Good morning, and welcome to the Sensient Technologies Corporation 2019 Fourth Quarter and Year End Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Steve Rolfs. Please go ahead, sir.

Good morning. I'm Steve Rolfs, Senior Vice President and Chief Financial Officer of Sensient Technologies Corporation. I would like to welcome all of you to Sensient's conference call to discuss 2019 fourth quarter financial results. I'm joined this morning by Paul Manning, Sensient's Chairman, President and Chief Executive Officer. This morning, we released our 2019 fourth quarter financial results. A copy of the release is now available on our website at sensient.com. During our call today, we will reference certain non-GAAP financial measures, which we believe provide investors with additional information to evaluate the company's performance and improve the comparability of results between reporting periods. These non-GAAP financial measures remove the impact of currency movements, depreciation and amortization, noncash stock-based compensation, divestiture and other related cost. The impact of the 2017 U.S. tax legislation and other items as noted in the company's filings. Non-GAAP financial results should not be considered in isolation from or as a substitute for financial information calculated in accordance with GAAP. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is available on the Investor Information section of our website at sensient.com and in our press release. We encourage investors to review these reconciliations in connection with the comments we make this morning. I would also like to remind everyone that comments made this morning, including responses to your questions, may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Our statements may be affected by certain factors, including risks and uncertainties, which are discussed in detail in the company's filings with the Securities and Exchange Commission. We urge you to read Sensient's filings, including our forth coming 10-K for a description of these factors. Please bear these factors in mind when you analyze our comments today. Now we'll hear from Paul Manning.

Thanks, Steve. Good morning. This morning we released our fourth quarter results. During 2019 we had strong results in natural colors, finished flavors and extracts, and our pharmaceutical business. These results were offset by several market dynamics and by the impact of a number of underperforming businesses that we are in the process of divesting. In 2019 Sensient’s business was impacted by a number of adverse market factors. We saw uncertainty in higher costs tied to raw material availability, tariffs, and trade disputes. We also saw changing consumer trends for cosmetic products, particularly makeup that had an adverse effect on our sales for the second half of 2018 and for all of 2019. Food-related markets were impacted by changing consumer tastes that have challenged many of our larger customers as well as certain product lines in which we participate. We have implemented a number of actions in response to these challenges. I expect a much better year in 2020 as our actions deliver improved results and as we focus on the strengths within our product portfolio. As we enter 2020, I am pleased to report that our raw material costs and availability challenges have been substantially addressed. Raw material inflation and availability were headwinds during 2019 in our food color, cosmetic, natural ingredients and fragrance businesses. With respect to changing consumer trends, you will recall that consumer spending on cosmetic makeup products began to decline in 2018 in most of our geographic locations. Our historical strength in cosmetics has been in cosmetic makeup and as a result of this change in consumer buying, we saw lower sales throughout 2019. Our business began to stabilize in the fourth quarter of 2019 and we have increased our efforts to sell skin and hair care products. We expect our cosmetic business to rebound…

Thank you, Paul. In my comments this morning, I will be explaining the differences between our GAAP results and our adjusted results. The adjusted results for 2019 remove the impact of the divestiture related costs that were incurred during the fourth quarter. When we discuss 2018 the adjusted results remove the impact of the 2017 tax legislation accounting that took place in 2018. Sensient’s operating income was a loss of $14.5 million in the fourth quarter of 2019 compared to $45.3 million of income in the comparable period last year. Operating income in the fourth quarter of 2019 includes $45.9 million of divestiture related costs. These costs are almost entirely non-cash expenses. In accounting terms these costs primarily include non-cash impairment charges, inventory charges, and other divestiture related costs. Excluding these costs, adjusted operating income in the fourth quarter 2019 was $31.4 million compared to $45.3 million in the fourth quarter of 2018 Foreign currency translation had a minimal impact on both revenue and operating income in the fourth quarter of 2019. Revenue for the Flavors and Fragrances Group was $169.1 million in the fourth quarter of 2019 compared to $175.5 million in the fourth quarter of 2018. The lower revenue was a result of lower flavor ingredient volumes, which included the yogurt, fruit prep and fragrances product lines. Operating profit was $14.2 million in the fourth quarter of 2019 compared to $22.3 million in the fourth quarter of 2018. The lower operating income was a result of lower production volumes consistent with our efforts to reduce inventory, lower sales volumes, costs associated with certain customer bankruptcy charges and higher raw material costs primarily in our natural ingredients business. Foreign currency translation had a minimal impact on both revenue and operating income in the quarter. Revenue for the Color Group…

