~~ITEM 1.~~

ITEM 1.

FINANCIAL STATEMENTS

SENSIENT TECHNOLOGIES CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS

(In thousands except per share amounts)

(Unaudited)

									Three Months Ended June 30,				Six Months Ended June 30,
	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016		2018		2017		2018		2017

Revenue	$	353,519	$	349,662	$	1,033,391	$	1,052,966	$	363,041	$	338,475	$	719,518	$	679,872

Cost of products sold		230,784		227,099		670,486		690,126		241,571		219,250		474,977		439,702

Selling and administrative expenses		70,725		71,412		242,478		220,505		69,289		74,845		136,679		171,753

Operating income		52,010		51,151		120,427		142,335		52,181		44,380		107,862		68,417

Interest expense		4,946		4,584		14,474		14,021		5,555		4,717		11,110		9,528

Earnings before income taxes		47,064		46,567		105,953		128,314		46,626		39,663		96,752		58,889

Income taxes		14,851		10,948		29,774		36,751		7,503		8,889		19,435		14,923

Earnings from continuing operations		32,213		35,619		76,179		91,563

Gain from discontinued operations, net of tax		-		-		-		3,343

Net earnings	$	32,213	$	35,619	$	76,179	$	94,906	$	39,123	$	30,774	$	77,317	$	43,966

Weighted average number of shares outstanding:
Basic		43,624		44,532		43,947		44,604		42,281		44,023		42,578		44,112

Diluted		43,864		44,816		44,209		44,873		42,371		44,290		42,701		44,384

Earnings per common share:
Basic:
Continuing operations	$	0.74	$	0.80	$	1.73	$	2.05
Discontinued operations		-		-		-		0.07
Earnings per common share	$	0.74	$	0.80	$	1.73	$	2.13

Diluted:
Continuing operations	$	0.73	$	0.79	$	1.72	$	2.04
Discontinued operations		-		-		-		0.07
Earnings per common share	$	0.73	$	0.79	$	1.72	$	2.11
Basic									$	0.93	$	0.70	$	1.82	$	1.00
Diluted									$	0.92	$	0.69	$	1.81	$	0.99

Dividends declared per common share	$	0.30	$	0.27	$	0.90	$	0.81	$	0.33	$	0.30	$	0.66	$	0.60

See accompanying notes to consolidated condensed financial statements.

Index

SENSIENT TECHNOLOGIES CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

Three Months
Ended September 30,

Nine Months
Ended September 30,

2017 2016 2017 2016

Comprehensive Income $ 44,599 $ 32,784 $ 141,053 $ 86,708

	Three Months Ended June 30,				Six Months Ended June 30,

	2018		2017		2018		2017

Comprehensive Income	$	2,477	$	59,183	$	64,535	$	96,454

See accompanying notes to consolidated condensed financial statements.

Index

SENSIENT TECHNOLOGIES CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands)

ASSETS	September 30, 2017 (Unaudited)			December 31, 2016			June 30, 2018 (Unaudited)			December 31, 2017

CURRENT ASSETS:
Cash and cash equivalents	$	24,654		$	25,865		$	30,888		$	29,344
Trade accounts receivable, net		222,552			194,509			277,301			195,439
Inventories		456,480			404,320			461,803			463,517
Prepaid expenses and other current assets		43,245			50,974			53,926			43,206
Assets held for sale		7,396			41,393			1,916			1,969

TOTAL CURRENT ASSETS		754,327			717,061			825,834			733,475

OTHER ASSETS		66,917			70,462			67,508			68,251
DEFERRED TAX ASSETS		18,075			12,120			11,259			7,885
INTANGIBLE ASSETS, NET		7,658			8,126			9,067			7,211
GOODWILL		407,127			383,568			409,022			408,995

PROPERTY, PLANT AND EQUIPMENT:
Land		34,866			33,015			34,912			35,198
Buildings		306,217			265,157			320,523			317,464
Machinery and equipment		684,526			643,869			698,805			687,896
Construction in progress		44,974			79,981			35,591			40,833
		1,070,583			1,022,022			1,089,831			1,081,391
Less accumulated depreciation		(585,822	)		(545,499	)		(601,006	)		(582,868	)
		484,761			476,523			488,825			498,523

TOTAL ASSETS	$	1,738,865		$	1,667,860		$	1,811,515		$	1,724,340

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Trade accounts payable	$	101,104		$	92,450		$	98,878		$	109,780
Accrued salaries, wages and withholdings from employees		25,676			26,502			22,491			23,613
Other accrued expenses		58,282			54,752			49,395			51,764
Income taxes		5,057			14,080			7,870			11,036
Short-term borrowings		20,092			20,578			20,036			20,130
Liabilities held for sale		-			5,313

TOTAL CURRENT LIABILITIES		210,211			213,675			198,670			216,323

DEFERRED INCOME TAXES		12,017			9,650
DEFERRED TAX LIABILITIES								31,714			18,724
OTHER LIABILITIES		8,427			6,103			10,014			13,539
ACCRUED EMPLOYEE AND RETIREE BENEFITS		21,283			19,911			21,926			19,294
LONG‑TERM DEBT		607,395			582,780			732,762			604,159

SHAREHOLDERS' EQUITY:
Common stock		5,396			5,396			5,396			5,396
Additional paid‑in capital		112,459			107,686			102,943			107,176
Earnings reinvested in the business		1,415,406			1,378,923			1,463,976			1,414,485
Treasury stock, at cost		(505,138	)		(442,799	)		(593,770	)		(525,422	)
Accumulated other comprehensive loss		(148,591	)		(213,465	)		(162,116	)		(149,334	)

TOTAL SHAREHOLDERS’ EQUITY		879,532			835,741			816,429			852,301

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,738,865		$	1,667,860		$	1,811,515		$	1,724,340

See accompanying notes to consolidated condensed financial statements.

Index

SENSIENT TECHNOLOGIES CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

							Six Months Ended June 30,
	Nine Months Ended September 30,
	2017			2016			2018			2017
Cash flows from operating activities:
Net earnings	$	76,179		$	94,906		$	77,317		$	43,966
Adjustments to arrive at net cash provided by operating activities:
Depreciation and amortization		36,626			35,176			26,022			24,436
Share-based compensation		6,296			6,743			1,783			4,252
Net loss on assets		1,371			7,893			259			328
Loss on divestiture of businesses		33,160			-			-			33,138
Deferred income taxes		(9,087	)		8,454			9,933			(4,765	)
Liquidation of foreign entity		-			(3,257	)
Changes in operating assets and liabilities		(33,423	)		679			(143,508	)		(100,561	)

Net cash provided by operating activities		111,122			150,594
Net cash (used in) provided by operating activities								(28,194	)		794

Cash flows from investing activities:
Acquisition of property, plant and equipment		(32,825	)		(58,004	)		(24,000	)		(19,666	)
Cash receipts on sold receivables								91,142			59,286
Proceeds from sale of assets		5,444			3,597			283			5,305
Proceeds from divestiture of businesses		12,457			-			-			12,457
Acquisition of new businesses								(11,313	)		-
Other investing activity		(338	)		(82	)		751			2,602

Net cash used in investing activities		(15,262	)		(54,489	)
Net provided by investing activities								56,863			59,984

Cash flows from financing activities:
Proceeds from additional borrowings		188,387			163,370			107,857			139,820
Debt payments		(190,164	)		(185,697	)		(33,009	)		(154,282	)
Purchase of treasury stock		(64,486	)		(27,728	)		(72,704	)		(26,743	)
Dividends paid		(39,696	)		(36,357	)		(28,244	)		(26,553	)
Other financing activity		(988	)		409			(2,779	)		(1,047	)

Net cash used in financing activities		(106,947	)		(86,003	)		(28,879	)		(68,805	)

Effect of exchange rate changes on cash and cash equivalents		9,876			1,406			1,754			8,178

Net (decrease) increase in cash and cash equivalents		(1,211	)		11,508
Net increase in cash and cash equivalents								1,544			151
Cash and cash equivalents at beginning of period		25,865			11,997			29,344			25,865

Cash and cash equivalents at end of period	$	24,654		$	23,505		$	30,888		$	26,016

See accompanying notes to consolidated condensed financial statements.

Index

SENSIENT TECHNOLOGIES CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

1.	Accounting Policies

In the opinion of Sensient Technologies Corporation (the “Company”), the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) that are necessary to present fairly the financial position of the Company as of ~~September~~June 30, ~~2017,~~2018, and the results of operations and comprehensive income for the three and ~~nine~~six months ended ~~September~~June 30, 2018 and 2017, ~~and 2016,~~respectively, and cash flows for the ~~nine~~six months ended ~~September~~June 30, 2018 and 2017, ~~and 2016.~~respectively. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Expenses are charged to operations in the period incurred.

Please refer to the notes in the Company’s annual consolidated financial statements for the year ended December 31, 2017, for additional details of the Company’s financial condition and a description of the Company’s accounting policies, which have been continued without change except for the Company’s Revenue Recognition accounting policy, which has been updated as a result of the Company’s adoption in the first quarter of 2018 of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, as noted below.

Revenue Recognition

The Company recognizes revenue as 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. In ~~July 2015,~~order to achieve this core principle, the Company applies the following five-step approach:

Identification of the contract, or contracts, with a customer

Identification of the performance obligations in the contract

Determination of the transaction price

Allocation of the transaction price to the performance obligations in the contract

Recognition of revenue when, or as, we satisfy the performance obligations

The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with the customer. For each contract, the Company considers the identified performance obligation to be the promise to transfer products. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment and then determines the net consideration to which the Company expects to be entitled. In addition, the Company assesses the customer’s ability to pay as part of its evaluation of the contract. As the Company’s standard payment terms are less than one year, the Company elected the practical expedient under Accounting Standards Codification (ASC) 606-10-32-18, and determined that its contracts do not have a significant financing component. The Company allocates the transaction price to each distinct product based on the relative standalone selling price. Revenue is recognized when control of the product is transferred to the customer, the customer is obligated to pay the Company, and the Company has no remaining obligations, which is typically at shipment. In certain locations, primarily outside the United States, product shipping terms may vary. Thus, in such locations, the point at which control of the product transfers to the customer and revenue recognition occurs will vary accordingly.

Customer returns of non-conforming products are estimated at the time revenue is recognized. In certain customer relationships, volume rebates exist, which are recognized according to the terms and conditions of the contractual relationship. Customer returns, rebates, and discounts are not material to the Company’s consolidated financial statements. The Company has elected to recognize the revenue and cost for freight and shipping when control over the products has transferred to the customer. The Company has elected to immediately expense contract costs related to obtaining a contract as the amortization period of the asset the Company otherwise would have recognized would have been less than a year.

Index

The Company disaggregates its revenue from customers by certain product lines and geographic locations for the Flavors & Fragrances and Color segments. Revenue for the Asia Pacific segment is managed on a geographic basis. For more information on the Company’s disaggregated revenue, see Note 4, Segment Information.

New Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) ~~affirmed its proposed one-year deferral of the effective date for Accounting Standards Update (ASU)~~issued, ASU No. 2014-09, Revenue from Contracts with Customers. Under this ~~proposal,~~new standard, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. The requirements of the new standard are effective for interim and annual periods beginning after December 15, 2017. The proposal also permits entities to adopt the standard for interim and annual reporting periods beginning after December 15, 2016. The Company currently recognizes revenue (net of estimated discounts, allowances, and returns) when title to goods passes, the customer is obliged to pay the Company, and the Company has no remaining obligations. Such recognition typically corresponds with the shipment of goods. The Company created a project team within its Corporate Finance Department, in 2016, to review the potential impact that this ASU may have on the Company. At that time, the Company’s revenue recognition project team began gathering data, including issuing a detailed revenue recognition questionnaire designed to highlight instances of variable consideration, and reviewing existing contracts and other relevant documents across all of the Company’s segments. In the first quarter of 2017, the Company finalized a detailed project plan and distributed a second revenue recognition questionnaire designed to examine potential instances of variable consideration in greater detail. In the second and third quarters of 2017, the Company reviewed and analyzed the questionnaires and supporting documentation and completed its review and analysis during the current quarter. In addition, the Company has updated its current internal controls and implemented additional controls and monitoring around revenue recognition during the second and third quarters of 2017. The Company also conducted training for all financial personnel on the new standard, controls, and monitoring during this quarter. The Company again updated its Audit Committee on the status of the implementation of this ASU during the current quarter. Based on procedures to date, the Company has not identified any areas that will result in significant changes to the timing of recognition or measurement of revenue. The Company will continue to evaluate the effects of this standard on its consolidated financial statements. As a result of our ongoing assessment, as of June 30, 2017, the Company has changed its planned method to incorporate this new standard and now plans to use the modified retrospective method.

