UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 1, 2018 (October 29, 2018)
INNOPHOS HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware | 001-33124 | 20-1380758 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) | ||
259 Prospect Plains Road, Cranbury, New Jersey | 08512 | |||
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code 609-495-2495
Not Applicable | ||||
(Former name or former address, if changed since last report.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ | 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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
☐ | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01 Entry into a Material Definitive Agreement.
On October 29, 2018, Innophos, Inc., an indirect, wholly-owned subsidiary of the Registrant (Innophos), and EURO MAROC PHOSPHORE (Emaphos) (Emaphos) entered into a Purified Phosphoric Acid (PPA) Supply Contract (Supply Agreement) pursuant to which Emaphos will sell and deliver, and Innophos will purchase and receive, purified wet phosphoric acid, subject to the terms and conditions contained in the PPA Supply Agreement.
The initial term of the Supply Agreement runs through December 31, 2019. Innophos may thereafter extend the term for additional one-year periods upon written notice to Emaphos for approval at least ninety (90) days prior to the then current termination date. Either party may terminate the Supply Agreement after the initial term upon one (1) years notice to the other party.
The foregoing description of the Supply Agreement is qualified in its entirety by the full text of the Supply Agreement, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K.
Item 2.02 Results of Operations and Financial Condition.
On November 1, 2018, the Registrant issued a press release announcing its financial results for the third quarter of 2018 and that it will be hosting a live conference call to discuss the results. The text of the press release is furnished with this Current Report on Form 8-K as Exhibit 99.1 and is incorporated by reference in response to this Item 2.02.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are filed or furnished (as indicated) with this report:
Exhibit No. |
Description | |
10.1* | Purified Phosphoric Acid (PPA) Supply Contract between Innophos, Inc. and EURO MAROC PHOSPHORE (Emaphos) (filed) | |
99.1 | Press Release (furnished) |
| Confidential portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended. |
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. | ||||||
November 1, 2018 | By: | /s/ Joshua Horenstein | ||||
Name: | Joshua Horenstein | |||||
Title: | Senior Vice President, Chief Legal and Human Resources Officer and Corporate Secretary |
Exhibit 10.1
Confidential Treatment Requested by Innophos Holdings, Inc.
Confidential Portions of this Exhibit marked as [***] have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.
PURIFIED PHOSPHORIC ACID (PPA) SUPPLY CONTRACT
This SUPPLY CONTRACT (including the General Terms and Conditions and each exhibit attached hereto, this Contract), dated as of January 1, 2018 (the Effective Date), is entered into by and between Innophos, Inc., a Delaware corporation (File No. 3829471) (the Buyer), EURO MAROC PHOSPHORE (Emaphos), a joint venture incorporated under the laws of Morocco and having its registered office at 2 Rue Al Abtal, Hay Erraha, 20200 Casablanca, Morocco (Registration No. 82423) (the Seller). Buyer and Seller are sometimes referred to herein individually as a Party and together as the Parties.
1. | Term of Agreement: The t erm of this Contract shall commence on the Effective Date and run through December 31, 2019 (the Initial Term), provided that the Term may be extended for additional one-year periods by Buyer upon written notice to Seller for approval at least ninety (90) days prior to the then current termination date (such additional one-year periods, together with the Initial Term, the Term). Either Party may terminate this Contract after the Initial Term upon one (1) years notice to the other Party. |
2. | Product: The Seller agrees to sell to Buyer, and the Buyer agrees to purchase from Seller, food grade Purified Wet Phosphoric acid (PPA) (the Product) upon the terms and conditions set forth in this Contract. |
3. | Specifications: See Exhibit A (the Specifications). |
4. | Pricing: (i) The price for Product meeting the Specifications for Q1 2018 is: [***] US Dollars (US$ [***]) per metric ton of P2O5 included in the Product. |
(ii) Pricing will be negotiated quarterly for the Initial Term. The Parties shall discuss pricing for the subsequent quarter at least thirty (30) days prior to the start of such quarter. If no agreement is reached, the price for the quarter will be based on the formula outlined in Exhibit B.
5. | Delivery Terms: FOB (Incoterms 2010), Jorf Lasfar Port (Morocco) |
6. | Payment Terms: Net 30 days |
7. | Volumes: Buyer may purchase Products from time to time by issuing one or more purchase orders to Seller. Each such purchase order shall be governed by the terms of this Contract (unless the Parties expressly agree in writing otherwise). |
Buyers estimate of its annual volume requirements of Products is approximately [***] metric tons of P2O5 (5% MOLOO) included in Product per year during the Initial Term. Buyer will provide an estimate of its estimated annual Product volume requirements for each subsequent year during the Term at least ninety (90) days prior to the start of each such year (to be sent no later than October for budget purposes). The Seller will confirm to Buyer the feasibility of the requirement within thirty (30) days of its receipt of Buyers estimate. Volume will be evenly spread over the year unless otherwise agreed between the parties.
