INNOSPEC INC., 10-Q filed on 04 Aug 21
v3.21.2
Cover Page - shares
6 Months Ended
Jun. 30, 2021
Jul. 28, 2021
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q2  
Document Quarterly Report true  
Document Transition Report false  
Current Fiscal Year End Date --12-31  
Document Period End Date Jun. 30, 2021  
Entity File Number 1-13879  
Entity Registrant Name INNOSPEC INC.  
Entity Central Index Key 0001054905  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 98-0181725  
Entity Address, Postal Zip Code 80112  
City Area Code 303  
Local Phone Number 792 5554  
Security Exchange Name NASDAQ  
Title of 12(b) Security Common stock  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   24,641,904
Entity Address, Address Line One 8310 South Valley Highway  
Entity Address, Address Line Two Suite 350  
Entity Address, City or Town Englewood  
Entity Address, State or Province CO  
Trading Symbol IOSP  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
v3.21.2
Condensed Consolidated Statements of Income - USD ($)
shares in Thousands, $ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Jun. 30, 2021
Jun. 30, 2020
Income Statement [Abstract]        
Net sales $ 354.5 $ 244.9 $ 694.1 $ 617.2
Cost of goods sold (246.2) (185.8) (485.0) (444.2)
Gross profit 108.3 59.1 209.1 173.0
Operating expenses:        
Selling, general and administrative (62.7) (63.5) (126.3) (127.9)
Research and development (8.6) (8.1) (17.6) (16.7)
Restructuring charge (0.0) (21.1) (0.0) (21.1)
Impairment of intangible assets (0.0) (19.8) (0.0) (19.8)
Total operating expenses (71.3) (112.5) (143.9) (185.5)
Operating income/(loss) 37.0 (53.4) 65.2 (12.5)
Other income, net 3.4 0.1 6.4 4.0
Interest expense, net (0.3) (0.5) (0.7) (1.1)
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
Net income/(loss) $ 22.4 $ (39.7) $ 45.8 $ (6.6)
Earnings per share:        
Basic $ 0.91 $ (1.62) $ 1.86 $ (0.27)
Diluted $ 0.90 $ (1.62) $ 1.84 $ (0.27)
Weighted average shares outstanding (in thousands):        
Basic 24,628 24,564 24,615 24,547
Diluted 24,869 24,564 24,856 24,547
v3.21.2
Condensed Consolidated Statements of Comprehensive Income - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Jun. 30, 2021
Jun. 30, 2020
Statement of Comprehensive Income [Abstract]        
Net income/(loss) $ 22.4 $ (39.7) $ 45.8 $ (6.6)
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)
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)
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
Total other comprehensive income/(loss) 4.4 5.9 (6.2) (2.0)
Total comprehensive income/(loss) $ 26.8 $ (33.8) $ 39.6 $ (8.6)
v3.21.2
Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Jun. 30, 2021
Jun. 30, 2020
Statement of Comprehensive Income [Abstract]        
Changes in cumulative translation adjustment, tax $ (0.5) $ (0.1) $ 0.5 $ 1.5
Amortization of prior service credit, tax 0.0 0.0 0.0 0.1
Amortization of actuarial net losses, tax $ 0.0 $ 0.0 $ (0.1) $ (0.1)
v3.21.2
Condensed Consolidated Balance Sheets - USD ($)
$ in Millions
Jun. 30, 2021
Dec. 31, 2020
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
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
v3.21.2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Millions
Jun. 30, 2021
Dec. 31, 2020
Statement of Financial Position [Abstract]    
Allowances for doubtful accounts $ 4.2 $ 4.5
Inventory allowances $ 21.1 $ 19.4
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 40,000,000 40,000,000
Common stock, shares issued 29,554,500 29,554,500
Treasury stock, shares 4,912,939 4,958,599
v3.21.2
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Millions
6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Cash Flows from Operating Activities    
Net income/(loss) $ 45.8 $ (6.6)
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 20.6 24.2
Impairment of intangible assets 0.0 19.8
Impairment of tangible assets 0.0 2.0
Deferred tax expense 7.8 (5.6)
Non-cash movements on defined benefit pension plans (1.6) (2.2)
Stock option compensation 2.9 2.8
Changes in assets and liabilities, net of effects of acquired and divested companies:    
