Year-Over-Year GAAP Diluted
EPS $1.03 vs. $0.88; Non-GAAP Diluted EPS $1.00 vs.
$0.74
Sales Advance 8 Percent;
Operating Cash Inflows of $18.0 Million
Innospec Inc. (Nasdaq:IOSP) today announced its financial results
for the first quarter ended March 31, 2012.
Total net sales for the first quarter were $200.8 million, an 8
percent increase from $185.3 million in the corresponding quarter
last year. Net income was $24.6 million, or $1.03 per diluted
share, a 14 percent increase over the $21.5 million, or $0.88 per
diluted share, recorded a year ago. The quarter-over-quarter
increase in reported net income was primarily due to strong Octane
Additives trading performance offset by lower foreign currency
exchange gains. EBITDA (earnings before interest, taxes,
depreciation, amortization and impairment) for the quarter was
$35.2 million, a 5 percent increase from $33.5 million posted a
year ago.
Results for the first quarter include after-tax foreign currency
exchange gains of $0.8 million, or $0.03 per diluted share; a year
ago, special items had a combined positive impact on net income of
$3.4 million, or $0.14 per diluted share. Excluding these
items, adjusted non-GAAP EPS was $1.00 per diluted share, a 35
percent increase from $0.74 a year ago. Cash generation for
the quarter was strong, with operating cash inflows of $18.0
million, before capital expenditures during the quarter of $4.3
million. Net cash stood at $60.0 million at the end of the
quarter.
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, 2012 |
Quarter ended
March 31, 2011 |
| (in millions, except share and
per share data) |
Income before income
taxes |
Net income |
Diluted EPS |
Income before income
taxes |
Net income |
Diluted EPS |
| |
|
|
|
|
|
|
| Reported GAAP amounts |
$ 32.0 |
$ 24.6 |
$ 1.03 |
$ 28.3 |
$ 21.5 |
$ 0.88 |
| |
|
|
|
|
|
|
| Foreign currency exchange gains |
(1.1) |
(0.8) |
(0.03) |
(5.5) |
(4.2) |
(0.17) |
| Civil complaint legal and professional
expenses |
-- |
-- |
-- |
1.0 |
0.8 |
0.03 |
| |
(1.1) |
(0.8) |
(0.03) |
(4.5) |
(3.4) |
(0.14) |
| |
|
|
|
|
|
|
| Adjusted non-GAAP
amounts |
$ 30.9 |
$ 23.8 |
$ 1.00 |
$ 23.8 |
$ 18.1 |
$ 0.74 |
"This was a very good quarter for Innospec, with good
contributions from all our businesses, especially in light of
continued unsettled economic conditions around the world," said
Patrick Williams, President and Chief Executive Officer. "Fuel
Specialties continued to achieve sales growth in excess of that
seen in our underlying markets, despite intense competitive
pressures and the volatility of raw materials pricing. We're
particularly pleased with our continued top-line growth here, as
well as our ability to essentially sustain gross margins at the 30
percent level in this business. The market for our Active
Chemicals segment continues to face some challenging times,
particularly in the Polymers business in Europe. The rebound
however in our Personal Care and Fragrance Ingredients businesses,
which we anticipated at year end, contributed to the positive
performance in the first quarter, particularly in the Americas.
We also had a particularly strong performance both in terms
of sales and margins from our Octane Additives segment."
Net sales in Fuel Specialties for the first quarter were $130.7
million, a 3 percent increase from $127.1 million in last year's
first quarter, driven by richer sales mix and improved
pricing. By region, sales were up 4 percent in the Americas, 7
percent in Europe, Middle East and Africa (EMEA), 20 percent in
Asia-Pacific; and down 52 percent in our Avtel business as a result
of the timing of shipments. Excluding our Avtel business, net
sales in Fuel Specialties grew 7 percent. The segment's gross
margin was 29.6 percent, a slight increase from a year
ago. Operating income for the quarter was $21.7 million, down
slightly from last year's $22.3 million.
