MILWAUKEE--(BUSINESS WIRE)-- Sensient Technologies Corporation (NYSE: SXT) reported earnings per share of 89 cents in the first quarter of 2018 compared to 30 cents in the first quarter of 2017. Revenue was $356.5 million in this year’s first quarter compared to $341.4 million in last year’s first quarter. Operating income was $55.7 million in the first quarter of 2018 and $24.0 million in last year’s first quarter.

As previously disclosed, the Company completed its restructuring activities in 2017 and did not incur any restructuring or other costs in the first quarter of 2018. Therefore, no adjustments were made to the GAAP results in the first quarter of 2018. Any reference to “adjusted results” refers to the results in the comparable period in 2017. The 2017 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 2017 first quarter operating income by $31.3 million ($23.4 million after-tax or 53 cents per share).

The adjusted results, discussed below, eliminate the impact of the restructuring and other costs in last year’s results, 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 earnings per share increased approximately 9% to 89 cents in this year’s first quarter, compared to adjusted earnings per share of 82 cents in the comparable period last year. First quarter operating income was $55.7 million, compared to adjusted operating income of $55.3 million reported in last year’s first quarter. Foreign currency translation increased revenue, operating income, and earnings per share by approximately 5% compared to the adjusted results in 2017.

The Company completed the acquisition of the natural colors business of GlobeNatural, a natural food and ingredient company based in Lima, Peru, in the first quarter. The natural colors of this business are used in a wide range of food and beverage applications and give Sensient expanded natural colors production capacity.

BUSINESS REVIEW

The Color Group reported revenue of $147.2 million in the quarter and $134.1 million in last year’s first quarter, an increase of approximately 10%. Segment operating income increased approximately 11% to $33.7 million in the quarter from $30.2 million in last year’s first quarter. Foreign exchange rates increased both revenue and operating income by approximately 6% in the quarter. The Group’s strong performance was driven primarily by outstanding new wins in cosmetics and natural colors.

The Flavors & Fragrances Group reported revenue of $188.3 million in the quarter and $186.9 million in last year’s first quarter. Segment operating income decreased to $25.3 million in the quarter from $28.8 million in last year’s first quarter. Foreign exchange rates increased revenue by approximately 4% and operating profit by approximately 1% in the quarter. The Group’s lower profit was a result of higher onion costs, lower onion pricing, and higher fragrance raw material costs. The Company now expects the onion headwind to continue through the end of the third quarter. The Group was also impacted by higher costs and lower volumes at the production site affected by last year’s plant consolidation. The lower volumes are also due to unfavorable trends in the North American dairy industry. The European Flavor businesses, Fragrances, and BioNutrients delivered strong results in the quarter.

The Asia Pacific Group reported revenue of $30.3 million in the current quarter compared to $29.6 million in last year’s first quarter. Segment operating income decreased to $4.9 million in the quarter from $5.2 million in the comparable period last year. Foreign exchange rates increased revenue by approximately 4% and operating income by approximately 6% in the quarter.

Corporate & Other reported operating costs of $8.2 million in the quarter and $40.1 million in last year’s first quarter. Last year’s first quarter includes $31.3 million of restructuring and other costs.

2018 OUTLOOK

“The Color Group had another strong quarter, led by cosmetics and food and beverage colors,” said Paul Manning, Chairman, President and CEO of Sensient Technologies Corporation. “We are off to a strong start in the second quarter in the Color Group. Results in our Asia Pacific Group are also off to a strong start in the second quarter. Within Flavors & Fragrances, many of the businesses continue to perform well, and the completion of the restructuring program has created a strong foundation for growth. While we now expect the onion headwind to continue through the end of the third quarter, this is a short-term issue that will resolve itself this year. I remain very optimistic about the Company’s future.”

As a result of higher onion costs and continued pricing pressure in the onion market the Company is updating its guidance. Sensient now expects diluted earnings per share for 2018 to be between $3.70 and $3.80. The Company’s previous guidance had been between $3.70 and $3.90.

CONFERENCE CALL

The Company will host a conference call to discuss its 2018 first quarter financial results at 10:00 a.m. CDT on Wednesday, April 25, 2018. To participate in the conference call, please contact InterCall Teleconferencing at (888) 818-9025 and refer to conference identification number 1249634. 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 April 25, 2018, through midnight on May 2, 2018, by calling (404) 537-3406 and referring to conference identification number 1249634. 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; the effectiveness of the Company’s past restructuring activities; 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; currency exchange rate fluctuations; estimates related to the Tax Cuts and Jobs Act and its effects on our results; 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.

www.sensient.com

Sensient Technologies Corporation
(In thousands, except percentages and per share amounts)
(Unaudited)
Consolidated Statements of Earnings					Three Months Ended March 31,
					2018				2017				% Change
Revenue					$	356,477			$	341,397			4.4	%
Cost of products sold						233,406				220,452			5.9	%
Selling and administrative expenses						67,390				96,908			-30.5	%
Operating income						55,681				24,037			131.6	%
Interest expense						5,555				4,811
Earnings before income taxes						50,126				19,226
Income taxes						11,932				6,034
Net earnings					$	38,194			$	13,192			189.5	%
Earnings per share of common stock:
	Basic				$	0.89			$	0.30
	Diluted				$	0.89			$	0.30
Average common shares outstanding:
	Basic					42,879				44,202
	Diluted					43,034				44,479

