A N N U A L R E PO R T 20 2 2
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Announced the next phase of our
strategic transformation by previewing
our refreshed strategic plan and new
operating model, developed through
an extensive assessment with
the Company’s senior leadership,
customers, investors and key partners.
Successfully completed the divestiture
of our Microbial Control business unit
and announced we have entered into an
agreement to sell our Savory Solutions
Group as we continuously evaluate our
portfolio to identify opportunities
to maximize shareholder value.
Externally recognized for achieving
sustainability leadership as we were
named to the Dow Jones Sustainability
Index for the third time and recognized
with CDP “A” score on climate change
for the eighth time.
Awarded the 2022 EcoVadis Platinum
sustainability rating for the second
time, placing IFF among the top 1%
of companies assessed.
Named for the first time to the 2022
Bloomberg Gender Equality Index
for our commitment to transparency
and setting a new standard in
gender-related data reporting.
Continued to strengthen our
commitment to diversity, equity &
inclusion as we are the first company
to receive Move-level certification
twice from EDGE, the leading global
assessment and business certification
for gender and intersectional equity.
Opened our new Singapore Innovation Center, our largest in the region and the
first in our global network of research, creative and application centers to integrate
the technologies, capabilities and expertise of all four business divisions.
FULL-YEAR 2022 RESU LTS
Company Financials
SALES
ADJ USTE D
OP ER ATING EBITDA*
$12.4 Billion
$2.5 Billion
ADJUST ED E PS *
$3.24
A DJU STED EP S
E X AM ORTIZATIO N*
$5.42
* Adjusted Operating EBITDA,
Adjusted EPS & Adjusted EPS
ex Amortization are Non-GAAP metrics.
Please see our GAAP to Non-GAAP
reconciliation in Exhibit A at the end
of this report.
Frank Clyburn Chief Executive Officer
D E A R FE LLOW S H A R E H O LD E R S ,
C U S TO M E R S & E M PLOY E ES
As I reflect on a year that was once again shaped by global uncertainty, I am constantly
reminded of the many instances in which IFFers around the world have risen above
these challenges to drive positive change, deliver results for our customers and create
exceptional experiences for the end-consumer.
and foremost—IFF has an incredible
foundation to build on our industry
leadership. But, to remain successful
and achieve our long-term vision,
it’s important that we continuously
evaluate both our strengths and
weaknesses, while considering
opportunities to improve our
performance and culture.
We introduced our
plan to transition from
our current divisional
structure to focus our
business around three
core end markets: Food
and Beverage, Home and
Personal Care and Health.
As I outlined at our December 2022
Investor Day, we introduced “Do What
Matters Most,” our refreshed strategic
plan and operating model that will
position our company for long-term
success. We are doubling down on
customer excellence, accelerating
productivity initiatives and undertaking
a portfolio optimization strategy, while
centering our business around the
highest-value opportunities. These
efforts will ensure IFF’s continued
ability to drive sustained, profitable
growth, meet and exceed customer
demand and continue fulfilling our
purpose of applying science and
creativity for a better world.
Our updated operating framework
will be guided by three key objectives
designed to support greater innova-
tion, efficiency and discipline in this
next chapter:
• Be The Premier Partner.
• Build Our Future.
• Become One IFF.
To become a more unified organiza-
tion and be “One IFF,” we are also
IFF continues to play an essential role
in the daily lives of so many people
around the world. For instance, when
a consumer grabs a yogurt from the
refrigerator, there’s a one-in-three
chance it was made with an IFF
probiotic. If someone is doing laundry
at home, there’s a 50% likelihood
their cold-water laundry detergent
was developed with an IFF cleaning
enzyme. Each day, I watch our
purpose unfold through the solutions,
products and experiences we create.
In 2022, our 24,000-strong global
team continued to push industry
boundaries and drive innovative
breakthroughs that deepen
our customer relationships and
Do More Good for our people
and planet.
I feel extremely fortunate to be part
of such a purpose-driven organization
that not only touches, but enriches the
lives of consumers across the globe.
At the same time, we also evaluated
who we are and who we want to
become as we continue to deepen
our role as an indispensable partner
in the consumer value chain. As many
of you know, I have spent much of the
last year engaging with customers,
partners and leaders across our
business to better understand what
we’re doing well and where we can
improve. From these important
conversations, I learned that—first
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simplifying our operations. We
introduced our plan to transition
from our current divisional structure
to focus our business around three
core end markets: Food and Beverage,
Home and Personal Care and Health.
As a leaner organization, IFF will
be better positioned to innovate,
streamline delivery and serve the
highest-value and highest-demand
markets. This is consistent with IFF’s
goal to Become the Premier Partner:
meeting customers where they are,
with innovative solutions that enhance
the consumer experience.
In line with this customer-first
approach, we also established a
Center of Commercial Excellence,
backed by a team intensely focused
on enhancing our sales capabilities
and providing a more holistic customer
experience. This group is focused on
leveraging IFF’s full product portfolio
while enhancing our sales execution
to unleash greater opportunities for
our customers.
Our robust R&D capabilities continued
to prove a strong advantage in 2022,
with significant new technologies
introduced across the portfolio. Our
cutting-edge probiotics research is
driving improvements in gut health,
while we harness the power of scent
modulation for applications that
increase cognition, memory and
sleep. R&D has long been central to
our progress and operations, and our
renewed focus in this area will only
make our offerings stronger. Alongside
these key strategic initiatives, we are
evolving our Board of Directors in
line with best-in-class corporate
governance standards to ensure that
IFF has the optimal support and
oversight to advance our growth and
transformation, while upholding our
commitment to being a force for
good. As part of our Board refresh,
we will continue to add additional
outside senior executives with specific
management, strategy and operations
expertise relevant to IFF’s current
profile.
We are on a mission to not only be the
premier partner for our customers,
but also the most responsible partner
for our communities and the planet.
That is why we have taken steps
to embed ESG+ priorities across
our entire enterprise to reaffirm
and strengthen our commitment to
managing our environmental footprint
and making a positive impact on the
communities in which we operate.
Since we launched our Do More Good
Plan in December of 2021, we have
made incredible progress. Over the
last year, we continued to execute
on our climate and planetary health,
equity and well-being, transparency
and accountability, and sustainable
solutions objectives to ensure we
remain positioned to win in the
sustainability market. In December of
R&D has long been
central to our progress
and operations, and our
renewed focus in this
area will only make our
offerings stronger.
3
this year, IFF received P&G’s inaugural
Supplier Sustainability Award, which
honors business partners who
champion environmental sustainability
and commit to protecting the planet.
Our people are our power at IFF,
and we work hard to create an
environment where every IFFer can
thrive. In 2022, IFF also received
Move-level certification from
Economic Dividend for Gender
Equality (EDGE), the leading global
assessment and business certification
for gender and intersectional equality.
The assessment encompassed 27
countries, giving IFF the added
distinction of having the largest
number of EDGE-certified countries at
one time. In addition, our achievement
marks the first – and currently only
time – a company has earned this
level of recognition twice.
Finally, IFF continued to deliver strong
financial results, including top and
bottom-line growth in 2022, despite
the volatile market environment.
For the full year, IFF delivered $12.4
billion in sales and adjusted operating
EBITDA* of $2.5 billion. Looking ahead,
as was previewed at our Investor Day,
we expect annual sales to grow 4% to
6% on average and adjusted operating
EBITDA* growth of 8% to 10% on a
comparable currency neutral basis**
in 2024—2026.***
productivity initiatives in the second
half of the year to strengthen our
business and improve our profitability.
With these initiatives, IFF is targeting
approximately $350-400 million in net
annualized savings from 2023-2025.
These necessary actions will allow
us to maintain our financial strength
and reinvest in our highest-value
opportunities to accelerate long-term
profitable growth.
Looking ahead to the next phase of
our transformation, I am energized by
the unique opportunity in front of us.
IFF has built an incredible foundation
as a trusted partner with world-class
talent, a robust R&D pipeline and
broad portfolio. I am confident that
our refreshed strategic framework and
new operating model will allow IFF to
increase our customer centricity, more
closely align with today’s marketplace
and deliver most efficiently for our
customers around the world.
All of us at IFF are more committed
than ever to challenging expectations
and redefining the possibilities of
our industry. I am confident that
together, we have everything we
need to achieve this as we commit
to Do What Matters Most.
Thank you.
As the global supply chain remains
challenged, we introduced enhanced
Frank Clyburn
Chief Executive Officer
IFF has built an
incredible foundation
as a trusted partner
with world-class talent,
a robust R&D pipeline
and broad portfolio.
* Adjusted Operating EBITDA is a Non-GAAP
metric. Please see our GAAP to Non-GAAP
reconciliation in Exhibit A at the end of
this report.
** Currency Neutral metrics eliminate the effects
that result from translating non-U.S. currencies
to U.S. dollars. We calculate currency neutral
numbers by translating current year invoiced
sale amounts at the exchange rates used for
the corresponding prior year period.
*** The Company cannot reconcile its forward-
looking comparable currency neutral Adjusted
Operating EBITDA without unreasonable
effort because certain items that impact net
income and other reconciling metrics are
out of the Company’s control and/or cannot
be reasonably predicted at this time. These
items include but are not limited to gains
(losses) on sale of fixed assets, shareholder
activism related costs, business divestiture
costs (including the anticipated Savory
Solutions divestiture), employee separation
costs, N&B inventory step-up costs, N&B
transaction related costs, integration related
costs and the impact of the merger with N&B.
4
Cautionary Statement Under The Private Securities
Litigation Reform Act of 1995
This letter includes “forward-looking statements” under the Federal
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are qualified in their entirety by cautionary statements
and risk factor disclosures contained in the Company’s Securities
and Exchange Commission (“SEC”) filings, including the Company’s
Annual Report on Form 10-K filed with the SEC on February 27, 2023
and subsequent filings with the SEC. The Company wishes to caution
readers that certain important factors may have affected and could in the
future affect the Company’s actual results and could cause the Company’s
actual results for subsequent periods to differ materially from those
expressed in any forward-looking statements made by or on behalf of
the Company. New risks emerge from time to time and it is not possible
for management to predict all such risk factors or to assess the impact
of such risks on the Company’s business. Accordingly, the Company
undertakes no obligation to publicly revise any forward-looking statements,
whether as a result of new information, future events, or otherwise.
10-K
International Flavors & Fragrances
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
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
(State or other jurisdiction
of incorporation or organization)
13-1432060
(I.R.S. Employer Identification No.)
521 West 57th Street, New York, NY 10019-2960
200 Powder Mill Road, Wilmington, DE 19803-2907
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (212) 765-5500
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class
Common Stock, par value 12 1/2¢ per share
1.750% Senior Notes due 2024
1.800% Senior Notes due 2026
Trading Symbol
IFF
IFF 24
IFF 26
Name of Each Exchange on Which Registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
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 the 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
Non-accelerated filer
☑
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by checkmark 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 has filed a report on and attestation to its management's assessment of the effectiveness of
its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The aggregate market value of the voting stock held by non-affiliates of the Registrant was $30,369,016,357 as of June 30, 2022.
As of February 21, 2023, there were 255,061,711 shares of the registrant’s common stock, par value 12 1/2¢ per share, outstanding.
Portions of the registrant’s proxy statement for the 2023 Annual Meeting of Shareholders (the “IFF 2023 Proxy Statement”) are
incorporated by reference in Part III of this Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
INTERNATIONAL FLAVORS & FRAGRANCES INC.
TABLE OF CONTENTS
ITEM 1. Business
ITEM 1A. Risk Factors
ITEM 1B. Unresolved Staff Comments
ITEM 2. Properties
ITEM 3. Legal Proceedings
ITEM 4. Mine Safety Disclosures
PART I
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
ITEM 6.
[Reserved]
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 8. Financial Statements and Supplementary Data
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
ITEM 9A. Controls and Procedures
ITEM 9B. Other Information
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance
ITEM 11. Executive Compensation
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
ITEM 13. Certain Relationships and Related Transactions and Director Independence
ITEM 14. Principal Accountant Fees and Services
ITEM 15. Exhibits and Financial Statement Schedules
PART IV
ITEM 16. Form 10-K Summary
SIGNATURES
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PART I
In this report, we use the terms “IFF,” “the Company,” “we,” “us” and “our” to refer to International Flavors & Fragrances
Inc. and its subsidiaries.
ITEM 1.
BUSINESS.
We are a leading creator and manufacturer of food, beverage, health & biosciences, scent and pharma solutions and
complementary adjacent products, including cosmetic active and natural health ingredients, which are used in a wide variety of
consumer products. Our products are sold principally to manufacturers of dairy, meat, beverages, snacks, savory, sweet, baked
goods and other foods, personal care products, soaps and detergents, cleaning products, perfumes and cosmetics, dietary
supplements, food protection, infant and elderly nutrition, functional food, pharmaceutical and oral care products. As a result,
we hold global leadership positions in the Food & Beverage, Home & Personal Care and Health & Wellness markets, and
across key Tastes, Textures, Scents, Nutrition, Enzymes, Cultures, Soy Proteins, Pharmaceutical Excipients and Probiotics
categories.
Sales in 2022 were approximately $12.440 billion. Based on 2022 sales, approximately 42% of sales were to global
consumer products companies and approximately 58% of sales were to small and mid-sized companies. During 2022, our 25
largest customers accounted for 28% of sales. In 2022, no customer accounted for more than 10% of sales.
Our business is geographically diverse, with sales in the U.S. representing approximately 29% of sales in 2022. No other
country represented more than 6% of sales.
Our Product Offerings
Our business currently consists of four segments: Nourish, Health & Biosciences, Scent and Pharma Solutions. As part of
our ongoing transformation and business initiatives, we intend to reorganize our segments around end markets: Food &
Beverage, Household & Personal Care and Health.
Nourish
As a leading creator of ingredients and solutions, we help our customers deliver on the promise of healthy and delicious
foods and drinks that appeal to consumers. We create products in our regional creative centers which allows us to satisfy local
customer preferences, while also helping to ensure regulatory compliance and production standards. We develop thousands of
different Nourish offerings, most of which are tailor-made, and we continually develop new ingredients and solutions to meet
changing consumer preferences and customer needs.
Our Nourish segment consists of an innovative and broad portfolio of natural-based ingredients to enhance nutritional
value, texture and functionality in a wide range of beverage, dairy, bakery, confectionery and culinary applications and consists
of three business units: Ingredients, Flavors and Food Designs.
Ingredients include a diversified portfolio across natural and plant-based specialty food ingredients derived from herbs and
plants that provide texturizing solutions used in the food industry, food protection solutions used in food and beverage products,
as well as specialty soy and pea protein with value-added formulations, emulsifiers and sweeteners. Natural food protection
ingredients consist of natural antioxidants and anti-microbials used for natural food preservation and shelf-life extension for
beverages, cosmetic and healthcare products, pet food and feed additives.
Flavors include a range of flavor compounds and natural taste solutions that are ultimately used by our customers in savory
products (soups, sauces, meat, fish, poultry, snacks, etc.), beverages (juice drinks, carbonated or flavored beverages, spirits,
etc.), sweets (bakery products, candy, cereal, chewing gum, etc.), and dairy products (yogurt, ice cream, cheese, etc.). Flavors
also include value-added spices and seasoning ingredients for meat, food service, convenience, alternative protein and culinary
products.
Food Designs include savory solution products such as spices, sauces, marinades and mixtures. During the fourth quarter
of 2022, we announced our entry into an agreement to sell the Savory Solutions Group. We expect that the transaction will
close in the second quarter of 2023, subject to customary closing conditions. Additionally, Food Designs provide inclusion
products that help with taste and texture by, among other things, combining flavorings with fruit, vegetables and other natural
ingredients for a wide range of food products, such as health snacks, baked goods, cereals, pastries, ice cream and other dairy
products.
3
Health & Biosciences
Our Health & Biosciences segment consists of the development and production of an advanced biotechnology-derived
portfolio of enzymes, food cultures, probiotics and specialty ingredients for food and non-food applications. Among many other
applications, this biotechnology-driven portfolio includes cultures for use in fermented foods such as yogurt, cheese and
fermented beverages, probiotic strains, many with documented clinical health claims for use as dietary supplements and
through industrial fermentation the production of enzymes and microorganisms that provide product and process performance
benefits to household detergents, animal feed, ethanol production and brewing. Health & Biosciences is comprised of five
business units: Health, Cultures & Food Enzymes, Home & Personal Care, Animal Nutrition and Grain Processing. On July 1,
2022, we completed the divestiture of our Microbial Control business unit (formerly a part of the Health & Biosciences
segment).
Health provides ingredients for dietary supplements, functional food and beverage, specialized nutrition and pharma.
Cultures & Food Enzymes provides products that aim to serve the global demand for healthy, natural, clean label and
fermented food for fresh dairy, cheese, bakery and brewing products. Such products contribute to extended shelf life, stability,
taste and texture, helping our customers to improve their product offerings. The business’s enzyme solutions also allow our
customers to provide low sugar, high fiber and lactose-free dairy products.
Home & Personal Care produces enzymes for laundry and dishwashing detergents, cleaning and textiles to help enhance
the product and process performance of products in the fabric and home care, textiles and industrials and personal care markets.
Animal Nutrition produces feed enzymes and animal health solutions that help to improve welfare, performance and
sustainability of livestock animal farming.
Grain Processing produces yeasts and enzymes for biofuel production and carbohydrate processing.
Scent
Our Scent segment creates fragrance compounds, fragrance ingredients and cosmetic ingredients that are integral elements
in the world’s finest perfumes and best-known household and personal care products. Consumer insights science and creativity
are at the heart of our Scent business, and, along with our unique portfolio of natural and synthetic ingredients, global footprint,
innovative technologies and know-how, and customer intimacy, we believe make us a market leader in scent products. The
Scent segment is comprised of three business units: Fragrance Compounds, Fragrance Ingredients and Cosmetic Actives.
Fragrance Compounds are unique and proprietary combinations of multiple fragrance ingredients that are ultimately used
by our customers in their consumer goods. Our creative and commercial teams within fragrance compounds are organized into
two broad categories: fine fragrances and consumer fragrances.
Our perfumers harness creativity and leverage our innovative captive molecules, sustainable natural ingredients obtained
with innovative processes, biotech ingredients, data science, and consumer insights to create unique and inspiring fragrances
driving consumer preferences.
Our fine fragrances focus on perfumes and colognes, creating global and local namesake brands, from high luxury to mass
market, from market leading to ultra-niche products.
Our consumer fragrances include three end-use categories of products:
• Fabric Care, including laundry detergents, fabric softeners and specialty laundry products;
• Home Care, including household cleaners, dishwashing detergents and air fresheners; and
• Body Care, including personal wash, hair care and toiletries products.
Fragrance Ingredients are natural and synthetic, and active and functional ingredients that are used internally and sold to
third parties, including competitors, for use in the preparation of compounds. While the principal role of our fragrance
ingredients facilities is to support our fragrance compounds business, we utilize excess manufacturing capacity to manufacture
and sell certain fragrance ingredients to third parties, enabling us to leverage our fixed costs while maintaining the security of
our supply for our perfumers and ultimately our customers. Flavor ingredients include natural flavor extracts, specialty
botanical extracts, distillates, essential oils, citrus products, aroma chemicals and natural gums and resins. Such ingredients are
used for food, beverage and flavors, and are often sold directly to food and beverage manufacturers who use them in producing
consumer products.
Cosmetic Actives designs, develops, manufactures and markets innovative ingredients for the cosmetics and personal care
industry, while offering active ingredients, functional ingredients, and delivery systems.
4
Pharma Solutions
Our Pharma Solutions segment produces, among other things, a vast portfolio of cellulosics and seaweed-based
pharmaceutical excipients, used to improve the functionality and delivery of active pharmaceutical ingredients, including
controlled or modified drug release formulations, and enabling the development of more effective pharmaceutical finished
dosage formulations. Our excipients are used in prescription and over-the-counter pharmaceuticals and dietary supplements.
Our Pharma Solutions products also serve a variety of other specialty and industrial end-uses including coatings, inks,
electronics, agriculture, and consumer products.
Consumer Insights, Research and Product Development Process
The markets in which we compete require constant innovation to remain competitive. Consumer preferences tend to drive
change in our markets, and as science evolves and sustainability continues to be a key factor to customers and consumers, we
must continue to strengthen our research and development platforms and adapt our capabilities to provide differentiated
products.
Consumer Insights
We believe that the first step to creating an innovative and unique product experience begins with gaining insight into the
consumer and emerging industry trends. By developing a deep understanding of what consumers value and prefer through our
consumer insight programs, we are better able to focus our research and development and creative efforts.
Our consumer science, insight and marketing teams interpret trends, monitor product launches, analyze quantitative market
data and conduct numerous consumer interviews annually.
Based on this information, we develop innovative and proprietary programs to evaluate potential products that enable us to
understand the emotional connections between a prospective product and the consumer. We believe this ability to pinpoint the
likelihood of a product’s success translates into stronger brand equity, resulting in increased returns and greater market share
gains for our customers as well as for IFF.
Research and Development
We consider our research and development infrastructure to be one of our key competencies and critical to our ability to
provide differentiated products to our customers. We have strong product and application development pipelines built upon a
global network that includes research and development, as well as regulatory and product stewardship capabilities.
We focus and invest substantial resources in the research and development of new and innovative molecules, compounds,
formulations and technologies and the application of these to our customers’ products. Using the knowledge gained from our
consumer insights programs and business unit needs, we strategically focus our resources around key research and development
platforms that address or anticipate consumer needs or preferences. Our innovation-based platforms are aligned with key
consumer insight-led growth themes: improving home and personal care, empowering wellbeing and healthy lives,
transforming food systems and accelerating climate solutions. By aligning our capabilities and resources to these platforms, we
ensure the proper support and focus for each program so that our products can be further developed and eventually accepted for
commercial application.
As of December 31, 2022, we have 940 granted U.S. patents, and 546 pending U.S. patent applications, as well as
numerous other granted patents and pending patent applications around the world. We have developed many unique molecules
and delivery systems for our customers that are used as the foundations of successful products around the world.
Our principal basic research and development activities are located in Union Beach, New Jersey; Wilmington, Delaware;
Palo Alto, California; Brabrand, Denmark; and Leiden, The Netherlands. At those locations, our scientists and application
engineers, while collaborating with our other research and development centers around the world, support the:
• discovery of new materials;
• development of new technologies, such as delivery systems;
• creation of new compounds; and
• enhancement of existing ingredients and compounds.
As of December 31, 2022, we employed approximately 3,200 people globally in research and development activities.
5
Creative Application
Through our global network of creative centers and application laboratories, we create or adapt the basic Nourish, Health &
Biosciences, Scent and Pharma Solutions products that we have developed in the research and development process to
commercialize for use in our customers’ consumer products. Our global creative teams consist of marketing, consumer science,
consumer insights and technical application experts, from a wide range of cultures and nationalities. In close partnership with
our customers’ product development groups, our creative teams create the experiences that our customers are seeking in order
to satisfy consumer demands in each of their respective markets.
New product development is driven by a variety of sources including requests from our customers, who are in need of
specific products for use in a new or modified consumer product, or as a result of internal initiatives stemming from our
consumer insights program. Our product development team works in partnership with our scientists and researchers to optimize
the consumer appeal and relevance of our offerings. We use a collaborative process between our researchers, our product
development team and our customers to perfect our offerings so they are ready to be included in the final consumer product.
In addition to creating new products, our researchers and product development teams advise customers on ways to improve
their existing products by moderating or substituting current ingredients with more readily accessible or less expensive
materials enhancing their yield. This often results in creating a better value proposition for our customers.
Most of our formulas are treated as trade secrets and remain our proprietary assets. Our business is not materially
dependent upon any individual patent, trademark or license.
Center for Commercial Excellence
Our recently established Center for Commercial Excellence utilizes a holistic and centralized approach towards
commercial execution by, among other things:
• Unlocking value through improved customer experience based on market, customer and pricing insights, digital and
advanced analytics, sales enablement, and marketing excellence;
• Building further sales force capability to deliver growth targets, own the end-to-end process, and deliver sales
synergies using CRM systems, pricing tools, segmentation models, commercial opportunity management, account plan
development, training, and incentive plans;
• Evaluating and driving new business development opportunities, including analyzing potential markets, assessing
client needs, and identifying competitor response strategies; and
• Strengthening collaboration across divisions by collecting and disseminating best practices and anchoring business
decisions in data-driven insights.
Supply Chain
We strive to provide our customers with consistent and quality products on a timely and cost-effective basis by managing
all aspects of the supply chain, from raw material sourcing through manufacturing, quality assurance, regulatory compliance
and distribution.
Procurement
In connection with the manufacture of our products, we use natural and synthetic ingredients. As of December 31, 2022,
we purchased approximately 30,000 different raw materials sourced from an extensive network of domestic and international
suppliers and distributors.
Natural ingredients are derived from flowers, fruits and other botanical products, as well as from animal and marine
products, and commodity crops like wheat, corn and soy. They contain varying numbers of organic chemicals that are
responsible for the fragrance, flavor, antioxidant properties and nutrition of the natural products. Natural products are purchased
directly from farms or in processed and semi-processed forms. Some natural products are used in compounds in the state in
which they are obtained and others are used after further processing. Natural products, together with various chemicals, are also
used as raw materials for the manufacture of synthetic ingredients by chemical processes.
In order to ensure our supply of raw materials, achieve favorable pricing and provide timely transparency regarding
inflationary trends to our customers, we continue to focus on:
• purchasing under contract with fixed or formula-based pricing for set time periods;
• entering into hedging for raw materials we purchase that can be hedged against liquid commodity assets;
• entering into supplier relationships to gain access to supplies we would not otherwise have;
•
•
reducing the complexity of our formulations;
implementing indexed pricing;
6
• evaluating the profitability of whether to buy or make an ingredient; and
• sourcing from local countries with our own procurement professionals.
Manufacturing and Distribution
As of December 31, 2022, we had approximately 220 manufacturing facilities, creative centers and application laboratories
located in approximately 45 different countries. Our major manufacturing facilities are located in the United States, The
Netherlands, Spain, Germany, Indonesia, Turkey, Brazil, Mexico, Slovenia, China, India, Ireland, Finland, Denmark, Belgium
and Singapore.
During the last few years, we undertook an initiative to optimize our global operations footprint to efficiently and cost-
effectively deliver value to our global customers. Since inception of the initiative, we completed the closure of 22 sites. By the
completion of this initiative, targeted to occur by the end of 2023, we expect to close approximately 30 manufacturing sites.
Our supply chain initiatives are focused on increasing capacity and investing in key technologies. Within our more mature
markets, we tend to focus on consolidation and cost optimization as well as the implementation of new technologies. In addition
to our own manufacturing facilities, we develop relationships with third parties, including contract manufacturing
organizations, that expand our access to the technologies, capabilities and capacity that we need to better serve our customers.
For more detailed information about risks related to our supply chain, please refer to Item 1A, “Risk Factors” – Supply
chain disruptions, geopolitical developments, including the Russia-Ukraine conflict, or climate change events (including severe
weather events) may adversely affect our suppliers or our procurement of raw materials, and thus may impact our business and
financial results.
Environmental, Social, and Governance
Following the integration with Nutrition and Biosciences, Inc. (“N&B”), we launched a refreshed and comprehensive
Environmental, Social, and Governance (“ESG”) roadmap, the ‘Do More Good Plan’ (“the Plan”), which aligns with IFF’s
purpose of applying science and creativity for a better world. The Plan includes ambitious 2030 goals across four key areas:
Environmental, Social, Governance and Sustainable Solutions.
Environmental: Climate & Planetary Health
Supporting environmental stewardship across our operations, including commitments to climate action, zero waste to
landfill, water stewardship solutions and an acceleration of our responsible sourcing practices by promoting regenerative
ecosystems and achieving zero deforestation for strategic raw material supply chains.
Social: Equity & Wellbeing
Advancing our commitment to people and communities by strengthening diversity, equity & inclusion within our
workforce, while continuously improving our safety program by striving for an injury-free workplace, and achieving world-
class safety performance. Within our responsible sourcing program, the Company will continue to promote human rights and
animal welfare, while supporting farmers’ livelihoods and ensuring prosperous and equitable value chains.
Governance: Transparency & Accountability
Continuing our commitment to good governance which starts with our Board and Executive Committee and is supported
by a strong governance framework, including having a robust program to ensure compliance with our Codes of Conduct and
adherence to the highest standards of ethics, integrity, honesty and respect in our dealings internally and with our business
partners. To enhance accountability in line with evolving stakeholder expectations, the Company has launched ESG metrics tied
to executive compensation, while expanding oversight for ESG at the Board of Directors level.
Sustainable Solutions
Focusing on the sustainability value proposition and growth for all new innovations as we assist customers in achieving
their own ESG goals by delivering an expanded suite of sustainable solutions for the market.
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In 2022, our Company continued to achieve notable recognitions in these areas. We qualified as a constituent of the Dow
Jones Sustainability Indices for the third consecutive year, a family of best-in-class benchmarks for investors who recognize
that sustainable business practices are critical to generating long-term shareholder value. Once again named to both the 2022
World Index and the North America Index, this distinction validates IFF’s leadership position in sustainability performance and
underscores our commitment to executing on key ESG priorities. IFF was also recognized by the Human Rights Campaign as a
2022 Best Place to Work for LBGTQ Equality and named among the 2022 Best Places to Work for Disability Inclusion by
Disability:IN, for the fourth and third consecutive years, respectively. In 2022, we were named to the CDP “A List” for
corporate transparency and action on climate change for the eighth consecutive year, and we also maintained a leadership
position on CDP’s lists for water security and forests. We were also awarded the 2022 EcoVadis Platinum sustainability rating
for the second time, placing IFF among the top 1% of companies assessed. IFF continues to be listed in the FTSE4Good Index
series as well as in the Euronext Vigeo World 120 Index for ESG performance.
In addition, in 2022 IFF further aligned with the recommendations of the Task Force on Climate-Related Financial
Disclosures (TCFD) by initiating the first phase of a climate scenario analysis to understand and quantify the potential risks and
opportunities related to climate change. For more detailed information about our ESG programs and performance, please refer
to our annual ESG report.
Governmental Regulation
We develop, produce and market our products in a number of jurisdictions around the world and are subject to federal,
regional and local legislation and regulations in various countries. Our products, which among other industries, are intended for
use in food, beverage, pharmaceutical and dietary supplements, home and personal care, feed, cosmetics industries, are subject
to strict quality and regulatory standards and environmental laws and regulations. We in turn are required to meet strict
standards which, in recent years, have become increasingly stringent and affect both existing as well as new products. While the
cost of compliance with such laws and regulations leads to higher overall capital expenditure, which can be significant in
certain periods, we do not currently anticipate any material capital expenditures necessary to comply with such laws and
regulations. We continue to monitor existing and pending laws and regulations and while the impact of regulatory changes
cannot be predicted with certainty, compliance has not had, and is not expected to have a material adverse effect on capital
expenditure, earnings or competitive position.
Our products and operations are subject to regulation by governmental agencies in each of the markets in which we
operate. These agencies include (1) the Food and Drug Administration and equivalent international agencies that regulate
flavors, pharmaceutical excipients and other ingredients in consumer products, (2) the Environmental Protection Agency and
equivalent international agencies that regulate our manufacturing facilities, as well as fragrance products (including
encapsulation systems), (3) the Occupational Safety and Health Administration and equivalent international agencies that
regulate the working conditions in our manufacturing, research laboratories and creative centers, (4) local and international
agencies that regulate trade and customs, (5) the Drug Enforcement Administration and other local or international agencies that
regulate controlled chemicals that we use in our operations, (6) the Chemical Registration/Notification authorities that regulate
chemicals that we use in, or transport to, the various countries in which we manufacture and/or market our products, and (7) the
U.S. Department of Agriculture and equivalent international authorities with respect to, among other things, labeling of
consumer products. We have seen an increase in registration and reporting requirements concerning the use of certain chemicals
in a number of countries, such as Registration, Evaluation, Authorization and Restriction of Chemicals (“REACH”) regulations
in the European Union, as well as similar regulations in other countries.
In addition, we are subject to various rules relating to health, work safety and the environment at the local and international
levels in the various countries in which we operate. Our manufacturing facilities throughout the world are subject to
environmental standards relating to air emissions, sewage discharges, the use of hazardous materials, waste disposal practices
and clean-up of existing environmental contamination. In recent years, there has been an increase in the stringency of
environmental regulation and enforcement of environmental standards, and the costs of compliance have risen significantly, a
trend we expect will continue in the future.
For more detailed information about risks related to governmental regulation applicable to the Company, please refer to
Item 1A, “Risk Factors” – If we are unable to comply with regulatory requirements and industry standards, including those
regarding product safety, quality, efficacy and environmental impact, we could incur significant costs and suffer reputational
harm which could adversely affect results of operations.
8
Competition
The markets for our products are part of a larger market that supplies a wide variety of ingredients and compounds used in
consumer products. The broader market includes functional foods and food additives, including seasonings, texturizers, spices,
cultures, enzymes, probiotics, certain food-related commodities, and fortified products, as well as natural ingredients,
nutritional ingredients, supplements and active cosmetic ingredients. Our acquisitions have also expanded our reach in products
within the functional food ingredient market, including ingredients focused on improving the health and wellness characteristics
of a consumer good, the dietary supplement, pharmaceutical ingredient, infant nutrition markets and the cosmetic actives
market.
The global market for our products has expanded, primarily as a result of an increase in demand for, and an increase in the
variety of, consumer products.
The market for our products is highly competitive. Our main competitors consist of (1) other large global companies, such
as Givaudan, Firmenich Symrise, DSM, Kerry, ADM, Novozymes, Chr. Hansen, (2) mid-sized companies, (3) numerous
regional and local manufacturers and (4) consumer product companies who may develop their own competing products.
We believe that our ability to create products with the sustainability related attributes customers expect and compete
successfully in the various sub-market is based on:
innovation and technological advances from our research and development activities and, as applicable, our scientists,
• our in-depth understanding of consumers,
• vertical integration,
•
• our ability to tailor products to customers’ needs,
• our ability to manufacture products on a global scale, and
• broad-based regulatory capabilities.
In certain industries, large multi-national customers and, increasingly, mid-sized customers, may limit the number of their
suppliers by placing some on “core lists,” giving them priority for development and production of their new or modified
products. To compete more successfully, we must make continued investments in customer relationships and tailor our research
and development efforts to anticipate customers’ needs, provide effective service and secure and maintain inclusion on these
“core lists.”
Private label manufacturers, mostly medium-sized, local or small food manufacturers, constitute a growing segment in
certain markets where we are active. Over the last decade, with the strengthening of supermarket chains, online platforms and
growing consumer price consciousness, consumption of private label products has grown at a faster rate than the brand food
industry rate. We believe that new business opportunities will continue to arise from these clients as they are increasing their
demand for products that are similar to existing products in the market, distinctive premium products, as well as more
innovative products.
Our People
The success of our business is built on our talented employees. At December 31, 2022, we had approximately 24,600
employees worldwide, of whom approximately 5,500 are employed in the United States. Our workforce plans and talent
management programs support our employees to best deliver the business strategy and ensure their development and
engagement.
Culture and Values
Our culture is based on our five corporate values of empowerment, expertise, innovation, integrity and responsibility, and
the expression of these values can be seen and felt throughout our history. Our employees appreciate that they contribute to
products that touch and enhance the lives of millions of people around the world. Our robust culture ambassador programs
continue to engage a broad portion of the IFF community in building common identity and shared purpose and strengthen
engagement and motivation by providing programming on IFF values and providing recognition of individuals who exemplify
them.
9
Leadership and Development
Our leadership development efforts empower employees to become forward-looking, inspiring and capable decision-
makers, agents of change and great leaders. A full portfolio of proprietary leadership development programs and an overarching
talent management system is in place to support growth of leaders and at all levels. To cultivate our employees’ talent and build
sustainable long-lasting careers at IFF, we provide tools that enable our employees to envision their career journeys in the form
of articulated career “ladders” and “frameworks”. We offer corresponding development opportunities to include specialized
courses for employees globally by partnering with leading institutions and universities to help provide the latest training and
development offerings at all levels. We also offer to our employees an extensive library of on-demand courses and materials on
leadership, management and professional skills development. Those learning resources are integrated into our human capital
platform, allowing managers and employees to establish digitalized learning plans that are ultimately captured as a part of their
employee profile. Further, those offerings complement our talent acquisition strategy and organized and personalized feedback
process, supported by industry-leading assessment tools.
Diversity, Equity, & Inclusion (DE&I)
Our DE&I vision: “Your Uniqueness Unleashes Our Potential.” sets the tone for our colleagues to be empowered to bring
their whole authentic selves to work. To this end, we are dedicated to nurturing a truly inclusive and equitable culture through
the three pillars of our DE&I mission:
• Our People embody the mosaic of the markets we serve and are empowered to transform the future;
• Our Spirit nurtures an inclusive and fair culture where every voice is valued and heard; and
• Our World embraces diversity of thought and strives to do more good, creating a better future for all.
In 2022, the IFF DE&I program continued to grow in reach and impact. We continued our commitment of gender equality
using the Economic Dividends for Gender Equity Methodological Framework, a leading global gender equity benchmark and
certification. IFF was the first company ever to retain a global “Move” rating from the Edge Certified Foundation, this time
across the harmonized company and 27 countries up from 22 countries. IFF also achieved an Edge Plus rating for
intersectionality inclusion. IFF was also named for the first time to the 2022 Bloomberg Gender Equality Index recognizing,
among other things, our commitment to transparency. IFF was also listed as a “Best Place to Work for Disability Inclusion” for
the second consecutive year with a 100% score. The AccessAbilities colleague community continued to push forward
awareness and inclusive behaviors for persons with disabilities. Moreover, IFF maintained our “Best Place to Work for
LGBTIQ+ Equality” with 100% scores in Human Rights Campaign Corporate Equality Index and the HRC Equidad Mexico
and also achieved a Bronze Level recognition form the India Workplace Equality Index. Throughout 2022, our employee
resource groups known as “colleague communities” continued to thrive and mature. Our communities; Women@IFF, Prisma,
Black Excellence, IFF Unidos, ACE, AccessAbilities, NextGen@IFF and SERVE (which supports veteran and first responder
issues), hosted several events throughout the year and continued to expand their footprint around the globe through chapter
development & new members. In 2022, our second annual Global Inclusion Week delivered over 5,000 hours of training further
advancing our journey towards inclusion.
Occupational Health & Safety
Employee safety is one of the cornerstones of our business. Our occupational health and safety management system
requires and encourages employees and supervised contractors at sites globally to uphold IFF’s protocols, report any incidents
and suggest improvements that improve the safety of work sites. Our safety management system is based on U.S. Occupational
Safety and Health Administration (“OSHA”) standards which apply to all of our sites in conjunction with any local regulations.
To work toward a safer workplace, we have put in place a set of protocols and programs related to three areas of focus: (a)
safety governance (setting and updating comprehensive safety policies and procedures), (b) safety training of employees based
on IFF policies and local requirements, and (c) safety culture characterized by awareness and communication. In response to
the novel coronavirus (“COVID-19”) pandemic, and while following the requirements of local authorities, we have developed
protocols and mandatory site guidelines to continue to protect the health and safety of employees at each location.
Availability of Reports
We make available free of charge on or through the “Investors” link on our website, www.iff.com, all materials that we file
electronically with the Securities and Exchange Commission (“SEC”), including our annual report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after electronically filing
such materials with, or furnishing them to, the SEC. During the period covered by this Form 10-K, we made all such materials
available through our website as soon as reasonably practicable after filing such materials with the SEC.
The SEC maintains an Internet website, www.sec.gov, that contains reports, proxy and information statements and other
information that we file electronically with the SEC.
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A copy of our By-Laws, Corporate Governance Guidelines, Codes of Conduct, and the charters of the Audit Committee,
Human Capital & Compensation Committee, Governance & Corporate Responsibility Committee and Innovation Committee of
the Board of Directors are posted on the “Investors” section of our website, www.iff.com.
Our principal executive offices are located at 521 West 57th Street, New York, New York 10019 and 200 Powder Mill
Road, Wilmington, Delaware 19803.
Executive Officers of Registrant
The current executive officers of the Company, as of February 27, 2023, are listed below.
Name
Frank Clyburn
Age Position
58 Chief Executive Officer and member of our Board of Directors
Executive Vice President, Chief Human Resources, Diversity & Inclusion and Communications
Officer
Deborah Borg
Michael DeVeau
Ralf Finzel
Simon Herriott
Jennifer Johnson
Ana Paula Mendonça
Glenn Richter
Angela Strzelecki
Vic Verma
Christophe Fauchon de Villeplee 58 President, Scent
46
42 Senior Vice President, Corporate Finance and Investor Relations
59 Executive Vice President, Global Operations Officer
59 President, Health & Biosciences
48 Executive Vice President, General Counsel and Corporate Secretary
54 Senior Vice President, Commercial Excellence
61 Executive Vice President and Chief Financial & Business Transformation Officer
56 President, Pharma Solutions
54 Executive Vice President, Chief Information Officer
Gregory Yep
57
Executive Vice President, Chief Research & Development, Global Integrated Solutions &
Sustainability Officer
Frank Clyburn has served as our Chief Executive Officer and a member of our Board of Directors since February 14, 2022.
Mr. Clyburn joined us from Merck, where he served as Executive Vice President and President of Human Health. While at
Merck since 2008, Mr. Clyburn held a number of positions, including Chief Commercial Officer, inaugural president of the
company’s Global Oncology business, and President of the Primary Care and Women’s Health businesses. Before joining
Merck, Mr. Clyburn was Vice President of the Oncology and Internal Medicine business units at Sanofi Aventis and held a wide
range of leadership roles with that company.
Deborah Borg has served as our Executive Vice President, Chief Human Resources, Diversity & Inclusion and
Communications Officer since August 29, 2022. Ms. Borg joined IFF from Bunge Limited, where she served as Chief Human
Resources and Communications Officer since 2016. Prior to joining Bunge, she served in a variety of business leadership and
Human Resources roles in Australia, Switzerland and the U.S. for Dow Chemical between 2000 and 2015. She began her career
at General Motors Australia.
Michael DeVeau has served as our Senior Vice President, Corporate Finance and Investor Relations since December 2022
and had previously served as Senior Vice President, Chief Investor Relations & Communications Officer from February 2021 to
December 2022, Vice President, Investor Relations, Communications, and Chief of Staff from September 2014 to February
2021, as well as divisional Chief Financial Officer, Scent from 2018 to 2020 and head of Corporate Strategy from 2016 to 2018.
Since joining the Company in 2009 as head of investor relations, Mr. DeVeau has held various roles of increasing scope and
responsibility in communications, finance and strategy. Prior to joining the Company, he served in leadership positions in
investor relations, finance and corporate development at PepsiCo. Mr. DeVeau began his career as an Equity Research Analyst
at Citigroup Investment Research.
Ralf Finzel has served as our Executive Vice President, Global Operations Officer since November 1, 2022. Previously, Mr.
Finzel served as Vice President of Integrated Supply Chain for Honeywell International Performance Materials and
Technologies Business Group in Houston since 2020. Prior to that, he served as Vice President of Integrated Supply Chain for
Honeywell International Building Technologies Business Group from July 2017 to March 2020. He first joined Honeywell in
Germany as an operations manager in 1999, and held various roles of increasing responsibility and scope in Europe and the
U.S. Prior to joining Honeywell, he worked in research and plant management roles for Hoechst AG.
11
Simon Herriott has served as our President, Health & Biosciences since February 2021. From 2019 to February 2021, Mr.
Herriott was Vice President and Global Business Director, Health & Biosciences for the N&B Business and from 2016 to 2019,
he served as Global Business Director, Bioactives, Industrial Biosciences and Vice President, Danisco Inc. Mr. Herriott was
employed by DuPont’s predecessor or formerly affiliated companies for 15 years and held a variety of roles, including Global
Business Director, Biomaterials, Industrial Biosciences.
Jennifer Johnson has served as our Executive Vice President, General Counsel and Corporate Secretary since February
2021. From 2019 to February 2021, Dr. Johnson served as Associate General Counsel for the N&B Business. Dr. Johnson
joined DuPont’s predecessor or formerly affiliated companies in 2013, where she led the legal team for DuPont’s former
Industrial Biosciences business as Associate General Counsel and subsequently served as Assistant Chief Intellectual Property
Counsel for Industrial Biosciences. Prior to joining DuPont, Dr. Johnson was a Partner at the law firm of Finnegan, Henderson,
Farabow, Garrett & Dunner, L.L.P.
Ana Paula Mendonça has served as our Senior Vice President, Commercial Excellence since December 2022. Prior to that,
she served as Vice President, President Global Ingredients & Regional General Manager, North America, Consumer Fragrances
since February 2022, and, before that, as Vice President, Regional General Manager, North America, Consumer Fragrances
since January 2016. Ms. Mendonça joined IFF more than 30 years ago, and her broad experience expands across Category
Management (Fine Fragrance, Home, Fabric, and Beauty), Global Marketing, and Product Innovation.
Glenn Richter has served as our Executive Vice President, Chief Financial & Business Transformation Officer since
February 2023. Mr. Richter served as our Executive Vice President, Chief Financial Officer from September 2021 to February
2023. Prior to joining IFF, Mr. Richter was Chief Financial Officer of TIAA, having worked at the company in various
leadership roles from April 2015 to July 2021. Previously, Mr. Richter worked for Nuveen Investments as Chief Operating
Officer and Chief Administrative Officer and before joining Nuveen Investments in 2006, he served as Executive Vice
President, Chief Financial Officer for RR Donnelley & Sons, and prior to that he was Executive Vice President & CFO of
Sears, Roebuck and Co. and Chairman of Sears Canada, a publicly-traded affiliate.
Angela Strzelecki has served as our President, Pharma Solutions since February 2021. From 2019 to February 2021, Dr.
Strzelecki was Platform Leader, Pharma Solutions for the N&B Business. From 2013 to 2019, Dr. Strzelecki held a variety of
leadership positions at DuPont or its formerly affiliated companies, including Platform Leader, Pharma Solutions for the
Nutrition and Health business, Planning Director - Corporate Planning and M&A , Global Business Director - Electronics &
Communications, and the North America Business Director - Building Innovations.
Vic Verma has served as our Executive Vice President, Chief Information Officer since February 2021 and had previously
served as our Senior Vice President, Chief Information Officer from 2016 to February 2021. Before joining the Company, Mr.
Verma served as Vice President of Global Infrastructure Operations at American Express, a multinational financial services
company. Prior to that, Mr. Verma held several other leadership positions at American Express as well as Vice President,
Division CIO and management consulting roles with GlaxoSmithKline, Bristol Myers Squibb and PricewaterhouseCoopers.
Christophe Fauchon de Villeplee has served as our President, Scent since September 2021. Mr. de Villeplee previously
served as President, Global Consumer Fragrances. He originally joined our Company in 1999 and has previously held positions
of increasing responsibility, including sales, group country management, regional general management of fragrances, North
America, and vice-president of Global Fine Fragrances and Beauty Care.
Gregory Yep has served as our Executive Vice President, Chief Research & Development, Global Integrated Solutions &
Sustainability Officer since February 2021. From June 2016 to February 2021, he served as our Executive Vice President, Chief
Research & Development and Sustainability Officer. From January 2015 to June 2016, Dr. Yep was Senior Vice President of
Research, Development & Applications with The Kerry Group, a taste and nutrition company. Prior to The Kerry Group, Dr.
Yep was Senior Vice President of R&D at PepsiCo, a multinational food, snack and beverage corporation, and was Global Vice
President, Application Technologies at Givaudan Flavors and Fragrances, a multinational manufacturer of flavors, fragrances
and active cosmetic ingredients. Earlier in his career, Dr. Yep was at McCormick & Company, a flavor, seasonings and spices
company, where he held executive roles of increasing responsibility in food science.
ITEM 1A. RISK FACTORS.
