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 September 30, 2023

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

200 Powder Mill Road, Wilmington, DE 19803-2907

(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
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 of common stock outstanding as of November 1, 2023: 255,279,134

INTERNATIONAL FLAVORS & FRAGRANCES INC.

TABLE OF CONTENTS

		PAGE
	PART I - Financial Information
ITEM 1.	Financial Statements
	Consolidated Balance Sheets - September 30, 2023 and December 31, 2022	1
	Consolidated Statements of Income (Loss) and Comprehensive Loss - Three and Nine Months Ended September 30, 2023 and 2022	2
	Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2023 and 2022	3
	Consolidated Statements of Shareholders’ Equity - Three and Nine Months Ended September 30, 2023 and 2022	4
	Notes to Consolidated Financial Statements	6
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	51
ITEM 4.	Controls and Procedures	51
	PART II - Other Information
ITEM 1.	Legal Proceedings	52
ITEM 1A.	Risk Factors	52
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
ITEM 5.	Other Information	52
ITEM 6.	Exhibits	53
Signatures		54

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

INTERNATIONAL FLAVORS & FRAGRANCES INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(DOLLARS IN MILLIONS)	September 30, 2023		December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	629	$	483
Restricted cash	10		10
Trade receivables (net of allowances of $55 and $53, respectively)	1,831		1,818
Inventories: Raw materials	862		1,073
Work in process	431		442
Finished goods	1,256		1,636
Total Inventories	2,549		3,151
Assets held for sale	482		1,200
Prepaid expenses and other current assets	890		770
Total Current Assets	6,391		7,432
Property, plant and equipment, at cost	6,368		6,180
Accumulated depreciation	(2,242)		(1,977)
Property, plant and equipment, net	4,126		4,203
Goodwill	13,031		13,355
Other intangible assets, net	8,381		9,082
Operating lease right-of-use assets	703		743
Other assets	763		689
Total Assets	$	33,395	$	35,504
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Bank borrowings, overdrafts, and current portion of long-term debt	$	1,142	$	410
Commercial paper	—		187
Accounts payable	1,112		1,418
Accrued payroll and bonus	236		267
Dividends payable	207		206
Liabilities held for sale	49		212
Other current liabilities	937		1,028
Total Current Liabilities	3,683		3,728
Other Liabilities:
Long-term debt	9,159		10,373
Retirement liabilities	228		231
Deferred income taxes	2,127		2,265
Operating lease liabilities	654		672
Other liabilities	475		491
Total Other Liabilities	12,643		14,032
Commitments and Contingencies (Note 16)
Redeemable non-controlling interests	60		59
Shareholders’ Equity:
Common stock $0.125 par value; 500,000,000 shares authorized; 275,726,629 shares issued as of September 30, 2023 and 275,726,629 shares issued as of December 31, 2022; and 255,268,628 and 254,968,463 shares outstanding as of September 30, 2023 and December 31, 2022, respectively	35		35
Capital in excess of par value	19,865		19,841
Retained earnings	378		955
Accumulated other comprehensive loss	(2,336)		(2,198)
Treasury stock, at cost (20,458,001 and 20,758,166 shares as of September 30, 2023 and December 31, 2022, respectively)	(964)		(978)
Total Shareholders’ Equity	16,978		17,655
Non-controlling interest	31		30
Total Shareholders’ Equity including Non-controlling interest	17,009		17,685
Total Liabilities and Shareholders’ Equity	$	33,395	$	35,504

See Notes to Consolidated Financial Statements

1

INTERNATIONAL FLAVORS & FRAGRANCES INC.

CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE LOSS

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(AMOUNTS IN MILLIONS EXCEPT PER SHARE AMOUNTS)	2023		2022		2023		2022
Net sales	$	2,820	$	3,063	$	8,776	$	9,596
Cost of goods sold	1,896		2,062		5,955		6,314
Gross profit	924		1,001		2,821		3,282
Research and development expenses	157		145		479		460
Selling and administrative expenses	444		413		1,343		1,328
Amortization of acquisition-related intangibles	170		182		513		552
Impairment of goodwill	—		2,250		—		2,250
Impairment of long-lived assets	—		—		—		120
Restructuring and other charges	2		(4)		61		5
Losses (gains) on sale of assets	1		—		(1)		(2)
Operating profit (loss)	150		(1,985)		426		(1,431)
Interest expense	110		83		337		232
Other income, net	(19)		(33)		(34)		(43)
Income (loss) before taxes	59		(2,035)		123		(1,620)
Provision for income taxes	32		160		77		220
Net income (loss)	27		(2,195)		46		(1,840)
Net income attributable to non-controlling interests	2		2		3		6
Net income (loss) attributable to IFF shareholders	$	25	$	(2,197)	$	43	$	(1,846)
Net income (loss) per share - basic	$	0.10	$	(8.60)	$	0.16	$	(7.22)
Net income (loss) per share - diluted	$	0.10	$	(8.60)	$	0.16	$	(7.22)
Average number of shares outstanding - basic	255		255		255		255
Average number of shares outstanding - diluted	256		255		255		255
Statements of Comprehensive Loss
Net income (loss)	$	27	$	(2,195)	$	46	$	(1,840)
Other comprehensive loss, after tax:
Foreign currency translation adjustments	(476)		(982)		(132)		(1,770)
Pension and postretirement liability adjustment	(3)		5		(6)		6
Other comprehensive loss	(479)		(977)		(138)		(1,764)
Comprehensive loss	(452)		(3,172)		(92)		(3,604)
Net income attributable to non-controlling interests	2		2		3		6
Comprehensive loss attributable to IFF shareholders	$	(454)	$	(3,174)	$	(95)	$	(3,610)

