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Innophos Holdings, Inc. Reports Second Quarter 2013 Results

         Innophos Holdings, Inc. Reports Second Quarter 2013 Results

PR Newswire

CRANBURY, N.J., July 29, 2013

CRANBURY, N.J., July 29, 2013 /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 2013.

Second Quarter Results

  oNet sales for the second quarter 2013 at $213 million were $1 million
    below second quarter 2012 levels, with higher sales in Specialty
    Phosphates nearly offsetting lower GTSP & Other sales.
  oUS/Canada Specialty Phosphates sales were up 9% year-over-year on 3%
    volume growth in the core business combined with a 7% benefit from
    acquisitions; average selling prices declined 1% due to mix. 
  oMexico Specialty Phosphates sales improved 11% sequentially, but were 9%
    lower compared to the year ago period. Thepremature equipment failure
    that we began tofix in the first quarter 2013 continued to affect
    performance through mid-May. Production performance improved throughout
    the quarter, meaningfully in June, and has since continued at short-term
    target levels.
  oGTSP & Other sales at $11 million for the second quarter 2013 were $9
    million below the year ago level on lower volumes as a result of soft
    fertilizer market conditions. 
  oDiluted EPS ^ for the second quarter 2013 was $0.52 compared to $0.73 for
    the second quarter 2012. The current period included expenses of $0.13
    per share due to increased maintenance costs and lower efficiencies
    resulting from Mexico production issues, $0.07 per share for a revision of
    estimates for phosphate rock inventories and $0.07 per share of
    translation expense due to a weakened Mexican peso against the US dollar.
    Included in the second quarter 2012 was $0.08 per share of adjustments,
    including amounts relating to prior periods, which increased cost of goods
    sold. Giving effect to these items, second quarter 2013 diluted EPS would
    have been $0.79 compared to $0.81 for the prior year period. 

Randy Gress, CEO of Innophos, commented on the results, "We made substantial
progress in the quarter delivering against our strategic goals. Volume growth
in the US/Canada business continued to improve on solid execution from our
growth strategy. In Mexico, we largely completed the short-term production
improvement program to address thepremature equipment failure that manifested
itself in the first quarter, driving an improving trend throughout the second
quarter, resulting in our Coatzacoalcos facility operating at its expected
production rate with good performance for the entire month of June."

Mr. Gress added, "Continued execution of our strategy drove strong sales
growth at our US/Canada business with volumes in our core business reaching
significantly improved levels of performance. In addition, we continued to
benefit from strong performance within our nutrition business where our recent
acquisitions contributed 7% growth to US/Canada Specialty Phosphates. Our low
sodium product line also continued to demonstrate success in the marketplace,
with CAL-RISE® recording sales more than double the prior year period, along
with new business winson low sodium blends for meat and poultry applications.
Lastly, our export sales from the US remained strong; up 9% year-over-year to
the EMEA and Asia Pacific zones, and our China blending facility began
producing Specialty Phosphates during the quarter." 

Mr. Gress continued, "In addition to the contributions of our growth strategy,
market demand showed signs of moderate improvement in consumer oriented food
ingredient applications, offset in part by continued soft demand in some
industrial markets. Actions taken to improve business mix were evident in
stronger sales to pharma markets and the resumption, for the first time since
fourth quarter 2012, of shipments to Venezuela towards the end of the quarter.
However, continued weak demand from asphalt modification and other industrial
end markets resulted in unfavorable mix trends versus the prior year period.
Building on the actions already implemented, we expect to again see sequential
improvement in mix for the third quarter 2013 in our US/Canada business."

Mr. Gress concluded, "Although consolidated results are still not at our
desired levels, there is increasing evidence in the quarter that the strategic
actions taken to improve long-term performance have gained traction.
US/Canada volume and mix trends are improving, and I expect that we can build
on and sustain the recent strong operating performance in Mexico through the
remainder of the year as we continue to make investments to improve the
business. We remain committed to achieving our targeted growth objectives,
and I believe we made significant strides in getting our business closer
towards those goals during this quarter."

Segment Results second quarter 2013 versus second quarter 2012

Specialty Phosphates

Specialty Phosphates sales were up 4% year-over-year primarily due to a 5%
benefit from acquisitions. US/Canada core business volumes, at their highest
level in over three years, exceeded the effects of lower Mexico volumes, which
were again affected by lower than normal production levels due to equipment
reliability issues that extended through mid-May. Selling prices were down 2%
year-over-year reflecting some continued unfavorable mix in the US and a price
reset on a long-term contract in Mexico.

