Innophos Holdings, Inc. Reports First Quarter 2014 Results

          Innophos Holdings, Inc. Reports First Quarter 2014 Results

Sales Up 10% Sequentially; Operating Income Up 22% Year-Over-Year

PR Newswire

CRANBURY, N.J., April 28, 2014

CRANBURY, N.J., April 28, 2014 /PRNewswire/ --Innophos Holdings, Inc.
(NASDAQ:IPHS), a leading international producer of performance-critical and
nutritional specialty ingredients, with applications in food, beverage,
dietary supplements, pharmaceutical, oral care and industrial end markets,
today announced its financial results for the first quarter 2014.

First Quarter Results

  oNet sales for the first quarter 2014 of $216 million were up 10%
    sequentially and 1% compared to first quarter 2013 levels. Specialty
    Phosphates sales increased 5% sequentially and 3% year-over-year on higher
    volumes from improved Mexico operations, partially offset by slightly
    lower prices.
  oUS/Canada Specialty Phosphates sales of $151 million were up 5%
    sequentially and flat with the prior year quarter due to poor weather
    conditions in January and February that affected demand and disrupted
    transportation networks.
  oMexico Specialty Phosphates sales of $44 million increased 4% sequentially
    and 14% compared to the year ago period on higher volumes from improved
    operations, partially offset by lower selling prices.
  oGTSP & Other sales of $21 million more than doubled sequentially, but
    declined 15% year-over-year due to sharply lower selling prices that more
    than offset an increase in volumes.
  oDiluted EPS for the first quarter 2014 was $0.64 compared to $0.55 for the
    first quarter 2013. Giving effect to the prior year adjustments previously
    disclosed, diluted EPS was $0.60 for the first quarter 2013.

Randy Gress, CEO of Innophos, commented on the results, "Overall, we are
pleased with our results for the first quarter, particularly by our continued
improved performance at our Mexico operation and sustained margins in our
US/Canada business. 2013 enhancements and adjustments to the Coatzacoalcos
facility supported greatly improved yields that will enable continued growth
and profitability within our North American network and strengthening of our
product mix in Latin America. While we made good progress during the quarter
on our annual goals, our US/Canada results were negatively affected by the
severe winter conditions which affected demand and limited our ability to ship
product in the first two months of the quarter. We also experienced a higher
than expected loss in our GTSP & Other business due to lower demand and
selling prices than expected for the second half of the quarter. That said,
we closed the quarter on a strong note in March and are seeing solid demand
from our customers in April. We remain confident that we will generate
improved earnings for the second quarter compared to our performance over the
last five quarters and deliver on our targets for the year, which are
reaffirmed."

Segment Results – first quarter 2014 versus 2013

Specialty Phosphates

Specialty Phosphates sales were up 3% year-over-year on 4% higher volumes
partially offset by a 1% drop in prices, both attributable to Mexico. 

Operating income of $26 million was up $14 million year-over-year. Taking
into account the $8 million of elevated cost of goods sold that was previously
reported for the prior year period, operating income was up $6 million due to
improved Mexico sales volumes. Operating income margin for first quarter 2014
was 13%, in line with expectations and up 730 basis points against the prior
year and up 290 basis points against the adjusted prior year level.

US/Canada

Sales were flat with the prior year due to the harsh weather conditions in
January and February that affected demand and limited our delivery
capabilities. Unfavorable mix also contributed to a flat volume/mix
comparison, as actual tons shipped increased by 2% year-over-year.

Operating income of $20 million was up $9 million year-over-year. Adjusting
for the $5 million of elevated costs in the prior year quarter, operating
income was up $4 million. Operating income margin was 13% for the first
quarter 2014, affected as expected by higher cost Purified Phosphoric Acid
(PPA) inventory and higher Merchant Grade Acid (MGA) costs caused by phosphate
rock consumption variances at our supplier's facility. Nevertheless,
operating income margin was up 630 basis points from the year ago period and
up 260 basis points against the adjusted prior year level.

