Innospec(US:IOSP)2024-05-10 13:25Part I Item 1. Condensed Consolidated Financial Statements This section presents Innospec Inc.'s unaudited interim condensed consolidated financial statements for Q1 2024, detailing financial performance and position Condensed Consolidated Statements of Income This statement details Innospec's Q1 2024 income, showing a slight sales decrease but improved gross profit, operating income, and net income Consolidated Income Statement Highlights (Q1 2024 vs Q1 2023) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net Sales | $500.2 million | $509.6 million | | Gross Profit | $155.7 million | $147.8 million | | Operating Income | $50.5 million | $41.0 million | | Net Income | $41.4 million | $33.2 million | | Diluted EPS | $1.65 | $1.33 | Condensed Consolidated Balance Sheets This statement details Innospec's balance sheet as of March 31, 2024, showing increased assets and equity, with higher cash and lower liabilities Balance Sheet Summary (as of March 31, 2024) | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $270.1 million | $203.7 million | | Total Current Assets | $912.9 million | $885.7 million | | Total Assets | $1,732.8 million | $1,707.4 million | | Total Current Liabilities | $364.9 million | $371.5 million | | Total Liabilities | $546.6 million | $557.8 million | | Total Equity | $1,186.2 million | $1,149.6 million | Condensed Consolidated Statements of Cash Flows This statement details Innospec's Q1 2024 cash flows, showing a significant increase in operating cash flow and overall cash and cash equivalents Cash Flow Summary (Q1 2024 vs Q1 2023) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $80.6 million | $21.8 million | | Net cash used in investing activities | $(14.3) million | $(22.0) million | | Net cash provided by financing activities | $0.5 million | $0.4 million | | Net change in cash and cash equivalents | $66.4 million | $0.4 million | Notes To The Unaudited Interim Condensed Consolidated Financial Statements These notes provide detailed disclosures on accounting policies, segment performance, goodwill, tax audits, contingent liabilities, and debt Segment Operating Income (Q1 2024 vs Q1 2023) | Segment | Operating Income (Q1 2024) | Operating Income (Q1 2023) | | :--- | :--- | :--- | | Performance Chemicals | $21.1 million | $10.4 million | | Fuel Specialties | $33.4 million | $32.4 million | | Oilfield Services | $16.9 million | $15.9 million | - Goodwill increased by $1.5 million due to a revision in the fair value of net assets acquired from QGP Química Geral S.A. in December 202330 - The company has a potential unrecognized tax benefit of $10.5 million related to the 2017 Tax Act, which may decrease in 2024 due to the lapse of the statute of limitations42 - As of March 31, 2024, the company had not drawn down on its $250.0 million revolving credit facility45 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 financial results, highlighting a slight sales decrease but improved gross profit, strong operating cash flow, and healthy liquidity Results of Operations This section details Q1 2024 operational results, showing a 2% net sales decrease but improved aggregate gross margin, driven by Performance Chemicals Segment Performance Summary (Q1 2024 vs Q1 2023) | Segment | Net Sales Change | Gross Profit Change | Gross Margin (%) 2024 | Gross Margin (%) 2023 | | :--- | :--- | :--- | :--- | :--- | | Performance Chemicals | +6% | +56% | 23.4% | 15.9% | | Fuel Specialties | -7% | +6% | 34.3% | 30.2% | | Oilfield Services | -3% | -13% | 35.3% | 39.5% | | Aggregate | -2% | +5% | 31.1% | 29.0% | - Performance Chemicals sales growth was driven by a 13% increase in volume from higher consumer demand for personal and home care products, with margins normalizing due to lower raw material costs and manufacturing efficiencies7980 - Fuel Specialties' gross margin improvement of 4.1 percentage points was primarily due to the absence of a $7.4 million inventory misappropriation charge that impacted the prior year84 - Oilfield Services' operating expenses decreased by $9.9 million (20%) year-over-year, driven by lower selling and customer service costs7886 Liquidity and Financial Condition The company's liquidity strengthened in Q1 2024, driven by strong operating cash flow and reduced working capital, resulting in increased cash and no outstanding debt - Net cash provided by operating activities increased to $80.6 million in Q1 2024 from $21.8 million in Q1 2023, mainly due to reductions in working capital and higher profitability9798 - Adjusted working capital (a non-GAAP measure) decreased by $21.6 million during the quarter, primarily due to a $41.6 million decrease in trade receivables9193 - As of March 31, 2024, the company had cash and cash equivalents of $270.1 million and no outstanding debt under its $250.0 million revolving credit facility99101 Item 3. Quantitative and Qualitative Disclosures about Market Risk The company manages market risks from interest rates, foreign currency, and commodity prices using derivatives, with no significant changes in exposure since 2023 - The company uses derivative instruments to manage market risks related to interest rates, foreign currency exchange, and commodity costs103104 - There have been no significant changes to the company's market risk exposure since the 2023 Form 10-K105 Item 4. Controls and Procedures The company's disclosure controls and procedures were effective as of March 31, 2024, with the QGP acquisition excluded from the current assessment - The company's disclosure controls and procedures were deemed effective as of March 31, 2024107 - The recently acquired QGP business has been excluded from the assessment of internal controls, with integration expected to be completed in 2024106 Part II Item 1. Legal Proceedings The company is involved in various legal proceedings, including an ongoing claim related to inventory misappropriation in Brazil, with no significant new developments - The company has an ongoing civil and criminal legal claim related to inventory misappropriation in Brazil, with no significant new developments111 Item 1A. Risk Factors No material changes in the company's risk factors have occurred since the disclosure in its 2023 Annual Report on Form 10-K - No material changes in risk factors have occurred since the 2023 Form 10-K filing113 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered equity sales, repurchasing shares for employee stock options, with $43.6 million remaining for public repurchases - No purchases were made under the public share repurchase program in Q1 2024, with $43.6 million remaining authorized for future repurchases115117 - The company repurchased 3,108 shares at an average price of $123.33 per share in connection with employee stock option exercises115117 Items 3, 4, 5, and 6 This section confirms no defaults on senior securities, no mine safety disclosures, and lists exhibits filed with the report, including certifications - Item 3: No defaults upon senior securities118 - Item 4: Mine Safety Disclosures are not applicable119 - Item 6: Exhibits filed include Sarbanes-Oxley certifications and compensatory plan agreements122