Company Quick10K Filing
International Flavors & Fragrances
Price119.80 EPS3
Shares113 P/E36
MCap13,596 P/FCF35
Net Debt3,889 EBIT585
TEV17,485 TEV/EBIT30
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-11
10-K 2019-12-31 Filed 2020-03-03
10-Q 2019-09-30 Filed 2019-11-04
10-Q 2019-06-30 Filed 2019-08-05
10-Q 2019-03-31 Filed 2019-05-06
10-K 2018-12-31 Filed 2019-02-26
10-Q 2018-09-30 Filed 2018-11-05
10-Q 2018-06-30 Filed 2018-08-07
10-Q 2018-03-31 Filed 2018-05-07
10-K 2017-12-31 Filed 2018-02-27
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10-K 2016-12-31 Filed 2017-02-28
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10-Q 2016-03-31 Filed 2016-05-09
10-K 2015-12-31 Filed 2016-03-01
10-Q 2015-09-30 Filed 2015-11-09
10-Q 2015-06-30 Filed 2015-08-10
10-Q 2015-03-31 Filed 2015-05-12
10-K 2014-12-31 Filed 2015-03-02
10-Q 2014-09-30 Filed 2014-11-04
10-Q 2014-06-30 Filed 2014-08-05
10-Q 2014-03-31 Filed 2014-05-06
10-K 2013-12-31 Filed 2014-02-25
10-Q 2013-09-30 Filed 2013-11-05
10-Q 2013-06-30 Filed 2013-08-06
10-Q 2013-03-31 Filed 2013-05-07
10-K 2012-12-31 Filed 2013-02-26
10-Q 2012-06-30 Filed 2012-08-08
10-Q 2012-03-31 Filed 2012-05-08
10-K 2011-12-31 Filed 2012-02-28
10-Q 2011-09-30 Filed 2011-11-08
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10-Q 2011-03-31 Filed 2011-05-10
10-K 2010-12-31 Filed 2011-02-24
10-Q 2010-09-30 Filed 2010-11-04
10-Q 2010-06-30 Filed 2010-08-05
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10-K 2009-12-31 Filed 2010-02-25
8-K 2020-06-18
8-K 2020-06-08
8-K 2020-05-15
8-K 2020-05-13
8-K 2020-05-11
8-K 2020-05-06
8-K 2020-02-12
8-K 2020-01-17
8-K 2019-12-17
8-K 2019-12-15
8-K 2019-12-15
8-K 2019-11-04
8-K 2019-10-29
8-K 2019-10-29
8-K 2019-08-05
8-K 2019-06-05
8-K 2019-05-06
8-K 2019-05-01
8-K 2019-02-13
8-K 2018-11-30
8-K 2018-11-05
8-K 2018-10-03
8-K 2018-09-24
8-K 2018-09-20
8-K 2018-09-20
8-K 2018-09-12
8-K 2018-09-10
8-K 2018-09-06
8-K 2018-08-25
8-K 2018-08-07
8-K 2018-08-03
8-K 2018-06-06
8-K 2018-05-21
8-K 2018-05-07
8-K 2018-05-07
8-K 2018-05-02
8-K 2018-02-14

IFF 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements.
Note 1. Nature of Operations and Summary of Significant Accounting Policies
Note 2. Net Income per Share
Note 3. Acquisitions
Note 4. Restructuring and Other Charges, Net
Note 5. Goodwill and Other Intangible Assets, Net
Note 6. Other Assets
Note 7. Debt
Note 8. Leases
Note 9. Income Taxes
Note 10. Stock Compensation Plans
Note 11. Segment Information
Note 12. Employee Benefits
Note 13. Financial Instruments
Note 14. Accumulated Other Comprehensive Loss
Note 15. Commitments and Contingencies
Note 16. Redeemable Noncontrolling Interests
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II. Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 6. Exhibits.
EX-31.1 iff033120exhibit311.htm
EX-31.2 iff033120exhibit312.htm
EX-32 iff033120exhibit32.htm

International Flavors & Fragrances Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
151296302012201420172020
Assets, Equity
1.31.00.70.50.2-0.12012201420172020
Rev, G Profit, Net Income
4.93.82.81.70.7-0.42012201420172020
Ops, Inv, Fin

Document
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xbrli:shares


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, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                         
Commission file number 1-4858
 INTERNATIONAL FLAVORS & FRAGRANCES INC.
(Exact name of registrant as specified in its charter)
 