In Active Chemicals, net sales rebounded from the fourth quarter
to $46.5 million, the same level as 2011's first quarter. By
region, sales increased 16 percent in the Americas for a record
quarter and 17 percent in Asia-Pacific, particularly due to strong
volumes across the company's Personal Care and Fragrance
Ingredients markets. Sales decreased 16 percent in EMEA, due
to intense competitive and economic pressures in the Polymers
market. Excluding sales in our Polymers business which
decreased 20 percent, net sales in Active Chemicals grew 9
percent. Active Chemicals' gross margin was 23.9 percent,
compared with a strong comparative of 25.2 percent last year,
rebounding significantly from the fourth quarter as we
predicted. The segment's operating income was $6.0 million,
down from $7.6 million in last year's first quarter, but up sharply
from $0.9 million in the fourth quarter last year.
Octane Additives' net sales for the quarter were $23.6 million,
more than double last year's $11.7 million. The segment's
gross margin was 60.2 percent, a significant increase from 40.2
percent in 2011, primarily the result of the sale of lower-cost
inventory. Operating income for the first quarter was $12.4
million, reflecting a significant increase from $2.2 million in the
corresponding quarter last year.
Corporate costs for the quarter were $8.6 million, compared with
$7.5 million a year ago. The increase was primarily due to
increased performance related and share based compensation
accruals, driven by the strong performance in Innospec's share
price during the quarter. The effective tax rate for the
quarter was 23.1 percent, compared to 24.0 percent in last year's
first quarter.
Net cash generated from operations was $18.0 million, over
triple the $5.7 million reported a year ago, primarily due to
continued strong operating performance, partially offset by
increased working capital requirements. Days sales outstanding
however remained essentially unchanged, sequentially, at
42.0. As of March 31, 2012, Innospec had $96.0 million in
cash, cash equivalents and short-term investments, $60.0 million
more than its total debt of $36.0 million.
Mr. Williams concluded, "We're excited with our strong
performance kicking off the year. We've cleaned up almost all
of the historic legacy items that had taken up an undue amount of
management time and our business has begun to normalize. We've
delivered what we promised, particularly in managing through the
economic challenges of our Fuel Specialties and Active Chemicals
businesses, our two main business drivers.
"We will continue to push for innovation in research and
development and be vigilant to geopolitical issues around the
globe. We are actively pursuing our stated acquisition
strategy and are well positioned financially for external growth in
this respect.
"We look forward to the second quarter with confidence and with
cautious optimism for the second half of 2012."
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 segment goodwill. Net income
excluding special items is net income per our consolidated
financial statements adjusted for the exclusion of foreign currency
exchange gains and civil complaint 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, they are subject to
certain risks, uncertainties and assumptions, and our actual
performance or results may differ materially from these
