8-K
Sensient Technologies Corp (SXT)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
October 20, 2023
(Date of Report/Date of earliest event reported)
SENSIENT TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
| Wisconsin | 001-07626 | 39-0561070 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-5304
(Address and zip code of principal executive offices)
(414) 271-6755
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Securities registered pursuant to Section 12(b) of the Act:
| 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 |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
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Sensient Technologies Corporation (the “Company”) issued a press release on October 20, 2023, disclosing its results of operations for its quarter ended September 30, 2023, and its financial condition at that date. The press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information contained in this Item 2.02 (including Exhibit 99.1) is intended to be furnished under Item 2.02 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act.
| Item 7.01 | Regulation FD Disclosure. |
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On October 20, 2023, the Company also posted an updated investor presentation for its quarter ended September 30, 2023, on the “Investor Information” section of its website. A copy of the investor presentation is furnished as Exhibit 99.2 to this Current Report on Form 8-K.
The information contained in this Item 7.01 (including Exhibit 99.2) is intended to be furnished under Item 7.01 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act.
| Item 9.01 | Financial Statements and Exhibits. |
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(d) Exhibits. The following exhibits are furnished with this Current Report on Form 8-K:
EXHIBIT INDEX
| Exhibit<br><br> Number | Description |
|---|---|
| 99.1 | Sensient Technologies Corporation Earnings Press Release for the Quarter Ended September 30, 2023. |
| 99.2 | Sensient Technologies Corporation Investor Presentation – Q3 2023. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| SENSIENT TECHNOLOGIES CORPORATION | |
|---|---|
| By: | /s/ John J. Manning |
| Name: | John J. Manning |
| Title: | Senior Vice President, General Counsel, and Secretary |
| Date: | October 20, 2023 |
Exhibit 99.1
| Contact:<br><br> <br>Amy Agallar<br><br> <br>(414) 347-3706<br><br> <br>investor.relations@sensient.com |
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Sensient Technologies Corporation
Reports Results for the Quarter Ended September 30, 2023
MILWAUKEE— October 20, 2023 — Sensient Technologies Corporation (NYSE: SXT), a leading provider of flavors and colors for the food, pharmaceutical, and personal care markets, today reported financial results for the third quarter ended September 30, 2023.
Third Quarter Consolidated Results
| • | Reported revenue increased 0.8% to $363.8 million versus last year’s results of $361.1 million. On a local currency basis^(1)^, revenue decreased 2.0%. |
|---|---|
| • | Reported operating income declined 6.2% to $44.5 million compared to $47.5 million recorded in the third quarter of 2022. On a local currency basis^(1)^, operating income decreased 9.8%.<br> Local currency adjusted EBITDA^(1)^ was down 7.1% in the third quarter, as a result of lower sales volumes. |
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| • | Reported diluted earnings per share was 75 cents in the third quarter of 2023 compared to 85 cents in the third quarter of 2022, a decrease of 11.8%. Local currency EPS^(1)^ decreased<br> 15.3% in the third quarter as a result of lower sales volumes and higher interest expense. |
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“As expected, the destocking headwinds and market environment impacted the quarter. Our teams continue to focus on winning new business and providing high levels of service to our customers. Our underlying business remains strong. I expect our focus on customer service and sales execution will result in a return to improved revenue growth as market dynamics improve,” said Paul Manning, Sensient’s Chairman, President, and Chief Executive Officer.
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| Sensient Technologies Corporation | Page 2 |
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| Earnings Release – Quarter Ended September 30, 2023 | |
| October 20, 2023 |
Third Quarter Group Results
| Reported | Local Currency^(1)^ | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | Quarter | Year-to-Date | Quarter | Year-to-Date | ||||||||
| Flavors & Extracts | 2.1 | % | -0.2 | % | -0.5 | % | -1.1 | % | ||||
| Color | -4.3 | % | 2.3 | % | -8.2 | % | 1.1 | % | ||||
| Asia Pacific | 4.4 | % | 3.6 | % | 4.3 | % | 6.1 | % | ||||
| Total Revenue | 0.8 | % | 1.7 | % | -2.0 | % | 1.0 | % | ||||
| Reported | Local Currency^(1)^ | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Operating Profit | Quarter | Year-to-Date | Quarter | Year-to-Date | ||||||||
| Flavors & Extracts | -12.4 | % | -16.9 | % | -13.6 | % | -17.5 | % | ||||
| Color | -18.7 | % | -6.7 | % | -23.4 | % | -7.8 | % | ||||
| Asia Pacific | 16.4 | % | 8.9 | % | 15.8 | % | 11.6 | % | ||||
| Total Operating Profit | -6.2 | % | -5.5 | % | -9.8 | % | -6.1 | % |
The Flavors & Extracts Group reported third quarter revenue of $191.0 million, an increase of $4.0 million versus the prior year’s third quarter. The Group’s revenue benefited from favorable pricing and exchange rates, partially offset by lower volumes, primarily due to customer destocking and market declines in certain product lines. Segment operating income was $23.1 million in the current quarter, a decrease of $3.3 million compared to the prior year’s third quarter. The lower operating income was primarily due to the lower volumes and higher input costs, partially offset by favorable pricing and exchange rates.
