Innophos Holdings, Inc. (Form: 10-K, Received: 02/27/2019 16:11:51)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON DC, 20549

_______________________________________________________________________________________________

FORM 10-K

_______________________________________________________________________________________________



ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

_______________________________________________________________________________________________

INNOPHOS HOLDINGS, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

_______________________________________________________________________________________________



Delaware (state or other jurisdiction of incorporation)	001-33124 (Commission File number)	20-1380758 (IRS Employer Identification No.)

259 Prospect Plains Road

Cranbury, New Jersey 08512

(Address of Principal Executive Officer, including Zip Code)

(609) 495-2495

(Registrants’ Telephone Number, Including Area Code)

Not Applicable

(Former name or former address, if changed since last report)

_______________________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, par value $.001 per share		Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ý Yes ¨ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes ý No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definition of “accelerated filer,” “large accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ý Accelerated Filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨ 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. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes ý No

The aggregate market value of the voting common equity held by non-affiliates of the registrant was approximately $0.8 billion as of June 30, 2018, the last business day of the Registrant’s most recently completed second quarter (based on the Nasdaq Global Select Market closing price on that date).

As of February 21, 2019, the registrant had 19,612,192 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE



Document		Incorporated By Reference In Part No.
Portions of Innophos Holdings, Inc. Proxy Statement to be filed for its Annual Meeting of Stockholders to be held May 14, 2019		III (Items 10, 11, 12, 13 and 14)

Page 1 of 89

Table of Contents

TABLE OF CONTENTS



		Page
PART I

Item 1.	Business	4
Item 1A.	Risk Factors	11
Item 1B.	Unresolved Staff Comments	20
Item 2.	Properties	20
Item 3.	Legal Proceedings	20
Item 4.	Mine Safety Disclosures	20

PART II

Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	21
Item 6.	Selected Financial Data	23
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 8.	Consolidated Financial Statements and Supplementary Data	40
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	84
Item 9A.	Controls and Procedures	84
Item 9B.	Other Information	84

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	85
Item 11.	Executive Compensation	85
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	85
Item 13.	Certain Relationships and Related Transactions and Director Independence	85
Item 14.	Principal Accounting Fees and Services	85

PART IV

Item 15.	Exhibits, Financial Statement Schedules	86

Item 16.	Form 10-K Summary	86

Signatures

Page 2 of 89

Table of Contents

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “should,” “will,” or “would,” and/or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.

Although we believe that we have a reasonable basis for each forward-looking statement contained in this Annual Report on Form 10-K, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain. The forward-looking statements in this Annual Report on Form 10-K may include, among other things, statements about: (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) our ability to implement and refine our Vision 2022 growth plan; (5) our ability to successfully identify and complete acquisitions in line with our Vision 2022 growth plan and effectively operate and integrate acquired businesses to realize the anticipated benefits of those acquisitions; (6) our ability to realize expected cost savings and efficiencies from our performance improvement and other optimization initiatives; (7) our ability to effectively compete in our markets, and to successfully develop new and competitive products that appeal to our customers; (8) changes in consumer preferences and demand for our products or a decline in consumer confidence and spending; (9) our ability to benefit from our investments in assets and human capital and the ability to complete projects successfully and on budget; (10) economic, regulatory and political risks associated with our 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 our supply chain or our relationship with our suppliers; (13) our ability to comply with, and the costs associated with compliance with, U.S. and foreign environmental protection laws; (14) our ability to meet quality and regulatory standards in the various jurisdictions in which we have operations or conduct business; and (15) other information that is not historical information.

You should refer to “Part I, Item 1A. Risk Factors” of this Annual Report on Form 10-K for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Annual Report on Form 10-K will prove to be accurate. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete discussion of all potential risks or uncertainties that may substantially impact our business. Moreover, we operate in a competitive and rapidly changing environment. New factors emerge from time to time and it is not possible to predict the impact of all of these factors on our business, financial condition or results of operations.

Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

You should read this Annual Report on Form 10-K and any documents that we reference in this report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

_______________________________________________________________________________________________

Unless the context otherwise indicates, all references in this Annual Report on Form 10-K to the “Company,” “Innophos,” “we,” “us” or “our” or similar words are to Innophos Holdings, Inc. and its consolidated subsidiaries. Innophos Holdings, Inc. is a Delaware corporation and was incorporated on July 15, 2004.

_______________________________________________________________________________________________

This Annual Report on Form 10-K includes trademarks, service marks and trade names owned by us or other companies. All trademarks, service marks and trade names included in this Annual Report on Form 10-K are the property of their respective owners.

Page 3 of 89

Table of Contents

PART I


ITEM 1.	BUSINESS

Our Company

Innophos is a leading international producer of specialty ingredient solutions that deliver 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.

Innophos combines more than a century of experience in specialty phosphate manufacturing with a broad range of other specialty nutritional ingredients. Utilizing our capabilities in consumer insight, research and product development and application expertise, we partner with our customers to provide differentiated product offerings that respond to consumer preferences and megatrends. We utilize this collaborative approach in order to attempt to generate market share gains for our customers.

Many of Innophos’ products are application-specific compounds engineered to meet customer performance requirements and are often critical to the taste, texture, performance or nutritional content of foods, beverages, pharmaceuticals, oral care products and other applications. For example, Innophos products act as flavor enhancers in beverages, electrolytes in sports drinks, texture additives in cheeses, leavening agents in baked goods, pharmaceutical excipients and cleaning agents in toothpaste, and they also provide a wide range of nutritional fortification solutions for food, beverage and nutritional supplement manufacturers.

Innophos’ product offering includes a wide array of botanical, enzyme and mineral based nutritional ingredients. These products have various applications in the food, beverage and dietary supplement end markets such as weight management, men and women health, digestive health, and cognitive health among others. Innophos’ 2017 acquisitions of Novel Ingredients and NutraGenesis substantially expanded Innophos’ portfolio of nutritional ingredients, which is a market that Innophos intends to continue to target for future growth of its food, health and nutrition segment.

Innophos commenced operations as an independent company in August 2004 after purchasing its North American specialty phosphates business from affiliates of Rhodia, S.A., or Rhodia, which has been a part of Solvay S.A. since 2011. In November 2006, Innophos completed an initial public offering and listed its common stock for trading on the Nasdaq Global Select Market under the symbol “IPHS”.

Our Segments and Products

We report our business in three segments: Food, Health and Nutrition; Industrial Specialties; and Other. We have three principal product lines within these reporting segments: (i) Specialty Ingredients; (ii) Core Ingredients; and (iii) Co-Products and Other. Our Food, Health and Nutrition reporting segment as well as our Industrial Specialties reporting segment consist of products in the Specialty Ingredients and Core Ingredients product lines. The Other reporting segment consists of products in the Co-Products and Other product line.

In 2018, we achieved sales of $801.8 million, of which 60% can be attributed to our Food, Health and Nutrition segment, 32% can be attributed to our Industrial Specialties segment, and 8% can be attributed to our Other segment.

Specialty Ingredients

Specialty Ingredients are the most value adding products in our portfolio. Specialty Ingredients consist of specialty phosphate products, specialty phosphoric acids, including polyphosphoric acid, and a range of other mineral, enzyme and botanical based specialty ingredients. With our 2017 acquisitions of Novel Ingredients and NutraGenesis, we have continued to grow our portfolio of nutritional ingredients, strongly supported by technology. Our Specialty Ingredients products have a wide range of applications, including:


•	flavor enhancers in beverages;


•	electrolytes in sports drinks;


•	texture modifiers in cheeses;


•	leavening agents in baked goods;


•	calcium and phosphorus fortification in food and beverages;


•	moisture and color retention in seafood, poultry and meat;


•	mineral, enzyme and botanical sources for a wide variety of fortified foods, beverages and dietary supplements;


•	excipients in vitamins, minerals, nutritional supplements and pharmaceuticals; and


•	abrasives in toothpaste.

Page 4 of 89

Table of Contents

Each product typically has a number of different applications and end uses. For example, our dicalcium phosphate product can be used as an excipient for pharmaceutical and dietary supplements, a leavening agent in bakery products and as an abrasive in oral care products. We often work directly with customers to tailor products to their required specifications for their finished product application.

Core Ingredients

Our Core Ingredients product line includes food grade purified phosphoric acid, or PPA, technical grade PPA, sodium tripolyphosphate, or STPP, and detergent grade PPA. Food grade PPA can be used to produce phosphate salts and has a variety of applications in food and beverages. Technical grade PPA has applications in water treatment. We also sell technical grade PPA in the merchant market to third-party phosphate derivative producers. STPP is a key ingredient in cleaning products, including industrial and institutional cleaners and automatic dishwashing detergents and consumer laundry detergents outside the United States. In addition to its use in cleaning products, STPP is also used in water treatment, clay processing, and copper ore processing. The end use market for STPP is largely derived from consumer product applications. Detergent Grade PPA is a lower grade form of PPA used primarily in the production of STPP.

Co-Products and Other

Our Co-Products and Other product line includes granular triple super phosphate, or GTSP, and merchant green phosphoric acid, or MGA. GTSP is generated at our Coatzacoalcos facility in Mexico as a co-product of our purified wet acid manufacturing process described further below under “Manufacturing”. GTSP is a fertilizer product used throughout Latin America for increasing crop yields in a wide range of agricultural sectors. We sell MGA in the merchant market to third party manufacturers of fertilizer products.

Our Industry

Each of the industries in which we have a presence is competitive in nature.

In connection with our Specialty Ingredients products, we face competition with respect to our phosphate products, as well as our botanical, enzyme and mineral based nutritional ingredients. Many of our phosphate products are viewed as basic ingredients that compete with virtually identical products and derivatives manufactured by other companies in the industry, including companies that utilize the thermal acid method of production described below under “Manufacturing.” North America is a competitive market for phosphates with several competitors importing products from overseas. Our major competitor in the downstream specialty phosphates industry is Israel Chemicals Limited, or ICL. We also compete in the specialty phosphates industry with imports from Germany, Belgium, Israel, Russia, North Africa and China. In recent years, we have faced increasing competition from imports, including domestically located production facilities owned by foreign based organizations. In addition, in recent years, we have experienced pricing pressure from overseas imports, which we expect to continue for the foreseeable future.

Our major PPA competitor is Nutrien Ltd., or Nutrien, formed on January 1, 2018 by the merger of Potash Corporation of Saskatchewan Inc., a global fertilizer company for which specialty phosphates represents only a small part of its business, with Agrium Inc. We consume the majority of our PPA production in our downstream operations and sell the remainder externally, where we compete with Nutrien. We also compete with PPA imports from China, Belgium and Israel.

Our major North American STPP competitor is Mexichem, S.A.B. de C.V., or Mexichem, in Mexico. We also compete with STPP imports from North Africa, Europe, Russia and China. Over the past several decades, there have been regulatory-driven efforts to reduce the use of STPP in consumer and institutional cleaners and it was essentially eliminated in consumer automatic dishwashing applications in the United States and Canada in 2010. The industrial and institutional cleaner market has also reformulated some of its products to reduce STPP content.

We are not a significant supplier to the GTSP or MGA fertilizer markets, and sell our GTSP co-product via a tolling arrangement that was initially established in December 2016.

Our nutritional ingredients business faces competition from a larger number of competitors as the industries in which we compete in connection with this business are highly fragmented. Our competitors in the nutritional ingredients space are multiple, and include Balchem Corporation, Jost Chemical Company, Naturex Inc. and BI Nutraceuticals Inc. to name a few.

For a discussion of the risks associated with the competition that we face in our markets, see “Part I, Item 1A. Risk Factors-Risks Related to Our Business Operations-Competition -The success of our business depends on our ability to successfully compete in competitive markets.” appearing elsewhere in this Annual Report on Form 10-K.

Our Customers

Page 5 of 89

Table of Contents

We supply a broad range of customers in over 70 countries worldwide. No customer accounted for more than ten percent of our net sales in 2018, 2017 or 2016. For the years ended December 31, 2018, 2017 and 2016, we generated net sales of $801.8 million, $722.0 million and $725.3 million, respectively.

Our customer base is principally composed of consumer goods manufacturers, specialty chemical manufacturers and distributors. Our customers manufacture products such as soft drinks, sports drinks and juices, various food products and dietary supplements, oral care products, petroleum and petrochemical products, and various cleaners and detergents. Our customers include major consumer goods manufacturers with global market recognition in the food, beverage, pharmaceutical and cleaning product markets. We have maintained long-term relationships with the majority of our key customers, with the average customer relationship having lasted over 15 years, and some relationships spanning many decades. Because our Specialty Ingredient products provide critical functionality and typically represent only a small percentage of our customers’ total end-product cost, our customers generally tend not to frequently change key raw materials or suppliers, especially in highly recognized brands in the food, health and nutrition markets.

Manufacturing

We currently have twelve manufacturing plants located in the United States, Canada, Mexico and China supporting our phosphates and nutrition ingredients products.

The production of specialty phosphates begins with phosphate rock, which can be processed in two alternative ways to produce PPA: (i) the thermal acid method, in which elemental phosphorus is combusted in a furnace and subsequently hydrated to produce PPA; or (ii) the purified wet acid method utilized by Innophos, in which mined phosphate rock is reacted with an acid (most often sulfuric acid) to produce MGA, which is then purified through solvent-based extraction into PPA. The conversion of MGA into PPA is a technically complex and a capital-intensive process. PPA can be sold or reacted with appropriate mineral salts or inorganic compounds to produce various specialty phosphate products as required.

We also produce a wide range of botanical, enzyme and mineral based ingredients as part of our nutrition business through a variety of customized production processes resulting in an extensive suite of product formulations.

Raw Materials and Energy

We purchase a range of raw materials and energy sources on the open market, including phosphate rock, sulfur and sulfuric acid, MGA, PPA, nutritional ingredients, natural gas and electricity. To help secure supply, we purchase several of our key raw materials under multi-year contracts generally providing for fixed or minimum quantities of materials, or purchase of our full requirements, and predetermined pricing formulae based on various market indices and other factors. We do not engage in any significant futures or other derivative contracts to hedge against fluctuations of raw materials. We rely on unaffiliated third parties to provide our raw materials, a result of which is that raw materials acquisition at economical price levels is an important risk of our business. See “Part I, Item 1A. Risk Factors - Raw Materials Availability and Pricing - The success of our business depends on our ability to successfully source sufficient amounts of the raw materials used in our products at competitive prices, often from a limited number of suppliers, some of whom with we do not have a long-term contract in place” in this Annual Report on Form 10-K for a discussion of the risks associated with our sourcing raw materials.

Phosphate Rock and MGA. MGA, which is purified to produce PPA, is the main raw material for the creation of our downstream salts and acids. We currently purchase the MGA for processing at our Geismar, Louisiana facility through a variety of suppliers, including a contract with Nutrien that expires in July 2021. We also source significant quantities internally from our Coatzacoalcos facility in Mexico, where we typically purchase phosphate rock in order to produce MGA. We upgraded our Coatzacoalcos facility to handle alternative grades of rock, which has increased our internal PPA supply and reduced our dependence on any single supplier. In addition to our primary sources, we have options for other spot suppliers and will continue to qualify and develop additional sources for potential future supply.

Sulfur and Sulfuric Acid. Sulfur is the key raw material used in the production of sulfuric acid, a key raw material used in the production of MGA by the wet method. We produce the vast majority of the sulfuric acid required to operate our Coatzacoalcos facility. Our U.S. needs for sulfuric acid and our Mexican needs for sulfur are handled through contracts with third parties.

Purified Phosphoric Acid. The key raw material input for all of our downstream specialty phosphate salt and specialty phosphoric acid operations is PPA. In addition to purifying MGA to produce PPA internally, we also purchase certain quantities of our PPA supply from third parties to optimize our consumption and net sales, including from Nutrien with whom we have a supply contract for PPA (distinct from the supply contract for MGA) which will expire in July 2021, as well as Euro Maroc Phosphate (Emaphos), with whom we have a supply contract through December 2019. We continue to qualify and develop additional sources of PPA. In 2018, we produced approximately 70% and purchased approximately 30% of our total PPA supply.

Page 6 of 89

Table of Contents

Nutritional Ingredients. We purchase a variety of botanicals, enzymes and minerals on the international open market for distribution, further processing, packaging and/or branding for our chosen food, beverages and dietary supplement end markets. We typically rely on spot suppliers, and in certain limited cases, short-term contracts, for our botanical, enzyme and mineral needs.

Natural Gas and Electricity. Natural gas and electricity are used to operate our facilities and generate heat and steam for the various manufacturing processes. We typically purchase natural gas and electricity on the North American open market at so-called “spot rates.” From time to time, we may enter into longer term natural gas and electricity supply contracts in an effort to eliminate some of the volatility in our energy costs. We did not enter into any economic hedges in the past three years.

Research and Development

Our new product and application development activities are aimed at developing and enhancing products, processes and applications by offering differentiated, technology-based solutions to our customers and thereby strengthening our position in the markets we serve. We focus on:


•	developing new or improved application-specific specialty ingredients based on our existing product line and identified or anticipated customer needs;


•	creating new products to be used in new applications or to serve new markets;


•	providing customers with premier technical services as they integrate our ingredients into their products and manufacturing processes;


•	ensuring that our products are manufactured in accordance with our stringent regulatory, health and safety policies and objectives and applicable law;


•	developing more efficient and lower cost manufacturing processes; and


•	expanding existing, and developing new, relationships with customers to meet their product application needs.

Environmental and Regulatory Compliance

Certain of our operations involve manufacturing and marketing ingredients for use in food, nutritional supplement and pharmaceutical excipient products, and therefore must comply with U.S. Food and Drug Administration, or FDA, or the U.S. Department of Agriculture, or USDA, regulatory controls and similar regulatory controls of foreign jurisdictions where we have operations or conduct business, as well as good manufacturing practices and the quality requirements of our customers. The regulation of, and legal requirements for, the manufacture and marketing of our products is a changing environment, and those changes may require increased operating costs to develop and implement additional quality assurance and product safety measures. Although there is some harmonization among the regulatory requirements of various jurisdictions, each country’s specific regulatory requirements apply to products imported and marketed in that country. Regulatory systems throughout the world vary in complexity and transparency, as well as the time required to navigate such system in order to enter the subject market. Our growth that involves expansion of existing products into new markets or new products into current or new markets is affected by our ability to establish a recognized regulatory status for such products, to obtain necessary regulatory approvals and achieve and maintain compliance with regulatory requirements. In addition, public perception in the United States, Europe and other markets of products we offer for sale in relation to their safety and other market and legal trends related to “natural”, “organic“ and “clean labeling” in foods also may affect our sales and operations.

In addition, our operations that involve the use, handling, processing, storage, transportation and disposal of hazardous materials are subject to extensive and frequently changing environmental regulation by federal, state, and local authorities, including, but not limited to, the U.S. Environmental Protection Agency and the U.S. Federal Railroad Administration, or FRA, as well as regulatory authorities with jurisdiction over our operations in Canada, Mexico and China. Our operations also expose us to the risk of claims for environmental remediation and restoration or for exposure to hazardous materials. Our production facilities require operating permits that are subject to renewal or modification. Violations of health and safety and environmental laws, regulations, or permits may result in restrictions being imposed on operating activities, substantial fines, penalties, damages, the rescission of an operating permit, third-party claims for property damage or personal injury, or other costs, any of which could have a material adverse effect on our business, financial condition, results of operations, or cash flows. Due to changes in health and safety and environmental laws and regulations, the time frames when those laws and regulations might be applied, and developments in environmental control technology, we cannot predict with certainty the amount of capital expenditures to be incurred for environmental purposes.

Some environmental laws and regulations impose liability and responsibility on present and former owners, operators or users of facilities, and sites for contamination at such facilities and sites without regard to causation or knowledge of contamination. Many of our sites have an extended history of industrial use. Soil and groundwater contamination have been detected at some of our sites, and additional contamination might occur or be discovered at these sites or other sites in the future (including sites to which we may have sent hazardous waste). We continue to investigate, monitor or cleanup contamination at most of these sites.

Page 7 of 89

Table of Contents

The potential liability for all these sites will depend on several factors, including the extent of contamination, the method of remediation, future developments and increasingly stringent regulation, the outcome of discussions with regulatory agencies, the liability of third parties, potential natural resource damage and insurance coverage. Liabilities for environmental matters are recorded in the accounting period in which our responsibility is established and the cost can be reasonably estimated. Due to the uncertainties associated with environmental investigations, cleanups and other obligations, as well as the ongoing nature of the investigations, cleanups and other obligations at our sites, we are unable to predict precisely the nature, cost and timing of our future remedial obligations with respect to our sites and, as a result, our actual environmental costs and liabilities could significantly exceed our accruals.

Further information, including the current status of significant environmental matters and the financial impact incurred for the remediation of such environmental matters, is included in Note 16 (Commitments and Contingencies) of the Notes to Financial Statements in "Part II, Item 8. Consolidated Financial Statements and Supplementary Data" and in “Part I, Item 1A. Risk Factors - Legal, Regulatory and Quality Risks - We are subject to a wide variety of laws, regulations and government policies, including with respect to product quality and labeling and the environment, which may change in significant ways.” and "Evolving Regulatory Standards - Our products may be negatively impacted as a result of evolving regulatory standards." appearing elsewhere in this Annual Report on Form 10-K.

Intellectual Property

We rely on a combination of patent, copyright and trademark laws to protect certain key intellectual aspects of our business. In addition, our pool of proprietary information, consisting of manufacturing know-how, trade secrets and unregistered copyrights relating to the design and operation of our facilities and systems, is considered particularly important and valuable. Accordingly, we seek to protect proprietary information through all legal means practicable. However, monitoring the unauthorized use of our intellectual property is difficult, and the steps we have taken may not prevent all unauthorized use by others.

Insurance

In the normal course of business, we are subject to numerous operating risks, including risks associated with environmental contamination, health and safety issues and compliance with food safety laws, while manufacturing, developing, marketing and supplying products.

We currently have in force insurance policies covering property, general liability, excess liability, workers’ compensation, employer’s liability, product liability, product recall, fiduciary and other coverages. We seek to maintain coverages consistent with market practices and required by those customers with whom we do business. Where appropriate for the protection of our property and interests, we also require others with whom we do business to provide certain coverages for our benefit. We believe that we are appropriately insured for the insurable risks associated with our business.

Employees

As of December 31, 2018, we had 1,485 employees at our facilities worldwide, of whom 813 were unionized hourly wage employees. We currently employ both union and non-union employees at most of our facilities. We have experienced no work stoppages or strikes at any of our unionized facilities since acquiring them in 2004. We are a party to a collective bargaining agreement with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, Local No. 7-765 to January 16, 2020 at the Chicago Heights, Illinois facility; International Union of Operating Engineers, Local No. 369 through April 18, 2019 at the Nashville, Tennessee facility; the Health Care, Professional, Technical, Office, Warehouse and Mail Order Employees Union, affiliated with the International Brotherhood of Teamsters, Local 743 to June 17, 2020 at the Chicago (Waterway), Illinois facility; the United Steelworkers, Local No. 6304 through April 30, 2020 at the Port Maitland, Ontario Canada facility; and the Sindicato de Trabajadores de la Industria Química, Petroquímica, Carboquímica, Gases, Similares y Conexos de la República Mexicana, at the Mexico facilities. The agreement at the Coatzacoalcos, Mexico facility is for an indefinite period, but wages are reviewed every year and the rest of the agreement is subject to negotiation every two years (next scheduled for June 2020).

Page 8 of 89

Table of Contents

Executive Officers

The following table and biographical material present information about the persons serving as our executive officers:



Name	Age	Position
Kim Ann Mink	59	Chairman, Chief Executive Officer and President
Han Kieftenbeld	53	Senior Vice President and Chief Financial Officer
William Dunworth	42	Vice President, Corporate Controller and Chief Accounting Officer
Sherry Duff	51	Senior Vice President, Chief Marketing and Technology Officer
Amy Hartzell	43	Senior Vice President, Supply Chain and Purchasing
Joshua Horenstein	42	Senior Vice President, Chief Legal and Human Resources Officer and Corporate Secretary
Mark Santangelo	61	Senior Vice President, Manufacturing, Engineering, and EH&S

Biographical Material

Kim Ann Mink, Ph.D. has been the Chief Executive Officer and President of Innophos since December 2015, a director of Innophos since January 2016 and Chairman of the Board since February 2017. Prior to joining Innophos, she served as Business President of Elastomers, Electrical and Telecommunications at The Dow Chemical Company, or Dow Chemical, from September 2012 to December 2015. Dr. Mink joined Dow Chemical in April 2009 as Global General Manager, Performance Materials and President and Chief Executive Officer of ANGUS Chemical Co. (then a fully owned subsidiary of Dow Chemical). Prior to joining Dow Chemical, Dr. Mink was Corporate Vice President and Global General Manager, Ion Exchange Resins at the Rohm and Haas Company (now a fully owned subsidiary of Dow Chemical), where she spent more than 20 years serving in numerous senior roles with increasing responsibilities. From September 2012 to December 2015, Dr. Mink served as a member of the Board of Advisors of Catalyst Inc. From November 2012 to December 2016, she served as a member of the National Board of Trustees of the ALS Association. In addition, in 2014, Dr. Mink was named to STEMconnector’s 100 Diverse Corporate Leaders in STEM. Since March 2017, Dr. Mink has served as a director and member of the Environmental, Health and safety Committee of PolyOne Corporation, a publicly-traded global provider of specialized polymer materials, services and solutions. Since July 2018, Dr. Mink has served as a director and member of the Audit Committee, Finance Committee and Health, Safety, Environmental and Security Committee of Eastman Chemical Company, a publicly-traded global specialty chemical company. In 2017 and 2018, Dr. Mink was recognized as one of the Top 25 Most Influential Women of the Mid-Market by CEO Connection. Dr. Mink received her B.A. in Chemistry from Hamilton College and a Ph.D. in Analytical Chemistry from Duke University. She is a graduate of the Wharton School of Business Management Program.

Han Kieftenbeld has been the Senior Vice President and Chief Financial Officer of Innophos since April 2016. From June 2014 to July 2015, Mr. Kieftenbeld served as the Global Chief Financial Officer at AB Mauri, a worldwide producer of bakery ingredients. From December 2010 to June 2014, Mr. Kieftenbeld served as the Global Chief Procurement Officer of Ingredion Incorporated, a global ingredient solutions provider. Mr. Kieftenbeld served as Chief Financial Officer at AkzoNobel N.V. from 2007 to 2010 and, before that, at ICI PLC from 1997 to 2007. Mr. Kieftenbeld held various roles of increasing responsibility at Unilever N.V. from 1988 to 2007. From 2006 to 2017, Mr. Kieftenbeld served as a non-executive advisor and board member at Themis Analytics, an international sales and marketing decision analytics solutions provider to the pharmaceutical industry. Mr. Kieftenbeld earned a master’s degree from New York University Stern School of Business, London School of Economics and Political Science, as well as the HEC School of Management, Paris. He holds a B.S. in Business Economics and Accounting from Windesheim University in the Netherlands.

William Dunworth has been the Vice President, Corporate Controller and Chief Accounting Officer of Innophos since October 2018. Prior to joining Innophos, from September 2012 to October 2018, Mr. Dunworth held positions of increasing responsibility with Pinnacle Foods, Inc., a publicly-traded packaged food company, including most recently serving as Assistant Corporate Controller from October 2016 to October 2018. From 2009 to 2012, Mr. Dunworth held the position of Financial Reporting Manager with Day & Zimmermann, a privately-held provider of construction, engineering, staffing and defense services. Mr. Dunworth began his career at KPMG where he worked from 2005 to 2009. Mr. Dunworth earned a B.S. in Accounting from Rowan University and is a Certified Public Accountant.

Sherry Duff has been the Senior Vice President, Chief Marketing and Technology Officer of Innophos since May 2017. Ms. Duff joined Innophos as Vice President, Chief Marketing Officer in July 2016. Previously, from November 2011 to June 2015, Ms. Duff served as the President and Managing Director of Arista Laboratories, Inc., a U.S. subsidiary of Molins, PLC that provides tobacco testing services. From 1997 to October 2011, Ms. Duff held a series of positions of increasing

Page 9 of 89

Table of Contents

responsibility at Arch Chemicals, Inc., global biocides company, including most recently as its Director, Strategic Planning, Business Development & Government Affairs. Ms. Duff received BS degree in Chemistry from the University of Connecticut and her MBA degree from Rensselaer Polytechnic Institute at Hartford.

Amy Hartzell has been the Senior Vice President, Supply Chain and Purchasing at Innophos since May 2017. Ms. Hartzell joined Innophos as Vice President, Supply Chain and Purchasing in April 2016. She worked at Dow Chemical Company from 2009 to March 2016, serving in positions of increasing responsibility, including most recently as its Global Director, Corporate Supply Chain Center of Excellence. Ms. Hartzell began her career at Rohm and Haas Company in 1997, serving in positions of increasing responsibility until Rohm and Haas Company was acquired by Dow Chemical Company. Ms. Hartzell earned a BS from Lehigh University and an MBA from La Salle University.

Joshua Horenstein is the Senior Vice President, Chief Legal and Human Resources Officer and Corporate Secretary of Innophos. Mr. Horenstein has been the Senior Vice President, Chief Legal Officer and Corporate Secretary of Innophos since May 2017. Mr. Horenstein has been the Chief Human Resources Officer of Innophos since September 2018. Mr. Horenstein was Vice President, Chief Legal Officer and Corporate Secretary from September 2016 to May 2017, and acting Vice President, Chief Legal Officer and Corporate Secretary from March 2016 to September 2016. Mr. Horenstein served as interim Chief Human Resources Officer from September 2017 through February 2018. Mr. Horenstein joined Innophos in 2010 as Corporate Counsel and M&A Attorney and has since held various legal positions of increasing responsibility. Before joining Innophos, Mr. Horenstein practiced law at several leading law firms, including Ballard Spahr, LLP, Pepper Hamilton, LLP and Flaster/Greenberg P.C. and was also Vice President and Chief Legal Officer at Rock Your Phone, Inc., a technology start-up company. Mr. Horenstein received his law degree from the University of Pennsylvania Law School and he holds bachelor degrees in Economics and Political Science from Penn State University.

Mark Santangelo has been the Senior Vice President, Manufacturing, Engineering, and EH&S of Innophos since May 2017. At the time of joining Innophos, Mr. Santangelo was serving as an independent operations and supply chain consultant to the specialty chemical industry. Previously, from December 2014 to May 2016, Mr. Santangelo held the position of Vice President, Global Operations and Supply Chain at Arizona Chemical Company, an international specialty chemical company. Prior to Arizona Chemical, Mr. Santangelo spent more than 30 years at Ashland Inc., an international specialty chemical company serving in positions of increasing responsibility with the last 8 years as Vice President Global Supply Chain. Mr. Santangelo earned his BS and MS degrees, each in chemical engineering, from Villanova University.

Available Information

The Securities and Exchange Commission, or the SEC, maintains a website that contains reports, proxy and information statements, and other information regarding issuers, including Innophos, that file electronically with the SEC. The public can obtain any documents that the Company files with the SEC at http://www.sec.gov. Innophos files annual reports, quarterly reports, proxy statements and other documents with the SEC under the Securities Exchange Act of 1934, as amended, or the Exchange Act.

Innophos also makes available free of charge through its website (www.innophos.com) its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those reports filed or furnished pursuant to the Exchange Act as soon as reasonably practicable after Innophos electronically files such material with, or furnishes it to, the SEC. The information contained on Innophos’ website is not included in, or incorporated by reference into, this Annual Report on Form 10-K.

Page 10 of 89

Table of Contents


ITEM 1A.	RISK FACTORS

The following discussion of risk factors contains "forward-looking statements," as discussed in the Forward-Looking Statements section of this Annual Report on Form 10-K. Investing in Innophos involves a significant degree of risk. We are providing the following cautionary discussion of risk factors, uncertainties and assumptions that we believe are relevant to our business. These are factors that, individually or in the aggregate, we think could cause our actual results to differ materially from expected and historical results and our forward-looking statements. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider this section to be a complete discussion of all potential risks or uncertainties that may substantially impact our business. Moreover, we operate in a competitive and rapidly changing environment. New factors emerge from time to time and it is not possible to predict the impact of all of these factors on our business, financial condition or results of operations.

Risks Related to Our Business Operations

External Factors Impacting Profitability - Our profitability may be affected by factors beyond our control.

Our ability to maintain and increase profitability depend to a large extent upon our ability to price our products at a level that will cover manufacturing and raw material costs and provide an acceptable profit margin. Our ability to maintain appropriate price levels and the related margins is determined by a number of factors largely beyond our control, such as the economic conditions of the geographic regions in which we conduct business, raw materials availability and pricing, competitive factors, adoption of new regulations in the U.S. and other jurisdictions in which we do business and customer preferences impacting use of our products, each of which is discussed further below. Any of the foregoing factors may materially and negatively impact our ability to increase profitability as part of our Vision 2022 growth plan. In addition, a key component of our Vision 2022 growth plan is inorganic growth through acquisitions. If we are unable to identify acquisition targets that are consistent with our growth plan, or if we are unsuccessful in acquiring those acquisition targets that we do identify, our ability to increase profitability as part of our Vision 2022 growth plan may be materially and adversely affected.

Raw Materials Availability and Pricing - The success of our business depends on our ability to successfully source sufficient amounts of the raw materials used in our products at competitive prices, often from a limited number of suppliers, some of whom with we do not have a long-term contract in place.

We may not be able to source sufficient amounts of the raw materials used in our products, including intermediate products we source to produce our products, at competitive prices, or at all, which may materially and negatively impact our business.

We rely on unaffiliated third parties to provide our raw materials. Most of our raw materials are supplied to us by either one or a small number of suppliers. Some of those suppliers rely, in turn, on sole or limited sources of supply for raw materials included in their products. Failure of our suppliers to maintain sufficient capability to meet changes in demand or quality, or to overcome unanticipated interruptions in their own sources of supply due to their own supplier’s performance failures or force majeure conditions, such as disaster or political unrest, may prevent them from continuing to supply raw materials as we require them, or at all. Our inability to obtain sufficient quantities of sole or limited source raw materials or to develop alternative sources on a timely basis if required could result in increased costs in our operations, which may be material, and may negatively impact our ability to properly maintain our existing level of operations.

Our raw materials are purchased under supply arrangements that vary from multi-year supply agreements to short term agreements. We also rely on spot suppliers. As a result, we are subject to risks that we may not be able to secure the raw materials needed for our products on favorable terms, or at all. We cannot be sure that the annual or other periodic contracts we have in place for our raw materials can be renewed at all or on similar terms to the current terms. In addition, with respect to those suppliers with whom we do have long-term agreements, we cannot be certain that our suppliers will not seek to terminate, modify or disrupt performance under such agreements. We do not have long-term pricing commitments in place for certain raw materials, including sulfur at our Mexican plant.

Various market conditions beyond our control can affect the price and supply of our raw materials, including the price and supply of phosphate rock and sulfur. Prices for phosphate rock and sulfur have historically experienced periodic significant fluctuations. Likewise, the cost of natural gas is often positively correlated with petroleum prices. We typically purchase natural gas at spot market prices for use at our facilities, and our business has, from time to time, been negatively impacted by wide fluctuations in natural gas prices. Recently, energy costs in Mexico increased substantially in the second half of 2018, and this trend has continued into 2019. We do not have long-term pricing commitments in place with respect to our energy needs at our Mexican plant. With respect to those supply agreements we have in place with pricing that is set according to predetermined

Page 11 of 89

Table of Contents

formulae dependent on price indices or market prices or, with respect to some shorter term contracts, by negotiation with reference to market conditions, the prices we pay under such contracts will generally lag the underlying market prices of the raw material, which exposes us to risks in the event the cost of the raw materials decreases quickly. With respect to those supply agreements we have in place with fixed annual pricing, although such contracts provide us price certainty and protection against increases in the market cost of such materials, they expose us to risks in the event that the cost of such materials decreases. We do not engage in any significant futures or other derivative contracts to hedge against fluctuations in the price of raw materials. Increased raw material pricing may adversely affect our margins if we are not able to offset costs with sales price increases. See “Competition - The success of our business depends on our ability to successfully compete in competitive markets” below.

Our phosphates-based business can be affected by the availability and cost of phosphate rock. Although there are multiple available global suppliers to supply phosphate rock to our Coatzacoalcos, Mexico site, in 2019, we expect the majority of our phosphate rock requirements to come from a limited number of these suppliers, thus exposing us to risks if any such supplier experiences a significant disruption.

Supply Chain Initiatives - Our recent supply chain initiatives may result in additional challenges.

We have recently undertaken significant initiatives in order to reduce the concentration of our supply chain. We have undertaken these initiatives in order for us to be able to utilize multiple MGA sources, increase our internal PPA supply, reduce our dependence on any single supplier or other third party, and lower our overall cost structure. Although we believe these initiatives will reduce the risks associated with reliance on a limited number of suppliers, such initiatives may present additional challenges that we will need to address in order to fully realize the anticipated benefits of these initiatives.

Our Coatzacoalcos facility was upgraded to handle alternative grades of rock, and our Geismar facility was upgraded to handle multiple sources of MGA, in each case without adversely affecting operating efficiency. Further investment may be required to realize the full benefits of improved process flexibility, including to address process efficiency issues which may arise over longer time periods as the plants processes raw materials from various sources. In addition, we may experience operational and logistical challenges as we attempt to increase production at our Coatzacoalcos and Geismar facilities. These challenges may in turn require further capital expenditures. As we continue to rely more on our Coatzacoalcos and Geismar facilities, any material disruption to production at such facilities may present further challenges to the supply chain initiatives we have previously undertaken.

We face new operational and logistical challenges as we operate our Geismar plant in a more self-reliant manner. We must source MGA from a variety of suppliers to support our Geismar facility and ensure all such sources provide the quality of MGA required, in a timely manner and at an acceptable cost. Any issues with the MGA quality may negatively impact the quality of the PPA that we produce. We must coordinate the logistics of efficiently transporting MGA to our Geismar plant and receiving and processing such MGA. We must continue to operate our deep well injection system at our Geismar plant to handle the co-product separated at the site efficiently and in accordance with applicable law. Any disruption in any of these activities may have a negative impact on our business.

If the anticipated benefits of our supply chain initiatives undertaken to date or any future supply chain initiatives or manufacturing optimization initiatives are not fully realized, we may not achieve the lower cost structure anticipated as a result of the substantial capital expenditures undertaken in connection with such initiatives.

Competition - The success of our business depends on our ability to successfully compete in competitive markets.

We operate in a competitive environment. Our ability to grow our business depends on our ability to effectively compete in each of our targeted markets. Some of our competitors have broader product portfolios, larger market shares, access to larger customer bases, including as a result of a broader geographical footprint, and greater financial resources with respect to the markets in which we compete. Our business will be materially and adversely affected if we are unable to effectively compete in those markets that we target.

Our operations are subject to currency fluctuation transaction risks. We may from time to time be at a competitive disadvantage as a result of the strengthening of the U.S. Dollar, which can place us at a competitive disadvantage with respect to our foreign competitors selling competing products into the markets to which we sell our products. In addition, we may from time to time be at a competitive disadvantage as a result of U.S. tariff and free trade agreements. We may be negatively impacted if tariffs on foreign imports into the United States apply to raw material we source and the countries from which we them. Any such tariffs may encourage our customers to source products from non-US suppliers. In addition, any such U.S. tariffs may increase competition in markets outside of the United States in which we compete if our competitors divert products from the United States to such markets as a result of the U.S. tariffs.

