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What changed in SENSIENT TECHNOLOGIES CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of SENSIENT TECHNOLOGIES CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+217 added−229 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-17)

Top changes in SENSIENT TECHNOLOGIES CORP's 2023 10-K

217 paragraphs added · 229 removed · 174 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

26 edited+2 added−3 removed52 unchanged
Biggest changeThe 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.
Biggest changeOn April 1, 2021, the Company completed the sale of the fragrances product line (excluding its essential oils product line) for $36.3 million of net cash. Flavors & Extracts Group The Company is a global developer, manufacturer, and supplier of flavor systems for the food, beverage, and personal care industries.
The Company’s principal products include: • flavors, flavor enhancers, ingredients, extracts, and bionutrients; • essential oils; • dehydrated vegetables and other food ingredients; • natural and synthetic food and beverage colors; • personal care colors and ingredients; • pharmaceutical and nutraceutical excipients and ingredients; and • technical colors, specialty colors, and specialty dyes and pigments.
The Company’s principal products include: ● flavors, flavor enhancers, ingredients, extracts, and bionutrients; ● essential oils; ● dehydrated vegetables and other food ingredients; ● natural and synthetic food and beverage colors; ● personal care colors and ingredients; ● pharmaceutical and nutraceutical colors, excipients, and ingredients; and ● technical colors, specialty colors, and specialty dyes and pigments.
The Flavors & Extracts Group produces flavor, extracts and essential oils products that impart a desired taste, texture, aroma, and/or other characteristics to a broad range of consumer and other products. This Group includes the Company’s natural ingredients business, which produces dehydrated garlic, onion, and other natural ingredients for food processors.
The Flavors & Extracts Group produces flavor, extracts, and essential oils products that impart a desired taste, texture, aroma, or other characteristics to a broad range of consumer and other products. This Group includes the Company’s natural ingredients business, which produces dehydrated garlic, onion, and other natural ingredients for food processors.
We also have a dedicated internal talent acquisition team, with deep knowledge of our Company and our core values, in order to help us find the best prospective employees for open positions worldwide. We hold ourselves accountable to filling open roles expeditiously by closely monitoring and limiting days to fill open roles.
We also have a dedicated internal talent acquisition team, with deep knowledge of our Company and our core values, in order to help us find the best prospective employees for open positions worldwide. We hold ourselves accountable for filling open roles expeditiously by closely monitoring and limiting days to fill open roles.
The majority of the proprietary processes and formulae developed by the Company are maintained as trade secrets and protected through internal physical and information technology controls and confidentiality agreements with customers as well as confidentiality and non-competition agreements with employees. 6 Index Within the Flavors & Extracts Group, development activity is focused on ingredients, flavors, natural extracts, and essential oils as well as flavor systems that are responsive to consumer trends and the processing needs of our food and beverage customers.
The majority of the proprietary processes and formulae developed by the Company are maintained as trade secrets and protected through internal physical and information technology controls and confidentiality agreements with customers as well as confidentiality and non-competition agreements with employees. 7 Index Within the Flavors & Extracts Group, development activity is focused on ingredients, flavors, natural extracts, and essential oils as well as flavor systems that are responsive to consumer trends and the processing needs of our food and beverage customers.
These reports and other information may be accessed from the website maintained by the Commission at http://www.sec.gov. The Company can also be reached at its website at www.sensient.com. The Company’s web address is provided as an inactive textual reference only, and the contents of that website are not incorporated in or otherwise to be regarded as part of this report.
These reports and other information may be accessed from the website maintained by the Commission at https://www.sec.gov. The Company can also be reached at its website at www.sensient.com. The Company’s web address is provided as an inactive textual reference only, and the contents of that website are not incorporated in or otherwise to be regarded as part of this report.
The advanced dehydration technologies utilized by our Natural Ingredients business permit fast and effective rehydration of ingredients used in many of today’s popular convenience foods. As of December 31, 2022, the Group’s principal manufacturing plants are located in California, Illinois, Michigan, Wisconsin, New Mexico, Belgium, Costa Rica, Mexico, Germany, and the United Kingdom.
The advanced dehydration technologies utilized by our Natural Ingredients business permit fast and effective rehydration of ingredients used in many of today’s popular convenience foods. As of December 31, 2023, the Group’s principal manufacturing plants are located in California, Illinois, Michigan, Wisconsin, New Mexico, Belgium, Costa Rica, Mexico, Germany, and the United Kingdom.
In addition, we strictly apply principles of non-discrimination, which are foundational to our non-negotiable expectations of integrity and professionalism, in all employment-related decisions. 8 Index Health and Safety We take pride in our strong and continually improving health and safety programs, which we view as important aspects of our economic health and core values.
In addition, we strictly apply principles of non-discrimination, which are foundational to our non-negotiable expectations of integrity and professionalism, in all employment-related decisions. 9 Index Health and Safety We take pride in our strong and continually improving health and safety programs, which we view as important aspects of our economic health and core values.
Foreign Operations Additional information regarding the Company’s foreign operations is set forth in Note 12, Segment and Geographic Information , in the Notes to Consolidated Financial Statements included in this report. 7 Index Patents, Formulae, and Trademarks The Company owns or controls many patents, formulae, and trademarks related to its businesses.
Foreign Operations Additional information regarding the Company’s foreign operations is set forth in Note 12, Segment and Geographic Information , in the Notes to Consolidated Financial Statements included in this report. 8 Index Patents, Formulae, and Trademarks The Company owns or controls many patents, formulae, and trademarks related to its businesses.
The Company’s corporate expenses, divestiture & other related costs and income, share-based compensation, and restructuring and other charges including operational improvement plan costs and income, and certain other costs are included in the “Corporate & Other” category as described in this report.
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 as described in this report.
We also have regular 1:1 meetings between non-production employees and their supervisors. In order to continue to develop and retain our key talent, we offer training programs based upon the employee’s role in the Company.
We also promote regular 1:1 meetings between non-production employees and their supervisors. In order to continue to develop and retain our key talent, we offer training programs based upon the employee’s role in the Company.
Individual goals are set annually for each employee, which flow from the Company strategy, and attainment of those goals is an element of the employee’s performance assessment. We invest in our development programs for high-impact roles, such as our General Management Development, Sales Representative Trainee, and Flavorist Trainee programs.
Individual goals are set annually for employees, which flow from the Company strategy, and attainment of those goals is an element of the employee’s performance assessment. We invest in our development programs for high-impact roles, such as our General Management Development, Sales Representative Trainee, and Flavorist Trainee programs.
Corporate Corporate provides management, administrative, and support services to the Company from its headquarters in Milwaukee, Wisconsin. The Company’s corporate expenses, divestiture & other related costs and income, share-based compensation, other charges including operational improvement plan costs and income, and other costs, are included in the “Corporate & Other” category.
Corporate Corporate provides management, administrative, and support services to the Company from its headquarters in Milwaukee, Wisconsin. 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.
We continue to develop, and improve upon, an effective on-boarding process to differentiate ourselves from our competitors and help enable our employees to succeed. We generally track our progress through weekly pre-hire team on-boarding calls, new hire surveys, new hire interviews, and a monthly report of our results to senior leadership.
We continue to develop, and improve upon, our on-boarding process to differentiate ourselves from our competitors and help enable our employees to succeed. We generally track our progress through weekly pre-hire team on-boarding calls, new hire surveys, new hire interviews, hiring manager surveys, and a monthly report of our results to senior leadership.
In food industries, markets include savory, beverage, and sweet flavors, as well as certain bioingredients. Through April 1, 2021, in non-food industries, the Group supplied fragrances and essential oil products to the personal, home-care, and bioingredients markets.
In food industries, markets include savory, beverage, and sweet flavors, as well as certain bioingredients. Through April 1, 2021, in non-food industries, the Group supplied fragrances and essential oil products to the personal, homecare, and bioingredients markets.
For 2022, the Company’s three reportable segments were 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.
For 2023, the Company’s three reportable segments were the Flavors & Extracts Group and the Color Group, which are managed on a product line basis, and the Asia Pacific Group, which is managed on a geographic basis.
After the divestiture of the fragrances product line on April 1, 2021, the Group still produced and supplied essential oils to the personal care market.
After the divestiture of the fragrances product line on April 1, 2021, the Group still produces and supplies essential oils to the personal care market.
The businesses are not materially dependent upon any particular patent, trademark, or formula; however, trademarks, patents, and formulae are important to the business of the Company. Human Capital As of December 31, 2022, the Company employed 4,094 persons worldwide. Approximately 44% of our employees were employed in the United States, and approximately 56% were employed outside of the United States.
The businesses are not materially dependent upon any particular patent, trademark, or formula; however, trademarks, patents, and formulae are important to the business of the Company. Human Capital As of December 31, 2023, the Company employed 3,956 persons worldwide. Approximately 43% of our employees were employed in the United States, and approximately 57% were employed outside of the United States.
Of our 4,094 employees worldwide, we had 506 general administration employees ( e.g. , accounting, administrative, regulatory compliance, IT, human resources, etc.), 2,575 production employees, 477 research and development employees, and 536 sales and marketing employees. We believe that our future success is dependent upon our continued ability to attract, retain, and motivate successful employees.
Of our 3,956 employees worldwide, we had 505 general administration employees ( e.g. , accounting, administrative, regulatory compliance, IT, human resources, etc.), 2,459 production employees, 465 research and development employees, and 527 sales and marketing employees. We believe that our future success is dependent upon our continued ability to attract, retain, and motivate successful employees.
Charters for the Audit, Compensation and Development, Nominating and Corporate Governance, Finance, and Executive Committees of the Company’s Board of Directors, as well as the Company’s Code of Conduct, Corporate Governance Guidelines, Policy on Recovery of Incentive Compensation From Executives, and Directors and Executive Officers Stock Ownership Guidelines are also available on the Company’s website.
Charters for the Audit, Compensation and Development, Nominating and Corporate Governance, Finance, and Executive Committees of the Company’s Board of Directors, as well as the Company’s Code of Conduct, Corporate Governance Guidelines, Policy Relating to Recovery of Erroneously Awarded Compensation, and Non-Employee Directors and Executive Officers Stock Ownership Guidelines are available on the Company’s website.
The purchase price for this acquisition was $14.9 million in cash. This business is now part of the Flavors & Extracts segment. On October 3, 2022, the Company acquired Endemix Doğal Maddeler A.Ş. and Teknoloji Yatırımları ve Danışmanlık Sanayi ve Ticaret A.Ş. (collectively, Endemix), a natural colors business located in Turkey.
On October 3, 2022, the Company acquired Endemix Doğal Maddeler A.Ş. and Teknoloji Yatırımları ve Danışmanlık Sanayi ve Ticaret A.Ş. (collectively, Endemix), a natural colors business located in Turkey. The Company paid $23.3 million in cash for this acquisition, which is net of $1.3 million in debt assumed. This business is part of the Color segment.
The Company’s research, development, and quality assurance personnel support the Company’s efforts to improve existing products and develop new products tailored to customer needs, while providing ongoing technical support and know-how to the Company’s manufacturing activities. The Company employed 789 people in research and development, quality assurance, quality control, and lab technician positions as of December 31, 2022.
The Company’s research, development, and quality assurance personnel support the Company’s efforts to improve existing products and develop new products tailored to customer needs, while providing ongoing technical support and know-how to the Company’s manufacturing activities.
The Color Group operates under the following trade names: • Sensient Food Colors (food and beverage colors); • Sensient Pharmaceutical Coating Systems (pharmaceutical and nutraceutical colors and coatings); • Sensient Cosmetic Technologies (personal care colors, ingredients, and systems); and • Sensient Specialty Markets (paper colors; and industrial colors for plastics, leather, wood stains, antifreeze, landscaping, and other uses).
As of December 31, 2023, the Group’s principal manufacturing plants are located in Missouri, Brazil, Canada, China, France, Germany, Italy, Mexico, Peru, Turkey, and the United Kingdom. 6 Index The Color Group operates under the following trade names: ● Sensient Food Colors (food and beverage colors); ● Sensient Pharmaceutical Coating Systems (pharmaceutical and nutraceutical colors and coatings); ● Sensient Cosmetic Technologies (personal care colors, ingredients, and systems); and ● Sensient Specialty Markets (paper colors and industrial colors for plastics, leather, wood stains, antifreeze, landscaping, and other uses).