The Color Group reported revenue of $145.0 million in the quarter, a decrease of $6.5 million compared to the prior year’s third quarter. The Group’s revenue was negatively impacted by lower volumes in both the food and pharmaceutical and personal care product lines, primarily due to customer destocking and market declines in certain product lines, partially offset by higher pricing and exchange rates. Segment operating income was $22.9 million in the quarter, a decrease of $5.3 million compared to the prior year’s third quarter results. The lower operating income is primarily a result of the lower volumes and higher input costs, partially offset by favorable pricing and exchange rates.
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| Sensient Technologies Corporation | Page 3 |
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| Earnings Release – Quarter Ended September 30, 2023 | |
| October 20, 2023 |
The Asia Pacific Group reported revenue of $36.8 million, an increase of $1.6 million compared to the prior year’s third quarter. The Group’s revenue benefited from favorable pricing, partially offset by lower volumes. Segment operating income was $8.1 million in the quarter, an increase of $1.1 million compared to the prior year’s third quarter. Operating income benefited from higher pricing, which was offset by lower volumes and higher input costs.
Corporate & Other reported operating expenses of $9.6 million in the current quarter, compared to $14 million of operating expenses reported in the prior year’s third quarter, primarily due to lower performance-based compensation.
2023 OUTLOOK
Sensient now expects 2023 full year GAAP diluted earnings per share to be down low double digits compared to our 2022 reported GAAP diluted earnings per share of $3.34 and also on a local currency basis compared to our 2022 adjusted diluted earnings per share^(1)^of $3.29. The Company’s previous 2023 full year GAAP diluted earnings per share guidance was for GAAP diluted earnings per share to be down high single digits compared to our 2022 reported GAAP diluted earnings per share and on a local currency basis compared to our 2022 adjusted diluted earnings per share^(1)^.
The Company now expects 2023 revenue to grow at a low single-digit rate on a local currency basis compared to the Company’s 2022 revenue. The Company’s previous 2023 revenue guidance was for a mid-single-digit growth rate on a local currency basis compared to the Company’s 2022 revenue. The Company continues to expect its 2023 adjusted EBITDA^(1)^ to be down mid-single digits on a local currency basis compared to the Company’s 2022 adjusted EBITDA^(1)^.
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| Sensient Technologies Corporation | Page 4 |
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| Earnings Release – Quarter Ended September 30, 2023 | |
| October 20, 2023 |
The Company expects its 2023 diluted earnings per share to be impacted by higher interest rates and a higher tax rate. Based on current exchange rates, the Company expects foreign exchange rates to be modestly favorable for the full year.
The Company’s guidance is based on current conditions and economic and market trends in the markets in which the Company operates and is subject to various risks and uncertainties as described below.
| ^(1)^ | Please refer to “Reconciliation of Non-GAAP Amounts” at the end of this release for more information regarding our non-GAAP<br> financial measures. |
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USE OF NON-GAAP FINANCIAL MEASURES
The Company’s non-GAAP financial measures eliminate the impact of certain items, which, depending on the measure, include: currency movements, depreciation and amortization, divestiture and other related costs and income, and non-cash share-based compensation. These measures are provided to enhance the overall understanding of the Company’s performance when viewed together with the GAAP results. Refer to “Reconciliation of Non-GAAP Amounts” at the end of this release.
CONFERENCE CALL
The Company will host a conference call to discuss its 2023 third quarter financial results at 8:30 a.m. CDT on Friday, October 20, 2023. To participate in the conference call, contact Chorus Call Inc. at (844) 492-3726 or (412) 317-1078, and ask to join the Sensient Technologies Corporation conference call. Alternatively, the call can be accessed by using the webcast link that is available on the Investor Information section of the Company’s web site at www.sensient.com.
A replay of the call will be available one hour after the end of the conference call through October 27, 2023, by calling (877) 344-7529 and referring to conference identification number 2925227. An audio replay and written transcript of the call will also be posted on the Investor Information section of the Company’s web site at www.sensient.com on or after October 24, 2023.