With respect to our phosphates-based business, we face competition from lower-cost producers, including in connection with

Page 12 of 89

Table of Contents

import competition, which competition intensifies from time to time as a result of changing exchange rates and production overcapacity. Import competition is heavily influenced by the actions of foreign governments, including the taxation and subsidy policies of China, which actions are frequently unpredictable. Certain producers are integrated back to phosphate rock, which may provide cost advantages to them depending on the markets in which they choose to compete. We also face competition from those suppliers who utilize the “thermal” production method, a process more heavily dependent on energy that may be cost advantaged compared to “wet” method producers (such as Innophos) during periods of low energy prices. In addition, we also face competition from those competitors continuing to seek to develop improvements to the purified wet acid method to produce PPA, which, if developed, may hurt our competitive position. In addition, new technologies are being developed to attempt to produce PPA at a cheaper cost than the thermal acid method or the purified wet acid method. Any such new or improved technology that is developed would be expected to reduce the barriers to entry and/or significantly increase competition in the markets in which we compete, all of which would be expected to harm our competitive position and our business. Although we have a number of product quality improvement and product enhancement initiatives underway, we cannot assure that our efforts in maintaining differentiation will be successful. We also face competition from competitors offering non-phosphate alternatives to our phosphate-based products, which may intensify as a result of evolving consumer preferences.

The nutritional ingredient market is also competitive in nature. In the nutritional ingredient market, competition is based upon a number of considerations, including product differentiation and innovation, product quality, technical service, and supply reliability. Our competitors continue to seek improvements to their products and manufacturing processes. Our success in the nutritional ingredient market depends on our ability to grow our product portfolio, effectively differentiate our products, supply quality products that comply with evolving regulations, source raw materials in sufficient quantities and at competitive prices and provide customer service that meets or exceeds our customer’s expectations.

Food, Health and Nutrition Portfolio - we may not be able to continue to grow our growing nutritional ingredient portfolio due to competitive factors or otherwise.

We are subject to commercial risks in connection with our focus on growing our Food, Health and Nutrition portfolio. Our two acquisitions in 2017 focused on companies with significant nutritional ingredient portfolios. We expect to continue to evaluate opportunities to grow our nutritional ingredient portfolio. We may not be successful in identifying targets consistent with our growth plan, and we may not be successful in acquiring those targets that we do identify. Our ability to acquire, develop and commercialize nutritional ingredients depends on, among other factors, our ability to adjust to market and consumer trends, effectively compete in the competitive dietary supplement market, generate and grow our brand recognition, conduct studies to generate the data needed to support noted benefits and differentiate our nutritional ingredients and protect our associated intellectual property, including our trademarks. We may not be able to fully commercialize and grow those nutritional ingredients that we acquire or develop internally as a result of any of the foregoing factors, which could materially and negatively impact our business.

Consumer Preferences - Changes in consumer preferences and perceptions may lessen the demand for our products, which could reduce our sales and profitability and harm our business.

Food products are often affected by changes in consumer tastes, national, regional and local economic conditions and demographic trends. For instance, changes in prevailing health or dietary preferences causing consumers to avoid food products containing phosphates in favor of foods that are perceived as being healthier could reduce our sales and profitability. Increasing concern among consumers, public health professionals and government agencies about health and wellness issues represent a significant challenge to some of our customers, including those engaged in the food and beverage industries.

Public perception in the United States, Europe and other markets, which may be driven by public opinions and publications concerning phosphate products in relation to their safety, may affect our sales and operations. Regulators in the United States, Europe and other jurisdictions may choose to change recommended daily intake levels for total phosphate in the diet or added phosphates in food. Ongoing safety evaluation by European Union regulators of phosphate content in food may result in more stringent regulations with respect to phosphates or otherwise influence public perception of the health risks associated with phosphates. In addition, U.S. class action trends related to “natural” and “clean labeling” in foods, as well as public interest organization spotlighting with respect to environmental impact, may affect our sales and operations. Also, additional demand restrictions may arise from producers reformulating to reduce or eliminate phosphate content, as has been announced over the past few years by major consumer packaged goods manufacturers and major food chains.

In addition, our growing nutritional ingredient portfolio is particularly subject to risks associated with consumer preferences. Our ability to acquire, develop and commercialize nutritional ingredients depends on, among other factors, our ability to understand evolving customer and market trends and our ability to translate these insights into commercially viable new products. If we are unable to do so, in whole or in part, our customer relationships and product sales could be harmed.

Page 13 of 89

Table of Contents

Furthermore, the nutritional supplements industry is characterized by rapid and frequent changes in demand for products and new product introductions. Our ineffectiveness in accurately predicting these trends could negatively impact consumer opinion of our products, which could harm our customer relationships and cause losses to our market share.

Legal, Regulatory and Quality Risks - We are subject to a wide variety of laws, regulations and government policies, including with respect to product quality and labeling and the environment, which may change in significant ways.

Our business is subject to regulation under a wide variety of laws, rules and regulations in each jurisdiction in which we have production operations (United States, Canada, Mexico and China) or conduct business, including the European Union. Our inability to maintain compliance with these evolving laws, rules and regulations would adversely affect the regulatory status of our products and facilities and adversely affect our results of operations, financial position and cash flows.

Failure to maintain compliance with the laws, rules and regulations applicable to the products we sell may have a material and adverse effect on our Company. The products we sell are required to have an approved regulatory status in each jurisdiction in which we market the products. Failure to establish a recognized regulatory status, including in new markets and with respect to new products for which we have limited experience, could lead to enforcement actions, fines and penalties or the assertion of private litigation claims and damages. Many of our products are ingredients in foods, nutritional supplements or pharmaceutical excipients that are used in finished products consumed or used by humans or animals and accordingly are subject to applicable food safety laws. Food products are highly regulated, and the laws, rules and regulations of the various jurisdictions in which we operate frequently are not harmonized. We are subject to a number of risks if we are unable to achieve and maintain compliance with evolving food safety laws. These risks are particularly prevalent as we continue to grow our Food, Health and Nutrition portfolio, including through acquisitions. Establishing a regulatory status for our products includes ensuring that any product claims we make are appropriately substantiated. Failure to establish appropriate substantiation for any such product claims, including products that we acquire through acquisitions, could lead to enforcement actions, fines and penalties or the assertion of private litigation claims and damages. Worldwide regulatory trends toward increasing regulation of food safety factors to reduce risks, adoption of increased food defense measures and prevention of economic adulteration of food particularly through supply chain management may increase our operating costs. For example, in 2011, the United States enacted the Food Safety Modernization Act, or FSMA, which mandates comprehensive, prevention-based controls by food processors to protect the U.S. food supply and provides the FDA with new enforcement authority. The FDA, pursuant to the FSMA, continues to promulgate and finalize the FSMA by implementing regulations. We are subject to substantial risks if we fail to maintain compliance with evolving FSMA requirements and comparable food regulatory requirements in other jurisdictions in which we do business, including enforcement actions, fines, the rescission or denial of operating permits, and other penalties. We are also subject to the increased costs associated with maintaining compliance with such regulatory requirements. In addition, in the United States and other jurisdictions where we conduct business, our products are subject to strict good manufacturing practice, or GMP, regulations established by the FDA and comparable foreign authorities. Compliance with such GMP regulations is costly, and failure to comply could lead to enforcement actions and harm our business. We are also subject to periodic inspection by federal, state, local and foreign authorities with jurisdiction over our operations and product markets, including, but not limited to the FDA and its foreign counterparts. If any non-compliance is identified during any such inspection, we could be subject to enforcement actions, fines and other penalties.

Establishing a regulatory status for our products frequently depends on our ability to confirm that our suppliers are complying with quality and regulatory requirements with respect to the raw materials provided to us. Failure to adequately evaluate, qualify and monitor our suppliers for compliance with evolving quality and regulatory requirements may impact the regulatory status of products we sell, thereby subjecting us to enforcement actions, fines and penalties or the assertion of private litigation claims and damages.

Our customers continue to adopt and refine supplier qualification programs and related raw material quality standards designed to ensure their compliance with stringent regulatory standards. Frequently, our customers adopt quality standards that are more stringent than legal requirements. Any failure to comply with our customers’ supplier qualification programs and related quality standards may result in costly customer claims and lost business.

Failure to maintain compliance with the environmental, health and safety laws, rules and regulations applicable to our Company in each jurisdiction in which we operate may have a material and adverse effect on our Company. Our operations involve the use, handling, processing, storage, transportation and disposal of hazardous materials. As a result, we are subject to comprehensive and frequently changing environmental and other regulatory requirements. Our operations also expose us to the risk of claims for environmental remediation and restoration or for exposure to hazardous materials. Our production facilities require various operating permits that are subject to periodic renewal or modification. Violations of environmental laws, regulations or permits may result in restrictions being imposed on operating activities, substantial fines, penalties, damages, the rescission or denial of operating permits, third-party claims for property damage or personal injury, or other costs. Some existing environmental laws and regulations impose liability and responsibility on present and former owners, operators or

Page 14 of 89

Table of Contents

users of facilities and sites for contamination at those locations without regard to causation or knowledge of contamination. Many of our sites have an extended history of industrial use, which may expose us to liability. Currently, we are involved in several compliance and remediation efforts and agency inspections concerning health, safety and environmental matters, the outcome of which cannot be predicted with certainty. Soil and groundwater contamination have been detected at some of our sites, and additional contamination might occur or be discovered at these sites or other sites (including sites which we might acquire or to which we may have sent hazardous waste) in the future, which could expose us to liability. For example, future environmental spending is probable at our site in Nashville, Tennessee, as discussed further in Note 16 (Commitments and Contingencies) of the audited financial statements appearing elsewhere in this Annual Report on Form 10-K. We continue to investigate, monitor and/or clean-up contamination at most of these sites. In addition, in 2017, we reached an agreement with federal and Louisiana authorities with respect to alleged non-compliance at our Geismar, Louisiana facility. This settlement agreement included a fine and subjects us to ongoing compliance obligations, including with respect to our implementation of a government-approved deep well injection system at the plant to handle the co-product separated at the site. If we fail to comply with the ongoing compliance obligations associated with this deep well injection system, we could be forced to develop alternative solutions for handling the subject co-product, which alternatives may be costly and time-consuming, and we could face additional fines and other penalties. Due to the uncertainties associated with environmental investigations, clean-ups and other obligations, as well as the ongoing nature of the investigations, clean-ups and other obligations at our sites, we cannot predict precisely the nature, cost, and timing of our future remedial obligations with respect to our sites.

Evolving Regulatory Standards - Our products may be negatively impacted as a result of evolving regulatory standards.

The laws, rules and regulations pertaining to the required regulatory status of our products evolve frequently. There can be no assurance that such laws, rules and regulations will not evolve in ways that will require us to modify our business models and objectives or affect our returns on investments by restricting existing activities and products, subjecting them to escalating costs or prohibiting them outright.

Additional laws or regulations focused on phosphate-based products may be implemented in the future. As European Union authorities continue to evaluate phosphate content safety considerations in food, any reduction in approved phosphate content could harm our business. In addition, regulators in the United States, the European Union and other jurisdictions may choose to no longer allow phosphates as a synthetic ingredient in products labeled with “organic” claims.

A number of states within the United States, and Canada (countrywide), have effectively banned the use of phosphate-based products in consumer automatic dishwashing detergents. In addition, the European Union enacted legislation to effectively ban phosphates in consumer detergents with a first phase that began in 2013, and in Australia an industry-led voluntary phosphate ban took effect in 2014. These trends and related changes in consumer preferences have already reduced our requirements for automatic dishwashing markets and we have responded with a shift in our capabilities to serve other food and industrial applications. Furthermore, although phosphates are still permitted for consumer detergent applications in many Latin American countries and other parts of the world, we cannot be sure that similar bans may not be implemented in some or all of these markets in the future or that additional customers will not reformulate their products to reduce STPP content in an effort to market a reduced phosphate content product line. We expect some detergent grade STPP reformulation in 2019, which will adversely affect our financial results.

Additional laws, regulations or distribution policies focused on reduced use of other phosphate-based products could occur in the future, including new regulations restricting or banning the use of polyphosphoric acid in asphalt road construction. Several states in the United States have regulations relating to the use of polyphosphoric acid in asphalt road construction, many of which restrict such use or require approvals (which may include trials) before such use is permitted. If restrictions are instituted in additional jurisdictions in the United States and Canada, a notable impact on our business could occur.

Changes in composition or permitted-use regulations in domestic or export countries may affect the regulatory status of our products and our ability to sell these products into some markets. Such changes may in turn require us to reformulate or establish alternative raw material sourcing, potentially incurring additional cost. If these measures are not successful, the available markets for our products may be limited.

International Operations - We are subject to a variety of risks with respect to our foreign operations.

We have production operations in Canada, China and Mexico. We evaluate business opportunities that may expand our operations to other areas beyond our current operations. We believe that revenue from sales outside the United States will continue to account for a material portion of our total revenue for the foreseeable future. There are inherent risks in international operations, including currency fluctuations and devaluations, economic and business conditions that differ from U.S. cycles, divergent social and political conditions that may become unsettled or even disruptive, communication and translation delays, errors due to cultural and language barriers, less predictable outcomes from differing legal and judicial systems, and energy cost volatility. Risks to our

Page 15 of 89

Table of Contents

Canadian operations include a differing federal and provincial regulatory environment from that in the United States, currency fluctuations and devaluations and the effects of the updated free trade arrangement between the United States, Canada and Mexico. Among the additional risks potentially affecting our Chinese operations are risks associated with complying with China’s regulatory requirements, changes in local economic conditions, currency devaluations, and potential disruption from socio-political activities in that country. Among the additional risks potentially affecting our Mexican operations are changes in local economic conditions, currency devaluations, the effects of the updated free trade arrangement between the United States, Canada and Mexico, potential disruption from socio-political violence in that country, energy cost volatility, and difficulty in contract enforcement due to differences in the Mexican legal and regulatory regimes compared to those of the United States. In the event that we establish operations in additional regions, our exposures to risks from the noted causes and from other as yet unknown causes may increase.

In addition, we are required to comply with the laws of each jurisdiction in which we have operations or sell our products, including safety and quality laws, product and facility registration laws, marketing laws, environmental laws, antitrust laws, anti-bribery laws and import and export control laws. The laws of these jurisdictions vary significantly, and we have limited experience in complying with the laws of certain such jurisdictions. Violations of such laws may result in restrictions being imposed on our operating activities, substantial fines, civil or criminal penalties, damages, the rescission of operating permits, third-party claims for property damage or personal injury, or other costs.

Our overall success as a multinational business depends, in part, upon our ability to succeed in differing economic, social and political conditions. Among other things, we are faced with potential difficulties in staffing and managing local workforces and designing and effecting solutions to manage commercial risks posed by local customers and distributors. We may not continue to succeed in developing and implementing policies and strategies that are effective in each location where we do business. These risks are not limited to only those countries where we actually operate facilities, but may extend to areas and regions that supply and service our facilities or are supplied and serviced by them.

As a U.S. corporation, we are subject to the regulations imposed by the U.S. Foreign Corrupt Practices Act, or FCPA, which generally prohibit U.S. companies, their subsidiaries and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business. We are also subject to the comparable anti-corruption laws of other countries in which we conduct business. We sell many of our products in developing countries through third-party sales agents and distributors whose personnel are not subject to our disciplinary procedures. Although we and our subsidiaries are committed to conducting business in a legal and ethical manner wherever we operate, and we communicate and seek to monitor compliance with our policies by all who do business with us, we cannot be sure that all of our third party distributors or agents will remain in full compliance with the FCPA or comparable foreign regulations at all times. Violations of the FCPA or similar anti-corruption laws by us or our distributors or agents may result in severe criminal or civil sanctions, could disrupt our business, and could adversely affect our reputation.

Labor Relations - Our profitability could be negatively impacted if we fail to maintain satisfactory labor relations.

A significant portion of our U.S. employees and a substantial majority of our non-U.S. employees are members of unions. Strikes, lockouts or other work stoppages or slowdowns involving our unionized employees could have a material adverse effect on our business.

Product Liability Exposure - We may be subject to costly product liability claims with respect to our products.

Many of our products are functional or fortification additives used in the food and beverage, consumer product, nutritional supplement and pharmaceutical industries. The sale of these additives and our customers' products that include them involve the risk of product liability and personal injury claims, which may be brought by our customers or end-users of our customers’ products. Although we endeavor to adhere to stringent quality standards in the course of their production, storage and transportation, our products could be subject to adverse effects from foreign matter such as moisture, dust, odors, insects, mold or other substances, or from excessive temperature variations. Our products may also be susceptible to non-conformance resulting from the raw materials we use to manufacture our products or other products supplied to us by third parties that we resell, as well as quality issues resulting from contract manufacturers that we utilize. In addition, we could be subject to claims by end-users of our customers’ products that incorporate our products that our customers have mislabeled or misrepresented the benefits of their products sold to such end-users. Historically, we have not been subject to material product liability claims, and no material claims are outstanding. However, because our products are used in manufacturing a wide variety of our customers' products, including those ingested by humans, and we have concentrated the recent growth of our business in those areas, we cannot be sure we will not be subject to material product liability or recall claims in the future. Any product liability claim brought against us, with or without merit, could result in: decreased demand for our products; regulatory investigations that could require costly recalls or product modifications; loss of revenues; substantial costs of litigation; liabilities that

Page 16 of 89

Table of Contents

substantially exceed our product liability insurance, which we would then be required to pay ourselves; an increase in our product liability insurance rates; and damage to our reputation and the reputation of our products.

Production Facility Operating Hazards - We may be subject to liability with respect to the operations of our production facilities.

Our production facilities are subject to hazards associated with the manufacturing, handling, storage and transportation of chemical substances and products, including failure of pipeline integrity, explosions, fires, inclement weather and natural disasters, terrorist attacks, mechanical failures, unscheduled downtime, transportation or utility interruptions, remedial complications, chemical spills, discharges or releases of toxic or hazardous substances, storage tank leaks and other environmental risks. Although we have implemented and installed various management systems and engineering controls and procedures at all our production facilities to enhance safety and minimize these risks and we insure our facilities to protect against a range of risks, these potential hazards continue to exist and could cause personal injury and loss of life, severe damage to or destruction of property and equipment, and environmental and natural resource damage, and may result in a suspension of operations (or extended shutdowns) and the imposition of civil or criminal penalties, whose nature, timing, severity and non-insured exposures are unknown. In addition, we do not have backup production capabilities in place for all of our production facilities. If we experience a disruption at any of our production facilities, it could have a material and adverse effect on our operations.

Intellectual Property Rights - If we are unable to protect our intellectual property rights, our position in our markets may be materially and adversely affected.

We rely on a combination of contractual provisions, confidentiality procedures and agreements, and patent, trademark, copyright, unfair competition, trade secrecy, and other intellectual property laws to protect our intellectual property and other proprietary rights on a worldwide basis. Nonetheless, we cannot be sure that any pending patent application or trademark application will result in an issued patent or registered trademark, that any issued or registered patents or trademarks will not be challenged, invalidated, circumvented or rendered unenforceable or that our confidentiality procedures will maintain the confidentiality of our confidential information. In addition, with respect to the intellectual property rights that we license from a third party, we cannot be certain that such third party will take all steps necessary to protect such rights from infringement by a third party. Our ability to protect our intellectual property, including intellectual property that we license from third parties, is particularly important as we seek to continue to grow our branded nutritional ingredient portfolio. The use of our intellectual property (owned or licensed by us) by others could reduce any competitive advantage we have developed or otherwise harm our business. Failure to protect the intellectual property associated with our branded nutritional ingredients in particular may have a material adverse effect on the sales of such products. Moreover, we cannot be sure that our intellectual property rights can be asserted in all cases, particularly in an international context, or that we can defend ourselves successfully or cost-effectively against the assertion of rights by others.

Contingency Planning - We may face operational challenges that could have a material adverse effect on our business.

We operate a number of manufacturing facilities in the United States, Mexico, Canada and China, and we coordinate company activities, including our sales, customer service, information technology systems and administrative services and the like, through headquarters operated in those countries.

Our sites and those of others who provide services to them are subject to varying risks of disaster and follow on consequences, both manmade and natural, that could degrade or render inoperable one or more of our facilities for an extended period of time. Such disaster related risks and effects are not predictable with certainty and, although they can be mitigated, they cannot be completely prevented. Although we review and analyze risks applicable to our business, the factors that actually affect us may not be those we have concluded are most likely to occur. Furthermore, although our reviews have led to more systematic contingency planning, our plans are in varying stages of development and execution, such that they may not be adequate at the time of occurrence for the magnitude of any particular disaster event that befalls us.

We depend on our information technology systems for the efficient functioning of our business, including accounting, sales and order processing, data storage, compliance, purchasing and inventory management. Although we attempt to mitigate interruptions to these systems, we may experience unanticipated interruptions, including in connection with implementing certain upgrades to these systems. In addition, we may experience difficulties in operating our business during an upgrade. Further, we may experience difficulties as we integrate acquired businesses onto our systems. Any such disruption to these systems could disrupt our business, including our ability to timely ship and track product orders, project inventory requirements, manage our supply chain and otherwise adequately service our customers. In addition, we may not be able to repair any disruption to our systems in an efficient and timely manner.

Page 17 of 89

Table of Contents

Increased global cybersecurity vulnerabilities, threats and sophisticated and targeted cyber-related attacks pose a risk to the security of our and our customers', partners', suppliers' and third-party service providers' respective products, systems and networks and the confidentiality, availability and integrity of our and our customers' data. Although we attempt to mitigate these risks by employing a number of measures, we remain potentially vulnerable to additional known or unknown threats. We may have access to sensitive, confidential or personal data or information that is subject to privacy and security laws, regulations and customer-imposed controls, including the California Data Protection Act and the European Union’s General Data Protection Regulation. Any failure to maintain compliance with these laws, regulations and controls may result in fines, third-party claims and other penalties. Despite our efforts to protect sensitive, confidential or personal data or information, we may be vulnerable to material security breaches, theft, misplaced or lost data, programming errors, employee errors and/or malfeasance that could potentially lead to the compromising of sensitive, confidential or personal data or information, improper use of our systems, software solutions or networks, unauthorized access, use, disclosure, modification or destruction of information, defective products, production downtimes and operational disruptions. In addition, a cyber-related attack could result in other negative consequences, including damage to our reputation or competitiveness, costly and time-consuming remediation or increased protection actions, litigation or regulatory action.

Acquisition Risks - Any acquisitions or divestitures we make could disrupt our business and not produce the expected benefits of such transaction.

We continue from time to time to consider certain acquisitions or divestitures. Acquisitions and divestitures involve numerous risks, including identifying attractive target acquisitions, successfully acquiring those identified targets, undisclosed risks affecting the target, difficulties integrating acquired businesses, the assumption of unknown liabilities, potential adverse effects on existing business relationships with current customers and suppliers and overall increased demand on our employees' time and resources.

We cannot provide assurance that any acquisitions or divestitures will perform as planned or prove to be beneficial to our operations and cash flow, or that we will be able to successfully integrate any acquisitions that we undertake. Any such failure could harm our financial condition, results of operations and cash flows.

Certain Financial Risks

Impairment Charges - The recognition of impairment charges on goodwill or long-lived assets could adversely impact our future financial position and results of operations.

We have approximately $245 million of total intangible assets at December 31, 2018, consisting of $153 million of goodwill and $92 million of other intangible assets. Additionally, we have approximately $240 million of long-lived assets at December 31, 2018.

We perform an annual impairment assessment for goodwill and our indefinite-lived intangible assets, and as necessary, for other long-lived assets. If the results of such assessments were to show that the fair value of these assets were less than the carrying values, we could be required to recognize a charge for impairment of goodwill and/or long-lived assets and the amount of the impairment charge could be material. Based on the results of the annual assessment, we concluded that as of December 31, 2018, the fair value of all of our reporting units was greater than their carrying value.

Even though it was determined that there was no additional goodwill impairment as of December 31, 2018, the future occurrence of a potential indicator of impairment, such as a significant adverse change in the business climate that would require a change in our assumptions or strategic decisions made in response to economic or competitive conditions, could require us to perform an assessment prior to the next required assessment date during the fourth quarter of 2019.

Tax Rates - Changes in our tax rates or exposure to additional income tax liabilities could impact our profitability.

We are subject to income taxes in the United States and in various other foreign jurisdictions. Our effective tax rates could be adversely affected by changes in the mix of earnings by jurisdiction, changes in tax laws or tax rates including recent tax reform in the United States to broaden the tax base and reduce deductions or credits, changes in the valuation of deferred tax assets and liabilities, and material adjustments from tax audits.

The recoverability of deferred tax assets, which are predominantly applicable in the United States, is dependent upon our ability to generate future taxable income in these jurisdictions. In addition, the amount of income taxes we pay is subject to ongoing audits in various jurisdictions and a material assessment by a governing tax authority could affect our profitability.

Interest Rates - Increased interest rates could increase our borrowing costs.

Page 18 of 89

Table of Contents

From time to time we may issue securities or seek additional borrowings to finance acquisitions, capital expenditures, working capital and for other general corporate purposes. An increase in our net leverage position, and an increase in interest rates in the general economy could result in an increase in our borrowing costs for these financings, as well as under any existing debt that bears interest at an un-hedged floating rate.

Contingencies Affecting Dividends - Our ability to pay dividends in the future may be compromised.

After our common stock became publicly traded in 2006, our Board of Directors initiated a policy of paying regular quarterly cash dividends, subject to the availability of funds, legal and contractual restrictions and prudent needs of our business. We have maintained that policy and paid dividends continuously since that time. However, we are a holding company that does not conduct any business operations of our own. As a result, we are normally dependent upon cash dividends, distributions and other transfers from our subsidiaries, most directly Innophos, Inc., our primary operating subsidiary, and Innophos Investment Holdings, Inc., the direct subsidiary of Innophos Holdings, Inc. and the direct parent company of Innophos, Inc., to make dividend payments on our common stock. The amounts available to us to pay cash dividends are restricted by provisions of Delaware law and historically, and we expect for the future, also by limitations in our debt facilities. As allowed by existing debt instruments, we may incur additional indebtedness that may restrict to an even greater degree, or prohibit, the payment of dividends on stock. We cannot be sure the level of our operations or agreements governing our current or future indebtedness will permit us to adhere to our current dividend policy, increase dividends, or pay any dividends at all, or that continued payment of dividends will remain prudent for our business in the future judgment of our Board of Directors.

Credit Facility Risks - Our credit facility restricts our current and future operations.

In December 2016, we entered into a credit agreement with a group of lenders to establish a credit facility, which credit facility essentially replaced our existing credit facility at that time. This credit facility imposes operating and financial restrictions on us, including affirmative and negative covenants that prohibit or limit a variety of actions by Innophos generally without the lenders’ approval. These include covenants that affect our ability, among other things, to: incur or guarantee indebtedness; create liens; enter into mergers, recapitalizations or assets purchases or sales; change names; make certain changes to our business; make restricted payments that include dividends, purchases and redemptions of equity; make advances, investments or loans; effect sales and leasebacks; enter into transactions with affiliates; allow negative pledges or limitations on the repayment abilities of subsidiaries; or amend subordinated debt. In addition to these restrictions and covenants, our credit facility requires us to comply with specified financial maintenance covenants. We cannot guarantee that we will be able to maintain compliance with these covenants. In addition, any of these restrictions or covenants could limit our ability to plan for or react to market conditions or meet certain capital needs and could otherwise restrict our corporate activities. For example, our results of operations may limit our borrowing base to a level below that which we seek to establish. Any such limitation could harm our business.

Additional Funding - We may not have access to the funds required for future growth and expansion.

We may need additional funds to grow and expand our operations. We expect to fund our capital expenditures from operating cash flow to the extent we are able to do so and from our credit facility. If our operating cash flow is insufficient to fund our capital expenditures, we may either reduce our capital expenditures or further utilize our credit facility. For further strategic growth through mergers or acquisitions, we may also seek to generate additional liquidity, including beyond our existing credit facility, through the sale of debt or equity securities in private or public markets, through the sale of non-productive assets or through additional borrowings under our existing credit facility and/or additional facilities. We cannot provide any assurance that our cash flows from operations and our existing credit facility will be sufficient to fund anticipated capital expenditures or that we will be able to obtain additional funds from financial markets or from the sale of assets at terms favorable to us or at all. If we are unable to generate sufficient cash flows or raise sufficient additional funds to cover our capital expenditures or other strategic growth opportunities, we may not be able to achieve our desired operating efficiencies and expansion plans, which may adversely impact our competitiveness and, therefore, our results of operations.

Page 19 of 89

Table of Contents


ITEM 1B.	UNRESOLVED STAFF COMMENTS

None.


ITEM 2.	PROPERTIES

Our headquarters are located in Cranbury, New Jersey, with manufacturing facilities strategically located throughout the United States, Canada, Mexico and China. We do not own and are not responsible for any closed U.S. or Canadian elemental phosphorus or phosphate production sites. Our properties located in the United States, Canada, Mexico, and Brazil are utilized in all three reporting segments. Our properties in China are only utilized in our Food, Health and Nutrition segment.



Facility Type	Location	Owned or Leased
Corporate Headquarters / Research & Development	Cranbury, NJ	Leased
Manufacturing	Chicago Heights, IL	Owned
Manufacturing	Nashville, TN	Owned
Manufacturing	Port Maitland, Ontario, Canada	Owned
Manufacturing	Geismar, LA	Owned
Manufacturing	Ogden, UT	Leased
Manufacturing / Research & Development / Administrative	North Salt Lake, UT	Owned
Manufacturing	Green Pond, SC	Owned
Manufacturing	Chicago (Waterway), IL	Owned
Warehouse	Chicago Heights, IL	Leased
Administrative	East Hanover, NJ	Leased
Manufacturing	East Hanover, NJ	Leased
Administrative	Brattleboro, VT	Leased
Manufacturing	Coatzacoalcos, Veracruz, Mexico	Owned
Manufacturing	Mission Hills, Guanajuato, Mexico	Leased
Administrative	Mexico City, Mexico	Leased
Administrative	Mississauga, Ontario, Canada	Leased
Manufacturing	Taicang City, China	Leased
Administrative	Xi'an, China	Leased
Administrative	Sao Paulo, Brazil	Leased


ITEM 3.	LEGAL PROCEEDINGS

The information set forth in Note 16 of the Notes to Consolidated Financial Statements, “Commitments and Contingencies,” in “Part II, Item 8. Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K is incorporated herein by reference.


ITEM 4.	MINE SAFETY DISCLOSURES

None.

Page 20 of 89

Table of Contents

PART II


ITEM 5.	MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Certain Market Data

Our common stock has been listed and traded since November 2006 on the Nasdaq Global Select Market under the symbol “IPHS.”

The number of holders of record of our common stock at February 19, 2019 was 8,602.

Dividends

Consistent with the determination our Board of Directors made in December 2006, we continue to declare and pay quarterly dividends. The Company declared a $0.48 per share dividend in the first quarter of 2019. The quarterly dividend has been $0.48 per share since August 2014. Subject to action by the Board of Directors, management’s present policy is to recommend dividends be continued, reflecting its judgment at the present time that stockholders are better served if we distribute to them, as quarterly dividends payable at the discretion of the Board of Directors, a portion of the cash generated by our business in excess of our expected cash needs rather than retaining or using the cash for other purposes. Our expected cash needs include operating expenses and working capital requirements, interest and principal payments on our indebtedness, capital expenditures, costs associated with being a public company, taxes and other costs. If our financial needs change, management’s recommendations concerning dividends may also change.

We are not required to pay dividends, and our stockholders will not be guaranteed, or have contractual or other rights, to receive dividends. Our Board of Directors may decide, in its discretion at any time, to decrease or increase the amount of dividends, otherwise modify or repeal the dividend policy or discontinue entirely the payment of dividends.

In addition to prudent business considerations, our ability to pay dividends is restricted by the laws of Delaware, our state of incorporation, and certain restrictions in the credit agreement governing our credit facility.

Because we are a holding company, substantially all assets shown on our consolidated balance sheet are held by our subsidiaries. Accordingly, our earnings and cash flow and our ability to pay dividends are largely dependent upon the earnings and cash flows of our subsidiaries and the distribution or other payment of such earnings to us in the form of dividends. Our ability to pay dividends on our common stock is limited by restrictions in the credit agreement governing our indebtedness affecting the ability to pay dividends. See Note 10 of Notes to Consolidated Financial Statements in “Part II, Item 8. Consolidated Financial Statements and Supplementary Data” and Part I, Item 1A. Risk Factors - Certain Financial Risks - Contingencies Affecting Dividends - Our ability to pay dividends in the future may be compromised." appearing elsewhere in this Annual Report on Form 10-K.

Issuer Purchases of Equity Securities

The Company did not have any share repurchases on the open market during 2018. From time to time, the Company reacquires shares from employees in connection with the vesting, exercise and forfeiture of awards under its equity compensation plans. In December 2018, the Company reacquired an aggregate of 14,891 shares at a price of $24.53 per share in connection with the surrender of restricted shares by employees for tax purposes.

Page 21 of 89

Table of Contents

Performance Graph

The following graph compares the cumulative total return on our common stock with the cumulative total return of the Standard & Poor’s ("S&P") 500 Index. This graph covers the period from December 31, 2013 through December 31, 2018 (the last trading day of our fiscal year). The graph shows total shareholder return assuming $100 was invested on December 31, 2013 and dividends were reinvested.

Page 22 of 89

Table of Contents


ITEM 6.	SELECTED FINANCIAL DATA

The following table presents selected historical consolidated statements of operations, balance sheet and other data for the periods presented and should only be read in conjunction with our audited consolidated financial statements and the related notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which are included elsewhere in this Annual Report on Form 10-K.



	(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)
	Year Ended December 31,
	2018			2017			2016		2015		2014
Statement of operations data:
Net sales	$	801,842		$	722,024		$	725,345	$	789,147	$	839,186
Cost of goods sold	658,451			572,995			574,953		645,818		651,722
Gross profit	143,391			149,029			150,392		143,329		187,464
Operating expenses:
Selling, general and administrative	81,101			82,301			67,413		87,067		75,959
Research and development	5,076			3,733			3,739		4,502		4,649
Total operating expenses	86,177			86,034			71,152		91,569		80,608
Operating income	57,214			62,995			79,240		51,760		106,856
Interest expense, net	13,523			7,008			7,669		7,518		4,354
Foreign exchange (gains) losses, net	528			(578		)	1,111		3,882		5,085
Other income, net	(69		)	(72		)	142		237		61
Income before income taxes	43,232			56,637			70,318		40,123		97,356
Provision for income taxes	7,161			34,192			22,347		13,777		32,895
Net income	$	36,071		$	22,445		$	47,971	$	26,346	$	64,461
Allocation of net income to common shareholders	$	35,940		$	22,369		$	47,683	$	26,274	$	64,324
Per share data:
Income per share:
Basic	$	1.84		$	1.15		$	2.47	$	1.31	$	2.96
Diluted	$	1.82		$	1.13		$	2.44	$	1.29	$	2.91
Cash dividends declared	$	1.92		$	1.92		$	1.92	$	1.92	$	1.76
Weighted average shares outstanding:
Basic	19,518,366			19,444,795			19,271,448		20,032,300		21,753,270
Diluted	19,760,259			19,733,410			19,581,476		20,323,385		22,121,903



	(Dollars in thousands)
	Year Ended December 31,
	2018			2017			2016			2015			2014
Other data:
Cash flows provided from (used in):
Operating activities	$	73,612		$	73,989		$	139,109		$	98,926		$	126,781
Investing activities	(33,970		)	(184,830		)	(36,599		)	(31,699		)	(29,398		)
Financing activities	(48,227		)	86,542			(67,072		)	(86,018		)	(94,042		)
Capital expenditures	56,745			34,859			36,599			31,699			27,955

Page 23 of 89

Table of Contents



	(Dollars in thousands)
	Year Ended December 31,
	2018		2017		2016		2015		2014
Balance sheet data:
Cash and cash equivalents	$	20,197	$	28,782	$	53,487	$	17,905	$	36,207
Accounts receivable, net	102,564		100,820		77,692		79,743		90,551
Inventories	180,203		145,685		128,295		172,667		184,621
Property, plant & equipment, net	240,235		219,297		205,459		199,494		198,988
Total assets	815,154		785,169		643,011		669,553		728,411
Total debt	300,000		310,009		185,000		213,002		136,005
Total stockholders’ equity	$	335,515	$	333,559	$	347,226	$	333,260	$	463,007

Items included in the preceding tables which had a significant impact on results are summarized as follows:

2018 included value chain transition costs of approximately $10.2 million ($9.7 million in cost of goods sold and $0.5 million in selling, general and administrative expense), $5.4 million of tax benefit related to the U.S. Tax Cuts and Jobs Act of 2017 and liabilities of approximately $10.3 million and $30.4 million in current and long-term liabilities, respectively, related to deferred income on a sale/leaseback transaction and vendor contract termination fee. 2017 included the acquisitions of Novel Ingredients and NutraGenesis (included in our Food, Health and Nutrition segment), increasing investing activities by approximately $151.1 million, and $17.3 million tax expense due to the enactment of the U.S. Tax Cuts and Jobs Act of 2017. 2016 included restructuring costs of approximately $1.5 million before tax ($0.2 million in cost of goods sold and $1.3 million in selling, general and administrative expense). 2015 included management transition expenses and restructuring costs of approximately $20.4 million before tax ($3.3 million in cost of goods sold and $17.1 million in selling, general and administrative expense) and the Company's stock repurchase program which increased financing activities by $125.0 million, which was partially offset by increased borrowings.

Page 24 of 89

Table of Contents


ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion contains forward-looking statements about our markets, the demand for our products and services and our future results. We based these statements on assumptions that we consider reasonable. Actual results may differ materially from those suggested by our forward-looking statements for various reasons including those discussed in the “Risk Factors” and “Forward-Looking Statements” sections of this Annual Report on Form 10-K.

Background

Innophos is a leading international producer of specialty ingredient solutions that deliver versatile benefits for the food, health, nutrition and industrial markets. Innophos combines more than a century of experience in specialty phosphate manufacturing with a broad range of other specialty nutritional ingredients. Many of Innophos' products are application-specific compounds engineered to meet customer performance requirements and are often critical to the taste, texture and performance of foods, beverages, pharmaceuticals, oral care products and other applications. For example, Innophos products act as flavor enhancers in beverages, electrolytes in sports drinks, texture additives in cheeses, leavening agents in baked goods, pharmaceutical excipients and cleaning agents in toothpaste, and they also provide a wide range of nutritional fortification solutions for food, beverage and nutritional supplement manufacturers.

2018 Overview

Our financial performance in 2018 was highlighted by:


•	Net sales of $801.8 million compared to $722.0 million for 2017, an increase of 11.1% or $79.8 million due to:


◦	$72.4 million revenue increase from the Novel Ingredients and NutraGenesis acquisitions that were completed in the latter part of 2017;


◦	$7.4 million revenue growth in the base business on higher selling prices that exceeded lower volumes;


•	Increased input costs of $29.3 million due to higher market prices for key raw materials, energy and freight;


•	$10.2 million of value chain transition costs;


•	Net income of $36.1 million, a 61% increase versus 2017 largely due to provisional U.S. tax reform charges in 2017;


•	Capital expenditures of $56.7 million, up 63% versus 2017 primarily due to investments in the value chain and manufacturing optimization program;


•	Total year dividends of $1.92 per share paid on the common stock in 2018, same as 2017 dividend payments;


•	Operating cash flow of $73.6 million, down 1% compared to 2017, due to inventory increases to support the value chain transition and higher interest and taxes paid, which were mostly offset by a $20 million Nutrien payment;


•	Free cash flow (net cash provided from operating activities plus cash used for capital expenditures plus cash received from sale leaseback transactions) of $39.6 million, up 1% versus 2017 as $23 million of sale leaseback proceeds exceeded the effects of lower operating cash flow and higher capital expenditures; and


•	A decrease in net debt (current and long-term debt less cash and cash equivalents) of $1.4 million.

2019 Outlook

Overall market conditions and the competitive landscape in 2019 are expected to be similar to 2018.

Revenues are expected to be largely in line with 2018 revenue of $802 million and approximately equally split between H1 and H2. The underlying base business is expected to remain stable.


•	Positive year-over-year contributors to 2019 revenue are expected to be:


•	Selling price increases with a particular focus on Food, Health and Nutrition,


•	New product development wins, and


•	New business gains.


•	These gains are expected to be offset by:


•	The discontinuation of lower-margin FHN nutrition trading business in 2018,

Page 25 of 89

Table of Contents


•	Lower co-product sales in the Other segment due to efficiency improvements delivered from the strategic value chain initiative, and


•	Indirect tariffs pressure from competition redirecting mostly technical grade product to international markets. The Company anticipates limited direct impact on its North American sales.


