Adjusted EPS Increased 9.5% to 81 Cents in the
Second Quarter
Reported EPS of 59 Cents Includes $13.0 Million
of Restructuring Costs
Flavors & Fragrances Operating Margin
Improves 140 Basis Points to 15.5%
Cash Flows from Operations Increased 11.6% in
the Second Quarter
Sensient Technologies Corporation (NYSE: SXT) reported second
quarter adjusted earnings per share of 81 cents, an increase of
9.5% over last year’s adjusted earnings per share of 74 cents.
Consolidated revenue was $374.7 million and $378.8 million in the
second quarters of 2014 and 2013, respectively. Adjusted operating
income increased by 10.6%, to $61.2 million, compared to $55.3
million of adjusted operating income reported in the second quarter
of 2013. Sensient’s adjusted operating margin increased 170 basis
points to 16.3% in the second quarter. The adjusted results
eliminate the impact of the 2014 and 2013 restructuring and other
costs, which are discussed in more detail below. As reported,
diluted earnings per share were 59 cents and 65 cents in the second
quarters of 2014 and 2013, respectively. Reported operating income
was $48.2 million in this year’s second quarter compared to $48.7
million in last year’s second quarter. Operating income was reduced
by restructuring and other costs of $13.0 million and $6.6 million,
in the second quarters of 2014 and 2013, respectively. As reported,
operating margins were 12.9% in the second quarters of both 2014
and 2013. Foreign currency translation did not have a significant
effect on either revenue or operating income in the quarter.
For the six months ended June 30, 2014, adjusted earnings per
share were $1.52 compared to $1.36 in the first half of last year,
an increase of 11.8%. Consolidated revenue was $742.8 million and
$744.4 million for the first six months of 2014 and 2013,
respectively. Adjusted operating income was $115.5 million in the
first six months of 2014, an increase of 10.6% over the adjusted
operating income of $104.4 million in the first six months of last
year. As reported, earnings per share were $0.55 and $1.08 in the
first six months of 2014 and 2013, respectively. Operating income,
as reported, was $49.8 million in the first half of this year
compared to $85.0 million in the first half of last year.
Restructuring and other costs were $65.7 million in the first six
months of 2014, compared to $19.4 million in the first six months
of 2013.
Sensient initiated a restructuring plan in the first quarter of
this year to eliminate underperforming operations, consolidate
manufacturing facilities, and improve efficiencies within the
Company. In 2013, the Company incurred restructuring costs to
relocate the headquarters of the Flavors & Fragrances Group and
consolidate manufacturing facilities. As noted above, the Company
incurred pre-tax restructuring and other costs of $13.0 million in
the second quarter of 2014, including $9.2 million of non-cash
charges for the write-down of fixed assets. For the six months
ended June 30, 2014, restructuring and other costs were $65.7
million, including $48.9 million of non-cash charges. In 2013,
restructuring costs were $6.6 million in the second quarter and
$19.4 million for the first six months.
Cash provided by operating activities increased 11.6% to $49.6
million in the quarter, compared to $44.5 million in last year’s
second quarter. The increase was driven by higher earnings,
excluding the non-cash charges. The Company repurchased 1.8 million
shares of its common stock in the second quarter, completing the
program to repurchase up to two million shares announced earlier
this year. Including dividend payments, the Company returned
approximately $120 million to shareholders in the second quarter
and more than $130 million year-to-date.
“I am very pleased with the strong results reported by the
Company and each of the operating groups in the second quarter,”
said Paul Manning, President and CEO of Sensient Technologies
Corporation. “Each of the Groups reported local currency operating
profit growth of over five percent and significant margin
improvement. We continue to see progress in the Flavors &
Fragrances Group and we are optimistic about future opportunities
across all of our businesses.”
The Board of Directors recently approved the adoption of
amendments to the Company’s Articles of Incorporation, By-Laws and
Corporate Governance Guidelines to provide for a majority voting
standard in uncontested elections of directors and replace the
Company’s current plurality voting standard and director
resignation policy. In accordance with Wisconsin law, the adoption
of a proposed amendment to Sensient’s Articles of Incorporation
will be submitted to a vote of Sensient’s shareholders at the
Company’s 2015 annual meeting of shareholders. If approved by a
majority of the Company’s shareholders, the majority voting
standard will apply to Company elections of directors thereafter.
The adoption of a majority voting standard is the latest step in
Sensient’s ongoing efforts to enhance its corporate governance
practices over the last few years. Other significant enhancements
have included the appointment of Dr. Elaine R. Wedral as
independent Lead Director, several changes to the Company’s
director and officer compensation practices designed to further
enhance the linkage between pay and Company performance, the
declassification of the Company’s Board of Directors and the
elimination of Sensient’s poison pill. The Board of Directors and
its Nominating and Corporate Governance Committee have also made
significant progress in their ongoing evaluation of potential
candidates for Sensient’s Board of Directors.
