International Flavors (IFF) closed the most recent trading day at $80.49, moving +0.21% from the previous trading session. The stock exceeded the S&P 500, which registered a loss of 1.37% for the day. Elsewhere, the Dow saw a downswing of 1.35%, while the tech-heavy Nasdaq depreciated by 1.8%.The ingredients producer for food, cosmetics and consumer products industries's stock has climbed by 0.09% in the past month, falling short of the Consumer Staples sector's gain of 1.56% and the S&P 500's gain of 5.1%. ...

The latest trading session saw International Flavors (IFF) ending at $80.18, denoting a -1.34% adjustment from its last day's close. The stock fell short of the S&P 500, which registered a loss of 0.32% for the day. Elsewhere, the Dow lost 0.71%, while the tech-heavy Nasdaq lost 0.2%.The the stock of ingredients producer for food, cosmetics and consumer products industries has risen by 1.63% in the past month, leading the Consumer Staples sector's gain of 1.08% and undershooting the S&P 500's gain of 4.59%. ...

International Flavors (IFF) ended the recent trading session at $82.01, demonstrating a -0.3% swing from the preceding day's closing price. This change lagged the S&P 500's daily gain of 0.76%. At the same time, the Dow added 0.59%, and the tech-heavy Nasdaq gained 1.12%.The ingredients producer for food, cosmetics and consumer products industries's shares have seen an increase of 1.59% over the last month, not keeping up with the Consumer Staples sector's gain of 4.52% and the S&P 500's gain of 2.5%.Analys ...

NEW YORK--(BUSINESS WIRE)--IFF (NYSE:IFF) today announced that it will release its fourth quarter and full year 2023 earnings results following the market close on Tuesday, Feb. 20, 2024. The management team will host a live webcast on Wednesday, Feb. 21, 2024 at 9:00 a.m. ET to discuss results and outlook with the investor community. IFF also announced today that the Company’s management will speak at the Consumer Analyst Group of New York (CAGNY) conference in Boca Raton, Florida, on Thursday, Feb. 22, 2 ...

SANDVIKA, Norway--(BUSINESS WIRE)--IFF (NYSE: IFF), a global leader in food and beverage, home and personal care and health, today announced its partnership with environmental non-governmental organization (NGO) Bellona in a long-term project to restore seaweed forests in northern Norway. The collaboration on the Norwegian Marine Restoration (NoMaRe) project aims to restore 5,000 square kilometers of seaweed forest by managing invasive sea urchin predation. The regrowth of the forests could increase biologi ...

NEW YORK--(BUSINESS WIRE)--IFF (NYSE: IFF) today announced the appointment of J. Erik Fyrwald to succeed Frank Clyburn as Chief Executive Officer and member of the IFF Board of Directors, effective Feb. 6, 2024. Clyburn will work closely with Fyrwald to ensure a seamless transition, remaining with IFF until March 31, 2024, and further serving in an advisory capacity through December 2024. Fyrwald brings to IFF more than four decades of executive and operational experience driving innovation and profitabl ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 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 j ...

[PART I - Financial Information](index=3&type=section&id=PART%20I%20-%20Financial%20Information) This section provides the unaudited consolidated financial statements and management's discussion and analysis for the periods ended June 30, 2023 [ITEM 1. Financial Statements](index=3&type=section&id=ITEM%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements of International Flavors & Fragrances Inc. for the periods ended June 30, 2023, and December 31, 2022, including balance sheets, income statements, cash flow statements, and statements of shareholders' equity, along with detailed notes explaining significant accounting policies, business divestitures, debt, and other financial instruments [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This section presents the company's financial position at June 30, 2023, and December 31, 2022, detailing assets, liabilities, and equity Consolidated Balance Sheet Data | (DOLLARS IN MILLIONS) | June 30, 2023 | December 31, 2022 | | :------------------------------------------------ | :------------ | :---------------- | | **ASSETS** | | | | Total Current Assets | $6,436 | $7,432 | | Property, plant and equipment, net | $4,218 | $4,203 | | Goodwill | $13,498 | $13,355 | | Other intangible assets, net | $8,813 | $9,082 | | Total Assets | $34,459 | $35,504 | | **LIABILITIES AND SHAREHOLDERS' EQUITY** | | |\ | Total Current Liabilities | $3,932 | $3,728 | | Long-term debt | $9,208 | $10,373 | | Total Other Liabilities | $12,811 | $14,032 | | Total Shareholders' Equity including Non-controlling interest | $17,655 | $17,685 | | Total Liabilities and Shareholders' Equity | $34,459 | $35,504 | - Total Assets decreased by **$1,045 million** from **$35,504 million** at December 31, 2022, to **$34,459 million** at June 30, 2023[9](index=9&type=chunk) - Total Current Assets decreased by **$996 million**, primarily due to a significant reduction in Assets held for sale from **$1,200 million** to **$212 million**[9](index=9&type=chunk) - Long-term debt decreased by **$1,165 million** from **$10,373 million** to **$9,208 million**[9](index=9&type=chunk) [Consolidated Statements of Income and Comprehensive Income (Loss)](index=4&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income%20(Loss)) This section details the company's financial performance, including net sales, gross profit, operating profit, and net income for the three and six months ended June 30, 2023 and 2022 Consolidated Income and Comprehensive Income (Loss) Data | (AMOUNTS IN MILLIONS EXCEPT PER SHARE AMOUNTS) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $2,929 | $3,307 | $5,956 | $6,533 | | Gross profit | $933 | $1,136 | $1,897 | $2,281 | | Operating profit | $145 | $213 | $276 | $554 | | Net income attributable to IFF shareholders | $27 | $107 | $18 | $351 | | Net income per share - diluted | $0.11 | $0.43 | $0.07 | $1.38 | - Net sales decreased by **11%** for the three months ended June 30, 2023, and by **9%** for the six months ended June 30, 2023, compared to the prior year periods[10](index=10&type=chunk) - Net income attributable to IFF shareholders significantly decreased by **75%** for the three months and **95%** for the six months ended June 30, 2023, compared to the prior year periods[10](index=10&type=chunk) - Operating profit decreased by **32%** for the three months and **50%** for the six months ended June 30, 2023, compared to the prior year periods[10](index=10&type=chunk) [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the company's cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2023 and 2022 Consolidated Cash Flow Data | (DOLLARS IN MILLIONS) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $375 | $(51) | | Net cash provided by (used in) investing activities | $552 | $(346) | | Net cash (used in) provided by financing activities | $(866) | $377 | | Net change in cash, cash equivalents and restricted cash | $100 | $(94) | | Cash, cash equivalents and restricted cash at end of period | $652 | $622 | - Net cash provided by operating activities significantly improved to **$375 million** for the six months ended June 30, 2023, compared to cash used of **$51 million** in the prior year[13](index=13&type=chunk) - Investing activities generated **$552 million** in cash, a substantial increase from **$346 million** used in the prior year, primarily due to net proceeds from business divestitures[13](index=13&type=chunk) - Financing activities used **$866 million** in cash, a reversal from **$377 million** provided in the prior year, mainly due to net repayments of commercial paper and long-term debt[13](index=13&type=chunk) [Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity) This section presents changes in shareholders' equity, including net income, dividends, and other comprehensive income components, for the period ended June 30, 2023 Consolidated Shareholders' Equity Data | (DOLLARS IN MILLIONS) | Balance at December 31, 2022 | Net income | Cumulative translation adjustment | Pension liability and postretirement adjustment; net of tax | Cash dividends declared | Stock options/SSARs | Vested restricted stock units and awards | Stock-based compensation | Redeemable NCI | Dividends paid on non controlling interest and Other | Balance at June 30, 2023 | | :------------------------------------------ | :--------------------------- | :--------- | :-------------------------------- | :-------------------------------------------------------- | :---------------------- | :------------------ | :--------------------------------------- | :----------------------- | :------------- | :--------------------------------------------------- | :----------------------- | | Total Shareholders' Equity | $17,685 | $19 | $344 | $(3) | $(413) | $3 | $9 | $32 | $(1) | $1 | $17,655 | - Total Shareholders' Equity decreased slightly from **$17,685 million** at December 31, 2022, to **$17,655 million** at June 30, 2023[16](index=16&type=chunk) - Cumulative translation adjustments positively impacted equity by **$344 million**, while cash dividends declared reduced equity by **$413 million**[16](index=16&type=chunk) [NOTE 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=8&type=section&id=NOTE%201.%20NATURE%20OF%20OPERATIONS%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note describes IFF's business operations and outlines the significant accounting policies applied in preparing the financial statements - IFF is a leading creator and manufacturer of food, beverage, health & biosciences, scent, and pharma solutions, serving a wide range of consumer product manufacturers[19](index=19&type=chunk) - The Company corrected prior year financial statements for errors related to cash flows, operating lease assets/liabilities, and derivative fair values, impacting balances as of June 30, 2022, and December 31, 2022[22](index=22&type=chunk) - The allowance for bad debts increased to **$63 million** at June 30, 2023, from **$53 million** at December 31, 2022, primarily due to expected credit losses on receivables from certain customers in Egypt, partially offset by reversals for Russia and Ukraine[35](index=35&type=chunk) - An impairment charge of **$120 million** was recognized in Q2 2022 for long-lived assets in Russia due to declining sales and margins, allocated to intangible assets (**$92 million**) and property, plant and equipment (**$28 million**)[44](index=44&type=chunk) [NOTE 2. NET INCOME PER SHARE](index=12&type=section&id=NOTE%202.%20NET%20INCOME%20PER%20SHARE) This note provides details on the calculation of basic and diluted net income per share, along with related dividend information Net Income Per Share Data | (AMOUNTS IN MILLIONS EXCEPT PER SHARE AMOUNTS) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income available to IFF shareholders | $26 | $109 | $17 | $353 | | Weighted average common shares outstanding (basic) | 255 | 255 | 255 | 255 | | Net income per share - basic | $0.11 | $0.43 | $0.07 | $1.38 | | Net income per share - diluted | $0.11 | $0.43 | $0.07 | $1.38 | - The Company declared quarterly dividends of **$0.81 per share** for Q2 2023 and **$0.79 per share** for Q2 2022, totaling **$1.62** and **$1.58** for the six months ended June 30, 2023 and 2022, respectively[49](index=49&type=chunk) [NOTE 3. BUSINESS DIVESTITURES](index=12&type=section&id=NOTE%203.%20BUSINESS%20DIVESTITURES) This note details the completed and planned divestitures of various business units, including their financial impacts and proceeds - The Company completed the divestiture of a portion of its Savory Solutions business on May 31, 2023, receiving approximately **$840 million** in cash proceeds and recognizing a pre-tax loss of **$10 million**[53](index=53&type=chunk)[55](index=55&type=chunk) - The Microbial Control business unit was divested on July 1, 2022, yielding net cash proceeds of approximately **$1.169 billion**[58](index=58&type=chunk) - The Flavor Specialty Ingredients business was divested on August 1, 2023, with net cash proceeds of approximately **$205 million**[59](index=59&type=chunk) [NOTE 4. RESTRUCTURING AND OTHER CHARGES](index=14&type=section&id=NOTE%204.%20RESTRUCTURING%20AND%20OTHER%20CHARGES) This note outlines the restructuring programs and associated charges, primarily severance costs, incurred during the reporting periods - Restructuring and other charges for the six months ended June 30, 2023, increased to **$59 million**, primarily due to the 2023 Restructuring Program[64](index=64&type=chunk)[65](index=65&type=chunk) - The 2023 Restructuring Program, initiated in December 2022, incurred **$64 million** in severance charges for the six months ended June 30, 2023, targeting approximately **630 headcount reductions**[63](index=63&type=chunk)[64](index=64&type=chunk) Restructuring and Other Charges by Segment | (DOLLARS IN MILLIONS) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------- | :----------------------------- | :----------------------------- | | Nourish | $32 | $3 | | Health & Biosciences | $11 | $1 | | Scent | $14 | $5 | | Pharma Solutions | $2 | $0 | | Total | $59 | $9 | [NOTE 5. PROPERTY, PLANT AND EQUIPMENT, NET](index=15&type=section&id=NOTE%205.