EX-99.1 2 ex99_1.htm EXHIBIT 99.1
Exhibit 99.1
 
Contact:
Kim Chase
 
(414) 347-3706
 
Sensient Technologies Corporation
Reports Results for the Quarter Ended June 30, 2018

MILWAUKEE— July 20, 2018 — 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).
 
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Sensient Technologies Corporation
Page 2
Earnings Release – Quarter Ended June 30, 2018
 
July 20, 2018
 
 
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%.
 
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Sensient Technologies Corporation
Page 3
Earnings Release – Quarter Ended June 30, 2018
 
July 20, 2018
 
 
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.
 
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Sensient Technologies Corporation
Page 4
Earnings Release – Quarter Ended June 30, 2018
 
July 20, 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.
 
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Sensient Technologies Corporation
Page 5
Earnings Release – Quarter Ended June 30, 2018
 
July 20, 2018
 
 
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.
 
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Sensient Technologies Corporation
Page 6
Earnings Release – Quarter Ended June 30, 2018
 
July 20, 2018
 
 
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
 
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Sensient Technologies Corporation
Page 7
(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.
 
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Sensient Technologies Corporation
Page 8
(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.
 
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Sensient Technologies Corporation
Page 9
(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