International Flavors & Fragrances(IFF) - 2025 Q2 - Quarterly Report

Filing Information Provides basic filing details for IFF's Form 10-Q for the period ended June 30, 2025, including registration status and common stock outstanding General Information Details IFF's basic filing information for the Quarterly Report on Form 10-Q, including its registration status and outstanding common stock - Registrant: International Flavors & Fragrances Inc. (IFF)[1] - Filing Type: Quarterly Report on Form 10-Q for the period ended June 30, 2025[1] Securities Registered | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | |---|---|---| | Common Stock, par value 12 1/2¢ per share | IFF | New York Stock Exchange | | 1.800% Senior Notes due 2026 | IFF 26 | New York Stock Exchange | - Filer Status: Large accelerated filer[3] - Common Stock Outstanding (as of July 31, 2025): 256,287,081 shares[3] PART I - Financial Information Presents IFF's unaudited consolidated financial statements and management's discussion and analysis ITEM 1. Financial Statements (Unaudited) Presents IFF's unaudited consolidated financial statements and detailed notes for the periods ended June 30, 2025 and 2024 Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Presents IFF's consolidated statements of income and comprehensive income for the three and six months ended June 30 Consolidated Statements of Income (Loss) - Three Months Ended June 30 | (DOLLARS AND SHARES IN MILLIONS EXCEPT PER SHARE AMOUNTS) | 2025 | 2024 | |---|---|---| | Net sales | $ 2,764 | $ 2,889 | | Gross profit | 1,030 | 1,068 | | Operating profit (loss) | 198 | 191 | | Income (loss) before income taxes | 534 | 183 | | Net income (loss) attributable to IFF shareholders | $ 612 | $ 170 | | Net income (loss) per share - diluted | $ 2.38 | $ 0.66 | Consolidated Statements of Income (Loss) - Six Months Ended June 30 | (DOLLARS AND SHARES IN MILLIONS EXCEPT PER SHARE AMOUNTS) | 2025 | 2024 | |---|---|---| | Net sales | $ 5,607 | $ 5,788 | | Gross profit | 2,065 | 2,092 | | Operating profit (loss) | (705) | 390 | | Income (loss) before income taxes | (460) | 298 | | Net income (loss) attributable to IFF shareholders | $ (406) | $ 230 | | Net income (loss) per share - diluted | $ (1.59) | $ 0.90 | - Net income attributable to IFF shareholders for the three months ended June 30, 2025, increased significantly to $612 million from $170 million in the prior year, primarily due to a $488 million gain on extinguishment of debt[6] - For the six months ended June 30, 2025, IFF reported a net loss attributable to shareholders of $406 million, a substantial decrease from a net income of $230 million in the prior year, largely impacted by a $1.153 billion impairment of goodwill[6] Consolidated Balance Sheets Presents IFF's consolidated balance sheets, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 Consolidated Balance Sheet Highlights | (DOLLARS AND SHARES IN MILLIONS EXCEPT PER SHARE AMOUNTS) | June 30, 2025 | December 31, 2024 | |---|---|---| | ASSETS | | | | Cash and cash equivalents | $ 816 | $ 469 | | Total Current Assets | 5,928 | 7,993 | | Goodwill | 8,283 | 9,080 | | Total Assets | $ 26,121 | $ 28,667 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Short-term debt and current portion of long-term debt | $ 500 | $ 1,413 | | Total Current Liabilities | 3,183 | 4,333 | | Long-term debt | 5,684 | 7,564 | | Total Shareholders' Equity | 14,404 | 13,876 | | Total Liabilities and Shareholders' Equity | $ 26,121 | $ 28,667 | - Total assets decreased from $28,667 million at December 31, 2024, to $26,121 million at June 30, 2025, primarily due to the reclassification of assets held for sale (Pharma Solutions disposal group) and a goodwill impairment[8] - Total debt (short-term and long-term) significantly decreased from $8,977 million at December 31, 2024, to $6,184 million at June 30, 2025, largely driven by debt repayments and extinguishment[8][95] Consolidated Statements of Shareholders' Equity Presents changes in IFF's consolidated shareholders' equity for the six months ended June 30, 2025 and 2024 - Total Shareholders' Equity increased from $13,911 million at January 1, 2025, to $14,436 million at June 30, 2025, primarily due to net income and other comprehensive income, despite cash dividends declared[11] - Accumulated other comprehensive loss improved from $(2,527) million at January 1, 2025, to $(1,415) million at June 30, 2025, largely driven by foreign currency translation adjustments[11] - Cash dividends declared were $0.40 per common share for each of the three months