e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the quarterly period ended: June 30, 2008
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 1-7626
SENSIENT TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
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Wisconsin
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39-0561070 |
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification
Number) |
777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202-5304
(Address of principal executive offices)
Registrants telephone number, including area code: (414) 271-6755
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for at least the past 90 days. Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company.
See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer þ |
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Accelerated filer o |
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Non-accelerated filer o
(Do not check if a smaller reporting company) |
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Smaller reporting company
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuers classes of Common Stock, as
of the latest practicable date.
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Class |
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Outstanding at July 31, 2008 |
Common Stock, par value $0.10 per share
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48,297,687 |
SENSIENT TECHNOLOGIES CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SENSIENT TECHNOLOGIES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In thousands except per share amounts)
(Unaudited)
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Three Months |
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Six Months |
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Ended June 30, |
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Ended June 30, |
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2008 |
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2007 |
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2008 |
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2007 |
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Revenue |
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$ |
332,795 |
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$ |
304,310 |
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$ |
640,214 |
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$ |
589,578 |
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Cost of products sold |
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231,073 |
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209,834 |
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442,850 |
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408,954 |
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Selling and administrative expenses |
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56,869 |
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54,485 |
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112,878 |
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106,421 |
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Operating income |
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44,853 |
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39,991 |
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84,486 |
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74,203 |
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Interest expense |
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8,480 |
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9,470 |
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17,058 |
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18,722 |
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Earnings before income taxes |
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36,373 |
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30,521 |
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67,428 |
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55,481 |
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Income taxes |
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10,913 |
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9,288 |
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21,291 |
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16,902 |
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Net earnings |
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$ |
25,460 |
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$ |
21,233 |
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$ |
46,137 |
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$ |
38,579 |
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Average number of common shares outstanding: |
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Basic |
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47,569 |
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46,655 |
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47,434 |
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46,529 |
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Diluted |
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48,166 |
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47,149 |
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47,986 |
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47,029 |
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Earnings per common share: |
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Basic |
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$ |
.54 |
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$ |
.46 |
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$ |
.97 |
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$ |
.83 |
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Diluted |
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$ |
.53 |
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$ |
.45 |
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$ |
.96 |
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$ |
.82 |
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Dividends per common share |
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$ |
.18 |
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$ |
.16 |
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$ |
.36 |
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$ |
.32 |
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See accompanying notes to consolidated condensed financial statements.
1
SENSIENT TECHNOLOGIES CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
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June 30, |
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2008 |
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December 31, |
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(Unaudited) |
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2007 * |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
10,280 |
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$ |
10,522 |
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Trade accounts receivable, net |
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230,558 |
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196,458 |
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Inventories |
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382,711 |
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361,534 |
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Prepaid expenses and other current assets |
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45,250 |
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41,530 |
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TOTAL CURRENT ASSETS |
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668,799 |
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610,044 |
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OTHER ASSETS |
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43,800 |
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44,404 |
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INTANGIBLE ASSETS, NET |
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14,960 |
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14,789 |
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GOODWILL |
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493,366 |
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476,611 |
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PROPERTY, PLANT AND EQUIPMENT: |
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Land |
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50,231 |
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46,013 |
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Buildings |
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269,084 |
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259,830 |
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Machinery and equipment |
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640,416 |
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612,265 |
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Construction in progress |
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37,337 |
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30,335 |
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997,068 |
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948,443 |
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Less accumulated depreciation |
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(564,318 |
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(530,109 |
) |
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432,750 |
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418,334 |
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TOTAL ASSETS |
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$ |
1,653,675 |
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$ |
1,564,182 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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CURRENT LIABILITIES: |
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Trade accounts payable |
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$ |
96,960 |
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$ |
88,812 |
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Accrued salaries, wages and withholdings from employees |
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20,071 |
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23,684 |
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Other accrued expenses |
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56,440 |
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56,948 |
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Income taxes |
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7,026 |
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2,342 |
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Short-term borrowings |
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51,056 |
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57,487 |
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TOTAL CURRENT LIABILITIES |
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231,553 |
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229,273 |
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OTHER LIABILITIES |
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29,504 |
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26,670 |
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ACCRUED EMPLOYEE AND RETIREE BENEFITS |
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46,493 |
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44,197 |
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LONG-TERM DEBT |
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458,381 |
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449,621 |
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SHAREHOLDERS EQUITY: |
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Common stock |
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5,396 |
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5,396 |
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Additional paid-in capital |
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78,197 |
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75,233 |
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Earnings reinvested in the business |
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847,082 |
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818,180 |
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Treasury stock, at cost |
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(122,229 |
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(132,358 |
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Accumulated other comprehensive income |
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79,298 |
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47,970 |
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TOTAL SHAREHOLDERS EQUITY |
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887,744 |
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814,421 |
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TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
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$ |
1,653,675 |
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$ |
1,564,182 |
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See accompanying notes to consolidated condensed financial statements.
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* |
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Condensed from audited financial statements. |
2
SENSIENT TECHNOLOGIES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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Six Months |
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Ended June 30, |
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2008 |
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2007 |
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Net cash provided by operating activities |
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$ |
38,486 |
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$ |
48,817 |
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Cash flows from investing activities: |
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Acquisition of property, plant and equipment |
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(22,876 |
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(15,629 |
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Proceeds from sale of assets |
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25 |
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1,420 |
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Decrease in other assets |
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1,410 |
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462 |
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Net cash used in investing activities |
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(21,441 |
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(13,747 |
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Cash flows from financing activities: |
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Proceeds from additional borrowings |
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9,052 |
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25,191 |
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Debt payments |
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(21,562 |
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(52,876 |
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Dividends paid |
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(17,235 |
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(15,003 |
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Proceeds from options exercised |
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11,785 |
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7,985 |
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Net cash used in financing activities |
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(17,960 |
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(34,703 |
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Effect of exchange rate changes on cash and cash equivalents |
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673 |
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518 |
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Net (decrease) increase in cash and cash equivalents |
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(242 |
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885 |
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Cash and cash equivalents at beginning of period |
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10,522 |
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5,035 |
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Cash and cash equivalents at end of period |
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$ |
10,280 |
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$ |
5,920 |
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See accompanying notes to consolidated condensed financial statements.
