Innophos takes $12M write-down

Cranbury, N.J.-Specialty phosphate maker Innophos Holdings said Oct. 13 that it has learned that the Mexican Supreme Court affirmed an appellate court ruling upholding resolutions of the Mexican National Waters Commission, or CNA, requiring the company’s Mexican subsidiary, Innophos Fosfatados S.A. de C.V., to pay higher water duties for the 1998-2002 period. Innophos said the liability, net of income taxes, amounted to approximately $20 million at current exchange rates, and reiterated that it was fully indemnified for it by Rhodia, S.A., and affiliates under agreements by which Innophos purchased its business from those parties in 2004. Rhodia’s indemnity obligation was previously confirmed by New York’s highest court. Innophos stated it intended to record the liability and an off-setting receivable for the indemnity, resulting in no net charge. Innophos said the next step in the 1998-2002 case would be for the CNA to issue new resolutions consistent with the court ruling, and once those resolutions became effective, to make payment. Innophos said its representatives were working with Rhodia representatives to coordinate required payments in a timely manner. The company also announced that, as a result of the latest court decision, it was taking an earnings charge in the 2010 third quarter, net of taxes, of $12 million for a related, previously disclosed contingent liability for higher water duties for the period 2005 to present. That contingent liability is already the subject of an indemnity claim in pending New York State Supreme Court proceedings being pursued by Innophos against Rhodia for related losses. Finally, Innophos added that, if future rates were set at the levels upheld in the court decision, annual pre-tax expenses for water at its Coatzacoalcos, Mexico facility could increase by approximately $1-2 million at current exchange rates, depending on capacity utilization. In other news, Innophos said its board of directors declared a dividend of $0.17 per share of common stock. The dividend will be payable Oct. 29, 2010, to stockholders of record as of the close of business on Oct. 18, 2010.