UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



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

For the quarterly period ended March 31, ~~2019~~2020



¨ ☐	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.~~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 ~~N.Y. 10019-2960~~, NY10019-2960

(Address of principal executive offices) (Zip Code)

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

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 þ 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 þ 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~~	þ	~~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 þ

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



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

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 ~~April 24, 2019~~May 1, 2020: ~~106,691,137~~106,851,144

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

INTERNATIONAL FLAVORS & FRAGRANCES INC.

CONSOLIDATED BALANCE SHEET

(Unaudited)


(DOLLARS IN THOUSANDS)	March 31, 2019			December 31, 2018			March 31, 2020			December 31, 2019
ASSETS
Current Assets:
Cash and cash equivalents	$	483,504		$	634,897		$	433,246		$	606,823
Restricted cash	13,625			13,625			9,699			17,122
Trade receivables (net of allowances of $8,815 and $9,173, respectively)	1,003,965			937,765
Trade receivables (net of allowances of $18,728 and $16,428, respectively)							943,114			876,197
Inventories: Raw materials	586,175			568,916			553,433			565,071
Work in process	52,033			48,819			48,297			44,532
Finished goods	476,280			460,802			474,183			513,465
Total Inventories	1,114,488			1,078,537			1,075,913			1,123,068
Prepaid expenses and other current assets	310,243			277,036			356,322			319,334
Total Current Assets	2,925,825			2,941,860			2,818,294			2,942,544
Property, plant and equipment, at cost	2,581,131			2,492,938			2,632,441			2,690,768
Accumulated depreciation	(1,287,102		)	(1,251,786		)	(1,293,317		)	(1,303,848		)
	1,294,029			1,241,152			1,339,124			1,386,920
Goodwill	5,434,000			5,378,388			5,267,559			5,497,596
Other intangible assets, net	2,974,177			3,039,322			2,677,446			2,851,935
Other assets	583,389			288,673			586,653			608,416
Total Assets	$	13,211,420		$	12,889,395		$	12,689,076		$	13,287,411
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Bank borrowings, overdrafts, and current portion of long-term debt	$	84,003		$	48,642		$	385,569		$	384,958
Accounts payable	476,413			471,382			456,156			510,372
Accrued payroll and bonus	91,293			121,080			87,083			102,704
Dividends payable	77,799			77,779			80,062			80,038
Other current liabilities	414,626			409,428			418,125			474,118
Total Current Liabilities	1,144,134			1,128,311			1,426,995			1,552,190
Long-term debt	4,421,430			4,504,417			3,946,905			3,997,438
Retirement liabilities	225,834			227,172			261,512			265,370
Deferred income taxes	658,804			655,879			616,084			641,456
Other liabilities	492,029			248,436			494,193			502,366
Total Other Liabilities	5,798,097			5,635,904			5,318,694			5,406,630
Commitments and Contingencies (Note 15)
Redeemable noncontrolling interests	114,711			81,806			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, 2019 and December 31, 2018; and 106,646,581 and 106,619,202 shares outstanding as of March 31, 2019 and December 31, 2018, respectively	16,066			16,066
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	3,802,602			3,793,609			3,835,265			3,823,152
Retained earnings	4,011,326			3,956,221			4,162,347			4,117,804
Accumulated other comprehensive loss	(657,354		)	(702,227		)	(1,164,208		)	(716,894		)
Treasury stock, at cost (21,879,556 and 21,906,935 shares as of March 31, 2019 and December 31, 2018, respectively)	(1,029,429		)	(1,030,718		)
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	6,143,211			6,032,951			5,827,850			6,217,304
Noncontrolling interest	11,267			10,423			12,824			12,244
Total Shareholders’ Equity including noncontrolling interest	6,154,478			6,043,374
Total Shareholders’ Equity including Noncontrolling interest							5,840,674			6,229,548
Total Liabilities and Shareholders’ Equity	$	13,211,420		$	12,889,395		$	12,689,076		$	13,287,411

INTERNATIONAL FLAVORS & FRAGRANCES INC.

CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE (LOSS) INCOME

(Unaudited)


	Three Months Ended						Three Months Ended
	March 31,						March 31,
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)	2019			2018			2020			2019
Net sales	$	1,297,402		$	930,928		$	1,347,317		$	1,297,402
Cost of goods sold	766,143			525,119			781,450			766,143
Gross profit	531,259			405,809			565,867			531,259
Research and development expenses	90,596			78,476			85,909			90,596
Selling and administrative expenses	213,182			142,644			229,714			213,182
Amortization of acquisition-related intangibles	47,625			9,185			48,350			47,625
Restructuring and other charges, net	16,174			717			4,918			16,174
Gains on sales of fixed assets	(188		)	(69		)
Losses (gains) on sales of fixed assets							754			(188		)
Operating profit	163,870			174,856			196,222			163,870
Interest expense	36,572			16,595			32,140			36,572
Other income, net	(7,278		)	(576		)
Other loss (income), net							10,574			(7,278		)
Income before taxes	134,576			158,837			153,508			134,576
Taxes on income	23,362			29,421			26,297			23,362
Net income	111,214			129,416			127,211			111,214
Net income attributable to noncontrolling interests	2,385			—			2,604			2,385
Net income attributable to IFF stockholders	108,829			129,416			124,607			108,829
Other comprehensive income, after tax:
Other comprehensive (loss) income, after tax:
Foreign currency translation adjustments	42,377			14,803			(452,278		)	42,377
Losses on derivatives qualifying as hedges	(97		)	(529		)
Gains (losses) on derivatives qualifying as hedges							1,447			(97		)
Pension and postretirement net liability	2,593			2,629			3,517			2,593
Other comprehensive income	44,873			16,903
Comprehensive income attributable to IFF stockholders	$	153,702		$	146,319
Other comprehensive (loss) income							(447,314		)	44,873
Comprehensive (loss) income attributable to IFF stockholders							$	(322,707	)	$	153,702

Net income per share - basic	$	0.97		$	1.63		$	1.16		$	0.97
Net income per share - diluted	0.96			1.63			$	1.15		$	0.96
Average number of shares outstanding - basic	111,864			79,018			112,082			111,864
Average number of shares outstanding - diluted	113,389			79,393			113,594			113,389

INTERNATIONAL FLAVORS & FRAGRANCES INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31,						Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2019			2018			2020			2019
Cash flows from operating activities:
Net income	$	111,214		$	129,416		$	127,211		$	111,214
Adjustments to reconcile to net cash provided by (used in) operating activities
Adjustments to reconcile to net cash provided by operating activities
Depreciation and amortization	81,775			33,384			80,595			81,775
Deferred income taxes	(12,389		)	18,404			2,221			(12,389		)
Gains on sale of assets	(188		)	(69		)
Losses (gains) on sale of assets							754			(188		)
Stock-based compensation	7,604			7,620			8,624			7,604
Pension contributions	(3,956		)	(4,387		)	(5,397		)	(3,956		)
Litigation settlement	—			(12,969		)
Changes in assets and liabilities, net of acquisitions:
Trade receivables	(55,935		)	(61,301		)	(133,291		)	(55,935		)
Inventories	(24,719		)	(30,185		)	(568		)	(24,719		)
Accounts payable	8,988			(8,435		)	(31,635		)	8,988
Accruals for incentive compensation	(36,969		)	(36,583		)	(19,340		)	(36,969		)
Other current payables and accrued expenses	(11,321		)	(18,540		)	(65,158		)	(11,321		)
Other assets	(9,978		)	(26,035		)	42,462			(9,978		)
Other liabilities	(6,894		)	(1,715		)	10,467			(6,894		)
Net cash provided by (used in) operating activities	47,232			(11,395		)
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		)	(22		)	—			(33,895		)
Additions to property, plant and equipment	(57,609		)	(33,105		)	(48,294		)	(57,609		)
Proceeds from life insurance contracts	1,890			—			1,739			1,890
Maturity of net investment hedges	—			(2,405		)
Proceeds from disposal of assets	3,970			293			3,806			3,970
Contingent consideration paid	(4,655		)	—			—			(4,655		)
Net cash used in investing activities	(90,299		)	(35,239		)	(42,749		)	(90,299		)
Cash flows from financing activities:
Cash dividends paid to shareholders	(77,779		)	(54,420		)	(80,038		)	(77,779		)
Increase in revolving credit facility and short term borrowings	2,895			53,688			169			2,895
Repayments on debt	(36,156		)	—			(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			—			—			200
Employee withholding taxes paid	(1,339		)	(3,266		)	(1,275		)	(1,339		)
Purchase of treasury stock	—			(10,617		)
Net cash used in financing activities	(112,179		)	(14,615		)	(107,228		)	(112,179		)
Effect of exchange rate changes on cash and cash equivalents	3,853			(1,521		)
Net change in cash and cash equivalents	(151,393		)	(62,770		)
Cash and cash equivalents at beginning of year	648,522			368,046
Cash and cash equivalents at end of period	$	497,129		$	305,276
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	$	48,506		$	20,236		$	41,755		$	48,506
Income taxes paid	33,326			24,939			32,636			33,326
Accrued capital expenditures	14,241			18,868			19,013			14,241

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			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, 2018	$	14,470	$	162,827		$	3,870,621		$	(637,482	)	(36,910,809	)	$	(1,726,234	)	$	5,092	$	1,689,294
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						129,416											720		130,136								108,829											844		109,673
Adoption of ASU 2014-09						2,158													2,158
Adoption of ASU 2016-02																											23,094													23,094
Adoption of ASU 2017-12																											981													981
Cumulative translation adjustment									14,803										14,803											42,377										42,377
Losses on derivatives qualifying as hedges; net of tax $106									(529		)								(529		)
Pension liability and postretirement adjustment; net of tax $1,894									2,629										2,629
Cash dividends declared ($0.69 per share)						(54,404		)											(54,404		)
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			(226		)							15,678		736					510					3,424									13,978		660					4,084
Treasury share repurchases												(73,154	)	(10,977		)			(10,977		)
Vested restricted stock units and awards			(3,704		)							30,294		1,426					(2,278		)			(2,405		)							13,401		629					(1,776		)
Stock-based compensation			7,620																7,620					7,604																7,604
Balance at March 31, 2018	$	14,470	$	166,517		$	3,947,791		$	(620,579	)	(36,937,991	)	$	(1,735,049	)	$	5,812	$	1,778,962
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			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, 2019	$	16,066	$	3,793,609		$	3,956,221		$	(702,227	)	(21,906,935	)	$	(1,030,718	)	$	10,423	$	6,043,374
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						108,829											844		109,673								124,607											617			125,224
Adoption of ASU 2016-02						23,094													23,094
Adoption of ASU 2017-12						981													981
Cumulative translation adjustment									42,377										42,377											(452,278		)									(452,278		)
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		)
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			3,424									13,978		660					4,084					(490		)							13,763		672						182
Vested restricted stock units and awards			(2,405		)							13,401		629					(1,776		)			(1,827		)							11,195		532						(1,295		)
Stock-based compensation			7,604																7,604					8,624																	8,624
Redeemable NCI			370																370					5,806																	5,806
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
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

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 ~~2018~~2019 Annual Report on Form 10-K (“~~2018~~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 ~~2019~~2020 and ~~2018~~2019 quarters, the actual closing dates were ~~March 29~~April 3 and March ~~30,~~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 ~~certain accounts receivable~~the receivables on a non-recourse basis to unrelated financial institutions ~~under “factoring” agreements that are sponsored, solely~~ and ~~individually, by certain customers. The Company~~ accounts for ~~these~~the transactions as ~~sales~~a sale of receivables. The applicable receivables ~~removes~~are removed from the ~~receivables sold from its financial statements, and records~~Company's Consolidated Balance Sheet when the cash proceeds ~~when~~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 ~~beneficial~~ impact on cash provided by operations from participating in these programs ~~decreased approximately $0.3~~was a decrease of $5.4 million for the three months ended March 31, ~~2019 compared to a decrease~~2020 and an increase of ~~approximately $11.0~~$5.2 million for the three months ended March 31, ~~2018.~~ 2019.