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| Sensient Technologies Corporation | Page 5 |
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| Earnings Release – Quarter Ended September 30, 2023 | |
| October 20, 2023 |
This release contains statements that may constitute “forward-looking statements” within the meaning of Federal securities laws including under “2023 Outlook” above. 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 Company’s ability to manage economic and capital market conditions and the impact of recessions and economic downturns; the impact of macroeconomic and geopolitical volatility, including inflation and shortages impacting the availability and cost of raw materials, energy, and other supplies; the availability and cost of labor, logistics, and transportation; the impact and uncertainty created by the COVID-19 pandemic and efforts to manage it on the global economy, including, but not limited to, its effects on our employees, facilities, customers, and suppliers, governmental regulations and restrictions, and general economic conditions; the uncertain impacts of the ongoing conflict between Russia and Ukraine on our supply chain, input costs, including energy and transportation, and on general economic conditions; the pace and nature of new product introductions by the Company and the Company’s customers; the Company’s ability to anticipate and respond to changing consumer preferences and changing technologies; the Company’s ability to successfully implement its growth strategies; the outcome of the Company’s various productivity-improvement and cost-reduction efforts, acquisition and divestiture activities, and operational improvement plan; industry, regulatory, legal, and economic factors related to the Company’s domestic and international business; the effects of tariffs, trade barriers, and disputes; growth in markets for products in which the Company competes; industry and customer acceptance of price increases; actions by competitors; currency exchange rate fluctuations; and other factors included in “Risk Factors” in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, and in other documents that the Company files with the SEC. 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.
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| Sensient Technologies Corporation | Page 6 |
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| Earnings Release – Quarter Ended September 30, 2023 | |
| October 20, 2023 |
ABOUT SENSIENT TECHNOLOGIES
Sensient Technologies Corporation is a leading global manufacturer and marketer of colors, flavors, and other specialty ingredients. Sensient uses advanced technologies and robust global supply chain capabilities to develop specialized solutions for food and beverages, as well as products that serve the pharmaceutical, nutraceutical, and personal care industries. Sensient’s customers range in size from small entrepreneurial businesses to major international manufacturers representing some of the world’s best-known brands. Sensient is headquartered in Milwaukee, Wisconsin.
www.sensient.com
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| (In thousands, except percentages and per share amounts) | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| Consolidated Statements of Earnings | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| 2023 | 2022 | % Change | 2023 | 2022 | % Change | |||||||||||||
| Revenue | $ | 363,829 | $ | 361,076 | 0.8 | % | $ | 1,107,148 | $ | 1,088,303 | 1.7 | % | ||||||
| Cost of products sold | 250,202 | 239,318 | 4.5 | % | 746,681 | 710,696 | 5.1 | % | ||||||||||
| Selling and administrative expenses | 69,096 | 74,265 | (7.0 | %) | 213,507 | 222,081 | (3.9 | %) | ||||||||||
| Operating income | 44,531 | 47,493 | (6.2 | %) | 146,960 | 155,526 | (5.5 | %) | ||||||||||
| Interest expense | 6,294 | 3,672 | 18,648 | 9,748 | ||||||||||||||
| Earnings before income taxes | 38,237 | 43,821 | 128,312 | 145,778 | ||||||||||||||
| Income taxes | 6,694 | 7,773 | 29,085 | 34,012 | ||||||||||||||
| Net earnings | $ | 31,543 | $ | 36,048 | (12.5 | %) | $ | 99,227 | $ | 111,766 | (11.2 | %) | ||||||
| Earnings per share of common stock: | ||||||||||||||||||
| Basic | $ | 0.75 | $ | 0.86 | $ | 2.36 | $ | 2.67 | ||||||||||
| Diluted | $ | 0.75 | $ | 0.85 | $ | 2.35 | $ | 2.65 | ||||||||||
| Average common shares outstanding: | ||||||||||||||||||
| Basic | 42,045 | 41,896 | 42,020 | 41,885 | ||||||||||||||
| Diluted | 42,233 | 42,242 | 42,241 | 42,199 | ||||||||||||||
| Results by Segment | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Revenue | 2023 | 2022 | % Change | 2023 | 2022 | % Change | ||||||||||||
| Flavors & Extracts | $ | 190,997 | $ | 187,046 | 2.1 | % | $ | 558,133 | $ | 559,110 | (0.2 | %) | ||||||
| Color | 144,939 | 151,469 | (4.3 | %) | 466,563 | 456,175 | 2.3 | % | ||||||||||
