EX-10.1






PRESS RELEASE




 INNOSPEC REPORTS FOURTH QUARTER AND FULL YEAR 2015 FINANCIAL RESULTS




Full year sales up 5 percent and EBITDA up 9 percent year-on-year; Margins strong in core

businesses




Balance sheet remains healthy; net cash positive entering 2016




Adjusted EPS of $4.36 per share for 2015, continuing to deliver shareholder value




Depressed conditions in Oilfield Services drive weaker Q4 performance




Q4 sales and EBITDA down as anticipated




Englewood, CO – February 16, 2016 – Innospec Inc. (NASDAQ: IOSP) today announced its financial
results for the fourth quarter and full year ended December 31, 2015.



Total net sales for the fourth quarter were $246.0 million, a 15 percent decrease from $290.7
million in the corresponding period last year. For the full year, sales reached a record $1.0
billion, up 5 percent on 2014.



Net income for the quarter was $31.5 million, or $1.28 per diluted share, compared with $27.9
million, or $1.11 per diluted share, a year ago. EBITDA (earnings before interest, taxes,
depreciation, amortization and acquisition fair value adjustments) for the quarter was $39.8
million, down 20 percent from 2014’s fourth quarter.



Results for this quarter include some special items, which are summarized in the table below.
Excluding these items, adjusted non-GAAP EPS (earnings per share) in the fourth quarter was $1.24
per diluted share, compared to $1.28 per diluted share a year ago. Innospec closed the quarter in
a net cash position of $5.6 milion. The Company paid a semi-annual dividend of $0.31 per common
share during the quarter.



Despite challenging market conditions, Innospec continued to generate cash and, during the quarter
operating cash inflows were $27.1 million before capital expenditures of $7.2 million.



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, 2015	 	Quarter ended December 31, 2014
	 	 	Income before	 	Net	 	 	 	 	 	Income before	 	Net	 	 
	(in millions, except share and per share data)	 	income taxes	 	Income	 	Diluted EPS	 	income taxes	 	income	 	Diluted EPS
	Reported GAAP amounts
	 	$	35.2	 	 	$	31.5	 	 	$	1.28	 	 	$	42.7	 	 	$	27.9	 	 	$	1.11	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Adjustment to fair value of contingent consideration
	 	 	(9.1	)	 	 	(5.6	)	 	 	(0.23	)	 	 	(1.9	)	 	 	(1.4	)	 	 	(0.06	)
	Amortization of acquired intangible assets
	 	 	4.3	 	 	 	3.4	 	 	 	0.14	 	 	 	4.1	 	 	 	3.0	 	 	 	0.12	 
	Fair value acquisition accounting
	 	 	3.7	 	 	 	2.4	 	 	 	0.10	 	 	 	—	 	 	 	—	 	 	 	—	 
	Foreign currency exchange (gains)/losses
	 	 	(2.0	)	 	 	(1.5	)	 	 	(0.06	)	 	 	0.4	 	 	 	0.3	 	 	 	0.01	 
	Adjustment of income tax provisions
	 	 	0.3	 	 	 	0.3	 	 	 	0.01	 	 	 	2.0	 	 	 	2.0	 	 	 	0.08	 
	Acquisition-related costs
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	0.5	 	 	 	0.4	 	 	 	0.02	 
	 
	 	 	(2.8	)	 	 	(1.0	)	 	 	(0.04	)	 	 	5.1	 	 	 	4.3	 	 	 	0.17	 
	Adjusted non-GAAP amounts
	 	$	32.4	 	 	$	30.5	 	 	$	1.24	 	 	$	47.8	 	 	$	32.2	 	 	$	1.28	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 






Commenting on the results, Patrick S. Williams, President and Chief Executive Officer, said,

 


“As we anticipated, continued depressed crude oil prices have taken their toll on our Oilfield
Services business. Outside of this, our core businesses continue to perform to expectations and
plan, with Fuel Specialties and Performance Chemicals, continuing to deliver good results. Given
the challenges in our markets around the globe, we believe that a 9 percent increase in EBITDA for
the full year over 2014 is a significant achievement and that our continued healthy balance sheet
and close customer relationships help us to face the unsettled market environment with confidence.”



