Delaware | 001-33124 | 20-1380758 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit No. | Description | |
Press Release dated October 31, 2017 announcing financial results for the third quarter of 2017. |
SIGNATURES | ||||
According to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. | ||||
INNOPHOS HOLDINGS, INC. | ||||
October 31, 2017 | By: | /s/ Joshua Horenstein | ||
Name: | Joshua Horenstein | |||
Title: | Senior Vice President, Chief Legal Officer and Corporate Secretary | |||
Investor Contact | Media Contact | |
Mark Feuerbach | Ryan Flaim | |
Innophos | Sharon Merrill Associates | |
609-366-1204 | 617-542-5300 | |
investor.relations@innophos.com | iphs@investorrelations.com |
• | Q3 earnings performance exceeded expectations; strongest adjusted diluted EPS performance in twelve quarters |
• | Closed expediently on acquisition of Novel Ingredients; delivered $10 million of sales and accretive to EPS |
• | Disciplined integration process established; unified Nutrition sales team presented during annual SupplySide West trade show |
• | Food, Health and Nutrition (FHN) segment up 5% as Novel Ingredients’ revenue contribution more than offset natural disasters-related demand impacts, as well as pricing decline |
• | Delivered $1 million of new Phase 2 Operational Excellence cost savings in the areas of MRO, packaging and logistics; committed to achieve full target of $13 million |
• | Full year 2017 revenue guidance increased to reflect Novel’s contribution, and adjusted EBITDA maintained; both forecasted to be in line with prior year |
Quarter 3 | 2017 | 2016 | Variance $ | Variance % |
Sales | 184 | 186 | (2) | (1)% |
Net Income | 12 | 14 | (2) | (15)% |
Adj. Net Income | 15 | 15 | 1 | 5% |
EBITDA | 29 | 32 | (3) | (10)% |
Adj. EBITDA | 35 | 34 | 1 | 3% |
Diluted EPS | 0.58 | 0.69 | (0.10) | (15)% |
Adj. Diluted EPS | 0.78 | 0.75 | 0.03 | 5% |
Cash from Ops | 27 | 40 | (13) | (32)% |
Free Cash Flow | 19 | 33 | (14) | (43)% |
• | Q3 sales were broadly in line with prior year with higher sales in the FHN segment. |
• | Adjusted EBITDA of $35 million, a year-over-year increase of 3%, yielded a margin of 19%, up 79 basis points versus prior year. |
• | Operational Excellence initiatives continued to make a strong contribution with favorable input costs more than offsetting lower selling prices and driving year-over-year gross margin enhancement. |
• | GAAP Net income and EPS were adversely affected by purchase accounting and M&A related expenses. |
• | Cash flow was positive but down year-over-year due to large working capital improvements in Q3 2016. |
• | Capex was up $2 million versus the prior year quarter, mostly due to the Geismar deep well investments. The Geismar project is forecasted to come in under budget. |
Sales | 2017 $ Millions | 2016 $ Millions | Variance $ | Variance % |
FHN | 98 | 94 | 5 | 5% |
IS | 68 | 70 | (2) | (4)% |
Other | 18 | 22 | (4) | (20)% |
Total Innophos | 184 | 186 | (2) | (1)% |
Adj. EBITDA | 2017 $ Millions | 2016 $ Millions | 2017 Margin | 2016 Margin |
FHN | 19 | 20 | 19% | 22% |
IS | 14 | 11 | 21% | 15% |
Other | 2 | 3 | 11% | 15% |
Total IPHS | 35 | 34 | 19% | 18% |
• | FHN represented 53% of total Company sales and were up due to the contribution from Novel Ingredients which more than offset the 3% price decline, in line with expectations. |
• | FHN Q3 margins were strong at 19%, down from the year-ago quarter due primarily to customer mix. |