3
SENSIENT TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. |
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Accounting Policies |
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In the opinion of Sensient Technologies Corporation (the Company), the accompanying unaudited
consolidated condensed financial statements contain all adjustments (consisting of only normal
recurring adjustments) which are necessary to present fairly the financial position of the
Company as of June 30, 2008 and December 31, 2007, the results of operations for the three and
six months ended June 30, 2008 and 2007, and cash flows for the six months ended June 30, 2008
and 2007. The results of operations for any interim period are not necessarily indicative of
the results to be expected for the full year. |
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The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results could differ from
those estimates. |
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Expenses are charged to operations in the year incurred. However, for interim reporting
purposes, certain expenses are charged to operations based on a proportionate share of
estimated annual amounts rather than as they are actually incurred. |
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Refer to the notes in the Companys annual consolidated financial statements for the year ended
December 31, 2007, for additional details of the Companys financial condition and a
description of the Companys accounting policies, which have been continued without change
except for the item discussed in Note 3. |
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2. |
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Share-Based Compensation |
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The Company adopted Statement of Financial Accounting Standards (SFAS) No. 123(R),
Share-Based Payment, on January 1, 2006, using the modified prospective transition method. The
Company recognized $0.6 million and $0.3 million of share-based compensation expense for the
quarters ended June 30, 2008 and 2007, respectively. For the six months ended June 30, 2008 and
2007, the Company recognized $0.8 million and $1.8 million of share-based compensation expense,
respectively. |
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The Company estimated the fair value of stock options using the Black-Scholes option pricing
model. Grants during the six months ended June 30, 2008 and 2007 had weighted-average fair
values of $6.77 and $5.81 per share, respectively. Significant assumptions used in estimating
the fair value of the awards granted during the six months ended June 30 are as follows: |
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2008 |
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2007 |
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Dividend yield |
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2.3 |
% |
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2.7 |
% |
Volatility |
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26.3 |
% |
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26.0 |
% |
Risk-free interest rate |
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3.1 |
% |
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4.8 |
% |
Expected term (years) |
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5.3 |
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5.0 |
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3. |
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Fair Value Measurements |
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On January 1, 2008 the Company adopted FASB Statement No. 157, Fair Value Measurements. This
Statement defines fair value for financial assets and liabilities, establishes a framework for
measuring fair value in generally accepted accounting principles (GAAP) and expands disclosures
about fair value measurements. As of June 30, 2008, the Companys only assets and liabilities
subject to this statement are forward contracts (all currently accounted for as cash flow
hedges) and mutual fund investments. Both of these financial instruments were previously being
recorded by the Company at fair value that meets the requirements as defined by FASB Statement
No. 157. Accordingly, there is no impact on the Companys net earnings and financial position
as a result of adopting this standard. The fair value of the forward contracts based on current
pricing obtained for comparable derivative products (Level 2 inputs per Statement No. 157) at
June 30, 2008 was an asset of $0.9 million. The fair value of the investments based on June 30,
2008 market quotes (Level 1 inputs per Statement No. 157) was an asset of $16.4 million. |
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The Company reviewed Financial Accounting Standards Board (FASB) Statement No. 159, The Fair
Value Option for Financial Assets and Liabilities, which permits companies to choose to measure
many financial instruments and certain other items at fair value. The Company chose not to
elect the fair value option for any |
4
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assets and liabilities not currently valued at fair value and determined that this statement
does not have an impact on its financial statements and disclosures. |
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4. |
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Segment Information |
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Operating results by segment for the periods and at the dates presented are as follows: |
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Flavors & |
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Corporate |
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(In thousands) |
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Fragrances |
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Color |
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& Other |
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Consolidated |
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Three months ended June 30, 2008: |
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Revenue from external customers |
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$ |
209,675 |
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$ |
103,794 |
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$ |
19,326 |
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$ |
332,795 |
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Intersegment revenue |
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4,747 |
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3,547 |
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|
937 |
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9,231 |
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Total revenue |
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$ |
214,422 |
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$ |
107,341 |
