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. While we are a global leader, our Nourish business operates regionally, with different formulas that reflect local taste preferences. 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, for our customers, most of which are tailor-made, and we continually develop new formulasingredients and solutions to meet changing consumer preferences and customer needs.

Our Nourish segment consists of mostan innovative and broad portfolio of our legacy Taste segment combined with N&B’s Food & Beverage divisionnatural-based ingredients to enhance nutritional value, texture and the food protection businessfunctionality in a wide range of N&B’s Health & Biosciences division. Our Nourish business spans a diversified portfolio across naturalbeverage, dairy, bakery, confectionery and plant-based specialty food ingredients, flavor compounds, and savory solutions and inclusionsculinary applications and consists of three business units: Ingredients, Flavors and Food Designs.

Our Health & Biosciences businesssegment consists of a biotechnology-driventhe development and production of an advanced biotechnology-derived portfolio of enzymes, food cultures, probiotics and specialty ingredients for food home and personal care,non-food applications. Among many other applications, this biotechnology-driven portfolio includes cultures for use in fermented foods such as yogurt, cheese and fermented beverages, probiotic strains, many with documented clinical health claims for use as dietary supplements and wellness applications.

Our Scent businesssegment creates fragrance compounds, fragrance ingredients and cosmetic ingredients that are integral elements in the world’s finest perfumes and best-known household and personal care products. Consumer insights science and creativity are at the heart of our Scent business, and, along with our unique portfolio of natural and synthetic ingredients, global footprint, innovative technologies and know-how, and customer intimacy, we believe make us a market leader in scent products. Our Scent business consists of our legacy Scent segment as well as our Flavor Ingredients business, formerly part of our legacy Taste business. The Scent segment is comprised of three business units: Fragrance Compounds, Fragrance Ingredients and Cosmetic Actives.

Our perfumers harness creativity and leverage our innovative captive molecules, sustainable natural ingredients obtained with innovative processes, biotech ingredients, data science, and consumer insights to create unique and inspiring fragrances driving consumer preferences.

Our fine fragrances focus on perfumes and colognes, creating global and local namesake brands, from high luxury to mass market, from market leading to ultra-niche products.

Our consumer fragrances include three end-use categories of products:

Our Pharma Solutions businesssegment produces, among other things, a vast portfolio includingof cellulosics and seaweed-based pharmapharmaceutical excipients, used to improve the functionality and delivery of active pharmaceutical ingredients, including controlled or modified drug release formulations, and enabling the development of more effective pharmaceutical finished dosage formats.formulations. Our excipients are used in prescription and over-the-counter pharmaceuticals and dietary supplements. Our Pharma Solutions products also serve a variety of other specialty and industrial end-uses including coatings, inks, electronics, agriculture, and consumer products. Pharma Solutions is comprised of N&B’s Pharma Solutions business.

The markets in which we compete require constant innovation to remain competitive. Consumer preferences tend to drive change in our markets, and as science evolves and sustainability continues to be a key factor to customers and consumers, we must continue to strengthen our research and development platforms and adapt our capabilities to provide differentiated products.

We believe that the first step to creating an innovative and unique product experience begins with gaining insight into the consumer and emerging industry trends. By developing a deep understanding of what consumers value and prefer through our consumer insight programs, we are better able to focus our research and development and creative efforts.

Our consumer science, insight and marketing teams interpret trends, monitor product launches, analyze quantitative market data and conduct numerous consumer interviews annually.

Based on this information, we develop innovative and proprietary programs to evaluate potential products that enable us to understand the emotional connections between a prospective product and the consumer. We believe this ability to pinpoint the likelihood of a product’s success translates into stronger brand equity, resulting in increased returns and greater market share gains for our customers as well as for IFF.

We consider our research and development infrastructure to be one of our key competencies and critical to our ability to provide differentiated products to our customers. We have strong product and application development pipelines built upon a global network that includes research and development, as well as regulatory and product stewardship capabilities.

We focus and invest substantial resources in the research and development of new and innovative molecules, compounds, formulations and technologies and the application of these to our customers’ products. Using the knowledge gained from our consumer insights programs and business unit needs, we strategically focus our resources around key research and development platforms that address or anticipate consumer needs or preferences. Our innovation-based platforms are aligned with key consumer insight-led growth themes: improving home and personal care, empowering wellbeing and healthy lives, transforming food systems and accelerating climate solutions. By aligning our capabilities and resources to these platforms, we ensure the proper support and focus for each program so that our products can be further developed and eventually accepted for commercial application.

As of December 31, 2021,2022, we have been940 granted 1,346U.S. patents, in the United States, since 2000, and have 608546 pending U.S. patent applications, as well as numerous other granted patents and pending patent applications.applications around the world. We have developed many unique molecules and delivery systems for our customers that are used as the foundations of successful products around the world.

Our principal basic research and development activities are located in Union Beach, New Jersey; Wilmington, Delaware; Palo Alto, California; Brabrand, Denmark; and Leiden, The Netherlands. At those locations, our scientists and application engineers, while collaborating with our other research and development centers around the world, support the:

As of December 31, 2021,2022, we employed approximately 3,4003,200 people globally in research and development activities.

Through our global network of creative centers and application laboratories, we create or adapt the basic Nourish, Health & Biosciences, Scent and Pharma Solutions products that we have developed in the research and development process to commercialize for use in our customers’ consumer products. Our global creative teams consist of marketing, consumer science, consumer insights and technical application experts, from a wide range of cultures and nationalities. In close partnership with our customers’ product development groups, our creative teams create the experiences that our customers are seeking in order to satisfy consumer demands in each of their respective markets.

New product development is driven by a variety of sources including requests from our customers, who are in need of specific products for use in a new or modified consumer product, or as a result of internal initiatives stemming from our consumer insights program. Our product development team works in partnership with our scientists and researchers to optimize the consumer appeal and relevance of our offerings. We use a collaborative process between our researchers, our product development team and our customers to perfect our offerings so they are ready to be included in the final consumer product.

In addition to creating new products, our researchers and product development teams advise customers on ways to improve their existing products by moderating or substituting current ingredients with more readily accessible or less expensive materials enhancing their yield. This often results in creating a better value proposition for our customers.

Most of our formulas are treated as trade secrets and remain our proprietary assets. Our business is not materially dependent upon any individual patent, trademark or license.

We strive to provide our customers with consistent and quality products on a timely and cost-effective basis by managing all aspects of the supply chain, from raw material sourcing through manufacturing, quality assurance, regulatory compliance and distribution.

In connection with the manufacture of our products, we use natural and synthetic ingredients. As of December 31, 2021,2022, we purchased approximately 28,50030,000 different raw materials sourced from an extensive network of domestic and international suppliers and distributors.

Natural ingredients are derived from flowers, fruits and other botanical products, as well as from animal and marine products, and commodity crops like wheat, corn and soy. They contain varying numbers of organic chemicals that are responsible for the fragrance, flavor, antioxidant properties and nutrition of the natural products. Natural products are purchased directly from farms or in processed and semi-processed forms. Some natural products are used in compounds in the state in which they are obtained and others are used after further processing. Natural products, together with various chemicals, are also used as raw materials for the manufacture of synthetic ingredients by chemical processes.

In order to ensure our supply of raw materials, achieve favorable pricing and provide timely transparency regarding inflationary trends to our customers, we continue to focus on:

As of December 31, 2021,2022, we had approximately 210220 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, Great Britain, Germany, Indonesia, Turkey, Brazil, Mexico, Slovenia, China, India, Ireland, Finland, Denmark, Belgium and Singapore.

During the last few years, we undertook an initiative to optimize our global operations footprint to efficiently and cost-effectively deliver value to our global customers. Between 2019 and 2020,Since inception of the Companyinitiative, we completed the closure of 2122 sites. During 2021, the Company completed the closure of one site. By the completion of this initiative, targeted forto occur by the end of 2022,2023, we expect to close approximately 30 manufacturing sites.

Our supply chain initiatives are focused on increasing capacity and investing in key technologies. Within our more mature markets, we tend to focus on consolidation and cost optimization as well as the implementation of new technologies. In addition to our own manufacturing facilities, we develop relationships with third parties, including contract manufacturing organizations, that expand our access to the technologies, capabilities and capacity that we need to better serve our customers.

Supporting environmental stewardship across our operations, including commitments to climate action, zero waste to landfill, water stewardship solutions and an acceleration of our responsible sourcing practices by promoting regenerative ecosystems and achieving zero deforestation for strategic raw material supply chains.

Advancing our commitment to people and communities by strengthening diversity, equity & inclusion within our workforce, while continuously improving our safety program by striving for an injury-free workplace, and achieving world-class safety performance. Within our responsible sourcing program, the Company will continue to promote human rights and animal welfare, while supporting farmers’ livelihoods and ensuring prosperous and equitable value chains.

Continuing our commitment to good governance which starts with our Board and Executive Committee and is supported by a strong governance framework, including having a robust program to ensure compliance with our Codes of Conduct and adherence to the highest standards of ethics, integrity, honesty and respect in our dealings internally and with our business partners. To enhance accountability in line with evolving stakeholder expectations, the Company plans to launchhas launched ESG metrics tied to executive compensation, while expanding oversight for ESG at the Board of Directors level. IFF remains on track to increase our transparency in disclosures and key performance indicators.

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.

In 2021,2022, our Company continued to achieve notable recognitions in these areas. We were named toqualified as a constituent of the Dow Jones Sustainability Indices for the secondthird consecutive year, a family of best-in-class benchmarks for investors who recognize that sustainable business practices are critical to generating long-term shareholder value. Once again named to both the 20212022 World Index and the North America Index, this distinction validates IFF’s leadership position in sustainability performance and underscores our commitment to executing on key ESG priorities. IFF was also recognized by the Human Rights Campaign as a 20212022 Best Place to Work for LBGTQ Equality and named among the 20212022 Best Places to Work for Disability Inclusion by Disability:IN, for the thirdfourth and secondthird consecutive years, respectively. For the first time in 2021,In 2022, we were also recognized bynamed to the CDP as a triple A list company“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 stewardshipsecurity and deforestation.forests. We were also awarded the 2022 EcoVadis Platinum sustainability rating for the second time, placing IFF among the top 1% of companies assessed. IFF continues to be named one of Barron’s 100 Most Sustainable Companies and listed in the FTSE4Good Index series as well as in the Euronext Vigeo World 120 Index for ESG performance.

In addition, in 2022 IFF further aligned with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) by initiating the first phase of a climate scenario analysis to understand and quantify the potential risks and opportunities related to climate change. For more detailed information about our ESG programs and performance, please refer to our annual sustainabilityESG report.

We develop, produce and market our products in a number of jurisdictions around the world and are subject to federal, regional and local legislation and regulations in various countries. Our products, which among other industries, are intended for use in food, beverage, pharmaceutical and dietary supplements, home and personal care, feed, cosmetics industries, are subject to strict quality and regulatory standards and environmental laws and regulations. We in turn are required to meet strict standards which, in recent years, have become increasingly stringent and affect both existing as well as new products. While the cost of compliance with such laws and regulations leads to higher overall capital expenditure, which can be significant in certain periods, we do not currently anticipate any material capital expenditures necessary to comply with such laws and regulations. We continue to monitor existing and pending laws and regulations and while the impact of regulatory changes cannot be predicted with certainty, compliance has not had, and is not expected to have a material adverse effect on capital expenditure, earnings or competitive position.

Our products and operations are subject to regulation by governmental agencies in each of the markets in which we operate. These agencies include (1) the Food and Drug Administration and equivalent international agencies that regulate flavors, pharmaceutical excipients and other ingredients in consumer products, (2) the Environmental Protection Agency and equivalent international agencies that regulate our manufacturing facilities, as well as fragrance products (including encapsulation systems) and microbial products,, (3) the Occupational Safety and Health Administration and equivalent international agencies that regulate the working conditions in our manufacturing, research laboratories and creative centers, (4) local and international agencies that regulate trade and customs, (5) the Drug Enforcement Administration and other local or international agencies that regulate controlled chemicals that we use in our operations, (6) the Chemical Registration/Notification authorities that regulate chemicals that we use in, or transport to, the various countries in which we manufacture and/or market our products, and (7) the U.S. Department of Agriculture and equivalent international authorities with respect to, among other things, labeling of consumer products. We have seen an increase in registration and reporting requirements concerning the use of certain chemicals in a number of countries, such as Registration, Evaluation, Authorization and Restriction of Chemicals (“REACH”) regulations in the European Union, as well as similar regulations in other countries.

