What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-02 compared with 2022-05-03 · 199 added, 135 removed, 128 unchanged (72% of the section changed)

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Forward-looking statements include

statements in the future tense, statements referring to any period after March 31, 2022, and statements including the terms “expect,” “believe,” “anticipate,” and other similar terms that express expectations as to future events or conditions.

statements in the future tense, statements referring to any period after June 30, 2022, and statements including the terms “expect,” “believe,” “anticipate,” and other similar terms that express expectations as to future events or conditions.

Private Securities Litigation Reform Act of 1995 provides a safe harbor for such forward-looking statements.

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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, among others, the impact and uncertainty created by the ongoing COVID-19 pandemic, including, but not limited to, its effects on our employees, facilities, customers, and suppliers;

the availability and cost

of raw materials, energy, and other supplies;

the availability and cost of labor, logistics, and transportation;

the uncertain impacts of the ongoing conflict between Russia and Ukraine on our supply chain, input costs, including energy and

transportation, and generally on economic conditions;

governmental regulations and restrictions;

and general economic conditions, including inflation;

of raw materials, energy, and other supplies, the availability and cost of labor, logistics, and transportation, governmental regulations and restrictions, and general economic conditions, including inflation;

the uncertain impacts of the ongoing

conflict between Russia and Ukraine on our supply chain, input costs, including energy and transportation, and on general economic conditions;

the pace and nature of new product introductions by the Company and the Company’s customers;

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cost-reduction efforts, acquisition and divestiture activities, and operational improvement plan;

the effectiveness of the Company’s past restructuring activities;

changes in costs of raw materials, including energy;

industry, regulatory, legal,

and economic factors related to the Company’s domestic and international business;

industry, regulatory, legal, and economic factors related to the Company’s domestic and

international business;

the effects of tariffs, trade barriers, and disputes;

growth in markets for products in which the Company competes;

industry and customer acceptance of price

industry and customer acceptance of price increases;

actions by competitors;

currency exchange rate fluctuations;

and the matters discussed under Item 1A in Part II of this Quarterly Report on Form 10-Q and Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31,

Except to the extent required by applicable law, 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.

Revenue was $355.5 million and $359.7 million for the three months ended March 31, 2022 and 2021, respectively.

The decrease in revenue was primarily due to the sale of the Company’s Fragrances product line on April 1, 2021, partially offset by

favorable pricing and volumes.

For the three months ended March 31, 2022, the impact of foreign exchange rates decreased consolidated revenue by approximately 2%.

The Company’s gross margin was 35.1% and 32.1% for the three months ended March 31, 2022 and 2021, respectively.

The increase in gross margin was primarily due to an increase in pricing and volumes, partially offset by higher input costs.

currency exchange rate

fluctuations;

and the matters discussed under Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as updated and supplemented in Part II, Item 1A of the Company’s Quarterly Report on Form 10-Q for the quarter

ended March 31, 2022.

expressed or implied therein will not be realized.

Revenue was $371.7 million and $335.8 million for the three months ended June 30, 2022 and 2021, respectively.

Revenue was $727.2 million and $695.5 million for the six months ended June 30, 2022 and 2021, respectively.

The increase in revenue

for the three and six months ended June 30, 2022 was primarily due to increased pricing and volumes.

The increase in revenue for the six months ended June 30, 2022 was partially offset by the sale of the Company’s Fragrances product line on April

For the three and six months ended June 30, 2022, the impact of foreign exchange rates decreased consolidated revenue by approximately 3%.

The Company’s gross margin was 35.2% and 33.2% for the three months ended June 30, 2022 and 2021, respectively.

The Company’s gross margin was 35.2% and 32.7% for the six months ended June 30, 2022 and 2021, respectively.

The increase in gross

margin for both the three and six months ended June 30, 2022 was primarily due to increased pricing and volumes, partially offset by higher input costs.

Gross margin was also impacted by unfavorable product mix for the three months ended June 30,

Selling and Administrative Expenses

Selling and administrative expense as a percent of revenue was 20.3% and 19.1% for the three months ended March 31, 2022 and 2021, respectively.