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$ |
20,263 |
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$ |
342,026 |
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Operating income (loss) |
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$ |
33,944 |
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$ |
19,288 |
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$ |
(8,379 |
) |
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$ |
44,853 |
|
Interest expense |
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|
|
|
|
|
|
|
|
|
8,480 |
|
|
|
8,480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
|
$ |
33,944 |
|
|
$ |
19,288 |
|
|
$ |
(16,859 |
) |
|
$ |
36,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2007: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers |
|
$ |
194,630 |
|
|
$ |
92,987 |
|
|
$ |
16,693 |
|
|
$ |
304,310 |
|
Intersegment revenue |
|
|
4,214 |
|
|
|
2,831 |
|
|
|
708 |
|
|
|
7,753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
198,844 |
|
|
$ |
95,818 |
|
|
$ |
17,401 |
|
|
$ |
312,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
$ |
30,341 |
|
|
$ |
17,157 |
|
|
$ |
(7,507 |
) |
|
$ |
39,991 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
9,470 |
|
|
|
9,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
|
$ |
30,341 |
|
|
$ |
17,157 |
|
|
$ |
(16,977 |
) |
|
$ |
30,521 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flavors & |
|
|
|
|
|
|
Corporate |
|
|
|
|
(In thousands) |
|
Fragrances |
|
|
Color |
|
|
& Other |
|
|
Consolidated |
|
Six months ended June 30, 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers |
|
$ |
400,583 |
|
|
$ |
202,296 |
|
|
$ |
37,335 |
|
|
$ |
640,214 |
|
Intersegment revenue |
|
|
9,042 |
|
|
|
7,816 |
|
|
|
1,519 |
|
|
|
18,377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
409,625 |
|
|
$ |
210,112 |
|
|
$ |
38,854 |
|
|
$ |
658,591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
$ |
62,739 |
|
|
$ |
37,793 |
|
|
$ |
(16,046 |
) |
|
$ |
84,486 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
17,058 |
|
|
|
17,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
|
$ |
62,739 |
|
|
$ |
37,793 |
|
|
$ |
(33,104 |
) |
|
$ |
67,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2007: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers |
|
$ |
371,253 |
|
|
$ |
186,129 |
|
|
$ |
32,196 |
|
|
$ |
589,578 |
|
Intersegment revenue |
|
|
8,104 |
|
|
|
5,881 |
|
|
|
1,349 |
|
|
|
15,334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
379,357 |
|
|
$ |
192,010 |
|
|
$ |
33,545 |
|
|
$ |
604,912 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
$ |
55,778 |
|
|
$ |
34,270 |
|
|
$ |
(15,845 |
) |
|
$ |
74,203 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
18,722 |
|
|
|
18,722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes |
|
$ |
55,778 |
|
|
$ |
34,270 |
|
|
$ |
(34,567 |
) |
|
$ |
55,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning in the first quarter of 2008, the Companys operations in China, previously reported
in the Flavors & Fragrances Group, are reported in the Corporate and Other segment. Results for
2007 have been restated to reflect this change. |
5
|
5. |
|
Inventories |
|
|
|
|
At June 30, 2008 and December 31, 2007, inventories included finished and in-process products
totaling $279.0 million and $266.3 million, respectively, and raw materials and supplies of
$103.7 million and $95.2 million, respectively. |
|
|
6. |
|
Retirement Plans |
|
|
|
|
The Companys components of annual benefit cost for the defined benefit plans for the periods
presented are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
(In thousands) |
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
Service cost |
|
$ |
338 |
|
|
$ |
261 |
|
|
$ |
669 |
|
|
$ |
523 |
|
Interest cost |
|
|
751 |
|
|
|
599 |
|
|
|
1,498 |
|
|
|
1,196 |
|
Expected return on plan assets |
|
|
(291 |
) |
|
|
(160 |
) |
|
|
(578 |
) |
|
|
(319 |
) |
Amortization of prior service cost |
|
|
488 |
|
|
|
484 |
|
|
|
975 |
|
|
|
968 |
|
Amortization of actuarial loss |
|
|
58 |
|
|
|
49 |
|
|
|
116 |
|
|
|
97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit expense |
|
$ |
1,344 |
|
|
$ |
1,233 |
|
|
$ |
2,680 |
|
|
$ |
2,465 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the three and six months ended June 30, 2008, the Company made contributions to its
defined benefit pension plans of $0.9 million and $2.3 million. Total contributions to Company
defined benefit pension plans are expected to be $5.9 million in 2008. |
|
7. |
|
Comprehensive Income |
|
|
|
Comprehensive income is comprised of the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
(In thousands) |
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
Net earnings |
|
$ |
25,460 |
|
|
$ |
21,233 |
|
|
$ |
46,137 |
|
|
$ |
38,579 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments |
|
|
2,966 |
|
|
|
13,353 |
|
|
|
30,145 |
|
|
|
15,064 |
|
Net unrealized gain (loss) on
cash flow hedges |
|
|
603 |
|
|
|
(9 |
) |
|
|
1,183 |
|
|
|
81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net comprehensive income |
|
$ |
29,029 |
|
|
$ |
34,577 |
|
|
$ |
77,465 |
|
|
$ |
53,724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
8. |
|
Cash Flows from Operating Activities |
|
|
|
Cash flows from operating activities are detailed below: |
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30, |
|
(In thousands) |
|
2008 |
|
|
2007 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
46,137 |
|
|
$ |
38,579 |
|
Adjustments to arrive at net cash provided
by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
22,784 |
|
|
|
22,216 |
|
Stock-based compensation |
|
|
763 |
|
|
|
1,805 |
|
Loss (gain) on assets |
|
|
878 |
|
|
|
(501 |
) |
Deferred income taxes |
|
|
481 |
|
|
|
1,460 |
|
Changes in operating assets and liabilities |
|
|
(32,557 |
) |
|
|
(14,742 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
38,486 |
|
|
$ |
48,817 |
|
|
|
|
|
|
|
|
9. |
|
Commitments and Contingencies |
|
|
|
Environmental Matters |
|
|
|
The Company is involved in various significant environmental matters, which are described
below. The Company is also involved in other site closure and related environmental
remediation and compliance activities at a manufacturing site related to a 2001 acquisition by
the Company for which reserves for environmental matters were established as of the date of
purchase. Actions that are legally required or necessary to prepare the site for sale are
substantially complete. |
|
|
|
Superfund Claim |
|
|
|
On July 6, 2004, the EPA notified the Companys subsidiary Sensient Colors Inc. (Sensient
Colors) that it may be a potentially responsible party (PRP) under the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA) for activities at the General
Color Company Superfund Site in Camden, New Jersey (the Site). The EPA requested
reimbursement of $10.9 million in clean-up costs, plus interest. Sensient Colors advised the
EPA that the Site had been expressly excluded from the Companys 1988 stock purchase of H.