In addition, we are subject to various rules relating to health, work safety and the environment at the local and international levels in the various countries in which we operate. Our manufacturing facilities throughout the world are subject to environmental standards relating to air emissions, sewage discharges, the use of hazardous materials, waste disposal practices and clean-up of existing environmental contamination. In recent years, there has been an increase in the stringency of environmental regulation and enforcement of environmental standards, and the costs of compliance have risen significantly, a trend we expect will continue in the future.

The markets for our products are part of a larger market that supplies a wide variety of ingredients and compounds used in consumer products. The broader market includes functional foods and food additives, including seasonings, texturizers, spices, cultures, enzymes, probiotics, certain food-related commodities, and fortified products, as well as natural ingredients, nutritional ingredients, supplements and active cosmetic ingredients. Our recent acquisitions have also expanded our reach in products within the functional food ingredient market, including ingredients focused on improving the health and wellness characteristics of a consumer good, the dietary supplement, pharmaceutical ingredient, infant nutrition markets and the cosmetic actives market.

The global market for our products has expanded, primarily as a result of an increase in demand for, and an increase in the variety of, consumer products.

The market for our products is highly competitive. Our main competitors consist of (1) other large global companies, such as Givaudan, Firmenich Symrise, DSM, Kerry, ADM, Novozymes, Chr. Hansen, (2) mid-sized companies, (3) numerous regional and local manufacturers and (4) consumer product companies who may develop their own competing products.

We believe that our ability to create products with the sustainability related attributes customers expect and compete successfully in the various sub-market is based on:

In certain industries, large multi-national customers and, increasingly, mid-sized customers, may limit the number of their suppliers by placing some on “core lists,” giving them priority for development and production of their new or modified products. To compete more successfully, we must make continued investments in customer relationships and tailor our research and development efforts to anticipate customers’ needs, provide effective service and secure and maintain inclusion on these “core lists.”

Private label manufacturers, mostly medium-sized, local or small food manufacturers, constitute a growing segment in certain markets where we are active. Over the last decade, with the strengthening of supermarket chains, online platforms and growing consumer price consciousness, consumption of private label products has grown at a faster rate than the brand food industry rate. We believe that new business opportunities will continue to arise from these clients as they are increasing their demand for products that are similar to existing products in the market, distinctive premium products, as well as more innovative products.

The success of our business is built on our talented employees. At December 31, 2021,2022, we had approximately 24,00024,600 employees worldwide, of whom approximately 5,3005,500 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.

Our culture is based on our five corporate values of empowerment, expertise, innovation, integrity and responsibility, and the expression of these values can be seen and felt throughout our history. Our employees appreciate that they contribute to products that touch and enhance the lives of millions of people around the world. In 2021, we implemented an employee engagement initiative through our culturalOur robust culture ambassador programprograms continue to buildengage a broad portion of the IFF community in building common identity and shared purpose drive positive organizational change,and strengthen engagement and motivation. Cultural ambassadors were nominatedmotivation by each site and led programs and sessionsproviding programming on promotion of the IFF values and providing recognition of individuals who exemplified such values. To date, approximately halfexemplify them.

Our leadership development efforts empower employees to become forward-looking, inspiring and capable decision-makers, agents of change and great leaders. A full portfolio of proprietary leadership development programs and an overarching talent management system is in place to support growth of leaders and at all levels. To cultivate our employees’ talent and build sustainable long-lasting careers at IFF, we provide tools that enable our employees to envision their career journeys in the form of articulated career “ladders” and “frameworks”. We offer corresponding development opportunities to include specialized courses for employees globally by partnering with leading institutions and universities to help provide the latest training and development offerings at all levels. We also offer to our employees an extensive library of on-demand courses and materials on leadership, management and professional skills development. Those learning resources are integrated into our human capital platform, allowing managers and employees to establish digitalized learning plans that are ultimately captured as a part of their employee profile. Further, those offerings complement our talent acquisition strategy and organized and personalized feedback process, supported by industry-leading assessment tools.

In 2021, our primary focus was harmonizing2022, the two correspondingIFF DE&I programs from the legacy N&Bprogram continued to grow in reach and IFF organizations. We reorganized IFF’s DE&I Steering Committee to ensure there was equitable representation of our employee population, including heritage N&B colleagues.impact. We continued our commitment of gender equality using the Economic Dividends for Gender Equity Methodological Framework.Framework, a leading global gender equity benchmark and certification. IFF was the first company ever to retain a global “Move” rating from the Edge Certified Foundation, this time across the harmonized company and 27 countries up from 22 countries. IFF also achieved an Edge Plus rating for intersectionality inclusion. IFF was also named for the first time to the 2022 Bloomberg Gender Equality Index recognizing, among other things, our commitment to transparency. IFF was also listed as a “Best Place to Work for Disability Inclusion” for the second consecutive year with a 100% score; part of this achievement was duescore. The AccessAbilities colleague community continued to the fact that we have launched a Disability Inclusion Taskforce that is auditing our policies & practicespush forward awareness and inclusive behaviors for any opportunities to be more inclusive of Peoplepersons with Disabilities.disabilities. Moreover, IFF maintained our “Best Place to Work for LGBTIQ+ Equality” with 100% scores in Human Rights Campaign Corporate Equality Index and the HRC Equidad Mexico and also achieved a Bronze Level recognition form the India Workplace Equality Index. Throughout 2021,2022, our employee resource groups known as “colleague communities” continued to thrive and mature. Our existing 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. We were also excited to launchIn 2022, our newest communities, such as Asian Colleagues for Equity, Empowerment, & Excellence, IFFers UNIDOS, and AccessAbility. Lastly, we hosted our firstsecond annual Global Inclusion Week deliveringdelivered over 5,000 hours of training which further advancesadvancing our journey towards full inclusion.

We make available free of charge on or through the “Investors” link on our website, www.iff.com, all materials that we file electronically with the Securities and Exchange Commission (“SEC”), including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after electronically filing such materials with, or furnishing them to, the SEC. During the period covered by this Form 10-K, we made all such materials available through our website as soon as reasonably practicable after filing such materials with the SEC.

The SEC maintains an Internet website, www.sec.gov, that contains reports, proxy and information statements and other information that we file electronically with the SEC.

A copy of our By-Laws, Corporate Governance Guidelines, Codes of Conduct, and the charters of the Audit Committee, Human Capital and& Compensation Committee, Nominating and Governance & Corporate Responsibility Committee and Innovation and Sustainability Committee of the Board of Directors are posted on the “Investors” section of our website, www.iff.com.

Our principal executive offices are located at 521 West 57th Street, New York, New York 10019 and 200 Powder Mill Road, Wilmington, DEDelaware 19803.

The current executive officers of the Company, as of February 28, 2022,27, 2023, are listed below.

WeThe global economy experienced high rates of inflation in 2022, and such inflationary pressure is expected to generally continue in 2023 despite price decreases for certain materials and services that hit historical highs in 2022. As a result of the broader inflationary environment and supply chain disruptions we have experienced, and may continue to experience, volatility and increases in the price of input costs, such as certain raw materials, transportation and energy costs. We might also suffer from supply disruptions from supplier exits as higher costs may become unaffordable for certain suppliers. The significant spike in energy prices over the course of 2022, especially in Europe, has created cost pressures for us and may continue to impact our financial performance. In addition, central banks may continue to increase interest rates or conduct other monetary policies to counter inflation, which could negatively affect our borrowing costs and those of our customers and suppliers, as a result of global marketwell as exchange rates and supply chain disruptions and the broader inflationary environment.other macroeconomic factors.

If we are unable to increase the prices of our products to our customers of our products to offset inflationary cost trends, or if we are unable to achieve cost savings to offset such cost increases, we could fail to meet our cost expectations, and our profits and operating results could be adversely affected. Our ability to price our products competitively to timely reflect higher input costs is critical to maintain and grow our sales. Increases in prices of our products to customers or the impact of the broader inflationary environment on our customers and may lead to declines in demand and sales volumes. Further, we may not be able to accurately predict the volume impact of price increases, especially if our competitors are able to more successfully adjust to such input cost volatility. Increasing our prices to our customers could result in long-term sales declines or loss of market share if our customers find alternative suppliers or choose to reformulate their consumer products to rely less on our products, which could have an adverse long-term impact on our results of operations. Increased cost volatility trends may also impact the business and financial situation of our customer or suppliers, which could in turn affect the demand or supply, respectively, by such parties. Future inflationary and deflationary trends are beyond our control, and we may not be able to sufficiently mitigate any impact on our business and financial situation.

In connection with our manufacturing of our products, we often rely on third party suppliers for raw materials. We use many different raw materials for our business, such as essential oils, extracts and concentrates derived from fruits, vegetables, flowers, woods and other botanicals, animal products, raw fruits, organic chemicals and petroleum-based chemicals, as well as, gelatin, glycols, cellulose processed grains, guar, locust bean gum, organic vegetable oils, peels, saccharides, seaweed, soybeans, and sugars and yeasts.

Supply chain disruptions, such as the ones related to the COVID-19 pandemic, may impair or delay our ability to obtain sufficient quantities of certain raw materials through our ordinary supply channels and cause us to incur higher costs by procuring raw materials from other sources in order to compensate for such delays or lack of availability.

In addition, our suppliers, similar to us, are subject to risks, inherent in agriculture, manufacturing and distribution on a global scale, including industrial accidents, environmental events, climate change, strikes and other labor disputes, disruptions in supply chain or information systems, disruption or loss of key research or manufacturing sites, product quality control, safety and environmental compliance issues, licensing requirements and other regulatory issues, as well as natural disasters, global or local health crisis,crises, international conflicts, terrorist acts, geopolitical developments, trade wars, and other external factors over which neither they nor we have control. These suppliers could also could become insolvent or experience other financial distress. For example, in 2017, a fire at the manufacturing facility of BASF Group (“BASF”), one of our suppliers, caused them to declare a force majeure event which resulted in industry disruption due to the lack of availability of certain ingredients used in many fragrance compounds.

If our suppliers are unable to supply us with sufficient quantities of ingredients and raw materials to meet our needs, we would need to seek alternative sources of such materials (which may result in higher transportation or procurement costs) or pursue our own production of such ingredients or direct acquisition of such raw materials. However, for certain of our ingredients and raw materials, we rely on a limited number of suppliers where there are not readily available alternatives. If we are unable to obtain or manufacture alternative sources of such ingredients or raw materials at a similar cost, we may seek to (i) reformulate our products and/or (ii) increase pricing to reflect the higher supply cost. To mitigate our sourcing risk, we maintain strategic stock levels for critical items. However, if we do not accurately estimate the amount of raw materials that will be used for the geographic region in which we will need these materials or competitively price our products, our margins could be adversely affected.

At the same time, climate-change related disruptions, like the February 2021 winter storm in Texas, may affect the availability, quality and pricing of raw materials. There is growing evidence that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather and precipitation patterns, growing and harvesting conditions (both on land and in the sea), and the frequency and severity of extreme weather and natural disasters, such as floods, wildfires, droughts and water scarcity. To the extent such climate change effects have a negative impact on crop size and quality, supply chain, energy or transportation costs, it could impact the availability, quality and pricing of affected raw materials. Climate related policies and energy production restrictions and pricing may exacerbate such negative impacts.

More generally, as we source many of our raw materials globally to help ensure quality control or to mitigate supply chain disruptions, we are subject to additional risks related to the increases toin energy or transportation costs. Energy prices are in turn subject to significant volatility caused by, among other things, market fluctuations, supply and demand changes, currency fluctuations, production and transportation disruptions, geopolitical developments, and other world events, as well as geopolitical developments and climate change related conditions discussed above. For instance, the Russia-Ukraine conflict could adversely impact, among other things, our raw material, energy and transportation costs, as well as certain of our suppliers and local markets, global and local macroeconomic conditions, and cause further supply chain disruptions.

