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What changed in International Flavors & Fragrances's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of International Flavors & Fragrances's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+370 added−362 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-27)

Top changes in International Flavors & Fragrances's 2023 10-K

370 paragraphs added · 362 removed · 257 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

48 edited+16 added−19 removed72 unchanged
Biggest changeName Age Position Frank Clyburn 58 Chief Executive Officer and member of our Board of Directors Deborah Borg 46 Executive Vice President, Chief Human Resources, Diversity & Inclusion and Communications Officer Michael DeVeau 42 Senior Vice President, Corporate Finance and Investor Relations Ralf Finzel 59 Executive Vice President, Global Operations Officer Simon Herriott 59 President, Health & Biosciences Jennifer Johnson 48 Executive Vice President, General Counsel and Corporate Secretary Ana Paula Mendonça 54 Senior Vice President, Commercial Excellence Glenn Richter 61 Executive Vice President and Chief Financial & Business Transformation Officer Angela Strzelecki 56 President, Pharma Solutions Vic Verma 54 Executive Vice President, Chief Information Officer Christophe Fauchon de Villeplee 58 President, Scent 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.
Biggest changeErik Fyrwald (1) 64 Chief Executive Officer and member of our Board of Directors Yuvraj Arora 52 President, Nourish Deborah Borg (1) 47 Executive Vice President, Chief Human Resources, Diversity & Inclusion and Communications Officer Michael DeVeau 43 Senior Vice President, Corporate Finance and Investor Relations Ralf Finzel (1) 60 Executive Vice President, Global Operations Officer Simon Herriott (1) 60 President, Health & Biosciences and Scent Jennifer Johnson (1) 49 Executive Vice President, General Counsel and Corporate Secretary Glenn Richter (1) 62 Executive Vice President, Chief Financial & Business Transformation Officer Angela Strzelecki (1) 57 President, Pharma Solutions Vic Verma 55 Executive Vice President, Chief Information Officer Casper Vroemen 54 Executive Vice President, Chief Research & Development Officer _____________________ (1) These individuals are executive officers and file reports under Section 16 of the Securities Exchange Act of 1934.
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.
Center for Commercial Excellence Our 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.
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. 7 Table of Contents In 2022, our Company continued to achieve notable recognitions in these areas.
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. 7 Table of Contents In 2023, our Company continued to achieve notable recognitions in these areas.
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.
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 Fragrance Compounds, Fragrance Ingredients and Cosmetic Ingredients.
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.
Governance: Transparency & Accountability Continuing our commitment to good governance which starts with our Board and Executive Leadership Team 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.
As of December 31, 2022, we employed approximately 3,200 people globally in research and development activities. 5 Table of Contents 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.
As of December 31, 2023, we employed approximately 3,700 people globally in research and development activities. 5 Table of Contents 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.
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.
In addition, in 2023 IFF further aligned with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) by completing 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.
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 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 Ingredients, Flavors and Food Designs.
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 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.
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.
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, or helping to increase or improve functionality of their formulations. This often results in creating a better value proposition for our customers.
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; • implementing indexed pricing; • reducing the complexity of our formulations; 6 Table of Contents • evaluating the profitability of whether to buy or make an ingredient; and • sourcing from local countries with our own procurement professionals.
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; • implementing indexed pricing; • reducing the complexity of our formulations; 6 Table of Contents • evaluating the profitability of whether to buy or make an ingredient; • sourcing from local countries with our own procurement professionals; and • periodically assessing our supply base with a view towards greater cost efficiencies and improvements.
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.
As of December 31, 2023, we purchased approximately 24,000 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 plant, animal and marine products, and commodity crops like wheat, corn and soy.
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.
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 2023 were approximately $11.479 billion.
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.
As of December 31, 2023, we have 880 granted U.S. patents and 431 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.
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.
At December 31, 2023, we had approximately 21,500 employees worldwide, of whom approximately 5,200 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.
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.
Manufacturing and Distribution As of December 31, 2023, we had approximately 190 manufacturing facilities, creative centers and application laboratories located in approximately 40 different countries. Our major manufacturing facilities are located in the United States, The Netherlands, Spain, Germany, Indonesia, Turkey, Brazil, Mexico, Slovenia, China, India, Ireland, Norway, Finland, Denmark, Belgium and Singapore.
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.
Our business is geographically diverse, with sales in the U.S. representing approximately 28% of sales in 2023. No other country represented more than 7% of sales. Our Product Offerings Our business currently consists of four segments: Nourish, Health & Biosciences, Scent and Pharma Solutions.
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.
Johnson 11 Table of Contents joined DuPont in 2013, where she led the legal team for DuPont’s former Industrial Biosciences business as Associate General Counsel and previously 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.
Prior to joining Honeywell, he worked in research and plant management roles for Hoechst AG. 11 Table of Contents Simon Herriott has served as our President, Health & Biosciences since February 2021. From 2019 to February 2021, Mr.
Prior to joining Honeywell, he worked in research and plant management roles for Hoechst AG. Simon Herriott has served as our President, Health & Biosciences since February 2021 and President, Scent since June 2023. From 2019 to February 2021, Mr.
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.
Based on 2023 sales, approximately 46% of sales were to global consumer products companies and approximately 54% of sales were to small and mid-sized companies. During 2023, our 25 largest customers accounted for approximately 32% of sales. In 2023, no customer accounted for more than 10% of sales.
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.
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. 8 Table of Contents 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.
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.
( “ 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 and our strategy for long term growth and value creation.
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 Table of Contents 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.
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.
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.
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 war, the Israel-Hamas war and wider Middle East developments (including disruptions to the Red Sea passage or such conflicts spreading further in the relevant regions), 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.
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 was Chief Financial Officer of TIAA, having worked at the company in various leadership roles from April 2015 to July 2021. Previously, Mr.
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 Table of Contents Leadership and Development Our leadership development efforts empower employees to become forward-looking, inspiring and capable decision-makers, agents of change and great leaders.
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.
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.
Our principal executive offices are located at 521 West 57th Street, New York, New York 10019 and 200 Powder Mill Road, Wilmington, Delaware 19803.
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.
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.
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.
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.
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.
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.
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. 10 Table of Contents 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.
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.
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”.
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”.
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.
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.
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.
We qualified as a constituent of the Dow Jones Sustainability Index, North America for the fourth 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. This distinction validates IFF’s leadership position in sustainability performance and underscores our commitment to executing on key ESG priorities.
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.
Health & Biosciences is comprised of Health, Cultures & Food Enzymes, Home & Personal Care, Animal Nutrition and Grain Processing. Health provides ingredients for dietary supplements, functional food and beverage, specialized nutrition and pharma.
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.
