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Innophos Holdings, Inc. Reports Second Quarter 2016 Results

CRANBURY, N.J., Aug. 1, 2016 /PRNewswire/ -- Innophos Holdings, Inc. (NASDAQ:  IPHS), today announced its financial results for the second quarter 2016.

Highlights

Kim Ann Mink, Ph.D., Chief Executive Officer, commented, "In the second quarter, we made very good progress in executing against the strategic pillars of our transformation, namely, operational excellence, commercial excellence and strategic growth. We continued to deliver improved margins and solid bottom line results particularly from our operational excellence pillar, driven by decreased SG&A expenses and improved procurement and sourcing of raw materials. We generated adjusted EBITDA of $30 million, in line with our first quarter 2016 results as expected, and delivered $35 million of free cash flow. We are pleased with the commitment to our cost management efforts that allowed us to maintain our margins under difficult conditions, along with our strong cash flow delivery. These will remain a priority for the Company."

Dr. Mink continued, "As we look to the second half of the year, we are focused on finalizing our roadmap for strategic growth, while continuing to capitalize on near-term actions and opportunities by executing the value creation levers that will drive sustainable improvement in the Company's financial performance. In addition, to help move Innophos significantly down our transformational path by bringing into the Company required new skill sets, new ideas, and external best practices, I am pleased to have further strengthened the foundation of my management team this quarter with the appointment of Sherry Duff as Vice President, Chief Marketing Officer. Since the first quarter, we made three excellent senior-level hires, whose knowledge base and skillset advance our collective management team to the next level, creating a solid foundation upon which we can effectively execute our initiatives. I remain encouraged by the momentum of our progress and confident in our ability to continue creating value for our shareholders."

______________________________
1 Net income of $12.1 million for the second quarter 2016 compared to $13.6 million for the second quarter 2015.
2 Diluted EPS of $0.61 for the second quarter 2016 compared to $0.65 for the second quarter 2015. 

 

Second Quarter Results

Net sales for the second quarter 2016 of $182 million were down 16% compared to the second quarter 2015.

Adjusted EBITDA of $30 million for the second quarter 2016 yielded a margin of 17%, up 110 basis points compared to the prior year quarter despite the effects of $2.4 million, or 132 basis points, planned maintenance stoppage costs in the current quarter. Adjusted EBITDA was $3 million below the prior year, and in line with first quarter 2016. Specialty Phosphates adjusted EBITDA margins improved 210 basis points versus the same quarter last year, partially offset by lower results recorded in GTSP & Other.

Adjusted diluted EPS for the second quarter 2016 was $0.63, which includes $0.08 of planned maintenance stoppage costs, compared to an adjusted diluted EPS of $0.66 for the second quarter 2015.

Free cash flow of $35 million in the second quarter 2016 was driven primarily by working capital reductions which enabled net debt to decrease $25 million sequentially to $190 million.

Year-to-date Results

Net sales for H1 2016 of $372 million were down 11% compared to H1 2015.

Adjusted EBITDA of $61 million for H1 2016 yielded a margin of 17%, up 100 basis points compared to H1 2015. Specialty Phosphates adjusted EBITDA margins for H1 2016 improved 140 basis points versus the same period last year.

Adjusted diluted EPS for H1 2016 was $1.28 compared to an adjusted EPS of $1.29 for the first half of 2015.

Free cash flow for H1 2016 was $24 million, down $17 million from the same period last year primarily due to $23 million higher tax payments, of which $19 million related to the cash repatriation program.

Recent Trends and Outlook

Specialty Phosphates volumes are expected to decline by 6-8% for full year 2016 compared to 2015, primarily due to reduced sales in lower margin, less differentiated applications and weak end market demand due to continued pressures on packaged foods.

Market phosphate rock prices were flat sequentially for the second quarter 2016, while sulfur market prices decreased during the same period. Both are expected to ease further in the third quarter given current weak fertilizer market conditions.

Cost improvements from the restructuring program implemented in the third quarter 2015 were in line with expectations, with $2.9 million lower costs realized in the current quarter against the third quarter 2015 baseline. Additional year-on-year cost savings were delivered due to detailed cost management. Management continues to review cost actions and productivity initiatives given the challenging market conditions.  

Adjusted EBITDA results for the third quarter are expected to be broadly in line with first and second quarter 2016 when considering the following effects:

2016 capital expenditures are expected to approximate $40 million due to requirements to support strategic manufacturing initiatives, along with continuous improvement in our plants.