| Asia Pacific | 36,774 | 35,221 | 4.4 | % | 112,888 | 109,014 | 3.6 | % | ||||||||||
| Intersegment elimination | (8,881 | ) | (12,660 | ) | (30,436 | ) | (35,996 | ) | ||||||||||
| Consolidated | $ | 363,829 | $ | 361,076 | 0.8 | % | $ | 1,107,148 | $ | 1,088,303 | 1.7 | % | ||||||
| Operating Income | ||||||||||||||||||
| Flavors & Extracts | $ | 23,078 | $ | 26,337 | (12.4 | %) | $ | 69,714 | $ | 83,929 | (16.9 | %) | ||||||
| Color | 22,925 | 28,200 | (18.7 | %) | 84,027 | 90,035 | (6.7 | %) | ||||||||||
| Asia Pacific | 8,095 | 6,952 | 16.4 | % | 24,911 | 22,877 | 8.9 | % | ||||||||||
| Corporate & Other | (9,567 | ) | (13,996 | ) | (31,692 | ) | (41,315 | ) | ||||||||||
| Consolidated | $ | 44,531 | $ | 47,493 | (6.2 | %) | $ | 146,960 | $ | 155,526 | (5.5 | %) | ||||||
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| Sensient Technologies Corporation | Page 8 | |||
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| (In thousands) | ||||
| (Unaudited) | ||||
| Consolidated Condensed Balance Sheets | September 30, | December 31, | ||
| --- | --- | --- | --- | --- |
| 2023 | 2022 | |||
| Cash and cash equivalents | $ | 31,985 | $ | 20,921 |
| Trade accounts receivable | 284,668 | 302,109 | ||
| Inventories | 587,024 | 564,110 | ||
| Prepaid expenses and other current assets | 41,477 | 47,640 | ||
| Total Current Assets | 945,154 | 934,780 | ||
| Goodwill & intangible assets (net) | 432,970 | 434,315 | ||
| Property, plant, and equipment (net) | 506,549 | 483,193 | ||
| Other assets | 125,503 | 129,326 | ||
| Total Assets | $ | 2,010,176 | $ | 1,981,614 |
| Trade accounts payable | $ | 110,973 | $ | 142,365 |
| Short-term borrowings | 22,807 | 20,373 | ||
| Other current liabilities | 90,037 | 109,415 | ||
| Total Current Liabilities | 223,817 | 272,153 | ||
| Long-term debt | 648,556 | 630,331 | ||
| Accrued employee and retiree benefits | 26,830 | 26,364 | ||
| Other liabilities | 53,317 | 53,168 | ||
| Shareholders' Equity | 1,057,656 | 999,598 | ||
| Total Liabilities and Shareholders' Equity | $ | 2,010,176 | $ | 1,981,614 |
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| Sensient Technologies Corporation | Page 9 |
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| (In thousands, except per share amounts) | |
| (Unaudited) |
Consolidated Statements of Cash Flows
Nine Months Ended September 30,
| 2023 | 2022 | |||||
|---|---|---|---|---|---|---|
| Cash flows from operating activities: | ||||||
| Net earnings | $ | 99,227 | $ | 111,766 | ||
| Adjustments to arrive at net cash provided by operating activities: | ||||||
| Depreciation and amortization | 43,360 | 39,262 | ||||
| Share-based compensation expense | 7,285 | 12,476 | ||||
| Net (gain) loss on assets | (81 | ) | 283 | |||
| Deferred income taxes | 2,082 | 20,465 | ||||
| Changes in operating assets and liabilities: | ||||||
| Trade accounts receivable | 18,830 | (39,520 | ) | |||
| Inventories | (21,455 | ) | (112,021 | ) | ||
| Prepaid expenses and other assets | 842 | (39,598 | ) | |||
| Trade accounts payable and other accrued expenses | (20,572 | ) | 24,110 | |||
| Accrued salaries, wages, and withholdings | (16,749 | ) | 1,819 | |||
| Income taxes | (6,536 | ) | (4,342 | ) | ||
| Other liabilities | 587 | 198 | ||||
| Net cash provided by operating activities | 106,820 | 14,898 | ||||
| Cash flows from investing activities: | ||||||
| Acquisition of property, plant, and equipment | (67,718 | ) | (51,703 | ) | ||
| Proceeds from sale of assets | 130 | 94 | ||||
| Acquisiton of new businesses | - | (1,048 | ) | |||
| Other investing activities | 2,036 | 947 | ||||
| Net cash used in investing activities | (65,552 | ) | (51,710 | ) | ||
| Cash flows from financing activities: | ||||||
| Proceeds from additional borrowings | 197,577 | 187,715 | ||||
| Debt payments | (174,083 | ) | (87,657 | ) | ||
| Dividends paid | (51,900 | ) | (51,681 | ) | ||
| Other financing activities | (8,034 | ) | (2,056 | ) | ||
| Net cash (used in) provided by financing activities | (36,440 | ) | 46,321 | |||
| Effect of exchange rate changes on cash and cash equivalents | 6,236 | 11,330 | ||||
| Net increase in cash and cash equivalents | 11,064 | 20,839 | ||||
| Cash and cash equivalents at beginning of period | 20,921 | 25,740 | ||||
| Cash and cash equivalents at end of period | $ | 31,985 | $ | 46,579 | ||
| Supplemental Information | ||||||
| Nine Months Ended September 30, | 2023 | 2022 | ||||
| Dividends paid per share | $ | 1.23 | $ | 1.23 | ||
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| Sensient Technologies Corporation | Page 10 |
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| (In thousands, except percentages) | |
| (Unaudited) |
Reconciliation of Non-GAAP Amounts
The following table summarizes the percentage change in the 2023 results compared to the 2022 results for the corresponding periods.
