UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

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

For the quarterly period ended ~~June~~September 30, 2021

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

For the transition period from to

Commission file number

1-13879

INNOSPEC INC.

(Exact name of registrant as specified in its charter)


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

8310 South Valley Highway
Suite 350
Englewood
Colorado		80112
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (303) 792 5554

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	IOSP	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such file.

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial standards provided pursuant to Section 13(a) of the

Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class		Outstanding as of ~~July 28,~~October 26, 2021
Common Stock, par value $0.01		24,647,433

~~24,641,904~~

Table of Contents

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION	25

Item 1	Condensed Consolidated Financial Statements	25
	Condensed Consolidated Statements of Income	25
	Condensed Consolidated Statements of Comprehensive Income	36
	Condensed Consolidated Balance Sheets	47
	Condensed Consolidated Balance Sheets (continued)	58
	Condensed Consolidated Statements of Cash Flows	69
	Condensed Consolidated Statements of Equity	710
	Notes To The Unaudited Interim Condensed Consolidated Financial Statements	912
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2021	2326
	Critical Accounting Estimates	2326
	Results of Operations	2326
	Liquidity and Financial Condition	3435
Item 3	Quantitative and Qualitative Disclosures about Market Risk	3637
Item 4	Controls and Procedures	3738

PART II	OTHER INFORMATION	3839

Item 1	Legal Proceedings	3839
Item 1A	Risk Factors	3839
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	3839
Item 3	Defaults Upon Senior Securities	3839
Item 4	Mine Safety Disclosures	3839
Item 5	Other Information	3839
Item 6	Exhibits	3940

SIGNATURES		41

Table of Contents

CAUTIONARY STATEMENT RELATIVE TO FORWARD-LOOKING STATEMENTS

This Form

10-Q

contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements. Such forward-looking statements include statements (covered by words like “expects,” “estimates,” “anticipates,” “may,” “could,” “believes,” “feels,” “plans,” “intends” or similar words or expressions, for example) which relate to earnings, growth potential, operating performance, events or developments that we expect or anticipate will or may occur in the future. Although forward-looking statements are believed by management to be reasonable when made, they are subject to certain risks, uncertainties and assumptions, including, the effects of the

COVID-19

pandemic, such as its duration, its unknown long-term economic impact, measures taken by governmental authorities to address it, the effectiveness, acceptance and distributions of

COVID-19

vaccines and the manner in which the pandemic may precipitate or exacerbate other risks and/or uncertainties, and our actual performance or results may differ materially from these forward-looking statements. Additional information regarding risks, uncertainties and assumptions relating to Innospec and affecting our business operations and prospects are described in Innospec’s Annual Report on Form

10-K

for the year ended December 31, 2020 and other reports filed with the U.S. Securities and Exchange Commission. You are urged to review our discussion of risks and uncertainties that could cause actual results to differ from forward-looking statements under the heading “Risk Factors” in such reports. Innospec undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Table of Contents

PART I FINANCIAL INFORMATION

Item 1 Condensed Consolidated Financial Statements

INNOSPEC INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended June 30						Six Months Ended June 30						Three Months Ended September 30						Nine Months Ended September 30
(in millions, except share and per share data)	2021			2020			2021			2020			2021			2020			2021			2020
Net sales	$	354.5		$	244.9		$	694.1		$	617.2		$	376.1		$	265.1		$	1,070.2		$	882.3
Cost of goods sold		(246.2	)		(185.8	)		(485.0	)		(444.2	)		(263.2	)		(186.4	)		(748.2	)		(630.6	)

Gross profit		108.3			59.1			209.1			173.0			112.9			78.7			322.0			251.7
Operating expenses:
Selling, general and administrative		(62.7	)		(63.5	)		(126.3	)		(127.9	)		(71.2	)		(54.2	)		(197.5	)		(182.1	)
Research and development		(8.6	)		(8.1	)		(17.6	)		(16.7	)		(10.3	)		(7.7	)		(27.9	)		(24.4	)
Restructuring charge		0.0			(21.1	)		0.0			(21.1	)		0.0			0.0			0.0			(21.1	)
Impairment of intangible assets		0.0			(19.8	)		0.0			(19.8	)		0.0			0.0			0.0			(19.8	)

Total operating expenses		(71.3	)		(112.5	)		(143.9	)		(185.5	)		(81.5	)		(61.9	)		(225.4	)		(247.4	)

Operating income/(loss)		37.0			(53.4	)		65.2			(12.5	)
Other income, net		3.4			0.1			6.4			4.0
Operating income														31.4			16.8			96.6			4.3
Other income/(expense), net														(0.2	)		3.8			6.2			7.8
Interest expense, net		(0.3	)		(0.5	)		(0.7	)		(1.1	)		(0.4	)		(0.4	)		(1.1	)		(1.5	)

Income/(loss) before income tax expense		40.1			(53.8	)		70.9			(9.6	)
Income tax (expense)/credit		(17.7	)		14.1			(25.1	)		3.0
Income before income tax expense														30.8			20.2			101.7			10.6
Income tax expense														(7.4	)		(7.5	)		(32.5	)		(4.5	)

Net income/(loss)	$	22.4		$	(39.7	)	$	45.8		$	(6.6	)
Net income													$	23.4		$	12.7		$	69.2		$	6.1

Earnings per share:
Basic	$	0.91		$	(1.62	)	$	1.86		$	(0.27	)	$	0.95		$	0.52		$	2.81		$	0.25

Diluted	$	0.90		$	(1.62	)	$	1.84		$	(0.27	)	$	0.94		$	0.51		$	2.78		$	0.25

Weighted average shares outstanding (in thousands):
Basic		24,628			24,564			24,615			24,547			24,643			24,570			24,624			24,555

Diluted		24,869			24,564			24,856			24,547			24,864			24,720			24,872			24,758

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

Table of Contents

INNOSPEC INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30					Six Months Ended June 30						Three Months Ended September 30						Nine Months Ended September 30
(in millions)	2021		2020			2021			2020			2021			2020			2021			2020
Net income/(loss)	$	22.4	$	(39.7	)		45.8			(6.6	)
Net income												$	23.4		$	12.7			69.2			6.1

Other comprehensive income/(loss):
Changes in cumulative translation adjustment, net of tax of $(0.5) million, $(0.1) million, $0.5 million and $1.5 million, respectively		3.8		5.5			(7.5	)		(2.4	)
Changes in cumulative translation adjustment, net of tax of $0.7 million, $(0.5) million, $1.2 million and $1.0 million, respectively													(7.0	)		11.9			(14.5	)		9.5
Amortization of prior service cost/(credit), net of tax of $0.0 million, $0.0 million, $0.0 million and $0.1 million, respectively		0.0		(0.2	)		0.1			(0.4	)		0.1			(0.1	)		0.2			(0.5	)
Amortization of actuarial net losses, net of tax of $0.0 million, $0.0 million, $(0.1) million and $(0.1) million, respectively		0.6		0.6			1.2			0.8
Amortization of actuarial net losses, net of tax of $(0.1) million, $0.0 million, $(0.2) million and $(0.1) million, respectively													0.5			0.3			1.7			1.1

Total other comprehensive income/(loss)		4.4		5.9			(6.2	)		(2.0	)		(6.4	)		12.1			(12.6	)		10.1

Total comprehensive income/(loss)	$	26.8	$	(33.8	)		39.6			(8.6	)
Total comprehensive income												$	17.0		$	24.8			56.6			16.2

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

Table of Contents

INNOSPEC INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in millions, except share and per share data)

June 30,

2021

December 31,
2020


(Unaudited)

Assets

Current assets:

Cash and cash equivalents
   $ 94.4    $ 105.3
Trade and other accounts receivable (less allowances of $4.2 million and $4.5 million respectively)
   281.6    221.4
Inventories (less allowances of $21.1 million and $19.4 million respectively):

Finished goods
   174.0    156.3
Raw materials
   76.5    63.7




Total inventories
   250.5    220.0
Prepaid expenses
   11.6    14.9
Prepaid income taxes
   3.5    4.2
Other current assets
   1.5    0.4




Total current assets
   643.1    566.2
Net property, plant and equipment
   214.1    210.8
Operating lease
right-of-use
assets
   36.4    40.1
Goodwill
   368.2    371.2
Other intangible assets
   66.4    75.3
Deferred tax assets
   7.4    7.6
Pension asset
   121.2    118.0
Other
non-current
assets
   5.0    8.2




Total assets
   $ 1,461.8    $ 1,397.4


(in millions, except share and per share data)	September 30, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	89.2	$	105.3
Trade and other accounts receivable (less allowances of $4.8 million and $4.5 million respectively)		302.8		221.4
Inventories (less allowances of $20.6 million and $19.4 million respectively):
Finished goods		193.0		156.3
Raw materials		81.1		63.7

Total inventories		274.1		220.0
Prepaid expenses		12.3		14.9
Prepaid income taxes		3.8		4.2
Other current assets		0.8		0.4

Total current assets		683.0		566.2
Net property, plant and equipment		213.0		210.8
Operating lease right-of-use assets		33.4		40.1
Goodwill		366.0		371.2
Other intangible assets		61.9		75.3
Deferred tax assets		7.3		7.6
Pension asset		122.8		118.0
Other non-current assets		5.0		8.2

Total assets	$	1,492.4	$	1,397.4

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

Table of Contents

INNOSPEC INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS - (Continued)

(Unaudited)

(in millions, except share and per share data)

June 30,
2021

December 31,
2020


(Unaudited)

Liabilities and Equity

Current liabilities:

Accounts payable
   $ 123.5 $ 98.7
Accrued liabilities
   142.3 129.8
Current portion of finance leases
   0.2 0.5
Current portion of plant closure provisions
   6.6 6.6
Current portion of accrued income taxes
   6.3 5.5
Current portion of operating lease liabilities
   12.1 11.3


Total current liabilities
   �� 291.0 252.4
Finance leases, net of current portion
   0.0 0.1
Operating lease liabilities, net of current portion
   24.4 28.9
Plant closure provisions, net of current portion
   51.0 51.9
Accrued income taxes, net of current portion
   28.6 32.4
Unrecognized tax benefits
   16.3 16.0
Deferred tax liabilities
   54.4 46.9
Pension liabilities and post-employment benefits
   19.5 20.5
Other
non-current
liabilities
   2.4 3.4

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
   339.5 336.1
Treasury stock (4,912,939 and 4,958,599 shares at cost, respectively)
   (93.1 ) (93.3 )
Retained earnings
   790.4 758.6
Accumulated other comprehensive loss
   (63.5 ) (57.3 )


Total Innospec stockholders’ equity
   973.6 944.4
Non-controlling
interest
   0.6 0.5


Total equity
   974.2 944.9


Total liabilities and equity
   $ 1,461.8 $ 1,397.4


(in millions, except share and per share data)	September 30, 2021			December 31, 2020
Liabilities and Equity
Current liabilities:
Accounts payable	$	137.1		$	98.7
Accrued liabilities		147.6			129.8
Current portion of finance leases		0.0			0.5
Current portion of operating lease liabilities		13.3			11.3
Current portion of plant closure provisions		5.7			6.6
Current portion of accrued income taxes		4.6			5.5

