NewMarket Corporation Reports Fourth Quarter and Full Year 2015 Results
-
NewMarket Posts Fourth Quarter EPS of $4.50, Up 7.9%, and Full Year
EPS of $19.45 Up 5.8%
-
Petroleum Additives Fourth Quarter Operating Profit of $75.3
Million, Down 11.9%, and Full Year Operating Profit of $374.9 Million,
Down 2.6%
-
Continuing Investment in R&D and Capital Spending to Fuel Long-Term
Growth
-
501,261 Shares Repurchased in 2015
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 2015.
Net income for the fourth quarter of 2015 was $53.9 million, or $4.50
per share, compared to net income of $52.1 million, or $4.17 per share,
for the fourth quarter of 2014. Net income for 2015 was $238.6 million,
or $19.45 per share, compared to net income of $233.3 million, or $18.38
per share, for 2014. Net income for all periods included the impact of
valuing an interest rate swap at fair value. Excluding this item, fourth
quarter 2015 earnings were $53.2 million, or $4.44 per share, compared
to $53.7 million, or $4.30 per share, last year. On the same basis,
earnings for the year 2015 were $240.6 million, or $19.61 per share,
compared to $237.6 million, or $18.72 per share, last year (see Summary
of Earnings table below).
Sales for the petroleum additives segment for the fourth quarter of 2015
were $476.7 million, down 13.0% versus the same period last year, due to
lower shipments, foreign currency exchange and changes in selling prices
and mix. Petroleum additives operating profit for the fourth quarter of
2015 was $75.3 million, an 11.9% decrease over fourth quarter operating
profit last year of $85.5 million. The decrease was due to lower sales
volume, changes in foreign currency exchange and increases in research
and development investments, partially offset by lower raw material
costs.
For the year, petroleum additives sales were $2,125 million compared to
sales in 2014 of $2,325 million, a decrease of 8.6%. This decrease was
primarily due to foreign currency exchange, changes in selling prices
and mix. Operating profit for petroleum additives for 2015 declined 2.6%
to $374.9 million, compared to $385.1 million for 2014. Changes in
foreign currency overshadowed strong operating performance in the
Americas and, to a lesser extent, the Asia Pacific region. The decrease
in operating profit was also due to increases in research and
development investments and lower sales volume, partially offset by
lower raw material costs.
Petroleum additives shipments for the fourth quarter of 2015 were down
4.3% from the same period last year. This decline, which represents the
lowest level of quarterly shipments in three years, was primarily due to
decreases in lubricant and fuel additives shipments in North America.
For the year, shipments declined 1.2% versus 2014, with increases in
fuel additives shipments, primarily in North America, offset by declines
in lubricant additives in all regions except Latin America. Shipments
were below our expectations for both the quarter and full year periods,
as demand for lubricant products trended lower in the face of a
continued general weakness in the global economy. In addition, we
believe the rapid decline in crude oil prices in the fourth quarter may
have led some customers to reduce stock levels in anticipation of lower
base oil prices.
The effective income tax rate for the fourth quarter of 2015 was 20.3%,
down from the rate of 28.8% in the same period last year. The effective
rate for 2015 was 29.6%, down slightly from the rate in 2014 of 31.2%.
The rate in the fourth quarter of 2015 was lower primarily due to
decreases in tax rates for certain of our foreign subsidiaries and an
increase in tax benefits associated with our research and development
activities in the US and Europe. The research and development tax credit
in the US was passed during the fourth quarter of 2015, retroactive to
the beginning of the year.
Our business continues to generate strong cash flows. During the year,
we paid dividends of $70.8 million, funded capital expenditures of
$126.5 million and repurchased 501,261 shares of our common stock for a
total of $197.9 million, including 44,778 shares in the fourth quarter.
At the end of 2015, we had $482.8 million remaining on our stock
repurchase authorization.
Construction continues on our new manufacturing facility in Singapore.
We expect commercial production to begin by mid-year 2016. In August, we
announced the second phase of construction which will include additional
component production units. Phase two will more than double our
investment in the Singapore facility and is scheduled to be completed in
2017.
