GAAP Diluted EPS $0.88 vs.
$0.30
Excluding Special Items, Diluted EPS
$0.74 vs. $0.67
Innospec Inc. (Nasdaq:IOSP) today announced its financial results
for the first quarter ended March 31, 2011.
Total net sales for the quarter were $185.3 million, up 13% from
$163.5 million in the corresponding period last year. Net income
was $21.5 million, or $0.88 per diluted share, up sharply from $7.4
million, or $0.30 per diluted share, a year ago. EBITDA (earnings
before interest, taxes, depreciation, amortization and impairment)
for the quarter was $33.5 million, more than double the $15.4
million a year ago.
Results for the first quarter include after-tax foreign exchange
gains of $4.2 million, or $0.17 per diluted share. The results also
include other special items, which are summarized in the table
below. For the first quarter of 2011, these items had a combined
positive impact on net income of $3.3 million, or $0.14 per diluted
share; a year ago, special items reduced net income by $9.2
million, or $0.37 per diluted share. Excluding these items, diluted
earnings per share for the first quarter of 2011 were $0.74, a 10%
increase from $0.67 a year ago.
EBITDA and net income excluding special items, and related per
share amounts, are non-GAAP financial measures that are defined and
reconciled with GAAP results herein and in the schedules below.
| |
Quarter ended
March 31, 2011 |
Quarter ended
March 31, 2010 |
| |
|
|
|
|
| |
After-tax (in millions) |
Per diluted share |
After-tax (in millions) |
Per diluted share |
| |
|
|
|
|
| Net income |
$ 21.5 |
$ 0.88 |
$ 7.4 |
$ 0.30 |
| |
|
|
|
|
| Foreign exchange (gains)/losses |
(4.2) |
(0.17) |
0.2 |
0.01 |
| Civil complaint legal and professional
expenses |
0.8 |
0.03 |
-- |
-- |
| Pension charge |
0.1 |
-- |
2.9 |
0.12 |
| Restructuring charge |
-- |
-- |
6.2 |
0.24 |
| OFFP/FCPA settlement accrual |
-- |
-- |
(3.0) |
(0.12) |
| OFFP/FCPA legal and professional
expenses |
-- |
-- |
2.9 |
0.12 |
| |
(3.3) |
(0.14) |
9.2 |
0.37 |
| |
|
|
|
|
| Net income excluding special
items |
$ 18.2 |
$ 0.74 |
$ 16.6 |
$ 0.67 |
"We are very pleased to report a 10% increase in our first
quarter earnings excluding special items – an excellent performance
in light of the margin pressure we're facing from higher raw
material costs," said Patrick Williams, President and Chief
Executive Officer. "Fuel Specialties continues to deliver solid
results in a very challenging environment, while Active Chemicals
turned in its best quarter ever, with sales up 24% and operating
income nearly double a year ago."
Fuel Specialties' net sales for the quarter were $127.1 million,
a 13% increase from $112.8 million in last year's first quarter. By
region, sales were up 11% in the Americas, 10% in Europe, Middle
East and Africa (EMEA), and 16% in Asia-Pacific. The segment's
gross margin was 28.9%, compared with 33.7% a year ago. Its
operating income for the quarter was $22.3 million, a 1% increase
from $22.1 million a year ago.
Net sales in Active Chemicals were $46.5 million, up 24% from
$37.4 million a year ago. By region, sales increased 23% in the
Americas, 29% in EMEA, and 13% in Asia-Pacific. Active Chemicals'
gross margin was 25.6%, compared with 21.9% a year ago. The
segment's operating income was $7.6 million, up 85% from $4.1
million in last year's first quarter.
In Octane Additives, net sales for the quarter were $11.7
million, down 12% from $13.3 million a year ago. The segment's
gross margin was 42.7%, compared with 45.1% a year ago. Operating
income for the quarter was $2.2 million, including a $1.0 million
accrual for civil complaint legal and professional expenses; a year
ago, operating income of $6.7 million included a $3.0 million
benefit from an adjustment to the settlement accrual related to the
United Nations Oil for Food Program and FCPA investigations.
Corporate costs for the quarter were $7.5 million, compared with
$9.0 million a year ago which included a $3.9 million pre-tax
charge for the expected cost of the Company's new external
compliance monitor. The increase excluding that item primarily
reflects higher accruals for share based compensation expense,
driven by the outstanding performance in Innospec's share price
during the quarter. As expected, the charge related to the
Company's pension plan declined sharply to $0.1 million from $3.8
million (pre-tax) a year ago. The effective tax rate for the
quarter was 24.0%, compared to 26.0% in last year's first
quarter.
