Innospec Reports Fourth Quarter and Full Year 2012 Financial Results

Innospec Reports Fourth Quarter and Full Year 2012 Financial Results

 Fourth quarter adjusted non-GAAP diluted EPS of $0.89 meets our expectations

         Record sales in Fuel Specialties, continued margin strength

             Higher volumes in all Performance Chemicals' markets

   Acquisition of Strata Control complete; healthy balance sheet positions
                        Innospec for continued growth

LITTLETON, Colo., Feb. 12, 2013 (GLOBE NEWSWIRE) -- Innospec Inc.
(Nasdaq:IOSP) today announced its financial results for the fourth quarter and
full year ended December 31, 2012.

Total net sales for the fourth quarter were $213.7 million, a 7 percent
increase from $200.5 million in the corresponding period last year. Net income
was $12.7 million, or $0.53 per diluted share, compared with $19.6 million, or
$0.82 per diluted share, a year ago. EBITDA (earnings before interest, taxes,
depreciation, amortization and impairment) for the quarter was $30.5 million,
a 24 percent increase from $24.5 million reported a year ago.

Results for the fourth quarter include some special items, which are
summarized in the table below. For the fourth quarter of 2012, these items had
a combined negative impact of $8.7 million, or $0.36 per diluted share; a year
ago, similar items reduced net income by $3.0 million, or $0.12 per diluted
share. Excluding these items from both periods, diluted earnings per share for
the fourth quarter of 2012 were $0.89, in line with our expectations, a
decrease from $0.94 a year ago.

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 December 31, Quarter ended December
                            2012                       31, 2011
                            Income                     Income
(in millions, except share  before   Net     Diluted   before  Net    Diluted
and per share data)         income   income  EPS       income  income EPS
                            taxes                      taxes
                                                                
Reported GAAP amounts       $ 26.7   $ 12.7  $ 0.53    $ 20.0  $ 19.6 $ 0.82
                                                                
Tax impact of               7.4      7.4     0.31      --      --     --
acquisition-related funding
Acquisition-related costs   2.5      2.0     0.08      --      --     --
Foreign currency exchange   (1.3)    (1.0)   (0.04)    2.6     2.2    0.09
(gains)/losses
Adjustment of income tax    0.3      0.3     0.01      0.8     0.8    0.03
provisions
                           8.9      8.7     0.36      3.4     3.0    0.12
                                                                
Adjusted non-GAAP amounts   $ 35.6   $ 21.4  $ 0.89    $ 23.4  $ 22.6 $ 0.94

Commenting on the results, Patrick Williams, President and Chief Executive
Officer, said, "Overall, we had a very good fourth quarter, both operationally
and financially, and we finished the year in a very solid position.We
delivered on our commitments and shared our success by returning a special
dividend to shareholders.We believe Innospec is poised for continued growth
and expansion.

"Both Fuel Specialties and Performance Chemicals performed above expectations
during the quarter.Despite a mild start to the winter season, Fuel
Specialties delivered record top-line results, driven by strong performances
in EMEA and the Americas during the quarter.Gross margin, benefitting from a
richer sales mix, was 31.3 percent, enabling Fuel Specialties to close the
full year above our 30 percent target.

"Performance Chemicals delivered excellent sales growth, driven by higher
volumes across Personal Care, Fragrances and Polymers, along with some margin
improvement.While we feel good about our performance and strategy in
Performance Chemicals, we are constantly monitoring the underlying growth
prospects for the industry as a whole.

"As anticipated by management, our Octane Additives business had a strong
fourth quarter, including a large order held over from the third quarter.At
the same time, the TEL business continues to wind down, and we will continue
to work responsibly with the few remaining countries as they transition to
unleaded gasoline."

For the full year, total revenues of $776.4 million were up slightly from
$774.4 million in 2011.Net income for 2012 was $68.3 million, or $2.86 per
diluted share, compared with $48.9 million, or $1.99 per diluted share, a year
ago.EBITDA for the year was $108.7 million, compared with $71.8 million in
2011.Special items reduced net income for the year by $11.4 million, or $0.48
per diluted share; in 2011, similar items reduced net income by $35.0 million,
or $1.43 per diluted share.Excluding these special items from both periods,
diluted earnings per share for the year were $3.34, a 2 percent decrease from
$3.42 in 2011.

