilities

Changes in Restructuring Liabilities

Changes in restructuring liabilities by program during the three months ended March 31, 2020 were as follows:

(DOLLARS IN THOUSANDS)	Balance at December 31, 2019		Additional Charges (Reversals), Net			Non-Cash Charges			Cash Payments			Balance at March 31, 2020
2017 Productivity Program
Severance	$	1,106	$	—		$	—		$	(146	)	$	960
Other(1)	88		—			—			—			88
Frutarom Integration Initiative
Severance	4,038		1,869			—			(928		)	4,979
Fixed asset write down	—		3,366			(3,366		)	—			—
Other(1)	2,485		(317		)	—			1			2,169
2019 Severance Plan
Severance	12,897		—			—			(1,048		)	11,849
Other(1)	471		—			—			—			471
Total restructuring	$	21,085	$	4,918		$	(3,366	)	$	(2,121	)	$	20,516

_______________________ 

(1) Other includes supplier contract termination costs, consulting and advisory fees.

Charges by Segment

The following table summarizes the total amount of costs incurred in connection with these restructuring programs by segment:

	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020		2019
Taste	$	4,918	$	2,553
Scent	—		10,900
Shared IT & Corporate Costs	—		2,721
Total Restructuring and other charges, net	$	4,918	$	16,174

XML

Accumulated Other Comprehensive Income (Loss) (Tables)

3 Months Ended

Mar. 31, 2020

Equity [Abstract]

Schedule of Changes in Accumulated Other Comprehensive Income (Loss)

The following tables present changes in the accumulated balances for each component of other comprehensive (loss) income, including current period other comprehensive (loss) income and reclassifications out of accumulated other comprehensive loss:

(DOLLARS IN THOUSANDS)	Foreign Currency Translation Adjustments			Gains on Derivatives Qualifying as Hedges			Pension and Postretirement Liability Adjustment			Total
Accumulated other comprehensive (loss) income, net of tax, as of December 31, 2019	$	(373,043	)	$	2,068		$	(345,919	)	$	(716,894	)
OCI before reclassifications	(452,278		)	3,300			—			(448,978		)
Amounts reclassified from AOCI	—			(1,853		)	3,517			1,664
Net current period other comprehensive income (loss)	(452,278		)	1,447			3,517			(447,314		)
Accumulated other comprehensive (loss) income, net of tax, as of March 31, 2020	$	(825,321	)	$	3,515		$	(342,402	)	$	(1,164,208	)

(DOLLARS IN THOUSANDS)	Foreign Currency Translation Adjustments			Losses  on Derivatives Qualifying as Hedges			Pension and Postretirement Liability Adjustment			Total
Accumulated other comprehensive (loss) income, net of tax, as of December 31, 2018	$	(396,996	)	$	4,746		$	(309,977	)	$	(702,227	)
OCI before reclassifications	42,377			2,059			—			44,436
Amounts reclassified from AOCI	—			(2,156		)	2,593			437
Net current period other comprehensive income (loss)	42,377			(97		)	2,593			44,873
Accumulated other comprehensive (loss) income, net of tax, as of March 31, 2019	$	(354,619	)	$	4,649		$	(307,384	)	$	(657,354	)

Reclassifications of Accumulated Other Comprehensive Income to Consolidated Statement of Comprehensive Income

The following table provides details about reclassifications out of Accumulated other comprehensive loss to the Consolidated Statement of Income and Comprehensive (Loss) Income: 

	Three Months Ended March 31,						Affected Line Item in the Consolidated Statement of Income and Comprehensive Income
(DOLLARS IN THOUSANDS)	2020			2019
Gains (losses) on derivatives qualifying as hedges
Foreign currency contracts	$	2,364		$	2,711		Cost of goods sold
Interest rate swaps	(216		)	(216		)	Interest expense
Tax	(295		)	(339		)	Provision for income taxes
Total	$	1,853		$	2,156		Total, net of income taxes
Losses on pension and postretirement liability adjustments
Prior service cost	$	(4,348	)	$	2,836		(a)
Actuarial losses	(191		)	168			(a)
Tax	1,022			(5,597		)	Provision for income taxes
Total	$	(3,517	)	$	(2,593	)	Total, net of income taxes

 _______________________

(a)

The amortization of prior service cost and actuarial loss is included in the computation of net periodic benefit cost. Refer to Note 16 of our 2019 Form 10-K for additional information regarding net periodic benefit cost.

XML

Stock Compensation Plans (Tables)

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation Expense and Related Tax Benefits

Stock-based compensation expense and related tax benefits were as follows:

	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020			2019
Equity-based awards	$	8,624		$	7,604
Liability-based awards	(639		)	730
Total stock-based compensation expense	7,985			8,334
Less: Tax benefit	(1,394		)	(1,382		)
Total stock-based compensation expense, after tax	$	6,591		$	6,952

XML

Restructuring and Other Charges, Net

3 Months Ended

Mar. 31, 2020

Restructuring and Related Activities [Abstract]

Restructuring and Other Charges, Net

RESTRUCTURING AND OTHER CHARGES, NET

Restructuring and other charges primarily consist of separation costs for employees including severance, outplacement and other benefit ("Severance") costs as well as costs related to plant closures, the costs of accelerated depreciation of fixed assets associated with plants ("Fixed asset write-down") and all other related restructuring ("Other") costs. All restructuring and other charges, net expenses are separately stated on the Consolidated Statement of Comprehensive (Loss) Income.

Frutarom Integration Initiative

In connection with the acquisition of Frutarom, the Company began to execute an integration plan that, among other initiatives, seeks to optimize its manufacturing network. As part of the Frutarom Integration Initiative, the Company expects to close approximately 35 manufacturing sites over the next twelve months with most of the closures targeted to occur before the end of fiscal 2021. During 2019, the Company announced the closure of ten facilities, of which six facilities are in Europe, Africa and Middle East, two facilities in Latin America, and one facility in each North America and Greater Asia regions. During the three months ended March 31, 2020, the Company announced the closure of four facilities, of which two facilities are in Europe, Africa and Middle East, one facility in Latin America, and one facility in North America. Since the inception of the initiative to date, the Company has expensed $15.3 million. Total costs for the program are expected to be approximately $60 million including cash and non-cash items.

2019 Severance Program

During the year ended December 31, 2019, the Company incurred severance charges related to approximately 190 headcount reductions, excluding those previously mentioned under the Frutarom Integration Initiative. The headcount reductions primarily related to the Scent business unit with additional amounts related to headcount reductions in all business units associated with the establishment of a new shared service center in Europe. Since the inception of the program, the Company has expensed $21.3 million to date. Total costs for the program are expected to be approximately $25 million.

2017 Productivity Program

In connection with the 2017 Productivity Program, the Company recorded $24.5 million of charges related to personnel costs and lease termination costs since the program's inception to date. Total costs for the program are expected to be approximately $25 million.

Changes in Restructuring Liabilities

Changes in restructuring liabilities by program during the three months ended March 31, 2020 were as follows:

(DOLLARS IN THOUSANDS)	Balance at December 31, 2019		Additional Charges (Reversals), Net			Non-Cash Charges			Cash Payments			Balance at March 31, 2020
2017 Productivity Program
Severance	$	1,106	$	—		$	—		$	(146	)	$	960
Other(1)	88		—			—			—			88
Frutarom Integration Initiative
Severance	4,038		1,869			—			(928		)	4,979
Fixed asset write down	—		3,366			(3,366		)	—			—
Other(1)	2,485		(317		)	—			1			2,169
2019 Severance Plan
Severance	12,897		—			—			(1,048		)	11,849
Other(1)	471		—			—			—			471
Total restructuring	$	21,085	$	4,918		$	(3,366	)	$	(2,121	)	$	20,516

_______________________ 

(1) Other includes supplier contract termination costs, consulting and advisory fees.

Charges by Segment

The following table summarizes the total amount of costs incurred in connection with these restructuring programs by segment:

	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020		2019
Taste	$	4,918	$	2,553
Scent	—		10,900
Shared IT & Corporate Costs	—		2,721
Total Restructuring and other charges, net	$	4,918	$	16,174

XML

Leases

3 Months Ended

Mar. 31, 2020

Leases [Abstract]

Leases

LEASES

The Company has operating leases for corporate offices, manufacturing facilities, research and development facilities, and certain transportation and office equipment, all of which are operating leases. The Company's leases have remaining lease terms of up to 40 years, some of which include options to extend the leases for up to 5 years.