Buyer shall provide to Seller a firm commitment Product volume nomination for the six-month period starting on the Effective Date and each subsequent six-month period during the Term. Estimated cargo size per vessel to be loaded will be 3,500 metric tons of P2O5 (5% MOLOO) included in Product. Buyer will provide its six-month Product volume nomination for each subsequent six-month period during the Term at least thirty (30) days prior to the start of each such six-month period. Seller shall supply 100% of the volumes included in Buyers six-month nominations.
8. | Weighing Sampling: Seller shall conduct weighing operations during the loading of the Product, at the Loading Port, in accordance with Sellers usual procedures. Buyer may be present or represented, at its own costs, during such weighing operations. The result of the weighing operations, as performed by Seller, shall be determinative, final and binding on Buyer and Seller, for all purposes (absent manifest error). The Sampling shall be realized in accordance with the Section 5 of the General Terms and Conditions. |
9. | Logistics Savings: Throughout the Term, Seller will coordinate with Buyer on logistical cost savings. |
10. | Other Terms: The General Terms and Conditions attached hereto are incorporated herein and form part of this Contract. |
2
IN WITNESS THEREOF, the Parties have executed and delivered this Contract as of the Effective Date.
EMAPHOS | INNOPHOS, INC. | |||
/s/ Valérie Renard Authorized Signatory |
/s/ Kim Ann Mink Signed | |||
Name of Signatory: Valérie Renard | Name of Signatory: Kim Ann Mink | |||
Title of Signatory: Commercial Director | Title of Signatory: President and CEO | |||
/s/ Mohamed Belhoussain Authorized Signatory |
Address: 259 Prospect Plains Road, Building A, Cranbury, NJ 08512 | |||
Name of Signatory: Mohamed Belhoussain
Title of Signatory : Executive Vice President Commercial OCP
Address: 2, Rue Al Abtal, Hay Erraha, 20200 Casablanca Morocco |
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[End of General Terms and Conditions]
9
Exhibit 99.1
FOR IMMEDIATE RELEASE | ||
Investor Contact Mark Feuerbach Innophos 609-366-1204 investor.relations@innophos.com |
Media Contact Ryan Flaim Sharon Merrill Associates 617-542-5300 iphs@investorrelations.com |
INNOPHOS HOLDINGS, INC. REPORTS
THIRD-QUARTER 2018 RESULTS
Sales of $197 million consistent with previously issued preliminary results and up 7% versus prior year, with FHN segment showing 17% growth
Reports Adjusted EBITDA of $32 million, at the top end of the previously issued estimate and sequentially in line with Q1 and Q2 2018, and Net Income of $14 million
Signed New PPA Supply Agreement In Support Of Strategic Value Chain Program
CRANBURY, New Jersey (November 1, 2018) Innophos Holdings, Inc. (NASDAQ: IPHS) today announced financial results for its third quarter ended September 30, 2018.
Strategic Highlights
| Remains on path to double digit year-on-year revenue growth in 2018 driven by FHN segment |
| Continues price actions to offset input cost increases |
| Advances completion of targeted value chain redesign with receipt of long lead-time environmental and operational government permits |
| Announces multi-year PPA supply agreement to further diversify sourcing for phosphates portfolio |
| Expects 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 |
| Projects $40 million cash generation in Q4 2018 from two transactions |
| Implemented SG&A actions to streamline cost structure while continuing focused investments in customer support functions |
Q3 Financial Highlights
| Sales of $197 million were up 7% compared with the prior year due to a stabilized base portfolio, contribution from acquisitions and ongoing pricing actions |
| FHN segment sales of $115 million grew 17% versus prior year, reflecting 14% growth from acquisitions and 3% FHN legacy growth. Sequentially, sales were lower due to discontinuation of a portion of lower-margin nutrition trading business |
| GAAP Net Income of $14 million, or $0.71 per share, was $3 million ahead of Q3 2017. A favorable adjustment due to the reversal of a portion of the preliminary tax reform provisions booked in Q4 2017 was partially offset by isolated operational issues that impacted sales in the phosphates portfolio as well as an unfavorable sales mix in the IS segment. In addition, higher freight, energy, amortization and interest expenses impacted Q3 earnings compared with prior year |
| Adjusted EBITDA of $32 million, adjusted EBITDA margin of 16% and adjusted diluted EPS of $0.58 were sequentially in line with Q1 and Q2 of 2018. Compared with prior year, adjusted EBITDA was down 9% and adjusted diluted EPS was down $0.20, or 25% due to a particularly strong quarter for the IS segment in Q3 2017, as well as the impact on sales from isolated operational issues and higher freight expenses in the current period |
| Free Cash Flow was down $14 million from the same quarter last year, due to planned capital expenditures and working capital needs to support the value chain repositioning and manufacturing optimization program |
Advances Strategic Value Chain OptimizationNew PPA Supply Agreement with Emaphos
In late October, the Company entered into a multi-year Purified Phosphoric Acid (PPA) supply agreement with Moroccan-based EURO MAROC PHOSPHORE (Emaphos), a joint venture between OCP, Prayon and Chemische Fabrik Budenheim. Under the terms of the new agreement, Innophos will be supplied with PPA, a key raw material in the manufacture of the Companys phosphate product portfolio. The supply agreement complements the Companys recently announced PPA supply agreement with Nutrien, supplements Innophos internal PPA production, and further diversifies its supply base.
