SENSIENT TECHNOLOGIES CORPORATION UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
- ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019
- TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
Commission file number: 1-7626
- Full title of the plan and address of the plan, if different from that of the issuer named below:
Sensient Technologies Corporation
Retirement Employee Stock Ownership Plan
- Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
SENSIENT TECHNOLOGIES CORPORATION
777 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202-5304
Table of Contents | ||
Page | ||
4 | ||
Statements of Net Assets Available for Benefits - December 31, 2019 and 2018 | 5 | |
Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 2019 | 6 | |
7 | ||
15 | ||
16 | ||
17 | ||
2 | ||
SENSIENT TECHNOLOGIES CORPORATION
RETIREMENT EMPLOYEE STOCK OWNERSHIP PLAN
FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018,
SUPPLEMENTAL SCHEDULE AS OF DECEMBER 31, 2019, AND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
3
Report of Independent Registered Public Accounting Firm
The Benefits Administrative Committee
Sensient Technologies Corporation Retirement Employee Stock Ownership Plan
Opinion on the Financial Statements
We have audited the accompanying statements of net assets available for benefits of Sensient Technologies Corporation Retirement Employee Stock Ownership Plan (the Plan) as of December 31, 2019 and 2018, and the related statement of changes in net assets available for benefits for the year ended December 31, 2019, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2019 and 2018, and the changes in net assets available for benefits for the year ended December 31, 2019, in conformity with accounting principles generally accepted in the United States.
Basis for Opinion
These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on the Plan's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether due to error or fraud. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Plan's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Wipfli LLP
We have served as the Plan's auditor since 2014.
June 8, 2020
Milwaukee, Wisconsin
4
SENSIENT TECHNOLOGIES CORPORATION
RETIREMENT EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2019 AND 2018
ASSETS:
Investments at fair value:
Interest in Sensient Technologies Corporation Master Trust
Contributions receivable
Net assets available for benefits
See notes to financial statements.
20192018
$ | 48,454,171 | $ | 43,573,233 |
1,072,794 | 1,044,094 | ||
$ | 49,526,965 | $ | 44,617,327 |
5
SENSIENT TECHNOLOGIES CORPORATION
RETIREMENT EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2019
ADDITIONS:
Net investment income from Sensient Technologies Corporation Master Trust
Sensient Technologies Corporation contributions
Total additions
DEDUCTIONS:
Withdrawals and distributions
Net increase
Net assets available for benefits:
Beginning of year
End of year
See notes to financial statements.
2019 | |
$ | 8,803,412 |
1,072,794 | |
9,876,206 | |
(4,966,568) | |
4,909,638 | |
44,617,327 | |
$ | 49,526,965 |
6 |
SENSIENT TECHNOLOGIES CORPORATION
RETIREMENT EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2019
Note 1 - Description of the Plan:
The following description of the Sensient Technologies Corporation Retirement Employee Stock Ownership Plan (the Plan) provides only general information. Participants should refer to the Plan agreement for a more comprehensive description of the Plan's provisions.
The Plan is a defined contribution plan covering substantially all domestic employees of Sensient Technologies Corporation (the Company) eligible to participate in the Plan. Seasonal employees of Sensient Natural Ingredients LLC (formerly known as Sensient Dehydrated Flavors LLC) become eligible in the Plan upon the completion of 1,000 hours of service. The Plan is subject to the provisions of the Employee Retirement Income Securities Act of 1974, as amended (ERISA).
The Company makes discretionary annual contributions to the Plan as determined annually by its Board of Directors. Participant contributions are not permitted under the Plan. The Plan allows participants to elect an in-service withdrawal on or after attaining age 59 ½. Company contributions for Plan years on or after January 1, 2007, become vested after three years of credited service with the Company, or upon termination due to death or disability. Company contributions made for Plan years beginning prior to January 1, 2007, became vested after five years of credited service with the Company, or upon termination due to death or disability. The Company contributed 1% of eligible participant compensation to the Plan for the year ended December 31, 2019, which totaled $1,072,794 and included non-cash contributions of Company stock of $1,053,850.
The administration of the Plan is the responsibility of the Benefits Administrative Committee (the Committee), which is appointed by the Finance Committee of the Company's Board of Directors. The assets of the Plan are maintained in the Sensient Technologies Corporation Master Trust (Master Trust) that is administered under a Master Trust agreement (as described in Note 3) with Fidelity Management Trust Company (the Trustee). The Trustee is responsible for maintaining the Master Trust assets and, generally, performing all other acts deemed necessary or proper to fulfill its responsibility as set forth in the Master Trust agreement pertaining to the Plan.