In 2023, we introduced patented enzymatic polymers that are renewable, biodegradable alternatives to functional ingredients used in home cleaning and beauty care products. Animal Nutrition produces feed enzymes and animal health solutions that help to improve nutrition, welfare, performance and sustainability of livestock animal farming. Grain Processing produces yeasts and enzymes for biofuel production and carbohydrate processing.
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 Table of Contents 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.
During the fourth quarter of 2023, we entered into an agreement to sell our Cosmetic Ingredients business and expect the divestiture to be completed in the first quarter of 2024. 4 Table of Contents 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.
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.
Angela Strzelecki has served as our President, Pharma Solutions since February 2021. From 2019 to February 2021, Dr. Strzelecki was Global Business Director, Pharma Solutions for the N&B Business. During her 29 year career with DuPont or its formerly affiliated companies, 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.
Strzelecki held a variety of leadership positions, including Planning Director - Corporate Planning and M&A, Global Business Director - Electronics & Communications, North America Business Director - Building Innovations, Global Business Director - Industrial Coatings and Global Technology Director for Coatings.
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.
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.
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.
During the last few years in connection with the acquisition of Frutarom, we undertook an initiative to optimize our global operations footprint to efficiently and cost-effectively deliver value to our global customers (the “Frutarom Integration Initiative”). From the inception of the Frutarom Integration Initiative through its completion as of March 31, 2023, we completed the closure of 22 sites.
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.
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. Casper Vroemen has served as our Executive Vice President, Chief Research & Development Officer since September 2023. Dr. Vroemen has been with the N&B Business since 2004.
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.
IFF continues to be listed in the FTSE4Good Index series as well as in the Euronext Vigeo World 120 Index for ESG performance.
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.
The market for our products is highly competitive. Our main competitors consist of (1) other large global companies, such as Givaudan, DSM-Firmenich Symrise, Kerry, ADM, Novonesis, (2) mid-sized companies, (3) numerous regional and local manufacturers and (4) consumer product companies who may develop their own competing products.
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.
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.
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.
He later assumed roles of increasing responsibility in marketing, brand management and general management upon his relocation to the United States in 2005 and in Singapore from 2012-2015. Deborah Borg has served as our Executive Vice President, Chief Human Resources, Diversity & Inclusion and Communications Officer since August 29, 2022. 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.
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.
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.
In 2023, we participated in the Black Equality Index for the first time. These indices allow us to understand what it takes to raise the bar and refine or adjust our DE&I initiatives accordingly. IFF was also listed as a “Best Place to Work for Disability Inclusion” for the fourth consecutive year.
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We expect that the transaction will close in the second quarter of 2023, subject to customary closing conditions.
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During the fourth quarter of 2022, we announced our entry into an agreement to sell a portion of the Savory Solutions business and completed the divestiture on May 31, 2023.
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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.
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During the fourth quarter of 2022, we announced our entry into an agreement to sell our Flavor Specialty Ingredients business and completed the divestiture on August 1, 2023. Cosmetic Ingredients designs, develops, manufactures and markets innovative ingredients for the cosmetics and personal care industry, while offering active ingredients, functional ingredients, and delivery systems.
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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.
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Environmental, Social, and Governance Following the integration with Nutrition and Biosciences, Inc.
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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.
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We were also awarded the 2023 EcoVadis Platinum sustainability rating for the third time, placing IFF among the top 1% of companies assessed. In addition, following our submission to CDP Climate Change, Water Security and Forests, we maintained our leadership position in CDP Climate Change and achieved management level for CDP Water Security and Forests for 2023.
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Hansen, (2) mid-sized companies, (3) numerous regional and local manufacturers and (4) consumer product companies who may develop their own competing products.
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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.
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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.
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Further, those offerings complement our talent acquisition strategy and organized and personalized feedback process, supported by industry-leading assessment tools. 9 Table of Contents Diversity, Equity, & Inclusion (“DE&I ” ) “Your Uniqueness Unleashes Our Potential ” is the unifying vision for DE&I at IFF around the world because we know that the diverse backgrounds, experiences and knowledge of our global workforce is what unleashes the potential that exists at the intersection of science and creativity.
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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.
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This is what enables us to Be the Premier Partner to our customers. In 2023, we refreshed our strategic framework to continue accelerating our journey. This new strategic framework builds on what has come before and increases focus on integrating DE&I into how we operate on a daily basis - fostering inclusive talent processes, inclusive employee experiences and external engagement.
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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.
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Through this new strategic framework, among other things: • We made progress against our ESG goals, increasing representation for women in senior leadership roles to approximately 38%; • We expanded accountability beyond the executive team by tying senior leader bonus awards to progress towards our 2030 gender diversity goals; • Our colleague communities or employee resource groups (open to all IFF employees, with a focus on Women, Black, LGBTQIA+, Latino/a/e, Asian, People with Disabilities, Early in Career, Veterans & First Responders) increased visibility and impact with well-attended events around the world; and • We committed to the Living Wage Pledge.
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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.
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IFF is proud to continue to be globally EDGE certified for gender equality at the “Move” level by the Edge Certified Foundation and we continue to leverage and be recognized by other external benchmarking organizations including Bloomberg Gender Equality Index; DisabilityIN’s Disability Equality Index, Workplace Pride, as well as others.
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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.
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Executive Officers of Registrant Below is a list of the executive officers of the Company and other significant employees who are members of our Executive Leadership Team as of February 28, 2024. 10 Table of Contents Name Age Position J.
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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.
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J. Erik Fyrwald has served as our Chief Executive Officer and a member of our Board of Directors since February 6, 2024. Mr. Fyrwald joined us from Syngenta, where he served as Chief Executive Officer since 2016. Prior to his role at Syngenta, Mr.
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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.
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Fyrwald served as Chief Executive Officer of Univar Solutions from May 2012 until May 2016, as Chairman and Chief Executive Officer of Nalco from 2008 until 2011, when Nalco merged with Ecolab Inc., and following the merger, he served as President of Ecolab. Mr. Fyrwald began his career at DuPont starting in 1981. During his 27 years at DuPont, Mr.
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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.
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Fyrwald held a number of positions, including Group Vice President of the Agriculture and Nutrition Division at DuPont and Vice President and General Manager of DuPont’s Nutrition and Health Business. Yuvraj Arora has served as our Executive Vice President and President, Nourish since June 19, 2023. Mr.
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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.
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Arora joined IFF from Kellogg North America, where he served as the President of the company’s six U.S. categories since April 2021. He was with Kellogg for more than 20 years, beginning in India in 2002 where he held roles in marketing and category management.
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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.
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Over the past two decades, he has assumed roles of increasing responsibility in research and development in Europe and the U.S. Recent Developments On January 11, 2024, we announced the departure of Frank K. Clyburn Jr. as our Chief Executive Officer, effective February 6, 2024. The Board of Directors appointed J.
