INTERNATIONAL FLAVORS & FRAGRANCES INC [IFF] Filings

10-Q 1 iff-20240630.htm 10-Q iff-20240630

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 June 30, 2024


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

For the transition period from to

Commission file number 1-4858

INTERNATIONAL FLAVORS & FRAGRANCES INC.

(Exact name of registrant as specified in its charter)



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

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

200 Powder Mill Road, Wilmington, DE 19803-2907

(Address of principal executive offices) (Zip Code)

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

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

Title of each class

Trading Symbol(s)

Name of each exchange
on which registered

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

IFF

New York Stock Exchange

1.800% 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 July 31, 2024: 255,659,175

INTERNATIONAL FLAVORS & FRAGRANCES INC.

TABLE OF CONTENTS


		PAGE
	PART I - Financial Information
ITEM 1.	Financial Statements

	Consolidated Statements of Income and Comprehensive Income - Three and Six Months Ended June 30, 2024 and 2023	1

	Consolidated Balance Sheets - June 30 , 2024 and December 31, 2023	2

	Consolidated Statements of Shareholders' Equity - Three and Six Months Ended June 30, 2024 and 2023	3

	Consolidated State ments of Cash Flows - Six Months Ended June 30, 2024 an d 2023	5

	Notes to Consolidated Financial Statements	6

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	44

ITEM 4.	Controls and Procedures	44

	PART II - Other Information
ITEM 1.	Legal Proceedings	45

ITEM 1A.	Risk Factors	45

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45

ITEM 5.	Other Information	45

ITEM 6.	Exhibits	45

Signatures		46

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

INTERNATIONAL FLAVORS & FRAGRANCES INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(AMOUNTS IN MILLIONS EXCEPT PER SHARE AMOUNTS)	2024		2023		2024		2023
Net sales	$	2,889	$	2,929	$	5,788	$	5,956
Cost of goods sold	1,821		1,996		3,696		4,059
Gross profit	1,068		933		2,092		1,897
Research and development expenses	173		161		339		322
Selling and administrative expenses	493		445		983		899
Amortization of acquisition-related intangibles	153		172		321		343
Impairment of goodwill	64		—		64		—

Restructuring and other charges	2		7		5		59
(Gains) losses on sale of assets	(8)		3		(10)		(2)
Operating profit	191		145		390		276
Interest expense	79		101		162		201

(Gains) losses on business disposals	(368)		5		(368)		19
Loss on assets classified as held for sale	282		—		282		—
Other expense (income), net	15		(11)		16		(8)
Income before income taxes	183		50		298		64
Provision for income taxes	11		23		65		45
Net income	172		27		233		19
Net income attributable to non-controlling interests	2		—		3		1
Net income attributable to IFF shareholders	$	170	$	27	$	230	$	18

Net income per share - basic	$	0.67	$	0.11	$	0.90	$	0.07
Net income per share - diluted	$	0.66	$	0.11	$	0.90	$	0.07
Average number of shares outstanding - basic	255		255		255		255
Average number of shares outstanding - diluted	256		255		256		255


Statements of Comprehensive Income (Loss)
Net income	$	172	$	27	$	233	$	19
Other comprehensive (loss) income, after tax:
Foreign currency translation adjustments	(128)		60		(421)		344
Gains (losses) on derivatives qualifying as hedges	1		—		(6)		—
Pension and postretirement liability adjustment	3		(1)		8		(3)
Other comprehensive (loss) income	(124)		59		(419)		341
Comprehensive income (loss)	48		86		(186)		360
Comprehensive income attributable to non-controlling interests	2		—		3		1
Comprehensive income (loss) attributable to IFF shareholders	$	46	$	86	$	(189)	$	359

See Notes to Consolidated Financial Statements

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INTERNATIONAL FLAVORS & FRAGRANCES INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(DOLLARS IN MILLIONS)	June 30, 2024		December 31, 2023
ASSETS
Current Assets:
Cash, cash equivalents, and restricted cash	$	671	$	709
Trade receivables (net of allowances)	1,775		1,726



Inventories	2,160		2,477
Assets held for sale	2,815		506
Prepaid expenses and other current assets	728		875
Total Current Assets	8,149		6,293


Property, plant and equipment, net	3,763		4,240
Goodwill	9,282		10,635
Other intangible assets, net	6,881		8,357