“In Oilfield Services, although we were able to hold our sales for much of 2015, crude oil prices
have continued to fall, with substantial impact on our customers. Although we believe we are doing
better than many in the industry, our fourth quarter was inevitably down, and we have continued to
align our cost base with business prospects and conditions.”



“Fuel Specialties operated to our expectations for the full year, but was softer in the fourth
quarter, impacted by order patterns and the very warm start to the winter across all regions. On a
positive note, our performance in EMEA is particularly encouraging, given continued sluggish
demand, and the headwinds of currency impacts in that region. Sales in both the Americas and Asia
Pacific have been progressing well, and we believe that recent contract wins and some organization
changes should pay dividends during 2016.”



“Within Performance Chemicals, our strategic Personal Care business has again added new products to
its portfolio, driving sales growth. We are delighted to see our ingredients being used in some
high profile customer launches. We are investing in new production facilities to support increased
sales, while creating capacity for future expansion. As we anticipated, headline results in this
business were offset by a softer performance in Polymers and further currency fluctuations.”



“We delivered the Octane Additives order in Q4 as planned. We now have a confirmed order for the
first part of 2016, which is similar to the order we fulfilled in Q4 2015. Beyond this we have no
further visibility.”



For the full year, total revenues of $1.0 billion increased 5 percent from $960.9 million in 2014.
Net income for 2015 was $119.5 million, or $4.86 per diluted share, compared to $84.1 million, or
$3.38 per diluted share, a year ago. EBITDA for the year was $153.3 million, up 9 percent from
$140.8 million in 2014. Special items increased net income for the full year by $12.4 million, or
$0.50 per diluted share; in 2014, similar items decreased net income by $7.2 million, or $0.29 per
diluted share.



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Year ended December 31, 2015	 	Year ended December 31, 2014
	 	 	Income before	 	Net	 	 	 	 	 	Income before	 	Net	 	 
	(in millions, except share and per share data)	 	income taxes	 	income	 	Diluted EPS	 	income taxes	 	income	 	Diluted EPS
	Reported GAAP amounts
	 	$	152.3	 	 	$	119.5	 	 	$	4.86	 	 	$	110.9	 	 	$	84.1	 	 	$	3.38	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Adjustment to fair value of contingent consideration
	 	 	(40.7	)	 	 	(24.2	)	 	 	(0.98	)	 	 	(1.9	)	 	 	(1.4	)	 	 	(0.06	)
	Amortization of acquired intangible assets
	 	 	17.0	 	 	 	13.3	 	 	 	0.54	 	 	 	14.0	 	 	 	10.5	 	 	 	0.42	 
	Fair value acquisition accounting
	 	 	3.7	 	 	 	2.4	 	 	 	0.10	 	 	 	—	 	 	 	—	 	 	 	—	 
	Adjustment of income tax provisions
	 	 	(2.3	)	 	 	(2.3	)	 	 	(0.09	)	 	 	(1.9	)	 	 	(1.9	)	 	 	(0.07	)
	Profit on disposal of subsidiary
	 	 	(1.6	)	 	 	(1.6	)	 	 	(0.07	)	 	 	—	 	 	 	—	 	 	 	—	 
	Foreign currency exchange gains
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(1.8	)	 	 	(1.4	)	 	 	(0.06	)
	Acquisition-related costs
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1.8	 	 	 	1.4	 	 	 	0.06	 
	 
	 	 	(23.9	)	 	 	(12.4	)	 	 	(0.50	)	 	 	10.2	 	 	 	7.2	 	 	 	0.29	 
	Adjusted non-GAAP amounts
	 	$	128.4	 	 	$	107.1	 	 	$	4.36	 	 	$	121.1	 	 	$	91.3	 	 	$	3.67	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 