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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.
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Erik Fyrwald as our Chief Executive Officer, effective February 6, 2024.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSignificant 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 Table of Contents • 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.
Biggest changeChanges to management, including turnover of our top executives, and significant shortfalls in recruitment, retention or transition of employees or our management team could adversely affect our ability to compete and achieve our strategic goals. 12 Table of Contents • 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. • 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. • International conflicts (such as the Russia-Ukraine war and the Israel-Hamas war), geopolitical events, natural disasters, public health crises (such as the COVID-19 pandemic), trade wars, terrorist acts, labor strikes, political or economic crises (such as uncertainty related to protracted U.S. federal government funding negotiations), accidents and other events could adversely affect our business and financial results, including 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 are subject to risks associated with the potential use of artificial intelligence (“AI”) in our own operations and by third-party partners that we may engage with. • 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. • 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. • 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. • 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. • If we fail to successfully enter into or close collaborations, joint ventures, partnerships or acquisitions, or successfully manage such transactions, it could adversely affect our business and growth opportunities. • 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. • 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. • 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.
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.
These 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.
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.
In addition, in light of our product offerings into functional food, nutraceuticals, natural antioxidants or pharmaceutical products, 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.
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.
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 functional foods, specialty fine ingredients and nutrition products, we may face greater competition-related risks in these markets than with our other businesses.
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.
While we generally 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.
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.
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 continue to lead to declines in demand and sales volumes.
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.
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. 13 Table of Contents • 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.
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.
In 2023, we spent approximately 5.5% 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.
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.
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 war and Israel-Hamas war) 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.
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.
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 16 Table of Contents local health crises, international conflicts, terrorist acts, geopolitical developments, trade wars, and other external factors over which neither they nor we have control.
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.
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 had determined in the past 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.
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.
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, competition and antitrust, 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.
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.
Although we do not currently anticipate any impairment charges related to COVID-19, the continuing effects of the 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.
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.
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 European Union’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.
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.
As the Russia-Ukraine war 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.
Supply chain complexities, aging equipment and infrastructure, human errors, or other failures may exacerbate such risks. 26 Table of Contents 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.
Supply chain complexities, aging equipment and infrastructure, human errors, or other failures may exacerbate such risks. 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.
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 Table of Contents 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.
If we are not successful in managing our inventory balances and shrinkage, our results of and cash flows from operations may be negatively affected. 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.
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.
Moreover, as a result of the COVID-19 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.
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.
These potential costs, changes and loss of revenue could have a material adverse effect on our business, results of operations and financial condition. 23 Table of Contents Our performance may be adversely impacted if we are not successful in managing our inventory and/or working capital balances.
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.
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, trade wars, terrorist acts, political or economic crises (such as the uncertainty related to protracted U.S. federal government funding negotiations) and other external factors over which we have no control.
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.
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 28 Table of Contents liabilities, changes in liabilities for uncertain tax positions, cost of repatriations or changes in tax laws or their interpretation.
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.
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, including through the increasing use of AI, 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.
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.
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 recently adopted by the European Commission (“EC”) 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; • the movement for increased unionization in the U.S. and internationally may lead to labor instability, employee turnover, increased labor costs or production and operation disruptions; • 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.
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.
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), novel uses of existing technologies or stricter rules on ingredients produced by biotechnology techniques have 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.
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 Table of Contents Moreover, we are not indemnified by N&B for tax liabilities related to pre-spin-off periods.
If we were required to indemnify DuPont pursuant to the Tax Matters Agreement as described 29 Table of Contents 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. Moreover, we are not indemnified for tax liabilities related to pre-spin-off periods.
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.
During 2023, approximately 72% 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.
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.
See “—Supply chain disruptions, geopolitical developments, including the Russia-Ukraine war, the Israel-Hamas war and wider Middle East developments (including disruptions to the Red Sea passage), 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.
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.
Any of these factors could adversely affect our business, financial condition and our 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.
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.
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. 18 Table of Contents During 2023, our 25 largest customers, a majority of which were multi-national consumer products companies, collectively accounted for approximately 32% of our sales in the aggregate.
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.
International conflicts (such as the Russia-Ukraine war and Israel-Hamas war), geopolitical events, natural disasters, public health crises (such as the COVID-19 pandemic), trade wars, terrorist acts, labor strikes, political or economic crises (such as uncertainty related to protracted U.S. federal government funding negotiations), accidents and other events could adversely affect our business and financial results, including by disrupting development, manufacturing, distribution or sale of our products.
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.
With the completion of the N&B Transaction, our customer base has further increased significantly and, based on 2023 sales, we had approximately 27,000 customers, approximately 54% of which are small and mid-sized companies.
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.
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 EC recently adopted a ban on microplastics, including those found in personal care items, detergents and cosmetics, to reduce plastics pollution.
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.
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.
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.
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. Federal, state, local and foreign governments, our customers, consumers and shareholders are becoming increasingly sensitive to environmental and other sustainability issues.
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 Table of Contents 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.
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.
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.
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. 26 Table of Contents 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.
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.
SOFR is observed and backward-looking, which stands in contrast with LIBOR’s methodology, which was an estimated forward-looking rate and relied, to some degree, on the expert judgment of submitting panel members.
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.
Any of these events or factors could potentially result in a material adverse impact on our business and results of operations. 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.
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.
Any of these occurrences could materially and adversely affect our borrowing costs, financial condition and results of operations. 25 Table of Contents 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.
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 current level of leverage could increase our vulnerability to sustained, adverse macroeconomic weakness, limit our ability to obtain further financing, lead to a reduction or suspension of our dividend payments, 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 projects or opportunities, including necessary investments into our business or large acquisitions.
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.
Changes to interest rate policy as managed 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.
Additionally, continued geopolitical turmoil, including the ongoing conflict between Russia and Ukraine, heightened the risk of cyber incidents.
Additionally, continued geopolitical turmoil, including the ongoing conflicts in the Middle East and between Russia and Ukraine, heightened the risk of cyber incidents.
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.
As we complete integration of systems of prior acquired companies with IFF’s systems and prepare for the announced divestitures, we reduce our risk profile.
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.
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.
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 Table of Contents The impact of currency fluctuation or devaluation in the international markets in which we operate may negatively affect our results of operations.
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.
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 Table of Contents 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.
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.
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.
As a result of our recent acquisitions, including the acquisition of Frutarom and the N&B Transaction, as of December 31, 2023, we recorded approximately $18.992 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, prior to the impact of impairment charges and business divestitures.
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.
Inflationary trends and pricing uncertainty, 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 continues to experience high rates of inflation.
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.
In addition, even though the operations of the N&B Business are being integrated, the full benefits of the transaction may not be realized, including, among others, the synergies, cost savings or revenue growth that are expected.