Conference Call

Innophos will host its second quarter 2016 conference call on Tuesday, August 2, 2016 at 9:00 am ET. The call can be accessed by dialing 1-888-771-4371 (U.S.) or 1-847-585-4405 (international) and entering passcode 43038685. 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 August 2 and 11:00 pm ET on August 16, 2016. The replay is accessible by dialing 1-888-843-7419 (U.S.) or 1-630-652-3042 (international) and entering passcode 4303 8685#. Additional information on Innophos' second quarter results can also be found on the Company's website. 

About the Company

Innophos is a leading international producer of performance-critical and nutritional specialty ingredients, with applications in food, beverage, dietary supplements, pharmaceutical, oral care and industrial end markets. Headquartered in Cranbury, New Jersey, Innophos has manufacturing operations across the United States, in Canada, Mexico and China. For more information please visit www.innophos.com. 'IPHS-G'

Contact

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

Media: Bryan Armstrong, FTI Consulting, Inc., 312-553-6707

 

Financial Tables Follow

 

Safe Harbor for Forward-Looking and Cautionary Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. As such, final results could differ from estimates or expectations due to risks and uncertainties, including but not limited to: incomplete or preliminary information; changes in government regulations and policies; continued acceptance of Innophos' products and services in the marketplace; competitive factors; technological changes; Innophos' dependence upon suppliers; and other risks. For any of these factors, Innophos claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, as amended.

 

Summary Profit & Loss Statement

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,


2016


2015


2016


2015









Net sales

$181,888


$217,294


$371,518


$418,903

Cost of goods sold

145,738


176,299


294,652


337,382

Gross profit

36,150


40,995


76,866


81,521

Operating expenses:








     Selling, general and administrative

15,732


18,667


33,967


36,658

     Research & development expenses

1,021


1,063


2,017


2,237

     Total operating expenses

16,753


19,730


35,984


38,895

Operating income

19,397


21,265


40,882


42,626

Interest expense, net

1,913


1,403


3,712


2,554

Foreign exchange loss 

355


117


316


2,432

Income before income taxes

17,129


19,745


36,854


37,640

Provision for income taxes

5,025


6,142


11,908


12,094

Net income

$12,104


$13,603


$24,946


$25,546









Diluted Earnings Per Participating Share

$0.61


$0.65


$1.27


$1.21

Diluted weighted average participating shares
outstanding

19,613,807


20,722,940


19,521,960


21,109,803

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 EBITDA Reconciliation to Net Income

(Dollars in thousands)

Three Months Ended June 30,


Six Months Ended June 30,


2016


2015


2016


2015









Net Income

$12,104


$13,603


$24,946


$25,546

Interest

1,913


1,403


3,712


2,554

Taxes

5,025


6,142


11,908


12,094

Depreciation & Amortization

9,282


10,762


18,564


20,633

EBITDA

28,324


31,910


59,130


60,827









Adjustments








Non-cash stock compensation *

1,292


1,402


1,826


1,585

Translation (income) expense 

355


117


316


2,432

Restructuring (income) expense 

-


-


(43)


-

Adjusted EBITDA

$29,971


$33,429


$61,229


$64,844









Percent of Sales

16.5%


15.4%


16.5%


15.5%









* Not adjusted for in Adjusted EPS








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 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 June 30,


Net Sales


2016


2015


% Change

Segment Net Sales






Specialty Phosphates US & Canada

$130,553


$148,376


(12.0)%

Specialty Phosphates Mexico

40,465


43,886


(7.8)%

Total Specialty Phosphates

171,018


192,262


(11.0)%

GTSP & Other

10,870


25,032


(56.6)%

Total

$181,888


$217,294


(16.3)%







Segment EBITDA






Specialty Phosphates US & Canada

$21,426


$20,486



Specialty Phosphates Mexico

9,259


9,175



Total Specialty Phosphates

30,685


29,661



GTSP & Other 

(2,361)


2,249



Total

$28,324


$31,910









Segment EBITDA % of net sales






Specialty Phosphates US & Canada

16.4%


13.8%



Specialty Phosphates Mexico

22.9%


20.9%



Total Specialty Phosphates

17.9%


15.4%



GTSP & Other 

(21.7)%


9.0%



Total

15.6%


14.7%









Depreciation and amortization expense






Specialty Phosphates US & Canada

$6,493


$6,786



Specialty Phosphates Mexico

1,832


3,196



Total Specialty Phosphates

8,325


9,982



GTSP & Other

957


780



Total

$9,282


$10,762









Segment Reporting - Year-to-date








Six Months Ended June 30,


Net Sales


2016


2015


% Change

Segment Net Sales






Specialty Phosphates US & Canada

$267,273


$295,500


(9.6)%

Specialty Phosphates Mexico

80,862


86,106


(6.1)%

Total Specialty Phosphates

348,135


381,606


(8.8)%

GTSP & Other

23,383


37,297


(37.3)%

Total

$371,518


$418,903


(11.3)%







Segment EBITDA






Specialty Phosphates US & Canada

$39,037


$42,435



Specialty Phosphates Mexico

22,417


17,147



Total Specialty Phosphates

61,454


59,582



GTSP & Other 

(2,324)