Risk Factor Summary
The following summary highlights some of the principal risks that could adversely affect our business, financial condition
or results of operations. This summary is not complete and the risks summarized below are not the only risks we face. These
risks are discussed more fully further below in this section entitled “Risk Factors” in Item 1A. of this report. These risks
include, but are not limited to, the following:
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•
Inflationary trends, including in the price of our input costs, such as raw materials, transportation and energy, could
adversely affect our business and financial results in the short term and result in uncertainties in the long term.
• Supply chain disruptions, geopolitical developments, including the Russia-Ukraine conflict, or climate change events
(including severe weather events) may adversely affect our suppliers or our procurement of raw materials, and thus
may impact our business and financial results.
•
If we are unable to successfully execute the next phase of our strategic transformation, it may have a material adverse
effect on our business, results of operations and financial condition.
• The integration of the N&B Business may continue to present significant challenges, and we may not realize
anticipated synergies and other benefits of the N&B Transaction.
• We have a substantial amount of indebtedness that could materially adversely affect our financial condition and our
degree of leverage could adversely affect our credit ratings.
•
•
If we fail to successfully enter into or close strategic transactions or divestments, or successfully manage acquisitions,
collaborations, joint ventures or partnerships, it could adversely affect our business and growth opportunities.
If we are unable to successfully market to our expanded and diverse customer base, our operating results and future
growth may be adversely affected.
• Our business is highly competitive, and if we are unable to compete effectively, our sales and results of operations will
suffer.
• Our success depends on attracting and retaining talented people within our business. Significant shortfalls in
recruitment or retention could adversely affect our ability to compete and achieve our strategic goals.
• A significant portion of our sales is generated from a limited number of large multi-national customers, which are
currently under competitive pressures that may affect the demand for our products and profitability.
• We may not successfully develop and introduce new products that meet our customers’ needs, which may adversely
affect our results of operations.
• Global health crises, such as the COVID-19 pandemic, have had an impact on our supply chain and could have a
material impact on global operations, our customers and our suppliers, which could adversely impact our business and
results of operations.
• Natural disasters, public health crises (such as the COVID-19 pandemic), international conflicts (such as the Russia-
Ukraine conflict), geopolitical events, terrorist acts, labor strikes, political or economic crises (such as the uncertainty
related to protracted U.S. federal debt ceiling negotiations), accidents and other events could adversely affect our
business and financial results by disrupting development, manufacturing, distribution or sale of our products.
• A significant data breach or other disruption to our information technology systems could disrupt our operations, result
in the loss of confidential information or personal data, and adversely impact our reputation, business or results of
operations.
• We have made investments in and continue to expand our business into emerging markets, which exposes us to certain
risks.
• The impact of currency fluctuation or devaluation in the international markets in which we operate may negatively
•
affect our results of operations.
International economic, political, legal, compliance and business factors could negatively affect our financial
statements, operations and growth.
• Economic uncertainty, including increased inflation, may adversely affect demand for our products which may have a
negative impact on our operating results and future growth.
•
If we are unable to react in a timely and cost-effective manner to changes in consumer trends, such as increasing
awareness of health and wellness, our results of operations and future growth may be adversely affected.
• We are subject to increasing customer, consumer, shareholder and regulatory focus on sustainability, which may result
in additional costs in order to meet new requirements or integrate the N&B Business and Frutarom with our
sustainability practices.
• Our performance may be adversely impacted if we are not successful in managing our inventory and/or working
capital balances.
• Any impairment of our tangible or intangible long-lived assets, including goodwill, may adversely impact our
profitability.
• Our funding obligations for our pension and postretirement plans could adversely affect our earnings and cash flows.
• The phase out of the London Interbank Offered Rate (“LIBOR”) may impact the interest rates paid on our variable rate
indebtedness and could cause our interest expense to increase.
13
• Our business may be negatively impacted as a result of the United Kingdom’s departure from the European Union.
•
If we are unable to comply with regulatory requirements and industry standards, including those regarding product
safety, quality, efficacy and environmental impact, we could incur significant costs and suffer reputational harm which
could adversely affect results of operations.
• Defects, quality issues (including product recalls), inadequate disclosure or misuse with respect to the products and
capabilities could adversely affect our business, reputation and results of operations.
• Our results of operations may be negatively impacted by the outcome of uncertainties related to litigation.
• Failure to comply with environmental protection laws may cause us to close, relocate or operate one or more of our
plants at reduced production levels, and expose us to civil or criminal liability, which could adversely affect our
operating results and future growth.
• We could be adversely affected by violations, by us or our counterparties, of the U.S. Foreign Corrupt Practices Act,
similar U.S. or foreign anti-bribery and anti-corruption laws and regulations, applicable sanctions laws and regulations
in the jurisdictions in which we operate or ethical business practices and related laws and regulations.
• Our ability to compete effectively depends on our ability to protect our intellectual property rights.
• Changes in our tax rates, the adoption of new U.S. or international tax legislation, or changes in existing tax laws
could expose us to additional tax liabilities that may affect our future results.
• The N&B Transaction could result in significant tax liability, and we may be obligated to indemnify DuPont for any
such tax liability imposed on DuPont.
•
If we fail to comply with data protection laws in the U.S. and abroad, we may be subject to fines, penalties and other
costs.
Risk Factors
We routinely encounter and address risks in conducting our business. Some of these risks may cause our future results to be
different - sometimes materially different - than we presently anticipate. Below are material risks we have identified that could
adversely affect our business. How we react to material future developments, as well as how our competitors and customers
react to those developments, could also affect our future results.
Risks Related to Our Business and Industry
Inflationary trends, including in the price of our input costs, such as raw materials, transportation and energy,
could adversely affect our business and financial results in the short term and result in uncertainties in the long term.
The global economy experienced high rates of inflation in 2022, and such inflationary pressure is expected to generally
continue in 2023 despite price decreases for certain materials and services that hit historical highs in 2022. As a result of the
broader inflationary environment and supply chain disruptions we have experienced, and may continue to experience, volatility
and increases in the price of input costs, such as certain raw materials, transportation and energy costs. We might also suffer
from supply disruptions from supplier exits as higher costs may become unaffordable for certain suppliers. The significant spike
in energy prices over the course of 2022, especially in Europe, has created cost pressures for us and may continue to impact our
financial performance. In addition, central banks may continue to increase interest rates or conduct other monetary policies to
counter inflation, which could negatively affect our borrowing costs and those of our customers and suppliers, as well as
exchange rates and other macroeconomic factors.
If we are unable to increase the prices of our products to our customers to offset inflationary cost trends, or if we are unable
to achieve cost savings to offset such cost increases, we could fail to meet our cost expectations, and our profits and operating
results could be adversely affected. Our ability to price our products competitively to timely reflect higher input costs is critical
to maintain and grow our sales. Increases in prices of our products to customers or the impact of the broader inflationary
environment on our customers may lead to declines in demand and sales volumes. Further, we may not be able to accurately
predict the volume impact of price increases, especially if our competitors are able to more successfully adjust to such input
cost volatility. Increasing our prices to our customers could result in long-term sales declines or loss of market share if our
customers find alternative suppliers or choose to reformulate their consumer products to rely less on our products, which could
have an adverse long-term impact on our results of operations. Increased cost volatility trends may also impact the business and
financial situation of our customer or suppliers, which could in turn affect the demand or supply, respectively, by such parties.
Future inflationary and deflationary trends are beyond our control, and we may not be able to sufficiently mitigate any impact
on our business and financial situation.
14
Supply chain disruptions, geopolitical developments, including the Russia-Ukraine conflict, or climate-change
events (including severe weather events) may adversely affect our suppliers or our procurement of raw materials, and
thus may impact our business and financial results.
In connection with our manufacturing of our products, we often rely on third party suppliers for raw materials. We use
many different raw materials for our business, such as essential oils, extracts and concentrates derived from fruits, vegetables,
flowers, woods and other botanicals, animal products, raw fruits, organic chemicals and petroleum-based chemicals, as well as,
gelatin, glycols, cellulose processed grains, guar, locust bean gum, organic vegetable oils, peels, saccharides, seaweed,
soybeans, and sugars and yeasts.
Supply chain disruptions, such as the ones related to the COVID-19 pandemic, may impair or delay our ability to obtain
sufficient quantities of certain raw materials through our ordinary supply channels and cause us to incur higher costs by
procuring raw materials from other sources in order to compensate for such delays or lack of availability.
In addition, our suppliers, similar to us, are subject to risks, inherent in agriculture, manufacturing and distribution on a
global scale, including industrial accidents, environmental events, climate change, strikes and other labor disputes, disruptions
in supply chain or information systems, disruption or loss of key research or manufacturing sites, product quality control, safety
and environmental compliance issues, licensing requirements and other regulatory issues, as well as natural disasters, global or
local health crises, international conflicts, terrorist acts, geopolitical developments, trade wars, and other external factors over
which neither they nor we have control. These suppliers could also become insolvent or experience other financial distress.
If our suppliers are unable to supply us with sufficient quantities of ingredients and raw materials to meet our needs, we
would need to seek alternative sources of such materials (which may result in higher transportation or procurement costs) or
pursue our own production of such ingredients or direct acquisition of such raw materials. However, for certain of our
ingredients and raw materials, we rely on a limited number of suppliers where there are not readily available alternatives. If we
are unable to obtain or manufacture alternative sources of such ingredients or raw materials at a similar cost, we may seek to (i)
reformulate our products and/or (ii) increase pricing to reflect the higher supply cost. To mitigate our sourcing risk, we maintain
strategic stock levels for critical items. However, if we do not accurately estimate the amount of raw materials that will be used
for the geographic region in which we will need these materials or competitively price our products, our margins could be
adversely affected.
Geopolitical developments, such as the Russia-Ukraine conflict, could adversely impact, among other things, our raw
material, energy and transportation costs, as well as certain of our suppliers and local markets, global and local macroeconomic
conditions, and cause further supply chain disruptions. As the Russia-Ukraine conflict has prolonged, it continues to impact our
sourcing of certain raw materials for future years, and we continue to look for alternative suppliers or adjust the types of raw
materials used in our products.
At the same time, climate-change related disruptions, like the February 2021 winter storm in Texas, may affect the
availability, quality and pricing of raw materials. There is growing evidence that carbon dioxide and other greenhouse gases in
the atmosphere may have an adverse impact on global temperatures, weather and precipitation patterns, growing and harvesting
conditions (both on land and in the sea), and the frequency and severity of extreme weather and natural disasters, such as
floods, wildfires, droughts and water scarcity. To the extent such climate change effects have a negative impact on crop size and
quality, supply chain, energy or transportation costs, it could impact the availability, quality and pricing of affected raw
materials. Climate related policies and energy production restrictions and pricing may exacerbate such negative impacts.
More generally, as we source many of our raw materials globally to help ensure quality control or to mitigate supply chain
disruptions, we are subject to additional risks related to the increases in energy or transportation costs. Energy prices are in turn
subject to significant volatility caused by, among other things, market fluctuations, supply and demand changes, currency
fluctuations, production and transportation disruptions, and other world events, as well as geopolitical developments and
climate change related conditions discussed above.
If we are not able to successfully mitigate such supply chain and climate-change related risks, we could experience
disruptions in production or increased costs, which may result in decrease in our gross margin or reduced sales, and have a
material adverse effect on our business, results of operations and financial condition.
15
If we are unable to successfully execute the next phase of our strategic transformation, it may have a material
adverse effect on our business, results of operations and financial condition.
In December 2022, we announced our new strategic and financial vision previewing a refreshed strategic plan and new
operating model, which among other things, consists of a renewed growth-focus strategy, enhanced cost & productivity
initiatives, a redesigned operating model, a reaffirmation of our commitment to our portfolio optimization initiatives and a plan
to evolve our Board in line with best-in-class governance standards, as well as certain changes to our Executive Leadership
Team. Implementing such changes can be complex, costly and time-consuming and may also result in unanticipated issues,
such as additional expenses, competitive responses, employee turnover or impact on our commercial relationships. Even if such
initiatives are implemented successfully, the full benefits may not be realized or may not be realized within the desired
timeframe. The failure to meet the challenges involved in implementing our strategic transformation could result in a material
adverse impact on our business, results of operations and financial condition.
The integration of the N&B Business may continue to present significant challenges, and we may not realize
anticipated synergies and other benefits of the N&B Transaction.
The combination of large, diverse and independent businesses is complex, costly and time-consuming. The combination
with the N&B Business may also result in material unanticipated problems, expenses, liabilities, competitive responses,
employee turnover and loss of customer and other business relationships. In addition, even if the operations of the N&B
Business are integrated successfully, the full benefits of the transaction may not be realized, including, among others, the
synergies, cost savings or revenue growth that are expected. These benefits may not be achieved within the anticipated time
frame or at all.
The difficulties of integration or realizing the full benefits of the N&B Transaction include, among others:
•
•
the diversion of management’s attention to integration matters;
integrating operations and systems, including communications systems, administrative and information technology
infrastructure and financial reporting and internal control systems, some of which may prove to be incompatible;
• conforming standards, controls, procedures and accounting and other policies, business cultures and compensation
•
•
•
•
•
structures between the businesses;
integrating employees and attracting and retaining key personnel, including talent;
retaining relationships with existing or new customers and suppliers;
integrating and managing the expanded operations of a significantly larger and more complex company;
liabilities that are larger than expected or potential unknown liabilities, adverse consequences and unforeseen
increased expenses associated with the transaction;
restrictions until February 2023 that may limit our ability to pursue certain strategic transactions, including issuing IFF
common stock for acquisitions and equity capital market transactions, or disposing of certain businesses that would
otherwise increase the value of our business, if such transaction(s) could cause certain aspects of the N&B Transaction
and certain DuPont historic transactions to fail to qualify as tax-free transactions;
• successfully exiting transitional services agreement entered into with DuPont in connection with the N&B Transaction
without impacting the continuity or quality of such services or incurring materially increased costs; and
• our ability to negotiate terms that are as favorable as those DuPont had received, as we replace or renew contracts
following the N&B Transaction and the loss of the DuPont brand recognition for the N&B Business.
The failure to meet the challenges involved in integrating the businesses and to realize the anticipated benefits of the
transaction could result in a material adverse impact on our business and results of operations.
We have a substantial amount of indebtedness that could materially adversely affect our financial condition and our
degree of leverage could adversely affect our credit ratings.
As of December 31, 2022, our total debt was $10.970 billion. Despite our level of indebtedness, we expect to continue to
have the ability to borrow additional debt. There may be circumstances in which required payments of principal and/or interest
on our debt could adversely affect our cash flows, our operating results or our ability to return capital to our shareholders.
16
Furthermore, our degree of leverage could adversely affect our future credit ratings. If we are unable to maintain or
improve our current investment grade rating or improve our leverage, it could adversely affect our future cost of funding,
liquidity and access to capital markets. On October 13, 2022, S&P Global Ratings downgraded our Local Currency LT credit
rating from “BBB” to “BBB-”. The Company does not have any rating downgrade triggers that would accelerate the maturity
dates of its senior unsecured debt. However, any downgrade in our credit rating may, depending on the extent of such
downgrade, negatively impact our ability to raise additional debt capital, our liquidity and capital position, and may increase
our cost of borrowing for new capital raises. In addition, our existing Amended Revolving Credit Facility and Term Loans have
pricing grids that are based on credit rating, such that our cost of borrowing may increase as our credit rating decreases. In
addition, our current level of leverage could increase our vulnerability to sustained, adverse macroeconomic weakness, limit our
ability to obtain further financing, decrease our flexibility in responding to or preparing for changes in the industry in which we
operate and our ability to pursue certain operational and strategic opportunities, including large acquisitions. Our level of
indebtedness, as well as our failure to comply with covenants under our debt instruments, could adversely affect our business,
results of operation and financial condition or our ability to return capital to our shareholders and additional debt instruments
may subject us to additional covenants.
If we fail to successfully enter into or close strategic transactions or divestments, or successfully manage
acquisitions, collaborations, joint ventures or partnerships, it could adversely affect our business and growth
opportunities.
From time to time, including as a part of our ongoing strategic transformation and our portfolio optimization strategy as
discussed above, we may enter into strategic transactions or we may divest certain non-core assets. For instance, during the
third quarter of 2022, we completed the divestiture of our Microbial Control business and during the fourth quarter of 2022, we
announced that we entered into an agreement for the sale our Savory Solutions business, which is expected to close in the
second quarter of 2023, subject to customary closing conditions. Any failure to complete or potential delays in closing any such
transaction could adversely affect the development of our portfolio optimization strategy as well as our financial condition.
We also evaluate and enter into collaborations, joint ventures or partnerships from time to time to enhance our research and
development efforts or expand our product portfolios and technology. The process of establishing and maintaining collaborative
relationships is difficult and time-consuming to negotiate, document and implement. We may not be able to successfully
negotiate such arrangements or the terms of the arrangements may not be as favorable as anticipated. Furthermore, our ability to
generate revenues from such collaborations will depend on our partners’ abilities and efforts to successfully perform the
functions assigned to them in these arrangements and these collaborations may not lead to development or commercialization of
products in the most efficient manner, or at all. In addition, from time to time, we have acquired, and we may acquire, only a
majority interest in companies and provided or may provide earnouts for the former owners along with the ability, at our option,
or obligation, at the former owners’ option, to purchase the minority interests at a future date at an established price. These
investments may have additional risks and may not be as efficient as other operations as we may have fiduciary or contractual
obligations to the minority investors and may rely on former owners for the continuing operation of the acquired business. If we
are unable to successfully establish and manage these collaborative relationships and majority investments it could adversely
affect our future growth.
In addition, from time to time, we evaluate acquisition candidates that may strategically fit our business and/or growth
objectives. If we are unable to successfully integrate and develop acquired businesses, we could fail to achieve anticipated
synergies and cost savings, including any expected increase in revenues and operating results, which could have a material
adverse effect on our financial results. Furthermore, even if successfully integrated, the acquisition target may fail to further the
Company’s business strategy as anticipated, expose the Company to increased competition or other challenges with respect to
the Company’s products or geographic markets, and expose the Company to additional liabilities associated with the acquired
business, technology or other asset or arrangement. We may also incur asset impairment charges related to acquisitions if we
fail to maintain and integrate the acquired businesses and such impairments charges would reduce our earnings.
17
If we are unable to successfully market to our expanded and diverse customer base, our operating results and future
growth may be adversely affected.
As a result of our acquisition of Frutarom and the N&B Transaction, the number of our customers significantly increased
and became more diverse. Our historical customer base was primarily comprised of large and medium-sized food, beverage and
consumer products companies. With the completion of the N&B Transaction, our customer base has further increased
significantly and, based on 2022 sales, we had approximately 40,000 customers, approximately 58% of which are small and
mid-sized companies. This substantial increase in and diversity of our customer base has required us and may continue to
require us to adjust, among other things, our product development, manufacturing, distribution, marketing, customer
relationship and sales strategy as well as adapt corporate, information technology, finance and administrative infrastructures to
support different go-to-market models. We may experience difficulty managing the growth of a portfolio of customers that is
more diverse in terms of its geographical presence as well as with respect to the types of services they require and the
infrastructure required to deliver our products. If we are unable to successfully gain market share or maintain our relationships
with these customers, our future growth could be adversely affected.
Our business is highly competitive, and if we are unable to compete effectively our sales and results of operations
will suffer.
The markets in which we compete are highly competitive. We face vigorous competition from companies throughout the
world, including multi-national and specialized companies active in flavors, fragrances, enzymes, pharmaceutical excipients,
nutrition and specialty ingredients, as well as consumer product companies which may develop their own competing products.
For instance, in the flavors industry, we face increasing competition from ingredient suppliers that have expanded their
portfolios to include flavor offerings. Some of our competitors specialize in one or more of our product sub-segments, while
others participate in many of our product sub-segments. In addition, some of our global competitors may have more resources
than we do or may have proprietary products that could permit them to respond to changing business and economic conditions
more effectively than we can. Moreover, there has been increased consolidation among our competitors, and such consolidation
or partnerships among our competitors may exacerbate these risks.
As we continue to enter into adjacent markets, such as cosmetic ingredients, functional foods, specialty fine ingredients and
nutrition products, we may face greater competition-related risks in these markets than with our other businesses. For example,
the specialty fine ingredients market is more price sensitive than the flavors market and is characterized by relatively lower
profit margins. Some fine ingredients products are less unique and more replaceable than competitors’ products. There is no
assurance that operating margins will remain at current levels, which could substantially impact our business, operating results
and financial condition.
Competition in our business is based, among other things, on innovation, product quality, regulatory compliance, pricing,
quality of customer service, the support provided by marketing and application groups, and understanding of consumers. It is
difficult for us to predict the timing, scale and success of our competitors’ actions in these areas. In particular, the discovery and
development of new products, protection of our intellectual property and development and retention of key employees are
critical to our ability to effectively compete in our business. Advancement in technologies have also enhanced the ability of our
competitors to develop substitutable products. Increased competition by existing or future competitors, including aggressive
price competition, could result in the loss of sales, reduced pricing and margin pressure and could adversely impact our sales
and profitability.
Failing to identify and make capital expenditures to achieve growth opportunities, being unable to make new concepts
scalable, or failing to effectively and timely reinvest in our business operations, could result in the loss of competitive position
and adversely affect our financial condition or results of operations.
Our success depends on attracting and retaining talented people within our business. Significant shortfalls in
recruitment or retention could adversely affect our ability to compete and achieve our strategic goals.
Attracting, developing, and retaining talented employees is essential to the successful delivery of our products and has
become more difficult and costly in the current labor market. Furthermore, as we continue to focus on innovation, our need for
scientists and other professionals will increase and may result in increased labor costs. The ability to attract and retain talented
employees is critical in the development of new products and technologies which is an integral component of our growth
strategy.
Competition for employees can be intense and if we are unable to successfully integrate, motivate and reward our
employees, we may not be able to retain them. If we are unable to retain our employees or attract new employees in the future,
our ability to effectively compete with our competitors and to grow our business could be adversely affected.
18
In addition, we have announced, as part of our strategic transformation initiatives, certain headcount reductions to re-align
our workforce to match strategic and financial objectives and optimize resources for long-term growth. Such reductions could
lead to increased uncertainty, attrition or lower morale amongst those employees who are not directly affected by the headcount
reductions as those reductions are being implemented, which may result in decreased productivity or could otherwise impact
our results of operation.
A significant portion of our sales is generated from a limited number of large multi-national customers, which are
currently under competitive pressures that may affect the demand for our products and profitability.
During 2022, our 25 largest customers, a majority of which were multi-national consumer products companies, collectively
accounted for 28% of our sales in the aggregate. Large multi-national customers’ market share, especially in the consumer
product industry, continues to be pressured by new smaller companies and specialty players that cater to or are more adept at
adjusting to the latest consumer trends, including towards natural products and clean labels, changes in the retail landscape
(including e-commerce and consolidation), and increased competition from private labels, which have resulted and may
continue to result in decreased demand for our products by such multi-national customers and volume erosion, especially in our
Nourish business. Furthermore, consolidations amongst our customers have resulted in larger and more sophisticated customers
with greater buying power and additional negotiating strength. If such trends continue, our sales could be adversely impacted if
we are not able to replace these sales.
In addition, large multi-national customers and, increasingly middle market customers, continue to utilize “core lists” of
suppliers to improve margins and profitability in the flavors and fragrance segments. Typically, these “core list” suppliers are
then given priority for new or modified products. Recently, these customers are making inclusion on their “core lists”
contingent upon a supplier providing more favorable terms, including rebates, which could adversely affect our margins. We
must either offer competitive cost-in-use solutions to secure and maintain inclusion on these “core lists” or seek to manage the
relationship without being on the “core-list.” If we choose not to pursue “core-list” status due to profitability concerns or if we
are unable to obtain “core-list” status, our ability to maintain our share of these customers’ future purchases could be adversely
affected and therefore our future results of operations.
We may not successfully develop and introduce new products that meet our customers’ needs, which may adversely
affect our results of operations.
Our ability to differentiate ourselves and deliver growth largely depends on our ability to successfully develop and
introduce new products and product improvements that meet our customers’ needs, and ultimately appeal to consumers.
Innovation is a key element of our ability to develop and introduce new products. We cannot be certain that we will be
successful in achieving our innovation goals, such as the development of new molecules, new and expanded delivery systems
and other technologies. In 2022, we spent approximately 5% of our sales on research and development, and as part of our new
strategic vision announced in December 2022, we expect to continue investment in research and development and innovation
initiatives. This investment level may vary in the future if available resources to invest in research and development are limited
due to our ongoing integration and restructuring efforts or from adverse macroeconomic or supply chain factors. We also may
need to devote more resources to enhancing our existing product portfolios. Our research and development investments may
only generate future revenues to the extent that we are able to develop products that meet our customers’ specifications, are at
an acceptable cost and achieve acceptance by the targeted consumer market. Furthermore, there may be significant lag times
from the time we incur research and development costs to the time that these research and development costs may result in
increased revenue.
Consequently, even when we “win” a project, our ability to generate revenues as a result of these investments is subject to
numerous customer, economic and other risks that are outside of our control, including delays by our customers in the launch of
a new product, the level of promotional support for the launch, poor performance of our third-party vendors, anticipated sales
by our customers not being realized or changes in market preferences or demands, or disruptive innovations by competitors.
19
Global health crises, such as the COVID-19 pandemic, have had an impact on our supply chain and could have a
material impact on global operations, our customers and our suppliers, which could adversely impact our business and
results of operations.
The continued evolution of COVID-19 and its variants, as well as periodic spikes in infection rates, local outbreaks at our
facilities, or supplier, customer or vendor facilities, in spite of safety measures or vaccinations, could cause disruptions to our
operations or those of our suppliers, customers or vendors. As a result of the pandemic’s impact on the global supply chain, we
have experienced, and may continue to experience, increased costs, delays or limited availability related to raw materials, strain
on shipping and transportation resources, and higher energy prices, which have negatively impacted and may continue to
negatively impact, our margins and operating results. We have also experienced and may experience in the future, changes in
the demand and volume for certain of our products, including due to consumption or stocking behavior changes related to the
COVID-19 pandemic. Additionally, as new variants of the virus appear, especially variants that are more easily spread, cause
more serious outcomes, or are resistant to existing vaccines, new health orders and safety protocols could further impact our on-
site operations and our ability to manufacture, ship or deliver products and solutions to customers.
Although we do not currently anticipate any impairment charges related to COVID-19, the continuing effects of a
prolonged pandemic could result in increased risks to us of asset write-downs and impairments, including, but not limited to,
property, plant and equipment, goodwill and other intangibles, and equity investments.
Any of these events or factors could potentially result in a material adverse impact on our business and results of
operations.
Natural disasters, public health crises (such as the COVID-19 pandemic), international conflicts (such as the Russia-
Ukraine conflict), geopolitical events, terrorist acts, labor strikes, political or economic crises (such as the uncertainty
related to protracted U.S. federal debt ceiling negotiations), accidents and other events could adversely affect our
business and financial results, including by disrupting development, manufacturing, distribution or sale of our products.
As a company engaged in the global development, manufacture and distribution of products, we are subject to the risks
inherent in such activities, including industrial accidents, environmental events, strikes and other labor disputes, product quality
control issues, safety, licensing requirements and other regulatory issues, as well as natural disasters, public health crises, such
as pandemics or epidemics, international conflicts, geopolitical events, terrorist acts, political or economic crises (such as the
uncertainty related protracted U.S. federal debt ceiling negotiations) and other external factors over which we have no control.
For instance, the Russia-Ukraine conflict has adversely impacted and could continue to impact, among other things, certain of
our local markets and suppliers, global and local macroeconomic conditions, foreign exchange rates and financial markets, raw
material, energy and transportation costs, and cause further supply chain disruptions. We maintain operations in both Russia and
Ukraine and export products to customers in Russia and Ukraine from operations outside the region. In response to the events in
Ukraine, the Company has limited the production and supply of ingredients in and to Russia to only those that meet the
essential needs of people, including food, hygiene and medicine. As a result of changes and uncertainties arising out of the
Russia-Ukraine conflict, our operating performance in Russia has declined in 2022 and may not reverse in the near future.
While we operate research and development, manufacturing and distribution facilities throughout the world, many of these
facilities are extremely specialized and certain of our research and development or creative laboratories facilities are uniquely
situated to support our research and development efforts while certain of our manufacturing facilities are the sole location
where a specific ingredient or product is produced. If our research and development activities or the manufacturing of
ingredients or products were disrupted, the cost of relocating or replacing these activities or reformulating these ingredients or
products may be substantial, which could result in production or development delays or otherwise have an adverse effect on our
margins, operating results and future growth.
A significant data breach or other disruption to our information technology systems could disrupt our operations,
result in the loss of confidential information or personal data, and adversely impact our reputation, business or results
of operations.
We rely on information technology systems, including some managed by third-party providers, to conduct business and to
support our business processes, including those relating to product formulas, product development, manufacturing, sales, order
and invoice processing, production, distribution, internal communications and communications with third parties throughout the
world, processing transactions, summarizing and reporting results of operations, complying with regulatory, tax or legal
requirements, and collecting and storing customer, supplier, employee and other stakeholder information.
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To address the risks to our information technology systems and the associated costs, we maintain an information security
program that includes updating technology and information security policies and controls, cybersecurity insurance,
cybersecurity governance and compliance, employee/consultant awareness training, table-top exercises, logging and monitoring
and routine testing of our information technology systems. We believe that these preventative actions provide adequate
measures of protection against information security breaches/incidents and generally reduce our cybersecurity risks, however,
cybersecurity incidents, data breaches and operational disruptions are constantly evolving, becoming more sophisticated and
conducted by groups and individuals with a wide range of expertise and motives, including foreign governments, cyber
terrorists, cyber criminals, malicious employees and other insiders and outsiders. Additionally, continued geopolitical turmoil,
including the ongoing conflict between Russia and Ukraine, heightened the risk of cyber incidents. We and our third-party
providers are subject to the risks posed by such incidents, which can take many forms, including code anomalies, “Acts of
God,” data leakage, hardware or software failures, human errors, cyber extortion, password theft or introduction of viruses,
malware and ransomware, including through phishing emails.
A disruption to our information technology systems could result in the loss of confidential business, customer, supplier or
employee information, litigation or fines, and may require substantial investigations, repairs or replacements or impact our
ability to summarize and report financial results in a timely manner, resulting in significant financial, legal and relational costs
and potentially harming our reputation and adversely impacting our operations, customer service and results of operations. As
we complete integration of N&B’s and Frutarom’s systems with IFF’s systems and prepare for the announced divestitures, we
reduce our risk profile. Additionally, an information security or data breach could require us to devote significant management
and financial resources to address the problems created, and, as a result of the private rights of action provided for under the
EU’s General Data Protection Regulation (the “GDPR”), the California Consumer Privacy Act (the “CCPA”) and other laws
relating to data protection and privacy in other jurisdictions, in the event of such breaches, additional private litigation against
us may result. These types of adverse impacts could also occur in the event the confidentiality, integrity or availability of
company, customer, supplier or employee information are compromised due to a data loss by us or a trusted third party. We or
the third parties with which we share information may not discover any such incidents and/or loss of information for a
significant period of time after the incident occurs. In addition, our hybrid and remote work arrangements could introduce
operational risk, including cybersecurity and IT systems management risks.
We have experienced threats to our data and our systems and although we have not experienced a material incident to date,
there can be no assurance that these measures will prevent or limit the impact of a future incident. Additionally, while we have
insurance coverage designed to address certain aspects of cyber risks in place, such insurance coverage may be insufficient to
cover all losses or all types of claims that may arise.
We have made investments in and continue to expand our business into emerging markets, which exposes us to
certain risks.
As part of our growth strategy, we have increased our presence in emerging markets by expanding our manufacturing
presence, sales organization and product offerings in these markets, and we expect to continue to expand our business in these
markets as part of our new strategic vision announced in December 2022. With our acquisition of Frutarom in 2018 and the
N&B Transaction, each of which also had a significant presence in emerging markets, our business in these markets has
meaningfully grown. In addition to the currency and international risks described below, our operations in these markets may be
subject to a variety of other risks. Emerging markets typically have a consumer base with limited or fluctuating disposable
income and customer demand in these markets may fluctuate accordingly. As a result, a decrease in customer demand in
emerging markets may have an adverse effect on our ability to execute our growth strategy.
Further, there is no assurance that our existing products, variants of our existing products or new products that we make,
manufacture, distribute or sell will be accepted or be successful in any particular developing or emerging market, due to local or
global competition, product price, cultural differences, consumer preferences or otherwise. In addition, emerging markets may
have weak legal systems which may affect our ability to enforce our intellectual property and contractual rights, exchange
controls, unstable governments and privatization or other government actions that may affect taxes, subsidies and incentive
programs and the flow of goods and currency. In conducting our business, we move products from one country to another and
may provide services in one country from a subsidiary located in another country. Accordingly, we are vulnerable to abrupt
changes in trade, customs and tax regimes in these markets. If we are unable to expand our business in developing and
emerging markets, effectively operate, or manage the risks associated with operating in these markets, or achieve the return on
capital we expect from our investments in these markets, our operating results and future growth could be adversely affected.
21
The impact of currency fluctuation or devaluation in the international markets in which we operate may negatively
affect our results of operations.
We have significant operations outside the U.S., the results of which are reported in the local currency and then translated
into U.S. dollars at applicable exchange rates for inclusion in our consolidated financial statements. The exchange rates between
these currencies and the U.S. dollar have fluctuated and will continue to do so in the future, with the fluctuations being
particularly pronounced in certain emerging markets. Changes in exchange rates between these local currencies and the U.S.
dollar will affect the recorded levels of sales, profitability, assets and/or liabilities. Along with other macroeconomic uncertainty
we are experiencing such as a highly inflationary global environment and supply chain disruptions discussed elsewhere in these
risk factors, we have experienced and continue to expect volatility in global foreign currency exchange rates. The expected
continuing increase of interest rates by the Federal Reserve Bank to counter inflationary trends may further impact such
exchange rates. Further volatility or unfavorable movements in currency exchange rates may adversely impact our financial
condition, cash flows or liquidity. Although we employ a variety of techniques to mitigate the impact of exchange rate
fluctuations, including sourcing strategies and a limited number of foreign currency hedging activities, we cannot guarantee that
such hedging and risk management strategies will be effective, and our results of operations could be adversely affected.
International economic, political, legal, compliance and business factors could negatively affect our financial
statements, operations and growth.
We operate on a global basis, with manufacturing and sales facilities in or supply arrangements with companies based in
the U.S., Europe, Africa, the Middle East, Latin America, and Greater Asia. During 2022, approximately 71% of our combined
net sales were to customers outside the U.S. and we intend to continue expansion of our international operations. As a result,
our business is increasingly exposed to risks inherent in international operations. These risks, which can vary substantially by
location, include the following:
• governmental laws, regulations and policies adopted to manage national economic and macroeconomic conditions,
such as increases in taxes, austerity measures that may impact consumer spending, monetary policies that may impact
inflation rates, employment regulations, currency fluctuations or controls and sustainability of resources;
• changes in environmental, health and safety permits or regulations, such as regulations related to biodiversity or the
continued implementation and evolution of the European Union’s REACH regulations and similar regulations that are
being evaluated and adopted in other markets, or the ban on microplastics proposed by European Commission and the
burdens and costs of our compliance with such regulations which may differ significantly across jurisdictions;
•
•
•
increased product labeling and ingredient prohibitions in specific markets that may impact consumer preferences,
products costs and/or customer acceptance;
the imposition of or changes in customs, tariffs, quotas, trade barriers, other trade protection measures, import or
export licensing requirements, and sanctions on trade with certain countries, imposed by the U.S. or other countries,
which could adversely affect our cost or ability to import raw materials or export our products to surrounding markets;
risks and costs arising from our ability to cater to local demand and customer preferences, language and cultural
differences;
• changes in the laws and policies that govern foreign investment in the countries in which we operate, including the risk
of expropriation or nationalization, the costs and ability to repatriate the profit that we generate in these countries;
•
•
risks and costs associated with complying with anti-money laundering and counter-terrorism financing laws;
risks and costs associated with complying with the U.S. Foreign Corrupt Practices Act, similar U.S. or foreign anti-
bribery and anti-corruption laws and regulations, applicable sanctions laws and regulations in the jurisdictions in
which we operate or ethical business practices and related laws and regulations;
•
risks and costs associated with political and economic instability, bribery and corruption, anti-American sentiment, and
social and ethnic unrest in the countries in which we operate;
• difficulty in recruiting and retaining trained local personnel;
• natural disasters, global or local health crisis, pandemics (such as the COVID-19 pandemic), epidemics or
international conflicts (such as the Russia-Ukraine conflict) or geopolitical tension (such as deteriorating U.S.-China
relations), including terrorist acts, political crisis, national and regional labor strikes in the countries in which we
operate, which could endanger our personnel, interrupt our operations or adversely affect the demand for our products,
the results of certain regions or our global supply chain; or
•
the risks of operating in developing or emerging markets in which there are significant uncertainties regarding the
interpretation, application and enforceability of laws and regulations and the enforceability of contract rights and
intellectual property rights.
The occurrence of any one or more of these factors could increase our costs and adversely affect our results of operations.
22
Economic uncertainty, including increased inflation, may adversely affect demand for our products which may have
a negative impact on our operating results and future growth.
Many of our products are ingredients in a wide assortment of global consumer products throughout the world. Historically,
demand for consumer products using our products, was stimulated and broadened by changing social habits and consumer
needs, population growth, an expanding global middle-class and general economic growth, especially in emerging markets.
Changes in the global, regional or local economic conditions have, and may in the near future, adversely impact demand
for consumer products at a regional or global level. Such parameters include, but are not limited to, increased inflation,
unemployment and underemployment, salaries and wage rates stagnation, low growth rates, and ongoing impacts of the
COVID-19 pandemic. Reduced consumer spending may cause changes in our customer orders including reduced demand for
our products or order cancellations. The timing of placing of orders and the amounts of these orders are generally at our
customers’ discretion. Customers may cancel, reduce or postpone orders with us on relatively short notice. Significant
cancellations, reductions or delays in orders by customers could affect our results of operation.
If we are unable to react in a timely and cost-effective manner to changes in consumer trends, such as increasing
awareness of health and wellness our results of operations and future growth may be adversely affected.
We must continually anticipate and react, in a timely and cost-effective manner, to changes in consumer preferences and
demands, including changes in demand driven by increasing awareness of health and wellness, demands for transparency or
cleaner labels with respect to product ingredients by consumers and regulators, and attitudes towards the impact of
biotechnology advances such as gene editing and mapping. Consumers, especially in developed economies such as the U.S. and
Western Europe, are rapidly shifting away from products containing artificial ingredients to all-natural, healthier alternatives. In
addition, there has been a growing demand by consumers, non-governmental organizations and, to a lesser extent, governmental
agencies to provide more transparency in product labeling and our customers have been taking steps to address this demand,
including by voluntarily providing product-specific ingredients disclosure. These two trends could affect the types and volumes
of our ingredients and compounds that our customers include in their consumer product offerings and, therefore, affect the
demand for our products. If we are unable to react to or anticipate these trends in a timely and cost-effective manner, our results
of operations and future growth may be adversely affected.
We are subject to increasing customer, consumer, shareholder and regulatory focus on sustainability, which may
result in additional costs in order to meet new requirements or integrate the N&B Business and Frutarom with our
sustainability practices.
Federal, state, local and foreign governments, our customers, consumers and shareholders are becoming increasingly
sensitive to environmental and other sustainability issues. In response, we have committed to a sustainability strategy to better
understand the opportunities and risks in our sustainable efforts.
The increased focus on sustainability may result in new regulations and customer requirements that could affect us. These
could cause us to incur additional direct costs or to make changes to our operations in order to comply with any new regulations
and customer requirements. We could also lose revenue if our customers divert business from us because we have not complied
with their sustainability requirements or if we are not successful in integrating N&B Business’ and Frutarom’s sustainability
metrics. Increased shareholder activism with respect to sustainability or other governance issues or management concerns could
also lead to increased costs and disruption to operations. These potential costs, changes and loss of revenue could have a
material adverse effect on our business, results of operations and financial condition.
Our performance may be adversely impacted if we are not successful in managing our inventory and/or working
capital balances.
We evaluate our inventory balances of materials based on shelf life, expected sourcing levels, known uses and anticipated
demand based on forecasted customer order activity and changes in our product/sales mix. Efficient inventory management is a
key component of our business success, financial returns and profitability. To be successful, we must maintain sufficient
inventory levels and an appropriate product/sales mix to meet our customers’ demands, without allowing those levels to
increase to such an extent that the costs associated with storing and holding other inventory adversely impact our financial
results. If our buying decisions do not accurately predict sourcing levels, customer trends or our expectations about customer
needs are inaccurate, we may have to take unanticipated markdowns or charges to dispose of the excess or obsolete inventory,
which can adversely impact our financial results. Current supply-chain related issues could also lead to raw material shortages
and inventory depletion, which may adversely affect our operations. See “—Supply chain disruptions, geopolitical
developments, including the Russia-Ukraine conflict or climate-change events (including severe weather events) may adversely
affect our suppliers or our procurement of raw materials, and thus may impact our business and financial results.”
Additionally, we believe excess inventory levels of raw materials with a short shelf life in our manufacturing facilities subjects
us to the risk of increased inventory shrinkage. If we are not successful in managing our inventory balances and shrinkage, our
results of and cash flows from operations may be negatively affected.
23
We sell certain accounts receivable on a non-recourse basis to unrelated financial institutions under “factoring” agreements,
some of which are sponsored by certain customers. The cost of participating in these programs was immaterial to our results in
all periods. Should we choose not to participate, or if these programs were no longer available, it could reduce our cash flows
from operations in the period in which the arrangement ends.
Any impairment of our tangible or intangible long-lived assets, including goodwill, may adversely impact our
profitability.
A significant portion of our assets consists of long-lived assets, including tangible assets such as our manufacturing
facilities, and intangible assets, including goodwill and customer relationships.
As a result of our recent acquisitions, including the acquisition of Frutarom and the N&B Transaction, as of December 31,
2022, we had recorded approximately $22.437 billion of intangible assets and goodwill, including $4.289 billion of goodwill
associated with the acquisition of Frutarom and $11.817 billion of goodwill associated with the merger with the N&B Business.
Our results of operations and financial position in future periods could be negatively impacted should future impairments of our
long-lived assets, including intangible assets or goodwill occur.
During the year ended December 31, 2022, we recorded a goodwill impairment charge of $2.250 billion, as well as an
impairment charge of $120 million allocated on a pro rata basis to intangible assets and property, plant and equipment in the
amounts of approximately $92 million and $28 million, respectively, in the Consolidated Statements of (Loss) Income and
Comprehensive (Loss) Income. Refer to Part II, Item 7 and Note 1, Note 5 and Note 6 to the Consolidated Financial Statements
for additional information.
At least annually, we assess both goodwill and indefinite-lived intangible assets for impairment. We test for impairment by
comparing the estimated fair value of a reporting unit with its carrying amount. If the carrying amount of a reporting unit
exceeds its estimated fair value, we record an impairment charge based on the difference of the two. Intangible assets with finite
lives are also tested for impairment when events or changes in circumstances indicate the carrying value may not be
recoverable. Such events and changes in circumstances could include a sustained decrease in our market capitalization,
increased competition or unexpected loss of market share, increased input costs beyond projections (for example due to
regulatory or industry changes), our inability to recognize the anticipated benefits of acquisitions, unexpected business
disruptions (for example due to a natural disaster, public health crises, such as pandemics or epidemics or loss of a customer,
supplier, or other significant business relationship), acts by governments and courts, operating results falling short of
projections, or significant adverse changes in the markets in which we operate. For example, in the third quarter of 2022, it was
determined that goodwill impairment triggering events occurred for the Nourish, Health & Biosciences and Pharma Solutions
reporting units. The primary indicators that were deemed to be triggering events in the quarter for the reporting units were
declines in projections across various reporting units and ongoing adverse macroeconomic impacts such as inflation, increases
in interest rates and unfavorable effects from exchange rates. As a result of the triggering events, we assessed the fair value of
the reporting units by using a discounted cash flow method at a rate of return that reflects the relative risk of the projected
future cash flows of each reporting unit, as well as a terminal value. We determined that the fair value of the Nourish and
Pharma Solutions reporting units exceeded their carrying value, and determined that there was no impairment of goodwill
relating to these reporting units. We determined that the carrying value of the Health & Biosciences reporting unit exceeded its
fair value and recorded a goodwill impairment charge of $2.250 billion in the Consolidated Statements of (Loss) Income and
Comprehensive (Loss) Income for the year ended December 31, 2022.
Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates
and market factors. Estimating the fair value of reporting units requires us to make assumptions and estimates regarding our
business performance, future plans, future annual net cash flows, income tax considerations, discount rates and growth rates
based on industry, economic, regulatory conditions and other market factors. Moreover, management will make significant
accounting judgments and estimates for the application of acquisition accounting under GAAP, and the underlying valuation
models. IFF’s business, operating results and financial condition could be materially and adversely impacted in future periods if
IFF’s accounting judgments and estimates related to these models prove to be inaccurate.
To the extent any of our acquisitions, including the acquisitions of Frutarom and the N&B Business, do not perform as
anticipated and our underlying assumptions and estimates related to their fair value determination are not met, whether due to
internal or external factors, the value of goodwill and other long-lived assets may be negatively affected and we may be
required to record impairment charges.
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Our funding obligations for our pension and postretirement plans could adversely affect our earnings and cash
flows.
The funding obligations for our pension plans are impacted by the performance of the financial markets, particularly the
equity markets and interest rates. Funding obligations are determined under government regulations and are measured each year
based on the value of assets and liabilities on a specific date. If the financial markets do not provide the long-term returns that
are expected under the governmental funding calculations, we could be required to make larger contributions. The equity
markets can be very volatile, and therefore our estimate of future contribution requirements can change dramatically in
relatively short periods of time. Similarly, changes in interest rates and legislation enacted by governmental authorities can
impact the timing and amounts of contribution requirements. An adverse change in the funded status of the plans could
significantly increase our required contributions in the future and adversely impact our liquidity.
Assumptions used in determining projected benefit obligations and the fair value of plan assets for our pension and other
postretirement benefit plans are determined by us in consultation with outside consultants and advisors. In the event that we
determine that changes are warranted in the assumptions used, such as the discount rate, expected long-term rate of return on
assets, or expected health care costs, our future pension and postretirement benefit expenses could increase or decrease. Due to
changing market conditions or changes in the participant population, the assumptions that we use may differ from actual results,
which could have a significant impact on our pension and postretirement liabilities and related costs and funding requirements.
The phase out of the London Interbank Offered Rate (“LIBOR”) may impact the interest rates paid on our variable
rate indebtedness and could cause our interest expense to increase.
In 2017, the United Kingdom’s Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that it
intends to phase out LIBOR by the end of 2021. It was unclear at that time whether or not LIBOR would cease to exist, if new
methods of calculating LIBOR would be established such that it continues to exist after 2021 or if replacement conventions
would be developed. In March 2021, the FCA confirmed that publication of all of the LIBOR settings for Euro, Sterling and
Swiss Franc and some of the LIBOR settings for Japanese Yen and US dollars ceased in December 2021 and the remainder of
the LIBOR settings for US dollars will cease in June 2023. In response to the expected phase out of LIBOR, in March 2022,
Congress passed the LIBOR Act to provide a uniform solution for replacing LIBOR references in existing contracts that do not
supply a fallback provision identifying an alternative benchmark rate.
To identify a successor rate for LIBOR, financial regulators in various countries, including the United States, the United
Kingdom, the European Union and Switzerland, have formed working groups with the aim of recommending alternatives to
LIBOR denominated in their local currencies. Some of the financial regulators have identified the Secured Overnight Financing
Rate (“SOFR”) as their preferred replacement rate for LIBOR. For example, in May 2022, the Alternative Reference Rates
Committee (ARRC), a group of private-market participants convened by the U.S. Federal Reserve Board and the Federal
Reserve Bank of New York, endorsed SOFR as its recommended alternative benchmark rate to replace the LIBOR settings for
US dollars. SOFR is observed and backward-looking, which stands in contrast with LIBOR under the current methodology,
which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members.