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.
The combination with the N&B Business may result in material unanticipated problems, expenses, liabilities, competitive responses, employee turnover and loss of customer and other business relationships.
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.
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.
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 impact of currency fluctuation or devaluation in the international markets in which we operate may negatively affect our results of operations. 21 Table of Contents 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.
We could suffer significant costs related to one or more challenges to our transfer pricing policies. 29 Table of Contents 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.
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 may be subject to assessments or audits in the future in any of the countries in which we operate.
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.
Further, we may not be able to accurately predict or hedge for price fluctuations of input costs, or predict the volume impact of the price increases in our products, while our competitors may be able to more successfully adjust to such input cost volatility.
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. 24 Table of Contents Our funding obligations for our pension and postretirement plans could adversely affect our earnings and cash flows.
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. 24 Table of Contents If we fail to successfully enter into or close collaborations, joint ventures, partnerships or acquisitions, or successfully manage such transactions, it could adversely affect our business and growth opportunities.
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. 20 Table of Contents 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 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 (including SEC), tax or legal requirements, and collecting and storing customer, supplier, employee and other stakeholder information.
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.
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 are permitted and meet the essential needs of people.
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.
These and other monetary policies to counter inflation could negatively affect our borrowing costs and those of our customers and suppliers, as well as exchange rates and other macroeconomic factors.
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. 28 Table of Contents 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).
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).
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.
During the third quarter of 2023, we announced that we entered into an agreement for the sale of our Cosmetics Ingredients business, which is expected to close in the first quarter of 2024, subject to customary closing conditions.
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.
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.
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.
In addition, our hybrid and remote work arrangements could introduce operational risk, including cybersecurity and IT systems management risks. 20 Table of Contents 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.
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.
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.
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.
Increased cost volatility trends may also impact the business and financial situation of our customers 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.
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.
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. Many governments have enacted or are enacting new or updated data protection laws, including data localization laws that require data to stay within their borders.
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 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.
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 Table of Contents Furthermore, our degree of leverage could adversely affect our future credit ratings.
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.
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.
We may not be able to successfully negotiate such arrangements or the terms of the arrangements may not be as favorable as anticipated.
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 existing 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 public debt rating decreases. The pricing grid rates have increased by 0.125% for the duration that financial covenant relief (as described below) is provided.
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.
See, also “—Supply chain disruptions, geopolitical developments, including the Russia-Ukraine war, the Israel-Hamas war and wider Middle East developments (including disruptions to the Red Sea passage), 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.” For instance, the Russia-Ukraine war has adversely impacted and may 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.
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.
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 Table of Contents 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.
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.
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 Table of Contents 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.
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.
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.
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 are subject to risks associated with the potential use of AI in our own operations and by third-party partners that we may engage with.
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.
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.
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.
Our level of indebtedness, as well as a 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 any additional debt modifications, instruments or covenant reliefs may subject us to additional covenants and restrictions. 14 Table of Contents If we are unable to successfully execute the next phase of our strategic transformation, including our portfolio optimization, it may have a material adverse effect on our business, results of operations and financial condition.
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.
We will continue to evaluate its impact as further guidance becomes available. 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.
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.
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. 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.
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.
Despite these precautions, our intellectual property is vulnerable to unauthorized access through employee error or actions, theft and cybersecurity incidents, and other security breaches, including due to increasing use of AI tools.
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.
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, and the development of certain new weight management pharmaceutical products such as glucagon-like peptide-1 (GLP-1) receptor agonists may affect consumer behavior and trends, and ultimately decrease demand for our product offerings.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur principal owned and leased properties as of December 31, 2022, are as follows: Europe, Africa & the Middle East North America Greater Asia Latin America Owned Leased Owned Leased Owned Leased Owned Leased Plant 48 20 24 13 22 12 18 5 Office 3 77 — 7 4 37 — 8 Laboratory 7 16 1 15 — 16 2 2 Warehouse 1 12 — 11 — 3 3 11 Other 5 5 — 8 11 4 3 4 64 130 25 54 37 72 26 30 Our principal executive offices are located at 521 West 57th Street, New York, New York and 200 Powder Mill Road, Wilmington, Delaware.
Biggest changeOur principal owned and leased properties, as of December 31, 2023, are as follows: Europe, Africa & the Middle East North America Greater Asia Latin America Owned Leased Owned Leased Owned Leased Owned Leased Plant 40 16 18 13 22 7 16 4 Office 2 57 — 6 3 20 — 3 Laboratory 7 13 2 15 — 14 — 3 Warehouse 1 11 — 10 — 2 2 8 Other 4 4 — 7 7 3 3 4 54 101 20 51 32 46 21 22 Our principal executive offices are located at 521 West 57th Street, New York, New York and 200 Powder Mill Road, Wilmington, Delaware.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 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.
Biggest changeThe 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.” For more detailed information about risks related to legal proceedings, refer to Item 1A, “Risk Factors” – “Our results of operations may be negatively impacted by the outcome of uncertainties related to legal claims, disputes, investigations and litigation, including the ongoing antitrust and competition investigations and related class actions lawsuits.” ITEM 4.
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ITEM 3. LEGAL PROCEEDINGS. We are subject to various claims and legal actions in the ordinary course of our business.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeITEM 4. Mine Safety Disclosures 31 PART II ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 31 ITEM 6. [Reserved] 32 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 32 ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 48 ITEM 8.
Biggest changeITEM 4. Mine Safety Disclosures 32 PART II ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 32 ITEM 6. [Reserved] 33 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33 ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 48

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information. Our common stock is principally traded on the New York Stock Exchange under the ticker symbol “IFF”. 31 Table of Contents Approximate Number of Equity Security Holders.
Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information.
Title of Class Number of shareholders of record as of February 21, 2023 Common stock, par value 12 1 /2¢ per share 3,431 Issuer Purchases of Equity Securities. None. Performance Graph.
Title of Class Number of shareholders of record as of February 21, 2024 Common stock, par value 12 1 /2¢ per share 3,249 Issuer Purchases of Equity Securities. None. Performance Graph.
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.
The graph is based on historical stock prices and measures total shareholder return, which takes into account both changes in stock price and dividends.
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SOURCE: S&P Capital IQ Year-end Data 2017 2018 2019 2020 2021 2022 International Flavors & Fragrances $ 100.00 $ 89.90 $ 88.38 $ 76.59 $ 108.41 $ 77.68 S&P 500 Index $ 100.00 $ 95.62 $ 125.72 $ 148.85 $ 191.58 $ 156.88 S&P 500 Consumer Staples Index $ 100.00 $ 91.62 $ 116.92 $ 129.48 $ 153.60 $ 152.65 S&P 500 Specialty Chemicals Index $ 100.00 $ 94.27 $ 111.49 $ 130.63 $ 168.56 $ 122.29
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Our common stock is principally traded on the New York Stock Exchange under the ticker symbol “IFF.” While we have historically paid dividends on a quarterly basis to shareholders of our common stock, the declaration and payment of future dividends will depend on many factors, including, but not limited to, our earnings, financial condition, business development needs and regulatory considerations.