The components of lease expense were as follows:

	Three Months Ended		Three Months Ended
(DOLLARS IN THOUSANDS)	March 31, 2020		March 31, 2019
Operating lease cost	$	12,443	$	12,469
Finance lease cost	753		—

Supplemental cash flow information related to leases was as follows:

	Three Months Ended		Three Months Ended
(DOLLARS IN THOUSANDS)	March 31, 2020		March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	12,331	$	11,076
Operating cash flows for finance leases	33		—
Financing cash flows for finance leases	721		—
Right-of-use assets obtained in exchange for lease obligations
Operating leases	10,968		9,249
Finance leases	1,930		452

XML

CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Statement [Abstract]
Net sales	$ 1,347,317	$ 1,297,402
Cost of goods sold	781,450	766,143
Gross profit	565,867	531,259
Research and development expenses	85,909	90,596
Selling and administrative expenses	229,714	213,182
Amortization of acquisition-related intangibles	48,350	47,625
Restructuring and other charges, net	4,918	16,174
Losses (gains) on sales of fixed assets	754	(188)
Operating profit	196,222	163,870
Interest expense	32,140	36,572
Other loss (income), net	10,574	(7,278)
Income before taxes	153,508	134,576
Taxes on income	26,297	23,362
Net income	127,211	111,214
Net income attributable to noncontrolling interests	2,604	2,385
Net income attributable to IFF stockholders	124,607	108,829
Other comprehensive (loss) income, after tax:
Foreign currency translation adjustments	(452,278)	42,377
Gains (losses) on derivatives qualifying as hedges	1,447	(97)
Pension and postretirement net liability	3,517	2,593
Net current period other comprehensive income (loss)	(447,314)	44,873
Comprehensive (loss) income attributable to IFF stockholders	$ (322,707)	$ 153,702
Net income per share - basic (in dollars per share)	$ 1.16	$ 0.97
Net income per share - diluted (in dollars per share)	$ 1.15	$ 0.96
Average number of shares outstanding - basic (in shares)	112,082	111,864
Average number of shares outstanding - diluted (in shares)	113,594	113,389

XML

Nature of Operations and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Nature of Operations and Summary of Significant Accounting Policies

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These interim statements and related management’s discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the related notes and management’s discussion and analysis of results of operations, liquidity and capital resources included in our 2019 Annual Report on Form 10-K (“2019 Form 10-K”). These interim statements are unaudited. The year-end balance sheet data included in this Form 10-Q was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles in the United States of America. We have historically operated and continue to operate on a 52/53 week fiscal year ending on the Friday closest to the last day of the quarter. For ease of presentation, March 31 and December 31 are used consistently throughout this Form 10-Q and these interim financial statements and related notes to represent the period-end dates. For the 2020 and 2019 quarters, the actual closing dates were April 3 and March 29, respectively. The unaudited interim financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair statement of the results for the periods presented. When used herein, the terms “IFF,” the “Company,” “we,” “us” and “our” mean International Flavors & Fragrances Inc. and its consolidated subsidiaries.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. The inputs into our judgments and estimates consider the current economic implications of COVID-19 on our critical and significant accounting estimates, including estimates associated with future cash flows that are used in assessing the risk of impairment of certain long lived assets. Actual results could differ from those estimates.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Company's statement of cash flows periods ended March 31, 2020 and March 31, 2019 to the amounts reported in the Company's balance sheet as at March 31, 2020, December 31, 2019, March 31, 2019 and December 31, 2018.

(DOLLARS IN THOUSANDS)	March 31, 2020		December 31, 2019		March 31, 2019		December 31, 2018
Current assets
Cash and cash equivalents	$	433,246	$	606,823	$	483,504	$	634,897
Restricted cash	9,699		17,122		13,625		13,625
Noncurrent assets
Restricted cash included in Other assets	5,439		—		—		—
Cash, cash equivalents and restricted cash	$	448,384	$	623,945	$	497,129	$	648,522

Accounts Receivable

The Company has various factoring agreements in the U.S. and The Netherlands under which it can factor up to approximately $100 million in receivables. In addition, the Company has factoring agreements sponsored by certain customers. Under all of the arrangements, the Company sells the receivables on a non-recourse basis to unrelated financial institutions and accounts for the transactions as a sale of receivables. The applicable receivables are removed from the Company's Consolidated Balance Sheet when the cash proceeds are received by the Company.

Through these factoring programs, the Company removed $200.3 million and $205.7 million of receivables from its balance sheet for the periods ended March 31, 2020 and December 31, 2019, respectively.

The impact on cash provided by operations from participating in these programs was a decrease of $5.4 million for the three months ended March 31, 2020 and an increase of $5.2 million for the three months ended March 31, 2019.

The cost of participating in these programs was $1.2 million for both of the periods ending March 31, 2020 and 2019.

Revenue Recognition

The Company recognizes revenue when control of the promised goods is transferred to its customers in an amount that reflects the consideration it expects to be entitled to in exchange for those goods. Sales, value added, and other taxes the Company collects are excluded from revenues. The Company receives payment in accordance with standard customer terms.

The following table presents the Company's revenues disaggregated by product categories:

	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020		2019
Taste
Flavor compounds	$	576,368	$	567,314
Savory solutions	155,764		136,337
Inclusions	30,146		28,633
Nutrition and specialty ingredients	43,955		44,208
Flavor ingredients	24,089		28,310
Total Taste	830,322		804,802
Scent
Fine fragrances	94,150		106,074
Consumer fragrance	314,028		283,221
Fragrance ingredients	108,817		103,305
Total Scent	516,995		492,600
Total revenues	$	1,347,317	$	1,297,402

Contract Assets

With respect to a small number of contracts for the sale of compounds, the Company has an “enforceable right to payment for performance to date” and as the products do not have an alternative use, the Company recognizes revenue for these contracts over time and records a contract asset using the output method. The output method recognizes revenue on the basis of direct measurements of the value to the customer of the goods or services transferred to date relative to the remaining goods or services promised under the contract.

The following table reflects the balances in the Company's accounts receivable, contract assets, and contract liabilities for the periods ended March 31, 2020 and December 31, 2019:

(DOLLARS IN THOUSANDS)	March 31, 2020		December 31, 2019
Receivables (included in Trade receivables)	$	961,842	$	892,625
Contract asset - Short term	1,951		2,736
Contract liabilities - Short term	11,379		11,107

Recent Accounting Pronouncements

In March 2020, the FASB issued Accounting Standards Update ("ASU") 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU is intended to simplify various aspects related to the cessation of reference rates in certain financial markets that would otherwise create modification accounting or changes in estimate. This guidance is effective for March 12, 2020 through December 31, 2022. The Company has not adopted any of the optional expedients or exceptions through March 31, 2020 but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The ASU is intended to simplify various aspects related to accounting for income taxes. This guidance is effective for fiscal years beginning after December 15, 2020, and for interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, “Intangibles - Goodwill and Other - Internal - Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service

Contract (a consensus of the FASB Emerging Issues Task Force).” The ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This guidance is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years, with early adoption permitted. The Company adopted the guidance effective the first day of its 2020 fiscal year. The adoption did not have an impact on its consolidated financial statements but may impact the Company in the future as and when it enters into cloud computing arrangements.

In August 2018, the FASB issued ASU 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans (Subtopic 715-20)", which modifies the disclosure requirements on company-sponsored defined benefit plans. The ASU is effective for fiscal years beginning after December 15, 2020 on a retrospective basis to all periods presented. Early adoption is permitted. The Company adopted the guidance effective the first day of its 2020 fiscal year. The adoption did not have an impact on its Consolidated Financial Statements and will have a minimal impact on its disclosures in future periods.

Adoption of Standard Related to Expected Credit Losses

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", with subsequent amendments, which requires issuers to measure expected credit losses for financial assets based on historical experience, current conditions and reasonable and supportable forecasts. As such, an entity will use forward-looking information to estimate credit losses, which may result in earlier recognition of losses.

