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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2002
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OR
[ ] 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
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SENSIENT TECHNOLOGIES CORPORATION
---------------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 39-0561070
- ------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202-5304
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(Address of principal executive offices)
Registrant's telephone number, including area code: (414) 271-6755
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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 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 X No
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Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock as of the latest practicable date.
Class Outstanding at July 31, 2002
- ---------------------------------------------- ----------------------------
Common Stock, par value $0.10 per share 47,337,138 shares
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SENSIENT TECHNOLOGIES CORPORATION
INDEX
Page No.
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PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets
- June 30, 2002 and December 31, 2001. 1
Consolidated Condensed Statements of Earnings
- Three and Six Months Ended June 30, 2002 and 2001. 2
Consolidated Condensed Statements of Cash Flows
- Six Months Ended June 30, 2002 and 2001. 3
Notes to Consolidated Condensed Financial Statements. 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 10
PART II. OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of Security Holders. 11
Item 6. Exhibits and Reports on Form 8-K. 11
Signatures. 12
Exhibit Index. 13
PART I
FINANCIAL INFORMATION
SENSIENT TECHNOLOGIES CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
June 30, December 31,
ASSETS 2002 2001
------ --------------- ---------------
CURRENT ASSETS:
Cash and cash equivalents $ 36 $ 2,317
Trade accounts receivable, net 155,929 134,626
Inventories 244,137 240,955
Prepaid expenses and other current assets 36,232 37,324
--------------- ---------------
TOTAL CURRENT ASSETS 436,334 415,222
--------------- ---------------
OTHER ASSETS 67,688 72,124
INTANGIBLES, NET 351,263 305,174
PROPERTY, PLANT AND EQUIPMENT:
Cost:
Land and buildings 179,958 169,491
Machinery and equipment 419,441 410,370
--------------- ---------------
599,399 579,861
Less accumulated depreciation 280,892 267,561
--------------- ---------------
318,507 312,300
--------------- ---------------
TOTAL ASSETS $ 1,173,792 $ 1,104,820
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Short-term borrowings $ 32,315 $ 26,672
Accounts payable and accrued expenses 99,215 95,897
Salaries, wages and withholdings from employees 9,838 10,164
Income taxes 22,227 17,661
Current maturities of long-term debt 41,739 41,794
--------------- ---------------
TOTAL CURRENT LIABILITIES 205,334 192,188
DEFERRED INCOME TAXES 17,217 18,071
OTHER DEFERRED LIABILITIES 20,549 21,718
ACCRUED EMPLOYEE AND RETIREE BENEFITS 18,323 18,890
LONG-TERM DEBT 439,254 423,137
SHAREHOLDERS' EQUITY:
Common stock 5,396 5,396
Additional paid-in capital 71,855 72,493
Earnings reinvested in the business 591,893 566,374
Treasury stock, at cost (122,252) (132,355)
Unearned portion of restricted stock (2,041) (2,623)
Accumulated other comprehensive income (loss) (71,736) (78,469)
--------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 473,115 430,816
--------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,173,792 $ 1,104,820
=============== ===============
See accompanying notes to consolidated condensed financial statements.
-1-
SENSIENT TECHNOLOGIES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In thousands except per share amounts)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
------------------------------ ------------------------------
2002 2001 2002 2001
------------ ------------- ------------ ------------
Revenue $239,576 $203,927 $452,699 $399,620
Cost of products sold 161,243 133,972 303,769 266,765
Selling and administrative expenses 39,615 38,694 77,677 76,976
------------ ------------- ------------ ------------
Operating income 38,718 31,261 71,253 55,879
Interest expense 7,563 7,630 15,179 16,452
------------ ------------- ------------ ------------
Earnings from continuing operations
before income taxes 31,155 23,631 56,074 39,427
Income taxes 9,970 5,358 17,944 10,150
------------ ------------- ------------ ------------
Earnings from continuing operations 21,185 18,273 38,130 29,277
Earnings from discontinued operations - - - 7,780
------------ ------------- ------------ ------------
Net earnings $ 21,185 $ 18,273 $ 38,130 $ 37,057
============ ============= ============ ============
Average number of common shares outstanding:
Basic 47,609 47,665 47,478 47,941
============ ============= ============ ============
Diluted 48,152 47,970 47,912 48,246
============ ============= ============ ============
Basic earnings per share:
Continuing operations $ .44 $ .38 $ .80 $ .61
Discontinued operations - - - .16
------------ ------------- ------------ ------------
Net earnings $ .44 $ .38 $ .80 $ .77
============ ============= ============ ============
Diluted earnings per share:
Continuing operations $ .44 $ .38 $ .80 $ .61
Discontinued operations - - - .16
------------ ------------- ------------ ------------
Net earnings $ .44 $ .38 $ .80 $ .77
============ ============= ============ ============
Dividends per common share $ .1325 $ .1325 $ .2650 $ .2650
============ ============= ============ ============
See accompanying notes to consolidated condensed financial statements.
