INNOSPEC INC

Legal matters

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, and employee and product liability claims.

As previously reported in the first quarter of 2023, we 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 Consolidated Financial Statements. In the second quarter of 2023, we 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 of 2023 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.

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.