At this time, I would like to welcome everyone to the International Flavors & Fragrances First Quarter 2012 Earnings Conference Call. [Operator Instructions] Speaking on the call today is Doug Tough, Chairman and CEO; Nicolas Mirzayantz, President of Fragrances; Hernan Vaisman, President of Flavors; and Kevin Berryman, Executive Vice President and CFO. This call is being recorded and will be available for playback under the Investor Relations section of iff.com. Please keep in mind that during this call, the management team will be making forward-looking statements about the company's performance, particularly with respect to the second quarter and full year of 2012, which can be identified by such terms as expect, anticipate, believe, outlook, guidance, may or similar terms and variations thereof. These statements are based on how IFF sees things today and contain elements of uncertainty. Accordingly, these forward-looking statements should be evaluated with consideration given to the many risks and uncertainties inherent in IFF's business that could cause actual results and events to differ materially from what is discussed today. For more detailed information about these risks and uncertainties, please refer to the cautionary statement and risk factor disclosure contained in IFF's filings with the SEC, including IFF's annual report on Form 10-K filed with the SEC on February 28, 2012. Please keep in mind that all numbers referenced, unless specifically stated otherwise, are on a comparable basis, which exclude items that impact comparability to accurately reflect on how IFF manages business. The reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, as defined in regulation G, is available under the Investor Relations section of iff.com. I would now like introduce Doug Tough, Chairman and CEO. You may begin.

Thank you, operator. And good morning and good afternoon, everyone. Michael DeVeau, our Head of Investor Relations, is unable to join us today as he is participating in an offsite weeklong, IFF leadership development program. He asked that I remind anyone who has follow-up questions to please contact him by e-mail and he will respond as soon as he gets a moment. Now reviewing our Q1 results. Excluding a 2-percentage-point impact related to foreign currency, the diversity and the strength of our category and geographic presence allowed us to continue to grow our business as worldwide local currency sales increased 1% in the first quarter, on top of the 9% growth we reported a year ago. In Flavors, local currency sales increased 5%, or 3% on a reported basis, led by double-digit performance in the emerging markets. If we exclude a 1 percentage point impact associated with an intentional, strategic exit of low-margin businesses in the year ago period, local currency sales on a like-for-like basis, or as we refer to it, LFL, grew 6%. As expected, Fragrance results were pressured by volume declines in ingredients, which had a 300-basis-point impact on total local currency Fragrance sales, as well as a challenging year ago comparison when Fine & Beauty Care grew 14% in local currency. We were encouraged by the trends seen throughout the quarter as each month improved sequentially, a trend that has continued in the month of April. From a profitability perspective, despite a pricing benefit of nearly 3%, overall gross margin declined 140 basis points due to a 9% increase in raw material costs. This was an improvement relative to the fourth quarter when gross margin was down 220 basis points from the previous year. Research, selling and administrative expenses as a percentage of sales were down 10 basis points as a result of ongoing cost control and modest benefits from our restructuring. However, as we have previously indicated, adjusted operating profit and adjusted EPS declined versus the prior year period, but results are in line with our expectations. After Nicolas, Hernan and Kevin finish their respective sections, I will give you some perspectives on our outlook for the full year. And with that, I would like to introduce our group President of Fragrances, Nicolas Mirzayantz.

