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,~~March 31, ~~2023~~2024

☐ 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

INNOSPEC INC.

(Exact name of registrant as specified in its charter)


	DELAWARE		98-0181725
	(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

	8310 South Valley Highway Suite 350 Englewood

	Colorado		80112
	(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

Common stock, par value $0.01 per share

IOSP

NASDAQ

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 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.~~files). Yes ☒ No ☐

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.


Large accelerated filer	☒	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 of common stock, as of the latest practicable date.


	Class		Outstanding as of ~~November 1, 2023~~April 30, 2024
	Common Stock, par value $0.01		~~24,865,799~~24,933,245

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION	2
Item 1	Condensed Consolidated Financial Statements	2
	Condensed Consolidated Statements of Income	2
	Condensed Consolidated Statements of Comprehensive Income	3
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Cash Flows	5
	Condensed Consolidated Statements of Equity	6
	Notes To The Unaudited Interim Condensed Consolidated Financial Statements	87
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Three ~~and Nine~~ Months Ended ~~September 30, 2023~~March 31, 2024	18
	Critical Accounting Estimates	18
	Results of Operations	18
	Liquidity and Financial Condition	2522
Item 3	Quantitative and Qualitative Disclosures about Market Risk	2724
Item 4	Controls and Procedures	2725
PART II	OTHER INFORMATION	2826
Item 1	Legal Proceedings	2826
Item 1A	Risk Factors	2826
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	2826
Item 3	Defaults Upon Senior Securities	2827
Item 4	Mine Safety Disclosures	2827
Item 5	Other Information	2827
Item 6	Exhibits	2928
SIGNATURES		3029

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,” “could,” “believes,” “feels,” “plans,” “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, 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, ~~2022~~2023 and other reports filed with the U.S. Securities and Exchange Commission ("SEC"). 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.

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,						Three Months Ended March 31,
(in millions, except share and per share data)	2023			2022			2023			2022			2024			2023
Net sales	$	464.1		$	513.0		$	1,454.1		$	1,453.0		$	500.2		$	509.6
Cost of goods sold		(326.9	)		(357.0	)		(1,018.7	)		(1,017.9	)		(344.5	)		(361.8	)
Gross profit		137.2			156.0			435.4			435.1			155.7			147.8
Operating expenses:
Selling, general and administrative		(83.7	)		(95.8	)		(285.5	)		(264.1	)		(92.7	)		(96.2	)
Research and development		(11.6	)		(10.1	)		(32.8	)		(30.3	)		(11.8	)		(10.6	)
Adjustment to fair value of contingent consideration														(0.8	)		—
Profit on disposal of property, plant and equipment														0.1			—
Total operating expenses		(95.3	)		(105.9	)		(318.3	)		(294.4	)		(105.2	)		(106.8	)
Operating income		41.9			50.1			117.1			140.7			50.5			41.0
Other income/(expense), net		4.8			(0.9	)		11.2			(0.2	)
Interest income/(expense), net		0.8			(0.3	)		0.8			(1.1	)
Other income, net														2.7			3.7
Interest income, net														2.1			0.3
Income before income tax expense		47.5			48.9			129.1			139.4			55.3			45.0
Income tax expense		(8.3	)		(10.2	)		(27.8	)		(31.9	)		(13.9	)		(11.8	)
Net income	$	39.2		$	38.7		$	101.3		$	107.5		$	41.4		$	33.2
Earnings per share:
Basic	$	1.58		$	1.56		$	4.08		$	4.34		$	1.66		$	1.34
Diluted	$	1.57		$	1.55		$	4.05		$	4.30		$	1.65		$	1.33
Weighted average shares outstanding (in thousands):
Basic		24,866			24,786			24,845			24,794			24,893			24,801
Diluted		25,006			24,965			25,000			24,976			25,066			24,962

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

INNOSPEC INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(in millions)	2023			2022			2023			2022			2024			2023
Net income	$	39.2		$	38.7		$	101.3			107.5		$	41.4		$	33.2
Other comprehensive income/(loss):
Changes in cumulative translation adjustment, net of tax of $0.5 million, $1.0 million, $(0.2) million and $2.2 million, respectively		(7.9	)		(16.4	)		(1.8	)		(37.1	)
Amortization of prior service cost, net of tax of $(0.1) million, $0.0 million, $(0.1) million and $(0.1) million, respectively		0.1			0.1			0.3			0.3
Amortization of actuarial net losses/(gains), net of tax of $0.2 million, $0.0 million, $0.4 million and $0.0 million, respectively		(0.4	)		0.1			(1.2	)		0.4
Total other comprehensive income/(loss)		(8.2	)		(16.2	)		(2.7	)		(36.4	)
Changes in cumulative translation adjustment (1)														(7.7	)		5.1
Amortization of prior service cost														0.1			0.1
Amortization of actuarial net gains														(0.1	)		(0.5	)
Other comprehensive income/(loss), before tax														(7.7	)		4.7
Income tax income/(expense) related to other comprehensive income														0.4			(0.3	)
Total comprehensive income	$	31.0		$	22.5		$	98.6		$	71.1		$	34.1		$	37.6

(1) Amounts are before tax of $0.4 million and $(0.4) million in 2024 and 2023, respectively.

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

INNOSPEC INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(in millions, except share and per share data)	September 30, 2023		December 31, 2022		March 31, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	207.2	$	147.1	$	270.1	$	203.7
Trade and other accounts receivable (less allowances of $7.8 million and $7.7 million respectively)		305.2		334.6
Inventories (less allowances of $27.4 million and $27.1 million respectively):
Trade and other accounts receivable (less allowances of $9.0 million and $10.3 million, respectively)						318.2		359.8
Inventories (less allowances of $26.4 million and $28.1 million, respectively):
Finished goods		234.0		259.3		216.5		215.7
Raw materials		97.5		113.8		87.8		84.4
Total inventories		331.5		373.1		304.3		300.1
Prepaid expenses		7.7		14.1		15.0		18.7
Prepaid income taxes		10.7		3.3		4.4		2.8
Other current assets		1.4		0.4		0.9		0.6
Total current assets		863.7		872.6		912.9		885.7
Net property, plant and equipment		244.6		220.9		268.7		268.3
Operating lease right-of-use assets		42.5		45.3
Operating leases right-of-use assets						43.5		45.1
Goodwill		357.9		358.8		397.5		399.3
Other intangible assets		47.8		45.0		57.7		57.3
Deferred tax assets		5.9		5.9		10.4		10.4
Pension asset		49.7		48.1		36.1		35.1
Other non-current assets		6.5		7.1		6.0		6.2
Total assets	$	1,618.6	$	1,603.7	$	1,732.8	$	1,707.4


Liabilities and Equity
Current liabilities:
Accounts payable	$	146.1		$	165.3		$	166.4		$	163.6
Accrued liabilities		165.1			202.9			163.6			185.9
Current portion of operating lease liabilities		13.1			13.9			13.6			13.6
Current portion of plant closure provisions		4.7			5.3			4.6			4.6
Current portion of accrued income taxes		15.2			18.4			12.2			2.6
Current portion of unrecognized tax benefits								4.5			1.2
Total current liabilities		344.2			405.8			364.9			371.5
Operating lease liabilities, net of current portion		29.4			31.4			30.0			31.6
Plant closure provisions, net of current portion		51.1			51.9			56.6			57.0
Accrued income taxes, net of current portion		11.6			21.0			11.6			11.6
Unrecognized tax benefits		14.1			13.4
Unrecognized tax benefits, net of current portion								10.5			13.6
Deferred tax liabilities		26.4			26.2			34.1			33.5
Pension liabilities and post-employment benefits		12.2			12.2			13.0			13.3
Acquisition-related contingent consideration								23.5			23.4
Other non-current liabilities		1.5			1.4			2.4			2.3
Total liabilities		490.5			563.3			546.6			557.8
Equity:
Common stock, $0.01 par value, authorized 40,000,000 shares, issued 29,554,500 shares		0.3			0.3
Common stock, $0.01 par value, authorized 40,000,000 shares, issued 29,554,500 shares								0.3			0.3
Additional paid-in capital		358.9			354.1			362.4			361.0
Treasury stock (4,687,975 and 4,788,966 shares at cost, respectively)		(94.2	)		(95.4	)
Treasury stock (4,621,255 and 4,686,511 shares at cost, respectively)								(93.3	)		(94.3	)
Retained earnings		1,008.3			924.2			1,069.6			1,028.2
Accumulated other comprehensive loss		(147.9	)		(145.2	)		(155.4	)		(148.1	)
Total Innospec stockholders’ equity		1,125.4			1,038.0			1,183.6			1,147.1
Non-controlling interest		2.7			2.4			2.6			2.5
Total equity		1,128.1			1,040.4			1,186.2			1,149.6
Total liabilities and equity	$	1,618.6		$	1,603.7		$	1,732.8		$	1,707.4

