☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common stock, par value $0.01 per share | IOSP | NASDAQ |
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
Class | Outstanding as of | |
Common Stock, par value $0.01 |
24,764,872 |
TABLE OF CONTENTS
PART I | 2 | |||||
Item 1 | 2 | |||||
2 | ||||||
3 | ||||||
4 | ||||||
5 | ||||||
6 | ||||||
7 | ||||||
9 | ||||||
Item 2 | 21 | |||||
21 | ||||||
21 | ||||||
30 | ||||||
Item 3 | 32 | |||||
Item 4 | 33 | |||||
PART II | 34 | |||||
Item 1 | 34 | |||||
Item 1A | 34 | |||||
Item 2 | 34 | |||||
Item 3 | 35 | |||||
Item 4 | 35 | |||||
Item 5 | 35 | |||||
Item 6 | 35 | |||||
36 |
CAUTIONARY STATEMENT RELATIVE TO FORWARD-LOOKING STATEMENTS
This Form
1
Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
(in millions, except share and per share data) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Net sales | $ | 513.0 | $ | 376.1 | $ | 1,453.0 | $ | 1,070.2 | ||||||||
Cost of goods sold | (357.0 | ) | (263.2 | ) | (1,017.9 | ) | (748.2 | ) | ||||||||
Gross profit | 156.0 | 112.9 | 435.1 | 322.0 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | (95.8 | ) | (71.2 | ) | (264.1 | ) | (197.5 | ) | ||||||||
Research and development | (10.1 | ) | (10.3 | ) | (30.3 | ) | (27.9 | ) | ||||||||
Total operating expenses | (105.9 | ) | (81.5 | ) | (294.4 | ) | (225.4 | ) | ||||||||
Operating income | 50.1 | 31.4 | 140.7 | 96.6 | ||||||||||||
Other (expense)/income, net | (0.9 | ) | (0.2 | ) | (0.2 | ) | 6.2 | |||||||||
Interest expense, net | (0.3 | ) | (0.4 | ) | (1.1 | ) | (1.1 | ) | ||||||||
Income before income tax expense | 48.9 | 30.8 | 139.4 | 101.7 | ||||||||||||
Income tax expense | (10.2 | ) | (7.4 | ) | (31.9 | ) | (32.5 | ) | ||||||||
Net income | $ | 38.7 | $ | 23.4 | $ | 107.5 | $ | 69.2 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 1.56 | $ | 0.95 | $ | 4.34 | $ | 2.81 | ||||||||
Diluted | $ | 1.55 | $ | 0.94 | $ | 4.30 | $ | 2.78 | ||||||||
Weighted average shares outstanding (in thousands): | ||||||||||||||||
Basic | 24,786 | 24,643 | 24,794 | 24,624 | ||||||||||||
Diluted | 24,965 | 24,864 | 24,976 | 24,872 | ||||||||||||
Three months Ended June 30 | Six Months Ended June 30 | |||||||||||||||||||
(in millions, except share and per share data) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||
Net sales | $ | 467.6 | $ | 354.5 | $ | 940.0 | $ | 694.1 | ||||||||||||
Cost of goods sold | (327.8 | ) | (246.2 | ) | (660.9 | ) | (485.0 | ) | ||||||||||||
Gross profit | 139.8 | 108.3 | 279.1 | 209.1 | ||||||||||||||||
Operating expenses: | ||||||||||||||||||||
Selling, general and administrative | (83.4 | ) | (62.7 | ) | (168.3 | ) | (126.3 | ) | ||||||||||||
Research and development | (10.1 | ) | (8.6 | ) | (20.2 | ) | (17.6 | ) | ||||||||||||
Total operating expenses | (93.5 | ) | (71.3 | ) | (188.5 | ) | (143.9 | ) | ||||||||||||
Operating income | 46.3 | 37.0 | 90.6 | 65.2 | ||||||||||||||||
Other (expense)/income, net | (3.6 | ) | 3.4 | 0.7 | 6.4 | |||||||||||||||
Interest expense, net | (0.4 | ) | (0.3 | ) | (0.8 | ) | (0.7 | ) | ||||||||||||
Income before income tax expense | 42.3 | 40.1 | 90.5 | 70.9 | ||||||||||||||||
Income tax expense | (10.0 | ) | (17.7 | ) | (21.7 | ) | (25.1 | ) | ||||||||||||
Net income | $ | 32.3 | $ | 22.4 | $ | 68.8 | $ | 45.8 | ||||||||||||
Earnings per share: | ||||||||||||||||||||
Basic | $ | 1.30 | $ | 0.91 | $ | 2.77 | $ | 1.86 | ||||||||||||
Diluted | $ | 1.29 | $ | 0.90 | $ | 2.76 | $ | 1.84 | ||||||||||||
Weighted average shares outstanding (in thousands): | ||||||||||||||||||||
Basic | 24,805 | 24,628 | 24,798 | 24,615 | ||||||||||||||||
Diluted | 24,971 | 24,869 | 24,967 | 24,856 | ||||||||||||||||
Three months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Net income | $ | 32.3 | $ | 22.4 | 68.8 | 45.8 | ||||||||||
Other comprehensive (loss)/income: | ||||||||||||||||
Changes in cumulative translation adjustment, net of tax of $1.4 million, $(0.5) million, $1.2 million and $0.5 million, respectively | (16.9 | ) | 3.8 | (20.7 | ) | (7.5 | ) | |||||||||
Amortization of prior service cost, net of tax of $(0.1) million, $0.0 million, $(0.1) million and $0.0 million, respectively | 0.1 | — | 0.2 | 0.1 | ||||||||||||
Amortization of actuarial net losses, net of tax of $0.0 million, $0.0 million, $0.0 million and $(0.1) million, respectively | 0.2 | 0.6 | 0.3 | 1.2 | ||||||||||||
Total other comprehensive (loss)/income | (16.6 | ) | 4.4 | (20.2 | ) | (6.2 | ) | |||||||||
Total comprehensive income | $ | 15.7 | $ | 26.8 | 48.6 | 39.6 | ||||||||||
Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Net income | $ | 38.7 | $ | 23.4 | 107.5 | 69.2 | ||||||||||
Other comprehensive income/(loss): | ||||||||||||||||
Changes in cumulative translation adjustment, net of tax of $1.0 million, $(0.5) million, $2.2 million and $0.5 million, respectively | (16.4 | ) | (7.0 | ) | (37.1 | ) | (14.5 | ) | ||||||||
Amortization of prior service cost, net of tax of $0.0 million, $0.0 million, $(0.1) million and $0.0 million, respectively | 0.1 | 0.1 | 0.3 | 0.2 | ||||||||||||
Amortization of actuarial net losses, net of tax of $0.0 million, $0.0 million, $0.0 million and $(0.1) million, respectively | 0.1 | 0.5 | 0.4 | 1.7 | ||||||||||||
Total other comprehensive loss | (16.2 | ) | (6.4 | ) | (36.4 | ) | (12.6 | ) | ||||||||
Total comprehensive income | $ | 22.5 | $ | 17.0 | 71.1 | 56.6 | ||||||||||
(in millions, except share and per share data) | June 30, 2022 | December 31, 2021 | ||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 71.4 | $ | 141.8 | ||||
Trade and other accounts receivable (less allowances of $5.8 million and $5.1 million respectively) | 339.9 | 284.5 | ||||||
Inventories (less allowances of $25.8 million and $25.4 million respectively): | ||||||||
Finished goods | 250.6 | 188.3 | ||||||
Raw materials | 111.6 | 89.3 | ||||||
Total inventories | 362.2 | 277.6 | ||||||
Prepaid expenses | 12.2 | 18.0 | ||||||
Prepaid income taxes | 13.2 | 5.8 | ||||||
Other current assets | 0.4 | 0.4 | ||||||
Total current assets | 799.3 | 728.1 | ||||||
Net property, plant and equipment | 209.7 | 214.4 | ||||||
Operating lease right-of-use | 49.3 | 35.4 | ||||||
Goodwill | 357.0 | 364.3 | ||||||
Other intangible assets | 48.1 | 57.5 | ||||||
Deferred tax assets | 6.0 | 6.4 | ||||||
Pension asset | 161.8 | 159.8 | ||||||
Other non-current assets | 6.7 | 5.0 | ||||||
Total assets | $ | 1,637.9 | $ | 1,570.9 | ||||
(in millions, except share and per share data) | September 30, 2022 | December 31, 2021 | ||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 100.5 | $ | 141.8 | ||||
Trade and other accounts receivable (less allowances of $8.9 million and $5.1 million respectively) | 342.5 | 284.5 | ||||||
Inventories (less allowances of $26.3 million and $25.4 million respectively): | ||||||||
Finished goods | 266.9 | 188.3 | ||||||
Raw materials | 114.9 | 89.3 | ||||||
Total inventories | 381.8 | 277.6 | ||||||
Prepaid expenses | 7.4 | 18.0 | ||||||
Prepaid income taxes | 13.8 | 5.8 | ||||||
Other current assets | 0.4 | 0.4 | ||||||
Total current assets | 846.4 | 728.1 | ||||||
Net property, plant and equipment | 206.6 | 214.4 | ||||||
Operating lease right-of-use | 45.9 | 35.4 | ||||||
Goodwill | 351.7 | 364.3 | ||||||
Other intangible assets | 43.6 | 57.5 | ||||||
Deferred tax assets | 5.7 | 6.4 | ||||||
Pension asset | 162.7 | 159.8 | ||||||
Other non-current assets | 6.6 | 5.0 | ||||||
Total assets | $ | 1,669.2 | $ | 1,570.9 | ||||
(in millions, except share and per share data) | June 30, 2022 | December 31, 2021 | September 30, 2022 | December 31, 2021 | ||||||||||||
