UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~September 30, 2020~~March 31, 2021


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

For the transition period from to

Commission file number 1-4858

INTERNATIONAL FLAVORS & FRAGRANCES INC.

(Exact name of registrant as specified in its charter)



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

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

(Address of principal executive offices) (Zip Code)

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

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

Title of each class

Trading Symbol(s)

Name of each exchange
on which registered

Common Stock, par value 12 1/2¢ per share

IFF

New York Stock Exchange

6.00% Tangible Equity Units

IFFT

New York Stock Exchange

0.500% Senior Notes due 2021

IFF 21

New York Stock Exchange

1.750% Senior Notes due 2024

IFF 24

New York Stock Exchange

1.800% Senior Notes due 2026

IFF 26

New York Stock Exchange

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

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

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


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

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

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

Number of shares outstanding as of ~~October 30, 2020: 106,933,358~~May 3, 2021: 248,919,878

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

INTERNATIONAL FLAVORS & FRAGRANCES INC.

CONSOLIDATED BALANCE SHEET

(Unaudited)


(DOLLARS IN THOUSANDS)		September 30, 2020		December 31, 2019
(DOLLARS IN MILLIONS)						(DOLLARS IN MILLIONS)	March 31, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS
Current Assets:	Current Assets:					Current Assets:
Cash and cash equivalents	Cash and cash equivalents	$	469,840	$	606,823	Cash and cash equivalents	$	872	$	650
Restricted cash	Restricted cash	12,841		17,122		Restricted cash	7		7
Trade receivables (net of allowances of $22,513 and $16,428, respectively)		928,625		876,197
Trade receivables (net of allowances of $40 and $21, respectively)						Trade receivables (net of allowances of $40 and $21, respectively)	2,023		929
Inventories: Raw materials	Inventories: Raw materials	589,775		565,071		Inventories: Raw materials	780		566
Work in process	Work in process	46,169		44,532		Work in process	325		38
Finished goods	Finished goods	515,337		513,465		Finished goods	1,484		528
Total Inventories	Total Inventories	1,151,281		1,123,068		Total Inventories	2,589		1,132

Prepaid expenses and other current assets	Prepaid expenses and other current assets	383,618		319,334		Prepaid expenses and other current assets	683		342
Total Current Assets	Total Current Assets	2,946,205		2,942,544		Total Current Assets	6,174		3,060
Property, plant and equipment, at cost	Property, plant and equipment, at cost	2,789,794		2,690,768		Property, plant and equipment, at cost	6,088		2,928
Accumulated depreciation	Accumulated depreciation	(1,409,371)		(1,303,848)		Accumulated depreciation	(1,501)		(1,470)
		1,380,423		1,386,920			4,587		1,458
Goodwill	Goodwill	5,427,482		5,497,596		Goodwill	17,104		5,593
Other intangible assets, net	Other intangible assets, net	2,675,482		2,851,935		Other intangible assets, net	11,652		2,727

Operating lease right-of-use assets						Operating lease right-of-use assets	803		299
Other assets	Other assets	655,782		608,416		Other assets	497		418
Total Assets	Total Assets	$	13,085,374	$	13,287,411	Total Assets	$	40,817	$	13,555
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:	Current Liabilities:					Current Liabilities:
Bank borrowings, overdrafts, and current portion of long-term debt	Bank borrowings, overdrafts, and current portion of long-term debt	$	440,962	$	384,958	Bank borrowings, overdrafts, and current portion of long-term debt	$	628	$	634

Accounts payable	Accounts payable	505,259		510,372		Accounts payable	1,337		556
Accrued payroll and bonus	Accrued payroll and bonus	107,301		102,704		Accrued payroll and bonus	222		133
Dividends payable	Dividends payable	82,311		80,038		Dividends payable	192		82
Other current liabilities	Other current liabilities	480,426		474,118		Other current liabilities	882		499
Total Current Liabilities	Total Current Liabilities	1,616,259		1,552,190		Total Current Liabilities	3,261		1,904
Long-term debt	Long-term debt	3,890,762		3,997,438		Long-term debt	11,330		3,779

Retirement liabilities	Retirement liabilities	257,993		265,370		Retirement liabilities	550		326
Deferred income taxes	Deferred income taxes	612,744		641,456		Deferred income taxes	2,727		593
Operating lease liabilities						Operating lease liabilities	697		265
Other liabilities	Other liabilities	517,296		502,366		Other liabilities	469		268
Total Other Liabilities	Total Other Liabilities	5,278,795		5,406,630		Total Other Liabilities	15,773		5,231
Commitments and Contingencies (Note 14)
Commitments and Contingencies (Note 15)						Commitments and Contingencies (Note 15)	0		0
Redeemable noncontrolling interests	Redeemable noncontrolling interests	100,005		99,043		Redeemable noncontrolling interests	102		98
Shareholders’ Equity:	Shareholders’ Equity:					Shareholders’ Equity:
Common stock 12 1/2¢ par value; 500,000,000 shares authorized; 128,526,137 shares issued as of September 30, 2020 and December 31, 2019; and 106,933,358 and 106,787,299 shares outstanding as of September 30, 2020 and December 31, 2019, respectively		16,066		16,066
Common stock 12 1/2¢ par value; 500,000,000 shares authorized; 270,266,598 shares issued as of March 31, 2021 and 128,526,137 shares issued as of December 31, 2020; and 248,859,641 and 106,937,990 shares outstanding as of March 31, 2021 and December 31, 2020, respectively						Common stock 12 1/2¢ par value; 500,000,000 shares authorized; 270,266,598 shares issued as of March 31, 2021 and 128,526,137 shares issued as of December 31, 2020; and 248,859,641 and 106,937,990 shares outstanding as of March 31, 2021 and December 31, 2020, respectively	34		16
Capital in excess of par value	Capital in excess of par value	3,847,824		3,823,152		Capital in excess of par value	19,796		3,853
Retained earnings	Retained earnings	4,170,894		4,117,804		Retained earnings	3,922		4,156
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(939,419)		(716,894)		Accumulated other comprehensive loss	(1,102)		(698)
Treasury stock, at cost (21,592,779 and 21,738,838 shares as of September 30, 2020 and December 31, 2019, respectively)		(1,017,158)		(1,022,824)
Treasury stock, at cost (21,406,957 and 21,588,147 shares as of March 31, 2021 and December 31, 2020, respectively)						Treasury stock, at cost (21,406,957 and 21,588,147 shares as of March 31, 2021 and December 31, 2020, respectively)	(1,008)		(1,017)
Total Shareholders’ Equity	Total Shareholders’ Equity	6,078,207		6,217,304		Total Shareholders’ Equity	21,642		6,310
Noncontrolling interest	Noncontrolling interest	12,108		12,244		Noncontrolling interest	39		12
Total Shareholders’ Equity including Noncontrolling interest	Total Shareholders’ Equity including Noncontrolling interest	6,090,315		6,229,548		Total Shareholders’ Equity including Noncontrolling interest	21,681		6,322
Total Liabilities and Shareholders’ Equity	Total Liabilities and Shareholders’ Equity	$	13,085,374	$	13,287,411	Total Liabilities and Shareholders’ Equity	$	40,817	$	13,555

See Notes to Consolidated Financial Statements

INTERNATIONAL FLAVORS & FRAGRANCES INC.

CONSOLIDATED STATEMENT OF (LOSS) INCOME AND COMPREHENSIVE ~~INCOME (LOSS)~~LOSS

(Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)		2020		2019		2020		2019
(AMOUNTS IN MILLIONS EXCEPT PER SHARE AMOUNTS)										(AMOUNTS IN MILLIONS EXCEPT PER SHARE AMOUNTS)	2021		2020
Net sales	Net sales	$	1,268,076	$	1,267,345	$	3,814,166	$	3,856,315	Net sales	$	2,465	$	1,347
Cost of goods sold	Cost of goods sold	743,649		734,257		2,242,030		2,245,729		Cost of goods sold	1,711		781
Gross profit	Gross profit	524,427		533,088		1,572,136		1,610,586		Gross profit	754		566
Research and development expenses	Research and development expenses	89,968		85,077		256,825		260,489		Research and development expenses	143		86
Selling and administrative expenses	Selling and administrative expenses	234,520		210,829		694,641		634,111		Selling and administrative expenses	451		230
Amortization of acquisition-related intangibles	Amortization of acquisition-related intangibles	47,738		48,430		144,922		143,964		Amortization of acquisition-related intangibles	152		48
Restructuring and other charges, net	Restructuring and other charges, net	1,497		3,716		8,299		22,415		Restructuring and other charges, net	4		5
Losses on sales of fixed assets	Losses on sales of fixed assets	415		372		1,568		1,136		Losses on sales of fixed assets	0		1
Operating profit	Operating profit	150,289		184,664		465,881		548,471		Operating profit	4		196
Interest expense	Interest expense	34,844		33,497		99,046		102,662		Interest expense	65		32

Other expense (income), net		9,945		(5,699)		4,762		(15,114)
Income before taxes		105,500		156,866		362,073		460,923
Taxes on income		19,269		27,059		61,265		81,033
Net income		86,231		129,807		300,808		379,890
Other (income) expense, net										Other (income) expense, net	(7)		11
(Loss) income before taxes										(Loss) income before taxes	(54)		153
Taxes on (loss) income										Taxes on (loss) income	(14)		26
Net (loss) income										Net (loss) income	(40)		127
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	1,403		2,683		5,169		7,560		Net income attributable to noncontrolling interests	2		3
Net income attributable to IFF stockholders		84,828		127,124		295,639		372,330
Other comprehensive income (loss), net, after tax:
Net (loss) income attributable to IFF stockholders										Net (loss) income attributable to IFF stockholders	(42)		124
Other comprehensive loss, after tax:										Other comprehensive loss, after tax:
Foreign currency translation adjustments	Foreign currency translation adjustments	79,291		(204,853)		(226,519)		(176,490)		Foreign currency translation adjustments	(417)		(452)
(Losses) gains on derivatives qualifying as hedges		(4,751)		2,939		(6,405)		3,257
Gains on derivatives qualifying as hedges										Gains on derivatives qualifying as hedges	4		1
Pension and postretirement net liability	Pension and postretirement net liability	3,507		2,721		10,399		7,908		Pension and postretirement net liability	9		4
Other comprehensive income (loss), net		78,047		(199,193)		(222,525)		(165,325)
Comprehensive income (loss) attributable to IFF stockholders		$	162,875	$	(72,069)	$	73,114	$	207,005
Other comprehensive loss										Other comprehensive loss	(404)		(447)
Comprehensive loss attributable to IFF stockholders										Comprehensive loss attributable to IFF stockholders	$	(446)	$	(323)

Net income per share - basic		$	0.76	$	1.15	$	2.68	$	3.34
Net income per share - diluted		$	0.75	$	1.13	$	2.64	$	3.30
Net (loss) income per share - basic										Net (loss) income per share - basic	$	(0.21)	$	1.16
Net (loss) income per share - diluted										Net (loss) income per share - diluted	$	(0.21)	$	1.15
Average number of shares outstanding - basic	Average number of shares outstanding - basic	112,183		111,998		112,148		111,953		Average number of shares outstanding - basic	206		112
Average number of shares outstanding - diluted	Average number of shares outstanding - diluted	113,622		113,493		113,631		113,133		Average number of shares outstanding - diluted	206		113

See Notes to Consolidated Financial Statements

INTERNATIONAL FLAVORS & FRAGRANCES INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)


		Nine Months Ended September 30,					Three Months Ended March 31,
(DOLLARS IN THOUSANDS)		2020		2019
(DOLLARS IN MILLIONS)						(DOLLARS IN MILLIONS)	2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income		$	300,808	$	379,890
Net (loss) income						Net (loss) income	$	(40)	$	127
Adjustments to reconcile to net cash provided by operating activities	Adjustments to reconcile to net cash provided by operating activities					Adjustments to reconcile to net cash provided by operating activities
Depreciation and amortization	Depreciation and amortization	243,576		235,429		Depreciation and amortization	242		81
Deferred income taxes	Deferred income taxes	(37,146)		(35,134)		Deferred income taxes	(86)		2
Losses on sale of assets	Losses on sale of assets	1,568		1,136		Losses on sale of assets	0		1
Stock-based compensation	Stock-based compensation	27,177		26,426		Stock-based compensation	11		9
Pension contributions	Pension contributions	(18,901)		(16,390)		Pension contributions	(9)		(5)

Changes in assets and liabilities, net of acquisitions:	Changes in assets and liabilities, net of acquisitions:					Changes in assets and liabilities, net of acquisitions:
Trade receivables	Trade receivables	(94,292)		(22,878)		Trade receivables	(175)		(133)
Inventories	Inventories	(42,771)		(84,140)		Inventories	118		(1)
Accounts payable	Accounts payable	21,593		(39,332)		Accounts payable	250		(32)
Accruals for incentive compensation	Accruals for incentive compensation	19,033		(20,726)		Accruals for incentive compensation	(22)		(19)
Other current payables and accrued expenses	Other current payables and accrued expenses	59,962		(12,161)		Other current payables and accrued expenses	48		(65)
Other assets	Other assets	(72,886)		(58,016)		Other assets	229		42
Other liabilities	Other liabilities	7,307		28,931		Other liabilities	(208)		10
Net cash provided by operating activities	Net cash provided by operating activities	415,028		383,035		Net cash provided by operating activities	358		17
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Cash paid for acquisitions, net of cash received		0		(49,065)

Additions to property, plant and equipment	Additions to property, plant and equipment	(124,070)		(160,449)		Additions to property, plant and equipment	(93)		(49)
Additions to intangible assets		0		(6,070)

Proceeds from life insurance contracts	Proceeds from life insurance contracts	1,739		1,890		Proceeds from life insurance contracts	0		2
Maturity of net investment hedges		(14,597)		0

Proceeds from disposal of assets	Proceeds from disposal of assets	18,202		34,607		Proceeds from disposal of assets	1		4
Proceeds from unwinding of cross currency swap derivative instruments		0		25,900
Contingent consideration paid		0		(4,655)

Net cash used in investing activities		(118,726)		(157,842)

Cash provided by the Merger with N&B						Cash provided by the Merger with N&B	207		0

Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	115		(43)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Cash dividends paid to shareholders	Cash dividends paid to shareholders	(240,273)		(233,477)		Cash dividends paid to shareholders	(82)		(80)
(Decrease) increase in revolving credit facility and short term borrowings		(655)		11
Deferred financing costs		(3,205)		0
Decrease in revolving credit facility and short-term borrowings						Decrease in revolving credit facility and short-term borrowings	(104)		0

Repayments on debt	Repayments on debt	(335,084)		(100,785)		Repayments on debt	(12)		(12)
Proceeds from issuance of long-term debt		200,000		0

Contingent consideration paid	Contingent consideration paid	(9,562)		(21,791)		Contingent consideration paid	(14)		0
Purchases of redeemable noncontrolling interest	Purchases of redeemable noncontrolling interest	(21,566)		0		Purchases of redeemable noncontrolling interest	0		(14)

Proceeds from issuance of stock in connection with stock options	Proceeds from issuance of stock in connection with stock options	0		200		Proceeds from issuance of stock in connection with stock options	3		0
Employee withholding taxes paid	Employee withholding taxes paid	(7,664)		(9,966)		Employee withholding taxes paid	(6)		(1)

Net cash used in financing activities	Net cash used in financing activities	(418,009)		(365,808)		Net cash used in financing activities	(215)		(107)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	(18,712)		(3,853)		Effect of exchange rate changes on cash, cash equivalents and restricted cash	(37)		(43)
Net change in cash, cash equivalents and restricted cash	Net change in cash, cash equivalents and restricted cash	(140,419)		(144,468)		Net change in cash, cash equivalents and restricted cash	221		(176)
Cash, cash equivalents and restricted cash at beginning of year	Cash, cash equivalents and restricted cash at beginning of year	623,945		648,522		Cash, cash equivalents and restricted cash at beginning of year	660		624
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	483,526	$	504,054	Cash, cash equivalents and restricted cash at end of period	$	881	$	448
Supplemental Disclosures:	Supplemental Disclosures:					Supplemental Disclosures:
Interest paid, net of amounts capitalized	Interest paid, net of amounts capitalized	$	112,653	$	122,121	Interest paid, net of amounts capitalized	$	42	$	42
Income taxes paid	Income taxes paid	101,307		98,819		Income taxes paid	36		33
Accrued capital expenditures	Accrued capital expenditures	22,523		15,826		Accrued capital expenditures	21		19

See Notes to Consolidated Financial Statements

INTERNATIONAL FLAVORS & FRAGRANCES INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(Unaudited)


(DOLLARS IN THOUSANDS)		Common stock		Capital in excess of par value		Retained earnings		Accumulated other comprehensive (loss) income		Treasury stock			Non-controlling interest		Total
										Shares	Cost
Balance at June 30, 2019		$	16,066	$	3,805,883	$	4,069,211	$	(668,359)	(21,751,837)	$	(1,023,422)	$	10,608	$	6,209,987
(DOLLARS IN MILLIONS)																	(DOLLARS IN MILLIONS)	Common stock			Capital in excess of par value		Retained earnings		Accumulated other comprehensive (loss) income		Treasury stock			Non-controlling interest		Total
																		Shares	Cost								Shares	Cost
Balance at January 1, 2020																	Balance at January 1, 2020	128,526,137	$	16	$	3,823	$	4,118	$	(717)	(21,738,838)	$	(1,023)	$	12	$	6,229
Net income	Net income					127,124							657		127,781		Net income						124							1		125

Adoption of ASU 2017-12						(1,962)									(1,962)

Cumulative translation adjustment	Cumulative translation adjustment							(204,853)							(204,853)		Cumulative translation adjustment								(452)							(452)
Gains on derivatives qualifying as hedges; net of tax of $(348)								2,939							2,939
Pension liability and postretirement adjustment; net of tax of $(1,937)								2,721							2,721
Gains on derivatives qualifying as hedges; net of tax of $0																	Gains on derivatives qualifying as hedges; net of tax of $0								1							1
Pension liability and postretirement adjustment; net of tax of $(1)																	Pension liability and postretirement adjustment; net of tax of $(1)								4							4
Cash dividends declared ($0.75 per share)	Cash dividends declared ($0.75 per share)					(80,027)									(80,027)		Cash dividends declared ($0.75 per share)						(80)									(80)
Stock options/SSARs	Stock options/SSARs			579						212	9				588		Stock options/SSARs				(1)						13,763	1				0

Vested restricted stock units and awards	Vested restricted stock units and awards			28						1,410	67				95		Vested restricted stock units and awards				(2)						11,195	1				(1)
Stock-based compensation	Stock-based compensation			8,126											8,126		Stock-based compensation				9											9
Redeemable NCI	Redeemable NCI			1,736											1,736		Redeemable NCI				6											6
Dividends paid on noncontrolling interest and Other						(47)							(96)		(143)
Balance at September 30, 2019		$	16,066	$	3,816,352	$	4,114,299	$	(867,552)	(21,750,215)	$	(1,023,346)	$	11,169	$	6,066,988

Balance at March 31, 2020																	Balance at March 31, 2020	128,526,137	$	16	$	3,835	$	4,162	$	(1,164)	(21,713,880)	$	(1,021)	$	13	$	5,841


(DOLLARS IN THOUSANDS)		Common stock		Capital in excess of par value		Retained earnings		Accumulated other comprehensive (loss) income		Treasury stock			Non-controlling interest		Total
										Shares	Cost
Balance at June 30, 2020		$	16,066	$	3,838,047	$	4,168,378	$	(1,017,466)	(21,594,097)	$	(1,017,220)	$	13,111	$	6,000,916
Net income						84,828							281		85,109
(DOLLARS IN MILLIONS)																	(DOLLARS IN MILLIONS)	Common stock			Capital in excess of par value		Retained earnings		Accumulated other comprehensive (loss) income		Treasury stock			Non-controlling interest		Total
																		Shares	Cost								Shares	Cost
Balance at January 1, 2021																	Balance at January 1, 2021	128,526,137	$	16	$	3,853	$	4,156	$	(698)	(21,588,147)	$	(1,017)	$	12	$	6,322
Net loss																	Net loss						(42)							1		(41)

Cumulative translation adjustment	Cumulative translation adjustment							79,291							79,291		Cumulative translation adjustment								(417)							(417)
Losses on derivatives qualifying as hedges; net of tax of $709								(4,751)							(4,751)
Pension liability and postretirement adjustment; net of tax of $(1,031)								3,507							3,507
Gains on derivatives qualifying as hedges; net of tax of $(1)																	Gains on derivatives qualifying as hedges; net of tax of $(1)								4							4
Pension liability and postretirement adjustment; net of tax of $1																	Pension liability and postretirement adjustment; net of tax of $1								9							9
Cash dividends declared ($0.77 per share)	Cash dividends declared ($0.77 per share)					(82,311)									(82,311)		Cash dividends declared ($0.77 per share)						(192)									(192)
Stock options/SSARs	Stock options/SSARs			626						424	20				646		Stock options/SSARs				1						98,729	5				6

Vested restricted stock units and awards	Vested restricted stock units and awards			92						894	42				134		Vested restricted stock units and awards				(4)						82,461	4				0
Stock-based compensation	Stock-based compensation			8,195											8,195		Stock-based compensation				11											11
Impact of N&B Merger																	Impact of N&B Merger	141,740,461	18		15,936									26		15,980
Redeemable NCI	Redeemable NCI			864											864		Redeemable NCI				(1)											(1)
Dividends paid on noncontrolling interest and Other						(1)							(1,284)		(1,285)
Balance at September 30, 2020		$	16,066	$	3,847,824	$	4,170,894	$	(939,419)	(21,592,779)	$	(1,017,158)	$	12,108	$	6,090,315

Balance at March 31, 2021																	Balance at March 31, 2021	270,266,598	$	34	$	19,796	$	3,922	$	(1,102)	(21,406,957)	$	(1,008)	$	39	$	21,681

See Notes to Consolidated Financial Statements

~~INTERNATIONAL FLAVORS & FRAGRANCES INC.~~

~~CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY~~

~~(Unaudited)~~

(DOLLARS IN THOUSANDS) Common
stock Capital in
excess of
par value Retained
earnings Accumulated other
comprehensive
(loss) income Treasury stock Non-controlling
interest Total
Shares Cost
Balance at January 1, 2019 $ 16,066 $ 3,793,609 $ 3,956,221 $ (702,227) (21,906,935) $ (1,030,718) $ 10,423 $ 6,043,374
Net income 372,330 2,163 374,493
Adoption of ASU 2016-02 23,094 23,094
Adoption of ASU 2017-12 (981) (981)
Cumulative translation adjustment (176,490) (176,490)
Gains on derivatives qualifying as hedges; net of tax of $39 3,257 3,257
Pension liability and postretirement adjustment; net of tax of $(3,038) 7,908 7,908
Cash dividends declared ($2.21 per share) (235,730) (235,730)
Stock options/SSARs 5,664 14,214 670 6,334
Vested restricted stock units and awards (10,940) 142,506 6,702 (4,238)
Stock-based compensation 26,426 26,426
Redeemable NCI 1,593 1,593
Dividends paid on noncontrolling interest and Other (635) (1,417) (2,052)
Balance at September 30, 2019 $ 16,066 $ 3,816,352 $ 4,114,299 $ (867,552) (21,750,215) $ (1,023,346) $ 11,169 $ 6,066,988

(DOLLARS IN THOUSANDS) Common
stock Capital in
excess of
par value Retained
earnings Accumulated other
comprehensive
(loss) income Treasury stock Non-controlling
interest Total
Shares Cost
Balance at January 1, 2020 $ 16,066 $ 3,823,152 $ 4,117,804 $ (716,894) (21,738,838) $ (1,022,824) $ 12,244 $ 6,229,548
Net income 295,639 1,689 297,328
Cumulative translation adjustment (226,519) (226,519)
Losses on derivatives qualifying as hedges; net of tax of $1,007 (6,405) (6,405)
Pension liability and postretirement adjustment; net of tax of $(3,218) 10,399 10,399
Cash dividends declared ($2.27 per share) (242,546) (242,546)
Stock options/SSARs (623) 57,652 2,743 2,120
Vested restricted stock units and awards (6,846) 88,407 2,923 (3,923)
Stock-based compensation 27,177 27,177
Redeemable NCI 4,964 4,964
Dividends paid on noncontrolling interest and Other (3) (1,825) (1,828)
Balance at September 30, 2020 $ 16,066 $ 3,847,824 $ 4,170,894 $ (939,419) (21,592,779) $ (1,017,158) $ 12,108 $ 6,090,315

~~See Notes to Consolidated Financial Statements~~

INTERNATIONAL FLAVORS & FRAGRANCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Nature of Operations

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

Basis of Presentation

These interim financial statements and related management’s discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the related notes and management’s discussion and analysis of results of operations, liquidity and capital resources included in our ~~2019~~2020 Annual Report on Form 10-K (“~~2019~~2020 Form 10-K”). These interim financial 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

On February 1, 2021 (the “Closing Date”), the Company completed the combination (the "Merger") of IFF and DuPont de Numerous, Inc (“DuPont”) nutrition and biosciences business (the “N&B Business”), which had been transferred to Nutrition and Biosciences, Inc., a Delaware corporation and wholly owned subsidiary of DuPont ("N&B") in a Reverse Morris Trust transaction.See Note 3 for additional information. As a result, the Company’s consolidated financial statements for the three months ended March 31, 2021 reflects the results of N&B from the Closing Date, whereas the Company’s consolidated financial statements for the three months ended March 31, 2020 do not.

