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Sensient Technologies Corporation Reports Results for the Quarter Ended June 30, 2018

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Sensient Technologies Corporation (NYSE:SXT) reported earnings per
share of 92 cents in the second quarter of 2018 compared to 69 cents in
the second quarter of 2017. Revenue was $363.0 million in this year's
second quarter compared to $338.5 million in last year's second quarter.
Operating income was $52.2 million in the second quarter of 2018 and
$44.4 million in last year's second quarter.

For the six months ended June 30, 2018 and 2017, earnings per share were
$1.81 and 99 cents, respectively. Revenue was $719.5 million for the
first six months of 2018 and $679.9 million for the first six months of
2017. Operating income was $107.9 million and $68.4 million in the first
six months of 2018 and 2017, respectively.

As previously disclosed, the Company completed its restructuring
activities in 2017 and did not incur any restructuring or other costs in
the first six months of 2018. Therefore, no adjustments were made to the
GAAP results in the first six months of 2018. Any reference to "adjusted
results" refers to the results in the comparable period in 2017. The
2017 reported results include restructuring and other costs, which are
described in more detail under "Reconciliation of Non-GAAP Amounts"
below. Restructuring and other costs reduced 2017 second quarter
operating income by $7.9 million ($7.6 million after-tax or 17 cents per
share) and operating income for the first six months of 2017 by $39.2
million ($31.1 million after-tax or 70 cents per share).

The adjusted results, discussed below, eliminate the impact of the
restructuring and other costs in last year's results, and enhance the
overall understanding of the Company's performance when viewed together
with our GAAP results. Refer to "Reconciliation of Non-GAAP Amounts"
below. Sensient's earnings per share increased approximately 6% to 92
cents in this year's second quarter, compared to adjusted earnings per
share of 87 cents in the comparable period last year. Second quarter
operating income was $52.2 million, compared to adjusted operating
income of $52.3 million reported in last year's second quarter. Foreign
currency translation increased revenue, operating income, and earnings
per share by approximately 1% compared to the adjusted results in 2017.

For the six months ended June 30, 2018 earnings per share were $1.81 and
operating income was $107.9 million, which compares to adjusted earnings
per share of $1.69 and adjusted operating income of $107.6 million for
the six months ended June 30, 2017. Foreign currency translation
increased revenue, operating income, and earnings per share by
approximately 3% compared to the adjusted results in 2017.

BUSINESS REVIEW

The Color Group reported revenue of $144.3 million in the quarter, an
increase of approximately 9% over last year's second quarter revenue of
$132.9 million. Segment operating income increased approximately 7% to
$31.1 million in the quarter from $29.1 million in last year's
comparable quarter. Foreign currency translation increased quarterly
revenue and operating income by approximately 1% and 2%, respectively.
The Group's performance was driven by continued strong demand for
cosmetics and natural food colors.

For the first six months of 2018, the Color Group reported revenue of
$291.5 million compared to $267.0 million in the first six months of
2017, an increase of approximately 9%. Operating income increased by
approximately 9% to $64.8 million in the first six months of 2018 from
$59.3 million in the first six months of 2017. Foreign currency
translation increased both revenue and operating income in the first six
months of 2018 by approximately 4%.

The Flavors & Fragrances Group reported revenue of $198.7 million in the
quarter, an increase of approximately 7% over last year's second quarter
revenue of $185.6 million. Segment operating income was $24.0 million in
this year's second quarter and $28.5 million in last year's second
quarter. Foreign currency translation increased revenue by approximately
2% in the quarter and had minimal impact on operating income in the
quarter. The Group's lower profit was a result of higher onion costs,
lower onion pricing, lower volumes at the production site affected by
last year's plant consolidation, and ongoing market declines in several
key dairy categories. The North American Savory, Latin America,
Fragrances, BioNutrients, and European Sweet & Beverage businesses all
delivered strong revenue growth in the quarter.

For the first six months of 2018, the Flavors & Fragrances Group
reported revenue of $387.0 million compared to $372.4 million in the
first six months of 2017, an increase of approximately 4%. Operating
income was $49.3 million and $57.3 million for the first six months of
2018 and 2017, respectively. Foreign currency translation increased
revenue by approximately 3% and operating income by approximately 1% in
the first six months of 2018.

The Asia Pacific Group reported revenue of $30.5 million in the current
quarter, an increase of approximately 5% compared to $28.9 million in
last year's comparable quarter. Operating income increased by
approximately 21% to $4.6 million in the current quarter compared to
$3.8 million reported in last year's quarter. Revenue for the first six
months of 2018 was $60.8 million compared to $58.6 million in the first
six months of 2017, an increase of approximately 4%. Operating income
increased 6% in the first six months of 2018 to $9.5 million from $9.0
million reported in the first six months of 2017. Foreign currency
translation increased revenue by approximately 3% and operating income
by approximately 5% in first six months of 2018.