Plan assets are invested primarily in the Company's common stock, a common collective trust fund, and in mutual funds. Participants have the option to receive dividends on the Company's common stock in the form of cash. Company contributions are invested in the Company common stock unless the participant meets the following age and service requirements and has elected to have a portion of their account invested in other funds. Participants are eligible to diversify immediately following the later of the date they become fully vested in their Company contribution account or upon reaching age 35. Upon eligibility, participants may elect to have a portion of their account invested in a common collective trust fund or various mutual funds offered by the Plan. Participants may revise their investment allocations daily.
The Plan does not allow participants to borrow funds from their account. Amounts that have been forfeited in accordance with provisions of the Plan serve to reduce Company contributions. Forfeitures used to reduce the Company contributions for 2019 were $125,000.
7
SENSIENT TECHNOLOGIES CORPORATION
RETIREMENT EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2019
Note 1 - (Continued):
Individual accounts are maintained by the Trustee for each Plan participant. Each participant's account is credited with the Company's contribution and an allocation of Plan income, and charged with withdrawals and an allocation of Plan losses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant's vested account.
Upon separation from service with the Company due to retirement or termination, and if the participant's vested account balance is greater than $5,000, the participant may receive his or her benefits in a lump-sum cash payment, lump-sum rollover into an IRA or another employer's eligible retirement plan, or defer receiving benefits until a future date. A participant whose vested account balance is greater than $1,000, but equal to or less than $5,000, may elect to receive a lump-sum distribution or a direct rollover to an individual retirement account, which will be established by the Company for the participant. A participant whose vested account balance is equal to or less than $1,000 will automatically receive a lump-sum distribution equal to his or her vested account balance. If the separation from service is due to permanent disability or death, the entire vested account balance is available to the participant or beneficiary(ies).
Note 2 - Accounting Policies:
Although it has not expressed any intention to do so, the Company has the right under the Plan to discontinue contributions at any time and to terminate the Plan subject to ERISA. In the event of termination, participant accounts become fully vested.
The financial statements of the Plan are prepared on an accrual basis in accordance with generally accepted accounting principles in the United States. The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Administrative expenses incurred by the Plan are paid by the Company on behalf of the Plan or from Plan assets as determined by the Committee.
In February 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-06,Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting, which requires any interest or change in that interest in the Master Trust to be presented in separate line items in the statement of net assets available for benefits and in the statement of changes in net assets available for benefits, respectively. ASU 2017-06 also requires that plans disclose the amount of their interest in each general type of investment within the Master Trust. The Plan's management adopted this standard in the 2019 plan year and made the required retrospective adjustments to all periods presented. The impact of adopting this standard is reflected in Note 3. The adoption of the standard did not impact the net assets available for benefits or changes in net assets available for benefits for the Master Trust.
8
SENSIENT TECHNOLOGIES CORPORATION
RETIREMENT EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2019
Note 3 - Master Trust:
The Plan's investments are held by the Master Trust, commingled with the investments of the Sensient Technologies Corporation Savings Plan. Use of the Master Trust permits the commingling of assets of various employee benefit plans for investment and administrative purposes. Each participating plan's interest in the investment funds of the Master Trust is based on account balances of the participants and their elected investment funds.
The Master Trust assets are allocated among the participating plans by assigning to each plan those transactions (primarily contributions, benefit payments, and plan-specific expenses) that can be specifically identified and by allocating among the plans, in proportion to the fair value of the assets assigned to each plan, income and expenses resulting from the collective investment assets of the Master Trust.
Investments held by the Plan are stated at fair value. Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date (an exit price). The stock fund is a unitized fund, which consists of the Company's common stock and short-term cash equivalents that provide liquidity for trading. The common stock is valued at the closing price reported on the major market on which the individual securities are traded and the short-term cash equivalents are valued at cost, which approximates fair value. The shares of mutual funds are valued at quoted market prices, which represent the net asset value (NAV) of shares held by the Plan at year-end. The common collective trust fund is valued at NAV provided by the administrator of the fund. The NAV of the common collective trust fund is based on underlying assets owned by the fund, minus its liabilities, and then divided by the number of units outstanding.
Purchases and sales of investments are recorded on a trade-date basis. Interest income is accrued when earned. Dividend income is recorded on the ex- dividend date. Capital gain distributions are included in dividend income. Net appreciation includes the Plan's gains and losses on investments bought, sold, and held during the year.
