Sensient Technologies Corporation Reports Results for the Quarter Ended March 31, 2018
MILWAUKEE–(BUSINESS WIRE)–Sensient Technologies Corporation (NYSE: SXT) reported earnings per
share of 89 cents in the first quarter of 2018 compared to 30 cents in
the first quarter of 2017. Revenue was $356.5 million in this yearÔÇÖs
first quarter compared to $341.4 million in last yearÔÇÖs first quarter.
Operating income was $55.7 million in the first quarter of 2018 and
$24.0 million in last yearÔÇÖs first quarter.
As previously disclosed, the Company completed its restructuring
activities in 2017 and did not incur any restructuring or other costs in
the first quarter of 2018. Therefore, no adjustments were made to the
GAAP results in the first quarter of 2018. Any reference to ÔÇ£adjusted
resultsÔÇØ refers to the results in the comparable period in 2017. The
2017 reported results include restructuring and other costs, which are
described in more detail under ÔÇ£Reconciliation of Non-GAAP AmountsÔÇØ
below. Restructuring and other costs reduced 2017 first quarter
operating income by $31.3 million ($23.4 million after-tax or 53 cents
per share).
The adjusted results, discussed below, eliminate the impact of the
restructuring and other costs in last yearÔÇÖs results, and enhance the
overall understanding of the CompanyÔÇÖs performance when viewed together
with our GAAP results. Refer to ÔÇ£Reconciliation of Non-GAAP AmountsÔÇØ
below. SensientÔÇÖs earnings per share increased approximately 9% to 89
cents in this yearÔÇÖs first quarter, compared to adjusted earnings per
share of 82 cents in the comparable period last year. First quarter
operating income was $55.7 million, compared to adjusted operating
income of $55.3 million reported in last yearÔÇÖs first quarter. Foreign
currency translation increased revenue, operating income, and earnings
per share by approximately 5% compared to the adjusted results in 2017.
The Company completed the acquisition of the natural colors business of GlobeNatural,
a natural food and ingredient company based in Lima, Peru, in the
first quarter. The natural colors of this business are used in a wide
range of food and beverage applications and give Sensient expanded
natural colors production capacity.
BUSINESS REVIEW
The Color Group reported revenue of $147.2 million in the quarter and
$134.1 million in last yearÔÇÖs first quarter, an increase of
approximately 10%. Segment operating income increased approximately 11%
to $33.7 million in the quarter from $30.2 million in last yearÔÇÖs first
quarter. Foreign exchange rates increased both revenue and operating
income by approximately 6% in the quarter. The GroupÔÇÖs strong
performance was driven primarily by outstanding new wins in cosmetics
and natural colors.
The Flavors & Fragrances Group reported revenue of $188.3 million in the
quarter and $186.9 million in last yearÔÇÖs first quarter. Segment
operating income decreased to $25.3 million in the quarter from $28.8
million in last yearÔÇÖs first quarter. Foreign exchange rates increased
revenue by approximately 4% and operating profit by approximately 1% in
the quarter. The GroupÔÇÖs lower profit was a result of higher onion
costs, lower onion pricing, and higher fragrance raw material costs. The
Company now expects the onion headwind to continue through the end of
the third quarter. The Group was also impacted by higher costs and lower
volumes at the production site affected by last yearÔÇÖs plant
consolidation. The lower volumes are also due to unfavorable trends in
the North American dairy industry. The European Flavor businesses,
Fragrances, and BioNutrients delivered strong results in the quarter.
The Asia Pacific Group reported revenue of $30.3 million in the current
quarter compared to $29.6 million in last yearÔÇÖs first quarter. Segment
operating income decreased to $4.9 million in the quarter from $5.2
million in the comparable period last year. Foreign exchange rates
increased revenue by approximately 4% and operating income by
approximately 6% in the quarter.
Corporate & Other reported operating costs of $8.2 million in the
quarter and $40.1 million in last yearÔÇÖs first quarter. Last yearÔÇÖs
first quarter includes $31.3 million of restructuring and other costs.
