10-Q 1 brhc10043253_10q.htm 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended:
September 30, 2022
 

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from
to
 
Commission file number: 001-07626

Sensient Technologies Corporation
(Exact name of registrant as specified in its charter)

Wisconsin
 
39-0561070
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification Number)

777 EAST WISCONSIN AVENUE, MILWAUKEE, WISCONSIN 53202-5304
(Address of principal executive offices)

Registrant’s telephone number, including area code:
(414) 271-6755

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, par value $0.10 per share
SXT
New York Stock Exchange LLC

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.

Large Accelerated Filer  
Accelerated Filer
Non-Accelerated Filer
     
Smaller Reporting Company
Emerging Growth Company
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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.

Class
 
Outstanding at October 26, 2022
Common Stock, par value $0.10 per share
 
42,037,685



SENSIENT TECHNOLOGIES CORPORATION
INDEX




Page No.




PART I. FINANCIAL INFORMATION:






Item 1.
Financial Statements:







1






2






3






4






5






6





Item 2.
16





Item 3.
23





Item 4.
23




PART II. OTHER INFORMATION:






Item 1.
23





Item 1A.
23





Item 2.
23





Item 6.
23






24






25

PART I.
FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS

SENSIENT TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands except per share amounts)
(Unaudited)

 
Three Months
Ended September 30,
   
Nine Months
Ended September 30,
 
   
2022
   
2021
   
2022
   
2021
 
                         
Revenue
 
$
361,076
   
$
344,287
   
$
1,088,303
   
$
1,039,816
 
Cost of products sold
   
239,318
     
229,216
     
710,696
     
697,538
 
Selling and administrative expenses
   
74,265
     
68,113
     
222,081
     
212,670
 
Operating income
   
47,493
     
46,958
     
155,526
     
129,608
 
Interest expense
   
3,672
     
3,037
     
9,748
     
9,792
 
Earnings before income taxes
   
43,821
     
43,921
     
145,778
     
119,816
 
Income taxes
   
7,773
     
10,009
     
34,012
     
28,300
 
Net earnings
 
$
36,048
   
$
33,912
   
$
111,766
   
$
91,516
 
                                 
Weighted average number of common shares outstanding:
                               
Basic
   
41,896
     
42,024
     
41,885
     
42,140
 
Diluted
   
42,242
     
42,206
     
42,199
     
42,287
 
                                 
Earnings per common share:
                               
Basic
 
$
0.86
   
$
0.81
   
$
2.67
   
$
2.17
 
Diluted
 
$
0.85
   
$
0.80
   
$
2.65
   
$
2.16
 
                                 
Dividends declared per common share
 
$
0.41
   
$
0.39
   
$
1.23
   
$
1.17
 

See accompanying notes to consolidated condensed financial statements.

1

SENSIENT TECHNOLOGIES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)

 
Three Months
Ended September 30,
   
Nine Months
Ended September 30,
 
   
2022
   
2021
   
2022
   
2021
 
                         
Comprehensive income
 
$
8,997
   
$
18,680
   
$
56,171
   
$
79,454
 

See accompanying notes to consolidated condensed financial statements.

2

SENSIENT TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)


 
September 30,
2022
(Unaudited)
   
December 31,
2021
 
Assets
           
Current Assets:
           
Cash and cash equivalents
 
$
46,579
   
$
25,740
 
Trade accounts receivable
   
287,197
     
261,121
 
Inventories
   
501,382
     
411,635
 
Prepaid expenses and other current assets
   
45,582
     
42,657
 
                 
Total current assets
   
880,740
     
741,153
 
                 
Other assets
   
100,277
     
92,952
 
Deferred tax assets
   
12,912
     
29,901
 
Intangible assets, net
   
14,042
     
14,975
 
Goodwill
   
390,798
     
420,034
 
Property, Plant, and Equipment:
               
Land
   
28,641
     
31,028
 
Buildings
   
304,928
     
315,207
 
Machinery and equipment
   
705,029
     
715,344
 
Construction in progress
   
55,896
     
32,801
 
     
1,094,494
     
1,094,380
 
Less accumulated depreciation
   
(654,055
)
   
(647,902
)
     
440,439
     
446,478
 
                 
Total assets
 
$
1,839,208
   
$
1,745,493
 
                 
Liabilities and ShareholdersEquity
               
                 
Current Liabilities:
               
