CRANBURY, N.J., Nov. 2 /PRNewswire-FirstCall/ -- Innophos Holdings, Inc.
(Nasdaq: IPHS), a leading specialty phosphates producer in North America,
today announced its financial results for the third quarter 2009.
Third Quarter Results
-- Net sales for the third quarter 2009 were $161.9 million, a decrease
of
$129.9 million, or 44.5%, as compared to $291.8 million for the same
period in 2008. Selling price decreases, primarily in Mexico, had a
negative effect on revenue of $72.0 million, with volume and mix
effects
being a negative $57.9 million. On a sequential basis, net sales
declined by $4.8 million or 2.9% versus second quarter 2009, with
higher
volumes, particularly in specialty salts and specialty acids, offset
by
an 8.9% price decline.
-- Operating income for the third quarter 2009 was $28.5 million, a
decrease of $84.4 million, or 74.8%, versus $112.9 million for the
comparable period in 2008. The decrease in operating income was
primarily due to the noted selling price and volume declines offset
partly by raw material savings.
-- Net income for the third quarter 2009 was $15.1 million, a decrease of
$64.6 million compared to $79.7 million for the same period in 2008.
-- Diluted earnings per share for the third quarter 2009 were $0.69
compared to $3.62 for the third quarter 2008 and $0.81 for the second
quarter 2009.
-- Cash generation continued to be strong and as of September 30, 2009
Innophos had $124.3 million of cash and cash equivalents. Net debt at
the end of the third quarter 2009 was $121.7 million, a decrease of
$30.6 million from $152.3 million at June 30, 2009. Capital
expenditures for the third quarter 2009 were $5.1 million compared to
$4.0 million for the third quarter 2008.
Randy Gress, CEO of Innophos, commented on the results, "Although comparisons
to the historic, record-setting third quarter 2008 are not favorable, third
quarter 2009 results were encouraging when viewed sequentially. Revenues in
the U.S. and Canada held at second quarter levels with specialty salts and
specialty acids up 3.7%. This represented good progress in delivering our
commercial targets and demonstrated the ongoing strength of this business.
Mexico continued to face a more challenging operating environment, but ongoing
success in cost reduction initiatives together with higher sales of specialty
salts and specialty acids improved profitability versus the second quarter."
Segment Results 3Q 2009 Versus 3Q 2008
United States
-- Year on year quarterly net sales decreased 18.5% on lower volume and
mix. Selling prices were flat versus the year ago quarter.
-- Operating income at $24.6 million was $20.8 million below the $45.4
million in the third quarter 2008. The decline was primarily a result
of lower volumes. Operating expenses were also higher due to spending
associated with the Company-wide Enterprise Resources Planning (ERP)
project.
Mexico
-- Net sales decreased 74.2% versus the third quarter 2008 due to both
lower selling prices and lower volumes across all product lines.
-- Impacts on operating income from the revenue decline and legal
expenses
associated with the OCP arbitration were mitigated in part by
successful
cost reduction initiatives delivering operating income of $2.0 million
in the quarter compared to $62.4 million in the third quarter 2008 and
a
loss of $1.7 million in the second quarter 2009.
Canada
-- Net sales decreased 29.7% versus the same quarter in 2008 due to lower
selling prices in Purified Phosphoric Acid and STPP & Other Products
along with lower volume and mix effects on revenue across all product
lines.
-- Operating income decreased by $3.2 million from $5.1 million in 2008
to
$1.9 million in 2009 due to the noted lower sales effects along with
higher raw material costs.
Recent Trends and Outlook
On a sequential basis, third quarter 2009 volumes excluding GTSP fertilizer
sales increased by 2.8%. The U.S. and Canada business delivered a 6.6%
increase, and Mexico declined by 4.6%. Selling prices declined 8.9%
sequentially, a slowing rate of decline compared to earlier quarters. In the
third quarter 2009 approximately $1 to $2 million of the expected $5 to $7
million raw material cost structure increase was incurred on a constant volume
and mix basis, with the remainder expected to be incurred in the fourth
quarter. Mexico's restructured fixed costs were in line with expectations.
Although it is often difficult to predict due to holidays and customers' year
end inventory planning, management currently expects fourth quarter volumes,
excluding GTSP fertilizer sales, to be similar to the third quarter 2009.
Selling prices are expected to decline at a rate significantly lower than that
experienced in the third quarter. As noted above, the Company expects its
fourth quarter 2009 raw material cost structure to increase $4 to $5 million
primarily as a result of the anticipated phosphoric acid sourcing mix.
Capital expenditures for 2009 are now expected to finish in the $18 to $20
million range; lower than previously indicated, partly due to timing
differences on project spending and partly a result of reprioritizing projects
consistent with present business needs. Spending will continue on the food
grade quality conversion of Mexico's phosphoric acid that is still targeted
for first quarter 2010 completion.