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.

In December 2022, we announced our new strategic and financial vision previewing a refreshed strategic plan and new operating model, which among other things, consists of a renewed growth-focus strategy, enhanced cost & productivity initiatives, a redesigned operating model, a reaffirmation of our commitment to the extent that employeesour portfolio optimization initiatives and a plan to evolve our Board in line with best-in-class governance standards, as well as certain changes to our manufacturing or distribution centers contract COVID-19, weExecutive Leadership Team. Implementing such changes can be complex, costly and time-consuming and may need to temporarily close those facilities, which mayalso result in reduced production hours, inabilityunanticipated issues, such as additional expenses, competitive responses, employee turnover or impact on our commercial relationships. Even if such initiatives are implemented successfully, the full benefits may not be realized or may not be realized within the desired timeframe. The failure to deliver products tomeet the challenges involved in implementing our customers and reduced sales. Additionally, compliance with vaccine mandates to the extent they are imposed in the jurisdictions in which we operate may lead to employee absences, resignations, or labor shortages. Any such mandates may also affect our suppliers, whichstrategic transformation could disrupt our access to raw materials and exacerbate supply-chain related risks.

The combination of large, diverse and independent businesses is complex, costly and time-consuming. The combination with the N&B Business may also result in material unanticipated problems, expenses, liabilities, competitive responses, employee turnover and loss of customer and other business relationships. In addition, even if the operations of the N&B Business are integrated successfully, the full benefits of the transaction may not be realized, including, among others, the synergies, cost savings or revenue growth that are expected. These benefits may not be achieved within the anticipated time frame or at all.

The difficulties of integration or realizing the full benefits of the N&B Transaction include, among others:

The failure to meet the challenges involved in integrating the businesses and to realize the anticipated benefits of the transaction could result in a material adverse impact on our business and results of operations.

As of December 31, 2021,2022, our total debt was $11.400$10.970 billion. Despite our level of indebtedness, we expect to continue to have the ability to borrow additional debt. There may be circumstances in which required payments of principal and/or interest on our debt could adversely affect our cash flows, our operating results or our ability to return capital to our shareholders.

Furthermore, our degree of leverage could adversely affect our future credit ratings. If we are unable to maintain or improve our current investment grade rating or improve our leverage, it could adversely affect our future cost of funding, liquidity and access to capital markets. On October 13, 2022, S&P Global Ratings downgraded our Local Currency LT credit rating from “BBB” to “BBB-”. The Company does not have any rating downgrade triggers that would accelerate the maturity dates of its senior unsecured debt. However, any downgrade in our credit rating may, depending on the extent of such downgrade, negatively impact our ability to raise additional debt capital, our liquidity and capital position, and may increase our cost of borrowing for new capital raises. In addition, our existing Amended Revolving Credit Facility and Term Loans have pricing grids that are based on credit rating, such that our cost of borrowing may increase as our credit rating decreases. In addition, our current level of leverage could increase our vulnerability to sustained, adverse macroeconomic weakness, limit our ability to obtain further financing, decrease our flexibility in responding to or preparing for changes in the industry in which we operate and our ability to pursue certain operational and strategic opportunities, including large acquisitions. Our level of indebtedness, as well as our failure to comply with covenants under our debt instruments, could adversely affect our business, results of operation and financial condition or our ability to return capital to our shareholders and the additional debt instruments may subject us to additional covenants.

From time to time, including as a part of our ongoing strategic transformation and our portfolio optimization strategy as discussed above, we evaluate acquisition candidatesmay enter into strategic transactions or we may divest certain non-core assets. For instance, during the third quarter of 2022, we completed the divestiture of our Microbial Control business and during the fourth quarter of 2022, we announced that may strategically fitwe entered into an agreement for the sale our Savory Solutions business, and/which is expected to close in the second quarter of 2023, subject to customary closing conditions. Any failure to complete or growth objectives. If we are unable to successfully integrate and develop acquired businesses, wepotential delays in closing any such transaction could fail to achieve anticipated synergies and cost savings, including any expected increase in revenues and operating results, which could have a material adverse effect onadversely affect the development of our portfolio optimization strategy as well as our financial results. Furthermore, even if successfully integrated, the acquisition target may fail to further the Company’s business strategy as anticipated, expose the Company to increased competition or other challenges with respect to the Company’s products or geographic markets, and expose the Company to additional liabilities associated with the acquired business, technology or other asset or arrangement. We may also incur asset impairment charges related to acquisitions if we fail to maintain and integrate the acquired businesses and such impairments charges would reduce our earnings.condition.

We also evaluate and enter into collaborations, joint ventures or partnerships from time to time to enhance our research and development efforts or expand our product portfolios and technology. The process of establishing and maintaining collaborative relationships is difficult and time-consuming to negotiate, document and implement. We may not be able to successfully negotiate such arrangements or the terms of the arrangements may not be as favorable as anticipated. Furthermore, our ability to generate revenues from such collaborations will depend on our partners’ abilities and efforts to successfully perform the functions assigned to them in these arrangements and these collaborations may not lead to development or commercialization of products in the most efficient manner, or at all. In addition, from time to time, we have acquired, and we may acquire, only a majority interest in companies and provided or may provide earnouts for the former owners along with the ability, at our option, or obligation, at the former owners’ option, to purchase the minority interests at a future date at an established price. These investments may have additional risks and may not be as efficient as other operations as we may have fiduciary or contractual obligations to the minority investors and may rely on former owners for the continuing operation of the acquired business. If we are unable to successfully establish and manage these collaborative relationships and majority investments it could adversely affect our future growth.

In addition, from time to time, we evaluate acquisition candidates that may enter intostrategically fit our business and/or growth objectives. If we are unable to successfully integrate and develop acquired businesses, we could fail to achieve anticipated synergies and cost savings, including any expected increase in revenues and operating results, which could have a material adverse effect on our financial results. Furthermore, even if successfully integrated, the acquisition target may fail to further the Company’s business strategy as anticipated, expose the Company to increased competition or other strategic transactionschallenges with respect to the Company’s products or geographic markets, and expose the Company to additional liabilities associated with the acquired business, technology or other asset or arrangement. We may also incur asset impairment charges related to acquisitions if we may sell or divest certain non-core assets as part offail to maintain and integrate the acquired businesses and such impairments charges would reduce our portfolio optimization strategy, such as the sale of the Microbial Control business which we expect will close in the second quarter of 2022, subject to customary closing conditions. The failure to complete or potential delays in closing any such transaction could adversely affect the development of our portfolio optimization strategy and our future growth.earnings.

The markets in which we compete are highly competitive. We face vigorous competition from companies throughout the world, including multi-national and specialized companies active in flavors, fragrances, enzymes, pharmaceutical excipients, nutrition and specialty ingredients, as well as consumer product companies which may develop their own competing products. For instance, in the flavors industry, we face increasing competition from ingredient suppliers that have expanded their portfolios to include flavor offerings. Some of our competitors specialize in one or more of our product sub-segments, while others participate in many of our product sub-segments. In addition, some of our global competitors may have more resources than we do or may have proprietary products that could permit them to respond to changing business and economic conditions more effectively than we can. Consolidation ofMoreover, there has been increased consolidation among our competitors, and such consolidation or partnerships among our competitors may exacerbate these risks.

As we continue to enter into adjacent markets, such as cosmetic ingredients, functional foods, specialty fine ingredients and nutrition products, we may face greater competition-related risks in these markets than with our other businesses. For example, the specialty fine ingredients market is more price sensitive than the flavors market and is characterized by relatively lower profit margins. Some fine ingredients products are less unique and more replaceable than competitors’ products. There is no assurance that operating margins will remain at current levels, which could substantially impact our business, operating results and financial condition.

Competition in our business is based, among other things, on innovation, product quality, regulatory compliance, pricing, quality of customer service, the support provided by marketing and application groups, and understanding of consumers. It is difficult for us to predict the timing, scale and success of our competitors’ actions in these areas. In particular, the discovery and development of new products, protection of our intellectual property and development and retention of key employees are critical to our ability to effectively compete in our business. Advancement in technologies have also enhanced the ability of our competitors to develop substitutable products. Increased competition by existing or future competitors, including aggressive price competition, could result in the loss of sales, reduced pricing and margin pressure and could adversely impact our sales and profitability.

Failing to identify and make capital expenditures to achieve growth opportunities, being unable to make new concepts scalable, or failing to effectively and timely reinvest in our business operations, could result in the loss of competitive position and adversely affect our financial condition or results of operations.

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 with historically high employee resignations.market. Furthermore, as we continue to focus on innovation, our need for scientists and other professionals will increase and may result in increased labor costs. The ability to attract and retain talented employees is critical in the development of new products and technologies which is an integral component of our growth strategy.

Competition for employees can be intense and if we are unable to successfully integrate, motivate and reward the acquired Frutaromour employees, employees from the N&B Business or our current employees in our combined company, we may not be able to retain them. If we are unable to retain theseour 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.

During 2021,2022, our 25 largest customers, a majority of which were multi-national consumer products companies, collectively accounted for 29%28% of our sales in the aggregate. Large multi-national customers’ market share, especially in the consumer product industry, continues to be pressured by new smaller companies and specialty players that cater to or are more adept at adjusting to the latest consumer trends, including towards natural products and clean labels, changes in the retail landscape (including e-commerce and consolidation), and increased competition from private labels, which have resulted and may continue to result in decreased demand for our products by such multi-national customers and volume erosion, especially in our Nourish business. Furthermore, consolidations amongst our customers have resulted in larger and more sophisticated customers with greater buying power and additional negotiating strength. If such trends continue, our sales could be adversely impacted if we are not able to replace these sales.

Our ability to differentiate ourselves and deliver growth largely depends on our ability to successfully develop and introduce new products and product improvements that meet our customers’ needs, and ultimately appeal to consumers. Innovation is a key element of our ability to develop and introduce new products. We cannot be certain that we will be successful in achieving our innovation goals, such as the development of new molecules, new and expanded delivery systems and other technologies. We currently spendIn 2022, we spent approximately 5% of our sales on research and development; however, thisdevelopment, and as part of our new strategic vision announced in December 2022, we expect to continue investment in research and development and innovation initiatives. This investment level may vary in the future if available resources to invest in research and development are limited due to our ongoing integration and restructuring efforts.efforts or from adverse macroeconomic or supply chain factors. We also may need to devote more resources to enhancing our existing product portfolios. Our research and development investments may only generate future revenues to the extent that we are able to develop products that meet our customers’ specifications, are at an acceptable cost and achieve acceptance by the targeted consumer market. Furthermore, there may be significant lag times from the time we incur research and development costs to the time that these research and development costs may result in increased revenue.

Consequently, even when we “win” a project, our ability to generate revenues as a result of these investments is subject to numerous customer, economic and other risks that are outside of our control, including delays by our customers in the launch of a new product, the level of promotional support for the launch, poor performance of our third-party vendors, anticipated sales by our customers not being realized or changes in market preferences or demands, or disruptive innovations by competitors.

As a company engaged in the global development, manufacture and distribution of products, we are subject to the risks inherent in such activities, including industrial accidents, environmental events, strikes and other labor disputes, product quality control issues, safety, licensing requirements and other regulatory issues, as well as natural disasters, public health crises, such as pandemics or epidemics, international conflicts, geopolitical events, terrorist acts, political or economic crises (such as the uncertainty related protracted U.S. federal debt ceiling negotiations) and other external factors over which we have no control. For instance, the Russia-Ukraine conflict has adversely impacted and could adverselycontinue to impact, among other things, certain of our local markets and suppliers, global and local macroeconomic conditions, foreign exchange rates and financial markets, raw material, energy and transportation costs, and cause further supply chain disruptions. We maintain operations in both Russia and Ukraine and export products to customers in Russia and Ukraine from operations outside the region. In response to the events in Ukraine, the Company has limited the production and supply of ingredients in and to Russia to only those that meet the essential needs of people, including food, hygiene and medicine. As a result of changes and uncertainties arising out of the Russia-Ukraine conflict, our operating performance in Russia has declined in 2022 and may not reverse in the near future.