Management Comments
Our third quarter results were in line with the preliminary expectations recently provided as we delivered topline growth of 7% year over year and adjusted EBITDA at the top end of the estimated range, said Kim Ann Mink, Ph.D., Chairman, President and Chief Executive Officer. As recently announced, our third quarter performance and outlook for 2018 reflect our expectations regarding a shift in the timing of the anticipated initial value chain benefits from 2018 to 2019, a portfolio decision regarding selective lower-margin nutrition trading business, and the impact from isolated operational issues on Q3 and Q4 that are not expected to impact 2019.
As we continue to shift our position over time to a value-adding, higher margin ingredient solutions provider, we remain focused on delivering wins through our SPARC new product development program that strengthen our organic growth prospects. In addition, we continue to selectively evaluate M&A opportunities that meet our disciplined financial and strategic criteria and will strengthen our position as an essential ingredients provider in high growth FHN markets.
We are confident that we are taking the necessary proactive actions to manage the near-term dynamics while simultaneously executing against key initiatives under our Strategic Pillars, said Mink. We remain confident that our strategic programs are positioning Innophos to deliver long-term value for our customers and shareholders, and that we are on track to achieve our Vision 2022 goals.
Q3 2018 Results
Variance $ and Variance % in the following tables may not foot due to rounding
$ Millions except EPS
Quarter 3 |
2018 | 2017 | Variance $ | Variance % | ||||||||||||
Sales |
197 | 184 | 13 | 7 | % | |||||||||||
Net Income |
14 | 11 | 3 | 22 | % | |||||||||||
Adj. Net Income |
12 | 15 | (4 | ) | (25 | )% | ||||||||||
EBITDA |
26 | 29 | (3 | ) | (10 | )% | ||||||||||
Adj. EBITDA |
32 | 35 | (3 | ) | (9 | )% | ||||||||||
Diluted EPS |
0.71 | 0.58 | 0.12 | 21 | % | |||||||||||
Adj. Diluted EPS |
0.58 | 0.78 | (0.20 | ) | (25 | )% | ||||||||||
Cash from Ops |
19 | 27 | (9 | ) | (31 | )% | ||||||||||
Free Cash Flow |
5 | 19 | (14 | ) | (76 | )% |
| Sales grew 7% compared with the prior year due to 3% higher volumes, and 4% higher prices |
| GAAP Net Income of $14 million, or diluted EPS of $0.71, were up versus the prior year due to a favorable change in the tax provision partially offset by isolated operational issues that impacted sales in the phosphates portfolio, as well as an unfavorable sales mix in the IS segment. In addition, higher freight, energy, amortization and interest expenses impacted Q3 earnings compared with prior year |
| The enactment of the Tax Cuts and Jobs Act (TCJA) in December 2017 resulted in a one-time provisional amount of $17 million for the three months and year ended December 31, 2017. During the third quarter of 2018, there was a reversal of approximately $6 million of the preliminary tax reform provisions booked in Q4 2017. This resulted in a Q3 tax rate of negative 22% before adjustment, and a favorable diluted EPS impact of $0.30 per share |
| After the close of the quarter, the Company received new and unprecedented charges of $2 million related to natural gas consumption in its Mexico plant, which the Company is actively disputing. Pending resolution, the Company has taken a prudent view to book the charges in Q3 and has adjusted these charges for non-GAAP comparative purposes |
| Adjusted EBITDA of $32 million was up sequentially but down 9% compared with last year. Selling price increases mostly offset a combination of lower volumes, greater input costs and higher freight expenses |
| Adjusted EBITDA margin of 16% was sequentially in line with Q1 and Q2, but down year over year |
| Adjusted diluted EPS of $0.58 was up sequentially, but down year over year due to lower volume effects caused by isolated operational issues, while selling price increases were effective in offsetting higher input costs |
| Free Cash Flow was $5 million, down $14 million versus the same quarter last year due to lower earnings, as well as higher capex of $6 million and greater working capital needs of $4 million to support the value chain repositioning and manufacturing optimization program |
Q3 2018 Segment Financials
Q3 Sales |
2018 $ Millions | 2017 $ Millions | Variance $ | Variance % | ||||||||||||
FHN |
115 | 98 | 17 | 17 | % | |||||||||||
IS |
66 | 68 | (2 | ) | (3 | )% | ||||||||||
Other |
16 | 18 | (2 | ) | (10 | )% | ||||||||||
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Total Innophos |
197 | 184 | 13 | 7 | % | |||||||||||
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Q3 Adj. EBITDA |