Our stated goal is to provide a 10% return per year for our shareholders
over any five year period (defined by EPS growth plus dividends). We may
not necessarily achieve a 10% return each year, and 2015 was such a
year. Unfavorable exchange rates and softer industry demand have worked
against us at a time when we have a great need to invest in developing
products to meet new, upcoming specifications and pursue specific growth
opportunities. Our increased investments in 2015, evidenced by our more
than $125 million of capital expenditures and 14% higher spending in
research and development, reinforces that we are making decisions to
promote the greatest long term value for our shareholders and customers,
and we remain focused on our long term objectives.
As we look forward to 2016 and beyond, we believe the fundamentals of
the industry remain unchanged with the petroleum additives market
growing at 1% to 2% for the foreseeable future, and we expect to exceed
that growth rate. We are making investments to position ourselves for
the future. Our capital spending is creating the capacity we need to
grow and support our customers worldwide; our research and development
investments are positioning us well to provide added value to our
customers; and our stock repurchases and dividend policy have been
effective ways to use cash flow and modest leverage to improve
shareholder return.
|
|
|
|
|
Summary of Earnings
|
|
|
(In millions, except per-share amounts)
|
|
|
Fourth Quarter Ended
|
|
Twelve Months Ended
|
|
|
December 31,
|
|
December 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Net Income:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
53.9
|
|
|
$
|
52.1
|
|
|
$
|
238.6
|
|
|
$
|
233.3
|
Loss (gain) on interest rate swap agreement
|
|
(0.7
|
)
|
|
1.6
|
|
|
2.0
|
|
|
4.3
|
Income excluding the above special item
|
|
$
|
53.2
|
|
|
$
|
53.7
|
|
|
$
|
240.6
|
|
|
$
|
237.6
|
Diluted Earnings Per Share:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
4.50
|
|
|
$
|
4.17
|
|
|
$
|
19.45
|
|
|
$
|
18.38
|
Loss (gain) on interest rate swap agreement
|
|
(0.06
|
)
|
|
0.13
|
|
|
0.16
|
|
|
0.34
|
Income excluding the above special item
|
|
$
|
4.44
|
|
|
$
|
4.30
|
|
|
$
|
19.61
|
|
|
$
|
18.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 table 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
10:00 a.m. EST on Tuesday, February 2, 2016 to review fourth quarter and
year-end 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 February 9,
2016 at 11:59 p.m. EST by dialing 1-877-660-6853 (domestic) and
1-201-612-7415 (international). The conference ID number is 13628106. 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; the ability to respond
effectively to technological changes in our industry; failure to protect
our intellectual property rights; the 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; gains or losses 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; political, economic, and
regulatory factors concerning our products; future governmental
regulation; resolution of environmental liabilities or legal
proceedings; and the 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)
|
|
|
|
Fourth Quarter Ended
|
|
Twelve Months Ended
|
|
|
December 31,
|
|
December 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Revenue:
|
|
|
|
|
|
|
|
|
Petroleum additives
|
|
$
|
476,683
|
|
|
$
|
547,915
|
|
|
$
|
2,124,995
|
|
|
$
|
2,325,082
|
|
All other (a)
|
|
2,939
|
|
|
963
|
|
|
15,835
|
|
|
10,323
|
|
Total
|
|
$