• | IS margins improved 628 basis points versus Q3 2016 primarily due to lower input costs. |
• | Other sales were down due to strong commodity fertilizer sales in the prior-year period. The tolling arrangement has resulted in margins ranging from 8-12% in 2017, avoiding margin volatility seen in prior years. |
YTD Quarter 3 | 2017 | 2016 | Variance $ | Variance % |
Sales | 529 | 558 | (29) | (5)% |
Net Income | 34 | 39 | (5) | (13)% |
Adj. Net Income | 38 | 40 | (1) | (4)% |
EBITDA | 83 | 91 | (8) | (9)% |
Adj. EBITDA | 93 | 95 | (3) | (3)% |
Diluted EPS | 1.70 | 1.96 | (0.26) | (13)% |
Adj. Diluted EPS | 1.94 | 2.03 | (0.09) | (4)% |
Cash from Ops | 47 | 82 | (35) | (43)% |
Free Cash Flow | 22 | 56 | (34) | (61)% |
• | YTD sales comparisons were adversely affected by H2 2016 pruning actions management took on lower margin, less differentiated applications. |
• | Adjusted EBITDA margin was up 43 basis points versus the prior year period due to lower input costs and Operational Excellence savings. |
• | Cash flow variances were unfavorable to prior year due to significant working capital reductions made in 2016. |
Sales | 2017 $ Millions | 2016 $ Millions | Variance $ | Variance % |
FHN | 282 | 287 | (5) | (2)% |
IS | 199 | 217 | (18) | (8)% |
Other | 49 | 54 | (6) | (10)% |
Total Innophos | 529 | 558 | (29) | (5)% |
Adj. EBITDA | 2017 $ Millions | 2016 $ Millions | 2017 Margin | 2016 Margin |
FHN | 53 | 61 | 19% | 21% |
IS | 34 | 31 | 17% | 14% |
Other | 5 | 3 | 11% | 6% |
Total IPHS | 93 | 95 | 18% | 17% |
• | FHN YTD sales were down due to unfavorable mix which had an adverse effect on average selling prices. |
• | IS YTD sales were primarily affected by H2 2016 pruning actions, resulting in improved adjusted EBITDA margin. |
• | Other sales were down versus prior year, but benefitted at the adjusted EBITDA margin level from the new tolling arrangement. |
INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES | |||||||
Condensed Consolidated Statement of Operations (Unaudited) | |||||||
(Dollars In thousands, except per share amounts or share amounts) | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2017 | 2016 | 2017 | 2016 | ||||
Net sales | $183,839 | $186,037 | $528,923 | $557,555 | |||
Cost of goods sold | 142,870 | 145,497 | 412,335 | 440,149 | |||
Gross profit | 40,969 | 40,540 | 116,588 | 117,406 | |||
Operating expenses: | |||||||
Selling, general and administrative | 20,894 | 17,749 | 60,069 | 51,716 | |||
Research & development expenses | 1,065 | 896 | 2,713 | 2,913 | |||
Total operating expenses | 21,959 | 18,645 | 62,782 | 54,629 | |||
Operating income | 19,010 | 21,895 | 53,806 | 62,777 | |||
Interest expense, net | 1,630 | 1,915 | 4,435 | 5,627 | |||
Foreign exchange loss (gain) | 100 | 110 | (35) | 426 | |||
Income before income taxes | 17,280 | 19,870 | 49,406 | 56,724 | |||
Provision for income taxes | 5,698 | 6,227 | 15,678 | 18,135 | |||
Net income | $11,582 | $13,643 | $33,728 | $38,589 | |||
Diluted Earnings Per Participating Share | $0.58 | $0.69 | $1.70 | $1.96 | |||
Diluted weighted average participating shares outstanding | 19,699,015 | 19,670,159 | 19,695,529 | 19,572,003 | |||
Dividends paid per share of common stock | $0.48 | $0.48 | $1.44 | $1.44 | |||
Dividends declared per share of common stock | $0.48 | $0.48 | $1.44 | $1.44 |
Adjusted EBITDA Reconciliation to Net Income | |||||||
(Dollars in thousands) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||