~~In July 2015, the FASB issued ASU No. 2015-11,~~ ~~Simplifying the Measurement of Inventory~~. Under this guidance, inventory that is accounted for using first-in-first-out, or average cost method, shall be measured at the lower of cost or net realizable value, as opposed to the lower of cost or market measurement under previous guidance. This guidance became effective for interim and annual periods beginning after December 15, 2016, with early adoption permitted. The Company adopted this standard in the first quarter of ~~2017, and it~~2018 using the modified retrospective method. The adoption of this new standard did not have an impact on the revenue recognized by the Company. The Company has updated its revenue recognition accounting policy, as outlined above, and has included a ~~material effect~~disclosure on its ~~consolidated financial statements.~~disaggregated revenue in Note 4, Segment Information. Additionally, the Company has included a discussion of its disaggregated revenue under Segment Information, in its Management’s Discussion and Analysis of Financial Condition and Results of Operations.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires lessees to recognize the lease assets and ~~lease~~ liabilities that arise from leases on the balance sheet and to disclose qualitative and quantitative information about lease transactions. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. In 2017, the Company created a project team within its Corporate Finance Department to review the impact that this ASU will have on the Company. In the first six months of 2018, the project team has begun gathering and reviewing existing leases and other relevant documents across all of the Company’s segments and installed a software solution to facilitate the implementation of this new standard. The Company ~~continues~~believes it has a complete population of leasing agreements and has begun to analyze the agreements during the second quarter. The Company has also implemented additional internal controls over the evaluation of new leases and the implementation of this ASU around leases. In July 2018, the Company updated its Audit Committee on the status of the implementation of this ASU. The Company will continue to evaluate the expected impact of this ~~standard.~~standard on the Company’s Consolidated Financial Statements. The Company expects to complete this evaluation by the end of the year and to finalize its implementation calculations in the first quarter of 2019.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments. This ASU clarifies how certain cash receipts and cash payments are presented and classified in the statement of cash flows. Among these changes, is a requirement that a transferor’s receipt of a beneficial interest in securitized trade receivables be disclosed as an investing transaction. There is also a requirement to classify cash receipts received that are related to beneficial interests in previously transferred receivables (i.e., deferred purchase price) as inflows from investing activities. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those years. The Company adopted this standard in the first quarter of 2018, using monthly cash receipts as its unit of account for cash received related to the beneficial interest in previously transferred receivables. In the second quarter of 2018, the Company updated its unit of account to daily cash receipts for cash received related to the beneficial interest in the previously transferred receivables. The Company has included $91 million and $59 million as cash flows from investing activities for the six month periods ended June 30, 2018 and 2017, respectively, related to collections on beneficial interests in previously transferred receivables. The reported amounts include adjustments of $35 million and $25 million of collections on beneficial interests in previously transferred receivables for the three months ended March 31, 2018 and 2017, respectively, which were previously reported as cash flows from operating activities.

In December 2016, the FASB issued ASU 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory. ~~Under current GAAP,~~Prior to the adoption of ASU 2016-16, the tax effects of intra-entity asset transfers ~~are~~were deferred until the transferred asset iswas sold to a third party or otherwise recovered through use. ~~The new guidance~~ASU 2016-16 eliminates the exception for all intra-entity sales of assets other than inventory. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those years. The Company ~~continues~~adopted this standard in the first quarter of 2018 resulting in a cumulative effect of $0.4 million increase to ~~evaluate~~Earnings reinvested in the ~~expected impact~~business; an increase of ~~this standard.~~$3.0 million to Deferred Tax Assets; a decrease of $3.7 million to Prepaid Expense and Other Current Assets; and a decrease of $1.1 million to Deferred Tax Liabilities on the Company’s Consolidated Balance Sheet.

Index

In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU requires employers to present the service cost component of the net periodic benefit cost in the same income statement line item as the other employee compensation costs arising from services rendered during the period. The other components of net benefit cost are to be presented outside of any subtotal of operating income. This ASU is effective for fiscal years and interim periods beginning after December 15, 2017, and early adoption is permitted. The Company adopted this standard in the first quarter of 2018, and as a result, the Company’s non-service cost portion of its pension expense is ~~currently evaluating~~now recorded in Interest Expense on the ~~expected~~Company’s Condensed Statement of Earnings. The Company’s service cost portion of pension expense is recorded in Selling and Administrative Expenses on the Company’s Consolidated Statement of Earnings. This change did not have a material impact ~~of this standard.~~on the Company’s consolidated financial statements.

In August 2017, the FASB issued ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities, which expands an entity’s ability to hedge ~~nonfinancial~~non-financial and financial risk components and reduce complexity in fair value hedges of interest rate risk. This guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line item as the hedged item. This ASU is effective for fiscal years and interim periods beginning after December 15, 2018. The Company is currently evaluating the expected impact of this standard.

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU allows entities the option to reclassify to retained earnings tax effects related to the change in federal tax rate for all items accounted for in Accumulated Other Comprehensive Income (OCI). This ASU is effective for fiscal years and interim periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating if the Company will make this policy election.

Please refer to the notes in the Company’s annual consolidated financial statements for the year ended December 31, ~~2016,~~2017, for additional details of the Company’s financial condition and a description of the Company’s accounting policies, which have been continued without change.

2.	Acquisition

On March 9, 2018, the Company completed the acquisition of certain net assets and the natural color business of GlobeNatural, a natural food and ingredient company based in Lima, Peru. The Company paid $10.8 million of cash for this acquisition. The Company acquired net assets of $2.1 million and identified intangible assets, principally customer relationships of $2.0 million, and allocated the remaining $6.7 million to goodwill. These operations are included in the Color segment.

3.	Fair Value

Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures, defines fair value for financial assets and liabilities, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. As of ~~September~~June 30, ~~2017,~~2018, and December 31, ~~2016,~~2017, the Company’s assets and liabilities subject to this standard are forward exchange contracts and investments in a money market fund and municipal investments. The fair value of the forward exchange contracts based on current pricing obtained for comparable derivative products (Level 2 inputs) was not material as of June 30, 2018, and was a liability of ~~$0.2~~$0.6 million as of ~~September 30, 2017, and~~ December 31, ~~2016.~~2017. The fair value of the investments based on ~~September 30, 2017, and December 31, 2016,~~ market quotes (Level 1 inputs) from June 30, 2018, and December 31, 2017, was an asset of ~~$0.2~~$ 0.1 million ~~and $1.8 million, respectively,~~in both periods and is reported in Other Assets in the Consolidated Condensed Balance Sheets.

The carrying values of the Company’s cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses, and short-term borrowings ~~approximated~~were approximately the same as the fair values as of ~~September~~June 30, ~~2017.~~2018. The fair value of the Company’s long-term debt, including current maturities, is estimated using discounted cash flows based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements (Level 2 inputs). The carrying value of the long-term debt at ~~September~~June 30, ~~2017,~~2018, was ~~$607.4~~$732.8 million. The fair value of the long-term debt at ~~September~~June 30, ~~2017,~~2018, was ~~$624.1~~$740.7 million.

Index

3.4.	Segment Information

Operating results by segment for the periods presented are as follows:

(In thousands)	Flavors & Fragrances			Color		Asia Pacific		Corporate & Other			Consolidated	Flavors & Fragrances		Color		Asia Pacific		Corporate & Other			Consolidated
Three months ended September 30, 2017:
Three months ended June 30, 2018:
Revenue from external customers	$	191,063	$	129,899	$	32,557	$	-		$	353,519	$	191,818	$	140,702	$	30,521	$	-		$	363,041
Intersegment revenue		4,929		3,324		151		-			8,404		6,840		3,589		-		-			10,429
Total revenue	$	195,992	$	133,223	$	32,708	$	-		$	361,923	$	198,658	$	144,291	$	30,521	$	-		$	373,470

Operating income (loss)	$	33,006	$	28,624	$	5,780	$	(15,400	)	$	52,010	$	24,001	$	31,133	$	4,634	$	(7,587	)	$	52,181
Interest expense		-		-		-		4,946			4,946		-		-		-		5,555			5,555
Earnings (loss) before income taxes	$	33,006	$	28,624	$	5,780	$	(20,346	)	$	47,064	$	24,001	$	31,133	$	4,634	$	(13,142	)	$	46,626

Three months ended September 30, 2016:
Three months ended June 30, 2017:
Revenue from external customers	$	195,318	$	122,302	$	32,042	$	-		$	349,662	$	180,736	$	129,253	$	28,486	$	-		$	338,475
Intersegment revenue		5,457		3,430		51		-			8,938		4,820		3,641		459		-			8,920
Total revenue	$	200,775	$	125,732	$	32,093	$	-		$	358,600	$	185,556	$	132,894	$	28,945	$	-		$	347,395

Operating income (loss)	$	32,386	$	26,522	$	6,251	$	(14,008	)	$	51,151	$	28,502	$	29,072	$	3,820	$	(17,014	)	$	44,380
Interest expense		-		-		-		4,584			4,584		-		-		-		4,717			4,717
Earnings (loss) before income taxes	$	32,386	$	26,522	$	6,251	$	(18,592	)	$	46,567	$	28,502	$	29,072	$	3,820	$	(21,731	)	$	39,663

(In thousands)	Flavors & Fragrances			Color		Asia Pacific		Corporate & Other			Consolidated	Flavors & Fragrances		Color		Asia Pacific		Corporate & Other			Consolidated
Nine months ended September 30, 2017:
Six months ended June 30, 2018:
Revenue from external customers	$	552,874	$	389,992	$	90,525	$	-		$	1,033,391	$	374,300	$	284,430	$	60,788	$	-		$	719,518
Intersegment revenue		15,549		10,191		764		-			26,504		12,704		7,021		-		-			19,725
Total revenue	$	568,423	$	400,183	$	91,289	$	-		$	1,059,895	$	387,004	$	291,451	$	60,788	$	-		$	739,243

Operating income (loss)	$	90,278	$	87,913	$	14,750	$	(72,514	)	$	120,427	$	49,328	$	64,805	$	9,506	$	(15,777	)	$	107,862
Interest expense		-		-		-		14,474			14,474		-		-		-		11,110			11,110
Earnings (loss) before income taxes	$	90,278	$	87,913	$	14,750	$	(86,988	)	$	105,953	$	49,328	$	64,805	$	9,506	$	(26,887	)	$	96,752

Nine months ended September 30, 2016:
Six months ended June 30, 2017:
Revenue from external customers	$	588,728	$	373,944	$	90,294	$	-		$	1,052,966	$	361,811	$	260,093	$	57,968	$	-		$	679,872
Intersegment revenue		20,019		10,471		129		-			30,619		10,620		6,867		613		-			18,100
Total revenue	$	608,747	$	384,415	$	90,423	$	-		$	1,083,585	$	372,431	$	266,960	$	58,581	$	-		$	697,972

Operating income (loss)	$	95,494	$	82,947	$	17,500	$	(53,606	)	$	142,335	$	57,272	$	59,289	$	8,970	$	(57,114	)	$	68,417
Interest expense		-		-		-		14,021			14,021		-		-		-		9,528			9,528
Earnings (loss) before income taxes	$	95,494	$	82,947	$	17,500	$	(67,627	)	$	128,314	$	57,272	$	59,289	$	8,970	$	(66,642	)	$	58,889

Beginning in the first quarter of 2017, the results of operations for certain of the Company’s cosmetic and fragrance businesses in the Asia Pacific segment are now reported in the Color segment and Flavors & Fragrances segment, respectively. The results for 2016 have been restated to reflect these changes.

The Company evaluates performance based on operating income of the respective segments before restructuring and other costs, interest expense, and income taxes. The 2017 ~~and 2016~~ restructuring and other costs ~~related to continuing operations~~ are reported in Corporate & Other. ~~See~~ ~~Note 11,~~ ~~Restructuring, for more information on the Company’s restructuring activities.~~ The 2017 ~~and 2016~~ other costs pertain to the costs associated with the Company’s divestiture of a facility and certain related business lines within the Flavors & Fragrances business in Strasbourg, France. ~~See~~ ~~Note 13,~~ ~~Divestiture~~.There have been no restructuring and other costs in 2018.

In addition to evaluating the Company’s performance based on the segments above, revenue is also disaggregated and analyzed by product line and geographic market. The following table displays our revenue by these major sources.

