SENSIENT TECHNOLOGIES CORP
For the period ended Dec 31, 2025. Filed Feb 13, 2026.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Feb 13, 2026
SXT$119.19-0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-02-19.
0001140361-25-005084
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-02-13.
0001140361-26-005311
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 74 previous paragraphs and 80 current paragraphs.
48 unchanged; 25 reworded; 7 added; 1 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 6 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (7)
Current report
Operating margins were positively impacted by the higher selling prices and volumes, partially offset by higher raw material costs.
Current report
Acquisition
Current report
On February 14, 2025, the Company acquired Biolie SAS, a natural color extraction business located in France. The Company paid $4.9 million in cash for this acquisition, which is net of $0.2 million in debt assumed. This business is part of the Color segment.
Current report
See Note 2, Acquisition, in the Notes to Consolidated Financial Statements included in this report for additional information.
Current report
The United States implemented significant tariffs on imports from a wide range of countries in 2025 and has announced the possibility of implementing additional, or increasing current, tariffs in 2026. These actions, and retaliatory tariffs imposed by other countries on United States exports, have led to significant volatility and uncertainty in global markets. The Company anticipates incurring incremental tariff costs on certain raw materials to produce our products and certain finished goods shipped to customers. However, the Company expects to manage the impact of the increased tariff costs through pricing actions. To the extent the Company is unable to offset the increased tariff costs, or the tariffs negatively impact demand, or other trade barriers are implemented, the Company’s revenue and profitability would be adversely impacted. If additional tariffs are adopted, the Company would incur additional tariff costs that could be material.
Current report
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA includes a broad range of tax reform provisions, such as the extension of certain expiring provisions, modifications to the international tax framework, and the continuation of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. These provisions did not have a material impact on our effective tax rate for the year ended December 31, 2025. We will continue to assess the OBBBA tax provisions and their impacts on our consolidated financial statements.
Removed paragraphs (1)
Previous report
Selling and administrative expenses as a percent of revenue was further impacted by higher performance-based compensation costs in 2024.
Reworded paragraphs (25)
Previous wording
Sensient Technologies Corporation (the Company or Sensient) is a leading global manufacturer and marketer of colors, flavors, and other specialty ingredients. The Company uses advanced technologies at facilities around the world to develop specialty food and beverage systems; personal care, essential oils, pharmaceutical, and nutraceutical systems; specialty colors; and other specialty and fine chemicals. The Company’s three reportable segments are the Flavors & Extracts Group and the Color Group, which are both managed on a product line basis, and the Asia Pacific Group, which is managed on a geographic basis. The Company’s corporate expenses, share-based compensation, restructuring and other charges, including the Portfolio Optimization Plan costs, and other costs are included in the “Corporate & Other” category.
Current wording
Sensient Technologies Corporation (the Company or Sensient) is a leading global manufacturer and marketer of colors, flavors, and other specialty ingredients. The Company uses advanced technologies at facilities around the world to develop specialty food and beverage systems; personal care, essential oils, pharmaceutical, and nutraceutical systems; specialty colors; and other specialty and fine chemicals. The Company’s three reportable segments are the Flavors & Extracts Group and the Color Group, which are both managed on a product line basis, and the Asia Pacific Group, which is managed on a geographic basis. The Company’s corporate expenses, share-based compensation(except for share-based compensation expense associated with stock grants to certain business unit leaders), restructuring and other charges, including the Portfolio Optimization Plan costs, and other costs are included in the “Corporate & Other” category.
Previous wording
The Company’s diluted earnings per share were $2.94 in 2024 and $2.21 in 2023. 2024 results were negatively impacted by $6.6 million ($2.5 million after tax, $0.06 per share) of Portfolio Optimization Plan costs. 2023 results were negatively impacted by $27.8 million ($27.4 million after tax, $0.65 per share) of Portfolio Optimization Plan costs. Adjusted diluted earnings per share, which exclude the Portfolio Optimization Plan costs, were $3.00 in 2024 and $2.86 in 2023 (see discussion below regarding non-GAAP financial measures).
Current wording
The Company’s diluted earnings per share were $3.16 in 2025 and $2.94 in 2024. 2025 results were negatively impacted by $15.8 million ($13.8 million after tax, $0.32 per share) of Portfolio Optimization Plan costs. 2024 results were negatively impacted by $6.6 million ($2.5 million after tax, $0.06 per share) of Portfolio Optimization Plan costs. Adjusted diluted earnings per share, which exclude the Portfolio Optimization Plan costs, were $3.48 in 2025 and $3.00 in 2024 (see discussion below regarding non-GAAP financial measures).
