10-Q 1 brhc10030070_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, 2021
 

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 20, 2021
Common Stock, par value $0.10 per share
 
42,026,333



SENSIENT TECHNOLOGIES CORPORATION
INDEX

 
 
Page No.
 
 
 
PART I. FINANCIAL INFORMATION:
 
 
 
 
Item 1.
Financial Statements:
 
     
 
 1
 
 
 
 
 2
 
 
 
 
 3
 
 
 
 
 4
 
 
 
 
 5
 
 
 
 
6
 
 
 
Item 2.
 19
 
 
 
Item 3.
26
 
 
 
Item 4.
26
 
 
 
PART II. OTHER INFORMATION:
 
 
 
 
Item 1.
27
 
 
 
   Item 1A.
27
 
 
 
Item 2.
27
 
 
 
Item 6.
27
 
 
 
 
28
 
 
 
 
29



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,
 
   
2021
   
2020
   
2021
   
2020
 
                         
Revenue
 
$
344,287
   
$
323,566
   
$
1,039,816
   
$
997,333
 
Cost of products sold
   
229,216
     
217,920
     
697,538
     
677,580
 
Selling and administrative expenses
   
68,113
     
64,491
     
212,670
     
201,912
 
Operating income
   
46,958
     
41,155
     
129,608
     
117,841
 
Interest expense
   
3,037
     
3,497
     
9,792
     
11,412
 
Earnings before income taxes
   
43,921
     
37,658
     
119,816
     
106,429
 
Income taxes
   
10,009
     
4,748
     
28,300
     
22,126
 
Net earnings
 
$
33,912
   
$
32,910
   
$
91,516
   
$
84,303
 
                                 
Weighted average number of common shares outstanding:
                               
Basic
   
42,024
     
42,307
     
42,140
     
42,299
 
Diluted
   
42,206
     
42,349
     
42,287
     
42,326
 
                                 
Earnings per common share:
                               
Basic
 
$
0.81
   
$
0.78
   
$
2.17
   
$
1.99
 
Diluted
 
$
0.80
   
$
0.78
   
$
2.16
   
$
1.99
 
                                 
Dividends declared per common share
 
$
0.39
   
$
0.39
   
$
1.17
   
$
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,
 
   
2021
   
2020
   
2021
   
2020
 
                         
Comprehensive income
 
$
18,680
   
$
51,232
   
$
79,454
   
$
60,909
 

See accompanying notes to consolidated condensed financial statements.

2


SENSIENT TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)

Assets
 
September 30,
2021
(Unaudited)
   
December 31, 2020
 
             
Current Assets:
           
Cash and cash equivalents
 
$
32,939
   
$
24,770
 
Trade accounts receivable
   
263,710
     
234,132
 
Inventories
   
392,231
     
381,346
 
Prepaid expenses and other current assets
   
50,081
     
48,578
 
Assets held for sale
   
-
     
52,760
 
                 
Total current assets
   
738,961
     
741,586
 
                 
Other assets
   
88,078
     
89,883
 
Deferred tax assets
   
25,859
     
29,678
 
Intangible assets, net
   
15,248
     
10,930
 
Goodwill
   
422,481
     
423,290
 
Property, Plant, and Equipment:
               
Land
   
30,990
     
31,422
 
Buildings
   
315,795
     
316,533
 
Machinery and equipment
   
704,812
     
703,485
 
Construction in progress
   
30,564
     
21,759
 
     
1,082,161
     
1,073,199
 
Less accumulated depreciation
   
(644,372
)
   
(627,706
)
     
437,789
     
445,493
 
                 
Total assets
 
$
1,728,416
   
$
1,740,860
 
                 
Liabilities and ShareholdersEquity
               
                 
Current Liabilities:
               
Trade accounts payable
 
$
123,894
   
$
107,324
 
Accrued salaries, wages, and withholdings from employees
   
35,530
     
34,462
 
Other accrued expenses
   
51,457
     
42,985
 
Income taxes
   
3,001
     
4,598
 
Short-term borrowings
   
10,483
     
9,247
 
Liabilities held for sale
   
-
     
17,339
 
                 
Total current liabilities
   
224,365
     
215,955
 
                 
Deferred tax liabilities
   
13,101
     
13,411
 
Other liabilities
   
30,399
     
30,213
 
Accrued employee and retiree benefits
   
30,258
     
28,941
 
Long-term debt
   
490,901
     
518,004
 
Shareholders’ Equity:
               
Common stock
   
5,396
     
5,396
 
Additional paid-in capital
   
108,210
     
102,909
 
Earnings reinvested in the business
   
1,620,710
     
1,578,662
 
Treasury stock, at cost
   
(623,771
)
   
