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| SXT > SEC Filings for SXT > Form 10-Q on 4-Nov-2009 | All Recent SEC Filings |
4-Nov-2009
Quarterly Report
Revenue for the Flavors & Fragrances segment in the third quarters of 2009 and 2008 was $194.8 million and $204.6 million, respectively. The decrease was primarily due to the unfavorable impact of foreign exchange rates ($7.9 million) and lower revenue in North America ($5.2 million). These items were partially offset by higher revenue in Latin America ($2.1 million) and Europe ($1.2 million). The lower revenue in North America was primarily due to lower volumes partially offset by higher selling prices. The lower volumes are partly due to
soft consumer demand and delays in customer launches of new products. The
increased revenue in Europe was primarily related to higher selling prices. The
increased revenue in Latin America was primarily related to higher volumes and
selling prices.
For the quarters ended September 30, 2009 and 2008, operating income was
$30.7 million and $31.8 million, respectively. The decrease was primarily
attributable to the unfavorable impact of foreign exchange rates ($1.1 million).
Higher profit in Latin America ($0.3 million) as a result of increased sales was
offset by lower profit in Europe ($0.3 million) due to unfavorable product mix.
Operating income as a percent of revenue was 15.7%, an increase of 20 basis
points from the comparable quarter last year.
For the nine months ended September 30, 2009 and 2008, revenue for the Flavors &
Fragrances segment was $576.9 million and $609.3 million, respectively. The
decrease in revenue was primarily due to the unfavorable impact of exchange
rates ($41.0 million) and lower revenue in Europe ($1.1 million). These items
were partially offset by higher revenue in North America ($4.9 million) and
Latin America ($4.9 million). The lower revenue in Europe was primarily due to
lower volumes partially offset by higher selling prices. The increased revenue
in North America and Latin America was primarily due to higher selling prices in
both markets partially offset by lower volume in North America. The lower
volumes are partly due to soft consumer demand and delays in customer launches
of new products.
Operating income was $94.9 million and $94.3 million for the nine months ended
September 30, 2009 and 2008, respectively. The increase in operating income was
primarily related to North America ($4.8 million) and Latin America
($1.5 million). The unfavorable impact of exchange rates decreased operating
profit by $5.7 million, or 6.0%. The increases in North America and Latin
America were primarily due to improved pricing partially offset by higher raw
material costs and unfavorable product mix.
Color -
Revenue for the Color segment for the third quarter of 2009 was $94.2 million
compared to $102.7 million reported in the prior year's third quarter. The
decrease in revenue was primarily due to the unfavorable effect of foreign
exchange rates ($5.8 million), lower sales of non-food colors ($1.6 million) and
lower sales of food and beverage colors ($1.1 million). The lower sales of
non-food colors were primarily due to lower volumes as a result of soft consumer
demand and lower purchases by the Company's customers as they reduce their
inventory levels. The lower sales of food and beverage colors were primarily due
to decreased volumes in the US market partially offset by higher selling prices.
Lower volumes of food and beverage colors in the U.S. market are partly due to
soft consumer demand and delays in customer launches of new products.
Operating income for the quarter ended September 30, 2009, was $14.6 million
versus $17.7 million in the comparable period last year. The decrease was
primarily due to lower profit in non-food colors ($2.6 million) and the
unfavorable impact of foreign exchange rates ($0.9 million). These items were
partially offset by higher profit in food and beverage colors ($0.4 million).
The lower profit in non-food colors was primarily driven by lower volumes
combined with increased raw material costs. The higher profit in food and
beverage colors was primarily related to an increase in selling prices which
offset the impact of raw material and energy costs. Operating income as a
percent of revenue was 15.5% compared to 17.3% in the prior year's quarter.
The Color Group revenue was $275.0 million and $312.8 million for the nine
months ended September 30, 2009 and 2008, respectively. The decrease was
primarily due to the unfavorable impact of foreign exchange rates
($27.3 million) and lower sales of non-food colors ($11.9 million). Sales of
food and beverage colors were up $1.4 million for the nine months ended
September 30, 2009, primarily related to higher selling prices. The lower sales
of non-food colors were primarily due to lower volumes as a result of soft
consumer demand and lower purchases by the Company's customers as they reduce
their inventory levels.
