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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: March 31, 2004
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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
SENSIENT TECHNOLOGIES CORPORATION
---------------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 39-0561070
- ------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification 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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
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 April 30, 2004
- --------------------------------------- -----------------------------
Common Stock, par value $0.10 per share 46,787,336 shares
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SENSIENT TECHNOLOGIES CORPORATION
INDEX
Page No.
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Consolidated Condensed Statements of Earnings
- Three Months Ended March 31, 2004 and 2003. 1
Consolidated Condensed Balance Sheets
- March 31, 2004 and December 31, 2003. 2
Consolidated Condensed Statements of Cash Flows
- Three Months Ended March 31, 2004 and 2003. 3
Notes to Consolidated Condensed Financial 4
Statements.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 8
Item 3. Quantitative and Qualitative Disclosures About 10
Market Risk.
Item 4. Controls and Procedures. 11
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K. 11
Signatures. 12
Exhibit Index. 13
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SENSIENT TECHNOLOGIES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In thousands except per share amounts)
(Unaudited)
Three Months
Ended March 31,
----------------------
2004 2003
-------- --------
Revenue $254,165 $235,097
Cost of products sold 179,493 158,115
Selling and administrative expenses 46,089 42,048
-------- --------
Operating income 28,583 34,934
Interest expense 7,363 7,245
-------- --------
Earnings before income taxes 21,220 27,689
Income taxes 6,260 7,227
-------- --------
Net earnings $ 14,960 $ 20,462
======== ========
Average number of common shares outstanding:
Basic 46,475 47,058
======== ========
Diluted 46,738 47,398
======== ========
Earnings per common share:
Basic $ .32 $ .43
======== ========
Diluted $ .32 $ .43
======== ========
Dividends per common share $ .15 $ .14
======== ========
See accompanying notes to consolidated condensed financial statements.
-1-
SENSIENT TECHNOLOGIES CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
March 31, December 31,
2004 2003
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,017 $ 3,250
Trade accounts receivable, net 171,700 168,073
Inventories 310,866 318,755
Prepaid expenses and other current assets 46,981 46,652
------------ ------------
TOTAL CURRENT ASSETS 533,564 536,730
------------ ------------
OTHER ASSETS 77,978 78,525
GOODWILL 423,098 428,922
INTANGIBLE ASSETS, NET 17,283 17,553
PROPERTY, PLANT AND EQUIPMENT:
Land 28,633 29,042
Buildings 193,900 193,147
Machinery and equipment 538,178 537,623
------------ ------------
760,711 759,812
Less accumulated depreciation (376,232) (368,014)
------------ ------------
384,479 391,798
------------ ------------
TOTAL ASSETS $ 1,436,402 $ 1,453,528
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 63,451 $ 67,535
Accrued salaries, wages and withholdings from employees 10,436 12,871
Other accrued expenses 59,952 61,464
Income taxes 13,828 11,817
Short-term borrowings 106,748 114,974
Current maturities of long-term debt 13,703 13,759
------------ ------------
TOTAL CURRENT LIABILITIES 268,118 282,420
DEFERRED INCOME TAXES 24,114 23,529
OTHER LIABILITIES 10,365 11,329
ACCRUED EMPLOYEE AND RETIREE BENEFITS 30,853 30,208
LONG-TERM DEBT 522,474 525,924
SHAREHOLDERS' EQUITY:
Common stock 5,396 5,396
Additional paid-in capital 72,151 72,194
Earnings reinvested in the business 682,753 674,803
Treasury stock, at cost (146,903) (147,472)
Unearned portion of restricted stock (3,554) (3,844)
Accumulated other comprehensive income (loss) (29,365) (20,959)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 580,478 580,118
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,436,402 $ 1,453,528
============ ============
See accompanying notes to consolidated condensed financial statements.