Total current liabilities		308.3			252.4
Finance leases, net of current portion		0.0			0.1
Operating lease liabilities, net of current portion		20.2			28.9
Plant closure provisions, net of current portion		50.8			51.9
Accrued income taxes, net of current portion		27.8			32.4
Unrecognized tax benefits		16.4			16.0
Deferred tax liabilities		54.4			46.9
Pension liabilities and post-employment benefits		19.1			20.5
Other non-current liabilities		2.3			3.4
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		341.3			336.1
Treasury stock (4,909,301 and 4,958,599 shares at cost, respectively)		(93.0	)		(93.3	)
Retained earnings		813.8			758.6
Accumulated other comprehensive loss		(69.9	)		(57.3	)

Total Innospec stockholders’ equity		992.5			944.4
Non-controlling interest		0.6			0.5

Total equity		993.1			944.9

Total liabilities and equity	$	1,492.4		$	1,397.4

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

Table of Contents

INNOSPEC INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30						Nine Months Ended September 30
(in millions)	2021			2020			2021			2020
Cash Flows from Operating Activities
Net income	$	45.8		$	(6.6	)	$	69.2		$	6.1
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		20.6			24.2			30.9			35.3
Impairment of intangible assets		0.0			19.8			0.0			19.8
Impairment of tangible assets		0.0			2.0			0.0			2.0
Deferred tax expense		7.8			(5.6	)
Deferred taxes								8.0			(3.3	)
Non-cash movements on defined benefit pension plans		(1.6	)		(2.2	)		(2.4	)		(3.3	)
Stock option compensation		2.9			2.8			4.6			4.4
Changes in assets and liabilities, net of effects of acquired and divested companies:
Trade and other accounts receivable		(64.3	)		76.2			(86.5	)		86.0
Inventories		(31.3	)		(2.1	)		(57.1	)		3.3
Prepaid expenses		3.5			3.9			2.4			5.7
Accounts payable and accrued liabilities		39.3			(79.6	)		58.6			(64.1	)
Plant closure provisions								(1.5	)		8.2
Accrued income taxes		(1.7	)		(9.5	)		(3.8	)		(12.9	)
Plant closure provisions		(0.6	)		8.5
Unrecognized tax benefits		0.3			(1.3	)		0.4			(0.9	)
Other assets and liabilities		0.9			1.7			1.6			1.4

Net cash provided by operating activities		21.6			32.2			24.4			87.7

Cash Flows from Investing Activities
Capital expenditures		(19.5	)		(14.6	)		(27.4	)		(21.7	)
Proceeds on disposal of property, plant and equipment		0.3			0.0			0.4			0.0

Net cash used in investing activities		(19.2	)		(14.6	)		(27.0	)		(21.7	)

Cash Flows from Financing Activities
Non-controlling interest		0.1			0.1			0.1			0.1
Proceeds from revolving credit facility		0.0			15.0			0.0			15.0
Repayments of revolving credit facility		0.0			(35.0	)		0.0			(75.0	)
Repayments of finance leases		(0.3	)		(0.6	)		(0.5	)		(0.9	)
Refinancing costs								0.0			(0.3	)
Dividend paid		(14.0	)		(12.8	)		(14.0	)		(12.8	)
Issue of treasury stock		1.7			0.8			2.0			1.2
Repurchase of common stock		(0.8	)		(2.1	)		(0.8	)		(2.1	)

Net cash used in financing activities		(13.3	)		(34.6	)		(13.2	)		(74.8	)
Effect of foreign currency exchange rate changes on cash		0.0			(0.5	)		(0.3	)		(0.3	)

Net change in cash and cash equivalents		(10.9	)		(17.5	)		(16.1	)		(9.1	)
Cash and cash equivalents at beginning of period		105.3			75.7			105.3			75.7

Cash and cash equivalents at end of period	$	94.4		$	58.2		$	89.2		$	66.6

The accompanying notes are an integral part of these un

~~udited~~unaudited interim condensed consolidated financial statements.

Table of Contents

INNOSPEC INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)


(in millions)	Common Stock		Additional Paid-In Capital		Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Non- Controlling Interest		Total Equity			Common Stock		Additional Paid-In Capital		Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Non- Controlling Interest		Total Equity
Balance at December 31, 2020	$	0.3	$	336.1	$	(93.3	)	$	758.6		$	(57.3	)	$	0.5	$	944.9		$	0.3	$	336.1	$	(93.3	)	$	758.6		$	(57.3	)	$	0.5	$	944.9
Net income									45.8								45.8										69.2								69.2
Dividend paid ($0.57 per share)									(14.0	)							(14.0	)									(14.0	)							(14.0	)
Changes in cumulative translation adjustment, net of tax												(7.5	)				(7.5	)												(14.5	)				(14.5	)
Share of net income															0.1		0.1																0.1		0.1
Treasury stock reissued				0.5		1.0											1.5					0.6		1.1											1.7
Treasury stock repurchased						(0.8	)										(0.8	)						(0.8	)										(0.8	)
Stock option compensation				2.9													2.9					4.6													4.6
Amortization of prior service cost, net of tax												0.1					0.1													0.2					0.2
Amortization of actuarial net losses, net of tax												1.2					1.2													1.7					1.7

Balance at June 30, 2021	$	0.3	$	339.5	$	(93.1	)	$	790.4		$	(63.5	)	$	0.6	$	974.2
Balance at September 30, 2021																			$	0.3	$	341.3	$	(93.0	)	$	813.8		$	(69.9	)	$	0.6	$	993.1


(in millions)	Common Stock		Additional Paid-In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Non- Controlling Interest		Total Equity			Common Stock		Additional Paid-In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Non- Controlling Interest		Total Equity
Balance at December 31, 2019	$	0.3	$	330.4		$	(93.3	)	$	755.5		$	(74.4	)	$	0.4	$	918.9		$	0.3	$	330.4		$	(93.3	)	$	755.5		$	(74.4	)	$	0.4	$	918.9
Net income										(6.6	)							(6.6	)										6.1								6.1
Dividend paid ($0.52 per share)										(12.8	)							(12.8	)										(12.8	)							(12.8	)
Changes in cumulative translation adjustment, net of tax													(2.4	)				(2.4	)													9.5					9.5
Share of net income																0.1		0.1																	0.1		0.1
Treasury stock reissued				(0.2	)		1.6											1.4					(0.4	)		1.7											1.3
Treasury stock repurchased							(2.1	)										(2.1	)							(2.1	)										(2.1	)
Stock option compensation				2.8														2.8					4.4														4.4
Amortization of prior service credit, net of tax													(0.4	)				(0.4	)													(0.5	)				(0.5	)
Amortization of actuarial net losses, net of tax													0.8					0.8														1.1					1.1

Balance at June 30, 2020	$	0.3	$	333.0		$	(93.8	)	$	736.1		$	(76.4	)	$	0.5	$	899.7
Balance at September 30, 2020																				$	0.3	$	334.4		$	(93.7	)	$	748.8		$	(64.3	)	$	0.5	$	926.0

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

Table of Contents

INNOSPEC INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)


(in millions)	Common Stock		Additional Paid-In Capital		Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Loss			Non- Controlling Interest		Total Equity
Balance at June 30, 2021	$	0.3	$	339.5	$	(93.1	)	$	790.4	$	(63.5	)	$	0.6	$	974.2
Net income									23.4							23.4
Changes in cumulative translation adjustment, net of tax											(7.0	)				(7.0	)
Treasury stock reissued				0.1		0.1										0.2
Stock option compensation				1.7												1.7
Amortization of prior service cost, net of tax											0.1					0.1
Amortization of actuarial net losses, net of tax											0.5					0.5

Balance at September 30, 2021	$	0.3	$	341.3	$	(93.0	)	$	813.8	$	(69.9	)	$	0.6	$	993.1


(in millions)	Common Stock		Additional Paid-In Capital			Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Loss			Non- Controlling Interest		Total Equity
Balance at June 30, 2020	$	0.3	$	333.0		$	(93.8	)	$	736.1	$	(76.4	)	$	0.5	$	899.7
Net income										12.7							12.7
Changes in cumulative translation adjustment, net of tax												11.9					11.9
Treasury stock reissued				(0.2	)		0.1										(0.1	)
Stock option compensation				1.6													1.6
Amortization of prior service credit, net of tax												(0.1	)				(0.1	)
Amortization of actuarial net losses, net of tax												0.3					0.3

Balance at September 30, 2020	$	0.3	$	334.4		$	(93.7	)	$	748.8	$	(64.3	)	$	0.5	$	926.0

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

Table of Contents

~~INNOSPEC INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF EQUITY~~

~~(Unaudited)~~

(in millions)

Common

Stock

Additional
Paid-In

Capital

Treasury

Stock

Retained

Earnings

Accumulated
Other

Comprehensive
Loss

Non-

Controlling
Interest

Total

Equity

Balance at March 31, 2021
   $ 0.3    $ 337.8    $ (93.6 ) $ 782.0 $ (67.9 ) $ 0.5    $ 959.1
Net income
         22.4    22.4
Dividend paid ($0.57 per share)
         (14.0 )    (14.0 )
Changes in cumulative translation adjustment, net of tax
         3.8    3.8
Share of net income
         0.1    0.1
Treasury stock reissued
      0.4    0.7    1.1
Treasury stock repurchased
         (0.2 )    (0.2 )
Stock option compensation
      1.3       1.3
Amortization of prior service cost, net of tax
         0.0    0.0
Amortization of actuarial net losses, net of tax
         0.6    0.6








Balance at June 30, 2021
   $ 0.3    $ 339.5    $ (93.1 ) $ 790.4 $ (63.5 ) $ 0.6    $ 974.2

(in millions)

Common

Stock

Additional
Paid-In

Capital

Treasury

Stock

Retained

Earnings

Accumulated
Other

Comprehensive
Loss

Non-

Controlling
Interest

Total

Equity

Balance at March 31, 2020
   $ 0.3    $ 331.2    $ (94.0 ) $ 788.6 $ (82.3 ) $ 0.5    $ 944.3
Net income
         (39.7 )    (39.7 )
Dividend paid ($0.52 per share)
         (12.8 )    (12.8 )
Changes in cumulative translation adjustment, net of tax
         5.5    5.5
Treasury stock reissued
      0.2    0.2    0.4
Stock option compensation
      1.6       1.6
Amortization of prior service credit, net of tax
         (0.2 )    (0.2 )
Amortization of actuarial net losses, net of tax
         0.6    0.6








Balance at June 30, 2020
   $ 0.3    $ 333.0    $ (93.8 ) $ 736.1 $ (76.4 ) $ 0.5    $ 899.7

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

~~Table of Contents~~

INNOSPEC INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form

10-Q

and Article 10 of Regulation

S-X

under the Securities Exchange Act of 1934. Accordingly, they do not include all the information and notes necessary for a comprehensive presentation of financial position, results of operations and cash flows.

It is our opinion, however, that all adjustments (consisting of normal, recurring adjustments, unless otherwise disclosed) have been made which are necessary for the condensed consolidated financial statements to be fairly stated. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form

10-K

for the year ended December 31, 2020 filed on February 17, 2021 (the “2020 Form

10-K”).

The results for the interim period covered by this report are not necessarily indicative of the results to be expected for the full year.

When we use the terms “Innospec,” “the Corporation,” “the Company,” “Registrant,” “we,” “us” and “our,” we are referring to Innospec Inc. and its consolidated subsidiaries unless otherwise indicated or the context otherwise requires.

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NOTE 2 – SEGMENT REPORTING

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

The Fuel Specialties, Performance Chemicals and Oilfield Services segments operate in markets where we actively seek growth opportunities although their ultimate customers are different. Our previously reported Octane Additives segment ceased trading in the second quarter of 2020.