Operating lease right-of-use assets	663		689
Other assets	805		764
Total Assets	$	29,543	$	30,978
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term debt and current portion of long-term debt	$	783	$	885
Accounts payable	1,272		1,378
Accrued payroll and bonus	275		265
Dividends payable	102		207
Liabilities held for sale	231		46
Other current liabilities	762		977
Total Current Liabilities	3,425		3,758
Other Liabilities:
Long-term debt	8,596		9,186

Retirement liabilities	206		253
Deferred income taxes	1,833		1,937
Operating lease liabilities	620		642
Other liabilities	572		560
Total Other Liabilities	11,827		12,578
Commitments and Contingencies (Note 18)

Shareholders’ Equity:
Common stock $0.125 par value; 500,000,000 shares authorized; 275,726,629 shares issued as of June 30, 2024 and December 31, 2023; and 255,656,988 and 255,288,535 shares outstanding as of June 30, 2024 and December 31, 2023, respectively	35		35
Capital in excess of par value	19,894		19,874
Accumulated deficit	(2,414)		(2,439)
Accumulated other comprehensive loss	(2,315)		(1,896)
Treasury stock, at cost (20,069,641 and 20,438,094 shares as of June 30, 2024 and December 31, 2023, respectively)	(946)		(963)
Total Shareholders’ Equity	14,254		14,611
Non-controlling interests	37		31
Total Shareholders’ Equity including Non-controlling interests	14,291		14,642
Total Liabilities and Shareholders’ Equity	$	29,543	$	30,978

See Notes to Consolidated Financial Statements

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INTERNATIONAL FLAVORS & FRAGRANCES INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)


(DOLLARS IN MILLIONS)	Common stock			Capital in excess of par value		Retained earnings		Accumulated other comprehensive (loss) income		Treasury stock			Non-controlling interest		Total
	Shares	Cost								Shares	Cost
Balance at April 1, 2023	275,726,629	$	35	$	19,844	$	739	$	(1,916)	(20,659,153)	$	(973)	$	32	$	17,761
Net income						27									27

Other Comprehensive income								59							59


Cash dividends declared(1)						(206)									(206)
Stock options/SSARs				2						3,269					2

Vested restricted stock units and awards				(14)						150,986	7				(7)
Stock-based compensation				20											20
Purchase of NCI				(1)											(1)


Balance at June 30, 2023	275,726,629	$	35	$	19,851	$	560	$	(1,857)	(20,504,898)	$	(966)	$	32	$	17,655


(DOLLARS IN MILLIONS)	Common stock			Capital in excess of par value		Accumulated deficit		Accumulated other comprehensive (loss) income		Treasury stock			Non-controlling interest		Total
	Shares	Cost								Shares	Cost
Balance at April 1, 2024	275,726,629	$	35	$	19,889	$	(2,481)	$	(2,191)	(20,407,096)	$	(961)	$	35	$	14,326
Net income						170							2		172

Other Comprehensive (loss)								(124)							(124)


Cash dividends declared(1)						(102)									(102)
Stock options/SSARs										8,369					—

Vested restricted stock units and awards				(20)						329,086	15				(5)
Stock-based compensation				25											25



Other						(1)									(1)
Balance at June 30, 2024	275,726,629	$	35	$	19,894	$	(2,414)	$	(2,315)	(20,069,641)	$	(946)	$	37	$	14,291



(DOLLARS IN MILLIONS)	Common stock			Capital in excess of par value		Retained earnings		Accumulated other comprehensive (loss) income		Treasury stock			Non-controlling interest		Total
	Shares	Cost								Shares	Cost
Balance at January 1, 2023	275,726,629	$	35	$	19,841	$	955	$	(2,198)	(20,758,166)	$	(978)	$	30	$	17,685
Net income						18							1		19

Other Comprehensive income								341							341


Cash dividends declared(1)						(413)									(413)
Stock options/SSARs				(3)						58,886	3				—

Vested restricted stock units and awards				(18)						194,382	9				(9)
Stock-based compensation				32											32
Purchase of NCI				(1)											(1)

Other													1		1
Balance at June 30, 2023	275,726,629	$	35	$	19,851	$	560	$	(1,857)	(20,504,898)	$	(966)	$	32	$	17,655

See Notes to Consolidated Financial Statements

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(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, 2024	275,726,629	$	35	$	19,874	$	(2,439)	$	(1,896)	(20,438,094)	$	(963)	$	31	$	14,642
Net income						230							3		233

Other Comprehensive (loss)								(419)							(419)


Cash dividends declared(1)						(204)									(204)
Stock options/SSARs				(2)						32,622	1				(1)

Vested restricted stock units and awards				(21)						335,831	16				(5)
Stock-based compensation				43											43



Other						(1)							3		2
Balance at June 30, 2024	275,726,629	$	35	$	19,894	$	(2,414)	$	(2,315)	(20,069,641)	$	(946)	$	37	$	14,291

_______________________

(1)Cash dividends declared per common share were $0.40 and $0.81 for the three months ended June 30, 2024 and June 30, 2023, respectively, and $0.80 and $1.62 per share for the six months ended June 30, 2024 and June 30, 2023, respectively.