While we operate research and development, manufacturing and distribution facilities throughout the world, many of these facilities are extremely specialized and certain of our research and development or creative laboratories facilities are uniquely situated to support our research and development efforts while certain of our manufacturing facilities are the sole location where a specific ingredient or product is produced. If our research and development activities or the manufacturing of ingredients or products were disrupted, the cost of relocating or replacing these activities or reformulating these ingredients or products may be substantial, which could result in production or development delays or otherwise have an adverse effect on our margins, operating results and future growth.

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. Cybersecurity

To address the risks to our information technology systems and the associated costs, we maintain an information security program that includes updating technology and information security policies and controls, cybersecurity insurance, cybersecurity governance and compliance, employee/consultant awareness training, table-top exercises, logging and monitoring and routine testing of our information technology systems. We believe that these preventative actions provide adequate measures of protection against information security breaches/incidents and generally reduce our cybersecurity risks, however, cybersecurity incidents, data breaches and operational disruptions are constantly evolving, becoming more sophisticated and are conducted by groups and individuals with a wide range of expertise and motives, including foreign governments, cyber terrorists, cyber criminals, and malicious employees and other insiders and outsiders. Additionally, continued geopolitical turmoil, including the ongoing conflict between Russia and Ukraine, heightened the risk of cyber incidents. We and our third-party providers are subject to the risks posed by such incidents, which can take many forms, including code anomalies, “Acts of God,” data leakage, hardware or software failures, human error,errors, cyber extortion, password theft or introduction of viruses, malware and ransomware, including through phishing emails.

A disruption to our information technology systems could result in the loss of confidential business, customer, supplier or employee information, litigation or fines, and may require substantial investigations, repairs or replacements or impact our ability to summarize and report financial results in a timely manner, resulting in significant financial, legal and relational costs and potentially harming our reputation and adversely impacting our operations, customer service and results of operations. As we work on integratingcomplete integration of N&B’s and Frutarom’s systems with IFF’s systems these risks may be exacerbated.and prepare for the announced divestitures, we reduce our risk profile. Additionally, aan information security or data breach could require us to devote significant management and financial resources to address the problems created, and, as a result of the private rights of action provided for under the EU’s General Data Protection Regulation (the “GDPR”), the California Consumer Privacy Act (the “CCPA”) and other laws relating to data protection and privacy in other jurisdictions, in the event of such breaches, additional private litigation against us may result. These types of adverse impacts could also occur in the event the confidentiality, integrity or availability of company, customer, supplier or employee information are compromised due to a data loss by us or a trusted third party. We or the third parties with which we share information may not discover any such incidents andand/or loss of information for a significant period of time after the incident occurs. In addition, our remote work arrangements, as a result of COVID-19, may pose challenges for our employeeshybrid and our IT systems and extended periods of remote work arrangements could introduce operational risk, including cybersecurity and IT systems management risks.

Although weWe have developed systems and processes that are designedexperienced threats to protect our data and customer dataour systems and although we have not experienced a material incident to date, there can be no assurance that these measures will prevent data loss and other security breaches and expect to continue to expend additional resources to bolster these protections, these security measures cannot provide absolute security and we may be unable to detect or preventlimit the impact of a breach or disruption in the future.future incident. Additionally, while we have insurance coverage designed to address certain aspects of cyber risks in place, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise.

As part of our growth strategy, we have increased our presence in emerging markets by expanding our manufacturing presence, sales organization and product offerings in these markets, and we expect to continue to expand our business in these markets.markets as part of our new strategic vision announced in December 2022. With our acquisition of Frutarom in 2018 and the N&B Transaction, each of which also had a significant presence in emerging markets, our business in these markets has meaningfully grown. In addition to the currency and international risks described below, our operations in these markets may be subject to a variety of other risks. Emerging markets typically have a consumer base with limited or fluctuating disposable income and customer demand in these markets may fluctuate accordingly. As a result, a decrease in customer demand in emerging markets may have an adverse effect on our ability to execute our growth strategy.

Further, there is no assurance that our existing products, variants of our existing products or new products that we make, manufacture, distribute or sell will be accepted or be successful in any particular developing or emerging market, due to local or global competition, product price, cultural differences, consumer preferences or otherwise. In addition, emerging markets may have weak legal systems which may affect our ability to enforce our intellectual property and contractual rights, exchange controls, unstable governments and privatization or other government actions that may affect taxes, subsidies and incentive programs and the flow of goods and currency. In conducting our business, we move products from one country to another and may provide services in one country from a subsidiary located in another country. Accordingly, we are vulnerable to abrupt changes in trade, customs and tax regimes in these markets. If we are unable to expand our business in developing and emerging markets, effectively operate, or manage the risks associated with operating in these markets, or achieve the return on capital we expect from our investments in these markets, our operating results and future growth could be adversely affected.

We have significant operations outside the U.S., the results of which are reported in the local currency and then translated into U.S. dollars at applicable exchange rates for inclusion in our consolidated financial statements. The exchange rates between these currencies and the U.S. dollar have fluctuated and will continue to do so in the future, with the fluctuations being particularly pronounced in certain emerging markets. Changes in exchange rates between these local currencies and the U.S. dollar will affect the recorded levels of sales, profitability, assets and/or liabilities. Additionally,Along with other macroeconomic uncertainty we are experiencing such as a highly inflationary global environment and supply chain disruptions discussed elsewhere in these risk factors, we have experienced and continue to expect volatility in global foreign currency exchange rates. The expected continuing increase of interest rates by the Federal Reserve Bank to counter inflationary trends may further impact such exchange rates. Further volatility or unfavorable movements in currency exchange rates may adversely impact our financial condition, cash flows or liquidity. Although we employ a variety of techniques to mitigate the impact of exchange rate fluctuations, including sourcing strategies and a limited number of foreign currency hedging activities, we cannot guarantee that such hedging and risk management strategies will be effective, and our results of operations could be adversely affected.

We operate on a global basis, with manufacturing and sales facilities in or supply arrangements with companies based in the U.S., Europe, Africa, the Middle East, Latin America, and Greater Asia. During 2021,2022, approximately 72%71% of our combined net sales were to customers outside the U.S. and we intend to continue expansion of our international operations. As a result, our business is increasingly exposed to risks inherent in international operations. These risks, which can vary substantially by location, include the following:

The occurrence of any one or more of these factors could increase our costs and adversely affect our results of operations.

Many of our products are ingredients in a wide assortment of global consumer products throughout the world. Historically, demand for consumer products using our products, was stimulated and broadened by changing social habits and consumer needs, population growth, an expanding global middle-class and general economic growth, especially in emerging markets.

Changes in the global, regional or local economic conditions have, and may in the near future, adversely impact demand for consumer products at a regional or global level. Such parameters include, but are not limited to, increased inflation, unemployment and underemployment, salaries and wage rates stagnation, and low growth rates.rates, and ongoing impacts of the COVID-19 pandemic. Reduced consumer spending may cause changes in our customer orders including reduced demand for our products or order cancellations. The timing of placing of orders and the amounts of these orders are generally at our customers’ discretion. Customers may cancel, reduce or postpone orders with us on relatively short notice. Significant cancellations, reductions or delays in orders by customers could affect our quarterly results.

We must continually anticipate and react, in a timely and cost-effective manner, to changes in consumer preferences and demands, including changes in demand driven by increasing awareness of health and wellness, and demands for transparency or cleaner labels with respect to product ingredients by consumers and regulators.regulators, and attitudes towards the impact of biotechnology advances such as gene editing and mapping. Consumers, especially in developed economies such as the U.S. and Western Europe, are rapidly shifting away from products containing artificial ingredients to all-natural, healthier alternatives. In addition, there has been a growing demand by consumers, non-governmental organizations and, to a lesser extent, governmental agencies to provide more transparency in product labeling and our customers have been taking steps to address this demand, including by voluntarily providing product-specific ingredients disclosure. These two trends could affect the types and volumes of our ingredients and compounds that our customers include in their consumer product offerings and, therefore, affect the demand for our products. If we are unable to react to or anticipate these trends in a timely and cost-effective manner, our results of operations and future growth may be adversely affected.

Federal, state, local and foreign governments, our customers, consumers and shareholders are becoming increasingly sensitive to environmental and other sustainability issues. In response, we have committed to a sustainability strategy through which we continue to assess our combined environmental footprint followingbetter understand the N&B Transactionopportunities and the Frutarom acquisition, with the intent of identifying synergies, gaps and opportunitiesrisks in our sustainabilitysustainable efforts.

We sell certain accounts receivable on a non-recourse basis to unrelated financial institutions under “factoring” agreements, some of which are sponsored by certain customers. The cost of participating in these programs was immaterial to our results in all periods. Should we choose not to participate, or if these programs were no longer available, it could reduce our cash flows from operations in the period in which the arrangement ends.

A significant portion of our assets consists of long-lived assets, including tangible assets such as our manufacturing facilities, and intangible assets, including goodwill and customer relationships.

At least annually, we assess both goodwill and indefinite-lived intangible assets for impairment. We test for impairment by comparing the estimated fair value of a reporting unit with its carrying amount. If the carrying amount of a reporting unit exceeds its estimated fair value, we record an impairment charge based on the difference of the two. Intangible assets with finite lives are also tested for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Such events and changes in circumstances could include a sustained decrease in our market capitalization, increased competition or unexpected loss of market share, increased input costs beyond projections (for example due to regulatory or industry changes), our inability to recognize the anticipated benefits of acquisitions, unexpected business disruptions (for example due to a natural disaster, public health crises, such as pandemics or epidemics or loss of a customer, supplier, or other significant business relationship), acts by governments and courts, operating results falling short of projections, or significant adverse changes in the markets in which we operate. For example, in the third quarter of 2022, it was determined that goodwill impairment triggering events occurred for the Nourish, Health & Biosciences and Pharma Solutions reporting units. The primary indicators that were deemed to be triggering events in the quarter for the reporting units were declines in projections across various reporting units and ongoing adverse macroeconomic impacts such as inflation, increases in interest rates and unfavorable effects from exchange rates. As a result of the triggering events, we assessed the fair value of the reporting units by using a discounted cash flow method at a rate of return that reflects the relative risk of the projected future cash flows of each reporting unit, as well as a terminal value. We determined that the fair value of the Nourish and Pharma Solutions reporting units exceeded their carrying value, and determined that there was no impairment of goodwill relating to these reporting units. We determined that the carrying value of the Health & Biosciences reporting unit exceeded its fair value and recorded a goodwill impairment charge of $2.250 billion in the Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income for the year ended December 31, 2022.

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates and market factors. Estimating the fair value of reporting units requires us to make assumptions and estimates regarding our business performance, future plans, future annual net cash flows, income tax considerations, discount rates and growth rates and based on industry, economic, regulatory conditions and other market factors. Moreover, management will make significant accounting judgments and estimates for the application of acquisition accounting under GAAP, and the underlying valuation models. IFF’s business, operating results and financial condition could be materially and adversely impacted in future periods if IFF’s accounting judgments and estimates related to these models prove to be inaccurate.

To the extent any of our acquisitions, including the acquisitions of Frutarom and the N&B Business, do not perform as anticipated and our underlying assumptions and estimates related to their fair value determination are not met, whether due to internal or external factors, the value of suchgoodwill and other long-lived assets may be negatively affected and we may be required to record impairment charges.

The funding obligations for our pension plans are impacted by the performance of the financial markets, particularly the equity markets and interest rates. Funding obligations are determined under government regulations and are measured each year based on the value of assets and liabilities on a specific date. If the financial markets do not provide the long-term returns that are expected under the governmental funding calculations, we could be required to make larger contributions. The equity markets can be very volatile, and therefore our estimate of future contribution requirements can change dramatically in relatively short periods of time. Similarly, changes in interest rates and legislation enacted by governmental authorities can impact the timing and amounts of contribution requirements. An adverse change in the funded status of the plans could significantly increase our required contributions in the future and adversely impact our liquidity.

Assumptions used in determining projected benefit obligations and the fair value of plan assets for our pension and other postretirement benefit plans are determined by us in consultation with outside consultants and advisors. In the event that we determine that changes are warranted in the assumptions used, such as the discount rate, expected long-term rate of return on assets, or expected health care costs, our future pension and postretirement benefit expenses could increase or decrease. Due to changing market conditions or changes in the participant population, the assumptions that we use may differ from actual results, which could have a significant impact on our pension and postretirement liabilities and related costs and funding requirements.