In the current year, the Company has changed its presentation from thousands to millions and, as a result, any necessary rounding adjustments have ~~historically operated and continue~~been made to ~~operate on~~prior year disclosed amounts.

Reporting Periods

Effective 2021, the Company changed its fiscal year end from a 52/~~53 week~~53-week fiscal year ending on the Friday closest to the last day of the ~~quarter.~~quarter, to a calendar year of the twelve-month period from January 1 to December 31. The Company elected to change its fiscal year end in connection with the Merger with N&B to align the Company’s fiscal year with N&B’s. For the 2020 comparative quarter presented, the actual closing date was April 3. For ease of presentation, ~~September 30~~March 31 and December 31 are used consistently throughout this Form 10-Q and these interim financial statements and related notes to represent the period-end ~~dates. For the 2020 and 2019 quarters, the actual closing~~ dates ~~were October 2 and September 27, respectively. The unaudited interim financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary~~ in the ~~judgment~~comparative periods. The three months ended March 31, 2021 contained three fewer business days than the corresponding period in 2020, however the impact of ~~management for a fair statement of the results for the periods presented. When used herein, the terms “IFF,” the “Company,” “we,” “us”~~this on revenue and ~~“our” mean International Flavors & Fragrances Inc. and its consolidated subsidiaries.~~net loss was not material.

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~~take into account the current economic implications of the novel coronavirus ("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~~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 ~~September 30,~~March 31, 2021 and March 31, 2020 ~~and September 30, 2019~~ to the amounts reported in the Company's balance sheet as at ~~September 30, 2020,~~March 31, 2021, December 31, ~~2019, September 30, 2019~~2020, March 31, 2020 and December 31, ~~2018.~~2019.

(DOLLARS IN THOUSANDS) September 30, 2020 December 31, 2019 September 30, 2019 December 31, 2018
Current assets
Cash and cash equivalents $ 469,840 $ 606,823 $ 494,897 $ 634,897
Restricted cash 12,841 17,122 9,157 13,625
Noncurrent assets
Restricted cash included in Other assets 845 0 0 0
Cash, cash equivalents and restricted cash $ 483,526 $ 623,945 $ 504,054 $ 648,522


(DOLLARS IN MILLIONS)	March 31, 2021		December 31, 2020		March 31, 2020		December 31, 2019
Current assets
Cash and cash equivalents	$	872	$	650	$	433	$	607
Restricted cash	7		7		10		17
Noncurrent assets
Restricted cash included in Other assets	2		3		5		0
Cash, cash equivalents and restricted cash	$	881	$	660	$	448	$	624

Accounts Receivable

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

Through these factoring programs, the Company removed ~~$209.3~~$304 million and ~~$205.7~~$249 million of receivables from its balance sheets as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively, which are primarily related to the factoring agreements sponsored by certain customers.

The impact on cash provided by operations from participating in these programs was an increase of ~~$3.6~~$55 million for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~an increase~~a decrease of ~~$36.8~~$5 million for the ~~nine~~three months ended ~~September 30, 2019.~~

March 31, 2020.

The cost of participating in these programs was ~~$1.1~~approximately $1 million ~~and $1.7 million~~ for both the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019, respectively, and was $3.1 million and $4.7 million for the nine months ended September 30, 2020 and 2019, respectively.~~2020.

Revenue Recognition

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

~~The following table presents the Company's~~ See Note 11 for further details on revenues disaggregated by ~~product categories:~~

Three Months Ended September 30, Nine Months Ended September 30,
(DOLLARS IN THOUSANDS) 2020 2019 2020 2019
Taste
Flavor compounds $ 674,240 $ 697,787 $ 2,062,718 $ 2,112,801
Flavor ingredients 90,998 84,641 281,166 285,748
Total Taste 765,238 782,428 2,343,884 2,398,549
Scent
Fragrance compounds 404,524 389,949 1,170,860 1,155,127
Fragrance ingredients 98,314 94,968 299,422 302,639
Total Scent 502,838 484,917 1,470,282 1,457,766
Total revenues $ 1,268,076 $ 1,267,345 $ 3,814,166 $ 3,856,315
segment.

Contract Assets

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

~~The~~ ~~following~~ ~~table reflects~~For the ~~balances in~~periods ended March 31, 2021 and December 31, 2020, the Company's gross accounts receivable was $2.063 billion and $950 million, respectively. The Company's contract assets and contract liabilities for the periods ended ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020 were not material.

(DOLLARS IN THOUSANDS) September 30, 2020 December 31, 2019
Receivables (included in Trade receivables) $ 951,138 $ 892,625
Contract asset - Short term 960 2,736
Contract liabilities - Short term 4,648 11,107

~~Recent Accounting Pronouncements~~

In March 2020, the FASB issued Accounting Standards Update ("ASU") 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU is intended to simplify various aspects related to the cessation of reference rates in certain financial markets that would otherwise create modification accounting or changes in estimate. This guidance is effective for the period from March 12, 2020 to December 31, 2022. The Company has not adopted any of the optional expedients or exceptions through September 30, 2020 but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.

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

In August 2018, the FASB issued ASU 2018-15, “Intangibles - Goodwill and Other - Internal - Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force).” The ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This guidance is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years, with early adoption permitted. The Company adopted the guidance effective the first day of its 2020 fiscal year. The adoption did not have an impact on its consolidated financial statements but may impact the Company in the future as and when it enters into cloud computing arrangements.

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

~~Adoption of Standard Related to~~ Expected Credit Losses

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

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

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

The Company also considers current and future economic conditions in the determination of the allowance. At ~~September 30, 2020,~~March 31, 2021, the Company reported ~~$928.6 million~~$2.023 billion of trade receivables, net of allowances of ~~$22.5~~$40 million. Based on the aging analysis as of ~~September 30, 2020,~~March 31, 2021, approximately ~~87%~~91% 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 approximately 1% of our accounts receivable.

The following is a rollforward of the Company's allowances for bad debts for the ~~nine~~three months ended ~~September 30, 2020:~~March 31, 2021, with the bad debt expense and write-offs both being under $1 million, which were not material:


(DOLLARS IN ~~THOUSANDS)~~MILLIONS)	Allowances for Bad Debts
Balance at December 31, ~~2019~~2020	$	~~16,428~~21
~~Bad debt expense~~	~~7,443~~

~~Write-offs~~Other adjustments(1)	~~(587)~~20
Foreign exchange	~~(771)~~(1)
Balance at ~~September 30, 2020~~March 31, 2021	$	~~22,513~~40

_______________________

(1)The ~~Company adjusted the amount of the~~adjustment to allowances for bad debts was a result of purchase price allocation related to the Merger with N&B.

Long-lived assets

Property, Plant and Equipment Property, plant and equipment are recorded at cost. Depreciation is calculated on a straight-line basis, principally over the following estimated useful lives: buildings and improvements, 1 to 50 years; machinery and equipment, 1 to 40 years; information technology hardware and software, 1 to 23 years; and leasehold improvements which are included in buildings and improvements, the estimated life of the improvements or the remaining term of the lease, whichever is shorter.

Finite-Lived Intangible Assets Finite-lived intangible assets include customer relationships, patents, trade names, technological know-how and other intellectual property valued at acquisition and amortized on a straight-line basis over the following estimated useful lives: customer relationships, 11 – 25 years; patents, 11 - 15 years; trade names, 4 - 28 years; and technological know-how, 5 - 28 years.

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

Recent Accounting Pronouncements

In January 2021, the FASB issued Accounting Standards Update ("ASU") 2021-01, "Reference Rate Reform (Topic 848): Scope." The ASU is intended to provide updates and responses to concerns over Topic 848 related to the cessation of reference rates in certain financial markets. Alternative reference rates that are more observable or transaction based have been identified and are being transitioned to in numerous jurisdictions globally, such as ofa receive-variable-rate, pay-variable-rate cross currency interest rate swap. This guidance is effective immediately for all entities, but does not apply to any contract modifications or new hedging relationships entered into after December 31, ~~2019 to reflect the correct classification of amounts between the allowances for bad debts and Trade Receivables.~~2022. 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~~is currently evaluating the impact of ~~the COVID-19 pandemic and its~~this guidance, but does not expect this guidance to have a material impact on its Consolidated Financial Statements.

In March 2020, the ~~liquidity~~FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU is intended to simplify various aspects related to the cessation of reference rates in certain ~~customers.~~financial markets that would otherwise create modification accounting or changes in estimate. This guidance is effective for the period from March 12, 2020 to December 31, 2022. The Company has not ~~made~~adopted any ~~additional increases~~of the optional expedients or exceptions through March 31, 2021 but will continue to ~~its allowances~~evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for ~~bad debts, as~~Income Taxes.” The ASU is intended to simplify various aspects related to accounting for income taxes. This guidance is effective for fiscal years beginning after December 15, 2020, and for interim periods within those fiscal years, with early adoption permitted. This guidance was adopted on January 2, 2021 and does not have a ~~result of COVID-19, in~~material impact on the ~~second and third quarters of 2020.~~Company's Consolidated Financial Statements.

NOTE 2. NET (LOSS) INCOME PER SHARE

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

Three Months Ended September 30, Nine Months Ended September 30,
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 2020 2019 2020 2019
Net Income
Net income attributable to IFF stockholders $ 84,828 $ 127,124 $ 295,639 $ 372,330
Adjustment related to decrease in redemption value of redeemable noncontrolling interests in excess of earnings allocated 864 1,736 4,964 1,593
Net income available to IFF stockholders $ 85,692 $ 128,860 $ 300,603 $ 373,923
Shares
Weighted average common shares outstanding (basic)(1)
112,183 111,998 112,148 111,953
Adjustment for assumed dilution(2):
Stock options and restricted stock awards 276 332 320 372
SPC portion of TEUs 1,163 1,163 1,163 808
Weighted average shares assuming dilution (diluted) 113,622 113,493 113,631 113,133
Net Income per Share
Net income per share - basic $ 0.76 $ 1.15 $ 2.68 $ 3.34
Net income per share - diluted 0.75 1.13 2.64 3.30


	Three Months Ended March 31,
(AMOUNTS IN MILLIONS EXCEPT PER SHARE AMOUNTS)	2021		2020
Net (Loss) Income
Net (loss) income attributable to IFF stockholders	$	(42)	$	124
Adjustment related to (increase) decrease in redemption value of redeemable noncontrolling interests in excess of earnings allocated	(1)		6
Net (loss) income available to IFF stockholders	$	(43)	$	130
Shares
Weighted average common shares outstanding (basic)(1)	206		112
Adjustment for assumed dilution(2):

SPC portion of TEUs	0		1
Weighted average shares assuming dilution (diluted)	206		113

Net (Loss) Income per Share (3)
Net (loss) income per share - basic	$	(0.21)	$	1.16
Net (loss) income per share - diluted	(0.21)		1.15

_______________________

(1)For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the tangible equity units (“TEUs”) were assumed to be outstanding at the minimum settlement amount for basic earnings per share. See below for details.

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

(3)Diluted net (loss) income per share attributable to IFF for the three months ended March 31, 2021 excluded 1 million potentially dilutive securities because there was a net loss attributable to IFF for the period and, as such, the inclusion of these securities would have been anti-dilutive.

As of the effective time of the Merger, each issued and outstanding share of common stock of N&B (except for shares of common stock of N&B held by N&B as treasury stock or by DuPont, which were canceled and ceased to exist and no consideration was delivered in exchange therefor) was converted into the right to receive one share of common stock of IFF. The Merger was completed in exchange for 141,740,461 shares of IFF common stock, par value $0.125 per share (or cash payment in lieu of fractional shares), which had been approved in the special shareholder meeting that occurred on August 27, 2020 where IFF shareholders voted to approve the issuance of shares of IFF common stock in connection with the N&B Transaction, pursuant to an Agreement and Plan of Merger (the "Merger Agreement"). The shares issued in the Merger represented approximately 55.4% of the common stock of IFF on a fully diluted basis, after giving effect to the Merger, as of February 1, 2021.

The Company declared a quarterly dividend to its shareholders of $0.77 and $0.75 per share for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively. For the nine months ended September 30, 2020 and 2019, the Company declared quarterly dividends to its shareholders totaling $2.27 and $2.21 per share,~~ respectively.

There were no stock options or stock-settled appreciation rights (“SSARs”) excluded from the computation of diluted net (loss) income per share for the three ~~and nine~~ months ended ~~September 30, 2020 and 2019.~~March 31, 2020.

The Company issued 16,500,000 TEUs, consisting of a prepaid stock purchase contract ("SPC") and a senior amortizing note, for net proceeds of ~~$800.2~~$800 million on September 17, 2018. For purposes of calculating basic net income (loss) per share, the SPCs were assumed to be settled at the minimum settlement amount of 0.3134 shares per SPC on ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020. For purposes of calculating diluted earnings per share, the SPCs were assumed to be settled at a conversion factor not to exceed 0.3665 and 0.3839 on ~~September 30,~~March 31, 2021 and 2020, ~~and 2019.~~respectively. The SPC conversion factor is based on the 20 day volume-weighted average price (“VWAP”) per share of the Company’s common stock. Per the TEU agreement, the maximum settlement amount is 0.3839 shares per SPC.

The Company has issued shares of purchased restricted common stock ~~and purchased restricted common stock~~ units ~~(collectively “PRSUs”~~(“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~~there was no difference between basic and diluted net (loss) income per share for both unrestricted common shareholders and PRSU shareholders for the three months ended March 31, 2021 and the difference for the three months ended March 31, 2020 was less than $0.01 per ~~share for each period presented, except for the nine months ended September 30, 2020 where the difference was less than $0.03 per share, and the~~share. The number of PRSUs outstanding as of ~~September 30,~~March 31, 2021 and 2020 was not material. Net loss allocated to such PRSUs was not material for the three months ended March 31, 2021 and ~~2019 was immaterial. Net~~net income allocated to such PRSUs was ~~$0.1 million and $0.2 million~~also not material for the three months ended ~~September 30, 2020 and 2019, respectively, and $0.5 million for both the nine months ended September 30, 2020 and 2019.~~March 31, 2020.

NOTE 3. ACQUISITIONS

~~Pending~~ Transaction with Nutrition & Biosciences, Inc.

On ~~December 15, 2019,~~February 1, 2021, IFF completed the ~~Company entered into definitive~~Merger with N&B. Pursuant to the transaction related agreements, ~~with~~ DuPont ~~de Nemours, Inc. (“DuPont”), including an Agreement and Plan of Merger (the "Merger Agreement"), pursuant~~transferred its N&B Business to ~~which DuPont will transfer its nutrition and biosciences business to Nutrition & Biosciences, Inc.,~~N&B, a ~~Delaware corporation and wholly owned~~wholly-owned subsidiary of DuPont, ~~(“N&B”),~~ and N&B ~~will merge~~merged with and into a wholly owned subsidiary of IFF in exchange for ~~a number of~~141,740,461 shares of IFF common stock, par value $0.125 per share (“IFF Common Stock”) ~~(collectively,~~.

On the ~~“DuPont~~Closing Date, the Company completed its Merger with N&B ~~Transaction”~~in a Reverse Morris Trust transaction (the “Transactions”)~~. In connection with~~, pursuant to which the ~~transaction,~~Company acquired the N&B Business of DuPont.Inthe Transactions, among other steps (i) DuPont ~~will receive~~transferred the N&B Business to N&B (the “Separation”); (ii) N&B made a ~~one-time $7.3~~cash distribution to DuPont of approximately $7.359 billion, ~~special cash payment~~subject to certain adjustments (the “Special Cash ~~Payment”~~Payments”); (iii) DuPont distributed to its stockholders all of the issued and outstanding shares of N&B common stock by way of an exchange offer (the “Distribution”), ~~subject to certain adjustments.~~and; (iv) N&B merged with and into a wholly owned subsidiary of IFF. As a result of the ~~DuPont~~Merger, the existing shares of N&B ~~Transaction,~~common stock were automatically converted into the right to receive a number of shares of IFF Common Stock. Immediately after the Merger, holders of DuPont’s common stock ~~will own~~that received shares of N&B common stock in the Distribution owned approximately 55.4% of the outstanding shares of IFF Common Stock on a fully diluted basis and existing holders of IFF Common Stock owned approximately 44.6% of the outstanding shares of IFF on a fully diluted basis.

~~Completion~~The Merger was accounted for using the purchase method of accounting in accordance with ASC Topic 805, Business Combinations, with IFF identified as the acquirer. As a result of the ~~DuPont~~Merger, N&B’s assets, liabilities and the operating results of N&B ~~Transaction is subject~~were included in the Company’s financial statements from the Closing Date. N&B contributed net sales of approximately $1.076 billion and net loss of approximately $59 million for the three months ended March 31, 2021, which includes the effects of purchase accounting adjustments, primarily related to ~~various closing conditions, including, among other things, (1) approval by IFF’s shareholders~~changes in amortization of ~~the issuance~~intangible assets, depreciation of ~~IFF Common Stock in connection with the transaction (which approval has been obtained); (2) the effectiveness~~property, plant and equipment and amortization of ~~the registration statements to be filed with the Securities and Exchange Commission pursuant~~stepped up inventory.

Prior to the ~~Merger Agreement;~~Distribution, N&B incurred new indebtedness in the form of term loans 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~~senior notes 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, as amended on August 25. 2020, providing for unsecured term loan facilities in an aggregate principal amount of $1.25$7.500 billion (the “Term Loan Facilities”), which reduced the commitments under the Bridge Loans commitment letter by a corresponding amount. On September 16, 2020, N&B issued $6.25 billion of senior unsecured notes (the “N&B Notes”), which reduced the remaining commitments under the Bridge Loans commitment letter in their entirety. The Bridge Loans commitment letter was also terminated as of such date. The N&B Notes, together with the Term Loan Facilities, will be used to ~~finance~~pay the Special Cash ~~Payment~~Payments made to DuPont stockholders. See Note 7 for additional information regarding the new term loans and senior notes incurred by N&B and subsequently assumed by IFF.

Purchase Price

The following table summarizes the aggregate purchase price consideration paid to ~~pay related fees~~acquire N&B (in millions, except share and ~~expenses. Following the consummation~~per share data):


(DOLLARS IN MILLIONS)
Fair value of common stock issued to DuPont stockholders(1)	$	15,929
Fair value attributable to pre-merger service for replacement equity awards(2)	25

Total purchase consideration	$	15,954

_______________________

(1)The fair value of common stock issued to DuPont stockholders represents 141,740,461 shares of the ~~merger, all obligations~~Company's common stock determined based on the number of ~~N&B~~fully diluted shares of IFF common stock, immediately prior to the Closing Date, multiplied by the quotient of 55.4%/44.6% and IFF common stock closing share price of $112.38 on the New York Stock Exchange on the Closing Date.

(2)At the time of the Transactions, each outstanding stock option, cash-settled stock appreciation right (“SAR”), restricted stock unit (“RSU”) award, and restricted stock award (“RSA”) with respect to ~~the Term Loan Facilities and the N&B Notes will be guaranteed~~DuPont common stock held by ~~IFF (or at the election~~employees of N&B were canceled and ~~IFF, assumed~~converted into similar classes of equity awards of IFF’s Class A Common Stock. Further, each outstanding Performance Share Unit (“PSU”) award with respect to DuPont common stock held by ~~IFF).~~

~~On August 27, 2020, a special shareholder meeting was held and IFF shareholders voted to approve the issuance~~employees of ~~shares of IFF Common Stock in connection with the DuPont~~ N&B ~~Transaction pursuant~~were canceled and converted into IFF’s RSU awards. The conversion was based on the ratio of the volume-weighted average per share closing price of DuPont stock on the twenty trading days prior to the ~~Merger Agreement.~~

~~2019 Acquisition Activity~~

~~During~~Closing Date and IFF’s stock on the ~~second quarter~~twenty trading days following the Closing Date. The fair value of ~~2019, the Company acquired the remaining 50% interest in an equity method investee located in Canada. The purchase~~replacement equity-based awards attributable to pre-Merger service was recorded as part of the additional interest increased the Company's ownership of the investee to 100%. The purchase price for the remaining 50% was approximately $37 million, including cash and an accrual for the amount expected to be paid in contingent consideration. The Company began to consolidate the results of the acquired entity from the date on which it acquired the remaining 50% interest during the second quarter of 2019. Goodwill of approximately $30 million and intangible assets of $20 million were recorded in connection with the acquisition.

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

~~During the first quarter of 2020, the Company completed the purchase price allocations~~Merger (see Note 10 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, customer relationships and other intangible assets by $5 million and approximately $3 million related to deferred tax liabilities and to decrease goodwill by $15 million. The income statement impact of the finalization of purchase accounting was not material.

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

additional information).

109

Purchase Price Allocation

The Merger with N&B was accounted under the acquisition method under which the Company allocated the purchase consideration to the tangible net assets and identifiable assets acquired based on estimated fair values at the Closing Date, and recorded the excess of consideration over the fair values of net assets acquired as goodwill. The purchase price allocation is preliminary and is subject to change. The Company is still evaluating the valuation and estimated useful lives of property, plant and equipment, goodwill, intangible assets (trade names, customer relationships and technological know-hows), inventory and leases, in addition to ensuring all other assets and liabilities and contingencies have been identified and recorded. Due to the timing of the business combination and the magnitude of and multi-jurisdictional nature of the net assets acquired, at March 31, 2021, the valuation process to determine the fair values is not complete and further adjustments are expected in fiscal year 2021. The Company has estimated the preliminary fair value of net assets acquired based on information currently available and will continue to adjust those estimates as additional information becomes available during the measurement period. As of March 31, 2021, the Company has not finalized its assessment of the In-Process Research and Development (IPR&D) assets acquired as part of the Transactions. Further, the assessment of certain contingencies including loss contracts and environmental liabilities, pension and postretirement benefit obligations and taxes remain open for completion of the related analysis. 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 Company will finalize its accounting for the N&B Merger, including the allocation of goodwill to reporting units, within one year of the Closing Date.

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed:


(DOLLARS IN MILLIONS)	Preliminary Estimated Fair Value
Cash and cash equivalents	$	207
Receivables	962
Inventory	1,615
Prepaid expenses and other current assets	342
Property, plant and equipment	3,242
Deferred income taxes	75
Intangible assets	9,176
Other assets	702
Accounts payable and accrued liabilities	(1,028)
Accrued payroll and employee benefits	(163)
Deferred tax liabilities	(2,369)
Long-term debt	(7,636)
Other long-term liabilities	(907)
Total identifiable net assets assumed	4,218
Non-controlling interest	(26)
Goodwill	11,762
Preliminary purchase price	$	15,954

Acquired inventory is comprised of finished goods, work in process and raw materials. The preliminary fair value of finished goods was calculated as the estimated selling price, adjusted for costs of the selling effort and a reasonable profit allowance relating to the selling effort. The preliminary fair value of work in process inventory was primarily calculated as the estimated selling price, adjusted for estimated costs to complete the manufacturing, estimated costs of the selling effort, as well as a reasonable profit margin on the remaining manufacturing and selling effort. The preliminary fair value of raw materials and supplies was determined based on replacement cost which approximates historical carrying value. The preliminary fair value step-up is amortized to “Cost of goods sold” in the Consolidated Statement of (Loss) Income and Comprehensive Loss as the inventory is sold, which is expected to be a period of approximately four months from the Closing Date.

The preliminary fair value of property, plant and equipment was primarily calculated using the cost approach, which determines the replacement costs for the assets and adjusts it for their age and condition. The fair value of the land assets was determined via the sales comparison approach.

The long-term debt assumed is comprised of a Term Loan Facility and Notes. The fair value of the Notes was determined on the basis of unadjusted quoted prices on an over-the-counter market. The fair value of the long-term debt assumed as part of the Term Loan Facility is based on the total indebtedness at the time of closing the Merger.

The Company has recognized $11.762 billion of goodwill, which is in part attributable to expected synergies generated by the integration of N&B including cross-selling benefits as well as cost synergies, substantially all of which is not deductible for income tax purposes. Any changes in the estimated fair values of the assets acquired and liabilities assumed in the Merger may change the amount of the purchase consideration allocated to goodwill. Goodwill of $2.839 billion, $7.291 billion and $1.632 billion is allocated to the Nourish, Health & Biosciences and Pharma Solutions segments, respectively. The allocation of goodwill to segments was based on a preliminary analysis and is subject to change during the measurement period as the Company continues to finalize the valuations of assets acquired and liabilities assumed.

