 Excellent results in Performance Chemicals despite market volatility with operating income up 11 percent Fuel Specialties and Oilfield Services impacted by significant decline in demand Octane Additives concludes as expected; Restructuring charge taken Impairment charge in Oilfield Services Drilling business Excellent cash generation enhances strong liquidity position; Improvement in net cash to 18.6 millionENGLEWOOD, Colo., Aug. 04, 2020 GLOBE NEWSWIRE -- Innospec Inc. NASDAQ: IOSP today announced its financial results for the second quarter ended June 30, 2020. Total net sales for the quarter were 244.9 million, down 32 percent from the 362.4 million reported in the corresponding quarter last year. There was a net loss of 39.7 million, or 1.62 per share, and an EBITDA loss of 19.5 million compared to a net income of 22.3 million, or 0.90 per share, and EBITDA of 43.8 million in the second quarter of 2019.Results for this quarter include special items summarized in the table below. Excluding these items, adjusted loss per share of 18 cents, compared to an adjusted earnings per share of 1.12 a year ago. Innospec closed the quarter in a net cash position of 18.6 million. Cash generation for the quarter was positive with net cash provided by operating activities of 29.8 million before capital expenditures of 6.8 million.EBITDA, income before income taxes 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 June 30, 2020 Quarter ended June 30, 2019 in millions, except share and per share data Loss before income taxes Net loss Per diluted share Income before income taxes Net income Per diluted share Reported GAAP amounts53.839.71.6230.522.30.90 Restructuring charge 21.1 16.8 0.68 - - - Impairment of acquired intangible assets 19.8 15.2 0.62 - - - Amortization of acquired intangible assets 4.6 3.6 0.15 4.6 3.6 0.15 Foreign currency exchange losses 1.2 0.9 0.04 1.8 1.3 0.05 Adjustment of income tax provisions - 1.2 0.05 - 0.4 0.02 46.7 35.3 1.44 6.4 5.3 0.22 Adjusted non-GAAP amounts7.14.40.1836.927.61.12 Commenting on the second quarter results, Patrick S. Williams, President and Chief Executive Officer, said,As we expected, this has been an extraordinary quarter, with market conditions which we have never seen before. We have been operating with the challenges of the massive economic impact of the COVID-19 pandemic and the response of the oil and gas industry to the collapse in crude oil demand.Performance Chemicals has performed very well despite demand volatility and production disruption. Steady sales combined with continued gross margin improvement have contributed to an 11 percent increase in operating income compared to the same period in 2019. This demonstrates the resilience of this business, even with some headwinds in the quarter. We believe that our strategy has us well positioned for future growth.The collapse in oil and fuel demand has had an inevitable impact on both Oilfield Services and Fuel Specialties. With freight transport reduced, passenger miles on the road depressed and aircraft largely grounded for much of the quarter, fuel demand for both diesel and gasoline was down significantly. The result has been a reduction in demand for fuel additives which has impacted our sales and the changes in volume and raw material costs have created a short-term margin impact. We expect demand to improve as global lockdowns are eased and economic activity recovers.The US onshore oil and gas industry has reacted to the demand destruction by making huge cuts to exploration and production. Not only have drilling and completion activities been radically cut back, but record low crude prices also contributed to a curtailment in production. We have responded by making substantial cuts to our cost base, which we believe will position us for improved operating leverage when growth returns. We have also recognized the changes in the oil and gas business by taking an impairment charge reflecting the reduction in the value of intangible assets in our drilling business.With no further motor gasoline business in the second quarter, we have determined that Octane Additives has finally reached its conclusion and as a result, we have booked a restructuring charge.Our portfolio has again generated cash during the quarter, further enhancing our strong balance sheet and liquidity in these troubled times.Revenues in Fuel Specialties were 107.4 million for the quarter down by 19 percent from last year. Volumes were down by 15 percent reflecting the reduction in fuel demand, there was a negative pricemix effect of 3 percent and an adverse currency impact of 1 percent. Gross margins of 23.6 percent were down significantly on last years second quarter and included significant inventory adjustments. Without these adjustments gross margins would have been 31.3 percent. Operating income was 4.7 million down from 24.1 million a year ago.In Performance Chemicals, revenues of 95.7 million were down 9 percent from 104.7 million a year ago driven by a 4 percent reduction in volumes, an adverse pricemix of 4 percent and a negative currency impact of 1 percent. Gross margins improved to 26.0 percent, up 3.1 percentage points on the same quarter in 2019. Operating income was up by 11 percent from last year at 12.2 million.In Oilfield Services, revenues of 41.8 million were down by 66 percent on the second quarter of 2019, reflecting the collapse of customer activity in completions in the US onshore market. Gross margins were 23.7 percent, which included significant inventory adjustments. Without these adjustments, gross margins would have been 1.0 percentage point higher than last year. This translated into an operating loss of 12.4 million compared to an operating income of 10.1 million in the same quarter last year.As expected, there were no Octane Additives revenues in the quarter compared to 1.9 million a year ago which resulted in an operating loss of 1.6 million compared to an operating income of 0.1 million in last years second quarter.Corporate costs for the quarter were 15.4 million, compared to the 13.6 million recorded a year ago, due mainly to higher personnel-related expenses. The effective tax rate for the quarter was 26.2 percent compared to 26.9 percent last year.Net cash provided by operating activities in the quarter was 29.8 million, compared to 50.0 million a year ago. In the quarter, the Company also distributed 12.8 million to shareholders for the semi-annual dividend. As of June 30, 2020, Innospec had 58.2 million in cash and cash equivalents, and total debt of 39.6 million, resulting in a net cash position of 18.6 million.Mr. Williams concluded, Although this has clearly been a disappointing quarter, we are looking forward with optimism.Performance Chemicals has continued to deliver excellent results and we have a number of very promising organic projects which we believe will enhance our growth in the coming quarters.Fuel Specialties should recover in line with an improvement in trade and overall economic conditions. Although delayed, we expect demand in areas like gasoline direct injection engine technology and new marine fuels to supplement underlying growth.In Oilfield Services, our strategy to diversify and broaden the base of our business is on track. Although pipeline throughput has dropped in the short-term, we are very pleased with our growth on drag reducing agents and we are expanding our plant to meet customer demand. We have adjusted our cost base to match customer activity in drilling, completion and production in the short-term. We continue to watch the environment very closely so that we can fine tune our operations.Our headline numbers include a restructuring charge to reflect the long-expected cessation of the Octane Additives business and an impairment charge relating to intangible assets in Oilfield Services. Without these, our small net loss is a reasonable result given the extraordinary nature of the quarter.Our excellent cash generation in the quarter underlines what we believe is the fundamental strength of our businesses. We have a very strong balance sheet and have further improved our liquidity. If the current turmoil generates an attractive acquisition opportunity, we are very well placed to accelerate our growth.Use of Non-GAAP Financial Measures The information presented in this press release includes financial measures that are not calculated or presented in accordance with Generally Accepted Accounting Principles in the United States GAAP. These non-GAAP financial measures comprise EBITDA, income before income taxes excluding special items, net income excluding special items and related per share amounts together with net debt. EBITDA is net income per our consolidated financial statements adjusted for the exclusion of charges for interest expense, net, income taxes, depreciation, impairment and amortization. Income before income taxes, net income and diluted EPS, excluding special items, per our consolidated financial statements are adjusted for the exclusion of restructuring charge, impairment of intangible assets, amortization of acquired intangible assets, foreign currency exchange losses and adjustment of income tax provisions. Net debt is total debt less cash and cash equivalents. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures are provided herein and in the schedules below. 