See Notes to Consolidated Financial Statements

2

INTERNATIONAL FLAVORS & FRAGRANCES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
(DOLLARS IN MILLIONS)	2023		2022
Cash flows from operating activities:
Net income (loss)	$	46	$	(1,840)
Adjustments to reconcile to net cash provided by operating activities
Depreciation and amortization	855		897
Deferred income taxes	(59)		(222)
Gains on sale of assets	(1)		(2)
Losses (gains) on business divestitures	29		(14)
Stock-based compensation	50		37
Pension contributions	(25)		(25)
Impairment of goodwill	—		2,250
Impairment of long-lived assets	—		120
Inventory write-down	62		—
Changes in assets and liabilities, net of acquisitions:
Trade receivables	(78)		(309)
Inventories	489		(808)
Accounts payable	(240)		111
Accruals for incentive compensation	(40)		(56)
Other current payables and accrued expenses	(216)		202
Other assets/liabilities, net	(77)		(152)
Net cash provided by operating activities	795		189
Cash flows from investing activities:
Cash paid for acquisitions, net of cash received	—		(110)
Additions to property, plant and equipment	(390)		(344)
Additions to intangible assets	—		(2)
Proceeds from disposal of assets	22		1
Cash provided by the Merger with N&B	—		11
Proceeds from unwinding of derivative instruments	—		173
Net proceeds received from business divestitures	1,006		1,158
Net cash provided by investing activities	638		887
Cash flows from financing activities:
Cash dividends paid to shareholders	(619)		(604)
(Decrease) increase in revolving credit facility and short-term borrowings	(100)		2
Proceeds from issuance of commercial paper (maturities after three months)	—		160
Repayments of commercial paper (maturities after three months)	—		(235)
Net repayments of commercial paper (maturities less than three months)	(187)		(52)
Deferred financing costs	(5)		—
Repayments of long-term debt	(355)		(300)
Deferred consideration paid	(6)		—
Employee withholding taxes paid	(12)		(20)
Other, net	(9)		(38)
Net cash used in financing activities	(1,293)		(1,087)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(30)		(150)
Net change in cash, cash equivalents and restricted cash	110		(161)
Cash, cash equivalents and restricted cash at beginning of year	552		716
Cash, cash equivalents and restricted cash at end of period	$	662	$	555
Supplemental Disclosures:
Interest paid, net of amounts capitalized	$	261	$	199
Income taxes paid	450		276
Accrued capital expenditures	67		93

See Notes to Consolidated Financial Statements

3

INTERNATIONAL FLAVORS & FRAGRANCES INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

(DOLLARS IN MILLIONS)	Common stock			Capital in excess of par value		Retained earnings		Accumulated  other comprehensive (loss) income		Treasury stock			Non-controlling interest		Total
	Shares	Cost								Shares	Cost
Balance at June 30, 2022	275,726,629	$	35	$	19,826	$	3,589	$	(2,210)	(20,781,898)	$	(980)	$	33	$	20,293
Net income (loss)						(2,197)							1		(2,196)
Cumulative translation adjustment								(982)							(982)
Pension liability and postretirement adjustment; net of tax of $(1)								5							5
Cash dividends declared ($0.81 per share)						(206)									(206)
Stock options/SSARs				1						1,551					1
Vested restricted stock units and awards				(1)						3,348	1				—
Stock-based compensation				12											12
Redeemable NCI				(6)											(6)
Balance at September 30, 2022	275,726,629	$	35	$	19,832	$	1,186	$	(3,187)	(20,776,999)	$	(979)	$	34	$	16,921

(DOLLARS IN MILLIONS)	Common stock			Capital in excess of par value		Retained earnings		Accumulated  other comprehensive (loss) income		Treasury stock			Non-controlling interest		Total
	Shares	Cost								Shares	Cost
Balance at June 30, 2023	275,726,629	$	35	$	19,851	$	560	$	(1,857)	(20,504,898)	$	(966)	$	32	$	17,655
Net income						25							2		27
Cumulative translation adjustment								(476)							(476)
Pension liability and postretirement adjustment; net of tax of $1								(3)							(3)
Cash dividends declared ($0.81 per share)						(207)									(207)
Stock options/SSARs				(2)						29,671	1				(1)
Vested restricted stock units and awards				(2)						17,226	1				(1)
Stock-based compensation				18											18
Dividends paid on non-controlling interest and Other													(3)		(3)
Balance at September 30, 2023	275,726,629	$	35	$	19,865	$	378	$	(2,336)	(20,458,001)	$	(964)	$	31	$	17,009

