Innospec Reports Third Quarter 2012 Financial Results

Innospec Reports Third Quarter 2012 Financial Results

  GAAP and Adjusted Non-GAAP Diluted EPS of $0.65 Per Share; Minimal Special
                Items and Stable Exchange Rates in the Quarter

   Sales Performance Reflects Richer Sales Mix and Improved Pricing in Fuel
   Specialties and Higher Volumes in Performance Chemicals, Offset by Order
              Pattern/Timing and a Weaker Euro Versus a Year Ago

  Cash Management, Inflows and Liquidity Solid, With Continued Balance Sheet

  Stronger Q4 Expected Due to Order Phasing, New Contract Wins, and Contract
               Renewals Underpinning Growth for 2013 and Beyond

LITTLETON, Colo., Oct. 31, 2012 (GLOBE NEWSWIRE) -- Innospec Inc.
(Nasdaq:IOSP) today announced its financial results for the third quarter
ended September 30, 2012.

Total net sales for the third quarter were $183.4 million, a 9 percent
decrease from $202.1 million in the corresponding quarter last year. Net
income was $15.5 million, or $0.65 per diluted share, and after adjustments
for special items in both this year and last, was down $7.0 million or $0.28
per diluted share. EBITDA (earnings before interest, taxes, depreciation,
amortization and impairment) for the quarter was $20.2 million, and benefited
from minimal special items and stable exchange rates in the quarter.

Results for the third quarter include several special items, which are
summarized in the table below. Excluding these items, adjusted non-GAAP EPS
was $0.65 per diluted share, a decrease from $0.93 a year ago. Cash generation
for the quarter was strong, with operating cash inflows of $33.7 million,
before capital expenditures of $5.2 million.Net cash stood at $99.6 million
at the end of the quarter.

EBITDA and net income excluding special items, and related per-share amounts,
are non-GAAP financial measures that are defined and reconciled with GAAP
results herein and in the schedules below.

                      Quarter ended September 30, Quarter ended September 30,
                       2012                        2011
(in millions, except   Income                     (Loss)/  Net
share and per share    before    Net     Diluted   before   (loss)/  Diluted
data)                  income    income  EPS       income   income   EPS
                       taxes                       taxes
Reported GAAP amounts  $ 17.0    $ 15.5  $ 0.65    $ (25.2) $ (16.8) $ (0.68)
Acquisition-related    0.3       0.2     0.01      3.0      2.4      0.10
Adjustment of income   (0.2)     (0.2)   (0.01)    3.1      3.1      0.13
tax provisions
Foreign currency       0.1       0.1     --        4.3      3.4      0.14
exchange losses
Civil complaint        --        --      --        45.0     29.3     1.19
Civil complaint legal
and professional       --        --      --        1.5      1.2      0.05
                      0.2       0.1     --        56.9     39.4     1.61
Adjusted non-GAAP      $ 17.2    $ 15.6  $ 0.65    $ 31.7   $ 22.6   $ 0.93

For the first nine months of 2012, total net sales of $562.7 million decreased
from $573.9 million in the corresponding period last year.Net income for the
nine-month period was $55.6 million, or $2.33 per diluted share, compared with
$29.3 million, or $1.19 per diluted share, a year ago.Excluding special
items, diluted earnings per share for the first nine months of 2012 were
$2.44, down slightly from $2.52 a year ago.EBITDA for the first nine months
of 2012 was $78.2 million, compared with $47.3 million a year ago (which
included a civil complaint settlement and associated legal and professional
expenses of $50.5 million).

Commenting on the quarter, Patrick Williams, President and Chief Executive
Officer, said, "Despite continuing soft economic conditions in world markets,
as well as erratic order patterns this quarter in both Fuel Specialties and
Octane Additives, we made important progress in our two growth engines during
the third quarter, which we expect will serve us well in the fourth quarter
and into 2013.

