UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended March 31, ~~2021~~2022


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

For the transition period from to

Commission file number 1-4858

INTERNATIONAL FLAVORS & FRAGRANCES INC.

(Exact name of registrant as specified in its charter)



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

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

200 Powder Mill Road, Wilmington, DE 19803-2907

(Address of principal executive offices) (Zip Code)

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

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

Title of each class

Trading Symbol(s)

Name of each exchange
on which registered

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

IFF

~~New York Stock Exchange~~

~~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 of common stock outstanding as of May ~~3, 2021: 248,919,878~~2, 2022: 254,838,017

INTERNATIONAL FLAVORS & FRAGRANCES INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

INTERNATIONAL FLAVORS & FRAGRANCES INC.

CONSOLIDATED BALANCE ~~SHEET~~SHEETS

(Unaudited)


(DOLLARS IN MILLIONS)	(DOLLARS IN MILLIONS)	March 31, 2021		December 31, 2020		(DOLLARS IN MILLIONS)	March 31, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Current Assets:	Current Assets:					Current Assets:
Cash and cash equivalents	Cash and cash equivalents	$	872	$	650	Cash and cash equivalents	$	657	$	711
Restricted cash	Restricted cash	7		7		Restricted cash	4		4
Trade receivables (net of allowances of $40 and $21, respectively)		2,023		929
Trade receivables (net of allowances of $69 and $46, respectively)						Trade receivables (net of allowances of $69 and $46, respectively)	2,160		1,906
Inventories: Raw materials	Inventories: Raw materials	780		566		Inventories: Raw materials	1,002		854
Work in process	Work in process	325		38		Work in process	311		287
Finished goods	Finished goods	1,484		528		Finished goods	1,482		1,375
Total Inventories	Total Inventories	2,589		1,132		Total Inventories	2,795		2,516

Assets held for sale						Assets held for sale	1,141		1,122
Prepaid expenses and other current assets	Prepaid expenses and other current assets	683		342		Prepaid expenses and other current assets	750		728
Total Current Assets	Total Current Assets	6,174		3,060		Total Current Assets	7,507		6,987
Property, plant and equipment, at cost	Property, plant and equipment, at cost	6,088		2,928		Property, plant and equipment, at cost	6,184		6,161
Accumulated depreciation	Accumulated depreciation	(1,501)		(1,470)		Accumulated depreciation	(1,889)		(1,793)
		4,587		1,458
Property, plant and equipment, net						Property, plant and equipment, net	4,295		4,368
Goodwill	Goodwill	17,104		5,593		Goodwill	16,298		16,414
Other intangible assets, net	Other intangible assets, net	11,652		2,727		Other intangible assets, net	10,250		10,506

Operating lease right-of-use assets	Operating lease right-of-use assets	803		299		Operating lease right-of-use assets	743		767
Other assets	Other assets	497		418		Other assets	654		616
Total Assets	Total Assets	$	40,817	$	13,555	Total Assets	$	39,747	$	39,658
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	$	628	$	634	Bank borrowings, overdrafts, and current portion of long-term debt	$	308	$	308

Commercial paper						Commercial paper	631		324
Accounts payable	Accounts payable	1,337		556		Accounts payable	1,629		1,532
Accrued payroll and bonus	Accrued payroll and bonus	222		133		Accrued payroll and bonus	259		335
Dividends payable	Dividends payable	192		82		Dividends payable	202		201
Liabilities held for sale						Liabilities held for sale	87		101
Other current liabilities	Other current liabilities	882		499		Other current liabilities	916		832
Total Current Liabilities	Total Current Liabilities	3,261		1,904		Total Current Liabilities	4,032		3,633
Other Liabilities:						Other Liabilities:
Long-term debt	Long-term debt	11,330		3,779		Long-term debt	10,738		10,768

Retirement liabilities	Retirement liabilities	550		326		Retirement liabilities	378		385
Deferred income taxes	Deferred income taxes	2,727		593		Deferred income taxes	2,454		2,518
Operating lease liabilities	Operating lease liabilities	697		265		Operating lease liabilities	653		670
Other liabilities	Other liabilities	469		268		Other liabilities	426		462
Total Other Liabilities	Total Other Liabilities	15,773		5,231		Total Other Liabilities	14,649		14,803
Commitments and Contingencies (Note 15)	Commitments and Contingencies (Note 15)	0		0		Commitments and Contingencies (Note 15)	0		0
Redeemable noncontrolling interests	Redeemable noncontrolling interests	102		98		Redeemable noncontrolling interests	101		105
Shareholders’ Equity:	Shareholders’ Equity:					Shareholders’ Equity:
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
Common stock $0.125 par value; 500,000,000 shares authorized; 275,726,629 shares issued as of March 31, 2022 and 275,726,629 shares issued as of December 31, 2021; and 254,804,747 and 254,573,984 shares outstanding as of March 31, 2022 and December 31, 2021, respectively						Common stock $0.125 par value; 500,000,000 shares authorized; 275,726,629 shares issued as of March 31, 2022 and 275,726,629 shares issued as of December 31, 2021; and 254,804,747 and 254,573,984 shares outstanding as of March 31, 2022 and December 31, 2021, respectively	35		35
Capital in excess of par value	Capital in excess of par value	19,796		3,853		Capital in excess of par value	19,823		19,826
Retained earnings	Retained earnings	3,922		4,156		Retained earnings	3,683		3,641
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(1,102)		(698)		Accumulated other comprehensive loss	(1,622)		(1,423)
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)
Treasury stock, at cost (20,921,882 and 21,152,645 shares as of March 31, 2022 and December 31, 2021, respectively)						Treasury stock, at cost (20,921,882 and 21,152,645 shares as of March 31, 2022 and December 31, 2021, respectively)	(986)		(997)
Total Shareholders’ Equity	Total Shareholders’ Equity	21,642		6,310		Total Shareholders’ Equity	20,933		21,082
Noncontrolling interest	Noncontrolling interest	39		12		Noncontrolling interest	32		35
Total Shareholders’ Equity including Noncontrolling interest	Total Shareholders’ Equity including Noncontrolling interest	21,681		6,322		Total Shareholders’ Equity including Noncontrolling interest	20,965		21,117
Total Liabilities and Shareholders’ Equity	Total Liabilities and Shareholders’ Equity	$	40,817	$	13,555	Total Liabilities and Shareholders’ Equity	$	39,747	$	39,658

See Notes to Consolidated Financial Statements

INTERNATIONAL FLAVORS & FRAGRANCES INC.

~~CONSOLIDATED STATEMENT OF (LOSS) INCOME AND COMPREHENSIVE LOSS~~Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

(Unaudited)


		Three Months Ended				Three Months Ended
		March 31,				March 31,
(AMOUNTS IN MILLIONS EXCEPT PER SHARE AMOUNTS)	(AMOUNTS IN MILLIONS EXCEPT PER SHARE AMOUNTS)	2021		2020			(AMOUNTS IN MILLIONS EXCEPT PER SHARE AMOUNTS)	2022		2021
Net sales	Net sales	$	2,465	$	1,347		Net sales	$	3,226	$	2,465
Cost of goods sold	Cost of goods sold	1,711		781			Cost of goods sold	2,081		1,711
Gross profit	Gross profit	754		566			Gross profit	1,145		754
Research and development expenses	Research and development expenses	143		86			Research and development expenses	157		143
Selling and administrative expenses	Selling and administrative expenses	451		230			Selling and administrative expenses	459		451
Amortization of acquisition-related intangibles	Amortization of acquisition-related intangibles	152		48			Amortization of acquisition-related intangibles	186		152
Restructuring and other charges, net		4		5
Losses on sales of fixed assets		0		1
Restructuring and other charges							Restructuring and other charges	2		4

Operating profit	Operating profit	4		196			Operating profit	341		4
Interest expense	Interest expense	65		32			Interest expense	72		65

Other (income) expense, net		(7)		11
(Loss) income before taxes		(54)		153
Taxes on (loss) income		(14)		26
Net (loss) income		(40)		127
Other income, net							Other income, net	(16)		(7)
Income (loss) before taxes							Income (loss) before taxes	285		(54)
Provision for (benefit from) income taxes							Provision for (benefit from) income taxes	39		(14)
Net income (loss)							Net income (loss)	246		(40)
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	2		3			Net income attributable to noncontrolling interests	2		2
Net (loss) income attributable to IFF stockholders		(42)		124
Net income (loss) attributable to IFF stockholders							Net income (loss) attributable to IFF stockholders	$	244	$	(42)

Net income (loss) per share - basic							Net income (loss) per share - basic	$	0.96	$	(0.21)
Net income (loss) per share - diluted							Net income (loss) per share - diluted	$	0.96	$	(0.21)
Average number of shares outstanding - basic							Average number of shares outstanding - basic	255		206
Average number of shares outstanding - diluted							Average number of shares outstanding - diluted	255		206

Statement of Comprehensive Income (Loss)							Statement of Comprehensive Income (Loss)
Net income (loss)							Net income (loss)	$	246	$	(40)
Other comprehensive loss, after tax:	Other comprehensive loss, after tax:						Other comprehensive loss, after tax:
Foreign currency translation adjustments	Foreign currency translation adjustments	(417)		(452)			Foreign currency translation adjustments	(199)		(417)
Gains on derivatives qualifying as hedges	Gains on derivatives qualifying as hedges	4		1			Gains on derivatives qualifying as hedges	—		4
Pension and postretirement net liability		9		4
Pension and postretirement liability adjustment							Pension and postretirement liability adjustment	—		9
Other comprehensive loss	Other comprehensive loss	(404)		(447)			Other comprehensive loss	(199)		(404)
Comprehensive loss attributable to IFF stockholders		$	(446)	$	(323)

Net (loss) income per share - basic		$	(0.21)	$	1.16
Net (loss) income per share - diluted		$	(0.21)	$	1.15
Average number of shares outstanding - basic		206		112
Average number of shares outstanding - diluted		206		113

Comprehensive income (loss)							Comprehensive income (loss)	47		(444)
Net income attributable to noncontrolling interests							Net income attributable to noncontrolling interests	2		2
Comprehensive income (loss) attributable to IFF stockholders							Comprehensive income (loss) attributable to IFF stockholders	$	45	$	(446)

See Notes to Consolidated Financial Statements

INTERNATIONAL FLAVORS & FRAGRANCES INC.

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF CASH FLOWS

(Unaudited)


		Three Months Ended March 31,					Three Months Ended March 31,
(DOLLARS IN MILLIONS)	(DOLLARS IN MILLIONS)	2021		2020		(DOLLARS IN MILLIONS)	2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net (loss) income		$	(40)	$	127
Adjustments to reconcile to net cash provided by operating activities
Net income (loss)						Net income (loss)	$	246	$	(40)
Adjustments to reconcile to net cash (used in) provided by operating activities						Adjustments to reconcile to net cash (used in) provided by operating activities
Depreciation and amortization	Depreciation and amortization	242		81		Depreciation and amortization	303		242
Deferred income taxes	Deferred income taxes	(86)		2		Deferred income taxes	(65)		(86)
Losses on sale of assets		0		1

Stock-based compensation	Stock-based compensation	11		9		Stock-based compensation	9		11
Pension contributions	Pension contributions	(9)		(5)		Pension contributions	(8)		(9)

Amortization of inventory step-up						Amortization of inventory step-up	—		182
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	(175)		(133)		Trade receivables	(272)		(175)
Inventories	Inventories	118		(1)		Inventories	(311)		(64)
Accounts payable	Accounts payable	250		(32)		Accounts payable	178		250
Accruals for incentive compensation	Accruals for incentive compensation	(22)		(19)		Accruals for incentive compensation	(101)		(22)
Other current payables and accrued expenses	Other current payables and accrued expenses	48		(65)		Other current payables and accrued expenses	39		48
Other assets		229		42
Other liabilities		(208)		10
Net cash provided by operating activities		358		17

Other assets/liabilities, net						Other assets/liabilities, net	(22)		21
Net cash (used in) provided by operating activities						Net cash (used in) provided by operating activities	(4)		358
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:

Additions to property, plant and equipment	Additions to property, plant and equipment	(93)		(49)		Additions to property, plant and equipment	(132)		(93)
Additions to intangible assets						Additions to intangible assets	(2)		—

Proceeds from life insurance contracts		0		2

Proceeds from disposal of assets	Proceeds from disposal of assets	1		4		Proceeds from disposal of assets	2		1

Cash provided by the Merger with N&B	Cash provided by the Merger with N&B	207		0		Cash provided by the Merger with N&B	11		207

Net cash provided by (used in) investing activities		115		(43)
Net cash (used in) provided by investing activities						Net cash (used in) provided by investing activities	(121)		115
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	(82)		(80)		Cash dividends paid to shareholders	(201)		(82)
Decrease in revolving credit facility and short-term borrowings		(104)		0
Increase (decrease) in revolving credit facility and short-term borrowings						Increase (decrease) in revolving credit facility and short-term borrowings	1		(104)
Proceeds from issuance of commercial paper (maturities after three months)						Proceeds from issuance of commercial paper (maturities after three months)	155		—
Repayments of commercial paper (maturities after three months)						Repayments of commercial paper (maturities after three months)	(75)		—
Net borrowings of commercial paper (maturities less than three months)						Net borrowings of commercial paper (maturities less than three months)	227		—

Repayments on debt		(12)		(12)
Repayments of long-term debt						Repayments of long-term debt	—		(12)

Contingent consideration paid	Contingent consideration paid	(14)		0		Contingent consideration paid	—		(14)
Purchases of redeemable noncontrolling interest		0		(14)

Purchases of noncontrolling interest						Purchases of noncontrolling interest	(6)		—

Proceeds from issuance of stock in connection with stock options	Proceeds from issuance of stock in connection with stock options	3		0		Proceeds from issuance of stock in connection with stock options	7		3
Employee withholding taxes paid	Employee withholding taxes paid	(6)		(1)		Employee withholding taxes paid	(13)		(6)

Net cash used in financing activities		(215)		(107)
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	95		(215)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	(37)		(43)		Effect of exchange rate changes on cash, cash equivalents and restricted cash	(24)		(37)
Net change in cash, cash equivalents and restricted cash	Net change in cash, cash equivalents and restricted cash	221		(176)		Net change in cash, cash equivalents and restricted cash	(54)		221
Cash, cash equivalents and restricted cash at beginning of year	Cash, cash equivalents and restricted cash at beginning of year	660		624		Cash, cash equivalents and restricted cash at beginning of year	716		660
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	881	$	448	Cash, cash equivalents and restricted cash at end of period	$	662	$	881
Supplemental Disclosures:	Supplemental Disclosures:					Supplemental Disclosures:
Interest paid, net of amounts capitalized	Interest paid, net of amounts capitalized	$	42	$	42	Interest paid, net of amounts capitalized	$	45	$	42
Income taxes paid	Income taxes paid	36		33		Income taxes paid	78		36
Accrued capital expenditures	Accrued capital expenditures	21		19		Accrued capital expenditures	64		21

See Notes to Consolidated Financial Statements

INTERNATIONAL FLAVORS & FRAGRANCES INC.