The estimated preliminary fair value and useful lives of the identifiable intangible assets are as follows:


(DOLLARS IN MILLIONS)	Estimated Amounts		Estimated Useful Lives



Finite lived intangible assets
Trade names	$	301	4 to 13 years
Customer relationships	6,745		13 to 25 years
Technological know-how	2,130		7 to 11 years
Total	$	9,176

The fair value of intangible assets is generally determined using an income method, which is based on forecasts of the expected future cash flows attributable to the respective assets. Significant estimates and assumptions inherent in the valuations reflect a consideration of other market participants, and include the amount and timing of future cash flows (including expected growth rates and profitability), royalty rates used in the relief from royalty method, customer attrition rates, product obsolescence factors, a brand’s relative market position and the discount rate applied to the cash flows. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions. Determining the useful life of an intangible asset also requires significant judgment. Trade names, customer relationships and technological know-hows are expected to have finite lives. The costs of finite-lived intangible assets are amortized through expense over their estimated lives.

Lease liabilities, included in “Other current liabilities” and “Operating lease liabilities” in the Consolidated Balance Sheet, at the Closing Date, are remeasured at the present value of the future minimum lease payments over the remaining lease term and the incremental borrowing rate of the Company as if the acquired leases were new leases as of the Closing Date. Right-of-use assets included in "Operating lease right-of-use assets" and “Other assets” in the Consolidated Balance Sheet as of the Closing Date, are equal to the amount of the lease liability at the Closing Date. As of March 31, 2021, the Company has not finalized its assessment of any off-market terms of the leases. The remaining lease term is based on the remaining term at the Closing Date plus any renewal or extension options that the Company is reasonably certain will be exercised.

The deferred income tax assets and liabilities include the expected future federal, state and foreign tax consequences associated with temporary differences between the preliminary fair values of the assets acquired and liabilities assumed and the respective tax bases. Tax rates utilized in calculating deferred income taxes generally represent the enacted statutory tax rates at the effective date of the Merger in the jurisdictions in which legal title of the underlying asset or liability resides. See Note 9 for additional information related to income taxes.

Pro forma financial information

The following unaudited pro forma financial information presents the combined results of operations of IFF and N&B as if the Merger had been completed as of the prior fiscal year, or January 1, 2020. 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 Merger and related borrowings had taken place on January 1, 2020, nor are they indicative of future results. The unaudited pro forma financial information for the three months ended March 31, 2021 includes IFF results, including the post-Merger results of N&B, since February 1, 2021, and pre-Merger results of N&B for the period January 1, 2021 through January 31, 2021.

The unaudited pro forma results for the three months ended March 31, 2021 were as follows:


	Three Months Ended March 31,
(DOLLARS IN MILLIONS)	2021		2020
Unaudited pro forma net sales	$	2,972	$	2,898
Unaudited pro forma net income (loss) attributable to the Company	219		(201)

The unaudited pro forma results for all periods include adjustments made to account for certain costs and transactions that would have been incurred had the Merger been completed as of January 1, 2020, including amortization charges for acquired intangibles assets, adjustments for transaction costs, adjustments for depreciation expense for property, plant and equipment, inventory step-up 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.

The Company incurred transaction-related costs of approximately $89 million for three months ended March 31, 2021. This amount primarily consists of the following: approximately $79 million of M&A advisory fees and $10 million of professional services fees, legal fees and others.

NOTE 4. RESTRUCTURING AND OTHER CHARGES, NET

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

Frutarom Integration Initiative

In connection with the acquisition of Frutarom, the Company ~~began to execute~~has been executing an integration plan that, among other initiatives, seeks to optimize its manufacturing ~~network.~~network (the "Frutarom Integration Initiative"). As part of the Frutarom Integration Initiative, the Company expects to close approximately 35 manufacturing sites with most of the closures targeted to occur by the end of ~~2021. During~~2022. Between 2019 and 2020, the Company ~~announced~~completed the closure of ~~10 sites, of which 6 sites were in Europe, Africa and Middle East, 2 sites in Latin America, and 1 site in each North America and Greater Asia regions.~~21 sites. During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, the Company ~~announced~~completed the closure of ~~6 sites, of which 3 sites are in Europe, Africa and Middle East,~~ 1 site ~~in Latin America, and 2 sites~~ in North America. Since the inception of the initiative through ~~September 30, 2020,~~March 31, 2021, the Company has closed 1622 sites and expensed total costs of ~~$18.3~~approximately $27 million. Total costs for the program are expected to be approximately ~~$40 million to $50~~$60 million including cash and non-cash ~~items.~~items through 2022.

2019 Severance Program

During the year ended December 31, 2019, the Company incurred severance charges related to approximately 190 headcount reductions, excluding those previously mentioned under the Frutarom Integration Initiative. The headcount reductions primarily related to the Scent business unit with additional amounts related to headcount reductions in all business units associated with the establishment of a new shared service center in Europe. Since the inception of the program, the Company has expensed ~~$21.7~~approximately $21 million ~~to date. Total costs for the program are expected to be approximately $25 million.~~

~~2017 Productivity Program~~

~~In connection with the 2017 Productivity Program, the Company recorded $24.5 million of charges related to personnel costs and lease termination costs since the program's inception~~ to date. As of ~~September 30, 2020,~~March 31, 2021, the program is largely completed. ~~Total costs for~~

Other Restructuring Charges

For the ~~program are expected~~three months ended March 31, 2021, the Company incurred approximately $4 million of severance charges related to ~~be approximately $25 million.~~executives separating from the Company.

Changes in Restructuring Liabilities

Changes in restructuring liabilities by program during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 were as follows:


(DOLLARS IN THOUSANDS)		Balance at December 31, 2019		Additional Charges (Reversals), Net		Non-Cash Charges		Cash Payments		Balance at September 30, 2020
2017 Productivity Program
(DOLLARS IN MILLIONS)												(DOLLARS IN MILLIONS)	Balance at December 31, 2020		Additional Charges (Reversals), Net		Impact of N&B Merger		Balance at March 31, 2021

Frutarom Integration Initiative												Frutarom Integration Initiative
Severance	Severance	$	1,106	$	0	$	0	$	(277)	$	829	Severance	$	3	$	0	$	—	$	3

Other(1)		88		0		0		0		88
Frutarom Integration Initiative
Severance		4,038		2,003		0		(3,221)		2,820
Fixed asset write down		0		4,647		(4,647)		0		0
Other(1)	Other(1)	2,485		1,291		371		(812)		3,335		Other(1)	3		0		—		3
2019 Severance Plan	2019 Severance Plan											2019 Severance Plan
Severance	Severance	12,897		358		0		(4,905)		8,350		Severance	6		0		—		6

Other(1)		471		0		0		0		471

Other Restructuring Charges												Other Restructuring Charges
Severance												Severance	2		4		—		6

N&B Restructuring Liabilities(2)												N&B Restructuring Liabilities(2)	0		0		4		4
Total restructuring	Total restructuring	$	21,085	$	8,299	$	(4,276)	$	(9,215)	$	15,893	Total restructuring	$	14	$	4	$	4	$	22

_______________________

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

(2)

Restructuring liabilities assumed as a result of the Merger with N&B.

Charges by Segment

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

Three Months Ended September 30, Nine Months Ended September 30,
(DOLLARS IN THOUSANDS) 2020 2019 2020 2019
Taste $ 1,139 $ 2,541 $ 7,941 $ 7,618
Scent 358 803 358 11,703
Shared IT & Corporate Costs 0 372 0 3,094
Total Restructuring and other charges, net $ 1,497 $ 3,716 $ 8,299 $ 22,415


	Three Months Ended March 31,
(DOLLARS IN MILLIONS)	2021		2020
Nourish	$	0	$	5



Shared IT & Corporate Costs	4		0
Total Restructuring and other charges, net	$	4	$	5

NOTE 5. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Goodwill

In the first quarter of 2021, in connection to the Merger, the Company reorganized its reporting structure. In connection with this reorganization, goodwill was reassigned among reporting units using a relative fair value approach based on the fair value of the elements transferred and the fair value of the elements remaining within the original reporting units. The Company tested goodwill for impairment on a pre-reorganization basis and determined there was no impairment for the affected reporting units. In connection with the reorganization, a portion of goodwill previously included in the Taste segment, now the Nourish segment, was moved to the Scent and Health & Biosciences segments amounting to $257 million and $728 million, respectively.

Movements in goodwill ~~during 2020~~attributable to each reportable segment for the three months ended March 31, 2021 were as follows:


~~(DOLLARS IN THOUSANDS)~~	~~Goodwill~~
~~Balance at December 31, 2019~~	$	~~5,497,596~~

~~Measurement period adjustments(1)~~	~~(15,283)~~
~~Foreign exchange~~	~~(54,831)~~

~~Balance at September 30, 2020~~	$	~~5,427,482~~


(DOLLARS IN MILLIONS)	Nourish		Health & Biosciences		Scent		Pharma Solutions		Total
Balance at December 31, 2020	$	4,859	$	0	$	734	$	0	$	5,593
Acquisitions(1)	2,839		7,291		0		1,632		11,762

Foreign exchange	(110)		(107)		(12)		(22)		(251)
Reallocation	(985)		728		257		0		0

Balance at March 31, 2021	$	6,603	$	7,912	$	979	$	1,610	$	17,104

_______________________

(1)~~Measurement period adjustments~~Acquisitions relate to ~~adjustments recorded~~the Merger with N&B. The amount of goodwill, and allocation of goodwill among reporting units, from the Merger with the N&B Business is preliminary and may materially change in ~~connection with completing the~~future periods as a result of purchase ~~price allocation related to the 2019 Acquisition Activity.~~accounting being finalized. See Note 3 for ~~details.~~additional information.

~~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~~	$	~~85,235~~
~~Natural Product Solutions~~	~~(57,102)~~
~~Fine Ingredients~~	~~(25,256)~~
~~Taste~~	~~(2,877)~~
~~Total~~	$	—

~~See Note 10 for further information on the reorganization.~~

1213

Other Intangible Assets

Other intangible assets, net consisted of the following amounts:


		September 30,		December 31,			March 31,		December 31,
(DOLLARS IN THOUSANDS)		2020		2019
(DOLLARS IN MILLIONS)						(DOLLARS IN MILLIONS)	2021		2020

Asset Type	Asset Type					Asset Type
Customer relationships	Customer relationships	$	2,639,670	$	2,653,446	Customer relationships	$	9,397	$	2,728
Trade names & patents	Trade names & patents	180,173		178,968		Trade names & patents	453		187
Technological know-how	Technological know-how	466,154		468,256		Technological know-how	2,579		479

Other	Other	2,489		40,362		Other	30		38
Total carrying value	Total carrying value	3,288,486		3,341,032		Total carrying value	12,459		3,432
Accumulated Amortization	Accumulated Amortization					Accumulated Amortization
Customer relationships	Customer relationships	(422,395)		(302,047)		Customer relationships	(500)		(470)
Trade names & patents	Trade names & patents	(35,015)		(27,213)		Trade names & patents	(126)		(38)
Technological know-how	Technological know-how	(155,893)		(135,269)		Technological know-how	(154)		(168)

Other	Other	299		(24,568)		Other	(27)		(29)
Total accumulated amortization	Total accumulated amortization	(613,004)		(489,097)		Total accumulated amortization	(807)		(705)

Other intangible assets, net	Other intangible assets, net	$	2,675,482	$	2,851,935	Other intangible assets, net	$	11,652	$	2,727

Amortization

Amortization expense was ~~$47.7~~$152 million and ~~$48.4~~$48 million for the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019, respectively and $144.9 million and $144.0 million for the nine months ended September 30, 2020 and 2019, respectively.~~2020.

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

(DOLLARS IN THOUSANDS) 2020 2021 2022 2023 2024
Estimated future intangible amortization expense $ 48,270 $ 190,415 $ 186,485 $ 186,368 $ 186,368

~~Potential COVID-19 Impact~~

Although IFF does 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 to goodwill and intangibles. Either of these events could potentially result in a material adverse impact on IFF’s business and results of operations.



(DOLLARS IN MILLIONS)	2021		2022		2023		2024		2025
Estimated future intangible amortization expense	$	608	$	807	$	807	$	807	$	805

NOTE 6. OTHER ASSETS

Other assets consisted of the following amounts:


(DOLLARS IN THOUSANDS)		September 30, 2020		December 31, 2019
Operating lease right-of-use assets		$	298,455	$	287,870
(DOLLARS IN MILLIONS)						(DOLLARS IN MILLIONS)	March 31, 2021		December 31, 2020

Finance lease right-of-use assets						Finance lease right-of-use assets	$	9	$	8
Deferred income taxes	Deferred income taxes	154,504		125,552		Deferred income taxes	102		197
Overfunded pension plans	Overfunded pension plans	99,212		85,657		Overfunded pension plans	110		101
Cash surrender value of life insurance contracts	Cash surrender value of life insurance contracts	47,417		47,578		Cash surrender value of life insurance contracts	49		49

Other~~(a)~~(1)	Other~~(a)~~(1)	56,194		61,759		Other~~(a)~~(1)	227		63
Total	Total	$	655,782	$	608,416	Total	$	497	$	418

_______________________

~~(a)~~(1)Includes ~~finance lease right-of-use assets,~~ restricted cash, land usage rights in China and long term deposits.

1314

NOTE 7. DEBT

Debt consisted of the following:


(DOLLARS IN THOUSANDS)		Effective Interest Rate		September 30, 2020		December 31, 2019
2020 Notes(1)		3.69	%	$	0	$	299,381
(DOLLARS IN MILLIONS)								(DOLLARS IN MILLIONS)	Effective Interest Rate		March 31, 2021		December 31, 2020

2021 Euro Notes(1)	2021 Euro Notes(1)	0.82	%	350,646		334,561		2021 Euro Notes(1)	0.82	%	$	353	$	368
2022 Notes(3)								2022 Notes(3)	0.69	%	300		0
2023 Notes(1)	2023 Notes(1)	3.30	%	299,234		299,004		2023 Notes(1)	3.30	%	299		299
2024 Euro Notes(1)	2024 Euro Notes(1)	1.88	%	584,429		558,124		2024 Euro Notes(1)	1.88	%	587		614
2025 Notes(3)								2025 Notes(3)	1.22	%	1,001		0
2026 Euro Notes(1)	2026 Euro Notes(1)	1.93	%	931,723		890,183		2026 Euro Notes(1)	1.93	%	936		978
2027 Notes(3)								2027 Notes(3)	1.56	%	1,220		0
2028 Notes(1)	2028 Notes(1)	4.57	%	396,925		396,688		2028 Notes(1)	4.57	%	397		397
2030 Notes(3)								2030 Notes(3)	2.21	%	1,511		0
2040 Notes(3)								2040 Notes(3)	3.04	%	775		0
2047 Notes(1)	2047 Notes(1)	4.44	%	493,887		493,571		2047 Notes(1)	4.44	%	494		494
2048 Notes(1)	2048 Notes(1)	5.12	%	786,160		785,996		2048 Notes(1)	5.12	%	786		786
Term Loan(1)		3.65	%	239,766		239,621
2022 Term Loan (1)		1.73	%	199,261		0
2050 Notes(3)								2050 Notes(3)	3.21	%	1,574		0
2018 Term Loan Facility(1)								2018 Term Loan Facility(1)	3.65	%	240		240
2022 Term Loan Facility (1)								2022 Term Loan Facility (1)	1.73	%	200		199
2024 Term Loan Facility(3)								2024 Term Loan Facility(3)	1.46	%	625		0
2026 Term Loan Facility(3)								2026 Term Loan Facility(3)	1.83	%	625		0
Amortizing Notes(1)	Amortizing Notes(1)	6.09	%	47,970		82,079		Amortizing Notes(1)	6.09	%	24		36

Bank overdrafts and other	Bank overdrafts and other			1,666		3,131		Bank overdrafts and other			11		2
Deferred realized gains on interest rate swaps				57		57

Total debt	Total debt			4,331,724		4,382,396		Total debt			11,958		4,413
Less: Short-term borrowings(2)	Less: Short-term borrowings(2)			(440,962)		(384,958)		Less: Short-term borrowings(2)			(628)		(634)
Total Long-term debt	Total Long-term debt			$	3,890,762	$	3,997,438	Total Long-term debt			$	11,330	$	3,779

_______________________

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

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

(3)Assumed by the Company as part of the N&B Merger.

Term Loan Facility and Senior Notes assumed as part of the N&B Merger

Following the Merger, the Company assumed the indebtedness incurred by N&B in the debt financings completed prior to the Distribution. This indebtedness includes (i) a Term Loan Facility of $1.250 billion pursuant to the term loan credit agreement (the "N&B Term Loan Facility") and (ii) a series of Senior Notes in the aggregate amount of $6.250 billion with maturities ranging from 2 – 30 years as further described below. N&B’s indebtedness raised prior to the Merger was used to finance the Special Cash Payment to DuPont, which has been paid, and for the satisfaction of the related transaction fees and expenses. See Note 3 for additional information.

N&B Term Loan Facility

The N&B Term Loan Facility was funded on February 1, 2021, and provides for a senior unsecured term loan credit facility in an aggregate principal amount of $1.250 billion, comprised of a $625 million three-year tranche (“2024 Term Loan Facility”) and a $625 million five-year tranche (“2026 Term Loan Facility”). Interest for each tranche equals, at the Company’s option, a per annum rate equal to either (x) an adjusted LIBOR rate plus an applicable margin varying from 0.750% to 2.000% for the three-year tranche and from 1.125% to 2.375% for the five-year tranche or (y) a base rate plus an applicable margin varying from 0.000% to 1.000% for the three-year tranche and from 0.125% to 1.375% for the five-year tranche, in each case depending on the class of IFF’s non-credit-enhanced, senior unsecured long-term debt credit rating.

The 2024 Term Loan Facility and 2026 Term Loan Facility are subject to customary affirmative and negative covenants and events of default after the Closing Date of the Merger. The 2024 Term Loan Facility and 2026 Term Loan Facility are also subject to a financial covenant requiring maintenance of a maximum consolidated leverage ratio of 4.75x until and including the end of the third full fiscal quarter after the Closing Date of the Merger, stepping down to 4.50x until and including the end of the sixth full fiscal quarter after the Closing Date of the Merger, stepping down further to 3.75x until and including the end of the ninth full fiscal quarter after the Closing Date of the Merger and stepping down further to 3.50x thereafter, with a step-up in connection with certain qualifying acquisitions. The Company was in compliance with all covenants as of March 31, 2021.

N&B Senior Notes

On September 16, 2020, N&B issued $6.250 billion in aggregate principal amount of senior unsecured notes consisting of: (i) $300 million senior unsecured notes maturing on September 15, 2022 (the “2022 Notes”), bearing interest at a rate of 0.697% per year, payable semi-annually on March 15 and September 15 of each year, beginning March 15, 2021; (ii) $1.000 billion senior unsecured notes maturing on October 1, 2025 (the “2025 Notes”), bearing interest at a rate of 1.230% per year, payable semi-annually on April 1 and October 1 of each year, beginning April 1, 2021; (iii) $1.200 billion senior unsecured notes maturing on October 15, 2027 (the “2027 Notes”), bearing interest at a rate of 1.832% per year, payable semi-annually on April 15 and October 15 of each year, beginning April 15, 2021; (iv) $1.500 billion senior unsecured notes maturing on November 1, 2030 (the “2030 Notes”), bearing interest at a rate of 2.300% per year, payable semi-annually on May 1 and November 1 of each year, beginning May 1, 2021; (v) $750 million senior unsecured notes maturing on November 15, 2040 (the “2040 Notes”), bearing interest at a rate of 3.268% per year, payable semi-annually on May 15 and November 15 of each year, beginning May 15, 2021, and; (vi) $1.500 billion senior unsecured notes maturing on December 1, 2050 (the “2050 Notes”), bearing interest at a rate of 3.468% per year, payable semi-annually on June 1 and December 1 of each year, beginning June 1, 2021.

Interest on each series of notes began accruing from September 16, 2020 payable semi-annually in arrears as described above. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months.

Redemption Provisions

The N&B Senior Notes assumed as a result of the Merger may be redeemed by the issuer at any time at the greater of 100% or the discounted present value of the remaining scheduled payments of principal and interest from the redemption date to the maturity date at Treasury Rate (as defined in the applicable indenture) plus (i) 10 basis points in the case of the 2022 Notes, (ii) 15 basis points in the case of the 2025 Notes, (iii) 25 basis points in the case of the 2027 Notes, (iv) 25 basis points in the case of the 2030 Notes, (v) 30 basis points in the case of the 2040 Notes and (vi) 30 basis points in the case of the 2050 Notes. The redemption dates of each of the N&B Senior Notes are provided in the table below:


Notes			Redemption Date
2022 Notes			September 15, 2022
2025 Notes			September 1, 2025
2027 Notes			August 15, 2027
2030 Notes			August 1, 2030
2040 Notes			May 15, 2040
2050 Notes			June 1, 2050

On or after the applicable redemption dates, each series of the N&B Senior Notes may be redeemed by the issuer at a redemption price equal to 100% of the principal amount of the N&B Senior Notes to be redeemed, plus accrued and unpaid interest on the notes to be redeemed to, but excluding, the redemption date.

2022 Term Loan Facility

On May 15, 2020, the Company entered into a Term Loan Agreement ~~(the~~(as amended on August 25, 2020, the "2022 Term Loan Agreement") with China Construction Bank Corporation, New York Branch, as administrative agent, and the lenders party ~~thereto.~~

~~The lenders party to the 2022 Term Loan Agreement have committed to provide~~thereto for a senior unsecured two year term loan facility in an aggregate principal amount of up to $200 ~~million.~~ million (the "2022 Term Loan Facility").

The loans under the 2022 Term Loan Agreement bear interest, at the Company's option, at a per annum rate equal to either (x) an adjusted LIBOR rate plus an applicable margin varying from 1.225% to 2.475% or (y) a base rate plus an applicable margin varying from 0.225% to 1.475%, in each case depending on the public debt ratings for non-credit enhanced long-term senior unsecured debt issued by the Company. The Company may voluntarily prepay the term loans without premium or penalty, with the balance payable on the second anniversary of the funding date. There is no required amortization under the 2022 Term Loan Agreement.

As of ~~September 30, 2020,~~March 31, 2021, the Company had $200 million outstanding in borrowings under the 2022 Term Loan Agreement. The 2022 Term Loan Agreement contains various covenants, limitations and events of default customary for similar facilities for similarly rated borrowers, including a maximum ratio of net debt to EBITDA of ~~4.0x with step-downs over time.~~

~~2020 Notes~~

During the third quarter of 2020, the Company repaid the 2020 Notes resulting in a payment of $300 million of which approximately $200 million was from the net proceeds received under the 2022 Term Loan Agreement.

~~Amended Debt Agreements~~

On August 25, 2020, the Company entered into (i) the Second Amended and Restated Revolving Credit Agreement (the "Revolving Credit Agreement"), which amended and restated the Credit Agreement dated as of November 9, 2011, as previously amended and restated as of December 2, 2016, and further amended as of May 21, 2018, June 6, 2018, July 13, 2018 and January 17, 2020 among the Company, certain of its subsidiaries, the lenders party thereto and Citibank, N.A. as administrative agent, (ii) an amendment to the Term Loan Credit Agreement, dated as of June 6, 2018, as previously amended as of July 13, 2018 and as of January 17, 2020, among the Company, the lenders party thereto, and Morgan Stanley Senior Funding, Inc. as administrative agent (as amended, the "Frutarom Term Loan Agreement") and (iii) an amendment to the 2022 Term Loan Agreement (as amended, and collectively with the Revolving Credit Agreement and Frutarom Term Loan Agreement, the "Amended Debt Agreements").

Under the amended terms of the Revolver Credit Agreement, the senior unsecured revolving loan credit facility maturing June 6, 2023 (the "Revolving Credit Facility") will increase from $1 billion to $2 billion upon completion of the DuPont N&B Transaction.

~~Additionally, under the Amended Debt Agreements, upon the completion of the DuPont N&B Transaction, the Company's maximum permitted ratio of net debt to Consolidated EBITDA will increase to~~ 4.75x, with step-downs over ~~time.~~time, following the close of the N&B Merger.

NOTE 8. LEASES

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

The components of lease expense were as follows:


		Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended			Three Months Ended		Three Months Ended
(DOLLARS IN THOUSANDS)		September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
(DOLLARS IN MILLIONS)										(DOLLARS IN MILLIONS)	March 31, 2021		March 31, 2020
Operating lease cost	Operating lease cost	$	12,971	$	12,422	$	36,978	$	38,228	Operating lease cost	$	32	$	12
Finance lease cost	Finance lease cost	1,292		0		2,846		0		Finance lease cost	1		1

Supplemental cash flow information related to leases was as follows:


		Nine Months Ended		Nine Months Ended			Three Months Ended		Three Months Ended
(DOLLARS IN THOUSANDS)		September 30, 2020		September 30, 2019
(DOLLARS IN MILLIONS)						(DOLLARS IN MILLIONS)	March 31, 2021		March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities	Cash paid for amounts included in the measurement of lease liabilities					Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases		$	39,429	$	36,932
Operating cash flows for finance leases		96		0
Operating cash flows for operating leases						Operating cash flows for operating leases	$	27	$	12

Financing cash flows for finance leases	Financing cash flows for finance leases	2,445		0		Financing cash flows for finance leases	1		1
Right-of-use assets obtained in exchange for lease obligations	Right-of-use assets obtained in exchange for lease obligations					Right-of-use assets obtained in exchange for lease obligations
Operating leases	Operating leases	36,782		26,710		Operating leases	11		11
Finance leases	Finance leases	3,964		2,316		Finance leases	1		2

Right-of-use assets are presented in "Operating lease right-of-use assets" and "Other Assets" in the Consolidated Balance Sheet. Lease liabilities are presented in "Operating lease liabilities" and "Other Liabilities" in the Consolidated Balance Sheet. Any other current liabilities related to operating and financing lease liabilities are presented in the "Other Current Liabilities" in the Consolidated Balance Sheet.

