NewMarket Corporation Reports Results for the Fourth Quarter and Full Year 2014 
1/29/2015 
  • Petroleum Additives Full Year Sales Up 2.4% on Increased Shipments of 4.2%
  • Petroleum Additives Operating Profit for 2014 Up 6.9% in Q4 and Up 2.6% for the Full Year
  • 664,254 Shares Repurchased in 2014

NewMarket Corporation (NYSE:NEU) Chairman and Chief Executive Officer, Thomas E. Gottwald, released the following earnings report of the Company’s operations for the fourth quarter and full year 2014.

Net income for the fourth quarter of 2014 was $52.1 million, or $4.17 per share, compared to net income of $54.0 million, or $4.08 per share, for the fourth quarter of 2013. Net income for 2014 was $233.3 million, or $18.38 per share, compared to net income of $264.7 million, or $19.90 per share, for 2013. Earnings for 2013 included the results from operations of a discontinued business and the related gain on the sale of the discontinued business. All quarterly and full-year periods included the impact of valuing an interest rate swap at fair value. Excluding these items, fourth quarter 2014 earnings were $53.7 million, or $4.30 per share, compared to $53.0 million, or $4.01 per share, in the prior year quarter, and earnings for the year 2014 were $237.6 million, or $18.72 per share, compared to $238.2 million, or $17.90 per share, last year (see Summary of Earnings table below).

Key to our business’ performance, the petroleum additives segment delivered operating profit of $85.5 million for the fourth quarter of 2014, an improvement of 6.9% over operating profit for the same period last year of $80.0 million. Sales of petroleum additives for the fourth quarter of 2014 were $547.9 million, down slightly from sales in the fourth quarter of last year of $553.9 million. Shipments were up about 1%. Petroleum additives operating profit for 2014 was $385.1 million, up 2.6% versus last year’s operating profit of $375.3 million. Sales for the year increased 2.4% to $2.3 billion, and shipments were up 4.2%.

Our business continued to generate strong cash flows in 2014. During the year, we paid dividends of $59.4 million, funded capital expenditures of $59.7 million and repurchased 664,254 shares of our stock at a cost of $248.5 million, including 95,644 shares repurchased in the fourth quarter. At the end of 2014, we had $256.7 million remaining on our stock repurchase authorization. Our strong financial position enhances our capability for future growth and improving shareholder value.

The results we have seen in the last few years reflect the hard work, dedication and extensive capabilities of NewMarket employees around the world. After having posted record results for each of the past 10 years, we expect that our petroleum additives segment will continue to deliver solid results in 2015. We believe our business fundamentals, including a long-term view, safety-first culture, customer-focused solutions, technology-driven product offerings, world-class supply chain capability and a regional organizational structure to better understand our customers’ needs, are core to our success.

               
Summary of Earnings
(In millions, except per-share amounts)
Fourth Quarter Ended Year Ended
December 31 December 31
2014 2013 2014 2013
Net Income:
Net income $ 52.1 $ 54.0 $ 233.3 $ 264.7
(Income) from operations of discontinued business - - - (0.5 )
(Gain) on sale of discontinued business - - - (21.9 )
(Gain) loss on interest rate swap agreement   1.6   (1.0 )   4.3   (4.1 )
Income excluding discontinued operations and special items $ 53.7 $ 53.0   $ 237.6 $ 238.2  
 
Diluted Earnings Per Share:
Net income $ 4.17 $ 4.08 $ 18.38 $ 19.90
(Income) from operations of discontinued business - - - (0.04 )
(Gain) on sale of discontinued business - - - (1.65 )
(Gain) loss on interest rate swap agreement   0.13   (0.07 )   0.34   (0.31 )
Income excluding discontinued operations and special items $ 4.30 $ 4.01   $ 18.72 $ 17.90  
 