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

(DOLLARS IN MILLIONS) Common
stock Capital in
excess of
par value Retained
earnings Accumulated other
comprehensive
(loss) income Treasury stock Non-controlling
interest Total
Shares Cost Shares Cost
Balance at January 1, 2020 128,526,137 $ 16 $ 3,823 $ 4,118 $ (717) (21,738,838) $ (1,023) $ 12 $ 6,229
Net income 124 1 125
Cumulative translation adjustment (452) (452)
Gains on derivatives qualifying as hedges; net of tax of $0 1 1
Pension liability and postretirement adjustment; net of tax of $(1) 4 4
Cash dividends declared ($0.75 per share) (80) (80)
Stock options/SSARs (1) 13,763 1 0
Vested restricted stock units and awards (2) 11,195 1 (1)
Stock-based compensation 9 9
Redeemable NCI 6 6
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 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		(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							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	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)		Net loss						(42)							1		(41)

Cumulative translation adjustment	Cumulative translation adjustment								(417)							(417)		Cumulative translation adjustment								(417)							(417)
Gains on derivatives qualifying as hedges; net of tax of $(1)	Gains on derivatives qualifying as hedges; net of tax of $(1)								4							4		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		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)						(192)									(192)		Cash dividends declared ($0.77 per share)						(192)									(192)
Stock options/SSARs	Stock options/SSARs				1						98,729	5				6		Stock options/SSARs				1						98,729	5				6

Vested restricted stock units and awards	Vested restricted stock units and awards				(4)						82,461	4				0		Vested restricted stock units and awards				(4)						82,461	4				—
Stock-based compensation	Stock-based compensation				11											11		Stock-based compensation				11											11
Impact of N&B Merger	Impact of N&B Merger	141,740,461	18		15,936									26		15,980		Impact of N&B Merger	141,740,461	18		15,936									26		15,980

Redeemable NCI	Redeemable NCI				(1)											(1)		Redeemable NCI				(1)											(1)

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


(DOLLARS IN MILLIONS)	Common stock			Capital in excess of par value		Retained earnings		Accumulated other comprehensive (loss) income		Treasury stock			Non-controlling interest		Total
	Shares	Cost								Shares	Cost
Balance at January 1, 2022	275,726,629	$	35	$	19,826	$	3,641	$	(1,423)	(21,152,645)	$	(997)	$	35	$	21,117
Net income						244							2		246

Cumulative translation adjustment								(199)							(199)


Cash dividends declared ($0.79 per share)						(202)									(202)
Stock options/SSARs				9						80,153	4				13

Vested restricted stock units and awards				(22)						150,610	7				(15)
Stock-based compensation				9											9
Purchases of NCI				1									(5)		(4)



Balance at March 31, 2022	275,726,629	$	35	$	19,823	$	3,683	$	(1,622)	(20,921,882)	$	(986)	$	32	$	20,965

See Notes to Consolidated Financial Statements

INTERNATIONAL FLAVORS & FRAGRANCES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Nature of Operations

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

Basis of Presentation

~~These~~The accompanying interim ~~financial statements and related management’s discussion and analysis~~Consolidated Financial Statements 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 ~~2020~~2021 Annual Report on Form 10-K (“~~2020~~2021 Form 10-K”). ~~These~~

The interim Consolidated Financial Statements are unaudited. In addition, certain information and footnote disclosures normally included in financial statements ~~are unaudited.~~prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted, if not materially different from the 2021 Form 10-K. The year-end balance sheet data included in this Form 10-Q was derived from the audited financial ~~statements, but does not include~~statements. In the opinion of management, all ~~disclosures required by generally accepted accounting principles in~~adjustments, which consist of normal recurring adjustments necessary for a fair statement of the ~~United States of America.~~interim Consolidated Financial Statements, have been made.

On February 1, 2021 (the “Closing Date”), pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), the Company completed the combination (the "Merger") of IFF and DuPont de ~~Numerous,~~Nemours, 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~~Consolidated Financial Statements for the three months ended March 31, ~~2021 reflects~~2022 reflect the results of N&B ~~from~~for the ~~Closing Date,~~full three months in the first quarter of 2022, whereas ~~the Company’s consolidated financial statements for~~ the three months ended March 31, ~~2020 do not.~~

In2021 reflect only two months of results of N&B in the ~~current year, the Company has changed its presentation from thousands to millions and, as a result, any necessary rounding adjustments have been made to prior year disclosed amounts.~~first quarter of 2021.

Reporting Periods

~~Effective 2021, the~~The Company ~~changed its fiscal year end from a 52/53-week fiscal year ending on the Friday closest to the last day of the quarter, to~~uses 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, 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 in the comparative periods. The three months ended March 31, 2021 contained three fewer business days than the corresponding period in 2020, however the impact of this on revenue and 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 take into account the current economic implications of the novel coronavirus ("COVID-19") and the potential impairment of assets arising from the recent events in Russia and Ukraine on our critical and significant accounting estimates, including estimates associated with future cash flows that are used in assessing the risk of impairment of certain long-lived assets. Actual results could differ from those estimates.

Cash, Cash Equivalents and Restricted Cash

~~The following table provides a reconciliation of cash,~~Cash, cash equivalents and restricted cash reported in the Company's ~~statement~~balance sheet as of ~~cash flows periods ended~~March 31, 2022, December 31, 2021, March 31, 2021 and ~~March 31, 2020 to the amounts reported in the Company's balance sheet as at March 31, 2021,~~ December 31, 2020 ~~March 31, 2020 and December 31, 2019.~~were as follows:


(DOLLARS IN MILLIONS)	March 31, 2022		December 31, 2021		March 31, 2021		December 31, 2020
Current assets
Cash and cash equivalents	$	657	$	711	$	872	$	650
Restricted cash	4		4		7		7
Noncurrent assets
Restricted cash included in Other assets	1		1		2		3
Cash, cash equivalents and restricted cash	$	662	$	716	$	881	$	660

(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~~$250 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~~Sheets when the cash proceeds are received by the Company.

Through these factoring programs, the Company removed $304 million and $249 million of receivables from its balance sheets as of March 31, 2021 and December 31, 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~~a decrease of ~~$55~~$45 million for the three months ended March 31, ~~2021~~2022 and ~~a decrease~~an increase of $5$29 million for the three months ended March 31, ~~2020.~~

2021. The cost of participating in these programs was approximately $1 million for both the three months ended March 31, ~~2021~~2022 and ~~2020.~~2021.

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. See Note 11 for further details on revenues disaggregated by segment.

Contract Assets and Liabilities

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

~~For the periods ended~~As of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company's gross accounts receivable was ~~$2.063~~$2.229 billion and ~~$950 million,~~$1.952 billion, respectively. The Company's contract assets and contract liabilities ~~for the periods ended~~as of March 31, ~~2021~~2022 and December 31, ~~2020~~2021 were not material.

Expected Credit Losses

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

The Company also considers current and future economic conditions in the determination of the allowance. At March 31, ~~2021,~~2022, the Company reported ~~$2.023~~$2.160 billion of trade receivables, net of allowances of ~~$40~~$69 million. Based on the aging analysis as of March 31, ~~2021,~~2022, approximately 91% of our accounts receivable were current based on the payment terms of the invoice. Receivables that ~~are~~were 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 three months ended March 31, ~~2021, with the bad debt expense and write-offs both being under $1 million, which were not material:~~2022:


(DOLLARS IN MILLIONS)	Allowances for Bad Debts
Balance at December 31, ~~2020~~2021	$	2146


~~Other adjustments~~Bad debt expense(1)	2023
Write-offs	(1)

Foreign exchange	~~(1)~~1
Balance at March 31, ~~2021~~2022	$	4069

_______________________

(1)The ~~adjustment to allowances for~~ bad ~~debts was a result of purchase price allocation~~debt expense included approximately $20 million related to ~~the Merger with N&B.~~expected credit losses on receivables from customers located in Russia and Ukraine (for both export and domestic sales) due to recent events in those countries. The Company will continue to evaluate its credit exposure related to Russia and Ukraine.

~~Long-lived assets~~

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~~10 to 27 years; patents, 11 -to 15 years; trade names, 4 -to 28 years; and technological know-how, 5 -to 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 Events in Russia and Ukraine

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

During the first quarter of 2022, in connection with the events in Ukraine (including the impact of the invasion and the sanctions placed on Russia), the Company determined that certain assets should be tested for recoverability. In order to perform the test for recoverability, the Company prepared an estimate of the undiscounted cash flows for the applicable asset groups. The total amount of assets in the applicable asset groups identified, and to be tested for recoverability, was approximately $228 million, or less than 1% of total assets, of which approximately $210 million related to Russia. Based on the projections made, it was determined that no impairment existed in any of the asset groups as of March 31, 2022. The undiscounted cash flows were prepared under the assumption that the Company’s operations in Russia and Ukraine would continue to operate and that the Company would be able to continue to manufacture and sell products within Russia, subject to limiting our operations to servicing essential needs. The Company may incur impairment of such assets in the future if these assumptions change or circumstances worsen.

As indicated above, the Company also recorded a charge of approximately $20 million related to expected credit losses on receivables from customers located in Russia and Ukraine (for both export and domestic sales) due to recent events in those countries. The Company will continue to evaluate its credit exposure related to Russia and Ukraine.

Recent Accounting Pronouncements

In November 2021, the FASB issued Accounting Standards Update ("ASU") 2021-10, "Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance." The ASU requires annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. This guidance is effective for all entities for annual periods beginning after December 15, 2021 and early adoption is permitted. The Company is currently evaluating the impact of this guidance, but does not expect this guidance to have a material impact on its Consolidated Financial Statements.

In October 2021, the FASB issued Accounting Standards Update ("ASU") 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers." The ASU is intended to provide specific guidance on how to recognize and measure acquired contract assets and liabilities from revenue contracts in a business combination. An acquirer needs to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. To achieve this, an acquirer may assess how the acquiree applied Topic 606 to determine what to record for the acquired revenue contracts. This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of this guidance, but does not expect this guidance to have a material impact on its Consolidated Financial Statements.

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 a 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, 2022. ~~The Company is currently evaluating the impact of this guidance, but does not expect this guidance to have a material impact on its Consolidated Financial Statements.~~

In March 2020, the 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 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 March 31, 2021 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. This guidance was adopted ~~on January 2, 2021~~ and does not have a material impact on the Company's Consolidated Financial Statements.

NOTE 2. NET INCOME (LOSS) ~~INCOME~~ PER SHARE

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

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


	Three Months Ended March 31,
(AMOUNTS IN MILLIONS EXCEPT PER SHARE AMOUNTS)	2022		2021
Net Income (Loss)
Net income (loss) attributable to IFF stockholders	$	244	$	(42)
Adjustment related to (increase) decrease in redemption value of redeemable noncontrolling interests in excess of earnings allocated	—		(1)
Net income (loss) available to IFF stockholders	$	244	$	(43)
Shares
Weighted average common shares outstanding (basic)(1)	255		206



Weighted average shares assuming dilution (diluted)	255		206

Net Income (Loss) per Share
Net income (loss) per share - basic	$	0.96	$	(0.21)
Net income (loss) per share - diluted	0.96		(0.21)

_______________________

(1)On September 15, 2021, additional shares of IFF's common stock were issued in settlement of the stock purchase contract ("SPC") portion of the tangible equity units ("TEUs"). For the three months ended March 31, 2021, ~~and 2020,~~ the ~~tangible equity units (“TEUs”)~~TEUs were assumed to be outstanding at the minimum settlement amount for basic earnings per ~~share.~~share ("EPS"). 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.additional information.

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~~the Merger ~~(the "Merger Agreement").~~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~~$0.79 and ~~$0.75~~$0.77 per share for the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, 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 months ended March 31, ~~2020.~~2022.

There were approximately 1000000 potentially dilutive securities excluded from the computation of diluted net income (loss) per share for the three months ended March 31, 2021 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.

The Company issued 16,500,000 TEUs, consisting of a prepaid ~~stock purchase contract ("SPC")~~SPC and a senior amortizing note, for net proceeds of $800 million on September 17, 2018. On September 14, 2021, the Company notified holders of the TEUs that the final settlement rate in respect of each SPC was 0.330911 shares of IFF's common stock. On September 15, 2021, 5,460,031 shares of IFF's common stock were issued in settlement of the SPCs. The SPC conversion factor is based on the 20 day volume-weighted average price (“VWAP”) per share of the Company’s common stock. For purposes of calculating basic net income (loss) per share, the ~~SPCs were assumed to be settled at the~~ minimum settlement ~~amount~~rate of ~~0.3134~~0.313400 shares per SPC on March 31, 2021 ~~and 2020.~~was used. 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~~0.366500 shares per SPC on March 31, 2021 and 2020, 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.2021.

The Company has issued shares of purchased restricted common stock units (“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 there was no difference between basic net income (loss) per share for both unrestricted common shareholders and PRSU shareholders for the three months ended March 31, 2022 and 2021. The difference between diluted net ~~(loss)~~ income per share for both unrestricted common shareholders and PRSU shareholders for the three months ended March 31, ~~2021~~2022 was less than $0.01 per share and ~~the~~there was no difference between diluted net income (loss) per share for both unrestricted common shareholders and PRSU shareholders for the three months ended March 31, ~~2020 was less than $0.01 per share. The~~2021. In addition, the number of PRSUs outstanding as of March 31, ~~2021~~2022 and ~~2020~~2021 was not material. Net ~~loss~~income allocated to such PRSUs was not material for the three months ended March 31, ~~2021~~2022 and ~~net income allocated to such PRSUs was also not material for the three months ended March 31, 2020.~~2021.

NOTE 3. ACQUISITIONS

Transaction with ~~Nutrition & Biosciences, Inc.~~N&B

On February 1, 2021, IFF completed the Merger with N&B. Pursuant to the transaction related agreements, DuPont transferred its N&B Business to N&B, a wholly-owned subsidiary of DuPont, and N&B merged with and into a wholly owned subsidiary of IFF in exchange for 141,740,461 shares of IFF common stock, par value $0.125 per share (“IFF Common Stock”).

~~On the Closing Date, the Company completed its Merger with N&B in a Reverse Morris Trust transaction (the “Transactions”), pursuant to which the Company acquired the N&B Business of DuPont.~~Inthe Transactions, among other steps (i) DuPont transferred the N&B Business to N&B (the “Separation”); (ii) N&B made a cash distribution to DuPont of approximately $7.359 billion, subject to certain adjustments (the “Special Cash 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”), and; (iv) N&B merged with and into a wholly owned subsidiary of IFF. As a result of the Merger, the existing shares of N&B 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 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.

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 Merger, N&B’s assets, liabilities and the operating results of N&B 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 changes in amortization of intangible assets, depreciation of property, plant and equipment and amortization of stepped up inventory.

Prior to the Distribution, N&B incurred new indebtedness in the form of term loans and senior notes in an aggregate principal amount of $7.500 billion to pay the Special Cash 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 acquire N&B ~~(in millions, except share and 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~~was $15.942 billion. Refer to ~~DuPont stockholders represents 141,740,461 shares~~Note 3 of the Company's common stock determined based on the number of 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 DuPont common stock held by employees of N&B were canceled and 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 employees of N&B 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 Closing Date and IFF’s stock on the twenty trading days following the Closing Date. The fair value of replacement equity-based awards attributable to pre-Merger service was recorded as part of the consideration transferred in the Merger (see Note 102021 Form 10-K for additional ~~information).~~

information.