Right-of-use assets and lease liabilities acquired from N&B were remeasured at the present value of the future minimum lease payments over the remaining lease term utilizing an updated incremental borrowing rate of the Company as if the acquired leases were new leases as of the Closing Date. Right-of-use assets were further adjusted for any off-market terms of the lease. The remaining lease term is based on the remaining term at the Closing Date plus any renewal or extension options that the Company is reasonably certain will be exercised. Additionally, the Company has elected short-term lease treatment for those acquired lease contracts which, at the Closing Date, have a remaining lease term of 12 months or less. For the leases acquired through the Transactions, the Company will retain the previous lease classification. This resulted in an increase in both right-of-use assets and operating lease liabilities of approximately $530 million as of the Closing Date.

NOTE 9. INCOME TAXES

Uncertain Tax Positions

As of March 31, 2021, the Company had $131 million of unrecognized tax benefits recorded in Other liabilities and an amount less than $1 million recorded to Other current liabilities. The balance includes $37 million associated with N&B uncertain tax positions recorded in the purchase accounting measurement period. If these unrecognized tax benefits were recognized, the effective tax rate would be affected.

As of March 31, 2021, the Company had accrued interest and penalties of $32 million classified in Other liabilities and an amount less than $1 million classified in Other current liabilities. The balance includes $17 million associated with N&B uncertain tax positions recorded in the purchase accounting measurement period.

As of March 31, 2021, the Company’s aggregate provisions for uncertain tax positions, including interest and penalties, was $164 million associated with tax positions asserted in various jurisdictions. The balance includes $54 million associated with N&B uncertain tax positions recorded in the purchase accounting measurement period.

The Company regularly repatriates earnings from non-U.S. subsidiaries. As the Company repatriates these funds to the U.S., they will be required to pay income taxes in certain U.S. states and applicable foreign withholding taxes during the period when such repatriation occurs. Accordingly, as of March 31, 2021, the Company had a deferred tax liability of $57 million for the effect of repatriating the funds to the U.S., attributable to various non-U.S. subsidiaries. There is 0 deferred tax liability associated with non-U.S. subsidiaries where we intend to indefinitely reinvest the earnings to fund local operations and/or capital projects.

The Company has ongoing income tax audits and legal proceedings which are at various stages of administrative or judicial review. In addition, the Company has open tax years with various taxing jurisdictions that range primarily from 2011 to 2020. Based on currently available information, the Company does not believe the outcome of any of these tax audits and other tax positions related to open tax years, when finalized, will have a material impact on its results of operations.

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

Effective Tax Rate

The effective tax rate for the three months ended March 31, 2021 was 25.9% compared to 17.0% for the three months ended March 31, 2020. The quarter-over-quarter increase was primarily due to higher repatriation costs and an unfavorable mix of earnings.

NOTE 9.10. 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 September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(DOLLARS IN THOUSANDS)		2020		2019		2020		2019
(DOLLARS IN MILLIONS)										(DOLLARS IN MILLIONS)	2021		2020
Equity-based awards	Equity-based awards	$	8,195	$	8,126	$	27,177	$	26,426	Equity-based awards	$	11	$	9
Liability-based awards	Liability-based awards	850		39		3,347		2,830		Liability-based awards	3		(1)
Total stock-based compensation expense	Total stock-based compensation expense	9,045		8,165		30,524		29,256		Total stock-based compensation expense	14		8
Less: Tax benefit	Less: Tax benefit	(1,803)		(1,143)		(5,765)		(4,666)		Less: Tax benefit	(3)		(1)
Total stock-based compensation expense, after tax	Total stock-based compensation expense, after tax	$	7,242	$	7,022	$	24,759	$	24,590	Total stock-based compensation expense, after tax	$	11	$	7

Transaction with Nutrition and Biosciences, Inc.

In connection with the Merger, N&B employees’ unvested and vested equity awards were converted into equity awards denominated in shares of the Company’s common stock based on a defined exchange ratio. N&B employees’ equity awards were converted into 335,347 IFF stock options, 258,572 IFF RSU awards and 5,816 IFF SAR awards.

For converted RSU awards, the fair value of the equity award is based on the Closing Date market price of IFF stock. For converted stock options and SAR awards, the exercise price per share of the converted award is equal to the exercise price per share of the N&B award immediately prior to the Merger divided by the exchange ratio. The fair value of the IFF stock options and SAR awards that the Company issued in connection with the Merger was estimated using the Black Scholes model.

The awards were generally issued with the same terms and conditions as were applicable prior to the Transaction. At the Closing Date, approximately $25 million of the fair value of the replacement awards granted to N&B employees was attributable to pre-combination service and was included in the purchase price. As of March 31, 2021, post-combination expense of approximately $9 million is expected to be recognized related to the replacement awards over the remaining post-combination service period, approximately up to three years.

NOTE ~~10.~~11. SEGMENT INFORMATION

During the first quarter of ~~2020,~~2021, the Company completed its Merger with N&B. Following the Merger, the Company reorganized its ~~reporting structure~~reportable segments 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 24 reportable operating ~~segments, Taste~~segments: Nourish, Health & Biosciences (“H&B”), Scent and ~~Scent; these~~Pharma Solutions. These segments align with the internal structure ~~used~~ to manage these businesses. The Company’s Chief Operating Decision Maker regularly reviews financial information to allocate resources and assess performance utilizing these reorganized segments. Therefore, beginning in the three months ended March 31, 2021, the Company reported its financial performance based on its new segments. The Company recast certain prior period amounts to conform to the way the Company is internally managed and how the Company monitors segment performance during the current fiscal year. Prior to the realignment, the Company operated and managed its business as two operating and reportable segments: Taste and Scent.

Nourish combines IFF’s Taste segment and N&B’s Food & Beverage segment. It is comprised of three platforms, Ingredients, Flavors and Food Designs, with a diversified portfolio across natural and plant-based specialty food ingredients, flavor compounds, and savory solutions and inclusions, respectively. Ingredients provide texturizing solutions to the food industry, food protection solutions used in food and ~~nutrition~~beverage products, specialty soy and ~~specialty ingredients. Flavor~~pea protein with value-added formulations, emulsifiers and sweeteners. Flavors provide a range of flavor compounds ~~provide unique flavors~~and natural taste solutions that are ultimately used by IFF's customers in savory products, beverages, sweets, and dairy products. ~~Savory solutions include~~Flavors also provide value-added spices and seasoning ingredients for meat, food service, convenience, alternative protein and culinary products. Food Designs provide savory solution products such as spices, sauces, marinades ~~or powder blends of flavors, natural colors, seasonings, functional ingredients~~ and ~~natural anti-oxidants~~mixtures. Additionally, Food Designs provide inclusion products that ~~are primarily designed for the meat and fish industry. Inclusions provide~~help with 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.

Health & Biosciences is comprised of six platforms, Health, Cultures & Food Enzymes, Home & Personal Care, Animal Nutrition, Grain Processing and Microbial Control, with a biotechnology-driven portfolio of products that serve the health and wellness, food, consumer and industrial markets. Products within this portfolio range from enzymes, food cultures, probiotics and specialty ingredients ~~primarily consist of natural health~~for non-food applications. Health provides 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~~dietary supplements, food and beverage, ~~manufacturers who use them~~specialized nutrition and pharma. Cultures & Food Enzymes provide products that aim to serve the global demand for healthy, natural, clean label and fermented food for fresh dairy, cheese, bakery and brewing products. This is accomplished by providing IFF's customers with products that allow for extended shelf life and stability, which help to improve customers' products and performance. The platform's enzyme solution also allows IFF's customers to provide low sugar, high fiber and lactose-free dairy products. Home & Personal Care produces enzymes for detergents, cleaning and textile processing products in ~~producing consumer products.~~the laundry, dishwashing, textiles and industrials and personal care markets that help to enhance product and process performances. Animal Nutrition produces enzymes that help to improve the product and process performance of animal feed products, which aim to lessen environmental impact by reducing farm waste. Grain Processing produces enzymes for biofuel production and carbohydrate processing. Microbial Control produces biocides for controlling microbial populations for oil and gas production, home and personal care and industrial preservation markets.

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

Pharma Solutions is comprised of N&B’s historical Pharma Solutions business. Pharma Solutions is a producer of cellulosics and alginates-based pharma excipients, used to improve the functionality and delivery of active pharmaceutical ingredients, including controlled or modified drug release formulations, and enabling the development of more effective pharma solutions. The primary market for Pharma Solutions is the oral dosage pharmaceuticals excipients market.

Effective in the first quarter of 2021, management elected to change the profit or loss measure of the Company’s reportable segments from Segment Operating Profit to Segment Adjusted Operating EBITDA for internal reporting and performance measurement purposes. This change was made to enhance the transparency and visibility of the underlying operating performance of each segment. The Company's Chief Operating Decision Maker evaluates the performance of these reportable operating segments based on ~~segment profit~~Segment Adjusted Operating EBITDA, which is defined as ~~operating profit~~Income (Loss) Before Taxes before depreciation and amortization expense, interest expense, restructuring ~~global expenses (as discussed below)~~and other charges, net 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 allocateditems. Prior period amounts have been recast to ~~individual reportable operating segments.~~reflect these changes in segment profitability measures.

1619

Reportable segment information was as follows:

Three Months Ended Nine Months Ended
September 30, September 30,
(DOLLARS IN THOUSANDS) 2020 2019 2020 2019
Net sales:
Taste $ 765,238 $ 782,428 $ 2,343,884 $ 2,398,549
Scent 502,838 484,917 1,470,282 1,457,766
Consolidated $ 1,268,076 $ 1,267,345 $ 3,814,166 $ 3,856,315
Segment profit:
Taste $ 101,600 $ 121,425 $ 346,223 $ 383,450
Scent 101,388 87,894 277,156 272,061
Global expenses (9,608) (8,385) (49,550) (35,957)
Operational Improvement Initiatives (a) 0 (712) 0 (1,652)
Frutarom Integration Related Costs (b) (1,883) (10,511) (8,816) (36,825)
Restructuring and Other Charges, net (c) (1,497) (3,716) (8,299) (22,415)
Losses on sale of assets (415) (372) (1,568) (1,136)
FDA Mandated Product Recall (d) 0 (250) 0 (250)
Frutarom Acquisition Related Costs (e) (808) 2,914 (1,382) (5,182)
Compliance Review & Legal Defense Costs (f) (1,000) (3,623) (1,624) (3,623)
N&B Transaction Related Costs (g) (8,247) 0 (24,372) 0
N&B Integration Related Costs (h) (29,241) 0 (61,887) 0
Operating profit 150,289 184,664 465,881 548,471
Interest expense (34,844) (33,497) (99,046) (102,662)
Other (expense) income, net (9,945) 5,699 (4,762) 15,114
Income before taxes $ 105,500 $ 156,866 $ 362,073 $ 460,923


	Three Months Ended
	March 31,
(DOLLARS IN MILLIONS)	2021		2020
Net sales:
Nourish	$	1,308	$	772
Health & Biosciences	426		34
Scent	569		541
Pharma Solutions	162		0
Consolidated	$	2,465	$	1,347
Segment Adjusted Operating EBITDA
Nourish	$	270	$	176
Health & Biosciences	128		9
Scent	128		118
Pharma Solutions	43		0
Total	569		303
Depreciation & Amortization	(242)		(81)
Interest Expense	(65)		(32)
Other Income (Expense), net	7		(11)
Frutarom Integration Related Costs (a)	(1)		(4)
Restructuring and Other Charges, net (b)	(4)		(5)
Losses on sale of assets	0		(1)
Shareholder Activism Related Costs (c)	(7)		0
Employee Separation Costs (d)	(3)		0
Compliance Review & Legal Defense Costs (e)	0		(1)
N&B Inventory Step-Up Costs	(182)		0
N&B Transaction Related Costs (f)	(89)		(5)
N&B Integration Related Costs (g)	(37)		(10)




(Loss) Income Before Taxes	$	(54)	$	153

_______________________


(a)			Represents ~~accelerated depreciation related to a plant relocation in India and China.~~
~~(b)~~			~~Represents~~ costs related to the integration of the Frutarom acquisition. For 2021, costs primarily related to performance stock awards. For 2020, costs primarily related to advisory services, retention bonuses and performance stock awards. ~~For 2019, costs principally related to advisory services.~~
~~(c)~~(b)			For 2021, represents costs primarily related to severance as part of the Company's restructuring efforts. For 2020, represents costs primarily related to the Frutarom Integration Initiative. ~~For 2019, represents~~
(c)			Represents shareholder activist related costs, primarily ~~related to the Frutarom Integration Initiative and 2019 Severance Program.~~professional fees.
(d)			Represents ~~additional claims that management paid~~costs related to ~~co-packers.~~severance liabilities, including accelerated stock compensation expense, for employees who have separated from the Company.
(e)			Represents transaction-related costs and expenses related to the acquisition of Frutarom. For 2020, amount primarily includes earn-out payments, net of adjustments, amortization for inventory "step-up" costs and transaction costs principally related to the 2019 Acquisition Activity, including an adjustment to reverse an earnout liability and another adjustment to record an earnout liability in the third quarter of 2020. For 2019, amount primarily includes amortization for inventory "step-up" costs and transaction costs, along with a measurement period adjustment to the amount of the inventory "step-up" recorded.
~~(f)~~			Costs related to reviewing the nature of inappropriate payments and review of compliance in certain other countries. In addition, includes legal costs for related shareholder lawsuits.
~~(g)~~(f)			Represents transaction costs and expenses related to the ~~pending~~ transaction with N&B, ~~principally related to~~primarily includes legal and professional ~~fees for capital raising activities.~~fees.
~~(h)~~(g)			Represents costs primarily related to advisory services for the integration of the ~~pending~~ transaction with N&B, ~~principally~~primarily consulting fees.

1720

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(DOLLARS IN THOUSANDS)		2020		2019		2020		2019
(DOLLARS IN MILLIONS)										(DOLLARS IN MILLIONS)	2021		2020
Europe, Africa and Middle East	Europe, Africa and Middle East	$	481,088	$	512,715	$	1,487,538	$	1,570,415	Europe, Africa and Middle East	$	873	$	543
Greater Asia	Greater Asia	283,204		281,461		868,025		862,680		Greater Asia	587		310
North America	North America	320,753		286,741		924,661		881,718		North America	722		303
Latin America	Latin America	183,031		186,428		533,942		541,502		Latin America	283		191
Consolidated	Consolidated	$	1,268,076	$	1,267,345	$	3,814,166	$	3,856,315	Consolidated	$	2,465	$	1,347


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(DOLLARS IN THOUSANDS)		2020		2019		2020		2019
(DOLLARS IN MILLIONS)										(DOLLARS IN MILLIONS)	2021		2020
Net sales related to the U.S.	Net sales related to the U.S.	$	286,394	$	254,438	$	824,836	$	796,488	Net sales related to the U.S.	$	654	$	271
Net sales attributed to all foreign countries	Net sales attributed to all foreign countries	981,682		1,012,907		2,989,330		3,059,827		Net sales attributed to all foreign countries	1,811		1,076

No non-U.S. country had net sales greater than 6% of total consolidated net sales for the three months ended ~~September 30, 2020 and nine months ended September 30, 2020.~~March 31, 2021.

NOTE ~~11.~~12. EMPLOYEE BENEFITS

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


(DOLLARS IN THOUSANDS)		U.S. Plans
		Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019
Service cost for benefits earned(1)		$	399	$	474	$	1,199	$	1,422
(DOLLARS IN MILLIONS)										(DOLLARS IN MILLIONS)	U.S. Plans
											Three Months Ended March 31,
											2021		2020

Interest cost on projected benefit obligation(2)	Interest cost on projected benefit obligation(2)	4,263		5,453		12,789		16,359		Interest cost on projected benefit obligation(2)	$	3	$	4
Expected return on plan assets(2)	Expected return on plan assets(2)	(7,082)		(6,983)		(21,248)		(20,949)		Expected return on plan assets(2)	(5)		(7)
Net amortization and deferrals(2)	Net amortization and deferrals(2)	1,857		1,276		5,573		3,827		Net amortization and deferrals(2)	2		2
Net periodic benefit (income) cost	Net periodic benefit (income) cost	$	(563)	$	220	$	(1,687)	$	659	Net periodic benefit (income) cost	$	0	$	(1)


(DOLLARS IN THOUSANDS)		Non-U.S. Plans
		Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019
(DOLLARS IN MILLIONS)										(DOLLARS IN MILLIONS)	Non-U.S. Plans
											Three Months Ended March 31,
											2021		2020
Service cost for benefits earned(1)	Service cost for benefits earned(1)	$	5,940	$	4,873	$	17,820	$	14,619	Service cost for benefits earned(1)	$	10	$	6
Interest cost on projected benefit obligation(2)	Interest cost on projected benefit obligation(2)	3,245		4,435		9,736		13,305		Interest cost on projected benefit obligation(2)	2		3
Expected return on plan assets(2)	Expected return on plan assets(2)	(11,614)		(10,904)		(34,842)		(32,712)		Expected return on plan assets(2)	(12)		(12)
Net amortization and deferrals(2)	Net amortization and deferrals(2)	3,834		2,922		11,502		8,766		Net amortization and deferrals(2)	5		4

Net periodic benefit (income) cost	Net periodic benefit (income) cost	$	1,405	$	1,326	$	4,216	$	3,978	Net periodic benefit (income) cost	$	5	$	1

_______________________

(1)Included as a component of Operating profit.

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

The Company expects to contribute a total of ~~$4.4~~$4 million to its U.S. pension plans and a total of ~~$20.9~~$25 million to its Non-U.S. Plans during ~~2020.~~2021. During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, 0 contributions were made to the qualified U.S. pension plans, ~~$15.6~~$8 million of contributions were made to the non-U.S. pension plans, and ~~$3.3~~$1 million of benefit payments were made with respect to the Company's non-qualified U.S. pension plan.

Income (expense) recognized for postretirement benefits other than pensions included the following components:

Three Months Ended September 30, Nine Months Ended September 30,
(DOLLARS IN THOUSANDS) 2020 2019 2020 2019
Service cost for benefits earned $ 142 $ 148 $ 428 $ 444
Interest cost on projected benefit obligation 474 578 1,423 1,734
Net amortization and deferrals (1,153) (1,195) (3,458) (3,584)
Total postretirement benefit income $ (537) $ (469) $ (1,607) $ (1,406)


	Three Months Ended March 31,
(DOLLARS IN MILLIONS)	2021		2020


Net amortization and deferrals	$	(1)	$	(1)
Total postretirement benefit income	$	(1)	$	(1)

The Company expects to contribute ~~$3.8~~$4 million to its postretirement benefits other than pension plans during ~~2020.~~2021. In the ~~nine~~three months ended ~~September 30, 2020, $2.0~~March 31, 2021, $1 million of contributions were made.

NOTE ~~12.~~13. FINANCIAL INSTRUMENTS

Fair Value

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

•Level 1 — Quoted prices for identical instruments in active markets.

•Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

•Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The Company determines the fair value of structured liabilities (where performance is linked to structured interest rates, inflation or currency risks) using the London Interbank Offer Rate ("LIBOR") swap curve and forward interest and exchange rates at period end. Such instruments are classified as Level 2 based on the observability of significant inputs to the model. The Company does not have any instruments classified as Level 3, other than those included in pension asset trusts as discussed in Note 16 of ~~our 2019~~the Company's 2020 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~~not material as of ~~September 30, 2020.~~March 31, 2021.

1922

The carrying values and the estimated fair values of financial instruments at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 consisted of the following:


		September 30, 2020				December 31, 2019					March 31, 2021				December 31, 2020
(DOLLARS IN THOUSANDS)		Carrying Value		Fair Value		Carrying Value		Fair Value
(DOLLARS IN MILLIONS)										(DOLLARS IN MILLIONS)	Carrying Value		Fair Value		Carrying Value		Fair Value
LEVEL 1	LEVEL 1									LEVEL 1
Cash and cash equivalents(1)	Cash and cash equivalents(1)	$	469,840	$	469,840	$	606,823	$	606,823	Cash and cash equivalents(1)	$	872	$	872	$	650	$	650
2025 Notes(6)										2025 Notes(6)	1,001		982		0		0
2027 Notes(6)										2027 Notes(6)	1,220		1,172		0		0
2030 Notes(6)										2030 Notes(6)	1,511		1,454		0		0
2040 Notes(6)										2040 Notes(6)	775		736		0		0
2050 Notes(6)										2050 Notes(6)	1,574		1,470		0		0
LEVEL 2	LEVEL 2									LEVEL 2
Credit facilities and bank overdrafts(2)	Credit facilities and bank overdrafts(2)	1,666		1,666		3,131		3,131		Credit facilities and bank overdrafts(2)	11		11		2		2
Derivatives	Derivatives									Derivatives
Derivative assets(3)	Derivative assets(3)	2,534		2,534		3,575		3,575		Derivative assets(3)	3		3		1		1
Derivative liabilities(3)	Derivative liabilities(3)	16,021		16,021		7,415		7,415		Derivative liabilities(3)	18		18		29		29

Long-term debt:(4)	Long-term debt:(4)									Long-term debt:(4)
2020 Notes		0		0		299,381		302,700

2021 Euro Notes	2021 Euro Notes	350,646		352,520		334,561		338,244		2021 Euro Notes	353		353		368		370
2022 Notes										2022 Notes	300		300		0		0
2023 Notes	2023 Notes	299,234		316,527		299,004		305,580		2023 Notes	299		314		299		316
2024 Euro Notes	2024 Euro Notes	584,429		611,473		558,124		586,825		2024 Euro Notes	587		615		614		648
2026 Euro Notes	2026 Euro Notes	931,723		983,308		890,183		945,306		2026 Euro Notes	936		1,008		978		1,061
2028 Notes	2028 Notes	396,925		469,184		396,688		441,500		2028 Notes	397		453		397		472
2047 Notes	2047 Notes	493,887		570,413		493,571		526,106		2047 Notes	494		561		494		608
2048 Notes	2048 Notes	786,160		994,157		785,996		919,040		2048 Notes	786		984		786		1,059
Term Loan(2)		239,766		240,000		239,621		240,000
2022 Term Loan(2)		199,261		200,000		0		0
2018 Term Loan Facility(2)										2018 Term Loan Facility(2)	240		240		240		240
2022 Term Loan Facility(2)										2022 Term Loan Facility(2)	200		200		199		200
2024 Term Loan Facility(7)										2024 Term Loan Facility(7)	625		625		0		0
2026 Term Loan Facility(7)										2026 Term Loan Facility(7)	625		625		0		0
Amortizing Notes(5)	Amortizing Notes(5)	47,970		48,734		82,079		84,430		Amortizing Notes(5)	24		25		36		37

_______________________

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

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

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

(4)The fair value of the Company's long-term debt was calculated using discounted cash flows applying current interest rates and current credit spreads based on its own credit risk.

(5)The fair value of the Amortizing Notes of the TEUs is based on the most recently quoted price for the outstanding securities, adjusted for any known significant deviation in value. The estimated fair value of these long-term obligations is not necessarily indicative of the amount that would be realized in a current market exchange.

(6)The fair value of the Notes is based on market quoted price as there is an active market for the Notes and observable market data and inputs.

(7)The carrying amount approximates fair value as the Term Loans were assumed at fair value and the interest rate is reset frequently based on current market rates.

Derivatives

Foreign 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.

Commodity Contracts

The Company utilizes options, futures and swaps that are not designated as hedging instruments to reduce exposure to commodity price fluctuations on purchases of inventory such as soybeans, soybean oil and soybean meal.

Cash Flow Hedges

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

Hedges Related to Issuances of Debt

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

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 (Loss) Income and Comprehensive ~~Income (Loss).~~Loss.

Cross Currency Swaps

During the third quarter of 2019, the Company entered into four EUR/USD cross currency swaps that mature through May 2023. The swaps all qualified as net investment hedges in order to mitigate a portion of the Company's net European investments from foreign currency risk. During the third quarter of 2020, the Company entered into a transaction to unwind two of the swaps issued in the third quarter of 2019 and paid proceeds of ~~$14.6~~$15 million, net of accrued interest receivable of ~~$2.2~~$2 million. The loss arising from the termination of the swaps has been included as a component of accumulated other comprehensive loss. As of ~~September 30, 2020,~~March 31, 2021, the two remaining swaps were in a net liability position with an aggregate fair value of ~~$8.5~~$11 million which was classified as other current liabilities. Changes in fair value related to cross currency swaps are recorded in OCI.