Kohnstamm & Company, Inc. (now Sensient Colors). The selling shareholders had retained
ownership of and liability for the Site, and some became owners of General Color Company, which
continued to operate there until the mid-1990s. In a letter to the EPA dated January 31, 2005,
the Company outlined legal challenges to the recoverability of certain costs and urged the EPA
to pursue General Color Company and related parties. The EPA informed Sensient Colors that it
was unwilling to discuss these legal challenges without prior conditions. In 2006, a private
developer, Westfield Acres Urban Renewal Association II, LP, pursuant to an agreement with the
EPA, began redevelopment efforts at the site (construction of affordable housing) by
demolishing buildings thereon. Thereafter, the EPA removed allegedly contaminated soil from the
locations where the buildings once stood. |
|
|
|
On March 16, 2007, the United States filed a complaint in the U.S. District Court in New Jersey
against Sensient Colors claiming over $16 million in response costs allegedly incurred and to
be incurred by the EPA pursuant to CERCLA. On October 30, 2007, the Court issued a memorandum
opinion and order denying Sensient Colors motion to dismiss the complaint. Sensient Colors
filed a timely answer to the complaint and a third-party complaint against the current owner and
former owner and operator of the site. The United States moved to strike Sensient Colors
affirmative defenses. On July 17, 2008, the parties presented oral arguments on the motion to
strike. The court has not yet issued its ruling. On July 29, 2008, Sensient Colors filed a
third-party complaint adding Kohnstamm Inc. (a Canadian affiliate of General Color Company) and
its president Avtar Singh as defendants. By order of the Court, all fact discovery is to be
completed by December 5, 2008. On October 3, 2008, the magistrate judge will meet with the
parties to address unresolved discovery issues. These are likely to include Sensient Colors
motion for a protective order and the EPAs motion to limit discovery to the administrative
record along with objections to particular responses to interrogatories, document demands and
requests for admissions. Fact depositions have been tentatively scheduled to begin in September.
Sensient Colors intends to vigorously defend its interests in the litigation. It is evaluating, among other things, the
pursuit of additional PRPs and additional challenges to the EPAs right to recover its claimed
response costs. Sensient Colors legal |
7
|
|
defense costs are being paid, in part, by an insurer with a reservation of coverage rights.
Litigation to resolve coverage rights is pending. |
|
|
|
Pleasant Gardens Realty Corp. v. H. Kohnstamm & Co., et al. |
|
|
|
The owner of Pleasant Gardens (Property), an apartment complex adjacent to the General Color
Superfund Site, filed a complaint in New Jersey state court in November 2003 against H.
Kohnstamm & Co. (now Sensient Colors), the Company, General Color Company, and unknown
defendants. Plaintiff seeks to hold defendants liable, in an unspecified amount, for damages
related to the alleged contamination of the Property. Plaintiff voluntarily dismissed the
Company without prejudice. Sensient Colors filed an answer denying liability and asserting
affirmative defenses. Limited discovery has occurred. In November 2006, the Camden Redevelopment
Agency (Agency) filed condemnation litigation against plaintiff (and other purported
interested parties) to take the Property. Sensient Colors is not a party to the condemnation
litigation. In advance of its filing, the Agency notified plaintiff that its appraiser had
assessed the fair market value of the Property at $7.7 million and that its environmental
consultant had estimated the costs for environmental cleanup, purportedly to meet requirements
of the New Jersey Department of Environmental Protection (DEP), at $7.5 million. Sensient
Colors and plaintiff have pursued a reduction in the scope and cost of the Agencys proposed
environmental cleanup in meetings with the DEP, the Agency and another party involved in the
condemnation, the New Jersey Schools Construction Corporation (NJSCC). To the extent that
there is a reduction in the condemnation value of the Property due to the Agencys remediation
of contamination for which Sensient Colors is allegedly responsible, such reduction may become a
part of the damages claimed by plaintiff. On March 29, 2007, plaintiff filed an amended
complaint naming the Agency, the NJSCC and the DEP as additional defendants in furtherance of
this effort. On April 20, 2007, Sensient Colors filed its answer to the amended complaint,
including cross claims against these newly added parties. The Agency, the DEP and the New Jersey
Schools Development Authority (NJSDA) (which replaced the NJSCC as a state agency effective
August 7, 2007) each filed answers, cross-claims and counter-claims; Sensient Colors has
responded to all three cross-claims. Fact discovery has been completed. Initial expert reports
and most rebuttal expert reports have been exchanged, and remaining rebuttal expert reports, if
any, will be exchanged shortly. Expert depositions are to be completed by September 1, 2008.
The trial is scheduled to begin on October 6, 2008. |
|
|
|
As of June 30, 2008, the liabilities related to environmental matters are estimated to be
between $0.8 million and $27.6 million. As of June 30, 2008, the Company has accrued $1.8
million, which is all related to the environmental reserves established in connection with the
2001 acquisition discussed above. This accrual represents managements best estimate of these
liabilities; however, the actual liabilities may be above the levels reserved or estimated, in
which case the Company would need to take charges or establish reserves in later periods.
Also, the Company has not been able to make a reasonable estimate of the liabilities, if any,
related to some of the environmental matters discussed above. The Company has not recorded any
potential insurance recoveries related to these liabilities, as receipts are not yet assured.
There can be no assurance that additional environmental matters will not arise in the future. |
|
|
|
Commercial Litigation |
|
|
|
The following is a significant commercial case involving the Company. |
|
|
|
Smead et al. v. Sensient Flavors Inc. et al. |
|
|
|
On April 14, 2008, the Companys subsidiary Sensient Flavors Inc. (Sensient Flavors), certain
other flavor manufacturers, a flavor industry trade association and its management company were
sued in Milwaukee County Circuit Court in Milwaukee, Wisconsin, by a former employee of
International Flavors & Fragrances, Inc. (IFF), Richard Smead, and his spouse, Kathy Smead.
