IOSP 10-Q
Innospec Inc. (IOSP)
10-Q
2020-11-04
For: 2020-09-30
View Original
Added on
April 12, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2020
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-13879
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| |
||
(Address of principal executive offices) |
(Zip Code) | |
Registrant’s telephone number, including area code: (303 ) 792 5554
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
| Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
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. 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 Yes ☒ No ☐
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 file.Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2
of the Exchange Act.| |
☒ |
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 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 ☐ No Indicate the number of shares outstanding of each of the issuer’s classes common stock, as of the latest practicable date.
of
| Class |
Outstanding as of October 31, 2020 | |
| Common Stock, par value $0.01 |
TABLE OF CONTENTS
2
CAUTIONARY STATEMENT RELATIVE TO FORWARD-LOOKING STATEMENTS
This Form
10-Q
contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements. Such forward-looking statements include statements (covered by words like “expects,” “estimates,” “anticipates,” “may,” “believes,” “feel,” “plan,” “intends” or similar words or expressions, for example) which relate to earnings, growth potential, operating performance, events or developments that we expect or anticipate will or may occur in the future. Although forward-looking statements are believed by management to be reasonable when made, they are subject to certain risks, uncertainties and assumptions, including, the effects of the COVID-19
pandemic, such as its duration, its unknown long-term economic impact, measures taken by governmental authorities to address it and the manner in which the pandemic may precipitate or exacerbate other risks and/or uncertainties, and our actual performance or results may differ materially from these forward-looking statements. Additional information regarding risks, uncertainties and assumptions relating to Innospec and affecting our business operations and prospects are described in Innospec’s Annual Report on Form 10-K
for the year ended December 31, 2019, this Form 10-Q
and other reports filed with the U.S. Securities and Exchange Commission. You are urged to review our discussion of risks and uncertainties that could cause actual results to differ from forward-looking statements under the heading “Risk Factors” in such reports. Innospec undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.3
PART I FINANCIAL INFORMATION
Item 1 Condensed Consolidated Financial Statements
INNOSPEC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended September 30 |
Nine Months Ended September 30 |
|||||||||||||||
| (in millions, except share and per share data) |
2020 |
2019 |
2020 |
2019 |
||||||||||||
| Net sales |
$ | $ | $ | $ | ||||||||||||
| Cost of goods sold |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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| Gross profit |
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| Operating expenses: |
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| Selling, general and administrative |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Research and development |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Restructuring charge |
( |
) | ||||||||||||||
| Impairment of intangible assets |
( |
) | ||||||||||||||
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| Total operating expenses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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| Operating income |
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| Other income, net |
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| Interest expense, net |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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| Income before income tax expense |
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| Income tax expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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| Net income |
$ | $ | $ | $ | ||||||||||||
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| Earnings per share: |
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| Basic |
$ | $ | $ | $ | ||||||||||||
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| Diluted |
$ | $ | $ | $ | ||||||||||||
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| Weighted average shares outstanding (in thousands): |
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| Basic |
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| Diluted |
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The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
4
INNOSPEC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended September 30 |
Nine Months Ended September 30 |
|||||||||||||||
| (in millions) |
2020 |
2019 |
2020 |
2019 |
||||||||||||
| Net income |
$ | $ | $ | $ | ||||||||||||
| |
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| Other comprehensive income/(loss): |
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| Changes in cumulative translation adjustment, net of tax of $( |
( |
) | ( |
) | ||||||||||||
| Changes in derivative instruments, net of tax of $ |
( |
) | ( |
) | ||||||||||||
| Amortization of prior service credit, net of tax of $ |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Amortization of actuarial net losses, net of tax of $ |
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| |
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| Total other comprehensive income/(loss) |
( |
) | ( |
) | ||||||||||||
| |
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| Total comprehensive income |
$ | $ | $ | $ | ||||||||||||
| |
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The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
5
INNOSPEC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| (in millions, except share and per share data) |
September 30, 2020 |
December 31, 2019 |
||||||
(Unaudited) |
||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | $ | ||||||
| Trade and other accounts receivable (less allowances of $ |
||||||||
| Inventories (less allowances of $ |
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| Finished goods |
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| Raw materials |
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| |
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| Total inventories |
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| Prepaid expenses |
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| Prepaid income taxes |
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| Other current assets |
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| Total current assets |
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| Net property, plant and equipment |
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| Operating lease right-of-use |
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| Goodwill |
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| Other intangible assets |
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| Deferred tax assets |
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| Pension asset |
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| Other non-current assets |
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| Total assets |
$ | $ | ||||||
| |
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|
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The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
6
INNOSPEC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS - (Continued)
| (in millions, except share and per share data) |
September 30, 2020 |
December 31, 2019 |
||||||
(Unaudited) |
||||||||
| Liabilities and Equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | $ | ||||||
| Accrued liabilities |
||||||||
| Current portion of finance leases |
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| Current portion of plant closure provisions |
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| Current portion of accrued income taxes |
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| Current portion of operating lease liabilities |
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| Total current liabilities |
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| Long-term debt |
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| Finance leases, net of current portion |
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| Plant closure provisions, net of current portion |
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| Accrued income taxes, net of current portion |
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| Unrecognized tax benefits |
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| Operating lease liabilities, net of current portion |
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| Deferred tax liabilities |
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| Pension liabilities and post-employment benefits |
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| Other non-current liabilities |
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| Equity: |
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| Common stock, $ |
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| Additional paid-in capital |
||||||||
| Treasury stock ( |
( |
) | ( |
) | ||||
| Retained earnings |
||||||||
| Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
| |
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| Total Innospec stockholders’ equity |
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| Non-controlling interest |
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| Total equity |
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| Total liabilities and equity |
$ | $ | ||||||
| |
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|
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The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
7
INNOSPEC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30 |
||||||||
| (in millions) |
2020 |
2019 |
||||||
| Cash Flows from Operating Activities |
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| Net income |
$ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
||||||||
| Impairment of intangible assets |
||||||||
| Impairment of tangible assets |
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| Deferred tax expense |
( |
) | ( |
) | ||||
| Cash contributions to defined benefit pension plans |
( |
) | ||||||
| Non-cash movements on defined benefit pension plans |
( |
) | ( |
) | ||||
| Stock option compensation |
||||||||
| Changes in assets and liabilities, net of effects of acquired and divested companies: |
||||||||
| Trade and other accounts receivable |
( |
) | ||||||
| Inventories |
( |
) | ||||||
| Prepaid expenses |
||||||||
| Accounts payable and accrued liabilities |
( |
) | ||||||
| Accrued income taxes |
( |
) | ( |
) | ||||
| Plant closure provisions |
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| Unrecognized tax benefits |
( |
) | ||||||
| Other assets and liabilities |
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| Net cash provided by operating activities |
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| Cash Flows from Investing Activities |
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| Capital expenditures |
( |
) | ( |
) | ||||
| Internally developed software |
( |
) | ||||||
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| Net cash used in investing activities |
( |
) | ( |
) | ||||
| Cash Flows from Financing Activities |
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| Non-controlling interest |
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| Proceeds from revolving credit facility |
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| Repayments of revolving credit facility |
( |
) | ( |
) | ||||
| Repayment of term loan |