Thank you, Doug, and good morning and good afternoon, everyone. Comparing to a 7% local currency growth rate in the year ago period, which was a record first quarter and our strongest quarterly growth in 2011, local currency sales in the first quarter declined 3% as new business wins and pricing benefits were more than offset by volume declines on existing business. Volume in Fine & Beauty Care remained under pressure, down 2% versus 14% growth last year, particularly in Western Europe, as we compared to a 2011 period which included both new wins and volume that was stronger than historical averages. Sales in our EAME region decreased 7% on top of 22% growth last year. However, local currency sales increased 4% in North America, and 5% in Latin America. Fine & Beauty Care sales trend improved versus the fourth quarter of 2011, primarily driven by an improved win rate in Fine Fragrance. In Functional Fragrance, local currency results were positive, up 1% for the 15th consecutive quarter, as new business wins and the realization of price increases continued to drive results. Sales were up 5% in Europe and 6% in Latin America. Within this segment, Fabric Care remained a standout, growing mid-single digits on the local currency basis. For Fragrance Ingredients, we continued to focus on driving portfolio management. While we have experienced top line pressure, we have been able to maintain and protect our percent margin on the external part of our business. We have been making balanced pricing decisions that have resulted in some volumes being lost. These volumes have been lost where our low-margin competitors are pricing to gain share in lower value-added segments of their portfolio. Going forward, our priorities for Ingredients remain: focusing on technology innovation; product portfolio management; asset optimization; and operations sustainability.…

Thank you, Nicholas. Marking the 25th consecutive quarter of local currency sales growth, I am pleased to report that the like-for-like local currency sales grew 6%, excluding approximately 1 percentage point associated with the strategic exit of low-margin business on top of the 12% local currency growth we reported in the first quarter, 2011. Our performance can once again be attributed to new business win and higher prices across all regions and all categories. In North America, like-for-like growth was 5%, excluding 2 percentage points related to the exit of low-margin businesses. The best performing category was Beverage, which was up strong double digits, thanks to new wins and increased volumes of products used in our sweetness tools. Within our EAME region, local currency growth was led by strong results in Africa and the Middle East. Western Europe continued to remain in positive territory on a local currency basis, led by our innovative naturals portfolio but at a slower rate than Africa and the Middle East. In Latin America, local currency growth was strongest in Dairy, up double digits, followed by high single-digit growth in Savory and Beverage. Similar to last quarter, our best performing region in terms of dollar growth and percentage change continues to be Greater Asia. Excluding approximately 1 percentage point associated with the exit of low-margin business, local currency sales growth was 9%, led by a double-digit increase in Confectionery and good growth across Savory and Beverage. Looking at the geographic breakdown of our sales, I am very pleased with our performance in the emerging markets, which has grown double digits on local currency basis for the 10th consecutive quarter. This performance was driven by a double-digit local currency growth in Africa, the Middle East, Indonesia, India, as well as in South Con [ph] and many impacted regions in LatAm. From an R&D perspective, we expanded our relationship with Evolva Holdings, a Swiss biotech company, to implement a commercially viable biosynthetic route for the sustainable production of a key flavoring ingredient. We expect this new agreement would leverage the progress we've made against our original agreement as we continue to build additional competitive advantages. Turning to profit. First quarter operating profit increased 1%, or $1 million, to $80 million, as volume growth, higher pricing and cost disciplines drove results. Operating profit margin was down 50 basis points versus the prior year period to 22.8% due to higher raw material costs. Looking ahead to the second quarter of 2012, while we are comparing to our net percent local currency growth rate, we are off to a solid start as new business wins are expected to continue to drive our top line performance. With that, let me turn it to Kevin.

Thank you, Hernan, and good morning and good afternoon, everyone. First quarter 2012 reported sales totaled $711 million, a decrease of 1% from the prior year period, as the impact of foreign exchange had a negative 2-percentage-point impact on sales. Excluding the impact of currencies, local currency sales increased 1%. The emerging markets continued to perform well, up 3% on a local currency basis, on top of the very strong 12% local currency sales growth we reported in the first quarter of 2011. Adjusted operating profit fell 8%, or $11 million, to $122 million as pricing actions and cost discipline were more than offset by increases in raw material costs. With interest expense declining $1 million and other expenses down approximately $6 million year-over-year, the decline in adjusted operating profit was mitigated at the net income level as adjusted EPS fell 3% to an even $1, in line with our forecast. As expected and as communicated on previous calls, our raw material costs remained high in the first quarter of 2012. While both businesses faced significant cost pressure, it was most pronounced in Fragrances, where strong increases in naturals, petrochemicals and feedstock ingredients drove a double-digit increase in raw material cost. Flavors raw material costs, which were up high-single digits, continued to be impacted by higher year-over-year cost of items such as citrus and mint and menthol. As expected, our traction against our pricing actions continued to reduce the gross margin impact on our profitability, as our gross margin shortfall versus the year ago period fell to 140 basis points versus the 330 and 220 basis points we saw in Q3 and Q4 of last year. This is a positive trend we will expect to continue over the course of 2012. Given that input costs were in line with our…

