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

☒	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

For the quarterly period ended ~~September 30, 2017~~ March 31, 2024

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

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

For the transition period fromto

Commission file number 1-13879

INNOSPEC INC.

(Exact name of registrant as specified in its charter)

~~DELAWARE~~

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~~

	Colorado		80112
	(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: ~~(303)~~ (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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes☒ No ☐

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


Large accelerated filer	☒	Accelerated filer		☐
~~Large accelerated~~Non-accelerated filer	☐	☒Smaller reporting company	~~Accelerated filer~~	☐

~~Non-accelerated filer~~		~~☐ (Do not check if a smaller reporting company)~~	~~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~~	Class	Outstanding as of ~~October 31, 2017~~April 30, 2024
	Common Stock, par value $0.01	~~24,137,575~~ 24,933,245

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION					2
~~PART I~~Item 1		~~FINANCIAL INFORMATION~~			4

~~Item 1~~		Condensed Consolidated Financial Statements			4	2
		Condensed Consolidated Statements of Income			4	2
		Condensed Consolidated Statements of Comprehensive Income			5	3
		Condensed Consolidated Balance Sheets			6	4
		~~Condensed Consolidated Balance Sheets (continued)~~			7
		Condensed Consolidated Statements of Cash Flows			8	5
		Condensed Consolidated ~~Statement~~Statements of Equity			10	6
		Notes To The Unaudited Interim Condensed Consolidated Financial Statements			11	7
Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2024			24	18
		Critical Accounting Estimates			24	18
		Results of Operations			24	18
		Liquidity and Financial Condition			33	22
Item 3		Quantitative and Qualitative Disclosures about Market Risk			34	24
Item 4		Controls and Procedures			35
			25
PART II		OTHER INFORMATION			36
			26
Item 1		Legal Proceedings			36	26
Item 1A		Risk Factors			36	26
Item 2		Unregistered Sales of Equity Securities and Use of Proceeds			36	26
Item 3		Defaults Upon Senior Securities			36	27
Item 4		Mine Safety Disclosures			36	27
Item 5		Other Information			36	27
Item 6	Exhibits	~~Exhibits~~			37
			28
SIGNATURES				38	29

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”~~“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, ~~2016~~2023 and other reports filed with the U.S. Securities and Exchange ~~Commission.~~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)	2017			2016			2017			2016			2024			2023
Net sales	$	332.4		$	205.5		$	953.0		$	645.6		$	500.2		$	509.6
Cost of goods sold		(233.6	)		(126.3	)		(658.2	)		(404.7	)		(344.5	)		(361.8	)

Gross profit		98.8			79.2			294.8			240.9			155.7			147.8
Operating expenses:
Selling, general and administrative		(60.7	)		(56.1	)		(176.9	)		(153.1	)		(92.7	)		(96.2	)
Research and development		(7.9	)		(6.5	)		(23.8	)		(19.6	)		(11.8	)		(10.6	)
Adjustment to fair value of contingent consideration		0.0			2.3			0.0			6.3			(0.8	)		—
Loss on disposal of subsidiary		0.0			0.0			(1.0	)		(1.4	)
Foreign exchange loss on liquidation of subsidiary		0.0			0.0			(1.8	)		0.0

Profit on disposal of property, plant and equipment														0.1			—
Total operating expenses		(68.6	)		(60.3	)		(203.5	)		(167.8	)		(105.2	)		(106.8	)

Operating income		30.2			18.9			91.3			73.1			50.5			41.0
Other net income/(expense)		1.8			(5.0	)		2.9			3.2
Interest expense, net		(2.1	)		(0.7	)		(6.3	)		(2.2	)

Income before income taxes		29.9			13.2			87.9			74.1
Income taxes		(6.6	)		(1.8	)		(21.3	)		(14.9	)

Other income, net														2.7			3.7
Interest income, net														2.1			0.3
Income before income tax expense														55.3			45.0
Income tax expense														(13.9	)		(11.8	)
Net income	$	23.3		$	11.4		$	66.6		$	59.2		$	41.4		$	33.2

Earnings per share:
Basic	$	0.97		$	0.48		$	2.76		$	2.47		$	1.66		$	1.34

Diluted	$	0.95		$	0.47		$	2.71		$	2.42		$	1.65		$	1.33

Weighted average shares outstanding (in thousands):
Basic		24,137			23,977			24,119			23,989			24,893			24,801

Diluted		24,565			24,476			24,569			24,462			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
(in millions)
   2017 2016 2017 2016
Net income
   $ 23.3 $ 11.4 $ 66.6 $ 59.2


Other comprehensive income:

Changes in cumulative translation adjustment, net of tax of $(0.4) million, $0.1 million, $(1.3) million and $(0.7) million, respectively
   18.1 (0.1 ) 30.7 (0.3 )
Changes in unrealized gains on derivative instruments, net of tax of $0.0 million, $0.0 million, $0.0 million and $0.0 million, respectively
   0.2 0.0 0.2 0.0
Amortization of prior service credit, net of tax of $0.0 million, $0.0 million, $0.1 million and $0.1 million, respectively
   (0.2 ) (0.2 ) (0.6 ) (0.7 )
Amortization of actuarial net losses, net of tax of $(0.1) million, $(0.1) million, $(0.6) million and $(0.4) million, respectively
   1.1 0.5 3.1 1.6


Total other comprehensive income
   19.2 0.2 33.4 0.6


Total comprehensive income
   $ 42.5 $ 11.6 $ 100.0 $ 59.8


	Three Months Ended March 31,
(in millions)	2024			2023
Net income	$	41.4		$	33.2
Other comprehensive income/(loss):
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	$	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, 2017			December 31, 2016			March 31, 2024		December 31, 2023
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	65.5		$	101.9		$	270.1	$	203.7
Trade and other accounts receivable (less allowances of $4.3 million and $4.7 million respectively)		245.6			154.4
Inventories (less allowances of $9.4 million and $8.6 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		144.7			118.1			216.5		215.7
Raw materials		66.8			55.7			87.8		84.4

Total inventories		211.5			173.8			304.3		300.1
Prepaid expenses		4.1			6.2			15.0		18.7
Prepaid income taxes		4.0			4.8			4.4		2.8
Other current assets		2.0			0.0			0.9		0.6

Total current assets		532.7			441.1			912.9		885.7
Property, plant and equipment:
Gross cost		312.9			251.8
Less accumulated depreciation		(123.7	)		(94.4	)

Net property, plant and equipment		189.2			157.4			268.7		268.3
Operating leases right-of-use assets								43.5		45.1
Goodwill		346.8			374.8			397.5		399.3
Other intangible assets		169.6			144.4			57.7		57.3
Deferred tax assets		16.3			14.9			10.4		10.4
Pension asset		54.9			48.0			36.1		35.1
Other non-current assets		3.1			0.8			6.0		6.2

Total assets	$	1,312.6		$	1,181.4		$	1,732.8	$	1,707.4


Liabilities and Equity
Current liabilities:
Accounts payable	$	166.4		$	163.6
Accrued liabilities		163.6			185.9
Current portion of operating lease liabilities		13.6			13.6
Current portion of plant closure provisions		4.6			4.6
Current portion of accrued income taxes		12.2			2.6
Current portion of unrecognized tax benefits		4.5			1.2
Total current liabilities		364.9			371.5
Operating lease liabilities, net of current portion		30.0			31.6
Plant closure provisions, net of current portion		56.6			57.0
Accrued income taxes, net of current portion		11.6			11.6
Unrecognized tax benefits, net of current portion		10.5			13.6
Deferred tax liabilities		34.1			33.5
Pension liabilities and post-employment benefits		13.0			13.3
Acquisition-related contingent consideration		23.5			23.4
Other non-current liabilities		2.4			2.3
Total liabilities		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
Additional paid-in capital		362.4			361.0
Treasury stock (4,621,255 and 4,686,511 shares at cost, respectively)		(93.3	)		(94.3	)
Retained earnings		1,069.6			1,028.2
Accumulated other comprehensive loss		(155.4	)		(148.1	)
Total Innospec stockholders’ equity		1,183.6			1,147.1
Non-controlling interest		2.6			2.5
Total equity		1,186.2			1,149.6
Total liabilities and equity	$	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 ~~BALANCE SHEETS - (Continued)~~

STATEMENTS OF CASH FLOWS

(Unaudited)

(in millions, except share and per share data)
   September 30,
2017 December 31,
2016
   (Unaudited)
Liabilities and Equity

Current liabilities:

Accounts payable
   $ 115.7 $ 59.6
Accrued liabilities
   94.0 94.3
Current portion of long-term debt
   10.3 10.3
Current portion of finance leases
   2.6 1.6
Current portion of plant closure provisions
   5.9 6.7
Current portion of accrued income taxes
   8.2 9.4
Current portion of acquisition-related contingent consideration
   1.1 1.1
Current portion of deferred income
   0.1 0.1


Total current liabilities
   237.9 183.1
Long-term debt, net of current portion
   219.0 258.5
Finance leases, net of current portion
   3.2 2.9
Plant closure provisions, net of current portion
   36.8 32.8
Unrecognized tax benefits, net of current portion
   1.8 2.3
Deferred tax liabilities
   48.6 32.3
Pension liabilities
   16.5 14.2
Deferred income, net of current portion
   0.5 0.5
Other non-current liabilities
   0.4 1.0


Total liabilities
   564.7 527.6


Equity:

Common stock, $0.01 par value, authorized 40,000,000 shares, issued 29,554,500 shares
   0.3 0.3
Additional paid-in capital
   317.9 315.1
Treasury stock (5,416,924 and 5,483,341 shares at cost, respectively)
   (97.1 ) (97.5 )
Retained earnings
   619.2 561.8
Accumulated other comprehensive loss
   (92.8 ) (126.2 )


Total Innospec stockholders’ equity
   747.5 653.5
Non-controlling interest
   0.4 0.3