Financial information regarding the Company’s three reportable segments and the operations included within Corporate & Other is set forth in Note 12, Segment and Geographic Information , in the Notes to Consolidated Financial Statements included in this report. 4 Index Acquisitions On July 15, 2021, the Company acquired substantially all of the assets of Flavor Solutions, Inc ., a flavors business located in New Jersey.
Financial information regarding the Company’s three reportable segments and the operations included within Corporate & Other is set forth in Note 12, Segment and Geographic Information , in the Notes to Consolidated Financial Statements included in this report.
Flavors & Extracts Group The Company is a global developer, manufacturer, and supplier of flavor systems for the food, beverage, and personal care industries. The Company’s flavor formulations are used in many of the world’s best-known consumer products. Under the unified brand names of Sensient Flavors and Sensient Natural Ingredients, the Group is a supplier to multinational and regional companies.
The Company’s flavor formulations are used in many of the world’s best-known consumer products. Under the unified brand names of Sensient Flavors and Sensient Natural Ingredients, the Group is a supplier to multinational and regional companies. As noted above, during the second quarter of 2021, the Company divested its fragrances product line (excluding its essential oils product line).
Divestitures 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 the sale. On September 18, 2020, the Company completed the sale of its yogurt fruit preparations product line.
Divestitures 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 its previously completed sale of its yogurt fruit preparations product line.
Removed
The 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. This business is now part of the Color segment.
Added
Acquisitions On July 15, 2021, the Company acquired substantially all of the assets of Flavor Solutions, Inc ., a flavors business located in New Jersey. 5 Index The purchase price for this acquisition was $14.9 million in cash. This business is part of the Flavors & Extracts segment.
Removed
As noted above, during the third quarter of 2020 and the second quarter of 2021, the Company divested its yogurt fruit preparations product line and fragrances product line (excluding its essential oils product line), respectively.
Added
The Company’s efforts also include the development of proprietary seed lines, sometimes in partnership with other business partners, for its natural ingredients and natural colors business lines. The Company employed 760 people in research and development, quality assurance, quality control, and lab technician positions as of December 31, 2023.
Removed
After the divestiture of the inks product line in the second quarter of 2020, the Company no longer sells specialty inks. 5 Index As of December 31, 2022, the Group’s principal manufacturing plants are located in Missouri, Brazil, Canada, China, France, Germany, Italy, Mexico, Peru, Turkey, and the United Kingdom.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFor example, current macroeconomic and political instability have caused global supply chain disruptions, inflation, and the strengthening of the U.S. dollar, which have adversely impacted and could continue to adversely impact our results of operations. 9 Index In addition, the credit markets provide us with liquidity to operate and grow our business beyond the liquidity that our cash flows provide.
Biggest changeFor example, current macroeconomic and political instability caused by rising interest rates, global supply chain disruptions, inflation, ongoing conflicts between Russia and Ukraine as well as Israel and Hamas and related disruptions in the Red Sea and region, geopolitical tensions, and the strengthening of the U.S. dollar, have adversely impacted, and could continue to adversely impact, our results of operations. 10 Index We have experienced, and could continue to experience, increased raw material and energy cost inflation, as well as disruptions and delays in our supply chain, as a result of global macroeconomic trends, including increased global demand, labor shortages, geopolitical and economic tensions, including the conflicts between Russia and Ukraine and in the Middle East, which has grown out of the Israel and Hamas conflict.
As mentioned above, our customers are under intense pressure in their markets from competitors and as a result of changing consumer preferences. Historically, these combined pressures have resulted in some of the Company’s customers entering bankruptcy or receivership. There is risk that other customers of the Company could enter bankruptcy or receivership in the near-term.
As mentioned above, our customers are under intense pressure in their markets from competitors and their end customers and as a result of changing consumer preferences. Historically, these combined pressures have resulted in some of the Company’s customers entering bankruptcy or receivership. There is risk that other customers of the Company could enter bankruptcy or receivership in the near-term.
In addition, the increased focus on ESG matters may result in new or increased regulations, laws, and demands, such as carbon tax programs and enhanced sustainability reporting regimes, which could cause us to incur additional costs or to make changes to our operations to comply with any such regulations, laws, or demands.
In addition, the increased focus on ESG matters may result in new or increased regulations, laws, and demands, such as carbon tax and tariff programs and enhanced sustainability reporting regimes, which could cause us to incur additional costs or to make changes to our operations to comply with any such regulations, laws, or demands.
Technology and Cybersecurity Risks • Our ability to protect our intellectual property rights is key to our performance. We protect our intellectual property rights as trade secrets, through patents, under confidentiality agreements, and through internal and external physical and cyber security systems.
Technology and Cybersecurity Risks • Our ability to protect our intellectual property rights is key to our performance. We protect our intellectual property rights as trade secrets, through patents, under confidentiality agreements, and through internal and external physical and cyber-security policies and systems.
If other parties were to infringe on our intellectual property rights, or if a third party successfully asserted that we had infringed on their intellectual property rights, it could have an adverse impact on our business. • Our ability to successfully maintain and upgrade our information technology systems, and to respond effectively to failures, disruptions, compromises, or breaches of our information technology systems, may adversely affect our competitiveness and profitability.
In addition, if other parties were to infringe on our intellectual property rights, or if a third party successfully asserted that we had infringed on their intellectual property rights, it could have an adverse impact on our business. • Our ability to successfully maintain and upgrade our information technology systems, and to respond effectively to failures, disruptions, compromises, or breaches of our information technology systems, may adversely affect our competitiveness and profitability.
The impact of any such event and the effectiveness of our response thereto may adversely affect our operations and subject us to lost business opportunities, increased operating costs, regulatory consequences, and reputational harm. While we take substantial steps to protect our information and systems through cyber security systems, monitoring, auditing, and training, these efforts may not always be successful.
The impact of any such event and the effectiveness of our response thereto may adversely affect our operations and subject us to lost business opportunities, increased operating costs, regulatory consequences, and reputational harm. While we take substantial steps to protect our information and systems through cyber security systems, monitoring, auditing, and training, these efforts are not always successful.
In addition, if any of these large customers are able to produce the products that we otherwise supply them, our results of operations may be adversely impacted. 11 Index • Our sales and profitability are affected by changing consumer preferences, changing regulations and technologies, and our ability and our customers’ ability to make and sell to consumers in highly competitive markets.
In addition, if any of these large customers are able to produce the products that we otherwise supply them, our results of operations may be adversely impacted. • Our sales and profitability are affected by changing consumer preferences, changing regulations and technologies, and our ability and our customers’ ability to make and sell to consumers in highly competitive markets.
These factors might adversely impact our ability to make certain products as well as our profitability on the products that can be made. 15 Index • We could be adversely affected by violations of anti-bribery and anti-corruption laws and regulations. Our business is subject to the U.S.
These factors might adversely impact our ability to make certain products as well as our profitability on the products that can be made. • We could be adversely affected by violations of anti-bribery and anti-corruption laws and regulations. Our business is subject to the U.S.
These fluctuations have impacted our results of operations in recent periods as discussed below in more detail under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Such currency exchange rate volatility may also adversely impact our financial condition or liquidity.
These fluctuations have impacted our results of operations in recent periods as discussed below in more detail under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Such currency exchange rate volatility may also adversely impact our financial condition or liquidity.
Those developments could negatively affect our results. • Consolidation has resulted in customers with increased buying power, which can affect our profitability. Many of our customers have consolidated in recent years and we expect the combination trend to continue in many business lines.
Those developments could negatively affect our results. 11 Index • Consolidation has resulted in customers with increased buying power, which can affect our profitability. Many of our customers have consolidated in recent years and we expect the combination trend to continue in many business lines.
In the event that there is an insufficient supply of water for our operations or the operations of the growers that we contract with, our Natural Ingredients business may be materially impacted and could have an adverse effect on our results.
In the event that there is an insufficient supply of water for our operations or the operations of the growers that we contract with, our Natural Ingredients business may be materially impacted and could have an adverse effect on our results in future periods.
We have, in the past, dealt with regulators shutting down suppliers that provided the Company with raw materials. This adversely impacted the supply of raw materials for the affected products and, therefore, impacted our ability to produce products containing these raw materials.
We have, in the past, dealt with regulators shutting down suppliers that provided the Company with raw materials. 12 Index This adversely impacted the supply of raw materials for the affected products and, therefore, impacted our ability to produce products containing these raw materials.
Additionally, consumers who buy food and personal care products from our customers may be unwilling to pay the higher prices that could result from the increased costs of products as a result of these sustainability efforts, which could adversely affect our business and financial condition. 14 Index • World events and natural disasters are beyond our control and could affect our results.
Additionally, consumers who buy food and personal care products from our customers may be unwilling to pay the higher prices that could result from the increased costs of products as a result of the increased costs engendered by these sustainability efforts, which could adversely affect our business and financial condition. • World events and natural disasters are beyond our control and could affect our results.
We sell flavors, fragrances, and colors that are used in foods, beverages, pharmaceuticals, personal care, nutraceuticals, and other items for human consumption or contact. These products involve risks such as contamination or spoilage, tampering, defects, and other adulteration.
We sell flavors, colors, and other specialty ingredients that are used in foods, beverages, pharmaceuticals, personal care, nutraceuticals, and other items for human consumption or contact. These products involve risks such as contamination or spoilage, tampering, defects, and other adulteration.
This competitive pressure has caused some of our customers to change or reduce ordering patterns, to resist price increases, to discontinue or reduce existing product offerings, and to introduce fewer new products and reduce or eliminate traditional limited time offerings.
Our customers face intense competition . This competitive pressure has caused some of our customers to change or reduce ordering patterns, to resist price increases, to discontinue or reduce existing product offerings, and to introduce fewer new products and reduce or eliminate traditional limited time offerings.
For example, the shelf-life for natural products is generally shorter than synthetic products, so as the demand for natural products grows, it becomes more likely that any excess inventory could need to be written off or subject to markdowns and would have an adverse impact on our revenue and profitability.
For example, the shelf-life for natural products is generally shorter than synthetic products, so if the demand for natural products slows, it becomes more likely that any excess inventory could need to be written off or subject to markdowns and would have an adverse impact on our revenue and profitability.
Additionally, if we do not maintain enough inventory to satisfy the demand of our customers, we may lose business to our competitors, which could adversely affect our results. Since the beginning of the COVID-19 pandemic, we have held large quantities of raw material and finished goods inventory to minimize disruptions to our customers.
Additionally, if we do not maintain enough inventory to satisfy the demand of our customers, we may lose business to our competitors, which could adversely affect our results. During the COVID-19 pandemic, we held large quantities of raw material and finished goods inventory to minimize disruptions to our customers.
We may not be able to pass these costs to customers for a variety of reasons, including the fact that some of our competitors may not be subject to the increased costs. Additionally, government regulatory action against any of our suppliers could also cause a supply disruption.
We may not be able to pass these costs to customers for a variety of reasons, including the fact that some of our competitors may not be subject to the increased costs. Additionally, government regulatory action against any of our suppliers or particular raw materials could also cause a supply disruption.
Additionally, our yields from harvests for onion were adversely impacted in 2021 and 2022 by both drought and flooding, resulting in reduced availability of onion products for our Natural Ingredients business.
Additionally, our yields from harvests for onion were adversely impacted in 2021 and 2022 by both drought and flooding, resulting in reduced availability of onion products for our Natural Ingredients business in recent prior years.
Additionally, certain payments made to us prior to a customer declaring for bankruptcy may be, and have been, subject to clawback during the bankruptcy or receivership process. Financially distressed customers may change or reduce ordering patterns, reduce willingness to accept price increases, discontinue or reduce existing product offerings, and introduce fewer new products.