The increase in selling and administrative expenses as a percent of revenue was primarily due to an

increase in expenses in the Color segment and higher performance-based executive compensation recorded in Corporate & Other, partially offset by divestiture & other related expenses and operational improvement plan costs in the prior

Selling and administrative expenses for the three months ended March 31, 2021 included divestiture & other related expenses and operational improvement plan costs totaling $2.5 million.

There were no divestiture & other related costs or

operational improvement plan costs for the three months ended March 31, 2022.

These expenses increased selling and administrative expense as a percent of revenue by 70 basis points for the three months ended March 31, 2021.

Selling and administrative expense as a percent of revenue was 20.4% and 22.6% for the three months ended June 30, 2022 and 2021, respectively.

Selling and administrative expense as a percent of revenue was 20.3% and 20.8% for the six months

ended June 30, 2022 and 2021, respectively.

Selling and administrative expenses for the three and six months ended June 30, 2021 included divestiture & other related expenses and operational improvement plan costs totaling $8.2 million and $10.7 million, respectively.

There were no

divestiture & other related costs or operational improvement plan costs for the three or six months ended June 30, 2022.

The decrease in selling and administrative expense as a percent of revenue for the three and six months ended June 30, 2022 is primarily due to the lack of divestiture & other related costs and operational improvement plan costs in 2022,

partially offset by higher performance-based executive compensation in 2022.

The divestiture & other related costs and operational improvement plan costs increased selling and administrative expense as a percent of revenue by 250 and 160 basis

points for the three and six months ended June 30, 2021, respectively.

Operating Income

Operating income was $52.8 million and $46.9 million for the three months ended March 31, 2022 and 2021, respectively.

Operating margins were 14.8% and 13.0% for the three months ended March 31, 2022 and 2021, respectively.

Operating income was $55.2 million and $35.8 million for the three months ended June 30, 2022 and 2021, respectively.

Operating margins were 14.9% and 10.6% for the three months ended June 30, 2022 and 2021, respectively.

The increase in

operating margin is primarily due to higher pricing and volumes, and the lack of divestiture & other related costs and operational improvement plan costs in the current period, partially offset by higher performance-based executive compensation

recorded in Corporate & Other .

Operating income was $108.0 million and $82.7 million for the six months ended June 30, 2022 and 2021, respectively.

Operating margins were 14.9% and 11.9% for the six months ended June 30, 2022 and 2021, respectively.

The increase in operating

margin is primarily due to higher pricing and volumes, and the lack of divestiture & other related costs and operational improvement plan costs in the current period, partially offset by higher input costs .

Interest Expense

Interest expense was $3.0 million and $3.4 million for the three months ended March 31, 2022 and 2021, respectively.

The decrease in expense was primarily due to the lower average interest rate in the current period compared to the comparable

prior year period.

The effective income tax rates for the three months ended March 31, 2022 and 2021 were 25.6% and 27.1%, respectively.

The effective tax rates for the three months ended March 31, 2022 and 2021 were both impacted by changes in estimates

associated with the finalization of prior year foreign tax items and the mix of foreign earnings.

Interest expense was $3.1 million and $3.3 million for the three months ended June 30, 2022 and 2021, respectively, and $6.1 million and $6.8 million for the six months ended June 30, 2022 and 2021, respectively.

The decrease in expense for the

three and six months ended June 30, 2022 was primarily due to the lower average interest rate in the current period compared to the comparable prior year period.

The effective income tax rates for the three months ended June 30, 2022 and 2021 were 25.9% and 20.0%, respectively.

For the six months ended June 30, 2022 and 2021, the effective income tax rates were 25.7% and 24.1%, respectively.

effective tax rates for the three and six months ended June 30, 2022 and 2021 were both impacted by changes in estimates associated with the finalization of prior year foreign tax items and the mix of foreign earnings.

The three and six months

ended June 30, 2021 were also impacted by changes in valuation allowances and an audit settlement.

On June 30, 2020, the Company completed the sale of its inks product line.

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On April 1, 2021, the Company completed the sale of its fragrances product line (excluding its essential oils product line) for $36.3 million of net cash.

