Segmental Reporting and Geographical Area Data

12 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Segmental Reporting and Geographical Area Data

Note 3.    Segmental Reporting and Geographical Area Data

Innospec divides its business into three segments for management and reporting purposes: Fuel Specialties, Performance Chemicals and Octane Additives. The Fuel Specialties and Performance Chemicals segments operate in markets where we actively seek growth opportunities although their ultimate customers are different. The Octane Additives segment is generally characterized by volatile and declining demand.

In 2013, the Company had a significant customer in the Fuel Specialties segment, Royal Dutch Shell plc and its affiliates (“Shell”), which accounted for $83.1 million (10%) of our net group sales. In 2012 and 2011, Shell accounted for $82.9 million (11%) and $78.7 million (10%) of our net group sales, respectively.

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:

(in millions)	2013			2012			2011
Net sales:
Fuel Specialties	$	567.4		$	527.2		$	521.2
Performance Chemicals		192.4			179.6			177.0
Octane Additives		59.0			69.6			76.2
	$	818.8		$	776.4		$	774.4
Gross profit:
Fuel Specialties	$	181.1		$	158.7		$	149.3
Performance Chemicals		46.3			43.8			40.6
Octane Additives		27.8			33.9			36.5
	$	255.2		$	236.4		$	226.4
Operating income:
Fuel Specialties	$	92.7		$	87.6		$	81.7
Performance Chemicals		23.6			24.3			22.6
Octane Additives		21.5			26.0			(22.4	)
Pension credit/(charge)		(2.3	)		(1.6	)		(2.9	)
Corporate costs		(43.4	)		(38.5	)		(29.2	)
Restructuring charge		(0.2	)		(0.2	)		(0.6	)
Impairment of Octane Additives segment goodwill		(1.3	)		(1.2	)		(2.0	)
Profit on disposal, net		0.0			0.1			0.0
Total operating income	$	90.6		$	96.5		$	47.2
Identifiable assets at year end:
Fuel Specialties	$	446.4		$	356.6		$	281.5
Performance Chemicals		176.8			113.4			106.7
Octane Additives		42.0			48.9			51.5
Corporate		128.8			60.5			129.1
	$	794.0		$	579.4		$	568.8

The pension charge relates to the United Kingdom defined benefit pension plan which is closed to future service accrual. The charges related to our other much smaller pension arrangements in the U.S. and overseas are included in the segment and income statement captions consistent with the related employees’ costs.

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

• managing the Group as a company with securities listed on the NASDAQ and registered with the SEC;

• the President/CEO’s office, group finance, group human resources, group legal and compliance counsel, and investor relations;

• running the corporate offices in the U.S. and Europe;

• the corporate development function since they do not relate to the current trading activities of our other reporting segments; and

• the corporate share of the information technology, accounting and human resources departments.

Sales by geographical area are reported by source (where the transactions originate) and by destination (where the final sales to customers are made). Intercompany sales are priced to recover cost plus an appropriate mark-up for profit and are eliminated in the consolidated financial statements.

Identifiable assets are those directly associated with the operations of the geographical area.

Goodwill has not been allocated by geographical location on the grounds that it would be impracticable to do so.

(in millions)	2013			2012			2011
Net sales by source:
United States	$	276.1		$	274.1		$	265.6
United Kingdom		502.4			475.1			482.8
Rest of Europe		129.1			142.8			151.7
Other		0.2			0.5			0.9
Sales between areas		(89.0	)		(116.1	)		(126.6	)
	$	818.8		$	776.4		$	774.4
Net sales by destination:
United States	$	278.7		$	272.4		$	248.2
United Kingdom		30.0			38.8			48.5
Rest of Europe		325.5			331.0			304.2
Other		184.6			134.2			173.5
	$	818.8		$	776.4		$	774.4
Income before income taxes:
United States	$	10.0		$	5.6		$	(42.6	)
United Kingdom		43.7			36.3			36.6
Rest of Europe		40.4			52.6			58.2
Impairment of Octane Additives segment goodwill		(1.3	)		(1.2	)		(2.0	)
	$	92.8		$	93.3		$	50.2
Long-lived assets at year end:
United States	$	148.2		$	31.5		$	22.0
United Kingdom		29.4			28.7			32.4
Rest of Europe		11.5			11.5			10.9
	$	189.1		$	71.7		$	65.3
Identifiable assets at year end:
United States	$	291.0		$	174.1		$	123.2
United Kingdom		261.5			192.1			253.8
Rest of Europe		53.2			63.8			49.8
Other		0.4			0.4			0.5
Goodwill		187.9			149.0			141.5
	$	794.0		$	579.4		$	568.8