Additionally, certain payments made to us prior to a customer declaring for bankruptcy may be, and have been, subject to clawback during the bankruptcy or receivership process. Financially distressed customers may change or reduce ordering patterns, reduce willingness to accept price increases, discontinue or reduce existing product offerings, and introduce fewer new products. Those developments could adversely affect our results.
Ultimately, o ur ability to sell our products to customers depends upon our customers’ ability to succeed against their competitors and to respond effectively to the demands of their own customers.
Ultimately, o ur ability to sell our products to customers depends upon our customers’ ability to succeed against their competitors and to respond effectively to the demands of their own customers, including pressure to reduce prices.
World events can adversely affect national, international, and local economies. Economies can also be affected by conflicts, natural disasters, changes in climate, severe weather (including droughts and flooding), epidemics, pandemics (including the coronavirus, as discussed in more detail above), or other catastrophic events.
World events can adversely affect national, international, and local economies. Economies can also be affected by conflicts, natural disasters, changes in climate, severe weather (including droughts and flooding), epidemics, pandemics, or other catastrophic events.
Because of the nature of our business, and the importance of our proprietary information and manufacturing facilities, we face threats not only from hackers’ intent on theft and disruption, but also from malicious insiders that may attempt to steal Company information.
Because of the nature of our business, and the importance of our proprietary information and manufacturing facilities, we face threats and experience cybersecurity incidents and attempts from time to time, not only from hackers’ intent on theft and disruption, but also from malicious insiders that may attempt to steal Company information or negligent employees.
The military conflict may also increase the risk of cybersecurity incidents, including the risk of cyberattacks in retaliation for the United States’ and European Union’s support of Ukraine and sanctions against Russia or otherwise. Such attacks, whether on us or on critical infrastructure and financial institutions globally, could also adversely affect our operations.
The military conflicts may also increase the risk of cybersecurity incidents, including the risk of cyberattacks in retaliation based upon the United States’ and/or European Union’s support for Ukraine or Israel. Such attacks, whether on us or on critical infrastructure and financial institutions globally, could also adversely affect our operations.
The Company also depends upon suppliers both inside and outside the countries in which products are manufactured.
The Company sells to customers located both inside and outside the countries in which products are manufactured. The Company also depends upon suppliers both inside and outside the countries in which products are manufactured.
Competition can reduce both our sales and the prices at which we are able to sell our products, which can negatively affect our results. • Our business is impacted by adverse developments in economic conditions, which could negatively affect our financial performance and our ability to grow or sustain the growth of our business.
Competition can reduce both our sales and the prices at which we are able to sell our products, or cause us to incur additional costs to remain competitive, which can negatively affect our results. • Our business is impacted by adverse developments in economic, political, and capital market conditions, which could negatively affect our financial performance and our ability to grow or sustain the growth of our business.
If these beneficial tariffs were reduced or eliminated, it could adversely affect our business and financial condition. • Various stakeholders’ increasing and changing expectations and new laws and regulations with respect to Environmental, Social, and Governance (ESG) matters may impose additional costs on us or expose us to additional risks.
If these beneficial tariffs were reduced or eliminated, it could adversely affect our business and financial condition. • Various stakeholders’ increasing and changing expectations and new laws and regulations with respect to Environmental, Social, and Governance (ESG) matters may impose additional costs on us or expose us to additional risks. 14 Index Stakeholder expectations in connection with ESG matters have been, and continue to be, rapidly evolving and increasing.
If the consumption or use of our products causes product damage, injury, illness, or death, we may be subject to liability, including class action lawsuits and other civil and governmental litigation. We are also subject to product liability claims involving products containing diacetyl and related chemicals.
If the consumption or use of our products causes product damage, injury, illness, or death, we may be subject to liability, including class action lawsuits and other civil and governmental litigation. We are also subject to product liability claims involving products containing diacetyl and related chemicals as well as cosmetic ingredients that may have utilized talc in the past.
The competition for these individuals can be significant, and the loss of key employees could harm our business. In addition, we need to provide for smooth transitions when replacing key management and technical personnel positions. Our operations and results may be negatively affected if we are not able to do so.
The loss of key employees or inability to attract new employees in the future could harm our business. In addition, we need to provide for smooth transitions when replacing key management and technical personnel positions. Our operations and results may be negatively affected if we are not able to do so.
Our sales could also be affected by changing regulations or technologies that could impact consumer demand for products that contain our products. Therefore, we depend upon our customers’ ability to create markets for the consumer products that incorporate the products that we manufacture.
Our sales could also be affected by changing regulations or technologies (including, for example, off-label prescription drug use for weight loss) that could impact consumer demand for products that contain our products. Therefore, we depend upon our customers’ ability to create markets for the consumer products that incorporate the products that we manufacture.
Additionally, as many areas move away from using carbon-based sources of energy, we would initially anticipate increases in the cost of energy generated from renewable energy sources as well as potential reliability and continuity issues related to electrical power generation, distribution, and supply.
Commodity, transportation, and energy price increases will raise both our raw material costs and operating costs. Additionally, as many areas move away from using carbon-based sources of energy, we would initially anticipate increases in the cost of energy generated from renewable energy sources as well as potential reliability and continuity issues related to electrical power generation, distribution, and supply.
Furthermore, our information technology systems may be susceptible to failures, disruptions, breaches, ransomware, theft, employee carelessness in the face of social engineering threats, and other similar cybersecurity events.
Furthermore, our and our third-party providers’ information technology systems are susceptible to failures, disruptions, breaches, ransomware, theft, employee carelessness in the face of social engineering and phishing threats and attacks, and other similar cybersecurity events.
A significant product defect, product recall, or product liability judgment can negatively impact our profitability for a period of time depending on the insurance coverage, costs, adverse publicity, product availability, scope, competitive reaction, and consumer attitudes.
While we maintain liability insurance against these risks, coverage may be unavailable or incomplete. A significant product defect, product recall, or product liability judgment can negatively impact our profitability for a period of time depending on the insurance coverage, costs, adverse publicity, product availability, scope, competitive reaction, and consumer attitudes.
A worldwide economic downturn and/or disruption of the credit markets could reduce our access to capital or significantly increase our costs of capital, which may negatively impact our financial condition, results of operations, and cash flows.
In addition, the credit markets provide us with liquidity to operate and grow our business beyond the liquidity that our cash flows provide. A worldwide economic downturn and/or disruption of the credit markets could reduce our access to capital or significantly increase our costs of capital, which may negatively impact our financial condition, results of operations, and cash flows.
These laws and regulations are administered in the United States by the Department of Agriculture, the Food and Drug Administration, the Environmental Protection Agency, the Department of Labor, and other federal and state governmental agencies. We, our suppliers, and our customers are subject to similar governmental regulation and oversight abroad.
These laws and regulations are administered in the United States by the Department of Agriculture, the Food and Drug Administration, the Environmental Protection Agency, the Department of Labor, and other federal and state governmental agencies.
In addition, if we cannot adequately anticipate and respond to the needs of our customers as they evolve in response to changing consumer preferences, new technologies, and price demands, our results could be adversely affected.
In addition, if we cannot adequately anticipate and respond to the needs of our customers as they evolve in response to changing consumer preferences, new technologies (including advancements such as artificial intelligence and machine learning, which may become critical in understanding consumer preferences in the future), and price demands, our results could be adversely affected.
This subjects us to risks that could materially impact our operating results, including: difficulties in staffing and managing foreign personnel in diverse cultures; transportation delays or interruptions; sometimes unpredictable regulatory changes; physical security risks; and the effects of international political developments and political and economic instability.
This subjects us to risks that could materially impact our operating results, including: difficulties in staffing and managing foreign personnel in diverse cultures; transportation and other supply chain delays or interruptions; sometimes unpredictable regulatory changes; physical security risks, including the potential for violence, civil and labor unrest, and possible terrorist attacks; difficulties in enforcing rights, collecting revenues, and protecting assets in foreign jurisdictions; and the effects of international political developments and political and economic instability.
Commodity and energy prices are subject to significant volatility caused by market fluctuations, supply and demand, currency fluctuation, production and transportation disruption, disruptive world events (such as the Russia-Ukraine military conflict discussed above), and changes in governmental regulations, particularly related to carbon reduction. Commodity, transportation, and energy price increases will raise both our raw material costs and operating costs.
Commodity and energy prices are subject to significant volatility caused by market fluctuations, supply and demand, currency fluctuation, production and transportation disruption, disruptive world events (such as the Russia-Ukraine and Middle Eastern conflicts and related disruptions in the Red Sea and Arabian Sea discussed above), and changes in governmental regulations, particularly related to carbon reduction.
Compliance with these laws and regulations can be complex and costly and affect our, our suppliers’, and our customers’ operations. Also, if we, our suppliers, or our customers fail to comply with applicable laws and regulations, we could be subject to administrative penalties and injunctive relief, civil and criminal remedies, fines, recalls of products, and private civil lawsuits.
Also, if we, our suppliers, or our customers fail to comply with applicable laws and regulations, we could be subject to administrative penalties and injunctive relief, civil and criminal remedies, fines, recalls of products, and private civil lawsuits. Regulatory action against a supplier or customer can create risk for us and negatively affect our operations.
These types of activities have required, and may continue to require, the devotion of significant resources and management attention and may pose business risks. Our ability to realize anticipated cost savings may be affected by a number of factors, including our ability to effectively reduce overhead, rationalize manufacturing capacity, and effectively produce products at the consolidated facilities.
Our ability to realize anticipated cost savings may be affected by a number of factors, including our ability to effectively reduce overhead, rationalize manufacturing capacity, and effectively produce products at the consolidated facilities.
Our success depends in part on our ability to maintain a current information technology platform for our businesses to operate effectively, reliably, and securely.
Our success depends in part on our ability to maintain current information technology platforms, including some managed by third-party providers, for our businesses to operate effectively, reliably, and securely.
These actions are likely to increase costs associated with our operations, including costs for raw materials, production, and transportation. If we are unable to pass on these costs, our profit could decline.
These actions are likely to increase costs associated with our operations, including costs for energy, raw materials, production, transportation, and labor.
Whenever raw materials become more costly or unavailable due to legal, regulatory, or other governmental actions, our profitability could be adversely impacted. • Environmental compliance may be costly to us.
As discussed above, actions by regulatory agencies against us and our suppliers can also adversely impact the availability of raw materials. Whenever raw materials become more costly or unavailable due to legal, regulatory, or other governmental actions, our profitability could be adversely impacted. • Environmental compliance may be costly to us.
For example, our Natural Ingredients business has significant operations in California, which has been dealing with drought conditions, flooding, and water supply issues.
For example, our Natural Ingredients business has significant operations in California, which has been dealing with drought conditions, flooding, and water supply issues, which such issues had negatively impacted certain of our yields from onion harvests in prior years as discussed above.
Those developments could adversely affect our results. • The impact of currency exchange rate fluctuation may negatively affect our results. We report the results of our foreign operations in the applicable local currency and then translate those results into U.S. dollars at applicable exchange rates.
We report the results of our foreign operations in the applicable local currency and then translate those results into U.S. dollars at applicable exchange rates. We are therefore subject to non-U.S. currency risks and non-U.S. exchange exposure.
We are also subject to the routine examination of our income tax returns by tax authorities in those countries in which we operate, and we may be subject to assessments or audits in the future in any of these countries. The results of such assessments or audits, if adverse to us, could negatively impact our results.
When and how this framework is adopted or enacted by the various countries in which we do business could increase tax complexity and uncertainty and may adversely affect our results of operations. 16 Index We are also subject to the routine examination of our income tax returns by tax authorities in those countries in which we operate, and we may be subject to assessments or audits in the future in any of these countries.
Our business strategy includes acquiring businesses and making investments that complement our existing businesses. We have acquired many companies and operations in the past and may continue growth by acquisition in the future. We continue to analyze and evaluate acquisition opportunities with the potential to strengthen our industry position or enhance our existing product offerings.
Our business strategy includes acquiring businesses, making investments that complement our existing businesses, and, based on an evaluation of our business portfolio, divesting existing businesses. We have acquired many companies and operations in the past and may continue to grow by acquisition in the future.