Given that SOFR is a secured rate backed by government securities, it will be a rate that does not take into account bank credit
risk (as is the case with LIBOR). Whether or not SOFR attains market traction as a LIBOR replacement tool remains in
question. It is unclear if other benchmarks may emerge or if other rates will be adopted. As such, the transition from LIBOR
poses future uncertainties and challenges.
Even if the financial instruments transition to using alternative benchmarks like SOFR successfully, the new benchmarks
are likely to differ from LIBOR, as the alternative benchmark rate may be calculated differently. Borrowings under our
revolving credit and term loan facilities are at variable interest rates based on LIBOR. Although our revolving credit and term
loan facilities include mechanics to facilitate the adoption by us and our lenders of an alternative benchmark rate in place of
LIBOR, no assurance can be made that such alternative rate will perform in a manner similar to LIBOR and may result in
interest rates that are higher or lower than those that would have resulted had LIBOR remained in effect. Further, transitioning
to an alternative benchmark rate, such as SOFR, may result in us incurring expense and legal risks, as renegotiation and
changes to documentation may be required in effecting the transition. Any of these occurrences could materially and adversely
affect our borrowing costs, financial condition and results of operations.
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Our business may be negatively impacted as a result of the United Kingdom’s departure from the European Union.
We currently manufacture goods in the United Kingdom for distribution in the European Union and vice-versa and
therefore may continue to be adversely affected as a result of the United Kingdom’s departure from the European Union
(“Brexit”) in 2020. The impact of the withdrawal has and may continue to, among other outcomes, exacerbate the disruption of
the free movement of goods, services and people between the United Kingdom and the European Union, undermine bilateral
cooperation in key geographic areas and disrupt trade between the United Kingdom and the European Union or other nations as
the United Kingdom pursues independent trade relations. In addition, Brexit continues to cause legal uncertainty, which could
last indefinitely, and may potentially create divergent national laws and regulations as the United Kingdom determines which
European Union laws to replace or replicate. Given the lack of comparable precedent, it is unclear what the financial, trade and
legal implications of the withdrawal of the United Kingdom from the European Union will be and how the withdrawal will
continue to affect us. Adverse consequences concerning Brexit or the European Union could include deterioration in global
economic conditions, instability in global financial markets, political uncertainty, volatility in currency exchange rates, or
adverse changes in the cross-border agreements currently in place, any of which could have an adverse impact on our financial
results in the future.
Risks Related to Legal and Regulatory Considerations
If we are unable to comply with regulatory requirements and industry standards, including those regarding product
safety, quality, efficacy and environmental impact, we could incur significant costs and suffer reputational harm which
could adversely affect results of operations.
The development, manufacture and sale of our products are subject to various regulatory requirements in each of the
countries in which our products are developed, manufactured and sold. In addition, we are subject to product safety and
compliance requirements established by governments, non-governmental organizations, including industry or similar oversight
bodies, or contractually by our customers, including requirements concerning product safety, quality and efficacy,
environmental impacts (including packaging, energy and water use and waste management) and other sustainability or similar
issues. Changes to regulations or the implementation of additional regulations, especially in certain highly regulated markets we
are active in, such as regulatory modernization of food safety laws and evolving standards and regulations affecting
pharmaceutical excipients or in reaction to new or next-generation technologies, including advances in protein engineering,
biotechnology (e.g., gene editing and gene mapping), or novel uses of existing technologies has required and may in the future
require us to reduce or remove certain ingredients, substances or processing aids from the product portfolio and may result in
significant costs or capital expenditures or require changes in business practice that could result in reduced margins or
profitability.
As concerns regarding safety, quality and environmental impact become more pressing, we may see new, more restrictive
regulations adopted that impact our products. For example, the European Chemicals Agency has proposed that the European
Commission adopt a ban on microplastics, including those found in personal care items, detergents and cosmetics, to reduce
plastics pollution. If this ban is adopted, we will be required to modify our products and/or innovate new solutions to replace
microplastics in our products. If we are unable to adapt to these new regulations or standards in a cost effective and timely
manner, we may lose business to competitors who are able to provide compliant products, expose ourselves to customer claims,
regulatory fines, litigation or reputational damage.
Gaps in our operational processes or those of our suppliers or distributors can result in products that do not meet our
quality control or industry standards or fail to comply with the relevant regulatory requirements, which in turn can result in
finished consumer goods that do not comply with applicable standards and requirements. Products that are mislabeled,
contaminated or damaged could result in a regulatory non-compliance event or even a product recall by the FDA or a similar
foreign agency. For instance, the Company determined that certain grades of microcrystalline cellulose (Avicel® PH 101, 102,
and 200 NF and Avicel® RC-591 NF) were found to be out-of-specification. Although the Company does not expect the OOS
conductivity issue to affect the functionality of Avicel® NF grades or to pose a human health hazard, corrective actions have
been implemented to improve operational and laboratory conditions.
We may also be exposed to serious adverse health claims related to undetected poor quality of raw materials, internal
system failures to adequately reduce or eliminate certain hazards (such as pathogens, allergens, contaminants, pesticides,
physical hazards, etc.) or products that are not in line with required or agreed specifications. Supply chain complexities, aging
equipment and infrastructure, human errors, or other failures may exacerbate such risks.
26
Our contracts often require us to indemnify our customers for the costs associated with a product non-compliance event,
including penalties, costs and settlements arising from litigation, remediation costs or loss of sales. As our offerings are used in
many products intended for human use or consumption, these consequences would be exacerbated if we or our customer did not
identify the defect before the product reaches the consumer and there was a resulting impact at the consumer level. Such a
result could lead to potentially large-scale adverse publicity, negative effects on consumer’s health, recalls and potential
litigation, fines, penalties, sanctions or other regulatory actions. In addition, if we do not have adequate insurance or contractual
indemnification from suppliers or other third parties, or if insurance or indemnification is not available, the liability relating to
product or possible third-party claims arising from mislabeled, contaminated or damaged products could adversely affect our
business, financial condition or results of operations. Furthermore, adverse publicity about our products, or our customers’
products that contain our ingredients, including concerns about product safety or similar issues, whether real or perceived,
could harm our reputation and result in an immediate adverse effect on our sales and customer relationships, as well as require
us to utilize significant resources to rebuild our reputation.
Defects, quality issues (including product recalls), inadequate disclosure or misuse with respect to the products and
capabilities could adversely affect our business, reputation and results of operations.
Defects in, misuse of, quality issues with respect to (including products recalls) or inadequate disclosure of risks relating to
our products, could lead to lost profits and other economic damage, property damage, personal injury or other liability resulting
in third-party claims, criminal liability, significant costs, damage to our reputation and loss of business. Any of these factors
could adversely affect our business, financial condition and our results of operations.
Our results of operations may be negatively impacted by the outcome of uncertainties related to litigation.
From time to time we are involved in a number of legal claims, regulatory investigations and litigation, including claims
related to intellectual property, product liability, environmental matters and indirect taxes. For instance, product liability claims
may arise due to the fact that we supply products to the food and beverage, functional food, pharma/nutraceutical and personal
care industries. Our manufacturing and other facilities may expose us to environmental claims and regulatory investigations and
potential fines.
In addition, in light of our product offerings into functional food, nutraceuticals, and natural antioxidants, we may also be
subject to claims of false or deceptive advertising claims relating to the efficacy, health benefits or other performance attributes
of such offerings in the U.S., Europe and other foreign jurisdictions in which we offer these types of products. These claims can
arise as a result of function claims, health claims, nutrient content claims and other claims that impermissibly suggest such
benefits or attributes for certain foods or food components. The cost of defending these claims or our obligations for direct
damages and indemnification if we were found liable could adversely affect our results of operations.
As a result of the N&B Transaction and the Frutarom acquisition, we assumed legal or environmental claims, regulatory
investigations, and litigation, including product liability, patent infringement, commercial litigation and other actions. We have
and will continue to become involved in additional actions arising from the acquired operations. Specifically, as the N&B
Business and Frutarom had a significant number of facilities located globally and a large number of customers, our exposure to
legal claims, regulatory and environmental investigations and litigation is increased. This will likely result in an increase in our
cost for defense, settlement of claims or indemnification obligations as compared to our historical experience.
Our insurance may not be adequate to protect us from potential material expenses related to pending and future claims and
our current levels of insurance may not be available in the future at commercially reasonable prices. Any of these factors could
adversely affect our profitability and results of operations.
Failure to comply with environmental protection laws may cause us to close, relocate or operate one or more of our
plants at reduced production levels, and expose us to civil or criminal liability, which could adversely affect our
operating results and future growth.
Our business operations and properties procure, make use of, manufacture, sell, and distribute substances that are
sometimes considered hazardous and are therefore subject to extensive and increasingly stringent federal, state, local and
foreign laws and regulations pertaining to protection of the environment, including air emissions, sewage discharges, the use of
hazardous materials, waste disposal practices and clean-up of existing environmental contamination.
27
Failure to comply with these laws and regulations or any future changes to them may result in significant consequences to
us, including the need to close or relocate one or more of our production facilities, administrative, civil and criminal penalties,
fines, sanctions, litigation, costly remediation measures, liability for damages and negative publicity. If we are unable to meet
production requirements, we can lose customer orders, which can adversely affect our future growth or we may be required to
make incremental capital investments to ensure supply. Idling of facilities or production modifications has caused or may cause
customers to seek alternate suppliers due to concerns regarding supply interruptions and these customers may not return or may
order at reduced levels even once issues are remediated. If these non-compliance issues reoccur in China or occur or in any
other jurisdiction, we may lose business and may be required to incur capital spending above previous expectations, close a
plant, or operate a plant at significantly reduced production levels on a permanent basis, and our operating results and cash
flows from operations may be adversely affected.
We could be adversely affected by violations, by us or our counterparties, of the U.S. Foreign Corrupt Practices Act,
similar U.S. or foreign anti-bribery and anti-corruption laws and regulations, applicable sanctions laws and regulations
in the jurisdictions in which we operate or ethical business practices and related laws and regulations.
The global nature of our business, our increased size and employee count, the significance of our international revenue, our
focus on emerging markets and presence in regulated industries create various domestic and local regulatory challenges and
subject us to risks associated with our international operations. The U.S. Foreign Corrupt Practices Act (the “FCPA”) and
similar anti-bribery and anti-corruption laws and regulations in other countries generally prohibit companies and their
intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business or for other
commercial advantage. In addition, U.S. public companies are required to maintain records that accurately and fairly represent
their transactions and have an adequate system of internal accounting controls. Under the FCPA, U.S. companies may be held
liable for the corrupt actions taken by directors, officers, employees, agents, or other strategic or local partners or
representatives. As such, if we or our intermediaries fail to comply with the requirements of the FCPA or similar legislation,
governmental authorities in the U.S. and elsewhere could seek to impose substantial civil and/or criminal fines and penalties
which could have a material adverse effect on our business, reputation, operating results and financial condition.
We operate or may pursue opportunities in some jurisdictions, such as China, India, Brazil, Russia and Africa, that pose
potentially elevated risks of fraud or corruption or increased risk of internal control issues. In certain jurisdictions, compliance
with anti-bribery laws may conflict with local customs and practices. From time to time, we have conducted and will conduct
internal investigations of the relevant facts and circumstances, control testing and compliance reviews, and take remedial
actions, when appropriate, to help ensure that we are in compliance with applicable corruption and similar laws and regulations.
For example, in August 2019, during the integration of Frutarom, we were made aware of allegations that two Frutarom
businesses operating principally in Russia and Ukraine made certain improper payments, including to representatives of a
number of customers. Our investigation substantiated the allegations that improper payments to representatives of customers
were made and that key members of Frutarom’s senior management at the time were aware of such payments. We did not
uncover any evidence suggesting that such payments had any connection to the U.S. In addition, Frutarom grew through rapid
acquisition and, as part of our integration efforts, we have implemented our anti-corruption and similar policies throughout a
number of those acquired companies, many of which were not previously subject to these U.S. laws.
Given the international scope of our business, we also sell certain of our products to countries that are subject to U.S. and
other sanctions under general licenses and authorizations related to such products, technologies and transactions. For example,
the U.S., the European Union and other countries have imposed sanctions and export controls on Russia, Belarus and occupied
regions of Ukraine. As a result, we have limited our export of ingredients to customers in Russia, Belarus and occupied regions
of Ukraine to only those that meet the essential needs of people. Compliance with sanctions laws is highly technical and
requires careful oversight, and it is possible that actions taken by us, our subsidiaries or our suppliers may cause us to be in
breach with these laws, which could have a material adverse effect to our business. Detecting, investigating and resolving actual
or alleged violations of the FCPA or other anti-bribery and anti-corruption laws and regulations is expensive, could consume
significant time and attention of our senior management and could subject us to investigations and inquiries by governmental
and other regulatory bodies. Any allegations of non-compliance with such laws and regulations could have a disruptive effect
on our operations in such jurisdiction, including interruptions of business or loss of third-party relationships, which may
negatively impact our results of operations or financial condition. Any determination that our operations or activities are not in
compliance with such laws and regulations could expose us to severe criminal or civil penalties or other sanctions, significant
fines, termination of necessary licenses and permits and penalties or other sanctions that may harm our business and reputation.
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In addition, our reputation and our customers’ willingness to purchase our products depend in part on our compliance by
our suppliers, distributors, customers or other counterparties with ethical employment practices, such as with respect to child
labor, wages and benefits, forced labor, discrimination, safe and healthy working conditions, as well as with all legal and
regulatory requirements relating to the conduct of their businesses (including the ones mentioned in the preceding paragraphs).
While we require that third-parties we work with agree to our code of conduct, we do not exercise control over our suppliers,
distributors, vendors and customers and due to the global nature of our business cannot guarantee their compliance with such
ethical and lawful business practices or such legal requirements. If our counterparties fail to comply with applicable laws,
regulations, safety codes, employment practices, human rights standards, quality standards, environmental standards,
production practices, or other obligations, norms, or ethical standards, our reputation and brand image could be harmed, and we
could be exposed to litigation, investigations, enforcement actions, monetary liability, and additional costs that would harm our
reputation, business, financial condition, results of operations and prospects.
Our ability to compete effectively depends on our ability to protect our intellectual property rights.
We rely on patents, trademarks, copyrights and trade secrets to protect our intellectual property rights. We often rely on
trade secrets to protect our products, manufacturing processes, extract methodologies and other processes, as this does not
require us to publicly file information regarding our intellectual property. From time to time, a third party may claim that we
have infringed upon or misappropriated their intellectual property rights, or a third party may infringe upon or misappropriate
our intellectual property rights. We could incur significant costs in connection with legal actions to assert our intellectual
property rights against third parties or to defend ourselves from third-party assertions of invalidity, infringement,
misappropriation or other claims. Any settlement or adverse judgment resulting from such litigation could require us to obtain a
license to continue to use the intellectual property rights that are the subject of the claim, or otherwise restrict or prohibit our
use of such intellectual property rights. Any required licensing fees may not be available to us on acceptable terms, if at all. For
those intellectual property rights that are protected as trade secrets, this litigation could result in even higher costs, and
potentially the loss of certain rights, since we would not have a perfected intellectual property right that precludes others from
making, using or selling our products or processes. The ongoing trend among our customers towards more transparent labeling
could further diminish our ability to effectively protect our products.
We vigilantly protect our intellectual property rights, including trade secrets. We have designed and implemented internal
controls intended to restrict access to and distribution of our respective intellectual property. Despite these precautions, our
intellectual property is vulnerable to unauthorized access through employee error or actions, theft and cybersecurity incidents,
and other security breaches. Protecting intellectual property related to biotechnology is particularly challenging because theft is
difficult to detect and biotechnology can be self-replicating. Accordingly, the impact of such theft can be significant.
For intellectual property rights that we seek to protect through patents, we cannot be certain that these rights, if obtained,
will not later be opposed, invalidated or circumvented. In addition, even if such rights are obtained in the U.S., the laws of some
other countries in which our products are or may be sold may not protect intellectual property rights to the same extent as the
laws of the U.S. If other parties were to infringe on our intellectual property rights, or if our intellectual property rights were the
subject of unauthorized access leading to competitive pressure or if a third party successfully asserted that we had infringed on
their intellectual property rights, it could materially and adversely affect our future results of operations by, among other things,
(i) being required to cease production and marketing or reducing the price that we could obtain in the marketplace for products
which are based on such rights, (ii) increasing the royalty or other fees that we may be required to pay in connection with such
rights, (iii) limiting the volume, if any, of such products that we can sell or (iv) resulting in significant litigation costs and
potential liability.
Changes in our tax rates, the adoption of new U.S. or international tax legislation, or changes in existing tax laws
could expose us to additional tax liabilities that may affect our future results.
We are subject to taxes in the U.S. and numerous foreign jurisdictions. Our future effective tax rates could be affected by
changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and
liabilities, changes in liabilities for uncertain tax positions, cost of repatriations or changes in tax laws or their interpretation.
Any of these changes could have a material adverse effect on our profitability.
We have and will continue to implement transfer pricing policies among our various operations located in different
countries. These transfer pricing policies are a significant component of the management and compliance of our operations
across international boundaries and overall financial results. Many countries routinely examine transfer pricing policies of
taxpayers subject to their jurisdiction, challenge transfer pricing policies aggressively where there is potential non-compliance
and impose significant interest charges and penalties where non-compliance is determined. However, governmental authorities
could challenge these policies more aggressively in the future and, if challenged, we may not prevail. We could suffer
significant costs related to one or more challenges to our transfer pricing policies.
29
We are subject to the continual examination of our income tax returns by the Internal Revenue Service, state tax authorities
and foreign tax authorities in those countries in which we operate, and we may be subject to assessments or audits in the future
in any of the countries in which we operate. The final determination of tax audits and any related litigation could be materially
different from our historical income tax provisions and accruals, and while we do not believe the results that follow would have
a material adverse effect on our financial condition, such results could have a material effect on our income tax provision, net
income or cash flows in the period or periods in which that determination is made.
In addition, a number of international legislative and regulatory bodies have proposed legislation and begun investigations
of the tax practices of multi-national companies and, in the European Union, the tax policies of certain European Union
member states. One of these efforts has been led by the Organization for Economic Co-operation and Development, an
international association of 34 countries including the U.S., which has finalized recommendations to revise corporate tax,
transfer pricing, and tax treaty provisions in member countries. On December 15, 2022, European Union member states
unanimously adopted the Minimum Tax Directive ensuring a global minimum level of taxation for multi-national companies.
Member States have until December 31, 2023 to transpose the Directive into national legislation. The enactment of the new
legislation could have a material effect on our effective tax rate, income tax expense, net income or cash flows.
Since 2013, the European Commission (“EC”) has been investigating tax rulings granted by tax authorities in a number of
European Union member states with respect to specific multi-national corporations to determine whether such rulings comply
with European Union rules on state aid, as well as more recent investigations of the tax regimes of certain European Union
member states. Under European Union law, selective tax advantages for particular taxpayers that are not sufficiently grounded
in economic realities may constitute impermissible state aid. If the EC determines that a tax ruling or tax regime violates the
state aid restrictions, the tax authorities of the affected European Union member state may be required to collect back taxes for
the period of time covered by the ruling. In late 2015 and early 2016, the EC declared that tax rulings, related to other
companies, by tax authorities in Luxembourg, the Netherlands and Belgium did not comply with the European Union state aid
restrictions. If the EC or tax authorities in other jurisdictions were to successfully challenge tax rulings applicable to us in any
of the member states in which we are subject to taxation or our internal intercompany arrangements, we could be exposed to
increased tax liabilities.
In December 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and
Jobs Act (the “Tax Act”) that significantly revised the U.S. tax code effective January 1, 2018. The Tax Act impacted our
consolidated results of operations during 2022 and is expected to continue to impact our consolidated results of operations in
future periods. The ultimate impact of the Tax Act, including for future periods, may depend on additional regulatory or
accounting guidance that may be issued with respect to the Tax Act.
In August 2022, the U.S. government enacted legislation commonly referred to as the “Inflation Reduction Act”, which,
among other things, imposes a minimum “book” tax on certain corporations effective for taxable years beginning after
December 31, 2022 and creates a new excise tax on stock repurchases made by certain publicly traded corporations after
December 31, 2022. The impact of the Inflation Reduction Act on our operations will depend on multiple factors, many of
which cannot be determined at this time. As a result, it is uncertain what the extent of the impact of the new law will be on our
operations. The application of the minimum book tax or the excise tax on us could adversely affect our results of operations.
The N&B Transaction could result in significant tax liability, and we may be obligated to indemnify DuPont for any
such tax liability imposed on DuPont.
The completion of the N&B Transaction in 2021 was conditioned upon the receipt by DuPont of an opinion that the
transaction generally will qualify as a tax-free reorganization. The tax opinion was based upon various factual representations
and assumptions, as well as certain undertakings made by DuPont, IFF and N&B. If any of those factual representations or
assumptions were untrue or incomplete in any material respect, any undertaking was or is not complied with, or the facts upon
which the opinion was based are materially different from the facts at the closing of the N&B Transaction, the transaction may
not qualify (in whole or part) for tax-free treatment.
The N&B spin-off and certain aspects of the pre-spin-off internal reorganizations to form N&B could be taxable to DuPont
if N&B or we were to engage in a “Spinco Tainting Act” (as defined in the Tax Matters Agreement, by and among DuPont,
N&B and IFF, a form of which is attached to IFF’s registration statement on Form S-4 (Registration Number 333-238072)). A
Spinco Tainting Act is generally any action (or inaction) within our control or under the control of N&B or their affiliates, any
event involving our common stock or the common stock of N&B or any assets of N&B or its subsidiaries, or any breach by
N&B or any of its subsidiaries of any factual representations, assumptions, or undertakings made by it, in each case, that would
affect the non-recognition treatment of the spin-off and internal reorganizations for U.S. federal income tax purposes, as
described above. Under the Tax Matters Agreement, we and N&B will be required to indemnify DuPont for any taxes resulting
from a Spinco Tainting Act. If we or N&B were required to indemnify DuPont pursuant to the Tax Matters Agreement as
described above, this indemnification obligation may be substantial and could have a material adverse effect on us, including
with respect to our financial condition and results of operations.
30
Moreover, we are not indemnified by N&B for tax liabilities related to pre-spin-off periods. Tax liabilities could increase as
an outcome of final determination of tax examinations and could adversely impact our financial results.
If we fail to comply with data protection laws in the U.S. and abroad, we may be subject to fines, penalties and other
costs.
Legal requirements relating to the collection, storage, handling, use, disclosure, transfer, and security of personal data
continue to evolve, and regulatory scrutiny in this area is increasing around the world. This regulatory environment is
increasingly challenging and may present material obligations and risks to our business, including significantly expanded
compliance burdens, restrictions on transfer of personal data, costs and enforcement risks. For example, the European Union’s
GDPR, which became effective in May 2018, greatly increases the jurisdictional reach of EU law and adds a broad array of
requirements related to personal data, including individual notice and opt-out preferences, restrictions on and requirements for
transfer of personal data and the public disclosure of significant data breaches. Additionally, violations of the GDPR can result
in fines of as much as 4% of a company’s annual revenue. Other governments have enacted or are enacting similar data
protection laws, including data localization laws that require data to stay within their borders. All of these evolving compliance
and operational requirements, restrictions on use of personal data, as well as the uncertain interpretation and enforcement of
laws, impose significant costs and regulatory risks that are likely to increase over time. Our failure to comply with these
evolving regulations could expose us to fines, sanctions, penalties and other costs that could harm our reputation and adversely
impact our financial results.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2.
PROPERTIES.
Our principal owned and leased properties as of December 31, 2022, are as follows:
Plant
Office
Laboratory
Warehouse
Other
Europe, Africa & the
Middle East
North America
Greater Asia
Latin America
Owned
Leased
Owned
Leased
Owned
Leased
Owned
Leased
48
3
7
1
5
64
20
77
16
12
5
130
24
—
1
—
—
25
13
7
15
11
8
54
22
4
—
—
11
37
12
37
16
3
4
72
18
—
2
3
3
26
5
8
2
11
4
30
Our principal executive offices are located at 521 West 57th Street, New York, New York and 200 Powder Mill Road,
Wilmington, Delaware. Our principal sites include facilities which, in the opinion of its management, are suitable and adequate
for their use and have sufficient capacity for its current business needs and expected near-term growth.
ITEM 3.
LEGAL PROCEEDINGS.
We are subject to various claims and legal actions in the ordinary course of our business. The Company’s material legal
proceedings are described in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 19,
“Commitments and Contingencies” under the heading “Litigation.”
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information.
31
Our common stock is principally traded on the New York Stock Exchange under the ticker symbol “IFF”.
Approximate Number of Equity Security Holders.
Title of Class
Common stock, par value 12 1/2¢ per share
Number of shareholders of record as of February 21, 2023
3,431
Issuer Purchases of Equity Securities.
None.
Performance Graph.
The following graph compares a shareholder’s cumulative total return for the last five fiscal years as if such amounts had
been invested in: (i) our common stock; (ii) the stocks included in the S&P 500 Index; (iii) the stocks included in the S&P 500
Consumer Staples Index; and (iv) the stocks included in the S&P 500 Specialty Chemicals Index. The graph is based on
historical stock prices and measures total shareholder return, which takes into account both changes in stock price and
dividends. The total return assumes that dividends were reinvested daily and is based on a $100 investment on December 31,
2017.
SOURCE: S&P Capital IQ
Year-end Data
International Flavors & Fragrances
S&P 500 Index
S&P 500 Consumer Staples Index
S&P 500 Specialty Chemicals Index
ITEM 6.
[RESERVED]
2017
100.00 $
100.00 $
100.00 $
100.00 $
$
$
$
$
2018
89.90 $
95.62 $
91.62 $
94.27 $
2019
88.38 $
125.72 $
116.92 $
111.49 $
2020
76.59 $
148.85 $
129.48 $
130.63 $
2021
108.41 $
191.58 $
153.60 $
168.56 $
2022
77.68
156.88
152.65
122.29
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
(UNLESS INDICATED OTHERWISE, DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
32
Overview
Company Background
On February 1, 2021, one of our wholly owned subsidiaries merged with and into the N&B Business (the “Merger”),
pursuant to a Merger Agreement with DuPont. The shares issued in the Merger represented approximately 55.4% of the
common stock of IFF on a fully diluted basis, after giving effect to the Merger, as of February 1, 2021. The N&B Business is an
innovation-driven and customer-focused business that provides solutions for the global food and beverage, dietary supplements,
home and personal care, energy, animal nutrition and pharma markets. The transaction was made in order to strengthen IFF's
customer base and market presence, with an enhanced position in the food & beverage, home & personal care and health &
wellness markets. See Note 3 to the Consolidated Financial Statements for additional information related to the N&B
Transaction.
As a result of the N&B Transaction, and following our 2018 acquisition of Frutarom Industries Ltd., we have expanded our
global leadership positions, which now include high-value ingredients and solutions in the Food & Beverage, Home & Personal
Care and Health & Wellness markets, and across key Taste, Texture, Scent, Nutrition, Enzymes, Cultures, Soy Proteins,
Pharmaceutical Excipients and Probiotics categories.
We are organized into four segments: Nourish, Health & Biosciences, Scent and Pharma Solutions. The Company’s
consolidated financial information for the year ended December 31, 2022 reflects the results of N&B for the full twelve months
of 2022, whereas the Company’s consolidated financial information for the year ended December 31, 2021 reflects the results
of N&B for eleven months of 2021, and 2020 does not include any amounts related to N&B.
Our Nourish segment consists of an innovative and broad portfolio of natural-based ingredients to enhance nutritional
value, texture and functionality in a wide range of beverage, dairy, bakery, confectionery and culinary applications and consists
of three business units: Ingredients, Flavors and Food Designs.
Our Health & Biosciences segment consists of the development and production of an advanced biotechnology-derived
portfolio of enzymes, food cultures, probiotics and specialty ingredients for food and non-food applications. Among many other
applications, this biotechnology-driven portfolio includes cultures for use in fermented foods such as yogurt, cheese and
fermented beverages, probiotic strains, many with documented clinical health claims for use as dietary supplements and
through industrial fermentation the production of enzymes and microorganisms that provide product and process performance
benefits to household detergents, animal feed, ethanol production and brewing. Health & Biosciences is comprised of five
business units: Health, Cultures & Food Enzymes, Home & Personal Care, Animal Nutrition and Grain Processing. On July 1,
2022, we completed the divestiture of our Microbial Control business unit (formerly a part of the Health & Biosciences
segment).
Our Scent segment creates fragrance compounds, fragrance ingredients and cosmetic ingredients that are integral elements
in the world’s finest perfumes and best-known household and personal care products. Consumer insights science and creativity
are at the heart of our Scent business, and, along with our unique portfolio of natural and synthetic ingredients, global footprint,
innovative technologies and know-how, and customer intimacy, we believe make us a market leader in scent products. The
Scent segment is comprised of three business units: Fragrance Compounds, Fragrance Ingredients and Cosmetic Actives.
Our Pharma Solutions segment produces, among other things, a vast portfolio of cellulosics and seaweed-based
pharmaceutical excipients, used to improve the functionality and delivery of active pharmaceutical ingredients, including
controlled or modified drug release formulations, and enabling the development of more effective pharmaceutical finished
dosage formulations. Our excipients are used in prescription and over-the-counter pharmaceuticals and dietary supplements.
Our Pharma Solutions products also serve a variety of other specialty and industrial end-uses including coatings, inks,
electronics, agriculture, and consumer products.
Financial Measures — Currency Neutral
Our financial results include the impact of foreign currency exchange rates. We provide currency neutral calculations in
this report to remove the impact of these items. We calculate currency neutral numbers by translating current year invoiced sale
amounts at the exchange rates used for the corresponding prior year period. We use currency neutral results in our analysis of
subsidiary and/or segment performance. We also use currency neutral numbers when analyzing our performance against our
competitors.
Due to the Merger with N&B, for the fiscal year 2022 we will not be presenting currency neutral impacts for the Nourish,
Health & Biosciences and Pharma Solutions operating segments as the performance in these operating segments includes
effects of N&B for the full twelve months of 2022 while the 2021 period does not, and thus the periods’ results are not equally
comparable. We present the currency neutral impacts for the Scent operating segment as this operating segment does not have
any effects of N&B.
33
Impairment of Goodwill
For the third quarter of 2022, we determined that goodwill impairment triggering events occurred for our Nourish, Health
& Biosciences and Pharma Solutions reporting units, which required us to complete an interim impairment assessment.
In performing the quantitative impairment test, we determined that the fair value of the Nourish and Pharma Solutions
reporting units exceeded their carrying values, and determined that there was no impairment of goodwill relating to these
reporting units. We determined that the carrying value of the Health & Biosciences reporting unit exceeded its fair value and
recorded a goodwill impairment charge of $2.250 billion in the Consolidated Statements of (Loss) Income and Comprehensive
(Loss) Income for the year ended December 31, 2022. See “Critical Accounting Policies and Use of Estimates” and Note 6 to
the Consolidated Financial Statements for additional information.
Impact of the Events in Russia and Ukraine
We maintain operations in both Russia and Ukraine and, additionally, export products to customers in Russia and Ukraine
from operations outside the region. In response to the events in Ukraine, we have limited the production and supply of
ingredients in and to Russia to only those that meet the essential needs of people, including food, hygiene and medicine.
In 2021, total sales to Russian customers were approximately 2% of total sales. For the year ended December 31, 2022,
sales to Russian customers were also approximately 2% of total sales.
In 2021, total sales to Ukrainian customers were less than 1% of total sales. For the year ended December 31, 2022, sales to
Ukrainian customers were also less than 1% of total sales.
See Note 1, Note 5 and Note 6 to the Consolidated Financial Statements for additional information.
Impact of COVID-19 Pandemic
On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic. Various policies and
initiatives have been implemented around the world to reduce the global transmission of COVID-19. Although there continue to
be minor operational disruptions, all of IFF’s manufacturing facilities remain open and continue to manufacture products.
The COVID-19 pandemic remains a serious threat to the health of the world’s population and certain countries and regions
continue to suffer from outbreaks or have seen a recurrence of infections, especially with the emergence of new variants of the
virus. Accordingly, the Company continues to take the threat from COVID-19 seriously. The impact that COVID-19 will have
on our consolidated results of operations for the remainder of 2023 remains uncertain. Due to the length and severity of the
COVID-19 pandemic, there is continued volatility as a result of retail and travel, consumer shopping and consumption
behavior. Moreover, as a result of disruptions or uncertainty relating to the COVID-19 pandemic, we are experiencing, and may
continue to experience, increased costs, delays or limited availability related to raw materials, strain on shipping and
transportation resources, and higher energy prices, which have negatively impacted, and may continue to negatively impact, our
margins and operating results. We will continue to evaluate the nature and extent of these potential impacts to our business,
consolidated results of operations, segment results, liquidity and capital resources.
Although IFF has not experienced and does not currently anticipate any impairment charges related to COVID-19, the
continuing effects of a prolonged pandemic could result in increased risk of asset write-downs and impairments. Any of these
events could potentially result in a material adverse impact on IFF’s business and results of operations.
For more detailed information about risks related to COVID-19, refer to Item 1A, “Risk Factors” - Global health crises,
such as the COVID-19 pandemic, have had an impact on our supply chain and could have a material impact on global
operations, our customers and our suppliers, which could adversely impact our business and results of operations.
2023 Restructuring Program
In December 2022, we announced a restructuring program mainly related to headcount reduction to improve our
organizational and operating structure, drive efficiencies and achieve cost savings (the “Program”). Once the Program is
finalized we expect to incur one-time costs of approximately $70 million and expect to achieve run-rate savings of
approximately $100 million, with approximately $75 million targeted to be realized in 2023. We expect to complete the
program by the end of 2023. The final amount and timing of this charge will be determined once the plan is finalized.
2022 Financial Performance Overview
For a reconciliation between reported and adjusted figures, please refer to the “Non-GAAP Financial Measures” section.
34
Sales
Sales in 2022 increased $784 million, or 7% on a reported basis, to $12.440 billion compared to $11.656 billion in the 2021
period. Sales included approximately $568 million of incremental sales attributable to N&B for the month of January in the
2022 period. In addition, the increase in sales was primarily driven by price increases across various businesses, offset in part
by the net impact of the divestiture of the Microbial Control business unit and acquisition of Health Wright Products, Inc.
(“change in business portfolio mix”) and volume decreases across various businesses.
Our 25 largest customers accounted for approximately 28% of total sales in 2022. In 2022, no customer accounted for more
than 10% of sales. A key factor for commercial success is our inclusion on strategic customers’ core supplier lists, which
provides opportunities to expand and win new business. We are on the core supplier lists of a large majority of our global and
strategic customers.
Gross Profit
Gross profit in 2022 increased $416 million, or 11% on a reported basis, to $4.151 billion (33.4% of sales) compared to
$3.735 billion (32.0% of sales) in the 2021 period. Approximately $179 million of gross profit was attributable to N&B for the
month of January in the 2022 period. The increase in gross profit was primarily driven by favorable net pricing across various
businesses and the impact of N&B inventory step-up costs from the prior year period, offset in part by the change in business
portfolio mix and volume decreases.
35
Results of Operations
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
Net sales
Cost of goods sold
Gross profit
Research and development (R&D) expenses
Selling and administrative (S&A) expenses
Restructuring and other charges
Amortization of acquisition-related intangibles
Impairment of goodwill
Impairment of long-lived assets
(Gains) losses on sale of fixed assets
Operating (loss) profit
Interest expense
Other income, net
(Loss) income before taxes
Provision for income taxes
Net (loss) income
Net income attributable to non-controlling interest
Net (loss) income attributable to IFF shareholders $
Net (loss) income per share — diluted
$
Gross margin
R&D as a percentage of sales
S&A as a percentage of sales
Operating margin
Effective tax rate
Segment net sales
Nourish
Health & Biosciences
Scent
Pharma Solutions
Consolidated
_______________________
NMF: Not meaningful
$
2022
$ 12,440
8,289
4,151
603
1,768
12
727
Year Ended December 31,
2021
$
$ 11,656
7,921
3,735
629
1,749
41
732
2,250
120
(3)
(1,326)
336
(37)
(1,625)
239
(1,864)
7
(1,871) $
(7.32) $
33.4 %
4.8 %
14.2 %
(10.7) %
(14.7) %
—
—
(1)
585
289
(58)
354
75
279
$
$
9
270
1.10
32.0 %
5.4 %
15.0 %
5.0 %
21.2 %
$
6,829
2,339
$
6,264
2,329
2,301
971
$ 12,440
2,254
809
$ 11,656
$
2020
5,084
2,998
2,086
357
949
17
193
—
—
4
566
132
Change
2022 vs. 2021 2021 vs. 2020
129 %
164 %
79 %
76 %
84 %
141 %
279 %
NMF
NMF
(125) %
3 %
119 %
NMF
(20) %
1 %
(24) %
125 %
(26) %
(66) %
NMF
(160) bps
NMF
NMF
NMF
7 %
5 %
11 %
(4) %
1 %
(71) %
(1) %
NMF
NMF
200 %
NMF
16 %
(36) %
NMF
219 %
NMF
(22) %
NMF
NMF
140 bps
(60) bps
(80) bps
NMF
NMF
(7)
441
74
367
4
363
3.21
41.0 %
7.0 %
18.7 %
11.1 %
16.8 %
2,886
134
2,064
—
5,084
9 %
— %
2 %
20 %
7 %
117 %
NMF
9 %
NMF
129 %
Cost of goods sold includes the cost of materials and manufacturing expenses. R&D includes expenses related to the
development of new and improved products and technical product support. S&A expenses include expenses necessary to
support our commercial activities and administrative expenses supporting our overall operating activities including compliance
with governmental regulations.
2022 IN COMPARISON TO 2021
Sales
Sales for 2022 increased $784 million, or 7% on a reported basis, to $12.440 billion compared to $11.656 billion in the
2021 period. Sales included approximately $568 million of incremental sales attributable to N&B for the month of January in
the 2022 period. In addition, the increase in sales was primarily driven by price increases across various businesses, offset in
part by the change in business portfolio mix and volume decreases across various businesses.
36
Sales performance by segment was as follows:
Nourish
Health & Biosciences
Scent
Pharma Solutions
Total
% Change in Sales - 2022 vs. 2021
Reported
Currency Neutral(1)
NMF
NMF
8 %
NMF
NMF
9 %
0 %
2 %
20 %
7 %
_______________________
(1) Currency neutral sales growth is calculated by translating current year invoiced sale amounts at the exchange rates for the
corresponding prior year period.
NMF: Not meaningful
Nourish
Nourish sales in 2022 increased $565 million, or 9% on a reported basis, to $6.829 billion compared to $6.264 billion in
the 2021 period. Nourish sales included approximately $293 million of incremental sales attributable to N&B for the month of
January in the 2022 period. In addition, performance in the Nourish operating segment was primarily driven by price increases,
particularly in the Ingredients and Food Design business units, offset in part by volume decreases across various business units.
Health & Biosciences
Health & Biosciences sales in 2022 increased $10 million, or 0.4% on a reported basis, to $2.339 billion compared to
$2.329 billion in the 2021 period. Health & Biosciences sales included approximately $202 million of incremental sales
attributable to N&B for the month of January in the 2022 period. The decrease in Health & Biosciences sales, excluding the
impact of N&B for the month of January in the 2022 period, was primarily driven by the change in business portfolio mix,
offset in part by price increases across various business units.
Scent
Scent sales in 2022 increased $47 million, or 2% on a reported basis, to $2.301 billion compared to $2.254 billion in the
2021 period. Scent sales in 2022 also increased 8% on a currency neutral basis. Performance in the Scent operating segment
was driven by price and volume increases in Fragrance Compounds and price increases in Fragrance Ingredients business units,
offset in part by unfavorable impacts from exchange rate variations.
Pharma Solutions
Pharma Solutions sales in 2022 increased $162 million, or 20% on a reported basis, to $971 million compared to $809
million. Pharma Solutions sales included approximately $73 million of incremental sales attributable to N&B for the month of
January in the 2022 period. In addition, performance in the Pharma Solutions operating segment was primarily driven by price
and volume increases.
Cost of Goods Sold
Cost of goods sold increased $368 million to $8.289 billion (66.6% of sales) in 2022 compared to $7.921 billion (68.0% of
sales) in 2021. Cost of goods sold included approximately $389 million of incremental costs attributable to N&B for the month
of January in the 2022 period. In addition, excluding the impact of N&B for the month of January in the 2022 period and the
N&B inventory step-up costs from the prior year period, the increase in cost of goods sold was primarily driven by higher
material costs, due to higher commodity prices, offset in part by the change in business portfolio mix and volume decreases in
sales.
Research and Development (R&D) Expenses
R&D expenses decreased $26 million to $603 million (4.8% of sales) in 2022 compared to $629 million (5.4% of sales) in
2021. R&D expenses included approximately $20 million of incremental expenses attributable to N&B for the month of
January in the 2022 period, which consisted primarily of employee related expenses, including salaries, wages and bonuses and
operating expenses for R&D related activities. In addition, excluding the impact of N&B for the month of January in the 2022
period, R&D expenses decreased primarily due to lower employee related expenses, including salaries, wages and bonuses, and
professional fees, including consulting costs, offset in part by higher operating expenses for R&D related activities.
37
Selling and Administrative (S&A) Expenses
S&A expenses increased $19 million to $1.768 billion (14.2% of sales) in 2022 compared to $1.749 billion (15.0% of
sales) in 2021. S&A expenses included approximately $51 million of incremental expenses attributable to N&B for the month
of January in the 2022 period, which consisted primarily of employee related expenses, including salaries, wages and bonuses,
professional fees, including consulting costs, and operating expenses for S&A related activities. In addition, excluding the
impact of N&B for the month of January in the 2022 period, S&A expenses decreased primarily due to lower employee related
expenses, including salaries, wages and bonuses, and professional fees, including consulting costs, offset in part by higher
operating expenses for S&A related activities.
Restructuring and Other Charges
Restructuring and other charges decreased to $12 million in 2022 compared to $41 million in 2021. The decrease was
primarily driven by lower severance costs incurred in 2022 (see Note 2 for additional information).
Amortization of Acquisition-Related Intangibles
Amortization expenses decreased to $727 million in 2022 compared to $732 million in 2021. Amortization expense
included approximately $47 million attributable to N&B for the month of January in the 2022 period related to the intangible
assets acquired through the Merger with N&B. Excluding the impact of N&B for the month of January in the 2022 period, the
decrease in amortization expense was primarily driven by the reduction in intangible assets as a result of the divestiture of the
Microbial Control business unit and impairment of intangible assets of an asset group that operates primarily in Russia, offset in
part by the impact of acquisitions of intangible assets from Health Wright Products, Inc. (see Note 3, Note 4 and Note 6 for
additional information).
Impairment of Goodwill
Impairment of goodwill was $2.250 billion in 2022, which was related to the Health & Biosciences reporting unit. See
Note 1 and Note 6 for additional information.
Impairment of Long-Lived Assets
Impairment of long-lived assets was $120 million in 2022. The impairment charge was due to the uncertainties related to
our operations in Russia and Ukraine and was allocated on a pro rata basis to intangible assets and property, plant and
equipment (see Note 1, Note 5 and Note 6 for additional information).
Interest Expense
Interest expense increased $47 million to $336 million in 2022 compared to $289 million in 2021. Interest expense
included approximately $13 million attributable to N&B for the month of January in the 2022 period, which included the
impact of the additional debt assumed in the Merger with N&B. In addition, the increase in interest expense was due to higher
interest rates, which led to an increase in the cost for participating in our factoring programs (see Note 1 for additional
information), higher effective interest rates on the outstanding Term Loan Facilities and an increase in draw downs of the
Revolving Credit Facility and commercial paper (see Note 9 for additional information).
Other Income, Net
Other income, net, decreased $21 million to $37 million in 2022 versus $58 million in 2021. Other income, net includes
approximately $6 million attributable to N&B for the month of January in the 2022 period. Excluding the impact of N&B for
the month of January in the 2022 period, the decrease in other income, net was primarily due to foreign exchange losses in 2022
compared to foreign exchange gains in the 2021 period and lower pension income in 2022 compared to the 2021 period, due to
the adjustment during the 2021 period to correct net income amounts related to certain defined benefit plans in prior years,
offset in part by higher interest income.
Income Taxes
The effective tax rate in 2022 was (14.7)% compared to 21.2% in 2021. The year-over-year change was primarily due to
the recording of non-tax-deductible impairment charges related to goodwill in the Health & Biosciences operating segment and
the tax effects of the divestiture of the Microbial Control business unit.
38
Segment Adjusted Operating EBITDA Results by Business Unit
We use Segment Adjusted Operating EBITDA for internal reporting and performance measurement purposes. Segment
Adjusted Operating EBITDA is defined as (Loss) Income Before Taxes before depreciation and amortization expense, interest
expense, restructuring and other charges and certain non-recurring items. Our determination of reportable segments was made
on the basis of our strategic priorities within each segment and corresponds to the manner in which our Chief Operating
Decision Maker reviews and evaluates operating performance to make decisions about resources to be allocated to the segment.
In addition to our strategic priorities, segment reporting is also based on differences in the products and services we provide.
(DOLLARS IN MILLIONS)
Segment Adjusted Operating EBITDA
Nourish
Health & Biosciences
Scent
Pharma Solutions
Total
Depreciation & Amortization
Interest Expense
Other Income, net
Acquisition Related Costs
Restructuring and Other Charges
Gains on Sale of Fixed Assets
Impairment of Goodwill
Impairment of Long-Lived Assets
Shareholder Activism Related Costs
Business Divestiture Costs
Employee Separation Costs
Strategic Initiative Costs
Global Shared Services Implementation Costs
Frutarom Acquisition Related Costs
N&B Inventory Step-Up Costs
N&B Transaction Related Costs
Integration Related Costs
(Loss) Income Before Taxes
Segment Adjusted Operating EBITDA margin:
Nourish
Health & Biosciences
Scent
Pharma Solutions
Consolidated
For the Year Ended
December 31,
2022
2021
$
$
1,176
634
423
222
2,455
(1,179)
(336)
37
4
(12)
3
(2,250)
(120)
(3)
(110)
(11)
(3)
(5)
(1)
—
—
(94)
(1,625)
$
$
1,172
625
463
165
2,425
(1,156)
(289)
58
—
(41)
1
—
—
(7)
(42)
(29)
—
—
(2)
(368)
(91)
(105)
354
17.2 %
27.1 %
18.4 %
22.9 %
19.7 %
18.7 %
26.8 %
20.5 %
20.4 %
20.8 %
Nourish Segment Adjusted Operating EBITDA
Nourish Segment Adjusted Operating EBITDA increased $4 million, or 0.3% on a reported basis, to $1.176 billion (17.2%
of segment sales) in 2022 from $1.172 billion (18.7% of segment sales) in the comparable 2021 period. Nourish Segment
Adjusted Operating EBITDA included approximately $65 million attributable to N&B for the month of January in the 2022
period. The decrease in Nourish Segment Adjusted Operating EBITDA, excluding the impact of N&B for the month of January
in the 2022 period, was primarily driven by volume decreases, offset in part by favorable net pricing.
39
Health & Biosciences Segment Adjusted Operating EBITDA
Health & Biosciences Segment Adjusted Operating EBITDA increased $9 million, or 1% on a reported basis, to $634
million (27.1% of segment sales) in 2022 from $625 million (26.8% of segment sales) in the comparable 2021 period. Health &
Biosciences Segment Adjusted Operating EBITDA included approximately $60 million attributable to N&B for the month of
January in the 2022 period. The decrease in Health & Biosciences Segment Adjusted Operating EBITDA, excluding the impact
of N&B for the month of January in the 2022 period, was primarily driven by volume decreases and the change in business
portfolio mix, offset in part by favorable net pricing.