Added
Our Board of Directors may reduce, suspend or discontinue the payment of dividends at any time. See Part II, Item 8 of this Form 10-K in the “Consolidated Statements of Shareholders’ Equity” and in the Notes to Consolidated Financial Statements in Note 12 for additional information. Approximate Number of Equity Security Holders.
Added
The total return assumes that dividends were reinvested daily and is based on a $100 investment on December 31, 2018. 32 Table of Contents SOURCE: S&P Capital IQ Year-end Data 2018 2019 2020 2021 2022 2023 International Flavors & Fragrances $ 100.00 $ 98.30 $ 85.19 $ 120.59 $ 86.40 $ 69.58 S&P 500 Index $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 S&P 500 Consumer Staples Index $ 100.00 $ 127.61 $ 141.32 $ 167.65 $ 166.61 $ 167.47 S&P 500 Specialty Chemicals Index $ 100.00 $ 118.26 $ 138.57 $ 178.80 $ 129.71 $ 150.65

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

96 edited+45 added−42 removed39 unchanged
Biggest changeSuch 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 Table of Contents • 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.
Biggest changeSuch risks, uncertainties and other factors include, among others, the following: • our substantial amount of indebtedness and its impact on our liquidity, credit ratings and ability to return capital to its shareholders; • our ability to successfully execute the next phase of our strategic transformation; • our ability to declare and pay dividends which is subject to certain considerations; • the impact of the outcomes of legal claims, disputes, regulatory investigations and litigation; • 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 war, the Israel-Hamas war and wider Middle East developments (including disruptions to the Red Sea passage) or climate-change related events (including severe weather events) that may affect our suppliers or procurement of raw materials; • our ability to attract and retain key employees, and manage turnover of top executives; • 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; 46 Table of Contents • 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; • disruption in the development, manufacture, distribution or sale of our products from international conflicts (such as the Russia-Ukraine war and the Israel-Hamas war), geopolitical events, trade wars, natural disasters (such as the COVID-19 pandemic), public health crises, terrorist acts, labor strikes, political or economic crises (such as the uncertainty related to U.S. government funding negotiations), accidents and similar events; • 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 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 integrate the N&B Business and realize anticipated synergies, among other benefits; • 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 meet increasing customer, consumer, shareholder and regulatory focus on sustainability; • our ability to successfully manage our working capital and inventory balances; • any impairment on our tangible or intangible long-lived assets; • our ability to enter into or close strategic transactions or divestments, or successfully establish and manage acquisitions, collaborations, joint ventures or partnerships; • changes in market conditions or governmental regulations relating to our pension and postretirement obligations; • the impact of the phase out of the London Interbank Offered Rate (“LIBOR”) on our variable rate interest expense; • our ability to comply with, and the costs associated with compliance with, regulatory requirements and industry standards, including regarding product safety, quality, efficacy and environment impact; • defects, quality issues (including product recalls), inadequate disclosure or misuse with respect to the products and capabilities; • our ability to comply with, and the costs associated with compliance with, U.S. and foreign environmental protection laws; • the impact of our or our counterparties’ failure to comply with the U.S.
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.
During 2022, 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 for the year ended December 31, 2022.
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.
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, 2023, there were no toll-charge obligations remaining.
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 decrease in cash flows from operating activities from 2021 to 2022 was primarily driven by the increase in working capital, largely related to inventories and accounts payable.
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 Table of Contents 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.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (UNLESS INDICATED OTHERWISE, DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) 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.
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.
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 Fragrance Compounds, Fragrance Ingredients and Cosmetic Ingredients.
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 increase in cash flows from investing activities from 2021 to 2022 was primarily driven by the change in net 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 2022.
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) .
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 for the year ended December 31, 2022. See Note 1 to the Consolidated Financial Statements for additional information .
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.
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 foreign currency exchange rates fluctuations.
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.
Such forward-looking statements are based on management’s current assumptions, estimates and expectations and include statements concerning (i) expected cash flow and availability of capital resources to fund our operations and meet our debt service requirements; (ii) our ability to execute on our strategic and financial transformation, including the progress and success of our portfolio optimization strategy, through non-core business divestitures and acquisitions, and expectations regarding the implementation of our refreshed growth-focused strategy; (iii) our ability to continue to generate value for, and return cash to, our shareholders; (iv) expectations of the impact of inflationary pressures and the pricing actions to offset exposure to such impacts; (v) the impact of high input costs, including commodities, raw materials, transportation and energy; (vi) the expected impact of global supply chain challenges; (vii) our ability to enhance our innovation efforts, drive cost efficiencies and execute on specific consumer trends and demands; (viii) the growth potential of the markets in which we operate, including the emerging markets; (ix) expectations regarding sales and profit for the fiscal year 2024, including the impact of foreign exchange, pricing actions, raw materials, energy, and sourcing, logistics and manufacturing costs; (x) the impact of global economic uncertainty and recessionary pressures on demand for consumer products; (xi) 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; (xii) our strategic investments in capacity and increasing inventory to drive improved profitability; (xiii) our ability to drive cost discipline measures and the ability to recover margin to pre-inflation levels; (xiv) expected capital expenditures in 2024; and (xv) the expected costs and benefits of our ongoing optimization of our manufacturing operations, including the expected number of closings.
New Accounting Standards See Note 1 to the Consolidated Financial Statements for a discussion of recent accounting pronouncements. 45 Table of Contents 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.
New Accounting Standards See Note 1 to the Consolidated Financial Statements for a discussion of recent accounting pronouncements. 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.
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.
As a result of disruptions or uncertainty relating to the COVID-19 pandemic, 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.
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 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 Ingredients, Flavors and Food Designs.
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.
The cash dividend declared per share in 2023, 2022 and 2021 was $3.24, $3.20 and $3.12, 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.
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.
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. 47 Table of Contents
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.
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.
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.
Contractual Obligations The Company believes its balances of cash and cash equivalents, which totaled approximately $729 million as of December 31, 2023, inclusive of approximately $26 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.
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.
Liquidity and Capital Resources Cash and Cash Equivalents We had cash and cash equivalents of approximately $729 million, inclusive of $26 million currently in Assets held for sale on the Consolidated Balance Sheets, at December 31, 2023 compared to $535 million, inclusive of $52 million in Assets held for sale on the Consolidated Balance Sheets, at December 31, 2022 and of this balance, a portion was held outside the United States.
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”).
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”).
R&D includes expenses related to the development of new and improved products and technical product support.
