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Innophos Holdings, Inc. Reports Fourth Quarter and Full Year 2016 Results

Margins Improved on Disciplined Cost Controls
Working Capital Reduction Drove Sizeable Cash Generation
Significant Progress Advancing Three Strategic Pillars of Operational Excellence, Commercial Excellence and Strategic Growth

CRANBURY, N.J., Feb. 21, 2017 /PRNewswire/ -- Innophos Holdings, Inc. (NASDAQ:  IPHS), today announced its financial results for the fourth quarter and full year ending December 31, 2016.

Q4 2016 Highlights

Full Year 2016 Highlights

"2016 was a meaningful and transformative year for Innophos as we strengthened the foundation of our business, delivered bottom line improvement and laid the groundwork for strategic growth," said Kim Ann Mink, Ph.D., Chief Executive Officer. "By remaining laser focused on reducing costs across the organization, we lowered input costs by a total of $22 million annually, $12 million of which was through our Operational Excellence initiatives and the balance from market conditions. Our 2016 financial results are a true testament to the performance driven culture we are cultivating at Innophos. Throughout the organization our teams are embracing the transformation that is underway, delivering results and displaying a commitment to excellence, transparency and accountability."

"The fourth quarter was highlighted by bottom line growth and tremendous cash generation. We grew margins even as we faced ongoing market headwinds. Our focus on efficient working capital resulted in meaningful free cash flow performance in the quarter that was more than triple the prior year. We also refinanced our credit facility with lower interest rates and an expanded capacity to support our Strategic Growth pillar."  

"As we move forward into 2017, although we expect market headwinds to continue, we are well positioned to deliver enhanced shareholder value," Dr. Mink continued. "Our focus will be on executing additional bottom line savings as we move to the next phase of Operational Excellence initiatives, which will standardize processes and reduce costs while improving how we operate. In addition, our Commercial Excellence blueprint that better aligns our sales organization with market opportunities and key customers will be fully implemented. Further, we plan to drive sustainable growth through acquisitions in attractive, high-growth, functional food, health and nutrition market segments. We are actively seeking opportunities to expand our capabilities and build upon our experience in providing value-added and innovative technology-based solutions to these markets."

Dr. Mink concluded, "I am confident that in the year ahead, we will leverage the momentum of our progress in 2016 by taking the appropriate, decisive next steps to further strengthen our competitive position, improve profitability and solidify Innophos' future growth prospects."

Fourth Quarter Results


$ Millions except EPS

Quarter 4

2016

2015

Variance $

Variance %

Sales

168

171

(3)

(2)%

Net Income

9

(5)

14

303%

Adj Net Income

10

6

4

70%

Adj EBITDA

26

22

4

17%

Diluted EPS

0.47

(0.24)

0.71

294%

Adj Diluted EPS

0.52

0.32

0.20

62%

Cash from Ops

57

23

34

150%

Variance $ and Variance % may not foot due to rounding.

Net sales for the fourth quarter 2016 of $168 million were down 2% compared with the fourth quarter 2015.

Net Income of $9 million for the fourth quarter 2016, up $14 million from the fourth quarter of 2015. Net income as a percent of sales was 6% reflecting improved mix and cost actions.

Adjusted EBITDA of $26 million for the fourth quarter 2016 yielded a margin of 16%, up 249 basis points compared with the prior-year quarter. Specialty Phosphates adjusted EBITDA margins of 17% improved 365 basis points versus the same quarter last year.

Diluted EPS of $0.47 compared with EPS loss of $0.24 for the fourth quarter 2015.  

Adjusted diluted EPS for the fourth quarter 2016 was $0.52, up 62% from an adjusted diluted EPS of $0.32 for the fourth quarter 2015.

Net Cash from operations of $57 million in the fourth quarter 2016 was more than double the same period of 2015, as a result of higher net income and significantly improved working capital.

Free cash flow of $46 million in the fourth quarter 2016 was the highest quarter of the year and more than triple the same period of 2015.

Net debt decreased 21% or $35 million sequentially to $132 million and was 33% or $64 million lower than December 2015.

Full Year Results


$ Millions except EPS

FY2016

2016

2015

Variance $

Variance %

Sales

725

789

(64)

(8)%

Net Income

48

26

22

82%

Adj Net Income

50

46

4

9%

Adj EBITDA

122

118

4

3%

Diluted EPS

2.44

1.29

1.15

89%

Adj Diluted EPS

2.55

2.27

0.28

12%

Cash from Ops

139

99

40

41%

Variance $ and Variance % may not foot due to rounding.

Net sales for 2016 of $725 million were down 8% compared with 2015.

Net Income of $48 million was up $22 million, or 82%, from 2015. Net income as a percent of sales was 7% in 2016, up from 3% in 2015 due to gross margin improvements from improved mix and cost actions. 

Adjusted EBITDA of $122 million yielded a margin of 17%, up 180 basis points compared with 2015 due to improved costs that offset lower sales. Specialty Phosphates adjusted EBITDA margins of 18% improved 251 basis points versus 2015.

Diluted EPS for 2016 was $2.44 compared with diluted EPS of $1.29 for 2015.

Adjusted diluted EPS for 2016 was $2.55 compared with an adjusted diluted EPS of $2.27 for 2015.

Net Cash from operations for 2016 was $139 million, up 41% from 2015.

Free cash flow for 2016 was $103 million, up 53% from 2015 despite $19 million of taxes paid in the first quarter of 2016 related to the cash repatriation program.

Recent Trends and Outlook 

Specialty Phosphates volumes declined by 7% for full year 2016 compared with 2015, in line with expectations, primarily driven by reduced sales in lower margin, less differentiated applications and weak end market demand due to continued pressures on packaged foods.

2017 is expected to be another year of transition with a focus on protecting earnings and delivering cash while continuing to build on the three strategic pillars.

Overall market conditions and competitive landscape for 2017 are expected to be similar to the prior year. Full year earnings are therefore expected to be broadly in line with 2016 reflecting the impact of management's continued focus on cost actions and productivity initiatives given the challenging market conditions.

Conference Call

Innophos will host its fourth quarter 2016 conference call on Wednesday, February 22, 2017 at 9:00 am ET. The call can be accessed by dialing (800) 708-4539 (U.S.) or 1-847-619-6396 (international) and entering passcode 44140578. Please dial in approximately 15 minutes ahead of the start time to ensure timely entry to the call. The Q4 2016 earnings call presentation will be made available on the Company's website the morning of the call. A replay will be available between 11:30 am ET on February 22 and 12:00 pm ET on March 8, 2017. The replay is accessible by dialing 1-888-843-7419 (U.S.) or 1-630-652-3042 (international) and entering passcode 44140578#. Additional information on Innophos' fourth quarter results can also be found on the Company's website.  

About the Company

Innophos is a leading international producer of specialty ingredient solutions that deliver far-reaching, versatile benefits for the food, health, nutrition and industrial markets. We leverage our expertise in the science and technology of blending and formulating phosphate, mineral and botanical based ingredients to help our customers offer products that are tasty, healthy, nutritious and economical. 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'

Contacts

Investors: Mark Feuerbach, 609-366-1204 or investor.relations@innophos.com

Media: Ryan Flaim, Sharron Merrill Associates, 617-542-5300 or IPHS@investorrelations.com

 

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

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Operations (Unaudited)

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










Three Months Ended December 31,


Year Ended December 31,


2016


2015


2016


2015









Net sales

$167,790


$170,632


$725,345


$789,147

Cost of goods sold

134,805


145,945


574,953


645,818

Gross profit

32,985


24,687


150,392


143,329

Operating expenses:








     Selling, general and administrative

15,839


27,278


67,555


87,304

     Research & development expenses

826


1,072


3,739


4,502

     Total operating expenses

16,665


28,350


71,294


91,806


Operating income

16,320


(3,663)


79,098


51,523









Interest expense, net

2,042


3,095


7,669


7,518

Foreign exchange loss (gain)

684


(1,179)


1,111


3,882

Income before income taxes

13,594


(5,579)


70,318


40,123

Provision for income taxes

4,212


(946)


22,347


13,777

Net income

$9,382


($4,633)


$47,971


$26,346









Diluted Earnings Per Participating Share

$0.47


($0.24)


$2.44


$1.29

Diluted weighted average participating shares
outstanding

19,678,598


19,242,777


19,581,476


20,323,385


Dividends paid per share of common stock

$0.48


$0.48


$1.92


$1.92

Dividends declared per share of common stock

$0.48


$0.48


$1.92


$1.92









 

 

Adjusted EBITDA Reconciliation to Net Income













(Dollars in thousands)

Three Months Ended December 31,


Year Ended December 31,


2016


2015


2016


2015









Net Income (loss)

$9,382


($4,633)


$47,971


$26,346

Interest expense, net

2,042


3,095


7,669


7,518

Provision for income taxes

4,212


(946)


22,347


13,777

Depreciation & amortization

8,872


8,855


37,479


38,535

EBITDA

24,508


6,371


115,466


86,176









Adjustments








Non-cash stock compensation *

493


180


3,077


2,423

Translation expense (income) 

684


(1,179)


1,111


3,882

Restructuring expense 

-


-


1,465


8,621

Operating expenses related to refinancing

585


-


585


-

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

$26,270


$22,473


$121,704


$118,203









Percent of Sales

15.7%


13.2%


16.8%


15.0%









* Not adjusted when calculating Adjusted EPS







































Adjusted Net Income Reconciliation to Net Income












(Dollars in thousands, except EPS)

Three Months Ended December 31,


Year Ended December 31,


2016


2015


2016


2015

Net Income (loss)

$9,382


($4,633)


$47,971


$26,346









Pre-tax Adjustments








Translation expense (income) 

684


(1,180)


1,110


3,881

Restructuring expense 

-


-


1,465


8,621

Operating expense related to refinancing

585


-


585


-

Management transition expense

-


11,789


-


11,789

Specialty Phosphates inventory reserves

-


3,312


-


3,312

Revision of 2014 supplier costs

-


2,000


-


2,000

Total Pre-tax Adjustments

1,269


15,921


3,160


29,603









Income tax effects on Adjustments

394


5,254


976


9,729

Adjusted Net Income

$10,257


$6,034


$50,155


$46,220









Adjusted Diluted Earnings 
Per Participating Share

$0.52


$0.32


$2.55


$2.27

Segment Reporting - Fourth 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 December 31,


Net Sales


2016


2015


% Change

Segment Net Sales






Specialty Phosphates US & Canada

$116,235


$127,216


(8.6)%

Specialty Phosphates Mexico

39,907


38,079


4.8%

Total Specialty Phosphates

156,142


165,295


(5.5)%

GTSP & Other

11,648


5,337


118.2%

Total

$167,790


$170,632


(1.7)%







Segment EBITDA






Specialty Phosphates US & Canada

$14,120


$9,585



Specialty Phosphates Mexico

10,846


8,068



Total Specialty Phosphates

24,966


17,653



GTSP & Other (a) 

(458)


(11,283)



Total

$24,508


$6,370









Segment EBITDA % of net sales






Specialty Phosphates US & Canada

12.1%


7.5%



Specialty Phosphates Mexico

27.2%


21.2%



Total Specialty Phosphates

16.0%


10.7%



GTSP & Other 

(3.9)%


(211.4)%



Total

14.6%


3.7%









Depreciation and amortization expense






Specialty Phosphates US & Canada

$5,850


$6,094



Specialty Phosphates Mexico

2,340


2,628



Total Specialty Phosphates

8,190


8,722



GTSP & Other

682


132



Total

$8,872


$8,854









(a) The three months ended December 31, 2015 includes an $11.8 million charge to earnings for management

      transition expenses.












Segment Reporting - Year-to-date








Year Ended December 31,


Net Sales


2016


2015


% Change

Segment Net Sales






Specialty Phosphates US & Canada

$511,304


$568,332


(10.0)%

Specialty Phosphates Mexico

162,095


164,489


(1.5)%

Total Specialty Phosphates

673,399


732,821


(8.1)%

GTSP & Other

51,946


56,326


(7.8)%

Total

$725,345


$789,147


(8.1)%







Segment EBITDA






Specialty Phosphates US & Canada

$68,457


$73,031



Specialty Phosphates Mexico

49,408


30,723



Total Specialty Phosphates

117,865


103,754



GTSP & Other (a) (b)

(2,399)


(17,578)



Total

$115,466


$86,176









Segment EBITDA % of net sales






Specialty Phosphates US & Canada

13.4%


12.9%



Specialty Phosphates Mexico

30.5%


18.7%



Total Specialty Phosphates

17.5%


14.2%



GTSP & Other 

(4.6)%


(31.2)%



Total

15.9%


10.9%









Depreciation and amortization expense






Specialty Phosphates US & Canada

$25,752


$26,442



Specialty Phosphates Mexico

7,940


9,558



Total Specialty Phosphates

33,692


36,000



GTSP & Other

3,787


2,535



Total

$37,479


$38,535









(a) The year ended December 31, 2016 includes a $1.5 million charge to earnings for restructuring reserves.