                              Year ended December 31, Year ended December 31,
                               2012                    2011
                               Income                  Income
(in millions, except share and before  Net    Diluted  before  Net    Diluted
per share data)                income  income EPS      income  income EPS
                               taxes                   taxes
                                                                
Reported GAAP amounts          $ 95.2  $ 68.3 $ 2.86   $52.6  $ 48.9 $ 1.99
                                                                
Tax impact of                  7.4     7.4    0.31     --      --     --
acquisition-related funding
Acquisition-related costs      2.8     2.2    0.09     3.0     2.5    0.10
Foreign currency exchange      2.0     1.6    0.07     (6.5)   (5.4)  (0.21)
losses/(gains)
Adjustment of income tax       0.2     0.2    0.01     4.0     4.0    0.16
provisions
Civil complaint settlement     --      --     --       45.0    29.3   1.19
Civil complaint legal and      --      --     --       5.5     4.6    0.19
professional expenses
                              12.4    11.4   0.48     51.0   35.0   1.43
                                                                
Adjusted non-GAAP amounts      $ 107.6 $ 79.7 $ 3.34   $103.6 $ 83.9 $3.42

Net sales in Fuel Specialties for the quarter were a record $155.0 million, a
7 percent increase from $144.7 million in last year's fourth quarter.By
region, sales rose 10 percent in the Americas driven by increased volumes, and
9 percent in EMEA, primarily due to a richer sales mix and improved pricing
partially offset by a weaker Euro.Sales declined 4 percent in Asia-Pacific,
driven by a reduction in volumes.The segment's gross margin for the quarter
was 31.3 percent, returning above the 30 percent target, and operating income
was $29.4 million, up 8 percent.For the full year, the segment's sales were
up 1 percent to $527.2 million and operating income increased 7 percent to
$87.6 million.

In Performance Chemicals, revenues for the quarter were $41.4 million, up 9
percent from $37.9 million a year ago, driven by improved volumes across all
markets, including continued expansion in Polymers and Personal Care.By
region, sales rose 19 percent in the Americas, primarily due to strong volume
growth in the Personal Care and Fragrance markets, and 4 percent in EMEA due
to increased Polymers volumes partially offset by a weaker Euro.Revenues fell
3 percent in Asia-Pacific from last year, reflecting the decline in the
region's Personal Care market.The segment's gross margin for the quarter was
24.6 percent, up 9.8 percentage points over the corresponding period, as
higher volumes improved manufacturing efficiencies.Operating income of $5.5
million for the quarter was up significantly from $0.9 million reported in the
year-ago period.Sales for the full year increased 1 percent, to $179.6
million, and operating income of $24.3 million was 8 percent higher than the
$22.6 million reported in 2011.

Octane Additives' net sales for 2012's fourth quarter were $17.3 million, down
from $17.9 million a year ago.Gross margin for the quarter was 36.4 percent,
compared to 47.5 percent in the year-ago period, primarily due to customer
mix.The segment's operating income for the quarter was $4.1 million, a
decline from $5.4 million reported a year ago.For the year, Octane Additives'
net sales were $69.6 million, a 9 percent decrease, and its operating income
was $26.0 million, compared to an operating loss of $22.4 million in 2011,
which included a $45.0 million pre-tax charge related to the civil complaint
settlement, and $5.5 million associated legal and professional expenses.

Corporate costs for the quarter were $13.0 million, compared with $8.9 million
a year ago, primarily due to $2.5 million in acquisition-related costs.The
full-year tax charge of $26.9 million was higher than forecast primarily due
to the non-cash impact of acquisition-related funding adding $7.4 million, or
$0.31 per diluted share, to the charge.

For the full year net cash generated from operations was $61.3 million, driven
primarily by strong trading performance.At year-end, Innospec had $22.4
million in cash and cash equivalents on hand.In the fourth quarter, the
Company made a special dividend of $46.7 million, $2.00 per share, and paid
$53.1 million net in cash in relation to the acquisition of Strata Control
Services, Inc.

Mr. Williams concluded, "We continue to deliver on organic growth in our two
core businesses, while continuing to pursue acquisition opportunities that
support our strategic objectives.In this respect, we closed on the
acquisition of Strata Control in the Oilfield Specialties area in December, an
important first step in the build-out of our business in this sector.We will
continue to invest in external growth opportunities and in the development of
new technologies, which are so important to our core operation's competitive
advantage.

"Innospec is highly cash generative and we consistently maintain close control
of costs, driving profitability and financial liquidity.That is why we were
able to return $47 million as a special dividend to shareholders; pay out some
$53 million in cash for the Strata acquisition; and sustain working capital
requirements, while still ending the year close to net cash/net debt neutral,
and with a strong balance sheet.

"We remain optimistic about our future growth prospects."

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 tax impact of acquisition-related funding,
acquisition-related costs, foreign currency exchange losses/(gains),
adjustment of income tax provisions, 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 below.

About Innospec Inc.