R&D expenses include expenses related to the development of new and improved products and technical product support.
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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 27, 2023.
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.
N&B’s indebtedness raised prior to the Merger was used to finance the Special Cash Payment (as defined below) to DuPont, which has been paid, and for the satisfaction of the related transaction fees and expenses. See Note 3 and Note 9 for additional information.
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, 2023, the Company had no borrowings outstanding under the 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.
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.
Pension and Other Postretirement Obligations As of December 31, 2023, the Company had pension funding obligations of approximately $854 million, with approximately $138 million payable within 12 months. See Note 15 to the Consolidated Financial Statements for a further discussion of our retirement plans.
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 the annual impairment test as of November 30, 2023, we first utilized 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.
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 2023 and 2022, we spent approximately $23 million and $30 million on capital projects and $139 million and $135 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.
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.
As of December 31, 2023, the Company had fixed lease payment obligations of approximately $926 million, with approximately $122 million payable within 12 months. See Note 8 to the Consolidated Financial Statements for a further discussion of our various lease arrangements.
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.
The Company’s material cash requirements include the following contractual and other obligations. Borrowings and Interest on Borrowings As of December 31, 2023, the Company had outstanding floating and fixed rate notes with varying maturities for an aggregate principal amount of approximately $9.980 billion (collectively the “Notes”), with approximately $885 million payable within 12 months.
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 Table of Contents The Periodic Assessment of Potential Impairment of Goodwill As of December 31, 2022, we have goodwill of approximately $13.355 billion.
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. The Periodic Assessment of Potential Impairment of Goodwill As of December 31, 2023, we have goodwill of approximately $10.635 billion.
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.
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. 34 Table of Contents In 2023, total sales to Russian customers were approximately 1% of total sales.
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.
As a result of the N&B Transaction, and following our prior 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. 33 Table of Contents We are organized into four segments: Nourish, Health & Biosciences, Scent and Pharma Solutions.
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 of December 31, 2023, the Company had purchase commitment obligations of approximately $391 million, with approximately $229 million payable within 12 months. 43 Table of Contents 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.
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.
The increase in cash flows from operating activities from 2022 to 2023 was primarily driven by the decrease in working capital, largely related to inventories and accounts receivable, offset in part by lower cash earnings, excluding the impact of non-cash adjustments.
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.
Cash Flows Provided By (Used In) Investing Activities Cash flows provided by investing activities in 2023 were $574 million compared to $745 million in 2022 and cash flows used in investing activities of $18 million in 2021.
As of December 31, 2022, the Company had postretirement obligations of approximately $36 million, with $3 million payable within 12 months. 43 Table of Contents Purchase Commitments The Company has various purchase commitments that include agreements for raw material procurement and contractual capital expenditures.
As of December 31, 2023, the Company had postretirement obligations of approximately $38 million, with approximately $4 million payable within 12 months. Purchase Commitments The Company has various purchase commitments that include agreements for raw material procurement and contractual capital expenditures.
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.
Cash Flows Provided By Operating Activities Cash flows provided by operating activities in 2023 were $1.439 billion, or 12.5% of sales, compared to $397 million, or 3.2% of sales, in 2022 and $1.437 billion, or 12.3% of sales, in 2021.
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.
In performing the quantitative impairment test, we determined that the fair value of four of the five reporting units exceeded their carrying values and determined that there was no further impairment of goodwill in these reporting units as of November 30, 2023.
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.
Future interest payments associated with the Notes total approximately $3.965 billion, with approximately $292 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, 2023, the Company had no Commercial Paper outstanding.
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.
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 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).
During 2022, based on the quantitative impairment test using the income approach, 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 for the year ended December 31, 2022.
(DOLLARS IN MILLIONS) December 31, 2022 Total debt (1) $ 10,987 Adjustments: Cash and cash equivalents (2) 535 Net debt $ 10,452 _______________________ (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.
(DOLLARS IN MILLIONS) December 31, 2023 Total debt (1) $ 10,096 Adjustments: Cash and cash equivalents (2) 729 Net debt $ 9,367 _______________________ (1) Total debt used for the calculation of net debt consisted of short-term debt, long-term debt, short-term finance lease obligations and long-term finance lease obligations.
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.
The notes bear effective interest rates ranging from 1.22% per year to 42 Table of Contents 5.12% per year, with maturities from March 14, 2024 to December 1, 2050. See Note 9 to the Consolidated Financial Statements for additional information.
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.
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.
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.
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. See Note 9 for additional information. Transaction with Nutrition & Biosciences, Inc.
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.
Research and Development (R&D) Expenses R&D expenses increased $33 million to $636 million (5.5% of sales) in 2023 compared to $603 million (4.8% of sales) in 2022.
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 Table of Contents Results of Operations Year Ended December 31, Change (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Net sales $ 12,440 $ 11,656 $ 5,084 7 % 129 % Cost of goods sold 8,289 7,921 2,998 5 % 164 % Gross profit 4,151 3,735 2,086 11 % 79 % Research and development (R&D) expenses 603 629 357 (4) % 76 % Selling and administrative (S&A) expenses 1,768 1,749 949 1 % 84 % Restructuring and other charges 12 41 17 (71) % 141 % Amortization of acquisition-related intangibles 727 732 193 (1) % 279 % Impairment of goodwill 2,250 — — NMF NMF Impairment of long-lived assets 120 — — NMF NMF (Gains) losses on sale of fixed assets (3) (1) 4 200 % (125) % Operating (loss) profit (1,326) 585 566 NMF 3 % Interest expense 336 289 132 16 % 119 % Other income, net (37) (58) (7) (36) % NMF (Loss) income before taxes (1,625) 354 441 NMF (20) % Provision for income taxes 239 75 74 219 % 1 % Net (loss) income (1,864) 279 367 NMF (24) % Net income attributable to non-controlling interest 7 9 4 (22) % 125 % Net (loss) income attributable to IFF shareholders $ (1,871) $ 270 $ 363 NMF (26) % Net (loss) income per share — diluted $ (7.32) $ 1.10 $ 3.21 NMF (66) % Gross margin 33.4 % 32.0 % 41.0 % 140 bps NMF R&D as a percentage of sales 4.8 % 5.4 % 7.0 % (60) bps (160) bps S&A as a percentage of sales 14.2 % 15.0 % 18.7 % (80) bps NMF Operating margin (10.7) % 5.0 % 11.1 % NMF NMF Effective tax rate (14.7) % 21.2 % 16.8 % NMF NMF Segment net sales Nourish $ 6,829 $ 6,264 $ 2,886 9 % 117 % Health & Biosciences 2,339 2,329 134 — % NMF Scent 2,301 2,254 2,064 2 % 9 % Pharma Solutions 971 809 — 20 % NMF Consolidated $ 12,440 $ 11,656 $ 5,084 7 % 129 % _______________________ NMF: Not meaningful Cost of goods sold includes the cost of materials and manufacturing expenses.