In the three months ended March 31, 2021, the Company incurred $1.6 million related to the divestitures, primarily for costs associated with employee separation and accelerated depreciation of fixed assets.

There were no costs related to the

divestitures incurred during the three months ended March 31, 2022.

For the three and six months ended June 30, 2021, the Company incurred $11.7 million and $13.3 million, respectively, related to the divestitures, primarily related to a non-cash net loss for the reclassification of accumulated foreign currency

translation and related items from Accumulated Other Comprehensive Loss to Selling and Administrative Expenses in the Consolidated Statements of Earnings.

were no costs related to the divestitures incurred during the three or six months ended June 30, 2022.

Operational Improvement Plan

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In the Asia Pacific segment, the Company incurred costs in connection with the elimination of certain selling and administrative positions.

In the three months ended March 31, 2021, the Company incurred $1.0 million related to the Operational Improvement Plan recorded in Corporate & Other, primarily for costs associated with exiting its New Jersey cosmetics manufacturing

There were no costs related to the Operational Improvement Plan incurred during the three months ended March 31, 2022.

During the second quarter of 2021, the Company received cash proceeds, net of associated expenses, in connection with the termination of a New Jersey office and laboratory space lease.

The terminated lease was originally executed in November

2020 as part of the Operational Improvement Plan;

however, the landlord for the property requested to terminate the lease prior to the end of its term and compensated the Company as part of a negotiated resolution for that termination.

In the three and six months ended June 30, 2021, the Company recorded income of $3.5 million and $2.5 million, respectively, related to the Operational Improvement Plan, primarily related to a $3.6 million gain associated with the terminated New

Jersey lease.

There were no costs or income related to the Operational Improvement Plan incurred during the three or six months ended June 30, 2022.

On July 15, 2021, the Company acquired substantially all of the assets of Flavor Solutions, Inc.

, a flavors business located in New Jersey.

The purchase price for this acquisition was $14.9 million

in cash with approximately $1.0 million of such amount being held back by the Company for 12 months in order to satisfy post-closing indemnification claims that may arise.

The assets acquired and liabilities assumed were recorded at their

estimated fair value as of the acquisition date.

The Company acquired net assets of $0.4 million and identified intangible assets, principally customer relationships, of $5.0 million.

The purchase price for this acquisition was $14.9 million in cash with approximately $1.0 million of such amount being held back by the Company for 12 months in order to satisfy post-closing

indemnification claims that may arise.

The assets acquired and liabilities assumed were recorded at their estimated fair value as of the acquisition date.

The Company acquired net assets of $0.4 million and identified intangible assets,

principally customer relationships, of $5.0 million.

The remaining $9.5 million was allocated to goodwill.

business is now part of the Flavors & Extracts segment.

This business is now part of the Flavors & Extracts segment.

COVID-19 has adversely affected most of the world through widespread illness, quarantines, factory shutdowns, and travel and transportation disruptions and restrictions.

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In addition, we have experienced inflationary increases in costs associated with certain raw materials,

logistics, transportation, and labor.

logistics, energy, transportation, and labor.

In response, we have taken pricing actions to offset these increases.

For the three months ended March 31, 2022, demand for many of the Company’s products remained strong.

All of the Company’s production facilities are open and operating as of this filing, but the Company continues to monitor developments and

regulations in regions where its production facilities are located.

For the three and six months ended June 30, 2022, demand for many of the Company’s products remained strong.

All of the Company’s production facilities are open and operating as of this filing, but the Company continues to monitor developments

and regulations in regions where its production facilities are located.

Governmental and social responses to the COVID-19 pandemic continue to evolve.

There continues to be uncertainty related to the impacts of new COVID-19 variants, and we expect that

the situation will remain dynamic and difficult to predict for the foreseeable future.

There can be no assurance that our experience to date with respect to facility operations, customer demand, the availability of supplies and transportation, and

other factors impacting our results and financial condition will be predictive of the ongoing impacts in the short or long term.

It is difficult to predict how economic conditions and changes in customer and consumer behavior may impact our results

over the longer term.

There continues to be uncertainty related to the impacts of new COVID-19 variants, and we expect

that the situation will remain dynamic and difficult to predict for the foreseeable future.

