IFF 10-K & 10-Q changes, risk factors and insider trading

•We have a substantial amount of indebtedness that could materially adversely affect, among other things, our financial condition, our ability to return capital to our shareholders, needed investments into our business, and our credit ratings.

•If we are unable to successfully execute our strategic transformation, including our portfolio optimization, it may have a material adverse effect on our business, results of operations and financial condition.

•Inflationary trends and pricing uncertainty, including in the price of our input costs, such as raw materials, transportation and energy, could adversely affect our business and financial results in the short term and result in uncertainties in the long term.

•A significant portion of our sales is generated from a limited number of large multi-national customers, which are currently under competitive pressures that may affect the demand for our products and profitability.

•We may not successfully develop and introduce new products that meet our customers’ needs, which may adversely affect our results of operations.

•We are subject to risks associated with the potential use of AI in our own operations and by third-party partners that we may engage with.

•We have made investments in and continue to expand our business into emerging markets, which exposes us to certain risks.

•If we fail to successfully enter into or close collaborations, joint ventures, partnerships, acquisitions, or divestitures, or successfully manage such transactions, it could adversely affect our business and growth opportunities.

•Our success depends on attracting and retaining talented people within our business and our management team. Changes to management, including turnover of our top executives, and significant shortfalls in recruitment, retention or transition of employees or our management team could adversely affect our ability to compete and achieve our strategic goals.

•If we are unable to successfully market to our expanded and diverse customer base, our operating results and future growth may be adversely affected.

•Defects, quality issues (including product recalls), inadequate disclosure or misuse with respect to the products and capabilities could adversely affect our business, reputation and results of operations.

As of December 31, 2024, our total debt was $8.977 billion. 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. In addition, our existing Revolving Credit Facility and Term Loan are also at variable interest rates, exposing us to potentially material interest rate risk at our current level of indebtedness.

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. 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 Revolving Credit Facility and Term Loan have pricing grids that are based on credit rating, such that our cost of borrowing may increase if our public debt rating decreases. The pricing grid rates have increased by 0.125% for the duration that financial covenant relief (as described below) is provided.

Our Revolving Credit Facility and Term Loan 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 maximum ratio of net debt for borrowed money to credit adjusted EBITDA in respect of the previous four fiscal quarters. On September 19, 2023, we entered into further amendments to our Revolving Credit Facility and Term Loan that extend certain relief with respect to this financial covenant by providing that during the relief period our leverage ratio shall not exceed as of the end of the fiscal quarter (for the period of the four fiscal quarters then ended): (i) 5.25x for any fiscal quarter ending on or before March 31, 2024, (ii) 4.75x for the fiscal quarter ending June 30, 2024, (iii) 4.50x for the fiscal quarter ending September 30, 2024, (iv) 4.25x for any subsequent fiscal quarter ending on or before March 31, 2025, (v) 4.00x for any subsequent fiscal quarter ending on or before September 30, 2025 and (vi) 3.75x for the fiscal quarter ending December 31, 2025. The financial covenant relief provided in the September 2023 amendments superseded the ratios and step downs set forth in prior amendments to these credit facilities entered into on August 4, 2022 and March 23, 2023.

During the financial covenant relief period, the amendments prohibit us from (i) effecting share repurchases, (ii) declaring and paying dividends in cash on common stock in excess of $0.81 per share per fiscal quarter (for an aggregate amount of $3.24 per fiscal year) and (iii) creating liens to secure debt in excess of the greater of $300 million and 3.65% of Consolidated Net Tangible Assets, in each case subject to certain exceptions set forth in the amendments. During the financial covenant relief period, the Term Loan is subject to a mandatory prepayment provision whereby certain asset sale proceeds must be used to pay down amounts outstanding thereunder. See Note 14 for additional information on the amendments to the debt agreements.

Our current level of leverage could increase our vulnerability to sustained, adverse macroeconomic weakness, limit our ability to obtain further financing, lead to a reduction or suspension of our dividend payments, decrease our flexibility in responding to or preparing for changes in the industry in which we operate and our ability to pursue certain operational and strategic projects or opportunities, including necessary investments into our business or large acquisitions. Our level of indebtedness, as well as a failure to comply with covenants under our debt instruments, could adversely affect our business, results of operations and financial condition or our ability to return capital to our shareholders and any additional debt modifications, instruments or covenant reliefs may subject us to additional covenants and restrictions.

If we are unable to successfully execute our strategic transformation, including our portfolio optimization, it may have a material adverse effect on our business, results of operations and financial condition.