Mexico

Mexico Specialty Phosphates sales increased 14% compared to first quarter 2013
on 18% higher volumes resulting from improved operations. However, selling
prices declined 4% primarily in PPA along with a price reset on a long-term
contract.

Operating income in the first quarter 2014 of $6 million was up $5 million
year-over-year due to improved sales and lower costs. Adjusting for the $3
million of elevated costs in the prior year quarter, operating income was up
$2 million. Operating income margin was 13% for the first quarter 2014, up
1,150 basis points from the year ago quarter and up 430 basis points against
the adjusted prior year level.

GTSP & Other

GTSP & Other sales (primarily Granulated Triple Superphosphate fertilizer
co-product) decreased 15% in the first quarter 2014 compared to the year ago
period on 20% lower selling prices partially offset by a 5% increase in
volumes. Fertilizer market prices increased 25-30% in the first six weeks of
2014, but then, contrary to our expectations, stabilized for the remainder of
the quarter, remaining considerably below the year ago levels. 

The first quarter 2014 operating loss of $4 million was $10 million
unfavorable to the prior year quarter. Adjusting for the previously disclosed
$1 million of elevated costs from reduced efficiencies and higher plant
maintenance and $7 million benefit related to Mexican water duties in the
prior year quarter, operating income was $4 million unfavorable to the prior
year quarter due to lower selling prices. Operating income margins were (20)%
for the first quarter 2014 compared to 26% for the first quarter 2013 as
reported and 1% on an adjusted basis. 

Recent Trends and Outlook

Specialty Phosphates volume was up 4% in the first quarter 2014 compared to
the prior year due to an 18% increase in Mexico volumes resulting from
improved operations. US/Canada actual tons shipped increased by 2%
year-over-year despite adverse weather conditions in January and February
2014; however, unfavorable mix led to a flat volume and mix comparison.
Export sales overall were up 6% year-over-year with a good recovery recorded
in Latin America. At this point, we are confident in our previously announced
full year 2014 target of 3-5% volume growth for Specialty Phosphates.

Specialty Phosphates operating income margins were 13% for the first quarter
2014, in line with expectations. As previously disclosed, our first quarter
results were affected by higher cost PPA inventory and phosphate rock
consumption variances from our MGA supplier that came out of inventory. As
expected, MGA purchase prices returned to normalized levels in the first
quarter 2014. At this time, we are also confident in our full year 2014 target
of 14-15% operating income margins for Specialty Phosphates.

Fertilizer market prices increased 25-30% in the first six weeks of 2014, but
then stabilized for the remainder of the quarter. Raw material prices have
therefore rebounded as well in the first quarter 2014, with market sulfur
prices increasing by nearly 50%, putting them somewhere between second and
third quarter 2013 levels, and market phosphate rock prices recently reported
up about 15% from fourth quarter 2013 levels. Sulfur market prices are
expected to increase another 20% in the second quarter 2014 and rock prices
are expected to increase moderately. Innophos has already announced selling
price increases to offset the effects of these rising raw material costs.

GTSP & Other recorded a $4 million operating loss for the first quarter 2014,
which was $1 million worse than our estimated $2-3 million operating loss.
Demand was softer and selling prices weaker than expected for the second half
of the quarter. We still expect to achieve break-even operating income in
this minor segment for the second quarter 2014 based on current market selling
and raw material price indications.

Net debt decreased sequentially by $18 million in the first quarter 2014 to
$112 million on solid earnings and working capital reductions.

Capital Expenditures

Capital expenditures were $6 million in the first quarter, about half the
previously expected 2014 run-rate for an average quarter. Our expectation for
2014 capital expenditures is now in the $35-40 million range, about $10
million below previous expectations, due solely to changes in the phasing of
certain projects. We continue to focus on capacity enhancements to our US,
Canada and Mexico Specialty Ingredients facilities and further improvements of
Mexico's reliability, efficiency and capability to process multiple grades of
rock, consistent with the Company's supply chain diversification strategy, and
to manufacture a more diverse mix of products.

