Sensient Technologies Corp 10-Q for FY2024 Q3
Sensient Technologies Corp (SXT)
10-Q
2024-11-05
For: 2024-09-30
View Original
Added on
April 10, 2026
About this 10-Q
Sensient Technologies Corp filed this 10-Q on November 5, 2024, covering the quarter ended September 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $392.61M
- up 7.9% from $363.83M a year earlier
- Net income
- $32.69M
- up 3.6% from net income of $31.54M a year earlier
- Diluted EPS
- $0.77
- up 2.7% from $0.75 a year earlier
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended:
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OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
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to
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Commission file number: 001-07626
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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(Address of principal executive offices)
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Registrant’s telephone number, including area code:
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(
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated Filer ☐
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Non-Accelerated Filer ☐
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Smaller Reporting Company
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Emerging Growth Company
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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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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Class
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Outstanding at October 23, 2024
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Common Stock, par value $0.10 per share
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SENSIENT TECHNOLOGIES CORPORATION
INDEX
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Page No.
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PART I. FINANCIAL INFORMATION:
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Item 1.
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Financial Statements:
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1
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2
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3
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5
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Item 2.
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Item 3.
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19
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Item 4.
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19
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PART II. OTHER INFORMATION:
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Item 1.
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19
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Item 1A.
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20
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Item 2.
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20
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Item 5.
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20
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Exhibits. | 20 |
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21
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22
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| PART I. |
FINANCIAL INFORMATION
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| ITEM 1. |
FINANCIAL STATEMENTS
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SENSIENT TECHNOLOGIES CORPORATION
(In thousands except per share amounts)
(Unaudited)
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Three Months
Ended September 30,
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Nine Months
Ended September 30,
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2024
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2023
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2024
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2023
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Revenue
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$
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$
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$
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$
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Cost of products sold
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Selling and administrative expenses
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Operating income
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Interest expense
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Earnings before income taxes
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Income taxes
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Net earnings
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$
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$
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$
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$
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Weighted average number of common shares outstanding:
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Basic
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Diluted
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Earnings per common share:
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Basic
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$
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$
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$
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$
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Diluted
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$
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$
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$
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$
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Dividends declared per common share
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$
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$
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$
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$
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See accompanying notes to consolidated condensed financial statements.
SENSIENT TECHNOLOGIES CORPORATION
(In thousands)
(Unaudited)
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Three Months
Ended September 30,
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Nine Months
Ended September 30,
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2024
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2023
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2024
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2023
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Comprehensive income
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$
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$
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$
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$
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See accompanying notes to consolidated condensed financial statements.
SENSIENT TECHNOLOGIES CORPORATION
(In thousands)
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September 30,
2024
(Unaudited)
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December 31,
2023
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| Assets |
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Current Assets:
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Cash and cash equivalents
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$
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$
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Trade accounts receivable
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Inventories
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Prepaid expenses and other current assets
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Total current assets
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Other assets
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Deferred tax assets
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Intangible assets, net
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Goodwill
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Property, Plant, and Equipment:
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Land
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Buildings
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Machinery and equipment
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Construction in progress
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Less accumulated depreciation
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(
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(
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Total assets
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$
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$
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Liabilities and Shareholders’
Equity
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Current Liabilities:
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Trade accounts payable
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$
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$
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Accrued salaries, wages, and withholdings from employees
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Other accrued expenses
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Income taxes
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Short-term borrowings
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Total current liabilities
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Deferred tax liabilities
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Other liabilities
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Accrued employee and retiree benefits
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Long-term debt
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Shareholders’ Equity:
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Common stock
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Additional paid-in capital
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Earnings reinvested in the business
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Treasury stock, at cost
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(
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Accumulated other comprehensive loss
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(
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(
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Total shareholders’ equity
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Total liabilities and shareholders’ equity
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$
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$
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See accompanying notes to consolidated condensed financial statements.
SENSIENT TECHNOLOGIES CORPORATION
(In thousands)
(Unaudited)
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Nine Months
Ended September 30,
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2024
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2023
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Cash flows from operating activities:
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Net earnings
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$
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$
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Adjustments to arrive at net cash provided by operating activities:
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Depreciation and amortization
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Share-based compensation expense
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Net gain on assets
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(
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(
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Portfolio Optimization Plan costs
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Deferred income taxes
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(
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Changes in operating assets and liabilities:
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Trade accounts receivable
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(
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Inventories
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Prepaid expenses and other assets
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Accounts payable and other accrued expenses
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(
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(
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Accrued salaries, wages, and withholdings from employees
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(
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Income taxes
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(
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Other liabilities
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Net cash provided by operating activities
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Cash flows from investing activities:
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Acquisition of property, plant, and equipment
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(
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(
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Proceeds from sale of assets
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Other investing activities
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(
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Net cash used in investing activities
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(
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(
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Cash flows from financing activities:
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Proceeds from additional borrowings
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Debt payments
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(
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(
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Dividends paid
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(
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(
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Other financing activities
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(
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(
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Net cash used in financing activities
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(
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(
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Effect of exchange rate changes on cash and cash equivalents
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(
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Net increase in cash and cash equivalents
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Cash and cash equivalents at beginning of period
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Cash and cash equivalents at end of period
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$
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$
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||||
See accompanying notes to consolidated condensed financial statements.
SENSIENT TECHNOLOGIES CORPORATION
(In thousands, except share and per share amounts)
(Unaudited)
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Treasury Stock
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Three Months Ended September
30, 2024
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Common
Stock
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Additional
Paid-In
Capital |
Earnings
Reinvested
in the
Business |
Shares
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Amount
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Accumulated
Other
Comprehensive
Income (Loss) |
Total
Equity
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|||||||||||||||||||||
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Balances at June 30, 2024
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$
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$
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$
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$
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(
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)
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$
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(
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$
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Net earnings
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-
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Other comprehensive income
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-
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Cash dividends paid – $
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(
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-
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(
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Share-based compensation
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-
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Non-vested stock issued upon vesting
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( |
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Other
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( |
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Balances at September 30, 2024
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$
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$
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$
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$
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(
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)
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$
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(
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)
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$
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|||||||||||||
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Three Months Ended September
30, 2023
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||||||||||||||||||||||||||||
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Balances at June 30, 2023
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$
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$
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$
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$
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(
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$
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(
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$
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Net earnings
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-
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Other comprehensive loss
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-
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(
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)
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(
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)
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Cash dividends paid – $
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(
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)
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-
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(
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Share-based compensation
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-
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| Non-vested stock issued upon vesting | ( |
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| Other |
( |
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Balances at September 30, 2023
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$
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$
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$
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$
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(
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)
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$
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(
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)
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$
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|||||||||||||
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Nine Months Ended September 30, 2024
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||||||||||||||||||||||||||||
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Balances at December 31, 2023
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$
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$
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$
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$
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(
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)
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$
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(
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$
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Net earnings
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-
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Other comprehensive loss
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-
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(
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(
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)
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Cash dividends paid – $
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(
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)
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-
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(
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Share-based compensation
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-
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Non-vested stock issued upon vesting
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(
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(
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Benefit plans
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(
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Other
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(
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(
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(
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Balances at September 30, 2024
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$
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$
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$
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$
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(
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)
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$
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(
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$
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Nine Months Ended September 30, 2023
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Balances at December 31, 2022
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$
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$
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$
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$
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(
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$
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(
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$
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Net earnings
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-
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Other comprehensive income
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-
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Cash dividends paid – $
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(
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-
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(
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Share-based compensation
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-
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Non-vested stock issued upon vesting
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(
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(
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Benefit plans
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(
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Other
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(
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(
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(
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Balances at September 30, 2023
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$
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$
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$
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$
|
(
|
)
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$
|
(
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)
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$
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|
|||||||||||||
See accompanying notes to consolidated condensed financial statements.
SENSIENT
TECHNOLOGIES CORPORATION
(Unaudited)
|
1.
|
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 September 30, 2024, and the results of operations, comprehensive income, and shareholders’ equity for the three and nine months ended September 30, 2024 and 2023, and cash flows for the nine months ended September 30,
2024 and 2023. 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.
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which will require the Company to disclose segment expenses that are significant and regularly provided to the Company’s chief operating decision maker (CODM). In addition, this ASU will require the Company to disclose the title and position of its CODM and how the CODM uses segment profit or loss information in assessing segment performance and deciding how to allocate resources. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company will adopt this ASU in the fourth quarter of 2024 using a retrospective transition method.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740):
Improvements to Income Tax Disclosures, which will require the Company to disclose specified
additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. This ASU will also require the Company to disaggregate its income taxes paid disclosure by
federal, state, and foreign taxes, with further disaggregation required for significant individual jurisdictions. This ASU is effective for fiscal years beginning after December 15, 2024. The Company will adopt this ASU in the fourth quarter of
2025 using a prospective transition method.
