What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-19 compared with 2024-02-14 · 225 added, 211 removed, 928 unchanged (32% of the section changed)

6 unchanged sentences

We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and December 31, 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

12 unchanged sentences

We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded QGP Química Geral S.A.

(“QGP”) from its assessment of internal control over financial reporting as of December 31, 2023, because it was acquired by the Company in a purchase business combination during 2023.

We have also excluded QGP from our audit of internal control over financial reporting.

QGP is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent less than 2% and less than 1% respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2023.

Definition and Limitations of Internal Control over Financial Reporting

16 unchanged sentences

(i) the significant judgment made by management when developing the estimate;

(ii) a high degree of auditor judgment and subjectivity in applying procedures relating to the recognition and measurement of the asset retirement obligations;

(ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions relating to the recognition and measurement of the asset retirement obligations;

(iii) the audit effort involved the use of professionals with specialized skill and knowledge.

and (iv) the significant audit effort in evaluating the significant assumptions related to:

the program of work required;

and the timing and cost of performing the remediation work.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

1 unchanged sentence

These procedures also included, among others:

(i) testing management’s process to recognize and measure the estimate;

(ii) evaluating the appropriateness of the valuation method;

(iii) testing the data used in the calculation of the estimate;

(iv) evaluating the reasonableness of significant assumptions including the assessment of the program of work required;

(i) testing management’s process to recognize and measure the plant closure provisions;

(ii) evaluating the appropriateness of the discounted cash flows model;

(iii) testing completeness and accuracy of the underlying data used in the calculation of the plant closure provisions;

(iv) evaluating the reasonableness of significant assumptions related to the assessment of the program of work required;

the timing and cost of performing the remediation work;

and the credit-adjusted risk-free rate;

and (v) evaluating the scope, competency, and objectivity of management’s specialists based on the work they were engaged to perform.

and (iv) evaluating the scope, competency, and objectivity of management’s specialists based on the work they were engaged to perform.

Professionals with specialized skill and knowledge were used to assist in evaluating management’s method and the reasonableness of the significant assumptions in respect of the program of the work required and the timing and cost of performing the remediation work.

10 unchanged sentences

Research and development

Adjustment to fair value of contingent consideration

Profit on disposal

2 unchanged sentences

Other income/(expense), net

Pension scheme settlement charge

Interest income/(expense), net

8 unchanged sentences

Changes in cumulative translation adjustment (1)

Amortization of prior service cost/(credit)

Amortization of prior service cost

Amortization of actuarial net losses/(gains)

Actuarial net gains/(losses) arising during the year

Actuarial net losses arising during the year

Pension scheme settlement

Other comprehensive income, before tax

39 unchanged sentences

Pension liabilities and post-employment benefits

Acquisition-related contingent deferred consideration

Acquisition-related contingent consideration

Other non-current liabilities

16 unchanged sentences

Depreciation and amortization

Adjustment to fair value of contingent consideration

Deferred taxes

Profit on disposal

Profit on disposal of property, plant and equipment

Non-cash income of defined benefit pension plans

18 unchanged sentences

Non-controlling interest

Proceeds from revolving credit facility

Repayments of revolving credit facility

Repayment of term loan

17 unchanged sentences

adjustment, net of tax

Share of net income

Non-controlling interest investment

Treasury stock re-issued

1 unchanged sentence

Stock option compensation

Amortization of prior service credit,

Amortization of prior service cost,

Amortization of actuarial net losses,

Actuarial net gains during

Actuarial net losses during

the year, net of tax

3 unchanged sentences

adjustment, net of tax

Non-controlling interest investment

Share of net income

Treasury stock re-issued

2 unchanged sentences

Amortization of prior service cost,

Amortization of actuarial net losses,

Actuarial net losses during

Amortization of actuarial net gains,

Actuarial net losses arising during

the year, net of tax

11 unchanged sentences

the year, net of tax

Pension scheme settlement

Balance at December 31 2024

5 unchanged sentences

Our Fuel Specialties business specializes in manufacturing and supplying fuel additives that improve fuel efficiency, boost engine performance and reduce harmful emissions.

Our Oilfield Services business supplies drilling, completion and production chemicals which make exploration and production more effective, cost-efficient and environmentally friendly.

Our Oilfield Services business supplies chemicals for drilling, completion, production and DRA which make exploration and production more effective, cost-efficient and environmentally friendly.

Accounting Policies

65 unchanged sentences

Due to the short-term nature of such receivables, the estimate of accounts receivable amounts that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers.

Additionally, a further allowance is included to account for the Company’s historic track record of credit losses, for balances which are not aged sufficiently to be considered under the aging based approach.

Additionally, a further allowance is included to account for the Company’s historical track record of credit losses, for balances which are not aged sufficiently to be considered under the aging based approach.

Inventories are stated at the lower of cost (FIFO method) or market value.

1 unchanged sentence

The Company accrues volume discounts where it is probable that the required volume will be attained and the amount can be reasonably estimated.

The discounts are recorded as a reduction in the cost of materials based on projected purchases over the period of the agreement.

The volume discounts are recorded as a reduction in the cost of materials based on projected purchases over the period of the agreement.

Inventories are adjusted for estimated obsolescence and written down to market value based on estimates of future demand and market conditions.

Acquisition-related contingent consideration:

Contingent consideration payable in cash is discounted to its fair value at each balance sheet date using the Company’s credit-adjusted risk-free rate.

Where contingent consideration is dependent upon pre-determined financial targets, an estimate of the fair value of the likely consideration payable is made at each balance sheet date.

Property, plant and equipment:

3 unchanged sentences

Maintenance and repairs are charged to expenses as incurred.

When assets are sold or retired the associated cost and accumulated depreciation are removed from the consolidated financial statements and any related gain or loss is included in earnings.

When assets are sold or retired the associated cost and accumulated depreciation are removed from the consolidated

financial statements and any related gain or loss is included in earnings.