The decrease in gross profit was primarily driven by volume decreases, the net impact of the change in business portfolio mix and unfavorable manufacturing absorption primarily related to our inventory reduction program, offset in part by favorable net pricing and productivity gains. 35 Table of Contents RESULTS OF OPERATIONS Year Ended December 31, Change (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Net sales $ 11,479 $ 12,440 $ 11,656 (8) % 7 % Cost of goods sold 7,798 8,289 7,921 (6) % 5 % Gross profit 3,681 4,151 3,735 (11) % 11 % Research and development (R&D) expenses 636 603 629 5 % (4) % Selling and administrative (S&A) expenses 1,787 1,768 1,749 1 % 1 % Restructuring and other charges 68 12 41 NMF (71) % Amortization of acquisition-related intangibles 680 727 732 (6) % (1) % Impairment of goodwill 2,623 2,250 — 17 % NMF Impairment of long-lived assets — 120 — (100) % NMF Gains on sale of assets (3) (3) (1) — % 200 % Operating (loss) profit (2,110) (1,326) 585 59 % NMF Interest expense 380 336 289 13 % 16 % Other expense (income), net 28 (37) (58) (176) % (36) % (Loss) income before taxes (2,518) (1,625) 354 55 % NMF Provision for income taxes 45 239 75 (81) % 219 % Net (loss) income (2,563) (1,864) 279 38 % NMF Net income attributable to non-controlling interest 4 7 9 (43) % (22) % Net (loss) income attributable to IFF shareholders $ (2,567) $ (1,871) $ 270 37 % NMF Net (loss) income per share — diluted $ (10.05) $ (7.32) $ 1.10 37 % NMF Gross margin 32.1 % 33.4 % 32.0 % (130) bps 140 bps R&D as a percentage of sales 5.5 % 4.8 % 5.4 % 70 bps (60) bps S&A as a percentage of sales 15.6 % 14.2 % 15.0 % 140 bps (80) bps Operating margin (18.4) % (10.7) % 5.0 % NMF NMF Effective tax rate (1.8) % (14.7) % 21.2 % NMF NMF Segment net sales Nourish $ 6,060 $ 6,829 $ 6,264 (11) % 9 % Health & Biosciences 2,081 2,339 2,329 (11) % — % Scent 2,393 2,301 2,254 4 % 2 % Pharma Solutions 945 971 809 (3) % 20 % Consolidated $ 11,479 $ 12,440 $ 11,656 (8) % 7 % _______________________ NMF: Not meaningful Cost of goods sold includes the cost of materials and manufacturing expenses.
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.
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 Ingredients, (5) Health & Biosciences and (6) Pharma Solutions.
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 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.
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.
Debt Covenants At December 31, 2023, we were in compliance with all financial and other covenants under our credit agreements, including the net debt to credit adjusted EBITDA (1) ratio.
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 decrease in cash flows used in financing activities from 2021 to 2022 was primarily driven by lower repayments of long-term debt and an increase in revolving credit facility and short-term borrowings, offset in part by net repayments of commercial paper, compared to proceeds from issuance of commercial paper in 2021, higher cash dividend payments and higher purchases of redeemable non-controlling interests. 40 Table of Contents We paid dividends totaling $826 million, $810 million and $667 million in 2023, 2022 and 2021, respectively.
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.
At December 31, 2023 our net debt to credit adjusted EBITDA (1) ratio was 4.51 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.
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.
Health & Biosciences is comprised of Health, Cultures & Food Enzymes, Home & Personal Care, Animal Nutrition and Grain Processing. 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.
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 for additional information on the amendments to the credit agreements. As of December 31, 2023, we had no 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 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.
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.
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%.
Based on the quantitative impairment test performed, we determined that the Health & Biosciences, Fragrance Ingredients and Pharma Solutions reporting units had excess fair value over carrying value of less than 25%. The Health & Biosciences, Fragrance Ingredients and Pharma Solutions reporting units had excess fair value over carrying value of approximately 8%, 18% and 8%, respectively.
Key estimates and assumptions used in these valuations include revenue growth rates, gross margins, EBITDA margins, terminal growth rates and discount rates.
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, adjusted operating EBITDA margins, terminal growth rates and discount rates.
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 consolidated financial information for the years ended December 31, 2023 and 2022 reflects the results of N&B for the full twelve months of 2023 and 2022 , whereas the year ended December 31, 2021 only reflects the results of N&B for eleven months of 2021.
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.
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.
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 Table of Contents 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.
Term Loans and Revolving Credit Facility Our 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.
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.
Scent Segment Adjusted Operating EBITDA Scent Segment Adjusted Operating EBITDA increased $38 million, or 9% on a reported basis, to $461 million (19.3% of segment sales) in 2023 from $423 million (18.4% of segment sales) in the comparable 2022 period.
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.
Adjusted operating EBITDA and adjusted operating EBITDA margin exclude depreciation and amortization expense, interest expense, other income (expense), net, restructuring and other charges and certain items unrelated to recurring operations such as impairment of goodwill, impairment of long-lived assets, acquisition, divestiture and integration related costs, strategic initiatives costs, regulatory costs, N&B inventory step-up costs and other costs that are not related to recurring operations.
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.
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. 44 Table of Contents 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.
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.
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.
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.
In addition, performance in the Nourish operating segment was driven by volume decreases across various business units and the divestiture of the portion of the Savory Solutions business, with an impact of approximately $310 million, offset in part by price increases across all business units.
(2) Cash and cash equivalents includes approximately $52 million currently in Assets held for sale on the Consolidated Balance Sheets. 42 Table of Contents Senior Notes 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.
Senior Notes As of December 31, 2023, we had $9.085 billion aggregate principal amount outstanding in senior unsecured notes, with $1.435 billion principal amount denominated in EUR and $7.650 billion principal amount denominated in USD, which includes the N&B Senior Notes assumed as a result of the Merger.
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.
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 items that are not related to recurring operations.
For the Year Ended December 31, (DOLLARS IN MILLIONS) 2022 2021 Segment Adjusted Operating EBITDA Nourish $ 1,176 $ 1,172 Health & Biosciences 634 625 Scent 423 463 Pharma Solutions 222 165 Total 2,455 2,425 Depreciation & Amortization (1,179) (1,156) Interest Expense (336) (289) Other Income, net 37 58 Acquisition Related Costs 4 — Restructuring and Other Charges (12) (41) Gains on Sale of Fixed Assets 3 1 Impairment of Goodwill (2,250) — Impairment of Long-Lived Assets (120) — Shareholder Activism Related Costs (3) (7) Business Divestiture Costs (110) (42) Employee Separation Costs (11) (29) Strategic Initiative Costs (3) — Global Shared Services Implementation Costs (5) — Frutarom Acquisition Related Costs (1) (2) N&B Inventory Step-Up Costs — (368) N&B Transaction Related Costs — (91) Integration Related Costs (94) (105) (Loss) Income Before Taxes $ (1,625) $ 354 Segment Adjusted Operating EBITDA margin: Nourish 17.2 % 18.7 % Health & Biosciences 27.1 % 26.8 % Scent 18.4 % 20.5 % Pharma Solutions 22.9 % 20.4 % Consolidated 19.7 % 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.