-2-
SENSIENT TECHNOLOGIES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months
Ended June 30,
-----------------------------------
2002 2001
------------ ------------
Net cash provided by operating activities of continuing operations $50,830 $16,260
Net cash provided by discontinued operations - 707
------------ ------------
Net cash provided by operating activities 50,830 16,967
------------ ------------
Cash flows from investing activities:
Acquisition of property, plant and equipment (13,269) (16,587)
Acquisition of new businesses - net of cash acquired (43,374) -
Proceeds from sale of assets 4,901 108,738
Increase in other assets (1,325) (891)
------------ ------------
Net cash (used in) provided by investing activities (53,067) 91,260
------------ ------------
Cash flows from financing activities:
Proceeds from additional borrowings 7,084 95,843
Reduction in debt (4,393) (165,456)
Purchase of treasury stock - (30,892)
Dividends (12,611) (12,764)
Proceeds from options exercised and other 9,643 8,433
------------ ------------
Net cash used in financing activities (277) (104,836)
------------ ------------
Effect of exchange rate changes on cash and cash equivalents 233 (650)
------------ ------------
Net (decrease) increase in cash and cash equivalents (2,281) 2,741
Cash and cash equivalents at beginning of period 2,317 3,217
------------ ------------
Cash and cash equivalents at end of period $ 36 $ 5,958
============ ============
Supplemental disclosure of cash flow information: Cash paid during the period
for:
Interest $15,687 $16,464
Income taxes 12,714 21,060
Liabilities assumed in acquisitions $10,539 -
See accompanying notes to consolidated condensed financial statements.
-3-
SENSIENT TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial
position of the Company as of June 30, 2002 and December 31, 2001, the
results of operations for the three and six months ended June 30, 2002 and
2001, and cash flows for the six months ended June 30, 2002 and 2001. The
results of operations for any interim period are not necessarily indicative
of the results to be expected for the full year.
2. Refer to the notes in the Company's annual consolidated financial
statements for the year ended December 31, 2001, for additional details of
the Company's financial condition and a description of the Company's
accounting policies. The accounting policies have been continued without
change except as a result of normal transactions in the interim and the
adoption of Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets," discussed in Note 3 below.
3. The Company adopted SFAS No. 142 on January 1, 2002. Under SFAS No. 142,
the Company no longer amortizes goodwill and other intangible assets with
indefinite useful lives. Instead, the carrying value is evaluated for
impairment on an annual basis. Pursuant to SFAS No. 142, the Company has
completed impairment testing as of December 31, 2001. Tests were performed
in accordance with accepted valuation techniques, yielding no goodwill
impairment.
The following tables reflect consolidated results as if the adoption of
SFAS No. 142 had occurred on January 1, 2001. Discontinued operations did
not have amortization for any period in the previous year; therefore,
separate disclosure for these operations was not presented.