•	Positive year-over-year contributions to 2019 earnings are expected from:


•	Selling price increases,


•	Margin contribution from business gains and new product development, and


•	The strategic value chain program.


•	These gains are expected to be partly offset by:


•	Input cost increases for raw materials and freight, and


•	Higher costs related to the Mexico energy supply shortages, that are expected through H1 2019.

From a GAAP and cash perspective, the expectation is that costs will be higher during H1 2019.

Capital investments are expected to be in line with 2018 to finalize the value chain and manufacturing optimization program that commenced in 2018. Average working capital is estimated to remain in line with 2018.

The Company expects its effective tax rate to operate in the 28-32% range.

Page 26 of 89

Table of Contents

Results of Operations

The following table sets forth a summary of the Company’s operations and their percentages of total revenue for the periods indicated (dollars in millions):



	Year Ended December 31,
	2018				2017					2016
	Amount			%	Amount			%		Amount		%
Net sales	$	801.8		100.0	$	722.0		100.0		$	725.3	100.0
Cost of goods sold	658.4			82.1	573.0			79.4		574.9		79.3
Gross profit	143.4			17.9	149.0			20.6		150.4		20.7
Operating expenses:
Selling, general and administrative	81.1			10.1	82.3			11.4		67.5		9.3
Research & development	5.1			0.6	3.7			0.5		3.7		0.5
Operating income	57.2			7.1	63.0			8.7		79.2		10.9
Interest expense, net	13.5			1.7	7.0			1.0		7.7		1.1
Foreign exchange (gains) losses, net	0.6			0.1	(0.5		)	(0.1	)	1.1		0.2
Other income, net	(0.1		)	—	(0.1		)	—		0.1		—
Provision for income taxes	7.1			0.9	34.2			4.7		22.3		3.1
Net income	$	36.1		4.5	$	22.4		3.1		$	48.0	6.6

Year Ended December 31, 2018 compared to the Year Ended December 31, 2017

Net Sales

Net sales represent the selling price of the products, net of any customer-related rebates, plus freight and any other items invoiced to customers. Net sales for the year ended December 31, 2018 were $801.8 million, an increase of $79.8 million, or 11.1% , as compared to $722.0 million for 2017 with prices up 3.9% and volumes up 7.2%. The high volumes were driven by a 10.0% increase resulting from acquisitions made during the second half of 2017, which was partially offset by a decrease of 2.8% primarily in the less differentiated portion of the base business. Food, Health and Nutrition sales were up 20.9%, or $82.9 million, with selling prices higher by 2.6%, or $10.3 million, and volume higher by 18.3%, or $72.6 million. The 2017 acquisitions contributed $70.3 million, or 18.2%, of the volume growth and the base business was up 0.1% in volume while contributing 2.1% of the higher pricing. Industrial Specialties sales were down 0.8%, or $2.1 million, with volumes lower by 5.4%, or $14.3 million, but selling prices higher by 4.6%, or $12.2 million. Other sales were lower by 1.5%, or $1.0 million, with volume lower by 11.1%, or $7.0 million, due to higher commodity fertilizer sales in the prior year period, but prices higher by 9.6%, or $6.0 million.

The Company calculates pure selling price dollar variances as the selling price for the current year period minus the selling price for the prior year period, and then multiplies the resulting selling price difference by the prior year period volume. Volume variance is calculated as the total sales variance minus the selling price variance and refers to the revenue effect of changes in tons sold at the relative prices applicable to the variation in tons, otherwise known as volume/mix. The following table illustrates for the year ended December 31, 2018 the percentage changes in net sales by reportable segment compared with the prior year, including the effect of price and volume/mix changes upon revenue:



	Price		Volume/Mix		Total
Food, Health and Nutrition	2.6	%	18.3	%	20.9	%
Industrial Specialties	4.6	%	(5.4	)%	(0.8	)%
Other	9.6	%	(11.1	)%	(1.5	)%
Total	3.9	%	7.2	%	11.1	%

Gross Profit

Gross profit represents net sales less cost of goods sold. Gross profit for the year ended December 31, 2018 was $143.4 million, a decrease of $5.6 million, or 3.8% , as compared to $149.0 million for 2017. Gross profit as a percentage of net sales decreased to 17.9 % for the year ended December 31, 2018, versus 20.6 % for 2017.

Page 27 of 89

Table of Contents

The following table outlines the factors resulting in the year on year change in gross profit in fiscal 2018.



	$ (in millions)
Higher selling prices	$	28.5
Higher sales volume	13.4
Effects of adjustments related to the application of purchase accounting (a)	4.3
Lower Operational Excellence initiatives expense	3.2
Higher raw materials costs (b)	(24.3		)
Higher manufacturing cost	(12.9		)
Higher value chain transition costs	(9.4		)
Higher depreciation and amortization	(5.7		)
Higher natural gas cost at our Coatzacoalcos, Mexico manufacturing facility	(5.0		)
Other (c)	2.3
	$	(5.6	)

(a) Represents expense recorded in 2017 related to the write-up to fair market value of inventories acquired as a result of the Novel acquisition.

(b) Primarily sulfur and MGA.

Operating Expenses and Research and Development

Operating Income

Operating income for the year ended December 31, 2018 was $57.2 million, a decrease of $5.8 million, or 9.2 %, as compared to $63 million for 2017. Operating income as a percentage of sales decreased to 7.1 % for 2018 from 8.7 % for 2017.

Interest Expense, net

Net interest expense, including deferred financing amortization expense, for the year ended December 31, 2018 was $13.5 million, an increase of $6.5 million, or 92.9% , as compared to $7.0 million for 2017. The increase was primarily due to higher market interest rates and a higher average loan balance due to the 2017 acquisitions.

Foreign Exchange

Foreign exchange for the year ended December 31, 2018 was a loss of $0.5 million as compared to a gain of $0.6 million for 2017. The U.S. Dollar is the functional currency of our Mexican and Canadian operations. Consequently, foreign exchange gain or loss is recorded on remeasurement of non-U.S. Dollar denominated monetary assets and liabilities. Such gains and losses fluctuate from period to period as the foreign currencies strengthen or weaken against the U.S. Dollar and the amount of non-U.S. Dollar denominated assets and liabilities increases or decreases.

The Company has greater foreign denominated asset balances (largely Mexican Peso and Canadian Dollar), such as value added tax, or VAT, receivables and prepaid income taxes in foreign jurisdictions, than offsetting foreign denominated liability balances. As the U.S. Dollar strengthened throughout 2018 versus the Mexican Peso and the Canadian Dollar, the remeasurement of the net foreign asset denominated balances contributed to a net foreign exchange loss for 2018. Conversely, as the Mexican Peso was strengthening in 2017, the Company realized a net foreign exchange gain.

Provision for Income Taxes

The effective income tax rate was 17% for the year ended December 31, 2018 compared to 60% for 2017. The most significant variance in the effective tax rate was due to the provisions of the U.S. Tax Cuts and Jobs Act of 2017 which decreased the tax rate by 430 basis points year over year. The two primary components of this 430 basis points decrease in the tax rate were: (1) the one-time transition tax on the mandatory deemed repatriation of foreign earnings of certain non-U.S.

Page 28 of 89

Table of Contents

subsidiaries which decreased the tax rate by 290 basis points year over year, and (2) the remeasurement of certain U.S. deferred tax assets and liabilities, based on the enacted rates, which decreased the tax rate by 160 basis points year over year.

Net Income

Net income for the year ended December 31, 2018 was $36.1 million, an increase of $13.7 million, as compared to $22.4 million for 2017, due to the factors described above.

Year Ended December 31, 2017 compared to the Year Ended December 31, 2016

Net Sales

Net sales represent the selling price of the products, net of any customer-related rebates, plus freight and any other items invoiced to customers. Net sales for the year ended December 31, 2017 were $722.0 million, a decrease of $3.3 million, or 0.5% , as compared to $725.3 million for 2016 with prices down 3.9%, partially offset by higher volumes of 3.4%. Food, Health and Nutrition sales were up 5.5%, or $20.6 million, with selling prices lower by 2.9%, or $11.1 million, but volume higher by 8.4%, or 31.7 million. Results from the newly acquired Novel Ingredients and NutraGenesis businesses had sales totaling $36.7 million in 2017. Industrial Specialties sales were down 5.6%, or $15.6 million, due to lower selling prices and flat sales volumes. Other sales were lower by 11.9%, or $8.3 million, with volume lower by 9.5%, or $6.6 million, due to higher commodity fertilizer sales in the prior year period, and prices lower by 2.4%, or $1.7 million.

The Company calculates pure selling price dollar variances as the selling price for the current year period minus the selling price for the prior year period, and then multiplies the resulting selling price difference by the prior year period volume. Volume variance is calculated as the total sales variance minus the selling price variance and refers to the revenue effect of changes in tons sold at the relative prices applicable to the variation in tons, otherwise known as volume/mix. The following table illustrates for the year ended December 31, 2017 the percentage changes in net sales by reportable segment compared with the prior year, including the effect of price and volume/mix changes upon revenue:



	Price		Volume/Mix		Total
Food, Health and Nutrition	(2.9	)%	8.4	%	5.5	%
Industrial Specialties	(5.6	)%	—	%	(5.6	)%
Other	(2.4	)%	(9.5	)%	(11.9	)%
Total	(3.9	)%	3.4	%	(0.5	)%

Gross Profit

Gross profit represents net sales less cost of goods sold. Gross profit for the year ended December 31, 2017 was $149.0 million, a decrease of $1.4 million, or 0.9% , as compared to $150.4 million for 2016. Gross profit percentage was 20.6 % for the year ended December 31, 2017, essentially unchanged from 20.7 % for 2016.

The following table outlines the factors resulting in the year on year change in gross profit in fiscal 2017.



	$ (in millions)
Lower raw material costs (a)	$	34.9
Novel Ingredients and NutraGenesis results	2.4
Lower manufacturing costs	2.2
Lower selling prices	(28.4		)
Lower sales volume	(6.8		)
Effects of planned maintenance outages	(4.3		)
Phase 2 Operational Excellence initiatives expense	(3.2		)
Higher depreciation expenses	(1.3		)
Other (b)	3.1
	$	(1.4	)

(a) Mainly phosphate rock and MGA.

(b) Primarily consists of a 2016 planned maintenance charge and GTSP lower of cost or market reserve.

Page 29 of 89

Table of Contents

Operating Expenses and Research and Development

Operating expenses consist primarily of selling, general and administrative expenses and research and development expenses. Operating expenses for the year ended December 31, 2017 were $85.9 million, an increase of $14.6 million, or 20.5 %, as compared to $71.3 million for 2016. The increase was due to $5.2 million of Novel Ingredients and NutraGenesis operating expenses for the current period, $5.2 million of transaction and integration costs related to the Novel Ingredients and NutraGenesis acquisitions, $3.4 million of such expenses for strategic initiatives and $1.4 million higher severance costs. Included in 2016 was $0.6 million of costs from the refinancing of our credit facility.

Operating Income

Operating income for the year ended December 31, 2017 was $63.1 million, a decrease of $16.0 million, or 20.2 %, as compared to $79.1 million for 2016. Operating income percentages decreased to 8.7 % for 2017 from 10.9 % for 2016.

Interest Expense, net

Net interest expense, including deferred financing amortization expense, for the year ended December 31, 2017 was $7.0 million, a decrease of $0.7 million, or 9.1% , as compared to $7.7 million for 2016. The decrease was primarily due to lower applicable margins on our December 2016 credit facility, lower deferred financing expense and prior year interest charges from U.S. federal and state amended tax returns from prior periods which did not reoccur in 2017.

Foreign Exchange

Foreign exchange for the year ended December 31, 2017 was a gain of $0.5 million as compared to a loss of $1.1 million for 2016. The U.S. Dollar is the functional currency of our Mexican and Canadian operations. Consequently, foreign exchange gain or loss is recorded on remeasurement of non-U.S. Dollar denominated monetary assets and liabilities. Such gains and losses fluctuate from period to period as the foreign currencies strengthen or weaken against the U.S. Dollar and the amount of non-U.S. Dollar denominated assets and liabilities increases or decreases.

The Company has greater foreign denominated asset balances (largely Mexican Peso and Canadian Dollar), such as value added tax, or VAT, receivables and prepaid income taxes in foreign jurisdictions, than offsetting foreign denominated liability balances. As the U.S. Dollar strengthened throughout 2016 versus the Mexican Peso and the Canadian Dollar, the remeasurement of the net foreign asset denominated balances contributed to a net foreign exchange loss for 2016. Conversely, as the Mexican Peso was strengthening in 2017, the Company realized a net foreign exchange gain.

Provision for Income Taxes

The effective income tax rate was 60% for the year ended December 31, 2017 compared to 32% for 2016. The most significant variance in the effective tax rate was due to the provisions of the U.S. Tax Cuts and Jobs Act of 2017 which increased the tax rate by 31% year over year. The two primary components of this 31% increase in the tax rate were: (1) the one-time transition tax on the mandatory deemed repatriation of foreign earnings of certain non-U.S. subsidiaries which increased the tax rate by 25%, and (2) the remeasurement of certain U.S. deferred tax assets and liabilities, based on the enacted rates, which increased the tax rate by 6%. The 31% increase in the effective income tax rate due to this legislation was partially offset by increased income, including non-taxable interest income, in lower tax rate jurisdictions which decreased the effective tax rate by 3%.

Net Income

Net income for the year ended December 31, 2017 was $22.4 million, a decrease of $25.6 million, as compared to $48.0 million for 2016, due to the factors described above.

Page 30 of 89

Table of Contents

Segment Reporting

The Company's chief executive officer is the chief operating decision maker and, as of the first quarter of 2017, has determined to assess the Company's performance and allocate the appropriate resources based on the following operating segments: (1) Food, Health and Nutrition; (2) Industrial Specialties; and (3) Other. The new reporting segments accurately reflect the underlying business dynamics and align with the strategic direction of the Company. The primary performance indicators for the chief operating decision maker are sales and EBITDA. The following table sets forth the historical results of these indicators by segment for the years ended December 31, 2018, 2017 and 2016:



	2018			2017			2016
Segment Net Sales
Food, Health and Nutrition	$	480,166		$	397,298		$	376,672
Industrial Specialties	260,605			262,704			278,284
Other	61,071			62,022			70,389
Total	$	801,842		$	722,024		$	725,345
Net Sales % Growth
Food, Health and Nutrition	20.9		%	5.5		%	(4.6		)%
Industrial Specialties	(0.8		)%	(5.6		)%	(12.9		)%
Other	(1.5		)%	(11.9		)%	(5.8		)%
Total	11.1		%	(0.5		)%	(8.1		)%
Segment EBITDA
Food, Health and Nutrition	$	61,791		$	67,156		$	78,128
Industrial Specialties	34,124			33,833			36,029
Other (a)	5,771			3,060			1,309
Total	$	101,686		$	104,049		$	115,466
Segment EBITDA % of net sales
Food, Health and Nutrition	12.9		%	16.9		%	20.7		%
Industrial Specialties	13.1		%	12.9		%	12.9		%
Other (a)	9.4		%	4.9		%	1.9		%
Total	12.7		%	14.4		%	15.9		%
Depreciation and amortization expense
Food, Health and Nutrition	$	28,695		$	24,212		$	20,269
Industrial Specialties	14,347			13,863			12,645
Other	1,889			2,329			4,565
Total	$	44,931		$	40,404		$	37,479


(a)	The year ended December 31, 2016 includes a $1.5 million charge to earnings for restructuring costs.

A reconciliation of net income to EBITDA follows:



	2018		2017		2016
Net income	$	36,071	$	22,445	$	47,971
Provision for income taxes	7,161		34,192		22,347
Interest expense, net	13,523		7,008		7,669
Depreciation and amortization	44,931		40,404		37,479
EBITDA	$	101,686	$	104,049	$	115,466

Page 31 of 89

Table of Contents

Segment Net Sales:

Food, Health and Nutrition net sales increased 20.9% for the year ended December 31, 2018 compared with the same period in 2017. Average selling prices increased by 2.6% , due primarily to the base business, and volumes increased 18.3% due primarily to the contribution of the Novel and NutraGenesis acquisitions purchased in the latter part of 2017. Net sales increased 5.5% for the year ended December 31, 2017 compared with the same period in 2016. Average selling prices decreased by 2.9% while volumes increased 8.4% due to the contribution of the Novel and NutraGenesis acquisitions.

Industrial Specialties net sales decreased 0.8% for the year ended December 31, 2018 compared with the same period in 2017. Average selling prices increased 4.6% while volumes decreased 5.4% . Net sales decreased 5.6% for the year ended December 31, 2017 compared with the same period in 2016. Average selling prices decreased 5.6% , due to strong pricing competition in technical grade products, while volumes were flat with improved mix due to product pruning.

Other net sales decreased 1.5% for the year ended December 31, 2018 compared with the same period in 2017. Average selling prices increased 9.6% , due to higher fertilizer market prices, while volumes decreased 11.1% . Net sales decreased 11.9% for the year ended December 31, 2017 compared with the same period in 2016. Average selling prices decreased 2.4% and volumes decreased 9.5% .

Segment EBITDA Percentage of Net Sales:

The 400 basis point decrease in Food, Health and Nutrition EBITDA margins for the year ended December 31, 2018 compared with 2017 is due to increased raw material costs, largely sulfur and MGA, which decreased margins by 640 basis points, higher manufacturing and operating costs which decreased margins by 380 basis points, and value chain transition costs which decreased margins by 100 basis points. This decrease was partially offset by higher sales volume/mix which increased margins by 350 basis points, higher average selling prices which increased margins by 210 basis points and lower strategic project and other costs which increased margins by 50 basis points. Fair value inventory purchase accounting charges in 2017 related to the Novel acquisition increased margins by 110 basis points in 2018.

The 380 basis point decrease in Food, Health and Nutrition EBITDA margins for the year ended December 31, 2017 compared with 2016 is due to lower average selling prices which decreased margins by 240 basis points, higher strategic project expenses which decreased margins by 110 basis points, higher manufacturing and operating costs which decreased margins by 80 basis points, and other items such as turnaround costs, sales volume/mix and severance which decreased margins by a combined 70 basis points. The inclusion of the newly acquired Novel Ingredients and NutraGenesis businesses decreased margins by 200 basis points, primarily due to a fair value inventory adjustment which decreased margins by 110 basis points. These decreases were partially offset by decreased raw material costs, mainly phosphate rock and MGA, which increased margins by 290 basis points and favorable translation and refinancing comparables which increased margins by 30 basis points.

The 20 basis point increase in Industrial Specialties EBITDA margins for the year ended December 31, 2018 when compared with 2017 is due to higher average selling prices which increased margins by 380 basis points and lower strategic project costs which increased margins by 90 basis points. This increase was mostly offset by value chain transition costs which decreased margins by 200 basis points, lower sales volume/mix which decreased margins by 80 basis points, higher manufacturing and operating costs which decreased margins by 60 basis points, higher Mexican natural gas costs which decreased margins by 50 basis points, higher raw material costs which decreased margins by 40 basis points, and miscellaneous other items that decreased margins by 20 basis points

The EBITDA margins for Industrial Specialties were unchanged for the year ended December 31, 2017 when compared with 2016. Lower average selling prices decreased margins by 510 basis points, higher strategic project expenses decreased margins by 70 basis points, and higher operating, turnaround and severance costs decreased margins by 70 basis points. These decreases were offset by decreased raw material costs, mainly phosphate rock and MGA, which increased margins by 450 basis points, higher sales volume/mix which increased margins by 140 basis points, and lower manufacturing costs including translation which increased margins by 50 basis points. Included in 2016 was the costs from the refinancing of our credit facility which increased margins by 10 basis points in 2017.

The 450 basis point increase in Other EBITDA margins for the year ended December 31, 2018 compared with 2017 is due to lower strategic project costs which increased margins by 910 basis points, higher selling prices which increased margins 840 basis points, and other items that increased margins by 50 basis points. This increase was partially offset by higher manufacturing and operating costs which decreased margins 530 basis points, lower sales volume/mix which decreased margins by 430 basis points, higher Mexican natural gas costs which decreased margins by 140 basis points, unfavorable movement in translation that decreased margins by 140 basis points, and value chain transition costs which decreased margins by 110 basis points.

Page 32 of 89

Table of Contents

The 300 basis point increase in Other EBITDA margins for the year ended December 31, 2017 compared with 2016 is due to decreased raw material costs, mainly phosphate rock and MGA, which increased margins by 1,660 basis points, and lower manufacturing costs including translation which increased margins 130 basis points. These increases were partially offset by higher strategic project expenses which decreased margins by 840 basis points, lower average selling prices which decreased margins by 250 basis points, lower sales volume/mix which decreased margins by 240 basis points and higher operating, turnaround and severance costs which decreased margins by 300 basis points. Included in 2016 was a lower of cost or market reserve and costs from the refinancing of our credit facility which increased margins by a combined 140 basis points in 2017.

Liquidity and Capital Resources

Historical

Our principal liquidity requirements have been, and we expect will be, for working capital and general corporate purposes, including capital expenditures, debt service, and our quarterly dividend program. Currently, the annual dividend payment is $1.92 per share or approximately $38 million. We do not currently have a share repurchase program in place. Capital investments are expected to be in line with 2018 to finalize the value chain and manufacturing optimization program that commenced in 2018. We have historically satisfied our liquidity requirements with internally generated cash flows and availability under our revolving credit facility. We expect that our ability to generate cash from our operations and ability to borrow from our credit facilities should be sufficient to support working capital needs, planned growth and capital expenditures for the next 12 months and for the foreseeable future.

Cash Flow Summary

The following table sets forth a summary of the Company’s cash flows for the periods indicated.



(Dollars in millions)	Year Ended December 31,
	2018			2017			2016
Operating Activities	$	73.6		$	74.0		$	139.1
Investing Activities	(34.0		)	(184.8		)	(36.6		)
Financing Activities	(48.2		)	86.5			(67.1		)
Effect of foreign exchange rate changes	—			(0.4		)	0.1

Year Ended December 31, 2018 compared to the Year Ended December 31, 2017

Net cash provided by operating activities was $73.6 million for the year ended December 31, 2018 as compared to $74.0 million for 2017, a decrease of $0.4 million. The decrease in net cash provided by operating activities resulted from higher working capital needs, primarily inventory of $40.3 million which was driven by the value chain transition project and other unfavorable working capital needs of $3.7 million, mostly offset by a vendor contract termination fee received of $21.3 million, favorable changes in accounts payable of $13.0 million and favorable changes in accounts receivable of $9.3 million.

Total inventories as of December 31, 2018 increased $34.5 million from December 31, 2017 levels. The following chart shows the historical days on hand performance:



	2018	2017	2016
Inventory Days on Hand	100	94	81

Net cash used for investing activities was $34.0 million for the year ended December 31, 2018, compared to $184.8 million for 2017, a decrease in spending of $150.8 million. The change was due to acquisition outflows of $151.0 in 2017 and $22.8 million received from the sale/leaseback transaction in 2018, partially offset by a $21.8 million increase in capital spending, primarily related to supply chain initiatives and $1.0 million cash received from the sale of an administrative building in 2017.

Approximately 60% of the 2018 capital spending was for strategic growth initiatives and the remaining 40% was for plant maintenance projects.

Page 33 of 89

Table of Contents

Net cash from financing activities for the year ended December 31, 2018 was a use of $48.2 million, compared to a source of $86.5 million in 2017, a decrease in cash of $134.7 million. This decrease in cash was largely due to increased loan borrowings in 2017 used to fund the Novel Ingredients and NutraGenesis acquisitions.

Year Ended December 31, 2017 compared to the Year Ended December 31, 2016

Net cash provided by operating activities was $74.0 million for the year ended December 31, 2017 as compared to $139.1 million for 2016, a decrease of $65.1 million. The decrease in operating activities cash resulted from unfavorable changes of $25.6 million in net income and $54.3 million in working capital due to a significant improvement in 2016 when working capital as a percent of sales was reduced by 690 basis points, partially offset by favorable changes of $12.6 million in other long term assets and liabilities and $2.2 million in non-cash adjustments to income.

The unfavorable change in working capital is derived from it being a use of cash of $13.1 million in 2017 compared to a source of $41.2 million in 2016, a decrease in cash of $54.3 million. The unfavorable change in working capital was due to unfavorable changes in inventory of $38.2 million, driven by adjusted inventory levels in the prior year due to customer demand, accounts receivable of $13.1 million due to the effects of extended payment terms and accounts payable of $18.2 million. These unfavorable effects were partially offset by favorable changes in other current liabilities of $13.2 million, largely due to U.S. income tax payments in the prior year, and other current assets of $2.1 million. Accounts receivable has increased as a percent of quarterly sales compared to the last four quarters' average due to pressures on customer payment terms.

Total inventories as of December 31, 2017 increased $17.4 million from December 31, 2016 levels, due to the inclusion of $19.8 million of acquisition inventory, resulting in days of inventory on hand increasing to 94 days as of December 31, 2017. The following chart shows its historical performance:



	2017	2016	2015
Inventory Days on Hand	94	81	98

Net cash used for investing activities was $184.8 million for the year ended December 31, 2017, compared to $36.6 million for 2016, an increase in spending of $148.2 million. The change was due to the acquisition of Novel Ingredients and NutraGenesis for an aggregate purchase price of $151.0 million, partially offset by a $1.8 million decrease in capital spending and $1.0 million cash received from the sale of an administrative building.

Approximately 53% of the 2017 capital spending was for strategic growth initiatives and the remaining 47% was for plant maintenance projects. Approximately half of the strategic growth investments were focused on the deep well injection system project at our Geismar, Louisiana facility which accounts for approximately 28% of the Company's total capital expenditures.

Net cash from financing activities for the year ended December 31, 2017 was a source of $86.5 million, compared to a use of $67.1 million in 2016, an increase in cash of $153.6 million. This increase in cash was largely due to $151.0 million increased loan borrowings for the Novel Ingredients and NutraGenesis acquisitions.

Indebtedness

Total debt was $300.0 million as of December 31, 2018. Short term and long term debt net of cash was $279.8 million as of December 31, 2018, a decrease of $1.4 million, or 0.5% from the December 31, 2017 level. For more information on our debt, see Note 10 of the Consolidated Financial Statements "Short-term Borrowings, Long-Term Debt and Interest Expense".

Other Liquidity Matters

On December 31, 2018, the Company had cash and cash equivalents outside the United States of $13.5 million, or 67% of the Company's balance. The foreign cash amounts are not restricted by law to be used in other countries.

2018 included value chain transition costs of approximately $10.2 million ($9.7 million in cost of goods sold and $0.5 million in selling general and administrative expense).

In December 2018, as a result of a supply agreement termination, the Company received consideration of $24.9 million which included $21.3 million in cash as well as receipt of certain tangible assets with a fair value of $3.6 million. For more information, see Note 22 of the Consolidated Financial Statements "Supply agreement termination".

Page 34 of 89

Table of Contents

In December 2018, the Company sold its Chicago Heights, Illinois warehouse for $23.0 million. Under the agreement, the Company is leasing back the property from the purchaser over a period of 20 years. The annual rent for the initial period of 5 years is $1.5 million plus taxes and subsequently will increase 10% every five years through the end of the lease. For more information, see Note 6 of the Consolidated Financial Statements "Property, Plant and Equipment, net".

Off-Balance Sheet Arrangements

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as “structured finance or special purpose entities”, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Contractual Obligations and Commercial Commitments

The following table sets forth our long-term contractual cash obligations as of December 31, 2018 (dollars in thousands):



	Years ending December 31,
Contractual Obligations	Total		2019		2020		2021		2022		2023		Thereafter
Revolver borrowings (1)	$	300,000	$	—	$	—	$	300,000	$	—	$	—	$	—
Future service pension benefits	12,024		946		1,012		1,093		1,179		1,239		6,555
Foreign withholding tax	1,164		—		—		—		—		—		1,164
Other (2)	187,051		81,530		66,645		38,876		—		—		—
Operating leases	67,335		8,259		7,130		6,490		6,032		5,467		33,957
Total contractual cash obligations	$	567,574	$	90,735	$	74,787	$	346,459	$	7,211	$	6,706	$	41,676

______________________


(1)	Amounts exclude interest payments. Interest on the $300.0 million balance of the revolver borrowings at current rates would be approximately $13.8 million annually.


(2)	Represents minimum annual purchase commitments to buy raw materials from suppliers.

Page 35 of 89

Table of Contents

Critical Accounting Estimates and Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of our financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates, including those related to allowance for bad debts, distributor incentives and rebates, the recoverability of long-lived assets, including amortizable intangible assets, goodwill, depreciation and amortization periods, income taxes and commitments and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Claims and Legal Proceedings

The categories of asserted or unasserted claims for which the Company has estimated a probable liability and for which amounts are estimable are critical accounting estimates. Please refer to Part I, Item 3. "Legal Proceedings" and the section entitled “Commitments and Contingencies” in Note 16 of Notes to Consolidated Financial Statements in “Part II, Item 8. Consolidated Financial Statements and Supplementary Data” for additional information about such estimates.

Income Taxes

We record income taxes based on the amounts that are refundable or payable in the current year, and we include results of any difference between GAAP and tax reporting that we record as deferred tax assets or liabilities. We review our deferred tax assets for recovery. A valuation allowance is established when the Company believes that it is more likely than not that some portion of its deferred tax assets will not be realized. Changes in valuation allowances from period to period are included in our tax provision in the period of change. Assessment of the appropriate amount and classification of income taxes is dependent on several factors, including estimates of the timing and realization of deferred income tax assets and the timing of income tax payments. Actual collections and payments may differ from these estimates as a result of changes in tax laws as well as unanticipated future transactions impacting related income tax balances. For more information, see Note 15 of the Consolidated Financial Statements "Income Taxes".

Goodwill

Goodwill represents the excess of the acquisition cost over the fair value of net assets of the businesses acquired. Accounting Standards Codification (ASC) 350, “ Intangibles-Goodwill and Other ,” requires periodic tests of the impairment of goodwill. ASC 350 requires a comparison, at least annually, of the net book value of the assets and liabilities associated with a reporting unit, including goodwill, with the fair value of the reporting unit, which corresponds to the discounted cash flows of the reporting unit, in the absence of an active market. When this comparison indicates that impairment must be recorded, the impairment recognized is the amount by which the carrying amount of the assets exceeds the fair value of these assets, not to exceed the carrying value of the goodwill. The annual goodwill impairment review is conducted during the fourth quarter of each year. Fair values for goodwill testing are estimated using a discounted cash flow approach. Significant estimates in the discounted cash flow approach include the cash flow forecasts for each of our reporting units, the discount rate and the terminal value. The five year cash flow forecasts of the Company’s reporting units is based upon management’s estimate at the date of the assessment, which incorporates managements long-term view of selling prices, sales volumes for Innophos’ products, key raw materials and energy costs, and our operating cost structure. The aggregated fair value of our reporting units was reconciled to our market capitalization at the date of the assessment, plus a suitable control premium. The terminal value was determined by applying business growth factors for each reporting unit which are in-line with longer term growth rates, to the latest year for which a forecast exists.

Our market capitalization during fourth quarter of 2018 exceeded the book value of our equity.

Our reporting units for goodwill purposes are Food, Health and Nutrition, Industrial Specialties and Other. These reporting segments accurately reflect the underlying business dynamics and align with the strategic direction of the Company.

As of October 31, 2018, the Company performed step one of the annual goodwill impairment test for each reporting unit and concluded that the fair values of all the reporting units were in excess of their carrying values by more than 25%. We used a

Page 36 of 89

Table of Contents

discount rate which is commensurate with the risks inherent to each reporting unit and in our cash flow forecasts. The discount rate used in our 2018 reporting unit valuations is 9.5%.

The development of future cash flow projections requires management estimates related to forecasted sales and expected costs trends. To the extent that changes in business conditions occur or other management decisions are made that result in adjusted management projections, impairment losses may occur in future periods.

Long-lived assets

Under ASC 360, “ Property, Plant, and Equipment ,” long-lived assets including property, plant and equipment and amortized intangible assets are evaluated and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. The review of these long-lived assets is performed at the individual asset level, asset group level, or the product group level depending on the lowest level for which identifiable cash flows are largely independent. The Company’s asset groupings or product groupings vary based on the interrelationship of the long-lived assets and the identifiable cash flows. For example, in certain instances, multiple manufacturing units may work with one another to produce the lowest identifiable cash flows or in other instances a stand-alone unit may produce the lowest level of identifiable cash flows. There are other instances where a stand-alone unit may produce multiple products and the lowest level of identifiable cash flows is at the product group level. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the undiscounted future cash flows expected to be generated by the asset, asset group or product group. When this comparison indicates that impairment must be recorded, the impairment recognized is the amount by which the carrying amount of the assets exceeds the fair value of the assets.

The determination of whether or not assets are impaired and the corresponding useful lives of these long-lived assets requires significant judgment. The development of future cash flow projections requires management estimates related to forecasted sales and expected costs trends. To the extent that changes in business conditions occur or other management decisions are made that result in adjusted management projections or alternative use of the assets, impairment losses or accelerated depreciation may occur in future periods.

Stock-Based Compensation Expense

Our compensation programs can include share-based payments. The primary share-based awards and their general terms and conditions currently in effect are as follows:


•	Stock options, which entitle the holder to purchase, after the end of a vesting term, a specified number of shares of Innophos common stock at an exercise price per share set equal to the market price of Innophos common stock on the date of grant.


•	Restricted stock grants, which entitle the holder to receive, at the end of each vesting term, a specified number of shares of Innophos common stock, and which also entitle the holder to receive dividends paid on such grants throughout the vesting period.

•

Performance share awards which entitle the holder to receive, at the end of a performance cycle, a number of shares of Innophos common stock, within a range of shares from zero to a specified maximum (generally 200% of initial share award), calculated using a combination of performance indicators as defined solely by reference to the Company’s own activities. Amounts equivalent to dividends will accrue over the performance period and are paid on performance share awards when vested and distributed.


•	Annual stock retainer grants, which entitle independent members of the Board of Directors to receive a number of shares of the Company’s common stock equal to a fixed retainer value.

Page 37 of 89

Table of Contents

The fair value of the options granted during 2018, 2017 and 2016 was determined using the Black-Scholes option-pricing model. The assumptions used in the Black-Scholes option-pricing model were as follows:



Non-qualified stock options	Year Ended December 31, 2018			Year Ended December 31, 2017			Year Ended December 31, 2016
Expected volatility	29.7		%	31.3		%	33.8		%
Dividend yield	4.6		%	3.6		%	6.6		%
Risk-free interest rate	2.6		%	2.1		%	1.4		%
Expected term in years	6.3			6.6			6.6
Weighted average grant date fair value of stock options	$	7.28		$	11.54		$	4.62

The expected volatility and the expected term are based on the Company's historical data. The dividend yield is the expected annual dividend payments divided by the average stock price up to the date of grant. The risk-free interest rates are derived from the U.S. Treasury securities in effect on the date of grant whose maturity period equals the options expected term. The Company applies an expected forfeiture rate to stock-based compensation expense. The estimate of the forfeiture rate is based primarily upon historical experience of employee turnover. As actual forfeitures become known, stock-based compensation expense is adjusted accordingly.

Pension and Post-Retirement Costs / Post-Employment Plan

The Company maintains both defined contribution plans and noncontributory defined benefit pension plans that together cover all U.S. and Canadian employees.

In the United States, salaried and hourly employees are covered by a defined contribution plan with a 401(k) feature. The plan provides for employee contributions, company matching contributions, and an age-weighted annual company contribution to eligible employees. Union-represented hourly employees at our Nashville, Tennessee site are covered by a traditional defined benefit plan providing benefits based on years of service and final average pay whose benefit accruals were frozen as of August 1, 2007, after which the Nashville union employees began participating in the Company’s existing noncontributory defined contribution benefit plan. All plans were established by Innophos in 2004.

Our pension and post-retirement benefit costs are developed from actuarial valuations. Inherent in these valuations are key assumptions, including the discount rate and the expected long-term rate on plan assets. These assumptions require significant judgment and material changes in our pension and post-retirement benefit costs may occur in the future due to changes in these assumptions, changes in levels of benefits provided, and changes in asset levels. Such assumptions are based on benchmarks obtained from third party sources.

As a sensitivity measure, the effect of a 25 basis-point decrease in our discount rate assumption would increase our net periodic benefit cost for our pension and post-retirement plans by approximately $.1 million. A 1% decrease in our expected rate of return on plan assets would increase our pension plan expense by $.2 million.

Recently Issued Accounting Standards

New accounting standards effective in 2018 are described in the Recent Accounting Pronouncements section in Note 1 of Notes to Consolidated Financial Statements in “Part II, Item 8. Consolidated Financial Statements and Supplementary Data.”

Page 38 of 89

Table of Contents


ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain market risks as part of our ongoing business operations. Primary exposures include changes in interest rates, as borrowings under our credit agreement will bear interest at floating rates based on LIBOR plus an applicable borrowing margin. We manage our interest rate risk by balancing the amount of fixed-rate and floating-rate debt to the extent practicable consistent with our credit status. For fixed-rate debt, interest rate changes do not affect earnings or cash flows. Conversely, for floating-rate debt, interest rate changes generally affect our earnings and cash flows, assuming other factors are held constant.

At December 31, 2018, we had a $450.0 million revolving credit facility, of which $300.0 million was outstanding, which approximates fair value (determined using level 2 inputs within the fair value hierarchy). Total remaining availability was $149.3 million, taking into account $0.7 million in face amount of letters of credit issued under the sub-facility. In December 2018, the Company entered into an interest rate swap, swapping the LIBOR exposure of $150.0 million of floating rate debt, which is currently outstanding under our Credit Agreement, to a fixed rate to maturity obligation of 2.677% expiring in November 2021. The fair value of this interest rate swap is a liability of approximately $1.0 million as of December 31, 2018 and is included in other long-term liabilities.

Changes in economic conditions could result in higher interest rates, thereby increasing our interest expense on our revolving line of credit. Changes in economic conditions may also result in lower operating income, reducing our funds available for capital investment, operations or other purposes. In addition, a substantial portion of our cash flow has been used to service debt and fund working capital needs, which may affect our ability to make future acquisitions or capital expenditures. We may from time to time use interest rate protection agreements to minimize our exposure to interest rate fluctuation. Regardless of hedges, we may experience economic loss and a negative impact on earnings or net assets as a result of interest rate fluctuations. Based on $150.0 million outstanding borrowings as floating rate debt under our credit facility, an immediate increase of one percentage point would cause an increase to interest expense of approximately $1.5 million per year.

From time to time, we may enter into longer term natural gas and electricity supply contracts in an effort to eliminate some of the volatility in our energy costs. We did not enter into any economic hedges in the past three years.

We do not currently, but may from time to time, hedge our currency rate risks.

We believe that our concentration of credit risk related to trade accounts receivable is limited since these receivables are spread among a number of customers and are geographically dispersed. No customer accounted for more than 10% of our sales in the last 3 years.

Foreign Currency Exchange Rates

The U.S. Dollar is the functional currency of our Canadian and Mexican operations. Accordingly, these operations’ monetary assets and liabilities are remeasured at current exchange rates, non-monetary assets and liabilities are remeasured at historical exchange rates, and revenue and expenses are remeasured at average exchange rates and at historical exchange rates for the related revenue and expenses of non-monetary assets and liabilities. All transaction gains and losses are included in net income.

Our principal source of exchange rate exposure in our foreign operations consists of expenses, such as labor expenses, which are denominated in the foreign currency of the country in which we operate. A decline in the value of the U.S. Dollar relative to the local currency would generally cause our operational expenses (particularly labor costs) to increase (conversely, a decline in the value of the foreign currency relative to the U.S. Dollar would cause these expenses to decrease). We believe that normal exchange rate fluctuations consistent with recent historical trends would have a modest impact on our expenses, and would not materially affect our financial condition or results of operations. Nearly all of our sales are denominated in U.S. Dollars and our exchange rate exposure in terms of sales revenues is minimal.