See Notes to Consolidated Financial Statements

4

(DOLLARS IN MILLIONS)	Common stock			Capital in excess of par value		Retained earnings		Accumulated  other comprehensive (loss) income		Treasury stock			Non-controlling interest		Total
	Shares	Cost								Shares	Cost
Balance at January 1, 2022	275,726,629	$	35	$	19,826	$	3,641	$	(1,423)	(21,152,645)	$	(997)	$	35	$	21,117
Net income (loss)						(1,846)							3		(1,843)
Cumulative translation adjustment								(1,770)							(1,770)
Pension liability and postretirement adjustment; net of tax of $(2)								6							6
Cash dividends declared ($2.39 per share)						(609)									(609)
Stock options/SSARs				11						85,728	4				15
Vested restricted stock units and awards				(39)						289,918	14				(25)
Stock-based compensation				37											37
Purchase of NCI				1									(6)		(5)
Redeemable NCI				(4)											(4)
Dividends paid on non-controlling interest and Other													2		2
Balance at September 30, 2022	275,726,629	$	35	$	19,832	$	1,186	$	(3,187)	(20,776,999)	$	(979)	$	34	$	16,921

(DOLLARS IN MILLIONS)	Common stock			Capital in excess of par value		Retained earnings		Accumulated  other comprehensive (loss) income		Treasury stock			Non-controlling interest		Total
	Shares	Cost								Shares	Cost
Balance at January 1, 2023	275,726,629	$	35	$	19,841	$	955	$	(2,198)	(20,758,166)	$	(978)	$	30	$	17,685
Net income						43							3		46
Cumulative translation adjustment								(132)							(132)
Pension liability and postretirement adjustment; net of tax of $1								(6)							(6)
Cash dividends declared ($2.43 per share)						(620)									(620)
Stock options/SSARs				(5)						88,557	4				(1)
Vested restricted stock units and awards				(20)						211,608	10				(10)
Stock-based compensation				50											50
Redeemable NCI				(1)											(1)
Dividends paid on non-controlling interest and Other													(2)		(2)
Balance at September 30, 2023	275,726,629	$	35	$	19,865	$	378	$	(2,336)	(20,458,001)	$	(964)	$	31	$	17,009

See Notes to Consolidated Financial Statements

5

INTERNATIONAL FLAVORS & FRAGRANCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Nature of Operations

International Flavors & Fragrances Inc. and its subsidiaries (the “Registrant,” “IFF,” “the Company,” “we,” “us” and “our”) is a leading creator and manufacturer of food, beverage, health & biosciences, scent and pharma solutions and complementary adjacent products, including cosmetic active and natural health ingredients, which are used in a wide variety of consumer products. Our products are sold principally to manufacturers of perfumes and cosmetics, hair and other personal care products, soaps and detergents, cleaning products, dairy, meat and other processed foods, beverages, snacks and savory foods, sweet and baked goods, sweeteners, dietary supplements, food protection, infant and elderly nutrition, functional food, and pharmaceutical excipients and oral care products.

Basis of Presentation

The accompanying interim Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and the related notes included in our 2022 Annual Report on Form 10-K (“2022 Form 10-K”).

The interim Consolidated Financial Statements are unaudited. In addition, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted, if not materially different from the 2022 Form 10-K. The year-end balance sheet data included in this Form 10-Q was derived from the audited financial statements. In the opinion of management, all adjustments, which consist of normal recurring adjustments necessary for a fair statement of the interim Consolidated Financial Statements, have been made.

Correction of Prior Year Consolidated Financial Statements

In the second quarter of 2023, the Company revised its Operating lease right-of-use assets from $636 million to $743 million and Operating lease liabilities from $565 million to $672 million on its Consolidated Balance Sheets as of December 31, 2022. This reflects the correction of an error of $107 million related to a lease renewal that was not correctly reflected in the prior year period. In addition, the Company revised its Other assets from $699 million to $689 million, which included a $9 million impact to deferred income taxes, Other liabilities from $472 million to $491 million and Accumulated other comprehensive loss from $2.169 billion to $2.198 billion on its Consolidated Balance Sheets as of December 31, 2022 and Consolidated Statements of Shareholders’ Equity at January 1, 2023. This reflects the correction of an error related to the fair value of derivative assets and liabilities of cross currency swaps. The impacts of these corrections are also presented in the related footnotes.

Reporting Periods

The Company uses a calendar year of the twelve-month period from January 1 to December 31.

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 the Company’s judgments and estimates take into account the ongoing global current events and adverse macroeconomic impacts 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 assets. Actual results could differ from those estimates.

6

Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash reported in the Company’s balance sheet as of September 30, 2023, December 31, 2022, September 30, 2022 and December 31, 2021 were as follows:

(DOLLARS IN MILLIONS)	September 30, 2023		December 31, 2022		September 30, 2022		December 31, 2021
Current assets
Cash and cash equivalents	$	629	$	483	$	538	$	711
Cash and cash equivalents included in Assets held for sale	23		52		—		—
Restricted cash	10		10		10		4
Non-current assets
Restricted cash included in Other assets	—		7		7		1
Cash, cash equivalents and restricted cash	$	662	$	552	$	555	$	716

Accounts Receivable

The Company has various factoring agreements in the U.S. and The Netherlands under which it can factor up to approximately €250 million in receivables (“Company’s own factoring agreements”). In addition, the Company utilizes 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 Sheets when the cash proceeds are received by the Company.