Liabilities and Equity | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 180.9 | $ | 148.7 | $ | 173.6 | $ | 148.7 | ||||||||
Accrued liabilities | 152.5 | 166.5 | 173.9 | 166.5 | ||||||||||||
Finance leases | — | 0.1 | — | 0.1 | ||||||||||||
Current portion of operating lease liabilities | 14.1 | 12.4 | 13.6 | 12.4 | ||||||||||||
Current portion of plant closure provisions | 6.6 | 5.2 | 5.6 | 5.2 | ||||||||||||
Current portion of accrued income taxes | 15.1 | 3.7 | 14.7 | 3.7 | ||||||||||||
Total current liabilities | 369.2 | 336.6 | 381.4 | 336.6 | ||||||||||||
Operating lease liabilities, net of current portion | 35.2 | 23.1 | 32.1 | 23.1 | ||||||||||||
Plant closure provisions, net of current portion | 49.2 | 51.3 | 50.0 | 51.3 | ||||||||||||
Accrued income taxes, net of current portion | 20.8 | 30.6 | 20.8 | 30.6 | ||||||||||||
Unrecognized tax benefits | 16.3 | 16.3 | 16.3 | 16.3 | ||||||||||||
Deferred tax liabilities | 60.8 | 60.8 | 59.7 | 60.8 | ||||||||||||
Pension liabilities and post-employment benefits | 16.4 | 17.8 | 15.6 | 17.8 | ||||||||||||
Other non-current liabilities | 1.4 | 1.4 | 1.4 | 1.4 | ||||||||||||
Total liabilities | 569.3 | 537.9 | 577.3 | 537.9 | ||||||||||||
Equity: | ||||||||||||||||
Common stock, $0.01 par value, authorized 40,000,000 shares, issued 29,554,500 shares | 0.3 | 0.3 | 0.3 | 0.3 | ||||||||||||
Additional paid-in capital | 350.9 | 346.7 | 352.2 | 346.7 | ||||||||||||
Treasury stock (4,758,826 and 4,780,806 shares at cost, respectively) | (92.3 | ) | (90.6 | ) | ||||||||||||
Treasury stock (4,781,326 and 4,780,806 shares at cost, respectively) | (94.6 | ) | (90.6 | ) | ||||||||||||
Retained earnings | 876.1 | 822.9 | 914.8 | 822.9 | ||||||||||||
Accumulated other comprehensive loss | (67.1 | ) | (46.9 | ) | (83.3 | ) | (46.9 | ) | ||||||||
Total Innospec stockholders’ equity | 1,067.9 | 1,032.4 | 1,089.4 | 1,032.4 | ||||||||||||
Non-controlling interest | 0.7 | 0.6 | 2.5 | 0.6 | ||||||||||||
Total equity | 1,068.6 | 1,033.0 | 1,091.9 | 1,033.0 | ||||||||||||
Total liabilities and equity | $ | 1,637.9 | $ | 1,570.9 | $ | 1,669.2 | $ | 1,570.9 | ||||||||
Six Months Ended June 30 | Nine months ended September 30 | |||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Cash Flows from Operating Activities | ||||||||||||||||
Net income | $ | 68.8 | $ | 45.8 | $ | 107.5 | $ | 69.2 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 20.8 | 20.6 | 30.9 | 30.9 | ||||||||||||
Deferred taxes | 1.0 | 7.8 | 0.6 | 8.0 | ||||||||||||
Non-cash movements on defined benefit pension plans | (1.3 | ) | (1.6 | ) | (1.9 | ) | (2.4 | ) | ||||||||
Stock option compensation | 3.2 | 2.9 | 4.7 | 4.6 | ||||||||||||
Changes in assets and liabilities, net of effects of acquired and divested companies: | ||||||||||||||||
Trade and other accounts receivable | (62.1 | ) | (64.3 | ) | (70.1 | ) | (86.5 | ) | ||||||||
Inventories | (88.3 | ) | (31.3 | ) | (112.6 | ) | (57.1 | ) | ||||||||
Prepaid expenses | 6.5 | 3.5 | 11.2 | 2.4 | ||||||||||||
Accounts payable and accrued liabilities | 20.9 | 39.3 | 38.9 | 58.6 | ||||||||||||
Plant closure provisions | — | (1.7 | ) | 0.3 | (1.5 | ) | ||||||||||
Accrued income taxes | (4.2 | ) | (0.6 | ) | (4.0 | ) | (3.8 | ) | ||||||||
Unrecognized tax benefits | — | 0.3 | — | 0.4 | ||||||||||||
Other assets and liabilities | (1.8 | ) | 0.9 | (2.2 | ) | 1.6 | ||||||||||
Net cash (used in)/provided by operating activities | (36.5 | ) | 21.6 | |||||||||||||
Net cash provided by operating activities | 3.3 | 24.4 | ||||||||||||||
Cash Flows from Investing Activities | ||||||||||||||||
Capital expenditures | (17.4 | ) | (19.5 | ) | (27.1 | ) | (27.4 | ) | ||||||||
Proceeds on disposal of property, plant and equipment | — | 0.3 | 0.1 | 0.4 | ||||||||||||
Net cash used in investing activities | (17.4 | ) | (19.2 | ) | (27.0 | ) | (27.0 | ) | ||||||||
Cash Flows from Financing Activities | ||||||||||||||||
Non-controlling interest | — | 0.1 | 1.9 | 0.1 | ||||||||||||
Proceeds from revolving credit facility | — | — | — | — | ||||||||||||
Repayments of revolving credit facility | — | — | — | — | ||||||||||||
Repayments of finance leases | (0.1 | ) | (0.3 | ) | (0.1 | ) | (0.5 | ) | ||||||||
Dividend paid | (15.6 | ) | (14.0 | ) | (15.6 | ) | (14.0 | ) | ||||||||
Issue of treasury stock | 2.1 | 1.7 | 2.1 | 2.0 | ||||||||||||
Repurchase of common stock | (2.7 | ) | (0.8 | ) | (5.0 | ) | (0.8 | ) | ||||||||
Net cash used in financing activities | (16.3 | ) | (13.3 | ) | (16.7 | ) | (13.2 | ) | ||||||||
Effect of foreign currency exchange rate changes on cash | (0.2 | ) | — | (0.9 | ) | (0.3 | ) | |||||||||
Net change in cash and cash equivalents | (70.4 | ) | (10.9 | ) | (41.3 | ) | (16.1 | ) | ||||||||
Cash and cash equivalents at beginning of period | 141.8 | 105.3 | 141.8 | 105.3 | ||||||||||||
Cash and cash equivalents at end of period | $ | 71.4 | $ | 94.4 | $ | 100.5 | $ | 89.2 | ||||||||
(in millions) | Common Stock | Additional Paid-In Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Non- Controlling Interest | Total Equity | |||||||||||||||||||||
Balance at December 31, 2021 | $ | 0.3 | $ | 346.7 | $ | (90.6 | ) | $ | 822.9 | $ | (46.9 | ) | $ | 0.6 | $ | 1,033.0 | ||||||||||||
Net income | 68.8 | 68.8 | ||||||||||||||||||||||||||
Dividend paid ($0.63 per share) | (15.6 | ) | (15.6 | ) | ||||||||||||||||||||||||
Changes in cumulative translation adjustment, net of tax | (20.7 | ) | (20.7 | ) | ||||||||||||||||||||||||
Share of net income | 0.1 | 0.1 | ||||||||||||||||||||||||||
Treasury stock reissued | 1.0 | 1.0 | 2.0 | |||||||||||||||||||||||||
Treasury stock repurchased | (2.7 | ) | (2.7 | ) | ||||||||||||||||||||||||
Stock option compensation | 3.2 | 3.2 | ||||||||||||||||||||||||||
Amortization of prior service cost, net of tax | 0.2 | 0.2 | ||||||||||||||||||||||||||
Amortization of actuarial net losses, net of tax | 0.3 | 0.3 | ||||||||||||||||||||||||||
Balance at June 30, 2022 | $ | 0.3 | $ | 350.9 | $ | (92.3 | ) | $ | 876.1 | $ | (67.1 | ) | $ | 0.7 | $ | 1,068.6 | ||||||||||||
(in millions) | Common Stock | Additional Paid-In Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Non- Controlling Interest | Total Equity | |||||||||||||||||||||
Balance at December 31, 2021 | $ | 0.3 | $ | 346.7 | $ | (90.6 | ) | $ | 822.9 | $ | (46.9 | ) | $ | 0.6 | $ | 1,033.0 | ||||||||||||
Net income | 107.5 | 107.5 | ||||||||||||||||||||||||||
Dividend paid ($0.63 per share) | (15.6 | ) | (15.6 | ) | ||||||||||||||||||||||||
Changes in cumulative translation adjustment, net of tax | (37.1 | ) | (37.1 | ) | ||||||||||||||||||||||||
Non-controlling interest investment | 1.8 | 1.8 | ||||||||||||||||||||||||||
Share of net income | 0.1 | 0.1 | ||||||||||||||||||||||||||
Treasury stock reissued | 0.8 | 1.0 | 1.8 | |||||||||||||||||||||||||
Treasury stock repurchased | (5.0 | ) | (5.0 | ) | ||||||||||||||||||||||||
Stock option compensation | 4.7 | 4.7 | ||||||||||||||||||||||||||
Amortization of prior service cost, net of tax | 0.3 | 0.3 | ||||||||||||||||||||||||||
Amortization of actuarial net losses, net of tax | 0.4 | 0.4 | ||||||||||||||||||||||||||
Balance at September 30, 2022 | $ | 0.3 | $ | 352.2 | $ | (94.6 | ) | $ | 914.8 | $ | (83.3 | ) | $ | 2.5 | $ | 1,091.9 | ||||||||||||
(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 | |||||||||||||||||||||
Balance at March 31, 2022 | $ | 0.3 | $ | 349.6 | $ | (90.6 | ) | $ | 859.4 | $ | (50.5 | ) | $ | 0.7 | $ | 1,068.9 | ||||||||||||
Net income | 32.3 | 32.3 | ||||||||||||||||||||||||||
Dividend paid ($0.63 per share) | (15.6 | ) | (15.6 | ) | ||||||||||||||||||||||||
Changes in cumulative translation adjustment, net of tax | (16.9 | ) | (16.9 | ) | ||||||||||||||||||||||||
