Sensient Technologies Corporation Reports Results for the Quarter Ended September 30, 2017
MILWAUKEE–(BUSINESS WIRE)–Sensient Technologies Corporation (NYSE: SXT) reported earnings per
share from continuing operations of 73 cents in the third quarter of
2017 compared to 79 cents in last year’s third quarter. Revenue was
$353.5 million in this year’s third quarter compared to $349.7 million
in the comparable period last year. Operating income was $52.0 million
in the third quarter of 2017 and $51.2 million in last year’s third
quarter. Foreign currency translation increased revenue by approximately
2%, and operating income and earnings per share by approximately 1%,
each in the third quarter.
For the nine months ended September 30, 2017 and 2016, earnings per
share from continuing operations were $1.72 and $2.04, respectively.
Revenue was $1.0 billion in the first nine months of 2017 and $1.1
billion in the first nine months of 2016. Operating income was $120.4
million and $142.3 million in the first nine months of 2017 and 2016,
respectively. Foreign currency translation did not have a significant
impact on revenue, operating income or earnings per share in the first
nine months of the year.
The reported results include restructuring and other costs, which are
described in more detail under “Reconciliation of Non-GAAP Amounts”
below. Restructuring and other costs reduced operating income by $6.0
million, or 15 cents per share, in this year’s third quarter and $45.2
million, or 85 cents per share, in the first nine months of 2017. In
2016, restructuring and other costs reduced operating income by $3.0
million, or 4 cents per share, in the third quarter, and $19.9 million,
or 38 cents per share, in the first nine months of 2016.
The adjusted results, discussed below, eliminate the impact of
restructuring and other costs and enhance the overall understanding of
the Company’s performance when viewed together with our GAAP results.
Refer to “Reconciliation of Non-GAAP Amounts” below. Sensient’s
third quarter adjusted earnings per share from continuing operations
increased approximately 7% to 89 cents, compared to 83 cents in the
comparable period last year. Adjusted third quarter operating income was
$58.0 million, an increase of approximately 7% from $54.1 million
reported in the third quarter of 2016. Foreign currency translation
increased both adjusted operating income and adjusted earnings per share
by approximately 1%.
For the nine months ended September 30, 2017 and 2016, adjusted earnings
per share from continuing operations were $2.58 and $2.42, respectively.
Adjusted operating income was $165.6 million in the first nine months of
this year compared to $162.2 million in the comparable period last year.
Foreign currency translation did not have a significant impact on either
adjusted operating income or adjusted earnings per share in the first
nine months of 2017.
Cash provided by operating activities was $48.3 million in the quarter
compared to $49.7 million in last year’s third quarter.
BUSINESS REVIEW
The Color Group reported revenue of $133.2 million in the quarter, an
increase of 6% compared to $125.7 million in last year’s third quarter.
Segment operating income increased approximately 8% to $28.6 million in
the quarter. Foreign currency increased both revenue and operating
income by approximately 2% in the quarter. The Group’s higher profit was
driven by strong results in Cosmetics and solid performances by the Food
Color businesses in Europe, North America and Asia.
For the first nine months of 2017, the Color Group reported revenue of
$400.2 million, an increase of approximately 4% over $384.4 million
reported in the comparable period last year. Segment operating income
increased approximately 6% to $87.9 million in the first nine months of
this year compared to $82.9 million reported in the first nine months of
last year. Foreign currency translation had an insignificant impact on
revenue and operating income in the first nine months of the year.
The Flavors & Fragrances Group reported third quarter revenue of $196.0
million, a decrease of approximately 2% compared to $200.8 million
reported in the comparable period last year. Segment operating income
was $33.0 million, an increase of approximately 2% compared to $32.4
million reported in the third quarter of 2016. The Group’s higher profit
was a result of solid performances in the Bionutrients, North America
Savory, Europe Savory, Latin America, North America Beverage and Natural
Ingredients businesses. Foreign currency translation increased revenue
by approximately 1% in the quarter and had a minimal impact on operating
income.
The Flavors & Fragrances Group reported revenue of $568.4 million and
$608.7 million in the first nine months of 2017 and 2016, respectively.
Segment operating income was $90.3 and $95.5 million in the first nine
months of 2017 and 2016, respectively. Foreign currency translation
reduced revenue and operating income by approximately 1% each, in the
first nine months of 2017.
The Asia Pacific Group reported revenue of $32.7 million, an increase of
approximately 2% compared to $32.1 million reported in the comparable
period last year. Segment operating income was $5.8 million and $6.3
million in the third quarters of 2017 and 2016, respectively. For the
first nine months of 2017 and 2016, revenue was $91.3 million and $90.4
million, respectively. Segment operating income was $14.8 million and
$17.5 million in the first nine months of 2017 and 2016, respectively.