Inflation and changing prices

Our costs and expenses will be subject to inflation and price fluctuations. Significant price fluctuations in raw materials, freight, and energy costs, if not compensated for by cost savings from production efficiencies or price increases passed on to customers could have a material effect on our financial condition and results of operations. See “Part I, Item 1A. Risk Factors - Raw Materials Availability and Pricing - The success of our business depends on our ability to successfully source sufficient amounts of the raw materials used in our products at competitive prices, often from a limited number of suppliers, some of whom with we do not have a long-term contract in place.” in this Annual Report on Form 10-K for a discussion of the risks associated with our sourcing raw materials.

Page 39 of 89

Table of Contents


ITEM 8.	CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS



	Page
Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm	41
Balance Sheets at December 31, 2018 and December 31, 2017	43
Statements of Comprehensive Income for each of the three years ended December 31, 2018	44
Statements of Stockholders’ Equity for each of the three years ended December 31, 2018	45
Statements of Cash Flows for each of the three years ended December 31, 2018	46
Notes to Consolidated Financial Statements	47

Page 40 of 89

Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Innophos Holdings, Inc.:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Innophos Holdings, Inc. and its subsidiaries (the “Company”) as of December 31, 2018 and 2017, and the related consolidated statements of comprehensive income, of stockholders’ equity, and of cash flows for each of the three years in the period ended December 31, 2018, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Page 41 of 89

Table of Contents

/s/PricewaterhouseCoopers LLP

Florham Park, New Jersey

February 27, 2019

We have served as the Company’s auditor since 2004.

Page 42 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Dollars in thousands, except per share amounts, the number of shares or where otherwise noted)



	December 31,
	2018			2017
ASSETS
Current assets:
Cash and cash equivalents	$	20,197		$	28,782
Accounts receivable, net of allowance for doubtful accounts ($688 and $445)	102,564			100,820
Inventories	180,203			145,685
Other current assets	24,094			24,969
Total current assets	327,058			300,256
Property, plant and equipment, net	240,235			219,297
Goodwill	152,767			152,700
Intangibles and other assets, net	95,094			112,916
Total assets	$	815,154		$	785,169
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	—		$	4
Accounts payable, trade and other	80,007			70,445
Other current liabilities	49,993			43,084
Total current liabilities	130,000			113,533
Long-term debt	300,000			310,005
Other long-term liabilities	49,639			28,072
Total liabilities	$	479,639		$	451,610
Commitments and contingencies (note 16)
Common stock, par value $.001 per share; authorized 100,000,000; issued 22,984,608 and 22,884,588; outstanding 19,613,085 and 19,537,872 shares	20			20
Paid-in capital	142,558			137,617
Common stock held in treasury, at cost (3,371,523 and 3,346,716 shares)	(176,862		)	(176,246		)
Retained earnings	372,815			374,366
Accumulated other comprehensive loss	(3,016		)	(2,198		)
Total stockholders' equity	335,515			333,559
Total liabilities and stockholders' equity	$	815,154		$	785,169

See notes to consolidated financial statements

Page 43 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(Dollars in thousands, except per share amounts, the number of shares or where otherwise noted)



	Year Ended December 31,
	2018				2017			2016
Net sales	$	801,842			$	722,024		$	725,345
Cost of goods sold	658,451				572,995			574,953
Gross profit	143,391				149,029			150,392
Operating expenses:
Selling, general and administrative	81,101				82,301			67,413
Research & development expenses	5,076				3,733			3,739
Total operating expenses	86,177				86,034			71,152
Operating income	57,214				62,995			79,240
Interest expense, net	13,523				7,008			7,669
Foreign exchange (gains) losses	528				(578		)	1,111
Other income, net	(69		)	—	$	(72	)	142
Income before income taxes	43,232				56,637			70,318
Provision for income taxes	7,161				34,192			22,347
Net income	$	36,071			22,445			47,971
Net income attributable to common shareholders	$	35,940			$	22,369		$	47,683
Per share data (see Note 13):
Income per share:
Basic	$	1.84			$	1.15		$	2.47
Diluted	$	1.82			$	1.13		$	2.44
Weighted average shares outstanding:
Basic	19,518,366				19,444,795			19,271,448
Diluted	19,760,259				19,733,410			19,581,476

Other comprehensive (loss) income, net of tax:
Change in interest rate swaps, (net of tax $256, $5, and $24)	$	(767	)		$	(9	)	$	(39	)
Change in pension and post-retirement plans, (net of tax $390, $236, and ($749))	(51		)		(705		)	1,349
Other comprehensive (loss) income, net of tax	$	(818	)		$	(714	)	$	1,310
Comprehensive income	$	35,253			$	21,731		$	49,281

See notes to consolidated financial statements

Page 44 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Statements of Stockholders’ Equity

(Dollars and shares in thousands)



	Number of Common Shares		Common Stock		Retained Earnings (Deficit)			Paid-in Capital/Common Stock Held in Treasury			Accumulated Other Comprehensive Income/(Loss)			Total Shareholders' Equity
Balance, December 31, 2015	19,290		$	19	$	378,321		$	(42,286	)	$	(2,794	)	$	333,260
Net income					47,971									47,971
Other comprehensive loss, (net of tax ($725))											1,310			1,310
Proceeds from stock award exercises and issuances	192							(1,428		)				(1,428		)
Share-based compensation								3,732						3,732
Excess tax benefits from exercise of stock options								(9		)				(9		)
Common stock repurchases	(27	)						(366		)				(366		)
Dividends declared ($1.92 per share)(b)					(37,244		)							(37,244		)
Balance, December 31, 2016	19,455		$	19	$	389,048		$	(40,357	)	$	(1,484	)	$	347,226
Net income					22,445									22,445
Other comprehensive income, (net of tax $241) (a)											(714		)	(714		)
Effects of U.S. enacted Tax Cuts and Jobs Act (a)					$	293								293
Proceeds from stock award exercises and issuances	108		1					(900		)				(899		)
Share-based compensation								3,823						3,823
Restricted stock forfeitures	(25	)						(1,195		)				(1,195		)
Dividends declared ($1.92 per share)(c)					(37,420		)							(37,420		)
Balance, December 31, 2017	19,538		$	20	$	374,366		$	(38,629	)	$	(2,198	)	$	333,559
Net income					36,071									36,071
Other comprehensive income, (net of tax $646) (a)											(818		)	(818		)
Effects of U.S. enacted Tax Cuts and Jobs Act (a)					(293		)							(293		)
Effects of adoption of ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory					360									360
Proceeds from stock award exercises and issuances	100							(246		)				(246		)
Share-based compensation								5,187						5,187
Restricted stock forfeitures	(25	)						(616		)				(616		)
Dividends declared ($1.92 per share)(d)					(37,689		)							(37,689		)
Balance, December 31, 2018	19,613		$	20	$	372,815		$	(34,304	)	$	(3,016	)	$	335,515

(a) Includes the impact of ASU 2018-02, which transferred those amounts from accumulated other comprehensive income (loss) to retained earnings. See Notes 1 and 18 to the Consolidated Financial Statements.

(b) $0.48 per share declared February 2016, May 2016, August 2016, October 2016

(d) $0.48 per share declared February 2018, May 2018, July 2018, November 2018

See notes to consolidated financial statements

Page 45 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Dollars in thousands)



	Year Ended December 31,
	2018			2017			2016
Cash flows from operating activities
Net income	$	36,071		$	22,445		$	47,971
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation and amortization	44,931			40,404			37,479
Amortization of deferred financing charges	430			429			680
Deferred income tax provision	9,628			10,411			9,534
Gain on sale of building	—			(153		)	—
Share-based compensation	5,187			3,823			2,822
Changes in assets and liabilities:
Contract termination fee received	21,250			—			—
Accounts receivable	(1,744		)	(11,020		)	2,058
Inventories	(34,518		)	5,749			44,012
Other current assets	833			1,426			(634		)
Accounts payable	9,471			(3,497		)	14,703
Other current liabilities	(3,411		)	(5,751		)	(18,926		)
Other long-term assets and liabilities, net	(14,516		)	9,723			(590		)
Net cash provided from operating activities	73,612			73,989			139,109
Cash flows used for investing activities:
Capital expenditures	(56,745		)	(34,859		)	(36,599		)
Proceeds from sale leaseback	22,775			—			—
Proceeds from sale of building	—			1,028			—
Acquisition of businesses, net of cash acquired	—			(150,999		)	—
Net cash used for investing activities	(33,970		)	(184,830		)	(36,599		)
Cash flows from financing activities:
Proceeds from exercise of stock options	—			205			17
Long-term debt borrowings	86,000			204,000			41,000
Long-term debt repayments	(96,000		)	(79,000		)	(69,002		)
Deferred financing costs	—			—			(1,495		)
Excess tax benefits from exercise of stock options	—			—			(9		)
Taxes paid related to net share settlement of equity awards	(616		)	(1,195		)	(366		)
Dividends paid	(37,611		)	(37,468		)	(37,217		)
Net cash (used for) provided by financing activities	(48,227		)	86,542			(67,072		)
Effect of foreign exchange rate changes on cash and cash equivalents	$	—		(406		)	144
Net change in cash	(8,585		)	(24,705		)	35,582
Cash and cash equivalents at beginning of period	28,782			53,487			17,905
Cash and cash equivalents at end of period	$	20,197		$	28,782		$	53,487
Supplemental disclosures of cash flow information:
Non-cash investing and financing activities:
Accrued additions to plant assets	$	9,400		$	9,570		$	2,942
Assets received as part of the supply agreement termination	$	3,610		$	—		$	—

See notes to consolidated financial statements

Page 46 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, the number of shares or where otherwise noted)

1. Basis of Statement Presentation:

Summary of Significant Accounting Policies

Fiscal Year

The Company's fiscal year end is December 31.

Description of Business and Principles of Consolidation

Innophos is a leading international producer of specialty ingredient solutions that deliver versatile benefits for the food, health, nutrition and industrial markets. The Company leverages its expertise in the science and technology of blending and formulating phosphate, mineral, enzyme and botanical based ingredients to help its 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.

Innophos combines more than a century of experience in specialty phosphate manufacturing with a broad range of other specialty nutritional ingredients. Utilizing its capabilities in consumer insight, research and product development and application expertise, it partners with its customers to provide differentiated product offerings that respond to consumer preferences and megatrends. The Company utilizes this collaborative approach in order to attempt to generate market share gains for its customers.

Innophos’ product offering includes a wide array of botanical, enzyme and mineral based nutritional ingredients. These products have various applications in the food, beverage and dietary supplement end markets and are manufactured to be readily digestible. Innophos’ 2017 acquisitions of Novel Ingredients and NutraGenesis substantially expanded Innophos’ portfolio of nutritional ingredients, which is a market that Innophos intends to continue to target for future growth.

Innophos Holdings, Inc. is the parent of Innophos Investments Holdings, Inc., which owns 100% of Innophos, Inc; all are incorporated under the laws of the State of Delaware. All intercompany transactions are eliminated in consolidation.

Certain prior year balances have been restated to conform to current year presentation.

Use of Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles requires the use of judgments and estimates made by management. Actual results could differ from those estimates. Some of the more significant estimates pertaining to the Company include accruals for contingencies, distributor incentives and rebates, the valuation of inventories, the allowance for doubtful accounts, income tax valuation allowances, the recoverability of long-lived assets and goodwill impairment testing analysis and cash flows and assumptions used in the recognition and measurement of assets acquired in business combinations. Management routinely reviews its estimates and assumptions utilizing currently available information, changes in facts and circumstances, and historical experience.

Error Correction

During the fourth quarter, the Company identified an error associated with disclosing accrued capital expenditures and adjusting for them as non-cash investing activities in the consolidated statement of cash flows. The Company has evaluated the materiality of the error and concluded it was not material to the previously issued consolidated financial statements. However, the Company has elected to revise its consolidated cash flow statement for the period ending December 31, 2017 to correct the error.

Page 47 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

The following table presents the effect of the revision on the selected line items previously reported in the consolidated cash flows statement for the year ended December 31, 2017:



	December 31, 2017						December 31, 2017
Consolidated Statement of Cash Flows	As reported			Adjustment			As revised

Cash flows from operating activities
Changes in assets and liabilities:
Accounts payable	$	3,131		$	(6,628	)	$	(3,497	)
Net cash provided by operations	$	80,617		$	(6,628	)	$	73,989

Cash flows used for investing activities
Capital expenditures	$	(41,487	)	$	6,628		$	(34,859	)
Net cash provided used for investing activities	$	(191,458	)	$	6,628		$	(184,830	)

Supplemental disclosures of cash flow information:
Non-cash investing and financing activities:
Accrued additions to plant assets				$	9,570		$	9,570

These accompanying notes to the consolidated financial statements reflect the impact of this revision. The revision of the Company’s interim consolidated statements of cash flows in the previously issued unaudited condensed consolidated financial statements for the three months ended March 31, 2018, six months ended June 30, 2018 and the nine months ended September 30, 2018 will be effected in connection with the Company’s filing of its Form 10-Q’s for the quarters ended March 31, June 30, and September 30, 2019, respectively.

Cash Equivalents

All highly liquid investments with original maturities of three months or less are considered to be cash equivalents.

Accounts Receivable and Allowances for Doubtful Accounts

Trade accounts receivable are recorded at the invoiced amount and does not bear interest. The collectability of accounts receivable is evaluated based on a combination of factors. Allowances for doubtful accounts is evaluated based on the length of time the receivables are past due, historical experience and financial wherewithal of the customer. In circumstances when it is probable that a specific customer is unable to meet its financial obligations, an allowance is recorded to reduce the receivable to the amount that is reasonably expected to be collected.

Inventories

Inventories are valued at the lower of cost or market. Cost is determined on the basis of the first-in, first-out method. These costs include raw materials, direct labor, manufacturing overhead and depreciation. Spare parts are included in inventory and are initially recorded at cost.

Inventories, including spare parts, are evaluated for excess quantities, obsolescence or shelf-life expiration. This evaluation includes an analysis of historical sales levels by product and projections of future demand. To the extent management determines there are excess, obsolete or expired inventory quantities, valuation reserves are recorded against all or a portion of the value of the related products with the appropriate charge to cost of goods sold.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation. Major renewals and improvements are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. The cost and related accumulated depreciation

Page 48 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

of all property, plant and equipment retired or otherwise disposed of are eliminated from the accounts and any resulting gain or loss is reflected in net income. Interest is capitalized in connection with the construction of major renewals and improvements. Capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset’s estimated useful life. Depreciation is calculated on the straight-line basis over the estimated useful lives of the related assets, typically ranging from ten to twenty years for buildings and improvements, five to fifteen years for machinery and equipment, and three to seven years for capitalized software. Leasehold improvements are amortized over the lease term or the estimated useful life of the improvement, whichever is less.

External direct costs in developing or obtaining internal use computer software and payroll, and payroll-related costs for employees dedicated solely to the project, to the extent of the time spent directly on the project and which they meet the requirements of ASC 350-40, are capitalized.

Long-Lived Assets

Under ASC 360,” Property, Plant, and Equipment ,” long-lived assets including property, plant and equipment and amortizable intangible assets are evaluated and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. The review of these long-lived assets is performed at the individual asset level, asset group level, or the product group level depending on the lowest level for which identifiable cash flows are largely independent. The Company’s asset groupings or product groupings vary based on the interrelationship of the long-lived assets and the identifiable cash flows. For example, in certain instances, multiple manufacturing units may work with one another to produce the lowest identifiable cash flows or in other instances a stand-alone unit may produce the lowest level of identifiable cash flows. There are other instances where a stand-alone unit may produce multiple products and the lowest level of identifiable cash flows is at the product group level. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the undiscounted future cash flows expected to be generated by the asset, asset group or product group. When this comparison indicates that impairment must be recorded, the impairment recognized is the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Goodwill

Goodwill represents the excess of the acquisition cost over the fair value of net assets of the businesses acquired. ASC 350, “ Intangibles—Goodwill and Other ,” requires periodic tests of the impairment of goodwill. ASC 350 requires a comparison, at least annually, of the net book value of the assets and liabilities associated with a reporting unit, including goodwill, with the fair value of the reporting unit, which corresponds to the discounted cash flows of the reporting unit, in the absence of an active market. The development of future cash flow projections requires management estimates related to forecasted sales and expected costs trends. To the extent that changes in business conditions occur or other management decisions are made that result in adjusted management projections, impairment losses may occur in future periods. If the entity determines that it's more likely than not that the fair value of a reporting unit exceeds the carrying amount, then determining an impairment charge is unnecessary. When the carrying value of the reporting unit exceeds the fair value amount, the impairment recognized is the amount by which the carrying amount of the assets exceeds the fair value of these assets, not to exceed the carrying value of the goodwill. The annual goodwill impairment review is conducted during the fourth quarter of each year.

Other Intangible Assets

Other intangible assets, which consist of developed technology, customer relationships, trade names, a non-compete agreement, patents, licenses and software, are amortized on a straight-line basis over their estimated useful lives which can be up to twenty years.

Revenue Recognition

Revenue from sales of the Company's products to its customers is recognized when title and risk of loss passes to the customer, which occurs either upon shipment or delivery, depending upon the agreed sales terms with customers. In the United States and Canada, the Company records estimated reductions to revenue for distributor incentives and customer incentives such as rebates, at the time of the initial sale. Distributor and customer incentives in Mexico are immaterial to the financial

Page 49 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

statements. The estimated reductions are based on the sales terms, historical experience and trend analysis. Accruals for distributor incentives are reflected as a direct reduction to accounts receivable and accruals for rebates are recorded as accrued expenses. This analysis requires a significant amount of judgment from management. Changes in the assumptions used to calculate these estimates or changes resulting from actual results are recorded against revenue in the period in which the change occurs.

Shipping and Handling Fees and Costs and Advertising Expenses

Shipping and handling fees and costs invoiced to customers are included in Net sales. Shipping and handling fees and costs incurred by the Company are included in Cost of goods sold. Advertising expenses, which are not significant, are expensed as incurred.

Foreign Currency Translation

The U.S. dollar is the functional currency of the Canadian and Mexican operations. Accordingly, these operations monetary assets and liabilities are remeasured at current exchange rates, non-monetary assets and liabilities are remeasured at historical exchange rates. Revenue and expenses related to monetary assets and liabilities are remeasured at average exchange rates and at historical exchange rates for the related revenue and expenses of non-monetary assets and liabilities. All translation gains and losses are included in net income.

Research and Development Expenses

Research and development expenditures, including expenditures relating to the development of new products and processes and significant improvements and refinements to existing products, are expensed as incurred.

Employee Termination Benefits

The Company does not have a written severance plan for its Mexican operations, nor does it offer similar termination benefits to affected employees in all Mexican restructuring initiatives. However, Mexican law requires payment of certain minimum termination benefits. Accordingly, in situations where minimum statutory termination benefits must be paid to the affected employees, the Company records employee severance costs associated with these activities in accordance with ASC 712, Compensation – Nonretirement Post Employment Benefits . The Company does have a written severance plan which is in accordance with ASC 712 for its U.S. and Canadian operations. The Company has an accrued obligation for post-employment benefits for U.S. and Canadian operations when the amounts are probable and reasonably estimated. In all other situations where the Company pays out termination benefits, including supplemental benefits paid in excess of statutory minimum amounts and benefits offered to affected employees based on management’s discretion, the Company records these termination costs in accordance with ASC 420, Exit or Disposal Cost Obligations .

The timing of the recognition of charges for employee severance costs depends on whether the affected employees are required to render service beyond their legal notification period in order to receive the benefits. If affected employees are required to render service beyond their legal notification period, charges are recognized ratably over the future service period. Otherwise, charges are recognized when a specific plan has been confirmed by management and required employee communication requirements have been met.

Legal Costs

The Company expenses legal costs as incurred, including those legal costs which may be incurred in connection with a loss contingency.

Income Taxes

The Company’s significant subsidiaries are the Company's United States subsidiaries which file a consolidated U.S. tax return, the Company's Mexican subsidiaries which file separate tax returns since 2016, the Company's Canadian subsidiary which files a separate Canadian tax return and the Netherlands files a fiscal unity return for certain Netherlands subsidiaries. The Company accounts for income taxes in accordance with ASC 740, Income Taxes. Under ASC 740, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases using enacted tax rates applied to those differences.

Page 50 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

Deferred tax assets are assessed for realizability and a valuation allowance is provided if a portion of the associated tax benefit is not expected to be realized.

If any material uncertain tax positions arise, the Company’s policy is to accrue associated penalties in selling, general and administrative expenses and to accrue interest as part of net interest expense. Other than the assessments disclosed in Note 15, Income Taxes, as of December 31, 2018, no significant adjustments have been proposed to the Company's tax positions and the Company currently does not anticipate any adjustments that would result in a material change to its financial position during the next twelve months.

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act significantly changes U.S. corporate income tax laws by, among other things, reducing the U.S. corporate income tax rate from 35% to 21% effective for tax years beginning after December 31, 2017 and transitioning U.S. international taxation from a worldwide tax system to a territorial tax system with a one-time mandatory transition or toll tax on post-1986 undistributed foreign earnings and profits of U.S. subsidiaries through the year ended December 31, 2017. Starting in 2018, the global intangible low-taxed income, or GILTI, provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company has elected to account for GILTI tax in the period in which it is incurred. Refer to Note 15 for additional information.

Environmental Costs

Environmental liabilities are recorded undiscounted when it is probable that these liabilities have been incurred and the amounts can be reasonably estimated. These liabilities are estimated based on an assessment of many factors, including the amount of remediation costs, the timing and extent of remediation actions required by the applicable governmental authorities, and the amount of the Company’s liability after considering the liability and financial resources of other potentially responsible parties. Generally, the recording of these accruals coincides with the assertion of a claim or litigation, completion of a feasibility study or a commitment to a formal plan of action. Anticipated recoveries from third parties are recorded as a reduction of expense only when such amounts are realized. Any insurance receivables would be recorded gross of the estimated liability.

Comprehensive Income (Loss)

Comprehensive income (loss) is composed of net income (loss), adjusted for changes in comprehensive income items such as changes in defined benefit pension plan funded status.

Share-based Compensation

The Company recognizes compensation expense for its Long-Term Incentive Plans (LTIP). Under applicable accounting standards, the fair value of share-based compensation is determined at the grant date and the recognition of the related expense is recorded over the period in which the share-based compensation vests. Refer to Note 12 for additional information.

Business Combinations

An acquired business is included in the consolidated financial statements upon obtaining control of the acquired assets. Assets acquired and liabilities assumed are recognized at the date of acquisition at their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recognized as goodwill.

Recently Issued Accounting Standards

Adopted

In May 2014, the Financial Accounting Standards Board, or FASB, issued guidance on revenue from contracts with customers that will supersede most current revenue recognition guidance, including industry-specific guidance. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include capitalization of certain contract costs, consideration of time value of money in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. In July 2015, the FASB approved the deferral of the effective date of this guidance by one year (with an option to

Page 51 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

early adopt at the original effective date), making it effective for the interim and annual periods beginning on or after December 15, 2017. The guidance permits the use of either a retrospective or modified retrospective transition method. The Company adopted the standard using the modified retrospective transition method on January 1, 2018. The Company concluded that revenues remain materially unchanged from the prior revenue recognition model and therefore, the adoption of this standard did not have a material impact on its financial position, results of operations and related disclosures. Please see Note 3, "Revenue Recognition", for further disclosures.

In March 2016, the FASB issued ASU 2016-15, Clarification on Classification of Certain Cash Receipts and Cash Payments on the Statement of Cash Flows. ASU 2016-15 clarifies the classification of certain cash receipts and cash payments in the statement of cash flows, including debt prepayment or extinguishment costs, settlement of contingent consideration arising from a business combination, insurance settlement proceeds, and distributions from certain equity method investees. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. The Company's adoption of this standard did not have a material impact on its statement of cash flows.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which reduces the complexity in the accounting standards by allowing the recognition of current and deferred income taxes for an intra-entity asset transfer, other than inventory, when the transfer occurs. Historically, recognition of the income tax consequence was not recognized until the asset was sold to an outside party. This amendment should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. There are no new disclosure requirements. This ASU is effective for annual reporting periods beginning after December 15, 2017. Early adoption is permitted in the first interim period of 2017. The Company adopted this standard as of January 1, 2018 on a modified retrospective basis and recorded an immaterial cumulative adjustment to retained earnings.

In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash, which clarifies guidance on the classification and presentation of restricted cash in the statement of cash flows. Under the ASU, changes in restricted cash and restricted cash equivalents would be included along with those of cash and cash equivalents in the statement of cash flows. As a result, entities would no longer present transfers between cash/equivalents and restricted cash/equivalents in the statement of cash flows. In addition, a reconciliation between the balance sheet and the statement of cash flows would be disclosed when the balance sheet includes more than one line item for cash/equivalents and restricted cash/equivalents. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company's adoption of this standard had no impact.

In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business , which narrows the existing definition of a business and provides a framework for evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or a business. The ASU requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities (collectively, the set) is not a business. To be considered a business, the set would need to include an input and a substantive process that together significantly contribute to the ability to create outputs. The standard also narrows the definition of outputs. The definition of a business affects areas of accounting such as acquisitions, disposals and goodwill. Under the new guidance, fewer acquired sets are expected to be considered businesses. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company adopted this standard on January 1, 2018, and there was no material impact on its financial position, results of operations and related disclosures.

In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost, which requires that only the service cost component of net periodic benefit costs be recorded as compensation cost in the operating expense section of the income statement. All other components of net periodic benefit cost (interest cost, expected return on plan assets and amortization of net loss) will be presented in other income (loss), net. This standard update is effective beginning with the first quarter 2018 and must be applied retrospectively. The Company's adoption of this standard did not have a material impact on its financial position, results of operations and related disclosures.

In May 2017, the FASB issued ASU No. 2017-09, Stock Compensation - Scope of Modification Accounting, which requires all modifications to be accounted for as a modification unless the fair value, vesting conditions and classification of the award as equity or liability are the same as the classification of the original award immediately before the original award is modified. The amendments in this ASU are effective for fiscal years beginning after December 15, 2017 and for interim periods therein. The Company's adoption of this standard did not have a material impact on its financial position, results of operations and related disclosures.

Page 52 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

In March 2018, the FASB issued ASU 2018-05 associated with the accounting and disclosures around the enactment of the Act and the Securities and Exchange Commission’s Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which the Company has adopted. See Note 15 for the disclosures related to this amended guidance.

Issued but not yet adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842)), and associated ASUs related to Topic 842, in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous GAAP. ASU 2016-02 requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset, or ROU, representing its right to use the underlying asset for the lease term on the balance sheet. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach and early adoption is permitted. In addition, entities can use an optional transition method to apply the transition requirements in Topic 842 at the Topic’s effective date. The Company will elect the transition method to adopt the new leases standard at the adoption date of the new standard on January 1, 2019. The company has a cross-functional team in place to evaluate and implement the new guidance and has substantially completed its evaluation. All of the leases classified by the Company are Operating leases, and the Company estimates it will record ROU Assets and Lease Liabilities of approximately $45.0 million to $50.0 million at January 1, 2019. These leases primarily cover rail cars, inventory tanks, building, equipment and fleet cars. In addition, the company has elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, does not require reassessment of prior conclusions related to contracts containing a lease, lease classification, and initial direct lease costs. As an accounting policy election, the company will exclude short-term leases (term of 12 months or less) from the balance sheet and will account for non-lease and lease components in a contract as a single component for most asset classes. The impact to the company's Consolidated Statement of Operations and Consolidated Statement of Cash Flows is expected to not be material.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and hedging (Topic 815): Targeted improvements to accounting for hedging activities. This standard more closely aligns the results of cash flow and fair value hedge accounting with risk management activities through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results in the financial statements. This standard also addresses specific limitations in current GAAP by expanding hedge accounting for both nonfinancial and financial risk components and by refining the measurement of hedge results to better reflect an entity’s hedging strategies. Additionally, by aligning the timing of recognition of hedge results with the earnings effect of the hedged item for cash flow and net investment hedges, and by including the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is presented, the results of an entity’s hedging program and the cost of executing that program will be more visible to users of financial statements. The new standard is effective for annual reporting periods beginning after December 15, 2018 with early adoption permitted. The Company does not anticipate the adoption of this standard will have a material impact on its financial position, results of operations and related disclosures.

In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20), Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. This amendment modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing and adding certain disclosures for these plans. The eliminated disclosures include the amounts in accumulated other comprehensive income expected to be recognized in net periodic benefit costs over the next fiscal year and the effects of a one-percentage-point change in assumed health care cost trend rates on the net periodic benefit costs and the benefit obligation for postretirement health care benefits. New disclosures include the interest crediting rates for cash balance plans, and an explanation of significant gains and losses related to changes in benefit obligations. The new standard is effective for fiscal years beginning after December 15, 2020, and must be applied retrospectively for all periods presented. Early adoption is permitted. The Company does not anticipate the adoption of this standard will have a material impact on its financial position, results of operations and related disclosures.

2. Acquisitions

On August 25, 2017, the Company acquired 100% of the outstanding shares of GenNx Novel Holding, Inc. (together with its direct and indirect wholly-owned subsidiaries, "Novel Ingredients"). Novel Ingredients was a privately-held specialty ingredients supplier of botanicals, proteins, amino acids and other healthy ingredients, as well as branded ingredient and custom formulated solutions, headquartered in East Hanover, New Jersey. The Company made an initial $125 million cash payment, subsequently adjusted lower by $1.3 million for post-closing working capital adjustments, for total consideration of

Page 53 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

$123.7 million. The acquisition was funded by borrowings under its existing credit facility. The addition of Novel Ingredients grows Innophos' Food, Health, and Nutrition portfolio, expanding its presence in high-growth nutrition end-markets and positioning the Company to more effectively develop innovative ingredient solutions that better serve its customers. Novel Ingredients serves attractive end-markets driven by health and wellness consumer trends such as immune health, sports nutrition, and cognitive health.

On November 3, 2017, the Company acquired 100% of the outstanding equity interests of NutraGenesis LLC, Icon Group LLC, and Tradeworks Group, Inc. (collectively referred to as "NutraGenesis"). NutraGenesis was a privately-held Vermont-based marketer of proprietary, branded and science-backed nutraceutical ingredients. The Company made a $27.4 million cash payment, subsequently adjusted lower by $0.1 million for post-closing working capital adjustments, for total consideration of $27.3 million . The acquisition was funded by borrowings under its existing credit facility. NutraGenesis is highly complementary to the Novel Ingredients acquisition and the Company's branded ingredients portfolio. NutraGenesis serves attractive high-growth end-markets, including stress reduction, weight management, joint health, brain health and metabolic wellness, that are driven by health and wellness consumer trends.

During the year ended December 31, 2017, the Company's results of operations included revenues of $36.7 million and a $2.3 million net loss attributable to Novel Ingredients and NutraGenesis. Acquisition related costs of $3.1 million (excluding integration costs of $2.1 million) were expensed as incurred and were included in selling, general, and administrative expense.

The excess of purchase price over the fair value amounts assigned to the assets acquired and liabilities assumed represents the goodwill amount resulting from the acquisitions and will be included in the Food, Health and Nutrition operating segment. The goodwill of $68.4 million arising from the acquisitions consists of expected revenue and cost synergies, operational know-how, and acquired workforce. Approximately $24.0 million of the goodwill is deductible for U.S. income tax purposes.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed (in thousands):



	Novel Ingredients			NutraGenesis
Cash	$	105		$	82
Accounts receivable, net of allowances of $511 and $0 for Novel Ingredients and NutraGenesis, respectively	11,255			850
Inventory, including fair value adjustment of $4,300 for Novel Ingredients	23,121			—
Other current assets	1,655			638
Property, plant and equipment	4,261			—
Other non-current assets	187			—
Goodwill	54,008			14,387
Intangible assets	52,900			13,699
Accounts payable	(14,726		)	(793		)
Accrued expenses	(3,910		)	(524		)
Deferred income taxes	(5,067		)	(151		)
Customer Deposits	—			(875		)
Total	$	123,789		$	27,313

Novel Ingredients has Net Operating Loss ("NOL") carryforwards of $16.4 million that are expected to be utilized in future periods.

The intangible assets acquired with Novel Ingredients and NutraGenesis include the following (in thousands):



	Useful life (years)	Novel Ingredients		NutraGenesis
Customer relationships	15-20	$	46,200	$	10,499
Trade names	5-10	6,700		3,200
		$	52,900	$	13,699

The weighted average useful life (years) of the intangible assets included in the above table is 17.4 years. The weighted average useful life (years) of the trade names included in the above table is 7.9 years. The weighted average useful life (years) of the customer relationships included in the above table is 19.1 years.

Page 54 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

The following unaudited pro forma information has been prepared as if the acquisitions had occurred on January 1, 2016 (amounts in thousands, excluding EPS figures). The unaudited pro forma results do not reflect any material adjustments, operating efficiencies and other synergies which may result from the consolidation of operations.



	Year Ended December 31,
	2017		2016
Revenues	$	792,600	$	812,447
Net income	$	22,011	$	41,711
Income per common share - Basic	$	1.13	$	2.16
Income per common share - Diluted	$	1.12	$	2.13

These amounts have been calculated after applying the Company's accounting policies and adjusting the results of Novel Ingredients and NutraGenesis to reflect the additional depreciation and amortization expense that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had been applied on January 1, 2016. Interest expense related to the borrowing for the acquisitions was applied on January 1, 2016. Depreciation and amortization expense of approximately $5.0 million and interest expense of approximately $4.4 million related to the above were included in the years ended December 31, 2017 and December 31, 2016. Further, the above pro forma amounts include a fair value adjustment to inventory of $4.3 million applied on January 1, 2016. The year ended December 31, 2017 includes non-recurring transaction costs of approximately $3.1 million.

3. Revenue Recognition

Adoption of ASC Topic 606, "Revenue from Contracts with Customers"

On January 1, 2018, the Company adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Based on the results of the analysis performed on the Company's effective contracts as of the initial application, the Company has concluded that revenues are expected to remain substantially unchanged from the previous revenue recognition model, and therefore, the adoption of the new standard did not have a material impact on the Company's financial position, results of operations or related disclosures.

Revenue Recognition

Revenues are recognized when control of goods is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods. Control passes either upon shipment or delivery, depending on the agreed sales terms with customers.

Certain customers may receive cash-based incentives or credits, which are accounted for as variable consideration. The Company estimates these amounts based on the expected amount to be provided to customers and reduce revenues recognized. There were no significant changes to its estimates of variable consideration upon adoption.

The Company reports its business in three operating segments: Food, Health, and Nutrition; Industrial Specialties; and Other. The Company has three principal product lines within these operating segments: (i) Specialty Ingredients; (ii) Core Ingredients; and (iii) Co-Products and Other. Revenue recognition is measured on the same basis across these segments, products, markets, and geographic countries, with the performance obligation being the transfer of control of goods at a single point in time.



	Year ended December 31, 2018
	U.S.		Canada		Mexico		Other Countries		Total
Specialty Ingredients	$	429,679	$	24,386	$	35,530	$	77,469	$	567,064
Core Ingredients	55,780		7,926		84,101		36,065		183,872
Co-Products & Other	32,323		354		17,658		571		50,906
Total	$	517,782	$	32,666	$	137,289	$	114,105	$	801,842

Page 55 of 89

Table of Contents



	Year ended December 31, 2017
	U.S.		Canada		Mexico		Other Countries		Total
Specialty Ingredients	$	358,816	$	23,435	$	37,365	$	70,640	$	490,256
Core Ingredients	56,841		8,224		78,757		30,997		174,819
Co-Products & Other	34,514		334		8,994		13,107		56,949
Total	$	450,171	$	31,993	$	125,116	$	114,744	$	722,024

Revenues for the geographic information are attributed to geographic areas based on the destination of the sale.

The Company's payment terms vary by geography and location of its customer and the products offered. Invoices are generated upon shipment of the goods, with the term between invoicing and when payment is due being insignificant.

Food, Health, and Nutrition and Industrial Specialties

The Food, Health and Nutrition reporting segment, as well as the Industrial Specialties reporting segment, consists of products in the Specialty Ingredients and Core Ingredients product lines.


•	flavor enhancers in beverages;


•	electrolytes in sports drinks;


•	texture modifiers in cheeses;


•	leavening agents in baked goods;


•	calcium and phosphorous fortification in food and beverages;


•	moisture and color retention in seafood, poultry, and meat;


•	mineral, enzyme and botanical source for a wide variety of fortified foods, beverages and dietary supplements;


•	excipients in vitamins, minerals, nutritional supplements and pharmaceuticals; and


•	abrasives in toothpaste.

Each product typically has a number of different applications and end uses. For example, the Company's dicalcium phosphate product can be used as an excipient for pharmaceutical and dietary supplements, a leavening agent in bakery products and as an abrasive in oral care products. The Company often works directly with customers to tailor products to their required specifications for their finished product application.

The Company's Core Ingredients product line includes food grade purified phosphoric acid, or PPA, technical grade PPA, sodium tripolyphosphate, or STPP, and detergent grade PPA. Food grade PPA can be used to produce phosphate salts and has a variety of applications in food and beverages. Technical grade PPA has applications in water treatment. The Company also sells technical grade PPA in the merchant market to third-party phosphate derivative producers. STPP is a key ingredient in cleaning products, including industrial and institutional cleaners and automatic dishwashing detergents and consumer laundry detergents outside the United States. In addition to its use in cleaning products, STPP is also used in water treatment, clay processing, and copper ore processing. The end use market for STPP is largely derived from consumer product applications. Detergent Grade PPA is a lower grade form of PPA used primarily in the production of STPP.

Other

The Other reporting segment consists of products in the Co-Products and Other product line.

The Company's Co-Products and Other product line includes granular triple super phosphate, or GTSP, and merchant green phosphoric acid, or MGA. GTSP is generated at the Company's Coatzacoalcos facility in Mexico as a co-product of its purified wet acid manufacturing process. GTSP is a fertilizer product used throughout Latin America for increasing crop yields in a wide range of agricultural sectors. The Company sells MGA in the merchant market to third party manufacturers of fertilizer products.

Practical Expedients and Exemptions

Page 56 of 89

Table of Contents

Management reviewed the practical expedients which a Company may utilize when implementing Topic 606. As such, the Company has applied the practical expedient related to significant financing components and does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

4. Inventories:

Inventories consist of the following:



	2018		2017
Raw materials	$	46,147	$	48,445
Finished products	119,407		83,634
Spare parts	14,649		13,606
	$	180,203	$	145,685

Inventory reserves for excess quantities, obsolescence or shelf-life expiration as of December 31, 2018 and December 31, 2017 were $14,327 and $16,168 , respectively.

5. Other Current Assets:

Other current assets consist of the following:



	2018		2017
Creditable taxes (value added taxes)	$	11,944	$	7,285
Vendor inventory deposits (prepaid)	454		7,807
Prepaid income taxes	6,658		3,394
Prepaid insurance	2,605		2,492
Other	2,433		3,991
	$	24,094	$	24,969

6. Property, Plant and Equipment, net:

Property, plant and equipment, at cost, consist of the following:



		2018						2017
	Typical Useful life (years)	Gross		Accumulated Depreciation		Net Book Value		Gross		Accumulated Depreciation		Net Book Value
Land	-	$	18,453	$	—	$	18,453	$	18,453	$	—	$	18,453
Land improvements	10-20	28,260		10,019		18,241		11,861		9,855		2,006
Buildings and improvements (a)	10-20	99,326		54,795		44,531		104,004		54,571		49,433
Machinery & equipment	5-15	551,226		410,521		140,705		501,908		388,905		113,003
Capitalized software	3-7	28,554		$	26,427	$	2,127	$	28,260	$	23,511	$	4,749
Construction-in-progress	-	16,178		—		16,178		31,653		—		31,653
		$	741,997	$	501,762	$	240,235	$	696,139	$	476,842	$	219,297

Depreciation expense was $30,723 , $32,023 and $30,255 in 2018 , 2017 and 2016 , respectively.