ended June 30, 2025 and 2024, and $0.80 per share for each of the six months ended June 30, 2025 and 2024[11] Consolidated Statements of Cash Flows Presents IFF's consolidated statements of cash flows, detailing operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Consolidated Statements of Cash Flows - Six Months Ended June 30 | (DOLLARS IN MILLIONS) | 2025 | 2024 | |---|---|---| | Net cash provided by operating activities | $ 368 | $ 336 | | Net cash provided by investing activities | 2,541 | 664 | | Net cash used in financing activities | (2,654) | (1,023) | | Net change in cash and cash equivalents | 345 | (61) | | Cash and cash equivalents at end of period | $ 816 | $ 674 | - Net cash provided by investing activities significantly increased to $2,541 million in the first six months of 2025 from $664 million in 2024, primarily due to higher net proceeds from business divestitures ($2,707 million in 2025 vs. $848 million in 2024)[15] - Net cash used in financing activities increased to $2,654 million in the first six months of 2025 from $1,023 million in 2024, driven by substantial principal payments of debt ($2,413 million in 2025 vs. $849 million in 2024)[15] Notes to Consolidated Financial Statements Provides detailed explanations and disclosures supporting IFF's consolidated financial statements NOTE 1. Nature of Operations and Summary of Significant Accounting Policies Describes IFF's business, recent segment reorganization, and significant accounting policies, including cash, inventories, and new accounting standards - IFF is a leading creator and manufacturer of products for food, beverage, health & biosciences, and scent applications, holding global leadership positions across key categories[17] - Effective January 1, 2025, IFF reorganized its internal structure, separating the former Nourish segment into two new reportable segments: Taste and Food Ingredients, and adjusted corporate cost allocations[22][59][60] Cash, Cash Equivalents and Restricted Cash (in millions) | (DOLLARS IN MILLIONS) | June 30, 2025 | December 31, 2024 | |---|---|---| | Cash and cash equivalents | $ 816 | $ 469 | | Cash, cash equivalents and restricted cash | $ 816 | $ 471 | - The Company sold approximately $910 million of receivables under factoring agreements for the six months ended June 30, 2025, with related costs of $12 million included in interest expense[25] Inventories (in millions) | (DOLLARS IN MILLIONS) | June 30, 2025 | December 31, 2024 | |---|---|---| | Raw materials | $ 804 | $ 657 | | Work in process | 396 | 368 | | Finished goods | 1,171 | 1,108 | | Total | $ 2,371 | $ 2,133 | - IFF is evaluating the impact of new FASB ASUs, including ASU 2025-05 (credit losses), ASU 2024-03/2025-01 (expense disaggregation), and ASU 2023-09 (income tax disclosures), with ASU 2023-09 expected to impact disclosures but not results of operations[29][30][31] NOTE 2. Net Income (Loss) Per Share Details the calculation of basic and diluted net income (loss) per share for the periods presented Net Income (Loss) Per Share - Three Months Ended June 30 | (AMOUNTS IN MILLIONS EXCEPT PER SHARE AMOUNTS) | 2025 | 2024 | |---|---|---| | Net income (loss) available to IFF shareholders | $ 612 | $ 170 | | Weighted average shares assuming dilution (diluted) | 257 | 256 | | Net income (loss) per share - diluted | $ 2.38 | $ 0.66 | Net Income (Loss) Per Share - Six Months Ended June 30 | (AMOUNTS IN MILLIONS EXCEPT PER SHARE AMOUNTS) | 2025 | 2024 | |---|---|---| | Net income (loss) available to IFF shareholders | $ (406) | $ 230 | | Weighted average shares assuming dilution (diluted) | 256 | 256 | | Net income (loss) per share - diluted | $ (1.59) | $ 0.90 | - Approximately 1 million potentially dilutive securities were excluded from diluted net loss per share for the six months ended June 30, 2025, as their inclusion would have been anti-dilutive due to the net loss[33] NOTE 3. Business Divestitures and Assets and Liabilities Held for Sale Outlines completed divestitures of Pharma Solutions, Nitrocellulose, and Tobacco Flavoring businesses, and related asset reclassifications - IFF completed the divestiture of its Pharma Solutions business on May 1, 2025, receiving gross cash proceeds of approximately $2.564 billion, with a pre-tax loss of $91 million recognized[37][40] - The divestiture of the Nitrocellulose business was completed on May 9, 2025, yielding cash proceeds of approximately $161 million and resulting in a pre-tax gain of $10 million[43][46] - The Tobacco Flavoring Business in North America was divested on April 1, 2025, for