Sincerely,

Thomas E. Gottwald

The results for all periods included the impact of valuing an interest rate swap at fair value, while the prior year periods included the results from operations of a discontinued business and the related gain on the sale of the discontinued business. The Company is reporting net income including these items, as well as income excluding them, and related per share amounts in the Summary of Earnings included in the earnings release. The Segment Results and Other Financial Information table included in this earnings release includes a non-GAAP financial measure, Income from Continuing Operations before Special Items and Income Tax Expense, which is reconciled to a GAAP measure. The Company has also included the non-GAAP financial measure EBITDA in this earnings release. A schedule following the financial statements included in this earnings release is provided reflecting the calculation of EBITDA, defined as income from continuing operations, before the deduction of interest and financing expenses, income taxes, depreciation and amortization. EBITDA is shown on the schedule both including and excluding the interest rate swap agreement. The Company believes that even though these items are not required by or presented in accordance with United States generally accepted accounting principles (GAAP), these additional measures enhance understanding of the Company’s performance and period to period comparability. The Company believes that these items should not be considered an alternative to net income determined under GAAP.

As a reminder, a conference call and Internet webcast is scheduled for 10:00 a.m. EST on Friday, January 30, 2015 to review fourth quarter and year-end 2014 financial results. You can access the conference call live by dialing 1-877-407-9210 (domestic) or 1-201-689-8049 (international) and requesting the NewMarket conference call. To avoid delays, callers should dial in five minutes early. The call will also be broadcast via the Internet and can be accessed through the Company’s website at www.newmarket.com or www.investorcalendar.com.  A teleconference replay of the call will be available until February 6, 2015 at 11:59 p.m. EST by dialing 1-877-660-6853 (domestic) and 1-201-612-7415 (international). The conference ID number is 13598780. A webcast replay will be available for 30 days.

NewMarket Corporation, through its subsidiaries Afton Chemical Corporation and Ethyl Corporation, develops, manufactures, blends, and delivers chemical additives that enhance the performance of petroleum products. From custom-formulated additive packages to market-general additives, the NewMarket family of companies provides the world with the technology to make engines run smoother, machines last longer and fuels burn cleaner.

Some of the information contained in this press release constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although NewMarket’s management believes its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results will not differ materially from expectations.

Factors that could cause actual results to differ materially from expectations include, but are not limited to: availability of raw materials and transportation systems; supply disruptions at single sourced facilities; ability to respond effectively to technological changes in our industry; failure to protect our intellectual property rights; hazards common to chemical businesses; occurrence or threat of extraordinary events, including natural disasters and terrorist attacks; competition from other manufacturers; sudden or sharp raw materials price increases; gain or loss of significant customers; risks related to operating outside of the United States; the impact of fluctuations in foreign exchange rates; political, economic, and regulatory factors concerning our products; future governmental regulation; resolution of environmental liabilities or legal proceedings; inability to complete future acquisitions or successfully integrate future acquisitions into our business; and other factors detailed from time to time in the reports that NewMarket files with the Securities and Exchange Commission, including the risk factors in Item 1A, “Risk Factors” of our 2013 Annual Report on Form 10-K, which is available to shareholders upon request.

You should keep in mind that any forward-looking statement made by NewMarket in the foregoing discussion speaks only as of the date on which such forward-looking statement is made. New risks and uncertainties come up from time to time, and it is impossible for us to predict these events or how they may affect the Company. We have no duty to, and do not intend to, update or revise the forward-looking statements in this discussion after the date hereof, except as may be required by law. In light of these risks and uncertainties, you should keep in mind that the events described in any forward-looking statement made in this discussion, or elsewhere, might not occur.