forward-looking statements. 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, 2011, and other reports filed with the U.S. Securities
and Exchange Commission. You are urged to review our
discussion of risks and uncertainties that could cause actual
results to differ from forward-looking statements 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 |
| (in millions, except share and
per share data) |
2012 |
2011 |
| |
|
|
| Net sales |
$ 200.8 |
$ 185.3 |
| Cost of goods sold |
(136.8) |
(132.5) |
| Gross profit |
64.0 |
52.8 |
| |
|
|
| Operating expenses: |
|
|
| Selling, general and administrative |
(27.8) |
(24.0) |
| Research and development |
(4.6) |
(4.3) |
| Restructuring charge |
(0.1) |
-- |
| Impairment of Octane Additives segment
goodwill |
(0.3) |
(0.6) |
| Total operating expenses |
(32.8) |
(28.9) |
| Operating income |
31.2 |
23.9 |
| Other net income |
1.1 |
5.3 |
| Interest expense, net |
(0.3) |
(0.9) |
| Income before income taxes |
32.0 |
28.3 |
| Income taxes |
(7.4) |
(6.8) |
| Net income |
$ 24.6 |
$ 21.5 |
| |
|
|
| Earnings per share: |
|
|
| Basic |
$ 1.07 |
$ 0.91 |
| Diluted |
$ 1.03 |
$ 0.88 |
| |
|
|
| Weighted average shares outstanding (in
thousands): |
|
|
| Basic |
23,055 |
23,655 |
| Diluted |
23,823 |
24,461 |
| |
| |
| Schedule 2A |
| INNOSPEC INC. AND
SUBSIDIARIES |
| |
|
|
| SEGMENTAL ANALYSIS OF
RESULTS |
Three Months Ended
March 31 |
| (in millions) |
2012 |
2011 |
| |
|
|
| Net sales: |
|
|
| Fuel Specialties |
$ 130.7 |
$ 127.1 |
| Active Chemicals |
46.5 |
46.5 |
| Octane Additives |
23.6 |
11.7 |
| |
200.8 |
185.3 |
| |
|
|
| Gross profit: |
|
|
| Fuel Specialties |
38.7 |
36.4 |
| Active Chemicals |
11.1 |
11.7 |
| Octane Additives |
14.2 |
4.7 |
| |
64.0 |
52.8 |
| |
|
|
| Operating income: |
|
|
| Fuel Specialties |
21.7 |
22.3 |
| Active Chemicals |
6.0 |
7.6 |
| Octane Additives |
12.4 |
2.2 |
| Pension credit/(charge) |
0.1 |
(0.1) |
| Corporate costs |
(8.6) |
(7.5) |
| |
31.6 |
24.5 |
| |
|
|
| Restructuring charge |
(0.1) |
-- |
| Impairment of Octane Additives segment
goodwill |
(0.3) |
(0.6) |
| Total operating income |
$ 31.2 |
$ 23.9 |
| |
|
|
| |
|
|
| |
|
|
| Schedule 2B |
| |
|
|
| NON-GAAP MEASURES |
Three Months Ended
March 31 |
| (in millions) |
2012 |
2011 |
| |
|
|
| Net income |
$ 24.6 |
$ 21.5 |
| Interest expense, net |
0.3 |
0.9 |
| Income taxes |
7.4 |
6.8 |
| Depreciation and amortization |
2.6 |
3.7 |
| Impairment of Octane Additives segment
goodwill |
0.3 |
0.6 |
| EBITDA |
35.2 |
33.5 |
| |
|
|
| Fuel Specialties |
22.7 |
23.5 |
| Active Chemicals |
6.9 |
9.1 |
| Octane Additives |
12.7 |
2.7 |
| Pension credit/(charge) |
0.1 |
(0.1) |
| Corporate costs |
(8.2) |
(7.0) |
| |
34.2 |
28.2 |
| Restructuring charge |
(0.1) |
-- |
| Other net income |
1.1 |
5.3 |
| EBITDA |
$ 35.2 |
$ 33.5 |
| |
| |
| Schedule 3 |
| INNOSPEC INC. AND
SUBSIDIARIES |
| CONSOLIDATED BALANCE
SHEETS |
| |
|
|
| (in millions) |
March 31, 2012 |
December 31,
2011 |
| |
|
|
| Assets |
|
|
| |
|
|
| Current assets: |
|
|
| Cash and cash equivalents |
$ 91.2 |
$ 76.2 |
| Short-term investments |
4.8 |
4.8 |
| Trade and other accounts receivable |
100.0 |
99.4 |
| Inventories |
139.1 |
135.9 |
| Prepaid expenses |
4.4 |
4.0 |
| Total current assets |
339.5 |
320.3 |
| |
|
|
| Property, plant and equipment |
46.5 |
45.9 |
| Goodwill |
141.2 |
141.5 |
| Intangible assets |
19.2 |
17.7 |
| Deferred finance costs |
1.6 |
1.7 |
| Deferred tax assets |