"We are particularly pleased with a number of contract extensions and proposed
joint technology agreements which have deepened our relationships with key
customers, as well as new contract wins in our Fuel Specialties and
Performance Chemicals segments.

"We renamed our Active Chemicals segment as Performance Chemicals during the
quarter, to better reflect the nature of that business. Importantly, we
witnessed the expansion of our Personal Care line; steady progress in our
Fragrance Ingredients business; and an upturn in our Polymers business. At
the end of the second quarter we stated our belief that we had reached the
bottom of the Polymers market, and it appears that we were broadly right,
although the improvement in volume so far has been in the lower margin

"Octane Additives sales were impacted significantly by delivery schedules
during the quarter, particularly with respect to one large order, which we
expect will be recognized in the fourth quarter. Meanwhile, we continue to
record strong cash inflows throughout our businesses, which have enabled
Innospec to maintain a very strong and liquid balance sheet position."

Net sales in Fuel Specialties for the third quarter were $127.0 million, down
7 percent from the $136.1 million reported in last year's third quarter, as a
richer sales mix and improved pricing were offset by lower volumes and a
weaker Euro.By region, sales were down 2 percent in the Americas and 12
percent in Europe, Middle East and Africa (EMEA).Sales in Asia-Pacific were
up 10 percent, driven by improved volumes.The Avtel business performed to
plan in the quarter, but suffered in comparison with a very strong third
quarter last year.The segment's gross margin was 29.0 percent.Operating
income for the quarter was $19.6 million, compared to $19.9 million a year

In Performance Chemicals, net sales increased by 7 percent, to $46.8
million.Polymers markets have stabilized, showing a slight uptick in volumes
sequentially over the second quarter, as we predicted, with a focus on
lower-margin business.By region, sales increased 30 percent in the Americas,
primarily due to strong growth in the Personal Care and Fragrance Ingredients
markets.Sales decreased 8 percent in EMEA due to the weaker Euro, and 4
percent in Asia-Pacific, a result of lower Fragrance Ingredients volumes,
together with intense competitive and economic pressures.Performance
Chemicals' gross margin was 22.2 percent, up slightly from the year ago
figure.The segment's operating income was $5.6 million, up from $5.0 million
in last year's third quarter.

Octane Additives' net sales for the quarter were $9.6 million, compared with a
strong comparative of $22.1 million a year ago, primarily due to delivery
phasing during the quarter, with respect to one significant order.We expect
this order to be recognized in the fourth quarter.The segment's gross margin
was 36.5 percent, a decline from last year's 45.2 percent, which reflects
lower production volumes.Operating income for the quarter was $1.5 million,
primarily impacted by the timing of shipments, compared to $8.4 million last
year after adjusting for the $46.5 million pre-tax charge related to the civil
complaint settlement and associated legal and professional expenses.

Corporate costs for the third quarter were $9.1 million, compared with $6.3
million a year ago.The increase was primarily due to increased share based
compensation accruals.The current year effective tax rate is 18.8 percent
compared to 10.1 percent last year which benefited from the tax deductions
recognized in respect of certain of the special items.

Net cash generated from operations was $33.7 million, more than triple the
$9.4 million a year ago, and includes an $18.9 million decrease in working
capital in the quarter.As of September 30, 2012, Innospec had $133.6 million
in cash, cash equivalents and short-term investments, and debt of $34.0

Mr. Williams concluded, "While phasing of orders contributed to the third
quarter trading being lower than we expected, we believe that our business
strategies are bearing fruit, and will deliver growth in the fourth quarter
and continue through 2013, despite the global economies remaining sluggish."