approximately $20 million in gross cash proceeds, recognizing a pre-tax gain of less than $1 million[47][48] Assets and Liabilities Held for Sale (December 31, 2024) | (DOLLARS IN MILLIONS) | December 31, 2024 | |---|---| | Total assets held-for-sale | $ 3,030 | | Total liabilities held-for-sale | $ 332 | - As of June 30, 2025, there were no assets and liabilities classified as 'held for sale', following the completion of several divestitures during the period[49][50] NOTE 4. Restructuring and Other Charges Details costs and impact of IFF's productivity enhancement program, including severance and fixed asset write-downs - IFF initiated a productivity enhancement program in 2024, aiming to improve productivity and optimize its organizational footprint by December 31, 2026, with estimated total costs ranging from $100 million to $120 million[53][54] - For the six months ended June 30, 2025, the Company incurred $38 million in severance costs related to the IFF Productivity Program, with total severance costs of $41 million and fixed asset write-downs of $20 million since inception[55] Restructuring and Other Charges by Segment (Six Months Ended June 30) | (DOLLARS IN MILLIONS) | 2025 | 2024 | |---|---|---| | Taste | $ 8 | $ 1 | | Food Ingredients | 10 | 2 | | Health & Biosciences | 8 | 1 | | Scent | 12 | 1 | | Total Restructuring and other charges | $ 38 | $ 5 | NOTE 5. Stock Compensation Plans Provides information on stock-based compensation expense and unrecognized compensation costs related to equity awards Stock-Based Compensation Expense (Six Months Ended June 30) | (DOLLARS IN MILLIONS) | 2025 | 2024 | |---|---|---| | Equity-based awards | $ 51 | $ 43 | | Liability-based awards | 1 | 2 | | Total stock-based compensation expense | $ 52 | $ 45 | | Less: Tax benefit | (13) | (9) | | Total stock-based compensation expense, after tax | $ 39 | $ 36 | - As of June 30, 2025, there was approximately $105 million of total unrecognized compensation cost related to non-vested equity awards[58] NOTE 6. Segment Information Presents financial data by IFF's reorganized reportable segments and geographic regions, including net sales and capital expenditures - Effective January 1, 2025, IFF reorganized its segments, splitting the former Nourish segment into Taste and Food Ingredients, and transferring immaterial businesses, resulting in five reportable segments[59][60][61] Net Sales by Segment (Three Months Ended June 30) | (DOLLARS IN MILLIONS) | 2025 | 2024 | |---|---|---| | Taste | $ 631 | $ 610 | | Food Ingredients | 850 | 847 | | Health & Biosciences | 577 | 556 | | Scent | 603 | 603 | | Pharma Solutions | 103 | 273 | | Total | $ 2,764 | $ 2,889 | Adjusted Operating EBITDA by Segment (Six Months Ended June 30, 2025) | (DOLLARS IN MILLIONS) | Taste | Food Ingredients | Health & Biosciences | Scent | Pharma Solutions | Total | |---|---|---|---|---|---|---| | Adjusted Operating EBITDA | $ 256 | $ 235 | $ 289 | $ 274 | $ 76 | $ 1,130 | Consolidated Capital Expenditures by Segment (Six Months Ended June 30) | (DOLLARS IN MILLIONS) | 2025 | 2024 | |---|---|---| | Taste | $ 42 | $ 23 | | Food Ingredients | 100 | 70 | | Health and Biosciences | 62 | 35 | | Scent | 32 | 25 | | Pharma Solutions | 38 | 47 | | Consolidated | $ 274 | $ 200 | Net Sales by Region (Six Months Ended June 30) | (DOLLARS IN MILLIONS) | 2025 | 2024 | |---|---|---| | Europe, Africa and Middle East | $ 1,905 | $ 1,949 | | Greater Asia | 1,317 | 1,363 | | North America | 1,671 | 1,742 | | Latin America | 714 | 734 | | Consolidated | $ 5,607 | $ 5,788 | NOTE 7. Employee Benefits Details net periodic benefit costs for non-U.S. pension plans and expected contributions to pension plans Net Periodic Benefit (Income) Cost - Non-U.S. Plans (Six Months Ended June 30) | (DOLLARS IN MILLIONS) | 2025 | 2024 | |---|---|---| | Service cost for benefits earned | $ 10 | $ 12 | | Interest cost on projected benefit obligation | 18 | 18 | | Expected return on plan assets | (23) | (25) | | Net amortization and deferrals | 2 | 3 | | Net periodic benefit (income) cost | $ 7 | $ 8 | - The Company expects to contribute $5 million to U.S. pension plans and $15 million to non-U.S. pension plans in 2025, with $2 million and $7 million already contributed, respectively, during the first six months[74] - Total postretirement benefit expense was $0 for both the three and six months ended June 30, 2025 and 2024[74] NOTE 8. Other Expense, Net Breaks down other expense, net, including foreign exchange losses, interest income, and pension-related benefits Other Expense, Net (Six