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


	Three Months Ended June 30						Six Months Ended June 30						Three Months Ended September 30						Nine Months Ended September 30
(in millions)	2021			2020			2021			2020			2021			2020			2021			2020
Net Sales:
Refinery and Performance	$	94.8		$	74.9		$	194.1			183.5		$	113.8		$	86.8		$	307.9			270.3
Other		48.3			32.5			88.3			70.9			42.6			33.2			130.9			104.1

Fuel Specialties		143.1			107.4			282.4			254.4			156.4			120.0			438.8			374.4

Personal Care		73.8			49.8			142.0			112.8			75.8			57.1			217.8			169.9
Home Care		21.3			21.3			44.3			42.9			24.4			21.6			68.7			64.5
Other		33.1			24.6			67.8			53.1			32.6			23.3			100.4			76.4

Performance Chemicals		128.2			95.7			254.1			208.8			132.8			102.0			386.9			310.8

Oilfield Services		83.2			41.8			157.6			154.0			86.9			43.1			244.5			197.1

	$	354.5		$	244.9		$	694.1			617.2		$	376.1		$	265.1		$	1,070.2			882.3

Gross profit/(loss):
Fuel Specialties	$	50.1		$	25.4		$	95.0			76.6		$	49.1		$	40.3		$	144.1			116.9
Performance Chemicals		31.6			24.9			63.0			52.5			32.6			24.0			95.6			76.5
Oilfield Services		26.6			9.9			51.1			46.1			31.2			14.4			82.3			60.5
Octane Additives		0.0			(1.1	)		0.0			(2.2	)		0.0			0.0			0.0			(2.2	)

	$	108.3		$	59.1		$	209.1			173.0		$	112.9		$	78.7		$	322.0			251.7

Operating income/(loss):
Fuel Specialties	$	28.5		$	4.7		$	52.3			36.8		$	26.6		$	22.2		$	78.9			59.0
Performance Chemicals		17.9			12.2			36.2			27.8			17.8			12.4			54.0			40.2
Oilfield Services		2.2			(12.4	)		3.4			(5.2	)		2.7			(4.5	)		6.1			(9.7	)
Octane Additives		0.0			(1.6	)		0.0			(2.8	)		0.0			0.0			0.0			(2.8	)
Corporate costs		(11.6	)		(15.4	)		(26.7	)		(28.2	)		(15.7	)		(13.3	)		(42.4	)		(41.5	)
Restructuring charge		0.0			(21.1	)		0.0			(21.1	)		0.0			0.0			0.0			(21.1	)
Impairment of intangible assets		0.0			(19.8	)		0.0			(19.8	)		0.0			0.0			0.0			(19.8	)

Total operating income	$	37.0		$	(53.4	)	$	65.2			(12.5	)	$	31.4		$	16.8		$	96.6			4.3

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NOTE 3 – EARNINGS PER SHARE

Basic earnings per share is based on the weighted average number of common shares outstanding during the period. Diluted earnings per share includes the effect of options that are dilutive and outstanding during the period under the treasury stock method. Per share amounts are computed as follows:


	Three Months Ended June 30					Six Months Ended June 30					Three Months Ended September 30				Nine Months Ended September 30
	2021		2020			2021		2020			2021		2020		2021		2020
Numerator (in millions):
Net income/(loss) available to common stockholders	$	22.4	$	(39.7	)	$	45.8	$	(6.6	)
Net income available to common stockholders											$	23.4	$	12.7	$	69.2	$	6.1

Denominator (in thousands):
Weighted average common shares outstanding		24,628		24,564			24,615		24,547			24,643		24,570		24,624		24,555
Dilutive effect of stock options and awards		241		0			241		0			221		150		248		203

Denominator for diluted earnings per share		24,869		24,564			24,856		24,547			24,864		24,720		24,872		24,758

Net income/(loss) per share, basic:	$	0.91	$	(1.62	)	$	1.86	$	(0.27	)
Net income per share, basic:											$	0.95	$	0.52	$	2.81	$	0.25

Net income/(loss) per share, diluted:	$	0.90	$	(1.62	)	$	1.84	$	(0.27	)
Net income per share, diluted:											$	0.94	$	0.51	$	2.78	$	0.25
																			��

In the three and ~~six~~nine months ended ~~June~~September 30, 2021, the average number of anti-dilutive options excluded from the calculation of diluted earnings per share were ~~19,836~~19,191 and 14,649, respectively (three and ~~six~~nine months ended ~~June~~September 30, 2020 – 017,980 and 0,23,420, respectively).

NOTE 4 – GOODWILL

The following table summarizes the goodwill movements:


(in millions)	Gross Cost			Gross Cost
Opening balance at January 1, 2021	$	371.2		$	371.2
Exchange effect		(3.0	)		(5.2	)

Closing balance at June 30, 2021	$	368.2
Closing balance at September 30, 2021				$	366.0

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NOTE 5 – OTHER INTANGIBLE ASSETS

The following table summarizes the other intangible assets movements:

(in millions)

2021

Gross cost at January 1
   $ 298.9
Exchange effect
   (1.5 )


Gross cost at June 30
   297.4


Accumulated amortization at January 1
   (223.6 )
Amortization expense
   (8.0 )
Exchange effect
   0.6


Accumulated
amortization
at June 30
   (231.0 )


Net book amount at June 30
   $ 66.4


(in millions)	2021
Gross cost at January 1	$	298.9
Exchange effect		(2.8	)

Gross cost at September 30		296.1

Accumulated amortization at January 1		(223.6	)
Amortization expense		(12.0	)
Exchange effect		1.4

Accumulated amortization at September 30		(234.2	)

Net book amount at September 30	$	61.9

The amortization expense for the ~~six~~nine months ended ~~June~~September 30, 2021 was ~~$8.0~~$12.0 million ~~(six~~(nine months ended ~~June~~September 30, 2020 – ~~$11.5~~$16.3 million).

The net book amount by category of other intangible assets is shown in the following table:


(in millions)	June 30 2021		December 31 2020		September 30 2021		December 31 2020
Product rights	$	4.4	$	6.3	$	3.5	$	6.3
Brand names		2.0		2.3		1.8		2.3
Technology		18.6		19.8		18.0		19.8
Customer relationships		39.4		44.2		36.9		44.2
Internally developed software		2.0		2.7		1.7		2.7

	$	66.4	$	75.3	$	61.9	$	75.3

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NOTE 6 – PENSION AND POST EMPLOYMENT BENEFITS

The Company maintains a defined benefit pension plan covering certain current and former employees in the United Kingdom (the ~~“Plan”~~“UK Plan”). The UK Plan is closed to future service accrual ~~but~~and has a large number of deferred and current pensioners.

~~The net service cost for the three and six months ended June 30, 2021 was $0.4 million and $0.8 million, respectively (three and six months ended June 30, 2020 – $0.3 million and~~

0.6 million respectively) and has been recognized in selling, general and administrative expenses within corporate costs. The following table shows the income statement effect recognized within other income, net:

Three Months Ended
June 30

Six Months Ended
June 30

(in millions)

2021

2020

2021

2020

Plan net pension credit/(charge):

Interest cost on projected benefit obligation
   $ (1.9 )    $ (2.7 )    $ (3.8 )    $ (5.5 )
Expected return on plan assets
   3.9    4.3    7.8    8.8
Amortization of prior service (cost)/credit
   0.0    0.2    (0.1 )    0.4
Amortization of actuarial net losses
   (0.4 )    (0.2 )    (0.8 )    (0.4 )








   $ 1.6    $ 1.6    $ 3.1    $ 3.3

~~The amortization of prior service credit and actuarial net losses is a reclassification out of accumulated other comprehensive loss into other income and expense.~~

The Company also maintains an unfunded defined benefit pension plan covering certain current and former employees in Germany (the “German plan”) ~~within our Fuel Specialties segment.~~

. The German plan is closed to new entrants and has no assets.

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


	Three Months Ended September 30						Nine Months Ended September 30
(in millions)	2021			2020			2021			2020
Service cost	$	(0.5	)	$	(0.3	)	$	(1.4	)	$	(1.0	)
Interest cost on projected benefit obligation		(1.9	)		(2.9	)		(5.7	)		(8.5	)
Expected return on plan assets		3.9			4.5			11.7			13.3
Amortization of prior service credit/(cost)		(0.1	)		0.2			(0.2	)		0.6
Amortization of actuarial net losses		(0.6	)		(0.4	)		(1.9	)		(1.2	)

Net periodic benefit	$	0.8		$	1.1		$	2.5		$	3.2

The service cost for the German plan for the three and six months ended June 30, 2021 was $0.1 million and $0.1 million, respectively (three and six months ended June 30, 2020 – $0.1 million and $0.1 million, respectively) and has been recognized in selling, general and administrative expenses. ~~The following table shows the income statement effect~~All other items have been recognized within other income and ~~expense:~~expense. The amortization of prior service credit and actuarial net losses are a reclassification out of accumulated other comprehensive loss into other income and expense.

Three Months Ended
June 30

Six Months Ended
June 30

(in millions)

2021

2020

2021

2020

Plan net pension charge:

Interest cost on projected benefit obligation
   $ 0.0    $ 0.0    $ 0.0    $ (0.1 )
Amortization of actuarial net losses
   (0.2 )    (0.3 )    (0.5 )    (0.4 )








   $ (0.2 )    $ (0.3 )    $ (0.5 )    $ (0.5 )

~~As at June 30, 2021, our Performance Chemicals segment has~~In addition, we have obligations for post-employment benefits in ~~its~~some of our other European ~~businesses with~~businesses. As at September 30, 2021, we have recorded a liability of

$4.8 million (December 31, 2020 – $5.3 million).

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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, 2021	$	13.6		$	2.4	$	16.0	$	13.6		$	2.4	$	16.0
Net change for tax positions of prior periods		(0.1	)		0.4		0.3		(0.2	)		0.6		0.4

Closing balance at June 30, 2021		13.5			2.8		16.3
Closing balance at September 30 , 2021									13.4			3.0		16.4
Current		0.0			0.0		0.0		0.0			0.0		0.0

Non-current	$	13.5		$	2.8	$	16.3	$	13.4		$	3.0	$	16.4

All of the ~~$16.3~~$16.4 million of unrecognized tax benefits, interest and penalties would impact our effective tax rate if recognized.

Innospec Performance Chemicals Italia Srl is subject to an ongoing tax audit in relation to the period 2011 to 2014 inclusive. The Company has determined that additional tax, interest and penalties totaling ~~$3.4~~$3.3 million may arise as a consequence of the tax audit. This includes an increase in interest accrued of $0.1 million and a reduction for foreign exchange movements of ~~$0.1~~$0.2 million recorded in the ~~six~~nine months to ~~June~~September 30, 2021. 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.

In 2018 the Company recorded an unrecognized tax benefit in relation to a potential adjustment that could arise as a consequence of the Tax Cuts and Jobs Act. The Company has determined that additional tax, interest and penalties totaling ~~$12.7~~$12.9 million may arise in relation to this item. This includes an increase in interest accrued of ~~$0.3~~$0.5 million in the ~~six~~nine months to ~~June~~September 30, 2021.

Other

~~Other~~ non-significant

items,

inclusive of interest and penalties, total $0.2 million.

The Company and its U.S. subsidiaries remain open to examination by the IRS for years 2017 onwards under the statute of limitations. The Company’s subsidiaries in foreign tax jurisdictions are open to examination including Germany (2016 onwards), Switzerland (2016 onwards), Spain ~~(2016~~(2017 onwards), France (2018 onwards) and the United Kingdom (2018 onwards).