See Notes to Consolidated Financial Statements

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INTERNATIONAL FLAVORS & FRAGRANCES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
(DOLLARS IN MILLIONS)	2024		2023
Cash flows from operating activities:
Net income	$	233	$	19
Adjustments to reconcile to net cash provided by operating activities
Depreciation and amortization	524		563
Deferred income taxes	(77)		(27)
Loss on assets classified as held for sale	282		—
Gains on sale of assets	(10)		(2)
(Gains) Losses on business disposals	(368)		19
Stock-based compensation	43		32
Pension contributions	(11)		(18)






Impairment of goodwill	64		—

Inventory write-down	—		44
Changes in assets and liabilities:
Trade receivables	(293)		(70)
Inventories	4		333
Accounts payable	54		(92)
Accruals for incentive compensation	18		(77)
Other current payables and accrued expenses	(78)		(248)
Other assets/liabilities, net	(49)		(101)
Net cash provided by operating activities	336		375
Cash flows from investing activities:

Additions to property, plant and equipment	(200)		(290)



Proceeds from disposal of assets	16		21


Net proceeds received from business divestitures	848		821
Net cash provided by investing activities	664		552
Cash flows from financing activities:
Cash dividends paid to shareholders	(309)		(413)
Decrease in revolving credit facility and short-term borrowings	—		(100)


Net borrowings of commercial paper (maturities less than three months)	189		(28)
Principal payments of debt	(849)		(300)

Deferred and contingent consideration paid	(36)		(6)





Withholding tax paid on stock-based compensation	(14)		(11)

Other, net	(4)		(8)
Net cash used in financing activities	(1,023)		(866)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(38)		39
Net change in cash, cash equivalents and restricted cash	(61)		100
Cash, cash equivalents and restricted cash at beginning of year	735		552
Cash, cash equivalents and restricted cash at end of period	$	674	$	652
Supplemental Disclosures:
Interest paid, net of amounts capitalized	$	158	$	191
Income taxes paid, net	185		404
Accrued capital expenditures	64		57

See Notes to Consolidated Financial Statements

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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 natural health ingredients, which are used in a wide variety of consumer products. Our products are sold principally to manufacturers of perfumes and cosmetics, hair and other personal care products, soaps and detergents, cleaning products, dairy, meat and other processed foods, beverages, snacks and savory foods, sweet and baked goods, sweeteners, dietary supplements, food protection, infant and elderly nutrition, functional food, and pharmaceutical excipients and oral care products.

Basis of Presentation

The accompanying interim Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and the related notes included in our 2023 Annual Report on Form 10-K (“2023 Form 10-K”), filed on February 28, 2024 with the Securities and Exchange Commission (“SEC”).

The interim Consolidated Financial Statements are prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America for interim financial information and with the rules and regulations for reporting on Form 10-Q, and are unaudited. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP in the United States of America have been condensed or omitted, if not materially different from the 2023 Form 10-K. The year-end balance sheet data included in this Form 10-Q was derived from the audited financial statements. In the opinion of management, all adjustments, which consist of normal recurring adjustments necessary for a fair statement of the interim Consolidated Financial Statements, have been made.

Correction of Prior Year Consolidated Financial Statements

The Company revised Interest expense from $116 million to $101 million, and Other income, net from $26 million to $11 million, on its Consolidated Statements of Income and Comprehensive Income (Loss) for the three months ended June 30, 2023. The Company also revised Interest expense from $227 million to $201 million and Other income, net from $34 million to $8 million for the six months ended June 30, 2023. These adjustments had no impact on net income and reflect certain adjustments made to interest expense associated with the Company’s cash pooling arrangements. The impacts of these corrections are also presented in the related footnotes.

Use of Estimates

The preparation of financial statements requires management to make estimates and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. The inputs into the Company’s judgments and estimates take into account the ongoing global current events and adverse macroeconomic impacts on our critical and significant accounting estimates, including estimates associated with future cash flows that are used in assessing the risk of impairment of certain assets. Actual results could differ from those estimates.

Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash reported in the Company’s balance sheet as of June 30, 2024, December 31, 2023, June 30, 2023 and December 31, 2022 were as follows:


(DOLLARS IN MILLIONS)	June 30, 2024		December 31, 2023		June 30, 2023		December 31, 2022
Current assets
Cash and cash equivalents	$	671	$	703	$	638	$	483
Cash and cash equivalents included in Assets held for sale	3		26		3		52
Restricted cash	—		6		11		10
Non-current assets
Restricted cash included in Other assets	—		—		—		7
Cash, cash equivalents and restricted cash	$	674	$	735	$	652	$	552

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Accounts Receivable

The Company has various factoring agreements globally under which it can factor up to approximately $300 million of its trade receivables (“Company’s own factoring agreements”). In addition, the Company utilizes factoring agreements sponsored by certain customers. Under all of the arrangements, the Company sells the trade receivables on a non-recourse basis to unrelated financial institutions and accounts for the transactions as sales of receivables. The applicable receivables are removed from the Company’s Consolidated Balance Sheets when the cash proceeds are received by the Company.

The Company sold a total of approximately $882 million and $858 million of receivables under the Company’s own factoring agreements and customer sponsored factoring agreements for the six months ended June 30, 2024 and 2023, respectively. The cost of participating in these programs was approximately $8 million and $7 million for the three months ended June 30, 2024 and 2023, respectively, and was approximately $14 million and $12 million for the six months ended June 30, 2024 and 2023, respectively. These costs are included as a component of interest expense. Under the Company’s own factoring agreements for which the Company has continued responsibility to collect receivables and provide to its sponsor, it sold approximately $436 million and $425 million of receivables for the six months ended June 30, 2024 and 2023, respectively. The outstanding principal amounts of receivables under the Company’s own factoring agreements amounted to approximately $210 million and $196 million as of June 30, 2024 and December 31, 2023, respectively. The proceeds from the sales of receivables are included in Net cash provided by operating activities in the Consolidated Statements of Cash Flows.

Expected Credit Losses

As of June 30, 2024, the Company reported $1.775 billion of trade receivables, net of allowances of $27 million. Based on the aging analysis as of June 30, 2024, less than 1% of the Company’s accounts receivable were past due by over 365 days based on the payment terms of the invoice.

The following is a roll-forward of the Company’s allowances for bad debts for the six months ended June 30, 2024 and 2023.


	Six Months Ended June 30,
(DOLLARS IN MILLIONS)	2024		2023
Balance at January 1	$	52	$	53
Bad debt expense (reversals)	(9)		8
Write-offs	(15)		—

Foreign exchange (gains) losses	(1)		2
Balance at June 30	$	27	$	63

Inventories

Inventories are stated at the lower of cost (on a weighted-average basis) or net realizable value. The Company’s inventories consisted of the following:


(DOLLARS IN MILLIONS)	June 30, 2024		December 31, 2023
Raw materials	$	708	$	779
Work in process	381		406
Finished goods	1,071		1,292
Total	$	2,160	$	2,477

Supply Chain Financing Program

In the fourth quarter of 2023, the Company entered into a supply chain financing (“SCF”) program. The SCF program is expected to be available to U.S. based suppliers starting in the second half of 2024. The Company makes continuous efforts to improve working capital efficiency and has worked with suppliers to optimize payment terms and conditions. The Company’s current payment terms with a majority of suppliers generally range from 0 to 180 days, which is deemed to be commercially reasonable. The Company’s SCF program is voluntary and will allow its suppliers to elect to sell the receivables owed to them by the Company to a third-party financial institution. The suppliers, at their own discretion, will determine the invoices they want to sell and directly negotiate the arrangements with the participating third-party financial institution. Supplier participation in the program is solely the decision of the supplier and has no bearing on the Company’s payment terms and amounts due with the supplier. The Company’s responsibility will be limited to making payments based upon the agreed contractual terms and arrangements. The Company will not provide any form of guarantees under the SCF program and will have no economic interest in the suppliers’ decision to participate in the SCF program. Amounts due to suppliers that elect to participate in the SCF program will be included in Accounts payable on the Consolidated Balance Sheets. The Company, or the third-party

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financial institution, may choose to terminate the agreement of the SCF program at any time upon 30 days’ prior written notice. The third-party financial institution may also terminate the agreement of the SCF program at any time upon three business days’ prior written notice in the event there are insufficient funds available for disbursements. As of June 30, 2024 and December 31, 2023, there were no amounts outstanding related to suppliers’ participation in the SCF program.

