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Item 8. Financial Statements and Supplementary Data

2024-02-22 compared with 2023-02-17 · 276 added, 258 removed, 829 unchanged (39% of the section changed)

Financial Statements and Supplementary Data.

CONSOLIDATED STATEMENTS OF EARNINGS

STATEMENTS OF EARNINGS

Years Ended December 31,

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See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME

Years Ended December 31,

(In thousands)

Cash flow hedges adjustment, net of tax (benefit) expense of $( 471 ), $( 430 ), and $ 524 , respectively

Cash flow hedges adjustment, net of tax benefit of $( 984 ), $( 471 ), and $( 430 ), respectively

Pension adjustment, net of tax (benefit) expense of $( 72 ), $( 462 ), and $ 577 , respectively

2 unchanged sentences

Foreign currency translation on long-term intercompany loans

Tax effect of current year activity on intercompany long-term loans

Tax effect of current year activity on long-term intercompany loans

Reclassification of cumulative translation to net earnings

2 unchanged sentences

See notes to consolidated financial statements.

CONSOLIDATED BALANCE SHEETS

BALANCE SHEETS

(In thousands except share and per share amounts)

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See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

CONSOLIDATED STATEMENTS OF

Years ended December 31,

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Share-based compensation expense

Net loss (gain) on assets

Net loss on assets

Net (gain) loss on divestitures and other charges

Portfolio optimization plan costs

Deferred income taxes

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Other financing activities

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

3 unchanged sentences

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF

SHAREHOLDERS’ EQUITY

(In thousands except

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Balances at December 31, 2020

Other comprehensive income

Other comprehensive loss

Cash dividends paid – $ 1.58

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Benefit plans

Purchase of treasury stock

Balances at December 31, 2021

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Benefit plans

Purchase of treasury stock

Balances at December 31, 2022

Other comprehensive loss

Other comprehensive income

Cash dividends paid – $ 1.64

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The Company’s three reportable segments are the Flavors & Extracts Group and the

Color Group, which are managed on a product basis, and the Asia Pacific Group, which is managed on a geographic basis.

The Company’s corporate expenses, restructuring including operational improvement plans, divestiture, share-based compensation,

the one-time COVID-19 employee payment in 2020, and other costs are included in the “Corporate & Other” category.

In the second quarter of 2020, the Company divested its inks product line;

in the third quarter of 2020, the Company divested its

yogurt fruit preparations product line;

and in the second quarter of 2021, the Company divested its fragrances (excluding essential oils) product line.

Color Group, which are managed on a product line basis, and the Asia Pacific Group, which is managed on a geographic basis.

The Company’s corporate expenses, divestiture & other related costs and income, share-based compensation, restructuring

and other charges, including operational improvement plan costs and income and portfolio optimization plan costs, and other costs are included in the “Corporate & Other” category.

In the second quarter of 2021, the Company divested its

fragrances (excluding essential oils) product line.

Principles of Consolidation and Basis of Presentation

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using the first-in, first-out (FIFO) method.

Inventories include finished and in-process products totaling $ 385.2 million and $ 280.2 million at December 31, 2022 and 2021, respectively, and raw materials and supplies of $ 178.9 million and $ 131.4 million at December 31, 2022 and 2021,

respectively.

The Company recorded a non-cash charge of $ 0.1 million and $ 1.8 million in Cost of Products Sold related to the divested product lines in 2021 and

2020, respectively.

There were no non-cash charges recorded in 2022 related to the divested product lines.

The non-cash charge reduced

the carrying value of certain inventories, as they were determined to be excess.

See Note 14, Divestitures , for additional information.

Inventories include finished and in-process products totaling $ 437.1 million and $ 385.2 million at December 31, 2023 and 2022, respectively, and raw materials and supplies of $ 161.3 million and $ 178.9 million at December 31, 2023 and 2022, respectively.

The Company recorded a non-cash charge of $ 3.1 million in Cost of Products Sold related to the portfolio optimization plan in 2023.

The non-cash charge reduced the carrying value of

certain inventories, as they were determined to be excess.

See Note 16, Portfolio Optimization Plan , for additional information.

Property, Plant, and Equipment

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Machinery and equipment have estimated useful lives ranging from 3 to 20 years.

Interest costs on significant projects constructed or developed for the Company’s own use

are capitalized as part of the asset.

Interest costs on significant projects constructed or developed

for the Company’s own use are capitalized as part of the asset.

Goodwill and Other Intangible Assets

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did no t record impairment charges for any of its reporting units in 2023, 2022, or 2021.

In the fourth quarter of 2019, as a result of the Company meeting the assets held

for sale criteria for its divestitures of its inks and fragrances (excluding its essential oils product line) product lines, the Company allocated $ 8.4

million of goodwill to those disposal groups.

The $ 8.4 million of goodwill related to the disposal groups was determined to be fully

In 2020, the fair value of the disposal groups decreased, which resulted in the previously allocated goodwill of $ 2.2 million to be reallocated to its respective financial reporting units.

In 2021, the fair value of the disposal groups increased, which resulted

in an additional $ 0.8 million of goodwill allocated to the disposal groups.

See Note 14, Divestitures, for additional details.

The cost of intangible assets with determinable useful lives is amortized on a straight-line basis to reflect the pattern of economic benefits consumed, ranging from 5 to 25 years.

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calculated based on the difference between fair value and carrying value.

Impairment losses were recorded as a result of the Company’s divestiture of its inks product line and its divestiture of its fragrances product line (excluding its

essential oils product line).

