INTERNATIONAL FLAVORS & FRAGRANCES INC (IFF) FY 2021 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

(UNLESS INDICATED OTHERWISE, DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)

Overview

Company Background

On February 1, 2021, one of our wholly owned subsidiaries merged with and into the N&B Business (the “Merger”), pursuant to a Merger Agreement with DuPont. The shares issued in the Merger represented approximately 55.4% of the common stock of IFF on a fully diluted basis, after giving effect to the Merger, as of February 1, 2021. The N&B Business is an innovation-driven and customer-focused business that provides solutions for the global food and beverage, dietary supplements, home and personal care, energy, animal nutrition and pharma markets. The transaction was made in order to strengthen IFF's customer base and market presence, with an enhanced position in the food & beverage, home & personal care and health & wellness markets. See Note 3 to the Consolidated Financial Statements for additional information related to the N&B Transaction.

As a result of the N&B Transaction, and following our 2018 acquisition of Frutarom Industries Ltd., we have expanded our global leadership positions, which now include high-value ingredients and solutions in the Food & Beverage, Home & Personal Care and Health & Wellness markets, and across key Taste, Texture, Scent, Nutrition, Enzymes, Cultures, Soy Proteins, Pharmaceutical Excipients, Biocides and Probiotics categories.

We are now organized in four segments: Nourish, Health & Biosciences, Scent, and Pharma Solutions. The Company’s consolidated financial information for the year ended December 31, 2021 reflects the results of N&B effective February 1, 2021, whereas the Company’s consolidated financial information for the year ended December 31, 2020 and 2019 do not include amounts related to N&B.

Our Nourish segment consists of most of our legacy Taste segment combined with N&B’s 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.

Our Health & Biosciences segment consists of a biotechnology-driven portfolio of enzymes, food cultures, probiotics and specialty ingredients for food, home and personal care, and health and wellness applications. Our Health & Biosciences business comprises N&B’s Health & Biosciences division (except the food protection business which is part of Nourish) in combination with the Natural Product Solutions business of legacy IFF. Health & Biosciences is comprised of six business units: Health, Cultures & Food Enzymes, Home & Personal Care, Animal Nutrition, Grain Processing and Microbial Control.

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. 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 Pharma Solutions segment produces a vast portfolio of cellulosics and seaweed-based pharma 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 formulations. Pharma Solutions is comprised of N&B’s Pharma Solutions business.

Financial Measures — Currency Neutral

Our financial results include the impact of foreign currency exchange rates. We provide currency neutral calculations in this report to remove the impact of these items. Beginning in the first quarter 2021, we elected to change the method in which we calculate currency neutral numbers to now be calculated by translating current year invoiced sale amounts at the exchange rates used for the corresponding prior year period. Previously we calculated currency neutral numbers by comparing current year results to the prior year results restated at exchange rates in effect for the current year based on the currency of the underlying transaction. We use currency neutral results in our analysis of subsidiary or segment performance. We also use currency neutral numbers when analyzing our performance against our competitors and believe the change in method better allows us to do so.

31

Due to the Merger with N&B, for the fiscal year 2021 we will not be presenting currency neutral impacts for the Nourish, Health & Biosciences and Pharma Solutions operating segments as the performance in these operating segments includes effects of N&B in 2021, while the 2020 period does not and thus the period’s results are not comparable. We present the currency neutral impacts for the Scent operating segment as this operating segment does not have any effects of N&B.

Impact of COVID-19 Pandemic

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

The COVID-19 pandemic remains a serious threat to the health of the world’s population and certain countries and regions continue to suffer from outbreaks or have seen a recurrence of infections, especially with the emergence of new variants of the virus. Accordingly, the Company continues to take the threat from COVID-19 seriously. The impact that COVID-19 will have on our consolidated results of operations for the remainder of 2022 remains uncertain. Due to the length and severity of COVID-19, there is continued volatility as a result of retail and travel, consumer shopping and consumption behavior. Moreover, as a result of disruptions or uncertainty relating to the COVID-19 pandemic, we are experiencing, and may continue to experience, increased costs, delays or limited availability related to raw materials, strain on shipping and transportation resources, and higher energy prices, which have negatively impacted, and may continue to negatively impact, our margins and operating results. We will continue to evaluate the nature and extent of these potential impacts to our business, consolidated results of operations, segment results, liquidity and capital resources.