Corporate & Other reported operating costs of $7.6 million in the
quarter and $17.0 million in last year's second quarter. Operating costs
for the first six months of 2018 were $15.8 million compared to $57.1
million in the first six months of 2017. Last year's results in the
second quarter and year-to-date period include $7.9 million and $39.2
million, respectively, of restructuring and other costs. The lower costs
this year are primarily a result of lower restructuring and other costs,
and lower performance based executive compensation.

2018 OUTLOOK

"Sensient delivered solid results in the second quarter, with revenue
growth in each of the Company's reporting segments," said Paul Manning,
Chairman, President and CEO of Sensient Technologies Corporation. "Color
had another strong quarter driven by strong demand for cosmetic
ingredients and natural food colors, and Flavors & Fragrances
performance was in line with my expectations. I remain very optimistic
about the Company's future."

The U.S. dollar has strengthened since the Company issued its previous
earnings guidance, and the Company is updating its 2018 earnings
guidance, primarily to reflect the impact of foreign currency. Sensient
now expects earnings per share for 2018 to be between $3.60 and $3.70.
The Company's previous guidance had been between $3.70 and $3.80.

CONFERENCE CALL

The Company will host a conference call to discuss its 2018 second
quarter financial results at 9:00 a.m. CDT on Friday, July 20, 2018. To
participate in the conference call, please contact InterCall
Teleconferencing at (888) 818-9025 and refer to conference
identification number 9465338. A webcast of the conference call will be
available on the Investor Information section of the Company's web site
at www.sensient.com.

A replay will be available beginning at 1:00 p.m. CDT on July 20, 2018,
through midnight on July 27, 2018, by calling (404) 537-3406 and
referring to conference identification number 9465338. A transcript of
the call will be posted on the Company's web site at www.sensient.com
after the call concludes.

This release contains statements that may constitute "forward-looking
statements" within the meaning of Federal securities laws. Such
forward-looking statements are not guarantees of future performance and
involve known and unknown risks, uncertainties and other factors
concerning the Company's operations and business environment. Important
factors that could cause actual results to differ materially from those
suggested by these forward-looking statements and that could adversely
affect the Company's future financial performance include the following:
the pace and nature of new product introductions by the Company and the
Company's customers; the Company's ability to successfully implement its
strategy to create sustainable, long-term shareholder value; the
Company's ability to successfully implement its growth strategies; the
outcome of the Company's various productivity-improvement and
cost-reduction efforts; the effectiveness of the Company's past
restructuring activities; changes in costs or availability of raw
materials, including energy; industry and economic factors related to
the Company's domestic and international business; growth in markets for
products in which the Company competes; industry and customer acceptance
of price increases; actions by competitors, including increased
intensity of competition; the loss of any customers in certain product
lines in which our sales are made to a relatively small number of
customers; product liability claims or product recalls; the costs of
compliance, or failure to comply, with laws and regulations applicable
to our industries and markets; changing consumer preferences and
changing technologies; currency exchange rate fluctuations; estimates
related to the Tax Cuts and Jobs Act and its effects on our results; and
failure to complete and integrate future acquisitions or dispositions.
The risks and uncertainties identified above are not the only risks the
Company faces. Additional risks and uncertainties not presently known to
the Company or that it currently believes to be immaterial also may
adversely affect the Company. Should any known or unknown risks and
uncertainties develop into actual events, these developments could have
material adverse effects on our business, financial condition and
results of operations. This release contains time-sensitive information
that reflects management's best analysis only as of the date of this
release. Except to the extent required by applicable laws, the Company
does not undertake to publicly update or revise its forward-looking
statements even if experience or future changes make it clear that any
projected results expressed or implied herein will not be realized.
Additional information regarding these risks can be found in our most
recent Annual Report on Form 10-K and subsequent reports that we file
with the SEC.