Treasury stock reissued | (0.2 | ) | 0.1 | (0.1 | ) | |||||||||||||||||||||||
Treasury stock repurchased | (1.8 | ) | (1.8 | ) | ||||||||||||||||||||||||
Stock option compensation | 1.5 | 1.5 | ||||||||||||||||||||||||||
Amortization of prior service cost, net of tax | 0.1 | 0.1 | ||||||||||||||||||||||||||
Amortization of actuarial net losses, net of tax | 0.2 | 0.2 | ||||||||||||||||||||||||||
Balance at June 30, 2022 | $ | 0.3 | $ | 350.9 | $ | (92.3 | ) | $ | 876.1 | $ | (67.1 | ) | $ | 0.7 | $ | 1,068.6 | ||||||||||||
(in millions) | Common Stock | Additional Paid-In Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Non- Controlling Interest | Total Equity | |||||||||||||||||||||
Balance at June 30, 2022 | $ | 0.3 | $ | 350.9 | $ | (92.3 | ) | $ | 876.1 | $ | (67.1 | ) | $ | 0.7 | $ | 1,068.6 | ||||||||||||
Net income | 38.7 | 38.7 | ||||||||||||||||||||||||||
Changes in cumulative translation adjustment, net of tax | (16.4 | ) | (16.4 | ) | ||||||||||||||||||||||||
Non-controlling interest investment | 1.8 | 1.8 | ||||||||||||||||||||||||||
Treasury stock reissued | (0.2 | ) | (0.2 | ) | ||||||||||||||||||||||||
Treasury stock repurchased | (2.3 | ) | (2.3 | ) | ||||||||||||||||||||||||
Stock option compensation | 1.5 | 1.5 | ||||||||||||||||||||||||||
Amortization of prior service cost, net of tax | 0.1 | 0.1 | ||||||||||||||||||||||||||
Amortization of actuarial net losses, net of tax | 0.1 | 0.1 | ||||||||||||||||||||||||||
Balance at September 30, 2022 | $ | 0.3 | $ | 352.2 | $ | (94.6 | ) | $ | 914.8 | $ | (83.3 | ) | $ | 2.5 | $ | 1,091.9 | ||||||||||||
(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 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 | ||||||||||||
Three months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Net Sales: | ||||||||||||||||
Personal Care | $ | 105.3 | $ | 73.8 | $ | 208.7 | $ | 142.0 | ||||||||
Home Care | 25.3 | 21.3 | 49.7 | 44.3 | ||||||||||||
Other | 38.4 | 33.1 | 77.7 | 67.8 | ||||||||||||
Performance Chemicals | 169.0 | 128.2 | 336.1 | 254.1 | ||||||||||||
Refinery and Performance | 123.9 | 94.8 | 272.3 | 194.1 | ||||||||||||
Other | 52.5 | 48.3 | 95.9 | 88.3 | ||||||||||||
Fuel Specialties | 176.4 | 143.1 | 368.2 | 282.4 | ||||||||||||
Oilfield Services | 122.2 | 83.2 | 235.7 | 157.6 | ||||||||||||
$ | $ | $940.0 | $694.1 | |||||||||||||
Gross profit/(loss): | ||||||||||||||||
Performance Chemicals | $ | 43.6 | $ | 31.6 | $ | 84.4 | $ | 63.0 | ||||||||
Fuel Specialties | 56.9 | 50.1 | 117.6 | 95.0 | ||||||||||||
Oilfield Services | 39.3 | 26.6 | 77.1 | 51.1 | ||||||||||||
$ | $ | $279.1 | $209.1 | |||||||||||||
Operating income/(loss): | ||||||||||||||||
Performance Chemicals | $ | 28.8 | $ | 17.9 | $ | 54.1 | $ | 36.2 | ||||||||
Fuel Specialties | 31.5 | 28.5 | 67.0 | 52.3 | ||||||||||||
Oilfield Services | 4.5 | 2.2 | 7.0 | 3.4 | ||||||||||||
Corporate costs | (18.5 | ) | (11.6 | ) | (37.5 | ) | (26.7 | ) | ||||||||
Total operating income | $ | 46.3 | $ | 37.0 | $ | 90.6 | $ | 65.2 | ||||||||
Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Net sales : | ||||||||||||||||
Personal Care | $ | 102.4 | $ | 75.8 | $ | 311.1 | $ | 217.8 | ||||||||
Home Care | 22.6 | 24.4 | 72.3 | 68.7 | ||||||||||||
Other | 34.7 | 32.6 | 112.4 | 100.4 | ||||||||||||
Performance Chemicals | 159.7 | 132.8 | 495.8 | 386.9 | ||||||||||||
Refinery and Performance | 133.2 | 113.8 | 405.5 | 307.9 | ||||||||||||
Other | 45.5 | 42.6 | 141.4 | 130.9 | ||||||||||||
Fuel Specialties | 178.7 | 156.4 | 546.9 | 438.8 | ||||||||||||
Oilfield Services | 174.6 | 86.9 | 410.3 | 244.5 | ||||||||||||
$ | 513.0 | $ | 376.1 | $ | 1,453.0 | $ | 1,070.2 | |||||||||
Gross profit: | ||||||||||||||||
Performance Chemicals | $ | 39.1 | $ | 32.6 | $ | 123.5 | $ | 95.6 | ||||||||
Fuel Specialties | 53.4 | 49.1 | 171.0 | 144.1 | ||||||||||||
Oilfield Services | 63.5 | 31.2 | 140.6 | 82.3 | ||||||||||||
$ | 156.0 | $ | 112.9 | $ | 435.1 | $ | 322.0 | |||||||||
Operating income/(loss): | ||||||||||||||||
Performance Chemicals | $ | 25.4 | $ | 17.8 | $ | 79.5 | $ | 54.0 | ||||||||
Fuel Specialties | 27.9 | 26.6 | 94.9 | 78.9 | ||||||||||||
Oilfield Services | 14.2 | 2.7 | 21.2 | 6.1 | ||||||||||||
Corporate costs | (17.4 | ) | (15.7 | ) | (54.9 | ) | (42.4 | ) | ||||||||
Total operating income | $ | 50.1 | $ | 31.4 | $ | 140.7 | $ | 96.6 | ||||||||
Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Numerator (in millions): | ||||||||||||||||
Net income available to common stockholders | $ | 38.7 | $ | 23.4 | $ | 107.5 | $ | 69.2 | ||||||||
Denominator (in thousands): | ||||||||||||||||
Weighted average common shares outstanding | 24,786 | 24,643 | 24,794 | 24,624 | ||||||||||||
Dilutive effect of stock options and awards | 179 | 221 | 182 | 248 | ||||||||||||
Denominator for diluted earnings per share | 24,965 | 24,864 | 24,976 | 24,872 | ||||||||||||
Net income per share, basic: | $ | 1.56 | $ | 0.95 | $ | 4.34 | $ | 2.81 | ||||||||
Net income per share, diluted: | $ | 1.55 | $ | 0.94 | $ | 4.30 | $ | 2.78 | ||||||||
Three months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Numerator (in millions): | ||||||||||||||||
Net income available to common stockholders | $ | 32.3 | $ | 22.4 | $ | 68.8 | $ | 45.8 | ||||||||
Denominator (in thousands): | ||||||||||||||||
Weighted average common shares outstanding | 24,805 | 24,628 | 24,798 | 24,615 | ||||||||||||
Dilutive effect of stock options and awards | 166 | 241 | 169 | 241 | ||||||||||||
Denominator for diluted earnings per share | 24,971 | 24,869 | 24,967 | 24,856 | ||||||||||||
Net income per share, basic: | $ | 1.30 | $ | 0.91 | $ | 2.77 | $ | 1.86 | ||||||||
Net income per share, diluted: | $ | 1.29 | $ | 0.90 | $ | 2.76 | $ | 1.84 | ||||||||
(in millions) | Gross Cost | |||
Opening balance at January 1, 2022 | $ | 364.3 | ||
Exchange effect | (7.3 | ) | ||
Closing balance at June 30, 2022 | $ | 357.0 | ||
(in millions) | Gross Cost | |||
Opening balance at January 1, 2022 | $ | 364.3 | ||
Exchange effect | (12.6 | ) | ||
Closing balance at September 30, 2022 | $ | 351.7 | ||
(in millions) | 2022 | |||
Gross cost at January 1 | $ | 295.2 | ||
Exchange effect | (3.6 | ) | ||
Gross cost at June 30 | 291.6 | |||
Accumulated amortization at January 1 | (237.7 | ) | ||
Amortization expense | (7.8 | ) | ||
Exchange effect | 2.0 | |||
Accumulated amortization at June 30 | (243.5 | ) | ||
Net book amount at June 30 | $ | 48.1 | ||
(in millions) | 2022 | |||
Gross cost at January 1 | $ | 295.2 | ||
Exchange effect | (6.3 | ) | ||
Gross cost at September 30 | 288.9 | |||
Accumulated amortization at January 1 | (237.7 | ) | ||
Amortization expense | (11.4 | ) | ||
Exchange effect | 3.8 | |||
Accumulated am o rtization at September 30 | (245.3 | ) | ||
Net book amount at September 30 | $ | 43.6 | ||
Three months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Service cost | $ | (0.6 | ) | $ | (0.5 | ) | $ | (1.2 | ) | $ | (0.9 | ) | ||||
Interest cost on projected benefit obligation | (2.6 | ) | (1.9 | ) | (5.4 | ) | (3.8 | ) | ||||||||
Expected return on plan assets | 4.2 | 3.9 | 8.5 | 7.8 | ||||||||||||
Amortization of prior service cost | (0.2 | ) | — | (0.3 | ) | (0.1 | ) | |||||||||
Amortization of actuarial net losses | (0.2 | ) | (0.6 | ) | (0.3 | ) | (1.3 | ) | ||||||||
Net periodic benefit | $ | 0.6 | $ | 0.9 | $ | 1.3 | $ | 1.7 | ||||||||
Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Service cost | $ | (0.6 | ) | $ | (0.5 | ) | $ | (1.8 | ) | $ | (1.4 | ) | ||||
Interest cost on projected benefit obligation | (2.4 | ) | (1.9 | ) | (7.8 | ) | (5.7 | ) | ||||||||
Expected return on plan assets | 3.8 | 3.9 | 12.3 | 11.7 | ||||||||||||