Index

Product Lines

(In thousands)	Flavors & Fragrances			Color			Asia Pacific			Consolidated
Three months ended June 30, 2018:
Flavors	$	115,222		$	-		$	-		$	115,222
Natural Ingredients		56,197			-			-			56,197
Fragrances		27,239			-			-			27,239
Food & Beverage Colors		-			77,467			-			77,467
Cosmetics		-			40,727			-			40,727
Other Colors		-			26,097			-			26,097
Asia Pacific		-			-			30,521			30,521
Intersegment Revenue		(6,840	)		(3,589	)		-			(10,429	)
Total revenue from external customers	$	191,818		$	140,702		$	30,521		$	363,041

Three months ended June 30, 2017:
Flavors	$	115,535		$	-		$	-		$	115,535
Natural Ingredients		48,998			-			-			48,998
Fragrances		21,023			-			-			21,023
Food & Beverage Colors		-			70,496			-			70,496
Cosmetics		-			36,889			-			36,889
Other Colors		-			25,509			-			25,509
Asia Pacific		-			-			28,945			28,945
Intersegment Revenue		(4,820	)		(3,641	)		(459	)		(8,920	)
Total revenue from external customers	$	180,736		$	129,253		$	28,486		$	338,475

Product Lines

(In thousands)	Flavors & Fragrances			Color			Asia Pacific			Consolidated
Six months ended June 30, 2018:
Flavors	$	224,273		$	-		$	-		$	224,273
Natural Ingredients		109,398			-			-			109,398
Fragrances		53,333			-			-			53,333
Food & Beverage Colors		-			154,283			-			154,283
Cosmetics		-			86,231			-			86,231
Other Colors		-			50,937			-			50,937
Asia Pacific		-			-			60,788			60,788
Intersegment Revenue		(12,704	)		(7,021	)		-			(19,725	)
Total revenue from external customers	$	374,300		$	284,430		$	60,788		$	719,518

Six Months ended June 30, 2017:
Flavors	$	229,152		$	-		$	-		$	229,152
Natural Ingredients		102,520			-			-			102,520
Fragrances		40,759			-			-			40,759
Food & Beverage Colors		-			141,884			-			141,884
Cosmetics		-			74,348			-			74,348
Other Colors		-			50,728			-			50,728
Asia Pacific		-			-			58,581			58,581
Intersegment Revenue		(10,620	)		(6,867	)		(613	)		(18,100	)
Total revenue from external customers	$	361,811		$	260,093		$	57,968		$	679,872

Index

Geographic Markets

(In thousands)	Flavors & Fragrances		Color		Asia Pacific		Consolidated
Three months ended June 30, 2018:
North America	$	127,196	$	63,738	$	-	$	190,934
Europe		44,964		41,127		24		86,115
Asia Pacific		9,069		17,641		30,284		56,994
Other		10,589		18,196		213		28,998
Total revenue from external customers	$	191,818	$	140,702	$	30,521	$	363,041

Three months ended June 30, 2017:
North America	$	121,727	$	59,303	$	-	$	181,030
Europe		42,414		37,787		64		80,265
Asia Pacific		6,798		15,023		27,976		49,797
Other		9,797		17,140		446		27,383
Total revenue from external customers	$	180,736	$	129,253	$	28,486	$	338,475

Geographic Markets

(In thousands)	Flavors & Fragrances		Color		Asia Pacific		Consolidated
Six months ended June 30, 2018:
North America	$	246,251	$	127,320	$	-	$	373,571
Europe		90,391		84,758		30		175,179
Asia Pacific		16,091		34,551		60,295		110,937
Other		21,567		37,801		463		59,831
Total revenue from external customers	$	374,300	$	284,430	$	60,788	$	719,518

Six months ended June 30, 2017:
North America	$	243,849	$	121,037	$	-	$	364,886
Europe		84,921		74,110		125		159,156
Asia Pacific		13,122		29,801		57,292		100,215
Other		19,919		35,145		551		55,615
Total revenue from external customers	$	361,811	$	260,093	$	57,968	$	679,872

4.5.	Inventories

At ~~September~~June 30, ~~2017,~~2018, and December 31, ~~2016,~~2017, inventories included finished and in-process products totaling ~~$306.2~~$314.7 million and ~~$273.8~~$310.4 million, respectively, and raw materials and supplies of ~~$150.3~~$147.1 million and ~~$130.5~~$153.1 million, respectively.

5.6.	Retirement Plans

The Company’s components of annual benefit cost for the defined benefit plans for the periods presented are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2017			2016			2017			2016			2018			2017			2018			2017

Service cost	$	466		$	502		$	1,392		$	1,508		$	366		$	465		$	734		$	926
Interest cost		366			414			1,080			1,259			286			359			575			714
Expected return on plan assets		(264	)		(286	)		(778	)		(883	)		(241	)		(259	)		(486	)		(514	)
Amortization of actuarial (gain) loss		(19	)		54			(61	)		162
Amortization of actuarial gain														(27	)		(21	)		(54	)		(42	)
Settlement expense		-			-			3,797			-			-			3,797			-			3,797

Total defined benefit expense	$	549		$	684		$	5,430		$	2,046		$	384		$	4,341		$	769		$	4,881

Index

During the three months ended June 30, 2017, one of the Company’s defined benefit plans was terminated. As a result, the pension benefit obligation was settled by making lump-sum cash payments to certain participants and also purchasing nonparticipating annuity contracts to cover the remaining vested benefits. As a result of this plan’s termination, the Company recognized $3.8 million of settlement expense during the three months ended June 30, 2017, which have been recorded in the Company’s restructuring and other costs. The plan was associated with two facilities ~~which~~that were closed under the Company’s 2014 Restructuring Plan.

As noted in Note 1, Accounting Policies, the Company adopted ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, in the first quarter of 2018. As a result of the adoption of this ASU, the non-service cost portion of the Company’s annual benefit costs summarized above is recorded in Interest Expense in the Company’s Condensed Statement of Earnings. The service cost portion of the Company’s annual benefit costs is recorded in Selling and Administrative Expenses on the Company’s Condensed Statement of Earnings.

6.7.	Shareholders’ Equity

The Company repurchased ~~505,085 and 839,734~~one million shares of its common stock for an aggregate cost of ~~$37.7 million and $64.5~~$72.7 million during the three ~~and nine~~ months ended ~~September~~March 31, 2018. The Company did not purchase any of its common stock during the three months ended June 30, ~~2017, respectively.~~2018. The Company repurchased ~~89,251~~178,800 and ~~400,477~~334,649 shares of its common stock for an aggregate cost of ~~$6.7~~$14.4 million and ~~$25.2~~$26.7 million during the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, respectively. The ~~amount of~~amounts related to treasury stock purchases reported in the Company’s Consolidated Condensed Statements of Cash Flow represent purchases that ~~have~~ settled within each respective ~~nine-month~~six-month period.

7.8.	Derivative Instruments and Hedging Activity

The Company may use forward exchange contracts and foreign currency denominated debt to manage its exposure to foreign exchange risk in order to reduce the effect of fluctuating foreign currencies on short-term foreign currency denominated intercompany transactions, non-functional currency raw material purchases, non-functional currency sales, and other known foreign currency exposures. These forward exchange contracts generally have maturities of less than 18 months. The Company’s primary hedging activities and their accounting treatment are summarized below.

Forward exchange contracts – Certain forward exchange contracts have been designated as cash flow hedges. The Company had ~~$30.0~~$28.8 million and ~~$25.4~~$44.9 million of forward exchange contracts designated as hedges outstanding as of ~~September~~June 30, ~~2017,~~2018, and December 31, ~~2016,~~2017, respectively. For the three and six months ended ~~September~~June 30, ~~2017, gains~~2018, losses of $0.1 million were reclassified into net earnings in the Company’s Consolidated Statement of Earnings, ~~were immaterial. For the nine months ended September 30, 2017, gains reclassified into net earnings in the Company’s Consolidated Statement of Earnings were $0.2 million,~~ which offset the earnings impact of the related non-functional asset or liability hedged in the same period. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2016, losses~~2017, gains of $0.2 million were reclassified into net earnings ~~were $0.2 million and $0.9 million, respectively.~~in the Company’s Consolidated Statement of Earnings, which offset the earnings impact of the related non-functional asset or liability hedged in the same period. In addition, the Company utilizes forward exchange contracts that are not designated as cash flow ~~hedges. The~~hedges; the results of these transactions were not material to the ~~consolidated~~ financial statements.

~~Index~~

Net investment hedges – The Company has certain debt denominated in Euros and Swiss Francs. These debt instruments have been designated as partial hedges of the Company’s Euro and Swiss Franc net asset positions. Changes in the fair value of this debt attributable to changes in the spot foreign exchange rate are recorded in foreign currency translation in other comprehensive income (“OCI”). As of ~~September~~June 30, ~~2017,~~2018, and December 31, ~~2016,~~2017, the total value of the Company’s Euro and Swiss Franc debt was ~~$258.4~~$255.2 million and ~~$195.6~~$261.9 million, respectively. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, the impact of foreign exchange rates on these debt instruments ~~increased~~decreased debt by ~~$7.3~~$13.6 million and ~~$25.3~~$6.7 million, respectively, which has been recorded as foreign currency translation in OCI.

Index

8.9.	Income Taxes

The effective income tax rates for continuing operations for the quarters ended ~~September~~June 30, 2018 and 2017, were 16.1% and ~~2016, were 31.6% and 23.5%~~22.4%, respectively. For the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, the effective income tax rates for continuing operations were ~~28.1%~~20.1% and ~~28.6%~~25.3%, respectively. The effective tax rates in both ~~2017~~2018 and ~~2016~~2017 were impacted by ~~restructuring activities,~~ changes in estimates associated with the finalization of prior year foreign and domestic tax items, audit settlements, adjustments to valuation allowances, and mix of foreign earnings. The ~~nine-month period ended September 30, 2016,~~2018 tax rate was also impacted by ~~deferred~~the 2017 Tax Cuts and Jobs Act, which is commonly referred to as “2017 Tax Legislation”, including the filing of certain tax ~~adjustments related to~~elections in the ~~divestitures discussed~~second quarter of 2018. The tax rate in ~~Note 13,~~ ~~Divestiture. The nine-month period ended September 30,~~ 2017 was also impacted by the restructuring activities, the limited tax deductibility of losses ~~discussed~~related to the Company’s restructuring activities, and the sale of a facility and certain related business lines within the Flavors & Fragrances segment in ~~Note 11,~~ ~~Restructuring~~,Strasbourg, France.

Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Legislation. The Company is applying SAB 118, and ~~impacted by a~~believes the impact of the 2017 Tax Legislation on the 2018 and 2017 income tax ~~planning opportunity that expires~~expenses should be considered provisional estimates. The ultimate impact could differ from these provisional amounts, possibly materially, due to additional guidance, changes in ~~2017.~~interpretation, and additional analysis and assumptions the Company has made. Any adjustments to the 2018 and 2017 provisional estimates will be reported in income tax expense in the reporting period in which any such adjustments are determined, which will be no later than the fourth quarter of 2018.

9.10.

Accumulated Other Comprehensive Income

The following table summarizes the changes in OCI during the three- and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2017:~~2018:

(In thousands)
Cash Flow
Hedges (a)

Pension
Items (a)

Foreign
Currency
Items
Total
Balance as of June 30, 2017 $ 161 $ (1,145 ) $ (159,993 ) $ (160,977 )
Other comprehensive (loss) income before reclassifications (437 ) - 12,827 12,390
Amounts reclassified from OCI 22 (26 ) - (4 )
Balance as of September 30, 2017 $ (254 ) $ (1,171 ) $ (147,166 ) $ (148,591 )

(In thousands)	Cash Flow Hedges (a)			Pension Items (a)			Foreign Currency Items			Total
Balance as of March 31, 2018	$	39		$	(339	)	$	(125,170	)	$	(125,470	)
Other comprehensive income before reclassifications		(145	)		-			(36,543	)		(36,688	)
Amounts reclassified from OCI		72			(30	)		-			42
Balance as of June 30, 2018	$	(34	)	$	(369	)	$	(161,713	)	$	(162,116	)

(In thousands)
Cash Flow
Hedges (a)

Pension
Items (a)

Foreign
Currency
Items
Total
Balance as of December 31, 2016 $ (85 ) $ (2,537 ) $ (210,843 ) $ (213,465 )
Other comprehensive (loss) income before reclassifications (46 ) - 56,895 56,849
Amounts reclassified from OCI (123 ) 1,366 6,782 8,025
Balance as of September 30, 2017 $ (254 ) $ (1,171 ) $ (147,166 ) $ (148,591 )

(In thousands)	Cash Flow Hedges (a)			Pension Items (a)			Foreign Currency Items			Total
Balance as of December 31, 2017	$	(669	)	$	(309	)	$	(148,356	)	$	(149,334	)
Other comprehensive income before reclassifications		525			-			(13,357	)		(12,832	)
Amounts reclassified from OCI		110			(60	)		-			50
Balance as of June 30, 2018	$	(34	)	$	(369	)	$	(161,713	)	$	(162,116	)

(a)

Cash Flow Hedges and Pension Items are net of tax.