 
 
New York
 
13-1432060
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
521 West 57th Street, New York, NY 10019-2960
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (212765-5500
 Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange
on which registered
Common Stock, par value 12 1/2¢ per share
 
IFF
 
New York Stock Exchange
6.00% Tangible Equity Units
 
IFFT
 
New York Stock Exchange
0.500% Senior Notes due 2021
 
IFF 21
 
New York Stock Exchange
1.750% Senior Notes due 2024
 
IFF 24
 
New York Stock Exchange
1.800% Senior Notes due 2026
 
IFF 26
 
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No   
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes     No   
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes    No   
Number of shares outstanding as of May 1, 2020: 106,851,144





PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(DOLLARS IN THOUSANDS)
March 31, 2020
 
December 31, 2019
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
433,246

 
$
606,823

Restricted cash
9,699

 
17,122

Trade receivables (net of allowances of $18,728 and $16,428, respectively)
943,114

 
876,197

Inventories: Raw materials
553,433

 
565,071

Work in process
48,297

 
44,532

Finished goods
474,183

 
513,465

Total Inventories
1,075,913

 
1,123,068

Prepaid expenses and other current assets
356,322

 
319,334

Total Current Assets
2,818,294

 
2,942,544

Property, plant and equipment, at cost
2,632,441

 
2,690,768

Accumulated depreciation
(1,293,317
)
 
(1,303,848
)
 
1,339,124

 
1,386,920

Goodwill
5,267,559

 
5,497,596

Other intangible assets, net
2,677,446

 
2,851,935

Other assets
586,653

 
608,416

Total Assets
$
12,689,076

 
$
13,287,411

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current Liabilities:
 
 
 
Bank borrowings, overdrafts, and current portion of long-term debt
$
385,569

 
$
384,958

Accounts payable
456,156

 
510,372

Accrued payroll and bonus
87,083

 
102,704

Dividends payable
80,062

 
80,038

Other current liabilities
418,125

 
474,118

Total Current Liabilities
1,426,995

 
1,552,190

Long-term debt
3,946,905

 
3,997,438

Retirement liabilities
261,512

 
265,370

Deferred income taxes
616,084

 
641,456

Other liabilities
494,193

 
502,366

Total Other Liabilities
5,318,694

 
5,406,630

Commitments and Contingencies (Note 15)

 

Redeemable noncontrolling interests
102,713

 
99,043

Shareholders’ Equity:
 
 
 
Common stock 12 1/2¢ par value; 500,000,000 shares authorized; 128,526,137 shares issued as of March 31, 2020 and December 31, 2019; and 106,812,257 and 106,787,299 shares outstanding as of March 31, 2020 and December 31, 2019, respectively
16,066

 
16,066

Capital in excess of par value
3,835,265

 
3,823,152

Retained earnings
4,162,347

 
4,117,804

Accumulated other comprehensive loss
(1,164,208
)
 
(716,894
)
Treasury stock, at cost (21,713,880 and 21,738,838 shares as of March 31, 2020 and December 31, 2019, respectively)
(1,021,620
)
 
(1,022,824
)
Total Shareholders’ Equity
5,827,850

 
6,217,304

Noncontrolling interest
12,824

 
12,244

Total Shareholders’ Equity including Noncontrolling interest
5,840,674

 
6,229,548

Total Liabilities and Shareholders’ Equity
$
12,689,076

 
$
13,287,411


See Notes to Consolidated Financial Statements
1



INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE (LOSS) INCOME
(Unaudited)
 
Three Months Ended
 
March 31,
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
2020
 
2019
Net sales
$
1,347,317

 
$
1,297,402

Cost of goods sold
781,450

 
766,143

Gross profit
565,867

 
531,259

Research and development expenses
85,909

 
90,596

Selling and administrative expenses
229,714

 
213,182

Amortization of acquisition-related intangibles
48,350

 
47,625

Restructuring and other charges, net
4,918

 
16,174

Losses (gains) on sales of fixed assets
754

 
(188
)
Operating profit
196,222

 
163,870

Interest expense
32,140

 
36,572

Other loss (income), net
10,574

 
(7,278
)
Income before taxes
153,508

 
134,576

Taxes on income
26,297

 
23,362

Net income
127,211

 
111,214

Net income attributable to noncontrolling interests
2,604

 
2,385

Net income attributable to IFF stockholders
124,607

 
108,829

Other comprehensive (loss) income, after tax:
 