Thank you. [Operator Instructions] The first question will come from Brett Hundley with Seaport Global. Please go ahead.

Hey, thank you and good morning guys.

Good morning, Brett.

Good morning, Brett.

Steve or Paul, so are you guys booking the full $6 million performance equity in your guidance for 2020? I'm calculating that's about a 3% headwind to EBIT growth. And if so, were these performance hurdles amended or changed in any way heading into 2020?

So first off, within the range, there is the full amount. Obviously, it flexes. If our EBITDA growth is not at the mid-single-digit rate we talked about, there would be less, which would buffer or mitigate the results. But within that range, there is the full amount. And then could you just repeat your question on the – where the amended?

Yes. So you just mentioned EBITDA, which I think for at least two years now, a lot of that performance has been tied to EBITDA. I could be wrong, but I thought it had changed a couple of years ago. And I was wondering if heading into 2020, did you change how those – how that performance comp is paid out based on certain metrics?

So heading into 2020, the structure is very similar to what it was last year. What you might be thinking of is a few years ago, we were incentivized on EPS. So for instance, changes in the tax rate could have an effect. We are not incentivized on EPS going forward. So it's EBITDA, its revenue, cash flow and then return on invested capital. But from last year, no significant changes, I would say.

And part of this, Brett, has to do with the performance-based metrics around it, right? So all of our equity awards are 100% performance based. There is no participation trophy of any kind. So when we don't deliver, like what happened in 2019, there is essentially no equity payout. So it certainly is fully 100% aligned to shareholder interests. But what you have, though, can be a more dramatic swing, like what we're experiencing now. So we had a underperforming 2019, we expect to perform in 2020. And given the nature this is 100% performance-based, you can have a large swing, which would then represent a headwind, a non-cash headwind, but a swing no less. You have a good year in 2020, and then as you get into 2021, these are significantly moderated. But it is, in fact, the very nature and our philosophy around pay for performance that essentially creates this financial dynamic that we have here.

Okay. Thanks for those comments. To the extent that you guys can comment on the divestitures, can we just get an update on the divestiture activity? You guys, obviously, recognized the number of cost during the quarter, but I haven't seen any notable headlines yet. So I just wanted to talk about potential interest in timing given that we are talking about a lot of these businesses coming out for full 2020, or at least that's how I'm modeling it?

So I think this: we'd certainly have interested buyers for each of the three businesses. I think that we're actively engaged with those individuals. So I can't necessarily get into details as those discussions are certainly governed by a non-disclosure. But I would tell you that it's certainly our intention to sell these businesses. The buyers in these cases each have much greater scale and effectively capital footprint in the market, so I think it makes very good sense with them. But we're going to do them right. We're going to get a fair price for them. And we're going to do that on a time frame that's consistent with that philosophy. So certainly, we'd like to sell them as soon as we can reasonably sell them. But we're not going to do anything stupid. And so to that end, sure, I would be very optimistic to have these things done as soon as possible. But we want to get them done right. We want to make sure we have the right buyer and that we get a fair outcome for our shareholders a fair outcome for our shareholders.

Okay.

Yes, as we – yes, I mean, certainly, as we effect of signing and a closing, we would make that publicly, consistent with expectations on that front. But I would tell you that there is, at this stage, interest in the three, and I expect that we can get this done.