Recent Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The ASU was issued to further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. This guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and may be applied either prospectively or retrospectively. The Company is currently evaluating the impact that this guidance will have on its income tax disclosures.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The ASU intends to improve reportable segment disclosure requirements, primarily through enhanced disclosures of significant segment expenses that are regularly provided to the Chief Operating Decision Maker and included within segment profit and loss. This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted, and applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact that this guidance will have on its reportable segment disclosures.

NOTE 2. NET INCOME PER SHARE

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


	Three Months Ended June 30,				Six Months Ended June 30,
(AMOUNTS IN MILLIONS EXCEPT PER SHARE AMOUNTS)	2024		2023		2024		2023
Net Income
Net income attributable to IFF shareholders	$	170	$	27	$	230	$	18
Adjustment related to (increase) in redemption value of redeemable non-controlling interests in excess of earnings allocated	—		(1)		—		(1)
Net income available to IFF shareholders	$	170	$	26	$	230	$	17
Shares
Weighted average common shares outstanding (basic)	255		255		255		255
Adjustment for assumed dilution:
Stock options and restricted stock awards	1		—		1		—

Weighted average shares assuming dilution (diluted)	256		255		256		255

Net Income per Share
Net income per share - basic(1)	$	0.67	$	0.11	$	0.90	$	0.07
Net income per share - diluted(1)	0.66		0.11		0.90		0.07

_______________________

(1)For the three months ended June 30, 2023, the basic and diluted net income per share cannot be recalculated based on the information presented in the table above due to rounding.

The Company declared a quarterly dividend to its shareholders of $0.40 and $0.81 per share for the three months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024 and 2023, the Company declared quarterly dividends to its shareholders totaling $0.80 and $1.62, respectively.

For the three and six months ended June 30, 2024, there were approximately 0.3 million share equivalents that had an anti-dilutive effect and therefore were excluded from the computation of diluted net income per share in the period. For the three and six months ended June 30, 2023, there were approximately 0.4 million share equivalents that had an anti-dilutive effect and therefore were excluded from the computation of diluted net loss per share.

The Company has issued shares of Purchased Restricted Stock Units (“PRSUs”) which contain rights to non-forfeitable dividends while these shares are outstanding and thus are considered participating securities. Such securities are required to be included in the computation of basic and diluted earnings per share pursuant to the two-class method.

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The Company did not present the two-class method since the difference between basic net income per share for both unrestricted common shareholders and PRSU shareholders for the three and six months ended June 30, 2024 was less than $0.01 per share. The difference between basic net income per share for both unrestricted common shareholders and PRSU shareholders for the three months ended June 30, 2023 was less than $0.01 per share. There was no difference between basic net income per share for both unrestricted common shareholders and PRSU shareholders for the six months ended June 30, 2023. The difference between diluted net income per share for both unrestricted common shareholders and PRSU shareholders for the three and six months ended June 30, 2024 and 2023 was less than $0.01 per share. In addition, the number of PRSUs outstanding as of June 30, 2024 and 2023 was not material. Net income allocated to such PRSUs was not material for the three and six months ended June 30, 2024 and 2023.

NOTE 3. BUSINESS DIVESTITURES AND ASSETS AND LIABILITIES HELD FOR SALE

Divestiture of the Cosmetic Ingredients Business

During the third quarter of 2023, the Company announced it had entered into an agreement to sell its Cosmetic Ingredients business, which was a part of the Scent segment. The Company completed the divestiture on April 2, 2024, and received cash proceeds of approximately $841 million. The sale consideration is subject to certain post-closing adjustments, which is primarily related to cash, indebtedness and working capital balances.

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


(DOLLARS IN MILLIONS)
Cash proceeds from the buyer	$	841
Direct costs to sell	(10)
Fair value of sale consideration	$	831

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


(DOLLARS IN MILLIONS)
Cash proceeds from the buyer	$	841
Cash transferred to the buyer	(32)
Net Cash flows from investing activities	$	809

The carrying amount of net assets associated with the business unit, adjusted for currency translation adjustment, was approximately $466 million. The major classes of assets and liabilities sold consisted of the following:

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(DOLLARS IN MILLIONS)	April 2, 2024
Assets
Cash and cash equivalents	$	32
Trade receivables, net	18
Inventories	17
Property, plant and equipment, net	7
Goodwill	271
Other intangible assets, net	144
Operating lease right-of-use assets	10
Other assets	11
Total assets	510
Liabilities
Accounts payable	$	(5)
Deferred tax liability	(25)
Other liabilities	(18)
Total liabilities	(48)
Equity
Accumulated other comprehensive income - currency translation adjustment	4
Total equity	4
Carrying value of net asset (adjusted for currency translation adjustment)	$	466

As a result of the business divestiture, the Company recognized a pre-tax gain of approximately $365 million, subject to certain post-closing adjustments, presented in (Gains) losses on business disposals on the Consolidated Statements of Income and Comprehensive Income (Loss) for the three and six months ended June 30, 2024. The total income tax expense/(benefit) recognized was approximately $34 million, with approximately $(7) million that was recognized during the year ended December 31, 2023.