 
 
Foreign currency translation adjustments
(452,278
)
 
42,377

Gains (losses) on derivatives qualifying as hedges
1,447

 
(97
)
Pension and postretirement net liability
3,517

 
2,593

Other comprehensive (loss) income
(447,314
)
 
44,873

Comprehensive (loss) income attributable to IFF stockholders
$
(322,707
)
 
$
153,702

 
 
 
 
Net income per share - basic
$
1.16

 
$
0.97

Net income per share - diluted
$
1.15

 
$
0.96

Average number of shares outstanding - basic
112,082

 
111,864

Average number of shares outstanding - diluted
113,594

 
113,389


See Notes to Consolidated Financial Statements
2



INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
 
Three Months Ended March 31,
(DOLLARS IN THOUSANDS)
2020
 
2019
Cash flows from operating activities:
 
 
 
Net income
$
127,211

 
$
111,214

Adjustments to reconcile to net cash provided by operating activities
 
 
 
Depreciation and amortization
80,595

 
81,775

Deferred income taxes
2,221

 
(12,389
)
Losses (gains) on sale of assets
754

 
(188
)
Stock-based compensation
8,624

 
7,604

Pension contributions
(5,397
)
 
(3,956
)
Changes in assets and liabilities, net of acquisitions:
 
 
 
Trade receivables
(133,291
)
 
(55,935
)
Inventories
(568
)
 
(24,719
)
Accounts payable
(31,635
)
 
8,988

Accruals for incentive compensation
(19,340
)
 
(36,969
)
Other current payables and accrued expenses
(65,158
)
 
(11,321
)
Other assets
42,462

 
(9,978
)
Other liabilities
10,467

 
(6,894
)
Net cash provided by operating activities
16,945

 
47,232

Cash flows from investing activities:
 
 
 
Cash paid for acquisitions, net of cash received

 
(33,895
)
Additions to property, plant and equipment
(48,294
)
 
(57,609
)
Proceeds from life insurance contracts
1,739

 
1,890

Proceeds from disposal of assets
3,806

 
3,970

Contingent consideration paid

 
(4,655
)
Net cash used in investing activities
(42,749
)
 
(90,299
)
Cash flows from financing activities:
 
 
 
Cash dividends paid to shareholders
(80,038
)
 
(77,779
)
Increase in revolving credit facility and short term borrowings
169

 
2,895

Repayments on debt
(11,584
)
 
(36,156
)
Contingent consideration paid
(327
)
 

Purchases of redeemable noncontrolling interest
(14,173
)
 

Proceeds from issuance of stock in connection with stock options

 
200

Employee withholding taxes paid
(1,275
)
 
(1,339
)
Net cash used in financing activities
(107,228
)
 
(112,179
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(42,529
)
 
3,853

Net change in cash, cash equivalents and restricted cash
(175,561
)
 
(151,393
)
Cash, cash equivalents and restricted cash at beginning of year
623,945

 
648,522

Cash, cash equivalents and restricted cash at end of period
$
448,384

 
$
497,129

Supplemental Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
41,755

 
$
48,506

Income taxes paid
32,636

 
33,326

Accrued capital expenditures
19,013

 
14,241


See Notes to Consolidated Financial Statements
3



INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(Unaudited)
(DOLLARS IN THOUSANDS)
Common
stock
 
Capital in
excess of
par value
 
Retained
earnings
 
Accumulated  other
comprehensive
(loss) income
 
Treasury stock
 
Non-controlling
interest
 
Total
Shares
 
Cost
 
Balance at January 1, 2019
$
16,066

 
$
3,793,609

 
$
3,956,221

 
$
(702,227
)
 
(21,906,935
)
 
$
(1,030,718
)
 
$
10,423

 
$
6,043,374

Net income
 
 
 
 
108,829

 
 
 
 
 
 
 
844

 
109,673

Adoption of ASU 2016-02
 
 
 
 
23,094

 
 
 
 
 
 
 
 
 
23,094

Adoption of ASU 2017-12
 
 
 
 
981

 
 
 
 
 
 
 
 
 
981

Cumulative translation adjustment
 
 
 
 
 
 
42,377

 
 
 
 
 
 
 
42,377

Losses on derivatives qualifying as hedges; net of tax $44
 
 
 
 
 
 
(97
)
 
 
 
 
 
 
 
(97
)
Pension liability and postretirement adjustment; net of tax $836
 
 
 
 
 
 
2,593

 
 