~~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~~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)


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

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

Frutarom Integration Initiative

In connection with the acquisition of Frutarom, the Company has been executing an integration plan that, among other initiatives, seeks to optimize its manufacturing network (the "Frutarom Integration Initiative"). As part of the Frutarom Integration Initiative, the Company now expects to close approximately 3530 manufacturing sites with ~~most of the~~all closures targeted to occur by ~~the end of 2022. Between 2019 and 2020, the Company completed the closure of 21 sites. During the three months ended March 31, 2021, the Company completed the closure of 1 site in North America.~~2023. Since the inception of the initiative through March 31, ~~2021,~~2022, the Company has closed 22 sites and expensed total costs of approximately ~~$27~~$37 million. Total costs for the program are expected to be approximately ~~$60~~$42 million including cash and non-cash ~~items through 2022.~~items.

2019 Severance Program

During the year ended December 31, 2019, the Company incurred severance charges related to approximately 190 headcount reductions, excluding those previously mentioned under the Frutarom Integration Initiative. The headcount reductions primarily related to the Scent business unit with additional amounts related to headcount reductions in all business units associated with the establishment of a new shared service center in Europe. Since the inception of the program, the Company has expensed approximately ~~$21~~$20 million to date. ~~As of March 31, 2021, the program is largely completed.~~

~~Other~~

N&B Merger Restructuring ~~Charges~~Liability

For the three months ended March 31, ~~2021,~~2022, the Company incurred approximately $4$2 million of ~~severance~~ charges related to ~~executives separating from~~severance. Since the ~~Company.~~

inception of the restructuring activities, there have been approximately 265 headcount reductions and the Company has expensed approximately $32 million.

Changes in Restructuring Liabilities

Changes in restructuring liabilities ~~by program~~ during the three months ended March 31, ~~2021~~2022 were as follows:


(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		(DOLLARS IN MILLIONS)	Balance at December 31, 2021		Additional Charges (Reversals), Net		Non-Cash Charges		Cash Payments		Balance at March 31, 2022

Frutarom Integration Initiative	Frutarom Integration Initiative									Frutarom Integration Initiative
Severance	Severance	$	3	$	0	$	—	$	3	Severance	$	5	$	—	$	—	$	—	$	5

Other(1)	Other(1)	3		0		—		3		Other(1)	3		—		—		(1)		2
2019 Severance Plan	2019 Severance Plan									2019 Severance Plan
Severance	Severance	6		0		—		6		Severance	5		—		—		—		5

Other Restructuring Charges	Other Restructuring Charges									Other Restructuring Charges
Severance	Severance	2		4		—		6		Severance	1		—		—		—		1

N&B Restructuring Liabilities(2)		0		0		4		4
Total restructuring		$	14	$	4	$	4	$	22
N&B Merger Restructuring Liability										N&B Merger Restructuring Liability
Severance										Severance	15		2		—		(5)		12

Total restructuring and other charges										Total restructuring and other charges	$	29	$	2	$	—	$	(6)	$	25

_______________________

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

~~(2)~~Restructuring liabilities ~~assumed as a result of~~are presented in "Other Current Liabilities" in the ~~Merger with N&B.~~Consolidated Balance Sheets.

Charges by Segment

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

Three Months Ended March 31,
(DOLLARS IN MILLIONS) 2021 2020
Nourish $ 0 $ 5
Shared IT & Corporate Costs 4 0
Total Restructuring and other charges, net $ 4 $ 5


	Three Months Ended March 31,
(DOLLARS IN MILLIONS)	2022		2021
Nourish	$	2	$	3

Scent	—		1


Total Restructuring and other charges	$	2	$	4

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 attributable to each reportable segment for the three months ended March 31, ~~2021~~2022 were as follows:

(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)~~Acquisitions relate to 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 future periods as a result of purchase accounting being finalized. See Note 3 for additional information.


(DOLLARS IN MILLIONS)	Nourish		Health & Biosciences		Scent		Pharma Solutions		Total
Balance at December 31, 2021	$	6,555	$	6,749	$	1,828	$	1,282	$	16,414



Foreign exchange	(50)		(42)		(11)		(13)		(116)


Balance at March 31, 2022	$	6,505	$	6,707	$	1,817	$	1,269	$	16,298

1310

Other Intangible Assets

Other intangible assets, net consisted of the following amounts:


		March 31,		December 31,			March 31,		December 31,
(DOLLARS IN MILLIONS)	(DOLLARS IN MILLIONS)	2021		2020		(DOLLARS IN MILLIONS)	2022		2021

Asset Type	Asset Type					Asset Type
Customer relationships	Customer relationships	$	9,397	$	2,728	Customer relationships	$	8,878	$	8,935
Technological know-how						Technological know-how	2,470		2,494
Trade names & patents	Trade names & patents	453		187		Trade names & patents	405		411
Technological know-how		2,579		479

Other	Other	30		38		Other	50		50
Total carrying value	Total carrying value	12,459		3,432		Total carrying value	11,803		11,890
Accumulated Amortization	Accumulated Amortization					Accumulated Amortization
Customer relationships	Customer relationships	(500)		(470)		Customer relationships	(991)		(887)
Technological know-how						Technological know-how	(441)		(388)
Trade names & patents	Trade names & patents	(126)		(38)		Trade names & patents	(76)		(68)
Technological know-how		(154)		(168)

Other	Other	(27)		(29)		Other	(45)		(41)
Total accumulated amortization	Total accumulated amortization	(807)		(705)		Total accumulated amortization	(1,553)		(1,384)

Other intangible assets, net	Other intangible assets, net	$	11,652	$	2,727	Other intangible assets, net	$	10,250	$	10,506

Amortization

Amortization expense was ~~$152~~$186 million and ~~$48~~$152 million for the three months ended March 31, 2022 and 2021, ~~and 2020.~~respectively.

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


(DOLLARS IN MILLIONS)	(DOLLARS IN MILLIONS)	2021		2022		2023		2024		2025		(DOLLARS IN MILLIONS)	2022		2023		2024		2025		2026
Estimated future intangible amortization expense	Estimated future intangible amortization expense	$	608	$	807	$	807	$	807	$	805	Estimated future intangible amortization expense	$	564	$	743	$	742	$	740	$	737

NOTE 6. OTHER CURRENT ASSETS AND LIABILITIES, AND OTHER ASSETS

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


(DOLLARS IN MILLIONS)	March 31, 2022		December 31, 2021
Value-added tax receivable	$	196	$	178
Income tax receivable	107		131
Prepaid expenses	328		288

Other	119		131
Total	$	750	$	728

Other assets consisted of the following amounts:


(DOLLARS IN MILLIONS)	(DOLLARS IN MILLIONS)	March 31, 2021		December 31, 2020		(DOLLARS IN MILLIONS)	March 31, 2022		December 31, 2021

Finance lease right-of-use assets	Finance lease right-of-use assets	$	9	$	8	Finance lease right-of-use assets	$	20	$	21
Deferred income taxes	Deferred income taxes	102		197		Deferred income taxes	111		82
Overfunded pension plans	Overfunded pension plans	110		101		Overfunded pension plans	134		136
Cash surrender value of life insurance contracts	Cash surrender value of life insurance contracts	49		49		Cash surrender value of life insurance contracts	49		52

Equity method investments						Equity method investments	85		86

Other(1)	Other(1)	227		63		Other(1)	255		239
Total	Total	$	497	$	418	Total	$	654	$	616

_______________________

(1)Includes ~~restricted cash,~~ land usage rights in China and long term deposits.

Other current liabilities consisted of the following amounts:


(DOLLARS IN MILLIONS)	March 31, 2022		December 31, 2021
Rebates and incentives payable	$	110	$	113
Value-added tax payable	55		50
Interest payable	70		48
Current pension and other postretirement benefit obligation	9		11
Accrued insurance (including workers’ compensation)	9		10

Restructuring and other charges	25		29
Current operating lease obligation	107		109
Current financing lease obligation	5		5

Accrued income taxes	151		94

Other accounts payable and accrued expenses payable	267		270
Other	108		93
Total	$	916	$	832

NOTE 7. DEBT

Debt consisted of the following:


(DOLLARS IN MILLIONS)	(DOLLARS IN MILLIONS)	Effective Interest Rate		March 31, 2021		December 31, 2020		(DOLLARS IN MILLIONS)	Effective Interest Rate		March 31, 2022		December 31, 2021

2021 Euro Notes(1)		0.82	%	$	353	$	368

2022 Notes(3)	2022 Notes(3)	0.69	%	300		0		2022 Notes(3)	0.69	%	$	300	$	300
2023 Notes(1)	2023 Notes(1)	3.30	%	299		299		2023 Notes(1)	3.30	%	300		300
2024 Euro Notes(1)	2024 Euro Notes(1)	1.88	%	587		614		2024 Euro Notes(1)	1.88	%	554		565
2025 Notes(3)	2025 Notes(3)	1.22	%	1,001		0		2025 Notes(3)	1.22	%	1,000		1,001
2026 Euro Notes(1)	2026 Euro Notes(1)	1.93	%	936		978		2026 Euro Notes(1)	1.93	%	882		900
2027 Notes(3)	2027 Notes(3)	1.56	%	1,220		0		2027 Notes(3)	1.56	%	1,217		1,218
2028 Notes(1)	2028 Notes(1)	4.57	%	397		397		2028 Notes(1)	4.57	%	397		397
2030 Notes(3)	2030 Notes(3)	2.21	%	1,511		0		2030 Notes(3)	2.21	%	1,510		1,511
2040 Notes(3)	2040 Notes(3)	3.04	%	775		0		2040 Notes(3)	3.04	%	774		775
2047 Notes(1)	2047 Notes(1)	4.44	%	494		494		2047 Notes(1)	4.44	%	495		494
2048 Notes(1)	2048 Notes(1)	5.12	%	786		786		2048 Notes(1)	5.12	%	787		786
2050 Notes(3)	2050 Notes(3)	3.21	%	1,574		0		2050 Notes(3)	3.21	%	1,572		1,572
2018 Term Loan Facility(1)		3.65	%	240		240
2022 Term Loan Facility (1)		1.73	%	200		199

2024 Term Loan Facility(3)	2024 Term Loan Facility(3)	1.46	%	625		0		2024 Term Loan Facility(3)	1.56	%	625		625
2026 Term Loan Facility(3)	2026 Term Loan Facility(3)	1.83	%	625		0		2026 Term Loan Facility(3)	1.94	%	625		625
Amortizing Notes(1)		6.09	%	24		36

Commercial paper(4)								Commercial paper(4)	—	%	631		324
Bank overdrafts and other	Bank overdrafts and other			11		2		Bank overdrafts and other			8		7

Total debt	Total debt			11,958		4,413		Total debt			11,677		11,400
Less: Short-term borrowings(2)	Less: Short-term borrowings(2)			(628)		(634)		Less: Short-term borrowings(2)			(939)		(632)
Total Long-term debt	Total Long-term debt			$	11,330	$	3,779	Total Long-term debt			$	10,738	$	10,768

_______________________

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

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

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

(4)The effective interest rate of commercial paper issuances fluctuates as short-term interest rates and demand fluctuate, and deferred debt issuance costs are immaterial. Additionally, the effective interest rate of commercial paper is not meaningful as issuances do not materially differ from short-term interest rates.

~~Term Loan Facility and Senior Notes assumed as part of~~Commercial Paper

During the ~~N&B Merger~~

~~Following the Merger,~~three months ended March 31, 2022, the Company ~~assumed~~had gross issuances of $873 million and repayments of $566 million under the ~~indebtedness incurred by N&B in~~Commercial Paper Program. The commercial paper issued had original maturities of less than 125 days. There were no commercial paper issuances or repayments during 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.three months ended March 31, 2021.

1512

The ~~2024 Term Loan Facility and 2026 Term Loan Facility are subject to customary affirmative and negative covenants and events of default after~~Commercial Paper Program is backed by the ~~Closing Date of~~borrowing capacity available under the ~~Merger.~~Revolving Credit Facility. 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”), bearingeffective interest ~~at a~~ rate of ~~0.697% per year, payable semi-annually on March 15~~commercial paper issuances does not materially differ from short-term interest rates, which fluctuate due to market conditions 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~~impact our 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:expense.


~~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 (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 for a senior unsecured two year term loan facility in an aggregate principal amount of up to $200 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 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 4.75x, with step-downs over 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.~~equipment. The Company's leases have remaining lease terms of up to 4050 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			Three Months Ended		Three Months Ended
(DOLLARS IN MILLIONS)	(DOLLARS IN MILLIONS)	March 31, 2021		March 31, 2020		(DOLLARS IN MILLIONS)	March 31, 2022		March 31, 2021
Operating lease cost	Operating lease cost	$	32	$	12	Operating lease cost	$	47	$	32
Finance lease cost	Finance lease cost	1		1		Finance lease cost	2		1

Supplemental cash flow information related to leases was as follows:


		Three Months Ended		Three Months Ended			Three Months Ended		Three Months Ended
(DOLLARS IN MILLIONS)	(DOLLARS IN MILLIONS)	March 31, 2021		March 31, 2020		(DOLLARS IN MILLIONS)	March 31, 2022		March 31, 2021
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 for operating leases	Operating cash flows for operating leases	$	27	$	12	Operating cash flows for operating leases	$	35	$	27

Financing cash flows for finance leases	Financing cash flows for finance leases	1		1		Financing cash flows for finance leases	2		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	11		11		Operating leases	18		11
Finance leases	Finance leases	1		2		Finance leases	1		1

~~Right-of-use~~Operating lease right-of-use assets are presented in "Operating lease right-of-use assets" and financing lease right-of-use assets are presented in "Other Assets" in the Consolidated Balance ~~Sheet. Lease~~Sheets. Operating lease liabilities are presented in "Operating lease liabilities" and financing lease liabilities are presented in "Other Liabilities" in the Consolidated Balance ~~Sheet.~~Sheets. 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.Sheets.

NOTE 9. INCOME TAXES

Uncertain Tax Positions

As of March 31, ~~2021,~~2022, the Company had approximately $131 million of unrecognized tax benefits recorded in Other liabilities and ~~an amount less than $1 million~~no amounts 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,~~2022, the Company had accrued interest and penalties of ~~$32~~approximately $37 million classified in Other liabilities and ~~an amount less than $1 million~~no amounts 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,~~2022, the Company’s aggregate provisions for uncertain tax positions, including interest and penalties, was ~~$164~~approximately $168 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,~~2022, the Company had a deferred tax liability of ~~$57~~approximately $87 million for the effect of repatriating the funds to the U.S., attributable to various non-U.S. subsidiaries. There is 0no 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~~2012 to ~~2020.~~2021. 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~~2022 was ~~25.9%~~13.7% compared to ~~17.0%~~25.9% for the three months ended March 31, ~~2020.~~2021. The quarter-over-quarter ~~increase~~decrease was primarily due to ~~higher repatriation costs and an unfavorable~~a favorable mix of ~~earnings.~~earnings and a one-time benefit associated with the proceedings of a bi-lateral advance pricing agreement.

