INNOSPEC INC., 10-Q filed on 03 Aug 22
v3.22.2
Cover Page - shares
6 Months Ended
Jun. 30, 2022
Jul. 26, 2022
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Fiscal Year Focus 2022  
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, 2022  
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  
City Area Code 303  
Entity Address, Postal Zip Code 80112  
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   24,790,674
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  
v3.22.2
Condensed Consolidated Statements of Income - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2022
Jun. 30, 2021
Jun. 30, 2022
Jun. 30, 2021
Income Statement [Abstract]        
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 $ 1.3 $ 0.91 $ 2.77 $ 1.86
Diluted $ 1.29 $ 0.9 $ 2.76 $ 1.84
Weighted average shares outstanding (in thousands):        
Basic 24,805,000 24,628,000 24,798,000 24,615,000
Diluted 24,971,000 24,869,000 24,967,000 24,856,000
v3.22.2
Condensed Consolidated Statements of Comprehensive Income - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2022
Jun. 30, 2021
Jun. 30, 2022
Jun. 30, 2021
Statement of Comprehensive Income [Abstract]        
Net income $ 32.3 $ 22.4 $ 68.8 $ 45.8
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 0.0 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
v3.22.2
Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2022
Jun. 30, 2021
Jun. 30, 2022
Jun. 30, 2021
Statement of Comprehensive Income [Abstract]        
Changes in cumulative translation adjustment, tax $ 1.4 $ 0.5 $ 1.2 $ 0.5
Amortization of prior service credit, tax 0.1 0.0 0.1 0.0
Amortization of actuarial net losses, tax $ 0.0 $ 0.0 $ 0.0 $ 0.1
v3.22.2
Condensed Consolidated Balance Sheets - USD ($)
$ in Millions
Jun. 30, 2022
Dec. 31, 2021
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 assets 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
Current liabilities:    
Accounts payable 180.9 148.7
Accrued liabilities 152.5 166.5
Finance leases   0.1
Current portion of operating lease liabilities 14.1 12.4
Current portion of plant closure provisions 6.6 5.2
Current portion of accrued income taxes 15.1 3.7
Total current liabilities 369.2 336.6
Plant closure provisions, net of current portion 49.2 51.3
Operating lease liabilities, net of current portion 35.2 23.1
Accrued income taxes, net of current portion 20.8 30.6
Unrecognized tax benefits 16.3 16.3
Deferred tax liabilities 60.8 60.8
Pension liabilities and post-employment benefits 16.4 17.8
Other non-current liabilities 1.4 1.4
Total liabilities 569.3 537.9
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 350.9 346.7
Treasury stock (4,739,680 and 4,780,806 shares at cost, respectively) (92.3) (90.6)
Retained earnings 876.1 822.9
Accumulated other comprehensive loss (67.1) (46.9)
Total Innospec stockholders' equity 1,067.9 1,032.4
Non-controlling interest 0.7 0.6
Total equity 1,068.6 1,033.0
Total liabilities and equity $ 1,637.9 $ 1,570.9
v3.22.2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Millions
Jun. 30, 2022
Dec. 31, 2021
Statement of Financial Position [Abstract]    
Allowances for doubtful accounts $ 5.8 $ 5.1
Inventory allowances $ 25.8 $ 25.4
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 4,758,826 4,780,806
v3.22.2
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Millions
6 Months Ended
Jun. 30, 2022
Jun. 30, 2021
Cash Flows from Operating Activities    
Net income $ 68.8 $ 45.8
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 20.8 20.6
Deferred tax expense 1.0 7.8
Non-cash income on defined benefit pension plans (1.3) (1.6)
Stock option compensation 3.2 2.9
Changes in assets and liabilities, net of effects of acquired and divested companies:    
Trade and other accounts receivable (62.1) (64.3)
Inventories (88.3) (31.3)
Prepaid expenses 6.5 3.5
Accounts payable and accrued liabilities 20.9 39.3
Plant closure provisions 0.0 (1.7)
Accrued income taxes (4.2) (0.6)
Other assets and liabilities (1.8) 0.9
Unrecognized tax benefits   0.3
Net cash (used in)/provided by operating activities (36.5) 21.6
Cash Flows from Investing Activities    
Capital expenditures (17.4) (19.5)
Proceeds on disposal of property, plant and equipment   0.3
Net cash used in investing activities (17.4) (19.2)
Cash Flows from Financing Activities    
Non-controlling interest   0.1
Proceeds from revolving credit facility 0.0 0.0
Repayments of revolving credit facility 0.0 0.0
Repayments of finance leases (0.1) (0.3)
Dividend paid (15.6) (14.0)
Issue of treasury stock 2.1 1.7
Repurchase of common stock (2.7) (0.8)
Net cash provided by/(used in) financing activities (16.3) (13.3)
Effect of foreign currency exchange rate changes on cash (0.2) 0.0
Net change in cash and cash equivalents (70.4) (10.9)
Cash and cash equivalents at beginning of period 141.8 105.3
Cash and cash equivalents at end of period $ 71.4 $ 94.4
v3.22.2
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, 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 reissued 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 reissued 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
Beginning Balance at Dec. 31, 2021 1,033.0 0.3 346.7 (90.6) 822.9 (46.9) 0.6
Net income 68.8       68.8    
Dividend paid (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 2.0   1.0 1.0      
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  
Ending Balance at Jun. 30, 2022 1,068.6 0.3 350.9 (92.3) 876.1 (67.1) 0.7
Beginning Balance at Mar. 31, 2022 1,068.9 0.3 349.6 (90.6) 859.4 (50.5) 0.7
Net income 32.3       32.3    
Dividend paid (15.6)       (15.6)    
Changes in cumulative translation adjustment, net of tax (16.9)         (16.9)  
Treasury stock reissued (0.1)   (0.2) 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  
Ending Balance at Jun. 30, 2022 $ 1,068.6 $ 0.3 $ 350.9 $ (92.3) $ 876.1 $ (67.1) $ 0.7
v3.22.2
Condensed Consolidated Statements of Equity (Parenthetical) - $ / shares
3 Months Ended 6 Months Ended
Jun. 30, 2022
Jun. 30, 2021
Jun. 30, 2022
Jun. 30, 2021
Statement of Stockholders' Equity [Abstract]        
Dividend paid, per share $ 0.63 $ 0.57 $ 0.63 $ 0.57
v3.22.2
Basis of Presentation
6 Months Ended
Jun. 30, 2022
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, 2021 filed on February 16, 2022 (the “2021 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.
v3.22.2
Segment Reporting
6 Months Ended
Jun. 30, 2022
Segment Reporting [Abstract]  
Segment Reporting
NOTE 2 – SEGMENT REPORTING
The Company reports its financial performance based on three reportable segments, which are Performance Chemicals, Fuel Specialties and Oilfield Services.
The Company evaluates the performance of its segments based on operating income. The following 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)
  