Use of Non-GAAP Financial Measures

The information presented in this press release includes financial measures
that are not calculated or presented in accordance with Generally Accepted
Accounting Principles in the United States (GAAP).These non-GAAP financial
measures comprise EBITDA and net income excluding special items, and related
per share amounts.EBITDA is net income per our consolidated financial
statements adjusted for the exclusion of charges for interest expense, net,
income taxes, depreciation, amortization and impairment of Octane Additives
segment goodwill.Income before income taxes, net income and diluted EPS,
excluding special items, per our consolidated financial statements are
adjusted for the exclusion of acquisition-related costs, adjustment of income
tax provisions, foreign currency exchange losses, civil complaint settlement
and civil complaint legal and professional expenses.Reconciliations of these
non-GAAP financial measures to their most directly comparable GAAP financial
measures are provided herein and in the schedules below.The Company believes
that such non-GAAP financial measures provide useful information to investors
and may assist them in evaluating the Company's underlying performance and
identifying operating trends.In addition, management uses these non-GAAP
financial measures internally to allocate resources and evaluate the
performance of the Company's operations.While the Company believes that such
measures are useful in evaluating the Company's performance, investors should
not consider them to be a substitute for financial measures prepared in
accordance with GAAP.In addition, these non-GAAP financial measures may
differ from similarly-titled non-GAAP financial measures used by other
companies and do not provide a comparable view of the Company's performance
relative to other companies in similar industries.Management believes the
most directly comparable GAAP financial measure is GAAP net income and has
provided a reconciliation of EBITDA and net income excluding special items,
and related per share amounts, to GAAP net income herein and in the schedules

About Innospec Inc.

Innospec Inc. is an international specialty chemicals company with
approximately 850 employees in 20 countries. Innospec manufactures and
supplies a wide range of specialty chemicals to markets in the Americas,
Europe, the Middle East, Africa and Asia-Pacific. Innospec's Fuel Specialties
business specializes in manufacturing and supplying the fuel additives that
help improve fuel efficiency, boost engine performance and reduce harmful
emissions. Innospec's Performance Chemicals business provides effective
technology-based solutions for our customers' processes or products focused in
the Personal Care; Household, Industrial & Institutional; and Fragrance
Ingredients markets. Innospec's Octane Additives business is the world's only
producer of tetra ethyl lead.

Forward-Looking Statements

This press release contains certain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.All
statements other than statements of historical facts included or incorporated
herein may constitute forward-looking statements. Such forward-looking
statements include statements (covered by words like "expects," "anticipates,"
"may," "believes" or similar words or expressions), for example, which relate
to operating performance, events or developments that we expect or anticipate
will or may occur in the future (including, without limitation, any of the
Company's guidance in respect of sales, gross margins, pension liabilities and
charges, net income, growth potential and other measures of financial
performance).Although forward-looking statements are believed by management
to be reasonable when made, they are subject to certain risks, uncertainties
and assumptions, and our actual performance or results may differ materially
from these forward-looking statements.Additional information regarding risks,
uncertainties and assumptions relating to the Company and affecting our
business operations and prospects are described in the Company's Annual Report
on Form 10-K for the year ended December 31, 2011, and other reports filed
with the U.S. Securities and Exchange Commission.You are urged to review our
discussion of risks and uncertainties that could cause actual results to
differ from forward-looking statements under the heading "Risk Factors." The
Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.

Schedule 1
                                         Three Months Ended Nine Months Ended
                                         September 30       September 30
                                         2012      2011     2012     2011
(in millions, except share and per share                           
Net sales                                 $183.4  $202.1 $562.7 $573.9
Cost of goods sold                        (132.7)   (144.4)  (391.3)  (405.3)
Gross profit                              50.7      57.7     171.4    168.6
Operating expenses:                                                
Selling, general and administrative      (28.3)    (72.6)   (83.4)   (127.1)
Research and development                 (4.8)     (4.7)    (14.4)   (13.7)
Restructuring charge                     (0.1)     --       (0.2)    --
Impairment of Octane Additives segment   (0.3)     (0.6)    (0.9)    (1.7)
Profit on disposal                       0.1       --       0.1      --
Total operating expenses                  (33.4)    (77.9)   (98.8)   (142.5)
Operating income/(loss)                   17.3      (20.2)   72.6     26.1
Other net (expense)/income                (0.1)     (4.3)    (3.3)    8.9
Interest expense, net                    (0.2)     (0.7)    (0.8)    (2.4)
Income/(loss) before income taxes        17.0      (25.2)   68.5     32.6
Income taxes                              (1.5)     8.4      (12.9)   (3.3)
Net income/(loss)                         $ 15.5    $ (16.8) $ 55.6   $ 29.3
Earnings/(loss) per share:                                        
Basic                                    $ 0.67    $ (0.71) $ 2.40   $ 1.24
Diluted                                  $ 0.65    $ (0.71) $ 2.33   $ 1.19
Weighted average shares outstanding (in                            
Basic                                   23,240    23,711   23,148   23,698
Diluted                                  23,923    23,711   23,872   24,616