912

Index

~~In 2017, the Company completed the divestiture of a facility and certain related business lines in the Flavors & Fragrances segment (See~~ ~~Note 13~~, ~~Divestiture~~, for additional information), resulting in the reclassification of the cumulative translation loss of $2.8 million into net earnings. In addition, the Company completed the sale of its European Natural Ingredient business (~~See~~ ~~Note 11,~~ ~~Restructuring~~, for additional information), resulting in the reclassification of the cumulative translation loss of $4.0 million into net earnings. During the three months ended June 30, 2017, one of the Company’s pension plans was terminated resulting in the reclassification of the cumulative loss of $1.5 million into net earnings (~~See~~ ~~Note 5,~~ ~~Retirement Plans, for additional information).~~

~~10.~~11.

Accounts Receivable Securitization

~~During October 2016,~~As previously disclosed, the Company entered into an accounts receivable securitization program with ~~a commitment size of $40 million,~~Wells Fargo & Company (“Wells Fargo”), whereby transactions under the program ~~are~~were accounted for as sales of trade receivables in accordance with ASC Topic 860, Transfers and Servicing. The commitment size under this program was $60 million. Sales of trade receivables under the program ~~are~~were recorded as a reduction of accounts receivable in the Consolidated Balance Sheet. ~~Proceeds received, including collections on the deferred purchase price receivable, are included in cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows.~~

~~The initial trade receivables sold to the third-party financial institution, Wells Fargo, in October 2016, totaled $60.6 million, for which $40 million in proceeds was received.~~ The fair value of the receivables sold equaled the carrying cost at the time of sale and no gain or loss ~~was~~had been recorded as a result of the ~~sale.~~sales. The ~~sale~~sales also resulted in the recording of a deferred purchase price amount, which represents the retained interest in the sold receivables. This amount iswas adjusted ~~each month~~daily based on collections and other activity. The ~~fair value of the deferred purchase price receivable recorded on the initial sale in October 2016, was $20.6 million. The~~ Company ~~estimates~~estimated the fair value of the deferred purchase price receivable based on historical performance of similar receivables, including an allowance for doubtful accounts, as well as estimated cash discounts to be taken by customers and potential credits issued to customers. The Company ~~deems~~deemed the interest rate risk related to the deferred purchase price receivable to be de minimis primarily due to the short average collection cycle of the related receivables. As of ~~September 30,~~December 31, 2017, the net trade receivables sold to Wells Fargo totaled ~~$64.9 million. The~~$96.4 million and the fair value of the deferred purchase price ~~receivable~~ was ~~$24.9~~$36.4 million, which iswas recorded in Trade Accounts Receivable in the Company’s Consolidated Balance Sheets.

In ~~October, 2017,~~June 2018, the Company amended its securitization program with Wells Fargo (the “Amendment”). Following the Amendment, the Company no longer accounts for the sales of the trade receivables in accordance with ASC Topic 860 and instead now maintains the trade receivables and related debt on its Consolidated Balance Sheet. In connection with the Amendment, Wells Fargo’s existing ownership interest in the trade receivables was converted into undivided interests in the trade receivables to secure a loan of up to $60 million to the Company and the deferred purchase price was eliminated. As of June 30, 2018, $60 million was borrowed under this ~~program.~~agreement. See Note 12, ~~See~~ ~~Note 16,~~ ~~Subsequent Event~~Debt, for ~~additional~~further information.

As a result of the Amendment, the Company’s trade account receivables increased by $60 million and the Company’s long-term debt increased by $60 million. This non-cash transaction did not impact the Company’s Consolidated Condensed Statement of Cash Flows during the six months ended June 30, 2018.

~~11.~~12.

Debt

In June 2018, the Company amended its accounts receivable securitization program with Wells Fargo. Under the amended program, Wells Fargo has extended a secured loan (the “Secured Loan”) of up to $60 million to the Company secured by Wells Fargo’s undivided interests in certain of the Company’s trade accounts receivables. The interest rate on the Secured Loan is LIBOR plus 0.75%. The Company has the intent and ability either to repay the Secured Loan with available funds from the Company’s existing long-term revolving credit facility, or to extend its accounts receivable program with Wells Fargo when it matures in October 2018. Accordingly, the Secured Loan has been classified as long-term debt on the Company’s Consolidated Balance Sheet. As of June 30, 2018, the Company has fully drawn the $60 million available under the securitization program.

In connection with the amendment to the accounts receivable securitization program, the Company entered into conforming amendments to its revolving credit facility and outstanding note purchase agreements.

13.	Restructuring

The Company incurred restructuring costs in both continuing and discontinued operations. The discussion in this note relates to the combination of both continuing and discontinued operations unless otherwise noted. Restructuring costs related to discontinued operations are recorded in discontinued operations within the Company’s Consolidated Condensed Statements of Earnings and are discussed in Note 12, ~~Discontinued Operations, in more detail.~~

InBetween March 2014 and 2017, the Company ~~announced that it was initiating~~executed a restructuring plan ~~(“2014 Restructuring Plan” or “Plan”)~~ to eliminate underperforming operations, consolidate manufacturing facilities, and improve efficiencies within the Company. The Company determined that it had redundant manufacturing capabilities in both North America and Europe and that it could lower costs and operate more efficiently by consolidating into fewer facilities. Eight facilities were identified for consolidation in the Flavors & Fragrances segment, four in North America and four in Europe. Closures have been completed in Indianapolis, Indiana, United States; Cornwall, Mississauga, and Halton Hills, Canada; Bremen, Germany; and Milan, Italy. The Company also sold its two European Natural Ingredients facilities as part of the Plan, as discussed below. In addition, the Company discontinued one of the businesses in the Color segment, located near Leipzig, Germany, because it did not fit with the Company’s long-term strategic plan and it had generated losses for several years. In 2015, the Company identified additional opportunities to consolidate manufacturing operations at one of the Color segment’s facilities in Europe and to eliminate additional positions in the European Flavors & Fragrances businesses. As of September 30, 2017, the Company has effectively completed all of the above-mentioned activities and closures.

~~Index~~

Based on this Plan, the Company determined that certain long-lived assets associated with the underperforming operations were impaired. The Company reduced the carrying amounts of these assets to their aggregate respective fair values, which were determined based on independent market valuations. The fair values of the remaining long-lived assets are estimated to be approximately $8 million, which includes certain of the land, buildings, and equipment in the assets held for sale, as noted below. Also, certain machinery and equipment has been identified to be disposed of at the time of the facility closures and the associated depreciation for these assets has been accelerated. The Company recorded $1 million of long-lived asset impairments, including the impairment charges and accelerated depreciation, during the three months ended September 30, 2017, versus $0.2 million during the three months ended September 30, 2016, and $1.4$7.4 million and $0.9 million during the nine months ended September 30, 2017 and 2016, respectively. Since initiating the Plan, the Company has recorded $88 million of long-lived asset impairments, including the impairment charges and accelerated depreciation. In addition, certain intangible assets, inventory, and other current assets were also determined to be impaired and were written down.

The Company has also incurred employee separation and other restructuring costs as a result of this Plan. The Company originally anticipated that it would reduce headcount related to direct and indirect labor at manufacturing sites by approximately 400 positions at the affected facilities, primarily in the Flavors & Fragrances segment. Except for certain positions assisting with the facility decommissioning activities, the majority of these positions have been eliminated as of September 30, 2017.

During the three months ended March 31, 2017, the Company sold its European Natural Ingredients business (also known as the European Dehydrated Vegetable business), a business in the Flavors & Fragrances segment. This business had two facilities, located in Marchais, France, and Elburg, the Netherlands. The European Natural Ingredients business had not generated significant profits for several years and did not fit with the Company’s long-term strategic plan. The Company completed the sale of this business on March 27, 2017, for a de minimis amount and has recognized a non-cash loss of approximately $21.6 million.

~~As of September 30, 2017, the Company has recorded assets held for sale of land, buildings, and equipment of $7.4 million related to the 2014 Restructuring Plan.~~

In accordance with GAAP, the Company recorded total restructuring costs of $6 million and $2.8 million for the three months ended September 30, 2017 and 2016, respectively, and restructuring costs of $33.6 million and $5.9 million for the nine months ended September 30, 2017 and 2016, respectively. Within the restructuring costs incurred during the current quarter, the Company incurred $3.1 million of inventory write-down costs related to the restructuring activities in North America and $1 million of long-lived asset impairments related to the potential sale of the Indianapolis facility. These non-cash costs were not anticipated as of June 30, 2017, and relate to the closure of the Indianapolis facility. Management re-evaluated its operational priorities during the third quarter and determined that certain inventories would not be used due to capacity constraints and other considerations related to the production transfer. In addition, the Company entered into an agreement to sell the Indianapolis property at a price that was below the net book value of the property as of June 30, 2017. Since initiating the 2014 Restructuring Plan, the Company has incurred $186$27.6 million of restructuring costs through September 30, 2017. The Company expects to incur approximately $1 million to $2 million of additional restructuring costs by the end of 2017, primarily related to the wind down of restructuring activities.

~~Since initiating the Plan, the Company has realized total savings of approximately $22 million as of September 30, 2017. During~~in Corporate & Other for the three and ~~nine~~six months ended ~~September~~June 30, 2017, the Company realized a de minimis amount of savings. The Company does not expect any additional savings for the remainder of 2017, but expects additional savings of approximately $4 million to $5 million in 2018. Expected savings have shifted from 2017 to 2018 primarily due to the delay in closing the Indianapolis facility. The Company intends to continue to optimize production at the consolidating sites after the completion of the restructuring activities.

In connection with the 2014 Restructuring Plan, the Company approved a plan to dispose of a certain business, located near Leipzig, Germany, within the Color segment. Production ceased in 2014 and the business met the criteria to be reported as a discontinued operation. In 2016, the facility and remaining assetsrespectively. There were ~~sold and the entity was liquidated.~~

~~Index~~

~~The Company evaluates performance based on operating income of each segment before restructuring and other costs. All~~no restructuring and other costs ~~related to continuing operations are recorded~~incurred in ~~Corporate & Other. The following table summarizes the restructuring expense by segment and discontinued operations for~~ the three ~~and nine~~or six months ended ~~September~~June 30, ~~2017 and 2016, respectively:~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

(In thousands)
2017

2016

2017

2016

Flavors & Fragrances $ 5,968 $ 2,763 $ 33,460 $ 8,630
Color - (67 ) - 65
Asia Pacific - - - -
Corporate & Other 32 85 167 703

Total Continuing Operations 6,000 2,781 33,627 9,398

Discontinued Operations - - - (3,485 )

Total Restructuring $ 6,000 $ 2,781 $ 33,627 $ 5,913

~~The Company recorded restructuring costs in continuing operations for the three and nine months ended September 30, 2017, as follows:~~

~~Three Months Ended September 30, 2017~~

(In thousands)
Selling &
Administrative

Cost of
Products Sold
      Total

Employee separation $ 29 $ - $ 29
Long-lived asset impairment 976 - 976
Write-down of inventory - 3,073 3,073
Other restructuring costs⁽¹⁾
1,922 - 1,922

Total $ 2,927 $ 3,073 $ 6,000

⁽¹⁾

~~Other costs include decommissioning costs, professional services, temporary labor, moving costs, and other related costs.~~

~~Nine Months Ended September 30, 2017~~

(In thousands)
Selling &
Administrative

Cost of
Products Sold
      Total

Employee separation⁽¹⁾
$ (599 ) $ - $ (599 )
Long-lived asset impairment 1,444 - 1,444
Loss on sale of business 21,563 - 21,563
Write-down of inventory - 3,415 3,415
Other restructuring costs⁽²⁾
7,804 - 7,804

Total $ 30,212 $ 3,415 $ 33,627

⁽¹⁾

Employee separation costs include a reversal, during the three months ended March 31, 2017, of the employee separation accrual for the European Natural Ingredients business, given the sale of this business, as well as, settlement expense, incurred during the three months ended June 30, 2017, related to the termination of one of the Company’s pension plans.