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  
    
 
 
    
 
 
    
 
 
    
 
 
 
     $
 
467.6
     $
 
354.5
     $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  
    
 
 
    
 
 
    
 
 
    
 
 
 
     $
 
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  
    
 
 
    
 
 
    
 
 
    
 
 
 
v3.22.2
Earnings Per Share
6 Months Ended
Jun. 30, 2022
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
 
 
  
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 the three and six months ended June 30, 2022, the average number of anti-dilutive options excluded from the calculation of diluted earnings per share were 29,600 and 27,094, respectively (three and six months ended June 30, 2021 – 19,836 and 14,649, respectively).
v3.22.2
Goodwill
6 Months Ended
Jun. 30, 2022
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill
NOTE 4 – GOODWILL
The following table summarizes the goodwill movements in the year:
 
(in millions)
  
Gross Cost
 
Opening balance at January 1, 2022
   $ 364.3  
Exchange effect
     (7.3
    
 
 
 
Closing balance at June 30, 2022
   $ 357.0  
    
 
 
 
v3.22.2
Other Intangible Assets
6 Months Ended
Jun. 30, 2022
Goodwill and Intangible Assets Disclosure [Abstract]  
Other Intangible Assets
NOTE 5 – OTHER INTANGIBLE ASSETS
The following table analyzes other intangible assets movements in the year:
 
(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  
    
 
 