Previous wording
Sensient’s revenue was approximately $1.6 billion and $1.5 billion in 2024 and 2023, respectively.
Current wording
Sensient’s revenue was approximately $1.61 billion and $1.56 billion in 2025 and 2024, respectively.
Previous wording
The Company’s gross margin was 32.6% in 2024 and 31.6% in 2023. The increase in gross margin was primarily due to higher volumes and selling prices, partially offset by higher raw material costs.
Current wording
The Company’s gross margin was 33.5% in 2025 and 32.6% in 2024. The increase in gross margin was primarily due to higher selling prices and volumes, partially offset by higher raw material costs and higher Portfolio Optimization Plan costs. Gross profit in 2025 and 2024 was negatively impacted by Portfolio Optimization Plan costs totaling $7.5 million and $1.4 million, respectively, which decreased gross margin by approximately 40 basis points and 10 basis points in 2025 and 2024, respectively. See Portfolio Optimization Plan below for further information.
Previous wording
Selling and administrative expense as a percent of revenue was 20.3% in 2024 and 21.0% in 2023. Selling and administrative expenses in 2024 and 2023 were increased by Portfolio Optimization Plan costs totaling $5.3 million and $24.7 million, respectively. Selling and administrative expense as a percent of revenue increased by approximately 40 basis points and 170 basis points in 2024 and 2023, respectively, as a result of these costs. See Portfolio Optimization Plan below for further information.
Current wording
Selling and administrative expense as a percent of revenue was 20.6% in 2025 and 20.3% in 2024. Selling and administrative expenses in 2025 and 2024 were increased by Portfolio Optimization Plan costs totaling $8.3 million and $5.3 million, respectively. Selling and administrative expense as a percent of revenue increased by approximately 50 basis points and 40 basis points in 2025 and 2024, respectively, as a result of these costs. See Portfolio Optimization Plan below for further information.
Previous wording
Operating income was $191.6 million in 2024 and $155.0 million in 2023. Operating margins were 12.3% in 2024 and 10.6% in 2023. Portfolio Optimization Plan costs decreased operating margins by approximately 40 basis points and 200 basis points in 2024 and 2023, respectively.
Current wording
Operating income was $207.1 million in 2025 and $191.6 million in 2024. Operating margins were 12.8% in 2025 and 12.3% in 2024. Portfolio Optimization Plan costs decreased operating margins by approximately 100 basis points and 40 basis points in 2025 and 2024, respectively.
Previous wording
Interest expense was $28.8 million in 2024 and $25.2 million in 2023. The increase in expense was primarily due to an increase in the average interest rate.
Current wording
Interest expense was $29.6 million in 2025 and $28.8 million in 2024. The increase in expense was primarily due to an increase in the average outstanding debt balance.
Previous wording
The effective income tax rate was 23.4% in 2024 and 28.1% in 2023. The effective tax rates in both 2024 and 2023 were impacted by the release of valuation allowances related to net operating losses, changes in estimates associated with the finalization of prior year foreign and domestic tax items, audit settlements, the mix of foreign earnings, and the limited tax deductibility of costs related to the Portfolio Optimization Plan. The effective tax rate in 2023 was further impacted by the release of a valuation allowance related to the foreign tax credit carryover. See Note 11, Income Taxes, in the Notes to Consolidated Financial Statements included in this report for additional information.
Current wording
The effective income tax rate was 24.3% in 2025 and 23.4% in 2024. The effective tax rates in both 2025 and 2024 were impacted by the release of valuation allowances related to net operating losses (NOLs), changes in estimates associated with the finalization of prior year foreign and domestic tax items, audit settlements, the mix of foreign earnings, and the limited tax deductibility of costs related to the Portfolio Optimization Plan. The effective tax rate in 2025 was also impacted by the change in the German tax rate. See Note 11, Income Taxes, in the Notes to Consolidated Financial Statements included in this report for additional information.
Previous wording
The 2025 effective income tax rate is estimated to be between 24% and 26%.
Current wording
The 2026 effective income tax rate is estimated to be between 24% and 25%.
Previous wording
The Company’s Felinfach site will continue to operate until all production activities have successfully transferred to other locations, and then will be closed. The Company has substantially completed all other actions contemplated underthe Portfolio Optimization Plan in accordance with local laws.