The Company adopted the guidance effective the first day of its 2020 fiscal year and performed an evaluation of the applicable criteria, including the aging of its trade receivables, recent write-off history and other factors related to future macroeconomic conditions. As a result of the evaluation, the Company determined that no adjustment would be required to the level of its allowances for bad debts or to the carrying value of any other financial asset.

The Company is exposed to credit losses primarily through its sales of products. To determine the appropriate allowance for expected credit losses, the Company considers certain credit quality indicators, such as aging, collection history, and creditworthiness of debtors. Regional and Global Credit committees review and approve specific customer allowance reserves. The allowance for expected credit losses is primarily based on two primary factors: i) the aging of the different categories of trade receivables, and ii) a specific reserve for accounts identified as uncollectable.

The Company also considers current and future economic conditions in the determination of the allowance. At March 31, 2020, the Company reported $961.8 million of trade receivables, net of allowances of $18.7 million. Based on an aging analysis at March 31, 2020, approximately 87% of our accounts receivable were current based on the payment terms of the invoice. Receivables that are past due by over 365 days account for less than 1% of our accounts receivable.

The following is a rollforward of the Company's allowances for bad debts for the three months ended March 31, 2020:

(DOLLARS IN THOUSANDS)	Allowances for Bad Debts
Balance at December 31, 2019	$	16,428
Bad debt expense	4,751
Write-offs	(1,301		)
Foreign exchange	(1,150		)
Balance at March 31, 2020	$	18,728

The Company adjusted the amount of the allowances for bad debts as of December 31, 2019 to reflect the correct classification of amounts between the allowances for bad debts and Trade Receivables. The adjustment was for $8.2 million and had the effect of increasing both the allowances for bad debts and Trade Receivables.

During the first quarter of 2020, the Company increased its allowances for bad debts by approximately $3.0 million to reflect higher expected future write-offs of receivables due to the impact of the COVID-19 pandemic and its impact on the liquidity of certain customers.

XML

Employee Benefits

3 Months Ended

Mar. 31, 2020

Retirement Benefits [Abstract]

Employee Benefits

EMPLOYEE BENEFITS

Pension and other defined contribution retirement plan expenses included the following components:

(DOLLARS IN THOUSANDS)	U.S. Plans
	Three Months Ended March 31,
	2020			2019
Service cost for benefits earned(1)	$	400		$	474
Interest cost on projected benefit obligation(2)	4,263			5,453
Expected return on plan assets(2)	(7,083		)	(6,983		)
Net amortization and deferrals(2)	1,858			1,275
Net periodic benefit (income) cost	$	(562	)	$	219

(DOLLARS IN THOUSANDS)	Non-U.S. Plans
	Three Months Ended March 31,
	2020			2019
Service cost for benefits earned(1)	$	5,940		$	4,873
Interest cost on projected benefit obligation(2)	3,245			4,435
Expected return on plan assets(2)	(11,614		)	(10,904		)
Net amortization and deferrals(2)	3,834			2,922
Net periodic benefit (income) cost	$	1,405		$	1,326

_______________________ 

(1) Included as a component of Operating profit.

(2) Included as a component of Other loss (income), net.

The Company expects to contribute a total of $4.4 million to its U.S. pension plans and a total of $20.9 million to its Non-U.S. Plans during 2020. During the three months ended March 31, 2020, no contributions were made to the qualified U.S. pension plans, $3.9 million of contributions were made to the non-U.S. pension plans, and $1.5 million of benefit payments were made with respect to the Company's non-qualified U.S. pension plan.

Expense recognized for postretirement benefits other than pensions included the following components: 

	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020			2019
Service cost for benefits earned	$	143		$	148
Interest cost on projected benefit obligation	474			578
Net amortization and deferrals	(1,153		)	(1,194		)
Total postretirement benefit income	$	(536	)	$	(468	)

The Company expects to contribute $3.8 million to its postretirement benefits other than pension plans during 2020. In the three months ended March 31, 2020, $1 million of contributions were made.

XML

Redeemable Noncontrolling Interests (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Stockholders' Equity Attributable to Noncontrolling Interest [Roll Forward]
Balance at beginning	$ 12,244
Share of profit or loss attributable to redeemable noncontrolling interests	2,604	$ 2,385
Dividends paid	39
Balance at end	12,824
Redeemable Noncontrolling Interest
Stockholders' Equity Attributable to Noncontrolling Interest [Roll Forward]
Balance at beginning	99,043	81,806
Acquired through acquisitions during 2019		26,224
Impact of foreign exchange translation	19,255	(190)
Share of profit or loss attributable to redeemable noncontrolling interests	1,987	1,541
Redemption value adjustment for the current period	(5,806)	(370)
Dividends paid		5,700
Measurement period adjustments	(1,426)
Exercises of redeemable noncontrolling interests	10,340
Balance at end	$ 102,713	$ 114,711

XML

Financial Instruments - Derivative Instruments Designated as Cash Flow and Net Investment Hedging Instruments (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Derivative Instruments, Gain (Loss) [Line Items]
Amount of (Loss) Gain Recognized in OCI on Derivative (Effective Portion)	$ 53,419	$ 24,030
Amount of (Loss) Gain Reclassified from Accumulated OCI into Income (Effective Portion)	1,853	2,156
Foreign currency contracts | Derivatives in Cash Flow Hedging Relationships [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of (Loss) Gain Recognized in OCI on Derivative (Effective Portion)	1,231	(312)
Cross Currency Swaps | Derivatives in Net Investment Hedging Relationships [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of (Loss) Gain Recognized in OCI on Derivative (Effective Portion)	21,351	10,667
Forward Contracts | Cost of goods sold | Derivatives in Cash Flow Hedging Relationships [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of (Loss) Gain Reclassified from Accumulated OCI into Income (Effective Portion)	2,069	2,372
2024 Euro Notes | Derivatives in Net Investment Hedging Relationships [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of (Loss) Gain Recognized in OCI on Derivative (Effective Portion)	9,569	4,206
Interest rate swaps | Derivatives in Cash Flow Hedging Relationships [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of (Loss) Gain Recognized in OCI on Derivative (Effective Portion)	216	216
Interest rate swaps | Interest expense | Derivatives in Cash Flow Hedging Relationships [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of (Loss) Gain Reclassified from Accumulated OCI into Income (Effective Portion)	216	216
Senior Notes Maturing 2021 through 2026 | Derivatives in Net Investment Hedging Relationships [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of (Loss) Gain Recognized in OCI on Derivative (Effective Portion)	$ 21,052	$ 9,253

XML

Debt - Components of Debt (Detail) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Long-term Debt, Gross	$ 4,332,474	$ 4,382,396
Less: Short term borrowings	(385,569)	(384,958)
Long-term debt	$ 3,946,905	3,997,438
2020 Notes
Debt Instrument [Line Items]
Effective Interest Rate	3.69%
Credit facilities	$ 299,598	299,381
2021 Euro Notes
Debt Instrument [Line Items]
Effective Interest Rate	0.82%
Credit facilities	$ 327,408	334,561
2023 Notes
Debt Instrument [Line Items]
Effective Interest Rate	3.30%
Credit facilities	$ 299,080	299,004
2024 Euro Notes
Debt Instrument [Line Items]
Effective Interest Rate	1.88%
Credit facilities	$ 546,009	558,124
2026 Euro Notes
Debt Instrument [Line Items]
Effective Interest Rate	1.93%
Credit facilities	$ 870,689	890,183
2028 Notes
Debt Instrument [Line Items]
Effective Interest Rate	4.57%
Credit facilities	$ 396,766	396,688
2047 Notes
Debt Instrument [Line Items]
Effective Interest Rate	4.44%
Credit facilities	$ 493,676	493,571
2048 Notes
Debt Instrument [Line Items]
Effective Interest Rate	5.12%
Credit facilities	$ 786,050	785,996
Amortizing Note
Debt Instrument [Line Items]
Effective Interest Rate	6.09%
Credit facilities	$ 70,882	82,079
Bank overdrafts and other
Debt Instrument [Line Items]
Bank overdrafts and other	2,594	3,131
Deferred realized gains on interest rate swaps
Debt Instrument [Line Items]
Deferred realized gains on interest rate swaps	$ 57	57
Term loan credit agreement | Loans payable
Debt Instrument [Line Items]
Effective Interest Rate	3.65%
Credit facilities	$ 239,665	$ 239,621