While the instability in Mexico has not yet materially adversely impacted our business there, it could do so in the future, and our results of operations could be adversely affected. 13 Index In addition, changes in policies by the United States or foreign governments could negatively affect our operating results due to changes in duties, tariffs, trade regulations, taxes, or limitations on currency or fund transfers.
In addition, changes in policies by the United States or foreign governments could negatively affect our operating results due to changes in duties, tariffs, trade regulations, employment regulations, taxes, or limitations on currency or fund transfers.
We have encountered difficulties, and may continue to encounter difficulties, in finding favorable pricing and reliable alternative sources or substitutes for certain of the raw materials we need (including sunflower oil) for certain products. If these difficulties persist, accelerate, or expand, our operations could be adversely affected.
For example, suppliers located in Ukraine are our main source of sunflower oil, which is primarily used in our savory and beverage businesses. We have encountered difficulties, and may continue to encounter difficulties, in finding favorable pricing and reliable alternative sources or substitutes for certain of the raw materials we need (including sunflower oil) for certain products.
From time to time, we or our customers have withdrawn or recalled products in the event of contamination, product defects, or perceived quality problems. If our customers withdraw or recall products related to ingredients that we provide to them, as has occurred in the past, they may make claims against us.
From time to time, we or our customers have withdrawn or recalled products in the event of contamination, product defects, or perceived quality problems.
Divestitures have inherent risks, including potential post-closing liabilities and claims for indemnification, that may impact our ability to fully realize the anticipated benefits of a given divestiture. If any additional post-closing risks materialize, the benefits of such divestitures may not be fully realized, if at all, and our business, financial condition, and results of operations could be negatively impacted.
If we are unable to consummate such transactions, or successfully integrate and grow acquisitions and achieve contemplated revenue synergies and cost savings, our financial results could be adversely affected. Divestitures have inherent risks, including potential post-closing liabilities and claims for indemnification, that may impact our ability to fully realize the anticipated benefits of a given divestiture.
We may also need to finance future acquisitions, and the terms of any financing, and the need to ultimately repay or refinance any indebtedness, may have negative effects on us. Acquisitions also could have a dilutive effect on our financial results.
If any additional post-closing risks materialize, the benefits of such divestitures may not be fully realized, if at all, and our business, financial condition, and results of operations could be negatively impacted. 17 Index We may also need to finance future acquisitions, and the terms of any financing, and the need to ultimately repay or refinance any indebtedness, may have negative effects on us.
We have transfer pricing policies that are a significant component of the management and compliance of our operations across international boundaries and overall financial results. Many countries routinely examine transfer pricing policies of taxpayers subject to their jurisdiction, challenge transfer pricing policies aggressively where there is potential non-compliance, and impose significant interest charges and penalties where non-compliance is determined.
Many countries routinely examine transfer pricing policies of taxpayers subject to their jurisdiction, challenge transfer pricing policies aggressively where there is potential non-compliance, and impose significant interest charges and penalties where non-compliance is determined. However, governmental authorities could challenge these policies more aggressively in the future and, if challenged, we may not prevail.
In addition, some of our customers and other stakeholders are requiring us to provide information on our plans relating to certain ESG matters, such as greenhouse gas emissions, and we expect this trend to continue as more regulations are being adopted.
In additi o n , s om e of our cu s tomers and other s tak e holders are requiring us to pro v ide information on our plans relating to certain ESG matter s, such as greenhouse gas emissions (including carbon scores for particula r product s we s uppl y ) , and we expect this trend to continue as more regulations are being adopted.
As discussed above, the price pressures in our markets make such cost reduction efforts particularly important. For example, in 2020 and 2021, the Company executed an operational improvement plan to further consolidate manufacturing facilities and improve efficiencies within the Personal Care business line of the Company.
As discussed above, the price pressures in our markets make such cost reduction efforts particularly important. For example, in 2023, the Company began the execution of a portfolio optimization plan to optimize certain production facilities, centralize and eliminate certain production and selling and administrative positions, and improve efficiencies globally within the Company.
We may not be able to identify suitable acquisition candidates or have sufficient financing and/or cash available to successfully complete acquisitions in the future. Our future growth through acquisitions could involve significant risks that may have a material adverse effect on us.
Our future growth through acquisitions could involve significant risks that may have a material adverse effect on us.
Acquisitions also generally result in goodwill, which would need to be written off against earnings in the future if it becomes impaired.
Acquisitions also could have a dilutive effect on our financial results. Acquisitions also generally result in goodwill, which would need to be written off against earnings in the future if it becomes impaired. Acquisitions and investments may involve significant cash expenditures, debt incurrences, equity issuances, operating losses, and expenses.
The enhanced stakeholder and regulatory focus on ESG matters requires us to continuously monitor various developing standards and reporting requirements and make continuous progress in our efforts to reduce our, as well as our suppliers’, energy consumption, greenhouse gas emissions, water usage, and waste generation. Implementing such monitoring, reporting, and improved sustainability could be costly.
The enhanced stakeholder and regulatory focus on ESG matters requires us to continuously monitor various developing standards and reporting requirements and make continuous progre ss in our e ffort s to reduce our , as w e ll as our suppliers ’ , energ y consumption , gr e enhous e gas emi ss ion s, water usage , and wa s te generation.
For example, we have a natural colors business in Peru, which has experienced political instability in recent years, including the removal of its president in late 2022. While the political instability of Peru has not yet materially adversely impacted our business in Peru, it could do so in the future, and our results of operations could be adversely affected.
For example, we have a flavors manufacturing facility in Celaya, Mexico; this city continues to experience increased levels of political and criminal violence by narcotics trafficking cartels. While the instability in Mexico has not yet materially adversely impacted our business there, it could do so in the future, and our results of operations could be adversely affected.
Structural and Organizational Risks • We depend on certain key personnel, and the loss of these persons may harm our business, including the loss of trade secrets. Our success depends in large part on the continued service and availability of our key management and technical personnel, and on our ability to attract and retain qualified new personnel.
Our success depends in large part on the continued service and availability of our key management and technical personnel, and on our ability to attract and retain qualified new personnel. The competition for these individuals can be significant and if we are unable to successfully integrate, motivate, and reward our employees, we may not be able to retain them.
When our customers do not successfully compete, as happens from time to time, it can impact our sales and the prices at which we sell our products, which can negatively affect our results. • The ongoing military conflict between Russia and Ukraine, and the global response to it, may adversely affect our operations. In February 2022, Russia invaded Ukraine.
When our customers do not successfully compete, as happens from time to time, it can impact our sales and the prices at which we sell our products, which can negatively affect our results. • In some product lines, most of our sales are made to a relatively small number of customers; if we lose any of those customers, sales and operating results could decline.
As a result of any of the foregoing, our results or financial condition could be adversely impacted and the impacts could be material. 10 Index • Intense competition among our customers and their competitors may result in reduced sales and profitability for our customers and us. Generally, we do not sell products directly to consumers.
Such disruption would have an adverse effect on our financial performance and future growth. • Intense competition among our customers and their competitors may result in reduced sales and profitability for our customers and us. Generally, we do not sell products directly to consumers. The customers to whom we sell our products incorporate our products into their own products.
As we emerge from the worst impacts of the pandemic, we may not be as effective as we intend in reducing our inventory to more normal levels. 12 Index • Raw material, energy, labor, and transportation cost volatility, including inflation in prices due to ongoing supply chain challenges and other macroeconomic forces, may reduce our profitability.
This has had an adverse impact on our ability to reduce our inventory at an optimal rate and may continue to have such an impact in the future. • Raw material, energy, labor, and transportation cost volatility, including inflation in prices due to ongoing supply chain challenges and other macroeconomic forces, may reduce our profitability.
Although we vigorously defend against claims when they are made, there can be no assurance that any claims or recalls will not be material. While we maintain liability insurance against these risks, coverage may be unavailable or incomplete.
If our customers withdraw or recall products related to ingredients that we provide to them, as has occurred in the past, they may make claims against us. 15 Index Although we vigorously defend against claims when they are made, there can be no assurance that any claims or recalls will not be material.
However, governmental authorities could challenge these policies more aggressively in the future and, if challenged, we may not prevail. We could suffer significant costs related to one or more challenges to our transfer pricing policies.
We could suffer significant costs related to one or more challenges to our transfer pricing policies. Structural and Organizational Risks • We depend on certain key personnel, and the loss of these persons may harm our business, including the loss of trade secrets.
Chinese government pandemic control policies also caused our facilities to be shutdown for certain periods during 2022. • The impact of tariffs and other trade barriers may negatively affect our results. The Company has manufacturing facilities located around the world. The Company sells to customers located both inside and outside the countries in which products are manufactured.
Any of these events could increase the cost of our products, create disruptions to our supply chain, and impair our ability to effectively operate and compete in the countries where we do business. • The impact of tariffs and other trade barriers may negatively affect our results. The Company has manufacturing facilities located around the world.
In addition, we have experienced increased costs for transportation, energy, and raw materials due in part to the negative impact of the Russia-Ukraine military conflict on the global economy. These increased costs, or any potential shortage of energy or raw materials, could adversely affect our profitability.
If these difficulties persist, accelerate, or expand, our operations could be adversely affected. These increased costs, or any potential shortage of energy or raw materials, could adversely affect our profitability.
If we are unable to respond, or we are perceived to be responding inadequately, to the expectations of our stakeholders, our business and reputation could be harmed, our profit and revenue could decline, and it could have a negative impact on the trading price of our common stock.
I f we are unable to re s pond , or w e ar e perceived to be re s ponding inad e quatel y , to th e expectations o f our stakeholder s, our busin es s and r e putation could b e harmed , our profit and rev e nue could decline , and it could ha v e a n e gati v e impact on the trading pric e of our common s tock.
Removed
Such disruption would have an adverse effect on our financial performance and future growth. • The coronavirus/COVID-19 has significantly impacted worldwide economic conditions and could adversely affect our results and financial condition.
Added
These types of activities have required, and may continue to require, the devotion of significant resources and management attention and may pose business risks. In addition, these actions may result in a deterioration of employee relations at the impacted locations in our business.
Removed
The coronavirus, also known as COVID-19, has caused, and may continue to cause, a material adverse effect on the level of economic activity around the world, including through factory shutdowns, disruptions in supply and logistics, travel and transportation restrictions, widespread illness and quarantines, and uncertainty and volatility in the financial markets. These disruptions present numerous risks to our operations.
Added
We increased the amount of onion and garlic planted in 2023, but there is no certainty that we will achieve greater yields or, if we do increase our yields, that there will be a market for such products.
Removed
We may be unable to produce goods due to constraints in production caused by our factories being ordered to close; our inability to obtain raw materials due to shortages, transportation disruptions, or supplier shutdowns; or due to illnesses and quarantines affecting our workforce.
Added
As we continue to emerge from the pandemic, we may not be as effective as we intend in reducing our inventory to more normal levels. As we saw starting at the end of 2022 and continuing through 2023, many of our customers are also reducing their inventory to more normal levels.
Removed
Any of these events could adversely affect our ability to produce and sell our products, resulting in reduced revenue. While all of our manufacturing facilities currently remain open, it remains possible that a government could order partial or total shutdown of one or more of our facilities as a result of a zero-COVID government policy or otherwise.
Added
In addition, if any of our suppliers become financially insolvent and fail to perform their obligations under arrangements with us, we may be forced to replace the underlying commitment at current or above market prices or on other terms that are less favorable to us with little recourse against such supplier.
Removed
Earlier during the COVID-19 pandemic in 2020 through 2022, our facilities in China and India were shut down at times by the local governments as a result of COVID-19 restrictions. Any such future shutdowns could adversely affect our results.
Added
In such events, we may incur losses, or our results of operations, financial condition, or liquidity could otherwise be adversely affected. 13 Index • The impact of currency exchange rate fluctuation may negatively affect our results.
Removed
Even if our facilities are allowed to remain open, an outbreak of illness among employees at any of our facilities could result in a temporary or prolonged manufacturing disruption or facility closure.