In 2017, the United Kingdom’s Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. It was unclear at that time whether or not LIBOR would cease to exist, if new methods of calculating LIBOR would be established such that it continues to exist after 2021 or if replacement conventions would be developed. In March 2021, the FCA confirmed that publication of all of the LIBOR settings for Euro, Sterling and Swiss Franc and some of the LIBOR settings for Japanese Yen and US dollars ceased in December 2021 and the remainder of the LIBOR settings for US dollars will cease in June 2023. In response to the expected phase out of LIBOR, in March 2022, Congress passed the LIBOR Act to provide a uniform solution for replacing LIBOR references in existing contracts that do not supply a fallback provision identifying an alternative benchmark rate.

To identify a successor rate for LIBOR, financial regulators in various countries, including the United States, the United Kingdom, the European Union and Switzerland, have formed working groups with the aim of recommending alternatives to LIBOR denominated in their local currencies. Some of the financial regulators have identified the Secured Overnight Financing Rate (“SOFR”) as their preferred alternativereplacement rate for LIBOR.

Even if the financial instruments transition to using alternative benchmarks like SOFR successfully, the new benchmarks are likely to differ from LIBOR, as the alternative benchmark rate may be calculated differently. Borrowings under our revolving credit and term loan facilities are at variable interest rates based on LIBOR. Although our revolving credit and term loan facilities include mechanics to facilitate the adoption by us and our lenders of an alternative benchmark rate in place of LIBOR, no assurance can be made that such alternative rate will perform in a manner similar to LIBOR and may result in interest rates that are higher or lower than those that would have resulted had LIBOR remained in effect. Further, transitioning to an alternative benchmark rate, such as SOFR, may result in us incurring expense and legal risks, as renegotiation and changes to documentation may be required in effecting the transition. Any of these occurrences could materially and adversely affect our borrowing costs, financial condition and results of operations.

We currently manufacture goods in the United Kingdom for distribution in the European Union and vice-versa and therefore may continue to be adversely affected as a result of the United Kingdom’s departure from the European Union (“Brexit”) in 2020. The impact of the withdrawal has and may continue to, among other outcomes, exacerbate the disruption of the free movement of goods, services and people between the United Kingdom and the European Union, undermine bilateral cooperation in key geographic areas and significantly disrupt trade between the United Kingdom and the European Union or other nations as the United Kingdom pursues independent trade relations. In addition, Brexit has and continues to cause legal uncertainty, which could last indefinitely, and may potentially create divergent national laws and regulations as the United Kingdom determines which European Union laws to replace or replicate. Given the lack of comparable precedent, it is unclear what the financial, trade and legal implications of the withdrawal of the United Kingdom from the European Union will be and how the withdrawal will continue to affect us. Adverse consequences concerning Brexit or the European Union could include deterioration in global economic conditions, instability in global financial markets, political uncertainty, volatility in currency exchange rates, or adverse changes in the cross-border agreements currently in place, any of which could have an adverse impact on our financial results in the future.

The development, manufacture and sale of our products are subject to various regulatory requirements in each of the countries in which our products are developed, manufactured and sold. In addition, we are subject to product safety and compliance requirements established by governments, non-governmental organizations, including industry or similar oversight bodies, or contractually by our customers, including requirements concerning product safety, quality and efficacy, environmental impacts (including packaging, energy and water use and waste management) and other sustainability or similar issues. Changes to regulations or the implementation of additional regulations, especially in certain highly regulated markets we are active in, such as regulatory modernization of food safety laws and evolving standards and regulations affecting pharmaceutical excipients microbials, or in reaction to new or next-generation technologies, including advances in protein engineering, biotechnology (e.g., gene editing and gene mapping,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.

We use a variety of strategies, methodologies and tools to minimize the likelihood of product or process non-compliance with these regulations and standards by (i) monitoring regulatory developments and current product standards, (ii) assessing relative risks in our supply chain, (iii) monitoring internal and external performance and (iv) testing raw materials and finished goods. As concerns regarding safety, quality and environmental impact become more pressing, we may see new, more restrictive regulations adopted that impact our products. For example, the European Chemicals Agency has proposed that the European Commission adopt a ban on microplastics, including those found in personal care items, detergents and cosmetics, to reduce plastics pollution. If this ban is adopted, we will be required to modify our products and/or innovate new solutions to replace microplastics in our products. If we are unable to adapt to these new regulations or standards in a cost effective and timely manner, we may lose business to competitors who are able to provide compliant products, expose ourselves to customer claims, regulatory fines, litigation or reputational damage.

We may also be exposed to serious adverse health claims related to undetected poor quality of raw materials, internal system failures to adequately reduce or eliminate certain hazards (such as pathogens, allergens, contaminants, pesticides, physical hazards, etc.) or products that are not in line with required or agreed specifications. Supply chain complexities, aging equipment and infrastructure, human errors, or other failures may exacerbate such risks.

Our contracts often require us to indemnify our customers for the costs associated with a product non-compliance event, including penalties, costs and settlements arising from litigation, remediation costs or loss of sales. As our offerings are used in many products intended for human use or consumption, these consequences would be exacerbated if we or our customer did not identify the defect before the product reaches the consumer and there was a resulting impact at the consumer level. Such a result could lead to potentially large-scale adverse publicity, negative effects on consumer’s health, recalls and potential litigation, fines, penalties, sanctions or other regulatory actions. In addition, if we do not have adequate insurance or contractual indemnification from suppliers or other third parties, or if insurance or indemnification is not available, the liability relating to product or possible third-party claims arising from mislabeled, contaminated or damaged products could adversely affect our business, financial condition or results of operations. Furthermore, adverse publicity about our products, or our customers’ products that contain our ingredients, including concerns about product safety or similar issues, whether real or perceived, could harm our reputation and result in an immediate adverse effect on our sales and customer relationships, as well as require us to utilize significant resources to rebuild our reputation.

Defects in, misuse of, quality issues with respect to (including products recalls) or inadequate disclosure of risks relating to our products, could lead to lost profits and other economic damage, property damage, personal injury or other liability resulting in third-party claims, criminal liability, significant costs, damage to our reputation and loss of business. Any of these factors could adversely affect our business, financial condition and our results of operations.

From time to time we are involved in a number of legal claims, regulatory investigations and litigation, including claims related to intellectual property, product liability, environmental matters and indirect taxes. For instance, product liability claims may arise due to the fact that we supply products to the food and beverage, functional food, pharma/nutraceutical and personal care industries. Our manufacturing and other facilities may expose us to environmental claims and regulatory investigations and potential fines.

In addition, in light of our product offerings into functional food, nutraceuticals, and natural antioxidants, we may also be subject to claims of false or deceptive advertising claims relating to the efficacy, health benefits or other performance attributes of such offerings in the U.S., Europe and other foreign jurisdictions in which we offer these types of products. These claims can arise as a result of function claims, health claims, nutrient content claims and other claims that impermissibly suggest such benefits or attributes for certain foods or food components. The cost of defending these claims or our obligations for direct damages and indemnification if we were found liable could adversely affect our results of operations.

As a result of the N&B Transaction and the Frutarom acquisition, we assumed legal or environmental claims, regulatory investigations, and litigation, including product liability, patent infringement, commercial litigation and other actions,actions. We have and we maywill continue to become involved in additional actions in the future arising from the acquired operations. Specifically, as the N&B Business and Frutarom had a significant number of facilities located globally and a large number of customers, our exposure to legal claims, regulatory and environmental investigations and litigation may increase.is increased. This couldwill likely result in an increase in our cost for defense, or settlement of claims or indemnification obligations if we wereas compared to be found liable in excess of our historical experience.

Our insurance may not be adequate to protect us from allpotential material expenses related to pending and future claims and our current levels of insurance may not be available in the future at commercially reasonable prices. Any of these factors could adversely affect our profitability and results of operations.

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.

Failure to comply with these laws and regulations or any future changes to them may result in significant consequences to us, including the need to close or relocate one or more of our production facilities, administrative, civil and criminal penalties, fines, sanctions, litigation, costly remediation measures, liability for damages and negative publicity. If we are unable to meet production requirements, we can lose customer orders, which can adversely affect our future growth or we may be required to make incremental capital investments to ensure supply. For example, we have completed negotiations with the Chinese government concerning the relocation of a second fragrance facility in China. Idling of facilities or production modifications has caused or may cause customers to seek alternate suppliers due to concerns regarding supply interruptions and these customers may not return or may order at reduced levels even once issues are remediated. If these non-compliance issues reoccur in China or occur or in any other jurisdiction, we may lose business and may be required to incur capital spending above previous expectations, close a plant, or operate a plant at significantly reduced production levels on a permanent basis, and our operating results and cash flows from operations may be adversely affected.

The global nature of our business, our increased size and employee count, the significance of our international revenue, our focus on emerging markets and presence in regulated industries create various domestic and local regulatory challenges and subject us to risks associated with our international operations. The U.S. Foreign Corrupt Practices Act or FCPA,(the “FCPA”) and similar anti-bribery and anti-corruption laws and regulations in other countries generally prohibit companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business or for other commercial advantage. In addition, U.S. public companies are required to maintain records that accurately and fairly represent their transactions and have an adequate system of internal accounting controls. Under the FCPA, U.S. companies may be held liable for the corrupt actions taken by directors, officers, employees, agents, or other strategic or local partners or representatives. As such, if we or our intermediaries fail to comply with the requirements of the FCPA or similar legislation, governmental authorities in the U.S. and elsewhere could seek to impose substantial civil and/or criminal fines and penalties which could have a material adverse effect on our business, reputation, operating results and financial condition.

We operate or may pursue opportunities in some jurisdictions, such as China, India, Brazil, Russia and Africa, that pose potentially elevated risks of fraud or corruption or increased risk of internal control issues. In certain jurisdictions, compliance with anti-bribery laws may conflict with local customs and practices. From time to time, we have conducted and will conduct internal investigations of the relevant facts and circumstances, control testing and compliance reviews, and take remedial actions, when appropriate, to help ensure that we are in compliance with applicable corruption and similar laws and regulations. For example, in August 2019, during the integration of Frutarom, we were made aware of allegations that two Frutarom businesses operating principally in Russia and Ukraine made certain improper payments, including to representatives of a number of customers. Our investigation substantiated the allegations that improper payments to representatives of customers were made and that key members of Frutarom’s senior management at the time were aware of such payments. We did not uncover any evidence suggesting that such payments had any connection to the U.S. In addition, Frutarom grew through rapid acquisition and, as part of our integration efforts, we have implemented our anti-corruption and similar policies throughout a number of those acquired companies, many of which were not previously subject to these U.S. laws.

We rely on patents, trademarks, copyrights and trade secrets to protect our intellectual property rights. We often rely on trade secrets to protect our products, manufacturing processes, extract methodologies and other processes, as this does not require us to publicly file information regarding our intellectual property. From time to time, a third party may claim that we have infringed upon or misappropriated their intellectual property rights, or a third party may infringe upon or misappropriate our intellectual property rights. We could incur significant costs in connection with legal actions to assert our intellectual property rights against third parties or to defend ourselves from third-party assertions of invalidity, infringement, misappropriation or other claims. Any settlement or adverse judgment resulting from such litigation could require us to obtain a license to continue to use the intellectual property rights that are the subject of the claim, or otherwise restrict or prohibit our use of such intellectual property rights. Any required licensing fees may not be available to us on acceptable terms, if at all. For those intellectual property rights that are protected as trade secrets, this litigation could result in even higher costs, and potentially the loss of certain rights, since we would not have a perfected intellectual property right that precludes others from making, using or selling our products or processes. The ongoing trend among our customers towards more transparent labeling could further diminish our ability to effectively protect our products.

We vigilantly protect our intellectual property rights, including trade secrets. We have designed and implemented internal controls intended to restrict access to and distribution of our respective intellectual property. Despite these precautions, our intellectual property is vulnerable to unauthorized access through employee error or actions, theft and cybersecurity incidents, and other security breaches. Protecting intellectual property related to biotechnology is particularly challenging because theft is difficult to detect and biotechnology can be self-replicating. Accordingly, the impact of such theft can be significant.