%20PROPERTY,%20PLANT%20AND%20EQUIPMENT,%20NET) This note provides a breakdown of the company's property, plant, and equipment, including depreciation and impairment charges Property, Plant and Equipment, Net Data | (DOLLARS IN MILLIONS) | June 30, 2023 | December 31, 2022 | | :---------------------- | :------------ | :---------------- | | Total Property, plant and equipment | $6,404 | $6,180 | | Accumulated depreciation | $(2,186) | $(1,977) | | Total property, plant and equipment, net | $4,218 | $4,203 | - Depreciation expense for the six months ended June 30, 2023, was **$220 million**, down from **$234 million** in the prior year[66](index=66&type=chunk) - An impairment charge of **$28 million** was recorded in Q2 2022 for property, plant and equipment in Russia[67](index=67&type=chunk) [NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS, NET](index=16&type=section&id=NOTE%206.%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS,%20NET) This note details the company's goodwill and other intangible assets, including changes due to foreign exchange, divestitures, amortization, and impairment Goodwill and Other Intangible Assets Data | (DOLLARS IN MILLIONS) | June 30, 2023 | December 31, 2022 | | :---------------------- | :------------ | :---------------- | | Goodwill | $13,498 | $13,355 | | Other intangible assets, net | $8,813 | $9,082 | - Goodwill increased by **$143 million** to **$13,498 million** at June 30, 2023, primarily due to foreign exchange impacts (**$147 million**), partially offset by business divestitures (**$4 million**)[68](index=68&type=chunk) - Amortization expense for other intangible assets was **$343 million** for the six months ended June 30, 2023, down from **$370 million** in the prior year[70](index=70&type=chunk) - An impairment charge of **$92 million** was recorded in Q2 2022 for intangible assets (customer relationships and technological know-how) in Russia[71](index=71&type=chunk) [NOTE 7. OTHER CURRENT ASSETS AND LIABILITIES, AND OTHER ASSETS](index=16&type=section&id=NOTE%207.%20OTHER%20CURRENT%20ASSETS%20AND%20LIABILITIES,%20AND%20OTHER%20ASSETS) This note provides a breakdown of other current assets and liabilities, as well as other non-current assets, and their changes Other Current Assets and Liabilities Data | (DOLLARS IN MILLIONS) | June 30, 2023 | December 31, 2022 | | :---------------------- | :------------ | :---------------- | | Prepaid expenses and other current assets | $898 | $770 | | Other assets | $754 | $689 | | Other current liabilities | $919 | $1,028 | - Prepaid expenses and other current assets increased by **$128 million**, driven by higher income tax receivables and prepaid expenses[73](index=73&type=chunk) - Other current liabilities decreased by **$109 million**, mainly due to lower accrued income taxes[74](index=74&type=chunk) [NOTE 8. DEBT](index=18&type=section&id=NOTE%208.%20DEBT) This note details the company's debt structure, including long-term debt, credit facilities, and recent repayment activities Debt Summary | (DOLLARS IN MILLIONS) | June 30, 2023 | December 31, 2022 | | :---------------------- | :------------ | :---------------- | | Total debt | $10,570 | $10,970 | | Total Long-term debt | $9,208 | $10,373 | - Total debt decreased by **$400 million** to **$10,570 million** at June 30, 2023, with long-term debt decreasing by **$1,165 million**[76](index=76&type=chunk) - The Company amended its Term Loan and Revolving Credit Facilities on March 23, 2023, extending financial covenant relief periods through December 31, 2024, and replacing LIBOR with Term SOFR as the reference rate for U.S. dollar-denominated loans[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk) - A **$300 million** debt repayment for the 2023 Notes was made on May 1, 2023, funded by the Revolving Credit Facility, which was subsequently repaid in June 2023[87](index=87&type=chunk) [NOTE 9. LEASES](index=20&type=section&id=NOTE%209.%20LEASES) This note outlines the company's lease obligations, distinguishing between operating and finance leases, and their associated costs and cash flows Lease Cost and Cash Flow Data | (DOLLARS IN MILLIONS) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $105 | $92 | | Finance lease cost | $4 | $4 | | Operating cash flows for operating leases | $64 | $70 | | Financing cash flows for finance leases | $4 | $3 | - Operating lease costs increased to **$105 million** for the six months ended June 30, 2023, from **$92 million** in the prior year[88](index=88&type=chunk) [NOTE 10. INCOME TAXES](index=20&type=section&id=NOTE%2010.%20INCOME%20TAXES) This note explains the company's effective tax rates, unrecognized tax benefits, and deferred tax liabilities, highlighting factors influencing tax expense - The effective tax rate for the three months ended June 30, 2023, was **46.0%** (vs. **16.2%** in 2022), and for the six months was **70.3%** (vs. **14.5%** in 2022), primarily due to tax expenses from business divestitures and changes in income/loss mix[89](index=89&type=chunk)[90](index=90&type=chunk) - As of June 30, 2023, the Company had **$111 million** in unrecognized tax benefits and **$37 million** in accrued interest and penalties[91](index=91&type=chunk) - A deferred tax liability of approximately **$159 million** was recorded for the effect of repatriating funds from non-U.S. subsidiaries[93](index=93&type=chunk) [NOTE 11. STOCK COMPENSATION PLANS](index=20&type=section&id=NOTE%2011.%20STOCK%20COMPENSATION%20PLANS) This note details the company's stock-based compensation expense and unrecognized compensation costs related to non-vested awards Stock-Based Compensation Expense | (DOLLARS IN MILLIONS) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total stock-based compensation expense | $20 | $17 | $32 | $26 | | Total stock-based compensation expense, after tax | $16 | $14 | $26 | $21 | - Total unrecognized compensation cost related to non-vested awards was approximately **$105 million** as of June 30, 2023[95](index=95&type=chunk) [NOTE 12. SEGMENT INFORMATION](index=21&type=section&id=NOTE%2012.%20SEGMENT%20INFORMATION) This note provides financial information by reportable segment, including net sales and adjusted operating EBITDA, reflecting distinct business performance - The Company operates in four reportable segments: Nourish, Health & Biosciences, Scent, and Pharma Solutions, each with distinct product portfolios and market focuses[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk) Segment Net Sales and Adjusted Operating EBITDA | (DOLLARS IN MILLIONS) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | **Net sales:** | | | | | | Nourish | $1,564 | $1,818 | $3,217 | $3,549 | | Health & Biosciences | $522 | $665 | $1,035 | $1,326 | | Scent | $592 | $580 | $1,200 | $1,165 | | Pharma Solutions | $251 | $244 | $504 | $493 | | Consolidated | $2,929 | $3,307 | $5,956 | $6,533 | | **Segment Adjusted Operating EBITDA:** | | | | | | Nourish | $181 | $365 | $389 | $694 | | Health & Biosciences | $145 | $184 | $276 | $376 | | Scent | $117 | $93 | $222 | $209 | | Pharma Solutions | $67 | $58 | $126 | $123 | | Total | $510 | $700 | $1,013 | $1,402 | - Nourish and Health & Biosciences segments experienced significant sales and EBITDA declines, while Scent and Pharma Solutions showed modest growth in both metrics[101](index=101&type=chunk) [NOTE 13. EMPLOYEE BENEFITS](index=23&type=section&id=NOTE%2013.