The Company sold a total of approximately $1.302 billion and $983 million of receivables under the Company’s own factoring agreements and customer sponsored factoring agreements for the nine months ended September 30, 2023 and 2022, respectively. The cost of participating in these programs was approximately $6 million and $3 million for the three months ended September 30, 2023 and 2022, respectively, and was approximately $18 million and $6 million for the nine months ended September 30, 2023 and 2022, respectively. These costs are included as a component of interest expense. Under the Company’s own factoring agreements, it sold approximately $632 million and $323 million of receivables for the nine months ended September 30, 2023 and 2022, respectively. The outstanding principal amounts of receivables under the Company’s own factoring agreements amounted to approximately $148 million and $157 million as of September 30, 2023 and December 31, 2022, respectively. The proceeds from the sales of receivables are included in net cash from operating activities in the Consolidated Statements of Cash Flows.

Revenue Recognition

The Company recognizes revenue from contracts with customers when the contract or purchase order has received approval and commitment from both parties, has the rights of the parties and payment terms (which can vary by customer) identified, has commercial substance, collectability of consideration is probable, and control has transferred. The revenue recognized reflects the consideration the Company 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.

Sales are reduced, at the time revenue is recognized, for applicable discounts, rebates and sales allowances based on historical experience. Related accruals are included in Other current liabilities in the accompanying Consolidated Balance Sheets. The Company considers shipping and handling activities undertaken after the customer has obtained control of the related goods as a fulfillment activity. Net sales include shipping and handling charges billed to customers. Cost of goods sold includes all costs incurred in connection with shipping and handling.

See Note 12 for further details on revenues disaggregated by segment.

Contract Assets and Liabilities

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.

7

As of September 30, 2023 and December 31, 2022, the Company’s gross accounts receivable were $1.886 billion and $1.871 billion, respectively. The Company’s contract assets and contract liabilities as of September 30, 2023 and December 31, 2022 were not material.

Expected Credit Losses

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 uncollectible.

The Company also considers current and future economic conditions in the determination of the allowance. At September 30, 2023, the Company reported $1.831 billion of trade receivables, net of allowances of $55 million. Based on the aging analysis as of September 30, 2023, approximately 1% of the Company’s accounts receivable were past due by over 365 days based on the payment terms of the invoice.

The following is a rollforward of the Company’s allowances for bad debts for the nine months ended September 30, 2023:

(DOLLARS IN MILLIONS)	Allowances for Bad Debts
Balance at December 31, 2022	$	53
Bad debt expense(1)	9
Write-offs	(6)
Foreign exchange	(1)
Balance at September 30, 2023	$	55

_______________________

(1)Bad debt expense included approximately $13 million related to expected credit losses on receivables from certain customers in Egypt, offset by approximately $8 million of reversals of allowances on receivables from customers located in Russia and Ukraine. The Company will continue to evaluate its credit exposure related to Egypt, Russia and Ukraine.

Long-Lived Assets

The Company reviews long-lived assets for impairment when events or changes in business conditions indicate that their carrying value may not be recovered. An estimate of undiscounted future cash flows produced by an asset or group of assets is compared to the carrying value to determine whether impairment exists. If assets are determined to be impaired, the loss is measured based on an estimate of fair value using various valuation techniques, including a discounted estimate of future cash flows.

Goodwill

Goodwill represents the difference between the total purchase price and the fair value of identifiable assets and liabilities acquired in business acquisitions.

The Company tests goodwill for impairment at the reporting unit level as of November 30 every year, or more frequently if events or changes in circumstances indicate the asset might be impaired. A reporting unit is an operating segment or one level below an operating segment (referred to as a component or group of components) to which goodwill is assigned when initially recorded.

The Company identifies its reporting units by assessing whether the components of its reporting segments constitute businesses for which discrete financial information is available and management of each reporting unit regularly reviews the operating results of those components. The Company determined that it has six reporting units under the Nourish, Health & Biosciences, Scent and Pharma Solutions segments: (1) Nourish, (2) Fragrance Compounds, (3) Fragrance Ingredients, (4) Cosmetic Ingredients, (5) Health & Biosciences and (6) Pharma Solutions. These reporting units were determined based on the level at which the performance is measured and reviewed by segment management. In cases where the components of an operating segment have similar economic characteristics, they are aggregated into a single reporting unit.

During the third quarter of 2022, the Company determined that the carrying value of the Health & Biosciences reporting unit exceeded its fair value and recorded a goodwill impairment charge of $2.250 billion on the Consolidated Statements of Income (Loss) and Comprehensive Loss for the three and nine months ended September 30, 2022 (see Note 6 for additional information).

8

Events in Israel

The Company maintains operations in Israel and, additionally, exports products to customers in Israel from operations outside the region. The Company will continue to evaluate the current events and any potential impacts to its Consolidated Financial Statements.

Events in Russia and Ukraine

The Company maintains operations in both Russia and Ukraine and, additionally, exports products to customers in Russia and Ukraine from operations outside the region. In response to the events in Ukraine, the Company has limited the production and supply of ingredients in and to Russia to only those that meet the essential needs of people, including food, hygiene and medicine.

Allowances for Bad Debts

As of September 30, 2023, the Company had a reserve of approximately $3 million related to expected credit losses on receivables from customers located in Russia and Ukraine. The Company will continue to evaluate its credit exposure related to Russia and Ukraine.

Impairment of Long-Lived Assets

During the second quarter of 2022, the sales and margins declined for certain entities within Russia due to supply chain issues, reduced product demand and exchange rate volatility. Further, it was determined that such declines in operating performance were not expected to reverse in the near future. Additionally, future expected growth was expected to be limited given operating conditions in Russia, which inhibited the required future investment.