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

INNOSPEC INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,						Three Months Ended March 31,
(in millions)	2023			2022			2024			2023
Cash Flows from Operating Activities
Net income	$	101.3		$	107.5		$	41.4		$	33.2
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		29.1			30.9			10.4			9.3
Adjustment to fair value of contingent consideration								0.8			—
Deferred taxes		0.5			0.6			0.8			1.2
Non-cash movements on defined benefit pension plans		(2.5	)		(1.9	)
Profit on disposal								(0.1	)		—
Non-cash income on defined benefit pension plans								(0.8	)		(0.8	)
Stock option compensation		5.9			4.7			2.1			1.9
Changes in assets and liabilities, net of effects of acquired and divested companies:
Trade and other accounts receivable		29.5			(70.1	)		39.5			(6.0	)
Inventories		42.0			(112.6	)		(6.0	)		9.1
Prepaid expenses		6.5			11.2			3.6			(1.2	)
Accounts payable and accrued liabilities		(57.2	)		38.9			(19.7	)		(28.0	)
Plant closure provisions		(1.2	)		0.3			(0.1	)		(0.3	)
Accrued income taxes		(20.2	)		(4.0	)
Income taxes								8.8			0.8
Unrecognized tax benefits		0.7			—			0.2			0.3
Other assets and liabilities		0.5			(2.2	)		(0.3	)		2.3
Net cash provided by/(used in) operating activities		134.9			3.3
Net cash provided by operating activities								80.6			21.8
Cash Flows from Investing Activities
Capital expenditures		(45.2	)		(27.1	)		(10.7	)		(17.7	)
Proceeds on disposal of property, plant and equipment								0.1			—
Internally developed software		(10.8	)		—			(3.7	)		(4.3	)
Proceeds on disposal of property, plant and equipment		—			0.1
Net cash used in investing activities		(56.0	)		(27.0	)		(14.3	)		(22.0	)
Cash Flows from Financing Activities
Non-controlling interest		0.3			1.9			0.2			—
Proceeds from revolving credit facility		—			—
Repayments of revolving credit facility		—			—
Repayments of finance leases		—			(0.1	)
Refinancing costs		(1.4	)		—
Dividend paid		(17.2	)		(15.6	)
Issue of treasury stock		0.7			2.1			0.7			0.7
Repurchase of common stock		(1.0	)		(5.0	)		(0.4	)		(0.3	)
Net cash used in financing activities		(18.6	)		(16.7	)
Net cash provided by financing activities								0.5			0.4
Effect of foreign currency exchange rate changes on cash		(0.2	)		(0.9	)		(0.4	)		0.2
Net change in cash and cash equivalents		60.1			(41.3	)		66.4			0.4
Cash and cash equivalents at beginning of period		147.1			141.8			203.7			147.1
Cash and cash equivalents at end of period	$	207.2		$	100.5		$	270.1		$	147.5

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

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			Common Stock		Additional Paid-In Capital			Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Loss			Non- Controlling Interest		Total Equity
Balance at December 31, 2022	$	0.3	$	354.1		$	(95.4	)	$	924.2		$	(145.2	)	$	2.4	$	1,040.4
Balance at December 31, 2023																				$	0.3	$	361.0		$	(94.3	)	$	1,028.2	$	(148.1	)	$	2.5	$	1,149.6
Net income										101.3								101.3											41.4							41.4
Dividend paid ($0.69 per share)										(17.2	)							(17.2	)
Changes in cumulative translation adjustment, net of tax													(1.8	)				(1.8	)												(7.3	)				(7.3	)
Share of net income																0.3		0.3															0.1			0.1
Treasury stock reissued				(1.1	)		2.2											1.1					(0.7	)		1.4										0.7
Treasury stock repurchased							(1.0	)										(1.0	)							(0.4	)									(0.4	)
Stock option compensation				5.9														5.9					2.1													2.1
Amortization of prior service cost, net of tax													0.3					0.3													0.1					0.1
Amortization of actuarial net gains, net of tax													(1.2	)				(1.2	)
Balance at September 30, 2023	$	0.3	$	358.9		$	(94.2	)	$	1,008.3		$	(147.9	)	$	2.7	$	1,128.1
Amortization of actuarial net losses, net of tax																															(0.1	)				(0.1	)
Balance at March 31, 2024																				$	0.3	$	362.4		$	(93.3	)	$	1,069.6	$	(155.4	)	$	2.6	$	1,186.2


(in millions)	Common Stock		Additional Paid-In Capital		Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Non- Controlling Interest		Total Equity			Common Stock		Additional Paid-In Capital			Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Loss			Non- Controlling Interest		Total Equity
Balance at December 31, 2021	$	0.3	$	346.7	$	(90.6	)	$	822.9		$	(46.9	)	$	0.6	$	1,033.0
Balance at December 31, 2022																			$	0.3	$	354.1		$	(95.4	)	$	924.2	$	(145.2	)	$	2.4	$	1,040.4
Net income									107.5								107.5											33.2							33.2
Dividend paid ($0.63 per share)									(15.6	)							(15.6	)
Changes in cumulative translation adjustment, net of tax												(37.1	)				(37.1	)												4.7					4.7
Non-controlling interest														1.8			1.8
Share of net income															0.1		0.1
Treasury stock reissued				0.8		1.0											1.8					(1.2	)		2.1										0.9
Treasury stock repurchased						(5.0	)										(5.0	)							(0.2	)									(0.2	)
Stock option compensation				4.7													4.7					1.9													1.9
Amortization of prior service cost, net of tax												0.3					0.3													0.1					0.1
Amortization of actuarial net losses, net of tax												0.4					0.4													(0.4	)				(0.4	)
Balance at September 30, 2022	$	0.3	$	352.2	$	(94.6	)	$	914.8		$	(83.3	)	$	2.5	$	1,091.9
Balance at March 31, 2023																			$	0.3	$	354.8		$	(93.5	)	$	957.4	$	(140.8	)	$	2.4	$	1,080.6

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

~~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, 2023

$
0.3

$
356.7

$
(94.2
)

$
969.1

$
(139.7
)

$
2.6

$
1,094.8

Net income

39.2

39.2

Changes in cumulative translation adjustment, net of tax

(7.9
)

(7.9
)
Share of net income

0.1

0.1

Treasury stock reissued

0.2

0.1

0.3

Treasury stock repurchased

(0.1
)

(0.1
)
Stock option compensation

2.0

2.0

Amortization of prior service cost, net of tax

0.1

0.1

Amortization of actuarial net gains, net of tax

(0.4
)

(0.4
)
Balance at September 30, 2023

$
0.3

$
358.9

$
(94.2
)

$
1,008.3

$
(147.9
)

$
2.7

$
1,128.1

(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, 2022

$
0.3

$
350.9

$
(92.3
)

$
876.1

$
(67.1
)

$
0.7

$
1,068.6

Net income

38.7

38.7

Changes in cumulative translation adjustment, net of tax

(16.4
)

(16.4
)
Non-controlling interest

1.8

1.8

Treasury stock reissued

(0.2
)

(0.2
)
Treasury stock repurchased

(2.3
)

(2.3
)
Stock option compensation

1.5

1.5

Amortization of prior service cost, net of tax

0.1

0.1

Amortization of actuarial net losses, net of tax

0.1

0.1

Balance at September 30, 2022

$
0.3

$
352.2

$
(94.6
)

$
914.8

$
(83.3
)

$
2.5

$
1,091.9

~~The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.~~

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, ~~2022~~2023 filed on February ~~22, 2023~~14, 2024 (the ~~“2022~~“2023 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,” “the Group,” “we,” “us” and “our,” we are referring to Innospec Inc. and its consolidated subsidiaries unless otherwise indicated or the context otherwise requires.

NOTE 2 – SEGMENT REPORTING

The Company reports its financial performance based on three reportable segments, which are Performance Chemicals, Fuel Specialties and Oilfield Services.