Net cash generated from operations was $5.7 million for the
quarter, primarily due to continued strong operating income, partly
offset by increased working capital requirements. As of March 31,
2011, Innospec had $94.2 million in cash and cash equivalents,
$67.2 million more than its total debt of $27.0 million. The
Company repurchased 116,820 Innospec shares during the quarter
under its Rule 10b5-1 repurchase plan.
Mr. Williams concluded, "Our core growth businesses in Fuel
Specialties and Active Chemicals continue to perform well, and are
strategically positioned to deliver much better results when raw
material costs begin to stabilize – or even fall. We are cognizant
that our customers are hurting as well from raw material cost
pressure – we remain committed to delivering the best
technology/customer service at the best price through our customer
focused innovation and research programs. With our strong cash flow
and highly liquid balance sheet, we have the financial flexibility
to drive significant long-term growth for our stockholders, both
organically and through potential acquisitions."
Use of Non-GAAP Financial Measures
The information presented in this press release includes
financial measures that are not calculated or presented in
accordance with Generally Accepted Accounting Principles in the
United States (GAAP). These non-GAAP financial measures comprise
EBITDA and net income excluding special items, and related per
share amounts. EBITDA is net income per our consolidated financial
statements adjusted for the exclusion of charges for interest
expense (net), income taxes, depreciation, amortization and
impairment of Octane Additives business goodwill. Net income
excluding special items is net income per our consolidated
financial statements adjusted for the exclusion of foreign exchange
(gains)/losses, civil complaint legal and professional expenses,
pension charge, restructuring charge, OFFP/FCPA settlement accrual
and OFFP/FCPA legal and professional expenses. Reconciliations of
these non-GAAP financial measures to their most directly comparable
GAAP financial measures are provided herein and in the schedules
below. The Company believes that such non-GAAP financial measures
provide useful information to investors and may assist them in
evaluating the Company's underlying performance and identifying
operating trends. In addition, management uses these non-GAAP
financial measures internally to allocate resources and evaluate
the performance of the Company's operations. While the Company
believes that such measures are useful in evaluating the Company's
performance, investors should not consider them to be a substitute
for financial measures prepared in accordance with GAAP. In
addition, these non-GAAP financial measures may differ from
similarly-titled non-GAAP financial measures used by other
companies and do not provide a comparable view of the Company's
performance relative to other companies in similar industries.
Management believes the most directly comparable GAAP financial
measure is GAAP net income and has provided a reconciliation of
EBITDA and net income excluding special items, and related per
share amounts, to GAAP net income herein and in the schedules
below.
About Innospec Inc.
Innospec Inc. is an international specialty chemicals company
with approximately 850 employees in 20 countries. Innospec
manufactures and supplies a wide range of specialty chemicals to
markets in the Americas, Europe, the Middle East, Africa and
Asia-Pacific. Innospec's Fuel Specialties business specializes in
manufacturing and supplying the fuel additives that help improve
fuel efficiency, boost engine performance and reduce harmful
emissions. Innospec's Active Chemicals business provides effective
technology-based solutions for our customers' processes or products
focused in the Personal Care; Household, Industrial &
Institutional; and Fragrance Ingredients markets. Innospec's Octane
Additives business is the world's only producer of tetra ethyl
lead.
Forward-Looking Statements
This press release contains certain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act
of 1995. All statements other than statements of historical facts
included or incorporated herein may constitute forward-looking
statements. Such forward-looking statements include statements
(covered by words like "expects," "anticipates," "may," "believes"
or similar words or expressions), for example, which relate to
operating performance, events or developments that we expect or
anticipate will or may occur in the future (including, without
limitation, any of the Company's guidance in respect of sales,
gross margins, pension liabilities and charges, net income, growth
potential and other measures of financial performance). Although
forward-looking statements are believed by management to be
reasonable when made, caution should be exercised not to place
undue reliance on such statements because they are subject to
certain risks, uncertainties and assumptions, including in respect
of the general business environment, regulatory actions or changes.
If the risks or uncertainties materialize or assumptions prove
incorrect or change, our actual performance or results may differ
materially from those expressed or implied by such forward-looking
statements and assumptions. Additional information regarding risks,
uncertainties and assumptions relating to the Company and affecting
our business operations and prospects are described in the
Company's Annual Report on Form 10-K for the year ended December
31, 2010, and other reports filed with the U.S. Securities and
Exchange Commission. You are urged to carefully review and consider
the cautionary statements and other disclosures made in those
filings, including specifically those under the heading "Risk
Factors." The Company undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.