 
NEWMARKET CORPORATION AND SUBSIDIARIES
SEGMENT RESULTS AND OTHER FINANCIAL INFORMATION
(In thousands, except per-share amounts, unaudited)
               
 
Fourth Quarter Ended Twelve Months Ended
December 31, December 31,
2014 2013 2014 2013
 
Revenue:
Petroleum additives $ 547,915 $ 553,925 $ 2,325,082 $ 2,271,259
All other (a)   963     2,446     10,323     9,096  
Total $ 548,878   $ 556,371   $ 2,335,405   $ 2,280,355  
 
Segment operating profit:
Petroleum additives $ 85,506 $ 79,982 $ 385,084 $ 375,291
All other (a)   (513 )   682     1,279     (1,150 )
 
Segment operating profit 84,993 80,664 386,363 374,141
 
Corporate unallocated expense (4,949 ) (5,253 ) (23,397 ) (22,508 )
Interest and financing expenses (3,889 ) (4,182 ) (16,567 ) (17,796 )
Other (expense) income, net   (294 )   19     (175 )   784  
Income from continuing operations before special items and income tax expense 75,861 71,248 346,224 334,621
 
(Loss) gain on an interest rate swap agreement (b)   (2,735 )   1,574     (7,125 )   6,690  
 
Income from continuing operations before income tax expense $ 73,126   $ 72,822   $ 339,099   $ 341,311  
 
Net income:
Income from continuing operations $ 52,055 $ 54,001 $ 233,255 $ 242,347
Gain on sale of discontinued business (c) 21,855
Income from operations of discontinued operations (c)               540  
Net income $ 52,055   $ 54,001   $ 233,255   $ 264,742  
 
Basic and diluted earnings per share:
Income from continuing operations $ 4.17 $ 4.08 $ 18.38 $ 18.21
Discontinued operations (c)               1.69  
Basic and diluted earnings per share $ 4.17   $ 4.08   $ 18.38   $ 19.90  
 
 
Notes to Segment Results and Other Financial Information
 
(a) "All other" includes the results of our tetraethyl lead (TEL) business, as well as certain contract manufacturing performed by Ethyl Corporation.
 
(b) The (loss) gain on an interest rate swap agreement represents the change, since the beginning of the reporting period, in the fair value of an interest rate swap which we entered into on June 25, 2009. We are not using hedge accounting to record the changes to fair value of the interest rate swap, and accordingly, any change in the fair value is immediately recognized in earnings.
 
(c) On July 2, 2013, Foundry Park I completed the sale of its real estate assets which comprised the entire real estate development segment. The operations of the real estate development segment are reported as discontinued operations.
 
 
NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per-share amounts, unaudited)
               
 
Fourth Quarter Ended Twelve Months Ended
December 31, December 31,
2014 2013 2014 2013
 
Net sales $ 548,878 $ 556,371 $ 2,335,405 $ 2,280,355
Cost of goods sold   391,350     404,733   1,669,982     1,627,059
 
Gross profit 157,528 151,638 665,423 653,296
 
Selling, general, and administrative expenses 41,683 43,130 163,520 164,878
Research, development, and testing expenses   35,810     33,258   139,183     136,573
 
Operating profit 80,035 75,250 362,720 351,845
 
Interest and financing expenses 3,889 4,182 16,567 17,796
Other (expense) income, net (a)   (3,020 )   1,754   (7,054 )   7,262
 
Income from continuing operations before income tax expense 73,126 72,822 339,099 341,311
Income tax expense   21,071     18,821   105,844     98,964
 
Income from continuing operations 52,055 54,001 233,255 242,347
 
Discontinued operations:
Gain on sale of discontinued business (net of tax) (b) 21,855
Income from operations of discontinued business (net of tax) (b)             540
 
Net income $ 52,055   $ 54,001 $ 233,255   $ 264,742
 
Basic and diluted earnings per share:
Income from continuing operations $ 4.17 $ 4.08 $ 18.38 $ 18.21
Discontinued operations (b)             1.69
Basic and diluted earnings per share $ 4.17   $ 4.08 $ 18.38   $ 19.90
 
Cash dividends declared per share $ 1.40   $ 1.10 $ 4.70   $ 3.80
 
 
Notes to Consolidated Statements of Income
 
(a) On June 25, 2009, we entered into an interest rate swap. The loss on the interest rate swap was $2.7 million for the quarter ended December 31, 2014 and $7.1 million for the twelve months ended December 31, 2014. The gain on the interest rate swap was $1.6 million for the quarter ended December 31, 2013 and $6.7 million for the twelve months ended December 31, 2013. We are not using hedge accounting to record the changes to fair value of the interest rate swap, and accordingly, any change in the fair value is immediately recognized in earnings.
 
