NewMarket Corporation Reports First Quarter 2015 Results 
4/22/2015 
  • Net Income of $63.9 Million, Up 11% Compared to First Quarter 2014
  • Record First Quarter Shipments, Up 1.5% Over First Quarter 2014
  • Petroleum Additives Operating Profit up 9% Over First Quarter 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 first quarter of 2015.

Net income for the first quarter of 2015 increased to $63.9 million, or $5.14 per share, an improvement of 11.2% over net income for the first quarter of 2014 of $57.5 million, or $4.43 per share. Earnings for both the first quarter of this year and last year included an unfavorable impact from valuing an interest rate swap at fair value. Excluding this item, EPS for the first quarter of 2015 would have been $5.26 per share, compared to $4.54 per share for the first quarter of last year (see Summary of Earnings table below).

Petroleum additives began 2015 with quarterly operating profit of $105.0 million, representing an improvement of 9.2% over last year’s first quarter operating profit of $96.2 million. Lower raw material costs between the quarterly periods resulting from lower prices were the primary driver of the increase. Sales of petroleum additives for this year’s first quarter were $554.8 million, down 3.4% versus the same period last year, mainly due to changes in foreign currency rates. We had record first quarter shipments in 2015, which were up 1.5% over the prior year quarter.

During the quarter, we funded capital expenditures of $20.4 million primarily to support the construction of the Singapore plant. We also paid dividends of $17.4 million.

We are pleased with our performance and earnings results in the first quarter of this year. We have made significant investments in people, research and development activities, and technical and production facilities over the past several years, and expect to continue to do so in the future. Doing so will help to ensure that we are well-positioned to deliver goods and services our customers value while continuing to provide solid returns for our shareholders. We believe this long-term strategy will help us achieve our plan to exceed the industry growth rate, which is currently estimated to be 1% to 2% over the next five years.

 
Summary of Earnings
(In millions, except per-share amounts)
First Quarter Ended
March 31
2015   2014
Net Income:
Net income $ 63.9 $ 57.5
Loss (gain) on interest rate swap agreement   1.5   1.4
Income excluding the above special items $ 65.4 $ 58.9
 
Diluted Earnings Per Share:
Net income $ 5.14 $ 4.43
Loss (gain) on interest rate swap agreement   0.12   0.11
Income excluding the above special items $ 5.26 $ 4.54
 

Sincerely,

Thomas E. Gottwald

The results for this year and last year include the impact of valuing an interest rate swap at fair value. The Company is reporting net income and related per share amounts including this item, as well as excluding it, 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 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 3:00 p.m. EDT on Thursday, April 23, 2015 to review first quarter 2015 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 April 30, 2015 at 11:59 p.m. EDT by dialing 1-877-660-6853 (domestic) and 1-201-612-7415 (international). The conference ID number is 13605985. 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 distribution systems; disruptions at manufacturing facilities, including single-sourced facilities; ability to respond effectively to technological changes in our industry; failure to protect our intellectual property rights; failure to attract and retain a highly-qualified workforce; hazards common to chemical businesses; competition from other manufacturers; sudden or sharp raw material price increases; gain or loss of significant customers; occurrence or threat of extraordinary events, including natural disasters and terrorist attacks; risks related to operating outside of the United States; the impact of fluctuations in foreign exchange rates; an information technology system failure; political, economic, and regulatory factors concerning our products; future governmental regulation; resolution of environmental liabilities or legal proceedings; and 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 2014 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)

 

Three Months Ended
March 31,

2015   2014
Revenue:
Petroleum additives $ 554,765 $ 574,045
All other (a)   4,801     2,377  
Total $ 559,566   $ 576,422  
Segment operating profit:
Petroleum additives $ 105,025 $ 96,179
All other (a)   2,099     535  
Segment operating profit 107,124 96,714
Corporate unallocated expense (7,015 ) (6,553 )
Interest and financing expenses (3,816 ) (4,164 )
Other (expense) income, net   (248 )   31  
Income before special items and income tax expense 96,045 86,028
(Loss) gain on an interest rate swap agreement (b)   (2,408 )   (2,233 )
Income before income tax expense $ 93,637   $ 83,795  
Net income $ 63,947   $ 57,523  
Earnings per share - basic and diluted $ 5.14   $ 4.43  
 

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.
 