Mr. Smead claims that while working in various positions at IFF he was exposed to butter
flavors and/or their constituents allegedly sold by Sensient Flavors and the other
manufacturer defendants, which caused him to suffer severe and permanent injury to his
respiratory system and other damages. Mrs. Smeads claim is for loss of consortium. The
allegations of this complaint are virtually identical to those contained in other complaints
that have been filed against Sensient Flavors in other jurisdictions over the presence of
diacetyl in butter flavoring for use in microwave popcorn production. |
|
|
|
The Company believes that plaintiffs claims are without merit and will vigorously defend this
case. The Company has responded to the Complaint, denying all liability and joining numerous
motions to dismiss that have been filed by some of the other flavor manufacturers. Briefing on
those motions is not yet complete. A |
8
|
|
preliminary analysis of Sensient Flavors sales records
suggests that it never sold any butter flavoring to IFF. This case is in the very early stages
and no trial date has been set.
|
|
|
|
The Company is involved in various other claims and litigation arising in the normal course of
business. In the judgment of management, which relies in part on information from Company
counsel, the ultimate resolution of these actions will not materially affect the consolidated
financial statements of the Company except as described above. |
9
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Revenue for the second quarter of 2008 was $332.8 million, an increase of 9.4% from $304.3
million recorded in the prior year second quarter. For the six months ended June 30, 2008,
revenue increased 8.6% to $640.2 million from $589.6 million in the prior year comparable
period. Revenue for the Flavors & Fragrances segment increased 7.8% and 8.0% for the quarter
and six months ended June 30, 2008, respectively, over the comparable periods last year.
Revenue for the Color segment increased 12.0% and 9.4% for the quarter and six months ended
June 30, 2008, respectively, over the comparable periods last year. Corporate and Other
revenue increased 16.4% and 15.8% for the quarter and six months ended June 30, 2008,
respectively. Additional information on group results can be found in the Segment Information
section.
The gross profit margin decreased 40 basis points to 30.6% for the quarter ended June 30, 2008,
from 31.0% for the second quarter of 2007. Increased selling prices were offset by higher raw
material costs, energy costs and unfavorable product mix. For the six months ended June 30,
2008, gross profit margin increased 20 basis points to 30.8% from 30.6% in the 2007 comparable
period. Higher selling prices more than offset the increase in raw material and energy costs.
Selling and administrative expenses as a percent of revenue were 17.1% in the second quarter of
2008, an improvement of 80 basis points. For the six months ended June 30, 2008, selling and
administrative expenses as a percent of revenue improved 50 basis points to 17.6%. The
improvement for both periods was due to revenue increasing at a rate greater than the increase
in selling and administrative expenses.
Operating income for the quarter ended June 30, 2008, was $44.9 million, an increase of 12.2%
from $40.0 million for the second quarter of 2007. Operating income for the six months ended
June 30, 2008, was $84.5 million compared to $74.2 million for the comparable period in 2007.
The change in operating income for each period was due to the revenue, margin and expense
changes discussed above.
Favorable foreign exchange rates increased revenue and operating income by 5.8% and 6.5%,
respectively, for the quarter ended June 30, 2008, over the same quarter of 2007. For the six
months ended June 30, 2008, foreign exchange rates increased revenue and operating income by
5.9% and 7.4%, respectively, over the comparable period last year.
Interest expense for the second quarter of 2008 was $8.5 million, a decrease of 10.5% from the
prior years quarter. Interest expense for the six months ended June 30, 2008, was $17.1
million compared to $18.7 million in the prior year period. The decrease in the quarter and
six months was the result of lower interest rates and lower average debt balances.
The effective income tax rates were 30.0% and 30.4% for the quarters ended June 30, 2008 and
2007, respectively. The effective tax rates were 31.6% and 30.5% for the six months ended June
30, 2008 and 2007, respectively. The effective tax rates for the three and six month periods
of both years were decreased by changes in estimates associated with the finalization of prior
year income tax returns and the resolution of prior years tax matters. The 2008 rate for the
quarter and six months also benefited from a change in tax rates in a foreign jurisdiction.
Management expects the effective tax rate for the remainder of 2008 to be 32.5%, excluding the
income tax expense or benefit related to discrete items, which will be reported separately in
the quarter in which they occur.
SEGMENT INFORMATION
Beginning in the first quarter of 2008, the Companys operations in China, previously reported
in the Flavors & Fragrances Group, are reported in the Corporate and Other segment. Results for
2007 have been restated to reflect this change.
Flavors & Fragrances
Revenue for the Flavors & Fragrances segment in the second quarter of 2008 increased $15.6
million, or 7.8%, to $214.4 million from $198.8 million for the same period last year. The
increase in revenue was due to higher revenue in North America ($3.4 million) and Europe ($2.0
million) partially offset by lower revenues in Latin America ($1.1 million). Favorable foreign
currency translation also increased revenue ($10.9 million). The
10
increase in North America was primarily attributable to higher selling prices in dehydrated
flavors and other flavors. The increase in Europe was due to both higher selling prices and
volumes.
For the quarter ended June 30, 2008, operating income increased $3.6 million, or 11.9%, to $33.9
million from $30.3 million last year. The increase was primarily attributable to higher profit
in North America ($2.5 million) and Europe ($0.6 million) partially offset by lower profits in
Latin America ($0.8 million). Favorable foreign currency translation also increased operating
profit ($1.1 million). The increase in North America was primarily due to improved pricing in
dehydrated flavors and other flavors partially offset by higher raw material and energy costs.
The increase in Europe was primarily due to higher selling prices and volumes. The lower profits
in Latin America were primarily due to lower volumes and increased raw material costs partially
offset by higher selling prices. Operating income as a percent of revenue was 15.8%, an
increase of 50 basis points from the comparable quarter last year, primarily due to the reasons
provided above.
For the six months ended June 30, 2008, revenue for the Flavors & Fragrances segment was $409.6
million, an increase of $30.3 million, or 8.0%, from $379.4 million reported in the same period
last year. The increase in revenue was primarily due to increased revenue in North America
($9.0 million) and Europe ($1.8 million) partially offset by lower revenue in Latin America
($1.3 million). Favorable foreign currency translation also increased revenue ($21.4 million).