The estimated useful lives of the major classes of depreciable assets are as follows:

3 unchanged sentences

The Company considers that its reporting units are consistent with its reportable segments.

The components in each segment (including products, markets and competitors)

have similar economic characteristics and the segments, therefore, reflect the lowest level at which operations and cash flows can be sufficiently distinguished, operationally and for financial reporting purposes, from the rest of the Company.

The components in each segment (including products, markets and competitors) have similar economic characteristics and the segments, therefore, reflect the lowest level at which operations and cash flows can be sufficiently distinguished, operationally and for financial reporting purposes, from the rest of the Company.

Initially we perform a qualitative assessment to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reportable segment is less than the carrying amount prior to performing a quantitative goodwill impairment test.

28 unchanged sentences

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of future lease payments over the remaining lease term.

Very few of our leases have renewal options or early

termination break clauses, but where they do, we have assessed the term of the lease based on any options being exercised only if they are reasonably certain.

Very few of our leases have renewal options or early termination break clauses, but where they do, we have assessed the term of the lease based on any options being exercised only if they are reasonably certain.

As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at point of recognition in determining the present value of future payments.

27 unchanged sentences

Remediation costs relate to asset retirement obligations at our current and former manufacturing sites following retirement of the long-lived assets, linked to their normal operation.

We recognize environmental remediation liabilities when they are probable and the costs can be reasonably estimated, and asset retirement obligations when there is an obligation based on a legal requirement, including those

arising from a Company promise, and the costs can be reasonably estimated.

The vast majority of our plant closure provision relates to our Ellesmere Port site in the United Kingdom.

10 unchanged sentences

The insurance contracts are adjusted each reporting period to reflect the estimated fair value of the premium that would be paid for such contracts at that time.

In May 2022, the Trustees of the United Kingdom defined benefit pension plan (“UK Plan”) entered into an agreement with Legal and General Assurance Society Limited to acquire an insurance policy that operates as an investment asset, with the intent of matching the remaining uninsured part of the UK Plan’s future cash outflow arising from the accrued pension liabilities of members.

Such an arrangement is commonly termed as a “buy-in”.

The benefit obligation was not transferred to the insurer, and the Company remains responsible for paying pension benefits.

The initial value of the asset associated with this contract was equal to the premium paid to secure the contract and is adjusted each reporting period to reflect the estimated fair value of the premium that would be paid for such a contract at that time.

The buy-in reduces the UK Plan’s value at risk in relation to key risks associated with improved longevity, inflation and interest rate movements while improving the security to the UK Plan and its members.

The Company consequently benefits from the buy-in as it reduces the UK Plan’s potential reliance on the Company for future cash funding requirements.

Movements in the Projected Benefit Obligation (“PBO”) are dependent on our assumptions in respect of the discount rate, annual member mortality rates, future return on assets and future inflation.

The Company previously maintained a defined benefit pension plan covering certain current and former employees in the United Kingdom (the “UK Plan”).

In May 2022, the trustees of the UK Plan entered into an agreement with Legal and General Assurance Society Limited ("L&G") to acquire an insurance policy that operates as an investment asset, with the intent of matching the remaining uninsured part of the UK Plan’s future cash outflow arising from the accrued pension liabilities of members.

Such an arrangement is commonly termed as a “buy-in”.

This followed previous partial buy-ins with Just Retirement Limited ("Just") entered into in 2015.

Since May 2022, the trustees of the UK Plan have been working towards a buy-out, where the company is no longer responsible for the future obligation for retirement benefits due to current and former employees.

This work was completed in the fourth quarter of 2024, with L&G and Just now responsible for the respective members included in the previous buy-ins via issuance of individual insurance policies to members.

Income taxes:

2 unchanged sentences

The effect on deferred taxes of a change in tax rates is recognized in the period that includes the enactment date.

The Company recognizes the tax benefit from a tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

The Company recognizes the tax benefit from a tax position only if it is more likely than

not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.

Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

The Company recognizes accrued interest and penalties associated with unrecognized tax benefits as part of income taxes in our consolidated statements of income .

The Company recognizes accrued interest and penalties associated with unrecognized tax benefits as part of income taxes in our consolidated statements of income if required.

Segment Reporting and Geographical Area Data

The Performance Chemicals, Fuel Specialties and Oilfield Services segments operate in markets where we actively seek growth opportunities although their ultimate customers are different.

Our Performance Chemicals segment provides effective technology-based solutions for our customers’ processes or products focused in the personal care, home care, agrochemical, construction, mining and other industrial markets.

Our Fuel Specialties segment develops, manufactures, blends, markets and supplies a range of specialty chemicals products used as additives to a wide range of fuels.

Our Oilfield Services segment develops and markets chemical solutions for fracturing, drilling, stimulation and completion operations, products for oil and gas production and transport which aid flow assurance and maintain asset integrity.

In 2023, the Company had a significant customer in the Oilfield Services segment which accounted for $ 265.2 million ( 13.6 %) of our net group sales (2022 - $ 222.2 million and 11.3 %).

The Company evaluates the performance of its segments based on operating income.

The following table analyzes sales and other financial information by the Company’s reportable segments:

Our Performance Chemicals segment provides innovative technology-based solutions for our customers’ processes or products in personal care, home care, agrochemical, construction, mining and other industrial markets.

Our Fuel Specialties segment develops, manufactures, blends, markets and supplies a range of specialty chemical products used as additives in diesel, jet, marine, fuel oil and other fuels.

Our Oilfield Services segment develops and markets chemical solutions for drilling, completion, production, DRA and oil and gas applications.

In 2023, the Company had a significant customer in the Oilfield Services segment which accounted for $ 265.2 million and 13.6 % (2022 - $ 222.2 million and 11.3 %) of the group's net sales.