⁽²⁾

~~Other costs include decommissioning costs, professional services, temporary labor, moving costs, and other related costs.~~

~~Index~~

~~The Company recorded restructuring costs in continuing operations for the three and nine months ended September 30, 2016, as follows:~~

~~Three Months Ended September 30, 2016~~

(In thousands)
Selling &
Administrative

Cost of
Products Sold
      Total
Employee separation $ 288 $ - $ 288
Long-lived asset impairment (231 ) - (231 )
Write-down of inventory - - -
Other restructuring costs⁽¹⁾
2,724 - 2,724

Total $ 2,781 $ - $ 2,781

⁽¹⁾

~~Other costs include decommissioning costs, professional services, temporary labor, moving costs, and other related costs.~~

~~Nine Months Ended September 30, 2016~~

(In thousands)
Selling &
Administrative

Cost of
Products Sold
      Total
Employee separation $ 738 $ - $ 738
Long-lived asset impairment 502 - 502
Write-down of inventory - 810 810
Other restructuring costs⁽¹⁾
7,348 - 7,348

Total $ 8,588 $ 810 $ 9,398

⁽¹⁾

~~Other costs include decommissioning costs, professional services, temporary labor, moving costs, and other related costs.~~

~~The following table summarizes the accrual activities for the restructuring activities for the nine months ended September 30, 2017:~~

(In thousands)
Employee
Separations
Other Total
Balance as of December 31, 2016 $ 6,959 $ 570 $ 7,529
Expense activity⁽¹⁾
(4,396 ) 7,804 3,408
Cash spent (2,250 ) (7,766 ) (10,016 )
Translation adjustment 101 - 101
Balance as of September 30, 2017 $ 414 $ 608 $ 1,022

⁽¹⁾

~~12.~~

~~Discontinued Operations~~

In connection with the 2014 Restructuring Plan, the Company approved a plan to dispose of a business unit within the Color segment, located near Leipzig, Germany. Since 2014, the business has met the criteria to be presented as a discontinued operation as established in ASC Subtopic 205-20, ~~Discontinued Operations~~. The results of this business have been reported as a discontinued operation in the Consolidated Condensed Statements of Earnings for all periods presented. In 2016, the facility and remaining assets were sold and the entity was liquidated.2018.

Index

~~The following table summarizes the discontinued operation’s results for the three and nine months ended September 30, 2017 and 2016:~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

(In thousands)
2017

2016

2017

2016

Revenue $ - $ - $ - $ -
Gain from discontinued operations before income taxes - - - 3,410
Income tax expense - - - (67 )
Gain from discontinued operations, net of tax $ - $ - $ - $ 3,343

~~13.~~14.

Divestiture

In ~~2016,~~ the ~~Company’s Board~~first quarter of Directors authorized management to explore strategic alternatives for a facility and certain related business lines within the Flavors & Fragrances segment in Strasbourg, France. In 2016, the Company recorded a non-cash impairment charge of $10.8 million, in selling and administrative expense, reducing the carrying value of the long-lived assets for this facility to zero. An estimate of the fair value of this business less cost to sell was determined to be lower than its carrying value. The difference between the fair value and its carrying value exceeded the existing net book value of the long-lived assets. In addition, the Company incurred $0.7 million of outside professional fees and other related costs in 2016, as a result of the then anticipated divestiture.

~~On January 6,~~ 2017, the Company completed the sale of ~~this~~a facility and certain ~~related~~ business lines in Strasbourg, France, for ~~approximately~~ $12.5 million. ~~At that time, the~~The Company recognized ~~an additional non-cash loss of approximately $11 million during the three months ended March 31, 2017. In addition, an additional~~a non-cash loss of approximately $0.6 million ~~was recognized~~and $11.6 million, respectively, in Corporate & Other during the three and six months ended June 30, 2017. ~~The additional non-cash losses in 2017 are primarily due to changes in the estimates related to working capital balances.~~

~~14.~~

~~Debt~~

On May 3, 2017, the Company issued three new fixed-rate notes consisting of a 7-year note of €50 million (approximately $53 million) at a fixed rate of 1.27%; a 10-year note of €40 million (approximately $43 million) at a fixed rate of 1.71%; and a 7-year note of $27 million at a fixed rate of 3.65%. Also, on May 3, 2017, the Company extended the maturity date of its revolving credit loan from November 2020 to May 2022, and increased its credit facility term loan to $145 million. Proceeds were used to refinance existing debt.

15.	Commitments and Contingencies

People of the State of Illinois v. Sensient Flavors LLC

On June 7, 2018, the Attorney General of the State of Illinois Office, on her own motion and at the request of the Illinois Environmental Protection Agency, filed a Complaint in the Lee County Circuit Court against Sensient Flavors LLC (“Sensient Flavors”). The Complaint alleges that Sensient Flavors’ Amboy, Illinois facility improperly discharged wastewater to the City of Amboy’s wastewater treatment plant in late 2015 and early 2016, causing the City to violate its discharge permit. The Complaint alleges two counts against Sensient Flavors for violations of Illinois state law; the first for causing water pollution alleged to have come from the City of Amboy wastewater treatment plant; and the second for the introduction of contaminants into a sewage works (i.e., the City of Amboy’s wastewater treatment plant). The Complaint seeks to enjoin Sensient Flavors from further violations, to assess civil penalties for each violation, and to order payment of all costs, including attorney, expert witness, and consultant fees.

The Company believes the facility’s discharges in question were done with the consent of the City of Amboy and in compliance with Illinois state law, and that Sensient Flavors complied with its wastewater permit, City of Amboy ordinances, and applicable Illinois state laws. The Company notes that at all times relevant to the Complaint, the City of Amboy accepted Sensient Flavors’ wastewater and, in fact, charged Sensient Flavors for treating Sensient Flavors’ wastewater. While the parties have been engaged in settlement discussion since March 2018, and the Company remains hopeful that it will be able to resolve this matter, the Company will nonetheless continue to vigorously defend itself. The Company does not believe that the civil penalties and costs, or the settlement costs in lieu thereof, will be material to the Company’s consolidated financial statements.

Other Claims and Litigation

The Company is subject to various claims and litigation arising in the normal course of business. The Company establishes reserves for claims and proceedings when it is probable that liabilities exist and reasonable estimates of loss can be made. While it is not possible to predict the outcome of these matters, based on our assessment of the facts and circumstances now known, we do not believe that these matters, individually or in the aggregate, will have a material adverse effect on our financial position. However, actual outcomes may be different from those expected and could have a material effect on our results of operations or cash flows in a particular period.

16.	Subsequent ~~Events~~Event

~~In October 2017,~~On July 10, 2018, the Company ~~amended its existing accounts receivable securitization program to increase~~completed the ~~commitment size from $40 million to $60 million and extend the expiration date~~acquisition of ~~the program until October 2018. Trade receivables were sold to Wells Fargo, for which~~Mazza Innovation Limited, a botanical extraction business with patented solvent-free extraction processes, located in Vancouver, Canada. The Company paid $20 million ~~in proceeds was received.~~of cash for this acquisition. This business provides broad technologies for both the Color and Flavors & Fragrances segments.

Index

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

~~The following discussion of the financial condition and results of operations excludes the results of discontinued operations unless otherwise indicated.~~

Revenue

Revenue was ~~$353.5~~$363.0 million and ~~$349.7~~$338.5 million for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, an increase of ~~1.1%~~7.3%. Revenue was ~~$1.0 billion~~$719.5 million and ~~$1.1 billion~~$679.9 million for the ~~nine~~six months ended ~~September~~June 30, 2018 and 2017, respectively, an increase of 5.8%. For the three and ~~2016, respectively. The~~six months ended June 30, 2018 and 2017, the impact of foreign exchange rates increased consolidated revenue by approximately ~~1.5% for the three months ended September 30, 2017~~2% and ~~decreased revenue by 0.2% for the nine months ended September 30, 2017.~~3%, respectively.

Gross Profit

The Company’s gross margin was ~~34.7%~~33.5% and ~~35.1%~~35.2% for the three months ended ~~September~~June 30, 2018 and 2017, ~~and 2016,~~ respectively. ~~Included in cost of sales is $3.1 million of restructuring costs for the three months ended September 30, 2017.~~ The decrease in gross margin for the three months ended ~~September~~June 30, ~~2017,~~2018, is primarily a result of higher ~~restructuring~~raw material costs and manufacturing and other costs, partially offset by higher ~~selling prices~~volumes and ~~the favorable impact of the divestitures~~ ~~(See~~ ~~Note 11,~~ ~~Restructuring, and Note 13,~~ ~~Divestiture~~, for further information). Restructuring costs reduced gross margin by 90 basis points during the three months ended September 30, 2017, and did not have a material impact on margin for the three months ended September 30, 2016.product mix.

Gross margin was ~~35.1%~~34.0% and ~~34.5%~~35.3% for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively. Included in costs of sales is ~~$3.4 million and $0.8~~$0.3 million of restructuring costs for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016, respectively.~~2017. The decrease in gross margin for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, is primarily ~~due to the increase in restructuring~~a result of higher raw material costs and manufacturing and other costs, partially offset by higher ~~selling prices~~volumes and ~~the favorable impact of the divestitures.~~product mix. Restructuring costs reduced gross margin by 3010 basis points ~~for~~during the ~~nine~~six months ended ~~September~~June 30, ~~2017, and did not have a material impact on the margin during the nine months ended September 30, 2016.~~2017.

Selling and Administrative Expense

Selling and administrative expenses as a percent of revenue were ~~20.0%~~19.1% and ~~20.4%~~22.1% for the three months ended ~~September~~June 30, 2018 and 2017, respectively. In 2018, there were no restructuring and ~~2016, respectively.~~other costs. Restructuring and other costs ~~(see the discussions below regarding~~ ~~Restructuring~~, ~~Divestiture, and~~ ~~Non-GAAP Financial Measures~~) of ~~$2.9 million and $3.0~~$7.9 million were included in selling and administrative expenses for the three months ended ~~September~~June 30, ~~2017 and 2016, respectively.~~2017. The decrease in selling and administrative expenses as a percent of revenue is primarily due to ~~lower outside services.~~the restructuring and other costs incurred in 2017. Restructuring and other costs increased selling and administrative expense as a percent of revenue by 80230 basis points for ~~both~~ the three months ended ~~September~~June 30, ~~2017 and 2016.~~2017.

Selling and administrative expenses as a percent of revenue were ~~23.5%~~19.0% and ~~20.9%~~25.3% for the ~~nine~~six months ended ~~September~~June 30, 2018 and 2017, respectively. In 2018, there were no restructuring and ~~2016, respectively.~~other costs. Restructuring and other costs of ~~$41.8 million and $19.1~~$38.8 million were included in selling and administrative expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016, respectively.~~2017. The ~~increase~~decrease in selling and administrative expenses as a percent of revenue is primarily due to the ~~higher~~ restructuring and other costs ~~and profit on a sale of an import right~~incurred in ~~2016 in the Flavors & Fragrances segment, partially offset by lower performance-based executive compensation and lower outside services.~~2017. Restructuring and other costs increased selling and administrative expense as a percent of revenue by ~~410 basis points and 180~~570 basis points for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016, respectively.~~2017.

Operating Income

Operating income was ~~$52.0~~$52.2 million and ~~$51.2~~$44.4 million for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively. Operating margins were ~~14.7%~~14.4% and ~~14.6%~~13.1% for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively. Restructuring and other costs reduced operating margins by ~~170 basis points and 90~~230 basis points during the three months ended ~~September~~June 30, 2017.

Operating income was $107.9 million and $68.4 million for the six months ended June 30, 2018 and 2017, respectively. Operating margins were 15.0% and ~~2016,~~10.1% for the six months ended June 30, 2018 and 2017, respectively. Restructuring and other costs reduced operating margins by 570 basis points during the six months ended June 30, 2017.

Interest Expense

Interest expense was $5.6 million and $4.7 million for the three months ended June 30, 2018 and 2017, respectively, and $11.1 million and $9.5 million for the six months ended June 30, 2018 and 2017, respectively. The increase in interest expense is a result of the Company’s higher average debt balance.

Index

Operating income was $120.4 million and $142.3 million for the nine months ended September 30, 2017 and 2016, respectively. Operating margins were 11.7% and 13.5% for the nine months ended September 30, 2017 and 2016, respectively. Restructuring and other costs reduced operating margins by 430 basis points and 190 basis points during the nine months ended September 30, 2017 and 2016, respectively.

~~Interest Expense~~

Interest expense was $4.9 million and $4.6 million for the three months ended September 30, 2017 and 2016, respectively, and $14.5 million and $14.0 million for the nine months ended September 30, 2017 and 2016, respectively.

Income Taxes

Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Legislation. The Company is applying SAB 118, and believes the impact of the 2017 Tax Legislation on the 2018 and 2017 income tax expenses should be considered provisional estimates. The ultimate impact could differ from these provisional amounts, possibly materially, due to additional guidance, changes in interpretation, and additional analysis and assumptions the Company has made. Any adjustments to the 2018 and 2017 provisional estimates will be reported in income tax expense in the reporting period in which any such adjustments are determined, which will be no later than the fourth quarter of 2018.