(a) In December 2018, the Company sold its Chicago Heights, IL warehouse for $23.0 million . Under the agreement, the Company is leasing back the property from the purchaser over a period of 20 years. The Company is accounting for the leaseback as an operating lease. The gain of $15.9 million realized in this transaction has been deferred. As of December 31, 2018 $0.8 is recorded in Other current liabilities and $15.1 million in Other long-term liabilities. On the transition to ASC 842 effective January 1, 2019, the deferred gain will be credited to Retained Earnings. The annual rent for the initial period of 5 years is approximately $1.5 million plus taxes and subsequently will increase 10% every five years through the end of the lease.

Page 57 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

7. Goodwill:



	Food, Health and Nutrition		Industrial Specialties		Other		Total
Balance: December 31, 2016	$	61,090	$	23,283	$	—	$	84,373
Add: Goodwill from Novel Ingredients acquisition	54,007		—		—		54,007
Add: Goodwill from NutraGenesis acquisition	14,320		—		—		14,320
Balance: December 31, 2017	$	129,417	$	23,283	$	—	$	152,700
Add: Goodwill from NutraGenesis acquisition	67						67
Balance: December 31, 2018	$	129,484	$	23,283	$	—	$	152,767

Page 58 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

8. Intangibles and Other Assets, net:

Intangibles and other assets consist of the following:



	Useful life (years)	2018		2017
Developed technology and application patents, net of accumulated amortization of $34,669 for 2018 and $30,716 for 2017	7-20	11,606		15,559
Customer relationships, net of accumulated amortization of $28,032 for 2018 and $22,279 for 2017	5-20	67,479		73,232
Trade names and license agreements, net of accumulated amortization of $14,599 for 2018 and $12,023 for 2017	5-20	12,962		15,538
Non-compete agreement, net of accumulated amortization of $1,319 for 2018 and $1,293 for 2017	3-10	14		40
Total intangibles		$	92,061	$	104,369
Deferred income taxes		$	—	$	5,058
Deferred financing costs, net of accumulated amortization of $4,331 for 2018 and $3,902 for 2017 (see note 11)		1,291		1,721
Other assets		1,742		1,768
Total other assets		$	3,033	$	8,547
		$	95,094	$	112,916

Amortization expense for intangibles was $14,208 , $8,381 and $7,222 in 2018 , 2017 and 2016 , respectively. Anticipated amortization expense for the next five years related to intangibles is as follows:



	2019		2020		2021		2022		2023
Intangible amortization expense	$	10,639	$	10,021	$	9,383	$	8,910	$	7,498

The preceding expected amortization expense is an estimate. Actual amounts of amortization expense may differ from estimated amounts due to additional intangible asset acquisitions, impairment of intangible assets, accelerated amortization of intangible assets and other events.

9. Other Current Liabilities:

Other current liabilities consist of the following:



	2018		2017
Payroll related	$	15,656	$	15,684
Taxes other than income taxes	3,071		2,804
Benefits and pensions	5,680		7,730
Freight and rebates	6,431		3,937
Income taxes	1,355		4,933
Restructuring reserve	217		1,719
Deferred gain on sale leaseback transaction (a)	790		—
Deferred contract termination fee (b)	9,489		—
Other	7,304		6,277
	$	49,993	$	43,084

(a) See Note 6 to the Consolidated Financial Statements for further details.

(b) See Note 22 to the Consolidated Financial Statements for further details.

Page 59 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

10. Short-term Borrowings, Long-Term Debt, and Interest Expense:

Short-term borrowings and long-term debt consist of the following:



	2018		2017
Revolver borrowings under the credit facility due 2021	$	300,000	$	310,000
Capital leases	—		9
Total borrowings	$	300,000	$	310,009
Less current portion	—		4
Long-term debt	$	300,000	$	310,005

In December 2016, Innophos Holdings, Inc. and certain of its directly and/or indirectly wholly-owned subsidiaries (referred to in this note as the "Company") entered into a senior secured credit facility, or Credit Agreement, with a group of lenders, or the Lenders, increasing the Company's borrowing capacity. The Credit Agreement replaces the term loan of $100.0 million and revolving line of credit under the prior facility with a $450.0 million revolving line of credit, including a $20.0 million letter of credit sub-facility and a $20.0 million swingline loan facility, all maturing on December 22, 2021. Interest accruing on amounts borrowed under the revolving line is based on an applicable margin over LIBOR (London Interbank Offered Rate) or bank base rate, ranging from 100 to 225 basis points for LIBOR and 0 to 125 basis points for base rate loans, in each case with loan period and interest alternative as chosen by the Company, which margin is adjusted quarterly depending on a total leverage ratio (as computed under the Credit Agreement) for the period in question. Commitment fees on the unused revolving line range from 12.5 to 37.5 basis points, depending on total leverage ratio (as computed under the Credit Agreement) for the period in question. The current applicable margin for LIBOR based loans, base rate loans and the commitment fee are 200 , 100 and 32.5 basis points, respectively.

The Credit Agreement also provides for possible additional revolving indebtedness under an incremental facility of up to $150.0 million (for an aggregate of revolving capacity up to $600.0 million ) upon future request by the Company to existing Lenders (and depending on their consent) or from other willing financial institutions invited by the Company and reasonably acceptable to the administrative agent to join in the Credit Agreement. This revolving credit facility increase, if implemented, may provide for higher applicable margins to either the increased portion or possibly the entire revolving credit facility, with limitations, for interest rates than those in effect for the original revolving commitments under the Credit Agreement.

The obligations of the Company under the Credit Agreement are secured by first priority liens on substantially all the United States assets of the Company, as well as a pledge of 65% of the voting equity of entities holding the Company's foreign subsidiaries.

The Credit Agreement contains representations given to the Lenders about the nature and status of the Company's business that serve as conditions to future borrowings, and affirmative, as well as negative, covenants typical of credit facilities of this kind that prohibit or limit a variety of actions by the Company and its subsidiaries generally without the Lenders’ approval. These include covenants that affect the ability of those entities, among other things, to (a) incur or guarantee indebtedness, (b) create liens, (c) enter into mergers, recapitalizations or assets purchases or sales, (d) change names, (e) make certain changes to their business, (f) make restricted payments that include dividends, purchases and redemptions of equity (g) make advances, investments or loans, (h) effect sales and leasebacks or (i) enter into transactions with affiliates, (j) allow negative pledges or limitations on the repayment abilities of subsidiaries or (k) amend subordinated debt. However, subject to continued compliance with the overall leverage restrictions described in more detail below, the Company retains flexibility under the Credit Agreement to develop its business and achieve strategic goals by, among other things, being permitted to take on additional debt, pay dividends (as long as the Total Leverage Ratio shall be .25 less than the then applicable level described below), re-acquire equity and make domestic acquisitions. Foreign acquisitions and investments are also permitted up to a fixed limit which is set initially at $213.0 million and can increase with ongoing cash generation up to as high as $425.0 million .

Among its affirmative covenants, the Credit Agreement requires the Company to maintain the following consolidated ratios (as defined and calculated according to the Credit Agreement) as of the end of each fiscal quarter:

(a) “Total Leverage Ratio” less than or equal to 3.50 to 1.00 .

(b) “Interest Coverage Ratio” greater than or equal to 3.00 to 1.00 .

Page 60 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

As of December 31, 2018 , the Accessible Borrowing Availability was $149.3 million and the Total Leverage Ratio and Interest Coverage Ratio calculated in accordance with the agreement were 2.40 and 9.55 , respectively.

As of December 31, 2018 , the Company was in full compliance with all debt covenant requirements.

The Credit Agreement provides for “Events of Default” that, unless waived, can or will lead to acceleration of obligations upon the occurrence, continuation and/or notice, as applicable, of specified events typical of credit facilities of this kind. These include (a) failures to pay interest or principal on loans, (b) misrepresentations, (c) failures to observe covenants, (d) cross defaults of other indebtedness in excess of $20.0 million , (e) uninsured and unsatisfied judgments in excess of $20.0 million or certain orders or injunctions, (f) bankruptcy and insolvency events, (g) events leading to aggregate liability under the Employee Retirement Income Security Act of 1974 (ERISA) in excess of $20.0 million , (h) changes of control, (i) invalidity of credit support /security agreements, and (i) certain disadvantageous changes in Credit Agreement debt compared to subordinated debt.

Fees and expenses incurred in 2016 with the Credit Agreement were approximately $1.5 million . This amount was recorded as deferred financing costs and is being amortized over the term of the Credit Agreement using the effective interest method.

As of December 31, 2018 , $300.0 million was outstanding under the revolving line of credit, which approximates fair value (determined using level 2 inputs within the fair value hierarchy), with total availability at 149.3 million , taking into account $0.7 million in face amount of letters of credit issued under the sub-facility. The current weighted average interest rate for all debt is 4.7% .

In December 2018, the Company entered into an interest rate swap, swapping the LIBOR exposure of $150.0 million of floating rate debt, which is currently outstanding under our Credit Agreement, to a fixed rate to maturity obligation of 2.677% expiring in November 2021. The fair value of this interest rate swap is a liability of approximately $1.0 million as of December 31, 2018 and is included in other long-term liabilities.

The Company manages interest rate risk by balancing the amount of fixed-rate and floating-rate debt to the extent practicable consistent with the credit status.

Innophos and its subsidiaries and affiliates may from time to time seek to acquire or otherwise retire outstanding debt through public or privately negotiated transactions, exchanges or otherwise. Debt repurchases or exchanges, if any, will depend on prevailing market conditions, Company liquidity requirements, restrictive financial covenants and other factors applicable at the time. The amounts involved may be material.

Total interest paid by the Company for all indebtedness for 2018 , 2017 and 2016 was $14.4 million , $6.8 million and $8.0 million , respectively.

Interest expense, net consists of the following:



	Year Ended December 31,
	2018			2017			2016
Interest expense	$	14,250		$	7,148		$	7,210
Deferred financing cost	430			429			680
Interest income	(75		)	(124		)	(53		)
Less: amount capitalized for capital projects	(1,082		)	(445		)	(168		)
Total interest expense, net	$	13,523		$	7,008		$	7,669

Page 61 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

11. Other Long-Term Liabilities:

Other long-term liabilities consist of the following:



	2018		2017
Deferred income taxes	$	5,113	$	2,354
Long term portion of U.S. transition tax	—		12,095
Pension and post retirement liabilities	9,238		8,886
Restructuring reserve	—		210
Uncertain tax positions	320		1,974
Environmental liabilities	1,100		1,100
Deferred gain on sale leaseback transaction (a)	15,073		—
Deferred contract termination fee (b)	15,371		—
Other liabilities	3,424		1,453
	$	49,639	$	28,072

(a) See Note 6 to the Consolidated Financial Statements for further details.

(b) See Note 22 to the Consolidated Financial Statements for further details.

12. Stockholders’ Equity / Stock-Based Compensation:

The Company's compensation programs include share-based payments. The primary share-based awards and their general terms and conditions currently in effect are as follows:

•

Restricted stock grants, which entitle the holder to receive, at the end of each vesting term, a specified number of shares of the Company's common stock, and which also entitle the holder to receive dividends paid on such grants throughout the vesting period. Compensation expense is amortized on a straight-line basis over the requisite vesting period, generally three years, and accelerated for those employees that are retirement eligible during the vesting period.


•	Stock options, which entitle the holder to purchase, after the end of a vesting term, a specified number of shares of the Company’s common stock at an exercise price per share set equal to the market price of the Company’s common stock on the date of grant. The stock options generally vest annually over three years with a ten year term from date of grant.

•

Performance share awards which entitle the holder to receive, at the end of a performance cycle, a number of shares of the Company’s common stock, within a range of shares from zero to a specified maximum (generally 200% of initial share award), calculated using a combination of performance indicators as defined by reference to the Company’s own activities. The performance shares generally vest at the end of a three year performance cycle and the number of shares distributable depends on the extent to which the Company attains pre-established performance goals. Amounts equivalent to dividends will accrue over the performance period and are paid on performance share awards when vested and distributed.


•	Annual stock retainer grants, which entitle independent members of the Board of Directors to receive a number of shares of the Company’s common stock, which immediately vest, equal to a fixed retainer value.

Page 62 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

The following table summarizes the components of stock-based compensation expense, all of which has been classified as selling, general and administrative expense:



	Year Ended December 31,
	2018		2017		2016
Stock options	$	1,754	$	1,068	$	994
Restricted stock	2,626		1,701		1,490
Performance shares	228		424		(257		)
Stock grants	579		630		595
Total stock-based compensation expense (a)	$	5,187	$	3,823	$	2,822

(a) 2016 includes accelerated stock-based compensation expense adjustments of $(254) , due to management transition.

A summary of restricted stock activity during the three years ended December 31, 2018 , is presented below:



	Number of Shares		Weighted Average Grant Date Fair Value Per Share
Outstanding at January 1, 2016	125,331		$	40.85
Granted	88,836		31.47
Released	(7,796	)	53.18
Forfeited / Surrendered	(29,920	)	40.79
Outstanding at December 31, 2016	176,451		$	35.27
Outstanding at January 1, 2017	176,451		$	35.27
Granted	30,723		52.41
Released	(32,171	)	34.71
Forfeited / Surrendered	(24,424	)	36.42
Outstanding at December 31, 2017	150,579		$	38.18
Outstanding at January 1, 2018	150,579		$	38.18
Granted	56,311		39.20
Released	(33,339	)	36.38
Forfeited / Surrendered	(24,936	)	35.89
Outstanding at December 31, 2018	148,615		$	39.35

Page 63 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

A summary of stock option activity during the three years ended December 31, 2018 , is presented below:



	Number of Options		Weighted Average Exercise Price		Weighted Average Grant Date Fair Value Per Option
Outstanding at January 1, 2016	691,922		$	34.33
Granted	400,215		31.18		$	4.62
Forfeited / Expired / Surrendered	(260,913	)	33.17
Exercised	(91,029	)	19.55
Outstanding at December 31, 2016	740,195		$	34.84
Exercisable at December 31, 2016	368,159		$	37.06
Outstanding at January 1, 2017	740,195		$	34.84
Granted	102,607		52.43		$	11.54
Forfeited / Expired / Surrendered	(175,767	)	37.24
Exercised	(49,530	)	23.40
Outstanding at December 31, 2017	617,505		$	38.00
Exercisable at December 31, 2017	343,849		$	38.05
Outstanding at January 1, 2018	617,505		$	38.00
Granted	196,198		39.28		$	7.28
Forfeited / Expired / Surrendered	(132,684	)	40.63
Exercised	(18,010	)	25.02
Outstanding at December 31, 2018	663,009		$	38.21
Exercisable at December 31, 2018	388,686		$	37.23

The fair value of the options granted during 2018 , 2017 and 2016 was determined using the Black-Scholes option-pricing model. The assumptions used in the Black-Scholes option-pricing model were as follows:



Non-qualified stock options	Year Ended December 31, 2018			Year Ended December 31, 2017			Year Ended December 31, 2016
Expected volatility	29.7		%	31.3		%	33.8		%
Dividend yield	4.6		%	3.6		%	6.6		%
Risk-free interest rate	2.6		%	2.1		%	1.4		%
Expected term in years	6.3			6.6			6.6
Weighted average grant date fair value of stock options	$	7.28		$	11.54		$	4.62

Page 64 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

A summary of performance share activity is presented below:



	Number of Shares		Weighted Average Grant Date Fair Value per Share
Outstanding at January 1, 2016	32,417		$	37.58
Granted (at targeted return on invested capital and contribution margin growth)	—		—
Forfeited	—		—
Vested	(12,401	)	54.46
Adjustment to estimate of shares to be earned	(20,016	)	27.12
Outstanding at December 31, 2016	—		$	—
Outstanding at January 1, 2017	—		$	—
Granted (at targeted return on invested capital and contribution margin growth)	22,958		52.44
Forfeited	(2,083	)	52.44
Vested	(353	)	49.54
Adjustment to estimate of shares to be earned	401		49.54
Outstanding at December 31, 2017	20,923		$	52.43
Outstanding at January 1, 2018	20,923		$	52.43
Granted (at targeted return on invested capital and contribution margin growth)	35,702		39.28
Forfeited	(1,023	)	40.90
Vested	—		—
Adjustment to estimate of shares to be earned	(30,984	)	$	43.19
Outstanding at December 31, 2018	24,618		$	45.47

The total intrinsic value of options exercised and stock grants during 2018 , 2017 and 2016 was $3.5 million , $4.2 million and $5.9 million , respectively. The aggregate intrinsic value of stock options outstanding and exercisable at December 31, 2018 was $0.0 million and $0.0 million , respectively. The total remaining unrecognized compensation expense related to share-based payments is as follows:



Unrecognized Compensation Expense	Restricted Stock		Stock Options		Performance Based
Amount	$	3,151	$	1,404	$	193
Weighted-average years to be recognized	1.3		1.8		1.7

13. Earnings per share (EPS)

The Company accounts for earnings per share in accordance with ASC 260 and related guidance, which requires two calculations of earnings per share (EPS) to be disclosed: basic EPS and diluted EPS. Under ASC Subtopic 260-10-45, as of January 1, 2009 unvested awards of share-based payments with rights to receive dividends or dividend equivalents, such as restricted stock, are considered participating securities for purposes of calculating EPS. Under the two-class method, a portion of net income is allocated to these participating securities and therefore is excluded from the calculation of EPS allocated to common stock, as shown in the table below.

The numerator for basic and diluted earnings per share is net earnings attributable to shareholders reduced by dividends attributable to unvested shares. The denominator for basic earnings per share is the weighted average number of common stock outstanding during the period. The denominator for diluted earnings per share is weighted average shares outstanding adjusted for the effect of dilutive outstanding stock options, performance share awards and restricted stock awards.

The following is a reconciliation of the weighted average basic number of common shares outstanding to the diluted number of common and common stock equivalent shares outstanding and the calculation of earnings per share using the two-class method:

Page 65 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)



	Year Ended December 31,
	2018			2017			2016
Net income	36,071			22,445			47,971
Less: earnings attributable to unvested shares	(131		)	(76		)	(288		)
Net income available to common shareholders	$	35,940		$	22,369		$	47,683
Weighted average number of common and potential common shares outstanding:
Basic number of common shares outstanding	19,518,366			19,444,795			19,271,448
Dilutive effect of stock equivalents	241,893			288,615			310,028
Diluted number of weighted average common shares outstanding	19,760,259			19,733,410			19,581,476
Earnings per common share:
Earnings per common share—Basic	$	1.84		$	1.15		$	2.47
Earnings per common share—Diluted	$	1.82		$	1.13		$	2.44

Total outstanding options, performance share awards and unvested restricted stock not included in the calculation of diluted earnings per share as the effect would be anti-dilutive are 488,987 , 377,361 and 445,303 for the years ended 2018 , 2017 and 2016 , respectively.

14. Pension Plans and Post-retirement Benefits:

Innophos maintains both defined contribution plans and noncontributory defined benefit pension plans that together cover substantially all U.S. and Canadian employees.

In the United States, salaried and hourly employees are covered by a defined contribution plan with a 401(k) feature. The plan provides for employee contributions, company matching contributions, and an age-weighted annual company contribution to eligible employees. Union-represented hourly employees, at the Company's Nashville, Tennessee site, are covered by a traditional defined benefit plan providing benefits based on years of service and final average pay. On April 26, 2007, the Company and the Union for the hourly employees at its Nashville, Tennessee facility agreed that it would freeze its defined benefit pension plan (the “Plan”) as of August 1, 2007. The accrual of additional benefits or increase in the current level of benefits under the Plan ceased as of August 1, 2007, after which the Nashville union employees now participate in the Company’s existing non-contributory defined contribution benefit plan. All plans were established by Innophos in 2004.

In Canada, salaried employees are covered by defined contribution plans which provide for company contributions as a percent of pay, employee contributions, and company matching contributions. Union-represented hourly employees are covered by a defined benefit plan providing benefits based on a negotiated benefit level and years of service. The defined contribution plans were established by the Company in 2004; the defined benefit plan for union-represented hourly employees is a continuation of the Rhodia Canada Inc.’s pension plan for its Port Maitland, Ontario Canada union employees, which was included in the acquisition of the Phosphates Business from Rhodia on August 13, 2004.

Innophos also has other post-retirement benefit plans covering substantially all of its U.S. and Canadian employees. Certain employee groups covered under the plans do not receive benefits post-age 65. In the United States, the health care plans are contributory with participants’ contributions adjusted annually, and limits on the Company’s share of the costs; the life insurance plans are noncontributory. The effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003, or the Act, are not significant. In Canada, the plans are non-contributory.

Innophos uses a December 31 measurement date for all of its plans. For the purposes of the following schedules, beginning of the year is January 1.

The weighted average discount rate at the measurement dates for the Company’s defined benefit pension plans and the post-retirement benefit plans is developed using a spot interest yield curve based upon a broad population of corporate bonds rated AA or higher, adjusted to match the duration of each plan’s projected benefit payment stream.

Page 66 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

The expected return is based on a specific asset mix, active management, rebalancing among diversified asset classes within the portfolio, and a consistent underlying inflation assumption to calculate the appropriate long-term expected investment return.

As a sensitivity measure, the effect of a 25 basis-point decrease in the Company's discount rate assumption would increase its net periodic benefit cost for its pension and post-retirement plans by approximately $51 . A 1% decrease in the Company's expected rate of return on plan assets would increase its pension plan expense by $179 .

The amounts in accumulated other comprehensive income (loss), or AOCI, for all plans that are expected to be amortized as components of net periodic benefit cost (benefit) during 2019 are as follows:



	Pension		Other Benefits			Total
Prior service cost	$	49	$	—		$	49
Net actuarial loss (gain)	197		(140		)	57
Transition obligation	—		12			12

Page 67 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

The changes in benefit obligations and fair value of plan assets recognized in other comprehensive loss during 2018 and 2017 are as follows:



	Pension Benefits						Other Benefits						Total
	2018			2017			2018			2017			2018			2017
Change in accumulated other comprehensive income
Amortization of net (gain) loss	$	(197	)	$	(177	)	$	168		$	212		$	(29	)	$	35
Amortization of prior service cost / transition obligation	(49		)	(108		)	(12		)	(23		)	(61		)	(131		)
Net (gain) loss	514			694			17			343			531			1,037
Total change in accumulated other comprehensive income	268			409			173			532			441			941
Deferred taxes	(67		)	(88		)	(323		)	(148		)	(390		)	(236		)
Net amount recognized	$	201		$	321		$	(150	)	$	384		$	51		$	705

Page 68 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

U.S. Plans

Obligations and Funded Status—U.S. Plans At December 31



	Pension Benefits						Other Benefits
	2018			2017			2018			2017
Accumulated benefit obligation at end of year	$	2,461		$	2,662		$	3,490		$	3,250
Change in benefit obligation
Benefit obligation at beginning of year	$	2,662		$	2,473		$	3,250		$	2,974
Service cost	—			—			144			123
Interest cost	94			100			114			118
Actuarial loss (gain)	(219		)	154			108			151
Benefits paid	(76		)	(65		)	(126		)	(116		)
Benefit obligation at end of year	$	2,461		$	2,662		$	3,490		$	3,250
Change in plan assets
Fair value of plan assets at beginning of year	$	2,628		$	2,263		$	—		$	—
Actual return on plan assets	(164		)	430			—			—
Employer contributions	—			—			126			116
Benefits paid	(76		)	(65		)	(126		)	(116		)
Fair value of plan assets at end of year	$	2,388		$	2,628		$	—		$	—
Funded status of the plan	$	(73	)	$	(34	)	$	(3,490	)	$	(3,250	)
Amounts recognized in the consolidated balance sheets
Noncurrent assets	$	—		$	—		$	—		$	—
Current liabilities	—			—			(248		)	(151		)
Noncurrent liabilities	(73		)	(34		)	(3,242		)	(3,099		)
Net amounts recognized	$	(73	)	$	(34	)	$	(3,490	)	$	(3,250	)
Amounts recognized in accumulated other comprehensive income
Prior service (credit) cost	$	—		$	—		$	—		$	—
Net actuarial (gain) loss	73			(22		)	(1,635		)	(1,911		)
Total amount recognized	$	73		$	(22	)	$	(1,635	)	$	(1,911	)
Deferred taxes	(18		)	5			398			758
Net amount recognized	$	55		$	(17	)	$	(1,237	)	$	(1,153	)

Page 69 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)



	Pension Benefits									Other Benefits
	2018			2017			2016			2018			2017			2016
Components of net periodic benefit cost
Service cost	$	—		$	—		$	—		$	144		$	123		$	172
Interest cost	94			100			114			114			118			165
Expected return on plan assets	(150		)	(140		)	(145		)	—			—			—
Amortization of:
Actuarial loss (gain)	—			—			—			(168		)	(211		)	(100		)
Net periodic benefit cost	$	(56	)	$	(40	)	$	(31	)	$	90		$	30		$	237
Weighted average assumptions for benefit obligation
Discount rate	4.22		%	3.60		%	4.16		%	4.04		%	3.66		%	4.22		%
Expected long-term rate of return on plan assets	6.51		%	6.30		%	6.20		%	NA			NA			NA
Rate of compensation increase	NA			NA			NA			4.00		%	4.00		%	3.75		%
Weighted average assumptions for net periodic benefit cost
Discount rate	3.60		%	4.16		%	4.50		%	3.66		%	4.22		%	4.25		%
Expected long-term rate of return on plan assets	6.30		%	6.20		%	6.51		%	NA			NA			NA
Rate of compensation increase	NA			NA			NA			4.00		%	3.75		%	3.75		%



Estimated Future Benefit Payments	Pension Benefits		Other Benefits
Fiscal 2019	$	98	$	248
Fiscal 2020	109		254
Fiscal 2021	116		268
Fiscal 2022	130		284
Fiscal 2023	138		289
Fiscal Years 2024-2028	751		1,290

Innophos expects to make no contributions to its U.S. defined benefit pension plan in 2019.

The estimated actuarial gain, prior service cost, and transition obligation (asset) for the post-retirement plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost during the 2019 fiscal year are $140 , $0 and $0 , respectively.

Assumed health care cost trend rates on the U.S. plans do not have a significant effect on the amounts reported for the health care plans as a result of limits on the Company’s share of the cost.

Page 70 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

Plan Assets

The investment policy for the Company’s U.S. defined benefit pension plan is designed to achieve long-term objectives of return, while mitigating against downside risk and considering expected cash flow. Investment managers appointed by the Plan are directed to achieve a satisfactory return through a diversified portfolio consistent with acceptable risks and prudent management. In accordance with the investment and risk philosophy of the Committee, a target asset mix of 92.3% equities and 7.7% fixed income instruments has been established. Investment weightings and results are tested regularly against appropriate benchmark portfolios.

Innophos, Inc.’s defined benefit pension plan invests in mutual funds and commercial paper and the weighted-average asset allocations at December 31, 2018 and 2017 by asset category are as follows:



	Plan Assets at December 31
	2018		2017
Asset Category
Equity securities	92.3	%	92.9	%
Fixed income securities	7.7		7.1
Total	100.0	%	100.0	%

The fair values of Innophos, Inc.’s pension plan assets at December 31, 2018 by asset category are as follows:



	Total		Level 1		Level 2		Level 3
Equity securities	$	2,204	$	2,204	$	—	$	—
Fixed income securities	184		184		—		—
	$	2,388	$	2,388	$	—	$	—

Defined Contribution Plan—U.S.

Innophos Inc.’s expense for the defined contribution plan was $0.8 million , $3.2 million and $3.0 million for 2018 , 2017 and 2016 , respectively.

Page 71 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

Canadian Plans

Obligations and Funded Status—Canadian Plans at December 31



	Pension Benefits						Other Benefits
	2018			2017			2018			2017
Accumulated benefit obligation at end of year	$	14,039		$	15,590		$	1,546		$	1,722
Change in benefit obligation
Benefit obligation at beginning of year	$	15,590		$	13,128		$	1,722		$	1,379
Service cost	439			383			63			51
Interest cost	515			517			57			55
Past service cost	—			153			—			—
Actuarial (gain) loss	(502		)	886			(61		)	181
Benefits paid	(775		)	(485		)	(100		)	(53		)
Foreign currency exchange rate changes	(1,228		)	1,008			(135		)	109
Benefit obligation at end of year	$	14,039		$	15,590		$	1,546		$	1,722
Change in plan assets
Fair value of plan assets at beginning of year	$	16,729		$	14,798		$	—		$	—
Actual return on plan assets	(484		)	1,308			—			—
Employer contributions	679			—			100			53
Benefits paid	(775		)	(485		)	(100		)	(53		)
Foreign currency exchange rate changes	(1,306		)	1,108			—			—
Fair value of plan assets at end of year	$	14,843		$	16,729		$	—		$	—
Funded status of the plan	$	804		$	1,139		$	(1,546	)	$	(1,722	)
Amounts recognized in the consolidated balance sheets
Noncurrent assets	$	804		$	1,139		$	—		$	—
Current liabilities	—			—			(59		)	(103		)
Noncurrent liabilities	—			—			(1,487		)	(1,619		)
Net amounts recognized	$	804		$	1,139		$	(1,546	)	$	(1,722	)
Amounts recognized in accumulated other comprehensive income
Net transition obligation	$	—		$	—		$	12		$	37
Prior service cost	97			158			—			—
Net actuarial loss	4,329			4,095			122			200
Total amount recognized	$	4,426		$	4,253		$	134		$	237
Deferred taxes	(1,107		)	(1,063		)	(34		)	(59		)
Net amount recognized	$	3,319		$	3,190		$	100		$	178

Page 72 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)



	Pension Benefits									Other Benefits
	2018			2017			2016			2018			2017			2016
Components of net periodic benefit cost
Service cost	$	439		$	383		$	362		$	63		$	51		$	49
Interest cost	515			517			489			57			55			51
Expected return on plan assets	(796		)	(819		)	(768		)	—			—			—
Amortization of:
Actuarial loss	188			177			207			4			—			—
Prior service cost	51			108			106			—			—			—
Net transition obligation	—			—			—			24			23			23
Net periodic benefit cost	$	397		$	366		$	396		$	148		$	129		$	123
Weighted average assumptions for balance sheet liability at end of year
Discount rate	3.64		%	3.37		%	3.75		%	3.64		%	3.37		%	3.75		%
Rate of compensation increase	NA			NA			NA			NA			NA			NA
Weighted average assumptions for net periodic benefit cost at end of year
Discount rate	3.37		%	3.75		%	3.75		%	3.37		%	3.75		%	3.75		%
Expected long-term rate of return	5.00		%	5.50		%	5.50		%	NA			NA			NA
Rate of compensation increase	NA			NA			NA			NA			NA			NA
Accrued health care cost trend rates at end of year
Health care cost trend rate assumed for next year (initial rate)										7		%	8		%	9		%
Rate to which the cost trend rate is assumed to decline (ultimate rate)										5		%	5		%	5		%
Year that the rate reaches the ultimate rate										2030			2030			2033

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects:



	Other Benefits
	2018			2017
Effect of a change in the assumed rate of increase in health benefit costs
Effect of a 1% increase on:
Total of service cost and interest cost	$	23		$	24
Post-retirement benefit obligation	$	211		$	221
Effect of a 1% decrease on:
Total of service cost and interest cost	$	(17	)	$	(18	)
Post-retirement benefit obligation	$	(169	)	$	(177	)

The estimated net actuarial loss, prior service cost, and transition obligation (asset) for all defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost during the 2019 fiscal year are $197 , $49 and $0 , respectively.

The estimated actuarial loss, prior service cost, and transition obligation (asset) for the post-retirement plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost during the 2019 fiscal year are $0 , $0 and $12 , respectively.

Page 73 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

Plan Assets

Innophos Canada Inc.’s pension plan invests in mutual funds and the weighted-average asset allocations at December 31, 2018 and 2017 by asset category are as follows:



	2018		2017
Asset Category
Equity securities	49.1	%	51.6	%
Fixed income securities	48.9		44.8
Other	2.0		3.6
Total	100.0	%	100.0	%

The fair values of Innophos Canada, Inc.’s pension plan assets at December 31, 2018 by asset category are as follows:



	Total		Level 1		Level 2		Level 3
Equity securities	$	7,287	$	7,287	$	—	$	—
Fixed income securities	7,257		—		7,257		—
Other	299		—		299		—
	$	14,843	$	7,287	$	7,556	$	—

The Pension Committee has promulgated a Statement of Investment Policies and Procedures based on the “prudent person portfolio approach” to ensure investment and administration of the assets of the Plan within the parameters set out in the Ontario Pension Benefits Act and the Regulations hereunder. Investment managers appointed by the Plan are directed to achieve a satisfactory return through a diversified portfolio consistent with acceptable risks and prudent management. In accordance with the investment and risk philosophy of the Committee, a target asset mix of 50% equities and 50% fixed income instruments has been established. Investment weightings and results are tested regularly against appropriate benchmark portfolios.

Cash Flows

Contributions

Innophos Canada, Inc. contributed $0.7 million to its pension plan in 2018 .

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:



Estimated Future Benefit Payments	Pension Benefits		Other Benefits
Fiscal 2019	$	541	$	59
Fiscal 2020	577		72
Fiscal 2021	617		92
Fiscal 2022	670		95
Fiscal 2023	712		100
Fiscal Years 2024-2028	4,034		480

Innophos plans to make $0.3 million in contributions to its Canadian pension plan in 2019 .

Defined Contribution Plans—Canada

Innophos Canada Inc.’s expense for the defined contribution plans was approximately $0.1 million for 2018 , 2017 and 2016 , respectively.

Page 74 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

Mexico

In accordance with Mexican labor law, a Mexican employee is entitled to certain post-employment payments after reaching fifteen years of service. In addition, Mexican employees also participate in a statutory profit sharing program based on 10% of adjusted taxable income.

15. Income Taxes:

A reconciliation of the U.S. statutory rate and income taxes follows:



	Year Ended December 31,
	2018					2017				2016
	Income before income taxes		Income tax expense			Income before income taxes		Income tax expense		Income before income taxes		Income tax expense/ (benefit)
U.S.	$	17,940	$	(3,062	)	$	8,026	$	20,230	$	24,727	$	10,989
Canada/Mexico/Europe/Asia	25,292		10,223			48,611		13,962		45,591		11,358
Total	$	43,232	$	7,161		$	56,637	$	34,192	$	70,318	$	22,347
Current income taxes			$	(2,467	)			$	23,781			$	12,813
Deferred income taxes			9,628					10,411				9,534
Total			$	7,161				$	34,192			$	22,347



	Year Ended December 31,
	2018			2017			2016
Income tax expense at the U.S. statutory rate	$	9,079		$	19,824		$	24,611
State income taxes	67			741			862
Foreign tax rate differential	1,885			(1,606		)	(1,549		)
Non-taxable interest expense (income)	3,370			(5,951		)	(5,582		)
Change in valuation allowance	(4,498		)	1,984			(168		)
U.S. Tax Cuts and Jobs Act of 2017	(5,443		)	17,286			—
Global intangible low-taxed income	843			—			—
Uncertain tax positions	(792		)	—			736
Currency related tax adjustments	1,951			870			(629		)
Other non-deductible permanent items	699			1,044			4,066
Provision for income taxes	$	7,161		$	34,192		$	22,347

Net deferred tax balances were reflected on the consolidated balance sheets as follows:



	Year Ended December 31,
	2018			2017
Net noncurrent deferred tax assets	$	—		$	5,058
Net noncurrent deferred tax liabilities	(5,113		)	(2,354		)
Net deferred tax assets	$	(5,113	)	$	2,704

Page 75 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

The components of the Company’s deferred tax assets/ (liabilities) were as follows:



	Year Ended December 31,
	2018			2017
Deferred tax assets:
Inventories	$	5,483		$	3,427
Accrued liabilities	15,061			7,472
Tax credits	2,249			3,846
Tax losses	5,664			22,196
Total deferred tax assets	28,457			36,941
Deferred tax liabilities:
Gain on bond retirement	—			(170		)
Intangibles	(11,574		)	(11,012		)
Fixed assets	(13,799		)	(10,809		)
Accrued liabilities	(2,249		)	(1,800		)
Total deferred tax liabilities	(27,622		)	(23,791		)
Total valuation allowances	(5,948		)	(10,446		)
Net deferred tax assets (liabilities)	$	(5,113	)	$	2,704

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:



	Year Ended December 31,
	2018			2017		2016
Gross unrecognized tax benefits at January 1	$	2,679		$	2,679	$	3,121
Additions for tax positions of prior years	—			—		973
Reductions for tax positions of prior years	(939		)	—		—
Reductions due to settlements	(1,420		)	—		(1,415		)
Gross unrecognized tax benefits at December 31	320			2,679		2,679

Net uncertain tax benefits, that if recognized would impact the effective tax rate, at December 31	$	253		$	2,116	$	1,741

The U.S. operations have deferred tax assets for federal tax loss carry forwards of $1.7 million and $13.9 million and state tax loss carry forwards of $0.3 million and $1.6 million as of December 31, 2018 and 2017 , respectively. These tax loss carry forwards will expire in the years 2026 through 2037. The Company realized tax benefits of $0.1 million and $0.8 million from stock options exercised in 2018 and 2017 , respectively.

The Company maintains full valuation allowances of $5.9 million and $10.4 million at December 31, 2018 and 2017 , respectively, on its capital loss on note redemptions, foreign withholding tax credits and foreign net operating loss carryforwards as it is more likely than not that these tax benefits will not be realized. The decrease in valuation allowances during 2018 is primarily a result of the true-up of prior year foreign tax withholding credits and foreign net operating losses. These foreign tax withholding credits and foreign net operating losses are not anticipated to be utilized in future years. Certain of these foreign tax attributes, approximately $3.3 million , do not expire, while the remaining tax attributes will expire in the years 2019 through 2038.

On December 22, 2017, the U.S. enacted the Tax Act. The Tax Act significantly changes U.S. corporate income tax laws by, among other things, reducing the U.S. corporate income tax rate from 35% to 21% effective for tax years beginning after December 31, 2017, 100% bonus depreciation for certain capital expenditures, stricter limits on deductions for interest and certain executive compensation and transitioning U.S. international taxation from a worldwide tax system to a territorial tax system.

Page 76 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. In accordance with SAB 118 and ASU 2018-05, the Company recognized the provisional tax impacts related to the re-measurement of deferred income tax assets and liabilities and the one-time, mandatory transition tax on deemed repatriation during the year ended December 31, 2017. During 2018, the Company finalized these calculations and recorded a total benefit of $7.4 million . This benefit included $3.2 million related to adjustments to the transition tax and a $4.2 million benefit related to the remeasurement of certain deferred tax assets and liabilities as a result of the U.S. federal tax return filing, mainly NOLs which were used to offset the transition tax.

The Company re-evaluated the impact of the Tax Act on its permanent reinvestment assertion. Specifically, with respect to the accumulated earnings of its Canadian subsidiary, the Company has reversed its permanent reinvestment assertion and has provided for $1.2 million of foreign withholding taxes on these unremitted earnings. Apart from the unremitted earnings, the Company has not provided for deferred taxes on the outside basis of its investment in the Canadian subsidiary as this remains permanently reinvested. The Company considers all other foreign subsidiaries to be permanently reinvested. A determination of the unrecognized deferred taxes related to these other components is not practicable.

Beginning in 2018, the Tax Act includes two new U.S. tax base erosion provisions, the GILTI provisions and the base-erosion and anti-abuse tax (“BEAT”) provisions.

The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company has elected to account for GILTI tax in the period in which it is incurred, and therefore has booked an additional tax income of $0.8 million for the period.

The BEAT provisions in the Tax Act eliminate the deduction of certain base-erosion payments made to related foreign corporations, and impose a minimum tax if greater than regular tax. The Company does not expect to have any material tax impacts of BEAT and therefore has not recorded any related tax impacts in its consolidated financial statements for the period ended December 31, 2018.