(b) On July 2, 2013, Foundry Park I completed the sale of its real estate assets which comprised the entire real estate development segment. The operations of the real estate development segment are reported as discontinued operations. The income from operations for the 2013 period represents the after tax earnings of the discontinued business.
 
 
NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
       
 
December 31, December 31,
2014 2013
ASSETS
 
Current assets:
Cash and cash equivalents $ 103,003 $ 238,703

Trade and other accounts receivable, less allowance for doubtful accounts ($443 - 2014; $564 - 2013)

302,803 309,847
Inventories 348,420 307,518
Deferred income taxes 7,837 8,267
Prepaid expenses and other current assets   35,128     32,984  
Total current assets   797,191     897,319  
 
Property, plant, and equipment, at cost 1,016,868 985,196
Less accumulated depreciation and amortization   709,009     700,160  
Net property, plant, and equipment   307,859     285,036  
 
Prepaid pension cost 16,082 55,087
Deferred income taxes 48,499 22,961
Intangibles (net of amortization) and goodwill 16,859 23,319
Deferred charges and other assets   45,435     43,552  
Total assets $ 1,231,925   $ 1,327,274  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 137,688 $ 134,132
Accrued expenses 86,539 77,992
Dividends payable 15,721 12,996
Income taxes payable 6,462 11,419
Other current liabilities   13,264     11,075  
Total current liabilities   259,674     247,614  
 
Long-term debt 363,526 349,467
Other noncurrent liabilities 187,684 157,745
 
Shareholders' equity

Common stock and paid-in capital (without par value); issued and outstanding - 12,446,365 in 2014 and 13,099,356 in 2013

Accumulated other comprehensive loss (139,160 ) (60,086 )
Retained earnings   560,201     632,534  
  421,041     572,448  
Total liabilities and shareholders' equity $ 1,231,925   $ 1,327,274  
 
 
NEWMARKET CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands, unaudited)
       
 
Twelve Months Ended
December 31,
2014 2013
 
Net income $ 233,255 $ 264,742
Depreciation and amortization 41,538 46,144
Cash pension and postretirement contributions (26,505 ) (32,483 )
Noncash pension and postretirement expense 16,751 23,083
Working capital changes (54,982 ) (189 )
Capital expenditures (59,716 ) (58,476 )
Net borrowings (repayments) under revolving credit facility 14,000 (75,000 )
Repurchases of common stock (248,509 ) (92,195 )
Dividends paid (59,400 ) (50,368 )
Proceeds from legal settlement 5,150 5,100
Proceeds from sale of discontinued business 140,011
Gain on sale of discontinued business (35,770 )
All other   2,718     14,975  
 
(Decrease) increase in cash and cash equivalents $ (135,700 ) $ 149,574  
 
 
NEWMARKET CORPORATION AND SUBSIDIARIES
NON-GAAP FINANCIAL INFORMATION
(In thousands, unaudited)
               
 
Fourth Quarter Ended Twelve Months Ended
December 31, December 31,
2014 2013 2014 2013
 
Income from continuing operations $ 52,055 $ 54,001 $ 233,255 $ 242,347
 
Add:
Interest and financing expenses 3,889 4,182 16,567 17,796
Income tax expense 21,071 18,821 105,844 98,964
Depreciation and amortization   9,999   9,863     40,177   40,061  
 
EBITDA from continuing operations 87,014 86,867 395,843 399,168
 
Plus (less): loss (gain) on interest rate swap agreement   2,735   (1,574 )   7,125   (6,690 )
 
EBITDA from continuing operations, as adjusted $ 89,749 $ 85,293   $ 402,968 $ 392,478  

 FOR INVESTOR INFORMATION CONTACT:
 Brian D. Paliotti
 Investor Relations
 Phone: 804.788.5555
 Fax: 804.788.5688
 Email:  investorrelations@newmarket.com