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Innophos Holdings, Inc. Reports Fourth-Quarter and Full-Year 2018 Results

CRANBURY, N.J.--(BUSINESS WIRE)--

Delivered Top and Bottom Line Results in Line with Expectations

Double Digit Year-on-Year Revenue Growth in 2018 Driven by FHN Acquisitions and Base Business Strength due to Pricing Actions

Significant Progress Made in Advancing Strategic Value Chain Initiative and Positioning Innophos to Improve Earnings

Innophos Holdings, Inc. (IPHS) today announced financial results for its fourth-quarter ended December 31, 2018.

Strategic Highlights

  • Contributions from price actions continued to offset input cost increases
  • Completed Phase II operational excellence that delivered 2018 cost reductions of $5 million
  • Significant progress made in advancing strategic value chain initiative including signing of strategic supply agreements, receipt of long lead-time government permits and progress in advancing capex investments
  • Switched to the new multi-source supply structure at the end of 2018 making a major step forward in the strategic value chain transition
  • On track to realize adjusted diluted EPS improvement of 10%, or $0.25 to $0.27 per share run rate by the end of 2019 from the value chain and manufacturing optimization program
  • Received $20 million Nutrien payment and completed $23 million sale leaseback in Q4

Financial Highlights

  • Full-year 2018 performance was in line with expectations with sales up 11% to $802 million, net income up 61% to $36 million, and Adjusted EBITDA up 4% to $125 million, compared with 2017
  • Q4 Sales of $193 million were flat compared with the prior-year quarter as stabilized base business and pricing power were partially offset by the planned discontinuation of a portion of low-margin nutrition trading business
  • Q4 GAAP Net Income of $5 million, or $0.24 per share, was 143% ahead of Q4 2017 due primarily to tax reform charges in the prior year quarter
  • Q4 Adjusted EBITDA of $30 million was up 10% and adjusted EBITDA margin was up 143 basis points year-over-year
  • Q4 Adjusted Diluted EPS increased 3% year-over-year to $0.54
  • Paid down $45 million in debt in Q4 resulting in net leverage of 2.2x
  • Average working capital for the quarter and the full year was 23% of annualized sales

Management Comments

“2018 was an important year for Innophos as we executed against our Vision 2022 strategic roadmap to transform the growth profile of the Company, prepare for a sustainably lower cost structure and develop science-backed solutions that better serve our customers and enhance our position in attractive Food, Health and Nutrition end-markets,” said Kim Ann Mink, Ph.D., Chairman, President and Chief Executive Officer. “Notably, before the end of the year, we achieved a major milestone with our strategic value chain program as our Geismar facility was switched to the new supply chain structure and is now taking intermediate product from internal as well as external sources per the new supply agreements that were completed in 2018.

“Our Q4 financial performance was in line with our expectations on both the top and bottom line as we capitalized on the stability of our base business, leveraged our pricing power and reduced operating expense. On a full-year basis, we grew sales by 11%, GAAP Net Income by 61% and adjusted EBITDA by 4%. In addition, by remaining disciplined with the management of our liquidity position, we further reduced our debt position and ended the year with net leverage of 2.2x.

“We have continued to take actions to proactively manage near-term market dynamics while simultaneously advancing our key initiatives under our Strategic Pillars,” said Mink. “Our priorities this year are to continue executing against the Strategic Pillar key initiatives. These include completing the transition of the multi-faceted strategic value chain repositioning, continuing to leverage our value selling to capture price increases, and delivering wins through our SPARC new product development program to drive organic growth. Further, we remain disciplined in our evaluation of M&A opportunities that meet our financial and strategic criteria."