| |
| |
| Schedule
1 |
| |
| INNOSPEC INC. AND
SUBSIDIARIES |
| CONSOLIDATED STATEMENTS
OF INCOME |
| |
|
|
| |
|
|
| |
|
|
| |
Three Months Ended March
31 |
| |
|
|
| |
2011 |
2010 |
| (in millions, except share and per share
data) |
|
|
| |
|
|
| Net sales |
$ 185.3 |
$ 163.5 |
| Cost of goods sold |
(131.7) |
(111.3) |
| Gross profit |
53.6 |
52.2 |
| |
|
|
| Selling, general and administrative |
(23.6) |
(26.9) |
| Research and development |
(4.3) |
(4.0) |
| Restructuring charge |
-- |
(8.2) |
| Amortization of intangible assets |
(1.2) |
(1.2) |
| Impairment of Octane Additives business
goodwill |
(0.6) |
(0.6) |
| |
(29.7) |
(40.9) |
| Operating income |
23.9 |
11.3 |
| Other net income/(expense) |
5.3 |
(0.1) |
| Interest expense (net) |
(0.9) |
(1.2) |
| Income before income taxes |
28.3 |
10 |
| Income taxes |
(6.8) |
(2.6) |
| Net income |
$ 21.5 |
$ 7.4 |
| |
|
|
| Earnings per share |
|
|
| Basic |
$ 0.91 |
$ 0.31 |
| Diluted |
$ 0.88 |
$ 0.30 |
| |
|
|
| Weighted average shares outstanding (in
thousands) |
|
|
| Basic |
23,655 |
23,682 |
| Diluted |
24,461 |
24,883 |
| |
|
|
| |
|
|
| Schedule 2A |
|
|
| |
|
|
| INNOSPEC INC. AND
SUBSIDIARIES |
| SEGMENTAL
ANALYSIS |
| |
|
|
| ANALYSIS OF BUSINESS UNIT RESULTS |
|
|
| |
|
|
| |
Three Months Ended March
31 |
| (in millions) |
2011 |
2010 |
| |
|
|
| Net sales |
|
|
| Fuel Specialties |
$ 127.1 |
$ 112.8 |
| Active Chemicals |
46.5 |
37.4 |
| Octane Additives |
11.7 |
13.3 |
| |
185.3 |
163.5 |
| |
|
|
| Gross profit |
|
|
| Fuel Specialties |
36.7 |
38.0 |
| Active Chemicals |
11.9 |
8.2 |
| Octane Additives |
5.0 |
6.0 |
| |
53.6 |
52.2 |
| |
|
|
| Operating income |
|
|
| Fuel Specialties |
22.3 |
22.1 |
| Active Chemicals |
7.6 |
4.1 |
| Octane Additives |
2.2 |
6.7 |
| Pension charge |
(0.1) |
(3.8) |
| Corporate costs |
(7.5) |
(9.0) |
| |
24.5 |
20.1 |
| |
|
|
| Restructuring charge |
-- |
(8.2) |
| Impairment of Octane Additives business
goodwill |
(0.6) |
(0.6) |
| Total operating income |
$ 23.9 |
$ 11.3 |
| |
|
|
| Schedule
2B |
|
|
| |
|
|
| NON-GAAP MEASURES |
|
|
| |
|
|
| |
Three Months Ended March
31 |
| |
2011 |
2010 |
| (in millions) |
|
|
| |
|
|
| Net income |
$ 21.5 |
$ 7.4 |
| Interest expense (net) |
0.9 |
1.2 |
| Income taxes |
6.8 |
2.6 |
| Depreciation and amortization |
3.7 |
3.6 |
| Impairment of Octane Additives business
goodwill |
0.6 |
0.6 |
| EBITDA |
33.5 |
15.4 |
| |
|
|
| Fuel Specialties |
23.5 |
23.3 |
| Active Chemicals |
9.1 |
5.6 |
| Octane Additives |
2.7 |
7.2 |
| Pension charge |
(0.1) |
(3.8) |
| Corporate costs |
(7.0) |
(8.6) |
| |
28.2 |
23.7 |
| Restructuring charge |
-- |
(8.2) |
| Other net income/(expense) |
5.3 |
(0.1) |
| EBITDA |
$ 33.5 |
$ 15.4 |
| |
|
|
| Schedule 3 |
|
|
| |
|
|
| INNOSPEC INC. AND
SUBSIDIARIES |
| CONSOLIDATED BALANCE
SHEETS |
|
|
| |
|
|
| |
|
|
| |
March 31 2011 |
December 31 2010 |
| Assets |
(in millions) |
| Current assets |
|
|
| Cash and cash equivalents |
$ 94.2 |
$ 111.3 |
| Accounts receivable (less allowance
of $2.2 and $2.1, respectively) |
89.3 |
84.2 |
| Inventories |
127.1 |
122.3 |
| Prepaid expenses |
3.4 |
4.1 |
| Total current assets |
314.0 |
321.9 |
| |
|
|
| Property, plant and equipment |
48.6 |
48.7 |
| Goodwill – Fuel Specialties and Active
Chemicals |
139.1 |
139.0 |
| Goodwill – Octane Additives |
4.0 |
4.6 |