The Company evaluates the performance of its segments based on operating income. The following table analyzes sales and other financial information by the Company’s reportable segments:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(in millions)	2023			2022			2023			2022			2024			2023
Net Sales:
Personal Care	$	97.0		$	102.4		$	263.8		$	311.1			94.8			88.2
Home Care		22.3			22.6			65.7			72.3			26.4			23.7
Other		25.9			34.7			94.9			112.4			39.6			39.5
Performance Chemicals		145.2			159.7			424.4			495.8		$	160.8		$	151.4
Refinery and Performance		126.0			133.2			394.6			405.5			145.1			149.5
Other		43.3			45.5			119.2			141.4			31.8			40.8
Fuel Specialties		169.3			178.7			513.8			546.9			176.9			190.3
Oilfield Services		149.6			174.6			515.9			410.3			162.5			167.9
	$	464.1		$	513.0		$	1,454.1		$	1,453.0		$	500.2		$	509.6
Operating income/(loss):
Performance Chemicals	$	16.9		$	25.4		$	36.5		$	79.5		$	21.1		$	10.4
Fuel Specialties		27.6			27.9			77.1			94.9			33.4			32.4
Oilfield Services		16.4			14.2			60.3			21.2			16.9			15.9
Corporate costs		(19.0	)		(17.4	)		(56.8	)		(54.9	)		(20.2	)		(17.7	)
Adjustment to fair value of contingent consideration														(0.8	)		—
Profit on disposal of property, plant and equipment														0.1			—
Total operating income	$	41.9		$	50.1		$	117.1		$	140.7		$	50.5		$	41.0

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,				Three Months Ended March 31,
	2023		2022		2023		2022		2024		2023
Numerator (in millions):
Net income available to common stockholders	$	39.2	$	38.7	$	101.3	$	107.5	$	41.4	$	33.2
Denominator (in thousands):
Weighted average common shares outstanding		24,866		24,786		24,845		24,794		24,893		24,801
Dilutive effect of stock options and awards		140		179		155		182		173		161
Denominator for diluted earnings per share		25,006		24,965		25,000		24,976		25,066		24,962
Net income per share, basic:	$	1.58	$	1.56	$	4.08	$	4.34	$	1.66	$	1.34
Net income per share, diluted:	$	1.57	$	1.55	$	4.05	$	4.30	$	1.65	$	1.33

In the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, the average number of anti-dilutive options excluded from the calculation of diluted earnings per share were ~~21,950~~31,184 ~~and~~ ~~29,293, respectively~~ (three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 – ~~109,377~~25,783 ~~and~~ ).

~~54,522~~8

~~, respectively).~~

NOTE 4 – GOODWILL

The following table summarizes the goodwill movements in the year:


(in millions)	Gross Cost			2024
Opening balance at January 1, 2023	$	358.8
Gross cost at January 1				$	399.3
Acquisitions					1.5
Exchange effect		(0.9	)		(3.3	)
Closing balance at September 30, 2023	$	357.9
Gross cost at March 31				$	397.5

In relation to the acquisition of QGP Química Geral S.A. (“QGP”) in December 2023, the fair value of the acquired net asset value reported at the end of the previous quarter has been revised. As a result there has been a decrease of $1.5 million in the fair value of the net assets acquired, with a corresponding increase to the acquired goodwill.

The measurement periods for the valuation of assets acquired and liabilities assumed ends as soon as information on the facts and circumstances that existed as of the acquisition dates becomes available but does not exceed twelve months. We have not completed our alignment of accounting policies or fair value review on the other net assets acquired at this stage, but any potential adjustments would not have a material impact on the reported figures.

The exchange effect for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 was $~~0.9~~3.3 million relating to our Performance Chemicals segment.

NOTE 5 – OTHER INTANGIBLE ASSETS

The following table analyzes other intangible assets movements in the year:


(in millions)	2023			2024
Gross cost at January 1	$	291.1		$	315.1
Additions		10.8			3.6
Exchange effect		(0.3	)		(1.2	)
Gross cost at September 30		301.6
Gross cost at March 31					317.5
Accumulated amortization at January 1		(246.1	)		(257.8	)
Amortization expense		(8.0	)		(2.8	)
Exchange effect		0.3			0.8
Accumulated amortization at September 30		(253.8	)
Net book amount at September 30	$	47.8
Accumulated amortization at March 31					(259.8	)
Net book amount at March 31				$	57.7

The amortization expense for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 was $~~8.0~~2.8 million ~~(nine~~(three months ended ~~September 30, 2022~~March 31, 2023 – $~~11.4~~2.7 million).

In relation to the acquisition of QGP in December 2023, a provisional amount based on previous acquisitions and management’s best current estimate has been included for customer lists. We have provisionally estimated the expected useful life of the other intangible assets to be 10 years. The measurement periods for the valuation of assets acquired and liabilities assumed ends as soon as information on the facts and circumstances that existed as of the acquisition dates becomes available but does not exceed twelve months.

In 2024, we capitalized $~~10.8~~3.6 million in relation to our internally developed software for a new Enterprise Resource Planning ~~(“ERP”)~~ system covering our EMEA and ASPAC regions. The expenses capitalized include the acquisition costs for the software as well as the external and internal costs of the development.

NOTE 6 – PENSION AND POST EMPLOYMENT BENEFITS

The Company maintains a defined benefit pension plan covering certain current and former employees in the United Kingdom (the “UK Plan”). The UK Plan is closed to future service accrual and has a large number of deferred and current pensioners. The assets of the UK Plan are predominantly insurance policies, operating as investment assets, covering all liabilities. This reduces the UK Plan’s potential reliance on the Company for future cash funding requirements.

The Company also maintains an unfunded defined benefit pension plan covering certain current and former employees in Germany (the “German plan”). The German plan is closed to new entrants and has no assets.

The net periodic benefit of these plans is shown in the following table:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(in millions)	2023			2022			2023			2022			2024			2023
Service cost	$	(0.9	)	$	(0.6	)	$	(2.7	)	$	(1.8	)	$	(0.8	)	$	(0.9	)
Interest cost on projected benefit obligation		(5.1	)		(2.4	)		(15.0	)		(7.8	)		(4.7	)		(4.9	)
Expected return on plan assets		6.5			3.8			19.0			12.3			6.4			6.2
Amortization of prior service cost		(0.2	)		(0.1	)		(0.4	)		(0.4	)		(0.1	)		(0.1	)
Amortization of actuarial net gains/(losses)		0.6			(0.1	)		1.6			(0.4	)
Amortization of actuarial net gains														0.1			0.5
Net periodic benefit	$	0.9		$	0.6		$	2.5		$	1.9		$	0.9		$	0.8

The service cost has been recognized in selling, general and administrative expenses. All other items have been recognized within other income and expense. The amortization of prior service cost and actuarial net ~~losses~~gains are a reclassification out of accumulated other comprehensive loss into other income and expense.

In addition, we have obligations for post-employment benefits in some of our other European businesses. As at ~~September 30, 2023,~~March 31, 2024, we have recorded a liability of $~~3.9~~4.2 million (December 31, ~~2022~~2023 – $~~4.1~~4.2 million).

NOTE 7 – 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		Unrecognized Tax Benefits			Interest and Penalties			Total
Opening balance at January 1, 2023	$	10.2	$	3.2	$	13.4
Opening balance at January 1, 2024							$	10.5		$	4.3		$	14.8
Net change for tax positions of prior periods		—		0.7		0.7		(0.1	)		0.3			0.2
Closing balance at September 30, 2023		10.2		3.9		14.1
Closing balance at March 31, 2024								10.4			4.6			15.0
Current		—		—		—		(3.2	)		(1.3	)		(4.5	)
Non-current	$	10.2	$	3.9	$	14.1	$	7.2		$	3.3		$	10.5

All of the $~~14.1~~15.0 million of unrecognized tax benefits ~~interest and penalties~~ would impact our effective tax rate if recognized.

In 2021 a non-U.S. subsidiary, Innospec Limited, entered into a review by the U.K. tax authorities under the U.K.’s Profit Diversion Compliance Facility (“PDCF”) in relation to the period 2017 to 2020 inclusive. The Company has determined that additional tax and interest totaling $~~1.1~~1.2 million may arise as a result of the ongoing review. ~~This includes an increase in interest accrued of $0.1~~ ~~million recorded in the nine months to September 30, 2023.~~

A non-U.S. subsidiary, Innospec Performance Chemicals Italia Srl, is subject to an ongoing tax audit in relation to the period 2011 to 2014 inclusive. The Company has determined that additional tax, interest and penalties totaling $~~3.2~~3.3 million may arise as a consequence of the tax audit. This includes a reduction for foreign exchange movements of $0.1 million recorded in the three months to March 31, 2024. 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. Following the end of the quarter, the Company received notice from the previous owner that the ongoing tax audit process is close to resolution. The liability which is expected to arise on settlement is consistent with the amount recorded.

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 of 2017 (“Tax 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 $~~9.8~~10.5 million may arise in relation to this item. This includes an increase in interest accrued of $~~0.6~~0.3 million in the ~~nine~~three months to ~~September 30, 2023.~~March 31, 2024. The Company believes that it is reasonably possible that there will be a decrease of $

10.5 million unrecognized tax benefits during 2024 in relation to this item due to a lapse of the statute of limitations.