Months Ended June 30) | (DOLLARS IN MILLIONS) | 2025 | 2024 | |---|---|---| | Foreign exchange losses | $ (41) | $ (41) | | Interest income | 11 | 6 | | Pension-related benefit | 1 | 3 | | Other | (1) | 16 | | Other expense, net | $ (30) | $ (16) | - Other expense, net, increased to $30 million for the six months ended June 30, 2025, from $16 million in 2024, primarily due to a decrease in 'Other' income/gains[75] NOTE 9. Income Taxes Explains IFF's effective tax rates, unrecognized tax benefits, and deferred tax liabilities for the periods presented - The effective tax rate for the three months ended June 30, 2025, was (14.6)%, driven by a $359 million tax benefit from an entity realignment project, partially offset by business divestitures[77] - For the six months ended June 30, 2025, the effective tax rate was 12.0%, influenced by the entity realignment tax benefit, business divestitures, and a largely non-taxable goodwill impairment charge[78] - As of June 30, 2025, IFF had $154 million in unrecognized tax benefits and $58 million in accrued interest and penalties, totaling $212 million for uncertain tax positions[79][80] - A deferred tax liability of approximately $151 million is recorded for the effect of repatriating funds from non-U.S. subsidiaries to the U.S.[81] NOTE 10. Property, Plant and Equipment, Net Provides details on IFF's property, plant, and equipment, including accumulated depreciation and capital expenditures Property, Plant and Equipment, Net (in millions) | (DOLLARS IN MILLIONS) | June 30, 2025 | December 31, 2024 | |---|---|---| | Total Property, plant and equipment | $ 6,616 | $ 6,167 | | Accumulated depreciation | (2,711) | (2,428) | | Total Property, plant and equipment, net | $ 3,905 | $ 3,739 | - Depreciation expense for the six months ended June 30, 2025, was $190 million, down from $203 million in the prior year[82] - Capitalized interest during construction was approximately $6 million for the six months ended June 30, 2025, consistent with $7 million in the prior year[83] NOTE 11. Goodwill and Other Intangible Assets, Net Details the goodwill impairment charge for the Food Ingredients unit and the carrying value of other intangible assets - IFF recognized a goodwill impairment charge of $1.153 billion for the Food Ingredients reporting unit for the six months ended June 30, 2025, following a segment reorganization, leaving no remaining goodwill for this unit[86] Goodwill Movements by Segment (Six Months Ended June 30, 2025) | (DOLLARS IN MILLIONS) | Taste | Food Ingredients | Scent | Health & Biosciences | Total | |---|---|---|---|---|---| | Balance at January 1, 2025 | $ — | $ — | $ 1,465 | $ 4,295 | $ 9,080 | | Reallocation of goodwill in segment reorganization | 2,178 | 1,153 | — | (14) | — | | Impairment | — | (1,153) | — | — | (1,153) | | Balance at June 30, 2025 | $ 2,305 | $ — | $ 1,511 | $ 4,467 | $ 8,283 | Other Intangible Assets, Net (in millions) | (DOLLARS IN MILLIONS) | June 30, 2025 | December 31, 2024 | |---|---|---| | Customer relationships | $ 7,314 | $ 7,004 | | Technological know-how | 2,026 | 1,937 | | Total carrying value | 9,653 | 9,234 | | Total accumulated amortization | (3,223) | (2,789) | | Other intangible assets, net | $ 6,430 | $ 6,445 | - Amortization expense for acquisition-related intangibles decreased to $288 million for the six months ended June 30, 2025, from $321 million in 2024, primarily due to Pharma Solutions intangible assets being classified as 'held for sale'[89][173] NOTE 12. Other Current Assets and Liabilities, and Other Assets Provides a breakdown of various current and non-current assets and liabilities, including prepaid expenses and accrued income taxes Prepaid Expenses and Other Current Assets (in millions) | (DOLLARS IN MILLIONS) | June 30, 2025 | December 31, 2024 | |---|---|---| | Value-added tax receivable | $ 154 | $ 152 | | Prepaid income taxes | 212 | 193 | | Earnout receivable | 100 | — | | Total | $ 940 | $ 737 | Other Assets (in millions) | (DOLLARS IN MILLIONS) | June 30, 2025 | December 31, 2024 | |---|---|---| | Deferred income taxes | $ 244 | $ 240 | | Overfunded pension plans | 168 | 144 | | Long-term receivables | 240 | 171 | | Total | $ 955 | $ 837 | Other Current Liabilities (in millions) | (DOLLARS IN MILLIONS) | June 30, 2025 | December 31, 2024 | |---|---|---| | Accrued income taxes | $ 218 | $ 131 | | Accrued expenses payable | 318 | 203 | | Accrued restructuring | 28 | 3 | | Total | $ 975 | $ 783 | NOTE 13. Debt Details IFF's debt structure, tender offers, repayments, and amendments to the Revolving