For intellectual property rights that we seek to protect through patents, we cannot be certain that these rights, if obtained, will not later be opposed, invalidated or circumvented. In addition, even if such rights are obtained in the U.S., the laws of some of the other countries in which our products are or may be sold domay not protect intellectual property rights to the same extent as the laws of the U.S. If other parties were to infringe on our intellectual property rights, or if our intellectual property rights were the subject of unauthorized access leading to competitive pressure or if a third party successfully asserted that we had infringed on their intellectual property rights, it could materially and adversely affect our future results of operations by, among other things, (i) being required to cease production and marketing or reducing the price that we could obtain in the marketplace for products which are based on such rights, (ii) increasing the royalty or other fees that we may be required to pay in connection with such rights, (iii) limiting the volume, if any, of such products that we can sell or (iv) resulting in significant litigation costs and potential liability.

We are subject to taxes in the U.S. and numerous foreign jurisdictions. Our future effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in liabilities for uncertain tax positions, cost of repatriations or changes in tax laws or their interpretation. Any of these changes could have a material adverse effect on our profitability.

We have and will continue to implement transfer pricing policies among our various operations located in different countries. These transfer pricing policies are a significant component of the management and compliance of our operations across international boundaries and overall financial results. Many countries routinely examine transfer pricing policies of taxpayers subject to their jurisdiction, challenge transfer pricing policies aggressively where there is potential non-compliance and impose significant interest charges and penalties where non-compliance is determined. However, governmental authorities could challenge these policies more aggressively in the future and, if challenged, we may not prevail. We could suffer significant costs related to one or more challenges to our transfer pricing policies.

We are subject to the continual examination of our income tax returns by the Internal Revenue Service, state tax authorities and foreign tax authorities in those countries in which we operate, and we may be subject to assessments or audits in the future in any of the countries in which we operate. The final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals, and while we do not believe the results that follow would have a material adverse effect on our financial condition, such results could have a material effect on our income tax provision, net income or cash flows in the period or periods in which that determination is made.

In addition, a number of international legislative and regulatory bodies have proposed legislation and begun investigations of the tax practices of multi-national companies and, in the European Union, the tax policies of certain European Union member states. One of these efforts has been led by the Organization for Economic Co-operation and Development, an international association of 34 countries including the U.S., which has finalized recommendations to revise corporate tax, transfer pricing, and tax treaty provisions in member countries. On December 15, 2022, European Union member states unanimously adopted the Minimum Tax Directive ensuring a global minimum level of taxation for multi-national companies. Member States have until December 31, 2023 to transpose the Directive into national legislation. The enactment of the new legislation could have a material effect on our effective tax rate, income tax expense, net income or cash flows.

Since 2013, the European Commission (“EC”) has been investigating tax rulings granted by tax authorities in a number of European Union member states with respect to specific multi-national corporations to determine whether such rulings comply with European Union rules on state aid, as well as more recent investigations of the tax regimes of certain European Union member states. Under European Union law, selective tax advantages for particular taxpayers that are not sufficiently grounded in economic realities may constitute impermissible state aid. If the EC determines that a tax ruling or tax regime violates the state aid restrictions, the tax authorities of the affected European Union member state may be required to collect back taxes for the period of time covered by the ruling. In late 2015 and early 2016, the EC declared that tax rulings, related to other companies, by tax authorities in Luxembourg, the Netherlands and Belgium did not comply with the European Union state aid restrictions. If the EC or tax authorities in other jurisdictions were to successfully challenge tax rulings applicable to us in any of the member states in which we are subject to taxation or our internal intercompany arrangements, we could be exposed to increased tax liabilities.

In December 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) that significantly revised the U.S. tax code effective January 1, 2018 by, among other things, lowering the corporate income tax rate from a top marginal rate of 35% to a flat 21%, limiting deductibility of interest expense and performance based incentive compensation, transitioning to a territorial system and creating new taxes associated with global operations.2018. The Tax Act impacted our consolidated results of operations during 20212022 and is expected to continue to impact our consolidated results of operations in future periods. In future periods, we expect that our effective tax rate will be impacted by the lower U.S. corporate tax rate that will initially be offset by the elimination of the deductibility of performance-based incentive compensation, and other provisions of the Tax Act that may impact us prospectively. However, theThe ultimate impact of the Tax Act, willincluding for future periods, may depend on additional regulatory or accounting guidance that may be issued with respect to the Tax Act.

In August 2022, the U.S. government enacted legislation commonly referred to as the “Inflation Reduction Act”, which, among other things, imposes a minimum “book” tax on certain corporations effective for taxable years beginning after December 31, 2022 and creates a new excise tax on stock repurchases made by certain publicly traded corporations after December 31, 2022. The impact of the Inflation Reduction Act and any operating and structural changes that we may undertake to permit us to benefit fromon our operations will depend on multiple factors, many of which cannot be determined at this time. As a result, it is uncertain what the extent of the impact of the new lower U.S.law will be on our operations. The application of the minimum book tax rate prospectively. Thisor the excise tax on us could adversely affect our results of operations.

The completion of the N&B Transaction in 2021 was conditioned upon the receipt by DuPont of an opinion that the transaction generally will qualify as a tax-free reorganization. The tax opinion was based upon various factual representations and assumptions, as well as certain undertakings made by DuPont, IFF and N&B. If any of those factual representations or assumptions were untrue or incomplete in any material respect, any undertaking was or is not complied with, or the facts upon which the opinion was based are materially different from the facts at the closing of the N&B Transaction, the transaction may not qualify (in whole or part) for tax-free treatment.

The N&B spin-off and certain aspects of the pre-spin-off internal reorganizations to form N&B could be taxable to DuPont if N&B or we were to engage in a “Spinco Tainting Act” (as defined in the Tax Matters Agreement, by and among DuPont, N&B and IFF, a form of which is attached to IFF’s registration statement on Form S-4 (Registration Number 333-238072)). A Spinco Tainting Act is generally any action (or inaction) within our control or under the control of N&B or their affiliates, any event involving our common stock or the common stock of N&B or any assets of N&B or its subsidiaries, or any breach by N&B or any of its subsidiaries of any factual representations, assumptions, or undertakings made by it, in each case, that would affect the non-recognition treatment of the spin-off and internal reorganizations for U.S. federal income tax purposes, as described above. Under the Tax Matters Agreement, we and N&B will be required to indemnify DuPont for any taxes resulting from a Spinco Tainting Act. If we or N&B were required to indemnify DuPont pursuant to the Tax Matters Agreement as described above, this indemnification obligation may be substantial and could have a material adverse effect on us, including with respect to itsour financial condition and results of operations.

Legal requirements relating to the collection, storage, handling, use, disclosure, transfer, and security of personal data continue to evolve, and regulatory scrutiny in this area is increasing around the world. This regulatory environment is increasingly challenging and may present material obligations and risks to our business, including significantly expanded compliance burdens, restrictions on transfer of personal data, costs and enforcement risks. For example, the European Union’s GDPR, which became effective in May 2018, greatly increases the jurisdictional reach of EU law and adds a broad array of requirements related to personal data, including individual notice and opt-out preferences, restrictions on and requirements for transfer of personal data and the public disclosure of significant data breaches. Additionally, violations of the GDPR can result in fines of as much as 4% of a company’s annual revenue. Other governments have enacted or are enacting similar data protection laws, including data localization laws that require data to stay within their borders. All of these evolving compliance and operational requirements, restrictions on use of personal data, as well as the uncertain interpretation and enforcement of laws, impose significant costs and regulatory risks that are likely to increase over time. Our failure to comply with these evolving regulations could expose us to fines, sanctions, penalties and other costs that could harm our reputation and adversely impact our financial results.

Our principal executive offices are located at 521 West 57th Street, New York, New York and 200 Powder Mill Road, Wilmington, Delaware. Our principal sites include facilities which, in the opinion of its management, are suitable and adequate for their use and have sufficient capacity for its current business needs and expected near-term growth.

Our Nourish segment consists of mostan innovative and broad portfolio of our legacy Taste segment combined with N&B’snatural-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 & Beverage division and the food protection business of N&B’s Health & Biosciences division. Our Nourish business spans a diversified portfolio across natural and plant-based specialty food ingredients, flavor compounds, and savory solutions and inclusions.Designs.

Our Health & Biosciences segment consists of a biotechnology-driventhe development and production of an advanced biotechnology-derived portfolio of enzymes, food cultures, probiotics and specialty ingredients for food home and personal care,non-food applications. Among many other applications, this biotechnology-driven portfolio includes cultures for use in fermented foods such as yogurt, cheese and fermented beverages, probiotic strains, many with documented clinical health claims for use as dietary supplements and wellness applications. Our Health & Biosciences business comprises N&B’s Health & Biosciences division (exceptthrough industrial fermentation the food protection business which is partproduction of Nourish) in combination with the Natural Product Solutions business of legacy IFF.enzymes and microorganisms that provide product and process performance benefits to household detergents, animal feed, ethanol production and brewing. Health & Biosciences is comprised of sixfive business units: Health, Cultures & Food Enzymes, Home & Personal Care, Animal Nutrition and Grain Processing andProcessing. On July 1, 2022, we completed the divestiture of our Microbial Control.Control business unit (formerly a part of the Health & Biosciences segment).

Our Scent segment creates fragrance compounds, fragrance ingredients and cosmetic ingredients that are integral elements in the world’s finest perfumes and best-known household and personal care products. OurConsumer insights science and creativity are at the heart of our Scent business, consistsand, along with our unique portfolio of our legacy Scent segment as well as our Flavor Ingredients business, formerly part of our legacy Taste business.natural and synthetic ingredients, global footprint, innovative technologies and know-how, and customer intimacy, we believe make us a market leader in scent products. The Scent segment is comprised of three business units: Fragrance Compounds, Fragrance Ingredients and Cosmetic Actives.

Our Pharma Solutions segment produces, among other things, a vast portfolio of cellulosics and seaweed-based pharmapharmaceutical excipients, used to improve the functionality and delivery of active pharmaceutical ingredients, including controlled or modified drug release formulations, and enabling the development of more effective pharmaceutical finished dosage formulations. Our excipients are used in prescription and over-the-counter pharmaceuticals and dietary supplements. Our Pharma Solutions is comprisedproducts also serve a variety of N&B’s Pharma Solutions business.other specialty and industrial end-uses including coatings, inks, electronics, agriculture, and consumer products.

On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic. Various policies and initiatives have been implemented around the world to reduce the global transmission of COVID-19. Although there continue to be minor operational disruptions, all of IFF’s manufacturing facilities remain open and continue to manufacture products.

The COVID-19 pandemic remains a serious threat to the health of the world’s population and certain countries and regions continue to suffer from outbreaks or have seen a recurrence of infections, especially with the emergence of new variants of the virus. Accordingly, the Company continues to take the threat from COVID-19 seriously. The impact that COVID-19 will have on our consolidated results of operations for the remainder of 20222023 remains uncertain. Due to the length and severity of the COVID-19 pandemic, there is continued volatility as a result of retail and travel, consumer shopping and consumption behavior. Moreover, as a result of disruptions or uncertainty relating to the COVID-19 pandemic, we are experiencing, and may continue to experience, increased costs, delays or limited availability related to raw materials, strain on shipping and transportation resources, and higher energy prices, which have negatively impacted, and may continue to negatively impact, our margins and operating results. We will continue to evaluate the nature and extent of these potential impacts to our business, consolidated results of operations, segment results, liquidity and capital resources.

Although IFF has not experienced and does not currently anticipate any impairment charges related to COVID-19, the continuing effects of a prolonged pandemic could result in increased risk of asset write-downs and impairments. Any of these events could potentially result in a material adverse impact on IFF’s business and results of operations.

In December 2022, we announced a restructuring program mainly related to headcount reduction to improve our organizational and cash flows.operating structure, drive efficiencies and achieve cost savings (the “Program”). Once the Program is finalized we expect to incur one-time costs of approximately $70 million and expect to achieve run-rate savings of approximately $100 million, with approximately $75 million targeted to be realized in 2023. We expect to complete the program by the end of 2023. The final amount and timing of this charge will be determined once the plan is finalized.