(In thousands, except per share data) Three Months Six Months
Ended June 30, Ended June 30,
------------------------------ ------------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Continuing operations:
Reported earnings from continuing operations $ 21,185 $ 18,273 $ 38,130 $ 29,277
Goodwill amortization, net of tax - 2,147 - 4,145
------------ ------------ ------------ ------------
Proforma earnings from continuing operations $ 21,185 $ 20,420 $ 38,130 $ 33,422
Net earnings:
Reported net earnings $ 21,185 $ 18,273 $ 38,130 $ 37,057
Goodwill amortization, net of tax - 2,147 - 4,145
------------ ------------ ------------ ------------
Proforma net earnings $ 21,185 $ 20,420 $ 38,130 $ 41,202
Basic earnings per share:
Continuing operations:
As reported $ .44 $ .38 $ .80 $ .61
Proforma $ .44 $ .43 $ .80 $ .70
Net earnings:
As reported $ .44 $ .38 $ .80 $ .77
Proforma $ .44 $ .43 $ .80 $ .86
Diluted earnings per share:
Continuing operations:
As reported $ .44 $ .38 $ .80 $ .61
Proforma $ .44 $ .43 $ .80 $ .70
Net earnings:
As reported $ .44 $ .38 $ .80 $ .77
Proforma $ .44 $ .43 $ .80 $ .86
-4-
The changes in goodwill for the six months ended June 30, 2002 were as
follows:
(In thousands)
Total
Balance as of December 31, 2001 $ 298,732
Goodwill of acquired businesses 34,016
Currency impact 10,782
-------------
Balance as of June 30, 2002 $ 343,530
The following table categorized intangible assets by major asset class as
of June 30, 2002:
(In thousands)
Carrying Accumulated
Amount Amortization Net
Goodwill $ 380,850 $ 37,320 $ 343,530
Amortized intangible assets 11,089 3,356 7,733
------------- -------------- -------------
Total $ 391,939 $ 40,676 $ 351,263
Amortized intangible assets consist primarily of customer lists and
technology with a weighted average amortization period of approximately 19
years. Amortization of intangible assets was not significant during the
periods presented and the estimated aggregate amortization expense for each
of the five succeeding years is not anticipated to be significant.
4. During the first quarter of 2002, the Company acquired three businesses for
cash of $44.9 million. The businesses acquired were SynTec GmbH, a
manufacturer of specialty dyes and chemicals for the imaging industry, ECS
Specialty Inks and Dyes, a producer and marketer of inks for specialty
printing applications and the flavors and essential oil operations of C.
Melchers GmbH & Company. The Company may be required to pay up to 4.6
million Euro ($4.5 million) of additional cash consideration for the 2002
acquisitions subject to specific performance targets in the first two years
following the acquisitions. The Company is in the process of measuring the
identifiable intangibles and goodwill related to these acquisitions.
5. Expenses are charged to operations in the year incurred. However, for
interim reporting purposes, certain expenses are charged to operations
based on an estimate rather than as expenses are actually incurred.
6. At June 30, 2002 and December 31, 2001, inventories included finished and
in-process products totaling $176.1 million and $173.2 million,
respectively, and raw materials and supplies of $68.0 million and $67.7
million, respectively.
7. Operating results and the related assets by segment for the periods
presented are as follows (in thousands):
Flavors & Corporate Continuing
Fragrances Color and Other Operations
---------- ----- --------- ----------
Three months ended June 30, 2002
- --------------------------------
Revenues from external customers $ 142,006 $ 82,170 $ 15,400 $ 239,576
Intersegment revenues 5,344 5,075 -- 10,419
---------------- ------------ ------------ ------------
Total revenue $ 147,350 $ 87,245 $ 15,400 $ 249,995
================ ============ ============ ============
Operating income (loss) $ 23,731 $ 20,559 $ (5,572) $ 38,718
Interest expense -- -- 7,563 7,563
---------------- ------------ ------------ ------------
Earnings (loss) before income taxes $ 23,731 $ 20,559 $ (13,135) $ 31,155
================ ============ ============ ============
Three months ended June 30, 2001
- --------------------------------
Revenues from external customers $ 128,982 $ 62,095 $ 12,850 $ 203,927
Intersegment revenues 4,678 6,856 161 11,695
---------------- ------------ ------------ ------------
Total revenue $ 133,660 $ 68,951 $ 13,011 $ 215,622
================ ============ ============ ============
Operating income (loss) $ 17,995 $ 18,915 $ (5,649) $ 31,261
Interest expense -- -- 7,630 7,630
---------------- ------------ ------------ ------------
Earnings (loss) before income taxes $ 17,995 $ 18,915 $ (13,279) $ 23,631