In 2024, the net sales to this customer did not exceed 10 % of the group's net sales.

The Chief Operating Decision Maker (“CODM”) is the President and Chief Executive Officer (the Principal Executive Officer) and is a Director of Innospec Inc..

The CODM evaluates the performance of the Company’s segments and makes strategic decisions relating to the Company's allocation of resources, based on the segments' monthly gross profit and operating income.

The following table analyzes financial information by the Company’s reportable segments:

(in millions)

4 unchanged sentences

Oilfield Services

Total net sales

Gross profit:

Performance Chemicals

Fuel Specialties

Oilfield Services

Total gross profit

Operating income/(expense):

3 unchanged sentences

Corporate costs

Adjustment to fair value of contingent consideration

Profit on disposal

4 unchanged sentences

Oilfield Services

The difference between net sales and gross profit is defined as cost of goods sold.

For further information see the relevant accounting policy within Note 2 of the Notes to the Financial Statements.

The difference between segmental gross profit and operating income/(expense) is split between selling, general and administrative expenses and research and development expenses.

For further information see the relevant accounting policies within Note 2 of the Notes to the Financial Statements.

The following table analyzes cost of goods sold by the Company’s reportable segments:

(in millions)

Performance Chemicals

Fuel Specialties

Oilfield Services

Total cost of goods sold

The following table analyzes selling, general and administrative expenses and research and development expenses by the Company’s reportable segments:

(in millions)

Performance Chemicals

Fuel Specialties

Oilfield Services

Total selling, general and administrative expenses and research and development expenses

The Company includes within the corporate costs line item the costs of:

7 unchanged sentences

Net sales by source:

United States & North America

United States

United Kingdom

Rest of World

1 unchanged sentence

Income before income taxes:

United States & North America

United States

United Kingdom

Rest of World

Long-lived assets at year-end:

United States & North America

United States

United Kingdom

Rest of World

Identifiable assets at year-end:

United States & North America

United States

United Kingdom

Rest of World

18 unchanged sentences

On December 8, 2023, the Company acquired QGP Química Geral (“QGP”).

The Company purchased the business for a total consideration of $ 58.0 million, net of cash acquired, and subject to working capital adjustments.

A portion of the consideration is deferred and payable in cash by December 7, 2026, and contingent on the financial performance of QGP for the 12 months ended June 30, 2026.

The fair value of this deferred, contingent consideration at December 31, 2023 is $ 23.4 million.

This deferred, contingent consideration will be updated at each balance sheet date based on latest available information.

We acquired the business to further strengthen our Performance Chemicals segment and add a manufacturing base in South America to compliment all of our end markets.

The revenue and earnings for QGP included in the consolidated income statement of the Company since the acquisition date, are immaterial to the group's results and financial position, due to the proximity of the acquisition to the reporting date.

The following table summarizes the calculations of the total purchase price and the estimated allocation of the purchase price to the provisional assets acquired and liabilities assumed for the business:

(in millions)

Other intangible assets

Deferred tax on other intangible assets

Net property, plant and equipment

Other net assets acquired

Purchase price, net of cash acquired

The measurement periods for the valuation of assets acquired and liabilities assumed ends as soon as information on the facts and circumstances that existed as of the acquisition dates becomes available but

does not exceed twelve months.

We have reviewed the acquired intangibles associated with the acquisition and concluded that the main identifiable asset is in relation to customer lists.

Based on current information available to management, we do not expect there to be any other material intangible assets other than goodwill.

We have engaged a third-party to assess the fair value of the intangible assets and acquired fixed assets.

This assessment has not been finalized due to the proximity of the acquisition to the filing date.

Accordingly, a provisional amount based on previous acquisitions and management’s best current estimate has been included for customer lists with the remaining purchase price above the book value of fixed assets and other net assets acquired being allocated to goodwill at this stage.

We have provisionally estimated the expected useful life of the other intangible assets to be 10 years.

We have not completed our alignment of accounting policies or fair value review on the other net assets acquired at this stage, but any potential adjustments would not have a material impact on the reported figures.

QGP, and the associated goodwill, are included within our Performance Chemicals segment for management and reporting purposes.

There is currently no goodwill amortizable for tax purposes.

Supplemental unaudited pro forma information

For illustrative purposes only pro forma information of the enlarged group is provided below but is not necessarily indicative of what the financial position or results of operations would have been had the QGP acquisition been completed as part of the Company from January 1, 2021.

In addition, the unaudited pro forma financial information is not indicative of, nor does it purport to project, the future financial position of operating results of the enlarged group.

(in millions, except per share data)

Earnings per share – basic

Adjustments to the unaudited pro forma financial information includes amortization in respect of the acquired other intangible assets, and the acquisition-related costs incurred in respect of the transaction.

The fair value of this deferred, contingent consideration at December 31, 2024 and 2023 was $ 20.1 million and $ 23.4 million, respectively.

This deferred, contingent consideration will be updated at each balance sheet date based on the latest available information.

Property, Plant and Equipment

17 unchanged sentences

Ended December 31

Finance lease cost:

Amortization of right-of-use assets

Interest on lease liabilities

Total finance lease cost

Operating lease cost

34 unchanged sentences

As of December 31, 2024, additional operating and finance leases that have not yet commenced are $ 0.3 million.

Future lease payment for all non-cancellable operating and finance leases as of December 31, 2022 were as follows:

Maturities of lease liabilities were as follows as at December 31, 2023:

(in millions)

12 unchanged sentences

Net book amount

Adjustment to the acquired fair values

Exchange effect

5 unchanged sentences

On December 8, 2023, the Company acquired QGP.

This resulted in additional goodwill of $ 37.4 million recognized within our Performance Chemicals segment.

See Note 5 of the Notes to the Consolidated Financial Statements for further details.

This resulted in goodwill of $ 37.4 million being recognized within our Performance Chemicals segment.