 
 
 
 
 
2,593

Cash dividends declared ($0.73 per share)
 
 
 
 
(77,799
)
 
 
 
 
 
 
 
 
 
(77,799
)
Stock options/SSARs
 
 
3,424

 
 
 
 
 
13,978

 
660

 
 
 
4,084

Vested restricted stock units and awards
 
 
(2,405
)
 
 
 
 
 
13,401

 
629

 
 
 
(1,776
)
Stock-based compensation
 
 
7,604

 
 
 
 
 
 
 
 
 
 
 
7,604

Redeemable NCI
 
 
370

 
 
 
 
 
 
 
 
 
 
 
370

Balance at March 31, 2019
$
16,066

 
$
3,802,602

 
$
4,011,326

 
$
(657,354
)
 
(21,879,556
)
 
$
(1,029,429
)
 
$
11,267

 
$
6,154,478

(DOLLARS IN THOUSANDS)
Common
stock
 
Capital in
excess of
par value
 
Retained
earnings
 
Accumulated  other
comprehensive
(loss) income
 
Treasury stock
 
Non-controlling
interest
 
Total
Shares
 
Cost
 
Balance at January 1, 2020
$
16,066

 
$
3,823,152

 
$
4,117,804

 
$
(716,894
)
 
(21,738,838
)
 
$
(1,022,824
)
 
$
12,244

 
$
6,229,548

Net income
 
 
 
 
124,607

 
 
 
 
 
 
 
617

 
125,224

Cumulative translation adjustment
 
 
 
 
 
 
(452,278
)
 
 
 
 
 
 
 
(452,278
)
Gains on derivatives qualifying as hedges; net of tax $(176)
 
 
 
 
 
 
1,447

 
 
 
 
 
 
 
1,447

Pension liability and postretirement adjustment; net of tax $(1,022)
 
 
 
 
 
 
3,517

 
 
 
 
 
 
 
3,517

Cash dividends declared ($0.75 per share)
 
 
 
 
(80,062
)
 
 
 
 
 
 
 
 
 
(80,062
)
Stock options/SSARs
 
 
(490
)
 
 
 
 
 
13,763

 
672

 
 
 
182

Vested restricted stock units and awards
 
 
(1,827
)
 
 
 
 
 
11,195

 
532

 
 
 
(1,295
)
Stock-based compensation
 
 
8,624

 
 
 
 
 
 
 
 
 
 
 
8,624

Redeemable NCI
 
 
5,806

 
 
 
 
 
 
 
 
 
 
 
5,806

Dividends paid on noncontrolling interest
and Other
 
 
 
 
(2
)
 
 
 
 
 
 
 
(37
)
 
(39
)
Balance at March 31, 2020
$
16,066

 
$
3,835,265

 
$
4,162,347

 
$
(1,164,208
)
 
(21,713,880
)
 
$
(1,021,620
)
 
$
12,824

 
$
5,840,674



See Notes to Consolidated Financial Statements
4



INTERNATIONAL FLAVORS & FRAGRANCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1.    NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These interim statements and related management’s discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the related notes and management’s discussion and analysis of results of operations, liquidity and capital resources included in our 2019 Annual Report on Form 10-K (“2019 Form 10-K”). These interim statements are unaudited. The year-end balance sheet data included in this Form 10-Q was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles in the United States of America. We have historically operated and continue to operate on a 52/53 week fiscal year ending on the Friday closest to the last day of the quarter. For ease of presentation, March 31 and December 31 are used consistently throughout this Form 10-Q and these interim financial statements and related notes to represent the period-end dates. For the 2020 and 2019 quarters, the actual closing dates were April 3 and March 29, respectively. The unaudited interim financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair statement of the results for the periods presented. When used herein, the terms “IFF,” the “Company,” “we,” “us” and “our” mean International Flavors & Fragrances Inc. and its consolidated subsidiaries.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. The inputs into our judgments and estimates consider the current economic implications of COVID-19 on our critical and significant accounting estimates, including estimates associated with future cash flows that are used in assessing the risk of impairment of certain long lived assets. Actual results could differ from those estimates.
Cash, Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Company's statement of cash flows periods ended March 31, 2020 and March 31, 2019 to the amounts reported in the Company's balance sheet as at March 31, 2020, December 31, 2019, March 31, 2019 and December 31, 2018.
(DOLLARS IN THOUSANDS)
March 31, 2020
 