As a part of our ongoing strategic transformation and our portfolio optimization strategy, we continue to evaluate and work towards divestitures or strategic transactions. For instance, during the second and third quarter of 2024, we completed divestitures of our Cosmetic Ingredients business and our Flavors and Essences UK business, respectively. Additionally, during March 2024 and October 2024, we entered into agreements for the sale of our Pharma Solutions business disposal group and our nitrocellulose business, respectively, which are each expected to close in the second quarter of 2025. Strategic transactions are generally dependent on many factors which we cannot fully control, including, among other things, relevant industry dynamics or macroeconomic conditions, the interest of potential buyers and their ability to finance such transactions (which is also impacted by general economic and financial conditions and market dynamics), the performance of the underlying assets or business, requisite regulatory approvals, and related separation activities.

Implementing such transactions can be complex, costly and time-consuming and may also result in additional expenses and unanticipated issues, such as competitive responses, employee turnover or impact on our commercial relationships. For instance, divestitures involve separation costs and efforts that may divert management’s and employees’ attention and also result in stranded costs and dis-synergies for the Company. Moreover, divestitures often entail post-closing third-party agreements, such as supply arrangements (including with “take or pay” provisions), product manufacturing, cross-licensing, transitional, or site services agreements (“ancillary agreements”), that may bind the Company for certain periods after closing, during which market or Company conditions may change. Any failure to enter into, complete or potential delays in closing any such transaction, any failure to avoid potential post-closing disputes, any failure to mitigate or manage the associated costs of such transactions, or obtain appropriate terms for ancillary agreements, could result in significant costs, adversely affect the successful implementation of our portfolio optimization strategy as well as our financial condition, including our leverage ratio. Even if such initiatives are implemented successfully, the full benefits may not be realized or may not be realized within the desired timeframe. The failure to meet the challenges involved in implementing our strategic transformation could result in a material adverse impact on our business, results of operations and financial condition.

Increased regulatory scrutiny or uncertainty towards artificial or other ingredients and certain chemical substances in the U.S. or other jurisdictions, may result in significant costs due to, among other things, delays in developing, manufacturing or marketing of new or existing products, potential required changes in business practices, higher compliance costs, or capital expenditures. See, also “—If we are unable to comply with regulatory requirements and industry standards, including those regarding product safety, quality, efficacy and environmental impact, we could incur significant costs and suffer reputational harm which could adversely affect results of operations.” At the same time, changes in consumer trends driven by increasing awareness of health and wellness, as well as the development of new weight management pharmaceutical products such as glucagon-like peptide-1 (GLP-1) receptor agonists, may affect consumer behavior. In addition, there has been growing pressure by consumers, non-governmental organizations and, in some cases, governmental agencies for more transparency in product labeling (including related to biotechnology applications, such as gene editing and mapping). Our customers have been taking steps to address these trends, including by voluntarily providing product-specific ingredients disclosure, which may impact consumer behavior. These and other consumer and regulatory trends could affect the types and volumes of our ingredients and compounds that our customers include in their consumer product offerings and, therefore, the demand for our products, which, among other things, can impact our ability to meet certain productivity levels.

Many of our products are ingredients in a wide assortment of global consumer products throughout the world. Changes in the global, regional or local economic conditions have, and may in the near future, adversely impact demand for consumer products at a regional or global level. Such parameters include, but are not limited to, increased inflation, unemployment and underemployment, salaries and wage rates stagnation, low growth rates, and impacts of supply disruptions, climate events, or geopolitical developments. See, also “—International economic, political, legal, compliance and business factors could negatively affect our financial statements, operations and growth.”

Our results of operations may be negatively impacted by the outcome of uncertainties related to legal claims, disputes, investigations and litigation, including the ongoing antitrust and competition investigations and related class action lawsuits.

From time to time we are involved in a number of legal claims, regulatory investigations, shareholder litigation and other litigation, including claims related to intellectual property, product liability, competition and antitrust, personal injury, 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, claims of personal injury (including from alleged exposure to facilities’ emissions), regulatory investigations and potential fines.

In addition, and as further described in our consolidated financial statements, we are subject to antitrust and competition investigations in the United States and Europe, as well as class action lawsuits against us and certain of our competitors in the United States and Canada, alleging violations of antitrust laws and related claims. We may face additional civil suits in the United States or elsewhere relating to such alleged conduct. At this time, we are unable to predict or determine the scope, duration, or outcome of these investigations and lawsuits.

Antitrust and competition enforcement actions by the U.S. Department of Justice and the U.S. Federal Trade Commission and other regulators may result in regulators imposing fines, penalties, or restrictions on a company’s business practices in a manner that may significantly impact its results of operations. Our results of operations, liquidity or financial condition could be adversely impacted by unfavorable outcomes in these or other pending or future claims, disputes, investigations or litigation. Poor results of operations, liquidity or financial condition-particularly as we work towards implementation of our ongoing strategic transformation and our portfolio optimization strategy-may increase the likelihood of shareholder litigation.