In the second quarter of 2024, the fair value of the acquired net assets was revised.

As a result of these remeasurement period adjustments, there was an increase of $ 3.1 million to the fair value of the net assets acquired, with a corresponding decrease to the acquired goodwill.

The components in each segment (including products, markets and competitors) have similar economic characteristics and the segments, therefore, reflect the lowest level at which operations and cash flows can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Company.

8 unchanged sentences

Gross cost at January 1

Written down in the year

Exchange effect

2 unchanged sentences

Amortization expense

Written down in the year

Exchange effect

4 unchanged sentences

Excluding the impact of foreign exchange translation on the balance sheet, $ 2.3 million, $ 2.3 million and $ 2.3 million of amortization, respectively, was recognized in cost of goods sold, and the remainder was recognized in selling, general and administrative expenses.

In 2023, we capitalized $ 15.1 million (2022 - $ 2.7 million) in relation to our internally developed software for a new Enterprise Resource Planning (“ERP”) system covering our EMEA and ASPAC regions.

In 2024, we capitalized $ 20.8 million (2023 - $ 15.1 million) in relation to our internally developed software for a new Enterprise Resource Planning (“ERP”) system covering our all our regions.

The expenses capitalized include the acquisition costs for the software as well as the external and internal costs of the development.

The additional completion costs are currently expected to be approximately $ 29.5 million.

A timescale and plan for the further implementation of the new ERP system into our other regions has not yet been fully determined at this time.

Our current plan is to complete the implementation of the new ERP system across all regions by the middle of 2026.

We have determined the useful economic life of the ERP system to be up to 12 years .

In 2024, within the remeasurement period, we finalized the valuation of customer lists in relation to the acquisition of QGP in December 2023.

This increased the intangible asset capitalized by $ 3.5 million in the second quarter of 2024.

Management also revised the expected useful life of the customer lists from 10 years to 7 years .

In 2023, we capitalized $ 7.3 million in relation to the acquisition of QGP.

See Note 5 of the Notes to the Consolidated Financial Statements for further details.

Other intangible assets at December 31, 2024 were:

12 unchanged sentences

United Kingdom plan

The Company maintains a defined benefit pension plan covering certain current and former employees in the United Kingdom (the “UK Plan”).

The UK Plan is closed to future service accrual and has a large number of deferred and current pensioners.

The Projected Benefit Obligation (“PBO”) is based on final salary and years of credited service reduced by social security benefits according to a plan formula.

Normal retirement age is 65 but provisions are made for early retirement.

In May 2022, the Trustees of the UK Plan entered into an agreement with Legal and General Assurance Society Limited to acquire an insurance policy that operates as an investment asset, with the intent of matching the remaining uninsured part of the UK Plan’s future cash outflow arising from the accrued pension liabilities of members.

The Company previously maintained a defined benefit pension plan covering certain current and former employees in the United Kingdom (the “UK Plan”).

Such an arrangement is commonly termed as a “buy-in”.

The benefit obligation was not transferred to the insurer, and the Company remains responsible for paying pension benefits.

The Company consequently benefits from the buy-in as it reduces the UK Plan’s potential reliance on the Company for future cash funding requirements.

This followed previous partial buy-ins with Just Retirement Limited ("Just") entered into in 2015.

As a result, the company has recognized a one-off, non-cash settlement charge of $ 155.6 million in the income statement relating to the updated valuations at the time of the buy-out and recycling of historical pension costs previously held in the statement of comprehensive income.

The remaining asset on the balance sheet of $ 2.5 million relates to cash held to cover the remaining expenses of the scheme and a negligible remaining Projected Benefit Obligation ("PBO") of $ 0.1 million, reflecting the UK Plan’s residual liabilities in respect of Guaranteed Minimum Pension equalization top-up payments due to former members of the UK Plan.

In 2024, the Company contributed $ 0.0 million (2023 – $ 0.0 million) in cash to the UK Plan in accordance with an agreement with the trustees.

For the year ending December 31, 2024, there are no plans to make cash contributions to the UK Plan.

The service cost shown in the table below has been recognized in selling, general and administrative expenses within corporate costs and the other items recognized within other income, net.

In September 2024, the Company received $ 8.4 million from the UK Plan as recovery of pension related costs previously incurred, which has been credited against the service cost in 2024, resulting in an associated income tax expense of $ 2.1 million.

Following the UK Plan buy-out, the Company is no longer required to make future cash contributions to the UK Plan.

(in millions)

Service cost/(credit)

Interest cost on PBO

Expected return on plan assets

Amortization of prior service cost/(credit)

Amortization of prior service cost

Amortization of actuarial net losses

Settlement event

Net periodic benefit

Recycling of residual reserves

Net periodic cost/(benefit)

The income statement captions are shown here:

Selling, general and administrative

Service cost/(credit)

Other expense/(income), net

Interest cost on PBO

Expected return on plan assets

Amortization of prior service cost

Amortization of actuarial net losses

Pension scheme settlement charge

Amortization of prior service cost

Recycling of residual reserves

Tax relating to the amortization of prior service cost

Tax relating to the recycling of residual reserves

The other financial statement captions relating to the buy-out settlement are shown here:

Recognized in Other Comprehensive Income

Recycling of residual reserves

Release of historic cumulative translation adjustments

Tax relating to the recycling of residual reserves

Tax relating to historic cumulative translation adjustments

Recognized in Reclassifications out of Accumulated Other Comprehensive Loss

Recycling of residual reserves

Release of historic cumulative translation adjustments

Tax relating to the recycling of residual reserves

Tax relating to historic cumulative translation adjustments

Plan assumptions at December 31, (%):

4 unchanged sentences

Debt securities and insurance contracts

Equity securities and real estate

Following the buy-in, the UK Plan does not need to follow an investment strategy.

The discount rate used represents the annualized yield based on a cash flow matched methodology with reference to an AA corporate bond spot curve and having regard to the duration of the UK Plan’s liabilities.