Total equity
   747.9 653.8


Total liabilities and equity
   $ 1,312.6 $ 1,181.4


	Three Months Ended March 31,
(in millions)	2024			2023
Cash Flows from Operating Activities
Net income	$	41.4		$	33.2
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		10.4			9.3
Adjustment to fair value of contingent consideration		0.8			—
Deferred taxes		0.8			1.2
Profit on disposal		(0.1	)		—
Non-cash income on defined benefit pension plans		(0.8	)		(0.8	)
Stock option compensation		2.1			1.9
Changes in assets and liabilities, net of effects of acquired and divested companies:
Trade and other accounts receivable		39.5			(6.0	)
Inventories		(6.0	)		9.1
Prepaid expenses		3.6			(1.2	)
Accounts payable and accrued liabilities		(19.7	)		(28.0	)
Plant closure provisions		(0.1	)		(0.3	)
Income taxes		8.8			0.8
Unrecognized tax benefits		0.2			0.3
Other assets and liabilities		(0.3	)		2.3
Net cash provided by operating activities		80.6			21.8
Cash Flows from Investing Activities
Capital expenditures		(10.7	)		(17.7	)
Proceeds on disposal of property, plant and equipment		0.1			—
Internally developed software		(3.7	)		(4.3	)
Net cash used in investing activities		(14.3	)		(22.0	)
Cash Flows from Financing Activities
Non-controlling interest		0.2			—
Issue of treasury stock		0.7			0.7
Repurchase of common stock		(0.4	)		(0.3	)
Net cash provided by financing activities		0.5			0.4
Effect of foreign currency exchange rate changes on cash		(0.4	)		0.2
Net change in cash and cash equivalents		66.4			0.4
Cash and cash equivalents at beginning of period		203.7			147.1
Cash and cash equivalents at end of period	$	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 ~~CASH FLOWS~~EQUITY

(Unaudited)

   Nine Months Ended
September 30
(in millions)
   2017 2016
Cash Flows from Operating Activities

Net income
   $ 66.6 $ 59.2
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization
   37.2 28.5
Adjustment to fair value of contingent consideration
   0.0 (6.3 )
Deferred taxes
   3.7 0.5
Loss on disposal of subsidiary
   1.0 1.4
Foreign exchange loss on liquidation of subsidiary
   1.8 0.0
Cash contributions to defined benefit pension plans
   (0.8 ) (0.8 )
Non-cash movements on defined benefit pension plans
   (2.7 ) (4.7 )
Stock option compensation
   3.4 2.8
Changes in assets and liabilities, net of effects of acquired and divested companies:

Trade and other accounts receivable
   (83.0 ) 12.3
Inventories
   (31.5 ) (1.0 )
Prepaid expenses
   2.2 (3.0 )
Accounts payable and accrued liabilities
   42.4 (1.0 )
Accrued income taxes
   (2.7 ) (0.9 )
Plant closure provisions
   2.9 1.5
Unrecognized tax benefits
   (0.5 ) (1.6 )
Other assets and liabilities
   (4.8 ) 0.1


Net cash provided by operating activities
   35.2 87.0
Cash Flows from Investing Activities

Capital expenditures
   (16.4 ) (12.2 )
Business combinations, net of cash acquired
   2.6 1.8
Acquisition of intangible asset
   (4.2 ) 0.0
Internally developed software
   (4.1 ) 0.0
Sale of short-term investments
   0.0 4.7


Net cash used in investing activities
   (22.1 ) (5.7 )
Cash Flows from Financing Activities

Proceeds from revolving credit facility
   10.0 28.0
Repayments of revolving credit facility
   (50.0 ) (18.0 )
Repayments of finance leases
   (1.7 ) (0.8 )
Payment for acquisition-related contingent consideration
   0.0 (44.0 )
Dividend paid
   (9.2 ) (8.1 )
Issue of treasury stock
   1.0 0.3
Repurchase of common stock
   (1.0 ) (8.2 )


Net cash used in financing activities
   (50.9 ) (50.8 )
Effect of foreign currency exchange rate changes on cash
   1.4 (0.3 )


Net change in cash and cash equivalents
   (36.4 ) 30.2
Cash and cash equivalents at beginning of period
   101.9 136.9


Cash and cash equivalents at end of period
   $ 65.5 $ 167.1


(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, 2023	$	0.3	$	361.0		$	(94.3	)	$	1,028.2	$	(148.1	)	$	2.5	$	1,149.6
Net income										41.4							41.4
Changes in cumulative translation adjustment, net of tax												(7.3	)				(7.3	)
Share of net income														0.1			0.1
Treasury stock reissued				(0.7	)		1.4										0.7
Treasury stock repurchased							(0.4	)									(0.4	)
Stock option compensation				2.1													2.1
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 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
Balance at December 31, 2022	$	0.3	$	354.1		$	(95.4	)	$	924.2	$	(145.2	)	$	2.4	$	1,040.4
Net income										33.2							33.2
Changes in cumulative translation adjustment, net of tax												4.7					4.7
Treasury stock reissued				(1.2	)		2.1										0.9
Treasury stock repurchased							(0.2	)									(0.2	)
Stock option compensation				1.9													1.9
Amortization of prior service cost, net of tax												0.1					0.1
Amortization of actuarial net losses, net of tax												(0.4	)				(0.4	)
Balance at March 31, 2023	$	0.3	$	354.8		$	(93.5	)	$	957.4	$	(140.8	)	$	2.4	$	1,080.6

Amortization of deferred finance costs of $0.5 million (2016 – $0.2 million) are included in depreciation and amortization in the condensed consolidated statement of cash flow but in interest expense in the condensed consolidated statement of income. We have recast certain 2016 amounts to conform to new accounting standards.

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

INNOSPEC INC. AND SUBSIDIARIES

~~CONDENSED CONSOLIDATED STATEMENT 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, 2016
   $ 0.3    $ 315.1 $ (97.5 ) $ 561.8 $ (126.2 ) $ 0.3    $ 653.8
Net income
      66.6    66.6
Dividend paid
      (9.2 )    (9.2 )
Non-controlling interest
      0.1    0.1
Changes in cumulative translation adjustment, net of tax
      30.7    30.7
Changes in unrealized gains on derivative instruments, net of tax
      0.2    0.2
Treasury stock reissued
      (0.6 ) 1.4    0.8
Treasury stock repurchased
      (1.0 )    (1.0 )
Stock option compensation
      3.4    3.4
Amortization of prior service credit, net of tax
      (0.6 )    (0.6 )
Amortization of actuarial net losses, net of tax
      3.1    3.1






Balance at September 30, 2017
   $ 0.3    $ 317.9 $ (97.1 ) $ 619.2 $ (92.8 ) $ 0.4    $ 747.9

~~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

~~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, ~~2016~~2023 filed on February ~~15, 2017.~~14, 2024 (the “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 ~~the four~~three reportable segments, which are Performance Chemicals, 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 is expected to decline in the near future as our one remaining refinery customer transitions to unleaded fuel.Services.

The Company evaluates the performance of its segments based on operating income. The following ~~tables analyze~~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)	2017		2016		2017		2016		2024			2023
Net Sales:
Refinery and Performance	$	97.4	$	89.8	$	286.5	$	281.7
Other		32.7		24.6		91.3		85.4

Fuel Specialties		130.1		114.4		377.8		367.1

Personal Care		52.2		33.7		148.4		97.7		94.8			88.2
Home Care		32.7		0.5		89.0		1.4		26.4			23.7
Other		25.4		2.6		72.3		7.7		39.6			39.5
Performance Chemicals									$	160.8		$	151.4
Refinery and Performance										145.1			149.5
Other										31.8			40.8
Fuel Specialties										176.9			190.3
Oilfield Services										162.5			167.9
									$	500.2		$	509.6
Operating income/(loss):
Performance Chemicals		110.3		36.8		309.7		106.8	$	21.1		$	10.4

Fuel Specialties										33.4			32.4
Oilfield Services		81.9		49.7		224.5		132.4		16.9			15.9
Octane Additives		10.1		4.6		41.0		39.3

	$	332.4	$	205.5	$	953.0	$	645.6

Corporate costs										(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									$	50.5		$	41.0

   Three Months Ended
September 30    Nine Months Ended
September 30
(in millions)
   2017    2016    2017    2016
Net sales:

Fuel Specialties
   $ 130.1    $ 114.4    $ 377.8    $ 367.1
Performance Chemicals
   110.3    36.8    309.7    106.8
Oilfield Services
   81.9    49.7    224.5    132.4
Octane Additives
   10.1    4.6    41.0    39.3








   $ 332.4    $ 205.5    $ 953.0    $ 645.6








Gross profit:

Fuel Specialties
   $ 44.6    $ 43.8    $ 135.9    $ 129.5
Performance Chemicals
   20.7    12.3    54.8    34.4
Oilfield Services
   28.5    20.6    82.9    52.1
Octane Additives
   5.0    2.5    21.2    24.9








   $ 98.8    $ 79.2    $ 294.8    $ 240.9

Operating income:

Fuel Specialties
   $ 24.9    $ 24.1    $ 75.5    $ 72.2
Performance Chemicals
   9.7    4.2    22.2    13.3
Oilfield Services
   1.8    0.0    8.5    (7.1 )
Octane Additives
   4.4    1.9    19.2    22.5
Pension credit
   1.1    1.6    3.2    5.1
Corporate costs
   (11.7 )    (15.2 )    (34.5 )    (37.8 )
Adjustment to fair value of contingent consideration
   0.0    2.3    0.0    6.3
Loss on disposal of subsidiary
   0.0    0.0    (1.0 )    (1.4 )
Foreign exchange loss on liquidation of subsidiary
   0.0    0.0    (1.8 )    0.0








Total operating income
   $ 30.2    $ 18.9    $ 91.3    $ 73.1

The pension credit relates to the United Kingdom defined benefit pension plan which is closed to future service accrual. The charges related to our other much smaller pension arrangements in the U.S. and overseas are included in the segment and income statement captions consistent with the related employees’ costs.