NOTE 10. STOCK COMPENSATION PLANS

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

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


		Three Months Ended March 31,				Three Months Ended March 31,
(DOLLARS IN MILLIONS)	(DOLLARS IN MILLIONS)	2021		2020			(DOLLARS IN MILLIONS)	2022		2021
Equity-based awards	Equity-based awards	$	11	$	9		Equity-based awards	$	9	$	11
Liability-based awards	Liability-based awards	3		(1)			Liability-based awards	—		3
Total stock-based compensation expense	Total stock-based compensation expense	14		8			Total stock-based compensation expense	9		14
Less: Tax benefit	Less: Tax benefit	(3)		(1)			Less: Tax benefit	(2)		(3)
Total stock-based compensation expense, after tax	Total stock-based compensation expense, after tax	$	11	$	7		Total stock-based compensation expense, after tax	$	7	$	11

~~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 11. SEGMENT INFORMATION

~~During the first quarter of 2021, the~~The Company ~~completed its Merger with N&B. Following the Merger, the Company reorganized its reportable segments and~~ is ~~now~~ organized into 4 reportable operating segments: Nourish, Health & Biosciences (“H&B”), Scent and Pharma Solutions. These segments align with the internal structure 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,~~business units, 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 beverage products, specialty soy and pea protein with value-added formulations, emulsifiers and sweeteners. Flavors provide a range of flavor compounds and natural taste solutions that are ultimately used by IFF's customers in savory products, beverages, sweets, and dairy products. 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 and mixtures. Additionally, Food Designs provide inclusion products that 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,~~business units, 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 for non-food applications. Health provides ingredients for dietary supplements, food and beverage, 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~~business unit'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 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 fragrance 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~~vast portfolio including cellulosics and ~~alginates-based pharma~~seaweed-based pharmaceutical 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~~pharmaceutical finished dosage formats. Pharma Solutions ~~is the oral dosage~~excipients are used in prescription and over-the-counter pharmaceuticals ~~excipients market.~~

~~Effective in the first quarter~~and dietary supplements. Pharma Solutions products also serve a variety 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~~other specialty and ~~performance measurement purposes. This change was made to enhance the transparency~~industrial end-uses including coatings, inks, electronics, agriculture, 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 Adjusted Operating EBITDA, which is defined as Income (Loss) Before Taxes before depreciation and amortization expense, interest expense, restructuring and other charges, net and certain non-recurring items. Prior period amounts have been recast to reflect these changes in segment profitability measures.

consumer products.

Reportable segment information was as follows:


		Three Months Ended				Three Months Ended
		March 31,				March 31,
(DOLLARS IN MILLIONS)	(DOLLARS IN MILLIONS)	2021		2020			(DOLLARS IN MILLIONS)	2022		2021
Net sales:	Net sales:						Net sales:
Nourish	Nourish	$	1,308	$	772		Nourish	$	1,731	$	1,308
Health & Biosciences	Health & Biosciences	426		34			Health & Biosciences	661		426
Scent	Scent	569		541			Scent	585		569
Pharma Solutions	Pharma Solutions	162		0			Pharma Solutions	249		162
Consolidated	Consolidated	$	2,465	$	1,347		Consolidated	$	3,226	$	2,465
Segment Adjusted Operating EBITDA
Segment Adjusted Operating EBITDA:							Segment Adjusted Operating EBITDA:
Nourish	Nourish	$	270	$	176		Nourish	$	329	$	270
Health & Biosciences	Health & Biosciences	128		9			Health & Biosciences	192		128
Scent	Scent	128		118			Scent	116		128
Pharma Solutions	Pharma Solutions	43		0			Pharma Solutions	65		43
Total	Total	569		303			Total	702		569
Depreciation & Amortization	Depreciation & Amortization	(242)		(81)			Depreciation & Amortization	(303)		(242)
Interest Expense	Interest Expense	(65)		(32)			Interest Expense	(72)		(65)
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)
Other income, net							Other income, net	16		7
Restructuring and Other Charges							Restructuring and Other Charges	(2)		(4)
Shareholder Activism Related Costs (a)							Shareholder Activism Related Costs (a)	(3)		(7)
Business Divestiture Costs (b)							Business Divestiture Costs (b)	(30)		—
Employee Separation Costs (c)							Employee Separation Costs (c)	(4)		(3)
Frutarom Acquisition Related Costs (d)							Frutarom Acquisition Related Costs (d)	(1)		—
N&B Inventory Step-Up Costs	N&B Inventory Step-Up Costs	(182)		0			N&B Inventory Step-Up Costs	—		(182)
N&B Transaction Related Costs (f)		(89)		(5)
N&B Integration Related Costs (g)		(37)		(10)
N&B Transaction Related Costs (e)							N&B Transaction Related Costs (e)	—		(89)
Integration Related Costs (f)							Integration Related Costs (f)	(18)		(38)

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

Income (Loss) Before Taxes							Income (Loss) Before Taxes	$	285	$	(54)

_______________________


(a)			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.
~~(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.~~
~~(c)~~			~~Represents~~ shareholder activist related costs, primarily professional fees.
~~(d)~~(b)			Represents costs related to the Company's planned sales of businesses, primarily legal and professional fees.
(c)			Represents costs related to severance, ~~liabilities,~~ including accelerated stock compensation expense, for certain employees and executives who have been separated or will separate from the Company.
~~(e)~~(d)			~~Costs~~Represents transaction-related costs and expenses related to ~~reviewing~~ the ~~nature~~acquisition of ~~inappropriate payments and review of compliance in certain other countries. In addition, includes legal costs for related shareholder lawsuits.~~Frutarom.


~~(f)~~(e)			Represents transaction costs and expenses related to the transaction with N&B, primarily includes legal and professional fees.
~~(g)~~(f)			Represents costs related to integration activities since 2018, primarily for Frutarom and N&B. For 2022, represents costs primarily related to external consulting fees and internal integration costs, including salaries. For 2021, represents costs primarily related to performance stock awards and consulting fees for advisory ~~services for the integration of the transaction with N&B, primarily consulting fees.~~services.

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


		Three Months Ended March 31,				Three Months Ended March 31,
(DOLLARS IN MILLIONS)	(DOLLARS IN MILLIONS)	2021		2020			(DOLLARS IN MILLIONS)	2022		2021
Europe, Africa and Middle East	Europe, Africa and Middle East	$	873	$	543		Europe, Africa and Middle East	$	1,128	$	873
Greater Asia	Greater Asia	587		310			Greater Asia	744		587
North America	North America	722		303			North America	1,002		722
Latin America	Latin America	283		191			Latin America	352		283
Consolidated	Consolidated	$	2,465	$	1,347		Consolidated	$	3,226	$	2,465


		Three Months Ended March 31,				Three Months Ended March 31,
(DOLLARS IN MILLIONS)	(DOLLARS IN MILLIONS)	2021		2020			(DOLLARS IN MILLIONS)	2022		2021
Net sales related to the U.S.	Net sales related to the U.S.	$	654	$	271		Net sales related to the U.S.	$	901	$	654
Net sales attributed to all foreign countries	Net sales attributed to all foreign countries	1,811		1,076			Net sales attributed to all foreign countries	2,325		1,811

No non-U.S. country had net sales greater than 6% of total consolidated net sales for the three months ended March 31, 2022 and 2021.

NOTE 12. EMPLOYEE BENEFITS

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


(DOLLARS IN MILLIONS)	(DOLLARS IN MILLIONS)	U.S. Plans				(DOLLARS IN MILLIONS)	U.S. Plans
		Three Months Ended March 31,						(DOLLARS IN MILLIONS)	Three Months Ended March 31,
		2021		2020						(DOLLARS IN MILLIONS)	2022				2021

Interest cost on projected benefit obligation(2)	Interest cost on projected benefit obligation(2)	$	3	$	4						$	4			$	3
Expected return on plan assets(2)	Expected return on plan assets(2)	(5)		(7)							Expected return on plan assets(2)		(5)				(5)
Net amortization and deferrals(2)	Net amortization and deferrals(2)	2		2							Net amortization and deferrals(2)		2				2
Net periodic benefit (income) cost	Net periodic benefit (income) cost	$	0	$	(1)						Net periodic benefit (income) cost		$	1			$	—


(DOLLARS IN MILLIONS)	(DOLLARS IN MILLIONS)	Non-U.S. Plans				(DOLLARS IN MILLIONS)	Non-U.S. Plans
		Three Months Ended March 31,						(DOLLARS IN MILLIONS)	Three Months Ended March 31,
		2021		2020						(DOLLARS IN MILLIONS)	2022				2021
Service cost for benefits earned(1)	Service cost for benefits earned(1)	$	10	$	6						$	9			$	10
Interest cost on projected benefit obligation(2)	Interest cost on projected benefit obligation(2)	2		3							5				2
Expected return on plan assets(2)	Expected return on plan assets(2)	(12)		(12)							Expected return on plan assets(2)		(11)				(12)
Net amortization and deferrals(2)	Net amortization and deferrals(2)	5		4							Net amortization and deferrals(2)		3				5

Net periodic benefit (income) cost	Net periodic benefit (income) cost	$	5	$	1						Net periodic benefit (income) cost		$	6			$	5

_______________________

(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$5 million to its U.S. pension plans and a total of ~~$25~~$33 million to its ~~Non-U.S. Plans~~non-U.S. pension plans during ~~2021.~~2022. During the three months ended March 31, ~~2021, 0~~2022, no contributions were made to the qualified U.S. pension plans, $8$7 million of contributions were made to the non-U.S. pension plans, and $1 million of benefit payments were made with respect to the Company's non-qualified U.S. pension plan.

~~Income (expense)~~

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

Three Months Ended March 31,
(DOLLARS IN MILLIONS) 2021 2020
Net amortization and deferrals $ (1) $ (1)
Total postretirement benefit income $ (1) $ (1)


	Three Months Ended March 31,
(DOLLARS IN MILLIONS)	2022		2021


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

The Company expects to contribute $4 million to its postretirement benefits other than pension plans during ~~2021.~~2022. In the three months ended March 31, ~~2021,~~2022, $1 million of contributions were made.

NOTE 13. FINANCIAL INSTRUMENTS

Fair Value

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

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

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

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

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The Company determines the fair value of structured liabilities (where performance is linked to structured interest rates, inflation or currency risks) using the London Interbank Offer Rate ("LIBOR") swap curve and forward interest and exchange rates at period end. Such instruments are classified as Level 2 based on the observability of significant inputs to the model. The Company does not have any instruments classified as Level 3, other than those included in pension asset trusts as discussed in Note 1615 of the Company's ~~2020~~2021 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 not material as of March 31, ~~2021.~~2022.

2217

The carrying values and the estimated fair values of financial instruments at March 31, ~~2021~~2022 and December 31, ~~2020~~2021 consisted of the following:


		March 31, 2021				December 31, 2020					March 31, 2022				December 31, 2021
(DOLLARS IN MILLIONS)	(DOLLARS IN MILLIONS)	Carrying Value		Fair Value		Carrying Value		Fair Value		(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)	$	872	$	872	$	650	$	650	Cash and cash equivalents(1)	$	657	$	657	$	711	$	711
2025 Notes~~(6)~~(5)	2025 Notes~~(6)~~(5)	1,001		982		0		0		2025 Notes~~(6)~~(5)	1,000		924		1,001		968
2027 Notes~~(6)~~(5)	2027 Notes~~(6)~~(5)	1,220		1,172		0		0		2027 Notes~~(6)~~(5)	1,217		1,089		1,218		1,180
2030 Notes~~(6)~~(5)	2030 Notes~~(6)~~(5)	1,511		1,454		0		0		2030 Notes~~(6)~~(5)	1,510		1,333		1,511		1,466
2040 Notes~~(6)~~(5)	2040 Notes~~(6)~~(5)	775		736		0		0		2040 Notes~~(6)~~(5)	774		662		775		762
2050 Notes~~(6)~~(5)	2050 Notes~~(6)~~(5)	1,574		1,470		0		0		2050 Notes~~(6)~~(5)	1,572		1,307		1,572		1,556
LEVEL 2	LEVEL 2									LEVEL 2
Credit facilities and bank overdrafts(2)	Credit facilities and bank overdrafts(2)	11		11		2		2		Credit facilities and bank overdrafts(2)	8		8		7		7
Derivatives	Derivatives									Derivatives
Derivative assets(3)		3		3		1		1

Derivative liabilities(3)	Derivative liabilities(3)	18		18		29		29		Derivative liabilities(3)	8		8		7		7

Commercial paper (2)										Commercial paper (2)	631		631		324		324
Long-term debt:(4)	Long-term debt:(4)									Long-term debt:(4)

2021 Euro Notes		353		353		368		370

2022 Notes	2022 Notes	300		300		0		0		2022 Notes	300		298		300		300
2023 Notes	2023 Notes	299		314		299		316		2023 Notes	300		301		300		308
2024 Euro Notes	2024 Euro Notes	587		615		614		648		2024 Euro Notes	554		561		565		585
2026 Euro Notes	2026 Euro Notes	936		1,008		978		1,061		2026 Euro Notes	882		888		900		960
2028 Notes	2028 Notes	397		453		397		472		2028 Notes	397		415		397		452
2047 Notes	2047 Notes	494		561		494		608		2047 Notes	495		494		494		585
2048 Notes	2048 Notes	786		984		786		1,059		2048 Notes	787		872		786		1,026
2018 Term Loan Facility(2)		240		240		240		240
2022 Term Loan Facility(2)		200		200		199		200

2024 Term Loan Facility~~(7)~~(6)	2024 Term Loan Facility~~(7)~~(6)	625		625		0		0		2024 Term Loan Facility~~(7)~~(6)	625		625		625		625
2026 Term Loan Facility~~(7)~~(6)	2026 Term Loan Facility~~(7)~~(6)	625		625		0		0		2026 Term Loan Facility~~(7)~~(6)	625		625		625		625
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.~~Sheets.

(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)~~(6)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~~other comprehensive income ("OCI") as a component of Gains on derivatives qualifying as hedges in the accompanying Consolidated ~~Statement~~Statements of Income (Loss) ~~Income~~ and Comprehensive ~~Loss.~~Income (Loss). Realized gains/(losses) in ~~AOCI~~accumulated other comprehensive income ("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~~Statements of Income (Loss) ~~Income~~ and Comprehensive ~~Loss~~Income (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~~Statements of Income (Loss) ~~Income~~ and Comprehensive ~~Loss.~~Income (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~~Statements of Income (Loss) ~~Income~~ and Comprehensive ~~Loss.~~Income (Loss).