Amortization of prior service cost | (0.1 | ) | (0.1 | ) | (0.4 | ) | (0.2 | ) | ||||||||
Amortization of actuarial net losses | (0.1 | ) | (0.6 | ) | (0.4 | ) | (1.9 | ) | ||||||||
Net periodic benefit | $ | 0.6 | $ | 0.8 | $ | 1.9 | $ | 2.5 | ||||||||
(in millions) | Unrecognized Tax Benefits | Interest and Penalties | Total | |||||||||
Opening balance at January 1, 2022 | $ | 13.2 | $ | 3.1 | $ | 16.3 | ||||||
Net change for tax positions of prior periods | (0.3 | ) | 0.3 | — | ||||||||
Closing balance at June 30, 2022 | 12.9 | 3.4 | 16.3 | |||||||||
Current | — | — | — | |||||||||
Non-current | $ | 12.9 | $ | 3.4 | $ | 16.3 | ||||||
(in millions) | Unrecognized Tax Benefits | Interest and Penalties | Total | |||||||||
Opening balance at January 1, 2022 | $ | 13.2 | $ | 3.1 | $ | 16.3 | ||||||
Net change for tax positions of prior periods | (0.5 | ) | 0.5 | — | ||||||||
Closing balance at September 30, 2022 | 12.7 | 3.6 | 16.3 | |||||||||
Current | — | — | — | |||||||||
Non-current | $ | 12.7 | $ | 3.6 | $ | 16.3 | ||||||
(in millions) | 2022 | |||
Total at January 1 | $ | 56.5 | ||
Charge for the period | 1.9 | |||
Utilized in the period | (1.9 | ) | ||
Exchange effect | (0.7 | ) | ||
Total at June 30 | 55.8 | |||
Due within one year | (6.6 | ) | ||
Due after one year | $ | 49.2 | ||
(in millions) | 2022 | |||
Total at January 1 | $ | 56.5 | ||
Charge for the period | 2.7 | |||
Utilized in the period | (2.5 | ) | ||
Exchange effect | (1.1 | ) | ||
Total at September 30 | 55.6 | |||
Due within one year | (5.6 | ) | ||
Due after one year | $ | 50.0 | ||
June 30, 2022 | December 31, 2021 | |||||||||||||||
(in millions) | Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||
Assets | ||||||||||||||||
Non-derivatives: | ||||||||||||||||
Cash and cash equivalents | $ | 71.4 | $ | 71.4 | $ | 141.8 | $ | 141.8 | ||||||||
Derivatives (Level 1 measurement): | ||||||||||||||||
Other current and non-current assets: | ||||||||||||||||
Emissions Trading Scheme credits | 3.3 | 3.3 | 3.9 | 3.9 | ||||||||||||
Liabilities | ||||||||||||||||
Non-derivatives: | ||||||||||||||||
Finance leases (including current portion) | $ | — | $ | — | $ | 0.1 | $ | 0.1 | ||||||||
Derivatives (Level 1 measurement): | ||||||||||||||||
Other current and non-current liabilities: | ||||||||||||||||
Foreign currency forward exchange contracts | 1.6 | 1.6 | 1.2 | 1.2 | ||||||||||||
Non-financial liabilities (Level 3 measurement): | ||||||||||||||||
Other current and non-current liabilities: | ||||||||||||||||
Stock equivalent units | 24.4 | 24.4 | 17.3 | 17.3 |
September 30, 2022 | December 31, 2021 | |||||||||||||||
(in millions) | Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||
Assets | ||||||||||||||||
Non-derivatives: | ||||||||||||||||
Cash and cash equivalents | $ | 100.5 | $ | 100.5 | $ | 141.8 | $ | 141.8 | ||||||||
Derivatives (Level 1 measurement): | ||||||||||||||||
Other current and non-current assets: | ||||||||||||||||
Emissions Trading Scheme credits | 2.7 | 2.7 | 3.9 | 3.9 | ||||||||||||
Liabilities | ||||||||||||||||
Non-derivatives: | ||||||||||||||||
Finance leases (including current portion) | $ | — | $ | — | $ | 0.1 | $ | 0.1 | ||||||||
Derivatives (Level 1 measurement): | ||||||||||||||||
Other current and non-current liabilities: | ||||||||||||||||
Foreign currency forward exchange contracts | 0.8 | 0.8 | 1.2 | 1.2 | ||||||||||||
Non-financial liabilities (Level 3 measurement): | ||||||||||||||||
Other current and non-current liabilities: | ||||||||||||||||
Stock equivalent units | 24.1 | 24.1 | 17.3 | 17.3 |
Number of shares | Weighted Average Grant-Date Fair Value | |||||||
Nonvested at December 31, 2021 | 680,711 | $ | 74.6 | |||||
Granted | 169,181 | $ | 87.5 | |||||
Vested | (122,052 | ) | $ | 69.5 | ||||
Forfeited | (57,746 | ) | $ | 69.1 | ||||
Nonvested at June 30, 2022 | 670,094 | $ | 79.2 | |||||
Number of shares | Weighted Average Grant-Date Fair Value | |||||||
Nonvested at December 31, 2021 | 680,711 | $ | 74.6 | |||||
Granted | 332,009 | $ | 60.2 | |||||
Vested | (126,552 | ) | $ | 69.7 | ||||
Forfeited | (57,746 | ) | $ | 69.3 | ||||
Nonvested at September 30, 2022 | 828,422 | $ | 69.9 | |||||
(in millions) Details about AOCL Components | Amount Reclassified from AOCL | Affected Line Item in the Statement where Net Income is Presented | Amount Reclassified from AOCL | Affected Line Item in the Statement where Net Income is Presented | ||||||||
Defined benefit pension plan items: | ||||||||||||
Amortization of prior service cost | $ | 0.3 | See (1) | $ | 0.4 | See (1) below | ||||||
Amortization of actuarial net losses | 0.3 | See (1) | 0.4 | See (1) below | ||||||||
0.6 | Total before tax | 0.8 | Total before tax | |||||||||
(0.1 | ) | Income tax expense | (0.1 | ) | Income tax expense | |||||||
Total reclassifications | $ | 0.5 | Net of tax | $ | 0.7 | 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. | (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. | (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, 2021 | $ | 10.7 | $ | (57.6 | ) | $ | (46.9 | ) | ||||
Other comprehensive income before reclassifications | — | (20.7 | ) | (20.7 | ) | |||||||
Amounts reclassified from AOCL | 0.5 | — | 0.5 | |||||||||
Total other comprehensive income/(loss) | 0.5 | (20.7 | ) | (20.2 | ) | |||||||
Balance at June 30, 2022 | $ | 11.2 | $ | (78.3 | ) | $ | (67.1 | ) | ||||
(in millions) | Defined Benefit Pension Plan Items | Cumulative Translation Adjustments | Total | |||||||||
Balance at December 31, 2021 | $ | 10.7 | $ | (57.6 | ) | $ | (46.9 | ) | ||||
Other comprehensive income before reclassifications | — | (37.1 | ) | (37.1 | ) | |||||||
Amounts reclassified from AOCL | 0.7 | — | 0.7 | |||||||||
Total other comprehensive income/(loss) | 0.7 | (37.1 | ) | (36.4 | ) | |||||||
Balance at September 30, 2022 | $ | 11.4 | $ | (94.7 | ) | $ | (83.3 | ) | ||||
(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) | |||
Amortization of actuarial net losses | 1.3 | See (1) | ||||
1.4 | Total before tax | |||||
(0.1 | ) | Income tax expense | ||||
Total reclassifications | $ | 1.3 | 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) | These items are included in other o me 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 | $ | (19.9 | ) | $ | (37.4 | ) | $ | (57.3 | ) | |||
Other comprehensive income before reclassifications | — | (7.5 | ) | (7.5 | ) | |||||||
Amounts reclassified from AOCL | 1.3 | — | 1.3 | |||||||||
Total other comprehensive income/(loss) | 1.3 | (7.5 | ) | (6.2 | ) | |||||||
Balance at June 30, 2021 | $ | (18.6 | ) | $ | (44.9 | ) | $ | (63.5 | ) | |||
(in millions) | Defined Benefit Pension Plan Items | Cumulative Translation Adjustments | Total | |||||||||
Balance at December 31, 2020 | $ | (19.9 | ) | $ | (37.4 | ) | $ | (57.3 | ) | |||
Other comprehensive income before reclassifications | — | (14.5 | ) | (14.5 | ) | |||||||
Amounts reclassified from AOCL | 1.9 | — | 1.9 | |||||||||
Total other comprehensive income | 1.9 | (14.5 | ) | (12.6 | ) | |||||||
Balance at September 30, 2021 | $ | (18.0 | ) | $ | (51.9 | ) | $ | (69.9 | ) | |||
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Three and SixNine Months Ended JuneSeptember 30, 2022
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
RESULTS OF OPERATIONS
The Company reports its financial performance based on three reportable segments, which are Performance Chemicals, Fuel Specialties and Oilfield Services.
The following table provides sales, gross profit and operating income by reporting segment:
Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Net sales: | ||||||||||||||||
Performance Chemicals | $ | 159.7 | $ | 132.8 | $ | 495.8 | $ | 386.9 | ||||||||