~~The following table presents a summary of the depreciation and amortization charges incurred by the Company’s reportable segments:~~

   Three Months Ended
September 30    Nine Months Ended
September 30
(in millions)
   2017    2016    2017    2016
Depreciation:

Fuel Specialties
   $ 1.0    $ 0.9    $ 3.0    $ 2.8
Performance Chemicals
   2.5    0.5    7.0    1.6
Oilfield Services
   1.6    1.7    4.8    4.6
Octane Additives
   0.2    0.1    0.6    0.4
Corporate
   0.3    0.3    0.7    0.7








   $ 5.6    $ 3.5    $ 16.1    $ 10.1








Amortization:

Fuel Specialties
   $ 0.2    $ 0.2    $ 0.6    $ 0.7
Performance Chemicals
   1.9    1.1    5.6    3.1
Oilfield Services
   2.9    2.9    8.9    8.9
Corporate
   1.9    1.9    5.5    5.5








   $ 6.9    $ 6.1    $ 20.6    $ 18.2

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.~~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,
	2017		2016		2017		2016		2024		2023
Numerator (in millions):
Net income available to common stockholders	$	23.3	$	11.4	$	66.6	$	59.2	$	41.4	$	33.2

Denominator (in thousands):
Weighted average common shares outstanding		24,137		23,977		24,119		23,989		24,893		24,801
Dilutive effect of stock options and awards		428		499		450		473		173		161

Denominator for diluted earnings per share		24,565		24,476		24,569		24,462		25,066		24,962

Net income per share, basic:	$	0.97	$	0.48	$	2.76	$	2.47	$	1.66	$	1.34

Net income per share, diluted:	$	0.95	$	0.47	$	2.71	$	2.42	$	1.65	$	1.33

In the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2024, the average number of anti-dilutive options excluded from the calculation of diluted earnings per share were ~~18,843 and 18,843, respectively~~31,184 (three ~~and nine~~ months ended ~~September 30, 2016~~March 31, 2023 – ~~0 and 0, respectively)~~25,783).

NOTE 4 – GOODWILL

The following table summarizes the goodwill movements in the year:


(in millions)	2024
Gross cost at January 1	$	399.3
Acquisitions		1.5
Exchange effect		(3.3	)
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 ~~balance sheet dates:~~

(in millions)
   Total
At December 31, 2016

Gross cost⁽¹⁾
   $ 611.3
Accumulated impairment losses
   (236.5 )


Net book amount
   $ 374.8


Acquisition adjustment
   (36.7 )
Exchange effect
   8.7
At September 30, 2017

Gross cost⁽¹⁾
   $ 583.3
Accumulated impairment losses
   (236.5 )


Net book amount
   $ 346.8

⁽¹⁾	~~Gross cost for 2017 and 2016 is net of $298.5 million of historical accumulated amortization.~~

~~Acquisition~~end of ~~Huntsman European Differentiated Surfactants Business~~

~~On December 30, 2016~~ the ~~Company acquired the European Differentiated Surfactants business (“Huntsman”) from Huntsman Investments (Netherlands) B.V. for~~previous quarter has been revised. As a ~~total consideration~~result there has been a decrease of ~~$200.2 million. During the year we have reviewed~~$1.5 million in the fair ~~values~~value of the net assets acquired, ~~and liabilities assumed resulting in a $36.7 million increase in assets acquired and~~with a corresponding ~~decrease in~~increase to the acquired goodwill. ~~The final working capital adjustments of $2.6 million were agreed in the third quarter of 2017.~~

The measurement ~~period~~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 ~~become~~becomes available but does not exceed twelve months. ~~The final~~We have not completed our alignment of accounting policies or fair value ofreview on the other net assets ~~and liabilities has~~acquired at this stage, but any potential adjustments would not ~~been determined as at September 30, 2017.~~have a material impact on the reported figures.

~~Huntsman, and~~

The exchange effect for the ~~associated goodwill and other intangible assets, are included within~~three months ended March 31, 2024 was $3.3 million relating to our Performance Chemicals ~~segment for management and reporting purposes. There is currently no goodwill amortizable for tax purposes.~~segment.

NOTE 5 – OTHER INTANGIBLE ASSETS

The following table ~~summarizes the~~analyzes other intangible assets ~~movement year on year:~~

   Nine Months Ended
September 30
(in millions)
   2017    2016
Gross cost at January 1
   $ 248.6    $ 248.6
Acquisitions
   37.7    0.0
Internally developed software
   4.1    0.0
Exchange effect
   4.1    0.0




Gross cost at September 30
   294.5    248.6




Accumulated amortization at January 1
   (104.2 )    (79.9 )
Amortization expense
   (20.6 )    (18.2 )
Exchange effect
   (0.1 )    0.0




Accumulated amortization at September 30
   (124.9 )    (98.1 )




Net book amount at September 30
   $ 169.6    $ 150.5

~~Acquisitions~~movements in the ~~year are related~~year:


(in millions)	2024
Gross cost at January 1	$	315.1
Additions		3.6
Exchange effect		(1.2	)
Gross cost at March 31		317.5
Accumulated amortization at January 1		(257.8	)
Amortization expense		(2.8	)
Exchange effect		0.8
Accumulated amortization at March 31		(259.8	)
Net book amount at March 31	$	57.7

The amortization expense for the three months ended March 31, 2024 was $2.8 million (three months ended March 31, 2023 – $2.7 million).

In relation to the ~~Huntsman~~ acquisition of QGP in December 2023, a provisional amount based on ~~our provisional assessment of~~previous acquisitions and management’s best current estimate has been included for customer lists. We have provisionally estimated the ~~fair value~~expected useful life of the other intangible assets ~~acquired. In~~to be 10 years. The measurement periods for the ~~first quarter~~valuation of ~~2017 we allocated $33.5 million~~assets acquired and liabilities assumed ends as soon as information on the facts and circumstances that existed as of ~~goodwill to intangibles relating to~~ the acquisition ~~completed on December 30, 2016. The intangible assets relate to customer relationships.~~dates becomes available but does not exceed twelve months.

In ~~addition, the Company completed the acquisition of customer and distributor lists in the Americas and Asia Pacific from Huntsman Holland B.V. for $4.2~~2024, we capitalized $3.6 million ~~in cash on August 9, 2017.~~

~~Internally developed software has been capitalized~~ in relation to our internally developed software for a new ~~information~~Enterprise Resource Planning system ~~platform~~covering our EMEA and ASPAC regions. The expenses capitalized include the acquisition costs for the ~~acquired Huntsman business.~~software as well as the external and internal costs of the development.

~~Amortization expense~~

   Nine Months Ended
September 30
(in millions)
   2017    2016
Product rights
   $ (2.8 )    $ (2.8 )
Brand names
   (0.9 )    (0.9 )
Technology
   (2.5 )    (2.5 )
Customer relationships
   (7.6 )    (5.1 )
Non-compete agreements
   (0.6 )    (0.7 )
Marketing related
   (0.7 )    (0.7 )
Internally developed software
   (5.5 )    (5.5 )




Total
   $ (20.6 )    $ (18.2 )

NOTE 6 – PENSION ~~PLANS~~AND POST EMPLOYMENT BENEFITS

The Company maintains a defined benefit pension plan ~~(the “Plan”)~~ covering ~~a number of its~~certain 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 “UK Plan”). The UK Plan is closed to future service accrual ~~but~~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.

   Three Months Ended
September 30    Nine Months Ended
September 30
(in millions)
   2017    2016    2017    2016
Plan net pension credit/(charge):

Service cost
   $ (0.2 )    $ (0.2 )    $ (0.7 )    $ (0.7 )
Interest cost on projected benefit obligation
   (3.9 )    (5.0 )    (11.3 )    (16.0 )
Expected return on plan assets
   6.2    7.2    18.2    23.0
Amortization of prior service credit
   0.2    0.2    0.7    0.8
Amortization of actuarial net losses
   (1.2 )    (0.6 )    (3.7 )    (2.0 )








   $ 1.1    $ 1.6    $ 3.2    $ 5.1

~~The amortization of prior service credit and actuarial net losses is a reclassification out of accumulated other comprehensive loss into selling, general and administrative expenses.~~

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

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


	Three Months Ended March 31,
(in millions)	2024			2023
Service cost	$	(0.8	)	$	(0.9	)
Interest cost on projected benefit obligation		(4.7	)		(4.9	)
Expected return on plan assets		6.4			6.2
Amortization of prior service cost		(0.1	)		(0.1	)
Amortization of actuarial net gains		0.1			0.5
Net periodic benefit	$	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 gains are a reclassification out of accumulated other comprehensive loss into other income and expense.

In addition, we have obligations for the German plan for the three and nine months ended September 30, 2017 was $0.1 million and $0.5 million, respectively (three and nine months ended September 30, 2016 - $0.2 million and $0.6 million, respectively).

post-employment benefits in some of our other European businesses. As at ~~September 30, 2017, our Performance Chemicals segment has pension obligations in its European businesses with~~March 31, 2024, we have recorded a liability of ~~$4.7~~$4.2 million (December 31, ~~2016 - $4.1~~2023 – $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, 2017	$	2.2		$	0.1	$	2.3
Reductions due to lapsed statute of limitations		(0.5	)		0.0		(0.5	)

Closing balance at September 30, 2017		1.7			0.1		1.8
Opening balance at January 1, 2024									$	10.5		$	4.3		$	14.8
Net change for tax positions of prior periods										(0.1	)		0.3			0.2
Closing balance at March 31, 2024										10.4			4.6			15.0
Current		0.0			0.0		0.0			(3.2	)		(1.3	)		(4.5	)

Non-current	$	1.7		$	0.1	$	1.8		$	7.2		$	3.3		$	10.5

All of the $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 $1.2 million may arise as a result of the ongoing review.

~~We recognize accrued~~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 ~~associated~~totaling $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 ~~uncertain~~the amount recorded.

In 2018 the Company recorded an unrecognized tax ~~positions~~benefit in relation to a potential adjustment that could arise as ~~part~~a consequence of ~~income taxes in our condensed consolidated statements~~the Tax Cuts and Jobs Act of ~~income.~~

~~The Company or one of its subsidiaries files~~2017 (“Tax Act”), but for which retrospective adjustment to the filed 2017 U.S. federal income tax returns ~~with~~was not permissible. The Company has determined that additional tax, interest and penalties totaling $10.5 million may arise in relation to this item. This includes an increase in interest accrued of $0.3 million in the ~~U.S. federal government, and various state and foreign jurisdictions. As previously disclosed, one~~three months to 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 ~~Company’s U.S. subsidiaries is currently subject to a state tax examination in respect~~statute of ~~2012 through to 2014 inclusive, and~~limitations.