There can be no assurance that our experience to date with respect to facility operations, customer demand, the availability of supplies and transportation,

and other factors impacting our results and financial condition will be predictive of the ongoing impacts in the short or long term.

It is difficult to predict how economic conditions and changes in customer and consumer behavior may impact our

results over the longer term.

As a result of any of the foregoing, our results or financial condition could be adversely impacted and the impacts could be material.

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(1) adjusted revenue, adjusted operating income, adjusted net earnings, and adjusted diluted earnings per share, which exclude the results of the

divested product lines, the divestiture & other related costs, and the operational improvement plan costs and (2) percentage changes in revenue, operating income, and diluted earnings per share on an adjusted local currency basis, which

eliminate the effects that result from translating its international operations into U.S.

dollars, the results of the divested product lines, the divestiture & other related costs, and the operational improvement plan costs.

divested product lines, the divestiture & other related costs, and the operational improvement plan costs and income and (2) percentage changes in revenue, operating income, and diluted earnings per share on an adjusted local currency basis,

which eliminate the effects that result from translating its international operations into U.S.

dollars, the results of the divested product lines, the divestiture & other related costs, and the operational improvement plan costs or income.

The Company has included each of these non-GAAP measures in order to provide additional information regarding our underlying operating results and comparable year-over-year performance.

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These non-GAAP measures may not be comparable to similarly titled measures used by other companies.

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands, except per share amounts)

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Divestiture & other related costs – Selling and administrative expenses

Operating income of the divested product lines

Operational improvement plan – Selling and administrative expenses

Operating loss (income) of the divested product lines

Operational improvement plan – Selling and administrative expenses (income)

Adjusted operating income

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Tax impact of divestiture & other related costs

Net earnings of the divested product lines, before tax

Net loss (earnings) of the divested product lines, before tax

Tax impact of the divested product lines

Operational improvement plan costs, before tax

Operational improvement plan income, before tax

Tax impact of operational improvement plan

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Results of operations of the divested product lines, net of tax

Operational improvement plan costs, net of tax

Operational improvement plan income, net of tax

Adjusted diluted earnings per share

Divestiture & other related costs are discussed under “Divestitures” above and

Note 2, Divestitures, in the Notes to the Consolidated Condensed Financial Statements included in this report.

The Operational Improvement Plan is discussed under “Operational Improvement

Plan” above and Note 3, Operational Improvement Plan, in the Notes to the Consolidated Condensed Financial Statements included in this report.

Divestiture & other related costs are discussed under “Divestitures” above and Note 2, Divestitures, in the Notes to the Consolidated Condensed Financial Statements

included in this report.

The Operational Improvement Plan is discussed under “Operational Improvement Plan” above and Note 3, Operational Improvement Plan, in the Notes to the Consolidated Condensed

Financial Statements included in this report.

Earnings per share calculations may not foot due to rounding differences .

The following table summarizes the percentage change for the results of the three months ended March 31, 2022, compared to the results for the three months ended March 31, 2021, in the respective financial measures.

Three Months Ended March 31, 2022

The following table summarizes the percentage change for the results of the three and six months ended June 30, 2022, compared to the results for the three and six months ended June 30, 2021, in the respective financial measures.

Three Months Ended June 30, 2022

Six Months Ended June 30, 2022

Foreign Exchange Rates

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Adjusted Local Currency

Foreign Exchange Rates

Adjustments (1)

Adjusted Local Currency

Flavors & Extracts

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For Operating Income and Diluted Earnings per Share, adjustments consist of the results of the divested product

lines, divestiture & other related costs, and operational improvement plan costs.

lines, divestiture & other related costs, and operational improvement plan costs and income.

Refer to table above for a reconciliation of these non-GAAP measures.

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Flavors & Extracts

Flavors & Extracts segment revenue was $182.7 million and $200.9 million for the three months ended March 31, 2022 and 2021, respectively, a decrease of approximately 9%.

Flavors & Extracts segment revenue was $189.3 million and $179.4 million for the three months ended June 30, 2022 and 2021, respectively, an increase of approximately 6%.