Divestiture of a Portion of the Savory Solutions Business

The Company completed the divestiture of a Portion of the Savory Solutions business on May 31, 2023, and received net cash proceeds of approximately $821 million. In addition, a receivable of approximately $37 million was recorded which reflected the remaining sale consideration that was received in January 2024.

As a result of the divestiture, the Company recognized a pre-tax loss of approximately $10 million presented in (Gains) losses on business disposals on the Consolidated Statements of Income and Comprehensive Income (Loss) for the three and six months ended June 30, 2023. There was a true-up settlement of $7 million for the three months ended December 31, 2023, resulting in a cumulative pre-tax loss of approximately $3 million. The Company also recognized the income tax effects associated with the transaction of approximately $7 million based on estimates as of June 30, 2023.

Liquidation of a Business in Russia

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

Assets and Liabilities Held for Sale

Pharma Solutions

During the first quarter of 2024, the Company announced it had entered into an agreement to sell its Pharma Solutions business, that is primarily made up of most businesses within the Company's existing Pharma Solutions reportable operating segment as well as certain adjacent businesses (the "Pharma Solutions disposal group"). The transaction is subject to customary closing conditions and is expected to close in the second quarter of 2025.

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.

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The Company determined that the assets and liabilities of the Pharma Solutions disposal group met the criteria to be presented as “held for sale” during the second quarter of 2024. As a result, as of June 30, 2024, such assets and liabilities were classified as held for sale on the Consolidated Balance Sheets. The carrying value is subject to change based on developments leading up to the closing date.

The classification of the Pharma Solutions disposal group as held for sale was considered an event or change in circumstance which required an assessment of the existing Pharma Solutions reporting unit. The Company performed a pre-classification goodwill impairment test and determined that the fair value of the Pharma Solutions reporting unit exceeded the carrying value.

The Company engaged an independent third party to determine the fair value of the assets held for sale as of May 1, 2024, based upon the sale price including earn outs expected to be received from the buyer. The fair value of the earn out was based on a Monte Carlo simulation. Goodwill was allocated to the Pharma Solutions disposal group based upon the relative fair value of the businesses included in the disposal group compared to the reporting units to which the businesses relate. The Company then performed a post-classification goodwill impairment test and determined that the fair value was less than the carrying value of the Pharma Solutions disposal group. As such, the Company recorded a non-cash goodwill impairment charge of $64 million.

The Company also performed a goodwill impairment test of the remaining businesses in the Pharma Solutions reporting unit that were not classified as held for sale and determined that the fair value exceeded the carrying value.

The Company engaged an independent third-party to determine an updated fair value of the Pharma Solutions disposal group as of June 30, 2024. The Company determined that the fair value of $2,686 million (fair value of $2,717 million less estimated costs to sell of $31 million) of the Pharma Solutions disposal group was less than the carrying value. As such, the Company recorded a loss of $282 million in the second quarter of 2024 to adjust the carrying value of the disposal group to its fair value less cost to sell. The Company recorded the loss on classification of held for sale as a valuation allowance on the group of assets held for sale, without allocation to the individual assets or major classes of assets within the group. Due to the nature of estimates, the carrying value is subject to change based on developments leading up to the closing date, and the actual amounts realized upon sale may differ from amounts recognized as of June 30, 2024. Any difference will be recognized as a gain or loss in future financial statements.

The Company recognized income tax benefits of $56 million related to loss on assets classified as held for sale for the Pharma Solutions disposal group.

In addition, pursuant to the terms agreed under the 2026 Term Loan Facility, a portion of the net cash proceeds received from the sale of the Pharma Solutions disposal group, when and if completed, must be used to repay our borrowings under the 2026 Term Loan Facility. Therefore, the Company reclassified the 2026 Term Loan Facility balance from "Long-term debt" to "Short-term debt and current portion of long-term debt" (see Note 13).

As of December 31, 2023, the assets and liabilities of the Cosmetic Ingredients business met the criteria to be presented as "held for sale". The Company completed the divestiture on April 2, 2024 and therefore the assets and liabilities of the Cosmetic Ingredients business are not included in the Company's Consolidated Balance Sheets as of June 30, 2024.