The cost of participating in these programs was ~~immaterial~~$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 ~~our results~~its customers in ~~all periods.~~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,~~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 ~~our~~the Company's accounts receivable, contract assets, and ~~accounts receivable~~contract liabilities for the ~~three months~~periods ended March 31, ~~2019~~2020 and December 31, ~~2018:~~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

(DOLLARS IN THOUSANDS) March 31, 2019 December 31, 2018
Receivables (included in Trade receivables) $ 1,012,780
$ 946,938
Contract asset - Short term 2,149
487

~~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 add, 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) 2019 2018
Flavor Compounds $ 713,560
$ 449,019
Fragrance Compounds 389,111
378,633
Ingredients 194,731
103,276
Total revenues $ 1,297,402
$ 930,928

Recent Accounting Pronouncements

In ~~October 2018,~~March 2020, the FASB issued Accounting Standards Update ("ASU") ~~2018-16, “Derivatives and Hedging~~2020-04, “Reference Rate Reform (Topic ~~815)~~848): ~~Inclusion~~Facilitation of the ~~Secured Overnight Financing~~Effects of Reference Rate ~~("SOFR") Overnight Index Swap ("OIS") Rate as a Benchmark Interest Rate for Hedge Accounting Purposes."~~Reform on Financial Reporting.” The ASU ~~allows~~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 ~~the use~~March 12, 2020 through December 31, 2022. The Company has not adopted any of the ~~OIS rate based on~~optional expedients or exceptions through March 31, 2020 but will continue to evaluate the ~~SOFR~~possible adoption of any such expedients or exceptions during the effective period as ~~a U.S. benchmark interest rate~~circumstances evolve.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for ~~purposes of applying hedge~~Income Taxes.” The ASU is intended to simplify various aspects related to accounting ~~under ASC 815, Derivatives~~for income taxes. This guidance is effective for fiscal years beginning after December 15, 2020, and ~~Hedging.~~for interim periods within those fiscal years, with early adoption permitted. The Company ~~applied~~is currently evaluating the impact this ~~new~~ guidance ~~as of December 29, 2018, the first day of the Company’s 2019 fiscal year. The adoption of the guidance did not~~may have ~~a material impact~~ on ~~the Consolidated Financial Statements.~~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 ~~is currently evaluating~~adopted the ~~impact this~~ guidance ~~will~~effective the first day of its 2020 fiscal year. The adoption did not have an impact on its ~~Consolidated Financial Statements.~~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 ~~is currently evaluating~~adopted the ~~impact this~~ guidance ~~will~~effective the first day of its 2020 fiscal year. The adoption did not have an impact on its Consolidated Financial ~~Statements.~~

~~In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820)", which modifies, removes~~Statements and adds certain disclosure requirements on fair value measurements. The ASU is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have a minimal impact on its ~~Consolidated Financial Statements.~~disclosures in future periods.

~~In June 2018, the FASB issued ASU 2018-07, "Compensation - Stock Compensation (Topic 718)" intended~~Adoption of Standard Related to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments. This guidance expands the scope of Topic 718, Compensation-Stock Compensation which currently only includes share-based payments to employees to include share-based payments issued to nonemployees for goods or services. The Company applied this new guidance as of December 29, 2018, the first day of the Company’s 2019 fiscal year. The adoption of the guidance did not have a material impact on the Consolidated Financial Statements.

In February 2018, FASB issued ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" which allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act, in addition to requiring certain disclosures about stranded tax effects. The guidance was effective as of December 29, 2018, the first day of the Company's fiscal year. The Company has elected to not reclassify any stranded tax effects to retained earnings.

In August 2017, FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities" which eliminates the requirement to separately measure and present hedge ineffectiveness and aligns the presentation of hedge gains and losses with the underlying hedge item. This guidance is effective, and as

required, has been applied on a modified retrospective basis. The impact of the adoption of this standard on December 29, 2018 was a decrease in the beginning balance of the currency translation adjustment component of Accumulated other comprehensive loss of $1.0 million, and an increase in Retained Earnings, as presented in the Company's Consolidated Balance Sheet. See Note 13 of the Consolidated Financial Statements for further details.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 is 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 ~~statements issued for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted.~~ asset.

The Company is ~~currently evaluating~~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 ~~this guidance will have~~of the COVID-19 pandemic and its impact on ~~its Consolidated Financial Statements.~~

~~In February 2016,~~ the FASB issued ASU 2016-02, "Leases (Topic 842)", with subsequent amendments, which requires changes to the accounting for leases and supersedes existing lease guidance, including ASC 840 - Leases. See Note 8 for further details.liquidity of certain customers.

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

Three Months Ended March 31,
(SHARES IN THOUSANDS) 2019 2018
Net Income
Net income attributable to IFF stockholders $ 108,829
$ 129,416
Add: Decrease in redemption value of redeemable noncontrolling interests in excess of earnings allocated 370
—
Net income available to IFF stockholders $ 109,199
$ 129,416
Shares
Weighted average common shares outstanding (basic)⁽¹⁾
111,864
79,018
Adjustment for assumed dilution⁽²⁾:

Stock options and restricted stock awards 362
375
SPC portion of TEUs 1,163
—
Weighted average shares assuming dilution (diluted) 113,389
79,393

Net Income per Share
Net income per share - basic $ 0.97
$ 1.63
Net income per share - dilutive 0.96
1.63

_______________________


(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 weighted-average shares~~ for basic earnings per share. See below for details.


(2)	Effect of dilutive securities includes dilution under stock plans and incremental impact of TEUs. See below for details.

The Company declared a quarterly dividend to its shareholders of ~~$0.73~~$0.75 and ~~$0.69~~$0.73 for the three months ended March 31, ~~2019~~2020 and ~~2018,~~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, ~~2019~~2020 and ~~2018.~~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 ~~approximately~~ $800.2 million on September 17, 2018. For purposes of calculating basic net income per share, the ~~periods outstanding, the SPC portion of the TEUs was~~SPCs were assumed to be settled at the minimum settlement amount of 0.3134 shares per SPC for ~~weighted-average shares for basic earnings per share.~~March 31, 2020 and 2019, respectively. For purposes of calculating diluted earnings per share, the ~~shares~~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 not to exceed~~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, ~~2019~~2020 and ~~2018~~2019 was immaterial. Net income allocated to such PRSUs was ~~$0.1~~$0.2 million for both the three months ended March 31, ~~2019~~2020 and ~~$0.3 million for the three months ended March 31, 2018.~~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

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 ~~three months ended March 31,~~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% ~~after receipt of previously pending regulatory approvals in Thailand. The two acquired entities, which manufacture flavor products, will be managed under the Frutarom segment.~~. The total purchase price for the two acquisitions made in the first quarter of 2019 was ~~$46.3~~$52 million, excluding cash acquired and including ~~$12.4~~$19 million of contingent consideration and deferred payments. ~~A preliminary~~The purchase price ~~allocation has~~allocations have been performed ~~giving rise to~~and resulted in goodwill of approximately ~~$55.4~~$47 million and intangible assets of ~~$18.4~~$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 ~~price allocation is expected to be completed within the measurement period.~~accounting was not material.

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

~~Frutarom~~

~~On October 4, 2018, the Company completed its acquisition of 100% of the equity of Frutarom Industries Ltd. (“Frutarom”).~~

~~Purchase Price Allocation~~

The Company allocated the purchase consideration to the tangible net assets and identifiable intangible assets acquired based on estimated fair values at the acquisition date, and recorded the excess of consideration over the fair values of net assets acquired as goodwill. During the first quarter of 2019, the Company updated the purchase price allocation, principally to reflect updated values for certain entities' fixed assets.

The purchase price allocation is preliminary and subject to change. The Company is currently finalizing the valuation of fixed assets, goodwill and intangible assets (trade names, product formulas, customer relationships and favorable/unfavorable leases and the related estimated useful lives). Additionally, the Company is finalizing the projected combined future tax rate to be applied to the valuation of assets, which could impact the valuation of goodwill and intangible assets. The determination of the fair value of assets and liabilities, including those related to leases, will be finalized as soon as the valuation is completed which is expected to be during the third quarter of 2019.

~~The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed (in thousands) as of October 4, 2018:~~

As reported in the fourth quarter of 2018 Measurement period adjustments As reported in the first quarter of 2019
Cash and cash equivalents $ 140,747
$ 140,747
Other current assets 699,627
699,627
Identifiable intangible assets 2,690,000
(21,700 ) 2,668,300
Other assets 353,710
43,200
396,910
Equity method investments 25,791
25,791
Current liabilities (311,325 ) (311,325 )
Debt assumed (77,037 ) (77,037 )
Other liabilities (632,488 ) (12,221 ) (644,709 )
Redeemable noncontrolling interest (97,510 ) (5,700 ) (103,210 )
Noncontrolling interest (3,700 ) (3,700 )
Goodwill 4,243,079
(3,579 ) 4,239,500
Total Purchase Consideration $ 7,030,894
$ 7,030,894

The preliminary fair value purchase price allocation of the assets and liabilities acquired in the acquisition of Frutarom as reported in the fourth quarter of 2018 were updated during the quarter ended March 31, 2019 primarily due to: (i) a $21.7 million decrease in the fair value of identifiable intangible assets (principally customer relationships and arising from the updated valuations for certain entities' fixed assets), (ii) a $43.2 million increase to property, plant and equipment (related to certain Frutarom entities), included in Other assets in the accompanying table, (iii) a $1.5 million increase to the noncurrent portion of earn-outs and a $10.7 million increase to deferred income tax liabilities, (iv) a $5.7 million decrease to redeemable noncontrolling interest. The cumulative impact of the adjustment resulted in a $3.6 million decrease to goodwill.

~~The measurement period adjustments did not have a material impact on the Company's Statement of Comprehensive Income for the first quarter of 2019.~~

~~The preliminary amounts of the components of intangible assets with finite lives that have been recorded are as follows:~~

(IN THOUSANDS) Estimated Amounts Weighted-Average Useful Life
Product formula $ 290,000
10 to 12 years
Customer relationships 2,230,000
18 to 23 years
Trade names 140,000
23 to 26 years
Favorable/Unfavorable Leases, net 8,300
5 to 15 years
Total $ 2,668,300

~~Pro forma financial information~~

The following unaudited pro forma financial information presents the combined results of operations of IFF and Frutarom as if the acquisition had been completed as of the beginning of the prior fiscal year, or January 1, 2018. The unaudited pro forma financial information is presented for informational purposes and is not indicative of the results of operations that would have been achieved if the acquisition and related borrowings had taken place on January 1, 2018, nor are they indicative of future results. The unaudited pro forma financial information for the three months ended March 31, 2018 included the pre-acquisition results of Frutarom for that period.

~~The unaudited pro forma results for the three months ended March 31, 2018 were as follows:~~

(IN THOUSANDS) Three Months Ended March 31, 2018
Unaudited pro forma net sales $ 1,315,733
Unaudited pro forma net income attributable to the Company 112,620

The unaudited pro forma results for all periods presented include adjustments made to account for certain costs and transactions that would have been incurred had the acquisition been completed as of January 1, 2018, including amortization charges for acquired intangibles assets, adjustments for acquisition transaction costs, adjustments for depreciation expense for property, plant, and equipment, and adjustments to interest expense. These adjustments are net of any applicable tax impact and were included to arrive at the pro forma results above.

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.

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 10 facilities, of which 6 facilities are in Europe, Africa and Middle East, 2 facilities in Latin America, and 1 facility in each North America and Greater Asia regions. During the three months ended March 31, 2020, the Company announced the closure of 4 facilities, of which 2 facilities are in Europe, Africa and Middle East, 1 facility in Latin America, and 1 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 ~~Charges~~Program

During the ~~first quarter of~~year ended December 31, 2019, the Company incurred severance charges ~~of $16.2 million~~ related to approximately 190 headcount ~~reductions.~~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. ~~The~~Since the inception of the program, the Company ~~made payments of$0.9~~has expensed $21.3 million~~related~~ to ~~personnel~~date. Total costs ~~during~~for the ~~three months ended March 31, 2019.~~program are expected to be approximately $25 million.

2017 Productivity Program

In connection with the 2017 Productivity Program, the Company expects to incur cumulative, pre-tax cash charges of between $30-$35 million, consisting primarily of $24-$26 million in personnel-related costs and an estimated $6 million in facility-related costs, such as lease termination, and integration-related costs. The Company recorded $24.5 million of charges related to personnel costs and lease termination costs ~~through~~since the ~~first quarter of 2019.~~program's inception to date. Total costs for the program are expected to be approximately $25 million.

~~The Company made payments of $0.5 million and $1.7 million related to personnel costs~~Changes in Restructuring Liabilities

Changes in restructuring liabilities by program during the three months ended March 31, 2019 and 2018, as well as lease termination costs for March 31, 2018. The overall charges were split approximately evenly between Taste and Scent. This initiative is expected to result in the reduction of approximately 370 members of the Company’s global workforce, including acquired entities, in various parts of the organization.