Foreign exchange rates decreased segment revenue by approximately 2%.

The decrease was primarily a result of lower revenue in Fragrances and Natural Ingredients, partially offset by higher revenue in Flavors, Extracts & Flavor Ingredients.

The lower revenues in Fragrances was due to the divestiture of the product

line in April 2021.

The lower revenue in Natural Ingredients was primarily due to lower volumes, partially offset by higher selling prices.

The higher revenue in Flavors, Extracts & Flavor Ingredients was primarily due to higher volumes, higher

selling prices, and the acquisition of Flavor Solutions, Inc .

The increase was primarily a result of higher revenue in Flavors, Extracts & Flavor Ingredients, offset by lower revenue in Natural Ingredients and lower revenue due to the completion of post-closing activities associated with the divestiture

of Yogurt Fruit Preparations in September of 2020.

The higher revenue in Flavors, Extracts & Flavor Ingredients was primarily due to higher volumes, higher selling prices, and the acquisition of Flavor

Solutions, Inc .

in July of 2021, partially offset by the unfavorable impact of foreign exchange rates.

Flavors & Extracts segment operating income was $27.6 million and $27.0 million for the three months ended March 31, 2022 and 2021, respectively, an increase of approximately 2%.

The lower revenue in Natural Ingredients was primarily due to lower volumes, partially offset by higher selling prices.

Flavors & Extracts segment revenue was $372.1 million and $380.3 million for the six months ended June 30, 2022 and 2021, respectively, a decrease of approximately 2%.

Foreign exchange rates decreased segment revenue by approximately 2%.

decrease was primarily a result of lower revenue due to the completion of post-closing activities associated with the divestiture of Yogurt Fruit Preparations in September of 2020 and the divestiture of Fragrances in April of 2021 and lower revenue

in Natural Ingredients, partially offset by higher revenue in Flavors, Extracts & Flavor Ingredients.

The lower revenue in Natural Ingredients was primarily due to lower volumes, partially offset by higher selling prices.

The higher revenue in

Flavors, Extracts & Flavor Ingredients was primarily due to higher volumes, higher selling prices, and the acquisition of Flavor Solutions, Inc.

in July of 2021, partially offset by the unfavorable

impact of foreign exchange rates.

Flavors & Extracts segment operating income was $30.0 million and $24.5 million for the three months ended June 30, 2022 and 2021, respectively, an increase of approximately 22%.

Foreign exchange rates decreased segment operating income by

approximately 1%.

The higher segment operating income was primarily a result of higher operating income in Flavors, Extracts & Flavor Ingredients and Natural Ingredients, partially offset by the divestiture of the Fragrances product line in

April of 2021.

The higher operating income in Flavors, Extracts & Flavor Ingredients was primarily due to higher selling prices, higher volumes, and lower manufacturing and other costs, partially offset by higher raw material costs.

operating income in Natural Ingredients was primarily due to higher selling prices and a favorable product mix, partially offset by lower volumes, higher raw material costs, and higher manufacturing and other costs.

Segment operating income as a

percent of revenue was 15.1% in the current quarter compared to 13.4% in the prior year’s comparable quarter.

Segment revenue for the Color segment was $148.4 million and $135.7 million for the three months ended March 31, 2022 and 2021, respectively, an increase of approximately 9%.

The higher segment operating income was primarily a result of higher operating income in Flavors, Extracts & Flavor Ingredients and Natural Ingredients.

The higher operating income in Flavors, Extracts & Flavor Ingredients

was primarily due to higher selling prices, higher volumes, and lower manufacturing and other costs, partially offset by higher raw material costs.

The higher operating income in Natural Ingredients was primarily due to higher selling prices,

partially offset by lower volumes, higher raw material costs, and higher manufacturing and other costs.

Segment operating income as a percent of revenue was 15.9% in the current quarter compared to 13.7% in the prior year’s comparable quarter.

Flavors & Extracts segment operating income was $57.6 million and $51.6 million for the six months ended June 30, 2022 and 2021, respectively, an increase of approximately 12%.

Foreign exchange rates decreased segment operating income by

approximately 1%.