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

For more detailed information about risks related to COVID-19, refer to Item 1A, “Risk Factors” - The COVID-19 pandemic may materially and adversely impact our operations, financial condition, results of operations and cash flows.

2021 Financial Performance Overview

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

Sales

Sales in 2021 increased $6.572 billion, or 129% on a reported basis, to $11.656 billion compared to $5.084 billion in the 2020 period. Performance 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 volume increases across the Nourish, Health & Biosciences and Scent operating segments and price increases in the Nourish segment.

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

Gross Profit

Gross profit in 2021 increased $1.649 billion, or 79% on a reported basis, to $3.735 billion (32.0% of sales) compared to $2.086 billion (41.0% of sales) in the 2020 period. The increase in gross profit was primarily driven by the inclusion of N&B, along with sales volume increases in the business. The decrease in gross profit margin, as a percentage of sales, was due to higher input costs and difference in product portfolio mix of the new N&B Business compared to the historical IFF product portfolio mix.

Adjusted Operating EBITDA

Adjusted operating EBITDA in 2021 increased $1.370 billion, or 130% on a reported basis, to $2.425 billion (20.8% of sales) compared to $1.055 billion (20.8% of sales) in the 2020 period. The increase in adjusted operating EBITDA was primarily driven by the inclusion of N&B, along with sales volume increases in the business.

32

Results of Operations

_______________________

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.

2021 IN COMPARISON TO 2020

Sales

Sales for 2021 increased $6.572 billion, or 129% on a reported basis, to $11.656 billion, compared to $5.084 billion in the 2020 period. Performance 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 in the Nourish segment.

33

Sales performance by segment was as follows:

_______________________

(1)Currency neutral sales growth is calculated by translating current year invoiced sale amounts at the exchange rates for the corresponding prior year period.

NMF: Not meaningful

Nourish

Nourish sales in 2021 increased $3.378 billion, or 117% on a reported basis, to $6.264 billion, compared to $2.886 billion in the 2020 period. 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 volume increases, particularly in Flavors.

Health & Biosciences

Health & Biosciences sales in 2021 was $2.329 billion compared to $134 million in the 2020 period. Performance in the Health & Biosciences operating segment 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 volume increases in the operating segment.

Scent

Scent sales in 2021 increased $190 million, or 9% on a reported basis, to $2.254 billion, compared to $2.064 billion in the 2020 period. Scent sales in 2021 also increased 8% on a currency neutral basis. Sales growth in the Scent operating segment was primarily driven by volume increases in both Fragrance Compounds and Fragrance Ingredients.

Pharma Solutions

Pharma Solutions sales in 2021 was $809 million. This was a new operating segment of the Company as a result of the Merger with N&B and did not exist in the comparable 2020 period.

Cost of Goods Sold

Cost of goods sold, as a percentage of sales, increased 9.0% in 2021 to 68.0% compared to 59.0% in 2020, primarily driven by higher input costs, volume increases in the business and impact of the difference in product portfolio mix of the new N&B Business compared to the historical IFF product portfolio mix.

Research and Development (R&D) Expenses

Overall R&D expenses, as a percentage of sales, decreased 1.6% in 2021 to 5.4% compared to 7.0% in 2020. The decrease, as a percentage of sales, in 2021 was primarily due to the impact of the Merger with N&B.

Selling and Administrative (S&A) Expenses

S&A expenses increased $800 million to $1.749 billion, or 15.0% as a percentage of sales, in 2021 compared to $949 million, or 18.7% as a percentage of sales, in 2020. The increase in S&A expenses was primarily due to the impact of the Merger with N&B and the related transaction and integration costs consisting of legal, professional and consulting fees, as well as business divestiture costs consisting mainly of legal and professional fees and employee separation costs. Adjusted 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.

Restructuring and Other Charges

Restructuring and other charges increased to $41 million in 2021 compared to $17 million in 2020. The increase was primarily driven by severance costs incurred in 2021 (see Note 2 for additional information).

Amortization of Acquisition-Related Intangibles

Amortization expenses increased to $732 million in 2021 compared to $193 million in 2020 primarily due to the intangible assets acquired as part of the Merger with N&B (see Notes 3 and 5 for additional information).