~~Changes in restructuring liabilities during the three months ended March 31, 2019, including both the 2019 severance charges and the 2017 Productivity Program,~~2020 were as follows:

(DOLLARS IN THOUSANDS) Employee-Related Costs Other Total
Balance at December 31, 2018 $ 4,125
$ 1,075
$ 5,200
Additional charges, net 16,174
—
16,174
Payments (1,393 ) —
(1,393 )
Balance at March 31, 2019 $ 18,906
$ 1,075
$ 19,981



(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

NOTE 5. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Goodwill

Movements in goodwill during ~~2019~~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

(DOLLARS IN THOUSANDS) Goodwill
Balance at December 31, 2018 $ 5,378,388
Acquisitions⁽¹⁾
61,711
Frutarom measurement period adjustment (3,579 )
Foreign exchange (2,520 )
Balance at March 31, 2019 $ 5,434,000

_______________________


(1)	~~Additions~~Measurement period adjustments relate to adjustments recorded in connection with completing the purchase price allocation related to the 2019 ~~acquisition activity.~~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

March 31, December 31,
(DOLLARS IN THOUSANDS) 2019 2018
Asset Type
Customer relationships $ 2,638,998
$ 2,658,659
Trade names & patents 177,566
177,770
Technological know-how 463,989
451,016
Other 33,009
43,766
Total carrying value 3,313,562
3,331,211
Accumulated Amortization
Customer relationships (193,263 ) (156,906 )
Trade names & patents (21,760 ) (19,593 )
Technological know-how (106,181 ) (93,051 )
Other (18,181 ) (22,339 )
Total accumulated amortization (339,385 ) (291,889 )
Other intangible assets, net $ 2,974,177
$ 3,039,322

Amortization

Amortization expense was ~~$47,625~~$48.4 million and ~~$9,185~~$47.6 million for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

Amortization expense for the next five years ~~and thereafter, based on preliminary valuations and determinations of useful lives,~~ 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

(DOLLARS IN THOUSANDS) 2019 2020 2021 2022 2023
Estimated future intangible amortization expense $ 190,281
$ 185,492
$ 180,661
$ 176,734
$ 176,621

NOTE 6. OTHER ASSETS

Other assets consisted of the following amounts:


(DOLLARS IN THOUSANDS)	March 31, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Operating lease right-of-use assets	$	300,888	$	—	$	287,301	$	287,870
Deferred income taxes	82,928		89,000		96,109		125,552
Overfunded pension plans	79,122		75,158		89,819		85,657
Cash surrender value of life insurance contracts	45,444		43,179		43,694		47,578
Equity method investments	26,735		31,470
Other^(a)	48,272		49,866		69,730		61,759
Total	$	583,389	$	288,673	$	586,653	$	608,416

_______________________


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

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

(DOLLARS IN THOUSANDS) Effective Interest Rate
March 31, 2019
December 31, 2018
2020 Notes⁽¹⁾
3.69 %
$ 298,743

$ 298,499
2021 Euro Notes⁽¹⁾
0.82 %
334,486

337,704
2023 Notes⁽¹⁾
3.30 %
298,774

298,698
2024 Euro Notes⁽¹⁾
1.88 %
558,869

564,034
2026 Euro Notes⁽¹⁾
1.93 %
891,757

899,886
2028 Notes⁽¹⁾
4.57 %
396,460

396,377
2047 Notes⁽¹⁾
4.44 %
493,256

493,151
2048 Notes⁽¹⁾
5.12 %
785,838

785,788
Term Loan⁽¹⁾
3.65 %
324,295

349,163
Amortizing Notes⁽¹⁾
6.09 %
114,667

125,007
Bank overdrafts and other

8,231

4,695
Deferred realized gains on interest rate swaps

57

57

4,505,433

4,553,059
Less: Short term borrowings⁽³⁾

(84,003 )
(48,642 )

$ 4,421,430

$ 4,504,417

_______________________


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


(2)	~~Represents the rate on drawn down and outstanding balances. Deferred debt issuance costs are immaterial.~~


~~(3)~~	Includes bank borrowings, overdrafts and current portion of long-term debt.

NOTE 8. LEASES

During the quarter ended March 31, 2019, the Company adopted ASU No. 2016-02, “Leases (Topic 842),” which requires most leases to be recognized on the balance sheet. The Company adopted the standard using the modified retrospective approach with an effective date of December 29, 2018, the beginning of its 2019 fiscal year. Prior year financial statements were not recast. The Company elected various transition provisions available for expired or existing contracts, which allows the Company to carryforward historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs.

The Company leases property and equipment, principally under operating leases. In accordance with ASU 2016-02, the Company records a right of use asset and related obligation at the present value of lease payments and, over the term of the lease, depreciates the right of use asset and accretes the obligation to future value. Some of the leases include rental escalation clauses, renewal options and/or termination options that are factored into the determination of lease payments when appropriate. The Company does not separate lease and nonlease components of contracts.

When available, the Company uses the rate implicit in the lease to discount lease payments to present value, however, most of the Company's leases do not provide a readily determinable implicit rate and the Company calculates the applicable incremental borrowing rate to discount the lease payments based on the term of the lease at lease commencement. The incremental borrowing rate is determined based on currency and lease terms.

Certain leases contain variable payments which are periodically adjusted for changes in an index or rate. Such payments are initially measured using the index or rate at the commencement date and are included in the measurement of the lease liability. Subsequent changes in variable payments are not included in the lease liability, but are recognized in profit and loss during the period in which the obligation for those payments is incurred.

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 has no finance~~ 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.

Upon adoption of the new guidance, the Company recorded a right of use asset of $308.3 million and total operating lease liabilities of $313.3 million. Additionally, the Company recorded a net increase to retained earnings of approximately $23.1 million related to the elimination of deferred gains on certain sale-leaseback transactions that occurred in prior years.

The components of lease expense were as follows:


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

Three Months Ended
(DOLLARS IN THOUSANDS) March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 11,076

~~Supplemental balance sheet information related to leases was as follows:~~

(DOLLARS IN THOUSANDS) March 31, 2019
Operating Leases
Operating lease right of use assets $ 300,888

Other current liabilities 37,198
Operating lease liabilities 266,569
Total operating lease liabilities $ 303,767

~~Weighted average remaining lease term and discount rate were as follows:~~

Weighted Average Remaining Lease Term
(in years)
Weighted Average Discount Rate
Operating leases 11.9 3.75 %

~~Maturities of lease liabilities were as follows:~~

(DOLLARS IN THOUSANDS) March 31, 2019
Less than 1 Year $ 37,680
1-3 Years 77,037
3-5 Years 65,087
After 5 years 211,387
Less: Imputed Interest (87,424 )
Total $ 303,767

~~Maturities of lease liabilities, as calculated prior to the adoption of ASU 2016-02, were as follows:~~

(DOLLARS IN THOUSANDS) December 31, 2018
Less than 1 Year $ 49,350
1-3 Years 78,600
3-5 Years 60,672
After 5 years 201,079
Total $ 389,701

~~Right of use assets by region were as follows:~~

(DOLLARS IN THOUSANDS) March 31, 2019
North America $ 142,748
Europe, Africa and Middle East 120,785
Greater Asia 23,151
Latin America 14,204
Consolidated $ 300,888

NOTE 9. INCOME TAXES

Uncertain Tax Positions

AtAs of March 31, ~~2019,~~2020, the Company had ~~$46~~$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, ~~2019,~~2020, the Company had accrued interest and penalties of ~~$3.2~~$14.2 million classified in Other liabilities and less than $0.1 million classified in Other current liabilities.

As of March 31, ~~2019,~~2020, the Company’s aggregate provisions for uncertain tax positions, including interest and penalties, was ~~$49.2~~$86.4 million associated with ~~various~~ tax positions asserted in various jurisdictions, none of which is individually material.

The Company regularly repatriates earnings from non-U.S. subsidiaries. ~~In the fourth quarter of 2018, the Company changed its assertion as part of its final analysis under SAB 118, consistent with the Company’s need to repatriate funds for debt repayment purposes.~~ 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, ~~2019,~~2020, the Company had a deferred tax liability of ~~$87.2~~$42.6 million for the effect of repatriating the funds to the U.S. ~~This balance consisted of $42.8 million~~, attributable to ~~IFF~~various non-U.S. subsidiaries. There is 0 deferred tax liability associated with non-U.S. subsidiaries ~~and $44.4 million associated with Frutarom which is still preliminary and will be refined through~~where we intend to indefinitely reinvest the ~~purchase accounting measurement period.~~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 ~~2009~~2010 to ~~2018.~~2019. Based on currently available information, the Company does not believe the ~~ultimate~~ 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, ~~2019~~2020 was ~~17.4%~~17.1% compared with ~~18.5%~~17.4% for the three months ended March 31, ~~2018.~~2019. The quarter-over-quarter decrease ~~was largely~~is primarily due to ~~a more favorable mix of earnings (including the impact of integration related costs, restructuring charges and Frutarom acquisition related costs), partially offset by higher~~lower repatriation costs and the ~~absence of the remeasurement~~reversal of loss provisions, ~~and the release~~partially offset by an unfavorable mix of ~~a State valuation allowance which benefited the first quarter of 2018.~~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)~~("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

Three Months Ended March 31,
(DOLLARS IN THOUSANDS) 2019 2018
Equity-based awards $ 7,604
$ 7,620
Liability-based awards 730
155
Total stock-based compensation expense 8,334
7,775
Less: Tax benefit (1,382 ) (1,563 )
Total stock-based compensation expense, after tax $ 6,952
$ 6,212

NOTE 11. SEGMENT INFORMATION

~~The~~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 ~~three~~2 reportable operating segments, Taste ~~Scent~~ and ~~Frutarom;~~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 which~~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 ~~the~~ food and beverage ~~industries for~~manufacturers who use them in producing consumer ~~products such as prepared foods, beverages, dairy, food and sweet~~ products.

Scent is comprised of (1) Fragrance Compounds, which are ultimately used by our customers in ~~two~~2 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.

Frutarom creates and manufactures a naturals-focused suite of flavor compounds, functional foods and specialty fine ingredients, largely targeting small, local and regional customers. Frutarom’s products are focused on three principal areas: (1) Savory Solutions, (2) Natural Product Solutions, which includes natural health ingredients, natural color and natural food protection, and (3) Taste Solutions.

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) 2019 2018
Net sales:
Taste $ 444,602
$ 449,019
Scent 488,352
481,909
Frutarom 364,448
—
Consolidated $ 1,297,402
$ 930,928
Segment profit:
Taste $ 108,455
$ 111,564
Scent 85,815
93,277
Frutarom 29,091
—
Global expenses (18,673 ) (23,825 )
Operational Improvement Initiatives (a) (406 ) (1,026 )
Acquisition Related Costs (b) —
514
Integration Related Costs (c) (14,897 ) —
Restructuring and Other Charges, net (d) (16,174 ) (717 )
Gains on Sale of Assets 188
69
FDA Mandated Product Recall (e) —
(5,000 )
Frutarom Acquisition Related Costs (f) (9,529 ) —
Operating profit 163,870
174,856
Interest expense (36,572 ) (16,595 )
Other income (expense) 7,278
576
Income before taxes $ 134,576
$ 158,837



	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, as well as a lab closure in Taiwan for 2018.~~India.



(b)	~~Represents adjustments to the contingent consideration payable for PowderPure, and transaction costs related to~~ ~~Fragrance Resources and PowderPure within Selling and administrative expenses.~~
~~(c)~~	Represents costs related to the integration of the Frutarom ~~acquisition,~~acquisition. For 2020, costs primarily related to advisory services, retention bonuses and performance stock awards. For 2019, costs principally related to advisory ~~expenses.~~services.
~~(d)~~(c)	For 2020, represents costs primarily related to the Frutarom Integration Initiative. For 2019, represents ~~severance~~ costs ~~related~~ primarily ~~to Scent. For 2018, represents severance costs~~ related to the ~~2017 Productivity Program~~Frutarom Integration Initiative and ~~Taiwan lab closure.~~the 2019 Severance Charges program.
~~(e)~~	~~Represents losses related to the FDA mandated recall.~~
~~(f)~~(d)	Represents transaction-related costs and expenses related to the acquisition of Frutarom. ~~Amount~~For 2020, amount primarily includes ~~$7.9 million~~earn-out payments, net of adjustments, amortization for inventory "step-up" costs and ~~$1.7 million of~~ transaction costs ~~included~~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 ~~Selling~~certain other countries. In addition, includes legal costs for related shareholder lawsuits.
(f)	Represents transaction costs and ~~administrative expenses.~~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, ~~are~~were as follows:


	Three Months Ended
	March 31,				Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2019		2018		2020		2019
Europe, Africa and Middle East	$	529,606	$	309,312	$	543,130	$	529,606
Greater Asia	287,962		243,557		309,508		287,962
North America	301,059		241,146		303,387		301,059
Latin America	178,775		136,913		191,292		178,775
Consolidated	$	1,297,402	$	930,928	$	1,347,317	$	1,297,402

Net sales are attributed to individual regions based upon the destination of product delivery. Net sales related to the U.S. for the three months ended March 31, 2019 and 2018 were $272.8 million and $230.2 million, respectively. Net sales attributed



	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

~~to all foreign countries in total for the three months ended March 31, 2019 and 2018 were $1.0 billion and $700.7 million, respectively.~~ No non-U.S. country had net sales in any period presented greater than 7%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) U.S. Plans
Three Months Ended March 31,
2019 2018
Service cost for benefits earned⁽¹⁾
$ 474
$ 596
Interest cost on projected benefit obligation⁽²⁾
5,453
4,790
Expected return on plan assets⁽²⁾
(6,983 ) (7,739 )
Net amortization and deferrals⁽²⁾
1,275
1,549
Net periodic benefit (income) cost $ 219
$ (804 )


(DOLLARS IN THOUSANDS)	Non-U.S. Plans						Non-U.S. Plans
	Three Months Ended March 31,
	2019			2018			2020			2019
Service cost for benefits earned⁽¹⁾	$	4,873		$	4,470		$	5,940		$	4,873
Interest cost on projected benefit obligation⁽²⁾	4,435			4,338			3,245			4,435
Expected return on plan assets⁽²⁾	(10,904		)	(12,032		)	(11,614		)	(10,904		)
Net amortization and deferrals⁽²⁾	2,922			2,972			3,834			2,922
Net periodic benefit (income) cost	$	1,326		$	(252	)	$	1,405		$	1,326

_______________________


(1)	Included as a component of Operating ~~Profit.~~profit.