Innospec Inc. is an international specialty chemicals company with
approximately 900 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; Polymers; 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

INNOSPEC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

                                       Three Months Ended Twelve Months Ended
                                        December 31        December 31
(in millions, except share and per      2012      2011     2012      2011
share data)
                                                                 
Net sales                               $ 213.7   $ 200.5  $ 776.4   $ 774.4
Cost of goods sold                      (148.7)   (142.7)  (540.0)   (548.0)
Gross profit                            65.0      57.8     236.4     226.4
                                                                 
Operating expenses:                                               
Selling, general and administrative     (33.7)    (28.8)   (117.1)   (155.9)
Research and development                (5.2)     (4.6)    (19.6)    (18.3)
Restructuring charge                    --        (0.6)    (0.2)     (0.6)
Impairment of Octane Additives segment  (0.3)     (0.3)    (1.2)     (2.0)
goodwill
Profit on disposal                      --        --       0.1       --
Total operating expenses                (39.2)    (34.3)   (138.0)   (176.8)
Operating income                        25.8      23.5     98.4      49.6
Other net income/(expense)              1.3       (2.6)    (2.0)     6.3
Interest expense, net                   (0.4)     (0.9)    (1.2)     (3.3)
Income before income taxes              26.7      20.0     95.2      52.6
Income taxes                            (14.0)    (0.4)    (26.9)    (3.7)
Net income                              $ 12.7    $ 19.6   $ 68.3    $ 48.9
                                                                 
Earnings per share:                                              
Basic                                   $ 0.54    $ 0.85   $ 2.95    $ 2.07
Diluted                                 $ 0.53    $ 0.82   $ 2.86    $ 1.99
                                                                 
Weighted average shares outstanding (in                           
thousands):
Basic                                   23,303    23,184  23,187    23,568
Diluted                                 23,913    24,037  23,850    24,520



INNOSPEC INC. AND SUBSIDIARIES

                                                         Schedule 2A
                                                         
SEGMENTAL ANALYSIS OF RESULTS           Three Months Ended Twelve Months Ended
                                        December 31        December 31
(in millions)                           2012     2011     2012      2011
                                                                 
Net sales:                                                        
Fuel Specialties                        $ 155.0   $ 144.7  $ 527.2   $ 521.2
Performance Chemicals                   41.4      37.9     179.6     177.0
Octane Additives                        17.3      17.9     69.6      76.2
                                       213.7     200.5    776.4     774.4
                                                                 
Gross profit:                                                     
Fuel Specialties                        48.5      43.7     158.7     149.3
Performance Chemicals                   10.2      5.6      43.8      40.6
Octane Additives                        6.3       8.5      33.9      36.5
                                       65.0      57.8     236.4     226.4
                                                                 
Operating income:                                                 
Fuel Specialties                        29.4      27.2     87.6      81.7
Performance Chemicals                   5.5       0.9      24.3      22.6
Octane Additives                        4.1       5.4      26.0      (22.4)
Pension credit/(charge)                 0.1       (0.2)    0.3       (0.5)
Corporate costs                         (13.0)    (8.9)    (38.5)    (29.2)
                                       26.1      24.4     99.7      52.2
                                                                 
Restructuring charge                    --        (0.6)    (0.2)     (0.6)
Impairment of Octane Additives segment  (0.3)     (0.3)    (1.2)     (2.0)
goodwill
Profit on disposal                      --        --       0.1       --
Total operating income                  $ 25.8    $ 23.5   $ 98.4    $ 49.6

                                                         
                                                         
                                                         Schedule 2B
                                                         
NON-GAAP MEASURES                       Three Months Ended Twelve Months Ended
                                        December 31        December 31
(in millions)                           2012      2011     2012       2011
                                                                  
Net income                              $ 12.7    $ 19.6   $ 68.3     $ 48.9
Interest expense, net                   0.4       0.9      1.2        3.3
Income taxes                            14.0      0.4      26.9       3.7
Depreciation and amortization           3.1       3.3      11.1       13.9
Impairment of Octane Additives segment  0.3       0.3      1.2        2.0
goodwill
EBITDA                                  30.5      24.5     108.7      71.8
                                                                  
Fuel Specialties                        30.5      28.2     91.7       86.1
Performance Chemicals                   6.4       2.4      28.0       28.6
Octane Additives                        4.4       5.8      27.3       (20.6)
Pension credit/(charge)                 0.1       (0.2)    0.3        (0.5)
Corporate costs                         (12.2)    (8.5)    (36.5)     (27.5)
                                       29.2      27.7     110.8      66.1
Restructuring charge                    --        (0.6)    (0.2)      (0.6)
Profit on disposal                      --        --       0.1        --
Other net income/(expense)              1.3       (2.6)    (2.0)      6.3
EBITDA                                  $ 30.5    $ 24.5   $ 108.7    $ 71.8



Schedule 3

INNOSPEC INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

                                                 December 31, December 31,
(in millions)                                     2012         2011
                                                             