See Note 14 , Divestitures , for additional information.

Impairment losses were recorded as a result of the Company’s divestiture of its fragrances product line (excluding its essential oils product line) in 2021 and the

Company’s portfolio optimization plan in 2023.

See Note 14 , Divestitures , and Note 16,

Portfolio Optimization Plan , for additional information.

The Company enters into lease agreements for certain office space, warehouses, land, and equipment in the ordinary course of business.

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See Note 18, Subsequent Event , for additional information.

Recently Issued Accounting Pronouncements

November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which

requires public entities to provide disclosures of significant segment expenses and other segment items.

This ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15,

The Company is currently evaluating the potential impact of this standard on its consolidated financial statements and its related disclosures.

Other recently issued accounting pronouncements are not

expected to have a material impact on the Company’s consolidated financial statements.

On July 15, 2021, the Company acquired

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was allocated to goodwill.

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

This business is part of the Flavors & Extracts segment.

On October 3, 2022, the Company acquired Endemix Doğal Maddeler A.Ş.

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(collectively, Endemix), a natural colors business located in Turkey.

Company paid $ 23.3 million in cash for this acquisition, which is net of $ 1.3 million in debt assumed, with $ 1.7 million of such amount

being held back by the Company for 12 months to satisfy any 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 $ 9.0 million and

identified intangible assets, principally technological know-how and customer relationships, of $ 4.9 million.

The remaining $ 9.4 million was allocated to goodwill.

The Company is still in the process of finalizing the estimated values for identifiable intangible assets and

fixed assets.

The Company anticipates completing this analysis in 2023.

This business is now part of the Color segment.

Company paid $ 23.3 million in cash for this acquisition, which is net of $ 1.3 million in debt assumed.

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

The Company acquired net assets of $ 9.0 million and identified intangible assets, principally technological know-how and customer relationships, of $ 4.9 million.

The remaining $ 9.4 million

was allocated to goodwill.

This business is part of the Color segment.

Trade Accounts Receivable

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correlates with its customer delinquency status.

This information is also adjusted for any known current economic conditions, including the current and expected impact of COVID-19.

Currently, the COVID-19 pandemic has not had and is not anticipated

to have a material impact on trade accounts receivable.

Forecasted economic conditions have not had a significant impact on the current credit loss estimate due to the short-term nature of the Company’s customer receivables;

however, the Company will

continue to monitor and evaluate the rapidly changing economic conditions.

Additionally, as the Company only has one portfolio segment,

there are not different risks between portfolios.

Specific accounts are written off against the allowance for doubtful accounts when the receivable is deemed no longer collectible.

This information is also adjusted for any known current economic conditions.

Forecasted economic conditions have not had a significant impact on the current credit loss estimate due to the short-term

nature of the Company’s customer receivables;

however, the Company will continue to monitor and evaluate the rapidly changing economic conditions.

Additionally, as the Company only has one portfolio segment, there are not different risks between portfolios.

Specific accounts are written off against the allowance for doubtful accounts when the receivable is deemed no longer

The following table summarizes the changes in the allowance for doubtful accounts for the years ended December 31, 2023 and 2022:

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Currency translation impact

Goodwill related to divestitures (1)

Acquisitions (1)

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Currency translation impact

Acquisitions (2)

Balance as of December 31 ,

In the fourth quarter of 2019, the Company met all of the assets held for sale criteria related to the divestitures of its inks product line and fragrances product line (excluding

its essential oils product line).

Goodwill was allocated to those disposal groups and was determined to be fully impaired based on the estimated fair value of each of the disposal groups.

In 2021, the fair value of the fragrances product

line (excluding its essential oils product line) disposal group increased, which increased the value of goodwill allocated to the disposal group by $ 0.8 million.

See Note 14, Divestitures, for additional information.

In 2021, the Company acquired Flavor Solutions, Inc.

In 2022, the Company acquired Endemix.

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leases, not including short-term lease expense or variable lease costs.

The Company entered into operating leases that resulted in $ 17.2

million, $ 9.8 million, and $ 13.0 million of right-of-use

The Company entered into operating leases that resulted in $ 9.0 million, $ 17.2 million, and $ 9.8 million of right-of-use

assets in exchange for operating lease obligations for the years ended December 31, 2023, 2022, and 2021, respectively.

The Company included $ 36.3 million and $ 26.5 million of right-of-use assets in Other Assets , $ 8.2 million and

$ 6.2 million of operating lease liabilities in Other Accrued Expenses , and $ 28.0

million and $ 20.6 million of operating lease liabilities in Other Liabilities , on the Company’s Consolidated Balance Sheets as of December 31, 2022 and 2021, respectively.

The Company’s weighted average remaining operating lease term was 6.5 years as of December 31, 2022.

The Company i ncluded $ 36.3 million of right-of-use assets in Other Assets

and $ 28.0 million of operating lease liabilities in Other Liabilities on the Company’s Consolidated Balance Sheets as of both Dec ember 31, 2023 and 2022.

The Company included $ 8.6

million and $ 8.2 million of operating lease liabilities in Other Accrued Expenses on the Company’s Consolidated Balance Sheets as of Dec ember 31, 2023 and 2022, respectively.

The Company’s weighted average remaining

operating lease term was 7.6 years as of December 31, 2023.

The Company’s weighted average discount rate for operating leases was 4.17 % as of December 31, 2023.