 
The amortization expense for the six months ended June 30, 2022 was $7.8 million (six months ended June 30, 2021 – $8.0 million).
v3.22.2
Pension and Post-Employment Benefits
6 Months Ended
Jun. 30, 2022
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 “UK Plan”). The UK Plan is closed to future service accrual and has a large number of deferred and current pensioners.
The Company also maintains an unfunded defined benefit pension plan covering certain current and former employees in Germany (the “German plan”). The German plan is closed to new entrants and has no assets.
The net periodic benefit of these plans is shown in the following table:
 
    
Three months Ended
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  
    
 
 
    
 
 
    
 
 
    
 
 
 
The service cost has been recognized in selling, general and administrative expenses. All other items have been recognized within other income and expense. The amortization of prior service cost and actuarial net losses are a reclassification out of accumulated other comprehensive loss into other income and expense.
In addition, we have obligations for post-employment benefits in some of our other European businesses. As at June 30, 2022, we have recorded a liability of $4.3 million (December 31, 2021 – $4.6 million).
In May 2022, the Trustees of the UK Plan entered into an agreement with Legal and General Assurance Society Limited to acquire an insurance policy that operates as an investment asset, with the intent of matching the remaining uninsured part of the UK Plan’s future cash flow arising from the accrued pension liabilities of members. Such an arrangement is commonly termed as a
“buy-in”.
The
buy-in
reduces the UK Plan’s value at risk in relation to key risks associated with improved longevity, inflation and interest rate movements whilst improving the security to the UK Plan and its members. The Company consequently benefits from the
buy-in
as it reduces the UK Plan’s potential reliance on the Company for future cash funding requirements. In accordance with US GAAP the
buy-in
does not trigger a remeasurement at an interim period, so accounting entries to reflect this will be included in Innospec’s Annual Report on Form
10-K
for the year ended
December
 31, 2022.
v3.22.2
Income Taxes
6 Months Ended
Jun. 30, 2022
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, 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  
    
 
 
    
 
 
    
 
 
 
All of the $16.3 million of unrecognized tax benefits, interest and penalties would impact our effective tax rate if recognized.
In 2021 a
non-U.S.
subsidiary, Innospec Limited, entered into a review by the U.K. tax authorities under the U.K.’s Profit Diversion Compliance Facility (“PDCF”). The Company determined that additional tax and interest totaling $0.9 million may arise during the course of the PDCF review process which is currently ongoing. This includes a reduction for foreign exchange movements of $0.1 million recorded in the six months to June 30, 2022.
A
non-U.S.
subsidiary, Innospec Performance Chemicals Italia Srl, is subject to an ongoing tax audit in relation to the period 2011 to 2014 inclusive. The Company has determined that additional tax, interest and penalties totaling $3.1 million may arise as a consequence of the tax audit. This includes an increase in interest accrual of $0.1 million and a reduction for foreign exchange movements of $0.3 million recorded in the six months to June 30, 2022. 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 of 2017 (“Tax Act”), but for which retrospective adjustment to the filed 2017 U.S. federal income tax returns was not permissible. The Company has determined that additional tax, interest and penalties totaling $12.3 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, 2022.
The Company and its U.S. subsidiaries remain open to examination by the IRS for certain elements of year 2017 and for years 2018 onwards under the statute of limitations. The Company’s subsidiaries in foreign tax jurisdictions are open to examination including the U.K. (2017 onwards), Switzerland (2017 onwards), Germany (2018 onwards), Spain (2018 onwards) and France (2019 onwards).
v3.22.2
Long-Term Debt
6 Months Ended
Jun. 30, 2022
Debt Disclosure [Abstract]  
Long-Term Debt
NOTE 8 – LONG-TERM DEBT
As at June 30, 2022, and December 31, 2021, the Company had not drawn down on its revolving credit facility.
The Company continues to have available a $250.0 million revolving credit facility until September 25, 2024. The facility contains an accordion feature whereby the Company may elect to increase the total available borrowings by an aggregate amount of up to $125.0 million.
As at June 30, 2022, the deferred finance costs of $0.8 
million (December 31, 2021 - 
$1.0 million) related to the arrangement of the credit facility, are included within other current and
non-current
assets at the balance sheet dates.
v3.22.2
Plant Closure Provisions
6 Months Ended
Jun. 30, 2022
Restructuring and Related Activities [Abstract]  
Plant Closure Provisions
NOTE 9 – PLANT CLOSURE PROVISIONS
The Company has continuing plans to remediate manufacturing facilities at sites around the world as and when those operations are expected to cease
or
we are required to decommission the sites according to local laws and regulations. The liability for estimated plant closure costs includes costs for environmental remediation liabilities and asset retirement obligations.
The principal site giving rise to asset retirement obligations is the manufacturing site at Ellesmere Port in the United Kingdom. There are also asset retirement obligations and environmental remediation liabilities on a much smaller scale in respect of other manufacturing sites.
Movements in the provisions are summarized as follows:
 