Operating income at $25 million improved by $14 million sequentially, but
remained $4 million below second quarter 2012 levels due to the Mexico
operating issues. Operating income in the second quarter 2013 included $4.5
million of elevated cost of goods sold in Mexico of which $3 million related
to lower efficiencies and increased maintenance costs to address the Mexico
production issues and $1.5 million related to changes in estimates for
phosphate rock inventory. Operating income margin for second quarter 2013 was
12%, up 640 basis points sequentially, but down 240 basis points from second
quarter 2012 levels. Adjusted for the noted elevated costs, operating income
margin would have been 15%.

US/Canada

US/Canada Specialty Phosphates sales increased 9% for the second quarter 2013
compared to the prior year period on 3% growth in the core business, plus a 7%
benefit from acquisitions. Sales mix improved significantly on a sequential
basis, but remained below normalized levels, with a successful
re-establishment of the Venezuela supply chain coming late in the quarter and
the asphalt and other industrial businesses remaining below year ago levels.
This resulted in a modest average selling price decline for the current
quarter versus the second quarter 2012.

For the second quarter 2013, operating income of $24 million was up $13
million sequentially and up $3 million versus the year ago quarter. Operating
income margin was 15% for the second quarter 2013, up 780 basis points
sequentially and 100 basis points from the year ago period.

Mexico

Second quarter 2013 sales were up 11% sequentially, but down 9% compared to
the second quarter 2012, a significant improvement from the first quarter 2013
variance, but still negative year-over-year due to the continued effects of
the prematureequipment failure that extended through mid-May which limited
production and sales. June manufacturing performance returned to short-term
target performance levels, but overall production was below expectations for
the quarter. June yields improved 380 basis points and production rates were
up 38% versus their first quarter 2013 averages. The business continued to
experience strong demand for its more differentiated products, and, with
significant progress made during the quarter with many of the production
issues resolved by mid-quarter, was able to show continuous sales volume
improvement in each month of the quarter. Selling prices declined on the less
differentiated detergent grade products, and combined with a price reset on a
long-term contract, contributed to an overall price decline of 4%.

Operating income in the second quarter 2013 of $1 million included $4.5
million of elevated cost of goods sold of which $3 million related to lower
efficiencies and increased maintenance costs and $1.5 million related to
changes in estimates for phosphate rock inventory. Adjusting for these costs,
operating income would have been $6 million, up $2 million sequentially,
reflecting the progress made in operations during the quarter, but down $3
million from second quarter 2012 levels with lower sales contributing to the
shortfall. Operating income margin on an adjusted basis would have been 13%
for the second quarter 2013, down 440 basis points from the strong year ago
quarter.

GTSP & Other

GTSP & Other sales (primarily Granulated Triple Superphosphate fertilizer
co-product) decreased 47% for the second quarter 2013 compared to the same
period in 2012 on lower volumes. The typical spring acceleration in market
fertilizer prices did not happen, with market pricing ending the quarter below
first quarter levels on weak market demand.

For the second quarter 2013, GTSP & Other recorded $3 million of operating
loss, level with the year ago period. The current quarter included $2 million
of elevated cost of goods sold of which $1 million related to lower
efficiencies and increased maintenance costs and $1 million related to changes
in estimates for phosphate rock inventory. The second quarter 2012 included
$3 million of adjustments, including amounts relating to prior periods, which
increased cost of goods sold. Without these noted costs, the second quarter
2013 had an operating loss of $1 million compared to break-even for the prior
year period. Operating income margins were -28% for the second quarter 2013
compared to -13% for the second quarter 2012. Excluding the noted costs,
operating income margin was -11% for the second quarter 2013, down 1,180 basis
points from the year ago period.

Recent Trends and Outlook

Moderate market demand growth was evident for Specialty Phosphates in the
second quarter 2013, and, together with the success of our growth strategy,
resulted in the strongest volume quarter for the US/Canada business in over
three years. Mexico volumes were affected by production issues related
topremature equipment failure that we began tofix in the first quarter and
continued through mid-May, but June returned to our short-term target levels
after the issues were resolved. This resulted in a significant sequential
improvement in year-over-year sales volume variance. Overall Specialty
Phosphates volume growth was 6% with 5% coming from acquisitions and the core
business contributing a net 1% growth despite the Mexico production issues.

Momentum behind our growth strategy continues to improve, as evidenced by
success with new products and continued export sales strength. We continue to
expect modest market growth in 2013, with recent favorable demand trends,
particularly in consumer oriented end markets, supporting this view. The June
improvement seen in Mexico manufacturing performance and sales volumes gives
us confidence that second half 2013 sales volumes for that business will
return to second half 2012 levels, an improvement of 6-7% compared to the
first half 2013. 