Scent Segment Adjusted Operating EBITDA
Scent Segment Adjusted Operating EBITDA decreased $40 million, or 9% on a reported basis, to $423 million (18.4% of
segment sales) in 2022 from $463 million (20.5% of segment sales) in the comparable 2021 period. On a currency neutral basis,
Scent Segment Adjusted Operating EBITDA increased 1% in 2022 compared to the prior year period. The decrease, on a
reported basis, was primarily driven by unfavorable impacts from exchange rate variations and net pricing, offset in part by
volume increases in Fragrance Compounds.
Pharma Solutions Segment Adjusted Operating EBITDA
Pharma Solutions Segment Adjusted Operating EBITDA increased $57 million, or 35% on a reported basis, to $222
million (22.9% of segment sales) in 2022 from $165 million (20.4% of segment sales) in the comparable 2021 period. Pharma
Solutions Segment Adjusted Operating EBITDA included approximately $12 million attributable to N&B for the month of
January in the 2022 period. In addition, the increase in Pharma Solutions Segment Adjusted Operating EBITDA, excluding the
impact of N&B for the month of January in the 2022 period, was primarily driven by favorable net pricing and volume
increases.
2021 IN COMPARISON TO 2020
For a comparison of our results of operations for the fiscal years ended December 31, 2021 and December 31, 2020, see
“Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K
for the fiscal year ended December 31, 2021, filed with the SEC on February 28, 2022.
Liquidity and Capital Resources
Cash and Cash Equivalents
We had cash and cash equivalents of approximately $535 million, inclusive of $52 million currently in Assets held for sale
on the Consolidated Balance Sheets, at December 31, 2022 compared to $711 million at December 31, 2021 and of this
balance, a portion was held outside the United States. Cash balances held in foreign jurisdictions are, in most circumstances,
available to be repatriated to the United States.
Effective utilization of the cash generated by our international operations is a critical component of our strategy. We
regularly repatriate cash from our non-U.S. subsidiaries to fund financial obligations in the U.S. As we repatriate these funds to
the U.S. we will be required to pay income taxes in certain U.S. states and applicable foreign withholding taxes during the
period when such repatriation occurs. Accordingly, as of December 31, 2022, we have a deferred tax liability of approximately
$166 million for the effect of repatriating the funds to the U.S.
Cash Flows Provided By Operating Activities
Cash flows provided by operating activities in 2022 were $397 million, or 3.2% of sales, compared to $1.437 billion, or
12.3% of sales, in 2021 and $714 million, or 14.0% of sales, in 2020. The decrease in cash flows provided by operating
activities from 2021 to 2022 was primarily driven by the increase in working capital, largely related to inventories and accounts
payable. The increase in cash flows provided by operating activities from 2020 to 2021 was primarily driven by higher cash
earnings, excluding the impact of non-cash adjustments, offset in part by the increase in working capital, largely related to
inventories and accounts receivable.
Cash Flows Provided By (Used In) Investing Activities
Cash flows provided by investing activities in 2022 were $745 million compared to cash flows used in investing activities
of $18 million and $187 million in 2021 and 2020, respectively. The increase in cash flows from investing activities from 2021
to 2022 was primarily driven by the change in proceeds received from business divestiture and unwinding of derivative
instruments, offset in part by the change in cash provided by the Merger with N&B, higher spending on property, plant and
equipment and cash paid for acquisitions, net of cash received, in the current year period. The decrease in cash flows used in
investing activities from 2020 to 2021 was primarily driven by the increase in cash provided by the Merger with N&B and
higher net proceeds received from the sale of the Fruit Preparation business, offset in part by higher spending on property, plant
and equipment in the 2021 period.
40
Additions to property, plant and equipment were $504 million, $393 million and $192 million in 2022, 2021 and 2020,
respectively (net of grants and other reimbursements from government authorities). These investments largely arise from our
ongoing focus to align our manufacturing facilities with customer demand, primarily in emerging markets, and new technology
consistent with our strategy.
We have evaluated and re-prioritized our capital projects and expect that capital spending in 2023 will be approximately
4.4% of sales (net of potential grants and other reimbursements from government authorities).
Cash Flows Used In Financing Activities
Cash flows used in financing activities in 2022 were $1.229 billion compared to $1.304 billion and $512 million in 2021
and 2020, respectively. The decrease in cash used in financing activities from 2021 to 2022 was primarily driven by less
repayments of long-term debt and an increase in revolving credit facility and short-term borrowings, offset in part by higher
repayments of commercial paper, net of borrowings, higher cash dividend payments and higher purchases of redeemable non-
controlling interest. The increase in cash flows used in financing activities from 2020 to 2021 was primarily driven by higher
repayments of both short-term and long-term debt and higher cash dividend payments, offset in part by proceeds from issuance
of commercial paper.
We paid dividends totaling $810 million, $667 million and $323 million in 2022, 2021 and 2020, respectively. The cash
dividend declared per share in 2022, 2021 and 2020 was $3.20, $3.12 and $3.04, respectively.
Our capital allocation strategy is primarily focused on debt repayment to maintain our investment grade rating. We will
also prioritize capital investment in our businesses to support the strategic long-term plans. We are also committed to
maintaining our history of paying a dividend to investors determined by our Board of Directors at its discretion based on
various factors.
We had a board approved stock repurchase program and as of May 7, 2018, we suspended our share repurchases. As of
November 1, 2022, the program has expired.
Capital Resources
Operating cash flow provides the primary source of funds for capital investment needs, dividends paid to shareholders and
debt service repayments. We anticipate that cash flows from operations and availability under our existing credit facilities will
be sufficient to meet our investing and financing needs. We regularly assess our capital structure, including both current and
long-term debt instruments, as compared to our cash generation and investment needs in order to provide ample flexibility and
to optimize our leverage ratios. We believe our existing cash balances are sufficient to meet our debt service requirements.
Refer to Note 9 for additional information.
Transaction with Nutrition & Biosciences, Inc.
On February 1, 2021, the N&B Term Loan Facility was funded, which provided for a senior unsecured term loan credit
facility in an aggregate principal amount of $1.250 billion, comprised of a $625 million three-year tranche (“2024 Term Loan
Facility”) and a $625 million five-year tranche (“2026 Term Loan Facility”). Following the Merger, we assumed the
indebtedness incurred by N&B in the debt financings, which included (i) the 2024 Term Loan Facility and 2026 Term Loan
Facility and (ii) a series of Senior Notes in the aggregate amount of $6.250 billion with maturities ranging from 2 to 30 years.
N&B’s indebtedness raised prior to the Merger was used to finance the Special Cash Payment to DuPont, which has been paid,
and for the satisfaction of the related transaction fees and expenses.
Refer to Note 3 and Note 9 for additional information.
In connection with the N&B Transaction, a wholly owned subsidiary of IFF merged with and into N&B in exchange for
141,740,461 shares of IFF common stock, par value $0.125 per share (“IFF Common Stock”), which had been approved in the
special shareholder meeting that occurred on August 27, 2020 where IFF shareholders voted to approve the issuance of shares
of IFF common stock in connection with the N&B Transaction pursuant to the Merger Agreement. In connection with the N&B
Transaction, DuPont received a one-time $7.359 billion special cash payment (the “Special Cash Payment”). The shares issued
in the Merger represented approximately 55.4% of the common stock of IFF on a fully diluted basis, after giving effect to the
Merger, as of February 1, 2021 (see Note 3 for additional information).
41
Amended Revolving Credit Facility and Term Loans
The Credit Agreements contain various covenants, limitations and events of default customary for similar facilities for
similarly rated borrowers, including the requirement for us to maintain, at the end of each fiscal quarter, a ratio of net debt for
borrowed money to Credit Adjusted EBITDA in respect of the previous 12-month period. On and after the Closing Date of the
N&B Transaction, the 2024 Term Loan Facility and 2026 Term Loan Facility are also subject to a financial covenant requiring
maintenance of a maximum consolidated leverage ratio of 4.75 to 1.0, with step downs to 3.50 to 1.0 over time, with the first
step-down which occurred after the fiscal quarter ended December 31, 2021 and the final step-down occurring after the fiscal
quarter ending June 30, 2023, with a step-up if the Company consummates certain qualified acquisitions. On August 4, 2022,
we amended our existing Term Loan Credit Agreement and Amended Revolving Credit Facility, and the amendment delays
certain step-downs from the maximum permitted leverage ratio of 4.50 to 1.0, stepping down to 3.50 to 1.0 over time, with the
first step-down now occurring after the fiscal quarter ending June 30, 2023 and the final step-down now occurring after the
fiscal quarter ending September 30, 2024, with a step-up if the Company consummates certain qualified acquisitions.
As of December 31, 2022, we had $100 million outstanding borrowings under our $2.000 billion Revolving Credit Facility.
The amount that we are able to draw down under the Revolving Credit Facility is limited by financial covenants as described in
more detail below. As of December 31, 2022, our borrowing capacity was approximately $902 million under the Revolving
Credit Facility.
See Note 9 to the Consolidated Financial Statements for additional information on our Credit Agreements.
Debt Covenants
At December 31, 2022 and 2021 we were in compliance with all financial and other covenants, including the net debt to
credit adjusted EBITDA(1) ratio. At December 31, 2022 our net debt to credit adjusted EBITDA(1) ratio was 4.14 to 1.0 as
defined by the credit facility agreements, which is below the relevant level provided by our financial covenants of existing
outstanding debt.
_______________________
(1) Credit adjusted EBITDA and net debt, which are non-GAAP measures used for these covenants, are calculated in accordance with the
definition in the debt agreements. In this context, these measures are used solely to provide information on the extent to which we are in
compliance with debt covenants and may not be comparable to credit adjusted EBITDA and net debt used by other companies.
Reconciliations of credit adjusted EBITDA to net (loss) income and net debt to total debt are as follows:
$
Year Ended December 31, 2022
(DOLLARS IN MILLIONS)
Net loss
Interest expense
Income taxes
Depreciation and amortization
Specified items(1)
Non-cash items(2)
Credit Adjusted EBITDA
_______________________
(1) Specified items for the 12 months ended December 31, 2022 of $2.605 billion consisted of acquisition related costs, restructuring and
other charges, impairment of goodwill, impairment of long-lived assets, shareholder activism related costs, business divestiture costs,
employee separation costs, strategic initiative costs, Global Shared Services implementation costs, Frutarom acquisition related costs
and integration related costs.
(1,871)
336
239
1,179
2,605
35
2,523
$
(2) Non-cash items represent all other adjustments to reconcile net (loss) income to net cash provided by operations as presented on the
Statements of Cash Flows, including gains on sale of fixed assets, gains on business disposal and stock-based compensation.
(DOLLARS IN MILLIONS)
Total debt(1)
Adjustments:
Cash and cash equivalents(2)
December 31, 2022
$
10,987
535
10,452
Net debt
_______________________
(1) Total debt used for the calculation of net debt consists of short-term debt, long-term debt, short-term finance lease obligations and long-
$
term finance lease obligations.
(2) Cash and cash equivalents includes approximately $52 million currently in Assets held for sale on the Consolidated Balance Sheets.
Senior Notes
42
As of December 31, 2022, we had $9.330 billion aggregate principal amount outstanding in senior unsecured notes, with
$1.380 billion principal amount denominated in EUR and $7.950 billion principal amount denominated in USD, which includes
the N&B Senior Notes assumed as a result of the Merger. The notes bear interest ranging from 1.22% per year to 5.12% per
year, with maturities from May 1, 2023 to December 1, 2050. See Note 9 to the Consolidated Financial Statements for
additional information.
Tangible Equity Units - Senior Unsecured Amortizing Notes
On September 14, 2021, the Company notified holders of the tangible equity units (“TEUs”) that the final settlement rate in
respect of each of the prepaid stock purchase contracts (“SPCs”) was 0.330911 shares of IFF’s common stock. On September
15, 2021, 5,460,031 shares of IFF’s common stock were issued in settlement of the SPCs. See Note 11 to the Consolidated
Financial Statements for additional information.
Other Contingencies
See Note 19 to the Consolidated Financial Statements for information related to Other Contingencies.
Other Commitments
Compliance with existing governmental requirements regulating the discharge of materials into the environment has not
materially affected our operations, earnings or competitive position. In 2022 and 2021, we spent approximately $30 million and
$64 million on capital projects and $135 million and $78 million in operating expenses and governmental charges, respectively,
for the purpose of complying with such regulations. Expenditures for these purposes will continue for the foreseeable future. In
addition, we are party to a number of proceedings brought under the Comprehensive Environmental Response, Compensation
and Liability Act or similar state statutes. It is expected that the impact of any judgments in or voluntary settlements of such
proceedings will not be material to our financial condition, results of operations or liquidity.
Contractual Obligations
The Company believes its balances of cash and cash equivalents, which totaled approximately $535 million as of
December 31, 2022, inclusive of $52 million currently in Assets held for sale on the Consolidated Balance Sheets, along with
cash generated by ongoing operations and continued access to debt markets, will be sufficient to satisfy its cash requirements
and capital return program over the next 12 months and beyond. The Company's material cash requirements include the
following contractual and other obligations.
Borrowings and Interest on Borrowings
As of December 31, 2022, the Company had outstanding floating and fixed rate notes with varying maturities for an
aggregate principal amount of approximately $10.580 billion (collectively the “Notes”), with $300 million payable within 12
months. Future interest payments associated with the Notes total approximately $4.006 billion, with $258 million payable
within 12 months.
The Company also issues unsecured short-term promissory notes (“Commercial Paper”) pursuant to a commercial paper
program. As of December 31, 2022, the Company had $187 million of Commercial Paper outstanding, all of which is payable
within 12 months.
As of December 31, 2022, the Company had $100 million outstanding under the Amended Revolving Credit Facility.
See Note 9 to the Consolidated Financial Statements for a further discussion of our various borrowing facilities.
Leases
The Company has lease arrangements for certain corporate offices, manufacturing facilities, research and development
facilities, and certain transportation and office equipment. As of December 31, 2022, the Company had fixed lease payment
obligations of approximately $828 million, with $117 million payable within 12 months. See Note 8 to the Consolidated
Financial Statements for a further discussion of our various lease arrangements.
Pension and Other Postretirement Obligations
As of December 31, 2022, the Company had pension funding obligations of approximately $788 million, with $73 million
payable within 12 months. See Note 15 to the Consolidated Financial Statements for a further discussion of our retirement
plans.
As of December 31, 2022, the Company had postretirement obligations of approximately $36 million, with $3 million
payable within 12 months.
43
Purchase Commitments
The Company has various purchase commitments that include agreements for raw material procurement and contractual
capital expenditures. As of December 31, 2022, the Company had purchase commitment obligations of approximately $231
million, with $222 million payable within 12 months.
U.S. Tax Reform Toll-Charge
The Company has obligations related to a 2017 U.S. tax reform “toll-charge” that is payable in installments over 8 years
beginning in 2018. As a result of the Merger with N&B, the remaining toll-charge obligations were accelerated and paid in full
in the amount of approximately $39 million in 2022. As of December 31, 2022, there were no toll-charge obligations remaining.
Critical Accounting Policies and Use of Estimates
Our significant accounting policies are more fully described in Note 1 to the Consolidated Financial Statements. As
disclosed in Note 1, the preparation of financial statements in conformity with U.S. generally accepted accounting principles
(“GAAP”) requires management to make estimates and assumptions that affect reported amounts and accompanying
disclosures. These estimates are based on management’s best judgment of current events and actions that we may undertake in
the future. Actual results may ultimately differ from these estimates.
Those areas requiring the greatest degree of management judgment or deemed most critical to our financial reporting
involve:
Business Combinations
From time to time we enter into strategic acquisitions in an effort to better service existing customers and to attain new
customers. When we acquire a controlling financial interest in an entity or group of assets that are determined to meet the
definition of a business, we apply the acquisition method described in ASC Topic 805, Business Combinations. In accordance
with GAAP, the results of the acquisitions we have completed are reflected in our financial statements from the date of
acquisition forward.
We allocate the purchase consideration paid to acquire the business to the assets acquired and liabilities assumed based on
estimated fair values at the acquisition date, with the excess of purchase price over the estimated fair value of the net assets
acquired recorded as goodwill. If during the measurement period (a period not to exceed twelve months from the acquisition
date) we receive additional information that existed as of the acquisition date but at the time of the original allocation described
above was unknown to us, we make the appropriate adjustments to the purchase price allocation in the reporting period in
which the amounts are determined.
Significant judgment is required to estimate the intangibles and fair value of fixed assets and in assigning their respective
useful lives. Accordingly, we typically engage third-party valuation specialists, who work under the direction of management,
to assist in valuing significant tangible and intangible assets acquired.
The fair value estimates are based on available historical information, future expectations and assumptions deemed
reasonable by management, but are inherently uncertain.
We typically use an income method to estimate the fair value of intangible assets, which is based on forecasts of the
expected future cash flows attributable to the respective assets. Significant estimates and assumptions inherent in the valuations
reflect a consideration of other marketplace participants, and include the amount and timing of future cash flows (including
expected growth rates, discount rates and profitability), royalty rates used in the relief of royalty method, customer attrition
rates, product obsolescence factors, a brand’s relative market position and the discount rate applied to the cash flows.
Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of
the estimates and assumptions.
Determining the useful life of an intangible asset also requires significant judgment. All of our acquired intangible assets
(e.g., trademarks, product formulas, non-compete agreements and customer relationships) are expected to have finite useful
lives. Our estimates of the useful lives of finite-lived intangible assets are based on a number of factors including competitive
environment, market share, brand history, operating plans and the macroeconomic environment of the regions in which the
brands are sold.
The costs of finite-lived intangible assets are amortized through expense over their estimated lives. The value of residual
goodwill is not amortized, but is tested at least annually for impairment as described in the following note. For acquired
intangible assets, the remaining useful life of the trade names and trademarks, product formulas, and customer relationships was
estimated at the point at which substantially all of the present value of cumulative cash flows have been earned.
44
The Periodic Assessment of Potential Impairment of Goodwill
As of December 31, 2022, we have goodwill of approximately $13.355 billion. We test goodwill for impairment at the
reporting unit level as of November 30 every year or more frequently if events or changes in circumstances indicate the asset
might be impaired. A reporting unit is an operating segment or one level below an operating segment (referred to as a
component) to which goodwill is assigned when initially recorded.
We identify our reporting units by assessing whether the components of our operating segments constitute businesses for
which discrete financial information is available and management of each operating segment regularly reviews the operating
results of those components. Components within a segment that have similar economic characteristics have been aggregated as
a single reporting unit. We determined that we have six reporting units under the Nourish, Health & Biosciences, Scent and
Pharma Solutions segments: (1) Nourish, (2) Fragrance Compounds, (3) Fragrance Ingredients, (4) Cosmetic Actives, (5)
Health & Biosciences and (6) Pharma Solutions.
For the annual impairment test as of November 30, 2022, we elected to bypass the qualitative assessment for all reporting
units, Step 0 of the guidance in ASC Topic 350, Intangibles – Goodwill and Other, which allows for the assessment of
qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying
value. For all six reporting units, we performed a Step 1 test.
We assessed the fair value of the reporting units using an income approach. Under the income approach, we determined the
fair value by using a discounted cash flow method at a rate of return that reflects the relative risk of the projected future cash
flows of each reporting unit, as well as a terminal value. We used the most current actual and forecasted operating data
available. Key estimates and assumptions used in these valuations include revenue growth rates, gross margins, EBITDA
margins, terminal growth rates and discount rates.
In performing the quantitative impairment test, we determined that the fair value of the six reporting units exceeded their
carrying values and determined that there was no further impairment of goodwill at any of our six reporting units as of
November 30, 2022. Based on the quantitative impairment test performed, we determined that all reporting units except the
Health & Biosciences reporting unit had excess fair value over carrying value of more than 25%. The Health & Biosciences
reporting unit had excess fair value over carrying value of approximately 3%.
If current long-term projections for these reporting units are not realized or materially decrease, we may be required to
write-off all or a portion of the goodwill. Such charge could have a material effect on the Consolidated Statements of
Operations and Balance Sheets.
For the third quarter of 2022, we determined that goodwill impairment triggering events occurred for our Nourish, Health
& Biosciences and Pharma Solutions reporting units, which required us to complete an interim impairment assessment. As a
result of the triggering events, we assessed the fair value of the reporting units using the income approach.
In performing the quantitative impairment test, we determined that the fair value of the Nourish and Pharma Solutions
reporting units exceeded their carrying value, and determined that there was no impairment of goodwill relating to these
reporting units. We determined that the carrying value of the Health & Biosciences reporting unit exceeded its fair value and
recorded a goodwill impairment charge of $2.250 billion in the Consolidated Statements of (Loss) Income and Comprehensive
(Loss) Income for the year ended December 31, 2022 (see Note 6 to the Consolidated Financial Statements for additional
information).
The Periodic Assessment of Potential Impairment of Long-lived Assets
We review long-lived assets for impairment when events or changes in business conditions indicate that their full carrying
value may not be recovered. An estimate of undiscounted future cash flows produced by an asset or group of assets is compared
to the carrying value to determine whether impairment exists. If assets are determined to be impaired, the loss is measured
based on an estimate of fair value using various valuation techniques, including a discounted estimate of future cash flows.
As previously mentioned, due to the uncertainties related to our operations in Russia and Ukraine, we recorded a charge of
approximately $120 million related to the impairment of certain long-lived assets in Russia in the Consolidated Statements of
(Loss) Income and Comprehensive (Loss) Income for the year ended December 31, 2022 (see Note 1 to the Consolidated
Financial Statements for additional information).
New Accounting Standards
See Note 1 to the Consolidated Financial Statements for a discussion of recent accounting pronouncements.
45
Non-GAAP Financial Measures
We use non-GAAP financial measures in this Form 10-K, including: (i) currency neutral metrics and (ii) adjusted operating
EBITDA and adjusted operating EBITDA margin. We also provide the non-GAAP measure net debt solely for the purpose of
providing information on the extent to which the Company is in compliance with debt covenants contained in its debt
agreements. Our non-GAAP financial measures are defined below.
These non-GAAP financial measures are intended to provide additional information regarding our underlying operating
results and comparable year-over-year performance. Such information is supplemental to information presented in accordance
with GAAP and is not intended to represent a presentation in accordance with GAAP. In discussing our historical and expected
future results and financial condition, we believe it is meaningful for investors to be made aware of and to be assisted in a better
understanding of, on a period-to-period comparable basis, financial amounts both including and excluding these identified
items, as well as the impact of exchange rate fluctuations. These non-GAAP measures should not be considered in isolation or
as substitutes for analysis of the Company’s results under GAAP and may not be comparable to other companies’ calculation of
such metrics.
Adjusted operating EBITDA and adjusted operating EBITDA margin exclude depreciation and amortization expense,
interest expense, other (expense) income, net, restructuring and other charges and certain non-recurring or unusual items such
as acquisition related costs, gains on sale of fixed assets, impairment of goodwill, impairment of long-lived assets, shareholder
activism related costs, business divestiture costs, employee separation costs, strategic initiative costs, Global Shared Services
implementation costs, Frutarom acquisition related costs, N&B inventory step-up costs, N&B transaction related costs and
integration related costs.
Net debt to credit adjusted EBITDA is the leverage ratio used in our credit agreement and defined as net debt divided by
credit adjusted EBITDA. However, as credit adjusted EBITDA for these purposes was calculated in accordance with the
provisions of the credit agreement, it may differ from the calculation used for adjusted operating EBITDA.
Cautionary Statement Under the Private Securities Litigation Reform Act of 1995
Statements in this Form 10-K, which are not historical facts or information, are “forward-looking statements” within the
meaning of The Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management’s
current assumptions, estimates and expectations and include statements concerning (i) the expected impact of global supply
chain challenges; (ii) expectations regarding sales and profit for the fiscal year 2023, including the impact of foreign exchange,
pricing actions, raw materials, energy, and sourcing, logistics and manufacturing costs; (iii) expectations of the impact of
inflationary pressures and the pricing actions to offset exposure to such impacts; (iv) the impact of high input costs, including
commodities, raw materials, transportation and energy; (v) our ability to drive cost discipline measures and the ability to
recover margin to pre-inflation levels; (vi) the progress of our portfolio optimization strategy, through non-core business
divestitures and acquisitions, and expectations regarding the implementation of our refreshed growth-focused strategy; (vii) the
ongoing impact of COVID-19 and our plans to respond to its global implications; (viii) the success of our integration efforts,
following the N&B Transaction, and ability to deliver on our synergy commitments as well as future opportunities for the
combined company; (ix) the success of the optimization of our portfolio; (x) the impact of global economic uncertainty and
recessionary pressures on demand for consumer products; (xi) the growth potential of the markets in which we operate,
including the emerging markets, (xii) expected capital expenditures in 2023; (xiii) the expected costs and benefits of our
ongoing optimization of our manufacturing operations, including the expected number of closings; (xiv) expected cash flow and
availability of capital resources to fund our operations and meet our debt service requirements; (xv) our ability to enhance our
innovation efforts, drive cost efficiencies and execute on specific consumer trends and demands; (xvi) our strategic investments
in capacity and increasing inventory to drive improved profitability; and (xvii) our ability to continue to generate value for, and
return cash to, our shareholders. These forward-looking statements should be evaluated with consideration given to the many
risks and uncertainties inherent in our business that could cause actual results and events to differ materially from those in the
forward-looking statements. Certain of such forward-looking information may be identified by such terms as “expect”,
“anticipate”, “believe”, “intend”, “outlook”, “may”, “estimate”, “should”, “predict” and similar terms or variations thereof.
Such forward-looking statements are based on a series of expectations, assumptions, estimates and projections about the
Company, are not guarantees of future results or performance, and involve significant risks, uncertainties and other factors,
including assumptions and projections, for all forward periods. Our actual results may differ materially from any future results
expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors include, among others, the
following:
•
•
•
inflationary trends, including in the price of our input costs, such as raw materials, transportation and energy;
supply chain disruptions, geopolitical developments, including the Russia-Ukraine conflict, or climate-change related
events (including severe weather events) that may affect our suppliers or procurement of raw materials;
our ability to successfully execute the next phase of our strategic transformation;
46
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
risks related to the integration of the N&B business, including whether we will realize the benefits anticipated from the
merger in the expected time frame;
our substantial amount of indebtedness and its impact on our liquidity, credit ratings and ability to return capital to its
shareholders;
our ability to enter into or close strategic transactions or divestments, or successfully establish and manage
acquisitions, collaborations, joint ventures or partnerships;
our ability to successfully market to our expanded and diverse customer base;
our ability to effectively compete in our market and develop and introduce new products that meet customers’ needs;
our ability to retain key employees;
changes in demand from large multi-national customers due to increased competition and our ability to maintain “core
list” status with customers;
our ability to successfully develop innovative and cost-effective products that allow customers to achieve their own
profitability expectations;
the impact of global health crises, such as the COVID-19 pandemic, on our supply chains, global operations, our
customers and our suppliers;
disruption in the development, manufacture, distribution or sale of our products from natural disasters (such as the
COVID-19 pandemic), public health crises, international conflicts (such as the Russia and Ukraine Conflict), terrorist
acts, labor strikes, political or economic crises (such as the uncertainty related to protracted U.S. federal debt ceiling
negotiations), accidents and similar events;
volatility and increases in the price of raw materials, energy and transportation;
the impact of a significant data breach or other disruption in our information technology systems, and our ability to
comply with data protection laws in the U.S. and abroad;
our ability to comply with, and the costs associated with compliance with, regulatory requirements and industry
standards, including regarding product safety, quality, efficacy and environmental impact;
our ability to meet increasing customer, consumer, shareholder and regulatory focus on sustainability;
defects, quality issues (including product recalls), inadequate disclosure or misuse with respect to the products and
capabilities;
our ability to react in a timely and cost-effective manner to changes in consumer preferences and demands, including
increased awareness of health and wellness;
our ability to benefit from our investments and expansion in emerging markets;
the impact of currency fluctuations or devaluations in the principal foreign markets in which we operate;
economic, regulatory and political risks associated with our international operations;
the impact of global economic uncertainty (including increased inflation) on demand for consumer products;
our ability to comply with, and the costs associated with compliance with, U.S. and foreign environmental protection
laws;
our ability to successfully manage our working capital and inventory balances;
the impact of our or our counterparties’ failure to comply with the U.S. Foreign Corrupt Practices Act, similar U.S. or
foreign anti-bribery and anti-corruption laws and regulations, applicable sanctions laws and regulations in the
jurisdictions in which we operate or ethical business practices and related laws and regulations;
any impairment on our tangible or intangible long-lived assets, including goodwill associated with the N&B merger
and the acquisition of Frutarom;
our ability to protect our intellectual property rights;
the impact of the outcomes of legal claims, regulatory investigations and litigation;
changes in market conditions or governmental regulations relating to our pension and postretirement obligations;
the impact of changes in federal, state, local and international tax legislation or policies, including the Tax Cuts and
Jobs Act, with respect to transfer pricing and state aid, and adverse results of tax audits, assessments, or disputes;
the impact of the United Kingdom’s departure from the European Union;
the impact of the phase out of the London Interbank Offered Rate (LIBOR) on interest expense;
the impact of any tax liability resulting from the N&B Transaction; and
our ability to comply with data protection laws in the U.S. and abroad.
47
The foregoing list of important factors does not include all such factors, nor necessarily present them in order of
importance. In addition, you should consult other disclosures made by the Company (such as in our other filings with the SEC
or in company press releases) for other factors that may cause actual results to differ materially from those projected by the
Company. Please refer to Part I. Item 1A., Risk Factors, of this Form 10-K for additional information regarding factors that
could affect our results of operations, financial condition and liquidity.
We intend our forward-looking statements to speak only as of the time of such statements and do not undertake or plan to
update or revise them as more information becomes available or to reflect changes in expectations, assumptions or results. We
can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any
material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this report or included in our
other periodic reports filed with the SEC could materially and adversely impact our operations and our future financial results.
Any public statements or disclosures made by us following this report that modify or impact any of the forward-looking
statements contained in or accompanying this report will be deemed to modify or supersede such outlook or other forward-
looking statements in or accompanying this report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We operate on a global basis and are exposed to currency fluctuation related to the manufacture and sale of our products in
currencies other than the U.S. dollar. The major foreign currencies involve the markets in the European Union, Great Britain,
Mexico, Brazil, China, India, Indonesia, Australia, Russia and Japan, although all regions are subject to foreign currency
fluctuations versus the U.S. dollar. We actively monitor our foreign currency exposures in all major markets in which we
operate, and employ a variety of techniques to mitigate the impact of exchange rate fluctuations, including foreign currency
hedging activities.
We have established a centralized reporting system to evaluate the effects of changes in interest rates, currency exchange
rates and other relevant market risks. Our risk management procedures include the monitoring of interest rate and foreign
exchange exposures and hedge positions utilizing statistical analyses of cash flows, market value and sensitivity analysis.
However, the use of these techniques to quantify the market risk of such instruments should not be construed as an endorsement
of their accuracy or the accuracy of the related assumptions. For the year ended December 31, 2022, our exposure to market
risk was estimated using sensitivity analyses, which illustrate the change in the fair value of a derivative financial instrument
assuming hypothetical changes in foreign exchange rates and interest rates.
We enter into foreign currency forward contracts with the objective of reducing exposure to cash flow volatility associated
with foreign currency receivables and payables, and with anticipated purchases of certain raw materials used in operations.
These contracts, the counterparties to which are major international financial institutions, generally involve the exchange of one
currency for a second currency at a future date, and have maturities not exceeding twelve months. The gain or loss on the
hedging instrument and services is recorded in earnings at the same time as the transaction being hedged is recorded in
earnings. At December 31, 2022, our foreign currency exposures pertaining to derivative contracts exist with the Euro. Based
on a hypothetical decrease or increase of 10% in the applicable balance sheet exchange rates (primarily against the U.S. dollar),
the estimated fair value of our foreign currency forward contracts would increase by approximately $18 million. However, any
change in the value of the contracts, real or hypothetical, would be significantly offset by a corresponding change in the value
of the underlying hedged items.
We use derivative instruments as part of our interest rate risk management strategy. We have entered into certain cross
currency swap agreements in order to mitigate a portion of our net European investments from foreign currency risk. As of
December 31, 2022, these swaps were in a net liability position with an aggregate fair value of $37 million. Based on a
hypothetical decrease or increase of 10% in the value of the U.S. dollar against the Euro, the estimated fair value of our cross
currency swaps would change by approximately $141 million.
At December 31, 2022, the fair value of our EUR fixed rate debt was $1.293 billion. Based on a hypothetical decrease or
increase of 10% in foreign exchange rates, the estimated fair value of our EUR fixed rate debt would change by approximately
$115 million.
At December 31, 2022, the fair value of our USD fixed rate debt was $6.387 billion. Based on a hypothetical decrease or
increase of 10% in interest rates, the estimated fair value of our US fixed rate debt would change by approximately
$639 million.
We purchase certain commodities, such as natural gas, electricity, petroleum-based products and certain crop related items.
We generally purchase these commodities based upon market prices that are established with the vendor as part of the purchase
process. In general, we do not use commodity financial instruments to hedge commodity prices.
48
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See index to Consolidated Financial Statements on page 51.
ITEM 9.
None.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures and Changes in Internal Control over Financial Reporting.
Our Chief Executive Officer and Chief Financial Officer, with the assistance of other members of our management, have
evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Form 10-K.
Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls
and procedures are effective as of the end of the period covered by this Form 10-K.
We have established controls and procedures designed to ensure that information required to be disclosed in the reports that
we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in
the Commission’s rules and forms and is accumulated and communicated to management, including the principal executive
officer and the principal financial officer, to allow timely decisions regarding required disclosure.
Our Chief Executive Officer and Chief Financial Officer have concluded that there have not been any changes in our
internal control over financial reporting during the fourth quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as
defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. In making
this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) in its 2013 Internal Control — Integrated Framework.
Based on this assessment, management determined that, as of December 31, 2022, our internal control over financial
reporting was effective.
PricewaterhouseCoopers LLP, our independent registered public accounting firm, has audited the effectiveness of our
internal control over financial reporting as of December 31, 2022 as stated in their report which is included herein.
ITEM 9B. OTHER INFORMATION.
None.
ITEM 9C. DISCLOSURES REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
None.
PART III
49
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information relating to directors and nominees of the Company is set forth in the IFF 2023 Proxy Statement and is
incorporated by reference herein. The information relating to Section 16(a) beneficial ownership reporting compliance that
appears in the IFF 2023 Proxy Statement is also incorporated by reference herein. See Part I, Item 1 of this Form 10-K for
information relating to the Company’s Executive Officers.
We have adopted a Code of Conduct (the “Code of Conduct”) that applies to all of our employees, including our chief
executive officer and our chief financial officer. We have also adopted a Code of Conduct for Directors and a Code of Conduct
for Executive Officers (together with the Code of Conduct, the “Codes”). The Codes are available through the Investors —
Governance link on our website at https://ir.iff.com/governance.
Only the Board of Directors or the Audit Committee of the Board may grant a waiver from any provision of our Codes in
favor of a director or executive officer, and any such waiver will be publicly disclosed. We will disclose substantive
amendments to and any waivers from the Codes provided to our chief executive officer, principal financial officer or principal
accounting officer, as well as any other executive officer or director, on the Company’s website: www.iff.com.
The information regarding the Company’s Audit Committee and its designated audit committee financial experts is set
forth in the IFF 2023 Proxy Statement and such information is incorporated by reference herein.
The information concerning procedures by which shareholders may recommend director nominees is set forth in the IFF
2023 Proxy Statement and such information is incorporated by reference herein.
ITEM 11.
EXECUTIVE COMPENSATION.
The items required by Part III, Item 11 are incorporated herein by reference from the IFF 2023 Proxy Statement to be filed
on or before April 28, 2023, except as to information required pursuant to Item 402(v) of Regulation S-K relating to pay versus
performance.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The items required by Part III, Item 12 are incorporated herein by reference from the IFF 2023 Proxy Statement to be filed
on or before April 28, 2023.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
The items required by Part III, Item 13 are incorporated herein by reference from the IFF 2023 Proxy Statement to be filed
on or before April 28, 2023.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The items required by Part III, Item 14 are incorporated herein by reference from the IFF 2023 Proxy Statement to be filed
on or before April 28, 2023.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
PART IV
50
(a)(1) FINANCIAL STATEMENTS: The following consolidated financial statements, related notes, and
independent registered public accounting firm’s report are included in this Form 10-K:
Report of Independent Registered Public Accounting Firm (PCAOB ID: 238)
Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income for the years ended December 31,
2022, 2021 and 2020
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2022, 2021 and 2020
Notes to Consolidated Financial Statements
(a)(3) EXHIBITS
(a)(2) FINANCIAL STATEMENT SCHEDULES
Schedule II — Valuation and Qualifying Accounts and Reserves for the years ended December 31, 2022, 2021
and 2020
All other schedules are omitted because they are not applicable or the required information is shown in the financial
statements or notes thereto.
52
54
55
56
57
58
112
S-1
51
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of International Flavors & Fragrances Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of International Flavors & Fragrances Inc. and its
subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of (loss) income and
comprehensive (loss) income, of shareholders' equity and of cash flows for each of the three years in the period ended
December 31, 2022, including the related notes and financial statement schedule listed in the index appearing under Item
15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal
control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to
express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in
all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of
internal control over financial reporting included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
52
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Interim Goodwill Impairment Assessment - Health & Biosciences Reporting Unit
As described in Notes 1 and 6 to the consolidated financial statements, the Company’s goodwill balance was $13.355
billion as of December 31, 2022, and the goodwill related to the Health & Biosciences reportable segment was $4.321 billion.
The Company has determined that the Health & Biosciences segment is also a reporting unit. Management tests goodwill for
impairment at the reporting unit level as of November 30 every year or more frequently if events or changes in circumstances
indicate the asset might be impaired. If a reporting unit’s carrying amount exceeds its fair value, the Company will record an
impairment charge based on that difference. For the third quarter of 2022, management determined that a goodwill impairment
triggering event occurred for the Health & Biosciences reporting unit. Management assessed the fair value of the reporting units
using an income approach. Under the income approach, management determined the fair value by using a discounted cash flow
method at a rate of return that reflects the relative risk of the projected future cash flows of each reporting unit, as well as a
terminal value. Key estimates and assumptions used in these valuations include revenue growth rates, gross margins, EBITDA
margins, terminal growth rates and discount rates. For the third quarter of 2022, management determined that the carrying value
of the Health & Biosciences reporting unit exceeded its fair value and recorded a goodwill impairment charge of $2.250 billion.
The principal considerations for our determination that performing procedures relating to the interim goodwill impairment
assessment of the Health & Biosciences reporting unit is a critical audit matter are (i) the significant judgment by management
when developing the fair value estimate of the Health & Biosciences reporting unit; (ii) a high degree of auditor judgment,
subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue
growth rates, gross margins, EBITDA margins, terminal growth rate, and discount rate; and (iii) the audit effort involved the use
of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating
to management’s interim goodwill impairment assessment, including controls over the valuation of the Health & Biosciences
reporting unit. These procedures also included, among others (i) testing management’s process for developing the fair value
estimate of the Health & Biosciences reporting unit; (ii) evaluating the appropriateness of the discounted cash flow method; (iii)
testing the completeness and accuracy of the underlying data used in the discounted cash flow method; and (iv) evaluating the
reasonableness of the significant assumptions used by management related to revenue growth rates, gross margins, EBITDA
margins, terminal growth rate, and discount rate. Evaluating management’s significant assumptions related to revenue growth
rates, gross margins, and EBITDA margins involved evaluating whether the assumptions used by management were reasonable
considering (i) the current and past performance of the Health & Biosciences reporting unit; (ii) the consistency with external
market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.
Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the discounted
cash flow method and (ii) the reasonableness of the significant assumptions related to the terminal growth rate and discount
rate.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 27, 2023
We have served as the Company’s auditor since 1957.
53
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
Net sales
Cost of goods sold
Gross profit
Research and development expenses
Selling and administrative expenses
Restructuring and other charges
Amortization of acquisition-related intangibles
Impairment of goodwill
Impairment of long-lived assets
(Gains) losses on sale of fixed assets
Operating (loss) profit
Interest expense
Other income, net
(Loss) income before taxes
Provision for income taxes
Net (loss) income
Net income attributable to non-controlling interest
Net (loss) income attributable to IFF shareholders
Statements of Comprehensive (Loss) Income
Net (loss) income
Other comprehensive (loss) income , after tax:
Foreign currency translation adjustments
Gains (losses) on derivatives qualifying as hedges
Pension and postretirement liability adjustment
Other comprehensive (loss) income
Comprehensive (loss) income
Net income attributable to non-controlling interest
Comprehensive (loss) income attributable to IFF shareholders
Net (loss) income per share — basic
Net (loss) income per share — diluted
Average number of shares outstanding - basic
Average number of shares outstanding - diluted
Year Ended December 31,
2021
2020
2022
$
$
$
$
$
$
12,440 $
8,289
4,151
603
1,768
12
727
2,250
120
(3)
(1,326)
336
(37)
(1,625)
239
(1,864)
7
(1,871) $
11,656 $
7,921
3,735
629
1,749
41
732
—
—
(1)
585
289
(58)
354
75
279
9
270 $
(1,864) $
279 $
(904)
—
158
(746)
(2,610)
7
(2,617) $
(7.32) $
(7.32) $
255
255
(848)
8
115
(725)
(446)
9
(455) $
1.11 $
1.10 $
243
243
5,084
2,998
2,086
357
949
17
193
—
—
4
566
132
(7)
441
74
367
4
363
367
88
(9)
(60)
19
386
4
382
3.25
3.21
112
114
See Notes to Consolidated Financial Statements
54
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
ASSETS
Current Assets:
Cash and cash equivalents
Restricted cash
Receivables:
Trade
Allowance for doubtful accounts
Inventories
Assets held for sale
Prepaid expenses and other current assets
Total Current Assets
Property, plant and equipment, net
Goodwill
Other intangible assets, net
Operating lease right-of-use assets
Other assets
Total Assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Bank borrowings, overdrafts and current portion of long-term debt
Commercial paper
Accounts payable
Accrued payroll and bonus
Dividends payable
Liabilities held for sale
Other current liabilities
Total Current Liabilities
Other Liabilities:
Long-term debt
Retirement liabilities
Deferred income taxes
Operating lease liabilities
Other liabilities
Total Other Liabilities
Commitments and Contingencies (Note 19)
Redeemable non-controlling interests
Shareholders’ Equity:
Common stock $0.125 par value; 500,000,000 shares authorized; 275,726,629 and 275,726,629
shares issued as of December 31, 2022 and December 31, 2021, respectively; and 254,968,463
and 254,573,984 shares outstanding as of December 31, 2022 and December 31, 2021,
respectively
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost (20,758,166 and 21,152,645 shares as of December 31, 2022 and
December 31, 2021, respectively)
Total Shareholders’ Equity
Non-controlling interest
Total Shareholders’ Equity including non-controlling interest
Total Liabilities and Shareholders’ Equity
See Notes to Consolidated Financial Statements
55
December 31,
2022
2021
$
$
$
$
483 $
10
1,871
(53)
3,151
1,200
770
7,432
4,203
13,355
9,082
636
699
35,407 $
410 $
187
1,418
267
206
212
1,028
3,728
10,373
231
2,265
565
472
13,906
711
4
1,952
(46)
2,516
1,122
728
6,987
4,368
16,414
10,506
767
616
39,658
308
324
1,532
335
201
101
832
3,633
10,768
385
2,518
670
462
14,803
59
105
35
19,841
955
(2,169)
(978)
17,684
30
17,714
35,407 $
35
19,826
3,641
(1,423)
(997)
21,082
35
21,117
39,658
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2021
2020
2022
$
(1,864) $
279 $
(DOLLARS IN MILLIONS)
Cash flows from operating activities:
Net (loss) income
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization
Deferred income taxes
(Gains) losses on sale of fixed assets
Gains on business divestiture
Stock-based compensation
Pension contributions
Amortization of inventory step-up
Impairment of goodwill
Impairment of long-lived assets
Changes in assets and liabilities, net of acquisitions:
Trade receivables
Inventories
Accounts payable
Accruals for incentive compensation
Other current payables and accrued expenses
Other assets/liabilities, net
Net cash provided by operating activities
Cash flows from investing activities:
Cash paid for acquisitions, net of cash received
Additions to property, plant and equipment
Additions to intangible assets
Proceeds from disposal of assets
Proceeds from unwinding of derivative instruments
Cash provided by the Merger with N&B
Net proceeds received from business divestiture
Maturity of net investment hedges
Proceeds from life insurance contracts
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Cash dividends paid to shareholders
Dividends paid to redeemable non-controlling interest
Increase (decrease) in revolving credit facility and short term borrowings
Proceeds from issuance of commercial paper (maturities after three months)
Repayments of commercial paper (maturities after three months)
Net borrowings of commercial paper (maturities less than three months)
Deferred financing costs
Repayments of long-term debt
Purchases of redeemable non-controlling interest
Proceeds from issuance of long-term debt
Contingent consideration paid
Proceeds from issuance of stock in connection with stock options
Employee withholding taxes paid
Other, net
Net cash used in financing activities
Effect of exchange rate changes on cash, cash equivalents and restricted cash
Net change in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of year
Cash, cash equivalents and restricted cash at end of year
Supplemental Disclosures:
Interest paid, net of amounts capitalized
Income taxes paid
Accrued capital expenditures
$
$
See Notes to Consolidated Financial Statements
56
1,179
(237)
(3)
(11)
49
(36)
—
2,250
120
(117)
(893)
(57)
(34)
92
(41)
397
(110)
(504)
(2)
8
173
11
1,169
—
—
745
(810)
—
104
225
(421)
48
—
(300)
(47)
—
—
—
(21)
(7)
(1,229)
(77)
(164)
716
552 $
310 $
329
150
1,156
(236)
(1)
—
54
(37)
368
—
—
(169)
(363)
419
96
4
(133)
1,437
—
(393)
(4)
18
—
246
115
—
—
(18)
(667)
(2)
(105)
—
—
324
(3)
(828)
—
3
(14)
9
(21)
—
(1,304)
(59)
56
660
716 $
310 $
289
117
367
325
(68)
4
—
36
(24)
—
—
—
(61)
18
28
44
57
(12)
714
—
(192)
—
17
—
—
—
(14)
2
(187)
(323)
—
—
—
—
—
(3)
(347)
(22)
200
(9)
—
(8)
—
(512)
21
36
624
660
128
133
41
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Cost
Capital in
excess of
par value
Retained
earnings
Accumulated
other
comprehensive
(loss) income
Treasury stock
Shares
Cost
Non-
controlling
interest
16 $
3,823 $
4,118 $
363
Common
stock
Shares
128,526,137 $
(DOLLARS IN MILLIONS)
Balance at December 31, 2019
Net income
Cumulative translation adjustment
Losses on derivatives qualifying
as hedges; net of tax $1
Pension liability and postretirement
adjustment; net of tax $(9)
Cash dividends declared ($3.04
per share)
Stock options/SSARs
Vested restricted stock units and
awards
Stock-based compensation
Redeemable NCI
Dividends on non-controlling
interest and other
Balance at December 31, 2020
Net income
Cumulative translation adjustment
Gain on derivatives qualifying as
hedges; net of tax $(1)
Pension liability and postretirement
adjustment; net of tax $(4)
Cash dividends declared ($3.12
per share)
Stock options/SSARs
Impact of N&B Merger
Conversion of tangible equity units
Vested restricted stock units and
awards
Stock-based compensation
Redeemable NCI
Dividends on non-controlling
interest and other
Balance at December 31, 2021
Net loss
Cumulative translation adjustment
Pension liability and postretirement
adjustment; net of tax $(4)
Cash dividends declared ($3.20
per share)
Stock options/SSARs
Vested restricted stock units and
awards
Stock-based compensation
Purchase of NCI
Redeemable NCI
Dividends on non-controlling
interest and other
Balance at December 31, 2022
(8)
36
2
128,526,137 $
16 $
3,853 $
141,740,461
5,460,031
18
1
4
15,936
(1)
(18)
54
(2)
275,726,629 $
35 $ 19,826 $
(325)
4,156 $
270
(785)
3,641 $
(1,871)
(815)
11
(41)
49
1
(5)
(717) (21,738,838) $ (1,023) $
12 $
1
88
(9)
(60)
57,652
93,039
3
3
(698) (21,588,147) $ (1,017) $
(1)
12 $
3
(848)
8
115
159,222
7
22
276,280
13
Total
6,229
364
88
(9)
(60)
(325)
3
(5)
36
2
(1)
6,322
273
(848)
8
115
(785)
11
15,976
—
(5)
54
(2)
(1,423) (21,152,645) $
(997) $
(904)
158
85,728
308,751
4
15
(2)
(2)
35 $ 21,117
(1,868)
3
(904)
158
(815)
15
(26)
49
(5)
(5)
(6)
(2)
(2)
30 $ 17,714
275,726,629 $
35 $ 19,841 $
955 $
(2,169) (20,758,166) $
(978) $
See Notes to Consolidated Financial Statements
57
INTERNATIONAL FLAVORS & FRAGRANCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
International Flavors & Fragrances Inc. and its subsidiaries (the “Registrant,” “IFF,” “the Company,” “we,” “us” and “our”)
is a leading creator and manufacturer of food, beverage, health & biosciences, scent and pharma solutions and complementary
adjacent products, including cosmetic active and natural health ingredients, which are used in a wide variety of consumer
products. Our products are sold principally to manufacturers of perfumes and cosmetics, hair and other personal care products,
soaps and detergents, cleaning products, dairy, meat and other processed foods, beverages, snacks and savory foods, sweet and
baked goods, sweeteners, dietary supplements, food protection, infant and elderly nutrition, functional food, and pharmaceutical
excipients and oral care products.