~~Aside from certain tax returns that are closed after completion~~As of ~~a U.S. Internal Revenue Service (“IRS”) audit,~~March 31, 2024, the Company and its U.S. subsidiaries remain open to examination by the IRS for certain elements of 2017 year ~~2017~~ and for years ~~2019~~2020 onwards under the statute of limitations. The Company’s subsidiaries in foreign tax jurisdictions are open to examination including Brazil ~~(2018~~(2019 onwards), Germany ~~(2018~~(2019 onwards), and the U.K. (2017 onwards).

NOTE 8 – LONG-TERM DEBT

As at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, the Company had not drawn down on its revolving credit facility. During the first three months of 2024 and 2023, the Company did not draw down or repay any borrowing on its revolving credit facility.

~~On May 31, 2023, Innospec Inc. and certain subsidiaries of the~~The Company ~~(together with the Company, the “Borrowers”) entered into~~continues to have available a ~~Multicurrency Revolving Facility Agreement with various lenders (the “Agreement”) which replaces the Company’s~~$250.0 million revolving credit facility ~~agreement dated~~until ~~September 26, 2019~~May 30, 2027. The ~~Agreement provides for a $250,000,000four-year~~ ~~multicurrency revolving loan~~ facility ~~available to the Borrowers (the “Facility”). The Agreement also~~ contains an accordion feature whereby the Company may elect to increase the total available borrowings by an aggregate amount of up to $~~125,000,000. The termination date of the Facility is~~ ~~May 30, 2027, but the Company has an option to request an extension of the Facility for a further year. As a consequence, the Company has capitalized $1.5~~125.0 ~~million of costs relating to the new Agreement which are to be amortized over the period to~~ ~~May 30, 2027. In addition the Company has written-off $0.5~~ ~~million of capitalized costs relating to the previous agreement.~~million.

As at ~~September 30, 2023,~~March 31, 2024, the deferred finance costs of $~~1.3~~1.1 million (December 31, ~~2022~~2023 - $~~0.6~~1.2 million) related to the arrangement of the credit facility, are included within other current and non-current assets at the balance sheet dates.

NOTE 9 – PLANT CLOSURE PROVISIONS

The Company has continuing plans to remediate manufacturing facilities at sites around the world as and when those operations are expected to cease, or we are required to decommission the sites according to local laws and regulations. The liability for estimated plant closure costs includes costs for environmental remediation liabilities and asset retirement obligations.

The principal site giving rise to asset retirement obligations is the manufacturing site at Ellesmere Port in the United Kingdom. There are also asset retirement obligations and environmental remediation liabilities on a much smaller scale in respect of other manufacturing sites.

Movements in the provisions are summarized as follows:


(in millions)	2023			2024
Total at January 1	$	57.2		$	61.6
Charge for the period		2.7			0.8
Utilized in the period		(3.9	)		(0.9	)
Exchange effect		(0.2	)		(0.3	)
Total at September 30		55.8
Total at March 31					61.2
Due within one year		(4.7	)		(4.6	)
Due after one year	$	51.1		$	56.6

The charge for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 was $~~2.7~~0.8 million ~~(nine~~(three months ended ~~September 30, 2022~~March 31, 2023 – $~~2.7~~0.9 million). The current year charge represents the accounting accretion only, with no changes for the expected cost and scope of future remediation activities. Amounts due within one year refer to provisions where expenditure is expected to arise within one year of the balance sheet date.

NOTE 10 – 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, 2023				December 31, 2022				March 31, 2024				December 31, 2023
(in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets
Non-derivatives:
Cash and cash equivalents	$	207.2	$	207.2	$	147.1	$	147.1
Derivatives (Level 1 measurement):
Other current and non-current assets:
Emissions Trading Scheme credits									$	3.9	$	3.9	$	4.8	$	4.8
Foreign currency forward exchange contracts		1.0		1.0		—		—		0.5		0.5		—		—
Emissions Trading Scheme credits		3.2		3.2		2.7		2.7
Liabilities
Derivatives (Level 1 measurement):
Other current and non-current liabilities:
Foreign currency forward exchange contracts		—		—		0.5		0.5		—		—		1.0		1.0
Non-financial liabilities (Level 3 measurement):
Other current and non-current liabilities:
Stock equivalent units		17.4		17.4		26.4		26.4
Acquisition-related contingent consideration									$	23.5	$	23.5	$	23.4	$	23.4

The following methods and assumptions were used to estimate the fair values:

~~Cash and cash equivalents:~~ ~~The carrying amount approximates fair value because of the short-term maturities of such instruments.~~

Emissions Trading Scheme credits: The fair value is determined by the open market pricing at the end of the reporting period.

Foreign currency forward exchange contracts: The fair value of derivatives relating to foreign currency forward exchange contracts are derived from current settlement prices and comparable contracts using current assumptions. Foreign currency forward exchange contracts primarily relate to contracts entered into to hedge future known transactions or hedge balance sheet net cash positions. The movements in the carrying amounts and fair values of these contracts are largely due to changes in exchange rates against the U.S. dollar.

~~Stock equivalent units:~~Acquisition-related contingent consideration: ~~The~~Contingent consideration payable in cash is discounted to its fair ~~values of stock equivalent units are calculated~~value at each balance sheet ~~date using either~~date. Where contingent consideration is dependent upon pre-determined financial targets, an estimate of the ~~Black-Scholes or Monte Carlo method depending~~fair value of the likely consideration payable is made at each balance sheet date. The contingent consideration payable has been calculated based on the ~~terms of each grant.~~latest forecast.

NOTE 11 – 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, 2023,~~March 31, 2024, 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~~three months of 2024 was a gain of $1.0 million (first three months of 2023 ~~was~~– a loss of $~~1.2~~ ~~million (first nine months of 2022 – a gain of $6.5~~0.9 million). ~~The gain or loss has been recorded in other income or expense.~~

NOTE 12 – CONTINGENCIES

Legal matters

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, and employee and product liability claims.

As ~~previously~~ reported in the ~~first and second quarters of~~ 2023 Form 10-K, we have incurred financial losses and lodged a civil and criminal legal claim related to a misappropriation of inventory ~~and other losses incurred~~ in Brazil. ~~There is also an ongoing insurance claim related~~As at the time of filing, there have been no significant developments to report in relation to the ~~misappropriation of inventory element of the matter.~~claims being made. Consistent with ~~our accounting treatment in the first and second~~prior quarters, a corresponding asset for the potential legal or insurance recoveries has not been recorded for the resulting financial losses arising from this matter.

In addition, unrelated to the Brazil matter, in the unlikely event there are an unexpectedly large number of individual claims or proceedings with an adverse resolution, this 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 non-U.S. excise taxes and customs duties. As at ~~September 30, 2023,~~March 31, 2024, such guarantees which are not recognized as liabilities in the condensed consolidated financial statements amounted to $~~6.0~~6.8 million (December 31, ~~2022~~2023 - $~~7.0~~6.2 million). The remaining terms of the fixed maturity guarantees are up to 9 years, with some further guarantees having no fixed expiry date.

Under the terms of the guarantee arrangements, generally the Company would be required to perform the obligations 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 connection with their various business activities, which are expected to be fulfilled with no adverse consequences material to the Company.

NOTE 13 – STOCK-BASED COMPENSATION PLANS

The compensation cost recorded for stock options for the three months ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~ was $~~2.0~~2.1 million and $~~1.5~~1.9 million, respectively.

The compensation cost recorded for stock equivalent units for the three months ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~ was $~~2.0~~2.5 million and $~~1.8~~ ~~million, respectively.~~

~~The compensation cost recorded for stock options for the first nine months of 2023 and 2022 was $5.9~~ ~~million and $4.7~~ ~~million, respectively. The compensation cost recorded for stock equivalent units for the first nine months of 2023 and 2022 was $7.1~~ ~~million and $15.9~~3.2 million, respectively.

The following table summarizes the transactions of the Company’s ~~share-based~~stock-based compensation plans for the ~~nine~~three months ended ~~September 30, 2023.~~March 31, 2024.


	Number of shares			Weighted Average Grant-Date Fair Value		Number of shares			Weighted Average Grant-Date Fair Value
Nonvested at December 31, 2022		757,040		$	69.0
Nonvested at December 31, 2023							652,891		$	75.2
Granted		159,322		$	94.3		135,942		$	130.5
Vested		(208,803	)	$	66.3		(160,207	)	$	86.6
Forfeited		(50,911	)	$	77.1		(7,151	)	$	83.9
Nonvested at September 30, 2023		656,648		$	75.1
Nonvested at March 31, 2024							621,475		$	84.2

~~New grants~~For the awards granted with market conditions during the three months ended March 31, 2024, a Monte Carlo model has been used to calculate the grant-date fair value. For all other awards granted in the quarter, a fair market value methodology has been used to calculate the grant-date fair value.