%20EMPLOYEE%20BENEFITS) This note outlines the company's pension and postretirement benefit plans, including net periodic benefit costs and expected contributions Net Periodic Benefit (Income) Cost | (DOLLARS IN MILLIONS) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------- | :----------------------------- | :----------------------------- | | U.S. Plans Net periodic benefit (income) cost | $(2) | $1 | | Non-U.S. Plans Net periodic benefit (income) cost | $4 | $12 | | Total postretirement benefit (income) expense | $(1) | $(1) | - The Company expects to contribute **$5 million** to U.S. pension plans and **$32 million** to non-U.S. pension plans in 2023[110](index=110&type=chunk) [NOTE 14. FINANCIAL INSTRUMENTS](index=24&type=section&id=NOTE%2014.%20FINANCIAL%20INSTRUMENTS) This note describes the company's use of financial instruments, including derivatives, for managing market risks and their fair value measurements - The Company uses a fair value hierarchy (Level 1, 2, 3) for financial instruments, with most derivatives classified as Level 2[113](index=113&type=chunk)[115](index=115&type=chunk) Fair Value of Financial Instruments | (DOLLARS IN MILLIONS) | June 30, 2023 Carrying Value | June 30, 2023 Fair Value | December 31, 2022 Carrying Value | December 31, 2022 Fair Value | | :---------------------- | :--------------------------- | :----------------------- | :------------------------------- | :----------------------------- | | Cash and cash equivalents | $638 | $638 | $483 | $483 | | Derivative assets | $17 | $17 | $1 | $1 | | Derivative liabilities | $119 | $119 | $75 | $75 | | Total debt | $10,570 | $9,006 | $10,970 | $9,005 | - The Company uses foreign currency forward contracts and commodity contracts to reduce exposure to volatility, and cross currency swaps as net investment hedges for European investments[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) Derivative Financial Instruments | (DOLLARS IN MILLIONS) | June 30, 2023 | December 31, 2022 | | :---------------------- | :------------ | :---------------- | | Foreign currency contracts | $(758) | $92 | | Commodity contracts | $7 | $(1) | | Cross currency swaps | $1,400 | $1,400 | [NOTE 15. ACCUMULATED OTHER COMPREHENSIVE LOSS](index=28&type=section&id=NOTE%2015.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20LOSS) This note details the components of accumulated other comprehensive loss, including foreign currency translation adjustments and pension liability adjustments Accumulated Other Comprehensive Loss Components | (DOLLARS IN MILLIONS) | December 31, 2022 | June 30, 2023 | | :---------------------- | :---------------- | :------------ | | Accumulated other comprehensive (loss) income, net of tax | $(2,198) | $(1,857) | | Foreign Currency Translation Adjustments | $(2,066) | $(1,722) | | Pension and Postretirement Liability Adjustment | $(133) | $(136) | - Accumulated other comprehensive loss improved from **$(2,198) million** at December 31, 2022, to **$(1,857) million** at June 30, 2023, primarily due to positive foreign currency translation adjustments[130](index=130&type=chunk) [NOTE 16. COMMITMENTS AND CONTINGENCIES](index=28&type=section&id=NOTE%2016.%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the company's various commitments and contingencies, including legal proceedings, guarantees, and potential loss estimates - The Company has **$431 million** in bank guarantees, letters of credit, and surety bonds, with **$94 million** outstanding as of June 30, 2023[132](index=132&type=chunk) - The Company is involved in various legal proceedings, including securities class actions, a challenge to a former CEO's bonus, and antitrust investigations by the EC, CMA, and DOJ related to its fragrance businesses[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk) - The Company completed the relocation of its Zhejiang Fragrance Ingredients plant, receiving a final payment of **$5 million** in June 2023 and recognizing a pre-tax gain of **$22 million**[148](index=148&type=chunk)[149](index=149&type=chunk) - The aggregate range of reasonably possible losses from third-party contingencies, in excess of accrued liabilities, is estimated at **$0 to $50 million**[158](index=158&type=chunk) [NOTE 17. REDEEMABLE NON-CONTROLLING INTERESTS](index=33&type=section&id=NOTE%2017.%20REDEEMABLE%20NON-CONTROLLING%20INTERESTS) This note details the changes in redeemable non-controlling interests, influenced by foreign exchange and redemption value adjustments Redeemable Non-controlling Interests Data | (DOLLARS IN MILLIONS) | December 31, 2022 | June 30, 2023 | | :---------------------- | :---------------- | :------------ | | Redeemable Non-controlling Interests | $59 | $61 | - Redeemable non-controlling interests increased slightly to **$61 million** at June 30, 2023, from **$59 million** at December 31, 2022, primarily due to foreign exchange translation and redemption value adjustments[160](index=160&type=chunk) [NOTE 18. ASSETS AND LIABILITIES HELD FOR SALE](index=33&type=section&id=NOTE%2018.%20ASSETS%20AND%20LIABILITIES%20HELD%20FOR%20SALE) This note provides information on assets and liabilities classified as held for sale, primarily due to business divestitures - The Flavor Specialty Ingredients business was classified as held for sale, with the transaction completed on August 1, 2023[161](index=161&type=chunk) Assets and Liabilities Held for Sale Data | (DOLLARS IN MILLIONS) | June 30, 2023 | December 31, 2022 | | :---------------------- | :------------ | :---------------- | | Total assets held-for-sale | $212 | $1,200 | | Total liabilities held-for-sale | $13 | $212 | - The significant decrease in assets held for sale from **$1,200 million** to **$212 million** is primarily due to the divestiture of the Savory Solutions business in May 2023[164](index=164&type=chunk)[165](index=165&type=chunk) [NOTE 19. ACQUISITIONS](index=34&type=section&id=NOTE%2019.