Basis of Presentation
On February 1, 2021 (the “Closing Date”), the Company completed the combination (the “Merger”) of IFF and DuPont de
Nemours, Inc (“DuPont”) nutrition and biosciences business (the “N&B Business”), which had been transferred to Nutrition
and Biosciences, Inc., a Delaware corporation and wholly owned subsidiary of DuPont (“N&B”) in a Reverse Morris Trust
transaction. See Note 3 for additional information. As a result, the Company’s Consolidated Financial Statements for the period
ended December 31, 2022 reflect the results of N&B for the full twelve months of 2022, whereas the period ended
December 31, 2021 reflect the results of N&B from the Closing Date and the period ended December 31, 2020 do not reflect
any results of N&B.
Certain reclassifications have been made to the prior periods’ financial information in order to conform to the current
period’s presentation.
Fiscal Year End
Effective 2021, the Company changed its fiscal year end from a 52/53-week fiscal year ending on the Friday closest to the
last day of the quarter, to a calendar year of the twelve-month period from January 1 to December 31. The Company elected to
change its fiscal year end in connection with the Merger with N&B to align the Company’s fiscal year with N&B’s. The 2022,
2021 and 2020 fiscal years were 52 week periods. For ease of presentation, December 31 is used consistently throughout the
financial statements and notes to represent the period-end date. For the 2022 and 2021 fiscal years, the actual closing dates were
December 31 and for the 2020 fiscal year, the actual closing date was January 1.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”)
requires management to make estimates and judgments that affect the amounts reported in the Consolidated Financial
Statements and accompanying notes. The inputs into our judgments and estimates take into account the current economic
implications of the novel coronavirus (“COVID-19”), the events in Russia and Ukraine, and the ongoing adverse
macroeconomic environment on our critical and significant accounting estimates, including estimates associated with future
cash flows that are used in assessing the risk of impairment of certain assets. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of International Flavors & Fragrances Inc. and those of its
subsidiaries. Significant intercompany balances and transactions have been eliminated. To the extent a subsidiary is not wholly
owned, any related non-controlling interests are included as a separate component of Shareholders’ Equity.
Revenue Recognition
The Company recognizes revenue from contracts with customers when the contract or purchase order has received
approval and commitment from both parties, has the rights of the parties and payment terms (which can vary by customer)
identified, has commercial substance, collectability of consideration is probable, and control has transferred. The revenue
recognized reflects the consideration the Company 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.
Sales are reduced, at the time revenue is recognized, for applicable discounts, rebates and sales allowances based on
historical experience. Related accruals are included in Other current liabilities in the accompanying Consolidated Balance
Sheets. The Company considers shipping and handling activities undertaken after the customer has obtained control of the
related goods as a fulfillment activity. Net sales include shipping and handling charges billed to customers. Cost of goods sold
includes all costs incurred in connection with shipping and handling.
58
Contract Assets and Liabilities
With respect to a small number of contracts for the sale of compounds, the Company has an “enforceable right to payment
for performance to date” and as the products do not have an alternative use, the Company recognizes revenue for these
contracts over time and records a contract asset using the output method. The output method recognizes revenue on the basis of
direct measurements of the value to the customer of the goods or services transferred to date relative to the remaining goods or
services promised under the contract.
As of December 31, 2022 and 2021, the Company’s gross accounts receivable was $1.871 billion and $1.952 billion,
respectively. The Company’s contract assets and contract liabilities as of December 31, 2022 and 2021 were not material.
Foreign Currency Translation
The Company translates the assets and liabilities of non-U.S. subsidiaries into U.S. dollars at year-end exchange rates.
Income and expense items are translated at average exchange rates during the year. Cumulative translation adjustments are
shown as a separate component of Shareholders’ Equity.
Research and Development
Research and development (“R&D”) expenses relate to the development of new and improved products, technical product
support and compliance with governmental regulation. All research and development costs are expensed as incurred.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with maturities of three months or less at date of purchase.
Restricted Cash
Restricted cash is comprised of cash or cash equivalents which has been placed into an account that is restricted for a
specific use and from which the Company cannot withdraw the cash on demand.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Company’s
statement of cash flows periods ended December 31, 2022, 2021 and 2020 to the amounts reported in the Company’s balance
sheets as of December 31, 2022, 2021 and 2020.
(DOLLARS IN MILLIONS)
Current assets
Cash and cash equivalents
$
Cash and cash equivalents included in
Assets held for sale
Restricted cash
Non-current assets
Restricted cash included in Other assets
Cash, cash equivalents and restricted cash
$
Accounts Receivable
December 31, 2022
December 31, 2021
December 31, 2020
483 $
52
10
7
552 $
711 $
—
4
1
716 $
650
—
7
3
660
The Company has certain factoring agreements in the U.S. and The Netherlands under which it can factor up to €250
million of its trade receivables. The factoring agreements supplement the Company's existing factoring programs that are
sponsored by certain customers. Under all of the arrangements, the Company sells the trade receivables on a non-recourse basis
to unrelated financial institutions and accounts for the transactions as sales of receivables. The applicable receivables are
removed from the Company’s Consolidated Balance Sheets when the cash proceeds are received by the Company.
The Company sold approximately $1.030 billion, $668 million and $351 million of receivables in 2022, 2021 and 2020,
respectively. The outstanding principal amounts of receivables under these arrangements amounted to approximately $212
million, $153 million and $57 million, respectively, as of December 31, 2022, 2021 and 2020. The proceeds from the sales of
receivables are included in net cash from operating activities in the Consolidated Statements of Cash Flows. The cost of
participating in these programs was approximately $12 million, $6 million and $4 million in 2022, 2021 and 2020, respectively,
and is included as a component of interest expense.
59
Expected Credit Losses
The Company is exposed to credit losses primarily through its sales of products. To determine the appropriate allowance
for expected credit losses, the Company considers certain credit quality indicators, such as aging, collection history, and
creditworthiness of debtors. Regional and Global Credit committees review and approve specific customer allowance reserves.
The allowance for expected credit losses is primarily based on two primary factors: i) the aging of the different categories of
trade receivables, and ii) a specific reserve for accounts identified as uncollectible.
The Company also considers current and future economic conditions in the determination of the allowance. At
December 31, 2022, the Company reported $1.818 billion of trade receivables, net of allowances of $53 million. Based on the
aging analysis as of December 31, 2022, approximately 1% of the Company’s accounts receivable were past due by over 365
days based on the payment terms of the invoice.
The following is a roll forward of the Company’s allowances for bad debts for the years ended December 31, 2021 and
2022:
Allowance for
Bad Debts
$
(DOLLARS IN MILLIONS)
Balance at December 31, 2020
Bad debt expense
Write-offs
Other adjustments(1)
Balance at December 31, 2021
Bad debt expense(2)
Foreign exchange
Balance at December 31, 2022
_______________________
(1) The adjustment to allowances for bad debts was a result of purchase price allocation related to the Merger with N&B.
(2) The bad debt expense included approximately $11 million related to expected credit losses on receivables from customers located in
Russia and Ukraine (for export and domestic sales) due to recent events in those countries. The Company will continue to evaluate its
credit exposure related to Russia and Ukraine.
21
6
(1)
20
46
19
(12)
53
$
Inventories
Inventories are stated at the lower of cost (on a weighted-average basis) or net realizable value. The Company's inventories
consisted of the following:
(DOLLARS IN MILLIONS)
Raw materials
Work in process
Finished goods
Total
Leases
December 31,
2022
2021
$
$
1,073 $
442
1,636
3,151 $
854
287
1,375
2,516
The Company determines if an arrangement is a lease at contract inception. A lease exists when a contract conveys to the
customer the right to control the use of identified property, plant, or equipment for a period of time in exchange for
consideration. The definition of a lease embodies two conditions: (1) there is an identified asset in the contract that is land or a
depreciable asset (i.e., property, plant, and equipment), and (2) the customer has the right to control the use of the identified
asset.
When the Company determines the arrangement is a lease, or contains a lease, at inception, it then determines whether the
lease is an operating lease or a finance lease at the commencement date.
The Company leases property and equipment, principally under operating leases. The Company records a right of use asset
and related obligation at the present value of lease payments and, over the term of the lease, depreciates the right of use asset
and accretes the obligation to future value. Some of the leases include rental escalation clauses, renewal options and/or
termination options that are factored into the determination of lease payments when appropriate. The Company has elected not
to separate non-lease components from lease components for all classes of leased assets.
60
When available, the Company uses the rate implicit in the lease to discount lease payments to present value, however, most
of the Company's leases do not provide a readily determinable implicit rate and the Company calculates the applicable
incremental borrowing rate to discount the lease payments based on the term of the lease at lease commencement. The
incremental borrowing rate is determined based on the Company's credit rating, currency and lease terms.
Long-Lived Assets
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation is calculated on a straight-line basis, principally over the
following estimated useful lives: buildings and improvements, 1 to 50 years; machinery and equipment, 1 to 40 years;
information technology hardware and software, 1 to 23 years; and leasehold improvements which are included in buildings and
improvements, the estimated life of the improvements or the remaining term of the lease, whichever is shorter.
Finite-Lived Intangible Assets
Finite-lived intangible assets include customer relationships, patents, trade names, technological know-how and other
intellectual property valued at acquisition and amortized on a straight-line basis over the following estimated useful lives:
customer relationships, 10 to 27 years; patents, 11 to 15 years; trade names, 4 to 28 years; and technological know-how, 5 to 28
years.
The Company reviews long-lived assets for impairment when events or changes in business conditions indicate that their
carrying value may not be recovered. An estimate of undiscounted future cash flows produced by an asset or group of assets is
compared to the carrying value to determine whether impairment exists. If assets are determined to be impaired, the loss is
measured based on an estimate of fair value using various valuation techniques, including a discounted estimate of future cash
flows.
Impairment of Long-Lived Assets
During the second quarter of 2022, the sales and margins declined for certain entities within Russia due to supply chain
issues, reduced product demand and exchange rate volatility. Additionally, future growth is expected to be limited given
operating conditions in Russia, which inhibit the required future investment.
In connection with uncertainties related to the Company’s operations in Russia and Ukraine, the Company updated its
analysis of the undiscounted cash flows of the applicable asset groups to determine if the cash flows exceeded the carrying
values of the applicable asset groups. With respect to an asset group in the Nourish segment, that manufactures and sells in
Russia and related markets, it was determined that the undiscounted cash flows were insufficient to cover the carrying value and
that an impairment charge was required to write-down the long-lived assets to their fair values. The fair value of such asset
group was determined based on a discounted cash flow approach which involved estimating the future cash flows for the
business discounted to their present values. The discount rate used in the determination of such fair value was based on
consideration of the risks inherent in the cash flows and market as of the valuation date.
As a result of this assessment, the Company recognized an impairment charge of $120 million in the Consolidated
Statements of (Loss) Income and Comprehensive (Loss) Income for the year ended December 31, 2022, which was allocated on
a pro rata basis to intangible assets and property, plant and equipment within the asset group in the amounts of approximately
$92 million and $28 million, respectively.
Goodwill
Goodwill represents the difference between the total purchase price and the fair value of identifiable assets and liabilities
acquired in business acquisitions.
The Company tests goodwill for impairment at the reporting unit level as of November 30 every year or more frequently if
events or changes in circumstances indicate the asset might be impaired. A reporting unit is an operating segment or one level
below an operating segment (referred to as a component) to which goodwill is assigned when initially recorded.
The Company identifies their reporting units by assessing whether the components of their reporting units constitute
businesses for which discrete financial information is available and management of each reporting unit regularly reviews the
operating results of those components. The Company determined that it has six reporting units under the Nourish, Health &
Biosciences, Scent and Pharma Solutions segments: (1) Nourish, (2) Fragrance Compounds, (3) Fragrance Ingredients, (4)
Cosmetic Actives, (5) Health & Biosciences and (6) Pharma Solutions. These reporting units were determined based on the
level at which the performance is measured and reviewed by segment management. In cases where the components of an
operating segment have similar economic characteristics, they are aggregated into a single reporting unit.
61
When testing goodwill for impairment, the Company has the option of first performing a qualitative assessment to
determine whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount. If the
Company elects to bypass the qualitative assessment for any reporting units, or if a qualitative assessment indicates it is more
likely than not that the estimated carrying value of a reporting unit exceeds its fair value, the Company performs a quantitative
goodwill impairment test.
Under the quantitative goodwill impairment test, if a reporting unit’s carrying amount exceeds its fair value, the Company
will record an impairment charge based on that difference, and the impairment charge will be limited to the amount of goodwill
allocated to that reporting unit.
For the third quarter of 2022, the Company determined that the carrying value of the Health & Biosciences reporting unit
exceeded its fair value and recorded a goodwill impairment charge of $2.250 billion in the Consolidated Statements of (Loss)
Income and Comprehensive (Loss) Income for the year ended December 31, 2022 (see Note 6 for additional information).
Income Taxes
The Company accounts for taxes under the asset and liability method. Under this method, deferred income taxes are
recognized for temporary differences between the financial statement and tax return bases of assets and liabilities, based on
enacted tax rates and other provisions of the tax law. The effect of a change in tax laws or rates on deferred tax assets and
liabilities is recognized as income in the period in which such change is enacted. Future tax benefits are recognized to the extent
that the realization of such benefits is more likely than not, and a valuation allowance is established for any portion of a
deferred tax asset that management believes may not be realized.
The Company recognizes uncertain tax positions that it has taken or expects to take on a tax return. Pursuant to accounting
requirements, the Company first determines whether it is “more likely than not” its tax position will be sustained if the relevant
tax authority were to audit the position with full knowledge of all the relevant facts and other information. For those tax
positions that meet this threshold, the Company measures the amount of tax benefit based on the largest amount of tax benefit
that it has a greater than 50% chance of realizing in a final settlement with the relevant authority. Those tax positions failing to
qualify for initial recognition are recognized in the first interim period in which they meet the more likely than not standard.
The Company maintains a cumulative risk portfolio relating to all of its uncertainties in income taxes in order to perform this
analysis, but the evaluation of its tax positions requires significant judgment and estimation in part because, in certain cases, tax
law is subject to varied interpretation, and whether a tax position will ultimately be sustained may be uncertain.
Interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense.
Retirement Benefits
Current service costs of retirement plans and postretirement health care and life insurance benefits are accrued. Prior
service costs resulting from plan improvements are amortized over periods ranging from 10 to 20 years.
Financial Instruments
Derivative financial instruments are used to manage interest and foreign currency exposures. The gain or loss on the
hedging instrument is recorded in earnings at the same time as the transaction being hedged is recorded in earnings. The
associated asset or liability related to the open hedge instrument is recorded in Prepaid expenses and Other current assets or
Other current liabilities, as applicable.
The Company records all derivative financial instruments on the balance sheet at fair value. Changes in a derivative’s fair
value are recognized in earnings unless specific hedge criteria are met. If the derivative is designated as a fair value hedge, the
changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in Net (loss)
income. If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative
are recorded in Accumulated Other Comprehensive Income (Loss) (“AOCI”) in the accompanying Consolidated Balance
Sheets and are subsequently recognized in Net income when the hedged item affects earnings. Ineffective portions of changes
in the fair value of cash flow hedges, if any, are recognized as a charge or credit to earnings.
Software Costs
The Company capitalizes direct internal and external development costs for certain significant projects associated with
internal-use software and amortizes these costs over seven years. Neither preliminary evaluation costs nor costs associated with
the software after implementation are capitalized. Costs related to projects that are not significant are expensed as incurred.
62
Net (Loss) Income Per Share
Under the two-class method, earnings are adjusted by accretion of amounts to redeemable non-controlling interests
recorded at redemption value. The adjustments represent in-substance dividend distributions to the non-controlling interest
holders as the holders have a contractual right to receive a specified amount upon redemption. As a result, earnings are adjusted
to reflect this in-substance distribution that is different from other common shareholders. In addition, the Company has
unvested share based payment awards with a right to receive nonforfeitable dividends and thus are considered participating
securities which are required to be included in the computation of basic and diluted earnings per share.
Basic (loss) income per share represents the amount of earnings available to each share of common stock outstanding
during the period. Basic (loss) income per share includes the effect of issuing shares of common stock, where (i) for 2021, the
prepaid stock purchase contracts (“SPCs”) were converted using the final settlement rate on September 14, 2021 (see Note 11
for additional information) and for 2020, the prepaid SPCs were converted into the minimum number of shares of common
stock under the if-converted method, and (ii) an adjustment to (loss) income to reflect adjustments made to record the
redeemable value of redeemable non-controlling interests. Diluted (loss) income per share also includes the effect of issuing
shares of common stock, assuming (i) stock options and warrants are exercised, (ii) restricted stock units are fully vested under
the treasury stock method, and (iii) for 2021, the incremental effect of the prepaid SPCs were converted using the final
settlement rate on September 14, 2021 (see Note 11 for additional information) and for 2020, the incremental effect of the
prepaid SPCs were converted into the maximum number of shares of common stock under the if-converted method.
Stock-Based Compensation
Compensation cost of all stock-based awards is measured at fair value on the date of grant and recognized over the service
period for which awards are expected to vest. The cost of such stock-based awards is principally recognized on a straight-line
attribution basis over their respective vesting periods, net of estimated forfeitures.
Financing Costs
Costs incurred in the issuance of debt are deferred and amortized as part of interest expense over the stated life of the
applicable debt instrument. Unamortized deferred financing costs relating to debt are presented as a reduction in the amount of
debt outstanding on the Consolidated Balance Sheets. Unamortized deferred financing costs relating to the revolving credit
facility are recorded in Other assets on the Consolidated Balance Sheets.
Redeemable Non-controlling Interests
Non-controlling interests in subsidiaries that are redeemable for cash or other assets outside of the Company’s control are
classified as mezzanine equity, outside of equity and liabilities, at the greater of the carrying value or the redemption value. The
increases or decreases in the estimated redemption amount are recorded with corresponding adjustments against Capital in
excess of par value and are reflected in the computation of earnings per share using the two-class method.
Held for Sale
Assets and liabilities to be disposed of by sale (“disposal groups”) are reclassified into assets and liabilities held for sale on
the Company’s Consolidated Balance Sheets. The reclassification occurs when an agreement to sell exists, or management has
committed to a plan to sell the assets within one year. Disposal groups are measured at the lower of carrying value or fair value
less costs to sell and are not depreciated or amortized. When the net realizable value of a disposal group increases during a
period, a gain can be recognized to the extent that it does not increase the value of the disposal group beyond its original
carrying value when the disposal group was reclassified as held for sale. The fair value of a disposal group, less any costs to
sell, is assessed each reporting period it remains classified as held for sale and any remeasurement to the lower of carrying
value or fair value less costs to sell is reported as an adjustment to the carrying value of the disposal group. See Note 21 for
additional information.
Recent Accounting Pronouncements
In December 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848.” The ASU was issued to provide an
update on ASU 2020-04 and ASU 2021-01 that were issued in March 2020 and January 2021, respectively, which provided
optional accounting guidance for a limited period of time to ease the potential burden in accounting for reference rate reform.
The guidance provides optional expedients and exceptions to existing accounting requirements for contract modifications and
hedge accounting related to transitioning from discontinued reference rates, such as London Interbank Offered Rate
(“LIBOR”), to alternative reference rates, if certain criteria are met. With the issuance of ASU 2022-06, the sunset date of Topic
848 has been deferred from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply
the relief in Topic 848. The Company is currently evaluating the impact of this guidance, but does not expect this guidance to
have a material impact on its Consolidated Financial Statements.
63
In November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities
about Government Assistance.” The ASU requires annual disclosures about transactions with a government that are accounted
for by applying a grant or contribution accounting model by analogy. This guidance is effective for all entities for annual
periods beginning after December 15, 2021 and early adoption is permitted. This guidance was adopted by the Company as of
January 1, 2022 using the prospective method of adoption. The adoption of this guidance did not have a material impact on the
Consolidated Financial Statements.
In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets
and Contract Liabilities from Contracts with Customers.” The ASU is intended to provide specific guidance on how to
recognize and measure acquired contract assets and liabilities from revenue contracts in a business combination. An acquirer
needs to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with
Topic 606, Revenue from Contracts with Customers. At the acquisition date, an acquirer should account for the related revenue
contracts in accordance with Topic 606 as if it had originated the contracts. To achieve this, an acquirer may assess how the
acquiree applied Topic 606 to determine what to record for the acquired revenue contracts. This guidance is effective for fiscal
years beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is permitted,
including adoption in an interim period. The Company early adopted ASU 2021-08 during the second quarter of 2022. The
adoption of this guidance did not have a material impact on the Consolidated Financial Statements.
NOTE 2. RESTRUCTURING AND OTHER CHARGES
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, principally related to fixed asset write-downs (“Fixed
asset write-down”) and all other related restructuring (“Other”) costs. All restructuring and other charges are separately stated
on the Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income.
Frutarom Integration Initiative
In connection with the acquisition of Frutarom, the Company has been executing an integration plan that, among other
initiatives, seeks to optimize its manufacturing network (the “Frutarom Integration Initiative”). As part of the Frutarom
Integration Initiative, the Company expects to close approximately 30 manufacturing sites with all closures targeted to occur by
the end of 2023. Since the inception of the initiative through December 31, 2022, the Company has closed 22 sites and
expensed total costs of approximately $39 million. Total costs for the program are expected to be approximately $42 million
including cash and non-cash items.
2019 Severance Program
During 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 program’s inception, the Company has expensed approximately $15 million.
As of the third quarter of 2022, the program is complete.
2017 Productivity Program
In connection with 2017 Productivity Program, the Company recorded $24 million of charges related to personnel costs
and lease termination costs since the program's inception. As of December 31, 2020, the program was completed.
Other Restructuring Charges
For 2022, 2021 and 2020, the Company incurred total charges of approximately $4 million primarily related to the
severance costs in connection with the closure of a facility in Germany.
N&B Merger Restructuring Liability
For 2022, the Company incurred approximately $15 million of charges related to severance, lease termination costs, and
lease impairment charges. Since the inception of the restructuring activities, there have been approximately 240 headcount
reductions and the Company has expensed approximately $45 million.
64
Changes in Restructuring Liability
Movements in severance-related accruals during 2020, 2021 and 2022 are as follows:
(DOLLARS IN MILLIONS)
2017 Productivity Program
Severance
Frutarom Integration Initiative
Severance
Fixed asset write down
Other(1)
2019 Severance Program
Severance
Other Restructuring Charges
Severance
Total restructuring
(DOLLARS IN MILLIONS)
Frutarom Integration Initiative
Severance
Fixed asset write down
Other(1)
2019 Severance Program
Severance
Other Restructuring Charges
Severance
Other(2)
N&B Merger Restructuring Liability
Severance
Other(3)
Total restructuring
$
(DOLLARS IN MILLIONS)
Frutarom Integration Initiative
Severance
Fixed asset write down
Other(1)
2019 Severance Program
Severance
Other Restructuring Charges
Severance
N&B Merger Restructuring Liability
Severance
Other(3)
Total restructuring
$
Balance at
January 1, 2020
Additional
Charges
(Reversals),
Net
Non-Cash
Charges
Cash
Payments
Balance at
December 31,
2020
$
1 $
(1) $
— $
— $
4
—
3
13
—
21 $
2
12
2
(1)
—
(12)
—
—
(3)
—
(2)
(6)
3
17 $
—
(12) $
(1)
(12) $
$
—
3
—
3
6
2
14
Balance at
January 1, 2021
Additional
Charges
(Reversals),
Net
Non-Cash
Charges
Cash
Payments
Balance at
December 31,
2021
3 $
—
3
6
2
—
—
—
14 $
5 $
5
—
—
—
1
27
3
41 $
— $
(5)
—
—
—
—
—
(3)
(8) $
(3) $
—
—
(1)
(1)
(1)
(12)
—
(18) $
5
—
3
5
1
—
15
—
29
Balance at
January 1, 2022
Additional
Charges
(Reversals),
Net
Non-Cash
Charges
Cash
Payments
Balance at
December 31,
2022
$
$
1 $
3
(2)
(5)
—
8
7
12 $
— $
(3)
—
—
—
—
(2)
(5) $
(2) $
—
(1)
—
—
(14)
(4)
(21) $
4
—
—
—
1
9
1
15
5 $
—
3
5
1
15
—
29 $
65
_______________________
(1) Includes supplier contract termination costs, consulting and advisory fees.
(2) Includes charges related to legal settlement costs.
(3) Includes lease impairment charges and losses incurred from restructuring activities as a result of the Merger with N&B.
Charges by Segment
The following table summarizes the total amount of costs incurred in connection with these restructuring programs and
activities by segment:
(DOLLARS IN MILLIONS)
Nourish
Health & Biosciences
Scent
Pharma Solutions
Total Restructuring and other charges
NOTE 3. ACQUISITIONS
Acquisition of Health Wright Products
2022
December 31,
2021
2020
$
$
8 $
2
1
1
12 $
32 $
5
3
1
41 $
10
—
7
—
17
On April 1, 2022 (“Acquisition Date”), the Company completed its acquisition of Health Wright Products, Inc. (“Health
Wright”). IFF acquired 100% of the equity of Health Wright pursuant to a purchase agreement entered into on February 16,
2022. Health Wright is known in the consumer Health and Nutrition industries for providing high quality nutritional
supplements. The acquisition was made in order to strengthen formulation and finished format capabilities to IFF’s Health &
Biosciences probiotics, natural extracts and botanical businesses.
The acquisition was accounted for under the purchase method. The fair value of consideration transferred was
approximately $157 million, including cash and estimated contingent consideration of $31 million. The preliminary purchase
price allocation has been performed and resulted in intangible assets of approximately $75 million, and approximately $45
million of goodwill (which is deductible for income tax purposes). The intangible assets primarily consisted of customer
relationships of approximately $74 million that have been fair valued using the Multi-Period Excess Earning Method and which
are being amortized over a period of approximately 19 years.
The purchase price allocation was finalized as of the end of 2022 when the Company finalized the valuation of the acquired
goodwill, intangible assets (trade names and customer relationships) and inventory, in addition to ensuring all other assets and
liabilities and contingencies have been identified and recorded.
The Company remeasured the fair value of contingent consideration as of December 31, 2022 and recognized a credit of
approximately $5 million, within Selling and administrative expenses, for changes in the fair value of contingent consideration
obligations. The reduction in the fair value of contingent consideration primarily resulted from changes in the probability
assessment of achieving the performance targets.
The measurement period adjustments were recorded during the year ended December 31, 2022 and the purchase price
allocation is complete as of December 31, 2022.
No pro forma information for 2022 was presented as the acquisition was not material to the Consolidated Financial
Statements.
Transaction with Nutrition & Biosciences, Inc.
On February 1, 2021, IFF completed the Merger with N&B. Pursuant to the transaction related agreements, DuPont
transferred its N&B Business to N&B, a wholly-owned subsidiary of DuPont, and N&B merged with and into a wholly owned
subsidiary of IFF in exchange for 141,740,461 shares of IFF common stock, par value $0.125 per share (“IFF Common
Stock”).
66
The Company completed its Merger with N&B in a Reverse Morris Trust transaction (the “Transactions”), pursuant to
which the Company acquired the N&B Business of DuPont. In the Transactions, among other steps (i) DuPont transferred the
N&B Business to N&B (the “Separation”); (ii) N&B made a cash distribution to DuPont of approximately $7.359 billion,
subject to certain adjustments (the “Special Cash Payments”); (iii) DuPont distributed to its stockholders all of the issued and
outstanding shares of N&B common stock by way of an exchange offer (the “Distribution”), and; (iv) N&B merged with and
into a wholly owned subsidiary of IFF. As a result of the Merger, the existing shares of N&B common stock were automatically
converted into the right to receive a number of shares of IFF Common Stock. Immediately after the Merger, holders of
DuPont’s common stock that received shares of N&B common stock in the Distribution owned approximately 55.4% of the
outstanding shares of IFF Common Stock on a fully diluted basis and existing holders of IFF Common Stock owned
approximately 44.6% of the outstanding shares of IFF on a fully diluted basis.
The Merger was accounted for using the purchase method of accounting in accordance with ASC Topic 805, Business
Combinations, with IFF identified as the acquirer. As a result of the Merger, N&B’s assets, liabilities and the operating results
of N&B were included in the Company’s financial statements from the Closing Date. N&B contributed net sales of
approximately $6.084 billion and net income of approximately $11 million for the year ended December 31, 2021, which
included the effects of purchase accounting adjustments, primarily related to changes in amortization of intangible assets,
depreciation of property, plant and equipment and amortization of stepped up inventory.
Prior to the Distribution, N&B incurred new indebtedness in the form of term loans and senior notes in an aggregate
principal amount of $7.500 billion to pay the Special Cash Payments made to DuPont stockholders. See Note 9 for additional
information regarding the new term loans and senior notes incurred by N&B and subsequently assumed by IFF.
Purchase Price
The following table summarizes the aggregate purchase price consideration paid to acquire N&B (in millions, except share
and per share data):
(DOLLARS IN MILLIONS)
Fair value of common stock issued to DuPont stockholders(1)
Fair value attributable to pre-merger service for replacement equity awards(2)
Pension funding adjustment(3)
Total purchase consideration
_______________________
(1) The fair value of common stock issued to DuPont stockholders represents 141,740,461 shares of the Company's common stock
determined based on the number of fully diluted shares of IFF common stock, immediately prior to the Closing Date, multiplied by the
quotient of 55.4%/44.6% and IFF common stock closing share price of $112.38 on the New York Stock Exchange on the Closing Date.
15,929
25
(12)
15,942
$
$
(2) At the time of the Transactions, each outstanding stock option, cash-settled stock appreciation right (“SAR”), restricted stock unit
(“RSU”) award, and restricted stock award (“RSA”) with respect to DuPont common stock held by employees of N&B were canceled
and converted into similar classes of equity awards of IFF’s Class A Common Stock. Further, each outstanding Performance Share Unit
(“PSU”) award with respect to DuPont common stock held by employees of N&B were canceled and converted into IFF’s RSU awards.
The conversion was based on the ratio of the volume-weighted average per share closing price of DuPont stock on the twenty trading
days prior to the Closing Date and IFF’s stock on the twenty trading days following the Closing Date. The fair value of replacement
equity-based awards attributable to pre-Merger service was recorded as part of the consideration transferred in the Merger (see Note 13
for additional information).
(3) The Merger related agreements provided that if the net pension balance of N&B as of the Closing Date differs from $220 million, such
differential amount would be settled in cash. The Company estimated the amount that it would receive and, accordingly, made an
adjustment of $12 million to the total purchase consideration.
Purchase Price Allocation
The Merger with N&B was accounted for under the acquisition method under which the Company allocated the purchase
consideration to the tangible net assets and identifiable assets acquired based on estimated fair values at the Closing Date, and
recorded the excess of consideration over the fair values of net assets acquired as goodwill. The purchase price allocation was
finalized as of the end of 2021 when the Company finalized the valuation of the acquired property, plant and equipment,
goodwill, intangible assets (trade names, customer relationships, IPR&D, and technological know-how), inventory and leases,
in addition to ensuring all other assets and liabilities and contingencies had been identified and recorded. Further, the
assessment of certain contingencies including loss contracts and environmental liabilities, pension and postretirement benefit
obligations and taxes was completed. Additionally, in connection with finalizing the purchase price allocation, the Company
finalized the projected combined future tax rate applied to the valuation of assets and recorded the applicable adjustments to the
values of goodwill and intangible assets.
67
The following table summarizes the fair values of the assets acquired and liabilities assumed as of February 1, 2021,
presenting both the preliminary and final purchase price allocations:
Measurement
Period
Adjustments
(1)(2)
Final Fair Value as
Reported in the
Fourth Quarter of
2021
Preliminary Estimated
Fair Value as Reported in
the First Quarter of 2021
$
(DOLLARS IN MILLIONS)
Cash and cash equivalents
Receivables
Inventory
Prepaid expenses and other current assets
Property, plant and equipment
Deferred income taxes
Intangible assets
Other assets
Accounts payable and accrued liabilities
Accrued payroll and employee benefits
Deferred tax liabilities(3)
Long-term debt
Other long-term liabilities
Total identifiable net assets assumed
Non-controlling interest
Goodwill(4)
Purchase price
_______________________
(1) The preliminary fair value purchase price allocation of the assets and liabilities acquired in the N&B Merger as reported in the first
quarter of 2021 were updated during the nine months ended December 31, 2021 to reflect updated fair values for intangible assets,
property, plant and equipment, equity method investments and inventory. In addition, the carrying amounts of certain assets and
liabilities were updated based on additional analysis of acquired assets and liabilities that existed at the Closing Date.
207 $
962
1,615
342
3,242
75
9,176
702
(1,028)
(163)
(2,369)
(7,636)
(907)
4,218
(26)
11,762
15,954 $
(14) $
(9)
(25)
32
(176)
8
47
116
(51)
15
(26)
—
12
(71)
4
55
(12) $
193
953
1,590
374
3,066
83
9,223
818
(1,079)
(148)
(2,395)
(7,636)
(895)
4,147
(22)
11,817
15,942
$
(2) During the fourth quarter of 2021, the Company recorded an adjustment to reflect the receipt of approximately $53 million in cash from
DuPont as a result of finalization of adjustments to the Special Cash Payment paid to DuPont by N&B, prior to the close of the
Transactions.
(3) The change to deferred tax liabilities was primarily a result of the finalization of the jurisdictional allocation of the tangible and
intangible assets. All measurement period adjustments were offset against goodwill.
(4) The cumulative impact of the adjustments during the nine months ended December 31, 2021 resulted in a $55 million increase to
goodwill.
Acquired inventory is comprised of finished goods, work in process and raw materials. The fair value of finished goods
was calculated as the estimated selling price, adjusted for costs of the selling effort and a reasonable profit allowance relating to
the selling effort. The fair value of work in process inventory was primarily calculated as the estimated selling price, adjusted
for estimated costs to complete the manufacturing, estimated costs of the selling effort, as well as a reasonable profit margin on
the remaining manufacturing and selling effort. The fair value of raw materials and supplies was determined based on
replacement cost which approximates historical carrying value. The fair value step-up has been amortized to “Cost of goods
sold” in the Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income, for the year ended December 31,
2021, as the inventory was sold.
The fair value of property, plant and equipment was primarily calculated using the cost approach, which determined the
replacement costs for the assets and adjusted them for their age and condition. The fair value of the land assets was determined
via the sales comparison approach.
The long-term debt assumed was comprised of a Term Loan Facility and Notes. The fair value of the Notes was determined
on the basis of unadjusted quoted prices on an over-the-counter market. The fair value of the long-term debt assumed as part of
the Term Loan Facility was based on the total indebtedness at the time of closing the Merger. See Note 9 for additional
information regarding the new term loans and senior notes incurred by N&B and subsequently assumed by IFF.
68
The Company recognized $11.817 billion of goodwill in connection with the N&B Merger, which was in part attributable
to expected synergies generated by the integration of N&B including cross-selling benefits as well as cost synergies.
Substantially all of the goodwill was not deductible for income tax purposes. Goodwill of $2.900 billion, $6.712 billion, $876
million and $1.329 billion was allocated to the Nourish, Health & Biosciences, Scent and Pharma Solutions segments,
respectively.
The fair value and useful lives of the identifiable intangible assets assumed as of February 1, 2021 were as follows:
(DOLLARS IN MILLIONS)
Indefinite-lived intangible assets
In-process research and development
Finite-lived intangible assets
Trade names
Customer relationships
Technological know-how
Other
Total finite-lived intangible assets
Total
Amounts
Useful Lives
$
$
13 Indefinite
261 4 to 22 years
6,734 11 to 27 years
2,194 5 to 18 years
21 2 years
9,210
9,223
The fair value of intangible assets was generally determined using an income method (specifically, for customer
relationships, the multi-period excess earnings method), which was based on forecasts of the expected future cash flows
attributable to the respective assets. Significant estimates and assumptions inherent in the valuations reflected a consideration of
other market participants, and included the amount and timing of future cash flows (including revenue growth rates, gross
margins and operating expenses), royalty rates used in the relief from royalty method, customer attrition rates, product
obsolescence factors, a brand’s relative market position and the discount rates applied to the cash flows. Unanticipated market
or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and
assumptions. Determining the useful life of an intangible asset also required significant judgment. Trade names, customer
relationships and technological know-hows are expected to have finite lives. The costs of finite lived intangible assets are
amortized through expense over their estimated lives.
Lease liabilities, included in “Other current liabilities” and “Operating lease liabilities” in the Consolidated Balance Sheets,
at the Closing Date, were remeasured at the present value of the future minimum lease payments over the remaining lease term
and the incremental borrowing rate of the Company as if the acquired leases were new leases as of the Closing Date. Right-of-
use assets included in “Operating lease right-of-use assets” in the Consolidated Balance Sheets as of the Closing Date, were
principally equal to the amount of the lease liability at the Closing Date, adjusted for any fair value adjustments for off-market
leases. The Company reviewed the acquired leases and applied a $15 million adjustment to reflect off-market leases. The
remaining lease term was based on the remaining term at the Closing Date plus any renewal or extension options that the
Company was reasonably certain would be exercised.
Net defined benefit plan liabilities were recognized based on appropriate actuarial assumptions and asset valuations as of
the Closing Date and, accordingly, liabilities of approximately $221 million were recorded.
The Company accrued approximately $75 million related to certain product liability and legal contingencies for which it
was determined that a liability existed at the Closing Date. Of this amount, approximately $61 million was related to the finding
of certain grades of microcrystalline cellulose (Avicel® PH 101, 102, and 200 NF and Avicel® RC-591 NF) being out-of-
specification. See Note 19 for additional information.
The deferred income tax assets and liabilities included the expected future federal, state and foreign tax consequences
associated with temporary differences between the fair values of the assets acquired and liabilities assumed and the respective
tax bases. Tax rates utilized in calculating deferred income taxes generally represented the enacted statutory tax rates at the
effective date of the Merger in the jurisdictions in which legal title of the underlying asset or liability resides. See Note 10 for
additional information related to income taxes.
The Company incurred transaction-related costs of approximately $91 million and $29 million in 2021 and 2020,
respectively. The transaction-related costs primarily consisted of merger and acquisition advisory, legal and professional fees in
2021 and legal and professional fees in 2020.
69
Pro Forma Financial Information
The following unaudited pro forma financial information presents the combined results of operations of IFF and N&B as if
the Merger had been completed as of January 1, 2020. The unaudited pro forma financial information is presented for
informational purposes and is not indicative of the results of operations that would have been achieved if the Merger and related
borrowings had taken place on January 1, 2020, nor are they indicative of future results. The unaudited pro forma financial
information for the year ended December 31, 2021 includes IFF results, including the post-Merger results of N&B, since
February 1, 2021, and pre-Merger results of N&B for the period January 1, 2021 through January 31, 2021.
The unaudited pro forma results for the year ended December 31, 2021 and 2020 were as follows:
(DOLLARS IN MILLIONS)
Unaudited pro forma net sales
Unaudited pro forma net income attributable to the Company
Year Ended December 31,
2020
2021
$
12,163 $
687
11,143
192
The unaudited pro forma results for all periods include adjustments made to account for certain costs and transactions that
would have been incurred had the Merger been completed as of January 1, 2020, including amortization charges for acquired
intangibles assets, adjustments for transaction costs, adjustments for depreciation expense for property, plant and equipment,
inventory step-up and adjustments to interest expense. These adjustments are net of any applicable tax impact and were
included to arrive at the pro forma results above.
NOTE 4. BUSINESS DIVESTITURE
Divestiture of Microbial Control
During the third quarter of 2021, the Company announced it had entered into an agreement to sell its Microbial Control
business unit, which was a part of the Health & Biosciences segment. The Company acquired the Microbial Control business
unit as part of the Merger with N&B.
The Company completed the divestiture of the Microbial Control business unit on July 1, 2022 and received cash proceeds
of approximately $1.254 billion, of which approximately $36 million was attributable to future services to be provided under
certain transition service agreements as described below. Certain transaction costs related to the divestiture of approximately
$11 million, which was contingent upon the consummation of the divestiture, were determined to be direct costs to sell and, as
such, were adjusted against the fair value of the sale consideration. In addition, approximately $15 million of cash proceeds
held in escrow were released to the Company upon satisfaction of certain conditions. The sale consideration was further
reduced by approximately $3 million for certain post-closing adjustments, which were primarily related to cash, indebtedness
and working capital balances.
The Company entered into transition services agreements with the buyer for providing certain general accounting,
information technology and other services up to 19 months following the date of the sale for minimal consideration. The fair
value of these transition service agreements was determined to be approximately $36 million, which was adjusted against the
sale consideration and recognized as deferred transition services income.
For the year ended December 31, 2022, the transition services income under the transition services agreements was
approximately $11 million and was recognized as a reduction to the costs incurred to provide services under the transition
service agreements, which was included in Selling and administrative expenses on the Consolidated Statements of (Loss)
Income and Comprehensive (Loss) Income.
The following table summarizes the fair value of the sale consideration received in connection with the divestiture:
(DOLLARS IN MILLIONS)
Cash proceeds from the buyer
Escrow proceeds
Proceeds attributable to transition service agreements
Direct costs to sell
Net cash settlement for post-closing adjustments
Fair value of sale consideration
$
$
1,254
15
(36)
(11)
(3)
1,219
70
The net proceeds received from business divestiture presented under Cash flows from investing activities represent the cash
portion of the sale consideration, which was determined as the fair value of sale consideration reduced by the amount held in
escrow and the Cash transferred to the buyer on the closing balance sheet as part of the transaction. The following table
summarizes the different components of net proceeds received from business divestiture presented under Cash flows from
investing activities:
(DOLLARS IN MILLIONS)
Fair value of sale consideration
Cash transferred to the buyer on the closing balance sheet
Employee reimbursement receivable
Net proceeds received from business divestiture
$
$
1,219
(49)
(1)
1,169
The carrying amount of net assets associated with the Microbial Control business unit was approximately $1.208 billion.
The major classes of assets and liabilities sold consisted of the following:
(DOLLARS IN MILLIONS)
Assets
Current assets
Goodwill and other intangible assets, net
Equity method investment
Other assets
Total assets
Liabilities
Accounts payable
Other liabilities
Total liabilities
June 30, 2022
263
867
74
80
1,284
41
35
76
$
$
$
$
As a result of the divestiture, the Company recognized a pre-tax gain of approximately $11 million presented in Other
income, net on the Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income for the year ended
December 31, 2022. The Company also recognized the income tax effects associated with the divestiture of approximately
$96 million based on preliminary estimates as of December 31, 2022.
NOTE 5. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consisted of the following amounts:
(DOLLARS IN MILLIONS)
Asset Type
Land
Buildings and improvements
Machinery and equipment
Information technology
Construction in process
Total Property, Plant and Equipment
Accumulated depreciation
Total Property, Plant and Equipment, Net
Impairment of Property, Plant and Equipment
December 31,
2022
2021
$
$
199 $
1,697
3,344
291
649
6,180
(1,977)
4,203 $
223
1,764
3,442
271
461
6,161
(1,793)
4,368
As discussed in Note 1, for the year ended December 31, 2022 an impairment charge of approximately $28 million was
recorded in connection with property, plant and equipment, primarily buildings and improvements, of an asset group that
operates primarily in Russia.
71
Depreciation
Depreciation expense was $452 million, $424 million and $132 million for the years ended December 31, 2022, 2021 and
2020, respectively.
NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
Goodwill
In the first quarter of 2021, in connection to the Merger, the Company reorganized its reporting structure. In connection
with this reorganization, goodwill was reassigned among reporting units using a relative fair value approach based on the fair
value of the elements transferred and the fair value of the elements remaining within the original reporting units. The Company
tested goodwill for impairment on a pre-reorganization basis and determined there was no impairment for the affected reporting
units. In connection with the reorganization, $985 million of goodwill previously included in the legacy Taste segment, now the
Nourish segment, was moved to the Scent and Health & Biosciences segments amounting to $257 million and $728 million,
respectively.
Movements in goodwill attributable to each reportable segment during the years ended December 31, 2021 and 2022 were
as follows:
Health &
Biosciences
Pharma
Solutions
$
Total
Scent
Nourish
(DOLLARS IN MILLIONS)
Balance at December 31, 2020
Acquisitions(1)
Transferred to assets held for sale(2)
Reduction from business divestiture
Foreign exchange
Reallocation
Balance at December 31, 2021
Acquisitions(3)
Impairment
Transferred to assets held for sale(4)
Foreign exchange
Balance at December 31, 2022
_______________________
(1) Acquisitions relate to the Merger with N&B. See Note 3 for additional information.
(2) Transferred to assets held for sale relate to the Microbial Control business unit that was classified as “held for sale” as of December 31,
— $
6,712
(536)
—
(155)
728
6,749
45
(2,250)
—
(223)
4,321 $
734 $
876
—
—
(39)
257
1,828
—
—
(42)
(41)
1,745 $
— $
1,329
—
—
(47)
—
1,282
—
—
—
(43)
1,239 $
4,859 $
2,900
—
(27)
(192)
(985)
6,555
—
—
(306)
(199)
6,050 $
5,593
11,817
(536)
(27)
(433)
—
16,414
45
(2,250)
(348)
(506)
13,355
$
2021.
(3) Acquisitions relate to the acquisition of Health Wright. See Note 3 for additional information.
(4) Transferred to assets held for sale relate to the portion of the Savory Solutions business and Flavor Specialty Ingredients business that
were classified as “held for sale” as of December 31, 2022. See Note 21 for additional information.
Goodwill Impairment Test
For the annual impairment test as of November 30, 2022, the Company elected to bypass the qualitative assessment for all
reporting units, Step 0 of the guidance in ASC Topic 350, Intangibles – Goodwill and Other, which allows for the assessment of
qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying
value. For all six reporting units, the Company performed a Step 1 test.