Okay. And if this is a situation where maybe this stretches into summer or beyond, and I'm sorry if I missed this in your prepared remarks, Steve, but would these be reported as discontinued ops during 2020?

So they do not meet the requirements for discontinued operations, but we will provide adjusted numbers with and without them. Actually, they're not in the accounting classification of discontinued operations.

Got it. And I have a couple more, but I'll jump back in the queue. The other one I wanted to ask you about was just on capital allocation. You guys touched on it a couple of times in your prepared remarks, but CapEx is starting to work down. You've raised your dividend already. And just given some continued challenges, at least early on here in 2020 on the top and the bottom line, might we see you guys take a more aggressive approach to share repo ahead? Or are you thinking differently about strategic combinations at this juncture? I appreciate it.

Sure. So I think the prioritization that we've historically had for capital allocation – I'm sorry, I'll take you on a little bit of a journey here, but I think it's good to share our philosophy on this. Number one, we're very committed to internally investing in the company, CapEx as we like to call it. That is the purest form of investment and typically earns the highest returns of other alternatives. The $40 million to $50 million is certainly consistent with that philosophy but it's also the outcome of a lot of restructuring that we've done, shrinking our footprint, taking a much more strategic approach to capital – to CapEx throughout the businesses. So I think that you compare the $40 million to $50 million was where we had been previously, $80 million, $90 million and even $100 million in some years, that is representative of, I think, some good work that was done in the course of restructuring. So I think that is a good and sustainable level for the time being, and that will continue to be a priority for us. The dividend will continue to be a priority for us. That is a source of value for many of our shareholders. We have a historical precedent of doing that, and that is one that we continue to be very committed to. And then as you saw in 2019, we spend a lot of our free cash flow on paying back debt. We paid up approximately $90 million down of debt, which we thought was a good and prudent thing for us to do. At this point, we want to continue to pay down debt. We like the debt-to-EBITDA to be somewhere in that 2.5 times to 3 times. That seems to work pretty well for us, enabling us to either do, as you suggest, buybacks or certain M&A activity. And so as we look at 2020, it's – those are the three moving parts, right? Buyback, is there an M&A opportunity, or would we pay more debt? And I think as we see it right now, here on February 14, our focus is to take down some more debt. But we're always looking for M&A opportunities, and should there be an unusual event in the stock that creates a rather obvious buying opportunity, we would not be opposed to doing something along those lines. So I won't give you a more precise answer because things do change and we want to be very, very flexible there, but you got kind of the guide rails in terms of our thinking on each of those pieces.

That’s great. Thanks, Paul.

Okay. Thanks, Brett.

The next question comes from Mitra Ramgopal with Sidoti. Please go ahead.

Yes. Good morning. Thanks for taking the questions. Just want to start first with the guidance. I know you had mentioned the coronavirus, you think, obviously, could have an impact, and it's just too early to sort of determine the extent of that. So I'm assuming that's not factored into the initial guidance. But I'm just wondering if it's already having an impact in terms of your manufacturing operations in Asia?

So it is for those businesses that produce in China, most specifically our cosmetic business in the Color Group and our food colors business in the Color Group. In general, in this company, we manufacture where we sell. So there's very little that we manufacture in China that is subsequently sent outside of China. Certainly, I can't think of anything off the top of my head that is destined for the Americas or Europe. There are some items made in China that we would send to another Asian country, but that tends to be a very small part of what they do. In one sense, I should tell you that the impact from China from a manufacturing standpoint is substantially isolated to China because we do manufacture in other countries. Where we are seeing an impact now is, initially, the coronavirus happened right during Chinese New Year. So during Chinese New Year, sales dropped, very little activity going on in China and throughout many Asian countries. So the fact that the coronavirus happened essentially right in the midst of Chinese New Year, it's very, very difficult to see right now what the potential economic and financial impact would be. I could tell you this right now, from raw materials that we would source in China. At this point, we've not had significant disruptions. There has been, in my estimation, no significant concern around product safety. In other words, raw materials that are made in China as sent to the U.S. or Europe would not present a food safety challenge to food producers or cosmetic producers. In other words, the food would not be tainted with the virus. So we don't see a raw material problem, but where we are seeing the problem is really in terms of accessing customers. So…

Okay. Yes. No, I really appreciate the color and the insight on that. And actually, just staying on the international front for a while. I know – I don't know if you can give us a sense what the tariff impact was for you in 2019. It seems like that should be less of a headwind for you in 2020. And I was just wondering if you had anything factored there into the guidance also?

Sure. So actually, on the raw material front, that – we believe we have that under control. And as of right now, that looks pretty good. So going back to 2019, you had not only the tariffs but you also had some regulatory actions that happened earlier in China that made it difficult to get certain raw materials. We've been pretty successful at moving our sourcing outside of China for those items that were impacted. So the – at the end of the day, the tariff impact and the trade uncertainty impact appears to have stabilized, ex- this virus issue that Paul talked about.

Okay. Okay. And now that – I know Brexit also had an impact for you in 2019, and I was just wondering now that, that's sort of official, again, that should, if anything, be a plus for you this year, I would imagine?

Yes. I think clarity creates stability in the market and creates stability in our business and for our customers. And I think now that there's much greater clarity around Brexit, I would say that, yes, we should not see any sort of incremental, up or down, versus prior year impacts as a result of Brexit and that being implemented.

Okay. And then on the Flavors & Fragrances segment, I know one of the areas of opportunities for you was the BioNutrients, biotech markets. And I'm just wondering if you're seeing any additional traction there. And if you can maybe address potential new products that you might be looking to bring to the market that could be a nice catalyst for you?

Sure. Yes. So for the folks on the line who may be kind of curious about the nature of BioNutrients, this is a portion of our flavor group that is essentially based on modifying protein sources, some of which we sell into the food industry, modifying those for different types of applications, in this case, mostly live cultures. So what that means in English is that, essentially, we make protein that feeds bacteria, for example, things you'd see in probiotics or prebiotics, animal nutrition, things of this nature. And so certainly, the live culture, fermentation, probiotics markets slowed in 2019. I think that's been pretty well publicized. Now they didn't go into decline, those markets. They went from, say, a 7% or 8% to maybe like a 3% or 4% growth rate. A lot of new entrants into that field, a lot of capacity for fermentation in that area. And so we think it's a very, very good market. What we like about it is it's a very technically driven market. It's all about improving the efficacy and yield of bacteria and these types of applications. And so that fits very well into our wheelhouse of innovative-driven products, applications-driven customer service and then being able to deliver products consistently and on time and at a high quality. So it's a very, very good market. Sure, it slowed down in 2019, but I think the prospects continue to be quite good. And it's also rather expansive in terms of the areas that you can get into. Sure, there's quite a bit of talk about probiotics declining or moderating its growth, but the areas of animal nutrition are still quite large, the areas of fermented ingredients are still quite large and quite fragmented, at least from a supplier standpoint. So still a very good market and we would expect them to have a good year here in 2020.

Okay. And on the Color Group, I know you touched on the customers transitioning from the little more synthetic to more natural formulations. And I'm just trying to get a sense as to how early or how far along are we in terms of that transition that you're seeing?

In Europe, we're in the eighth inning. It's probably, I don't know, where – they just finished the top of the ace on that one. In the Americas and in Asia Pacific, we're in about the third inning. So nobody's quite gone to get a hot dog yet, but, right, they're thinking about it. So we're maybe about third of the way through this thing, which is to say about 30% to 35% of the products on the market right now contain a natural color solution, or I could say even more broadly, a non-synthetic colored solution. We do not expect any sort of legislative mandate from any jurisdictions outside of Europe, which is to say, this will continue to be a long burn. It'll continue to be a consumer-driven trend rather than a government-mandated law, as we saw in Europe. So I think the prospects are quite good. We had an outstanding year in natural colors. We were up 8%. We won many of the key market conversions. But with our very, very strong number one presence in food colors, we have access to a great many customers, not only those big multinationals, but also a lot of these B and C customers who are very, very aggressive about utilizing natural colors in their solutions. And so that's going to continue to be a real nice growth engine for us. Even in the fourth quarter where there was a lot of slowdown in a number of markets, we were still up 4%. So we have a very, very good business platform there, very technically driven. There's still a lot of activity around replacing titanium dioxide. The good folks of California are trying to outlaw caramel in many applications. In fact, they actually have in Proposition 65, so there's lots of opportunities for us to replace caramel. So very, very good trends there for our business. And we think, as I said, that's going to be a real hit for us and continue – and it's been a real hit for us, and it's going to continue to be that way. One other trend I would note in Europe, you'll hear this term coloring food stuffs, just think of that as kind of a more natural version of natural colors. We can – some other time, we can get into the regulatory nuances of what I mean by that, but that would be the next wave that we see in Europe. And that's really been underway for several years, but that continues to pick up speed. So that means that there's still very good growth prospects for Europe. Even though Europe is in the 8.5 inning on natural colors, they're probably like – they're just sort of singing the national anthem, and they're sitting down for the first inning on coloring food stuff, I would say.

Okay. Thanks for your color on that and I appreciate it. And finally, Steve, I know the DSOs came in quite a bit at the end of the year. I'm just wondering how we should think about that going forward?

So a couple of things to point out on the balance sheet. So for a couple of the businesses that we're seeking to divest from an accounting standpoint, they've moved into a classification known as assets held for sale. So when you look at our balance sheet dollars, some of the receivables, inventory, some of the other lines, there's an amount that was reclassified onto this assets held for sale. What I would point out, however, is if you – particularly on the inventory line, if you normalize that, as Paul mentioned, I think, in his comments, we did a good job of bringing inventory down in the year. And so I think we took out about – on a normalized basis, we took out about 12 or 14 days of inventory. But it's – just looking at the balance sheet, it's difficult because some of those items are being reclassed. But if you adjust for that, we did make that improvement in inventory.

Okay, sounds good. Thanks again for taking the questions.

Thank you.

Sure. Thanks, Mitra.

[Operator Instructions] The next question will come from Heidi Vesterinen with Exane BNP Paribas. Please go ahead.

Hi, good morning.

Hi, Heidi.

So first question, is it possible for you to tell us what the growth rate of the group was excluding the businesses that are being sold? You said natural colors, I think, was up 8%, right, for the full year. Perhaps you could even go business-by-business? Could you share that with us? Thank you. That's the first question.

Sure. So Heidi, on the businesses to be divested, first off, I think Paul did a good job of talking about the strategic rationale for that. It will just bring more focus to parts of the business where we have more differentiation. We lack scale there. And in most cases, that – those businesses had limited synergy with the other parts of our business. But if you look back to this past year 2019, the $140 million of revenue that we're divesting, depending on the quarter, it was probably down high single digits to low double digits. So for instance, if you were to take the fourth quarter where our consolidated revenue was down 1.5%, we would have been flat if we had not factored in these divested businesses. So it did have a – between a 1% and 2% negative impact on the overall revenue.

And so then pairing that with the rest of the businesses, I mentioned the natural colors was up 8%. Our flavors and extracts was up 6% for the year and 8% for the fourth quarter, so we're very pleased with that one. Our pharmaceutical business where we're selling flavors and natural colors and extracts, that was up almost 20%. It's a small business, but it's a very strong growth engine for us. The SNI business, the natural Ingredients business was up about 1 percentage point. We think that will be up much more than that in 2020. When you look at cosmetics, cosmetics was down about 7% for the year, owing to all these factors we've talked about, not only the tariffs but really this moderating of demand in the makeup market that's really kind of been playing out over the last 18 months. So those are some of the highlights from the other parts of the business. The flavor ingredients business, this is the one to sort of piggyback on some of what Steve said, that's the part of the portfolio that was down, down more than 10%. Now we think part of what gives me confidence that we will grow revenue in flavors this year is not only the quality of our wins, we're winning in flavors, we're winning in extracts, those products that rely much more on technology, application support, good customer service, good technical salespeople, but we're finding ways to moderate the loss of some of these flavor ingredients. And I think that's going to be really, really important as we move forward. But that's kind of some of the highlights of the businesses, which when you kind of put them all together in that pot, comes out to where we came out in the quarter, down about 1.5%.

Thank you. And then the next question, so you said that you're quite optimistic on the SNI business. We saw that Indian onion prices are spiking. Does that impact you in any way?

There's always – these products are always – should be considered market products. However, India has traditionally been more of a domestic market. You recall from a couple of years ago, their move to introduce product into the U.S. was – at the scale that they did was somewhat unprecedented. Nevertheless, onion raw material costs are up. I think that's been pretty well publicized in the U.S. and even in China, and certainly to your point about India. And so I think that is one of the factors that kind of hit us a little bit in Q4 because there is a lag between when you get cost and when you can take price at times. And so I think our products continue to be very, very competitive there. And I think that you would see us in a position to grow revenue not only in the onion category but in garlic, based on new wins, based on pricing for sure. So there's also some opportunities in garlic as well. But I think, yes, as a general statement, I would say, sure, you could say that bodes well for us.

So that's in terms of top line. And your profits, I guess, will improve in that segment because the prices will catch up with the inputs. Is that what you meant?

Q4 to Q1, yes. I think as you think about SNI for the year, we would expect them to be certainly at the average and perhaps even a little bit above the average for the Flavor Group in general on revenue. But there are higher costs that we're seeing in the raw material side of things. So we don't necessarily get into all the profit levers there within SNI, but we should expect to see low to mid, maybe even mid-single-digit top line growth in the SNI, which, as you know, is about 30% of the Flavor Group.

Thank you. And then the last question. I think in your earlier remarks – so actually, it was in response to another question, you talked about new entrants in probiotics. Is this a relatively new trend as I thought your customer base there was quite consolidated? And in which regions are you seeing these new entrants emerge? Thank you.

So you're right, it is a very consolidated industry. There's kind of three names that you know pretty well that constitute the majority of this market. Nevertheless, there are many, many start-ups. Many of them are ex from some of those top brands that I've just referenced buying for a position in the market. There's a lot of bacterial strains that have been developed or that are being used in the marketplace. So you may see a fairly steady group of bacteria in many probiotic products. But given the interest – the end consumer interest in these and in live cultures in general, there are literally hundreds of bacterial strains that can be developed for probiotics. And so I think it is on that concept that you see many start-ups, many a little bit more established brands vying for positions in the market. In the U.S. market for sure, and the European market, for sure, those are really kind of our key focus areas that we pay attention to and really is where our business is today.

Thank you.

The next question is a follow-up from Brett Hundley with Seaport Global. Please go ahead.

Thank you for taking. I just had two quick ones. You guys have given us a lot of good detail on the near-term in 2020 and thinking about the model, but I wanted to maybe have a quick higher-level discussion on flavor margins real quick. Just given the commentary that we've had over the last five years, I think it'd be helpful to revisit that. And if I exclude divestitures, can you just maybe address utilizations across your footprint and talk about what type of OI margins might be possible for this flavors business over the next two years or five years as investors reset kind of what's possible for this business?