%20ACQUISITIONS) This note details recent acquisition activities, including the integration of acquired businesses and related contingent consideration adjustments - The acquisition of Health Wright Products, Inc. was completed on April 1, 2022, integrating it into the Health & Biosciences segment[166](index=166&type=chunk) - An expense of approximately **$5 million** was recognized for changes in the fair value of contingent consideration obligations related to the Health Wright Products acquisition for the three and six months ended June 30, 2023[167](index=167&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial performance, condition, and results of operations for the three and six months ended June 30, 2023, compared to the prior year periods, covering sales, gross profit, operating expenses, segment performance, liquidity, capital resources, and key risk factors, highlighting the impacts of divestitures, macroeconomic conditions, and strategic initiatives [OVERVIEW](index=35&type=section&id=OVERVIEW) This section provides an overview of IFF's business, market position, and key financial highlights for the reporting period - IFF has expanded its global leadership in Food & Beverage, Home & Personal Care, and Health & Wellness markets through mergers and acquisitions, operating in four segments: Nourish, Health & Biosciences, Scent, and Pharma Solutions[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk) - Sales to Russian customers were approximately **1%** of total sales for Q2 2023 and **2%** for the six months ended June 30, 2023, with operations limited to essential needs[177](index=177&type=chunk) - Sales in Q2 2023 decreased by **11%** (**9%** currency neutral) to **$2.929 billion**, primarily due to volume decreases and divestitures, partially offset by price increases[181](index=181&type=chunk) - Gross profit decreased by **18%** to **$933 million** (**31.9%** of sales) in Q2 2023, driven by volume declines, divestitures, unfavorable manufacturing absorption, and an inventory write-down[182](index=182&type=chunk) [RESULTS OF OPERATIONS](index=37&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the company's financial performance, including net sales, gross profit, operating profit, and net income, across different segments and periods Key Financial Performance Indicators | (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change (%) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change (%) | | :----------------------------------------------- | :------------------------------- | :------------------------------- | :--------- | :----------------------------- | :----------------------------- | :--------- | | Net sales | $2,929 | $3,307 | (11)% | $5,956 | $6,533 | (9)% | | Gross profit | $933 | $1,136 | (18)% | $1,897 | $2,281 | (17)% | | Operating profit | $145 | $213 | (32)% | $276 | $554 | (50)% | | Net income attributable to IFF shareholders | $27 | $107 | (75)% | $18 | $351 | (95)% | | Net income per share - diluted | $0.11 | $0.43 | (74)% | $0.07 | $1.38 | (95)% | | Gross margin | 31.9% | 34.4% | (250)bps | 31.9% | 34.9% | (300)bps | | Operating margin | 5.0% | 6.4% | (140)bps | 4.6% | 8.5% | NMF | | Effective tax rate | 46.0% | 16.2% | NMF | 70.3% | 14.5% | NMF | - Nourish sales decreased **14%** (**12%** currency neutral) in Q2 2023 due to volume declines, Savory Solutions divestiture, and unfavorable exchange rates[188](index=188&type=chunk) - Health & Biosciences sales decreased **22%** (**20%** currency neutral) in Q2 2023, primarily due to the Microbial Control divestiture and volume decreases[189](index=189&type=chunk) - Scent sales increased **2%** (**5%** currency neutral) in Q2 2023, driven by price increases in Fragrance Compounds and Ingredients[190](index=190&type=chunk) - Pharma Solutions sales increased **3%** (**3%** currency neutral) in Q2 2023, driven by price increases[191](index=191&type=chunk) - Interest expense increased by **51%** in Q2 2023 and **52%** for the six months, driven by higher interest rates on commercial paper and Term Loan Facilities, and increased factoring program costs[198](index=198&type=chunk)[220](index=220&type=chunk) - Segment Adjusted Operating EBITDA for Nourish decreased **50%** in Q2 2023, and for Health & Biosciences decreased **21%**, while Scent increased **26%** and Pharma Solutions increased **16%**[203](index=203&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk)[207](index=207&type=chunk) [Liquidity](index=44&type=section&id=Liquidity) This section discusses the company's ability to meet its short-term and long-term financial obligations, focusing on cash flows and available resources - Cash and cash equivalents increased to **$641 million** at June 30, 2023, from **$535 million** at December 31, 2022[229](index=229&type=chunk) - Cash flows from operating activities significantly improved to **$375 million** for the six months ended June 30, 2023, compared to a **$51 million** use in the prior year, driven by working capital reduction[231](index=231&type=chunk) - Investing activities provided **$552 million** in cash, up from a **$346 million** use, primarily due to business divestitures[232](index=232&type=chunk) - Financing activities used **$866 million** in cash, compared to **$377 million** provided in the prior year, due to net repayments of commercial paper and long-term debt[234](index=234&type=chunk) - Capital spending in 2023 is expected to be approximately **4.4% of sales**, slightly up from **4.1%** in 2022[233](index=233&type=chunk) [Capital Resources](index=45&type=section&id=Capital%20Resources) This section details the company's capital allocation strategy, debt structure, and compliance with financial covenants - The Company's capital allocation strategy focuses on maintaining an investment-grade rating, investing in the business, paying dividends, and repaying debt[236](index=236&type=chunk) - As of June 30, 2023, the Company was in compliance with all debt covenants, with a net debt to credit adjusted EBITDA ratio of **4.54 to 1.0**, below the covenant limit[243](index=243&type=chunk) - The Company had **$9.069 billion** in senior unsecured notes outstanding as of June 30, 2023, with maturities ranging from 2024 to 2050[247](index=247&type=chunk) [Non-GAAP Financial Measures](index=46&type=section&id=Non-GAAP%20Financial%20Measures) This section explains the company's use of non-GAAP financial measures to provide additional insights into its operational performance - The Company uses non-GAAP financial measures, including currency neutral metrics, adjusted operating EBITDA, adjusted operating EBITDA margin, and net debt to credit adjusted EBITDA, to provide additional insight into underlying operating results and comparable performance[251](index=251&type=chunk)[253](index=253&type=chunk)[254](index=254&type=chunk)[255](index=255&type=chunk) [Cautionary Statement Under the Private Securities Litigation Reform Act of 1995](index=47&type=section&id=Cautionary%20Statement%20Under%20the%20Private%20Securities%20Litigation%20Reform%20Act%20of%201995) This section highlights the inherent risks and uncertainties associated with forward-looking statements made by the company - Forward-looking statements are subject to significant risks and uncertainties, including inflationary trends, supply chain disruptions, integration risks from the N&B merger, substantial indebtedness, and global economic uncertainty[256](index=256&type=chunk)[257](index=257&type=chunk)[259](index=259&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=49&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses the Company's exposure to market risks, particularly foreign currency risk, and its use of derivative instruments to manage these risks, highlighting the impact of hypothetical changes