Net sales in Fuel Specialties for the quarter were $186.3 million, a 14 percent decrease from
$216.8 million in last year’s fourth quarter, driven by reduced volumes in Oilfield Services and a
softer fourth quarter in Fuel Specialties in the Americas. Adjusting for the acquisition, revenues
fell by 19 percent year over year driven by a 10 percent reduction in volumes, 5 percent from a
combination of lower pricing and a weaker sales mix and 4 percent from the adverse currency
impacts. Excluding Oilfield Services, fuel revenues in the Americas fell by 12 percent year over
year due to a reduction in volumes due to order patterns and the warm start to the winter. In EMEA
and AsPac sales were broadly on par with last year. Overall, the segment’s gross margin for the
quarter was 35.3 percent, up 3.1 percentage points from 32.2 percent in last year’s fourth quarter,
and operating income was $ 25.6 million. For the full year, the segment’s sales were up 11 percent
to $758.3 million and operating income was broadly flat at $103.9 million.



In Performance Chemicals, revenues for the quarter were $39.2 million, down from $51.0 million last
year as a result of the disposal of the Aroma Chemicals business. Excluding the disposal, net
sales were up 6 percent from a year ago as volume growth of 14 percent was partially offset by 3
percent lower pricing and an adverse currency impact of 5 percent. By region, sales in the Americas
grew by 13 percent, while EMEA, was broadly flat, and AsPac fell by 14 percent. The segment’s
gross margin for the quarter was 27.3 percent benefitting from a richer sales mix as strong growth
in our strategic Personal Care business was offset by softness in the Polymers market. Operating
income for the quarter was $4.2 million. Sales for the full year were $194.5 million and
operating income was $23.5 million.



Octane Additives’ net sales for 2015’s fourth quarter were $20.5 million, compared to $22.9 million
a year ago. Gross margin for the quarter was 48.3 percent, and the segment’s operating income was
$8.8 million, compared to last year’s $10.6 million. For the year, Octane Additives’ net sales
were $59.5 million an 8 percent increase, and its operating income was $24.7 million, a 9 percent
increase from a year ago.



Corporate costs for the quarter were $13.5 million, up from $9.0 million a year ago driven
primarily by a legal fee recovery in 2014. The effective tax rate for the quarter was 10.5 percent
and, as we expected, the full year effective tax rate of 21.5 percent was lower than last year’s
24.2 percent.



For the full year, net cash generated from operations was $117.7 million, compared to $106.3
million during 2014. At year-end, Innospec had $141.7 million in cash, cash equivalents and
short-term investments and total debt of $136.1 million, resulting in a net cash position of $5.6
million.



Mr. Williams concluded, 



“While Innospec continues to perform well, the intense pressure on our oil and gas business has
meant that we have inevitably seen a significant slow-down which has impacted our results in Q4.
However, our other businesses remain strong, and we anticipate that we will continue to generate
good operating cash flow. During the quarter, we also paid our semi-annual dividend of 31 cents per
share, and still came in with a positive year-end cash position. We believe that our very healthy
balance sheet will enable us to ride out these market conditions, and that we should emerge as a
stronger player when the market recovers. We expect 2016 to present some formidable challenges, but
we feel that we are well-placed to deal with them positively and we continue to be focused on
future growth and generating shareholder value.”



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, income before income taxes excluding
special items 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 acquisition fair value adjustments.
Income before income taxes, net income and diluted EPS, excluding special items, per our
consolidated financial statements are adjusted for the exclusion of adjustment to fair value of
contingent consideration, amortization of acquired intangible assets, fair value acquisition
accounting, adjustment of income tax provisions, profit on disposal of subsidiary, foreign currency
exchange (gains)/losses and acquisition-related costs. 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 1300 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. The Fuel Specialties business
specializes in manufacturing and supplying the fuel additives that help improve fuel efficiency,
boost engine performance and reduce harmful emissions. This business also contains Oilfield
Services which provides specialty chemicals for oil & gas drilling and production operations.
Innospec’s Performance Chemicals business provides effective technology-based solutions for our
customers’ processes or products focused in the Personal Care and Polymers 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,” “estimates,” “anticipates,” “may,”
“believes,” “feels” 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, 2014, 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:



Brian Watt


Innospec Inc.