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

The Company expects to contribute a total of ~~approximately $4.2~~$4.4 million to its U.S. pension plans and a total of ~~$19.3~~$20.9 million to its Non-U.S. Plans during ~~2019.~~2020. During the three months ended March 31, ~~2019,~~2020, no contributions were made to the qualified U.S. pension plans, ~~$2.7~~$3.9 million of contributions were made to the non-U.S. pension plans, and ~~$1.1~~$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	)

Three Months Ended March 31,
(DOLLARS IN THOUSANDS) 2019 2018
Service cost for benefits earned $ 148
$ 195
Interest cost on projected benefit obligation 578
654
Net amortization and deferrals (1,194 ) (1,189 )
Total postretirement benefit income $ (468 ) $ (340 )

The Company expects to contribute ~~approximately $3.9~~$3.8 million to its postretirement benefits other than pension plans during ~~2019.~~2020. In the three months ended March 31, ~~2019 $1.1~~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~~.


•	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 ~~2018~~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, ~~2019.~~2020.

The carrying values and the estimated fair values of financial instruments at March 31, ~~2019~~2020 and December 31, ~~2018~~2019 consisted of the following:


	March 31, 2019				December 31, 2018				March 31, 2020				December 31, 2019
(DOLLARS IN THOUSANDS)	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
LEVEL 1
Cash and cash equivalents⁽¹⁾	$	483,504	$	483,504	$	634,897	$	634,897	$	433,246	$	433,246	$	606,823	$	606,823
LEVEL 2
Credit facilities and bank overdrafts⁽²⁾	8,231		8,231		4,695		4,695		2,594		2,594		3,131		3,131
Derivatives⁽³⁾
Derivative assets(3)	—		21,296		—		7,229		32,892		32,892		3,575		3,575
Derivative liabilities(3)	—		3,220		—		6,907		5,631		5,631		7,415		7,415
Long-term debt:⁽³⁾⁽⁴⁾
2020 Notes	298,743		299,291		298,499		300,356		299,598		301,191		299,381		302,700
2021 Euro Notes	334,486		340,073		337,704		341,094		327,408		327,667		334,561		338,244
2023 Notes	298,774		298,642		298,698		293,017		299,080		303,381		299,004		305,580
2024 Euro Notes	558,869		596,056		564,034		584,129		546,009		549,159		558,124		586,825
2026 Euro Notes	891,757		934,385		899,886		909,439		870,689		822,800		890,183		945,306
2028 Notes	396,460		414,879		396,377		401,231		396,766		418,176		396,688		441,500
2047 Notes	493,256		472,958		493,151		446,725		493,676		446,510		493,571		526,106
2048 Notes	785,838		828,682		785,788		783,925		786,050		823,569		785,996		919,040
Term Loan⁽²⁾	324,295		325,000		349,163		350,000		239,665		240,000		239,621		240,000
Amortizing Notes⁽⁴⁾⁽⁵⁾	114,667		117,579		125,007		127,879		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.


~~(4)~~(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.

~~In prior years, the~~Cash Flow Hedges

The Company ~~entered into~~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 ~~change in the value~~effective portions of ~~the~~ cash flow hedges isare recorded in OCI as a component of ~~gains/~~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.

~~In prior years,~~Hedges Related to Issuances of Debt

Subsequent to the ~~Company designated~~issuance of the 2021 ~~Euro Notes, 2024~~ 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 ~~investment in Euro functional currency subsidiaries.~~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~~foreign currency translation adjustments in the accompanying Consolidated Statement of Income and Comprehensive (Loss) Income.

~~In prior years,~~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 ~~certain~~four new EUR/USD cross currency swaps ~~which~~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 ~~its~~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 as a component of the Foreign currency translation adjustments.~~OCI.

In prior years, the Company entered into interest rate swap agreements to hedge the anticipated issuance of fixed-rate debt, which are designated as cash flow hedges. The amount of gains and losses realized upon termination of these agreements is amortized over the life of the corresponding debt issuance.

The following table shows the notional amount of the Company’s derivative instruments outstanding as of March 31, ~~2019~~2020 and December 31, ~~2018:~~2019:



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

(DOLLARS IN THOUSANDS) March 31, 2019 December 31, 2018
Foreign currency contracts $ 460,758
$ 585,581
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, ~~2019~~2020 and December 31, ~~2018~~2019:


	March 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		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	$	3,926	$	1,001	$	4,927	$	2,803	$	2,421	$	5,224
Cross currency swaps	16,369		—		16,369		27,668		—		27,668
	$	20,295	$	1,001	$	21,296	$	30,471	$	2,421	$	32,892
Derivative liabilities ^(b)
Foreign currency contract	$	90	$	3,130	$	3,220	$	—	$	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

December 31, 2018
(DOLLARS IN THOUSANDS) Fair Value of
Derivatives
Designated as
Hedging
Instruments Fair Value of
Derivatives Not
Designated as
Hedging
Instruments Total Fair Value
Derivative assets ^(a)

Foreign currency contracts $ 4,122
$ 2,020
$ 6,142
Cross currency swaps 1,087
—
1,087
$ 5,209
$ 2,020
$ 7,229
Derivative liabilities ^(b)

Foreign currency contracts $ 205
$ 6,702
$ 6,907
_______________________

~~_______________________~~


(a)	Derivative assets are recorded to Prepaid expenses and ~~Other~~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, ~~2019~~2020 and ~~2018~~2019 (in thousands):



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

Amount of Gain (Loss) Location of Gain (Loss) Recognized in Income on Derivative
(DOLLARS IN THOUSANDS) Three Months Ended March 31,
2019 2018
Foreign currency contracts $ 926
$ (3,615 ) 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.

~~Most of these 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, ~~2019~~2020 and ~~2018~~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

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,
2019 2018 2019 2018
Derivatives in Cash Flow Hedging Relationships:
Foreign currency contracts $ (312 ) $ (743 ) Cost of goods sold $ 2,372
$ (2,193 )
Interest rate swaps ⁽¹⁾
216
216
Interest expense (216 ) (216 )
Derivatives in Net Investment Hedging Relationships:
Foreign currency contracts —
(696 ) N/A —
—
Cross currency swaps 10,667
—
N/A —
—
Non-Derivatives in Net Investment Hedging Relationships:
2024 Euro Notes 4,206
(15,977 ) N/A —
—
2021 Euro Notes & 2026 Euro Notes 9,253
—
N/A —
—
Total $ 24,030
$ (17,200 ) $ 2,156
$ (2,409 )

_______________________


(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, ~~2018.~~2019.

The Company expects that ~~approximately $6.2~~$4.8 million (net of tax) of derivative gain included in AOCI at March 31, ~~2019,~~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.

NOTE 14. ACCUMULATED OTHER COMPREHENSIVE ~~INCOME (LOSS)~~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 ~~income:~~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, 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 )



(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	)

(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, 2017 $ (297,416 ) $ (10,332 ) $ (329,734 ) $ (637,482 )
OCI before reclassifications 14,803
(2,938 ) —
11,865
Amounts reclassified from AOCI —
2,409
2,629
5,038
Net current period other comprehensive income (loss) 14,803
(529 ) 2,629
16,903
Accumulated other comprehensive (loss) income, net of tax, as of March 31, 2018 $ (282,613 ) $ (10,861 ) $ (327,105 ) $ (620,579 )

The following table provides details about reclassifications out of ~~accumulated~~Accumulated other comprehensive ~~income~~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	Three Months Ended March 31,						Affected Line Item in the Consolidated Statement of Income and Comprehensive Income
(DOLLARS IN THOUSANDS)	2019			2018				2020			2019
Gains (losses) on derivatives qualifying as hedges
Foreign currency contracts	$	2,711		$	(2,506	)	Cost of goods sold	$	2,364		$	2,711		Cost of goods sold
Interest rate swaps	(216		)	(216		)	Interest expense	(216		)	(216		)	Interest expense
Tax	(339		)	313			Provision for income taxes	(295		)	(339		)	Provision for income taxes
Total	$	2,156		$	(2,409	)	Total, net of income taxes	$	1,853		$	2,156		Total, net of income taxes
Losses on pension and postretirement liability adjustments
Prior service cost	$	2,836		$	1,772		(a)	$	(4,348	)	$	2,836		(a)
Actuarial losses	168			(5,103		)	(a)	(191		)	168			(a)
Tax	(5,597		)	702			Provision for income taxes	1,022			(5,597		)	Provision for income taxes
Total	$	(2,593	)	$	(2,629	)	Total, net of income taxes	$	(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 ~~2018~~2019 Form 10-K for additional information regarding net periodic benefit cost.

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, ~~2019,~~2020, the Company had total bank guarantees and standby letters of credit of ~~approximately $58.5~~$47.8 million with various financial institutions. Included in the above aggregate amount was a total of ~~$17.9~~$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, ~~2019.~~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 ~~approximately $10.3~~$7.7 million as of March 31, ~~2019.~~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, ~~2019,~~2020, the Company had available lines of credit of ~~approximately $107.7~~$97.4 million with various financial institutions, in addition to the ~~$912.3~~$789.7 million of capacity under the ~~Amended~~ Credit Facility. There were no material amounts drawn down pursuant to these lines of credit as of March 31, ~~2019.~~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~~consolidated financial statements if it is probable that a liability ~~will be~~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 ~~will be~~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.

~~Environmental~~Litigation Matters

~~Over~~On August 12, 2019, Marc Jansen filed a putative securities class action against IFF, its Chairman and CEO, and its CFO, in the ~~past 20 years, various federal and state authorities and private parties have claimed~~United States District Court for the Southern District of New York. The lawsuit was filed after IFF disclosed that ~~the Company is a Potentially Responsible Party (“PRP”) as a generator~~preliminary results of ~~waste materials for alleged pollution at a number of waste sites operated by third parties located~~investigations indicated that Frutarom businesses operating principally in ~~New Jersey~~Russia and ~~have sought~~Ukraine had made improper payments to ~~recover costs incurred~~representatives of customers. On December 26, 2019, the Court appointed a group of six investment funds as lead plaintiff and ~~to be incurred to clean up the sites.~~

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 Company has been identified as a PRP at seven facilities operated by third parties at which investigation and/or remediation activities may be ongoing. The Company analyzes potential liability on at least a quarterly basis and accrues for environmental liabilities when they are probable and estimable. The Company estimates its share of the total future cost for these sites to be less than $3 million.

While joint and several liability is authorized under federal and state environmental laws, the Company believes the amounts it has paid and anticipates paying in the future for clean-up costs and damages at all sites are not and will not have a material adverse effect on its financial condition, results of operations or liquidity. This assessment is based upon,amended complaint alleges, among other things, that defendants made materially false and misleading statements or omissions concerning IFF’s acquisition of Frutarom,

the ~~involvement of other PRPs at most~~integration of the ~~sites,~~two companies, and the ~~status~~companies’ financial reporting and results. The amended complaint asserts claims under Section 10(b) of the ~~proceedings, including various settlement agreements~~Securities Exchange Act of 1934 and ~~consent decrees,~~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 ~~extended time period over which~~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 ~~will likely be~~and failing to prevent them from being made. ~~There can be no assurance, however,~~

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 ~~future events will not require~~former minority shareholders of Frutarom were harmed as a result of the ~~Company~~US $20 million bonus paid to materially increase the amounts it anticipates paying for clean-up costs and damages at these sites, and that such increased amounts will not have a material adverse effect on its financial condition, results of operations or cash flows.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 ~~$66~~$9 million as of March 31, ~~2019.~~

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 ~~2020.~~2021. The Company received ~~the first~~a payment of $15 million in both the fourth quarter of ~~2017. No additional amounts have been received since~~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 ~~quarter~~and final payment expected in the second half of ~~2017.~~2020 upon the final environmental inspection.

Production at the facility ceased during 2019. The net book value of the current plant was approximately ~~$20~~$10 million as of March 31, ~~2019. The Company expects to relocate approximately half of production capacity of the facility by the middle of 2019 and the remainder of the production capacity of the facility by the middle of~~ 2020.