Added
These kinds of restrictions could be adopted with little to no advanced notice, and we may not be able to effectively mitigate the adverse impacts from such measures.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeFlavors & Extracts Group: U.S. – Livingston and Turlock, California; Amboy, Illinois; Harbor Beach, Michigan; Juneau, Wisconsin; and Deming, New Mexico. 17 Index International – Heverlee, Belgium; San Jose, Costa Rica*; Geesthacht, Germany; Celaya and Tlalnepantla*, Mexico; and Wales and Milton Keynes, United Kingdom. Asia Pacific Group: U.S. – None.
Biggest changeInternational – Heverlee, Belgium; San Jose, Costa Rica*; Geesthacht, Germany; Celaya and Tlalnepantla*, Mexico; and Wales and Milton Keynes, United Kingdom. Asia Pacific Group: U.S. – None. International – Keysborough, Australia; Guangzhou, China*; Mumbai, India*; Hitachi, Japan; Auckland, New Zealand; Manila, Philippines*; and Bangkok, Thailand*. * Indicates a leased property at the location.
We own a part, and lease a part, of our Flavors & Extracts Group headquarters offices located in Hoffman Estates, Illinois. As of December 31, 2022, the locations of our production properties by reportable segment are as follows: Color Group: U.S. – St. Louis, Missouri.
We own a part, and lease a part, of our Flavors & Extracts Group headquarters offices located in Hoffman Estates, Illinois. As of December 31, 2023, the locations of our production properties by reportable segment are as follows: Color Group: U.S. – St. Louis, Missouri.
International – Jundiai, Brazil*; Delta, British Columbia, Canada*; Kingston, Ontario, Canada; Saint Ouen L’Aumone, France; Geesthacht, Germany; Reggio Emilia, Italy; Lerma, Mexico; Lima, Peru*; Johannesburg, South Africa; Gebze, Turkey; and Kings Lynn, United Kingdom.
International – Jundiai, Brazil*; Delta, British Columbia, Canada*; Kingston, Ontario, Canada; Saint Ouen L’Aumone, France; Geesthacht, Germany; Reggio Emilia, Italy; Lerma, Mexico; Lima, Peru*; Johannesburg, South Africa; Gebze, Turkey; and Kings Lynn, United Kingdom. Flavors & Extracts Group: U.S. – Livingston and Turlock, California; Amboy, Illinois; Harbor Beach, Michigan; Juneau, Wisconsin; and Deming, New Mexico.
International – Keysborough, Australia; Guangzhou, China*; Mumbai, India*; Hitachi, Japan; Auckland, New Zealand; Manila, Philippines*; and Bangkok, Thailand*. * Indicates a leased property at the location. All properties are owned except as otherwise indicated above. All facilities are considered to be in good condition (ordinary wear and tear excepted) and suitable and adequate for the Company’s requirements.
All properties are owned except as otherwise indicated above. All facilities are considered to be in good condition (ordinary wear and tear excepted) and suitable and adequate for the Company’s requirements.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changePaul Manning (Chairman, President, and Chief Executive Officer) and Mr. John J. Manning (Senior Vice President, General Counsel, and Secretary) are brothers. 18 Index PART II
Biggest changeMorris has held his present office since January 1, 2024, and previously served as General Manager, Sweet and Beverage Flavors North America (August 2017 – December 2023). Mr. Paul Manning (Chairman, President, and Chief Executive Officer) and Mr. John J. Manning (Senior Vice President, General Counsel, and Secretary) are brothers. 21 Index PART II
Item 4. Mine Safety Disclosure. Not applicable. Information About Our Executive Officers The executive officers of the Company and their ages as of February 17, 2023 are as follows: Name Age Position Paul Manning 48 Chairman, President, and Chief Executive Officer Amy M. Agallar 45 Vice President and Treasurer Michael C.
Item 4. Mine Safety Disclosure. Not applicable. 20 Index Information About Our Executive Officers The executive officers of the Company and their ages as of February 22, 2024 are as follows: Name Age Position Paul Manning 49 Chairman, President, and Chief Executive Officer Amy M. Agallar 46 Vice President and Treasurer Michael C.
Rolfs 58 Senior Vice President and Chief Financial Officer Tobin Tornehl 49 Vice President, Controller and Chief Accounting Officer The Company has employed all of the individuals named above, in substantively their current positions, for at least the past five years except as follows: • Ms. Agallar has held her present office since January 9, 2019.
Rolfs 59 Senior Vice President and Chief Financial Officer Tobin Tornehl 50 Vice President, Controller and Chief Accounting Officer The Company has employed all of the individuals named above, in substantively their current positions, for at least the past five years except as follows: • Mr.
Geraghty 61 President, Color Group Thierry Hoang 42 Vice President, Asia Pacific Group Amy Schmidt Jones 53 Vice President, Human Resources and Senior Counsel John J. Manning 54 Senior Vice President, General Counsel, and Secretary E. Craig Mitchell 58 President, Flavors & Extracts Group Stephen J.
Geraghty 62 President, Color Group Thierry Hoang 43 Vice President, Asia Pacific Group Amy Schmidt Jones 54 Vice President, Human Resources and Senior Counsel John J. Manning 55 Senior Vice President, General Counsel, and Secretary Steve Morris 60 President, Flavors & Extracts Group Stephen J.
Removed
Prior to joining the Company, Ms. Agallar was Director – Business Development CIS of Modine Manufacturing (June 2018 – January 2019), and Director – Global Treasury Operations of Modine Manufacturing (2011– June 2018). • Mr.
Removed
Hoang has held his present office since June 1, 2018, and previously served as a General Manager, Business Unit Manager, and Sales Account Manager for Sensient Cosmetics in France and Asia Pacific (2009 – May 2018). • Ms. Jones has held her present office since April 2, 2018. Prior to joining the Company, Ms.
Removed
Jones was a partner of Michael Best & Friedrich LLP (1998 – March 2018). • Mr. Mitchell has held his present office since September 17, 2018. Prior to joining the Company, Mr.
Removed
Mitchell served as President and Chief Operating Officer of Sekisui Specialty Chemical America, LLC (April 2016 – September 2018), and Vice President of Sales, Americas of Celanese Corporation (2013 – April 2016). • Mr. Tornehl has held his present office since November 10, 2018, and previously served as Director, Finance (2008 – November 2018). Mr.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDecember 31, 2017 December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 Sensient Technologies Corporation $ 100 $ 78 $ 94 $ 108 $ 150 $ 111 S&P Midcap Specialty Chemicals Index 100 95 113 121 144 128 S&P Midcap Food Products Index 100 93 109 120 140 137 S&P 500 Index 100 96 126 149 191 157 Standard & Poor’s and S&P are registered trademarks of Standard & Poor’s Financial Services, LLC.
Biggest changeDecember 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 Sensient Technologies Corporation $ 100 $ 121 $ 139 $ 192 $ 143 $ 132 S&P Midcap Specialty Chemicals Index 100 118 127 151 135 151 S&P Midcap Food Products Index 100 117 128 150 147 134 S&P 500 Index 100 131 156 200 164 207 Standard & Poor’s and S&P are registered trademarks of Standard & Poor’s Financial Services, LLC.
On October 19, 2017, the Board of Directors authorized the repurchase of up to three million shares (2017 Authorization). As of December 31, 2022, 1,267,019 shares had been repurchased under the 2017 Authorization. There were no repurchases of shares by the Company during 2022. There is no expiration date for the 2017 Authorization.
On October 19, 2017, the Board of Directors authorized the repurchase of up to three million shares (2017 Authorization). As of December 31, 2023, 1,267,019 shares had been repurchased under the 2017 Authorization. There were no repurchases of shares by the Company during 2023. There is no expiration date for the 2017 Authorization.
The 2017 Authorization may be modified, suspended, or discontinued by the Board of Directors at any time. As of December 31, 2022, the maximum number of shares that may be purchased under publicly announced plans is 1,732,981.
The 2017 Authorization may be modified, suspended, or discontinued by the Board of Directors at any time. As of December 31, 2023, the maximum number of shares that may be purchased under publicly announced plans is 1,732,981.
The graph assumes a $100 investment made on December 31, 2017, and reinvestment of dividends. The stock performance shown on the graph is not necessarily indicative of future price performance.
The graph assumes a $100 investment made on December 31, 2018, and reinvestment of dividends. The stock performance shown on the graph is not necessarily indicative of future price performance.
Since 1962, the Company has paid, without interruption, a quarterly cash dividend. During fiscal 2022, the Company paid aggregate cash dividends of $1.64 per share to our shareholders, and the Company most recently declared a dividend of $0.41 per share payable on March 1, 2023 to shareholders of record on February 7, 2023.
Since 1962, the Company has paid, without interruption, a quarterly cash dividend. During fiscal 2023, the Company paid aggregate cash dividends of $1.64 per share to our shareholders, and the Company most recently declared a dividend of $0.41 per share payable on March 1, 2024 to shareholders of record on February 6, 2024.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities. The Company’s common stock is listed on the New York Stock Exchange under the ticker symbol “SXT.” The number of shareholders of record of the Company’s common stock on February 9, 2023 was 1,990.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities. The Company’s common stock is listed on the New York Stock Exchange under the ticker symbol “SXT.” The number of shareholders of record of the Company’s common stock on February 8, 2024 was 1,932.
Added
The stock performance graph and related information presented below is not deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission or subject to Regulation 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the Exchange Act, and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent the Company specifically incorporates it by reference into such a filing.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeTwelve Months Ended December 31, (In thousands except per share amounts) 2022 2021 % Change Revenue (GAAP) $ 1,437,039 $ 1,380,264 4.1 % Revenue of the divested product lines - (30,062 ) Adjusted revenue $ 1,437,039 1,350,202 6.4 % Operating Income (GAAP) $ 196,751 $ 170,028 15.7 % Divestiture & other related costs – Cost of products sold - 86 Divestiture & other related (income) costs – Selling and administrative expenses (2,532 ) 14,052 Operating income of the divested product lines - (1,880 ) Operational improvement plan income – Selling and administrative expenses - (1,895 ) Adjusted operating income $ 194,219 $ 180,391 7.7 % Net Earnings (GAAP) $ 140,887 $ 118,745 18.6 % Divestiture & other related (income) costs, before tax (2,532 ) 14,138 Tax impact of divestiture & other related costs and income (1) 636 2,092 Net earnings of the divested product lines, before tax - (1,880 ) Tax impact of the divested product lines (1) - 460 Operational improvement plan income, before tax - (1,895 ) Tax impact of operational improvement plan (1) - 471 Adjusted net earnings $ 138,991 $ 132,131 5.2 % Diluted Earnings Per Share (GAAP) $ 3.34 $ 2.81 18.9 % Divestiture & other related (income) costs, net of tax (0.04 ) 0.38 Results of operations of the divested product lines, net of tax - (0.03 ) Operational improvement plan, net of tax - (0.03 ) Adjusted diluted earnings per share $ 3.29 $ 3.13 5.1 % (1) Tax impact adjustments were determined based on the nature of the underlying non-GAAP adjustments and their relevant jurisdictional tax rates.
Biggest changeThese non-GAAP measures may not be comparable to similarly titled measures used by other companies. 24 Index Twelve Months Ended December 31, (In thousands except per share amounts) 2023 2022 % Change Operating Income (GAAP) $ 155,023 $ 196,751 (21.2 )% Portfolio optimization plan costs – Cost of products sold 3,135 - Divestiture & other related income – Selling and administrative expenses - (2,532 ) Portfolio optimization plan costs – Selling and administrative expenses 24,706 - Adjusted operating income $ 182,864 $ 194,219 (5.8 )% Net Earnings (GAAP) $ 93,394 $ 140,887 (33.7 )% Divestiture & other related income, before tax - (2,532 ) Tax impact of divestiture & other related income (1) - 636 Portfolio optimization plan costs, before tax 27,841 Tax impact of portfolio optimization plan costs (1) (415 ) Adjusted net earnings $ 120,820 $ 138,991 (13.1 )% Diluted Earnings Per Share (GAAP) $ 2.21 $ 3.34 (33.8 )% Divestiture & other related income, net of tax - (0.04 ) Portfolio optimization plan costs, net of tax 0.65 - Adjusted diluted earnings per share $ 2.86 $ 3.29 (13.1 )% (1) Tax impact adjustments were determined based on the nature of the underlying non-GAAP adjustments and their relevant jurisdictional tax rates.