in currency values on cross currency swaps - The Company uses derivative instruments, specifically cross currency swap agreements, to mitigate foreign currency risk on its net European investments[264](index=264&type=chunk) - As of June 30, 2023, these swaps were in a net liability position with an aggregate fair value of **$117 million**[264](index=264&type=chunk) - A hypothetical **10%** decrease or increase in the U.S. dollar's value against the Euro would change the estimated fair value of cross currency swaps by approximately **$144 million**[264](index=264&type=chunk) [ITEM 4. Controls and Procedures](index=49&type=section&id=ITEM%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter ended June 30, 2023 - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of June 30, 2023[265](index=265&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2023[267](index=267&type=chunk) [PART II - Other Information](index=50&type=section&id=PART%20II%20-%20Other%20Information) This section covers legal proceedings, risk factors, equity security sales, other information, and exhibits related to the company's operations [ITEM 1. Legal Proceedings](index=50&type=section&id=ITEM%201.%20Legal%20Proceedings) This section updates disclosures on legal proceedings, referring to Note 16 of the Consolidated Financial Statements for details on ongoing litigation, including securities class actions, antitrust investigations, and other claims - Updates on legal proceedings are provided in Note 16 to the Consolidated Financial Statements[270](index=270&type=chunk) [ITEM 1A. Risk Factors](index=50&type=section&id=ITEM%201A.%20Risk%20Factors) This section highlights key risk factors that could negatively impact the Company's operations, liquidity, or financial condition, particularly emphasizing the potential adverse outcomes of legal claims, disputes, and investigations, especially those related to antitrust and product liability - The Company's results may be negatively impacted by legal claims, disputes, investigations, and litigation, including those related to intellectual property, product liability, competition, and antitrust[272](index=272&type=chunk) - Ongoing antitrust and competition investigations by the EC, CMA, and DOJ, along with related class action lawsuits, pose significant risks[272](index=272&type=chunk) - Acquisitions like N&B and Frutarom have increased exposure to legal and environmental claims, potentially raising defense and settlement costs[274](index=274&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report[276](index=276&type=chunk) [ITEM 5. Other Information](index=51&type=section&id=ITEM%205.%20Other%20Information) This section reports on Rule 10b5-1 trading plans, noting no new plans adopted by directors or executive officers during the quarter, and the termination of one executive's plan - No new Rule 10b5-1 trading plans were adopted by directors or executive officers during the quarter ended June 30, 2023[278](index=278&type=chunk) - Christophe Fauchon de Villeplee, President, Scent, terminated his Rule 10b5-1 trading arrangement effective May 23, 2023[279](index=279&type=chunk) [ITEM 6. Exhibits](index=51&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications under the Sarbanes-Oxley Act and XBRL interactive data files - Exhibits include certifications by Frank Clyburn and Glenn Richter under Sections 302 and 1350 of the Sarbanes-Oxley Act of 2002[281](index=281&type=chunk) - XBRL Instance Document and Taxonomy Extensions are provided for interactive data filing[281](index=281&type=chunk) [Signatures](index=52&type=section&id=Signatures) This section provides the official signatures of the company's principal executive, financial, and accounting officers, certifying the report - The report was signed on August 9, 2023, by Frank Clyburn (CEO), Glenn Richter (EVP & CFO), and Beril Yildiz (SVP, Corporate Controller & Chief Accounting Officer)[283](index=283&type=chunk)

Financial Data and Key Metrics Changes - The company generated $3 billion in sales for Q1 2023, reflecting a 1% comparable currency neutral growth, with adjusted operating EBITDA at $503 million, down 19% year-over-year due to lower volumes and inventory reduction efforts [74][75][52] - The net debt to credit adjusted EBITDA ratio was reported at 4.6x, slightly higher than previous quarters, indicating a need for continued focus on debt management [57][75] Business Line Data and Key Metrics Changes - The Nourish segment's sales were flat, with significant volume declines in the ingredients business, which accounted for approximately 60% of the total company volume decline [78][83] - The Scent division performed well, with double-digit growth in both fine and consumer fragrances, while Pharma Solutions also showed solid growth driven by core products [53][78] Market Data and Key Metrics Changes - The company noted that destocking efforts by customers are expected to end, with a belief that consumer demand will remain resilient in the second half of the year [59][36] - Geographical performance showed improvement, with sales in China up 2% and Greater Asia up 1%, indicating potential for recovery in those markets [36][36] Company Strategy and Development Direction - The company is focused on portfolio optimization, with divestitures of non-core businesses being a central strategy to strengthen capital structure and reduce debt [76][87] - There is an emphasis on improving customer service and supply chain agility to enhance operational efficiency and reduce bottlenecks [86][87] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging operating environment, citing soft end market demand and customer inventory destocking as significant factors impacting performance [71][75] - The company anticipates mid-single digit volume growth in the second half of the year, driven by improved market conditions and easier year-over-year comparisons [36][33] Other Important Information - The company is executing a cost reduction program with an annualized impact of about $100 million, which is expected to contribute positively to profitability in the latter half of the year [62][87] - Cash flow from operations improved to $127 million in Q1 2023, compared to a negative $4 million in the same period last year, indicating better cash management [55][75] Q&A Session Summary Question: Insights on cash flow progression and working capital improvement - Management indicated they are tracking well against objectives for adjusted free cash flow, with a focus on reducing inventory and improving working capital [11][12] Question: Explanation of consumer strength in fragrances versus weakness in food ingredients - Management noted strong demand in consumer fragrances due to pent-up demand and innovation, while the ingredients segment faced challenges from overstocking and destocking [14][15] Question: Context for deleveraging plans and dividend considerations - Management confirmed plans to reduce leverage to below 3x by the end of next year through a combination of working capital improvements and divestitures, stating that cutting the dividend is not being considered [30][39] Question: Update on pricing strategy in Nourish and margin outlook - Management is taking a surgical approach to pricing adjustments in response to market conditions, with expectations for margin improvement in the Nourish segment over time [45][46] Question: Status of the enzymes business and margin outlook - Management highlighted ongoing innovation in the enzymes business and expressed confidence in margin recovery despite past challenges from inflation and manufacturing absorption [49][52]