(593,540
)
Accumulated other comprehensive loss
   
(171,153
)
   
(159,091
)
                 
Total shareholders’ equity
   
939,392
     
934,336
 
                 
Total liabilities and shareholders’ equity
 
$
1,728,416
   
$
1,740,860
 

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,
 
   
2021
   
2020
 
             
Cash flows from operating activities:
           
Net earnings
 
$
91,516
   
$
84,303
 
Adjustments to arrive at net cash provided by operating activities:
               
Depreciation and amortization
   
38,828
     
36,831
 
Share-based compensation expense
   
6,431
     
4,017
 
Net loss (gain) on assets
   
203
     
(254
)
Loss on divestitures and other charges
   
13,774
     
5,821
 
Deferred income taxes
   
3,793
     
(9,001
)
Changes in operating assets and liabilities:
               
Trade accounts receivable
   
(35,290
)
   
(7,962
)
Inventories
   
(15,898
)
   
17,433
 
Prepaid expenses and other assets
   
(15,016
)
   
(4,726
)
Accounts payable and other accrued expenses
   
24,007
     
9,018
 
Accrued salaries, wages, and withholdings from employees
   
1,763
     
7,410
 
Income taxes
   
(1,155
)
   
(3,899
)
Other liabilities
   
3,192
     
3,936
 
                 
Net cash provided by operating activities
   
116,148
     
142,927
 
                 
Cash flows from investing activities:
               
Acquisition of property, plant, and equipment
   
(37,608
)
   
(34,009
)
Proceeds from sale of assets
   
201
     
1,022
 
Proceeds from divesture of businesses
   
36,790
     
12,228
 
Acquisition of new businesses
    (13,875 )     -  
Other investing activities
   
1,348
     
4,955
 
                 
Net cash used in investing activities
   
(13,144
)
   
(15,804
)
                 
Cash flows from financing activities:
               
Proceeds from additional borrowings
   
55,589
     
33,164
 
Debt payments
   
(67,534
)
   
(101,061
)
Purchase of treasury stock
   
(31,467
)
   
-
 
Dividends paid
   
(49,468
)
   
(49,537
)
Other financing activities
   
(582
)
   
(415
)
                 
Net cash used in financing activities
   
(93,462
)
   
(117,849
)
                 
Effect of exchange rate changes on cash and cash equivalents
   
(1,373
)
   
(3,527
)
                 
Net increase in cash and cash equivalents
   
8,169
     
5,747
 
Cash and cash equivalents at beginning of period
   
24,770
     
21,153
 
                 
Cash and cash equivalents at end of period
 
$
32,939
   
$
26,900
 

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
   
Treasury Stock
   
Accumulated
Other
Comprehensive
   
Total
 
Three Months Ended September 30, 2021
 
Stock
   
Capital
   
in the Business
   
Shares
   
Amount
   
Income (Loss)
   
Equity
 
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
 

Three Months Ended September 30, 2020
                                         
Balances at June 30, 2020
 
$
5,396
   
$
99,962
   
$
1,553,622
     
11,647,627
   
$
(593,540
)
 
$
(204,724
)
 
$
860,716
 
Net earnings
   
-
     
-
     
32,910
     
-
     
-
     
-
     
32,910
 
Other comprehensive income
   
-
     
-
     
-
     
-
     
-
     
18,322
     
18,322
 
Cash dividends paid – $0.39 per share
   
-
     
-
     
(16,519
)
   
-
     
-
     
-
     
(16,519
)
Share-based compensation
   
-
     
1,355
     
-
     
-
     
-
     
-
     
1,355
 
Other
   
-
     
1
     
-
     
-
     
-
   
-
     
1
Balances at September 30, 2020
 
$
5,396
   
$
101,318
   
$
1,570,013
     
11,647,627
   
$
(593,540
)
 
$
(186,402
)
 
$
896,785
 

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
 

Nine Months Ended September 30, 2020
                                         
Balances at December 31, 2019
 
$
5,396
   
$
98,425
   
$
1,536,100
     
11,682,636
   
$
(595,324
)
 
$
(163,008
)
 
$
881,589
 
Net earnings
   
-
     
-
     
84,303
     
-
     
-
     
-
     
84,303
 
Other comprehensive loss
   
-
     
-
     
-
     
-
     
-
     
(23,394
)
   
(23,394
)
Cash dividends paid – $1.17 per share
   
-
     
-
     
(49,537
)
   