Fuel Specialties | 178.7 | 156.4 | 546.9 | 438.8 | ||||||||||||
Oilfield Services | 174.6 | 86.9 | 410.3 | 244.5 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | 513.0 | $ | 376.1 | $ | 1,453.0 | $ | 1,070.2 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit: | ||||||||||||||||
Performance Chemicals | $ | 39.1 | $ | 32.6 | $ | 123.5 | $ | 95.6 | ||||||||
Fuel Specialties | 53.4 | 49.1 | 171.0 | 144.1 | ||||||||||||
Oilfield Services | 63.5 | 31.2 | 140.6 | 82.3 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | 156.0 | $ | 112.9 | $ | 435.1 | $ | 322.0 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Operating income/(loss): | ||||||||||||||||
Performance Chemicals | $ | 25.4 | $ | 17.8 | $ | 79.5 | $ | 54.0 | ||||||||
Fuel Specialties | 27.9 | 26.6 | 94.9 | 78.9 | ||||||||||||
Oilfield Services | 14.2 | 2.7 | 21.2 | 6.1 | ||||||||||||
Corporate costs | (17.4 | ) | (15.7 | ) | (54.9 | ) | (42.4 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total operating income | $ | 50.1 | $ | 31.4 | $ | 140.7 | $ | 96.6 | ||||||||
|
|
|
|
|
|
|
|
21
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Net sales: | ||||||||||||||||
Performance Chemicals | $ | 169.0 | $ | 128.2 | $ | 336.1 | $ | 254.1 | ||||||||
Fuel Specialties | 176.4 | 143.1 | 368.2 | 282.4 | ||||||||||||
Oilfield Services | 122.2 | 83.2 | 235.7 | 157.6 | ||||||||||||
$ | 467.6 | $ | 354.5 | $ | 940.0 | $ | 694.1 | |||||||||
Gross profit: | ||||||||||||||||
Performance Chemicals | $ | 43.6 | $ | 31.6 | $ | 84.4 | $ | 63.0 | ||||||||
Fuel Specialties | 56.9 | 50.1 | 117.6 | 95.0 | ||||||||||||
Oilfield Services | 39.3 | 26.6 | 77.1 | 51.1 | ||||||||||||
$ | 139.8 | $ | 108.3 | $ | 279.1 | $ | 209.1 | |||||||||
Operating income/(loss): | ||||||||||||||||
Performance Chemicals | $ | 28.8 | $ | 17.9 | $ | 54.1 | $ | 36.2 | ||||||||
Fuel Specialties | 31.5 | 28.5 | 67.0 | 52.3 | ||||||||||||
Oilfield Services | 4.5 | 2.2 | 7.0 | 3.4 | ||||||||||||
Corporate costs | (18.5 | ) | (11.6 | ) | (37.5 | ) | (26.7 | ) | ||||||||
Total operating income | $ | 46.3 | $ | 37.0 | $ | 90.6 | $ | 65.2 | ||||||||
Three monthsMonths Ended JuneSeptember 30, , 2022
The following table shows the changechanges in components ofsales, gross profit and operating incomeexpenses by reporting segment for the three months ended JuneSeptember 30, 2022 and the three months ended JuneSeptember 30, 2021:
Three months ended September 30 | ||||||||||||||||
(in millions, except ratios) | 2022 | 2021 | Change | |||||||||||||
Net sales: | ||||||||||||||||
Performance Chemicals | $ | 159.7 | $ | 132.8 | $ | 26.9 | +20 | % | ||||||||
Fuel Specialties | 178.7 | 156.4 | 22.3 | +14 | % | |||||||||||
Oilfield Services | 174.6 | 86.9 | 87.7 | +101 | % | |||||||||||
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$ | 513.0 | $ | 376.1 | $ | 136.9 | +36 | % | |||||||||
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Gross profit: | ||||||||||||||||
Performance Chemicals | $ | 39.1 | $ | 32.6 | $ | 6.5 | +20 | % | ||||||||
Fuel Specialties | 53.4 | 49.1 | 4.3 | +9 | % | |||||||||||
Oilfield Services | 63.5 | 31.2 | 32.3 | +104 | % | |||||||||||
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$ | 156.0 | $ | 112.9 | $ | 43.1 | +38 | % | |||||||||
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Gross margin (%): | ||||||||||||||||
Performance Chemicals | 24.5 | 24.5 | +0.0 | % | ||||||||||||
Fuel Specialties | 29.9 | 31.4 | -1.5 | % | ||||||||||||
Oilfield Services | 36.4 | 35.9 | +0.5 | % | ||||||||||||
Aggregate | 30.4 | 30.0 | +0.4 | % | ||||||||||||
Operating expenses: | ||||||||||||||||
Performance Chemicals | $ | (13.7 | ) | $ | (14.8 | ) | $ | 1.1 | -7 | % | ||||||
Fuel Specialties | (25.5 | ) | (22.5 | ) | (3.0 | ) | +13 | % | ||||||||
Oilfield Services | (49.3 | ) | (28.5 | ) | (20.8 | ) | +73 | % | ||||||||
Corporate costs | (17.4 | ) | (15.7 | ) | (1.7 | ) | +11 | % | ||||||||
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$ | (105.9 | ) | $ | (81.5 | ) | $ | (24.4 | ) | +30 | % | ||||||
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22
Three Months Ended June 30 | ||||||||||||||||
(in millions, except ratios) | 2022 | 2021 | Change | |||||||||||||
Net sales: | ||||||||||||||||
Performance Chemicals | $ | 169.0 | $ | 128.2 | $ | 40.8 | +32 | % | ||||||||
Fuel Specialties | 176.4 | 143.1 | 33.3 | +23 | % | |||||||||||
Oilfield Services | 122.2 | 83.2 | 39.0 | +47 | % | |||||||||||
$ | 467.6 | $ | 354.5 | $ | 113.1 | +32 | % | |||||||||
Gross profit: | ||||||||||||||||
Performance Chemicals | $ | 43.6 | $ | 31.6 | $ | 12.0 | +38 | % | ||||||||
Fuel Specialties | 56.9 | 50.1 | 6.8 | +14 | % | |||||||||||
Oilfield Services | 39.3 | 26.6 | 12.7 | +48 | % | |||||||||||
$ | 139.8 | $ | 108.3 | $ | 31.5 | +29 | % | |||||||||
Gross margin (%): | ||||||||||||||||
Performance Chemicals | 25.8 | 24.6 | +1.2 | |||||||||||||
Fuel Specialties | 32.3 | 35.0 | -2.7 | |||||||||||||
Oilfield Services | 32.2 | 32.0 | +0.2 | |||||||||||||
Aggregate | 29.9 | 30.6 | -0.7 | |||||||||||||
Operating expenses: | ||||||||||||||||
Performance Chemicals | $ | (14.8 | ) | $ | (13.7 | ) | $ | (1.1 | ) | +8 | % | |||||
Fuel Specialties | (25.4 | ) | (21.6 | ) | (3.8 | ) | +18 | % | ||||||||
Oilfield Services | (34.8 | ) | (24.4 | ) | (10.4 | ) | +43 | % | ||||||||
Corporate costs | (18.5 | ) | (11.6 | ) | (6.9 | ) | +59 | % | ||||||||
$ | (93.5 | ) | $ | (71.3 | ) | $ | (22.2 | ) | +31 | % | ||||||
Performance Chemicals
Net sales:
Three Months Ended June 30, 2022 | ||||||||||||||||
Change (%) | Americas | EMEA | ASPAC | Total | ||||||||||||
Volume | +32 | -7 | -19 | +6 | ||||||||||||
Price and product mix | +26 | +38 | +34 | +34 | ||||||||||||
Exchange rates | — | -13 | -7 | -8 | ||||||||||||
+58 | +18 | +8 | +32 | |||||||||||||
Three months ended September 30, 2022 | ||||||||||||||||
Change (%) | Americas | EMEA | ASPAC | Total | ||||||||||||
Volume | +22 | -13 | +55 | +4 | ||||||||||||
Price and product mix | +23 | +32 | -14 | +26 | ||||||||||||
Exchange rates | — | -16 | -10 | -10 | ||||||||||||
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+45 | +3 | +31 | +20 | |||||||||||||
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Higher sales volumes for the Americas and ASPAC were primarily driven by increased demand for our personal care products. Lower sales volumes for EMEA and ASPAC were due to reductions in demand for our Home Care products when compared to the strong sales volumes in the prior year. The Americas and EMEA benefitted from a favorable price and product mix due to increased sales of higher priced products together with the impact of increased raw materials pricing being passed on through higher selling prices. ASPAC was impacted by an adverse price and product mix due to increased sales of lower priced products. EMEA and ASPAC were adversely impacted by exchange rate movements year over year, due to a weakening of the British pound sterling and the European Union euro against the U.S. dollar.
Gross margin: was unchanged year over year, primarily due to a favorable sales mix from increased sales of higher margin products being offset by higher raw material costs.
Operating expenses: decreased $1.1 million year over year, primarily due to lower provisions for doubtful debts and lower acquired intangibles amortization, partly offset by higher performance-related remuneration accruals.
Fuel Specialties
Net sales: the table below details the components which comprise the year over year change in net sales spread across the markets in which we operate:
Three months ended September 30, 2022 | ||||||||||||||||||||
Change (%) | Americas | EMEA | ASPAC | AvGas | Total | |||||||||||||||