Business is conducted in various countries throughout the world and is subject to tax in numerous jurisdictions. A significant number of tax returns are filed and subject to examination by various federal, state and local tax authorities. Tax examinations are often complex, as tax authorities may disagree with the treatment of items reported requiring several years to resolve. As such, the Company maintains liabilities for possible assessments by tax authorities resulting from known tax exposures for uncertain income tax positions. The Company’s policy is to accrue associated penalties in selling, general and administrative expenses and to accrue interest in net interest expense. Currently, the Company is under examination, or has been contacted for examination on income tax returns for the years 2014 through 2017. The Company has recorded an immaterial amount for interest and penalties in the statement of operations. Interest and penalties related to uncertain tax positions of $0.1 million and $0.8 million are accrued in other long-term liabilities as of December 31, 2018 and December 31, 2017, respectively. Other than the items mentioned above, as of December 31, 2018, no significant adjustments have been proposed to the Company's tax positions and the Company currently does not anticipate any adjustments that would result in a material change to its financial position during the next twelve months.

Income taxes paid (net of refunds) were $18.4 million , $14.9 million and $27.9 million for 2018 , 2017 and 2016 , respectively.

Page 77 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

16. Commitments and Contingencies:

Leases

Under agreements expiring through 2021, the Company leases railcars and other equipment under various operating leases. Rental expense for 2018 , 2017 and 2016 was $7,387 , $7,287 and $6,930 , respectively. Minimum annual rentals for all operating leases are:



Year Ending	Lease Payments
2019	$	8,259
2020	7,130
2021	6,490
2022	6,032
2023	5,467
Thereafter	33,957

Purchase Commitments and Supplier Concentration

The Company relies on unaffiliated third parties to provide its raw materials, including intermediate products the Company sources to produce its products. The Company’s raw materials are purchased under supply arrangements that vary from long-term multi-year supply agreements to short term agreements. Some of these supply contracts include minimum purchase obligations on the part of the Company. The Company has multiple raw material supply contracts with pricing that is established annually based on a formula. The Company may be unable to renew the annual or other periodic contracts it has in place for its raw materials at all or on similar terms to the current terms. In addition, with respect to those suppliers with whom the Company does have long-term multi-year agreements, such suppliers may nevertheless seek to terminate, modify or disrupt performance under such agreements. The Company also relies on spot suppliers for certain raw materials and may from time to time experience sourcing difficulties in connection therewith.

Most of the Company’s raw materials are supplied to the Company by either one or a small number of suppliers. Some of those suppliers rely, in turn, on sole or limited sources of supply for raw materials included in their products. As a result, the Company may from time to time experience difficulties in sourcing raw materials.

In addition, from time to time, the Company enters into toll manufacturing agreements or other arrangements to produce minimum quantities of product for a certain duration. If the Company experience delays in delivering contracted production, the Company may be subject to contractual liabilities to the buyers to whom the Company has promised the products.

Environmental

The Company's operations are subject to extensive and changing federal, state, local and international environmental laws, rules and regulations. The Company's manufacturing sites have an extended history of industrial use, and soil and groundwater contamination have or may have occurred in the past and might occur or be discovered in the future.

Environmental efforts are difficult to assess for numerous reasons, including the discovery of new remedial sites, discovery of new information and scarcity of reliable information pertaining to certain sites, improvements in technology, changes in environmental laws and regulations, numerous possible remedial techniques and solutions, difficulty in assessing the involvement of and the financial capability of other potentially responsible parties and the extended time periods over which remediation occurs. Other than the items listed below, the Company is not aware of material environmental liabilities which are probable and estimable. As the Company's environmental contingencies are more clearly determined, it is reasonably possible that amounts may need to be accrued. However, management does not believe, based on current information, that environmental remediation requirements will have a material impact on the Company's results of operations, financial position or cash flows.

Future environmental spending is probable at the Company's site in Nashville, Tennessee, both with respect to the eastern portion which had been used historically as a landfill, as well as a western parcel therein, previously acquired from a third party, which reportedly had housed, but no longer does, a fertilizer and pesticide manufacturing facility. The Company has an estimated liability with a range of $0.9 million - $1.3 million . The remedial action plan for that site has yet to be finalized, and as

Page 78 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)

such, the Company has recorded a liability, which represents the Company's best estimate, of $1.1 million as of December 31, 2018 .

Litigation

The Company is party to legal proceedings and contractual disputes that arise in the ordinary course of its business. Except as to the matters specifically discussed, management believes the likelihood that the ultimate disposition of these matters will have a material adverse effect on its business, results of operations, financial condition and/or cash flows is remote. However, these matters cannot be predicted with certainty and an unfavorable resolution of one or more of them could have a material adverse effect on the Company's business, results of operations, financial condition, and/or cash flows.

17. Changes in Accumulated Other Comprehensive Income (Loss) by Component:



	Pension and Other Post-retirement Adjustments			Changes in Fair Value of Effective Cash Flow Hedges			Total
Balance at December 31, 2016	$	(1,493	)	$	9		$	(1,484	)
Other comprehensive income (loss) before reclassifications	(412		)	(9		)	(421		)
Amounts reclassified from accumulated other comprehensive income (loss)	(293		)	—			(293		)
Net current period other comprehensive income (loss)	(705		)	(9		)	(714		)
Balance at December 31, 2017	(2,198		)	—			(2,198		)
Other comprehensive income (loss) before reclassifications	(344		)	(767		)	(1,111		)
Amounts reclassified from accumulated other comprehensive income (loss)	293			—			293
Net current period other comprehensive income (loss)	(51		)	(767		)	(818		)
Balance at December 31, 2018	$	(2,249	)	$	(767	)	$	(3,016	)

18. Financial Instruments and Concentration of Credit Risks:

The Company believes that its concentration of credit risk related to trade accounts receivable is limited since these receivables are spread among a number of customers and are geographically dispersed. The ten largest customers accounted for 24% , 26% and 35% , respectively, of net sales for 2018 , 2017 and 2016 . No customer accounted for more than 10% of the Company's sales in the last three years.

Page 79 of 89

Table of Contents

19. Valuation Allowances:

Valuation allowances as of December 31, 2018 , 2017 and 2016 , and the changes in the valuation allowances for the year ended December 31, 2018 , 2017 and 2016 are as follows:



	Balance, January, 1 2018		Charged/ (credited) to costs and expenses			Deductions (Bad debts)		(Credited) to Goodwill		Balance, December 31, 2018
Deferred taxes valuation allowances	$	10,446	$	(4,498	)	$	—	$	—	$	5,948
	Balance, January, 1 2017		Charged/ (credited) to costs and expenses			Deductions (Bad debts)		(Credited) to Goodwill		Balance, December 31, 2017
Deferred taxes valuation allowances	$	8,462	$	1,984		$	—	$	—	$	10,446
	Balance, January, 1 2016		Charged/ (credited) to costs and expenses			Deductions (Bad debts)		(Credited) to Goodwill		Balance, December 31, 2016
Deferred taxes valuation allowances	$	8,630	$	(168	)	$	—	$	—	$	8,462

20. Segment Reporting:

The Company discloses certain financial and supplementary information about its reportable segments, revenue by products and revenues by geographic area. Operating segments are defined as components of an enterprise about which separate discrete financial information is evaluated regularly by the chief operating decision maker, in order to decide how to allocate resources and assess performance. The primary performance indicators for the chief operating decision maker are sales and EBITDA (defined as net income (loss) before interest, income taxes, depreciation and amortization). All references to sales in this Annual Report on Form 10-K are recognized when title and risk of loss passes to the customer, which occurs either upon shipment or delivery, depending upon the agreed sales terms with customers.

Page 80 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)



For the year ended December 31, 2018	Food, Health and Nutrition		Industrial Specialties		Other		Total
Sales	$	480,166	$	260,605	$	61,071	$	801,842
EBITDA	$	61,791	$	34,124	$	5,771	$	101,686
Depreciation and amortization expense	$	28,695	$	14,347	$	1,889	$	44,931
Other data
Capital expenditures	$	37,368	$	17,886	$	1,491	$	56,745
Long-lived assets	$	142,659	$	88,468	$	9,108	$	240,235
Total assets	$	601,030	$	190,823	$	23,301	$	815,154
For the year ended December 31, 2017	Food, Health and Nutrition		Industrial Specialties		Other		Total
Sales	$	397,298	$	262,704	$	62,022	$	722,024
EBITDA	$	67,156	$	33,833	$	3,060	$	104,049
Depreciation and amortization expense	$	24,212	$	13,863	$	2,329	$	40,404
Other data
Capital expenditures	$	23,556	$	10,820	$	483	$	34,859
Long-lived assets	$	130,705	$	71,925	$	16,667	$	219,297
Total assets (b)	$	556,479	$	190,700	$	37,990	$	785,169



For the year ended December 31, 2016	Food, Health and Nutrition		Industrial Specialties		Other		Total
Sales	$	376,672	$	278,284	$	70,389	$	725,345
EBITDA (a)	$	78,128	$	36,029	$	1,309	$	115,466
Depreciation and amortization expense	$	20,269	$	12,645	$	4,565	$	37,479
Other data
Capital expenditures	$	19,181	$	15,866	$	1,552	$	36,599
Long-lived assets	$	124,664	$	72,727	$	8,068	$	205,459
Total assets	$	397,575	$	210,680	$	34,756	$	643,011


(a)	The year ended December 31, 2016 includes a $1.5 million charge to earnings for restructuring reserves in Other.


(b)	The increase in total assets in the Food, Health and Nutrition segment is largely due to the Novel Ingredients and NutraGenesis acquisitions.

A reconciliation of net income to EBITDA follows:



	2018		2017		2016
Net income	$	36,071	$	22,445	$	47,971
Provision for income taxes	7,161		34,192		22,347
Interest expense, net	13,523		7,008		7,669
Depreciation and amortization	44,931		40,404		37,479
EBITDA	$	101,686	$	104,049	$	115,466

Page 81 of 89

Table of Contents

INNOPHOS HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts, share amounts or where otherwise noted)



	Year Ended December 31,
Product Revenues	2018		2017		2016
Specialty Ingredients	$	567,064	$	490,256	$	456,465
Core Ingredients	183,872		174,819		200,560
Co-Products and Other	50,906		56,949		68,320
Total	$	801,842	$	722,024	$	725,345
	Year Ended December 31,
Geographic Revenues	2018		2017		2016
U.S.	$	517,782	$	450,171	$	418,411
Mexico	137,289		125,116		123,885
Canada	32,666		31,993		32,391
Other foreign countries	114,105		114,744		150,658
Total	$	801,842	$	722,024	$	725,345
	Year Ended December 31,
Geographic Long-lived Assets	2018		2017		2016
U.S.	$	127,788	$	113,795	$	104,118
Mexico	99,403		91,414		85,698
Canada	11,510		12,293		13,575
Other foreign countries	1,534		1,795		2,068
Total	$	240,235	$	219,297	$	205,459

Revenues for the geographic information are attributed to geographic areas based on the destination of the sale.

Long-lived assets include property, plant and equipment.

21. Quarterly information (unaudited):



	2018
	Quarters ended
	March 31		June 30		September 30		December 31			Total
Net sales	$	205,440	$	206,725	$	196,934	$	192,743		$	801,842
Gross profit	42,227		36,385		35,228		29,551			143,391
Net income (loss)	10,915		6,246		14,090		4,820			36,071
Per share data:
Income per share:
Basic	$	0.56	$	0.32	$	0.72	$	0.25
Diluted	$	0.55	$	0.31	$	0.71	$	0.24
	2017
	Quarters ended
	March 31		June 30		September 30		December 31			Total
Net sales	$	165,944	$	179,140	$	183,839	$	193,101		$	722,024
Gross profit	36,543		39,076		40,969		32,441			149,029
Net income (loss) (a)	10,923		11,223		11,582		(11,283		)	22,445
Per share data:
Income per share:
Basic	$	0.56	$	0.58	$	0.59	$	(0.58	)
Diluted	$	0.55	$	0.57	$	0.58	$	(0.58	)

(a) The three months ended December 31, 2017 include a $17.3 million charge to income taxes for the impacts of the Tax Act.

Page 82 of 89

Table of Contents

22. Supply agreement termination

In June 2018, the Company agreed to terminate a previously long-term supply agreement and replaced it with a short-term one. In December 2018, as a result of the termination, the Company received consideration of $24.9 million which included $21.3 million in cash as well as receipt of certain tangible assets with a fair value of $3.6 million . The consideration was recorded as a deferred liability with $9.5 million in Other current liabilities and the remaining $15.4 recorded in Other long-term liabilities. Beginning in January 2019, the deferred liability will be amortized on a straight-line basis through July 2021, which is the end of the new supply agreement, as a reduction of Cost of goods sold.

Page 83 of 89

Table of Contents


ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.


ITEM 9A.	CONTROLS AND PROCEDURES

Disclosure Control and Procedures

The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) that are designed to provide reasonable assurance that information required to be reported in the Company’s consolidated financial statements and filings is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Principal Executive Officer and Principal Financial Officer, with the participation of management, concluded that the Company’s disclosure controls and procedures are effective at the reasonable assurance level as of December 31, 2018.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control framework and processes are designed to provide reasonable assurance to management and the Board of Directors regarding the reliability of financial reporting and the preparation of the Company’s consolidated financial statements in accordance with United States generally accepted accounting principles.

As of December 31, 2018, management conducted an assessment of the Company’s internal control over financial reporting based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013). Based on the assessment, management concluded that, as of December 31, 2018, the Company’s internal control over financial reporting is effective at the reasonable assurance level.

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the Company’s financial statements included in this Annual Report on Form 10-K and issued its report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018, which is included in “Part II, Item 8. Consolidated Financial Statements and Supplementary Data”.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company's internal control over financial reporting during or with respect to the fourth quarter of 2018 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.


ITEM 9B.	OTHER INFORMATION

None.

Page 84 of 89

Table of Contents

PART III


ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information relating to our executive officers appears in "Part 1, Item 1. Business" appearing elsewhere in this Annual Report on Form 10-K. Additional information required by this Item is incorporated herein by reference to the 2019 Proxy Statement.


ITEM 11.	EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference to the 2019 Proxy Statement.


ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plans

The following information is provided for our most recently completed fiscal year for certain plans providing compensation in the form of equity securities.

Equity Compensation Plan Information



Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b) *		(c)
Equity compensation plans approved by security holders	865,722	$	38.79	1,398,114	* *
Equity compensation plans not approved by security holders	—	$	—	—
Total	865,722	$	38.79	1,398,114

______________________



*	In column (b), the weighted average exercise price is only applicable to stock options.

**	In column (c), the shares shown are attributable to the 2009 and 2018 Long Term Incentive Plans.

Additional information required by this Item is incorporated herein by reference to the 2019 Proxy Statement.


ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated herein by reference to the 2019 Proxy Statement.


ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item is incorporated herein by reference to the 2019 Proxy Statement.

Page 85 of 89

Table of Contents

PART IV


ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)(1) Financial Statements. The financial statements filed as part of this Annual Report on Form 10-K are listed on the Index to Financial Statements in “Part II, Item 8. Consolidated Financial Statements and Supplementary Data.”

(a)(2) Financial Statement Schedules. Schedules are omitted because they are not required or because the information is provided elsewhere in the financial statements noted in (a)(1) above.

(a)(3) Exhibits required by Item 601 of Regulation S-K. The information required by this Section (a)(3) of Item 15 is set forth on the Exhibit Index that follows the signatures page of this Annual Report on Form 10-K.


ITEM 16.	FORM 10-K SUMMARY

Optional disclosure, not included in this Annual Report on Form 10-K.

Page 86 of 89

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Innophos Holdings, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized on the 27th day of February, 2019 .



	INNOPHOS HOLDINGS, INC.

	By:		/ S / K IM A NN M INK
			Kim Ann Mink
			Chief Executive Officer and President (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of Innophos Holdings, Inc. and in the capacities and on the dates indicated.



Signatures	Title	Dates

/S/ KIM ANN MINK	Chairman, Chief Executive Officer and President	February 27, 2019
Kim Ann Mink	(Principal Executive Officer)

/S/ HAN KIEFTENBELD	Senior Vice President and Chief Financial Officer	February 27, 2019
Han Kieftenbeld	(Principal Financial Officer)

/S/ WILLIAM DUNWORTH	Vice President, Corporate Controller and Chief Accounting Officer	February 27, 2019
William Dunworth	(Principal Accounting Officer)

/S/ GARY CAPPELINE	Director	February 27, 2019
Gary Cappeline

/S/ JANE HILK	Director	February 27, 2019
Jane Hilk

/S/ L INDA M YRICK	Director	February 27, 2019
Linda Myrick

/S/ K AREN O SAR	Director	February 27, 2019
Karen Osar

/S/ J OHN S TEITZ	Director	February 27, 2019
John Steitz

/S/ P ETER T HOMAS	Director	February 27, 2019
Peter Thomas

/S/ R OBERT Z ATTA	Director	February 27, 2019
Robert Zatta

Page 87 of 89

Table of Contents

EXHIBIT INDEX



Exhibit No.		Description
3.1		Second Amended and Restated Certificate of Incorporation of Innophos Holdings, Inc. incorporated by reference to Exhibit 3.1 of Amendment No. 4 to Registration Statement 333-135851 on Form S-1 of Innophos Holdings, Inc. filed October 30, 2006
3.2		Amended and Restated By-Laws of Innophos Holdings, Inc. as of February 8, 2018, incorporated by reference to Exhibit 3.1 of the Current report on Form 8-K of Innophos Holdings, Inc. filed February 12, 2018
4.1		Form of Common Stock certificate, incorporated by reference to Exhibit 4.1 of Amendment No. 4 to Registration Statement 333-135851 on Form S-1 of Innophos Holdings, Inc. filed October 30, 2006
10.1		Termination Agreement, dated as of June 29, 2018, by and among Innophos, Inc., PCS Sales (USA), Inc. and PCS Nitrogen Fertilizer, L.P. (now part of Nutrien) (filed in redacted form per confidential treatment order), incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K of Innophos Holdings, Inc. filed on July 2, 2018
10.2		Merchant Green Acid Supply Agreement, dated as of June 29, 2018, by and between Innophos, Inc. and PCS Sales (USA), Inc. (now part of Nutrien) (filed in redacted form per confidential treatment order), incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K of Innophos Holdings, Inc. filed on July 2, 2018
10.3		Services Agreement, dated as of June 29, 2018, by and between Innophos, Inc. and PCS Nitrogen Fertilizer, L.P. (now part of Nutrien), incorporated by reference to Exhibit 10.4 of the Current Report on Form 8-K of Innophos Holdings, Inc. filed on July 2, 2018
10.4		Letter Agreement between Innophos, Inc. and PCS Nitrogen Fertilizer, L.P., dated June 29, 2018, incorporated by reference to Exhibit 10.5 of the Current Report on Form 8-K of Innophos Holdings, Inc. filed on July 2, 2018
10.5		Purified Wet Phosphoric Acid Supply Agreement, effective as of July 30, 2018, by and between Innophos, Inc. and PCS Sales (USA), Inc. (now part of Nutrien) (filed in redacted form per confidential treatment order), incorporated by reference to Exhibit 10.6 of the Current Report on Form 8-K of Innophos Holdings, Inc. filed on July 2, 2018
10.6		Purified Phosphoric Acid (PPA) Supply Contract between Innophos, Inc. and EURO MAROC PHOSPHORE (Emaphos) (filed in redacted form per confidential treatment order), incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K of Innophos Holdings, Inc. filed on November 1, 2018
10.7		Sulfur Supply Contract dated as of January 1, 2011 by and Between Pemex Gas Y Petroquimica Basica (assigned to Pemex Transformacion Industrial) and Innophos Fosfatados de Mexico, S. de R.L. de C.V. (filed in redacted form per confidential treatment order), incorporated by reference to Exhibit 10.7 of Annual Report on Form 10-K of Innophos Holdings, Inc. filed on February 28, 2011
10.8		Partial Assignment of Rights and Obligations Agreement dated November 1, 2012, by and between Administracion Portuaria Integral de Coatzacoalcos, S.A. de C.V. and Innophos Fosfatados de Mexico, S. de R.L. de C.V (in redacted form per confidential treatment order), incorporated by reference to Exhibit 99.1 to Form 8-K of Innophos Holdings, Inc. filed November 9, 2012
10.9		Addendum to Partial Assignment of Rights and Obligations agreement, dated May 31, 2016, incorporated by reference to Exhibit 10.9 of the Annual Report on Form 10-K of Innophos Holdings, Inc. filed on February 28, 2017
10.10+		Innophos Holdings, Inc. Amended and Restated 2005 Executive Stock Option Plan, incorporated by reference to Exhibit 10.28 to Amendment No. 4 of Registration Statement 333-135851 on Form S-1 of Innophos Holdings, Inc. filed October 30, 2006
10.11+		Form of 2006 Long-Term Equity Incentive Plan, incorporated by reference to Exhibit 10.37 to Amendment No. 4 of Registration Statement 333-135851 on Form S-1 of Innophos, Inc. filed October 30, 2006
10.12+		Form of 2009 Long-Term Incentive Plan (2009 LTIP), incorporated by reference to Exhibit 99.1 of the Current Report on Form 8-K of Innophos Holdings, Inc. filed June 4, 2009
10.13+		Form of Award Agreement under the 2009 LTIP (for 2018 awards, other than Dr. Mink) incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K of Innophos Holdings, Inc. filed on April 4, 2018
10.14+		Form of Award Agreement under the 2009 LTIP (for 2018 award for Dr. Mink) incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K of Innophos Holdings, Inc. filed on April 4, 2018
10.15+		Form of Award Agreement under the 2009 LTIP (for 2017 awards), incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K of Innophos Holdings, Inc. filed on April 7, 2017
10.16+		Form of Award Agreement under the 2009 LTIP (for 2016 awards) incorporated by reference to Exhibit 10.13 of the Annual Report on Form 10-K of Innophos Holdings, Inc. filed on February 28, 2017

Page 88 of 89

Table of Contents



10.17+		Innophos Holdings, Inc. 2018 Long-Term Incentive Plan, incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K of Innophos Holdings, Inc. filed on May 16, 2018
10.18+*		Form of Innophos, Inc. Retirement Savings Restoration Plan, effective as of January 1, 2019
10.19+*		Innophos, Inc. Management Incentive Plan, effective as of January 1, 2018
10.20+		Form of Indemnification Agreement (prior to September 2018), by and among Innophos Holdings, Inc. and certain Directors and Executive Officers, incorporated by reference to Exhibit 99.2 of Form 8-K of Innophos Holdings, Inc. filed January 31, 2007
10.21+*		Form of Indemnification Agreement (for directors and executive officers joining after September 2018), by and among Innophos Holdings, Inc. and certain Directors and Executive Officers
10.22+		Executive Employment Agreement, dated November 10, 2015, by and between Innophos Holdings, Inc. and Kim Ann Mink, incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K of Innophos Holdings, Inc. filed on November 16, 2015
10.23+		Executive Employment Agreement, dated April 1,2016, by and between Innophos Holdings, Inc. and Han Kieftenbeld, incorporated by reference to Exhibit 10.18 of the Annual Report on Form 10-K of Innophos Holdings, Inc. filed on March 1, 2018
10.24+		Executive Employment Agreement, dated as of October 7, 2016, by and between Innophos Holdings, Inc. and Joshua Horenstein, incorporated by reference to Exhibit 10.19 of the Annual Report on Form 10-K of Innophos Holdings, Inc. filed on March 1, 2018
10.25+		Change in Control Agreement, dated July 15, 2016, by and between Innophos Holdings, Inc. and Sherry Duff, incorporated by reference to Exhibit 10.20 of the Annual Report on Form 10-K of Innophos Holdings, Inc. filed on March 1, 2018
10.26+		Change in Control Agreement, dated April 26, 2017, by and between Innophos Holdings, Inc. and Amy Hartzell, incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by Innophos Holdings, Inc. on June 6, 2017
10.27+*		Change in Control Agreement, dated April 26, 2017, by and between Innophos Holdings, Inc. and Mark Santangelo
10.28		Credit Agreement, dated December 22, 2016, between the Company and a group of Lenders, including Wells Fargo Bank, National Association, as administrative agent, incorporated by reference to exhibit 10.1 of the Current Report on Form 8-K filed by Innophos Holdings, Inc. on December 22, 2016
21.1*		Subsidiaries of Registrant
23.1*		Consent of PricewaterhouseCoopers LLP
31.1*		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**		Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

Pursuant to rules of the Securities and Exchange Commission, agreements and instruments evidencing the rights of holders of debt whose total amount does not exceed 10% of the total assets of the registrant and its subsidiaries on a consolidated basis are not being filed as exhibits to this report. The registrant has agreed to furnish a copy of such agreements and instruments to the Commission upon its request.

* Filed herewith.

** Furnished herewith.

+ Management contract or compensatory plan or arrangement.

Page 89 of 89

Exhibit 10.18

INNOPHOS, INC.

RETIREMENT SAVINGS RESTORATION PLAN

Active 39171720.2 1

INNOPHOS, INC.

RETIREMENT SAVINGS RESTORATION PLAN



	Table of Contents
		Page
Article 1 - Definitions		1
1.1	Account.	1
1.2	Administrator.	1
1.3	Board.	1
1.4	Change-in-Control.	1
1.5	Code.	2
1.6	Compensation.	2
1.7	Disability.	3
1.8	Effective Date.	3
1.9	Eligible Employee.	4
1.1	Employee.	4
1.11	Employer.	4
1.12	Employer Annual Retirement Contribution.	4
1.13	Employer Discretionary Contribution.	4
1.14	Employer Restoration Matching Contribution.	4
1.15	ERISA.	4
1.16	Investment Fund.	4
1.17	Parent.	4
1.18	Participant.	4
1.19	Plan Year.	4
1.20	Retirement.	4
1.21	Separation from Service.	5
1.22	Service Recipient.	5
1.23	Trust.	5
1.24	Trustee.	5
1.25	Years of Service.	5
Article 2 - Participation		5
2.1	Commencement of Participation.	5
2.2	Loss of Eligible Employee Status.	5
Article 3 - Contributions		5
3.1	Employer Restoration Matching Contribution.	5
3.2	Employer Annual Retirement Contribution.	6
3.3	Employer Discretionary Contributions.	6
3.4	Crediting of Contributions.	6
3.5	Distribution Elections.	6
Article 4 - Vesting		7
4.1	Vesting of Employer Restoration Matching Contributions.	7
4.2	Vesting of Employer Annual Retirement Contributions.	7

Active 39171720.2 2



4.3	Vesting of Employer Discretionary Contributions.	7
4.4	Vesting in Event of Retirement, Disability, Death or Change-in-Control.	7
4.5	Amounts Not Vested.	7
4.6	Forfeitures.	8
Article 5 - Accounts		8
5.1	Accounts.	8
5.2	Investments, Gains and Losses.	8
Article 6 - Distributions		9
6.1	Distributions Upon Separation from Service other than Disability or Death.	9
6.2	Substantially Equal Annual Installments.	9
6.3	Distributions upon Separation from Service due to Disability.	9
6.4	Distributions upon Death.	9
6.5	Changes to Distribution Elections.	9
6.6	Unforeseeable Emergency.	10
Article 7 - Beneficiaries		10
7.1	Beneficiaries.	10
7.2	Lost Beneficiary.	10
Article 8 - Funding		11
8.1	Prohibition Against Funding.	11
8.2	Deposits in Trust.	11
Article 9 - Claims Administration		11
9.1	General.	11
9.2	Claims Procedure.	11
9.3	Right of Appeal.	12
9.4	Review of Appeal.	12
9.5	Designation.	12
Article 10 - General Provisions		12
10.1	Administrator.	12
10.2	No Assignment.	13
10.3	No Employment Rights.	13
10.4	Incompetence.	13
10.5	Identity.	14
10.6	Other Benefits.	14
10.7	Right of Setoff.	14
10.8	Expenses.	14
10.9	Insolvency.	14
10.1	Amendment or Modification.	14
10.11	Plan Suspension or Termination.	15
10.12	Construction.	15
10.13	Governing Law.	15
10.14	Severability.	16
10.15	Headings.	16

Active 39171720.2 3



10.16	Terms.	16
10.17	409A Compliance.	16
10.18	Payments Upon Income Inclusion Under 409A.	16

Active 39171720.2 4

INNOPHOS, INC.

RETIREMENT SAVINGS RESTORATION PLAN

Innophos, Inc., a Delaware corporation, (the “Employer”) hereby adopts this Innophos, Inc. Retirement Savings Restoration Plan (the “Plan”) for the benefit of a select group of management or highly compensated employees. This Plan is an unfunded arrangement and is intended to be exempt from the participation, vesting, funding, and fiduciary requirements set forth in Title I of the Employee Retirement Income Security Act of 1974, as amended. It is intended to comply with Internal Revenue Code Section 409A.

This Plan was originally effective January 1, 2006 and was amended and related effective January 1, 2019.

Active 39171720.2 5

Article 1 - Definitions


1.1	Account.

The bookkeeping account established for each Participant as provided in Section 5.1 hereof.


1.2	Administrator.

An administrative committee appointed by the Board of Directors. The term shall include members of the committee while acting in their capacities as such. The Administrator shall serve as the agent for the Employer with respect to the Trust.


1.3	Board.

The Board of Directors of Innophos, Inc.


1.4	Change-in-Control.

Provided that such definition shall be interpreted in a manner that is consistent with Code Section 409A and regulations thereunder, a “Change-in-Control” shall mean the first to occur of any of the following:

Change in Control means any of the following:


a)	the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation) in one or a series of related transactions, of all or substantially all the properties or assets of the Employer and its subsidiaries and controlled affiliated entities taken as a whole to any Person;


b)	the adoption of a plan relating to the liquidation or dissolution of the Employer;


c)	the consummation of any transaction (including without limitation, any merger or consolidation), the result of which is that any Person becomes the Beneficial Owner, directly or indirectly, of more than 50% of the aggregate voting power of all classes of voting stock of the Employer; or

the first day on which a majority of the members of the Board of Directors of the Employer (or any parent entity of Employer if that entity has equity securities registered under Section 12 of the Exchange Act or has filed and had become effective a registration statement under the Securities Act, notwithstanding that the undertaking of such entity to file reports under Section 15(d) of the Exchange Act may have been suspended) are not Continuing Directors.

For purposes of this definition only, the following additional terms have the respective meanings given to them: “ Securities Act ” means the U.S. Securities Act of 1933, as amended to date and all related regulations, and any successors; “ Exchange Act ” means the U.S. Securities Exchange Act of 1934, as amended to date and all related regulations, and any successors; “ Beneficial Owner ” has the meaning assigned to that term under Exchange Act Rules 13d-3 and 13d-5 without regard to any time limitation as concerns securities a person has a right to acquire; “ Person ” means that term is used in Section 13(d) of the Exchange Act; and “ Continuing Directors ” means directors of the Employer (or any parent entity of Employer if that entity has equity securities registered under Section 12 of the Exchange Act or has filed and had become effective a registration statement under the Securities Act, notwithstanding that the undertaking of such entity to file reports under Section 15(d) of the Exchange Act may have been suspended) at the date the Plan is adopted or who are nominated for election or elected to such Board with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election.


1.5	Code.

The Internal Revenue Code of 1986, as amended.


1.6	Compensation.

(a) For purposes of Section 3.1, Employer Restoration Matching Contribution, Compensation shall have the same meaning as set forth in the Innophos, Inc. 401(k) Plan (“Qualified Plan”) for purposes of determining safe harbor matching contributions under the Qualified Plan, but determined without regard to any limitations under Section 401(a)(17) of the Code.

(b) For purposes of Section 3.2, Employer Annual Retirement Contribution, Compensation shall have the same meaning as set forth in the Qualified Plan for purposes of determining the allocation of discretionary employer contributions, but determined without regard to any limitations under Section 401(a)(17) of the Code.


1.7	Disability.

A Participant shall be considered disabled if (a) the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (b) the Participant is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Participant’s Employer.


1.8	Effective Date.

January 1, 2006.


1.9	Eligible Employee.

An Employee shall be considered an Eligible Employee if such Employee is designated as an Eligible Employee by the Administrator. The designation of an Employee as an Eligible Employee in any year shall not confer upon such Employee any right to be designated as an Eligible Employee in any future Plan Year.


1.10	Employee.

Any person employed by the Employer or any of its parent or subsidiary corporations or controlled affiliated entities designated by the Employer.


1.11	Employer.

Innophos, Inc.


1.12	Employer Annual Retirement Contribution.

A contribution made by the Employer that is credited to a Participant’s Account in accordance with the terms of Section 3.2 hereof.


1.13	Employer Discretionary Contribution.

A discretionary contribution made by the Employer that is credited to a Participant’s Account in accordance with the terms of Section 3.3 hereof.


1.14	Employer Restoration Matching Contribution.

A contribution made by the Employer that is credited to a Participant’s Account in accordance with the terms of Section 3.1 hereof.


1.15	ERISA.

The Employee Retirement Income Security Act of 1974, as amended.


1.16	Investment Fund.

Each investment(s) which serves as a means to measure value, increases or decreases with respect to a Participant’s Accounts.


1.17	Parent.

Innophos Holdings, Inc., a Delaware corporation, including its successors and assignees.


1.18	Participant.

An Eligible Employee who is a Participant as provided in Article 2.


1.19	Plan Year.

Calendar year.


1.20	Retirement.

Retirement means a Participant has reached age sixty-five (65) and has a Separation from Service.


1.21	Separation from Service.

A separation from service with the Employer or Service Recipient within the meaning of Code Section 409A(a)(2)(A)(i) and regulation thereunder.


1.22	Service Recipient.

Provided such definition is in compliance with regulations promulgated under Code Section 409A, Service Recipient shall mean the person for whom the services are performed and with respect to whom the legally binding right to compensation arises, and all persons with whom such person would be considered a single employer under Code Section 414(b) (employees of controlled group of corporations), and all persons with whom such person would be considered a single employer under Code Section 414(c) (employees of partnerships, proprietorships, etc., under common control).


1.23	Trust.

The agreement between the Employer and the Trustee under which the assets of the Plan are held, administered and managed, which shall conform to the terms of Rev. Proc. 92-64.


1.24	Trustee.

Investors Bank and Trust Company or such other successor that shall become trustee pursuant to the terms of the Plan.


1.25	Years of Service.

A Participant’s “Years of Service” shall be measured by employment during a twelve (12) month period commencing with the Participant’s date of hire and anniversaries thereof.

Article 2 - Participation


2.1	Commencement of Participation.

Each Eligible Employee shall become a Participant on the date on which an Employer Restoration Matching Contribution, Employer Annual Retirement Contribution or an Employer Discretionary Contribution is first credited to his or her Account.


2.2	Loss of Eligible Employee Status.

A Participant who is no longer an Eligible Employee shall cease to be eligible for any employer contributions as of the end of the Plan Year in which such Participant is determined to no longer be an Eligible Employee. Amounts credited to the Account of a Participant who is no longer an Eligible Employee shall continue to be held, pursuant to the terms of the Plan and shall be distributed as provided in Article 6.

Article 3 - Contributions


3.1	Employer Restoration Matching Contribution.

The Employer shall also credit to the Account of each Participant who has contributed the lesser of 5% of Compensation or the Code Section 402(g) limit into the Qualified Plan for the applicable Plan Year, an Employer Restoration Matching Contribution in an amount equal to 5% of the Participant’s Compensation less the amount contributed to the Qualified Plan for the applicable Plan Year. A Participant must be employed by the Employer on the date the Employer Restoration Matching Contribution is credited to the Plan in order to be eligible for such Contribution for a given Plan Year.


3.2	Employer Annual Retirement Contribution.

The Employer may, in its discretion and subject to such limitations as the Employer may determine, make an Employer Annual Retirement Contribution to the Account of each Participants equal to a percentage of the Participant’s Compensation. The amount of the Employer Annual Retirement Contribution shall be determined by the Employer annually and communicated to the Participant(s). A Participant must be employed by the Employer on the date the Employer Annual Retirement Contribution is credited to the Plan in order to be eligible for the such Contribution for a given Plan Year


3.3	Employer Discretionary Contributions.

The Employer reserves the right to make discretionary contributions to some or all Participants’ Accounts in such amount and in such manner as may be determined by the Employer.


3.4	Crediting of Contributions.

(a) Employer Restoration Matching Contributions shall be credited to a Participant’s Account and transferred to the Trust as soon as administratively feasible after the end of the Plan Year, but no later than March 31 of the Plan Year following the Plan Year for which such Contribution is being credited.

(b) Employer Annual Retirement Contributions, if made, shall be credited to a Participant’s Account and transferred to the Trust as soon as administratively feasible after the end of the Plan Year, but no later than March 31 of the Plan Year following the Plan Year for which such Contribution is being credited.

(c) Employer Discretionary Contributions shall be credited to a Participant’s Account and transferred to the Trust at such time as the Employer shall determine.


3.5	Distribution Elections.

(a) At the time a Participant first becomes eligible to participate in the Plan, he or she must also elect the form of the distribution as provided in Section 6.1. A Distribution Election with respect to any Contributions that may be credited to the Plan must be submitted to the Administrator before the beginning of the calendar year during which the amount to be deferred will be earned and, subject to Section 6.5, once made shall be irrevocable for all contributions pursuant to the Plan.

(b) Notwithstanding the foregoing, in a year in which an Employee is first eligible to participate, and provided that such Employee is not eligible to participate in any other account balance arrangement subject to Code Section 409A, such Distribution Election shall be submitted within thirty (30) days after the date on which an Employee is first eligible to participate, with respect to any Contributions that may be credited during the remainder of the calendar year after such election is made.

Article 4 - Vesting


4.1	Vesting of Employer Restoration Matching Contributions.

Except as otherwise provided herein, a Participant shall have a vested right to the portion of his or her Account attributable to Employer Restoration Matching Contributions in accordance with the following schedule:

Completed Years of Service Vested Percentage

1 but fewer than 2 25%

2 but fewer than 3 50%

3 but fewer than 4 75%

4 or more 100%


4.2	Vesting of Employer Annual Retirement Contributions.

Except as otherwise provided herein, a Participant shall have a vested right to 100% of his or her Account attributable to Employer Annual Retirement Contributions after three (3) Years of Service.


4.3	Vesting of Employer Discretionary Contributions.

A Participant shall have a vested right to the portion of his or her Account attributable to Employer Discretionary Contribution(s) and any earnings or losses on the investment of such Employer Discretionary Contribution(s) according to such vesting schedule as the Employer shall determine at the time an Employer Discretionary Contribution is made.


4.4	Vesting in Event of Retirement, Disability, Death or Change-in-Control.

(a) A Participant who incurs a Separation from Service due to Retirement shall be fully vested in the amounts credited to his or her Account as of the date of Retirement.

(b) A Participant who incurs a Separation from Service due to Disability shall be fully vested in the amounts credited to his or her Account as of the date of Disability.

(d) Upon a Change-in-Control, all Participants shall be fully vested in the amounts credited to their Accounts as of the date of the Change-in-Control.


4.5	Amounts Not Vested.

Any amounts credited to a Participant’s Account that are not vested at the time of his or her Separation from Service shall be forfeited.


4.6	Forfeitures.

Any forfeitures from a Participant’s Account shall continue to be held in the Trust, shall be separately invested and shall be used to reduce succeeding Employer Contributions until such forfeitures have been entirely so applied. If the Employer advises the Trustee that no further Employer Contributions will be made, then such forfeitures shall be returned to the Employer.

Article 5 - Accounts


5.1	Accounts.

The Employer shall establish an Account for each Participant that receives Employer Restoration Matching Contributions, Employer Annual Retirement Contributions, and Employer Discretionary Contributions, if any. Each Participant’s Account shall be credited with Employer Restoration Matching Contributions, Employer Annual Retirement Contributions, and Employer Discretionary Contributions, if any, and the Participant’s allocable share of any earnings or losses on the foregoing. Each Participant’s Account shall be reduced by any distributions made plus any federal and state tax withholding, and any social security withholding tax as may be required by law.


5.2	Investments, Gains and Losses.

(a) A Participant may direct that his or her Account established pursuant to Section 5.1 may be valued as if invested in one or more Investment Funds as selected by the Employer in multiples of one percent (1%). The Employer may from time to time, at the discretion of the Administrator, change the Investment Funds for purposes of this Plan.