PART I - Financial Information [Financial Statements](index=3&type=section&id=ITEM%201.%20Financial%20Statements) For the three months ended March 31, 2023, the company reported a net loss of $8 million, a significant downturn from the $246 million net income in the same period of 2022, with total assets remaining stable at approximately $35.5 billion and cash flow from operations improving to $127 million from a $4 million use of cash in the prior year, primarily due to better working capital management [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2023, total assets were $35.47 billion, a slight increase from $35.41 billion at year-end 2022, driven by higher cash and goodwill, partially offset by a decrease in inventories, while total liabilities increased to $17.62 billion from $17.63 billion, mainly due to a significant rise in short-term borrowings and commercial paper, with long-term debt decreasing Consolidated Balance Sheet Highlights (as of March 31, 2023 vs. Dec 31, 2022) | Account | March 31, 2023 ($M) | December 31, 2022 ($M) | | :--- | :--- | :--- | | **Total Current Assets** | 7,442 | 7,432 | | Goodwill | 13,458 | 13,355 | | Other intangible assets, net | 8,968 | 9,082 | | **Total Assets** | **35,470** | **35,407** | | **Total Current Liabilities** | 4,874 | 3,728 | | Long-term debt | 9,220 | 10,373 | | **Total Liabilities** | 17,621 | 17,634 | | **Total Shareholders' Equity** | 17,790 | 17,714 | [Consolidated Statements of (Loss) Income and Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20%28Loss%29%20Income%20and%20Comprehensive%20Income) For the first quarter of 2023, the company reported a net loss of $8 million, compared to a net income of $246 million in the same period of 2022, driven by a **6%** decrease in net sales to $3.03 billion and a significant drop in operating profit from $341 million to $131 million, impacted by higher restructuring charges and interest expenses Q1 2023 vs Q1 2022 Income Statement | Metric | Q1 2023 ($M) | Q1 2022 ($M) | | :--- | :--- | :--- | | Net sales | 3,027 | 3,226 | | Gross profit | 964 | 1,145 | | Operating profit | 131 | 341 | | Income before taxes | 14 | 285 | | Net (loss) income | (8) | 246 | | Net (loss) income attributable to IFF | (9) | 244 | | Diluted EPS | $(0.04) | $0.96 | [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities was $127 million for the first quarter of 2023, a significant improvement from the $4 million used in the prior-year period, mainly due to positive changes in inventories, while net cash used in investing activities increased to $167 million due to higher capital expenditures, and net cash from financing activities was $78 million, down from $95 million, reflecting changes in short-term borrowing activities Q1 2023 vs Q1 2022 Cash Flow Summary | Cash Flow Activity | Q1 2023 ($M) | Q1 2022 ($M) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | 127 | (4) | | Net cash used in investing activities | (167) | (121) | | Net cash provided by financing activities | 78 | 95 | | **Net change in cash** | **65** | **(54)** | [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail significant accounting policies, business divestitures, and restructuring activities, including the ongoing integration of N&B, a new restructuring program initiated in late 2022, and planned divestitures of the Savory Solutions and Flavor Specialty Ingredients businesses, with the company also amending its debt agreements to extend covenant relief and transition from LIBOR to SOFR, and facing new antitrust investigations in the U.S. and Europe - The company has six reporting units for goodwill testing: Nourish, Fragrance Compounds, Fragrance Ingredients, Cosmetic Actives, Health & Biosciences, and Pharma Solutions[37](index=37&type=chunk) - In December 2022, the company initiated a new restructuring program focused on headcount reduction, incurring **$57 million** in severance charges in Q1 2023 for approximately **600** actual and planned reductions[52](index=52&type=chunk) - The company has entered into agreements to sell a portion of its Savory Solutions business and its Flavor Specialty Ingredients business, with both transactions expected to close in 2023, and the related assets and liabilities, valued at **$1.2 billion** and **$216 million** respectively, are now classified as held for sale[151](index=151&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In Q1 2023, sales decreased **6%** to **$3.03 billion** (down **2%** currency-neutral) due to volume declines and the divestiture of the Microbial Control business, partially offset by price increases, while gross margin contracted to **31.8%** from **35.5%** due to lower volumes and unfavorable manufacturing absorption, operating profit fell **62%** to **$131 million**, the company's leverage ratio was **4.62 to 1.0**, within its amended covenant of **5.25x**, and management expects capital spending to be approximately **4.1%** of sales for 2023 [Results of Operations](index=33&type=section&id=Results%20of%20Operations) First quarter 2023 sales fell **6%** to **$3.03 billion**, driven by volume decreases and a net negative impact of **$111 million** from portfolio changes, while gross profit declined **16%** to **$964 million**, with margin compression from **35.5%** to **31.8%**, operating profit plummeted **62%** to **$131 million**, heavily impacted by a **$50 million** increase in restructuring charges and a **$39 million** rise in interest expense, and the company reported a net loss of **$8 million** compared to a **$246 million** net income in the prior year Q1 2023 vs Q1 2022 Performance Summary | Metric | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $3,027 M | $3,226 M | (6)% | | Gross Profit | $964 M | $1,145 M | (16)% | | Operating Profit | $131 M | $341 M | (62)% | | Net (Loss) Income | $(8) M | $246 M | (103)% | | Diluted EPS | $(0.04) | $0.96 | (104)% | - The decrease in sales was primarily driven by volume decreases and the net impact of the divestiture of the Microbial Control business unit and acquisition of Health Wright Products, Inc., which was approximately **$111 