+44-151-356-6241


Brian.Watt@innospecinc.com



1



Schedule 1




INNOSPEC INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(in millions, except share and per share data)	 	 	 	 	 	 	 	 
	}	 	Three Months Ended	 	 	 	 	 	Twelve Months Ended
	}	 	December 31	 	 	 	 	 	December 31
	 	 	2015	 	 	 	 	 	2014	 	 	 	 	 	2015	 	 	 	 	 	2014
	Net sales
	 	$	246.0	 	 	 	 	 	 	$	290.7	 	 	$	 	 	 	 	1,012.3	 	 	 	 	 	 	$	960.9	 
	Cost of goods sold
	 	 	(159.7	)	 	 	 	 	 	 	(196.6	)	 	 	 	 	 	 	(666.3	)	 	 	 	 	 	 	(658.9	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Gross profit
	 	 	86.3	 	 	 	 	 	 	 	94.1	 	 	 	 	 	 	 	346.0	 	 	 	 	 	 	 	302.0	 
	Operating expenses:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Selling, general and administrative
	 	 	(55.1	)	 	 	 	 	 	 	(47.1	)	 	 	 	 	 	 	(206.7	)	 	 	 	 	 	 	(169.2	)
	Research and development
	 	 	(6.0	)	 	 	 	 	 	 	(4.9	)	 	 	 	 	 	 	(25.3	)	 	 	 	 	 	 	(22.2	)
	Adjustment to fair value of contingent consideration
	 	 	9.1	 	 	 	 	 	 	 	1.9	 	 	 	 	 	 	 	40.7	 	 	 	 	 	 	 	1.9	 
	Profit on disposal of subsidiary
	 	 	—	 	 	 	 	 	 	 	—	 	 	 	 	 	 	 	1.6	 	 	 	 	 	 	 	—	 
	Total operating expenses
	 	 	(52.0	)	 	 	 	 	 	 	(50.1	)	 	 	 	 	 	 	(189.7	)	 	 	 	 	 	 	(189.5	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Operating income
	 	 	34.3	 	 	 	 	 	 	 	44.0	 	 	 	 	 	 	 	156.3	 	 	 	 	 	 	 	112.5	 
	Other net income/(expense)
	 	 	2.0	 	 	 	 	 	 	 	(0.4	)	 	 	 	 	 	 	—	 	 	 	 	 	 	 	1.8	 
	Interest expense, net
	 	 	(1.1	)	 	 	 	 	 	 	(0.9	)	 	 	 	 	 	 	(4.0	)	 	 	 	 	 	 	(3.4	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Income before income taxes
	 	 	35.2	 	 	 	 	 	 	 	42.7	 	 	 	 	 	 	 	152.3	 	 	 	 	 	 	 	110.9	 
	Income taxes
	 	 	(3.7	)	 	 	 	 	 	 	(14.8	)	 	 	 	 	 	 	(32.8	)	 	 	 	 	 	 	(26.8	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net income
	 	$	31.5	 	 	 	 	 	 	$	27.9	 	 	 	 	 	 	$	119.5	 	 	 	 	 	 	$	84.1	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Earnings per share:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic
	 	$	1.31	 	 	 	 	 	 	$	1.14	 	 	 	 	 	 	$	4.96	 	 	 	 	 	 	$	3.45	 
	Diluted
	 	$	1.28	 	 	 	 	 	 	$	1.11	 	 	 	 	 	 	$	4.86	 	 	 	 	 	 	$	3.38	 
	Weighted average shares outstanding (in thousands):
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic
	 	 	24,093	 	 	 	 	 	 	 	24,384	 	 	 	 	 	 	 	24,107	 	 	 	 	 	 	 	24,391	 
	Diluted
	 	 	24,598	 	 	 	 	 	 	 	25,111	 	 	 	 	 	 	 	24,612	 	 	 	 	 	 	 	24,878	 