Trade and other accounts receivable (64.3) 76.2
Inventories (31.3) (2.1)
Prepaid expenses 3.5 3.9
Accounts payable and accrued liabilities 39.3 (79.6)
Accrued income taxes (1.7) (9.5)
Plant closure provisions (0.6) 8.5
Unrecognized tax benefits 0.3 (1.3)
Other assets and liabilities 0.9 1.7
Net cash provided by operating activities 21.6 32.2
Cash Flows from Investing Activities    
Capital expenditures (19.5) (14.6)
Proceeds on disposal of property, plant and equipment 0.3 0.0
Net cash used in investing activities (19.2) (14.6)
Cash Flows from Financing Activities    
Non-controlling interest 0.1 0.1
Proceeds from revolving credit facility 0.0 15.0
Repayments of revolving credit facility (0.0) (35.0)
Repayments of finance leases (0.3) (0.6)
Dividend paid (14.0) (12.8)
Issue of treasury stock 1.7 0.8
Repurchase of common stock (0.8) (2.1)
Net cash used in financing activities (13.3) (34.6)
Effect of foreign currency exchange rate changes on cash 0.0 (0.5)
Net change in cash and cash equivalents (10.9) (17.5)
Cash and cash equivalents at beginning of period 105.3 75.7
Cash and cash equivalents at end of period $ 94.4 $ 58.2
v3.21.2
Condensed Consolidated Statements of Equity - USD ($)
$ in Millions
Total
Common Stock [Member]
Additional Paid-In Capital [Member]
Treasury Stock [Member]
Retained Earnings [Member]
Accumulated Other Comprehensive Loss [Member]
Non-Controlling Interest [Member]
Beginning Balance at Dec. 31, 2019 $ 918.9 $ 0.3 $ 330.4 $ (93.3) $ 755.5 $ (74.4) $ 0.4
Net income (6.6)       (6.6)    
Dividend paid (12.8)       (12.8)    
Changes in cumulative translation adjustment, net of tax (2.4)         (2.4)  
Share of net income 0.1           0.1
Treasury stock re-issued 1.4   (0.2) 1.6      
Treasury stock repurchased (2.1)     (2.1)      
Stock option compensation 2.8   2.8        
Amortization of prior service cost, net of tax (0.4)         (0.4)  
Amortization of actuarial net losses, net of tax 0.8         0.8  
Ending Balance at Jun. 30, 2020 899.7 0.3 333.0 (93.8) 736.1 (76.4) 0.5
Beginning Balance at Mar. 31, 2020 944.3 0.3 331.2 (94.0) 788.6 (82.3) 0.5
Net income (39.7)       (39.7)    
Dividend paid (12.8)       (12.8)    
Changes in cumulative translation adjustment, net of tax 5.5         5.5  
Treasury stock re-issued 0.4   0.2 0.2      
Stock option compensation 1.6   1.6        
Amortization of prior service cost, net of tax (0.2)         (0.2)  
Amortization of actuarial net losses, net of tax 0.6         0.6  
Ending Balance at Jun. 30, 2020 899.7 0.3 333.0 (93.8) 736.1 (76.4) 0.5
Beginning Balance at Dec. 31, 2020 944.9 0.3 336.1 (93.3) 758.6 (57.3) 0.5
Net income 45.8       45.8    
Dividend paid (14.0)       (14.0)    
Changes in cumulative translation adjustment, net of tax (7.5)         (7.5)  
Share of net income 0.1           0.1
Treasury stock re-issued 1.5   0.5 1.0      
Treasury stock repurchased (0.8)     (0.8)      
Stock option compensation 2.9   2.9        
Amortization of prior service cost, net of tax 0.1         0.1  
Amortization of actuarial net losses, net of tax 1.2         1.2  
Ending Balance at Jun. 30, 2021 974.2 0.3 339.5 (93.1) 790.4 (63.5) 0.6
Beginning Balance at Mar. 31, 2021 959.1 0.3 337.8 (93.6) 782.0 (67.9) 0.5
Net income 22.4       22.4    
Dividend paid (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 re-issued 1.1   0.4 0.7      
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  
Ending Balance at Jun. 30, 2021 $ 974.2 $ 0.3 $ 339.5 $ (93.1) $ 790.4 $ (63.5) $ 0.6
v3.21.2
Condensed Consolidated Statements of Equity (Parenthetical) - $ / shares
3 Months Ended 6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Jun. 30, 2021
Jun. 30, 2020
Statement of Stockholders' Equity [Abstract]        
Dividend paid, per share $ 0.57 $ 0.52 $ 0.57 $ 0.52
v3.21.2
Basis of Presentation
6 Months Ended
Jun. 30, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation
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.
v3.21.2
Segment Reporting
6 Months Ended
Jun. 30, 2021
Segment Reporting [Abstract]  
Segment Reporting
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
 