The inflation rate is derived using a similar cash flow matched methodology as used for the discount rate but having regard to the difference between yields on fixed interest and index linked United Kingdom government gilts.

A 0.25 % change in the discount rate assumption would change the PBO at December 31, 2023 by approximately $ 10.8 million and the net pension credit for 2023 would change by approximately $ 0.6 million.

A 0.25 % change in the level of price inflation assumption would change the PBO at December 31, 2023 by approximately $ 6.9 million and the net pension credit for 2023 by approximately $ 0.3 million.

Following the buy-out, the UK Plan does not need to follow an investment strategy.

Movements in PBO and fair value of UK Plan assets are as follows:

10 unchanged sentences

Opening balance

Return of Funds to Cover Historic Expenses

Benefits paid

3 unchanged sentences

Net pension asset

Due to the UK Plan being closed to future accrual the PBO is equal to the Accumulated Benefit Obligation.

The UK Plan holds approximately 1 % (December 31, 2022 – 1 %) of the UK Plan’s assets in debt securities issued by non-U.S.

governments and government agencies.

No more than 5 % of the UK Plan’s assets were invested in any one individual company’s investment funds.

Debt securities

In the prior year, fixed income securities are valued based on quotations received from independent pricing services or from dealers who make markets in such securities and are classified as Level 1.

Corporate debt securities are classified as Level 2 in line with the industry standard.

Equity backed securities

In the prior year, common and preferred stock for which market prices are readily available at the measurement date are valued at the last reported sale price or official closing price on the primary market or exchange on which they are actively traded.

Other financial derivatives are classified as Level 2 and certain investments that are measured at fair value using the net asset value per share (or its equivalent) have not been categorized with a hierarchy.

Other asset backed securities

The Company has invested in insurance contracts, known as buy-in contracts.

The value of the insurance contracts are based on significant unobservable inputs including plan participant medical data, in addition to observable inputs which include expected return on assets and estimated value premium.

Therefore, we have classified the contracts as Level 3 investments.

Fair value estimates are provided by external parties and are subsequently reviewed and approved by management.

The fair values of pension assets by level of input were as follows:

3 unchanged sentences

At December 31, 2024

Debt securities:

Debt securities issued by non-U.S.

governments and government agencies

Corporate debt securities

Equity backed securities:

Other financial derivatives

Other asset backed securities:

Insurance contracts

Total assets at fair value

Total plan assets

3 unchanged sentences

governments and government agencies

Corporate debt securities

Equity backed securities:

Other financial derivatives

Other asset backed securities:

2 unchanged sentences

Total plan assets

(1) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) have not been categorized in the fair value table with a hierarchy.

The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.

The reconciliation of the fair value of the UK Plan assets measured using significant unobservable inputs was as follows:

11 unchanged sentences

Balance at December 31, 2024

The projected net periodic benefit for the year ending December 31, 2024 is as follows:

The projected net periodic cost for the year ending December 31, 2025 is as follows:

(in millions)

3 unchanged sentences

Amortization of actuarial net losses

Net periodic benefit

Net periodic cost

The following benefit payments are expected to be made:

37 unchanged sentences

Closing balance at December 31, 2024

All of the $ 14.8 million of unrecognized tax benefits would impact our effective tax rate if recognized.

As at December 31, 2024, the Company has no unrecognized tax benefits.

In 2021 a non-U.S.

1 unchanged sentence

tax authorities under the U.K.’s Profit Diversion Compliance Facility (“PDCF”) in relation to the period 2017 to 2020 inclusive.

The Company has determined that additional tax and interest totaling $ 1.2 million may arise as a result of the ongoing review.

During 2023 the Company recorded an additional interest accrual of $ 0.1 million and a $ 0.1 million increase due to foreign exchange movements.

The Company believes that it is reasonably possible that there will be a decrease of $ 1.2 million unrecognized tax benefits within the coming year in relation to this item resulting from effective settlement of the outstanding tax positions with the U.K.

tax authorities.

subsidiary, Innospec Performance Chemicals Italia Srl, is subject to an ongoing tax audit in relation to the period 2011 to 2014 inclusive.

The Company has determined that additional tax, interest and penalties totaling $ 3.4 million may arise as a consequence of the tax audit.

This includes additional interest accrued of $ 0.1 million and $ 0.1 million for foreign exchange movements recorded during 2023.

As any additional tax arising as a consequence of the tax audit would be reimbursed by the previous owner under the terms of the sale and purchase agreement, an indemnification asset of the same amount is recorded in the financial statements to reflect this arrangement.

The Company had determined that additional tax and interest totaling $ 1.2 million would arise as a consequence of the review.

During the quarter ended September 30, 2024 the Company and the U.K.

tax authorities reached agreement on this position, and the liability was settled.

The liability which was agreed on ultimate settlement was consistent with the amount recorded as a liability, and this item has been released from unrecognized tax benefits and recognized in income taxes.

subsidiary, Innospec Performance Chemicals Italia Srl, was subject to a tax audit in relation to the period 2011 to 2014 inclusive.

The Company had determined that additional tax, interest and penalties totaling $ 3.4 million would arise as a consequence of the tax audit.

As any additional tax arising as a consequence of the tax audit is to be reimbursed by the previous owner under the terms of the sale and purchase agreement, an indemnification asset of the same amount was recorded in the financial statements to reflect this arrangement.

During the quarter ended June 30, 2024, the Company submitted documentation to the tax authorities confirming its acceptance of the previously disputed position, and due to imminent settlement, this item was released from unrecognized tax benefits and recognized in accrued income taxes in that quarter.

In 2018 the Company recorded an unrecognized tax benefit in relation to a potential adjustment that could arise as a consequence of the Tax Cuts and Jobs Act of 2017 (“Tax Act”), but for which retrospective adjustment to the filed 2017 U.S.

federal income tax returns was not permissible.