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notes due November 2025

Euro-denominated senior notes due November 2022

6.08 % senior notes due November 2026

6.14 % senior notes due November 2027

4.94 % senior notes due May 2028

6.34 % senior notes due November 2029

Euro-denominated senior notes due November 2023

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Euro-denominated senior notes due May 2027

4.15 % Euro-denominated senior notes

4.62 % Euro-denominated senior notes due November 2029

British Pound-denominated notes due November 2023

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Total long-term debt

In May 2021, the Company executed an amended and restated credit agreement ( Credit Agreement ) with a syndicate of banks to extend the maturity of Sensient’s $ 350 million multi-currency revolving credit facility from May 2022 to May 2026 and to modify certain other provisions of the credit agreement as set forth therein.

In December 2022, the Company amended the Credit Agreement to, among other things, transition from the London Inter-Bank Offered Rate to:

(i) the Secured

Overnight Financing Rate (SOFR) as the benchmark rate under the Credit Agreement for borrowings denominated in U.S.

dollars and (ii) the Euro Interbank Offered Rate for borrowings denominated in Euros.

Borrowings under the revolving credit facility

bear interest at a variable rate, based upon the applicable reference rate and including a margin percentage dependent upon the Company’s leverage ratio, as described below.

In August 2022, the Company amended its accounts receivable securitization program with Wells Fargo Bank N.A.

(Wells Fargo) to increase the program amount from $ 30 million to $ 85 million.

Under the amended program, Wells Fargo has extended a secured loan (Secured Loan) of up to $ 85 million to the Company secured by Wells Fargo’s undivided interests in certain of the

Company’s trade accounts receivables.

The interest rate on the Secured Loan is the SOFR as administered by the Federal Reserve Bank of New York plus a 10

basis point Term SOFR Adjustment plus an Applicable Margin of 70 basis points.

The Company has the intent and ability either to repay

the Secured Loan with available funds from the Company’s existing long-term revolving credit facility or to extend its accounts receivable program with Wells Fargo when it matures.

Accordingly, the Secured Loan has been classified as long-term

debt on the Company’s Consolidated Balance Sheet and is included with the Revolving Credit Facilities above.

As of December 31, 2022, the amount was fully drawn.

In November 2022, the Company entered

into a 75 million Euro unsecured term loan (Term Loan) with PNC Bank, N.A (PNC Bank) that matures in November 2024 .

The Company immediately borrowed the full amount of the Term Loan and used the proceeds to repay the 66.9 million Euro 1.85 % senior note that

came due in November 2022 and a portion of outstanding borrowings on the Company’s revolving credit facility.

In November 2022, the Company entered into a

€ 75 million unsecured term loan (Term Loan) with PNC Bank, N.A (PNC Bank) that matures in November 2024 .

The Company immediately borrowed the full amount of the Term Loan and used the proceeds to repay the € 66.9 million 1.85 % senior note that came due in November 2022 and a portion of outstanding

borrowings on the Company’s revolving credit facility.

The term loan will act as a partial hedge of the Company’s net asset position in Euros.

See Note 7, Derivative

Instruments and Hedging Activity , for additional information.

Borrowings on the Term Loan bear interest at a variable rate, based upon the Eurocurrency Rate and including a margin percentage dependent upon the Company’s leverage ratio, as

described below.

The average interest rate on the Term Loan was 2.72 % for the year ended December 31, 2022.

See Note 7, Derivative Instruments and Hedging Activity , for

additional information.

Borrowings on the Term Loan bear interest at a variable rate, based upon the Eurocurrency Rate and including a margin percentage dependent upon the Company’s leverage ratio, as described below.

The average interest rate on the

Term Loan was 4.49 % for the year ended December 31, 2023.

In December 2022, the Company amended the amended and restated credit agreement (Credit Agreement) to, among other things,

transition from the London Inter-Bank Offered Rate to:

(i) the Secured Overnight Financing Rate (SOFR) as the benchmark rate under the Credit Agreement for borrowings denominated in U.S.

dollars and (ii) the Euro Interbank Offered Rate for

borrowings denominated in Euros.

Borrowings under the revolving credit facility bear interest at a variable rate, based upon the applicable reference rate and including a margin percentage dependent upon the Company’s leverage ratio, as described

The borrowings under the revolving credit facility, excluding borrowings on the accounts receivable

securitization program, had an average interest rate of 5.74 % and 3.01 % for the years ended December 31, 2023 and 2022, respectively.

In May 2023, the Company entered into an agreement to issue $ 75 million and € 40 million in five-year , fixed-rate, senior notes at coupon rates of 4.94 % and 4.15 %, respectively.

were issued in May 2023, and the proceeds were used to repay a portion of existing indebtedness under the Company’s Credit Agreement.

The notes will mature in May 2028 .

In August 2023, the Company amended its accounts receivable securitization program with Wells Fargo Bank N.A.

(Wells Fargo) to extend the termination date from August 2023 to August 2024 .

Under the amended program, Wells Fargo has extended a secured loan (Secured Loan) of up to $ 85 million to the Company secured by Wells Fargo’s undivided interests in certain of the Company’s trade accounts receivables.

The interest rate on the Secured Loan is the SOFR as administered by the Federal Reserve Bank of New York plus a 10 basis point Term SOFR Adjustment plus an Applicable Margin of 70 basis points.

The Company has the intent and ability either to refinance the Secured Loan with available funds from the Company’s existing long-term revolving credit facility or to extend its accounts receivable

program with Wells Fargo when it matures.

Accordingly, the Secured Loan has been classified as long-term debt on the Company’s Consolidated Balance Sheet and is included with the Revolving Credit Facilities above.

As of December 31, 2023, the amount was fully drawn.