( |
) | ||||||
| Repayments of finance leases |
( |
) | ( |
) | ||||
| Refinancing costs |
( |
) | ( |
) | ||||
| Dividend paid |
( |
) | ( |
) | ||||
| Issue of treasury stock |
||||||||
| Repurchase of common stock |
( |
) | ( |
) | ||||
| |
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| Net cash used in financing activities |
( |
) | ( |
) | ||||
| Effect of foreign currency exchange rate changes on cash |
( |
) | ( |
) | ||||
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| Net change in cash and cash equivalents |
( |
) | ( |
) | ||||
| Cash and cash equivalents at beginning of period |
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| Cash and cash equivalents at end of period |
$ | $ | ||||||
| |
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The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
8
INNOSPEC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
| (in millions) |
Common Stock |
Additional Paid-In Capital |
Treasury Stock |
Retained Earnings |
Accumulated Other Comprehensive Loss |
Non- Controlling Interest |
Total Equity |
|||||||||||||||||||||
| Balance at December 31, 2019 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | |||||||||||||||||
| Net income |
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| Dividend paid ($ |
( |
) | ( |
) | ||||||||||||||||||||||||
| Changes in cumulative translation adjustment, net of tax |
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| Share of net income |
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| Treasury stock reissued |
( |
) | ||||||||||||||||||||||||||
| Treasury stock repurchased |
( |
) | ( |
) | ||||||||||||||||||||||||
| Stock option compensation |
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| Amortization of prior service credit, net of tax |
( |
) | ( |
) | ||||||||||||||||||||||||
| Amortization of actuarial net losses, net of tax |
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| Balance at September 30, 2020 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | |||||||||||||||||
| |
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| (in millions) |
Common Stock |
Additional Paid-In Capital |
Treasury Stock |
Retained Earnings |
Accumulated Other Comprehensive Loss |
Non- Controlling Interest |
Total Equity |
|||||||||||||||||||||
| Balance at December 31, 2018 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | |||||||||||||||||
| Net income |
||||||||||||||||||||||||||||
| Dividend paid ($ |
( |
) | ( |
) | ||||||||||||||||||||||||
| Changes in cumulative translation adjustment, net of tax |
( |
) | ( |
) | ||||||||||||||||||||||||
| Changes in derivative instruments, net of tax |
( |
) | ( |
) | ||||||||||||||||||||||||
| Share of net income |
( |
) | ( |
) | ||||||||||||||||||||||||
| Treasury stock reissued |
( |
) | ||||||||||||||||||||||||||
| Treasury stock repurchased |
( |
) | ( |
) | ||||||||||||||||||||||||
| Stock option compensation |
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| Amortization of prior service credit, net of tax |
( |
) | ( |
) | ||||||||||||||||||||||||
| |
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| Balance at September 30, 2019 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | |||||||||||||||||
| |
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The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements
9
INNOSPEC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
| (in millions) |
Common Stock |
Additional Paid-In Capital |
Treasury Stock |
Retained Earnings |
Accumulated Other Comprehensive Loss |
Non- Controlling Interest |
Total Equity |
|||||||||||||||||||||
| Balance at June 30, 2020 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | |||||||||||||||||
| Net income |
||||||||||||||||||||||||||||
| Changes in cumulative translation adjustment, net of tax |
||||||||||||||||||||||||||||
| Treasury stock reissued |
( |
) | ( |
) | ||||||||||||||||||||||||
| Stock option compensation |
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| Amortization of prior service credit, net of tax |
( |
) | ( |
) | ||||||||||||||||||||||||
| Amortization of actuarial net losses, net of tax |
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| Balance at September 30, 2020 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | |||||||||||||||||
| |
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| (in millions) |
Common Stock |
Additional Paid-In Capital |
Treasury Stock |
Retained Earnings |
Accumulated Other Comprehensive Loss |
Non- Controlling Interest |
Total Equity |
|||||||||||||||||||||
| Balance at June 30, 2019 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | |||||||||||||||||
| Net income |
||||||||||||||||||||||||||||
| Changes in cumulative translation adjustment, net of tax |
( |
) | ( |
) | ||||||||||||||||||||||||
| Changes in derivative instruments, net of tax |
( |
) | ( |
) | ||||||||||||||||||||||||
| Treasury stock reissued |
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| Stock option compensation |
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| Amortization of prior service credit, net of tax |
( |
) | ( |
) | ||||||||||||||||||||||||
| |
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| Balance at September 30, 2019 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | |||||||||||||||||
| |
|
|
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The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
10
INNOSPEC INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – BASIS OF PRESENTATION
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form
10-Q
and Article 10 of Regulation S-X
under the Securities Exchange Act of 1934. Accordingly, they do not include all the information and notes necessary for a comprehensive presentation of financial position, results of operations and cash flows.It is our opinion, however, that all adjustments (consisting of normal, recurring adjustments, unless otherwise disclosed) have been made which are necessary for the condensed consolidated financial statements to be fairly stated. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form
10-K
for the year ended December 31, 2019 filed on February 19, 2020 (the “2019 Form 10-K”).
The results for the interim period covered by this report are not necessarily indicative of the results to be expected for the full year.
When we use the terms “Innospec,” “the Corporation,” “the Company,” “Registrant,” “we,” “us” and “our,” we are referring to Innospec Inc. and its consolidated subsidiaries unless otherwise indicated or the context otherwise requires.
Credit losses
With an effective date of January 1, 2020, we have applied Accounting Standards Update (ASU)
No. 2016-13,
Financial Instruments – Credit Losses (ASC Topic 326). This replaces the incurred loss impairment methodology under previous GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.The standard was adopted using prospective application and principally impacts the allowance for trade and other accounts receivables. Upon adoption, there was no adjustment made to opening retained earnings as at January 1, 2020. As a result of implementing the standard, the Company did not recognize any material change to the allowance within trade and other accounts receivable as at January 1, 2020. Trade and other accounts receivable are shown net of a $4.7 million allowance at September 30, 2020. The allowance remains immaterial to the financial statements.
The Company is exposed to credit losses primarily through sales of products. The Company’s expected loss allowance methodology for trade and other accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers’ receivables. Due to the short-term nature of such receivables, the estimate of accounts receivable amounts that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers. Additionally, a further allowance is included to account for the Company’s historic track record of credit losses, for balances which are not aged sufficiently to be considered under the aging based approach.
11
The Company considered the current and expected future economic and market conditions surrounding the
COVID-19
pandemic and determined that the estimate of credit losses was not significantly impacted.NOTE 2 – SEGMENT REPORTING
The Company reports its financial performance based on the following four reportable segments: Fuel Specialties, Performance Chemicals, Oilfield Services and Octane Additives.
The Fuel Specialties, Performance Chemicals and Oilfield Services segments operate in markets where we actively seek growth opportunities although their ultimate customers are different. The Octane Additives segment ceased
trading and is no longer
a reporting segment from July 1, 2020, as reported in our Quarterly Report on Form 10-Q
for the quarter ended June 30, 2020 (see Note 4 of the Notes to the Condensed Consolidated Financial Statements for further information).The Company evaluates the performance of its segments based on operating income. The following tables analyze sales and other financial information by the Company’s reportable segments:
Three Months Ended September 30 |
Nine Months Ended September 30 |
||||||||||||||||
(in millions) |
2020 |
2019 |
2020 |
2019 |
|||||||||||||
Net Sales: |
|||||||||||||||||
Refinery and Performance |
$ | $ | $ | $ | |||||||||||||
Other |
|||||||||||||||||
Fuel Specialties |
|||||||||||||||||
Personal Care |
|||||||||||||||||
Home Care |
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Other |
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Performance Chemicals |
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Oilfield Services |
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Octane Additives |
|||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||
Gross profit/(loss): |
|||||||||||||||||
Fuel Specialties |
$ | $ | $ | $ | |||||||||||||
Performance Chemicals |
|||||||||||||||||
Oilfield Services |
|||||||||||||||||
Octane Additives |
( |
) | ( |
) | |||||||||||||
| $ | $ | $ | $ | ||||||||||||||
Operating income/(loss): |
|||||||||||||||||
Fuel Specialties |
$ | $ | $ | $ | |||||||||||||
Performance Chemicals |
|||||||||||||||||
Oilfield Services |
( |
) | ( |
) | |||||||||||||
Octane Additives |
( |
) | ( |
) | |||||||||||||
Corporate costs |
( |
) | ( |
) | ( |
) | ( |
) | |||||||||
Restructuring charge |
( |
) | |||||||||||||||
Impairment of intangible assets |
( |
) | |||||||||||||||
Total operating income |
$ | $ | $ | $ | |||||||||||||
12
NOTE 3 – EARNINGS PER SHARE
Basic earnings per share is based on the weighted average number of common shares outstanding during the period. Diluted earnings per share includes the effect of options that are dilutive and outstanding during the period under the treasury stock method. Per share amounts are computed as follows:
Three Months Ended September 30 |
Nine Months Ended September 30 |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
Numerator (in millions): |
||||||||||||||||
Net income available to common stockholders |
$ | $ | $ | $ | ||||||||||||
Denominator (in thousands): |
||||||||||||||||
Weighted average common shares outstanding |
||||||||||||||||
Dilutive effect of stock options and awards |
||||||||||||||||
Denominator for diluted earnings per share |
||||||||||||||||
Net income per share, basic: |
$ | $ | $ | $ | ||||||||||||
Net income per share, diluted: |
$ | $ | $ | $ | ||||||||||||
In the three and nine months ended September 30, 2020, the average number of anti-dilutive options excluded from the calculation of diluted earnings per share were 17,980 and 23,420 , respectively (three and nine months ended September 30, 2019 – 12,539 and 6,270 , respectively).
NOTE 4 – RESTRUCTURING
During the quarter ended June 30, 2020, the Company recorded provisions of $21.1 million for the restructuring of its Octane Additives segment in line with the end of the manufacturing and sale of tetra ethyl lead (“TEL”) for use in motor gasoline. As a result, the Octane Additives segment ceased
trading and is no longer
a reporting segment from July 1, 2020. Production of TEL will continue for sales to the aviation market (“AvTel”), as reported within our Fuel Specialties segment.