Foreign currency translation had less than a 1% favorable impact on
revenue and operating income in the quarter and year-to-date periods.
Corporate & Other, which includes the restructuring and other costs,
reported operating costs of $15.4 million in the quarter and $72.5
million in the first nine months of 2017. In 2016, Corporate & Other
reported operating costs of $14.0 million in the quarter and $53.6
million in the first nine months. The higher Corporate & Other costs in
this year’s first nine months are primarily attributable to higher
restructuring and other costs, which principally relate to the non-cash
losses from the divestitures of a European savory ingredient facility
and the Company’s European Natural Ingredients business, which were both
completed in the first quarter of 2017.
“Sensient had another solid quarter with good performances in both the
Color Group and Flavors & Fragrances Group,” said Paul Manning,
Chairman, President and CEO of Sensient Technologies Corporation. “The
Color Group delivered a very good result driven by strong demand for
cosmetics, while several businesses contributed to a solid performance
by the Flavors & Fragrances Group. I remain very optimistic about the
Company’s future.”
2017 OUTLOOK
Sensient expects earnings per share from continuing operations to be
between $2.47 and $2.52, which includes an estimated 93 cents of
restructuring and other costs. The Company’s previous guidance had been
between $2.56 and $2.61, which included 84 cents of restructuring and
other costs.
The Company’s expectations for adjusted earnings per share, which
excludes restructuring and other costs, is unchanged and continues to be
within the range of $3.40 to $3.45. Refer to “Reconciliation of
Non-GAAP Amounts” below for a description of restructuring and other
costs excluded from the adjusted results.
CONFERENCE CALL
The Company will host a conference call to discuss its 2017 third
quarter financial results at 10:00 a.m. CDT on Friday, October 20, 2017.
To participate in the conference call, please contact InterCall
Teleconferencing at (888) 818-9025 and refer to conference
identification number 95350828. A webcast of the conference call will be
available on the Investor Information section of the Company’s web site
at www.sensient.com.
A replay will be available beginning at 1:00 p.m. CDT on October 20,
2017, through midnight on October 27, 2017, by calling (404) 537-3406
and referring to conference identification number 95350828. A transcript
of the call will be posted on the Company’s web site at www.sensient.com
after the call concludes.
This release contains statements that may constitute “forward-looking
statements” 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 Company’s operations and business environment. Important
factors that could cause actual results to differ materially from those
suggested by these forward-looking statements and that could adversely
affect the Company’s future financial performance include the following:
the pace and nature of new product introductions by the Company and the
Company’s customers; the Company's ability to successfully implement its
strategy to create sustainable, long-term shareholder value; the
Company’s ability to successfully implement its growth strategies; the
outcome of the Company’s various productivity-improvement and
cost-reduction efforts; changes in costs or availability of raw
materials, including energy; industry and economic factors related to
the Company’s 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; 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 management’s best analysis only
as of the date of this release. Except to the extent required by
applicable laws, the Company does not undertake to publicly update or
revise its forward-looking statements even if experience or future
changes make it clear that any projected results expressed or implied
herein will not be realized. 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
Company’s customers include major international manufacturers
representing most of the world’s best-known brands. Sensient is
headquartered in Milwaukee, Wisconsin.
| Sensient Technologies Corporation | ||||||||||||
| (In thousands, except percentages and per share amounts) | ||||||||||||
| Consolidated Statements of Earnings | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
| 2017 | 2016 | % Change | 2017 | 2016 | % Change | |||||||