Trade accounts payable
 
$
132,904
   
$
125,519
 
Accrued salaries, wages, and withholdings from employees
   
40,918
     
40,939
 
Other accrued expenses
   
54,283
     
46,292
 
Income taxes
   
5,373
     
11,016
 
Short-term borrowings
   
21,947
     
8,539
 
                 
Total current liabilities
   
255,425
     
232,305
 
                 
Deferred tax liabilities
   
16,489
     
14,349
 
Other liabilities
   
37,736
     
28,829
 
Accrued employee and retiree benefits
   
27,854
     
28,579
 
Long-term debt
   
547,190
     
503,006
 
Shareholders’ Equity:
               
Common stock
   
5,396
     
5,396
 
Additional paid-in capital
   
120,381
     
111,352
 
Earnings reinvested in the business
   
1,690,813
     
1,630,713
 
Treasury stock, at cost
   
(631,853
)
   
(634,408
)
Accumulated other comprehensive loss
   
(230,223
)
   
(174,628
)
                 
Total shareholders’ equity
   
954,514
     
938,425
 
                 
Total liabilities and shareholders’ equity
 
$
1,839,208
   
$
1,745,493
 

See accompanying notes to consolidated condensed financial statements.

3

SENSIENT TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
Nine Months
Ended September 30,
 
   
2022
   
2021
 
             
Cash flows from operating activities:
           
Net earnings
 
$
111,766
   
$
91,516
 
Adjustments to arrive at net cash provided by operating activities:
               
Depreciation and amortization
   
39,262
     
38,828
 
Share-based compensation expense
   
12,476
     
6,431
 
Net loss on assets
   
283
     
203
 
Loss on divestitures and other charges
   
-
     
13,774
 
Deferred income taxes
   
20,465
     
3,793
 
Changes in operating assets and liabilities:
               
Trade accounts receivable
   
(39,520
)
   
(35,290
)
Inventories
   
(112,021
)
   
(15,898
)
Prepaid expenses and other assets
   
(39,598
)
   
(15,016
)
Accounts payable and other accrued expenses
   
24,110
     
24,007
 
Accrued salaries, wages, and withholdings from employees
   
1,819
     
1,763
 
Income taxes
   
(4,342
)
   
(1,155
)
Other liabilities
   
198
     
3,192
 
                 
Net cash provided by operating activities
   
14,898
     
116,148
 
                 
Cash flows from investing activities:
               
Acquisition of property, plant, and equipment
   
(51,703
)
   
(37,608
)
Proceeds from sale of assets
   
94
     
201
 
Proceeds from divestiture of businesses
   
-
     
36,790
 
Acquisition of new business
    (1,048 )     (13,875 )
Other investing activities
   
947
     
1,348
 
                 
Net cash used in investing activities
   
(51,710
)
   
(13,144
)
                 
Cash flows from financing activities:
               
Proceeds from additional borrowings
   
187,715
     
55,589
 
Debt payments
   
(87,657
)
   
(67,534
)
Purchase of treasury stock
   
-
     
(31,467
)
Dividends paid
   
(51,681
)
   
(49,468
)
Other financing activities
   
(2,056
)
   
(582
)
                 
Net cash provided by (used in) financing activities
   
46,321
     
(93,462
)
                 
Effect of exchange rate changes on cash and cash equivalents
   
11,330
     
(1,373
)
                 
Net increase in cash and cash equivalents
   
20,839
     
8,169
 
Cash and cash equivalents at beginning of period
   
25,740
     
24,770
 
                 
Cash and cash equivalents at end of period
 
$
46,579
   
$
32,939
 

See accompanying notes to consolidated condensed financial statements.

4

SENSIENT TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, except share and per share amounts)
(Unaudited)

 
Common
   
Additional
Paid-In
   
Earnings Reinvested
in the
   
Treasury Stock
   
Accumulated
Other
Comprehensive
   
Total
 
Three Months Ended Sept. 30, 2022
 
Stock
   
Capital
   
Business
   
Shares
   
Amount
   
Income (Loss)
   
Equity
 
Balances at June 30, 2022
 
$
5,396
   
$
116,596
   
$
1,672,000
     
12,058,773
   
$
(631,853
)
 
$
(203,172
)
 
$
958,967
 
Net earnings
   
-
     
-
     
36,048
     
-
     
-
     
-
     
36,048
 
Other comprehensive loss
   
-
     
-
     
-
     
-
     
-
     
(27,051
)
   
(27,051
)
Cash dividends paid – $0.41 per share
   
-
     
-
     
(17,235
)
   