2018 $ Millions | 2017 $ Millions | 2018 Margin | 2017 Margin | ||||||||||||
FHN |
17 | 19 | 15 | % | 19 | % | ||||||||||
IS |
12 | 14 | 19 | % | 21 | % | ||||||||||
Other |
3 | 2 | 16 | % | 11 | % | ||||||||||
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Total IPHS |
32 | 35 | 16 | % | 19 | % | ||||||||||
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Note: See Adjusted EBITDA reconciliation to EBITDA in the financial tables that follow
| FHN sales were up 17% year over year (price +3%, volume +15%) due to the contribution from acquisitions and strength of the base portfolio; adjusted EBITDA margins were 400 bps below 2017 due to the impact of the isolated phosphate related operational issues and dilution effect from lower margin acquisitions |
| IS sales were down 3% year over year with sequentially steady sales. Volumes were down 9% partly offset by selling price increases of 6%; adjusted EBITDA margins were down 288 bps versus the prior-year quarter due to the impact of the isolated operational issues and unfavorable sales mix |
| Other sales were down 10% (price +5%, volume down 15%) due primarily to the lower level of co-product sales. Other adjusted EBITDA margins were 16% |
Year-to-Date Results
Variance $ and Variance % in the following tables may not foot due to rounding
$ Millions except EPS
YTD Q3 |
2018 | 2017 | Variance $ | Variance % | ||||||||||||
Sales |
609 | 529 | 80 | 15 | % | |||||||||||
Net Income |
31 | 34 | (2 | ) | (7 | )% | ||||||||||
Adj. Net Income |
35 | 38 | (4 | ) | (10 | )% | ||||||||||
EBITDA |
78 | 83 | (5 | ) | (6 | )% | ||||||||||
Adj. EBITDA |
95 | 93 | 2 | 3 | % | |||||||||||
Diluted EPS |
1.57 | 1.70 | (0.13 | ) | (8 | )% | ||||||||||
Adj. Diluted EPS |
1.74 | 1.94 | (0.20 | ) | (10 | )% | ||||||||||
Cash from Ops |
31 | 47 | (16 | ) | (34 | )% | ||||||||||
Free Cash Flow |
(12 | ) | 22 | (34 | ) | (157 | )% |
| Sales improved 15% reflecting the benefit of acquisitions and proactive pricing programs |
| GAAP Net Income of $31 million was impacted by expenses related to the value chain transition, isolated operational issues, and higher freight and energy costs, which were more than offset by a revision to the tax provision |
| Adjusted EBITDA grew 3% due to contributions from acquisitions while legacy business price increases offset input cost increases |
| Average working capital was 22% for the first three quarters of 2018, same as the prior year |
YTD Quarter 3 Segment Financials
YTD Q3 Segment Sales |
2018 $ Millions | 2017 $ Millions | Variance $ | Variance % | ||||||||||||
FHN |
367 | 281 | 86 | 30 | % | |||||||||||
IS |
196 | 199 | (3 | ) | (2 | )% | ||||||||||
Other |
46 | 49 | (2 | ) | (5 | )% | ||||||||||
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Total Innophos |
609 | 529 | 80 | 15 | % | |||||||||||
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YTD Q3 Segment Adj. EBITDA |
2018 $ Millions | 2017 $ Millions | 2018 Margin | 2017 Margin | ||||||||||||
FHN |
56 | 53 | 15 | % | 19 | % | ||||||||||
IS |
34 | 34 | 17 | % | 17 | % | ||||||||||
Other |
5 | 5 | 10 | % | 11 | % | ||||||||||
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Total IPHS |
95 | 93 | 16 | % | 18 | % | ||||||||||
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Note: See Adjusted EBITDA reconciliation to EBITDA in the financial tables that follow
| FHN represented 60% of total Company sales and was up 30% year over year (price +1%, volume +29%) due to the contribution from acquisitions and strength of the legacy portfolio; adjusted EBITDA margins were 360 bps below 2017 due to the dilution effects from lower margin acquisitions, isolated operational issues and higher freight costs |
| IS sales were down 2% with selling price increases nearly offsetting volume (price +4%, volume down 6%); adjusted EBITDA margins were up 12 bps due to price increases covering cost increases |
| Other sales were down 5% (price +6%, volume down 11%) due primarily to lower level of co-product sales. Other adjusted EBITDA margins were 10% |
Full Year 2018 Outlook
The Company is reiterating the revenue and adjusted EBITDA guidance provided on October 16, 2018.
Revenue is expected to grow 10% to 12% compared with full-year 2017, which equates to a range of $791 million to $806 million. Adjusted EBITDA is expected to grow 3% to 7% compared with full-year 2017, which equates to a range of $123 million to $128 million.
As previously announced, the impact from specific strategic value chain repositioning transition charges is expected to affect 2018 GAAP earnings as these transition costs are incurred ahead of the $20 million negotiated payment from Nutrien accruing to earnings.