(in millions)
  
2021
    
2020
    
2021
    
2020
 
Net Sales:
                                   
Refinery and Performance
   $ 94.8      $ 74.9      $ 194.1        183.5  
Other
     48.3        32.5        88.3        70.9  
    
 
 
    
 
 
    
 
 
    
 
 
 
Fuel Specialties
     143.1        107.4        282.4        254.4  
    
 
 
    
 
 
    
 
 
    
 
 
 
Personal Care
     73.8        49.8        142.0        112.8  
Home Care
     21.3        21.3        44.3        42.9  
Other
     33.1        24.6        67.8        53.1  
    
 
 
    
 
 
    
 
 
    
 
 
 
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
    
 
 
    
 
 
    
 
 
    
 
 
 
v3.21.2
Earnings per Share
6 Months Ended
Jun. 30, 2021
Earnings Per Share [Abstract]  
Earnings per Share
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
 
    
2021
    
2020
    
2021
    
2020
 
Numerator (in millions):
                                   
Net income/(loss) available to common stockholders
   $ 22.4      $ (39.7    $ 45.8      $ (6.6
    
 
 
    
 
 
    
 
 
    
 
 
 
Denominator (in thousands):
                                   
Weighted average common shares outstanding
     24,628        24,564        24,615        24,547  
Dilutive effect of stock options and awards
     241        0        241        0  
    
 
 
    
 
 
    
 
 
    
 
 
 
Denominator for diluted earnings per share
     24,869        24,564        24,856        24,547  
    
 
 
    
 
 
    
 
 
    
 
 
 
Net income/(loss) per share, basic:
   $ 0.91      $ (1.62    $ 1.86      $ (0.27
    
 
 
    
 
 
    
 
 
    
 
 
 
Net income/(loss) per share, diluted:
   $ 0.90      $ (1.62    $ 1.84      $ (0.27
    
 
 
    
 
 
    
 
 
    
 
 
 
In the three and six months ended June 30, 2021, the average number of anti-dilutive options excluded from the calculation of diluted earnings per share were 19,836 and 14,649, respectively (three and six months ended June 30, 2020 – 0 and 0, respectively).
v3.21.2
Goodwill
6 Months Ended
Jun. 30, 2021
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill
NOTE 4 – GOODWILL
The following table summarizes the goodwill movements:
 
(in millions)
  
Gross Cost
 
Opening balance at January 1, 2021
   $ 371.2  
Exchange effect
     (3.0
    
 
 
 
Closing balance at June 30, 2021
   $ 368.2  
    
 
 
 
v3.21.2
Other Intangible Assets
6 Months Ended
Jun. 30, 2021
Goodwill and Intangible Assets Disclosure [Abstract]  
Other Intangible Assets
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  
    