34

Interest Expense

Interest expense increased $157 million to $289 million in 2021, compared to $132 million in 2020. This increase was primarily driven by the debt assumed in the Merger with N&B (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

Other income, net, increased approximately $51 million to $58 million of income in 2021 versus $7 million of income in 2020. The increase of $51 million includes approximately $17 million in income to correct net income amounts related to certain defined benefit plans in prior years and $13 million in gains from business disposal. The increase also includes the impact of foreign exchange gains and higher interest income.

Income Taxes

The effective tax rate was 21.2% in 2021 as compared to 16.8% in 2020. The year-over-year increase was largely due to an unfavorable mix of earnings, higher repatriation costs and cost of global intangible low-taxed income (“GILTI”), partially offset by tax benefits related to supply chain optimization and credits.

Excluding the $127 million tax benefit associated with the pre-tax non-GAAP adjustments, the adjusted effective tax rate for 2021 was 20.0%. For 2020, the adjusted effective tax rate was 17.6% excluding the $33 million tax benefit associated with the pre-tax non-GAAP adjustments. The year-over-year increase was largely due to an unfavorable mix of earnings, higher repatriation costs and cost of GILTI, partially offset by tax benefits related to supply chain optimization and credits.

Segment Adjusted Operating EBITDA Results by Business Unit

Effective in the first quarter of 2021, management elected to change the profit or loss measure of the Company's reportable segments from Segment Operating Profit to Segment Adjusted Operating EBITDA for internal reporting and performance measurement purposes. Segment Adjusted Operating EBITDA is defined as Income Before Taxes before depreciation and amortization expense, interest expense, restructuring and other charges and certain non-recurring items. Prior period amounts have been recast to reflect these changes in segment profitability measures. Our determination of reportable segments was made on the basis of our strategic priorities within each segment and corresponds to the manner in which our Chief Operating Decision Maker reviews and evaluates operating performance to make decisions about resources to be allocated to the segment. In addition to our strategic priorities, segment reporting is also based on differences in the products and services we provide. As a result, we added two new reportable segments - Health & Biosciences and Pharma Solutions. Nourish is composed of most of IFF’s legacy Taste division and N&B’s Food & Beverage division. The Scent and Health & Biosciences segments include a component of the legacy Taste segment.

35

Nourish Segment Adjusted Operating EBITDA

Nourish Segment Adjusted Operating EBITDA increased $573 million to $1.172 billion (18.7% of segment sales) in 2021 from $599 million (20.8% of segment sales) in the comparable 2020 period. The increase primarily reflected the inclusion of N&B, along with volume increases in the operating segment. The decrease in segment adjusted operating EBITDA margin, as a percentage of sales, was due to the difference in product portfolio mix of the new Nourish operating segment, as a result of the Merger with N&B, compared to the legacy Taste operating segment, and higher input costs.

Health & Biosciences Segment Adjusted Operating EBITDA

Health & Biosciences Segment Adjusted Operating EBITDA increased $585 million to $625 million (26.8% of segment sales) in 2021 from $40 million (29.9% of segment sales) in the comparable 2020 period. The increase primarily reflected the inclusion of N&B, which comprises most of this segment.

Scent Segment Adjusted Operating EBITDA

Scent Segment Adjusted Operating EBITDA increased $47 million to $463 million (20.5% of segment sales) in 2021 from $416 million (20.2% of segment sales) in the comparable 2020 period. The increase primarily reflected volume increases in the operating segment.

Pharma Solutions Segment Adjusted Operating EBITDA

Pharma Solutions Segment Adjusted Operating EBITDA was $165 million (20.4% of segment sales) in 2021. This was a new operating segment of the Company as a result of the Merger with N&B and did not exist in the comparable 2020 period.

36

2020 IN COMPARISON TO 2019

For a comparison of our results of operations for the fiscal years ended December 31, 2020 and December 31, 2019, 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, filed with the SEC on February 22, 2021.

Liquidity and Capital Resources

Cash and Cash Equivalents

We had cash and cash equivalents of approximately $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.

In connection with the Merger with N&B, the Company's cash balance increased by approximately $246 million, which included the cash acquired of $193 million and approximately $53 million related to the Special Cash Payment made in accordance with the Merger Agreement.