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NOTE 8 – LONG-TERM DEBT

As at ~~June~~September 30, 2021, and December 31, 2020, the Company ~~had repaid all of its borrowings under~~has 0t drawn down on its revolving credit facility.

The Company continues to have available a $250.0 million revolving credit facility until September 25, 2024. 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.

The deferred finance costs of ~~$1.2~~

$1.1 million (December 31, 2020 - $1.3 million) related to the arrangement of the credit facility, are included within other current and

non-current

assets at the balance sheet dates.

NOTE 9 – PLANT CLOSURE PROVISIONS

The Company has continuing plans to remediate ~~some of its~~ 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 closure costs includes costs for decontamination and environmental remediation activities (“remediation”).

~~As a result, the~~

The principal site giving rise to remediation liabilities is the manufacturing site at Ellesmere Port in the United Kingdom. There are also provisions on a much smaller scale in respect of ~~some of our~~ other manufacturing ~~sites in the U.S. and Europe.~~sites. We recognize environmental remediation liabilities when they are probable and costs can be reasonably ~~estimated, and asset retirement obligations when there is a legal obligation and costs can be reasonably~~ estimated.

Movements in the provisions are summarized as follows:

(in millions)

2021

Total at January 1
   $ 58.5
Charge for the period
   1.9
Utilized in the period
   (2.5 )
Exchange effect
   (0.3 )


Total at June 30
   57.6
Due within one year
   (6.6 )


Due after one year
   $ 51.0


(in millions)	2021
Total at January 1	$	58.5
Charge for the period		2.8
Utilized in the period		(4.3	)
Exchange effect		(0.5	)

Total at September 30		56.5
Due within one year		(5.7	)

Due after one year	$	50.8

The charge for the ~~six~~nine months ended ~~June~~September 30, 2021 was ~~$1.9~~$2.8 million ~~(six~~(nine months ended ~~June~~September 30, 2020 – ~~$9.8~~ $11.0

million). The current year charge represents the accounting accretion only, with no changes for the expected cost and scope of future remediation activities. In the prior year, the charge ~~includes~~included an additional ~~$7.5~~

$7.5

million provision as a result of the restructuring activities following the closure of our Octane Additives business and the cessation of the production and sales of TEL for use in motor gasoline.

Amounts due within one year refer to provisions where expenditure is expected to arise within one year of the balance sheet date.

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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:


	June 30, 2021				December 31, 2020				September 30, 2021				December 31, 2020
(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	$	94.4	$	94.4	$	105.3	$	105.3	$	89.2	$	89.2	$	105.3	$	105.3
Derivatives (Level 1 measurement):
Other current and non-current assets:
Foreign currency forward exchange contracts		1.1		1.1		0.0		0.0		0.4		0.4		0.0		0.0

Liabilities
Non-derivatives:
Finance leases (including current portion)		0.2		0.2		0.6		0.6		0.0		0.0		0.6		0.6
Derivatives (Level 1 measurement):
Other current and non-current liabilities:
Foreign currency forward exchange contracts		0.0		0.0		0.5		0.5		0.0		0.0		0.5		0.5
Non-financial liabilities (Level 3 measurement):
Other current and non-current liabilities:
Stock equivalent units		17.8		17.8		17.2		17.2		17.9		17.9		17.2		17.2

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

Cash and cash equivalents:

The carrying amount approximates fair value because of the short-term maturities of such instruments.

Derivatives:

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

Finance leases:

Finance leases relate to certain fixed assets in our Fuel Specialties and Oilfield Services segments. The carrying amount of finance leases approximates to the fair value.

Stock equivalent units:

The fair values of stock equivalent units are calculated at each balance sheet date using either the Black-Scholes or Monte Carlo method depending on the terms of each grant.

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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 ~~June~~September 30, 2021, 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 ~~six~~nine months of 2021 was a gain of ~~$0.2~~

$0.9 million (first ~~six~~nine months of 2020 – a gain of ~~$1.8~~$0.7 million).

NOTE 12 – CONTINGENCIES

Legal matters

While we are involved from time to time in claims and legal proceedings that result from, and are incidental to, the conduct of our business including business and commercial litigation, employee and product liability claims, there are no material pending legal proceedings to which the Company or any of its subsidiaries is a party, or of which any of their property is subject. It is possible, however, that an adverse resolution of an unexpectedly large number of such individual claims or proceedings could in the aggregate have a material adverse effect on the results of operations for a particular year or quarter.

Guarantees

The Company and certain of the Company’s consolidated subsidiaries are contingently liable for certain obligations of affiliated companies primarily in the form of guarantees of debt and performance under contracts entered into as a normal business practice. This includes guarantees of

non-U.S.

excise taxes and customs duties. As at ~~June~~September 30, 2021, such guarantees which are not recognized as liabilities in the condensed consolidated financial statements amounted to ~~$8.4~~$8.6 million (December 31, 2020 - $9.9 million). The remaining terms of the fixed maturity guarantees are up to

3 4 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 should the affiliated company fail to fulfil its obligations under the arrangements. In some cases, the guarantee arrangements have recourse provisions that would enable the Company to recover any payments made under the terms of the guarantees from securities held of the guaranteed parties’ assets.

The Company and its affiliates have numerous long-term sales and purchase commitments in their various business activities, which are expected to be fulfilled with no adverse consequences material to the Company.

NOTE 13 – STOCK-BASED COMPENSATION PLANS

The Company grants stock options and stock equivalent units (“SEUs”) from time to time as a long-term performance incentive. In certain cases, the grants are subject to performance conditions such as the Company’s stock price. Where performance conditions apply the Monte Carlo simulation model is used to determine the fair values. Otherwise the Black-Scholes model is used to determine the fair values.

Stock option plans

The following table summarizes the transactions of the Company’s stock option plans for the ~~six~~nine months ended ~~June~~September 30, 2021.


	Number of Options			Weighted Average Exercise Price		Weighted Average Grant-Date Fair Value		Number of Options			Weighted Average Exercise Price		Weighted Average Grant-Date Fair Value
Outstanding at December 31, 2020		442,893		$	32.49	$	45.31		442,893		$	32.49	$	45.31
Granted - at discount		81,596		$	0.00	$	92.37		81,596		$	0.00	$	92.37
- at market value		10,688		$	99.85	$	32.73		10,688		$	99.85	$	32.73
Exercised		(52,870	)	$	32.93	$	38.15		(56,508	)	$	34.57	$	37.45
Forfeited		(17,806	)	$	17.98	$	65.96		(19,023	)	$	20.46	$	63.56
Outstanding at June 30, 2021		464,501		$	28.75	$	53.57

Outstanding at September 30, 2021									459,646		$	28.44	$	53.64

At ~~June~~September 30, 2021, there were ~~87,136~~86,836 stock options that were exercisable, of which ~~65,176~~66,776 had performance conditions attached.

The stock option compensation cost for the first ~~six~~nine months of 2021 was ~~$2.9~~$4.6 million (first ~~six~~nine months of 2020 – ~~$2.8~~$4.4 million). The total intrinsic value of options exercised in the first ~~six~~nine months of 2021 was ~~$1.7~~$1.8 million (first ~~six~~nine months of 2020 – ~~$4.6~~$4.7 million).

The total compensation cost related to

non-vested

stock options not yet recognized at ~~June~~September 30, 2021 was ~~$10.5~~$8.8 million and this cost is expected to be recognized over the weighted-average period of ~~2.15~~2.02 years.

Stock equivalent units

The following table summarizes the transactions of the Company’s SEUs for the ~~six~~nine months ended ~~June~~September 30, 2021:


	Number of SEUs			Weighted Average Exercise Price		Weighted Average Grant-Date Fair Value		Number of SEUs			Weighted Average Exercise Price		Weighted Average Grant-Date Fair Value
Outstanding at December 31, 2020		390,164		$	4.35	$	63.96		390,164		$	4.35	$	63.96
Granted - at discount		91,451		$	0.00	$	92.01		94,151		$	0.00	$	91.83
- at market value		3,803		$	99.85	$	32.71		3,803		$	99.85	$	32.71
Exercised		(29,573	)	$	16.67	$	43.05		(35,384	)	$	13.93	$	45.20
Forfeited		(21,940	)	$	2.76	$	67.01		(25,290	)	$	2.40	$	66.53

Outstanding at June 30, 2021		433,905		$	3.51	$	70.87
Outstanding at September 30, 2021									427,444		$	3.57	$	71.22

At ~~June~~September 30, 2021 there were ~~32,132~~26,771 SEUs that are exercisable, of which ~~27,935~~22,574 had performance conditions attached.

The charges for SEUs are spread over the life of the award subject to a revaluation to fair value each quarter. The revaluation may result in a charge or a credit to the income statement in the quarter dependent upon our share price and other performance criteria.

The SEU compensation for the first ~~six~~nine months of 2021 was a ~~$2.9~~$3.4 million charge (first ~~six~~nine months of 2020 – ~~$3.0~~$4.9 million credit). The total intrinsic value of SEUs exercised in the first ~~six~~nine months of 2021 was ~~$1.3~~$1.6 million (first ~~six~~nine months of 2020 – ~~$6.1~~$6.3 million).

The weighted-average remaining vesting period of

non-vested

SEUs is ~~2.08~~1.89 years.

NOTE 14 – RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE LOSS

~~Reclassifications out of accumulated other comprehensive loss for the first six months of 2021 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
   1.3    See
(1)
below



   1.4    Total before tax
   (0.1 )    Income tax expense



Total reclassifications
   $ 1.3    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 accumulated other comprehensive loss for the first six months of 2021, ne~~

~~of tax, were:~~

(in millions)

Defined

Benefit

Pension

Plan Items

Cumulative
Translation
Adjustments

Total

Balance at December 31, 2020
   $ (15.9 )    $ (41.4 )    $ (57.3 )






Other comprehensive income before reclassifications
   0.0    (7.5 )    (7.5 )
Amounts reclassified from AOCL
   1.3    0.0    1.3






Total other comprehensive income
   1.3    (7.5 )    (6.2 )






Balance at June 30, 2021
   $ (14.6 )    $ (48.9 )    $ (63.5 )

~~Table of Contents~~

Reclassifications out of accumulated other comprehensive loss (“AOCL”) for the first ~~six~~nine months of ~~2020~~2021 were:

(in millions)
Details about AOCL Components

Amount
Reclassified
from AOCL

Affected Line Item in the
Statement where
Net Income is Presented
Defined benefit pension plan items:

Amortization of prior service credit
   $ (0.4 )    See
(1)
below
Amortization of actuarial net losses
   0.8    See
(1)
below



   0.4    Total before tax
   0.0    Income tax expense



Total reclassifications
   $ 0.4    Net of tax


(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	$	0.2		See (1) below
Amortization of actuarial net losses		1.9		See (1) below

		2.1		Total before tax
		(0.2	)	Income tax expense

Total reclassifications	$	1.9		Net of tax

~~(1)~~

(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 for the first ~~six~~nine months of ~~2020, ne~~

2021, net of tax, were:


(in millions)	Defined Benefit Pension Plan Items			Cumulative Translation Adjustments			Total			Defined Benefit Pension Plan Items			Cumulative Translation Adjustments			Total
Balance at December 31, 2019	$	(9.3	)	$	(65.1	)	$	(74.4	)
Balance at December 31, 2020										$	(19.9	)	$	(37.4	)	$	(57.3	)

Other comprehensive income before reclassifications		0.0			(2.4	)		(2.4	)		0.0			(14.5	)		(14.5	)
Amounts reclassified from AOCL		0.4			0.0			0.4			1.9			0.0			1.9

Total other comprehensive income		0.4			(2.4	)		(2.0	)		1.9			(14.5	)		(12.6	)

Balance at June30, 2020	$	(8.9	)	$	(67.5	)	$	(76.4	)
Balance at September 30, 2021										$	(18.0	)	$	(51.9	)	$	(69.9	)

212

Reclassifications out of accumulated other comprehensive loss for the first nine months of 2020 were:


(in millions) Details about AOCL Components	Amount Reclassified from AOCL			Affected Line Item in the Statement where Net Income is Presented
Defined benefit pension plan items:
Amortization of prior service credit	$	(0.6	)	See (1) below
Amortization of actuarial net losses		1.2		See (1) below

		0.6		Total before tax
		0.0		Income tax expense

Total reclassifications	$	0.6		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 accumulated other comprehensive loss for the first nine months of 2020, net of tax, were:


(in millions)	Defined Benefit Pension Plan Items			Cumulative Translation Adjustments			Total
Balance at December 31, 2019	$	(9.3	)	$	(65.1	)	$	(74.4	)

Other comprehensive income before reclassifications		0.0			9.5			9.5
Amounts reclassified from AOCL		0.6			0.0			0.6

Total other comprehensive income		0.6			9.5			10.1

Balance at September 30, 2020	$	(8.7	)	$	(55.6	)	$	(64.3	)

NOTE 15 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Company has reviewed recently issued accounting pronouncements and concluded ~~that the following~~there were no matters ~~are~~ relevant to the Company’s financial statements.