The Company assessed the fair value of the reporting units using an income approach. Under the income approach, the
Company determined the fair value by using a discounted cash flow method at a rate of return that reflects the relative risk of
the projected future cash flows of each reporting unit, as well as a terminal value. The Company used the most current actual
and forecasted operating data available. Key estimates and assumptions used in these valuations include revenue growth rates,
gross margins, EBITDA margins, terminal growth rates and discount rates.
In performing the quantitative impairment test, the Company determined that the fair value of the six reporting units
exceeded their carrying values and determined that there was no further impairment of goodwill at any of the Company’s six
reporting units as of November 30, 2022. Based on the quantitative impairment test performed, the Company determined that
all reporting units except the Health & Biosciences reporting unit had excess fair value over carrying value of more than 25%.
72
As of November 30, 2022, the Health & Biosciences reporting unit had excess fair value over carrying value of
approximately 3% and goodwill of approximately $4.321 billion. While management believes that the assumptions used in the
impairment test were reasonable, changes in key assumptions, including lower revenue growth, operating margin, terminal
growth rates or increase in discount rates could result in a future impairment.
If current long-term projections for these reporting units are not realized or materially decrease, the Company may be
required to write-off all or a portion of the goodwill. Such charge could have a material effect on the Consolidated Statements
of Operations and Balance Sheets.
For the third quarter of 2022, the Company determined that goodwill impairment triggering events occurred for its
Nourish, Health & Biosciences and Pharma Solutions reporting units, which required it to complete an interim impairment
assessment. The primary indicators that were deemed to be triggering events in the quarter for the reporting units were declines
in the Company’s projections across various reporting units and ongoing adverse macroeconomic impacts such as inflation,
increases in interest rates and unfavorable effects from exchange rates. As a result of the triggering events, the Company
assessed the fair value of the reporting units using the income approach.
In performing the quantitative impairment test, the Company determined that the fair value of the Nourish and Pharma
Solutions reporting units exceeded their carrying value, and determined that there was no impairment of goodwill relating to
these reporting units. The Company determined that the carrying value of the Health & Biosciences reporting unit exceeded its
fair value and recorded a goodwill impairment charge of $2.250 billion in the Consolidated Statements of (Loss) Income and
Comprehensive (Loss) Income for the year ended December 31, 2022.
Other Intangible Assets
Other intangible assets, net consisted of the following amounts:
(DOLLARS IN MILLIONS)
Asset Type
Customer relationships
Technological know-how
Trade names & patents
Other
Total carrying value
Accumulated Amortization
Customer relationships
Technological know-how
Trade names & patents
Other
Total accumulated amortization
Other intangible assets, net
Impairment of Intangible Assets
December 31,
2022
2021
$
$
8,318 $
2,339
358
47
11,062
(1,252)
(589)
(97)
(42)
(1,980)
9,082 $
8,935
2,494
411
50
11,890
(887)
(388)
(68)
(41)
(1,384)
10,506
As discussed in Note 1, for the year ended December 31, 2022, an impairment charge of approximately $92 million was
recorded in connection with intangible assets, primarily customer relationships and technological know-how, of an asset group
that operates primarily in Russia, which was included within accumulated amortization.
Amortization
Amortization expense was $727 million for the year ended December 31, 2022, $732 million for the year ended December
31, 2021 and $193 million for the year ended December 31, 2020. Amortization expense for the next five years and thereafter,
based on valuations and determinations of useful lives, is expected to be as follows:
(DOLLARS IN MILLIONS)
Estimated future intangible
amortization expense
2023
2024
December 31,
2025
2026
2027
$
703 $
702 $
699 $
697 $
598
73
NOTE 7. OTHER CURRENT ASSETS AND LIABILITIES, AND OTHER ASSETS
Prepaid expenses and other current assets consisted of the following amounts:
(DOLLARS IN MILLIONS)
Value-added tax receivable
Income tax receivable
Packaging materials
Prepaid expenses
Other
Total
Other assets consisted of the following amounts:
(DOLLARS IN MILLIONS)
Finance lease right-of-use assets
Deferred income taxes
Overfunded pension plans
Cash surrender value of life insurance contracts
Equity method investments
Other(1)
Total
December 31,
2022
2021
212 $
129
148
144
137
770 $
December 31,
2022
2021
22 $
158
180
45
10
284
699 $
$
$
$
$
_______________________
(1) Includes land usage rights in China, long term deposits and receivables on certain derivative instruments.
Other current liabilities consisted of the following amounts:
(DOLLARS IN MILLIONS)
Rebates and incentives payable
Value-added tax payable
Interest payable
Current pension and other postretirement benefit obligation
Accrued insurance (including workers’ compensation)
Restructuring and other charges
Current operating lease obligation
Accrued freight
Accrued commissions payable
Accrued income taxes
Accrued expenses payable
Other
Total
NOTE 8. LEASES
December 31,
2022
2021
$
$
99 $
65
55
10
9
15
86
18
11
313
256
91
1,028 $
178
131
128
160
131
728
21
82
136
52
86
239
616
113
50
48
11
10
29
109
—
13
94
270
85
832
The Company has leases for corporate offices, manufacturing facilities, research and development facilities, and certain
transportation and office equipment, the majority of which are operating leases. The Company's leases have remaining lease
terms of up to 50 years, some of which include options to extend the leases for up to 7 years.
74
The components of lease expense were as follows:
(DOLLARS IN MILLIONS)
Operating lease cost
Finance lease cost
2022
$
December 31,
2021
2020
187 $
8
168 $
7
62
4
Supplemental cash flow information related to leases was as follows:
(DOLLARS IN MILLIONS)
Cash paid for amounts included in the measurement of lease liabilities
2022
Operating cash flow for operating leases
Financing cash flow for finance leases
Right-of-use assets obtained in exchange for lease obligations
$
Operating leases
Finance leases
Supplemental balance sheet information related to leases was as follows:
(DOLLARS IN MILLIONS)
Operating Leases
Operating lease right-of-use assets
Current operating lease obligations(2)
Operating lease liabilities
Total operating lease liabilities
Finance Leases
Finance lease right-of-use assets(1)
Current finance lease obligations(2)
Finance lease liabilities(3)
Total finance lease liabilities
_______________________
(1) Presented in Other assets in the Consolidated Balance Sheets.
(2) Presented in Other current liabilities in the Consolidated Balance Sheets.
(3) Presented in Other liabilities in the Consolidated Balance Sheets.
Weighted average remaining lease term and discount rate were as follows:
Weighted average remaining lease term in years
Operating leases
Finance leases
Weighted average discount rate
Operating leases
Finance leases
December 31,
2021
2020
135 $
7
60
7
129 $
6
88
15
December 31,
2022
2021
$
$
$
$
636 $
86
565
651 $
22 $
5
12
17 $
52
4
63
6
767
109
670
779
21
5
15
20
December 31,
2022
2021
10.1
4.0
4.03 %
2.59 %
11.1
4.3
2.73 %
1.85 %
75
Maturities of lease liabilities as of December 31, 2022 were as follows:
Total
Total undiscounted liabilities
(DOLLARS IN MILLIONS)
2023
2024
2025
2026
2027
Thereafter
Operating Leases Finance Leases
111 $
$
103
89
78
66
363
810
(159)
651 $
117
106
93
81
68
363
828
(160)
Less: Imputed interest
668
Total lease liabilities
Right-of-use assets and lease liabilities acquired from N&B were remeasured at the present value of the future minimum
lease payments over the remaining lease term utilizing an updated incremental borrowing rate of the Company as if the
acquired leases were new leases as of the Closing Date. Right-of-use assets were further adjusted for any off-market terms of
the lease. The remaining lease term is based on the remaining term at the Closing Date plus any renewal or extension options
that the Company is reasonably certain will be exercised. Additionally, the Company has elected short-term lease treatment for
those acquired lease contracts which, at the Closing Date, have a remaining lease term of 12 months or less. For the leases
acquired through the Transactions, the Company will retain the previous lease classification. This resulted in an increase in both
right-of-use assets and operating lease liabilities of approximately $525 million and $523 million, respectively, as of the
Closing Date.
6 $
3
4
3
2
—
18
(1)
17 $
$
As a result of the Company’s acquisition of Health Wright, there was an increase of approximately $22 million in finance
lease right-of-use assets and $21 million in finance lease liabilities as of the Acquisition Date. In the fourth quarter of 2022, the
Company exercised its option to purchase the asset and, as such, de-recognized the finance lease right-of-use assets and finance
lease liabilities.
NOTE 9. DEBT
Debt consisted of the following at December 31:
(DOLLARS IN MILLIONS)
2022 Notes(3)
2023 Notes(1)
2024 Euro Notes(1)
2025 Notes(3)
2026 Euro Notes(1)
2027 Notes(3)
2028 Notes(1)
2030 Notes(3)
2040 Notes(3)
2047 Notes(1)
2048 Notes(1)
2050 Notes(3)
2024 Term Loan Facility(4)
2026 Term Loan Facility(4)
Commercial Paper(5)
Amended Revolving Credit facility(6)
Bank overdrafts and other
Total debt
Less: Short term borrowings(2)
Total Long-term debt
Effective
Interest Rate
2022
2021
0.69 % $
3.30 %
1.88 %
1.22 %
1.93 %
1.56 %
4.57 %
2.21 %
3.04 %
4.44 %
5.12 %
3.21 %
3.65 %
4.92 %
$
$
— $
300
532
1,000
845
1,215
398
1,510
774
495
787
1,571
625
625
187
100
6
10,970 $
(597)
10,373 $
300
300
565
1,001
900
1,218
397
1,511
775
494
786
1,572
625
625
324
—
7
11,400
(632)
10,768
76
_______________________
(1) Amount is net of unamortized discount and debt issuance costs.
(2) Includes bank borrowings, overdrafts, current portion of long-term debt and commercial paper.
(3) Assumed by the Company as part of the N&B Merger. Amount is net of unamortized premium and debt issuance costs.
(4) Assumed by the Company as part of the N&B Merger and recorded at fair value.
(5) The effective interest rate of commercial paper issuances fluctuate as short-term interest rates and demand fluctuate, and deferred debt
issuance costs are immaterial. Additionally, the effective interest rate of commercial paper is not meaningful as issuances do not
materially differ from short-term interest rates. Proceeds from the issuance of commercial paper include $225 million of proceeds with
original maturities greater than three months.
(6) The interest rate on the Amended Revolving Credit Facility is, at the applicable borrower's option, a per annum rate equal to either (x) an
eurocurrency rate plus an applicable margin varying from 1.000% to 1.625% or (y) a base rate plus an applicable margin varying from
0.000% to 0.625%, in each case depending on the public debt ratings for non-credit enhanced long-term senior unsecured debt issued by
the Company.
Term Loan Facility and Senior Notes assumed as part of the N&B Merger
Following the Merger, the Company assumed the indebtedness incurred by N&B in the debt financings completed prior to
the Distribution. This indebtedness includes (i) a Term Loan Facility of $1.250 billion pursuant to the term loan credit
agreement (the “N&B Term Loan Facility”) and (ii) a series of Senior Notes in the aggregate amount of $6.250 billion with
maturities ranging from 2 to 30 years as further described below. N&B’s indebtedness raised prior to the Merger was used to
finance the Special Cash Payment to DuPont, which has been paid, and for the satisfaction of the related transaction fees and
expenses. See Note 3 for additional information.
N&B Term Loan Facility
The N&B Term Loan Facility was funded on February 1, 2021, and provides for a senior unsecured term loan credit
facility in an aggregate principal amount of $1.250 billion, comprised of a $625 million three-year tranche (“2024 Term Loan
Facility”) and a $625 million five-year tranche (“2026 Term Loan Facility”). Interest for each tranche equals, at the Company’s
option, a per annum rate equal to either (x) an adjusted LIBOR rate plus an applicable margin varying from 0.750% to 2.000%
for the three-year tranche and from 1.125% to 2.375% for the five-year tranche or (y) a base rate plus an applicable margin
varying from 0.000% to 1.000% for the three-year tranche and from 0.125% to 1.375% for the five-year tranche, in each case
depending on the class of IFF’s non-credit-enhanced, senior unsecured long-term debt credit rating.
The 2024 Term Loan Facility and 2026 Term Loan Facility are subject to customary affirmative and negative covenants
and events of default after the Closing Date of the Merger. On and after the Closing Date of the N&B Transaction, the 2024
Term Loan Facility and 2026 Term Loan Facility are also subject to a financial covenant requiring maintenance of a maximum
consolidated leverage ratio of 4.75x, with step downs to 3.50x over time, with the first step-down which occurred after the
fiscal quarter ended December 31, 2021 and the final step-down occurring after the fiscal quarter ending June 30, 2023, with a
step-up if the Company consummates certain qualified acquisitions.
On August 4, 2022, the Company and certain of its subsidiaries entered into Amendment No. 2 To Credit Agreement which
amended and restated the Company’s Credit Agreement among the Company, certain of its subsidiaries, the banks, financial
institutions and other institutional lenders party thereto, and Morgan Stanley Senior Funding, Inc. as administrative agent.
Pursuant to the amendment, the 2024 Term Loan Facility and 2026 Term Loan Facility are subject to a financial covenant
requiring maintenance of a maximum consolidated leverage ratio of 4.50x until and including the end of the fiscal quarter
ending on June 30, 2023, stepping down to 4.25x until and including the end of the fiscal quarter ending on March 31, 2024,
stepping down further to 4.00x until and including the end of the fiscal quarter ending on June 30, 2024, stepping down further
to 3.75x until and including the end of the fiscal quarter ending on September 30, 2024, stepping down further to 3.50x
thereafter, with a step-up in connection with certain qualifying acquisitions. The Company was in compliance with all
covenants as of December 31, 2022.
77
N&B Senior Notes
On September 16, 2020, N&B issued $6.250 billion in aggregate principal amount of senior unsecured notes consisting of:
(i) $300 million senior unsecured notes which matured on September 15, 2022 (the “2022 Notes”), bearing interest at a rate of
0.697% per year, payable semi-annually on March 15 and September 15 of each year, beginning March 15, 2021; (ii)
$1.000 billion senior unsecured notes maturing on October 1, 2025 (the “2025 Notes”), bearing interest at a rate of 1.230% per
year, payable semi-annually on April 1 and October 1 of each year, beginning April 1, 2021; (iii) $1.200 billion senior
unsecured notes maturing on October 15, 2027 (the “2027 Notes”), bearing interest at a rate of 1.832% per year, payable semi-
annually on April 15 and October 15 of each year, beginning April 15, 2021; (iv) $1.500 billion senior unsecured notes
maturing on November 1, 2030 (the “2030 Notes”), bearing interest at a rate of 2.300% per year, payable semi-annually on May
1 and November 1 of each year, beginning May 1, 2021; (v) $750 million senior unsecured notes maturing on November 15,
2040 (the “2040 Notes”), bearing interest at a rate of 3.268% per year, payable semi-annually on May 15 and November 15 of
each year, beginning May 15, 2021, and; (vi) $1.500 billion senior unsecured notes maturing on December 1, 2050 (the “2050
Notes”), bearing interest at a rate of 3.468% per year, payable semi-annually on June 1 and December 1 of each year, beginning
June 1, 2021.
Interest on each series of notes began accruing from September 16, 2020 payable semi-annually in arrears as described
above. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months.
On September 15, 2022, the Company repaid the full $300 million outstanding of its 2022 Notes at maturity.
Amended Revolving Credit Facility
On August 4, 2022, the Company and certain of its subsidiaries entered into the Amendment No. 1 To Credit Agreement
which amended and restated the Company’s Revolving Credit Facility (previously and more recently amended and restated as
of July 28, 2021) among the Company, certain of its subsidiaries, the banks, financial institutions and other institutional lenders
party thereto, and Citibank, N.A. as administrative agent.
The interest rate on the Amended Revolving Credit Facility is, at the applicable borrower's option, a per annum rate equal
to either (x) an eurocurrency rate plus an applicable margin varying from 1.000% to 1.625% or (y) a base rate plus an
applicable margin varying from 0.000% to 0.625%, in each case depending on the public debt ratings for non-credit enhanced
long-term senior unsecured debt issued by the Company.
The Amended Revolving Credit Facility is available for general corporate purposes of each borrower and its subsidiaries.
The obligations under the Amended Revolving Credit Facility are unsecured and the Company has guaranteed the obligations
of each other borrower under the Amended Revolving Credit Facility. The Company pays a commitment fee on the aggregate
unused commitments; such fee is not material. The Amended Revolving Credit Agreement contains various covenants,
limitations and events of default customary for similar facilities for similarly rated borrowers, including a maximum permitted
ratio of Net Debt to Consolidated EBITDA of 4.50x as of December 31, 2022, with step-downs to 3.50x over time, with a step-
up if the Company consummates certain qualifying acquisitions.
In connection with the initial issuance of the Revolving Credit Facility, the Company incurred $1 million of debt issuance
costs. As of December 31, 2022, the Company was in compliance with all covenants under the Amended Revolving Credit
Facility. As of December 31, 2022, total capacity under the Amended Revolving Credit Facility was $2.000 billion, with $100
million outstanding borrowings. Under the amended terms of the Revolver Credit Agreement, the Amended Revolving Credit
Facility increased from $1.000 billion to $2.000 billion, maturing on July 28, 2026. At the option of the Company, the facility
may be increased to $2.500 billion subject to certain conditions. As the Amended Revolving Credit Facility is a multi-year
revolving credit agreement, the Company classifies as long-term debt the portion that it has the intent and ability to maintain
outstanding longer than 12 months.
During 2022, the Company had draw downs of $550 million and repayments of $450 million under the Amended
Revolving Credit Facility. There were no draw downs or repayments under the Amended Revolving Credit Facility in 2021.
2018 Senior Unsecured Notes
On September 25, 2018 the Company issued €300 million aggregate principal amount of senior unsecured notes that
matured on September 25, 2021 (the “2021 Euro Notes”). The 2021 Notes bore interest at a rate of 0.5% per year, payable
annually on September 25 of each year, beginning September 25, 2019. Total proceeds from the issuance of the 2021 Notes, net
of underwriting discounts and offering costs, were €298 million ($350 million in USD). During the third quarter of 2021, the
Company repaid the 2021 Euro Notes in a payment of €300 million. The repayment on the 2021 Euro Notes was funded
primarily from the Company’s existing cash balances, with the remainder coming from the issuance of commercial paper.
78
On September 25, 2018, the Company issued €800 million aggregate principal amount of senior unsecured notes that
mature on September 25, 2026 (the “2026 Euro Notes”). The 2026 Notes bear interest at a rate of 1.8% per year, payable
annually on September 25 of each year, beginning September 25, 2019. Total proceeds from the issuance of the 2026 Notes, net
of underwriting discounts and offering costs, were €794 million ($932 million in USD).
On September 26, 2018, the Company issued $400 million aggregate principal amount of senior unsecured notes that
mature on September 26, 2028 (the “2028 Notes”). The 2028 Notes bear interest at a rate of 4.45% per year, payable semi-
annually on March 26 and September 26 of each year, beginning March 26, 2019. Total proceeds from the issuance of the 2028
Notes, net of underwriting discounts and offering costs, were $397 million.
On September 26, 2018, the Company issued $800 million aggregate principal amount of senior unsecured notes that
mature on September 26, 2048 (the “2048 Notes” and collectively with the 2021 Euro Notes, 2026 Euro Notes, 2020 Notes,
2028 Notes, the “2018 Senior Unsecured Notes”). The 2048 Notes bear interest at a rate of 5.0% per year, payable semi-
annually on March 26 and September 26 of each year, beginning March 26, 2019. Total proceeds from the issuance of the 2048
Notes, net of underwriting discounts and offering costs, were $787 million.
As discussed in Note 16, the 2021 Euro Notes and 2026 Euro Notes have been designated as a hedge of the Company’s net
investment in certain subsidiaries.
2023 Notes
On April 4, 2013, the Company issued $300 million face amount of 3.20% Senior Notes (“2023 Notes”) due 2023 at a
discount of less than $1 million. The Company received proceeds related to the issuance of these 2023 Notes of $298 million
which was net of the less than $1 million discount and a $2 million underwriting discount (recorded as deferred financing
costs). In addition, the Company incurred $1 million of other deferred financing costs in connection with the debt issuance. The
discount and deferred financing costs are being amortized as interest expense over the term of the 2023 Notes. The 2023 Notes
bear interest at a rate of 3.20% per year, with interest payable on May 1 and November 1 of each year, commencing on
November 1, 2013. The 2023 Notes mature on May 1, 2023.
2024 Euro Notes
On March 14, 2016, the Company issued €500 million face amount of 1.75% Senior Notes (“2024 Euro Notes”) due 2024
at a discount of €1 million. The Company received proceeds related to the issuance of these 2024 Euro Notes of €496 million
which was net of the €1 million discount and €3 million underwriting discount (recorded as deferred financing costs). In
addition, the Company incurred $1 million of other deferred financing costs in connection with the debt issuance. In connection
with the debt issuance, the Company entered into pre-issuance hedging transactions that were settled upon issuance of the debt
and resulted in a loss of approximately $3 million. The discount, deferred financing costs and pre-issuance hedge loss are being
amortized as interest expense over the eight year term of the debt. The 2024 Euro Notes bear interest at a rate of 1.75% per
annum, with interest payable on March 14 of each year, commencing on March 14, 2017. The 2024 Euro Notes will mature on
March 14, 2024.
As discussed in Note 16, the 2024 Euro Notes have been designated as a hedge of the Company’s net investment in certain
subsidiaries.
2047 Notes
On May 18, 2017, the Company issued $500 million face amount of 4.375% Senior Notes (“2047 Notes”) due 2047 at a
discount of $2 million. The Company received proceeds related to the issuance of these 2047 Notes of $494 million which was
net of the $2 million discount and $4 million in underwriting fees (recorded as deferred financing costs). In addition, the
Company incurred $1 million in legal and professional costs associated with the issuance and such costs were recorded as
deferred financing costs. In connection with the debt issuance, the Company entered into pre-issuance hedging transactions that
were settled upon issuance of the debt and resulted in a loss of approximately $5 million. The discount, deferred financing costs
and pre-issuance hedge loss are being amortized as interest expense over the 30 year term of the debt. The 2047 Notes bear
interest at a rate of 4.375% per annum, with interest payable semi-annually on June 1 and December 1 of each year,
commencing on December 1, 2017. The 2047 Notes will mature on June 1, 2047.
79
2018 Term Loan Facility
On June 6, 2018, the Company entered into a Term Loan Credit Agreement (as amended on July 13, 2018, January 17,
2020 and August 25, 2020, the “2018 Term Loan Credit Agreement”) with Morgan Stanley Senior Funding, Inc., as the
administrative agent, and the lenders party thereto, pursuant to which the lenders thereunder committed to provide, a senior
unsecured term loan facility in an original aggregate principal amount of up to $350 million (the “2018 Term Loan Facility”),
which matured on October 1, 2021. In 2019, the Company made payments of $110 million on the 2018 Term Loan Facility, and
during the third quarter of 2021, the Company repaid the remainder of the 2018 Term Loan Facility in two payments of
$120 million each. The repayments on the 2018 Term Loan Facility were funded primarily from the Company's existing cash
balances, with the remainder coming from the issuance of commercial paper.
2022 Term Loan Facility
On May 15, 2020, the Company entered into a Term Loan Agreement (as amended on August 25, 2020, the “2022 Term
Loan Agreement”) with China Construction Bank Corporation, New York Branch, as administrative agent, and the lenders party
thereto, pursuant to which the lenders thereunder have committed to provide a senior unsecured two year term loan facility in
an aggregate principal amount of up to $200 million (the “2022 Term Loan Facility”). The loans under the 2022 Term Loan
Agreement bore interest, at the Company's option, at a per annum rate equal to either (x) an adjusted LIBOR rate plus an
applicable margin varying from 1.225% to 2.475% or (y) a base rate plus an applicable margin varying from 0.225% to
1.475%, in each case depending on the public debt ratings for non-credit enhanced long-term senior unsecured debt issued by
the Company. The Company could voluntarily prepay the term loans without premium or penalty, with the balance payable on
the second anniversary of the funding date. There is no required amortization under the 2022 Term Loan Agreement.
During the fourth quarter of 2021, the Company elected to voluntarily prepay the outstanding balance of the 2022 Term
Loan Facility.
Commercial Paper
During 2022, the Company had gross issuances of $6.040 billion and repayments of $6.177 billion under the commercial
paper program. The commercial paper issued had original maturities of less than 126 days. During 2021, the Company had
gross issuances of $800 million and repayments of $476 million under the commercial paper program.
The Commercial Paper Program is backed by the borrowing capacity available under the Revolving Credit Facility. The
effective interest rate of commercial paper issuances does not materially differ from short-term interest rates, which fluctuate
due to market conditions and as a result may impact our interest expense.
Redemption Provisions
The 2023 Notes, 2024 Euro Notes, 2026 Euro Notes, 2028 Notes, 2047 Notes, and 2048 Notes (collectively, the “Notes”)
share the same redemption provisions. Upon 30 days’ notice to holders of the Notes, the Company may redeem the Notes for
cash in whole, at any time, or in part, from time to time, prior to maturity, at redemption prices that include accrued and unpaid
interest and a make-whole premium, as specified in the indenture governing the Notes. However, no make-whole premium will
be paid for redemptions of each note on or after the following date:
Note
2023 Notes
2024 Euro Notes
2026 Euro Notes
2028 Notes
2047 Notes
2048 Notes
Redemption Date
February 1, 2023
December 14, 2023
June 25, 2026
June 26, 2028
December 1, 2046
March 26, 2048
The indenture of the Notes provides for customary events of default and contains certain negative covenants that limit the
ability of the Company and its subsidiaries to grant liens on assets, or to enter into sale-leaseback transactions. In addition,
subject to certain limitations, in the event of the occurrence of both (1) a change of control of the Company and (2) a
downgrade of the Notes below investment grade rating by both Moody’s Investors Services, Inc., Standard & Poor’s Ratings
Services and Fitch Ratings Inc. within a specified time period, the Company will be required to make an offer to repurchase the
Notes at a price equal to 101% of the principal amount of the Notes, plus accrued and unpaid interest to the date of repurchase.
80
The 2025 Notes, 2027 Notes, 2030 Notes, 2040 Notes and 2050 Notes (collectively, the “N&B Senior Notes”), assumed as
a result of the Merger, may be redeemed by the issuer at any time at the greater of 100% or the discounted present value of the
remaining scheduled payments of principal and interest from the redemption date to the maturity date at Treasury Rate (as
defined in the applicable indenture) plus (i) 15 basis points in the case of the 2025 Notes, (ii) 25 basis points in the case of the
2027 Notes, (iii) 25 basis points in the case of the 2030 Notes, (iv) 30 basis points in the case of the 2040 Notes and (v) 30 basis
points in the case of the 2050 Notes. The redemption dates of each of the N&B Senior Notes are provided in the table below:
Notes
2025 Notes
2027 Notes
2030 Notes
2040 Notes
2050 Notes
Redemption Date
September 1, 2025
August 15, 2027
August 1, 2030
May 15, 2040
June 1, 2050
On or after the applicable redemption dates, each series of the N&B Senior Notes may be redeemed by the issuer at a
redemption price equal to 100% of the principal amount of the N&B Senior Notes to be redeemed, plus accrued and unpaid
interest on the notes to be redeemed to, but excluding, the redemption date.
Outstanding Borrowings
The following table shows the contractual maturities of the Company's long-term debt as of December 31, 2022.
(DOLLARS IN MILLIONS)
Payments Due by Period
Total
Less than 1
Year
1-3 Years
3-5 Years
More than
5 Years
Total Outstanding Borrowings
$
10,580 $
300 $
2,156 $
2,674 $
5,450
NOTE 10. INCOME TAXES
Earnings before income taxes consisted of the following:
(DOLLARS IN MILLIONS)
U.S. loss before taxes
Foreign income before taxes
Total (loss) income before taxes
The income tax provision consisted of the following:
(DOLLARS IN MILLIONS)
Current tax provision
Federal
State and local
Foreign
Total current tax provision
Deferred tax provision
Federal
State and local
Foreign
Total deferred tax benefit
Total provision for income taxes
2022
December 31,
2021
2020
(1,918) $
293
(1,625) $
(493) $
847
354 $
(142)
583
441
2022
December 31,
2021
2020
102 $
49
325
476
(77)
(111)
(49)
(237)
239 $
(5) $
13
303
311
(121)
(34)
(81)
(236)
75 $
(9)
1
150
142
(8)
(2)
(58)
(68)
74
$
$
$
$
81
Effective Tax Rate Reconciliation
Reconciliation between the U.S. federal statutory income tax rate to the actual effective tax rate was as follows:
Statutory tax rate
Tax effect of non-deductible goodwill impairment
Difference in effective tax rate on foreign earnings and remittances(1)
Tax benefit from supply chain optimization
Unrecognized tax benefit, net of reversals
Tax impact on gains on business disposal
Deferred taxes on deemed repatriation(2)
Global intangible low-taxed income
Foreign-derived intangible income
U.S. foreign tax credit - general limitation
Research and development credit
Acquisition costs
Establishment (release) of valuation allowance on state deferred
State and local taxes including rate changes(3)
Other, net
2022
21.0 %
(29.1)
—
0.8
0.9
(5.9)
(5.6)
(0.8)
1.1
0.1
0.8
—
—
4.3
(2.3)
(14.7) %
December 31,
2021
2020
21.0 %
—
8.0
(5.8)
0.7
4.0
2.7
4.1
(1.6)
(3.1)
(1.4)
2.4
(3.0)
(4.8)
(2.0)
21.2 %
21.0 %
—
(6.9)
(5.0)
5.7
—
(0.2)
5.3
(0.3)
(1.9)
(1.0)
1.0
(0.4)
(0.6)
0.1
16.8 %
Effective tax rate
_______________________
(1) For 2021, the rate includes rate change impacts related to the Netherlands and United Kingdom.
(2) For 2022, the rate includes establishment of the “held for sale” deferred tax liabilities due to a change in assertion.
(3) For 2022, the rate includes rate change impacts related to the remeasurement of the state tax rate on deferred taxes.
The effective tax rate reflects the recording of non-tax-deductible impairment charges related to goodwill in the Health &
Biosciences operating segment and the tax effects of the divestiture of the Microbial Control business unit.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts
and Jobs Act (the “Tax Act”) that significantly revised the U.S. tax code effective January 1, 2018. The Tax Act created
significant international tax provisions, including global intangible low-taxed income (“GILTI”). The Company has elected to
treat GILTI as a current period cost if and when incurred. This tax position resulted in approximately a net $112 million income
tax expense for the year ended December 31, 2022, offset in part by approximately $99 million in foreign tax credits.
The U.S. consolidated group has historically generated taxable income after the inclusion of foreign dividends which has
allowed the Company to realize its federal deferred tax assets. Foreign dividends are now subject to a 100% dividends received
deduction under the Tax Act and do not serve as a source of federal taxable income. However, as of December 31, 2022, the
U.S. consolidated group is in a cumulative income position. It is expected to continue to be in a cumulative income position
primarily due to the inclusion of GILTI and expects to realize tax benefits from the reversal of its temporary differences,
including capitalized research and experimental expenditures.
Further, as of December 31, 2022, the Company has maintained a valuation allowance of approximately $1 million on
certain state tax attributes based on a state taxable income forecast. The main inputs into the forecast are the 2022 taxable
income projections. Changes in the performance of the North American business, the Company’s transfer pricing policies and
adjustments to the Company’s U.S. tax profile could impact the estimate.
82
Deferred Taxes
The deferred tax assets and liabilities consisted of the following amounts:
(DOLLARS IN MILLIONS)
Employee and retiree benefits
Credit and net operating loss carryforwards
Amortizable research and development expenses
Interest limitation
Inventory
Lease obligations
Other, net
Gross deferred tax assets
Property, plant and equipment, net
Intangible assets(1)
Right-of-use assets
Loss on foreign currency translation
Deferred taxes on deemed repatriation
Gross deferred tax liabilities
Valuation allowance
Total net deferred tax liabilities
December 31,
2022
2021
61 $
315
84
3
19
151
140
773
(229)
(2,049)
(151)
(23)
(166)
(2,618)
(262)
(2,107) $
148
312
42
43
32
189
79
845
(265)
(2,486)
(187)
(30)
(81)
(3,049)
(232)
(2,436)
$
$
_______________________
(1) Includes deferred taxes on intangible assets owned by a fully consolidated partnership.
Net operating loss carryforwards were approximately $301 million and $272 million at December 31, 2022 and 2021,
respectively. If unused, approximately $98 million will expire between 2023 and 2042. The remainder, totaling approximately
$203 million, may be carried forward indefinitely. Tax credit carryforwards were approximately $14 million and $40 million at
December 31, 2022 and 2021, respectively. If unused, the $14 million will expire between 2023 and 2042.
Of the $315 million deferred tax asset for net operating loss carryforwards and credits at December 31, 2022, the Company
considers it unlikely that a portion of the tax benefit will be realized. Accordingly, a valuation allowance of approximately $261
million on net operating loss carryforwards and $1 million of tax credits has been established against these deferred tax assets.
Uncertain Tax Positions
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
2022
$
(DOLLARS IN MILLIONS)
Balance of unrecognized tax benefits at beginning of year
Gross amount of increases in unrecognized tax benefits as a result of
positions taken during a prior year(1)
Gross amount of decreases in unrecognized tax benefits as a result of
positions taken during a prior year
Gross amount of increases in unrecognized tax benefits as a result of
positions taken during the current year
The amounts of decreases in unrecognized benefits relating to settlements
with taxing authorities
Reduction in unrecognized tax benefits due to the lapse of applicable
statute of limitation
Balance of unrecognized tax benefits at end of year
_______________________
(1) For 2021, the amount includes positions related to N&B opening balance sheet amounts.
$
December 31,
2021
2020
130 $
99 $
1
(18)
31
(27)
(5)
112 $
42
(3)
5
(1)
(12)
130 $
75
11
—
24
(2)
(9)
99
83
At December 31, 2022, 2021 and 2020, there were approximately $98 million, $130 million and $98 million, respectively,
of unrecognized tax benefits recorded to Other liabilities. There was approximately $14 million recorded to Other current
liabilities for 2022, less than $1 million recorded to Other current liabilities for 2021 and approximately $1 million recorded to
Other current liabilities for 2020. If these unrecognized tax benefits were recognized, all the benefits and related interest and
penalties would be recorded as a benefit to income tax expense.
The Company decreased its liabilities for interest and penalties by approximately $1 million, net, for the year ended
December 31, 2022, and increased its liabilities for interest and penalties by approximately $19 million and $3 million, net, for
the years ended December 31, 2021 and 2020, respectively. At December 31, 2022, 2021 and 2020, the Company had accrued
approximately $31 million, $36 million and $17 million, respectively, of interest and penalties classified as Other liabilities,
$4 million classified as Other current liabilities for December 31, 2022 and less than $1 million classified as Other current
liabilities for December 31, 2021 and 2020.
As of December 31, 2022, the Company’s aggregate provision for unrecognized tax benefits, including interest and
penalties, was approximately $147 million associated with various tax positions principally asserted in foreign jurisdictions.
The Company’s reversal of uncertain tax positions due to the expiration of related statutes of limitations over the next 12
months was estimated to be approximately $18 million, which has been classified as current. The total changes to the uncertain
tax positions over the next 12 months is impracticable to estimate and is dependent on the resolution of new or existing tax
disputes.
Other
Tax benefits credited to Shareholders’ equity were not material for the years ended December 31, 2022, 2021 and 2020
associated with stock option exercises and PRSU dividends.
The Company regularly repatriates earnings from non-U.S. subsidiaries. As the Company repatriates these funds to the
U.S., they will be required to pay income taxes in certain U.S. states and applicable foreign withholding taxes during the period
when such repatriation occurs. Accordingly, as of December 31, 2022, the Company had a deferred tax liability of
approximately $166 million for the effect of repatriating the funds to the U.S., attributable to various non-U.S. subsidiaries.
There is no deferred tax liability associated with non-U.S. subsidiaries where we intend to indefinitely reinvest the earnings to
fund local operations and/or capital projects.
The Company has ongoing income tax audits and legal proceedings which are at various stages of administrative or judicial
review, of which the material items are discussed below. In addition, the Company has other ongoing tax audits and legal
proceedings that relate to indirect taxes, such as value-added taxes, capital tax, sales and use and property taxes, which are
discussed in Note 19.
The Company also has several other tax audits in process and has open tax years with various taxing jurisdictions that
range primarily from 2012 to 2021. Based on currently available information, the Company does not believe the ultimate
outcome of any of these tax audits and other tax positions related to open tax years, when finalized, will have a material impact
on its results of operations and financial position.
84
NOTE 11. NET (LOSS) INCOME PER SHARE
Basic and diluted net (loss) income per share is based on the weighted average number of shares outstanding. A
reconciliation of shares used in the computation of basic and diluted net (loss) income per share is as follows:
(AMOUNTS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
Net (Loss) Income
Net (loss) income attributable to IFF shareholders
Adjustment related to (increase) decrease in redemption value of
redeemable non-controlling interests in excess of earnings allocated
Net (loss) income attributable to IFF shareholders
$
Shares
Weighted average common shares outstanding (basic)(1)
Adjustment for assumed dilution(2):
$
Stock options and restricted stock awards
SPC portion of the TEUs
2022
December 31,
2021
2020
(1,871) $
3
(1,868) $
255
270 $
(2)
268 $
243
363
2
365
112
—
—
255
—
—
243
1
1
114
Weighted average shares assuming dilution (diluted)
Net (Loss) Income per Share
Net (loss) income per share - basic(3)
Net (loss) income per share - diluted(4)
_______________________
(1) On September 15, 2021, additional shares of IFF's common stock were issued in settlement of the SPC portion of the TEUs. For the year
ended December 31, 2020, the TEUs were assumed to be outstanding at the minimum settlement amount for basic earnings per share
(“EPS”). See below for additional information.
(7.32) $
(7.32)
1.11 $
1.10
3.25
3.21
$
(2) Effect of dilutive securities includes dilution under stock plans and incremental impact of TEUs. See below for additional information.
(3) For the years ended December 31, 2022, 2021 and 2020, the basic net (loss) income per share cannot be recalculated based on the
information presented in the table above due to the effects of rounding.
(4) For the years ended December 31, 2022 and 2020, the diluted net (loss) income per share cannot be recalculated based on the
information presented in the table above due to the effects of rounding.
As of the effective time of the Merger, each issued and outstanding share of common stock of N&B (except for shares of
common stock of N&B held by N&B as treasury stock or by DuPont, which were canceled and ceased to exist and no
consideration was delivered in exchange therefor) was converted into the right to receive one share of common stock of IFF.
The Merger was completed in exchange for 141,740,461 shares of IFF common stock, par value $0.125 per share (or cash
payment in lieu of fractional shares), which had been approved in the special shareholder meeting that occurred on August 27,
2020 where IFF shareholders voted to approve the issuance of shares of IFF common stock in connection with the N&B
Transaction, pursuant to the Merger Agreement. The shares issued in the Merger represented approximately 55.4% of the
common stock of IFF on a fully diluted basis, after giving effect to the Merger, as of February 1, 2021.
The Company issued 16,500,000 TEUs, consisting of a prepaid SPC and a senior amortizing note, for net proceeds
of approximately $800 million on September 17, 2018. On September 14, 2021, the Company notified holders of the TEUs that
the final settlement rate in respect of each SPC was 0.330911 shares of IFF’s common stock. On September 15, 2021, 5,460,031
shares of IFF's common stock were issued in settlement of the SPCs. The SPC conversion factor is based on the VWAP per
share of the Company’s common stock. For purposes of calculating basic net income per share, the settlement rate of 0.330911
shares per SPC, the final settlement rate, was used on December 31, 2021 and 0.313400 shares per SPC was used on
December 31, 2020. For purposes of calculating diluted earnings per share, the settlement rate of 0.330911 shares per SPC, the
final settlement rate, was used on December 31, 2021 and 0.383900 shares per SPC was used on December 31, 2020.
The Company has issued shares of Purchased Restricted Stock Units (“PRSUs”) which contain non-forfeitable rights to
dividends and thus are considered participating securities which are required to be included in the computation of basic and
diluted earnings per share pursuant to the two-class method. The two-class method was not presented since there was no
difference between basic net (loss) income per share for both common shareholders and PRSU holders as of December 31,
2022, 2021 and 2020, and there was no difference between diluted net loss per share for both common shareholders and PRSU
holders as of December 31, 2022. The difference between diluted net income per share for both common shareholders and
PRSU holders was less than $0.01 and $0.04 per share as of December 31, 2021 and 2020. In addition, for each year, the
number of PRSUs outstanding as of December 31, 2022, 2021 and 2020 was immaterial. Net loss allocated to such PRSUs
during 2022 was not material and net income allocated to such PRSUs during 2021 and 2020 was not material.
85
There were approximately 0.3 million potentially dilutive securities excluded from the computation of diluted net loss per
share for the year ended December 31, 2022 because there was a net loss attributable to IFF for the period and, as such, the
inclusion of these securities would have been anti-dilutive.
For the year ended December 31, 2022, there were approximately 0.3 million share equivalents that had an anti-dilutive
effect and therefore were excluded from the computation of diluted net loss per share. There were no share equivalents
excluded from the computation of diluted net income per share for the years ended December 31, 2021 and 2020.
NOTE 12. SHAREHOLDERS’ EQUITY
Dividends
Cash dividends declared per share were $3.20, $3.12 and $3.04 for the years ended December 31, 2022, 2021 and 2020,
respectively. The Consolidated Balance Sheets reflect $206 million of dividends payable at December 31, 2022. This amount
relates to a cash dividend of $0.81 per share declared in December 2022 and paid in January 2023. Dividends declared, but not
paid as of December 31, 2021 and December 31, 2020 were $201 million ($0.79 per share) and $82 million ($0.77 per share),
respectively.
Share Repurchases
In December 2012, the Board of Directors authorized a $250 million share repurchase program, which commenced in the
first quarter of 2013. In August 2015, the Board of Directors approved an additional $250 million share repurchase
authorization and extension through December 31, 2017. Based on the total remaining amount of $56 million available under
the amended repurchase program as of October 31, 2017, the Board of Directors re-approved on November 1, 2017 a $250
million share repurchase authorization and extension for a total value of $300 million available under the program.
As of May 7, 2018, the Company has suspended its share repurchases. On November 1, 2022, the share repurchase
program expired.
NOTE 13. STOCK COMPENSATION PLANS
The Company has various equity plans under which its officers, senior management, other key employees and Board of
Directors may be granted options to purchase IFF common stock or other forms of stock-based awards.
The cost of all employee stock-based awards are principally recognized on a straight-line attribution basis over their
respective vesting periods, net of estimated forfeitures. Total stock-based compensation expense included in the Consolidated
Statements of (Loss) Income and Comprehensive (Loss) Income was as follows:
(DOLLARS IN MILLIONS)
Equity-based awards
Liability-based awards
Total stock-based compensation
Less tax benefit
Total stock-based compensation, net of tax
2022
December 31,
2021
2020
$
$
49 $
2
51
(8)
43 $
54 $
8
62
(13)
49 $
36
4
40
(8)
32
The shareholders of the Company approved the Company’s 2021 Stock Award and Incentive Plan (the “2021 Plan”) on
May 5, 2021. The 2021 Plan replaced the Company’s 2015 Stock Award and Incentive Plan (the “2015 Plan”) and the
Company's 2010 Stock Award and Incentive Plan (the “2010 Plan”), and provides the source for future deferrals of cash into
deferred stock under the Company’s Deferred Compensation Plan (with the Deferred Compensation Plan being deemed a
subplan under the 2010 Plan for the sole purpose of funding deferrals under the IFF Share Fund).
Under the 2021 Plan, a total of 2,290,000 shares were authorized for issuance. At December 31, 2022, 1,403,092 shares
were subject to outstanding awards and 1,777,205 shares remained available for future awards under all of the Company’s
equity award plans, including the 2015 Plan and 2010 Plan (excluding shares not yet issued under open cycles of the
Company’s Long-Term Incentive Plan).
The Company offers a Long-Term Incentive Plan (“LTIP”) for senior management. The targeted payout is principally 50%
cash and 50% IFF common stock at the end of the three-year cycle.
86
For the 2020-2022 cycle, the LTIP awards are earned based on the achievement of: (i) an annual Leverage Ratio for 2020
(representing one-sixth of the award value), (ii) a 2-year cumulative Leverage Ratio for 2021-2022 (representing one-third of
the award value) and (iii) Relative TSR targets (representing one-half of the award value). For the 2021-2023 cycle, the LTIP
awards are earned based on the achievement of: (i) an annual Leverage Ratio for 2021, 2022 and 2023 (representing one-half of
the award value) and (ii) Relative TSR targets (representing one-half of the award value). For the 2022-2024 cycle, the LTIP
awards are earned based on the achievement of: (i) 3-year cumulative Return on Invested Capital (“ROIC”) (representing one-
half of the award value) and (ii) Relative TSR targets (representing one-half of the award value).
The Leverage Ratio measures Net debt as compared to a measure profitability. The ROIC measures adjusted net operating
profit after tax against average invested capital. When the award is granted, 50% of the target dollar value of the award is
converted to a number of “notional” shares based on the closing price at the beginning of the cycle. For those shares whose
payout is based on Relative TSR, compensation expense is recognized using a graded-vesting attribution method, while
compensation expense for the remainder of the performance shares (Leverage Ratio or ROIC targets for the applicable cycle) is
recognized on a straight-line basis over the vesting period based on the probable outcome of the performance condition.
The 2018-2020 cycle concluded at the end of 2020 and an aggregate 7,484 shares of common stock were issued in March
2021. The 2019-2021 cycle concluded at the end of 2021 and no shares of common stock were issued in March 2022. The
2020-2022 cycle concluded at the end of 2022 and no shares of common stock will be issued in March 2023.
In 2006, the Board of Directors approved the Equity Choice Program (the “Program”) for senior management. This
program continues under the 2015 Plan. Eligible employees can choose from among three equity alternatives and will be
granted such equity awards up to certain dollar awards depending on the participant’s employment grade level. A participant
may choose among (1) Stock-Settled Appreciation Rights (“SSARs”), (2) Restricted Stock Units (“RSUs”) or (3) PRSUs.
Transaction with Nutrition and Biosciences, Inc.
In connection with the Merger, N&B employees’ outstanding (unvested and/or vested and unexercised) equity awards were
converted into equity awards denominated in shares of the Company’s common stock based on a defined exchange ratio. N&B
employees’ equity awards were converted into 335,347 IFF stock options, 258,572 IFF RSU awards and 5,816 IFF SAR
awards.
For converted RSU awards, the fair value of the equity award is based on the Closing Date market price of IFF stock. For
converted stock options and SAR awards, the exercise price per share of the converted award is equal to the exercise price per
share of the N&B award immediately prior to the Merger divided by the exchange ratio. The fair value of the IFF stock options
and SAR awards that the Company issued in connection with the Merger was estimated using the Black Scholes model.
The converted awards were generally issued with the same terms and conditions as were applicable prior to the
Transaction. At the Closing Date, approximately $25 million of the fair value of the replacement awards granted to N&B
employees was attributable to pre-combination service and was included in the purchase price. As of December 31, 2022, post-
combination expense of approximately $11 million is expected to be recognized related to the replacement awards over the
remaining post-combination service period, approximately up to three years.
SSARs and Options
SSARs are a contractual right to receive the value, in shares of Company stock, of the appreciation in our stock price from
the grant date to the date the SSARs are exercised by the participant. SSARs granted become exercisable on the third
anniversary of the grant date and have a maximum term of seven years. SSARs do not require a financial investment by the
SSARs grantee. Stock options require the participant to pay the exercise price at the time they exercise their stock options. No
stock options were granted in 2022, 2021 or 2020.
