☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended:
|
March 31, 2019 |
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from
|
to |
Wisconsin | 39‑0561070 | |
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification Number)
|
Registrant's telephone number, including area code: | (414) 271‑6755 |
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common stock, par value $0.10 per share
|
SXT
|
New York Stock Exchange, Inc.
|
Large accelerated filer ☒
|
Accelerated filer ☐
|
Non-accelerated filer ☐
|
Smaller reporting company ☐
|
Emerging growth company ☐
|
|
Yes ☐ |
No ☒ |
Class |
Outstanding at April 30, 2019 | |
Common Stock, par value $0.10 per share | 42,319,163 |
Page No.
|
|||
PART I. FINANCIAL INFORMATION:
|
|||
Item 1.
|
Financial Statements:
|
||
|
|||
1
|
|||
|
|||
2
|
|||
|
|||
3
|
|||
|
|||
4
|
|||
|
|||
5
|
|||
6
|
|||
Item 2.
|
13 | ||
Item 3.
|
16 | ||
Item 4.
|
16 | ||
PART II. OTHER INFORMATION:
|
|||
Item 1.
|
17 | ||
Item 1A.
|
17 | ||
Item 2.
|
17 | ||
Item 6.
|
17
|
||
18 | |||
19 |
PART I.
|
FINANCIAL INFORMATION
|
Three Months
Ended March 31,
|
||||||||
2019
|
2018
|
|||||||
Revenue
|
$
|
347,513
|
$
|
356,477
|
||||
Cost of products sold
|
232,288
|
233,406
|
||||||
Selling and administrative expenses
|
65,805
|
67,390
|
||||||
Operating income
|
49,420
|
55,681
|
||||||
Interest expense
|
5,402
|
5,555
|
||||||
Earnings before income taxes
|
44,018
|
50,126
|
||||||
Income taxes
|
11,211
|
11,932
|
||||||
Net earnings
|
$
|
32,807
|
$
|
38,194
|
||||
Weighted average number of shares outstanding:
|
||||||||
Basic
|
42,239
|
42,879
|
||||||
Diluted
|
42,275
|
43,034
|
||||||
Earnings per common share:
|
||||||||
Basic
|
$
|
0.78
|
$
|
0.89
|
||||
Diluted
|
$
|
0.78
|
$
|
0.89
|
||||
Dividends declared per common share
|
$
|
0.36
|
$
|
0.33
|
Three Months
Ended March 31,
|
||||||||
2019
|
2018
|
|||||||
Comprehensive Income
|
$
|
32,091
|
$
|
62,058
|
ASSETS
|
March, 31
2019
(Unaudited)
|
December 31,
2018
|
||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$
|
33,896
|
$
|
31,901
|
||||
Trade accounts receivable, net
|
273,800
|
255,350
|
||||||
Inventories
|
468,324
|
490,757
|
||||||
Prepaid expenses and other current assets
|
50,276
|
44,857
|
||||||
TOTAL CURRENT ASSETS
|
826,296
|
822,865
|
||||||
OTHER ASSETS
|
87,891
|
66,788
|
||||||
DEFERRED TAX ASSETS
|
8,653
|
9,189
|
||||||
INTANGIBLE ASSETS, NET
|
18,295
|
18,867
|
||||||
GOODWILL
|
413,710
|
416,175
|
||||||
PROPERTY, PLANT, AND EQUIPMENT:
|
||||||||
Land
|
36,467
|
36,787
|
||||||
Buildings
|
319,242
|
318,463
|
||||||
Machinery and equipment
|
695,811
|
688,003
|
||||||
Construction in progress
|
32,973
|
34,772
|
||||||
|
1,084,493
|
1,078,025
|
||||||
Less accumulated depreciation
|
(598,467
|
)
|
(586,969
|
)
|
||||
486,026
|
491,056
|
|||||||
TOTAL ASSETS
|
$
|
1,840,871
|
$
|
1,824,940
|
||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Trade accounts payable
|
$
|
108,381
|
$
|
131,812
|
||||
Accrued salaries, wages, and withholdings from employees
|
20,255
|
23,410
|
||||||
Other accrued expenses
|
38,703
|
31,198
|
||||||
Income taxes
|
10,031
|
8,234
|
||||||
Short-term borrowings
|
20,082
|
20,046
|
||||||
TOTAL CURRENT LIABILITIES
|
197,452
|
214,700
|
||||||
DEFERRED TAX LIABILITIES
|
31,097
|
28,976
|
||||||
OTHER LIABILITIES
|
21,845
|
8,554
|
||||||
ACCRUED EMPLOYEE AND RETIREE BENEFITS
|
23,801
|
23,210
|
||||||
LONG‑TERM DEBT
|
688,952
|
689,553
|
||||||
SHAREHOLDERS’ EQUITY:
|
||||||||
Common stock
|
5,396
|
5,396
|
||||||
Additional paid‑in capital
|
100,485
|
101,663
|
||||||
Earnings reinvested in the business
|
1,533,832
|
1,516,243
|
||||||
Treasury stock, at cost
|
(595,718
|
)
|
(597,800
|
)
|
||||
Accumulated other comprehensive loss
|
(166,271
|
)
|
(165,555
|
)
|
||||
|
||||||||
TOTAL SHAREHOLDERS’ EQUITY
|
877,724
|
859,947
|
||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
1,840,871
|
$
|
1,824,940
|
Three Months
Ended March 31,
|
||||||||
2019
|
2018
|
|||||||
Cash flows from operating activities:
|
||||||||
Net earnings
|
$
|
32,807
|
$
|
38,194
|
||||
Adjustments to arrive at net cash provided by (used in) operating activities:
|
||||||||
Depreciation and amortization
|