Thanks, Kevin. Going forward, we expect business trends should improve over the course of the year, as we continue to capitalize on our strong emerging market presence, a healthy research and development pipeline and our profit improvement initiatives. In fact, overall, April has proven to be a strong month for both Flavors and Fragrances, though Ingredients remained soft. From a top line perspective, Flavors' local currency should remain resilient even as we accelerate the exit of low-margin businesses. In Fragrance, we expect local currency sales growth starting in Q2 to be driven by strong new wins. As Nicolas communicated, the one area where we see risk to our plan could be in Ingredients as current trends remain soft on our external sales portfolio. Regarding our margin structure, while we expect raw material costs will rise modestly in 2012, we are seeing pressure beginning to ease, which when combined with our pricing actions, should result in gross margin expansion beginning in Q2 and continuing throughout the balance of the year. We expect that this will lead to the third consecutive year of adjusted operating profit and adjusted EPS growth, even as our incentive compensation program resets, and we continue to make incremental investments in R&D and other parts of the business that are vital to sustain long-term profitable growth. While we started the year in line with our expectations, the majority of the year is still ahead of us. Overall, we remain cautiously optimistic despite the current trends in Ingredients and the fluidity in the macroeconomic environment, particularly in Western Europe, both of which pose some risk in our achieving our long term financial targets in 2012. In wrapping up, we have started the year broadly in line with where we thought we would be. Both our Flavors and Fragrance teams have executed the strategy to deliver financial results in line with our expectations. Going forward, we remain cautiously optimistic in our outlook given the evolving macroeconomic landscape. We will proactively manage our performance, making adjustments as necessary as we continue to make progress against our strategic plan. With that, we would be happy to take any questions you may have.

[Operator Instructions] Your first question comes from the line of Mark Astrachan with Stifel, Nicolaus. Mark S. Astrachan - Stifel, Nicolaus & Co., Inc., Research Division: I guess, Doug, in terms of thinking about what you said, first quarter results, April trends, how do you think about that over in the balance of the full year relative to long-term expectations? Like you had talked a bit about that in that context on the last call. So maybe if you could give us a bit of an update in terms of where we're thinking for the results for the year on both the sales and earnings basis relative to this target? That'd be helpful.

Sure, Mark. Well, I don't think anything has really meaningfully changed, Mark, versus where we were before. I make that with one caveat, that we're probably as perplexed as the rest of the world about what might evolve in Europe, particularly Western Europe. It remains a little bit of a cloud over our heads and our customers' heads. But putting that part aside, the Q1 came in, in line with expectations in volume and profitability, in EPS. We think we're probably closer to the lower end of the sales guidance range we've given. And as I've just mentioned, we think there's some risk to the long-term financial EPS target. But relative to what our comments would have been, we wouldn't be meaningfully different, absent the caveat I've just given about Western Europe. I think the embellishment I would provide on it is the expectation that both comparables are easing, or as the overall situation now as we see it in cost of goods and raw material impacts is easing, the pipeline we have in terms of R&D wins, the customer wins is solid and the R&D pipeline remains robust. So we wouldn't be meaningfully changing anything relative to what we said a while ago. Mark S. Astrachan - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then just secondly, the spread between your volumes and your largest competitor's volumes have widened now to the largest amount in probably 3 years, at least since you and Kevin have been at the company. Just wondering what has led to that share shift and how you think about that going forward?