The increase was primarily a result of higher segment operating income in Flavors, Extracts & Flavor Ingredients and Natural Ingredients, partially offset by lower segment operating income due to the divestiture of Fragrances

in April of 2021.

The higher segment operating income in Flavors, Extracts & Flavor Ingredients was primarily a result of higher selling prices and volumes, lower manufacturing and other costs, and the acquisition of Flavor Solutions, Inc.

in July of 2021, partially offset by higher raw material costs and the unfavorable impact of foreign exchange rates.

The higher segment operating income in Natural Ingredients was primarily a result of

higher selling prices and favorable product mix, partially offset by lower volumes, higher raw material costs, and higher manufacturing and other costs.

Segment operating income as a percent of revenue was 15.5% in the current six month period

compared to 13.6% in the prior year’s comparable six month period.

Segment revenue for the Color segment was $156.3 million and $133.2 million for the three months ended June 30, 2022 and 2021, respectively, an increase of approximately 17%.

The increase was a result of higher revenue in Food &

Pharmaceutical Colors and Personal Care, primarily due to higher volumes and selling prices, partially offset by the unfavorable impact of foreign exchange rates that decreased segment revenue by approximately 4%.

Segment operating income for the Color segment was $30.7 million and $26.6 million for the three months ended March 31, 2022 and 2021, respectively, an increase of approximately 15%.

Segment revenue for the Color segment was $304.7 million and $268.9 million for the six months ended June 30, 2022 and 2021, respectively, an increase of approximately 13%.

The increase was a result of higher revenue in Food & Pharmaceutical

Colors and Personal Care, primarily due to higher volumes and selling prices, partially offset by the unfavorable impact of foreign exchange rates that decreased segment revenue by approximately 3%.

Segment operating income for the Color segment was $31.2 million and $25.6 million for the three months ended June 30, 2022 and 2021, respectively, an increase of approximately 22%.

Foreign exchange rates decreased segment operating income by

approximately 5%.

The increase in segment operating income was a result of higher segment operating income in Food & Pharmaceutical Colors and Personal Care.

The higher operating income in Food & Pharmaceutical Colors was due to higher

volumes and selling prices, partially offset by higher raw material costs and higher manufacturing and other costs.

The higher operating income in Personal Care was due to higher volumes and selling prices, partially offset by higher manufacturing

and other costs.

The increase in segment operating income was a result of higher operating income in Food & Pharmaceutical Colors and Personal Care.

The higher operating income in Food & Pharmaceutical Colors was due to higher volumes and

selling prices, partially offset by higher raw material costs, higher manufacturing and other costs, unfavorable product mix, and the unfavorable impact of foreign exchange rates.

The higher operating income in Personal Care was due to higher

volumes and selling prices, partially offset by unfavorable product mix.

Segment operating income as a percent of revenue was 20.0% in the current quarter and 19.2% in the prior year’s comparable quarter.

Segment revenue for the Asia Pacific segment was $36.5 million and $33.8 million for the three months ended March 31, 2022 and 2021, respectively, an increase of approximately 8%.

Segment operating income for the Color segment was $61.8 million and $52.2 million for the six months ended June 30, 2022 and 2021, respectively, an increase of approximately 18%.

Foreign exchange rates decreased segment operating income by

approximately 4%.

The increase in segment operating income was a result of higher operating income in Food & Pharmaceutical Colors and Personal Care.

The higher operating income in Food & Pharmaceutical Colors was due to higher volumes and

selling prices, partially offset by higher raw material costs, higher manufacturing and other costs, unfavorable product mix, and the unfavorable impact of foreign exchange rates.

The higher operating income in Personal Care was due to higher

volumes and selling prices, partially offset by unfavorable product mix, higher manufacturing and other costs, and the unfavorable impact of foreign exchange rates.

Segment operating income as a percent of revenue was 20.3% in the current six month

period and 19.4% in the prior year’s comparable period.

Segment revenue for the Asia Pacific segment was $37.3 million and $32.3 million for the three months ended June 30, 2022 and 2021, respectively, an increase of approximately 16%.

The increase was a result of higher volumes and selling prices,

partially offset by the unfavorable impact of foreign exchange rates that decreased segment revenue by approximately 8%.