The following table shows the notional amount of the Company’s derivative instruments outstanding as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:


(DOLLARS IN MILLIONS)	March 31, 2021		December 31, 2020
Foreign currency contracts	$	121	$	221
Commodity contracts	5		0
Cross currency swaps	300		300

(DOLLARS IN THOUSANDS) September 30, 2020 December 31, 2019
Foreign currency contracts $ 392,199 $ 473,600
Cross currency swaps 300,000 600,000

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 ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:


		September 30, 2020							March 31, 2021
(DOLLARS IN THOUSANDS)		Fair Value of Derivatives Designated as Hedging Instruments		Fair Value of Derivatives Not Designated as Hedging Instruments		Total Fair Value
(DOLLARS IN MILLIONS)								(DOLLARS IN MILLIONS)	Fair Value of Derivatives Designated as Hedging Instruments		Fair Value of Derivatives Not Designated as Hedging Instruments		Total Fair Value
Derivative assets~~(a)~~(1)	Derivative assets~~(a)~~(1)							Derivative assets~~(a)~~(1)
Foreign currency contracts	Foreign currency contracts	$	909	$	1,625	$	2,534	Foreign currency contracts	$	2	$	1	$	3

Derivative liabilities~~(b)~~(2)	Derivative liabilities~~(b)~~(2)							Derivative liabilities~~(b)~~(2)
Foreign currency contract	Foreign currency contract	$	5,117	$	2,446	$	7,563	Foreign currency contract	$	0	$	7	$	7
Cross currency swaps	Cross currency swaps	8,458		0		8,458		Cross currency swaps	11		0		11
Total derivative liabilities	Total derivative liabilities	$	13,575	$	2,446	$	16,021	Total derivative liabilities	$	11	$	7	$	18


		December 31, 2019							December 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
(DOLLARS IN MILLIONS)								(DOLLARS IN MILLIONS)	Fair Value of Derivatives Designated as Hedging Instruments		Fair Value of Derivatives Not Designated as Hedging Instruments		Total Fair Value
Derivative assets~~(a)~~(1)	Derivative assets~~(a)~~(1)							Derivative assets~~(a)~~(1)
Foreign currency contracts	Foreign currency contracts	$	1,310	$	2,265	$	3,575	Foreign currency contracts	$	0	$	1	$	1

Derivative liabilities~~(b)~~(2)	Derivative liabilities~~(b)~~(2)							Derivative liabilities~~(b)~~(2)
Foreign currency contracts	Foreign currency contracts	$	797	$	2,431	$	3,228	Foreign currency contracts	$	6	$	0	$	6
Interest rate swaps		4,187		—		4,187
Cross currency swaps								Cross currency swaps	23		—		23
Total derivative liabilities	Total derivative liabilities	$	4,984	$	2,431	$	7,415	Total derivative liabilities	$	29	$	0	$	29

_______________________

~~(a)~~(1)Derivative assets are recorded to Prepaid expenses and other current assets in the Consolidated Balance Sheet.

~~(b)~~(2)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 (Loss) Income and Comprehensive ~~Income (Loss)~~Loss for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (in ~~thousands)~~millions):

Amount of Gain (Loss) Location of Gain (Loss) Recognized in Income on Derivative
(DOLLARS IN THOUSANDS) Three Months Ended September 30,
2020 2019
Foreign currency contracts(1)
$ 4,460 $ (4,392) Other expense (income), net
Amount of Gain (Loss) Location of Gain (Loss) Recognized in Income on Derivative
(DOLLARS IN THOUSANDS) Nine Months Ended September 30,
2020 2019
Foreign currency contracts(1)
$ 1,108 $ (7,398) Other expense (income), net


	Amount of Gain (Loss)				Location of Gain (Loss) Recognized in Income on Derivative
(DOLLARS IN MILLIONS)	Three Months Ended March 31,
	2021		2020
Foreign currency contracts(1)	$	(3)	$	(8)	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.

2225

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 (Loss) Income and Comprehensive ~~Income (Loss)~~Loss for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (in ~~thousands)~~millions):

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 September 30, Three Months Ended September 30,
(DOLLARS IN THOUSANDS) 2020 2019 2020 2019
Derivatives in Cash Flow Hedging Relationships:
Foreign currency contracts $ (4,966) $ 2,438 Cost of goods sold $ 1,207 $ 1,924
Interest rate swaps (1)
215 216 Interest expense (215) (216)
Derivatives in Net Investment Hedging Relationships:
Cross currency swaps (8,370) 17,803 N/A — —
Non-Derivatives in Net Investment Hedging Relationships:
2024 Euro Notes (18,135) 16,437 N/A — —
2021 Euro Notes & 2026 Euro Notes (39,896) 36,162 N/A — —
Total $ (71,152) $ 73,056 $ 992 $ 1,708
Amount of Gain (Loss)
Recognized in OCI on
Derivative (Effective
Portion) Location of Gain (Loss)
Reclassified from AOCI into Income (Effective Portion) Amount of Gain (Loss)
Reclassified from
Accumulated OCI into
Income (Effective
Portion)
Nine Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Derivatives in Cash Flow Hedging Relationships:
Foreign currency contracts $ (7,049) $ (265) Cost of goods sold $ 4,527 $ 6,619
Interest rate swaps (1)
644 644 Interest expense (644) (644)
Derivatives in Net Investment Hedging Relationships:
Cross currency swaps (1,988) 24,408 N/A — —
Non-Derivatives in Net Investment Hedging Relationships:
2024 Euro Notes (19,640) 15,820 N/A — —
2021 Euro Notes & 2026 Euro Notes (43,207) 34,804 N/A — —
Total $ (71,240) $ 75,411 $ 3,883 $ 5,975

~~_______________________~~

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


	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 MILLIONS)	2021		2020			2021		2020
Derivatives in Cash Flow Hedging Relationships:
Foreign currency contracts	$	4	$	1	Cost of goods sold	$	(2)	$	2

Derivatives in Net Investment Hedging Relationships:

Cross currency swaps	9		21		N/A	—		—
Non-Derivatives in Net Investment Hedging Relationships:
2024 Euro Notes	20		10		N/A	—		—
2021 Euro Notes & 2026 Euro Notes	45		21		N/A	—		—
Total	$	78	$	53		$	(2)	$	2

The ineffective portion of the above noted cash flow hedges were not material during the three ~~and nine~~ months ended ~~September 30, 2019.~~March 31, 2021 and 2020.

The Company expects that ~~$4.1~~$3 million (net of tax) of derivative gain included in AOCI at ~~September 30, 2020,~~March 31, 2021, 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 ~~13.~~14. ACCUMULATED OTHER COMPREHENSIVE LOSS

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


(DOLLARS IN THOUSANDS)		Foreign Currency Translation Adjustments		Gains (Losses) 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)
(DOLLARS IN MILLIONS)										(DOLLARS IN MILLIONS)	Foreign Currency Translation Adjustments		Gains (Losses) on Derivatives Qualifying as Hedges		Pension and Postretirement Liability Adjustment		Total
Accumulated other comprehensive (loss) income, net of tax, as of December 31, 2020										Accumulated other comprehensive (loss) income, net of tax, as of December 31, 2020	$	(285)	$	(7)	$	(406)	$	(698)
OCI before reclassifications	OCI before reclassifications	(226,519)		(2,522)		0		(229,041)		OCI before reclassifications	(417)		2		2		(413)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	0		(3,883)		10,399		6,516		Amounts reclassified from AOCI	—		2		7		9
Net current period other comprehensive income (loss)	Net current period other comprehensive income (loss)	(226,519)		(6,405)		10,399		(222,525)		Net current period other comprehensive income (loss)	(417)		4		9		(404)
Accumulated other comprehensive (loss) income, net of tax, as of September 30, 2020		$	(599,562)	$	(4,337)	$	(335,520)	$	(939,419)
Accumulated other comprehensive (loss) income, net of tax, as of March 31, 2021										Accumulated other comprehensive (loss) income, net of tax, as of March 31, 2021	$	(702)	$	(3)	$	(397)	$	(1,102)


(DOLLARS IN THOUSANDS)		Foreign Currency Translation Adjustments		Gains (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)
(DOLLARS IN MILLIONS)										(DOLLARS IN MILLIONS)	Foreign Currency Translation Adjustments		Gains (Losses) on Derivatives Qualifying as Hedges		Pension and Postretirement Liability Adjustment		Total
Accumulated other comprehensive (loss) income, net of tax, as of December 31, 2019										Accumulated other comprehensive (loss) income, net of tax, as of December 31, 2019	$	(373)	$	2	$	(346)	$	(717)
OCI before reclassifications	OCI before reclassifications	(176,490)		9,232		179		(167,079)		OCI before reclassifications	(452)		3		0		(449)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	0		(5,975)		7,729		1,754		Amounts reclassified from AOCI	0		(2)		4		2
Net current period other comprehensive income (loss)	Net current period other comprehensive income (loss)	(176,490)		3,257		7,908		(165,325)		Net current period other comprehensive income (loss)	(452)		1		4		(447)
Accumulated other comprehensive (loss) income, net of tax, as of September 30, 2019		$	(573,486)	$	8,003	$	(302,069)	$	(867,552)
Accumulated other comprehensive (loss) income, net of tax, as of March 31, 2020										Accumulated other comprehensive (loss) income, net of tax, as of March 31, 2020	$	(825)	$	3	$	(342)	$	(1,164)

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


		Nine Months Ended September 30,				Affected Line Item in the Consolidated Statement of Income and Comprehensive Income (Loss)		Three Months Ended March 31,				Affected Line Item in the Consolidated Statement of (Loss) Income and Comprehensive Loss
(DOLLARS IN THOUSANDS)		2020		2019
(DOLLARS IN MILLIONS)							(DOLLARS IN MILLIONS)	2021		2020		Affected Line Item in the Consolidated Statement of (Loss) Income and Comprehensive Loss
Gains (losses) on derivatives qualifying as hedges	Gains (losses) on derivatives qualifying as hedges						Gains (losses) on derivatives qualifying as hedges

Foreign currency contracts	Foreign currency contracts	$	5,174	$	7,565	Cost of goods sold	Foreign currency contracts	$	(3)	$	2	Cost of goods sold
Interest rate swaps		(644)		(644)		Interest expense

Tax	Tax	(647)		(946)		Provision for income taxes	Tax	1		0		Provision for income taxes
Total	Total	$	3,883	$	5,975	Total, net of income taxes	Total	$	(2)	$	2	Total, net of income taxes
Losses on pension and postretirement liability adjustments	Losses on pension and postretirement liability adjustments						Losses on pension and postretirement liability adjustments

Prior service cost	Prior service cost	$	(13,044)	$	4,991	(a)	Prior service cost	$	2	$	(5)	(1)
Actuarial losses	Actuarial losses	(573)		(14,003)		(a)	Actuarial losses	(8)		0		(1)
Tax	Tax	3,218		1,283		Provision for income taxes	Tax	(1)		1		Provision for income taxes
Total	Total	$	(10,399)	$	(7,729)	Total, net of income taxes	Total	$	(7)	$	(4)	Total, net of income taxes

_______________________

~~(a)~~(1)The amortization of prior service cost and actuarial loss is included in the computation of net periodic benefit cost. Refer to Note 16 of ~~our 2019~~the Company's 2020 Form 10-K for additional information regarding net periodic benefit cost.

NOTE ~~14.~~15. COMMITMENTS AND CONTINGENCIES

Guarantees and Letters of Credit

The Company has various bank guarantees, ~~and~~ letters of credit and surety bonds which are ~~available for use~~used to support its ongoing business operations, ~~and to~~ satisfy governmental requirements associated with pending litigation in various ~~jurisdictions.~~jurisdictions and the payment of customs duties.

At ~~September 30, 2020,~~March 31, 2021, the Company had total bank guarantees, ~~and~~commercial guarantees, standby letters of credit and surety bonds of ~~$46.3 million~~$1.985 billion with various financial institutions. Included in the above aggregate amount was a total of ~~$13.5~~$13 million for other assessments in Brazil for various income tax and indirect tax disputes related to fiscal years 1998-2011. There was $111 million outstanding under the bank guarantees and $33 million outstanding under the commercial guarantees as of March 31, 2021. There were no material amounts utilized under the standby letters of credit as of ~~September 30, 2020.~~March 31, 2021.

In order to challenge the assessments in these cases in Brazil, the Company has been required to, and has separately pledged assets, principally property, plant and equipment, to cover assessments in the amount of ~~$7.2~~$7 million as of ~~September 30, 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, as amended on August 25, 2020, 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. On September 16, 2020, N&B issued $6.25 billion of senior unsecured notes, which reduced the remaining commitments under the Bridge Loans commitment letter in their entirety. The Bridge Loans commitment letter was also terminated as of such date. The N&B Notes, 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 N&B Notes will be guaranteed by IFF (or at the election of N&B and IFF, assumed by IFF).March 31, 2021.

Lines of Credit

The Company has various lines of credit which are available to support its ongoing business operations. As of ~~September 30, 2020,~~March 31, 2021, the Company had available lines of credit of ~~$107.2 million~~$6.295 billion with various financial institutions, in addition to the ~~$627.7 million~~$1.098 billion of capacity under the Credit Facility. There were ~~no material amounts drawn down~~total draw downs of $109 million pursuant to these lines of credit as of ~~September 30, 2020.~~March 31, 2021.

Litigation

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

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

Litigation Matters

On August 12, 2019, Marc Jansen filed a putative securities class action against IFF, its Chairman and CEO, and its then-CFO, in the United States District Court for the Southern District of New York. The lawsuit was filed after IFF disclosed that preliminary results of investigations indicated that Frutarom businesses operating principally in Russia and Ukraine had made improper payments to representatives of customers. On December 26, 2019, the Court appointed a group of six investment funds as lead ~~plaintiff~~plaintiffs and Pomerantz LLP as lead counsel. On March 16, 2020, lead ~~plaintiff~~plaintiffs 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. IFF, its officers, and Frutarom filed a motion to dismiss the case on June 26, 2020. On March 30, 2021, the court dismissed all of the claims against IFF, its officers and Frutarom. On April 28, 2021, lead plaintiffs filed a notice of appeal to the United States Court of Appeals for the Second Circuit.

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. One motion ("Borg") asserts claims under the U.S. federal securities laws against IFF, its Chairman and CEO, and its former CFO. On November 8, 2020, IFF and its officers filed their response to the Borg motion. On April 20, 2021, Mr. Borg filed a motion to stay the proceeding pending an appellate decision in the U.S. proceeding. The other motion ("Oman") (following an initial amendment) ~~asserts~~asserted claims under the Israeli Securities Act-1968 against IFF, its Chairman and CEO, and its former CFO, and against Frutarom and certain former Frutarom officers and directors, as well as claims under the Israeli Companies Act-1999 against certain former Frutarom officers and directors. On October 4, 2020, the Oman plaintiff filed a motion to remove IFF and its officers from the motion and to add factual allegations from the US amended complaint. Responses to the motion to amend the Oman motion were filed during November 2020. The court granted the motion to amend the Oman motion on February 17, 2021.

On October 29, 2019, IFF and Frutarom filed a claim in the Tel Aviv District Court, Israel, against Ori Yehudai, the former President and CEO of Frutarom, and against certain former directors of Frutarom, challenging the bonus of US $20 million granted to Yehudai in 2018. IFF and Frutarom allege, among other things, that Yehudai was not entitled to receive the bonus because he breached his fiduciary duty by, among other things, knowing of the above-mentioned improper payments and failing to prevent them from being made. The parties agreed, pursuant to the court’s recommendation, to attempt to resolve the dispute through mediation, which is ~~scheduled for the fourth quarter 2020,~~still ongoing, during which the proceedings relating to this claim are stayed.

On March 11, 2020, an IFF shareholder filed a motion to approve a class action in Israel against, among others, Frutarom, Yehudai, and Frutarom’s former board of directors, alleging that former minority shareholders of Frutarom were harmed as a result of the US $20 million bonus paid to Yehudai. The parties to this motion agreed to attempt to resolve the dispute through mediation to take place regarding the aforesaid claim against Yehudai, which as noted is still ongoing, during which the proceedings relating to this motion are stayed.

Investigation

On June 3, 2020, the Israel Police’s National Fraud Investigation Unit and the Israeli Securities Authority commenced an investigation into Frutarom and certain of its former executives, based on suspected bribery of foreign officials, money laundering, and violations of the Israeli Securities Act-1968. The National Fraud Investigation Unit and the Israeli Securities Authority have provided IFF and Frutarom with various orders. IFF is working to ensure compliance with such orders, all in accordance with, and subject to, Israeli law.

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 $60 million as of ~~September 30, 2020.~~

March 31, 2021.

Guangzhou Scent plant

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

The net book value of the existing plant was approximately $9 million as of ~~September 30, 2020.~~March 31, 2021.

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 2022. The Company received payments totaling $30 million through the end of 2019. In the third quarter of 2020, the Company received a payment of approximately $13 million. A final payment is expected to be received upon completion of the final environmental inspection.

Production at the facility ceased during 2019. In the second quarter of 2020, the Company transferred ownership of the site to the government. The land remediation activities are in progress and are expected to be completed in the second half of 2022. During the second quarter of 2020, the remaining net book value of the plant was written off.

Total China Operations

The total net book value of all 710 plants in China was approximately ~~$199~~$289 million as of ~~September 30, 2020.~~March 31, 2021.

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 ~~$20.7~~$20 million. The Brazilian matters take an extended period of time to proceed through the judicial process and there are a limited number of rulings to date.

~~Pending Transaction with Nutrition & Biosciences, Inc.~~

The Merger Agreement governing the DuPont N&B Transaction, subjects IFF to various contingent payments to the extent that the transaction is not consummated. Specifically, the Merger Agreement provides DuPont the right to receive a termination fee of $521.5 million, in certain circumstances, including if the agreement is terminated due to the IFF Board changing its recommendation. In addition, if the Merger Agreement is terminated, DuPont and IFF have agreed to split 50/50 any commitment fees incurred in connection with the debt financing for the DuPont N&B Transaction.

On August 27, 2020, a special shareholder meeting was held and IFF shareholders voted to approve the issuance of shares of IFF Common Stock in connection with the DuPont N&B Transaction pursuant to the Merger Agreement.

2729

Brazil Tax Credits

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

In addition to the ~~$8.0~~$8 million recognized in the fourth quarter of 2019, during the first quarter of 2020 the Company recognized ~~$3.5~~$4 million as an additional recovery on the existing claim. During ~~the first nine months of~~ 2020, the Company also recognized ~~$2.7~~$3 million related to a claim from another of its subsidiaries in Brazil. The income is recognized as a reduction in Selling and Administrative expenses.

Other

The Company determines estimates of reasonably possible losses or ranges of reasonably possible losses in excess of related accrued liabilities, if any, when it has determined that either a loss is reasonably possible or a loss in excess of accrued amounts is reasonably possible and the amount of losses or range of losses is determinable. For all third party contingencies (including labor, contract, technology, tax, product-related claims and business litigation), the Company currently estimates that the aggregate range of reasonably possible losses in excess of any accrued liabilities is ~~$0.1 million~~$0 to approximately ~~$12.0~~$28 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 ~~15.~~16. REDEEMABLE NONCONTROLLING INTERESTS

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

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


(DOLLARS IN ~~THOUSANDS)~~MILLIONS)	Redeemable Noncontrolling Interests
Balance at December 31, ~~2018~~2019	$	~~81,806~~99
~~Acquired through acquisitions during 2019~~	~~23,594~~
Impact of foreign exchange translation	~~923~~19
Share of profit or loss attributable to redeemable noncontrolling interests	~~5,397~~2
Redemption value adjustment for the current period	~~(1,593)~~(6)
Measurement period adjustments	~~5,392~~ (1)
~~Dividends paid~~	~~(432)~~
Exercises of redeemable noncontrolling interests	~~(542)~~(10)
Balance at ~~September 30, 2019~~March 31, 2020	$	~~114,545~~103

Balance at December 31, ~~2019~~2020	$	~~99,043~~98

Impact of foreign exchange translation	~~16,268~~2
Share of profit or loss attributable to redeemable noncontrolling interests	~~3,480~~1
Redemption value adjustment for the current period	~~(4,964)~~1
~~Measurement period adjustments~~	~~(1,426)~~
~~Dividends paid~~	~~(1,626)~~
~~Exercises of redeemable noncontrolling interests~~	~~(10,770)~~
Balance at ~~September 30, 2020~~March 31, 2021	$	~~100,005~~102

For ~~2019,~~2020, the increase in redeemable noncontrolling interests was primarily due to the ~~interests acquired through acquisitions during~~impact of foreign exchange translation offset by the ~~first quarter~~exercise of ~~2019, as discussed in Note 3.~~options.

During 2020, the Company paid ~~$13.1~~approximately $14 million related to the purchase of certain noncontrolling interests where the option related to the purchase had been exercised in the fourth quarter of 2019.

For 2021, the increase in redeemable noncontrolling interests was primarily due to foreign exchange translation.

NOTE 17. SUBSEQUENT EVENT

Fruit Preparation Divestiture

In the second quarter of 2021, IFF entered into an agreement to divest its fruit preparation business to Frulact, which specializes in fruit preparations for the food & beverage industry. The divestiture is expected to close in the third quarter 2021, pending customary closing conditions, including regulatory approvals and is not expected to have a material impact on the Company's results of operations.

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

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

OVERVIEW

Company Background

~~We are~~On February 1, 2021, the Company completed its Merger with Nutrition & Biosciences, Inc. (“N&B”), a ~~leading innovator~~subsidiary of ~~sensory experiences that move~~DuPont formed to hold the ~~world. Our creative capabilities, global footprint, regulatory~~Nutrition and ~~technological know-how provide us~~Biosciences business (the “N&B Business”, and such transaction, the "N&B Transaction") pursuant to an Agreement and Plan of Merger (the "Merger Agreement") with DuPont de Nemours, Inc. ("DuPont"). The shares issued in the Merger represented approximately 55.4% of the common stock of IFF on a ~~competitive advantage in meeting~~fully diluted basis, after giving effect to the ~~demands~~Merger, as of ~~our global, regional~~February 1, 2021.

As a result of the N&B Transaction, and ~~local customers around the world. The~~following our 2018 acquisition of Frutarom ~~solidified~~Industries Ltd., we have expanded our ~~position as~~global leadership positions, which now include high-value ingredients and solutions in the Food & Beverage, Home & Personal Care and Health & Wellness markets, and across key Taste, Texture, Scent, Nutrition, Enzymes, Cultures, Soy Proteins, Pharmaceutical Excipients, Biocides and Probiotics categories.

We are now organized in four segments: Nourish, Health & Biosciences, Scent, and Pharma Solutions. The Company’s consolidated financial information for the three months ended March 31, 2021 reflects the results of N&B effective February 1, 2021, whereas the Company’s consolidated financial information for the three months ended March 31, 2020 do not include amounts related to N&B.

Nourish segment consists of most of our legacy Taste segment, N&B’s Food & Beverage division and the food protection business of N&B’s Health & Biosciences division. This segment comprises an ~~industry leader across an expanded~~innovative and broad portfolio of ~~products, resulting~~natural-based ingredients to enhance nutritional value, texture and functionality in a ~~broader customer base across small, mid-sized~~wide range of beverage, dairy, bakery, confectionery and ~~large companies and an expansion to new adjacency that provides a platform for significant cross-selling opportunities.~~culinary applications.

InHealth & Biosciences segment consists of N&B’s Health & Biosciences division, with the ~~first quarter~~exception of ~~fiscal year 2020, we began operating our business across two segments, Taste and Scent. As~~food protection, which is part of ~~this new operating model, nearly all~~our Nourish segment, as well as parts of our Nutrition and Specialty Ingredients offerings. This segment is the biotechnology-driven portfolio of the ~~former Frutarom business segment was consolidated with the Taste segment.~~

As a leading creator of flavor offerings, we help our customers deliver on the promise of delicious and healthy foods and drinks that appeal to consumers. Our Taste business comprises a diversified portfolio across flavor compounds, savory solutions, inclusions and nutrition and specialty ingredients. While we are a global leader, our flavor compounds are more regional in nature, with different formulas that reflect local taste preferences. Consequently, we manage our flavor compounds geographically, creating products in our regional creative centers which allow us to satisfy local taste preferences, while also helping to ensure regulatory compliance and production standards. The savory solutions, inclusions and nutritionN&B Business, where enzymes, food cultures, probiotics and specialty ingredients ~~products were included~~for food and non-food applications are developed and produced. The Health & Biosciences business includes a biotechnology-driven probiotics portfolio, that produces cultures for use in fermented foods such as yogurt, cheese and fermented beverages. It also uses industrial fermentation to produce enzymes and microorganisms that provide product and process performance benefits to household detergents, animal feed, ethanol production and brewing.

Scent segment consists of our legacy Scent segment as well as, effective January 2, 2021, our Flavor Ingredients business.

Pharma Solutions segment consists of N&B’s Pharma Solutions division, which is one of the ~~legacy Frutarom businesses during 2019~~world’s largest producers of cellulosics and ~~are managed globally under~~alginates-based pharma excipients, and is used to improve the ~~Taste business segment beginning~~functionality and delivery of active pharmaceutical ingredients, including controlled or modified drug release formulations, and enable the development of more effective pharma solutions.