Overall market conditions and the competitive landscape are expected to be similar in Q4 compared with prior quarters with Q4 expected to reflect the usual seasonality and thus be the softest sales quarter in the year.
Selling price increases have continued to be effective in offsetting input cost increases and the Company has continued to take further price increase actions.
Excluding the Q3 2018 adjustment to the tax provision, the Company anticipates the effective tax rate to operate in the 29-31% range.
Free cash flow is expected to benefit significantly in Q4 from two key initiatives: the Companys previously announced intention to complete a sale leaseback transaction and the $20 million Nutrien contractual payment.
The Company continues to diligently work through the multi-faceted value chain repositioning and manufacturing optimization program. By the end of 2019, the program is estimated to deliver adjusted diluted EPS improvement of 10%, which represents an estimated run rate of $0.25 to $0.27 per share.
Conference Call
Innophos will host its third quarter 2018 conference call today November 1, 2018 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 Companys 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 Q3 2018 earnings call presentation will be made available on the Companys website the morning of the call. If you are unable to listen to the live call, the webcast will be archived on the Companys website. In addition, a replay of the call will be available between November 1, 2018 and November 15, 2018. The replay is accessible by dialing (877) 660-6853 (U.S.) or (201) 612-7415 (international) and entering the Conference ID number 13684095.
Additional information on Innophos third quarter 2018 results can also be found on the Companys 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
SOURCE Innophos Holdings, Inc.
###
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 Companys expectations regarding the business environment and the Companys 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 Companys 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 Companys ability to implement and refine its Vision 2022 strategic roadmap; (5) the Companys 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 Companys ability to realize expected cost savings and efficiencies from its performance improvement and other optimization initiatives; (7) the Companys 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 Companys products or a decline in consumer confidence and spending; (9) the Companys 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 Companys 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 Companys supply chain or its relationship with its suppliers; (13) the Companys ability to comply with, and the costs associated with compliance with, U.S. and foreign environmental protection laws and (14) the Companys 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 September 30, | Nine Month Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net sales |
$ | 196,934 | $ | 183,839 | $ | 609,099 | $ | 528,923 | ||||||||
Cost of goods sold |
161,706 | 142,870 | 495,259 | 412,335 | ||||||||||||
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Gross profit |
35,228 | 40,969 | 113,840 | 116,588 | ||||||||||||
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Operating expenses: |
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Selling, general and administrative |
19,525 | 20,908 | 64,548 | 60,111 | ||||||||||||
Research & development expenses |
1,240 | 1,065 | 3,989 | 2,713 | ||||||||||||
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Total operating expenses |
20,765 | 21,973 | 68,537 | 62,824 | ||||||||||||
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Operating income |
14,463 | 18,996 | 45,303 | 53,764 | ||||||||||||
Interest expense, net |
3,428 | 1,630 | 9,530 | 4,435 | ||||||||||||
Foreign exchange loss (gain) |
(531 | ) | 100 | 409 | (35 | ) | ||||||||||
Other income |
(14 | ) | (14 | ) | (42 | ) | (42 | ) | ||||||||
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Income before income taxes |
11,580 | 17,280 | 35,406 | 49,406 | ||||||||||||
(Benefit) provision for income taxes |
(2,510 | ) | 5,698 | 4,155 | 15,678 | |||||||||||
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Net income |
$ | 14,090 | $ | 11,582 | $ | 31,251 | $ | 33,728 | ||||||||
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Diluted Earnings Per Participating Share |
$ | 0.71 | $ | 0.58 | $ | 1.57 | $ | 1.70 | ||||||||