Segment operating income for the Asia Pacific segment was $8.2 million and $6.8 million for the three months ended March 31, 2022 and 2021, respectively, an increase of approximately 22%.

Segment revenue for the Asia Pacific segment was $73.8 million and $66.2 million for the six months ended June 30, 2022 and 2021, respectively, an increase of approximately 12%.

The increase was a result of higher volumes and selling prices,

partially offset by the unfavorable impact of foreign exchange rates, which decreased segment revenue by approximately 7%.

Segment operating income for the Asia Pacific segment was $7.7 million and $5.8 million for the three months ended June 30, 2022 and 2021, respectively, an increase of approximately 33%.

The increase was primarily a result of higher volumes and

selling prices, partially offset by the unfavorable impact of foreign exchange rates that decreased segment operating income by approximately 8%.

Segment operating income as a percent of revenue was 22.5% in the current quarter and 20.0% in the

prior year’s comparable quarter.

selling prices, partially offset by higher other operating costs and the unfavorable impact of foreign exchange rates that decreased segment operating income by approximately 10%.

Segment operating income as a percent of revenue was 20.7% in the

current quarter and 17.9% in the prior year’s comparable quarter.

Segment operating income for the Asia Pacific segment was $15.9 million and $12.5 million for the six months ended June 30, 2022 and 2021, respectively, an increase of approximately 27%.

The increase was primarily a result of higher volumes and

selling prices, partially offset by higher raw material and other operating costs and the unfavorable impact of foreign exchange rates that decreased segment operating income by approximately 9%.

Segment operating income as a percent of revenue was

21.6% in the current six month period and 19.0% in the prior year’s comparable period.

Corporate & Other

The Corporate & Other operating expense was $13.7 million and $13.5 million for the three months ended March 31, 2022 and 2021, respectively.

Operating expense for the three months ended March 31, 2022 was consistent with the prior period

primarily due to an increase in performance-based executive compensation offset by the prior period including divestiture & other related expenses of $1.6 million and operational improvement plan expenses of $1.0 million.

There were no

divestiture & other related expenses or operational improvement plan expenses in the current period.

The Corporate & Other operating expense was $13.7 million and $20.2 million for the three months ended June 30, 2022 and 2021, respectively.

The lower operating expense for the three months ended June 30, 2022 was primarily due to the prior

period including divestiture & other related expenses of $11.7 million, partially offset by higher performance-based executive compensation in 2022 and the prior period including operational improvement plan income of $3.5 million.

no divestiture & other related expenses or operational improvement plan income or costs in the current period.

The Corporate & Other operating expense was $27.3 million and $33.7 million for the six months ended June 30, 2022 and 2021, respectively.

The lower operating expense for the six months ended June 30, 2022 was primarily due to the prior

period including divestiture & other related expenses of $13.3 million, partially offset by higher performance-based executive compensation in 2022 and the prior period including operational improvement plan income of $2.5 million.

no divestiture & other related expenses or operational improvement plan income or costs in the current six month period.

LIQUIDITY AND FINANCIAL CONDITION

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The Company’s financial position remains strong.

The Company is in compliance with its loan covenants calculated in accordance with applicable agreements as of March 31, 2022.

The Company is in compliance with its loan covenants calculated in accordance with applicable agreements as of June 30, 2022.

The Company expects its cash flow from operations and its existing

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repay these obligations through a combination of cash flow from operations, issuance of additional notes, and substantial borrowing capacity under the Company’s revolving credit facility, which matures in 2026.

As a result of our ability to manage the impact of inflation through pricing and other actions, the impact of inflation was not material to the Company’s financial position and its results of operations for the three months ended March 31, 2022.

The Company currently anticipates inflation will not significantly impact the remainder of 2022, as a result of the Company’s pricing and other actions;

however, the Company, like others in its industry, has faced challenges due to conditions in

the global supply chain and global economy.

In particular, the Company has experienced increased costs for certain inputs, such as raw materials, shipping and logistics, and labor-related costs.

