XML 37 R21.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Pension and Post-Employment Benefits | 12 Months Ended
--- | ---
Dec. 31, 2018
Retirement Benefits [Abstract] |
Pension and Post-Employment Benefits | Note 9. Pension and Post-Employment Benefits United Kingdom plan The Company maintains a defined benefit pension plan (the “Plan”) covering a number of its current and former employees in the United Kingdom, although it does also have other much smaller pension arrangements in the U.S. and overseas. The Plan is closed to future service accrual but 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. The Plan’s assets are invested by several investment management companies in funds holding United Kingdom and overseas equities, United Kingdom and overseas fixed interest securities, index linked securities, property unit trusts and cash or cash equivalents. The trustees’ investment policy is to seek to achieve specified objectives through investing in a suitable mixture of real and monetary assets. The trustees recognize that the returns on real assets, while expected to be greater over the long-term than those on monetary assets, are likely to be more volatile. A mixture across asset classes should nevertheless provide the level of returns required by the Plan to meet its liabilities at an acceptable level of risk for the trustees and an acceptable level of cost to the Company. In 2018, the Company contributed $1.0 million in cash to the Plan in accordance with an agreement with the trustees. The net service cost for the twelve months ended December 31, 2018 was $1.2 million (twelve months ended December 31, 2017 – $0.9 million and twelve months ended December 31, 2016 – $1.0 million) and has been recognized in selling, general and administrative expenses within corporate costs. The following table shows the income statement effect recognized within other income, net:
(in millions) |  | 2018 |  |  | 2017 |  |  | 2016 |
Plan net pension (credit)/charge: |  |  |  |  |  |  |  |  |  |  |  |
Interest cost on PBO |  | $ | 15.0 |  |  | $ | 15.2 |  |  | $ | 20.8 |
Expected return on plan assets |  |  | (22.2 | ) |  |  | (24.5 | ) |  |  | (29.9 | )
Amortization of prior service credit |  |  | (1.1 | ) |  |  | (1.0 | ) |  |  | (1.1 | )
Amortization of actuarial net losses |  |  | 2.0 |  |  |  | 5.0 |  |  |  | 2.6 |
|  | $ | (6.3 | ) |  | $ | (5.3 | ) |  | $ | (7.6 | )
Plan assumptions at December 31, (%): |  |  |  |  |  |  |  |  |  |  |  |
Discount rate |  |  | 2.78 |  |  |  | 2.56 |  |  |  | 2.48 |
Inflation rate |  |  | 2.25 |  |  |  | 2.20 |  |  |  | 2.25 |
Rate of return on plan assets – overall on bid-value |  |  | 3.05 |  |  |  | 2.75 |  |  |  | 3.20 |
Plan asset allocation by category (%): |  |  |  |  |  |  |  |  |  |  |  |
Equity securities |  |  | 12 |  |  |  | 38 |  |  |  | 25 |
Debt securities |  |  | 83 |  |  |  | 53 |  |  |  | 66 |
Cash |  |  | 5 |  |  |  | 9 |  |  |  | 9 |
|  |  | 100 |  |  |  | 100 |  |  |  | 100 |
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 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 by approximately $21 million and the net pension credit for 2018 would change by approximately $0.5 million. A 0.25% change in the level of price inflation assumption would change the PBO by approximately $14 million and the net pension credit for 2018 by approximately $0.6 million. Movements in PBO and fair value of Plan assets are as follows:
(in millions) |  | 2018 |  |  | 2017 |
Change in PBO: |  |  |  |  |  |  |  |
Opening balance |  | $ | 721.4 |  |  | $ | 710.2 |
Interest cost |  |  | 15.0 |  |  |  | 15.2 |
Service cost |  |  | 1.2 |  |  |  | 0.9 |
Benefits paid |  |  | (43.7 | ) |  |  | (37.8 | )
Actuarial gains |  |  | (14.6 | ) |  |  | (32.7 | )
Plan amendments |  |  | 3.3 |  |  |  | 0.0 |
Exchange effect |  |  | (39.4 | ) |  |  | 65.6 |
Closing balance |  | $ | 643.2 |  |  | $ | 721.4 |