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 in 2022. The Company has experienced increased costs for certain inputs, such as raw materials, shipping and logistics, and labor-related costs.
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 in 2023. The Company has experienced increased costs for certain inputs, such as raw materials, shipping and logistics, and labor-related costs.
Goodwill Valuation The Company reviews the carrying value of goodwill annually utilizing several valuation methodologies, including a discounted cash flow model. The Company completed its annual goodwill impairment test under Accounting Standards Codification (ASC) 350, Intangibles – Goodwill and Other , in the third quarter of 2022.
Goodwill Valuation The Company reviews the carrying value of goodwill annually utilizing several valuation methodologies, including a discounted cash flow model. The Company completed its annual goodwill impairment test under Accounting Standards Codification (ASC) 350, Intangibles – Goodwill and Other , in the third quarter of 2023.
Management believes the Company’s most critical accounting estimates and assumptions are in the following areas: Revenue Recognition The Company recognizes revenue at the transfer of control of its products to the Company’s customers in an amount reflecting the consideration to which the Company expects to be entitled.
Management believes the Company’s most critical accounting estimates and assumptions are in the following areas: 27 Index Revenue Recognition The Company recognizes revenue at the transfer of control of its products to the Company’s customers in an amount reflecting the consideration to which the Company expects to be entitled.
For a discussion of the year ended December 31, 2021, compared to the year ended December 31, 2020, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission on February 18, 2022, which is incorporated herein by reference.
For a discussion of the year ended December 31, 2022, compared to the year ended December 31, 2021, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission on February 17, 2023, which is incorporated herein by reference.
This section generally discusses the results of our operations for the year ended December 31, 2022, compared to the year ended December 31, 2021.
This section generally discusses the results of our operations for the year ended December 31, 2023, compared to the year ended December 31, 2022.
Segment performance is evaluated on operating income before any applicable divestiture & other related costs and income, share-based compensation, acquisition, restructuring including the operational improvement plan, and other costs (which are reported in Corporate & Other), interest expense, and income taxes.
Segment performance is evaluated on operating income before any applicable divestiture & other related income, share-based compensation, acquisition, restructuring and other costs, including the portfolio optimization plan costs, and other costs (which are reported in Corporate & Other), interest expense, and income taxes.
The Company believes that it has the ability to refinance or repay these obligations through a combination of cash flow from operations, issuance of additional notes, and substantial borrowing capacity of approximately $207 million under the Company’s revolving credit facility, which matures in 2026.
The Company believes that it has the ability to refinance or repay all of its obligations through a combination of cash flow from operations, issuance of additional notes, and substantial borrowing capacity of approximately $318 million under the Company’s revolving credit facility, which matures in 2026.
The higher operating income in Natural Ingredients was primarily due to higher selling prices and a favorable product mix, partially offset by higher raw material costs and manufacturing and other costs and unfavorable volumes.
The lower operating income in Natural Ingredients was primarily due to higher raw material costs, lower volumes, and an unfavorable product mix, partially offset by higher selling prices and lower manufacturing and other costs.
The Company’s contractual obligations consist primarily of operational commitments, which we expect to continue to be able to satisfy through cash generated from operations, and debt. The Company has various series of notes outstanding that mature from 2023 through 2027, with approximately $146 million coming due in 2023.
The Company’s contractual obligations consist primarily of operational commitments, which we expect to continue to be able to satisfy through cash generated from operations, and debt. The Company has various series of notes outstanding that mature from 2024 through 2029, with approximately $82 million coming due in 2024.
Note: Earnings per share calculations may not foot due to rounding differences . 22 Index The following table summarizes the percentage change in the 2022 results compared to the 2021 results in the respective financial measures.
Note: Earnings per share calculations may not foot due to rounding differences . The following table summarizes the percentage change in the 2023 results compared to the 2022 results in the respective financial measures.
The effective tax rates in both 2022 and 2021 were impacted by changes in estimates associated with the finalization of prior year foreign and domestic tax items, audit settlements, mix of foreign earnings, the divestiture & other related costs and income, and the release of valuation allowances related to the foreign tax credit carryover and foreign net operating losses.
The effective tax rates in both 2023 and 2022 were impacted by the release of valuation allowances related to the foreign tax credit carryover and net operating losses, changes in estimates associated with the finalization of prior year foreign and domestic tax items, audit settlements, and mix of foreign earnings.
In 2022, the Company paid $21.7 million for the acquisition of Endemix Doğal Maddeler A.Ş. and Teknoloji Yatırımları ve Danışmanlık Sanayi ve Ticaret A.Ş. and $1.0 million related to the holdback associated with the acquisition of Flavor Solutions, Inc. In 2021, the Company paid $13.9 million for the acquisition of Flavor Solutions, Inc.
The Company paid $1.7 million and $21.7 million in 2023 and 2022, respectively, for the acquisition of Endemix Doğal Maddeler A.Ş. and Teknoloji Yatırımları ve Danışmanlık Sanayi ve Ticaret A.Ş. and $1.0 million in 2022 related to a purchase price holdback associated with the acquisition of Flavor Solutions, Inc.
The higher segment revenue was primarily a result of higher revenue in Food & Pharmaceutical Colors and Personal Care. The higher revenue in Food & Pharmaceutical Colors was primarily due to higher selling prices, favorable volumes, and the acquisition of Endemix Doğal Maddeler A.Ş. , partially offset by the unfavorable impact of foreign exchange rates.
The higher revenue in Food & Pharmaceutical Colors was primarily due to higher selling prices, the acquisition of Endemix Doğal Maddeler A.Ş. , and the favorable impact of foreign exchange rates, partially offset by lower volumes.
Cash Flows from Investing Activities Net cash used in investing activities was $98.4 million and $35.6 million in 2022 and 2021, respectively. Capital expenditures were $79.3 million in 2022 and $60.8 million in 2021. In 2022, the Company received $2.5 million of proceeds from the divestiture of the yogurt fruit preparations product line.
Cash Flows from Investing Activities Net cash used in investing activities was $87.6 million and $98.4 million in 2023 and 2022, respectively. Capital expenditures were $87.9 million in 2023 and $79.3 million in 2022. In 2022, the Company received $2.5 million of proceeds from the divestiture of the yogurt fruit preparations product line.
Management has recorded valuation allowances to reduce the Company’s deferred tax assets to the amount that is more likely than not to be realized. As of December 31, 2022, the Company recorded gross deferred tax assets of $99.6 million with an associated valuation allowance of $28.1 million.
Management has recorded valuation allowances to reduce the Company’s deferred tax assets to the amount that is more likely than not to be realized. As of December 31, 2023, the Company recorded gross deferred tax assets of $117.4 million with an associated valuation allowance of $34.1 million.
Management internally reviews each of these non-GAAP measures to evaluate performance on a comparative period-to-period basis and to gain additional insight into underlying operating and performance trends, and the Company believes the information can be beneficial to investors for the same purposes. These non-GAAP measures may not be comparable to similarly titled measures used by other companies.
Management internally reviews each of these non-GAAP measures to evaluate performance on a comparative period-to-period basis and to gain additional insight into underlying operating and performance trends, and the Company believes the information can be beneficial to investors for the same purposes.
The higher segment operating income was primarily a result of higher operating income in Food & Pharmaceutical Colors and Personal Care due to higher selling prices and favorable volumes, partially offset by higher raw material costs and manufacturing and other costs, unfavorable product mix, and the unfavorable impact of foreign exchange rates.
The higher operating income in Food & Pharmaceutical Colors was primarily due to higher selling prices and the favorable impact of foreign exchange rates, which increased segment operating income by approximately 2%, partially offset by higher raw material and manufacturing and other costs, lower volumes, and an unfavorable product mix.
In conducting its annual test for impairment, the Company performed a quantitative assessment of the fair values for each of its reporting units and compared each of these values to the net book value of each reporting unit. Fair value is estimated using both a discounted cash flow analysis and an analysis of comparable company market values.
In conducting its annual test for impairment, the Company performed a qualitative assessment of its previously calculated fair values for each of its reporting units. Fair value is estimated using both a discounted cash flow analysis and an analysis of comparable company market values. If the fair value of a reporting unit exceeds its net book value, no impairment exists.
Segment revenue was higher than the prior year primarily due to higher selling prices and favorable volumes, partially offset by the unfavorable impact of foreign exchange rates. Segment operating income for the Asia Pacific segment was $29.5 million in 2022 and $26.3 million in 2021, an increase of approximately 12%. Foreign exchange rates decreased segment operating income by approximately 10%.
Segment revenue was higher than the prior year primarily due to higher selling prices, partially offset by lower volumes and the unfavorable impact of foreign exchange rates, which decreased segment revenue by approximately 2%. Segment operating income for the Asia Pacific segment was $30.8 million in 2023 and $29.5 million in 2022, an increase of approximately 4%.
Divestiture & other related costs and income are discussed under “Divestitures” above and Note 14, Divestitures, in the Notes to the Consolidated Financial Statements included in this report. Operational improvement plan costs and income are discussed under “Operational Improvement Plan” above and Note 15, Operational Improvement Plan, in the Notes to the Consolidated Financial Statements included in this report.
Divestiture & other related income is discussed under “Divestitures” above and Note 14, Divestitures, in the Notes to the Consolidated Financial Statements included in this report. Portfolio optimization plan costs are discussed under “Portfolio Optimization Plan” above and Note 16, Portfolio Optimization Plan, in the Notes to the Consolidated Financial Statements included in this report.
The increase in expense was primarily due to an increase in the average debt outstanding and the average interest rate. 20 Index Income Taxes The effective income tax rate was 22.7% in 2022 and 24.6% in 2021.
The increase in expense was primarily due to an increase in the average interest rate and average debt outstanding. 23 Index Income Taxes The effective income tax rate was 28.1% in 2023 and 22.7% in 2022.
The higher revenue in Personal Care was primarily due to higher selling prices and favorable volumes, partially offset by the unfavorable impact of foreign exchange rates. Segment operating income for the Color segment was $114.6 million in 2022 and $103.6 million in 2021, an increase of approximately 11%.
The lower revenue in Personal Care was primarily due to lower volumes, partially offset by higher selling prices and the favorable impact of foreign exchange rates. Segment operating income for the Color segment was $105.4 million in 2023 and $114.6 million in 2022, a decrease of approximately 8%.
Selling and administrative expense as a percent of revenue decreased by approximately 20 basis points and increased by approximately 90 basis points in 2022 and 2021, respectively, as a result of these income and expenses. See Divestitures below for further information. Operating Income Operating income was $196.8 million in 2022 and $170.0 million in 2021.
Selling and administrative expense as a percent of revenue increased by approximately 170 basis points and decreased by approximately 20 basis points in 2023 and 2022, respectively, as a result of these expenses and income. See Divestitures and Portfolio Optimization Plan below for further information.
Changes in estimates of future cash flows caused by items such as unforeseen events or changes in market conditions could negatively affect the reporting units’ fair value and result in an impairment charge.
Changes in estimates of future cash flows caused by items such as unforeseen events or changes in market conditions could negatively affect the reporting units’ fair value and result in an impairment charge. Income Taxes The Company estimates its income tax expense in each of the taxing jurisdictions in which it operates.
The Company’s diluted earnings per share were $3.34 in 2022 and $2.81 in 2021. 2022 results were positively impacted by $2.5 million ($1.9 million after tax, $0.04 per share) of divestiture & other related income. 2021 results were negatively impacted by $12.2 million ($14.8 million after tax, $0.35 per share) of divestiture & other related costs and operational improvement plan costs and income.