| Intangible assets |
17.8 |
19.0 |
| Deferred finance costs |
0.3 |
0.5 |
| Deferred income taxes |
12.5 |
12.7 |
| Other non-current assets |
2.9 |
1.9 |
| Total assets |
$ 539.2 |
$ 548.3 |
| Liabilities and Stockholders' Equity |
|
|
| Accounts payable |
$ 52.0 |
$ 45.9 |
| Current portion of accrued liabilities |
72.6 |
85.7 |
| Accrued income taxes |
5.5 |
6.1 |
| Short-term borrowing |
27.0 |
15.0 |
| Current portion of plant closure
provisions |
4.2 |
3.9 |
| Current portion of unrecognized tax
benefits |
2.2 |
2.2 |
| Current portion of deferred income |
0.1 |
0.1 |
| Total current liabilities |
163.6 |
158.9 |
| |
|
|
| Accrued liabilities, net of current
portion |
13.7 |
13.6 |
| Long-term debt, net of current portion |
-- |
32.0 |
| Plant closure provisions, net of current
portion |
23.5 |
23.6 |
| Unrecognized tax benefits, net of current
portion |
6.5 |
6.4 |
| Pension liability |
9.8 |
11.7 |
| Other non-current liabilities |
0.4 |
0.5 |
| Deferred income, net of current portion |
0.9 |
0.9 |
| Total stockholders' equity |
320.8 |
300.7 |
| Total liabilities and stockholders'
equity |
$ 539.2 |
$ 548.3 |
| |
|
|
| Schedule 4 |
|
|
| |
|
|
| INNOSPEC INC. AND
SUBSIDIARIES |
| CONSOLIDATED STATEMENTS
OF CASH FLOWS |
| |
|
|
| |
|
|
| |
Three Months Ended March
31 |
| |
2011 |
2010 |
| |
(in millions) |
| Cash Flows from Operating
Activities |
|
|
| |
|
|
| Net income |
$ 21.5 |
$ 7.4 |
| Adjustments to reconcile net income to cash
provided by operating activities: |
|
|
| Depreciation and amortization |
3.9 |
3.9 |
| Impairment of Octane Additives
business goodwill |
0.6 |
0.6 |
| Deferred income taxes |
0.2 |
(0.6) |
| Changes in working capital |
(16.3) |
(9.2) |
| Excess tax benefit from stock based
payment arrangements |
(0.6) |
-- |
| Income taxes and other current
liabilities |
(0.8) |
(7.7) |
| Movement on plant closure
provisions |
0.1 |
-- |
| Movement on pension liability |
(2.2) |
10.4 |
| Stock option compensation |
0.9 |
0.9 |
| Movements on other non-current
assets and liabilities |
(1.6) |
2.7 |
| Net cash provided by operating
activities |
5.7 |
8.4 |
| |
|
|
| Cash Flows from Investing
Activities |
|
|
| |
|
|
| Capital expenditures |
(1.5) |
(1.4) |
| Net cash (used in) investing activities |
(1.5) |
(1.4) |
| |
|
|
| Cash Flows from Financing
Activities |
|
|
| |
|
|
| Net (repayment)/receipt of revolving credit
facility |
(5.0) |
4.0 |
| Repayment of term loan |
(15.0) |
(10.0) |
| Excess tax benefit from stock based payment
arrangements |
0.6 |
-- |
| Issue of treasury stock |
0.5 |
-- |
| Repurchase of common stock |
(3.4) |
(0.1) |
| Net cash (used in) financing activities |
(22.3) |
(6.1) |
| Effect of exchange rate changes on
cash |
1.0 |
(2.0) |
| Net change in cash and cash equivalents |
(17.1) |
(1.1) |
| Cash and cash equivalents at beginning of
period |
111.3 |
68.6 |
| Cash and cash equivalents at end of
period |
$ 94.2 |
$ 67.5 |
| |
|
|
| Amortization of deferred finance
costs of $0.2 million (2010 -- $0.3 million) are included in
depreciation and amortization in the cash flow statement but in
interest expense in the income statement. |
CONTACT: Brian Watt
Innospec Inc.
+44-151-356-6241
Brian.Watt@innospecinc.com
Tom Pratt
RF Binder Partners
+1-212-994-7563
Tom.Pratt@RFBinder.com
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