Financial Measures — Currency Neutral

Changes in our financial results include the impact of changes in foreign currency exchange rates. We provide currency neutral calculations in this report to remove the impact of these items. Beginning in the first quarter 2021, we elected to change the method in which we calculate currency neutral numbers to now be calculated by translating current year invoiced sale amounts at the exchange rates used for the corresponding prior year period. Previously we calculated 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 ~~2020.~~the underlying transaction. We use currency neutral results in our analysis of subsidiary or segment performance.

~~Our global~~

We also use currency neutral numbers when analyzing our performance against our competitors and believe the change in method better allows us to do so.

Due to the Merger with N&B, for the fiscal year 2021 we will not be presenting currency neutral impacts for the Nourish, Health & Biosciences and Pharma Solution operating segments as the performance in these operating segments includes effects of N&B in 2021, while the 2020 period does not and thus the periods are not comparable. We present the currency neutral impacts for the Scent business creates fragrance compounds and fragrance ingredients that are integral elements in the world’s finest perfumes and best-known household and personal care products. We believe our unique portfoliooperating segment as this operating segment does not have any effects of ~~natural and synthetic ingredients, global footprint, innovative technologies and know-how, deep consumer insight and customer intimacy make us a market leader in scent.~~N&B.

Impact of COVID-19 Pandemic

On March 11, 2020, the World Health Organization designated ~~the recent novel coronavirus ("COVID-19")~~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 where appropriate. ~~Some of the restrictions imposed (such as the closure of non-essential businesses and the closure of retail establishments) have begun to be lifted.~~ 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 continue to be minor disruptions, all of IFF’s manufacturing facilities remain open and continue to manufacture products.

The COVID-19 pandemic remains a serious threat to the health of the world's population and certain countries and regions continue to suffer from outbreaks or have seen a recurrence of infections. Accordingly, the Company continues to take the threat from COVID-19 seriously even as the adverse financial impact of COVID-19 on the Company has lessened.

~~Health and Safety of our People and Consumers~~

Employee safety is our first priority, and we continue to execute on 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, and having our office-based employees continuing to work remotely where appropriate.

We maintain crisis management teams in place monitoring this 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. We have developed return-to-workplace protocols and implemented mandatory site guidelines to continue to protect the health and safety of our employees at each location and to promote an orderly and phased return for those who have been working from home.

~~Customer Demand~~

In the third quarter of 2020, consolidated revenue was flat on a reported basis and increased 1% on a currency neutral basis (which excludes the effects of changes in currency), a significant sequential improvement over the second quarter as we continued to experience reduced demand due to COVID-19 in many product categories, offset by Consumer Fragrances which continues to perform well. Two areas where demand continues to be below historical levels are: 1) Taste products used in retail food services (principally in Flavor Compounds), and 2) our Fine Fragrances product categories. These declines are primarily a result of travel and shelter-in-place restrictions, in certain regions, and the closure of retail outlets. In the third quarter of 2020, we experienced lower declines in both Flavor Compounds and Fine Fragrances than were experienced in the second quarter of 2020.

Operating profit margin declined in the third quarter of 2020 as compared to the prior year as a result of incremental costs in certain categories. We expect demand to return for all categories (including for Taste products used in retail food services and Fine Fragrances product categories) although the timing of this increase in demand is uncertain and depends on the duration and scope of the COVID-19 pandemic, overall economic conditions and consumer preferences.

~~Facilities and Supply Chain~~

Through the third quarter of 2020, we have incurred some additional costs related to our supply chain but, overall, there has been minimal disruption to our supply chain network, including in the areas of the supply of our ingredients, raw materials and 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. As a result, shipments for some orders continue to be delayed.

In affected locations, we continue to receive shipments from our suppliers and have taken steps to minimize any disruptions on this segment of our supply chain including increasing inventory levels to meet anticipated customer demand in the fourth quarter of 2020 and early 2021. Although all of our manufacturing facilities remain operational, we anticipate that we will continue to incur additional costs from labor, shipping, and cleaning as well as higher raw material costs, related to potential COVID-19 supply chain disruptions.

Our manufacturing plants continue to operate world-wide in compliance with the orders and restrictions imposed by government authorities in each of our locations, and we are working with our customers to meet their specific shipment needs. Most plants have restored operations to historical levels, notwithstanding that certain restrictions imposed to achieve social distancing remain in place and stricter measures may be reinstated. Some of IFF's R&D and creative applications centers are operating on limited schedules. To provide business continuity, we have relationships with third party laboratories that can conduct adequate testing.

~~Overall Impact on Financial Results~~

For our consolidated results of operations for the third quarter of 2020, revenue was largely flat but the overall performance reflects continued strength in Consumer Fragrances, partially offset by declines in Fine Fragrances and most Taste products. The impact that COVID-19 will have on our consolidated results of operations for the remainder of ~~the year and into the early part of~~ 2021 remains uncertain. ~~Based on~~Due to the length and severity of COVID-19, we ~~may experience~~are experiencing 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.

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

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

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

Financial Performance Overview

For a reconciliation between reported and adjusted figures, please refer to the "Non-GAAP Financial Measures" section.

Sales

Sales in the ~~third~~first quarter of ~~2020 were flat~~2021 increased $1.118 billion, or 83% on a reported basis, ~~and increased 1% on a currency neutral basis. Scent sales increased 4% on both a reported and currency neutral basis~~to $2.465 billion compared to $1.347 billion in the ~~third~~2020 period. Performance was primarily driven by $1.076 billion of incremental sales that were attributable to the inclusion of N&B, which was merged and consolidated into our results of operations effective February 1, 2021. In addition, sales performance was driven by volume increases across the Nourish, Health & Biosciences and Scent operating segments.

Gross Profit

Gross profit in the first quarter of ~~2020. Taste sales decreased 2%~~2021 increased $188 million, or 33% on a reported basis, ~~and 1% on a currency neutral basis in the third quarter~~to $754 million (31% of 2020. Change in consolidated reported and currency neutral sales were driven by continued strength in Consumer Fragrances, offset by overall lower volume reductions in Taste and certain other Scent product categories. The year-on-year declines in sales of many product categories is due to travel and shelter-in-place restrictions, in certain regions, as a result of COVID-19.

Exchange rate variations had an unfavorable impact on net sales for the third quarter of 2020 of approximately 1%. The effect of exchange rates can vary by business and region, depending upon the mix of sales priced in U.S. dollars assales) compared to ~~other currencies.~~

~~Gross Margin~~

Gross margin decreased to 41.4% in the third quarter of 2020 from 42.1% in the 2019 period, principally driven by unfavorable price versus input costs, sales volume reductions on existing business and unfavorable mix due to COVID-19, partially offset by the impact of productivity, integration and cross selling initiatives.

~~Operating profit~~

~~Operating profit decreased $34.4~~$566 million ~~to $150.3 million (11.9%~~(42% of sales) in the 2020 ~~third quarter~~period. The increase in gross profit was primarily driven by the inclusion of N&B, along with sales volume increases in the business. The decrease in gross profit margin, as a percentage of sales, was due to the difference in product portfolio mix of the new N&B Business compared to ~~$184.7~~the historical IFF product portfolio mix.

Adjusted Operating EBITDA

Adjusted operating EBITDA in the first quarter of 2021 increased $266 million, ~~(14.6%~~or 88% on a reported basis, to $569 million (23% of sales) compared to $303 million (22% of sales) in the comparable ~~2019~~2020 period. ~~Foreign currency had a 5.1% unfavorable impact on~~The increase in adjusted operating ~~profit~~EBITDA was primarily driven by the inclusion of N&B, along with sales volume increases in the third quarter of 2020 compared to a 1.1% unfavorable impact on operating profit in the 2019 period. Adjusted operating profit was $193.4 million (15.2% of sales) for the third quarter of 2020, a decrease from $200.9 million (15.9% of sales) for the third quarter of 2019, principally driven by unfavorable price versus input costs and sales volume reductions on existing business due to COVID-19, partially offset by productivity, integration and cross selling initiatives.business.

RESULTS OF OPERATIONS


		Three Months Ended								Nine Months Ended									Three Months Ended
		September 30,								September 30,									March 31,
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)		2020			2019			Change		2020			2019			Change
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)																		(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)	2021			2020			Change
Net sales	Net sales	$	1,268,076		$	1,267,345		—	%	$	3,814,166		$	3,856,315		(1)	%	Net sales	$	2,465		$	1,347		83	%
Cost of goods sold	Cost of goods sold	743,649			734,257			1	%	2,242,030			2,245,729			—	%	Cost of goods sold	1,711			781			119	%
Gross profit	Gross profit	524,427			533,088					1,572,136			1,610,586					Gross profit	754			566
Research and development (R&D) expenses	Research and development (R&D) expenses	89,968			85,077			6	%	256,825			260,489			(1)	%	Research and development (R&D) expenses	143			86			66	%
Selling and administrative (S&A) expenses	Selling and administrative (S&A) expenses	234,520			210,829			11	%	694,641			634,111			10	%	Selling and administrative (S&A) expenses	451			230			96	%
Amortization of acquisition-related intangibles	Amortization of acquisition-related intangibles	47,738			48,430			(1)	%	144,922			143,964			1	%	Amortization of acquisition-related intangibles	152			48			217	%
Restructuring and other charges, net	Restructuring and other charges, net	1,497			3,716			(60)	%	8,299			22,415			(63)	%	Restructuring and other charges, net	4			5			(20)	%
Losses on sales of fixed assets	Losses on sales of fixed assets	415			372			12	%	1,568			1,136			38	%	Losses on sales of fixed assets	—			1			(100)	%
Operating profit	Operating profit	150,289			184,664					465,881			548,471					Operating profit	4			196
Interest expense	Interest expense	34,844			33,497			4	%	99,046			102,662			(4)	%	Interest expense	65			32			103	%

Other expense (income), net		9,945			(5,699)			NMF		4,762			(15,114)			NMF
Income before taxes		105,500			156,866					362,073			460,923
Taxes on income		19,269			27,059			(29)	%	61,265			81,033			(24)	%
Net income		$	86,231		$	129,807		(34)	%	$	300,808		$	379,890		(21)	%
Other (income) expense, net																		Other (income) expense, net	(7)			11			(164)	%
(Loss) income before taxes																		(Loss) income before taxes	(54)			153
Taxes on (loss) income																		Taxes on (loss) income	(14)			26			(154)	%
Net (loss) income																		Net (loss) income	$	(40)		$	127		(131)	%
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	1,403			2,683			(48)	%	5,169			7,560			(32)	%	Net income attributable to noncontrolling interests	2			3			(33)	%
Net income attributable to IFF stockholders		$	84,828		$	127,124		(33)	%	$	295,639		$	372,330		(21)	%
Net (loss) income attributable to IFF stockholders																		Net (loss) income attributable to IFF stockholders	$	(42)		$	124		(134)	%
Diluted EPS	Diluted EPS	$	0.75		$	1.13		(34)	%	$	2.64		$	3.30		(20)	%	Diluted EPS	$	(0.21)		$	1.15		(118)	%
Gross margin	Gross margin	41.4		%	42.1		%			41.2		%	41.8		%			Gross margin	30.6		%	42.0		%	NMF
R&D as a percentage of sales	R&D as a percentage of sales	7.1		%	6.7		%			6.7		%	6.8		%			R&D as a percentage of sales	5.8		%	6.4		%	(60)	bps
S&A as a percentage of sales	S&A as a percentage of sales	18.5		%	16.6		%			18.2		%	16.4		%			S&A as a percentage of sales	18.3		%	17.1		%	120	bps
Operating margin	Operating margin	11.9		%	14.6		%			12.2		%	14.2		%			Operating margin	0.2		%	14.6		%	NMF
Adjusted operating margin		15.2		%	15.9		%			15.0		%	16.1		%

Effective tax rate	Effective tax rate	18.3		%	17.2		%			16.9		%	17.6		%			Effective tax rate	25.9		%	17.0		%	890	bps
Segment net sales	Segment net sales																	Segment net sales
Taste		$	765,238		$	782,428		(2)	%	$	2,343,884		$	2,398,549		(2)	%
Nourish																		Nourish	$	1,308		$	772		69	%
Health & Biosciences																		Health & Biosciences	426			34			NMF
Scent	Scent	502,838			484,917			4	%	1,470,282			1,457,766			1	%	Scent	569			541			5	%
Pharma Solutions																		Pharma Solutions	162			—			100	%
Consolidated	Consolidated	$	1,268,076		$	1,267,345				$	3,814,166		$	3,856,315				Consolidated	$	2,465		$	1,347

_______________________

NMF: Not meaningful

Cost of goods sold includes the cost of materials and manufacturing expenses. R&D includes expenses related to the development of new and improved products and technical product support. S&A expenses include expenses necessary to support our commercial activities and administrative expenses supporting our overall operating activities including compliance with governmental regulations.

~~THIRD~~FIRST QUARTER ~~2020~~2021 IN COMPARISON TO ~~THIRD~~FIRST QUARTER ~~2019~~2020

Sales

Sales for the ~~third~~first quarter of ~~2020 totaled $1.3~~2021 increased $1.118 billion, ~~which was flat~~or 83% on a reported basis, ~~and increased 1% on a currency neutral basis as~~to $2.465 billion, compared to $1.347 billion in the prior year quarter. ~~Sales~~Performance was primarily driven by $1.076 billion of incremental sales that was attributable to the inclusion of N&B, which was merged and consolidated into our results of operations effective February 1, 2021. In addition, sales performance reflected growth for the Nourish, Health & Biosciences and Scent ~~segment reflected continued growth in Consumer Fragrances, partially offset~~segments, primarily driven by ~~declines in Fine Fragrances. Sales performance for~~volume increases across the ~~Taste segment reflected reduced sales in most Taste products related to retail food services.~~three segments.

Sales Performance by Segment


		% Change in Sales - Third Quarter 2020 vs. Third Quarter 2019					% Change in Sales - First Quarter 2021 vs. First Quarter 2020
		Reported		Currency Neutral (1)			Reported		Currency Neutral(1)
Taste		-2	%	-1	%
Nourish						Nourish	69	%	NMF
Health & Biosciences						Health & Biosciences	NMF		NMF
Scent	Scent	4	%	4	%	Scent	5	%	5	%
Pharma Solutions						Pharma Solutions	NMF		NMF
Total	Total	0	%	1	%	Total	83	%	NMF

_______________________

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

~~Taste~~NMF: Not meaningful

~~Taste~~Nourish

Nourish sales in ~~2020 decreased 2%~~2021 increased $536 million, or 69% on a reported basis, ~~and 1% on a currency neutral basis versus~~to $1.308 billion, compared to $772 million in the prior year period. Performance in the Nourish operating segment was primarily driven by $525 million of incremental sales ~~declines in all regions (except North America) primarily from volume reductions due to reduced consumer demand related~~that was attributable to the ~~COVID-19 pandemic, partially offset~~inclusion of N&B, along with volume increases, particularly in Flavors.

Health & Biosciences

Health & Biosciences sales in 2021 was $426 million compared to $34 million in the prior year period. Performance in the Health & Biosciences operating segment was primarily driven by $389 million of incremental sales that was attributable to the inclusion of N&B, as the majority of this operating segment consists of the new ~~win performances (net of losses).~~N&B Business. In addition, sales performance reflected volume increases in the operating segment.

Scent

Scent sales in ~~2020~~2021 increased 4%$28 million, or 5% on ~~both~~ a reported ~~and~~basis, to $569 million, compared to $541 million in the prior year period. Scent sales in 2021 also increased 5% on a currency neutral basis. Sales growth in the Scent ~~business unit~~operating segment was led by ~~Consumer Fragrances, primarily driven by new win performances (net of losses) and volume increases. Performance in the Scent business unit was partially offset by declines in Fine Fragrances,~~Fragrance Compounds, primarily driven by volume ~~reductions from disruptions~~increases.

Pharma Solutions

Pharma Solutions sales in ~~consumer access to certain retail markets due to~~2021 was $162 million. This was a new operating segment of the ~~COVID-19 pandemic.~~

Company as a result of the Merger with N&B and did not exist in the comparable 2020 period.

Cost of Goods Sold

Cost of goods sold, as a percentage of sales, increased ~~0.7%~~11.4% in the ~~third~~first quarter of 2021 to 69.4% compared to 58.0% in the first quarter of 2020, ~~to 58.6% compared to 57.9% in the third quarter of 2019, principally~~primarily driven ~~by higher raw material costs, as a percentage of sales, due to the impact of COVID-19 and partially offset~~ by the impact of ~~productivity and integration initiatives.~~

~~Research and Development (R&D) Expenses~~

~~Overall R&D expenses, as a percentage of sales, increased to 7.1%~~the difference in ~~the third quarter of 2020 versus 6.7% in the third quarter of 2019. The increase, as a percentage of sales, in 2020 was principally due to the impact of an increase in Applied R&D expenses.~~

~~Selling and Administrative (S&A) Expenses~~

S&A expenses increased $23.7 million to $234.5 million (18.5% of sales), in the third quarter of 2020 compared to $210.8 million (16.6% of sales) in the third quarter of 2019. Adjusted S&A expense decreased by $2.8 million to $193.6 million (15.3% of sales) in 2020 compared to $196.5 million (15.5% of sales) in 2019.

~~Restructuring and Other Charges~~

~~Restructuring and other charges decreased to $1.5 million in the third quarter of 2020 compared to $3.7 million in the third quarter of 2019 (see Note 4 for additional information).~~

~~Amortization of Acquisition-Related Intangibles~~

~~Amortization expenses decreased to $47.7 million in the third quarter of 2020 compared to $48.4 million in the third quarter of 2019.~~

~~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 10 to the Consolidated Financial Statements) and certain non-recurring items, net; Interest expense; Other (expense) income, net; and Taxes on income. See Note 10 to the Consolidated Financial Statements for the reconciliation to Income before taxes.

Three Months Ended September 30,
(DOLLARS IN THOUSANDS) 2020 2019
Segment profit:
Taste $ 101,600 $ 121,425
Scent 101,388 87,894
Global expenses (9,608) (8,385)
Operational Improvement Initiatives — (712)
Frutarom Integration Related Costs (1,883) (10,511)
Restructuring and Other Charges, net (1,497) (3,716)
Losses on sale of assets (415) (372)
FDA Mandated Product Recall — (250)
Frutarom Acquisition Related Costs (808) 2,914
Compliance Review & Legal Defense Costs (1,000) (3,623)
N&B Transaction Related Costs (8,247) —
N&B Integration Related Costs (29,241) —
Operating profit $ 150,289 $ 184,664
Profit margin:
Taste 13.3 % 15.5 %
Scent 20.2 % 18.1 %
Consolidated 11.9 % 14.6 %

~~Taste Segment Profit~~

Taste segment profit decreased $19.8 million to $101.6 million in the third quarter of 2020 (13.3% of segment sales) from $121.4 million (15.5% of sales) in the comparable 2019 period. The decrease principally reflected volume reductions on existing business and unfavorable price versus input costs due to COVID-19, partially offset by the impact of new win performances (net of losses), integration, cross selling and productivity initiatives.

~~Scent Segment Profit~~

Scent segment profit increased $13.5 million to $101.4 million in the third quarter of 2020 (20.2% of segment sales) from $87.9 million (18.1% of sales) in the comparable 2019 period. The increase principally reflected new win performances (net of losses) and the impact of productivity initiatives, partially offset by unfavorable price versus input costs and mix.

~~Global Expenses~~

~~Interest Expense~~

Interest expense increased to $34.8 million in the third quarter of 2020 compared to $33.5 million in the 2019 period. Average cost of debt was 3.1% for the 2020 period compared to 3.0% for the 2019 period.

~~Other Expense (Income), Net~~

Other expense (income), net decreased by $15.6 million to $9.9 million of net expense in the third quarter of 2020 versus $5.7 million of income in the 2019 period. The decrease was primarily driven by foreign exchange losses.

~~Income Taxes~~

The effective tax rate for the three months ended September 30, 2020 was 18.3% compared with 17.2% for the three months ended September 30, 2019. The adjusted effective tax rate for the three months ended September 30, 2020 was 18.5%. compared to 18.1% for the third quarter of 2019. The increase in effective tax rate and adjusted effective tax rate was primarily due to an unfavorableproduct portfolio mix of ~~earnings and an increase in loss provisions, partially offset by lower repatriation costs.~~

~~FIRST NINE MONTHS 2020 IN COMPARISON TO FIRST NINE MONTHS 2019~~

~~Sales~~

~~Sales for~~ the ~~first nine months of 2020 totaled $3.8 billion, a decrease of 1% on a reported basis and an increase of 1% on a currency neutral basis as~~new N&B Business compared to the ~~2019 period. The 2019 Acquisition Activity had an immaterial impact on sales growth on both a reported and currency neutral basis. Sales performance for~~historical IFF product portfolio mix. In addition, the Scent segment reflected continued growth in Consumer Fragrances, partially offset by declines in Fine Fragrances. Sales performance for the Taste segment reflected reduced sales in most Taste products related to retail food services.

~~Sales Performance by Segment~~

% Change in Sales - First Nine Months 2020 vs. First Nine Months 2019
Reported
Currency Neutral (1)
Taste -2 % 0 %
Scent 1 % 2 %
Total -1 % 1 %

~~_______________________~~

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

~~Taste~~

~~Taste sales in 2020 decreased 2% on a reported basis and were flat on a currency neutral basis versus the prior year period. Performance~~increase was ~~primarily driven by volume reductions~~ due to ~~reduced consumer demand related to COVID-19, partially offset by new win performances (net of losses).~~

~~Scent~~

Scent sales in 2020 increased 1% on a reported basis and increased 2% on a currency neutral basis. Sales growth in the Scent business unit was led by Consumer Fragrances, primarily driven by new win performances (net of losses) and volume increases in most product offerings to support consumer demand related to the COVID-19 pandemic. Performance in the Scent business unit was partially offset by declines in Fine Fragrances, primarily driven by volume reductions caused by the disruption of consumer access to retail markets due to COVID-19. Fragrance Ingredients also contributed to the decline in the Scent business unit, primarily driven by price reductions and supply-chain challenges in India requiring us to forego external sales to customers in Fragrance Ingredients in favor of supplying our Fragrance Compounds business.

~~Cost of Goods Sold~~

Cost of goods sold, as a percentage of sales, increased 0.6% in the first nine months of 2020 to 58.8% compared to 58.2% in the 2019 period, principally driven by higher raw material costs, as a percentage of sales, due to the impact of COVID-19 and partially offset by the impact of productivity and integration initiatives.increases.

Research and Development (R&D) Expenses

Overall R&D expenses, as a percentage of sales, decreased to ~~6.7%~~5.8% in the first ~~nine months~~quarter of ~~2020~~2021 versus ~~6.8%~~6.4% in the ~~2019 period.~~first quarter of 2020. The decrease, as a percentage of sales, in 2021 was primarily due to the impact of the Merger with N&B that led to an increase in R&D expenses, offset by a larger increase in sales.

Selling and Administrative (S&A) Expenses

~~In the first nine months of 2020,~~ S&A expenses increased ~~to $694.6 million from $634.1 million, and 18.2% as a percentage of sales, in the 2020 period compared to 16.4% in the 2019 period. Adjusted S&A expenses increased by $4.4~~$221 million to ~~$598.3~~$451 million ~~(15.7% as a percentage~~(18.3% of sales) in the ~~2020 period~~first quarter of 2021 compared to ~~$593.9~~$230 million ~~(15.4% as a percentage~~(17.1% of sales) in ~~2019.~~the first quarter of 2020. Adjusted S&A expense increased by $104 million to $314 million (12.7% of sales) in 2021 compared to $210 million (15.6% of sales) in 2020. The increase in S&A expenses was primarily due to ~~higher employee related expenses (including bonuses to essential workers) and incentive compensation.~~

~~During~~ the ~~first quarter of 2020, we recognized $5.7 million in income~~N&B Transaction costs related to ~~the expected recoveries of previously paid indirect taxes in Brazil. The income was recorded as a reduction in S&A expenses during the first nine months of 2020.~~

legal and professional fees.

Restructuring and Other Charges

Restructuring and other charges decreased to ~~$8.3~~$4 million in the first ~~nine months~~quarter of ~~2020~~2021 compared to ~~$22.4~~$5 million in the first ~~nine months~~quarter of ~~2019 primarily driven by the decrease in costs related to the 2019 Severance Plan~~2020 (see Note 4 for additional information).

Amortization of Acquisition-Related Intangibles

Amortization expenses increased to ~~$144.9~~$152 million in the first ~~nine months~~quarter of ~~2020~~2021 compared to ~~$144.0 million in the 2019 period.~~

~~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 10 to the Consolidated Financial Statements) and certain non-recurring items, net, Interest expense, Other (expense) income, net and Taxes on income. See Note 10 to the Consolidated Financial Statements for the reconciliation to Income before taxes.