Diluted weighted average participating shares outstanding |
19,838,962 | 19,699,052 | 19,790,570 | 19,695,530 | ||||||||||||
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 Net Income Reconciliation to Net Income
(Dollars in thousands, except EPS) | Three Months Ended September 30, | Nine Month Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net Income |
$ | 14,090 | $ | 11,582 | $ | 31,251 | $ | 33,728 | ||||||||
Pre-tax Adjustments |
||||||||||||||||
Foreign exchange loss (gain) |
(531 | ) | 100 | 409 | (35 | ) | ||||||||||
Severance/Restructuring expense |
1,297 | 1,298 | 2,581 | 2,624 | ||||||||||||
Inventory fair value adjustment |
| 1,395 | | 1,395 | ||||||||||||
M&A related costs |
45 | 2,954 | 982 | 2,954 | ||||||||||||
Mexico natural gas disputed charges |
1,857 | | 1,857 | | ||||||||||||
Value chain transition |
2,385 | | 6,878 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Pre-tax Adjustments |
5,053 | 5,747 | 12,707 | 6,938 | ||||||||||||
Income tax effects on Adjustments |
1,515 | 1,895 | 3,447 | 2,240 | ||||||||||||
Tax reform adjustments |
(5,982 | ) | | (5,982 | ) | | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted Net Income |
$ | 11,646 | $ | 15,434 | $ | 34,529 | $ | 38,426 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted Diluted Earnings Per Participating Share |
$ | 0.58 | $ | 0.78 | $ | 1.74 | $ | 1.94 |
Adjusted EBITDA Reconciliation to Net Income
(Dollars in thousands) | Three Months Ended September 30, | Nine Month Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net Income |
$ | 14,090 | $ | 11,582 | $ | 31,251 | $ | 33,728 | ||||||||
Interest expense, net |
3,428 | 1,630 | 9,530 | 4,435 | ||||||||||||
Provision for income taxes |
(2,510 | ) | 5,698 | 4,155 | 15,678 | |||||||||||
Depreciation & amortization |
10,864 | 9,878 | 33,317 | 29,009 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
EBITDA |
25,872 | 28,788 | 78,253 | 82,850 | ||||||||||||
Adjustments |
||||||||||||||||
Non-cash stock compensation |
1,152 | 711 | 4,143 | 2,996 | ||||||||||||
Foreign exchange loss (gain) |
(531 | ) | 100 | 409 | (35 | ) | ||||||||||
Severance/Restructuring expense |
1,297 | 1,298 | 2,581 | 2,624 | ||||||||||||
Inventory fair value adjustment |
| 1,395 | | 1,395 | ||||||||||||
M&A related costs |
45 | 2,954 | 982 | 2,954 | ||||||||||||
Mexico natural gas disputed charges |
1,857 | | 1,857 | | ||||||||||||
Value chain transition |
2,385 | | 6,878 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDA |
$ | 32,077 | $ | 35,246 | $ | 95,103 | $ | 92,784 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Percent of Sales |
16.3 | % | 19.2 | % | 15.6 | % | 17.5 | % |
Segment Adjusted EBITDA Reconciliation to EBITDA
(Dollars in thousands) | Three Months Ended September 30, 2018 | Three Months Ended September 30, 2017 | ||||||||||||||||||||||||||||||
FHN | IS | Other | Total | FHN | IS | Other | Total | |||||||||||||||||||||||||
EBITDA |
$ | 14,563 | $ | 8,885 | $ | 2,424 | $ | 25,872 | $ | 16,442 | $ | 13,491 | ($ | 1,145 | ) | $ | 28,788 | |||||||||||||||
Non-cash stock compensation |
652 | 456 | 44 | 1,152 | 402 | 282 | 27 | 711 | ||||||||||||||||||||||||
Foreign exchange loss (gain) |
67 | 0 | (598 | ) | (531 | ) | (71 | ) | 0 | 171 | 100 | |||||||||||||||||||||
Severance/Restructuring exp. |
765 | 441 | 92 | 1,298 | 630 | 668 | 0 | 1,298 | ||||||||||||||||||||||||
Inventory fair value adjustment |
0 | 0 | 0 | 0 | 1,395 | 0 | 0 | 1,395 | ||||||||||||||||||||||||
M&A related costs |
45 | 0 | 0 | 45 | 0 | 0 | 2,954 | 2,954 | ||||||||||||||||||||||||
Mexico natural gas disputed charges |
414 | 871 | 572 | 1,857 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
Value chain transition |
909 | 1,466 | 9 | 2,384 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Adjusted EBITDA |
$ | 17,415 | $ | 12,119 | $ | 2,543 | $ | 32,077 | $ | 18,798 | $ | 14,441 | $ | 2,007 | $ | 35,246 | ||||||||||||||||
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|
|
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|
|
|
|
|
|||||||||||||||||
Nine Months Ended September 30, 2018 | Nine Months Ended September 30, 2017 | |||||||||||||||||||||||||||||||
FHN | IS | Other | Total | FHN | IS | Other | Total | |||||||||||||||||||||||||
EBITDA |
$ | 48,494 | $ | 26,772 | $ | 2,987 | $ | 78,253 | $ | 49,098 | $ | 31,666 | $ | 2,086 | $ | 82,850 | ||||||||||||||||
Non-cash stock compensation |
2,345 | 1,641 | 157 | 4,143 | 1,696 | 1,186 | 114 | 2,996 | ||||||||||||||||||||||||
Foreign exchange loss (gain) |
76 | 0 | 333 | 409 | (101 | ) | 0 | 66 | (35 | ) | ||||||||||||||||||||||