================ ============ ============ ============
-5-
Flavors & Corporate Continuing
Fragrances Color and Other Operations
---------- ----- --------- ----------
Six months ended June 30, 2002
- ------------------------------
Revenues from external customers $ 270,883 $ 152,667 $ 29,149 $ 452,699
Intersegment revenues 10,349 10,466 -- 20,815
---------- ---------- ---------- ----------
Total revenue $ 281,232 $ 163,133 $ 29,149 $ 473,514
========== ========== ========== ==========
Operating income (loss) $ 42,668 $ 38,348 $ (9,763) $ 71,253
Interest expense -- -- 15,179 15,179
---------- ---------- ---------- ----------
Earnings (loss) before income taxes $ 42,668 $ 38,348 $ (24,942) $ 56,074
========== ========== ========== ==========
Assets $ 447,142 $ 265,531 $ 461,119 $1,173,792
========== ========== ========== ==========
Six months ended June 30, 2001
- ------------------------------
Revenues from external customers $ 249,242 $ 122,641 $ 27,737 $ 399,620
Intersegment revenues 8,923 12,765 161 21,849
---------- ---------- ---------- ----------
Total revenue $ 258,165 $ 135,406 $ 27,898 $ 421,469
========== ========== ========== ==========
Operating income (loss) $ 30,739 $ 34,879 $ (9,739) $ 55,879
Interest expense -- -- 16,452 16,452
---------- ---------- ---------- ----------
Earnings (loss) before income taxes $ 30,739 $ 34,879 $ (26,191) $ 39,427
========== ========== ========== ==========
Assets $ 437,525 $ 225,513 $ 403,003 $1,066,041
========== ========== ========== ==========
8. During the six months ended June 30, 2001, the Company repurchased 1.3
million shares of common stock for an aggregate price of $29.3 million. The
Company did not repurchase any shares during the six months ended June 30,
2002.
9. Comprehensive income is comprised of net earnings, foreign currency
translation and unrealized gains and losses on cash flow hedges. Total
comprehensive income for the three months ended June 30, 2002 and 2001 was
$27.7 million and $19.3 million, respectively. Total comprehensive income
for the six months ended June 30, 2002 and 2001 was $44.9 million and $29.4
million, respectively.
10. Cash flows by operating activities of continuing operations is detailed
below:
Six Months Ended June 30,
2002 2001
--------- ---------
Cash flows from operating activities:
Earnings from continuing operations $ 38,130 $ 29,277
Adjustments to arrive at net cash
Provided by operating activities:
Depreciation and amortization 19,709 23,732
Gain on sale of assets (315) (188)
Changes in operating assets and liabilities (net of
effects of acquisitions of businesses) (6,694) (36,561)
-------- --------
Net cash provided by operating activities of continuing operations $ 50,830 $ 16,260
======== ========
11. For the six months ended June 30, 2002, depreciation and amortization
expense related to continuing operations were $19.1 million and $0.6
million, respectively. For the six months ended June 30, 2001, depreciation
and amortization expense related to continuing operations were $18.9
million and $4.8 million, respectively. The decrease in amortization
expense reflects the adoption of SFAS No. 142 on January 1, 2002, for
acquisitions prior to June 30, 2001.
-6-
12. On February 23, 2001, the Company completed the sale of substantially all
the assets of its Red Star Yeast business. The operating results of the
business through February 23, 2001 and the gain from the sale have been
reported net of tax in a separate line item "Earnings from discontinued
operations" on the statements of earnings. Refer to note 12 in the
Company's annual consolidated financial statements for the year ended
December 31, 2001, for additional information.
The results from discontinued operations are as follows (in thousands):
Three Months Ended Six Months Ended
June 30, 2001 June 30, 2001
-------------------- --------------------
Revenue - $ 16,810
Income taxes - $ 6,278
Earnings from discontinued operations - $ 7,780
-7-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CONTINUING OPERATIONS
Revenue for the quarter ended June 30, 2002 increased by 17.5% to
$239.6 million from $203.9 million for the comparable quarter of 2001.
For the six months ended June 30, 2002, revenue increased by 13.3% to
$452.7 million. Revenue for the Flavors and Fragrances segment
increased by 10.2% for the quarter and by 8.9% for the six months ended
June 30, 2002 over the comparable periods last year. The Color segment
increased revenue by 26.5% for the quarter and by 20.5% for the six
months ended June 30, 2002 over the comparable periods last year.
Additional information on group results can be found in the Segment
Information section.
