Sensient Technologies Corporation Reports Results for the Quarter Ended June 30, 2014

  Sensient Technologies Corporation Reports Results for the Quarter Ended June   30, 2014          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  Business Wire  MILWAUKEE -- July 24, 2014  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       Three Months Ended June 30,                    Six Months Ended June 30, Earnings                                                                                                                       2014          2013          % Change           2014            2013          %                                                                                                  Change                                                                                                   Revenue             $ 374,666     $ 378,806       -1.1      %      $ 742,797       $ 744,446     -0.2  %                                                                                                   Cost of               245,002       256,285       -4.4      %        488,625         504,788     -3.2  % products sold Selling and administrative       81,455      73,843       10.3      %       204,384       154,642    32.2  % expenses                                                                                                   Operating             48,209        48,678        -1.0      %        49,788          85,016      -41.4 % income Interest             3,718       4,008                          7,849         8,269    expense                                                                                                   Earnings before       44,491        44,670                           41,939          76,747 income taxes 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           $ 48,209      $ 48,678        -1.0      %      $ 49,788        $ 85,016      -41.4 % income (GAAP) Restructuring - Cost of               -             277                              -               872 products sold Restructuring & other - Selling      12,979      6,365                          65,701        18,543   and administrative Adjusted operating           $ 61,188     $ 55,320       10.6      %      $ 115,489      $ 104,431    10.6  % income                                                                                                   Net earnings        $ 29,061      $ 32,282        -10.0     %      $ 26,986        $ 53,721      -49.8 % (GAAP) Restructuring & other, before         12,979        6,642                            65,701          19,415 tax Tax impact of restructuring &      (2,260  )    (1,940  )                       (17,534   )    (5,306  ) other Adjusted net        $ 39,780     $ 36,984       7.6       %      $ 75,153       $ 67,830     10.8  % earnings                                                                                                   Diluted EPS         $ 0.59        $ 0.65          -9.2      %      $ 0.55          $ 1.08        -49.1 % (GAAP) Restructuring & other, net of        0.22        0.09                           0.97          0.28     tax Adjusted            $ 0.81       $ 0.74         9.5       %      $ 1.52         $ 1.36       11.8  % diluted EPS                                                                                                                                                                                                                                                                                                       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          Three Months Ended June 30,                    Six Months Ended June 30, Segment                                                                                                   Revenue             2014          2013          % Change           2014            2013          %                                                                                                  Change                                                                                                   Flavors &           $ 216,192     $ 226,626       -4.6      %      $ 429,571       $ 442,467     -2.9  % Fragrances Color                 133,225       128,231       3.9       %        266,863         257,710     3.6   % Corporate &           38,992        37,653        3.6       %        74,334          72,529      2.5   % Other Intersegment         (13,743 )    (13,704 )                       (27,971   )    (28,260 ) elimination                                                                                                   Consolidated        $ 374,666    $ 378,806      -1.1      %      $ 742,797      $ 744,446    -0.2  %                                                                                                                                                                                                                                                                                                       Operating Income                                                                                                   Flavors &           $ 33,554      $ 31,984        4.9       %      $ 63,493        $ 60,390      5.1   % Fragrances Color                 30,858        28,432        8.5       %        60,265          55,115      9.3   % Corporate &          (16,203 )    (11,738 )                       (73,970   )    (30,489 ) Other                                                                                                   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                                        469,248            452,358 assets (net) Property, plant, and                                        520,027            532,121 equipment (net) Other assets                                     89,305           45,715                                                                                                         Total Assets                                  $ 1,926,472       $ 1,800,895                                                                                                    Current                                         $ 248,206          $ 213,309 liabilities Long-term debt                                    472,105            342,699 Accrued employee and                                      27,145             60,464 retiree benefits Other                                             32,521             22,259 liabilities Shareholders'                                    1,146,495        1,162,164  Equity                                                                                                     Total   Liabilities   and                                           $ 1,926,472       $ 1,800,895    Shareholders'   Equity                                                                                                                                                                                                      Sensient Technologies                                                                                      Corporation (In thousands, except per share amounts)                                                                                                   Consolidated Statements of Cash Flows Three Months                                    2014               2013 Ended June 30,                                                                                                   Net cash provided by                                     $ 49,604           $ 44,455 operating activities                                                                                                   Cash flows from investing activities:   Acquisition   of property,                                    (15,041   )        (34,202   )   plant and   equipment   Proceeds from   sale of                                         11                 7   assets   Other   investing                                      (526      )       (62       )   activity                                                                                                   Net cash used in investing                                     (15,556   )       (34,257   ) activities                                                                                                   Cash flows from financing activities:   Proceeds from   additional                                      125,487            42,158   borrowings   Debt payments                                   (30,382   )        (31,173   )   Purchase of   treasury                                        (106,029  )        -   stock   Dividends                                       (12,270   )        (11,508   )   paid   Proceeds from   options                                        65               364          exercised and   other                                                                                                   Net cash used in financing                                     (23,129   )       (159      ) activities                                                                                                   Effect of exchange rate changes on cash                                  46               (2,844    ) and cash equivalents                                                                                                   Net increase in cash and cash                                     10,965             7,195 equivalents Cash and cash equivalents at                                   17,463           19,470     beginning of period Cash and cash equivalents at                                  $ 28,428          $ 26,665     end of period                                                                                                                                                                                                                                                                                                       Supplemental Information Three Months                                    2014               2013 Ended June 30,                                                                                                   Depreciation and                                             $ 12,971           $ 12,930 amortization                                                                                                   Dividends paid                                  $ 0.25             $ 0.23 per share  Contact:  Sensient Technologies Corporation Dick Hobbs, (414) 347-3706  
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