Volume | -11 | -13 | +16 | +32 | -6 | |||||||||||||||
Price and product mix | +33 | +34 | +32 | -16 | +30 | |||||||||||||||
Exchange rates | — | -21 | -6 | — | -10 | |||||||||||||||
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+22 | — | +42 | +16 | +14 | ||||||||||||||||
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Sales volumes in the Americas and EMEA have decreased year over year as the global demand for refined fuel products has stabilised following the post COVID-19 pandemic increases in the prior year. ASPAC sales volumes were higher year over year, primarily due to variations in the timing of demand. Price and product mix was favorable in all our regions due to increased sales of higher margin products and the impact of increased raw materials pricing being passed on through higher selling prices. AvGas volumes were higher than the prior year due to variations in the demand from customers, being partly offset by an adverse price and product mix with a higher proportion of sales to lower margin customers. EMEA and ASPAC were adversely impacted by exchange rate movements year over year, due to a weakening of the British pound sterling and the European Union euro against the U.S. dollar.
23
Gross margin: the year over year decrease of 1.5 percentage points was due to the impact of the time lag for passing higher raw material costs through to selling prices, together with higher manufacturing costs linked to increased energy prices.
Operating expenses: the year over year increase of $3.0 million was due to higher selling expenses to support the increased sales, including higher provisions for doubtful debts, together with higher performance-related remuneration accruals.
Oilfield Services
Net sales: have increased year over year by $87.7 million, or 101 percent, with the majority of our customer activity concentrated in the Americas region. Customer demand has increased in the third quarter of 2022 which we expect will continue to drive further sales growth into 2023.
Gross margin: the year over year increase of 0.5 percentage points was due to a favorable sales mix, while management continue to maintain prices in a competitive market.
Operating expenses: the year over year increase of $20.8 million was driven by higher customer service costs which are necessary to support the increase in demand, together with increased provisions for doubtful debts and higher performance-related remuneration accruals.
Other Income Statement Captions
Corporate costs: the year over year increase of $1.7 million was primarily due to higher performance-related remuneration accruals.
Other net income/(expense): for the third quarter of 2022 and 2021, included the following:
(in millions) | 2022 | 2021 | Change | |||||||||
Net pension credit | $ | 1.2 | $ | 1.3 | $ | (0.1 | ) | |||||
Foreign exchange gains/(losses) on translation | (6.2 | ) | (2.2 | ) | (4.0 | ) | ||||||
Foreign currency forward contracts gains/(losses) | 4.1 | 0.7 | 3.4 | |||||||||
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$ | (0.9 | ) | $ | (0.2 | ) | $ | (0.7 | ) | ||||
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Interest expense, net: was $0.3 million in the third quarter of 2022 compared to $0.4 million in the third quarter of 2021. Interest expense includes a commitment fee to retain the Company’s revolving credit facility for the term of the agreement.
24
Income taxes: the effective tax rate was 20.9% and 24.0% in the third quarter of 2022 and 2021, respectively. The adjusted effective tax rate, once adjusted for the items set out in the following table, was 20.1% in 2022 compared with 22.3% in 2021. The 2.2% 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:
Three months ended September 30 | ||||||||
(in millions) | 2022 | 2021 | ||||||
Income before income taxes | $ | 48.9 | $ | 30.8 | ||||
Indemnification asset regarding tax audit | 0.2 | 0.1 | ||||||
Adjustment for stock compensation | 1.5 | 1.6 | ||||||
Legacy costs of closed operations | 0.7 | 1.1 | ||||||
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$ | 51.3 | $ | 33.6 | |||||
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Income taxes | $ | 10.2 | $ | 7.4 | ||||
Adjustment of income tax provision | — | (0.1 | ) | |||||
Tax on legacy cost of closed operations | 0.1 | 0.2 | ||||||
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Adjusted income taxes | $ | 10.3 | $ | 7.5 | ||||
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GAAP effective tax rate | 20.9 | % | 24.0 | % | ||||
Adjusted effective tax rate | 20.1 | % | 22.3 | % |
25
Nine Months Ended September 30 , 2022
The following table shows the changes in sales, gross profit and operating expenses by reporting segment for the nine months ended September 30, 2022 and the nine months ended September 30, 2021:
Nine months ended September 30 | ||||||||||||||||
(in millions, except ratios) | 2022 | 2021 | Change | |||||||||||||
Net sales: | ||||||||||||||||
Performance Chemicals | $ | 495.8 | $ | 386.9 | $ | 108.9 | +28 | % | ||||||||
Fuel Specialties | 546.9 | 438.8 | 108.1 | +25 | % | |||||||||||
Oilfield Services | 410.3 | 244.5 | 165.8 | +68 | % | |||||||||||
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$ | 1,453.0 | $ | 1,070.2 | $ | 382.8 | +36 | % | |||||||||
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Gross profit: | ||||||||||||||||
Performance Chemicals | $ | 123.5 | $ | 95.6 | $ | 27.9 | +29 | % | ||||||||
Fuel Specialties | 171.0 | 144.1 | 26.9 | +19 | % | |||||||||||
Oilfield Services | 140.6 | 82.3 | 58.3 | +71 | % | |||||||||||
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$ | 435.1 | $ | 322.0 | $ | 113.1 | +35 | % | |||||||||
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Gross margin (%): | ||||||||||||||||
Performance Chemicals | 24.9 | 24.7 | +0.2 | % | ||||||||||||
Fuel Specialties | 31.3 | 32.8 | -1.5 | % | ||||||||||||
Oilfield Services | 34.3 | 33.7 | +0.6 | % | ||||||||||||
Aggregate | 29.9 | 30.1 | -0.2 | % | ||||||||||||
Operating expenses: | ||||||||||||||||
Performance Chemicals | $ | (44.0 | ) | $ | (41.6 | ) | $ | (2.4 | ) | +6 | % | |||||
Fuel Specialties | (76.1 | ) | (65.2 | ) | (10.9 | ) | +17 | % | ||||||||
Oilfield Services | (119.4 | ) | (76.2 | ) | (43.2 | ) | +57 | % | ||||||||
Corporate costs | (54.9 | ) | (42.4 | ) | (12.5 | ) | +29 | % | ||||||||
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$ | (294.4 | ) | $ | (225.4 | ) | $ | (69.0 | ) | +31 | % | ||||||
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26
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, 2022 | ||||||||||||||||
Change (%) | Americas | EMEA | ASPAC | Total | ||||||||||||
Volume | +29 | -10 | +4 | +5 | ||||||||||||
Price and product mix | +26 | +35 | +20 | +31 | ||||||||||||
Exchange rates | — | -13 | -7 | -8 | ||||||||||||
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+55 | +12 | +17 | +28 | |||||||||||||
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Higher sales volumes for the Americas and ASPAC were primarily driven by increased demand for our personal care products. Lower sales volumes for EMEA were due to reductions in demand for our Home Care products when compared to the strong sales volumes in the prior year. All our regions benefitted from a favorable price and product mix due to increased sales of higher priced products together with the impact of increased raw materials pricing being passed on through higher selling prices. EMEA and ASPAC were adversely impacted by exchange rate movements year over year, due to a weakening of the British pound sterling and the European Union euro against the U.S. dollar.