|
479,622
|
|
|
$
|
548,878
|
|
|
$
|
2,140,830
|
|
|
$
|
2,335,405
|
|
Segment operating profit:
|
|
|
|
|
|
|
|
|
Petroleum additives
|
|
$
|
75,342
|
|
|
$
|
85,506
|
|
|
$
|
374,934
|
|
|
$
|
385,084
|
|
All other (a)
|
|
850
|
|
|
(513
|
)
|
|
4,372
|
|
|
1,279
|
|
Segment operating profit
|
|
76,192
|
|
|
84,993
|
|
|
379,306
|
|
|
386,363
|
|
Corporate unallocated expense
|
|
(6,028
|
)
|
|
(4,949
|
)
|
|
(22,779
|
)
|
|
(23,397
|
)
|
Interest and financing expenses
|
|
(3,716
|
)
|
|
(3,889
|
)
|
|
(14,652
|
)
|
|
(16,567
|
)
|
Other income (expense), net
|
|
20
|
|
|
(294
|
)
|
|
317
|
|
|
(175
|
)
|
Income before special items and income tax expense
|
|
66,468
|
|
|
75,861
|
|
|
342,192
|
|
|
346,224
|
|
Gain (loss) on an interest rate swap agreement (b)
|
|
1,144
|
|
|
(2,735
|
)
|
|
(3,221
|
)
|
|
(7,125
|
)
|
Income before income tax expense
|
|
$
|
67,612
|
|
|
$
|
73,126
|
|
|
$
|
338,971
|
|
|
$
|
339,099
|
|
Net income
|
|
$
|
53,914
|
|
|
$
|
52,055
|
|
|
$
|
238,603
|
|
|
$
|
233,255
|
|
Earnings per share - basic and diluted
|
|
$
|
4.50
|
|
|
$
|
4.17
|
|
|
$
|
19.45
|
|
|
$
|
18.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
|
(b)
|
|
The gain (loss) 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)
|
|
|
|
Fourth Quarter Ended
|
|
Twelve Months Ended
|
|
|
December 31,
|
|
December 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Net sales
|
|
$
|
479,622
|
|
|
$
|
548,878
|
|
|
$
|
2,140,830
|
|
|
$
|
2,335,405
|
|
Cost of goods sold
|
|
326,317
|
|
|
391,350
|
|
|
1,461,774
|
|
|
1,669,982
|
|
Gross profit
|
|
153,305
|
|
|
157,528
|
|
|
679,056
|
|
|
665,423
|
|
Selling, general, and administrative expenses
|
|
43,320
|
|
|
41,683
|
|
|
164,082
|
|
|
163,520
|
|
Research, development, and testing expenses
|
|
39,602
|
|
|
35,810
|
|
|
158,254
|
|
|
139,183
|
|
Operating profit
|
|
70,383
|
|
|
80,035
|
|
|
356,720
|
|
|
362,720
|
|
Interest and financing expenses, net
|
|
3,716
|
|
|
3,889
|
|
|
14,652
|
|
|
16,567
|
|
Other income (expense), net (a)
|
|
945
|
|
|
(3,020
|
)
|
|
(3,097
|
)
|
|
(7,054
|
)
|
Income before income tax expense
|
|
67,612
|
|
|
73,126
|
|
|
338,971
|
|
|
339,099
|
|
Income tax expense
|
|
13,698
|
|
|
21,071
|
|
|
100,368
|
|
|
105,844
|
|
Net income
|
|
$
|
53,914
|
|
|
$
|
52,055
|
|
|
$
|
238,603
|
|
|
$
|
233,255
|
|
Earnings per share - basic and diluted
|
|
$
|
4.50
|
|
|
$
|
4.17
|
|
|
$
|
19.45
|
|
|
$
|
18.38
|
|
Cash dividends declared per share
|
|
$
|
1.60
|
|
|
$
|
1.40
|
|
|
$
|
5.80
|
|
|
$
|
4.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Consolidated Statements of Income
|
|
(a)
|
|
On June 25, 2009, we entered into an interest rate swap. Other
income (expense), net includes a gain on the interest rate swap of
$1.1 million for the fourth quarter ended December 31, 2015 and a
loss of $2.7 million for the fourth quarter ended December 31, 2014.
The loss on the interest rate swap was $3.2 million for the twelve
months ended December 31, 2015 and $7.1 million for the twelve
months ended December 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 except share amounts, unaudited)
|
|
|
|
December 31,
|
|
December 31,
|
|
|
2015
|
|
2014
|
ASSETS
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
93,424
|
|
|
$
|
103,003
|
|
Trade and other accounts receivable, less allowance for doubtful
accounts ($487 - 2015; $443 - 2014)
|
|
287,967
|
|
|
302,803
|
|
Inventories
|
|
351,631
|
|
|
348,420
|
|
Deferred income taxes
|
|
6,375
|
|
|
7,837
|
|