As of March 31, 2024, the Company and its U.S. subsidiaries are currently subject to a federal income tax examination in respect of 2015. The Company currently anticipates that adjustments, if any, arising out of these tax audits would not result in a material change to the Company’s financial position as at September 30, 2017.

~~The~~ Company and its U.S. subsidiaries remain open to examination by the IRS for certain elements of 2017 year and for years ~~2014 onwards.~~2020 onwards under the statute of limitations. The Company’s subsidiaries in foreign tax jurisdictions are open to examination including ~~France (2014~~Brazil (2019 onwards), Germany ~~(2015~~(2019 onwards), ~~Switzerland (2015 onwards)~~ and the ~~United Kingdom (2015~~U.K. (2017 onwards).

Tax audits have been opened by the Italian tax authorities in respect of Innospec Performance Chemicals Italia Srl, acquired as part of the Huntsman business in respect of the period 2011 to 2013 inclusive. Any additional tax arising as a consequence of the tax audit would be a liability of the previous owner under the terms of the sales and purchase agreement.

The Company is in a position to control whether or not to repatriate foreign earnings and we currently do not expect to make a repatriation in the foreseeable future. No taxes have been provided for on the unremitted earnings of our overseas subsidiaries as any tax basis differences relating to investments in these overseas subsidiaries are considered to be indefinite in duration. The amount of unremitted earnings at December 31, 2016 was approximately $788 million. If these earnings are remitted, additional taxes could result after offsetting foreign income taxes paid although the calculation of the additional taxes is not practicable to compute at this time.11

NOTE 8 – LONG-TERM DEBT

~~Long-term debt consists~~As at March 31, 2024, and December 31, 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.

The Company continues to have available a $250.0 million revolving credit facility until May 30, 2027. The facility contains an accordion feature whereby the Company may elect to increase the total available borrowings by an aggregate amount of up to $125.0 million.

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

(in millions)
   September 30,
2017    December 31,
2016
Revolving credit facility
   $ 121.0    $ 161.0
Term loan
   110.0    110.0
Deferred finance costs
   (1.7 )    (2.2 )




   $ 229.3    $ 268.8
Due within one year
   (10.3 )    (10.3 )




Due after one year
   $ 219.0    $ 258.5

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 ~~of Innospec’s manufacturing facilities~~ includes costs for ~~decontamination and~~ environmental remediation ~~activities (“remediation”).~~ liabilities and asset retirement obligations.

The principal site giving rise to ~~remediation liabilities~~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 ~~our~~ other manufacturing ~~sites in the U.S. and Europe.~~

sites.

Movements in the provisions are summarized as follows:


	Nine Months Ended September 30
(in millions)	2017			2016			2024
Total at January 1	$	39.5		$	37.7		$	61.6
Charge for the period		4.4			3.5			0.8
Utilized in the period		(1.7	)		(2.1	)		(0.9	)
Exchange effect		0.5			0.1			(0.3	)

Total at September 30		42.7			39.2
Total at March 31								61.2
Due within one year		(5.9	)		(5.0	)		(4.6	)

Due after one year	$	36.8		$	34.2		$	56.6

The charge for the three months ended March 31, 2024 was $0.8 million (three months ended March 31, 2023 – $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, 2017				December 31, 2016				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	$	65.5	$	65.5	$	101.9	$	101.9
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		2.0		2.0		0.0		0.0		0.5		0.5		—		—
Interest rate swaps		0.6		0.6		0.4		0.4
Liabilities
Non-derivatives:
Long-term debt (including current portion)	$	229.3	$	229.3	$	268.8	$	268.8
Finance leases (including current portion)		5.8		5.8		4.5		4.5
Derivatives (Level 1 measurement):
Other non-current liabilities:
Other current and non-current liabilities:
Foreign currency forward exchange contracts		0.0		0.0		0.6		0.6		—		—		1.0		1.0
Non-financial liabilities (Level 3 measurement):
Stock equivalent units		11.4		11.4		9.8		9.8
Acquisition-related contingent consideration									$	23.5	$	23.5	$	23.4	$	23.4

The following methods and assumptions were used to estimate the fair ~~values of financial instruments:~~values:

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

~~Long-term debt and finance leases:~~ ~~Long-term debt principally comprises the term loan and revolving credit facility, which are shown net of deferred finance costs that have been capitalized.~~ Emissions Trading Scheme credits: The fair value ~~of long-term debt approximates to the carrying value, as the discounting to its present value~~ is ~~offset~~determined by the ~~interest rate swaps. Finance leases relate to certain fixed assets in our oilfield services business. The carrying amount~~open market pricing at the end of ~~finance leases approximates to~~ the ~~fair value.~~reporting period.

~~Derivatives:~~Foreign currency forward exchange contracts: The fair value of derivatives relating to foreign currency forward exchange contracts ~~and interest rate swaps~~ are derived from current settlement prices and comparable contracts using current assumptions. ~~Interest rate swaps relate to contracts taken out to hedge interest rate risk on a portion of our long-term debt.~~ 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 and changes~~dollar.

Acquisition-related contingent consideration: Contingent consideration payable in ~~U.S. LIBOR.~~

~~Stock equivalent units:~~ ~~The~~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, 2017~~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 ~~2017 was a loss of $0.6 million (first nine months of 2016: gain of $3.2 million).~~

The Company enters into interest rate swaps to minimize interest rate exposure related to a part of our borrowing requirements. These interest rate swaps have been designated as hedging instruments, and their impact on accumulated other comprehensive loss for the first nine months of 20172024 was a gain of ~~$0.2~~$1.0 million (first ~~nine~~three months of ~~2016: $0.0~~2023 – a loss of $0.9 million).

NOTE 12 – ~~COMMITMENTS AND~~ CONTINGENCIES

~~Legal~~Legal matters

~~While we~~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 reported in the 2023 Form 10-K, we have incurred financial losses and lodged a civil and criminal legal claim related to a misappropriation of inventory in Brazil. As at the time of filing, there have been no significant developments to report in relation to the claims being made. Consistent with 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 ~~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 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, 2017,~~March 31, 2024, such guarantees which are not recognized as liabilities in the condensed consolidated financial statements amounted to ~~$3.3 million.~~

$6.8 million (December 31, 2023 - $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 ~~fulfil~~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 ~~Company grants~~compensation cost recorded for stock options for the three months ended March 31, 2024 and 2023 was $2.1 million and $1.9 million, respectively.

The compensation cost recorded for stock equivalent units ~~(“SEUs”) from time to time as a long-term performance incentive. In certain cases~~for 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.three months ended March 31, 2024 and 2023 was $2.5 million and $3.2 million, respectively.

~~Stock option plans~~

The following table summarizes the transactions of the Company’s ~~stock option~~stock-based compensation plans for the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2024.

   Number of
Options    Weighted
Average
Exercise
Price    Weighted
Average
Grant-Date
Fair Value
Outstanding at December 31, 2016
   570,994    $ 20.38    $ 21.68
Granted - at discount
   79,664    $ 0.00    $ 61.39
- at market value
   18,843    $ 70.60    $ 16.84
Exercised
   (83,255 )    $ 12.56    $ 23.86
Forfeited
   (3,805 )    $ 15.91    $ 22.47



Outstanding at September 30, 2017
   582,441    $ 20.64    $ 26.68


	Number of shares			Weighted Average Grant-Date Fair Value
Nonvested at December 31, 2023		652,891		$	75.2
Granted		135,942		$	130.5
Vested		(160,207	)	$	86.6
Forfeited		(7,151	)	$	83.9
Nonvested at March 31, 2024		621,475		$	84.2

~~At September 30, 2017, there were 44,443~~

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 ~~that were exercisable, of which 9,421 had performance conditions attached.~~

granted. The ~~stock option compensation cost~~maximum potential vesting has been reflected in the grant-date fair value calculation, but not reflected for the ~~first nine months~~number of ~~2017 was $3.4 million (first nine months of 2016 – $2.8 million). The total intrinsic value of options exercised~~awards granted, as shown in the ~~first nine months~~table above. All other awards granted in the quarter have similar vesting conditions to those granted in the previous periods.

As of ~~2017~~March 31, 2024, there was ~~$2.0~~$34.6 million ~~(first nine months~~ of ~~2016 – $1.8 million).~~

~~The~~ total unrecognized compensation cost related to ~~non-vested stock options not yet recognized at September 30, 2017 was $6.7 million and this~~nonvested share-based compensation arrangements. That cost is expected to be recognized over ~~the~~a weighted-average period of ~~2.05~~ 2.2 years.

~~Stock equivalent units~~

~~The following table summarizes the transactions of the Company’s SEUs for the nine months ended September 30, 2017:~~

   Number
of SEUs    Weighted
Average
Exercise
Price    Weighted
Average
Grant-Date
Fair Value
Outstanding at December 31, 2016
   279,815    $ 3.77    $ 33.40
Granted - at discount
   180,249    $ 0.00    $ 62.76
- at market value
   5,530    $ 70.60    $ 16.84
Exercised
   (34,054 )    $ 5.47    $ 27.09
Forfeited
   (16,075 )    $ 0.00    $ 33.77



Outstanding at September 30, 2017
   415,465    $ 3.03    $ 46.41

~~At September 30, 2017 there were 54,759 SEUs that are exercisable, of which 49,391 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 cost for the first nine months of 2017 was $3.6 million (first nine months of 2016 – $3.7 million). The total intrinsic value of SEUs exercised in the first nine months of 2017 was $1.1 million (first nine months of 2016 – $1.5 million).