Please refer to the notes in the Company’s
annual consolidated financial statements for the year ended December 31, 2023, for additional details of the Company’s financial condition and a description of the Company’s accounting policies, which have been continued without change.
|
2.
|
Portfolio Optimization Plan
|
During the fourth quarter of 2023, the Board
of Directors of the Company approved a plan to undertake an effort to optimize certain production facilities and improve efficiencies within the Company (Portfolio Optimization Plan). As part of the Portfolio Optimization Plan, in the Flavors
& Extracts segment, the Company evaluated the closure of its manufacturing facility in Felinfach, Wales, United Kingdom, the closure of its sales office in Granada, Spain, and the centralization and elimination of certain selling and
administrative positions. In addition, in the Color segment, the Company evaluated the closure of a manufacturing facility in Delta, British Columbia, Canada, the closure of a sales office in Argentina, and centralizing and eliminating certain
production positions and selling and administrative positions. The Company reports all costs associated with the Portfolio Optimization Plan in the Corporate & Other segment.
The Company’s Felinfach
site will continue to operate until all production activities have successfully transferred to other locations, and then will be closed. The Company has substantially completed all other actions contemplated under the Portfolio Optimization Plan in
accordance with local laws.
The Company recorded
non-cash impairment charges in Selling and Administrative Expenses, primarily related to certain property, plant, and equipment during the nine months ended September 30, 2024, when the estimated fair value
of these assets was lower than the carrying value. The property, plant, and equipment related to a product line that was shut down and determined to not be usable at other plant locations.
The Company recorded $2.7 million and $3.7 million of accrued
liabilities in Other Accrued Expenses on the Company’s Consolidated Balance Sheet related to the Portfolio Optimization Plan as of September 30, 2024 and December 31, 2023, respectively. The Company expects
the Portfolio Optimization Plan will cost approximately $40 million, of which $33.6 million has been incurred through September 30, 2024, primarily related to non-cash impairment charges and proposed employee separation costs, and upon completion would
reduce annual operating costs by approximately $8 million to $10 million, with the full benefit expected to be achieved after 2025. The Company anticipates it would reduce headcount by approximately 100 positions, primarily in the Flavors & Extracts and Color segments, related to certain production and selling and administrative positions.
The following table
summarizes the Portfolio Optimization Plan expenses by segment for the three months ended September 30, 2024:
|
(In thousands)
|
Flavors &
Extracts
|
Color
|
Corporate
& Other
|
Consolidated
|
||||||||||||
|
Employee separation – Selling and administrative expenses
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
| Other production costs – Cost of products sold |
||||||||||||||||
|
Other costs – Selling and administrative expenses(1)
|
|
|
(
|
)
|
|
|||||||||||
|
Total
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
|
|
(1) |
|
The following table
summarizes the Portfolio Optimization Plan expenses by segment for the nine months ended September 30, 2024:
|
(In thousands)
|
Flavors &
Extracts
|
Color
|
Corporate
& Other
|
Consolidated
|
||||||||||||
|
Non-cash impairment charges – Selling and administrative expenses
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Non-cash charges – Cost of products sold
|
|
(
|
)
|
|
|
|||||||||||
|
Employee separation – Selling and administrative expenses
|
|
|
|
|
||||||||||||
| Other production costs – Cost of products sold |
||||||||||||||||
|
Other costs – Selling and administrative expenses(1)
|
|
|
(
|
)
|
|
|||||||||||
|
Total
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
|
|
(1) | |
|
3.
|
Trade Accounts Receivable
|
Trade accounts receivables are recorded at their face amount, less an allowance for expected losses on doubtful accounts. The allowance for doubtful accounts is calculated based on customer-specific analysis and an aging
methodology using historical loss information. The Company believes historical loss information is a reasonable basis for expected credit losses as the Company’s historical credit loss experience correlates with its customer delinquency status.
This information is also adjusted for any known current economic conditions. Forecasted economic conditions have not had a significant impact on the current credit loss estimate due to the short-term nature of the Company’s customer receivables;
however, the Company will continue to monitor and evaluate as economic conditions change. Additionally, as the Company only has one
portfolio segment, there are not different risks between portfolios. Specific accounts are written off against the allowance for doubtful accounts when the receivable is deemed no longer collectible.
The following table summarizes the changes in
the allowance for doubtful accounts during the three and nine month periods ended September 30, 2024 and 2023:
|
(In thousands)
Three Months Ended September 30, 2024
|
Allowance for
Doubtful Accounts
|
|||
|
Balance at June
30, 2024
|
$
|
|
||
|
Provision for
expected credit losses
|
|
|||
|
Accounts
written off
|
(
|
)
|
||
|
Translation and
other activity
|
|
|||
|
Balance at
September 30, 2024
|
$
|
|
||
|
(In thousands)
Three Months Ended September 30, 2023
|
Allowance for
Doubtful Accounts
|
|||
|
Balance at June 30, 2023
|
$
|
|
||
|
Provision for
expected credit losses
|
|
|||
|
Accounts
written off
|
(
|
)
|
||
|
Translation and
other activity
|
(
|
)
|
||
|
Balance at
September 30, 2023
|
$
|
|
||
|
(In thousands)
Nine
Months Ended September 30, 2024
|
Allowance for
Doubtful Accounts
|
|||
|
Balance at
December 31, 2023
|
$
|
|
||
|
Provision for
expected credit losses
|
|
|||
|
Accounts
written off
|
(
|
)
|
||
|
Translation and
other activity
|
(
|
)
|
||
|
Balance at
September 30, 2024
|
$
|
|
||
|
(In thousands)
Nine
Months Ended September 30, 2023
|
Allowance for
Doubtful Accounts
|
|||
|
Balance at
December 31, 2022
|
$
|
|
||
|
Provision for
expected credit losses
|
|
|||
|
Accounts
written off
|
( |
) | ||
|
Translation and
other activity
|
||||
|
Balance at
September 30, 2023
|
$ | |||
| 4. |
Inventories
|
At September 30, 2024, and December 31, 2023, inventories included finished and in-process products totaling $415.4 million and $437.1 million, respectively, and raw materials and supplies of $165.4 million and $161.3 million,
respectively.
| 5. |
Debt
|
On August 30, 2024, the Company entered into Amendment No. 11 (Receivables Amendment) to the Receivables Purchase Agreement, dated as of October 3, 2016. The Receivables Amendment extended the termination date of the Receivables Purchase Agreement from August 30, 2024 to August 29, 2025 .
On October 31, 2024, the Company entered into Amendment No. 1 (Loan Amendment) to the Loan Agreement with PNC Bank, N.A., dated as of
November 7, 2022. The Loan Amendment extended the maturity date of the Loan Agreement from November 7, 2024 to November 7, 2025 .
| 6. |
Fair Value
|
Accounting
Standards Codification 820, Fair Value Measurement, 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, trade accounts payable, accrued expenses, and short-term borrowings were approximately the same as the fair values as of September 30, 2024 and December 31, 2023. The net fair value of the forward exchange contracts
based on current pricing obtained for comparable derivative products (Level 2 inputs) was a liability of $0.3 million and an asset of $1.0 million as of September 30, 2024 and December 31, 2023, respectively. 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 September 30, 2024 and December 31, 2023 was $625.8 million and $645.2 million, respectively. The fair value of the long-term debt at September 30, 2024 and December 31, 2023 was $638.4
million and $653.7 million, respectively.
| 7. |
Segment Information
|
The Company evaluates performance based on
operating income before share-based compensation; restructuring and other charges, including Portfolio Optimization Plan costs; interest expense; and income taxes (segment operating income). Total revenue and segment operating income by business
segment and geographic region include both sales to customers, as reported in the Company’s Consolidated Statements of Earnings, and intersegment sales, which are accounted for at prices that approximate market prices and are eliminated in
consolidation.
The Company determines its operating segments
based on information utilized by its chief operating decision maker to allocate resources and assess performance. The Company’s three
reportable segments are the Flavors & Extracts and Color segments, which are both managed on a product line basis, and the Asia Pacific segment, which is managed on a geographic basis. The Company’s Flavors & Extracts segment produces flavor,
extracts, and essential oils products that impart a desired taste, texture, aroma, or other characteristics to a broad range of consumer and other products. The Color segment produces natural and synthetic color systems for use in foods, beverages,
pharmaceuticals, and nutraceuticals; colors and other ingredients for personal care, such as active ingredients, solubilizers, and surface treated pigments; pharmaceutical and nutraceutical excipients, such as colors, flavors, coatings, and
nutraceutical ingredients; and technical colors for industrial applications. The Asia Pacific segment is managed on a geographic basis and produces and distributes color, flavor, and essential oils products in the Asia Pacific countries. The
Company’s corporate expenses, share-based compensation, and restructuring and other charges, including Portfolio Optimization Plan costs, are included in the “Corporate & Other” category.