-
     
-
     
-
     
(49,537
)
Share-based compensation
   
-
     
4,017
     
-
     
-
     
-
     
-
     
4,017
 
Non-vested stock issued upon vesting
   
-
     
(1,352
)
   
-
     
(26,515
)
   
1,352
     
-
     
-
 
Benefit plans
   
-
     
241
     
-
     
(16,344
)
   
833
     
-
     
1,074
 
Adoption of ASU 2016-13
   
-
     
-
     
(853
)
   
-
     
-
     
-
     
(853
)
Other
   
-
     
(13
)
   
-
     
7,850
     
(401
)
   
-
     
(414
)
Balances at September 30, 2020
 
$
5,396
   
$
101,318
   
$
1,570,013
     
11,647,627
   
$
(593,540
)
 
$
(186,402
)
 
$
896,785
 

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, 2021; the results of operations, comprehensive income, and shareholders’ equity for the three and nine months ended September 30, 2021 and 2020; and cash flows for the nine months ended September 30, 2021 and 2020. 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 Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which clarifies and simplifies aspects of the accounting for income taxes. ASU 2019-12 is effective for public business entities beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company adopted ASU 2019-12 on January 1, 2021, using retrospective, modified retrospective, or prospective basis for certain amendments. There was no impact to the consolidated financial statements.

Recently Issued Accounting Pronouncements

In March 2020, the 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, 2020, 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

In October 2019, the Company announced its intent to divest its inks, fragrances (excluding its essential oils product line), and yogurt fruit preparations product lines. The divesting and exit of these three product lines does not meet the criteria to be presented as a discontinued operation on the Consolidated Statements of Earnings.

On June 30, 2020, the Company completed the sale of its inks product line. In 2021 and 2020, the Company received $0.5 million and $11.6 million of net cash, respectively, as part of the sale.

On September 18, 2020, the Company completed the sale of its yogurt fruit preparations product line for $1.0 million. The sale 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. As a result of the completion of the sale, the Company recorded a non-cash net loss of $11.3 million, for the nine months ended September 30, 2021, primarily related to the reclassification of accumulated foreign currency translation and related items from Accumulated Other Comprehensive Loss to Selling and Administrative Expenses in the Consolidated Statements of Earnings.
6


The assets and liabilities related to the inks and fragrances (excluding its essential oils product line) product lines are recorded in Assets Held for Sale and Liabilities Held for Sale as of December 31, 2020, as follows:

(In thousands)
 
December 31,
2020
 
Assets held for sale:
     
Trade accounts receivable
 
$
20,722
 
Inventories
   
25,045
 
Prepaid expenses and other current assets
   
1,843
 
Property, plant, and equipment, net
   
3,434
 
Intangible assets
   
1,716
 
Assets held for sale
 
$
52,760
 
         
Liabilities held for sale:
       
Trade accounts payable
 
$
13,967
 
Accrued salaries, wages, and withholdings from employees
   
1,739
 
Other accrued expenses
   
1,633
 
Liabilities held for sale
 
$
17,339
 

The Company reports all costs associated with the divestitures in Corporate & Other. 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 Company reports all costs associated with the divestitures in Corporate & Other. The following table summarizes the divestiture & other related costs for the three months ended September 30, 2020:

(In thousands)
 
Yogurt Fruit Preparations
   
Fragrances
   
Inks
   
Corporate/
Other
   
Total
 
Other costs - Selling and administrative expenses(1)
 
$
(446
)
 
$
247
   
$
158
   
$
353
   
$
312
 
Other costs – Cost of Products Sold     -       7       (207 )     52       (148 )
Total
 
$
(446
)
 
$
254
   
$
(49
)
 
$
405
   
$
164
 


(1)
Other costs – Selling and administrative expenses include employee separation costs, professional services, accelerated depreciation, and other related costs and income.
 
7

The Company reports all costs associated with the divestitures in Corporate & Other. 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 employee separation costs, professional services, accelerated depreciation, and other related costs.
 
The Company reports all costs associated with the divestitures in Corporate & Other. The following table summarizes the divestiture & other related costs for the nine months ended September 30, 2020:

(In thousands)
 
Yogurt Fruit Preparations
   
Fragrances
   
Inks
   
Corporate/
Other
   
Total
 
Non-cash impairment charges – Selling and administrative expenses
 
$
2,597
   
$
339
   
$
9,295
   
$
(6
)
 
$
12,225
 
Non-cash charges – Cost of products sold
   
1,679
     
77
     
(207
)
   
242
     
1,791
 
Reclassification of foreign currency translation and related items – Selling and administrative expenses
   
-
     
-