million**[168](index=168&type=chunk)[172](index=172&type=chunk) - Interest expense increased by **54%** to **$111 million** due to higher effective interest rates on term loans and increased commercial paper borrowings[171](index=171&type=chunk)[183](index=183&type=chunk) [Segment Performance Analysis](index=34&type=section&id=Segment%20Performance%20Analysis) In Q1 2023, Scent was the only segment with reported sales growth (**4%**), while Health & Biosciences sales fell **22%**, heavily impacted by a portfolio change, Nourish sales declined **5%**, and Pharma Solutions grew **2%**, with all segments experiencing a decline in Segment Adjusted Operating EBITDA and margin compression, primarily due to lower volumes, unfavorable manufacturing absorption, and currency headwinds, and Nourish EBITDA saw the largest drop at **37%** Q1 2023 Sales Growth by Segment | Segment | Reported % Change | Currency Neutral % Change | | :--- | :--- | :--- | | Nourish | -5% | 0% | | Health & Biosciences | -22% | -19% | | Scent | 4% | 8% | | Pharma Solutions | 2% | 4% | | **Total** | **-6%** | **-2%** | Q1 2023 Segment Adjusted Operating EBITDA | Segment | Q1 2023 EBITDA ($M) | Q1 2022 EBITDA ($M) | Margin Q1 2023 | Margin Q1 2022 | | :--- | :--- | :--- | :--- | :--- | | Nourish | 208 | 329 | 12.6% | 19.0% | | Health & Biosciences | 131 | 192 | 25.5% | 29.0% | | Scent | 105 | 116 | 17.3% | 19.8% | | Pharma Solutions | 59 | 65 | 23.3% | 26.1% | | **Total** | **503** | **702** | **16.6%** | **21.8%** | [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity position improved, with cash from operations increasing to **$127 million** in Q1 2023 from a **$4 million** use in Q1 2022, driven by better working capital management, and as of March 31, 2023, the company was in compliance with all debt covenants, with a net debt to credit adjusted EBITDA ratio of **4.62 to 1.0**, below the amended covenant threshold of **5.25 to 1.0**, having amended its credit agreements in March 2023 to extend covenant relief through 2024 and transition from LIBOR to SOFR - Cash flow from operations improved to **$127 million** in Q1 2023 from a use of **$4 million** in Q1 2022, mainly due to a decrease in working capital, particularly inventories[194](index=194&type=chunk) - On March 23, 2023, the company amended its credit agreements to extend the covenant relief period through December 31, 2024, with a consolidated leverage ratio not to exceed **5.25x** for fiscal quarters ending on or before June 30, 2023[201](index=201&type=chunk)[202](index=202&type=chunk) Debt Covenant Compliance (as of March 31, 2023) | Metric | Value | | :--- | :--- | | Net Debt | $10,715 M | | Credit Adjusted EBITDA (LTM) | $2,320 M | | **Net Debt to Credit Adjusted EBITDA Ratio** | **4.62 to 1.0** | | Covenant Maximum | 5.25 to 1.0 | [Quantitative and Qualitative Disclosures about Market Risk](index=42&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) There were no material changes in market risk from the 2022 Form 10-K, with the exception of new cross-currency swap agreements, which are used to hedge net European investments and had a net liability fair value of **$41 million** as of March 31, 2023, where a hypothetical **10%** change in the USD/EUR exchange rate would alter their fair value by approximately **$146 million** - The company entered into cross-currency swap agreements to mitigate foreign currency risk on its net European investments, and as of March 31, 2023, these swaps had a net liability fair value of **$41 million**[225](index=225&type=chunk) - A hypothetical **10%** increase or decrease in the value of the U.S. dollar against the Euro would result in a change of approximately **$146 million** in the estimated fair value of the cross-currency swaps[225](index=225&type=chunk) [Controls and Procedures](index=42&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2023, with no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls - The CEO and CFO concluded that the company's disclosure controls and procedures are effective as of the end of the period covered by the report[226](index=226&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, the company's internal controls[228](index=228&type=chunk) PART II - Other Information [Legal Proceedings](index=43&type=section&id=ITEM%201.%20Legal%20Proceedings) This section refers to Note 16 of the Consolidated Financial Statements for updates on legal proceedings, with key developments including new putative class action lawsuits filed in Q1 2023 against IFF and competitors in Canada and the U.S. alleging antitrust violations, and in March 2023, IFF's facilities were inspected by European and UK authorities, and the company received a subpoena from the U.S. DOJ related to potential anticompetitive conduct in its fragrance businesses - In March and April 2023, three putative class action lawsuits were filed against IFF and competitors in Canada and the U.S. alleging violations of competition and antitrust laws[131](index=131&type=chunk) - On March 7, 2023, the European Commission, UK CMA, and U.S. DOJ initiated investigations into potential anticompetitive conduct related to IFF's fragrance businesses, including unannounced inspections of IFF facilities[133](index=133&type=chunk) [Risk Factors](index=43&type=section&id=ITEM%201A.%20Risk%20Factors) The company updated its risk factors to highlight the potential negative impact from legal uncertainties, specifically addressing the new antitrust and competition investigations in the United States and Europe, as well as related class action lawsuits in the U.S. and Canada, noting it is unable to predict the outcome or potential financial impact of these matters - The company is subject to new antitrust and competition investigations in the United States and Europe[233](index=233&type=chunk) - Class action lawsuits have been filed against IFF and competitors in the United States and Canada, alleging violations of antitrust laws[233](index=233&type=chunk) - The company states it is currently unable to predict the scope, duration, or outcome of these investigations and lawsuits, or their potential impact on financial results[233](index=233&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds during the period - None[237](index=237&type=chunk) [Exhibits](index=44&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, with notable exhibits including amendments to the Term Loan and Revolving Credit Agreements dated March 23, 2023, an Amended and Restated Executive Severance Policy, and required certifications from the CEO and CFO under the Sarbanes-Oxley Act - Filed amendments to the Term Loan Credit Agreement (Amendments No. 3 & 4) and the Revolving Credit Agreement (Amendments No. 2 & 3), both dated March 23, 2023[240](index=240&type=chunk) - Includes certifications by CEO Frank Clyburn and CFO Glenn Richter pursuant to Section 302 of the Sarbanes-Oxley Act[240](index=240&type=chunk)