Operating results by segment for the periods
presented are as follows:
|
(In thousands)
|
Flavors &
Extracts
|
Color
|
Asia
Pacific
|
Corporate &
Other
|
Consolidated
|
|||||||||||||||
|
Three months ended September 30, 2024:
|
||||||||||||||||||||
|
Revenue from
external customers
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Intersegment
revenue
|
|
|
|
|
|
|||||||||||||||
|
Total revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Operating
income (loss)
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
|
Interest
expense
|
|
|
|
|
|
|||||||||||||||
|
Earnings (loss)
before income taxes
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
|
Three months ended September 30, 2023:
|
||||||||||||||||||||
|
Revenue from
external customers
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Intersegment
revenue
|
|
|
|
|
|
|||||||||||||||
|
Total revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Operating
income (loss)
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
|
Interest
expense
|
|
|
|
|
|
|||||||||||||||
|
Earnings (loss)
before income taxes
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
|
(In thousands)
|
Flavors &
Extracts
|
Color
|
Asia
Pacific
|
Corporate &
Other
|
Consolidated
|
|||||||||||||||
|
Nine months ended September 30,
2024:
|
||||||||||||||||||||
|
Revenue from
external customers
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Intersegment
revenue
|
|
|
|
|
|
|||||||||||||||
|
Total revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Operating
income (loss)
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
|
Interest
expense
|
|
|
|
|
|
|||||||||||||||
|
Earnings (loss)
before income taxes
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
|
Nine months ended September 30,
2023:
|
||||||||||||||||||||
|
Revenue from
external customers
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Intersegment
revenue
|
|
|
|
|
|
|||||||||||||||
|
Total revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Operating
income (loss)
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
|
Interest
expense
|
|
|
|
|
|
|||||||||||||||
|
Earnings (loss)
before income taxes
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
Product Lines
|
(In thousands)
|
Flavors &
Extracts
|
Color
|
Asia Pacific
|
Consolidated
|
||||||||||||
|
Three months ended September 30, 2024:
|
||||||||||||||||
|
Flavors,
Extracts & Flavor Ingredients
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Natural
Ingredients
|
|
|
|
|
||||||||||||
|
Food &
Pharmaceutical Colors
|
|
|
|
|
||||||||||||
|
Personal Care
|
|
|
|
|
||||||||||||
|
Asia Pacific
|
-
|
-
|
|
|
||||||||||||
|
Intersegment
Revenue
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
|
Total revenue
from external customers
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Three months ended September 30, 2023:
|
||||||||||||||||
|
Flavors,
Extracts & Flavor Ingredients
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Natural
Ingredients
|
|
|
|
|
||||||||||||
|
Food &
Pharmaceutical Colors
|
|
|
|
|
||||||||||||
|
Personal Care
|
|
|
|
|
||||||||||||
|
Asia Pacific
|
-
|
-
|
|
|
||||||||||||
|
Intersegment
Revenue
|
(
|
)
|
(
|
)
|
|
(
|
)
|
|||||||||
|
Total revenue
from external customers
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
(In thousands)
|
Flavors &
Extracts
|
Color
|
Asia Pacific
|
Consolidated
|
||||||||||||
|
Nine months ended September 30,
2024:
|
||||||||||||||||
|
Flavors,
Extracts & Flavor Ingredients
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Natural
Ingredients
|
|
|
|
|
||||||||||||
|
Food &
Pharmaceutical Colors
|
|
|
|
|
||||||||||||
|
Personal Care
|
|
|
|
|
||||||||||||
|
Asia Pacific
|
-
|
-
|
|
|
||||||||||||
|
Intersegment
Revenue
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
|
Total revenue
from external customers
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Nine months ended September 30, 2023:
|
||||||||||||||||
|
Flavors,
Extracts & Flavor Ingredients
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Natural
Ingredients
|
|
|
|
|
||||||||||||
|
Food &
Pharmaceutical Colors
|
|
|
|
|
||||||||||||
|
Personal Care
|
|
|
|
|
||||||||||||
|
Asia Pacific
|
-
|
-
|
|
|
||||||||||||
|
Intersegment
Revenue
|
(
|
)
|
(
|
)
|
|
(
|
)
|
|||||||||
|
Total revenue
from external customers
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Geographic Markets
|
(In thousands)
|
Flavors &
Extracts
|
Color
|
Asia Pacific
|
Consolidated
|
||||||||||||
|
Three months ended September 30, 2024:
|
||||||||||||||||
|
North America
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Europe
|
|
|
|
|
||||||||||||
|
Asia Pacific
|
|
|
|
|
||||||||||||
|
Other
|
|
|
|
|
||||||||||||
|
Total revenue
from external customers
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Three months ended September 30, 2023:
|
||||||||||||||||
|
North America
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Europe
|
|
|
|
|
||||||||||||
|
Asia Pacific
|
|
|
|
|
||||||||||||
|
Other
|
|
|
|
|
||||||||||||
|
Total revenue
from external customers
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
(In thousands)
|
Flavors &
Extracts
|
Color
|
Asia Pacific
|
Consolidated
|
||||||||||||
|
Nine months ended September 30,
2024:
|
||||||||||||||||
|
North America
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Europe
|
|
|
|
|
||||||||||||
|
Asia Pacific
|
|
|
|
|
||||||||||||
|
Other
|
|
|
|
|
||||||||||||
|
Total revenue
from external customers
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Nine months ended September 30,
2023:
|
||||||||||||||||
|
North America
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Europe
|
|
|
|
|
||||||||||||
|
Asia Pacific
|
|
|
|
|
||||||||||||
|
Other
|
|
|
|
|
||||||||||||
|
Total revenue
from external customers
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
8.
|
Retirement Plans
|
The Company’s components of annual benefit cost for the defined benefit plans for
the periods presented are as follows:
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
|
(In thousands)
|
2024
|
2023
|
2024
|
2023
|
||||||||||||
|
Service cost
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Interest cost
|
|
|
|
|
||||||||||||
|
Expected return on plan assets
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
|
Recognized actuarial loss
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
|
Total defined benefit expense
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
The Company’s non-service cost portion of defined benefit expense is recorded in Interest Expense on the Company’s Consolidated 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 Statements of Earnings.
| 9. |
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 $24.3 million and $58.4 million of forward exchange contracts designated as cash flow hedges outstanding as of September 30, 2024 and December 31, 2023, respectively. For the three and nine months ended September 30,
2024, the amounts reclassified into net earnings in the Company’s Consolidated Statements of Earnings that offset the underlying transactions’ impact on earnings in the same period were not material. For the three months ended September 30, 2023,
a gain of $0.8 million was reclassified into net earnings in the Company’s Consolidated Statements of Earnings that offset the
underlying transactions’ impact on earnings in the same period. For the nine months ended September 30, 2023, a gain of $1.4 million
was reclassified into net earnings in the Company’s Consolidated Statements of Earnings that offset the underlying transactions’ impact on earnings in the same period. 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 of the Company.
Net investment hedges – The Company has designated certain foreign currency denominated long-term borrowings as partial hedges of the Company’s foreign currency net asset positions. As of September 30, 2024 and December 31, 2023,
the total value of the Company’s net investment hedges was $317.4 million and $313.3 million, respectively. These net investment hedges included Euro and British Pound denominated long-term debt. Changes in the fair value of this debt attributable to changes in the
spot foreign exchange rate are recorded in foreign currency translation in Other Comprehensive Income (OCI). For the three months ended September 30, 2024 and 2023, the impact of foreign exchange rates on these debt instruments increased debt by $12.6 million and decreased debt by $11.0 million, respectively, which has been recorded as foreign currency translation in OCI. For the nine months ended September 30, 2024 and 2023, the impact of foreign
exchange rates on these debt instruments increased debt by $4.1 million and decreased debt by $2.8 million, respectively, which has been recorded as foreign currency translation in OCI.
| 10. |
Income Taxes
|
The effective income tax rates for the three
months ended September 30, 2024 and 2023 were 23.7 % and 17.5 %, respectively. For the nine months ended September 30, 2024 and 2023, the effective income tax rates were 25.7 % and 22.7 %, respectively. The effective tax rates for the three and nine
months ended September 30, 2024 and 2023, were impacted by changes in estimates associated with the finalization of prior year foreign tax items and the mix of foreign earnings. The effective tax rates for both the three and nine months ended
September 30, 2024, were also impacted by the limited tax deductibility of costs related to the Portfolio Optimization Plan. The effective tax rates for both the three and nine months ended September 30, 2023, were also impacted by changes in
valuation allowances.