(b) The Administrator shall adjust the amounts credited to each Participant’s Account to reflect Employer Restoration Matching Contributions, Employer Annual Retirement Contributions, Employer Discretionary Contributions, investment experience, distributions and any other appropriate adjustments. Such adjustments shall be made as frequently as is administratively feasible.

(c) A Participant may change his or her selection of Investment Funds no more than six (6) times each Plan Year with respect to his or her Account by filing a new election in accordance with procedures established by the Administrator. An election shall be effective as soon as administratively feasible following the date of the change as indicated by the Participant in a form prescribed by the Administrator.

(d) Notwithstanding the Participant’s ability to designate the Investment Fund according to which the Participant’s Account may be valued, the Employer shall have no obligation to invest any funds in accordance with the Participant’s election. Participants’ Accounts shall merely be bookkeeping entries on the Employer’s books, and no Participant shall obtain any property right or interest in any Investment Fund.

Article 6 - Distributions


6.1	Distributions Upon Separation from Service other than Disability or Death.

If the Participant has a Separation from Service, the Participant’s Account shall be distributed in the seventh calendar month following Participant’s Separation from Service. Distribution shall be made either in a lump-sum payment or in substantially equal annual installments, as defined in Section 6.2 below, over a period of three (3) years as elected by the Participant. If the Participant fails to properly designate the form of the distribution, the Account shall be paid in a lump-sum payment.


6.2	Substantially Equal Annual Installments.

The amount of the substantially equal payments shall be determined by multiplying the Participant’s Account by a fraction, the denominator of which in the first year of payment equals the number of years over which benefits are to be paid, and the numerator of which is one (1). The amounts of the payments for each succeeding year shall be determined by multiplying the Participant’s Account as of the applicable anniversary of the payout by a fraction, the denominator of which equals the number of remaining years over which benefits are to be paid, and the numerator of which is one (1). Installment payments made pursuant to this Section 6.2 shall be made on the applicable anniversaries of the date on which the Participant’s initial installment was payable.


6.3	Distributions upon Disability.

Upon a Participant’s Disability, all amounts credited to his or her Account shall be paid to the Participant in a lump sum, as soon as administratively feasible but no later than sixty (60) days following the date of Disability.


6.4	Distributions upon Death.

Upon the death of a Participant, all amounts credited to his or her Account shall be paid, as soon as administratively feasible but no later than sixty (60) days following his or her date of death, to his or her beneficiary or beneficiaries, as determined under Article 7 hereof, in a lump sum.


6.5	Changes to Distribution Elections.

A Participant will be permitted to elect to change the form or timing of the distribution of the balance of his or her Account to the extent permitted and in accordance with the requirements of Code Section 409A(a)(4)(C), including the requirement that (i) a redeferral election may not take effect until at least twelve (12) months after such election is filed with the Employer, (ii) an election to further defer a distribution (other than a distribution upon death, Disability or an unforeseeable emergency) must result in the first distribution subject to the election being made at least five (5) years after the previously elected date of distribution, and (iii) any redeferral election affecting a distribution at a fixed date must be filed with the Employer at least twelve (12) months before the first scheduled payment under the previous fixed date distribution election. Once distributions commence, no such changes to distributions shall be permitted. For purposes of this Section 6.5, a series of installment payments paid from the Account shall be treated as a single payment.


6.6	Unforeseeable Emergency.

The Administrator may permit an early distribution of part or all of any vested amounts; provided, however, that such distribution shall be made only if the Administrator, in its sole discretion, determines that the Participant has experienced an Unforeseeable Emergency. An Unforeseeable Emergency is defined as a severe financial hardship resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Code Section 152(a)) of the Participant, loss of the Participant’s property due to casualty or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. If an Unforeseeable Emergency is determined to exist, a distribution may not exceed the amounts necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship).

Article 7 - Beneficiaries


7.1	Beneficiaries.

Each Participant may from time to time designate one or more persons (who may be any one or more members of such person’s family or other persons, administrators, trusts, foundations or other entities) as his or her beneficiary under the Plan. Such designation shall be made in a form prescribed by the Administrator. Each Participant may at any time and from time to time, change any previous beneficiary designation, without notice to or consent of any previously designated beneficiary, by amending his or her previous designation in a form prescribed by the Administrator. If the beneficiary does not survive the Participant (or is otherwise unavailable to receive payment) or if no beneficiary is validly designated, then the amounts payable under this Plan shall be paid to the Participant’s estate. If more than one person is the beneficiary of a deceased Participant, each such person shall receive a pro rata share of any death benefit payable unless otherwise designated in the applicable form. If a beneficiary who is receiving benefits dies, all benefits that were payable to such beneficiary shall then be payable to the estate of that beneficiary.


7.2	Lost Beneficiary.

All Participants and beneficiaries shall have the obligation to keep the Administrator informed of their current addresses until such time as all benefits due have been paid. If a Participant or beneficiary cannot be located by the Administrator exercising reasonable diligence under the circumstances, then, in its sole discretion, the Administrator may presume that the Participant or beneficiary is deceased for purposes of the Plan and all unpaid amounts (net of diligence expenses) owed to the Participant or beneficiary shall be paid accordingly or, if a beneficiary cannot be so located, then such amounts may be forfeited. Any such presumption of death shall be final, conclusive and binding on all parties.

Article 8 - Funding


8.1	Prohibition Against Funding.

Should any investment be acquired in connection with the liabilities assumed under this Plan, it is expressly understood and agreed that the Participants and beneficiaries shall not have any right with respect to, or claim against, such assets nor shall any such purchase be construed to create a trust of any kind or a fiduciary relationship between the Employer and the Participants, their beneficiaries or any other person. Any such assets shall be and remain a part of the general, unpledged, unrestricted assets of the Employer, subject to the claims of its general creditors. It is the express intention of the parties hereto that this arrangement shall be unfunded for tax purposes and for purposes of Title I of the ERISA. Each Participant and beneficiary shall be required to look to the provisions of this Plan and to the Employer itself for enforcement of any and all benefits due under this Plan, and to the extent any such person acquires a right to receive payment under this Plan, such right shall be no greater than the right of any unsecured general creditor of the Employer. The Employer or the Trust shall be designated the owner and beneficiary of any investment acquired in connection with its obligation under this Plan.


8.2	Deposits in Trust.

Notwithstanding Section 8.1, or any other provision of this Plan to the contrary, the Employer shall deposit into the Trust amounts arising from Employer Restoration Matching Contributions, Employer Annual Retirement Contributions, and any Employer Discretionary Contributions.

Article 9 - Claims Administration


9.1	General.

If a Participant, beneficiary or his or her representative is denied all or a portion of an expected Plan benefit for any reason and the Participant, beneficiary or his or her representative desires to dispute the decision of the Administrator, he or she must file a written notification of his or her claim with the Administrator.


9.2	Claims Procedure.

Upon receipt of any written claim for benefits, the Administrator shall be notified and shall give due consideration to the claim presented. If any Participant or beneficiary claims to be entitled to benefits under the Plan and the Administrator determines that the claim should be denied in whole or in part, the Administrator shall, in writing, notify such claimant within ninety (90) days of receipt of the claim that the claim has been denied. The Administrator may extend the period of time for making a determination with respect to any claim for a period of up to ninety (90) days, provided that the Administrator determines that such an extension is necessary because of special circumstances and notifies the claimant, prior to the expiration of the initial ninety (90) day period, of the circumstances requiring the extension of time and the date by which the Plan expects to render a decision. If the claim is denied to any extent by the Administrator, the Administrator shall furnish the claimant with a written notice setting forth:

(a) the specific reason or reasons for denial of the claim;

(b) a specific reference to the Plan provisions on which the denial is based;

(c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and

(d) an explanation of the provisions of this Article.


9.3	Right of Appeal.

A claimant who has a claim denied wholly or partially under Section 9.2 may appeal to the Administrator for reconsideration of that claim. A request for reconsideration under this Section must be filed by written notice within sixty (60) days after receipt by the claimant of the notice of denial under Section 9.2.


9.4	Review of Appeal.

Upon receipt of an appeal the Administrator shall promptly take action to give due consideration to the appeal. Such consideration may include a hearing of the parties involved, if the Administrator feels such a hearing is necessary. In preparing for this appeal the claimant shall be given the right to review pertinent documents and the right to submit in writing a statement of issues and comments. After consideration of the merits of the appeal the Administrator shall issue a written decision which shall be binding on all parties. The decision shall specifically state its reasons and pertinent Plan provisions on which it relies. The Administrator’s decision shall be issued within sixty (60) days after the appeal is filed, except that the Administrator may extend the period of time for making a determination with respect to any claim for a period of up to sixty (60) days, provided that the Administrator determines that such an extension is necessary because of special circumstances and notifies the claimant, prior to the expiration of the initial sixty (60) day period, of the circumstances requiring the extension of time and the date by which the Plan expects to render a decision.


9.5	Designation.

The Administrator may designate any other person of its choosing to make any determination otherwise required under this Article. Any person so designated shall have the same authority and discretion granted to the Administrator hereunder.

Article 10 - General Provisions


10.1	Administrator.

(a) The Administrator is expressly empowered to limit the amount of Compensation that may be deferred; to deposit amounts into the Trust in accordance with Section 8.2 hereof; to interpret the Plan, and to determine all questions arising in the administration, interpretation and application of the Plan; to employ actuaries, accountants, counsel, and other persons it deems necessary in connection with the administration of the Plan; to obtain any information from the Employer it reasonably deems necessary to determine whether the Employer would be considered insolvent or subject to a proceeding in bankruptcy; and to take all other necessary and proper actions to fulfill its duties as Administrator.

(b) The Administrator shall not be liable for any actions by it hereunder, unless due to its own gross negligence, willful misconduct or lack of good faith.

(c) The Administrator shall be indemnified and saved harmless by the Employer from and against all personal liability to which it may be subject by reason of any act done or omitted to be done in its official capacity as Administrator in good faith in the administration of the Plan and Trust, including all expenses reasonably incurred in its defense in the event the Employer fails to provide such defense upon the request of the Administrator. The Administrator is relieved of all responsibility in connection with its duties hereunder to the fullest extent permitted by law, short of breach of duty to the beneficiaries.


10.2	No Assignment.

Benefits or payments under this Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or the Participant’s beneficiary, whether voluntary or involuntary, and any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber, attach or garnish the same shall not be valid, nor shall any such benefit or payment be in any way liable for or subject to the debts, contracts, liabilities, engagement or torts of any Participant or beneficiary, or any other person entitled to such benefit or payment pursuant to the terms of this Plan, except to such extent as may be required by law. If any Participant or beneficiary or any other person entitled to a benefit or payment pursuant to the terms of this Plan becomes bankrupt or attempts to anticipate, alienate, sell, transfer, assign, pledge, encumber, attach or garnish any benefit or payment under this Plan, in whole or in part, or if any attempt is made to subject any such benefit or payment, in whole or in part, to the debts, contracts, liabilities, engagements or torts of the Participant or beneficiary or any other person entitled to any such benefit or payment pursuant to the terms of this Plan, then such benefit or payment, in the discretion of the Administrator, shall cease and terminate with respect to such Participant or beneficiary, or any other such person.


10.3	No Employment Rights.

Participation in this Plan shall not be construed to confer upon any Participant the legal right to be retained in the employ of the Employer, or give a Participant or beneficiary, or any other person, any right to any payment whatsoever, except to the extent of the benefits provided for hereunder. Each Participant shall remain subject to discharge to the same extent as if this Plan had never been adopted.


10.4	Incompetence.

If the Administrator determines that any person to whom a benefit is payable under this Plan is incompetent by reason of physical or mental disability, the Administrator shall have the power to cause the payments becoming due to such person to be made to another for his or her benefit without responsibility of the Administrator or the Employer to see to the application of such payments. Any payment made pursuant to such power shall, as to such payment, operate as a complete discharge of the Employer, the Administrator and the Trustee.


10.5	Identity.

If, at any time, any doubt exists as to the identity of any person entitled to any payment hereunder or the amount or time of such payment, the Administrator shall be entitled to hold such sum until such identity or amount or time is determined or until an order of a court of competent jurisdiction is obtained. The Administrator shall also be entitled to pay such sum into court in accordance with the appropriate rules of law. Any expenses incurred by the Employer, Administrator, and Trust incident to such proceeding or litigation shall be charged against the Account of the affected Participant.


10.6	Other Benefits.

The benefits of each Participant or beneficiary hereunder shall be in addition to any benefits paid or payable to or on account of the Participant or beneficiary under any other pension, disability, annuity or retirement plan or policy whatsoever.


10.7	Right of Setoff.

The Employer may, to the extent permitted by applicable law, deduct from and setoff against any amounts payable to a Participant from this Plan such amounts as may be owed by a Participant to the Employer, although the Participant shall remain liable for any part of the Participant’s payment obligation not satisfied through such deduction and setoff; provided, however, that this setoff may occur only at the date on which the amount would otherwise be distributed to the Participant as required by Code Section 409A. By electing to participate in the Plan and deferring compensation hereunder, the Participant agrees to any deduction or setoff under this Section 10.7.


10.8	Expenses.

All expenses incurred in the administration of the Plan, whether incurred by the Employer or the Plan, shall be paid by the Employer.


10.9	Insolvency.

As of the date the Plan was adopted and this agreement entered into, the Employer represents that it is not Insolvent (as defined in the Trust). Should the Employer become Insolvent, the Employer, through its Board and chief executive or chief financial officer, shall give immediate written notice of such to the Administrator and the Trustee. Upon receipt of such notice, the Administrator or Trustee shall cease to make any payments to Participants or their beneficiaries and shall hold any and all assets attributable to the Employer for the benefit of the general creditors of the Employer.


10.10	Amendment or Modification.

The Employer may, at any time, in its sole discretion, amend or modify the Plan in whole or in part, except that no such amendment or modification shall have any retroactive effect to reduce any amounts allocated to a Participant’s Accounts, and provided that such amendment or modification complies with Codes Section 409A and related regulations thereunder.


10.11	Plan Suspension or Termination.

The Employer further reserves the right to suspend or terminate the Plan in whole or in part, in the following manner, except that no such suspension or termination shall have any retroactive effect to reduce any amounts allocated to a Participant’s Accounts, and provided that such suspension or termination complies with Codes Section 409A and related regulations thereunder:

(a) The Employer, in its sole discretion, may terminate the Plan provided that the distribution of the amounts credited to all vested Participant’s Accounts shall not be accelerated but shall be paid at such time and in such manner as determined under the terms of the Plan immediately prior to termination as if the Plan had not been terminated;

(b) The Employer, in its sole discretion, may terminate the Plan and distribute all vested Participants’ Accounts no earlier than twelve (12) calendar months from the date of the Plan termination and no later than twenty-four (24) calendar months from the date of the Plan termination, provided however that all other similar arrangements are also terminated by the Employer and no other similar arrangements are adopted by the Employer within a five year period from the date of termination;

(c) The Employer may decide, in its discretion, to terminate the Plan in the event of a Change-in-Control and distribute all vested Participants Account balances no later than twelve (12) months after the effective date of the Change-in-Control, provided however that the Employer terminates all other similar arrangements. Any corporation or other business organization that is a successor to the Employer by reason of a Change-in-Control shall have the right to become a party to the Plan by appropriate entity action. If within thirty (30) days from the effective date of the Change-in-Control such new entity does not become a party hereto, as above provided, the full amount of the Participant’s Account shall become immediately distributable to the Participant pursuant to this subsection; or,

(d) The Employer may decide, in its sole discretion, to terminate the Plan in the event of a corporate dissolution taxed under Code Section 331, or with the approval of a bankruptcy court, provided that the Participants’ vested Account balances are distributed to Participants and are included in the Participants’ gross income in the latest of: (i) the calendar year in which the termination occurs; (ii) the calendar year in which the amounts deferred are no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which payment is administratively practicable.


10.12	Construction.

All questions of interpretation, construction or application arising under or concerning the terms of this Plan shall be decided by the Administrator, in its sole and final discretion, whose decision shall be final, binding and conclusive upon all persons.


10.13	Governing Law.

This Plan shall be governed by, construed and administered in accordance with the applicable provisions of ERISA, Code Section 409A, and any other applicable federal law, provided, however, that to the extent not preempted by federal law this Plan shall be governed by, construed and administered under the laws of the State of New Jersey, other than its laws respecting choice of law.


10.14	Severability.

If any provision of this Plan is held invalid or unenforceable, its invalidity or unenforceability shall not affect any other provision of this Plan and this Plan shall be construed and enforced as if such provision had not been included therein. If the inclusion of any Employee (or Employees) as a Participant under this Plan would cause the Plan to fail to comply with the requirements of sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, or Code Section 409A, then the Plan shall be severed with respect to such Employee or Employees, who shall be considered to be participating in a separate arrangement.


10.15	Headings.

The Article headings contained herein are inserted only as a matter of convenience and for reference and in no way define, limit, enlarge or describe the scope or intent of this Plan nor in any way shall they affect this Plan or the construction of any provision thereof.


10.16	Terms.

Capitalized terms shall have meanings as defined herein. Singular nouns shall be read as plural, masculine pronouns shall be read as feminine, and vice versa, as appropriate.


10.17	409A Compliance.

It is intended that this Plan comply with Code Section 409A in accordance with Treasury Regulations 1.409A-1 et. seq. (and any subsequent IRS notices or guidance), and this Plan will be interpreted, administered and operated in good faith accordingly. In the event that any provision of this Plan is inconsistent with Code Section 409A or such guidance, then the applicable provisions of Code Section 409A shall supersede such provision. Nothing herein shall be construed as an entitlement to or guarantee of any particular tax treatment to a Participant.

Active 39171720.2 6


10.18	Payments Upon Income Inclusion Under 409A.

The Plan may permit acceleration of the time or schedule of a payment to a Participant to pay an amount the Participant includes in income as a result of the Plan failing to meet the requirements of Code Section 409A.

IN WITNESS WHEREOF, Innophos, Inc. has caused this instrument to be executed by its duly authorized officer, on this 1 ^st day of January, 2019.



	Innophos, Inc.

	By:/s/ Joshua Horenstein

	Title: SVP


ATTEST:

By:/s/ Michael Lestino

Title: Assistant General Counsel

Active 39171720.2 7

Exhibit 10.19

Management Incentive Plan

Innophos, Inc.

Effective 1/1/2018

Purpose

The Management Incentive Plan (the “Plan”) is designed to promote the interests of Innophos, Inc. and certain of its corporate affiliates (collectively, the “Corporation”) by providing senior executives, managers and other key employees with incentives and rewards commensurate with the achievement of the business and their personal achievement of business objectives.

Participation and Eligibility

All U.S. employees of the Corporation who have exempt status under the Fair Labor Standards Act will be eligible to participant in the Plan unless otherwise determine by the Administrator (as defined below). Non-U.S. employees may be eligible to participate on such terms and conditions as the Administrator may determine. Employees selected for participation in the Plan will be assigned a target level of bonus as a percentage of base salary. Employees who are not exempt from the application of the Fair Labor Standards Act will not be eligible to participate in this Plan.

Administration

The Administrator for purposes of this Plan means:

•

with respect to officers subject to Section 16 of the Securities Exchange Act of 1934, the Compensation Committee of the Board of Directors of Innophos Holdings, Inc. (the “Compensation Committee”); provided, however, that, (i) with respect to bonuses payable to the officers other than the CEO, the Compensation Committee will approve the individual performance factors that have initially been set or evaluated by the CEO, and (ii) with respect to amounts payable to the CEO, the process for approval of any bonus will be made in accordance with the Compensation Committee charter and other applicable governing corporate governance procedures as such may be in effect from time to time; or


•	with respect to all other exempt employees of the Corporation, the CEO or her delegate.

Notwithstanding the forgoing, for each participant in the Plan, the Compensation Committee will set the common performance factor based on financial performance of the Company for each fiscal year.

Guidelines for Changes

Changes to the goals established pursuant to this Plan or the terms under which an individual employee participates in this Plan may be made by approval of the Administrator. Participants who join the plan after the beginning of the year will only be eligible for a prorated award based on the portion of the plan year during which they were employed, unless otherwise determined by the Administrator.

Base Salary and Payment

The annual base salary in effect on December 31 of the applicable fiscal year is to be used for calculating bonuses. Bonuses will be paid annually upon review of the audited financial results and determination of bonus payout levels. The Administrator has the discretion to make bonus payments pursuant to, but subject to the annual limitations of, the Plan or portions thereof more frequently than annually. All bonuses are subject to withholding taxes in accordance with the requirements of the relevant taxing authorities.

Basis of the Formula

The Administrator shall designate the performance goal(s) to be attained for each fiscal year based on one or more performance measures, and the payout schedule detailing the total amount which may be available for payout to each participant based upon the relative level of attainment of the performance goal(s). The Administrator may establish performance goals by reference to any financial or operational metrics it shall determine in its discretion, which may be expressed with respect to the Corporation or one or more parents, affiliates, operating units or groups, as the Administrator may determine.

In addition to company-wide performance goals, participants in the Plan will also have personal performance goals, including a safety goal, established for a particular plan year, and progress towards those performance goals, as determined by the Administrator, may determine a portion of a participant’s Bonus.

Unless the Compensation Committee expressly determines otherwise, each member of the Executive Team (the CEO and those officers elected by the Board of Directors or appointed by the CEO) will have a common performance factor based on financial performance of the Company that will determine 70% of the individual’s bonus payout, and the remaining 30% of the bonus payout will be based on the individual’s personal performance factor determined based on performance against goals set for that individual. For all participants other than the Executive Team, unless the Administrator provides otherwise, the common performance factor will determine 50% of the

individual’s bonus payout, and the remaining 50% of the bonus payout will be based on the individual’s personal performance factor. If the threshold level of achievement for the common performance factor is not met for any plan year, no bonus will be payable under this Plan to any participant.

Determination of Results

As soon as reasonably practicable after the audit of the annual financial statements has been completed and accepted by the Board of Directors for a fiscal year, but in no event later than the end of the next fiscal year, the Administrator will determine (i) whether and to what extent the performance goal(s) for the fiscal year were satisfied, and (ii) the amount available for each Participant’s Bonus for such fiscal year based upon the payout schedule established under the Plan for such Participant for the fiscal year. Awards determined to be payable in the sole discretion of the Administrator will be paid as soon as administratively feasible following the completion of the audit for the relevant fiscal year, but in no event later than the last day of the following fiscal year. Notwithstanding anything herein to the contrary, the Administrator retains the discretion to determine whether and how much bonus will be paid to any participant, and may decide in its discretion to pay no bonus to a participant even if the relevant performance measures are met.

Plan Administration and Related Matters


1.	TERMINATION OF EMPLOYMENT

Except as otherwise provided in a binding employment or severance agreement between the Corporation any participant (an “Employment Agreement”) or by the Administrator, the following provisions shall apply:

•

If a participant ceases his or her employment with the Corporation at any time prior to the distribution of the awards, the employee forfeits any award under the Plan, unless the employee terminates due to retirement, death or disability. To qualify for bonus payment after retirement, the participant must reach age 65 or age 55 with at least 15 years of company service and give formal written notification of his or her voluntary departure no less than ninety (90) days prior to his or her last day worked. In cases where the bonus payment is deemed payable after termination, payment will be pro-rata for the time actually worked during the plan year.


•	Participants who are on extended disability leave or on an approved leave of absence during the year will receive prorated awards based upon the time actually worked during the plan year. Disability pay and benefits are not bonus eligible compensation.


•	Except as expressly provided above, if a participant leaves the Corporation due to voluntary or involuntary termination, whether with or without cause, he or she will not be eligible for any bonus payment under this Plan.


2.	FUNDING

No funds need be set aside or reserved for payment of any Participant under the Plan, and any obligation by the Corporation to a Participant under the Plan shall be unfunded and shall be paid from the general assets and general funds of the Corporation.


3.	NO RIGHT TO CONTINUED PARTICIPATION OR EMPLOYMENT

Except as otherwise provided in an Employment Agreement, participation in the Plan by an employee in any plan year shall not be held or construed to confer upon the employee the right to participate in the Plan in any subsequent fiscal year or period. Neither the establishment of the Plan, the participation by an employee in the Plan nor the payment of any award hereunder or any other action pursuant to the Plan shall be held or construed to confer upon any Participant the right to continue in the employ of the Corporation or affect any right which the Corporation may have to terminate at will the employment of any such Participant.


4.	CLAWBACK POLICY; SECTION 409A

Payments under the Plan are subject to the Company’s clawback policies or procedures, as such policies and procedures may be in effect from time to time. Payments under the Plan are intended to be exempt from or compliant with Section 409A of the Internal Revenue Code, as amended, and the Plan shall be construed and interpreted accordingly.


5.	RELATIONSHIP TO OTHER PLANS AND ARRANGEMENTS

Participation and payments under the Plan shall not affect or be affected by participation or payments under any other plan of the Corporation, except as otherwise specifically provided by the Corporation. Nothing in this Plan is intended to override or curtail an individual’s rights pursuant to an Employment Agreement. This Plan shall not be deemed an exclusive method of providing incentive compensation for employees of the Corporation, nor shall it preclude the Corporation from authorizing or approving other forms of incentive compensation. The Corporation may grant bonuses to persons outside the United States under such terms and conditions as may, in the judgment of the Administrator, be necessary or advisable to comply with the laws of the applicable foreign jurisdictions and, to that end, may establish sub-plans, modified vesting, exercise or settlement procedures and other terms and procedures.


6.	NON-TRANSFERABILITY OF FUNDS

No amount payable at any time under the Plan shall be subject to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge, or encumbrance of any kind. Nor shall it in any manner be subject to the debts or liabilities of any person. Any attempt to so alienate or subject any such amount shall be void.


7.	AMENDMENT OF THE PLAN

Subject to the provisions of any Employment Agreement, the Administrator may amend or terminate the Plan at any time for any reason, and such amendment may be applicable to any fiscal

year for which bonuses have not yet been paid, whether such amendment is adopted before or after the end of the applicable fiscal year.


8.	EFFECTIVE DATE

The Plan evidenced by this document shall be effective as of January 1, 2018, and shall continue in effect until terminated or modified.

Exhibit 10.21

INDEMNIFICATION AGREEMENT

This Indemnification Agreement ("Agreement") is made as of ________ __, ____ by and between Innophos Holdings, Inc., a Delaware corporation (the "Company"), and the undersigned individual ("Indemnitee"). This Agreement supersedes and replaces any and all previous Agreements between the Company and Indemnitee covering the subject matter of this Agreement.

RECITALS

WHEREAS, the Board of Directors of the Company (the "Board") believes that highly competent persons have become more reluctant to serve publicly-held corporations as directors and/or officers or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;

WHEREAS, the Board has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, directors, officers, and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself. The Second Amended and Restated Certificate of Incorporation of the Company (the "Certificate of Incorporation") requires indemnification of the officers and directors of the Company. Indemnitee may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware (the "DGCL"). The Certificate of Incorporation and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the board of directors, officers and other persons with respect to indemnification;

WHEREAS, the uncertainties relating to such insurance and to indemnification may increase the difficulty of attracting and retaining such persons;

WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company and its stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;

WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified;

RLF1 19400693v.1

WHEREAS, this Agreement is a supplement to and in furtherance of the Certificate of Incorporation and any resolutions adopted pursuant thereto, as well as any rights of Indemnitees under any directors’ and officers’ liability insurance policy, and this Agreement shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and

WHEREAS, Indemnitee does not regard the protection available under the Certificate of Incorporation and insurance as adequate in the present circumstances, and may not be willing to serve or continue to serve as an officer or director without adequate protection, and the Company desires Indemnitee to serve or continue to serve in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that Indemnitee be so indemnified.

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

Section 1. Services to the Company. Indemnitee agrees to serve as a director and/or officer of the Company and/or an affiliate of the Company. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to continue Indemnitee in such position. This Agreement shall not be deemed an employment contract between the Company (or any of its subsidiaries or any Enterprise) and Indemnitee. Indemnitee specifically acknowledges that Indemnitee's employment with the Company (or any of its subsidiaries or any Enterprise), if any, is at will, and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment contract between Indemnitee and the Company (or any of its subsidiaries or any Enterprise), other applicable formal severance policies duly adopted by the Board, or, with respect to service as a director or officer of the Company, by the Certificate of Incorporation, the bylaws of the Company (the “Bylaws”), and the DGCL. The foregoing notwithstanding, this Agreement shall continue in force after Indemnitee has ceased to serve as an officer and/or director of the Company or any affiliate of the Company, as provided in Section 16 hereof.

Section 2. Definitions. As used in this Agreement:

(a) References to "agent" shall mean any person who is or was a director, officer, or employee of the Company or a subsidiary of the Company or other person authorized by the Company to act for the Company, to include such person serving in such capacity as a director, officer, employee, fiduciary or other official of another corporation, partnership, limited liability company, joint venture, trust or other enterprise at the request of, for the convenience of, or to represent the interests of the Company or a subsidiary of the Company.

(b) A "Change in Control" shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:

i. Acquisition of Stock by Third Party. Any Person (as defined below) is or becomes the Beneficial Owner (as defined below), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company's then outstanding securities unless the change in relative Beneficial Ownership of the Company's

- 2 -

RLF1 19400693v.1

securities by any Person results solely from a reduction in the aggregate number of outstanding shares of securities entitled to vote generally in the election of directors;

ii. Change in Board of Directors. During any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in Sections 2(b)(i), 2(b)(iii) or 2(b)(iv)) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the members of the Board;

iii. Corporate Transactions. The effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the Surviving Entity) more than 50% of the combined voting power of the voting securities of the Surviving Entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing body of such Surviving Entity;

iv. Liquidation. The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; and

v. Other Events. There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act (as defined below), whether or not the Company is then subject to such reporting requirement.

For purposes of this Section 2(b), the following terms shall have the following meanings:

(A) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time.

(B) "Person" shall have the meaning as set forth in Sections 13(d) and 14(d) of the Exchange Act; provided, however, that Person shall exclude (i) the Company, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (iii) any entity owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

(C) "Beneficial Owner" shall have the meaning given to such term in Rule 13d-3 under the Exchange Act; provided, however, that Beneficial Owner shall exclude any Person otherwise becoming

- 3 -

RLF1 19400693v.1

a Beneficial Owner by reason of the stockholders of the Company approving a merger of the Company with another entity.

(d) "Surviving Entity" shall mean the surviving entity in a merger or consolidation or any entity that controls, directly or indirectly, such surviving entity.

(c) "Corporate Status" describes the status of a person who is or was a director, trustee, partner, managing member, officer, employee, agent or fiduciary of the Company or of any other corporation, limited liability company, partnership or joint venture, trust or other enterprise which such person is or was serving at the request of the Company.

(d) "Disinterested Director" shall mean a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(e) "Enterprise" shall mean the Company and any other corporation, limited liability company, partnership, joint venture, trust or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, trustee, partner, managing member, employee, agent or fiduciary.

(f) "Expenses" shall include all reasonable attorneys' fees, retainers, court costs, transcript costs, fees and other costs of experts and other professionals, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, ERISA excise taxes and penalties, and all other disbursements, obligations or expenses of the types customarily incurred in connection with, or as a result of, prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a deponent or witness in, or otherwise participating in, a Proceeding. Expenses also shall include (i) Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, (ii) expenses incurred in connection with recovery under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Indemnitee is ultimately determined to be entitled to such indemnification, advancement or Expenses or insurance recovery, as the case may be, and (iii) for purposes of Section 14(d) only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee's rights under this Agreement, the Certificate of Incorporation, the Bylaws or under any directors’ and officers’ liability insurance policies maintained by the Company, by litigation or otherwise. The parties agree that for the purposes of any advancement of Expenses for which Indemnitee has made written demand to the Company in accordance with this Agreement, all Expenses included in such demand that are certified by affidavit of Indemnitee's counsel as being reasonable in the good faith judgment of such counsel shall be presumed conclusively to be reasonable. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

(g) "Independent Counsel" shall mean a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the

- 4 -

RLF1 19400693v.1

Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee's rights under this Agreement. The Company agrees to pay the reasonable fees and expenses of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

(h) The term "Proceeding" shall include any threatened, pending or completed action, suit, claim, counterclaim, cross claim, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative, legislative, regulatory or investigative (formal or informal) nature, including any appeal therefrom, in which Indemnitee was, is or will be involved as a party, potential party, non-party witness or otherwise by reason of Indemnitee’s Corporate Status, by reason of any action taken by Indemnitee (or a failure to take action by Indemnitee) or of any action (or failure to act) on Indemnitee's part while acting pursuant to Indemnitee's Corporate Status, in each case whether or not serving in such capacity at the time any liability or Expense is incurred for which indemnification, reimbursement, or advancement of Expenses can be provided under this Agreement. If the Indemnitee believes in good faith that a given situation may lead to or culminate in the institution of a Proceeding, this shall be considered a Proceeding under this paragraph.

(i) Reference to "other enterprise" shall include employee benefit plans; references to "fines" shall include any excise tax assessed with respect to any employee benefit plan; references to "serving at the request of the Company" shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner Indemnitee reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Company" as referred to in this Agreement.

Section 3. Indemnity in Third-Party Proceedings. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses, judgments, fines and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines and amounts paid in settlement) actually and reasonably incurred by Indemnitee or on Indemnitee's behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal Proceeding had no reasonable cause to believe that Indemnitee's conduct was unlawful. The parties hereto intend that this Agreement shall provide to the fullest extent permitted by law for indemnification in excess of that expressly permitted by statute, including, without limitation, any indemnification provided by the Certificate of Incorporation, the Bylaws, vote of the Company’s stockholders or disinterested directors or applicable law.

- 5 -

RLF1 19400693v.1

Section 4. Indemnity in Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 4 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee's behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. No indemnification for Expenses shall be made under this Section 4 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company, unless and only to the extent that the Delaware Court (as hereinafter defined) or any court in which the Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification.

Section 5. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provisions of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by or on behalf of Indemnitee in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee's behalf in connection with or related to each successfully resolved claim, issue or matter to the fullest extent permitted by law. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

Section 6. Indemnification For Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is, by reason of Indemnitee's Corporate Status, a witness, is or was made (or asked) to respond to discovery requests in any Proceeding, or otherwise asked to participate in any Proceeding to which Indemnitee is not a party, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee's behalf in connection therewith.

Section 7. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

Section 8. Additional Indemnification.

(a) Notwithstanding any limitation in Sections 3, 4, or 5, the Company shall indemnify Indemnitee to the fullest extent permitted by applicable law if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) by reason of Indemnitee's Corporate Status.

- 6 -

RLF1 19400693v.1

(b) For purposes of Section 8(a), the meaning of the phrase "to the fullest extent permitted by applicable law" shall include, but not be limited to:

i. to the fullest extent permitted by the provision of the DGCL that authorizes or contemplates additional indemnification by agreement, or the corresponding provision of any amendment to or replacement of the DGCL, and

ii. to the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors.

Section 9. Exclusions. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnification payment in connection with any claim involving Indemnitee:

(a) for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision; or

(b) for (i) an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act (as defined in Section 2(b) hereof) or similar provisions of state statutory law or common law, (ii) any reimbursement of the Company by the Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act) or (iii) any reimbursement of the Company by Indemnitee of any compensation pursuant to any compensation recoupment or clawback policy adopted by the Board or the compensation committee of the Board, including but not limited to any such policy adopted to comply with stock exchange listing requirements implementing Section 10D of the Exchange Act; or

(c) except as provided in Section 14(d) of this Agreement, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation, (ii) such payment arises in connection with any mandatory counterclaim or cross claim brought or raised by Indemnitee in any Proceeding (or any part of any Proceeding), or (iii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.

Section 10. Advances of Expenses. Notwithstanding any provision of this Agreement to the contrary (other than Section 14(d)), the Company shall advance, to the extent not prohibited by law, the Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding (or any part of any Proceeding) not initiated by Indemnitee or any Proceeding initiated by Indemnitee with the prior approval of the Board as provided in Section 9(c), and such advancement shall be

- 7 -

RLF1 19400693v.1

made within thirty (30) days after the receipt by the Company of a statement or statements requesting such advances from time to time, whether prior to or after final disposition of any Proceeding. Advances shall be unsecured and interest free. Advances shall be made without regard to Indemnitee's ability to repay the Expenses and without regard to Indemnitee's ultimate entitlement to indemnification under the other provisions of this Agreement. In accordance with Section 14(d), advances shall include any and all reasonable Expenses incurred pursuing an action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. The Indemnitee shall qualify for advances upon the execution and delivery to the Company of this Agreement, which shall constitute an undertaking providing that the Indemnitee undertakes to repay the amounts advanced (without interest) by the Company pursuant to this Section 10, if and only to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company. No other form of undertaking shall be required other than the execution of this Agreement. This Section 10 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 9.

Section 11. Procedure for Notification and Defense of Claim.

(a) Indemnitee shall notify the Company in writing of any matter with respect to which Indemnitee intends to seek indemnification or advancement of Expenses hereunder as soon as reasonably practicable following the receipt by Indemnitee of written notice thereof. The written notification to the Company shall include a description of the nature of the Proceeding and the facts underlying the Proceeding. To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of such Proceeding. The omission by Indemnitee to notify the Company hereunder will not relieve the Company from any liability which it may have to Indemnitee hereunder or otherwise than under this Agreement, and any delay in so notifying the Company shall not constitute a waiver by Indemnitee of any rights under this Agreement. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification.

(b) The Company will be entitled to participate in the Proceeding at its own expense.

(c) The Company shall not settle any Proceeding (in whole or in part) if such settlement would impose any Expense, judgment, liability, fine, penalty or limitation on Indemnitee in respect of which Indemnitee is not entitled to be indemnified hereunder without Indemnitee’s prior written consent, which shall not be unreasonably withheld.

Section 12. Procedure Upon Application for Indemnification.

(a) Upon written request by Indemnitee for indemnification pursuant to Section 11(a), a determination, if required by applicable law, with respect to Indemnitee's entitlement thereto shall be made in the specific case: (i) if a Change in Control shall have occurred, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; or (ii) if a Change in Control shall not have occurred, (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (B) by a committee of Disinterested Directors

- 8 -

RLF1 19400693v.1

designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (C) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee or (D) if so directed by the Board, by the stockholders of the Company; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or Expenses (including attorneys' fees and disbursements) incurred by or on behalf of Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee's entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. The Company promptly will advise Indemnitee in writing with respect to any determination that Indemnitee is or is not entitled to indemnification, including a description of any reason or basis for which indemnification has been denied.

(b) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 12(a) hereof, the Independent Counsel shall be selected as provided in this Section 12(b). If a Change in Control shall not have occurred, the Independent Counsel shall be selected by the Board, and the Company shall give written notice to Indemnitee advising Indemnitee of the identity of the Independent Counsel so selected. If a Change in Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within ten (10) days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided , however , that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Section 2 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or the Delaware Court has determined that such objection is without merit. If, within twenty (20) days after the later of submission by Indemnitee of a written request for indemnification pursuant to Section 11(a) hereof and the final disposition of the Proceeding, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Delaware Court for resolution of any objection which shall have been made by the Company or Indemnitee to the other's selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by such court or by such other person as such court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 12(a) hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 14(a) of this Agreement, Independent Counsel shall be discharged and relieved

- 9 -

RLF1 19400693v.1

of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

(c) If the Company disputes a portion of the amounts for which indemnification is requested, the undisputed portion shall be paid and only the disputed portion withheld pending resolution of any such dispute.

Section 13. Presumptions and Effect of Certain Proceedings.

(a) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall, to the fullest extent not prohibited by law, presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 11(a) of this Agreement, and the Company shall, to the fullest extent not prohibited by law, have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Company (including by its directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(b) Subject to Section 14(e), if the person, persons or entity empowered or selected under Section 12 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall, to the fullest extent not prohibited by law, be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 13(b) shall not apply (i) if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 12(a) of this Agreement and if ( A) within fifteen (15) days after receipt by the Company of the request for such determination the Board has resolved to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within seventy-five (75) days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat, or (ii) if the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 12(a) of this Agreement.