The Master Trust invests in various securities. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such change could materially affect participants' account balances and the amounts reported in the financial statements. See Note 10.
The fair value of the net assets of the Master Trust as of December 31, 2019 and 2018, is as follows:
20192018
Sensient Technologies Corporation stock fund Mutual funds
Common collective trust fund measured at NAV
Net assets in Master Trust
$ | 53,495,896 | $ | 47,754,188 |
181,208,095 | 144,153,286 | ||
9,381,064 | 12,407,496 | ||
$ | 244,085,055 | $ | 204,314,970 |
9
SENSIENT TECHNOLOGIES CORPORATION
RETIREMENT EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2019
Note 3 - (Continued):
The Plan's interest in the fair value of the net assets of the Master Trust as of December 31, 2019 and 2018, is as follows:
20192018
Sensient Technologies Corporation stock fund Mutual funds
Common collective trust fund measured at NAV
Plan's interest in net assets in Master Trust
$ | 40,636,860 | $ | 35,885,262 |
5,183,468 | 4,008,200 | ||
2,633,843 | 3,679,771 | ||
$ | 48,454,171 | $ | 43,573,233 |
The net investment income of the Master Trust for the year ended December 31, 2019, is as follows:
Dividends on Sensient Technologies Corporation stock fund
Interest and other dividends
Net appreciation of investments based on quoted market prices
Net investment income of Master Trust
Plan's equity in net investment of the Master Trust
2019 | |
$ | 1,169,754 |
16,855,428 | |
28,567,476 | |
$ | 46,592,658 |
$ | 8,803,412 |
During the year ended December 31, 2019, net appreciation of the investments held by the Master Trust (including gains and losses on investments bought, sold, or held during the year) is as follows:
2019
Sensient Technologies Corporation stock fund Mutual funds
Net appreciation in fair value of investments - Master Trust
$ | 8,963,497 |
19,603,979 | |
$ | 28,567,476 |
10
SENSIENT TECHNOLOGIES CORPORATION
RETIREMENT EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2019
Note 4 - Non-participant Directed Investments of the Plan:
The non-participant directed investments of the Plan held by the Master Trust are invested in the Sensient Technologies Corporation stock fund. Participant account balances, which are eligible to be diversified but remain in the Sensient Technologies Corporation stock fund, cannot be separately determined and are reported as non-participant directed investments. Information about the net assets and the significant components of the changes in net assets relating to non-participant directed net assets of the Plan held by the Master Trust is as follows:
Non-participant directed net assets:
Sensient Technologies Corporation stock fund
Contributions receivable from Sensient Technologies Corporation
Non-participant directed net assets
Changes in non-participant directed net assets:
Contributions
Dividends
Net appreciation
Withdrawals and distributions
Transfers to participant directed investments
20192018
$ | 40,636,860 | $ | 35,885,262 |
1,053,850 | 1,022,638 | ||
$ | 41,690,710 | $ | 36,907,900 |
2019 |
$ | 1,053,850 |
874,701 | |
6,795,223 | |
(3,117,039) | |
(823,925) | |
$ | 4,782,810 |
Note 5 - Income Tax Status:
The Plan has received a determination letter from the Internal Revenue Service (IRS) dated June 2, 2017, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the Code) and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan administrator believes the Plan is being operated in compliance with the applicable requirements of the Code. Therefore, the Plan administrator believes that the Plan is qualified and the related trust is tax exempt.
11
SENSIENT TECHNOLOGIES CORPORATION
RETIREMENT EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2019
Note 6 - Benefits Payable:
The Plan records benefits when payment is made to participant. As of December 31, 2019 and 2018, the Plan had benefits payable to persons who elected to withdraw from participation in the Plan, but had not yet been paid, of $45,749 and $233,758 respectively.
Note 7 - Related Parties and Parties-in-Interest:
The Plan holds shares of mutual funds and units of a common collective trust fund in a Master Trust, managed by the Trustee of the Plan. The Plan also invests in common stock of the Company through a unitized stock fund held by the Master Trust. The unitized stock fund held 803,877 and 850,143 shares of Sensient Technologies Corporation common stock at December 31, 2019 and 2018, respectively. During the year ended December 31, 2019, purchases of shares by the Master Trust totaled $2,023,622. During the year ended December 31, 2019, sales of shares by the Master Trust totaled $5,328,639. These transactions qualify as related party transactions; however, they are exempt from the prohibited transactions rules under ERISA. The Plan pays fees to the Trustee for investment management, recordkeeping, and other administrative services.