In November 2023, the

Company entered into a fixed rate, senior note purchase agreement with the purchasers named therein pursuant to which the Company issued $ 105

million of U.S.

dollar-denominated senior notes and € 40 million of Euro-denominated senior notes.

The three U.S.

dollar-denominated notes were issued for $ 35 million each, maturing in November 2026 , November 2027 , and November 2029 , and bearing interest rates of 6.08 %, 6.14 %, and 6.34 %, respectively.

Euro-denominated note was issued for € 40 million, maturing in November 2029 and bearing an interest rate of 4.62 %.

The proceeds were used

to refinance the $ 75 million 3.66 %

senior notes due in November 2023 and the € 38.2 million 3.06 % senior notes due in November 2023 , and to repay a portion of the Company’s revolving credit borrowings, including the borrowings previously used to repay the existing

balance due on the Company’s 25 million Great British Pound 2.53 % senior notes due in November 2023 .

The aggregate amounts of contractual maturities on long-term debt subsequent to December 31, 2023, are as follows:

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The Company had stand-by and trade letters of credit outstanding of $ 6.2

million as of both December 31, 2022 and 2021.

million and $ 2.8 million as of December 31, 2023 and 2022, respectively.

Short-term Borrowings

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Current maturities of long-term debt

Loans of foreign subsidiaries

The weighted average interest rates on short-term borrowings were 6.58 %

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the inception of the transaction and on an ongoing basis.

The Company manages its

exposure to foreign exchange risk by the use of forward exchange contracts to reduce the effect of fluctuating foreign currencies on non-functional currency sales, purchases, and other known foreign currency exposures.

These forward exchange

contracts generally have maturities of less than 18 months.

The Company also uses certain debt denominated in foreign currencies to manage

the net asset positions of the Company’s foreign subsidiaries.

The Company manages its exposure to foreign

exchange risk by the use of forward exchange contracts to reduce the effect of fluctuating foreign currencies on non-functional currency sales, purchases, and other known foreign currency exposures.

These forward exchange contracts generally have

maturities of less than 18 months.

The Company also uses certain debt denominated in foreign currencies to manage the net asset positions

of the Company’s foreign subsidiaries.

The Company’s primary hedging activities and their accounting treatment are summarized below.

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For the years ended December 31, 2023,

2021, and 2020, gains of $ 1.0 million and $ 1.3

million and a loss of $ 1.3 million, respectively, were reclassified into net earnings in the Company’s Consolidated Statement of Earnings

that offset the earnings impact of the related non-functional asset or liability hedged in the same period.

In addition, the Company utilizes forward exchange contracts that are not designated as cash flow hedges and the results of these transactions

are not material to the financial statements.

2022, and 2021, gains of $ 2.2 million, $ 1.0

million, and $ 1.3 million, respectively, were reclassified into net earnings in the Company’s Consolidated Statement of Earnings that

offset the earnings impact of the related non-functional asset or liability hedged in the same period.

In addition, the Company utilizes forward exchange contracts that are not designated as cash flow hedges and the results of these transactions are

not material to the financial statements.

Net Investment Hedges

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These net investment hedges include Euro and British Pound denominated long-term debt.

Changes in the fair value of this debt attributable to changes in the spot

foreign exchange rate are recorded in foreign currency translation in OCI.

The impact of foreign exchange rates on these debt instruments decreased debt by $ 19.3 million and $ 17.9 million for the years ended December 31, 2022 and 2021,

respectively, and are recorded as foreign currency translation in OCI.

For the year ended December 31, 2022, there was no reclassification of OCI with respect to net investment hedges into net earnings.

For the years ended December 31, 2021 and

2020, losses of $ 4.2 million and $ 10.8

million, respectively, were reclassified into net earnings in the Company’s Consolidated Statement of Earnings that offset the underlying transactions’ impact on earnings in the same period.

In 2021, the losses were primarily associated with the

partial termination of the net investment hedge related to the Euro debt in connection with the sale of the fragrances product line, including the Spanish legal entity.

In 2020, the losses were primarily associated with the termination of the net

investment hedge related to the Swiss Franc debt that terminated in connection with the sale of the inks product line, including its Swiss legal entity.

See Note 14, Divestitures , for additional

Changes in the fair value of this debt attributable to

changes in the spot foreign exchange rate are recorded in foreign currency translation in OCI.

The impact of foreign exchange rates on these debt instruments increased debt by $ 11.4 million and decreased debt by $ 19.3 million for the years

ended December 31, 2023 and 2022, respectively, and are recorded as foreign currency translation in OCI.

For the years ended December 31, 2023 and 2022, there was no reclassification of OCI with respect to net investment hedges into net earnings.

For the year ended December 31, 2021, losses of $ 4.2 million were reclassified into net earnings in the Company’s Consolidated Statement

of Earnings that offset the underlying transactions’ impact on earnings in the same period.

In 2021, the losses were primarily associated with the partial termination of the net investment hedge related to the Euro debt in connection with the sale

of the fragrances product line, including the Spanish legal entity.

See Note 14, Divestitures , for additional information.

Concentrations of Credit Risk

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Grants issued after December 2013 and before December 2020 to elected officers consist of 100 % performance stock unit awards.

These awards are based on a three-year performance period and a three-year vesting period with a pro-rata vesting upon retirement.

These awards are based on a three-year

performance period and a three-year vesting period with a pro-rata vesting upon retirement.

Three-year performance that exceeds the stated performance metrics would result in an award up to 200 % of the original grant.