In addition to our strategic priorities, segment reporting is also based on differences in the products and services we provide. 38 Table of Contents For the Year Ended December 31, (DOLLARS IN MILLIONS) 2023 2022 Segment Adjusted Operating EBITDA Nourish $ 732 $ 1,176 Health & Biosciences 588 634 Scent 461 423 Pharma Solutions 199 222 Total 1,980 2,455 Depreciation & Amortization (1,142) (1,179) Interest Expense (380) (336) Other (Expense) Income, net (28) 37 Restructuring and Other Charges (68) (12) Impairment of Goodwill (2,623) (2,250) Impairment of Long-Lived Assets — (120) Acquisition, Divestiture and Integration Related Costs (174) (201) Strategic Initiatives Costs (31) (8) Regulatory Costs (50) — Other (2) (11) Loss Before Taxes $ (2,518) $ (1,625) Segment Adjusted Operating EBITDA margin: Nourish 12.1 % 17.2 % Health & Biosciences 28.3 % 27.1 % Scent 19.3 % 18.4 % Pharma Solutions 21.1 % 22.9 % Consolidated 17.2 % 19.7 % Nourish Segment Adjusted Operating EBITDA Nourish Segment Adjusted Operating EBITDA decreased $444 million, or 38% on a reported basis, to $732 million (12.1% of segment sales) in 2023 from $1.176 billion (17.2% of segment sales) in the comparable 2022 period.
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.
See “Critical Accounting Policies and Use of Estimates” and Note 6 to the Consolidated Financial Statements for additional information.
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 Table of Contents 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.
The increase in R&D expenses was primarily driven by higher operating expenses for R&D related activities, offset in part by the net impact of the change in business portfolio mix. 37 Table of Contents Selling and Administrative (S&A) Expenses S&A expenses increased $19 million to $1.787 billion (15.6% of sales) in 2023 compared to $1.768 billion (14.2% of sales) in 2022.
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).
Interest Expense Interest expense increased $44 million to $380 million in 2023 compared to $336 million in 2022. The increase in interest expense was due to higher interest rates on our cash pooling arrangements, commercial paper borrowings, outstanding Term Loan Facilities (see Note 9 for additional information) and factoring programs (see Note 1 for additional information).
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.
Scent Scent sales in 2023 increased $92 million, or 4% on a reported basis, to $2.393 billion compared to $2.301 billion in the 2022 period. On a currency neutral basis, Scent sales increased 6% in 2023 compared to the 2022 period as exchange rate variations had an unfavorable impact.
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.
In addition, the performance was primarily driven by volume decreases and unfavorable manufacturing absorption primarily related to our inventory reduction program, offset in part by favorable net pricing and productivity gains. 2022 IN COMPARISON TO 2021 For a comparison of our results of operations for the fiscal years ended December 31, 2022 and December 31, 2021, see “Part II, Item 7.
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.
In addition, performance in the Health & Biosciences operating segment was driven by the net impact of the divestiture of the Microbial Control business unit and acquisition of Health Wright Products, Inc., which was approximately $228 million, and volume decreases across various business units, offset in part by price increases across all business units.
(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.
See Note 1 and Note 6 for additional information. Impairment of Long-Lived Assets There was no impairment of long-lived assets in 2023. Impairment of long-lived assets was $120 million in 2022.
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.
Gross Profit Gross profit in 2023 decreased $470 million, or 11% on a reported basis, to $3.681 billion (32.1% of sales) compared to $4.151 billion (33.4% of sales) in the 2022 period.
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 anticipate that cash flows from operations, cash proceeds generated from planned business divestitures and availability under our existing credit facilities will be sufficient to meet our investing and financing needs, including our debt service requirements.
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 increase in cash flows used in financing activities from 2022 to 2023 was primarily driven by higher repayments of long-term and short-term debts, compared to lower net repayments of long-term and short-term debts in 2022, and higher net repayments of commercial paper.
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 Table of Contents 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.
In addition, the performance was primarily driven by favorable net pricing, productivity gains and volume increases, offset in part by the impact of the divestiture of the FSI business. 39 Table of Contents Pharma Solutions Segment Adjusted Operating EBITDA Pharma Solutions Segment Adjusted Operating EBITDA decreased $23 million, or 10% on a reported basis, to $199 million (21.1% of segment sales) in 2023 from $222 million (22.9% of segment sales) in the comparable 2022 period.
(“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.
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.
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.
Restructuring and Other Charges Restructuring and other charges increased to $68 million in 2023 compared to $12 million in 2022. The increase was driven by higher severance costs incurred as part of the 2023 Restructuring Program, net of reversals of prior severance cost accruals. See Note 2 for additional information.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeBased 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.
Biggest changeBased on a hypothetical decrease or increase of 1% in interest rates, our annual interest expense would change by approximately $6 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.
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.
For the year ended December 31, 2023, 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 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.
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, 2023, these swaps were in a liability position with an aggregate fair value of $161 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 the value of the U.S. dollar against the Euro, the estimated fair value of our cross currency swaps would change by approximately $152 million. At December 31, 2023, the fair value of our EUR fixed rate debt was $1.384 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 foreign exchange rates, the estimated fair value of our EUR fixed rate debt would change by approximately $143 million. At December 31, 2023, the fair value of our USD fixed rate debt was $6.227 billion.
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.
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 change by approximately $153 million as of December 31, 2023.
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.
These contracts, and the counterparties to which are major international financial institutions, generally involve the exchange of one currency for a second currency at a future date, have maturities not exceeding twelve months, and are marked-to-market with changes in fair value that are recorded to Other expense (income), net within our Consolidated Statements of (Loss) Income and Comprehensive Loss.
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.
We enter into foreign currency forward contracts with the objective of managing our exchange rate risk related to foreign currency denominated monetary assets and liabilities of our operations.
Removed
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 Table of Contents
Added
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 $623 million. At December 31, 2023, the total amount of our outstanding debt subject to interest rate fluctuations was $895 million.
Added
In general, with the exception of soy and natural gas, we do not use commodity financial instruments to hedge commodity prices. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. See index to Consolidated Financial Statements on page 50 .

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