| Three Months Ended September 30, | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Revenue | Total | Foreign<br><br> <br>Exchange<br><br> <br>Rates | Local<br><br> <br>Currency | ||||||
| Flavors & Extracts | 2.1 | % | 2.6 | % | (0.5 | %) | |||
| Color | (4.3 | %) | 3.9 | % | (8.2 | %) | |||
| Asia Pacific | 4.4 | % | 0.1 | % | 4.3 | % | |||
| Total Revenue | 0.8 | % | 2.8 | % | (2.0 | %) | |||
| Operating Income | |||||||||
| Flavors & Extracts | (12.4 | %) | 1.2 | % | (13.6 | %) | |||
| Color | (18.7 | %) | 4.7 | % | (23.4 | %) | |||
| Asia Pacific | 16.4 | % | 0.6 | % | 15.8 | % | |||
| Corporate & Other | (31.6 | %) | 0.0 | % | (31.6 | %) | |||
| Total Operating Income | (6.2 | %) | 3.6 | % | (9.8 | %) | |||
| Diluted Earnings Per Share | (11.8 | %) | 3.5 | % | (15.3 | %) | |||
| Adjusted EBITDA | (3.9 | %) | 3.2 | % | (7.1 | %) | |||
| Nine Months Ended September 30, | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Revenue | Total | Foreign<br><br> <br>Exchange<br><br> <br>Rates | Local<br><br> <br>Currency | ||||||
| Flavors & Extracts | (0.2 | %) | 0.9 | % | (1.1 | %) | |||
| Color | 2.3 | % | 1.2 | % | 1.1 | % | |||
| Asia Pacific | 3.6 | % | (2.5 | %) | 6.1 | % | |||
| Total Revenue | 1.7 | % | 0.7 | % | 1.0 | % | |||
| Operating Income | |||||||||
| Flavors & Extracts | (16.9 | %) | 0.6 | % | (17.5 | %) | |||
| Color | (6.7 | %) | 1.1 | % | (7.8 | %) | |||
| Asia Pacific | 8.9 | % | (2.7 | %) | 11.6 | % | |||
| Corporate & Other | (23.3 | %) | 0.0 | % | (23.3 | %) | |||
| Total Operating Income | (5.5 | %) | 0.6 | % | (6.1 | %) | |||
| Diluted Earnings Per Share | (11.3 | %) | 0.4 | % | (11.7 | %) | |||
| Adjusted EBITDA | (4.7 | %) | 0.5 | % | (5.2 | %) |
The following table summarizes the reconciliation between Operating Income (GAAP) and Adjusted EBITDA for the three and nine months ended September 30, 2023 and 2022.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | % Change | 2023 | 2022 | % Change | |||||||||
| Operating income (GAAP) | $ | 44,531 | $ | 47,493 | (6.2 | %) | $ | 146,960 | $ | 155,526 | (5.5 | %) | ||
| Depreciation and amortization | 14,770 | 13,082 | 43,360 | 39,262 | ||||||||||
| Share-based compensation expense | 2,519 | 3,785 | 7,285 | 12,476 | ||||||||||
| Adjusted EBITDA | $ | 61,820 | $ | 64,360 | (3.9 | %) | $ | 197,605 | $ | 207,264 | (4.7 | %) | ||
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| Sensient Technologies Corporation | Page 11 |
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| (In thousands, except percentages) | |
| (Unaudited) |
Reconciliation of Non-GAAP Amounts - Continued
The following table summarizes the reconciliation between Debt (GAAP) and Net Debt, and Operating Income (GAAP) and Credit Adjusted EBITDA for the trailing twelve months ended September 30, 2023 and 2022.