The Company has

determined that additional tax, interest and penalties totaling $ 10.2 million may arise in relation to this item.

This includes an increase in the unrecognized tax benefit of $ 0.1 million and additional interest accrued of $ 0.9 million recorded during 2023.

The Company believes that it is reasonably possible that there will be a decrease of $ 10.2 million unrecognized tax benefits within the coming year in relation to this item due to a lapse of the statute of limitations.

As of December 31, 2023, the Company and its U.S.

subsidiaries remain open to examination by the IRS for certain elements of 2017 year and for years 2020 onwards under the statute of limitations.

The Company determined that additional tax, interest and penalties totaling $ 11.0 million could arise in relation to this item.

This includes an increase in additional interest accrued of $ 0.8 million recorded during 2024.

As the statute of limitations in relation to this item lapsed in the quarter ended December 31, 2024, this item has now been released from unrecognized tax benefits in the final quarter.

The Company and its U.S.

subsidiaries remain open to examination by the IRS for years 2021 onwards under the statute of limitations.

The Company’s subsidiaries in foreign tax jurisdictions are open to examination including Brazil (2020 onwards), Germany (2020 onwards), and the U.K.

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federal statutory rate because of the factors indicated below.

In considering the items that create variances when compared to the U.S.

federal statutory rate, it is worth

noting that the percentage impact of a given item in the table below would be higher in 2024 because income before income taxes in 2024 is significantly lower than in 2023 and prior years.

Statutory rate

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Tax on unremitted earnings

Change in U.K.

statutory tax rate

State and local taxes

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Non-deductible officer compensation

Tax on closure of legacy operations

Adjustment to contingent consideration

Movement in unrecognized deferred taxes

Impact of internal reorganizations

Meals and entertainment

Stock compensation

Other items and adjustments, net

The effective tax rate has been positively impacted by the current year recognition of previously unrecognized tax benefits.

This item arose due to the lapse of the statute of limitations associated with the unrecognized tax benefit in the final quarter of 2024.

This item had a lesser impact in prior years, with a negative impact on the effective tax rate in 2023 and a positive impact in 2022.

Foreign income inclusions arise each year from certain types of income earned overseas being taxable under U.S.

tax regulations.

Foreign tax credits can fully or partially offset these incremental U.S.

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The utilization of foreign tax credits varies year on year as this is dependent on a number of variable factors which are difficult to predict and may prevent offset.

The effective tax rate is negatively impacted by the net impact of foreign inclusions post foreign tax credit usage in 2023.

As a consequence of the Company having operations outside of the U.S., it is also exposed to foreign currency fluctuations.

These have had a positive impact on the effective tax rate in 2023.

As in the prior year, the level of foreign-derived intangible income benefit that the Company is entitled to has had a positive impact on the effective tax rate.

There was also a benefit arising from adjustments to the tax charge for previous years, primarily arising from return to provision adjustments in relation to the federal and state tax returns filed in the U.S.

Other items do not have a significant impact on the effective tax rate in either 2023 or 2022.

The effective tax rate in 2024 and the disclosed prior years has been negatively impacted by these items.

The Company is subject to state taxes and local taxes primarily in the U.S.

in addition to federal taxes.

The effective tax rate in 2024 and the disclosed prior years has been negatively impacted by these taxes.

While the absolute amount of such taxes incurred in 2024 is comparable to prior years, as income before income taxes is substantially lower it has a higher overall impact on the effective tax rate.

The level of foreign-derived intangible income benefit that the Company is entitled to has had a positive impact on the effective tax rate in both 2024 and the disclosed prior years.

The Company benefits from innovation reliefs in relation to relevant research and development expenditure in certain jurisdictions, notably the U.S.

and the U.K., which have a positive impact on the effective tax rate.

While the absolute amount of such reliefs claimed in 2024 is comparable to prior years, as income before income taxes is substantially lower it has a higher overall impact on the effective tax rate.

The Company considers that there is insufficient evidence that sufficient future taxable income will arise in certain territories to allow for the recognition of deferred tax assets.

In such cases, a valuation allowance is applied, which results in a permanent adjustment to the tax charge and therefore impacts on the effective tax rate.

There is an increase in the valuation allowances in 2024 which have a negative impact on the effective tax rate.

The rate was positively impacted by this item in 2023 as an assessment of evidence allowed for the recognition of previously unrecognized deferred taxes.

Details of deferred tax assets and liabilities are analyzed as follows:

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Inventory provisions

Carried forward interest deductions

Bad debt reserves

Research and experimental expenditure

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The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets.

Available evidence considered in determining the use of deferred tax assets includes, but is not limited to, cumulative losses arising in recent accounting periods, the Company’s estimate of future taxable income and any applicable tax-planning strategies.

Available evidence considered in determining the use of deferred tax assets includes, but is not limited to, cumulative losses

arising in recent accounting periods, the Company’s estimate of future taxable income and any applicable tax-planning strategies.

Based on such evidence, if it is more likely than not that some portion or all of such deferred tax assets will not be realized, a valuation allowance is recorded to reduce the Company’s deferred tax assets.

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As of December 31, 2024, the Company has approximately $ 0.2 million of tax-effected state net operating loss carryforwards, net of federal benefit.

Some of these loss carryforwards will begin to expire in 2036 if not utilized, while other can be carried forward indefinitely.

The Company utilized all remaining federal

net operating loss carryforwards during 2023.

The Company also has approximately $ 8.9 million of tax-effected foreign net operating loss carryforwards, net of valuation allowance, across five of the Company’s foreign subsidiaries, which can also be carried forward indefinitely.

Some of these loss carryforwards will begin to expire in 2037 if not utilized.

The Company also has approximately $ 7.0 million of tax-effected foreign net operating loss carryforwards, net of valuation allowance, across four of the Company’s foreign subsidiaries, which can also be carried forward indefinitely.