Acquisition

On March 9, 2018, the Company completed the acquisition of certain net assets and the natural color business of ~~Restructuring~~,GlobeNatural, a natural food and ~~impacted by a tax planning opportunity that expires~~ingredient company based in ~~2017.~~Lima, Peru. The Company paid $10.8 million of cash for this acquisition. The Company acquired net assets of $2.1 million and identified intangible assets, principally customer relationships of $2.0 million, and allocated the remaining $6.7 million to goodwill. These operations are included in the Color segment.

Restructuring

~~Index~~

~~As of September 30, 2017, the Company has recorded assets held for sale of land, buildings, and equipment of $7.4 million related to the 2014 Restructuring Plan.~~

~~Since initiating the Plan, the Company has realized total savings of approximately $22 million as of September 30, 2017. During~~in Corporate & Other for the three and ~~nine~~six months ended ~~September~~June 30, 2017, respectively. There were no restructuring and other costs incurred in the Company realized a de minimis amount of savings. The Company does not expect any additional savings for the remainder of 2017, but expects additional savings of approximately $4 million to $5 million inthree or six months ended June 30, 2018. Expected savings have shifted from 2017 to 2018 primarily due to the delay in closing the Indianapolis facility. The Company intends to continue to optimize production at the consolidating sites after the completion of the restructuring activities.

Divestiture

1716

Index

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 EPS from continuing operations (which exclude restructuring and other costs) and (2) percentage changes in revenue, operating income, diluted EPS, adjusted operating income, and adjusted diluted EPS on a local currency basis (which eliminate the effects that result from translating its international operations into U.S. dollars). The other costs in 2017 ~~and 2016~~ are for the divestiture related costs discussed under Divestiture above. There were no restructuring and other costs incurred in the three and six months ended June 30, 2018.

The Company has included each of these non-GAAP measures in order to provide additional information regarding our underlying operating results and comparable ~~period-to-period~~year-over-year performance. Such information is supplemental to information presented in accordance with GAAP and is not intended to represent a presentation in accordance with GAAP. These non-GAAP measures should not be considered in isolation. Rather, they should be considered together with GAAP measures and the rest of the information included in this report. 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.

	Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended June 30,								Six Months Ended June 30,
	2017		2016			% Change			2017			2016			% Change			2018		2017			% Change			2018		2017			% Change
Operating income from continuing operations (GAAP)	$	52,010	$	51,151			1.7	%	$	120,427		$	142,335			(15.4	%)

Operating income (GAAP)																		$	52,181	$	44,380			17.6	%	$	107,862	$	68,417			57.7	%
Restructuring - Cost of products sold		3,073		-						3,415			810						-		-						-		342
Restructuring - Selling and administrative		2,927		2,781						30,212			8,588						-		7,415						-		27,285
Other - Selling and administrative ⁽¹⁾		14		191						11,555			10,483						-		494						-		11,541
Adjusted operating income	$	58,024	$	54,123			7.2	%	$	165,609		$	162,216			2.1	%	$	52,181	$	52,289			(0.2	%)	$	107,862	$	107,585			0.3	%

Net earnings from continuing operations (GAAP)	$	32,213	$	35,619			(9.6	%)	$	76,179		$	91,563			(16.8	%)
Net earnings (GAAP)																		$	39,123	$	30,774			27.1	%	$	77,317	$	43,966			75.9	%
Restructuring and other, before tax		6,014		2,972						45,182			19,881						-		7,909						-		39,168
Tax impact of restructuring and other		681		(1,399	)					(7,424	)		(2,999	)					-		(278	)					-		(8,105	)
Adjusted net earnings	$	38,908	$	37,192			4.6	%	$	113,937		$	108,445			5.1	%	$	39,123	$	38,405			1.9	%	$	77,317	$	75,029			3.0	%

Diluted EPS from continuing operations (GAAP)	$	0.73	$	0.79			(7.6	%)	$	1.72		$	2.04			(15.7	%)	$	0.92	$	0.69			33.3	%	$	1.81	$	0.99			82.8	%
Restructuring and other, net of tax		0.15		0.04						0.85			0.38						-		0.17						-		0.70
Adjusted diluted EPS	$	0.89	$	0.83			7.2	%	$	2.58		$	2.42			6.6	%	$	0.92	$	0.87			5.7	%	$	1.81	$	1.69			7.1	%

(1)

The other costs in 2017 ~~and 2016~~ are for the divestiture related costs discussed under Divestiture above.

1817

Index

The following table summarizes the percentage change for the results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, compared to the results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, in the respective financial measures.

	Three Months Ended September 30, 2017									Nine Months Ended September 30, 2017									Three Months Ended June 30, 2018									Six Months Ended June 30, 2018
Revenue	Total			Foreign Exchange Rates			Local Currency			Total			Foreign Exchange Rates			Local Currency			Total			Foreign Exchange Rates			Local Currency			Total			Foreign Exchange Rates			Local Currency
Flavors & Fragrances		(2.4	%)		1.3	%		(3.7	%)		(6.6	%)		(0.8	%)		(5.9	%)		7.1	%		1.6	%		5.4	%		3.9	%		3.0	%		0.9	%
Color		6.0	%		2.1	%		3.8	%		4.1	%		0.2	%		3.9	%		8.6	%		1.4	%		7.2	%		9.2	%		3.6	%		5.6	%
Asia Pacific		1.9	%		0.5	%		1.4	%		1.0	%		0.4	%		0.6	%		5.4	%		1.4	%		4.0	%		3.8	%		2.9	%		0.9	%
Total Revenue		1.1	%		1.5	%		(0.4	%)		(1.9	%)		(0.2	%)		(1.6	%)		7.3	%		1.5	%		5.7	%		5.8	%		3.2	%		2.6	%


Operating Income from Continuing Operations
Operating Income
Flavors & Fragrances		1.9	%		0.3	%		1.6	%		(5.5	%)		(0.5	%)		(5.0	%)		(15.8	%)		(0.2	%)		(15.6	%)		(13.9	%)		0.6	%		(14.4	%)
Color		7.9	%		2.1	%		5.8	%		6.0	%		(0.1	%)		6.1	%		7.1	%		2.0	%		5.1	%		9.3	%		4.3	%		5.0	%
Asia Pacific		(7.5	%)		0.8	%		(8.3	%)		(15.7	%)		0.6	%		(16.3	%)		21.3	%		2.3	%		19.0	%		6.0	%		4.7	%		1.3	%
Corporate & Other		9.9	%		0.2	%		9.8	%		35.3	%		(0.1	%)		35.4	%		(55.4	%)		0.6	%		(56.0	%)		(72.4	%)		2.1	%		(74.5	%)
Operating Income from Continuing Operations		1.7	%		1.3	%		0.4	%		(15.4	%)		(0.3	%)		(15.1	%)
Operating Income																				17.6	%		1.2	%		16.4	%		57.7	%		3.1	%		54.6	%

Diluted EPS from Continuing Operations		(7.6	%)		1.3	%		(8.9	%)		(15.7	%)		(0.5	%)		(15.2	%)
Diluted EPS																				33.3	%		1.4	%		31.9	%		82.8	%		3.0	%		79.8	%

Adjusted Operating Income ⁽¹⁾		7.2	%		1.3	%		5.9	%		2.1	%		(0.3	%)		2.4	%		(0.2	%)		1.2	%		(1.4	%)		0.3	%		3.1	%		(2.8	%)
Adjusted Diluted EPS ⁽¹⁾		7.2	%		1.2	%		6.0	%		6.6	%		(0.4	%)		7.0	%		5.7	%		1.1	%		4.6	%		7.1	%		3.0	%		4.1	%

(1)

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

SEGMENT INFORMATION

The Company determines its operating segments based on information utilized by the chief operating decision maker to allocate resources and assess performance. Segment performance is evaluated on operating income of the respective business units before restructuring and other costs, which are reported in Corporate & Other, interest expense, and income taxes.

~~Beginning~~The Company’s discussion below regarding its operating segments has been updated to reflect the Company’s disaggregation of revenue, which was adopted in the first quarter of ~~2017, the results~~2018, as summarized in Part I, Item I, Note 4, Segment Information, of operations for certain of the Company’s cosmetic and fragrance businesses in the Asia Pacific segment are now reported in the Color segment and Flavors & Fragrances segment, respectively. The results for 2016 have been restated to reflect these changes.this report.

Flavors & Fragrances

Flavors & Fragrances segment revenue was ~~$196.0~~$198.7 million and ~~$200.8~~$185.6 million for the three months ended ~~September~~June 30, 2018 and 2017, ~~and 2016,~~ respectively, ~~a decrease~~an increase of ~~2.4%~~approximately 7%. Foreign exchange rates increased segment revenue by ~~1.3%~~approximately 2%. The ~~decrease in segment revenue~~increase was primarily ~~due to lower~~a result of higher revenue in ~~Europe ($5.1 million) which was~~Natural Ingredients and Fragrances. The higher revenue in Natural Ingredients is primarily ~~due to the divestitures ($7.3 million) and lower~~a result of favorable volumes, ~~($0.7 million),~~ partially offset by lower selling prices. The higher revenue in Fragrances is primarily a result of favorable volumes, higher selling prices, ~~($1.1 million)~~ and ~~the~~ favorable ~~impact of exchange rates ($1.9 million).~~exchanges rates. Growth within Flavors was broad based but was offset by lower volumes at one site. This site has been impacted by last year’s plant consolidation and by market and customer declines in certain dairy categories.

Flavors & Fragrances segment revenue was ~~$568.4~~$387.0 million and ~~$608.7~~$372.4 million for the ~~nine~~six months ended ~~September~~June 30, 2018 and 2017, ~~and 2016,~~ respectively, ~~a decrease~~an increase of ~~6.6%~~approximately 4%. Foreign exchange rates ~~reduced~~increased segment revenue by ~~0.8%~~approximately 3%. The ~~decrease in segment revenue~~increase was primarily ~~due to~~a result of higher revenue in Fragrances and Natural Ingredients, partially offset by lower revenue in ~~Europe ($25.6 million)~~Flavors. The higher revenue in Fragrances is primarily a result of favorable volumes, higher selling prices, and ~~North America ($14.9 million).~~favorable exchange rates. The higher revenue in Natural Ingredients is primarily a result of favorable volumes and exchange rates, partially offset by the impact of the 2017 sale of the European Natural Ingredients business and lower selling prices. The lower revenue in ~~Europe was~~Flavors is primarily ~~due to the divestitures ($16.2 million),~~a result of lower volumes, ~~($8.5 million), and~~partially offset by the ~~unfavorable~~favorable impact of exchange rates ~~($4.5 million) partially offset by~~and higher selling prices ($3.7 million). The lower revenue in North America was primarily due to lower volumes ($27.4 million) partially offset by higher selling prices ($12.0 million) and the favorable impact of foreign exchange rates ($0.5 million).prices.

1918

Index

Flavors & Fragrances segment operating income was ~~$33.0~~$24.0 million and ~~$32.4~~$28.5 million for the three months ended ~~September~~June 30, 2018 and 2017, respectively, a decrease of approximately 16%. Foreign exchange rates had minimal impact on segment operating income. The lower segment operating income was primarily a result of lower operating income in Flavors and ~~2016,~~Natural Ingredients. The lower operating income in Flavors is primarily a result of lower volumes and product mix, partially offset by higher selling prices. The lower operating income in Natural Ingredients was primarily due to lower selling prices and higher raw material costs, partially offset by higher volumes and lower manufacturing and other costs. Segment operating income as a percent of revenue was 12.1% in the current quarter and 15.4% in the prior year’s comparable quarter.