Current wording
The Company’s Felinfach site was shut down in May 2025, and all production activities have been transferred to other locations. The Company began marketing the Felinfach site for sale in June 2025. As a result, the Company met all of the assets held for sale criteria for the Felinfach land and building assets in June 2025, which have been recorded as the only balance in Fixed assets held for sale on the Company’s Consolidated Balance Sheets. The Company has substantially completed all other actions contemplated under the Portfolio Optimization Plan in accordance with local laws.
Previous wording
The Company determines its operating segments based on information utilized by its chief operating decision maker to allocate resources and assess performance. Segment performance is evaluated on operating income before any applicable share-based compensation, acquisition, restructuring and other costs, including the Portfolio Optimization Plan costs, and other costs (which are reported in Corporate & Other), interest expense, and income taxes.
Current wording
The Company determines its operating segments based on information utilized by its chief operating decision maker to allocate resources and assess performance. Segment performance is evaluated on operating income before share-based compensation(except for share-based compensation expense associated with stock grants to certain business unit leaders), restructuring and other costs, including the Portfolio Optimization Plan costs, and other costs (which are reported in Corporate & Other), interest expense, and income taxes.
Previous wording
Flavors & Extracts segment revenue was $793.7 million in 2024 and $741.1 million in 2023, an increase of approximately 7%. The higher segment revenue was a result of higher revenue in Natural Ingredients and Flavors, Extracts & Flavor Ingredients due to higher volumes and selling prices. Foreign exchange rates had an immaterial impact on segment revenue.
Current wording
Flavors & Extracts segment revenue was $786.9 million in 2025 and $793.7 million in 2024, a decrease of approximately 1%. The lower segment revenue was a result of lower revenue in Agricultural Ingredients, partially offset by higher revenue in Flavors, Extracts & Flavor Ingredients. The lower revenue in Agricultural Ingredients was due to lower volumes, partially offset by higher selling prices. The higher revenue in Flavors, Extracts & Flavor Ingredients was primarily due to higher selling prices and volumes. Foreign exchange rates had an immaterial impact on segment revenue.
Previous wording
Flavors & Extracts segment operating income was $97.1 million in 2024 and $87.8 million in 2023, an increase of approximately 11%. Foreign exchange rates had an immaterial impact on segment operating income. The higher segment operating income was a result of higher operating income in Flavors, Extracts & Flavor Ingredients, partially offset by lower operating income in Natural Ingredients. The higher operating income in Flavors, Extracts & Flavor Ingredients was primarily due to lower raw material costs, higher selling prices, higher volumes, and a favorable product mix. The lower operating income in Natural Ingredients was primarily due to higher raw material costs, partially offset by higher volumes and selling prices. Segment operating income as a percent of revenue was 12.2% and 11.8% for 2024 and 2023, respectively.
Current wording
Flavors & Extracts segment operating income was $100.7 million in 2025 and $97.1 million in 2024, an increase of approximately 4%. Foreign exchange rates had an immaterial impact on segment operating income. The higher segment operating income was a result of higher operating income in Flavors, Extracts & Flavor Ingredients, partially offset by lower operating income in Agricultural Ingredients. The higher operating income in Flavors, Extracts & Flavor Ingredients was primarily due to higher selling prices and volumes, partially offset by higher manufacturing and other costs. The lower operating income in Agricultural Ingredients was due to higher raw material costs, lower volumes, a one-time charge stemming from the impact of atmospheric river events late in the year that disrupted the harvest and production, and higher manufacturing and other costs, partially offset by higher selling prices. Segment operating income as a percent of revenue was 12.8% and 12.2% for 2025 and 2024, respectively.
Previous wording
Segment revenue for the Color segment was $647.9 million in 2024 and $608.0 million in 2023, an increase of approximately 7%. The higher segment revenue was a result of higher revenue in Food & Pharmaceutical Colors and Personal Care due to higher volumes and selling prices, partially offset bythe unfavorable impact of foreign exchange rates, which decreased segment revenue by approximately 1%.
Current wording
Color segment revenue was $700.6 million in 2025 and $647.9 million in 2024, an increase of approximately 8%. The higher segment revenue was a result of higher revenue in Food & Pharmaceutical Colors and Personal Care. The higher revenue in Food & Pharmaceutical Colors was primarily due to higher volumes and selling prices. The higher revenue in Personal Care was primarily due to higher selling prices and the acquisition of Biolie SAS, partially offset by lower volumes. Segment revenue was further increased by the favorable impact of foreign exchange rates, which increased segment revenue by approximately 1%.
