EBITDA (earnings before interest, taxes, depreciation, amortization and impairment) for the quarter was $16.0 million, compared with $19.6 million a year ago.
For the first quarter of 2009, these items had a combined negative impact on net income of $9.5 million, or $0.39 per diluted share; a year ago, similar items reduced net income by $7.9 million, or $0.32 per diluted share. Excluding these items from both periods, diluted earnings per share for the first quarter of 2009 were $0.65, a 5% increase from $0.62 a year ago.
“We are very pleased with our first quarter operating results given the challenging conditions we are facing across all our global markets,” said Patrick Williams, president and chief executive officer. “Fuel Specialties again delivered excellent results, and Active Chemicals’ performance improved significantly from the fourth quarter despite continued weakness in its non-core polymers business. In Octane Additives, results excluding legal and professional expenses were down but essentially in line with our expectations, primarily reflecting the timing of certain shipments.”
In the Fuel Specialties segment, operating income for the quarter was $27.2 million, a 15% increase from $23.6 million a year ago. The segment’s gross margin was 37.4%, compared with 34.4% a year ago. Its net sales for the quarter declined 1%, to $113.5 million. By region, sales rose 9% in the Americas, were unchanged in the Europe, Middle East and Africa (EMEA) region, and declined 17% in the Asia-Pacific region.
Williams commented, “Unit volumes in Fuel Specialties’ key Americas and EMEA regions were flat to slightly positive – and significantly stronger than their markets. We continue to grow our share of the global fuel additives market through innovative new products and our service-oriented approach. However, we expect the segment’s yearover- year comparisons to become increasingly challenging in successive quarters as demand has clearly softened.”
Active Chemicals reported operating income for the quarter of $1.2 million, compared with $0.1 million a year ago. The segment’s gross margin was 17.4%, up from 13.5% a year ago, and significantly improved from 5.7% in last year’s fourth quarter. Net sales in Active Chemicals were $29.3 million, down 17% from last year’s first quarter. By region, sales declined 12% in the Americas and 27% in the EMEA region, but were up 14% in the Asia-Pacific region. Excluding the polymers business, the segment’s net sales declined 4% and its gross margin was 19.3%, compared with 14.7% a year ago.
The Octane Additives segment reported a $5.8 million operating loss for the quarter, compared with a $3.0 million loss a year ago. These results include $7.0 million in legal and professional expenses and accruals in respect of the United Nations Oil for Food Program and related investigations for the first quarter of 2009, compared with $6.8 million in similar expenses a year ago. The segment’s gross margin for the quarter was 50.9%, up from 40.3% a year ago. Octane Additives’ net sales for the quarter were $5.3 million, down 72%.
Corporate costs for the quarter were $1.0 million, compared with $6.0 million a year ago, reflecting a pre-tax $2.4 million gain on stock options forfeited upon resignation of the company’s former chief executive officer, the pound’s weakness against the dollar and continued tight cost controls. After-tax non-cash foreign exchange losses recognized in the quarter were $4.9 million, compared with gains of $0.4 million a year ago. The company also incurred a $1.5 million pre-tax non-cash charge related to its pension plan, compared with a $0.6 million charge a year ago. The effective tax rate for the quarter was 32.6%, compared with 37.6% a year ago.
The company generated net cash from operations of $27.2 million for the quarter. As of March 31, 2009, Innospec had net debt of $37.5 million, compared with stockholders’ equity of $235.0 million. As previously reported, the company successfully negotiated a new three-year $150 million finance facility during the first quarter.
Williams concluded, “I am confident that our aggressive executive management team, relentless research and development efforts and proven service programs will prevail over economic forces to continue strengthening our business. In the long term, Innospec is well-positioned to deliver robust growth at attractive margins in its chosen Fuel Specialties and Active Chemicals markets.”