Credit Agreement Debt Structure (in millions) | (DOLLARS IN MILLIONS) | June 30, 2025 | December 31, 2024 | |---|---|---| | Total debt | $ 6,184 | $ 8,977 | | Less: Short-term borrowings | (500) | (1,413) | | Total Long-term debt | $ 5,684 | $ 7,564 | - IFF commenced tender offers on May 20, 2025, to repurchase $2.5 billion of Senior Notes for $2.0 billion cash, resulting in a $488 million gain on debt extinguishment, primarily funded by Pharma Solutions divestiture proceeds[97] - The remaining $413 million balance of the 2026 Term Loan Facility was repaid in the first six months of 2025 using divestiture proceeds[98] - On June 25, 2025, the Revolving Credit Agreement was amended, extending the termination date to June 25, 2030, and adjusting the net debt to credit adjusted EBITDA ratio covenant to 4.00x through September 30, 2025, and 3.75x thereafter[104] - As of June 30, 2025, IFF had no outstanding borrowings under its $2 billion Revolving Credit Facility and was in compliance with all debt covenants[104][237] NOTE 14. Leases Presents information on total lease costs and supplemental cash flow information related to operating and finance leases Total Lease Cost (Six Months Ended June 30) | (DOLLARS IN MILLIONS) | 2025 | 2024 | |---|---|---| | Total operating lease cost | $ 90 | $ 92 | | Finance lease cost | 6 | 6 | Supplemental Cash Flow Information Related to Leases (Six Months Ended June 30) | (DOLLARS IN MILLIONS) | 2025 | 2024 | |---|---|---| | Operating cash flows for operating leases | $ 67 | $ 60 | | Financing cash flows for finance leases | 6 | 5 | | Right-of-use assets obtained in exchange for lease obligations (Operating leases) | 79 | 44 | NOTE 15. Financial Instruments Describes IFF's use of financial instruments, fair value hierarchy, and derivative contracts for risk management - IFF uses a fair value hierarchy (Level 1, 2, 3) for financial instruments, with most debt and derivatives classified as Level 2 due to observable market inputs[110][113] Fair Value of Long-term Debt (June 30, 2025) | (DOLLARS IN MILLIONS) | Carrying Value | Fair Value | |---|---|---| | 2025 Notes | $ 500 | $ 496 | | 2026 Euro Notes | 942 | 934 | | 2027 Notes | 805 | 754 | | 2028 Notes | 399 | 399 | | 2030 Notes | 1,239 | 1,090 | | 2040 Notes | 342 | 245 | | 2047 Notes | 392 | 307 | | 2048 Notes | 674 | 592 | | 2050 Notes | 889 | 568 | - The Company uses foreign currency forward contracts to manage exchange rate risk, commodity contracts for price fluctuations (soybeans, natural gas), and cross currency swaps ($1.4 billion notional) as net investment hedges for European investments[115][116][117][118] Derivative Instruments Measured at Fair Value (June 30, 2025) | (DOLLARS IN MILLIONS) | Derivatives Designated as Hedging Instruments | Derivatives Not Designated as Hedging Instruments | Total Fair Value | |---|---|---|---| | Foreign currency forward contracts (assets) | $ — | $ 36 | $ 36 | | Foreign currency contracts (liabilities) | — | 1 | 1 | | Cross currency swaps (liabilities) | 254 | — | 254 | | Total derivative assets | $ — | $ 36 | $ 36 | | Total derivative liabilities | $ 254 | $ 1 | $ 255 | NOTE 16. Accumulated Other Comprehensive Loss Details changes in accumulated other comprehensive loss, primarily driven by positive foreign currency translation adjustments Changes in Accumulated Other Comprehensive Loss (Six Months Ended June 30, 2025) | (DOLLARS IN MILLIONS) | Foreign Currency Translation Adjustments | Gains (Losses) on Derivatives Qualifying as Hedges | Pension and Postretirement Liability Adjustment | Total | |---|---|---|---|---| | Accumulated other comprehensive loss, net of tax, as of January 1, 2025 | $ (2,426) | $ (2) | $ (99) | $ (2,527) | | Net current period other comprehensive income (loss) | 1,162 | (1) | (49) | 1,112 | | Accumulated other comprehensive loss, net of tax, as of June 30, 2025 | $ (1,264) | $ (3) | $ (148) | $ (1,415) | - The accumulated other comprehensive loss improved significantly by $1,112 million for the six months ended June 30, 2025, primarily driven by positive foreign currency translation adjustments of $1,162 million[128] NOTE 17. Commitments and Contingencies Outlines IFF's bank guarantees, letters of credit, and legal proceedings, including class action settlements and antitrust investigations - As of June 30, 2025, IFF had approximately $198 million in available bank guarantees, letters of credit, and surety bonds, with $54 million outstanding[131] - In the second quarter of 2025, IFF finalized a settlement agreement for a securities class action in Israel