NewMarket Corporation Reports Second Quarter and First Half 2016 Results
-
NewMarket Posts First Half Net Income of $126 Million and Earnings
Per Share of $10.65
-
Petroleum Additives First Half Operating Profit of $203 Million
-
Continued Investment in R&D and Capital Expenditures to Fuel
Long-Term Growth
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 2016.
Net income for the second quarter of 2016 was $64.4 million, or $5.43
per share, compared to net income of $58.7 million, or $4.72 per share,
for the second quarter of 2015. For the first half of 2016, net income
was $126.3 million, or $10.65 per share, compared to net income of
$122.7 million, or $9.86 per share, for the first half of last year. Net
income for all periods included the impact of valuing an interest rate
swap at fair value. Excluding this item, second quarter 2016 earnings
were $65.3 million, or $5.50 per share, compared to $57.8 million, or
$4.65 per share, last year. On the same basis, earnings for the first
half of this year were $129.6 million, or $10.92 per share, compared to
$123.2 million, or $9.90 per share, last year (see Summary of Earnings
table below).
Sales for the petroleum additives segment for the second quarter of 2016
were $516.1 million, down 7.4% versus the same period last year, due
mainly to changes in selling prices, mix and lower shipments. Petroleum
additives operating profit for the second quarter of 2016 was $102.5
million, a 9.0% increase over second quarter operating profit last year
of $94.1 million. The increase was primarily due to lower raw material
and conversion costs, partially offset by decreases in selling prices
and shipments. Shipments between the quarterly periods were down 1.5%
from the same period last year, as the decrease in lubricant additive
shipments was only partially offset by an increase in fuel additives
shipments. North America and Latin America were the main regions
contributing to lower lubricant additives shipments, and North America
and Asia Pacific were the primary drivers for the increase in fuel
additives shipments.
Petroleum additives sales for the first half of the year were $1,022
million compared to sales in the first half of last year of $1,112
million, or a decrease of 8.1%. This decrease was due mainly to changes
in selling prices, mix and lower shipments. Petroleum additives
operating profit for the first half of the year was $202.9 million
compared to $199.1 million for the first half of 2015, or an increase of
1.9%. The increase was primarily due to lower raw material and
conversion costs, partially offset by decreases in selling prices and
shipments. Shipments decreased 2.4% between periods, as the decrease in
lubricant additives shipments was partially offset by an increase in
fuel additives shipments. North America and Latin America were the main
regions contributing to lower lubricant additives shipments, and North
America and Asia Pacific were the primary drivers for the increase in
fuel additives shipments, although those increases were partially offset
by a decline in our European region.
We continued to generate solid operating cash flows in the first half of
2016. During this period, we paid dividends of $37.9 million, funded
capital expenditures of $64.3 million which included the continued
investment in our new manufacturing facility in Singapore, and
repurchased 98,867 shares of our common stock for a total of $35.8
million, or an average cost of $362.25 per share.
Our petroleum additives segment continued its solid performance in the
second quarter and first half of 2016. Our operating margins remain
strong and consistent with our long-term expectations for the
performance of our business. We are committed to providing our customers
with products and innovative solutions to meet their ever-changing
business needs, evidenced by our ongoing robust investments in research
and development. In addition, we have completed construction of phase
one of our new manufacturing facility in Singapore. Phase two is
expected to be completed in 2018 and will more than double our
investment there. We believe the fundamentals of how we run our business
- a long term view, safety-first culture, customer-focused solutions,
technology-driven product offerings, and world class supply chain
capability - will continue to be beneficial for all our stakeholders.