December 31, 2019
 
March 31, 2019
 
December 31, 2018
Current assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
433,246

 
$
606,823

 
$
483,504

 
$
634,897

Restricted cash
9,699

 
17,122

 
13,625

 
13,625

Noncurrent assets
 
 
 
 
 
 
 
Restricted cash included in Other assets
5,439

 

 

 

Cash, cash equivalents and restricted cash
$
448,384

 
$
623,945

 
$
497,129

 
$
648,522


Accounts Receivable
The Company has various factoring agreements in the U.S. and The Netherlands under which it can factor up to approximately $100 million in receivables. In addition, the Company has factoring agreements sponsored by certain customers. Under all of the arrangements, the Company sells the receivables on a non-recourse basis to unrelated financial institutions and accounts for the transactions as a sale of receivables. The applicable receivables are removed from the Company's Consolidated Balance Sheet when the cash proceeds are received by the Company.
Through these factoring programs, the Company removed $200.3 million and $205.7 million of receivables from its balance sheet for the periods ended March 31, 2020 and December 31, 2019, respectively.
The impact on cash provided by operations from participating in these programs was a decrease of $5.4 million for the three months ended March 31, 2020 and an increase of $5.2 million for the three months ended March 31, 2019.
The cost of participating in these programs was $1.2 million for both of the periods ending March 31, 2020 and 2019.

5



Revenue Recognition
The Company recognizes revenue when control of the promised goods is transferred to its customers in an amount that reflects the consideration it expects to be entitled to in exchange for those goods. Sales, value added, and other taxes the Company collects are excluded from revenues. The Company receives payment in accordance with standard customer terms.
The following table presents the Company's revenues disaggregated by product categories:
 
Three Months Ended March 31,
(DOLLARS IN THOUSANDS)
2020
 
2019
Taste
 
 
 
Flavor compounds
$
576,368

 
$
567,314

Savory solutions
155,764

 
136,337

Inclusions
30,146

 
28,633

Nutrition and specialty ingredients
43,955

 
44,208

Flavor ingredients
24,089

 
28,310

Total Taste
830,322

 
804,802

Scent
 
 
 
Fine fragrances
94,150

 
106,074

Consumer fragrance
314,028

 
283,221

Fragrance ingredients
108,817

 
103,305

Total Scent
516,995

 
492,600

Total revenues
$
1,347,317

 
$
1,297,402


Contract Assets
With respect to a small number of contracts for the sale of compounds, the Company has an “enforceable right to payment for performance to date” and as the products do not have an alternative use, the Company recognizes revenue for these contracts over time and records a contract asset using the output method. The output method recognizes revenue on the basis of direct measurements of the value to the customer of the goods or services transferred to date relative to the remaining goods or services promised under the contract.
The following table reflects the balances in the Company's accounts receivable, contract assets, and contract liabilities for the periods ended March 31, 2020 and December 31, 2019:
(DOLLARS IN THOUSANDS)
March 31, 2020
 
December 31, 2019
Receivables (included in Trade receivables)
$
961,842

 
$
892,625

Contract asset - Short term
1,951

 
2,736

Contract liabilities - Short term
11,379

 
11,107


Recent Accounting Pronouncements
In March 2020, the FASB issued Accounting Standards Update ("ASU") 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU is intended to simplify various aspects related to the cessation of reference rates in certain financial markets that would otherwise create modification accounting or changes in estimate. This guidance is effective for March 12, 2020 through December 31, 2022. The Company has not adopted any of the optional expedients or exceptions through March 31, 2020 but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The ASU is intended to simplify various aspects related to accounting for income taxes. This guidance is effective for fiscal years beginning after December 15, 2020, and for interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, “Intangibles - Goodwill and Other - Internal - Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service