Previous wording
Segment operating income for the Color segment was $119.5 million in 2024 and $105.4 million in 2023, an increase of approximately 13%. The higher segment operating income was a result of higher operating income in Personal Care and Food & Pharmaceutical Colors. The higher operating income in Personal Care was primarily due to higher volumes and selling prices and a favorable product mix. The higher operating income in Food & Pharmaceutical Colors was primarily due to higher volumes and selling prices and a favorable product mix, partially offset by higher raw material and manufacturing and other costs. These increases were partially offset by the unfavorable impact of foreign exchange rates, which decreased segment operating income by approximately 1%. Segment operating income as a percent of revenue was 18.4% and 17.3% for 2024 and 2023, respectively.
Current wording
Color segment operating income was $141.3 million in 2025 and $119.5 million in 2024, an increase of approximately 18%. The higher segment operating income was a result of higher operating income in Food & Pharmaceutical Colors, partially offset by lower operating income in Personal Care. The higher operating income in Food & Pharmaceutical Colors was due to higher selling prices and volumes, a favorable product mix, and the favorable impact of foreign exchange rates, which increased segment operating income by approximately 1%, partially offset by higher raw material and manufacturing and other costs. The lower operating income in Personal Care was primarily due to higher raw material and manufacturing and other costs, partially offset by higher selling prices. Segment operating income as a percent of revenue was 20.2% and 18.4% for 2025 and 2024, respectively.
Previous wording
Segment revenue for the Asia Pacific segment was $162.5 million and $146.1 million for 2024 and 2023, respectively, an increase of approximately 11%. Segment revenue was higher than the prior year primarily due to higher volumes and selling prices, partially offset by the unfavorable impact of foreign exchange rates, which decreased segment revenue by approximately 2%.
Current wording
Asia Pacific segment revenue was $168.2 million and $162.5 million for 2025 and 2024, respectively, an increase of approximately 4%. Segment revenue was higher than the prior year primarily due to higher selling prices and the favorable impact of foreign exchange rates, which increased segment revenue by approximately 1%, partially offset by lower volumes largely driven by tariff-related impacts.
Previous wording
Segment operating income for the Asia Pacific segment was $34.5 million in 2024 and $30.8 million in 2023, an increase of approximately 12%. The increase in segment operating income was a result of higher volumes and selling prices, partially offset by higher raw material and manufacturing and other costs and the unfavorable impact of foreign exchange rates, which decreased segment operating income by approximately 2%. Segment operating income as a percent of revenue was 21.2% in 2024 and 21.1% in 2023.
Current wording
Asia Pacific segment operating income was $36.6 million in 2025 and $34.5 million in 2024, an increase of approximately 6%. The increase in segment operating income was a result of higher selling prices, a favorable product mix, and the favorable impact of foreign exchange rates, which increased segment operating income by approximately 3%, partially offset by higher raw material and manufacturing and other costs. Segment operating income as a percent of revenue was 21.8% in 2025 and 21.2% in 2024.
Previous wording
The Corporate & Other operating loss was $59.5 million in 2024 and $68.9 million in 2023. The lower operating loss was primarily a result of lower Portfolio Optimization Plan costs, partially offset by higher performance-based compensation costs in 2024. See the Portfolio Optimization Plan section above for further information.
Current wording
The Corporate & Other operating loss was $71.5 million in 2025 and $59.5 million in 2024. The higher operating loss was primarily a result of higher Portfolio Optimization Plan costs and higher performance-based compensation costs in 2025. See the Portfolio Optimization Plan section above for further information.
Previous wording
The Company’s financial position remains strong. The Company is in compliance with its loan covenants calculated in accordance with applicable agreements as of December 31, 2024. The Company expects its cash flow from operations and its existing debt capacity can be used to meet anticipated future cash requirements for operations, capital expenditures, and dividend payments, as well as potential acquisitions and stock repurchases. The Company’s contractual obligations consist primarily of operational commitments, which we expect to continue to be able to satisfy through cash generated from operations, and debt. The Company has various series of notes outstanding that mature from 2025 through 2029, with approximately $56 million coming due in 2025. The Company believes that it has the ability to refinance or repay all of its obligations through a combination of cash flow from operations, issuance of additional notes, and substantial borrowing capacity of approximately $257 million under the Company’s revolving credit facility, which matures in 2026.