-
     
-
     
-
     
(17,235
)
Share-based compensation
   
-
     
3,785
     
-
     
-
     
-
     
-
     
3,785
 
Balances at September 30, 2022
 
$
5,396
   
$
120,381
   
$
1,690,813
     
12,058,773
   
$
(631,853
)
 
$
(230,223
)
 
$
954,514
 

Three Months Ended Sept. 30, 2021
Balances at June 30, 2021
 
$
5,396
   
$
105,967
   
$
1,603,239
     
11,892,497
   
$
(614,404
)
 
$
(155,921
)
 
$
944,277
 
Net earnings
   
-
     
-
     
33,912
     
-
     
-
     
-
     
33,912
 
Other comprehensive loss
   
-
     
-
     
-
     
-
     
-
     
(15,232
)
   
(15,232
)
Cash dividends paid – $0.39 per share
   
-
     
-
     
(16,441
)
   
-
     
-
     
-
     
(16,441
)
Share-based compensation
   
-
     
2,243
     
-
     
-
     
-
     
-
     
2,243
 
Purchase of treasury stock
    -
      -
      -
      105,600
      (9,367 )     -
      (9,367 )
Balances at September 30, 2021
 
$
5,396
   
$
108,210
   
$
1,620,710
     
11,998,097
   
$
(623,771
)
 
$
(171,153
)
 
$
939,392
 

Nine Months Ended September 30, 2022
Balances at December 31, 2021
 
$
5,396
   
$
111,352
   
$
1,630,713
     
12,107,549
   
$
(634,408
)
 
$
(174,628
)
 
$
938,425
 
Net earnings
   
-
     
-
     
111,766
     
-
     
-
     
-
     
111,766
 
Other comprehensive loss
   
-
     
-
     
-
     
-
     
-
     
(55,595
)
   
(55,595
)
Cash dividends paid – $1.23 per share
   
-
     
-
     
(51,681
)
   
-
     
-
     
-
     
(51,681
)
Share-based compensation
   
-
     
12,476
     
-
     
-
     
-
     
-
     
12,476
 
Non-vested stock issued upon vesting
   
-
     
(3,239
)
   
-
     
(61,821
)
   
3,239
     
-
     
-
 
Benefit plans
   
-
     
560
     
-
     
(11,786
)
   
618
     
-
     
1,178
 
Other
   
-
     
(768
)
   
15
     
24,831
     
(1,302
)
   
-
     
(2,055
)
Balances at September 30, 2022
 
$
5,396
   
$
120,381
   
$
1,690,813
     
12,058,773
   
$
(631,853
)
 
$
(230,223
)
 
$
954,514
 

Nine Months Ended September 30, 2021
Balances at December 31, 2020
 
$
5,396
   
$
102,909
   
$
1,578,662
     
11,647,627
   
$
(593,540
)
 
$
(159,091
)
 
$
934,336
 
Net earnings
   
-
     
-
     
91,516
     
-
     
-
     
-
     
91,516
 
Other comprehensive loss
   
-
     
-
     
-
     
-
     
-
     
(12,062
)
   
(12,062
)
Cash dividends paid – $1.17 per share
   
-
     
-
     
(49,468
)
   
-
     
-
     
-
     
(49,468
)
Share-based compensation
   
-
     
6,431
     
-
     
-
     
-
     
-
     
6,431
 
Non-vested stock issued upon vesting
   
-
     
(1,264
)
   
-
     
(24,711
)
   
1,264
     
-
     
-
 
Benefit plans
   
-
     
338
     
-
     
(14,791
)
   
756
     
-
     
1,094
 
Purchase of treasury stock
   
-
     
-
     
-
     
382,593
     
(31,874
)
   
-
     
(31,874
)
Other
   
-
     
(204
)
   
-
     
7,379
     
(377
)
   
-
     
(581
)
Balances at September 30, 2021
 
$
5,396
   
$
108,210
   
$
1,620,710
     
11,998,097
   
$
(623,771
)
 
$
(171,153
)
 
$
939,392
 

See accompanying notes to consolidated condensed financial statements.

5

SENSIENT TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(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, 2022, and the results of operations, comprehensive income, and shareholders’ equity for the three and nine months ended September 30, 2022 and 2021, and cash flows for the nine months ended September 30, 2022 and 2021. 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 March 2020, the Financial Accounting Standards Board (FASB) issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other inter-bank offered rates to alternative rates. The guidance is effective upon issuance and generally can be applied through December 31, 2022. The Company is currently evaluating the potential impact of this standard on its consolidated financial statements and its related disclosures.