Assets                                                        
                                                             
Current assets:                                               
Cash and cash equivalents                         $ 22.4       $ 76.2
Short-term investments                            5.1          4.8
Trade and other accounts receivable               115.7        99.4
Inventories                                       138.3        135.9
Current portion of deferred tax assets            11.0         --
Prepaid expenses                                  4.1          4.0
Total current assets                              296.6        320.3
                                                             
Property, plant and equipment                     49.8         45.9
Goodwill                                          149.0        141.5
Other intangible assets                           68.6         17.7
Deferred finance costs                            1.3          1.7
Deferred tax assets, net of current portion       12.7         19.7
Pension asset                                     --           21.4
Other non-current assets                          1.4          0.6
Total assets                                      $ 579.4      $ 568.8
                                                             
Liabilities and Stockholders' Equity                          
                                                             
Current liabilities:                                          
Accounts payable                                  $ 57.3       $ 53.3
Current portion of accrued liabilities            72.1         77.0
Accrued income taxes                              3.2          2.0
Current portion of long-term debt                 5.0          5.0
Current portion of plant closure provisions       5.1          4.1
Current portion of unrecognized tax benefits      3.0          3.2
Current portion of deferred tax liabilities       0.2          --
Current portion of deferred income                1.4          1.4
Total current liabilities                         147.3        146.0
                                                             
Accrued liabilities, net of current portion       --           4.9
Long-term debt, net of current portion            25.0         30.0
Plant closure provisions, net of current portion  25.3         24.5
Unrecognized tax benefits, net of current portion 9.8          9.4
Deferred tax liabilities, net of current portion  3.6          2.9
Pension liabilities                               46.0         6.3
Acquisition-related contingent consideration      4.3          --
Other non-current liabilities                     0.2          0.8
Deferred income, net of current portion           0.9          0.9
Total stockholders' equity                        317.0        343.1
Total liabilities and stockholders' equity        $ 579.4      $ 568.8



Schedule 4

INNOSPEC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                          Twelve Months Ended
                                                           December 31
(in millions)                                              2012      2011
                                                                   
Cash Flows from Operating Activities                                
                                                                   
Net income                                                 $ 68.3    $ 48.9
Adjustments to reconcile net income to cash provided by             
operating activities:
Depreciation and amortization                              11.5      14.4
Impairment of Octane Additives segment goodwill            1.2       2.0
Deferred taxes                                             12.6      (4.0)
Profit on disposal of property, plant and equipment        (0.1)     --
(Repayment)/issue of promissory note in civil complaint    (5.0)     15.0
settlement
Non-cash issue of treasury stock in civil complaint        --        5.0
settlement
Changes in working capital                                 (20.5)    (43.3)
Excess tax benefit from stock based payment arrangements   (2.2)     (1.1)
Accrued income taxes                                       1.0       (4.1)
Movement on plant closure provisions                       1.8       1.1
Cash contributions to defined benefit pension plans        (9.4)     (9.5)
Non-cash expense of defined benefit pension plans          0.1       1.0
Stock option compensation                                  3.1       3.1
Movements on unrecognized tax benefits                     0.2       4.0
Movements on other non-current assets and liabilities      (1.3)     2.2
Net cash provided by operating activities                  61.3      34.7
                                                                   
Cash Flows from Investing Activities                                
                                                                   
Capital expenditures                                       (8.8)     (7.0)
Business combinations, net of cash acquired                (53.1)    --
Internally developed software and other costs              (8.5)     (3.1)
Proceeds on disposal of property, plant and equipment      0.2       --
Purchase of short-term investments                         (5.0)     (5.0)
Sale of short-term investments                             4.9       4.4
Net cash (used in) investing activities                    (70.3)    (10.7)
                                                                   
Cash Flows from Financing Activities                                
                                                                   
Net receipt of revolving credit facility                   --        13.0
Repayment of term loan                                     --        (40.0)
Refinancing costs                                          --        (1.7)
Excess tax benefit from stock based payment arrangements   2.2       1.1
Dividend paid                                              (46.7)    --
Issue of treasury stock                                    1.2       0.7
Repurchase of common stock                                 (1.4)     (28.1)
Net cash (used in) financing activities                    (44.7)    (55.0)
Effect of foreign currency exchange rate changes on cash  (0.1)     0.1
Net change in cash and cash equivalents                    (53.8)    (30.9)
Cash and cash equivalents at beginning of year             76.2      107.1
Cash and cash equivalents at end of year                   $ 22.4    $ 76.2

Amortization of deferred finance costs of $0.4 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.
         +44-151-356-6241
         Brian.Watt@innospecinc.com
        
         Robert D. Ferris
         RF|Binder Partners
         +1-212-994-7505
         Robert.Ferris@RFBinder.com