Prepaid expenses and other current assets
|
|
35,370
|
|
|
35,128
|
|
Total current assets
|
|
774,767
|
|
|
797,191
|
|
Property, plant, and equipment, at cost
|
|
1,128,989
|
|
|
1,016,868
|
|
Less accumulated depreciation and amortization
|
|
726,543
|
|
|
709,009
|
|
Net property, plant, and equipment
|
|
402,446
|
|
|
307,859
|
|
Prepaid pension cost
|
|
20,430
|
|
|
16,082
|
|
Deferred income taxes
|
|
38,354
|
|
|
48,499
|
|
Intangibles (net of amortization) and goodwill
|
|
10,907
|
|
|
16,859
|
|
Deferred charges and other assets
|
|
43,011
|
|
|
45,435
|
|
Total assets
|
|
$
|
1,289,915
|
|
|
$
|
1,231,925
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Accounts payable
|
|
$
|
128,745
|
|
|
$
|
137,688
|
|
Accrued expenses
|
|
99,511
|
|
|
86,539
|
|
Dividends payable
|
|
17,594
|
|
|
15,721
|
|
Income taxes payable
|
|
12,773
|
|
|
6,462
|
|
Other current liabilities
|
|
5,057
|
|
|
13,264
|
|
Total current liabilities
|
|
263,680
|
|
|
259,674
|
|
Long-term debt
|
|
494,586
|
|
|
363,526
|
|
Other noncurrent liabilities
|
|
144,085
|
|
|
187,684
|
|
Total liabilities
|
|
902,351
|
|
|
810,884
|
|
Shareholders' equity:
|
|
|
|
|
Common stock and paid-in capital (without par value); issued and
outstanding shares - 11,948,446 in 2015 and 12,446,365 in 2014
|
|
—
|
|
|
—
|
|
Accumulated other comprehensive loss
|
|
(144,526
|
)
|
|
(139,160
|
)
|
Retained earnings
|
|
532,090
|
|
|
560,201
|
|
Total shareholders' equity
|
|
387,564
|
|
|
421,041
|
|
Total liabilities and shareholders' equity
|
|
$
|
1,289,915
|
|
|
$
|
1,231,925
|
|
|
|
|
|
|
|
|
|
|
|
NEWMARKET CORPORATION AND SUBSIDIARIES
|
SELECTED CONSOLIDATED CASH FLOW DATA
|
(In thousands, unaudited)
|
|
|
|
Twelve Months Ended
|
|
|
December 31,
|
|
|
2015
|
|
2014
|
Net income
|
|
$
|
238,603
|
|
|
$
|
233,255
|
|
Depreciation and amortization
|
|
42,265
|
|
|
41,538
|
|
Cash pension and postretirement contributions
|
|
(26,813
|
)
|
|
(26,505
|
)
|
Noncash pension and postretirement expense
|
|
22,037
|
|
|
16,751
|
|
Working capital changes
|
|
(15,021
|
)
|
|
(54,982
|
)
|
Capital expenditures
|
|
(126,499
|
)
|
|
(59,716
|
)
|
Net borrowings under revolving credit facility
|
|
131,000
|
|
|
14,000
|
|
Repurchases of common stock
|
|
(194,924
|
)
|
|
(248,509
|
)
|
Dividends paid
|
|
(70,763
|
)
|
|
(59,400
|
)
|
Proceeds from legal settlement
|
|
—
|
|
|
5,150
|
|
All other
|
|
(9,464
|
)
|
|
2,718
|
|
Decrease in cash and cash equivalents
|
|
$
|
(9,579
|
)
|
|
$
|
(135,700
|
)
|
|
NEWMARKET CORPORATION AND SUBSIDIARIES
|
NON-GAAP FINANCIAL INFORMATION
|
(In thousands, unaudited)
|
|
|
|
Fourth Quarter Ended
|
|
Twelve Months Ended
|
|
|
December 31,
|
|
December 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Net Income
|
|
$
|
53,914
|
|
|
$
|
52,055
|
|
|
$
|
238,603
|
|
|
$
|
233,255
|
Add:
|
|
|
|
|
|
|
|
|
Interest and financing expenses, net
|
|
3,716
|
|
|
3,889
|
|
|
14,652
|
|
|
16,567
|
Income tax expense
|
|
13,698
|
|
|
21,071
|
|
|
100,368
|
|
|
105,844
|
Depreciation and amortization
|
|
10,615
|
|
|
9,999
|
|
|
41,178
|
|
|
40,177
|
EBITDA
|
|
81,943
|
|
|
87,014
|
|
|
394,801
|
|
|
395,843
|
(Less) plus: (Gain) loss on interest rate swap agreement
|
|
(1,144
|
)
|
|
2,735
|
|
|
3,221
|
|
|
7,125
|
EBITDA, as adjusted
|
|
$
|
80,799
|
|
|
$
|
89,749
|
|
|
$
|
398,022
|
|
|
$
|
402,968
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20160201006181/en/ Copyright Business Wire 2016
Source: Business Wire
(February 1, 2016 - 5:01 PM EST)
News by QuoteMedia
www.quotemedia.com
|