In connection with uncertainties related to the Company’s operations in Russia and Ukraine, the Company updated its analysis of the undiscounted cash flows of the applicable asset groups to determine if the cash flows exceeded the carrying values of the applicable asset groups. With respect to an asset group in the Nourish segment, that manufactures and sells in Russia and related markets, it was determined that the undiscounted cash flows were insufficient to cover the carrying value and that an impairment charge was required to write-down the long-lived assets to their fair values. The fair value of such asset group was determined based on a discounted cash flow approach which involved estimating the future cash flows for the business discounted to their present values. The discount rate used in the determination of such fair value was based on consideration of the risks inherent in the cash flows and market as of the valuation date.

As a result of this assessment, the Company recognized an impairment charge of $120 million during the second quarter of 2022, which was allocated on a pro rata basis to intangible assets and property, plant and equipment within the asset group in the amounts of approximately $92 million and $28 million, respectively.

Recent Accounting Pronouncements

In December 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848.” The ASU was issued to provide an update on ASU 2020-04 and ASU 2021-01 that were issued in March 2020 and January 2021, respectively, which provided optional accounting guidance for a limited period of time to ease the potential burden in accounting for reference rate reform. The guidance provides optional expedients and exceptions to existing accounting requirements for contract modifications and hedge accounting related to transitioning from discontinued reference rates, such as London Interbank Offered Rate (“LIBOR”), to alternative reference rates, if certain criteria are met. With the issuance of ASU 2022-06, the sunset date of Topic 848 has been deferred from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. The Company has adopted this guidance on January 1, 2023, which did not have a material impact on its Consolidated Financial Statements. On March 23, 2023, the Company amended certain existing debt agreements where the interest rate benchmark was updated from LIBOR to the Secured Overnight Financing Rate (“Term SOFR”). The Company applied Topic 848 to its recent amendments of its debt agreements. See Note 8 for additional information on the amendments to the debt agreements.

9

In September 2022, the FASB issued ASU 2022-04, “Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations.” The ASU requires that a buyer in a supplier finance program disclose sufficient information about the program to allow users of the financial statements to understand the program’s nature, activity during the period, changes from period to period and potential magnitude. The buyer should disclose qualitative and quantitative information about its supplier finance programs. The ASU requires the buyer’s annual disclosure to include a rollforward of the obligations under the supplier finance programs during the annual period, including the amount of obligations confirmed and subsequently paid. This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023, and early adoption is permitted. The Company has adopted this guidance on January 1, 2023, which did not have a material impact on its Consolidated Financial Statements. As of September 30, 2023, the Company did not have any obligations under supplier finance programs.

NOTE 2. NET INCOME (LOSS) PER SHARE

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

	Three Months Ended September 30,				Nine Months Ended September 30,
(AMOUNTS IN MILLIONS EXCEPT PER SHARE AMOUNTS)	2023		2022		2023		2022
Net Income (Loss)
Net income (loss) attributable to IFF shareholders	$	25	$	(2,197)	$	43	$	(1,846)
Adjustment related to (increase) decrease in redemption value of redeemable noncontrolling interests in excess of earnings allocated	—		1		(1)		3
Net income (loss) available to IFF shareholders	$	25	$	(2,196)	$	42	$	(1,843)
Shares
Weighted average common shares outstanding (basic)	255		255		255		255
Adjustment for assumed dilution:
Stock options and restricted stock awards	1		—		—		—
Weighted average shares assuming dilution (diluted)	256		255		255		255
Net Income (Loss) per Share
Net income (loss) per share - basic(1)	$	0.10	$	(8.60)	$	0.16	$	(7.22)
Net income (loss) per share - diluted(1)	0.10		(8.60)		0.16		(7.22)

_______________________

(1)For the three and nine months ended September 30, 2022, the basic and diluted net loss per share cannot be recalculated based on the information presented in the table above due to rounding.

The Company declared a quarterly dividend to its shareholders of $0.81 per share for each of the three months ended September 30, 2023 and 2022. For the nine months ended September 30, 2023 and 2022, the Company declared quarterly dividends to its shareholders totaling $2.43 and $2.39, respectively.

There were approximately 0.3 million and 0.4 million potentially dilutive securities excluded from the computation of diluted net loss per share for the three and nine months ended September 30, 2022, respectively, because there was a net loss attributable to IFF for these periods and, as such, the inclusion of these securities would have been anti-dilutive.

For the three and nine months ended September 30, 2023, there were approximately 0.4 million share equivalents that had an anti-dilutive effect and therefore were excluded from the computation of diluted net income per share in these periods. For the three and nine months ended September 30, 2022, there were approximately 0.3 million share equivalents that had an anti-dilutive effect and therefore were excluded from the computation of diluted net loss per share in these periods.

The Company has issued shares of Purchased Restricted Stock Units (“PRSUs”) which contain rights to non-forfeitable 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.

10

The Company did not present the two-class method since the difference between basic net income per share for both unrestricted common shareholders and PRSU shareholders for the three and nine months ended September 30, 2023 was less than $0.01 per share. There was no difference between basic net loss per share for both unrestricted common shareholders and PRSU shareholders for the three and nine months ended September 30, 2022. The difference between diluted net income per share for both unrestricted common shareholders and PRSU shareholders for the three and nine months ended September 30, 2023 was less than $0.01 per share. There was no difference between diluted net loss per share for both unrestricted common shareholders and PRSU shareholders for the three and nine months ended September 30, 2022. In addition, the number of PRSUs outstanding as of September 30, 2023 and 2022 was not material. Net income (loss) allocated to such PRSUs was not material for the three and nine months ended September 30, 2023 and 2022.

