updated 11/1/2010 4:17:33 PM ET 2010-11-01T20:17:33

GAAP Diluted EPS $1.20 vs. Loss of $(0.11)

Excluding Special Items, Diluted EPS $0.75 vs. $0.48

NEWARK, Del., Nov. 1, 2010 (GLOBE NEWSWIRE) -- Innospec Inc. (Nasdaq:IOSP) today announced its financial results for the third quarter ended September 30, 2010.

Total net sales for the quarter were $174.0 million, up 17% from $149.2 million in the third quarter of 2009. Net income was $30.0 million, or $1.20 per diluted share, compared with a net loss of $2.7 million, or $0.11 per share, a year ago. EBITDA (earnings before interest, taxes, depreciation, amortization and impairment) for the quarter was $36.7 million, up significantly from $10.0 million a year ago.

Results for the third quarter include several special items, which are summarized in the table below. For the third quarter of 2010, these items had a combined positive impact on net income of $11.3 million, or $0.45 per diluted share; a year ago, similar items reduced net income by $14.6 million, or $0.59 per diluted share. Excluding these items, diluted earnings per share for the third quarter of 2010 were $0.75, a 56% increase from $0.48 a year ago.

EBITDA and net income excluding special items, and related per share amounts, are non-GAAP financial measures that are defined and reconciled with GAAP results herein and in the schedules below.

For the first nine months of 2010, total net sales of $505.9 million were up 16% from $434.3 million in the corresponding period last year. Net income for the nine-month period was $49.4 million, or $1.98 per diluted share, compared with $6.7 million, or $0.27 per diluted share, a year ago. Excluding special items, diluted earnings per share for the first nine months of 2010 were $2.08, a 41% increase from $1.47 a year ago. EBITDA for the first nine months of 2010 was $69.9 million, up 90% from $36.8 million a year ago.

"We are pleased to report strong earnings growth as well as excellent cash generation for the third quarter of 2010," said Patrick Williams, President and Chief Executive Officer. "All three of our business segments again performed well, generating double-digit increases in operating income. Fuel Specialties, our largest business, has seen some improvement in fuel demand, but delivered a remarkable 17% unit volume increase for the quarter – outperforming its markets by a wide margin. The forward momentum in Active Chemicals continues, in part due to the success of its new Iselux surfactant, and Octane Additives turned in another exceptionally strong quarter." 

In Fuel Specialties, net sales for the third quarter were $113.9 million, a 14% increase from $100.1 million in last year's third quarter. By region, sales were up 15% in the Americas, 6% in the Europe, Middle East and Africa (EMEA) region, and 29% in the Asia-Pacific region. The segment's gross margin was 32.8%, compared with 32.9% a year ago. Its operating income for the quarter was $18.7 million, a 17% increase from $16.0 million a year ago. 

Active Chemicals reported net sales of $38.2 million for the quarter, up 4% from $36.6 million a year ago. By region, sales rose 22% in the Americas and 29% in the Asia-Pacific region, but declined 13% in the EMEA region. Active Chemicals' gross margin was 21.7% for the third quarter, compared with 23.8% a year ago. The segment's operating income was $4.3 million, a 16% increase from $3.7 million in last year's third quarter. 

In Octane Additives, net sales for the quarter were $21.9 million, up 75% from $12.5 million a year ago. The segment's gross margin was 44.3%, compared with 44.8% a year ago. Its operating income for the quarter was $6.4 million, compared with a $14.7 million operating loss a year ago (which included an $18.3 million settlement accrual related to the United Nations Oil for Food Program and FCPA investigations).   

Corporate costs for the quarter were $5.4 million, compared with $4.4 million a year ago. Innospec incurred a $2.5 million pre-tax charge related to its pension plan, compared with a $1.7 million charge a year ago. The Company also recorded after-tax foreign exchange gains of $9.1 million in the third quarter, compared with a $4.9 million gain a year ago. Excluding the impact of the adjustments of income tax provisions in the year, the current year effective tax rate is 21.6%.

Net cash generated from operations was $22.0 million for the third quarter, driven primarily by continued strong operating income. As of September 30, 2010, Innospec had $101.5 million in cash and cash equivalents, $53.5 million more than its total debt of $48.0 million.   

Mr. Williams concluded, "Our ongoing growth businesses in Fuel Specialties and Active Chemicals remain well-positioned to deliver substantial earnings growth in the years ahead. With our current balance sheet and strong cash generation capability, we will also be taking a closer look at potential strategic acquisitions as well as other opportunities to enhance 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 and net income excluding special items, and related per share amounts. EBITDA is net income per our consolidated financial statements adjusted for the exclusion of charges for interest expense (net), income taxes, depreciation, amortization and impairment of Octane Additives business goodwill. Net income excluding special items is net income per our consolidated financial statements adjusted for the exclusion of foreign exchange gains, adjustment of income tax provisions, pension charge and OFFP/FCPA settlement accrual. 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 800 employees in 23 countries. Innospec manufactures and supplies a wide range of specialty chemicals to markets in the Americas, Europe, the Middle East, Africa and Asia-Pacific.  Innospec's Fuel Specialties business specializes in manufacturing and supplying the fuel additives that help improve fuel efficiency, boost engine performance and reduce harmful emissions. Innospec's Active Chemicals business provides effective technology-based solutions for our customers' processes or products focused in the Personal Care; Household, Industrial & Institutional; and Fragrance Ingredients markets. Innospec's Octane Additives business is the world's only producer of tetra ethyl lead.

Forward-Looking Statements

This press release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements.  Such forward-looking statements include statements (covered by words like "expects", "anticipates", "may", "believes" or similar words or expressions), for example, which relate to operating performance, events or developments that we expect or anticipate will or may occur in the future (including, without limitation, any of the Company's guidance in respect of sales, gross margins, net income, growth potential and other measures of financial performance). Although forward-looking statements are believed by management to be reasonable when made, caution should be exercised not to place undue reliance on such statements because they are subject to certain risks, uncertainties and assumptions, including in respect of the general business environment, regulatory actions or changes. If the risks or uncertainties materialize or assumptions prove incorrect or change, our actual performance or results may differ materially from those expressed or implied by such forward-looking statements and assumptions. Additional information regarding risks, uncertainties and assumptions relating to the Company and affecting our business operations and prospects are described in the Company's Annual Report on Form 10-K for the year ended December 31, 2009, and other reports filed with the U.S. Securities and Exchange Commission. You are urged to carefully review and consider the cautionary statements and other disclosures made in those filings, specifically those under the heading "Risk Factors".  The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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