The 2.0 million, remediation of facilities of $7.5 million, provision for a loss making contract of $7.2 million, impairment of tangible assets of $2.0 million and costs of redundancy due to the 2.4 million. During the quarter ended September 30, 2020 the utilization of these provisions and the unwinding of the discounting was not material.
restructuring
provisions comprise the future committed costs of environmental monitoring of $down-sizing
of the TEL operations of $13
NOTE 5 – GOODWILL
The following table summarizes the goodwill movements:
(in millions) |
Gross Cost |
Accumulated Impairment Losses |
Net Book Amount |
|||||||||
Opening balance at January 1 |
$ | $ | ( |
) | $ | |||||||
Exchange effect |
||||||||||||
Closing balance at September 30 |
$ | $ | ( |
) | $ | |||||||
NOTE 6 – OTHER INTANGIBLE ASSETS
The following table summarizes the other intangible assets movements:
(in millions) |
2020 |
|||
Gross cost at January 1 |
$ | |||
Exchange effect |
||||
Gross cost at September 30 |
||||
Accumulated amortization at January 1 |
( |
) | ||
Amortization expense |
( |
) | ||
Impairment |
( |
) | ||
Exchange effect |
( |
) | ||
Accumulated amortization at September 30 |
( |
) | ||
Net book amount at September 30 |
$ | |||
During the quarter ended June 30, 2020, the Company impaired the intangible assets arising from the acquisition of Strata Control Services Inc., which forms part of our Oilfield Services segment. The impairment review was triggered by the reduction in demand for drilling related products. A discounted cash flow analysis was performed to determine the fair value of the assets, linked to the down turn in the results of that segment. The impaired assets relate to technology ($10.0 million) and customer relationships ($9.8 million).
The amortization expense for the nine months ended September 30, 2020 was $16.3 million (nine months ended September 30, 2019 – $17.2 million).
The net book amount by category of other intangible assets is shown in the following table:
(in millions) |
September 30 2020 |
December 31 2019 |
||||||
Product rights |
$ | $ | ||||||
Brand names |
||||||||
Technology |
||||||||
Customer relationships |
||||||||
Internally developed software |
||||||||
| $ | $ | |||||||
14
NOTE 7 – PENSION AND POST EMPLOYMENT BENEFITS
The Company maintains a defined benefit pension plan (the “Plan”) covering a number of its current and former employees in the United Kingdom, although it does also have other much smaller pension arrangements in the U.S. and overseas. The Plan is closed to future service accrual but has a large number of deferred and current pensioners.
The net service cost for the three and nine months ended September 30, 2020 was $0.3 million and $0.9 million respectively (three and nine months ended September 30, 2019 – $0.2 million and $0.7 million respectively) and has been recognized in selling, general and administrative expenses within corporate costs. The following table shows the income statement effect recognized within other income, net:
Three Months Ended September 30 |
Nine Months Ended September 30 |
|||||||||||||||
(in millions) |
2020 |
2019 |
2020 |
2019 |
||||||||||||
Plan net pension credit/(charge): |
||||||||||||||||
Interest cost on projected benefit obligation |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
Expected return on plan assets |
||||||||||||||||
Amortization of prior service credit |
||||||||||||||||
Amortization of actuarial net losses |
( |
) | ( |
) | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
The amortization of prior service credit and actuarial net losses is a reclassification out of accumulated other comprehensive loss into other income and expense.
The Company also maintains an unfunded defined benefit pension plan covering a number of its current and former employees in Germany (the “German plan”) within our Fuel Specialties segment. The German plan is closed to new entrants and has no assets. The net service cost for the German plan for the three and nine months ended September 30, 2020 was $0.0 million and $0.1 million respectively (three and nine months ended September 30, 2019 – $0.0 million and $0.1 million respectively) and has been recognized in selling, general and administrative expenses. The following table shows the income statement effect recognized within other income and expense:
Three Months Ended September 30 |
Nine Months Ended September 30 |
|||||||||||||||
(in millions) |
2020 |
2019 |
2020 |
2019 |
||||||||||||
Plan net pension charge: |
||||||||||||||||
Interest cost on projected benefit obligation |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
Amortization of actuarial net losses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||
As at September 30, 2020, our Performance Chemicals segment has obligations for post-employment benefits in its European businesses with a liability of $4.8 million (December 31, 2019 – $4.5 million).
15
NOTE 8 – INCOME TAXES
A roll-forward of unrecognized tax benefits and associated accrued interest and penalties is as follows:
(in millions) |
Unrecognized Tax Benefits |
Interest and Penalties |
Total |
|||||||||
Opening balance at January 1 |
$ | $ | $ | |||||||||
Net change for tax positions of prior periods |
( |
) | ( |
) | ||||||||
Closing balance at September 30 |
||||||||||||
Current |
||||||||||||
Non-current |
$ | $ | $ | |||||||||
All of the $15.5 million of unrecognized tax benefits, interest and penalties would impact our effective tax rate if recognized.
As previously disclosed, a 2011 to 2014 inclusive. The Company has determined that additional tax, interest and penalties totaling $3.3 million may arise as a consequence of the tax audit. This includes a reduction in interest accrued of $0.1 million and an increase for foreign exchange movements of $0.1 million recorded in the nine months to September 30, 2020. As any additional tax arising as a consequence of the tax audit would be reimbursed by the previous owner under the terms of the sale and purchase agreement, an indemnification asset of the same amount is recorded in the financial statements to reflect this arrangement.
non-U.S.
subsidiary, Innospec Performance Chemicals Italia Srl, is subject to an ongoing tax audit in relation to the period As previously disclosed, in 2018 the Company recorded an unrecognized tax benefit in relation to a potential adjustment that could arise as a consequence of the Tax Cuts and Jobs Act, but for which retrospective adjustment to the filed 2017 U.S. federal income tax returns was not permissible. The Company has determined that additional tax, interest and penalties totaling $12.2 million may arise in relation to this item. This includes an increase in interest accrued of $0.5 million in the nine months to September 30, 2020.
As previously disclosed, in 2015 the Company recorded an unrecognized tax benefit of $1.2 million in relation to additional tax that could have arisen if a historical impairment in value of certain of the Company’s 1.2 million in full, together with accrued interest of $0.2 million thereon, in the three months ended June 30, 2020, following a review of the value of the Company’s investments that confirmed the historical impairment in value undertaken in 2005 was appropriate.
non-U.S.
subsidiaries was reversed upon challenge by the tax authorities. The Company released the provision of $16
NOTE 9 – LONG-TERM DEBT
Long-term debt consists of the following:
(in millions) |
September 30, 2020 |
December 31, 2019 |
||||||
Revolving credit facility |
$ | $ | ||||||
Deferred finance costs |
( |
) | ||||||
| $ | $ | |||||||
On September 16, 2020, Innospec and certain of its subsidiaries agreed to extend the term of its revolving credit facility until September 25, 2024 . The costs of $0.3 million for extending the term have been capitalized on the balance sheet.
As at September 30, 2020, the Company had repaid all of its borrowings under the revolving 1.4 million
credit
facility and as a result, the related deferred finance costs asset
of $is
now included within other non-current
assets at the balance sheet date.NOTE 10 – PLANT CLOSURE PROVISIONS
The Company has continuing plans to close some of its manufacturing facilities at sites around the world as and when those operations are expected to be decommissioned. The liability for estimated closure costs of Innospec’s manufacturing facilities includes costs for decontamination and environmental remediation activities (“remediation”).
As a result, the principal site giving rise to remediation liabilities is the manufacturing site at Ellesmere Port in the United Kingdom. There are also remediation liabilities on a much smaller scale in respect of our other manufacturing sites in the U.S. and Europe.
Movements in the provisions are summarized as follows:
(in millions) |
2020 |
|||
Total at January 1 |
$ | |||
Charge for the period |
||||
Utilized in the period |
( |
) | ||
Exchange effect |
||||
Total at September 30 |
||||
Due within one year |
( |
) | ||
Due after one year |
$ | |||
The charge for the nine months ended September 30, 2020 was $11.0 million (nine months ended September 30, 2019 – $3.2 million). This includes $7.5 million of additional provisions as a result of the restructuring activities following the cessation of sales of TEL for use in motor gasoline (see Note 4 of the Notes to the Condensed Consolidated Financial Statements for further information).
Amounts due within one year refer to provisions where expenditure is expected to arise within one year of the balance sheet date.