-2-
SENSIENT TECHNOLOGIES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months
Ended March 31,
-----------------------
2004 2003
-------- --------
Net cash provided by operating activities $ 24,826 $ 853
-------- --------
Cash flows from investing activities:
Acquisition of property, plant and equipment (9,635) (10,336)
Acquisition of businesses - net of cash acquired -- (4,107)
Proceeds from sale of assets -- 1,948
Decrease in other assets 2,078 68
-------- --------
Net cash used in investing activities (7,557) (12,427)
-------- --------
Cash flows from financing activities:
Proceeds from additional borrowings 19,470 23,232
Reduction in debt (29,013) (691)
Purchase of treasury stock -- (4,969)
Dividends paid (7,009) (6,763)
Proceeds from options exercised and other 326 2,693
-------- --------
Net cash (used in) provided by financing activities (16,226) 13,502
-------- --------
Effect of exchange rate changes on cash and cash equivalents (276) 526
-------- --------
Net increase in cash and cash equivalents 767 2,454
Cash and cash equivalents at beginning of period 3,250 2,103
-------- --------
Cash and cash equivalents at end of period $ 4,017 $ 4,557
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 2,704 $ 2,705
Income taxes 3,068 5,987
Liabilities assumed in acquisitions $ -- $ --
See accompanying notes to consolidated condensed financial statements.
-3-
SENSIENT TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Accounting Policies
In the opinion of Sensient Technologies Corporation (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 March 31,
2004 and December 31, 2003, and the results of operations and cash flows
for the three months ended March 31, 2004 and 2003. The results of
operations for any interim period are not necessarily indicative of the
results to be expected for the full year.
Expenses are charged to operations in the year incurred. However, for
reporting purposes, certain expenses are charged to operations based on an
estimate rather than as expenses are actually incurred.
Certain amounts as previously presented have been reclassified to conform
to the current period presentation.
Refer to the notes in the Company's annual consolidated financial
statements for the year ended December 31, 2003, for additional details of
the Company's financial condition and a description of the Company's
accounting policies, which have been continued without change except for
the item described below.
On January 1, 2004, the Company adopted the remaining provisions of the
Financial Accounting Statements Board Interpretation No. 46 ("46R"),
"Consolidation of Variable Interest Entities," to clarify certain
provisions of FIN No. 46, and to exempt certain entities from its
requirements. There was no impact of adopting this interpretation on the
Company's consolidated financial statements.
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation." Stock options are granted at prices equal to
the fair value of the Company's common stock on the dates of grant.
Accordingly, no significant compensation cost has been recognized for the
grant of stock options under the Company's stock option plans. If the
Company had elected to recognize compensation cost based on the fair value
of the options granted at grant date as prescribed by SFAS No. 123, net
earnings and earnings per common share would have been reduced to the pro
forma amounts indicated below:
Three Months
Ended March 31,
(In thousands except per share information) ---------------------------
2004 2003
---------- ----------
Net earnings:
As reported $ 14,960 $ 20,462
Add: reported stock compensation
expense - net of tax 180 132
Less: fair value stock compensation
expense - net of tax (663) (619)
---------- ----------
Pro forma net earnings $ 14,477 $ 19,975
========== ==========
Earnings per common share:
Basic as reported $ .32 $ .43
Less: net impact of fair value stock
expense - net of tax (.01) (.01)
---------- ----------
Basic pro forma $ .31 $ .42
Diluted as reported $ .32 $ .43
Less: net impact of fair value stock
expense - net of tax (.01) (.01)
---------- ----------
Diluted pro forma $ .31 $ .42
-4-
2. Segment Information
Operating results and the related assets by segment for the periods
presented are as follows:
(In thousands) Flavors & Corporate
Fragrances Color & Other Consolidated
------------ ------------ ------------ ------------
Three months ended March 31, 2004:
Revenues from external customers $ 145,663 $ 91,643 $ 16,859 $ 254,165
Intersegment revenues 5,901 2,523 -- 8,424
------------ ------------ ------------ ------------
Total revenue $ 151,564 $ 94,166 $ 16,859 $ 262,589
============ ============ ============ ============
Operating income (loss) $ 17,812 $ 15,649 $ (4,878) $ 28,583
Interest expense -- -- 7,363 7,363
------------ ------------ ------------ ------------
Earnings (loss) before income taxes $ 17,812 $ 15,649 $ (12,241) $ 21,220
============ ============ ============ ============
Assets $ 679,203 $ 618,375 $ 138,824 $ 1,436,402
============ ============ ============ ============
Three months ended March 31, 2003:
Revenues from external customers $ 133,966 $ 86,153 $ 14,978 $ 235,097
Intersegment revenues 5,562 3,415 -- 8,977
------------ ------------ ------------ ------------
Total revenue $ 139,528 $ 89,568 $ 14,978 $ 244,074
============ ============ ============ ============
Operating income (loss) $ 20,028 $ 20,196 $ (5,290) $ 34,934
Interest expense -- -- 7,245 7,245
------------ ------------ ------------ ------------
Earnings (loss) before income taxes $ 20,028 $ 20,196 $ (12,535) $ 27,689
============ ============ ============ ============
Assets $ 611,252 $ 555,848 $ 148,071 $ 1,315,171
============ ============ ============ ============
3. Retirement Plans
The Company's pension expense for the periods presented are as follows:
Three Months Ended March 31,
---------------------------
(In thousands) 2004 2003
------ ------
Service cost $ 205 $ 175
Interest cost 390 381
Expected return on plan assets (64) (64)
Amortization of prior service cost 305 298
------ ------
Defined benefit expense $ 836 $ 790
====== ======
During the first quarter of 2004, the Company made a contribution of $0.1
million to its pension plans. Total contributions to Company pension plans
are expected to be $0.4 million in 2004.