Flavors & Fragrances segment operating income was $49.3 million and $57.3 million for the six months ended June 30, 2018 and 2017, respectively, ~~an increase~~a decrease of ~~1.9%~~approximately 14%. Foreign exchange rates increased segment operating income by ~~0.3%~~approximately 1%. The ~~higher~~lower segment operating income was ~~due to higher operating income in North America ($1.2 million), and Latin America ($0.3 million) partially offset by~~primarily a result of lower operating income in ~~Europe ($0.8 million).~~Flavors and Natural Ingredients. The ~~higher~~lower operating income in ~~North America~~Flavors is primarily a result of lower volumes and product mix, partially offset by higher selling prices, lower manufacturing and other costs, and lower raw material costs. The lower operating income in Natural Ingredients was primarily due to higher raw material costs and lower selling prices, ~~($3.6 million),~~ partially offset by higher ~~raw material costs ($1.0 million), higher~~volumes and lower manufacturing and other costs ($0.5 million), unfavorable volume and product mix ($0.5 million), and the unfavorable impact of foreign exchange rates ($0.4 million). The lower operating income in Europe was primarily due to unfavorable volume and mix ($1.6 million), higher manufacturing and other costs ($1.2 million), higher raw material prices ($0.7 million), partially offset by the impact of the divestiture ($1.5 million) and higher selling prices ($1.1 million).costs. Segment operating income as a percent of revenue was ~~16.8% in the current quarter~~12.7% and ~~16.1% in the prior year’s comparable quarter.~~

~~Flavors & Fragrances segment operating income was $90.3 million and $95.5 million~~15.4% for the ~~nine~~six months ended ~~September~~June 30, 2018 and 2017, and 2016, respectively, a decrease of 5.5%. Foreign exchange rates decreased segment operating income by 0.5%. The lower segment operating income was due to lower operating income in Europe ($2.6 million), North America ($2.0 million), and Latin America ($0.5 million). The lower operating income in Europe was primarily due to higher manufacturing and other costs ($6.4 million), unfavorable volume and product mix ($3.3 million), and the impact of unfavorable exchange rates ($0.2 million) partially offset by higher selling prices ($3.7 million) and the impact of the divestitures ($3.8 million). The lower operating income in North America was primarily due to unfavorable volume and product mix ($9.3 million), profit on the one-time sale of an import right in 2016 ($2.7 million), and raw material costs ($1.8 million) partially offset by higher selling prices ($12.0 million). The lower operating income in Latin America was primarily a result of higher raw material costs ($1.6 million), unfavorable volume and product mix ($0.7 million), higher manufacturing and other costs ($0.4 million), and the unfavorable impact of foreign exchange rates ($0.2 million) partially offset by higher selling prices ($2.4 million). Segment operating income as a percent of revenue was 15.9% for the nine months ended September 30, 2017, and 15.7% for the prior year’s comparable period.respectively.

Color

Segment revenue for the Color segment was ~~$133.2~~$144.3 million and ~~$125.7~~$132.9 million for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, an increase of ~~6.0%~~approximately 9%. Foreign exchange rates increased segment revenue by ~~2.1%~~approximately 1%. The higher segment revenue was due to higher sales of non-food colors ($6.0 million) and higher sales of food and beverage colors ($1.5 million). The higher sales of non-food colors were primarily due to higher volumes ($4.8 million), primarily in cosmetics, the impact of favorable exchange rates ($0.9 million), and higher selling prices ($0.4 million). The higher sales of food and beverage colorsincrease was primarily a result of higher revenue in Food & Beverage Colors and Cosmetic Colors. The higher revenue in Food & Beverage Colors is primarily a result of higher volumes, favorable exchange rates, and the impact of the acquisition (refer to Note 2, Acquisition, for more information). The higher revenue in Cosmetic Colors is primarily a result of higher volumes and favorable exchange ~~rates ($1.8 million), and higher selling prices ($0.4 million) partially offset by lower volumes ($0.8 million).~~rates.

Segment revenue for the Color segment was ~~$400.2~~$291.5 million and ~~$384.4~~$267.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, an increase of ~~4.1%~~approximately 9%. Foreign exchange rates increased segment revenue by ~~0.2%~~approximately 4%. The higher segment revenue was ~~due to~~primarily a result of higher ~~sales of non-food colors ($15.5 million)~~revenue in Food & Beverage Colors and ~~food and beverage colors ($0.3 million).~~Cosmetic Colors. The higher ~~sales~~revenue in Food & Beverage Colors is primarily a result of ~~non-food colors were primarily due to~~ higher volumes, ~~($14.1 million) and selling prices ($1.0 million), primarily in cosmetics,~~favorable exchange rates, and the impact of the acquisition. The higher revenue in Cosmetic Colors is primarily a result of higher volumes, the favorable impact of exchange rates ~~($0.4 million).~~and higher selling prices.

Segment operating income for the Color segment was ~~$28.6~~$31.1 million and ~~$26.5~~$29.1 million for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, an increase of ~~7.9%~~approximately 7%. Foreign exchange rates increased segment operating income by ~~2.1%~~approximately 2%. The higher segment operating income was primarily ~~due to~~a result of higher ~~profit for non-food colors ($2.8 million) partially offset by lower profit for food~~operating income in Cosmetic Colors and ~~beverage colors ($0.7 million).~~Food & Beverage Colors. The higher operating income ~~for non-food colors was~~in Cosmetic Colors is primarily a result of ~~volume~~higher volumes and product mix, ~~($3.5 million), higher selling prices ($0.4 million), lower raw material costs ($0.3 million), and the favorable impact of exchange rates ($0.2 million),~~ partially offset by higher manufacturing and other ~~costs ($1.4 million).~~costs. The ~~lower~~higher operating income ~~for food and beverage colors was~~in Food & Beverage Colors is primarily a result of higher ~~raw material costs ($1.3 million) and unfavorable volume~~volumes and product mix, ~~($0.7 million),~~ partially offset by ~~lower manufacturing and other costs ($0.5 million), the favorable impact of exchange rates ($0.4 million), and~~ higher ~~selling prices ($0.4 million).~~raw material costs. Segment operating income as a percent of revenue was ~~21.5%~~21.6% in the current quarter and ~~21.1%~~21.9% in the prior year’s comparable quarter.

Segment operating income for the Color segment was ~~$87.9~~$64.8 million and ~~$82.9~~$59.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, an increase of ~~6.0%~~approximately 9%. Foreign exchange rates ~~decreased~~increased segment operating income by ~~0.1%~~approximately 4%. The higher segment operating income was primarily ~~due to~~a result of higher ~~profit for non-food colors ($6.0 million) partially offset by lower profit for food and beverage colors ($1.1 million).~~operating income in Cosmetic Colors. The higher operating income ~~for non-food colors was~~in Cosmetic Colors is primarily a result of ~~volume~~higher volumes and product mix, ~~($7.6 million) and~~ higher selling prices, ~~($1.0 million)~~and the favorable impact of exchange rates, partially offset by higher manufacturing and other costs ($2.5 million), and the unfavorable impact of foreign exchange rates ($0.2 million). The lower operating income for food and beverage colors was primarily a result of unfavorable volume and product mix ($1.6 million), higher manufacturing and other costs ($0.6 million), and higher raw material costs ($0.6 million), partially offset by higher selling prices ($1.7 million).costs. Segment operating income as a percent of revenue was ~~22.0%~~22.2% for both the six month periods ended June 30, 2018 and ~~21.6% for the nine months ending September 30, 2017 and 2016, respectively.~~2017.

~~Index~~

Asia Pacific

Segment revenue for the Asia Pacific segment was ~~$32.7~~$30.5 million and ~~$32.1~~$28.9 million for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, an increase of ~~1.9%~~approximately 5%. Foreign exchange rates increased segment revenue by ~~0.5%~~approximately 1%. The higher segment revenue was primarily due to higher selling prices ~~($0.5 million)~~ and ~~the favorable impact of foreign exchange rates ($0.2 million) partially offset by lower volumes ($0.1 million).~~volumes.

Index

Segment revenue for the Asia Pacific segment was ~~$91.3~~$60.8 million and ~~$90.4~~$58.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, an increase of ~~1.0%~~approximately 4%. Foreign exchange rates increased segment revenue by ~~0.4%~~approximately 3%. The higher segment revenue was primarily due to favorable exchange rates and higher selling prices, ~~($1.3 million), and the favorable impact of foreign exchange rates ($0.4 million)~~ partially offset by lower ~~volumes ($0.7 million).~~volumes.

Segment operating income for the Asia Pacific segment was ~~$5.8~~$4.6 million and ~~$6.3~~$3.8 million for the three months ended ~~September~~June 30, 2018 and 2017, ~~and 2016,~~ respectively, ~~a decrease~~an increase of ~~7.5%~~approximately 21%. Foreign exchange rates increased segment operating income by ~~0.8%~~approximately 2%. The ~~decrease in~~higher segment operating income was primarily ~~a result of higher manufacturing and other costs ($1.0 million), and unfavorable volume and product mix ($0.4 million), partially offset by~~due to higher selling prices ~~($0.5 million)~~ and ~~lower raw material costs ($0.3 million).~~higher volumes and product mix. Segment operating income as a percent of revenue was ~~17.7%~~15.2% in the current quarter and ~~19.5%~~13.2% in the prior year’s comparable quarter.

Segment operating income for the Asia Pacific segment was ~~$14.8~~$9.5 million and ~~$17.5~~$9.0 million for the ~~nine~~six months ended ~~September~~June 30, 2018 and 2017, ~~and 2016,~~ respectively, ~~a decrease~~an increase of ~~15.7%~~approximately 6%. Foreign exchange rates increased segment operating income by ~~0.6%~~approximately 5%. The ~~decrease in~~higher segment operating income was primarily ~~a result of~~due to higher selling prices and higher volumes and product mix, partially offset by higher manufacturing and other costs ($3.5 million), higher raw material costs ($0.2 million), and unfavorable volume and product mix ($0.4 million) partially offset by higher selling prices ($1.3 million) and the favorable impact of exchange rates ($0.1 million).costs. Segment operating income as a percent of revenue was ~~16.2%~~15.6% and ~~19.4%~~15.3% for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively.

Corporate & Other

The Corporate & Other operating loss was ~~$15.4~~$7.6 million and ~~$14.0~~$17.0 million for the three months ended ~~September~~June 30, 2018 and 2017, respectively, and ~~2016,~~$15.8 million and $57.1 million, for the six months ended June 30, 2018 and 2017, respectively. The ~~higher~~lower operating loss ~~was~~in both the three and six month periods ended June 30, 2018, were primarily a result of ~~higher~~the absence in 2018 of the restructuring and other costs ~~($3.1 million), partially offset by lower outside services ($1.6 million). Restructuring and other costs~~that were ~~$6.0 million and $3.0 million for the three months ended September 30,~~incurred in 2017 ~~and 2016, respectively.~~

The Corporate & Other operating loss was $72.5 million and $53.6 million for the nine months ended September 30, 2017 and 2016, respectively. The higher operating loss was primarily a result of higher restructuring and other costs ($25.3 million) partially offset by lower outside services ($3.9 million) and lower performance based executive compensation ~~($1.3 million).~~incurred in 2018. Restructuring and other costs were ~~$45.2~~$7.9 million and ~~$19.9~~$39.2 million for the ~~nine months~~three and six month periods ended ~~September~~June 30, 2017, respectively. There were no restructuring and ~~2016, respectively.~~other costs incurred in the three and six month periods ended June 30, 2018.

LIQUIDITY AND FINANCIAL CONDITION

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 ~~September~~June 30, ~~2017.~~2018. The Company expects its cash flow from operations and its available debt capacity can be used to meet future cash requirements for operations, capital expenditures, dividend payments, acquisitions, and stock repurchases.

Cash Flows from Operating Activities

Net cash ~~provided by~~used in operating activities was ~~$111.1 million and $150.6~~$28.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016, respectively. The lower~~2018, compared to net cash provided by operating activities ~~is primarily due~~of $0.8 million for the six months ended June 30, 2017. The Company adopted ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, during the first quarter of 2018 (refer to Note 1, Accounting Policies, included in Part I, Item I of this report). The Company adopted this standard in the first quarter of 2018, using monthly cash receipts as its unit of account for cash received related to the beneficial interest in previously transferred receivables. In the second quarter of 2018, the Company updated its unit of account to daily cash receipts for cash received related to the beneficial interest in the previously transferred receivables. The Company has included $91 million and $59 million as cash flows from investing activities for the six month periods ended June 30, 2018 and 2017, respectively, related to collections on beneficial interests in previously transferred receivables. The reported amounts include adjustments of $35 million and $25 million of collections on beneficial interests in previously transferred receivables for the three months ended March 31, 2018 and 2017, respectively, which were previously reported as cash flows from operating activities.

In June 2018, the Company amended its account receivable securitization program with Wells Fargo. As a ~~higher use~~result of ~~working capital~~the amendment made to the Company’s account receivable securitization program (refer to Note 11, Accounts Receivable Securitization, for more information), the Company’s trade account receivables increased by $60 million and the ~~timing~~Company’s long-term debt increased by $60 million. This non-cash transaction was recorded on the Company’s Consolidated Condensed Statement of ~~tax payments.~~

Cash Flows during the six months ended June 30, 2018.

