CRANBURY, N.J., Feb. 14, 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 fourth quarter and full year 2012.
Fourth Quarter Results
Full Year Results
Randy Gress, CEO of Innophos, commented on the results, "I am satisfied with the progress we made throughout 2012 in delivering on our strategic objectives and positioning the business for future growth. However, our results in 2012 have also reflected the challenging market conditions we have experienced. The environment was particularly reflected in the fourth quarter, as the timing of the holiday season, combined with customer efforts to reduce inventories in an uncertain demand environment, resulted in a significantly more pronounced fourth quarter seasonal slowdown in our US and Canada Specialty Phosphates business. That said, volumes have since recovered strongly in January 2013, which gives us confidence that the effect was limited to the fourth quarter."
Mr. Gress continued, "Our strategic accomplishments in 2012 included two acquisitions in the attractive high growth nutritional ingredients space, as well as a significant step forward in the resources and capabilities dedicated to developing our business in higher growth geographies such as the Asia Pacific region. Our latest acquisition, Triarco, was completed on December 31st, and I believe Triarco's botanical and enzyme based ingredients business will prove highly complementary to the two mineral ingredients businesses, Kelatron and AMT, that we acquired in late 2011 and mid-2012. Through these acquisitions we have built a strong platform for future growth that will also support growth in our Specialty Phosphate product range."Mr. Gress concluded, "Looking ahead to the coming year, we are encouraged by what looks to be a strong start and we are confident of continued success with our strategic initiatives. We will also continue to take the necessary steps to ensure we are maximizing shareholder value by leveraging our strong cash flow and balance sheet both to invest in growth and improve cash returns to shareholders, and I expect 2013 to show further progress against both of these goals."
Segment Results – full year and fourth quarter 2012 versus 2011 Specialty PhosphatesFor the full year, Specialty Phosphates sales revenue was up 6% year over year with prices up 5%. US/Canada volumes were up 4%, with moderately lower market demand offset by growth initiatives, while acquisitions contributed 3% to growth. Mexico volumes were also affected adversely by lower market demand.
For the quarter, Specialty Phosphates sales revenue was down 1% year over year.
Full year operating income at $108 million was $8 million below 2011 levels as the effects of 2011's market raw material cost inflation were more fully realized in cost of goods sold, thus catching up to selling price increases achieved in earlier periods. Operating income margin for 2012 was 14%, down 210 basis points from 2011 levels, with US/Canada at 15% and Mexico at its expected 12%.
For the quarter, operating income at $20 million was $6 million below fourth quarter 2011 levels primarily due to lower volumes in Mexico. Fourth quarter operating income margin was 11%, down 290 basis points against the fourth quarter 2011 and down 240 points sequentially, with lower volumes and unfavorable mix the primary reason for the quarter margin sequential decline.
US/CanadaUS/Canada Specialty Phosphates sales increased 8% for 2012 on 5% higher prices and 3% growth from acquisitions. Excluding acquisitions, volumes were flat due to moderately lower market demand offset by growth initiatives.
For the quarter, sales increased 4%, all attributable to acquisitions. Prices were flat with the year ago period, while continuing success with growth initiatives was fully offset by a greater than anticipated year-end destocking effect.Operating income at $86 million for 2012 was $8 million below 2011, as the effects described above of raw material cost increases catching up to selling price increases outweighed the selling price increases recognized in 2012. As a result, operating income margins for 2012 at 15% were 280 basis points below 2011 levels.
For the fourth quarter 2012, operating income of $16 million was similar to the year ago quarter, but down $7 million sequentially, resulting in an operating margin of 12%, down 90 basis points against fourth quarter 2011 and down 420 basis points sequentially. The large sequential decline is primarily due to lower volumes causing lower cost leverage with unfavorable product mix also contributing.
MexicoMexico Specialty Phosphates 2012 sales were 1% above 2011 on 6% higher prices, but 5% lower volumes, due to soft market demand.Fourth quarter 2012 volumes improved sequentially to similar levels seen in the 2012 first half. However, fourth quarter sales were down 11% against a very strong fourth quarter 2011, with prices down 5% in the less differentiated technical grade products and volumes down 6%.Operating income at $22 million for 2012 was flat with 2011 despite the previously noted lower volumes. Operating income margin was 12% for 2012, level with 2011.
For the fourth quarter 2012, operating income of $5 million was down $5 million from fourth quarter 2011 levels, but up $2 million sequentially. The variance against prior year is primarily due to lower sales, along with $2 million of planned maintenance outage expenses in the current quarter.