6



Contract (a consensus of the FASB Emerging Issues Task Force).” The ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This guidance is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years, with early adoption permitted. The Company adopted the guidance effective the first day of its 2020 fiscal year. The adoption did not have an impact on its consolidated financial statements but may impact the Company in the future as and when it enters into cloud computing arrangements.
In August 2018, the FASB issued ASU 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans (Subtopic 715-20)", which modifies the disclosure requirements on company-sponsored defined benefit plans. The ASU is effective for fiscal years beginning after December 15, 2020 on a retrospective basis to all periods presented. Early adoption is permitted. The Company adopted the guidance effective the first day of its 2020 fiscal year. The adoption did not have an impact on its Consolidated Financial Statements and will have a minimal impact on its disclosures in future periods.
Adoption of Standard Related to Expected Credit Losses
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", with subsequent amendments, which requires issuers to measure expected credit losses for financial assets based on historical experience, current conditions and reasonable and supportable forecasts. As such, an entity will use forward-looking information to estimate credit losses, which may result in earlier recognition of losses.
The Company adopted the guidance effective the first day of its 2020 fiscal year and performed an evaluation of the applicable criteria, including the aging of its trade receivables, recent write-off history and other factors related to future macroeconomic conditions. As a result of the evaluation, the Company determined that no adjustment would be required to the level of its allowances for bad debts or to the carrying value of any other financial asset.
The Company is exposed to credit losses primarily through its sales of products. To determine the appropriate allowance for expected credit losses, the Company considers certain credit quality indicators, such as aging, collection history, and creditworthiness of debtors. Regional and Global Credit committees review and approve specific customer allowance reserves. The allowance for expected credit losses is primarily based on two primary factors: i) the aging of the different categories of trade receivables, and ii) a specific reserve for accounts identified as uncollectable.
The Company also considers current and future economic conditions in the determination of the allowance. At March 31, 2020, the Company reported $961.8 million of trade receivables, net of allowances of $18.7 million. Based on an aging analysis at March 31, 2020, approximately 87% of our accounts receivable were current based on the payment terms of the invoice. Receivables that are past due by over 365 days account for less than 1% of our accounts receivable.
The following is a rollforward of the Company's allowances for bad debts for the three months ended March 31, 2020:
(DOLLARS IN THOUSANDS)
Allowances for
Bad Debts
Balance at December 31, 2019
$
16,428

Bad debt expense
4,751

Write-offs
(1,301
)
Foreign exchange
(1,150
)
Balance at March 31, 2020
$
18,728


The Company adjusted the amount of the allowances for bad debts as of December 31, 2019 to reflect the correct classification of amounts between the allowances for bad debts and Trade Receivables. The adjustment was for $8.2 million and had the effect of increasing both the allowances for bad debts and Trade Receivables.
During the first quarter of 2020, the Company increased its allowances for bad debts by approximately $3.0 million to reflect higher expected future write-offs of receivables due to the impact of the COVID-19 pandemic and its impact on the liquidity of certain customers.

7



NOTE 2. NET INCOME PER SHARE
A reconciliation of the shares used in the computation of basic and diluted net income per share is as follows: 
 
Three Months Ended March 31,
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
2020
 
2019
Net Income
 
 
 
Net income attributable to IFF stockholders
$
124,607

 
$
108,829

Add: Reduction in redemption value of redeemable noncontrolling interests in excess of earnings allocated
5,806

 
370

Net income available to IFF stockholders
$
130,413

 
$
109,199

Shares
 
 
 
Weighted average common shares outstanding (basic)(1)
112,082

 
111,864

Adjustment for assumed dilution(2):
 
 
 
Stock options and restricted stock awards
349

 
362

SPC portion of TEUs
1,163

 
1,163

Weighted average shares assuming dilution (diluted)
113,594

 
113,389

 
 
 
 
Net Income per Share
 
 
 