Starting with the December 2020 grant, grants issued to elected officers consist of

60 % performance stock unit awards and 40 % non-vested restricted stock awards.

The performance stock unit awards are based on

a three-year performance period and a three-year vesting period with a pro-rata vesting upon retirement.

Three-year performance that exceeds the stated performance metrics would result in an award

up to 200 % of the original grant.

The non-vested restricted stock

awards granted are based on a three-year vesting period with a

pro-rata vesting upon retirement.

Starting with the December 2020 grant, grants issued to

elected officers consist of 60 % performance stock unit awards

(as described above) and 40 % non-vested restricted stock

The non-vested restricted stock awards granted are based on a three-year vesting period with a pro-rata vesting upon retirement.

The Company expenses awards for non-vested stock, including time-vesting stock and performance stock units, based on the fair value of the Company’s common stock at the

date of the grant.

The December 2019 performance stock unit awards, which were based on the three-year

performance period of January 1, 2020 to December 31, 2022, exceeded the stated performance metrics, which resulted in an award payout of 200 %

of the original grant upon vesting in February 2023.

The following table summarizes the non-vested stock and performance stock unit activity:

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million, and $ 9.6 million in 2023, 2022, and 2021, respectively.

Company also recognized tax related benefits of $ 1.2 million, $ 1.0 million, and $ 0.8 million, in 2022, 2021, and 2020, respectively.

Company also recognized tax related benefits of $ 1.1 million, $ 1.2 million, and $ 1.0 million in 2023, 2022, and 2021,

respectively.

Retirement Plans

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Benefits and settlements paid

Actuarial gain

Actuarial loss (gain)

Benefit obligation at end of year

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Benefits paid

Settlement payments

Actual loss on plan assets

Actual gain (loss) on plan assets

Plan assets at end of year

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Expected return on plan assets

Recognized actuarial loss

Recognized actuarial (gain) loss

Settlement income

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(In thousands)

Net actuarial (loss) gain arising during the period

Prior service cost

Amortization of actuarial loss, included in defined benefit expense

Net actuarial gain (loss) arising during the period

Amortization of actuarial (gain) loss, included in defined benefit expense

Pension adjustment, net of tax

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Balance as of December 31 ,

Other comprehensive income (loss) before reclassifications

Other comprehensive income before reclassifications

Amounts reclassified from OCI

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Effective tax rate

Certain reclassifications to prior year amounts have been made to conform to current year presentation.

Taxes on foreign earnings include the difference between the tax rates applied to foreign earnings relative

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rate varies from year to year based on the finalization of prior year foreign and domestic tax items, audit settlements, and mix of foreign earnings.

The effective tax rates in 2022, 2021, and 2020 were all impacted by tax costs related to the divestitures and the release of valuation allowances related to the foreign tax credit carryover and net operating losses.

The effective tax rates in 2023, 2022, and 2021 were all impacted by the release of valuation allowances related to the foreign

tax credit carryover and net operating losses.

The effective tax rate in 2023 was impacted by the limited tax deductibility of costs related to the portfolio optimization plan, and the effective tax rates in 2022 and 2021 were impacted by tax

costs related to the divestitures.

See Note 14, Divestitures , and Note 16, Portfolio Optimization Plan .

The Company’s valuation allowance at December 31, 2023 and 2022 was $ 34.1 million and $ 28.1 million, respectively.

In 2022 and 2021, the valuation allowance related to

foreign tax credits and state and foreign NOLs was reduced.

During 2020, the Company completed tax planning strategies and Federal tax regulations were finalized that resulted in the partial release of this valuation allowance.

The increase of the 2021 effective tax rate from GILTI compared to 2020 is primarily related to not filing the high tax election given the foreign rate mix.

In 2023, the valuation allowance related to foreign tax credits was reduced, and the valuation allowance related to state

and foreign NOLs was increased.

In 2022, the valuation allowance related to foreign tax credits and state and foreign NOLs was reduced.

During 2021, the Company completed tax planning strategies and Federal tax regulations were finalized that

resulted in the partial release of this valuation allowance.

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities consisted of the following:

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Net deferred tax assets

Certain reclassifications to prior year amounts have been made to conform to current year presentation.

At December 31, 2022, foreign tax credit carryovers were $ 34.3 million , all of which expires before 2035.

At December 31, 2023, foreign tax credit carryovers were $ 31.7 million , all of which expire before 2035.

At December 31, 2023, foreign operating loss carryovers were $ 76.7

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The Company is electing to recognize GILTI as a period expense in the period the tax is incurred.

The Organisation for Economic Co-operation and Development has issued Pillar Two model rules imposing a global minimum corporate tax rate of 15 %.

Many countries have implemented laws based on these model rules, with expected effective dates beginning in fiscal year 2024.

As currently designed, Pillar Two will ultimately apply

to our worldwide operations.

These rules are not expected to materially increase our global tax costs as we do not have material operations in jurisdictions with tax rates lower than the Pillar Two minimum.

We will continue to monitor U.S.

global legislative action related to Pillar Two for potential impacts .

Federal and state income taxes are provided on international subsidiary income distributed to or taxable in the U.S.

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Balance at the end of year

The amount of the unrecognized tax benefits that would affect the effective tax rate, if recognized, was approximately $ 3.9 million.

The Company recognizes interest and penalties related to the unrecognized tax benefits in income tax expense.

$ 0.4 million of accrued interest and penalties were reported as an income tax liability as of both December 31, 2022 and 2021.