1,245



Total

$59,130


$60,827









Segment EBITDA % of net sales






Specialty Phosphates US & Canada

14.6%


14.4%



Specialty Phosphates Mexico

27.7%


19.9%



Total Specialty Phosphates

17.7%


15.6%



GTSP & Other 

(9.9)%


3.3%



Total

15.9%


14.5%









Depreciation and amortization expense






Specialty Phosphates US & Canada

$12,684


$13,725



Specialty Phosphates Mexico

4,024


5,294



Total Specialty Phosphates

16,708


19,019



GTSP & Other

1,856


1,614



Total

$18,564


$20,633



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 June 30, 2016


Six Months Ended June 30, 2016













Reportable Segments

  Price  


Volume/Mix


  Total  


  Price  


Volume/Mix


  Total  

Specialty Phosphates US & Canada

(2.1)%


(9.9)%


(12.0)%


(0.4)%


(9.2)%


(9.6)%

Specialty Phosphates Mexico

(4.3)%


(3.5)%


(7.8)%


(3.6)%


(2.5)%


(6.1)%

Total Specialty Phosphates

(2.6)%


(8.4)%


(11.0)%


(1.2)%


(7.6)%


(8.8)%

GTSP & Other

(17.4)%


(39.2)%


(56.6)%


(17.1)%


(20.2)%


(37.3)%

Total

(4.3)%


(12.0)%


(16.3)%


(2.6)%


(8.7)%


(11.3)%













 

Summary Cash Flow Statement 

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)






Six Months Ended June 30,


2016


2015

Cash flows (used for) provided from operating activities




     Net income

$24,946


$25,546

     Adjustments to reconcile net income to net cash provided from




     operating activities:




          Depreciation and amortization

18,564


20,633

          Amortization of deferred financing charges

337


285

          Deferred income tax provision

363


135

          Share-based compensation

1,301


1,585

     Changes in assets and liabilities:




         Increase in accounts receivable

(5,302)


(10,876)

         Decrease in inventories

16,480


9,573

         Decrease in other current assets

5,947


13,969

         Increase (decrease) in accounts payable

2,328


(4,144)

         Decrease in other current liabilities

(18,327)


(1,589)

         Changes in other long-term assets and liabilities

(4,598)


135

              Net cash provided from operating activities

42,039


55,252

Cash flows used for investing activities:




      Capital expenditures

(18,538)


(14,146)

             Net cash used for investing activities

(18,538)


(14,146)

Cash flows (used for) provided from financing activities:




     Proceeds from exercise of stock options

9


190

     Long-term debt borrowings

36,000


110,000

     Long-term debt repayments

(19,002)


(2,002)

     Excess tax (deficiency) benefit from exercise of stock options

(331)


764

     Common stock repurchases and restricted stock forfeitures

(318)


(86,248)

     Dividends paid

(18,564)


(20,061)

            Net cash (used for) provided from financing activities

(2,206)


2,643

Effect of foreign exchange rate changes on cash and cash equivalents

12


38

Net change in cash

21,307


43,787

Cash and cash equivalents at beginning of period

17,905


36,207

Cash and cash equivalents at end of period

$39,212


$79,994









Summary Balance Sheets 

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(Dollars In thousands)






June 30
2016


December 31,
2015

ASSETS




Current assets:




     Cash and cash equivalents

$39,212


$17,905

     Accounts receivable, net

85,037


79,743

     Inventories

156,137


172,667

     Assets held for sale

490


-

     Other current assets

17,502


23,514

               Total current assets

298,378


293,829

Property, plant and equipment, net

202,283


199,494

Goodwill

84,373


84,373

Intangibles and other assets, net

87,183


90,522

               Total assets

$672,217


$668,218

LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




     Current portion of long-term debt

$4,000


$4,002

     Accounts payable, trade and other

39,129


36,898

     Other current liabilities

44,014


63,204

               Total current liabilities

87,143


104,104

Long-term debt

225,002


207,665

Other long-term liabilities

20,252


23,189

               Total stockholders' equity

339,820


333,260

               Total liabilities and stockholders' equity

$672,217


$668,218





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 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-second-quarter-2016-results-300307028.html

SOURCE Innophos Holdings, Inc.

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