2018 OUTLOOK
ÔÇ£The Color Group had another strong quarter, led by cosmetics and food
and beverage colors,ÔÇØ said Paul Manning, Chairman, President and CEO of
Sensient Technologies Corporation. ÔÇ£We are off to a strong start in the
second quarter in the Color Group. Results in our Asia Pacific Group are
also off to a strong start in the second quarter. Within Flavors &
Fragrances, many of the businesses continue to perform well, and the
completion of the restructuring program has created a strong foundation
for growth. While we now expect the onion headwind to continue through
the end of the third quarter, this is a short-term issue that will
resolve itself this year. I remain very optimistic about the CompanyÔÇÖs
future.ÔÇØ
As a result of higher onion costs and continued pricing pressure in the
onion market the Company is updating its guidance. Sensient now expects
diluted earnings per share for 2018 to be between $3.70 and $3.80. The
CompanyÔÇÖs previous guidance had been between $3.70 and $3.90.
CONFERENCE CALL
The Company will host a conference call to discuss its 2018 first
quarter financial results at 10:00 a.m. CDT on Wednesday, April 25,
2018. To participate in the conference call, please contact InterCall
Teleconferencing at (888) 818-9025 and refer to conference
identification number 1249634. A webcast of the conference call will be
available on the Investor Information section of the CompanyÔÇÖs web site
at www.sensient.com.
A replay will be available beginning at 1:00 p.m. CDT on April 25, 2018,
through midnight on May 2, 2018, by calling (404) 537-3406 and referring
to conference identification number 1249634. A transcript of the call
will be posted on the CompanyÔÇÖs web site at www.sensient.com
after the call concludes.
This release contains statements that may constitute ÔÇ£forward-looking
statementsÔÇØ within the meaning of Federal securities laws. Such
forward-looking statements are not guarantees of future performance and
involve known and unknown risks, uncertainties and other factors
concerning the CompanyÔÇÖs operations and business environment. Important
factors that could cause actual results to differ materially from those
suggested by these forward-looking statements and that could adversely
affect the CompanyÔÇÖs future financial performance include the following:
the pace and nature of new product introductions by the Company and the
CompanyÔÇÖs customers; the Company's ability to successfully implement its
strategy to create sustainable, long-term shareholder value; the
CompanyÔÇÖs ability to successfully implement its growth strategies; the
outcome of the CompanyÔÇÖs various productivity-improvement and
cost-reduction efforts; the effectiveness of the CompanyÔÇÖs past
restructuring activities; changes in costs or availability of raw
materials, including energy; industry and economic factors related to
the CompanyÔÇÖs domestic and international business; growth in markets for
products in which the Company competes; industry and customer acceptance
of price increases; actions by competitors, including increased
intensity of competition; the loss of any customers in certain product
lines in which our sales are made to a relatively small number of
customers; product liability claims or product recalls; the costs of
compliance, or failure to comply, with laws and regulations applicable
to our industries and markets; changing consumer preferences and
changing technologies; currency exchange rate fluctuations; estimates
related to the Tax Cuts and Jobs Act and its effects on our results; and
failure to complete and integrate future acquisitions or dispositions.
The risks and uncertainties identified above are not the only risks the
Company faces. Additional risks and uncertainties not presently known to
the Company or that it currently believes to be immaterial also may
adversely affect the Company. Should any known or unknown risks and
uncertainties develop into actual events, these developments could have
material adverse effects on our business, financial condition and
results of operations. This release contains time-sensitive information
that reflects managementÔÇÖs best analysis only as of the date of this
release. Except to the extent required by applicable laws, the Company
does not undertake to publicly update or revise its forward-looking
statements even if experience or future changes make it clear that any
projected results expressed or implied herein will not be realized.
Additional information regarding these risks can be found in our most
recent Annual Report on Form 10-K and subsequent reports that we file
with the SEC.
ABOUT SENSIENT TECHNOLOGIES
Sensient Technologies Corporation is a leading global manufacturer and
marketer of colors, flavors and fragrances. Sensient employs advanced
technologies at facilities around the world to develop specialty food
and beverage systems, cosmetic and pharmaceutical systems, inkjet and
specialty inks and colors, and other specialty and fine chemicals. The
CompanyÔÇÖs customers include major international manufacturers
representing most of the worldÔÇÖs best-known brands. Sensient is
headquartered in Milwaukee, Wisconsin.