Looking beyond the fourth quarter, demand and pricing outlooks are still
uncertain. However, if the economic outlook continues to improve, the Company
should see some volume recovery. Selling prices will remain under pressure,
though at expected reduced rates of decline.
As previously disclosed, the phosphate rock supply agreement between OCP and
Innophos' Mexican subsidiary, Innophos Mexicana, will terminate after
September 9, 2010. Innophos is continuing its efforts to develop long term
supply arrangements for its Mexican operations from multiple sources and is in
advanced discussions with several potential suppliers. Innophos is also
continuing its evaluation of the Company's newly acquired Mexican phosphate
rock mining concessions as a long term supply source. Management believes
that an orderly transition from OCP as a single source supplier of rock is in
the best strategic interests of the Company. However, during the remainder of
the current contract, and while uncertainty remains as to the competitiveness
of Innophos' contract rock pricing, conditions will continue to be difficult
for the Mexican operation. Through an ongoing focus on operational efficiency,
the business is targeting a minimum goal of remaining profitable until the
sourcing situation improves.
As previously disclosed, Innophos Mexicana and OCP are arbitrating differences
concerning 2008 and 2009 rock pricing under the supply agreement and
counterclaims by OCP filed in July 2009 that Mexicana breached that agreement.
Management believes such claims are without merit.
Recently, OCP requested that the arbitral tribunal in Paris order Innophos
Mexicana to furnish interim security in the amount of $68.4 million pending
the arbitration, which will conclude after further hearings in July 2010.
Management believes the OCP request meets none of the applicable standards for
this type of relief and is totally unwarranted by the facts and circumstances
of the arbitration case. Accordingly, Innophos Mexicana will vigorously
oppose the request. The tribunal has yet to establish a schedule for
briefing, and possibly hearings, on the issue.
Management believes the likelihood of the arbitral tribunal approving security
for the OCP counterclaims in the nature and magnitude of OCP's request is
remote.
OCP's request for security has in no way altered management's evaluation of
the arbitration case or the counterclaims, or altered its determination that
no accruals are warranted.
About Innophos Holdings, Inc.
Innophos Holdings, Inc. (www.innophos.com), the holding company for a leading
North American manufacturer of specialty phosphates, serves a diverse range of
customers across multiple applications, geographies and channels. Innophos
offers a broad suite of products used in a wide variety of food and beverage,
consumer products, pharmaceutical and industrial applications. Innophos'
market-leading positions derive from its experience and dedication to customer
service and innovation. Headquartered in Cranbury, New Jersey, Innophos has
manufacturing operations in Nashville, TN; Chicago Heights, IL; Chicago
(Waterway), IL; Geismar, LA; Port Maitland, ON (Canada); and Coatzacoalcos,
Veracruz and Mission Hills, Guanajuato (Mexico). 'IPHS-E'
Financial Tables Follow
Conference Call Details
The conference call is scheduled for Tuesday, November 3, 2009 at 10:00 am ET
and can be accessed by dialing 888-713-4215 (U.S.) or 617-213-4867
(international) and entering passcode 78420864. Please dial in approximately
15 minutes ahead of the start time to ensure timely entry to the call. A
replay will be available between 12:00 pm ET on November 3 and 1:00 pm ET on
November 17, 2009. The replay is accessible by dialing 888-286-8010 (U.S.) or
617-801-6888 (international) and entering passcode 62811230.
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 third-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 - Third Quarter
INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Operations (Unaudited)
(Dollars in thousands, except per share amounts or share amounts)
Three months Three months
ended ended
September 30, September 30,
2009 2008
---- ----
Net sales $161,934 $291,772
Cost of goods sold 114,204 165,189
------ -------
Gross profit 47,730 126,583
------ -------
Operating expenses:
Selling, general and administrative 18,777 13,152
Research & development expenses 462 526
--- ---
Total operating expenses 19,239 13,678
------ ------
Operating income 28,491 112,905
Interest expense, net 6,009 8,886
Foreign exchange gain (243) (869)
Other income, net - (152)
--- ----
Income before income taxes 22,725 105,040
Provision for income taxes 7,592 25,388
------- -------
Net income $15,133 $79,652
======= =======
Depreciation & Amortization $14,365 $13,232
Diluted Earnings Per Share $0.69 $3.62
Diluted weighted average common
shares outstanding: 22,075,416 22,023,475
Dividends paid per share of
common stock $0.17 $0.17
Dividends declared per share of
common stock $0.17 $-
Segment Reporting - Third Quarter
The company reports its operations in three segments--United States, Mexico
and Canada, each of which sells the entire portfolio of products. The primary
performance indicators for the chief operating decision maker are sales and
operating income, with sales on a ship-from basis. The following table sets
forth the historical results of these indicators by segment:
Three months ended Three months ended
September 30, September 30, Net Sales
2009 2008 % Change
---- ---- ---------
Segment Net Sales
United States $119,107 $146,154 (18.5%)
Mexico 34,469 133,732 (74.2%)
Canada 8,358 11,886 (29.7%)
-------- -------- -----
Total $161,934 $291,772 (44.5%)
======== ======== =====
Segment Operating Income
United States $24,636 $45,400
Mexico 1,975 62,357
Canada 1,880 5,148
------- --------
Total $28,491 $112,905
======= ========
Segment Operating
Income % of net sales
United States 20.7% 31.1%
Mexico 5.7% 46.6%
Canada 22.5% 43.3%
Price / Volume - Third Quarter
The Company calculates pure selling price dollar variances as the selling
price for the current period minus the selling price for the prior period, and
then multiplies the resulting selling price difference by the prior period
volume. The selling price dollar variance is then divided by the prior period
sales dollars to calculate the percentage change. Volume/mix variance is
calculated as the total sales variance minus the selling price variance.