 
 
 
 
The amortization expense for the six months ended June 30, 2021 was $8.0 million (six months ended June 30, 2020 – $11.5 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
 
Product rights
   $ 4.4      $ 6.3  
Brand names
     2.0        2.3  
Technology
     18.6        19.8  
Customer relationships
     39.4        44.2  
Internally developed software
     2.0        2.7  
    
 
 
    
 
 
 
     $ 66.4      $ 75.3  
    
 
 
    
 
 
 
v3.21.2
Pension and Post-Employment Benefits
6 Months Ended
Jun. 30, 2021
Retirement Benefits [Abstract]  
Pension and Post-Employment Benefits
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”). The Plan is closed to future service accrual but has a large number of deferred and current pensioners.
The net service cost for the three and 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 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 recognized within 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 obligations for post-employment benefits in its European businesses with a liability of $4.8 million (December 31, 2020 – $5.3 million).
 
v3.21.2
Income Taxes
6 Months Ended
Jun. 30, 2021
Income Tax Disclosure [Abstract]  
Income Taxes
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
 
Opening balance at January 1, 2021
   $ 13.6      $ 2.4      $ 16.0  
Net change for tax positions of prior periods
     (0.1      0.4        0.3  
    
 
 
    
 
 
    
 
 
 
Closing balance at June 30, 2021
     13.5        2.8        16.3  
Current
     0.0        0.0        0.0  
    
 
 
    
 
 
    
 
 
 
Non-current
   $ 13.5      $ 2.8      $ 16.3  
    
 
 
    
 
 
    
 
 
 
All of the $16.3 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 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 million recorded in the six months to June 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 million may arise in relation to this item. This includes an increase in interest accrued of $0.3 million in the six months to June 30, 2021.
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 onwards), France (2018 onwards) and the United Kingdom (2018 onwards).
 
v3.21.2
Long-Term Debt
6 Months Ended
Jun. 30, 2021
Debt Disclosure [Abstract]  
Long-Term Debt
NOTE 8 – LONG-TERM DEBT
As at June 30, 2021, and December 31, 2020, the Company had repaid all of its borrowings under 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 
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. 
v3.21.2
Plant Closure Provisions
6 Months Ended
Jun. 30, 2021
Restructuring and Related Activities [Abstract]  
Plant Closure Provisions
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 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. 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  
    
 
 
 
The charge for the six months ended June 30, 2021 was $1.9 million (six months ended June 30, 2020 – $9.8 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 an additional $7.5 million provision as a result of the restructuring activities following the closure of our Octane Additives business and the cessation of 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.
 
v3.21.2
Fair Value Measurements
6 Months Ended
Jun. 30, 2021
Fair Value Disclosures [Abstract]  
Fair Value Measurements
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
 
(in millions)
  
Carrying

Amount
    
Fair

Value
    
Carrying

Amount
    
Fair

Value
 
Assets
                                   
Non-derivatives:
                                   
Cash and cash equivalents
   $ 94.4      $ 94.4      $ 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  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
                                   
Non-derivatives:
                                   
Finance leases (including current portion)
     0.2        0.2        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  
Non-financial
liabilities (Level 3 measurement):
                                   
Other current and
non-current
liabilities:
                                   
Stock equivalent units
     17.8        17.8        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.
v3.21.2
Derivative Instruments and Risk Management
6 Months Ended
Jun. 30, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Risk Management
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 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 months of 2021 was a gain of $0.2 million (first six months of 2020 – a gain of $1.8 million).
v3.21.2
Contingencies
6 Months Ended
Jun. 30, 2021
Commitments and Contingencies Disclosure [Abstract]  
Contingencies
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 30, 2021, such guarantees which are not recognized as liabilities in the condensed consolidated financial statements amounted to $8.4 million (December 31, 2020 - $9.9 million). The remaining terms of the fixed maturity guarantees are up to
 
3 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.
 
v3.21.2
Stock-Based Compensation Plans
6 Months Ended
Jun. 30, 2021
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation Plans
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 months ended June 30, 2021.
 
