NewMarket Corporation Reports Second Quarter and First Half 2017 Results 
8/2/2017 
  • Second Quarter Net Income of $62.7 Million versus $64.4 Million in 2016
  • First Half Earnings Per Share of $10.69 versus $10.65 in 2016
  • Petroleum Additives First Half Shipments Up 10.1%
  • Completed Acquisition of Petroleum Additives Company in Mexico

Richmond, VA, August 2, 2017 – NewMarket Corporation (NYSE:NEU) Chairman and Chief Executive Officer, Thomas E. Gottwald, released the following earnings report of the Company’s operations for the second quarter and first half of 2017.
Net income for the second quarter of 2017 was $62.7 million, or $5.29 per share, compared to net income of $64.4 million, or $5.43 per share, for the second quarter of 2016. For the first half of 2017, net income was $126.7 million, or $10.69 per share, compared to net income of $126.3 million, or $10.65 per share, for the first half of last year.
Sales for the petroleum additives segment for the second quarter of 2017 were $544.2 million, up 5.4% versus the same period last year, mainly due to higher shipments, partially offset by changes in selling prices. Petroleum additives operating profit for the second quarter of 2017 was $94.9 million, lower than second quarter operating profit last year of $102.5 million. The decrease was due to lower selling prices and increasing raw material costs, partially offset by increased shipments. Shipments between quarterly periods were up 6.4% from the same period last year with increases in both lubricant additives and fuel additives shipments. Asia Pacific and Europe were the main regions contributing to the increase in lubricant additives shipments, and Europe was the primary driver of the increase in fuel additives shipments.
Petroleum additives sales for the first half of the year were $1.1 billion compared to sales in the first half of last year of $1.0 billion, or an increase of 6.1%. This increase was due mainly to higher shipments partially offset by changes in selling prices. Petroleum additives operating profit for the first half of the year was $194.0 million compared to $202.9 million for the first half of 2016, or a decrease of 4.4%. The decrease was due to lower selling prices and increasing raw material costs, partially offset by increased shipments. Shipments increased 10.1% between periods with increases in both lubricant additives and fuel additives shipments. The regional drivers for those increases were consistent with the drivers in the second quarter discussed above.
The effective income tax rate for the second quarter of 2017 was 26.5%, down from the rate of 30.1% in the same period last year. The effective rate for the first half of 2017 was 27.0%, down from the rate in 2016 of 30.2%. The rates in both periods were lower primarily due to increased earnings in foreign jurisdictions with lower tax rates.
We continued to generate solid operating cash flows in the first half of 2017. During the period we paid dividends of $41.5 million and funded capital expenditures of $85.2 million. We also issued $250 million of fixed rate long-term debt in a private placement transaction, and repaid $129.6 million under our revolving credit facility. We are continuing to use our capital to achieve our long-term growth plans. In early July, we completed our previously announced acquisition of Aditivos Mexicanos, S.A. de C.V., a petroleum additives manufacturing, sales and distribution company based in Mexico City, Mexico. In addition, construction continues on phase two of our manufacturing facility in Singapore which is expected to be completed in the second half of 2017, and we are continuing to invest in research and development in order to meet our customers’ ever-changing business needs.



Our petroleum additives business is performing consistent with our expectations. We continue to make decisions to promote long-term value for our shareholders and customers, and we remain focused on our long-term objectives. We believe the fundamentals of the industry as a whole remain unchanged, with the petroleum additives market growing at 1% to 2% annually for the foreseeable future. We continue to believe that we will exceed that growth rate over the long term.


Sincerely,
Thomas E. Gottwald

The Company has included the non-GAAP financial measure EBITDA in the schedules to this earnings release. A schedule following the financial statements provides the calculation of EBITDA, defined as income from continuing operations before the deduction of interest and financing expenses, income taxes, depreciation and amortization. The Company believes that even though this item is not required by or presented in accordance with United States generally accepted accounting principles (GAAP), this additional measure enhances understanding of the Company’s performance and period to period comparability. The Company believes that this item 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, August 3, 2017 to review second quarter 2017 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. A teleconference replay of the call will be available until August 10, 2017 at 11:59 p.m. EDT by dialing 1-877-481-4010 (domestic) or 1-919-882-2331 (international). The replay ID number is 15996. 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 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, the availability of raw materials and distribution systems; disruptions at manufacturing facilities, including single-sourced facilities; the 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; the gain or loss of significant customers; the 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 or security breach; political, economic, and regulatory factors concerning our products; future governmental regulation; resolution of environmental liabilities or legal proceedings; our inability to realize expected benefits from investment in our infrastructure or from recent or future acquisitions or our inability to successfully integrate recent or 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 2016 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 arise 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.






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







NEWMARKET CORPORATION AND SUBSIDIARIES
SEGMENT RESULTS AND OTHER FINANCIAL INFORMATION
(In thousands, except per-share amounts, unaudited)

 
 
Second Quarter Ended
June 30,
 
Six Months Ended
June 30,
 
 
2017
 
2016
 
2017
 
2016
Revenue:
 
 
 
 
 
 
 
 
Petroleum additives
 
$
544,153

 
$
516,112

 
$
1,084,186

 
$
1,022,255

All other (a)
 
3,035

 
5,695

 
5,820

 
9,479

Total
 
$
547,188

 
$
521,807

 
$
1,090,006

 
$
1,031,734

Segment operating profit:
 
 
 
 
 
 
 
 
Petroleum additives
 
$
94,932

 
$
102,531

 
$
194,002

 
$
202,920

All other (a)
 
860

 
1,355

 
1,940

 
1,591

Segment operating profit
 
95,792

 
103,886

 
195,942

 
204,511

Corporate unallocated expense
 
(5,003
)
 
(6,136
)
 
(11,672
)
 
(11,406
)
Interest and financing expenses
 
(5,360
)
 
(3,954
)
 
(10,932
)
 
(8,142
)
Other income (expense), net
 
(139
)
 
(1,724
)
 
185

 
(3,945
)
Income before income tax expense
 
$
85,290

 
$
92,072

 
$
173,523

 
$
181,018

Net income
 
$
62,728

 
$
64,389

 
$
126,665

 
$
126,320

Earnings per share - basic and diluted
 
$
5.29

 
$
5.43

 
$
10.69

 
$
10.65


Notes to Segment Results and Other Financial Information
(a) "All other" includes the results of our tetraethyl lead (TEL) business, as well as certain contracted manufacturing and services associated with Ethyl Corporation.








NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per-share amounts, unaudited)

 
 
Second Quarter Ended
June 30,
 
Six Months Ended
June 30,
 
 
2017
 
2016
 
2017
 
2016
Net sales
 
$
547,188

 
$
521,807

 
$
1,090,006

 
$
1,031,734

Cost of goods sold
 
382,312

 
343,407

 
754,885

 
677,784

Gross profit
 
164,876

 
178,400

 
335,121

 
353,950

Selling, general, and administrative expenses
 
38,816

 
40,388

 
78,745

 
81,328

Research, development, and testing expenses
 
35,581

 
40,720

 
72,286

 
79,936

Operating profit
 
90,479

 
97,292

 
184,090

 
192,686

Interest and financing expenses, net
 
5,360

 
3,954

 
10,932

 
8,142

Other income (expense), net
 
171

 
(1,266
)
 
365

 
(3,526
)
Income before income tax expense
 
85,290

 
92,072

 
173,523

 
181,018

Income tax expense
 
22,562

 
27,683

 
46,858

 
54,698

Net income
 
$
62,728

 
$
64,389

 
$
126,665

 
$
126,320

Earnings per share - basic and diluted
 
$
5.29

 
$
5.43

 
$
10.69

 
$
10.65

Cash dividends declared per share
 
$
1.75

 
$
1.60

 
$
3.50

 
$
3.20







NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts, unaudited)

 
 
June 30,
2017
 
December 31,
2016
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
278,035

 
$
192,154

Trade and other accounts receivable, less allowance for doubtful accounts ($598 - 2017; $710 - 2016)
 
332,372

 
306,916

Inventories
 
356,152

 
311,512

Prepaid expenses and other current assets
 
28,756

 
26,301

Total current assets
 
995,315

 
836,883

Property, plant, and equipment, at cost
 
1,352,487

 
1,264,957

Less accumulated depreciation and amortization
 
791,348

 
761,212

Net property, plant, and equipment
 
561,139

 
503,745

Prepaid pension cost
 
36,994

 
25,800

Deferred income taxes
 
23,284

 
29,063

Intangibles (net of amortization) and goodwill
 
10,217

 
10,436

Deferred charges and other assets
 
9,834

 
10,509

Total assets
 
$
1,636,783

 
$
1,416,436

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
157,531

 
$
141,869

Accrued expenses
 
88,719

 
104,082

Dividends payable
 
19,125

 
17,478

Income taxes payable
 
12,969

 
17,573

Other current liabilities
 
12,138

 
13,588

Total current liabilities
 
290,482

 
294,590

Long-term debt
 
627,976

 
507,275

Other noncurrent liabilities
 
134,620

 
131,320

Total liabilities
 
1,053,078

 
933,185

Shareholders' equity:
 
 
 
 
Common stock and paid-in capital (without par value; issued and outstanding shares - 11,852,512 at June 30, 2017 and 11,845,972 at December 31, 2016)
 
2,961

 
1,603

Accumulated other comprehensive loss
 
(168,597
)
 
(182,510
)
Retained earnings
 
749,341

 
664,158

Total shareholders' equity
 
583,705

 
483,251

Total liabilities and shareholders' equity
 
$
1,636,783

 
$
1,416,436








NEWMARKET CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands, unaudited)

 
 
Six Months Ended
June 30,
 
 
2017
 
2016
Net income
 
$
126,665

 
$
126,320

Depreciation and amortization
 
24,623

 
21,082

Cash pension and postretirement contributions
 
(12,936
)
 
(13,058
)
Noncash pension and postretirement expense
 
4,055

 
6,111

Working capital changes
 
(51,376
)
 
29,965

Capital expenditures
 
(85,211
)
 
(64,289
)
Net (repayments) borrowings under revolving credit facility
 
(129,574
)
 
25,000

Issuance of 3.78% senior notes
 
250,000

 

Repurchases of common stock
 

 
(35,815
)
Dividends paid
 
(41,484
)
 
(37,917
)
All other
 
1,119

 
7,313

Increase in cash and cash equivalents
 
$
85,881

 
$
64,712







NEWMARKET CORPORATION AND SUBSIDIARIES
NON-GAAP FINANCIAL INFORMATION
(In thousands, unaudited)

 
 
Second Quarter Ended
June 30,
 
Six Months Ended
June 30,
 
 
2017
 
2016
 
2017
 
2016
Net Income
 
$
62,728

 
$
64,389

 
$
126,665

 
$
126,320

Add:
 
 
 
 
 
 
 
 
Interest and financing expenses, net
 
5,360

 
3,954

 
10,932

 
8,142

Income tax expense
 
22,562

 
27,683

 
46,858

 
54,698

Depreciation and amortization
 
12,045

 
10,129

 
24,079

 
20,539

EBITDA
 
$
102,695

 
$
106,155

 
$
208,534

 
$
209,699