~~The weighted-average remaining vesting period of non-vested SEUs is 1.93 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 ~~2017~~2024 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
Foreign currency translation items:
Liquidation of subsidiary	$	1.8		Loss on liquidation of subsidiary
Defined benefit pension plan items:
Amortization of prior service credit	$	(0.7	)	See⁽¹⁾ below
Amortization of prior service cost					$	0.1		See (1) below
Amortization of actuarial net losses		3.7		See⁽¹⁾ below		(0.1	)	See (1) below
						—		Total before tax
		4.8		Total before tax		—		Income tax expense
		(0.5	)	Income tax expense

Total reclassifications	$	4.3		Net of tax	$	—		Net of tax

⁽¹⁾	~~These items are included in the computation of net periodic pension cost. See Note 6 of the Notes to the Condensed Consolidated Financial Statements for additional information.~~

(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 ~~accumulated other comprehensive loss~~AOCL for the first ~~nine~~three months of ~~2017,~~2024, net of tax, were:


(in millions)	Derivative instruments		Defined Benefit Pension Plan Items			Cumulative Translation Adjustments			Total			Defined Benefit Pension Plan Items			Cumulative Translation Adjustments			Total
Balance at December 31, 2016	$	0.3	$	(46.0	)	$	(80.5	)	$	(126.2	)

Balance at December 31, 2023												$	(77.2	)	$	(70.9	)	$	(148.1	)
Other comprehensive income before reclassifications		0.2		0.0			30.7			30.9			—			(7.3	)		(7.3	)
Amounts reclassified from AOCL		0.0		2.5			0.0			2.5			—			—			—

Total other comprehensive income		0.2		2.5			30.7			33.4			—			(7.3	)		(7.3	)

Balance at September 30, 2017	$	0.5	$	(43.5	)	$	(49.8	)	$	(92.8	)

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 March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. ASU 2017-07 requires companies to present the service cost component of net benefit cost in the same line items in which they report compensation cost. Companies will present all other components of net benefit cost outside operating income, if this subtotal is presented. The new standard is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. The Company has ~~not yet determined the effect of the standard on its ongoing financial reporting.~~

~~In February 2016, the FASB~~reviewed recently issued ~~Accounting Standards Update (ASU) 2016-02, Revision to Lease Accounting, which amends ASC Topic 842, Leases. The ASU requires lessees to recognize a right-of-use asset~~accounting pronouncements and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. The Company has not yet determined the effect of the standard on its ongoing financial reporting.

~~In May 2014, the FASB issued Accounting Standards Update (ASU) 2014-09,~~~~Revenue from Contracts with Customers (Topic 606)~~. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. The new standard will become effective for annual reporting periods beginning after December 15, 2017. ASU 2014-09 may be applied retrospectively to each prior period presented in the financial statements (full retrospective approach) or retrospectively with the cumulative effect of initially applying the standard recognized as an adjustmentconcluded there were no matters relevant to the opening balance of retained earnings as of the date of adoption (modified retrospective approach). We will adopt the new revenue standard on January 1, 2018 utilizing the modified retrospective approach.

~~We are spending significant time and efforts evaluating, analyzing and documenting the expected impact of ASU 2014-09 on our~~Company’s financial statements. Our approach includes performing a detailed review of key contracts representative of our different businesses and product lines, reviewing various industry publications, and comparing our current accounting policies to the principles and requirements outlined in the new standard. Our assessment at this stage is that we do not expect the new revenue recognition standard will have a material impact on our financial statements upon adoption.

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 three months of 2024 the Company did not make any purchases from AdvanSix (first three months of 2023 – $0.1 million). As at March 31, 2024, the Company owed nil to AdvanSix (December 31, 2023 – nil).

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 ~~2017~~2024 the Company incurred fees from SGR of ~~$0.3~~$0.2 million (first ~~nine~~three months of ~~2016~~2023 – ~~$0.4~~$0.1 million). As at ~~September 30, 2017,~~March 31, 2024, the ~~amount due~~Company owed less than $0.1 million to SGR (December 31, 2023 – nil).

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 sold scrap metal to EMR in the first three months of 2024 for less than $0.1 million (first three months of 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 March 31, 2024, EMR owed less than $0.1 million for scrap metal purchased from the Company ~~was $0.0 million~~ (December 31, ~~2016 - $0.0 million)~~2023 – nil).

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~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 ~~business combinations, environmental liabilities,~~plant closure provisions, pensions, ~~deferred tax~~income taxes and ~~uncertain income tax positions, goodwill and property, plant and equipment and other intangible assets (net of amortization).~~goodwill. These policies have been discussed in the Company’s ~~2016 Annual Report on~~2023 Form 10-K.

RESULTS OF OPERATIONS

The Company reports its financial performance based on ~~the four~~three reportable segments, which are Performance Chemicals, Fuel Specialties ~~Performance Chemicals,~~and Oilfield ~~Services and Octane Additives.~~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)	2017			2016			2017			2016			2024			2023
Net sales:
Performance Chemicals													$	160.8		$	151.4
Fuel Specialties	$	130.1		$	114.4		$	377.8		$	367.1			176.9			190.3
Performance Chemicals		110.3			36.8			309.7			106.8
Oilfield Services		81.9			49.7			224.5			132.4			162.5			167.9
Octane Additives		10.1			4.6			41.0			39.3

	$	332.4		$	205.5		$	953.0		$	645.6
													$	500.2		$	509.6
Gross profit:
Performance Chemicals													$	37.7		$	24.1
Fuel Specialties	$	44.6		$	43.8		$	135.9		$	129.5			60.6			57.4
Oilfield Services														57.4			66.3
													$	155.7		$	147.8
Operating income/(loss):
Performance Chemicals		20.7			12.3			54.8			34.4		$	21.1		$	10.4
Fuel Specialties														33.4			32.4
Oilfield Services		28.5			20.6			82.9			52.1			16.9			15.9
Octane Additives		5.0			2.5			21.2			24.9

	$	98.8		$	79.2		$	294.8		$	240.9

Operating income:
Fuel Specialties	$	24.9		$	24.1		$	75.5		$	72.2
Performance Chemicals		9.7			4.2			22.2			13.3
Oilfield Services		1.8			0.0			8.5			(7.1	)
Octane Additives		4.4			1.9			19.2			22.5
Pension credit		1.1			1.6			3.2			5.1
Corporate costs		(11.7	)		(15.2	)		(34.5	)		(37.8	)		(20.2	)		(17.7	)
Adjustment to fair value of contingent consideration		0.0			2.3			0.0			6.3			(0.8	)		—
Loss on disposal of subsidiary		0.0			0.0			(1.0	)		(1.4	)
Foreign exchange loss on liquidation of Subsidiary		0.0			0.0			(1.8	)		0.0

Profit on disposal of property, plant and equipment														0.1			—
Total operating income	$	30.2		$	18.9		$	91.3		$	73.1		$	50.5		$	41.0

Three Months Ended ~~September 30, 2017~~March 31, 2024

The following table shows the ~~change~~changes in ~~components of~~sales, gross profit and operating ~~income~~expenses by reporting segment for the three months ended ~~September 30, 2017~~March 31, 2024 and the three months ended ~~September 30, 2016:~~March 31, 2023:


	Three Months Ended September 30											Three Months Ended March 31,
(in millions, except ratios)	2017			2016			Change					2024			2023			Change
Net sales:
Performance Chemicals												$	160.8		$	151.4		$	9.4		+6%
Fuel Specialties	$	130.1		$	114.4		$	15.7		+14	%		176.9			190.3			(13.4	)	-7%
Performance Chemicals		110.3			36.8			73.5		+200	%
Oilfield Services		81.9			49.7			32.2		+65	%		162.5			167.9			(5.4	)	-3%
Octane Additives		10.1			4.6			5.5		+120	%

	$	332.4		$	205.5		$	126.9		+62	%
												$	500.2		$	509.6		$	(9.4	)	-2%
Gross profit:
Performance Chemicals												$	37.7		$	24.1		$	13.6		+56%
Fuel Specialties	$	44.6		$	43.8		$	0.8		+2	%		60.6			57.4			3.2		+6%
Performance Chemicals		20.7			12.3			8.4		+68	%
Oilfield Services		28.5			20.6			7.9		+38	%		57.4			66.3			(8.9	)	-13%
Octane Additives		5.0			2.5			2.5		+100	%

	$	98.8		$	79.2		$	19.6		+25	%
												$	155.7		$	147.8		$	7.9		+5%
Gross margin (%):
Performance Chemicals													23.4			15.9			+7.5
Fuel Specialties		34.3			38.3			-4.0					34.3			30.2			+4.1
Performance Chemicals		18.8			33.4			-14.6
Oilfield Services		34.8			41.4			-6.6					35.3			39.5			-4.2
Octane Additives		49.5			54.3			-4.8
Aggregate		29.7			38.5			-8.8					31.1			29.0			+2.1
Operating expenses:
Performance Chemicals												$	(16.6	)	$	(13.7	)	$	(2.9	)	+21%
Fuel Specialties	$	(19.7	)	$	(19.7	)	$	0.0		0	%		(27.2	)		(25.0	)		(2.2	)	+9%
Performance Chemicals		(11.0	)		(8.1	)		(2.9	)	+36	%
Oilfield Services		(26.7	)		(20.6	)		(6.1	)	+30	%		(40.5	)		(50.4	)		9.9		-20%
Octane Additives		(0.6	)		(0.6	)		0.0		0	%
Pension credit		1.1			1.6			(0.5	)	-31	%
Corporate costs		(11.7	)		(15.2	)		3.5		-23	%		(20.2	)		(17.7	)		(2.5	)	+14%
Adjustment to fair value of contingent consideration		0.0			2.3			(2.3	)	-100	%		(0.8	)		—			(0.8	)	n/a
Profit on disposal of property, plant and equipment													0.1			—			0.1		n/a
												$	(105.2	)	$	(106.8	)	$	1.6		-1%
	$	(68.6	)	$	(60.3	)	$	(8.3	)	+14	%

~~Fuel Specialties~~Performance Chemicals

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

Three Months Ended September 30, 2017

Three Months Ended March 31, 2024

Change (%)

Americas

EMEA

ASPAC

AvTel

Total

Americas

EMEA

ASPAC

Total

Volume

-2

-1

+19

+14

+13

Acquisition

—

Price and product mix

-4

+17

+10

+16

-12

-15

-12

-14

Exchange rates

—

-4

+21

+14

~~Volumes in the Americas~~

Higher sales volumes for all our regions was driven by increased demand for our personal care and home care products resulting from higher consumer demand. All our regions were ~~higher than the prior year due to higher demand, partly offset~~affected by an adverse price and product ~~mix. Volumes in~~mix due to lower selling prices driven by lower raw material costs. EMEA and ASPAC decreased due to the continuation of customer reformulation to our new technologies. Price and product mix in EMEA and ASPAC benefitted from increased sales of higher margin products from our continuing technology changes. AvTel volumes were higher than the prior year due to variations in the timing of demand, together with a favorable price mix. EMEA benefited from favorable exchange rate movements ~~year over year, driven by a strengthening of the European Union euro~~ against the U.S. dollar.

