CRANBURY, N.J., July 28, 2014 /PRNewswire/ -- Innophos Holdings,
Inc. (NASDAQ: IPHS), 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, today
announced its financial results for the second quarter 2014.
Second Quarter Results
- Net sales for the second quarter 2014 of $220 million were up 2% sequentially and 3%
compared to second quarter 2013 levels. Specialty Phosphates
sales increased 1% sequentially, but declined 2% year-over-year
primarily due to lower Mexico STPP sales.
- US/Canada Specialty Phosphates sales of $157 million were 4% higher sequentially, but
down 1% compared to the prior year quarter with prices down 2% and
volumes up 1%.
- Mexico Specialty Phosphates sales of $41
million decreased 8% sequentially and 6% compared to the
year ago period, primarily due to the reduced demand and timing of
STPP orders, as the first half 2014 STPP volumes were just slightly
below first half 2013 levels.
- GTSP & Other sales of $22
million were up modestly on a sequential basis and doubled
compared to the year ago period on higher volumes, partially offset
by lower pricing.
- Diluted EPS for the second quarter 2014 was $0.93 compared to $0.52 for the second quarter 2013. Giving
effect to the prior year adjustments previously disclosed, diluted
EPS was $0.79 for the second quarter
2013.
Randy Gress, CEO of Innophos,
commented, "I am pleased with our strong improvement in operating
performance and bottom line results for the 2014 second quarter,
which reflect strong execution across our businesses. We delivered
better than expected levels of Specialty Phosphates operating
income, mainly driven by continued solid performance and improving
yields at our Coatzacoalcos
operations and the timing of price increases in Mexico achieved ahead of raw material cost
increases due to inventory lags. While profitability reflected
improved operating performance, net sales for the quarter were
negatively affected by softening market dynamics for our core
markets, combined with adverse timing of Mexico STPP sales,
continued weaker INNOVALT® sales for asphalt markets due to
uncertain federal transportation funding and slower growth than
expected in our nutrition business. Cash generation remains strong,
and we continue to return value to our shareholders as evidenced by
the repurchase of 112,000 shares in the second quarter as part of
our previously announced program and a 20% increase in our
quarterly dividend we are announcing for our third quarter payment.
Based on our second-quarter performance and current market
visibility, we are reaffirming our Specialty Phosphates margin
target for the year, but expect to come in at the low end of our
volume growth range as a result of the revenue-related headwinds
that affected our results in the second quarter."
Segment Results – second quarter 2014 versus 2013
Specialty Phosphates
Specialty Phosphates sales were down 2% year-over-year, with
volume and price each down 1%.
Operating income of $32 million
was up $7 million year-over-year and
$6 million sequentially. Taking
into account the $5 million of
elevated cost of goods sold that was previously reported for the
prior year period, operating income was up $2 million. Operating income margin for the
second quarter 2014 was 16%, up 360 basis points against the prior
year and up 140 basis points against the adjusted prior year
level.
US/Canada
Sales were 1% lower than the prior year period on 2% lower
prices, partially offset by 1% higher volumes. Price
increases implemented in the second quarter 2014 to offset
increasing raw material costs are expected to take effect at the
beginning of the third quarter 2014. Growth impediments
continued in the US for the INNOVALT® asphalt business, due to
declining funds in the federal highway transportation budget, and
ongoing unresolved import issues into China for some of our nutrition business
customers.
Operating income of $21 million
was up $1 million sequentially, but
$2 million lower year-over-year due
to lower selling prices. Operating income margin was 14% for
the second quarter 2014, up 20 basis points sequentially, but down
130 basis points from the prior year level.
Mexico
Mexico Specialty Phosphates sales decreased 6% compared to
second quarter 2013 on 8% lower volumes resulting primarily from
the timing of STPP orders. Selling prices increased 2% as the
Mexico business realized price
increases during the quarter.
Operating income in the second quarter 2014 of $11 million was up $5
million sequentially and up $9
million year-over-year due to lower costs and the timing of
the achievement of price increases ahead of the effects of higher
raw material costs due to inventory lags. Adjusting for the
$5 million of elevated costs in the
prior year quarter, operating income was up $4 million. Operating income margin was 25%
for the second quarter 2014, up significantly when compared to 3%
for the year ago quarter and 13% for the adjusted prior-year
quarter.
GTSP & Other
GTSP & Other sales (primarily Granulated Triple
Superphosphate fertilizer co-product) essentially doubled in the
second quarter 2014 compared to the year ago period on 110% higher
volumes, but 11% lower selling prices.
The second quarter 2014 operating income at break-even levels,
which included a $1 million accrual
for Geismar contingent liabilities
recorded in "Other", was $3 million
higher than the prior year quarter and up $4
million sequentially. Adjusting for the previously
disclosed $2 million of elevated
costs from reduced efficiencies and higher plant maintenance in the
prior year quarter, operating income was $1
million higher than the prior year quarter. Operating income
margins were 1% for the second quarter 2014 compared to (28)% for
the second quarter 2013 as reported and (11)% on an adjusted
basis.
Recent Trends and Outlook
Specialty Phosphates volume was down 1% in the second quarter
2014 compared to the prior year primarily due to softening market
dynamics for our core markets, combined with adverse STPP order
patterns in Mexico, lower growth
than expected for the nutrition business and continued dampening on
INNOVALT® sales for asphalt markets. Export sales overall
were up 13% year-over-year with growth achieved across all regions.
As a result of the noted challenges in the US markets,
which negatively affected first half 2014 growth rates by 100 basis
points, our expectation for Specialty Phosphates volume growth is
now at the low end of the full year 2014 target range of 3-5%.
Specialty Phosphates operating income margins were 16% for the
second quarter 2014, above the full year expected range, due to
significantly improved profitability levels in Mexico. We remain confident in our full year
2014 target of 14-15% operating income margins for Specialty
Phosphates.
Fertilizer market prices remained stable during the second
quarter 2014, but have increased 5-10% during July. Market
phosphate rock prices were flat sequentially in the second quarter
2014 and are expected to remain stable for the third quarter.
Sulfur market prices increased approximately 20% in the second
quarter 2014 and are expected to increase slightly in the third
quarter. Innophos has implemented selling price increases to
offset the effects of the rise in raw material costs.
GTSP & Other recorded break-even operating income for the
second quarter 2014. Included in these results was a $1 million accrual in "Other" for Geismar contingent liabilities, including
settlement civil penalties, following the receipt of a draft
consent decree and discussions with government parties. We
expect to generate $1 million of
operating income in this minor segment for the third quarter 2014
based on current market selling and raw material price
indications.
Net debt decreased sequentially by $11
million in the second quarter 2014 to $101 million as the company generated additional
cash from operations. Innophos spent $6.2
million to repurchase 112,000 shares during the second
quarter 2014, and the Board of Directors has approved a 20%
increase in the quarterly dividend rate to $0.48 per share to be paid in the third
quarter. Details of the declaration will be announced
separately.
Capital Expenditures
Capital expenditures were $9
million in the second quarter, up $3
million from the first quarter 2014. Our expectation
for 2014 capital expenditures remains in the $35-40 million range. We continue to focus on
capacity enhancements to our US, Canada and Mexico Specialty Ingredients
facilities and further improvements of Mexico's reliability, efficiency and
capability to manufacture a more diverse mix of higher quality
products.
About Innophos Holdings, Inc.
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.
Innophos combines more than a century of experience in specialty
phosphate manufacturing with a growing capability in a broad range
of other specialty ingredients to supply a product range produced
to stringent regulatory manufacturing standards and the quality
demanded by customers worldwide. Innophos is continually
developing new and innovative specialty ingredients addressing
specific customer applications and supports these high-value
products with industry-leading technical service.
Headquartered in Cranbury, New
Jersey, Innophos has manufacturing operations in
Nashville, TN; Chicago Heights, IL; Chicago (Waterway), IL; Geismar, LA; Ogden,
UT; North Salt Lake, UT;
Salt Lake City, UT; Paterson, NJ; Green
Pond, SC; Port Maitland, ON
(Canada); Taicang (China); Coatzacoalcos, Veracruz and San Jose de Iturbide (Mission Hills), Guanajuato (Mexico). For more information
please visit www.innophos.com. 'IPHS-G'
Financial Tables Follow
Innophos Holdings,
Inc.
|
FTI Consulting,
Inc.
|
|
|
Investor Relations:
(609) 366-1299
|
Bryan Armstrong/Matt
Steinberg
|
investor.relations@innophos.com
|
(212)
850-5600
|
Conference Call Details
The conference call is scheduled for Tuesday, July 29, 2014 at 10:00 am ET and can be accessed by dialing
1-888-206-4064 (U.S.) or
1-630-827-5973 (international) and entering passcode
37748160. 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 July 29 and 1:00 pm ET on August
12, 2014. The replay is accessible by dialing
1-888-843-7419 (U.S.) or 1-630-652-3042
(international) and entering passcode 5575193#.
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 – Second
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
June 30,
|
|
2014
|
|
2013
|
|
|
|
|
Net sales
|
$219,542
|
|
$213,176
|
Cost of goods
sold
|
166,969
|
|
172,281
|
Gross
profit
|
52,573
|
|
40,895
|
Operating
expenses:
|
|
|
|
Selling, general and
administrative
|
19,683
|
|
17,939
|
Research &
development expenses
|
1,081
|
|
826
|
Total operating
expenses
|
20,764
|
|
18,765
|
Operating
income
|
31,809
|
|
22,130
|
Interest expense,
net
|
1,128
|
|
1,594
|
Foreign exchange loss
(gain)
|
(1,042)
|
|
2,915
|
Income before income
taxes
|
31,723
|
|
17,621
|
Provision for income
taxes
|
11,095
|
|
6,054
|
Net income
|
$20,628
|
|
$11,567
|
|
|
|
|
Diluted Earnings Per
Participating Share
|
$0.93
|
|
$0.52
|
|
|
|
|
Diluted weighted
average participating shares outstanding:
|
22,251,416
|
|
22,320,172
|
Dividends paid per
share of common stock
|
$0.40
|
|
$0.35
|
Dividends declared
per share of common stock
|
$0.40
|
|
$0.35
|
Segment Reporting – Second 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 operating income, 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
June 30,
|
|
Net
Sales
|
|
2014
|
|
2013
|
|
% Change
|
Segment Net
Sales
|
|
|
|
|
|
Specialty Phosphates
US & Canada
|
$157,267
|
|
$159,054
|
|
(1.1)%
|
Specialty Phosphates
Mexico
|
40,885
|
|
43,370
|
|
(5.7)%
|
Total Specialty
Phosphates
|
198,152
|
|
202,424
|
|
(2.1)%
|
GTSP &
Other
|
21,390
|
|
10,752
|
|
98.9%
|
Total
|
$219,542
|
|
$213,176
|
|
3.0%
|
|
|
|
|
|
|
Segment Operating
Income
|
|
|
|
|
|
Specialty Phosphates
US & Canada
|
$21,334
|
|
$23,759
|
|
|
Specialty Phosphates
Mexico
|
10,320
|
|
1,333
|
|
|
Total Specialty
Phosphates
|
31,654
|
|
25,092
|
|
|
GTSP &
Other
|
155
|
|
(2,962)
|
|
|
Total
|
$31,809
|
|
$22,130
|
|
|
|
|
|
|
|
|
Segment Operating
Income % of net sales
|
|
|
|
|
|
Specialty Phosphates
US & Canada
|
13.6%
|
|
14.9%
|
|
|
Specialty Phosphates
Mexico
|
25.2%
|
|
3.1%
|
|
|
Total Specialty
Phosphates
|
16.0%
|
|
12.4%
|
|
|
GTSP &
Other
|
0.7%
|
|
(27.5)%
|
|
|
Total
|
14.5%
|
|
10.4%
|
|
|
|
|
|
|
|
|
Depreciation and
amortization expense
|
|
|
|
|
|
Specialty Phosphates
US & Canada
|
$6,291
|
|
$6,465
|
|
|
Specialty Phosphates
Mexico
|
2,277
|
|
2,318
|
|
|
Total Specialty
Phosphates
|
8,568
|
|
8,783
|
|
|
GTSP &
Other
|
357
|
|
682
|
|
|
Total
|
$8,925
|
|
$9,465
|
|
|
Price / Volume – Second 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
June 30, 2014 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
|
(1.8)%
|
|
0.7%
|
|
(1.1)%
|
Specialty Phosphates
Mexico
|
2.5%
|
|
(8.2)%
|
|
(5.7)%
|
Total Specialty
Phosphates
|
(0.9)%
|
|
(1.2)%
|
|
(2.1)%
|
GTSP &
Other
|
(10.9)%
|
|
109.8%
|
|
98.9%
|
Total
|
(1.4)%
|
|
4.4%
|
|
3.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specialty
Phosphates Product Lines
|
Price
|
|
Volume/Mix
|
|
Total
|
Specialty
Ingredients
|
(0.9)%
|
|
1.1%
|
|
0.2%
|
Food &
Technical Grade PPA
|
(1.2)%
|
|
(2.0)%
|
|
(3.2)%
|
STPP &
Detergent Grade PPA
|
(0.3)%
|
|
(15.7)%
|
|
(16.0)%
|
Summary Cash Flow Statement
INNOPHOS HOLDINGS,
INC. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Cash Flows (Unaudited)
|
(Dollars in
thousands)
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
2014
|
|
2013
|
Cash flows provided
from operating activities
|
|
|
|
Net income
|
$34,813
|
|
$23,970
|
Adjustments to reconcile net
income to net cash provided
|
|
|
|
from operating
activities:
|
|
|
|
Depreciation and amortization
|
17,399
|
|
18,851
|
Amortization of deferred financing charges
|
263
|
|
288
|
Deferred income tax provision
|
(71)
|
|
1,331
|
Share-based compensation
|
1,975
|
|
1,751
|
Changes in assets and
liabilities:
|
|
|
|
Increase in accounts receivable
|
(19,279)
|
|
(7,512)
|
Decrease in inventories
|
17,169
|
|
9,278
|
Decrease in other current assets
|
12,146
|
|
10,451
|
(Decrease) increase in accounts payable
|
(917)
|
|
3,745
|
Increase (decrease) in other current liabilities
|
2,533
|
|
(15,281)
|
Changes in other long-term assets and liabilities
|
2,019
|
|
(3,143)
|
Net cash provided from operating activities
|
68,050
|
|
43,729
|
Cash flows used for
investing activities:
|
|
|
|
Capital
expenditures
|
(14,722)
|
|
(15,879)
|
Net cash used for investing activities
|
(14,722)
|
|
(15,879)
|
Cash flows used for
financing activities:
|
|
|
|
Proceeds from exercise of
stock options
|
159
|
|
75
|
Long-term debt
borrowings
|
-
|
|
28,000
|
Long-term debt
repayments
|
(24,001)
|
|
(36,000)
|
Excess tax benefits from
exercise of stock options
|
154
|
|
1,041
|
Common stock
repurchases
|
(6,381)
|
|
(70)
|
Dividends paid
|
(17,546)
|
|
(15,326)
|
Net cash used for financing activities
|
(47,615)
|
|
(22,280)
|
Net change in
cash
|
5,713
|
|
5,570
|
Cash and cash
equivalents at beginning of period
|
32,755
|
|
26,815
|
Cash and cash
equivalents at end of period
|
$38,468
|
|
$32,385
|
Summary Balance Sheets
INNOPHOS HOLDINGS,
INC. AND SUBSIDIARIES
|
Condensed
Consolidated Balance Sheets (Unaudited)
|
(Dollars In
thousands)
|
|
|
|
|
|
June 30,
2014
|
|
December
31,
2013
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$38,468
|
|
$32,755
|
Accounts receivable,
net
|
107,713
|
|
88,434
|
Inventories
|
164,298
|
|
181,467
|
Other current
assets
|
69,380
|
|
81,961
|
Total current assets
|
379,859
|
|
384,617
|
Property, plant and
equipment, net
|
201,690
|
|
201,985
|
Goodwill
|
84,373
|
|
84,373
|
Intangibles and other
assets, net
|
71,669
|
|
74,691
|
Total assets
|
$737,591
|
|
$745,666
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Current portion of long-term
debt
|
$4,004
|
|
$4,002
|
Accounts payable, trade and
other
|
37,800
|
|
38,717
|
Other current
liabilities
|
37,146
|
|
34,613
|
Total current liabilities
|
78,950
|
|
77,332
|
Long-term
debt
|
135,004
|
|
159,007
|
Other long-term
liabilities
|
47,454
|
|
45,908
|
Total stockholders' equity
|
476,183
|
|
463,419
|
Total liabilities and stockholders' equity
|
$737,591
|
|
$745,666
|
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.
SOURCE Innophos Holdings, Inc.