BUSINESS REVIEW
The Color Group reported revenue of $133.2 million in the
quarter, an increase of 3.9% from the $128.2 million reported in
the comparable period last year. Operating income increased 8.5% to
$30.9 million from $28.4 million in last year’s second quarter. The
Color Group’s operating margin increased 100 basis points to 23.2%
in the quarter, driven by strong performances in the digital inks
and food and beverage color businesses. Foreign currency
translation increased revenue by less than one percent and
operating income by 1.5% in the quarter.
For the six months ended June 30, 2014, Color Group revenue was
$266.9 million, an increase of 3.6% from the $257.7 million
reported in the first six months of last year. Operating income
increased 9.3% to $60.3 million compared to $55.1 million for the
comparable period last year. Foreign currency translation did not
have a significant impact on either revenue or operating income in
the first half of 2014.
The Flavors & Fragrances Group reported second quarter
revenue of $216.2 million compared to the $226.6 million reported
in last year’s second quarter. Operating income increased 4.9% to
$33.6 million compared to $32.0 million in the second quarter of
2013. The Flavors & Fragrances Group’s operating margin
increased to 15.5% in the quarter, an improvement of 140 basis
points from the margin in last year’s second quarter. Several
businesses reported double-digit operating profit growth in the
quarter including Natural Ingredients, North America Beverage,
North America Savory, Europe Beverage and Europe Sweet. Foreign
currency translation did not have a significant impact on either
revenue or operating income in the quarter.
The Flavors & Fragrances Group reported revenue of $429.6
million and $442.5 million in the first six months of 2014 and
2013, respectively. Operating income was $63.5 million for the
first six months of 2014, an increase of 5.1% compared to the $60.4
million reported in the comparable period last year. Foreign
currency translation did not have a significant impact on either
revenue or operating income in the first half of 2014.
The Corporate & Other segment, which includes the Company’s
operations in Asia Pacific, and the flavor businesses in Central
and South America, reported revenue of $39.0 million in the second
quarter compared to $37.7 million in the comparable period last
year. For the six months ended June 30, 2014, revenue was $74.3
million, an increase of 2.5% over the $72.5 million reported in the
first half of last year. In local currency terms, revenue in this
segment grew by approximately 7% for both the quarter and
year-to-date periods.
2014 OUTLOOK
Sensient has increased its 2014 diluted earnings per share
guidance to be within the range of $2.95 and $3.02, excluding
restructuring and other costs. The Company’s previous guidance had
been a range between $2.92 and $3.00 per share.
CONFERENCE CALL
The Company will host a conference call to discuss its 2014
second quarter financial results at 10:00 a.m. CDT on Friday, July
25, 2014. To participate in the conference call, please contact
InterCall Teleconferencing at (706) 758-1089 and refer to
conference identification number 72151622. 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 July
25, 2014, through midnight on August 1, 2014, by calling (404)
537-3406 and referring to conference identification number
72151622. A transcript of the call will also 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. 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 Annual Report
on Form 10-K for the year ended December 31, 2013, and Quarterly
Report on Form 10-Q for the quarter ended March 31, 2014.
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.
www.sensient.com
Sensient Technologies
Corporation
(In thousands, except percentages and per share amounts)
Consolidated
Statements of Earnings Three Months Ended June 30,
Six Months Ended June 30, 2014 2013
% Change 2014 2013 % Change
Revenue $ 374,666 $ 378,806 -1.1 % $ 742,797 $ 744,446 -0.2 %
Cost of products sold 245,002 256,285 -4.4 % 488,625 504,788
-3.2 % Selling and administrative expenses 81,455
73,843 10.3 % 204,384 154,642
32.2 % Operating income 48,209 48,678 -1.0 % 49,788
85,016 -41.4 % Interest expense 3,718 4,008
7,849 8,269 Earnings
before income taxes 44,491 44,670 41,939 76,747 Income taxes
15,430 12,388 14,953
23,026 Net earnings $ 29,061 $ 32,282 $
26,986 $ 53,721 Earnings per common share:
Basic $ 0.60 $ 0.65 $ 0.55 $ 1.08
Diluted $ 0.59 $ 0.65 $ 0.55 $ 1.08
Average common shares outstanding: Basic
48,665 49,751 -2.2 % 49,256
49,731 -1.0 % Diluted 48,953
49,917 -1.9 % 49,512 49,892
-0.8 %
Reconciliation of Non-GAAP
Amounts The Company's 2014 results include pre-tax
restructuring and other charges of $13.0 million ($10.7 million
after-tax or $0.22 per share) and $65.7 million ($48.2 million
after-tax or $0.97 per share) for the three and six month periods
ended June 30, 2014, respectively, related to eliminating
underperforming operations, consolidating manufacturing facilities,
improving efficiencies within the Company and other items. The
Company's 2013 results include pre-tax restructuring charges of
$6.6 million ($4.7 million after-tax or $0.09 per share) and $19.4
million ($14.1 million after-tax of $0.28 per share) for the three
and six month periods ended June 30, 2013 related to the 2013
restructuring program.