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Included in the Company’s Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 are the following carrying amounts of the assets and liabilities held for sale:


(DOLLARS IN MILLIONS)	June 30, 2024		December 31, 2023
Assets
Cash and cash equivalents	$	3	$	26
Trade receivables, net	170		15
Inventories	260		18
Property, plant and equipment, net	358		7
Goodwill(1)	1,163		276
Other intangible assets, net	1,056		146
Operating lease right-of-use assets	13		9
Other assets	74		9
Less: Loss recognized on assets held-for-sale(2)	(282)		—
Total assets held-for-sale	$	2,815	$	506
Liabilities
Accounts payable	$	74	$	4
Deferred tax liability	61		24
Other liabilities	96		18
Total liabilities held-for-sale	$	231	$	46

_______________________

(1)The goodwill balance in assets held for sale for the Pharma Solutions disposal group as of June 30, 2024, is presented net of $64 million of goodwill impairment.

(2)Includes the impact of $102 million, primarily related to loss on foreign currency translation, expected to be reclassified out of accumulated other comprehensive loss upon close of the sale.

NOTE 4. RESTRUCTURING AND OTHER CHARGES

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

N&B Merger Restructuring Liability

For the six months ended June 30, 2024, the Company had approximately $2 million of charges related to a lease impairment. Since the inception of the restructuring activities, there have been a total of approximately 215 headcount reductions and the Company has expensed approximately $49 million. As of December 31, 2023, the restructuring activities were completed related to employee exits. The Company continues to evaluate its owned and leased properties following the combination of IFF and DuPont de Nemours, Inc’s nutrition and biosciences business (“Merger with N&B”) and may incur additional costs to further consolidate its footprint.

2023 Restructuring Program

In December 2022, the Company announced a restructuring program mainly related to headcount reduction to improve its organizational and operating structure, drive efficiencies and achieve cost savings. For the six months ended June 30, 2024, the Company incurred approximately $3 million of charges related to severance. Since the inception of the restructuring program, the Company has expensed approximately $73 million and there have been a total of approximately 670 actual and planned headcount reductions.

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Changes in Restructuring Liabilities

Changes in restructuring liabilities during the six months ended June 30, 2024 were as follows:


(DOLLARS IN MILLIONS)	Balance at January 1, 2024		Additional Charges (Reversals), Net		Non-Cash Charges		Cash Payments		Balance at June 30, 2024
















N&B Merger Restructuring Liability


Other	$	—	$	2	$	(2)	$	—	$	—
2023 Restructuring Program
Severance	14		3		—		(14)		3
Total Restructuring and other charges	$	14	$	5	$	(2)	$	(14)	$	3

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

Charges by Segment

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


	Three Months Ended June 30,				Six Months Ended June 30,
(DOLLARS IN MILLIONS)	2024		2023		2024		2023
Nourish	$	1	$	2	$	3	$	32
Health & Biosciences	—		1		1		11
Scent	1		4		1		14
Pharma Solutions	—		—		—		2

Total Restructuring and other charges	$	2	$	7	$	5	$	59

NOTE 5. STOCK COMPENSATION PLANS

The Company has various plans under which its officers, senior management, other key employees and directors may be granted equity-based awards. Equity awards outstanding under the plans include PRSUs, Restricted Stock Units (“RSUs”), Stock-Settled Appreciation Rights (“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 June 30,				Six Months Ended June 30,
(DOLLARS IN MILLIONS)	2024		2023		2024		2023
Equity-based awards	$	25	$	20	$	43	$	32
Liability-based awards	1		—		2		—
Total stock-based compensation expense	26		20		45		32
Less: Tax benefit	(5)		(4)		(9)		(6)
Total stock-based compensation expense, after tax	$	21	$	16	$	36	$	26

As of June 30, 2024, there was approximately $112 million of total unrecognized compensation cost related to non-vested awards granted under the equity incentive plans.

NOTE 6. SEGMENT INFORMATION

The Company is organized into four reportable operating segments: Nourish, Health & Biosciences, Scent and Pharma Solutions.