For a reconciliation between reported and adjusted figures, please refer to the "Non-GAAP“Non-GAAP Financial Measures"Measures” section.

Sales in 20212022 increased $6.572 billion,$784 million, or 129%7% on a reported basis, to $11.656$12.440 billion compared to $5.084$11.656 billion in the 20202021 period. PerformanceSales 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 $6.084 billion of incremental sales that were attributable to the inclusion of N&B, which was merged and consolidated into our results of operations effective February 1, 2021. In addition, sales performance was driven by volumeprice increases across various businesses, offset in part by the Nourish,net impact of the divestiture of the Microbial Control business unit and acquisition of Health & BiosciencesWright Products, Inc. (“change in business portfolio mix”) and Scent operating segments and price increases in the Nourish segment.volume decreases across various businesses.

Our 25 largest customers accounted for approximately 29%28% of total sales in 2021.2022. In 2021,2022, no customer accounted for more than 10% of sales. A key factor for commercial success is our inclusion on strategic customers’ core supplier lists, which provides opportunities to expand and win new business. We are on the core supplier lists of a large majority of our global and strategic customers.

Gross profit in 20212022 increased $1.649 billion,$416 million, or 79%11% on a reported basis, to $4.151 billion (33.4% of sales) compared to $3.735 billion (32.0% of sales) compared to $2.086 billion (41.0% of sales) in the 20202021 period. Approximately $179 million of gross profit was attributable to N&B for the month of January in the 2022 period. The increase in gross profit was primarily driven by favorable net pricing across various businesses and the inclusionimpact of N&B along with sales volume increasesinventory step-up costs from the prior year period, offset in part by the business. The decreasechange in gross profit margin, as a percentage of sales, was due to higher input costs and difference in productbusiness portfolio mix of the new N&B Business compared to the historical IFF product portfolio mix.and volume decreases.

NMF: Not meaningful

Cost of goods sold includes the cost of materials and manufacturing expenses. R&D includes expenses related to the development of new and improved products and technical product support. S&A expenses include expenses necessary to support our commercial activities and administrative expenses supporting our overall operating activities including compliance with governmental regulations.

Sales for 20212022 increased $6.572 billion,$784 million, or 129%7% on a reported basis, to $11.656$12.440 billion compared to $5.084$11.656 billion in the 20202021 period. PerformanceSales 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 $6.084 billion of incremental sales that was attributable to the inclusion of N&B, which was merged and consolidated into our results of operations effective February 1, 2021. In addition, sales performance reflected volume increases for the Nourish, Health & Biosciences and Scent operating segments and price increases across various businesses, offset in part by the Nourish segment.change in business portfolio mix and volume decreases across various businesses.

Sales performance by segment was as follows:

NMF: Not meaningful

Nourish sales in 20212022 increased $3.378 billion,$565 million, or 117%9% on a reported basis, to $6.264$6.829 billion compared to $2.886$6.264 billion in the 20202021 period. PerformanceNourish sales included approximately $293 million of incremental sales attributable to N&B for the month of January in the 2022 period. In addition, performance in the Nourish operating segment was primarily driven by $3.082 billion of incremental sales that was attributable to the inclusion of N&B, along with volumeprice increases, particularly in Flavors.the Ingredients and Food Design business units, offset in part by volume decreases across various business units.

Health & Biosciences sales in 2021 was $2.3292022 increased $10 million, or 0.4% on a reported basis, to $2.339 billion compared to $134 million$2.329 billion in the 20202021 period. Performance in the Health & Biosciences operating segmentsales included approximately $202 million of incremental sales attributable to N&B for the month of January in the 2022 period. The decrease in Health & Biosciences sales, excluding the impact of N&B for the month of January in the 2022 period, was primarily driven by $2.193 billion of incremental sales that was attributable to the inclusion of N&B, as the majority of this operating segment consists of the new N&B Business. In addition, sales performance reflected volumechange in business portfolio mix, offset in part by price increases in the operating segment.across various business units.

Scent sales in 20212022 increased $190$47 million, or 9%2% on a reported basis, to $2.254$2.301 billion compared to $2.064$2.254 billion in the 20202021 period. Scent sales in 20212022 also increased 8% on a currency neutral basis. Sales growthPerformance in the Scent operating segment was primarily driven by price and volume increases in both Fragrance Compounds and price increases in Fragrance Ingredients.Ingredients business units, offset in part by unfavorable impacts from exchange rate variations.

Pharma Solutions sales in 2021 was2022 increased $162 million, or 20% on a reported basis, to $971 million compared to $809 million. This was a newPharma Solutions sales included approximately $73 million of incremental sales attributable to N&B for the month of January in the 2022 period. In addition, performance in the Pharma Solutions operating segment of the Company as a result of the Merger with N&Bwas primarily driven by price and did not exist in the comparable 2020 period.volume increases.

Cost of goods sold as a percentageincreased $368 million to $8.289 billion (66.6% of sales, increased 9.0%sales) in 2021 to 68.0%2022 compared to 59.0%$7.921 billion (68.0% of sales) in 2020,2021. Cost of goods sold included approximately $389 million of incremental costs attributable to N&B for the month of January in the 2022 period. In addition, excluding the impact of N&B for the month of January in the 2022 period and the N&B inventory step-up costs from the prior year period, the increase in cost of goods sold was primarily driven by higher inputmaterial costs, volume increasesdue to higher commodity prices, offset in part by the business and impact of the differencechange in productbusiness portfolio mix of the new N&B Business compared to the historical IFF product portfolio mix.and volume decreases in sales.

Overall R&D expenses as a percentagedecreased $26 million to $603 million (4.8% of sales, decreased 1.6%sales) in 2021 to 5.4%2022 compared to 7.0%$629 million (5.4% of sales) in 2020. The decrease, as a percentage2021. R&D expenses included approximately $20 million of sales,incremental expenses attributable to N&B for the month of January in 2021 wasthe 2022 period, which consisted primarily of employee related expenses, including salaries, wages and bonuses and operating expenses for R&D related activities. In addition, excluding the impact of N&B for the month of January in the 2022 period, R&D expenses decreased primarily due to the impactlower 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.

S&A expenses increased $800$19 million to $1.768 billion (14.2% of sales) in 2022 compared to $1.749 billion or 15.0% as a percentage(15.0% of sales,sales) in 2021 compared to $949 million, or 18.7% as a percentage of sales, in 2020. The increase in2021. S&A expenses wasincluded approximately $51 million of incremental expenses attributable to N&B for the month of January in the 2022 period, which consisted primarily of employee related expenses, including salaries, wages and bonuses, professional fees, including consulting costs, and operating expenses for S&A related activities. In addition, excluding the impact of N&B for the month of January in the 2022 period, S&A expenses decreased primarily due to the impact of the Merger with N&Blower employee related expenses, including salaries, wages and the related transaction and integration costs consisting of legal, professional and consulting fees, as well as business divestiture costs consisting mainly of legalbonuses, and professional fees, and employee separation costs. Adjustedincluding consulting costs, offset in part by higher operating expenses for S&A expense increased by $672 million to $1.480 billion (12.7% as a percentage of sales) in 2021 compared to $808 million (15.9% as a percentage of sales) in 2020.related activities.

Restructuring and other charges increaseddecreased to $12 million in 2022 compared to $41 million in 2021 compared to $17 million in 2020.2021. The increasedecrease was primarily driven by lower severance costs incurred in 20212022 (see Note 2 for additional information).

Amortization expenses increaseddecreased to $727 million in 2022 compared to $732 million in 2021 compared2021. Amortization expense included approximately $47 million attributable to $193 millionN&B for the month of January in 2020 primarily duethe 2022 period related to the intangible assets acquired as part ofthrough the Merger with N&B. Excluding the impact of N&B for the month of January in the 2022 period, the decrease in amortization expense was primarily driven by the reduction in intangible assets as a result of the divestiture of the Microbial Control business unit and impairment of intangible assets of an asset group that operates primarily in Russia, offset in part by the impact of acquisitions of intangible assets from Health Wright Products, Inc. (see NotesNote 3, Note 4 and 5Note 6 for additional information).

Interest expense increased $157$47 million to $336 million in 2022 compared to $289 million in 2021, compared2021. Interest expense included approximately $13 million attributable to $132 millionN&B for the month of January in 2020. This increase was primarily driven by the 2022 period, which included the impact of the additional debt assumed in the Merger with N&B&B. In addition, the increase in interest expense was due to higher interest rates, which led to an increase in the cost for participating in our factoring programs (see Note 1 for additional information), higher effective interest rates on the outstanding Term Loan Facilities and an increase in draw downs of the Revolving Credit Facility and commercial paper (see Note 9 for additional information). Average cost of debt was 2.9% for the 2021 period and 3.0% for the 2020 period.

Other income, net, increased approximately $51decreased $21 million to $37 million in 2022 versus $58 million in 2021. Other income, net includes approximately $6 million attributable to N&B for the month of January in the 2022 period. Excluding the impact of N&B for the month of January in the 2022 period, the decrease in other income, net was primarily due to foreign exchange losses in 2022 compared to foreign exchange gains in the 2021 period and lower pension income in 2022 compared to the 2021 versus $7 million of income in 2020. The increase of $51 million includes approximately $17 million in incomeperiod, due to the adjustment during the 2021 period to correct net income amounts related to certain defined benefit plans in prior years, and $13 millionoffset in gains from business disposal. The increase also includes the impact of foreign exchange gains andpart by higher interest income.

Nourish Segment Adjusted Operating EBITDA increased $573$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 from $599period. Nourish Segment Adjusted Operating EBITDA included approximately $65 million (20.8%attributable to N&B for the month of segment sales)January in the comparable 20202022 period. The increase primarily reflected the inclusion of N&B, along with volume increases in the operating segment. The decrease in segment adjusted operatingNourish Segment Adjusted Operating EBITDA, margin, as a percentageexcluding the impact of sales,N&B for the month of January in the 2022 period, was due to the differenceprimarily driven by volume decreases, offset in product portfolio mixpart by favorable net pricing.

Health & Biosciences Segment Adjusted Operating EBITDA increased $585$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 from $40period. Health & Biosciences Segment Adjusted Operating EBITDA included approximately $60 million (29.9%attributable to N&B for the month of segment sales)January in the comparable 20202022 period. The increase primarily reflecteddecrease in Health & Biosciences Segment Adjusted Operating EBITDA, excluding the inclusionimpact of N&B which comprises mostfor the month of this segment.January in the 2022 period, was primarily driven by volume decreases and the change in business portfolio mix, offset in part by favorable net pricing.

Scent Segment Adjusted Operating EBITDA increased $47decreased $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 2021 from $416 million (20.2% of segment sales) in the comparable 20202021 period. On a currency neutral basis, Scent Segment Adjusted Operating EBITDA increased 1% in 2022 compared to the prior year period. The increasedecrease, on a reported basis, was primarily reflecteddriven by unfavorable impacts from exchange rate variations and net pricing, offset in part by volume increases in the operating segment.Fragrance Compounds.

For a comparison of our results of operations for the fiscal years ended December 31, 20202021 and December 31, 2019,2020, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the fiscal year ended December 31, 2020,2021, filed with the SEC on February 22, 2021.28, 2022.

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 compared to $650 million at December 31, 2020 and of this balance, a portion was held outside the United States. Cash balances held in foreign jurisdictions are, in most circumstances, available to be repatriated to the United States.

Effective utilization of the cash generated by our international operations is a critical component of our strategy. We regularly repatriate cash from our non-U.S. subsidiaries to fund financial obligations in the U.S. As we repatriate these funds to the U.S. we will be required to pay income taxes in certain U.S. states and applicable foreign withholding taxes during the period when such repatriation occurs. Accordingly, as of December 31, 2021,2022, we have a deferred tax liability of approximately $81$166 million for the effect of repatriating the funds to the U.S.