Please refer to the notes in the Company’s annual consolidated financial statements for the year ended December 31, 2021, 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.
Divestitures

On June 30, 2020, the Company completed the sale of its inks product line. On September 18, 2020, the Company completed the sale of its yogurt fruit preparations product line. This sale also included an earnout based on future performance, which could result in additional cash consideration for the Company. On April 1, 2021, the Company completed the sale of its fragrances product line (excluding its essential oils product line) for $36.3 million of net cash.

The Company reports all costs associated with the divestitures in Corporate & Other. There were no costs associated with the divestitures for the three and nine months ended September 30, 2022.

The following table summarizes the divestiture & other related costs for the three months ended September 30, 2021:

(In thousands)
 
Yogurt Fruit Preparations
   
Fragrances
   
Inks
   
Corporate &
Other
   
Total
 
Other costs - Selling and administrative expenses(1)
  $
102
    $
149
    $
(157
)
  $
147
    $
241
 


(1)
Other costs – Selling and administrative expenses include employee separation costs, professional services, accelerated depreciation, and other related costs and income.
 
The following table summarizes the divestiture & other related costs for the nine months ended September 30, 2021:

(In thousands)
 
Yogurt Fruit Preparations
   
Fragrances
   
Inks
   
Corporate &
Other
   
Total
 
Non-cash impairment charges – Selling and administrative expenses
 
$
-
   
$
1,062
   
$
-
   
$
-
   
$
1,062
 
Non-cash charges – Cost of products sold
   
-
     
37
     
(9
)
   
-
     
28
 
Reclassification of foreign currency translation and related items – Selling and administrative expenses
   
-
     
10,193
     
-
     
-
     
10,193
 
Other costs - Selling and administrative expenses(1)
   
631
     
1,365
     
(362
)
   
584
     
2,218
 
Total
 
$
631
   
$
12,657
   
$
(371
)
 
$
584
   
$
13,501
 


(1)
Other costs – Selling and administrative expenses include environmental remediation, employee separation costs, professional services, accelerated depreciation, and other related costs.

6

In March 2020, the Company was notified by the buyer of the Company’s fragrances product line that environmental sampling conducted at the Company’s Granada, Spain location had identified the presence of contaminants in soil and groundwater in certain areas of the property. The Company records liabilities related to environmental remediation obligations when estimated future expenditures are probable and the amount of the liability is reasonably estimable. Based upon an environmental investigation and a quantitative risk assessment performed by a consultant hired by the Company, the Company recorded $0.3 million related to these obligations in Selling and Administrative Expenses during the nine months ended September 30, 2021.

3.
Operational Improvement Plan

During the third quarter of 2020, the Company approved an operational improvement plan (Operational Improvement Plan) to consolidate manufacturing facilities and improve efficiencies within the Company. As part of the Operational Improvement Plan, the Company combined its New Jersey cosmetics manufacturing facility in the Personal Care product line of the Color segment into its existing Color segment facility in Missouri. In addition, the Company centralized certain Flavors & Extracts segment support functions in Europe into one location. In the Asia Pacific segment, the Company incurred costs in connection with the elimination of certain selling and administrative positions.

The Company reports all costs and income associated with the Operational Improvement Plan in Corporate & Other. There were no costs associated with the Operational Improvement Plan for the three and nine months ended September 30, 2022.

The following table summarizes the Operational Improvement Plan expenses recorded in Selling and Administrative Expenses by segment for the three months ended September 30, 2021:

(In thousands)
 
Flavors &
Extracts
   
Color
   
Asia Pacific
   
Consolidated
 
Employee separation costs
 
$
1
   
$
(120
)
 
$
(4
)
 
$
(123
)
Other costs(1)
   
-
     
605
     
1
     
606
 
Total expense (income)
 
$
1
   
$
485
   
$
(3
)
 
$
483
 


(1) Other costs include professional services, accelerated depreciation, and other related costs.

The following table summarizes the Operational Improvement Plan expenses recorded in Selling and Administrative Expenses by segment for the nine months ended September 30, 2021:


(In thousands)
 
Flavors &
Extracts
   
Color
   
Asia Pacific
   
Consolidated
 
Employee separation costs
 
$
(15
)
 
$
(40
)
 
$
(72
)
 
$
(127
)
Other income(1)
   
-
     
(3,624
)
   
-
     
(3,624
)
Other costs(2)
   
-
     
1,739
     
2
     
1,741
 
Total expense (income)
 
$
(15
)
 
$
(1,925
)
 
$
(70
)
 
$
(2,010
)


(1)
Other income includes cash received for the early termination of a lease less associated expenses.