| Sensient Technologies Corporation | ||||||
| (In thousands, except percentages and per share amounts) | ||||||
| (Unaudited) | ||||||
|
Consolidated Statements of Earnings |
Three Months Ended March 31, | |||||
| 2018 | 2017 | % Change | ||||
| Revenue | $ | 356,477 | $ | 341,397 | 4.4 | % |
| Cost of products sold | 233,406 | 220,452 | 5.9 | % | ||
| Selling and administrative expenses | 67,390 | 96,908 | -30.5 | % | ||
| Operating income | 55,681 | 24,037 | 131.6 | % | ||
| Interest expense | 5,555 | 4,811 | ||||
| Earnings before income taxes | 50,126 | 19,226 | ||||
| Income taxes | 11,932 | 6,034 | ||||
| Net earnings | $ | 38,194 | $ | 13,192 | 189.5 | % |
| Earnings per share of common stock: | ||||||
| Basic | $ | 0.89 | $ | 0.30 | ||
| Diluted | $ | 0.89 | $ | 0.30 | ||
| Average common shares outstanding: | ||||||
| Basic | 42,879 | 44,202 | ||||
| Diluted | 43,034 | 44,479 | ||||
| Reconciliation of Non-GAAP Amounts | ||||||
|
The Company did not incur any restructuring or other costs for the three months ended March 31, 2018. The Company's results for the three months ended March 31, 2017, included pre-tax restructuring and other costs of $31.3 million ($23.4 million after-tax or $0.53 per share). The restructuring costs related to eliminating underperforming operations, consolidating manufacturing facilities and improving efficiencies within the Company. The other costs in 2017 related to the completed sale of a facility and certain related business lines within the Flavors & Fragrances segment in Strasbourg, France. |
||||||
| Three Months Ended March 31, | ||||||
| 2018 | 2017 | % Change | ||||
| Operating income (GAAP) | $ | 55,681 | $ | 24,037 | 131.6 | % |
| Restructuring – Cost of products sold | – | 342 | ||||
| Restructuring – Selling and administrative | – | 19,870 | ||||
| Other – Selling and administrative | – | 11,047 | ||||
| Adjusted operating income | $ | 55,681 | $ | 55,296 | 0.7 | % |
| Net earnings (GAAP) | $ | 38,194 | $ | 13,192 | 189.5 | % |
| Restructuring and other, before tax | – | 31,259 | ||||
| Tax impact of restructuring and other | – | (7,827 | ) | |||
| Adjusted net earnings | $ | 38,194 | $ | 36,624 | 4.3 | % |
| Diluted EPS (GAAP) | $ | 0.89 | $ | 0.30 | 196.7 | % |
| Restructuring and other, net of tax | – | 0.53 | ||||
| Adjusted diluted EPS | $ | 0.89 | $ | 0.82 | 8.5 | % |
|
We have included each of these non-GAAP measures in order to provide additional information regarding our underlying operating results and comparable period-over-period performance. Such information is supplemental to information presented in accordance with GAAP and is not intended to represent a presentation in accordance with GAAP. These non-GAAP measures should not be considered in isolation. Rather, they should be considered together with GAAP measures and the rest of the information included in this release and our SEC filings. Management internally reviews each of these non-GAAP measures to evaluate performance on a comparative period-to-period basis and to gain additional insight into underlying operating and performance trends, and we believe the information can be beneficial to investors for the same purposes. These non-GAAP measures may not be comparable to similarly titled measures used by other companies. |
|
Note: Earnings per share calculations may not foot due to rounding differences. |
| Sensient Technologies Corporation | ||||||
| (In thousands, except per share amounts) | ||||||
| (Unaudited) | ||||||
| Results by Segment | Three Months Ended March 31, | |||||
|
Revenue |
2018 | 2017 | % Change | |||
| Flavors & Fragrances | $ | 188,346 | $ | 186,875 | 0.8 | % |
| Color | 147,160 | 134,066 | 9.8 | % | ||
| Asia Pacific | 30,267 | 29,636 | 2.1 | % | ||