~~Index~~

Cash Flows from Investing Activities

Net cash ~~used in~~provided by investing activities was ~~$15.3~~$56.9 million and ~~$54.5~~$60.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively. Capital expenditures were ~~$32.8~~$24 million and ~~$58.0~~$20 million for the ~~nine~~six months ended ~~September~~June 30, 2018 and 2017, respectively. During the first six months of 2018 and ~~2016, respectively.~~2017, the Company has included $91 million and $59 million, respectively, of cash receipts on sold receivables, related to the adoption of ASU (2016-15), discussed above. During the three months ended March 31, 2018, the Company acquired one business and the assets of another business for a total of $11.3 million. During the three months ended March 31, 2017, the Company sold two ~~different~~ businesses and a facility and certain business lines for $12.5 million in proceeds. During the three months ended June 30, 2017, the Company sold a facility (that was previously closed as a result of the Company’s 2014 Restructuring Plan) for $5.0 million.

Index

Cash Flows from Financing Activities

Net cash used in financing activities was ~~$106.9~~$28.9 million and ~~$86.0~~$68.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively. The Company repurchased ~~$64.5~~$72.7 million and ~~$27.7~~$26.7 million of Company stock for the six months ended June 30, 2018 and 2017, respectively. Net debt increased in the first ~~nine~~six months of ~~2017~~2018 by $75 million and ~~2016, respectively. Net debt~~ decreased by $15 million in the first ~~nine~~six months of ~~2017 and 2016, by $1.8 million and $22.3 million, respectively.~~2017. For purposes of the cash flow statement, net changes in debt exclude the impact of foreign exchange rates. Dividends of ~~$39.7~~$28.2 million and ~~$36.4~~$26.6 million were paid during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively. Dividends paid were 9066 cents per share and 8160 cents per share in the first ~~nine~~six months of 2018 and 2017, ~~and 2016,~~ respectively. ~~Subsequent to September 30, 2017,~~

In June 2018, the Company ~~announced that~~amended its ~~quarterly dividend would increase~~account receivable securitization program with Wells Fargo. As a result of the amendment made to ~~33 cents per share, starting with its dividend payable on December 1, 2017.~~the Company’s account receivable securitization program (refer to Note 11, Accounts Receivable Securitization, for more information), the Company’s trade account receivables increased by $60 million and the Company’s long-term debt increased by $60 million. This non-cash transaction did not impact the Company’s Consolidated Condensed Statement of Cash Flows during the six-months ended June 30, 2018.

CONTRACTUAL OBLIGATIONS

~~There~~Refer to Note 11, Accounts Receivable Securitization, included in Part I, Item I of this report for information about the Company’s amended account receivable securitization program. Otherwise, there have been no material changes in the Company’s contractual obligations during the quarter ended ~~September~~June 30, ~~2017.~~2018. For additional information about contractual obligations, refer to “Contractual Obligations” under Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

OFF-BALANCE SHEET ARRANGEMENTS

~~In 2016,~~As of June 30, 2018, the Company ~~entered into~~has no off-balance sheet arrangements.

As previously disclosed, the Company was engaged in an accounts receivable securitization program with Wells Fargo with a commitment size of ~~$40~~$60 million, whereby transactions under the program ~~are~~were accounted for as sales of trade receivables in accordance with ASC Topic 860, Transfers and Servicing, and removed from the Company’s ~~consolidated balance sheet (refer~~Consolidated Balance Sheet. In June 2018, the Company amended this accounts receivable securitization program to eliminate the sale of the trade receivables from the Company to Wells Fargo. In connection with the amendment, Wells Fargo’s ownership interest in the trade receivables was converted into undivided interests in certain of the Company’s trade receivables to secure a loan of up to $60 million to the Company and the deferred purchase price was eliminated. As a result of this amendment, the Company’s trade account receivables increased by $60 million and the Company’s long-term debt increased by $60 million during the second quarter of 2018. See Note ~~10,~~11, Accounts Receivable Securitization~~included in Part I, Item I of this report). In October 2017, the Company extended this program for 1 year~~, and ~~increased the commitment size to $60 million (refer to~~ Note ~~16,~~12, ~~Subsequent Event~~Debt, included in Part I, Item I of this ~~report).~~report for further information.

CRITICAL ACCOUNTING POLICIES

There have been no material changes in the Company’s critical accounting policies during the quarter ended ~~September~~June 30, ~~2017.~~2018. For additional information about critical accounting policies, refer to “Critical Accounting Policies” under Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the Company’s exposure to market risk during the quarter ended ~~September~~June 30, ~~2017.~~2018. For additional information about market risk refer to Item 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

Index

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures: The Company carried out an evaluation, under the supervision and with the participation of management, including the Company’s Chairman, President and Chief Executive Officer and its Senior Vice President and Chief Financial Officer, of the effectiveness, as of the end of the period covered by this report, of the design and operation of the disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act. Based upon that evaluation, the Company’s Chairman, President and Chief Executive Officer and its Senior Vice President and Chief Financial Officer have concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report.

Change in Internal Control Over Financial Reporting: There ~~have~~has been no changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the Company’s most recent quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

~~Index~~

FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements that reflect management’s current assumptions and estimates of future economic circumstances, industry conditions, Company performance, and financial results. Forward-looking statements include statements in the future tense, statements referring to any period after ~~September~~June 30, ~~2017,~~2018, and statements including the terms “expect,” “believe,” “anticipate”, and other similar terms that express expectations as to future events or conditions. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for such forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, and other factors that could cause actual events to differ materially from those expressed in those statements. A variety of factors could cause the Company’s actual results and experience to differ materially from the anticipated results. These factors and assumptions include the pace and nature of new product introductions by the Company and the Company’s customers; the Company’s ability to successfully implement its growth ~~strategies and restructuring plan;~~strategies; the outcome of the Company’s various productivity-improvement and cost-reduction efforts; the effectiveness of the Company’s past restructuring activities; changes in costs and availability of raw materials and energy; industry and economic factors related to the Company’s domestic and international business; competition from other suppliers of colors, flavors, and fragrances; growth or contraction in markets for products in which the Company competes; terminations and other changes in customer relationships; the costs of compliance, or failure to comply, with laws and regulations applicable to our industries and markets; changing consumer preferences and changing technologies; industry and customer acceptance of price increases; currency exchange rate fluctuations; cost and availability of credit; results of litigation, governmental investigations, or other proceedings; complications as a result of existing or future information technology system applications and hardware; the matters discussed under Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016;~~2017; and the matters discussed above under Item 2 including the critical accounting policies referenced therein. Except to the extent required by applicable law, the Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

PART II.

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

People of the State of Illinois v. Sensient Flavors LLC

Index

Other Claims and Litigation

~~SEC Inquiry~~

On October 22, 2015, the Company received an informal inquiry from the staff of the Securities and Exchange Commission’s Division of Enforcement requesting the voluntary provision of documents and information generally related to the Company’s disclosures of its restructuring activities, its treatment of long-lived assets, and its use of non-GAAP financial measures in its SEC filings and 2014 Annual Report to Shareholders. The Company is fully cooperating with the inquiry and is unable to predict the outcome of the inquiry or its potential impact.

ITEM 1A.

RISK FACTORS

There were no material changes to the risk factors previously disclosed in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

~~Index~~

~~ITEM 2.~~

~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

~~The following table provides the specified information about the repurchases of its common shares by the Company during the third quarter of~~ 2017:.

Period
Total number
of shares
purchased

Average
price paid
per share

Total number of
shares purchased as
part of a publicly
announced plan (1)

Maximum number of
shares that may be
purchased under
publicly announced plans

July 1 to July 31, 2017 213,085 $ 75.20 213,085 877,026
August 1 to August 31, 2017 292,000 74.38 292,000 585,026
September 1 to September 30, 2017 - - - 585,026

Total 505,085 $ 74.73 505,085

~~(1)~~

Shares were repurchased pursuant to the Board of Directors’ August 21, 2014, authorization to repurchase up to five million shares. Repurchases under this authorization do not have an expiration date. This authorization may be modified, suspended, or discontinued by the Board of Directors at any time. On October 19, 2017, the Board of Directors, approved a resolution to increase the authorization to repurchase under its share repurchase program by three million shares.

ITEM 6.

EXHIBITS

See Exhibit Index following this report.

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Index

SENSIENT TECHNOLOGIES CORPORATION

EXHIBIT INDEX

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED ~~SEPTEMBER~~JUNE 30, ~~2017~~2018

Exhibit		Description		Incorporated by Reference From	Filed Herewith

~~10.1~~4.1(d)		Third Amendment ~~No. 1~~dated as of June 22, 2018 to ~~the Receivables Sale~~Note Purchase Agreement dated as of ~~October 2, 2017, among Sensient Natural Ingredients LLC,Sensient Colors LLC, Sensient Flavors LLC, and Sensient Receivables LLC~~March 22, 2011		~~Exhibit 10.1 to Current Report on Form 8-K dated October 2, 2017 (Commission File No. 1-7626)~~	X

~~10.2~~4.2(d)		Third Amendment ~~No. 1 to the Receivables Purchase Agreement and Performance Undertaking,~~ dated as of ~~October 2, 2017, among Sensient Receivables LLC, Sensient Technologies Corporation, and Wells Fargo Bank, National Association~~June 22, 2018 to Note Purchase Agreement dated as of April 5, 2013		~~Exhibit 10.2 to Current Report on Form 8-K dated October 2, 2017 (Commission File No. 1-7626)~~	X

4.3(c)	Second Amendment dated as of June 22, 2018 to Note Purchase Agreement dated as of November 6, 2015		X

4.4(b)	First Amendment dated as of June 22, 2018 to Note Purchase Agreement dated as of May 3, 2017		X

10.2(d)	First Amendment to Second Amended and Restated Credit Agreement dated as of June 22, 2018		X

10.5(c)	Amendment No. 2 to Receivables Purchase Agreement, dated as of June 26, 2018		X

31		Certifications of the Company’s Chairman, President & Chief Executive Officer and Senior Vice President & Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act			X

32		Certifications of the Company’s Chairman, President & Chief Executive Officer and Senior Vice President & Chief Financial Officer pursuant to 18 United States Code § 1350			X

101		Interactive data files pursuant to Rule 405 of Regulation S-T			X

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Index

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		SENSIENT TECHNOLOGIES CORPORATION

Date:	~~November 7, 2017~~August 6, 2018	By:	/s/ John J. Manning
			John J. Manning,Vice President,
			General Counsel ~~&Secretary~~& Secretary


Date:	~~November 7, 2017~~August 6, 2018	By:	/s/ Stephen J. Rolfs
			Stephen J. Rolfs, Senior Vice President & Chief Financial Officer

2625

Wisconsin		39‑0561070
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

Class		Outstanding at ~~October~~July 31, ~~2017~~2018
Common Stock, par value $0.10 per share		~~43,475,886~~42,275,723

			Page No.

PART I. FINANCIAL INFORMATION:

	Item 1.	Financial Statements:
		Consolidated Condensed Statements of Earnings ‑ Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016.~~2017.	1

		Consolidated Condensed Statements of Comprehensive Income - Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016.~~2017.	2

		Consolidated Condensed Balance Sheets - ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016.~~2017.	3

		Consolidated Condensed Statements of Cash Flows ‑ ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016.~~2017.	4

		Notes to Consolidated Condensed Financial Statements.	5

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	15

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	2221

	Item 4.	Controls and Procedures.	22

PART II. OTHER INFORMATION:

	Item 1.	Legal Proceedings.	2322

	Item 1A.	Risk Factors.	23

	Item 2.6.	~~Unregistered Sales of Equity Securities and Use of Proceeds.~~Exhibits.	2423

	~~Item 6.~~	~~Exhibits.~~	24

		Exhibit Index.	2524

		~~Signatures.~~Signatures.	2625

(In thousands)	Selling & Administrative		Cost of Products Sold		Total

Employee separation	$	29	$	-	$	29
Long-lived asset impairment		976		-		976
Write-down of inventory		-		3,073		3,073
Other restructuring costs⁽¹⁾		1,922		-		1,922

Total	$	2,927	$	3,073	$	6,000

(In thousands)	Employee Separations			Other			Total
Balance as of December 31, 2016	$	6,959		$	570		$	7,529
Expense activity⁽¹⁾		(4,396	)		7,804			3,408
Cash spent		(2,250	)		(7,766	)		(10,016	)
Translation adjustment		101			-			101
Balance as of September 30, 2017	$	414		$	608		$	1,022

Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of a publicly announced plan (1)		Maximum number of shares that may be purchased under publicly announced plans

July 1 to July 31, 2017		213,085	$	75.20		213,085		877,026
August 1 to August 31, 2017		292,000		74.38		292,000		585,026
September 1 to September 30, 2017		-		-		-		585,026

Total		505,085	$	74.73		505,085