Well, I'll talk to this briefly and then I'll certainly ask the 2 group presidents to chime in a little bit. I mean, I think we would look at things from a longer-term perspective. I accept very much you said about the most recent results, you're aware the industry doesn't get share information per se. So we couldn't claim victory a few years ago, nor do we understand the absolute share position right now. But over the course of the longer term, our results aren't meaningfully different. We think we've got extremely robust comparables to go up against, which we've just reported upon. So we'd probably look at the longer-term, Mark, and say, do we have the level of wins underway with customers? Is there a level of customer intimacy we need to have to make sure we win? And is the pipeline in R&D short and mid-term and long-term underway to give us confidence that our current business plan's going to achieve the results we expect? And those would very much be the case. I'll let -- Nicolas will talk first with any embellishments he might want on Fragrance comments.

As Doug has said, much information is not readily available, so it's difficult to comment. The most recent results show a difference, but when we go back to the 2-year, 3-year period, we have averaged actually a 7% growth above our long-term financial of 4% to 6%, and which -- a market which has grown over 3%. So that's important. And as Doug was mentioning, we see a very, very strong pipeline of new projects, good pipeline of new wins and also strength in colleague [ph] participation, which will be leading to sequential improvement as we progress.

Hi, Mark. This is Hernan of Flavors. I mean, if you evaluate the Flavors performance of the last 2, 3 years, I mean, definitely we can say that we are performing pretty well in the marketplace. Having said that, I mean, we really -- I mean, you see I think with our competition in Latin America, we see a kind of a softness in our business. We really address it early last year. We make several changes, we fine-tune the strategy, and I can say now that we are in better position really to grabbing more market share going forward. So overall, I feel very confident. The fundamentals of the business in Flavors are there, and the results are proof of it.

Your next question comes from the line of Ed Aaron with RBC Capital Markets.

It sounds like you're seeing in your value added businesses, seeing some nice sequential improvement so far this year. I'm wondering if you're seeing any signs of strength in that business beyond what you can just attribute to easier comparisons?

You want to talk to the technology opportunities?

Yes. I mean, I think that all with the business is based on the market, but also I think that you have to have the right portfolio. I mean, we have been investing, I mean, a lot in terms of technology, and now we are getting into the market and this kind of portfolio improvement is helping us to really get businesses from the market, even sometimes from the competition. So I think that this is the upside. On the downside, I could say that the -- Doug mentioned it before, I mean, Europe is under stress, so we can really see probably some volumes going down. But basically, definitely, I mean, the technology will give us the advantage to really overcome, I mean, this kind of softness in Europe.

But maybe just to kind of ask a follow-up clarification trends. Just on your kind of April comments because it sounds like you saw some strength in April. And this was I think in your report of this quarter last year, you had mentioned that trends had kind of worsened in the month of April. So what I was kind of getting at is when you look at just -- I hate to be so focused on the last month or so, but if you look at your kind of most recent trends, is the improvement just entirely reflective of the easy comps -- easier comps that you're up against? Or have you seen more of an underlying strengthening of the business as you look at things in the last couple of months?

Overall, there is a strength. I mean, Hernan has touched upon, and I think it's remarkable, the comment that was made in his opening remarks, that this is the 25th consecutive quarter of growth in Flavors and its growth off of a strong results again, year ago. So the buoyancy that we're seeing is growth on growth, and while it's to a lesser level, the general comment looks to be the same in Fragrance compounds. We remain concerned and made the note that the softness in Fragrance Ingredients we would expect to continue in Q2. But on the core Fragrance -- Flavors in particular, it's growth on top of growth.

Your next question comes from Lauren Lieberman with Barclays Capital.

I've come to focus a little bit on Asia because that's actually the one division where it just felt like at least in the compound business within Fragrances, it was pretty different than how we'd looked at it. So Functional down 9, Fine down 3. So Nicolas, can we maybe talk a little bit about what's going on there? Was there anything in particular in the comps? And then how to think about that going forward?