Yes. So today, flavors and extracts is about 40% of the Flavor Group, about another 30% is SNI, about another 30% are these flavor ingredients. That's kind of a broad breakdown of them. Flavors are certainly the most technically driven, the ones that require the most innovation, application support, customer support in general and very, very, very high service levels. So now certainly, the high service levels and other features are clear in the SNI business, perhaps less so in the flavor ingredients business. Given that, you should expect, and we do experience higher price points and higher gross margins in that flavor category. So those have been on a nice upward swing to revenue growth, and that's what we're going to continue to push for is that mid and maybe even as you saw in the fourth quarter, high single-digit flavor and extract growth. We think the extract market is much more fragmented than the flavors market. And this is an area that's not encumbered by core listings and other, in my estimation, factors that limit competition in a particular field of specialty ingredients. So that said, that's going to continue to be the focus area. SNI continues to be a very, very profitable business as well on the operating profit margin line. And so I think the growth there, we should expect to see a fair amount within the Americas. Much of that growth is being driven in the Americas right now. We still see good opportunities within Europe, and we see very good opportunities within Asia for flavors and for extracts. Now what makes this – what has been diluting that effort, and I've mentioned this in the prepared comments, is these flavor ingredients. So if you can imagine a production plant that makes flavors by the…

You definitely did, and it was very good color, at least for me, so I appreciate it. And then just in the interest of time, just one quick follow-up. IFF mentioned yesterday that they saw an inflection point mid-Q4 with regards to flavor sales to large MNC customers. Are you guys noticing any of this, either in food and beverage colors or any other parts of your portfolio?

Well, I think, perhaps, one of the things that – so I guess, maybe not really. We don't necessarily sell flavors to a lot of multinationals to begin with. We really focus more on those Bs and Cs. And as you can see, it was really the driving factor in our flavors growth. I think on the color side, I would tell you that there's certainly been some activity amongst the big multinationals. There were a couple of key conversions from synthetic to natural last year in 2019. But I would still say the drivers are these B and C, these local and regionals, for sure. As we look at Nielsen data for a lot of these markets, I look at yogurt, still down by 4%, still a market that's kind of dominated by larger players. Ice cream is down, gum is down, cereal is down, and these are all volume declines. I think in some cases, the multinationals may be up on sales, but they're down on volume. So I don't know. As I think about our business, I didn't see anything that was significant in, call it – in which case, I could call it an inflection point. So it's a – maybe it's a matter of perspective, but I hope he's right.

No, for sure. And you guys do operate a different business. I was just curious if you had seen some of that elsewhere, but I think there are other drivers on the color side for you. So I appreciate the comments. And thanks for the follow-up.

And one other thing on that, Brett, and this could be inferred from what many companies are saying, but product churn was quite significant in 2019. And the definition that I have for product churn would be products get launched and they get killed or discontinued in three months, or it's a limited time offering, it was only intended to be out there six months or a year. The rate of attrition was significant last year, the highest I've seen in many, many years, perhaps even ever. Now some of this is the – when you get B and C customers, they are quicker to launch in general, and they are launching more and even more unusual products, in my opinion, in many of these markets. So the failure rates can tend to be very, very high. So in order to cover that significant attrition rate, you got to have big wins. Our win rate was quite strong in the company last year, but what was happening was there was a lot of market churn. So that would be a key factor I think you want to be looking for in 2020, has market churn of products subsided or is it still remaining rather elevated? And I could give you more color on that as the year goes on. One other thing, just to clarify an earlier comment I made, lest I create any sort of consternation, the Proposition 65 in California with respect to the use of caramel colors, principally in colas and other products. Technically, the Proposition 65 is just a warning on the product. It does not outlaw caramel for those products. So I just wanted to clarify that one. But nevertheless, a warning may drive many customers to want to replace caramel in their products. And that is something, from an innovation standpoint, we spent many years refining and developing, so just wanted to make that clarification.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to the company for any closing remarks.

Okay. That will conclude our call. I thank everybody for participating today. And if you have any follow-up questions, we can handle those after the call. So thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.