related to the Frutarom acquisition, with a payment of approximately $6.8 million expected to be covered by insurers[136] - IFF recognized a $42 million provision in Q2 2025 for anticipated settlement of U.S. class action lawsuits related to alleged anticompetitive conduct in its fragrance businesses[139] - IFF is cooperating with ongoing antitrust investigations by the EC, CMA, DOJ, Swiss Competition Commission, and Mexican Competition Commission regarding its fragrance businesses, and has applied for leniency in several jurisdictions[141] - The criminal investigation by Israeli authorities into Frutarom and former executives for suspected bribery and money laundering was closed on February 26, 2024[140] NOTE 18. Subsequent Events Discloses significant events after the reporting period, including tax legislation, a share repurchase program, and a business divestiture - On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted in the U.S., permanently extending key tax provisions and making significant changes to the U.S. international tax framework, which IFF is currently evaluating for financial statement impact[146] - On August 5, 2025, IFF's Board authorized a new $500 million share repurchase program, to be funded from available cash and operating activities[147] - On August 5, 2025, IFF announced a definitive agreement to divest its soy crush, concentrates, and lecithin business, expected to close in Q4 2025, aligning with its portfolio strengthening strategy[148] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses IFF's financial condition and results, analyzing sales, profitability, segment performance, and liquidity for the periods ended June 30, 2025 OVERVIEW Provides an overview of IFF's business, recent segment reorganization, and key financial highlights for the second quarter of 2025 - IFF is a leading global creator and manufacturer of products for food, beverage, health & biosciences, and scent markets, with a recent sale of its Pharma Solutions disposal group[151] - Effective January 1, 2025, IFF reorganized its segments, splitting Nourish into Taste and Food Ingredients, resulting in five reportable segments[152] - Sales in Q2 2025 decreased by 4% on a reported and currency-neutral basis to $2.764 billion, primarily due to divestiture impacts of approximately $193 million, partially offset by volume increases[158] - Gross profit in Q2 2025 decreased by 4% to $1.030 billion (37.3% of sales), driven by divestitures, but partially offset by volume increases and productivity gains[159] RESULTS OF OPERATIONS Presents a summary of IFF's key financial results, including net sales, gross profit, and net income, for the three and six months ended June 30 Key Financial Results (Three Months Ended June 30) | (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) | 2025 | 2024 | Change (%) | |---|---|---|---| | Net sales | $ 2,764 | $ 2,889 | (4) % | | Gross profit | 1,030 | 1,068 | (4) % | | Operating profit (loss) | 198 | 191 | 4 % | | Income (loss) before income taxes | 534 | 183 | 192 % | | Net income (loss) attributable to IFF shareholders | $ 612 | $ 170 | 260 % | | Net income (loss) per share - diluted | $ 2.38 | $ 0.66 | 261 % | Key Financial Results (Six Months Ended June 30) | (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) | 2025 | 2024 | Change (%) | |---|---|---|---| | Net sales | $ 5,607 | $ 5,788 | (3) % | | Gross profit | 2,065 | 2,092 | (1) % | | Operating profit (loss) | (705) | 390 | (281) % | | Income (loss) before income taxes | (460) | 298 | (254) % | | Net income (loss) attributable to IFF shareholders | $ (406) | $ 230 | (277) % | | Net income (loss) per share - diluted | $ (1.59) | $ 0.90 | (277) % | - Operating profit for Q2 2025 increased by 4% to $198 million, while for the six months, it swung to a loss of $705 million from a profit of $390 million in 2024, primarily due to a $1.153 billion goodwill impairment[161] SECOND QUARTER 2025 IN COMPARISON TO SECOND QUARTER 2024 Compares IFF's financial performance for Q2 2025 against the prior year, including sales by segment and expense analysis Sales Performance by Segment (Q2 2025 vs. Q2 2024) | | Reported | (1) Currency Neutral | (1)(2) Comparable Currency Neutral | |---|---|---|---| | Taste | 3 % | 4 % | 6 % | | Food Ingredients | 0 % | 1 % | 1 % | | Health & Biosciences | 4 % | 4 % | 4 % | | Scent | 0 % | 1 % | 1 % | | Pharma Solutions | -62 % | -62 % | 21 % | | Total | -4 % | -4 % | 3 % | - Pharma Solutions sales decreased 62% in Q2 2025 due to divestitures, but on a comparable currency neutral basis (excluding divestiture impact), sales increased 21% driven by volume and price[169] - Cost of sales decreased by $87 million in Q2 2025, primarily due to divestitures ($130 million impact) and lower input costs, partially offset by volume increases[170] - R&D expenses increased by $9 million in Q2 2025 due to higher employee-related and operating costs, despite an $8 million reduction from divestitures[171] - S&A expenses decreased by $10 million in Q2 2025, driven by lower consulting fees related to divestitures, but partially offset by a $42 million provision for fragrance business class action settlements[172][139] - Interest expense decreased by $18 million in Q2 2025 due to lower debt outstanding, while a $488 million gain on extinguishment of debt was recognized from tender offers funded by divestiture proceeds[176][177] Adjusted Operating EBITDA Performance by Segment (Q2 2025 vs. Q2 2024) | | Reported | (1)(2) Comparable Adjusted | |---|---|---| | Taste | -2 % | 2 % | | Food Ingredients | 14 % | 16 % | | Health & Biosciences | 0 % | 1 % | | Scent | -9 % | -8 % | | Pharma Solutions | -62 % | 0 % | | Total | -6 % | 2 % | FIRST SIX MONTHS 2025 IN COMPARISON TO FIRST SIX MONTHS 2024 Compares IFF's financial performance for H1 2025 against the prior year, including sales by segment and goodwill impairment Sales Performance by Segment (H1 2025 vs. H1 2024) | | Reported | (1) Currency Neutral | (1)(2) Comparable Currency Neutral | |---|---|---|---| | Taste | 2 % | 5 % | 6 % | | Food Ingredients | -3 % | -2 % | -2 % | | Health & Biosciences | 3 % | 4 % | 4 % | | Scent | -2 % | 0 % | 3 % | | Pharma Solutions | -29 % | -28 % | 12 % | | Total | -3 % | -1 % | 3 % | - Consolidated sales for H1 2025 decreased 3% to $5.607 billion, primarily due to a $224 million impact from divestitures, partially offset by volume increases[192] - Food Ingredients sales decreased 3% in H1 2025, driven by volume decreases in Protein Solutions, while Taste, Health & Biosciences, and Scent segments showed positive or flat currency-neutral sales growth[196][197][198][199] - Goodwill impairment was $1.153 billion in H1 2025 (Food Ingredients) compared to $64 million in H1 2024 (Pharma Solutions disposal group)[206] - Restructuring and other charges increased to $38 million in H1 2025 from $5 million in 2024, driven by higher severance costs from the IFF Productivity Program[207] Adjusted Operating EBITDA Performance by Segment (H1 2025 vs. H1 2024) | | Reported | (1)(2) Comparable Adjusted | |---|---|---| | Taste | 5 % | 8 % | | Food Ingredients | 8 % | 9 % | | Health & Biosciences | — % | 1 % | | Scent | -12 % | -7 % | | Pharma Solutions | -28 % | 10 % | | Total | -3 % | 2 % | Liquidity Discusses IFF's cash and cash equivalents, and cash flows from operating, investing, and financing activities - Cash and cash equivalents increased to $816 million at June 30, 2025, from $471 million at December 31, 2024[225] - Cash flows from operating activities increased to $368 million for H1 2025 from $336 million in H1 2024, driven by decreased working capital[227] - Cash flows from investing activities significantly increased to $2.541 billion for H1 2025 from $664 million in H1 2024, primarily due to higher net proceeds from business divestitures[228] - Cash flows used in financing activities increased to $2.654 billion for H1 2025 from $1.023 billion in H1 2024, mainly due to $2.0 billion in Senior Notes repurchases and repayment of the 2026 Term Loan Facility[230] - Capital spending in 2025 is expected to be approximately 6.0% of sales, up from 4.0% in 2024[229] Capital Resources Outlines IFF's capital allocation strategy, debt covenants, and outstanding senior unsecured notes - IFF's capital allocation strategy focuses on maintaining investment-grade ratings, investing in the business, paying dividends, repurchasing shares, and repaying debt[232] - The Revolving Credit Agreement was amended on June 25, 2025, extending its termination to June 25, 2030, and setting net debt to credit adjusted EBITDA ratio covenants[235][236] - As of June 30, 2025, IFF was in compliance with all financial covenants, with a net debt to credit adjusted EBITDA ratio of 2.47 to 1.0, below the 4.00x covenant[238] Net Debt and Credit Adjusted EBITDA (Twelve Months Ended June 30, 2025) | (DOLLARS IN MILLIONS) | June 30, 2025 | |---|---| | Total debt | $ 6,213 | | Cash and cash equivalents | 816 | | Net debt | $ 5,397 | | Credit Adjusted EBITDA | $ 2,184 | - As of June 30, 2025, IFF had $6.140 billion in senior unsecured notes outstanding, with maturities ranging from