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, we have a deferred tax liability of approximately $81 million for the effect of repatriating the funds to the U.S.

Restricted Cash

At December 31, 2021 we had a balance of $5 million (of which $4 million is included in Current Assets and $1 million is included in Other Assets) compared to $10 million at December 31, 2020.

Cash Flows Provided By Operating Activities

Cash flows provided by operations in 2021 were $1.437 billion, or 12.3% of sales, compared to $714 million, or 14.0% of sales, in 2020 and $699 million in 2019. The increase in cash 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 changes 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.

Working capital (current assets less current liabilities) totaled $3.354 billion at year-end 2021 compared to $1.156 billion at year-end 2020. The increase in working capital was due to the Merger with N&B.

We have various factoring agreements in the U.S. and The Netherlands under which we can factor up to approximately $250 million in receivables with a financial institution. Additionally, we maintain factoring programs that are sponsored by certain customers. Under all of the arrangements, we sell the receivables on a non-recourse basis to unrelated financial institutions and account for the transactions as a sale of receivables. The applicable receivables are removed from our Consolidated Balance Sheets when the cash proceeds are received.

The impact on cash provided by operations from participating in these programs increased approximately $19 million, $43 million and $38 million in 2021, 2020 and 2019, respectively, compared to each respective prior year period. The cost of participating in these programs was approximately $6 million, $4 million, and $7 million in 2021, 2020, and 2019, respectively (see Note 1 for additional information).

Cash Flows Provided By (Used In) Investing Activities

Cash flows used in investing activities in 2021 were $18 million compared to $187 million and $226 million in 2020 and 2019, respectively. The decrease in cash used in investing activities from 2020 to 2021 was primarily driven by the increase in cash provided by the Merger with N&B and higher net proceeds received from the sale of the fruit preparation business, largely offset 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 disposal of assets in 2020 and cash paid on settlement of derivative instruments in 2020 versus proceeds in 2019.

Additions to property, plant and equipment were $393 million, $192 million 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.

37

We have evaluated and re-prioritized our capital projects and expect that capital spending in 2022 will be approximately 5.0% of sales (net of potential grants and other reimbursements from government authorities).

Cash Flows Used In Financing Activities

Cash flows used in financing activities in 2021 were $1.304 billion compared to $512 million and $505 million in 2020 and 2019, respectively. The increase in cash 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 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 $667 million, $323 million and $314 million in 2021, 2020 and 2019, respectively. The cash dividend declared per share in 2021, 2020 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 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 have a board approved stock repurchase program with a total remaining value of $280 million. As of May 7, 2018, we have suspended our share repurchases.

Capital Resources

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

Transaction with Nutrition & Biosciences, Inc.

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

Immediately after the closing of the merger with N&B on February 1, 2022, DuPont shareholders owned approximately 55.4% of the shares of IFF, and existing IFF shareholders owned approximately 44.6% of the shares of IFF.

Refer to Notes 3 and 9 for additional information.

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

Revolving Credit Facility and Term Loan Facilities

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’s maximum permitted ratio of net debt to Credit Adjusted EBITDA under the Credit Agreements is 4.75 to 1.0, stepping down to 3.50 to 1.0 over time (with a step-up if the Company consummates certain qualified acquisitions).

38

As of December 31, 2021, we had no outstanding borrowings under our $2.000 billion Revolving Credit Facility. The amount that we are able to draw down under the Revolving Credit Facility is limited by financial covenants as described in more detail below. As of December 31, 2021, our borrowing capacity was approximately $1.025 billion under the Revolving Credit Facility.

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

Debt Covenants

At December 31, 2021 and 2020 we were in compliance with all financial and other covenants, including the net debt to adjusted EBITDA ratio. At December 31, 2021 our Net Debt to Credit Adjusted EBITDA(1) ratio was 4.11 to 1 as defined by our Credit Agreements, which is below the maximum levels in the financial covenants in our existing outstanding credit facilities.