The awards granted with market conditions during the three months ended March 31, 2024, include a performance measure for Innospec's total shareholder return as compared to a peer group of companies. This measure can result in a maximum 130% vesting for the number of stock options granted. The maximum potential vesting has been reflected in the grant-date fair value calculation, but not reflected for the number of awards granted, as shown in the table above. All other awards granted in the quarter have similar vesting conditions to those granted in ~~previous periods. The valuation methodologies of~~ the ~~new grants are consistent with~~ previous periods.

As of ~~September 30, 2023,~~March 31, 2024, there was $~~23.5~~34.6 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of ~~1.9~~2.2 years.

NOTE 14 – RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE LOSS

Reclassifications out of accumulated other comprehensive loss (“AOCL”) for the first ~~nine~~three months of ~~2023~~2024 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 cost

$
0.4

See (1) below
Amortization of actuarial net gains

(1.6
)

See (1) below

(1.2
)

Total before tax

0.3

Income tax expense
Total reclassifications

$
(0.9
)

Net of tax

~~(1)~~

~~These items are included in other income and expense. See Note 6 of the Notes to the Condensed Consolidated Financial Statements for additional information.~~

~~Changes in AOCL for the first nine months of 2023, net of tax, were:~~

(in millions)

Defined
Benefit
Pension
Plan Items

Cumulative
Translation
Adjustments

Total

Balance at December 31, 2022

$
(58.4
)

$
(86.8
)

$
(145.2
)
Other comprehensive income before reclassifications

—

(1.8
)

(1.8
)
Amounts reclassified from AOCL

(0.9
)

—

(0.9
)
Total other comprehensive income/(loss)

(0.9
)

(1.8
)

(2.7
)
Balance at September 30, 2023

$
(59.3
)

$
(88.6
)

$
(147.9
)

~~Reclassifications out of AOCL for the first nine months of 2022 were:~~


(in millions) Details about AOCL Components	Amount Reclassified from AOCL			Affected Line Item in the Statement where Net Income is Presented	Amount Reclassified from AOCL			Affected Line Item in the Statement where Net Income is Presented
Defined benefit pension plan items:
Amortization of prior service cost	$	0.4		See (1) below	$	0.1		See (1) below
Amortization of actuarial net losses		0.4		See (1) below		(0.1	)	See (1) below
		0.8		Total before tax		—		Total before tax
		(0.1	)	Income tax expense		—		Income tax expense
Total reclassifications	$	0.7		Net of tax	$	—		Net of tax

(1)

These items are included in other income and expense. See Note 6 of the Notes to the Condensed Consolidated Financial Statements for additional information.

Changes in AOCL for the first ~~nine~~three months of ~~2022,~~2024, net of tax, were:


(in millions)	Defined Benefit Pension Plan Items		Cumulative Translation Adjustments			Total			Defined Benefit Pension Plan Items			Cumulative Translation Adjustments			Total
Balance at December 31, 2021	$	10.7	$	(57.6	)	$	(46.9	)
Balance at December 31, 2023									$	(77.2	)	$	(70.9	)	$	(148.1	)
Other comprehensive income before reclassifications		—		(37.1	)		(37.1	)		—			(7.3	)		(7.3	)
Amounts reclassified from AOCL		0.7		—			0.7			—			—			—
Total other comprehensive income/(loss)		0.7		(37.1	)		(36.4	)
Balance at September 30, 2022	$	11.4	$	(94.7	)	$	(83.3	)
Total other comprehensive income										—			(7.3	)		(7.3	)
Balance at March 31, 2024									$	(77.2	)	$	(78.2	)	$	(155.4	)

Reclassifications out of AOCL for the first three months of 2023 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 cost	$	0.1		See (1) below
Amortization of actuarial net losses		(0.5	)	See (1) below
		(0.4	)	Total before tax
		0.1		Income tax expense
Total reclassifications	$	(0.3	)	Net of tax

(1)

These items are included in other income and expense. See Note 6 of the Notes to the Condensed Consolidated Financial Statements for additional information.

Changes in AOCL for the first three months of 2023, net of tax, were:


(in millions)	Defined Benefit Pension Plan Items			Cumulative Translation Adjustments			Total
Balance at December 31, 2022	$	(58.4	)	$	(86.8	)	$	(145.2	)
Other comprehensive income before reclassifications		—			4.7			4.7
Amounts reclassified from AOCL		(0.3	)		—			(0.3	)
Total other comprehensive income		(0.3	)		4.7			4.4
Balance at March 31, 2023	$	(58.7	)	$	(82.1	)	$	(140.8	)

NOTE 15 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

~~In October 2023, the Financial Accounting Standards Board~~The Company has reviewed recently issued ~~Accounting Standards Update (ASU) No. 2023-06, Disclosure Improvements. This guidance covers a number of disclosure improvements intended to align with the SEC's disclosure update~~accounting pronouncements and ~~simplification initiative. The effective dates for any required changes~~concluded there were no matters relevant to the ~~specified disclosures are aligned with the timing of changes to the relevant SEC regulations. The Company does not expect the new standard to have a material impact on the~~ Company’s ~~consolidated~~ financial ~~statements, including its accounting policies, processes and systems.~~statements.

NOTE 16 – RELATED PARTY TRANSACTIONS

Mr. Patrick S. Williams has been an executive director of the Company since April 2009 and has been a non-executive director of AdvanSix Inc. ("AdvanSix"), a chemicals manufacturer, since February 2020. In the first ~~nine~~three months of 2024 the Company did not make any purchases from AdvanSix (first three months of 2023 ~~the Company purchased product from AdvanSix for $0.3~~ ~~million (first nine months of 2022~~ – $~~0.4~~0.1 million). As at ~~September 30, 2023,~~March 31, 2024, the Company owed $~~0.0~~nil ~~million~~ to AdvanSix (December 31, ~~2022~~2023 – $~~0.0~~nil ~~million)~~).

Mr. Robert I. Paller has been a 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~~three months of ~~2023~~2024 the Company incurred fees from SGR of $0.2 million (first ~~nine~~three months of ~~2022~~2023 – $~~0.2~~0.1 million). As at ~~September 30, 2023,~~March 31, 2024, the Company owed less than $~~0.0~~0.1 million to SGR (December 31, ~~2022~~2023 – $~~0.0~~nil ~~million)~~).

Mr. David F. Landless has been a 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~~three months of ~~2023~~2024 for ~~a value of~~less than $0.1 million (first ~~nine~~three months of ~~2022~~2023 – less than $0.1 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, 2023,~~March 31, 2024, EMR owed less than $~~0.0~~0.1 million for scrap metal purchased from the Company (December 31, ~~2022~~2023 – $~~0.0~~nil ~~million)~~).

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Three ~~and Nine~~ Months Ended ~~September 30, 2023~~March 31, 2024

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,~~plant closure provisions, pensions, income taxes ~~goodwill, property, plant~~ and ~~equipment and other intangible assets (net of depreciation and amortization).~~goodwill. These policies have been discussed in the Company’s ~~2022~~2023 Form 10-K.

RESULTS OF OPERATIONS

The Company reports its financial performance based on three reportable segments, which are Performance Chemicals, Fuel Specialties and Oilfield Services.

The following table provides sales, gross profit and operating income by reporting segment:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(in millions)	2023			2022			2023			2022			2024			2023
Net sales:
Performance Chemicals	$	145.2		$	159.7		$	424.4		$	495.8		$	160.8		$	151.4
Fuel Specialties		169.3			178.7			513.8			546.9			176.9			190.3
Oilfield Services		149.6			174.6			515.9			410.3			162.5			167.9
	$	464.1		$	513.0		$	1,454.1		$	1,453.0		$	500.2		$	509.6
Gross profit:
Performance Chemicals	$	30.3		$	39.1		$	76.4		$	123.5		$	37.7		$	24.1
Fuel Specialties		53.0			53.4			155.2			171.0			60.6			57.4
Oilfield Services		53.9			63.5			203.8			140.6			57.4			66.3
	$	137.2		$	156.0		$	435.4		$	435.1		$	155.7		$	147.8
Operating income/(loss):
Performance Chemicals	$	16.9		$	25.4		$	36.5		$	79.5		$	21.1		$	10.4
Fuel Specialties		27.6			27.9			77.1			94.9			33.4			32.4
Oilfield Services		16.4			14.2			60.3			21.2			16.9			15.9
Corporate costs		(19.0	)		(17.4	)		(56.8	)		(54.9	)		(20.2	)		(17.7	)
Adjustment to fair value of contingent consideration														(0.8	)		—
Profit on disposal of property, plant and equipment														0.1			—
Total operating income	$	41.9		$	50.1		$	117.1		$	140.7		$	50.5		$	41.0