Cross Currency Swaps

During the ~~third~~first quarter of ~~2019,~~2022, the Company entered into ~~four~~twelve EUR/USD cross currency swaps, with a notional value of $1.400 billion that mature through ~~May 2023.~~November 2030. 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 $15 million, net of accrued interest receivable of $2 million. The loss arising from the termination of the swaps has been included as a component of accumulated other comprehensive loss. As of March 31, ~~2021,~~2022, the ~~two~~fourteen remaining swaps were in a net liability position with an aggregate fair value of ~~$11~~$6 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 March 31, ~~2021~~2022 and December 31, ~~2020:~~2021:

(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 MILLIONS)	March 31, 2022		December 31, 2021
Foreign currency contracts	$	42	$	46
Commodity contracts	4		10
Cross currency swaps	1,700		300

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~~Sheets as of March 31, ~~2021~~2022 and December 31, ~~2020:~~2021:


		March 31, 2021							March 31, 2022
(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		(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(1)
Foreign currency contracts		$	2	$	1	$	3

Derivative liabilities~~(2)~~(1)	Derivative liabilities~~(2)~~(1)							Derivative liabilities~~(2)~~(1)
Foreign currency contract	Foreign currency contract	$	0	$	7	$	7	Foreign currency contract	$	—	$	2	$	2
Cross currency swaps	Cross currency swaps	11		0		11		Cross currency swaps	6		—		6
Total derivative liabilities	Total derivative liabilities	$	11	$	7	$	18	Total derivative liabilities	$	6	$	2	$	8

December 31, 2020
(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(1)
Foreign currency contracts $ 0 $ 1 $ 1
Derivative liabilities(2)
Foreign currency contracts $ 6 $ 0 $ 6
Cross currency swaps 23 — 23
Total derivative liabilities $ 29 $ 0 $ 29


	December 31, 2021
(DOLLARS IN MILLIONS)	Fair Value of Derivatives Designated as Hedging Instruments		Fair Value of Derivatives Not Designated as Hedging Instruments		Total Fair Value





Derivative liabilities(1)
Foreign currency contracts	$	—	$	2	$	2
Cross currency swaps	5		—		5
Total derivative liabilities	$	5	$	2	$	7

_______________________

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

~~(2)Derivative liabilities are recorded as~~ Other current liabilities in the Consolidated Balance ~~Sheet.~~Sheets.

The following table shows the effect of the Company’s derivative instruments which were not designated as hedging instruments in the Consolidated ~~Statement~~Statements of Income (Loss) ~~Income~~ and Comprehensive ~~Loss~~Income (Loss) for the three months ended March 31, ~~2021~~2022 and ~~2020 (in millions):~~2021:


		Amount of Gain (Loss)				Location of Gain (Loss) Recognized in Income on Derivative		Amount of Gain (Loss)				Location of Gain (Loss) Recognized in Income on Derivative
(DOLLARS IN MILLIONS)	(DOLLARS IN MILLIONS)	Three Months Ended March 31,					(DOLLARS IN MILLIONS)	Three Months Ended March 31,
		2021		2020				2022		2021
Foreign currency contracts(1)	Foreign currency contracts(1)	$	(3)	$	(8)	Other (income) expense, net	Foreign currency contracts(1)	$	2	$	(3)	Other income, net

_______________________

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

The following table shows the effect of the Company’s derivative and non-derivative instruments designated as cash flow and net investment hedging instruments, net of tax, in the Consolidated ~~Statement~~Statements of Income (Loss) ~~Income~~ and Comprehensive ~~Loss~~Income (Loss) for the three months ended March 31, ~~2021~~2022 and ~~2020 (in millions):~~2021:


		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									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,							Three Months Ended March 31,												Three Months Ended March 31,
(DOLLARS IN MILLIONS)	(DOLLARS IN MILLIONS)	2021		2020			2021			2020		(DOLLARS IN MILLIONS)		2022					2021							2022			2021
Derivatives in Cash Flow Hedging Relationships:	Derivatives in Cash Flow Hedging Relationships:																	Derivatives in Cash Flow Hedging Relationships:
Foreign currency contracts	Foreign currency contracts	$	4	$	1		Cost of goods sold			$	(2)				$	2		Foreign currency contracts	$	—			$	4		Cost of goods sold			$	—			$	(2)

Derivatives in Net Investment Hedging Relationships:	Derivatives in Net Investment Hedging Relationships:														Derivatives in Net Investment Hedging Relationships:

Cross currency swaps	Cross currency swaps	9		21		N/A		—				—			Cross currency swaps		(1)				9				N/A		—				—
Non-Derivatives in Net Investment Hedging Relationships:	Non-Derivatives in Net Investment Hedging Relationships:														Non-Derivatives in Net Investment Hedging Relationships:
2024 Euro Notes	2024 Euro Notes	20		10		N/A		—				—			2024 Euro Notes		9				20				N/A		—				—
2021 Euro Notes & 2026 Euro Notes	2021 Euro Notes & 2026 Euro Notes	45		21		N/A		—				—			2021 Euro Notes & 2026 Euro Notes		14				45				N/A		—				—
Total	Total	$	78	$	53			$	(2)			$	2		Total		$	22			$	78					$	—			$	(2)

The ineffective portion of the above noted cash flow hedges ~~were~~was not material during the three months ended March 31, ~~2021~~2022 and ~~2020.~~2021.

~~The Company expects that $3 million (net of tax) of derivative gain included in AOCI at~~At March 31, ~~2021,~~2022, based on current market rates, ~~will~~the Company does not expect any derivative losses (net of tax), included in AOCI, to be reclassified into earnings within the next 12 months. ~~The majority of this amount will vary due to fluctuations in foreign currency exchange rates.~~

NOTE 14. ACCUMULATED OTHER COMPREHENSIVE 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 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, 2021	$	(1,133)	$	1	$	(291)	$	(1,423)
OCI before reclassifications	(199)		—		(3)		(202)
Amounts reclassified from AOCI	—		—		3		3
Net current period other comprehensive income (loss)	(199)		—		—		(199)
Accumulated other comprehensive (loss) income, net of tax, as of March 31, 2022	$	(1,332)	$	1	$	(291)	$	(1,622)


(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	$	(285)	$	(7)	$	(406)	$	(698)
OCI before reclassifications	(417)		2		2		(413)
Amounts reclassified from AOCI	—		2		7		9
Net current period other comprehensive income (loss)	(417)		4		9		(404)
Accumulated other comprehensive (loss) income, net of tax, as of March 31, 2021	$	(702)	$	(3)	$	(397)	$	(1,102)

(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 $ (373) $ 2 $ (346) $ (717)
OCI before reclassifications (452) 3 0 (449)
Amounts reclassified from AOCI 0 (2) 4 2
Net current period other comprehensive income (loss) (452) 1 4 (447)
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~~Statements of Income (Loss) ~~Income~~ and Comprehensive ~~Loss:~~Income (Loss):


		Three Months Ended March 31,				Affected Line Item in the Consolidated Statement of (Loss) Income and Comprehensive Loss		Three Months Ended March 31,				Affected Line Item in the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(DOLLARS IN MILLIONS)	(DOLLARS IN MILLIONS)	2021		2020			(DOLLARS IN MILLIONS)	2022		2021
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	$	(3)	$	2	Cost of goods sold	Foreign currency contracts	$	—	$	(3)	Cost of goods sold

Tax	Tax	1		0		Provision for income taxes	Tax	—		1		Provision for income taxes
Total	Total	$	(2)	$	2	Total, net of income taxes	Total	$	—	$	(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	$	2	$	(5)	(1)	Prior service cost	$	2	$	2	(1)
Actuarial losses	Actuarial losses	(8)		0		(1)	Actuarial losses	(5)		(8)		(1)

Tax	Tax	(1)		1		Provision for income taxes	Tax	—		(1)		Provision for income taxes
Total	Total	$	(7)	$	(4)	Total, net of income taxes	Total	$	(3)	$	(7)	Total, net of income taxes

_______________________

(1)The amortization of prior service cost and actuarial loss is included in the computation of net periodic benefit cost. Refer to Note 1615 of the Company's ~~2020~~2021 Form 10-K for additional information regarding net periodic benefit cost.

NOTE 15. COMMITMENTS AND CONTINGENCIES

Guarantees and Letters of Credit

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

At March 31, ~~2021,~~2022, the Company had total bank guarantees, commercial guarantees, standby letters of credit and surety bonds of ~~$1.985 billion~~approximately $405 million with various financial institutions. Included in the above aggregate amount was a total of ~~$13~~$16 million for other assessments in Brazil for various income tax and indirect tax disputes related to fiscal years 1998-2011. There was ~~$111~~a total of approximately $12 million outstanding under the bank guarantees and ~~$33~~standby letters of credit and approximately $105 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 March 31, 2021.~~2022.

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 $7approximately $8 million as of March 31, ~~2021.~~2022.

Lines of Credit

The Company has various lines of credit which are available to support its ongoing business operations. As of March 31, ~~2021,~~2022, the Company had available lines of credit of ~~$6.295~~approximately $1.864 billion with various financial institutions, in addition to the ~~$1.098 billion~~$842 million of capacity under the Credit Facility. There were total draw downs of ~~$109~~approximately $642 million pursuant to these lines of credit as of March 31, ~~2021.~~2022, including approximately $631 million related to the issuance of commercial paper.

Litigation

The Company assesses contingencies related to litigation and/or other matters to determine the degree of probability and range of possible loss. A loss contingency is accrued in the Company’s ~~consolidated financial statements~~Consolidated Financial Statements if it is probable that a liability 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 plaintiffs and Pomerantz LLP as lead counsel. On~~ March 16, 2020, ~~lead plaintiffs filed~~ an amended complaint was filed, 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~~2020, which was granted on March 30, ~~2021, the court dismissed all of the claims against IFF, its officers and Frutarom.~~2021. On April 28, 2021, lead plaintiffs filed a notice of appeal to the United States Court of Appeals for the Second Circuit. Lead plaintiffs are pursuing the appeal only against Frutarom and certain former officers of Frutarom. The parties have submitted their briefs to the Court of Appeals. The Second Circuit held oral argument on February 10, 2022, and the Court has not yet ruled.

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. On June 15, 2021, August 11, 2021, November 9, 2021, January 9, 2022 and April 7, 2022, the U.S. lead plaintiffs filed update notices with the Israeli court regarding the appeal in the U.S. proceeding. The other motion ("Oman") (following an initial amendment) 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,~~February 17, 2021, the court granted a motion by 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~~The amended Oman motion was filed on July 4, 2021. On August 29, 2021, the former Frutarom officers and certain former Frutarom directors filed a motion to dismiss the case. On September 30, 2021, Frutarom notified the court that it joins the legal arguments made in the motion to ~~amend~~dismiss. On February 22, 2022, the ~~Oman motion were filed during November 2020. The~~ court ~~granted~~denied the motion to ~~amend the Oman motion on February 17, 2021.~~dismiss.

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~~and a court decision is ~~still ongoing, during~~pending with regard to the order in which ~~the proceedings relating to~~ this claim ~~are stayed.~~and the class action described below will be heard.

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. On July 27, 2021, counsel to the movant in the class action filed a notice with the court that the mediation process ended without an agreement. On August 26, 2021, a motion to dismiss the class action application was filed by Yehudai ~~which as noted is still ongoing, during which~~and certain former directors of Frutarom. On September 9, 2021, an additional motion to dismiss was filed by other former directors of Frutarom together with ICC Industries, Inc. and its affiliates. On December 9, 2021, the ~~proceedings relating~~court denied the motions to ~~this motion are stayed.~~

dismiss.

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~~As part of the investigation, the National Fraud Investigation Unit and the Israeli Securities Authority have provided IFF and Frutarom with various ~~orders.~~orders, mainly requesting that IFF isand Frutarom provide certain documents and materials. In addition, a seizure of assets was imposed on Frutarom and certain of its affiliates. IFF has been working to ensure compliance with such orders, all in accordance with, and subject to, Israeli law. On August 25, 2021, the Israeli Police informed Frutarom that they have decided to remove the temporary criminal seizure of assets order from the real estate assets of Frutarom and its related companies, which was done in parallel with the transfer of the case to the District Attorney's Office in Israel.

China Facilities

Guangzhou Taste ~~plant~~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~~been transferring 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~~$59 million as of March 31, ~~2021.~~2022.

Guangzhou Scent ~~plant~~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$8 million as of March 31, ~~2021.~~2022.

Zhejiang Ingredients ~~plant~~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 10 plants in China was approximately ~~$289~~$274 million as of March 31, ~~2021.~~2022.

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~~$24 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.

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~~issue was made by the Brazilian Supreme Court who affirmed the use of the gross calculation with respect to claims submitted prior to March 2017. Although the Company had not submitted a claim until after March 2017, the Company believes that the Supreme Court, whilst confirming the use of the gross method of calculation, does not override the January 2020 ruling by the Brazilian tax authorities with respect to the $8timeframe for the calculation.

Avicel® PH NF (Pharma Solutions)

The Company has determined that certain grades of microcrystalline cellulose (Avicel® PH 101, 102, and 200 NF and Avicel® RC-591 NF) were found to be out-of-specification (collectively, “OOS Avicel® NF”). The Company does not expect this issue to affect the functionality of Avicel® NF grades or to pose a human health hazard. Corrective actions have been implemented to improve operational and laboratory conditions. Based on the information available, as of March 31, 2022, payments associated with the issue were approximately $30 million, ~~recognized in the fourth quarter of 2019, during the first quarter of 2020~~and the Company ~~recognized $4 million~~has a current accrual of approximately $31 million. The total amount of exposure may increase as an additional recovery on the existing claim. During 2020, the Company also recognized $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.customers present claims or other exposures are identified.

Other

The Company determines estimates of reasonably possible losses or ranges of reasonably possible losses in excess of related accrued liabilities, if any, when it has determined that either a loss is reasonably possible or a loss in excess of accrued amounts is reasonably possible and the amount of losses or range of losses is determinable. For all third party contingencies (including labor, contract, technology, tax, product-related claims and business litigation), the Company currently estimates that the aggregate range of reasonably possible losses in excess of any accrued liabilities is $0 to approximately ~~$28~~$35 million. The estimates included in this amount are based on the Company’s analysis of currently available information and, as new information is obtained, these estimates may change. Due to the inherent subjectivity of the assessments and the unpredictability of outcomes of legal proceedings, any amounts accrued or included in this aggregate amount may not represent the ultimate loss to the Company from the matters in question. Thus, the Company’s exposure and ultimate losses may be higher or lower, and possibly significantly so, than the amounts accrued or the range disclosed above.

NOTE 16. REDEEMABLE NONCONTROLLING INTERESTS

Through certain subsidiaries of ~~our~~the Company's 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~~in most cases, similar price and conditions of exercise, and will be settled on a pre-agreed formula based on ~~the~~a 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 MILLIONS)	Redeemable Noncontrolling Interests
~~Balance at December 31, 2019~~	$	99

~~Impact of foreign exchange translation~~	19
~~Share of profit or loss attributable to redeemable noncontrolling interests~~	2
~~Redemption value adjustment for the current period~~	~~(6)~~
~~Measurement period adjustments~~	~~(1)~~

~~Exercises of redeemable noncontrolling interests~~	~~(10)~~
~~Balance at March 31, 2020~~	$	~~103~~

Balance at December 31, 2020	$	98

Impact of foreign exchange translation	2
Share of profit or loss attributable to redeemable noncontrolling interests	1
Redemption value adjustment for the current period	1



Balance at March 31, 2021	$	102

Balance at December 31, 2021	$	105

Impact of foreign exchange translation	(4)





Balance at March 31, 2022	$	101

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

NOTE 17. ASSETS HELD FOR SALE

Microbial Control

During ~~2020,~~the third quarter of 2021, the Company ~~paid approximately $14 million related~~announced it had entered into an agreement to sell its Microbial Control business unit, which is a part of the ~~purchase~~Health & Biosciences segment. The Company acquired the Microbial Control business unit as part of ~~certain noncontrolling interests where~~ the ~~option related~~Merger with N&B.