Q4 2018 Results

Variance $ and Variance % in the following tables and comments may not foot due to rounding

$ Millions except EPS

 
Quarter 4   2018   2017   Variance $   Variance %
Sales       193           193       0   0%
Net Income       5           (11)       16   143%
Adj. Net Income       11           10       0   4%
EBITDA       23           21       2   11%
Adj. EBITDA       30           27       3   10%
Diluted EPS       0.24           (0.58)       0.82   142%
Adj. Diluted EPS       0.54           0.52       0.02   3%
Cash from Ops       43           27       15   56%
Free Cash Flow       52           17       35   204%
 
  • Sales were in line with the prior year as the 3% increase in the base business was offset by a decrease due to the previously communicated decision to discontinue a portion of low-margin nutrition trading business
  • GAAP Net Income of $5 million, and diluted EPS of $0.24, were up versus the prior year due to tax reform provisions taken in the prior-year period
  • The supply imbalance in Mexico’s natural gas network that was communicated in the Company's Q3 release has continued and resulted in sizable rate increases. Supply to the Southern part of the country, where Innophos’ Coatzacoalcos facility is located, has been impacted as a result of low levels of storage and pipeline investments falling behind schedule. The impact in the quarter was $2 million, after $1 million of adjustments for non-GAAP purposes.
  • Adjusted EBITDA of $30 million was up 10% and Adjusted EBITDA margin of 15% was up 143 basis points compared with Q4 2017, which included a plant maintenance outage
  • Adjusted diluted EPS of $0.54 was up $0.02 year over year as the increase in EBITDA was largely offset by a $0.07 impact from higher tax rates
  • Free Cash Flow was $52 million, mostly driven by the receipt of the $20 million Nutrien payment and $23 million from the sale leaseback transaction completed in Q4 2018

Q4 2018 Segment Financials

                 
Q4 Sales   2018 $ Millions   2017 $ Millions   Variance $   Variance %
FHN   113   116   (3)   -2%
IS   65   64   1   1%
Other   15   13   2   11%
Total IPHS   193   193   0   0%
       
                 
Q4 Adj. EBITDA   2018 $ Millions   2017 $ Millions   2018 $ Margin   2017 $ Margin
FHN   17   22   15%   19%
IS   10   3   15%   4%
Other   3   3   22%   22%
Total IPHS   30   27   15%   14%

Note: See Adjusted EBITDA reconciliation to EBITDA in the financial tables that follow

 
  • FHN sales declined 2% year over year (price +5%, volume -8%) as the strength in the base portfolio was offset by the Company’s decision to discontinue a portion of low-margin nutrition trading business; adjusted EBITDA margins were sequentially similar to the past two quarters but 377 bps below 2017 due to continued increases in freight market rates and other input costs
  • IS sales were up 1% year over year (price +6%, volume -5%); adjusted EBITDA margins were up markedly versus the prior-year quarter due to the improved selling prices in 2018 and maintenance outage expense in Q4 2017
  • Other sales were up 11% (price +22%, volume -11%) due primarily to higher co-product prices; adjusted EBITDA margins were 22%, up 90 bps from prior year

Year-to-Date Results

Variance $ and Variance % in the following tables and comments may not foot due to rounding

$ Millions except EPS

 
YTD Q4   2018   2017   Variance $   Variance %
Sales       802           722       80   11%
Net Income       36           22       14   61%
Adj. Net Income       45           49       (4)   (7)%
EBITDA       102           104       (2)   (2)%
Adj. EBITDA       125           120       5   4%
Diluted EPS       1.82           1.13       0.69   60%
Adj. Diluted EPS       2.28           2.46       (0.18)   (7)%
Cash from Ops       74           74       0   (1)%
Free Cash Flow       40           39       1   1%
 
  • Sales improved 11% reflecting the benefit of acquisitions and proactive pricing programs
  • GAAP Net Income of $36 million was up $14 million due primarily to tax reform charges in the prior year
  • Adjusted EBITDA grew 4% due to contributions from acquisitions as well as base business price increases which offset input cost increases
  • Average working capital was 23% of annualized sales

YTD Quarter 4 Segment Financials

 
YTD Q4 Segment Sales   2018 $ Millions   2017 $ Millions   Variance $   Variance %
FHN   480   397   83   21%
IS   261   263   (2)   (1)%
Other   61   62   (1)   (2)%
Total IPHS   802   722   80   11%
 
 
YTD Q4 Segment Adj. EBITDA   2018 $ Millions   2017 $ Millions   2018 $ Margin   2017 $ Margin
FHN   73   75   15%   19%
IS   44   37   17%   14%
Other   8   8   13%   13%
Total IPHS   125   120   16%   17%

Note: See Adjusted EBITDA reconciliation to EBITDA in the financial tables that follow