4. Inventories
At March 31, 2004 and December 31, 2003, inventories included finished and
in-process products totaling $220.8 million and $227.2 million,
respectively, and raw materials and supplies of $90.1 million and $91.6
million, respectively.
-5-
5. Special Charges
On December 19, 2003, the Company announced its intent to improve its cost
efficiency worldwide by reducing headcount and improving operational
efficiency. The Company recorded special charges of $6.5 million ($4.7
million after-tax, $0.10 per share) in December 2003. During the first
quarter of 2004, approximately $1.0 million of payments, mostly for
severance, have been applied to the special charges reserve. The remaining
payments will be made in 2004.
A rollforward of the special charges reserve related to severance and
other employee separation costs is included below (In thousands):
December 31, 2003 $2,768
Amounts paid (966)
------
March 31, 2004 $1,802
======
6. Acquisitions
The Company has not acquired any businesses in 2004. In March of 2003, the
Company acquired certain assets of Kyowa Koryo Kagaku Kabushiki Kaisha, a
former Japanese flavor producer, for $4.1 million, net of cash acquired.
The Company has not completed the purchase price allocations for Formulabs
Iberica S.A., a manufacturer and marketer of specialty inks, primarily for
inkjet applications, acquired in August 2003.
The Company may be required to pay up to 1.8 million Euro (approximately
$2.1 million) of additional cash consideration for acquisitions made in
2002 subject to specific performance targets in the second year following
the acquisitions.
7. Shareholders' Equity
The Company did not repurchase any shares of its common stock during the
three months ended March 31, 2004. During the three months ended March 31,
2003, the Company repurchased 0.3 million shares of its common stock for
an aggregate price of $5.0 million.
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 March 31, 2004 and 2003
was $6.6 million and $20.6 million, respectively.
8. Cash Flows from Operating Activities
Cash flows from operating activities are detailed below:
Three Months Ended March 31,
(In thousands) ---------------------------
2004 2003
-------- --------
Cash flows from operating activities:
Net earnings $ 14,960 $ 20,462
Adjustments to arrive at net cash provided
by operating activities:
Depreciation and amortization 12,247 11,074
Gain on sale of assets -- (1,470)
Changes in operating assets and liabilities, net of
effects of acquisitions of businesses (2,381) (29,213)
-------- --------
Net cash provided by operating activities $ 24,826 $ 853
======== ========
-6-
9. Guarantees
In connection with the sale of substantially all of the Company's Yeast
business on February 23, 2001, the Company has provided the buyer of these
operations with indemnification against certain potential liabilities as
is customary in transactions of this nature. The period provided for
indemnification against most types of claims has now expired, but for
specific types of claims, including but not limited to tax and
environmental liabilities, the amount of time provided for indemnification
is either five years or the applicable statute of limitations. The maximum
amount of the Company's liability related to certain of these provisions
is capped at approximately 35% of the consideration received in the
transaction. In cases where the Company believes it is probable that
payments will be required under these provisions, a liability was
recognized at the time of the asset sale. The Company believes that the
probability of incurring payments under these provisions in excess of the
amount of the liability recorded is remote.