| Revenue | $ | 353,519 | $ | 349,662 | 1.1 | % | $ | 1,033,391 | $ | 1,052,966 | -1.9 | % |
| Cost of products sold | 230,784 | 227,099 | 1.6 | % | 670,486 | 690,126 | -2.8 | % | ||||
| Selling and administrative expenses | 70,725 | 71,412 | -1.0 | % | 242,478 | 220,505 | 10.0 | % | ||||
| Operating income | 52,010 | 51,151 | 1.7 | % | 120,427 | 142,335 | -15.4 | % | ||||
| Interest expense | 4,946 | 4,584 | 14,474 | 14,021 | ||||||||
| Earnings before income taxes | 47,064 | 46,567 | 105,953 | 128,314 | ||||||||
| Income taxes | 14,851 | 10,948 | 29,774 | 36,751 | ||||||||
| Earnings from continuing operations | 32,213 | 35,619 | 76,179 | 91,563 | ||||||||
| Gain from discontinued operations, net of tax | – | – | – | 3,343 | ||||||||
| Net earnings | $ | 32,213 | $ | 35,619 | -9.6 | % | $ | 76,179 | $ | 94,906 | -19.7 | % |
| Earnings per share of common stock: | ||||||||||||
| Basic: | ||||||||||||
| Continuing operations | $ | 0.74 | $ | 0.80 | $ | 1.73 | $ | 2.05 | ||||
| Discontinued operations | – | – | – | 0.07 | ||||||||
| Earnings per share of common stock | $ | 0.74 | $ | 0.80 | $ | 1.73 | $ | 2.13 | ||||
| Diluted: | ||||||||||||
| Continuing operations | $ | 0.73 | $ | 0.79 | $ | 1.72 | $ | 2.04 | ||||
| Discontinued operations | – | – | – | 0.07 | ||||||||
| Earnings per share of common stock | $ | 0.73 | $ | 0.79 | $ | 1.72 | $ | 2.11 | ||||
| Average common shares outstanding: | ||||||||||||
| Basic | 43,624 | 44,532 | 43,947 | 44,604 | ||||||||
| Diluted | 43,864 | 44,816 | 44,209 | 44,873 | ||||||||
| Reconciliation of Non-GAAP Amounts | ||||||||||||
|
The Company's results from continuing operations for the three and nine months ended September 30, 2017, include pre-tax restructuring and other costs of $6.0 million ($6.7 million after-tax or $0.15 per share) and $45.2 million ($37.8 million after-tax or $0.85 per share), respectively. The restructuring costs relate to eliminating underperforming operations, consolidating manufacturing facilities and improving efficiencies within the Company. The other costs in 2017 and 2016 relate to the now completed sale of a facility and certain related business lines within the Flavors & Fragrances segment in Strasbourg, France. The Company's results from continuing operations for the three and nine months ended September 30, 2016, include pre-tax restructuring and other costs of $3 million ($1.6 million after-tax or $0.04 per share) and $20 million ($16.9 million after-tax or $0.38 per share), respectively. |
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| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
| 2017 | 2016 | % Change | 2017 | 2016 | % Change | |||||||
| Operating income from continuing operations (GAAP) | $ | 52,010 | $ | 51,151 | 1.7 | % | $ | 120,427 | $ | 142,335 | -15.4 | % |
| Restructuring – Cost of products sold | 3,073 | – | 3,415 | 810 | ||||||||
| Restructuring – Selling and administrative | 2,927 | 2,781 | 30,212 | 8,588 | ||||||||
| Other – Selling and administrative | 14 | 191 | 11,555 | 10,483 | ||||||||
| Adjusted operating income | $ | 58,024 | $ | 54,123 | 7.2 | % | $ | 165,609 | $ | 162,216 | 2.1 | % |
| Net earnings from continuing operations (GAAP) | $ | 32,213 | $ | 35,619 | -9.6 | % | $ | 76,179 | $ | 91,563 | -16.8 | % |
| Restructuring and other, before tax | 6,014 | 2,972 | 45,182 | 19,881 | ||||||||
| Tax impact of restructuring and other | 681 | (1,399 | ) | (7,424 | ) | (2,999 | ) | |||||
| Adjusted net earnings | $ | 38,908 | $ | 37,192 | 4.6 | % | $ | 113,937 | $ | 108,445 | 5.1 | % |
| Diluted EPS from continuing operations (GAAP) | $ | 0.73 | $ | 0.79 | -7.6 | % | $ | 1.72 | $ | 2.04 | -15.7 | % |
| Restructuring and other, net of tax | 0.15 | 0.04 | 0.85 | 0.38 | ||||||||
| Adjusted diluted EPS | $ | 0.89 | $ | 0.83 | 7.2 | % | $ | 2.58 | $ | 2.42 | 6.6 | % |
|
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. |
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|
Note: Earnings per share calculations may not foot due to rounding differences. |
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| Sensient Technologies Corporation | ||||||||||||
| (In thousands, except per share amounts) | ||||||||||||
| Results by Segment | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
|
Revenue |
2017 | 2016 | % Change | 2017 | 2016 | % Change | ||||||
| Flavors & Fragrances | $ | 195,992 | $ | 200,775 | -2.4 | % | $ | 568,423 | $ | 608,747 | -6.6 | % |