| September 30, | ||||||
|---|---|---|---|---|---|---|
| Debt | 2023 | 2022 | ||||
| Short-term borrowings | $ | 22,807 | $ | 21,947 | ||
| Long-term debt | 648,556 | 547,190 | ||||
| Credit Agreement adjustments^(1)^ | (19,463 | ) | (30,694 | ) | ||
| Net Debt | $ | 651,900 | $ | 538,443 | ||
| Operating income (GAAP) | $ | 188,185 | $ | 195,946 | ||
| Depreciation and amortization | 56,565 | 52,485 | ||||
| Share-based compensation expense | 10,947 | 15,618 | ||||
| Other non-operating (gains) losses^(2)^ | (3,783 | ) | 122 | |||
| Credit Adjusted EBITDA | $ | 251,914 | $ | 264,171 | ||
| Net Debt to Credit Adjusted EBITDA | 2.6 | x | 2.0 | x |
^(1)^ Adjustments include cash and cash equivalents, as described in the Company's Third Amended and Restated Credit Agreement (Credit Agreement), and certain letters of credit and hedge contracts.
^(2)^ Adjustments consist of certain financing transaction costs, certain non-financing interest items, and gains and losses related to certain non-cash, non-operating, and/or non-recurring items as described in the Credit Agreement.
The following table summarizes the reconciliation between Diluted Earnings Per Share (GAAP) and Adjusted Diluted Earnings Per Share for the twelve months ended December 31, 2022.
| Twelve Months Ended December 31, | |||
|---|---|---|---|
| 2022 | |||
| Diluted earnings per share (GAAP) | $ | 3.34 | |
| Divestiture & other related income, net of tax | (0.04 | ) | |
| Adjusted diluted earnings per share | $ | 3.29 |
Note: Earnings per share calculations may not foot due to rounding differences.
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.
Exhibit 99.2
Third Quarter 2023 Investor Presentation
2 FORWARD-LOOKING STATEMENTS This document contains statements that may constitute “forward-looking statements” within the meaning of Federal securities laws including under “2023 Financial Outlook” in this presentation. 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 Company’s ability to manage economic and capital market conditions and the impact of recessions and economic downturns; the impact of macroeconomic and geopolitical volatility, including inflation and shortages impacting the availability and cost of raw materials, energy, and other supplies; the availability and cost of labor, logistics, and transportation; the impact and uncertainty created by the COVID-19 pandemic and efforts to manage it on the global economy, including, but not limited to, its effects on our employees, facilities, customers, and suppliers, governmental regulations and restrictions, and general economic conditions; the uncertain impacts of the ongoing conflict between Russia and Ukraine on our supply chain, input costs, including energy and transportation, and on general economic conditions; the pace and nature of new product introductions by the Company and the Company’s customers; the Company’s ability to anticipate and respond to changing consumer preferences and changing technologies; the Company’s ability to successfully implement its growth strategies; the outcome of the Company’s various productivity-improvement and cost-reduction efforts, acquisition and divestiture activities, and operational improvement plan; industry, regulatory, legal, and economic factors related to the Company’s domestic and international business; the effects of tariffs, trade barriers, and disputes; growth in markets for products in which the Company competes; industry and customer acceptance of price increases; actions by competitors; currency exchange rate fluctuations; and other factors included in “Risk Factors” in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, and in other documents that the Company files with the SEC. 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 presentation contains time-sensitive information that reflects management’s best analysis only as of the date of this presentation. 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.
3 NON-GAAP FINANCIAL MEASURES Within this document, the Company reports certain non-GAAP financial measures, including: (1) percentage changes in revenue, operating income, diluted earnings per share, and adjusted EBITDA on a local currency basis (which eliminate the effects that result from translating its international operations into U.S. dollars), and (2) adjusted EBITDA (which excludes depreciation and amortization expense, and non-cash share based compensation expense). The Company has included each of these non-GAAP measures in order to provide additional information regarding the 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 presentation and the Company’s 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. The Company believes this information can be beneficial to investors for these same purposes. These non-GAAP measures may not be comparable to similarly titled measures used by other companies. Refer to “Non-GAAP Financial Measures” at the end of this presentation for reconciliations and additional information.