Long-Term Debt

As at December 31, 2024 and 2023, the Company has no t drawn down on its revolving credit facility.

During 2024, 2023 and 2022, the Company did no t draw down or repay any borrowing on its revolving credit facility.

On May 31, 2023, Innospec Inc.

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The Agreement also contains an accordion feature whereby the Company may elect to increase the total available borrowings by an aggregate amount of up to $ 125,000,000 .

The termination date of the Facility is May 30, 2027 , but the Company has an option to request an extension of the Facility for a further year.

As a consequence, the Company has capitalized $ 1.4 million of costs relating to the new Agreement which are to be amortized over the period to May 30, 2027 .

In addition, the Company has written-off $ 0.6 million of capitalized costs relating to the previous agreement.

The termination date of the Facility is May 30, 2027 , but the Agreement includes an option for the Company to request an extension of the Facility for a further year.

Effective as of May 20, 2024, the termination date of the Facility was extended from May 30, 2027 to May 31, 2028 in accordance with the terms of the Company’s multicurrency revolving facility agreement (the “Facility Agreement”).

No other terms of the Facility Agreement or the Facility were modified.

The Company paid a customary extension fee in connection with the extension of the Facility as contemplated by the Facility Agreement.

As a consequence, the Company has capitalized a further $ 0.3 million of costs relating to the new Agreement which are to be amortized over the period to May 31, 2028 .

The deferred finance costs of $ 1.1 million (December 31, 2023 – $ 1.2 million) related to the arrangement of the credit facility, are included within other current and non-current assets at the balance sheet dates.

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Plant Closure Provisions

The Company has continuing plans to remediate manufacturing facilities at sites around the world as and when those operations are expected to cease or we are required to decommission the sites according to local laws and regulations.

local laws and regulations.

The liability for estimated plant closure costs includes costs for environmental remediation liabilities and asset retirement obligations.

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The Company gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair

value measurement.

The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy Levels.

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Emissions Trading Scheme credits

Foreign currency forward exchange

Derivatives (Level 1 measurement):

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The fair value is determined by the open market pricing at the end of the reporting period.

The fair value of derivatives relating to foreign currency forward exchange contracts and interest rate swaps are derived from current settlement prices and comparable contracts using current

The fair value of derivatives relating to foreign currency forward exchange contracts and interest rate swaps are derived from current settlement prices and comparable contracts using current assumptions.

Foreign currency forward exchange contracts primarily relate to contracts entered into to hedge future known transactions or hedge balance sheet net cash positions.

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The Company enters into various foreign currency forward exchange contracts to minimize currency exchange rate exposure from expected future cash flows.

As at December 31, 2023, foreign currency forward exchange contracts with a notional value of $ 156.5 million were in place (December 31, 2022 $ 161.1 million), with maturity dates of up to one year from the date of inception.

These foreign currency forward exchange contracts have not been designated as hedging instruments, and their impact on the income statement for 2023 was a loss of $ 4.0 million (2022 – gain $ 0.7 million).

As at December 31, 2024, foreign currency forward exchange contracts with a notional value of $ 212.8 million were in place (December 31, 2023 $ 156.5 million), with maturity dates of up to two years from the date of inception.

These foreign currency forward exchange contracts have not been designated as hedging instruments, and their impact on the income statement for 2024 was a gain of $ 5.3 million (2023 – loss $ 4.0 million).

As at December 31, 2024 and 2023, the Company did not hold any raw material derivatives.

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We are involved from time to time in claims and legal proceedings that result from, and are incidental to, the conduct of our business including business and commercial litigation, employee and product liability claims.

As previously reported in the first quarter of 2023, we have lodged a civil and criminal legal claim and insurance claim related to a misappropriation of inventory in Brazil and as a consequence we have written-off $ 7.4 million of our inventory to cost of goods sold in our financial statements.

In the second quarter of 2023, we have incurred additional charges of $ 8.0 million as we exited the Brazilian trading relationship associated with the inventory misappropriation.

The costs incurred in the second quarter include $ 5.0 million to cost of goods sold and $ 3.0 million to selling, general and administration costs.

A corresponding asset for the potential legal or insurance recoveries has not been recorded for the resulting financial losses arising from this matter.

As reported in the 2023 Form 10-K, we have incurred financial losses and lodged a civil and criminal legal claim related to a misappropriation of inventory in Brazil.

As at the time of filing, there have been no significant developments to report in relation to the claims being made.

Consistent with prior quarters, a corresponding asset for the potential legal or insurance recoveries has not been recorded for the resulting financial losses arising from this matter.

In addition, unrelated to the Brazil matter, in the unlikely event there are an unexpectedly large number of individual claims or proceedings with an adverse resolution, this could in the aggregate have a material adverse effect on the results of operations for a particular year or quarter.

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As at December 31, 2024, such guarantees which are not recognized as liabilities in the consolidated financial statements amounted to $ 6.8 million (December 31, 2023 – $ 6.2 million).

The remaining terms of the fixed maturity guarantees vary from approximately 1 month to 9 years, with some further guarantees having no fixed expiry date.

The remaining terms of the fixed maturity guarantees vary from approximately 2 months to 8 years, with some further guarantees having no fixed expiry date.

Under the terms of the guarantee arrangements, generally the Company would be required to perform should the affiliated company fail to fulfill its obligations under the arrangements.

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The aggregate number of shares of common stock reserved for issuance which can be granted under the plans is 2,550,000 .

The fair value of stock options is measured on the grant date using either the Black-Scholes model, or in cases where performance criteria are dependent upon external factors such as the Company’s stock price, using a Monte Carlo model.

The fair value of stock options is measured on the grant date using either a fair market value methodology, or in cases where performance criteria are dependent upon external factors such as the Company’s stock price, using a Monte Carlo model.