SSARs and options activity was as follows:
(SHARE AMOUNTS IN THOUSANDS)
December 31, 2021
Granted
Exercised
Canceled
December 31, 2022
Shares Subject to
SSARs/Options
Weighted
Average Exercise
Price
SSARs/
Options
Exercisable
287 $
134
(84)
(6)
331 $
107.48
126.91
106.66
117.04
115.35
235
182
Expected to Vest at December 31, 2022
142 $
122.27
87
The weighted average exercise price of SSARs and options exercisable at December 31, 2022, 2021 and 2020 were
$109.50, $109.77 and $118.10, respectively.
SSARs and options outstanding at December 31, 2022 was as follows:
Price Range
Over $65
Number
Outstanding
(in thousands)
Weighted Average
Remaining
Contractual Life
(in years)
Weighted
Average
Exercise Price
Aggregate
Intrinsic Value
(in millions)
331
5.65 $
115.35 $
2
SSARs and options exercisable as of December 31, 2022 was as follows:
Price Range
Over $65
Number
Exercisable
(in thousands)
Weighted Average
Remaining
Contractual Life
(in years)
Weighted
Average
Exercise Price
Aggregate
Intrinsic Value
(in millions)
182
5.05 $
109.50 $
2
The total intrinsic value of options/SSARs exercised during 2022 was approximately $2 million, $3 million for 2021 and
was not material for 2020.
As of December 31, 2022, the total unrecognized compensation cost related to non-vested SSARs granted was
approximately $4 million; such cost is expected to be recognized over a weighted average period of approximately 1.91 years.
Restricted Stock Units
The Company has granted RSUs to eligible employees and members of the Board of Directors. The Company has granted
both time-based RSUs, which contain no performance criteria provisions, and performance-based RSUs. Such RSUs are subject
to forfeitures or adjustments if certain conditions are not met, including service period or pre-established cumulative
performance targets. RSUs principally vest 100% at the end of three years. An RSU’s fair value is calculated based on the
market price of the Company's stock at date of grant, with an adjustment to reflect the fact that such awards do not participate in
dividend rights. The aggregate fair value is amortized to expense ratably over the vesting period.
RSU activity was as follows:
(SHARE AMOUNTS IN THOUSANDS)
December 31, 2021
Granted
Vested
Forfeited
Change due to performance conditions, net
December 31, 2022
Number of Shares
Weighted Average
Grant Date Fair
Value Per Share
777 $
556
(322)
(58)
(16)
937 $
126.20
115.13
124.62
129.36
120.48
120.81
The total fair value of RSUs that vested during the year ended December 31, 2022 was approximately $40 million.
As of December 31, 2022, there was approximately $58 million of total unrecognized compensation cost related to non-
vested RSUs granted under the equity incentive plans; such cost is expected to be recognized over a weighted average period of
approximately 1.98 years.
Purchased Restricted Stock Units
The grant of awards under the Program provided for eligible employees to purchase shares of IFF common stock and
deposit them into an escrow account. For each share deposited in escrow by the eligible employee, the Company matched with
the grant of a restricted stock unit. The shares of restricted stock units generally vest on the third anniversary of the grant date,
are subject to continued employment and other specified conditions, and pay dividends if and when paid by the Company.
Holders of restricted stock units have, in most instances, all of the rights of shareholders, except that they may not sell, assign,
pledge or otherwise encumber such shares. PRSUs pay dividend equivalents and do not have voting rights.
88
The following table summarizes the Company's PRSU activity for the years ended December 31, 2022, 2021 and 2020:
(DOLLARS IN MILLIONS)
2022
2021
2020
PRSU activity was as follows:
(SHARE AMOUNTS IN THOUSANDS)
December 31, 2021
Granted
Vested
Forfeited
December 31, 2022
Issued Shares
Aggregate Purchase Price
6
9
9
43,690 $
61,870 $
66,160 $
Covered Shares
21,845
30,935
33,080
Number of
Shares
Weighted Average
Grant Date Fair
Value Per Share
155 $
44
(95)
(14)
90 $
138.36
126.49
138.06
135.50
133.36
The total fair value of PRSUs that vested during the year ended December 31, 2022 was approximately $13 million.
As of December 31, 2022, there was approximately $4 million of total unrecognized compensation cost related to non-
vested PRSUs granted under the equity incentive plans; such cost is expected to be recognized over a weighted average period
of approximately 1.87 years.
Liability Awards
The Company has granted cash-settled RSUs (“Cash RSUs”) to eligible employees that are paid out 100% in cash upon
vesting. Such RSUs are subject to forfeiture if certain conditions are not met. Cash RSUs principally vest 100% at the end of
three years and contain no performance criteria provisions. A Cash RSU's fair value is calculated based on the market price of
the Company's stock at the date of the closing period and is accounted for as a liability award. The aggregate fair value is
amortized to expense ratably over the vesting period.
Cash RSU activity was as follows:
(SHARE AMOUNTS IN THOUSANDS)
December 31, 2021
Granted
Vested
Forfeited
December 31, 2022
Cash RSUs
Weighted Average
Fair
Value Per Share
116 $
43
(38)
(2)
119 $
150.65
104.84
130.67
107.00
104.84
The total fair value of Cash RSUs that vested during the year ended December 31, 2022 was approximately $5 million.
As of December 31, 2022, there was approximately $5 million of total unrecognized compensation cost related to non-
vested Cash RSUs granted under the equity incentive plans; such cost is expected to be recognized over a weighted average
period of approximately 1.81 years. The aggregate compensation cost will be adjusted based on changes in the Company’s
stock price.
NOTE 14. SEGMENT INFORMATION
The Company is organized into four reportable operating segments: Nourish, Health & Biosciences, Scent and Pharma
Solutions. These segments align with the internal structure to manage these businesses. The Company’s Chief Operating
Decision Maker regularly reviews financial information to allocate resources and assess performance utilizing these segments.
89
Nourish is comprised of three business units, Ingredients, Flavors and Food Designs, with a diversified portfolio across
natural and plant-based specialty food ingredients, flavor compounds, and savory solutions and inclusions, respectively.
Ingredients provide texturizing solutions to the food industry, food protection solutions used in food and beverage products,
specialty soy and pea protein with value-added formulations, emulsifiers and sweeteners. Flavors provide a range of flavor
compounds and natural taste solutions that are ultimately used by IFF’s customers in savory products, beverages, sweets, and
dairy products. Flavors also provide value-added spices and seasoning ingredients for meat, food service, convenience,
alternative protein and culinary products. Food Designs provide savory solution products such as spices, sauces, marinades and
mixtures. Additionally, Food Designs provide inclusion products that help with taste and texture by, among other things,
combining flavorings with fruit, vegetables, and other natural ingredients for a wide range of food products, such as health
snacks, baked goods, cereals, pastries, ice cream and other dairy products.
Health & Biosciences is comprised of five business units, Health, Cultures & Food Enzymes, Home & Personal Care,
Animal Nutrition and Grain Processing, with a biotechnology-driven portfolio of products that serve the health and wellness,
food, consumer and industrial markets. Products within this portfolio range from enzymes, food cultures, probiotics and
specialty ingredients for non-food applications. Health provides ingredients for dietary supplements, food and beverage,
specialized nutrition and pharma. Cultures & Food Enzymes provide products that aim to serve the global demand for healthy,
natural, clean label and fermented food for fresh dairy, cheese, bakery and brewing products. This is accomplished by providing
IFF’s customers with products that allow for extended shelf life and stability, which help to improve customers’ products and
performance. The business unit’s enzyme solution also allows IFF’s customers to provide low sugar, high fiber and lactose-free
dairy products. Home & Personal Care produces enzymes for detergents, cleaning and textile processing products in the
laundry, dishwashing, textiles and industrials and personal care markets that help to enhance product and process performances.
Animal Nutrition produces enzymes that help to improve the product and process performance of animal feed products, which
aim to lessen environmental impact by reducing farm waste. Grain Processing produces enzymes for biofuel production and
carbohydrate processing.
Scent is comprised of (1) Fragrance Compounds, which are ultimately used by IFF’s customers in two broad categories:
Fine Fragrances, including perfumes and colognes, and Consumer Fragrances, including fragrance compounds for personal care
(e.g., soaps), household products (e.g., detergents and cleaning agents) and beauty care, including toiletries; (2) Fragrance
Ingredients, consisting of synthetic and natural ingredients that can be combined with other materials to create unique fine
fragrance and consumer fragrance compounds; and (3) Cosmetic Active Ingredients, consisting of active and functional
ingredients, botanicals and delivery systems to support our customers’ cosmetic and personal care product lines. Major
fragrance customers include the cosmetics industry, including perfume and toiletries manufacturers, and the household products
industry, including manufacturers of soaps, detergents, fabric care, household cleaners and air fresheners.
Pharma Solutions is comprised of a vast portfolio including cellulosics and seaweed-based pharmaceutical excipients, used
to improve the functionality and delivery of active pharmaceutical ingredients, including controlled or modified drug release
formulations, and enabling the development of more effective pharmaceutical finished dosage formats. Pharma Solutions
excipients are used in prescription and over-the-counter pharmaceuticals and dietary supplements. Pharma Solutions products
also serve a variety of other specialty and industrial end-uses including coatings, inks, electronics, agriculture, and consumer
products.
Beginning the first quarter of 2021, the Company’s Chief Operating Decision Maker evaluates the performance of these
reportable operating segments based on Segment Adjusted Operating EBITDA, which is defined as (Loss) Income Before
Taxes before depreciation and amortization expense, interest expense, restructuring and other charges and certain non-recurring
items. Prior period amounts have been recast to reflect any necessary changes in segment profitability measures.
Reportable segment information is as follows:
(DOLLARS IN MILLIONS)
Net sales
Nourish
Health & Biosciences
Scent
Pharma Solutions
Consolidated
2022
December 31,
2021
2020
$
$
6,829 $
2,339
2,301
971
12,440 $
6,264 $
2,329
2,254
809
11,656 $
2,886
134
2,064
—
5,084
90
(DOLLARS IN MILLIONS)
Segment assets
Nourish
Health & Biosciences
Scent
Pharma Solutions
Consolidated
(DOLLARS IN MILLIONS)
Segment Adjusted Operating EBITDA:
Nourish
Health & Biosciences
Scent
Pharma Solutions
December 31,
2022
2021
$
$
17,008 $
10,877
4,310
3,212
35,407 $
17,449
14,774
4,078
3,357
39,658
2022
December 31,
2021
2020
$
$
1,176
634
423
1,172
625
463
$
599
40
416
—
1,055
(325)
(132)
7
—
(17)
(4)
—
—
222
2,455
(1,179)
(336)
37
4
(12)
3
(2,250)
(120)
(3)
165
2,425
(1,156)
(289)
58
—
(41)
1
—
—
(7)
(42)
(29)
—
Total
Depreciation & Amortization
Interest Expense
Other Income, net
Acquisition Related Costs (a)
Restructuring and Other Charges
Gains (Losses) on Sale of Fixed Assets
Impairment of Goodwill (b)
Impairment of Long-Lived Assets (c)
Shareholder Activism Related Costs (d)
Business Divestiture Costs (e)
Employee Separation Costs (f)
Strategic Initiative Costs (g)
Global Shared Services Implementation Costs (h)
Frutarom Acquisition Related Costs (i)
Compliance Review & Legal Defense Costs (j)
N&B Inventory Step-Up Costs
N&B Transaction Related Costs (k)
Integration Related Costs (l)
(Loss) Income Before Taxes
_______________________
(a) Represents costs related to the acquisition of Health Wright Products, primarily consulting and legal fees, offset in part by earn out
(110)
(11)
(3)
(5)
(1)
—
—
—
(94)
(1,625) $
—
(2)
—
(368)
(91)
(105)
$
354
$
—
—
(3)
—
—
(1)
(3)
—
(29)
(107)
441
adjustments.
(b) Represents costs related to the impairment of goodwill in the Health & Biosciences reporting unit.
(c) Represents costs related to the impairment of intangible and fixed assets of an asset group that operates primarily in Russia.
(d) Represents shareholder activist related costs, primarily professional fees.
(e) Represents costs, including establishment of deferred tax liabilities, related to the Company's sales and planned sales of businesses,
primarily legal and professional fees.
(f) Represents costs related to severance, including accelerated stock compensation expense, for certain employees and executives who
have been separated or will separate from the Company.
(g) Represents costs related to the Company's strategic assessment and business portfolio optimization efforts, primarily consulting fees.
(h) Represents costs related to the Company's efforts of restructuring the Global Shared Services Centers, primarily consulting fees.
91
(i) Represents transaction-related costs and expenses related to the acquisition of Frutarom, primarily includes earn-out payments, net of
adjustments.
(j) Costs related to reviewing the nature of inappropriate payments and review of compliance in certain other countries. In addition,
includes legal costs for related shareholder lawsuits.
(k) Represents transaction costs and expenses related to the transaction with N&B, primarily legal and professional fees.
(l) Represents costs related to integration activities since 2018, primarily for Frutarom and N&B. For 2022, represents costs primarily
related to external consulting fees and internal integration costs, including salaries of individuals who are fully dedicated to integration
efforts. For 2021 and 2020, represents costs primarily related to performance stock awards and consulting fees for advisory services.
The Company has not disclosed revenues at a lower level than provided herein, such as revenues from external customers
by product, as it is impracticable for it to do so.
The Company had no customers that accounted for greater than 10% of consolidated net sales in 2022, 2021 and 2020.
Long-lived assets, net, by country, consisted as follows:
(DOLLARS IN MILLIONS)
United States
China
Denmark
Finland
France
Germany
Other
Consolidated
December 31,
2022
2021
$
$
1,771 $
258
250
212
187
181
1,344
4,203 $
2,041
259
251
196
188
156
1,277
4,368
Segment capital expenditures and depreciation and amortization consisted as follows:
(DOLLARS IN MILLIONS)
Nourish
Health & Biosciences
Scent
Pharma Solutions
Consolidated
Capital Expenditures
2021
2022
2020
Depreciation and Amortization
2020
2021
2022
$
$
215 $
160
56
73
504 $
183 $
139
41
30
393 $
98 $
7
87
—
192 $
596 $
363
81
139
1,179 $
594 $
353
84
125
1,156 $
211
36
78
—
325
Net sales are attributed to individual regions based upon the destination of product delivery and are as follows:
(DOLLARS IN MILLIONS)
Europe, Africa and Middle East
Greater Asia
North America
Latin America
Consolidated
(DOLLARS IN MILLIONS)
Net sales related to the U.S.
Net sales attributed to all foreign countries
$
$
$
Net Sales by Geographic Area
2021
2022
2020
4,219 $
2,876
3,853
1,492
12,440 $
4,093 $
2,728
3,499
1,336
11,656 $
1,987
1,162
1,228
707
5,084
Net Sales by Geographic Area
2021
2022
2020
3,611 $
8,829
3,211 $
8,445
1,093
3,991
No non-U.S. country had net sales greater than 6% of total consolidated net sales for 2022 and net sales greater than 7%
and 6% of total consolidated net sales for 2021 and 2020, respectively.
92
NOTE 15. EMPLOYEE BENEFITS
The Company has pension and/or other retirement benefit plans covering approximately one-fifth of active employees. In
2007, the Company amended its U.S. qualified and non-qualified pension plans under which accrual of future benefits was
suspended for all participants that did not meet the rule of 70 (age plus years of service equal to at least 70 as of December 31,
2007). Pension benefits are generally based on years of service and compensation during the final years of employment. Plan
assets consist primarily of equity securities and corporate and government fixed income securities. Substantially all pension
benefit costs are funded as accrued; such funding is limited, where applicable, to amounts deductible for income tax purposes.
Certain other retirement benefits are provided by general corporate assets.
In connection with the Merger with N&B, as of the Closing Date, the Company assumed responsibility for approximately
20 additional defined benefit plans and recognized liabilities in the aggregate amount of $221 million.
The Company sponsors a qualified defined contribution plan covering substantially all U.S. employees. Under this plan,
the Company matches 100% of participants’ contributions up to 4% of compensation and 75% of participants’ contributions
from over 4% to 8%. Employees that are still eligible to accrue benefits under the pension plans are limited to a 50% match of
up to 6% of the participants’ compensation.
In addition to pension benefits, certain health care and life insurance benefits are provided to qualifying U.S. employees
upon retirement from IFF. Such coverage is provided through insurance plans with premiums based on benefits paid. The
Company does not generally provide health care or life insurance coverage for retired employees of foreign subsidiaries; such
benefits are provided in most foreign countries by government-sponsored plans, and the cost of these programs is not material.
The Company offers a non-qualified Deferred Compensation Plan (“DCP”) for certain key employees and non-employee
directors. Eligible employees and non-employee directors may elect to defer receipt of salary, incentive payments and Board of
Directors’ fees into participant-directed investments which are generally invested by the Company in individual variable life
insurance contracts it owns that are designed to informally fund savings plans of this nature. The cash surrender value of life
insurance is based on the net asset values of the underlying funds available to plan participants. At December 31, 2022 and
December 31, 2021, the Consolidated Balance Sheets reflect liabilities of approximately $53 million and $64 million,
respectively, related to the DCP in Other liabilities and approximately $25 million and $26 million, respectively, included in
Capital in excess of par value related to the portion of the DCP that will be paid out in IFF shares.
The total cash surrender value of life insurance contracts the Company owns in relation to the DCP and post-retirement life
insurance benefits amounted to $45 million and $52 million at December 31, 2022 and 2021, respectively, and are recorded in
Other assets in the Consolidated Balance Sheets.
The plan assets and benefit obligations of the defined benefit pension plans are measured at December 31 of each year.
93
24
13
(46)
15
5
11
7
18
1
2
(5)
(2)
(DOLLARS IN MILLIONS)
Components of net periodic benefit cost
Service cost for benefits earned(1)
Interest cost on projected benefit
obligation(2)
Expected return on plan assets(2)
Net amortization of deferrals(2)
Settlements and curtailments(2)
Net periodic benefit cost (income)
Defined contribution and other
retirement plans
Total expense
Changes in plan assets and benefit
obligations recognized in OCI
Net actuarial (gain) loss
Recognized actuarial loss
Prior service cost
Recognized prior service (cost) credit
Currency translation adjustment
Total (gain) loss recognized in OCI (before
tax effects)
2022
U.S. Plans
2021
2020
2022
Non-U.S. Plans
2021
2020
$
1 $
1 $
1 $
34 $
41 $
15
(21)
8
—
3
71
(106)
29
—
(5)
17
(28)
8
—
(2)
17
(42)
11
—
20
10
(55)
19
(10)
5
33
36 $
36
31 $
13
11 $
29
49 $
33
38 $
— $
(8)
—
—
—
(8) $
12
(9)
—
—
—
3
$
(143) $
(12)
—
1
(27)
(135)
(10)
(2)
1
(16)
$
(181) $
(162)
$
$
$
_______________________
(1) Included as a component of Operating Profit.
(2) Included as a component of Other Income (Expense), net.
(DOLLARS IN MILLIONS)
Components of net periodic benefit cost
Service cost for benefits earned
Interest cost on projected benefit obligation
Net amortization and deferrals
Total credit
Changes in plan assets and benefit obligations recognized in OCI
Net actuarial loss
Recognized actuarial loss
Recognized prior service credit
Total recognized in OCI (before tax effects)
Postretirement Benefits
2021
2020
2022
$
$
$
$
1 $
1
(5)
(3) $
(16) $
(1)
6
(11) $
1 $
7
(20)
(12) $
(3)
(2)
6
1
The weighted-average actuarial assumptions used to determine expense at December 31 of each year are:
Discount rate
Expected return on plan assets
Rate of compensation increase
2022
2.86 %
3.80 %
3.25 %
U.S. Plans
2021
2.51 %
3.80 %
3.25 %
2020
2022
Non-U.S. Plans
2021
3.26 %
5.60 %
3.25 %
1.43 %
3.52 %
2.72 %
0.85 %
4.21 %
2.56 %
2020
1.49 %
4.62 %
2.46 %
94
Changes in the postretirement benefit obligation and plan assets, as applicable, are detailed in the following table:
$
(DOLLARS IN MILLIONS)
Benefit obligation at beginning of year
Service cost for benefits earned
Interest cost on projected benefit obligation
Actuarial (gain) loss
Plan amendments
Adjustments for expense/tax contained
in service cost
Plan participants’ contributions
Benefits paid
Curtailments/settlements
Translation adjustments
Acquisitions/Transferred Liabilities
Other
Benefit obligation at end of year
$
Fair value of plan assets at beginning of year $
Actual return on plan assets
Employer contributions
Participants’ contributions
Benefits paid
Settlements
Translation adjustments
Acquisitions/Transferred Assets
Other
Fair value of plan assets at end of year
Funded status at end of year
$
$
U.S. Plans
2022
2021
Non-U.S. Plans
2021
2022
Postretirement
Benefits
2022
2021
66 $
1
2
(16)
—
—
—
(2)
—
—
—
(1)
50 $
69
1
1
(4)
—
—
—
(4)
—
—
3
—
66
662 $
1
15
(139)
—
—
—
(38)
—
—
—
(1)
500 $
649 $
(118)
5
—
(38)
—
—
—
—
498 $
(2) $
682 $
1
12
(5)
—
—
—
(37)
—
—
—
9
662 $
678 $
3
5
—
(37)
—
—
—
—
649 $
(13) $
1,501 $
34
17
(468)
—
(2)
4
(32)
(21)
(104)
—
1
930 $
1,320 $
(286)
31
4
(32)
(21)
(96)
—
—
920 $
(10) $
1,294 $
42
10
(146)
(2)
(2)
4
(34)
(39)
(93)
465
2
1,501 $
1,145
25
32
4
(34)
(24)
(74)
247
(1)
1,320
(181)
The amounts recognized in the balance sheet are detailed in the following table:
(DOLLARS IN MILLIONS)
Other assets
Other current liabilities
Retirement liabilities
Net amount recognized
U.S. Plans
Non-U.S. Plans
2022
2021
2022
2021
$
$
51 $
(6)
(47)
(2) $
53 $
(5)
(61)
(13) $
129 $
(1)
(138)
(10) $
83
(2)
(262)
(181)
The amounts recognized in AOCI are detailed in the following table:
(DOLLARS IN MILLIONS)
Net actuarial (gain) loss
Prior service cost (credit)
Total AOCI (before tax effects)
U.S. Plans
2022
2021
Non-U.S. Plans
2021
2022
Postretirement
Benefits
2022
2021
$
$
129 $
—
129 $
137 $
—
137 $
110 $
(3)
107 $
291 $
(3)
288 $
(3) $
(9)
(12) $
14
(15)
(1)
95
(DOLLARS IN MILLIONS)
Accumulated Benefit Obligation — end of year
Information for Pension Plans with an ABO
in excess of Plan Assets:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
Weighted-average assumptions used to determine
obligations at December 31
Discount rate
Rate of compensation increase
(DOLLARS IN MILLIONS)
Estimated Future Benefit Payments
2023
2024
2025
2026
2027
2028 - 2032
Contributions
U.S. Plans
Non-U.S. Plans
2022
2021
2022
2021
$
$
495
$
654
$
870
$
1,410
$
49
49
—
$
63
62
—
$
169
150
86
944
330
840
5.42 %
3.75 %
2.86 %
3.25 %
4.02 %
3.00 %
1.43 %
2.72 %
U.S. Plans
Non-
U.S. Plans
Postretirement
Benefits
$
39 $
39
39
40
39
188
34 $
34
36
38
39
223
3
3
4
4
4
18
—
Required Company Contributions in the Following Year (2023)
$
5 $
32 $
The Company considers a number of factors in determining and selecting assumptions for the overall expected long-term
rate of return on plan assets. The Company considers the historical long-term return experience of its assets, the current and
expected allocation of its plan assets and expected long-term rates of return. The Company derives these expected long-term
rates of return with the assistance of its investment advisors. The Company bases its expected allocation of plan assets on a
diversified portfolio consisting of domestic and international equity securities, fixed income, property and alternative asset
classes. The asset allocation is monitored on an ongoing basis.
The Company considers a variety of factors in determining and selecting its assumptions for the discount rate at
December 31. For the U.S. plans, the discount rate was based on the internal rate of return for a portfolio of high quality bonds
rated Aa or higher by either Moody’s or Standard & Poor’s with maturities that are consistent with the projected future benefit
payment obligations of the plan. For the Non-U.S. Plans, the discount rates were determined by region and are based on high
quality long-term corporate bonds. Consideration has been given to the duration of the liabilities in each plan when selecting
the bonds to be used in determining the discount rate. The rate of compensation increase for all plans and the medical cost trend
rate for the applicable U.S. plans are based on plan experience.
The percentage of assets in the Company’s pension plans, by type, is as follows:
Cash and cash equivalents
Equities
Fixed income
Property
Alternative and other investments
U.S. Plans
Non-U.S. Plans
2022
2021
2022
2021
2 %
47 %
51 %
— %
— %
1 %
45 %
54 %
— %
— %
3 %
18 %
37 %
9 %
33 %
6 %
18 %
34 %
6 %
36 %
With respect to the U.S. plans, the expected return on plan assets was determined based on an asset allocation model using
the current target allocation, real rates of return by asset class and an anticipated inflation rate. The target investment allocation
is 10% equity securities and 90% fixed income securities.
The expected annual rate of return for the non-U.S. plans employs a similar set of criteria adapted for local investments,
inflation rates and in certain cases specific government requirements. The target asset allocation, for the non-U.S. plans,
consists of approximately: 35% in fixed income securities; 35% in alternative investments; 15% in equity securities; and 15%
in properties.
96
The following tables present the Company’s plan assets for the U.S. and non-U.S. plans using the fair value hierarchy as of
December 31, 2022 and 2021. The plans’ assets were accounted for at fair value and are classified in their entirety based on the
lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a
particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and their
placement within the fair value hierarchy levels. For more information on a description of the fair value hierarchy, see Note 16.
(DOLLARS IN MILLIONS)
Cash Equivalents
Fixed Income Securities
Government & Government Agency Bonds
Corporate Bonds
Municipal Bonds
Assets measured at net asset value(1)
Total
Receivables
Total
(DOLLARS IN MILLIONS)
Cash Equivalents
Fixed Income Securities
Government & Government Agency Bonds
Corporate Bonds
Municipal Bonds
Assets measured at net asset value(1)
Total
Receivables
Total
U.S. Plans for the Year Ended
December 31, 2022
Level 2
Level 3
Total
Level 1
$
— $
9 $
— $
—
—
—
6
73
5
$
— $
93 $
—
—
—
— $
$
$
9
6
73
5
404
497
1
498
U.S. Plans for the Year Ended
December 31, 2021
Level 2
Level 3
Total
Level 1
$
— $
5 $
— $
—
—
—
15
77
4
$
— $
101 $
—
—
—
— $
$
$
5
15
77
4
547
648
1
649
_______________________
(1) Investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been
classified in the fair value hierarchy. The fair value amounts presented in the table above are intended to permit reconciliation of the fair
value hierarchy to the amounts presented in the Consolidated Balance Sheets. The total amount measured at net asset value includes
approximately $234 million and $294 million in pooled equity funds and $170 million and $253 million in fixed income mutual funds
for the years ended December 31, 2022 and 2021, respectively.
97
(DOLLARS IN MILLIONS)
Cash
Equity Securities
U.S. Large Cap
U.S. Mid Cap
Non-U.S. Large Cap
Non-U.S. Mid Cap
Non-U.S. Small Cap
Emerging Markets
Fixed Income Securities
U.S. Corporate Bonds
Non-U.S. Treasuries/Government Bonds
Non-U.S. Corporate Bonds
Non-U.S. Asset-Backed Securities
Non-U.S. Other Fixed Income
Alternative Types of Investments
Insurance Contracts
Derivative Financial Instruments
Absolute Return Funds
Other
Property
Non-U.S. Property
Total
(DOLLARS IN MILLIONS)
Cash
Equity Securities
U.S. Large Cap
Non-U.S. Large Cap
Non-U.S. Mid Cap
Non-U.S. Small Cap
Emerging Markets
Fixed Income Securities
U.S. Corporate Bonds
Non-U.S. Treasuries/Government Bonds
Non-U.S. Corporate Bonds
Non-U.S. Asset-Backed Securities
Non-U.S. Other Fixed Income
Alternative Types of Investments
Insurance Contracts
Derivative Financial Instruments
Absolute Return Funds
Other
Property
Non-U.S. Property
Total
Non-U.S. Plans for the Year Ended
December 31, 2022
Level 1
Level 2
Level 3
Total
$
14 $
9 $
— $
73
6
79
4
1
7
35
144
34
—
2
—
—
4
—
4
407 $
—
—
—
—
—
—
—
—
75
46
—
177
56
2
64
—
429 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3
81
84 $
23
73
6
79
4
1
7
35
144
109
46
2
177
56
6
67
85
920
$
$
Non-U.S. Plans for the Year Ended
December 31, 2021
Level 1
Level 2
Level 3
Total
37 $
36 $
— $
100
104
1
1
30
42
162
58
—
2
—
—
4
—
—
—
—
—
—
—
—
137
51
—
265
91
110
2
—
—
—
—
—
—
—
—
—
—
—
—
—
10
73
100
104
1
1
30
42
162
195
51
2
265
91
114
12
5
546 $
—
692 $
72
82 $
77
1,320
$
98
Cash and cash equivalents are primarily held in registered money market funds which are valued using a market approach
based on the quoted market prices of identical instruments. Other cash and cash equivalents are valued daily by the fund using a
market approach with inputs that include quoted market prices for similar instruments.
Equity securities are primarily valued using a market approach based on the quoted market prices of identical instruments.
Pooled funds are typically common or collective trusts valued at their net asset values (NAVs).
Fixed income securities are primarily valued using a market approach with inputs that include broker quotes and
benchmark yields.
Derivative instruments are valued by the custodian using closing market swap curves and market derived inputs.
Property values are primarily based on valuation of the underlying investments, which include inputs such as cost,
discounted future cash flows, independent appraisals and market comparable data.
Hedge funds are valued based on valuation of the underlying securities and instruments within the funds. Quoted market
prices are used when available and NAVs are used for unquoted securities within the funds.
Absolute return funds are actively managed funds mainly invested in debt and equity securities and are valued at their
NAVs.
The following table presents a reconciliation of Level 3 non-U.S. plan assets held during the year ended December 31,
2022:
(DOLLARS IN MILLIONS)
Ending balance as of December 31, 2021
Actual return on plan assets
Purchases, sales and settlements
Ending balance as of December 31, 2022
Non-U.S. Plans
Hedge
Funds
Total
Property
$
$
72 $
(2)
11
81 $
10 $
(1)
(6)
3 $
82
(3)
5
84
The following weighted average assumptions were used to determine the postretirement benefit expense and obligation for
the years ended December 31:
Discount rate
Current medical cost trend rate
Ultimate medical cost trend rate
Medical cost trend rate decreases to ultimate rate in year
Expense
Liability
2022
2.90 %
6.75 %
4.75 %
2030
2021
2.60 %
7.00 %
4.75 %
2030
2022
5.40 %
6.50 %
4.75 %
2030
2021
2.90 %
6.75 %
4.75 %
2030
The following table presents the sensitivity of disclosures to changes in selected assumptions for the year ended
December 31, 2022:
(DOLLARS IN MILLIONS)
25 Basis Point Decrease in Discount Rate
Change in PBO
Change in ABO
Change in pension expense
25 Basis Point Decrease in Long-Term Rate of Return
Change in pension expense
U.S. Pension
Plans
Non-U.S.
Pension Plans
Postretirement
Benefit Plan
$
12 $
11
—
1
38
37
5
3
N/A
1
—
N/A
The Company contributed $31 million to its non-U.S. pension plans in 2022. No contributions were made to the
Company’s qualified U.S. pension plans in 2022. The Company made $5 million in benefit payments with respect to its non-
qualified U.S. pension plan. In addition, $2 million of payments were made with respect to the Company’s other postretirement
plans.
NOTE 16. FINANCIAL INSTRUMENTS
Fair Value
99
Accounting guidance on fair value measurements specifies a hierarchy of valuation techniques based on whether the inputs
to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent
sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs create the following
fair value hierarchy:
• Level 1 — Quoted prices for identical instruments in active markets.
• Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments
in markets that are not active; and model-derived valuations in which all significant inputs and significant value
drivers are observable in active markets.
• Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value
drivers are unobservable.
This hierarchy requires the Company to use observable market data, when available, and to minimize the use of
unobservable inputs when determining fair value. The Company determines the fair value of structured liabilities (where
performance is linked to structured interest rates, inflation or currency risks) using the LIBOR swap curve and forward interest
and exchange rates at period end. Such instruments are classified as Level 2 based on the observability of significant inputs to
the model. The Company does not have any instruments classified as Level 3, other than those included in pension asset trusts
included in Note 15. These valuations take into consideration the Company's credit risk and its counterparties’ credit risk.
The carrying value and the estimated fair values of financial instruments at December 31 consisted of the following:
(DOLLARS IN MILLIONS)
LEVEL 1
Cash and cash equivalents(1)
LEVEL 2
Credit facilities and bank overdrafts(2)
Derivatives
Derivative assets(3)
Derivative liabilities(3)
Commercial paper(2)
Long-term debt:
2022 Notes(4)
2023 Notes(4)
2024 Euro Notes(4)
2025 Notes(4)
2026 Euro Notes(4)
2027 Notes(4)
2028 Notes(4)
2030 Notes(4)
2040 Notes(4)
2047 Notes(4)
2048 Notes(4)
2050 Notes(4)
2024 Term Loan Facility(5)
2026 Term Loan Facility(5)
2022
2021
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
$
483 $
483 $
711 $
711
106
20
56
187
106
20
56
187
7
—
7
324
—
300
532
1,000
845
1,215
398
1,510
774
495
787
1,571
625
625
—
298
519
884
774
1,006
380
1,188
535
390
685
1,021
625
625
300
300
565
1,001
900
1,218
397
1,511
775
494
786
1,572
625
625
7
—
7
324
300
308
585
968
960
1,180
452
1,466
762
585
1,026
1,556
625
625
_______________________
(1) The carrying amount of cash and cash equivalents approximates fair value due to the short maturity of those instruments.
(2) The carrying amount approximates fair value as the interest rate is reset frequently based on current market rates as well as the short
maturity of those instruments.
(3) The carrying amount approximates fair value as the instruments are marked-to-market and held at fair value on the Consolidated Balance
Sheets.
(4) The fair value of the Note is obtained from pricing services engaged by the Company, and the Company receives one price for each
security. The fair value provided by the pricing services are estimated using pricing models, where the inputs to those models are based
on observable market inputs or recent trades of similar securities. The inputs to the valuation techniques applied by the pricing services
100
are typically benchmark yields, benchmark security prices, credit spreads, reported trades and broker-dealer quotes, all with reasonable
levels of transparency.
(5) The carrying amount approximates fair value as the Term Loans were assumed at fair value and the interest rate is reset frequently based
on current market rates.
Derivatives
Forward Currency Forward Contracts
The Company periodically enters into foreign currency forward contracts with the objective of reducing exposure to cash
flow volatility associated with its intercompany loans, foreign currency receivables and payables and anticipated purchases of
certain raw materials used in operations. These contracts generally involve the exchange of one currency for a second currency
at a future date, have maturities not exceeding twelve months and are with counterparties which are major international
financial institutions.
Commodity Contracts
The Company utilizes options that are not designated as hedging instruments to reduce exposure to commodity price
fluctuations on purchases of inventory such as soybeans, soybean oil and soybean meal.
Cash Flow Hedges
Through the third quarter of 2021, the Company maintained several forward currency contracts which qualified as cash
flow hedges. The objective of these hedges is to protect against the currency risk associated with forecasted U.S. dollar
(“USD”) denominated raw material purchases made by Euro (“EUR”) functional currency entities which result from changes in
the EUR/USD exchange rate. The effective portions of cash flow hedges are recorded in other comprehensive income (“OCI”)
as a component of Gains (losses) on derivatives qualifying as hedges in the accompanying Consolidated Statements of (Loss)
Income and Comprehensive (Loss) Income. Realized gains/(losses) in accumulated other comprehensive income (loss)
(“AOCI”) related to cash flow hedges of raw material purchases are recognized as a component of Cost of goods sold in the
accompanying Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income in the same period as the related
costs are recognized.
There were no cash flow hedges as of December 31, 2022 and December 31, 2021.
Hedges Related to Issuances of Debt
Subsequent to the issuance of the 2021 Euro Notes and 2026 Euro Notes during the third quarter of 2018, the Company
designated the debt as a hedge of a portion of its net European investments. Accordingly, the change in the value of the debt that
is attributable to foreign exchange movements is recorded in OCI as a component of foreign currency translation adjustments in
the accompanying Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income.
Subsequent to the issuance of the 2024 Euro Notes during the first quarter of 2016, the Company designated the debt as a
hedge of a portion of its net European investments. Accordingly, the change in the value of the debt that is attributable to
foreign exchange movements is recorded in OCI as a component of foreign currency translation adjustments in the
accompanying Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income.
During the first quarter of 2016, the Company entered into and terminated two Euro interest rate swap agreements to hedge
the anticipated issuance of fixed-rate debt. These swaps were designated as cash flow hedges. The effective portions of cash
flow hedges are recorded in OCI as a component of Losses on derivatives qualifying as hedges in the accompanying
Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income. The Company incurred a loss of €3 million ($3
million) due to the termination of these swaps. The loss is being amortized as interest expense over the life of the 2024 Euro
Notes as discussed in Note 9.
During the fourth quarter of 2016 and the first quarter of 2017, the Company entered into interest rate swap agreements to
hedge the anticipated issuance of fixed-rate debt, which are designated as cash flow hedges. The various hedge instruments
were settled upon issuance of the debt on May 18, 2017 and resulted in a loss of approximately $5 million. As discussed in Note
9, the loss is being amortized as interest expense over the life of the 2047 Notes.
Cross Currency Swaps
During the third quarter of 2022, the Company entered into a transaction to unwind the fourteen outstanding EUR/USD
cross currency swaps designated as net investment hedges issued between the third quarter of 2019 and the first quarter of 2022.
The Company received proceeds of approximately $183 million, including $11 million of interest income. The gain arising
from the termination of the swaps has been included as a component of Accumulated other comprehensive loss.
Following the unwinding of the existing swaps, during the third quarter of 2022, the Company entered into twelve new
EUR/USD cross currency swaps, with a notional value of $1.400 billion that mature through November 2030. The swaps all
101
qualified as net investment hedges in order to mitigate a portion of the Company's net European investments from foreign
currency risk. As of December 31, 2022, the twelve remaining swaps were in a net liability position with an aggregate fair value
of $37 million which were classified as Other assets and Other liabilities on the Consolidated Balance Sheets. Changes in fair
value related to cross currency swaps are recorded in OCI.
The following table shows the notional amount of the Company’s derivative instruments outstanding as of December 31,
2022 and December 31, 2021:
(DOLLARS IN MILLIONS)
Foreign currency contracts(1)
Commodity contracts(1)
Cross currency swaps
______________________
(1) Foreign currency contracts and commodity contracts are presented net of contracts bought and sold.
$
December 31,
2022
2021
92 $
(1)
1,400
46
10
300
The following tables show the Company’s derivative instruments measured at fair value (Level 2 of the fair value
hierarchy) as reflected in the Consolidated Balance Sheets as of December 31, 2022 and December 31, 2021:
(DOLLARS IN MILLIONS)
Derivative assets(1)
Foreign currency contracts
Cross currency swaps
Total derivative assets
Derivative liabilities(2)
Cross currency swaps
(DOLLARS IN MILLIONS)
Derivative liabilities(2)
Fair Value of
Derivatives
Designated as Hedging
Instruments
December 31, 2022
Fair Value of
Derivatives Not
Designated as Hedging
Instruments
Total Fair Value
$
$
$
— $
19
19 $
56 $
1 $
—
1 $
— $
1
19
20
56
Fair Value of
Derivatives
Designated as Hedging
Instruments
December 31, 2021
Fair Value of
Derivatives Not
Designated as
Hedging Instruments
Total Fair Value
Foreign currency contracts
Cross currency swaps
Total derivative liabilities
_______________________
(1) Derivative assets are recorded to Other assets in the Consolidated Balance Sheets.
(2) Derivative liabilities are recorded as Other current liabilities in the Consolidated Balance Sheets.
— $
5
5 $
$
$
2 $
—
2 $
2
5
7
The following table shows the effect of the Company’s derivative instruments which were not designated as hedging
instruments in the Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income for the years ended
December 31, 2022 and December 31, 2021:
(DOLLARS IN MILLIONS)
Foreign currency contracts
Amount of Gain (Loss)
For the year ended
December 31,
2022
2021
$
7 $
Location of Gain (Loss)
Recognized in
Income on Derivative
6 Other (income) expense, net
These net gains (losses) mostly offset any recognized gains (losses) arising from the revaluation of the related
intercompany loans during the same respective periods.
102
The following table shows the effect of the Company’s derivative instruments designated as cash flow and net investment
hedging instruments, net of tax, in the Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income for the
years ended December 31, 2022 and December 31, 2021:
(DOLLARS IN MILLIONS)
Derivatives in Cash Flow Hedging
Relationships:
Foreign currency contracts
Interest rate swaps (1)
Derivatives in Net Investment Hedging
Relationships:
Cross currency swaps
Non-Derivatives in Net Investment Hedging
Relationships:
2024 Euro Notes
2021 Euro Notes & 2026 Euro Notes
Total
Amount of Gain (Loss)
Recognized in OCI on
Derivative and Non-Derivative
(Effective Portion)
For the years ended
December 31,
2022
2021
Location of Gain
(Loss) Reclassified
from AOCI into
Income
(Effective Portion)
Amount of Gain (Loss)
Reclassified from AOCI
into Income
(Effective Portion)
For the years ended
December 31,
2022
2021
$
$
— $
—
7 Cost of goods sold $
1 Interest expense
(16)
14 N/A
27
43
54 $
38 N/A
72 N/A
132
$
— $
—
—
—
—
— $
(6)
(1)
—
—
—
(7)
_______________________
(1) Interest rate swaps were entered into as pre-issuance hedges for the Company's bond offerings.
The ineffective portion of the above noted cash flow hedges and net investment hedges was not material for the years
ended December 31, 2022 and 2021.
At December 31, 2022, based on current market rates, the Company does not expect any derivative losses (net of tax),
included in AOCI, to be reclassified into earnings within the next 12 months.
NOTE 17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following tables present changes in the accumulated balances for each component of other comprehensive income
(loss), including current period other comprehensive income (loss) and reclassifications out of accumulated other
comprehensive income (loss):
(DOLLARS IN MILLIONS)
Accumulated other comprehensive (loss) income,
net of tax, as of December 31, 2021
OCI before reclassifications
Amounts reclassified from AOCI
Net current period other comprehensive income (loss)
Accumulated other comprehensive (loss) income,
net of tax, as of December 31, 2022
Foreign
Currency
Translation
Adjustments
(Losses) Gains
on Derivatives
Qualifying as
Hedges
Pension and
Postretirement
Liability
Adjustment
Total
$
(1,133) $
(904)
—
(904)
$
(2,037) $
1 $
—
—
—
1 $
(291) $
148
10
158
(1,423)
(756)
10
(746)
(133) $
(2,169)
103
(DOLLARS IN MILLIONS)
Accumulated other comprehensive (loss) income,
net of tax, as of December 31, 2020
OCI before reclassifications
Amounts reclassified from AOCI
Net current period other comprehensive income (loss)
Accumulated other comprehensive (loss) income,
net of tax, as of December 31, 2021
(DOLLARS IN MILLIONS)
Accumulated other comprehensive (loss) income,
net of tax, as of December 31, 2019
OCI before reclassifications
Amounts reclassified from AOCI
Net current period other comprehensive income (loss)
Accumulated other comprehensive (loss) income,
net of tax, as of December 31, 2020
Foreign
Currency
Translation
Adjustments
(Losses) Gains
on Derivatives
Qualifying as
Hedges
Pension and
Postretirement
Liability
Adjustment
Total
$
(285) $
(848)
—
(848)
$
(1,133) $
(7) $
1
7
8
1 $
(406) $
97
18
115
(698)
(750)
25
(725)
(291) $
(1,423)
Foreign
Currency
Translation
Adjustments
(Losses) Gains
on Derivatives
Qualifying as
Hedges
Pension and
Postretirement
Liability
Adjustment
Total
$
$
(373) $
88
—
88
(285) $
2 $
(5)
(4)
(9)
(7) $
(346) $
(74)
14
(60)
(406) $
(717)
9
10
19
(698)
The following table provides details about reclassifications out of Accumulated other comprehensive loss to the
Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income:
(DOLLARS IN MILLIONS)
(Losses) gains on derivatives qualifying as
hedges
Foreign currency contracts
Interest rate swaps
Tax
Total
(Losses) gains on pension and postretirement
liability adjustments
Prior service cost
Actuarial losses
Other items
Tax
Total
Year Ended December 31,
2022
2021
2020
Affected Line Item in the
Consolidated Statements of (Loss)
Income and Comprehensive (Loss)
Income
$
$
$
$
— $
—
—
— $
7 $
(21)
—
4
(10) $
(7) $
(1)
1
(7) $
7 $
(38)
17
(4)
(18) $
6 Cost of goods sold
(1) Interest expense
(1) Provision for income taxes
4 Total, net of income taxes
7 (1)
(30) (1)
— (2)
9 Provision for income taxes
(14) Total, net of income taxes
_______________________
(1) The amortization of prior service cost and actuarial loss is included in the computation of net periodic benefit cost. Refer to Note 15 to
the Consolidated Financial Statements for additional information regarding net periodic benefit cost.
(2) Represents certain amounts of pension income that were corrected in 2021.
NOTE 18. CONCENTRATIONS OF CREDIT RISK
The Company does not have significant concentrations of risk in financial instruments. Temporary investments are made in
a well-diversified portfolio of high-quality, liquid obligations of government, corporate and financial institutions. There are also
limited concentrations of credit risk with respect to trade receivables because the Company has a large number of customers
who are spread across many industries and geographic regions. The Company’s larger customers are each spread across many
sub-categories of its segments and geographical regions. The Company had no customer that accounted for more than 10% of
its consolidated net sales for the years ended 2022, 2021 and 2020.
104
NOTE 19. COMMITMENTS AND CONTINGENCIES
Guarantees and Letters of Credit
The Company has various bank guarantees, letters of credit and surety bonds which are available for use to support its
ongoing business operations, satisfy governmental requirements associated with pending litigation in various jurisdictions and
the payment of customs duties.
At December 31, 2022, the Company had total bank guarantees, commercial guarantees, standby letters of credit and surety
bonds of approximately $434 million with various financial institutions. Included in the above aggregate amount was a total of
approximately $14 million for other assessments in Brazil for various income tax and indirect tax disputes related to fiscal years
1998-2011. There was a total of approximately $116 million outstanding under the bank guarantees, standby letters of credit
and commercial guarantees as of December 31, 2022.
In order to challenge the assessments in these cases in Brazil, the Company has been required to, and has separately
pledged assets, principally property, plant and equipment, to cover assessments in the amount of approximately $8 million as of
December 31, 2022.
Lines of Credit
The Company has various lines of credit which are available to support its ongoing business operations. As of
December 31, 2022, the Company had available lines of credit of approximately $1.859 billion with various financial
institutions, in addition to the $902 million of capacity under the Credit Facility. There were total draw downs of approximately
$297 million pursuant to these lines of credit as of December 31, 2022, including approximately $187 million related to the
issuance of commercial paper and $100 million related to borrowings under the Amended Revolving Credit Facility. Refer to
Note 9 for additional information.
Litigation
The Company assesses contingencies related to litigation and/or other matters to determine the degree of probability and
range of possible loss. A loss contingency is accrued in the Company’s Consolidated Financial Statements if it is probable that a
liability has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable
and unfavorable resolutions could occur, assessing contingencies is highly sensitive and requires judgments about future events.
On at least a quarterly basis, the Company reviews contingencies related to litigation to determine the adequacy of accruals.
The amount of ultimate loss may differ from these estimates and further events may require the Company to increase or
decrease the amounts it has accrued on any matter.