-7-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Revenue for the quarter ended March 31, 2004 increased by 8.1% to $254.2
million from $235.1 million for the comparable quarter of 2003. Revenue
for the Flavors & Fragrances segment increased by 8.6% over the comparable
period last year. Revenue for the Color segment increased by 5.1% and
revenue for Asia Pacific increased by 12.6% for the quarter over the
comparable period last year. Additional information on group results can
be found in the Segment Information section.
The gross profit margin was 29.4% and 32.7% for the three months ended
March 31, 2004 and 2003, respectively. Approximately two-thirds of the
decrease in margin resulted from lower volumes and pricing in North
American food and beverage colors as well as in paper and industrial
colors and one-third of the decrease was due to lower pricing combined
with higher costs in the dehydrated flavors business. Lower volumes and
pricing within the Color segment during the quarter were primarily
attributable to increased competitive activity and lower demand for colors
as a result of fewer new product introductions by customers. Pricing of
dehydrated flavor products declined, as compared to the previous year's
comparable quarter, as a result of increased competitive activity. The
increased costs within the dehydrated flavors business during the quarter
were due to lower yields in the most recent harvest as well as increased
energy and other processing costs.
Selling and administrative expenses as a percent of revenue were 18.1% and
17.9% for the three months ended March 31, 2004 and 2003, respectively.
The increase was primarily attributable to expenses related to personnel
changes and additions to manage the expanded size and scope of the
Company's businesses after the recent acquisitions.
Operating income for the three months ended March 31, 2004 was $28.6
million, compared to $34.9 million for the comparable quarter in 2003 for
reasons explained above.
Favorable foreign exchange rates increased revenue by 5.8% and operating
income by 4.6% for the three month period ended March 31, 2004 over the
comparable period last year.
As discussed in Note 5 of the financial statements, the Company announced
on December 19, 2003, its intent to reduce headcount and improve the
operational efficiency of its operations. Savings as a result of these
initiatives had a positive impact on operating income of $1.7 million in
the quarter ended March 31, 2004. Additional restructuring savings are
expected to be realized during the remainder of the year.
Interest expense for the three months ended March 31, 2004 was $7.4
million, an increase of 1.6% over the prior year. The increase was a
result of higher average debt balances partially offset by lower interest
rates.
The effective income tax rate was 29.5% and 26.1% for the three months
ended March 31, 2004 and 2003, respectively. The effective tax rate for
the three months ended March 31, 2004 was slightly reduced by the
favorable settlement of certain prior year tax matters. The effective tax
rate for the three months ended March 31, 2003 was also reduced by the
favorable settlement of certain prior year tax matters, which amounted to
three cents of earnings per share. Management expects the effective tax
rate for the remainder of 2004 to be 31%.
SEGMENT INFORMATION
Flavors & Fragrances -
For the three months ended March 31, 2004, revenue for the Flavors &
Fragrances segment increased by 8.6%, to $151.6 million, compared to
$139.5 million for the same period last year. Favorable foreign exchange
rates resulted in a 5.9% increase in revenue. Excluding exchange rates,
revenue increased 2.7%, or $3.8 million, primarily because of higher
fragrance sales ($2.1 million), which were due to the recently completed
expansion in the aroma chemical product line, and improved results in
Latin America ($1.8 million), offset by declines in other markets.
Operating income in the quarter ended March 31, 2004 was $17.8 million
compared to $20.0 million last year. Excluding the favorable effect of
exchange rates
-8-
(2.8%, or $0.6 million), the decrease was primarily attributable to lower
profits in the dehydrated flavors business ($2.4 million) due to lower
pricing and higher product costs. Operating income as a percent of revenue
was 11.8%, a decrease of 260 basis points from the comparable quarter last
year.
Color -
For the three months ended March 31, 2004, revenue for the Color segment
increased by $4.6 million, or 5.1% to $94.2 million. Favorable foreign
exchange rates and acquisitions resulted in a 5.2% and 1.8% increase in
revenue, respectively. Excluding exchange rates and acquisitions, revenue
decreased 1.9% or $1.7 million, primarily the result of declines in
volumes and prices in North American food and beverage colors ($2.6
million) and in paper and industrial colors ($0.8 million), partially
offset by continued growth in the cosmetic color business ($1.5 million).
Operating income for the three months ended March 31, 2004 was $15.6
million versus $20.2 million from the comparable period last year.