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Earnings
(In millions, except per-share amounts)
|
|
|
|
Second Quarter Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
Net Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
64.4
|
|
|
$
|
58.7
|
|
|
|
$
|
126.3
|
|
|
$
|
122.7
|
Loss (gain) on interest rate swap agreement
|
|
|
|
0.9
|
|
|
|
(0.9
|
)
|
|
|
|
3.3
|
|
|
|
0.5
|
Income excluding the above special item
|
|
|
$
|
65.3
|
|
|
$
|
57.8
|
|
|
|
$
|
129.6
|
|
|
$
|
123.2
|
Diluted Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
5.43
|
|
|
$
|
4.72
|
|
|
|
$
|
10.65
|
|
|
$
|
9.86
|
Loss (gain) on interest rate swap agreement
|
|
|
|
0.07
|
|
|
|
(0.07
|
)
|
|
|
|
0.27
|
|
|
|
0.04
|
Income excluding the above special item
|
|
|
$
|
5.50
|
|
|
$
|
4.65
|
|
|
|
$
|
10.92
|
|
|
$
|
9.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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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
3:00 p.m. EDT on Thursday, July 28, 2016 to review second quarter and
first half 2016 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 August 4,
2016 at 11:59 p.m. EDT by dialing 1-877-660-6853 (domestic) or
1-201-612-7415 (international). The conference ID number is 13640355. 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 (including the additional risks and uncertainties introduced by
the recent referendum on the United Kingdom’s membership in the European
Union); 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 our inability to realize expected benefits from
investment in our infrastructure or future acquisitions or our inability
to 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 2015 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)
|
|
|
|
|
|
Second Quarter Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum additives
|
|
|
$
|
516,112
|
|
|
|
$
|
557,363
|
|
|
|
$
|
1,022,255
|
|
|
|
$
|
1,112,128
|
|
All other (a)
|
|
|
|
5,695
|
|
|
|
|
3,346
|
|
|
|
|
9,479
|
|
|
|
|
8,147
|
|
Total
|
|
|
$
|
521,807
|
|
|
|
$
|
560,709
|
|
|
|
$
|
1,031,734
|
|
|
|
$
|
1,120,275
|
|
Segment operating profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum additives
|
|
|
$
|
102,531
|
|
|
|
$
|
94,052
|
|
|
|
$
|
202,920
|
|
|
|
$
|
199,077
|
|
All other (a)
|
|
|
|
1,355
|
|
|
|
|
216
|
|
|
|
|
1,591
|
|
|
|
|
2,315
|
|
Segment operating profit
|
|
|
|
103,886
|
|
|
|
|
94,268
|
|
|
|
|
204,511
|
|
|
|
|
201,392
|
|
Corporate unallocated expense
|
|
|
|
(6,136
|
)
|
|
|
|
(5,540
|
)
|
|
|
|
(11,406
|
)
|
|
|
|
(12,555
|
)
|
Interest and financing expenses
|
|
|
|
(3,954
|
)
|
|
|
|
(3,582
|
)
|
|
|
|
(8,142
|
)
|
|
|
|
(7,398
|
)
|
Other income (expense), net
|
|
|
|
(197
|
)
|
|
|
|
368
|
|
|
|
|
1,436
|
|
|
|
|
120
|
|
Income before special item and income tax expense
|
|
|
|
93,599
|
|
|
|
|
85,514
|
|
|
|
|
186,399
|
|
|
|
|
181,559
|
|
Gain (loss) on an interest rate swap agreement (b)
|
|
|
|
(1,527
|
)
|
|
|
|
1,522
|
|
|
|
|
(5,381
|
)
|
|
|
|
(886
|
)
|
Income before income tax expense
|
|
|
$
|
92,072
|
|
|
|
$
|
87,036
|
|
|
|
$
|
181,018
|
|
|
|
$
|
180,673
|
|
Net income