13,672
|
12,578
|
||||||
Share-based compensation
|
687
|
1,254
|
||||||
Net (gain) loss on assets
|
(41
|
)
|
70
|
|||||
Deferred income taxes
|
2,674
|
(4,346
|
)
|
|||||
Changes in operating assets and liabilities
|
(26,375
|
)
|
(66,441
|
)
|
||||
Net cash provided by (used in) operating activities
|
23,424
|
(18,691
|
)
|
|||||
Cash flows from investing activities:
|
||||||||
Acquisition of property, plant, and equipment
|
(8,300
|
)
|
(11,058
|
)
|
||||
Cash receipts on sold receivables
|
-
|
44,406
|
||||||
Proceeds from sale of assets
|
45
|
45
|
||||||
Acquisition of new businesses
|
-
|
(11,000
|
)
|
|||||
Other investing activity
|
(301
|
)
|
789
|
|||||
Net cash (used in) provided by investing activities
|
(8,556
|
)
|
23,182
|
|||||
Cash flows from financing activities:
|
||||||||
Proceeds from additional borrowings
|
16,689
|
92,348
|
||||||
Debt payments
|
(12,577
|
)
|
(12,280
|
)
|
||||
Purchase of treasury stock
|
-
|
(72,704
|
)
|
|||||
Dividends paid
|
(15,218
|
)
|
(14,274
|
)
|
||||
Other financing activity
|
(803
|
)
|
(2,715
|
)
|
||||
Net cash used in financing activities
|
(11,909
|
)
|
(9,625
|
)
|
||||
Effect of exchange rate changes on cash and cash equivalents
|
(964
|
)
|
6,210
|
|||||
Net increase in cash and cash equivalents
|
1,995
|
1,076
|
||||||
Cash and cash equivalents at beginning of period
|
31,901
|
29,344
|
||||||
Cash and cash equivalents at end of period
|
$
|
33,896
|
$
|
30,420
|
Common
Stock
|
Additional
Paid-In
Capital
|
Earnings
Reinvested
in the
Business
|
Treasury Stock
|
Accumulated
Other
Comprehensive
Income (Loss)
|
||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Balances at December 31, 2017
|
$
|
5,396
|
$
|
107,176
|
$
|
1,414,485
|
10,759,291
|
$
|
(525,422
|
)
|
$
|
(149,334
|
)
|
|||||||||||
Net earnings
|
-
|
-
|
38,194
|
-
|
-
|
-
|
||||||||||||||||||
Other comprehensive income
|
-
|
-
|
-
|
-
|
-
|
23,864
|
||||||||||||||||||
Cash dividends paid – $0.33 per share
|
-
|
-
|
(14,274
|
)
|
-
|
-
|
-
|
|||||||||||||||||
Share-based compensation
|
-
|
1,254
|
-
|
-
|
-
|
-
|
||||||||||||||||||
Stock options exercised
|
-
|
(38
|
)
|
-
|
(2,000
|
)
|
98
|
-
|
||||||||||||||||
Non-vested stock issued upon vesting
|
-
|
(4,842
|
)
|
-
|
(99,152
|
)
|
4,842
|
-
|
||||||||||||||||
Benefit plans
|
-
|
350
|
-
|
(15,126
|
)
|
769
|
-
|
|||||||||||||||||
Purchase of treasury stock
|
-
|
-
|
-
|
1,000,000
|
(72,704
|
)
|
-
|
|||||||||||||||||
Other
|
-
|
(801
|
)
|
418
|
40,430
|
(1,975
|
)
|
-
|
||||||||||||||||
Balances at March 31, 2018
|
$
|
5,396
|
$
|
103,099
|
$
|
1,438,823
|
11,683,443
|
$
|
(594,392
|
)
|
$
|
(125,470
|
)
|
Common
Stock
|
Additional
Paid-In
Capital
|
Earnings
Reinvested
in the
Business
|
Treasury Stock
|
Accumulated
Other
Comprehensive
Income (Loss)
|
||||||||||||||||||||
Shares |
Amount | |||||||||||||||||||||||
Balances at December 31, 2018
|
$
|
5,396
|
$
|
101,663
|
$
|
1,516,243
|
11,731,223
|
$
|
(597,800
|
)
|
$
|
(165,555
|
) |
|||||||||||
Net earnings
|
-
|
-
|
32,807
|
-
|
-
|
-
|
||||||||||||||||||
Other comprehensive income (loss)
|
-
|
-
|
-
|
-
|
-
|
(716
|
) |
|||||||||||||||||
Cash dividends paid – $0.36 per share
|
-
|
-
|
(15,218
|
)
|
-
|
-
|
-
|
|||||||||||||||||
Share-based compensation
|
-
|
687
|
-
|
-
|
-
|
-
|
||||||||||||||||||
Non-vested stock issued upon vesting
|
-
|
(1,784
|
)
|
-
|
(35,016
|
)
|
1,784
|
-
|
||||||||||||||||
Benefit plans
|
-
|
72
|
-
|
(18,597
|
)
|
948
|
-
|
|||||||||||||||||
Other
|
-
|
(153
|
)
|
-
|
12,769
|
(650
|
)
|
-
|
||||||||||||||||
Balances at March 31, 2019
|
$
|
5,396
|
$
|
100,485
|
$
|
1,533,832
|
11,690,379
|
$
|
(595,718
|
)
|
$
|
(166,271 | ) |
1. |
Accounting Policies
|
1. |
The Company will not re-assess an expired or existing contract to determine if it is a lease or contains a lease.
|
2. |
The Company will not re-assess the lease classification for an existing lease based on the new standard’s lease classification criteria.
|
3. |
The Company will not re-assess the accounting treatment for initial direct costs on existing leases based on the new standard’s guidance.
|
4. |
The Company will account for the lease and non-lease components as a single lease component for all leases.