| Color | 133,223 | 125,732 | 6.0 | % | 400,183 | 384,415 | 4.1 | % | ||||
| Asia Pacific | 32,708 | 32,093 | 1.9 | % | 91,289 | 90,423 | 1.0 | % | ||||
| Intersegment elimination | (8,404 | ) | (8,938 | ) | (26,504 | ) | (30,619 | ) | ||||
| Consolidated | $ | 353,519 | $ | 349,662 | 1.1 | % | $ | 1,033,391 | $ | 1,052,966 | -1.9 | % |
|
Operating Income |
||||||||||||
| Flavors & Fragrances | $ | 33,006 | $ | 32,386 | 1.9 | % | $ | 90,278 | $ | 95,494 | -5.5 | % |
| Color | 28,624 | 26,522 | 7.9 | % | 87,913 | 82,947 | 6.0 | % | ||||
| Asia Pacific | 5,780 | 6,251 | -7.5 | % | 14,750 | 17,500 | -15.7 | % | ||||
| Corporate & Other | (15,400 | ) | (14,008 | ) | (72,514 | ) | (53,606 | ) | ||||
| Consolidated | $ | 52,010 | $ | 51,151 | 1.7 | % | $ | 120,427 | $ | 142,335 | -15.4 | % |
|
The Company’s reportable segments consist of the Flavors & Fragrances, Color, and Asia Pacific segments. Beginning in the first quarter of 2017, the results of operations for certain of the cosmetic and fragrance businesses in the Asia Pacific segment, are now reported in the Color segment and Flavors & Fragrances segment, respectively. The results for 2016 have been restated to reflect these changes. The 2017 and 2016 restructuring and other costs related to continuing operations are reported in Corporate & Other. |
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| Consolidated Condensed Balance Sheets | ||||||||||||
| September 30, | 2017 | 2016 | ||||||||||
| Cash and cash equivalents | $ | 24,654 | $ | 23,505 | ||||||||
| Trade accounts receivable, net | 222,552 | 244,157 | ||||||||||
| Inventories | 456,480 | 406,957 | ||||||||||
| Other current assets | 50,641 | 86,588 | ||||||||||
| Total Current Assets | 754,327 | 761,207 | ||||||||||
| Goodwill & intangible assets (net) | 414,785 | 406,244 | ||||||||||
| Property, plant, and equipment (net) | 484,761 | 478,429 | ||||||||||
| Other assets | 84,992 | 89,739 | ||||||||||
| Total Assets | $ | 1,738,865 | $ | 1,735,619 | ||||||||
| Trade accounts payable | $ | 101,104 | $ | 99,468 | ||||||||
| Short-term debt | 20,092 | 21,417 | ||||||||||
| Other current liabilities | 89,015 | 103,562 | ||||||||||
| Total Current Liabilities | 210,211 | 224,447 | ||||||||||
| Long-term debt | 607,395 | 596,840 | ||||||||||
| Accrued employee and retiree benefits | 21,283 | 20,919 | ||||||||||
| Other liabilities | 20,444 | 15,017 | ||||||||||
| Shareholders' Equity | 879,532 | 878,396 | ||||||||||
| Total Liabilities and Shareholders' Equity | $ | 1,738,865 | $ | 1,735,619 | ||||||||
| Sensient Technologies Corporation | ||||
| (In thousands, except per share amounts) | ||||
| Consolidated Statements of Cash Flows | ||||
| Three Months Ended September 30, | 2017 | 2016 | ||
| Cash flows from operating activities: | ||||
| Net earnings | $ | 32,213 | $ | 35,619 |
| Adjustments to arrive at net cash provided by operating activities: | ||||
| Depreciation and amortization | 12,190 | 11,875 | ||
| Stock-based compensation | 2,044 | 1,940 | ||
| Net loss (gain) on assets | 1,043 | (214 | ) | |
| Loss on divestiture of businesses | 22 | – | ||
| Deferred income taxes | (4,322 | ) | 2,223 | |
| Changes in operating assets and liabilities | 5,118 | (1,694 | ) | |
| Net cash provided by operating activities | 48,308 | 49,749 | ||
| Cash flows from investing activities: | ||||
| Acquisition of property, plant and equipment | (13,159 | ) | (23,710 | ) |
| Proceeds from sale of assets | 139 | 2,687 | ||
| Other investing activity | (206 | ) | (34 | ) |
| Net cash used in investing activities | (13,226 | ) | (21,057 | ) |
| Cash flows from financing activities: | ||||
| Proceeds from additional borrowings | 48,567 | 55,886 | ||
| Debt payments | (35,882 | ) | (62,630 | ) |
| Purchase of treasury stock | (37,743 | ) | (6,673 | ) |
| Dividends paid | (13,143 | ) | (12,091 | ) |
| Other financing activity | 59 | 119 | ||
| Net cash used in financing activities | (38,142 | ) | (25,389 | ) |
| Effect of exchange rate changes on cash and cash equivalents | 1,698 | 9 | ||
| Net (decrease) increase in cash and cash equivalents | (1,362 | ) | 3,312 | |
| Cash and cash equivalents at beginning of period | 26,016 | 20,193 | ||
| Cash and cash equivalents at end of period | $ | 24,654 | $ | 23,505 |
| Supplemental Information | ||||
| Three Months Ended September 30, | 2017 | 2016 | ||
| Dividends paid per share | $ | 0.30 | $ | 0.27 |
Contacts
Sensient Technologies Corporation
Kim Chase
(414) 347-3706