Three Months Ended ~~September 30, 2023~~March 31, 2024

The following table shows the changes in sales, gross profit and operating expenses by reporting segment for the three months ended ~~September 30, 2023~~March 31, 2024 and the three months ended ~~September 30, 2022:~~March 31, 2023:


	Three Months Ended September 30,											Three Months Ended March 31,
(in millions, except ratios)	2023			2022			Change					2024			2023			Change
Net sales:
Performance Chemicals	$	145.2		$	159.7		$	(14.5	)	(9	)%	$	160.8		$	151.4		$	9.4		+6%
Fuel Specialties		169.3			178.7			(9.4	)	(5	)%		176.9			190.3			(13.4	)	-7%
Oilfield Services		149.6			174.6			(25.0	)	(14	)%		162.5			167.9			(5.4	)	-3%
	$	464.1		$	513.0		$	(48.9	)	(10	)%	$	500.2		$	509.6		$	(9.4	)	-2%
Gross profit:
Performance Chemicals	$	30.3		$	39.1		$	(8.8	)	(23	)%	$	37.7		$	24.1		$	13.6		+56%
Fuel Specialties		53.0			53.4			(0.4	)	(1	)%		60.6			57.4			3.2		+6%
Oilfield Services		53.9			63.5			(9.6	)	(15	)%		57.4			66.3			(8.9	)	-13%
	$	137.2		$	156.0		$	(18.8	)	(12	)%	$	155.7		$	147.8		$	7.9		+5%
Gross margin (%):
Performance Chemicals		20.9			24.5			(3.6	)				23.4			15.9			+7.5
Fuel Specialties		31.3			29.9			1.4					34.3			30.2			+4.1
Oilfield Services		36.0			36.4			(0.4	)				35.3			39.5			-4.2
Aggregate		29.6			30.4			(0.8	)				31.1			29.0			+2.1
Operating expenses:
Performance Chemicals	$	(13.4	)	$	(13.7	)	$	0.3		(2	)%	$	(16.6	)	$	(13.7	)	$	(2.9	)	+21%
Fuel Specialties		(25.4	)		(25.5	)		0.1		(0	)%		(27.2	)		(25.0	)		(2.2	)	+9%
Oilfield Services		(37.5	)		(49.3	)		11.8		(24	)%		(40.5	)		(50.4	)		9.9		-20%
Corporate costs		(19.0	)		(17.4	)		(1.6	)	9	%		(20.2	)		(17.7	)		(2.5	)	+14%
Adjustment to fair value of contingent consideration													(0.8	)		—			(0.8	)	n/a
Profit on disposal of property, plant and equipment													0.1			—			0.1		n/a
	$	(95.3	)	$	(105.9	)	$	10.6		(10	)%	$	(105.2	)	$	(106.8	)	$	1.6		-1%

Performance Chemicals

Net sales: the table below details the components which comprise the year over year change in net sales spread across the markets in which we operate:

Three Months Ended September 30, 2023

Three Months Ended March 31, 2024

Change (%)

Americas

EMEA

ASPAC

Total

Americas

EMEA

ASPAC

Total

Volume

+11

-16

+19

+14

+13

Acquisition

—

Price and product mix

-22

-17

-9

-19

-12

-15

-12

-14

Exchange rates

—

-11

-6

-23

-9

-4

Higher sales volumes for ~~the Americas and EMEA~~all our regions was ~~due to~~driven by increased demand for our personal care and home care products resulting from ~~consumers, while ASPAC suffered from weaker~~higher consumer demand. All our regions were ~~negatively impacted~~affected by an adverse price and product mix ~~primarily~~ due to ~~an adverse sales mix with~~lower selling prices driven by lower raw material costs. EMEA and ASPAC benefited from favorable exchange rate movements against the ~~greater proportion of sales from lower priced products.~~U.S. dollar.

Gross margin: the year over year ~~decrease~~increase of ~~3.6~~7.5 percentage points was due to ~~an adverse sales mix~~margins returning to a more normalized level when compared to the depressed margins in the prior year. Margins have benefited from ~~reduced sales of higher margin products and~~raw materials pricing reductions in the ~~adverse~~current year, combining with the favorable impact ~~of reduced~~for our manufacturing efficiency ~~resulting from lower~~due to the higher production volumes.

Operating expenses:~~decreased $0.3~~ increased $2.9 million year over year, due to ~~lower acquired intangibles amortization following the end of the expected life of the assets~~higher selling expenses, including commissions

and increased provisions for doubtful debts, together with ~~lower performance related remuneration accruals, being partly offset by~~ higher ~~research and development expenditure.~~

performance-related remuneration.

Fuel Specialties

Net sales: the table below details the components which comprise the year over year change in net sales spread across the markets in which we operate:


	Three Months Ended September 30, 2023										Three Months Ended March 31, 2024
Change (%)	Americas		EMEA		ASPAC		AvGas		Total		Americas		EMEA		ASPAC		AvGas		Total
Volume		-3		-11		-5		+20		-4		-2		—		+1		-24		-2
Price and product mix		-3		-2		-9		-6		-4		-3		-10		-4		+1		-6
Exchange rates		-		+8		+2		-		+3		—		+2		—		—		+1
		-6		-5		-12		+14		-5		-5		-8		-3		-23		-7

Sales volumes were down in ~~all~~the Americas, in part due to a milder winter compared to the prior year which has adversely impacted the sales of our ~~regions have decreased year over~~winter related products. ASPAC volumes are slightly up on the prior year due to ~~a reduction~~variations in the ~~sales~~timing of ~~lower margin higher volume products.~~demand. Price and product mix was adverse ~~with a favorable~~in all our regions due to the decreased sales ~~mix being offset by lower pricing.~~of higher margin products. AvGas volumes were ~~higher~~lower than the prior year due to variations in the demand from customers, being partly offset by ~~an adverse~~a favorable price and product mix ~~with~~from a higher proportion of sales to ~~lower~~higher margin customers. EMEA benefited from favorable exchange rate movements year over year against the U.S. dollar.

Gross margin: the year over year increase of ~~1.4~~4.1 percentage points was ~~driven by an improved sales mix from increased sales~~primarily due to the adverse impact in the prior year in relation to the inventory misappropriation of ~~higher margin products, partially offset by the continued impact of raw material and other inflationary pressures.~~$7.4 million in Brazil. The current year margins are more in line with our normal expectations.

Operating expenses: the year over year ~~decrease~~increase of ~~$0.1~~$2.2 million ~~was primarily due to lower provisions for doubtful debts and lower performance related remuneration accruals, being partly offset by higher~~includes increased spending on research and development ~~expenditure.~~and higher performance-related remuneration.

Oilfield Services

Net sales:have decreased year over year by ~~$25.0~~$5.4 million, or 142 percent, with the majority of our customer activity continuing to be concentrated in the Americas region. ~~We believe that customer~~Sequentially quarter on quarter, demand ~~remains strong despite operating income~~from our production chemicals customers has softened. In the short-term we expect production chemicals activity to remain below previous quarters and will continue to pursue further sales growth ~~beginning to moderate as we expected for the second half of the year. We remain on track for significant full year growth~~and margin improvement in ~~2023.~~our other oilfield segments.

Gross margin: the year over year decrease of ~~0.4~~4.2 percentage points was due to an ~~unfavorable~~adverse sales mix ~~when~~ compared to ~~a strong~~the prior year comparative.

Operating expenses: the year over year decrease of ~~$11.8~~$9.9 million was driven by ~~the~~lower selling expenses, including lower customer service costs ~~and commissions related~~which are necessary to support the ~~lower~~ demand from certain ~~customers.~~customers, together with lower provisions for doubtful debts.

Other Income Statement Captions

Corporate costs: the year over year increase of ~~$1.6~~$2.5 million was due to ~~one-off acquisition related costs together with~~the growth and timing of information technology expenditure, higher performance-related remuneration and the adverse revaluation ~~charges relating to~~of our United Kingdom ~~Emission~~Emissions Trading Scheme carbon credits ~~driven by~~which can be traded on the open ~~market pricing.~~market.

Adjustment to fair value of contingent consideration: the $0.8 million expense in 2024 represents the accretion charge for the acquisition-related contingent consideration payable in relation to our QGP operation in Brazil which was acquired in December 2023.