Operating income was $43.3 million and $55.5 million for the nine months ended
September 30, 2009 and 2008, respectively. The decrease was primarily due to the
unfavorable impact of foreign exchange rates ($4.9 million), lower profit in
non-food colors ($6.0 million) and lower profit on sales of food and beverage
colors ($1.3 million). The lower profit in non-food colors was primarily due to
reduced volumes and higher raw material costs. The lower profit from sales of
food and beverage colors was primarily due to higher raw material costs and
lower volumes partially offset by higher selling prices. Operating income as a
percent of revenue was 15.7% compared to 17.8% in the prior year's first nine
months.
LIQUIDITY AND FINANCIAL CONDITION
The Company's ratio of debt to total capital improved to 32.9% as of
September 30, 2009, from 37.0% as of December 31, 2008. The improvement was due
to higher equity and lower outstanding debt balances.
Net cash provided by operating activities was $98.6 million for the nine months
ended September 30, 2009, compared to $66.3 million for the comparable period
last year. The increase in cash provided by operating activities was primarily
due to less cash required to fund working capital increases in the first nine
months of 2009 compared to the same period in 2008, especially inventory and
accounts receivable.
Net cash used in investing activities was $31.5 million and $31.1 million for
the nine months ended September 30, 2009 and 2008, respectively. Capital
expenditures were $30.9 million and $34.4 million for the year-to-date periods
ended September 30, 2009 and 2008, respectively.
Net cash used in financing activities was $59.7 million in the first nine months
of 2009 and $35.5 million in the comparable period of 2008 primarily related to
higher net repayments on debt in the first nine months of 2009 due to the
significantly higher cash provided by operating activities. In the first nine
months of 2009, net repayments on debt were $40.4 million compared to
$25.1 million for the first nine months of 2008. For purposes of the cash flow
statement, net changes in debt exclude the impact of foreign exchange rates.
Dividends of $27.7 million and $26.4 million were paid during the nine months
ended September 30, 2009 and 2008, respectively, reflecting the Company's higher
dividend of $0.57 per share in the first nine months of 2009 compared to $0.55
per share in the same period in 2008. In the first nine months of 2009 and 2008,
the Company's cash provided from operations was able to fund capital
expenditures, pay dividends and reduce outstanding debt.
The Company's financial position remains strong. In the first quarter of 2009,
the Company borrowed under its term loan that was completed in October 2008. The
proceeds from this term loan were used to retire maturing debt. The Company
expects that its 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. The Company may refinance a portion of its
variable rate debt through a new debt offering in early 2010.
The Company completed its annual goodwill impairment test under ASC 350,
Intangibles - Goodwill and Other, in the third quarter of 2009. In conducting
its annual test for impairment, the Company estimates the fair value for each of
its reporting units and compares each of these values to the net book value of
each reporting unit. Fair value is estimated using both a discounted cash flow
analysis and an analysis of comparable company market values. If the fair value
of a reporting unit exceeds its net book value, no impairment exists. The
Company has three reporting units that were tested for impairment. The Flavors
and Fragrances reporting unit and the Asia Pacific reporting unit had fair
values that were over 75% above their respective net book values. The fair value
of the Color reporting unit, with goodwill of approximately $310 million at its
measurement date, has a premium over net book value of between 10 percent and
20 percent. The estimate of fair value for the Color reporting unit is based on
current cash flow levels assuming a modest rate of future growth. A sustained
reduction of cash flow from this reporting unit or an increase in the discount
rate could cause the estimated fair value to fall below the net book value of
the reporting unit.
CONTRACTUAL OBLIGATIONS
There have been no material changes in the Company's contractual obligations
during the quarter ended September 30, 2009. For additional information about
contractual obligations, refer to page 23 of the Company's 2008 Annual Report,
portions of which were filed as Exhibit 13.1 to the Company's Annual Report on
Form 10-K for the year ended December 31, 2008.
OFF-BALANCE SHEET ARRANGEMENTS
The Company had no off-balance sheet arrangements as of September 30, 2009.
CRITICAL ACCOUNTING POLICIES
There have been no material changes in the Company's critical accounting
policies during the quarter ended September 30, 2009. For additional information
about critical accounting policies, refer to pages 21 and 22 of the Company's
2008 Annual Report, portions of which were filed as Exhibit 13.1 to the
Company's Annual Report on Form 10-K for the year ended December 31, 2008.
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