17
NOTE 11 – FAIR VALUE MEASUREMENTS
The following table presents the carrying amount and fair values of the Company’s financial assets and liabilities measured on a recurring basis:
September 30, 2020 |
December 31, 2019 |
|||||||||||||||
(in millions) |
Carrying Amount |
Fair Value |
Carrying Amount |
Fair Value |
||||||||||||
Assets |
||||||||||||||||
Non-derivatives: |
||||||||||||||||
Cash and cash equivalents |
$ | $ | $ | $ | ||||||||||||
Derivatives (Level 1 measurement): |
||||||||||||||||
Other current and non-current assets: |
||||||||||||||||
Foreign currency forward exchange contracts |
||||||||||||||||
Liabilities |
||||||||||||||||
Non-derivatives: |
||||||||||||||||
Long-term debt (including current portion) |
$ | $ | $ | $ | ||||||||||||
Finance leases (including current portion) |
||||||||||||||||
Non-financial liabilities (Level 3 measurement): |
||||||||||||||||
Other current and non-current liabilities: |
||||||||||||||||
Stock equivalent units |
||||||||||||||||
The following methods and assumptions were used to estimate the fair values:
Cash and cash equivalents:
Derivatives:
Long-term debt and finance leases:
Stock equivalent units:
18
NOTE 12 – DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT
The Company enters into various foreign currency forward exchange contracts to minimize currency exchange rate exposure from expected future cash flows. As at September 30, 2020 the contracts have maturity dates of up to twelve months at the date of inception. These foreign currency forward exchange contracts have not been designated as hedging instruments, and their impact on the income statement for the first nine months of 2020 was a gain of $0.7 million (first nine months of 2019: gain of $2.9 million).
As at September 30, 2020 and December 31, 2019 the Company did not hold any interest rate swaps. In prior years, the Company entered into interest rate swaps to minimize interest rate exposure related to a portion of its borrowing requirements. These interest rate swaps were designated as hedging instruments, and their impact on accumulated other comprehensive loss for the first nine months of 2019 was a loss of $1.8 million.
NOTE 13 – COMMITMENTS AND CONTINGENCIES
Legal matters
While we are involved from time to time in claims and legal proceedings that result from, and are incidental to, the conduct of our business including business and commercial litigation, employee and product liability claims, there are no material pending legal proceedings to which the Company or any of its subsidiaries is a party, or of which any of their property is subject. It is possible, however, that an adverse resolution of an unexpectedly large number of such individual claims or proceedings could in the aggregate have a material adverse effect on the results of operations for a particular year or quarter.
Guarantees
The Company and certain of the Company’s consolidated subsidiaries are contingently liable for certain obligations of affiliated companies primarily in the form of guarantees of debt and performance under contracts entered into as a normal business practice. This includes guarantees of 9.6 million (December 31, 2019 - $4.7 million). The remaining terms of the fixed maturity guarantees vary from 1 month to 3 years , with some further guarantees having no fixed expiry date.
non-U.S.
excise taxes and customs duties. As at September 30, 2020, such guarantees which are not recognized as liabilities in the condensed consolidated financial statements amounted to $Under the terms of the guarantee arrangements, generally the Company would be required to perform should the affiliated company fail to fulfill its obligations under the arrangements. In some cases, the guarantee arrangements have recourse provisions that would enable the Company to recover any payments made under the terms of the guarantees from securities held of the guaranteed parties’ assets.
The Company and its affiliates have numerous long-term sales and purchase commitments in their various business activities, which are expected to be fulfilled with no adverse consequences material to the Company.
19
NOTE 14 – STOCK-BASED COMPENSATION PLANS
The Company grants stock options and stock equivalent units (“SEUs”) from time to time as a long-term performance incentive. In certain cases the grants are subject to performance conditions such as the Company’s stock price. Where performance conditions apply the Monte Carlo simulation model is used to determine the fair values. Otherwise the Black-Scholes model is used to determine the fair values.
Stock option plans
The following table summarizes the transactions of the Company’s stock option plans for the nine months ended September 30, 2020:
Number of Options |
Weighted Average Exercise Price |
Weighted Average Grant-Date Fair Value |
||||||||||
| Outstanding at December 31, 2019 |
$ | $ | ||||||||||
| Granted - at discount |
$ | $ | ||||||||||
| - at market value |
$ | $ | ||||||||||
| Exercised |
( |
) | $ | $ | ||||||||
| Forfeited |
( |
) | $ | $ | ||||||||
| |
|
|||||||||||
| Outstanding at September 30, 2020 |
$ | $ | ||||||||||
| |
|
|||||||||||
At September 30, 2020, there were 35,157 stock options that were exercisable, of which 7,611 had performance conditions attached.
The stock option compensation cost for the first nine months of 2020 was $4.4 million (first nine months of 2019 – $4.9 million). The total intrinsic value of options exercised in the first nine months of 2020 was $4.7 million (first nine months of 2019 – $2.7 million).
The total compensation cost related to 8.4 million and this cost is expected to be recognized over the weighted-average period of 1.75 years.
non-vested
stock options not yet recognized at September 30, 2020 was $Stock equivalent units
The following table summarizes the transactions of the Company’s SEUs for the nine months ended September 30, 2020:
Number of SEUs |
Weighted Average Exercise Price |
Weighted Average Grant-Date Fair Value |
||||||||||
| Outstanding at December 31, 2019 |
$ | $ | ||||||||||
| Granted - at discount |
$ | $ | ||||||||||
| - at market value |
$ | $ | ||||||||||
| Exercised |
( |
) | $ | $ | ||||||||
| Forfeited |
( |
) | $ | $ | ||||||||
| |
|
|||||||||||
| Outstanding at September 30, 2020 |
$ | $ | ||||||||||
| |
|
|||||||||||
20
At September 30, 2020 there were 53,146 SEUs that are exercisable, of which 46,614 had performance conditions attached.
The charges for SEUs are spread over the life of the award subject to a revaluation to fair value each quarter. The revaluation may result in a charge or a credit to the income statement in the quarter dependent upon our share price and other performance criteria.
The SEU compensation for the first nine months of 2020 was a $4.9 million credit (first nine months of 2019 – $14.0 million charge). The total intrinsic value of SEUs exercised in the first nine months of 2020 was $6.3 million (first nine months of 2019 – $6.8 million).
The weighted-average remaining vesting period of 2.05 years.
non-vested
SEUs is 21
NOTE 15 – RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE LOSS
Reclassifications out of accumulated other comprehensive loss for the first nine months of 2020 were:
| (in millions) Details about AOCL Components |
Amount Reclassified from AOCL |
Affected Line Item in the Statement where Net Income is Presented | ||||
| Defined benefit pension plan items: |
||||||
| Amortization of prior service credit |
$ | ( |
) | See (1) below | ||
| Amortization of actuarial net losses |
See (1) below | |||||
| |
|
|||||
| Total before tax | ||||||
| Income tax expense | ||||||
| |
|
|||||
| Total reclassifications |
$ |
Net of tax | ||||
| |
|
|||||
( 1) |
These items are included in other income and expense. See Note 7 of the Notes to the Condensed Consolidated Financial Statements for additional information. |
Changes in accumulated other comprehensive loss for the first nine months of 2020, net of tax, were:
| (in millions) |
Defined Benefit Pension Plan Items |
Cumulative Translation Adjustments |
Total |
|||||||||
| Balance at December 31, 2019 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| |
|
|
|
|
|
|||||||
| Other comprehensive income before reclassifications |
||||||||||||
| Amounts reclassified from AOCL |
||||||||||||
| |
|
|
|
|
|
|||||||
| Total other comprehensive income |
||||||||||||
| |
|
|
|
|
|
|||||||
| Balance at September 30, 2020 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| |
|
|
|
|
|
|||||||
22
NOTE 16 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update (ASU)
No. 2019-12,
Simplifying the Accounting for Income Taxes (Topic 740), which removes certain exceptions to the general principles in Topic 740 and improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. The Company is evaluating the effect of adopting this new accounting guidance but does not expect adoption will have a material impact on the Company’s disclosures.NOTE 17 – RELATED PARTY TRANSACTIONS
Mr. Patrick S. Williams has been an executive director of the Company since April 2009 and has been a 0.2 million. As at September 30, 2020, the Company owed $0.0 million to AdvanSix.
non-executive
director of AdvanSix, a chemicals manufacturer, since February 2020. In the first nine months of 2020 the Company purchased product from AdvanSix for $Mr. Robert I. Paller has been a 0.6 million (first nine months of 2019 – $0.4 million). As at September 30, 2020, the Company owed $0.1 million to SGR (December 31, 2019 – $0.0 million).
non-executive
director of the Company since November 1, 2009. The Company has retained and continues to retain Smith, Gambrell & Russell, LLP (“SGR”), a law firm with which Mr. Paller holds a position. In the first nine months of 2020 the Company incurred fees from SGR of $Mr. David F. Landless has been a 0.2 million (first nine months of 2019 – $0.4 million). A tendering process is operated periodically to select the best buyer for the sale of scrap metal by the Company. As at September 30, 2020 EMR owed $0.0 million for scrap metal purchased from the Company (December 31, 2019 – $0.0 million).
non-executive
director of the Company since January 1, 2016 and is a non-executive
director of Ausurus Group Limited which owns European Metal Recycling Limited (“EMR”). The Company has sold scrap metal to EMR in the first nine months of 2020 for a value of $23
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Three and Nine Months Ended September 30, 2020
This discussion should be read in conjunction with our unaudited interim condensed consolidated financial statements and the notes thereto.