Gross ~~margin~~~~: decreased by 4.0~~margin: the year over year increase of 7.5 percentage points aswas due to margins ~~returned~~returning to ~~be within our expected range after~~a more normalized level when compared to the ~~highs of~~depressed margins in the prior year. ~~The~~Margins have benefited from raw materials pricing reductions in the current year, ~~was impacted by adverse sales mix and manufacturing variances, compared to a favorable sales mix in the prior year.~~

~~Operating expenses:~~~~are consistent~~combining with the ~~prior year.~~favorable impact for our manufacturing efficiency due to the higher production volumes.

~~Performance Chemicals~~Operating expenses: increased $2.9 million year over year, due to higher selling expenses, including commissions

and increased provisions for doubtful debts, together with higher performance-related remuneration.

Fuel Specialties

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


	Three Months Ended September 30, 2017										Three Months Ended March 31, 2024
Change (%)	Americas		EMEA		ASPAC		Acquisition		Total		Americas		EMEA		ASPAC		AvGas		Total
Volume		+20		-2		+1		0		+13		-2		—		+1		-24		-2
Acquisition		0		0		0		+196		+196
Price and product mix		-16		+4		-5		0		-10		-3		-10		-4		+1		-6
Exchange rates		0		+3		0		0		+1		—		+2		—		—		+1
												-5		-8		-3		-23		-7
		+4		+5		-4		+196		+200

~~Increased Personal Care demand led to higher~~

Sales volumes were down in the Americas, ~~and~~in part due to a milder winter compared to the prior year which has adversely impacted the sales of our winter related products. ASPAC ~~partly offset by pricing pressures which adversely affected~~volumes are slightly up on the ~~price~~prior year due to variations in the timing of demand. Price and product ~~mix. EMEA experienced a decline~~mix was adverse in all our regions due to the decreased sales of higher margin products. AvGas volumes were lower than the prior year due to variations in the ~~quarter due to order phasing, which was~~demand from customers, being partly offset by a favorable price and product ~~mix.~~mix from a higher proportion of sales to higher margin customers. EMEA benefited from favorable exchange rate movements year over year ~~driven by a strengthening of the European Union euro~~ against the U.S. dollar. ~~Sales growth from the acquisition of our Huntsman business at the end of 2016 has been excluded from the market analysis above and included as one variance for the segment total.~~

Gross ~~margin:~~margin: the year onover year ~~decrease~~increase of ~~14.6~~4.1 percentage points was driven by the dilutive effect of the lower margins for our acquired Huntsman business together with continued pricing pressures. However, gross margin improved 2.2 percentage points sequentially comparedprimarily due to the ~~second quarter, with both the heritage and acquired businesses delivering margin improvements.~~

~~Operating expenses:~~the year on year increase of $2.9 million is due to a $4.2 million increase for the acquisition of our Huntsman business, partly offset by a reduction of $1.0 million relating to a one-off commercial legal settlementadverse impact in the prior year ~~and lower accruals for share based compensation due~~in relation to the ~~relative performance~~inventory misappropriation of ~~the Innospec share price~~$7.4 million in Brazil. The current year ~~over year.~~margins are more in line with our normal expectations.

~~Oilfield Services~~

~~Net sales:~~Operating expenses: the year onover year increase of ~~$32.2~~$2.2 million ~~was driven by continued improvement in customer activity driving an 8 percent increase sequentially over the second quarter. Overall volumes~~includes increased ~~by 83 percent year~~spending on ~~year, partly offset by an adverse price and product mix of 18 percent.~~

~~Gross margin:~~ the year on year decrease of 6.6 percentage points is comparing to a very strong comparative quarter and the result of higher costs in the current year related to the effect of Hurricane Harvey on raw material price and availability.

~~Operating expenses:~~ ~~the year on year increase of $6.1 million was driven by higher selling and technical support expenses required to service the increase in customer demand, together with additional~~ research and development and higher ~~administration costs~~performance-related remuneration.

Oilfield Services

Net sales: have decreased year over year by $5.4 million, or 2 percent, with the majority of our customer activity continuing to ~~support~~be concentrated in the ~~business growth.~~Americas region. Sequentially quarter on quarter, demand 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 and margin improvement in our other oilfield segments.

~~Octane Additives~~

~~Net sales:~~~~have increased by $5.5 million~~Gross margin: the year over year decrease of 4.2 percentage points was due to an adverse sales mix compared to the prior year ~~due to the phasing of orders from our one remaining refinery customer.~~comparative.

~~Gross margin:~~Operating expenses: the year onover year decrease of ~~4.8 percentage points~~$9.9 million was ~~due~~driven by lower selling expenses, including lower customer service costs which are necessary to support the demand from certain customers, together with lower ~~volumes of production in the current year leading to a higher manufacturing cost per tonne.~~provisions for doubtful debts.

~~Operating expenses:~~ ~~are consistent with the prior year.~~

Other Income Statement Captions

~~Pension credit:~~ ~~is non-cash, and was a $1.1 million net credit in 2017 compared to a $1.6 million net credit in 2016 primarily due to higher amortization of actuarial losses.~~

Corporate costs:the year onover year ~~decrease~~increase of ~~$3.5~~$2.5 million related to $1.7 million non-recurring acquisition-related costs in the prior year for our Huntsman business, partly offset by $0.5 million of integration related costs in the current year; together with lower performance based personnel-related compensation, including lower accruals for share-based compensationwas due to the ~~relative performance~~growth and timing of ~~the Innospec share price year over year;~~information technology expenditure, higher performance-related remuneration and the ~~benefit~~adverse revaluation of our United Kingdom Emissions Trading Scheme carbon credits which can be traded on the ~~weaker British pound sterling against the U.S. dollar for our Ellesmere Port cost base.~~open market.

Adjustment to fair value of contingent consideration:the $0.8 million expense in 2024 represents the ~~comparative period there was a~~accretion charge for the acquisition-related contingent consideration ~~credit of $2.3 million related~~payable in relation to ~~a previous acquisition.~~

our QGP operation in Brazil which was acquired in December 2023.

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


(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, net: was income of $1.8 million related to $1.3 million of gains on translation of net assets denominated in non-functional currencies mainly in our European businesses, together with $0.5 million of gains on foreign currency forward exchange contracts. In the prior year, other net expense of $5.0 million primarily related to net losses of $6.7 million on translation of assets and liabilities denominated in non-functional currencies in our European businesses, partly offset by gains of $1.7 million on foreign currency forward exchange contracts.

~~Interest expense, net:~~ ~~was~~ $2.1 million in ~~2017~~the first quarter of 2024 compared to ~~$0.7~~income of $0.3 million in ~~2016, driven by~~ the ~~additional term loan related~~first quarter of 2023. Interest income from our cash balances has increased over recent periods due to higher central bank interest rates together with the increases in our ~~Huntsman acquisition, increased working capital requirements funded by our credit facility and the recent rise in LIBOR impacting our credit facility interest.~~cash balances.

Income taxes:~~The~~ the effective tax rate was ~~22.1%~~25.1% and ~~13.6%~~26.2% in the ~~third~~first quarter of ~~2017~~2024 and ~~2016,~~2023, respectively. The adjusted effective tax rate, once adjusted for the items set out in the following table, was ~~23.8%~~24.5% in ~~the third quarter of 2017~~2024 compared with ~~19.4%~~25.8% in ~~the third quarter of 2016.~~2023. The ~~4.4% increase~~1.3% percentage point decrease in the adjusted effective ~~tax~~ rate was primarily due to the ~~third quarter of 2017 benefiting, to~~fact that a lesser extent, from the positive impact of taxable profits in different geographical locations as compared to the third quarter of 2016, together with the impact of stock compensation adjustments as a consequence of the introduction of ASU 2016-09 in 2017. 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 to evaluate the performancehigher proportion of the Company’s ~~operations and for planning and forecasting~~profits are being generated in ~~subsequent periods.~~

~~The following table shows a reconciliation of the GAAP effective~~lower tax ~~rate to the adjusted effective tax rate:~~

   Three Months Ended
September 30
(in millions)
   2017 2016
Income before income taxes
   $ 29.9 $ 13.2
Adjustment to fair value of contingent consideration
   0.0 (2.4 )
Adjustment for stock compensation
   1.2 0.0


   $ 31.1 $ 10.8


Income taxes
   $ 6.6 $ 1.8
Tax on adjustment to fair value of contingent consideration
   0.0 (0.9 )
Tax on stock compensation
   0.3 0.0
Adjustment of income tax positions
   0.5 1.2


   $ 7.4 $ 2.1


GAAP effective tax rate
   22.1 % 13.6 %
Adjusted effective tax rate
   23.8 % 19.4 %

~~Nine Months Ended September 30, 2017~~

~~The following table shows the change in components of operating income by reporting segment for the nine months ended September 30, 2017 and the nine months ended September 30, 2016:~~

   Nine Months Ended
September 30
(in millions, except ratios)
   2017    2016    Change
Net sales:

Fuel Specialties
   $ 377.8    $ 367.1    $ 10.7    +3 %
Performance Chemicals
   309.7    106.8    202.9    +190 %
Oilfield Services
   224.5    132.4    92.1    +70 %
Octane Additives
   41.0    39.3    1.7    +4 %







   $ 953.0    $ 645.6    $ 307.4    +48 %







Gross profit:

Fuel Specialties
   $ 135.9    $ 129.5    $ 6.4    +5 %
Performance Chemicals
   54.8    34.4    20.4    +59 %
Oilfield Services
   82.9    52.1    30.8    +59 %
Octane Additives
   21.2    24.9    (3.7 )    -15 %