 
  • FHN represented 60% of total Company sales and was up 21% year over year (price +3%, volume +18%) due to the contribution from acquisitions and strength of the base portfolio; adjusted EBITDA margins were 362 bps below 2017 due to the dilutive effects from lower-margin acquisitions, isolated operational issues in Q3 and higher freight costs
  • IS sales were down 1% with selling price increases nearly offsetting volume decreases (price +5%, volume -5%); adjusted EBITDA margins were up 270 bps due to effective price increases
  • Other sales were down 2% (price +10%, volume -11%) due primarily to lower level of co-product sales. Other adjusted EBITDA margins were 13%

Full Year 2019 Outlook

Overall market conditions and the competitive landscape in 2019 are expected to be similar to 2018.

Revenues are expected to be largely in line with 2018 revenue of $802 million and approximately equally split between H1 and H2. The underlying base business is expected to remain stable.

  • Positive year-over-year contributors to 2019 revenue are:
    • Selling price increases with a particular focus on Food, Health and Nutrition,
    • New product development wins, and
    • New business gains.
  • These gains are expected to be offset by:
    • The discontinuation of lower-margin FHN nutrition trading business in 2018,
    • Lower co-product sales in the Other segment due to efficiency improvements delivered from the strategic value chain initiative, and
    • Indirect tariffs pressure from competition redirecting mostly technical grade product to international markets. The Company anticipates limited direct impact on its North American sales.

Adjusted EBITDA is expected to grow 1-3% in 2019 from $125 million in 2018, with phasing in the range of 42-45% in H1 and 55-58% in H2.

  • Positive year-over-year contributions to 2019 earnings are expected from:
    • Selling price increases,
    • Margin contribution from business gains and new product development, and
    • The strategic value chain program, which is on track to realize adjusted diluted EPS improvement of 10%, or $0.25 to $0.27 per share run rate by the end of 2019.
  • These gains are expected to be partly offset by:
    • Input cost increases for raw materials and freight, and
    • Higher costs related to the Mexico energy supply shortages that are expected through H1 2019. The anticipated non-recurring portion is expected to be adjusted for non-GAAP purposes.

From a GAAP and cash perspective, the expectation is that costs will be higher during H1. The anticipated non-recurring portion is expected to be adjusted for non-GAAP reporting purposes such as value chain transition expense and Mexico natural gas supply adjustment charges.

Capital investments are expected to be in line with 2018 to finalize the value chain and manufacturing optimization program that commenced in 2018. Average working capital is estimated to remain in line with 2018.

The Company expects its effective tax rate to operate in the 28-32% range.

Conference Call

Innophos will host its fourth-quarter 2018 conference call today February 20, 2019 at 9:00 am ET to discuss its earnings results. Those who wish to listen to the conference call webcast should visit the “Investors” section of the Company’s website at www.innophos.com. The live call also can be accessed by dialing (877) 604-1612 (U.S.) or (201) 389-0883 (international). No passcode is required. Please dial in approximately 15 minutes ahead of the start time to ensure timely entry to the call. The Q4 2018 earnings call presentation will be made available on the Company’s website the morning of the call. If you are unable to listen to the live call, the webcast will be archived on the Company’s website. In addition, a replay of the call will be available between February 20 and March 6, 2019. The replay is accessible by dialing (877) 660-6853 (U.S.) or (201) 612-7415 (international) and entering the Conference ID number 13686718.

Additional information on Innophos’ fourth quarter 2018 results can also be found on the Company’s website.

About the Company

Innophos is a leading international producer of specialty ingredient solutions that deliver far-reaching, versatile benefits for the food, health, nutrition and industrial markets. We leverage our expertise in the science and technology of blending and formulating phosphate, mineral, enzyme and botanical based ingredients to help our customers offer products that are tasty, healthy, nutritious and economical. Headquartered in Cranbury, New Jersey, Innophos has manufacturing operations across the United States, in Canada, Mexico and China. For more information, please visit www.innophos.com. 'IPHS-G'