XML

Income Taxes - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Taxes [Line Items]
Domestic earnings repatriated	$ 42.6
Undistributed foreign earnings	$ 0.0
Spanish tax settlement
Income Taxes [Line Items]
Effective tax rate	17.10%	17.40%
Foreign Tax Authority
Income Taxes [Line Items]
Provision for uncertain tax positions	$ 86.4
Other Liabilities
Income Taxes [Line Items]
Unrecognized tax benefits that would impact effective tax rate	71.4
Accrued interest and penalties	14.2
Other Current Liabilities
Income Taxes [Line Items]
Unrecognized tax benefits that would impact effective tax rate	0.7
Other Current Liabilities | Maximum
Income Taxes [Line Items]
Accrued interest and penalties	$ 0.1

XML

Redeemable Noncontrolling Interests (Tables)

3 Months Ended

Mar. 31, 2020

Noncontrolling Interest [Abstract]

Schedule of Redeemable Noncontrolling Interest

The following table sets forth the details of the Company's redeemable noncontrolling interests:

(DOLLARS IN THOUSANDS)	Redeemable Noncontrolling Interests
Balance at December 31, 2018	$	81,806
Acquired through acquisitions during 2019	26,224
Impact of foreign exchange translation	(190		)
Share of profit or loss attributable to redeemable noncontrolling interests	1,541
Redemption value adjustment for the current period	(370		)
Dividends paid	5,700
Balance at March 31, 2019	$	114,711
Balance at December 31, 2019	$	99,043
Impact of foreign exchange translation	19,255
Share of profit or loss attributable to redeemable noncontrolling interests	1,987
Redemption value adjustment for the current period	(5,806		)
Measurement period adjustments	(1,426		)
Exercises of redeemable noncontrolling interests	(10,340		)
Balance at March 31, 2020	$	102,713

XML

Segment Information (Tables)

3 Months Ended

Mar. 31, 2020

Segment Reporting [Abstract]

Reportable Segment Information

	Three Months Ended
	March 31,
(DOLLARS IN THOUSANDS)	2020			2019
Net sales:
Taste	$	830,322		$	804,802
Scent	516,995			492,600
Consolidated	$	1,347,317		$	1,297,402
Segment profit:
Taste	$	137,347		$	131,402
Scent	105,395			89,953
Global expenses	(20,393		)	(16,667		)
Operational Improvement Initiatives (a)	—			(406		)
Frutarom Integration Related Costs (b)	(3,650		)	(14,897		)
Restructuring and Other Charges, net (c)	(4,918		)	(16,174		)
(Losses) gains on sale of assets	(754		)	188
Frutarom Acquisition Related Costs (d)	(813		)	(9,529		)
Compliance Review & Legal Defense Costs (e)	(649		)	—
N&B Transaction Related Costs (f)	(5,199		)	—
N&B Integration Related Costs (g)	(10,144		)	—
Operating profit	196,222			163,870
Interest expense	(32,140		)	(36,572		)
Other (loss) income, net	(10,574		)	7,278
Income before taxes	$	153,508		$	134,576

(a) Represents accelerated depreciation related to a plant relocation in India.

(b)	Represents costs related to the integration of the Frutarom acquisition. For 2020, costs primarily related to advisory services, retention bonuses and performance stock awards. For 2019, costs principally related to advisory services.
(c)	For 2020, represents costs primarily related to the Frutarom Integration Initiative. For 2019, represents costs primarily related to the Frutarom Integration Initiative and the 2019 Severance Charges program.
(d)	Represents transaction-related costs and expenses related to the acquisition of Frutarom. For 2020, amount primarily includes earn-out payments, net of adjustments, amortization for inventory "step-up" costs and transaction costs principally related to the 2019 Acquisition Activity. For 2019, amount primarily includes amortization for inventory "step-up" costs and transaction costs.
(e)	Costs related to reviewing the nature of inappropriate payments and review of compliance in certain other countries. In addition, includes legal costs for related shareholder lawsuits.
(f)	Represents transaction costs and expenses related to the pending transaction with Nutrition & Biosciences Inc.
(g)	Represents costs related to the integration of the pending transaction with Nutrition & Biosciences Inc.

Net Sales by Destination of Product Delivery

Net sales, which are attributed to individual regions based upon the destination of product delivery, were as follows:

	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020		2019
Europe, Africa and Middle East	$	543,130	$	529,606
Greater Asia	309,508		287,962
North America	303,387		301,059
Latin America	191,292		178,775
Consolidated	$	1,347,317	$	1,297,402

	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020		2019
Net sales related to the U.S.	$	270,686	$	272,803
Net sales attributed to all foreign countries	1,076,631		1,024,599

XML

Net Income Per Share

3 Months Ended

Mar. 31, 2020

Earnings Per Share [Abstract]

Net Income Per Share

NET INCOME PER SHARE

A reconciliation of the shares used in the computation of basic and diluted net income per share is as follows: 

	Three Months Ended March 31,
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)	2020		2019
Net Income
Net income attributable to IFF stockholders	$	124,607	$	108,829
Add: Reduction in redemption value of redeemable noncontrolling interests in excess of earnings allocated	5,806		370
Net income available to IFF stockholders	$	130,413	$	109,199
Shares
Weighted average common shares outstanding (basic)(1)	112,082		111,864
Adjustment for assumed dilution(2):
Stock options and restricted stock awards	349		362
SPC portion of TEUs	1,163		1,163
Weighted average shares assuming dilution (diluted)	113,594		113,389
Net Income per Share
Net income per share - basic	$	1.16	$	0.97
Net income per share - diluted	1.15		0.96

_______________________ 

(1) For the three months ended March 31, 2020 and 2019, the tangible equity units (“TEUs”) were assumed to be outstanding at the minimum settlement amount 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.

The Company declared a quarterly dividend to its shareholders of $0.75 and $0.73 for the three months ended March 31, 2020 and 2019, respectively.

There were no stock options or stock-settled appreciation rights (“SSARs”) excluded from the computation of diluted net income per share for the three months ended March 31, 2020 and 2019.

The Company issued 16,500,000 TEUs, consisting of a prepaid stock purchase contract ("SPC") and a senior amortizing note, for net proceeds of $800.2 million on September 17, 2018. For purposes of calculating basic net income per share, the SPCs were assumed to be settled at the minimum settlement amount of 0.3134 shares per SPC for March 31, 2020 and 2019, respectively. For purposes of calculating diluted earnings per share, the SPCs were assumed to be settled at a conversion factor not to exceed 0.3839 on March 31, 2020 and 2019, respectively. The SPC conversion factor is based on the 20 day volume-weighted average price (“VWAP”) per share of the Company’s common stock. Per the TEU agreement, the maximum settlement amount is 0.3839 shares per SPC.

The Company has issued shares of purchased restricted common stock and purchased restricted common stock units (collectively “PRSUs”) which contain rights to nonforfeitable dividends while these shares are outstanding and thus are considered participating securities. Such securities are required to be included in the computation of basic and diluted earnings per share pursuant to the two-class method. The Company did not present the two-class method since the difference between basic and diluted net income per share for both unrestricted common shareholders and PRSU shareholders was less than $0.01 per share for each period presented, and the number of PRSUs outstanding as of March 31, 2020 and 2019 was immaterial. Net income allocated to such PRSUs was $0.2 million for both the three months ended March 31, 2020 and 2019.

XML

Segment Information

3 Months Ended

Mar. 31, 2020

Segment Reporting [Abstract]

Segment Information

SEGMENT INFORMATION

During the first quarter of 2020, the Company reorganized its reporting structure and combined substantially all of the components of the former Frutarom reportable operating segment into the former Taste reportable operating segment. Prior year amounts have been recast to conform to the current year reporting structure. As a result of the reorganization, the Company is now organized into two reportable operating segments, Taste and Scent; these segments align with the internal structure used to manage these businesses.