Gross margin:
Operating expenses:
Fuel Specialties
Net sales:
Three Months Ended June 30, 2022 | ||||||||||||||||||||
Change (%) | Americas | EMEA | ASPAC | AvGas | Total | |||||||||||||||
Volume | +22 | -12 | +35 | -32 | +3 | |||||||||||||||
Price and product mix | +38 | +32 | +7 | +2 | +27 | |||||||||||||||
Exchange rates | — | -15 | -3 | — | -7 | |||||||||||||||
+60 | +5 | +39 | -30 | +23 | ||||||||||||||||
Nine months ended September 30, 2022 | ||||||||||||||||||||
Change (%) | Americas | EMEA | ASPAC | AvGas | Total | |||||||||||||||
Volume | +16 | -5 | +16 | +16 | +7 | |||||||||||||||
Price and product mix | +32 | +32 | +16 | -19 | +26 | |||||||||||||||
Exchange rates | — | -17 | -4 | — | -8 | |||||||||||||||
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+48 | +10 | +28 | -3 | +25 | ||||||||||||||||
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The Americas and ASPAC sales volumes have increased year over year as the global demand for refined fuel products has increased. EMEA sales volumes were lower year over year primarily due to variations in the timing of demand. Price and product mix was favorable in all our regions due to increased sales of higher margin products and the impact of increased raw materials pricing being passed on through higher selling prices. AvGas volumes were lower than the prior year due to variations in the demand from customers, being partly offset by a favorable price and product mix with a higher proportion of sales to higher margin customers. EMEA and ASPAC were adversely impacted by exchange rate movements year over year, due to a weakening of the British pound sterling and the European Union euro against the U.S. dollar.
(in millions) | 2022 | 2021 | Change | |||||||||
Net pension credit | $ | 1.2 | $ | 1.4 | (0.2 | ) | ||||||
Profit on disposal of assets | — | 0.2 | (0.2 | ) | ||||||||
Foreign exchange (losses)/gains on translation | (6.4 | ) | 2.9 | (9.3 | ) | |||||||
Foreign currency forward contracts gains/(losses) | 1.6 | (1.1 | ) | 2.7 | ||||||||
$ | (3.6 | ) | $ | 3.4 | $ | (7.0 | ) | |||||
Three Months Ended June 30 | ||||||||
(in millions) | 2022 | 2021 | ||||||
Income before income taxes | $ | 42.3 | $ | 40.1 | ||||
Indemnification asset regarding tax audit | 0.2 | (0.1 | ) | |||||
Adjustment for stock compensation | 1.5 | 1.2 | ||||||
Legacy costs of closed operations | 0.8 | 0.9 | ||||||
Adjusted income before income taxes | $ | 44.8 | $ | 42.1 | ||||
Income taxes | $ | 10.0 | $ | 17.7 | ||||
Tax on stock compensation | — | 0.2 | ||||||
Adjustment of income tax provision | — | (0.3 | ) | |||||
Tax on legacy cost of closed operations | 0.2 | 0.2 | ||||||
Tax on foreign exchange on distribution | — | (0.2 | ) | |||||
Change in UK statutory tax rate | — | (7.4 | ) | |||||
Adjusted income taxes | $ | 10.2 | $ | 10.2 | ||||
GAAP effective tax rate | 23.6 | % | 44.1 | % | ||||
Adjusted effective tax rate | 22.8 | % | 24.2 | % |
Six Months Ended June 30 | ||||||||||||||||
(in millions, except ratios) | 2022 | 2021 | Change | |||||||||||||
Net sales: | ||||||||||||||||
Performance Chemicals | $ | 336.1 | $ | 254.1 | $ | 82.0 | +32 | % | ||||||||
Fuel Specialties | 368.2 | 282.4 | 85.8 | +30 | % | |||||||||||
Oilfield Services | 235.7 | 157.6 | 78.1 | +50 | % | |||||||||||
$ | 940.0 | $ | 694.1 | $ | 245.9 | +35 | % | |||||||||
Gross profit: | ||||||||||||||||
Performance Chemicals | $ | 84.4 | $ | 63.0 | $ | 21.4 | +34 | % | ||||||||
Fuel Specialties | 117.6 | 95.0 | 22.6 | +24 | % | |||||||||||
Oilfield Services | 77.1 | 51.1 | 26.0 | +51 | % | |||||||||||
$ | 279.1 | $ | 209.1 | $ | 70.0 | +33 | % | |||||||||
Gross margin (%): | ||||||||||||||||
Performance Chemicals | 25.1 | 24.8 | +0.3 | |||||||||||||
Fuel Specialties | 31.9 | 33.6 | -1.7 | |||||||||||||
Oilfield Services | 32.7 | 32.4 | +0.3 | |||||||||||||
Aggregate | 29.7 | 30.1 | -0.4 | |||||||||||||
Operating expenses: | ||||||||||||||||
Performance Chemicals | $ | (30.3 | ) | $ | (26.8 | ) | $ | (3.5 | ) | +13 | % | |||||
Fuel Specialties | (50.6 | ) | (42.7 | ) | (7.9 | ) | +19 | % | ||||||||
Oilfield Services | (70.1 | ) | (47.7 | ) | (22.4 | ) | +47 | % | ||||||||
Corporate costs | (37.5 | ) | (26.7 | ) | (10.8 | ) | +40 | % | ||||||||
$ | (188.5 | ) | $ | (143.9 | ) | $ | (44.6 | ) | +31 | % | ||||||
Six Months Ended June 30, 2022 | ||||||||||||||||
Change (%) | Americas | EMEA | ASPAC | Total | ||||||||||||
Volume | +33 | -8 | -9 | +6 | ||||||||||||
Price and product mix | +28 | +36 | +26 | +33 | ||||||||||||
Exchange rates | — | -11 | -6 | -7 | ||||||||||||
+61 | +17 | +11 | +32 | |||||||||||||
Six Months Ended June 30, 2022 | ||||||||||||||||||||
Change (%) | Americas | EMEA | ASPAC | AvGas | Total | |||||||||||||||
Volume | +34 | — | +15 | +8 | +14 | |||||||||||||||
Price and product mix | +30 | +29 | +10 | -21 | +23 | |||||||||||||||
Exchange rates | — | -14 | -3 | — | -7 | |||||||||||||||
+64 | +15 | +22 | -13 | +30 | ||||||||||||||||
27
Gross margin
Operating expenses:
Oilfield Services
Net sales:
Gross margin:
Operating expenses:
Other Income Statement Captions
Corporate costs:
Other net income:
(in millions) | 2022 | 2021 | Change | |||||||||
Net pension credit | $ | 2.5 | $ | 2.6 | $ | (0.1 | ) | |||||
Profit on disposal of assets | — | 0.2 | (0.2 | ) | ||||||||
Foreign exchange (losses)/gains on translation | (4.2 | ) | 3.4 | (7.6 | ) | |||||||
Foreign currency forward contracts gains | 2.4 | 0.2 | 2.2 | |||||||||
$ | 0.7 | $ | 6.4 | $ | (5.7 | ) | ||||||
(in millions) | 2022 | 2021 | Change | |||||||||
Net pension credit | $ | 3.7 | $ | 3.9 | $ | (0.2 | ) | |||||
Profit on disposal of assets | — | 0.2 | (0.2 | ) | ||||||||
Foreign exchange gains/(losses) on translation | (10.4 | ) | 1.2 | (11.6 | ) | |||||||
Foreign currency forward contracts gains/(losses) | 6.5 | 0.9 | 5.6 | |||||||||
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$ | (0.2 | ) | $ | 6.2 | $ | (6.4 | ) | |||||
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Interest expense, net:
28
Income taxes:
The following table shows a reconciliation of the GAAP effective tax ratecharge to the adjusted effective tax rate:charge:
Nine months ended September 30 | ||||||||
(in millions) | 2022 | 2021 | ||||||
Income before income taxes | $ | 139.4 | $ | 101.7 | ||||
Indemnification asset regarding tax audit | 0.4 | 0.1 | ||||||
Adjustment for stock compensation | 4.7 | 4.2 | ||||||
Acquisition costs | — | 0.8 | ||||||
Legacy cost of closed operations | 2.6 | 2.9 | ||||||
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$ | 147.1 | $ | 109.7 | |||||
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| |||||
Income taxes | $ | 31.9 | $ | 32.5 | ||||
Tax on stock compensation | 0.5 | 0.3 | ||||||
Adjustment of income tax provision | — | (0.4 | ) | |||||
Tax on acquisition costs | — | 0.2 | ||||||
Tax on legacy cost of closed operations | 0.5 | 0.6 | ||||||
Tax on foreign exchange on distribution | — | (0.2 | ) | |||||
Change in UK statutory tax rate | — | (7.4 | ) | |||||
|
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Adjusted income taxes | $ | 32.9 | $ | 25.6 | ||||
|
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GAAP effective tax rate | 22.9 | % | 32.0 | % | ||||
Adjusted effective tax rate | 22.4 | % | 23.3 | % |
29
Six Months Ended June 30 | ||||||||
(in millions) | 2022 | 2021 | ||||||
Income before income taxes | $ | 90.5 | $ | 70.9 | ||||
Indemnification asset regarding tax audit | 0.2 | — | ||||||
Adjustment for stock compensation | 3.2 | 2.6 | ||||||
Acquisition costs | — | 0.8 | ||||||
Legacy cost of closed operations | 1.9 | 1.8 | ||||||
Adjusted income before income taxes | $ | 95.8 | $ | 76.1 | ||||
Income taxes | $ | 21.7 | $ | 25.1 | ||||
Tax on stock compensation | 0.5 | 0.3 | ||||||
Adjustment of income tax provision | — | (0.3 | ) | |||||
Tax on acquisition costs | — | 0.2 | ||||||