Financial Tables Follow

Safe Harbor for Forward-Looking and Cautionary Statements

This press release contains or may contain 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. The Company intends these forward-looking statements to be covered by the safe harbor provisions for such statements. Statements made in this press release that relate to our future performance or future financial results or other future events (which may be identified by such terms as “expect”, “estimate”, “anticipate”, “assume”, “believe”, “plan”, “intend’, “may”, “will”, “should”, “outlook”, “guidance”, “target”, “opportunity”, “potential” or similar terms and variations or the negative thereof) are forward-looking statements, including the Company’s expectations regarding the business environment and the Company’s overall guidance regarding future performance and growth. These statements are based on our current beliefs and expectations and are subject to significant risks and uncertainties. Actual results may materially differ from the expectations expressed in or implied by these forward-looking statements. Factors that could cause the Company’s actual results to differ materially include, but are not limited to: (1) global macroeconomic conditions and trends; (2) the behavior of financial markets, including fluctuations in foreign currencies, interest rates and turmoil in capital markets; (3) changes in regulatory controls regarding tariffs, duties, taxes and income tax rates; (4) the Company’s ability to implement and refine its Vision 2022 strategic roadmap; (5) the Company’s ability to successfully identify and complete acquisitions in line with its Vision 2022 strategic roadmap and effectively operate and integrate acquired businesses to realize the anticipated benefits of those acquisitions; (6) the Company’s ability to realize expected cost savings and efficiencies from its performance improvement and other optimization initiatives; (7) the Company’s ability to effectively compete in its markets, and to successfully develop new and competitive products that appeal to its customers; (8) changes in consumer preferences and demand for the Company’s products or a decline in consumer confidence and spending; (9) the Company’s ability to benefit from its investments in assets and human capital and the ability to complete projects successfully and on budget; (10) economic, regulatory and political risks associated with the Company’s international operations, most notably Mexico and China; (11) volatility and increases in the price of raw materials, energy and transportation, and fluctuations in the quality and availability of raw materials and process aids; (12) the impact of a disruption in the Company’s supply chain or its relationship with its suppliers; (13) the Company’s ability to comply with, and the costs associated with compliance with, U.S. and foreign environmental protection laws and (14) the Company’s ability to meet quality and regulatory standards in the various jurisdictions in which it has operations or conducts business. We caution you to consider the important risks and other factors as set forth in the forward-looking statements section and in Item 1A Risk Factors in our most recent Annual Report on Form 10-K, as amended by subsequent reports on Forms 10-Q and 8-K. We do not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.

Summary Profit & Loss Statement

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Operations (Unaudited)
(Dollars in thousands, except per share amounts or share amounts)
 
 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

2018   2017

2018

  2017
Net Sales $192,744 $193,100 $801,842 $722,024
Cost of goods sold 163,192   160,659   658,451   572,995  
Gross profit 29,552   32,441   143,391   149,029  
Operating expenses:
Selling, general and administrative 16,553 22,190 81,101 82,301
Research & development expenses 1,087   1,020   5,076   3,733  
Total operating expenses 17,640   23,210   86,177   86,034  
Operating income 11,912 9,231 57,214 62,995
Interest expense, net 3,993 2,572 13,523 7,008
Foreign exchange loss (gain) 119 (543 ) 528 (578 )
Other income (26 ) (30 ) (69 ) (72 )
Income before income taxes 7,826 7,232 43,232 56,637
(Benefit) provision for income taxes 3,006   18,515   7,161   34,192  
Net income $4,820   $(11,283 ) $36,071   $22,445  
Diluted Earnings Per Participating Share $0.24 $(0.58 ) $1.82 $1.13
 
Diluted weighted average participating shares outstanding 19,671,101 19,530,339 19,760,259 19,733,410
 
Dividends paid per share of common stock $0.48 $0.48 $1.92 $1.92
 
Dividends declared per share of common stock $0.48 $0.48 $1.92 $1.92
 

Adjusted Net Income Reconciliation to Net Income

(Dollars in thousands, except EPS)  