Severance/Restructuring exp.(inc.) |
1,527 | 922 | 132 | 2,581 | 1,295 | 1,303 | 26 | 2,624 | ||||||||||||||||||||||||
Inventory fair value adjustment |
0 | 0 | 0 | 0 | 1,395 | 0 | 0 | 1,395 | ||||||||||||||||||||||||
M&A related costs |
968 | 0 | 14 | 982 | 0 | 0 | 2,954 | 2,954 | ||||||||||||||||||||||||
Mexico natural gas disputed charges |
414 | 871 | 572 | 1,857 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
Value chain transition |
2,575 | 3,685 | 618 | 6,878 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Adjusted EBITDA |
$ | 56,399 | $ | 33,891 | $ | 4,813 | 95,103 | $ | 53,383 | $ | 34,155 | $ | 5,246 | $ | 92,784 | |||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
Segment Reporting
Three Months Ended September 30, | Nine Month Ended September 30, | |||||||||||||||
Segment Net Sales | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Food, Health and Nutrition |
$ | 115,132 | $ | 98,276 | $ | 367,159 | $ | 281,558 | ||||||||
Industrial Specialties |
65,667 | 67,682 | 195,767 | 198,721 | ||||||||||||
Other |
16,135 | 17,881 | 46,173 | 48,644 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 196,934 | $ | 183,839 | $ | 609,099 | $ | 528,923 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Sales % change |
||||||||||||||||
Food, Health and Nutrition |
17.2 | % | 30.4 | % | ||||||||||||
Industrial Specialties |
(3.0 | )% | (1.5 | )% | ||||||||||||
Other |
(9.8 | )% | (5.1 | )% | ||||||||||||
|
|
|
|
|||||||||||||
Total |
7.1 | % | 15.2 | % | ||||||||||||
|
|
|
|
|||||||||||||
Segment EBITDA |
||||||||||||||||
Food, Health and Nutrition |
$ | 14,563 | $ | 16,442 | $ | 48,494 | $ | 49,098 | ||||||||
Industrial Specialties |
8,885 | 13,491 | 26,772 | 31,666 | ||||||||||||
Other |
2,424 | (1,145 | ) | 2,987 | 2,086 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 25,872 | $ | 28,788 | $ | 78,253 | $ | 82,850 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Segment EBITDA % of net sales |
||||||||||||||||
Food, Health and Nutrition |
12.6 | % | 16.7 | % | 13.2 | % | 17.4 | % | ||||||||
Industrial Specialties |
13.5 | % | 19.9 | % | 13.7 | % | 15.9 | % | ||||||||
Other |
15.0 | % | (6.4 | )% | 6.5 | % | 4.3 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
13.1 | % | 15.7 | % | 12.8 | % | 15.7 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Depreciation and amortization expense |
||||||||||||||||
Food, Health and Nutrition |
$ | 7,142 | $ | 5,664 | $ | 21,677 | $ | 16,884 | ||||||||
Industrial Specialties |
3,153 | 3,488 | 10,257 | 10,346 | ||||||||||||
Other |
569 | 726 | 1,383 | 1,779 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 10,864 | $ | 9,878 | $ | 33,317 | $ | 29,009 | ||||||||
|
|
|
|
|
|
|
|
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 September 30, 2018 | Nine Months Ended September 30, 2018 | |||||||||||||||||||||||
Reportable Segments |
Price | Volume/Mix | Total | Price | Volume/Mix | Total | ||||||||||||||||||
Food, Health and Nutrition |
2.5 | % | 14.7 | % | 17.2 | % | 1.4 | % | 29.0 | % | 30.4 | % | ||||||||||||
Industrial Specialties |
6.3 | % | (9.3 | )% | (3.0 | )% | 4.1 | % | (5.6 | )% | (1.5 | )% | ||||||||||||
Other |
4.8 | % | (14.6 | )% | (9.8 | )% | 6.2 | % | (11.3 | )% | (5.1 | )% | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
4.1 | % | 3.0 | % | 7.1 | % | 2.9 | % | 12.3 | % | 15.2 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Summary Cash Flow Statement
INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
Nine Month Ended September 30, | ||||||||
2018 | 2017 | |||||||
Cash flows provided from operating activities |
||||||||
Net income |
$ | 31,251 | $ | 33,728 | ||||
Adjustments to reconcile net income to net cash provided from operating activities: |
||||||||
Depreciation and amortization |
33,317 | 29,009 | ||||||
Amortization of deferred financing charges |
322 | 322 | ||||||
Deferred income tax provision |
7,006 | (14 | ) | |||||
Gain on sale of building |
| (153 | ) | |||||
Share-based compensation |
4,143 | 2,996 | ||||||
Changes in assets and liabilities: |
||||||||
Increase in accounts receivable |
(2,272 | ) | (13,024 | ) | ||||
(Increase) decrease in inventories |
(23,094 | ) | 2,873 | |||||
(Increase) decrease in other current assets |
(9,362 | ) | 151 | |||||
Decrease in accounts payable |
(5,664 | ) | (7,566 | ) | ||||
Increase in other current liabilities |
10,291 | 1,666 | ||||||
Changes in other long-term assets and liabilities |
(15,071 | ) | (3,331 | ) | ||||
|
|
|
|
|||||
Net cash provided from operating activities |
30,867 | 46,657 | ||||||
|
|
|
|
|||||
