Sensient Technologies Corporation (NYSE:SXT) reported
diluted earnings per share of 30 cents for its third quarter ended
September 30, 2005. Diluted earnings per share were 46 cents in the
third quarter of 2004 and 34 cents in the second quarter of 2005.
Revenue for the third quarter was $256.4 million compared to $256.8
million in the prior year's third quarter. Strong revenue growth in
North American food and beverage product lines for both colors and
flavors was offset by lower inkjet ink volumes. A sharp rise in costs
for raw materials and energy impacted quarterly earnings by six cents
per share.
Results for the third quarter of 2005 include tax benefits from favorable audit settlements of two cents per share, which are offset by severance charges of two cents per share.
Diluted earnings per share for the nine months ended September 30, 2005, were 91 cents compared to $1.17 in last year's first nine months. Revenue for the first nine months of this year was $771.0 million compared to $774.8 million in the first nine months of the prior year. The prior year's comparable period included $30.2 million of inkjet ink revenue that was lost at the end of 2004 when a major customer changed suppliers. Results for the first nine months of 2005 include higher energy, raw material and severance costs totaling approximately eleven cents per share. Year-to-date results also include a previously disclosed one-time expense, recorded in the Corporate and Other segment, of approximately six cents per share related to a customer arbitration.
For the nine months ended September 30, 2005, cash flow provided by operating activities was $91.9 million. Total debt as of September 30, 2005, was $535.8 million, a reduction of $21.4 million in the quarter and $79.4 million since the beginning of the year.
Sensient also announced today that it is evaluating actions to reduce costs by lowering headcount and rationalizing certain facilities. These plans, which will target annual savings in excess of $10 million, are expected to be finalized in the fourth quarter. The Company expects to incur one-time expenses estimated at $8 million in connection with the program.
"The company is achieving solid revenue growth within the food and beverage product lines, however, rising raw material and energy costs are depressing operating profit," said Kenneth P. Manning, Chairman, President and CEO of Sensient Technologies Corporation. "We are responding to rising costs with price increases and a program to reduce our cost structure significantly, which is expected to deliver earnings growth in 2006."
BUSINESS REVIEW
Flavors & Fragrances Group revenue grew 5.8%, to $171.2 million in the quarter ended September 30, 2005, compared to $161.8 million in last year's third quarter. Operating income was $20.2 million compared to $24.9 million in the third quarter of 2004. For the past nine months, revenue and operating income were $504.5 million and $63.5 million, respectively. Group revenue in the quarter benefited from strong growth in North America. New customer wins led to a 7.9% increase in U.S. traditional flavor sales. Revenue was also up in Canada, Latin America and Europe.
Third quarter operating income was affected by cost increases, including higher costs for raw materials and energy. Increased costs impacted most product lines, but were particularly severe within the dehydrated flavors product line because of low yields in the 2005 crop. Although pricing within this product line was higher in the quarter, these price increases did not offset the effect of higher costs. Additional price increases, which will take place when annual contracts are renewed in the fourth quarter of 2005, are expected to result in greater profitability within this product line.
Color Group revenue was $82.1 million in the quarter ended September 30, 2005, compared to $92.5 million in last year's third quarter. Operating income was $13.1 million compared to $17.0 million in the third quarter of 2004. For the past nine months, revenue and operating income were $261.3 million and $42.6 million, respectively. Group revenue for the quarter was down because of lower inkjet ink revenues, primarily as a result of the previously disclosed winding up of a supply agreement with an original equipment manufacturer at the end of 2004. Quarterly operating income declined on lower inkjet ink revenues and unfavorable cost comparisons to the prior year. This quarter showed continued growth in revenue and profit from food and beverage colors.
Asia Pacific Group revenues, which are reported within the Corporate and Other segment, were up 4.1% in the quarter, as a result of sales gains in Australia. The Asia Pacific Group was realigned during the third quarter. As a result, Sensient's operations in Japan and China are now reported as part of the Flavors & Fragrances Group. Previously, these locations were included within the Asia Pacific Group. This change in reporting segments has been reflected in the results for the three months and nine months ended September 30, 2005. Results for the comparable periods in 2004 have also been restated to reflect this change.