Gross profit increased by 12.0% and by 12.1% for the three and six
month periods ended June 30, 2002, respectively, compared to the same
periods in the prior year. The increase in gross profit resulted from
higher revenue and realized cost savings from the cost improvement
programs that began in December 2000.
Selling and administrative expenses as a percent of revenue decreased
to 16.5% for the three months ended June 30, 2002 compared to 19.0% in
the comparable period of 2001. For the six months ended June 30, 2002,
selling and administrative costs as a percent of revenue decreased to
17.2% versus 19.3% in the comparable period of 2001. For both the three
and six month periods, the improvement came as a result of revenue
growth, realized cost savings and the mandatory adoption of SFAS No.
142. On a comparable basis, assuming SFAS No. 142 had been adopted in
2001, selling and administrative expense, as a percent of revenue,
would have been 17.9% and 18.1% for the three and six months ended June
30, 2001, respectively.
Operating income for the three months ended June 30, 2002 was $38.7
million, an increase of 23.9% from $31.3 million last year. For the six
months ended June 30, 2002, operating income increased 27.5% to $71.3
million from $55.9 million in the same period last year. The increase
in operating income for the three and six month periods was driven by
the combination of higher revenue and realized cost savings. The
adoption of SFAS No. 142 also increased operating income by $2.3
million and $4.5 million for the three and six months ended June 30,
2002, respectively. On a comparable basis, assuming SFAS No. 142 had
been adopted in 2001, operating income would have increased by 15.5%
and 18.1% for the three and six months ended June 30, 2002,
respectively. Favorable foreign exchange rates during the quarter
increased both revenue and operating income by approximately 1%. For
the six months ended June 30, 2002, foreign exchange rate impact was
minimal.
Interest expense for the three months ended June 30, 2002, was constant
at $7.6 million. For the six months ended June 30, 2002, interest
expense was $15.2 million, a decrease of 7.7% versus the comparable
period last year. The decrease was a result of lower interest rates
more than offsetting a higher average amount of debt.
The effective income tax rate on continuing operations was 32.0% and
22.7% for the three months ended June 30, 2002 and 2001, respectively.
The effective tax rate for the quarter ended June 30, 2002 included a
benefit from the adoption of SFAS No. 142 and other nominal
adjustments. The effective tax rate for the quarter ended June 30, 2001
was reduced due to an adjustment related to the expected settlement of
certain tax liabilities. Without the 2001 adjustment and reflecting the
effect of adopting SFAS No. 142 in 2001, the 2001 second quarter
effective tax rate would have been 31.0%. For the six months ended June
30, 2002 and June 30, 2001 the tax rate was 32.0% and 25.7%,
respectively. Without the 2001 adjustments and reflecting the effect of
adopting SFAS No. 142 in 2001, the 2001 effective tax rate for the six
months ending June 30, 2001 would have been 30.8%.
DISCONTINUED OPERATIONS
On February 23, 2001, the Company completed the sale of substantially
all the assets of its Red Star Yeast business. A gain from the sale of
the business and its results through February 23, 2001 were included
net of tax in a separate line item "Earnings from discontinued
operations" on the statements of earnings.
-8-
SEGMENT INFORMATION
Flavors & Fragrances - The Flavors & Fragrances segment reported a
10.2% increase in revenue, to $147.4 million for the second quarter of
2002 compared to $133.7 million for the same period last year. The
majority of the revenue increase was a result of double-digit growth in
fragrances and in dehydrated and beverage flavors. The March 2002
acquisition of the flavors and essential oil operations of C. Melchers
GmbH & Company also contributed to the increase in revenue for the
quarter. Operating income increased 31.9% to $23.7 million for the
second quarter of 2002 compared with $18.0 million in the same period
last year. Operating margins improved 260 basis points, to 16.1%, as a
result of higher volumes and lower selling and administrative expenses
from the cost improvement programs that began in December 2000. For the
six months ended June 30, 2002, revenue increased 8.9% to $281.2
million. Operating income increased 38.8% to $42.7 million from $30.7
million for the same period in 2001, due to items previously mentioned.