ABOUT SENSIENT TECHNOLOGIES

Sensient Technologies Corporation is a leading global manufacturer and
marketer of colors, flavors and fragrances. Sensient employs advanced
technologies at facilities around the world to develop specialty food
and beverage systems, cosmetic and pharmaceutical systems, inkjet and
specialty inks and colors, and other specialty and fine chemicals. The
Company's customers include major international manufacturers
representing most of the world's best-known brands. Sensient is
headquartered in Milwaukee, Wisconsin.

www.sensient.com

           
Sensient Technologies Corporation

 

(In thousands, except percentages and per share amounts)
(Unaudited)
 
Consolidated Statements of Earnings Three Months Ended June 30, Six Months Ended June 30,
 
2018 2017 % Change 2018 2017 % Change
 
Revenue $ 363,041 $ 338,475 7.3 % $ 719,518 $ 679,872 5.8 %
 
Cost of products sold 241,571 219,250 10.2 % 474,977 439,702 8.0 %
Selling and administrative expenses   69,289   74,845 -7.4 %   136,679   171,753 -20.4 %
 
Operating income 52,181 44,380 17.6 % 107,862 68,417 57.7 %
Interest expense   5,555   4,717   11,110   9,528
 
Earnings before income taxes 46,626 39,663 96,752 58,889
Income taxes   7,503   8,889   19,435   14,923
 
Net earnings $ 39,123 $ 30,774 27.1 % $ 77,317 $ 43,966 75.9 %
 
Earnings per share of common stock:
Basic $ 0.93 $ 0.70 $ 1.82 $ 1.00
 
Diluted $ 0.92 $ 0.69 $ 1.81 $ 0.99
 
Average common shares outstanding:
Basic   42,281   44,023   42,578   44,112
 
Diluted   42,371   44,290   42,701   44,384
 
 
Reconciliation of Non-GAAP Amounts
 
The Company did not incur any restructuring or other costs for the
three and six months ended June 30, 2018. The Company's results for
the three and six months ended June 30, 2017, included pre-tax
restructuring and other costs of $7.9 million ($7.6 million
after-tax or $0.17 per share) and $39.2 million ($31.1 million
after-tax or $0.70 per share), respectively. The restructuring costs
related to eliminating underperforming operations, consolidating
manufacturing facilities and improving efficiencies within the
Company. The other costs in 2017 related to the completed sale of a
facility and certain related business lines within the Flavors &
Fragrances segment in Strasbourg, France.
 
     
Three Months Ended June 30, Six Months Ended June 30,
2018   2017   % Change 2018   2017   % Change
Operating income (GAAP) $ 52,181 $ 44,380 17.6 % $ 107,862 $ 68,417 57.7 %
Restructuring - Cost of products sold - - - 342
Restructuring - Selling and administrative - 7,415 - 27,285
Other - Selling and administrative   -   494     -   11,541  
Adjusted operating income $ 52,181 $ 52,289   -0.2 % $ 107,862 $ 107,585   0.3 %
 
Net earnings (GAAP) $ 39,123 $ 30,774 27.1 % $ 77,317 $ 43,966 75.9 %
Restructuring and other, before tax - 7,909 - 39,168
Tax impact of restructuring and other   -   (278 )   -   (8,105 )
Adjusted net earnings $ 39,123 $ 38,405   1.9 % $ 77,317 $ 75,029   3.0 %
 
Diluted EPS (GAAP) $ 0.92 $ 0.69 33.3 % $ 1.81 $ 0.99 82.8 %
Restructuring and other, net of tax   -   0.17     -   0.70  
Adjusted diluted EPS $ 0.92 $ 0.87   5.7 % $ 1.81 $ 1.69   7.1 %
 
 
We have included each of these non-GAAP measures in order to provide
additional information regarding our underlying operating results
and comparable period-over-period performance. Such information is
supplemental to information presented in accordance with GAAP and is
not intended to represent a presentation in accordance with GAAP.
These non-GAAP measures should not be considered in isolation.
Rather, they should be considered together with GAAP measures and
the rest of the information included in this release and our SEC
filings. Management internally reviews each of these non-GAAP
measures to evaluate performance on a comparative period-to-period
basis and to gain additional insight into underlying operating and
performance trends, and we believe the information can be beneficial
to investors for the same purposes. These non-GAAP measures may not
be comparable to similarly titled measures used by other companies.
 
 
Note: Earnings per share calculations may not foot due to
rounding differences.
 