Taste is comprised of a diversified portfolio across flavor compounds, savory solutions, inclusions and nutrition and specialty ingredients. Flavor compounds provide unique flavors that are ultimately used by IFF's customers in savory products,

beverages, sweets, and dairy products. Savory solutions include marinades or powder blends of flavors, natural colors, seasonings, functional ingredients and natural anti-oxidants that are primarily designed for the meat and fish industry. Inclusions provide taste and texture by, among other things, combining flavorings with fruit, vegetables, and other natural ingredients for a wide range of food products, such as health snacks, baked goods, cereals, pastries, ice cream and other dairy products. Nutrition and specialty ingredients primarily consist of natural health ingredients, natural food protection, natural colors and flavor ingredients. The flavor ingredients market includes natural flavor extracts, specialty botanical extracts, distillates, essential oils, citrus products, aroma chemicals, and natural gums and resins. Such ingredients are used for food, beverage, and flavors and are often sold directly to food and beverage manufacturers who use them in producing consumer products.

Scent is comprised of (1) Fragrance Compounds, which are ultimately used by our customers in two broad categories: Fine Fragrances, including perfumes and colognes, and Consumer Fragrances, including fragrance compounds for personal care (e.g., soaps), household products (e.g., detergents and cleaning agents) and beauty care, including toiletries; (2) Fragrance Ingredients, consisting of synthetic and natural ingredients that can be combined with other materials to create unique fine fragrance and consumer compounds; and (3) Cosmetic Active Ingredients, consisting of active and functional ingredients, botanicals and delivery systems to support our customers’ cosmetic and personal care product lines. Major fragrance customers include the cosmetics industry, including perfume and toiletries manufacturers, and the household products industry, including manufacturers of soaps, detergents, fabric care, household cleaners and air fresheners.

The Company's Chief Operating Decision Maker evaluates the performance of these reportable operating segments based on segment profit which is defined as operating profit before restructuring, global expenses (as discussed below) and certain non-recurring items, Interest expense, Other income (expense), net and Taxes on income.

The Global expenses caption represents corporate and headquarter-related expenses which include legal, finance, human resources, certain incentive compensation expenses and other R&D and administrative expenses that are not allocated to individual reportable operating segments.

Reportable segment information was as follows:

	Three Months Ended
	March 31,
(DOLLARS IN THOUSANDS)	2020			2019
Net sales:
Taste	$	830,322		$	804,802
Scent	516,995			492,600
Consolidated	$	1,347,317		$	1,297,402
Segment profit:
Taste	$	137,347		$	131,402
Scent	105,395			89,953
Global expenses	(20,393		)	(16,667		)
Operational Improvement Initiatives (a)	—			(406		)
Frutarom Integration Related Costs (b)	(3,650		)	(14,897		)
Restructuring and Other Charges, net (c)	(4,918		)	(16,174		)
(Losses) gains on sale of assets	(754		)	188
Frutarom Acquisition Related Costs (d)	(813		)	(9,529		)
Compliance Review & Legal Defense Costs (e)	(649		)	—
N&B Transaction Related Costs (f)	(5,199		)	—
N&B Integration Related Costs (g)	(10,144		)	—
Operating profit	196,222			163,870
Interest expense	(32,140		)	(36,572		)
Other (loss) income, net	(10,574		)	7,278
Income before taxes	$	153,508		$	134,576

(a) Represents accelerated depreciation related to a plant relocation in India.

(b)	Represents costs related to the integration of the Frutarom acquisition. For 2020, costs primarily related to advisory services, retention bonuses and performance stock awards. For 2019, costs principally related to advisory services.
(c)	For 2020, represents costs primarily related to the Frutarom Integration Initiative. For 2019, represents costs primarily related to the Frutarom Integration Initiative and the 2019 Severance Charges program.
(d)	Represents transaction-related costs and expenses related to the acquisition of Frutarom. For 2020, amount primarily includes earn-out payments, net of adjustments, amortization for inventory "step-up" costs and transaction costs principally related to the 2019 Acquisition Activity. For 2019, amount primarily includes amortization for inventory "step-up" costs and transaction costs.
(e)	Costs related to reviewing the nature of inappropriate payments and review of compliance in certain other countries. In addition, includes legal costs for related shareholder lawsuits.
(f)	Represents transaction costs and expenses related to the pending transaction with Nutrition & Biosciences Inc.
(g)	Represents costs related to the integration of the pending transaction with Nutrition & Biosciences Inc.

Net sales, which are attributed to individual regions based upon the destination of product delivery, were as follows:

	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020		2019
Europe, Africa and Middle East	$	543,130	$	529,606
Greater Asia	309,508		287,962
North America	303,387		301,059
Latin America	191,292		178,775
Consolidated	$	1,347,317	$	1,297,402

	Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2020		2019
Net sales related to the U.S.	$	270,686	$	272,803
Net sales attributed to all foreign countries	1,076,631		1,024,599

No non-U.S. country had net sales in any period presented greater than 6% of total consolidated net sales.

XML

Cover - shares	3 Months Ended
	Mar. 31, 2020	May 01, 2020
Entity Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2020
Document Transition Report	false
Entity File Number	1-4858
Entity Registrant Name	INTERNATIONAL FLAVORS & FRAGRANCES INC
Entity Incorporation, State or Country Code	NY
Entity Tax Identification Number	13-1432060
Entity Address, Address Line One	521 West 57th Street
Entity Address, City or Town	New York
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10019
City Area Code	212
Local Phone Number	765-5500
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		106,851,144
Entity Central Index Key	0000051253
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
Amendment Flag	false
Common Stock, par value 12 1/2¢ per share
Entity Information [Line Items]
Title of 12(b) Security	Common Stock, par value 12 1/2¢ per share
Trading Symbol	IFF
Security Exchange Name	NYSE
6.00% Tangible Equity Units
Entity Information [Line Items]
Title of 12(b) Security	6.00% Tangible Equity Units
Trading Symbol	IFFT
Security Exchange Name	NYSE
0.500% Senior Notes due 2021
Entity Information [Line Items]
Title of 12(b) Security	0.500% Senior Notes due 2021
Trading Symbol	IFF 21
Security Exchange Name	NYSE
1.750% Senior Notes due 2024
Entity Information [Line Items]
Title of 12(b) Security	1.750% Senior Notes due 2024
Trading Symbol	IFF 24
Security Exchange Name	NYSE
1.800% Senior Notes due 2026
Entity Information [Line Items]
Title of 12(b) Security	1.800% Senior Notes due 2026
Trading Symbol	IFF 26
Security Exchange Name	NYSE

XML

Acquisitions

3 Months Ended

Mar. 31, 2020

Business Combinations [Abstract]

Acquisitions

ACQUISITIONS

Pending Transaction with Nutrition & Biosciences, Inc.

On December 15, 2019, the Company entered into definitive agreements with DuPont de Nemours, Inc. (“DuPont”), including an Agreement and Plan of Merger, pursuant to which DuPont will transfer its nutrition and biosciences business to Nutrition & Biosciences, Inc., a Delaware corporation and wholly owned subsidiary of DuPont (“N&B”), and N&B will merge with and into a wholly owned subsidiary of IFF in exchange for a number of shares of IFF common stock, par value $0.125 per

share (“IFF Common Stock”) (collectively, the “DuPont N&B Transaction”). In connection with the transaction, DuPont will receive a one-time $7.3 billion special cash payment (the “Special Cash Payment”), subject to certain adjustments. As a result of the DuPont N&B Transaction, holders of DuPont’s common stock will own approximately 55.4% of the outstanding shares of IFF on a fully diluted basis.

Completion of the DuPont N&B Transaction is subject to various closing conditions, including, among other things, (1) approval by IFF’s shareholders of the issuance of IFF Common Stock in connection with the transaction; (2) the effectiveness of the registration statements to be filed with the Securities and Exchange Commission pursuant to the Merger Agreement; and (3) the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (which waiting period has expired), and obtaining certain other consents, authorizations, orders or approvals from governmental authorities. We expect that the transaction will close in early 2021.

On December 15, 2019, IFF and N&B entered into a commitment letter which provides $7.5 billion in an aggregate principal amount of senior unsecured bridge term loans (the "Bridge Loans"). On January 17, 2020, N&B entered into a term loan credit agreement providing for unsecured term loan facilities in an aggregate principal amount of $1.25 billion (the “Term Loan Facilities”), which reduced the commitments under the Bridge Loans commitment letter by a corresponding amount. N&B will be the initial borrower under the remaining $6.25 billion tranche of the 364-day senior unsecured bridge facility (the “Bridge Facility”) (or, if applicable, any replacement debt financing), which, together with the Term Loan Facilities, will be used to finance the Special Cash Payment and to pay related fees and expenses. Following the consummation of the merger, all obligations of N&B with respect to the Term Loan Facilities and the Bridge Facility (if any) or, if applicable, the replacement debt financing, will be guaranteed by IFF (or at the election of N&B and IFF, assumed by IFF).