~~In March 2021, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”)~~

~~No. 2021-03,~~

~~Intangibles—Goodwill~~

and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events. The amendments in this ASU are effective on a prospective basis for fiscal years beginning after December 15, 2019. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The optional election in this ASU, to evaluate goodwill impairment triggering events only as of the end of each reporting period, has not been adopted by the Company.

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, a chemicals manufacturer, since February 2020. In the first ~~six~~nine months of 2021 the Company purchased product from AdvanSix for ~~$0.1~~$0.3 million (first ~~six~~nine months of 2020 – $0.2 million). As at ~~June~~September 30, 2021, the Company owed ~~$0.1~~$0.0 million to AdvanSix (December 31, 2020 – $0.0 million).

Mr. Robert I. Paller has been a

non-executive

director of the Company since November 1, 2009. The Company has retained and continues to retain Smith, Gambrell & Russell, LLP (“SGR”), a law firm with which Mr. Paller holds a position. In the first ~~six~~nine months of 2021 the Company incurred fees from SGR of $0.1 million (first ~~six~~nine months of 2020 – ~~$0.2~~$0.6 million). As at ~~June~~September 30, 2021, the Company owed $0.0 million to SGR (December 31, 2020 – $0.1 million).

Mr. David F. Landless has been a

non-executive

director of the Company since January 1, 2016 and is a

non-executive

director of Ausurus Group Limited which owns European Metal Recycling Limited (“EMR”). The Company has sold scrap metal to EMR in the first ~~six~~nine months of 2021 for a value of ~~$0.4~~$0.5 million (first ~~six~~nine months of 2020 – ~~$0.0~~$0.2 million). A tendering process is operated periodically to select the best buyer for the sale of scrap metal by the Company. As at ~~June~~September 30, 2021 EMR owed ~~$0.1~~$0.0 million for scrap metal purchased from the Company (December 31, 2020 – $0.0 million).

222

Table of Contents

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2021

This discussion should be read in conjunction with our unaudited interim condensed consolidated financial statements and the notes thereto.

CRITICAL ACCOUNTING ESTIMATES

The policies and estimates that the Company considers the most critical in terms of complexity and subjectivity of assessment are those related to environmental liabilities, pensions, income taxes, goodwill, property, plant and equipment and other intangible assets (net of depreciation and amortization) and the impact of the

COVID-19

pandemic (“the pandemic”) and the current economic environment. These policies have been discussed in the Company’s 2020 Form

10-K.

RESULTS OF OPERATIONS

The Company reports its financial performance based on the following three reportable segments: Fuel Specialties, Performance Chemicals and Oilfield Services. Our previously reported Octane Additives segment ceased trading in the second quarter of 2020.

The following table provides operating income by reporting segment:

Three Months Ended
June 30

Six Months Ended
June 30

(in millions)

2021

2020

2021

2020

Net sales:

Fuel Specialties
   $ 143.1    $ 107.4    282.4    254.4
Performance Chemicals
   128.2    95.7    254.1    208.8
Oilfield Services
   83.2    41.8    157.6    154.0








   $ 354.5    $ 244.9    694.1    617.2








Gross profit/(loss):

Fuel Specialties
   $ 50.1    $ 25.4    95.0    76.6
Performance Chemicals
   31.6    24.9    63.0    52.5
Oilfield Services
   26.6    9.9    51.1    46.1
Octane Additives
   0.0    (1.1 )    0.0    (2.2 )








   $ 108.3    $ 59.1    209.1    173.0








Operating income/(loss):

Fuel Specialties
   $ 28.5    $ 4.7    52.3    36.8
Performance Chemicals
   17.9    12.2    36.2    27.8
Oilfield Services
   2.2    (12.4 )    3.4    (5.2 )
Octane Additives
   0.0    (1.6 )    0.0    (2.8 )
Corporate costs
   (11.6 )    (15.4 )    (26.7 )    (28.2 )
Restructuring Charge
   0.0    (21.1 )    0.0    (21.1 )
Impairment of intangible assets
   0.0    (19.8 )    0.0    (19.8 )








Total operating income
   $ 37.0    $ (53.4 )    65.2    (12.5 )


	Three Months Ended September 30						Nine Months Ended September 30
(in millions)	2021			2020			2021			2020
Net sales:
Fuel Specialties	$	156.4		$	120.0			438.8			374.4
Performance Chemicals		132.8			102.0			386.9			310.8
Oilfield Services		86.9			43.1			244.5			197.1

	$	376.1		$	265.1			1,070.2			882.3

Gross profit/(loss):
Fuel Specialties	$	49.1		$	40.3			144.1			116.9
Performance Chemicals		32.6			24.0			95.6			76.5
Oilfield Services		31.2			14.4			82.3			60.5
Octane Additives		0.0			0.0			0.0			(2.2	)

	$	112.9		$	78.7			322.0			251.7

Operating income/(loss):
Fuel Specialties	$	26.6		$	22.2			78.9			59.0
Performance Chemicals		17.8			12.4			54.0			40.2
Oilfield Services		2.7			(4.5	)		6.1			(9.7	)
Octane Additives		0.0			0.0			0.0			(2.8	)
Corporate costs		(15.7	)		(13.3	)		(42.4	)		(41.5	)
Restructuring Charge		0.0			0.0			0.0			(21.1	)
Impairment of intangible assets		0.0			0.0			0.0			(19.8	)

Total operating income	$	31.4		$	16.8			96.6			4.3

Table of Contents

Three Months Ended ~~June~~September 30 , 2021

The following table shows the change in components of operating income by reporting segment for the three months ended ~~June~~September 30, 2021 and the three months ended ~~June~~September 30, 2020:

Three Months Ended
June 30

(in millions, except ratios)

2021

2020

Change

Net sales:

Fuel Specialties
   $ 143.1    $ 107.4    $ 35.7 +33 %
Performance Chemicals
   128.2    95.7    32.5 +34 %
Oilfield Services
   83.2    41.8    41.4 +99 %






   $ 354.5    $ 244.9    $ 109.6 +45 %






Gross profit:

Fuel Specialties
   $ 50.1    $ 25.4    $ 24.7 +97 %
Performance Chemicals
   31.6    24.9    6.7 +27 %
Oilfield Services
   26.6    9.9    16.7 +169 %
Octane Additives
   0.0    (1.1 )    1.1 -100 %






   $ 108.3    $ 59.1    $ 49.2 +83 %






Gross margin (%):


Fuel Specialties


35.0



23.6



+11.4

Performance Chemicals


24.6



26.0



-1.4

Oilfield Services


32.0



23.7



+8.3

Aggregate


30.6



24.1



+6.5

Operating expenses:

Fuel Specialties
   $ (21.6 )    $ (20.7 )    $ (0.9 ) +4 %
Performance Chemicals
   (13.7 )    (12.7 )    (1.0 ) +8 %
Oilfield Services
   (24.4 )    (22.3 )    (2.1 ) +9 %
Octane Additives
   0.0    (0.5 )    0.5 -100 %
Corporate costs
   (11.6 )    (15.4 )    3.8 -25 %
Restructuring charge
   0.0    (21.1 )    21.1 -100 %
Impairment of intangible assets
   0.0    (19.8 )    19.8 -100 %






   $ (71.3 )    $ (112.5 )    $ 41.2 -37 %


	Three Months Ended September 30
(in millions, except ratios)	2021			2020			Change
Net sales:
Fuel Specialties	$	156.4		$	120.0		$	36.4		+30	%
Performance Chemicals		132.8			102.0			30.8		+30	%
Oilfield Services		86.9			43.1			43.8		+102	%

	$	376.1		$	265.1		$	111.0		+42	%

Gross profit:
Fuel Specialties	$	49.1		$	40.3		$	8.8		+22	%
Performance Chemicals		32.6			24.0			8.6		+36	%
Oilfield Services		31.2			14.4			16.8		+117	%

	$	112.9		$	78.7		$	34.2		+43	%

Gross margin (%):
Fuel Specialties		31.4			33.6			-2.2
Performance Chemicals		24.5			23.5			+1.0
Oilfield Services		35.9			33.4			+2.5
Aggregate		30.0			29.7			+0.3

Operating expenses:
Fuel Specialties	$	(22.5	)	$	(18.1	)	$	(4.4	)	+24	%
Performance Chemicals		(14.8	)		(11.6	)		(3.2	)	+28	%
Oilfield Services		(28.5	)		(18.9	)		(9.6	)	+51	%
Corporate costs		(15.7	)		(13.3	)		(2.4	)	+18	%

	$	(81.5	)	$	(61.9	)	$	(19.6	)	+32	%

Table of Contents

Fuel Specialties

Net sales:

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

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Change (%)

Americas

EMEA

ASPAC

AvGas

Total

Americas

EMEA

ASPAC

AvGas

Total

Volume

+39

+11

+28

-11

+20

+54

-44

+17

Price and product mix

-3

+88

-5

+17

+11

+52

+12

Exchange rates

+13

+36

+25

+28

+77

+33

+49

+24

+19

+30

Volumes in all our regions have increased year over year, as the global demand for refined fuel products ~~is returning~~has returned to near the

~~pre-pandemic~~

levels. Price and product mix was slightly improved in EMEA, while the Americas and ASPAC were adverse due to higher sales of lower margin products. AvGas volumes were lower than the prior year due to variations in the demand from customers, being offset by a favorable price and product mix with a higher proportion of sales to high margin customers. EMEA and ASPAC benefitted from favorable exchange rate movements year over year, due to a strengthening of the British pound sterling and the European Union euro against the U.S. dollar.