About Innophos Holdings, Inc.

Innophos is a leading international producer of performance-critical and
nutritional specialty ingredients, with applications in food, beverage,
dietary supplements, pharmaceutical, oral care and industrial end markets.
Innophos combines more than a century of experience in specialty phosphate
manufacturing with a growing capability in a broad range of other specialty
ingredients to supply a product range produced to stringent regulatory
manufacturing standards and the quality demanded by customers worldwide.
Innophos is continually developing new and innovative specialty ingredients
addressing specific customer applications and supports these high-value
products with industry-leading technical service. Headquartered in Cranbury,
New Jersey, Innophos has manufacturing operations in Nashville, TN; Chicago
Heights, IL; Chicago (Waterway), IL; Geismar, LA; Ogden, UT; North Salt Lake,
UT; Salt Lake City, UT; Paterson, NJ; Green Pond, SC; Port Maitland, ON
(Canada); Taicang (China); Coatzacoalcos, Veracruz and San Jose de Iturbide
(Mission Hills), Guanajuato (Mexico). For more information please visit
www.innophos.com. 'IPHS-G'

Financial Tables Follow

Innophos Holdings, Inc.                FTI Consulting, Inc.
Investor Relations: (609) 366-1299     Bryan Armstrong/Matt Steinberg
investor.relations@innophos.com        (212) 850-5600

Conference Call Details

The conference call is scheduled for Tuesday, April 29, 2014 at 10:00 am ET
and can be accessed by dialing 1-888-206-4065  (U.S.) or 1-630-827-5974
(international) and entering passcode 37157154. 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 April 29 and 1:00 pm ET on May
13, 2014. The replay is accessible by dialing 1-888-843-7419 (U.S.) or
1-630-652-3042 (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 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 – First 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 March 31,
                                                  2014            2013
Net sales                                         $216,341        $214,441
Cost of goods sold                                174,409         177,407
Gross profit                                      41,932          37,034
Operating expenses:
 Selling, general and administrative          18,973          18,356
 Research& development expenses              1,015           753
 Total operating expenses                     19,988          19,109
Operating income                                  21,944          17,925
Interest expense, net                             705             1,152
Foreign exchange loss (gain)                      1,001           (498)
Income before income taxes                        20,238          17,271
Provision for income taxes                        6,053           4,868
Net income                                        $14,185         $12,403
Diluted Earnings Per Participating Share          $0.64           $0.55
Diluted weighted average participating shares     22,235,994      22,326,418
outstanding:
Dividends paid per share of common stock          $0.40           $0.35
Dividends declared per share of common stock      $0.40           $0.35

Segment Reporting – First Quarter

The Company reports its operations in three segments: Specialty Phosphates US
& Canada, Specialty Phosphates Mexico and GTSP & Other. The primary
performance indicators for the chief operating decision maker are sales and
operating income, with sales presented on a ship-from basis. Sales on a
ship-from basis are on the same revenue recognition principle as a ship-to
basis and are recognized when delivery has occurred and title and risk of loss
passes to the customer. The following table sets forth the historical results
of these indicators by segment: 

                                       Three Months Ended March 31,  Net Sales
                                       2014             2013         %Change
Segment Net Sales
Specialty Phosphates US& Canada       $151,010         $150,991     0.0%
Specialty Phosphates Mexico            44,489           38,916       14.3%
Total Specialty Phosphates             195,499          189,907      2.9%
GTSP& Other                           20,842           24,534       (15.0)%
Total                                  $216,341         $214,441     0.9%
Segment Operating Income
Specialty Phosphates US& Canada       $20,213          $10,792
Specialty Phosphates Mexico            5,861            656
Total Specialty Phosphates             26,074           11,448
GTSP& Other (a)                       (4,130)          6,477
Total                                  $21,944          $17,925
Segment Operating Income % of net
sales
Specialty Phosphates US& Canada       13.4%            7.1%
Specialty Phosphates Mexico            13.2%            1.7%
Total Specialty Phosphates             13.3%            6.0%
GTSP& Other (a)                       (19.8)%          26.4%
Total                                  10.1%            8.4%
Depreciation and amortization expense
Specialty Phosphates US& Canada       $5,319           $7,107
Specialty Phosphates Mexico            2,769            1,758
Total Specialty Phosphates             8,088            8,865
GTSP& Other                           387              521
Total                                  $8,475           $9,386

    The three months ended March31, 2013 includes a $7.2 million benefit to
(a) earnings related to updates to the provision for the CNA Fresh Water
    Claims in GTSP & Other.