CRITICAL ACCOUNTING ESTIMATES
The policies and estimates that the Company considers the most critical in terms of complexity and subjectivity of assessment are those related to environmental liabilities, pensions, income taxes, goodwill and property, plant and equipment and other intangible assets (net of depreciation and amortization). These policies have been discussed in the Company’s 2019 Form
10-K.
Impact of
COVID-19
Pandemic and Current Economic Environment The Company’s results have continued to be impacted during the third quarter of 2020, due to the
COVID-19
pandemic and the global economic environment. Fuel Specialties have been impacted by reduced demand stemming from the reduction in freight transport and passenger miles and the widespread grounding of aircraft for the majority of the second and third quarters
. We have seen some improvement in the third quarter as travel has begun to increase, but demand has not returned to the pre COVID-19
levels. We expect demand will continue to improve, to the extent global economic activity recovers, subject to any future lockdowns or restrictions that are not currently in place. Performance Chemicals have experienced little overall impact from the pandemic as increased demand for certain products linked to health, hygiene and cleaning outweighed some lost revenues linked to the short-term shutdown of some of our customers manufacturing facilities. Oilfield Services have been heavily impacted by the reduction in oil exploration and production as the wider industry reacts to the reduction in demand and low oil price. We have seen some improvement in the third quarter from increasing demand and the benefit from the reduction in headcount that occurred in the second quarter. We do not know how long this downturn will last and the rate of recovery will depend heavily on the rate and extent to which the government restrictions on movement continue to be lifted.Our manufacturing facilities have continued to operate with only some minor interruption, and we expect them to continue to do so. We have implemented flexible working, including working from home for our employees where possible, in line with advice and rules in each of the jurisdictions in which we operate.
Additional costs have been incurred to ensure our manufacturing and administrative facilities are COVID safe for our employees. While these costs have not been significant to date there may be increased costs in the future, if further safety restrictions are required.
Raw material sourcing has not been significantly impacted and we do not expect that to change over the remainder of the year. Logistics are operating with some delays but our products are currently being delivered to our customers. We believe that our
financial position remains strong. We have sufficient access to capital if needed, including our $250 million revolving credit facility we entered into in September 2019, and we do not anticipate any issues with meeting the covenants for our debt agreements. We have extended this facility by a further twelve months until September 2024, during the third quarter of 2020. Our major capital projects are continuing to progress as planned. As we operate in the chemical industry, we continue to be focused on protecting the health and safety of our employees and have procedures in place at each of our operating facilities to help ensure their well-being.
24
We do not know how long the current economic environment will continue and while we have made estimates as to potential impacts on our financial position and operations, the ultimate impact on our business will depend on many factors which are very difficult to predict with certainty and substantially beyond our control.
25
RESULTS OF OPERATIONS
The Company previously reported its financial performance based on the following four reportable segments: Fuel Specialties, Performance Chemicals, Oilfield Services and Octane Additives. The Octane Additives segment ceased
trading and is no longer
a reporting segment from July 1, 2020 (see Note 4 of the Notes to the Condensed Consolidated Financial Statements for further information) and legacy costs of this segment totaling $1.1 million are now reported in Corporate costs
.
The following table provides operating income by reporting segment:
Three Months Ended September 30 |
Nine Months Ended September 30 |
|||||||||||||||
| (in millions) |
2020 |
2019 |
2020 |
2019 |
||||||||||||
| Net sales: |
||||||||||||||||
| Fuel Specialties |
$ | 120.0 | $ | 144.1 | $ | 374.4 | $ | 433.4 | ||||||||
| Performance Chemicals |
102.0 | 99.9 | 310.8 | 322.7 | ||||||||||||
| Oilfield Services |
43.1 | 121.4 | 197.1 | 358.1 | ||||||||||||
| Octane Additives |
0.0 | 6.5 | 0.0 | 8.4 | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
$ |
265.1 | $ |
371.9 | $ | 882.3 | $ | 1,122.6 | |||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Gross profit/(loss): |
||||||||||||||||
| Fuel Specialties |
$ | 40.3 | $ | 54.1 | $ | 116.9 | $ | 154.5 | ||||||||
| Performance Chemicals |
24.0 | 22.6 | 76.5 | 73.2 | ||||||||||||
| Oilfield Services |
14.4 | 41.2 | 60.5 | 120.4 | ||||||||||||
| Octane Additives |
0.0 | 1.2 | (2.2 | ) | (0.1 | ) | ||||||||||
| |
|
|
|
|
|
|
|
|||||||||
$ |
78.7 | $ |
119.1 | $ | 251.7 | $ 348.0 |
||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Operating income/(loss): |
||||||||||||||||
| Fuel Specialties |
$ | 22.2 | $ | 31.1 | $ | 59.0 | $ | 88.1 | ||||||||
| Performance Chemicals |
12.4 | 9.3 | 40.2 | 33.8 | ||||||||||||
| Oilfield Services |
(4.5 | ) | 10.0 | (9.7 | ) | 27.9 | ||||||||||
| Octane Additives |
0.0 | 0.8 | (2.8 | ) | (1.9 | ) | ||||||||||
| Corporate costs |
(13.3 | ) | (13.0 | ) | (41.5 | ) | (41.8 | ) | ||||||||
| Restructuring charge |
0.0 | 0.0 | (21.1 | ) | 0.0 | |||||||||||
| Impairment of intangible assets |
0.0 | 0.0 | (19.8 | ) | 0.0 | |||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total operating income |
$ | 16.8 | $ | 38.2 | $ | 4.3 | $ | 106.1 | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
26
Three Months Ended September 30, 2020
The following table shows the change in components of operating income by reporting segment for the three months ended September 30, 2020 and the three months ended September 30, 2019:
Three Months Ended September 30 |
||||||||||||||||
| (in millions, except ratios) |
2020 |
2019 |
Change |
|||||||||||||
| Net sales: |
||||||||||||||||
| Fuel Specialties |
$ | 120.0 | $ | 144.1 | $ | (24.1 | ) | -17 | % | |||||||
| Performance Chemicals |
102.0 | 99.9 | 2.1 | +2 | % | |||||||||||
| Oilfield Services |
43.1 | 121.4 | (78.3 | ) | -64 | % | ||||||||||
| Octane Additives |
0.0 | 6.5 | (6.5 | ) | -100 | % | ||||||||||
| |
|
|
|
|
|
|||||||||||
| $ | 265.1 | $ | 371.9 | $ | (106.8 | ) | -29 | % | ||||||||
| |
|
|
|
|
|
|||||||||||
| Gross profit: |
||||||||||||||||
| Fuel Specialties |
$ | 40.3 | $ | 54.1 | $ | (13.8 | ) | -26 | % | |||||||
| Performance Chemicals |
24.0 | 22.6 | 1.4 | +6 | % | |||||||||||
| Oilfield Services |
14.4 | 41.2 | (26.8 | ) | -65 | % | ||||||||||
| Octane Additives |
0.0 | 1.2 | (1.2 | ) | -100 | % | ||||||||||
| |
|
|
|
|
|
|||||||||||
| $ | 78.7 | $ | 119.1 | $ | (40.4 | ) | -34 | % | ||||||||
| |
|
|
|
|
|
|||||||||||
| Gross margin (%): |
||||||||||||||||
| Fuel Specialties |
33.6 |
37.5 |
-3.9 |
|||||||||||||
| Performance Chemicals |
23.5 |
22.6 |
+0.9 |
|||||||||||||
| Oilfield Services |
33.4 |
33.9 |
-0.5 |
|||||||||||||
| Octane Additives |
0.0 |
18.5 |
n/a |
|||||||||||||
| Aggregate |
29.7 |
32.0 |
-2.3 |
|||||||||||||
| Operating expenses: |
||||||||||||||||
| Fuel Specialties |
$ | (18.1 | ) | $ | (23.0 | ) | $ | 4.9 | -21 | % | ||||||
| Performance Chemicals |
(11.6 | ) | (13.3 | ) | 1.7 | -13 | % | |||||||||
| Oilfield Services |
(18.9 | ) | (31.2 | ) | 12.3 | -39 | % | |||||||||
| Octane Additives |
0.0 | (0.4 | ) | 0.4 | -100 | % | ||||||||||
| Corporate costs |
(13.3 | ) | (13.0 | ) | (0.3 | ) | +2 | % | ||||||||
| |
|
|
|
|
|
|||||||||||
| $ | (61.9 | ) | $ | (80.9 | ) | $ | 19.0 | -23 | % | |||||||
| |
|
|
|
|
|
|||||||||||
27
Fuel Specialties
Net sales:
Three Months Ended September 30, 2020 |
||||||||||||||||||||
| Change (%) |
Americas |
EMEA |
ASPAC |
AvTel |