(in millions)
  
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  
    
 
 
 
The charge for the six months ended June 30, 2022 was $1.9 million (six months ended June 30, 2021 – $1.9 million). The current year charge represents the accounting accretion only, with no changes for the expected cost and scope of future remediation activities.
Amounts due within one year refer to provisions where expenditure is expected to arise within one year of the balance sheet date.
v3.22.2
Fair Value Measurements
6 Months Ended
Jun. 30, 2022
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, 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  
The following methods and assumptions were used to estimate the fair values:
Cash and cash equivalents:
The carrying amount approximates fair value because of the short-term maturities of such instruments.
Emissions Trading Scheme credits:
The fair value is determined by the open market pricing at the end of the reporting period.
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.
v3.22.2
Derivative Instruments and Risk Management
6 Months Ended
Jun. 30, 2022
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, 2022, 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 2022 was a gain of $2.4 million (first six months of 2021 – a gain of $0.2 million).
v3.22.2
Contingencies
6 Months Ended
Jun. 30, 2022
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, 2022, such guarantees which are not recognized as liabilities in the condensed consolidated financial statements amounted to $6.0 
million (December 31, 2021 - 
$4.6 million). The remaining terms of the fixed maturity guarantees are up to 4 years and one month, 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.
v3.22.2
Stock-Based Compensation Plans
6 Months Ended
Jun. 30, 2022
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation Plans
NOTE 13 – STOCK-BASED COMPENSATION PLANS
The compensation cost recorded for stock options for the three months ended June 30, 2022 and 2021 was $1.5 million and $1.3 million, respectively. The compensation cost recorded for stock equivalent units for the three months ended June 30, 2022 was $7.0 
million.    The
compensation credit recorded for stock equivalent units for the three months ended June 30, 2021 was $1.5 million.
The compensation cost recorded for stock options for the first six months of 2022 and 2021 was $3.2 million and $2.9 million, respectively. The compensation cost recorded for stock equivalent units for the first six months of 2022 and 2021 was $14.1 million and $2.9 million, respectively.
The following table summarizes the transactions of the Company’s share-based compensation plans for the six months ended June 30, 2022.
 
    
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  
    
 
 
    
 
 
 
New grants in the quarter have similar vesting conditions to those granted in previous periods. The valuation methodologies of the new grants are consistent with previous periods.
As of June 30, 2022, there was $26.8 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 1.98 years.
v3.22.2
Reclassifications out of Accumulated Other Comprehensive Loss
6 Months Ended
Jun. 30, 2022
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 (“AOCL”) for the first six months of 2022 were:
 
(in millions)
Details about AOCL Components
  
Amount
Reclassified
from AOCL
 
  
Affected Line Item in the
Statement where
Net Income is Presented
Defined benefit pension plan items:
  
  
Amortization of prior service cost
   $ 0.3      See 
(1)
 below
Amortization of actuarial net losses
     0.3      See 
(1)
 below
    
 
 
      
       0.6      Total before tax
       (0.1    Income tax expense
    
 
 
      
Total reclassifications
   $ 0.5      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 2022, net of tax, were:
 
(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
    
 
 
    
 
 
    
 
 
 
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, net of tax, were:
 
(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
    
 
 
    
 
 
    
 
 
 
 