- 10 -

RLF1 19400693v.1

(c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee's conduct was unlawful.

(d) For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee's action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the directors or officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser, financial advisor or other expert selected with reasonable care by or on behalf of the Enterprise. The provisions of this Section 13(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

(e) The knowledge and/or actions, or failure to act, of any director, officer, trustee, partner, managing member, fiduciary, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

Section 14. Remedies of Indemnitee.

(a) Subject to Section 14(e), in the event that (i) a determination is made pursuant to Section 12 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 10 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 12(a) of this Agreement within ninety (90) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 5, 6 or 7 or the second to last sentence of Section 12(a) of this Agreement within ten (10) days after receipt by the Company of a written request therefor, (v) payment of indemnification pursuant to Section 3, 4 or 8 of this Agreement is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, or (vi) the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or Proceeding designed to deny, or to recover from, the Indemnitee the benefits provided or intended to be provided to the Indemnitee hereunder, Indemnitee shall be entitled to an adjudication by a court of Indemnitee's entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at Indemnitee's option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 14(a). The Company shall not oppose Indemnitee's right to seek any such adjudication or award in arbitration.

- 11 -

RLF1 19400693v.1

(b) In the event that a determination shall have been made pursuant to Section 12(a) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 14 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 14 the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

(c) If a determination shall have been made pursuant to Section 12(a) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 14, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

(d) The Company shall, to the fullest extent not prohibited by law, be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 14 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. It is the intent of the Company that, to the fullest extent permitted by law, the Indemnitee not be required to incur legal fees or other Expenses associated with the interpretation, enforcement or defense of Indemnitee's rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Indemnitee hereunder. The Company shall, to the fullest extent permitted by law, indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefor) advance, to the extent not prohibited by law, such Expenses to Indemnitee, which are incurred by or on behalf of Indemnitee in connection with any action brought by Indemnitee for indemnification or advancement of Expenses from the Company under this Agreement or under any directors' and officers' liability insurance policies maintained by the Company if, in the case of indemnification, Indemnitee is wholly successful on the underlying claims; if Indemnitee is not wholly successful on the underlying claims, then such indemnification shall be only to the extent Indemnitee is successful on such underlying claims or otherwise as permitted by law, whichever is greater.

(e) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement of Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.

Section 15. Non-exclusivity; Survival of Rights; Insurance; Subrogation.

(a) The rights of indemnification and to receive advancement of Expenses as provided by this Agreement (i) shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise and (ii) shall be interpreted independently of, and without reference to, any other such rights to which Indemnitee may at any time be entitled. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken

- 12 -

RLF1 19400693v.1

or omitted by Indemnitee in Indemnitee's Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Certificate of Incorporation and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

(b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents of the Enterprise, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of such claim or of the commencement of a Proceeding, as the case may be, to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.

(c) In the event of any payment made by the Company under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

(d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder (or for which advancement is provided hereunder) if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

(e) The Company's obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, trustee, partner, managing member, fiduciary, employee or agent of any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of Expenses from such other corporation, limited liability company, partnership, joint venture, trust or other enterprise.

Section 16. Duration of Agreement. This Agreement shall continue until and terminate upon the later of: (a) ten (10) years after the date that Indemnitee shall have ceased to serve as a director and/or officer of the Company or an affiliate of the Company or (b) one (1) year after the final termination of any Proceeding then pending in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any proceeding (including any appeal thereof) commenced by Indemnitee pursuant to Section 14 of this Agreement relating thereto. The indemnification and advancement of expenses rights provided by or granted pursuant to this

- 13 -

RLF1 19400693v.1

Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent of the Company or of any other Enterprise, and shall inure to the benefit of Indemnitee and Indemnitee's spouse, assigns, heirs, devisees, executors and administrators and other legal representatives. The Company shall require and shall cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company to, by written agreement, expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

Section 17. Severability. Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

Section 18. Enforcement.

(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director or officer of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving or continuing to serve as a director or officer of the Company.

(b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided, however, that this Agreement is a supplement to and in furtherance of the Certificate of Incorporation, the Bylaws, any directors’ and officers’ insurance maintained by the Company and applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

Section 19. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver.

Section 20. Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to

- 14 -

RLF1 19400693v.1

indemnification or advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement or otherwise.

Section 21. Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, (b) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, (c) mailed by reputable overnight courier and receipted for by the party to whom said notice or other communication shall have been directed or (d) sent by facsimile transmission, with receipt of oral confirmation that such transmission has been received:

(a) If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide to the Company.

(b) If to the Company to:

259 Prospect Plains Road, Building A

Cranbury, NJ 08512

Attention: Legal Department

or to any other address as may have been furnished to Indemnitee by the Company.

Section 22. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

Section 23. Applicable Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 14(a) of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Court of Chancery of the State of Delaware (the "Delaware Court"), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, irrevocably RL&F Service Corp., 920 North King Street, 2 ^nd Floor, Wilmington, New Castle County, Delaware 19801 as its agent in the State of Delaware as such party's agent for acceptance of legal process in connection with any such action

- 15 -

RLF1 19400693v.1

or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

Section 24. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

Section 25. Miscellaneous. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. The headings of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.



INNOPHOS HOLDINGS, INC.	INDEMNITEE


By:
Name:	Name:
Office:	Address:

- 16 -

RLF1 19400693v.1

Exhibit 10.27

CHANGE IN CONTROL AGREEMENT

This CHANGE OF CONTROL AGREEMENT (the “Agreement”), dated April 26, 2017 (the “Effective Date”), by and between Innophos Holdings, Inc. , a Delaware corporation (the “Company”), and Mark Santangelo (the “Executive”).

RECITAL

Whereas, it is in the best interests of the Company and its subsidiaries to encourage Executive to continue the Executive’s career and services with the Company and its subsidiaries following a Change in Control (as defined herein).

AGREEMENT

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Executive and the Company agree as follows

1. Term . This Agreement is effective as of the Effective Date and shall expire on the earlier of (a) six months following the termination of Executive’s employment with the Company or (b) the first anniversary of a Change in Control, subject to the survival of certain provisions as provided in Paragraph 9(i). Executive's employment with the Company will begin on May 1, 2017. The Agreement supersedes any other oral or written agreement or understanding between the Company and the Executive as to the subject matter hereof.

2. Definitions .

(a) “ Cause ” means:

(i) other than by reason of a physical or mental incapacity, any continued and willful failure of the Executive at any time to attempt in good faith to perform the Executive’s duties with the Company, including a continued and willful failure by the Executive to attempt in good faith to meet reasonable, material performance expectations that are not measured by Company economic performance, which is not cured by the Executive within sixty (60) days after receiving notice from the Company identifying such deficiencies; or

(ii) the willful engaging by the Executive in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Company; or

(iii) conviction of the Executive of a felony (other than a traffic-related felony) or a guilty or nolo contendere plea by the Executive with respect thereto; or

(iv) a material breach by the Executive of any material provision of this Agreement; or

(v) a willful violation by the Executive of a material legal requirement, or of any material written Company policy or procedure, that in either case is materially and demonstrably injurious to the Company; or

(vi) the Executive’s failure to obtain or maintain, or inability to qualify for, any license (other than a driver’s license) required by law for the performance of the Executive’s material job responsibilities, or the suspension or revocation of any such license held by the Executive as a result of an action or inaction by the Executive; provided that, if such failure, suspension or revocation is curable, such failure should not constitute Cause unless the Executive does not cure the failure within a reasonable time (not less than sixty (60) days) after receiving notice of such deficiency, provided further, in no event shall Cause exist under this clause (vi) so long as the Executive is diligently pursuing a cure of such failure, suspension or revocation in good faith and the failure is cured within one hundred twenty (120) days after receiving such notice.

(b) “ Change in Control ” means the date on which the earliest of the following events occurs:

(i) any Person, as defined in this Paragraph 2(b), becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of 50% or more of (x) the then outstanding shares of common stock of the Company or (y) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the “Company Voting Stock”);

(ii) any Person becomes the beneficial owner of 50% or more of (x) the then outstanding shares of common stock of Innophos (as defined in this Paragraph 2(b)) or (y) the combined voting power of the then outstanding securities of Innophos entitled to vote generally in the election of directors;

(iii) the closing of a sale or other disposition (whether by merger, consolidation, reorganization or otherwise) of all or substantially all of the assets of the Company, or the Company adopts a plan of liquidation providing for the distribution of all or substantially all of its assets;

(iv) the Company combines with another entity (by merger or otherwise) but, immediately after the combination, the stockholders of the Company immediately prior to the combination hold, directly or indirectly, 50% or less of the Company Voting Stock, other ownership interests of the combined entity, and any parent entity owning 100% of the Company Voting Stock or other ownership interests of such combined entity (there being excluded from the number of shares or other ownership interests held by such stockholders, but not from the voting stock of the combined entity, any shares or other ownership interests received by affiliates of such other entity in exchange for stock or other ownership interests of such other entity); or

(v) the majority of the Board consists of individuals other than Incumbent Directors, which term means the members of the Board on the date of this Agreement; provided that any person becoming a director subsequent to such date whose

election or nomination for election was supported by two-thirds of the directors who then comprised the Incumbent Directors shall be considered to be an Incumbent Director;

(vi) Notwithstanding anything herein to the contrary, for purposes of this Agreement, a Change in Control shall not include any transaction, whether by bona fide public offering or private placement to institutional investors of any class or series of capital stock of the Company, determined by the Board to be effected for the purpose of equity financing, including the conversion of any debt securities of the Company into equity securities of the Company. The definition of a Change in Control under this Agreement is not intended to modify or otherwise affect the definition of such term or any similar term under any other plan or arrangement of the Company. For purposes of this Paragraph 2(b), a “Person” means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended, other than employee benefit plans sponsored or maintained by the Company and corporations controlled by the Company, and “Innophos” means Innophos, Inc., a Delaware corporation .

(d) “ Date of Termination .” Except as otherwise provided in Paragraph 8(a) hereof, “Date of Termination” means (i) if the Executive’s employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date, specified therein, that is within thirty (30) days of such notice, as the case may be, (ii) if the Executive’s employment is terminated by the Company without Cause, the Date of Termination shall be the date on which the Company notifies the Executive of such termination, or any later date, specified therein, as the case may be, (iii) if the Executive’s employment is terminated by reason of death or disability, the Date of Termination shall be the date of death of the Executive or the effective date of disability (as determined by the Company), as the case may be, and (iv) if the Executive’s employment is terminated by the Executive other than for Good Reason, the Date of Termination shall be the date of receipt of the Notice of Termination or any later date, specified therein, that is within thirty (30) days of such notice, subject to the Company’s acceptance of such proposed later Date of Termination.

(e) “ Good Reason ” means, in the absence of a written consent of the Executive:

(i) a material reduction in the Executive’s authority, title or duties, or the assignment to the Executive of duties that are inconsistent in a significant way with the Executive’s position; or

(ii) any reduction by the Company of the Executive’s annual base salary other than a good faith reduction, which is remedied by the Company within thirty (30) business days after receiving notice from the Executive; or

(iii) any reduction by the Company of the target percentage applicable to Executive’s annual short term bonus (provided that when such percentage is applied against the Executive’s base salary, the product shall be referenced herein as the “Target Bonus”).

(f) “ Non-Cause Termination ” means the Executive’s termination of employment as the result of a Company-initiated termination of employment without Cause or (ii) as the result of a resignation by the Executive for Good Reason.

(g) “ Notice of Termination .” Any termination by the Company with or without Cause, or by the Executive with or without Good Reason, shall be communicated by Notice of Termination to the other party in accordance with Paragraph 9(b) of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a notice which: (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (iii) if the Date of Termination is other than the date of receipt of such notice, specifies the termination date (which date shall within thirty (30) days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not constitute a waiver of any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

3. Change in Control Termination of Employment . All payments to which the Executive may become entitled under this Agreement are conditioned upon and subject to Executive’s compliance with the restrictive covenants set forth in this Agreement, and the execution and non-revocation of a release in a form reasonably and routinely provided by the Company at the time of Termination (the “Release”). The Executive shall have twenty-one (21) days to deliver an executed Release to the Company and seven (7) days to revoke the Release. Payments under Paragraph 3(a) of this Agreement, if any, shall commence or be made, as applicable, on the Company’s first regular payday next following the 60 ^th day after the Date of Termination. Payments under Paragraph 3(b) of this Agreement, if any, shall be made on the 30 ^th day next following the occurrence of a Change of Control (or, if such day is not a business day, on the next business day).

(a) If the Executive’s employment terminates pursuant to a Non-Cause Termination within twelve (12) months after a Change in Control, the Company shall pay to the Executive the annual base salary and annual short-term bonus amounts that the Executive would have earned (i) if the Executive had remained employed for twelve (12) months following the Date of Termination (such period or assumed continuing employment is hereinafter referred to as the “CIC Severance Period”), and (ii) if, for each calendar year or portion thereof within the Severance Period, the Executive had earned, based on the assumed attainment of all applicable performance goals for such year, an Annual Bonus in an amount equal to the Target Bonus in effect for her immediately prior to her Date of Termination, pro-rated for any period less than a full calendar year. The annual base salary payments to be made pursuant to the preceding sentence shall be paid in equal monthly installments, and each annual bonus amount payable pursuant to the preceding sentence shall be paid at the same time following the close of the calendar year to which it relates as it would have been paid pursuant to the Company’s policies and procedures if the Executive had remained employed at the close of such year.

(b) If the Executive’s employment terminates pursuant to a Non-Cause Termination during the six-month period preceding a Change in Control, the Executive shall be entitled to receive the excess of (i) the payments Executive would have received in accordance with Paragraph 3(a), assuming that the Executive’s employment with the Company had terminated immediately following the occurrence of the Change in Control over (ii) the actual amount, if any, paid to executive as severance (under any plan, program or arrangement pursuant to which the Executive may have received cash severance payments) following the Executive’s termination of employment, such excess amounts shall be paid to the Executive in a single cash lump sum.

(c) The Executive shall not be entitled to any payment under this Agreement following termination of Executive’s employment for any reason other than pursuant to a CIC Non-Cause Termination.

(d) Notwithstanding the foregoing provisions of this Paragraph 3, if the Executive is found to have breached the Executive’s obligations under Exhibit A, (i) the Executive shall no longer be entitled to, and the Company shall no longer be obligated to pay, any remaining unpaid portion of the amounts otherwise payable under this Paragraph 3 as of the date of such breach, and (ii) the Executive shall repay any portion of such amounts previously paid or provided to the Executive; provided, however, that Executive shall be entitled to retain the first $1,000 of any such amounts, which will be considered full and adequate consideration for the Executive’s general release. (For purposes of determining repayment of benefits, if any, the Executive shall repay the Company its costs incurred to provide such benefits.) Any disputes with respect to the application of this Paragraph 3(d) will be subject to Paragraph 5 hereof; provided that during the pendency of any such dispute, the Company will be entitled to withhold any payments pursuant to this Paragraph 3 so long as the Company believes, in good faith based on evidence in the possession of the Company, that it is reasonably likely to prevail in such dispute.

4. Non-exclusivity of Rights . Except as otherwise specifically provided in this Agreement, nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies for which the Executive may qualify, nor shall anything herein limit or otherwise negatively affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts that are vested benefits, consisting of any compensation previously deferred by the Executive, or that the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any other contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or other contract or agreement, except as explicitly modified by this Agreement.

5. Arbitration; No Set Off . Any controversy, dispute or claim arising out of or relating to this Agreement, the Executive’s employment with the Company, or the termination thereof (collectively, “Covered Claims”) shall be resolved by binding arbitration, to be held in Newark, New Jersey, before a panel of three arbitrators with expertise in employment and labor

matters, in accordance with the Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association (“AAA Employment Rules”). Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The Company shall promptly advance to the Executive (and her beneficiaries) any and all costs and expenses (including without limitation attorneys’ fees) incurred by the Executive (or any of her beneficiaries) in resolving any such Covered Claim; provided, however, that to the extent that the Executive’s claims/defenses do not prevail in such arbitration, then the panel, in its discretion, may determine that some or all of the amounts advanced by the Company shall be repaid by the Executive (or her beneficiaries) to the Company. Pending the resolution of any Covered Claim, the Executive (and his beneficiaries) shall continue to receive all payments and benefits due from the Company and its affiliated companies under this Agreement or otherwise. Except as provided below, the Company’s obligation to make or cause to be made the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company or any of its affiliated companies may have against the Executive or others.

6. Restrictive Covenants .

(a) The Executive acknowledges that the Executive’s employment as a senior vice president of the Company creates a relationship of confidence and trust between the Executive and the Company with respect to confidential and proprietary information applicable to the business of the Company and its clients. The Executive further acknowledges the competitive nature of the business of the Company. Accordingly, it is agreed that the restrictions contained in this Paragraph 6 are reasonable and necessary for the protection of the interests of the Company and that any violation of these restrictions could cause substantial and irreparable injury to the Company.

(b) The Executive and the Company agree that provisions of Exhibit A attached to this Agreement shall be made a part hereof as if set forth at length in the body of this Agreement.

7. Successors .

(a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive and the Executive’s legal representatives.

(b) No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company without the Executive’s prior written consent, except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which the Company is not the continuing entity, or a sale, liquidation or other disposition of all or substantially all of the assets of the Company, provided that the terms and conditions of Paragraph 7(c) below are satisfied. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and permitted assigns.

(c) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly, and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place, all within ten (10) days after the occurrence of the applicable event. As used in this Agreement, “Company” means the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

8. Section 409A Compliance . The parties intend that any severance or other compensation payable to the Executive under this Agreement be paid or provided in compliance with Section 409A of the Code and all regulations, guidance, and other interpretative authority issued thereunder (“Section 409A”) such that there will be no adverse tax consequences, interest, or penalties for the Executive under Section 409A as a result of the payments and benefits so paid or provided to him. The parties agree to modify this Agreement, or the timing (but not the amount) of the payment of the severance or other compensation, or both, to the extent necessary to comply with Section 409A. In addition, notwithstanding anything to the contrary contained in any other provision of this Agreement, the payments and benefits to be provided to the Executive under this Agreement shall be subject to the provisions set forth below.

(a) The date of the Executive’s “separation from service”, as defined in the regulations issued under Section 409A, shall be treated as the Executive’s Date of Termination for purpose of determining the time of payment of any amount that becomes payable to the Executive under this Agreement.

(b) In the case of any amounts that are payable to the Executive under this Agreement, or under any other “nonqualified deferred compensation plan” (within the meaning of Section 409A) maintained by the Company or any of its affiliated companies, in the form in the form of “a series of installment payments”, as defined in Treas. Reg. §1.409A-2(b)(2)(iii), (A) the Executive’s right to receive such payments shall be treated as a right to receive a series of separate payments under Treas. Reg. §1.409A-2(b)(2)(iii), and (B) to the extent any such plan does not already so provide, it is hereby amended to so provide, with respect to amounts payable to the Executive thereunder.

(c) If the Executive is a “specified employee” within the meaning of the Section 409A at the time of the Executive’s “separation from service” within the meaning of Section 409A, then any payment otherwise required to be made to the Executive under this Agreement on account of the Executive’s separation from service, to the extent such payment (after taking in to account all exclusions applicable to such payment under Section 409A) is properly treated as deferred compensation subject to Section 409A, shall not be made until the first business day after (i) the expiration of six months from the date of the Executive’s separation from service, or (ii) if earlier, the date of the Executive’s death (the “Delayed Payment Date”). On the Delayed Payment Date, there shall be paid to the Executive or, if the Executive has died, to the Executive’s estate, in a single cash lump sum, an amount equal to aggregate amount of the payments delayed pursuant to the preceding sentence, without interest.

(d) All expenses eligible for reimbursement hereunder shall be paid to the Executive promptly, but in any event by no later than December 31 of the calendar year following the calendar year in which such expenses were incurred. The expenses incurred by the Executive in any calendar year that are eligible for reimbursement under this Agreement shall not affect the expenses incurred by the Executive in any other calendar year that are eligible for reimbursement hereunder. The Executive’s right to receive any reimbursement hereunder shall not be subject to liquidation or exchange for any other benefit.

(e) If, as of the date on which, or by which, any payment required to be made to the Executive (or his estate) under this Agreement, calculation of the amount of such payment is not administratively practicable due to events beyond the control of the Executive (or his estate) then such payment shall be made to the Executive (or his estate) within ten (10) business days after, but in any event by no later than December 31 next following, the date on which calculation of the amount of such payment first becomes administratively practicable.

9. Miscellaneous .

(a) This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. The parties may exchange and agree on details concerning the provisions of this Agreement, and the conditions to which the rights and privileges under this Agreement are subject. No provision of this Agreement may be waived except by a written waiver explicitly identifying the provision and signed by the party making the waiver.

(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:



If to the Executive:	Mark Santangelo At the most recent address on file at the Company.
If to the Company:	Innophos Holdings, Inc. 259 Prospect Plains Road Cranbury, NJ 08512 Attn: Senior Vice President – Human Resources

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Any notice, request or other communication given in connection with this Agreement shall be in writing and shall be deemed to have been given (i) when personally delivered to the recipient (provided a written acknowledgment of receipt is obtained), (ii) three (3) business days after mailing by certified or registered mail, postage prepaid, return receipt requested or (iii) two business days after being sent by a nationally recognized overnight courier (provided that a written acknowledgment of receipt is obtained by the overnight courier), to the party concerned

at the address indicated above (or such other address as the recipient shall have specified by ten (10) days’ advance notice given in accordance with this Paragraph 9(b)).

(c) The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

(d) The Company shall withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

(e) The Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

(f) Definitions set forth in this Agreement and any terms of this Agreement which conflict with the provisions of any other policy, plan, contract, or other arrangement which applies to the Executive shall supersede and replace the conflicting provisions of such other policy, plan, contract or arrangement to the extent necessary to resolve the conflict.

(g) The interpretation and construction of this Agreement (including the Exhibits hereto) shall be governed by the internal laws of the State of New Jersey as a contract to be performed in such state and without regard to the conflict of law provisions thereof.

(h) Notwithstanding Paragraph 5 above, the Company may seek equitable relief in the event of a breach by the Executive of the covenants set forth in Exhibit A hereto. In that regard, the parties hereby consent to exclusive jurisdiction and agree that such proceeding will be conducted in the federal or state courts of the State of New Jersey sitting in and for the County of Middlesex or otherwise in such state and county wherein the headquarters of the Company is located at the time; provided such other location shall be in the United States of America. To effect the foregoing, the Executive hereby subjects himself to the in personam jurisdiction of such courts and waives all objections as to improper venue for such forum posited as provided in the preceding sentence.

(i) Except as otherwise expressly set forth in this Agreement, upon the expiration of the Term, the respective rights and obligations of the parties shall survive such expiration to the extent necessary to carry out the intentions of the parties as embodied in the rights and obligations of the parties under this Agreement. This Agreement shall continue in effect until there are no further rights or obligations of the parties outstanding hereunder and shall not be terminated by either party without the express prior written consent of both parties.

(j) The Company represents and warrants to the Executive that (i) the execution, delivery and performance of this Agreement by the Company has been fully and validly authorized by all necessary corporate action, (ii) the officer signing this Agreement on

behalf of the Company is duly authorized to do so, (iii) the execution, delivery and performance of this Agreement does not violate any applicable law, regulation, order, judgment or decree or any agreement, plan or corporate governance document to which the Company is a party or by which it is bound and (iv) upon execution and delivery of this Agreement by the Executive and the Company, it shall be a valid and binding obligation of the Company enforceable against it in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally.



MARK SANTANGELO	INNOPHOS HOLDINGS, INC.
Signed: /s/ Mark Santangelo	By: /s/ Jean Marie Mainente
Date: 4-26-17	Title: SVP, Chief Human Resources Officer
	Date: 4-26-17

EXHIBIT A

NONCOMPETITION AND NONSOLICITATION AGREEMENT

1. General.

The terms of this Noncompetition and Nonsolicitation Agreement are made part of the Change in Control Agreement to which it is an exhibit, and, except as expressly provided in this Noncompetition and Nonsolicitation Agreement, shall be of unlimited duration. For purposes of this Exhibit, the “Noncompete Period” means that period commencing on the Effective Date and ending twelve (12) months following the Executive’s termination of employment with the Company and its subsidiaries. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Change in Control Agreement to which this Exhibit is attached.

2. Confidential Information.

a. The Executive acknowledges that the information, observations and data, including trade secrets, obtained by the Executive during the period from the Effective Date until the Executive is no longer employed or retained by the Company or its controlled affiliates concerning their business and affairs (collectively, “Confidential Information”) are the property of those entities. Therefore, the Executive agrees that, except as required by law, court order, an arbitrator, a mediator or by other legal process, including, but not limited to, depositions, interrogatories, court testimony, arbitration, and the like, and except in connection with any litigation, arbitration or mediation involving the Agreement (including the Exhibits thereto), including the enforcement of the Agreement (including the Exhibits thereto), the Executive shall not at any time disclose to any unauthorized person or use for his own purposes any Confidential Information without the prior written consent of the Company’s Board of Directors (which may

delegate to an authorized officer authority to give such consent), unless and to the extent that: (i) the Confidential Information becomes generally known to and available for use by the public or generally known in the industry other than as a result of the Executive’s acts or omissions, (ii) the Executive discloses or uses such information in the performance of his duties as an employee and an officer of the Company (including services to its controlled affiliates) in the ordinary course of business, or (iii) the Executive discloses such information to third parties with whom the Company or its affiliates have entered into a non-disclosure agreement and such disclosure is made in the ordinary course performance of the Executive’s duties and responsibilities to the Company and its affiliates. The Executive shall deliver to the Company promptly following the termination of his employment, or at any other time the Company may reasonably request, all memoranda, notes, plans, records, reports, computer tapes, printouts and software and other documents and data (and copies thereof) embodying the Confidential Information or Work Product (as defined below) which the Executive may then possess or control, provided that the Executive may retain (i) papers and other materials of a personal nature, including, but not limited to, photographs, correspondence, personal diaries, calendars and rolodexes, personal files and phone books, (ii) information showing his compensation or relating to reimbursement of expenses, (iii) information that the Executive reasonably believes may be needed for tax purposes and (iv) copies of plans, programs and agreements relating to his employment, or termination thereof, with the Company. Notwithstanding the foregoing or anything in this Agreement to the contrary, Confidential Information or Work Product shall not include: any information in the Executive’s possession or known to the Executive prior to employment with the Company, including but not limited to information that is located on the Executive’s rolodex (whether paper or electronic), any information that is generally known in the industry or in the public domain, or any information that becomes generally known in the industry or in the public domain through no wrongful act on the Executive’s part, any information that during the term hereof is disclosed to Executive by a third party which, to the best of Executive’s knowledge, third party does not have an obligation to keep confidential and has not required Executive to keep confidential. Executive shall not be restricted from using or disclosing any general knowledge or know-how retained by Executive in his memory (and not in a tangible medium) relating to the chemicals industry in general and not applicable to phosphates or Company’s products and businesses specifically, provided that Executive satisfies his obligations provided in paragraphs 3-6 below.

b. The Executive represents and warrants to the Company that, to the best of his knowledge, the Executive has nothing that contains any material information which belongs to any former employer that the Executive is not entitled to have or use for the benefit of the Company and its controlled affiliates. If at any time the Executive discovers that the foregoing statement is incorrect in any material respect, the Executive shall promptly return any such materials to the Executive’s former employer or obtain any necessary consents. The Executive understands that Company does not want any such materials, and that the Executive will not be permitted to use or refer to any such materials in the performance of the Executive’s duties.

3. Intellectual Property, Inventions and Patents.

The Executive acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or not including any confidential information) and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) which (i) relate to the Company’s or any of its controlled affiliate’s actual or anticipated business, research and development or existing or future products or services and (ii) are conceived, developed or made by the Executive (whether individually or jointly with others) while employed by the Company or its affiliates or their predecessors in interest (collectively, “Work Product”), belong to the Company or such affiliate, as the case may be. The Executive shall disclose Work Product promptly to the Company or the applicable affiliate in the manner reasonably required under procedures established by those entities and, at the expense of the Company or applicable affiliate, as the case may be, perform all actions reasonably requested on behalf of any such entity (whether during or after any period of employment or engagement) to establish and confirm such ownership (including, without limitation, assignments, consents, powers of attorney and other instruments). The Employee acknowledges and agrees that the Company’s or applicable affiliate’s ownership of Work Product includes all future rights arising from the Work Product, which rights do not yet exist, as well as new uses, media, means and forms of exploitation throughout the universe exploiting current or future technology yet to be developed.

4. Non-competition and Non-solicitation.

a. Non-competition . The Executive acknowledges that, during the course of the Executive’s employment or similar engagement with the Company and its controlled affiliates (including their respective predecessors in interest), the Executive has or will become familiar with the trade secrets of, and other Confidential Information concerning, those entities and that the Executive’s services have been, and are reasonably expected to be, of special, unique and extraordinary value to the Company and its affiliates. As a result, the Executive agrees that, during the Noncompete Period, the Executive shall not directly or indirectly own any interest in, manage, control, participate in, be employed by, consult with, render services for, or in any manner engage in any Competing Business within any geographical area in which the Company or any of its controlled affiliates engage or have active plans at the Date of Termination to engage in such businesses. The Executive acknowledges and agrees that this restriction is without specific geographic limitation inasmuch as the Company and its affiliates conduct business on a nationwide and international basis, that its sales and marketing prospects are for continued expansion both nationally and internationally, that access to the Company’s Confidential Information would provide any national or international competitor with an unfair competitive advantage, and that, therefore, the restrictions set forth in this section are reasonable and properly required for the adequate protection of the legitimate interests of the Company. Nothing herein shall prohibit the Executive from owning beneficially not more than 2% of any class of outstanding equity securities or other comparable interests of any issuer that is publicly traded, so long as the Executive has no active participation in the business of such issuer. For purposes hereof, the term “Competing Business” means any business that is engaged in the production or sale of phosphates or other products that compete with the products produced, distributed or sold by the Company or its controlled affiliates (or are in the process of being

actively developed by such entities), provided that “Competing Business” shall only mean those businesses referenced above as of the Date of Termination for any period following the Date of Termination. This restriction shall not prevent the Executive from working for a subsidiary, division, venture or other business or functional service unit (collectively a “Unit”) of a Competing Business so long as (i) such Unit is not itself a Competing Business, (ii) the Executive does not manage or participate in business activities or projects of any Unit that is a Competing Business, and (iii) the Executive otherwise strictly complies with the restrictive covenants contained in this Exhibit.

b. Non-solicitation . During the Noncompete Period, the Executive shall not directly or indirectly through another person or entity: (i) induce or attempt to induce any executive or other key employee of the Company or any controlled affiliate to leave the employ of any of those entities, or in any way interfere with the relationship between the Company or any such affiliate and any such person; (ii) solicit any person who was an executive or other key employee of the Company or any controlled affiliate at any time within the one year period prior to an offer of employment to such person; or (iii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee or other business relation of the Company or any controlled affiliate to cease doing business with any Company-affiliated entity, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and Company affiliated entity. The following shall not be deemed a violation of this provision (a) providing customary business references for Company executives or other key employees at their request, (b) being involved in a general solicitation to the public of general advertising, or (c) if an entity with which the Executive is associated hires or engages any employee of the Company or any of its controlled affiliates, if the Executive was not, directly or indirectly, involved in hiring or identifying such person as a potential recruit or assisting in the recruitment of such employee. For purposes hereof, the Executive shall only be deemed to have been involved “indirectly” in soliciting, hiring or identifying an employee if the Executive (x) directs a third party to solicit or hire the Employee, (y) identifies an employee to a third party as a potential recruit or (z) aids, assists or participates with a third party in soliciting or hiring an employee.

5. Nature of Restrictive Covenants; Enforcement.

a. For purposes of enforcement, the restrictive covenants contained in this schedule are independent of any other provision of this Exhibit. As a result, the existence of any claim or right of set-off that the Executive may have or allege against the Company, whether based on this Exhibit or otherwise, shall not prevent the enforcement of the covenants or be deemed to mitigate any harm suffered by the Company.

b. Because the Executive’s services are unique (resulting in the Company’s need for the restrictions in this schedule) and because the Executive has access to Confidential Information, Work Product and other proprietary resources representing valuable assets of the Company, the parties agree that the Company and its affiliates might suffer irreparable harm from a breach or threatened breach by the Executive of the restrictions set forth in this Exhibit and that money damages would not be an adequate remedy for any such non-compliant conduct.

In the event of a breach or threatened breach of the restrictive covenants in this Exhibit, the Company (including its affected affiliates and their respective successors or assigns) in addition to other rights and remedies existing in their favor, shall be entitled to seek specific performance and/or injunctive or other equitable relief from a court of competent jurisdiction in order to enforce, or prevent any violations of, the provisions in this Exhibit (without posting a bond or other security, any requirement of which is waived by the Executive). In the event of any breach by the Executive of the restrictions set forth in this Exhibit, the Noncompete Period shall be tolled until such breach has been cured. If, at the time of enforcement, a court holds that restrictions contained in this Exhibit are unreasonable under circumstances then existing, the parties agree that the maximum period, scope or geographical area reasonable under such circumstances (or as otherwise allowed by governing law) are to be substituted for the stated period, scope or area provided in this Exhibit, and the restrictions are to be deemed reformed to that extent and shall be enforceable as so reformed to the fullest extent permitted by law to provide protection to the Company.

The Executive acknowledges and agrees that (i) the restrictions contained in this Exhibit are reasonable and will not subject him to undue hardship, (ii) the Executive has had the opportunity to review these restrictions and the other provisions of this Agreement with legal counsel and such other advisors as the Executive deems appropriate, (iii) the Executive has carefully read and fully understands all of the provisions of this Exhibit, and (iv) the Executive is voluntarily entering into the Employment Agreement containing this Exhibit without any reliance upon any representations or statement made by the Company with regard to the subject matter, basis or effect of this Exhibit, other than those in writing, including those contained in the Employment Agreement and this Exhibit.

6. Non-Disparagement.

Executive shall not at any time make any statement, written or otherwise, that disparages or criticizes the Company or any related party. The Company (which, for this purpose, shall be limited to members of the Company’s Board of Directors, and its Named Executive Officers) shall not at any time make any statement, written or otherwise, that disparages or criticizes Executive.

EXHIBIT 21.1



SUBSIDIARIES OF INNOPHOS HOLDINGS, INC.
Company	Ownership*	Jurisdiction
Innophos Investments Holdings, Inc.	Innophos Holdings, Inc.	Delaware
Innophos, Inc.	Innophos Investments Holdings, Inc.	Delaware
Woody IV, LLC	Innophos Investments Holdings, Inc.	Utah
Innophos Nutrition, Inc.	Innophos, Inc.	Delaware
Innophos (Gibraltar) Investments Holdings Limited	Innophos, Inc.	Gibraltar
Novel Ingredient Holdings, Inc.	Innophos, Inc.	Delaware
Novel Ingredient Investment Holdings, Inc.	Novel Ingredient Holdings, Inc.	Delaware
Novel Ingredient Services, LLC	Novel Ingredient Investment Holdings, Inc.	New Jersey
Advantra Z, Inc.	Novel Ingredient Investment Holdings, Inc.	New Jersey
NutraGenesis, LLC	Novel Ingredient Services, LLC	Vermont
Icon Group, LLC	Novel Ingredient Services, LLC	Vermont
Tradeworks Group Inc.	Novel Ingredient Services, LLC	Delaware
Innophos (Gibraltar) Investments Limited	Innophos (Gibraltar) Investments Holdings Limited	Gibraltar
Innophos Investments IV, LLC	Innophos (Gibraltar) Investments Limited	Delaware
Innophos (Gibraltar) Holdings Limited	Innophos, Inc.	Gibraltar
Innophos (Gibraltar) Limited	Innophos (Gibraltar) Holdings Limited	Gibraltar
Innophos Netherlands Investments Holdings C.V.	Innophos (Gibraltar) Holdings Limited	Netherlands
Innophos Investments III, LLC	Innophos Netherlands Investments Holdings C.V.	Delaware
Innophos Netherlands Holdings B.V.	Innophos Netherlands Investments Holdings C.V.	Netherlands
Innophos Brasil Importacão, Exportacão e Comercializacão de Produtos Quimicos Ltda	Innophos Netherlands Holdings B.V.	Brazil
Innophos, SRL	Innophos Netherlands Holdings B.V.	Argentina
Innophos Germany GmbH	Innophos Netherlands Holdings B.V.	Germany
Innophos Canada Holdings B.V.	Innophos Netherlands Holdings B.V.	Netherlands
Innophos Canada, Inc.	Innophos Canada Holdings B.V.	Ontario, Canada
Innophos (Hong Kong) Limited	Innophos Netherlands Holdings B.V.	Hong Kong (China)
Innophos (Taicang) Food Ingredients Manufacturing Co., Ltd.	Innophos (Hong Kong) Limited	China
Innophos (Taicang) Trading Co., Ltd.	Innophos (Hong Kong) Limited	China
Innophos International Holdings B.V.	Innophos Netherlands Holdings B.V.	Netherlands
Innophos Mexico Holdings, LLC	Innophos International Holdings B.V.	Delaware



SUBSIDIARIES OF INNOPHOS HOLDINGS, INC.
Company	Ownership*	Jurisdiction
Innophos Mexicana, S. de R.L. de C.V.	Innophos Mexico Holdings, LLC	Mexico
Innophos TGI, S. R.L. de C.V.	Innophos Mexicana, S. de R.L. de C.V.	Mexico
Innophos Fosfatados de Mexico, S. de R.L. de C.V.	Innophos TGI, S. R.L. de C.V.	Mexico
Innophos Servicios de Mexico, S. de R.L. de C.V.	Innophos Mexicana, S. de R.L. de C.V.	Mexico


•	*100% by direct parent, except in each of the Mexican entities, as well as Innophos Netherlands Investments Holdings C.V., Innophos, SRL and Innophos Brasil Importacao, Exportacao e Commercializacao de Produtos Quimicos Ltda where minority qualifying interests are held by other affiliates.

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No.s 333-159973 and 333-139623) of Innophos Holdings, Inc. of our report dated February 27, 2019 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Florham Park, New Jersey

February 27, 2019

Exhibit 31.1

CERTIFICATIONS

I, Kim Ann Mink, certify that:

1. I have reviewed this Annual Report on Form 10-K of Innophos Holdings, Inc. (“the registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Dated: February 27, 2019	By:	/S/ K IM A NN M INK
		Kim Ann Mink
		Chief Executive Officer, President and Director (Principal Executive Officer)

Exhibit 31.2

I, Han Kieftenbeld, certify that:

1. I have reviewed this Annual Report on Form 10-K of Innophos Holdings, Inc. (“the registrant”);

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Dated: February 27, 2019	By:	/S/ H AN K IEFTENBELD
		Han Kieftenbeld
		Senior Vice President and Chief Financial Officer (Principal Financial Officer)

Exhibit 32.1

Certification Pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350)

I, Kim Ann Mink, certify that:

1. the accompanying Annual Report on Form 10-K for the year ended December 31, 2018 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Innophos Holdings, Inc. at the dates and for the periods indicated.

A signed original of this written statement required by Section 906 has been provided Innophos Holdings, Inc. and will be retained by Innophos Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

The undersigned expressly disclaims any obligation to update the foregoing certification except as required by law.

Date: February 27, 2019

/S/ K IM A NN M INK

Kim Ann Mink

Chief Executive Officer, President and Director

(Principal Executive Officer)

The foregoing certification is being furnished solely pursuant to the requirements of 18 U.S.C. § 1350 and is not being filed as a part of the Report or as a separate disclosure document.

Exhibit 32.2

Certification Pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350)

I, Han Kieftenbeld, certify that:

The undersigned expressly disclaims any obligation to update the foregoing certification except as required by law.

Date: February 27, 2019

/S/ H AN K IEFTENBELD

Han Kieftenbeld

Senior Vice President and Chief Financial Officer

(Principal Financial Officer)

The foregoing certification is being furnished solely pursuant to the requirements of 18 U.S.C. § 1350 and is not being filed as a part of the Report or as a separate disclosure document.