2017 | 2016 | 2017 | 2016 | ||||
Net Income | $11,582 | $13,643 | $33,728 | $38,589 | |||
Interest expense, net | 1,630 | 1,915 | 4,435 | 5,627 | |||
Provision for income taxes | 5,698 | 6,227 | 15,678 | 18,135 | |||
Depreciation & amortization | 9,878 | 10,043 | 29,009 | 28,607 | |||
EBITDA | 28,788 | 31,828 | 82,850 | 90,958 | |||
Adjustments | |||||||
Non-cash stock compensation | 711 | 758 | 2,997 | 2,584 | |||
Foreign exchange loss (gain) | 100 | 110 | (35) | 426 | |||
Severance/Restructuring expense (income) | 1,298 | 1,508 | 2,624 | 1,465 | |||
Inventory fair value adjustment | 1,395 | 0 | 1,395 | 0 | |||
M&A related costs | 2,954 | 0 | 2,954 | 0 | |||
Adjusted EBITDA | $35,246 | $34,204 | $92,785 | $95,433 | |||
Percent of Sales | 19.2% | 18.4% | 17.5% | 17.1% | |||
Adjusted Net Income Reconciliation to Net Income | |||||||
(Dollars in thousands, except EPS) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||
2017 | 2016 | 2017 | 2016 | ||||
Net Income (loss) | $11,582 | $13,643 | $33,728 | $38,589 | |||
Pre-tax Adjustments | |||||||
Foreign exchange loss (gain) | 100 | 110 | (35) | 426 | |||
Severance/Restructuring expense (income) | 1,298 | 1,508 | 2,624 | 1,465 | |||
Inventory fair value adjustment | 1,395 | 0 | 1,395 | 0 | |||
M&A related costs | 2,954 | 0 | 2,954 | 0 | |||
Total Pre-tax Adjustments | 5,747 | 1,618 | 6,938 | 1,891 | |||
Income tax effects on Adjustments | 1,895 | 507 | 2,241 | 582 | |||
Adjusted Net Income | $15,434 | $14,754 | $38,425 | $39,898 | |||
Adjusted Diluted Earnings Per Participating Share | $0.78 | $0.75 | $1.94 | $2.03 |
Segment Adjusted EBITDA Reconciliation to EBITDA | |||||||||
(Dollars in thousands) | Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | |||||||
FHN | IS | Other | Total | FHN | IS | Other | Total | ||
EBITDA | $16,442 | $13,491 | ($1,145) | $28,788 | $19,649 | $10,237 | $1,942 | $31,828 | |
Non-cash stock compensation | 402 | 282 | 27 | 711 | 440 | 318 | 0 | 758 | |
Foreign exchange loss (gain) | (71) | 0 | 171 | 100 | 0 | 0 | 110 | 110 | |
Severance/Restructuring exp.(inc.) | 631 | 667 | 0 | 1,298 | 195 | 0 | 1,313 | 1,508 | |
Inventory fair value adjustment | 1,395 | 0 | 0 | 1,395 | 0 | 0 | 0 | 0 | |
M&A related costs | 0 | 0 | 2,954 | 2,954 | 0 | 0 | 0 | 0 | |
Adjusted EBITDA | $18,799 | $14,440 | $2,007 | $35,246 | $20,284 | $10,555 | $3,365 | $34,204 | |
Nine Months Ended September 30, 2017 | Nine Months Ended September 30, 2016 | ||||||||
FHN | IS | Other | Total | FHN | IS | Other | Total | ||
EBITDA | $49,098 | $31,666 | $2,086 | $82,850 | $59,326 | $29,934 | $1,698 | $90,958 | |
Non-cash stock compensation | 1,696 | 1,187 | 114 | 2,997 | 1,479 | 1,033 | 72 | 2,584 | |
Foreign exchange loss (gain) | (101) | 0 | 66 | (35) | 0 | 0 | 426 | 426 | |
Severance/Restructuring exp.(inc.) | 1,296 | 1,302 | 26 | 2,624 | 340 | 0 | 1,125 | 1,465 | |
Inventory fair value adjustment | 1,395 | 0 | 0 | 1,395 | 0 | 0 | 0 | 0 | |
M&A related costs | 0 | 0 | 2,954 | 2,954 | 0 | 0 | 0 | 0 | |
Adjusted EBITDA | $53,384 | $34,155 | $5,246 | $92,785 | $61,145 | $30,967 | $3,321 | $95,433 | |
Cash From Operations Reconciliation to EBITDA | |||||||
(Dollars in thousands) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||
2017 | 2016 | 2017 | 2016 | ||||
EBITDA | $28,788 | $31,828 | $82,850 | $90,958 | |||
Operating Working Capital | 2,026 | 18,662 | (19,032) | 32,387 | |||