Total China Operations

The total net book value of all ~~five~~8 plants in China ~~(one of which is currently under construction)~~ was approximately $199 million as of March 31, ~~2019.~~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 ~~$28.2~~$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. ~~During 2018,~~

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 ~~received an unfavorable~~was informed of a favorable ruling ~~with respect to a claim related to potentially unpaid excise taxes~~ from ~~1993. Based on~~ the ~~revised ruling,~~Brazilian tax authorities confirming that the Company ~~has determined that it is now probable that it will have~~was entitled to ~~pay~~recover the ~~original claim in addition~~overpayments of certain indirect taxes (known as PIS/COFINS) for the period from November 2011 to ~~penalties and interest. The total~~December 2018, plus interest on the amount of the ~~claim that has been recorded~~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 ~~$4.8 million.~~

~~FDA-Mandated Product Recall~~

eligible to recover overpayments based on the gross or the net amount of ICMS amounts paid on PIS/COFINS. The Company ~~periodically incurs product liability claims based~~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 ~~product that~~the gross versus net amount issued is ~~sold~~still pending.

In addition to ~~customers that may be defective or otherwise not in accordance with~~ the customer’s requirements. In the first quarter of 2017, the Company was made aware of a claim for product that was subject to an FDA-mandated product recall. As of March 31, 2019, the Company had recorded total charges of approximately $17.5$8.0 million with respect to this claim, of which $5.0 million was recorded in the three months ended March 31, 2018. The Company settled the claim with the customer in the first quarter of 2018 for a total of $16.0 million, of which $3.0 million was paidrecognized in the fourth quarter of ~~2017 and $13.0 million was paid~~2019, during the ~~three months ended March 31, 2018. The remaining accrual~~first quarter of ~~approximately $1.0~~2020 the Company recognized $3.5 million ~~represents management's best estimate~~as an additional recovery on the existing claim. During the first quarter of ~~losses~~2020, the Company also recognized $2.2 million related to ~~claims~~a claim from ~~other affected parties.~~another of its subsidiaries in Brazil. The ~~Company does not believe that the ultimate settlement of the claim will have~~income is recognized as a ~~material impact on its financial condition.~~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.

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 ~~in accordance with~~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			Redeemable Noncontrolling Interests
Balance at December 31, 2018	$	81,806		$	81,806
Acquired through acquisitions during 2019	26,224			26,224
Impact of foreign exchange translation	(190		)	(190		)
Share of profit or loss attributable to redeemable noncontrolling interests	1,541			1,541
Redemption value mark-up for the current period	(370		)
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	5,700			(1,426		)
Balance at March 31, 2019	$	114,711
Exercises of redeemable noncontrolling interests				(10,340		)
Balance at March 31, 2020				$	102,713

~~The~~For 2019, the increase in redeemable noncontrolling interests iswas 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~~

~~Frutarom acquisition~~

~~Frutarom's operating results have been included in our operating results from October 4, 2018, the date we completed the acquisition. See our 2018 Form 10-K for further details of the transaction.~~

~~Frutarom Integration Initiative~~

After the completion of the acquisition of Frutarom, we established priorities of driving topline growth by leveraging our combined technologies, expanded product portfolio and significantly expanded customer base to enhance our offerings, including cross-selling opportunities. In addition, we expect to unlock shareholder value by delivering $145 million in cost synergies through procurement excellence, network optimization and a streamlined organization and operating model. We expect to achieve $30-35 million of cost synergies by the end of 2019 across all three workstreams. To achieve these savings, we will incur certain costs such as advisory, personnel or facility related costs.

We have begun to execute our integration plan to simplify and harmonize our go-to-market business models, clarify roles and responsibilities and accelerate decision-making through a series of organizational changes. While organizational moves are the first step, we expect it will take 6-12 months from March 31, 2019 to fully complete the integration efforts including associated process, systems and governance changes.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 ~~creation~~first quarter of ~~fragrance compounds that are integral elements in~~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 ~~world’s finest perfumes and best-known consumer products within fabric care, home care, personal wash, hair care and toiletries products. Our Scent~~former Frutarom business consists of Fragrance Compounds and Fragrance Ingredients. Our Fragrance Compounds are defined into two broad categories, Fine Fragrances and Consumer Fragrances. Consumer Fragrances consists of five end-use categories of products: (1) Fabric Care, (2) Home Care, (3) Personal Wash, (4) Hair Care and (5) Toiletries. Fragrance Ingredients consist of active and functional ingredients that are used internally and sold to third parties, including customers and competitors, and are included insegment was consolidated with the ~~Scent business unit.~~Taste segment.

~~Flavors are the key building blocks that impart taste experiences in food and beverage products and, as such, play a~~

~~significant role in determining consumer preference for the end products in which they are used.~~ As a leading creator of ~~Flavor Compounds,~~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 ~~flavors business i~~sflavor compounds are more regional in nature, with different formulas that reflect local taste preferences. Consequently, we manage our ~~flavors business~~flavor compounds geographically, creating ~~Flavor Compounds~~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

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 ~~develop thousands~~believe our unique portfolio of ~~different~~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 ~~taste offerings~~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 ~~most of which are tailor-made. We continually develop new formulas~~ to meet ~~changing consumer preferences and customer~~their specific shipment needs. Our ~~Flavor Compounds~~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

manufacturing facilities are ~~ultimately~~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 byin retail food services and our ~~customers~~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 ~~following four end-use categories~~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 ~~consumer goods:~~the DuPont N&B Transaction is subject to various closing conditions, including, among other things, (1) ~~Savory,~~approval by IFF’s shareholders of the issuance of IFF Common Stock in connection with the transaction; (2) ~~Beverages, (3) Sweet~~the effectiveness of the registration statements to be filed with the Securities and ~~(4) Dairy.~~

Our Frutarom business creates and manufactures a naturals-focused suite of Flavor Compounds and specialty fine ingredients, largely targeting small, local and regional customers. Our Frutarom business seeksExchange Commission pursuant to ~~capitalize on~~ the health and wellness emphasis of consumers and deliver growth by offering customers natural flavor products that combine solutions to create natural colors, extending shelf life and natural functional food ingredients. Frutarom’s products are focused on three principal areas: (1) Savory Solutions, (2) Natural Product Solutions, which includes natural health ingredients, natural color and natural food protection,Merger Agreement; and (3) ~~Taste Solutions.~~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~~Financial Performance Overview

Sales

Sales in the first quarter of ~~2019~~2020 increased ~~39%~~4% on a reported basis and ~~44%~~6% on a currency neutral basis (which excludes the effects of changes in currency)~~, with the effects of the Frutarom acquisition contributing approximately 39% to~~. Taste sales increased 3% on a reported ~~growth rates~~basis and ~~41% to~~5% on a currency neutral ~~growth rates. Taste reported sales declined 1% but achieved currency neutral sales growth of 2%.~~basis. Scent achieved sales growth of 1%5% on a reported basis and 4%7% on a currency neutral basis in the first quarter of ~~2019. Currency~~2020. Consolidated reported and currency neutral sales growth was driven by new ~~win performance~~wins (net of losses) and ~~price~~volume increases ~~(principally due to increases in raw material input costs)~~ in both Taste and ~~Scent.~~

~~Overall, our first quarter 2019 results continued~~Scent, including increased shipments in certain product categories to ~~be driven by our strong emerging market presence that represented 47% of total sales and experienced 40% growth on both a reported and currency neutral basis, due primarily~~support customer demand related to the ~~acquisition of Frutarom, for the first quarter of 2019. Excluding the impact of our acquisition of Frutarom, we experienced 3% growth on a currency neutral basis~~COVID-19 pandemic, partially offset by Fine Fragrances sales declines in March 2020 due to global stay-at-home and results were flat on a reported basis. From a geographic perspective, North America ("NOAM"), Europe, Africa and Middle East ("EAME"), Greater Asia ("GA") and Latin America ("LA") all delivered sales growth on a consolidated basis, led by EAME.travel restrictions.

Exchange rate variations had ~~a material~~an unfavorable impact on net sales for the first quarter of ~~2019.~~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 ~~margins decreased~~margin increased to ~~40.9%~~42.0% in the first quarter of ~~2019~~2020 from ~~43.6%~~40.9% in the ~~2018~~2019 period, principally driven ~~primarily~~ by ~~unfavorable price versus input costs which were only~~increased volumes on existing business, new wins (net of losses) and the impact of cost savings and productivity initiatives, partially offset by cost and productivity initiatives and product mix. Included in the first quarter of 2019 was $8.4 million of Frutarom inventory "step-"up" costs, operational improvement initiatives, and integration related expenses compared to $5.5 million of operational improvement and FDA mandated product recall costs included in the first quarter of 2018. Excluding these items, adjusted gross margin decreased 2.6% compared to the prior year period.

We believe that, for the next several quarters, we will continue to see lower margins as a result of price versus input costs and increases in Selling and administrative expenses, offset by cost and productivity initiatives and new win performance, net of losses (as discussed in our 2018 Form 10-K).

~~We continue to seek improvements in our margins through operational performance, cost reduction efforts and mix enhancement.~~higher raw materials costs.

Operating profit

Operating profit ~~decreased $11.0~~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 ~~first quarter compared to $174.9 million (18.8% of sales) in the comparable 2018~~ period. The first quarter of 2019 included $40.8 million of charges related to operational improvement initiatives, integration related costs, restructuring and other charges, net, and Frutarom acquisition related costs, as compared to $6.2 million of charges related to operational improvement initiatives, restructuring and other charges, net and an FDA mandated product recall which were partially offset by acquisition related costs and gainsForeign currency had a 2.0% unfavorable impact on ~~sale of assets in the 2018 period.~~

Excluding these charges, adjusted operating profit was $204.7 million for the first quarter of 2019, an increase from $181.0 million for the first quarter of 2018, principally driven by the inclusion of Frutarom's operating profit in the first quarter of ~~2019, offset by the impact of lower margins in IFF's legacy business. Foreign currency had~~2020 compared to a 1.3% unfavorable impact on operating profit in the 2019 ~~period compared to a 4.0% favorable impact on~~period. Adjusted operating profit inwas $222.3 million (16.5% of sales) for the ~~2018 period. Operating profit as a percentage~~first quarter of ~~sales, excluding the above charges, decreased to 15.8%~~2020, an increase from $204.7 million (15.8% of sales) for the first quarter of 2019, ~~compared to 19.4% for the first quarter of 2018,~~ principally driven by ~~lower margins as a result~~increased volumes on existing business, new wins (net of ~~price to input costs (including the net impact of the BASF supply chain disruption)~~losses) and ~~increases in Selling and administrative expenses, offset by~~ cost saving and productivity initiatives, partially offset by higher raw materials costs.

Cash flows

Cash, cash equivalents and ~~volume growth.~~

~~Interest Expense~~

~~Interest expense increased to $36.6~~restricted cash decreased $175.6 million in the ~~first quarter of 2019~~three months ended March 31, 2020, as compared to ~~$16.6~~a decrease of $151.4 million in the ~~2018 period driven by increased borrowings to finance the Frutarom acquisition.~~

~~Cash flows~~three months ended March 31, 2019.

Cash flows provided by operations for the three months ended March 31, ~~2019~~2020 was ~~$47.2~~$16.9 million or ~~3.6%~~1.3% of sales, compared to cash ~~used~~flows provided by operations of ~~$11.4~~$47.2 million or ~~1.2%~~3.6% of sales for the three months ended March 31, ~~2018.~~2019. The ~~increase~~decrease in cash provided by operating activities during ~~2019~~2020 was principally driven by higher ~~earnings excluding~~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 ~~depreciation and amortization, legal settlement charges in the prior year, and higher cash inflows related to working~~exchange rate fluctuations was partially offset by lower capital expenditures in the current ~~year.~~year and the 2019 Acquisition Activity.

~~Results of Operations~~RESULTS OF OPERATIONS


	Three Months Ended								Three Months Ended
	March 31,								March 31,
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)	2019			2018			Change		2020			2019			Change
Net sales	$	1,297,402		$	930,928		39	%	$	1,347,317		$	1,297,402		4	%
Cost of goods sold	766,143			525,119			46	%	781,450			766,143			2	%
Gross profit	531,259			405,809					565,867			531,259
Research and development (R&D) expenses	90,596			78,476			15	%	85,909			90,596			(5	)%
Selling and administrative (S&A) expenses	213,182			142,644			49	%	229,714			213,182			8	%
Amortization of acquisition-related intangibles	47,625			9,185			NMF		48,350			47,625			2	%
Restructuring and other charges, net	16,174			717			NMF		4,918			16,174			(70	)%
Gains on sales of fixed assets	(188		)	(69		)	172	%
Losses (gains) on sales of fixed assets									754			(188		)	NMF
Operating profit	163,870			174,856					196,222			163,870
Interest expense	36,572			16,595			120	%	32,140			36,572			(12	)%
Other income, net	(7,278		)	(576		)	NMF
Other loss (income), net									10,574			(7,278		)	NMF
Income before taxes	134,576			158,837					153,508			134,576
Taxes on income	23,362			29,421			(21	)%	26,297			23,362			13	%
Net income	$	111,214		$	129,416				$	127,211		$	111,214
Net income attributable to noncontrolling interests	2,385			—			—	%	2,604			2,385			9	%
Net income attributable to IFF stockholders	$	108,829		$	129,416		(16	)%	$	124,607		$	108,829		14	%
Diluted EPS	$	0.96		$	1.63		(41	)%	$	1.15		$	0.96		19	%
Gross margin	40.9		%	43.6		%	(264	)	42.0		%	40.9		%
R&D as a percentage of sales	7.0		%	8.4		%	(145	)	6.4		%	7.0		%
S&A as a percentage of sales	16.4		%	15.3		%	111		17.0		%	16.4		%
Operating margin	12.6		%	18.8		%	(615	)	14.6		%	12.6		%
Adjusted operating margin ⁽¹⁾	15.8		%	19.4		%	(367	)	16.5		%	15.8		%
Effective tax rate	17.4		%	18.5		%	(116	)	17.1		%	17.4		%
Segment net sales
Taste	$	444,602		$	449,019		(1	)%	$	830,322		$	804,802		3	%
Scent	488,352			481,909			1	%	516,995			492,600			5	%
Frutarom	364,448			—			—	%
Consolidated	$	1,297,402		$	930,928				$	1,347,317		$	1,297,402

NMF: Not meaningful

~~_______________________~~

~~(1)~~

Adjusted operating margin excludes $40.8 million of charges related to operational improvement initiatives, integration related costs, restructuring and other charges, net, and Frutarom acquisition related costs for the three months ended March 31, 2019, and excludes $6.2 million of charges related to operational improvement initiatives, restructuring and other charges, net, acquisition related costs, gain on sale of assets and an FDA mandated product recall for the three months ended March 31, 2018. See "Non-GAAP Financial Measures" below.