We continue to expect to manage these impacts in the

near term, but persistent, accelerated, or expanded inflationary conditions could exacerbate these challenges and impact our profitability.

however, the Company, like others in its industry, has faced challenges due to conditions

in the global supply chain and global economy.

In particular, the Company has experienced increased costs for certain inputs, such as energy, raw materials, shipping and logistics, and labor-related costs.

We continue to expect to manage these

impacts in the near term, but persistent, accelerated, or expanded inflationary conditions could exacerbate these challenges and impact our profitability.

Cash Flows from Operating Activities

Net cash used in operating activities was $0.9 million for the three months ended March 31, 2022, compared to net cash provided by operating activities of $29.0 million for the three months ended March 31, 2021.

The decrease in net cash from

operating activities was primarily due to an increase in cash used for inventory and higher incentive payments in 2022.

Net cash provided by operating activities was $22.8 million and $89.3 million for the six months ended June 30, 2022 and 2021, respectively.

The decrease in net cash from operating activities was primarily due to an increase in cash used for

inventory in 2022.

Cash Flows from Investing Activities

Net cash used in investing activities was $12.2 million and $9.8 million during the three months ended March 31, 2022 and 2021, respectively.

Capital expenditures were $12.7 million and $14.2 million during the three months ended March 31, 2022

and 2021, respectively.

In addition, during the three months ended March 31, 2021, the Company received cash proceeds of $4.1 million related to the Company’s divestiture activities.

Net cash used in investing activities was $30.8 million during the six months ended June 30, 2022.

Net cash provided by investing activities was $10.6 million during the six months ended June 30, 2021.

During the six months ended June 30, 2021,

the Company received cash proceeds of $36.3 million related to the Company’s divestiture activities.

Capital expenditures were $32.5 million and $25.6 million during the six months ended June 30, 2022 and 2021, respectively.

Cash Flows from Financing Activities

Net cash provided by financing activities was $14.9 million for the three months ended March 31, 2022, and net cash used in financing activities was $15.9 million for the three months ended March 31, 2021.

Net cash provided by financing activities was $1.4 million for the six months ended June 30, 2022, and net cash used in financing activities was $92.7 million for the six months ended June 30, 2021.

Net debt increased by $37.9 million and

$12.5 million for the three months ended March 31, 2022 and 2021, respectively.

The cash proceeds from the increase in net debt in the current period were primarily used to support inventory investments during the three months ended March 31, 2022.

decreased by $36.6 million for the six months ended June 30, 2022 and 2021, respectively.

The cash proceeds from the increase in net debt in the current period were primarily used to support inventory investments during the six months ended June

For purposes of the cash flow statement, net changes in debt exclude the impact of foreign exchange rates.

The Company repurchased shares of its common stock for $11.7 million during the three months ended March 31, 2021.

There were no repurchases

of shares of the Company’s common stock in the current period.

Dividends of $17.2 million and $16.5 million were paid during the three months ended March 31, 2022 and 2021, respectively.

Dividends paid were $0.41 and $0.39 per share for the three

months ended March 31, 2022 and 2021, respectively.

The Company repurchased shares of its common stock for $22.5 million during the six months ended June 30, 2021.

There were no

repurchases of shares of the Company’s common stock in 2022.

Dividends of $34.4 million and $33.0 million were paid during the six months ended June 30, 2022 and 2021, respectively.

Dividends paid were $0.82 and $0.78 per share for the six months

ended June 30, 2022 and 2021, respectively.

CRITICAL ACCOUNTING POLICIES

There have been no material changes in the Company’s critical accounting policies during the quarter ended March 31, 2022.

There have been no material changes in the Company’s critical accounting policies during the quarter ended June 30, 2022.

For additional information about the Company’s critical accounting policies, refer to “Critical Accounting Policies” under

1 unchanged sentence

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the Company’s exposure to market risk during the quarter ended March 31, 2022.

For additional information about market risk, refer to Part II, Item 7A of the Company’s Annual Report on Form 10-K for the

year ended December 31, 2021.

There have been no material changes in the Company’s exposure to market risk during the quarter ended June 30, 2022.

For additional information about market risk, refer to Part II, Item 7A of the Company’s Annual Report on Form 10-K for the year

ended December 31, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis