August 6, 2019 - 7:30 AM EDT
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Innophos Holdings, Inc. Reports Second-Quarter 2019 Results

CRANBURY, N.J.

Pricing Power, Cost Actions and Mix Shift Offset Topline Pressures to Drive Margin Growth and Benefit Bottom Line Performance

On Track to Achieve Year-End EPS Improvement Targets from New Lower Cost Value Chain Structure

Innophos Holdings, Inc. (NASDAQ: IPHS) today announced financial results for its second-quarter ended June 30, 2019.

Strategic Highlights

  • Continued progress executing against Vision 2022 strategic roadmap and Strategic Pillars
  • Leveraged value-selling model to continue to capture price increases to offset the gross profit effects of lower sales volumes
  • On schedule to realize GAAP and adjusted diluted EPS improvement of $0.25 to $0.27 per share run rate by the end of 2019 from the value chain optimization program that provided some initial sequential benefits in the quarter
  • Completed planned annual maintenance shut-down of Coatzacoalcos, Mexico facility on time and on budget with $3 million of maintenance and under-absorption costs in Q2 2019

Q2 2019 Financial Highlights

  • Sales of $185 million were down 10% compared with prior-year quarter as pricing power was predominantly offset by the planned discontinuation of low-margin nutrition trading business, as well as a general weakening of demand including customer destocking, lost 2019 business due to Midwest flooding and continued “indirect” tariff effects
  • GAAP Net Income of $1 million, or $0.07 per diluted share, was down $5 million from Q2 2018, primarily due to a $6.6 million one-off tax charge
  • Reported EBITDA of $26 million was up $4 million, or 17% year-over-year due to reduced value chain transition costs
  • Adjusted EBITDA of $30 million was flat sequentially but down $1 million year-on-year, while adjusted EBITDA margin of 16% was up 30 basis points sequentially and 129 basis points compared with the prior-year quarter, reflecting improved mix and continued price increases and cost management, as well as early benefits from the new value chain lower cost structure
  • Q2 2019 adjusted diluted EPS of $0.43 was down 22% year-on-year due primarily to a higher effective tax rate and interest expense, lower adjusted EBITDA and higher non-cash stock compensation
  • Free Cash Flow of $20 million, up $24 million year-on-year on improved working capital and lower capital expenditures

Management Comments

“By leveraging our improved mix, pricing power momentum, cost management and lower cost structure, we grew our adjusted EBITDA margin by 129 basis points in the second quarter despite a 10% decline in sales,” said Kim Ann Mink, Ph.D., Chairman, President and Chief Executive Officer. “This solid margin performance is a strong testament to the effectiveness of our Vision 2022 strategy and Strategic Pillar framework that have begun to transform Innophos’ growth profile.”

“Second-quarter sales were impacted by several factors that more than offset our continued pricing power. This included difficult year-over-year comparisons due to the planned discontinuation of low-margin nutrition trading business announced in Q3 2018, lower sales to the fertilizer markets in the US due to the ongoing Midwest flooding, and indirect tariff pricing pressure on our IS segment. In addition, we experienced softer than expected demand in several markets including customer destocking.”

“In response to these factors that we expect to persist through the balance of the year, we are resetting our 2019 revenue guidance. At the same time, we are maintaining our EBITDA guidance as we expect to continue to benefit from our pricing power and cost containment actions. In addition, while investments in high return projects remain a priority, we are committed to a more efficient approach to spending going forward, as reflected in our revised Capex range,” continued Mink.

“While we manage through the near-term by focusing on what we can control, we remain committed to executing on the strategic priorities that will advance Innophos on our transformational Vision 2022 journey. First, we will continue to shift the mix of business to higher levels of attractive FHN business through our SPARC new product development program and the pursuit of targeted M&A opportunities. Second, we will benefit from our lower-cost value chain structure to help achieve our year-end EPS improvement goal. And finally, we will leverage our market leadership in Commercial Excellence to capture further pricing power,” concluded Mink.

Q2 2019 Results

Variance $ and Variance % in the following tables and comments may not foot due to rounding

$ Millions except EPS

Quarter 2

2019

2018

Variance $

Variance %

Sales

185

207

(22)

(10)%

Net Income

1

6

(5)

(78)%

Adj. Net Income

9

11

(2)

(22)%

EBITDA

26

23

4

17%

Adj. EBITDA

30

31

(1)

(3)%

Diluted EPS

0.07

0.31

(0.24)

(78)%

Adj. Diluted EPS

0.43

0.55

(0.12)

(22)%

Cash from Ops

26

8

18

BIG

Free Cash Flow

20

(3)

24

712%

  • Sales were 10% below prior year as 3% selling price increases were offset by a 13% volume decline
  • The Q2 2019 volume decline was impacted by several factors, including discontinued low-margin nutrition trading business, a general weakening of demand including customer destocking, lost 2019 business from Midwest flooding and continued “indirect” tariff impacts
  • GAAP Net Income of $1 million and diluted EPS of $0.07 were down versus the prior year primarily due to a $6.6 million one-off tax charge related to Dutch tax regulations enacted in the current quarter retroactive to January 1, 2018
  • In line with the Company’s expectations, Mexico’s natural gas network improved sequentially following their pipeline completion. As a result, there were no imbalance charges and there was a 12% sequential reduction in the basic rate invoiced that resulted in similar year-over-year natural gas costs
  • Adjusted EBITDA margin of 16% was up 129 basis points year over year due to improved sales pricing and mix combined with improvements in cost structure
  • Free Cash Flow was $20 million, up $24 million from the prior year period on improved working capital and lower capital expenditures

Q2 2019 Segment Financials

Q2 Sales

2019 $ Millions

2018 $ Millions

Variance $

Variance %

FHN

107

126

(19)

(15)%

IS

68

67

1

1%

Other

11

14

(4)

(25)%

Total IPHS

185

207

(22)

(10)%

Q2 Adj. EBITDA

2019 $ Millions

2018 $ Millions

2019 % Margin

2018 % Margin

FHN

22

18

21%

14%

IS

8

11

12%

16%

Other

(1)

2

-7%

11%

Total IPHS

30

31

16%

15%

Note: See Adjusted EBITDA reconciliation to EBITDA in the financial tables that follow

  • FHN sales declined 15% year over year (price +3%, volume -18%) as price increases were offset by lower volumes due to the discontinuation of low-margin nutrition trading business and softer demand including customer destocking; adjusted EBITDA margins were up 611 basis points sequentially and 639 basis points compared with Q2 2018 due to increased selling prices, improved sales mix, capitalized variances for the nutrition business, lower costs from the value chain optimization program and a reclassification to FHN of some profit that was recorded in the Other segment in Q1 2019
  • IS sales were up 1% year over year (price +3%, volume -2%) due to higher prices that exceeded lower volume effects from “indirect” unfavorable tariff impacts on international sales as Chinese competition redirected mostly technical grade product and Midwest flooding; adjusted EBITDA margins were down 320 basis points sequentially due to the planned maintenance outage and 409 basis points year over year due to higher freight costs and the noted tariff impacts
  • Other sales were down 25% (price -1%, volume -23%) due primarily to reduced co-product and low grade acid sales volumes; adjusted EBITDA margins were negative 7% due to the reclassification of some Q1 2019 profit on certain intermediate product transactions from Other to the downstream consuming segments. Year-to-date margins are properly reflected at 12%

Year-to-Date Results

Variance $ and Variance % in the following tables and comments may not foot due to rounding

$ Millions except EPS

YTD Q2

2019

2018

Variance $

Variance %

Sales

376

412

(36)

(9)%

Net Income

10

17

(7)

(41)%

Adj. Net Income

20

23

(3)

(13)%

EBITDA

52

52

0

(1)%

Adj. EBITDA

60

63

(3)

(5)%

Diluted EPS

0.51

0.87

(0.36)

(41)%

Adj. Diluted EPS

1.00

1.15

(0.15)

(13)%

Cash from Ops

17

10

7

76%

Free Cash Flow

1

(17)

18

106%

  • Sales decreased 9% on 3% higher prices but 12% lower volumes due to the planned discontinuation of low-margin nutrition trading business, as well as a general weakening of demand including customer destocking, lost 2019 business due to Midwest flooding and continued “indirect” tariff effects
  • GAAP Net Income of $10 million was down $7 million due primarily to a one-off tax charge related to Dutch tax regulations enacted in Q2 2019 retroactive to January 1, 2018
  • Adjusted EBITDA declined 5% due to the effects of lower sales volumes and higher input costs that were not entirely covered by selling price increases

YTD Quarter 2 Segment Financials

YTD Q2 Segment Sales

2019 $ Millions

2018 $ Millions

Variance $

Variance %

FHN

222

252

(30)

(12)%

IS

131

130

1

1%

Other

24

30

(6)

(20)%

Total IPHS

376

412

(36)

(9)%

YTD Q2 Segment Adj. EBITDA

2019 $ Millions

2018 $ Millions

2019 % Margin

2018 % Margin

FHN

39

39

18%

15%

IS

18

22

14%

17%

Other

3

2

12%

8%

Total IPHS

60

63

16%

15%

Note: See Adjusted EBITDA reconciliation to EBITDA in the financial tables that follow

  • FHN represented 59% of total Company sales and was down 12% year over year (price +4%, volume -16%) as price increases were offset by lower volumes due to the discontinuation of low-margin nutrition trading business, as well as general weakening in demand including customer destocking; adjusted EBITDA margins were 221 bps above H1 2018 due to increased selling prices and improved sales mix
  • IS sales were up 1% with selling price increases exceeding volume decreases (price +4%, volume -3%); adjusted EBITDA margins were down 292 bps due to higher freight costs and “indirect” unfavorable tariff impacts
  • Other sales were down 20% (price -1%, volume -19%) due primarily to reduced co-product and low grade acid sales volumes. Other adjusted EBITDA margins were 12%

Full Year 2019 Outlook

The Company is revising its previously announced 2019 revenue guidance to reflect current market conditions.

Revenues are now forecasted to be 6-7% below 2018 revenue of $802 million, compared with the prior expectation of 1-2% down.

The revised revenue range reflects the expectation that the US fertilizer sales impacted by Midwest flooding will not rebound in 2019 as previously expected. In addition, the Company expects market softness to continue to impact both FHN and IS volumes, as well as IS pricing and volumes to continue to be affected indirectly by tariffs. The year-over-year volume decline from the discontinuation of the low margin nutrition business is expected to impact comps through the end of the year, but less materially for the fourth quarter. The combined impact of these factors will be partially offset by positive year-over-year revenue contribution from price increases and new product wins.

Innophos continues to expect Adjusted EBITDA to grow 1-3% in 2019 from $125 million in 2018, reflecting the benefits of pricing and cost actions more than offsetting impacts from volume declines.

From a GAAP and cash flow perspective, costs are expected to be lower in H2 than H1 as the Company winds down spending on the non-recurring expenses that are adjusted for non-GAAP reporting purposes, including value chain transition expense and Mexico natural gas supply adjustment charges.

Capital investments are now expected to be in the $45 to $50 million range, approximately 15-20% below 2018 spending. This compares with the prior expectation of capital investments in line with prior year, and reflects the Company’s expectation to be more efficient with spending to finalize the optimization of the value chain and manufacturing program while continuing to make investments in high return projects.

The Company expects its effective tax rate to operate in the 28-32% range, excluding the second quarter $6.6 million one-time Dutch tax charge.

Conference Call

Innophos will host its second-quarter 2019 conference call today August 6, 2019 at 9:00 am ET to discuss its earnings results. Those who wish to listen to the conference call webcast should visit the “Investors” section of the Company’s website at www.innophos.com. The live call also can be accessed by dialing (877) 604-1612 (U.S.) or (201) 389-0883 (international). No passcode is required. Please dial in approximately 15 minutes ahead of the start time to ensure timely entry to the call. The Q2 2019 earnings call presentation will be made available on the Company’s website prior to the call. If you are unable to listen to the live call, the webcast will be archived on the Company’s website. In addition, a replay of the call will be available between August 6 and August 20, 2019. The replay is accessible by dialing (877) 660-6853 (U.S.) or (201) 612-7415 (international) and entering the Conference ID number 13692166.

Additional information on Innophos’ second-quarter 2019 results can also be found on the Company’s website.

About the Company

Innophos is a leading international producer of essential ingredients. We partner with world-leading health & nutrition, food & beverage and industrial brands to create science-based solutions that improve quality of life. Our knowledgeable teams apply science to unlock the potential that lies within the blends and formulations that we deliver. Forward thinking and people centric at heart, we execute with purpose and efficiency to create value in everything we do. 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'

Financial Tables Follow

Safe Harbor for Forward-Looking and Cautionary Statements

This press release contains or may contain 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. The Company intends these forward-looking statements to be covered by the safe harbor provisions for such statements. Statements made in this press release that relate to our future performance or future financial results or other future events (which may be identified by such terms as “expect”, “estimate”, “anticipate”, “assume”, “believe”, “plan”, “intend’, “may”, “will”, “should”, “outlook”, “guidance”, “target”, “opportunity”, “potential” or similar terms and variations or the negative thereof) are forward-looking statements, including the Company’s expectations regarding the business environment and the Company’s overall guidance regarding future performance and growth. These statements are based on our current beliefs and expectations and are subject to significant risks and uncertainties. Actual results may materially differ from the expectations expressed in or implied by these forward-looking statements. Factors that could cause the Company’s actual results to differ materially include, but are not limited to: (1) global macroeconomic conditions and trends; (2) the behavior of financial markets, including fluctuations in foreign currencies, interest rates and turmoil in capital markets; (3) changes in regulatory controls regarding tariffs, duties, taxes and income tax rates; (4) the Company’s ability to implement and refine its Vision 2022 strategic roadmap; (5) the Company’s ability to successfully identify and complete acquisitions in line with its Vision 2022 strategic roadmap and effectively operate and integrate acquired businesses to realize the anticipated benefits of those acquisitions; (6) the Company’s ability to realize expected cost savings and efficiencies from its performance improvement and other optimization initiatives; (7) the Company’s ability to effectively compete in its markets, and to successfully develop new and competitive products that appeal to its customers; (8) changes in consumer preferences and demand for the Company’s products or a decline in consumer confidence and spending; (9) the Company’s ability to benefit from its investments in assets and human capital and the ability to complete projects successfully and on budget; (10) economic, regulatory and political risks associated with the Company’s international operations, most notably Mexico and China; (11) volatility and increases in the price of raw materials, energy and transportation, and fluctuations in the quality and availability of raw materials and process aids; (12) the impact of a disruption in the Company’s supply chain or its relationship with its suppliers; (13) the Company’s ability to comply with, and the costs associated with compliance with, U.S. and foreign environmental protection laws and (14) the Company’s ability to meet quality and regulatory standards in the various jurisdictions in which it has operations or conducts business. We caution you to consider the important risks and other factors as set forth in the forward-looking statements section and in Item 1A Risk Factors in our most recent Annual Report on Form 10-K, as amended by subsequent reports on Forms 10-Q and 8-K. We do not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.

Summary Profit & Loss Statement

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

 

 

 

 

Condensed Consolidated Statement of Operations (Unaudited)

 

 

 

 

(Dollars in thousands, except per share amounts or share amounts)

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

Net Sales

$

185,038

 

 

$

206,725

 

 

$

376,452

 

 

$

412,165

 

Cost of goods sold

 

148,646

 

 

 

170,340

 

 

 

303,648

 

 

 

333,553

 

Gross profit

 

36,392

 

 

 

36,385

 

 

 

72,804

 

 

 

78,612

 

Operating expenses:

 

 

 

 

 

 

 

Selling, general and administrative

 

20,261

 

 

 

22,503

 

 

 

39,703

 

 

 

45,023

 

Research & development expenses

 

1,232

 

 

 

1,338

 

 

 

2,572

 

 

 

2,749

 

Total operating expenses

 

21,493

 

 

 

23,841

 

 

 

42,275

 

 

 

47,772

 

Operating income

 

14,899

 

 

 

12,544

 

 

 

30,529

 

 

 

30,840

 

Interest expense, net

 

3,887

 

 

 

3,198

 

 

 

7,589

 

 

 

6,102

 

Foreign exchange (gain) loss

 

(470

)

 

 

1,136

 

 

 

(851

)

 

 

940

 

Other income

 

(8

)

 

 

(13

)

 

 

(11

)

 

 

(28

)

Income before income taxes

 

11,490

 

 

 

8,223

 

 

 

23,802

 

 

 

23,826

 

Provision for income taxes

 

10,089

 

 

 

1,977

 

 

 

13,707

 

 

 

6,665

 

Net income

$

1,401

 

 

$

6,246

 

 

$

10,095

 

 

$

17,161

 

Diluted Earnings Per Participating Share

$

0.07

 

 

$

0.31

 

 

$

0.51

 

 

$

0.87

 

Diluted weighted average participating shares outstanding

 

19,776,845

 

 

 

19,818,883

 

 

 

19,715,907

 

 

 

19,765,971

 

Dividends paid per share of common stock

$

0.48

 

 

$

0.48

 

 

$

0.96

 

 

$

0.96

 

Dividends declared per share of common stock

$

0.48

 

 

$

0.48

 

 

$

0.96

 

 

$

0.96

 

Adjusted Net Income Reconciliation to Net Income

(Dollars in thousands, except EPS)

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2019

 

 

 

2018

 

 

2019

 

 

 

2018

Net Income

$

1,401

 

 

$

6,246

 

$

10,095

 

 

$

17,161

Pre-tax Adjustments

 

 

 

 

 

 

 

 

Foreign exchange loss (gain)

 

(470

)

 

 

1,136

 

 

(851

)

 

 

940

Severance/Restructuring expense

 

1,306

 

 

 

304

 

 

3,249

 

 

 

1,284

M&A related costs

 

285

 

 

 

186

 

 

451

 

 

 

938

Mexico natural gas supply imbalance charges

 

0

 

 

 

0

 

 

1,179

 

 

 

0

Value chain transition

 

743

 

 

 

4,493

 

 

2,338

 

 

 

4,493

Supplier Q418 payment amortization

 

(1,254

)

 

 

0

 

 

(2,365

)

 

 

0

Other

 

151

 

 

 

0

 

 

463

 

 

 

0

Total Pre-Tax Adjustments

 

761

 

 

 

6,119

 

 

4,464

 

 

 

7,655

Income tax effects on Adjustments

 

244

 

 

 

1,471

 

 

1,332

 

 

 

1,933

One-time Dutch tax charge

 

6,603

 

 

 

0

 

 

6,603

 

 

 

0

Adjusted Net Income

$

8,521

 

 

$

10,894

 

$

19,830

 

 

$

22,883

Adjusted Diluted Earnings Per Participating Share

$

0.43

 

 

$

0.55

 

$

1.00

 

 

$

1.15

Adjusted EBITDA Reconciliation to Net Income

(Dollars in thousands)

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

Net Income

$

1,401

 

 

$

6,246

 

 

$

10,095

 

 

$

17,161

 

Interest expense, net

 

3,887

 

 

 

3,198

 

 

 

7,589

 

 

 

6,102

 

Provision for income taxes

 

10,089

 

 

 

1,977

 

 

 

13,707

 

 

 

6,665

 

Depreciation & amortization

 

10,886

 

 

 

11,089

 

 

 

20,646

 

 

 

22,453

 

EBITDA

 

26,263

 

 

 

22,510

 

 

 

52,037

 

 

 

52,381

 

Adjustments

 

 

 

 

 

 

 

Non-cash stock compensation

 

2,780

 

 

 

1,993

 

 

 

3,567

 

 

 

2,992

 

Foreign exchange loss (gain)

 

(470

)

 

 

1,136

 

 

 

(851

)

 

 

940

 

Severance/Restructuring expense

 

1,306

 

 

 

304

 

 

 

3,249

 

 

 

1,284

 

M&A related costs

 

285

 

 

 

186

 

 

 

451

 

 

 

938

 

Mexico natural gas supply imbalance charges

 

0

 

 

 

0

 

 

 

1,179

 

 

 

0

 

Value chain transition

 

743

 

 

 

4,493

 

 

 

2,338

 

 

 

4,493

 

Supplier Q418 payment amortization

 

(1,254

)

 

 

0

 

 

 

(2,365

)

 

 

0

 

Other

 

151

 

 

 

0

 

 

 

463

 

 

 

0

 

Adjusted EBITDA

$

29,804

 

 

$

30,622

 

 

$

60,068

 

 

$

63,028

 

Percent of Sales

 

16.1

%

 

 

14.8

%

 

 

16.0

%

 

 

15.3

%

 

Segment Adjusted EBITDA Reconciliation to EBITDA

(Dollars in thousands)

Three Months Ended

 

Three Months Ended

 

June 30, 2019

 

June 30, 2018

 

FHN

 

IS

 

Other

 

Total

 

FHN

 

IS

 

Other

 

Total

EBITDA

$

19,561

 

 

$

6,972

 

 

$

(270

)

 

$

26,263

 

 

$

14,939

 

$

7,794

 

$

(223

)

 

$

22,510

Non-cash stock compensation

 

1,573

 

 

 

1,101

 

 

 

106

 

 

 

2,780

 

 

 

1,128

 

 

789

 

 

76

 

 

 

1,993

Foreign exchange loss (gain)

 

66

 

 

 

 

(536

)

 

 

(470

)

 

 

96

 

 

 

1,040

 

 

 

1,136

Severance/Restructuring exp

 

848

 

 

 

391

 

 

 

67

 

 

 

1,306

 

 

 

169

 

 

114

 

 

21

 

 

 

304

M&A related costs

 

285

 

 

 

 

 

285

 

 

 

172

 

 

 

14

 

 

 

186

Value chain transition

 

448

 

 

 

266

 

 

 

30

 

 

 

744

 

 

 

1,666

 

 

2,219

 

 

608

 

 

 

4,493

Supplier payment amortization

 

(652

)

 

 

(477

)

 

 

(125

)

 

 

(1,254

)

 

 

 

 

Other

 

89

 

15

 

 

52

 

 

10

 

 

 

151

 

 

 

 

 

Adjusted EBITDA

$

22,218

 

 

$

8,305

 

 

$

(718

)

 

$

29,804

 

 

$

18,170

 

$

10,916

 

$

1,536

 

 

$

30,622

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

Six Months Ended

 

June 30, 2019

 

June 30, 2018

 

FHN

 

IS

 

Other

 

Total

 

FHN

 

IS

 

Other

 

Total

EBITDA

$

33,967

 

 

$

15,029

 

 

$

3,041

 

 

$

52,037

 

 

$

33,931

 

$

17,886

 

$

564

 

 

$

52,381

Non-cash stock compensation

 

2,019

 

 

 

1,412

 

 

 

136

 

 

 

3,567

 

 

 

1,693

 

 

1,185

 

 

114

 

 

 

2,992

Foreign exchange loss (gain)

 

(60

)

 

 

 

(791

)

 

 

(851

)

 

 

9

 

 

 

931

 

 

 

940

Severance/Restructuring exp

 

2,100

 

 

 

981

 

 

 

168

 

 

 

3,249

 

 

 

763

 

 

482

 

 

40

 

 

 

1,285

M&A related costs

 

451

 

 

 

 

 

451

 

 

 

923

 

 

 

14

 

 

 

937

Mexico natural gas supply adj.

 

263

 

 

 

553

 

 

 

363

 

 

 

1,179

 

 

 

 

 

Value chain transition

 

1,409

 

 

 

836

 

 

 

93

 

 

 

2,338

 

 

 

1,666

 

 

2,219

 

 

608

 

 

 

4,493

Supplier payment amortization

 

(1,230

)

 

 

(899

)

 

 

(236

)

 

 

(2,365

)

 

 

 

 

Other

 

261

 

 

 

169

 

 

 

33

 

 

 

463

 

 

 

 

 

Adjusted EBITDA

$

39,180

 

 

$

18,081

 

 

$

2,807

 

 

$

60,068

 

 

$

38,985

 

$

21,772

 

$

2,271

 

 

$

63,028

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment Reporting

 

Three Months Ended June 30,

 

Six Months Ended June 30,

Segment Net Sales

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

Food, Health and Nutrition

$

106,543

 

 

$

125,664

 

 

$

221,609

 

 

$

252,027

 

Industrial Specialties

 

67,725

 

 

 

66,751

 

 

 

130,923

 

 

 

130,101

 

Other

 

10,770

 

 

 

14,310

 

 

 

23,920

 

 

 

30,037

 

Total

$

185,038

 

 

$

206,725

 

 

$

376,452

 

 

$

412,165

 

Net Sales % change

 

 

 

 

 

 

 

Food, Health and Nutrition

 

(15.2

)%

 

 

 

 

(12.1

)%

 

 

Industrial Specialties

 

1.5

%

 

 

 

 

0.6

%

 

 

Other

 

(24.7

)%

 

 

 

 

(20.4

)%

 

 

Total

 

(10.5

)%

 

 

 

 

(8.7

)%

 

 

Segment EBITDA

 

 

 

 

 

 

 

Food, Health and Nutrition

$

19,561

 

 

$

14,939

 

 

$

33,967

 

 

$

33,931

 

Industrial Specialties

 

6,972

 

 

 

7,794

 

 

 

15,029

 

 

 

17,886

 

Other

 

(270

)

 

 

(223

)

 

 

3,041

 

 

 

564

 

Total

$

26,263

 

 

$

22,510

 

 

$

52,037

 

 

$

52,381

 

Segment EBITDA % of net sales

 

 

 

 

 

 

 

Food, Health and Nutrition

 

18.4

%

 

 

11.9

%

 

 

15.3

%

 

 

13.5

%

Industrial Specialties

 

10.3

%

 

 

11.7

%

 

 

11.5

%

 

 

13.7

%

Other

 

(2.5

)%

 

 

(1.6

)%

 

 

12.7

%

 

 

1.9

%

Total

 

14.2

%

 

 

10.9

%

 

 

13.8

%

 

 

12.7

%

Depreciation and amortization expense

 

 

 

 

 

 

 

Food, Health and Nutrition

$

6,781

 

 

$

7,213

 

 

$

13,169

 

 

$

14,535

 

Industrial Specialties

 

3,766

 

 

 

3,368

 

 

 

6,946

 

 

 

7,104

 

Other

 

339

 

 

 

508

 

 

 

531

 

 

 

814

 

Total

$

10,886

 

 

$

11,089

 

 

$

20,646

 

 

$

22,453

 

Price / Volume

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/mix variance is calculated as the total sales variance minus the selling price variance. The following table illustrates the percentage changes in net sales by reportable segments compared with the same period of the prior year, including the effect of selling price and volume/mix changes upon revenue:

 

Three Months Ended

 

Six Months Ended

 

June 30, 2019

 

June 30, 2019

Reportable Segments

Price

 

Vol/Mix

 

Total

 

Price

 

Vol/Mix

 

Total

Food, Health and Nutrition

3.1

%

 

(18.3

)%

 

(15.2

)%

 

3.7

%

 

(15.8

)%

 

(12.1

)%

Industrial Specialties

3.4

%

 

(1.9

)%

 

1.5

%

 

3.5

%

 

(2.9

)%

 

0.6

%

Other

(1.3

)%

 

(23.4

)%

 

(24.7

)%

 

(1.1

)%

 

(19.3

)%

 

(20.4

)%

Total

2.9

%

 

(13.4

)%

 

(10.5

)%

 

3.3

%

 

(12.0

)%

 

(8.7

)%

Summary Cash Flow Statement

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Cash Flows (Unaudited)

(Dollars in thousands)

 

Six Months Ended June 30,

 

 

2019

 

 

 

2018

 

Cash flows provided from (used for) operating activities

 

 

 

Net income

$

10,095

 

 

$

17,161

 

Adjustments to reconcile net income to net cash provided from (used for) operating activities:

 

 

 

Depreciation and amortization

 

20,646

 

 

 

22,453

 

Amortization of deferred financing charges

 

215

 

 

 

215

 

Deferred income tax provision

 

208

 

 

 

97

 

Dutch income tax liability

 

6,603

 

 

Share-based compensation

 

3,567

 

 

 

2,992

 

Changes in assets and liabilities:

 

 

 

Accounts receivable

 

3,607

 

 

 

(8,110

)

Inventories

 

7,748

 

 

 

(13,136

)

Other current assets

 

(12,918

)

 

 

(4,481

)

Accounts payable

 

(24,129

)

 

 

(2,692

)

Other current liabilities

 

4,226

 

 

 

(718

)

Other long-term assets and liabilities

 

(3,087

)

 

 

(4,224

)

Net cash (used for) provided by operating activities

 

16,781

 

 

 

9,557

 

Cash flows used for investing activities:

 

 

 

Capital expenditures

 

(15,837

)

 

 

(26,475

)

Net cash used for investing activities

 

(15,837

)

 

 

(26,475

)

Cash flows provided by (used for) financing activities:

 

 

 

Long-term debt borrowings

 

37,000

 

 

 

61,000

 

Long-term debt repayments

 

(7,000

)

 

 

(41,000

)

Restricted stock forfeitures

 

(235

)

 

 

(251

)

Dividends paid

 

(18,866

)

 

 

(18,782

)

Net cash provided by (used for) financing activities

 

10,899

 

 

 

967

 

Effect of foreign exchange rate changes on cash and cash equivalents

 

 

(559

)

Net change in cash

 

11,843

 

 

 

(16,510

)

Cash and cash equivalents at beginning of period

 

20,197

 

 

 

28,782

 

Cash and cash equivalents at end of period

$

32,040

 

 

$

12,272

 

Cash From Operations Reconciliation to EBITDA

(Dollars in thousands)

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

EBITDA

$

26,263

 

 

$

22,510

 

 

$

52,037

 

 

$

52,381

 

Operating Working Capital

 

11,168

 

 

 

5,160

 

 

 

(23,050

)

 

 

(24,986

)

Taxes paid

 

(6,400

)

 

 

(9,400

)

 

 

(9,000

)

 

 

(12,800

)

Interest paid

 

(3,900

)

 

 

(3,700

)

 

 

(7,500

)

 

 

(6,800

)

All other including non-cash stock compensation and changes in other long-term assets and liabilities

 

(876

)

 

 

(6,485

)

 

 

4,294

 

 

 

1,762

 

Net cash provided from operation

$

26,255

 

 

$

8,085

 

 

$

16,781

 

 

$

9,557

 

Cash From Operations Reconciliation to Adjusted EBITDA

(Dollars in thousands)

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

Adjusted EBITDA

$

29,804

 

 

$

30,622

 

 

$

60,068

 

 

$

63,028

 

Operating Working Capital

 

10,407

 

 

 

(959

)

 

 

(27,514

)

 

 

(32,641

)

Taxes paid

 

(6,400

)

 

 

(9,400

)

 

 

(9,000

)

 

 

(12,800

)

Interest paid

 

(3,900

)

 

 

(3,700

)

 

 

(7,500

)

 

 

(6,800

)

All other including non-cash stock compensation and changes in other long-term assets and liabilities

 

(3,656

)

 

 

(8,478

)

 

 

727

 

 

 

(1,230

)

Net cash provided from operation

$

26,255

 

 

$

8,085

 

 

$

16,781

 

 

$

9,557

 

Free Cash Flow Reconciliation to Cash From Operations

(Dollars in thousands)

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

Cash from Operations

$

26,255

 

 

$

8,085

 

 

$

16,781

 

 

$

9,557

 

Capital Expenditures

 

(5,913

)

 

 

(11,410

)

 

 

(15,837

)

 

 

(26,475

)

Free Cash Flow

$

20,342

 

 

$

(3,325

)

 

$

944

 

 

$

(16,918

)

Summary Balance Sheets

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(Dollars in thousands)

 

 

June 30,
2019

 

December 31,
2018

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

32,040

 

$

20,197

Accounts receivable, net

 

 

98,957

 

 

102,564

Inventories

 

 

172,455

 

 

180,203

Other current assets

 

 

37,012

 

 

24,094

Total current assets

 

 

340,464

 

 

327,058

Property, plant and equipment, net

 

 

235,349

 

 

240,235

Lease right-of-use assets

 

 

51,604

 

Goodwill

 

 

152,767

 

 

152,767

Intangibles and other assets, net

 

 

89,971

 

 

95,094

Total assets

 

$

870,155

 

$

815,154

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable, trade and other

 

 

51,297

 

 

80,007

Other current liabilities

 

 

67,993

 

 

49,993

Total current liabilities

 

 

119,290

 

 

130,000

Long-term debt

 

 

330,000

 

 

300,000

Long-term lease liabilities

 

 

45,478

 

Other long-term liabilities

 

 

36,200

 

 

49,639

Total stockholders' equity

 

 

339,187

 

 

335,515

Total liabilities and stockholders' equity

 

$

870,155

 

$

815,154

Additional Information

Net debt is a supplemental financial measure that is not required by, or presented in accordance with, US GAAP. 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.

Free cash flow is a supplemental financial measure that is not required by, or presented in accordance with, US GAAP. The Company believes free cash flow 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 free cash flow as net cash provided from operating activities plus cash used for capital expenditures plus cash received from sale leaseback transactions.

EBITDA, adjusted EBITDA, adjusted net income and adjusted diluted EPS are supplemental financial measures that are not required by, or presented in accordance with, US GAAP. The Company believes EBITDA and adjusted EBITDA are helpful in analyzing the cash flow generating capability of the business and as performance measures for purposes of presentation in this release.

Net Working Capital is a supplemental financial measure that is not required by, or presented in accordance with, US GAAP. The Company believes net working capital is helpful in analyzing the effects on the cash flow generating capability of the business and as a performance measure for purposes of presentation in this release. The Company defines net working capital as total current assets less cash and cash equivalents less total current liabilities plus current portion of capital leases.

Operating Working Capital is a supplemental financial measure that is not required by, or presented in accordance with, US GAAP. The Company believes operating working capital is helpful in analyzing the effects on the cash flow generating capability of the business and as a performance measure for purposes of presentation in this release. The Company defines operating working capital as net working capital less taxes less interest.

Innophos is not able to provide a reconciliation of its expectation for adjusted earnings to 2019 GAAP net income given the dynamic nature of the strategic value chain repositioning program expenses and potential Mexico energy charges that may be incurred. In addition, Innophos is not able to provide a reconciliation of its 2022 expectation for adjusted EBITDA margin to GAAP net income due to the number of variables in the projected EBITDA margin for 2022. As a result we are currently unable to quantify accurately certain amounts that would be required to be included in GAAP net income for 2019 or 2022 or the individual adjustments for such reconciliation. In addition, we believe such reconciliation would imply a degree of precision that would be confusing or misleading to investors.

Investors
Mark Feuerbach
Innophos
609-366-1204
[email protected]

Media
Ryan Flaim
Sharon Merrill Associates
617-542-5300
[email protected]


Source: Business Wire (August 6, 2019 - 7:30 AM EDT)

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