Innophos Holdings, Inc. News
Innophos Holdings, Inc. Reports First Quarter 2008 Results
First Quarter Results — Net sales for the first quarter 2008 were $162.5 million, an increase of $25.8 million, or 18.9%, as compared to $136.7 million for the same period in 2007. — Operating income for the first quarter 2008 was $23.4 million, an increase of $13.4 million, or 134%, compared to $10.0 million for the comparable period in 2007. Operating income in both first quarter 2008 and first quarter 2007 included certain highlighted items. The first quarter 2008 did not reflect approximately $3.6 million of gross profit from a GTSP (fertilizer co-product) export shipment delayed from March into April due to a customer's ocean shipping logistics issues and included $2.1 million in legal fees to comply with a STPP document request subpoena from the U.S. Department of Justice (\"DOJ\"). The first quarter 2007 was negatively affected by a $1.4 million charge for Mexican workforce reorganization costs. — Depreciation and amortization for the first quarter 2008, excluding deferred financing amortization expense, was $12.5 million, an increase of $0.9 million compared to $11.6 million for the first quarter of 2007. — Net interest expense for the first quarter 2008, including deferred financing amortization expense, was $8.6 million, a decrease of $1.3 million, compared to $9.9 million for the comparable period in 2007. — Tax expense for the first quarter 2008 was $5.3 million, an increase of $3.1 million compared to $2.2 million for the comparable period in 2007. — Net income for the first quarter 2008 was $9.3 million, an improvement of $11.4 million compared to a net loss of $2.1 million for the same period in 2007. — Diluted earnings per share for the first quarter 2008 were $0.43. Innophos had 20.9 million shares issued and outstanding at March 31, 2008. — As of March 31, 2008, Innophos had $11.7 million of cash and cash equivalents. Net debt at the end of the first quarter 2008 was $386.3 million, an increase of $17.5 million from $368.8 million at December 31, 2007. This increase was due to a $14.0 million borrowing on the Company's revolving debt needed to fund a $32.1 million increase in working capital. Capital expenditures for the first quarter 2008 were $4.1 million versus $4.6 million in the same quarter of 2007.
Segment Results 1Q 2008 Versus 1Q 2007 — U.S. — Year on year quarterly net sales increased 22.0% due to the impacts of higher prices across all product lines and favorable volume and mix effects on revenue in specialty salts and specialty acids which reached its highest volume level since the formation of Innophos. This record volume is due in part to increased market share resulting from commercial efforts and reduced competitive supply including imports. Operating income increased by $3.9 million from $0.7 million in the first quarter of 2007 to $4.6 million in the first quarter of 2008. This improvement was driven by higher selling prices which exceeded higher raw material, energy and freight costs and increased operating expenses primarily from $2.1 million of legal fees incurred to satisfy the DOJ STPP antitrust investigation document request subpoena. — Mexico — Net sales increased 16.7% for the quarter versus the comparable quarter 2007 due to higher prices across all product lines, but most significantly in STPP and Other Products, which exceeded lower volume and mix effects on revenue, again most significantly in STPP and Other Products. Volume was lower primarily due to a GTSP export shipment delayed into April because of a customer's ocean shipping logistics issues and lower GTSP production for the quarter due to rock supply interruptions due to port congestion and other logistics issues in Morocco. Operating income increased by $9.5 million, from $8.0 million in the first quarter of 2007 to $17.5 million in the first quarter of 2008, driven by higher selling prices which exceeded higher raw material, energy and freight costs. Included in 2007 operating income was $1.4 million of unusual expense related to the Mexican workforce reorganization. — Canada — Net sales increased 3.9% for the quarter versus the same quarter 2007 due to higher selling prices which exceeded lower volume and mix effects on revenue. Operating income remained flat at $1.4 million for both quarters.
2008 Market Outlook
Market prices of phosphate rock and sulfur, two primary raw materials used in the production of specialty phosphates, have increased substantially over the last several quarters. If current raw material market price levels for phosphate rock and sulfur are sustained throughout 2008 into early 2009, the Company currently estimates that annual raw material costs will increase by an amount equivalent to approximately 50-60% of 2007 annual sales by the second quarter 2009, as compared to the Innophos cost structure at the end of 2007. Approximately half of this cost increase is expected to occur during 2008, the balance is expected to occur in the first quarter of 2009.
Historically, Innophos has successfully recovered raw material, energy, and other cost increases through price increases. During the fourth quarter of 2007, the company implemented price increases in all its product lines, most of which became effective
While the Company cannot guarantee that these measures will succeed, to date marketplace acceptance rates for these increases have been high. In light of recent market volatility, it is possible that raw material costs may continue to increase, and that additional price increases or employment of other measures may be necessary to recover those additional cost increases. Finally, as Innophos raises prices, it is possible that demand for its products may decline to the extent its customers reformulate their products or otherwise reduce purchases.