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

2018   2017 2018   2017
Net Income $4,820 $(11,283 ) $36,071 $22,445

Pre-tax Adjustments

Foreign exchange loss (gain) 119 (543 ) 528 (578 )
Severance/Restructuring expense (51 ) 358 2,530 2,982
Inventory fair value adjustment 0 2,905 0 4,300
M&A related costs 1,212 2,325 2,194 5,279
Mexico natural gas supply imbalance charges 970 0 2,827 0
Value chain transition 3,002 0 9,880 0
Other 40 0 40 0
D&A - mining concession & value chain 2,194   0   2,194   0  
Total Pre-Tax Adjustments 7,486 5,045 20,193 11,983
Income tax effects on Adjustments 2,383 857 5,831 3,097
Tax reform and foreign exchange adjustments 660   17,286   (5,322 ) 17,286  
Adjusted Net Income $10,583   $10,191   $45,111   $48,617  
Adjusted Diluted Earnings Per Participating Share $0.54 $0.52 $2.28 $2.46
 

Adjusted EBITDA Reconciliation to Net Income

(Dollars in thousands)  

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

2018   2017 2018   2017
Net Income $4,820 ($11,283 ) $36,071 $22,445
Interest expense, net 3,993 2,572 13,523 7,008
Provision for income taxes 3,006 18,515 7,161 34,192
Depreciation & amortization 11,614   11,395   44,931   40,404  
EBITDA 23,433 21,199 101,686 104,049

Adjustments

Non-cash stock compensation 1,044 827 5,187 3,823
Foreign exchange loss (gain) 119 (543 ) 528 (578 )
Severance/Restructuring expense (51 ) 358 2,530 2,982
Inventory fair value adjustment 0 2,905 0 4,300
M&A related costs 1,212 2,325 2,194 5,279
Mexico natural gas supply imbalance charges 970 0 2,827 0
Value chain transition 3,002 0 9,880 0
Other 40   0   40   0  
Adjusted EBITDA $29,769   $27,071   $124,872   $119,855  
Percent of Sales 15.4 % 14.0 % 15.6 % 16.6 %
 

Segment Adjusted EBITDA Reconciliation to EBITDA

(Dollars in thousands)   Three Months Ended   Three Months Ended
December 31, 2018 December 31, 2017
FHN   IS   Other   Total FHN   IS   Other   Total
EBITDA $13,297 $7,351 $2,783 $23,431 $18,058 $2,167 $973 $21,198
Non-cash stock compensation 591 414 40 1,045 468 327 31 826
Foreign exchange loss (gain) (38 ) 157 119 (76 ) (467 ) (543 )
Severance/Restructuring exp(inc) (2 ) (43 ) (7 ) (52 ) 209 132 17 358
Inventory fair value adjustment

 

2,905 2,905
M&A related costs 1,212 1,212 2,325 2,325
Mexico natural gas supply adj. 216 455 299 970
Value chain transition 1,493 1,442 66 3,001
Other 22  

 

15   3   40        
Adjusted EBITDA $16,792   $9,634   $3,341   $29,767   $21,564   $2,626 $2,879   $27,069  
 
Twelve Months Ended Twelve Months Ended
December 31, 2018 December 31, 2017
FHN IS Other Total FHN IS Other Total
EBITDA $61,791 $34,124 $5,771 $101,686 $67,156 $33,833 $3,060 $104,049
Non-cash stock compensation 2,936 2,054 197 5,187 2,164 1,514 145 3,823
Foreign exchange loss (gain) 38 490 528 (176 ) (402 ) (578 )
Severance/Restructuring exp(inc) 1,526 879 125 2,530 1,504 1,435 43 2,982
Inventory fair value adjustment 4,300 4,300
M&A related costs 2,180 14 2,194 5,279 5,279
Mexico natural gas supply adj. 630 1,326 871 2,827
Value chain transition 4,068 5,127 685 9,880
Other 22   15   3   40        
Adjusted EBITDA $73,191   $43,525   $8,156   $124,872   $74,948   $36,782 $8,125   $119,855  
 

Segment Reporting

 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

Segment Net Sales 2018   2017 2018   2017
Food, Health and Nutrition $113,008 $115,740 $480,166 $397,298
Industrial Specialties 64,838 63,982 260,605 262,704
Other 14,899   13,378   61,071   62,022  
Total $192,745   $193,100   $801,842   $722,024  
Net Sales % change

 

 

 

 

 

 

 

 