| 11. |
Accumulated Other Comprehensive Income
|
The following table summarizes the changes in OCI during the three
and nine month periods ended September 30, 2024 and 2023:
|
(In thousands)
|
Cash Flow
Hedges (1)
|
Pension
Items (1)
|
Foreign
Currency
Items
|
Total
|
||||||||||||
|
Balances at December 31, 2023
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||
|
Other comprehensive loss before
reclassifications
|
(
|
)
|
|
(
|
)
|
(
|
)
|
|||||||||
|
Amounts reclassified from OCI
|
|
(
|
)
|
|
(
|
)
|
||||||||||
|
Balances at September 30, 2024
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||
|
(In thousands)
|
Cash Flow
Hedges (1)
|
Pension
Items (1)
|
Foreign
Currency
Items
|
Total
|
||||||||||||
|
Balances at June 30, 2024
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||
|
Other comprehensive (loss) income
before reclassifications
|
(
|
)
|
|
|
|
|||||||||||
|
Amounts reclassified from OCI
|
|
(
|
)
|
|
|
|||||||||||
|
Balances at September 30, 2024
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||
|
(In thousands)
|
Cash Flow
Hedges (1)
|
Pension
Items (1)
|
Foreign
Currency
Items
|
Total
|
||||||||||||
|
Balances at December 31, 2022
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
|
Other comprehensive income before
reclassifications
|
|
|
|
|
||||||||||||
|
Amounts reclassified from OCI
|
(
|
)
|
(
|
)
|
|
(
|
)
|
|||||||||
|
Balances at September 30, 2023
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||
|
(In thousands)
|
Cash Flow
Hedges (1)
|
Pension
Items (1)
|
Foreign
Currency
Items
|
Total
|
||||||||||||
|
Balances at June 30, 2023
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||
|
Other comprehensive loss before
reclassifications
|
(
|
)
|
|
(
|
)
|
(
|
)
|
|||||||||
|
Amounts reclassified from OCI
|
(
|
)
|
(
|
)
|
|
(
|
)
|
|||||||||
|
Balances at September 30, 2023
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||
| (1) |
|
| 12. |
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.
| 13. |
Subsequent Events
|
On October 24, 2024 , the Company announced its quarterly dividend of $0.41 per share would be payable on December 2, 2024 .
On October 31, 2024, the Company entered into an amendment to its existing Loan Agreement with PNC Bank, N.A. See Note 5, Debt, for further details.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that reflect management’s current assumptions and estimates of future economic circumstances, industry conditions, Company performance, and financial results. Forward-looking statements include
statements in the future tense, statements referring to any period after September 30, 2024, and statements including the terms “expect,” “believe,” “anticipate,” and other similar terms that express expectations as to future events or conditions.
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for such forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, and other
factors that could cause actual events to differ materially from those expressed in the forward-looking statements. A variety of factors could cause the Company’s actual results and experience to differ materially from the anticipated results.
These factors and assumptions include, among others, the Company’s ability to manage general business, economic, and capital market conditions, including actions taken by customers in response to such 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, disruptions and delays in the Company’s supply
chain, and the conflicts between Russia and Ukraine and Israel and Hamas and other parties in the Middle East; the availability and cost of labor, logistics, and transportation; 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 Portfolio Optimization 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; the Company’s ability to enhance its innovation efforts and
drive cost efficiencies; currency exchange rate fluctuations; and the matters discussed under Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Except to the extent required by applicable law, 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 therein will not be realized.
OVERVIEW
Revenue
Revenue was $392.6 million and $363.8 million for the three months ended September 30, 2024 and 2023, respectively. Revenue was $1.2 billion and $1.1 billion for the nine months ended September 30, 2024 and 2023, respectively. The increase in
revenue for the three and nine months ended September 30, 2024 was primarily due to higher volumes and selling prices. For the three months ended September 30, 2024, the impact of foreign exchange rates decreased consolidated revenue by
approximately 1%. Foreign exchange rates had an immaterial impact on consolidated revenue for the nine months ended September 30, 2024.
Gross Margin
The Company’s gross margin was 33.2% and 31.2% for the three months ended September 30, 2024 and 2023, respectively. The Company’s gross margin was 32.8% and 32.6% for the nine months ended September 30, 2024 and 2023, respectively. The increase
in gross margin for both the three and nine months ended September 30, 2024 was primarily due to the higher volumes and selling prices, partially offset by higher raw material costs.
Selling and Administrative Expenses
Selling and administrative expense as a percent of revenue was 20.3% and 19.0% for the three months ended September 30, 2024 and 2023, respectively. Selling and administrative expense as a percent of revenue was 20.2% and 19.3% for the nine
months ended September 30, 2024 and 2023, respectively. For the three months ended September 30, 2024, selling and administrative expenses were increased by Portfolio Optimization Plan costs totaling $1.0 million, which increased selling and
administrative expenses as a percent of revenue by approximately 20 basis points. For the nine months ended September 30, 2024, selling and administrative expenses were increased by Portfolio Optimization Plan costs totaling $5.3 million, which
increased selling and administrative expenses as a percent of revenue by approximately 50 basis points. See Portfolio Optimization Plan below for further information. The remaining increase in selling and
administrative expense as a percent of revenue for the three and nine months ended September 30, 2024, was primarily due to higher performance-based executive compensation costs in 2024.
Operating Income
Operating income was $50.5 million and $44.5 million for the three months ended September 30, 2024 and 2023, respectively. Operating margins were 12.9% and 12.2% for the three months ended September 30, 2024 and 2023, respectively. The increase
in operating margin was primarily due to the higher volumes and selling prices, partially offset by higher raw material costs and higher performance-based executive compensation costs in 2024. Portfolio Optimization Plan costs also offset the
increase, decreasing operating margins by approximately 30 basis points for the three months ended September 30, 2024.
Operating income was $149.6 million and $147.0 million for the nine months ended September 30, 2024 and 2023, respectively. Operating margins were 12.7% and 13.3% for the nine months ended September 30, 2024 and 2023, respectively. Portfolio
Optimization Plan costs decreased operating margins by approximately 50 basis points for the nine months ended September 30, 2024.
Interest Expense
Interest expense was $7.7 million and $6.3 million for the three months ended September 30, 2024 and 2023, respectively, and $22.4 million and $18.6 million for the nine months ended September 30, 2024 and 2023, respectively. The increase in
interest expense for the three and nine months ended September 30, 2024, was primarily due to an increase in the average interest rate.
Income Taxes
The effective income tax rates for the three months ended September 30, 2024 and 2023 were 23.7% and 17.5%, respectively. The effective income tax rates for the nine months ended September 30, 2024 and 2023 were 25.7% and 22.7%, respectively.
The effective tax rates for the three and nine months ended September 30, 2024 and 2023 were impacted by changes in estimates associated with the finalization of prior year foreign tax items and the mix of foreign earnings. The effective tax rates
for both the three and nine months ended September 30, 2024, were also impacted by the limited tax deductibility of costs related to the Portfolio Optimization Plan. The effective tax rates for both the three and nine months ended September 30,
2023, were also impacted by changes in valuation allowances.
Portfolio Optimization Plan
During the fourth quarter of 2023, the Board of Directors of the Company approved a plan to undertake an effort to optimize certain production facilities and improve efficiencies within the Company (Portfolio
Optimization Plan). As part of the Portfolio Optimization Plan, in the Flavors & Extracts segment, the Company evaluated the closure of its manufacturing facility in Felinfach, Wales, United Kingdom, the closure of its sales office in Granada,
Spain, and the centralization and elimination of certain selling and administrative positions. In addition, in the Color segment, the Company evaluated the closure of a manufacturing facility in Delta, British Columbia, Canada, the closure of a
sales office in Argentina, and centralizing and eliminating certain production positions and selling and administrative positions. The Company reports all costs associated with the Portfolio Optimization Plan in the Corporate & Other segment.
The Company’s Felinfach site will continue to operate until all production activities have successfully transferred to other locations, and then will be closed. The Company has substantially completed
all other actions contemplated under the Portfolio Optimization Plan in accordance with local laws.
For the three months ended September 30, 2024, the Company incurred costs of $1.2 million related to the Portfolio Optimization Plan recorded in Corporate & Other, primarily for costs associated with employee separation and professional
services.
For the nine months ended September 30, 2024, the Company incurred costs of $5.8 million related to the Portfolio Optimization Plan recorded in Corporate & Other, primarily for costs associated with employee separation, impairment of fixed
assets, decommissioning, and professional services.
NON-GAAP FINANCIAL MEASURES
Within the following tables, the Company reports certain non-GAAP financial measures, including: (1) adjusted operating income, adjusted net earnings, and adjusted diluted earnings per share, which exclude restructuring and other costs,
including the Portfolio Optimization Plan costs, and (2) percentage changes in revenue, operating income, and diluted earnings per share on an adjusted local currency basis, which eliminate the effects that result from translating its international
operations into U.S. dollars and restructuring and other costs, including the Portfolio Optimization Plan costs.
The Company has included each of these non-GAAP measures in order to provide additional information regarding our underlying operating results and comparable year-over-year 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 report. 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
the Company believes 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.