Other net income/(expense): for the ~~third~~first quarter of ~~2023~~2024 and ~~2022,~~2023, included the following:

(in millions)

2023

2022

Change

Net pension credit

$
1.8

$
1.2

0.6

Foreign exchange gains/(losses) on translation

2.6

(6.2
)

8.8

Foreign currency forward contracts gains/(losses)

0.4

4.1

(3.7
)

$
4.8

$
(0.9
)

$
5.7


(in millions)	2024		2023			Change
Net pension credit	$	1.7	$	1.7			—
Foreign exchange gains on translation		—		2.9			(2.9	)
Foreign currency forward contracts gains/(losses)		1.0		(0.9	)		1.9
	$	2.7	$	3.7		$	(1.0	)

Interest ~~income/(expense),~~income, net: was income of ~~$0.8~~$2.1 million in the ~~third~~first quarter of ~~2023~~2024 compared to ~~an expense~~income of $0.3 million in the ~~third~~first quarter of ~~2022, driven by~~2023. Interest income from our cash balances has increased over recent periods due to higher central bank interest rates together with the ~~higher interest income being earned~~increases in ~~2023 for~~ our ~~increasing~~ cash balances.

Income taxes:the effective tax rate was ~~17.5%~~25.1% and ~~20.9%~~26.2% in the ~~third~~first quarter of ~~2023~~2024 and ~~2022,~~2023, respectively. The adjusted effective tax rate, once adjusted for the items set out in the following table, was ~~17.6%~~24.5% in ~~2023~~2024 compared with ~~20.1%~~25.8% in ~~2022.~~2023. The ~~2.5%~~1.3% percentage point decrease in the adjusted effective rate was primarily due to ~~foreign currency fluctuations arising in~~ the ~~Company's non-U.S. operations and~~fact that a ~~lower~~higher proportion of the Company’s profits are being generated in ~~higher~~lower tax jurisdictions. The Company believes that this adjusted effective tax rate, a 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 charge to the adjusted effective tax charge:~~

Three Months Ended
September 30,

(in millions)

2023

2022

Income before income taxes

$
47.5

$
48.9

Indemnification asset regarding tax audit

0.1

0.2

Adjustment for stock compensation

2.0

1.5

Acquisition costs

0.3

—

Legacy costs of closed operations

0.7

0.7

Adjusted income before income taxes

$
50.6

$
51.3

Income taxes

$
8.3

$
10.2

Tax on stock compensation

0.2

—

Adjustment of income tax provision

0.1

—

Tax on acquisition costs

0.1

—

Tax on legacy cost of closed operations

0.2

0.1

Adjusted income taxes

$
8.9

$
10.3

GAAP effective tax rate

17.5
%

20.9
%
Adjusted effective tax rate

17.6
%

20.1
%

~~Nine Months Ended September 30, 2023~~

~~The following table shows the changes in sales, gross profit and operating expenses by reporting segment for the nine months ended September 30, 2023 and the nine months ended September 30, 2022:~~

Nine Months Ended
September 30,

(in millions, except ratios)

2023

2022

Change

Net sales:

Performance Chemicals

$
424.4

$
495.8

$
(71.4
)

(14
)%
Fuel Specialties

513.8

546.9

(33.1
)

(6
)%
Oilfield Services

515.9

410.3

105.6

26
%

$
1,454.1

$
1,453.0

$
1.1

0
%
Gross profit:

Performance Chemicals

$
76.4

$
123.5

$
(47.1
)

(38
)%
Fuel Specialties

155.2

171.0

(15.8
)

(9
)%
Oilfield Services

203.8

140.6

63.2

45
%

$
435.4

$
435.1

$
0.3

0
%
Gross margin (%):

Performance Chemicals

18.0

24.9

(6.9
)

Fuel Specialties

30.2

31.3

(1.1
)

Oilfield Services

39.5

34.3

5.2

Aggregate

29.9

29.9

0.0

Operating expenses:

Performance Chemicals

$
(39.9
)

$
(44.0
)

$
4.1

(9
)%
Fuel Specialties

(78.1
)

(76.1
)

(2.0
)

3
%
Oilfield Services

(143.5
)

(119.4
)

(24.1
)

20
%
Corporate costs

(56.8
)

(54.9
)

(1.9
)

3
%

$
(318.3
)

$
(294.4
)

$
(23.9
)

8
%

~~Performance Chemicals~~

~~Net sales:~~ ~~the table below details the components which comprise the year over year change in net sales spread across the markets in which we operate:~~

Nine Months Ended September 30, 2023

Change (%)

Americas

EMEA

ASPAC

Total

Volume

-11

-3

-21

-8

Price and product mix

-10

-5

+3

-6

Exchange rates

-

-

-

-

-21

-8

-18

-14

Lower sales volumes for all our regions were primarily driven by reduced demand for our personal care products resulting from cautious consumer demand together with the impact of destocking by our customers. The Americas and EMEA were impacted by an adverse price and product mix due to a higher proportion of lower priced products being sold. ASPAC benefited from a favorable price and product mix due to a higher proportion of higher priced products being sold.

~~Gross margin:~~ the year over year decrease of 6.9 percentage points was due to an adverse sales mix from reduced sales of higher margin products and the adverse impact of reduced manufacturing efficiency resulting from lower production volumes.

~~Operating expenses:~~ decreased $4.1 million year over year, due to lower selling expenses including commissions, lower performance-related remuneration accruals and lower acquired intangibles amortization following the end of the expected life of the assets.

~~Fuel Specialties~~

~~Net sales:~~ ~~the table below details the components which comprise the year over year change in net sales spread across the markets in which we operate:~~

Nine Months Ended September 30, 2023

Change (%)

Americas

EMEA

ASPAC

AvGas

Total

Volume

-14

-15

-22

+6

-14

Price and product mix

+9

+10

+6

-12

+8

Exchange rates

-

-

-

-

-

-5

-5

-16

-6

-6

Sales volumes in all our regions have decreased year over year, primarily due to a reduction in the sales of lower margin higher volume products. Price and product mix was favorable in all our regions due to an increased proportion of higher margin products being sold. AvGas volumes were higher than the prior year due to variations in the demand from customers, being offset by an adverse price and product mix due to a higher proportion of sales to lower margin customers.

~~Gross margin~~: the year over year decrease of 1.1 percentage points was primarily due to the impact of the Brazil inventory misappropriation and the ending of that trading relationship, being partly offset by a favorable sales mix from increased sales of higher margin products.

~~Operating expenses:~~ the year over year increase of $2.0 million includes higher provisions for doubtful debts related to the ending of the Brazilian trading relationship, being partly offset by lower performance-related remuneration accruals.

~~Oilfield Services~~

~~Net sales:~~ have increased year over year by $105.6 million, or 26 percent, with the majority of our customer activity concentrated in the Americas region. We believe that customer demand remains strong despite operating income growth beginning to moderate as expected for the second half of the year, and we remain on track for significant full year growth in 2023.

~~Gross margin:~~ ~~the year over year increase of 5.2 percentage points was due to a favorable sales mix and the benefit of improved pricing.~~

~~Operating expenses:~~ the year over year increase of $24.1 million was driven by higher customer service costs which are necessary to support the increase in demand with certain customers, together with higher performance related remuneration accruals.

~~Other Income Statement Captions~~

~~Corporate costs:~~ ~~the year over year increase of $1.9 million was primarily due to one-off acquisition related costs.~~

~~Other net income/(expense):~~ ~~for the first nine months of 2023 and 2022, included the following:~~

(in millions)

2023

2022

Change

Net pension credit

$
5.2

$
3.7

$
1.5

Foreign exchange gains/(losses) on translation

7.2

(10.4
)

17.6

Foreign currency forward contracts gains/(losses)

(1.2
)

6.5

(7.7
)

$
11.2

$
(0.2
)

$
11.4

~~Interest income/(expense), net:~~ was income of $0.8 million in the first nine months of 2023 compared to an expense of $1.1 million in the first nine months of 2022. Interest income from our cash balances has increased in recent periods due to global increases in central bank interest rates. Interest expenses in the current and the prior year relate to the ongoing commitment fee the Company pays to retain the revolving credit facility during the term of the agreement.