Periodically, the Company assesses its insurance coverage for all known claims, where applicable, taking into account
aggregate coverage by occurrence, limits of coverage, self-insured retentions and deductibles, historical claims experience and
claims experience with its insurance carriers. The liabilities are recorded at management’s best estimate of the probable
outcome of the lawsuits and claims, taking into consideration the facts and circumstances of the individual matters as well as
past experience on similar matters. At each balance sheet date, the key issues that management assesses are whether it is
probable that a loss as to asserted or unasserted claims has been incurred and if so, whether the amount of loss can be
reasonably estimated. The Company records the expected liability with respect to claims in Other liabilities and expected
recoveries from its insurance carriers in Other assets. The Company recognizes a receivable when it believes that realization of
the insurance receivable is probable under the terms of the insurance policies and its payment experience to date.
105
Litigation Matters
On August 12, 2019, Marc Jansen filed a putative securities class action against IFF, its then Chairman and CEO, and its
then-CFO, in the United States District Court for the Southern District of New York. The lawsuit was filed after IFF disclosed
that preliminary results of investigations indicated that Frutarom businesses operating principally in Russia and Ukraine had
made improper payments to representatives of customers. On March 16, 2020, an amended complaint was filed, which added
Frutarom and certain former officers of Frutarom as defendants. The amended complaint alleges, among other things, that
defendants made materially false and misleading statements or omissions concerning IFF’s acquisition of Frutarom, the
integration of the two companies, and the companies’ financial reporting and results. The amended complaint asserts claims
under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, and under the Israeli Securities Act-1968,
against all defendants, and under Section 20(a) of the Securities Exchange Act of 1934 against the individual defendants, on
behalf of a putative class of persons and entities who purchased or otherwise acquired IFF securities on the New York Stock
Exchange between May 7, 2018 and August 12, 2019 and persons and entities who purchased or otherwise acquired IFF
securities on the Tel Aviv Stock Exchange between October 9, 2018 and August 12, 2019. The amended complaint seeks an
award of unspecified compensatory damages, costs, and expenses. IFF, its officers, and Frutarom filed a motion to dismiss the
case on June 26, 2020, which was granted on March 30, 2021. On April 28, 2021, lead plaintiffs filed a notice of appeal to the
United States Court of Appeals for the Second Circuit. Lead plaintiffs are pursuing the appeal only against Frutarom and certain
former officers of Frutarom. The parties have submitted their briefs to the Court of Appeals. The Second Circuit held oral
argument on February 10, 2022. On September 30, 2022, the Second Circuit affirmed the dismissal of Plaintiffs' claims. On
October 14, 2022, Plaintiffs filed a Petition for Rehearing En Banc, which the Second Circuit denied on January 4, 2023.
Two motions to approve securities class actions were filed in the Tel Aviv District Court, Israel, in August 2019, similarly
alleging, among other things, false and misleading statements largely in connection with IFF’s acquisition of Frutarom and the
above-mentioned improper payments. One motion (“Borg”) asserts claims under the U.S. federal securities laws against IFF, its
former Chairman and CEO, and its former CFO. On November 8, 2020, IFF and its officers filed their response to the Borg
motion. On April 20, 2021, Mr. Borg filed a motion to stay the proceeding pending an appellate decision in the U.S. proceeding.
On June 15, 2021, August 11, 2021, November 9, 2021, January 9, 2022, April 7, 2022 and July 10, 2022, the U.S. lead
plaintiffs filed update notices with the Israeli court regarding the appeal in the U.S. proceeding. The other motion (“Oman”)
(following an initial amendment) asserted claims under the Israeli Securities Act-1968 against IFF, its former Chairman and
CEO, and its former CFO, and against Frutarom and certain former Frutarom officers and directors, as well as claims under the
Israeli Companies Act-1999 against certain former Frutarom officers and directors. On February 17, 2021, the court granted a
motion by the Oman plaintiff to remove IFF and its officers from the motion and to add factual allegations from the US
amended complaint. The amended Oman motion was filed on July 4, 2021. On August 29, 2021, the former Frutarom officers
and certain former Frutarom directors filed a motion to dismiss the case. On September 30, 2021, Frutarom notified the court
that it joins the legal arguments made in the motion to dismiss. On February 22, 2022, the court denied the motion to dismiss.
On July 14, 2022, the court approved the parties’ motion to mediate the dispute, which postpones all case deadlines until after
the mediation. Also stayed is a request to appeal the court’s denial of the motion to dismiss filed by the former Frutarom
officers and certain former Frutarom directors. The parties held the first of multiple mediation meetings on September 13, 2022
and November 22, 2022.
On October 29, 2019, IFF and Frutarom filed a claim in the Tel Aviv District Court, Israel, against Ori Yehudai, the former
President and CEO of Frutarom, and against certain former directors of Frutarom, challenging the bonus of US $20 million
granted to Yehudai in 2018. IFF and Frutarom allege, among other things, that Yehudai was not entitled to receive the bonus
because he breached his fiduciary duty by, among other things, knowing of the above-mentioned improper payments and failing
to prevent them from being made. The parties agreed, pursuant to the court’s recommendation, to attempt to resolve the dispute
through mediation, and a court decision is pending with regard to the order in which this claim and the class action described
below will be heard.
On March 11, 2020, an IFF shareholder filed a motion to approve a class action in Israel against, among others, Frutarom,
Yehudai, and Frutarom’s former board of directors, alleging that former minority shareholders of Frutarom were harmed as a
result of the US $20 million bonus paid to Yehudai. The parties to this motion agreed to attempt to resolve the dispute through
mediation to take place regarding the aforesaid claim against Yehudai. On July 27, 2021, counsel to the movant in the class
action filed a notice with the court that the mediation process ended without an agreement. On August 26, 2021, a motion to
dismiss the class action application was filed by Yehudai and certain former directors of Frutarom. On September 9, 2021, an
additional motion to dismiss was filed by other former directors of Frutarom together with ICC Industries, Inc. and its affiliates.
On December 9, 2021, the court denied the motions to dismiss. Responses to the class action motion were filed in May 2022,
and applicant’s response was filed in December 2022.
106
Investigation
On June 3, 2020, the Israel Police’s National Fraud Investigation Unit and the Israeli Securities Authority commenced an
investigation into Frutarom and certain of its former executives, based on suspected bribery of foreign officials, money
laundering, and violations of the Israeli Securities Act-1968. As part of the investigation, the National Fraud Investigation Unit
and the Israeli Securities Authority have provided IFF and Frutarom with various orders, mainly requesting that IFF and
Frutarom provide certain documents and materials. In addition, a seizure of assets was imposed on Frutarom and certain of its
affiliates. IFF has been working to ensure compliance with such orders, all in accordance with, and subject to, Israeli law. On
August 25, 2021, the Israeli Police informed Frutarom that they have decided to remove the temporary criminal seizure of
assets order from the real estate assets of Frutarom and its related companies, which was done in parallel with the transfer of the
case to the District Attorney’s Office in Israel.
China Facilities
Hangzhou Ingredients Plant
As previously disclosed, in 2014 the Company agreed to relocate an ingredients facility in Hangzhou, China to Jiande,
China. In connection with such relocation, the Company entered into a land swap and relocation agreement with the local
authority pursuant to which the Company agreed to transfer ownership of the land underlying the facility in exchange for
various elements of compensation, including cash and land use rights for the new facility. The Company initially determined
that the gain, if any, would be recognized upon final transfer of ownership. During the fourth quarter of 2019, the Company
completed the final environmental cleanup activities and transferred ownership of the land to the local authority. The amount of
the gain ultimately recognized in the fourth quarter of 2019 was $4 million. The amount was recorded as a component of Other
income, net.
The net book value of the plant in Jiande, China was approximately $59 million as of December 31, 2022.
Guangzhou Taste Plant
During the fourth quarter of 2016, the Company was notified that certain governmental authorities have begun to evaluate
a change in the zoning of the Guangzhou Taste plant. The zoning, if changed, would prevent the Company from continuing to
manufacture product at the existing plant. The ultimate outcome of any change that the governmental authorities may propose,
the timing of such a change, and the nature of any compensation arrangements that might be provided to the Company are
uncertain. To address the governmental authorities' requirements, the Company has been transferring certain production
capabilities from the Guangzhou Taste plant to a newly built facility in Zhangjiagang.
The net book value of the Guangzhou and Zhangjiagang Taste plants was approximately $51 million and $37 million,
respectively, as of December 31, 2022.
Guangzhou Scent Plant
During the second quarter of 2019, the Company was notified that certain governmental authorities had changed the zoning
where the Guangzhou Scent plant is located. The zoning change did not affect the current operations but prevents expansions or
other increases in the operating capacity of the plant. The Company believes that it is possible that the zoning may be enforced
in the future such that it would not be able to continue manufacturing at the existing site. The ultimate outcome of any change
that the governmental authorities may propose, the timing of such a change, and the nature of any compensation arrangements
that might be provided to the Company are uncertain.
The net book value of the Guangzhou Scent plant was approximately $7 million as of December 31, 2022.
Zhejiang Ingredients Plant
In the fourth quarter of 2017, the Company concluded discussions with the government regarding the relocation of its
Fragrance Ingredients plant in Zhejiang and, based on the agreements reached, expects to receive total compensation payments
up to approximately $50 million. The relocation compensation will be paid to the Company over the period of the relocation.
The Company received payments totaling $30 million through the end of 2019. In the third quarter of 2020, the Company
received a payment of approximately $13 million. A final payment is expected to be received in March 2023 upon final delivery
of the land to the government.
Production at the facility ceased during 2019. In the second quarter of 2020, the Company transferred ownership of the site
to the government. The land remediation activities have been completed in November 2022, however the Company is still in
process of completing the final land restoration activities in order to restore the land to its original height, per the government’s
request. This process is expected to be completed in February 2023 and final delivery of the land to the government is expected
to be completed in March 2023.
107
During the second quarter of 2020, the remaining net book value of the plant was written off. Products previously
manufactured at the Zhejiang Ingredients plant are now being produced at the Company’s Ingredients plant in Jiande.
Total China Operations
The total net book value of all plants in China was approximately $243 million as of December 31, 2022.
If the Company is required to close a plant, or operate one at significantly reduced production levels on a permanent basis,
the Company may be required to record charges that could have a material impact on its consolidated financial results of
operations, financial position and cash flows in future periods.
Environmental Proceedings
The Company is reporting the following environmental matter in compliance with SEC requirements to disclose
environmental proceedings where a governmental authority is a party and that involve potential monetary sanctions of $300,000
or greater. On May 27, 2022, the Solae, LLC Memphis site (“Solae”) was served an Administrative Order and Assessment (the
“Order”) by the City of Memphis related to alleged wastewater discharge violations. Solae submitted an appeal of the Order on
June 24, 2022. Discussions with the City regarding potential resolution of the violations and penalties related to said violations
are ongoing. Additionally, the Solae facility has undertaken capital project efforts, some of which began prior to the issuance of
the Order, that are anticipated to address, on a schedule consistent with the Order, deadlines for attaining compliance with
current wastewater permit requirements. This matter is not expected to have a material adverse effect on the Company’s
financial position, cash flows or results of operations.
Other Contingencies
The Company has contingencies involving third parties (such as labor, contract, technology or product-related claims or
litigation) as well as government-related items in various jurisdictions in which it operates pertaining to such items as value-
added taxes, other indirect taxes, customs and duties and sales and use taxes. It is possible that cash flows or results of
operations, in any period, could be materially affected by the unfavorable resolution of one or more of these contingencies.
The most significant government-related contingencies exist in Brazil. With regard to the Brazilian matters, the Company
believes it has valid defenses for the underlying positions under dispute; however, in order to pursue these defenses, the
Company is required to, and has provided, bank guarantees and pledged assets in the aggregate amount of approximately $22
million. The Brazilian matters take an extended period of time to proceed through the judicial process and there are a limited
number of rulings to date.
Brazil Tax Credits
In 2017 the Brazilian Supreme Court (“BSC”) ruled that Brazilian tax authorities should not include a value added tax
known as “ICMS” in the calculation of certain indirect taxes (“PIS/COFINS”). By removing the ICMS from the calculation of
the indirect tax base, the Court effectively eliminated a “tax on tax”. The Brazilian tax authorities filed an appeal seeking
clarification of certain matters, including the amount of ICMS to which taxpayers would be entitled in order to reduce their
indirect tax base (i.e. the gross rate or the net rate).
In light of the BSC's decision, in November 2017, the Company filed suit consistent with the BSC decision to require that
ICMS be excluded from the PIS/COFINS calculation and received a favorable preliminary decision that was confirmed by the
BSC in September 2018. This preliminary ruling granted the Company the right to prospectively exclude ICMS amounts from
the PIS/COFINS calculation, but left open the issue of whether the Company could recover the gross or net amount of ICMS
amounts paid on PIS/COFINS for the period from November 2011 to December 2018.
In January 2020, the Company was informed of a favorable ruling from the Brazilian tax authorities confirming that the
Company was entitled to recover the overpayments of certain indirect taxes (known as PIS/COFINS) for the period from
November 2011 to December 2018, plus interest on the amount of the overpayments. The overpayments arose from the
inclusion of a value added tax known as ICMS in the calculation of the PIS/COFINS tax. The ruling did not, however, settle the
question of whether the Company is eligible to recover overpayments based on the gross or the net amount of ICMS amounts
paid on PIS/COFINS. The Company calculated the amount of overpayments using the gross method which yields a higher
amount than the application of the net method. A final ruling on the gross versus net amount issue was made by the BSC who
affirmed the use of the gross calculation with respect to claims submitted prior to March 2017. Although the Company had not
submitted a claim until after March 2017, the Company believes that the Supreme Court, whilst confirming the use of the gross
method of calculation, does not override the January 2020 ruling by the Brazilian tax authorities with respect to the timeframe
for the calculation.
108
In addition to the $8 million recognized in the fourth quarter of 2019, during the first quarter of 2020 the Company
recognized $4 million as an additional recovery on the existing claim. During 2020, the Company also recognized $3 million
related to a claim from another of its subsidiaries in Brazil. The income was recognized as a reduction in Selling and
Administrative expenses.
Avicel® PH NF (Pharma Solutions)
The Company has determined that certain grades of microcrystalline cellulose (Avicel® PH 101, 102, and 200 NF and
Avicel® RC-591 NF) were found to be out-of-specification. The Company does not expect the OOS conductivity issue to affect
the functionality of Avicel® NF grades or to pose a human health hazard. Corrective actions have been implemented to improve
operational and laboratory conditions. Based on the information available, as of December 31, 2022, payments associated with
the issue were approximately $34 million, and the Company has a current accrual of approximately $19 million. The total
amount of exposure may increase if additional customers present claims or other exposures are identified.
Other
The Company determines estimates of reasonably possible losses or ranges of reasonably possible losses in excess of
related accrued liabilities, if any, when it has determined that either a loss is reasonably possible or a loss in excess of accrued
amounts is reasonably possible and the amount of losses or range of losses is determinable. For all third party contingencies
(including labor, contract, technology, tax, product-related claims and business litigation), the Company currently estimates that
the aggregate range of reasonably possible losses in excess of any accrued liabilities is $0 to approximately $46 million. The
estimates included in this amount are based on the Company’s analysis of currently available information and, as new
information is obtained, these estimates may change. Due to the inherent subjectivity of the assessments and the
unpredictability of outcomes of legal proceedings, any amounts accrued or included in this aggregate amount may not represent
the ultimate loss to the Company from the matters in question. Thus, the Company’s exposure and ultimate losses may be
higher or lower, and possibly significantly so, than the amounts accrued or the range disclosed above.
NOTE 20. REDEEMABLE NON-CONTROLLING INTERESTS
Through certain subsidiaries of the Company’s Frutarom acquisition, there are certain non-controlling interests that carry
redemption features. The non-controlling interest holders have the right, over a stipulated period of time, to sell their respective
interests to Frutarom, and Frutarom has the option to purchase these interests (subject to the same timing). In most cases, these
options carry similar price and conditions of exercise, and will be settled on a pre-agreed formula based on a multiple of the
average EBITDA of consecutive quarters to be achieved during the period ending prior to the exercise date.
The following table sets forth the details of the Company's redeemable non-controlling interests:
(DOLLARS IN MILLIONS)
Balance at December 31, 2019
Impact of foreign exchange translation
Share of profit or loss attributable to redeemable non-controlling interests
Redemption value adjustment for the current period
Measurement period adjustments
Dividends paid
Exercises of redeemable non-controlling interests
Balance at December 31, 2020
Impact of foreign exchange translation
Share of profit or loss attributable to redeemable non-controlling interests
Redemption value adjustment for the current period
Dividends paid
Balance at December 31, 2021
Impact of foreign exchange translation
Share of profit or loss attributable to redeemable non-controlling interests
Redemption value adjustment for the current period
Exercises of redeemable non-controlling interests
Balance at December 31, 2022
$
$
$
$
109
Redeemable
Non-controlling Interests
99
13
3
(2)
(1)
(2)
(12)
98
1
6
2
(2)
105
(6)
4
5
(49)
59
NOTE 21. ASSETS HELD FOR SALE
During the fourth quarter of 2022, the Company announced it had entered into an agreement to sell a portion of its Savory
Solutions business, which is part of the Nourish segment. In addition, in the first quarter of 2023, the Company announced it
had entered into an agreement to sell its Flavor Specialty Ingredients business within the Scent segment. Both transactions are
subject to customary closing conditions and are expected to close in the second quarter and third quarter of 2023, respectively.
The sales do not constitute a strategic shift of the Company’s operations and do not, and will not, have major effects on the
Company’s operations and financial results; therefore, the transactions do not meet the discontinued operations criteria.
It was determined that the assets and liabilities of these businesses met the criteria to be presented as “held for sale.” As a
result, as of December 31, 2022, such assets and liabilities were classified as held for sale and are reported on the Consolidated
Balance Sheets. The Company expects that the sale proceeds less costs to sell will exceed the preliminary estimate of the
carrying value of the net assets for both businesses. The carrying value is subject to change based on developments leading up
to the closing date.
Included in the Company’s Consolidated Balance Sheets as of December 31, 2022 are the following carrying amounts of
the assets and liabilities held for sale:
(DOLLARS IN MILLIONS)
Assets
Cash and cash equivalents
Trade receivables, net
Inventories
Property, plant and equipment, net
Goodwill
Other intangible assets, net
Operating lease right-of-use assets
Other assets
Total assets held-for-sale
Liabilities
Accounts payable
Deferred tax liability(1)
Other liabilities
Total liabilities held-for-sale
December 31, 2022
52
85
157
92
348
428
13
25
1,200
56
92
64
212
$
$
$
$
_______________________
(1) The Company is currently analyzing the tax impact of the sale transaction and has included preliminary numbers for the deferred tax
liability, which are subject to further updates.
Microbial Control
During the third quarter of 2021, the Company announced it had entered into an agreement to sell its Microbial Control
business unit, which is a part of the Health & Biosciences segment. The Company acquired the Microbial Control business unit
as part of the Merger with N&B. See Note 4 for additional information.
110
Included in the Company’s Consolidated Balance Sheets as of December 31, 2021 are the following carrying amounts of
the assets and liabilities held for sale:
(DOLLARS IN MILLIONS)
Assets
Trade receivables, net
Inventories
Property, plant and equipment, net
Goodwill
Other intangible assets, net
Operating lease right-of-use assets
Other assets
Total assets held-for-sale
Liabilities
Accounts payable
Deferred tax liability
Other liabilities
Total liabilities held-for-sale
December 31, 2021
63
125
30
536
349
5
14
1,122
69
24
8
101
$
$
$
$
111
(a)(3) EXHIBITS
Exhibit
Number Description
2.1 Agreement and Plan of Merger, dated May 7, 2018, by and among the Registrant, Frutarom Industries Ltd.
and Icon Newco Ltd., incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-
K filed on May 9, 2018.
2.2 Amendment No. 1 to Agreement and Plan of Merger, dated August 25, 2018, by and among International
Flavors & Fragrances, Inc., Frutarom Industries Ltd. and Icon Newco Ltd. incorporated by reference to
Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on August 27, 2018.
2.3 Agreement and Plan of Merger, dated December 15, 2019, by and among DuPont de Nemours Inc., Nutrition
& Biosciences, Inc., International Flavors & Fragrances Inc. and Neptune Merger Sub I Inc., incorporated by
reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on December 18, 2019.
2.4 Separation and Distribution Agreement, dated as of December 15, 2019, by and among DuPont de Nemours
Inc., Nutrition & Biosciences, Inc. and International Flavors & Fragrances Inc., incorporated by reference to
Exhibit 2.2 to the Registrant’s Current Report on Form 8-K filed on December 18, 2019.
2.4(i) Amendment No. 1 to the Separation and Distribution Agreement, dated January 22, 2021, by and among
DuPont de Nemours, Inc., Nutrition & Biosciences, Inc., International Flavors & Fragrances Inc. and
Neptune Merger Sub II LLC, incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on
Form 8-K filed on January 25, 2021.
2.4(ii) Amendment No. 2 to the Separation and Distribution Agreement, dated February 1, 2021, by and among
DuPont de Nemours, Inc., Nutrition & Biosciences, Inc., International Flavors & Fragrances Inc. and
Neptune Merger Sub II LLC, incorporated by reference to Exhibit 2.4 to the Registrant’s Current Report on
Form 8-K filed on February 3, 2021.
3.1 Restated Certificate of Incorporation of the Registrant, incorporated by reference to Exhibit 10(g) to the
Registrant’s Quarterly Report on Form 10-Q filed on August 12, 2002.
3.2 Bylaws of International Flavors & Fragrances Inc., effective as of December 13, 2022, incorporated by
reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed on December 19, 2022.
4.1 Indenture, dated as of April 4, 2013, between the Registrant and U.S. Bank National Association, as Trustee
(including the form of Notes), incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on
Form 8-K filed on April 4, 2013.
4.2 Indenture, dated as of March 2, 2016, between the Registrant and U.S. Bank National Association, as Trustee
(including the form of Debt Security), incorporated by reference to Exhibit 4.1 to the Registrant’s
Registration Statement on Form S-3 (Registration No. 333-209889) filed on March 2, 2016.
4.3 First Supplemental Indenture, dated as of March 14, 2016, between the Registrant and U.S. Bank National
Association, as Trustee (including the form of Notes), incorporated by reference to Exhibit 4.7 to the
Registrant’s Current Report on Form 8-K filed on March 14, 2016.
4.4 Second Supplemental Indenture, dated as of May 18, 2017, between the Registrant and U.S. Bank National
Association, as Trustee (including the form of Notes), incorporated by reference to Exhibit 4.7 to the
Registrant’s Current Report on Form 8-K filed on May 18, 2017.
4.5 Third Supplemental Indenture, dated as of September 17, 2018, between International Flavors & Fragrances
Inc. and U.S. Bank National Association, as trustee, incorporated by reference to Exhibit 4.5 to the
Registrant’s Current Report on Form 8-K filed on September 17, 2018.
4.6 Form of Amortizing Note, incorporated by reference to Exhibit 4.5 to the Registrant’s Current Report on
Form 8-K filed on September 17, 2018.
4.7 Purchase Contract Agreement, dated September 17, 2018, between International Flavors & Fragrances Inc.
and U.S. Bank National Association, as purchase contract agent, as attorney-in-fact for holders of the
purchase contracts referred to therein and as trustee under the indenture referred to therein, incorporated by
reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on September 17, 2018.
4.8 Form of Unit, incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed
on September 17, 2018.
4.9 Form of Purchase Contract, incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on
Form 8-K filed on September 17, 2018.
4.10 Fourth Supplemental Indenture, dated as of September 25, 2018, between International Flavors & Fragrances
Inc. and U.S. Bank National Association, as trustee, incorporated by reference to Exhibit 4.2 to the
Registrant’s Current Report on Form 8-K filed on September 25, 2018.
4.11 Form of Global Note for the 2021 Notes, incorporated by reference to Exhibit 4.2 to the Registrant’s Current
Report on Form 8-K filed on September 25, 2018.
4.12 Form of Global Note for the 2026 Notes, incorporated by reference to Exhibit 4.2 to the Registrant’s Current
Report on Form 8-K filed on September 25, 2018.
112
Exhibit
Number Description
4.13 Fifth Supplemental Indenture, dated as of September 26, 2018, between International Flavors & Fragrances
Inc. and U.S. Bank National Association, as trustee, incorporated by reference to Exhibit 4.2 to the
Registrant’s Current Report on Form 8-K filed on September 26, 2018.
4.14 Form of Global Note for the 2020 Notes, incorporated by reference to Exhibit 4.2 to the Registrant’s Current
Report on Form 8-K filed on September 26, 2018.
4.15 Form of Global Note for the 2028 Notes, incorporated by reference to Exhibit 4.2 to the Registrant’s Current
Report on Form 8-K filed on September 26, 2018.
4.16 Form of Global Notes for the 2048 Notes, incorporated by reference to Exhibit 4.2 to the Registrant’s
Current Report on Form 8-K filed on September 26, 2018.
4.17 Indenture, dated as of September 16, 2020, between the N&B and U.S. Bank National Association, as
Trustee (including the form of Notes), incorporated by reference to Exhibit 99.16 to the Registrant’s
Registration Statement on Form S-4 (Registration No. 333-238072) filed on October 5, 2020.
4.18 First Supplemental Indenture, dated as of February 1, 2021, among Nutrition & Biosciences, Inc.,
International Flavors & Fragrances Inc. and U.S. Bank National Association, as Trustee. Incorporated by
reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on February 4, 2021.
4.19 Second Supplemental Indenture, dated as of March 4, 2021, among Nutrition & Biosciences, Inc.,
International Flavors & Fragrances Inc. and U.S. Bank National Association, as trustee, incorporated by
reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed on March 4, 2021.
4.20 Icon Debt Assumption Supplement, dated as of March 4, 2021, among Neptune Merger Sub II LLC (as
successor by merger to Nutrition & Biosciences, Inc.) and International Flavors & Fragrances Inc., and as
acknowledged by Morgan Stanley Senior Funding, Inc., as administrative agent, incorporated by reference to
Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on March 4, 2021.
4.21 Description of Securities, incorporated by reference to Exhibit 4.17 to the Registrant's Annual Report on
Form 10-K filed on March 3, 2020.
*10.1 Letter Agreement, dated as of May 26, 2014, between the Registrant and Andreas Fibig, incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 28, 2014.
*10.2 Letter Agreement between International Flavors & Fragrances Inc. and Franklin K. Clyburn, Jr., effective
January 18, 2022, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
filed on January 20, 2022.
*10.3 Supplemental Retirement Plan, incorporated by reference to Exhibit 10.5 to the Registrant’s Annual Report
on Form 10-K filed on February 27, 2008.
*10.4 2021 Stock Award and Incentive Plan, incorporated by reference to Annex 1 to the Registrant’s Proxy
Statement filed with the Commission on March 23, 2021.
*10.5 Form of Restricted Stock Units Agreement – Non-Employee Director under the 2021 Stock Award and
Incentive Plan, incorporated by reference to Exhibit 10.5 to the Registrant’s Annual Report on Form 10-K,
filed on February 28, 2022.
*10.6 Form of Restricted Stock Units Award Agreement under the 2021 Stock Award and Incentive Plan,
incorporated by reference to Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K, filed on February
28, 2022.
*10.7 Form of Equity Choice Program Award Agreement under the 2021 Stock Award and Incentive Plan,
incorporated by reference to Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K, filed on February
28, 2022.
*10.8 Form of Performance-Based Restricted Stock Units Award Agreement under the 2021 Stock Award and
Incentive Plan, incorporated by reference to Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K,
filed on February 28, 2022.
*10.9 2015 Stock Award and Incentive Plan, as amended and restated February 7, 2017, incorporated by reference
to Exhibit 10.13 to the Registrant’s Annual Report on Form 10-K filed on February 28, 2017.
*10.10 Form of Annual Incentive Plan Award Agreement under the 2015 Stock Award and Incentive Plan,
incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed on May
12, 2015.
*10.11 Form of Long-Term Incentive Plan Award Agreement under the 2015 Stock Award and Incentive Plan,
incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q filed on May
12, 2015.
*10.12 Form of Equity Choice Program Award Agreement under the 2015 Stock Award and Incentive Plan,
incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q filed on May
12, 2015.
113
Exhibit
Number Description
*10.13 Form of Restricted Stock Units Award Agreement under the 2015 Stock Award and Incentive Plan,
incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q filed on May
12, 2015.
*10.14 Form of Non-Employee Director Restricted Stock Units Award Agreement under the 2015 Stock Award and
Incentive Plan, incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q
filed on May 12, 2015.
*10.15 Form of Equity Choice Program Award Agreement under the 2015 Stock Award and Incentive Plan,
incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on
November 9, 2015.
*10.16 Form of Long-Term Incentive Plan Award Agreement under the 2015 Stock Award and Incentive Plan,
incorporated by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K filed on March
1, 2016.
*10.17 Amended and Restated Executive Severance Policy, as amended through and including November 1, 2017,
incorporated by reference to Exhibit 10.17 to the Registrant’s Annual Report on Form 10-K filed on
February 27, 2018 (the “Executive Severance Policy”).
*10.18 Amendment to the Executive Severance Policy dated November 3, 2020, incorporated by reference to
Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K filed on February 22, 2021.
*10.19 Form of Director/Officer Indemnification Agreement, incorporated by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K filed on July 28, 2008.
*10.20 Form of Executive Death Benefit Program - Plan Agreement, incorporated by reference to Exhibit 10.27 to
the Registrant’s Annual Report on Form 10-K filed on February 28, 2012.
*10.21(i) Deferred Compensation Plan, as amended and restated December 12, 2011, incorporated by reference to
Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K filed on February 28, 2012 (the “Deferred
Compensation Plan”).
*10.21(ii) First Amendment to the Deferred Compensation Plan dated as of December 31, 2020, incorporated by
reference to Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K filed on February 22, 2021.
*10.22 Deferred Compensation Plan (the “2023 Deferred Compensation Plan”), incorporated by reference to Exhibit
4.3 to the Registrant's Registration Statement on Form S-8 filed on November 29, 2022.
10.23(i) Credit Agreement, dated as of November 9, 2011, amended and restated as of December 2, 2016, among the
Registrant, International Flavors & Fragrances (Luxembourg) S.à.r.l., International Flavors & Fragrances
(Nederland) Holding B.V., International Flavors & Fragrances I.F.F. (Nederland) B.V. and International
Flavors & Fragrances (Greater Asia) PTE. Ltd., as borrowers, the banks, financial institutions and other
institutional lenders party thereto, and Citibank, N.A., as administrative agent, incorporated by reference to
Exhibit 10.28 to the Registrant’s Current Report on Form 8-K filed on December 5, 2016.
10.23(ii) Amendment No. 1 to Credit Agreement, dated as of May 21, 2018, among the Registrant, International
Flavors & Fragrances (Nederland) Holding B.V., International Flavors & Fragrances I.F.F. (Nederland) B.V.
and International Flavors & Fragrances (Greater Asia) PTE. Ltd., as borrowers, the lenders signatory thereto
and Citibank, N.A., as administrative agent, incorporated by reference to Exhibit 10.1 to the Registrant’s
Current Report on Form 8-K filed on May 24, 2018.
10.23(iii) Amendment No. 2 to Credit Agreement, dated as of June 6, 2018, among the Registrant, International
Flavors & Fragrances (Nederland) Holding B.V., International Flavors & Fragrances I.F.F. (Nederland) B.V.
and International Flavors & Fragrances (Greater Asia) PTE. Ltd., as borrowers, the lenders signatory thereto
and Citibank, N.A., as administrative agent, incorporated by reference to Exhibit 10.2 to the Registrant’s
Current Report on Form 8-K filed on June 8, 2018.
10.23(iv) Amendment No. 3 to Credit Agreement, dated as of July 13, 2018, among the Registrant, International
Flavors & Fragrances (Nederland) Holding B.V., International Flavors & Fragrances I.F.F. (Nederland) B.V.
and International Flavors & Fragrances (Greater Asia) PTE. Ltd., as borrowers, the lenders signatory thereto
and Citibank, N.A., as administrative agent, incorporated by reference to Exhibit 10.4 to the Registrant’s
Quarterly Report on Form 10-Q filed on August 7, 2018.
10.23(v) Amendment No. 4 to Credit Agreement, dated as of January 17, 2020 among International Flavors &
Fragrances Inc., International Flavors & Fragrances (Nederland) Holding B.V., International Flavors &
Fragrances I.F.F. (Nederland) B.V. and International Flavors & Fragrances (Greater Asia) PTE. Ltd., as
borrowers, the lenders signatory thereto and Citibank, N.A., as administrative agent, incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 22, 2020.
10.23(vi) Second Amended and Restated Credit Agreement, dated as of August 25, 2020 among International Flavors
& Fragrances Inc., International Flavors & Fragrances (Nederland) Holding B.V. and International Flavors &
Fragrances I.F.F. (Nederland) B.V., as borrowers, the lenders signatory thereto and Citibank, N.A., as
administrative agent, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-
K filed on August 28, 2020.
114
Exhibit
Number Description
10.23(vii) Third Amended and Restated Credit Agreement, dated as of July 28, 2021 among International Flavors &
Fragrances Inc., International Flavors & Fragrances (Nederland) Holding B.V. and International Flavors &
Fragrances I.F.F. (Nederland) B.V., as borrowers, the lenders signatory thereto and Citibank, N.A., as
administrative agent, incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on 8-K
filed on July 28, 2021.
10.23(viii) Amendment No.1 to Third Amended and Restated Credit Agreement, dated as of August 4, 2022, among the
Registrant, International Flavors & Fragrances (Nederland) Holding B.V. and International Flavors &
Fragrances I.F.F. (Nederland) B.V., as borrowers, the lenders signatory thereto and Citibank, N.A., as
administrative agent, incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-
K filed on August 8, 2022.
10.24(i) Term Loan Credit Agreement, dated as of June 6, 2018, among the Registrant, as borrower, the lenders
signatory thereto and Morgan Stanley Senior Funding, Inc. as administrative agent, incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on June 8, 2018.
10.24(ii) Amendment No 1. to Credit Agreement, dated as of July 13, 2018, among the Registrant, as borrower, the
lenders signatory thereto and Morgan Stanley Senior Funding, Inc. as administrative agent, incorporated by
reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q filed on August 7, 2018.
10.24(iii) Amendment No. 2 to Credit Agreement, dated as of January 17, 2020 among International Flavors &
Fragrances Inc., as borrower, the lenders signatory thereto and Morgan Stanley Senior Funding, Inc. as
administrative agent, incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report filed on
Form 8-K filed on January 22, 2020.
10.24(iv) Amendment No. 3 to Credit Agreement, dated as of August 25, 2020 among International Flavors &
Fragrances Inc., as borrower, the lenders signatory thereto and Morgan Stanley Senior Funding, Inc. as
administrative agent, incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-
K filed on August 28, 2020.
10.25 Employee Matters Agreement, dated as of December 15, 2019, by and among DuPont de Nemours Inc.,
Nutrition & Biosciences, Inc. and International Flavors & Fragrances Inc, incorporated by reference to the
Registrant's Current Report on Form 8-K filed on December 18, 2019.
10.25(i) Amendment to the Employee Matters Agreement, dated January 22, 2021, by and among International
Flavors & Fragrances Inc., DuPont de Nemours, Inc. and Nutrition & Biosciences, Inc., incorporated by
reference to the Registrant’s Current Report on Form 8-K filed on January 25, 2021.
10.26(i) Term Loan Credit Agreement, dated as of May 15, 2020 among International Flavors & Fragrances Inc., as
borrower, the lenders signatory thereto and China Construction Bank Corporation, New York Branch, as
administrative agent, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-
K filed on May 21, 2020.
10.26(ii) Amendment No. 1 to Credit Agreement, dated as of August 25, 2020, among the Company, as borrower, the
lenders signatory thereto and China Construction Bank Corporation, New York Branch as administrative
agent, incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on
August 28, 2020.
10.26(iii) Amendment No. 2 to Term Loan Credit Agreement, dated as of August 4, 2022, among International Flavors
& Fragrances Inc., as borrower, the lenders signatory thereto and Morgan Stanley Senior Funding, Inc., as
administrative agent, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-
K filed on August 8, 2022.
10.27 Term Loan Credit Agreement, dated as of January 17, 2020, by and among Nutrition & Biosciences, Inc., as
borrower, and Morgan Stanley Senior Funding Inc., as administrative agent, and the other lenders party
thereto, incorporated by reference to Exhibit 99.14 to the Registrant’s Form S-4 Registration Statement filed
on October 5, 2020.
10.27(i) Amendment No. 1 to Credit Agreement, dated as of August 25, 2020, by and among Nutrition &
Biosciences, Inc., the lenders signatory thereto and Morgan Stanley Senior Fund, Inc., as administrative
agent, incorporated by reference to Exhibit 99.15 to the Registrant’s Form S-4 Registration Statement filed
on October 5, 2020.
10.28 Co-Operation Agreement, dated as of March 7, 2021, incorporated by reference to the Registrant's Current
Report on Form 8-K filed on March 8, 2021.
10.29 Tax Matters Agreement, dated as of February 1, 2021, by and among DuPont de Nemours, Inc., Nutrition &
Biosciences, Inc. and International Flavors & Fragrances Inc., incorporated by reference to Exhibit 10.1 to
the Registrant’s Current Report on Form 8-K filed on February 4, 2021.
115
Exhibit
Number Description
10.30 Intellectual Property Cross-License Agreement, dated as of February 1, 2021, by and between Nutrition &
Biosciences, Inc. and DuPont de Nemours, Inc., incorporated by reference to Exhibit 10.2 to the Registrant’s
Current Report on Form 8-K filed on February 4, 2021.
21 List of Principal Subsidiaries.
23 Consent of PricewaterhouseCoopers LLP.
31.1 Certification of Frank Clyburn pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Glenn Richter pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification of Frank Clyburn and Glenn Richter pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
the Sarbanes-Oxley Act of 2002.
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extensions Schema
101.CAL XBRL Taxonomy Extension Calculation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase
101.LAB XBRL Taxonomy Extension Label Linkbase
101.PRE XBRL Taxonomy Extension Presentation Linkbase
____________________
* Management contract or compensatory plan or arrangement
ITEM 16. FORM 10-K SUMMARY.
None.
116
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
INTERNATIONAL FLAVORS & FRAGRANCES INC.
By:
Name:
Title:
/s/ Glenn Richter
Glenn Richter
Executive Vice President and Chief Financial & Business
Transformation Officer
Dated: February 27, 2023
117
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature
/s/ Frank Clyburn
Frank Clyburn
/s/ Glenn Richter
Glenn Richter
/s/ Beril Yildiz
Beril Yildiz
/s/ Dale F. Morrison
Dale F. Morrison
/s/ Kathryn J. Boor
Kathryn J. Boor
/s/ Edward D. Breen
Edward D. Breen
/s/ Barry A. Bruno
Barry A. Bruno
/s/ Mark Costa
Mark Costa
/s/ Carol Anthony (John) Davidson
Carol Anthony (John) Davidson
/s/ Roger W. Ferguson, Jr.
Roger W. Ferguson, Jr.
/s/ John F. Ferraro
John F. Ferraro
/s/ Christina Gold
Christina Gold
/s/ Matthias Heinzel
Matthias Heinzel
/s/ Gary Hu
Gary Hu
/s/ Stephen Williamson
Stephen Williamson
/s/ Dawn C. Willoughby
Dawn C. Willoughby
Title
Date
Chief Executive Officer and Director
(Principal Executive Officer)
February 27, 2023
Executive Vice President and Chief Financial &
Business Transformation Officer
(Principal Financial Officer)
February 27, 2023
Senior Vice President, Corporate Controller and
Chief Accounting Officer
(Principal Accounting Officer)
February 27, 2023
Chairman of the Board, Director
February 27, 2023
February 27, 2023
February 27, 2023
February 27, 2023
February 27, 2023
February 27, 2023
February 27, 2023
February 27, 2023
February 27, 2023
February 27, 2023
February 27, 2023
February 27, 2023
February 27, 2023
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
118
INTERNATIONAL FLAVORS & FRAGRANCES INC. AND SUBSIDIARIES
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Allowance for doubtful
accounts
Valuation allowance on
credit and operating loss
carryforwards and other
net deferred tax assets
Allowance for doubtful
accounts
Valuation allowance on
credit and operating loss
carryforwards and other
net deferred tax assets
(IN MILLIONS)
For the Year Ended December 31, 2022
Balance at
beginning
of period
Additions
(deductions)
charged to
costs and
expenses
Acquisitions
Accounts
written off
Translation
adjustments
Other
Balance at
end of
period
$
46 $
19
$
— $
— $
(12) $
— $
53
232
51
—
—
(21)
—
262
For the Year Ended December 31, 2021
Balance at
beginning
of period
Additions
charged to
costs and
expenses
Acquisitions
Accounts
written off
Translation
adjustments Other(1)
Balance at
end of
period
$
21 $
6
$
— $
(1) $
— $
20 $
46
257
(18)
9
—
(16)
—
232
For the Year Ended December 31, 2020
Balance at
beginning
of period
Additions
charged to
costs and
expenses
Acquisitions
Accounts
written off
Translation
adjustments
Other
Balance at
end of
period
$
16 $
Allowance for doubtful
accounts
Valuation allowance on
credit and operating loss
carryforwards and other
net deferred tax assets
_______________________
(1) The amount relates to adjustment to allowances for bad debts as a result of purchase price allocation related to the Merger with N&B.
— $
— $
204
— $
(1) $
—
18
—
—
35
6
$
257
21
S-1
Exhibit A
International Flavors & Fragrances
E XHIBIT A
IN T ER NATIONAL F L AVOR S AN D FR AGR A NC ES I NC .
NO N-GA AP RECONCIL IATION S
RECON CILIATI ON OF ADJUST E D OPE R AT IN G E B IT DA
(DOLLARS IN MILLIONS)
TOTAL COMPANY
As Reported Loss Before Taxes
Depreciation & Amortization
Interest Expense
Other Income, net
Acquisition Related Costs
Restructuring and Other Charges
Gains on Sale of Fixed Assets
Impairment of Goodwill
Impairment of Long-Lived Assets
Shareholder Activism Related Costs
Business Divestiture Costs
Employee Separation Costs
Strategic Initiative Costs
Global Shared Services Implementation Costs
Frutarom Acquisition Related Costs
Integration Related Costs
Adjusted Operating EBITDA
2022
$(1,871)
(4)
10
(2)
2,250
96
2
174
85
10
2
4
1
71
-
$828
RECONC IL ATION OF N E T (LOS S ) I N CO M E A N D E A RNI NG S PE R SH ARE ( EP S )
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
TOTAL COMPANY
As Reported Net loss Attributable to IFF stockholders
Acquisition Related Costs
Restructuring and Other Charges
Gains on Sale of Fixed Assets
Impairment of Goodwill
Impairment of Long-Lived Assets
Shareholder Activism Related Costs
Business Divestiture Costs
Gains on Business Disposal
Employee Separation Costs
Strategic Initiative Costs
Global Shared Services Implementation Costs
Frutarom Acquisition Related Costs
Integration Related Costs
Redemption value adjustment to EPS
Adjusted Net Income
RECONC IL IATION OF EA RN I NGS P E R SH A R E ( E PS ) EX AMO RTIZ AT ION
(DOLLARS AND SHARE AMOUNTS IN MILLIONS)
Numerator
Adjusted Net Income
Amortization of Acquisition related Intangible Assets
Tax impact on Amortization of Acquisition related Intangible Assets
Amortization of Acquisitiovn related Intangible Assets, net of tax
Adjusted Net Income ex. Amortization
Denominator
Weighted average shares assuming dilution (diluted)
Adjusted EPS ex. Amortization
2022
$(1,625)
1,179
336
(37)
(4)
12
(3)
2,250
120
3
110
11
3
5
1
94
$2,455
$(7.32)
(0.02)
0.04
(0.01)
8.81
0.38
0.01
0.68
0.34
0.04
0.01
0.01
-
0.28
(0.01)
$3.24
2022
$828
727
170
557
1,385
255
$5.42
The Company uses non-GAAP financial measures such as Adjusted Operating EBITDA, Adjusted Net Income ex amortization, Adjusted Net Income, Adjusted EPS and Adjusted EPS ex amortization (which
excludes acquisition related costs, restructuring and other charges, gains on sale of fixed assets, impairment of goodwill, impairment of long-lived assets, shareholder activism related costs, business divestiture
costs, gains on business disposal, employee separation costs, strategic initiative costs, Global Shared Services implementation costs, Frutarom acquisition related costs, integration related costs and redemption
value adjustment related to EPS) as the Company believes that these non-GAAP financial measures provide investors with an overall perspective of the period-to-period performance of our core business. Such
information is supplemental to information presented in accordance with GAAP and is not intended to represent a presentation in accordance with GAAP. These non-GAAP measures may not be comparable to
similarly titled measures used by other companies.
BOARD OF D IR ECTORS
LEA DER SH IP TEAM
Kathryn J. Boor 4 *
Dean of the Graduate School and
Vice Provost for Graduate Education
Cornell University
Edward D. Breen 4
Executive Chairman and Chief Executive Officer
DuPont de Nemours, Inc.
Barry A. Bruno 1
Executive Vice President, Chief Marketing Officer
and President - Consumer Domestic
Church & Dwight Co., Inc.
Frank Clyburn 4
Chief Executive Officer
International Flavors & Fragrances Inc.
Mark J. Costa 1, 2
Chairman & Chief Executive Officer
Eastman Chemical Company
Carol Anthony (John) Davidson 1
Former Senior Vice President,
Controller and Chief Accounting Officer
Tyco International Ltd.
Design by Liquid Creative, Inc. www.lqcreative.com
© 2023 International Flavors & Fragrances Inc.
All rights reserved.
Roger W. Ferguson, Jr. 2 *, 3
Former President and Chief Executive Officer
TIAA
Frank Clyburn
Chief Executive Officer
John F. Ferraro 1*
Former Global Chief Operating Officer
Ernst & Young
Christina Gold 2, 3 *
Former Chief Executive Officer
The Western Union Company
Matthias Heinzel 4
Chief Executive Officer of Life Science
Merck KGaA
Gary Hu 1
Portfolio Manager
Icahn Capital LP
Dale F. Morrison 3 +
Founding Partner
Twin Ridge Capital Management
Stephen Williamson 1
Senior Vice President and Chief Financial Officer
Thermo Fisher Scientific
Dawn C. Willoughby 2, 3
Former Executive Vice President
and Chief Operating Officer
The Clorox Company
1 Audit Committee
2 Human Capital and Compensation Committee
3 Nominating and Governance Committee
4 Innovation and Sustainability Committee
* Indicates Chair
+ Chair of the Board
Information as of February 8, 2023
Deborah Borg
Executive Vice President, Chief Human
Resources, Diversity & Inclusion and
Communications Officer
Michael DeVeau
Senior Vice President, Corporate Finance
and Investor Relations
Ralf Finzel
Executive Vice President,
Global Operations Officer
Christophe Fauchon de Villeplee
President, Scent
Simon Herriott
President, Health & Biosciences
Jennifer Johnson
Executive Vice President,
General Counsel & Corporate Secretary
Glenn Richter
Executive Vice President,
Chief Financial Officer
Angela Strzelecki
President, Pharma Solutions
Ana Paula Teles de Mendonça
Senior Vice President,
Commercial Excellence
Vic Verma
Executive Vice President,
Chief Information Officer
Gregory Yep
Executive Vice President,
Chief Research & Development,
Global Integrated Solutions &
Sustainability Officer
INTERNATIONA L FL AVORS & FR AGR A NC ES IN C .
G LOBAL HEAD QUARTERS
521 West 57th Street | New York, NY 10019 | 212.765.5500
www.iff.com
This report is printed on paper containing post consumer fiber. The paper used
in this report is also certified under the Sustainable Forestry Initiative® guidelines.