INNOSPEC INC. AND SUBSIDIARIES




Schedule 2A




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	SEGMENTAL ANALYSIS OF RESULTS	 	Three Months Ended	 	Twelve Months Ended
	 	 	December 31	 	December 31
	(in millions)	 	2015	 	2014	 	2015	 	2014
	Net sales:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Fuel Specialties
	 	$	186.3	 	 	$	216.8	 	 	$	758.3	 	 	$	682.2	 
	Performance Chemicals
	 	 	39.2	 	 	 	51.0	 	 	 	194.5	 	 	 	223.5	 
	Octane Additives
	 	 	20.5	 	 	 	22.9	 	 	 	59.5	 	 	 	55.2	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	246.0	 	 	 	290.7	 	 	 	1,012.3	 	 	 	960.9	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Gross profit:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Fuel Specialties
	 	 	65.7	 	 	 	69.9	 	 	 	265.1	 	 	 	219.0	 
	Performance Chemicals
	 	 	10.7	 	 	 	11.8	 	 	 	52.4	 	 	 	54.4	 
	Octane Additives
	 	 	9.9	 	 	 	12.4	 	 	 	28.5	 	 	 	28.6	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	86.3	 	 	 	94.1	 	 	 	346.0	 	 	 	302.0	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Operating income:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Fuel Specialties
	 	 	25.6	 	 	 	36.6	 	 	 	103.9	 	 	 	104.4	 
	Performance Chemicals
	 	 	4.2	 	 	 	4.7	 	 	 	23.5	 	 	 	25.6	 
	Octane Additives
	 	 	8.8	 	 	 	10.6	 	 	 	24.7	 	 	 	22.6	 
	Pension credit/(charge)
	 	 	0.1	 	 	 	(0.8	)	 	 	0.2	 	 	 	(3.3	)
	Corporate costs
	 	 	(13.5	)	 	 	(9.0	)	 	 	(38.3	)	 	 	(38.7	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	25.2	 	 	 	42.1	 	 	 	114.0	 	 	 	110.6	 
	Adjustment to fair value of contingent consideration
	 	 	9.1	 	 	 	1.9	 	 	 	40.7	 	 	 	1.9	 
	Profit on disposal of subsidiary
	 	 	—	 	 	 	—	 	 	 	1.6	 	 	 	—	 
	Total operating income
	 	$	34.3	 	 	$	44.0	 	 	$	156.3	 	 	$	112.5	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 






Schedule 2B




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	NON-GAAP MEASURES	 	Three Months Ended	 	Twelve Months Ended
	 	 	December 31	 	December 31
	(in millions)	 	2015	 	2014	 	2015	 	2014
	Net income
	 	$	31.5	 	 	$	27.9	 	 	$	119.5	 	 	$	84.1	 
	Interest expense, net
	 	 	1.1	 	 	 	0.9	 	 	 	4.0	 	 	 	3.4	 
	Income taxes
	 	 	3.7	 	 	 	14.8	 	 	 	32.8	 	 	 	26.8	 
	Depreciation and amortization
	 	 	8.9	 	 	 	7.8	 	 	 	34.0	 	 	 	28.4	 
	Adjustment to fair value of contingent consideration
	 	 	(9.1	)	 	 	(1.9	)	 	 	(40.7	)	 	 	(1.9	)
	Fair value acquisition accounting
	 	 	3.7	 	 	 	—	 	 	 	3.7	 	 	 	—	 
	EBITDA
	 	 	39.8	 	 	 	49.5	 	 	 	153.3	 	 	 	140.8	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Fuel Specialties
	 	 	34.9	 	 	 	40.8	 	 	 	128.8	 	 	 	118.0	 
	Performance Chemicals
	 	 	5.9	 	 	 	6.8	 	 	 	30.5	 	 	 	34.2	 
	Octane Additives
	 	 	8.9	 	 	 	10.7	 	 	 	25.1	 	 	 	23.0	 
	Pension credit/(charge)
	 	 	0.1	 	 	 	(0.8	)	 	 	0.2	 	 	 	(3.3	)
	Corporate costs
	 	 	(12.0	)	 	 	(7.6	)	 	 	(32.9	)	 	 	(32.9	)
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	37.8	 	 	 	49.9	 	 	 	151.7	 	 	 	139.0	 
	Profit on disposal of subsidiary
	 	 	—	 	 	 	—	 	 	 	1.6	 	 	 	—	 
	Other net income/(expense)
	 	 	2.0	 	 	 	(0.4	)	 	 	—	 	 	 	1.8	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	EBITDA
	 	$	39.8	 	 	$	49.5	 	 	$	153.3	 	 	$	140.8	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 






