INNOPHOS HOLDINGS, INC. CRANBURY, N.J., April 27, 2016 /PRNewswire/ -- Innophos Holdings, Inc. (NASDAQ: IPHS), today announced its financial results for the first quarter 2016.
Highlights
-- Adjusted EBITDA of $31 million, in line with first quarter 2015, and up
39% sequentially, resulting in a margin of 17%, up 90 basis points
compared to the prior year quarter.
-- Adjusted diluted EPS for the first quarter 2016 was $0.66 compared to an
adjusted EPS of $0.64 for the first quarter 2015 and an adjusted EPS of
$0.32 for the fourth quarter 2015.
-- Restructuring and streamlining savings of $2.5 million in line with
expectations.
-- Innophos Nutrition plant closure at Paterson, NJ effective March 31(st).
-- Han Kieftenbeld joins the company as Senior Vice President and Chief
Financial Officer.
-- Amy Hartzell joins the company as Vice President, Supply Chain and
Purchasing.
Kim Ann Mink, Ph.D., Chief Executive Officer, commented, "In the first quarter, we began constructing a road map for the strategic direction of Innophos, while simultaneously identifying value creation levers that will drive sustainable improvement in the company's financial performance. While still early in our journey, I am pleased with the level of engagement across the entire organization. These initiatives will continue to be a core focus for us throughout 2016. While the market environment continues to pose challenges for our business, we generated adjusted EBITDA of $31 million, up significantly on a sequential basis. We are pleased to report this sequential improvement in our profitability and to see our cost management efforts begin to take effect during the quarter."
Dr. Mink continued, "Going forward, we are committed to making meaningful changes to drive operational excellence, commercial excellence and strategic growth, the three strategic pillars of our transformation. Underlying all three of these pillars is a foundation based on building a strong management team who brings deep industry, functional and change management experience. Accordingly, we have already begun this process with the recently announced hire of Han Kieftenbeld as Chief Financial Officer. I am also pleased to highlight the addition of Amy Hartzell, Vice President, Supply Chain and Purchasing to our management team. As we continue to execute on our strategic pillars, I am confident that Han and Amy's contributions will help support and enhance our transformation, creating strategic growth and delivering value for our shareholders. We are off to an excellent start to our journey and look forward to our future."
First Quarter Results
-- Net sales for the first quarter 2016 of $190 million were down 6%
compared to the first quarter 2015, and up 11% sequentially.
-- Specialty Phosphates sales of $177 million were down 7% versus the prior
year quarter, primarily due to lower volumes in the US/Canada segment,
as selling prices were relatively flat overall. Sales increased 7%
sequentially, on 2% higher prices and 5% higher volumes.
-- US/Canada Specialty Phosphates sales of $137 million were down 7%
compared to the prior year quarter, and up 8% sequentially. Selling
prices increased 1% year over year, on improved customer mix, while
volumes declined 8%, due to weak demand that carried into the early
part of the quarter and reduced sales in lower margin, less
differentiated applications.
-- Mexico Specialty Phosphates sales of $40 million decreased 4%
compared to the year ago period on 1% lower volumes and 3% lower
prices, primarily in PPA, and increased 6% sequentially.
-- GTSP & Other sales of $13 million were up 2% versus prior year quarter
primarily on higher volumes, mostly offset by weaker fertilizer market
prices. Sales were well up on a sequential basis.
-- Adjusted EBITDA of $31 million was on par with prior year and up 39%
sequentially.
-- Adjusted diluted EPS for the first quarter 2016 was $0.66 compared to an
adjusted EPS of $0.64 for the first quarter 2015 and an adjusted EPS of
$0.32 for the fourth quarter 2015.
-- Capital expenditures were $8 million in the first quarter 2016
(approximately 75% maintenance, 25% growth).
-- Net debt increased sequentially by $19 million in the first quarter
2016, to $214 million, due to tax payments made in the United States
after recognizing revenue received from foreign subsidiaries in the
fourth quarter 2015 for United States income tax purposes. The related
expenses pertaining to that revenue will be recognized for United States
income tax purposes over the next two years.
Recent Trends and Outlook
Specialty Phosphates volumes are expected to decline by 3-5% for full year 2016 compared to 2015, primarily due to reduced sales in lower margin, less differentiated applications in the United States and detergent application reformulation that is expected to affect the Mexico Specialty Phosphates segment. Market demand in 2016 is expected to remain challenging in the United States and Canada home markets due to continued pressures on packaged foods.
Market phosphate rock prices declined approximately 12% in the first quarter 2016 versus the fourth quarter 2015, and sulfur market prices decreased 14% during the same period. Both are expected to ease further in the second quarter given current weak fertilizer market conditions. Cost improvements from the restructuring program implemented in the third quarter 2015 were in line with expectations, with $2.5 million lower costs realized in the current quarter against the third quarter 2015 baseline. Management continues to review cost actions and productivity initiatives given the challenging market conditions.
Adjusted EBITDA of $31 million for the first quarter 2016 yielded a margin of 17%, up 90 basis points compared to the prior year quarter. Adjusted EBITDA results for the second quarter are expected to be broadly in line with first quarter 2016 when considering the following effects:
-- Continued headwinds in sales; seasonality expected to provide sequential
improvement.
-- Strength of US Dollar will continue to attract competition from overseas
and pressure exports from the US.
-- Some softening of raw material costs.
-- Planned maintenance stoppage cost expected in the $4 million range.
2016 capital expenditures will approximate $40 million due to additional requirements to support strategic manufacturing initiatives and restructuring, along with continuous improvement in our plants.
Conference Call
Innophos will host its first quarter 2016 conference call on Thursday, April 28, 2016 at 10:00 am ET. The call can be accessed by dialing 1-888-771-4371 (U.S.) or 1-847-585-4405 (international) and entering passcode 42367604. Please dial in approximately 15 minutes ahead of the start time to ensure timely entry to the call. A replay will be available between 1:00 pm ET on April 28 and 11:00 pm ET on May 12, 2016. The replay is accessible by dialing 1-888-843-7419 (U.S.) or 1-630-652-3042 (international) and entering passcode 4236 7604#. Additional information on Innophos' first quarter results can also be found on the Company's website.
About the Company
Innophos is a leading international producer of performance-critical and nutritional specialty ingredients, with applications in food, beverage, dietary supplements, pharmaceutical, oral care and industrial end markets. Headquartered in Cranbury, New Jersey, Innophos has manufacturing operations across the United States, in Canada, Mexico and China. For more information please visit www.innophos.com. 'IPHS-G'
Contact
Investors: Mark Feuerbach, 609-366-1204 or investor.relations@innophos.com
Media: Bryan Armstrong, FTI Consulting, Inc., 312-553-6707
Financial Tables Follow
Safe Harbor for Forward-Looking and Cautionary Statements
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. As such, final results could differ from estimates or expectations due to risks and uncertainties, including but not limited to: incomplete or preliminary information; changes in government regulations and policies; continued acceptance of Innophos' products and services in the marketplace; competitive factors; technological changes; Innophos' dependence upon suppliers; and other risks. For any of these factors, Innophos claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, as amended.
Summary Profit & Loss Statement - First Quarter
INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Operations (Unaudited)
(Dollars In thousands, except per share amounts or share amounts)
Three Months Ended March 31,
----------------------------
2016 2015
Net sales $189,630 $201,609
Cost of goods sold 148,914 161,083
Gross profit 40,716 40,526
Operating expenses:
Selling, general and administrative 18,235 17,991
Research & development expenses 996 1,174
Total operating expenses 19,231 19,165
------ ------
Operating income 21,485 21,361
Interest expense, net 1,799 1,151
Foreign exchange loss (gain) (39) 2,315
Income before income taxes 19,725 17,895
Provision for income taxes 6,883 5,952
Net income $12,842 $11,943
======= =======
Diluted Earnings Per Participating Share $0.66 $0.55
Diluted weighted average participating shares outstanding 19,430,029 21,501,634
Dividends paid per share of common stock $0.48 $0.48
Dividends declared per share of common stock $0.48 $0.48
Adjusted EBITDA Reconciliation to Net Income
(Dollars in thousands)
1Q16 1Q15 2Q15 3Q15 4Q15 2015
---- ---- ---- ---- ---- ----
Net Income $12,842 $11,943 $13,603 $5,433 ($4,633) $26,346
Interest 1,799 1,151 1,403 1,869 3,095 7,518
Taxes 6,883 5,952 6,142 2,628 (945) 13,777
Depreciation & Amortization 9,282 9,871 10,761 9,048 8,855 38,535
EBITDA 30,806 28,917 31,909 18,978 6,372 86,176
Adjustments
-----------
Non-cash stock compensation (ordinary) * 534 183 1,402 658 180 2,423
Translation (income) expense (39) 2,315 117 2,629 (1,180) 3,881
Restructuring (income) expense (43) - - 8,621 - 8,621
Management transition expense - - - - 11,789 11,789
Specialty Phosphates inventory reserves - - - - 3,312 3,312
Revision of 2014 supplier costs - - - - 2,000 2,000
Adjusted EBITDA $31,258 $31,415 $33,428 $30,886 $22,473 $118,202
======= ======= ======= ======= ======= ========
Percent of Sales 16.5% 15.6% 15.4% 15.5% 13.2% 15.0%
* Not adjusted for in Adjusted EPS
Segment Reporting - First Quarter
The Company reports its operations in three segments: Specialty Phosphates US & Canada, Specialty Phosphates Mexico and GTSP & Other. The primary performance indicators for the chief operating decision maker are sales and EBITDA, with sales presented on a ship-from basis. Sales on a ship-from basis are on the same revenue recognition principle as a ship-to basis and are recognized when delivery has occurred and title and risk of loss passes to the customer. The following table sets forth the historical results of these indicators by segment:
Three Months Ended March 31, Net Sales
----------------------------
2016 2015 % Change
Segment Net Sales
Specialty Phosphates US & Canada $136,720 $147,124 (7.1)%
Specialty Phosphates Mexico 40,398 42,220 (4.3)%
Total Specialty Phosphates 177,118 189,344 (6.5)%
------- ------- -----
GTSP & Other 12,512 12,265 2.0%
Total $189,630 $201,609 (5.9)%
======== ======== =====
Segment EBITDA
Specialty Phosphates US & Canada $17,611 $21,949
Specialty Phosphates Mexico 13,158 7,973
Total Specialty Phosphates 30,769 29,922
------ ------
GTSP & Other 37 (1,005)
Total $30,806 $28,917
======= =======
Segment EBITDA % of net sales
Specialty Phosphates US & Canada 12.9% 14.9%
Specialty Phosphates Mexico 32.6% 18.9%
Total Specialty Phosphates 17.4% 15.8%
---- ----
GTSP & Other 0.3% (8.2)%
Total 16.2% 14.3%
==== ====
Depreciation and amortization expense
Specialty Phosphates US & Canada $6,191 $6,939
Specialty Phosphates Mexico 2,192 2,098
Total Specialty Phosphates 8,383 9,037
----- -----
GTSP & Other 899 834
Total $9,282 $9,871
====== ======
Price / Volume - First Quarter
The Company calculates pure selling price dollar variances as the selling price for the current year to date period minus the selling price for the prior year to date period, and then multiplies the resulting selling price difference by the prior year to date period volume. The current quarter selling price dollar variance is derived from the current quarter year to date selling price dollar variance less the previous quarter year to date selling price dollar variance. The selling price dollar variance is then divided by the prior period sales dollars to calculate the percentage change. Volume variance is calculated as the total sales variance minus the selling price variance and refers to the revenue effect of changes in tons sold at the relative prices applicable to the variation in tons, otherwise known as volume/mix.
The following tables illustrate for the three months ended March 31, 2016 the percentage changes in net sales by reportable segments and by Specialty Phosphates product lines compared with the same period of the prior year, including the effect of selling price and volume/mix changes upon revenue:
Reportable Segments Price Volume/Mix Total
------------------- ----- ---------- -----
Specialty Phosphates US & Canada 1.2% (8.3)% (7.1)%
Specialty Phosphates Mexico (2.9)% (1.4)% (4.3)%
Total Specialty Phosphates 0.3% (6.8)% (6.5)%
GTSP & Other (16.6)% 18.6% 2.0%
Total (0.7)% (5.2)% (5.9)%
===== ===== =====
Specialty Phosphates Product Lines Price Volume/Mix Total
---------------------------------- ----- ---------- -----
Specialty Ingredients 1.2% (7.7)% (6.5)%
Food & Technical Grade PPA (1.7)% (2.6)% (4.3)%
STPP & Detergent Grade PPA (1.9)% (8.9)% (10.8)%
Summary Cash Flow Statement
INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
Three Months Ended March 31,
----------------------------
2016 2015
Cash flows (used for) provided from operating activities
Net income $12,842 $11,943
Adjustments to reconcile net income to net cash (used for)
provided from operating activities:
Depreciation and amortization 9,282 9,871
Amortization of deferred financing charges 168 143
Deferred income tax provision - 107
Share-based compensation (9) 183
Changes in assets and liabilities:
Increase in accounts receivable (12,170) (9,930)
Decrease in inventories 6,072 8,268
Increase in other current assets (9,617) (2,719)
Increase (decrease) in accounts payable 6,310 (16,615)
Decrease in other current liabilities (14,388) (429)
Changes in other long-term assets and liabilities (1,564) 1,271
Net cash (used for) provided from operating activities (3,074) 2,093
Cash flows used for investing activities:
Capital expenditures (8,024) (5,911)
Net cash used for investing activities (8,024) (5,911)
Cash flows provided from financing activities:
Proceeds from exercise of stock options 9 189
Long-term debt borrowings 23,000 70,000
Long-term debt repayments (5,001) (1,001)
Excess tax (deficiency) benefit from exercise of stock options (331) 273
Common stock repurchases and restricted stock forfeitures - (34,316)
Dividends paid (9,256) (10,198)
Net cash provided from financing activities 8,421 24,947
Effect of foreign exchange rate changes on cash and cash equivalents 206 (90)
Net change in cash (2,471) 21,039
Cash and cash equivalents at beginning of period 17,905 36,207
Cash and cash equivalents at end of period $15,434 $57,246
======= =======
Summary Balance Sheets
INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars In thousands)
March 31, December 31,
2016 2015
ASSETS
Current assets:
Cash and cash equivalents $15,434 $17,905
Accounts receivable, net 91,888 79,743
Inventories 166,610 172,667
Assets held for sale 563 -
Other current assets 33,065 23,514
Total current assets 307,560 293,829
Property, plant and equipment, net 199,360 199,494
Goodwill 84,373 84,373
Intangibles and other assets, net 88,821 90,522
Total assets $680,114 $668,218
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $4,001 $4,002
Accounts payable, trade and other 43,346 36,898
Other current liabilities 48,735 63,204
Total current liabilities 96,082 104,104
Long-term debt 225,834 207,665
Other long-term liabilities 22,175 23,189
Total stockholders' equity 336,023 333,260
Total liabilities and stockholders' equity $680,114 $668,218
======== ========
Additional Information
Net debt is a supplemental financial measure that is not required by, or presented in accordance with, USGAAP. The Company believes net debt is helpful in analyzing leverage and as a performance measure for purposes of presentation in this release. The Company defines net debt as total long-term debt (including any current portion) less cash and cash equivalents.
EBITDA is a supplemental financial measure that is not required by, or presented in accordance with, USGAAP. The Company believes EBITDA is helpful in analyzing the cash flow generating capability of the business and as a performance measure for purposes of presentation in this release. The Company defines EBITDA as net income (loss) before interest, taxes, depreciation and amortization.
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SOURCE Innophos Holdings, Inc.