October 2025 to December 2050[241] New Accounting Standards Refers to Note 1 for a discussion of recent accounting pronouncements relevant to IFF's financial statements - Refer to Note 1 to the Consolidated Financial Statements for a discussion of recent accounting pronouncements[245] Non-GAAP Financial Measures Defines and explains IFF's use of non-GAAP financial measures, including currency neutral metrics and adjusted operating EBITDA - IFF uses non-GAAP financial measures such as comparable currency neutral metrics, adjusted operating EBITDA, adjusted operating EBITDA margin, and net debt to credit adjusted EBITDA to provide additional insight into underlying operating results and comparable year-over-year performance[246][247] - Currency neutral metrics are calculated by translating current year sales at prior year exchange rates to eliminate currency fluctuation effects[248] - Adjusted operating EBITDA excludes depreciation, amortization, interest, other expense, and certain non-recurring items like goodwill impairment, restructuring, and divestiture costs[250] - Net debt to credit adjusted EBITDA is a leverage ratio defined as net debt (debt less cash) divided by trailing 12-month credit adjusted EBITDA, used for credit agreement compliance[251] Cautionary Statement Under the Private Securities Litigation Reform Act of 1995 Highlights forward-looking statements and associated risks and uncertainties that could materially affect IFF's actual results - This section contains forward-looking statements based on management's current assumptions and expectations, which involve significant risks and uncertainties that could cause actual results to differ materially[252][253] - Key risks include substantial indebtedness, ability to execute strategic transformation, regulatory and economic trends, outcomes of legal claims, supply chain disruptions, inflationary pressures, and ability to attract and retain key employees[253] - IFF does not undertake to update or revise forward-looking statements as more information becomes available or to reflect changes in expectations, assumptions, or results[255] ITEM 3. Quantitative and Qualitative Disclosures about Market Risk Discusses IFF's market risk exposures, noting no material changes from the 2024 Form 10-K, except for cross currency swap agreements - No material changes in market risk from the 2024 Form 10-K, except for cross currency swap agreements[257] - As of June 30, 2025, cross currency swaps had an aggregate fair value liability of $254 million; a hypothetical 10% change in USD value against EUR would alter their fair value by approximately $163 million[258] ITEM 4. Controls and Procedures Confirms the effectiveness of IFF's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter ended June 30, 2025 - The CEO and CFO concluded that IFF's disclosure controls and procedures were effective as of June 30, 2025[259] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[261] PART II - Other Information Provides additional information not covered in the financial statements, including legal proceedings, risk factors, and other disclosures ITEM 1. Legal Proceedings Refers to Note 17 for updated disclosures on legal proceedings, including class action lawsuits and ongoing antitrust investigations - Updates on legal proceedings are provided in Note 17 to the Consolidated Financial Statements[264] ITEM 1A. Risk Factors Indicates no material changes to the risk factors previously disclosed in the 2024 Form 10-K - No material changes to risk factors disclosed in the 2024 Form 10-K[265] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds States there were no unregistered sales of equity securities or use of proceeds during the reporting period - None[266] ITEM 5. Other Information Reports no directors or executive officers adopted or terminated Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025 - No directors or executive officers adopted or terminated Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[267] ITEM 6. Exhibits Lists the exhibits filed with the Form 10-Q, including certifications, XBRL documents, and the interactive data file - Includes certifications (Sarbanes-Oxley Act Section 302 and 18 U.S.C. Section 1350) and various XBRL taxonomy extension files[270] Signatures Contains the signatures of the CEO, CFO, and SVP, Corporate Controller and Chief Accounting Officer, certifying the report - Report signed by J. Erik Fyrwald (CEO), Michael DeVeau (CFO), and Beril Yildiz (SVP, Corporate Controller and Chief Accounting Officer) on August 5, 2025[272]