Yes, good question. First of all, we come especially in the Functional, as you were referring, from 14% growth in 2011 and 31% in 2010. So it was a comp effect. But it was mostly 3 key drivers that drove the decline in Asia. First, a loss of a business last year. So we knew about it, which was at the low-margin business, number 1. Number 2, last year, we saw a significant promotional activity with some customers that did not take place in 2012. And last, important to mention that we had also some inventory correction with a key customer affecting us in particular. So these where the key drivers of the challenges in Q1. We expect a sequential improvement as we progress throughout the year. Two factors: first, increased colleague [ph] participation and also strong win rate that we know will be backing us later on this year.

Just to follow up. Because it sounded like particularly, at least the 2 and 3, the promotions and then the inventory correction. If I'm understanding, they should have actually been isolated to this quarter, so the only thing that kind of continues as we go through the year is the lost business. So does it turn positive as we get -- excluding Ingredients, does the compounds business get positive when we go into the second quarter?

We have to see. We see a positive improvement as we progress, and we see continued improvements. So our expectations as we progress throughout the year, we should expect that sequential improvement for compounds.

Okay. And then can you just explain, Nicolas -- I'm sorry, like significant promotion with some customers. I didn't -- my misunderstanding maybe, but I didn't know there was much that IFF would do with customers that was terribly promotional? So can you just elaborate on what that would have been or how to think about it?

Yes, sorry if I was not clear enough, Lauren. Some customers were very active in their promotional activities in the market. So a lot of advertising a lot of promotion in stores during that specific quarter, and the customers where we are highly represented. So we benefited from that increased activity and promotional activity. We did not see this year the same level of promotion on their part.

Okay. Got it. So that actually may be something that continues to be a headwind as we move forward, if that customer's promotional for more than a quarter. Okay. And then just maybe, Doug, for you. You guys mentioned on Ingredients, review is underway. Just what's -- timing of kind of sharing with us anything that might be more specific, both decisions made internally and then anything that is able to be share with us.

Well, the internal work is underway, Lauren, and the plan is to for presentations to our Board mid-summer. And with conclusions coming out of -- and Nicolas referenced that we're going at it with the same degree of rigor akin to what we've presented at the Investor Day a year ago with economic profitability and really a deep dive into all parts. So Board review is planned for mid-late summer and the implications, what we can share with you and the investment community we would do so thereafter.

Your next question comes from the line of Jeffrey Zekauskas with JPMorgan. Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division: Can you elaborate a little bit about what the issues are in Ingredients? Is it that your prices are too high or your normal customers are now more backwardly integrated and so you have too much capacity? From a strategic point of view, what's the malfunction in Ingredients?

Hi Jeff, it's Nicolas. One thing which is important and that we have mentioned over the last quarter is that we have taken strategic pricing to protect margins from the rising raw material cost. So every player in the business has different portfolio, which are impacted differently by different feedstock. And yet we felt that the priority for us was to protect margin levels, which we did. But we don't see necessarily additional backward integration from some of our customers in that respect. So this is part of the analysis that we're conducting. And as Doug said, it's a very much in-depth full review of the different parts of our portfolio because I think it's about portfolio participation. You have a different set of competitors according to the different portfolio in which you are engaged, and therefore, we are going through that in-depth analysis. Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division: So why do you need a strategic review at all?