Nine Months Ended
September 30,
(DOLLARS IN THOUSANDS) 2020 2019
Segment profit:
Taste $ 346,223 $ 383,450
Scent 277,156 272,061
Global expenses (49,550) (35,957)
Operational Improvement Initiatives — (1,652)
Frutarom Integration Related Costs (8,816) (36,825)
Restructuring and Other Charges, net (8,299) (22,415)
Losses on sale of assets (1,568) (1,136)
FDA Mandated Product Recall — (250)
Frutarom Acquisition Related Costs (1,382) (5,182)
Compliance Review & Legal Defense Costs (1,624) (3,623)
N&B Transaction Related Costs (24,372) —
N&B Integration Related Costs (61,887) —
Operating profit $ 465,881 $ 548,471
Profit margin:
Taste 14.8 % 16.0 %
Scent 18.9 % 18.7 %
Consolidated 12.2 % 14.2 %

~~Taste Segment Profit~~

~~Taste segment profit decreased to $346.2~~$48 million in the first ~~nine months~~quarter of 2020 or 14.8% as a percentage of sales, compared to $383.5 million, or 16.0% as a percentage of sales, in the comparable 2019 period. The decrease in segment profit principally reflected volume reductions on existing business and unfavorable price versus input costsprimarily due to ~~COVID-19, partially offset by new win performances (net of losses), integration, cross selling~~the Merger with N&B (see Notes 3 and ~~productivity initiatives.~~

~~Scent Segment Profit~~

Scent segment profit increased to $277.2 million in the first nine months of 2020, or 18.9% as a percentage of sales, compared to $272.1 million, or 18.7% as a percentage of sales, in the comparable 2019 period. The increase in segment profit principally reflected new win performances (net of losses) and the impact of productivity initiatives, partially offset by unfavorable price versus input costs and mix.

~~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 nine months of 2020, global expenses were $49.6 million compared to $36.0 million during the first nine months of 2019. The increase was driven by higher incentive compensation expense in 2020 and lower gains from our currency hedging program.5 for additional information).

Interest Expense

Interest expense ~~decreased~~increased to ~~$99.0~~$65 million in the first ~~nine months~~quarter of ~~2020~~2021 compared to ~~$102.7~~$32 million in the ~~2019~~2020 period. ~~This decrease~~The increase was primarily driven by ~~repayments on~~ the ~~Term Loan and TEUs.~~debt assumed in the Merger with N&B (see Note 7 for additional information). Average cost of debt was ~~3.0%~~3.8% for the ~~2020~~2021 period compared to 2.9% for the ~~2019~~2020 period.

Other (Income) Expense, ~~(Income),~~ Net

~~Other~~In the first quarter of 2021, we recognized other income, net, of $7 million compared to other expense, ~~(income),~~ net, ~~decreased by $19.9~~of $11 million ~~to $4.8 million of net expense~~ in the ~~first nine months of~~ 2020 ~~versus $15.1 million of income in the comparable 2019~~ period. The ~~decrease~~change of $18 million was primarily driven by lower foreign exchange losses.

Income Taxes

The effective tax rate for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was ~~16.9%~~25.9% compared ~~with 17.6%~~to 17.0% for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. The year-over-year decrease was primarily due to lower repatriation costs and non-U.S. provision to return adjustments recorded in 2020, partially offset by an unfavorable mix of earnings and an increase in loss provisions.

Excluding the $18.6 million tax benefit associated with the pre-tax operational improvement initiatives, integration related costs, restructuring and other charges, net, losses (gains) on sale of assets, Frutarom acquisition related costs, N&B acquisition related costs, and compliance review & legal defense costs, the adjusted effective tax rate for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was ~~17.0%~~19.7%.

~~For~~ compared to 16.2% for the ~~nine months ended September 30, 2019, the~~first quarter of 2020. The increase in effective tax rate and adjusted effective tax rate was ~~18.4% excluding~~primarily due to higher repatriation costs and an unfavorable mix of earnings.

Segment Adjusted Operating EBITDA Results by Business Unit

Effective in the ~~$16.1 million tax benefit associated with~~first quarter of 2021, management elected to change the ~~pre-tax operational improvement initiatives, integration related costs,~~profit or loss measure of the Company's reportable segments from Segment Operating Profit to Segment Adjusted Operating EBITDA for internal reporting and performance measurement purposes. Segment Adjusted Operating EBITDA is defined as (Loss) Income Before Taxes before depreciation and amortization expense, interest expense, restructuring and other charges, net ~~losses~~and certain non-recurring items. Prior period amounts have been recast to reflect these changes in segment profitability measures. Our determination of reportable segments was made on ~~sale~~the basis of ~~assets,~~our strategic priorities within each segment and ~~Frutarom acquisition related costs.~~corresponds to the manner in which our Chief Operating Decision Maker reviews and evaluates operating performance to make decisions about resources to be allocated to the segment. In addition to our strategic priorities, segment reporting is also based on differences in the products and services we provide. As a result, we added two new reportable segments - Health & Biosciences and Pharma Solutions. Nourish is composed of most of IFF’s legacy Taste division and N&B’s Food & Beverage division. The Scent and Health & Biosciences segments include a component of the legacy Taste segment.


	Three Months Ended March 31,
(DOLLARS IN MILLIONS)	2021			2020
Segment Adjusted Operating EBITDA
Nourish	$	270		$	176
Health & Biosciences	128			9
Scent	128			118
Pharma Solutions	43			—
Total	569			303
Depreciation & Amortization	(242)			(81)
Interest Expense	(65)			(32)
Other Income (Expense), net	7			(11)
Frutarom Integration Related Costs	(1)			(4)
Restructuring and Other Charges, net	(4)			(5)
Losses on sale of assets	—			(1)
Shareholder Activism Related Costs	(7)			—
Employee Separation Costs	(3)			—
Compliance Review & Legal Defense Costs	—			(1)
N&B Inventory Step-Up Costs	(182)			—
N&B Transaction Related Costs	(89)			(5)
N&B Integration Related Costs	(37)			(10)





(Loss) Income Before Taxes	$	(54)		$	153
Segment Adjusted Operating EBITDA margin:
Nourish	20.6		%	22.8		%
Health & Biosciences	30.0		%	26.5		%
Scent	22.5		%	21.8		%
Pharma Solutions	26.5		%	—		%
Consolidated	23.1		%	22.5		%

Nourish Segment Adjusted Operating EBITDA

Nourish Segment Adjusted Operating EBITDA increased $94 million to $270 million in the first quarter of 2021 (20.6% of segment sales) from $176 million (22.8% of segment sales) in the comparable 2020 period. The increase primarily reflected the inclusion of N&B, along with volume increases in the operating segment. The decrease in segment adjusted operating EBITDA margin, as a percentage of sales, was due to the difference in product portfolio mix of the new Nourish operating segment, as a result of the Merger with N&B, compared to the historical Taste operating segment.

Health & Biosciences Segment Adjusted Operating EBITDA

Health & Biosciences Segment Adjusted Operating EBITDA increased $119 million to $128 million in the first quarter of 2021 (30.0% of segment sales) from $9 million (26.5% of segment sales) in the comparable 2020 period. The increase primarily reflected the inclusion of N&B, as the majority of this operating segment consists of the new N&B Business.

Scent Segment Adjusted Operating EBITDA

Scent Segment Adjusted Operating EBITDA increased $10 million to $128 million in the first quarter of 2021 (22.5% of segment sales) from $118 million (21.8% of segment sales) in the comparable 2020 period. The increase primarily reflected volume increases in the operating segment.

Pharma Solutions Segment Adjusted Operating EBITDA

Pharma Solutions Segment Adjusted Operating EBITDA was $43 million in the first quarter of 2021 (26.5% of segment sales). This was a new operating segment of the Company as a result of the Merger with N&B and did not exist in the comparable 2020 period.

Liquidity and Capital Resources

Cash and Cash Equivalents

We had cash and cash equivalents of ~~$469.8~~$872 million at ~~September 30, 2020~~March 31, 2021 compared to ~~$606.8~~$650 million at December 31, ~~2019~~2020 and of this balance, a portion was held outside the United States. Cash balances held in foreign jurisdictions are, in most circumstances, available to be repatriated to the United States.

In connection with the Merger with N&B, the Company's cash balance increased by approximately $207 million.

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 ~~September 30, 2020,~~March 31, 2021, we had a deferred tax liability of ~~$44.0~~$57 million for the effect of repatriating the funds to the U.S., attributable to various non-U.S. subsidiaries. There is no deferred tax liability associated with non-U.S. subsidiaries where we intend to indefinitely reinvest the earnings to fund local operations and/or capital projects.

Restricted Cash

Restricted cash of ~~$13.7~~$9 million relates, principally, to amounts escrowed related to certain payments to be made to former Frutarom option holders in future periods. As of ~~September 30, 2020,~~March 31, 2021, a portion of this balance, ~~$0.8~~$2 million, is classified as a noncurrent asset.

Cash Flows Provided By Operating Activities

Cash flows provided by operations for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was ~~$415.0~~$358 million, or ~~10.9%~~14.5% of sales, compared to cash provided by operations of ~~$383.0~~$17 million, or ~~9.9%~~1.3% of sales, for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. The increase in cash provided by operating activities during ~~2020~~2021 was ~~principally~~primarily driven by ~~lower net working capital (principally~~changes related to accounts payable, inventories, accrued expenses ~~inventories,~~ and ~~incentive compensation), partially~~accounts receivable, largely offset by lower cash earnings in the current year.

Working capital (current assets less current liabilities) totaled ~~$1.3~~$2.913 billion and ~~$1.4~~$1.156 billion at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

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

As of ~~September 30, 2020,~~March 31, 2021, the Company had removed approximately ~~$209.3~~$304 million of receivables. The impact on cash provided by operations from participating in these programs increased approximately ~~$3.6~~$55 million and ~~$36.8~~decreased approximately $5 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. The cost of participating in these programs was approximately ~~$1.1~~$1 million ~~and $1.7 million~~ for both the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019, respectively, and was $3.1 million and $4.7 million for the nine months ended September 30, 2020 and 2019, respectively.~~2020.

Cash Flows ~~Used In~~Provided By (Used In) Investing Activities

Net investing activities during the first ~~nine~~three months of ~~2020 used $118.7~~2021 provided $115 million compared to ~~$157.8~~$43 million utilized in the prior year period. ~~Additions~~The increase in cash provided by investing activities, compared to cash utilized in investing activities in the prior year period, was primarily driven by the increase in cash provided by the Merger with N&B, offset by higher spending on property, plant and equipment were $124.1 million during the first nine months of 2020 compared to $160.4 million in the first nine months of 2019. The decrease in cash used in investing activities was further attributable to acquisition activities in the 2019 period, partially offset byand lower proceeds from the disposal of assets in the current ~~year, and cash paid upon maturity of net investment hedges in the current year versus proceeds for unwinding similar instruments in the prior~~ year.

~~In light of the logistical difficulties resulting from the COVID-19 pandemic and to preserve our liquidity, where possible we~~We have evaluated and re-prioritized our capital ~~projects. We~~projects and expect that capital spending in ~~2020~~2021 will be about 4%4.5% of sales (net of potential grants and other reimbursements from government authorities), ~~down~~up slightly from 5%4% in ~~2019.~~2020.

Frutarom Integration Initiative

We expect to incur costs related to the Frutarom Integration Initiative. Total restructuring costs for the program are expected to be approximately $40 million to $50 million including cash and non-cash items. Since the inception of the initiative, we expensed $18.3 million, of which $10.4 million was recorded in 2019 and $7.9 million was recorded in the first nine months of 2020. The costs are principally related to severance and fixed asset write-downs, with the remainder comprising costs such as contract termination and relocation. The Company expects to close an additional 6-8 sites in connection with the integration initiative for the remainder of 2020 with most of the remaining sites scheduled to close by the end of 2021.

We expect to achieve $145 million of synergy targets, with total savings in line with our original expectations.

~~Additionally, during the first nine months of 2020, we recorded $8.8 million in advisory services, retention bonuses and performance stock awards costs~~ See Note 4 for additional information 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 expect that most restructuring activities and their related charges will be completed at the end of 2021.Integration Initiative.

Cash Flows Used In Financing Activities

Cash used in financing activities in the first ~~nine~~three months of ~~2020~~2021 was ~~$418.0~~$215 million compared to ~~$365.8~~$107 million in the prior year period. The increase in cash used in financing activities was ~~principally~~primarily driven by higher repayments of debt, ~~partially offset by~~higher contingent considerations paid, higher employee taxes paid and higher cash ~~proceeds from debt financing raised in the current year.~~dividend payments.

We paid dividends totaling ~~$240.3~~$82 million in the ~~2020~~2021 period. We declared a cash dividend per share of $0.77 in the ~~third~~first quarter of ~~2020~~2021 that was paid on ~~October 5, 2020~~April 6, 2021 to all shareholders of record as of ~~September 24, 2020.~~March 26, 2021.

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

We currently have a board approved stock repurchase program with a total remaining value of ~~$279.7~~$280 million. As of May 7, 2018, we have suspended our share repurchases.

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

Overall cash, cash equivalents and restricted cash were also affected by exchange rates changes, which resulted in a $18.7 million reduction in cash for the nine months ended September 30, 2020 compared to a decrease of $3.9 million for the nine months ended September 30, 2019.

Capital Resources

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

~~Pending~~ Transaction with Nutrition & Biosciences, Inc.

~~In conjunction with~~On February 1, 2021, N&B funded the ~~DuPont~~ N&B ~~Transaction, IFF and N&B have engaged Morgan Stanley Senior Funding, Inc. and Credit Suisse~~Term Loan Funding LLC as joint lead arrangers and bookrunners to structure, arrange and syndicate the financings that will be required to close the transaction. Specifically, N&B will be the initial borrower underFacility, which provided for a ~~$1.25 billion 3-year/5-year~~ senior unsecured term loan credit facility in an aggregate principal amount of $1.250 billion, comprised of a $625 million three-year tranche (“2024 Term Loan Facility”) and a $625 million five-year tranche (“2026 Term Loan Facility”). Following the ~~initial issuer~~Merger, we assumed the indebtedness incurred by N&B in the debt financings, which included (i) the 2024 Term Loan Facility and 2026 Term Loan Facility and (ii) a series of ~~$6.25~~Senior Notes in the aggregate amount of $6.250 billion ~~of senior unsecured notes, which will be~~with maturities ranging from 2 – 30 years as further described below. N&B’s indebtedness raised prior to the Merger was used to finance the Special Cash Payment to DuPont, ~~in connection with~~which has been paid, and for the ~~separation and to pay~~satisfaction of the related transaction fees and expenses. ~~Following the consummation of the DuPont N&B Transaction, all obligations of N&B will be guaranteed by IFF, or at the election of N&B and IFF, assumed by IFF.~~

Upon completion of our combination with N&B, pursuant to the Merger Agreement, 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. ~~On August 27, 2020, a special shareholder meeting was held~~

Refer to Note 3 and ~~IFF shareholders voted to approve the issuance of shares of IFF Common Stock in connection with the DuPont N&B Transaction pursuant to the Merger Agreement.~~Note 7 for additional information.

Revolving Credit Facility and Term Loans

The Amended Debt Agreements 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 Consolidated EBITDA in respect of the previous 12-month period. Effective in the third quarter of 2020, the maximum permitted ratio of net debt to Consolidated EBITDA under the Amended Debt Agreements is 4.0 to 1.0 through the end of 2020, with step-downs over time. Further, after the expected closing date of the pending DuPont N&B Transaction in the first quarter of 2021, the Company’s maximum permitted ratio of net debt to Consolidated EBITDA under the Amended Debt Agreements shall be 4.75 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 ~~September 30, 2020,~~March 31, 2021, we had no outstanding borrowings under our $1$2.000 billion Revolving Credit Facility, $240 million outstanding under the Frutarom Term Loan Agreement and $200 million outstanding in borrowings under the 2022 Term Loan Agreement. The amount that we are able to draw down under the Revolving Credit Facility is limited by financial covenants as described in more detail below. As of ~~September 30, 2020,~~March 31, 2021, our draw down capacity was ~~$628 million~~$1.098 billion under the Revolving Credit Facility.

Refer to Note 7 and Part IV, Item 15, "Exhibits and Financial Statement Schedules," Note 9 of our 2020 Form 10-K, filed on February 22, 2021, for additional information.

Debt Covenants

At ~~September 30, 2020,~~March 31, 2021, we were in compliance with all financial and other covenants, including the ~~net debt~~Net Debt to ~~adjusted~~Credit Adjusted EBITDA ratio. At ~~September 30, 2020~~March 31, 2021 our Net Debt/~~adjusted~~Credit Adjusted EBITDA(1) ratio was ~~3.44~~4.32 to 1.0 as defined by the credit facility agreements, ~~well~~which is below the financial covenants of existing outstanding debt.

_______________________

(1)Credit 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~~Credit Adjusted EBITDA and Net Debt used by other companies. Reconciliations of ~~adjusted~~Credit Adjusted EBITDA to net ~~income~~loss and net debt to total debt are as follows:

4038


(DOLLARS IN MILLIONS)	Twelve Months Ended ~~September 30, 2020~~March 31, 2021
Net ~~income~~loss	$	~~379.1~~ (286)
Interest expense	~~134.5~~262
Income taxes	~~77.5~~ (104)
Depreciation and amortization	~~331.4~~1,840
Specified items (1)(3)	~~161.8~~812
Non-cash items (2)(3)	~~38.1~~41
Credit Adjusted EBITDA	$	~~1,122.4~~2,565

(1)Specified items for the 12 months ended ~~September 30, 2020~~March 31, 2021 of ~~$161.8~~$812 million, consisted of ~~operational improvement initiatives, acquisition related costs,~~ Frutarom integration related costs, restructuring and other charges, net, ~~FDA mandated product recall,~~shareholder activism related costs, employee separation costs, Frutarom acquisition related costs, compliance review & legal defense costs, N&B inventory step-up costs, N&B transaction related costs, ~~and~~ N&B integration related ~~costs.~~costs and other N&B specified items.

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

(3)Specified and non-cash items may not include all eligible add-back items from the Merger with N&B, for the purposes of the Credit Adjusted EBITDA calculation, due to availability of the information.


(DOLLARS IN MILLIONS)	~~September 30, 2020~~March 31, 2021
Total debt	$	~~4,331.7~~11,958
Adjustments:
Cash and cash equivalents	~~469.8~~872
Net debt	$	~~3,861.9~~11,086

Senior Notes

As of ~~September 30, 2020,~~March 31, 2021, we had ~~$3.88~~$10.132 billion aggregate principal amount outstanding in senior unsecured notes, with ~~$1.88~~$1.882 billion principal amount denominated in EUR and ~~$2.00~~$8.250 billion principal amount denominated in ~~USD.~~USD, which includes the N&B Senior Notes assumed as a result of the Merger. The notes bear interest ranging from ~~0.50%~~0.69% per year to ~~5.00%~~5.12% per year, with maturities from September 2021 to ~~September 2048. Of these notes, $300 million in aggregate principal amount of our 3.40% senior notes matured in September 2020, which the Company repaid during the third quarter of 2020.~~December 1, 2050. See Note 7 for additional information.

Contractual Obligations

We expect to contribute a total of ~~$4.4~~$4 million to our U.S. pension plans and a total of ~~$20.9~~$25 million to our Non-U.S. plans during ~~2020.~~2021. During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, there were no contributions made to the qualified U.S. pension plans, ~~$15.6~~$8 million of contributions were made to the non-U.S. pension plans, and ~~$3.3~~$1 million of benefit payments were made with respect to our non-qualified U.S. pension plan. We also expect to contribute ~~$3.8~~$4 million to our postretirement benefits other than pension plans during ~~2020.~~2021. During the ~~nine~~three months ended ~~September 30, 2020, $2.0~~March 31, 2021, $1 million of contributions were made to postretirement benefits other than pension plans.

As discussed in Note 1415 to the Consolidated Financial Statements, at ~~September 30, 2020,~~March 31, 2021, 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.~~Standards

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

Non-GAAP Financial Measures

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

4139

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

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

Adjusted gross ~~margin~~profit excludes ~~operational improvement initiatives, Frutarom integration related costs, FDA mandated product recall, and~~ Frutarom acquisition related costs and N&B inventory step-up costs.

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

Adjusted operating ~~profit~~EBITDA and adjusted operating EBITDA margin ~~exclude operational improvement initiatives, Frutarom integration related costs,~~include depreciation and amortization expense, interest expense, other income (expense), net, restructuring and other charges, net and certain non-recurring items such as Frutarom integration related costs, losses on sale of assets, ~~FDA mandated product recall, Frutarom acquisition~~shareholder activism related costs, employee separation costs, compliance review & legal defense costs, N&B inventory step-up costs, N&B transaction related costs and N&B integration related costs.

Adjusted effective tax rate excludes ~~operational improvement initiatives, acquisition related costs,~~ Frutarom integration related costs, restructuring and other charges, net, losses on sale of assets, ~~FDA mandated product recall,~~shareholder activism related costs, employee separation costs, Frutarom acquisition related costs, compliance review & legal defense costs, N&B inventory step-up costs, N&B transaction related costs, ~~and~~ N&B integration related ~~costs.~~costs and redemption value adjustment to EPS.

Net Debt to ~~Combined~~Credit 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~~Credit Adjusted EBITDA. However, as Credit 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.~~adjusted operating EBITDA.

A. Reconciliation of Non-GAAP Metrics

Reconciliation of Gross Profit
Three Months Ended September 30,
(DOLLARS IN THOUSANDS) 2020 2019
Reported (GAAP) $ 524,427 $ 533,088
Operational Improvement Initiatives (a) — 711
Frutarom Integration Related Costs (c) 103 187
FDA Mandated Product Recall (e) — 250
Frutarom Acquisition Related Costs (f) — (3,603)
Adjusted (Non-GAAP) $ 524,530 $ 530,633


Reconciliation of Gross Profit
	Three Months Ended March 31,
(DOLLARS IN MILLIONS)	2021		2020
Reported (GAAP)	$	754	$	566
Frutarom Acquisition Related Costs (e)	—		1
N&B Inventory Step-Up Costs	182		—












Adjusted (Non-GAAP)	$	936	$	567

Reconciliation of Selling and Administrative Expenses
Three Months Ended September 30,
(DOLLARS IN THOUSANDS) 2020 2019
Reported (GAAP) $ 234,520 $ 210,829
Frutarom Integration Related Costs (c) (1,597) (10,047)
Frutarom Acquisition Related Costs (f) (808) (691)
Compliance Review & Legal Defense Costs (g) (1,000) (3,623)
N&B Transaction Related Costs (h) (8,247) —
N&B Integration Related Costs (i) (29,241) —
Adjusted (Non-GAAP) $ 193,627 $ 196,468


Reconciliation of Selling and Administrative Expenses
	Three Months Ended March 31,
(DOLLARS IN MILLIONS)	2021		2020
Reported (GAAP)	$	451	$	230
Frutarom Integration Related Costs (a)	(1)		(4)
Shareholder Activism Related Costs (c)	(7)		—
Employee Separation Costs (d)	(3)		—
Compliance Review & Legal Defense Costs (f)	—		(1)
N&B Transaction Related Costs (g)	(89)		(5)
N&B Integration Related Costs (h)	(37)		(10)








Adjusted (Non-GAAP)	$	314	$	210

4240

Reconciliation of Operating Profit
Three Months Ended September 30,
(DOLLARS IN THOUSANDS) 2020 2019
Reported (GAAP) $ 150,289 $ 184,664
Operational Improvement Initiatives (a) — 712
Frutarom Integration Related Costs (c) 1,883 10,511
Restructuring and Other Charges, net (d) 1,497 3,716
Losses on Sale of Assets 415 372
FDA Mandated Product Recall (e) — 250
Frutarom Acquisition Related Costs (f) 808 (2,914)
Compliance Review & Legal Defense Costs (g) 1,000 3,623
N&B Transaction Related Costs (h) 8,247 —
N&B Integration Related Costs (i) 29,241 —
Adjusted (Non-GAAP) $ 193,380 $ 200,934

Reconciliation of Net Income
Three Months Ended September 30,
2020 2019
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) Income before taxes Taxes on income (k) Net Income Attributable to IFF (l) Diluted EPS (m) Income before taxes Taxes on income (k) Net Income Attributable to IFF (l) Diluted EPS (m)
Reported (GAAP) $ 105,500 $ 19,269 $ 84,828 $ 0.75 $ 156,866 $ 27,059 $ 127,124 $ 1.13
Operational Improvement Initiatives (a) — — — — 712 243 469 —
Acquisition Related Costs (b) — — — — (3,371) — (3,371) (0.03)
Frutarom Integration Related Costs (c) 1,883 407 1,476 0.01 10,511 2,347 8,164 0.07
Restructuring and Other Charges, net (d) 1,497 349 1,148 0.01 3,716 811 2,905 0.03
Losses on Sale of Assets 415 91 324 — 372 98 274 —
FDA Mandated Product Recall (e) — — — — 250 57 193 —
Frutarom Acquisition Related Costs (f) 1,316 523 793 0.01 (2,914) (715) (2,199) (0.02)
Compliance Review & Legal Defense Costs (g) 1,000 228 772 0.01 3,623 827 2,796 0.02
N&B Transaction Related Costs (h) 8,247 — 8,247 0.07 — — — —
N&B Integration Related Costs (i) 29,241 6,719 22,522 0.20 — — — —
Redemption value adjustment to EPS (j) — — — (0.01) — — — (0.02)
Adjusted (Non-GAAP) $ 149,099 $ 27,586 $ 120,110 $ 1.06 $ 169,765 $ 30,727 $ 136,355 $ 1.20