The Company classifies assets as "held for sale" when, among other factors, management approves and commits to a formal plan of sale with the ~~purchase had been exercised in~~expectation the ~~fourth quarter~~sale will be completed within one year. Pursuant to ASC 360, assets held for sale were recorded at the lower of ~~2019.~~

~~For 2021,~~carrying value or the ~~increase in redeemable noncontrolling interests was primarily due~~fair market value, less costs to ~~foreign exchange translation.~~sell. The sale does not constitute a strategic shift of the Company’s operations and does not, and will not, have major effects on the Company’s operations and financial results; therefore, the transaction does not meet the discontinued operations criteria.

3025

Based on the agreement to sell, it was determined that the assets and liabilities of the Microbial Control business unit met the criteria to be presented as “held for sale" and such assets and liabilities were classified as held for sale and are reported on the Consolidated Balance Sheets. The Company expects that the transaction will close for approximately $1.282 billion in the third quarter of 2022 and that the sale proceeds less costs to sell will exceed the carrying value of the net assets.

Included in the Company's Consolidated Balance Sheets as of March 31, 2022 are the following carrying amounts of the assets and liabilities held for sale:


(DOLLARS IN MILLIONS)	March 31, 2022
Assets
Trade Receivables, net	$	78
Inventories	129
Property, plant and equipment, net	28
Goodwill	536
Other intangible assets, net	349
Operating lease right-of-use assets	4
Other assets	17
Total assets held-for-sale	$	1,141
Liabilities
Accounts payable	$	55
Deferred tax liability	24
Other liabilities	8
Total liabilities held-for-sale	$	87

NOTE ~~17.~~18. SUBSEQUENT EVENT

~~Fruit Preparation Divestiture~~Acquisition of Health Wright Products

InOn April 1, 2022 ("Acquisition Date"), the ~~second quarter~~Company completed its acquisition of ~~2021,~~Health Wright Products, Inc. (“Health Wright”). IFF acquired 100% of the equity of Health Wright pursuant to a purchase agreement entered into ~~an agreement to divest its fruit preparation business to Frulact, which specializes in fruit preparations for the food & beverage industry. The divestiture~~on February 16, 2022. Health Wright is ~~expected to close~~known in the ~~third quarter 2021, pending customary closing conditions, including regulatory approvals~~consumer Health and ~~is not expected~~Nutrition industries for providing high quality nutritional supplements. The acquisition was made in order to ~~have a material impact~~strengthen formulation and finished format capabilities to IFF’s Health & Biosciences probiotics, natural extracts and botanical businesses.

Under the terms of the purchase agreement, the Company agreed to pay approximately $131 million, of which approximately $123 million was paid on the ~~Company's~~Acquisition Date. Further contingent consideration will be payable upon achievement of certain earnout milestones, which is estimated to be approximately $44 million.

The acquisition will be accounted for using the purchase method of accounting, and Health Wright’s assets, liabilities and results of ~~operations.~~operations will be included in the Company’s financial statements from the Acquisition Date. The Company is in the process of completing the purchase price allocation.

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

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

The following management’s discussion and analysis should be read in conjunction with the management’s discussion and analysis of financial condition and results of operations, liquidity and capital resources included in our 2021 Annual Report on Form 10-K (“2021 Form 10-K”).

OVERVIEW

Company Background

On February 1, 2021, the Company completed its Merger with Nutrition & Biosciences, Inc. (“N&B”), a subsidiary of DuPont formed to hold the Nutrition and 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 fully diluted basis, after giving effect to the Merger, as of February 1, 2021.

As a result of the N&B Transaction, and following our 2018 acquisition of Frutarom Industries Ltd., we have expanded our 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 ininto four reportable operating segments: Nourish, Health & Biosciences, Scent, and Pharma Solutions. The Company’s consolidated financial information for the three months ended March 31, ~~2021 reflects~~2022 reflect the results of N&B ~~effective February 1, 2021,~~for the full three months in the first quarter of 2022, whereas ~~the Company’s consolidated financial information for~~ the three months ended March 31, ~~2020 do not include amounts related to~~2021 reflect only two months of results of N~~&B.~~&B in the first quarter of 2021.

Our 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 innovative and broad portfolio of natural-based ingredients to enhance nutritional value, texture and functionality in a wide range of beverage, dairy, bakery, confectionery and culinary applications.

Our Health & Biosciences segment consists of N&B’s Health & Biosciences division, with the exception of food protection, which is part of our Nourish segment, as well as parts of our Nutrition and Specialty Ingredients offerings. This segment is thea biotechnology-driven portfolio ~~of the N&B Business,~~ where enzymes, food cultures, probiotics and specialty ingredients for food and non-food applications are developed and produced. The ~~Health & Biosciences business includes a~~ biotechnology-driven ~~probiotics~~ portfolio ~~that~~of this segment 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. Health & Biosciences is comprised of six business units: Health, Cultures & Food Enzymes, Home & Personal Care, Animal Nutrition, Grain Processing and Microbial Control.

~~Scent~~ ~~segment consists of our legacy~~Our Scent segment ~~as well as, effective January 2, 2021, our Flavor~~creates fragrance compounds, fragrance ingredients and cosmetic ingredients that are integral elements in the world’s finest perfumes and best-known household and personal care products. The Scent segment is comprised of three business units: Fragrance Compounds, Fragrance Ingredients ~~business.~~and Cosmetic Actives.

~~Pharma Solutions~~ ~~segment consists of N&B’s~~Our Pharma Solutions ~~division, which is one of the world’s largest producers~~segment produces a vast portfolio of cellulosics and ~~alginates-based pharma~~seaweed-based pharmaceutical excipients, ~~and is~~ used to improve the functionality and delivery of active pharmaceutical ingredients, including controlled or modified drug release formulations, and ~~enable~~enabling the development of more effective ~~pharma solutions.~~pharmaceutical formulations.

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~~Our method in ~~which we calculate~~calculating currency neutral numbers ~~to now be calculated~~is conducted 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 the underlying transaction. We use currency neutral results in our analysis of subsidiary or segment performance.

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~~For the ~~Merger with N&B, for~~first quarter of 2022, the ~~fiscal year 2021 we will~~Company is not be presenting currency neutral ~~impacts~~numbers for the Nourish, Health & Biosciences and Pharma ~~Solution~~Solutions operating segments as ~~the performance in~~ these operating segments ~~includes~~include the effects of the Merger with N&B, which closed on February 1, 2021. As a result, the three months ended March 31, 2022 reflect the results of N&B for the full three months in the first quarter of 2022, whereas the three months ended March 31, 2021 reflect only two months of results of N&B in the first quarter of 2021, ~~while the 2020 period does~~which do not ~~and thus the periods are not comparable. We~~ present ~~the currency neutral impacts for the Scent operating segment as this operating segment does not have any effects of N&B.~~equally comparable periods.

Impact of COVID-19 Pandemic

On March 11, 2020, the World Health Organization designated 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. IFF has been designated an essential business in most locations given that its products are used in the manufacture of food products as well as the manufacture of a range of cleaning and hygiene products. Accordingly, althoughCOVID-19. 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.~~infections, especially with the emergence of new variants of the virus. 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.~~

seriously. The impact that COVID-19 will have on our consolidated results of operations for the remainder of ~~2021~~2022 remains uncertain. Due to the length and severity of COVID-19, ~~we are experiencing~~there is continued volatility as a result of retail and travel, consumer shopping and consumption behavior. Moreover, as a result of disruptions or uncertainty relating to the COVID-19 pandemic, we are experiencing, and may continue to experience, increased costs, delays or limited availability related to raw materials, strain on shipping and transportation resources, and higher energy prices, which have negatively impacted, and may continue to negatively impact, our margins and operating results. 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 has not experienced and 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.~~impairments. Any of these events could potentially result in a material adverse impact on IFF’s business and results of operations.

For more detailed information about risks related to COVID-19, refer to Part I, Item 1A, “Risk Factors,” of our 2021 Form 10-K filed on February 28, 2022 with the SEC.

Impact of the Events in Russia and Ukraine

We maintain operations in both Russia and Ukraine and, additionally, export products to customers in Russia and Ukraine from operations outside the region. In response to the events in Ukraine, we have limited the production and supply of ingredients in and to Russia to only those that meet the essential needs of people, including food, hygiene and medicine.

In 2021, total sales to Russian customers were approximately 2% of total sales. For the three months ended March 31, 2022 sales to Russian customers were also approximately 2% of total sales.

In 2021, total sales to Ukrainian customers were less than 1% of total sales. For the three months ended March 31, 2022 sales to Ukrainian customers were also less than 1% of total sales.

For the first quarter of 2022, we recorded a charge of approximately $20 million related to expected credit losses on receivables from customers located in Russia and Ukraine (for both export and domestic sales) and performed a test of recoverability of certain long-lived assets in the affected countries. For additional information, refer to Note 1 to the Consolidated Financial Statements and Part I, Item 1A, “Risk Factors,” of our 2021 Form 10-K filed on February 28, 2022 with the SEC.

Financial Performance Overview

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

Sales

Sales in the first quarter of ~~2021~~2022 increased ~~$1.118 billion,~~$761 million, or ~~83%~~31% on a reported basis, to ~~$2.465~~$3.226 billion compared to ~~$1.347~~$2.465 billion in the ~~2020~~2021 period. ~~Performance was primarily driven by $1.076 billion~~Sales included approximately $568 million of incremental sales ~~that were~~ attributable to ~~the inclusion of~~ N&B ~~which was merged and consolidated into our results~~for the month of ~~operations effective February 1, 2021.~~January in the 2022 period. In addition, the increase in sales ~~performance~~ was driven by volume and price increases across the ~~Nourish, Health & Biosciences and Scent operating segments.~~business.

Gross Profit

Gross profit in the first quarter of ~~2021~~2022 increased ~~$188~~$391 million, or ~~33%~~52% on a reported basis, to ~~$754 million (31%~~$1.145 billion (35.5% of sales) compared to ~~$566~~$754 million ~~(42%~~(30.6% of sales) in the ~~2020~~2021 period. ~~The~~Gross profit included approximately $179 million attributable to N&B for the month of January in the 2022 period. In addition, the increase in gross profit was ~~primarily~~ driven by ~~the inclusion of N&B, along with sales~~price and volume increases in the overall 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 the historical IFF product portfolio mix.~~

Adjusted Operating EBITDA

Adjusted operating EBITDA in the first quarter of ~~2021~~2022 increased ~~$266~~$133 million, or ~~88%~~23% on a reported basis, to ~~$569~~$702 million ~~(23%~~(21.8% of sales) compared to ~~$303~~$569 million ~~(22%~~(23.1% of sales) in the comparable ~~2020~~2021 period. ~~The increase in adjusted~~Adjusted operating EBITDA ~~was primarily driven by~~included approximately $137 million attributable to N&B for the ~~inclusion~~month of ~~N&B, along with sales volume increases~~January in the ~~business.~~2022 period.

3228

RESULTS OF OPERATIONS


		Three Months Ended								Three Months Ended
		March 31,								March 31,
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)	(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)	2021			2020			Change			(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)	2022			2021			Change
Net sales	Net sales	$	2,465		$	1,347		83	%		Net sales	$	3,226		$	2,465		31	%
Cost of goods sold	Cost of goods sold	1,711			781			119	%		Cost of goods sold	2,081			1,711			22	%
Gross profit	Gross profit	754			566						Gross profit	1,145			754			52	%
Research and development (R&D) expenses	Research and development (R&D) expenses	143			86			66	%		Research and development (R&D) expenses	157			143			10	%
Selling and administrative (S&A) expenses	Selling and administrative (S&A) expenses	451			230			96	%		Selling and administrative (S&A) expenses	459			451			2	%
Amortization of acquisition-related intangibles	Amortization of acquisition-related intangibles	152			48			217	%		Amortization of acquisition-related intangibles	186			152			22	%
Restructuring and other charges, net		4			5			(20)	%
Losses on sales of fixed assets		—			1			(100)	%
Restructuring and other charges											Restructuring and other charges	2			4			(50)	%

Operating profit	Operating profit	4			196						Operating profit	341			4			NMF
Interest expense	Interest expense	65			32			103	%		Interest expense	72			65			11	%

Other (income) expense, net		(7)			11			(164)	%
(Loss) income before taxes		(54)			153
Taxes on (loss) income		(14)			26			(154)	%
Net (loss) income		$	(40)		$	127		(131)	%
Other income, net											Other income, net	(16)			(7)			129	%
Income (loss) before taxes											Income (loss) before taxes	285			(54)			NMF
Provision for (benefit from) income taxes											Provision for (benefit from) income taxes	39			(14)			NMF
Net income (loss)											Net income (loss)	$	246		$	(40)		NMF
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	2			3			(33)	%		Net income attributable to noncontrolling interests	2			2			—	%
Net (loss) income attributable to IFF stockholders		$	(42)		$	124		(134)	%
Diluted EPS		$	(0.21)		$	1.15		(118)	%
Net income (loss) attributable to IFF stockholders											Net income (loss) attributable to IFF stockholders	$	244		$	(42)		NMF
Net income (loss) per share - diluted											Net income (loss) per share - diluted	$	0.96		$	(0.21)		NMF
Gross margin	Gross margin	30.6		%	42.0		%	NMF			Gross margin	35.5		%	30.6		%	490	bps
R&D as a percentage of sales	R&D as a percentage of sales	5.8		%	6.4		%	(60)	bps		R&D as a percentage of sales	4.9		%	5.8		%	(90)	bps
S&A as a percentage of sales	S&A as a percentage of sales	18.3		%	17.1		%	120	bps		S&A as a percentage of sales	14.2		%	18.3		%	(410)	bps
Operating margin	Operating margin	0.2		%	14.6		%	NMF			Operating margin	10.6		%	0.2		%	NMF

Effective tax rate	Effective tax rate	25.9		%	17.0		%	890	bps		Effective tax rate	13.7		%	25.9		%	NMF
Segment net sales	Segment net sales										Segment net sales
Nourish	Nourish	$	1,308		$	772		69	%		Nourish	$	1,731		$	1,308		32	%
Health & Biosciences	Health & Biosciences	426			34			NMF			Health & Biosciences	661			426			55	%
Scent	Scent	569			541			5	%		Scent	585			569			3	%
Pharma Solutions	Pharma Solutions	162			—			100	%		Pharma Solutions	249			162			54	%
Consolidated	Consolidated	$	2,465		$	1,347					Consolidated	$	3,226		$	2,465

_______________________

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.

FIRST QUARTER ~~2021~~2022 IN COMPARISON TO FIRST QUARTER ~~2020~~2021

Sales

Sales for the first quarter of ~~2021~~2022 increased ~~$1.118 billion,~~$761 million, or ~~83%~~31% on a reported basis, to ~~$2.465~~$3.226 billion, compared to ~~$1.347~~$2.465 billion in the prior year quarter. ~~Performance was primarily driven by $1.076 billion~~Sales included approximately $568 million of incremental sales ~~that was~~ attributable to ~~the inclusion of~~ N&B ~~which was merged and consolidated into our results~~for the month of ~~operations effective February 1, 2021.~~January in the 2022 period. In addition, the increase in sales ~~performance reflected growth for the Nourish, Health & Biosciences and Scent segments, primarily~~was driven by volume and price increases across the ~~three segments.~~business.