19
v3.22.2
Recently Issued Accounting Pronouncements
6 Months Ended
Jun. 30, 2022
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 there were no matters relevant to the Company’s financial statements.
v3.22.2
Related Party Transactions
6 Months Ended
Jun. 30, 2022
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 2022 the Company purchased product from AdvanSix for $0.3 million (first six months of 2021 – $0.1 million). As at June 30, 2022, the Company owed $0.0 million to AdvanSix (December 31, 2021 – $0.1 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 2022 the Company incurred fees from SGR of $0.1 million (first six months of 2021 – $0.1 million). As at June 30, 2022, the Company owed $0.0 million to SGR (December 31, 2021 – $0.0 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 2022 for a value of $0.1 million (first six months of 2021 – $0.4 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, 2022 EMR owed $0.0 million for scrap metal purchased from the Company (December 31, 2021 – $0.0 million).
v3.22.2
Segment Reporting (Tables)
6 Months Ended
Jun. 30, 2022
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)
  
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  
    
 
 
    
 
 
    
 
 
    
 
 
 
     $
 
467.6
     $
 
354.5
     $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  
    
 
 
    
 
 
    
 
 
    
 
 
 
     $
 
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  
    
 
 
    
 
 
    
 
 
    
 
 
 
v3.22.2
Earnings per Share (Tables)
6 Months Ended
Jun. 30, 2022
Earnings Per Share [Abstract]  
Summary of Earnings Per Share
 
  
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  
    
 
 
    
 
 
    
 
 
    
 
 
 
v3.22.2
Goodwill (Tables)
6 Months Ended
Jun. 30, 2022
Goodwill and Intangible Assets Disclosure [Abstract]  
Summary of Goodwill
The following table summarizes the goodwill movements in the year:
 
(in millions)
  
Gross Cost
 
Opening balance at January 1, 2022
   $ 364.3  
Exchange effect
     (7.3
    
 
 
 
Closing balance at June 30, 2022
   $ 357.0  
    
 
 
 
v3.22.2
Other Intangible Assets (Tables)
6 Months Ended
Jun. 30, 2022
Goodwill and Intangible Assets Disclosure [Abstract]  
Summary of Other Intangible Assets
The following table analyzes other intangible assets movements in the year:
 
(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  
    
 
 
 
v3.22.2
Pension and Post-Employment Benefits (Tables)
6 Months Ended
Jun. 30, 2022
Plan Net Pension Credit
The net periodic benefit of these plans is shown in the following table:
 
    
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  
    
 
 
    
 
 
    
 
 
    
 
 
 
v3.22.2
Income Taxes (Tables)
6 Months Ended
Jun. 30, 2022
Income Tax Disclosure [Abstract]  
Roll-forward of Unrecognized Tax Benefits and Associated Accrued Interest and Penalties
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, 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  
    
 
 
    
 
 
    
 
 
 
v3.22.2
Plant Closure Provisions (Tables)
6 Months Ended
Jun. 30, 2022
Restructuring and Related Activities [Abstract]  
Movements in Plant Closure and Restructuring Provisions
Movements in the provisions are summarized as follows:
 
(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  
    
 
 
 
v3.22.2
Fair Value Measurements (Tables)
6 Months Ended
Jun. 30, 2022
Fair Value Disclosures [Abstract]  
Carrying Amount and Fair Values of the Company's Assets and Liabilities Measured on a Recurring Basis
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, 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  
v3.22.2
Stock-Based Compensation Plans (Tables)
6 Months Ended
Jun. 30, 2022
Summary of Transactions of The Share Based Compensation Plans
The following table summarizes the transactions of the Company’s share-based compensation plans for the six months ended June 30, 2022.
 
    
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  
    
 
 
    
 
 
 
v3.22.2
Reclassifications out of Accumulated Other Comprehensive Loss (Tables)
6 Months Ended
Jun. 30, 2022
Equity [Abstract]  
Summary of Reclassifications Out of Accumulated Other Comprehensive Loss
Reclassifications out of accumulated other comprehensive loss (“AOCL”) for the first six months of 2022 were:
 
(in millions)
Details about AOCL Components
  
Amount
Reclassified
from AOCL
 
  
Affected Line Item in the
Statement where
Net Income is Presented
Defined benefit pension plan items:
  
  
Amortization of prior service cost
   $ 0.3      See 
(1)
 below
Amortization of actuarial net losses
     0.3      See 
(1)
 below
    
 
 
      
       0.6      Total before tax
       (0.1    Income tax expense