   $ 294.8    $ 240.9    $ 53.9    +22 %







Gross margin (%):

Fuel Specialties
   36.0    35.3    +0.7
Performance Chemicals
   17.7    32.2    -14.5
Oilfield Services
   36.9    39.4    -2.5
Octane Additives
   51.7    63.4    -11.7
Aggregate
   30.9    37.3    -6.4
Operating expenses:

Fuel Specialties
   $ (60.4 )    $ (57.3 )    $ (3.1 )    +5 %
Performance Chemicals
   (32.6 )    (21.1 )    (11.5 )    +55 %
Oilfield Services
   (74.4 )    (59.2 )    (15.2 )    +26 %
Octane Additives
   (2.0 )    (2.4 )    0.4    -17 %
Pension credit
   3.2    5.1    (1.9 )    -37 %
Corporate costs
   (34.5 )    (37.8 )    3.3    -9 %
Adjustment to fair value of contingent consideration
   0.0    6.3    (6.3 )    -100 %
Loss on disposal of subsidiary
   (1.0 )    (1.4 )    0.4    -29 %
Foreign exchange loss on liquidation of subsidiary
   (1.8 )    0.0    (1.8 )    n/a







   $ (203.5 )    $ (167.8 )    $ (35.7 )    +21 %

~~Fuel Specialties~~

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

   Nine Months Ended September 30, 2017
Change (%)
   Americas    EMEA    ASPAC    AvTel    Total
Volume
   +10    -6    -4    -15    -2
Price and product mix
   -6    +11    +8    +5    +5
Exchange rates
   0    -1    0    0    0










   +4    +4    +4    -10    +3

Volumes in the Americas were higher as a result of increased demand following a slower than normal end to 2016. Price and product mix in the Americas was adversely impacted by increased sales of lower margin products. Volumes in EMEA and ASPAC decreased due to customer reformulation to our new technologies. Price and product mix in EMEA and ASPAC benefited from increased sales of higher margin products. AvTel volumes were lower than the prior year due to variations in the timing and level of demand from customers, together with a favorable price mix. EMEA was adversely impacted by exchange rate movements year over year, driven by a weakening of the European Union euro and the British pound sterling against the U.S. dollar.

~~Gross margin~~: the year on year increase of 0.7 percentage points was driven by increased sales of higher margin products together with a favorable price and product mix. The effect of weaker exchange rates versus the U.S. dollar did not significantly impact gross margin.

~~Operating expenses:~~the year on year increase of $3.1 million was driven by $1.9 million higher selling and administrative expenses, including higher performance based personnel-related compensation; together with $1.2 million higher research and development expenses.

~~Performance Chemicals~~

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

   Nine Months Ended September 30, 2017
Change (%)
   Americas    EMEA    ASPAC    Acquisition    Total
Volume
   +9    +2    +16    0    +8
Acquisition
   0    0    0    +187    +187
Price and product mix
   -6    +5    -9    0    -4
Exchange rates
   0    -2    -3    0    -1










   +3    +5    +4    +187    +190

Excluding the Huntsman acquisition, increased Personal Care demand led to higher volumes in all our markets. Price and product mix was adversely affected by pricing pressures in the Americas and ASPAC while EMEA benefitted from favorable price and product mix. EMEA and ASPAC were adversely impacted by exchange rate movements year over year, driven by a weakening of the European Union euro and the British pound sterling against the U.S. dollar. Sales growth from the acquisition of our Huntsman business at the end of 2016 has been excluded from the market analysis above and included as one variance for the segment total.

~~Gross margin:~~the year on year decrease of 14.5 percentage points was driven by the dilutive effect of the lower margins for our acquired Huntsman business together with some one-off events for an unplanned plant outage and raw materials purchasing and pricing issues in the second quarter.

~~Operating expenses:~~the year on year increase of $11.5 million is due to $12.9 million additional expenses within our acquired Huntsman business, partly offset by a $1.0 million one-off commercial legal settlement in the prior year and lower share based compensation driven by the relative performance of the Innospec share price year over year.

~~Oilfield Services~~

~~Net sales:~~the year on year increase of $92.1 million was due to an improvement in customer demand for all our product lines following the rise in customer activity as oil prices recovered. Overall volumes increased by 75 percent year on year, partly offset by an adverse price and product mix of 5 percent.

~~Gross margin:~~ the year on year decrease of 2.5 percentage points when compared to a strong prior year, was driven by the mix of customer activity and the adverse effect of Hurricane Harvey on raw material price and availability.

~~Operating expenses:~~ the year on year increase of $15.2 million was driven by higher selling and technical support expenses required to service the increase in customer demand, together with additional research and development and higher administration costs to support the business growth.

~~Octane Additives~~

~~Net sales:~~~~have increased by $1.7 million compared to the prior year, due to the phasing of orders from our one remaining refinery customer.~~

~~Gross margin:~~ ~~the year on year decrease of 11.7 percentage points was due to lower volumes of production in the current year leading to a higher manufacturing cost per tonne.~~

~~Operating expenses:~~ ~~the year on year decrease of $0.4 million was due to a reduction in the provisions for doubtful debts together with continuing cost efficiencies.~~

~~Other Income Statement Captions~~

~~Pension credit:~~ ~~is non-cash, and was a $3.2 million net credit in 2017 compared to a $5.1 million net credit in 2016, primarily due to higher amortization of actuarial losses in the current year.~~

~~Corporate costs:~~ the year on year decrease of $3.3 million related to $2.7 million non-recurring acquisition-related costs in the prior year for our Huntsman business, partly offset by $1.7 million of integration related costs in the current year; together with lower performance based personnel-related compensation; and the benefit of the weaker British pound sterling against the U.S. dollar for our Ellesmere Port cost base.

~~Adjustment to fair value of contingent consideration:~~ ~~in the comparative period there was a contingent consideration credit of $6.3 million related to a previous acquisition.~~

~~Loss on disposal of subsidiary~~~~: the loss of $1.0 million relates to an indemnity claim in relation to residual testing in the Aroma Chemicals business which was sold in 2015.~~

~~Foreign exchange loss on liquidation of subsidiary~~: the $1.8 million loss relates to the reclassification of historic foreign exchange translations of net assets from accumulated other comprehensive losses, for our captive insurance company which was liquidated in the first quarter of 2017.

~~Other net income:~~ other net income of $2.9 million related to $3.5 million of gains on translation of net assets denominated in non-functional currencies mainly in our European businesses, partly offset by losses of $0.6 million on foreign currency forward exchange contracts. In the prior year, other net income of $3.2 million primarily related to net gains on foreign currency forward contracts.

~~Interest expense, net:~~ was $6.3 million in 2017 compared to $2.2 million in 2016, driven by the additional term loan related to the Huntsman acquisition, increased working capital requirements funded by our credit facility and the recent rise in LIBOR impacting our revolving credit facility borrowing.

~~Income taxes~~: The effective tax rate was 24.2% and 20.1% in the first nine months of 2017 and 2016, respectively. The adjusted effective tax rate, once adjusted for the items set out in the following table, was 24.8% in the first nine months of 2017 compared with 20.2% in the first nine months of 2016. The 4.6% increase in the adjusted effective tax rate was primarily due to the first nine months of 2017 benefiting to a lesser extent from the positive impact of taxable profits in different geographical locations as compared to the first nine months of 2016, together with the impact of stock compensation adjustments as a consequence of ASU 2016-09 in 2017.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 ~~rate~~charge to the adjusted effective tax ~~rate:~~charge:


	Nine Months Ended September 30						Three Months Ended March 31,
(in millions)	2017			2016			2024			2023
Income before income taxes	$	87.9		$	74.1		$	55.3		$	45.0
Indemnification asset regarding tax audit								0.1			(0.1	)
Adjustment for stock compensation								2.1			1.9
Adjustment to fair value of contingent consideration		0.0			(7.1	)		0.8			—
Adjustment to fair value acquisition accounting		1.7			0.0
Loss on disposal of subsidiary		1.0			1.4
Foreign exchange loss on liquidation of subsidiary		1.8			0.0
Adjustment for stock compensation		3.0			0.0

	$	95.4		$	68.4

Legacy cost of closed operations								0.8			0.8
Adjusted income before income taxes							$	59.1		$	47.6
Income taxes	$	21.3		$	14.9		$	13.9		$	11.8
Tax on adjustment to fair value of contingent consideration		0.0			(2.7	)
Tax on adjustment to fair value acquisition accounting		0.3			0.0
Tax on stock compensation		1.6			0.0			(0.1	)		—
Adjustment of income tax provision		0.5			1.6			0.2			0.3

	$	23.7		$	13.8

Tax on adjustment to fair value of contingent consideration								0.3			—
Tax on legacy cost of closed operations								0.2			0.2
Adjusted income taxes							$	14.5		$	12.3
GAAP effective tax rate		24.2	%		20.1	%		25.1	%		26.2	%
Adjusted effective tax rate		24.8	%		20.2	%		24.5	%		25.8	%

LIQUIDITY AND FINANCIAL CONDITION

Working Capital

In the first three months of 2024 our working capital increased by $33.8 million, while our adjusted working capital decreased by $21.6 million. The difference is primarily due to the exclusion of increases in our cash balances from the 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, 2017			December 31, 2016			March 31, 2024			December 31, 2023
Total current assets	$	532.7		$	441.1		$	912.9		$	885.7
Total current liabilities		(237.9	)		(183.1	)		(364.9	)		(371.5	)

Working capital		294.8			258.0			548.0			514.2
Less cash and cash equivalents		(65.5	)		(101.9	)		(270.1	)		(203.7	)
Less prepaid income taxes		(4.0	)		(4.8	)		(4.4	)		(2.8	)
Less other current assets								(0.9	)		(0.6	)
Add back current portion of accrued income taxes		8.2			9.4			12.2			2.6
Add back current portion of long-term debt		10.3			10.3
Add back current portion of finance leases		2.6			1.6
Add back current portion of unrecognized tax benefits								4.5			1.2
Add back current portion of plant closure provisions		5.9			6.7			4.6			4.6
Add back current portion of acquisition-related contingent consideration		1.1			1.1
Add back current portion of deferred income		0.1			0.1

Add back current portion of operating lease liabilities								13.6			13.6
Adjusted working capital	$	253.5		$	180.5		$	307.5		$	329.1

During the first nine months of 2017 our working capital increased by $36.8 million, while our adjusted working capital has increased by $73.0 million. The difference is primarily due to the exclusion of cash and cash equivalents from the adjusted working capital measure. The Huntsman acquisition accounted for approximately $38 million of these movements which included a one-off working capital funding requirement post acquisition. The remaining movements are primarily driven by increased inventories and accounts receivables across our businesses in line with the timing of demand from our customers.