Overall, our second half 2013 Specialty Phosphates year-over-year growth
expectation, excluding the benefit of recent acquisitions, remains within our
4-6% long-term target range. Strong performance by our recent acquisitions is
expected to continue, and this, together with the full year benefit of the two
acquisitions made in 2012, is expected to contribute an additional 4% revenue
growth for the second half 2013 in comparison to the prior year period.

We do not expect any major changes in raw material purchase prices or
underlying Specialty Phosphates selling prices through the third quarter 2013.


During the second quarter 2013, the Company revised its methodology for
estimating phosphate rock inventories on hand. As a result, we recorded a $2
million write-down of phosphate rock inventory in the second quarter 2013. In
addition to this inventory charge, the Mexico business incurred elevated cost
of goods sold of $4 million from lower efficiencies and higher maintenance
costs resulting from the Mexico production issues noted earlier. Of the total
$6 million of higher costs noted above, Mexico Specialty Phosphates incurred
$4 million and GTSP & Other incurred $2 million.

Specialty Phosphates operating income margins were 12% for the second quarter
2013 as reported and met our second half expectation of 15% when adjusting out
the additional Mexico costs noted above. Continued improvement in US/Canada
business mix is expected to support improved margins for that business in the
third quarter 2013. However, sequential margin improvement will not reach its
full potential in the third quarter for Mexico because of a planned
maintenance outage in Coatzacoalcos that typically occurs every 12 to 18
months and typically costs $2-3 million. This outage is not expected to have
a significant effect on sales volumes in the second half 2013. Specialty
Phosphates operating income margins are therefore expected to remain at 15%
for the second half, as fourth quarter improvements in the Mexico margins will
likely be offset by seasonally lower volumes affecting fixed cost leverage for
the US/Canada business.

GTSP & Other profitability slipped to a small loss for the second quarter 2013
on an adjusted basis. Low market demand, which affected sales volumes in the
quarter, resulted in weaker market pricing at the end of the quarter compared
to the beginning. Based on current market price conditions, GTSP is expected
to operate at a small loss through the third quarter.

Net debt increased sequentially by $8 million in the second quarter 2013 to
$136 million as a result of increased working capital in Mexico to support
improved production and sales.

Capital Expenditures

Capital expenditures were $8 million in the second quarter 2013, a slight
increase from the first quarter 2013 level as expected. We now expect
expenditures to approximate $35-40 million for the year. Investment continues
to be focused on capacity enhancements for US/Canada and Mexico Specialty
Ingredients facilities, expanding geographically and enhancing Mexico's
capability to process multiple grades of rock, consistent with the Company's
supply chain diversification strategy.

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; 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.
                                                            Bryan
Investor Relations: (609) 366-1299           Armstrong/Matt
                                                            Steinberg
investor.relations@innophos.com   (212) 850-5600

Conference Call Details

The conference call is scheduled for Tuesday, July 30, 2013 at 10:00 am ET and
can be accessed by dialing 888-206-4065  (U.S.) or 630-827-5974
(international) and entering passcode 35291712. 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 30 and 1:00 pm ET on
August 14, 2013. The replay is accessible by dialing 888-843-7419 (U.S.) or
630-652-3042 (international) and entering passcode 6861213#.

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 second-party 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  Three months ended
                                        June 30,            June 30,
                                        2013                2012
Net sales                               $213,176            $214,180
Cost of goods sold                      172,281             171,812
Gross profit                            40,895              42,368
Operating expenses:
 Selling, general and               17,939              15,236
administrative
 Research& development expenses    826                 849
 Total operating expenses           18,765              16,085
Operating income                        22,130              26,283
Interest expense, net                   1,594               1,595
Foreign exchange loss (gain)            2,915               (108)
Income before income taxes              17,621              24,796
Provision for income taxes              6,054               8,292
Net income                              $11,567             $16,504
Diluted Earnings Per Participating      $0.52               $0.73
Share
Diluted weighted average participating  22,320,172          22,713,254
shares outstanding:
Dividends paid per share of common      $0.35               $0.27
stock
Dividends declared per share of common  $0.35               $0.27
stock