In addition, in light of our product offerings into functional food, nutraceuticals, natural antioxidants or pharmaceutical products, we may also be subject to claims of false or deceptive advertising claims relating to the efficacy, health benefits or other performance attributes of such offerings in the U.S., Europe and other foreign jurisdictions in which we offer these types of products. 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.

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

Supply chain disruptions, geopolitical developments, climate-change events, natural disasters, public health crises, tariffs and trade wars, and other events may adversely affect our business, our procurement of raw materials, and our development, manufacturing, distribution or sale of our products, and thus may impact our productivity, business and financial results.

We, directly or indirectly through our suppliers, are subject to risks, inherent in agriculture, development, manufacturing, distribution or sale on a global scale, including natural disasters, global or local health crises, international conflicts, terrorist acts, geopolitical developments, trade wars, industrial accidents, environmental events, climate change events (including severe weather events), strikes and other labor disputes, disruptions in supply chain or information systems, political or economic crises (such as uncertainty related to protracted U.S. federal government funding negotiations or inflation), disruption or loss of key research or manufacturing sites, product quality control, safety and environmental compliance issues, regulatory requirements, as well as other external factors over which neither our suppliers nor we have control.

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 products and cellulose processed grains, guar, locust bean gum, organic vegetable oils, peels, saccharides, seaweed, soybeans, and sugars and yeasts. In connection with our manufacturing of our products, we often rely on third-party suppliers for such raw materials. 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 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.

Environmental events may affect our facilities, customers or suppliers and 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. Environmental or climate change events may disrupt our facilities and have a negative impact on, among other things, crop size and quality, supply chain, energy or transportation costs, affecting as a result our manufacturing processes and the availability, quality, and pricing of affected raw materials. Climate related policies and energy production restrictions and pricing, or the lack or failure of such policies and restrictions, may exacerbate such negative impacts.

As we source many of our raw materials globally, we are subject to additional risks. Supply chain disruptions, as demonstrated by the disruptions related to the COVID-19 pandemic, may result in increased costs, delays or limited availability related to raw materials, strain on shipping and transportation resources, and higher energy prices, which can negatively impact our margins and operating results. Energy prices (including the price of fuel and alternative energy sources) are in and of themselves subject to significant volatility caused by, among other things, market fluctuations, supply and demand changes, currency fluctuations, production and transportation disruptions, and other world events, as well as geopolitical developments and climate change related conditions discussed above.

In addition, the imposition of or changes in customs, tariffs, other trade protection measures (including with respect to China, Canada, Mexico, European Union or other jurisdictions by the U.S.), import or export licensing requirements, and sanctions on trade with certain countries, imposed by the U.S. or other countries as well as related retaliatory actions or ensuing uncertainty related to such trade measures, could adversely affect demand for our products, our cost or ability to import raw materials or export our products to other markets.

Similarly, geopolitical developments, such as the US-China relations, escalating tensions between China and Taiwan, the Russia-Ukraine war, the Israel-Hamas war and wider Middle East developments (including disruptions to the Red Sea passage or such conflicts spreading further in the relevant regions), could also impact, among other things, certain raw material, energy and transportation costs, certain of our suppliers, distributors, customers and local markets, global and local macroeconomic conditions, and cause further supply chain disruptions (including by delaying the delivery times of raw materials needed for our business or our products to customers). We maintain operations in both Russia and Ukraine and export products to customers in Russia and Ukraine from operations outside the region. As the Russia-Ukraine war has prolonged, it continues to impact our sourcing of certain raw materials for future years, and we continue to look for alternative suppliers or adjust the types of raw materials used in our products. In response to the events in Ukraine, the Company has limited the production and supply of ingredients in and to Russia and Belarus to only those that meet the essential needs of people, including food, hygiene and medicine, and as a result, our operating performance in Russia remains lower compared to previous years and may not reverse in the near future. The Israel-Hamas war and wider Middle East developments have impacted and may continue to impact our operations in Israel and certain of our customers, local markets and suppliers.

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, manufacturing and distribution facilities were disrupted, including due to the risks outlined above, 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.

Inflationary trends and pricing uncertainty, including in the price of our input costs, such as raw materials, transportation and energy, could adversely affect our business and financial results in the short term and result in uncertainties in the long term.

Inflationary pressure and price uncertainty may continue in 2025. 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. In addition, though many central banks have paused monetary policies such as increasing interest rates to counter inflation, rates remain at historical highs and may continue to remain at such levels. These and other monetary policies to counter inflation could negatively affect our borrowing costs and those of our customers and suppliers, as well as exchange rates and other macroeconomic factors.

Our Nourish segment consists of an innovative and broad portfolio of natural-based ingredients to enhance nutritional value, texture and functionality in a wide range of beverage, dairy, bakery, confectionery and culinary applications and consists of Ingredients and Flavors.