_______________________

(1)Credit Adjusted EBITDA and Net Debt, which are non-GAAP measures used for these covenants, are calculated in accordance with the definition in the debt agreements. In this context, these measures are used solely to provide information on the extent to which we are in compliance with debt covenants and may not be comparable to Credit Adjusted EBITDA and Net Debt used by other companies. Reconciliations of Credit Adjusted EBITDA to net income and net debt to total debt are as follows:

_______________________

(1)Specified items for the 12 months ended December 31, 2021 of $682 million consist of Frutarom integration related costs, restructuring and other charges, shareholder activism related costs, business divestiture costs, gains on business disposal, employee separation costs, pension income adjustment, pension settlement, Frutarom acquisition related costs, N&B inventory step-up costs, N&B transaction related costs, N&B integration related costs and other N&B specified items.

(2)Non-cash items represent all other adjustments to reconcile net income to net cash provided by operations as presented on the Statement of Cash Flows, including gains on disposal of assets and stock-based compensation.

(3)Specified and non-cash items may not include all eligible add-back items from the Merger with N&B, for the purposes of the Credit Adjusted EBITDA calculation, due to availability of the information.

_______________________

(1)Total debt used for the calculation of Net debt consists of short-term debt, long-term debt, short-term finance lease obligations and long-term finance lease obligations.

Senior Notes

As of December 31, 2021, we had $9.721 billion aggregate principal amount outstanding in senior unsecured notes, with $1.471 billion principal amount denominated in EUR and $8.250 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% per year to 5.12% per year, with maturities from September 15, 2022 to December 1, 2050. See Note 9 to the Consolidated Financial Statements for additional information.

Tangible Equity Units - Senior Unsecured Amortizing Notes

On September 14, 2021, the Company notified holders of the tangible equity units (“TEUs”) that the final settlement rate in respect of each of the prepaid stock purchase contracts (“SPCs”) was 0.330911 shares of IFF's common stock. On September 15, 2021, 5,460,031 shares of IFF's common stock were issued in settlement of the SPCs. See Note 8 for further information on the TEUs.

39

Other Contingencies

See Note 19 to the Consolidated Financial Statements for information related to Other Contingencies.

Other Commitments

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

Contractual Obligations

The Company believes its balances of cash and cash equivalents, which totaled approximately $711 million as of December 31, 2021, along with cash generated by ongoing operations and continued access to debt markets, will be sufficient to satisfy its cash requirements and capital return program over the next 12 months and beyond. The Company's material cash requirements include the following contractual and other obligations.

Borrowings and Interest on Borrowings

As of December 31, 2021, the Company had outstanding floating and fixed rate notes with varying maturities for an aggregate principal amount of approximately $10.971 billion (collectively the "Notes"), with $300 million payable within 12 months. Future interest payments associated with the Notes total approximately $4.259 billion, with $253 million payable within 12 months. See Note 9 to the Consolidated Financial Statements for a further discussion of our various borrowing facilities.

The Company also issues unsecured short-term promissory notes ("Commercial Paper") pursuant to a commercial paper program. As of December 31, 2021, the Company had $324 million of Commercial Paper outstanding, all of which is payable within 12 months.

Leases

The Company has lease arrangements for certain corporate offices, manufacturing facilities, research and development facilities, and certain transportation and office equipment. As of December 31, 2021, the Company had fixed lease payment obligations of approximately $937 million, with $134 million payable within 12 months. See Note 7 to the Consolidated Financial Statements for a further discussion of our various lease arrangements.

Pension and Other Postretirement Obligations

As of December 31, 2021, the Company had pension funding obligations of approximately $811 million, with $74 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, the Company had postretirement obligations of approximately $37 million, with $4 million payable within 12 months.

Purchase Commitments

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

U.S. Tax Reform Toll-Charge

The Company has obligations related to a U.S. tax reform "toll-charge" that is payable in installments over 8 years beginning in 2018. As of December 31, 2021, there are four installments and the Company had toll-charge obligations of approximately $39 million, with $5 million payable within 12 months.

The information above does not include approximately $130 million of the total unrecognized tax benefits for uncertain tax positions, $36 million of associated accrued interest and $81 million associated with the deferred tax liability on deemed repatriation. Due to the high degree of uncertainty regarding the timing of potential cash flows, we are unable to make a reasonable estimate of the amount and period in which the remaining liabilities might be paid.