2019 Acquisition Activity

During the second quarter of 2019, the Company acquired the remaining 50% interest in an equity method investee located in Canada. The purchase of the additional interest increased the Company's ownership of the investee to 100%. The purchase price for the remaining 50% was approximately $37 million, including cash and an accrual for the amount expected to be paid in contingent consideration. The Company began to consolidate the results of the acquired entity from the date on which it acquired the remaining 50% interest during the second quarter of 2019. Goodwill of approximately $30 million and intangible assets of $20 million were recorded in connection with the acquisition.

During the first quarter of 2019, the Company acquired 70% of a company in Europe and increased its ownership of an Asian company from 49% to 60%. The total purchase price for the two acquisitions made in the first quarter of 2019 was $52 million, excluding cash acquired and including $19 million of contingent consideration and deferred payments. The purchase price allocations have been performed and resulted in goodwill of approximately $47 million and intangible assets of $28 million.

During the first quarter of 2020, the Company completed the purchase price allocations for all three of the transactions that were made during 2019. As a result of finalizing the purchase price allocations, adjustments were recorded to increase fixed assets by $13 million and customer relationships and other intangible assets by $5 million and to decrease goodwill by $15 million. The income statement impact of the finalization of purchase accounting was not material.

Pro forma information has not been presented as the entities acquired in 2019 were not material.

XML

Debt

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Debt

 DEBT

Debt consisted of the following:

(DOLLARS IN THOUSANDS)	Effective Interest Rate		March 31, 2020			December 31, 2019
2020 Notes(1)	3.69	%	$	299,598		$	299,381
2021 Euro Notes(1)	0.82	%	327,408			334,561
2023 Notes(1)	3.30	%	299,080			299,004
2024 Euro Notes(1)	1.88	%	546,009			558,124
2026 Euro Notes(1)	1.93	%	870,689			890,183
2028 Notes(1)	4.57	%	396,766			396,688
2047 Notes(1)	4.44	%	493,676			493,571
2048 Notes(1)	5.12	%	786,050			785,996
Term Loan(1)	3.65	%	239,665			239,621
Amortizing Notes(1)	6.09	%	70,882			82,079
Bank overdrafts and other			2,594			3,131
Deferred realized gains on interest rate swaps			57			57
Total debt			4,332,474			4,382,396
Less: Short-term borrowings(2)			(385,569		)	(384,958		)
Total Long-term debt			$	3,946,905		$	3,997,438

_______________________ 

(1) Amount is net of unamortized discount and debt issuance costs.

(2)

Includes bank borrowings, overdrafts and current portion of long-term debt.

XML

CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash flows from operating activities:
Net income	$ 127,211	$ 111,214
Adjustments to reconcile to net cash provided by operating activities
Depreciation and amortization	80,595	81,775
Deferred income taxes	2,221	(12,389)
Losses (gains) on sale of assets	754	(188)
Stock-based compensation	8,624	7,604
Pension contributions	(5,397)	(3,956)
Changes in assets and liabilities, net of acquisitions:
Trade receivables	(133,291)	(55,935)
Inventories	(568)	(24,719)
Accounts payable	(31,635)	8,988
Accruals for incentive compensation	(19,340)	(36,969)
Other current payables and accrued expenses	(65,158)	(11,321)
Other assets	42,462	(9,978)
Other liabilities	10,467	(6,894)
Net cash provided by operating activities	16,945	47,232
Cash flows from investing activities:
Cash paid for acquisitions, net of cash received	0	(33,895)
Additions to property, plant and equipment	(48,294)	(57,609)
Proceeds from life insurance contracts	1,739	1,890
Proceeds from disposal of assets	3,806	3,970
Contingent consideration paid	0	(4,655)
Net cash used in investing activities	(42,749)	(90,299)
Cash flows from financing activities:
Cash dividends paid to shareholders	(80,038)	(77,779)
Increase in revolving credit facility and short term borrowings	169	2,895
Repayments on debt	(11,584)	(36,156)
Contingent consideration paid	(327)	0
Purchases of redeemable noncontrolling interest	(14,173)	0
Proceeds from issuance of stock in connection with stock options	0	200
Employee withholding taxes paid	(1,275)	(1,339)
Net cash used in financing activities	(107,228)	(112,179)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(42,529)	3,853
Net change in cash, cash equivalents and restricted cash	(175,561)	(151,393)
Cash, cash equivalents and restricted cash at beginning of year	623,945	648,522
Cash, cash equivalents and restricted cash at end of period	448,384	497,129
Supplemental Disclosures:
Interest paid, net of amounts capitalized	41,755	48,506
Income taxes paid	32,636	33,326
Accrued capital expenditures	$ 19,013	$ 14,241

XML

Accumulated Other Comprehensive Income (Loss) - Schedule of Changes in Accumulated Other Comprehensive Income (Loss) (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Stockholders' Equity Attributable to Parent	$ 6,217,304
Net current period other comprehensive income (loss)	(447,314)	$ 44,873
Stockholders' Equity Attributable to Parent	5,827,850
Accumulated Translation Adjustment [Member]
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Stockholders' Equity Attributable to Parent	(373,043)	(396,996)
OCI, before Reclassifications, Net of Tax, Attributable to Parent	(452,278)	42,377
Reclassification from AOCI, Current Period, Net of Tax, Attributable to Parent	0	0
Net current period other comprehensive income (loss)	(452,278)	42,377
Stockholders' Equity Attributable to Parent	(825,321)	(354,619)
Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Stockholders' Equity Attributable to Parent	2,068	4,746
OCI, before Reclassifications, Net of Tax, Attributable to Parent	3,300	2,059
Reclassification from AOCI, Current Period, Net of Tax, Attributable to Parent	1,853	2,156
Net current period other comprehensive income (loss)	1,447	(97)
Stockholders' Equity Attributable to Parent	3,515	4,649
Accumulated Defined Benefit Plans Adjustment
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Stockholders' Equity Attributable to Parent	(345,919)	(309,977)
OCI, before Reclassifications, Net of Tax, Attributable to Parent	0	0
Reclassification from AOCI, Current Period, Net of Tax, Attributable to Parent	(3,517)	(2,593)
Net current period other comprehensive income (loss)	3,517	2,593
Stockholders' Equity Attributable to Parent	(342,402)	(307,384)
AOCI Attributable to Parent [Member]
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Stockholders' Equity Attributable to Parent	(716,894)	(702,227)
OCI, before Reclassifications, Net of Tax, Attributable to Parent	(448,978)	44,436
Reclassification from AOCI, Current Period, Net of Tax, Attributable to Parent	(1,664)	(437)
Net current period other comprehensive income (loss)	(447,314)	44,873
Stockholders' Equity Attributable to Parent	$ (1,164,208)	$ (657,354)

XML

Other Assets - Schedule of Other Assets (Detail) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Other Assets [Abstract]
Operating lease right-of-use assets	$ 287,301	$ 287,870
Deferred income taxes	96,109	125,552
Overfunded pension plans	89,819	85,657
Cash surrender value of life insurance contracts	43,694	47,578
Other	69,730	61,759
Total	$ 586,653	$ 608,416

XML

Label	Element	Value
Accounting Standards Update 2017-12 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ 981,000
Accounting Standards Update 2017-12 [Member] | Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	981,000
Accounting Standards Update 2016-02 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	23,094,000
Accounting Standards Update 2016-02 [Member] | Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ 23,094,000

XML

Leases - Supplemental cash flow information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Leases [Abstract]
Operating cash flows from operating leases	$ 12,331	$ 11,076
Operating cash flows for finance leases	33	0
Financing cash flows for finance leases	721	0
Right-of-Use Asset Obtained in Exchange for Operating Lease Liability	10,968	9,249
Right-of-Use Asset Obtained in Exchange for Finance Lease Liability	$ 1,930	$ 452