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

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

FIRST QUARTER ~~2019~~2020 IN COMPARISON TO FIRST QUARTER ~~2018~~2019

Sales

Sales for the first quarter of ~~2019~~2020 totaled $1.3 billion, an increase of ~~39%~~4% on a reported basis and ~~44%~~6% on a currency neutral basis as compared to the prior year quarter. ~~Excluding the impact of our acquisition of Frutarom, sales were flat~~The 2019 Acquisition Activity contributed 1% on both a reported ~~basis~~ and ~~grew 3% on a~~ currency neutral basis. Sales growth was primarily driven by ~~Frutarom,~~ new ~~win performance~~wins (net of losses) and ~~price~~volume increases ~~(principally due to increases in raw material input costs)~~ in both Taste and ~~Scent.~~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 2019 vs First Quarter 2018				% Change in Sales - First Quarter 2020 vs. First Quarter 2019
	Reported		Currency Neutral		Reported		Currency Neutral
Taste	-1	%	2	%	3	%	5	%
Scent	1	%	4	%	5	%	7	%
Frutarom	N/A		N/A
Total	39	%	44	%	4	%	6	%

_______________________


(1)	Currency neutral sales growth is calculated by translating prior year sales at the exchange rates for the corresponding ~~2019~~2020 period.

Taste

Taste sales in ~~2019 decreased 1%~~2020 increased 3% on a reported basis and ~~increased 2%~~5% on a currency neutral basis versus the prior year period. ~~Growth~~Performance was ~~primarily~~ driven by sales growth in Savory Solutions primarily from new ~~win performance~~wins (net of losses), and ~~to a lesser extent, price increases (principally due to increases in raw material input costs).~~

~~Sales~~ growth in the Taste business unit was led by GA, which was primarily driven by new win performance (net of losses) and, to a lesser extent, price increases (principally due to increases in raw material input costs), followed by growth in EAME and NOAM primarily driven by new win performance (net of losses).Flavors across all regions.

Scent

Scent sales in ~~2019~~2020 increased 1%5% on a reported basis and 4%7% on a currency neutral basis. Year-over-year, 2019 sales growth reflected price increases (principally due to increases in raw material input costs) and, to a lesser extent, new win performance (net of losses), which were partially offset by volume reductions on existing business.

Sales growth in the Scent business unit was led by ~~Fine~~Consumer Fragrances ~~which were~~ primarily driven by new ~~win performance~~wins (net of losses), followed by ~~Consumer Fragrances,~~Fragrance Ingredients primarily driven by ~~price~~volume increases ~~(principally~~on existing business. Fine Fragrance declined versus the prior year period, as the temporary disruption of consumer access to retail markets due to ~~increases~~COVID-19 led to a deceleration in ~~raw material input costs), which were partially offset by volume reductions on existing business.~~performance late in the quarter.

~~Frutarom~~

~~Frutarom sales in 2019 were $364 million, which included approximately $269 million in sales of Flavor Compounds and approximately $95 million in sales of Ingredient product categories.~~

Cost of Goods Sold

Cost of goods sold, as a percentage of sales, ~~increased 270~~decreased 110 bps to 58.0% in the first quarter of 2020 compared to 59.1% in the first quarter of 2019, ~~compared to 56.4% in~~principally driven by increased volumes on existing business and the ~~first quarter~~impact of ~~2018, driven primarily by unfavorable price versus input costs, which were partially offset by~~ cost savings and productivity ~~initiatives.~~

~~Included in cost of goods sold was $8.4 million of charges related to operational improvement~~ initiatives, integration related costs and Frutarom inventory "step-up", as compared to $5.5 million of charges related to an FDA mandated product recall and an adjustment to the contingent consideration payable for PowderPure in the first quarter in 2018.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 versus 8.4% in the first quarter of 2018.~~2019. The decrease as a percentage of sales in ~~2019~~2020 was principally ~~lower~~ due to ~~R&D expenses from our Frutarom's business unit.~~

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 ~~$70.5~~$16.5 million to ~~$213.2~~$229.7 million ~~or 16.4% as a percentage~~(17.0% of ~~sales,~~sales), in the first quarter of ~~2019~~2020 compared to ~~$142.6~~$213.2 million ~~or 15.3% as a percentage~~(16.4% of ~~sales,~~sales) in the first quarter of ~~2018.~~

Included in 2019 was approximately $14.6 million of integration related costs and $1.7 million of Frutarom acquisition related costs, and included in 2018 was approximately $0.5 million of acquisition related costs. Excluding these costs, adjusted2019. Adjusted S&A expense increased by ~~$53.8~~$13.2 million ~~but decreased~~ to ~~15.2%~~$210.1 million (15.6% of ~~sales~~sales) in ~~2019~~2020 compared to ~~15.4%~~$196.9 million (15.2% of ~~sales~~sales) in ~~2018.~~2019. The ~~slight decrease is~~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 ~~decline~~reduction in ~~personnel related costs and the impact of our acquisition of Frutarom.~~S&A expenses.

Restructuring and Other Charges

~~2019 Severance charges~~Frutarom Integration Initiative

During the first quarter of 2019, the Company incurred severance charges of $16.2 million related to approximately 190 headcount reductions. The headcount reductions primarily related to the Scent business unit with additional amounts related to headcount reductions in all business units associatedIn connection with the ~~establishment~~acquisition of ~~a new shared service center in Europe. The Company made payments~~Frutarom, we began to execute an integration plan that, among other initiatives, seeks to optimize its manufacturing network. As part of~~$0.9 millionrelated~~ the Frutarom Integration Initiative, we expect to ~~personnel costs during~~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, ~~2019.~~

~~2017 Productivity Program~~

~~In connection with 2017 Productivity Program,~~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 expects to incur cumulative, pre-tax cash charges of between $30-$35 million, consisting primarily of $24-$26 million in personnel-related costs and an estimated $6 million in facility-related costs, such as lease termination, and integration-related costs. The Company recorded $24.5 million of charges related to personnel costs and lease termination costs through the first quarter of 2019.

~~The Company made payments of $0.5 million and $1.7 million related to personnel costs during the three months ended March 31, 2019 and 2018, as well as lease termination~~has expensed $15.3 million. Total costs for ~~March 31, 2018. The overall charges were split approximately evenly between Taste and Scent. This initiative is~~the program are expected to ~~result in the reduction of~~be approximately ~~370 members of the Company’s global workforce,~~$60 million including ~~acquired entities, in various parts of the organization.~~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 ~~compared to $9.2 million in the first quarter of 2018~~ principally due to the ~~acquisition of Frutarom.~~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,						Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2019			2018			2020			2019
Segment profit:
Taste	$	108,455		$	111,564		$	137,347		$	131,402
Scent	85,815			93,277			105,395			89,953
Frutarom	29,091			—
Global expenses	(18,673		)	(23,825		)	(20,393		)	(16,667		)
Operational Improvement Initiatives	(406		)	(1,026		)	—			(406		)
Acquisition Related Costs	—			514
Integration Related Costs	(14,897		)	—
Frutarom Integration Related Costs							(3,650		)	(14,897		)
Restructuring and Other Charges, net	(16,174		)	(717		)	(4,918		)	(16,174		)
Gains on Sale of Assets	188			69
FDA Mandated Product Recall	—			(5,000		)
(Losses) gains on sale of assets							(754		)	188
Frutarom Acquisition Related Costs	(9,529		)	—			(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	$	163,870		$	174,856		$	196,222		$	163,870
Profit margin:
Taste	24.4		%	24.8		%	16.5		%	16.3		%
Scent	17.6		%	19.4		%	20.4		%	18.3		%
Frutarom	8.0		%	N/A
Consolidated	12.6		%	18.8		%	14.6		%	12.6		%

Taste Segment Profit

~~Flavors~~Taste segment profit ~~decreased $3.1~~increased $5.9 million to ~~$108.5~~$137.3 million in the first quarter of ~~2019 (24.4%~~2020 (16.5% of segment sales) from ~~$111.6~~$131.4 million ~~(24.8%~~(16.3% of sales) in the comparable ~~2018~~2019 period. The ~~decrease~~increase principally reflected ~~the impact~~volume increases on existing business, new wins (net of ~~unfavorable foreign exchange rates~~losses), and ~~price versus input costs, partially offset by~~the impact of cost savings ~~and productivity initiatives.~~initiatives, partially offset by higher raw materials costs.

Scent Segment Profit

Scent segment profit ~~decreased $7.5~~increased $15.4 million to ~~$85.8~~$105.4 million in the first quarter of ~~2019 (17.6%~~2020 (20.4% of segment sales) from ~~$93.3~~$90.0 million ~~(19.4%~~(18.3% of sales) in the comparable ~~2018~~2019 period. ~~Segment profit as a percentage of sales included the impact of unfavorable foreign exchange rates and price versus input costs, as well as~~The increase principally reflected volume increases ~~in Selling and administrative expenses, which were partially offset by new win performance (net of losses)~~on existing business and the ~~favorable~~ impact of cost savings and productivity ~~initiatives.~~initiatives, partially offset by price increases on raw materials.

~~Frutarom Segment Profit~~

~~Frutarom segment profit was 8.0% of segment sales in the first quarter of 2019.~~

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 ~~2019,~~2020, Global expenses were ~~$18.7~~$20.4 million compared to ~~$23.8~~$16.7 million during the first quarter of ~~2018.~~2019. The ~~decrease~~increase was principally driven by lower gains from our currency hedging program, ~~offset by reductions in~~and to a lesser extent, higher incentive compensation ~~expense.~~expense in 2019.

Interest Expense

Interest expense ~~increased~~decreased to ~~$36.6~~$32.1 million in the first quarter of ~~2019~~2020 compared to ~~$16.6~~$36.6 million in the ~~2018 period~~2019 period. This decrease was primarily driven by ~~increased borrowings~~repayments on the Term Loan and TEUs. Average cost of debt was 2.9% for the 2020 period compared to ~~finance~~3.2% for the ~~acquisition of Frutarom.~~

2019 period.

Income Taxes

The effective tax rate for the three months ended March 31, ~~2019~~2020 was ~~17.4%~~17.1% compared with ~~18.5%~~17.4% for the three months ended March 31, 2018. The quarter-over-quarter decrease was largely due to a more favorable mix of earnings (including the impact of integration related costs, restructuring charges and Frutarom acquisition related costs), partially offset by higher repatriation costs, and the absence of the remeasurement of loss provisions and the release of a State valuation allowance which benefited the first quarter of 2018.

Excluding the $9.0 million tax benefit associated with the pre-tax operational improvement initiatives, integration related costs, restructuring and other charges, net, and Frutarom acquisition related costs, offset by the tax charge associated with gains on sales of fixed assets, the adjusted2019. Adjusted effective tax rate for the three months ended March 31, ~~2019~~2020 was ~~18.5%~~16.2%. Excluding the $0.9 million tax benefit associated with the pre-tax restructuring, and operational improvement initiative costs which were partially offset by the tax charge associated with gains on sales of fixed assets, acquisition-related costs, and the impact of the U.S. tax reform in the current quarter, the adjusted effective tax ratecompared to 18.5% for the first quarter of ~~2018 was 18.4%.~~2019. The ~~year-over-year increase~~decrease in the both the effective tax rate and the adjusted effective tax rate was largely due to ~~higher~~lower repatriation costs and the ~~absence of the remeasurement~~reversal of loss provisions, ~~and the release of a State valuation allowance which benefited the first quarter of 2018,~~ partially offset by ~~a more favorable~~an unfavorable mix of earnings.