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||||||||||
|
(In thousands, except per share amounts)
|
2024
|
2023
|
% Change
|
2024
|
2023
|
% Change
|
||||||||||||||||||
|
Operating Income (GAAP)
|
$
|
50,520
|
$
|
44,531
|
13.4
|
%
|
$
|
149,583
|
$
|
146,960
|
1.8
|
%
|
||||||||||||
|
Portfolio Optimization Plan costs – Cost of products sold
|
209
|
-
|
523
|
-
|
||||||||||||||||||||
|
Portfolio Optimization Plan costs – Selling and administrative expenses
|
1,002
|
-
|
5,252
|
-
|
||||||||||||||||||||
|
Adjusted operating income
|
$
|
51,731
|
$
|
44,531
|
16.2
|
%
|
$
|
155,358
|
$
|
146,960
|
5.7
|
%
|
||||||||||||
|
|
||||||||||||||||||||||||
|
Net Earnings (GAAP)
|
$
|
32,690
|
$
|
31,543
|
3.6
|
%
|
$
|
94,562
|
$
|
99,227
|
(4.7
|
%)
|
||||||||||||
|
Portfolio Optimization Plan costs, before tax
|
1,211
|
-
|
5,775
|
-
|
||||||||||||||||||||
|
Tax impact of Portfolio Optimization Plan costs(1)
|
(17
|
)
|
-
|
(586
|
)
|
-
|
||||||||||||||||||
|
Adjusted net earnings
|
$
|
33,884
|
$
|
31,543
|
7.4
|
%
|
$
|
99,751
|
$
|
99,227
|
0.5
|
%
|
||||||||||||
|
|
||||||||||||||||||||||||
|
Diluted earnings per share (GAAP)
|
$
|
0.77
|
$
|
0.75
|
2.7
|
%
|
$
|
2.23
|
$
|
2.35
|
(5.1
|
%)
|
||||||||||||
|
Portfolio Optimization Plan costs, net of tax
|
0.03
|
-
|
0.12
|
-
|
||||||||||||||||||||
|
Adjusted diluted earnings per share
|
$
|
0.80
|
$
|
0.75
|
6.7
|
%
|
$
|
2.35
|
$
|
2.35
|
0.0
|
%
|
||||||||||||
|
(1)
|
Tax impact adjustments were determined based on the nature of the underlying non-GAAP adjustments and their relevant jurisdictional tax rates.
|
Portfolio Optimization Plan costs are discussed under “Portfolio Optimization Plan” above and Note 2, Portfolio Optimization Plan, in the Notes to the Consolidated Financial Statements included in this report.
Note: Earnings per share calculations may not foot due to rounding differences.
The following table summarizes the percentage change for the results of the three and nine months ended September 30, 2024, compared to the results for the three and nine months ended September 30, 2023, in the respective financial measures.
|
Three Months Ended September 30, 2024
|
Nine Months Ended September 30, 2024
|
|||||||||||||||||||||||||||||||
|
Revenue
|
Total
|
Foreign Exchange Rates
|
Adjustments(1)
|
Adjusted Local Currency
|
Total
|
Foreign Exchange Rates
|
Adjustments(1)
|
Adjusted Local Currency
|
||||||||||||||||||||||||
|
Flavors & Extracts
|
6.4
|
%
|
(0.4
|
%)
|
N/A
|
6.8
|
%
|
8.5
|
%
|
0.2
|
%
|
N/A
|
8.3
|
%
|
||||||||||||||||||
|
Color
|
11.8
|
%
|
(1.2
|
%)
|
N/A
|
13.0
|
%
|
5.0
|
%
|
(0.2
|
%)
|
N/A
|
5.2
|
%
|
||||||||||||||||||
|
Asia Pacific
|
13.6
|
%
|
0.2
|
%
|
N/A
|
13.4
|
%
|
6.9
|
%
|
(2.5
|
%)
|
N/A
|
9.4
|
%
|
||||||||||||||||||
|
Total Revenue
|
7.9
|
%
|
(0.7
|
%)
|
N/A
|
8.6
|
%
|
6.7
|
%
|
(0.2
|
%)
|
N/A
|
6.9
|
%
|
||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Operating Income
|
||||||||||||||||||||||||||||||||
|
Flavors & Extracts
|
12.1
|
%
|
(0.7
|
%)
|
0.0
|
%
|
12.8
|
%
|
8.7
|
%
|
(0.1
|
%)
|
0.0
|
%
|
8.8
|
%
|
||||||||||||||||
|
Color
|
30.0
|
%
|
(0.9
|
%)
|
0.0
|
%
|
30.9
|
%
|
10.7
|
%
|
(0.1
|
%)
|
0.0
|
%
|
10.8
|
%
|
||||||||||||||||
|
Asia Pacific
|
15.0
|
%
|
(0.3
|
%)
|
0.0
|
%
|
15.3
|
%
|
4.2
|
%
|
(3.3
|
%)
|
0.0
|
%
|
7.5
|
%
|
||||||||||||||||
|
Corporate & Other
|
51.1
|
%
|
0.1
|
%
|
12.6
|
%
|
38.4
|
%
|
42.4
|
%
|
0.1
|
%
|
18.2
|
%
|
24.1
|
%
|
||||||||||||||||
|
Total Operating Income
|
13.4
|
%
|
(1.0
|
%)
|
(2.7
|
%)
|
17.1
|
%
|
1.8
|
%
|
(0.7
|
%)
|
(3.9
|
%)
|
6.4
|
%
|
||||||||||||||||
|
Diluted Earnings per Share
|
2.7
|
%
|
(1.3
|
%)
|
(4.0
|
%)
|
8.0
|
%
|
(5.1
|
%)
|
(0.8
|
%)
|
(5.2
|
%)
|
0.9
|
%
|
||||||||||||||||
| (1) |
Adjustments consist of Portfolio Optimization Plan costs.
|
Note: Refer to table above for a reconciliation of these non-GAAP measures.
SEGMENT INFORMATION
The Company determines its operating segments based on information utilized by its chief operating decision maker to allocate resources and assess performance. Segment performance is evaluated on operating income before share-based compensation,
restructuring and other costs, including the Portfolio Optimization Plan costs, and other costs (which are reported in Corporate & Other), interest expense, and income taxes.
The Company’s reportable segments consist of the Flavors & Extracts, Color, and Asia Pacific segments.
Flavors & Extracts
Flavors & Extracts segment revenue was $203.3 million and $191.0 million for the three months ended September 30, 2024 and 2023, respectively, an increase of approximately 6%. The increase was a result of higher revenue in Natural
Ingredients and Flavors, Extracts & Flavor Ingredients, primarily due to higher volumes and selling prices. Foreign exchange rates had an immaterial impact on segment revenue for the three months ended September 30, 2024.
Flavors & Extracts segment revenue was $605.6 million and $558.1 million for the nine months ended September 30, 2024 and 2023, respectively, an increase of approximately 9%. The increase was a result of higher revenue in Natural Ingredients
and Flavors, Extracts & Flavor Ingredients. The increase in Natural Ingredients was a result of higher volumes and selling prices. The increase in Flavors, Extracts & Flavor Ingredients was primarily a result of higher selling prices.
Foreign exchange rates had an immaterial impact on segment revenue for the nine months ended September 30, 2024.
Flavors & Extracts segment operating income was $25.9 million and $23.1 million for the three months ended September 30, 2024 and 2023, respectively, an increase of approximately 12%. The higher segment operating income was primarily a
result of higher operating income in Flavors, Extracts & Flavor Ingredients, partially offset by lower operating income in Natural Ingredients. The higher segment operating income in Flavors, Extracts, & Flavor Ingredients was primarily
due to lower raw material costs, higher selling prices, lower manufacturing and other costs, higher volumes, and savings generated from the Portfolio Optimization Plan. The lower segment operating income in Natural Ingredients was primarily a
result of higher raw material costs, partially offset by higher selling prices and volumes. Foreign exchange rates decreased segment operating income by approximately 1%. Segment operating income as a percent of revenue was 12.7% in the current
quarter compared to 12.1% in the prior year’s comparable quarter.
Flavors & Extracts segment operating income was $75.7 million and $69.7 million for the nine months ended September 30, 2024 and 2023, respectively, an increase of approximately 9%. The increase was a result of higher segment operating
income in Flavors, Extracts & Flavor Ingredients, partially offset by lower segment operating income in Natural Ingredients. The higher segment operating income in Flavors, Extracts & Flavor Ingredients was primarily a result of lower raw
material costs, higher selling prices, and savings generated from the Portfolio Optimization Plan. The lower segment operating income in Natural Ingredients was primarily a result of higher raw material costs, partially offset by higher volumes and
selling prices. Foreign exchange rates had an immaterial impact on segment operating income for the nine months ended September 30, 2024. Segment operating income as a percent of revenue was 12.5% in both the current nine month period and the prior
year’s comparable nine month period.
Color
Color segment revenue was $162.1 million and $144.9 million for the three months ended September 30, 2024 and 2023, respectively, an increase of approximately 12%. The increase was a result of higher revenue in Food & Pharmaceutical Colors
and Personal Care. The higher revenue in Food & Pharmaceutical Colors was due to higher volumes and selling prices, partially offset by the unfavorable impact of foreign exchange rates that decreased segment revenue by approximately 1%. The
higher revenue in Personal Care was primarily due to higher volumes.