3329

Sales Performance by Segment

% Change in Sales - First Quarter 2021 vs. First Quarter 2020

% Change in Sales - First Quarter 2022 vs. First Quarter 2021

Reported

Currency Neutral(1)

Reported

Currency Neutral(1)

Nourish

NMF

Nourish

NMF

Health & Biosciences

NMF

Health & Biosciences

NMF

Scent

Pharma Solutions

NMF

Pharma Solutions

NMF

Total

NMF

Total

NMF

_______________________

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

NMF: Not meaningful

Nourish

Nourish sales in ~~2021~~2022 increased ~~$536~~$423 million, or ~~69%~~32% on a reported basis, to ~~$1.308~~$1.731 billion compared to ~~$772 million~~$1.308 billion in the prior year period. ~~Performance~~Nourish sales included approximately $293 million of incremental sales attributable to N&B for the month of January in the 2022 period. In addition, performance in the Nourish operating segment was ~~primarily~~ driven by ~~$525 million of incremental sales that was attributable to the inclusion of N&B, along with~~price and volume increases, ~~particularly~~with price increases primarily in ~~Flavors.~~the Ingredients and Food Design business units and volume increases primarily in the Flavors and Food Design business units.

Health & Biosciences

Health & Biosciences sales in ~~2021 was $426~~2022 increased $235 million, or 55% on a reported basis, to $661 million compared to ~~$34~~$426 million in the prior year period. ~~Performance~~Health & Biosciences sales included approximately $202 million of incremental sales attributable to N&B for the month of January in the 2022 period. In addition, 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 N&B Business. In addition, sales performance reflected~~ volume increases ~~in the operating segment.~~across various business units.

Scent

Scent sales in ~~2021~~2022 increased ~~$28~~$16 million, or 5%3% on a reported basis, to ~~$569~~$585 million, compared to ~~$541~~$569 million in the prior year period. ~~Scent sales in 2021 also increased 5% on~~On a currency neutral ~~basis.~~basis, Scent sales increased 6% in the 2022 period. Sales growth in the Scent operating segment was ~~led by Fragrance Compounds, primarily~~ driven by volume ~~increases.~~and price increases in both Fragrance Compounds and Fragrance Ingredients, offset by unfavorable impacts from exchange rate variations.

Pharma Solutions

Pharma Solutions sales in ~~2021 was~~2022 increased $87 million, or 54% on a reported basis, to $249 million compared to $162 ~~million. This was a new~~million in the prior year period. Pharma Solutions sales included approximately $73 million of incremental sales attributable to N&B for the month of January in the 2022 period. In addition, performance in the Pharma Solutions operating segment ~~of the Company as a result of the Merger with N&B~~was primarily driven by price and ~~did not exist in the comparable 2020 period.~~volume increases.

Cost of Goods Sold

Cost of goods sold ~~as a percentage~~increased $370 million to $2.081 billion (64.5% of ~~sales, increased 11.4%~~sales) in the first quarter of ~~2021 to 69.4%~~2022 compared to ~~58.0%~~$1.711 billion (69.4% of sales) in the first quarter of ~~2020, primarily driven by~~2021. Cost of goods sold included approximately $389 million of incremental costs attributable to N&B for the ~~impact~~month of January in the ~~difference in product portfolio mix of the new N&B Business compared to the historical IFF product portfolio mix. In addition, the increase was due to volume increases.~~2022 period.

Research and Development (R&D) Expenses

~~Overall~~ R&D expenses ~~as a percentage~~increased $14 million to $157 million (4.9% of ~~sales, decreased to 5.8%~~sales) in the first quarter of ~~2021 versus 6.4%~~2022 compared to $143 million (5.8% of sales) in the 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~~2021. R&D expenses included approximately $20 million of incremental expenses attributable to N&B for the month of January in the 2022 period, which consisted primarily of employee related expenses, including salaries, wages and bonuses and operating expenses for R&D related activities, primarily offset by ~~a larger increase in sales.~~lower Applied R&D expenses.

Selling and Administrative (S&A) Expenses

S&A expenses increased ~~$221~~$8 million to $459 million (14.2% of sales) in the first quarter of 2022 compared to $451 million (18.3% of sales) in the first quarter of ~~2021 compared~~2021. S&A expenses included approximately $51 million of incremental expenses attributable to ~~$230 million (17.1%~~N&B for the month of ~~sales)~~January in the ~~first quarter~~2022 period, which consisted primarily of ~~2020. Adjusted S&A expense increased~~employee related expenses, including salaries, wages and bonuses, primarily offset 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~~lower administrative expenses ~~was primarily~~principally due to ~~the N&B Transaction costs related to legal and~~lower professional ~~fees.~~fees, including consulting costs.

Restructuring and Other Charges

Restructuring and other charges decreased to $2 million in the first quarter of 2022 compared to $4 million in the first quarter of ~~2021 compared to $5 million~~2021. The decrease was driven by lower severance costs in the first quarter of ~~2020~~2022 (see Note 4 for additional information).

Amortization of Acquisition-Related Intangibles

Amortization expenses increased to $186 million in the first quarter of 2022 compared to $152 million in the first quarter of ~~2021 compared~~2021. Amortization expense included approximately $47 million attributable to ~~$48 million~~N&B for the month of January in the ~~first quarter of 2020 primarily due~~2022 period related to the intangible assets acquired through the Merger with N&B (see Notes 3 and 5 for additional information).

Interest Expense

Interest expense increased to ~~$65~~$72 million in the first quarter of ~~2021~~2022 compared to ~~$32~~$65 million in the ~~2020~~2021 period. ~~The increase was primarily driven by~~Interest expense included approximately $13 million attributable to N&B for the month of January in the 2022 period, which included the impact of the additional debt assumed in the Merger with N&B (see Note 7 for additional information). Average cost of debt was 2.5% for the 2022 period compared to 3.8% for the 2021 ~~period compared to 2.9% for the 2020~~ period.

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

In the first quarter of ~~2021,~~2022, we recognized other income, net, of $7$16 million compared to ~~other expense, net, of $11~~$7 million in the ~~2020~~2021 period. The change of ~~$18~~$9 million includes approximately $6 million attributable to N&B for the month of January in the 2022 period. In addition, the change, excluding the impact of N&B for the month of January in the 2022 period, was ~~primarily driven by lower~~due to foreign exchange ~~losses.~~gains in the first quarter of 2022 compared to foreign exchange losses in the 2021 period.

Income Taxes

The effective tax rate for the three months ended March 31, ~~2021~~2022 was ~~25.9%~~13.7% compared to ~~17.0%~~25.9% for the three months ended March 31, ~~2020.~~2021. The ~~adjusted effective tax rate for the three months ended March 31, 2021 was 19.7%. compared to 16.2% for the first quarter of 2020. The increase in effective tax rate and adjusted effective tax rate~~quarter-over-quarter decrease was primarily due to ~~higher repatriation costs and an unfavorable~~a favorable mix of ~~earnings.~~earnings and a one-time benefit associated with the proceedings of a bi-lateral advance pricing agreement.

Segment Adjusted Operating EBITDA Results by Business Unit

~~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~~The Company uses 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~~ 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 the basis of our strategic priorities within each segment and 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.

3531


		Three Months Ended March 31,							Three Months Ended March 31,
(DOLLARS IN MILLIONS)	(DOLLARS IN MILLIONS)	2021			2020			(DOLLARS IN MILLIONS)	2022			2021
Segment Adjusted Operating EBITDA
Segment Adjusted Operating EBITDA:								Segment Adjusted Operating EBITDA:
Nourish	Nourish	$	270		$	176		Nourish	$	329		$	270
Health & Biosciences	Health & Biosciences	128			9			Health & Biosciences	192			128
Scent	Scent	128			118			Scent	116			128
Pharma Solutions	Pharma Solutions	43			—			Pharma Solutions	65			43
Total	Total	569			303			Total	702			569
Depreciation & Amortization	Depreciation & Amortization	(242)			(81)			Depreciation & Amortization	(303)			(242)
Interest Expense	Interest Expense	(65)			(32)			Interest Expense	(72)			(65)
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)
Other income, net								Other income, net	16			7
Restructuring and Other Charges								Restructuring and Other Charges	(2)			(4)
Shareholder Activism Related Costs	Shareholder Activism Related Costs	(7)			—			Shareholder Activism Related Costs	(3)			(7)
Business Divestiture Costs								Business Divestiture Costs	(30)			—
Employee Separation Costs	Employee Separation Costs	(3)			—			Employee Separation Costs	(4)			(3)
Compliance Review & Legal Defense Costs		—			(1)
Frutarom Acquisition Related Costs								Frutarom Acquisition Related Costs	(1)			—
N&B Inventory Step-Up Costs	N&B Inventory Step-Up Costs	(182)			—			N&B Inventory Step-Up Costs	—			(182)
N&B Transaction Related Costs	N&B Transaction Related Costs	(89)			(5)			N&B Transaction Related Costs	—			(89)
N&B Integration Related Costs		(37)			(10)
Integration Related Costs								Integration Related Costs	(18)			(38)

(Loss) Income Before Taxes		$	(54)		$	153
Income (Loss) Before Taxes								Income (Loss) Before Taxes	$	285		$	(54)
Segment Adjusted Operating EBITDA margin:	Segment Adjusted Operating EBITDA margin:							Segment Adjusted Operating EBITDA margin:
Nourish	Nourish	20.6		%	22.8		%	Nourish	19.0		%	20.6		%
Health & Biosciences	Health & Biosciences	30.0		%	26.5		%	Health & Biosciences	29.0		%	30.0		%
Scent	Scent	22.5		%	21.8		%	Scent	19.8		%	22.5		%
Pharma Solutions	Pharma Solutions	26.5		%	—		%	Pharma Solutions	26.1		%	26.5		%
Consolidated	Consolidated	23.1		%	22.5		%	Consolidated	21.8		%	23.1		%

Nourish Segment Adjusted Operating EBITDA

Nourish Segment Adjusted Operating EBITDA increased ~~$94~~$59 million to ~~$270~~$329 million in the first quarter of ~~2021 (20.6%~~2022 (19.0% of segment sales) from ~~$176~~$270 million ~~(22.8%~~(20.6% of segment sales) in the comparable ~~2020~~2021 period. ~~The increase primarily reflected~~Nourish Segment Adjusted Operating EBITDA included approximately $65 million attributable to N&B for the ~~inclusion~~month of ~~N&B, along with volume increases~~January 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.2022 period.

Health & Biosciences Segment Adjusted Operating EBITDA

Health & Biosciences Segment Adjusted Operating EBITDA increased ~~$119~~$64 million to ~~$128~~$192 million in the first quarter of ~~2021 (30.0%~~2022 (29.0% of segment sales) from $9$128 million ~~(26.5%~~(30.0% of segment sales) in the comparable ~~2020~~2021 period. Health & Biosciences Segment Adjusted Operating EBITDA included approximately $60 million attributable to N&B for the month of January in the 2022 period. In addition, the increase was driven by volume increases across various business units in the operating segment. The ~~increase primarily reflected~~decrease in Health & Biosciences Segment Adjusted Operating EBITDA margin, as a percentage of sales, excluding the ~~inclusion~~impact of N&B for the month of January in the 2022 period, was due to an increase in cost of goods sold as ~~the majority~~a result of ~~this operating segment consists of the new N&B Business.~~higher commodity prices.

Scent Segment Adjusted Operating EBITDA

Scent Segment Adjusted Operating EBITDA ~~increased $10~~decreased $12 million to ~~$128~~$116 million in the first quarter of ~~2021 (22.5%~~2022 (19.8% of segment sales) from ~~$118~~$128 million ~~(21.8%~~(22.5% of segment sales) in the comparable ~~2020~~2021 period. The ~~increase primarily~~decrease reflected ~~volume~~ increases in material costs and unfavorable impacts from exchange rate variations in the operating ~~segment.~~segment, partially offset by volume increases.

Pharma Solutions Segment Adjusted Operating EBITDA

Pharma Solutions Segment Adjusted Operating EBITDA ~~was $43~~increased $22 million to $65 million in the first quarter of ~~2021~~2022 (26.1% of segment sales) from $43 million (26.5% of segment sales). ~~This~~Pharma Solutions Segment Adjusted Operating EBITDA included approximately $12 million attributable to N&B for the month of January in the 2022 period. In addition, the increase was driven by price and volume increases. The increase in Pharma Solutions Segment Adjusted Operating EBITDA margin, as a ~~new operating segment~~percentage of sales, excluding the impact of N&B for the month of January in the 2022 period, was due to a greater increase in sales than cost of goods sold, which helped to offset the impact of the ~~Company~~increase in the cost of goods sold as a result of ~~the Merger with N&B and did not exist in the comparable 2020 period.~~higher commodity prices.

Liquidity ~~and Capital Resources~~

Cash and Cash Equivalents

We had cash and cash equivalents of ~~$872~~$657 million at March 31, ~~2021~~2022 compared to ~~$650~~$711 million at December 31, ~~2020~~2021 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 March 31, ~~2021,~~2022, we had a deferred tax liability of ~~$57~~approximately $87 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 $9 million relates, principally, to amounts escrowed related to certain payments to be made to former Frutarom option holders in future periods. As of March 31, 2021, a portion of this balance, $2 million, is classified as a noncurrent asset.

Cash Flows (Used In) Provided By Operating Activities

Cash flows ~~provided by operations~~used in operating activities for the three months ended March 31, ~~2021~~2022 was ~~$358~~$4 million, or ~~14.5%~~(0.1)% of sales, compared to cash provided by ~~operations~~operating activities of ~~$17~~$358 million, or ~~1.3%~~14.5% of sales, for the three months ended March 31, ~~2020.~~2021. The ~~increase~~decrease in cash ~~provided by~~flows from operating activities during ~~2021~~2022 was primarily driven by changes related to inventories, accounts receivables, accrual for incentive compensation, accounts payable ~~inventories,~~and accrued expenses, ~~and accounts receivable,~~ largely offset by ~~lower~~higher cash earnings inexcluding the ~~current year.~~impact of non-cash adjustments.

Working capital (current assets less current liabilities) totaled ~~$2.913~~$3.475 billion and ~~$1.156~~$3.354 billion at March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

We have various factoring agreements in the U.S. and The Netherlands under which we can factor up to approximately ~~$100~~$250 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~~Sheets when the cash proceeds are received.

~~As of March 31, 2021, the Company had removed approximately $304 million of receivables.~~ The impact on cash provided by operations from participating in these programs decreased approximately $45 million and increased approximately ~~$55 million and decreased approximately $5~~$29 million for the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively. The cost of participating in these programs was approximately $1 million for both the three months ended March 31, ~~2021~~2022 and ~~2020.~~2021.

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

~~Net~~Cash flows used in investing activities during the first three months of ~~2021 provided $115~~2022 was $121 million compared to ~~$43~~$115 million ~~utilized~~provided by investing activities in the prior year period. The ~~increase~~decrease in cash ~~provided by~~flows from investing activities ~~compared to cash utilized in investing activities in the prior year period,~~ was primarily driven by the ~~increase~~change in cash provided by the Merger with N&B ~~offset by~~in the current year period, which was related to a pension true-up payment received from DuPont. Additionally, the decrease was due to higher spending on property, plant and equipment ~~and lower proceeds from the disposal of assets~~ in the current ~~year.~~year period.