Note 8 - Fair Value Measurements:
As of December 31, 2019 and 2018, the Plan's assets and liabilities subject to ASC 820, Fair Value Measurement, are the Sensient Technologies Corporation stock fund, mutual fund investments, and a common collective trust fund held by the Master Trust. The fair value of Company common stock and mutual funds are based on December 31, 2019 market quotes (Level 1 inputs). The common collective trust fund is measured at fair value using net asset value per share as a practical expedient.
The Company is required to categorize the Master Trust's assets based on the following fair value hierarchy:
Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with observable market data.
Level 3: Unobservable inputs that reflect the reporting entity's own assumptions.
12
SENSIENT TECHNOLOGIES CORPORATION
RETIREMENT EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2019
Note 8 - (Continued):
The following table sets forth by level, within the fair value hierarchy, the Master Trust's assets at fair value as of December, 31, 2019 and 2018:
December 31, 2019 | Level 1 | Total |
Sensient Technologies
Corporation stock fund
Mutual funds
Total assets in the fair value hierarchy
Common collective trust fund (A)
Total assets at fair value
$ | 53,495,896 | $ | 53,495,896 |
181,208,095 | 181,208,095 | ||
$ | 234,703,991 | $ | 234,703,991 |
- | 9,381,064 | ||
$ | 234,703,991 | $ | 244,085,055 |
December 31, 2018 | Level 1 | Total |
Sensient Technologies
Corporation stock fund
Mutual funds
Total assets in the fair value hierarchy
Common collective trust fund (A)
Total assets at fair value
$ | 47,754,188 | $ | 47,754,188 |
144,153,286 | 144,153,286 | ||
$ | 191,907,474 | $ | 191,907,474 |
- | 12,407,496 | ||
$ | 191,907,474 | $ | 204,314,970 |
- In accordance with ASC Subtopic 820-10,Fair Value Measurement - Overall, certain investments that were measured at fair value using net asset value per share as a practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the statements of net assets available for benefits. This category includes a common collective trust fund that is designed to deliver safety and stability by preserving principal and accumulating earnings. This fund is primarily invested in guaranteed investment contracts and synthetic investment contracts. Participant-directed redemptions have no restrictions; however, the Plan is required to provide a one-year redemption notice to liquidate its entire share in the fund.
13
SENSIENT TECHNOLOGIES CORPORATION
RETIREMENT EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2019
Note 9 - Reconciliation of Financial Statements to Form 5500:
The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:
December 31 | |||||
2019 | 2018 | ||||
Net assets available for benefits per the financial statements | $ | 49,526,965 | $ | 44,617,327 | |
Benefits payable | (45,749) | (233,758) | |||
Net assets available for benefits per the Form 5500 | $ | 49,481,216 | $ | 44,383,569 |
The following is a reconciliation of the net change in net assets available for benefits per the financial statements to the Form 5500 for the year ended December 31, 2019:
Net additions in net assets available for benefits per the financial statements | $ | 4,909,638 | |
Benefits payable | 188,009 | ||
Net additions in net assets available for benefits per the Form 5500 | $ | 5,097,647 |
Note 10 - Subsequent Events:
Subsequent to December 31, 2019, the novel coronavirus ("COVID-19") has adversely affected, and may continue to adversely affect the macroeconomic environment and global economy. Due to the disruption of COVID-19 on the global economy, the values of investment securities have declined significantly and may continue to be adversely affected. The value of the Plan's investments have and will fluctuate in response to changing macroeconomic conditions. As a result, the amount of losses that will be recognized in subsequent period, if any, and the related impact on the Plan's liquidity cannot be determined at this time.
Management evaluated subsequent events for the Plan through June 8, 2020, the date the financial statements were available to be issued, and is not aware of any other subsequent events that would require recognition or disclosure.
14
EXHIBIT INDEX
Exhibit No. | Description |
Exhibit 23.1Consent of Independent Registered Public Accounting Firm
15
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefits plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
Sensient Technologies Corporation Retirement Employee Stock Ownership Plan | |
Date: June 8, 2020 | By: /s/ John J. Manning |
Name: John J. Manning | |
Title: Senior Vice President, General Counsel & Secretary |
16
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-27356) of our report dated June 8, 2020, relating to the financial statements of the Sensient Technologies Corporation Retirement Employee Stock Ownership Plan which appears in this Form 11-K.
/s/ Wipfli LLP
Milwaukee, Wisconsin
June 8, 2020
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Sensient Technologies Corporation published this content on 08 June 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 June 2020 15:47:04 UTC