The Company’s diluted earnings per share were $2.21 in 2023 and $3.34 in 2022. 2023 results were negatively impacted by $27.8 million ($27.4 million after tax, $0.65 per share) of portfolio optimization plan costs. 2022 results were positively impacted by $2.5 million ($1.9 million after tax, $0.04 per share) of divestiture & other related income.
Adjusted diluted earnings per share, which exclude the divestiture & other related costs and income, the results of operations of the divested product lines, and the operational improvement plan costs and income, were $3.29 in 2022 and $3.13 in 2021 (see discussion below regarding non-GAAP financial measures). Additional information on the results is included below.
Adjusted diluted earnings per share, which exclude the divestiture & other related income and the portfolio optimization plan costs, were $2.86 in 2023 and $3.29 in 2022 (see discussion below regarding non-GAAP financial measures). Additional information on the results is included below.
If the fair value of a reporting unit exceeds its net book value, no impairment exists. The Company’s three reporting units each had goodwill recorded and were tested for impairment. All three reporting units had fair values that were above their respective net book values by at least 90%.
The Company’s three reporting units each had goodwill recorded and were tested for impairment. All three reporting units had fair values that were above their respective net book values by at least 75%.
Cash Flows from Financing Activities Net cash provided by financing activities was $86.2 million in 2022, and net cash used in financing activities was $107.8 million in 2021. The Company had a net increase in debt of $157.2 million and $2.0 million in 2022 and 2021, respectively.
Cash Flows from Financing Activities Net cash used in financing activities was $82.0 million in 2023, and net cash provided by financing activities was $86.2 million in 2022. The Company had a net decrease in debt of $3.5 million in 2023 compared to a net increase in debt of $157.2 million in 2022.
See the Divestitures and Operational Improvement Plan sections above for further information. LIQUIDITY AND FINANCIAL POSITION Financial Condition The Company’s financial position remains strong. The Company is in compliance with its loan covenants calculated in accordance with applicable agreements as of December 31, 2022.
LIQUIDITY AND FINANCIAL POSITION Financial Condition The Company’s financial position remains strong. The Company is in compliance with its loan covenants calculated in accordance with applicable agreements as of December 31, 2023.
See Note 15, Operational Improvement Plan , in the Notes to Consolidated Financial Statements included in this report for additional information. 21 Index NON-GAAP FINANCIAL MEASURES Within the following tables, the Company reports certain non-GAAP financial measures, including: (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 income, 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 income, and the operational improvement plan costs and income.
NON-GAAP FINANCIAL MEASURES Within the following tables, the Company reports certain non-GAAP financial measures, including: (1) adjusted operating income, adjusted net earnings, and adjusted diluted earnings per share, which exclude the divestiture & other related income and restructuring and other costs, including the portfolio optimization 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 divestiture & other related income, and restructuring and other costs, including the portfolio optimization plan costs.
RESULTS OF OPERATIONS 2022 vs. 2021 Revenue Sensient’s revenue was approximately $1.4 billion in both 2022 and 2021. Gross Profit The Company’s gross margin was 34.0% in 2022 and 32.9% in 2021.
RESULTS OF OPERATIONS 2023 vs. 2022 Revenue Sensient’s revenue was approximately $1.46 billion and $1.44 billion in 2023 and 2022, respectively. Gross Profit The Company’s gross margin was 31.6% in 2023 and 34.0% in 2022.
The lower operating loss was primarily a result of 2022 favorably impacted by divestiture & other related income totaling $2.5 million and 2021 negatively impacted by divestiture and other related costs and operational improvement plan costs and income totaling $12.2 million, partially offset by higher performance-based compensation in 2022.
The higher operating loss was primarily a result of portfolio optimization plan costs totaling $27.8 million negatively impacting 2023 and divestiture & other related income totaling $2.5 million favorably impacting 2022, partially offset by lower performance-based compensation in 2023. See the Divestitures and Portfolio Optimization Plan sections above for further information.
On October 3, 2022, the Company acquired Endemix Doğal Maddeler A.Ş. and Teknoloji Yatırımları ve Danışmanlık Sanayi ve Ticaret A.Ş. (collectively, Endemix), a natural colors business located in Turkey.
Acquisitions On October 3, 2022, the Company acquired Endemix Doğal Maddeler A.Ş. and Teknoloji Yatırımları ve Danışmanlık Sanayi ve Ticaret A.Ş. (collectively, Endemix), a natural colors business located in Turkey. The Company paid $23.3 million in cash for this acquisition, which is net of $1.3 million in debt assumed. This business is part of the Color segment.
Segment operating income as a percent of revenue was 19.0% in both 2022 and 2021. Asia Pacific Segment revenue for the Asia Pacific segment was $143.6 million and $135.3 million for 2022 and 2021, respectively, an increase of approximately 6%. Foreign exchange rates decreased segment revenue by approximately 8%.
Segment operating income as a percent of revenue was 17.3% and 19.0% for 2023 and 2022, respectively. Asia Pacific Segment revenue for the Asia Pacific segment was $146.1 million and $143.6 million for 2023 and 2022, respectively, an increase of approximately 2%.
The lower segment revenue was primarily due to these reasons as well as 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 unfavorable volumes, partially offset by higher selling prices.
Flavors & Extracts Flavors & Extracts segment revenue was $741.1 million in 2023 and $738.0 million in 2022. The higher segment revenue was due to higher revenue in Natural Ingredients, partially offset by lower revenue in Flavors, Extracts & Flavor Ingredients. The higher revenue in Natural Ingredients was primarily due to higher selling prices, partially offset by lower volumes.
See Note 14, Divestitures , in the Notes to Consolidated Financial Statements included in this report for additional information. Operational Improvement Plan During the third quarter of 2020, the Company approved an operational improvement plan (Operational Improvement Plan) to consolidate manufacturing facilities and improve efficiencies within the Company.
See Note 14, Divestitures , in the Notes to Consolidated Financial Statements included in this report for additional information. 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.
See Note 2, Acquisitions , in the Notes to Consolidated Financial Statements included in this report for additional information. Divestitures 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 the sale.
See Note 2, Acquisitions , in the Notes to Consolidated Financial Statements included in this report for additional information. Divestitures In 2022, the Company received $2.5 million of net cash related to the previously completed sale of its yogurt fruit preparations product line.
See Note 11, Income Taxes , in the Notes to Consolidated Financial Statements included in this report for additional information. 2022 2021 Rate before divestiture and discrete items 25.8 % 24.3 % Divestiture & other related costs and income impact - 4.2 % Discrete items (3.1 %) (3.9 %) Reported effective tax rate 22.7 % 24.6 % The 2023 effective income tax rate is estimated to be between 24% and 26%, before any discrete items, such as finalization of prior year foreign and domestic tax items, audit settlements, and valuation allowance adjustments.
See Note 11, Income Taxes , in the Notes to Consolidated Financial Statements included in this report for additional information. 2023 2022 Rate before portfolio optimization plan and discrete items 25.5 % 25.8 % Portfolio optimization plan impact 4.7 % - Discrete items (2.1 %) (3.1 %) Reported effective tax rate 28.1 % 22.7 % The 2024 effective income tax rate is estimated to be between 24% and 25%.
SEGMENT INFORMATION The Company determines its operating segments based on information utilized by its chief operating decision maker to allocate resources and assess performance.
Note: Refer to table above for a reconciliation of these non-GAAP measures. 25 Index SEGMENT INFORMATION The Company determines its operating segments based on information utilized by its chief operating decision maker to allocate resources and assess performance.
The higher revenue in Flavors, Extracts & Flavor Ingredients was primarily due to higher selling prices, favorable volumes, and the acquisition of Flavor Solutions, Inc. on July 15, 2021, partially offset by the unfavorable impact of foreign exchange rates. Flavors & Extracts segment operating income was $105.4 million in 2022 and $98.7 million in 2021, an increase of approximately 7%.
The lower revenue in Flavors, Extracts & Flavor Ingredients was primarily due to lower volumes, partially offset by higher selling prices and the favorable impact of foreign exchange rates, which increased segment revenue by approximately 1%. Flavors & Extracts segment operating income was $87.8 million in 2023 and $105.4 million in 2022, a decrease of approximately 17%.
Twelve Months Ended December 31, 2022 Total Foreign Exchange Rates Adjustments (1) Adjusted Local Currency Revenue Flavors & Extracts (0.2 %) (2.2 %) (3.8 %) 5.8 % Color 10.8 % (3.8 %) (0.4 %) 15.0 % Asia Pacific 6.1 % (8.0 %) (0.3 %) 14.4 % Total Revenue 4.1 % (3.4 %) (2.2 %) 9.7 % Operating Income Flavors & Extracts 6.9 % (0.9 %) (2.5 %) 10.3 % Color 10.7 % (5.1 %) 0.7 % 15.1 % Asia Pacific 12.0 % (10.1 %) (0.4 %) 22.5 % Corporate & Other (9.8 %) 0.0 % (29.4 %) 19.6 % Total Operating Income 15.7 % (5.2 %) 8.4 % 12.5 % Diluted Earnings per Share 18.9 % (5.3 %) 14.3 % 9.9 % (1) For Revenue, adjustments consist of revenues of the divested product lines.
Twelve Months Ended December 31, 2023 Total Foreign Exchange Rates Adjustments (1) Adjusted Local Currency Revenue Flavors & Extracts 0.4 % 1.2 % N/A (0.8 %) Color 0.7 % 1.6 % N/A (0.9 %) Asia Pacific 1.7 % (1.8 %) N/A 3.5 % Total Revenue 1.4 % 1.1 % N/A 0.3 % Operating Income Flavors & Extracts (16.7 %) 0.6 % 0.0 % (17.3 %) Color (8.1 %) 1.5 % 0.0 % (9.6 %) Asia Pacific 4.4 % (1.9 %) 0.0 % 6.3 % Corporate & Other 30.6 % 0.0 % 56.3 % (25.7 %) Total Operating Income (21.2 %) 1.0 % (15.4 %) (6.8 %) Diluted Earnings per Share (33.8 %) 0.9 % (20.7 %) (14.0 %) (1) For Operating Income and Diluted Earnings per Share, adjustments consist of divestiture & other related income in 2022 and portfolio optimization plan costs in 2023.
The increase in segment operating income was a result of higher selling prices and favorable volumes, partially offset by higher raw material costs and manufacturing and other costs and the unfavorable impact of foreign exchange rates. Segment operating income as a percent of revenue was 20.5% in 2022 and 19.5% in 2021.
Foreign exchange rates decreased segment operating income by approximately 2%. The increase in segment operating income was a result of higher selling prices, partially offset by higher raw material costs and lower volumes.
The Company recorded non-cash charges of $0.1 million and $1.8 million in 2021 and 2020, respectively, in Cost of Products Sold primarily related to the yogurt fruit preparations divestiture. There were no non-cash charges recorded in 2022 related to the yogurt fruit preparations divestiture. The charges reduced the carrying value of certain inventories, as they were determined to be excess.
The Company recorded non-cash charges of $3.1 million in 2023 in Cost of Products Sold related to the portfolio optimization plan. The charges reduced the carrying value of certain inventories, as they were determined to be excess.
Total dividends paid were $68.9 million and $66.7 million in 2022 and 2021, respectively. CRITICAL ACCOUNTING POLICIES In preparing the financial statements in accordance with accounting principles generally accepted in the U.S., management is required to make estimates and assumptions that have an impact on the asset, liability, revenue, and expense amounts reported.
CRITICAL ACCOUNTING POLICIES In preparing the financial statements in accordance with accounting principles generally accepted in the U.S., management is required to make estimates and assumptions that have an impact on the asset, liability, revenue, and expense amounts reported. These estimates can also affect supplemental information disclosures of the Company, including information about contingencies, risk, and financial condition.
The higher operating income in Flavors, Extracts & Flavor Ingredients was primarily due to higher selling prices and favorable volumes, partially offset by higher raw material costs and manufacturing and other costs and the unfavorable impact of foreign exchange rates.
The lower operating income in Flavors, Extracts & Flavor Ingredients was primarily due to higher raw material and manufacturing and other costs and lower volumes, partially offset by higher selling prices. Segment operating income as a percent of revenue was 11.8% and 14.3% for 2023 and 2022, respectively.