    
Number of
Options
    
Weighted
Average
Exercise
Price
    
Weighted
Average
Grant-Date

Fair Value
 
Outstanding at December 31, 2020
     442,893      $ 32.49      $ 45.31  
Granted - at discount
     81,596      $ 0.00      $ 92.37  
- at market value
     10,688      $ 99.85      $ 32.73  
Exercised
     (52,870    $ 32.93      $ 38.15  
Forfeited
     (17,806    $ 17.98      $ 65.96  
Outstanding at June 30, 2021
     464,501      $ 28.75      $ 53.57  
At June 30, 2021, there were 87,136 stock options that were exercisable, of which 65,176 had performance conditions attached.
The stock option compensation cost for the first six months of 2021 was $2.9 million (first six months of 2020 – $2.8 million). The total intrinsic value of options exercised in the first six months of 2021 was $1.7 million (first six months of 2020 – $4.6 million).
The total compensation cost related to
non-vested
stock options not yet recognized at June 30, 2021 was $10.5 million and this cost is expected to be recognized over the weighted-average period of 2.15 years.
Stock equivalent units
The following table summarizes the transactions of the Company’s SEUs for the six months ended June 30, 2021:
 
    
Number
of SEUs
    
Weighted
Average
Exercise
Price
    
Weighted
Average
Grant-Date

Fair Value
 
Outstanding at December 31, 2020
     390,164      $ 4.35      $ 63.96  
Granted - at discount
     91,451      $ 0.00      $ 92.01  
- at market value
     3,803      $ 99.85      $ 32.71  
Exercised
     (29,573    $ 16.67      $ 43.05  
Forfeited
     (21,940    $ 2.76      $ 67.01  
    
 
 
    
 
 
    
 
 
 
Outstanding at June 30, 2021
     433,905      $ 3.51      $ 70.87  
    
 
 
    
 
 
    
 
 
 
 
At June 30, 2021 there were 32,132 SEUs that are exercisable, of which 27,935 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 months of 2021 was a $2.9 million charge (first six months of 2020 – $3.0 million credit). The total intrinsic value of SEUs exercised in the first six months of 2021 was $1.3 million (first six months of 2020 – $6.1 million).
The weighted-average remaining vesting period of
non-vested
SEUs is 2.08 years.
v3.21.2
Reclassifications out of Accumulated Other Comprehensive Loss
6 Months Ended
Jun. 30, 2021
Equity [Abstract]  
Reclassifications out of Accumulated Other Comprehensive Loss
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
t
 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
    
 
 
    
 
 
    
 
 
 
 
Reclassifications out of accumulated other comprehensive loss for the first six 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
   $ (0.4    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
    
 
 
      
 
(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 2020, ne
t
 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        (2.4      (2.4
Amounts reclassified from AOCL
     0.4        0.0        0.4  
    
 
 
    
 
 
    
 
 
 
Total other comprehensive income
     0.4        (2.4      (2.0
    
 
 
    
 
 
    
 
 
 
Balance at June30, 2020
   $ (8.9    $ (67.5    $ (76.4
    
 
 
    
 
 
    
 
 
 
v3.21.2
Recently Issued Accounting Pronouncements
6 Months Ended
Jun. 30, 2021
Accounting Changes and Error Corrections [Abstract]  
Recently Issued Accounting Pronouncements
NOTE 15 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Company has reviewed recently issued accounting pronouncements and concluded that the following 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.
v3.21.2
Related Party Transactions
6 Months Ended
Jun. 30, 2021
Related Party Transactions [Abstract]  
Related Party Transactions
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 months of 2021 the Company purchased product from AdvanSix for $0.1 million (first six months of 2020 – $0.2 million). As at June 30, 2021, the Company owed $0.1 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 months of 2021 the Company incurred fees from SGR of $0.1 million (first six months of 2020 – $0.2 million). As at June 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 months of 2021 for a value of $0.4 million (first six months of 2020 – $0.0 million). A tendering process is operated periodically to select the best buyer for the sale of scrap metal by the Company. As at June 30, 2021 EMR owed $0.1 million for scrap metal purchased from the Company (December 31, 2020 – $0.0 million).
v3.21.2
Segment Reporting (Tables)
6 Months Ended
Jun. 30, 2021
Segment Reporting [Abstract]  
Segment Reporting
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
 