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 on a ship-from basis. Sales on a ship-from basis
are on the same revenue recognition 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     Three months
                                    ended            ended
                                    June 30,         June 30,        Net Sales
                                    2013             2012            %Change
Segment Net Sales
Specialty Phosphates US& Canada    $159,054         $146,270        8.7%
Specialty Phosphates Mexico         43,370           47,800          -9.3%
Total Specialty Phosphates          202,424          194,070         4.3%
GTSP& Other                        10,752           20,110          -46.5%
Total                               $213,176         $214,180        -0.5%
Segment Operating Income
Specialty Phosphates US& Canada    $23,759          $20,267
Specialty Phosphates Mexico         1,333            8,534
Total Specialty Phosphates          25,092           28,801
GTSP& Other (a)                    (2,962)          (2,518)
Total                               $22,130          $26,283
Segment Operating Income % of net
sales
Specialty Phosphates US& Canada    14.9%            13.9%
Specialty Phosphates Mexico         3.1%             17.9%
Total Specialty Phosphates          12.4%            14.8%
GTSP& Other (a)                    -27.5%           -12.5%
Total                               10.4%            12.3%
Depreciation and amortization
expense
Specialty Phosphates US& Canada    $6,465           $6,178
Specialty Phosphates Mexico         2,318            3,790
Total Specialty Phosphates          8,783            9,968
GTSP& Other                        682              1,348
Total                               $9,465           $11,316
(a) The three month period ended June 30, 2012 includes a $3.9
million charge to earnings for
 out of period costs in
Mexico.

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, 2013 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   -1.1%            9.8%            8.7%
Specialty Phosphates Mexico        -3.9%            -5.4%           -9.3%
Total Specialty Phosphates         -1.8%            6.1%            4.3%
GTSP& Other                       -0.5%            -46.0%          -46.5%
Total                              -1.6%            1.1%            -0.5%
Note: Includes AMT/Triarco benefit of 6.8% in Specialty Phosphates US &
Canada
 Volume/Mix and 5.1% in Total Specialty Phosphates
Volume/Mix
Specialty Phosphates Product Lines  Price        Volume/Mix       Total
Specialty Ingredients              -2.3%            8.7%            6.4%
Food& Technical Grade PPA         0.6%             1.2%            1.8%
STPP& Detergent Grade PPA         -2.3%            -2.1%           -4.4%
Note: Includes AMT/Triarco benefit of 7.3% in Specialty Ingredients Volume/Mix

Summary Cash Flow Statement

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
                                           Six months ended  Six months ended
                                           June 30,          June 30,
                                           2013              2012
Cash flows provided from operating
activities
 Net income                            $23,970           $44,092
 Adjustments to reconcile net income to net cash
provided from
 operating activities:
 Depreciation and amortization    18,851            21,555
 Amortization of deferred         288               287
financing charges
 Deferred income tax provision    1,331             (359)
(benefit)
 Share-based compensation         1,751             2,328
 Changes in assets and liabilities:
 (Increase) decrease in accounts   (7,512)           6,322
receivable
 Decrease in inventories           9,278             17,096
 Decrease in other current assets  10,451            2,584
 Decrease in accounts payable      3,745             8,006
 Decrease in other current         (15,281)          (25,042)
liabilities
 Changes in other long-term assets (3,143)           (3,488)
and liabilities
 Net cash provided from     43,729            73,381
operating activities
Cash flows used for investing activities:
 Capital expenditures                 (15,879)          (10,491)
 Net cash used for investing (15,879)          (10,491)
activities
Cash flows used for financing activities:
 Proceeds from exercise of stock       75                14
options
 Long-term debt borrowings             28,000            5,000
 Long-term debt repayments             (36,000)          (24,000)
 Excess tax benefits from exercise of  1,041             2,310
stock options
 Common stock repurchases              (70)              -
 Dividends paid                        (15,326)          (11,290)
 Net cash used for financing  (22,280)          (27,966)
activities
Net change in cash                         5,570             34,924
Cash and cash equivalents at beginning of  26,815            35,242
period
Cash and cash equivalents at end of period $32,385           $70,166

Summary Balance Sheets

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars In thousands)
                                                    June 30,  December 31,
                                                    2013        2012
ASSETS
Current assets:
 Cash and cash equivalents                      $32,385     $26,815
 Accounts receivable, net                       101,545     94,033
 Inventories                                    153,663     162,941
 Other current assets                           85,082      99,927
 Total current assets                 372,675     383,716
Property, plant and equipment, net                  197,266     195,723
Goodwill                                            83,879      83,879
Intangibles and other assets, net                   74,917      75,948
 Total assets                         $728,737    $739,266
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Current portion of long-term debt              $4,013      $4,000
 Accounts payable, trade and other              40,230      36,485
 Other current liabilities                      30,749      46,030
 Total current liabilities            74,992      86,515
Long-term debt                                      164,007     172,000
Other long-term liabilities                         34,567      36,428
 Total liabilities                    273,566     294,943
 Total stockholders' equity           455,171     444,323
 Total liabilities and stockholders'  $728,737    $739,266
equity

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.

Website: http://www.innophos.com