NOTE 3. BUSINESS DIVESTITURES

Divestiture of the Flavor Specialty Ingredients Business

During the fourth quarter of 2022, the Company announced it had entered into an agreement to sell its Flavor Specialty Ingredients (“FSI”) business, which was a part of the Scent segment. The Company completed the divestiture on August 1, 2023, and received cash proceeds of approximately $190 million, which included $1 million related to the delayed transfer of the control of specific assets and liabilities of non-U.S. jurisdiction business. Concurrent with the completion of the business divestiture, the Company entered into a supply agreement arrangement with the buyer. Based on the terms of the supply agreement, an adjustment of $4 million was made against the fair value of sale consideration. In addition, approximately $15 million of proceeds were held in escrow and will be released upon satisfaction of certain conditions. The proceeds held in escrow were presented in Prepaid expenses and other current assets on the Consolidated Balance Sheets. The sale consideration is subject to certain post-closing adjustments, which primarily relate to cash, indebtedness and working capital balances.

The following table summarizes the fair value of sale consideration received in connection with the business divestiture:

(DOLLARS IN MILLIONS)
Cash proceeds from the buyer	$	190
Amount held in escrow	15
Advance receipt for business to be transferred	(1)
Direct costs to sell	(5)
Proceeds attributable to supply agreement	(4)
Fair value of sale consideration	$	195

The net proceeds received from the business divestiture presented under Cash flows from investing activities represent the cash portion of the sale consideration, which was determined as the fair value of sale consideration adjusted by the direct costs to sell, advance receipt for business to be transferred, amount held in escrow and the cash transferred to the buyer as part of the transaction. The following table summarizes the different components of net proceeds received from business divestiture presented under Cash flows from investing activities:

(DOLLARS IN MILLIONS)
Fair value of sale consideration	$	195
Direct costs to sell	5
Advance receipt for business to be transferred	1
Amount held in escrow	(15)
Cash transferred to the buyer	(1)
Net proceeds received from business divestiture	$	185

The carrying amount of net assets associated with the business unit, adjusted for currency translation adjustment, was approximately $205 million. The major classes of assets and liabilities sold consisted of the following:

11

(DOLLARS IN MILLIONS)	August 1, 2023
Assets
Cash and cash equivalents	$	1
Trade receivables, net	13
Inventories	45
Property, plant and equipment, net	29
Goodwill	44
Other intangible assets, net	73
Other assets	10
Total assets	215
Liabilities
Accounts payable	(4)
Deferred tax liability	(1)
Other liabilities	(6)
Total liabilities	(11)
Equity
Accumulated other comprehensive income - currency translation adjustment	1
Total equity	1
Carrying value of net asset (adjusted for currency translation adjustment)	$	205

As a result of the business divestiture, the Company recognized a pre-tax loss of approximately $10 million, subject to certain post-closing adjustments, presented in Other income, net on the Consolidated Statements of Income (Loss) and Comprehensive Loss for the three and nine months ended September 30, 2023. The Company has also recognized income tax effects associated with the business divestiture across multiple periods. Based on preliminary estimates, the total income taxes recognized was approximately $15 million, with approximately $3 million that was recognized during the year ended December 31, 2022.

Divestiture of a Portion of the Savory Solutions Business

During the fourth quarter of 2022, the Company announced it had entered into an agreement to sell a portion of its Savory Solutions business, which was part of the Nourish segment. The Company completed the divestiture on May 31, 2023, and received cash proceeds of approximately $840 million. In addition, a receivable of approximately $30 million was recorded which reflects the estimated future payment to be received as part of the sale consideration. The sale consideration is subject to certain post-closing adjustments, which primarily relate to cash, indebtedness and working capital balances.

The following table summarizes the fair value of sale consideration received in connection with the business divestiture:

(DOLLARS IN MILLIONS)
Cash proceeds from the buyer	$	840
Receivable from the buyer	30
Direct costs to sell	(20)
Fair value of sale consideration	$	850

The net proceeds received from the business divestiture presented under Cash flows from investing activities represent the cash portion of the sale consideration, which was determined as the fair value of sale consideration adjusted by the amount receivable from the buyer, direct costs to sell and the cash transferred to the buyer as part of the transaction. The following table summarizes the different components of net proceeds received from business divestiture presented under Cash flows from investing activities:

12

(DOLLARS IN MILLIONS)
Fair value of sale consideration	$	850
Direct costs to sell	20
Receivable from the buyer	(30)
Cash transferred to the buyer (including restricted cash)	(19)
Net proceeds received from business divestiture	$	821

The carrying amount of net assets associated with the business unit, adjusted for currency translation and pension adjustments, was approximately $860 million. The major classes of assets and liabilities sold consisted of the following:

(DOLLARS IN MILLIONS)	May 31, 2023
Assets
Cash and cash equivalents	$	15
Restricted cash	4
Trade receivables, net	69
Inventories	116
Property, plant and equipment, net	77
Goodwill	317
Other intangible assets, net	367
Right-of-use assets	20
Other assets	24
Total assets	1,009
Liabilities
Accounts payable	(44)
Deferred tax liability	(92)
Other liabilities	(54)
Total liabilities	(190)
Equity
Accumulated other comprehensive income - currency translation adjustment	42
Accumulated other comprehensive income - pension liability and postretirement	(1)
Total equity	41
Carrying value of net asset (adjusted for currency translation and pension adjustments)	$	860