Excluding the favorable effect of exchange rates (4.5%, or $0.9 million)
and acquisitions (2.1%, or $0.4 million), the resulting decrease in
operating income was primarily attributable to declines in the food and
beverage colors business. Partially offsetting those decreases were the
reduction of reserves ($1.8 million) primarily related to lower than
expected environmental costs associated with the closure of a
manufacturing site. Operating income as a percent of revenue was 16.6%, a
decrease of 590 basis points from the comparable quarter last year,
primarily due to the reasons provided above. Quarterly profits for the
Color segment represent a significant improvement over the $12.2 million
of operating income and the related profit margin of 14.8% in the fourth
quarter of 2003. Management expects this improvement to continue over the
remainder of the year as a result of its cost reduction and other profit
improvement initiatives.
FINANCIAL CONDITION
Cash provided by operating activities increased $24 million for the three
months ended March 31, 2004 compared to the comparable period last year.
The Company's ratio of debt to total capital improved to 52.6% as of March
31, 2004, from 53.0% as of December 31, 2003. The improvement resulted
from a decrease in debt.
Net cash provided by operating activities was $24.8 million for the three
months ended March 31, 2004, compared to $0.9 million for the three months
ended March 31, 2003. The increase in cash provided by operating
activities was primarily due to a decrease in the growth of inventory
during the quarter versus the comparable quarter last year. Net cash
increased $12 million due to an $8 million decline in inventories this
quarter from a better matching of production to demand and a $4 million
increase in last year's quarter to accommodate the consolidation of three
manufacturing facilities in the second half of last year. The remaining
increase in net cash was attributable to improvements in trade accounts
receivable and other areas of working capital.
Net cash used in investing activities was $7.6 million for the three
months ended March 31, 2004 compared to $12.4 million in the comparable
period last year. Net cash used in investing activities in 2004 included
capital expenditures of $9.6 million. Net cash used in investing
activities in 2003 included capital expenditures of $10.3 million and
acquisitions of $4.1 million.
Net cash used in financing activities was $16.2 million for the three
months ended March 31, 2004, compared to $13.5 million of net cash
provided by financing activities in the comparable period in the prior
year. During 2004, the net cash provided from operating activities was
sufficient to fund capital expenditures, pay dividends and reduce
borrowings. During 2003, net borrowings were used to fund acquisitions.
Net reductions of debt were $9.5 million in 2004 compared to net
borrowings of $22.5 million in 2003. Dividends of $7.0 million and $6.8
million were paid during the three months ended March 31, 2004 and 2003,
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 expenditures and dividend
payments to shareholders.
-9-
ISSUER PURCHASES OF EQUITY SECURITIES
The Company did not purchase any shares of Company stock during the three
months ended March 31, 2004. On April 27, 2001, the Company approved a
share repurchase program under which it is authorized to repurchase up to
5.0 million shares of Company stock. As of March 31, 2004, 4.3 million
shares were available under this authorization. The Company's share
repurchase program has no expiration date.
CONTRACTUAL OBLIGATIONS
The Company is subject to certain contractual obligations, including
long-term debt, operating leases and manufacturing purchases. The
following table summarizes the Company's significant contractual
obligations as of March 31, 2004.
Payments due by period
(In thousands) Total < 1 year 1-3 years 4-5 years > 5 years
-------- -------- --------- --------- ---------
Long-term debt $536,177 $ 13,703 $231,759 $ 99,340 $191,375
Operating lease obligations 29,570 7,216 10,624 4,944 6,786
Manufacturing purchase commitments 63,197 34,026 20,880 5,387 2,904
-------- -------- -------- -------- --------
Total contractual obligations $628,944 $ 54,945 $263,263 $109,671 $201,065
======== ======== ======== ======== ========
CRITICAL ACCOUNTING POLICIES
In preparing the financial statements in accordance with accounting
principles generally accepted in the U.S., management is required to make
estimates and assumptions that have an impact on the assets, liabilities,
revenue, and expense amounts reported. These estimates can also affect
supplemental information disclosures of the Company, including information
about contingencies, risk, and financial condition. The Company believes,
given current facts and circumstances, its estimates and assumptions are
reasonable, adhere to accounting principles generally accepted in the
U.S., and are consistently applied. Inherent in the nature of an estimate
or assumption is the fact that actual results may differ from estimates
and estimates may vary as new facts and circumstances arise. The Company
makes routine estimates and judgments in determining the net realizable
value of accounts receivable, inventories, property, plant and equipment,
and prepaid expenses. Management believes the Company's most critical
accounting estimates and assumptions are in the following areas:
Goodwill Valuation
The Company reviews the carrying value of goodwill annually utilizing
several valuation methodologies, including a discounted cash flow model.