2




Schedule 3




INNOSPEC INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS




	 	 	 	 	 	 	 	 	 
	 	 	December 31,	 	December 31,
	(in millions)	 	2015	 	2014
	Assets
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Current assets:
	 	 	 	 	 	 	 	 
	Cash and cash equivalents
	 	$	136.9	 	 	$	41.6	 
	Short-term investments
	 	 	4.8	 	 	 	4.7	 
	Trade and other accounts receivable
	 	 	137.4	 	 	 	164.3	 
	Inventories
	 	 	159.9	 	 	 	184.9	 
	Current portion of deferred tax assets
	 	 	8.8	 	 	 	8.4	 
	Prepaid expenses
	 	 	6.1	 	 	 	8.3	 
	Prepaid income taxes
	 	 	3.0	 	 	 	2.0	 
	Other current assets
	 	 	1.8	 	 	 	—	 
	Total current assets
	 	 	458.7	 	 	 	414.2	 
	Net property, plant and equipment
	 	 	76.0	 	 	 	80.8	 
	Goodwill
	 	 	267.4	 	 	 	276.1	 
	Other intangible assets
	 	 	168.7	 	 	 	181.1	 
	Deferred finance costs
	 	 	1.4	 	 	 	1.1	 
	Deferred tax assets, net of current portion
	 	 	1.4	 	 	 	0.7	 
	Pension asset
	 	 	55.5	 	 	 	45.2	 
	Other non-current assets
	 	 	0.9	 	 	 	0.7	 
	Total assets
	 	$	1,030.0	 	 	$	999.9	 
	 
	 	 	 	 	 	 	 	 
	Liabilities and Stockholders’ Equity
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Current liabilities:
	 	 	 	 	 	 	 	 
	Bank overdraft
	 	$	—	 	 	$	—	 
	Accounts payable
	 	 	52.2	 	 	 	87.6	 
	Accrued liabilities
	 	 	84.1	 	 	 	77.2	 
	Current portion of long-term debt
	 	 	—	 	 	 	0.4	 
	Current portion of finance leases
	 	 	0.7	 	 	 	0.5	 
	Current portion of plant closure provisions
	 	 	6.4	 	 	 	5.7	 
	Current portion of accrued income taxes
	 	 	7.9	 	 	 	5.6	 
	Current portion of acquisition-related contingent consideration
	 	 	54.6	 	 	 	45.7	 
	Current portion of deferred income
	 	 	0.2	 	 	 	0.2	 
	Total current liabilities
	 	 	206.1	 	 	 	222.9	 
	Long-term debt, net of current portion
	 	 	133.0	 	 	 	139.0	 
	Finance leases, net of current portion
	 	 	2.4	 	 	 	1.7	 
	Plant closure provisions, net of current portion
	 	 	31.3	 	 	 	28.4	 
	Unrecognized tax benefits, net of current portion
	 	 	3.9	 	 	 	6.2	 
	Deferred tax liabilities, net of current portion
	 	 	37.7	 	 	 	23.0	 
	Pension liability
	 	 	9.2	 	 	 	10.4	 
	Acquisition-related contingent consideration, net of current portion
	 	 	—	 	 	 	49.5	 
	Deferred income, net of current portion
	 	 	0.6	 	 	 	0.9	 
	Other non-current liabilities
	 	 	0.5	 	 	 	2.0	 
	Equity
	 	 	605.3	 	 	 	515.9	 
	 