~~Gross margin~~

~~: the year over year increase of 11.4 percentage points was driven by favourable pricing and sales mix when compared to the prior year, which was adversely impacted by the pandemic.~~

~~Operating expenses:~~

~~the year over year increase of $0.9 million was due to higher personnel-related expenses and an increase in the allowance for doubtful debts.~~

~~Performance Chemicals~~

~~Net sales:~~

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

~~Three Months Ended June 30, 2021~~

~~Change (%)~~

~~Americas~~

~~EMEA~~

~~ASPAC~~

~~Total~~

~~Volume~~

~~+52~~

~~+20~~

~~+18~~

~~Price and product mix~~

~~+15~~

~~-14~~

~~Exchange rates~~

~~+67~~

~~+21~~

~~+10~~

~~+34~~

Higher volumes in all our regions was driven by increased demand for our Personal Care products, together with the recovery of demand in some of our other markets which have been adversely impacted by the pandemic. The Americas and EMEA benefitted from a favorable price and product mix due to increased sales of higher priced products. ASPAC suffered an adverse price and product mix due to increased sales of lower priced products. EMEA and ASPAC benefitted from favorable exchange rate movements year over year, due to a strengthening of the British pound sterling and the European Union euro against the U.S. dollar.

~~Gross margin:~~

~~the year over year decrease of 1.4 percentage points was primarily due to a weaker sales mix and the timing of planned plant shutdowns.~~

~~Operating expenses:~~

~~the year over year increase of $1.0 million was due to higher personnel-related expenses and increased spending on research and development.~~

~~Oilfield Services~~

~~Net sales:~~

have increased year over year by $41.4 million, or 99 percent. Customer demand grew sequentially quarter on quarter as the pandemic recovery gathered pace. We expect the growth in customer demand will continue into the third quarter.

~~Gross margin:~~

the year over year increase of 8.3 percentage points was primarily due to a favorable sales mix compared to a prior year comparative which was adversely impacted by the pandemic, together with the benefit of management cost control initiatives being realized.

~~Operating expenses:~~

~~the year over year increase of $2.1 million was driven by our flexible customer service response to the increase in demand as the pandemic recovery continues.~~

~~Octane Additives~~

The Octane Additives business ceased trading and is no longer a reporting segment from July 1, 2020 as the production of TEL for use in motor gasoline has finished. Legacy costs related to these operations have now been recorded as operating expenses within corporate costs.

~~In the second quarter of 2020, there was a gross loss of $1.1 million, together with operating expenses of $0.5 million.~~

~~Other Income Statement Captions~~

~~Corporate costs:~~

the year over year decrease of $3.8 million was driven by lower personnel-related expenses, including lower share-based compensation accruals linked to the Innospec share price decrease in the quarter.

~~Other net income:~~

~~for the second quarter of 2021 and 2020, included the following:~~

(in millions)

2021

2020

Change

United Kingdom pension credit
   $ 1.6    $ 1.6    0.0
German pension charge
   (0.2 )    (0.3 )    0.1
Profit on disposal of assets
   0.2    0.0    0.2
Foreign exchange gain on translation
   2.9    (1.1 )    4.0
Foreign currency forward contracts losses
   (1.1 )    (0.1 )    (1.0 )






   $ 3.4    $ 0.1    $ 3.3

~~Interest expense, net:~~

was $0.3 million for the second quarter of 2021 compared to $0.5 million in the second quarter of 2020, driven by the repayment in full of our revolving credit facility in the second half of 2020. Interest expense includes a commitment fee to retain the Company’s revolving credit facility for the term of the agreement.

~~Income taxes:~~

the effective tax rate was 44.1% and 26.2% in the second quarter of 2021 and 2020, respectively. The adjusted effective tax rate, once adjusted for the items set out in the following table, was 24.2% in 2021 compared with 23.6% in 2020. The 0.6% percentage point increase in the adjusted effective rate was primarily due to the fact that a higher proportion of the Company’s profits are being generated in higher tax jurisdictions. The Company believes that this adjusted effective tax rate, a

~~non-GAAP~~

~~financial measure, provides useful information to investors and may assist them in evaluating the Company’s underlying performance and identifying operating trends. In addition, management uses this~~

~~non-GAAP~~

~~financial measure internally to evaluate the performance of the Company’s operations and for planning and forecasting in subsequent periods.~~

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

Three Months Ended
June 30

(in millions)

2021

2020

Income before income taxes
   $ 40.1 $ (53.8 )
Indemnification asset regarding tax audit
   (0.1 ) (0.5 )
Adjustment for stock compensation
   1.2 (1.4 )
Legacy costs of closed operations
   0.9 0.0
Restructuring charge
   0.0 21.1
Impairment of acquired intangible assets
   0.0 19.8


Adjusted income before income taxes
   $ 42.1 $ (14.8 )


Income taxes
   $ 17.7 $ (14.1 )
Tax on stock compensation
   0.2 0.1
Adjustment of income tax provision
   (0.3 ) 1.2
Tax on legacy cost of closed operations
   0.2 0.0
Tax on restructuring charge
   0.0 4.3
Tax on impairment of acquired intangible assets
   0.0 4.6
Tax on foreign exchange on distribution
   (0.2 ) 0.4
Change in UK statutory tax rate
   (7.4 ) 0.0


Adjusted income taxes
   $ 10.2 $ (3.5 )


GAAP effective tax rate
   44.1 % 26.2 %
Adjusted effective tax rate
   24.2 % 23.6 %

In March 2021 it was announced that the UK rate of corporation tax would increase from 19% to 25% from April 1, 2023. The legislation accompanying this announcement was enacted on June 10, 2021. As this legislation was enacted in the three months ended June 30, 2021, the effect of this change was recognized in our financial results for this period. This has resulted in a charge of $7.4 million in the three months ended June 30, 2021, reflecting the impact of the increase in the UK corporation tax rate on our UK deferred tax balances.

~~Six Months Ended , June 30 2021~~

~~The following table shows the change in components of operating income by reporting segment for the six months ended June 30, 2021 and the six months ended June 30, 2020:~~

Six Months Ended
June 30

(in millions, except ratios)

2021

2020

Change

Net sales:

Fuel Specialties
   $ 282.4    $ 254.4    $ 28.0    +11 %
Performance Chemicals
   254.1    208.8    45.3    +22 %
Oilfield Services
   157.6    154.0    3.6    +2 %







   $ 694.1    $ 617.2    $ 76.9    +12 %







Gross profit:

Fuel Specialties
   $ 95.0    $ 76.6    $ 18.4    +24 %
Performance Chemicals
   63.0    52.5    10.5    +20 %
Oilfield Services
   51.1    46.1    5.0    +11 %
Octane Additives
   0.0    (2.2 )    2.2    -100 %







   $ 209.1    $ 173.0    $ 36.1    +21 %







Gross margin (%):

Fuel Specialties


33.6



30.1



+3.5


Performance Chemicals


24.8



25.1



-0.3


Oilfield Services


32.4



29.9



+2.5


Aggregate


30.1



28.0



+2.1


Operating expenses:

Fuel Specialties
   $ (42.7 )    $ (39.8 )    $ (2.9 )    +7 %
Performance Chemicals
   (26.8 )    (24.7 )    (2.1 )    +9 %
Oilfield Services
   (47.7 )    (51.3 )    3.6    -7 %
Octane Additives
   0.0    (0.6 )    0.6    -100 %
Corporate costs
   (26.7 )    (28.2 )    1.5    -5 %
Restructuring charge
   0.0    (21.1 )    21.1    -100 %
Impairment of intangible assets
   0.0    (19.8 )    19.8    -100 %







   $ (143.9 )    $ (185.5 )    $ 41.6    -22 %

~~Fuel Specialties~~

~~Net sales:~~

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

Six Months Ended June 30, 2021

Change (%)

Americas

EMEA

ASPAC

AvGas

Total

Volume
   +14    +4    +11    -38    +5
Price and product mix
   -4    -3    -3    +46    0
Exchange rates
   0    +12    +2    0    +6










   +10    +13    +10    +8    +11

~~Volumes in all our regions have increased year over year, as the global demand for refined fuel products is returning to~~

pre-pandemic

levels. Price and product mix was adverse in ~~all our regions~~the Americas due to ~~higher~~decreased sales of ~~lower~~higher margin products. Price and product mix was favorable in EMEA and ASPAC due to increased sales of higher margin products. AvGas volumes were lower than the prior year due to variations in the demand from customers, being offset by a favorable price and product mix with a higher proportion of sales to higher margin customers. EMEA and ASPAC benefitted from favorable exchange rate movements year over year, due to a strengthening of the British pound sterling and the European Union euro against the U.S. dollar.

Gross margin

: the year over year ~~increase~~decrease of ~~3.5~~2.2 percentage points was ~~driven by a favorable~~due to the combination of an adverse sales mix ~~in comparison to the prior year which was adversely~~for our higher margin jet fuel additive, as international travel remains impacted by the ~~pandemic.~~pandemic, together with the time lag for passing higher raw material costs through to selling prices.

Operating expenses:

the year over year increase of ~~$2.9~~$4.4 million was ~~primarily~~ due to higher selling expenses to support the increased sales, together with higher research and development costs and higher personnel-related expenses ~~together with an increase in the allowance for doubtful debts.~~including higher share-based compensation accruals and higher performance related remuneration accruals.

Performance Chemicals

Net sales:

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

~~Six~~Three Months Ended ~~June~~September 30, 2021

Change (%)

Americas

EMEA

ASPAC

Total

Volume

+32

+533

-34

+1310

Price and product mix

+721

-816

+337

+19

Exchange rates

+92

+41

+61

+3954

+16

-121

+224

+30

Higher volumes ~~in all our regions was~~for the Americas were driven by increased demand for our Personal Care ~~products, together with~~products. Volumes in EMEA were favorable including the continued recovery of demand ~~in some of our other~~across several markets which have been adversely impacted by the pandemic. ~~The Americas and EMEA~~Lower volumes in ASPAC were primarily driven by a reduction in demand for our Personal Care products. All our regions benefitted from a favorable price and product mix due to increased sales of higher ~~priced products. ASPAC suffered an adverse price and product mix due to increased sales of lower~~ priced products. EMEA and ASPAC benefitted from favorable exchange rate movements year over year, due to a strengthening of the British pound sterling and the European Union euro against the U.S. dollar.

Gross margin:

the year over year ~~decrease~~increase of ~~0.3~~1.0 percentage ~~points~~point was ~~primarily~~ due to higher volumes driving the improved recovery of fixed costs, together with a favorable sales mix.

Operating expenses:

the year over year increase of ~~$2.1~~$3.2 million was due to ~~higher personnel-related expenses and~~ increased spending on research and ~~development.~~development, an increase in the allowance for doubtful debts and higher personnel-related expenses including higher share-based compensation accruals and higher performance related remuneration accruals.

Oilfield Services

Net sales:

have increased year over year by ~~$3.6~~$43.8 million, or ~~2 percent.~~102 percent, with the majority of our customer activity continuing to be in the Americas region. Customer demand has again grown ~~during 2021~~sequentially quarter on quarter as the pandemic recovery ~~gathered pace.~~continued. We expect that the growth in customer demand will continue into the ~~third quarter.~~fourth quarter and further ahead into 2022.

Gross margin:

the year over year increase of 2.5 percentage points was ~~primarily~~ due to a favorable sales mix compared to a prior year comparative which was adversely impacted by the pandemic, ~~together with the benefit of~~while management ~~cost control initiatives being realized.~~have successfully maintained prices in a competitive market.

Operating expenses:

the year over year ~~decrease~~increase of ~~$3.6~~$9.6 million was driven by ~~the~~

~~right-sizing~~

ofour continuing customer service flexibility which allows us to support the ~~operations to adjust for the reduction~~increase in demand ~~caused by~~as the pandemic impact lessened, together with ~~lower amortization for acquired intangible assets.~~

~~Octane Additives~~

~~The Octane Additives business ceased trading~~higher personnel-related expenses including higher share-based compensation accruals and ~~is no longer a reporting segment from July 1, 2020 as the production of TEL for use in motor gasoline has finished. Legacy costs~~higher performance related ~~to these operations have now been recorded as operating expenses within corporate costs.~~

~~In the first six months of 2020, there was a gross loss of $2.2 million, together with operating expenses of $0.6 million.~~

remuneration accruals.