Operating income margin was 10% for the 2012 fourth quarter, below the full year average, as a result of the higher maintenance expense.
GTSP & OtherGTSP & Other sales (primarily fertilizer co-product) increased 6% for 2012 compared to 2011, with volumes up 19% but prices down 13% on average. Market prices increased during the first half of 2012, but fell throughout the second half, returning back to the seasonal lows seen at the beginning of the year.For the fourth quarter, sales increased 2% compared to fourth quarter 2011, with volumes up 14%, but prices down 12%.GTSP & Other recorded $2 million of operating income in 2012 compared to $21 million for 2011. Included in the 2012 results is $7 million of income related to the settlement with Rhodia over Mexican water duties charges and $2 million of adjustments related to prior periods. 2011 included $3 million of income resulting from a reduction in the provision for excess Mexican water duties charges. Excluding these adjustments, 2012 had an operating loss of $3 million compared to an operating income of $18 million for 2011. Operating income margins were -3% for 2012 compared to 18% for 2011, excluding the noted adjustments.
For the fourth quarter 2012, GTSP & Other was just above break-even at $0.5 million, down $4 million from the year ago period on a combination of lower phosphate fertilizer market prices and relatively high market raw material costs. Operating income margins were 2% for the fourth quarter 2012 compared to 20% for the fourth quarter 2011.
Recent Trends and OutlookMarket demand was flat to moderately lower in 2012, with this trend accentuated by the year-end destocking already noted. Although we are encouraged by what looks to be a strong start to 2013, this partly represents a carry-over of December orders to January, and we remain cautious on overall demand levels for 2013.
Momentum continues to improve in our product innovation and geographic expansion initiatives; however, we currently expect only modest market growth in 2013. Overall, we expect growth in Specialty Phosphates around the low end of our 4-6% long term target, with further growth of approximately 5% anticipated from the full year benefit of acquisitions completed in 2012. First quarter 2013 revenue growth is expected to be moderately below the full year expectation in comparison to a strong first quarter 2012 for Mexico Specialty Phosphates.
We do not expect any major change in raw material purchase prices or underlying selling prices through the first quarter 2013. However, the US & Canada segment will have higher sequential costs of goods sold in the first quarter reflecting purchase accounting effects for the Triarco acquisition.
We will see a further significant reduction in depreciation as the stepped up asset values created at the formation of the Company in 2004 reach the end of their depreciation lives. This will be partly offset by the amortization of the intangibles associated with recent acquisitions. Overall, we expect depreciation and amortization expense to be $7 million lower in 2013 than in 2012, of which $4.5 million will benefit Specialty Phosphates. This benefit, combined with improved mix and better operating leverage, is expected to increase Specialty Phosphates operating income margins by approximately 200 basis points sequentially. We expect full year Specialty Phosphates operating income margins to be similar to the 15% achieved for the first three quarters of 2012.
For the short term, GTSP is expected to continue near break-even through the first quarter. As with last year, fertilizer prices have been declining through the winter period, and no improvement in pricing is anticipated before the second quarter. Mining expenses for the development of our Mexico phosphate concessions were lower than initially anticipated in the second half of 2012 and are expected to continue at approximately their current run rate for the first half of 2013.
Net debt increased by $69 million in the 2012 fourth quarter to $149 million resulting primarily from the $45 million of cash paid for the Triarco acquisition and a temporary increase in Mexico working capital.
Capital Expenditures Capital expenditures were $33 million in 2012, with a higher spend rate in the fourth quarter as activity increased on some of the larger initiatives that had been delayed from earlier in the year by changes in engineering specifications. Investment continues to be focused on capacity enhancements for US/Canada and Mexico Specialty Ingredients facilities, expanding geographically, including the investment in China, and enhancing Mexico's capability to process multiple grades of rock, consistent with the Company's supply chain diversification strategy. Our expectation for 2013 is for capital expenditures in the $40-45 million range.