	 	 	 	 	 	 	 	 
	Total liabilities and equity
	 	$	1,030.0	 	 	$	999.9	 
	 
	 	 	 	 	 	 	 	 






3




Schedule 4




INNOSPEC INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS




	 	 	 	 	 	 	 	 	 
	 	 	Twelve Months Ended
	 	 	December 31
	(in millions)	 	2015	 	2014
	Cash Flows from Operating Activities
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Net income
	 	$	119.5	 	 	$	84.1	 
	Adjustments to reconcile net income to cash provided by operating activities:
	 	 	 	 	 	 	 	 
	Depreciation and amortization
	 	 	35.2	 	 	 	29.1	 
	Adjustment to fair value of contingent consideration
	 	 	(40.7	)	 	 	(1.9	)
	Deferred taxes
	 	 	12.0	 	 	 	5.8	 
	Repayment of promissory note in civil complaint settlement
	 	 	—	 	 	 	(5.0	)
	Changes in working capital
	 	 	(3.6	)	 	 	(12.8	)
	Excess tax benefit from stock-based payment arrangements
	 	 	(0.5	)	 	 	(0.4	)
	Accrued income taxes
	 	 	2.0	 	 	 	14.9	 
	Movement on plant closure provisions
	 	 	4.1	 	 	 	1.9	 
	Profit on disposal of subsidiary
	 	 	(1.6	)	 	 	—	 
	Cash contributions to defined benefit pension plans
	 	 	(9.0	)	 	 	(11.6	)
	Non-cash expense of defined benefit pension plans
	 	 	0.5	 	 	 	3.8	 
	Stock option compensation
	 	 	3.7	 	 	 	2.6	 
	Movements on unrecognized tax benefits
	 	 	(2.3	)	 	 	(6.8	)
	Movements on other non-current assets and liabilities
	 	 	(1.6	)	 	 	2.6	 
	Net cash provided by operating activities
	 	 	117.7	 	 	 	106.3	 
	Cash Flows from Investing Activities
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Capital expenditures
	 	 	(17.6	)	 	 	(13.5	)
	Proceeds from disposal of subsidiary
	 	 	41.5	 	 	 	—	 
	Business combinations, net of cash acquired
	 	 	—	 	 	 	(98.7	)
	Internally developed software
	 	 	(8.6	)	 	 	(8.4	)
	Purchase of short-term investments
	 	 	(6.7	)	 	 	(5.0	)
	Sale of short-term investments
	 	 	6.4	 	 	 	6.6	 
	Net cash provided by/(used in) investing activities
	 	 	15.0	 	 	 	(119.0	)
	Cash Flows from Financing Activities
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Non-controlling interest
	 	 	0.3	 	 	 	—	 
	Net repayment of revolving credit facility
	 	 	(6.0	)	 	 	(3.0	)
	Repayment of term loans
	 	 	(0.4	)	 	 	(1.7	)
	Refinancing costs
	 	 	(1.5	)	 	 	(0.1	)
	Excess tax benefit from stock-based payment arrangements
	 	 	0.5	 	 	 	0.4	 
	Dividend paid
	 	 	(14.9	)	 	 	(13.4	)
	Issue of treasury stock
	 	 	1.0	 	 	 	0.4	 
	Repurchase of common stock
	 	 	(15.3	)	 	 	(6.9	)
	Net cash used in financing activities
	 	 	(36.3	)	 	 	(24.3	)
	Effect of foreign currency exchange rate changes on cash
	 	 	(1.1	)	 	 	(1.6	)
	 
	 	 	 	 	 	 	 	 
	Net change in cash and cash equivalents
	 	 	95.3	 	 	 	(38.6	)
	Cash and cash equivalents at beginning of year
	 	 	41.6	 	 	 	80.2	 
	Cash and cash equivalents at end of year
	 	$	136.9	 	 	$	41.6	 
	 
	 	 	 	 	 	 	 	 






Amortization of deferred finance costs of $1.2 million (2014 — $0.7 million) are included in
depreciation and amortization in the cash flow statement but in interest expense in the income
statement.




4