(2)
Other costs include professional services, accelerated depreciation, and other related costs.

As of September 30, 2022 and December 31 2021, accrued liabilities in Other Accrued Expenses totaled $0.3 million and $0.8 million, respectively, related to the Operational Improvement Plan.

7

4.
Acquisition

On July 15, 2021, the Company acquired substantially all of the assets of Flavor Solutions, Inc., a flavors business located in New Jersey. The purchase price for this acquisition was $14.9 million in cash. The assets acquired and liabilities assumed were recorded at their estimated fair value as of the acquisition date. The Company acquired net assets of $0.4 million and identified intangible assets, principally customer relationships, of $5.0 million. The remaining $9.5 million was allocated to goodwill. This business is now part of the Flavors & Extracts segment.

5.
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, including the current and expected impact of COVID-19. Currently, the COVID-19 pandemic has not had and is not anticipated to have a material impact on trade accounts receivable. 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 the rapidly changing economic conditions. 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, 2022 and 2021:

(In thousands)
Three Months Ended September 30, 2022
 
Allowance for
Doubtful Accounts
 
Balance at June 30, 2022
 
$
4,494
 
Provision for expected credit losses
   
51
 
Accounts written off
   
(33
)
Translation and other activity
   
(105
)
Balance at September 30, 2022
 
$
4,407
 

(In thousands)
Three Months Ended September 30, 2021
 
Allowance for
Doubtful Accounts
 
Balance at June 30, 2021
 
$
3,749
 
Provision for expected credit losses
   
186
 
Accounts written off
   
(41
)
Translation and other activity
   
(65
)
Balance at September 30, 2021
 
$
3,829
 

(In thousands)
Nine Months Ended September 30, 2022
 
Allowance for
Doubtful Accounts
 
Balance at December 31, 2021
 
$
4,877
 
Provision for expected credit losses
   
883
 
Accounts written off
   
(1,129
)
Translation and other activity
   
(224
)
Balance at September 30, 2022
 
$
4,407
 

(In thousands)
Nine Months Ended September 30, 2021
 
Allowance for
Doubtful Accounts
 
Balance at December 31, 2020
 
$
3,891
 
Provision for expected credit losses
   
480
 
Accounts written off
    (414 )
Translation and other activity
    (128 )
Balance at September 30, 2021
  $ 3,829  

8

6.
Inventories
 
At September 30, 2022, and December 31, 2021, inventories included finished and in-process products totaling $332.1 million and $280.2 million, respectively, and raw materials and supplies of $169.3 million and $131.4 million, respectively.

7.
Debt

On August 31, 2022, the Company entered into Amendment No. 9 (Amendment) to the Receivables Purchase Agreement, dated as of October 3, 2016. The Amendment increased the facility limit from $30 million to $85 million and extended the maturity date from October 1, 2022 to August 31, 2023. The Amendment also changed the interest rate benchmark from the London Interbank Offered Rate to the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York and modified certain other provisions.

8.
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, 2022 and December 31, 2021. The net fair value of the forward exchange contracts based on current pricing obtained for comparable derivative products (Level 2 inputs) was an asset of $0.3 million and $0.1 million as of September 30, 2022 and December 31, 2021, 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, 2022 and December 31, 2021 was $547.7 million and $503.5 million, respectively. The fair value of the long-term debt at September 30, 2022 and December 31, 2021 was $539.1 million and $520.0 million, respectively.

9.
Segment Information

The Company evaluates performance based on operating income before divestiture & other related costs, share-based compensation, restructuring and other charges including the Operational Improvement 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, and 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 cosmetics, 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 and flavor products for the Asia Pacific countries. The Company’s corporate expenses, divestiture & other related costs, share-based compensation, operational improvement plan expenses, and other costs are included in the “Corporate & Other” category.

Divestiture & other related costs and restructuring and other costs, including the Operational Improvement Plan costs, for the three and nine months ended September 30, 2021, are further described in Note 2, Divestitures, and Note 3, Operational Improvement Plan, and are included in the operating income (loss) results in Corporate & Other below. There were no divestiture & other related costs or Operational Improvement Plan costs for the three and nine months ended September 30, 2022. In addition, the Company’s corporate expenses and share-based compensation are included in Corporate & Other.

9

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, 2022:
                             
Revenue from external customers
 
$
181,397
   
$
144,570
   
$
35,109
   
$
-
   
$
361,076
 
Intersegment revenue
   
5,649
     
6,899
     
112
     
-
     
12,660
 
Total revenue
 
$
187,046
   
$
151,469
   
$