Cash flows provided by operationsoperating activities in 20212022 were $397 million, or 3.2% of sales, compared to $1.437 billion, or 12.3% of sales, compared toin 2021 and $714 million, or 14.0% of sales, in 20202020. 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 $699 million in 2019.accounts payable. The increase in cash flows provided by operating activities from 2020 to 2021 was primarily driven by higher cash earnings, excluding the impact of depreciation and amortization and amortization of N&B inventory step-up costs, and changesnon-cash adjustments, offset in part by the increase in working capital, largely related to accounts payable, inventories and accounts receivable. The increase in cash provided by operating activities from 2019 to 2020 was primarily driven by changes related to accounts receivable, inventories, incentive compensation and accrued expenses, largely offset by lower cash earnings in 2020.

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 were $18 million comparedand 2020, respectively. The increase in cash flows from investing activities from 2021 to $187 million2022 was primarily driven by the change in proceeds received from business divestiture and $226 millionunwinding of derivative instruments, offset in 2020part by the change in cash provided by the Merger with N&B, higher spending on property, plant and 2019, respectively.equipment and cash paid for acquisitions, net of cash received, in the current year period. The decrease in cash flows used in investing activities from 2020 to 2021 was primarily driven by the increase in cash provided by the Merger with N&B and higher net proceeds received from the sale of the fruit preparationFruit Preparation business, largely offset in part by higher spending on property, plant and equipment in the current year. The decrease in cash used in investing activities from 2019 to 2020 was primarily driven by lower payments for acquisitions and lower spending on property, plant and equipment, partially offset by lower proceeds from disposal2021 period.

Additions to property, plant and equipment were $504 million, $393 million and $192 million in 2022, 2021 and $236 million in 2021, 2020, and 2019, respectively (net of grants and other reimbursements from government authorities). These investments largely arise from our ongoing focus to align our manufacturing facilities with customer demand, primarily in emerging markets, and new technology consistent with our strategy.

Cash flows used in financing activities in 20212022 were $1.304$1.229 billion compared to $1.304 billion and $512 million in 2021 and $505 million2020, respectively. The decrease in 2020cash used in financing activities from 2021 to 2022 was primarily driven by less repayments of long-term debt and 2019, respectively.an increase in revolving credit facility and short-term borrowings, offset in part by higher repayments of commercial paper, net of borrowings, higher cash dividend payments and higher purchases of redeemable non-controlling interest. The increase in cash flows used in financing activities from 2020 to 2021 was primarily driven by higher repayments of both short-term and long-term debt and higher cash dividend payments, partially offset in part by proceeds from issuance of commercial paper. The increase in cash used in financing activities from 2019 to 2020 was primarily driven by higher repayments of debt and higher cash dividend payments, largely offset by cash proceeds from issuance of new long-term debt in 2020.

We paid dividends totaling $810 million, $667 million and $323 million in 2022, 2021 and $314 million in 2021, 2020, and 2019, respectively. The cash dividend declared per share in 2022, 2021 and 2020 was $3.20, $3.12 and 2019 was $3.12, $3.04, and $2.96, 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 termlong-term plans. We are also committed to maintaining our history of paying a dividend to investors determined by our Board of Directors at its discretion based on various factors.

We currently havehad a board approved stock repurchase program with a total remaining value of $280 million. Asand as of May 7, 2018, we have suspended our share repurchases. As of November 1, 2022, the program has expired.

Operating cash flow provides the primary source of funds for capital investment needs, dividends paid to shareholders and debt service repayments. We anticipate that cash flows from operations and availability under our existing credit facilities will be sufficient to meet our investing and financing needs. We regularly assess our capital structure, including both current and long-term debt instruments, as compared to our cash generation and investment needs in order to provide ample flexibility and to optimize our leverage ratios. We believe our existing cash balances are sufficient to meet our debt service requirements.

On February 1, 2021, the N&B Term Loan Facility was funded, which provided for a senior unsecured term loan credit facility in an aggregate principal amount of $1.250 billion, comprised of a $625 million three-year tranche (“2024 Term Loan Facility”) and a $625 million five-year tranche (“2026 Term Loan Facility”). Following the Merger, we assumed the indebtedness incurred by N&B in the debt financings, which included (i) the 2024 Term Loan Facility and 2026 Term Loan Facility and (ii) a series of Senior Notes in the aggregate amount of $6.250 billion with maturities ranging from 2 to 30 years. N&B’s indebtedness raised prior to the Merger was used to finance the Special Cash Payment to DuPont, which has been paid, and for the satisfaction of the related transaction fees and expenses.

In connection with the N&B Transaction, a wholly owned subsidiary of IFF merged with and into N&B in exchange for 141,740,461 shares of IFF common stock, par value $0.125 per share (“IFF Common Stock”), which had been approved in the special shareholder meeting that occurred on August 27, 2020 where IFF shareholders voted to approve the issuance of shares of IFF common stock in connection with the N&B Transaction pursuant to the Merger Agreement. In connection with the N&B Transaction, DuPont received a one-time $7.359 billion special cash payment (the “Special Cash Payment”). The shares issued in the Merger represented approximately 55.4% of the common stock of IFF on a fully diluted basis, after giving effect to the Merger, as of February 1, 2021 (see Note 3 for additional information).

The Credit Agreements contain various covenants, limitations and events of default customary for similar facilities for similarly rated borrowers, including the requirement for us to maintain, at the end of each fiscal quarter, a ratio of net debt for borrowed money to Credit Adjusted EBITDA in respect of the previous 12-month period. On and after the Closing Date of the N&B Transaction, the Company’s2024 Term Loan Facility and 2026 Term Loan Facility are also subject to a financial covenant requiring maintenance of a maximum consolidated leverage ratio of 4.75 to 1.0, with step downs to 3.50 to 1.0 over time, with the first step-down which occurred after the fiscal quarter ended December 31, 2021 and the final step-down occurring after the fiscal quarter ending June 30, 2023, with a step-up if the Company consummates certain qualified acquisitions. On August 4, 2022, we amended our existing Term Loan Credit Agreement and Amended Revolving Credit Facility, and the amendment delays certain step-downs from the maximum permitted leverage ratio of net debt to Credit Adjusted EBITDA under the Credit Agreements is 4.754.50 to 1.0, stepping down to 3.50 to 1.0 over time, (withwith the first step-down now occurring after the fiscal quarter ending June 30, 2023 and the final step-down now occurring after the fiscal quarter ending September 30, 2024, with a step-up if the Company consummates certain qualified acquisitions).

As of December 31, 2021,2022, we had no$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, 2021,2022, our borrowing capacity was approximately $1.025 billion$902 million under the Revolving Credit Facility.

See Note 9 to the Consolidated Financial Statements for additional information on our Credit Agreements.

As of December 31, 2021,2022, we had $9.721$9.330 billion aggregate principal amount outstanding in senior unsecured notes, with $1.471$1.380 billion principal amount denominated in EUR and $8.250$7.950 billion principal amount denominated in USD, which includes the N&B Senior Notes assumed as a result of the Merger. The notes bear interest ranging from 0.69%1.22% per year to 5.12% per year, with maturities from September 15, 2022May 1, 2023 to December 1, 2050. See Note 9 to the Consolidated Financial Statements for additional information.

On September 14, 2021, the Company notified holders of the tangible equity units (“TEUs”) that the final settlement rate in respect of each of the prepaid stock purchase contracts (“SPCs”) was 0.330911 shares of IFF'sIFF’s common stock. On September 15, 2021, 5,460,031 shares of IFF'sIFF’s common stock were issued in settlement of the SPCs. See Note 811 to the Consolidated Financial Statements for further information on the TEUs.

Compliance with existing governmental requirements regulating the discharge of materials into the environment has not materially affected our operations, earnings or competitive position. In 20212022 and 2020,2021, we spent approximately $64$30 million and $7$64 million on capital projects and approximately $78$135 million and $29$78 million in operating expenses and governmental charges, respectively, for the purpose of complying with such regulations. Expenditures for these purposes will continue for the foreseeable future. In addition, we are party to a number of proceedings brought under the Comprehensive Environmental Response, Compensation and Liability Act or similar state statutes. It is expected that the impact of any judgments in or voluntary settlements of such proceedings will not be material to our financial condition, results of operations or liquidity.

The Company believes its balances of cash and cash equivalents, which totaled approximately $711$535 million as of December 31, 2021,2022, inclusive of $52 million currently in Assets held for sale on the Consolidated Balance Sheets, along with cash generated by ongoing operations and continued access to debt markets, will be sufficient to satisfy its cash requirements and capital return program over the next 12 months and beyond. The Company's material cash requirements include the following contractual and other obligations.

As of December 31, 2021,2022, the Company had outstanding floating and fixed rate notes with varying maturities for an aggregate principal amount of approximately $10.971$10.580 billion (collectively the "Notes"“Notes”), with $300 million payable within 12 months. Future interest payments associated with the Notes total approximately $4.259$4.006 billion, with $253$258 million payable within 12 months.

See Note 9 to the Consolidated Financial Statements for a further discussion of our various borrowing facilities.

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, 2021,2022, the Company had fixed lease payment obligations of approximately $937$828 million, with $134$117 million payable within 12 months. See Note 78 to the Consolidated Financial Statements for a further discussion of our various lease arrangements.

As of December 31, 2021,2022, the Company had pension funding obligations of approximately $811$788 million, with $74$73 million payable within 12 months. See Note 15 to the Consolidated Financial Statements for a further discussion of our retirement plans.

As of December 31, 2021,2022, the Company had postretirement obligations of approximately $37$36 million, with $4$3 million payable within 12 months.

The Company has various purchase commitments that include agreements for raw material procurement and contractual capital expenditures. As of December 31, 2021,2022, the Company had purchase commitment obligations of approximately $299$231 million, with $169$222 million payable within 12 months.

The Company has obligations related to a 2017 U.S. tax reform "toll-charge"“toll-charge” that is payable in installments over 8 years beginning in 2018. As a result of December 31, 2021, there are four installments and the Company hadMerger with N&B, the remaining toll-charge obligations were accelerated and paid in full in the amount of approximately $39 million with $5 million payable within 12 months.

Our significant accounting policies are more fully described in Note 1 to the Consolidated Financial Statements. As disclosed in Note 1, the preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect reported amounts and accompanying disclosures. These estimates are based on management’s best judgment of current events and actions that we may undertake in the future. Actual results may ultimately differ from these estimates.

Those areas requiring the greatest degree of management judgment or deemed most critical to our financial reporting involve:

As of December 31, 2021,2022, we have goodwill of $16.414approximately $13.355 billion. We test goodwill for impairment at the reporting unit level as of November 30 every year or more frequently if events or changes in circumstances indicate the asset might be impaired. A reporting unit is an operating segment or one level below an operating segment (referred to as a component) to which goodwill is assigned when initially recorded.

We identify our reporting units by assessing whether the components of our operating segments constitute businesses for which discrete financial information is available and management of each operating segment regularly reviews the operating results of those components. Components within a segment that have similar economic characteristics have been aggregated as a single reporting unit. We determined that we have identified sevensix 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 (6) Microbial Control and (7)(6) Pharma Solutions.

For the annual impairment test as of November 30, 2021,2022, we utilizedelected 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. If, based on a review of qualitative factors, it is more likely than not that the fair value of a reporting unit is less than its carrying value, a quantitative impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. Based on a review of qualitative factors, we determined that for four of theFor all six reporting units, a quantitative (Step 1) impairment analysis was not necessary to determine if the carrying values of the reporting unit exceeded their fair values. For the other three reporting units (Nourish, Health & Biosciences and Pharma Solutions), we determined thatperformed a Step 1 test was necessary.test.

We assessed the fair value of the reporting units primarily 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 useused the most current actual and forecasted operating data available. Key estimates and assumptions used in these valuations include revenue growth rates, gross margins, EBITDA margins, terminal growth rates and profit margins based on our internal forecasts and historical operating trends, and our specific weighted-average cost of capital used to discount future cash flows.rates.

In performing the quantitative impairment test, we determined that the fair value of the threesix reporting units exceeded their carrying values and taken together with the results of the qualitative test, we determined that there was no further impairment of goodwill at any of our sevensix reporting units in 2021.as of November 30, 2022. Based on the quantitative impairment test performed, at November 30, 2021, we determined that all reporting units except the excess of fair values over their respective carrying values were 62%, 44% and 29% for the Nourish, Health & Biosciences and Pharma Solutions reporting units, respectively.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%.