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); and Coatzacoalcos, Veracruz and San Jose de Iturbide (Mission Hills), Guanajuato (Mexico). For more information please visit www.innophos.com. 'IPHS-G'
Financial Tables FollowInnophos Holdings, Inc.FTI Consulting, Inc.Investor Relations: (609) 366-1299Alexandra Tramont/Matt Steinberginvestor.email@example.com Conference Call DetailsThe conference call is scheduled for Friday, February 15, 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 34232459. 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 February 15 and 1:00 pm ET on February 28, 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 fourth-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 – Fourth Quarter INNOPHOS HOLDINGS, INC. AND SUBSIDIARIESCondensed Consolidated Statement of Operations (Unaudited)(Dollars In thousands, except per share amounts or share amounts)Three months endedThree months endedDecember 31,December 31,20122011Net sales
$208,779$209,160Cost of goods sold
36,40549,592Operating expenses:Selling, general and administrative
14,63318,426Research & development expenses
787718Total operating expenses
20,98530,448Interest expense, net
1,4411,639Foreign exchange loss (gain)
242(1,143)Income before income taxes
19,30229,952Provision for income taxes
$13,392$20,950Diluted Earnings Per Share
$0.60$0.93Diluted weighted average common shares outstanding:
22,349,16022,500,590Dividends paid per share of common stock
$0.35$0.25Dividends declared per share of common stock
$0.35$0.25Segment Reporting – Fourth Quarter The Company reports its operations in three segments: Specialty Phosphates US & Canada, Specialty Phosphates Mexico and GTSP & Other. The primary performance indicators for the chief operating decision maker are sales and 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 endedThree months endedDecember 31,December 31,Net Sales20122011% ChangeSegment Net SalesSpecialty Phosphates US & Canada
$137,288$132,4003.7%Specialty Phosphates Mexico
47,79253,577-10.8%Total Specialty Phosphates
185,080185,977-0.5%GTSP & Other
$208,779$209,160-0.2%Segment Operating IncomeSpecialty Phosphates US & Canada
$15,740$16,442Specialty Phosphates Mexico
4,7579,590Total Specialty Phosphates
20,49726,032GTSP & Other (a)
$20,985$30,448Segment Operating Income % of net salesSpecialty Phosphates US & Canada
11.5%12.4%Specialty Phosphates Mexico
10.0%17.9%Total Specialty Phosphates
11.1%14.0%GTSP & Other (a)
10.1%14.6%Depreciation and amortization expenseSpecialty Phosphates US & Canada
$5,935$4,911Specialty Phosphates Mexico
3,3455,236Total Specialty Phosphates
9,28010,147GTSP & Other
$10,217$11,233(a) The three month period ended December 31, 2011 includes a $0.2 million charge to earnings related to updates to the provision for Mexican water duties.Price / Volume – Fourth 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 December 31, 2012 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 PriceVolume/Mix TotalSpecialty Phosphates US & Canada
-0.1%3.8%3.7%Specialty Phosphates Mexico
-5.0%-5.8%-10.8%Total Specialty Phosphates
-1.5%1.0%-0.5%GTSP & Other
-2.7%2.5%-0.2%Note: Includes Kelatron/AMT benefit of 3.6% in Specialty Phosphates US & Canada Volume/Mix and 2.6% in Total Specialty Phosphates Volume/MixSpecialty Phosphates Product Lines PriceVolume/Mix TotalSpecialty Ingredients
-1.1%-0.6%-1.7%Food & Technical Grade PPA
-4.7%8.1%3.4%STPP & Detergent Grade PPA
1.5%-1.5%0.0%Note: Includes Kelatron/AMT benefit of 3.9% in Specialty Ingredients Volume/MixSummary Profit & Loss Statement – Full Year INNOPHOS HOLDINGS, INC. AND SUBSIDIARIESCondensed Consolidated Statement of Operations (Unaudited)(Dollars In thousands, except per share amounts or share amounts) Year Ended December 3120122011Net sales
$862,399$810,487Cost of goods sold
177,420205,315Operating expenses:Selling, general and administrative
64,32065,380Research & development expenses
3,1072,923Total operating expenses
109,993137,012Interest expense, net
5,9775,726Foreign exchange (gain) loss
(1,957)875Income before income taxes
105,973130,411Provision for income taxes
$74,190$86,522Diluted Earnings Per Share
$3.30$3.83Diluted weighted average common shares outstanding:
22,475,88122,578,567Dividends paid per share of common stock
$1.14$0.92Dividends declared per share of common stock
$0.89$1.00Segment Reporting – Full Year 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: Year ended December 31Net Sales20122011% ChangeSegment Net SalesSpecialty Phosphates US & Canada