Net income per share - basic
$
1.16

 
$
0.97

Net income per share - diluted
1.15

 
0.96


_______________________ 
(1)
For the three months ended March 31, 2020 and 2019, the tangible equity units (“TEUs”) were assumed to be outstanding at the minimum settlement amount for basic earnings per share. See below for details.
(2)
Effect of dilutive securities includes dilution under stock plans and incremental impact of TEUs. See below for details.
The Company declared a quarterly dividend to its shareholders of $0.75 and $0.73 for the three months ended March 31, 2020 and 2019, respectively.
There were no stock options or stock-settled appreciation rights (“SSARs”) excluded from the computation of diluted net income per share for the three months ended March 31, 2020 and 2019.
The Company issued 16,500,000 TEUs, consisting of a prepaid stock purchase contract ("SPC") and a senior amortizing note, for net proceeds of $800.2 million on September 17, 2018. For purposes of calculating basic net income per share, the SPCs were assumed to be settled at the minimum settlement amount of 0.3134 shares per SPC for March 31, 2020 and 2019, respectively. For purposes of calculating diluted earnings per share, the SPCs were assumed to be settled at a conversion factor not to exceed 0.3839 on March 31, 2020 and 2019, respectively. The SPC conversion factor is based on the 20 day volume-weighted average price (“VWAP”) per share of the Company’s common stock. Per the TEU agreement, the maximum settlement amount is 0.3839 shares per SPC.
The Company has issued shares of purchased restricted common stock and purchased restricted common stock units (collectively “PRSUs”) which contain rights to nonforfeitable dividends while these shares are outstanding and thus are considered participating securities. Such securities are required to be included in the computation of basic and diluted earnings per share pursuant to the two-class method. The Company did not present the two-class method since the difference between basic and diluted net income per share for both unrestricted common shareholders and PRSU shareholders was less than $0.01 per share for each period presented, and the number of PRSUs outstanding as of March 31, 2020 and 2019 was immaterial. Net income allocated to such PRSUs was $0.2 million for both the three months ended March 31, 2020 and 2019.
NOTE 3.    ACQUISITIONS
Pending Transaction with Nutrition & Biosciences, Inc.
On December 15, 2019, the Company entered into definitive agreements with DuPont de Nemours, Inc. (“DuPont”), including an Agreement and Plan of Merger, pursuant to which DuPont will transfer its nutrition and biosciences business to Nutrition & Biosciences, Inc., a Delaware corporation and wholly owned subsidiary of DuPont (“N&B”), and N&B will merge with and into a wholly owned subsidiary of IFF in exchange for a number of shares of IFF common stock, par value $0.125 per

8



share (“IFF Common Stock”) (collectively, the “DuPont N&B Transaction”). In connection with the transaction, DuPont will receive a one-time $7.3 billion special cash payment (the “Special Cash Payment”), subject to certain adjustments. As a result of the DuPont N&B Transaction, holders of DuPont’s common stock will own approximately 55.4% of the outstanding shares of IFF on a fully diluted basis.
Completion of the DuPont N&B Transaction is subject to various closing conditions, including, among other things, (1) approval by IFF’s shareholders of the issuance of IFF Common Stock in connection with the transaction; (2) the effectiveness of the registration statements to be filed with the Securities and Exchange Commission pursuant to the Merger Agreement; and (3) the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (which waiting period has expired), and obtaining certain other consents, authorizations, orders or approvals from governmental authorities. We expect that the transaction will close in early 2021.
On December 15, 2019, IFF and N&B entered into a commitment letter which provides $7.5 billion in an aggregate principal amount of senior unsecured bridge term loans (the "Bridge Loans"). On January 17, 2020, N&B entered into a term loan credit agreement providing for unsecured term loan facilities in an aggregate principal amount of $1.25 billion (the “Term Loan Facilities”), which reduced the commitments under the Bridge Loans commitment letter by a corresponding amount. N&B will be the initial borrower under the remaining $6.25 billion tranche of the 364-day senior unsecured bridge facility (the “Bridge Facility”) (or, if applicable, any replacement debt financing), which, together with the Term Loan Facilities, will be used to finance the Special Cash Payment and to pay related fees and expenses. Following the consummation of the merger, all obligations of N&B with respect to the Term Loan Facilities and the Bridge Facility (if any) or, if applicable, the replacement debt financing, will be guaranteed by IFF (or at the election of N&B and IFF, assumed by IFF).
2019 Acquisition Activity
During the second quarter of 2019, the Company acquired the remaining 50% interest in an equity method investee located in Canada. The purchase of the additional interest increased the Company's ownership of the investee to 100%. The purchase price for the remaining 50% was approximately $37 million, including cash and an accrual for the amount expected to be paid in contingent consideration. The Company began to consolidate the results of the acquired entity from the date on which it acquired the remaining 50% interest during the second quarter of 2019. Goodwill of approximately $30 million and intangible assets of $20 million were recorded in connection with the acquisition.
During the first quarter of 2019, the Company acquired 70% of a company in Europe and increased its ownership of an Asian company from 49% to 60%. The total purchase price for the two acquisitions made in the first quarter of 2019 was $52 million, excluding cash acquired and including $19 million of contingent consideration and deferred payments. The purchase price allocations have been performed and resulted in goodwill of approximately $47 million and intangible assets of $28 million.
During the first quarter of 2020, the Company completed the purchase price allocations for all three of the transactions that were made during 2019. As a result of finalizing the purchase price allocations, adjustments were recorded to increase fixed assets by $13 million and customer relationships and other intangible assets by $5 million and to decrease goodwill by $15 million. The income statement impact of the finalization of purchase accounting was not material.
Pro forma information has not been presented as the entities acquired in 2019 were not material.
NOTE 4.    RESTRUCTURING AND OTHER CHARGES, NET
Restructuring and other charges primarily consist of separation costs for employees including severance, outplacement and other benefit ("Severance") costs as well as costs related to plant closures, the costs of accelerated depreciation of fixed assets associated with plants ("Fixed asset write-down") and all other related restructuring ("Other") costs. All restructuring and other charges, net expenses are separately stated on the Consolidated Statement of Comprehensive (Loss) Income.