Fair value of plan assets: |  |  |  |  |  |  |  |
Opening balance |  | $ | 837.4 |  |  | $ | 758.2 |
Actual benefits paid |  |  | (43.7 | ) |  |  | (37.8 | )
Actual contributions by employer |  |  | 1.1 |  |  |  | 1.0 |
Actual return on assets |  |  | (10.3 | ) |  |  | 43.0 |
Exchange effect |  |  | (45.4 | ) |  |  | 73.0 |
Closing balance |  | $ | 739.1 |  |  | $ | 837.4 |
The current investment strategy of the Plan is to obtain an asset allocation of approximately 85% debt securities and 15% equity securities in order to achieve a more predictable return on assets. Due to the change in the Plan’s investment strategy in 2018 the Plan’s assets no longer include index-tracking funds with one investment management company (December 31, 2017 – 30%). The Plan continues to hold approximately 9% (December 31, 2017 – 10%) of the Plan’s assets in United Kingdom government gilts. No more than 5% of the Plan’s assets were invested in any one individual company’s investment funds. For the vast majority of assets, a market approach is adopted to assess the fair value of the assets, with the inputs being the quoted market prices for the actual securities held in the relevant fund. Equity securities 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 and are classified in Level 1. Fixed income securities 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. Insurance contracts The Company has invested in insurance contracts, known as buy-in contracts. The value of the insurance contract is 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 the external parties and are subsequently reviewed and approved by management. The fair values of pension assets by level of input were as follows:
(in millions) |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |  |  | Total |
At December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed income securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt securities issued by non-U.S. governments and government agencies |  | $ | 67.2 |  |  | $ |  |  |  | $ |  |  |  | $ | 67.2 |
Corporate debt securities |  |  |  |  |  |  | 406.4 |  |  |  |  |  |  |  | 406.4 |
Other asset-backed securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other financial derivatives |  |  |  |  |  |  | 0.5 |  |  |  |  |  |  |  | 0.5 |
Real estate |  |  | 31.4 |  |  |  |  |  |  |  |  |  |  |  | 31.4 |
Insurance contracts |  |  |  |  |  |  |  |  |  |  | 142.5 |  |  |  | 142.5 |
Investments measured at net asset value (1) |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 53.0 |
Total assets at fair value |  |  | 98.6 |  |  |  | 406.9 |  |  |  | 142.5 |  |  |  | 701.0 |
Cash |  |  | 38.1 |  |  |  |  |  |  |  |  |  |  |  | 38.1 |
Total plan assets |  | $ | 136.7 |  |  | $ | 406.9 |  |  | $ | 142.5 |  |  | $ | 739.1 |
At December 31, 2017 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed income securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt securities issued by non-U.S. governments and government agencies |  | $ | 86.0 |  |  | $ |  |  |  | $ |  |  |  | $ | 86.0 |
Corporate debt securities |  |  | 194.5 |  |  |  | 232.3 |  |  |  |  |  |  |  | 426.8 |
Other asset-backed securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity securities held for proprietary investment purposes |  |  | 0.1 |  |  |  |  |  |  |  |  |  |  |  | 0.1 |
Real estate |  |  | 34.4 |  |  |  |  |  |  |  |  |  |  |  | 34.4 |
Insurance contracts |  |  |  |  |  |  |  |  |  |  | 162.8 |  |  |  | 162.8 |
Investments measured at net asset value (1) |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 52.3 |
Total assets at fair value |  |  | 315.0 |  |  |  | 232.3 |  |  |  | 162.8 |  |  |  | 762.4 |
Cash |  |  | 75.0 |  |  |  |  |  |  |  |  |  |  |  | 75.0 |
Total plan assets |  | $ | 390.0 |  |  | $ | 232.3 |  |  | $ | 162.8 |  |  | $ | 837.4 |
(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 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 Plan assets measured using significant unobservable inputs was as follows:
(in millions) |  | Other Assets |
Balance at December 31, 2016 |  | $ | 152.9 |
Realized/unrealized gains/(losses): |  |  |  |
Relating to assets still held at the reporting date |  |  | 2.8 |
Relating to assets sold during the period |  |  | 0.0 |
Purchases, issuances and settlements |  |  | (7.4 | )
Exchange effect |  |  | 14.5 |
Balance at December 31, 2017 |  |  | 162.8 |
Realized/unrealized gains/(losses): |  |  |  |
Relating to assets still held at the reporting date |  |  | (4.8 | )
Relating to assets sold during the period |  |  | 0.0 |
Purchases, issuances and settlements |  |  | (6.7 | )
Exchange effect |  |  | (8.8 | )
Balance at December 31, 2018 |  | $ | 142.5 |
The projected net service cost for the year ending December 31, 2019 is $0.9 million and will be recognized in selling, general and administrative expenses. The following will be recognized in other income and expense:
(in millions) |  |  |
Interest cost on PBO |  | $ | 15.2 |
Expected return on plan assets |  |  | (21.9 | )
Amortization of prior service credit |  |  | (0.9 | )
|  | $ | (7.6 | )
In total, there will be a net pension credit of $6.7 million to the Innospec’s net income for the year ending December 31, 2019. The following benefit payments are expected to be made:
(in millions) |  |  |
2019 |  | $ | 38.5 |
2020 |  | $ | 36.6 |
2021 |  | $ | 36.1 |
2022 |  | $ | 35.4 |
2023 |  | $ | 34.3 |
2024-2028 |  | $ | 168.7 |
German plan The Company also maintains an unfunded defined benefit pension plan covering a number of its current and former employees in Germany (the “German plan”). The German plan is closed to new entrants and has no assets. The net service cost for the German plan for the twelve months ended December 31, 2018 was $0.2 million (twelve months ended December 31, 2017 – $0.2 million and twelve months ended December 31, 2016 – $0.2 million). The following table shows the income statement effect recognized within other income and expense:
(in millions) |  | 2018 |  |  | 2017 |  |  | 2016 |
Plan net pension charge: |  |  |  |  |  |  |  |  |  |  |  |
Interest cost on PBO |  | $ | 0.2 |  |  | $ | 0.2 |  |  | $ | 0.2 |
Amortization of actuarial net loss |  |  | 0.4 |  |  |  | 0.4 |  |  |  | 0.2 |
|  | $ | 0.6 |  |  | $ | 0.6 |  |  | $ | 0.4 |
Plan assumptions at December 31, (%): |  |  |  |  |  |  |  |  |  |  |  |
Discount rate |  |  | 1.90 |  |  |  | 1.70 |  |  |  | 1.80 |
Inflation rate |  |  | 1.75 |  |  |  | 1.75 |  |  |  | 1.75 |
Rate of increase in compensation levels |  |  | 2.75 |  |  |  | 2.75 |  |  |  | 2.75 |
Movements in PBO of the German plan are as follows:
(in millions) |  | 2018 |  |  | 2017 |
Change in PBO: |  |  |  |  |  |  |  |
Opening balance |  | $ | 11.8 |  |  | $ | 10.1 |
Service cost |  |  | 0.2 |  |  |  | 0.2 |
Interest cost |  |  | 0.2 |  |  |  | 0.2 |
Benefits paid |  |  | (0.3 | ) |  |  | (0.2 | )
Actuarial losses |  |  | 0.0 |  |  |  | 0.2 |
Exchange effect |  |  | (0.6 | ) |  |  | 1.3 |
Closing balance |  | $ | 11.3 |  |  | $ | 11.8 |
The amount of unrecognized actuarial net losses in other comprehensive loss in respect of the German plan is $2.1 million, net of tax of $0.7 million. Other plans Company contributions to defined contribution schemes during 2018 were $8.6 million (2017 – $7.9 million). As at December 31, 2018, we have post-employment obligations in our European businesses with a liability of $4.4 million (December 31, 2017 – $4.7 million).

X
- References No definition available. + Details
Name: | us-gaap_CompensationAndRetirementDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for pension and other postretirement benefits. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 715 -URI http://asc.fasb.org/topic&trid=2235017 + Details
Name: | us-gaap_PensionAndOtherPostretirementBenefitsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration