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Innophos Holdings, Inc. Reports Third-Quarter 2017 Results

Q3 Earnings Performance Exceeds Expectations
Novel Ingredients Integration Progressing as Planned
Full Year Revenue Guidance Raised; Earnings Guidance Maintained

CRANBURY, N.J., Oct. 31, 2017 /PRNewswire/ -- Innophos Holdings, Inc. (NASDAQ: IPHS) today announced its financial results for the third quarter ended September 30, 2017.

Highlights

"We delivered a solid third quarter on both the top and bottom line, including the strongest adjusted diluted EPS performance in the past twelve quarters," said Kim Ann Mink, Ph.D., Chairman, President and Chief Executive Officer. "During the quarter we swiftly closed our Novel Ingredients acquisition, which in its first five weeks of operations contributed $10 million in sales and was $0.01 accretive to EPS excluding purchase accounting expenses."

"We have made excellent progress with the integration of Novel Ingredients, facilitated by a disciplined integration process led by our newly created Integration Management Office (IMO), and with oversight by an Executive Steering Committee. We already achieved several key milestones, including the integration of our Nutrition sales force. We continue to work toward delivering the $15 million of identified cost and tax synergies and we remain encouraged by the potential for cross-selling opportunities."

"We are mapping out a repeatable integration process that will be instrumental to drive toward our Vision 2022 growth aspirations," said Mink. "To that end, we continue to actively evaluate several strategic growth opportunities that advance our goal of being a leading specialty ingredient solutions provider to attractive FHN markets and more closely align Innophos with consumer mega-trends such as health and wellness, energized aging, and clean labels."

"Executing against our Operational Excellence pillar remains a key priority," continued Mink. "The implementation of our Phase 2 program involves process, systems and organizational changes to optimize our MRO, packaging and logistics costs. In Q3, we delivered $1 million of savings. We remain on track to deliver $13 million of Phase 2 total savings."

"Going forward, we remain steadfastly focused on executing against our three strategic pillars of Operational Excellence, Commercial Excellence and Strategic Growth to advance toward our Vision 2022 goals and deliver shareholder value," concluded Mink.

Third Quarter Results
Variance $ and Variance % in the following tables may not foot due to rounding

$ Millions except EPS

Quarter 3

2017

2016

Variance $

Variance %

Sales

184

186

(2)

(1)%

Net Income

12

14

(2)

(15)%

Adj. Net Income

15

15

1

5%

EBITDA

29

32

(3)

(10)%

Adj. EBITDA

35

34

1

3%

Diluted EPS

0.58

0.69

(0.10)

(15)%

Adj. Diluted EPS

0.78

0.75

0.03

5%

Cash from Ops

27

40

(13)

(32)%

Free Cash Flow

19

33

(14)

(43)%

 

 

Q3 Segment Financials

Sales

2017 $ Millions

2016 $ Millions

Variance $

Variance %

FHN

98

94

5

5%

IS

68

70

(2)

(4)%

Other

18

22

(4)

(20)%

Total Innophos

184

186

(2)

(1)%


Adj. EBITDA

2017 $ Millions

2016 $ Millions

2017 Margin

2016 Margin

FHN

19

20

19%

22%

IS

14

11

21%

15%

Other

2

3

11%

15%

Total IPHS

35

34

19%

18%

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

 

 

Year-to-date Results
Variance $ and Variance % in the following tables may not foot due to rounding

$ Millions except EPS

YTD Quarter 3

2017

2016

Variance $

Variance %

Sales

529

558

(29)

(5)%

Net Income

34

39

(5)

(13)%

Adj. Net Income

38

40

(1)

(4)%

EBITDA

83

91

(8)

(9)%

Adj. EBITDA

93

95

(3)

(3)%

Diluted EPS

1.70

1.96

(0.26)

(13)%

Adj. Diluted EPS

1.94

2.03

(0.09)

(4)%

Cash from Ops

47

82

(35)

(43)%

Free Cash Flow

22

56

(34)

(61)%

 

 

YTD Quarter 3 Segment Financials

Sales

2017 $ Millions

2016 $ Millions

Variance $

Variance %

FHN

282

287

(5)

(2)%

IS

199

217

(18)

(8)%

Other

49

54

(6)

(10)%

Total Innophos

529

558

(29)

(5)%


Adj. EBITDA

2017 $ Millions

2016 $ Millions

2017 Margin

2016 Margin

FHN

53

61

19%

21%

IS

34

31

17%

14%

Other

5

3

11%

6%

Total IPHS

93

95

18%

17%

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

 

Full Year 2017 Outlook 

The Company increased its full year 2017 sales guidance, and maintained its adjusted EBITDA. Both are forecasted to be broadly in line with prior year.

2017 guidance reflects the contributions from Novel Ingredients in both Q3 and Q4 with estimated sales of $35 million.

Q4 is expected to reflect typical seasonality with lower sequential sales and unfavorable mix.

Demand impact from the recent natural disasters is expected to carry into Q4 and forecasted to have an unfavorable $3 million effect on sales for the full year.

An estimated $3 million of Phase 2 Operational Excellence savings will take effect in 2017, $2 million of which will be recorded in Q4. Near term logistics savings are being impacted by lack of trucking equipment availability following recent hurricanes.

The Company is planning a manufacturing stoppage in Q4 as a first step in a broader plant maintenance and supply chain optimization program that will be phased throughout 2018, demonstrating our continued commitment to our phosphates product portfolio. This stoppage will impact earnings adversely by approximately $4 million due to maintenance expense, lower fixed costs absorption and higher cost of externally sourced material.

Q4 2017 is forecasted to show double-digit sales and adjusted EBITDA growth versus prior year.

Conference Call

Innophos will host its third quarter 2017 conference call on Tuesday, October 31, 2017 at 9:00 am ET to discuss its earnings results. The call can be accessed by dialing 1-877-604-1612 (U.S.) or 1-201-389-0883 (international). No passcode is required. Please dial in approximately 15 minutes ahead of the start time to ensure timely entry to the call. The Q3 2017 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 October 31 and 11:59 pm ET on November 15, 2017. The replay is accessible by dialing 1-877-660-6853 (U.S.) or 1-201-612-7415 (international) and entering passcode 13672461#. Additional information on Innophos' third 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'

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; (5) the Company's ability to successfully identify and complete acquisitions in line with its Vision 2022 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 September 30,


Nine Months Ended September 30,


2017


2016


2017


2016









Net sales

$183,839


$186,037


$528,923


$557,555

Cost of goods sold

142,870


145,497


412,335


440,149

Gross profit

40,969


40,540


116,588


117,406

Operating expenses:








     Selling, general and administrative

20,894


17,749


60,069


51,716

     Research & development expenses

1,065


896


2,713


2,913

     Total operating expenses

21,959


18,645


62,782


54,629

Operating income

19,010


21,895


53,806


62,777

Interest expense, net

1,630


1,915


4,435


5,627

Foreign exchange loss (gain)

100


110


(35)


426

Income before income taxes

17,280


19,870


49,406


56,724

Provision for income taxes

5,698


6,227


15,678


18,135

Net income

$11,582


$13,643


$33,728


$38,589









Diluted Earnings Per Participating Share

$0.58


$0.69


$1.70


$1.96

Diluted weighted average participating shares outstanding

19,699,015


19,670,159


19,695,529


19,572,003

Dividends paid per share of common stock

$0.48


$0.48


$1.44


$1.44

Dividends declared per share of common stock

$0.48


$0.48


$1.44


$1.44

             

Adjusted EBITDA Reconciliation to Net Income













(Dollars in thousands)

Three Months Ended September 30,


Nine Months Ended September 30,


2017


2016


2017


2016

Net Income

$11,582


$13,643


$33,728


$38,589

Interest expense, net

1,630


1,915


4,435


5,627

Provision for income taxes

5,698


6,227


15,678


18,135

Depreciation & amortization

9,878


10,043


29,009


28,607

EBITDA

28,788


31,828


82,850


90,958









Adjustments








Non-cash stock compensation 

711


758


2,997


2,584

Foreign exchange loss (gain)

100


110


(35)


426

Severance/Restructuring expense (income)

1,298


1,508


2,624


1,465

Inventory fair value adjustment

1,395


-


1,395


-

M&A related costs

2,954


-


2,954


-

Adjusted EBITDA

$35,246


$34,204


$92,785


$95,433









Percent of Sales

19.2%


18.4%


17.5%


17.1%

















Adjusted Net Income Reconciliation to Net Income













(Dollars in thousands, except EPS)

Three Months Ended September 30,


Nine Months Ended September 30,


2017


2016


2017


2016

Net Income (loss)

$11,582


$13,643


$33,728


$38,589









Pre-tax Adjustments








Foreign exchange loss (gain)

100


110


(35)


426

Severance/Restructuring expense (income)

1,298


1,508


2,624


1,465

Inventory fair value adjustment

1,395


-


1,395


-

M&A related costs

2,954


-


2,954


-

Total Pre-tax Adjustments

5,747


1,618


6,938


1,891









Income tax effects on Adjustments

1,895


507


2,241


582

Adjusted Net Income

$15,434


$14,754


$38,425


$39,898









Adjusted Diluted Earnings
Per Participating Share

$0.78


$0.75


$1.94


$2.03

           

Segment Adjusted EBITDA Reconciliation to EBITDA
















(Dollars in thousands)

Three Months Ended September 30, 2017


Three Months Ended September 30, 2016












    FHN   

      IS     

  Other  

   Total   


    FHN   

      IS     

  Other  

   Total   

EBITDA

$16,442

$13,491

($1,145)

$28,788


$19,649

$10,237

$1,942

$31,828











Non-cash stock compensation

402

282

27

711


440

318

0

758

Foreign exchange loss (gain)

(71)

0

171

100


0

0

110

110

Severance/Restructuring exp.(inc.)

631

667

0

1,298


195

0

1,313

1,508

Inventory fair value adjustment

1,395

0

0

1,395


0

0

0

0

M&A related costs

0

0

2,954

2,954


0

0

0

0

Adjusted EBITDA

$18,799

$14,440

$2,007

$35,246


$20,284

$10,555

$3,365

$34,204












Nine Months Ended September 30, 2017


Nine Months Ended September 30, 2016












    FHN   

      IS     

  Other  

   Total   


    FHN   

      IS     

  Other  

   Total   

EBITDA

$49,098

$31,666

$2,086

$82,850


$59,326

$29,934

$1,698

$90,958











Non-cash stock compensation

1,696

1,187

114

2,997


1,479

1,033

72

2,584

Foreign exchange loss (gain)

(101)

0

66

(35)


0

0

426

426

Severance/Restructuring exp.(inc.)

1,296

1,302

26

2,624


340

0

1,125

1,465

Inventory fair value adjustment

1,395

0

0

1,395


0

0

0

0

M&A related costs

0

0

2,954

2,954


0

0

0

0

Adjusted EBITDA

$53,384

$34,155

$5,246

$92,785


$61,145

$30,967

$3,321

$95,433

                   

Cash From Operations Reconciliation to EBITDA 










(Dollars in thousands)

Three Months Ended September 30,


Nine Months Ended September 30,


2017


2016


2017


2016

EBITDA

$28,788


$31,828


$82,850


$90,958









Operating Working Capital

2,026


18,662


(19,032)


32,387

Taxes paid

(2,659)


(8,394)


(14,024)


(34,837)

Interest paid

(1,606)


(1,800)


(4,291)


(5,298)

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

752


(531)


1,154


(1,406)

Net cash provided from operations

$27,301


$39,765


$46,657


$81,804

















Cash From Operations Reconciliation to Adjusted EBITDA 










(Dollars in thousands)

Three Months Ended September 30,


Nine Months Ended September 30,


2017


2016


2017


2016

Adjusted EBITDA

$35,246


$34,204


$92,785


$95,433









Operating Working Capital

(3,721)


17,044


(25,970)


30,496

Taxes paid

(2,659)


(8,394)


(14,024)


(34,837)

Interest paid

(1,606)


(1,800)


(4,291)


(5,298)

All other including changes in other long-term assets and liabilities

41


(1,289)


(1,843)


(3,990)

Net cash provided from operations

$27,301


$39,765


$46,657


$81,804

















Free Cash Flow Reconciliation to Cash From Operations










(Dollars in thousands)

Three Months Ended September 30,


Nine Months Ended September 30,


2017


2016


2017


2016









Cash From Operations

$27,301


$39,765


$46,657


$81,804

Capital Expenditures

(8,573)


(7,137)


(24,650)


(25,675)

Free Cash Flow

$18,728


$32,628


$22,007


$56,129

                

Segment Reporting - Third Quarter



Three Months Ended September 30,


Net Sales


2017


2016


% Change

Segment Net Sales






Food, Health and Nutrition

$98,276


$93,586


5.0%

Industrial Specialties

67,682


70,124


(3.5)%

Other

17,881


22,327


(19.9)%

Total

$183,839


$186,037


(1.2)%







Segment EBITDA






Food, Health and Nutrition

$16,442


$19,649



Industrial Specialties

13,491


10,237



Other

(1,145)


1,942



Total

$28,788


$31,828









Segment EBITDA % of net sales






Food, Health and Nutrition

16.7%


21.0%



Industrial Specialties

19.9%


14.6%



Other

(6.4)%


8.7%



Total

15.7%


17.1%









Depreciation and amortization expense






Food, Health and Nutrition

$5,664


$5,802



Industrial Specialties

3,488


2,957



Other

727


1,284



Total

$9,879


$10,043



                   

Segment Reporting - Year-to-date



Nine Months Ended September 30,


Net Sales


2017


2016


% Change

Segment Net Sales






Food, Health and Nutrition

$281,558


$286,660


(1.8)%

Industrial Specialties

198,721


216,591


(8.3)%

Other

48,644


54,304


(10.4)%

Total

$528,923


$557,555


(5.1)%







Segment EBITDA






Food, Health and Nutrition

$49,098


$59,326



Industrial Specialties

31,666


29,934



Other

2,086


1,698



Total

$82,850


$90,958









Segment EBITDA % of net sales






Food, Health and Nutrition

17.4%


20.7%



Industrial Specialties

15.9%


13.8%



Other

4.3%


3.1%



Total

15.7%


16.3%









Depreciation and amortization expense






Food, Health and Nutrition

$16,884


$15,845



Industrial Specialties

10,346


9,554



Other

1,779


3,208



Total

$29,009


$28,607



                

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 September 30, 2017


Nine Months Ended September 30, 2017













Reportable Segments

  Price  


Volume/Mix


  Total  


  Price  


Volume/Mix


  Total  

Food, Health and Nutrition

(3.4)%


8.4%


5.0%


(3.6)%


1.8%


(1.8)%

Industrial Specialties

(4.8)%


1.3%


(3.5)%


(6.1)%


(2.2)%


(8.3)%

Other

(7.9)%


(12.0)%


(19.9)%


(7.3)%


(3.1)%


(10.4)%

Total

(4.5)%


3.3%


(1.2)%


(5.0)%


(0.1)%


(5.1)%

              

Summary Cash Flow Statement 


INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)






Nine Months Ended September 30,


2017


2016

Cash flows provided from operating activities




     Net income

$33,728


$38,589

     Adjustments to reconcile net income to net cash provided from




     operating activities:




          Depreciation and amortization

29,009


28,607

          Amortization of deferred financing charges

322


505

          Deferred income tax (benefit) provision

(14)


363

          Gain on sale of building

(153)


-

          Share-based compensation

2,996


2,329

     Changes in assets and liabilities:




         Increase in accounts receivable

(13,024)


(107)

         Decrease in inventories

2,873


33,092

         Decrease in other current assets

151


2,102

         Decrease in accounts payable

(7,566)


(2,545)

         Increase (decrease) in other current liabilities

1,666


(16,145)

         Changes in other long-term assets and liabilities

(3,331)


(4,986)

              Net cash provided from operating activities

46,657


81,804

Cash flows used for investing activities:




      Capital expenditures

(24,650)


(25,675)

      Proceeds from sale of building

1,028


-

      Acquisition of businesses, net of cash acquired

(124,984)


-

             Net cash used for investing activities

(148,606)


(25,675)

Cash flows provided by (used for) financing activities:




     Proceeds from exercise of stock options

-


9

     Long-term debt borrowings

146,000


36,000

     Long-term debt repayments

(36,000)


(49,002)

     Excess tax (deficiency) benefit from exercise of stock options

-


(346)

     Restricted stock forfeitures

(738)


(331)

     Dividends paid

(28,095)


(27,891)

            Net cash provided by (used for) financing activities

81,167


(41,561)

Effect of foreign exchange rate changes on cash and cash equivalents

27


323

Net change in cash

(20,755)


14,891

Cash and cash equivalents at beginning of period

53,487


17,905

Cash and cash equivalents at end of period

$32,732


$32,796

                   

Summary Balance Sheets 


INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(Dollars In thousands)






September 30,
2017


December 31,
2016

ASSETS




Current assets:




     Cash and cash equivalents

$32,732


$53,487

     Accounts receivable, net

102,162


77,692

     Inventories

148,536


128,295

     Other current assets

25,479


23,894

               Total current assets

308,909


283,368

Property, plant and equipment, net

211,601


205,459

Goodwill

139,459


84,373

Intangibles and other assets, net

110,797


69,811

               Total assets

$770,766


$643,011

LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




     Current portion of capital leases

$4


$0

     Accounts payable, trade and other

59,969


51,611

     Other current liabilities

47,945


43,605

               Total current liabilities

107,918


95,216

Long-term debt

295,006


185,000

Other long-term liabilities

14,072


15,569

               Total stockholders' equity

353,770


347,226

               Total liabilities and stockholders' equity

$770,766


$643,011

 

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.

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 less total current liabilities.  

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 2022 expectation for Adjusted EBITDA margin to GAAP net income due to the number of variables in the projected EBITDA margin for 2022 and because we are currently unable to quantify accurately certain amounts that would be required to be included in GAAP net income 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.

Investor Contact

Media Contact

Mark Feuerbach     

Ryan Flaim

Innophos    

Sharon Merrill Associates

609-366-1204      

617-542-5300

investor.relations@innophos.com     

iphs@investorrelations.com

 

View original content:http://www.prnewswire.com/news-releases/innophos-holdings-inc-reports-third-quarter-2017-results-300545774.html

SOURCE Innophos Holdings, Inc.

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