XML

Financial Instruments - Derivative Instruments Measured at Fair Value (Detail) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Derivatives, Fair Value [Line Items]
Total Fair Value, Derivative Assets	$ 32,892
Total Fair Value, Derivative Liabilities		$ 7,415
Foreign currency contracts
Derivatives, Fair Value [Line Items]
Total Fair Value, Derivative Assets	5,224	3,575
Total Fair Value, Derivative Liabilities	5,631	3,228
Currency Swap
Derivatives, Fair Value [Line Items]
Total Fair Value, Derivative Assets	27,668
Interest rate swaps
Derivatives, Fair Value [Line Items]
Total Fair Value, Derivative Liabilities		4,187
Fair Value of Derivatives Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Total Fair Value, Derivative Assets	30,471
Total Fair Value, Derivative Liabilities		4,984
Fair Value of Derivatives Designated as Hedging Instruments [Member] | Foreign currency contracts
Derivatives, Fair Value [Line Items]
Total Fair Value, Derivative Assets	2,803	1,310
Total Fair Value, Derivative Liabilities	0	797
Fair Value of Derivatives Designated as Hedging Instruments [Member] | Interest rate swaps
Derivatives, Fair Value [Line Items]
Total Fair Value, Derivative Assets	27,668
Total Fair Value, Derivative Liabilities		4,187
Fair Value of Derivatives Not Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Total Fair Value, Derivative Assets	2,421
Total Fair Value, Derivative Liabilities		2,431
Fair Value of Derivatives Not Designated as Hedging Instruments [Member] | Foreign currency contracts
Derivatives, Fair Value [Line Items]
Total Fair Value, Derivative Assets	2,421	2,265
Total Fair Value, Derivative Liabilities	5,631	$ 2,431
Fair Value of Derivatives Not Designated as Hedging Instruments [Member] | Currency Swap
Derivatives, Fair Value [Line Items]
Total Fair Value, Derivative Assets	$ 0

XML

Segment Information - Reportable Segment Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Net sales:
Net sales	$ 1,347,317	$ 1,297,402
Segment profit:
Operating profit	196,222	163,870
Restructuring and other charges, net	(4,918)	(16,174)
(Losses) gains on sale of assets	(754)	188
Interest expense	(32,140)	(36,572)
Other income (expense)	(10,574)	7,278
Income before taxes	153,508	134,576
Taste
Net sales:
Net sales	830,322	804,802
Scent
Net sales:
Net sales	516,995	492,600
Corporate and Other
Segment profit:
Operational improvement initiative costs	0	(406)
Restructuring and other charges, net	(4,918)	(16,174)
(Losses) gains on sale of assets	(754)	188
Frutarom Acquisition Related Costs	(813)	(9,529)
FDA Mandated Product Recall	(649)	0
Operating Segments | Taste
Net sales:
Net sales	830,322	804,802
Segment profit:
Operating profit	137,347	131,402
Operating Segments | Scent
Net sales:
Net sales	516,995	492,600
Segment profit:
Operating profit	105,395	89,953
Corporate, Non-Segment
Segment profit:
Operating profit	(20,393)	(16,667)
Nutrition & Biosciences, Inc | Corporate and Other
Segment profit:
Integration-related costs	(10,144)	0
Transaction related costs	(5,199)	0
Frutarom | Corporate and Other
Segment profit:
Integration-related costs	$ (3,650)	$ (14,897)

XML

Employee Benefits - Postretirement Benefits Other Than Pension Expenses (Detail) - Defined Contribution and Other Retirement Plans - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Defined Benefit Plan Disclosure [Line Items]
Service cost for benefits earned	$ 143	$ 148
Interest cost on projected benefit obligation	474	578
Net amortization and deferrals	(1,153)	(1,194)
Net periodic benefit (income) cost	$ (536)	$ (468)

XML

Goodwill and Other Intangible Assets, Net - Schedule of Movements in Goodwill (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($)
Goodwill [Roll Forward]
Balance at December 31, 2019	$ 5,497,596
Measurement period adjustments(1)	(15,283)
Foreign exchange	(214,754)
Balance at March 31, 2020	$ 5,267,559

XML

Net Income Per Share - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions		3 Months Ended
	Sep. 17, 2018	Mar. 31, 2020	Mar. 31, 2019
Earnings Per Share [Abstract]
Dividends declared per share, in dollars per share		$ 0.75	$ 0.73
Tangible equity units issued	16,500,000
Tangible equity units proceeds	$ 800.2
Price for basic share (usd per share)	$ 0.3134
Tangible Equity Units, Price for Shares Diluted	$ 0.3839
Net income allocated to PRS		$ 0.2	$ 0.2

XML

Commitments and Contingencies

3 Months Ended

Mar. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

Guarantees and Letters of Credit

The Company has various bank guarantees and letters of credit which are available for use to support its ongoing business operations and to satisfy governmental requirements associated with pending litigation in various jurisdictions.

At March 31, 2020, the Company had total bank guarantees and standby letters of credit of $47.8 million with various financial institutions. Included in the above aggregate amount was a total of $13.8 million for other assessments in Brazil for various income tax and indirect tax disputes related to fiscal years 1998-2011. There were no material amounts utilized under the standby letters of credit as of March 31, 2020.

In order to challenge the assessments in these cases in Brazil, the Company has been required to, and has separately pledged assets, principally property, plant and equipment, to cover assessments in the amount of $7.7 million as of March 31, 2020.

On December 15, 2019, IFF and N&B entered into a commitment letter which provides $7.5 billion in an aggregate principal amount of senior unsecured bridge term loans. On January 17, 2020, N&B entered into a term loan credit agreement providing for unsecured term loan facilities in an aggregate principal amount of $1.25 billion, which reduced the commitments under the Bridge Loans commitment letter by a corresponding amount. N&B will be the initial borrower under the remaining $6.25 billion tranche of the 364-day senior unsecured bridge facility (or, if applicable, any replacement debt financing), which, together with the Term Loan Facilities, will be used to finance the Special Cash Payment and to pay related fees and expenses. Following the consummation of the merger, all obligations of N&B with respect to the Term Loan Facilities and the Bridge Facility (if any) or, if applicable, the replacement debt financing, will be guaranteed by IFF (or at the election of N&B and IFF, assumed by IFF).

Lines of Credit

The Company has various lines of credit which are available to support its ongoing business operations. As of March 31, 2020, the Company had available lines of credit of $97.4 million with various financial institutions, in addition to the $789.7 million of capacity under the Credit Facility. There were no material amounts drawn down pursuant to these lines of credit as of March 31, 2020.

Litigation

The Company assesses contingencies related to litigation and/or other matters to determine the degree of probability and range of possible loss. A loss contingency is accrued in the Company’s consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly sensitive and requires judgments about future events. On at least a quarterly basis, the Company reviews contingencies related to litigation to determine the adequacy of accruals. The amount of ultimate loss may differ from these estimates and further events may require the Company to increase or decrease the amounts it has accrued on any matter.

Periodically, the Company assesses its insurance coverage for all known claims, where applicable, taking into account aggregate coverage by occurrence, limits of coverage, self-insured retentions and deductibles, historical claims experience and claims experience with its insurance carriers. The liabilities are recorded at management’s best estimate of the probable outcome of the lawsuits and claims, taking into consideration the facts and circumstances of the individual matters as well as past experience on similar matters. At each balance sheet date, the key issues that management assesses are whether it is probable that a loss as to asserted or unasserted claims has been incurred and if so, whether the amount of loss can be reasonably estimated. The Company records the expected liability with respect to claims in Other liabilities and expected recoveries from its insurance carriers in Other assets. The Company recognizes a receivable when it believes that realization of the insurance receivable is probable under the terms of the insurance policies and its payment experience to date.

Litigation Matters

On August 12, 2019, Marc Jansen filed a putative securities class action against IFF, its Chairman and CEO, and its CFO, in the United States District Court for the Southern District of New York. The lawsuit was filed after IFF disclosed that preliminary results of investigations indicated that Frutarom businesses operating principally in Russia and Ukraine had made improper payments to representatives of customers. On December 26, 2019, the Court appointed a group of six investment funds as lead plaintiff and Pomerantz LLP as lead counsel. On March 16, 2020, lead plaintiff filed an amended complaint, which added Frutarom and certain former officers of Frutarom as defendants. The amended complaint alleges, among other things, that defendants made materially false and misleading statements or omissions concerning IFF’s acquisition of Frutarom,

the integration of the two companies, and the companies’ financial reporting and results. The amended complaint asserts claims under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, and under the Israeli Securities Act-1968, against all defendants, and under Section 20(a) of the Securities Exchange Act of 1934 against the individual defendants, on behalf of a putative class of persons and entities who purchased or otherwise acquired IFF securities on the New York Stock Exchange between May 7, 2018 and August 12, 2019 and persons and entities who purchased or otherwise acquired IFF securities on the Tel Aviv Stock Exchange between October 9, 2018 and August 12, 2019. The amended complaint seeks an award of unspecified compensatory damages, costs, and expenses.