Other Income Statement Captions

Corporate costs:

the year over year ~~decrease~~increase of ~~$1.5~~$2.4 million was driven by ~~lower~~higher personnel-related ~~expenses.~~expenses including higher share-based compensation accruals and higher performance related remuneration accruals. In the prior year, the share-based compensation accruals declined significantly due to the pandemic adversely impacting the Innospec share price. In the current quarter, the Innospec share price decline has been relatively moderate.

Other net income:

for the ~~first six months~~third quarter of 2021 and 2020, included the following:

(in millions)

2021

2020

Change

United Kingdom pension credit
   $ 3.1    $ 3.3    (0.2 )
German pension charge
   (0.5 )    (0.5 )    0.0
Profit on disposal of assets
   0.2    0.0    0.2
Foreign exchange gain on translation
   3.4    (0.6 )    4.0
Foreign currency forward contracts gain
   0.2    1.8    (1.6 )






   $ 6.4    $ 4.0    $ 2.4


(in millions)	2021			2020			Change
Net pension credit	$	1.3		$	1.4			(0.1	)
Foreign exchange gains/(losses) on translation		(2.2	)		3.5			(5.7	)
Foreign currency forward contracts gains/(losses)		0.7			(1.1	)		1.8

	$	(0.2	)	$	3.8		$	(4.0	)

Interest expense, net:

was ~~$0.7~~$0.4 million for the ~~first six months~~third quarter of 2021 compared to ~~$1.1~~$0.4 million in the ~~first six months of 2020, driven by the repayment in full of our revolving credit facility in the second half~~third quarter of 2020. Interest expense includes a commitment fee to retain the Company’s revolving credit facility for the term of the agreement.

Income taxes:

the effective tax rate was ~~35.4%~~24.0% and ~~31.3%~~37.1% in the ~~first six months~~third quarter of 2021 and 2020, respectively. The adjusted effective tax rate, once adjusted for the items set out in the following table, was ~~23.8%~~22.3% in ~~the first six months of~~ 2021 compared with ~~25.8%~~23.0% in ~~the first six months of~~ 2020. The ~~2.0%~~0.7% percentage point decrease in the adjusted effective rate was primarily due to the fact that a lower proportion of the Company’s profits are being generated in higher tax jurisdictions. The Company believes that this adjusted effective tax rate, a

non-GAAP

financial measure, provides useful information to investors and may assist them in evaluating the Company’s underlying performance and identifying operating trends. In addition, management uses this

non-GAAP

financial measure internally to evaluate the performance of the Company’s operations and for planning and forecasting in subsequent periods.

The following table shows a reconciliation of the GAAP effective tax charge to the adjusted effective tax charge:


	Six Months Ended June 30						Three Months Ended September 30
(in millions)	2021			2020			2021			2020
Income before income taxes	$	70.9		$	(9.6	)	$	30.8		$	20.2
Indemnification asset regarding tax audit		0.0			(0.3	)		0.1			0.4
Adjustment for stock compensation		2.6			0.0			1.6			0.0
Acquisition costs		0.8			0.0
Legacy cost of closed operations		1.8			0.0
Restructuring charge		0.0			21.1
Impairment of acquired intangible assets		0.0			19.8
Legacy costs of closed operations								1.1			1.1

Adjusted income before income taxes	$	76.1		$	31.0
							$	33.6		$	21.7

Income taxes	$	25.1		$	(3.0	)	$	7.4		$	7.5
Tax on stock compensation		0.3			0.5
Adjustment of income tax provision		(0.3	)		1.2			(0.1	)		(0.2	)
Tax on acquisition costs		0.2			0.0
Tax on legacy cost of closed operations		0.4			0.0			0.2			0.2
Tax on restructuring charge		0.0			4.3
Tax on impairment of acquired intangible assets		0.0			4.6
Tax on foreign exchange on distribution		(0.2	)		0.4			0.0			0.1
Change in UK statutory tax rate		(7.4	)		0.0			0.0			(2.6	)

Adjusted income taxes	$	18.1		$	8.0		$	7.5		$	5.0

GAAP effective tax rate		35.4	%		31.3	%		24.0	%		37.1	%
Adjusted effective tax rate		23.8	%		25.8	%		22.3	%		23.0	%

Nine Months Ended September 30, 2021

The following table shows the change in components of operating income by reporting segment for the nine months ended September 30, 2021 and the nine months ended September 30, 2020:


	Nine Months Ended September 30
(in millions, except ratios)	2021			2020			Change
Net sales:
Fuel Specialties	$	438.8		$	374.4		$	64.4		+17	%
Performance Chemicals		386.9			310.8			76.1		+24	%
Oilfield Services		244.5			197.1			47.4		+24	%

	$	1,070.2		$	882.3		$	187.9		+21	%

Gross profit:
Fuel Specialties	$	144.1		$	116.9		$	27.2		+23	%
Performance Chemicals		95.6			76.5			19.1		+25	%
Oilfield Services		82.3			60.5			21.8		+36	%
Octane Additives		0.0			(2.2	)		2.2		+100	%

	$	322.0		$	251.7		$	70.3		+28	%

Gross margin (%):
Fuel Specialties		32.8			31.2			+1.6
Performance Chemicals		24.7			24.6			+0.1
Oilfield Services		33.7			30.7			+3.0
Aggregate		30.1			28.5			+1.6

Operating expenses:
Fuel Specialties	$	(65.2	)	$	(57.9	)	$	(7.3	)	+13	%
Performance Chemicals		(41.6	)		(36.3	)		(5.3	)	+15	%
Oilfield Services		(76.2	)		(70.2	)		(6.0	)	+9	%
Octane Additives		0.0			(0.6	)		0.6		-100	%
Corporate costs		(42.4	)		(41.5	)		(0.9	)	+2	%
Restructuring charge		0.0			(21.1	)		21.1		-100	%
Impairment of intangible assets		0.0			(19.8	)		19.8		-100	%

	$	(225.4	)	$	(247.4	)	$	22.0		-9	%

Fuel Specialties

Net sales:

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

Nine Months Ended September 30, 2021

Change (%)

Americas

EMEA

ASPAC

AvGas

Total

Volume

+25

-40

Price and product mix

-3

+48

Exchange rates

+22

+16

+13

+17

Volumes in all our regions have increased year over year, as the global demand for refined fuel products has returned to near the

pre-pandemic

levels. Price and product mix was adverse in the Americas due to decreased sales of higher margin products. Price and product mix was favorable in EMEA and ASPAC due to increased sales of higher margin products. AvGas volumes were lower than the prior year due to variations in the demand from customers, being offset by a favorable price and product mix with a higher proportion of sales to higher margin customers. EMEA and ASPAC benefitted from favorable exchange rate movements year over year, due to a strengthening of the British pound sterling and the European Union euro against the U.S. dollar.

Gross margin

: the year over year increase of 1.6 percentage points was driven by a favorable sales mix in comparison to the prior year which was adversely impacted by the pandemic.

Operating expenses:

the year over year increase of $7.3 million was due to higher selling expenses to support the increased sales, together with higher research and development costs and higher personnel-related expenses including higher share-based compensation accruals and higher performance related remuneration accruals.

Performance Chemicals

Net sales:

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

Nine Months Ended September 30, 2021

Change (%)

Americas

EMEA

ASPAC

Total

Volume

+35

-8

+12

Price and product mix

Exchange rates

+44

+17

+24

Higher volumes for the Americas were driven by increased demand for our Personal Care products. Volumes in EMEA were favorable including the continued recovery of demand across several markets which have been adversely impacted by the pandemic. Lower volumes in ASPAC were primarily driven by a reduction in demand for our Personal Care products. All our regions benefitted from a favorable price and product mix due to increased sales of higher priced products. EMEA and ASPAC benefitted from favorable exchange rate movements year over year, due to a strengthening of the British pound sterling and the European Union euro against the U.S. dollar.

Gross margin:

the year over year increase of 0.1 percentage points was primarily due to sales mix.

~~In March 2021 it~~

Operating expenses:

the year over year increase of $5.3 million was ~~announced~~due to increased spending on research and development, an increase in the allowance for doubtful debts and higher personnel-related expenses including higher share-based compensation accruals and higher performance related remuneration accruals.

Oilfield Services

Net sales:

have increased year over year by $47.4 million, or 24 percent, with the majority of our customer activity continuing to be in the Americas region. Customer demand has continued to increase over several quarters as the pandemic recovery continued. We expect that the ~~UK rate~~growth in customer demand will continue into the fourth quarter and further ahead into 2022.

Gross margin:

the year over year increase of ~~corporation tax would increase from 19%~~3.0 percentage points was due to ~~25% from April 1, 2023. The legislation accompanying this announcement~~a favorable sales mix compared to a prior year comparative which was ~~enacted on June 10, 2021. As this legislation was enacted in~~adversely impacted by the ~~three months ended June 30, 2021, the effect of this change was recognized in our financial results for this period. This has resulted~~pandemic, while management have successfully maintained prices in a ~~charge~~competitive market.

Operating expenses:

the year over year increase of ~~$7.4~~$6.0 million was driven by our continuing customer service flexibility which allows us to support the increase in demand as the ~~three~~pandemic impact lessened, together with higher personnel-related expenses including higher share-based compensation accruals and higher performance related remuneration accruals.

Octane Additives

The Octane Additives business ceased trading and is no longer a reporting segment from July 1, 2020 as the production and sales of TEL for use in motor gasoline has ended. Legacy costs related to these operations have now been recorded as operating expenses within corporate costs. In the first six months ~~ended June 30, 2021, reflecting~~ of 2020, there was a gross loss of $2.2 million, together with operating expenses of $0.6 million.

Other Income Statement Captions

Corporate costs:

the year over year increase of $0.9 million was driven by higher personnel-related expenses including higher share-based compensation accruals and higher performance related remuneration accruals, together with the adverse impact of the ~~increase~~foreign currency translation of our costs at Ellesmere Port in the ~~UK corporation tax rate on our UK deferred tax balances.~~United Kingdom due to a strengthening of the British pound sterling against the U.S. dollar.

Other net income:

for the first nine months of 2021 and 2020, included the following:


(in millions)	2021		2020		Change
Net pension credit	$	3.9	$	4.2		(0.3	)
Profit on disposal of assets		0.2		0.0		0.2
Foreign exchange gains on translation		1.2		2.9		(1.7	)
Foreign currency forward contracts gains		0.9		0.7		0.2

	$	6.2	$	7.8	$	(1.6	)

Interest expense, net:

was $1.1 million for the first nine months of 2021 compared to $1.5 million in the first nine months of 2020, driven by the repayment in full of our revolving credit facility in the second half of 2020. Interest expense includes a commitment fee to retain the Company’s revolving credit facility for the term of the agreement.

Income taxes:

the effective tax rate was 32.0% and 42.5% in the first nine months of 2021 and 2020, respectively. The adjusted effective tax rate, once adjusted for the items set out in the following table, was 23.3% in the first nine months of 2021 compared with 24.7% in the first nine months of 2020. The 1.4% percentage point decrease in the adjusted effective rate was primarily due to the fact that a lower proportion of the Company’s profits are being generated in higher tax jurisdictions. The Company believes that this adjusted effective tax rate, a

non-GAAP

financial measure internally to evaluate the performance of the Company’s operations and for planning and forecasting in subsequent periods.