(in millions)
  
2021
    
2020
    
2021
    
2020
 
Net Sales:
                                   
Refinery and Performance
   $ 94.8      $ 74.9      $ 194.1        183.5  
Other
     48.3        32.5        88.3        70.9  
    
 
 
    
 
 
    
 
 
    
 
 
 
Fuel Specialties
     143.1        107.4        282.4        254.4  
    
 
 
    
 
 
    
 
 
    
 
 
 
Personal Care
     73.8        49.8        142.0        112.8  
Home Care
     21.3        21.3        44.3        42.9  
Other
     33.1        24.6        67.8        53.1  
    
 
 
    
 
 
    
 
 
    
 
 
 
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
    
 
 
    
 
 
    
 
 
    
 
 
 
v3.21.2
Earnings per Share (Tables)
6 Months Ended
Jun. 30, 2021
Earnings Per Share [Abstract]  
Summary of Earnings Per Share Per share amounts are computed as follows:
 
    
Three Months Ended
June 30
    
Six Months Ended
June 30
 
    
2021
    
2020
    
2021
    
2020
 
Numerator (in millions):
                                   
Net income/(loss) available to common stockholders
   $ 22.4      $ (39.7    $ 45.8      $ (6.6
    
 
 
    
 
 
    
 
 
    
 
 
 
Denominator (in thousands):
                                   
Weighted average common shares outstanding
     24,628        24,564        24,615        24,547  
Dilutive effect of stock options and awards
     241        0        241        0  
    
 
 
    
 
 
    
 
 
    
 
 
 
Denominator for diluted earnings per share
     24,869        24,564        24,856        24,547  
    
 
 
    
 
 
    
 
 
    
 
 
 
Net income/(loss) per share, basic:
   $ 0.91      $ (1.62    $ 1.86      $ (0.27
    
 
 
    
 
 
    
 
 
    
 
 
 
Net income/(loss) per share, diluted:
   $ 0.90      $ (1.62    $ 1.84      $ (0.27
    
 
 
    
 
 
    
 
 
    
 
 
 
v3.21.2
Goodwill (Tables)
6 Months Ended
Jun. 30, 2021
Goodwill and Intangible Assets Disclosure [Abstract]  
Summary of Goodwill
The following table summarizes the goodwill movements:
 
(in millions)
  
Gross Cost
 
Opening balance at January 1, 2021
   $ 371.2  
Exchange effect
     (3.0
    
 
 
 
Closing balance at June 30, 2021
   $ 368.2  
    
 
 
 
v3.21.2
Other Intangible Assets (Tables)
6 Months Ended
Jun. 30, 2021
Goodwill and Intangible Assets Disclosure [Abstract]  
Summary of 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  
    
 
 
 
Schedule of Amortization Expense
The net book amount by category of other intangible assets is shown in the following table:
 
(in millions)
  
June 30

2021
    
December 31

2020
 
Product rights
   $ 4.4      $ 6.3  
Brand names
     2.0        2.3  
Technology
     18.6        19.8  
Customer relationships
     39.4        44.2  
Internally developed software
     2.0        2.7  
    
 
 
    
 
 
 
     $ 66.4      $ 75.3  
    
 
 
    
 
 
 
v3.21.2
Pension and Post-Employment Benefits (Tables)
6 Months Ended
Jun. 30, 2021
United Kingdom Plan [Member]  
Plan Net Pension Credit 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