Food, Health and Nutrition (2.4 )% 20.9 %
Industrial Specialties 1.3 % (0.8 )%
Other 11.4 % (1.5 )%
Total (0.2 )% 11.1 %
Segment EBITDA
Food, Health and Nutrition $13,297 $18,058 $61,791 $67,156
Industrial Specialties 7,351 2,167 34,124 33,833
Other 2,783   973   5,771   3,060  
Total $23,431   $21,198   $101,686   $104,049  
Segment EBITDA % of net sales
Food, Health and Nutrition 11.8 % 15.6 % 12.9 % 16.9 %
Industrial Specialties 11.3 % 3.4 % 13.1 % 12.9 %
Other 18.7 % 7.3 % 9.4 % 4.9 %
Total 12.2 % 11.0 % 12.7 % 14.4 %
Depreciation and amortization expense
Food, Health and Nutrition $7,018 $7,328 $28,695 $24,212
Industrial Specialties 4,090 3,517 14,347 13,863
Other 506   550   1,889   2,329  
Total $11,614   $11,395   $44,931   $40,404  
 

Price / Volume

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/mix variance is calculated as the total sales variance minus the selling price variance. The following table illustrates the percentage changes in net sales by reportable segments compared with the same period of the prior year, including the effect of selling price and volume/mix changes upon revenue:

  Three Months Ended   Twelve Months Ended
December 31, 2018 December 31, 2018
Reportable Segments Price   Vol/Mix   Total Price   Vol/Mix   Total
Food, Health and Nutrition   5.4 %   (7.8 )%     (2.4 )%   2.6 %   18.3 %     20.9 %
Industrial Specialties 6.5 % (5.2 )% 1.3 % 4.6 % (5.4 )% (0.8 )%
Other   22.0 %   (10.6 )%     11.4 %   9.6 %   (11.1 )%     (1.5 )%
Total   6.9 %   (7.1 )%     (0.2 )%   3.9 %   7.2 %     11.1 %
 

Summary Cash Flow Statement

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Cash Flows (Unaudited)
(Dollars in thousands)
 
 

Twelve Months Ended
December 31,

2018   2017
Cash flows provided from (used for) operating activities
Net income $   36,071 $   22,445
Adjustments to reconcile net income to net cash provided from (used for) operating activities:
Depreciation and amortization 44,931 40,404
Amortization of deferred financing charges 430 429
Deferred income tax (benefit) provision 10,352 10,411
Gain on sale of building (153 )
Share-based compensation 5,187 3,823
Changes in assets and liabilities:
Proceeds from vendor contract termination 21,250
(Increase) decrease in accounts receivable (1,744 ) (11,020 )
(Increase) decrease in inventories (34,518 ) 5,749
(Increase) decrease in other current assets 1,273 1,426
Increase (decrease) in accounts payable 9,471 (3,497 )
Increase (decrease) in other current liabilities (3,411 ) (5,751 )
Changes in other long-term assets and liabilities     (15,680 )     9,723  
Net cash provided from (used for) operating activities     73,612       73,989  
Cash flows provided by (used for) investing activities:
Capital expenditures (56,745 ) (34,859 )
Proceeds from sale leaseback 22,775
Proceeds from sale of building 1,028
Acquisition of businesses, net of cash acquired           (150,999 )
Net cash provided by (used for) investing activities     (33,970 )     (184,830 )
Cash flows provided by (used for) financing activities:
Proceeds from exercise of stock options 205
Long-term debt borrowings 86,000 204,000
Long-term debt repayments (96,000 ) (79,000 )
Restricted stock forfeitures (616 ) (1,195 )
Dividends paid     (37,611 )     (37,468 )
Net cash provided by (used for) financing activities     (48,227 )     86,542  
Effect of foreign exchange rate changes on cash and cash equivalents           (406 )
Net change in cash (8,585 ) (24,705 )
Cash and cash equivalents at beginning of period     28,782       53,487  
Cash and cash equivalents at end of period $   20,197   $   28,782  
 

Cash From Operations Reconciliation to EBITDA

(Dollars in thousands)  

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

2018   2017 2018   2017
EBITDA $   23,433 $   21,199 $   101,686 $   104,049
Operating Working Capital 13,459 16,821 (12,016 ) (2,974 )
Taxes paid (1,766 ) (866 ) (18,356 ) (14,890 )
Interest paid (3,972 ) (2,462 ) (14,370 ) (6,753 )
All other including non-cash stock compensation and changes in other long-term assets and liabilities     11,591       (7,360 )     16,668       (5,443 )
Net cash provided from operation $   42,745   $   27,332   $   73,612   $   73,989  
 