We had a ~~$91.2~~$41.6 million ~~increase~~decrease in trade and other accounts receivable, driven primarily ~~related to a $66.6 million increase for~~by the ~~Huntsman acquisition trade receivables in our Performance Chemicals segment. The~~ timing of sales in our Fuel Specialties and Oilfield Services segments has also increased receivables. Days’ sales outstanding in our Fuel Specialties segment increased from 45 days to 57 days; increased in our Performance Chemicals segment from 55 days to 66 days; and increased from 54 days to 61 daystrading activity in our Oilfield Services segment.

~~We had a $37.7 million increase in inventories, which is related to increases in all our segments to align with the timing of demand from customers.~~ Days’ sales ~~in inventory in our Fuel Specialties segment increased from 84 days to 106 days;~~outstanding decreased in our Performance Chemicals segment from 9464 days to 5161 days; increased from 55 days to 56 days in our Fuel Specialties segment; and decreased from 7255 days to 6148 days in our Oilfield Services segment.

We had a $4.2 million increase in inventories, including a $1.7 million decrease in allowances, primarily due to our continued approach of maintaining higher inventory levels in order to mitigate the risk of supply chain disruption for certain key raw materials, in particular for our Fuel Specialties segment. Days’ sales in inventory decreased in our Performance Chemicals segment from 62 days to 55 days; increased from 121 days to 133 days in our Fuel Specialties segment; and increased from 48 days to 55 days in our Oilfield Services segment.

Prepaid expenses decreased ~~by $2.1~~$3.7 million, from ~~$6.2~~$18.7 million to ~~$4.1~~$15.0 million, due to ~~the timing of invoices received and~~ the normal expensing of prepaid invoices.

We had a ~~$55.8~~$19.5 million ~~increase~~decrease in accounts payable and accrued liabilities, primarily related to a $34.0 million increase for the Huntsman acquisition in our Performance Chemicals segment and a $20.6 million increase for our Oilfield Services segment driven by increased customer activity. Creditor days in our Fuel Specialties segment increased from 28 days to 37 days; in our Performance Chemicals segment increased from 32 days to 48 days; and increased from 32 days to 46 days in our Oilfield Services segment.

~~Operating Cash Flows~~

We have generated cash in operating activities of $35.2 million in the first nine months of 2017 compared to $87.0 million in the first nine months of 2016. The year over year change in cash from operating activities is primarily due to the ~~working capital requirements~~timing of ~~our acquired Huntsman business, increased~~production to align with customer ~~activity~~demand in our Oilfield Services segment, and dependent on the ~~payment~~timing of ~~long-term incentive performance based personnel-related compensation.~~payments for each of our reporting segments. Creditor days (including goods received not invoiced) remained constant in our Performance Chemicals segment at 45 days; increased from 41 days to 45 days in our Fuel Specialties segment; and increased from 48 days to 51 days in our Oilfield Services segment.

Operating Cash Flows

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

reductions in our working capital for the first three months of 2024, together with the changes for income tax payments and the contribution from higher profitability.

Cash

At ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016~~2023, we had cash and cash equivalents of ~~$65.5~~$270.1 million and ~~$101.9~~$203.7 million, respectively, of which ~~$54.5~~$72.6 million and ~~$90.2~~$59.8 million, respectively, were held by non-U.S. subsidiaries principally in the United Kingdom.

The ~~Company is~~increase in ~~a position to control whether or not to repatriate foreign earnings. We currently do not expect to make a repatriation in~~cash and cash equivalents of $66.4 million for the ~~foreseeable future and hence have not provided for future income taxes on~~first three months of 2024 was driven by the cash ~~held~~generated from operating activities together with decreased working capital requirements, being partly offset by ~~overseas subsidiaries. If circumstances were to change that would cause these earnings to be repatriated, an additional U.S. tax liability could be incurred,~~our continued investments in capital projects.

Debt

At March 31, 2024, and December 31, 2023, we ~~continue to monitor this position.~~

~~Debt~~

~~At September 30, 2017, the Company~~ had ~~$121.0 million of~~no debt outstanding under the revolving credit facility ~~$110.0 million of debt~~and no obligations were outstanding ~~on our term loan and $5.8 million of obligations~~ under finance leases relating to certain fixed assets within our Oilfield Services segment. Total long-term debt at September 30, 2017 is reported net of deferred finance costs of $1.7 million (December 31, 2016 - $2.2 million).leases.

At December 31, 2016, we had $161.0 million of debt outstanding under the revolving credit facility, $110.0 million of debt outstanding on our term loan and $4.5 million of obligations under finance leases relating to certain fixed assets within our Oilfield Services segment.23

~~The Company has a revolving credit facility that provides for borrowing of up to $200.0 million through November 2020 and may be drawn down in full in the U.S. and the United Kingdom.~~

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 ~~2016~~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, 2017.~~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.

On December 30, 2016 we acquired the European Differentiated Surfactants business from Huntsman (“Huntsman”). We excluded the operations of Huntsman from the scope of our Sarbannes-Oxley Section 404 report on internal controls over financial reporting as of December 31, 2016. We are continuing the process of implementing our internal control structure and in the third quarter of 2017 implemented a new information system platform over the acquired operations. In connection with this implementation, the Company has updated its internal controls over financial reporting, as necessary to accommodate modifications to its business processes and accounting procedures.

There were no ~~other~~ 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.

PART II OTHER INFORMATION

Item 1 Legal Proceedings

~~Legal~~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 1I of our ~~2016~~2023 Form ~~10-K .~~10-K. In management’s view, there have been no material changes in the risk factors facing the Company ~~since that time.~~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.

~~On November 3, 2015~~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 March 31, 2024, the Company ~~announced that~~did not purchase any of its ~~board~~common stock as part of ~~directors has authorized a~~its share repurchase program ~~which targets to~~announced on February 15, 2022. The repurchase program allows for up to ~~$90~~$50 million of the Company’s common stock to be repurchased in the open market over ~~the next three years.~~a three-year period commencing on February 16, 2022.

During the ~~three months~~quarter ended ~~September 30, 2017, no shares of our~~March 31, 2024, the company repurchased its common stock ~~were repurchased~~in connection with the exercising of stock options by ~~the Company. There was $82.5 million remaining under the 2015 authorization as at September 30, 2017.~~directors and employees.

~~Repurchases of common stock are held as treasury shares unless reissued under equity compensation plans.~~

Item 3 Defaults Upon Senior Securities

None.

Item 4 Mine Safety Disclosures

Not applicable.

Item 5 Other Information

None.

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
~~31.2~~		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
~~32.1~~		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
~~32.2~~		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101
~~101~~		XBRL Instance Document and Related ~~Items.~~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.

* 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, 2017~~		By
Date: May 10, 2024	~~/s/~~By		/s/ PATRICK S. WILLIAMS
				Patrick S. Williams
				President and Chief Executive Officer

~~Date: November 8, 2017~~		By
Date: May 10, 2024	~~/s/~~ By		/s/ IAN P. CLEMINSON
				Ian P. Cleminson
				Executive Vice President and Chief Financial Officer


(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, 2016	$	0.3	$	315.1		$	(97.5	)	$	561.8		$	(126.2	)	$	0.3	$	653.8
Net income										66.6								66.6
Dividend paid										(9.2	)							(9.2	)
Non-controlling interest																0.1		0.1
Changes in cumulative translation adjustment, net of tax													30.7					30.7
Changes in unrealized gains on derivative instruments, net of tax													0.2					0.2
Treasury stock reissued				(0.6	)		1.4											0.8
Treasury stock repurchased							(1.0	)										(1.0	)
Stock option compensation				3.4														3.4
Amortization of prior service credit, net of tax													(0.6	)				(0.6	)
Amortization of actuarial net losses, net of tax													3.1					3.1

Balance at September 30, 2017	$	0.3	$	317.9		$	(97.1	)	$	619.2		$	(92.8	)	$	0.4	$	747.9


(in millions)	Total
At December 31, 2016
Gross cost⁽¹⁾	$	611.3
Accumulated impairment losses		(236.5	)

Net book amount	$	374.8

Acquisition adjustment		(36.7	)
Exchange effect		8.7
At September 30, 2017
Gross cost⁽¹⁾	$	583.3
Accumulated impairment losses		(236.5	)

Net book amount	$	346.8


(in millions)	September 30, 2017			December 31, 2016
Revolving credit facility	$	121.0		$	161.0
Term loan		110.0			110.0
Deferred finance costs		(1.7	)		(2.2	)

	$	229.3		$	268.8
Due within one year		(10.3	)		(10.3	)

Due after one year	$	219.0		$	258.5


	Number of Options			Weighted Average Exercise Price		Weighted Average Grant-Date Fair Value
Outstanding at December 31, 2016		570,994		$	20.38	$	21.68
Granted - at discount		79,664		$	0.00	$	61.39
- at market value		18,843		$	70.60	$	16.84
Exercised		(83,255	)	$	12.56	$	23.86
Forfeited		(3,805	)	$	15.91	$	22.47

Outstanding at September 30, 2017		582,441		$	20.64	$	26.68


	Number of SEUs			Weighted Average Exercise Price		Weighted Average Grant-Date Fair Value
Outstanding at December 31, 2016		279,815		$	3.77	$	33.40
Granted - at discount		180,249		$	0.00	$	62.76
- at market value		5,530		$	70.60	$	16.84
Exercised		(34,054	)	$	5.47	$	27.09
Forfeited		(16,075	)	$	0.00	$	33.77

Outstanding at September 30, 2017		415,465		$	3.03	$	46.41


(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	)