| Intersegment elimination | (9,296 | ) | (9,180 | ) | ||
| Consolidated | $ | 356,477 | $ | 341,397 | 4.4 | % |
|
Operating Income |
||||||
| Flavors & Fragrances | $ | 25,327 | $ | 28,770 | -12.0 | % |
| Color | 33,672 | 30,217 | 11.4 | % | ||
| Asia Pacific | 4,872 | 5,150 | -5.4 | % | ||
| Corporate & Other | (8,190 | ) | (40,100 | ) | ||
| Consolidated | $ | 55,681 | $ | 24,037 | 131.6 | % |
|
The CompanyÔÇÖs reportable segments consist of the Flavors & Fragrances, Color, and Asia Pacific segments. The 2017 restructuring and other costs are reported in Corporate & Other. |
| Consolidated Condensed Balance Sheets | ||||
| March 31, | 2018 | 2017 | ||
| Cash and cash equivalents | $ | 30,420 | $ | 29,109 |
| Trade accounts receivable, net | 216,480 | 202,343 | ||
| Inventories | 467,996 | 410,067 | ||
| Other current assets | 45,023 | 51,422 | ||
| Assets Held for Sale | 2,022 | 6,788 | ||
| Total Current Assets | 761,941 | 699,729 | ||
| Goodwill & intangible assets (net) | 433,001 | 395,806 | ||
| Property, plant, and equipment (net) | 502,034 | 478,582 | ||
| Other assets | 78,412 | 77,085 | ||
| Total Assets | $ | 1,775,388 | $ | 1,651,202 |
| Trade accounts payable | $ | 96,136 | $ | 81,260 |
| Short-term debt | 20,237 | 20,281 | ||
| Other current liabilities | 86,865 | 89,543 | ||
| Total Current Liabilities | 203,238 | 191,084 | ||
| Long-term debt | 691,265 | 572,200 | ||
| Accrued employee and retiree benefits | 22,021 | 20,430 | ||
| Other liabilities | 31,408 | 17,653 | ||
| Shareholders' Equity | 827,456 | 849,835 | ||
| Total Liabilities and Shareholders' Equity | $ | 1,775,388 | $ | 1,651,202 |
| Sensient Technologies Corporation | ||||
| (In thousands, except per share amounts) | ||||
| (Unaudited) | ||||
| Consolidated Statements of Cash Flows | ||||
| Three Months Ended March 31, | 2018 | 2017 | ||
| Cash flows from operating activities: | ||||
| Net earnings | $ | 38,194 | $ | 13,192 |
| Adjustments to arrive at net cash provided by operating activities: | ||||
| Depreciation and amortization | 12,578 | 12,141 | ||
| Stock-based compensation | 1,254 | 1,930 | ||
| Net loss on assets | 70 | 386 | ||
| Loss on divestiture of businesses | – | 31,882 | ||
| Deferred income taxes | (4,346 | ) | 2,202 | |
| Changes in operating assets and liabilities | (29,499 | ) | (30,574 | ) |
| Net cash provided by operating activities | 18,251 | 31,159 | ||
| Cash flows from investing activities: | ||||
| Acquisition of property, plant and equipment | (11,058 | ) | (10,069 | ) |
| Cash receipts on sold receivables | 9,051 | 6,407 | ||
| Proceeds from sale of assets | 45 | 105 | ||
| Proceeds from divestiture of businesses | – | 12,457 | ||
| Acquisition of new businesses | (11,000 | ) | – | |
| Other investing activity | (798 | ) | (63 | ) |
| Net cash (used in) provided by investing activities | (13,760 | ) | 8,837 | |
| Cash flows from financing activities: | ||||
| Proceeds from additional borrowings | 92,348 | 5,657 | ||
| Debt payments | (12,280 | ) | (19,350 | ) |
| Purchase of treasury stock | (72,704 | ) | (12,365 | ) |
| Dividends paid | (14,274 | ) | (13,306 | ) |
| Other financing activity | (2,715 | ) | (477 | ) |
| Net cash used in financing activities | (9,625 | ) | (39,841 | ) |
| Effect of exchange rate changes on cash and cash equivalents | 6,210 | 3,089 | ||
| Net increase in cash and cash equivalents | 1,076 | 3,244 | ||
| Cash and cash equivalents at beginning of period | 29,344 | 25,865 | ||
| Cash and cash equivalents at end of period | $ | 30,420 | $ | 29,109 |
| Supplemental Information | ||||
| Three Months Ended March 31, | 2018 | 2017 | ||
| Dividends paid per share | $ | 0.33 | $ | 0.30 |
Contacts
Sensient Technologies Corporation
Kim Chase
(414) 347-3706