2005 OUTLOOK
Sensient expects that its 2005 fourth quarter earnings, before any expenses related to its cost reduction program, will be flat in comparison to the third quarter of 2005.
CONFERENCE CALL
The company will host a conference call to discuss its 2005 third quarter financial results at 2:00 p.m. CDT on Monday, October 17, 2005. To make a reservation for the conference call, please contact InterCall Teleconferencing at (706) 645-6973 and refer to the Sensient Technologies Corporation conference call.
A replay will be available beginning at 5:00 p.m. CDT on October 17, 2005, through midnight on October 24, 2005, by calling (706) 645-9291 and referring to passcode 1213421. A transcript of the call will also be posted on the company's web site at www.sensient-tech.com after the call concludes.
This release contains forward-looking statements (as that term is defined in the Private Securities Litigation Reform Act of 1995) that reflect management's current assumptions and estimates of future economic circumstances, industry conditions, company performance and financial results. A variety of factors could cause the company's actual results and experience to differ materially from the anticipated results, including, but not limited to the factors noted in this press release and in the Management's Discussion and Analysis in our most recently filed annual report on Form 10-K for the year ended December 31, 2004, and quarterly report on Form 10-Q for the quarter ended June 30, 2005. The forward-looking statements in this press release speak only as to the date of this release. Sensient Technologies Corporation expressly disclaims any obligation or undertaking to release publicly any updates or revisions to such statements to reflect any change in its expectations upon which such statements are based.
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, display imaging chemicals, and other specialty chemicals. The company's customers include major international manufacturers representing some of the world's best-known brands. Sensient is headquartered in Milwaukee, Wisconsin.
www.sensient-tech.com -0- Sensient Technologies Corporation (In thousands, except percentages and per share amounts) Consolidated Statements of Earnings Three Months Ended Nine Months Ended September 30, September 30, -------------------------- --------------------------- % % 2005 2004 Change 2005 2004 Change -------- --------- -------- --------- --------- ------ Revenue $256,416 $256,849 (0.2) $771,043 $774,819 (0.5) Cost of products sold 183,370 179,287 2.3 543,987 542,495 0.3 Selling and administrative expenses 45,560 41,280 10.4 144,086 133,435 8.0 -------- --------- --------- --------- Operating income 27,486 36,282 (24.2) 82,970 98,889 (16.1) Interest expense 8,820 7,646 26,446 22,974 -------- --------- --------- --------- Earnings before income taxes 18,666 28,636 (34.8) 56,524 75,915 (25.5) Income taxes 4,538 7,044 13,702 21,114 -------- --------- --------- --------- Net earnings $14,128 $21,592 (34.6) $42,822 $54,801 (21.9) ======== ========= ========= ========= Earnings per common share: Basic $0.30 $0.46 (34.8) $0.91 $1.18 (22.9) ======== ========= ========= ========= Diluted $0.30 $0.46 (34.8) $0.91 $1.17 (22.2) ======== ========= ========= ========= Average common shares outstanding: Basic 46,910 46,597 0.7 46,834 46,528 0.7 ======== ========= ========= ========= Diluted 47,170 46,896 0.6 47,173 46,808 0.8 ======== ========= ========= ========= Results by Three Months Ended Nine Months Ended Segment September 30, September 30, -------------------------- --------------------------- % % Revenue 2005 2004 Change 2005 2004 Change -------- -------- --------- -------- --------- --------- ------ Flavors & Fragrances $171,191 $161,781 5.8 $504,502 $485,861 3.8 Color 82,116 92,455 (11.2) 261,290 282,102 (7.4) Corporate & Other 12,246 11,767 4.1 36,152 32,657 10.7 Intersegment elimination (9,137) (9,154) (0.2) (30,901) (25,801) 19.8 -------- --------- --------- --------- Consolidated $256,416 $256,849 (0.2) $771,043 $774,819 (0.5) ======== ========= ========= ========= Operating Income ---------------- Flavors & Fragrances $20,241 $24,944 (18.9) $63,542 $66,486 (4.4) Color 13,137 17,033 (22.9) 42,593 50,386 (15.5) Corporate & Other (5,892) (5,695) 3.5 (23,165) (17,983) 28.8 -------- --------- --------- --------- Consolidated $27,486 $36,282 (24.2) $82,970 $98,889 (16.1) ======== ========= ========= ========= Sensient Technologies Corporation (In thousands, except per share amounts) Consolidated Condensed Balance Sheets September 30, 2005 2004 ---------- ---------- Current assets $511,878 $547,508 Intangibles (net) 440,477 442,191 Property, plant and equipment (net) 381,498 385,029 Other assets 66,534 75,521 ---------- ---------- Total Assets $1,400,387 $1,450,249 ========== ========== Current liabilities $199,069 $255,111 Long-term debt 491,897 518,573 Accrued employee and retiree benefits 41,290 32,764 Other liabilities 14,117 31,225 Shareholders' equity 654,014 612,576 ---------- ---------- Total Liabilities and Shareholders' Equity $1,400,387 $1,450,249 ========== ========== Consolidated Statements of Cash Flows Nine Months Ended September 30, 2005 2004 ---------- ---------- Net cash provided by operating activities $91,900 $94,424 ---------- ---------- Cash flows from investing activities: Acquisition of property, plant and equipment (22,342) (32,535) Proceeds from sale of assets 982 1,092 Decrease in other assets 616 2,822 ---------- ---------- Net cash used in investing activities (20,744) (28,621) ---------- ---------- Cash flows from financing activities: Proceeds from additional borrowings 40,540 188,664 Debt and capital lease payments (91,713) (232,160) Dividends paid (21,240) (21,067) Proceeds from options exercised and other 3,855 2,756 ---------- ---------- Net cash used in financing activities (68,558) (61,807) ---------- ---------- Effect of exchange rate changes on cash and cash equivalents (261) 10 ---------- ---------- Net increase in cash and cash equivalents 2,337 4,006 Cash and cash equivalents at beginning of period 2,243 3,250 ---------- ---------- Cash and cash equivalents at end of period $4,580 $7,256 ========== ========== Supplemental Information Nine Months Ended September 30, 2005 2004 ---------- ---------- Depreciation and amortization $35,407 $34,691 Dividends per share $0.45 $0.45
Results for the third quarter of 2005 include tax benefits from favorable audit settlements of two cents per share, which are offset by severance charges of two cents per share.
Diluted earnings per share for the nine months ended September 30, 2005, were 91 cents compared to $1.17 in last year's first nine months. Revenue for the first nine months of this year was $771.0 million compared to $774.8 million in the first nine months of the prior year. The prior year's comparable period included $30.2 million of inkjet ink revenue that was lost at the end of 2004 when a major customer changed suppliers. Results for the first nine months of 2005 include higher energy, raw material and severance costs totaling approximately eleven cents per share. Year-to-date results also include a previously disclosed one-time expense, recorded in the Corporate and Other segment, of approximately six cents per share related to a customer arbitration.
For the nine months ended September 30, 2005, cash flow provided by operating activities was $91.9 million. Total debt as of September 30, 2005, was $535.8 million, a reduction of $21.4 million in the quarter and $79.4 million since the beginning of the year.
Sensient also announced today that it is evaluating actions to reduce costs by lowering headcount and rationalizing certain facilities. These plans, which will target annual savings in excess of $10 million, are expected to be finalized in the fourth quarter. The Company expects to incur one-time expenses estimated at $8 million in connection with the program.
"The company is achieving solid revenue growth within the food and beverage product lines, however, rising raw material and energy costs are depressing operating profit," said Kenneth P. Manning, Chairman, President and CEO of Sensient Technologies Corporation. "We are responding to rising costs with price increases and a program to reduce our cost structure significantly, which is expected to deliver earnings growth in 2006."