Taxes paid | (2,659) | (8,394) | (14,024) | (34,837) | |||
Interest paid | (1,606) | (1,800) | (4,291) | (5,298) | |||
All other including non-cash stock compensation and changes in other long-term assets and liabilities | 752 | (531) | 1,154 | (1,406) | |||
Net cash provided from operations | $27,301 | $39,765 | $46,657 | $81,804 | |||
Cash From Operations Reconciliation to Adjusted EBITDA | |||||||
(Dollars in thousands) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||
2017 | 2016 | 2017 | 2016 | ||||
Adjusted EBITDA | $35,246 | $34,204 | $92,785 | $95,433 | |||
Operating Working Capital | (3,721) | 17,044 | (25,970) | 30,496 | |||
Taxes paid | (2,659) | (8,394) | (14,024) | (34,837) | |||
Interest paid | (1,606) | (1,800) | (4,291) | (5,298) | |||
All other including changes in other long-term assets and liabilities | 41 | (1,289) | (1,843) | (3,990) | |||
Net cash provided from operations | $27,301 | $39,765 | $46,657 | $81,804 | |||
Free Cash Flow Reconciliation to Cash From Operations | |||||||
(Dollars in thousands) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||
2017 | 2016 | 2017 | 2016 | ||||
Cash From Operations | $27,301 | $39,765 | $46,657 | $81,804 | |||
Capital Expenditures | (8,573) | (7,137) | (24,650) | (25,675) | |||
Free Cash Flow | $18,728 | $32,628 | $22,007 | $56,129 | |||
Three Months Ended September 30, | Net Sales | ||||
2017 | 2016 | % Change | |||
Segment Net Sales | |||||
Food, Health and Nutrition | $98,276 | $93,586 | 5.0% | ||
Industrial Specialties | 67,682 | 70,124 | (3.5)% | ||
Other | 17,881 | 22,327 | (19.9)% | ||
Total | $183,839 | $186,037 | (1.2)% | ||
Segment EBITDA | |||||
Food, Health and Nutrition | $16,442 | $19,649 | |||
Industrial Specialties | 13,491 | 10,237 | |||
Other | (1,145) | 1,942 | |||
Total | $28,788 | $31,828 | |||
Segment EBITDA % of net sales | |||||
Food, Health and Nutrition | 16.7% | 21.0% | |||
Industrial Specialties | 19.9% | 14.6% | |||
Other | (6.4)% | 8.7% | |||
Total | 15.7% | 17.1% | |||
Depreciation and amortization expense | |||||
Food, Health and Nutrition | $5,664 | $5,802 | |||
Industrial Specialties | 3,488 | 2,957 | |||
Other | 727 | 1,284 | |||
Total | $9,879 | $10,043 | |||
Nine Months Ended September 30, | Net Sales | ||||
2017 | 2016 | % Change | |||
Segment Net Sales | |||||
Food, Health and Nutrition | $281,558 | $286,660 | (1.8)% | ||
Industrial Specialties | 198,721 | 216,591 | (8.3)% | ||
Other | 48,644 | 54,304 | (10.4)% | ||
Total | $528,923 | $557,555 | (5.1)% | ||
Segment EBITDA | |||||
Food, Health and Nutrition | $49,098 | $59,326 | |||
Industrial Specialties | 31,666 | 29,934 | |||
Other | 2,086 | 1,698 | |||
Total | $82,850 | $90,958 | |||
Segment EBITDA % of net sales | |||||
Food, Health and Nutrition | 17.4% | 20.7% | |||
Industrial Specialties | 15.9% | 13.8% | |||
Other | 4.3% | 3.1% | |||
Total | 15.7% | 16.3% | |||
Depreciation and amortization expense | |||||
Food, Health and Nutrition | $16,884 | $15,845 | |||
Industrial Specialties | 10,346 | 9,554 | |||
Other | 1,779 | 3,208 | |||
Total | $29,009 | $28,607 | |||
Three Months Ended September 30, 2017 | Nine Months Ended September 30, 2017 | ||||||||||
Reportable Segments | Price | Volume/Mix | Total | Price | Volume/Mix | Total | |||||
Food, Health and Nutrition | (3.4)% | 8.4% | 5.0% | (3.6)% | 1.8% | (1.8)% | |||||
Industrial Specialties | (4.8)% | 1.3% | (3.5)% | (6.1)% | (2.2)% | (8.3)% | |||||
Other | (7.9)% | (12.0)% | (19.9)% | (7.3)% | (3.1)% | (10.4)% | |||||