Color segment revenue was $489.8 million and $466.6 million for the nine months ended September 30, 2024 and 2023, respectively, an increase of approximately 5%. The increase was a result of higher revenue in Food & Pharmaceutical Colors and
Personal Care, primarily due to higher volumes and selling prices. Foreign exchange rates had an immaterial impact on segment revenue for the nine months ended September 30, 2024.
Segment operating income for the Color segment was $29.8 million and $22.9 million for the three months ended September 30, 2024 and 2023, respectively, an increase of approximately 30%. The increase in segment operating income was a result of
higher operating income in Personal Care and Food & Pharmaceutical Colors. The higher operating income in Personal Care was primarily due to higher volumes and lower raw material costs. The higher operating income in Food & Pharmaceutical
Colors was primarily due to higher volumes, selling prices, and savings generated from the Portfolio Optimization Plan, partially offset by higher manufacturing and other costs. Foreign exchange rates decreased segment operating income by
approximately 1%. Segment operating income as a percent of revenue was 18.4% in the current quarter and 15.8% in the prior year’s comparable quarter.
Segment operating income for the Color segment was $93.0 million and $84.0 million for the nine months ended September 30, 2024 and 2023, respectively, an increase of approximately 11%. The increase in segment operating income was primarily a
result of higher operating income in Personal Care and savings generated from the Portfolio Optimization Plan. The higher operating income in Personal Care was primarily due to higher volumes and selling prices and lower manufacturing and other
costs. Foreign exchange rates had an immaterial impact on segment operating income for the nine months ended September 30, 2024. Segment operating income as a percent of revenue was 19.0% in the current nine month period and 18.0% in the prior
year’s comparable period.
Asia Pacific
Segment revenue for the Asia Pacific segment was $41.8 million and $36.8 million for the three months ended September 30, 2024 and 2023, respectively, an increase of approximately 14%. The increase was primarily a result of higher volumes.
Foreign exchange rates had an immaterial impact on segment revenue for the three months ended September 30, 2024.
Segment revenue for the Asia Pacific segment was $120.7 million and $112.9 million for the nine months ended September 30, 2024 and 2023, respectively, an increase of approximately 7%. The increase was a result of higher volumes and selling
prices, partially offset by the unfavorable impact of foreign exchange rates that decreased segment revenue by approximately 3%.
Segment operating income for the Asia Pacific segment was $9.3 million and $8.1 million for the three months ended September 30, 2024 and 2023, respectively, an increase of approximately 15%. The increase was primarily a result of the higher
volumes. Foreign exchange rates had an immaterial impact on segment operating income for the three months ended September 30, 2024. Segment operating income as a percent of revenue was 22.3% in the current quarter and 22.0% in the prior year’s
comparable quarter.
Segment operating income for the Asia Pacific segment was $26.0 million and $24.9 million for the nine months ended September 30, 2024 and 2023, respectively, an increase of approximately 4%. The increase was primarily a result of the higher
volumes and selling prices, partially offset by higher raw material and manufacturing and other costs and the unfavorable impact of foreign exchange rates that decreased segment operating income by approximately 3%. Segment operating income as a
percent of revenue was 21.5% in the current nine month period and 22.1% in the prior year’s comparable period.
Corporate & Other
The Corporate & Other operating expense was $14.5 million and $9.6 million for the three months ended September 30, 2024 and 2023, respectively. The higher operating expense was primarily a result of Portfolio Optimization Plan costs
totaling $1.2 million negatively impacting the three months ended September 30, 2024, and higher performance-based executive compensation costs. See the Portfolio Optimization Plan section above for
further information.
The Corporate & Other operating expense was $45.1 million and $31.7 million for the nine months ended September 30, 2024 and 2023, respectively. The higher operating expense was primarily a result of Portfolio Optimization Plan costs
totaling $5.8 million negatively impacting the nine months ended September 30, 2024, and higher performance-based executive compensation costs. See the Portfolio Optimization Plan section above for further
information.
LIQUIDITY AND FINANCIAL CONDITION
Financial Condition
The Company’s financial position remains strong. The Company is in compliance with its loan covenants calculated in accordance with applicable agreements as of September 30, 2024. The Company expects its cash flow from operations and its
existing debt capacity can be used to meet anticipated future cash requirements for operations, capital expenditures, and dividend payments, as well as potential acquisitions and stock repurchases. The Company’s contractual obligations consist
primarily of operational commitments, which we expect to continue to be able to satisfy through cash generated from operations and debt. The Company has various series of notes outstanding that mature from 2025 through 2029. The Company believes
that it has the ability to refinance or repay these obligations through a combination of cash flow from operations, issuance of additional notes, and sufficient borrowing capacity under the Company’s revolving credit facility, which matures in
2026.
As a result of our ability to manage the impact of inflation through pricing and other actions, the impact of inflation was not material to the Company’s financial position and its results of operations for the three or nine months ended
September 30, 2024. The Company has experienced increased costs for certain inputs, such as raw materials, shipping and logistics, and labor-related costs. We continue to expect to manage these impacts in the near term, but persistent, accelerated,
or expanded inflationary conditions could exacerbate these challenges and impact our profitability.
Cash Flows from Operating Activities
Net cash provided by operating activities was $135.8 million and $106.8 million for the nine months ended September 30, 2024 and 2023, respectively. The increase in net cash from operating activities was primarily due to a decrease in cash used
for performance-based compensation payments (which are determined based on prior year performance) made during 2024 compared to 2023 and an increase in cash provided by inventory during 2024 compared to 2023, partially offset by a decrease in cash
provided by accounts receivable.
Cash Flows from Investing Activities
Net cash used in investing activities was $37.2 million and $65.6 million during the nine months ended September 30, 2024 and 2023, respectively. Capital expenditures were $36.1 million and $67.7 million during the nine months ended September
30, 2024 and 2023, respectively.
Cash Flows from Financing Activities
Net cash used in financing activities was $75.1 million and $36.4 million for the nine months ended September 30, 2024 and 2023, respectively. Net debt decreased by $19.8 million and increased by $23.5 million for the nine months ended September
30, 2024 and 2023, respectively. For purposes of the cash flow statement, net changes in debt exclude the impact of foreign exchange rates. Dividends of $52.0 million and $51.9 million were paid during the nine months ended September 30, 2024 and
2023, respectively. Total dividends of $1.23 per share were paid for both the nine months ended September 30, 2024 and 2023.
CRITICAL ACCOUNTING POLICIES
There have been no material changes in the Company’s critical accounting policies during the quarter ended September 30, 2024. For additional information about the Company’s critical accounting policies, refer to “Critical Accounting Policies”
under Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
| ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
There have been no material changes in the Company’s exposure to market risk during the quarter ended September 30, 2024. For additional information about market risk, refer to Part II, Item 7A of the Company’s Annual Report on Form 10-K for the
year ended December 31, 2023.
| ITEM 4. |
CONTROLS AND PROCEDURES
|
Evaluation of Disclosure Controls and Procedures: The Company carried out an evaluation, under the supervision and with the participation of management, including the Company’s Chairman, President, and Chief Executive Officer and its Vice
President and Chief Financial Officer, of the effectiveness, as of the end of the period covered by this report, of the design and operation of the disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act. Based upon
that evaluation, the Company’s Chairman, President, and Chief Executive Officer and its Vice President and Chief Financial Officer have concluded that the disclosure controls and procedures were effective as of the end of the period covered by this
report.
Changes in Internal Control over Financial Reporting: There have been no changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the quarter ended September 30, 2024,
that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
| ITEM 1. |
LEGAL PROCEEDINGS
|
See Part I, Item 1, Note 12, Commitments and Contingencies, of this report for information regarding legal proceedings in which the Company is involved.
There were no material changes to the risk factors previously disclosed in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
| ITEM 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
On October 19, 2017, the Board of Directors authorized the repurchase of up to three million shares (2017 Authorization). As of September 30, 2024, 1,267,019 shares had been repurchased under the 2017 Authorization. There is no expiration date
for the 2017 Authorization. The 2017 Authorization may be modified, suspended, or discontinued by the Board of Directors at any time. As of September 30, 2024, the maximum number of shares that may be purchased under publicly announced plans is
1,732,981. No shares were purchased by the Company during the three or nine months ended September 30, 2024.
| ITEM 5. |
OTHER INFORMATION
|
Rule 10b5-1 Trading Arrangements
During the three months ended September 30, 2024, no director or officer of the Company adopted terminated
Amendment to Term Loan
On October 31, 2024, the Company entered into Amendment No. 1 (the Amendment) to that certain Loan Agreement, by and between the Company and PNC Bank, National Association. The Amendment amends the Loan Agreement to, among other things, (i)
extend the maturity date of the Loan Agreement to November 7, 2025, and (ii) set the margin on the borrowings, which was previously determined on the basis of the Company’s leverage ratio, to a fixed rate. The borrowings under the Loan Agreement
bear interest on the unpaid principal amount at the Eurocurrency Rate (defined as reserve-adjusted EURIBOR) plus such margin.