BUSINESS REVIEW
Flavors & Fragrances Group revenue grew 5.8%, to $171.2 million in the quarter ended September 30, 2005, compared to $161.8 million in last year's third quarter. Operating income was $20.2 million compared to $24.9 million in the third quarter of 2004. For the past nine months, revenue and operating income were $504.5 million and $63.5 million, respectively. Group revenue in the quarter benefited from strong growth in North America. New customer wins led to a 7.9% increase in U.S. traditional flavor sales. Revenue was also up in Canada, Latin America and Europe.
Third quarter operating income was affected by cost increases, including higher costs for raw materials and energy. Increased costs impacted most product lines, but were particularly severe within the dehydrated flavors product line because of low yields in the 2005 crop. Although pricing within this product line was higher in the quarter, these price increases did not offset the effect of higher costs. Additional price increases, which will take place when annual contracts are renewed in the fourth quarter of 2005, are expected to result in greater profitability within this product line.
Color Group revenue was $82.1 million in the quarter ended September 30, 2005, compared to $92.5 million in last year's third quarter. Operating income was $13.1 million compared to $17.0 million in the third quarter of 2004. For the past nine months, revenue and operating income were $261.3 million and $42.6 million, respectively. Group revenue for the quarter was down because of lower inkjet ink revenues, primarily as a result of the previously disclosed winding up of a supply agreement with an original equipment manufacturer at the end of 2004. Quarterly operating income declined on lower inkjet ink revenues and unfavorable cost comparisons to the prior year. This quarter showed continued growth in revenue and profit from food and beverage colors.
Asia Pacific Group revenues, which are reported within the Corporate and Other segment, were up 4.1% in the quarter, as a result of sales gains in Australia. The Asia Pacific Group was realigned during the third quarter. As a result, Sensient's operations in Japan and China are now reported as part of the Flavors & Fragrances Group. Previously, these locations were included within the Asia Pacific Group. This change in reporting segments has been reflected in the results for the three months and nine months ended September 30, 2005. Results for the comparable periods in 2004 have also been restated to reflect this change.
2005 OUTLOOK
Sensient expects that its 2005 fourth quarter earnings, before any expenses related to its cost reduction program, will be flat in comparison to the third quarter of 2005.
CONFERENCE CALL
The company will host a conference call to discuss its 2005 third quarter financial results at 2:00 p.m. CDT on Monday, October 17, 2005. To make a reservation for the conference call, please contact InterCall Teleconferencing at (706) 645-6973 and refer to the Sensient Technologies Corporation conference call.
A replay will be available beginning at 5:00 p.m. CDT on October 17, 2005, through midnight on October 24, 2005, by calling (706) 645-9291 and referring to passcode 1213421. A transcript of the call will also be posted on the company's web site at www.sensient-tech.com after the call concludes.
This release contains forward-looking statements (as that term is defined in the Private Securities Litigation Reform Act of 1995) that reflect management's current assumptions and estimates of future economic circumstances, industry conditions, company performance and financial results. A variety of factors could cause the company's actual results and experience to differ materially from the anticipated results, including, but not limited to the factors noted in this press release and in the Management's Discussion and Analysis in our most recently filed annual report on Form 10-K for the year ended December 31, 2004, and quarterly report on Form 10-Q for the quarter ended June 30, 2005. The forward-looking statements in this press release speak only as to the date of this release. Sensient Technologies Corporation expressly disclaims any obligation or undertaking to release publicly any updates or revisions to such statements to reflect any change in its expectations upon which such statements are based.
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, display imaging chemicals, and other specialty chemicals. The company's customers include major international manufacturers representing some of the world's best-known brands. Sensient is headquartered in Milwaukee, Wisconsin.