Current wording
The Company’s financial position remains strong. The Company is in compliance with its loan covenants calculated in accordance with applicable agreements as of December 31, 2025. The Company expects its cash flow from operations and its existing debt capacity can be used to meet anticipated future cash requirements for operations, capital expenditures, and dividend payments, as well as potential acquisitions and stock repurchases. However, the Company anticipates to increase its existing debt capacity over the coming years to further support the increased cash requirements for operations and capital expenditures associated with the natural colors conversion activity. The Company’s contractual obligations consist primarily of operational commitments, which we expect to continue to be able to satisfy through cash generated from operations, and debt. The Company has various series of notes outstanding that mature from 2026 through 2029, with approximately $35 million coming due in 2026. The Company believes that it has the ability to refinance or repay all of its obligations through a combination of cash flow from operations, issuance of additional notes, and substantial borrowing capacity of approximately $261 million under the Company’s revolving credit facility, which matures in 2030.
Previous wording
Net cash provided by operating activities was $157.2 million and $169.7 million in 2024 and 2023, respectively. Operating cash flow provided the primary source of funds for operating needs, capital expenditures, and shareholder dividends. The decrease in net cash provided by operating activities in 2024 was primarily due to a decrease in the cash provided by accounts receivable, partially offset by a decrease in cash used for performance-based compensation payments (which are determined based on prior year performance) made during 2024 compared to 2023.
Current wording
Net cash provided by operating activities was $127.8 million and $157.2 million in 2025 and 2024, respectively. Operating cash flow provided the primary source of funds for operating needs, capital expenditures, and shareholder dividends. The decrease in net cash provided by operating activities in 2025 was primarily due to an increase in cash used by inventory and an increase in cash used for performance-based compensation payments (which are determined based on prior year performance) made during 2025 compared to 2024, partially offset by an increase in cash provided by accounts receivable.
Previous wording
Net cash used in investing activities was $59.2 million and $87.6 million in 2024 and 2023, respectively. Capital expenditures were $59.2 million in 2024 and $87.9 million in 2023. The Company paid $1.7 million in 2023 related to a purchase price holdback associated with the acquisition of Endemix Doğal Maddeler A.Ş. and Teknoloji Yatırımları ve Danışmanlık Sanayi ve Ticaret A.Ş.
Current wording
Net cash used in investing activities was $92.7 million and $59.2 million in 2025 and 2024, respectively. Capital expenditures were $89.4 million in 2025 and $59.2 million in 2024. In 2025, the Company paid $4.9 million for the acquisition of Biolie SAS.
Previous wording
Net cash used in financing activities was $81.5 million and $82.0 million in 2024 and 2023, respectively. The Company had a net decrease in debt of $7.8 million and $3.5 million in 2024 and 2023, respectively. For the purposes of the cash flow statement, net changes in debt exclude the impact of foreign exchange rates. The Company has paid uninterrupted quarterly cash dividends since commencing public trading of its stock in 1962. Dividends paid per share were $1.64 in 2024 and 2023. Total dividends paid were $69.4 million and $69.2 million in 2024 and 2023, respectively.
Current wording
Net cash used in financing activities was $35.0 million and $81.5 million in 2025 and 2024, respectively. The Company had a net increase in debt of $38.9 million and a net decrease in debt of $7.8 million in 2025 and 2024, respectively. The cash proceeds from the increase in net debt in 2025 were primarily used to support capital expenditure investments related to natural color conversion efforts during the year. For the purposes of the cash flow statement, net changes in debt exclude the impact of foreign exchange rates. The Company has paid uninterrupted quarterly cash dividends since commencing public trading of its stock in 1962. Dividends paid per share were $1.64 in 2025 and 2024. Total dividends paid were $69.6 million and $69.4 million in 2025 and 2024, respectively.
Previous wording
The Company reviews the carrying value of goodwill annually utilizing several valuation methodologies, including a discounted cash flow model. The Company completed its annual goodwill impairment test under Accounting Standards Codification (ASC) 350, Intangibles – Goodwill and Other, in the third quarter of 2024. In conducting its annual test for impairment, the Company performed a qualitative assessment of its previously calculated fair values for each of its reporting units. Fair value is estimated using both a discounted cash flow analysis and an analysis of comparable company market values. If the fair value of a reporting unit exceeds its net book value, no impairment exists. The Company’s three reporting units each had goodwill recorded and were tested for impairment. All three reporting units had fair values that were above their respective net book values by at least 75%. Changes in estimates of future cash flows caused by items such as unforeseen events or changes in market conditions could negatively affect the reporting units’ fair value and result in an impairment charge.