|
2. |
Acquisitions
|
3. |
Fair Value
|
4. |
Segment Information
|
(In thousands)
|
Flavors &
Fragrances
|
Color
|
Asia
Pacific
|
Corporate
& Other
|
Consolidated
|
|||||||||||||||
Three months ended March 31, 2019:
|
||||||||||||||||||||
Revenue from external customers
|
$
|
178,744
|
$
|
140,250
|
$
|
28,519
|
$
|
-
|
$
|
347,513
|
||||||||||
Intersegment revenue
|
4,809
|
3,629
|
-
|
-
|
8,438
|
|||||||||||||||
Total revenue
|
$
|
183,553
|
$
|
143,879
|
$
|
28,519
|
$
|
-
|
$
|
355,951
|
||||||||||
Operating income (loss)
|
$
|
23,125
|
$
|
30,199
|
$
|
4,218
|
$
|
(8,122
|
)
|
$
|
49,420
|
|||||||||
Interest expense
|
-
|
-
|
-
|
5,402
|
5,402
|
|||||||||||||||
Earnings (loss) before income taxes
|
$
|
23,125
|
$
|
30,199
|
$
|
4,218
|
$
|
(13,524
|
)
|
$
|
44,018
|
|||||||||
Three months ended March 31, 2018:
|
||||||||||||||||||||
Revenue from external customers
|
$
|
182,482
|
$
|
143,728
|
$
|
30,267
|
$
|
-
|
$
|
356,477
|
||||||||||
Intersegment revenue
|
5,864
|
3,432
|
-
|
-
|
9,296
|
|||||||||||||||
Total revenue
|
$
|
188,346
|
$
|
147,160
|
$
|
30,267
|
$
|
-
|
$
|
365,773
|
||||||||||
Operating income (loss)
|
$
|
25,327
|
$
|
33,672
|
$
|
4,872
|
$
|
(8,190
|
)
|
$
|
55,681
|
|||||||||
Interest expense
|
-
|
-
|
-
|
5,555
|
5,555
|
|||||||||||||||
Earnings (loss) before income taxes
|
$
|
25,327
|
$
|
33,672
|
$
|
4,872
|
$
|
(13,745
|
)
|
$
|
50,126
|
(In thousands)
|
Flavors &
Fragrances
|
Color
|
Asia
Pacific
|
Consolidated
|
||||||||||||
Three months ended March 31, 2019:
|
||||||||||||||||
Flavors
|
$
|
104,276
|
$
|
-
|
$
|
-
|
$
|
104,276
|
||||||||
Natural Ingredients
|
51,219
|
-
|
-
|
51,219
|
||||||||||||
Fragrances
|
28,058
|
-
|
-
|
28,058
|
||||||||||||
Food & Beverage Colors
|
-
|
80,364
|
-
|
80,364
|
||||||||||||
Cosmetics
|
-
|
38,283
|
-
|
38,283
|
||||||||||||
Other Colors
|
-
|
25,232
|
-
|
25,232
|
||||||||||||
Asia Pacific
|
-
|
-
|
28,519
|
28,519
|
||||||||||||
Intersegment Revenue
|
(4,809
|
)
|
(3,629
|
)
|
-
|
(8,438
|
)
|
|||||||||
Total revenue from external customers
|
$
|
178,744
|
$
|
140,250
|
$
|
28,519
|
$
|
347,513
|
Flavors &
Fragrances
|
Color |
Asia
Pacific
|
Consolidated
|
|||||||||||||
Three months ended March 31, 2018:
|
||||||||||||||||
Flavors
|
$
|
109,051
|
$
|
-
|
$
|
-
|
$
|
109,051
|
||||||||
Natural Ingredients
|
53,201
|
-
|
-
|
53,201
|
||||||||||||
Fragrances
|
26,094
|
-
|
-
|
26,094
|
||||||||||||
Food & Beverage Colors
|
-
|
76,816
|
-
|
76,816
|
||||||||||||
Cosmetics
|
-
|
45,504
|
-
|
45,504
|
||||||||||||
Other Colors
|
-
|
24,840
|
-
|
24,840
|
||||||||||||
Asia Pacific
|
-
|
-
|
30,267
|
30,267
|
||||||||||||
Intersegment Revenue
|
(5,864
|
)
|
(3,432
|
)
|
-
|
(9,296
|
)
|
|||||||||
Total revenue from external customers
|
$
|
182,482
|
$
|
143,728
|
$
|
30,267
|
$
|
356,477
|
(In thousands)
|
Flavors &
Fragrances
|
Color
|
Asia
Pacific
|
Consolidated
|
||||||||||||
Three months ended March 31, 2019:
|
||||||||||||||||
North America
|
$
|
112,747
|
$
|
66,007
|
$
|
25
|
$
|
178,779
|
||||||||
Europe
|
48,001
|
42,135
|
41
|
90,177
|
||||||||||||
Asia Pacific
|
7,609
|
16,425
|
28,266
|
52,300
|
||||||||||||
Other
|
10,387
|
15,683
|
187
|
26,257
|
||||||||||||
Total revenue from external customers
|
$
|
178,744
|
$
|
140,250
|
$
|
28,519
|
$
|
347,513
|
||||||||
Three months ended March 31, 2018:
|
||||||||||||||||
North America
|
$
|
119,055
|
$
|
63,582
|
$
|
-
|
$
|
182,637
|
||||||||
Europe
|
45,427
|
43,631
|
6
|
89,064
|
||||||||||||
Asia Pacific
|
7,022
|
16,910
|
30,011
|
53,943
|
||||||||||||
Other
|
10,978
|
19,605
|
250
|
30,833
|
||||||||||||
Total revenue from external customers
|
$
|
182,482
|
$
|
143,728
|
$
|
30,267
|
$
|
356,477
|
5. |
Inventories
|
6. |
Retirement Plans
|
Three Months Ended
March 31,
|
||||||||
(In thousands)
|
2019
|
2018
|
||||||
Service cost
|
$
|
359
|
$
|
368
|
||||
Interest cost
|
320
|
289
|
||||||
Expected return on plan assets
|
(231
|
)
|
(245
|
)
|
||||
Recognized actuarial gain
|
(39
|
)
|
(27
|
)
|
||||
Total defined benefit expense
|
$
|
409
|
$
|
385
|
7. |
Leases
|
(in thousands)
|
||||
Year ending December 31,
|
||||
2019
|
$
|
6,537
|
||
2020
|
6,998
|
|||
2021
|
3,715
|
|||
2022
|
1,800
|
|||
2023
|
1,044
|
|||
Thereafter
|
2,330
|
|||
Total lease payments
|
22,424
|
|||
Less imputed interest
|
(1,651
|
)
|
||
Present value of lease liabilities
|
$
|
20,773
|
8. |
Derivative Instruments and Hedging Activity
|
9. |
Income Taxes
|
10. |
Accumulated Other Comprehensive Income
|
(In thousands)
|
Cash Flow
Hedges (a)
|
Pension
Items (a)
|
Foreign
Currency
Items
|
Total
|
||||||||||||
Balance as of December 31, 2017
|
$
|
(669
|
)
|
$
|
(309
|
)
|
$
|
(148,356
|
)
|
$
|
(149,334
|
)
|
||||
Other comprehensive income before reclassifications
|
670
|
-
|
23,186
|
23,856
|
||||||||||||
Amounts reclassified from OCI
|
38
|
(30
|
)
|
-
|
8
|
|||||||||||
Balance as of March 31, 2018
|
$
|
39
|
$
|
(339
|
)
|
$
|
(125,170
|
)
|
$
|
(125,470
|
)
|
(In thousands)
|
Cash Flow
Hedges (a)
|
Pension
Items (a)
|
Foreign
Currency
Items
|
Total
|
||||||||||||
Balance as of December 31, 2018
|
$
|
147
|
$
|
549
|
$
|
(166,251
|
)
|
$
|
(165,555
|
)
|
||||||
Other comprehensive income before reclassifications
|
597
|
-
|
(1,164
|
)
|
(567
|
)
|
||||||||||
Amounts reclassified from OCI
|
(112
|
)
|
(37
|
)
|
-
|
(149
|
)
|
|||||||||
Balance as of March 31, 2019
|
$
|
632
|
$
|
512
|
$
|
(167,415
|
)
|
$
|
(166,271
|
)
|
(a) |
Cash Flow Hedges and Pension Items are net of tax.