Reconciliation of Net (Loss) Income
	Three Months Ended March 31,
	2021								2020
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)	(Loss) Income before taxes		Taxes on (loss) income (j)		Net (Loss) Income Attributable to IFF (k)		Diluted EPS (l)		Income before taxes		Taxes on income (j)		Net Income Attributable to IFF (k)		Diluted EPS (l)
Reported (GAAP)	$	(54)	$	(14)	$	(42)	$	(0.21)	$	153	$	26	$	124	$	1.15
Frutarom Integration Related Costs (a)	1		—		1		—		4		1		3		0.02
Restructuring and Other Charges, net (b)	4		1		3		0.02		5		1		4		0.03
Losses on Sale of Assets	—		—		—		—		1		1		—		—
Shareholder Activism Related Costs (c)	7		2		5		0.03		—		—		—		—
Employee Separation Costs (d)	3		—		3		0.01		—		—		—		—
Frutarom Acquisition Related Costs (e)	—		—		—		—		—		(2)		2		0.02
Compliance Review & Legal Defense Costs (f)	—		—		—		—		1		—		1		—
N&B Inventory Step-Up Costs	182		37		145		0.70		—		—		—		—
N&B Transaction Related Costs (g)	89		18		71		0.34		5		—		5		0.05
N&B Integration Related Costs (h)	37		9		28		0.14		10		2		8		0.07
Redemption value adjustment to EPS (i)	—		—		—		0.01		—		—		—		(0.05)



Adjusted (Non-GAAP)	$	269	$	53	$	214	$	1.03	$	179	$	29	$	147	$	1.30


(a)			Represents ~~accelerated depreciation related to a plant relocation in India and China.~~
~~(b)~~			~~Represents adjustments to the fair value for an equity method investment in Canada which we began consolidating in the second quarter of 2019.~~
~~(c)~~			~~Represents~~ costs related to the integration of the Frutarom acquisition. For 2021, costs primarily related to performance stock awards. For 2020, costs primarily related to advisory services, retention bonuses and performance stock awards. ~~For 2019, costs principally related to advisory services.~~
~~(d)~~(b)			For 2021, represents costs primarily related to severance as part of the Company's restructuring efforts. For 2020, represents costs primarily related to the Frutarom Integration Initiative. ~~For 2019, represents~~
(c)			Represents shareholder activist related costs, primarily professional fees.
(d)			Represents costs related to severance liabilities, including accelerated stock compensation expense, for employees who have separated from the ~~Frutarom Integration Initiative and 2019 Severance Program.~~Company.
(e)			~~Represents additional claims that management paid to co-packers.~~
~~(f)~~			Represents transaction-related costs and expenses related to the acquisition of Frutarom. For 2020, amount primarily includes earn-out payments, net of adjustments, amortization for inventory "step-up" costs and transaction costs principally related to the 2019 Acquisition Activity, including an adjustment to reverse an earnout liability and another adjustment to record an earnout liability in the third quarter of 2020. For 2019, amount primarily includes amortization for inventory "step-up" costs and transaction costs, along with a measurement period adjustment to the amount of the inventory "step-up" recorded.Activity.
~~(g)~~(f)			Costs related to reviewing the nature of inappropriate payments and review of compliance in certain other countries. In addition, includes legal costs for related shareholder lawsuits.
~~(h)~~(g)			Represents transaction costs and expenses related to the ~~pending~~ transaction with N&B, ~~principally related to~~primarily includes legal and professional ~~fees for capital raising activities.~~fees.
~~(i)~~(h)			Represents costs primarily related to advisory services for the integration of the ~~pending~~ transaction with N&B, ~~principally~~primarily consulting fees.
~~(j)~~(i)			Represents the adjustment to EPS related to the excess of the redemption value of certain redeemable noncontrolling interests over their existing carrying value.
~~(k)~~(j)			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~~the relevant jurisdiction, ~~in which such charges were incurred,~~ except for those items which are non-taxable or ~~are~~ subject to a valuation ~~allowance~~allowances for which the tax expense (benefit) was calculated at 0%. ~~For fiscal years 2020 and 2019, these non-GAAP adjustments were not subject to foreign~~The tax ~~credits, but to the extent that such factors are applicable to any future non-GAAP adjustments we will take such factors into consideration~~benefit for amortization is calculated in ~~calculating~~a similar manner as the tax ~~expense (benefit). For amortization,~~effects of the ~~tax benefit has been calculated based on the statutory rate on a country by country basis.~~non-GAAP adjustments.
~~(l)~~(k)			For 2021, net loss is increased by income attributable to noncontrolling interest of $2 million. For 2020, ~~and 2019,~~ net income is reduced by income attributable to noncontrolling interest of ~~$1.4M and $2.7M, respectively.~~
~~(m)~~			~~The sum of these items does not foot due to rounding.~~

Reconciliation of Gross Profit
Nine Months Ended September 30,
(DOLLARS IN THOUSANDS) 2020 2019
Reported (GAAP) $ 1,572,136 $ 1,610,586
Operational Improvement Initiatives (a) — 1,651
Frutarom Integration Related Costs (c) 348 508
FDA Mandated Product Recall (e) — 250
Frutarom Acquisition Related Costs (f) 759 4,247
Adjusted (Non-GAAP) $ 1,573,243 $ 1,617,242

Reconciliation of Selling and Administrative Expenses
Nine Months Ended September 30,
(DOLLARS IN THOUSANDS) 2020 2019
Reported (GAAP) $ 694,641 $ 634,111
Frutarom Integration Related Costs (c) (7,875) (35,647)
Frutarom Acquisition Related Costs (f) (623) (937)
Compliance Review & Legal Defense Costs (g) (1,624) (3,623)
N&B Transaction Related Costs (h) (24,372) —
N&B Integration Related Costs (i) (61,887) —
Adjusted (Non-GAAP) $ 598,260 $ 593,904

Reconciliation of Operating Profit
Nine Months Ended September 30,
(DOLLARS IN THOUSANDS) 2020 2019
Reported (GAAP) $ 465,881 $ 548,471
Operational Improvement Initiatives (a) — 1,652
Frutarom Integration Related Costs (c) 8,816 36,825
Restructuring and Other Charges, net (d) 8,299 22,415
Losses on Sale of Assets 1,568 1,136
FDA Mandated Product Recall (e) — 250
Frutarom Acquisition Related Costs (f) 1,382 5,182
Compliance Review & Legal Defense Costs (g) 1,624 3,623
N&B Transaction Related Costs (h) 24,372 —
N&B Integration Related Costs (i) 61,887 —
Adjusted (Non-GAAP) $ 573,829 $ 619,554

Reconciliation of Net Income
Nine Months Ended September 30,
2020 2019
(DOLLARS IN THOUSANDS) Income before taxes Taxes on income (k) Net Income Attributable to IFF (l) Diluted EPS (m) Income before taxes Taxes on income (k) Net Income Attributable to IFF (l) Diluted EPS
Reported (GAAP) $ 362,073 $ 61,265 $ 295,639 $ 2.64 $ 460,923 $ 81,033 $ 372,330 $ 3.30
Operational Improvement Initiatives (a) — — — — 1,652 561 1,091 0.01
Acquisition Related Costs (b) — — — — (3,371) — (3,371) (0.03)
Frutarom Integration Related Costs (c) 8,816 1,959 6,857 0.06 36,825 8,270 28,555 0.25
Restructuring and Other Charges, net (d) 8,299 1,922 6,377 0.06 22,415 5,394 17,021 0.16
Losses on Sale of Assets 1,568 356 1,212 0.01 1,136 290 846 0.01
FDA Mandated Product Recall (e) — — — — 250 57 193 —
Frutarom Acquisition Related Costs (f) 1,382 (1,160) 2,542 0.02 5,182 672 4,510 0.04
Compliance Review & Legal Defense Costs (g) 1,624 358 1,266 0.01 3,623 827 2,796 0.02
N&B Transaction Related Costs (h) 24,372 904 23,468 0.21 — — — —
N&B Integration Related Costs (i) 61,887 14,255 47,632 0.42 — — — —
Redemption value adjustment to EPS (j) — — — (0.04) — — — (0.02)
Adjusted (Non-GAAP) $ 470,021 $ 79,859 $ 384,993 $ 3.38 $ 528,635 $ 97,104 $ 423,971 $ 3.74


~~(a)~~			~~Represents accelerated depreciation related to a plant relocation in India and China.~~
~~(b)~~			~~Represents adjustments to the fair value for an equity method investment in Canada which we began consolidating in the second quarter of 2019.~~
~~(c)~~			Represents costs related to the integration of the Frutarom acquisition. For 2020, costs primarily related to advisory services, retention bonuses and performance stock awards. For 2019, costs principally related to advisory services.
~~(d)~~			~~For 2020, represents costs primarily related to the Frutarom Integration Initiative. For 2019, represents costs primarily related to the Frutarom Integration Initiative and 2019 Severance Program.~~
~~(e)~~			~~Represents additional claims that management paid to co-packers.~~
~~(f)~~			Represents transaction-related costs and expenses related to the acquisition of Frutarom. For 2020, amount primarily includes earn-out payments, net of adjustments, amortization for inventory "step-up" costs and transaction costs principally related to the 2019 Acquisition Activity, including an adjustment to reverse an earnout liability and another adjustment to record an earnout liability in the third quarter of 2020. For 2019, amount primarily includes amortization for inventory "step-up" costs and transaction costs, along with a measurement period adjustment to the amount of the inventory "step-up" recorded.
~~(g)~~			~~Costs related to reviewing the nature of inappropriate payments and review of compliance in certain other countries. In addition, includes legal costs for related shareholder lawsuits.~~
~~(h)~~			~~Represents transaction costs and expenses related to the pending transaction with N&B, principally related to legal and professional fees for capital raising activities.~~
~~(i)~~			~~Represents costs primarily related to advisory services for the integration of the pending transaction with N&B, principally consulting fees.~~
~~(j)~~			~~Represents the adjustment to EPS related to the excess of the redemption value of certain redeemable noncontrolling interests over their existing carrying value.~~
~~(k)~~			The income tax expense (benefit) on non-GAAP adjustments is computed in accordance with ASC 740 using the same methodology as the GAAP provision of income taxes. Income tax effects of non-GAAP adjustments are calculated based on the applicable statutory tax rate for each jurisdiction in which such charges were incurred, except for those items which are non-taxable or are subject to a valuation allowance for which the tax expense (benefit) was calculated at 0%. For fiscal years 2020 and 2019, these non-GAAP adjustments were not subject to foreign tax credits, but to the extent that such factors are applicable to any future non-GAAP adjustments we will take such factors into consideration in calculating the tax expense (benefit). For amortization, the tax benefit has been calculated based on the statutory rate on a country by country basis.$3 million.
(l)			~~For 2020 and 2019, net income is reduced by income attributable to noncontrolling interest of $5.2M and $7.6M, respectively.~~
~~(m)~~			The sum of these items does not foot due to rounding.

4641

~~B. Foreign Currency Reconciliation~~

Three Months Ended Nine Months Ended

September 30, September 30,
2020 2019 2020 2019
Operating Profit:
% Change - Reported (GAAP) (18.6)% 15.9% (15.1)% 12.2%
Items impacting comparability 14.8% 6.3% 7.7% 8.0%
% Change - Adjusted (Non-GAAP) (3.8)% 22.2% (7.4)% 20.2%
Currency Impact 5.1% 1.1% 2.8% 1.9%
% Change Year-over-Year - Currency Neutral Adjusted (Non-GAAP)* 1.3% 23.3% (4.6)% 22.1%

~~_______________________~~

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

Cautionary Statement Under the Private Securities Litigation Reform Act of 1995

Statements in this Form 10-Q, ~~that~~which 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,~~implications; (ii) ~~the proposed~~our combination with ~~DuPont’s Nutrition & Biosciences business (“~~N~~&B”),~~&B, including the expected benefits and synergies of the N&B Transaction and future opportunities for the combined company; (iii) our ability to achieve the anticipated benefits of the Frutarom acquisition, including $145 million of expected ~~synergies,~~synergies; (iv) our ability to achieve our Vision 2021 strategy of accelerated revenue and profitability growth, (v) the growth potential of the markets in which we operate, including the emerging markets, (vi) expected capital expenditures in ~~2020, (v)~~2021, (vii) expectations regarding the Frutarom Integration Initiative, (viii) the expected costs ~~associated with~~and benefits of our ~~various restructuring activities, (vi)~~ongoing optimization of our ~~margin expectations for 2020, (vii)~~manufacturing operations, including the expected number of closings, (ix) expected cash flow and availability of capital resources to fund our operations and meet our debt service ~~requirements, (viii)~~requirements; (x) our ability to innovate and execute on specific consumer trends and demands; and (xi) our ability to continue to generate value for, and return cash to, our ~~shareholders, and (ix) anticipated contributions to our pension plans and other post-retirement programs in 2020.~~shareholders. 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 risks, uncertainties and other 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 N&B and the Frutarom business, including whether we will realize the benefits anticipated from the ~~acquisition~~acquisitions in the expected time frame;

•unanticipated costs, liabilities, charges or expenses resulting from the Frutarom ~~acquisition;~~acquisition and the N&B Transaction;

•risks related to the restrictions that we are required to abide by in connection with the N&B Transaction;

•our ability to provide the same types and level of services to the N&B Business that historically have been provided by DuPont, and our ability to maintain relationships with third parties and pre-existing customers of N&B.

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

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

•the increase in our leverage resulting from the additional debt incurred to pay a portion of the consideration for Frutarom and its impact on our liquidity and ability to return capital to its shareholders;

•our ability to successfully market to our expanded and diverse ~~Taste~~Nourish customer base;

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

•our ability to retain key employees;

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

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

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

•the impact of a disruption in our supply chain, including the inability to obtain ingredients and raw materials from third parties;

•volatility and increases in the price of raw materials, energy and transportation;

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

•our ability to comply with, and the costs associated with compliance with, regulatory requirements and industry standards, including regarding product safety, quality, efficacy and environmental impact;

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

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

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

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

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

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

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

•our ability to successfully manage our working capital and inventory balances;

•the impact of the failure to comply with U.S. or foreign anti-corruption and anti-bribery laws and regulations, including the U.S. Foreign Corrupt Practices Act;

•any impairment on our tangible or intangible long-lived assets, including goodwill associated with the acquisition of ~~Frutarom;~~Frutarom and Merger with N&B;

•our ability to protect our intellectual property rights;

•the impact of the outcome of legal claims, regulatory investigations and litigation;

•changes in market conditions or governmental regulations relating to our pension and postretirement obligations;

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

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

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

•~~risks associated with~~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 ~~pending combination with N&B, including business uncertainties and contractual restrictions while the transaction is pending, costs incurred in connection~~other filings with the ~~transaction, our ability~~SEC or in company press releases) for other factors that may cause actual results to ~~pursue alternative transactions, and~~differ materially from those projected by the ~~impact if we fail~~Company. Please refer 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~~Part I. Item 1A., Risk Factors of the ~~transaction.~~2020 Form 10-K for additional information regarding factors that could affect our results of operations, financial condition and cash flow.

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

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

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

There are no material changes in market risk from the information provided in our ~~2019~~2020 Form ~~10-K.~~10-K, except for the USD fixed rate debt.

At March 31, 2021, the fair value of our USD fixed rate debt was $8.427 billion. Based on a hypothetical decrease or increase of 10% in interest rates, the estimated fair value of our USD fixed rate debt would decrease or increase, accordingly, by approximately $843 million.

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 ~~September 30, 2020~~March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

5044

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

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

Litigation Matters

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. One motion ("Borg") asserts claims under the U.S. federal securities laws against IFF, its Chairman and CEO, and its former CFO. On November 8, 2020, IFF and its officers filed their response to the Borg motion. On April 20, 2021, Mr. Borg filed a motion to stay the proceeding pending an appellate decision in the U.S. proceeding. The other motion ("Oman") (following an initial amendment) ~~asserts~~asserted claims under the Israeli Securities Act-1968 against IFF, its Chairman and CEO, and its former CFO, and against Frutarom and certain former Frutarom officers and directors, as well as claims under the Israeli Companies Act-1999 against certain former Frutarom officers and directors. On October 4, 2020, the Oman plaintiff filed a motion to remove IFF and its officers from the motion and to add factual allegations from the ~~U.S.~~US amended complaint. Responses to the motion to amend the Oman motion were filed during November 2020. The court granted the motion to amend the Oman motion on February 17, 2021.

Investigation

ITEM 1a. RISK FACTORS.

~~The following additional risk factor relating~~Refer to ~~COVID-19 should be read in conjunction with the risk factors previously disclosed in~~ Part I, Item 1A, “Risk Factors,” of our ~~2019~~2020 Annual Report on Form 10-K (the ~~"2019~~"2020 Form 10-K") and the information contained in this Quarterly Report on Form 10-Q and our other reports and registration statements filed with the SEC. The developments described in this additional risk factor have heightened, or in some cases manifested, certain of the risks disclosed in the risk factor section of our 2019 Form 10-K, and such risk factors are further qualified by the information relating to COVID-19 that is described in this Quarterly Report on Form 10-Q, including in the additional risk factor below. Except as described herein, thereThere have been no material changes with respect to the risk factors disclosed in our ~~2019~~2020 Form 10-K.

5145

~~Supplemental Risk Factor:~~

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

COVID-19 was identified in China in late 2019 and has spread globally. Government authorities, including those in countries where IFF has manufacturing and other operations, have taken various measures to try to contain this spread, such as the closure of non-essential businesses, reduced travel, the closure of retail establishments, the promotion of social distancing and remote working policies where appropriate. 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:~~ IFF’s manufacturing plants continue to operate world-wide in compliance with the orders and restrictions imposed by government authorities in each of IFF's locations, and IFF is working with its customers to meet their specific shipment needs. Most plants have restored operations to historical levels, notwithstanding that certain restrictions imposed to achieve social distancing remain in place. Some of IFF's R&D and creative applications centers are operating on limited schedules or with a reduced workforce of essential employees as a result of certain safety measures implemented by IFF to limit the number of the on-site workforce.

The ability of IFF to continue to supply its products is highly dependent on its ability to maintain the safety of its workforce. The ability of employees to work may be significantly impacted by individuals contracting or being exposed to COVID-19, and IFF’s operations and financial results may be negatively affected as a result. IFF has developed return-to-workplace protocols and mandatory site guidelines to continue to protect the health and safety of employees at each location and to promote an orderly and phased return for employees who have been working from home. While IFF is following the requirements of governmental authorities and taking additional preventative and protective measures to ensure the safety of its workforce, there can be no assurance that these measures will be successful, and to the extent that employees in IFF’s manufacturing or distribution centers contract COVID-19, IFF may be required to temporarily close those facilities, which may result in reduced production hours, more rigorous cleaning processes and other preventative and protective measures for employees. Workforce disruptions of this nature may significantly impact IFF’s ability to maintain its operations and may adversely impact its financial results.

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

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

•~~Customer-related risks:~~ IFF is experiencing, and may continue to experience, changes in the demand and volume for certain of its products, including due to consumption or stocking behavior changes. For example, ingredients used in products sold mainly in retail outlets, such as Fine Fragrances or Taste products 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 does not currently anticipate any impairment charges related to COVID-19, the continuing effects of a prolonged pandemic could result in increased risk of asset write-downs and impairments, including, but not limited to, equity investments, goodwill and intangibles. Any of these events could potentially result in a material adverse impact on IFF’s business and results of operations.

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

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

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

None.

ITEM 6. EXHIBITS.


~~10.1~~4.1						Second ~~Amended and Restated Credit Agreement,~~Supplemental Indenture, dated as of ~~August 25, 2020~~March 4, 2021, among Nutrition & Biosciences, Inc., International Flavors & Fragrances Inc. and U.S. Bank National Association, as trustee (incorporated by reference from Exhibit 4.1 to Form 8-K dated March 4, 2021).
4.2						Icon Debt Assumption Supplement, dated as of March 4, 2021, among Neptune Merger Sub II LLC (as successor by merger to Nutrition & Biosciences, Inc.) and International Flavors & Fragrances Inc., ~~International Flavors & Fragrances (Nederland) Holding B.V.~~ and ~~International Flavors & Fragrances I.F.F. (Nederland) B.V.,~~ as ~~borrowers, the lenders signatory thereto and Citibank, N.A. as administrative agent, incorporated~~acknowledged by ~~reference to Exhibit 10.1 to the Registrant's Current Report to Form 8-K filed on August 28, 2020.~~
~~10.2~~						~~Amendment No. 3 to Credit Agreement, dated as of August 25, 2020 among International Flavors & Fragrances Inc., as borrower, the lenders signatory thereto and~~ Morgan Stanley Senior Funding, Inc., as administrative agent ~~incorporated~~(incorporated by reference tofrom Exhibit ~~10.2 to the Registrant's Current Report~~4.2 to Form 8-K ~~filed on August 28, 2020.~~dated March 4, 2021).
~~10.3~~10.1						~~Amendment No. 1 to Credit~~Co-Operation Agreement dated ~~as of August 25, 2020, among the Company, as borrower, the lenders signatory thereto and China Construction Bank Corporation, New York Branch as administrative agent, incorporated~~March 7, 2021 (incorporated by reference tofrom Exhibit ~~10.3 to the Registrant's Current Report~~10.1 to Form 8-K ~~filed on August 28, 2020.~~dated March 8, 2021).
31.1						Certification of Andreas Fibig pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2						Certification of Rustom Jilla pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32						Certification of Andreas Fibig and Rustom Jilla pursuant to 18 U.S.C. Section 1350 as adopted pursuant to the Sarbanes-Oxley Act of 2002.
101.INS						XBRL Instance Document
101.SCH						XBRL Taxonomy Extensions Schema
101.CAL						XBRL Taxonomy Extension Calculation Linkbase
101.DEF						XBRL Taxonomy Extension Definition Linkbase
101.LAB						XBRL Taxonomy Extension Label Linkbase
101.PRE						XBRL Taxonomy Extension Presentation Linkbase
104						Cover Page Interactive File (formatted as Inline XBRL and contained in Exhibit 101)

5346

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:

~~November 9, 2020~~May 10, 2021

By:

/s/ Andreas Fibig

Andreas Fibig

Chairman of the Board and Chief Executive Officer

Dated:

~~November 9, 2020~~May 10, 2021

By:

/s/ Rustom Jilla

Rustom Jilla

Executive Vice President and Chief Financial Officer

Dated:

May 10, 2021

By:

/s/ Robert Anderson

Robert Anderson

Senior Vice President, Corporate Controller and Chief Accounting Officer (Principal Accounting Officer)

5447


Reconciliation of Operating Profit
	Three Months Ended September 30,
(DOLLARS IN THOUSANDS)	2020		2019
Reported (GAAP)	$	150,289	$	184,664
Operational Improvement Initiatives (a)	—		712
Frutarom Integration Related Costs (c)	1,883		10,511
Restructuring and Other Charges, net (d)	1,497		3,716
Losses on Sale of Assets	415		372
FDA Mandated Product Recall (e)	—		250
Frutarom Acquisition Related Costs (f)	808		(2,914)
Compliance Review & Legal Defense Costs (g)	1,000		3,623
N&B Transaction Related Costs (h)	8,247		—
N&B Integration Related Costs (i)	29,241		—



Adjusted (Non-GAAP)	$	193,380	$	200,934


Reconciliation of Net Income
	Three Months Ended September 30,
	2020								2019
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)	Income before taxes		Taxes on income (k)		Net Income Attributable to IFF (l)		Diluted EPS (m)		Income before taxes		Taxes on income (k)		Net Income Attributable to IFF (l)		Diluted EPS (m)
Reported (GAAP)	$	105,500	$	19,269	$	84,828	$	0.75	$	156,866	$	27,059	$	127,124	$	1.13
Operational Improvement Initiatives (a)	—		—		—		—		712		243		469		—
Acquisition Related Costs (b)	—		—		—		—		(3,371)		—		(3,371)		(0.03)
Frutarom Integration Related Costs (c)	1,883		407		1,476		0.01		10,511		2,347		8,164		0.07
Restructuring and Other Charges, net (d)	1,497		349		1,148		0.01		3,716		811		2,905		0.03
Losses on Sale of Assets	415		91		324		—		372		98		274		—
FDA Mandated Product Recall (e)	—		—		—		—		250		57		193		—
Frutarom Acquisition Related Costs (f)	1,316		523		793		0.01		(2,914)		(715)		(2,199)		(0.02)
Compliance Review & Legal Defense Costs (g)	1,000		228		772		0.01		3,623		827		2,796		0.02
N&B Transaction Related Costs (h)	8,247		—		8,247		0.07		—		—		—		—
N&B Integration Related Costs (i)	29,241		6,719		22,522		0.20		—		—		—		—
Redemption value adjustment to EPS (j)	—		—		—		(0.01)		—		—		—		(0.02)

Adjusted (Non-GAAP)	$	149,099	$	27,586	$	120,110	$	1.06	$	169,765	$	30,727	$	136,355	$	1.20