As a result of the business divestiture, the Company recognized a pre-tax loss of approximately $10 million, subject to certain post-closing adjustments, presented in Other income, net on the Consolidated Statements of Income (Loss) and Comprehensive Loss for the nine months ended September 30, 2023. The Company has also recognized income tax effects associated with the business divestiture across multiple periods. Based on preliminary estimates, the total income taxes recognized was approximately $88 million, with approximately $72 million that was recognized during the year ended December 31, 2022.

Liquidation of a Business in Russia

As part of the liquidation of a business in Russia for the sale of the portion of the Savory Solutions business, the Company recognized a pre-tax loss of approximately $10 million presented in the Other income, net, and tax benefits of approximately $2 million presented in Provision for income taxes on the Consolidated Statements of Income (Loss) and Comprehensive Loss for the nine months ended September 30, 2023.

13

Divestiture of Microbial Control

The Company completed the divestiture of the Microbial Control business unit on July 1, 2022, which was acquired as part of the Company’s merger with Nutrition and Biosciences, Inc. (“N&B”), a wholly-owned subsidiary of DuPont, in 2021 (the “Merger”), and received net cash proceeds of approximately $1.169 billion. The Company also entered into transition services agreements with the buyer for providing certain general accounting, information technology and other services up to 19 months following the date of the sale for minimal consideration. The fair value of these transition services agreements was determined to be approximately $36 million, which was adjusted against the sale consideration and recognized as deferred transition services income. The transition services income under the transition services agreements for the three and nine months ended September 30, 2023 was approximately $6 million and $19 million, respectively, and for the three and nine months ended September 30, 2022 was approximately $6 million. The transition services income was recognized as a reduction to the costs incurred to provide services under the transition services agreements, which was included in Selling and administrative expenses on the Consolidated Statements of Income (Loss) and Comprehensive Loss.

NOTE 4.    RESTRUCTURING AND OTHER CHARGES

Restructuring and other charges primarily consist of separation costs for employees including severance, outplacement and other employee benefit costs (“Severance”), charges related to the write-down of fixed assets of plants to be closed (“Fixed asset write-down”) and all other related restructuring (“Other”) costs. All restructuring and other charges are separately stated on the Consolidated Statements of Income (Loss) and Comprehensive Loss.

Frutarom Integration Initiative

In connection with the acquisition of Frutarom, the Company executed an integration plan that, among other initiatives, sought to optimize its manufacturing network (the “Frutarom Integration Initiative”). Since the inception of the initiative through March 31, 2023, the Company closed 22 sites and expensed total costs of approximately $36 million. As of March 31, 2023, the Frutarom Integration Initiative was completed.

N&B Merger Restructuring Liability

For the nine months ended September 30, 2023, the Company had approximately $2 million of charges related to a lease impairment. Since the inception of the restructuring activities, there have been a total of approximately 215 headcount reductions and the Company has expensed approximately $47 million.

2023 Restructuring Program

In December 2022, the Company announced a restructuring program mainly related to headcount reduction to improve its organizational and operating structure, drive efficiencies and achieve cost savings. For the nine months ended September 30, 2023, the Company incurred approximately $63 million of charges related to severance and there have been a total of approximately 605 actual and planned headcount reductions. The Company expects to incur a majority of the costs for the 2023 Restructuring Program in the current year.

Changes in Restructuring Liabilities

Changes in restructuring liabilities during the nine months ended September 30, 2023 were as follows:

(DOLLARS IN MILLIONS)	Balance at December 31, 2022		Additional Charges (Reversals), Net		Non-Cash Charges		Cash Payments		Balance at September 30, 2023
Frutarom Integration Initiative
Severance	$	4	$	(3)	$	—	$	(1)	$	—
Other Restructuring Charges
Severance	1		(1)		—		—		—
N&B Merger Restructuring Liability
Severance	9		—		—		(8)		1
Other	1		2		(2)		(1)		—
2023 Restructuring Program
Severance	—		63		—		(39)		24
Total Restructuring and other charges	$	15	$	61	$	(2)	$	(49)	$	25

Restructuring liabilities are presented in “Other current liabilities” on the Consolidated Balance Sheets.

14

Charges by Segment

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

	Three Months Ended September 30,				Nine Months Ended September 30,
(DOLLARS IN MILLIONS)	2023		2022		2023		2022
Nourish	$	1	$	—	$	33	$	3
Health & Biosciences	1		1		12		2
Scent	—		(5)		14		—
Pharma Solutions	—		—		2		—
Total Restructuring and other charges	$	2	$	(4)	$	61	$	5

NOTE 5. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment consisted of the following amounts:

(DOLLARS IN MILLIONS)	September 30, 2023		December 31, 2022
Asset Type
Land	$	191	$	199
Buildings and improvements	1,721		1,697
Machinery and equipment	3,575		3,344
Information technology	386		291
Construction in process	495		649
Total Property, plant and equipment	6,368		6,180
Accumulated depreciation	(2,242)		(1,977)
Total property, plant and equipment, net	$	4,126	$	4,203

Depreciation expense was $122 million and $111 million for the three months ended September 30, 2023 and 2022, respectively, and $342 million and $345 million for the nine months ended September 30, 2023 and 2022, respectively.