Sensient Overview 2 Provider of customized solutions for food and beverage, pharmaceutical, and personal care customers Global market leader offering an extensive portfolio of natural flavor and color technology platforms and solutions Exceptional innovation & applications expertise with unique ability to service global, regional, and local customers
Innovative Technologies Creating Unique Solutions 2 Applications expertise and solutions-based selling High impact relative to cost Technically-driven products that are difficult to replace Strong consumer trends Opportunities to grow organically and through M&A
Focusing our portfolio and strengthening our commitment to the end markets 2 Investing in core focus areas of Flavors and Extracts, Natural Ingredients, Food and Pharmaceutical Colors, and Personal Care Divested non-core product lines (inks, fragrances, and yogurt fruit prep product lines) in 2020 and 2021 Expanded flavor portfolio and strengthened technical solutions capabilities through the acquisition of Flavor Solutions, Inc. in July 2021 Strengthened extensive natural color portfolio by acquiring Endemix, a vertically integrated natural color and extracts company, in October 2022
Natural solutions provider focused on consistent and sustainable supply chain 2 Provider of natural solutions to support health & wellness and clean label consumer trends Robust agronomy program ensures responsible procurement and traceability of sustainable ingredients Committed to delivering safe, authentic, high-quality natural products through Sensient’s CertasureTM program
8 Color Group 2022 Revenue: $604M Core Areas of Focus: Food and Pharmaceutical Colors and Personal Care Flavors & Extracts Group 2022 Revenue: $738M Core Areas of Focus: Natural Flavors, Extracts and Natural Ingredients Asia Pacific Group 2022 Revenue: $144M Core Areas of Focus: Flavors and Colors for food and beverage Global Revenue by Group 2022 Global Revenues include intercompany sales which are eliminated on a consolidated basis.
9 Global market leader Natural color innovator Excellent innovation & applications expertise Color Group
10 Color Overview Food and Pharmaceutical 73% of 2022 Segment Revenue LC Revenue Change* Q3 ’23 (7.5%) YTD ’23 +3.7% Market trend toward natural colors in food and beverage Unique value proposition for Pharmaceutical customers includes colors, flavors, coatings, and extracts Personal Care 27% of 2022 Segment Revenue LC Revenue Change* Q3 ’23 (10.0%) YTD ’23 (5.8%) Demand for innovative products with multiple benefits Product line includes dyes, pigments, formulation aides and ingredients for color cosmetics, hair care, and skin care 2022 Revenue: $604M *Local-currency (LC) revenue is a Non-GAAP metric, please see our GAAP to Non-GAAP Reconciliation at the end of this document.
11 Flavors & Extracts Group Broad product offering Unique ability to service global, regional, and local customers Leading technology platforms Outstanding applications expertise
12 Flavors & Extracts Overview Flavors, Extracts, and Flavor Ingredients 67% of 2022 Segment Revenue LC Revenue Change* Q3 ’23 (3.3%) YTD ’23 (0.8%) Opportunities for on trend products with extracts, taste modulation, and natural flavors Natural Ingredients 33% of 2022 Segment Revenue LC Revenue Change* Q3 ’23 +5.1% YTD ’23 (1.7%) Leading provider of dehydrated onion, garlic, and other products 2022 Revenue: $738M *Local-currency (LC) revenue is a Non-GAAP metric, please see our GAAP to Non-GAAP Reconciliation at the end of this document.
13 Asia Pacific Group Portfolio of food and beverage flavors and colors R&D centers in key strategic markets to support local and regional customer base Ability to deliver localized solutions and technology platforms
14 2022 revenue of $144 million and operating income of $29 million Sensient’s sales of flavors and colors for Food and Pharmaceutical are managed on a geographic basis and reported as a separate segment Manufacturing capabilities in Australia, New Zealand, China, Japan, Philippines, Thailand, and India Q3 2023 local currency revenue* was up 4.3% and operating profit* improved 15.8% *Local currency revenue and local currency operating profit are Non-GAAP metrics. Please see our GAAP to Non-GAAP Reconciliation at the end of this document. Asia Pacific Overview
15 2023 Q3 Segment Results Flavors & Extracts Group third quarter revenue declined slightly. Favorable pricing and new sales wins were offset by lower volumes due to customer destocking and ongoing end market declines in certain product categories. Operating income declined in the quarter primarily due to higher input costs and lower volumes. Asia Pacific Group third quarter revenue increased due to favorable pricing and new sales wins, partially offset by lower volumes due primarily to destocking and market declines. Operating income increased as a result of higher pricing, partially offset by lower volumes. Local Currency Revenue* Local Currency* Commentary: Q3 YTD Color Group reported lower revenue in the quarter due to lower volumes related to customer destocking and ongoing end market declines in certain product categories. Volume declines were partially offset by pricing and volume growth as a result of new sales wins. Operating income declined due to lower volumes and higher input costs. Color (8.2%) +1.1% Flavors & Extracts (0.5%) (1.1%) Asia Pacific +4.3% +6.1% Local Currency Operating Income* Q3 YTD Color (23.4%) (7.8%) Flavors & Extracts (13.6%) (17.5%) Asia Pacific +15.8% +11.6% * Local-currency (LC) revenue and operating income are Non-GAAP metrics. Please see our GAAP to Non-GAAP Reconciliation at the end of this document.