20.0 |
19.7 |
| Pension asset |
23.8 |
21.4 |
| Other non-current assets |
0.2 |
0.6 |
| Total assets |
$ 592.0 |
$ 568.8 |
| |
|
|
| Liabilities and Stockholders' Equity |
|
|
| |
|
|
| Current liabilities: |
|
|
| Accounts payable |
$ 57.1 |
$ 53.3 |
| Current portion of accrued
liabilities |
68.7 |
77.0 |
| Accrued income taxes |
2.9 |
2.0 |
| Current portion of long-term debt |
5.0 |
5.0 |
| Current portion of plant closure
provisions |
3.3 |
4.1 |
| Current portion of unrecognized tax
benefits |
3.2 |
3.2 |
| Current portion of deferred income |
2.2 |
1.4 |
| Total current liabilities |
142.4 |
146.0 |
| |
|
|
| Accrued liabilities, net of current
portion |
4.6 |
4.9 |
| Long-term debt, net of current portion |
31.0 |
30.0 |
| Plant closure provisions, net of current
portion |
24.9 |
24.5 |
| Unrecognized tax benefits, net of current
portion |
9.5 |
9.4 |
| Deferred tax liabilities |
3.4 |
2.9 |
| Pension liability |
6.6 |
6.3 |
| Other non-current liabilities |
0.1 |
0.8 |
| Deferred income, net of current portion |
0.9 |
0.9 |
| Total stockholders' equity |
368.6 |
343.1 |
| Total liabilities and stockholders'
equity |
$ 592.0 |
$ 568.8 |
| |
| |
| Schedule 4 |
| INNOSPEC INC. AND
SUBSIDIARIES |
| CONSOLIDATED STATEMENTS
OF CASH FLOWS |
| |
|
|
| |
Three Months Ended
March 31 |
| (in millions) |
2012 |
2011 |
| |
|
|
| Cash Flows from Operating Activities |
|
|
| |
|
|
| Net income |
$ 24.6 |
$ 21.5 |
| Adjustments to reconcile net income to cash
provided by operating activities: |
|
|
| Depreciation and amortization |
2.7 |
3.9 |
| Impairment of Octane Additives segment
goodwill |
0.3 |
0.6 |
| Deferred taxes |
0.2 |
0.2 |
| Changes in working capital |
(9.1) |
(16.3) |
| Excess tax benefit from stock based
payment arrangements |
(0.2) |
(0.6) |
| Accrued income taxes |
0.8 |
(0.8) |
| Movement on plant closure provisions |
(0.4) |
0.1 |
| Cash contributions to defined benefit
pension plans |
(2.3) |
(2.3) |
| Non-cash expense of defined benefit
pension plans |
-- |
0.1 |
| Stock option compensation |
0.8 |
0.9 |
| Movements on other non-current assets and
liabilities |
0.6 |
(1.6) |
| Net cash provided by operating
activities |
18.0 |
5.7 |
| |
|
|
| Cash Flows from Investing Activities |
|
|
| |
|
|
| Capital expenditures |
(1.8) |
(1.5) |
| Capitalization of internally developed
software and other costs |
(2.5) |
-- |
| Sale of short-term investments |
0.1 |
-- |
| Net cash (used in) investing activities |
(4.2) |
(1.5) |
| |
|
|
| Cash Flows from Financing Activities |
|
|
| |
|
|
| Net receipt/(repayment) of revolving credit
facility |
1.0 |
(5.0) |
| Repayment of term loan |
-- |
(15.0) |
| Excess tax benefit from stock based payment
arrangements |
0.2 |
0.6 |
| Issue of treasury stock |
0.2 |
0.5 |
| Repurchase of common stock |
(0.4) |
(3.4) |
| Net cash provided by/(used in) financing
activities |
1.0 |
(22.3) |
| Effect of foreign currency exchange rate
changes on cash |
0.2 |
0.9 |
| Net change in cash and cash equivalents |
15.0 |
(17.2) |
| Cash and cash equivalents at beginning of
period |
76.2 |
107.1 |
| Cash and cash equivalents at end of
period |
$ 91.2 |
$ 89.9 |
| |
|
|
| Amortization of deferred finance
costs of $0.1 million (2011 -- $0.2 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
Robert D. Ferris
RF|Binder Partners
+1-212-994-7505
Robert.Ferris@RFBinder.com
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