The following table shows a reconciliation of the GAAP effective tax charge to the adjusted effective tax charge:


	Nine Months Ended September 30
(in millions)	2021			2020
Income before income taxes	$	101.7		$	10.6
Indemnification asset regarding tax audit		0.1			0.1
Adjustment for stock compensation		4.2			0.0
Acquisition costs		0.8			0.0
Legacy cost of closed operations		2.9			1.1
Restructuring charge		0.0			21.1
Impairment of acquired intangible assets		0.0			19.8

	$	109.7		$	52.7

Income taxes	$	32.5		$	4.5
Tax on stock compensation		0.3			0.5
Adjustment of income tax provision		(0.4	)		1.0
Tax on acquisition costs		0.2			0.0
Tax on legacy cost of closed operations		0.6			0.2
Tax on restructuring charge		0.0			4.3
Tax on impairment of acquired intangible assets		0.0			4.6
Tax on foreign exchange on distribution		(0.2	)		0.5
Change in UK statutory tax rate		(7.4	)		(2.6	)

Adjusted income taxes	$	25.6		$	13.0

GAAP effective tax rate		32.0	%		42.5	%
Adjusted effective tax rate		23.3	%		24.7	%

LIQUIDITY AND FINANCIAL CONDITION

Working Capital

In the first ~~six~~nine months of 2021 our working capital increased by ~~$38.3~~$60.9 million, while our adjusted working capital increased by ~~$50.1~~$76.7 million. The difference is primarily due to the exclusion of the increase in our cash and cash equivalents.

The Company believes that adjusted working capital, a

non-GAAP

financial measure, (defined by the Company as trade and other accounts receivable, inventories, prepaid expenses, accounts payable and accrued liabilities rather than total current assets less total current liabilities) provides useful information to investors in evaluating the Company’s underlying performance and identifying operating trends. Management uses this

non-GAAP

financial measure internally to allocate resources and evaluate the performance of the Company’s operations. Items excluded from working capital in the adjusted working capital calculation are listed in the table below and represent factors which do not fluctuate in line with the day to day working capital needs of the business.


(in millions)	June 30, 2021			December 31, 2020			September 30, 2021			December 31, 2020
Total current assets	$	643.1		$	566.2		$	683.0		$	566.2
Total current liabilities		(291.0	)		(252.4	)		(308.3	)		(252.4	)

Working capital		352.1			313.8			374.7			313.8
Less cash and cash equivalents		(94.4	)		(105.3	)		(89.2	)		(105.3	)
Less prepaid income taxes		(3.5	)		(4.2	)		(3.8	)		(4.2	)
Less other current assets		(1.5	)		(0.4	)		(0.8	)		(0.4	)
Add back current portion of accrued income taxes		6.3			5.5			4.6			5.5
Add back current portion of finance leases		0.2			0.5			0.0			0.5
Add back current portion of plant closure provisions		6.6			6.6			5.7			6.6
Add back current portion of operating lease liabilities		12.1			11.3			13.3			11.3

Adjusted working capital	$	277.9		$	227.8		$	304.5		$	227.8

We had a ~~$60.2~~$81.4 million increase in trade and other accounts receivable, driven by the recovery of sales in all our segments due to the easing of the pandemic restrictions. Days’ sales outstanding in our Fuel Specialties segment has increased from 52 days to 5562 days; increased in our Performance Chemicals segment from 60 days to 64 days; and increased from 64 days to 7877 days in our Oilfield Services segment.

We had a ~~$30.5~~$54.1 million increase in inventories as we manage inventory levels ~~in anticipation of~~to meet the continued recovery in ~~demand.~~demand and to manage the risk of supply-chain disruption. Days’ sales in inventory in our Fuel Specialties segment increased from 116 days to ~~131~~126 days; increased in our Performance Chemicals segment from 58 days to 6263 days; and decreased from 95 days to 7685 days in our Oilfield Services segment.

Prepaid expenses decreased ~~$3.3~~$2.6 million, from $14.9 million to ~~$11.6~~$12.3 million due to the normal expensing of prepaid ~~costs.~~costs, together with the prepayment of some

mid-year

invoicing.

We had a ~~$37.3~~$56.2 million increase in accounts payable and accrued liabilities ~~primarily~~ due to higher production activity resulting from increased customer demand, together with higher inventory levels to manage the ~~recovery~~risk of ~~customer demand.~~supply-chain disruption. Creditor days (including goods received not invoiced) in our Fuel Specialties segment increased from 34 days to 48 days; ~~increased~~remained unchanged in our Performance Chemicals segment ~~from~~at 48 ~~days to 49~~ days; and ~~decreased~~increased from 53 days to 5256 days in our Oilfield Services segment.

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Table of Contents

Operating Cash Flows

We generated cash from operating activities of ~~$21.6~~$24.4 million in the first ~~six~~nine months of 2021 compared to cash inflows of ~~$32.2~~$87.7 million in the first ~~six~~nine months of 2020. The year over year decrease in the cash generated from our operating activities was primarily related to increases in our working capital. ~~As the pandemic recovery~~Increased demand has ~~accelerated during the second quarter, the increased demand~~ led to higher accounts receivable, together with higher inventory levels ~~in anticipation of what we~~and accounts payable. We believe ~~will be strong~~the higher inventory levels are necessary to support customer demand in the ~~third quarter.~~fourth quarter and going into 2022, as well as to manage the risk of supply-chain disruption.

Cash

At ~~June~~September 30, 2021 and December 31, 2020, we had cash and cash equivalents of ~~$94.4~~$89.2 million and $105.3 million, respectively, of which ~~$32.0~~$29.1 million and $52.5 million, respectively, were held by

non-U.S.

subsidiaries principally in the United Kingdom.

The ~~$10.9~~$16.1 million decrease in cash and cash equivalents for the first ~~six~~nine months of 2021 ~~is primarily~~has been due to the increases in our working capital, ~~as customer demand has been recovering from the pandemic decline,~~ our continued investment in capital projects and the payment of our semi-annual dividend of $14.0 million.

Debt

At ~~June~~September 30, 2021, we had no debt outstanding under the revolving credit facility and ~~$0.2~~$0.0 million of obligations under finance leases relating to certain fixed assets within our Fuel Specialties and Oilfield Services segments.

At December 31, 2020, we had no debt outstanding under the revolving credit facility and $0.6 million of obligations under finance leases relating to certain fixed assets within our Fuel Specialties and Oilfield Services segments.

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Table of Contents

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 2020 Annual Report on Form

10-K

and there have been no significant changes since that time.

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Table of Contents

Item 4 Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on an evaluation carried out as of the end of the period covered by this report, under the supervision and with the participation of our management, our Chief Executive Officer and our Chief Financial Officer concluded that the Company’s “disclosure controls and procedures” (as defined in Rules

13a-15(e)

and

15d-15(e)

of the Securities Exchange Act of 1934) were effective as of ~~June~~September 30, ~~2021.~~2021, to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

The Company is continuously seeking to improve the efficiency and effectiveness of its operations and of its internal control over financial reporting. This is intended to result in refinements to processes throughout the Company.

There were no changes to our internal control over financial reporting which were identified in connection with the evaluation required by paragraph (d) of Rules

13a-15

and

15d-15

under the Securities Exchange Act of 1934, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II OTHER INFORMATION

Item 1 Legal Proceedings

Legal matters

While we are involved from time to time in claims and legal proceedings that result from, and are incidental to, the conduct of our business including business and commercial litigation, employee and product liability claims, there are no material pending legal proceedings to which the Company or any of its subsidiaries is a party, or of which any of their property is subject. It is possible, however, that an adverse resolution of an unexpectedly large number of such individual claims or proceedings could, in the aggregate, have a material adverse effect on results of operations for a particular year or quarter.

Item 1A Risk Factors

Information regarding risk factors that could have a material impact on our results of operations or financial condition are described under “Risk Factors” in Item 1A of Part I of our 2020 Form

10-K.

In management’s view, there have been no material changes in the risk factors facing the Company since that time.

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

There have been no unregistered sales of equity securities.

During the quarter ended ~~June~~September 30, 2021 the Company made no open market repurchases of its common stock.

During the quarter ended ~~June~~September 30, 2021, the Company ~~purchased~~did not purchase any of its common stock in connection with the exercising of stock options by employees. ~~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

May 1, 2021 through May 31, 2021
   1,247    $ 101.3




Total
   1,247    $ 101.3

Item 3 Defaults Upon Senior Securities

None.

Item 4 Mine Safety Disclosures

Not applicable.

~~Item 5 Other~~

Item 5 Other Information

None.

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Item 6 Exhibits


31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		XBRL Instance Document and Related Item - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

104		Cover Page Interactive Data File – The cover page XBRL tags are embedded within the inline XBRL document.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		INNOSPEC INC.
		Registrant

Date: ~~August 4,~~November 3, 2021	By	/s/ PATRICK S. WILLIAMS
		Patrick S. Williams
		President and Chief Executive Officer

Date: ~~August 4,~~November 3, 2021	By	/s/ IAN P. CLEMINSON
		Ian P. Cleminson
		Executive Vice President and Chief Financial Officer


(in millions, except share and per share data)	June 30, 2021			December 31, 2020
	(Unaudited)
Liabilities and Equity
Current liabilities:
Accounts payable	$	123.5		$	98.7
Accrued liabilities		142.3			129.8
Current portion of finance leases		0.2			0.5
Current portion of plant closure provisions		6.6			6.6
Current portion of accrued income taxes		6.3			5.5
Current portion of operating lease liabilities		12.1			11.3

Total current liabilities	��	291.0			252.4
Finance leases, net of current portion		0.0			0.1
Operating lease liabilities, net of current portion		24.4			28.9
Plant closure provisions, net of current portion		51.0			51.9
Accrued income taxes, net of current portion		28.6			32.4
Unrecognized tax benefits		16.3			16.0
Deferred tax liabilities		54.4			46.9
Pension liabilities and post-employment benefits		19.5			20.5
Other non-current liabilities		2.4			3.4

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		339.5			336.1
Treasury stock (4,912,939 and 4,958,599 shares at cost, respectively)		(93.1	)		(93.3	)
Retained earnings		790.4			758.6
Accumulated other comprehensive loss		(63.5	)		(57.3	)

Total Innospec stockholders’ equity		973.6			944.4
Non-controlling interest		0.6			0.5

Total equity		974.2			944.9

Total liabilities and equity	$	1,461.8		$	1,397.4


(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		1.3		See (1) below

		1.4		Total before tax
		(0.1	)	Income tax expense

Total reclassifications	$	1.3		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.


(in millions)	Defined Benefit Pension Plan Items			Cumulative Translation Adjustments			Total
Balance at December 31, 2020	$	(15.9	)	$	(41.4	)	$	(57.3	)

Other comprehensive income before reclassifications		0.0			(7.5	)		(7.5	)
Amounts reclassified from AOCL		1.3			0.0			1.3

Total other comprehensive income		1.3			(7.5	)		(6.2	)

Balance at June 30, 2021	$	(14.6	)	$	(48.9	)	$	(63.5	)


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

		0.4		Total before tax
		0.0		Income tax expense

Total reclassifications	$	0.4		Net of tax


Period	Total number of shares purchased		Average price paid per share
May 1, 2021 through May 31, 2021		1,247	$	101.3

Total		1,247	$	101.3

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company