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| SXT > SEC Filings for SXT > Form 10-Q on 7-Aug-2009 | All Recent SEC Filings |
7-Aug-2009
Quarterly Report
Revenue for the second quarter of 2009 was $304.0 million compared to $332.8 million recorded in the prior year's second quarter. For the six months ended June 30, 2009, revenue was $586.8 million compared to $640.2 million in the prior year's first half. The impact of foreign exchange rates reduced consolidated revenue by 8.2% and 8.8% in the quarter and six months ended June 30, 2009, respectively. Revenue for the Flavors & Fragrances segment decreased 6.6% and 5.6% for the three and six months ended June 30, 2009, respectively, from the comparable periods last year. Color segment revenue decreased 12.7% and 13.9% for the second quarter and six months ended June 30, 2009, respectively, from the comparable periods last year. Corporate and Other revenue decreased 10.2% and 10.5% for the quarter and six months ended June 30, 2009, respectively, from the comparable periods last year. The impact of foreign exchange rates decreased quarterly revenue for the Flavors & Fragrances Group by 7.7%, the Color Group by 9.8% and Corporate and Other by 6.7%. The impact of foreign exchange rates decreased year-to-date revenue for the Flavors & Fragrances Group by 8.2%, the Color Group by 10.2% and Corporate and Other by 8.5%. Additional information on group results can be found in the Segment Information section.
The gross profit margin increased 60 basis points to 31.2% for the quarter ended June 30, 2009, from 30.6% for the same period in 2008. For the six months ended June 30, 2009 and 2008, the gross profit margin was 30.9% and 30.8%, respectively. Higher selling prices more than offset the increased cost of raw materials and unfavorable product mix in both periods.
Selling and administrative expenses as a percent of revenue were 16.9% and 17.1% in the quarters ended June 30, 2009 and 2008, respectively. For the six months ended June 30, 2009, selling and administrative expenses as a percent of revenue improved 60 basis points to 17.0%. Lower expense for performance based compensation and professional fees were partially offset by an increase in other employee related costs.
Operating income was $43.3 million and $44.9 million for the quarters ended June 30, 2009 and 2008, respectively. Operating income was $81.6 million and $84.5 million for the six months ended June 30, 2009 and 2008, respectively. The impact of foreign exchange rates reduced operating income by 9.5% and 10.5% in the quarter and six months ended June 30, 2009, respectively. The change in operating income was due to the revenue, margin and expense changes discussed above. Additional information can be found in the Segment Information section.
Interest expense for the second quarter of 2009 was $5.7 million, a decrease of 33.4% from the prior year's quarter. Interest expense was $12.9 million and $17.1 million for the six months ended June 30, 2009 and 2008, respectively. The decrease was the result of lower interest rates combined with lower average debt balances.
The effective income tax rates were 31.3% and 30.0% for the quarters ended June 30, 2009 and 2008, respectively. The effective income tax rates were 31.0% and 31.6% for the six months ended June 30, 2009 and 2008, respectively. The effective tax rates in both 2009 and 2008 were reduced by changes in estimates associated with the finalization of prior year foreign tax items. The Company expects the effective tax rate for the remainder of 2009 to be 32.5%, excluding the income tax expense or benefit related to discrete items, which will be reported separately in the quarter in which they occur.
Beginning in the first quarter of 2009, the Company's operations in Japan, previously reported in Flavors & Fragrances Group, are reported with the Asia Pacific Group. The Asia Pacific Group is included in the Corporate and Other segment. Results for 2008 have been restated to reflect this change.
Revenue for the Flavors & Fragrances segment in the second quarters of 2009 and 2008 was $197.6 million and $211.5 million, respectively. The decrease was primarily due to the unfavorable impact of foreign exchange rates ($16.3 million) and lower revenue in Europe ($4.3 million). These items were partially offset by higher revenue in North America ($5.4 million) and Latin America ($1.3 million). The lower revenue in Europe was primarily due to lower volumes partially offset by higher selling prices. The increased revenue in North America
and Latin America was primarily related to higher selling prices. Increased volumes of dehydrated flavors and dairy flavors were offset by decreased volumes of other products.
For the quarter ended June 30, 2009, operating income increased 1.6% to
$34.2 million from $33.7 million last year. The increase was primarily
attributable to higher profit in North America ($2.7 million) and Latin
America ($0.4 million). The unfavorable impact of exchange rates decreased
operating income by approximately $2.2 million, or 6.7%. The increased
operating income in the above markets was primarily due to improved
pricing partially offset by higher raw material and unfavorable product
mix. Operating income as a percent of revenue was 17.3%, an increase of
140 basis points from the comparable quarter last year, primarily due to
the reasons provided above.