Reconciliation of Non-GAAP Amounts
The Company did not incur any restructuring or other costs for the three months ended March 31, 2018. The Company's results for the three months ended March 31, 2017, included pre-tax restructuring and other costs of $31.3 million ($23.4 million after-tax or $0.53 per share). The restructuring costs related to eliminating underperforming operations, consolidating manufacturing facilities and improving efficiencies within the Company. The other costs in 2017 related to the completed sale of a facility and certain related business lines within the Flavors & Fragrances segment in Strasbourg, France.
				Three Months Ended March 31,
				2018				2017					% Change
Operating income (GAAP)				$	55,681			$	24,037				131.6	%
Restructuring - Cost of products sold					-				342
Restructuring - Selling and administrative					-				19,870
Other - Selling and administrative					-				11,047
Adjusted operating income				$	55,681			$	55,296				0.7	%
Net earnings (GAAP)				$	38,194			$	13,192				189.5	%
Restructuring and other, before tax					-				31,259
Tax impact of restructuring and other					-				(7,827	)
Adjusted net earnings				$	38,194			$	36,624				4.3	%
Diluted EPS (GAAP)				$	0.89			$	0.30				196.7	%
Restructuring and other, net of tax					-				0.53
Adjusted diluted EPS				$	0.89			$	0.82				8.5	%

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.
Note: Earnings per share calculations may not foot due to rounding differences.

Sensient Technologies Corporation
(In thousands, except per share amounts)
(Unaudited)
Results by Segment				Three Months Ended March 31,
Revenue				2018					2017					% Change
Flavors & Fragrances				$	188,346				$	186,875				0.8	%
Color					147,160					134,066				9.8	%
Asia Pacific					30,267					29,636				2.1	%
Intersegment elimination					(9,296	)				(9,180	)
Consolidated				$	356,477				$	341,397				4.4	%
Operating Income
Flavors & Fragrances				$	25,327				$	28,770				-12.0	%
Color					33,672					30,217				11.4	%
Asia Pacific					4,872					5,150				-5.4	%
Corporate & Other					(8,190	)				(40,100	)
Consolidated				$	55,681				$	24,037				131.6	%

The Company’s reportable segments consist of the Flavors & Fragrances, Color, and Asia Pacific segments. The 2017 restructuring and other costs are reported in Corporate & Other.

Consolidated Condensed Balance Sheets
March 31,							2018				2017
Cash and cash equivalents							$	30,420			$	29,109
Trade accounts receivable, net								216,480				202,343
Inventories								467,996				410,067
Other current assets								45,023				51,422
Assets Held for Sale								2,022				6,788
	Total Current Assets							761,941				699,729
Goodwill & intangible assets (net)								433,001				395,806
Property, plant, and equipment (net)								502,034				478,582
Other assets								78,412				77,085
	Total Assets						$	1,775,388			$	1,651,202
Trade accounts payable							$	96,136			$	81,260
Short-term debt								20,237				20,281
Other current liabilities								86,865				89,543
	Total Current Liabilities							203,238				191,084
Long-term debt								691,265				572,200
Accrued employee and retiree benefits								22,021				20,430
Other liabilities								31,408				17,653
Shareholders' Equity								827,456				849,835
	Total Liabilities and Shareholders' Equity						$	1,775,388			$	1,651,202

Sensient Technologies Corporation
(In thousands, except per share amounts)
(Unaudited)
Consolidated Statements of Cash Flows
Three Months Ended March 31,								2018					2017
Cash flows from operating activities:
	Net earnings							$	38,194				$	13,192
	Adjustments to arrive at net cash provided by operating activities:
	Depreciation and amortization								12,578					12,141
	Stock-based compensation								1,254					1,930
	Net loss on assets								70					386
	Loss on divestiture of businesses								-					31,882
	Deferred income taxes								(4,346	)				2,202
	Changes in operating assets and liabilities								(29,499	)				(30,574	)
Net cash provided by operating activities									18,251					31,159
Cash flows from investing activities:
	Acquisition of property, plant and equipment								(11,058	)				(10,069	)
	Cash receipts on sold receivables								9,051					6,407
	Proceeds from sale of assets								45					105
	Proceeds from divestiture of businesses								-					12,457
	Acquisition of new businesses								(11,000	)				-
	Other investing activity								(798	)				(63	)
Net cash (used in) provided by investing activities									(13,760	)				8,837
Cash flows from financing activities:
	Proceeds from additional borrowings								92,348					5,657
	Debt payments								(12,280	)				(19,350	)
	Purchase of treasury stock								(72,704	)				(12,365	)
	Dividends paid								(14,274	)				(13,306	)
	Other financing activity								(2,715	)				(477	)
Net cash used in financing activities									(9,625	)				(39,841	)
Effect of exchange rate changes on cash and cash equivalents									6,210					3,089
Net increase in cash and cash equivalents									1,076					3,244
Cash and cash equivalents at beginning of period									29,344					25,865
Cash and cash equivalents at end of period								$	30,420				$	29,109
Supplemental Information
Three Months Ended March 31,								2018					2017
Dividends paid per share								$	0.33				$	0.30

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Sensient Technologies Corporation

Kim Chase

(414) 347-3706

Source: Sensient Technologies Corporation

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