The liability for unrecognized tax benefits

relates to multiple jurisdictions and is reported in Other Liabilities on the Company’s Consolidated Balance Sheet at December 31, 2022.

The amount of the unrecognized tax

benefits that would affect the effective tax rate, if recognized, was approximately $ 4.3 million.

The Company recognizes interest and

penalties related to the unrecognized tax benefits in income tax expense.

$ 0.4 million of accrued interest and penalties were

reported as an income tax liability as of both December 31, 2023 and 2022.

The liability for unrecognized tax benefits relates to multiple jurisdictions and is reported in Other Liabilities on the Company’s

Consolidated Balance Sheet at December 31, 2023.

The Company believes that it is reasonably possible that the total amount of liability for unrecognized tax benefits as of December 31, 2023, will decrease by

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accounting policies.

The Company evaluates performance based on operating income before divestiture & other related costs and income, share-based compensation, restructuring and other charges including operational improvement plan costs

and income, the one-time COVID-19 employee payment in 2020, interest expense , and income taxes (segment operating income).

Total revenue and segment operating income by business segment

and geographic region include both sales to customers, as reported in the Company’s Consolidated Statements of Earnings, and intersegment sales, which are accounted for at prices that approximate market prices and are eliminated in consolidation.

The Company evaluates performance based on operating income before divestiture & other related costs and income, share-based compensation, restructuring and other charges, including operational improvement plan costs and

income and portfolio optimization plan costs, interest expense, and income taxes (segment operating income).

Total revenue and segment operating income by business segment and geographic region include both sales to customers, as reported in the

Company’s Consolidated Statements of Earnings, and intersegment sales, which are accounted for at prices that approximate market prices and are eliminated in consolidation.

Assets by business segment and geographic region are those assets used in the Company’s operations in each segment and geographic region.

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performance is evaluated on operating income of the respective business units before divestiture & other related costs and income, share-based compensation, and restructuring and other charges, including operational improvement plan costs and

income, which are reported in Corporate & Other.

income and portfolio optimization plan costs, which are reported in Corporate & Other.

The Company’s three reportable segments are Flavors & Extracts and Color segments, which are both managed on a product line basis, and the Asia Pacific segment, which is managed on a geographic basis.

The Company’s Flavors & Extracts

segment produces flavor, extracts, and essential oils products that impart a desired taste, texture, aroma, or other characteristic to a broad range of consumers and other products.

segment produces flavor, extracts, and essential oils products that impart a desired taste, texture, aroma, or other characteristic to a broad range of consumer and other products.

The Color segment produces natural and synthetic color systems for

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flavor, and essential oils products for the Asia Pacific countries.

The Company’s corporate expenses, divestiture & other related costs and income, share-based compensation, operational improvement plan expenses and income, the one-time COVID-19

employee payment, and other costs are included in the “Corporate & Other” category.

The Company’s corporate expenses, divestiture & other related costs and income, share-based compensation, restructuring and other charges, including operational improvement plan

costs and income and portfolio optimization plan costs, and certain other costs are included in the “Corporate & Other” category.

Divestiture & other related costs and income and restructuring and other costs, including the operational

improvement plan costs and income, for the years ended December 31, 2022, 2021 , and 2020 , are further

described in Note 14, Divestitures, and Note 15, Operational Improvement

Plan, and are included in the operating income (loss) results in Corporate & Other below.

In addition, the Company’s corporate expenses and share-based compensation are

included in Corporate & Other.

improvement plan costs and income and portfolio optimization plan costs, for the years ended December 31, 2023, 2022, and 2021, are further described in Note 14, Divestitures, Note 15, Operational Improvement Plan, and Note 16, Portfolio Optimization Plan, and are included in the operating income (loss) results in Corporate & Other below.

addition, the Company’s corporate expenses and share-based compensation are included in Corporate & Other.

(In thousands)

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No other country of destination exceeded 10% of consolidated sales.

Total long-lived assets in the United

States amounted to $ 586.8 million , $ 550.3 million , and $ 518.2 million , at December 31, 2022, 2021, and 2020, respectively.

Total long-lived assets in the United States amounted to $ 603.2 million , $ 586.8 million , and $ 550.3

million , at December 31, 2023, 2022, and 2021, respectively.

Product Information

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Natural Ingredients

Yogurt Fruit Preparations

Food & Pharmaceutical Colors

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assets and liabilities subject to this standard are forward exchange contracts.

The net fair value of the forward exchange contracts based on current pricing obtained for comparable derivative products (Level 2 inputs) was a liability of $ 0.2 million and an asset of $ 0.1

The net fair value of the forward exchange contracts based on current pricing obtained for comparable derivative products (Level 2 inputs) was an asset of $ 1.0 million and a liability of $ 0.2

million as of December 31, 2023 and 2022, respectively.

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The fair value of the long-term debt at December 31, 2023 and 2022, was $ 653.7 million and $ 622.2 million, respectively.

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

In 2021 and 2020, the Company received $ 0.5 million and $ 11.6 million of net cash, respectively, as part of

On September 18, 2020, the Company completed the sale of its yogurt fruit preparations product line.The Company received $ 2.5 million of net cash in 2022 and $ 1.0 million of net cash in

each of 2021 and 2020, as part of the sale.

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.

As a result of the completion of the sale, the Company recorded a non-cash net loss of $ 11.3 million for the year ended December 31, 2021, primarily related to 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.

In 2021, the Company received $ 1.5 million of net cash

related to the previously completed sales of its yogurt fruit preparations and inks product lines.

In 2022, the Company received $ 2.5

million of net cash related to the previously completed sale of its yogurt fruit preparations product line.