|
|
|
$
|
64,389
|
|
|
|
$
|
58,733
|
|
|
|
$
|
126,320
|
|
|
|
$
|
122,680
|
|
Earnings per share - basic and diluted
|
|
|
$
|
5.43
|
|
|
|
$
|
4.72
|
|
|
|
$
|
10.65
|
|
|
|
$
|
9.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
|
|
|
|
Second Quarter Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
Net sales
|
|
|
$
|
521,807
|
|
|
|
$
|
560,709
|
|
|
$
|
1,031,734
|
|
|
|
$
|
1,120,275
|
|
Cost of goods sold
|
|
|
|
343,407
|
|
|
|
|
391,001
|
|
|
|
677,784
|
|
|
|
|
769,295
|
|
Gross profit
|
|
|
|
178,400
|
|
|
|
|
169,708
|
|
|
|
353,950
|
|
|
|
|
350,980
|
|
Selling, general, and administrative expenses
|
|
|
|
40,388
|
|
|
|
|
40,655
|
|
|
|
81,328
|
|
|
|
|
82,464
|
|
Research, development, and testing expenses
|
|
|
|
40,720
|
|
|
|
|
40,118
|
|
|
|
79,936
|
|
|
|
|
79,803
|
|
Operating profit
|
|
|
|
97,292
|
|
|
|
|
88,935
|
|
|
|
192,686
|
|
|
|
|
188,713
|
|
Interest and financing expenses, net
|
|
|
|
3,954
|
|
|
|
|
3,582
|
|
|
|
8,142
|
|
|
|
|
7,398
|
|
Other income (expense), net (a)
|
|
|
|
(1,266
|
)
|
|
|
|
1,683
|
|
|
|
(3,526
|
)
|
|
|
|
(642
|
)
|
Income before income tax expense
|
|
|
|
92,072
|
|
|
|
|
87,036
|
|
|
|
181,018
|
|
|
|
|
180,673
|
|
Income tax expense
|
|
|
|
27,683
|
|
|
|
|
28,303
|
|
|
|
54,698
|
|
|
|
|
57,993
|
|
Net income
|
|
|
$
|
64,389
|
|
|
|
$
|
58,733
|
|
|
$
|
126,320
|
|
|
|
$
|
122,680
|
|
Earnings per share - basic and diluted
|
|
|
$
|
5.43
|
|
|
|
$
|
4.72
|
|
|
$
|
10.65
|
|
|
|
$
|
9.86
|
|
Cash dividends declared per share
|
|
|
$
|
1.60
|
|
|
|
$
|
1.40
|
|
|
$
|
3.20
|
|
|
|
$
|
2.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Consolidated Statements of Income
|
|
|
|
(a)
|
|
On June 25, 2009, we entered into an interest rate swap. Other
income (expense), net includes a loss on the interest rate swap of
$1.5 million for the second quarter ended June 30, 2016, a gain of
$1.5 million for the second quarter ended June 30, 2015, and losses
of $5.4 million for the six months ended June 30, 2016 and $0.9
million for the six months ended June 30, 2015. 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)
|
|
|
|
|
|
June 30, 2016
|
|
|
December 31, 2015
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
158,136
|
|
|
|
$
|
93,424
|
|
Trade and other accounts receivable, less allowance for doubtful
accounts ($439 - 2016; $487 - 2015)
|
|
|
|
303,899
|
|
|
|
|
287,967
|
|
Inventories
|
|
|
|
303,475
|
|
|
|
|
351,631
|
|
Prepaid expenses and other current assets
|
|
|
|
31,142
|
|
|
|
|
35,370
|
|
Total current assets
|
|
|
|
796,652
|
|
|
|
|
768,392
|
|
Property, plant, and equipment, at cost
|
|
|
|
1,192,321
|
|
|
|
|
1,128,989
|
|
Less accumulated depreciation and amortization
|
|
|
|
746,660
|
|
|
|
|
726,543
|
|
Net property, plant, and equipment
|
|
|
|
445,661
|
|
|
|
|
402,446
|
|
Prepaid pension cost
|
|
|
|
26,538
|
|
|
|
|
20,430
|
|
Deferred income taxes
|
|
|
|
40,741
|
|
|
|
|
44,729
|
|
Intangibles (net of amortization) and goodwill
|
|
|
|
9,242
|
|
|
|
|
10,907
|
|
Deferred charges and other assets
|
|
|
|
39,448
|
|
|
|
|
39,345
|
|
Total assets
|
|
|
$
|
1,358,282