|
11. |
Accounts Receivable Securitization
|
12. |
Commitments and Contingencies
|
Three Months Ended March 31, 2019
|
||||||||||||
Total
|
Foreign
Exchange
Rates
|
Local
Currency
|
||||||||||
Revenue
|
||||||||||||
Flavors & Fragrances
|
(2.5
|
%)
|
(2.3
|
%)
|
(0.2
|
%)
|
||||||
Color
|
(2.2
|
%)
|
(4.6
|
%)
|
2.4
|
%
|
||||||
Asia Pacific
|
(5.8
|
%)
|
(3.5
|
%)
|
(2.3
|
%)
|
||||||
Total Revenue
|
(2.5
|
%)
|
(3.3
|
%)
|
0.8
|
%
|
||||||
Operating Income
|
||||||||||||
Flavors & Fragrances
|
(8.7
|
%)
|
(1.1
|
%)
|
(7.6
|
%)
|
||||||
Color
|
(10.3
|
%)
|
(4.7
|
%)
|
(5.6
|
%)
|
||||||
Asia Pacific
|
(13.4
|
%)
|
(0.4
|
%)
|
(13.0
|
%)
|
||||||
Corporate & Other
|
(0.8
|
%)
|
(0.2
|
%)
|
(0.6
|
%)
|
||||||
Total
Operating Income
|
(11.2
|
%)
|
(3.3
|
%)
|
(7.9
|
%)
|
||||||
Diluted EPS
|
(12.4
|
%)
|
(3.4
|
%)
|
(9.0
|
%)
|
PART II.
|
OTHER INFORMATION
|
Exhibit
|
Description
|
Incorporated by Reference From
|
Filed Herewith
|
Certifications of the Company’s Chairman, President & Chief Executive Officer and Senior Vice President & Chief Financial Officer pursuant to
Rule 13a-14(a) of the Exchange Act
|
X
|
||
Certifications of the Company’s Chairman, President & Chief Executive Officer and Senior Vice President & Chief Financial Officer pursuant to
18 United States Code § 1350
|
X
|
||
101
|
Interactive data files pursuant to Rule 405 of Regulation S-T
|
X
|
SENSIENT TECHNOLOGIES CORPORATION
|
||||
Date:
|
May 6, 2019
|
By:
|
/s/ John J. Manning
|
|
John J. Manning, Vice President,
|
||||
General Counsel & Secretary
|
||||
Date:
|
May 6, 2019
|
By:
|
/s/ Stephen J. Rolfs
|
|
Stephen J. Rolfs, Senior Vice President & Chief Financial Officer
|
1. |
I have reviewed this quarterly report on Form 10-Q of Sensient Technologies Corporation;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect
the registrant’s ability to record, process, summarize, and report financial information; and
|
b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: May 6, 2019
|
|
/s/ Paul Manning
|
|
Paul Manning, Chairman, President &
|
|
Chief Executive Officer
|
1. |
I have reviewed this quarterly report on Form 10-Q of Sensient Technologies Corporation;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect
the registrant’s ability to record, process, summarize, and report financial information; and
|
b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: May 6, 2019
|
|
/s/ Stephen J. Rolfs
|
|
Stephen J. Rolfs, Senior Vice President &
|
|
Chief Financial Officer
|
/s/ Paul Manning
|
|||
Name:
|
Paul Manning | ||
Title:
|
Chairman, President & Chief Executive Officer
|
||
Date:
|
May 6, 2019
|
/s/ Stephen J. Rolfs
|
|||
Name:
|
Stephen J. Rolfs | ||
Title:
|
Senior Vice President & Chief Financial Officer
|
||
Date:
|
May 6, 2019
|
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Apr. 30, 2019 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | SENSIENT TECHNOLOGIES CORP | |
Entity Central Index Key | 0000310142 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Ex Transition Period | false | |
Entity Common Stock, Shares Outstanding | 42,319,163 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 |
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited) [Abstract] | ||
Revenue | $ 347,513 | $ 356,477 |
Cost of products sold | 232,288 | 233,406 |
Selling and administrative expenses | 65,805 | 67,390 |
Operating income | 49,420 | 55,681 |
Interest expense | 5,402 | 5,555 |
Earnings before income taxes | 44,018 | 50,126 |
Income taxes | 11,211 | 11,932 |
Net earnings | $ 32,807 | $ 38,194 |
Weighted average number of shares outstanding: | ||
Basic (in shares) | 42,239 | 42,879 |
Diluted (in shares) | 42,275 | 43,034 |
Earnings per common share: | ||
Basic (in dollars per share) | $ 0.78 | $ 0.89 |
Diluted (in dollars per share) | 0.78 | 0.89 |
Dividends declared per common share (in dollars per share) | $ 0.36 | $ 0.33 |
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) [Abstract] | ||
Comprehensive Income | $ 32,091 | $ 62,058 |
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (Parenthetical) - $ / shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) [Abstract] | ||
Cash dividends per share (in dollars per share) | $ 0.36 | $ 0.33 |
Accounting Policies |
3 Months Ended | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||
Accounting Policies |
In the opinion of Sensient Technologies Corporation (the “Company”), the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) that are necessary to present fairly the financial position of the Company as of March 31, 2019, and the results of operations, comprehensive income, cash flows, and shareholders’ equity for the three months ended March 31, 2019 and 2018. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year. The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Expenses are charged to operations in the period incurred. Please refer to the notes in the Company’s annual consolidated financial statements for the year ended December 31, 2018, for additional details of the Company’s financial condition and a description of the Company’s accounting policies, which have been continued without change except for the Company’s Lease and Derivative Financial Instruments accounting policies. These policies have been updated as a result of the Company’s adoption of Accounting Standards Update (ASU) 2016-02, Leases (Topic 842), and ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities, in the first quarter of 2019 and are described below. Leases The Company enters into lease agreements for certain office space, warehouses, land, and equipment in the ordinary course of business. The Company determines if an arrangement is a lease at inception and evaluates the lease classification (i.e., operating lease or financing lease) at that time. Lease arrangements with an initial term of 12 months or less are considered short-term leases and are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the term of the lease. Operating leases are included in Other Assets, Other Accrued Expenses, and Other Liabilities on the Company’s Consolidated Condensed Balance Sheet. Operating lease right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate on the commencement date for determining the present value of lease payments. The Company considers the likelihood of exercising options to extend or terminate the lease when determining the lease term. The Company has lease agreements with lease and non-lease components. The Company has elected the practical expedient to account for the lease and non-lease components as a single lease component for all leases. Derivative Financial Instruments The Company selectively uses derivative financial instruments to reduce market risk associated with changes in foreign currency and interest rate exposures that exist as part of ongoing business operations. All derivative transactions are authorized and executed pursuant to the Company’s risk management policies and procedures, which strictly prohibit the use of financial instruments for speculative trading purposes. The primary objectives of the foreign exchange risk management activities are to understand and mitigate the impact of potential foreign exchange fluctuations on the Company’s financial results and its economic well-being. Changes in the fair value of derivatives that are designated as fair value hedges, along with the gain or loss on the hedged item, are recorded in current period earnings. Generally, these risk management transactions involve the use of foreign currency derivatives to protect against