Cash From Operations Reconciliation to Adjusted EBITDA

(Dollars in thousands)  

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

2018   2017 2018   2017
Adjusted EBITDA $   29,769 $   27,071 $   124,872 $   119,855
Operating Working Capital 8,167 11,776 (30,015 ) (14,957 )
Taxes paid (1,766 ) (866 ) (18,356 ) (14,890 )
Interest paid (3,972 ) (2,462 ) (14,370 ) (6,753 )
All other including non-cash stock compensation and changes in other long-term assets and liabilities     10,547       (8,187 )     11,481       (9,266 )
Net cash provided from operation $   42,745   $   27,332   $   73,612   $   73,989  

Free Cash Flow Reconciliation to Cash From Operations

(Dollars in thousands)  

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

2018   2017 2018   2017
Cash from Operations $   42,745 $   27,332 $   73,612 $   73,989
Capital Expenditures (13,442 ) (10,209 ) (56,745 ) (34,859 )
Proceeds from sale leaseback     22,775       0       22,775       0  
Free Cash Flow $   52,078   $   17,123   $   39,642   $   39,130  
 

Summary Balance Sheets

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
 
 

December 31,
2018

 

December 31,
2017

ASSETS
Current assets:
Cash and cash equivalents $  

20,197

 

$  

28,782

 

Accounts receivable, net 102,564 100,820
Inventories 180,203 145,685
Other current assets     23,654       24,969  
Total current assets 326,618 300,256
Property, plant and equipment, net 240,235 219,297
Goodwill 152,767 152,700
Intangibles and other assets, net     95,094       112,916  
Total assets $   814,714   $   785,169  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capital leases $ 0 $ 4
Accounts payable, trade and other 80,007 70,445
Other current liabilities     49,993       43,084  
Total current liabilities 130,000 113,533
Long-term debt 300,000 310,005
Other long-term liabilities 49,199 28,072
Total stockholders' equity     335,515       333,559  
Total liabilities and stockholders' equity $   814,714   $   785,169  
 

Additional Information

Net debt is a supplemental financial measure that is not required by, or presented in accordance with, US GAAP. 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.

Free cash flow is a supplemental financial measure that is not required by, or presented in accordance with, US GAAP. The Company believes free cash flow is helpful in analyzing the cash flow generating capability of the business and as a performance measure for purposes of presentation in this release. The Company defines free cash flow as net cash provided from operating activities plus cash used for capital expenditures plus cash received from sale leaseback transactions.

EBITDA, adjusted EBITDA, adjusted net income and adjusted diluted EPS are supplemental financial measures that are not required by, or presented in accordance with, US GAAP. The Company believes EBITDA and adjusted EBITDA are helpful in analyzing the cash flow generating capability of the business and as performance measures for purposes of presentation in this release.

Net Working Capital is a supplemental financial measure that is not required by, or presented in accordance with, US GAAP. The Company believes net working capital is helpful in analyzing the effects on the cash flow generating capability of the business and as a performance measure for purposes of presentation in this release. The Company defines net working capital as total current assets less cash and cash equivalents less total current liabilities plus current portion of capital leases.

Operating Working Capital is a supplemental financial measure that is not required by, or presented in accordance with, US GAAP. The Company believes operating working capital is helpful in analyzing the effects on the cash flow generating capability of the business and as a performance measure for purposes of presentation in this release. The Company defines operating working capital as net working capital less taxes less interest.

Innophos is not able to provide a reconciliation of its expectation for adjusted earnings to 2019 GAAP net income given the dynamic nature of the strategic value chain repositioning program expenses and potential Mexico energy charges that may be incurred. In addition, Innophos is not able to provide a reconciliation of its 2022 expectation for adjusted EBITDA margin to GAAP net income due to the number of variables in the projected EBITDA margin for 2022. As a result we are currently unable to quantify accurately certain amounts that would be required to be included in GAAP net income for 2019 or 2022 or the individual adjustments for such reconciliation. In addition, we believe such reconciliation would imply a degree of precision that would be confusing or misleading to investors.

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