(b) The year ended December 31, 2015 includes an $11.8 million charge to earnings for management transition

      expenses and an $8.6 million charge to earnings for restructuring reserves.








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 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 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 December 31, 2016


Year Ended December 31, 2016













Reportable Segments

Price  


Volume/Mix


Total  


Price  


Volume/Mix


Total  

Specialty Phosphates US & Canada

(1.1)%


(7.5)%


(8.6)%


(0.7)%


(9.3)%


(10.0)%

Specialty Phosphates Mexico

(4.7)%


9.5%


4.8%


(2.9)%


1.4%


(1.5)%

Total Specialty Phosphates

(2.0)%


(3.5)%


(5.5)%


(1.2)%


(6.9)%


(8.1)%

GTSP & Other

(97.3)%


215.5%


118.2%


(27.1)%


19.3%


(7.8)%

Total

(4.9)%


3.2%


(1.7)%


(3.0)%


(5.1)%


(8.1)%













Summary Cash Flow Statement 

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)






Year Ended December 31,


2016


2015

Cash flows provided from operating activities




     Net income

$47,971


$26,346

     Adjustments to reconcile net income to net cash provided from




     operating activities:




          Depreciation and amortization

37,479


38,535

          Amortization of deferred financing charges

680


615

          Deferred income tax provision (benefit)

9,534


(36,637)

          Share-based compensation

2,822


6,618

     Changes in assets and liabilities:




         Decrease in accounts receivable

2,058


10,784

         Decrease in inventories

44,012


12,071

         (Increase) decrease in other current assets

(634)


23,264

         Increase (decrease) in accounts payable

14,703


(16,436)

         (Decrease) increase in other current liabilities

(18,926)


27,932

         Changes in other long-term assets and liabilities

(590)


5,834

              Net cash provided from operating activities

139,109


98,926

Cash flows used for investing activities:




      Capital expenditures

(36,599)


(31,699)

             Net cash used for investing activities

(36,599)


(31,699)

Cash flows used for financing activities:




     Proceeds from exercise of stock options

17


246

     Long-term debt borrowings

41,000


159,000

     Long-term debt repayments

(69,002)


(82,003)

     Deferred financing costs

(1,495)


(277)

     Excess tax (deficiency) benefit from exercise of stock options

(9)


975

     Common stock repurchases and restricted stock forfeitures

(366)


(125,401)

     Dividends paid

(37,217)


(38,558)

            Net cash used for financing activities

(67,072)


(86,018)

Effect of foreign exchange rate changes on cash and cash equivalents

144


489

Net change in cash

35,582


(18,302)

Cash and cash equivalents at beginning of period

17,905


36,207

Cash and cash equivalents at end of period

$53,487


$17,905





Summary Balance Sheets 

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(Dollars In thousands)






December 31
2016


December 31
2015

ASSETS




Current assets:




     Cash and cash equivalents

$53,487


$17,905

     Accounts receivable, net

77,692


79,743

     Inventories

128,295


172,667

     Other current assets

23,894


23,514

               Total current assets

283,368


293,829

Property, plant and equipment, net

205,459


199,494

Goodwill

84,373


84,373

Intangibles and other assets, net

69,811


91,857

               Total assets

$643,011


$669,553

LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




     Current portion of long-term debt

$0


$4,002

     Accounts payable, trade and other

51,611


36,898

     Other current liabilities

43,605


63,204

               Total current liabilities

95,216


104,104

Long-term debt

185,000


209,000

Other long-term liabilities

15,569


23,189

               Total stockholders' equity

347,226


333,260

               Total liabilities and stockholders' equity

$643,011


$669,553





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 net cash used for investing purposes.

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.

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/innophos-holdings-inc-reports-fourth-quarter-and-full-year-2016-results-300410859.html

SOURCE Innophos Holdings, Inc.

News Provided by Acquire Media

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