These authorizations may be modified, suspended, or discontinued by the Board of Directors at any time. 24 Index Cash Flows from Operating Activities Net cash provided by operating activities was $12.1 million and $145.2 million in 2022 and 2021, respectively. Operating cash flow provided the primary source of funds for operating needs.
The Company’s share repurchase program has no expiration date. These authorizations may be modified, suspended, or discontinued by the Board of Directors at any time. There were no shares of Company stock repurchased in 2023 or 2022. Cash Flows from Operating Activities Net cash provided by operating activities was $169.7 million and $12.1 million in 2023 and 2022, respectively.
Selling and Administrative Expenses Selling and administrative expense as a percent of revenue was 20.3% in 2022 and 20.6% in 2021. Selling and administrative expenses in 2022 were reduced by divestiture & other related income totaling $2.5 million and in 2021 were increased by divestiture & other related expenses and operational improvement plan costs and income totaling $12.2 million.
Selling and administrative expenses in 2023 were increased by portfolio optimization plan costs totaling $24.7 million and in 2022 were reduced by divestiture & other related income totaling $2.5 million.
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, and other costs are included in the “Corporate & Other” category.
The Company’s three reportable segments are the Flavors & Extracts Group and the Color Group, which are both managed on a product line basis, and the Asia Pacific Group, which is managed on a geographic basis.
The higher segment operating income was primarily a result of higher operating income in Flavors, Extracts & Flavor Ingredients and Natural Ingredients, partially offset by lower operating income in Fragrances due to the divestiture of the product line in 2021.
Foreign exchange rates increased segment operating income by approximately 1%. The lower segment operating income was a result of lower operating income in Natural Ingredients and Flavors, Extracts & Flavor Ingredients.
Inherent in the nature of an estimate or assumption is the fact that actual results may differ from estimates and estimates may vary as new facts and circumstances arise. The Company makes routine estimates and judgments in determining the net realizable value of accounts receivable, inventories, and property, plant, and equipment.
The Company makes routine estimates and judgments in determining the net realizable value of accounts receivable, inventories, and property, plant, and equipment.
In October 2017, the Board of Directors authorized the repurchase of up to three million shares. As of December 31, 2022, 1,732,981 shares were available to be repurchased under the existing authorization. The Company’s share repurchase program has no expiration date.
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. In October 2017, the Board of Directors authorized the repurchase of up to three million shares. As of December 31, 2023, 1,732,981 shares were available to be repurchased under the existing authorization.
The Company repurchased shares of its common stock for $42.5 million during 2021. There were no repurchases of shares of the Company’s common stock in 2022. The Company has paid uninterrupted quarterly cash dividends since commencing public trading of its stock in 1962. Dividends paid per share were $1.64 in 2022 and $1.58 in 2021.
For the purposes of the cash flow statement, net changes in debt exclude the impact of foreign exchange rates. The Company has paid uninterrupted quarterly cash dividends since commencing public trading of its stock in 1962. Dividends paid per share were $1.64 in 2023 and 2022. Total dividends paid were $69.2 million and $68.9 million in 2023 and 2022, respectively.
These estimates can also affect supplemental information disclosures of the Company, including information about contingencies, risk, and financial condition. The Company believes, given current facts and circumstances, that its estimates and assumptions are reasonable, adhere to accounting principles generally accepted in the U.S., and are consistently applied.
The Company believes, given current facts and circumstances, that its estimates and assumptions are reasonable, adhere to accounting principles generally accepted in the U.S., and are consistently applied. Inherent in the nature of an estimate or assumption is the fact that actual results may differ from estimates and estimates may vary as new facts and circumstances arise.
The increase in gross margin was primarily due to higher selling prices and the divestiture of the inks, fragrances, and yogurt fruit preparations product lines, which decreased gross margin 40 basis points in 2021, partially offset by higher raw material costs in 2022.
The decrease in gross margin was primarily due to higher raw material costs, lower volumes, and portfolio optimization plan costs, which decreased gross margin 20 basis points in 2023, partially offset by higher selling prices in 2023. Selling and Administrative Expenses Selling and administrative expense as a percent of revenue was 21.0% in 2023 and 20.3% in 2022.
Additional information on segment results can be found in the Segment Information section. Interest Expense Interest expense was $14.5 million in 2022 and $12.5 million in 2021.
Portfolio optimization plan costs decreased operating margins by approximately 200 basis points in 2023 and divestiture & other related income improved operating margins by approximately 20 basis points in 2022. Additional information on segment results can be found in the Segment Information section. Interest Expense Interest expense was $25.2 million in 2023 and $14.5 million in 2022.
Corporate & Other The Corporate & Other operating loss was $52.8 million in 2022 and $58.5 million in 2021.
Segment operating income as a percent of revenue was 21.1% in 2023 and 20.5% in 2022. 26 Index Corporate & Other The Corporate & Other operating loss was $68.9 million in 2023 and $52.8 million in 2022.
Segment operating income as a percent of revenue was 14.3% and 13.3% for 2022 and 2021, respectively. 23 Index Color Segment revenue for the Color segment was $604.0 million in 2022 and $545.3 million in 2021, an increase of approximately 11%. Foreign exchange rates decreased segment revenue by approximately 4%.
Color Segment revenue for the Color segment was $608.0 million in 2023 and $604.0 million in 2022, an increase of approximately 1%. Foreign exchange rates increased segment revenue by approximately 2%. The higher segment revenue was a result of higher revenue in Food & Pharmaceutical Colors, partially offset by lower revenue in Personal Care.
The decrease in net cash provided by operating activities in 2022 was primarily due to an increase in the cash used for inventory as the Company invested in strategic inventory positions in order to manage production and on time delivery despite disruptions in our supply chain.
Operating cash flow provided the primary source of funds for operating needs, capital expenditures, and shareholder dividends. The increase in net cash provided by operating activities in 2023 was primarily due to a decrease in the cash used for inventory investments during 2023 compared to 2022 and an increase in cash provided by accounts receivable.
Removed
In the second quarter of 2020, the Company divested its inks product line (Color Group); in the third quarter of 2020, the Company divested its yogurt fruit preparations product line (Flavors & Extracts Group); and in the second quarter of 2021, the Company divested its fragrances product line (Flavors & Extracts Group).
Added
The Company’s corporate expenses, divestiture & other related costs and income, share-based compensation, restructuring and other charges, including operational improvement plan costs and portfolio optimization plan costs, and other costs are included in the “Corporate & Other” category.
Removed
Operating margins were 13.7% in 2022 and 12.3% in 2021. Divestiture & other related income improved operating margins by approximately 20 basis points in 2022 and divestiture & other related costs and operational improvement plan costs and income reduced operating margins by approximately 90 basis points in 2021.
Added
Selling and administrative expenses as a percent of revenue was further impacted by lower performance-based compensation in 2023. Operating Income Operating income was $155.0 million in 2023 and $196.8 million in 2022. Operating margins were 10.6% in 2023 and 13.7% in 2022.
Removed
Acquisitions 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. This business is now part of the Flavors & Extracts segment.
Added
The effective tax rate in 2023 was also impacted by the limited tax deductibility of costs related to the portfolio optimization plan.
Removed
The 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. This business is now part of the Color segment.
Added
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.
Removed
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.
Added
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.
Removed
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.
Added
The Company reports all costs associated with the Portfolio Optimization Plan in the Corporate & Other segment. See Note 16, Portfolio Optimization Plan , in the Notes to Consolidated Financial Statements included in this report for additional information.
Removed
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.
Added
The lower segment operating income was a result of lower operating income in Personal Care, partially offset by higher operating income in Food & Pharmaceutical Colors. The lower operating income in Personal Care was primarily due to higher raw material and manufacturing and other costs and lower volumes, partially offset by higher selling prices.
Removed
As part of the Operational Improvement Plan, the Company combined its New Jersey cosmetics manufacturing facility in the Personal Care product line of the Color segment into its existing Color segment facility in Missouri. In addition, the Company centralized certain Flavors & Extracts segment support functions in Europe into one location.
Added
NEW PRONOUNCEMENTS Refer to the “ Recently Issued Accounting Pronouncements ” section within Note 1, “ Summary of Significant Accounting Policies ,” in the Notes to Consolidated Financial Statements included in this report for additional details. 28 Index
Removed
In the Asia Pacific segment, the Company incurred costs in connection with the elimination of certain selling and administrative positions. 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.
Removed
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.
Removed
The Company reports all costs and income associated with the Operational Improvement Plan in Corporate & Other.
Removed
For Operating Income and Diluted Earnings per Share, adjustments consist of the results of the divested product lines, divestitures & other related costs and income, and operational improvement plan costs and income. Note: Refer to table above for a reconciliation of these non-GAAP measures.
Removed
Flavors & Extracts Flavors & Extracts segment revenue was $738.0 and $739.4 million in 2022 and 2021, respectively. Foreign exchange rates decreased segment revenue by approximately 2%, while the divestitures of Yogurt Fruit Preparations and Fragrances decreased segment revenue by approximately 4%.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIn addition, this hypothetical calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar. 26 Index The Company has certain debt denominated in Euros and British Pounds. These non-derivative debt instruments act as partial hedges of the Company’s Euro and British Pound net asset positions.
Biggest changeHowever, any change in the value of the contracts, real or hypothetical, would be significantly offset by a corresponding change in the value of the underlying hedged items. In addition, this hypothetical calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar. The Company has certain debt denominated in Euros and British Pounds.
The Company manages its debt structure and interest rate risk through the use of fixed rate and floating rate debt. The Company’s primary exposure is to interest rates in the U.S. and Western Europe.
The Company manages its debt structure and interest rate risk through the use of fixed rate and floating rate debt. The Company’s primary exposure is to interest rates in the U.S. and Europe.
At December 31, 2022, the potential increase or decrease in annual interest expense of floating rate debt, assuming a hypothetical 10% fluctuation in interest rates, would be $1.1 million. The Company is the purchaser of certain commodities, such as vanilla, corn, sugar, soybean meal, and fruits.
At December 31, 2023, the potential increase or decrease in annual interest expense of floating rate debt, assuming a hypothetical 10% fluctuation in interest rates, would be $1.0 million. The Company is the purchaser of certain commodities, such as vanilla, corn, sugar, soybean meal, and fruits.
The net fair value of these instruments, based on dealer quotes, was a liability of $0.2 million and an asset of $0.1 million as of December 31, 2022 and 2021 , respectively.
The net fair value of these instruments, based on dealer quotes, was an asset of $1.0 million and a liability of $0.2 million as of December 31, 2023 and 2022 , respectively.
On occasion, the Company may enter into non-cancelable forward purchase contracts, as deemed appropriate, to reduce the effect of price fluctuations on future manufacturing requirements. 27 Index
On occasion, the Company may enter into non-cancelable forward purchase contracts, as deemed appropriate, to reduce the effect of price fluctuations on future manufacturing requirements. 29 Index
At December 31, 2022, the potential gain or loss in the fair value of the Company’s outstanding foreign exchange contracts, assuming a hypothetical 10% fluctuation in the currencies of such contracts, would be approximately $1.8 million.
At December 31, 2023, the potential gain or loss in the fair value of the Company’s outstanding foreign exchange contracts, assuming a hypothetical 10% fluctuation in the currencies of such contracts, would be approximately $3.5 million.
The potential increase or decrease in the annual U.S. dollar equivalent interest expense of the Company’s outstanding foreign currency-denominated debt, assuming a hypothetical 10% fluctuation in the currencies of such debt, would be approximately $0.8 million at December 31, 2022.
These non-derivative debt instruments act as partial hedges of the Company’s Euro and British Pound net asset positions. The potential increase or decrease in the annual U.S. dollar equivalent interest expense of the Company’s outstanding foreign currency-denominated debt, assuming a hypothetical 10% fluctuation in the currencies of such debt, would be approximately $1.1 million at December 31, 2023.
Removed
However, any change in the value of the contracts, real or hypothetical, would be significantly offset by a corresponding change in the value of the underlying hedged items.

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