Changes in estimates of future cash flows caused by items such as
unforeseen events or changes in market conditions, could negatively affect
the reporting segment's fair value and result in an impairment charge.
However, the current fair values of the reporting segments are
significantly in excess of carrying values, and accordingly management
believes that only significant changes in the cash flow assumptions would
result in impairment.
Income Taxes
The Company estimates its income tax expense in each of the taxing
jurisdictions in which it operates. The Company is subject to a tax audit
in each of these jurisdictions, which could result in changes to the
estimated tax expense. The amount of these changes would vary by
jurisdiction and would be recorded when known. These changes could impact
the Company's financial statements. Management has recorded valuation
allowances to reduce its deferred tax assets to the amount that is more
likely than not to be realized. In doing so, management has considered
future taxable income and ongoing tax planning strategies in assessing the
need for the valuation allowance. An adjustment to the recorded valuation
allowance as a result of changes in facts or circumstances could result in
a significant change in the Company's tax expense.
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 March 31, 2004. For additional information on market
risk, refer to pages 19 and 20 of the Company's 2003 Annual Report,
portions of which were filed as Exhibit 13.1 to the Company's Form 10-K
for the year ended December 31, 2003.
-10-
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains a system of disclosure controls and procedures that
is designed to ensure that all information required to be disclosed by the
Company is accumulated and communicated to management in a timely manner.
Management has reviewed this system of disclosure controls and procedures
as of the end of the period covered by this report, under the supervision
of and with the participation of the Company's Chairman, President and
Chief Executive Officer and its Vice President, Chief Financial Officer
and Treasurer. Based on that review, the Chairman, President and Chief
Executive Officer and the Vice President, Chief Financial Officer and
Treasurer have concluded that the current system of controls and
procedures is effective.
The Company maintains a system of internal control over financial
reporting. There have been no changes that materially affected, or are
reasonably likely to materially affect, the Company's internal control
over financial reporting during the quarter ended March 31, 2004.
FORWARD-LOOKING STATEMENTS
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; results of newly acquired businesses; the
Company's ability to successfully implement its growth strategies; the
outcome of the Company's various productivity-improvement and
cost-reduction efforts; changes in costs of raw materials, including
energy; industry and economic factors related to the Company's domestic
and international business; competition from other suppliers of color and
flavors and fragrances; growth in markets for products in which the
Company competes; industry acceptance of price increases; currency
exchange rate fluctuations; 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.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. (See Exhibit Index following this report.)
(b) Reports on Form 8-K. A report on Form 8-K was filed on February 17,
2004 to disclose earnings for the quarter and year ended December
31, 2003. A report on Form 8-K was filed on April 20, 2004 to
disclose earnings for the quarter ended March 31, 2004.
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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: May 7, 2004 By: /s/ John L. Hammond
----------------------------------
John L. Hammond, Vice President,
Secretary & General Counsel
Date: May 7, 2004 By: /s/ Richard F. Hobbs
-----------------------------------
Richard F. Hobbs, Vice President,
Chief Financial Officer & Treasurer
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SENSIENT TECHNOLOGIES CORPORATION
EXHIBIT INDEX
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2004
Exhibit Description Incorporated by Filed
Reference From Herewith
3.2 Amended and Restated By-Laws of Exhibit 3.2 to Annual
Sensient Technologies Corporation Report on Form 10-K for
as amended as of March 4, 2004 the fiscal year ended
December 31, 2003
(Commission File No.
1-7626)
31 Certifications of the Company's X
Chairman, President & Chief
Executive Officer and Vice
President, Chief Financial Officer
& Treasurer pursuant to Rule
13a-14(a) of the Exchange Act
32 Certifications of the Company's X
Chairman, President & Chief
Executive Officer and Vice
President, Chief Financial Officer
& Treasurer pursuant to 18 United
States Code Section 1350
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