The increased revenue in North America and Europe is primarily due to higher selling prices in
dehydrated flavors and other flavors as well as volume growth in certain markets. The decrease
in Latin America is primarily due to lower volumes partially offset by higher selling prices.
Operating income for the six months ended June 30, 2008, increased $7.0 million, or 12.5%, to
$62.7 million from $55.8 million last year. The increase in operating income was primarily due
to improvements in North America ($4.8 million) and Europe ($1.3 million) partially offset by
lower operating income in Latin America ($1.3 million). Favorable foreign currency translation
also increased operating profit ($2.2 million). The increase in North America was primarily due
to improved pricing in dehydrated flavors and other flavors and volume growth in certain markets
partially offset by higher raw material and energy costs. The increase in Europe was primarily
attributable to higher selling prices. The decrease in Latin America was primarily due to lower
volumes and higher raw material costs partially offset by higher selling prices. Operating
income as a percent of revenue was 15.3%, an increase of 60 basis points from the comparable
period last year, primarily due to the reasons provided above.
Color
Revenue for the Color segment for the second quarter of 2008 was $107.3 million, an increase of
$11.5 million, or 12.0%, from $95.8 million reported in the prior years comparable period. The
increase in revenue was due to higher volumes of cosmetic colors ($3.3 million), higher volumes
of technical colors ($0.8 million), higher sales of food and beverage colors ($0.7 million) and
higher volumes of pharmaceutical colors ($0.6 million). Favorable foreign currency translation
also increased revenue ($6.1 million). The higher sales of food and beverage colors primarily
related to higher selling prices in North America and higher volumes and selling prices in
Europe.
Operating income for the quarter ended June 30, 2008, increased $2.1 million, or 12.4%, to $19.3
million from $17.2 million in the comparable period last year. The increase was due to higher
profit from sales of technical colors ($1.0 million) and cosmetic colors ($0.5 million)
partially offset by lower profit from food and beverage colors ($1.0 million). Favorable foreign
currency translation also increased operating profit ($1.5 million). The improved profits from
technical colors and cosmetic colors primarily relate to favorable costs and volumes,
respectively. The lower profit from food and beverage colors is primarily due to higher raw
material costs and lower volumes partially offset by increased selling prices. Operating income
as a percent of revenue was 18.0%, an increase of 10 basis points from the prior years quarter.
For the six months ended June 30, 2008, revenue for the Color segment increased $18.1 million,
or 9.4%, to $210.1 million from $192.0 million in 2007. The increase in revenue was due to
increased volumes of cosmetic colors ($2.9 million) and higher sales of food and beverage colors
($2.2 million) and pharmaceutical colors ($1.1 million). Favorable foreign currency translation
also increased revenue ($11.8 million). The higher sales of food and beverage colors were
primarily due to higher selling prices in North America and higher selling prices and volumes in
Europe. The higher pharmaceutical sales were due to both higher volumes and selling prices.
Operating income for the six months ended June 30, 2008, increased $3.5 million, or 10.3%, to
$37.8 million from $34.3 million in the comparable period last year. The increase was due to
increased profit from technical colors ($1.5 million) partially offset by lower profit from food
and beverage colors ($0.9 million). Favorable foreign currency translation also increased
operating profit ($3.0 million). The increased profit from technical colors was due to favorable
product mix and lower costs. The lower profit from food and beverage colors was primarily due
11
to higher raw material costs and lower volumes partially offset by higher selling prices.
Operating income as a percent of revenue was 18.0%, an increase of 20 basis points from the
comparable period last year, primarily due to the reasons provided above.
LIQUIDITY AND FINANCIAL CONDITION
The Companys ratio of debt to total capital improved to 36.5% as of June 30, 2008, from 38.4%
as of December 31, 2007. The improvement resulted from an increase in equity primarily from
current year earnings and the impact of currency translation partially offset by an increase in
total debt. The increase in total debt was primarily due to the impact of currency translation
and financed capital spending partially offset by cash provided by operating activities. The
Companys debt to EBITDA ratio has improved to 2.5 as of June 30, 2008 from 2.6 as of December
31, 2007.
Net cash provided by operating activities was $38.5 million for the six months ended June 30,
2008, compared to $48.8 million for the same period last year. The decrease in cash provided
by operating activities was due to a larger increase in working capital this year compared to
2007 partially offset by higher earnings. The increase in working capital was primarily due to
an increase in accounts receivable as a result of this quarters strong sales and an increase
in inventory partially due to strategic purchases of key raw materials.
Net cash used in investing activities was $21.4 million and $13.7 million for the six months
ended June 30, 2008 and 2007, respectively. Capital expenditures were $22.9 million and $15.6
million for the quarter ended June 30, 2008 and 2007, respectively.
Net cash used in financing activities was $18.0 million for the six months ended June 30, 2008,
compared to $34.7 million in the same period last year. Net payments of debt were $12.5
million and $27.7 million for the first six months of 2008 and 2007, respectively. For
purposes of the cash flow statement, net changes in debt exclude the impact of foreign exchange
rates. Dividends of $17.2 million and $15.0 million were paid during the six months ended June
30, 2008 and 2007, respectively, reflecting the Companys increase in the dividend to $0.36 per
share for the first six months of 2008 compared to $0.32 in the same period of 2007. The
Companys cash from operating activities during the first six months of 2008 and 2007 funded
capital expenditures, payment of dividends and a net reduction in debt.
The Companys financial position remains strong. Its expected cash flows from operations and
existing lines of credit can be used to meet future cash requirements for operations, capital
expenditures and dividend payments to shareholders.
On July 17, 2008, the Companys Board of Directors voted to increase the Companys quarterly
cash dividend from $0.18 per share to $0.19 per share effective for the quarterly dividend
payable on September 2, 2008, to shareholders of record on August 8, 2008.