                                                              Schedule 2A
SEGMENTAL ANALYSIS OF RESULTS         Three Months Ended Nine Months Ended
                                     September 30       September 30
(in millions)                         2012      2011     2012     2011
Net sales:                                                     
Fuel Specialties                     $127.0  $136.1 $372.2 $376.5
Performance Chemicals                46.8      43.9     138.2    139.1
Octane Additives                     9.6       22.1     52.3     58.3
                                     183.4     202.1    562.7    573.9
Gross profit:                                                  
Fuel Specialties                     36.8      38.1     110.2    105.6
Performance Chemicals                10.4      9.6      33.6     35.0
Octane Additives                     3.5       10.0     27.6     28.0
                                     50.7      57.7     171.4    168.6
Operating income/(loss):                                       
Fuel Specialties                     19.6      19.9     58.2     54.5
Performance Chemicals                5.6       5.0      18.8     21.7
Octane Additives                     1.5       (38.1)   21.9     (27.8)
Pension credit/(charge)               --        (0.1)    0.2      (0.3)
Corporate costs                       (9.1)     (6.3)    (25.5)   (20.3)
                                     17.6      (19.6)   73.6     27.8
Restructuring charge                  (0.1)     --       (0.2)    --
Impairment of Octane Additives        (0.3)     (0.6)    (0.9)    (1.7)
segment goodwill
Profit on disposal                    0.1       --       0.1      --
Total operating income/(loss)         $ 17.3    $ (20.2) $ 72.6   $ 26.1
                                                              Schedule 2B
NON-GAAP MEASURES                     Three Months Ended Nine Months Ended
                                     September 30       September 30
(in millions)                         2012      2011     2012     2011
Net income/(loss)                     $ 15.5    $ (16.8) $ 55.6   $ 29.3
Interest expense, net                 0.2       0.7      0.8      2.4
Income taxes                          1.5       (8.4)    12.9     3.3
Depreciation and amortization         2.7       3.5      8.0      10.6
Impairment of Octane Additives        0.3       0.6      0.9      1.7
segment goodwill
EBITDA                                20.2      (20.4)   78.2     47.3
Fuel Specialties                      20.6      21.0     61.2     57.9
Performance Chemicals                 6.5       6.5      21.6     26.2
Octane Additives                      1.9       (37.6)   22.9     (26.4)
Pension credit/(charge)               --        (0.1)    0.2      (0.3)
Corporate costs                       (8.7)     (5.9)    (24.3)   (19.0)
                                     20.3      (16.1)   81.6     38.4
Restructuring charge                  (0.1)     --       (0.2)    --
Profit on disposal                    0.1       --       0.1      --
Other net (expense)/income            (0.1)     (4.3)    (3.3)    8.9
EBITDA                                $ 20.2    $ (20.4) $ 78.2   $ 47.3