Liquidity and Capital Resources

Cash and Cash Equivalents

We had cash and cash equivalents of ~~$483.5~~$433.2 million at March 31, ~~2019~~2020 compared to ~~$634.9~~$606.8 million at December 31, ~~2018,~~2019, of which ~~$414.3~~$323.0 million of the balance at March 31, ~~2019~~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, ~~2019,~~2020, we ~~have~~had a deferred tax liability of ~~$87.2~~$42.6 million for the effect of repatriating the funds to the U.S. ~~This balance consists of $42.8 million~~, attributable to ~~IFF~~various non-U.S. subsidiaries. There is no deferred tax liability associated with non-U.S. subsidiaries ~~and $44.4 million associated with Frutarom which is still preliminary and will be refined through~~where we intend to indefinitely reinvest the ~~purchase accounting measurement period.~~earnings to fund local operations and/or capital projects.

Restricted Cash

Restricted cash of ~~$13.6~~$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, ~~2019~~2020 was ~~$47.2~~$16.9 million or ~~3.6%~~1.3% of sales, compared to cash ~~used~~provided by operations of ~~$11.4~~$47.2 million or ~~1.2%~~3.6% of sales for the three months ended March 31, ~~2018.~~2019. The ~~increase~~decrease in cash provided by operating activities during ~~2019~~2020 was principally driven by higher ~~earnings excluding the impact of depreciation and amortization, legal settlement charges in the prior year, and higher cash inflows~~net working capital (principally related to ~~working capital in the current year.~~accounts receivable and accounts payable).

Working capital (current assets less current liabilities) totaled ~~$1.8~~$1.4 billion at both March 31, ~~2019~~2020 and December 31, ~~2018. Working capital has remained constant as additional raw materials~~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 ~~finished goods inventories and prepaid expenses and other current assets~~will continue to monitor the reserve.

We have ~~offset the reduction~~various factoring agreements in the ~~cash balance since December 31, 2018.~~

~~We sold certain accounts receivable~~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 ~~under “factoring” agreements that~~and account for the transactions as a sale of receivables. The applicable receivables are ~~sponsored, solely and individually, by certain customers. We believe that participating in~~removed from our Consolidated Balance Sheet when the ~~factoring programs strengthens our relationships with these customers and provides operational efficiencies.~~cash proceeds are received.

As of March 31, 2020, the Company had removed approximately $200 million of receivables. The ~~beneficial~~ impact on cash provided by operations from participating in these programs decreased approximately ~~$0.3~~$5 million for the three months ended March 31, ~~2019 compared to a decrease~~2020. The cost of participating in these programs was approximately ~~$11.0~~$1 million for the three months ended March 31, ~~2018. The cost of participating in these programs was immaterial to our results in all periods.~~2020.

Cash Flows Used In Investing Activities

Net investing activities during the first three months of ~~2019~~2020 used ~~$90.3~~$42.7 million compared to ~~$35.2~~$90.3 million in the prior year ~~period. The increase in cash used in investing activities principally reflected the current quarter acquisition activity~~

~~whereas there were no material acquisitions in the comparable~~ period. Additions to property, plant and equipment were ~~$57.6~~$48.3 million during the first three months of ~~2019~~2020 compared to ~~$33.1~~$57.6 million in the first three months of ~~2018.~~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 ~~requirement to begin relocating one of~~liquidity, where possible we have evaluated and re-prioritized our ~~Fragrance Ingredients facilities in China, the ongoing construction of new facilities in India and Indonesia, and~~ capital ~~requirements to integrate our recently acquired Frutarom business, we~~projects. We expect that capital spending in ~~2019~~2020 will be about ~~5-6%~~4% of sales (net of potential grants and other reimbursements from government authorities)., down from 5% in 2019.

Frutarom ~~Restructuring~~Integration Initiative

~~The Company currently expects~~We expect to incur costs related to ~~integrate~~ the ~~legacy IFF and~~ Frutarom ~~businesses (the “Frutarom Integration”).~~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-offs~~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 ~~quarter~~three months of ~~2019, the Company recorded $2.6~~2020, we incurred $4.9 million in costs related to the closure of ~~three~~4 sites. The costs principally related to ~~site closure costs~~severance and ~~costs associated~~fixed asset write-downs, with the remainder comprising costs such as contract termination and relocation.

Additionally, during the first three months of ~~third party contracts.~~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 ~~2019~~2020 was ~~$112.2~~$107.2 million compared to ~~$14.6~~$112.2 million in the ~~comparable 2018 period,~~prior year period. The decrease in cash used in financing activities was principally driven by lower repayments of debt, ~~during the first quarter of 2019 and increased dividend payments, which were~~ offset by ~~treasury stock~~ purchases ~~made~~of redeemable noncontrolling interests in the ~~prior~~current year.

We paid dividends totaling ~~$77.8~~$80.0 million in the ~~2019~~2020 period. We declared a cash dividend per share of ~~$0.73~~$0.75 in the first quarter of ~~2019~~2020 that was paid on April ~~5, 2019~~6, 2020 to all shareholders of record as of March ~~25, 2019.~~26, 2020.

Our capital allocation strategy ~~is primarily focused on debt repayment~~seeks to maintain our investment grade ~~rating.~~rating while investing in the business and continuing to pay dividends and repaying debt. We ~~will also prioritize~~make capital ~~investment~~investments in our businesses to support ~~the~~our operational needs and strategic long term plans. ~~The company is also~~We are committed to maintaining ~~its~~our history of paying a dividend to investors which is determined by our Board of Directors ~~(“Board”)~~ at its discretion based on various ~~factors, and finally will be very selective in pursuing value creating strategic M&A over the near term.~~factors.

We currently have a board approved stock repurchase program with a total remaining value of $279.7 million. OnAs of May 7, 2018, we ~~announced that we were suspending~~have suspended our share ~~repurchases until our deleveraging target is met following our acquisition~~repurchases.

Effect of ~~Frutarom.~~exchange rate changes on cash, cash equivalents and restricted cash

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.

~~We supplement short-term liquidity~~Pending Transaction with ~~access~~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 ~~capital markets, mainly through bank credit facilities. The revolving credit~~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 ~~is used as a backstop for our commercial paper program.~~

~~We expect to contribute a total of approximately $4.2 million to our U.S. pension plans~~ and, ~~a total of $19.3 million to our Non-U.S. plans during 2019. During the three months ended March 31, 2019, there were no contributions made~~ to the ~~qualified U.S. pension plans, $2.7 million~~extent necessary, a $6.25 billion tranche of ~~contributions were made~~the 364-Day senior unsecured bridge facility, which will be used to finance the ~~non-U.S. pension plans,~~Special Cash Payment to DuPont in connection with the separation and ~~$1.1 million~~to pay related fees and expenses. N&B may access the bond markets in advance of ~~benefit payments were made~~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 ~~respect~~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 ~~our non-qualified U.S. pension plan. We also expect~~be filed with the SEC pursuant to ~~contribute approximately $3.9 million~~which IFF shareholders will be asked to ~~our postretirement benefits other than pension plans during 2019. During~~approve the ~~three months ended March 31, 2019, $1.1 million of contributions were made~~share issuance required to ~~postretirement benefits other than pension plans.~~effect the N&B Transaction.

The ~~Amended~~ 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, ~~including the pro forma effect of the acquisition of Frutarom,~~ 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, ~~2019~~2020 we had no outstanding borrowings under our ~~Amended~~$1 billion Credit Facility ~~but $325~~and $240 million outstanding for the Term Loan. The amount ~~which~~that we are able to draw down on under the ~~Amended~~ Credit Facility is limited by financial covenants as described in more detail below. As of March 31, ~~2019,~~2020, our draw down capacity was ~~$912~~$790 million onunder the ~~Amended~~ Credit ~~Facility and $350 million on the Term Loan.~~Facility.

At March 31, ~~2019 and 2018~~2020, we were in compliance with all financial and other covenants, including the net debt to adjusted EBITDA ratio. At March 31, ~~2019~~2020 our Net Debt/adjusted EBITDA⁽¹⁾ ratio was ~~3.67~~3.33 to 11.0 as defined by the credit facility agreements, well below the financial covenants of existing outstanding debt. Failure to comply with the financial and other covenants under our debt agreements would constitute default and would allow the lenders to accelerate the maturity of all indebtedness under the related agreement. If such acceleration were to occur, we would not have sufficient liquidity available to repay the indebtedness. We would likely have to seek amendments under the agreements for relief from the financial covenants or repay the debt with proceeds from the issuance of new debt or equity, and/or asset sales, if necessary. We may be unable to amend the agreements or raise sufficient capital to repay such obligations in the event the maturities are accelerated.

_______________________

(1)

Adjusted EBITDA and Net Debt, which are non-GAAP measures used for these covenants, are calculated in accordance with the definition in the debt agreements. In this context, these measures are used solely to provide information on the extent to which we are in compliance with debt covenants and may not be comparable to adjusted EBITDA and Net Debt used by other companies. Reconciliations of adjusted EBITDA to net income and net debt to total debt are as follows:


(DOLLARS IN MILLIONS)	Twelve Months Ended March 31, 2019		Twelve Months Ended March 31, 2020
Net income	$	365.7	$	471.7
Interest expense	162.6		133.7
Income taxes	123.3		100.1
Depreciation and amortization	257.7		322.1
Specified items ⁽¹⁾	158.1		105.8
Non-cash items ⁽²⁾	29.1		38.9
Adjusted EBITDA	$	1,096.5	$	1,172.3

(1)

Specified items for the 12 months ended March 31, ~~2019~~2020 of ~~$158.1~~$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 ~~Frutarom acquisition~~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, 2019		March 31, 2020
Total debt	$	4,505.4	$	4,332.5
Adjustments:
Cash and cash equivalents	483.5		433.2
Net debt	$	4,021.9	$	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, ~~2019,~~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

~~The Company uses~~We use non-GAAP financial ~~operating~~ measures in this Form 10-Q, including: (i) currency neutral ~~sales (which eliminates the effects that result from translating its international sales to U.S. dollars),~~metrics, (ii) adjusted gross margin, ~~(which excludes operational improvement initiatives, integration related costs, FDA mandated product recall, and Frutarom acquisition related costs,~~ (iii) adjusted operating profit and adjusted operating margin, ~~(which excludes operational improvement initiatives, acquisition related costs, integration related costs, restructuring and other charges, net, gains on sale of assets, FDA~~

~~mandated product recall, and Frutarom acquisition related costs,~~ (iv) adjusted selling and administrative expenses, ~~(which excludes acquisition related costs, integration related costs, and Frutarom acquisition related costs)~~ and (v) adjusted effective tax rate (which excludes operational improvement initiatives, acquisition related costs, restructuring and other charges, net, Frutarom acquisition related costs, integration related costs, gains on sales of assets, FDA mandated product recall, and U.S. tax reform). The Companyrate. We also ~~provides~~provide the non-GAAP measures adjusted EBITDA ~~(which excludes certain specified items and non-cash items as set forth in the Company’s debt agreements)~~ and net debt ~~(which is adjusted for deferred gain on interest rate swaps and cash and cash equivalents)~~ 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.

WeThese non-GAAP financial measures are intended to provide ~~these metrics because they are used by management as one means by which we assess~~additional information regarding our ~~financial~~underlying operating results and ~~operational performance and are also frequently used by analysts, investors and other interested parties in providing period to period comparisons of our operational~~comparable year-over-year performance. In addition, we believe that these measures, when used as supplements to GAAP measures of performance, are helpful to management and investors in evaluating the effectiveness of our business strategies and to compare our performance relative to our peers. Such information is supplemental to information presented in accordance

with GAAP and is not intended to represent a presentation in accordance with GAAP. ~~Currency neutral sales, adjusted gross margin, adjusted operating profit, adjusted operating margin, adjusted selling~~In discussing our historical and ~~administrative expenses~~expected future results and ~~adjusted effective tax~~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 ~~our~~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,				Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2019		2018		2020		2019
Reported (GAAP)	$	531,259	$	405,809	$	565,867	$	531,259
Operational Improvement Initiatives (a)	406		453		—		406
Integration Related Costs (c)	156		—
FDA Mandated Product Recall (e)	—		5,000
Frutarom Acquisition Related Costs (g)	7,850		—
Frutarom Integration Related Costs (b)					149		156
Frutarom Acquisition Related Costs (d)					513		7,850
Adjusted (Non-GAAP)	$	539,671	$	411,262	$	566,529	$	539,671

												Reconciliation of Selling and Administrative Expenses
	Three Months Ended March 31,					Three Months Ended March 31,
(DOLLARS IN THOUSANDS)	2019			2018		2020			2019
Reported (GAAP)	$	213,182		$	142,644	$	229,714		$	213,182
Acquisition Related Costs (b)	—			514
Integration Related Costs (c)	(14,557		)	—
Frutarom Acquisition Related Costs (g)	(1,679		)	—
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)	$	196,946		$	143,158	$	210,143		$	196,946

Reconciliation of Operating Profit
Three Months Ended March 31,
(DOLLARS IN THOUSANDS) 2019 2018
Reported (GAAP) $ 163,870
$ 174,856
Operational Improvement Initiatives (a) 406
1,026
Acquisition Related Costs (b) —
(514 )
Integration Related Costs (c) 14,897
—
Restructuring and Other Charges, net (d) 16,174
717
Gains on Sale of Assets (188 ) (69 )
FDA Mandated Product Recall (e) —
5,000
Frutarom Acquisition Related Costs (g) 9,529
—
Adjusted (Non-GAAP) $ 204,688
$ 181,016



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,
2019 2018

Income before taxes Taxes on income (h) Net Income Attributable to IFF (i) Diluted EPS Income before taxes Taxes on income (h) Net Income Attributable to IFF Diluted EPS (j)
Reported (GAAP) $ 134,576
$ 23,362
$ 108,829
$ 0.96
$ 158,837
$ 29,421
$ 129,416
$ 1.63
Operational Improvement Initiatives (a) 406
142
264
—
1,026
294
732
0.01
Acquisition Related Costs (b) —
—
—
—
(514 ) (134 ) (380 ) —
Integration Related Costs (c) 14,897
3,349
11,548
0.10
—
—
—
—
Restructuring and Other Charges, net (d) 16,174
4,031
12,143
0.11
717
169
548
0.01
Gains on Sale of Assets (188 ) (43 ) (145 ) —
(69 ) (17 ) (52 ) —
FDA Mandated Product Recall (e) —
—
—
—
5,000
1,196
3,804
0.05
U.S. Tax Reform (f) —
—
—
—
—
(649 ) 649
0.01
Frutarom Acquisition Related Costs (g) 9,529
1,530
7,999
0.07
—
—
—
—
Adjusted (Non-GAAP) $ 175,394
$ 32,371
$ 140,638
$ 1.24
$ 164,997
$ 30,280
$ 134,717
$ 1.69



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

(a)

Represents accelerated depreciation related to a plant relocation in ~~India, as well as a lab closure in Taiwan for 2018.~~India.