Tax on legacy cost of closed operations | 0.4 | 0.4 | ||||||
Tax on foreign exchange on distribution | — | (0.2 | ) | |||||
Change in UK statutory tax rate | — | (7.4 | ) | |||||
Adjusted income taxes | $ | 22.6 | $ | 18.1 | ||||
GAAP effective tax rate | 24.0 | % | 35.4 | % | ||||
Adjusted effective tax rate | 23.6 | % | 23.8 | % |
LIQUIDITY AND FINANCIAL CONDITION
Working Capital
In the first sixnine months of 2022 our working capital increased by $38.6$73.5 million, while our adjusted working capital increased by $116.0$119.3 million. The difference is primarily due to the exclusion of the decrease in our cash and cash equivalents and the exclusion of movements for income taxes prepaid and due within one year.
The Company believes that adjusted working capital, a
(in millions) | June 30, 2022 | December 31, 2021 | ||||||
Total current assets | $ | 799.3 | $ | 728.1 | ||||
Total current liabilities | (369.2 | ) | (336.6 | ) | ||||
Working capital | 430.1 | 391.5 | ||||||
Less cash and cash equivalents | (71.4 | ) | (141.8 | ) | ||||
Less prepaid income taxes | (13.2 | ) | (5.8 | ) | ||||
Less other current assets | (0.4 | ) | (0.4 | ) | ||||
Add back current portion of accrued income taxes | 15.1 | 3.7 | ||||||
Add back finance leases | — | 0.1 | ||||||
Add back current portion of plant closure provisions | 6.6 | 5.2 | ||||||
Add back current portion of operating lease liabilities | 14.1 | 12.4 | ||||||
Adjusted working capital | $ | 380.9 | $ | 264.9 | ||||
(in millions) | September 30, 2022 | December 31, 2021 | ||||||
Total current assets | $ | 846.4 | $ | 728.1 | ||||
Total current liabilities | (381.4 | ) | (336.6 | ) | ||||
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Working capital | 465.0 | 391.5 | ||||||
Less cash and cash equivalents | (100.5 | ) | (141.8 | ) | ||||
Less prepaid income taxes | (13.8 | ) | (5.8 | ) | ||||
Less other current assets | (0.4 | ) | (0.4 | ) | ||||
Add back current portion of accrued income taxes | 14.7 | 3.7 | ||||||
Add back finance leases | — | 0.1 | ||||||
Add back current portion of plant closure provisions | 5.6 | 5.2 | ||||||
Add back current portion of operating lease liabilities | 13.6 | 12.4 | ||||||
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Adjusted working capital | $ | 384.2 | $ | 264.9 | ||||
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We had a $55.4$58.0 million increase in trade and other accounts receivable driven by increased trading activity across all our reporting segments. Days’ sales outstanding decreased in our Performance Chemicals segment from 64 days to 5957 days; increased from 53 days to 6258 days in our Fuel Specialties segment; and increased from 52 days to 6457 days in our Oilfield Services segment.
We had a $84.6$104.2 million increase in inventories, net of a $0.4$0.1 million increase in allowances, in anticipation of further increases in demand in 2022, while managing the risk of further supply chain disruption for certain key raw materials, especially in our Fuel Specialties segment. Days’ sales in inventory increased in our Performance Chemicals segment from 59 days to 6676 days; increased from 108 days to 151 days in our Fuel Specialties segment; and were unchanged atdecreased from 76 days to 58 days in our Oilfield Services segment.
Prepaid expenses decreased $5.8$10.6 million, from $18.0 million to $12.2$7.4 million due to the normal expensing of prepaid invoices.
We had a $18.2$32.3 million increase in accounts payable and accrued liabilities, which was dependent on the timing of payments for each of our reporting segments. Creditor days (including goods received not invoiced) increaseddecreased in our Performance Chemicals segment from 47 days to 5144 days; increaseddecreased from 50 days to 5446 days in our Fuel Specialties segment; and increased from 48 days to 6152 days in our Oilfield Services segment.
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Operating Cash Flows
We usedgenerated cash forfrom operating activities of $36.5$3.3 million in the first sixnine months of 2022 compared to cash inflowsgenerated of $21.6$24.4 million in the first sixnine months of 2021. The reduction in cash generated from operating activities was principally related to the increase in working capital required to support the growth in sales.
Cash
At JuneSeptember 30, 2022 and December 31, 2021, we had cash and cash equivalents of $71.4$100.5 million and $141.8 million, respectively, of which $26.7$42.9 million and $55.1 million, respectively, were held by
The decrease in cash and cash equivalents of $70.4$41.3 million for the first sixnine months of 2022 was driven by our increased working capital levels to support sales growth, together with our continued investments in capital projects, share repurchases and the payment of our semi-annual dividend.
Debt
At JuneSeptember 30, 2022, we had no debt outstanding under the revolving credit facility and $0.0 million of obligations under finance leases relating to certain fixed assets within our Oilfield Services segment.
At December 31, 2021, we had no debt outstanding under the revolving credit facility and $0.1 million of obligations under finance leases relating to certain fixed assets within our Fuel Specialties and Oilfield Services segments.
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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
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
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 2021 Annual Report on Form
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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
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
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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 2021 Form
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
There have been no unregistered sales of equity securities.
During the quarter ended JuneSeptember 30, 2022, the Company purchased its common stock as part of a recently announced share repurchase program and 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 | Total number of shares purchased as part of publicly announced plans or programs 1 | Approximate dollar value of shares that may yet be purchased under the plans or programs | ||||||||||||
April 1, 2022 through April 30, 2022 | 10,000 | $ | 94.2 | 10,000 | $ | 48.1 million | ||||||||||
May 1, 2022 through May 31, 2022 | 8,700 | $ | 94.0 | 8,700 | $ | 47.3 million | ||||||||||
Total | 18,700 | $ | 94.1 | 18,700 | $ | 47.3 million | ||||||||||
Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs1 | Approximate dollar value of shares that may yet be purchased under the plans or programs | ||||||||||||
July 1, 2022 through July 31, 2022 | 7,500 | 91.93 | 7,500 | $ | 46.6 million | |||||||||||
August 1, 2022 through August 31, 2022 | 2,500 | 95.91 | 2,500 | $ | 46.4 million | |||||||||||
September 1, 2022 through September 30, 2022 | 15,000 | 90.52 | 15,000 | $ | 45.0 million | |||||||||||
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Total | 25,000 | 91.48 | 25,000 | $ | 45.0 million | |||||||||||
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1 | On February 15, 2022 the Company announced a repurchase plan for up to $50 million of the Company’s common stock over a three-year period commencing on February 16, 2022. |
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Item 3 Defaults Upon Senior Securities
None.
Item 4 Mine Safety Disclosures
Not applicable.
Item 5 Other Information
None.
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: | By | /s/ PATRICK S. WILLIAMS | ||||
Patrick S. Williams | ||||||
President and Chief Executive Officer | ||||||
Date: | By | /s/ IAN P. CLEMINSON | ||||
Ian P. Cleminson | ||||||
Executive Vice President and Chief Financial Officer |