Sensient Technologies Corporation — 2013 Form 10-K
Reporting period: Fiscal year ended December 31, 2013. The filing is dated February 28, 2014. The company is a global manufacturer and marketer of colors, flavors, and fragrances, with reportable Flavors & Fragrances and Color segments.
Financial performance and position
The supplied filing text incorporates the financial statements and management’s discussion from the 2013 Annual Report to Shareholders but does not reproduce their figures. Accordingly, clear values for revenue, earnings, margins, cash flow, debt, and liquidity are not provided in the supplied text.
- Research and development expense was $34.5 million in 2013, versus $34.7 million in 2012 and $33.2 million in 2011.
- The company increased its annual common-stock dividend rate from $0.88 to $0.92 per share, effective with the quarterly dividend paid June 3, 2013.
- No shares were repurchased in the fourth quarter of 2013. As of February 24, 2014, 2,639,241 shares had been repurchased under the active authorization.
Material changes and operating developments
- In 2013, the company completed the relocation of the Flavors & Fragrances Group headquarters to Chicago and implemented a profit-improvement plan across all segments, including facility and position consolidations. The supplied text does not state the related restructuring costs or quantified savings.
- Beginning in the first quarter of 2013, cosmetic and pharmaceutical operations in Asia Pacific and China were moved into the Color segment; prior-year segment results were restated.
- Paul Manning became President and Chief Executive Officer on February 2, 2014.
Outlook, risks, and contingencies
The filing provides no specific financial guidance in the supplied text. Management’s forward-looking statements identify risks including raw-material and energy cost volatility, supply interruptions, foreign-exchange movements, customer concentration and purchasing power, competitive pressure, customer acceptance of price increases, changing consumer preferences, regulation, and execution of cost-reduction initiatives.
- A California wage-and-hour class action was preliminarily approved for settlement on a claims-made basis, capped at $275,000; final approval was scheduled for March 14, 2014.
- The Cherry Blossom litigation was concluded after neither party sought further review of the appellate decision. The court affirmed the denial of Crossroads’ claim to recover more than $1.4 million from Sensient.
- Management said other ordinary-course claims were not expected to materially affect the consolidated financial statements. Environmental compliance had no material adverse effect in 2013, and the company did not expect a material adverse effect over the following two years.
- Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2013; the independent auditor audited internal control over financial reporting.
Important facts for investors to verify
- Review the incorporated 2013 Annual Report’s statements and MD&A for revenue, profit, segment results, cash flow, margins, debt, liquidity, and restructuring charges; those figures are not clear in the supplied filing text.
- Assess whether the profit-improvement plan delivered savings sufficient to offset implementation costs and operating pressures.
- Check subsequent developments and final disposition of the wage-and-hour settlement.
- Evaluate exposure to key customers, commodity and energy prices, foreign currencies, and regulatory requirements.