Cash flows used for investing activities: |
||||||||
Capital expenditures |
(43,303 | ) | (24,650 | ) | ||||
Proceeds from sale of building |
| 1,028 | ||||||
Acquisition of businesses, net of cash acquired |
| (124,984 | ) | |||||
|
|
|
|
|||||
Net cash used for investing activities |
(43,303 | ) | (148,606 | ) | ||||
|
|
|
|
|||||
Cash flows provided by financing activities: |
||||||||
Long-term debt borrowings |
86,000 | 146,000 | ||||||
Long-term debt repayments |
(51,000 | ) | (36,000 | ) | ||||
Restricted stock forfeitures |
(251 | ) | (738 | ) | ||||
Dividends paid |
(28,197 | ) | (28,095 | ) | ||||
|
|
|
|
|||||
Net cash provided by financing activities |
6,552 | 81,167 | ||||||
|
|
|
|
|||||
Effect of foreign exchange rate changes on cash and cash equivalents |
181 | 27 | ||||||
|
|
|
|
|||||
Net change in cash |
(5,703 | ) | (20,755 | ) | ||||
Cash and cash equivalents at beginning of period |
28,782 | 53,487 | ||||||
|
|
|
|
|||||
Cash and cash equivalents at end of period |
$ | 23,079 | $ | 32,732 | ||||
|
|
|
|
Cash From Operations Reconciliation to EBITDA
(Dollars in thousands) | Three Months Ended September 30, | Nine Month Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
EBITDA |
$ | 25,872 | $ | 28,788 | $ | 78,253 | $ | 82,850 | ||||||||
Operating Working Capital |
(1,606 | ) | 2,296 | (25,474 | ) | (19,086 | ) | |||||||||
Taxes paid |
(3,792 | ) | (2,659 | ) | (16,590 | ) | (14,024 | ) | ||||||||
Interest paid |
(3,618 | ) | (1,606 | ) | (10,398 | ) | (4,291 | ) | ||||||||
All other including non-cash stock compensation and changes in other long-term assets and liabilities |
1,903 | 482 | 5,076 | 1,208 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net cash provided from operations |
$ | 18,759 | $ | 27,301 | $ | 30,867 | $ | 46,657 | ||||||||
|
|
|
|
|
|
|
|
Cash From Operations Reconciliation to Adjusted EBITDA
(Dollars in thousands) | Three Months Ended September 30, | Nine Month Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Adjusted EBITDA |
$ | 32,077 | $ | 35,246 | $ | 95,103 | $ | 92,784 | ||||||||
Operating Working Capital |
(6,659 | ) | (3,451 | ) | (38,181 | ) | (26,024 | ) | ||||||||
Taxes paid |
(3,792 | ) | (2,659 | ) | (16,590 | ) | (14,024 | ) | ||||||||
Interest paid |
(3,618 | ) | (1,606 | ) | (10,398 | ) | (4,291 | ) | ||||||||
All other including changes in other long-term assets and liabilities |
751 | (229 | ) | 933 | (1,788 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net cash provided from operations |
$ | 18,759 | $ | 27,301 | $ | 30,867 | $ | 46,657 | ||||||||
|
|
|
|
|
|
|
|
Free Cash Flow Reconciliation to Cash From Operations
(Dollars in thousands) | Three Months Ended September 30, | Nine Month Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Cash From Operations |
$ | 18,759 | $ | 27,301 | $ | 30,867 | $ | 46,657 | ||||||||
Capital Expenditures |
(14,277 | ) | (8,573 | ) | (43,303 | ) | (24,650 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Free Cash Flow |
$ | 4,482 | $ | 18,728 | ($ | 12,436 | ) | $ | 22,007 | |||||||
|
|
|
|
|
|
|
|
Summary Balance Sheets
INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars In thousands)
September 30, 2018 |
December 31, 2017 |
|||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 23,079 | $ | 28,782 | ||||
Accounts receivable, net |
103,092 | 100,820 | ||||||
Inventories |
168,746 | 145,685 | ||||||
Other current assets |
34,282 | 24,969 | ||||||
|
|
|
|
|||||
Total current assets |
329,199 | 300,256 | ||||||
Property, plant and equipment, net |
232,408 | 219,297 | ||||||
Assets held for sale |
6,975 | | ||||||
Goodwill |
152,767 | 152,700 | ||||||
Intangibles and other assets, net |
98,891 | 112,916 | ||||||
|
|
|
|
|||||
Total assets |
$ | 820,240 | $ | 785,169 | ||||
|
|
|
|
|||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Current portion of capital leases |
$ | 4 | $ | 4 | ||||
Accounts payable, trade and other |
64,784 | 70,445 | ||||||
Other current liabilities |
53,393 | 43,084 | ||||||
|
|
|
|
|||||
Total current liabilities |
118,181 | 113,533 | ||||||
Long-term debt |
345,003 | 310,005 | ||||||
Other long-term liabilities |
16,387 | 28,072 | ||||||
Total stockholders equity |
340,669 | 333,559 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders equity |
$ | 820,240 | $ | 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 2018 and 2019 GAAP net income given the dynamic nature of the strategic value chain repositioning program expenses 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 2018, 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.