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.

result of the completion of the sale, the Company recorded a non-cash net loss of $ 11.3 million for the year ended December 31, 2021,

primarily related to 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.

The Company reports all costs and income associated with the divestitures in Corporate & Other.

There were no divestiture & other related costs for the year ended December 31, 2023.

For the year ended December 31, 2022, the Company recorded a $ 2.5 million gain in Selling and Administrative Expenses associated with

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administrative expenses include employee separation costs, bad debt expense, environmental remediation costs, professional services, accelerated depreciation, and other related costs.

The following table summarizes the divestiture & other related costs for the year ended December 31, 2020:

(In thousands)

Non-cash impairment charges – Selling and administrative expenses

Non-cash charges – Cost of products sold

Reclassification of foreign currency translation and related items – Selling and administrative expenses

Other costs - Selling and administrative expenses (1)

Other costs – Selling and

administrative expenses include employee separation costs, environmental remediation costs, professional services, accelerated depreciation, and other related costs.

The Company recorded non-cash impairment charges in Selling and Administrative Expenses,

primarily related to property, plant, and equipment and allocated goodwill, during the years ended December 31, 2021 and 2020, when the estimated fair value less costs to sell the product line was lower than its carrying value.

The estimated fair

values for the inks and fragrances (excluding its essential oils product line) product lines were determined based on indicative bids, which are classified as Level 3 inputs in the fair value measurement hierarchy.

The Company recorded non-cash

charges in Cost of Products Sold during the years ended December 31, 2021 and 2020, to reduce the carrying value of certain inventories, when they were

determined to be excess.

The Company recorded a non-cash loss during the year ended December 31, 2021 and a non-cash gain during the year ended December 31, 2020, related to the reclassification of foreign currency translation and related items from

Accumulated Other Comprehensive Loss to Selling and Administrative Expenses

in the Consolidated Statements of Earnings.

primarily related to property, plant, and equipment and allocated goodwill, during the year ended December 31, 2021, when the estimated fair value less costs to sell the product line was lower than its carrying value.

The estimated fair values for

the inks and fragrances (excluding its essential oils product line) product lines were determined based on indicative bids, which are classified as Level 3 inputs in the fair value measurement hierarchy.

The Company recorded non-cash charges in Cost of Products Sold during the year ended December 31, 2021, to reduce the carrying value of certain inventories, when they were determined to be excess.

Company recorded a non-cash loss during the year ended December 31, 2021, related to the reclassification of foreign currency translation and related items from Accumulated

Other Comprehensive Loss to Selling and Administrative Expenses in the Consolidated Statements of Earnings.

In March 2020, the Company was notified by the buyer of the Company’s fragrances product line that environmental sampling conducted at the Company’s Granada, Spain location

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the liability is reasonably estimable.

Based upon an environmental investigation and a quantitative risk assessment performed by a consultant hired by the Company, the Company has recorded $ 0.3 million and $ 0.8 million related to these obligations in Selling and Administrative Expenses during the years ended December 31, 2021 and 2020, respectively.

Based upon an environmental investigation and a quantitative risk assessment performed by a consultant hired by the Company, the Company recorded $ 0.3 million related to these obligations in Selling and Administrative Expenses during the year ended

December 31, 2021.

Operational Improvement Plan

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There were no

Operational Improvement Plan costs recorded for the year ended December 31, 2022.

Operational Improvement Plan costs recorded for the years ended December 31, 2023 and 2022.

The following table summarizes the Operational Improvement Plan income and expenses recorded in Selling and Administrative Expenses by segment for the year ended December 31, 2021:

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professional services, accelerated depreciation, and other related costs.

The following table summarizes the Operational Improvement Plan expenses by segment for the year ended December 31, 2020:

(In thousands)

Employee separation

Other costs (1)

Other costs include professional services,

accelerated depreciation, and other related costs.

The Company recorded the Operational Improvement Plan expenses for the year ended December 31, 2020, as follows:

Portfolio Optimization Plan

During the fourth quarter of 2023, the board of directors of the Company approved a

portfolio optimization plan (Portfolio Optimization Plan) to undertake an effort to optimize certain production facilities and improve efficiencies within the Company.

As part of the Portfolio Optimization Plan, in the Flavors & Extracts

segment, the Company is evaluating the potential closure of its manufacturing facility in Felinfach, Wales, United Kingdom, the potential closure of its sales office in Granada, Spain, and the potential centralization and elimination of certain

selling and administrative positions, with such proposals remaining subject to information and consultation processes in certain countries.

In addition, in the Color segment, the Company’s proposals include closing a manufacturing facility in

Delta, British Columbia, Canada, closing a sales office in Argentina, and centralizing and eliminating certain production positions as well as potentially eliminating some selling and administrative positions, with such proposals remaining

subject to information and consultation processes in certain countries.

The Company reports all costs associated with the Portfolio Optimization Plan in the Corporate & Other segment .

The Company recorded non-cash impairment charges in Selling and Administrative Expenses , primarily related to certain property, plant, and equipment and definite-lived intangible assets during the year ended December 31, 2023, when the estimated fair value of these assets was lower

than the carrying value.

The estimated fair value for property, plant, and equipment was based on an independent market valuation, which is classified as Level 3 inputs in the fair value measurement hierarchy.

The definite-lived intangible assets

relate to a product line to be shut down and were fully impaired as of December 31, 2023.

The Company also recorded non-cash charges in Cost of Products Sold during the year ended December 31, 2023, to

reduce the carrying value of certain inventories when they were determined to be excess.