40

Critical Accounting Policies and Use of Estimates

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

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

Business Combinations. From time to time we enter into strategic acquisitions in an effort to better service existing customers and to attain new customers. When we acquire a controlling financial interest in an entity or group of assets that are determined to meet the definition of a business, we apply the acquisition method described in ASC Topic 805, Business Combinations. In accordance with GAAP, the results of the acquisitions we have completed are reflected in our financial statements from the date of acquisition forward.

We allocate the purchase consideration paid to acquire the business to the assets acquired and liabilities assumed based on estimated fair values at the acquisition date, with the excess of purchase price over the estimated fair value of the net assets acquired recorded as goodwill. If during the measurement period (a period not to exceed twelve months from the acquisition date) we receive additional information that existed as of the acquisition date but at the time of the original allocation described above was unknown to us, we make the appropriate adjustments to the purchase price allocation in the reporting period in which the amounts are determined.

Significant judgment is required to estimate the intangibles and fair value of fixed assets and in assigning their respective useful lives. Accordingly, we typically engage third-party valuation specialists, who work under the direction of management, to assist in valuing significant tangible and intangible assets acquired.

The fair value estimates are based on available historical information, future expectations and assumptions deemed reasonable by management, but are inherently uncertain.

We typically use an income method to estimate the fair value of intangible assets, which is based on forecasts of the expected future cash flows attributable to the respective assets. Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants, and include the amount and timing of future cash flows (including expected growth rates, discount rates and profitability), royalty rates used in the relief of royalty method, customer attrition rates, product obsolescence factors, a brand’s relative market position and the discount rate applied to the cash flows. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions.

Determining the useful life of an intangible asset also requires significant judgment. All of our acquired intangible assets (e.g., trademarks, product formulas, non-compete agreements and customer relationships) are expected to have finite useful lives. Our estimates of the useful lives of finite-lived intangible assets are based on a number of factors including competitive environment, market share, brand history, operating plans and the macroeconomic environment of the regions in which the brands are sold.

The costs of finite-lived intangible assets are amortized through expense over their estimated lives. The value of residual goodwill is not amortized, but is tested at least annually for impairment as described in the following note. For acquired intangible assets, the remaining useful life of the trade names and trademarks, product formulas, and customer relationships was estimated at the point at which substantially all of the present value of cumulative cash flows have been earned.

The periodic assessment of potential impairment of goodwill. As of December 31, 2021, we have goodwill of $16.414 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. We have identified seven 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) Pharma Solutions.

41

For the annual impairment test as of November 30, 2021, we utilized Step 0 of the guidance in ASC Topic 350, Intangibles – Goodwill and Other, which allows for the assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. 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 the 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 that a Step 1 test was necessary.

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 use the most current actual and forecasted operating data available. Key estimates and assumptions used in these valuations include revenue 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.

In performing the quantitative test, we determined that the fair value of the three reporting units exceeded their carrying values and, taken together with the results of the qualitative test, we determined that there was no impairment of goodwill at any of our seven reporting units in 2021. Based on the quantitative impairment test performed at November 30, 2021, we determined that 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.

If current long-term projections for these reporting units are not realized or materially decrease, we may be required to write-off all or a portion of the goodwill. Such charge could have a material effect on the Consolidated Statements of Operations and Balance Sheets.

The periodic assessment of potential impairment of long-lived assets. We review long-lived assets for impairment when events or changes in business conditions indicate that their full carrying value may not be recovered. An estimate of undiscounted future cash flows produced by an asset or group of assets is compared to the carrying value to determine whether impairment exists. If assets are determined to be impaired, the loss is measured based on an estimate of fair value using various valuation techniques, including a discounted estimate of future cash flows.

New Accounting Standards

See Note 1 to the Consolidated Financial Statements for a discussion of recent accounting pronouncements.

Non-GAAP Financial Measures

We use non-GAAP financial measures in this Form 10-K, including: (i) currency neutral metrics, (ii) adjusted gross profit, (iii) adjusted selling and administrative expenses (adjusted S&A), (iv) adjusted operating EBITDA and adjusted operating EBITDA margin, (v) adjusted effective tax rate, (vi) adjusted net income and (vii) adjusted diluted EPS. We also provide the non-GAAP measure net debt solely for the purpose of providing information on the extent to which the Company is in compliance with debt covenants contained in its debt agreements. Our non-GAAP financial measures are defined below.