exposure resulting from recorded accounts receivable and payable. The Company may utilize forward exchange contracts, generally with maturities of less than 18 months, that qualify as cash flow hedges. Generally, these foreign exchange contracts are intended to offset the effect of exchange rate fluctuations on non-functional currency denominated sales and purchases. For derivative instruments that are designated as cash flow hedges, gains and losses, including any hedge ineffectiveness, are deferred in accumulated other comprehensive income (OCI) until the underlying transaction is recognized in earnings. Hedge effectiveness is determined by how closely the changes in the fair value of the hedging instrument offset the changes in the fair value or cash flows of the hedged item. Hedge accounting is permitted only if the hedging relationship is expected to be highly effective at the inception of the transaction and on an ongoing basis. Recently Adopted Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize the lease assets and liabilities that arise from leases on the balance sheet and to disclose qualitative and quantitative information about lease transactions. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which provides an additional transition method allowing entities to apply the new lease standard at the adoption date. The Company adopted each of these standards in the first quarter of 2019 using the optional transition method allowed under ASU 2018-11. The Company elected the following practical expedients permitted within the standard:
The adoption of this standard resulted in the recognition of $20.7 million in right-of-use assets and lease liabilities for operating leases as of January 1, 2019. The adoption of this standard did not have an impact on the Company’s Consolidated Statements of Earnings, or to cash provided by or used in operating, financing, or investing activities on the Company’s Consolidated Condensed Statements of Cash Flows. In August 2017, the FASB issued ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities, which expands an entity’s ability to hedge non-financial and financial risk components and reduce complexity in fair value hedges of interest rate risk. This guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line item as the hedged item. This ASU is effective for fiscal years and interim periods beginning after December 15, 2018. The Company adopted this standard in the first quarter of 2019, and the adoption did not have a material impact on the Company’s consolidated financial statements. The Company adopted ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, in the first quarter of 2018 using monthly cash receipts as its unit of account. In the second quarter of 2018, the Company updated its unit of account to daily cash receipts for the cash received related to the beneficial interest in the previously transferred receivables. As a result, the reported results as of June 30, 2018, included an adjustment of $35.4 million for collections on beneficial interest in previously transferred receivables and an adjustment of $1.6 million for company owned life insurance proceeds for the three months ended March 31, 2018, which were previously reported as cash flows from operating activities. The Consolidated Condensed Statement of Cash Flows for the three months ended March 31, 2018 have been updated to reflect these adjustments. Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments, which replaces the current incurred loss impairment model with a methodology that reflects expected credit losses. Under the new methodology, entities will be required to measure expected credit losses on financial instruments held at amortized cost, including trade receivables, based on historical experience, current conditions, and reasonable forecasts. Adoption of this guidance is required for interim and annual periods beginning after December 15, 2019, with early adoption permitted for interim and annual periods beginning after December 15, 2018. The Company is currently evaluating the expected impact of this standard. In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates step two of the current goodwill impairment test and specifies that goodwill impairment should be measured by comparing the fair value of a reporting unit with its carrying amount. This standard will be applied prospectively and is effective for annual or interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the expected impact of this standard. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which changes the requirements for fair value measurements by removing, modifying, and adding certain disclosures. Adoption of this guidance is required for interim and annual periods beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the expected impact of this standard. Please refer to the notes in the Company’s annual consolidated financial statements for the year ended December 31, 2018, for additional details of the Company’s financial condition and a description of the Company’s accounting policies, which have been continued without change, except as discussed above. |
Acquisitions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 | |||
Acquisitions [Abstract] | |||
Acquisitions |
On March 9, 2018, the Company completed the acquisition of certain net assets and the natural color business of GlobeNatural, a company based in Lima, Peru. The Company paid $10.8 million of cash for this acquisition. The assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date. The Company acquired net assets of $1.4 million and identified intangible assets, principally customer relationships of $2.0 million, and allocated the remaining $7.4 million to goodwill. These operations are included in the Color segment. On July 10, 2018, the Company completed the acquisition of Mazza Innovation Limited, a botanical extraction business with patented solvent-free extraction processes, located in Vancouver, Canada. The Company paid $19.8 million of cash for this acquisition. The assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date. The Company acquired net assets of $4.0 million and identified intangible assets, principally technological know-how, of $6.9 million. The remaining $8.9 million was allocated to goodwill. This business was included in Corporate & Other in 2018. Beginning in the first quarter of 2019, the results of operations of this business are now reported in the Color segment. The results for 2018 have been restated to reflect this change. |
Fair Value |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 | |||
Fair Value [Abstract] | |||
Fair Value |
Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures, defines fair value for financial assets and liabilities, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. The carrying values of the Company’s cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses, and short-term borrowings were approximately the same as the fair values as of March 31, 2019. The fair value of the Company’s long-term debt, including current maturities, is estimated using discounted cash flows based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements (Level 2 inputs). The carrying value of the long-term debt at March 31, 2019, was $689.0 million. The fair value of the long-term debt at March 31, 2019, was $702.7 million. |
Segment Information |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information |
Operating results by segment for the periods presented are as follows:
The Company evaluates performance based on operating income of the respective segments before restructuring and other costs, interest expense, and income taxes. There were no restructuring and other costs incurred in either the first quarter of 2019 or 2018. In July 2018, the Company completed the acquisition of Mazza Innovation Limited (See Note 2, Acquisitions, for further information). This business was included in Corporate & Other in 2018. Beginning in the first quarter of 2019, the results of operations of this business are now reported in the Color segment. The results for 2018 have been restated to reflect this change. In addition to evaluating the Company’s performance based on the segments above, revenue is also disaggregated and analyzed by product line and geographic market. The following table displays the Company’s revenue by these major sources. Product Lines
Geographic Markets
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Inventories |
3 Months Ended | ||
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Mar. 31, 2019 | |||
Inventories [Abstract] | |||
Inventories |
At March 31, 2019, and December 31, 2018, inventories included finished and in-process products totaling $310.6 million and $320.4 million, respectively, and raw materials and supplies of $157.7 million and $170.4 million, respectively. |
Retirement Plans |
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Plans [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Plans |
The Company’s components of annual benefit cost for the defined benefit plans for the periods presented are as follows:
The Company’s non-service cost portion of defined benefit expense is recorded in Interest Expense on the Company’s Consolidated Condensed Statements of Earnings. The Company’s service cost portion of defined benefit expense is recorded in Selling and Administrative Expenses on the Company’s Consolidated Condensed Statements of Earnings. |
Leases |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases |
The Company leases certain office space, warehouses, land, and equipment under operating lease arrangements. Some of the Company’s leases include options to extend the leases for up to an additional five years. Some of the Company’s lease agreements also include rental payments that are adjusted periodically for inflation (i.e., CPI index). The Company recorded operating lease expense, which includes short-term lease expense and variable lease costs, of $3.0 million for the three months ended March 31, 2019. For the three months ended March 31, 2019, the Company paid $2.5 million in cash for operating leases, not including short-term lease expense or variable lease costs. The Company entered into operating leases that resulted in $2.4 million of right-of-use assets in exchange for operating lease obligations for the three months ended March 31, 2019. The Company included $20.8 million of right-of-use assets in Other Assets and $7.9 million and $12.9 million of operating lease liabilities in Other Accrued Expenses and Other Liabilities, respectively, on the Company’s Consolidated Condensed Balance Sheets as of March 31, 2019. The Company’s weighted average remaining operating lease term was 3.7 years as of March 31, 2019. The Company’s weighted average discount rate for operating leases was 3.8% as of March 31, 2019. As of March 31, 2019, maturities of operating lease liabilities for future annual periods are as follows:
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Derivative Instruments and Hedging Activity |
3 Months Ended | ||
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Mar. 31, 2019 | |||
Derivative Instruments and Hedging Activity [Abstract] | |||
Derivative Instruments and Hedging Activity |
The Company may use forward exchange contracts and foreign currency denominated debt to manage its exposure to foreign exchange risk in order to reduce the effect of fluctuating foreign currencies on short-term foreign currency denominated intercompany transactions, non-functional currency raw material purchases, non-functional currency sales, and other known foreign currency exposures. These forward exchange contracts generally have maturities of less than 18 months. The Company’s primary hedging activities and their accounting treatment are summarized below. Forward exchange contracts – Certain forward exchange contracts have been designated as cash flow hedges. The Company had $59.2 million and $76.0 million of forward exchange contracts designated as cash flow hedges outstanding as of March 31, 2019, and December 31, 2018, respectively. For the three months ended March 31, 2019 and 2018, the amounts reclassified into net earnings in the Company’s Consolidated Condensed Statement of Earnings that offset the earnings impact of the related non-functional asset or liability hedged in the same period were not material. In addition, the Company utilizes forward exchange contracts that are not designated as cash flow hedges; the results of these transactions were not material to the financial statements. Net investment hedges – The Company has certain debt denominated in Euros, Swiss Francs, and British Pounds. These debt instruments have been designated as partial hedges of the Company’s Euro, Swiss Franc, and British Pound net asset positions. Changes in the fair value of this debt attributable to changes in the spot foreign exchange rate are recorded in foreign currency translation in OCI. As of March 31, 2019, and December 31, 2018, the total value of the Company’s Euro, Swiss Franc, and British Pound debt designated as net investment hedges was $361.7 million and $366.5 million, respectively. For the three months ended March 31, 2019, the impact of foreign exchange rates on these debt instruments decreased debt by $4.9 million, which has been recorded as foreign currency translation in OCI. |
Income Taxes |
3 Months Ended | ||
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Mar. 31, 2019 | |||
Income Taxes [Abstract] | |||
Income Taxes |
The effective income tax rates for the three months ended March 31, 2019 and 2018, were 25.5% and 23.8%, respectively. The effective tax rates in both 2019 and 2018 were impacted by changes in estimates associated with the finalization of prior year foreign and domestic tax items, audit settlements, and the mix of foreign earnings. |
Accumulated Other Comprehensive Income |
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Accumulated Other Comprehensive Income [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income |
The following table summarizes the changes in OCI during the three-month periods ended March 31, 2019 and 2018:
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Accounts Receivable Securitization |
3 Months Ended | ||
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Mar. 31, 2019 | |||
Accounts Receivable Securitization [Abstract] | |||
Accounts Receivable Securitization |
The Company is engaged in an accounts receivable securitization program with Wells Fargo & Company (Wells Fargo). The commitment size under the program is $70 million. Between October 2016 and June 2018, the Company accounted for sales of trade receivables under the program as a reduction of accounts receivable in the Consolidated Condensed Balance Sheets in accordance with ASC Topic 860, Transfers and Servicing (ASC Topic 860). In June 2018, the Company amended the program. Following the amendment, the Company no longer accounts for the sales of the trade receivables in accordance with ASC Topic 860, and instead now maintains the trade receivables and related debt on its Consolidated Condensed Balance Sheets. Under the amended program, Wells Fargo has extended a secured loan of up to $70 million to the Company secured by Wells Fargo’s undivided interests in certain of the Company’s trade accounts receivables. The program expires in October 2019; however, the Company has the intent and ability to refinance or extend the program prior to maturity. As of March 31, 2019, $70 million was borrowed under the program. |