16 2023 Q3 Consolidated Results Q3 YTD Local Currency Revenue* (2.0%) +1.0% Local Currency Operating Income* (9.8%) (6.1%) Local Currency Diluted EPS* (15.3%) (11.7%) Local Currency Adjusted EBITDA* (7.1%) (5.2%) Q3 consolidated local currency revenue declined as favorable pricing actions and volumes from new sales wins were offset by overall lower volumes, primarily driven by customer destocking and ongoing end market declines. Q3 consolidated local currency operating income declined as a result of overall lower volumes, partially offset by lower performance-based compensation. Q3 local currency diluted EPS declined as a result of the operating income headwinds and higher interest expense. * Local-currency (LC) revenue, operating income, diluted EPS, and adjusted EBITDA are Non-GAAP metrics. Please see our GAAP to Non-GAAP Reconciliation at the end of this document.
Capital Allocation Prioritize ROI capital projects Maintain prudent level of leverage to support Sensient’s long-standing dividend and opportunistic M&A and share repurchases $77 $43 $57 $62 $66 $67 $69 $51 $39 $52 $61 $79 $31 $14 $23 $87 $118 $- $50 $100 $150 $200 $250 2018 2019 2020 2021 2022 DOLLARS IN MILLIONS Share Repurchase Acquisitions Dividends Debt Repayments Capital Expenditures 17
2023 Financial Outlook 17 Metric Revised Guidance Previous Guidance Comments Local Currency Revenue* Low single-digit growth Mid-single-digit growth Local Currency Adjusted EBITDA* No Change Mid-single-digit decrease Excludes the impact of share-based stock compensation Diluted EPS (GAAP) Low double-digit decrease High single-digit decrease FX modestly favorable for the full year Higher interest rates and a higher tax rate Local Currency Diluted EPS* Low double-digit decrease High single-digit decrease * The local currency revenue, diluted EPS, and adjusted EBITDA growth rates for 2023 are compared to 2022 revenue, adjusted diluted EPS, and adjusted EBITDA, respectively. Local currency revenue, adjusted diluted EPS, and adjusted EBITDA are Non-GAAP metrics. Please see our GAAP to Non-GAAP Reconciliation at the end of this document.
Why Invest? Strong competitive position Defensible and ‘sticky’ business (& low portion of customer costs) Global presence Exposure to stable and growing markets Focused on improving returns and on growth 17
APPENDIX* *Amounts in thousands, except percentages and per share amounts
ESG Information Environmental Sensient is committed to the principles of sound environmental stewardship and the responsible and sustainable use of energy and natural resources. Long-term goals to reduce Energy, Water, and Hazardous Waste intensity Seed-to-shelf program focused on strengthening a sustainable supply chain Emphasis on implementing sustainability from the design stage. Chemical Risk Strategy implemented to identify and reduce risk in our portfolio Social Sensient strives to conduct business in an ethical manner and to make a positive contribution to society through our product offerings and business activities. Sensient’s Code of Conduct and Supplier Code of Conduct require strong ethical behavior, fair employment practices, and strict human rights practices and product safety standards Robust product, environmental, and raw material safety programs designed to exceed industry standards Raw material traceability and sustainability programs Support for our local communities through volunteerism, financial donations, sponsorships, and employee education opportunities Governance Sensient is committed to maintaining the highest standards of professional conduct and strong corporate governance practices through our comprehensive corporate governance framework. Board comprised of a majority of independent directors with diverse and accomplished backgrounds Committed to board diversity and refreshment, we were recognized by 50/50 Women on Boards for the eleventh year in a row and we have added seven new directors since 2014. Robust Code of Conduct built on a foundation of ethics, safety and quality, and professionalism resulting in ethical and lawful conduct of our business 21
Non-GAAP Financial Measures 21
Non-GAAP Financial Measures (Cont’d) 21
Non-GAAP Financial Measures (Cont’d) 21
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