Our Pharma Solutions segment produces, among other things, a vast portfolio of cellulosics and seaweed-based pharmaceutical excipients, used to improve the functionality and delivery of active pharmaceutical ingredients, including controlled or modified drug release formulations, and enabling the development of more effective pharmaceutical finished dosage formulations. Our excipients are used in prescription and over-the-counter pharmaceuticals and dietary supplements. Our Pharma Solutions products also serve a variety of other specialty and industrial end-uses including coatings, inks, electronics, agriculture and consumer products. During March 2024, we entered into an agreement to sell the Pharma Solutions business disposal group, that is primarily made up of most businesses within the Company’s existing Pharma Solutions reportable segment as well as certain adjacent businesses. During October 2024, the Company entered into an agreement to sell its nitrocellulose business, which is within the Company’s existing Pharma Solutions reportable operating segment. Both transactions are expected to close in the second quarter of 2025.

Impact related to the Israel-Hamas War

We maintain operations in Israel and, additionally, export products to customers in Israel from operations outside the region. We will continue to evaluate the current events and any potential impacts related to this matter, but we do not expect there to be a material impact to our Consolidated Financial Statements.

In 2024 and 2023, total sales to Israeli customers were approximately 1% of total sales.

Impact related to the Russia-Ukraine War

We maintain operations in both Russia and Ukraine and, additionally, export products to customers in Russia and Ukraine from operations outside the region. In response to the events in Ukraine, we have limited the production and supply of ingredients in and to Russia to only those that meet the essential needs of people, including food, hygiene and medicine.

In 2024 and 2023, total sales to Russian customers were approximately 1% of total sales.

In 2024 and 2023, total sales to Ukrainian customers were both less than 1% of total sales.

We have a reserve of approximately $2 million related to expected credit losses on receivables from customers located in Russia and Ukraine. During 2022, we also recorded a charge of $120 million related to the impairment of certain long-lived assets in Russia. See Note 1, Note 11 and Note 12 to the Consolidated Financial Statements for additional information.

For more detailed information about risks related to the Russia-Ukraine war and the Israel-Hamas war, refer to Item 1A, “Risk Factors” – “Supply chain disruptions, geopolitical developments, climate-change events, natural disasters, public health crises, tariffs and trade wars, and other events may adversely affect our business, our procurement of raw materials, and our development, manufacturing, distribution or sale of our products, and thus may impact our productivity, business and financial results.”

Our Food Ingredients segment consists of a diversified portfolio across natural, artificial and plant-based specialty food ingredients that provide functional properties solutions for food and beverage products, as well as specialty soy protein with value-added formulations, emulsifiers and sweeteners. Natural food protection ingredients consist of natural antioxidants and anti-microbials used for natural food preservation and shelf-life extension for beverages, cosmetic and healthcare products, pet food and feed additives. Food Ingredients also includes savory solutions (such as spices, marinades, and mixtures) and inclusion products (such as products combining flavorings with fruit, vegetables and other natural ingredients).

Food Ingredients

Food Ingredients sales in 2026 increased $43 million, or 5% on a reported basis, to $839 million compared to $796 million in the prior year period. On a comparable currency neutral basis, Food Ingredients sales increased 3% in 2026 compared to the prior year period primarily driven by volume increases across nearly all business entities. Exchange rate variations had a favorable impact of 4%. Comparable portfolio results exclude the impact of the divestiture of the SCL disposal group with an impact of approximately $17 million.

R&D expenses increased $2 million to $166 million (6.1% of sales) in the first quarter of 2026 compared to $164 million (5.8% of sales) in the first quarter of 2025. The increase in R&D expenses was primarily driven by an increase in employee related costs and operating expenses for R&D related activities, offset by divestitures, with an impact of approximately $5 million.

Amortization expenses increased to $146 million in the first quarter of 2026 compared to $143 million in the first quarter of 2025. The increase in amortization expense was primarily driven by the impact of foreign currency exchange rates. See Note 11 for additional information.

There was no impairment of goodwill in the first quarter of 2026 compared to $1.153 billion in the first quarter of 2025, which was related to the Food Ingredients reporting unit. See Note 11 for additional information.

Taste Segment Adjusted Operating EBITDA increased $22 million, or 17% on a reported basis, to $153 million in the first quarter of 2026 (23.3% of segment sales) from $131 million (20.9% of segment sales) in the comparable 2025 period. On a comparable currency neutral basis, Taste Segment Adjusted Operating EBITDA increased 18% in 2026 compared to the prior year period led primarily by volume increases and productivity gains. Comparable portfolio results exclude the impact of the divestiture of the Rene Laurent business with an impact of approximately $3 million.

Food Ingredients Segment Adjusted Operating EBITDA