|
|
|
|
$
|
1,286,249
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
$
|
135,639
|
|
|
|
$
|
128,745
|
|
Accrued expenses
|
|
|
|
80,303
|
|
|
|
|
99,511
|
|
Dividends payable
|
|
|
|
17,449
|
|
|
|
|
17,594
|
|
Income taxes payable
|
|
|
|
17,596
|
|
|
|
|
12,773
|
|
Other current liabilities
|
|
|
|
7,024
|
|
|
|
|
5,057
|
|
Total current liabilities
|
|
|
|
258,011
|
|
|
|
|
263,680
|
|
Long-term debt
|
|
|
|
521,264
|
|
|
|
|
490,920
|
|
Other noncurrent liabilities
|
|
|
|
146,793
|
|
|
|
|
144,085
|
|
Total liabilities
|
|
|
|
926,068
|
|
|
|
|
898,685
|
|
Shareholders' equity:
|
|
|
|
|
|
|
|
|
|
|
Common stock and paid-in capital (without par value); issued and
outstanding shares - 11,848,384 in 2016 and 11,948,446 in 2015
|
|
|
|
1,109
|
|
|
|
|
0
|
|
Accumulated other comprehensive loss
|
|
|
|
(153,838
|
)
|
|
|
|
(144,526
|
)
|
Retained earnings
|
|
|
|
584,943
|
|
|
|
|
532,090
|
|
Total shareholders' equity
|
|
|
|
432,214
|
|
|
|
|
387,564
|
|
Total liabilities and shareholders' equity
|
|
|
$
|
1,358,282
|
|
|
|
$
|
1,286,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NEWMARKET CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands, unaudited)
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2016
|
|
|
2015
|
Net income
|
|
|
$
|
126,320
|
|
|
|
$
|
122,680
|
|
Depreciation and amortization
|
|
|
|
21,082
|
|
|
|
|
20,566
|
|
Cash pension and postretirement contributions
|
|
|
|
(13,058
|
)
|
|
|
|
(13,354
|
)
|
Noncash pension and postretirement expense
|
|
|
|
6,111
|
|
|
|
|
11,626
|
|
Working capital changes
|
|
|
|
24,942
|
|
|
|
|
(18,365
|
)
|
Capital expenditures
|
|
|
|
(64,289
|
)
|
|
|
|
(50,047
|
)
|
Net borrowings (repayments) under revolving credit facility
|
|
|
|
25,000
|
|
|
|
|
(2,000
|
)
|
Repurchases of common stock
|
|
|
|
(35,815
|
)
|
|
|
|
(8,000
|
)
|
Dividends paid
|
|
|
|
(37,917
|
)
|
|
|
|
(34,824
|
)
|
All other
|
|
|
|
12,336
|
|
|
|
|
(5,113
|
)
|
Increase in cash and cash equivalents
|
|
|
$
|
64,712
|
|
|
|
$
|
23,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NEWMARKET CORPORATION AND SUBSIDIARIES
NON-GAAP FINANCIAL INFORMATION
(In thousands, unaudited)
|
|
|
|
|
|
Second Quarter Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
Net Income
|
|
|
$
|
64,389
|
|
|
$
|
58,733
|
|
|
|
$
|
126,320
|
|
|
$
|
122,680
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and financing expenses, net
|
|
|
|
3,954
|
|
|
|
3,582
|
|
|
|
|
8,142
|
|
|
|
7,398
|
Income tax expense
|
|
|
|
27,683
|
|
|
|
28,303
|
|
|
|
|
54,698
|
|
|
|
57,993
|
Depreciation and amortization
|
|
|
|
10,129
|
|
|
|
10,109
|
|
|
|
|
20,539
|
|
|
|
20,023
|
EBITDA
|
|
|
|
106,155
|
|
|
|
100,727
|
|
|
|
|
209,699
|
|
|
|
208,094
|
Plus (less): loss (gain) on interest rate swap agreement
|
|
|
|
1,527
|
|
|
|
(1,522
|
)
|
|
|
|
5,381
|
|
|
|
886
|
EBITDA, as adjusted
|
|
|
$
|
107,682
|
|
|
$
|
99,205
|
|
|
|
$
|
215,080
|
|
|
$
|
208,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20160727005816/en/ Copyright Business Wire 2016
Source: Business Wire
(July 27, 2016 - 5:01 PM EDT)
News by QuoteMedia
www.quotemedia.com
|