                                                              Schedule 3
                                                 September 30, December 31,
(in millions)                                     2012          2011
Current assets:                                                
Cash and cash equivalents                        $129.6      $76.2
Short-term investments                           4.0           4.8
Trade and other accounts receivable              93.4          99.4
Inventories                                      143.8         135.9
Prepaid expenses                                 4.3           4.0
Total current assets                              375.1         320.3
Property, plant and equipment                     46.7          45.9
Goodwill                                          140.5         141.5
Intangible assets                                 21.0          17.7
Deferred finance costs                            1.4           1.7
Deferred tax assets                               20.2          19.7
Pension asset                                     28.6          21.4
Other non-current assets                          0.9           0.6
Total assets                                      $634.4      $568.8
Liabilities and Stockholders' Equity                           
Current liabilities:                                           
Accounts payable                                 $54.8       $53.3
Current portion of accrued liabilities           82.3          77.0
Accrued income taxes                             3.1           2.0
Current portion of long-term debt                5.0           5.0
Current portion of plant closure provisions      3.6           4.1
Current portion of unrecognized tax benefits     3.0           3.2
Current portion of deferred income               0.3           1.4
Total current liabilities                         152.1         146.0
Accrued liabilities, net of current portion       4.1           4.9
Long-term debt, net of current portion            29.0          30.0
Plant closure provisions, net of current portion  24.9          24.5
Unrecognized tax benefits, net of current portion 9.5           9.4
Deferred tax liabilities                          4.3           2.9
Pension liability                                 6.5           6.3
Other non-current liabilities                     0.1           0.8
Deferred income, net of current portion           0.9           0.9
Total stockholders' equity                        403.0       343.1
Total liabilities and stockholders' equity        $634.4      $568.8

                                                           Schedule 4
                                             Nine Months Ended
                                             September 30
(in millions)                                 2012           2011
Cash Flows from Operating Activities                        
Net income                                    $55.6        $29.3
Adjustments to reconcile net income to cash                 
provided by operating activities:
Depreciation and amortization                8.3            11.1
Impairment of Octane Additives segment       0.9            1.7
Deferred taxes                               0.9            (4.0)
Profit on disposal of property, plant and    (0.1)          --
Non-cash issue of promissory note in civil   --             15.0
complaint settlement
Non-cash issue of treasury stock in civil    --             5.0
complaint settlement
Changes in working capital                   6.0            (24.3)
Excess tax benefit from stock based payment  (2.1)          (1.2)
Accrued income taxes                         1.0            (9.6)
Movement on plant closure provisions         --             (0.5)
Cash contributions to defined benefit        (7.0)          (6.9)
pension plans
Non-cash expense of defined benefit pension  0.1            0.3
Stock option compensation                    2.4            2.3
Movements on other non-current assets and    (2.0)          2.7
Net cash provided by operating activities     64.0           20.9
Cash Flows from Investing Activities                        
Capital expenditures                          (5.7)          (5.9)
Capitalization of internally developed        (6.4)          --
software and other costs
Proceeds on disposal of property, plant and   0.2            --
Purchase of short-term investments            (3.3)          (4.2)
Sale of short-term investments                4.2            3.6
Net cash (used in) investing activities       (11.0)         (6.5)
Cash Flows from Financing Activities                        
Net receipt of revolving credit facility      4.0            43.0
Repayment of term loan                        --             (15.0)
Repayment of promissory note                  (5.0)          --
Excess tax benefit from stock based payment   2.1            1.2
Issue of treasury stock                       0.8            0.7
Repurchase of common stock                    (1.4)          (19.5)
Net cash provided by financing activities     0.5            10.4
Effect of foreign currency exchange rate      (0.1)          0.2
changes on cash
Net change in cash and cash equivalents       53.4           25.0
Cash and cash equivalents at beginning of     76.2           107.1
Cash and cash equivalents at end of period    $ 129.6        $ 132.1
Amortization of deferred finance costs of $0.3 million (2011 -- $0.5 million)
are included in depreciation and amortization in the cash flow statement but
in interest expense in the income statement.

CONTACT: Brian Watt
         Innospec Inc.
         Robert D. Ferris
         RF|Binder Partners
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