9



Frutarom Integration Initiative
In connection with the acquisition of Frutarom, the Company began to execute an integration plan that, among other initiatives, seeks to optimize its manufacturing network. As part of the Frutarom Integration Initiative, the Company expects to close approximately 35 manufacturing sites over the next twelve months with most of the closures targeted to occur before the end of fiscal 2021. During 2019, the Company announced the closure of ten facilities, of which six facilities are in Europe, Africa and Middle East, two facilities in Latin America, and one facility in each North America and Greater Asia regions. During the three months ended March 31, 2020, the Company announced the closure of four facilities, of which two facilities are in Europe, Africa and Middle East, one facility in Latin America, and one facility in North America. Since the inception of the initiative to date, the Company has expensed $15.3 million. Total costs for the program are expected to be approximately $60 million including cash and non-cash items.
2019 Severance Program
During the year ended December 31, 2019, the Company incurred severance charges related to approximately 190 headcount reductions, excluding those previously mentioned under the Frutarom Integration Initiative. The headcount reductions primarily related to the Scent business unit with additional amounts related to headcount reductions in all business units associated with the establishment of a new shared service center in Europe. Since the inception of the program, the Company has expensed $21.3 million to date. Total costs for the program are expected to be approximately $25 million.
2017 Productivity Program
In connection with the 2017 Productivity Program, the Company recorded $24.5 million of charges related to personnel costs and lease termination costs since the program's inception to date. Total costs for the program are expected to be approximately $25 million.
Changes in Restructuring Liabilities
Changes in restructuring liabilities by program during the three months ended March 31, 2020 were as follows:
(DOLLARS IN THOUSANDS)
Balance at
December 31, 2019
 
Additional Charges (Reversals), Net
 
Non-Cash Charges
 
Cash Payments
 
Balance at March 31, 2020
2017 Productivity Program
 
 
 
 
 
 
 
 
 
Severance
$
1,106

 
$

 
$

 
$
(146
)
 
$
960

Other(1)
88

 

 

 

 
88

Frutarom Integration Initiative
 
 
 
 
 
 
 
 
 
Severance
4,038

 
1,869

 

 
(928
)
 
4,979

Fixed asset write down

 
3,366

 
(3,366
)
 

 

Other(1)
2,485

 
(317
)
 

 
1

 
2,169

2019 Severance Plan
 
 
 
 
 
 
 
 
 
Severance
12,897

 

 

 
(1,048
)
 
11,849

Other(1)
471

 

 

 

 
471

Total restructuring
$
21,085

 
$
4,918

 
$
(3,366
)
 
$
(2,121
)
 
$
20,516

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

10



Charges by Segment
The following table summarizes the total amount of costs incurred in connection with these restructuring programs by segment:
 
Three Months Ended March 31,
(DOLLARS IN THOUSANDS)
2020
 
2019
Taste
$
4,918

 
$
2,553

Scent

 
10,900

Shared IT & Corporate Costs

 
2,721

Total Restructuring and other charges, net
$
4,918

 
$
16,174


NOTE 5. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
Goodwill
Movements in goodwill during 2020 were as follows:
(DOLLARS IN THOUSANDS)
Goodwill
Balance at December 31, 2019
$
5,497,596

Measurement period adjustments(1)
(15,283
)
Foreign exchange
(214,754
)
Balance at March 31, 2020
$
5,267,559


_______________________ 
(1)
Measurement period adjustments relate to adjustments recorded in connection with completing the purchase price allocation related to the 2019 Acquisition Activity. See Note 3 for details.
Reallocation of goodwill
In the first quarter of 2020, in connection with the reorganization of the Company's reporting structure, certain entities were moved between reporting units. As a result of the movements, Goodwill was reallocated between reporting units as follows:
(DOLLARS IN THOUSANDS)
Increase (decrease) to Goodwill
Cosmetic active ingredients
$
110,788

Natural Product Solutions
(78,945
)
Fine Ingredients
(29,221