www.sensient-tech.com -0- Sensient Technologies Corporation (In thousands, except percentages and per share amounts) Consolidated Statements of Earnings Three Months Ended Nine Months Ended September 30, September 30, -------------------------- --------------------------- % % 2005 2004 Change 2005 2004 Change -------- --------- -------- --------- --------- ------ Revenue $256,416 $256,849 (0.2) $771,043 $774,819 (0.5) Cost of products sold 183,370 179,287 2.3 543,987 542,495 0.3 Selling and administrative expenses 45,560 41,280 10.4 144,086 133,435 8.0 -------- --------- --------- --------- Operating income 27,486 36,282 (24.2) 82,970 98,889 (16.1) Interest expense 8,820 7,646 26,446 22,974 -------- --------- --------- --------- Earnings before income taxes 18,666 28,636 (34.8) 56,524 75,915 (25.5) Income taxes 4,538 7,044 13,702 21,114 -------- --------- --------- --------- Net earnings $14,128 $21,592 (34.6) $42,822 $54,801 (21.9) ======== ========= ========= ========= Earnings per common share: Basic $0.30 $0.46 (34.8) $0.91 $1.18 (22.9) ======== ========= ========= ========= Diluted $0.30 $0.46 (34.8) $0.91 $1.17 (22.2) ======== ========= ========= ========= Average common shares outstanding: Basic 46,910 46,597 0.7 46,834 46,528 0.7 ======== ========= ========= ========= Diluted 47,170 46,896 0.6 47,173 46,808 0.8 ======== ========= ========= ========= Results by Three Months Ended Nine Months Ended Segment September 30, September 30, -------------------------- --------------------------- % % Revenue 2005 2004 Change 2005 2004 Change -------- -------- --------- -------- --------- --------- ------ Flavors & Fragrances $171,191 $161,781 5.8 $504,502 $485,861 3.8 Color 82,116 92,455 (11.2) 261,290 282,102 (7.4) Corporate & Other 12,246 11,767 4.1 36,152 32,657 10.7 Intersegment elimination (9,137) (9,154) (0.2) (30,901) (25,801) 19.8 -------- --------- --------- --------- Consolidated $256,416 $256,849 (0.2) $771,043 $774,819 (0.5) ======== ========= ========= ========= Operating Income ---------------- Flavors & Fragrances $20,241 $24,944 (18.9) $63,542 $66,486 (4.4) Color 13,137 17,033 (22.9) 42,593 50,386 (15.5) Corporate & Other (5,892) (5,695) 3.5 (23,165) (17,983) 28.8 -------- --------- --------- --------- Consolidated $27,486 $36,282 (24.2) $82,970 $98,889 (16.1) ======== ========= ========= ========= Sensient Technologies Corporation (In thousands, except per share amounts) Consolidated Condensed Balance Sheets September 30, 2005 2004 ---------- ---------- Current assets $511,878 $547,508 Intangibles (net) 440,477 442,191 Property, plant and equipment (net) 381,498 385,029 Other assets 66,534 75,521 ---------- ---------- Total Assets $1,400,387 $1,450,249 ========== ========== Current liabilities $199,069 $255,111 Long-term debt 491,897 518,573 Accrued employee and retiree benefits 41,290 32,764 Other liabilities 14,117 31,225 Shareholders' equity 654,014 612,576 ---------- ---------- Total Liabilities and Shareholders' Equity $1,400,387 $1,450,249 ========== ========== Consolidated Statements of Cash Flows Nine Months Ended September 30, 2005 2004 ---------- ---------- Net cash provided by operating activities $91,900 $94,424 ---------- ---------- Cash flows from investing activities: Acquisition of property, plant and equipment (22,342) (32,535) Proceeds from sale of assets 982 1,092 Decrease in other assets 616 2,822 ---------- ---------- Net cash used in investing activities (20,744) (28,621) ---------- ---------- Cash flows from financing activities: Proceeds from additional borrowings 40,540 188,664 Debt and capital lease payments (91,713) (232,160) Dividends paid (21,240) (21,067) Proceeds from options exercised and other 3,855 2,756 ---------- ---------- Net cash used in financing activities (68,558) (61,807) ---------- ---------- Effect of exchange rate changes on cash and cash equivalents (261) 10 ---------- ---------- Net increase in cash and cash equivalents 2,337 4,006 Cash and cash equivalents at beginning of period 2,243 3,250 ---------- ---------- Cash and cash equivalents at end of period $4,580 $7,256 ========== ========== Supplemental Information Nine Months Ended September 30, 2005 2004 ---------- ---------- Depreciation and amortization $35,407 $34,691 Dividends per share $0.45 $0.45
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