This news release does not constitute an offer to sell, or the solicitation of an offer to buy, any securities of Innophos Holdings, Inc., nor shall there be any offer, solicitation or sale of securities in any state in which an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of that state.
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
Financial Tables Follow
Conference Call Details
The conference call is scheduled for
Forward Looking Statements
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 first-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 - First Quarter INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES Condensed Consolidated Statement of Operations (Unaudited) (Dollars in thousands, except per share amounts) Three months Three months ended ended March 31, March 31, 2008 2007 Net sales $162,538 $136,680 Cost of goods sold 121,831 115,698 Gross profit 40,707 20,982 Operating expenses: Selling, general and administrative 16,769 10,413 Research & development expenses 510 542 Total operating expenses 17,279 10,955 Operating income 23,428 10,027 Interest expense, net 8,620 9,921 Foreign exchange loss (gain) 290 (134) Other (income) expense, net (80) 58 Income before income taxes 14,598 182 Provision for income taxes 5,342 2,250 Net income (loss) $9,256 $(2,068) Dividends paid per share of common stock $0.17 $0.11 Dividends declared per share of common stock $0.17 $0.17
Segment Reporting - First Quarter
The company reports its operations in three segments-
Three months Three months ended ended March 31, March 31, 2008 2007 Net Sales % Change Segment Net Sales United States $92,850 76,127 22.0% Mexico 61,884 53,039 16.7% Canada 7,804 7,514 3.9% Total $162,538 $136,680 18.9% Segment Operating Income United States $4,564 $652 Mexico 17,510 7,953 Canada 1,354 1,422 Total $23,428 $10,027 Segment Operating Income % of net sales United States 4.9% 0.9% Mexico 28.3% 15.0% Canada 17.4% 18.9% Price / Volume - First Quarter The following table illustrates for the three months ended March 31, 2008 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 14.0% 8.0% 22.0% Canada 16.8% (12.9%) 3.9% Mexico 54.5% (37.8%) 16.7%
The following table illustrates for the three months ended
Price Volume/Mix Total Purified Phosphoric Acid 30.6% (3.4%) 27.2% Specialty Salts and Specialty Acids 10.3% 11.2% 21.5% STPP & Other Products 65.0% (57.6%) 7.4% Summary Cash Flow Statement INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) (Dollars in thousands) Three months Three months ended ended March 31, March 31, 2008 2007 Cash flows from operating activities Net income (loss) $9,256 $(2,068) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 12,541 11,565 Amortization of deferred financing charges 683 822 Deferred income tax benefit (631) (1,078) Deferred profit sharing 190 31 Stock-based compensation 401 231 Changes in assets and liabilities: Increase in accounts receivable (8,743) (3,617) Increase in inventories (16,890) (193) Decrease/(increase) in other current assets 2,383 (2,531) Decrease in accounts payable (1,866) (385) Decrease in other current liabilities (7,029) (4,278) Changes in other long-term assets and liabilities (104) (431) Net cash used in operating activities (9,809) (1,932) Cash flows from investing activities: Capital expenditures (4,086) (4,625) Net cash used for investing activities (4,086) (4,625) Cash flows from financing activities: Proceeds from exercise of stock options 31 750 Principal payments of term-loan (500) (8,000) Revolver Borrowing 14,000 - Dividends paid (3,551) (2,275) Net cash provided from (used for) financing activities 9,980 (9,525) Net change in cash (3,915) (16,082) Cash and cash equivalents at beginning of period 15,661 31,760 Cash and cash equivalents at end of period $11,746 $15,678 Summary Balance Sheets INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited) (Dollars in thousands) March 31, December 31, 2008 2007 ASSETS Current assets: Cash and cash equivalents $11,746 $15,661 Accounts receivable - trade 68,822 60,079 Inventories 95,618 78,728 Other current assets 16,001 18,384 Total current assets 192,187 172,852 Property, plant and equipment, net 253,488 260,563 Goodwill 47,268 47,268 Intangibles and other assets, net 60,588 62,016 Total assets $553,531 $542,699 LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Current portion of long-term debt $58,026 $1,328 Accounts payable, trade and other 34,578 36,444 Other current liabilities 38,351 45,380 Total current liabilities 130,955 83,152 Long-term debt 339,974 383,172 Other long-term liabilities 31,640 31,671 Total liabilities 502,569 497,995 Total stockholders' equity 50,962 44,704 Total liabilities and stockholders' equity $553,531 $542,699
Additional Information
It should be noted the unusual expense items discussed are not considered extraordinary under
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.
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