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Reportable segment information was as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(DOLLARS IN MILLIONS)	2024		2023		2024		2023
Net sales:
Nourish	$	1,478	$	1,564	$	2,974	$	3,217
Health & Biosciences	558		522		1,089		1,035
Scent	603		592		1,248		1,200
Pharma Solutions	250		251		477		504
Consolidated	$	2,889	$	2,929	$	5,788	$	5,956
Segment Adjusted Operating EBITDA:
Nourish	$	232	$	181	$	448	$	389
Health & Biosciences	165		145		324		276
Scent	137		117		294		222
Pharma Solutions	54		67		100		126
Total	588		510		1,166		1,013
Depreciation & Amortization	(246)		(287)		(524)		(563)
Interest Expense	(79)		(101)		(162)		(201)
Other (Expense) Income, net	(15)		11		(16)		8
Restructuring and Other Charges (a)	(2)		(7)		(5)		(59)
Impairment of Goodwill b)	(64)		—		(64)		—
Gains (Losses) on Business Disposals c)	368		(5)		368		(19)
Loss on Assets Classified as Held for Sale d)	(282)		—		(282)		—
Acquisition, Divestiture and Integration Costs e)	(59)		(45)		(117)		(76)
Strategic Initiatives Costs f)	(12)		(9)		(16)		(22)
Regulatory Costs g)	(19)		(14)		(54)		(19)
Other h)	5		(3)		4		2






Income Before Taxes	$	183	$	50	$	298	$	64

_______________________


(a)			For 2024, represents costs related to lease impairment and severance as part of the Company's restructuring efforts. For 2023, represents costs primarily related to severance as part of the Company's restructuring efforts.
b)			Represents costs related to the impairment of goodwill related to the Pharma Solutions disposal group.
c)			For 2024, primarily represents gains recognized as part of the sale of the Cosmetic Ingredients business. For 2023, primarily represents losses recognized as part of the sale of a portion of the Savory Solutions business.
d)			Represents the loss recognized on assets classified as held for sale of the Pharma Solutions disposal group.
e)			For 2024 and 2023, primarily represents costs related to the Company's actual and planned acquisitions and divestitures and integration related activities primarily for N&B. These costs primarily consisted of external consulting fees, professional and legal fees and salaries of individuals who are fully dedicated to such efforts. For the three months ended June 30, 2024, business divestiture and integration related costs were approximately $56 million and $3 million, respectively. For the three months ended June 30, 2023, business divestiture, integration and acquisition related costs were approximately $20 million, $20 million and $5 million, respectively. For the six months ended June 30, 2024, business divestiture and integration related costs were approximately $112 million and $5 million, respectively. For the six months ended June 30, 2023, business divestiture, integration and acquisition related costs were approximately $41 million, $30 million, and $5 million, respectively.
f)			Represents costs related to the Company's strategic assessment and business portfolio optimization efforts and reorganizing the Global Business Services Centers, primarily consulting fees.
g)			Represents costs primarily related to legal fees incurred and provisions recognized for the ongoing investigations of the fragrance businesses.
h)			Represents gains (losses) from sale of assets, executive employee separation costs and costs related to the Company's entity realignment project to optimize the structure of holding companies, primarily consulting fees.

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


	Three Months Ended June 30,				Six Months Ended June 30,
(DOLLARS IN MILLIONS)	2024		2023		2024		2023
Europe, Africa and Middle East	$	972	$	970	$	1,949	$	2,040
Greater Asia	681		673		1,363		1,361
North America	876		910		1,742		1,815
Latin America	360		376		734		740
Consolidated	$	2,889	$	2,929	$	5,788	$	5,956


	Three Months Ended June 30,				Six Months Ended June 30,
(DOLLARS IN MILLIONS)	2024		2023		2024		2023
Net sales related to the U.S.	$	822	$	777	$	1,633	$	1,648
Net sales attributed to all foreign countries	2,067		2,152		4,155		4,308

No non-U.S. country had net sales greater than 10% of total consolidated net sales for each of the three and six months ended June 30, 2024 and 2023.

NOTE 7. EMPLOYEE BENEFITS

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


(DOLLARS IN MILLIONS)	U.S. Plans
	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

Interest cost on projected benefit obligation(2)	$	5	$	6	$	11	$	13
Expected return on plan assets(2)	(6)		(8)		(12)		(16)
Net amortization and deferrals(2)	1		1		2		1
Net periodic benefit (income) cost	$	—	$	(1)	$	1	$	(2)


(DOLLARS IN MILLIONS)	Non-U.S. Plans
	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Service cost for benefits earned(1)	$	6	$	5	$	12	$	10
Interest cost on projected benefit obligation(2)	9		9		18		18
Expected return on plan assets(2)	(12)		(11)		(25)		(23)
Net amortization and deferrals(2)	1		(1)		3		(1)

Net periodic benefit (income) cost	$	4	$	2	$	8	$	4

_______________________

(1)Included as a component of Operating profit.

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

The Compa