CONTRACTUAL OBLIGATIONS
There have been no material changes in the Companys contractual obligations during the
quarter ended June 30, 2008. For additional information about contractual obligations, refer
to page 23 of the Companys 2007 Annual Report, portions of which were filed as Exhibit 13.1 to
the Companys Annual Report on Form 10-K for the year ended December 31, 2007.
OFF-BALANCE SHEET ARRANGEMENTS
The Company had no off-balance sheet arrangements as of June 30, 2008.
CRITICAL ACCOUNTING POLICIES
There have been no material changes in the Companys critical accounting policies during
the quarter ended June 30, 2008. For additional information about critical accounting policies,
refer to pages 21 and 22 of the Companys 2007 Annual Report, portions of which were filed as
Exhibit 13.1 to the Companys Annual Report on Form 10-K for the year ended December 31, 2007.
12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the Companys exposure to market risk during the quarter
ended June 30, 2008. For additional information about market risk, refer to pages 22 and 23 of
the Companys 2007 Annual report, portions of which were filed as Exhibit 13.1 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2007.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures: The Company carried out an evaluation, under
the supervision and with the participation of management, including the Companys Chairman and
Chief Executive Officer and its Vice President and Chief Financial Officer, of the
effectiveness, as of the end of the period covered by this report, of the design and operation
of the disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act of
1934. Based upon that evaluation, the Companys Chairman and Chief Executive Officer and its
Vice President and Chief Financial Officer have concluded that the disclosure controls and
procedures were effective as of the end of the period covered by this report.
Change in Internal Control Over Financial Reporting:
During the quarter ended June 30, 2008, the company implemented a new enterprise resource
planning software application at one significant location in its Color segment. The
implementation included the order taking, manufacturing, general ledger and financial reporting
processes. The Company followed a system development process that required significant
pre-implementation planning, design and testing. There has been no other change in the
Companys internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)
and 15d-15(f)) during the Companys most recent quarter that has materially affected, or is
reasonably likely to materially affect, the Companys internal control over financial
reporting.
FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements that reflect managements current assumptions
and estimates of future economic circumstances, industry conditions, Company performance and
financial results. Forward-looking statements include statements in the future tense,
statements referring to any period after June 30, 2008, and statements including the terms
expect, believe, anticipate and other similar terms that express expectations as to
future events or conditions. The Private Securities Litigation Reform Act of 1995 provides a
safe harbor for such forward-looking statements. Such forward-looking statements are not
guarantees of future performance and involve known and unknown risks, uncertainties and other
factors that could cause actual events to differ materially from those expressed in those
statements. A variety of factors could cause the Companys actual results and experience to
differ materially from the anticipated results. These factors and assumptions include the pace
and nature of new product introductions by the Company and the Companys customers; the
Companys ability to successfully implement its growth strategies; the outcome of the Companys
various productivity-improvement and cost-reduction efforts; changes in costs of raw materials,
including energy; industry and economic factors related to the Companys domestic and
international business; competition from other suppliers of color and flavors and fragrances;
growth or contraction in markets for products in which the Company competes; terminations and
other changes in customer relationships; industry and customer acceptance of price increases;
currency exchange rate fluctuations; results of litigation, environmental investigations or
other proceedings; complications as a result of existing or future information technology
system applications and hardware; the matters discussed under Item 1A of the Companys Annual
Report on Form 10-K for the year ended December 31, 2007; and the matters discussed above under
Item 2 including the critical accounting policies described therein. 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 therein will not
be realized.
13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Superfund Claim
On July 6, 2004, the EPA notified the Companys subsidiary Sensient Colors Inc. (Sensient
Colors) that it may be a potentially responsible party (PRP) under the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA) for activities at the General
Color Company Superfund Site in Camden, New Jersey (the Site). The EPA requested
reimbursement of $10.9 million in clean-up costs, plus interest. Sensient Colors advised the
EPA that the Site had been expressly excluded from the Companys 1988 stock purchase of H.
Kohnstamm & Company, Inc. (now Sensient Colors). The selling shareholders had retained
ownership of and liability for the Site, and some became owners of General Color Company, which
continued to operate there until the mid-1990s. In a letter to the EPA dated January 31, 2005,
the Company outlined legal challenges to the recoverability of certain costs and urged the EPA
to pursue General Color Company and related parties. The EPA informed Sensient Colors that it
was unwilling to discuss these legal challenges without prior conditions. In 2006, a private
developer, Westfield Acres Urban Renewal Association II, LP, pursuant to an agreement with the
EPA, began redevelopment efforts at the site (construction of affordable housing) by
demolishing buildings thereon. Thereafter, the EPA removed allegedly contaminated soil from the
locations where the buildings once stood.
On March 16, 2007, the United States filed a complaint in the U.S. District Court in New Jersey
against Sensient Colors claiming over $16 million in response costs allegedly incurred and to
be incurred by the EPA pursuant to CERCLA. On October 30, 2007, the Court issued a memorandum
opinion and order denying Sensient Colors motion to dismiss the complaint. Sensient Colors
filed a timely answer to the complaint and a third-party complaint against the current owner and
former owner and operator of the site. The United States moved to strike Sensient Colors
affirmative defenses. On July 17, 2008, the parties presented oral arguments on the motion to
strike. The court has not yet issued its ruling. On July 29, 2008, Sensient Colors filed a
third-party complaint adding Kohnstamm Inc. (a Canadian affiliate of General Color Company) and
its president Avtar Singh as defendants. By order of the Court, all fact discovery is to be
completed by December 5, 2008. On October 3, 2008, the magistrate judge will meet with the
parties to address unresolved discovery issues. These are likely to include Sensient Colors
motion for a protective order and the EPAs motion to limit discovery to the administrative
record along with objections to particular responses to interrogatories, document demands and
requests for admissions. Fact depositions have been tentatively scheduled to begin in
September. Sensient Colors intends to vigorously defend its interests in the litigation. It is
evaluating, among other things, the pursuit of additional PRPs and additional challenges to the
EPAs right to recover its claimed response costs. Sensient Colors legal defense costs are
being paid, in part, by an insurer with a reservation of coverage rights. Litigation to resolve
coverage rights is pending.