 

NEWMARKET CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per-share amounts, unaudited)

 
Three Months Ended
March 31,
2015   2014
Net sales $ 559,566 $ 576,422
Cost of goods sold   378,294     414,492  
Gross profit 181,272 161,930
Selling, general, and administrative expenses 41,809 39,548
Research, development, and testing expenses   39,685     32,207  
Operating profit 99,778 90,175
Interest and financing expenses, net 3,816 4,164
Other income (expense), net   (2,325 )   (2,216 )
Income before income tax expense 93,637 83,795
Income tax expense   29,690     26,272  
Net income $ 63,947   $ 57,523  
Earnings per share - basic and diluted $ 5.14   $ 4.43  
Cash dividends declared per share $ 1.40   $ 1.10  
 

Notes to Consolidated Statements of Income

 
On June 25, 2009, we entered into an interest rate swap. Other income (expense), net includes the loss on the interest rate swap of $2.4 million for the three months ended March 31, 2015 and $2.2 million for the three months ended March 31, 2014. 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.
 
   

NEWMARKET CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, unaudited)

 
March 31,
2015
December 31,
2014
ASSETS
Current assets:
Cash and cash equivalents $ 119,243 $ 103,003
Trade and other accounts receivable, less allowance for doubtful accounts ($467 - 2015; $443 - 2014) 303,334 302,803
Inventories 345,414 348,420
Deferred income taxes 5,487 7,837
Prepaid expenses and other current assets   37,873     35,128  
Total current assets   811,351     797,191  
Property, plant, and equipment, at cost 1,025,540 1,016,868
Less accumulated depreciation and amortization   706,970     709,009  
Net property, plant, and equipment   318,570     307,859  
 
Prepaid pension cost 16,693 16,082
Deferred income taxes 50,544 48,499
Intangibles (net of amortization) and goodwill 15,260 16,859
Deferred charges and other assets   45,252     45,435  
Total assets $ 1,257,670   $ 1,231,925  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 136,325 $ 137,688
Accrued expenses 78,661 86,539
Dividends payable 15,738 15,721
Income taxes payable 21,237 6,462
Other current liabilities   5,173     13,264  
Total current liabilities   257,134     259,674  
Long-term debt 373,541 363,526
Other noncurrent liabilities 184,105 187,684
Shareholders' equity:
Common stock and paid-in capital (without par value); issued and outstanding - 12,443,241 in 2015 and 12,446,365 in 2014 426
Accumulated other comprehensive loss (163,467 ) (139,160 )
Retained earnings   605,931     560,201  
Total shareholders' equity   442,890     421,041  
Total liabilities and shareholders' equity $ 1,257,670   $ 1,231,925  
 
 

NEWMARKET CORPORATION AND SUBSIDIARIES

SELECTED CONSOLIDATED CASH FLOW DATA

(In thousands, unaudited)

 
Three Months Ended
March 31,
2015   2014
Net income $ 63,947 $ 57,523
Depreciation and amortization 10,186 10,258
Cash pension and postretirement contributions (6,730 ) (5,202 )
Noncash pension and postretirement expense 5,837 3,654
Working capital changes (13,806 ) (66,764 )
Capital expenditures (20,424 ) (9,251 )
Net borrowings under revolving credit facility 10,000 6,000
Repurchases of common stock (1,042 ) (77,061 )
Dividends paid (17,421 ) (14,200 )
All other   (14,307 )   2,997  
Increase (decrease) in cash and cash equivalents $ 16,240   $ (92,046 )
 
 

NEWMARKET CORPORATION AND SUBSIDIARIES

NON-GAAP FINANCIAL INFORMATION

(In thousands, unaudited)

 
Three Months Ended
March 31,
2015   2014
Net Income $ 63,947 $ 57,523
Add:
Interest and financing expenses, net 3,816 4,164
Income tax expense 29,690 26,272
Depreciation and amortization   9,914   9,903
EBITDA 107,367 97,862
Plus (less): loss (gain) on interest rate swap agreement   2,408   2,233
EBITDA, as adjusted $ 109,775 $ 100,095
 

 

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