For the six months ended June 30, 2009 and 2008, revenue for the Flavors & Fragrances segment was $382.1 million and $404.7 million, respectively. The decrease in revenue was primarily due to the unfavorable impact of exchange rates ($33.2 million) and lower revenue in Europe ($2.3 million). These items were partially offset by higher revenue in North America ($10.1 million) and Latin America ($2.8 million). The lower revenue in Europe was primarily due to lower volumes partially offset by higher selling prices. The increased revenue in North America and Latin America was primarily due to higher selling prices. Increased volumes of dehydrated flavors and dairy flavors were offset by decreased volumes of other products.
Operating income was $64.2 million and $62.5 million for the six months ended June 30, 2009 and 2008, respectively. The increase in operating income was primarily related to North America ($4.8 million) and Latin America ($1.2 million). The unfavorable impact of exchange rates decreased operating profit by $4.6 million, or 7.3%. The increases in North America and Latin America were primarily due to improved pricing partially offset by higher raw material costs and unfavorable product mix.
Revenue for the Color segment for the second quarter of 2009 was $93.7 million compared to $107.3 million reported in the prior year's second quarter. The decrease in revenue was primarily due to the unfavorable effect of foreign exchange rates ($10.6 million) and lower sales of non-food colors ($5.3 million). Sales of food and beverage colors were up $2.2 million in the quarter, primarily due to higher selling prices. The lower sales of non-food colors were primarily due to lower volumes as a result of current economic conditions.
Operating income for the quarter ended June 30, 2009, was $15.0 million versus $19.3 million in the comparable period last year. The decrease was primarily due to the unfavorable impact of foreign exchange rates ($1.9 million) and lower profit in non-food colors ($2.4 million). The lower profit in non-food colors was primarily driven by lower volumes combined with increased raw material costs. The Group expects margins will improve over the remainder of 2009 as a result of increased selling prices and reduced raw material costs. Operating income as a percent of revenue was 16.0% compared to 18.0% in the prior year's quarter.
The Color Group revenue was $180.8 million and $210.1 million for the six months ended June 30, 2009 and 2008, respectively. The decrease was primarily due to the unfavorable impact of foreign exchange rates ($21.5 million) and lower sales of non-food colors ($10.3 million). Sales of food and beverage colors were up $2.5 million for the six months ended June 30, 2009, primarily related to higher selling prices. The lower sales of non-food colors were primarily due to lower volumes as a result of current economic conditions.
Operating income was $28.7 million and $37.8 million for the six months ended June 30, 2009 and 2008, respectively. The decrease was primarily due to the unfavorable impact of foreign exchange rates ($3.9 million), lower profit in non-food colors ($3.4 million) and lower profit on sales of food and beverage colors ($1.7 million). The lower profit in non-food colors was primarily due to reduced volumes and higher raw material costs. The lower profit from sales of food and beverage colors was primarily due to higher raw material costs and lower volumes partially offset by higher selling prices. Operating income as a percent of revenue was 15.9% compared to 18.0% in the prior year's first six months.
The Company's ratio of debt to total capital improved to 34.7% as of June 30, 2009, from 37.0% as of December 31, 2008. The improvement was due to higher equity and lower outstanding debt balances.
Net cash provided by operating activities was $55.4 million for the six months ended June 30, 2009, compared to $38.5 million for the comparable period last year. The increase in cash provided by operating activities was primarily due to less cash required to fund working capital increases in the first six months of 2009 compared to the same period in 2008.
Net cash used in investing activities was $20.0 million and $21.4 million for the six months ended June 30, 2009 and 2008, respectively. Capital expenditures were $19.6 million and $22.9 million for the year-to-date periods ended June 30, 2009 and 2008, respectively.
Net cash used in financing activities was $26.5 million in the first six months of 2009 and $18.0 million in the comparable period of 2008. In the first six months of 2009, net repayments on debt were $12.6 million compared to $12.5 million for the first six months of 2008. For purposes of the cash flow statement, net changes in debt exclude the impact of foreign exchange rates. Dividends of $18.5 million and $17.2 million were paid during the six months ended June 30, 2009 and 2008, respectively, reflecting the Company's higher dividend of $0.38 per share in the first half of 2009 compared to $0.36 per share in the same period in 2008. In the first six months of 2009 and 2008, the Company's cash provided from operations was able to fund capital expenditures and pay dividends.
The Company's financial position remains strong. In the first quarter of 2009, the Company borrowed under its term loan that was completed in October 2008. The proceeds from this term loan were used to retire maturing debt. The Company expects that its cash flows from operations and existing lines of credit can be used to meet future cash requirements for operations, capital expenditures and dividend payments to shareholders.
There have been no material changes in the Company's contractual obligations during the quarter ended June 30, 2009. For additional information about contractual obligations, refer to page 23 of the Company's 2008 Annual Report, portions of which were filed as Exhibit 13.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008.
The Company had no off-balance sheet arrangements as of June 30, 2009.
There have been no material changes in the Company's critical accounting policies during the quarter ended June 30, 2009. For additional information about critical accounting policies, refer to pages 21 and 22 of the Company's 2008 Annual Report, portions of which were filed as Exhibit 13.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008.
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