Commitments and Contingencies |
3 Months Ended | ||
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Mar. 31, 2019 | |||
Commitments and Contingencies [Abstract] | |||
Commitments and Contingencies |
The Company is subject to various claims and litigation arising in the normal course of business. The Company establishes reserves for claims and proceedings when it is probable that liabilities exist and reasonable estimates of loss can be made. While it is not possible to predict the outcome of these matters, based on our assessment of the facts and circumstances now known, we do not believe that these matters, individually or in the aggregate, will have a material adverse effect on our financial position. However, actual outcomes may be different from those expected and could have a material effect on our results of operations or cash flows in a particular period. |
Accounting Policies (Policies) |
3 Months Ended | ||||||||||||
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Mar. 31, 2019 | |||||||||||||
Accounting Policies [Abstract] | |||||||||||||
Leases | Leases The Company enters into lease agreements for certain office space, warehouses, land, and equipment in the ordinary course of business. The Company determines if an arrangement is a lease at inception and evaluates the lease classification (i.e., operating lease or financing lease) at that time. Lease arrangements with an initial term of 12 months or less are considered short-term leases and are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the term of the lease. Operating leases are included in Other Assets, Other Accrued Expenses, and Other Liabilities on the Company’s Consolidated Condensed Balance Sheet. Operating lease right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate on the commencement date for determining the present value of lease payments. The Company considers the likelihood of exercising options to extend or terminate the lease when determining the lease term. The Company has lease agreements with lease and non-lease components. The Company has elected the practical expedient to account for the lease and non-lease components as a single lease component for all leases. |
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Derivative Financial Instruments | Derivative Financial Instruments The Company selectively uses derivative financial instruments to reduce market risk associated with changes in foreign currency and interest rate exposures that exist as part of ongoing business operations. All derivative transactions are authorized and executed pursuant to the Company’s risk management policies and procedures, which strictly prohibit the use of financial instruments for speculative trading purposes. The primary objectives of the foreign exchange risk management activities are to understand and mitigate the impact of potential foreign exchange fluctuations on the Company’s financial results and its economic well-being. Changes in the fair value of derivatives that are designated as fair value hedges, along with the gain or loss on the hedged item, are recorded in current period earnings. Generally, these risk management transactions involve the use of foreign currency derivatives to protect against exposure resulting from recorded accounts receivable and payable. The Company may utilize forward exchange contracts, generally with maturities of less than 18 months, that qualify as cash flow hedges. Generally, these foreign exchange contracts are intended to offset the effect of exchange rate fluctuations on non-functional currency denominated sales and purchases. For derivative instruments that are designated as cash flow hedges, gains and losses, including any hedge ineffectiveness, are deferred in accumulated other comprehensive income (OCI) until the underlying transaction is recognized in earnings. Hedge effectiveness is determined by how closely the changes in the fair value of the hedging instrument offset the changes in the fair value or cash flows of the hedged item. Hedge accounting is permitted only if the hedging relationship is expected to be highly effective at the inception of the transaction and on an ongoing basis. |
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Recently Adopted/Issued Accounting Pronouncements | Recently Adopted Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize the lease assets and liabilities that arise from leases on the balance sheet and to disclose qualitative and quantitative information about lease transactions. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which provides an additional transition method allowing entities to apply the new lease standard at the adoption date. The Company adopted each of these standards in the first quarter of 2019 using the optional transition method allowed under ASU 2018-11. The Company elected the following practical expedients permitted within the standard:
The adoption of this standard resulted in the recognition of $20.7 million in right-of-use assets and lease liabilities for operating leases as of January 1, 2019. The adoption of this standard did not have an impact on the Company’s Consolidated Statements of Earnings, or to cash provided by or used in operating, financing, or investing activities on the Company’s Consolidated Condensed Statements of Cash Flows. In August 2017, the FASB issued ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities, which expands an entity’s ability to hedge non-financial and financial risk components and reduce complexity in fair value hedges of interest rate risk. This guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line item as the hedged item. This ASU is effective for fiscal years and interim periods beginning after December 15, 2018. The Company adopted this standard in the first quarter of 2019, and the adoption did not have a material impact on the Company’s consolidated financial statements. The Company adopted ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, in the first quarter of 2018 using monthly cash receipts as its unit of account. In the second quarter of 2018, the Company updated its unit of account to daily cash receipts for the cash received related to the beneficial interest in the previously transferred receivables. As a result, the reported results as of June 30, 2018, included an adjustment of $35.4 million for collections on beneficial interest in previously transferred receivables and an adjustment of $1.6 million for company owned life insurance proceeds for the three months ended March 31, 2018, which were previously reported as cash flows from operating activities. The Consolidated Condensed Statement of Cash Flows for the three months ended March 31, 2018 have been updated to reflect these adjustments. Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments, which replaces the current incurred loss impairment model with a methodology that reflects expected credit losses. Under the new methodology, entities will be required to measure expected credit losses on financial instruments held at amortized cost, including trade receivables, based on historical experience, current conditions, and reasonable forecasts. Adoption of this guidance is required for interim and annual periods beginning after December 15, 2019, with early adoption permitted for interim and annual periods beginning after December 15, 2018. The Company is currently evaluating the expected impact of this standard. In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates step two of the current goodwill impairment test and specifies that goodwill impairment should be measured by comparing the fair value of a reporting unit with its carrying amount. This standard will be applied prospectively and is effective for annual or interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the expected impact of this standard. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which changes the requirements for fair value measurements by removing, modifying, and adding certain disclosures. Adoption of this guidance is required for interim and annual periods beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the expected impact of this standard. Please refer to the notes in the Company’s annual consolidated financial statements for the year ended December 31, 2018, for additional details of the Company’s financial condition and a description of the Company’s accounting policies, which have been continued without change, except as discussed above. |
Segment Information (Tables) |
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Segment Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Operating results by segment for the periods presented are as follows:
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Product Information | Product Lines
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Geographical Information | Geographic Markets
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Retirement Plans (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Retirement Plans [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual Benefit Cost | The Company’s components of annual benefit cost for the defined benefit plans for the periods presented are as follows:
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Leases (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maturities of Operating Lease Liabilities | As of March 31, 2019, maturities of operating lease liabilities for future annual periods are as follows:
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Accumulated Other Comprehensive Income (Tables) |
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Accumulated Other Comprehensive Income [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in OCI | The following table summarizes the changes in OCI during the three-month periods ended March 31, 2019 and 2018:
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Accounting Policies (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |||
Right of use assets | $ 20,800 | ||
Lease liabilities | 20,773 | ||
Collected on sold receivables | $ 0 | $ 44,406 | |
ASU 2016-02 [Member] | |||
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |||
Right of use assets | $ 20,700 | ||
Lease liabilities | $ 20,700 | ||
ASU 2016-15 [Member] | Restatement Adjustment [Member] | |||
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |||
Collected on sold receivables | 35,400 | ||
Proceeds from life insurance | $ 1,600 |
Acquisitions (Details) - USD ($) $ in Thousands |
3 Months Ended | ||||
---|---|---|---|---|---|
Jul. 10, 2018 |
Mar. 09, 2018 |
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
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Acquisition [Abstract] | |||||
Acquisition of new businesses | $ 0 | $ (11,000) | |||
Goodwill | $ 413,710 | $ 416,175 | |||
Globe Natural [Member] | |||||
Acquisition [Abstract] | |||||
Acquisition of new businesses | $ (10,800) | ||||
Net assets acquired | 1,400 | ||||
Goodwill | 7,400 | ||||
Globe Natural [Member] | Customer Relationships [Member] | |||||
Acquisition [Abstract] | |||||
Intangibles assets acquired | $ 2,000 | ||||
Mazza Innovation Limited [Member] | |||||
Acquisition [Abstract] | |||||
Acquisition of new businesses | $ (19,800) | ||||
Net assets acquired | 4,000 | ||||
Goodwill | 8,900 | ||||
Mazza Innovation Limited [Member] | Technological Know-how [Member] | |||||
Acquisition [Abstract] | |||||
Intangibles assets acquired | $ 6,900 |
Fair Value (Details) - Level 2 [Member] $ in Millions |
Mar. 31, 2019
USD ($)
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---|---|
Carrying Value [Member] | |
Investments, Fair Value Disclosure [Abstract] | |
Long term debt | $ 689.0 |
Fair Value [Member] | |
Investments, Fair Value Disclosure [Abstract] | |
Long term debt | $ 702.7 |
Inventories (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Inventories [Abstract] | ||
Inventories, including finished and in-process products | $ 310.6 | $ 320.4 |
Raw materials and supplies | $ 157.7 | $ 170.4 |
Retirement Plans (Details) - Defined Benefit Plan [Member] - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
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Defined Benefit Plan, Net Periodic Benefit Cost (Credit) [Abstract] | ||
Service cost | $ 359 | $ 368 |
Interest cost | 320 | 289 |
Expected return on plan assets | (231) | (245) |
Recognized actuarial gain | (39) | (27) |
Total defined benefit expense | $ 409 | $ 385 |
Leases (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Leases [Abstract] | |
Extended lease term | 5 years |
Operating lease expense | $ 3,000 |
Cash paid for operating leases | 2,500 |
Right-of-use assets in exchange for operating lease obligations | 2,400 |
Right of use assets | 20,800 |
Operating lease, other accrued expenses | 7,900 |
Operating lease, other liabilities | $ 12,900 |
Weighted average remaining operating lease term | 3 years 8 months 12 days |
Weighted average discount rate for operating leases | 3.80% |
Maturities of Operating Lease Liabilities [Abstract] | |
2019 | $ 6,537 |
2020 | 6,998 |
2021 | 3,715 |
2022 | 1,800 |
2023 | 1,044 |
Thereafter | 2,330 |
Total lease payments | 22,424 |
Less imputed interest | (1,651) |
Present value of lease liabilities | $ 20,773 |
Derivative Instruments and Hedging Activity (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
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Maximum [Member] | ||
Derivative instruments and hedging activity for the period [Abstract] | ||
Number of months for contracts to mature | 18 months | |
Forward Exchange Contracts [Member] | Cash Flow Hedges [Member] | ||
Derivative instruments and hedging activity for the period [Abstract] | ||
Derivative, fair value | $ 59.2 | $ 76.0 |
Foreign Currency Denominated Debt, Net Investment Hedging [Member] | ||
Derivative instruments and hedging activity for the period [Abstract] | ||
Carrying value of foreign denominated debt | 361.7 | $ 366.5 |
Impact of foreign exchange rates on debt instruments recorded in Other Comprehensive Income | $ 4.9 |
Income Taxes (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Income Taxes [Abstract] | ||
Effective income tax rates for continuing operations | 25.50% | 23.80% |
Accounts Receivable Securitization (Details) $ in Millions |
Mar. 31, 2019
USD ($)
|
---|---|
Accounts Receivable Securitization [Abstract] | |
Accounts receivable securitization program commitment amount | $ 70 |
Maximum borrowing capacity, secured loan | 70 |
Credit facility, borrowings outstanding | $ 70 |
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