The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the Amendment, which is filed with this Quarterly Report on Form 10-Q as Exhibit 10.2 and is incorporated herein by reference.
| ITEM 6. |
EXHIBITS
|
The exhibits listed in the following Exhibit Index are filed as part of this Quarterly Report on Form 10-Q.
SENSIENT TECHNOLOGIES CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2024
|
Exhibit
|
Description
|
Incorporated by Reference From
|
Filed Herewith
|
||
|
Amendment No. 11 to Receivables Purchase Agreement, dated as of August 30, 2024, among Sensient Receivables LLC, Sensient Technologies Corporation, and Wells Fargo Bank, National Association.
|
Exhibit 10.1 to Current Report on Form 8-K dated September 4, 2024 (Commission File No. 1-7626)
|
||||
|
Amendment No. 1 to Loan Agreement, dated as of October 31, 2024, between Sensient Technologies Corporation and PNC Bank, National Association.
|
X
|
||||
|
Certifications of the Company’s Chairman, President & Chief Executive Officer and 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 Vice President & Chief Financial Officer pursuant to 18 United States Code § 1350
|
X
|
||||
|
101.INS
|
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
|
X
|
|||
|
101.SCH
|
Inline XBRL Taxonomy Extension Schema Document
|
X
|
|||
|
101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
X
|
|||
|
101.DEF
|
Inline XBRL Taxonomy Extension Definition Linkbase Document
|
X
|
|
101.LAB
|
Inline XBRL Taxonomy Extension Label Linkbase Document
|
X
|
|||
|
101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
X
|
|||
|
104
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
|
X
|
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 thereunto duly authorized.
|
SENSIENT TECHNOLOGIES CORPORATION
|
||||
|
Date:
|
November 5, 2024
|
By:
|
/s/ John J. Manning
|
|
|
John J. Manning, Senior Vice President, General Counsel & Secretary
|
||||
|
Date:
|
November 5, 2024
|
By:
|
/s/ Tobin Tornehl
|
|
|
Tobin Tornehl, Vice President & Chief Financial Officer
|
||||
22
Exhibit 10.2
Execution Version
FIRST AMENDMENT TO LOAN AGREEMENT
This FIRST AMENDMENT TO LOAN AGREEMENT (this “Amendment”) is dated as
of October 31, 2024 and is by and among SENSIENT TECHNOLOGIES CORPORATION, a Wisconsin corporation (the “Company” or the “Borrower”), the financial institutions signatory hereto as lenders, and PNC BANK, NATIONAL ASSOCIATION, a national banking association, as administrative agent (in such capacity, the “Administrative Agent”).
Unless otherwise indicated, all capitalized terms used herein and not otherwise defined shall have the respective meanings provided such terms in
the Loan Agreement referred to below.
W I T N E S S E T H :
WHEREAS, the Company, the financial institutions party thereto (the “Lenders”)
and the Administrative Agent are parties to a certain Loan Agreement dated as of November 7, 2022 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan
Agreement”);
WHEREAS, each of the Lenders and the Administrative Agent entered into Assignment and Assumption Agreements whereby the Administrative Agent
irrevocably purchased and assumed all of the rights and obligations under the Loan Agreement from each of the other Lenders; and
WHEREAS, the Company, the Administrative Agent and the sole Lender wish to amend the Loan Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Amendments to Loan Agreement. Upon the First Amendment Effective Date (as defined below), the Loan Agreement is hereby amended as follows:
(a) The definition of “Applicable
Margin” in Section 1.01 of the Loan Agreement is hereby deleted in its entirety.
(b) The definition of “Applicable
Period” in Section 1.01 of the Loan Agreement is hereby deleted in its entirety.
(c) The definition of “Base Rate
Margin” in Section 1.01 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:
“Base Rate Margin” means 0.125%.
(d) The definition of “Calculation
Date” in Section 1.01 of the Loan Agreement is hereby deleted in its entirety.
(e) The definition of “Daily Simple
SOFR” in Section 1.01 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:
“Daily Simple SOFR” means, for any day
(a “SOFR Rate Day”), the interest rate per annum determined by the Administrative Agent (rounded upwards, at the Administrative Agent’s discretion, to the nearest 1/100th
of 1%) equal to SOFR for the day (the “SOFR Determination Date”) that is 2 Business Days prior to (i) such SOFR Rate Day if such SOFR Rate Day is a Business Day or (ii)
the Business Day immediately preceding such SOFR Rate Day if such SOFR Rate Day is not a Business Day, in each case, as such SOFR is published by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing
rate) on the website of the Federal Reserve Bank of New York, at http://www.newyorkfed.org, or any successor source identified by the Federal Reserve Bank of New York or
its successor administrator for the secured overnight financing rate from time to time. If Daily Simple SOFR as determined above would be less than the Floor, then Daily Simple SOFR shall be deemed to be the Floor. If SOFR for any SOFR
Determination Date has not been published or replaced with a Benchmark Replacement by 5:00 p.m. (Pittsburgh, Pennsylvania time) on the second Business Day immediately following such SOFR Determination Date, then SOFR for such SOFR Determination
Date will be SOFR for the first Business Day preceding such SOFR Determination Date for which SOFR was published in accordance with the definition of “SOFR”; provided
that SOFR determined pursuant to this sentence shall be used for purposes of calculating Daily Simple SOFR for no more than 3 consecutive SOFR Rate Days. If and when Daily Simple SOFR as determined above changes, any applicable rate of interest
based on Daily Simple SOFR will change automatically without notice to the Borrower, effective on the date of any such change.
(f) The
definition of “EURIBOR Rate” in Section 1.01 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:
“EURIBOR Rate” means the rate per annum equal to the Euro Interbank
Offered Rate as administered by the European Money Markets Institute (or any other person that takes over the administration of such rate) for a period equal in length to the applicable interest period (one (1), three (3) or six (6) months), as
displayed on the applicable Bloomberg page (or on any successor or substitute page or service providing such quotations as determined by the Administrative Agent from time to time) at approximately 11:00 a.m. (Brussels time) two (2) business days
prior to the commencement of such interest period; provided, that if by such time the EURIBOR Rate in respect of such day has not been so published, or if such day is not a business day, then the EURIBOR Rate for such day will be the EURIBOR Rate
as published in respect of the first preceding business day for which such EURIBOR Rate was published thereon; provided further that any EURIBOR Rate so determined based on the first preceding business day shall be utilized for purposes of
calculation of the EURIBOR Rate for no more than three (3) consecutive business days (any such day, collectively, the “EURIBOR Lookback Day”).
(g) The
definition of “Eurocurrency Rate Margin” in Section 1.01 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:
“Eurocurrency Rate Margin” means 1.125%.
(h) The definition of “Maturity
Date” in Section 1.01 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:
“Maturity Date” means November 7, 2025.
2
(i) The definition of “Percentage”
in Section 1.01 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:
“Percentage” means, with respect to each Lender, the ratio of (a) that
Lender’s Term Loan Commitment, to (b) the Aggregate Term Loan Commitment Amount. For purposes of this definition only, following the advance of the Term Loan, each
Lender’s Percentage shall be deemed to be the portion (on a percentage basis) of the Term Loan held by such Lender.
(j) Article I of the Loan Agreement
is hereby amended by adding a new Section following Section 1.6 to read in its entirety as follows:
Section 2.13(l) of this Agreement provides a mechanism for determining
an alternative rate of interest in the event that any Benchmark is no longer available or in certain other circumstances. The Administrative Agent does not warrant or accept any responsibility for, and shall not have any liability with respect to,
(a) the continuation of, administration of, submission of or calculation of, or any other matter related to, any Benchmark, or any component definition thereof or rates referred to in the definition thereof, or any alternative or successor rate
thereto, or replacement rate therefor (including any Benchmark Replacement), including whether the composition or characteristics of any such alternative, successor or replacement rate (including any Benchmark Replacement) will be similar to, or
produce the same value or economic equivalence of, or have the same volume or liquidity as, such Benchmark prior to its discontinuance or unavailability, or (b) the effect, implementation or composition of any Conforming Changes. The Administrative
Agent and its affiliates or other related entities may engage in transactions that affect the calculation of any Benchmark, any alternative, successor or replacement rate (including any Benchmark Replacement) or any relevant adjustments thereto, in
each case, in a manner adverse to the Borrower or any other person or entity. The Administrative Agent may select information sources or services in its reasonable discretion to ascertain any Benchmark, any component definition thereof or rates
referred to in the definition thereof, in each case pursuant to the terms of this Agreement, and shall have no liability to the Borrower, any Lender or any other person or entity for damages of any kind, including direct or indirect, special,
punitive, incidental or consequential damages, costs, losses or expenses (whether in tort, contract or otherwise and whether at law or in equity), for any error or calculation of any such rate (or component thereof) provided by any such information
source or service.