Current wording
The Company reviews the carrying value of goodwill annually utilizing several valuation methodologies, including a discounted cash flow model. The Company completed its annual goodwill impairment test under Accounting Standards Codification (ASC) 350, Intangibles – Goodwill and Other, in the third quarter of 2025. In conducting its annual test for impairment, the Company performed a quantitative assessment of the fair values for each of its reporting units and compared each of these values to the net book value of each reporting unit. Fair value is estimated using both a discounted cash flow analysis and an analysis of comparable company market values. If the fair value of a reporting unit exceeds its net book value, no impairment exists. The Company’s three reporting units each had goodwill recorded and were tested for impairment. All three reporting units had fair values that were above their respective net book values by at least 75%. Changes in estimates of future cash flows caused by items such as unforeseen events or changes in market conditions could negatively affect the reporting units’ fair value and result in an impairment charge.
Previous wording
The Company estimates its income tax expense in each of the taxing jurisdictions in which it operates. The Company is subject to a tax audit in each of these jurisdictions, which could result in changes to the estimated tax expense. The amount of these changes would vary by jurisdiction and would be recorded when probable and estimable. These changes could impact the Company’s financial statements. Management has recorded valuation allowances to reduce the Company’s deferred tax assets to the amount that is more likely than not to be realized. As of December 31, 2024, the Company recorded gross deferred tax assets of $112.3 million with an associated valuation allowance of $29.7 million. Examples of deferred tax assets include deductions, net operating losses, and tax credits that the Company believes will reduce its future tax payments. In assessing the future realization of these assets, management has considered future taxable income and ongoing tax planning strategies. An adjustment to the recorded valuation allowance as a result of changes in facts or circumstances could result in a significant change in the Company’s tax expense. The Company does not provide for deferred taxes on unremitted earnings of foreign subsidiaries, which are considered to be invested indefinitely.
Current wording
The Company estimates its income tax expense in each of the taxing jurisdictions in which it operates. The Company is subject to a tax audit in each of these jurisdictions, which could result in changes to the estimated tax expense. The amount of these changes would vary by jurisdiction and would be recorded when probable and estimable. These changes could impact the Company’s financial statements. Management has recorded valuation allowances to reduce the Company’s deferred tax assets to the amount that is more likely than not to be realized. As of December 31, 2025, the Company recorded gross deferred tax assets of $133.9 million with an associated valuation allowance of $29.1 million. Examples of deferred tax assets include deductions, net operating losses, and tax credits that the Company believes will reduce its future tax payments. In assessing the future realization of these assets, management has considered future taxable income and ongoing tax planning strategies. An adjustment to the recorded valuation allowance as a result of changes in facts or circumstances could result in a significant change in the Company’s tax expense. The Company does not provide for deferred taxes on unremitted earnings of foreign subsidiaries, which are considered to be invested indefinitely.
Previous wording
The Company’s inventories contain a variety of inventory types with varying characteristics that would impact potential inventory obsolescence. The Company estimates any required write-downs for inventory obsolescence by examining inventories on a quarterly basis to determine if there are any damaged items or slow-moving products in which the carrying values could exceed net realizable value. Inventory write-downs are recorded as the difference between the cost of inventory and its estimated market value. The Company recorded non-cash charges of $0.7 million and $3.1 million in 2024 and 2023, respectively, in Cost of Products Sold related to the Portfolio Optimization Plan. The non-cash charges in 2024 were primarily related to trial production runs that did not meet quality specifications and thus were disposed of, and the non-cash charges in 2023 reduced the carrying value of certain inventories, as they were determined to be excess. While significant judgment is involved in determining the net realizable value of certain inventories with shorter expirations, the Company believes that inventory is appropriately stated at the lower of cost or net realizable value.
Current wording
The Company’s inventories contain a variety of inventory types with varying characteristics that would impact potential inventory obsolescence. The Company estimates any required write-downs for inventory obsolescence by examining inventories on a quarterly basis to determine if there are any damaged items or slow-moving products in which the carrying values could exceed net realizable value. Inventory write-downs are recorded as the difference between the cost of inventory and its estimated market value. The Company recorded non-cash charges of $4.3 million and $0.7 million in 2025 and 2024, respectively, in Cost of Products Sold related to the Portfolio Optimization Plan. The non-cash charges in 2025 reduced the carrying value of certain inventories, as they were determined to be excess, and the non-cash charges in 2024 were primarily related to trial production runs that did not meet quality specifications and thus were disposed. While significant judgment is involved in determining the net realizable value of certain inventories with shorter expirations, the Company believes that inventory is appropriately stated at the lower of cost or net realizable value.