Let me add a couple of little bits and embellish something. One of the points you'd raised, Jeff, was is there a capacity change in the industry and which could be a driving force and implication going forward? And that's one of the areas we're frankly investigating right now. Early signs suggest there might be some legitimacy to that. So when you have the couple of quarters or 3 quarters of softness that we've had, in the order of double-digit, it frankly is very much on the radar screen of both management and our board. So you can call it a strategic review or an extremely in-depth analysis to what are the root causes? What are the implications going forward? Is there a need to reshape the portfolio? I guess I'd liken it, analogous to the Investor Day we had a year ago, where we articulated some categories had robust profitability and would hence get enhanced emphasis, and some needed remediation, which is underway, too. So in the context of the broad-scale portfolio of Fragrance Ingredients that Nicolas just referenced, there maybe some of those that we emphasize and those that we de-emphasize. So that's kind of the -- and the other one final comment would be in this very price-sensitive environment, we saw some customers opt for a lower-priced alternative, and as Nicolas said, we retained the margin by pricing up, which has caused the elasticity to be a little more negative than we'd first thought.

Your next question comes from the line of John Roberts with Buckingham Research.

What percent of your Fragrance capacity is used internally versus sold externally?

It's roughly -- John, this is Kevin. It's roughly 50/50. And you're specifically talking the Ingredients business when you asked that?

Correct. Yes, the back integration. And the Fragrance compound business, are they charged market price for what they use internally? Or do you transfer that to them at standard cost?

Well, we don't go into the details of what our transfer pricing methodology ultimately is, John. But we do have clarity in our strategic review in terms of the evaluation of what the costs are and how they flow through to the compound business to the extent that there are benefits there. And as you know, we only report at and track our business at the consolidated Fragrance BU level.

No, I know. I'm just trying to get -- as you review the Ingredients business, should you look at the 100% of the capacity on a market basis to review it versus maybe you might look at it more favorably if you used standard costing, for example.

We do both. That's part of our deep dive in terms of the work that's being done.

Okay. And then you had double-digit growth in the emerging markets, but in local currency, at least, Greater Asia is only up 1%, Latin America is up only 4%. Kind of where was the growth substantially above 10% to kind of weight average those up double-digit?

The double-digit number was for Flavors in terms of their emerging market growth. It was a lower number for the Fragrance business. Fragrance had softness across both the developed and emerging markets.

Was emerging market Fragrance roughly flat or?

Yes. It was actually both of them were under pressure.

And it largely was in the Ingredients side that caused that? Because again, Asia had pretty steep drop in Ingredients.

Certainly, that was part of it.

Your next question comes from the line of Mike Sison with KeyBanc.

In terms of the raw material pressures you're seeing in Fragrances, if I were to take out Fragrance Ingredients, is the pressure less on the other 2 segments? And I'm just curious if most of the pressure is really just on this one little business.

No, it's actually across the board that you're seeing. Impacting probably some categories more than some others, according to the portfolio and the mix of the Fragrances. And one thing that you have also to take into account is that the input costs in the Ingredients are then also flowing into our compound business. So you see the impact internally and you see it also from the portfolio of Ingredients we're buying directly on the outside.

It does sound like you're getting some pricing -- when you think about the 280-basis-point margin decline year-over-year for Fragrances, how much of that comes back as pricing flows through in the second quarter? And do you sort of make it all up by the end of the year?

Mike, this is Kevin. Our pricing initiatives continue to gain traction in the quarter so our effective pricing levels in Q1 are greater than what we saw in Q4. The combination of our continued hold on pricing and continued pricing actions, which then combined with a more moderate level of input costs increases over the balance of the year will translate into our gross margin profile starting to look more positive in Q2 and then continuing to improve over the course of the year.

Okay. And one real quick one for Hernan. When you sort of look to the second quarter and beyond, your sales growth was very good in the first quarter. It sounds like it's going to be very good in the second, third and fourth. Will your earnings growth start to mirror that type of growth and maybe improve as the year unfolds?

Yes. As was explained by Kevin and Doug, I think that we now start seeing the positive inflection point. I think that the pricing policy that we applied together with the departure of low-margin business will improve our gross margin performance. So I could say that it's going to be better. The second half or even the second quarter will be better than today, the first quarter.

And there are no further questions at this time.

Thank you all very much for your participation. We look forward to having a further conversation in 3 months time. Thank you.

Thank you for joining today's conference. You may now disconnect.