GAAP Diluted EPS $0.98 vs. Loss of $(0.01)
Excluding Special Items, Diluted EPS $1.07 vs. $0.68
NEWARK, Del., Feb. 15, 2011 (GLOBE NEWSWIRE) -- Innospec Inc. (Nasdaq:IOSP) today announced its financial results for the fourth quarter and full year ended December 31, 2010.
Total net sales for the fourth quarter were $177.3 million, an 8% increase from $164.2 million in the corresponding period last year. Net income was $24.3 million, or $0.98 per diluted share, compared with a net loss of ($0.3) million, or ($0.01) per share, a year ago. EBITDA (earnings before interest, taxes, depreciation, amortization and impairment) for the quarter was $21.6 million, up significantly from $6.1 million a year ago.
Results for the fourth quarter include several special items, which are summarized in the table below. For the fourth quarter of 2010, these items had a combined negative impact on net income of $2.1 million, or $0.09 per diluted share; a year ago, similar items reduced net income by $17.3 million, or $0.69 per diluted share. Excluding these items from both periods, diluted earnings per share for the fourth quarter of 2010 were $1.07, a 57% increase from $0.68 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.
"Our core Fuel Specialties and Active Chemicals businesses both delivered strong revenue and unit volume growth in the fourth quarter, despite significant headwinds in December from adverse weather conditions causing production delays at our manufacturing plants in both the U.S. and Europe," said Patrick Williams, President and Chief Executive Officer. "Margin pressure in Fuel Specialties – reflecting sharp increases in raw material costs – was largely offset by record profits in Active Chemicals. Under the circumstances, we are very pleased to report a 57% increase for the quarter in earnings per share excluding special items."
For the full year, total revenues of $683.2 million were up 14% from $598.5 million in 2009. Net income for 2010 was $73.7 million, or $2.97 per diluted share, compared with $6.4 million, or $0.26 per diluted share, a year ago. EBITDA for the year was $91.5 million, compared with $42.9 million in 2009. Special items reduced net income for the year by $8.7 million, or $0.35 per diluted share; in 2009, similar items reduced net income by $48.6 million, or $1.96 per diluted share. Excluding these items from both periods, diluted earnings per share for the year were $3.32, a 50% increase from $2.22 in 2009.
Net sales in Fuel Specialties for the quarter were $127.2 million, a 9% increase from $117.0 million in last year's fourth quarter. By region, sales rose 15% in the Americas and 9% in the Asia-Pacific region, but were flat in the Europe, Middle East and Africa (EMEA) region. The segment's gross margin for the quarter was 30.9%, compared with 36.0% a year ago, and its operating income was $19.7 million, down 18%. For the full year, the segment's sales were up 8%, to $458.1 million, and operating income declined 5% to $77.6 million.
In Active Chemicals, net sales for the quarter were $39.0 million, up 20% from a year ago. By region, sales increased 35% in the Americas, 10% in the EMEA region, and 12% in the Asia-Pacific region. The segment's gross margin for the quarter was 23.8%, compared with 18.5% a year ago, and operating income of $4.7 million was up sharply from $1.1 million in last year's fourth quarter. Sales for the full year increased 17%, to $152.7 million, and operating income of $16.7 million was almost double the $8.8 million reported in 2009.
Octane Additives' net sales for the quarter were $11.1 million, down 24% from $14.7 million a year ago. Its gross margin for the quarter was 56.8%, compared with 20.4% a year ago. The segment's operating income for the quarter was $1.1 million, compared with a $20.7 million operating loss in last year's fourth quarter (which included a $21.9 million settlement accrual related to the United Nations Oil for Food Program and FCPA investigations). For the year, Octane Additives' sales were $72.4 million, up 59%, and its operating income was $25.8 million, compared with a $44.8 million operating loss in 2009 (after $53.1 million in charges and investigation expenses).
Corporate costs for the quarter were $7.1 million, including $1.4 million in retention bonuses, compared with $3.1 million a year ago (which included a $2.5 million benefit from a United Kingdom sales tax settlement). Innospec also incurred a $2.4 million pre-tax non-cash charge related to its pension plan, compared with a $1.7 million charge a year ago. Excluding the impact of the OFFP/FCPA settlement accrual and the adjustment of income tax provisions, the full year effective tax rate was 13.6%, compared to 24.3% in 2009.
During 2010, the Company made excellent progress in reducing future liabilities related to its United Kingdom defined benefit pension plan. The initiatives included closure of the plan to future service accrual and other management actions that reduced projections of the long-term liability; the plan also benefited from improved investment returns. As a result, the pension liability on the Company's balance sheet was $11.7 million as of December 31, 2010, down sharply from $124.2 million a year ago. In addition, Innospec expects its quarterly charges related to the pension plan to decline significantly in 2011.
Net cash generated from operations was $15.8 million for the quarter, driven primarily by strong operating income. At year-end, Innospec had $111.3 million in cash and cash equivalents, $64.3 million more than its total debt of $47.0 million. The Company repurchased 125,645 Innospec shares during the quarter under its Rule 10b5-1 repurchase plan, for approximately $2.5 million.
Mr. Williams concluded, "On balance, 2010 was a very successful year for Innospec. We achieved a 50% increase in earnings per share excluding special items and improved our net cash position by approximately $47 million. Our ongoing businesses in Fuel Specialties and Active Chemicals made good strategic progress and are well-positioned to drive continued organic growth, and we clearly have the financial flexibility and resources to consider potential acquisitions to supplement our growth strategy."
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 adjustment of income tax provisions, pension charge, restructuring charge, civil complaint legal and professional expenses, OFFP/FCPA legal and professional expenses, OFFP/FCPA settlement accrual, foreign exchange gains, retention bonuses, gain on stock options forfeited and prior years' United Kingdom sales tax settlement. 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.
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, 2009, 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
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