(b)

Represents ~~adjustments to the contingent consideration payable for PowderPure, and transaction costs related to~~
~~Fragrance Resources and PowderPure within Selling and administrative expenses.~~

~~(c)~~

~~For 2019, represents~~ costs related to the integration of the Frutarom ~~acquisition,~~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 ~~2018,~~2020, represents costs primarily related to the ~~integration of the David Michael and Fragrance Resources acquisitions.~~

~~(d)~~

Frutarom Integration Initiative. For 2019, represents ~~severance~~ costs ~~related~~ primarily ~~to Scent. For 2018, represents severance costs~~ related to the ~~2017 Productivity Program~~Frutarom Integration Initiative and ~~Taiwan lab closure.~~the 2019 Severance Charges program.

~~(e)~~

~~Represents losses related to the FDA mandated recall.~~

~~(f)~~

~~Represents charges incurred related to enactment of certain U.S. tax legislation changes in December 2017.~~

~~(g)~~(d)

Represents transaction-related costs and expenses related to the acquisition of Frutarom. ~~Amount~~For 2020, amount primarily includes ~~$7.9 million~~earn-out payments, net of adjustments, amortization for inventory "step-up" costs and ~~$1.7 million of~~ transaction costs ~~included~~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 ~~Selling~~certain other countries. In addition, includes legal costs for related shareholder lawsuits.

(f)

Represents transaction costs and ~~administrative expenses.~~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 ~~year~~years 2020 and 2019, these non-GAAP adjustments were not subject to foreign tax credits, ~~or valuation allowances,~~ but to the extent that such factors are applicable to any future non-GAAP adjustments we will take such factors into consideration in calculating the tax expense (benefit).

~~(i)~~(j)

For 2020 and 2019, net income is reduced by income attributable to noncontrolling interest of ~~$2.4M.~~$2.6M and $2.4M, respectively.

~~(j)~~(k)

The sum of these items does not foot due to rounding.

B. Foreign Currency Reconciliation


	Three Months Ended		Three Months Ended
	March 31,		March 31,
	2019	2018	2020	2019
Operating Profit:
% Change - Reported (GAAP)	(6.3)%	34.0%	19.7%	(6.3)%
Items impacting comparability ⁽¹⁾	19.4%	(19.0)%	(11.1)%	19.4%
% Change - Adjusted (Non-GAAP)	13.1%	16.0%	8.6%	13.1%
Currency Impact	1.3%	(4.0)%	2.0%	1.3%
% Change Year-over-Year - Currency Neutral Adjusted (Non-GAAP)*	14.4%	12.0%	10.6%	14.4%

_______________________

⁽¹⁾ ~~Includes items impacting comparability of $40.8 million and $6.2 million for the three months ended March 31, 2019 and March 31, 2018, respectively.~~

* Currency neutral amount is calculated by translating prior year amounts at the exchange rates used for the corresponding ~~2019~~2020 period. Currency neutral operating profit also eliminates the year-over-year impact of cash flow hedging.

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 ~~cost~~ synergies, ~~from the integration of Frutarom of $30-35 million by the end of 2019, (ii)~~, (iv), (v) expected capital expenditures in ~~2019, (iii)~~2020, (vi) expected costs associated with our various restructuring activities, ~~(iv)~~(vii) our margin expectations for ~~2019, (v)~~2020, (viii) expected cash flow and availability of capital resources to fund our operations and meet our debt service requirements, ~~(vi)~~(ix) our ability to continue to generate value for, and return cash to, our shareholders, and ~~(vii)~~(x) anticipated contributions to our pension plans and other post-retirement programs in ~~2019.~~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 ~~its~~our expanded and ~~decentralized~~diverse Taste ~~and Frutarom~~ customer base;

our ability to effectively compete in ~~its~~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;

~~the impact of the~~ disruption in the development, manufacture, distribution or sale of our ~~manufacturing operations;~~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;

~~the impact of any failure or interruption of our key information technology systems or a breach of information security;~~

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

our ability to ~~establish~~meet consumer, customer and ~~manage collaborations, joint ventures or partnership that lead to development or commercialization of products;~~regulatory sustainability standards;

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

the impact of currency fluctuations or devaluations in the principal foreign markets in which ~~it operates;~~we operate;

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

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

~~the inability to retain key personnel;~~

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

our ability to ~~realize the benefits of its cost and productivity initiatives;~~

~~our ability to~~ successfully manage ~~its~~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 ~~its~~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 ~~future impairment of our tangible or intangible long-lived assets;~~

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

the ~~effect of potential government regulation on certain product development initiatives, and restrictions or costs that may be imposed on the Company or its operations as a result; and~~

~~the~~ impact of the United Kingdom’s expected departure from the European ~~Union~~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 ~~2019.~~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 ~~2018~~2019 Form 10-K for additional information regarding factors that could affect our results of operations, financial condition and cash flow.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

There are no material changes in market risk from the information provided in our ~~2018~~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, ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

On October 4, 2018, we completed the acquisition of Frutarom. We are in the process of integrating Frutarom into our systems and control environment. As a result of these integration activities, certain controls will be evaluated and may be changed.

The Company implemented changes to internal controls due to the adoption of Accounting Standard Update No. 2016-02, Leases (Accounting Standard Codification Topic 842) effective January 1, 2019. These changes include implementing a new lease accounting system and processes to evaluate and account for contracts under the new accounting standard.

There were no other changes in the company’s internal control over financial reporting during the quarter ended March 31, 2019, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

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

~~Environmental~~Litigation Matters

~~Over~~On August 12, 2019, Marc Jansen filed a putative securities class action against IFF, its Chairman and CEO, and its CFO, in the ~~past 20 years, various~~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 ~~state authorities~~CEO, and ~~private parties have claimed~~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 ~~we are~~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 ~~Potentially Responsible Party (“PRP”)~~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 ~~generator~~result of ~~waste materials for alleged pollution at a number~~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 ~~waste sites operated~~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 ~~third parties located principally~~the information relating to COVID-19 that is described in ~~New Jersey and have sought to recover costs incurred and to be incurred to clean up~~this Quarterly Report on Form 10-Q, including in the ~~sites.~~

Weadditional risk factor below. Except as described herein, there have been ~~identified as a PRP at seven facilities operated by third parties at which investigation and/or remediation activities~~no material changes with respect to the risk factors disclosed in our 2019 Form 10-K.

Supplemental Risk Factor:

The COVID-19 pandemic may ~~be ongoing. We analyze our potential liability on at least a quarterly basis. We accrue for environmental liabilities when they are probable~~materially and ~~estimable. We estimate our share of the total future cost for these sites to be less than $3 million.~~

While joint and several liability is authorized under federal and state environmental laws, we believe the amounts we have paid and anticipate paying in the future for clean-up costs and damages at all sites are not material and will not have a material adverse effect on ouradversely 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:

•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 ~~liquidity. This assessment is based upon, among other things,~~with a reduced workforce comprised of essential employees as a result of certain safety measures implemented by IFF to limit the ~~involvement of other PRPs at most~~number of the ~~sites,~~on-site workforce.

The ability of IFF to continue to supply its products is highly dependent on its ability to maintain the ~~status~~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 ~~proceedings, including various settlement agreements~~requirements of governmental authorities and ~~consent decrees,~~taking additional preventative and protective measures to ensure the ~~extended time period over which payments will likely be made. There~~safety of its workforce, there can be no assurance ~~however,~~ that ~~future~~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 ~~will not require us to materially increase the amounts we anticipate paying for clean-up costs and damages at these sites, and that such increased amounts will not have~~could potentially result in a material adverse ~~effect~~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 ~~condition,~~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 ~~cash flows.~~

~~Other~~

~~We are also a party to other litigations arising in the ordinary course of our business. We~~that we currently do not expect ~~the outcome of these cases, singly or in the aggregate,~~ to ~~have a material effect on our consolidated financial condition.~~present significant risks.

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

None.

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 ~~Richard A. O'Leary~~Rustom Jilla pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification of Andreas Fibig and ~~Richard A. O'Leary~~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)

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 ~~6, 2019~~11, 2020	By:	/s/ Andreas Fibig
			Andreas Fibig
			Chairman of the Board and Chief Executive Officer

Dated:	May ~~6, 2019~~11, 2020	By:	/s/ ~~Richard A. O'Leary~~Rustom Jilla
			~~Richard A. O'Leary~~Rustom Jilla
			Executive Vice President and Chief Financial Officer

4144



	Three Months Ended March 31,
(SHARES IN THOUSANDS)	2019		2018
Net Income
Net income attributable to IFF stockholders	$	108,829	$	129,416
Add: Decrease in redemption value of redeemable noncontrolling interests in excess of earnings allocated	370		—
Net income available to IFF stockholders	$	109,199	$	129,416
Shares
Weighted average common shares outstanding (basic)⁽¹⁾	111,864		79,018
Adjustment for assumed dilution⁽²⁾:
Stock options and restricted stock awards	362		375
SPC portion of TEUs	1,163		—
Weighted average shares assuming dilution (diluted)	113,389		79,393

Net Income per Share
Net income per share - basic	$	0.97	$	1.63
Net income per share - dilutive	0.96		1.63



	As reported in the fourth quarter of 2018			Measurement period adjustments		As reported in the first quarter of 2019
Cash and cash equivalents	$	140,747				$	140,747
Other current assets	699,627					699,627
Identifiable intangible assets	2,690,000			(21,700	)	2,668,300
Other assets	353,710			43,200		396,910
Equity method investments	25,791					25,791
Current liabilities	(311,325		)			(311,325		)
Debt assumed	(77,037		)			(77,037		)
Other liabilities	(632,488		)	(12,221	)	(644,709		)
Redeemable noncontrolling interest	(97,510		)	(5,700	)	(103,210		)
Noncontrolling interest	(3,700		)			(3,700		)
Goodwill	4,243,079			(3,579	)	4,239,500
Total Purchase Consideration	$	7,030,894				$	7,030,894



(IN THOUSANDS)	Estimated Amounts		Weighted-Average Useful Life
Product formula	$	290,000	10 to 12 years
Customer relationships	2,230,000		18 to 23 years
Trade names	140,000		23 to 26 years
Favorable/Unfavorable Leases, net	8,300		5 to 15 years
Total	$	2,668,300



(IN THOUSANDS)	Three Months Ended March 31, 2018
Unaudited pro forma net sales	$	1,315,733
Unaudited pro forma net income attributable to the Company	112,620



(DOLLARS IN THOUSANDS)	Employee-Related Costs			Other		Total
Balance at December 31, 2018	$	4,125		$	1,075	$	5,200
Additional charges, net	16,174			—		16,174
Payments	(1,393		)	—		(1,393		)
Balance at March 31, 2019	$	18,906		$	1,075	$	19,981



	Weighted Average Remaining Lease Term (in years)	Weighted Average Discount Rate
Operating leases	11.9	3.75	%



(DOLLARS IN THOUSANDS)	March 31, 2019
Less than 1 Year	$	37,680
1-3 Years	77,037
3-5 Years	65,087
After 5 years	211,387
Less: Imputed Interest	(87,424		)
Total	$	303,767