The Company’s policy is to issue shares from treasury stock to holders of stock options who exercise those options, but if sufficient treasury stock is not available, the Company will issue previously unissued shares of stock to holders of stock options who exercise options.

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As at December 31, 2024 the liability for SEUs of $ 16.8 million is included in accrued liabilities in the consolidated balance sheet, where they will remain until they are cash settled.

The fair value of SEUs is re-measured at each balance sheet reporting date using either the Black-Scholes model, or in cases where performance criteria are dependent upon external factors such as the Company’s stock price, using a Monte Carlo model.

The fair value of SEUs is re-measured at each balance sheet reporting date using either a fair market value methodology, or in cases where performance criteria are dependent upon external factors such as the Company’s stock price, using a Monte Carlo model.

Compensation cost

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Transactions in the period

The fair value of each stock option or SEU granted in the year was estimated on the date of grant using the Black-Scholes option-pricing model and where appropriate the Monte Carlo simulation model.

These models utilized the following weighted average assumptions to determine the grant-date fair values of the share-based compensation granted in the year:

The fair value of each stock option or SEU granted in the year was calculated with the following weighted average assumptions to determine the grant-date fair values of the share-based compensation:

Dividend yield

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Exercisable at December 31, 2024

For the awards granted with market conditions, a Monte Carlo model has been used to calculate the grant-date fair value.

For all other awards granted, a fair market value methodology has been used to calculate the grant-date fair value.

The awards granted with market conditions include a performance measure for Innospec's total shareholder return as compared to a peer group of companies.

This measure can result in a maximum 130 % vesting for the number of stock options granted.

The maximum potential vesting has been reflected in the grant-date fair value calculation, but not reflected for the number of awards granted, as shown in

the table above.

All other awards granted in the quarter have similar vesting conditions to those granted in the previous periods.

Other disclosures

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The weighted-average grant-date fair value of share-based compensation plans granted during 2024, 2023, and 2022 was $ 130.3 , $ 94.4 , and $ 60.2 , respectively.

The Company recorded a current tax charge of $ 0.3 million in 2023, a current tax charge of $ 0.7 million in 2022 and a current tax benefit of $ 1.3 million in 2021, in relation to stock option compensation.

The Company recorded a current tax charge of $ 0.1 million in 2024, a current tax charge of $ 0.3 million in 2023 and a current tax charge of $ 0.7 million in 2022, in relation to stock option compensation.

This amount is inclusive of excess tax benefits.

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See (1) below

Pension scheme settlement

See (1) below

Total before tax

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Amounts reclassified from AOCL

Actuarial net gains/(losses) arising during the year

Actuarial net losses arising during the year

Net current period other comprehensive income/(losses)

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Amounts reclassified from AOCL

Actuarial net gains arising during the year

Actuarial net losses arising during the year

Net current period other comprehensive income/(losses)

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Recently Issued Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No.

2023-09, Improvements to Income Tax Disclosures (Topic 740).

This guidance establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing guidance.

Under the new guidance, entities must consistently categorize and provide greater disaggregation of information in the rate reconciliation.

They must also further disaggregate income taxes paid.

This ASU is effective for fiscal years beginning after December 15, 2024, although early adoption is permitted.

The Company intends to adopt the new standard on January 1, 2025.

We are currently evaluating the impact of adopting this new accounting guidance on our consolidated financial statements, including accounting policies, processes and systems, but we do not expect the adoption of this ASU will have a material impact on the Company’s disclosures.

In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No.

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The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption was permitted.

The adoption of this ASU has not had a material impact on the Company’s disclosures.

In November 2024, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No.

2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40).

The amendments in this ASU require disclosure within the notes to the financial statements, of specified information about certain costs and expenses.

The ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

Early adoption is permitted.

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Williams has been an executive director of the Company since April 2009 and has been a non-executive director of AdvanSix, a chemicals manufacturer, since February 2020.

In 2023, the Company purchased product from AdvanSix for $ 0.4 million (2022 – $ 0.5 million;

In 2024, the Company did no t purchase any product from AdvanSix (2023 – $ 0.4 million;

2022 - $ 0.5 million).

As at December 31, 2023, the Company owed $ 0.0 million to AdvanSix (December 31, 2022 – $ 0.0 million).

Paller has been a non-executive director of the Company since November 1, 2009.

As at December 31, 2024, the Company owed nil to AdvanSix (December 31, 2023 – nil ).

Paller was a non-executive director of the Company since November 1, 2009 until May 10, 2024, when he did not stand for re-election to the board.

The Company has retained and continues to retain Smith, Gambrell & Russell, LLP (“SGR”), a law firm with which Mr.

Paller holds a position.

In 2023, the Company incurred fees payable to SGR of $ 0.3 million, (2022 - $ 0.3 million;

From January 1, 2024 until May 10, 2024 the Company incurred fees from SGR of $ 0.2 million (2023 – $ 0.3 million;

2022 – $ 0.3 million).

As at December 31, 2023, the Company owed $ 0.0 million to SGR (December 31, 2022 – $ 0.0 million).

As at December 31, 2024, the Company owed nil to SGR (December 31, 2023 – nil ).

Landless has been a non-executive director of the Company since January 1, 2016 and is a non-executive director of Ausurus Group Limited which owns European Metal Recycling Limited (“EMR”).

The Company has sold scrap metal to EMR in 2023 for a value of $ 0.1 million (2022 - $ 0.1 million;

The Company has sold scrap metal to EMR in 2024 for a value of less than $ 0.1 million (2023 - $ 0.1 million;

2022 – $ 0.1 million).

A tendering process is operated periodically to select the best buyer for the sale of scrap metal by the Company.

As at December 31, 2023, EMR owed $ 0.0 million (December 31, 2022 – $ 0.0 million).

As at December 31, 2024, EMR owed nil for scrap metal purchased from the Company (December 31, 2023 – nil ).

Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data