$569,816$525,6628.4%Specialty Phosphates Mexico
187,743186,2110.8%Total Specialty Phosphates
757,559711,8736.4%GTSP & Other
$862,399$810,4876.4%Segment Operating IncomeSpecialty Phosphates US & Canada
$86,002$94,055Specialty Phosphates Mexico
21,91321,948Total Specialty Phosphates
107,915116,003GTSP & Other (a) (b)
$109,993$137,012Segment Operating Income % of net salesSpecialty Phosphates US & Canada
15.1%17.9%Specialty Phosphates Mexico
11.7%11.8%Total Specialty Phosphates
14.2%16.3%GTSP & Other (a) (b)
12.8%16.9%Depreciation and amortization expenseSpecialty Phosphates US & Canada
$23,215$19,808Specialty Phosphates Mexico
14,57818,050Total Specialty Phosphates
37,79337,858GTSP & Other
$42,335$43,676(a) The year ended December 31, 2012 includes a $7.1 million benefit to earnings primarily for the settlementwith Rhodia on their liability for the charges to be paid for Mexican water duties and a $2.4 million chargeto earnings for prior period adjustments.(b) The year ended December 31, 2011 includes a $3.4 million benefit to earnings related to updates to theprovision for Mexican water duties.Price / Volume – Full Year 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 year ended December 31, 2012 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 PriceVolume/Mix TotalSpecialty Phosphates US & Canada
4.8%3.6%8.4%Specialty Phosphates Mexico
6.1%-5.3%0.8%Total Specialty Phosphates
5.1%1.3%6.4%GTSP & Other
2.9%3.5%6.4%Note: Includes Kelatron/AMT benefit of 3.6% in Specialty Phosphates US & Canada Volume/Mix and 2.7% in Total Specialty Phosphates Volume/MixSpecialty Phosphates Product Lines PriceVolume/Mix TotalSpecialty Ingredients
4.8%1.0%5.8%Food & Technical Grade PPA
6.4%7.2%13.6%STPP & Detergent Grade PPA
4.8%-5.4%-0.6%Note: Includes Kelatron/AMT benefit of 3.9% in Specialty Ingredients Volume/MixSummary Cash Flow Statement INNOPHOS HOLDINGS, INC. AND SUBSIDIARIESCondensed Consolidated Statements of Cash Flows (Unaudited)(Dollars in thousands)Year endedYear endedDecember 31,December 31,20122011Cash flows from operating activitiesNet income
$74,190$86,522Adjustments to reconcile net income to net cash provided fromoperating activities:Depreciation and amortization
42,33443,676Amortization of deferred financing charges
884608Deferred income tax provision
1675,379Deferred profit sharing
1,9126,250Changes in assets and liabilities:Decrease (increase) in accounts receivable
13,017(28,154)Decrease (increase) in inventories
12,154(45,021)(Increase) decrease in other current assets
(21,283)3,238Increase (decrease) in accounts payable
2,059(5,939)Decrease in other current liabilities
(20,573)(14,685)Changes in other long-term assets and liabilities
(3,456)(5,242)Net cash provided from operating activities
101,40546,346Cash flows from investing activities:Capital expenditures
(33,060)(34,195)Acquisition of businesses, net of cash acquired
(71,706)(20,533)Net cash used for investing activities
(104,766)(54,728)Cash flows used for financing activities:Proceeds from exercise of stock options
528484Long-term debt borrowings
333,00022,000Long-term debt repayments
(309,000)(19,000)Deferred financing costs
(1,461)-Excess tax benefits from exercise of stock options
3,9312,511Common stock repurchases
(24,810)(19,921)Net cash used for financing activities
(5,066)(20,082)Net change in cash
(8,427)(28,464)Cash and cash equivalents at beginning of period
35,24263,706Cash and cash equivalents at end of period
$26,815$35,242Summary Balance Sheets INNOPHOS HOLDINGS, INC. AND SUBSIDIARIESCondensed Consolidated Balance Sheets (Unaudited)(Dollars In thousands)December 31,2012December 31,2011ASSETSCurrent assets:Cash and cash equivalents
$26,815$35,242Accounts receivable - trade
163,606169,728Other current assets
94,56175,316Total current assets
379,015384,707Property, plant and equipment, net
83,21461,587Intangibles and other assets, net
$737,177$687,015LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Current portion of long-term debt
$4,000$4,000Accounts payable, trade and other
36,48532,640Other current liabilities
46,03071,609Total current liabilities
172,000148,000Other long-term liabilities
292,854293,807Total stockholders' equity
444,323393,208Total liabilities and stockholders' equity
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.|
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