Price / Volume – First 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 March 31, 2014 the
percentage changes in net sales by reportable segments and by Specialty
Phosphates product lines compared with the same period of the prior year,
including the effect of selling price and volume/mix changes upon revenue:

Reportable Segments                 Price  Volume/Mix   Total
Specialty Phosphates US& Canada   (0.2)%     0.2%        0.0%
Specialty Phosphates Mexico        (4.2)%     18.5%       14.3%
Total Specialty Phosphates         (1.0)%     3.9%        2.9%
GTSP& Other                       (19.9)%    4.9%        (15.0)%
Total                              (3.2)%     4.1%        0.9%
Specialty Phosphates Product Lines  Price  Volume/Mix   Total
Specialty Ingredients              0.0%       3.3%        3.3%
Food& Technical Grade PPA         (4.9)%     4.1%        (0.8)%
STPP& Detergent Grade PPA         (1.2)%     9.7%        8.5%

Summary Cash Flow Statement

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
                                                  Three Months Ended March 31,
                                                  2014             2013
Cash flows provided from operating activities
 Net income                                   $14,185          $12,403
 Adjustments to reconcile net income to net
cash provided
 from operating activities:
 Depreciation and amortization           8,475            9,386
 Amortization of deferred financing      132              147
charges
 Deferred income tax provision          -                1,791
 Share-based compensation                1,158            718
 Changes in assets and liabilities:
 Increase in accounts receivable          (18,642)         (15,708)
 Decrease in inventories                  16,398           23,261
 Decrease in other current assets         5,989            8,388
 Increase in accounts payable             632              9,973
 Increase (decrease) in other current     3,753            (11,058)
liabilities
 Changes in other long-term assets and    1,388            (3,745)
liabilities
 Net cash provided from operating  33,468           35,556
activities
Cash flows used for investing activities:
 Capital expenditures                        (6,133)          (7,437)
 Net cash used for investing        (6,133)          (7,437)
activities
Cash flows used for financing activities:
 Proceeds from exercise of stock options      99               -
 Long-term debt borrowings                    -                3,000
 Long-term debt repayments                    (8,001)          (25,000)
 Excess tax benefits from exercise of stock   108              968
options
 Common stock repurchases                     (189)            (70)
 Dividends paid                               (8,766)          (7,641)
 Net cash used for financing         (16,749)         (28,743)
activities
Net change in cash                                10,586           (624)
Cash and cash equivalents at beginning of period  32,755           26,815
Cash and cash equivalents at end of period        $43,341          $26,191

Summary Balance Sheets

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars In thousands)
                                                     March 31,  December 31,

                                                     2014        2013
ASSETS
Current assets:
 Cash and cash equivalents                       $43,341     $32,755
 Accounts receivable, net                        107,076     88,434
 Inventories                                     165,069     181,467
 Other current assets                            75,466      81,472
 Total current assets                  390,952     384,128
Property, plant and equipment, net                   200,660     201,985
Goodwill                                             84,373      84,373
Intangibles and other assets, net                    73,901      74,691
 Total assets                          $749,886    $745,177


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Current portion of long-term debt               $4,001      $4,002
 Accounts payable, trade and other               39,349      38,717
 Other current liabilities                       37,877      34,124
 Total current liabilities             81,227      76,843
Long-term debt                                       151,007     159,007
Other long-term liabilities                          47,591      45,908
 Total stockholders' equity            470,061     463,419
 Total liabilities and stockholders'   $749,886    $745,177
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
 
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