(k) Section 2.8(b) of the Loan
Agreement is hereby amended by deleting the references to capitalized term “Alternative Currency” appearing therein and replacing it with the uncapitalized term “alternative currency”.
(l) Section 5.3 of the Loan
Agreement is hereby amended and restated in its entirety to read as follows:
3
Section 5.3 Compliance with Laws.
The Company will, and will cause each Subsidiary to, comply with the requirements of applicable laws and regulations, the non-compliance with which
would effect a Material Adverse Change. In addition, and without limiting the foregoing sentence, the Company will (a) ensure, and cause each Subsidiary to ensure, that no Person who owns a controlling interest in or otherwise controls the Company
or any Subsidiary is or shall be a Sanctioned Person, (b) not use or permit the use of the proceeds of the Term Loan in a manner inconsistent with the second sentence of Section
4.20 and not repay the Term Loans with funds derived from any unlawful activity and (c) comply, and cause each Subsidiary to comply, with all Anti-Terrorism Laws in all material respects.
2. Representations and Warranties. The Company hereby represents and warrants that:
(a) The execution, delivery and
performance by the Company of this Amendment have been duly authorized by all necessary corporate or other organizational action and do not and will not (a) require any consent or approval of the equityholders of the Company, or any
authorization, consent, approval, order, filing, registration or qualification by or with any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, other than those consents described in Schedule 4.2
of the Loan Agreement, each of which has been obtained and is in full force and effect, (b) violate any provision of any law, rule or regulation (including Regulation X of the Board of Governors of the Federal Reserve System and Section 7 of the
Exchange Act or any regulation promulgated thereunder) or of any order, writ, injunction or decree presently in effect having applicability to the Company or of the Organizational Documents of the Borrower, (c) result in a breach of or constitute
a default under any indenture or loan or credit agreement or any other material agreement, lease or instrument to which the Company or any Subsidiary is a party or by which it or its properties may be bound or affected, or (d) result in, or
require, the creation or imposition of any Lien or other charge or encumbrance of any nature upon or with respect to any of the properties now owned or hereafter acquired by the Company or any Subsidiary.
(b) This Amendment has been duly
executed and delivered by the duly authorized officers of the Company and constitutes the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with its respective terms, except to the extent that such
enforcement may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally or by general equitable principles.
(c) Both immediately before and
immediately after giving effect to this Amendment, the representations and warranties contained in Article IV of the Loan Agreement are correct in all material respects (or correct in all respects, if any such representation and warranty is
qualified by materiality or reference to Material Adverse Change), except to the extent that such representations and warranties relate solely to an earlier date, in which case such representations and warranties are correct in all material
respects (or correct in all respects, if any such representation and warranty is qualified by materiality or reference to Material Adverse Change) as of such earlier date.
(d) Immediately before and
immediately after giving effect to this Amendment, no event has occurred and is continuing, or would result from this Amendment, which constitutes a Default or an Event of Default.
4
3. Effectiveness. This Amendment shall become effective, and the “First Amendment Effective Date” shall be deemed to have occurred, upon the occurrence or satisfaction of each of the events and conditions below:
(a) the execution and delivery
hereof by the Company, the Administrative Agent and the Required Lenders;
(b) the Administrative Agent shall
have received, in form and substance satisfactory to it:
(i) a certificate of the secretary
or an assistant secretary of the Company (i) certifying that the execution, delivery and performance of the Amendment and other documents contemplated hereunder have been duly approved by all necessary action of the Governing Board of the Company
(or the Finance Committee thereof, if such committee is authorized to act on behalf of the Governing Board of the Company), and attaching true and correct copies of the applicable resolutions granting such approval, (ii) certifying that attached
to such certificate are true and correct copies of the Organizational Documents of the Company, together with such copies (or a certification that no modifications have been made to such Organizational Documents since the date last delivered to
the Administrative Agent), and (iii) certifying the names of the officers of the Company who are authorized to sign the Amendment and other documents contemplated hereunder, together with the true signatures of such officers (or a certification
that there have been no changes to the officers of the Company since the Closing Date);
(ii) a certificate of good standing
of the Company from the Secretary of State of its jurisdiction of incorporation, dated not more than thirty days before the First Amendment Effective Date;
(iii) such other documents
(including “know your customer” information) as the Administrative Agent or the Required Lenders may reasonably deem necessary or advisable in connection with the Term Loan; and
(iv) a Beneficial Ownership
Certification in relation to the Company (or a certification that the Company qualifies for an express exclusion from the “legal entity customer” definition under the Beneficial Ownership Regulation) to any Lender requesting the same; and
(c) The Company shall have paid all
fees and expenses of the Administrative Agent required to be paid as of the First Amendment Effective Date under this Amendment, including fees of counsel for the Administrative Agent for which a statement has been received.
4. References, Effect, Etc. Upon the effectiveness of this Amendment, each reference to the Loan Agreement in the Loan Agreement or any other Loan Document shall mean and be a reference to the Loan Agreement as modified
by this Amendment. For the avoidance of doubt, this Amendment constitutes a Loan Document.
5. Estoppel, Acknowledgement and Reaffirmation. As of the date hereof, the aggregate outstanding principal amount of the Term Loan is €75,000,000 and PNC Bank, National Association is the sole Lender with respect to the
Term Loan and holds the entire outstanding principal amount thereof. The Borrower hereby acknowledges and reaffirms its obligations under the Loan Documents and agrees that this Amendment shall in no manner impair or otherwise adversely affect
such obligations, except as explicitly set forth herein.
5
6. No Waiver. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders, nor
constitute a waiver of or consent to any provision of the Loan Agreement or any other Loan Documents executed and/or delivered in connection therewith.
7. Counterparts. This Amendment may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall
constitute a single contract. Delivery of an executed counterpart of a signature page of this Amendment by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this
Amendment.
8. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
9. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.
* * *
6
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized signatories to execute and deliver this Amendment as of the date first
above written.
|
SENSIENT TECHNOLOGIES CORPORATION,
|
|||
|
as Company
|
|||
|
By:
|
/s/ Amy M. Agallar
|
||
|
Name:
|
Amy M. Agallar
|
||
|
Title:
|
Vice President and Treasurer
|
||
SENSIENT TECHNOLOGIES CORPORATION
FIRST AMENDMENT TO LOAN AGREEMENT
|
PNC BANK, NATIONAL ASSOCIATION,
|
|||
|
as Administrative Agent and the sole Lender
|
|||
|
By:
|
/s/ Joseph Plantier
|
||
|
Name:
|
Joseph Plantier
|
||
|
Title:
|
Assistant Vice President
|
||
SENSIENT TECHNOLOGIES CORPORATION
FIRST AMENDMENT TO LOAN AGREEMENT
EXHIBIT 31
CERTIFICATION
Pursuant to Rule 13a-14(a) of the Exchange Act
I, Paul Manning, certify that:
| 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:
|
November 5, 2024
|
|
|
/s/ Paul Manning
|
||
|
Paul Manning, Chairman, President & Chief Executive Officer
|
||
EXHIBIT 31
CERTIFICATION
Pursuant to Rule 13a-14(a) of the Exchange Act
I, Tobin Tornehl, certify that:
| 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:
|
November 5, 2024
|
|
|
/s/ Tobin Tornehl
|
||
|
Tobin Tornehl, Vice President & Chief Financial Officer
|
||
2
EXHIBIT 32
CERTIFICATION
Pursuant to 18 United States Code § 1350
The undersigned hereby certifies that the Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2024, of Sensient Technologies Corporation (the “Company”) filed with the Securities and Exchange Commission on or about the date
hereof fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
|
/s/ Paul Manning
|
|||
|
Name:
|
Paul Manning
|
||
|
Title:
|
Chairman, President & Chief Executive Officer
|
||
|
Date:
|
November 5, 2024
|
||
A signed original of this written statement required by Section 906 has been provided to Sensient Technologies Corporation and will be retained by Sensient Technologies Corporation and furnished to the Securities and Exchange Commission or its
staff upon request.
EXHIBIT 32
CERTIFICATION
Pursuant to 18 United States Code § 1350
The undersigned hereby certifies that the Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2024, of Sensient Technologies Corporation (the “Company”) filed with the Securities and Exchange Commission on or about the date
hereof fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
|
/s/ Tobin Tornehl
|
|||
|
Name:
|
Tobin Tornehl
|
||
|
Title:
|
Vice President & Chief Financial Officer
|
||
|
Date:
|
November 5, 2024
|
||
A signed original of this written statement required by Section 906 has been provided to Sensient Technologies Corporation and will be retained by Sensient Technologies Corporation and furnished to the Securities and Exchange Commission or its
staff upon request.
2