As of December 31, 2023, the Company recorded $ 3.7 million of accrued liabilities in Other Accrued Expenses on the Company’s Consolidated Balance Sheet

related to this plan.

The Company expects this plan would, if executed in full, cost approximately $ 40 million, primarily related to

non-cash impairment charges and proposed employee separation costs, and upon completion would reduce annual operating costs by approximately $ 8

million to $ 10 million, with the full benefit expected to be achieved after 2025.

The Company proposes to reduce headcount by

approximately 130 positions, primarily in the Flavors & Extracts and Color segments, related to certain production and selling and

administrative positions.

The following table summarizes the Portfolio Optimization Plan expenses by segment

for the year ended December 31, 2023:

(In thousands)

Administrative

Employee separation

Other costs (1)

Other costs include professional services,

accelerated depreciation, and other related costs.

As of December 31, 2021, accrued liabilities in Other Accrued Expenses totaled $ 0.8 million related to this plan.

There were no amounts accrued as of December 31, 2022 related to this plan.

Non-cash impairment charges – Selling and administrative expenses

Non-cash charges – Cost of products sold

Employee separation – Selling and administrative expenses

Other costs – Selling and administrative expenses (1)

include legal settlements, professional services, and other related costs.

Commitments and Contingencies

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Sensient Technologies Corporation and subsidiaries (the Company) as of December 31, 2022 and 2021, the related

consolidated statements of earnings, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and the

financial statement schedule listed in the Index at Item 15 (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the

financial position of the Company at December 31, 2022 and 2021, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S.

accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of

December 31, 2022, based on the criteria established in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 17, 2023

expressed an unqualified opinion thereon.

We have audited the accompanying consolidated balance sheets of Sensient Technologies Corporation (the Company) as of December 31, 2023 and 2022, the related

consolidated statements of earnings, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended

December 31, 2023, and the related notes and the financial statement schedule listed in the Index at Item 15 (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements

present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31,

2023, in conformity with U.S.

generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s

internal control over financial reporting as of December 31, 2023, based on the criteria established in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)

and our report dated February 22, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange

Commission and the PCAOB.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules

and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing

procedures that respond to those risks.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free

of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used

and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made

by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be

communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any

way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the account or disclosure to which

The communication of the

critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter

or on the account or disclosure to which it relates.

Income Taxes--Valuation Allowances for Deferred Tax Assets

Description of the Matter

As described in Note 11 to the consolidated financial statements, at December 31, 2022, the Company had gross deferred tax assets of $99.6 million, $60.1 million of which relate to net operating losses (NOLs), foreign tax

credits and other tax credits reduced by a $28.1 million valuation allowance.

Deferred tax assets are reduced by a valuation allowance if, based upon the weight of all available evidence, it is more likely than not that some

portion, or all, of the deferred tax assets will not be realized.

Management’s analysis of the realizability of its deferred tax assets related to NOLs, foreign tax credits and other tax credits was significant to our audit because the amounts are material to

the financial statements and the assessment process related to the realizability of these deferred tax assets is complex, and involves significant judgments that include projections of income, sources of income and tax planning

of the Matter

As described in Note 11 to the consolidated financial statements, at December 31, 2023, the Company had gross deferred tax assets of $117.4 million,

$59.6 million of which relate to net operating losses (NOLs), foreign tax credits and other tax credits reduced by a $34.1 million valuation allowance.

Deferred tax assets are reduced by a valuation allowance if, based

upon the weight of all available evidence, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.

Management’s analysis of the realizability of its deferred tax assets related to NOLs, foreign tax credits and other tax credits was significant to our audit because the amounts are

material to the financial statements and the assessment process related to the realizability of these deferred tax assets is complex, and involves significant judgments that include projections of income, sources of

income and tax planning strategies

Addressed the

Matter in Our

We tested controls relating to the realizability of deferred tax assets, including controls over management’s projections of future taxable income, the future reversal of existing taxable temporary differences and management’s

identification and use of available tax planning strategies.

To test management’s assessment of the realizability of its deferred tax assets related to NOLs, foreign and other tax credits, our audit procedures included, among others, evaluation of the assumptions used by the Company to

develop tax planning strategies and projections of future taxable income by jurisdiction and testing the completeness and accuracy of the underlying data used in its projections.

We involved our tax professionals to evaluate the

application of tax law in the Company’s available tax planning strategies and projections of future taxable income.

We assessed the historical accuracy of management’s projections and reconciled the projections of future taxable

income with other forecasted financial information prepared by the Company.

We also tested the Company’s scheduling of the reversal of existing temporary taxable differences.

We tested controls relating to the realizability of deferred tax assets, including controls over management’s projections of future taxable income, the future reversal of existing

taxable temporary differences and management’s identification and use of available tax planning strategies.

To test management’s assessment of the realizability of its deferred tax assets related to NOLs, foreign and other tax credits, our audit procedures included, among others, evaluation

of the assumptions used by the Company to develop tax planning strategies and projections of future taxable income by jurisdiction and testing the completeness and accuracy of the underlying data used in its

We involved our tax professionals to evaluate the application of tax law in the Company’s available tax planning strategies and projections of future taxable income.

We assessed the historical accuracy

of management’s projections and reconciled the projections of future taxable income with other forecasted financial information prepared by the Company.

We also considered the Company’s scheduling of the reversal of

existing temporary taxable differences.

/s/ Ernst & Young LLP

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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-K

Item 8. Financial Statements and Supplementary Data