These non-GAAP financial measures are intended to provide additional information regarding our underlying operating results and comparable year-over-year performance. Such information is supplemental to information presented in accordance with GAAP and is not intended to represent a presentation in accordance with GAAP. In discussing our historical and expected future results and financial condition, we believe it is meaningful for investors to be made aware of and to be assisted in a better understanding of, on a period-to-period comparable basis, financial amounts both including and excluding these identified items, as well as the impact of exchange rate fluctuations. These non-GAAP measures should not be considered in isolation or as substitutes for analysis of the Company’s results under GAAP and may not be comparable to other companies’ calculation of such metrics.

Adjusted gross profit excludes employee separation costs, Frutarom acquisition related costs, N&B inventory step-up costs and N&B integration related costs.

Adjusted selling and administrative expenses excludes Frutarom integration related costs, restructuring and other charges, shareholder activism related costs, business divestiture costs, employee separation costs, Frutarom acquisition related costs, compliance review & legal defense costs, N&B transaction related costs and N&B integration related costs.

42

Adjusted operating EBITDA and adjusted operating EBITDA margin exclude depreciation and amortization expense, interest expense, other income (expense), net, restructuring and other charges and certain non-recurring items such as Frutarom integration related costs, (gains) losses on sale of assets, shareholder activism related costs, business divestiture costs, employee separation costs, Frutarom acquisition related costs, compliance review & legal defense costs, N&B inventory step-up costs, N&B transaction related costs and N&B integration related costs.

Adjusted effective tax rate excludes Frutarom integration related costs, restructuring and other charges, (gains) losses on sale of assets, shareholder activism related costs, business divestiture costs, gains on business disposal, employee separation costs, pension income adjustment, pension settlement, Frutarom acquisition related costs, compliance review & legal defense costs, N&B inventory step-up costs, N&B transaction related costs and N&B integration related costs.

Net Debt to Credit Adjusted EBITDA is the leverage ratio used in our credit agreements and defined as Net Debt divided by Credit Adjusted EBITDA. However, as Credit Adjusted EBITDA for these purposes was calculated in accordance with the provisions of the credit agreements, it may differ from the calculation used for adjusted operating EBITDA.

A. Reconciliation of Non-GAAP Metrics

43

44

Cautionary Statement Under the Private Securities Litigation Reform Act of 1995

Statements in this Form 10-K, which are not historical facts or information, are “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management’s current assumptions, estimates and expectations and include statements concerning (i) the impacts of COVID-19 and our plans to respond to its implications; (ii) the expected impact of global supply chain challenges; (iii) expectations regarding sales and profit for the fiscal year 2022, including the impact of foreign exchange, pricing actions, raw materials, and sourcing, logistics and manufacturing costs; (iii) expectations of the impact of inflationary pressures and the pricing actions to offset exposure to such impacts; (iv) the impact of high input costs, including raw materials, transportation and energy; (v) our ability to drive cost discipline measures and the ability to recover margin to pre-inflation levels; (vi) the divestiture of our Microbial Control business and the progress of our portfolio optimization strategy, through non-core business divestitures; (vii) our combination with N&B, including the expected benefits and synergies of the N&B Transaction and future opportunities for the combined company; (viii) the success of our integration efforts and ability to deliver on our synergy commitments as well as future opportunities for the combined company; (ix) our ability to achieve the anticipated benefits of the Frutarom acquisition, including $145 million of expected synergies; (x) the growth potential of the markets in which we operate, including the emerging markets, (xi) expected capital expenditures in 2022; (xii) the expected costs and benefits of our ongoing optimization of our manufacturing operations, including the expected number of closings; (xiii) expected cash flow and availability of capital resources to fund our operations and meet our debt service requirements; (xiv) our ability to innovate and execute on specific consumer trends and demands; and (xv) our ability to continue to generate value for, and return cash to, our shareholders. These forward-looking statements should be evaluated with consideration given to the many risks and uncertainties inherent in our business that could cause actual results and events to differ materially from those in the forward-looking statements. Certain of such forward-looking information may be identified by such terms as “expect”, “anticipate”, “believe”, “intend”, “outlook”, “may”, “estimate”, “should”, “predict” and similar terms or variations thereof. Such forward-looking statements are based on a series of expectations, assumptions, estimates and projections about the Company, are not guarantees of future results or performance, and involve significant risks, uncertainties and other factors, including assumptions and projections, for all forward periods. Our actual results may differ materially from any future results expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors include, among others, the following:

•inflationary trends in the price of our input costs, such as raw materials, transportation and energy;

•supply chain disruptions, geopolitical developments or climate-change related events that may affect our suppliers or procurement of raw materials;

•disruption in the development, manufacture, distribution or sale of our products from COVID-19 and other public health crises;

•risks related to the integration of N&B and the Frutarom business, including whether we will realize the benefits anticipated from the acquisitions in the expected time frame;

•our ability to successfully establish and manage acquisitions, collaborations, joint ventures or partnerships, or the failure to close strategic transactions or divestments;

•our ability to successfully market to our expanded and diverse customer base;

•our substantial amount of indebtedness and its impact on our liquidity and ability to return capital to its shareholders;

•our ability to effectively compete in our market and develop and introduce new products that meet customers’ needs;

•our ability to retain key employees;

•changes in demand from large multi-national customers due to increased competition and our ability to maintain “core list” status with customers;

•our ability to successfully develop innovative and cost-effective products that allow customers to achieve their own profitability expectations;

•disruption in the development, manufacture, distribution or sale of our products from natural disasters, public health crises, international conflicts, terrorist acts, labor strikes, political crisis, accidents and similar events;

•volatility and increases in the price of raw materials, energy and transportation;

•the impact of a significant data breach or other disruption in our information technology systems, and our ability to comply with data protection laws in the U.S. and abroad;

•our ability to comply with, and the costs associated with compliance with, regulatory requirements and industry standards, including regarding product safety, quality, efficacy and environmental impact;

•our ability to meet increasing customer, consumer, shareholder and regulatory focus on sustainability;

•defect, quality issues (including product recalls), inadequate disclosure or misuse with respect to the products and capabilities;

45

•our ability to react in a timely and cost-effective manner to changes in consumer preferences and demands, including increased awareness of health and wellness;

•our ability to benefit from our investments and expansion in emerging markets;

•the impact of currency fluctuations or devaluations in the principal foreign markets in which we operate;

•economic, regulatory and political risks associated with our international operations;

•the impact of global economic uncertainty on demand for consumer products;

•our ability to comply with, and the costs associated with compliance with, U.S. and foreign environmental protection laws;

•our ability to successfully manage our working capital and inventory balances;

•the impact of the failure to comply with U.S. or foreign anti-corruption and anti-bribery laws and regulations, including the U.S. Foreign Corrupt Practices Act;

•any impairment on our tangible or intangible long-lived assets, including goodwill associated with the acquisition of Frutarom;

•our ability to protect our intellectual property rights;

•the impact of the outcome of legal claims, regulatory investigations and litigation;

•changes in market conditions or governmental regulations relating to our pension and postretirement obligations;

•the impact of changes in federal, state, local and international tax legislation or policies, including the Tax Cuts and Jobs Act, with respect to transfer pricing and state aid, and adverse results of tax audits, assessments, or disputes;

•the impact of the United Kingdom’s departure from the European Union;

•the impact of the phase out of the London Interbank Offered Rate (LIBOR) on interest expense; and

•risks associated with our CEO transition, including the impact of employee hiring and retention.

The foregoing list of important factors does not include all such factors, nor necessarily present them in order of importance. In addition, you should consult other disclosures made by the Company (such as in our other filings with the SEC or in company press releases) for other factors that may cause actual results to differ materially from those projected by the Company. Please refer to Part I. Item 1A., Risk Factors, of this Form 10-K for additional information regarding factors that could affect our results of operations, financial condition and liquidity.

We intend our forward-looking statements to speak only as of the time of such statements and do not undertake or plan to update or revise them as more information becomes available or to reflect changes in expectations, assumptions or results. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this report or included in our other periodic reports filed with the SEC could materially and adversely impact our operations and our future financial results.

Any public statements or disclosures made by us following this report that modify or impact any of the forward-looking statements contained in or accompanying this report will be deemed to modify or supersede such outlook or other forward-looking statements in or accompanying this report.