~~Income taxes:~~ the effective tax rate was 21.5% and 22.9% in the first nine months of 2023 and 2022, respectively. The adjusted effective tax rate, once adjusted for the items set out in the following table, was 21.4% in 2023 compared with 22.4% in 2022. The 1.0% decrease in the adjusted effective rate was primarily due to a lower proportion of the Company's profits being generated in higher tax jurisdictions, in addition to foreign currency fluctuations arising in the Company's non-U.S. operations which had a greater positive impact in the third quarter of 2023. The Company believes that this adjusted effective tax rate, a 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 charge to the adjusted effective tax charge:


	Nine Months Ended September 30,						Three Months Ended March 31,
(in millions)	2023			2022			2024			2023
Income before income taxes	$	129.1		$	139.4		$	55.3		$	45.0
Indemnification asset regarding tax audit		—			0.4			0.1			(0.1	)
Adjustment for stock compensation		5.9			4.7			2.1			1.9
Acquisition costs		1.8			—
Adjustment to fair value of contingent consideration								0.8			—
Legacy cost of closed operations		2.4			2.6			0.8			0.8
Adjusted income before income taxes	$	139.2		$	147.1		$	59.1		$	47.6
Income taxes	$	27.8		$	31.9		$	13.9		$	11.8
Tax on stock compensation		0.2			0.5			(0.1	)		—
Adjustment of income tax provision		0.7			—			0.2			0.3
Tax on acquisition costs		0.5			—
Tax on adjustment to fair value of contingent consideration								0.3			—
Tax on legacy cost of closed operations		0.6			0.5			0.2			0.2
Adjusted income taxes	$	29.8		$	32.9		$	14.5		$	12.3
GAAP effective tax rate		21.5	%		22.9	%		25.1	%		26.2	%
Adjusted effective tax rate		21.4	%		22.4	%		24.5	%		25.8	%

LIQUIDITY AND FINANCIAL CONDITION

Working Capital

In the first ~~nine~~three months of ~~2023~~2024 our working capital increased by ~~$52.7~~$33.8 million, while our adjusted working capital decreased by ~~$20.4~~$21.6 million. The difference is primarily due to the exclusion of increases in our cash balances from the ~~increases for cash and cash equivalents, together with the changes for prepaid income taxes and the current portion of accrued income taxes.~~adjusted working capital.

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, 2023			December 31, 2022			March 31, 2024			December 31, 2023
Total current assets	$	863.7		$	872.6		$	912.9		$	885.7
Total current liabilities		(344.2	)		(405.8	)		(364.9	)		(371.5	)
Working capital		519.5			466.8			548.0			514.2
Less cash and cash equivalents		(207.2	)		(147.1	)		(270.1	)		(203.7	)
Less prepaid income taxes		(10.7	)		(3.3	)		(4.4	)		(2.8	)
Less other current assets		(1.4	)		(0.4	)		(0.9	)		(0.6	)
Add back current portion of accrued income taxes		15.2			18.4			12.2			2.6
Add back current portion of unrecognized tax benefits								4.5			1.2
Add back current portion of plant closure provisions		4.7			5.3			4.6			4.6
Add back current portion of operating lease liabilities		13.1			13.9			13.6			13.6
Adjusted working capital	$	333.2		$	353.6		$	307.5		$	329.1

We had a ~~$29.4~~$41.6 million decrease in trade and other accounts receivable, driven primarily by ~~positive cash collections.~~the timing of trading activity in our Oilfield Services segment. Days’ sales outstanding decreased in our Performance Chemicals segment from 6064 days to 5461 days; increased from 5455 days to 5556 days in our Fuel Specialties segment; and ~~increased~~decreased from 5455 days to 6248 days in our Oilfield Services segment.

We had a ~~$41.6~~$4.2 million increase in inventories, including a $1.7 million decrease in ~~inventories, net~~allowances, primarily due to our continued approach of a $0.3 million increase in allowances, partially driven by lower production volumes in our Performance Chemicals segment together with the misappropriation of $7.4 million of inventory in Brazil during the first quarter of 2023. The Company continues to maintainmaintaining higher inventory levels ~~necessary~~in order to ~~manage~~mitigate the risk of ~~potential~~ supply chain disruption for certain key raw materials, ~~especially~~ in particular for our Fuel Specialties ~~segment, despite some easing of the pressures during the year.~~segment. Days’ sales in inventory decreased in our Performance Chemicals segment from 7862 days to 6055 days; increased from ~~138~~121 days to ~~146~~133 days in our Fuel Specialties segment; and increased from 5848 days to 6455 days in our Oilfield Services segment.

Prepaid expenses decreased ~~$6.4~~$3.7 million, from ~~$14.1~~$18.7 million to ~~$7.7~~$15.0 million, ~~primarily~~ due to the normal expensing of prepaid invoices.

We had a ~~$57.0~~$19.5 million decrease in accounts payable and accrued liabilities, ~~which was~~due to the timing of production to align with customer demand in our Oilfield Services segment, and dependent on the timing of payments for each of our reporting segments. Creditor days (including goods received not invoiced) ~~decreased~~remained constant in our Performance Chemicals segment ~~from 42 days to 34~~at 45 days; increased from 4541 days to 4645 days in our Fuel Specialties segment; and ~~decreased~~increased from 5448 days to 4751 days in our Oilfield Services segment.

Operating Cash Flows

We generated cash from operating activities of ~~$134.9~~$80.6 million in the first ~~nine~~three months of ~~2023~~2024 compared to ~~cash outflows of $3.3~~$21.8 million in the first ~~nine~~three months of ~~2022.~~2023. The increase in cash generated from operating activities was related to

2522

~~was principally related to decreases~~reductions in our working capital infor the first ~~nine~~three months of ~~2023, compared to increases in working capital in the first nine months of 2022. The increases in 2022 were driven by higher trade receivables linked with revenue growth,~~2024, together with the ~~need to secure~~changes for income tax payments and the ~~supply of certain raw materials at that time.~~contribution from higher profitability.

Cash

At ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, we had cash and cash equivalents of ~~$207.2~~$270.1 million and ~~$147.1~~$203.7 million, respectively, of which ~~$76.4~~$72.6 million and ~~$76.4~~$59.8 million, respectively, were held by non-U.S. subsidiaries principally in the United Kingdom.

The increase in cash and cash equivalents of ~~$60.1~~$66.4 million for the first ~~nine~~three months of ~~2023~~2024 was driven by ~~our positive trading~~the cash ~~flow generation,~~generated from operating activities together with decreased working capital requirements, being partly offset by ~~the timing of tax payments,~~ our continued investments in capital ~~projects and the payment of our semi-annual dividend.~~projects.

Debt

At ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, we had no debt outstanding under the revolving credit facility and no obligations were outstanding under finance leases.

On May 31, 2023, Innospec Inc. and certain subsidiaries of the Company entered into a Multicurrency Revolving Facility Agreement with various lenders, providing for a $250,000,000 four-year multicurrency revolving loan facility. The termination date of the facility is May 30, 2027, but the Company has an option to request an extension of the facility for a further year. This agreement replaced the Company’s credit facility agreement dated September 26, 2019. See Note 8 of the Notes to the Condensed Consolidated Financial Statements for additional information.23

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 ~~2022~~2023 Annual Report on Form 10-K and there have been no significant changes since that time.

Item 4 Controls and Procedures

Evaluation of Disclosure Controls and Procedures

On December 8, 2023, the Company acquired QGP Química Geral S.A. (“QGP”). As permitted by related SEC staff interpretive guidance for newly acquired businesses, management has excluded QGP from its assessment of the effectiveness of the Company’s internal control over financial reporting. We are currently in the process of implementing our internal control structure over the acquired operations and expect that this effort will be completed in 2024.

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, 2023,~~March 31, 2024, to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) 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.

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.

2725

PART II OTHER INFORMATION

Item 1 Legal Proceedings

Legal matters

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 ~~2022~~2023 Form 10-K. In management’s view, there have been no material changes in the risk factors facing the Company as disclosed in those SEC filings.

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

There have been no unregistered sales of equity securities.

The following table provides information about our repurchases of equity securities in the period.

Issuer Purchases of Equity Securities


Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Approximate dollar value of shares that may yet be purchased under the plans or programs
February 1, 2024 through February 29, 2024		3,108	$	123.33		—	$	43.6	million

Total		3,108	$	123.33		—	$	43.6	million

During the quarter ended ~~September 30, 2023,~~March 31, 2024, the Company did not ~~repurchase~~purchase any of its common ~~stock.~~stock as part of its share repurchase program announced on February 15, 2022. The repurchase program allows for up to $50 million of the Company’s common stock to be repurchased in the open market over a three-year period commencing on February 16, 2022.

During the quarter ended March 31, 2024, the company repurchased its common stock in connection with the exercising of stock options by directors and employees.

Item 3 Defaults Upon Senior Securities

None.

Item 4 Mine Safety Disclosures

Not applicable.

Item 5 Other Information

~~(a), (b), and (c) –~~ ~~None~~.None.

2827

Item 6 Exhibits

10.1

Innospec - 2024 Performance Shares Grant Agreement. *
10.2		Innospec - 2024 Time-Based Shares Grant Agreement.*
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.

29* Denotes a management contract or compensatory plan.

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 8, 2023~~May 10, 2024	By	/s/ PATRICK S. WILLIAMS
		Patrick S. Williams President and Chief Executive Officer

Date: ~~November 8, 2023~~May 10, 2024	By	/s/ IAN P. CLEMINSON
		Ian P. Cleminson Executive Vice President and Chief Financial Officer

3029


	Nine Months Ended September 30, 2023
Change (%)	Americas		EMEA		ASPAC		Total
Volume		-11		-3		-21		-8
Price and product mix		-10		-5		+3		-6
Exchange rates		-		-		-		-
		-21		-8		-18		-14