           
Sensient Technologies Corporation

 

(In thousands, except per share amounts)
(Unaudited)
 
Results by Segment Three Months Ended June 30, Six Months Ended June 30,
 

Revenue

2018 2017 % Change 2018 2017 % Change
 
Flavors & Fragrances $ 198,658 $ 185,556 7.1 % $ 387,004 $ 372,431 3.9 %
Color 144,291 132,894 8.6 % 291,451 266,960 9.2 %
Asia Pacific 30,521 28,945 5.4 % 60,788 58,581 3.8 %
Intersegment elimination   (10,429 )   (8,920 )   (19,725 )   (18,100 )
 
Consolidated $ 363,041   $ 338,475   7.3 % $ 719,518   $ 679,872   5.8 %
 
 
 

Operating Income

 
Flavors & Fragrances $ 24,001 $ 28,502 -15.8 % $ 49,328 $ 57,272 -13.9 %
Color 31,133 29,072 7.1 % 64,805 59,289 9.3 %
Asia Pacific 4,634 3,820 21.3 % 9,506 8,970 6.0 %
Corporate & Other   (7,587 )   (17,014 )   (15,777 )   (57,114 )
 
Consolidated $ 52,181   $ 44,380   17.6 % $ 107,862   $ 68,417   57.7 %
 
 
The Company's reportable segments consist of the Flavors &
Fragrances, Color, and Asia Pacific segments. The 2017 restructuring
and other costs are reported in Corporate & Other.
 
         
Consolidated Condensed Balance Sheets
June 30, 2018 2017
 
Cash and cash equivalents $ 30,888 $ 26,016
Trade accounts receivable, net 277,301 216,197
Inventories 461,803 428,932
Other current assets 53,926 48,203
Assets Held for Sale   1,916   7,333
Total Current Assets 825,834 726,681
 
Goodwill & intangible assets (net) 418,089 408,205
Property, plant, and equipment (net) 488,825 480,006
Other assets   78,767   83,441
 
Total Assets $ 1,811,515 $ 1,698,333
 
Trade accounts payable $ 98,878 $ 93,018
Short-term debt 20,036 20,385
Other current liabilities   79,756   75,140
Total Current Liabilities 198,670 188,543
 
Long-term debt 732,762 586,940
Accrued employee and retiree benefits 21,926 21,059
Other liabilities 41,728 18,076
Shareholders' Equity   816,429   883,715
 
Total Liabilities and Shareholders' Equity $ 1,811,515 $ 1,698,333
 
 
During the three months ended June 30, 2018, the Company amended its
account receivable securitization program and the Company no longer
accounts for the sale of trade receivables in accordance with
Accounting Standard Codification (ASC) Topic 860, Transfers and
Servicing
. As a result of this amendment, the Company's trade
account receivables increased by $60 million and the Company's
long-term debt increased by $60 million.
 
           
Sensient Technologies Corporation

 

(In thousands, except per share amounts)
(Unaudited)
 
Consolidated Statements of Cash Flows
Six Months Ended June 30,
2018 2017
Cash flows from operating activities:
Net earnings $ 77,317 $ 43,966
Adjustments to arrive at net cash provided by operating activities:
 
Depreciation and amortization 26,022 24,436
Stock-based compensation 1,783 4,252
Net loss on assets 259 328
Loss on divestiture of businesses - 33,138
Deferred income taxes 9,933 (4,765 )
Changes in operating assets and liabilities   (143,508 )   (100,561 )
 
Net cash (used in) provided by operating activities   (28,194 )   794  
 
Cash flows from investing activities:
Acquisition of property, plant and equipment (24,000 ) (19,666 )
Cash receipts on sold receivables 91,142 59,286
Proceeds from sale of assets 283 5,305
Proceeds from divestiture of businesses - 12,457
Acquisition of new businesses (11,313 ) -
Other investing activity   751     2,602  
 
Net cash provided by investing activities   56,863     59,984  
 
Cash flows from financing activities:
Proceeds from additional borrowings 107,857 139,820
Debt payments (33,009 ) (154,282 )
Purchase of treasury stock (72,704 ) (26,743 )
Dividends paid (28,244 ) (26,553 )
Other financing activity   (2,779 )   (1,047 )
 
Net cash used in financing activities   (28,879 )   (68,805 )
 
Effect of exchange rate changes on cash and cash equivalents   1,754     8,178  
 
Net increase in cash and cash equivalents 1,544 151
Cash and cash equivalents at beginning of period   29,344     25,865  
Cash and cash equivalents at end of period $ 30,888   $ 26,016  
 

The Company adopted Accounting Standards Update (ASU) 2016-15, Statement
of Cash Flows: Classification of Certain Cash Receipts and Cash
Payments,
in the first quarter of 2018. This ASU requires that
certain cash receipts received on securitized accounts receivable,
which were previously reported as cash flows from operating
activities, are reported as cash flows from investing activities.
As a result, the Company has included $91 million and $59 million
in net cash provided by investing activities for the first six
months of 2018 and 2017, respectively.

 
 
Supplemental Information
Six Months Ended June 30, 2018 2017
 
Dividends paid per share $ 0.66 $ 0.60

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