We have evaluated and re-prioritized our capital projects and expect that capital spending in ~~2021~~2022 will be ~~about 4.5%~~approximately 5.0% of sales (net of potential grants and other reimbursements from government authorities), up ~~slightly~~ from 4%3.4% in ~~2020.~~2021.

~~Frutarom Integration Initiative~~

~~We expect to achieve $145 million of synergy targets, with total savings in line with our original expectations. See Note 4 for additional information related to the Frutarom Integration Initiative.~~

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

Cash ~~used in~~flows provided by financing activities in the first three months of ~~2021~~2022 was ~~$215~~$95 million compared to ~~$107~~$215 million used in financing activities in the prior year period. The increase in cash ~~used in~~flows from financing activities was primarily driven by higher proceeds from issuance of commercial paper, net of repayments, slight increase in short-term debt compared to repayments of short-term debt ~~higher~~from the prior year period, less repayments of long-term debt and less contingent considerations paid, largely offset by higher cash dividend payments, higher employee taxes paid and higher ~~cash dividend payments.~~

purchases of noncontrolling interest.

We paid dividends totaling ~~$82~~$201 million in the ~~2021~~2022 period. We declared a cash dividend per share of ~~$0.77~~$0.79 in the first quarter of ~~2021~~2022 that was paid on April 6, ~~2021~~2022 to all shareholders of record as of March ~~26, 2021.~~25, 2022.

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 $280 million. As of May 7, 2018, we have suspended our share repurchases.

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.

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

On February 1, 2021, N&B funded the N&B Term Loan Facility, which provided 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”). Following the 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 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.

Upon completion of our combination with N&B, pursuant to the Merger Agreement, DuPont shareholders own approximately 55.4% of the shares of IFF, and existing IFF shareholders own approximately 44.6% of the shares of IFF.

Refer to ~~Note 3 and~~ Note 7 for additional information.

Revolving Credit Facility and Term Loans

As of March 31, ~~2021,~~2022, we had no outstanding borrowings under our $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.~~Facility. 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 March 31, ~~2021,~~2022, our draw down capacity was ~~$1.098 billion~~$842 million under the Revolving Credit Facility.

Refer to Note 7 of this Form 10-Q and Part IV, Item 15, "Exhibits and Financial Statement Schedules," Note 9 of our ~~2020~~2021 Form 10-K, filed on February ~~22, 2021,~~28, 2022, for additional information.

Debt Covenants

At March 31, ~~2021,~~2022, we were in compliance with all financial and other covenants, including the Net Debt to Credit Adjusted EBITDA ratio. At March 31, ~~2021~~2022 our Net Debt/Credit Adjusted EBITDA(1) ratio was ~~4.32~~4.18 to 1.0 as defined by the credit facility agreements, 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 Credit Adjusted EBITDA and Net Debt used by other companies. Reconciliations of Credit Adjusted EBITDA to net ~~loss~~income and net debt to total debt are as follows:


(DOLLARS IN MILLIONS)	Twelve Months Ended March 31, ~~2021~~2022
Net ~~loss~~income	$	~~(286)~~556
Interest expense	~~262~~296
Income taxes	~~(104)~~128
Depreciation and amortization	~~1,840~~1,217
Specified items(1)~~(3)~~	~~812~~405
Non-cash items(2)~~(3)~~	4138
Credit Adjusted EBITDA	$	~~2,565~~2,640

_______________________

(1)Specified items for the 12 months ended March 31, ~~2021~~2022 of ~~$812~~$405 million, consisted of ~~Frutarom integration related costs,~~ restructuring and other charges, ~~net,~~ shareholder activism related costs, business divestiture costs, employee separation costs, pension income adjustment, pension settlement, Frutarom acquisition related ~~costs, compliance review & legal defense~~ costs, N&B inventory step-up costs, N&B transaction related costs ~~N&B~~and integration related ~~costs and other N&B specified items.~~costs.

(2)Non-cash items represent all other adjustments to reconcile net ~~loss~~income to net cash provided by operations as presented on the Statement of Cash Flows, including ~~gain~~gains on disposal of assets, gains on business disposal 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)	March 31, ~~2021~~2022
Total debt(1)	$	~~11,958~~11,695
Adjustments:
Cash and cash equivalents	~~872~~657
Net debt	$	~~11,086~~11,038

_______________________

(1)Total debt used for the calculation of Net debt consists of short-term debt, long-term debt, short-term finance lease obligations and long-term finance lease obligations.

Senior Notes

As of March 31, ~~2021,~~2022, we had ~~$10.132~~$9.691 billion aggregate principal amount outstanding in senior unsecured notes, with ~~$1.882~~$1.441 billion principal amount denominated in EUR and $8.250 billion principal amount denominated in USD, which includes the N&B Senior Notes assumed as a result of the Merger. The notes bear interest ranging from 0.69% per year to 5.12% per year, with maturities from September ~~2021~~2022 to December 1, 2050. See Note 7 for additional information.

Contractual Obligations

We expect to contribute a total of $4$5 million to our U.S. pension plans and a total of ~~$25~~$33 million to our ~~Non-U.S.~~non-U.S. pension plans during ~~2021.~~2022. During the three months ended March 31, ~~2021,~~2022, there were no contributions made to the qualified U.S. pension plans, $8$7 million of contributions were made to the non-U.S. pension plans, and $1 million of benefit payments were made with respect to our non-qualified U.S. pension plan. We also expect to contribute $4 million to our postretirement benefits other than pension plans during ~~2021.~~2022. During the three months ended March 31, ~~2021,~~2022, $1 million of contributions were made to postretirement benefits other than pension plans.

As discussed in Note 15 to the Consolidated Financial Statements, at March 31, ~~2021,~~2022, 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

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)~~(ii) adjusted operating EBITDA and adjusted operating EBITDA ~~margin and (v) adjusted effective tax rate.~~margin. We also provide the non-GAAP 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.

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.

Adjusted ~~gross profit excludes Frutarom acquisition related costs and N&B inventory step-up costs.~~

Adjusted selling and administrative expenses exclude Frutarom integration related costs, 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 EBITDA and adjusted operating EBITDA margin ~~include~~exclude 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,~~ shareholder activism related costs, business divestiture costs, employee separation costs, ~~compliance review & legal defense~~Frutarom acquisition related costs, N&B inventory step-up costs, N&B transaction related costs and ~~N&B~~ integration related costs.

Adjusted effective tax rate excludes Frutarom integration related costs, restructuring and other charges, net, losses on sale of assets, 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, N&B integration related costs and redemption value adjustment to EPS.

Net Debt to 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 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 adjusted operating EBITDA.

~~A. Reconciliation of Non-GAAP Metrics~~

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 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

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 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.
~~(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.~~
~~(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 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.
~~(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)~~			~~Represents transaction costs and expenses related to the transaction with N&B, primarily includes legal and professional fees.~~
~~(h)~~			~~Represents costs primarily related to advisory services for the integration of the transaction with N&B, primarily consulting fees.~~
~~(i)~~			~~Represents the adjustment to EPS related to the excess of the redemption value of certain redeemable noncontrolling interests over their existing carrying value.~~
~~(j)~~			The income tax effects of non-GAAP adjustments are calculated based on the applicable statutory tax rate for the relevant jurisdiction, except for those items which are non-taxable or subject to valuation allowances for which the tax expense (benefit) was calculated at 0%. The tax benefit for amortization is calculated in a similar manner as the tax effects of the non-GAAP adjustments.
~~(k)~~			~~For 2021, net loss is increased by income attributable to noncontrolling interest of $2 million. For 2020, net income is reduced by income attributable to noncontrolling interest of $3 million.~~
~~(l)~~			~~The sum of these items does not foot due to rounding.~~

Cautionary Statement Under the Private Securities Litigation Reform Act of 1995

Statements in this Form 10-Q, 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~~including those concerning (i) the impacts of COVID-19 and our plans to respond to its implications; (ii) the expected impact of global supply chain challenges; (iii) expectations regarding sales and profit for the fiscal year 2022, including the impact of foreign exchange, pricing actions, raw materials, and sourcing, logistics and manufacturing costs; (iv) expectations of the impact of inflationary pressures and the pricing actions to offset exposure to such impacts; (v) the impact of high input costs, including raw materials, transportation and energy; (vi) our ability to drive cost discipline measures and the ability to recover margin to pre-inflation levels; (vii) the divestiture of our Microbial Control business and the progress of our portfolio optimization strategy, through non-core business divestitures; (viii) our combination with N&B, including the expected benefits and synergies of the N&B Transaction and future opportunities for the combined company; ~~(iii)~~(ix) the success of our integration efforts and ability to deliver on our synergy commitments as well as future opportunities for the combined company; (x) our ability to achieve the anticipated benefits of the Frutarom acquisition, including $145 million of expected synergies; ~~(iv) our ability to achieve our Vision 2021 strategy of accelerated revenue and profitability growth, (v)~~(xi) the growth potential of the markets in which we operate, including the emerging markets, ~~(vi)~~(xii) expected capital expenditures in ~~2021, (vii) expectations regarding the Frutarom Integration Initiative, (viii)~~2022; (xiii) the expected costs and benefits of our ongoing optimization of our manufacturing operations, including the expected number of ~~closings, (ix)~~closings; (xiv) expected cash flow and availability of capital resources to fund our operations and meet our debt service requirements; ~~(x)~~(xv) our ability to innovate and execute on specific consumer trends and demands; and ~~(xi)~~(xvi) our ability to continue to generate value for, and return cash to, our 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:

•inflationary trends in the price of our input costs, such as raw materials, transportation and energy;

•supply chain disruptions, geopolitical developments, including the Russia-Ukraine conflict, or climate-change related events (including severe weather events) that may affect our suppliers or procurement of raw materials;

•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 acquisitions in the expected time frame;

•~~unanticipated costs, liabilities, charges or expenses resulting from the Frutarom 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;~~partnerships, or the failure to close strategic transactions or divestments;

•~~the increase in~~ our ~~leverage resulting from the additional debt incurred~~ability to ~~pay a portion~~successfully market to our expanded and diverse customer base;

•our substantial amount of ~~the consideration for Frutarom~~indebtedness and its impact on our liquidity and ability to return capital to its shareholders;

•~~our ability to successfully market to our expanded and diverse 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;

4236

•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 meet increasing consumer, customer, shareholder and regulatory focus on sustainability;

•defect, quality issues (including product recalls), inadequate disclosure or misuse with respect to the products and capabilities;

•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 N&B merger and the acquisition of ~~Frutarom and Merger with N&B;~~Frutarom;

•our ability to protect our intellectual property rights;

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

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

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

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

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

•risks associated with our CEO transition, including the impact of employee hiring and retention.

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 ~~2020~~2021 Form 10-K for additional information regarding factors that could affect our results of operations, financial condition and ~~cash flow.~~liquidity.

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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

There are no material changes in market risk from the information provided in our ~~2020~~2021 Form 10-K, except for the ~~USD fixed~~cross currency swap agreements.

We use derivative instruments as part of our interest rate ~~debt.~~

Atrisk management strategy. We have entered into certain cross currency swap agreements in order to mitigate a portion of our net European investments from foreign currency risk. As of March 31, ~~2021, the~~2022, these swaps were in a net liability position with an aggregate fair value of ~~our USD fixed rate debt was $8.427 billion.~~$6 million. Based on a hypothetical decrease or increase of 10% in ~~interest rates,~~the value of the U.S. dollar against the Euro, the estimated fair value of our ~~USD fixed rate debt~~cross currency swaps would ~~decrease or increase, accordingly,~~change by approximately ~~$843~~$176 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 March 31, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

4438

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

~~We are subject~~For information that updates the disclosures set forth under Part I, Item 3. "Legal Proceedings" in our 2021 Annual Report on Form 10-K (the "2021 Form 10-K"), refer to ~~various claims and legal actions in the ordinary course of our business.~~

~~Litigation Matters~~

On August 12, 2019, Marc Jansen filed a putative securities class action against IFF, its Chairman and CEO, and its 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 plaintiffs and Pomerantz LLP as lead counsel. On March 16, 2020, lead 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 appealNote 15 to the ~~United States Court of Appeals for the Second Circuit.~~

~~Two motions to approve securities class actions were filed~~"Consolidated Financial Statements" 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) 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 still ongoing, during which the proceedings relating to this ~~claim are stayed.~~

~~Investigation~~

ITEM ~~1a.~~1A. RISK FACTORS.

Refer to Part I, Item 1A, “Risk Factors,” of our ~~2020 Annual Report on~~2021 Form 10-K, ~~(the "2020 Form 10-K")~~filed on February 28, 2022 with the SEC, and the information contained in this Quarterly Report on Form 10-Q and our other reports and registration statements filed with the SEC. There have been no material changes with respect to the risk factors disclosed in our ~~2020~~2021 Form 10-K.

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

None.

ITEM 6. EXHIBITS.


~~4.1~~						Second Supplemental Indenture, dated as of 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., and as acknowledged by Morgan Stanley Senior Funding, Inc., as administrative agent (incorporated by reference from Exhibit 4.2 to Form 8-K dated March 4, 2021).
~~10.1~~						~~Co-Operation Agreement dated March 7, 2021 (incorporated by reference from Exhibit 10.1 to Form 8-K dated March 8, 2021).~~
31.1						Certification of ~~Andreas Fibig~~Frank Clyburn pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2						Certification of ~~Rustom Jilla~~Glenn Richter pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32						Certification of ~~Andreas Fibig~~Frank Clyburn and ~~Rustom Jilla~~Glenn Richter 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)

4639

SIGNATURES

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

Dated:

May ~~10, 2021~~9, 2022

By:

/s/ ~~Andreas Fibig~~Frank Clyburn

~~Andreas Fibig~~Frank Clyburn

~~Chairman of the Board and~~ Chief Executive Officer and Director (Principal Executive Officer)

Dated:

May ~~10, 2021~~9, 2022

By:

/s/ ~~Rustom Jilla~~Glenn Richter

~~Rustom Jilla~~Glenn Richter

Executive Vice President and Chief Financial Officer (Principal Financial Officer)

Dated:

May ~~10, 2021~~9, 2022

By:

/s/ Robert Anderson

Robert Anderson

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

4740


		PAGE
	PART I
ITEM 1.	Financial Information

	Consolidated Balance Sheets - March 31, 2022 and December 31, 2021	1

	Consolidated Statements of Income (Loss)and Com p rehensive Income (Loss )- Three Months Ended March 31, 2022 and 2021	2

	Consolidated Statements of Cash Flows - Three Months Ended March 31, 2022 and 2021	3

	Consolidated Statements of Shareholders' Equity - Three Mo nths Ended March 31, 2022 and 2021	4

	Notes to Consolidated Financial Statements	5

ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	38

ITEM 4.	C ontrols and Procedur es	38

	PART II
ITEM 1.	Legal Proceedings	39

ITEM 1A.	Risk Factors	39

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39

ITEM 6.	E xhibits	39

Signatures		40


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 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