The following table illustrates for the three months ended September 30, 2009
the percentage changes in net sales by reportable segment compared with the
same period of the prior year, including the effect of price and volume/mix
changes upon revenue:
Price Volume/Mix Total
----- ---------- -----
United States (0.2%) (18.3%) (18.5%)
Canada (11.6%) (18.1%) (29.7%)
Mexico (52.6%) (21.6%) (74.2%)
The following table illustrates for the three months ended September 30, 2009
the percentage changes in net sales by major product lines compared with the
same period of the prior year, including the effect of price and volume/mix
changes upon revenue:
Price Volume/Mix Total
----- ---------- -----
Purified
Phosphoric Acid (29.6%) (39.0%) (68.6%)
Specialty Salts and
Specialty Acids (4.8%) (10.5%) (15.3%)
STPP & Other Products (56.8%) (15.7%) (72.5%)
Summary Cash Flow Statement
INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
Nine months ended Nine months ended
September 30, September 30,
2009 2008
---- ----
Cash flows from operating activities
Net income $62,986 $148,195
Adjustments to reconcile
net income to net cash
provided from operating activities:
Depreciation and amortization 38,214 40,371
Amortization of deferred
financing charges 2,700 2,046
Deferred income tax provision
(benefit) 4,451 (879)
Deferred profit sharing (470) 410
Share-based compensation 2,470 2,340
Gain on retirement of bonds (3,500) -
Changes in assets and liabilities:
Increase in restricted cash (1,748) -
Decrease (increase) in
accounts receivable 13,004 (44,019)
Decrease (increase) in inventories 41,040 (52,411)
Increase in other current assets (1,704) (99)
(Decrease) increase in accounts
payable (3,498) 4,748
Increase in other current
liabilities 2,839 32,398
Changes in other long-term assets
and liabilities (805) (1,697)
---- ------
Net cash provided from
operating activities 155,979 131,403
Cash flows from investing activities:
Capital expenditures (12,723) (13,238)
------- -------
Net cash used for investing
activities (12,723) (13,238)
------- -------
Cash flows from financing activities:
Proceeds from exercise of stock
options 578 392
Principal repayment of senior
unsecured notes (6,500) -
Principal payments of term-loan (126,500) (1,500)
Deferred financing costs (1,050) -
Excess tax benefits from exercise
of stock options 2 1,062
Dividends paid (10,824) (10,664)
------- -------
Net cash used for
financing activities (144,294) (10,710)
-------- -------
Net change in cash (1,038) 107,455
Cash and cash equivalents at
beginning of period 125,328 15,661
-------- --------
Cash and cash equivalents at end
of period $124,290 $123,116
======== ========
Summary Balance Sheets
INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
September 30, December 31,
2009 2008
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $124,290 $125,328
Restricted cash 1,748 -
Accounts receivable - trade 66,537 79,541
Inventories 104,270 145,310
Other current assets 41,888 40,184
------ ------
Total current assets 338,733 390,363
Property, plant and equipment, net 209,758 230,422
Goodwill 51,706 51,706
Intangibles and other assets, net 52,591 55,713
-------- --------
Total assets $652,788 $728,204
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $- $72,613
Accounts payable, trade and other 22,861 26,359
Other current liabilities 47,358 44,482
------ ------
Total current liabilities 70,219 143,454
Long-term debt 246,000 309,887
Other long-term liabilities 38,834 32,103
------- -------
Total liabilities 355,053 485,444
------- -------
Total stockholders' equity 297,735 242,760
-------- --------
Total liabilities and
stockholders' equity $652,788 $728,204
======== ========
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 debt less
cash and cash equivalents.
SOURCE Innophos Holdings, Inc.
Innophos Holdings, Inc., Investor Relations, +1-609-366-1299,
investor.relations@innophos.com; or Breakstone Group, Maura Gedid,
+1-646-452-2335