Three Months Ended
June 30, Six Months Ended June 30, 2014
2013 % Change 2014 2013 % Change
Operating income (GAAP) $ 48,209 $
48,678 -1.0 %
$ 49,788 $ 85,016
-41.4 % Restructuring - Cost of products sold - 277 - 872
Restructuring & other - Selling and administrative
12,979 6,365 65,701
18,543
Adjusted operating income $
61,188 $ 55,320 10.6 %
$
115,489 $ 104,431 10.6 %
Net earnings (GAAP) $ 29,061 $
32,282 -10.0 %
$ 26,986 $ 53,721
-49.8 % Restructuring & other, before tax 12,979 6,642 65,701
19,415 Tax impact of restructuring & other (2,260 )
(1,940 ) (17,534 ) (5,306 )
Adjusted net
earnings $ 39,780 $ 36,984
7.6 %
$ 75,153 $ 67,830
10.8 %
Diluted EPS (GAAP) $ 0.59
$ 0.65 -9.2 %
$ 0.55 $
1.08 -49.1 % Restructuring & other, net of tax
0.22 0.09 0.97 0.28
Adjusted diluted EPS $ 0.81
$ 0.74 9.5 %
$ 1.52
$ 1.36 11.8 % These
non-GAAP financial measures are utilized by management in comparing
our operating performance on a consistent basis. We believe that
these financial measures are appropriate to enhance an overall
understanding of our underlying operating performance trends
compared to historical and prospective periods. Management also
believes that these measures are useful to investors in their
analysis of our results of operations and provide improved
comparability between fiscal periods. Non-GAAP financial measures
should not be considered in isolation from, or as a substitute for,
financial information calculated in accordance with GAAP. Investors
are encouraged to review the reconciliation of these non-GAAP
measures to their most directly comparable GAAP financial measures.
Sensient Technologies Corporation
(In thousands, except per share amounts)
Results by Segment Three Months Ended June 30, Six
Months Ended June 30,
Revenue
2014 2013 % Change 2014 2013
% Change Flavors & Fragrances $ 216,192 $ 226,626
-4.6 % $ 429,571 $ 442,467 -2.9 % Color 133,225 128,231 3.9 %
266,863 257,710 3.6 % Corporate & Other 38,992 37,653 3.6 %
74,334 72,529 2.5 % Intersegment elimination (13,743 )
(13,704 ) (27,971 ) (28,260 )
Consolidated $ 374,666 $ 378,806 -1.1 % $ 742,797
$ 744,446 -0.2 %
Operating
Income
Flavors & Fragrances $ 33,554 $ 31,984 4.9 % $ 63,493 $
60,390 5.1 % Color 30,858 28,432 8.5 % 60,265 55,115 9.3 %
Corporate & Other (16,203 ) (11,738 )
(73,970 ) (30,489 ) Consolidated $ 48,209 $
48,678 -1.0 % $ 49,788 $ 85,016 -41.4 %
Beginning in the first quarter of 2014, the results of
operations for the Company’s Fragrances businesses in Asia Pacific
and China, previously reported in the Corporate & Other
segment, are reported in the Flavors & Fragrances Group, and
the results of operations for the Company’s pharmaceutical flavors
business, previously reported in the Flavors & Fragrances
Group, are reported in the Colors Group with the pharmaceutical
colors business. Results for 2013 have been restated to reflect
this change. Restructuring and other charges are reported in the
Corporate & Other segment.
Consolidated
Condensed Balance Sheets June 30, 2014
2013 Current assets $ 847,892 $ 770,701 Goodwill
& intangible assets (net) 469,248 452,358 Property, plant, and
equipment (net) 520,027 532,121 Other assets 89,305
45,715 Total Assets $ 1,926,472 $
1,800,895 Current liabilities $ 248,206 $ 213,309
Long-term debt 472,105 342,699 Accrued employee and retiree
benefits 27,145 60,464 Other liabilities 32,521 22,259
Shareholders' Equity 1,146,495 1,162,164
Total Liabilities and Shareholders' Equity $
1,926,472 $ 1,800,895
Sensient Technologies Corporation
(In thousands, except per share amounts)
Consolidated Statements of Cash Flows Three Months Ended
June 30, 2014 2013 Net cash provided by
operating activities $ 49,604 $ 44,455 Cash flows from
investing activities: Acquisition of property, plant and equipment
(15,041 ) (34,202 ) Proceeds from sale of assets 11 7 Other
investing activity (526 ) (62 ) Net cash used
in investing activities (15,556 ) (34,257 )
Cash flows from financing activities: Proceeds from additional
borrowings 125,487 42,158 Debt payments (30,382 ) (31,173 )
Purchase of treasury stock (106,029 ) - Dividends paid (12,270 )
(11,508 ) Proceeds from options exercised and other 65
364 Net cash used in financing
activities (23,129 ) (159 ) Effect of exchange
rate changes on cash and cash equivalents 46
(2,844 ) Net increase in cash and cash equivalents 10,965
7,195 Cash and cash equivalents at beginning of period
17,463 19,470 Cash and cash equivalents at end
of period $ 28,428 $ 26,665
Supplemental Information Three Months Ended June 30,
2014 2013 Depreciation and amortization $
12,971 $ 12,930 Dividends paid per share $ 0.25 $ 0.23
Sensient Technologies CorporationDick Hobbs, (414) 347-3706
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