Color - Revenue for the Color segment increased by 26.5% to $87.2
million in the second quarter of 2002 versus $69.0 million in the year
ago period. The increase was primarily attributable to the Company's
recently acquired specialty ink and dye businesses, as well as growth
in the pharmaceutical, cosmetic and natural color product lines. Gains
in these areas were offset by softness in sales to food and beverage
customers. Operating income in the second quarter of 2002 was $20.6
million versus $18.9 million from the 2001 second quarter. Operating
income as a percent of revenue was 23.6% compared to 27.4% for the
comparable quarter last year. The decrease as a percent of revenue
reflects newly acquired businesses that have not yet been integrated,
softness in the food and beverage product lines, and a change in mix
when compared to the record margins in last year's second quarter.
Revenue for the six months ended June 30, 2002 increased by 20.5%, due
to the items previously mentioned. Operating income increased by 9.9%
to $38.3 million, compared to $34.9 million for the same period in
2001, due to the items previously mentioned.
FINANCIAL CONDITION
The Company's ratio of debt to total capital was 52.0% as of June 30,
2002, down from 53.3% as of December 31, 2001. The decrease resulted
from an increase in shareholders' equity during the six months that was
nearly twice the increase in debt. The current ratio was 2.1x at June
30, 2002, relatively flat compared with 2.2x at December 31, 2001.
Net cash provided by operating activities of continuing operations was
$50.8 million for the six months ended June 30, 2002, compared to $16.3
million for the six months ended June 30, 2001. The $34.5 million
increase in cash provided by operating activities was primarily due to
increased earnings and improvements in net working capital.
Net cash used in investing activities was $53.1 million for the six
months ended June 30, 2002 compared to net cash provided by investing
activities of $91.3 million for the six months ended June 30, 2001.
Cash used in investing activities in 2002 included acquisitions of
$43.4 million and capital expenditures of $13.3 million. Net cash
provided by investing activities in 2001 included cash proceeds from
the sale of the Red Star Yeast division of $108.7 million, which was
partially offset by capital expenditures of $16.6 million.
Net cash used in financing activities was $0.3 million for the six
months ended June 30, 2002, compared with cash used in financing
activities of $104.8 million in the comparable period the prior year.
Net borrowings in 2002 of $2.7 million were limited as cash flows from
operations were primarily used to fund acquisitions and capital
projects. During 2001, cash proceeds from the sale of the Red Star
Yeast business were used to fund a net reduction of borrowings of $69.6
million and treasury stock purchases of $30.9 million. Dividends of
$12.6 million and $12.8 million were paid during the six months ended
June 30, 2002 and 2001, respectively.
The Company's 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 expansion programs and
dividend payments to shareholders.
-9-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the Company's market risk during
the quarter ended June 30, 2002. For additional information on market
risk, refer to pages 19 and 20 of the Company's 2001 Annual Report,
portions of which were filed as Exhibit 13.1 to the Company's Form 10-K
for the year ended December 31, 2001.
FORWARD-LOOKING INFORMATION
This document contains forward-looking statements that reflect
management's current assumptions and estimates of future economic
circumstances, industry conditions, Company performance and financial
results. 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 Company's 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's customers; execution of the
Company's acquisition program and results of newly acquired businesses;
industry and economic factors related to the Company's domestic and
international business; industry acceptance of price increases;
currency exchange rate fluctuations; and the outcome of various
productivity-improvement and cost-reduction efforts. 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.
-10-
PART II
OTHER INFORMATION
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 Company's quarterly report on Form 10-Q for the
quarter ended March 31, 2002, filed on May 14, 2002.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. (See Exhibit Index following this report.)
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter ended June 30, 2002.
-11-
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.
SENSIENT TECHNOLOGIES CORPORATION
Date: August 13, 2002 By: /s/ John L. Hammond
-----------------------------------
John L. Hammond, Vice President,
Secretary and General Counsel
Date: August 13, 2002 By: /s/ Richard F. Hobbs
-----------------------------------
Richard F. Hobbs, Vice
President, Chief Financial
Officer and Treasurer
-12-
SENSIENT TECHNOLOGIES CORPORATION
EXHIBIT INDEX TO
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2002
Exhibit Description Filed Herewith Incorporated by Reference From
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10.1 Sensient Technologies Corporation 2002 Appendix B to Definitive Proxy
Stock Option Plan Statement filed on Schedule 14A
on March 22, 2002
(Commission File No. 1-7626)
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