Total |
|||||||||||||||
| Volume |
-21 | -3 | -19 | -10 | -12 | |||||||||||||||
| Price and product mix |
+13 | -8 | -14 | -28 | -5 | |||||||||||||||
| Exchange rates |
0 | 0 | 0 | 0 | 0 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| -8 | -11 | -33 | -38 | -17 | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
Volumes in all our regions have continued to suffer from the adverse impact of the
COVID-19
pandemic, which has reduced the global demand for fuel additive products. We believe there are signs that customer demand has started to recover in the third quarter to the extent that lockdowns in countries around the world have been eased. Price and product mix in the Americas was favorable due to a richer sales mix, while price and product mix in EMEA and ASPAC was adverse due to lower sales of higher margin products. AvTel volumes were lower than the prior year due to variations in the demand from customers, together with an adverse price and product mix. There was a negligible foreign exchange impact in the quarter.Gross margin
Operating expenses:
COVID-19
pandemic, including lower travel and entertainment costs, together with lower personnel related performance-based remuneration due to a decrease in share-based compensation accruals linked to the Innospec share price.Performance Chemicals
Net sales:
Three Months Ended September 30, 2020 |
||||||||||||||||
| Change (%) |
Americas |
EMEA |
ASPAC |
Total |
||||||||||||
| Volume |
+18 | -4 | +33 | +5 | ||||||||||||
| Price and product mix |
-15 | -1 | -2 | -6 | ||||||||||||
| Exchange rates |
0 | +4 | +2 | +3 | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| +3 | -1 | +33 | +2 | |||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
Higher volumes in the Americas and ASPAC were driven by increased demand for our Personal Care and Home Care products. Volumes were lower in EMEA due to lower demand in Personal Care and for our toll manufacturing products. All our regions suffered an adverse price and product mix driven by increased sales of lower priced products due largely to lower raw materials costs. EMEA and ASPAC benefitted from favorable exchange rate movements year over year, due to a strengthening of the British pound sterling and the European Union euro against the U.S. dollar.
28
Gross margin:
Operating expenses:
COVID-19
pandemic, including lower travel and entertainment costs, together with lower personnel related performance-based remuneration due to a decrease in share-based compensation accruals linked to the Innospec share price.Oilfield Services
Net sales:
COVID-19
pandemic adversely impacting world-wide demand for crude oil. The previously expected recovery in the U.S. completions market has been delayed, however the Company has seen some improvement in the demand for crude oil as prices recovered in the third quarter which led to higher sales for our production and drag reducing agent product lines.Gross margin:
Operating expenses:
right-sizing
of the operations to adjust for the reduction in demand caused by the COVID-19
pandemic, together with lower accruals for long-term performance-based incentive plans due to a decrease in share-based compensation accruals linked to the Innospec share price.Octane Additives
The Octane Additives business ceased
trading and is no longer
a reporting segment from July 1, 2020 as the production of TEL for use in motor gasoline has finished. Legacy costs related to these operations have now been recorded as operating expenses within Corporate costs.
Other Income Statement Captions
Corporate costs:
COVID-19
pandemic.29
Other net income:
| (in millions) |
2020 |
2019 |
Change |
|||||||||
| United Kingdom pension credit |
$ | 1.6 | $ | 2.0 | $ | (0.4 | ) | |||||
| German pension charge |
(0.2 | ) | (0.2 | ) | 0.0 | |||||||
| Foreign exchange gain/(loss) on translation |
3.5 | (2.7 | ) | 6.2 | ||||||||
| Foreign currency forward contracts (loss)/gain |
(1.1 | ) | 1.9 | (3.0 | ) | |||||||
| |
|
|
|
|
|
|||||||
| $ | 3.8 | $ | 1.0 | $ | 2.8 | |||||||
| |
|
|
|
|
|
|||||||
Interest expense, net:
Income taxes:
non-GAAP
financial measure, provides useful information to investors and may assist them in evaluating the Company’s underlying performance and identifying operating trends. In addition, management uses this non-GAAP
financial measure internally to evaluate the performance of the Company’s operations and for planning and forecasting in subsequent periods.The following table shows a reconciliation of the GAAP effective tax rate to the adjusted effective tax rate:
Three Months Ended September 30 |
||||||||
| (in millions) |
2020 |
2019 |
||||||
| Income before income taxes |
$ | 20.2 | $ | 37.8 | ||||
| Indemnification asset regarding tax audit |
0.4 | 0.0 | ||||||
| Adjustment for stock compensation |
0.0 | 1.6 | ||||||
| |
|
|
|
|||||
| $ | 20.6 | $ | 39.4 | |||||
| |
|
|
|
|||||
| Income taxes |
$ | 7.5 | $ | 7.7 | ||||
| Tax on stock compensation |
0.0 | 0.4 | ||||||
| Adjustment of income tax provision |
(0.2 | ) | (0.3 | ) | ||||
| Tax on foreign exchange on distribution |
0.1 | 0.8 | ||||||
| Change in UK statutory tax rate |
(2.6 | ) | 0.0 | |||||
| |
|
|
|
|||||
| $ | (4.8 | ) | $ | 8.6 | ||||
| |
|
|
|
|||||
| GAAP effective tax rate |
37.1 | % | 20.4 | % | ||||
| Adjusted effective tax rate |
23.3 | % | 21.8 | % | ||||
30
Nine Months Ended September 30, 2020
The following table shows the change in components of operating income by reporting segment for the nine months ended September 30, 2020 and the nine months ended September 30, 2019:
Nine Months Ended September 30 |
||||||||||||||||
| (in millions, except ratios) |
2020 |
2019 |
Change |
|||||||||||||
| Net sales: |
||||||||||||||||
| Fuel Specialties |
$ | 374.4 | $ | 433.4 | $ | (59.0 | ) | -14 | % | |||||||
| Performance Chemicals |
310.8 | 322.7 | (11.9 | ) | -4 | % | ||||||||||
| Oilfield Services |
197.1 | 358.1 | (161.0 | ) | -45 | % | ||||||||||
| Octane Additives |
0.0 | 8.4 | (8.4 | ) | -100 | % | ||||||||||
| |
|
|
|
|
|
|||||||||||
| $ | 882.3 | $ | 1,122.6 | $ | (240.3 | ) | -21 | % | ||||||||
| |
|
|
|
|
|
|||||||||||
Gross profit/(loss): |
||||||||||||||||
| Fuel Specialties |
$ | 116.9 | $ | 154.5 | $ | (37.6 | ) | -24 | % | |||||||
| Performance Chemicals |
76.5 | 73.2 | 3.3 | +5 | % | |||||||||||
| Oilfield Services |
60.5 | 120.4 | (59.9 | ) | -50 | % | ||||||||||
| Octane Additives |
(2.2 | ) | (0.1 | ) | (2.1 | ) | n/a | |||||||||
| |
|
|
|
|
|
|||||||||||
| $ | 251.7 | $ | 348.0 | $ | (96.3 | ) | -28 | % | ||||||||
| |
|
|
|
|
|
|||||||||||
| Gross margin (%): |
||||||||||||||||
| Fuel Specialties |
31.2 |
35.6 |
-4.4 |
|||||||||||||
| Performance Chemicals |
24.6 |
22.7 |
+1.9 |
|||||||||||||
| Oilfield Services |
30.7 |
33.6 |
-2.9 |
|||||||||||||
| Octane Additives |
0.0 |
-1.2 |
n/a |
|||||||||||||
| Aggregate |
28.5 |
31.0 |
-2.5 |
|||||||||||||
| Operating expenses: |
||||||||||||||||
| Fuel Specialties |
$ | (57.9 | ) | $ | (66.4 | ) | $ | 8.5 | -13 | % | ||||||
| Performance Chemicals |
(36.3 | ) | (39.4 | ) | 3.1 | -8 | % | |||||||||
| Oilfield Services |
(70.2 | ) | (92.5 | ) | 22.3 | -24 | % | |||||||||
| Octane Additives |
(0.6 | ) | (1.8 | ) | 1.2 | -67 | % | |||||||||
| Corporate costs |
(41.5 | ) | (41.8 | ) | 0.3 | -1 | % | |||||||||
| Restructuring charge |
(21.1 | ) | 0.0 | (21.1 | ) | n/a | ||||||||||
| Impairment of intangible assets |
(19.8 | ) | 0.0 | (19.8 | ) | n/a | ||||||||||
| |
|
|
|
|
|
|||||||||||
| $ | (247.4 | ) | $ | (241.9 | ) | $ | (5.5 | ) | +2 | % | ||||||
| |
|
|
|
|
|
|||||||||||
31
Fuel Specialties
Net sales:
Nine Months Ended September 30, 2020 |
||||||||||||||||||||
| Change (%) |
Americas |
EMEA |
ASPAC |
AvTel |
Total |
|||||||||||||||
| Volume |
-14 | -7 | -19 | +5 | -10 | |||||||||||||||
| Price and product mix |
+5 | -6 | -6 | -19 | -4 | |||||||||||||||
| Exchange rates |
0 | 0 | 0 | 0 | 0 | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| -9 | -13 | -25 | -14 | -14 | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
Volumes in all our regions have suffered from the adverse impact of the
COVID-19
pandemic, which reduced the global demand for fuel additive products. We believe there are signs that customer demand has started to recover in the third quarter as lockdowns in countries around the world have been eased. Price and product mix in the Americas was favorable due to a richer sales mix, while price and product mix in EMEA and ASPAC was adverse due to lower sales of higher margin products. AvTel volumes were higher than the prior year due to variations in the demand from customers, being offset by an adverse price and product mix. There was a negligible foreign exchange impact year to date.Gross margin
COVID-19
pandemic in the second quarter reducing demand for our higher margin products, together with adverse raw material costs and higher provisions for slow moving inventory.Operating expenses:
COVID-19
pandemic, including lower travel and entertainment costs, together with lower personnel related performance-based remuneration due to a decrease in share-based compensation accruals linked to the Innospec share price.Performance Chemicals
Net sales:
Nine Months Ended September 30, 2020 |
||||||||||||||||
| Change (%) |
Americas |
EMEA |
ASPAC |
Total |
||||||||||||
| Volume |
+11 | -5 | +35 | +2 | ||||||||||||
| Price and product mix |
-13 | -3 | -2 | -6 | ||||||||||||
| Exchange rates |
0 | 0 | 0 | 0 | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| -2 | -8 | +33 | -4 | |||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
Higher volumes in the Americas and ASPAC were driven by increased demand for our Personal Care and Home Care products. Volumes were lower in EMEA due to lower demand in Personal Care and Home Care products. All our regions suffered an adverse price and product mix due to increased sales of lower priced products due largely to lower raw material costs. There was a negligible foreign exchange impact year to date.
32
Gross margin:
Operating expenses:
COVID-19
pandemic, including lower travel and entertainment costs.Oilfield Services
Net sales:
COVID-19
pandemic reducing world-wide demand together with the depressed price of crude oil. The previously expected recovery in the U.S. completions market has been delayed, however the Company has seen some improvement in the demand for crude oil in the third quarter leading to higher sales for our production and drag reducing agent products.Gross margin:
Operating expenses:
right-sizing
of the operations to adjust for the reduction in demand caused by the COVID-19
pandemic, together with lower accruals for long-term performance-based incentive plans due to a decrease in share-based compensation accruals linked to the Innospec share price.Octane Additives
The Octane Additives business ceased
trading and is no longer
a reporting segment from July 1, 2020 as the production of TEL for use in motor gasoline has finished. Legacy costs related to these operations have now been recorded as operating expenses within corporate costs.
Prior to July 1, 2020 net sales were nil in 2020 compared to $8.4 million in the prior year; gross loss was $2.2 million in 2020 compared to $0.1 million in the prior year; operating expenses were $0.6 million in 2020 compared to $1.8 million in the prior year.
Other Income Statement Captions
Corporate costs:
COVID-19
pandemic. The decrease in costs was partly offset by the inclusion of legacy costs related to the now closed Octane Additives segment of $1.1 million, together with higher spending on information technology following the network security incident in the second quarter of 2019.33
Restructuring charge:
Impairment of intangible assets:
Other net income:
| (in millions) |
2020 |
2019 |
Change |
|||||||||
| United Kingdom pension credit |
$ | 4.9 | $ | 5.8 | $ | (0.9 | ) | |||||
| German pension charge |
(0.7 | ) | (0.4 | ) | (0.3 | ) | ||||||
| Foreign exchange gains/(losses) on translation |
2.9 | (3.2 | ) | 6.1 | ||||||||
| Foreign currency forward contracts gains |
0.7 | 2.9 | (2.2 | ) | ||||||||
| |
|
|
|
|
|
|||||||
| $ | 7.8 | $ | 5.1 | $ | 2.7 | |||||||
| |
|
|
|
|
|
|||||||
Interest expense, net:
Income taxes:
non-GAAP
financial measure, provides useful information to investors and may assist them in evaluating the Company’s underlying performance and identifying operating trends. In addition, management uses this non-GAAP
financial measure internally to evaluate the performance of the Company’s operations and for planning and forecasting in subsequent periods.The following table shows a reconciliation of the GAAP effective tax rate to the adjusted effective tax rate:
Nine Months Ended September 30 |
||||||||
| (in millions) |
2020 |
2019 |
||||||
| Income before income taxes |
$ | 10.6 | $ | 107.1 | ||||
| Indemnification asset regarding tax audit |
0.1 | 0.0 | ||||||
| Adjustment for stock compensation |
0.0 | 4.5 | ||||||
| Restructuring charge |
21.1 | 0.0 | ||||||
| Impairment of acquired intangible assets |
19.8 | 0.0 | ||||||
| |
|
|
|
|||||
| $ | 51.6 | $ | 111.6 | |||||
| |
|
|
|
|||||
| Income taxes |
$ | 4.5 | $ | 26.0 | ||||
| Tax on stock compensation |
0.5 | 1.8 | ||||||
| Adjustment of income tax provision |
1.0 | (0.9 | ) | |||||
| Tax on restructuring charge |
4.3 | 0.0 | ||||||
| Tax on impairment of acquired intangible assets |
4.6 | 0.0 | ||||||
34
| Tax on foreign exchange on distribution |
0.5 | 0.8 | ||||||
| Change in UK statutory tax rate |
(2.6 | ) | 0.0 | |||||
| |
|
|
|
|||||
| $ | 12.8 | $ | 27.7 | |||||
| |
|
|
|
|||||
| GAAP effective tax rate |
42.5 | % | 24.3 | % | ||||
| Adjusted effective tax rate |
24.8 | % | 24.8 | % |
35
LIQUIDITY AND FINANCIAL CONDITION
Working Capital
In the first nine months of 2020 our working capital decreased by $27.8 million, while our adjusted working capital decreased by $28.9 million. The difference is primarily due to the exclusion of the net increase for prepaid and current taxes, which was partly offset by a reduction in our cash and cash equivalents.
The Company believes that adjusted working capital, a
non-GAAP
financial measure, (defined by the Company as trade and other accounts receivable, inventories, prepaid expenses, accounts payable and accrued liabilities rather than total current assets less total current liabilities) provides useful information to investors in evaluating the Company’s underlying performance and identifying operating trends. Management uses this non-GAAP
financial measure internally to allocate resources and evaluate the performance of the Company’s operations. Items excluded from working capital in the adjusted working capital calculation are listed in the table below and represent factors which do not fluctuate in line with the day to day working capital needs of the business.| (in millions) |
September 30, 2020 |
December 31, 2019 |
||||||
| Total current assets |
$ | 528.8 | $ | 630.3 | ||||
| Total current liabilities |
(229.8 | ) | (303.5 | ) | ||||
| |
|
|
|
|||||
| Working capital |
299.0 | 326.8 | ||||||
| Less cash and cash equivalents |
(66.6 | ) | (75.7 | ) | ||||
| Less prepaid income taxes |
(8.1 | ) | (2.5 | ) | ||||
| Less other current assets |
(0.2 | ) | (0.8 | ) | ||||
| Add back current portion of accrued income taxes |
5.4 | 10.3 | ||||||
| Add back current portion of finance leases |
0.4 | 1.0 | ||||||
| Add back current portion of plant closure provisions |
5.2 | 5.6 | ||||||
| Add back current portion of operating lease liabilities |
11.3 | 10.6 | ||||||
| |
|
|
|
|||||
| Adjusted working capital |
$ | 246.4 | $ | 275.3 | ||||
| |
|
|
|
|||||
We had a $85.8 million decrease in trade and other accounts receivable primarily driven by the decline in sales in our Fuel Specialties and Oilfield Services segments as a result of the
COVID-19
pandemic. Days’ sales outstanding in our Fuel Specialties segment increased from 52 days to 56 days; decreased in our Performance Chemicals segment from 64 days to 62 days; and increased from 66 days to 88 days in our Oilfield Services segment.We had a $4.8 million decrease in inventories, net of a $3.8 million increase in allowances, as we managed inventory levels in anticipation of increased demand that we expect in the fourth quarter. Days’ sales in inventory in our Fuel Specialties segment increased from 97 days to 154 days; increased in our Performance Chemicals segment from 66 days to 71 days; and increased from 71 days to 131 days in our Oilfield Services segment.
Prepaid expenses decreased $6.8 million, from $14.7 million to $7.9 million due to the normal expensing of prepaid invoices.
We had a $68.5 million decrease in accounts payable and accrued liabilities primarily due to lower production activity to align with reduced customer demand, together with lower accruals for share-based payments linked to the decrease in the Innospec share price during the year. Creditor days (including goods received not invoiced) in our Fuel Specialties segment decreased from 52 days to 39 days; decreased in our Performance Chemicals segment from 54 days to 46 days; and remained unchanged in our Oilfield Services segment at 43 days.
36
Operating Cash Flows
We generated cash from operating activities of $87.7 million in the first nine months of 2020 compared to cash inflows of $103.2 million in the first nine months of 2019. The reduction in cash generated from operating activities was primarily related to the adverse impact of
COVID-19
on customer activity and the timing of payments for income taxes.Cash
At September 30, 2020 and December 31, 2019, we had cash and cash equivalents of $66.6 million and $75.7 million, respectively, of which $21.0 million and $57.9 million, respectively, were held by
non-U.S.
subsidiaries principally in the United Kingdom.The decrease in cash and cash equivalents in 2020 of $9.1 million was primarily driven by the repayment of $60.0 million of our revolving credit facility being partly offset by cash inflows from operating activities and reductions in working capital.
Debt
At September 30, 2020, we had $0.0 million of debt outstanding under the revolving credit facility and $0.6 million of obligations under finance leases relating to certain fixed assets within our Fuel Specialties and Oilfield Services segments. As noted above, we have extended our revolving credit facility until September 2024.
At December 31, 2019, we had $60.0 million of debt outstanding under the revolving credit facility and $1.5 million of obligations under finance leases relating to certain fixed assets within our Fuel Specialties and Oilfield Services segments.
37
Item 3 Quantitative and Qualitative Disclosures about Market Risk
The Company uses floating rate debt to finance its global operations. The Company is subject to business risks inherent in
non-U.S.
activities, including political and economic uncertainty, import and export limitations, and market risk related to changes in interest rates and foreign currency exchange rates. The political and economic risks are mitigated by the stability of the major countries in which the Company’s largest operations are located. Credit limits, ongoing credit evaluation and account monitoring procedures are used to minimize bad debt risk. Collateral is not generally required.From time to time, the Company uses derivatives, including interest rate swaps, commodity swaps and foreign currency forward exchange contracts, in the normal course of business to manage market risks. The derivatives used in hedging activities are considered risk management tools and are not used for trading purposes. In addition, the Company enters into derivative instruments with a diversified group of major financial institutions in order to manage the exposure to
non-performance
of such instruments. The Company’s objective in managing the exposure to changes in interest rates is to limit the impact of such changes on earnings and cash flows and to lower overall borrowing costs. The Company’s objective in managing the exposure to changes in foreign currency exchange rates is to reduce volatility on earnings and cash flows associated with such changes.The Company offers fixed prices for some long-term sales contracts. As manufacturing and raw material costs are subject to variability the Company, from time to time, uses commodity swaps to hedge the cost of some raw materials thus reducing volatility on earnings and cash flows. The derivatives are considered risk management tools and are not used for trading purposes. The Company’s objective is to manage its exposure to fluctuating costs of raw materials.
The Company’s exposure to market risk has been discussed in the Company’s 2019 Annual Report on Form
10-K
and there have been no significant changes since that time.38
Item 4 Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on an evaluation carried out as of the end of the period covered by this report, under the supervision and with the participation of our management, our Chief Executive Officer and our Chief Financial Officer concluded that the Company’s “disclosure controls and procedures” (as defined in Rules
13a-15(e)
and 15d-15(e)
of the Securities Exchange Act of 1934) were effective as of September 30, 2020.Changes in Internal Control over Financial Reporting
The Company is continuously seeking to improve the efficiency and effectiveness of its operations and of its internal control over financial reporting. This is intended to result in refinements to processes throughout the Company.
There were no changes to our internal control over financial reporting which were identified in connection with the evaluation required by paragraph (d) of Rules
13a-15
and 15d-15
under the Securities Exchange Act of 1934, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.39
PART II OTHER INFORMATION
Item 1 Legal Proceedings
Legal matters
While we are involved from time to time in claims and legal proceedings that result from, and are incidental to, the conduct of our business including business and commercial litigation, employee and product liability claims, there are no material pending legal proceedings to which the Company or any of its subsidiaries is a party, or of which any of their property is subject. It is possible, however, that an adverse resolution of an unexpectedly large number of such individual claims or proceedings could, in the aggregate, have a material adverse effect on results of operations for a particular year or quarter.
Item 1A Risk Factors
Information regarding risk factors that could have a material impact on our results of operations or financial condition are described under “Risk Factors” in Item 1A of Part I of our 2019 Form
10-K.
In management’s view, there have been no material changes in the risk factors facing the Company since that time other than an update to the risk factor first disclosed under “Risk Factors” in Item 1A of Part II of our Form 10-Q
for the quarter ended March 31, 2020 and updated in Item 1A of Part II of our Form 10-Q
for the quarter ended June 30, 2020, as follows:The
COVID-19
pandemic has had, and is expected to continue to have, an adverse impact on our business, results of operations, financial position and cash flows. We have been closely monitoring the impact of the
COVID-19
pandemic on all aspects of our business, including how it has and will impact our customers, employees, supply chain, and distribution network. The effects of COVID-19
on the global economic environment have impacted, and are expected to continue to impact, the results of the Company significantly, particularly with respect to reduced demand within our Fuel Specialties and Oilfield Services segments, and we are unable to predict the ultimate impact that it may have on our business, future results of operations, financial position or cash flows. The further extent to which our operations may be impacted by the COVID-19
pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted. These include, but are not limited to, the availability and productivity of our employees, the duration and severity of the pandemic; government restrictions on businesses and individuals; the impact of the pandemic on our customers’ businesses and the resulting demand for our products; the impact on our suppliers and supply chain network; the impact on global economies, including the possibility of recession and depression, and the timing and rate of economic recovery; the development of treatments and vaccines; and potential adverse effects on the financial markets.The impact of
COVID-19,
as well as future pandemics or resurgences, may also exacerbate other risks discussed in Item 1A, “Risk Factors” in our Annual Report on Form 10-K
for the fiscal year ended December 31, 2019, any of which could have a material effect on us. This situation is changing rapidly and additional impacts may arise that we are not aware of currently.Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
There have been no unregistered sales of equity securities.
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During the quarter ended September 30, 2020 the Company made no open market repurchases of its common stock.
During the quarter ended September 30, 2020, the Company did not purchase any of its common stock in connection with the exercising of stock options by employees.
Item 3 Defaults Upon Senior Securities
None.
Item 4 Mine Safety Disclosures
Not applicable.
Item 5 Other |
Information |
None.
Item 6 Exhibits
| 10.1 | Extension Request for Multicurrency Revolving Facility Agreement and Confirmation (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed October 6, 2020) | |
| 31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1 | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2 | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101 | XBRL Instance Document and Related Item - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. | |
| 104 | Cover Page Interactive Data File – The cover page XBRL tags are embedded within the inline XBRL document. | |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| INNOSPEC INC. | ||||||||
Registrant | ||||||||
| Date: November 4, 2020 |
By |
/s/ PATRICK S. WILLIAMS | ||||||
Patrick S. Williams | ||||||||
President and Chief Executive Officer | ||||||||
| Date: November 4, 2020 |
By |
/s/ IAN P. CLEMINSON | ||||||
Ian P. Cleminson | ||||||||
Executive Vice President and Chief Financial Officer | ||||||||