Pleasant Gardens Realty Corp. v. H. Kohnstamm & Co., et al.
The owner of Pleasant Gardens (Property), an apartment complex adjacent to the General Color
Superfund Site, filed a complaint in New Jersey state court in November 2003 against H.
Kohnstamm & Co. (now Sensient Colors), the Company, General Color Company, and unknown
defendants. Plaintiff seeks to hold defendants liable, in an unspecified amount, for damages
related to the alleged contamination of the Property. Plaintiff voluntarily dismissed the
Company without prejudice. Sensient Colors filed an answer denying liability and asserting
affirmative defenses. Limited discovery has occurred. In November 2006, the Camden Redevelopment
Agency (Agency) filed condemnation litigation against plaintiff (and other purported
interested parties) to take the Property. Sensient Colors is not a party to the condemnation
litigation. In advance of its filing, the Agency notified plaintiff that its appraiser had
assessed the fair market value of the Property at $7.7 million and that its environmental
consultant had estimated the costs for environmental cleanup, purportedly to meet requirements
of the New Jersey Department of Environmental Protection (DEP), at $7.5 million. Sensient
Colors and plaintiff have pursued a reduction in the scope and cost of the Agencys proposed
environmental cleanup in meetings with the DEP, the Agency and another party involved in the
condemnation, the New Jersey Schools Construction Corporation (NJSCC). To the extent that
there is a reduction in the condemnation value of the Property due to the Agencys remediation
of contamination for which Sensient Colors is allegedly responsible, such reduction may become a
part of the damages claimed by plaintiff. On March 29, 2007, plaintiff filed an amended
complaint naming the Agency, the NJSCC and the DEP as additional defendants in furtherance of
this effort. On April 20, 2007, Sensient Colors filed its answer to the amended complaint,
including cross claims against these newly added parties. The Agency, the DEP and the New Jersey
Schools Development Authority (NJSDA) (which replaced the NJSCC as a state agency
14
effective August 7, 2007) each filed answers, cross-claims and counter-claims; Sensient Colors
has responded to all three cross-claims. Fact discovery has been completed. Initial expert
reports and most rebuttal expert reports have been exchanged, and remaining rebuttal expert
reports, if any, will be exchanged shortly. Expert depositions are to be completed by September
1, 2008. The trial is scheduled to begin on October 6, 2008.
Smead et al. v. Sensient Flavors Inc. et al.
On April 14, 2008, the Companys subsidiary Sensient Flavors Inc. (Sensient Flavors), certain
other flavor manufacturers, a flavor industry trade association and its management company were
sued in Milwaukee County Circuit Court in Milwaukee, Wisconsin, by a former employee of
International Flavors & Fragrances, Inc. (IFF), Richard Smead, and his spouse, Kathy Smead.
Mr. Smead claims that while working in various positions at IFF he was exposed to butter
flavors and/or their constituents allegedly sold by Sensient Flavors and the other
manufacturer defendants, which caused him to suffer severe and permanent injury to his
respiratory system and other damages. Mrs. Smeads claim is for loss of consortium. The
allegations of this complaint are virtually identical to those contained in other complaints
that have been filed against Sensient Flavors in other jurisdictions over the presence of
diacetyl in butter flavoring for use in microwave popcorn production.
The Company believes that plaintiffs claims are without merit and will vigorously defend this
case. The Company has responded to the Complaint, denying all liability and joining numerous
motions to dismiss that have been filed by some of the other flavor manufacturers. Briefing on
those motions is not yet complete. A preliminary analysis of Sensient Flavors sales records
suggests that it never sold any butter flavoring to IFF. This case is in the very early stages
and no trial date has been set.
The Company is involved in various other claims and litigation arising in the normal course of
business. In the judgment of management, which relies in part on information from Company
counsel, the ultimate resolution of these actions will not materially affect the consolidated
financial statements of the Company except as described above.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The information responsive to this item was provided in, and is incorporated by reference from,
Item 4 of the Companys quarterly report on Form 10-Q for the quarter ended March 31, 2008,
filed on May 9, 2008.
ITEM 6. EXHIBITS
See Exhibit Index following this report.
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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SENSIENT TECHNOLOGIES CORPORATION
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Date: August 8, 2008 |
By: |
/s/ John L. Hammond
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John L. Hammond, Vice President, |
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Secretary & General Counsel |
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Date: August 8, 2008 |
By: |
/s/ Richard F. Hobbs
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Richard F. Hobbs, Vice President |
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& Chief Financial Officer |
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SENSIENT TECHNOLOGIES CORPORATION
EXHIBIT INDEX
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2008
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Exhibit |
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Description |
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Incorporated by Reference From |
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Filed Herewith |
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10.1
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Sensient
Technologies
Corporation 1999
Non-Employee
Director Stock
Option Plan (as
amended through
July 17, 2008)*
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X |
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10.2
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Sensient
Technologies
Corporation 2002
Directors Stock
Plan (as amended
through July 17,
2008)*
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X |
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31
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Certifications of
the Companys
Chairman & Chief
Executive Officer
and Vice President
& Chief Financial
Officer pursuant to
Rule 13a-14(a) of
the Exchange Act
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X |
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32
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Certifications of
the Companys
Chairman & Chief
Executive Officer
and Vice President
& Chief Financial
Officer pursuant to
18 United States
Code § 1350
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X |
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* |
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These copies of the plans being filed reflect changes which, taken together, are not considered
material. The amendments to the plans were adopted by resolution of the Sensient Board of
Directors; therefore, rather than filing of an amendment document, the company is filing copies of
the plans as amended. |
17