Total | (4.5)% | 3.3% | (1.2)% | (5.0)% | (0.1)% | (5.1)% | |||||
INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES | |||||
Condensed Consolidated Statements of Cash Flows (Unaudited) | |||||
(Dollars in thousands) | |||||
Nine Months Ended September 30, | |||||
2017 | 2016 | ||||
Cash flows provided from operating activities | |||||
Net income | 33,728 | 38,589 | |||
Adjustments to reconcile net income to net cash provided from | |||||
operating activities: | |||||
Depreciation and amortization | 29,009 | 28,607 | |||
Amortization of deferred financing charges | 322 | 505 | |||
Deferred income tax (benefit) provision | (14 | ) | 363 | ||
Gain on sale of building | (153 | ) | — | ||
Share-based compensation | 2,996 | 2,329 | |||
Changes in assets and liabilities: | |||||
Increase in accounts receivable | (13,024 | ) | (107 | ) | |
Decrease in inventories | 2,873 | 33,092 | |||
Decrease in other current assets | 151 | 2,102 | |||
Decrease in accounts payable | (7,566 | ) | (2,545 | ) | |
Increase (decrease) in other current liabilities | 1,666 | (16,145 | ) | ||
Changes in other long-term assets and liabilities | (3,331 | ) | (4,986 | ) | |
Net cash provided from operating activities | 46,657 | 81,804 | |||
Cash flows used for investing activities: | |||||
Capital expenditures | (24,650 | ) | (25,675 | ) | |
Proceeds from sale of building | 1,028 | — | |||
Acquisition of businesses, net of cash acquired | (124,984 | ) | — | ||
Net cash used for investing activities | (148,606 | ) | (25,675 | ) | |
Cash flows provided by (used for) financing activities: | |||||
Proceeds from exercise of stock options | — | 9 | |||
Long-term debt borrowings | 146,000 | 36,000 | |||
Long-term debt repayments | (36,000 | ) | (49,002 | ) | |
Excess tax (deficiency) benefit from exercise of stock options | — | (346 | ) | ||
Restricted stock forfeitures | (738 | ) | (331 | ) | |
Dividends paid | (28,095 | ) | (27,891 | ) | |
Net cash provided by (used for) financing activities | 81,167 | (41,561 | ) | ||
Effect of foreign exchange rate changes on cash and cash equivalents | 27 | 323 | |||
Net change in cash | (20,755 | ) | 14,891 | ||
Cash and cash equivalents at beginning of period | 53,487 | 17,905 | |||
Cash and cash equivalents at end of period | 32,732 | 32,796 |
INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES | |||
Condensed Consolidated Balance Sheets (Unaudited) | |||
(Dollars In thousands) | |||
September 30, 2017 | December 31, 2016 | ||
ASSETS | |||
Current assets: | |||
Cash and cash equivalents | $32,732 | $53,487 | |
Accounts receivable, net | 102,162 | 77,692 | |
Inventories | 148,536 | 128,295 | |
Other current assets | 25,479 | 23,894 | |
Total current assets | 308,909 | 283,368 | |
Property, plant and equipment, net | 211,601 | 205,459 | |
Goodwill | 139,459 | 84,373 | |
Intangibles and other assets, net | 110,797 | 69,811 | |
Total assets | $770,766 | $643,011 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||
Current liabilities: | |||
Current portion of capital leases | $4 | $0 | |
Accounts payable, trade and other | 59,969 | 51,611 | |
Other current liabilities | 47,945 | 43,605 | |
Total current liabilities | 107,918 | 95,216 | |
Long-term debt | 295,006 | 185,000 | |
Other long-term liabilities | 14,072 | 15,569 | |
Total stockholders’ equity | 353,770 | 347,226 | |
Total liabilities and stockholders’ equity | $770,766 | $643,011 | |