Performance Chemicals operating income more than doubles on personal care growth Fuel Specialties operating income up double digits with margin expansion As expected, Oilfield Services results impacted by lower production chemical activity Debt-free balance sheet with over $240 million in net cash GAAP EPS $1.24 and adjusted non-GAAP EPS $1.39 ENGLEWOOD, Colo., Aug. 06, 2024 (GLOBE NEWSWIRE) -- Innospec Inc. (NASDAQ:IOSP) today announced its financial results for the second quarter ended June 30, 2024. Total revenues for the second quarter were $435.0 million, a decrease of 9 percent from $480.4 million in the corresponding period last year. Net income for the quarter was $31.2 million or $1.24 per diluted share compared to $28.9 million or $1.16 per diluted share recorded last year. Adjusted EBITDA for the quarter was $54.1 million compared to $47.4 million reported in the same period a year ago. Results for this quarter include some special items, which are summarized in the table below. Excluding these items, adjusted non-GAAP EPS in the second quarter was $1.39 per diluted share, compared to $1.28 per diluted share a year ago. Cash from operating activities was $4.7 million before capital expenditures of $15.2 million. The quarter closed with net cash of $240.2 million and in the second quarter, the Company paid its semi-annual dividend of 76 cents per common share. Adjusted EBITDA, income before income taxes excluding special items and net income excluding special items and related per-share amounts together with net cash, are non-GAAP financial measures that are defined and reconciled with GAAP results herein and in the schedules below.   Quarter ended June 30, 2024 Quarter ended June 30, 2023                                       (in millions, except share and per share data)   Income beforeincome taxes   Netincome   Diluted EPS   Income beforeincome taxes   Net income   Diluted EPS                                       Reported GAAP amounts $ 43.7   $ 31.2   $ 1.24   $ 36.6   $ 28.9   $ 1.16                                         Amortization of acquired intangible assets   3.2     2.4     0.10     2.6     2.0     0.08   Legacy costs of closed operations   0.8     0.6     0.02     0.9     0.7     0.03   Adjustment to fair value of contingent consideration   0.6     0.4     0.02     -     -     -   Adjustment of income tax provisions   -     0.2     0.01     -     0.3     0.01   Foreign currency exchange losses/(gains)   0.1     0.1     -     (1.2 )   (0.9 )   (0.04 ) Acquisition related costs   -     -     -     1.5     1.1     0.04       4.7     3.7     0.15                     Adjusted non-GAAP amounts $ 48.4   $ 34.9   $ 1.39   $ 40.4   $ 32.1   $ 1.28                                         Commenting on the second quarter results, Patrick S. Williams, President and Chief Executive Officer, said, "This was a mixed quarter for Innospec as Fuel Specialties and Performance Chemicals continued to deliver strong results while Oilfield Services declined as expected on significant production chemical headwinds. Nevertheless, overall operating income grew 19 percent and operating margins improved. Performance Chemicals operating income more than doubled over the prior year on higher sales and improved gross margins. Demand for our mild and natural personal care technologies continued to drive growth in operating income. We are excited by opportunities in all our end-markets and remain cautiously optimistic that we can maintain these improved results in the second half of 2024. Our recent acquisition of QGP Quimica is performing in line with expectations and is well positioned for growth. In Fuel Specialties, gross margins were at the upper end of our targeted 32 to 35 percent range and operating income and margins improved over the prior year. We continue to target further sales growth and margin improvement in the business as we pursue a diverse set of end-market and geographic opportunities in both fuel and non-fuel applications. As anticipated, Oilfield Services results were impacted by significantly lower production chemical activity in the quarter. As of the end of July this activity has not recovered. While potential remains for some near-term recovery in this business, we currently expect to see lower sales levels continuing through the second half of 2024. In parallel we plan to remain focused on several exciting, technology-based sales growth and margin improvement opportunities in our other oilfield segments." Revenues in Performance Chemicals of $160.1 million were up 25 percent over the second quarter of last year with acquisition growth of 7 percent, volume growth of 29 percent and an adverse price/mix of 11 percent. Gross margins of 22.6 percent increased by 5.4 percentage points from the same quarter last year. Operating income of $21.2 million more than doubled from $9.2 million in the corresponding prior year period. Revenues in Fuel Specialties of $166.6 million were up 8 percent from $154.2 million in the second quarter of last year. Volumes were up 20 percent offset by an adverse price/mix of 12 percent. Gross margins of 34.6 percent increased by 5.5 percentage points over last year. Operating income of $30.4 million was up 78 percent from $17.1 million a year ago. Adjusting for the $8.0 million loss in Brazil in the second quarter of 2023, prior year gross margins were 32.3 percent and operating income was $25.1 million. Revenues in