Impairment of Property, Plant and Equipment

As discussed in Note 1, during the second quarter of 2022, an impairment charge of approximately $28 million was recorded in connection with property, plant and equipment, primarily buildings and improvements, of an asset group that operated primarily in Russia.

NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Goodwill

Movements in goodwill attributable to each reportable segment for the nine months ended September 30, 2023 were as follows:

(DOLLARS IN MILLIONS)	Nourish		Health & Biosciences		Scent		Pharma Solutions		Total
Balance at December 31, 2022	$	6,050	$	4,321	$	1,745	$	1,239	$	13,355
Transferred to assets held for sale	—		—		(267)		—		(267)
Reduction from business divestitures	(4)		—		—		—		(4)
Foreign exchange	(41)		(7)		(2)		(3)		(53)
Balance at September 30, 2023	$	6,005	$	4,314	$	1,476	$	1,236	$	13,031

The goodwill balances at September 30, 2023 and December 31, 2022 include $2.250 billion of accumulated impairment related to the Health & Biosciences reportable segment. The accumulated impairment relates entirely to an impairment charge recorded in 2022.

15

Impairment of Goodwill

For the third quarter of 2022, the Company determined that goodwill impairment triggering events occurred for its Nourish, Health & Biosciences and Pharma Solutions reporting units, which required it to complete an interim impairment assessment. The primary indicators that were deemed to be triggering events in the quarter for the reporting units were declines in the Company’s projections across various reporting units and ongoing adverse macroeconomic impacts such as inflation, increases in interest rates and unfavorable effects from exchange rates.

As a result of the triggering events, the Company assessed the fair value of the reporting units using the income approach. Under the income approach, the Company determined the fair value by using a discounted cash flow method at a rate of return that reflected the relative risk of the projected future cash flows of each reporting unit, as well as a terminal value. The Company used the most current actual and forecasted operating data available. Key estimates and assumptions used in these valuations included revenue growth rates, gross margins, EBITDA margins, terminal growth rates and discount rates. These estimates and assumptions were considered Level 3 inputs under the fair value hierarchy.

In performing the quantitative impairment test, the Company determined that the fair value of the Nourish and Pharma Solutions reporting units exceeded their carrying value, and determined that there was no impairment of goodwill relating to these reporting units. The Company determined that the carrying value of the Health & Biosciences reporting unit exceeded its fair value and recorded a goodwill impairment charge of $2.250 billion on the Consolidated Statements of Income (Loss) and Comprehensive Loss for the three and nine months ended September 30, 2022.

Other Intangible Assets

Other intangible assets, net consisted of the following amounts:

	September 30,		December 31,
(DOLLARS IN MILLIONS)	2023		2022
Asset Type
Customer relationships	$	8,072	$	8,318
Technological know-how	2,314		2,339
Trade names & patents	331		358
Other	44		47
Total carrying value	10,761		11,062
Accumulated Amortization
Customer relationships	(1,488)		(1,252)
Technological know-how	(745)		(589)
Trade names & patents	(107)		(97)
Other	(40)		(42)
Total accumulated amortization	(2,380)		(1,980)
Other intangible assets, net	$	8,381	$	9,082

Amortization

Amortization expense was $170 million and $182 million for the three months ended September 30, 2023 and 2022, respectively, and $513 million and $552 million for the nine months ended September 30, 2023 and 2022, respectively.

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

(DOLLARS IN MILLIONS)	2023		2024		2025		2026		2027
Estimated future intangible amortization expense	$	173	$	692	$	690	$	688	$	589

Impairment of Intangible Assets

As discussed in Note 1, during the second quarter of 2022, an impairment charge of approximately $92 million was recorded in connection with intangible assets, primarily customer relationships and technological know-how, of an asset group that operated primarily in Russia.

NOTE 7.    OTHER CURRENT ASSETS AND LIABILITIES, AND OTHER ASSETS

Prepaid expenses and other current assets consisted of the following amounts:

16

(DOLLARS IN MILLIONS)	September 30, 2023		December 31, 2022
Value-added tax receivable	$	159	$	212
Prepaid income taxes	224		129
Packaging materials and supplies	157		148
Prepaid expenses	184		144
Other	166		137
Total	$	890	$	770

Other assets consisted of the following amounts:

(DOLLARS IN MILLIONS)	September 30, 2023		December 31, 2022
Deferred income taxes	$	212	$	167
Overfunded pension plans	202		180
Cash surrender value of life insurance contracts	46		45
Finance lease right-of-use assets	25		22
Equity method investments	10		10
Other(1)	268		265
Total	$	763	$	689

_______________________

(1)Includes land usage rights in China, long-term deposits and receivables on certain derivative instruments.

Other current liabilities consisted of the following amounts:

(DOLLARS IN MILLIONS)	September 30, 2023		December 31, 2022
Rebates and incentives payable	$	99	$	99
Value-added tax payable	62		65
Interest payable	74		55
Current pension and other postretirement benefit obligation	5		10
Accrued insurance (including workers’ compensation)	10		9
Earn outs payable	31		—
Accrued restructuring	25		15
Current operating lease obligation	83		86
Accrued freight	12