Two motions to approve securities class actions were filed in the Tel Aviv District Court, Israel, in August 2019, similarly alleging, among other things, false and misleading statements largely in connection with IFF’s acquisition of Frutarom and the above-mentioned improper payments.  Both assert claims under the U.S. federal securities laws against IFF, its Chairman and CEO, and its former CFO. One also asserts claims under the Israeli Securities Act-1968 against IFF, as well as against Frutarom and certain former Frutarom officers and directors, and asserts claims under the Israeli Companies Act-1999 against certain former Frutarom officers and directors.

On October 29, 2019, IFF and Frutarom filed a claim in the Tel Aviv District Court, Israel, against Ori Yehudai, the former President and CEO of Frutarom, and against certain former directors of Frutarom, challenging the bonus of US $20 million granted to Yehudai in 2018.  IFF and Frutarom allege, among other things, that Yehudai was not entitled to receive the bonus because he breached his fiduciary duty by, among other things, knowing of the above-mentioned improper payments and failing to prevent them from being made.

On March 11, 2020, an IFF shareholder filed a motion to approve a class action in Israel against, among others, Frutarom, Yehudai, and Frutarom’s former board of directors, alleging that former minority shareholders of Frutarom were harmed as a result of the US $20 million bonus paid to Yehudai.

China Facilities

Guangzhou Taste plant

During the fourth quarter of 2016, the Company was notified that certain governmental authorities have begun to evaluate a change in the zoning of the Guangzhou Taste plant. The zoning, if changed, would prevent the Company from continuing to manufacture product at the existing plant. The ultimate outcome of any change that the governmental authorities may propose, the timing of such a change, and the nature of any compensation arrangements that might be provided to the Company are uncertain. To address the governmental authorities' requirements, the Company has begun to transfer certain production capabilities from the Guangzhou Taste plant to a newly built facility in Zhangjiagang.

The net book value of the plant in Guangzhou was approximately $59 million as of March 31, 2020.

Guangzhou Scent plant

During the second quarter of 2019, the Company was notified that certain governmental authorities had changed the zoning where the Guangzhou Scent plant is located. The zoning change did not affect the current operations but prevents expansions or other increases in the operating capacity of the plant. The Company believes that it is possible that the zoning may be enforced in the future such that it would not be able to continue manufacturing at the existing site. The ultimate outcome of any change that the governmental authorities may propose, the timing of such a change, and the nature of any compensation arrangements that might be provided to the Company are uncertain.

The net book value of the existing plant was approximately $9 million as of March 31, 2020.

Zhejiang Ingredients plant

In the fourth quarter of 2017, the Company concluded discussions with the government regarding the relocation of its Fragrance Ingredients plant in Zhejiang and, based on the agreements reached, expects to receive total compensation payments up to approximately $50 million. The relocation compensation will be paid to the Company over the period of the relocation which is expected to be through the end of 2021. The Company received a payment of $15 million in both the fourth quarter of 2017 and the second quarter of 2019. The third payment of $13.8 million is expected in the second quarter of 2020 with the fourth and final payment expected in the second half of 2020 upon the final environmental inspection.

Production at the facility ceased during 2019. The net book value of the current plant was approximately $10 million as of March 31, 2020.

Total China Operations

The total net book value of all eight plants in China was approximately $199 million as of March 31, 2020.

If the Company is required to close a plant, or operate one at significantly reduced production levels on a permanent basis, the Company may be required to record charges that could have a material impact on its consolidated financial results of operations, financial position and cash flows in future periods.

Other Contingencies

The Company has contingencies involving third parties (such as labor, contract, technology or product-related claims or litigation) as well as government-related items in various jurisdictions in which it operates pertaining to such items as value-added taxes, other indirect taxes, customs and duties and sales and use taxes. It is possible that cash flows or results of operations, in any period, could be materially affected by the unfavorable resolution of one or more of these contingencies.

The most significant government-related contingencies exist in Brazil. With regard to the Brazilian matters, the Company believes it has valid defenses for the underlying positions under dispute; however, in order to pursue these defenses, the Company is required to, and has provided, bank guarantees and pledged assets in the aggregate amount of $21.5 million. The Brazilian matters take an extended period of time to proceed through the judicial process and there are a limited number of rulings to date.

Pending Transaction with Nutrition & Biosciences, Inc.

The Merger Agreement governing the DuPont N&B Transaction, subjects IFF to various contingent payments to the extent that the transaction is not consummated. Specifically, the Merger Agreement provides DuPont the right to receive a termination fee of $521.5 million, in certain circumstances, including if the agreement is terminated due to the IFF Board changing its recommendation and to reimburse DuPont’s transaction-related expenses in an amount up to $75 million if the Merger Agreement is terminated because IFF’s shareholders do not approve the issuance of IFF Common Stock in connection with the transaction.

Brazil Tax Credits

In early January 2020, the Company was informed of a favorable ruling from the Brazilian tax authorities confirming that the Company was entitled to recover the overpayments of certain indirect taxes (known as PIS/COFINS) for the period from November 2011 to December 2018, plus interest on the amount of the overpayments. The overpayments arose from the inclusion of a value added tax known as ICMS in the calculation of the PIS/COFINS tax. The ruling did not, however, settle the question of whether the Company is eligible to recover overpayments based on the gross or the net amount of ICMS amounts paid on PIS/COFINS. The Company calculated the amount of overpayments using the gross method which yields a higher amount than the application of the net method. A final ruling on the gross versus net amount issued is still pending.

In addition to the $8.0 million recognized in the fourth quarter of 2019, during the first quarter of 2020 the Company recognized $3.5 million as an additional recovery on the existing claim. During the first quarter of 2020, the Company also recognized $2.2 million related to a claim from another of its subsidiaries in Brazil. The income is recognized as a reduction in Selling and administrative expenses.

Other

The Company determines estimates of reasonably possible losses or ranges of reasonably possible losses in excess of related accrued liabilities, if any, when it has determined that either a loss is reasonably possible or a loss in excess of accrued amounts is reasonably possible and the amount of losses or range of losses is determinable. For all third party contingencies (including labor, contract, technology, tax, product-related claims and business litigation), the Company currently estimates that the aggregate range of reasonably possible losses in excess of any accrued liabilities is $0 to approximately $10 million. The estimates included in this amount are based on the Company’s analysis of currently available information and, as new information is obtained, these estimates may change. Due to the inherent subjectivity of the assessments and the unpredictability of outcomes of legal proceedings, any amounts accrued or included in this aggregate amount may not represent the ultimate loss to the Company from the matters in question. Thus, the Company’s exposure and ultimate losses may be higher or lower, and possibly significantly so, than the amounts accrued or the range disclosed above.

XML

Net Income Per Share (Tables)

3 Months Ended

Mar. 31, 2020

Earnings Per Share [Abstract]

Reconciliation of Shares Used in Computation of Basic and Diluted Net Income Per Share

A reconciliation of the shares used in the computation of basic and diluted net income per share is as follows: 

	Three Months Ended March 31,
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)	2020		2019
Net Income
Net income attributable to IFF stockholders	$	124,607	$	108,829
Add: Reduction in redemption value of redeemable noncontrolling interests in excess of earnings allocated	5,806		370
Net income available to IFF stockholders	$	130,413	$	109,199
Shares
Weighted average common shares outstanding (basic)(1)	112,082		111,864
Adjustment for assumed dilution(2):
Stock options and restricted stock awards	349		362
SPC portion of TEUs	1,163		1,163
Weighted average shares assuming dilution (diluted)	113,594		113,389
Net Income per Share
Net income per share - basic	$	1.16	$	0.97
Net income per share - diluted	1.15		0.96

_______________________ 

(1) For the three months ended March 31, 2020 and 2019, the tangible equity units (“TEUs”) were assumed to be outstanding at the minimum settlement amount 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.