Oilfield Services of $108.3 million for the quarter were down 45 percent from $198.4 million in the second quarter of last year. Gross margins of 30.6 percent decreased by 11.5 percentage points from the same quarter last year on a weaker sales mix. Operating income of $7.3 million decreased 74 percent from $28.0 million in the prior year period. Corporate costs for the quarter were $17.6 million, compared with $20.1 million a year ago. The effective tax rate for the quarter was 28.6 percent compared to 21.0 percent in the same period last year reflecting the geographical location of taxable profits. For the quarter, cash provided by operating activities was $4.7 million compared to $55.0 million a year ago. As of June 30, 2024, Innospec had $240.2 million in cash and cash equivalents and no debt. Mr. Williams concluded, "I am very pleased with the strong results in Fuel Specialties and Performance Chemicals in the quarter. We continue to execute as expected against a broad set of technology-led growth opportunities in these businesses. While the results and short-term outlook in Oilfield Services are clearly below our targeted range, our team remains intensely focused on leveraging our leading customer service and technology to build a stronger medium to long-term business. With over $240 million in net-cash we expect to continue to pursue organic investments and complementary M&A while returning value to shareholders through dividend growth." 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 adjusted EBITDA, income before income taxes excluding special items, net income excluding special items and related per share amounts together with net cash. Adjusted EBITDA is net income per our consolidated financial statements adjusted for the exclusion of interest (income)/expense, net, income taxes, depreciation and amortization, foreign currency exchange losses/(gains), legacy costs of closed operations, adjustment to fair value of contingent consideration and acquisition related costs. Income before income taxes, net income and diluted EPS, excluding special items, per our consolidated financial statements are adjusted for the exclusion of amortization of acquired intangible assets, legacy costs of closed operations, adjustment to fair value of contingent consideration, adjustment of income tax provisions, foreign currency exchange losses/(gains) and acquisition related costs. Net cash is cash and cash equivalents less total debt. 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, these non-GAAP measures address questions the Company routinely receives from analysts and investors and the Company has determined that it is appropriate to make this data available to all investors. 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 uses adjusted EPS (the most directly comparable GAAP financial measure for which is GAAP EPS) and net income excluding special items and adjusted EBITDA (the most directly comparable GAAP financial measure for which is GAAP net income) to allocate resources and evaluate the performance of the Company's operations and has provided a reconciliation of adjusted 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 2,400 employees in 22 countries. Innospec manufactures and supplies a wide range of specialty chemicals to markets in the Americas, Europe, the Middle East, Africa and Asia-Pacific.  The Performance Chemicals business creates innovative technology-based solutions for our customers in the Personal Care, Home Care, Agrochemical, Mining and Industrial markets. The Fuel Specialties business specializes in manufacturing and supplying fuel additives that improve fuel efficiency, boost engine performance and reduce harmful emissions. Oilfield Services provides specialty chemicals to all elements of the oil and gas exploration and production industry.  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," "estimates," "anticipates," "may," "could," "believes," "feels," "plans," "intends" or similar words or expressions, for example) which relate to earnings, growth potential, operating performance, events or developments that we expect or anticipate will or may occur in the future.  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 Innospec and affecting our business operations and prospects are described in Innospec's Annual Report on Form 10-K for the year ended December 31, 2023, Innospec's Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 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" in such reports.  Innospec undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Contacts: Corbin Barnes Innospec Inc. +44-151-355-3611   INNOSPEC INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME Schedule 1       Three Months Ended June 30   Six Months Ended June 30 (in millions, except share and per share data)   2024   2023   2024   2023                   Net sales $ 435.0   $ 480.4   $ 935.2   $ 990.0   Cost of goods sold   (308.1 )   (330.0 )   (652.6 )   (691.8 ) Gross profit   126.9     150.4     282.6     298.2                     Operating expenses:                 Selling, general and administrative   (73.4 )   (105.6 )   (166.1 )   (201.8 ) Research and development   (12.2 )   (10.6 )   (24.0 )   (21.2 ) Adjustment to fair value of contingent consideration   (0.6 )   -     (1.4 )   -   Profit on disposal of property, plant and equipment   -     -     0.1     -   Total operating expenses   (86.2 )   (116.2 )   (191.4