NewMarket Corporation Reports Second Quarter and First Half 2014 Results

  • NewMarket Posts Second Quarter Net Income of $66.8 Million and Earnings Per Share of $5.24
  • Petroleum Additives Second Quarter Operating Profit of $109 Million
  • 222,200 Shares Repurchased in Second Quarter
  • Ground Broken for New Manufacturing Facility in Singapore

RICHMOND, Va.--()--NewMarket Corporation (NYSE:NEU) President 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 2014.

Net income for the second quarter of 2014 was $66.8 million, or $5.24 per share, compared to net income of $64.0 million, or $4.81 per share, for the second quarter of 2013. For the first half of 2014, net income was $124.3 million, or $9.66 per share, compared to net income of $131.8 million, or $9.88 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, while both periods last year included the results from operations of a discontinued business. Excluding these items, second quarter 2014 earnings were $68.2 million, or $5.35 per share, compared to $61.3 million, or $4.61 per share, last year. On the same basis, earnings for the first half of this year were $127.0 million, or $9.87 per share, compared to $127.8 million, or $9.58 per share, last year (see Summary of Earnings table below).

In our petroleum additives segment, sales for this year’s second quarter were $617.5 million compared to sales for the same period last year of $581.3 million, with shipments up a strong 7.2% to record levels. Operating profit reached $109.1 million, an 11.6% improvement over second quarter operating profit last year of $97.8 million. For the first half of this year, petroleum additives operating profit was $205.3 million compared to operating profit for the same period last year of $199.8 million. Sales for the first half of this year were $1.2 billion compared to sales in the first half of last year of $1.1 billion, with shipments up 6.6%.

In late June, we broke ground on the site of our previously announced manufacturing facility in Jurong Island, Singapore. Our initial investment of over $100 million demonstrates the Company’s commitment to serving the Asia Pacific and Middle East markets. This facility will help improve our security of supply, reduce customer lead-times for the delivery of our products, and help us grow in support of our customers. We expect the plant to become operational during the fourth quarter of 2015.

During the second quarter, we repurchased 222,200 shares of our stock at a cost of $85.8 million. At the end of June, we had $337.9 million remaining on our stock repurchase authorization, and we had 12.6 million shares outstanding.

We are pleased with the results of our petroleum additives segment and the overall performance of our business during the first half of this year. We are making the investments necessary to support our customers around the world, both now and in the future, and we expect these investments to allow us to continue to provide solid returns for our shareholders.

 
Summary of Earnings
(In millions, except per-share amounts)

Second Quarter Ended

 

Six Months Ended

June 30 June 30
2014   2013 2014   2013
Net Income:
Net income $ 66.8 $ 64.0 $ 124.3 $ 131.8
Loss (income) from operations of discontinued business - 0.4 - (0.5 )
Loss (gain) on interest rate swap agreement   1.4   (3.1 )   2.7   (3.5 )
Income excluding discontinued operations and special items $ 68.2 $ 61.3   $ 127.0 $ 127.8  
 
Diluted Earnings Per Share:
Net income $ 5.24 $ 4.81 $ 9.66 $ 9.88
Loss (income) from operations of discontinued business - 0.03 - (0.04 )
Loss (gain) on interest rate swap agreement   0.11   (0.23 )   0.21   (0.26 )
Income excluding discontinued operations and special items $ 5.35 $ 4.61   $ 9.87 $ 9.58  
 

Please read our second quarter Form 10-Q for more details on operations of the Company.

Sincerely,

Thomas E. Gottwald

The results for all periods include the impact of valuing an interest rate swap at fair value, while both periods last year include the results from operations of a 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 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. EDT on Wednesday, July 30, 2014, to review second quarter and first half 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 August 6, 2014 at 11:59 p.m. EDT by dialing 1-877-660-6853 (domestic) and 1-201-612-7415 (international). The conference ID number is 13585986. 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)
   
 
 
Second Quarter Ended Six Months Ended
June 30, June 30,
2014 2013 2014 2013
 
Revenue:
Petroleum additives $ 617,504 $ 581,338 $ 1,191,549 $ 1,139,738
All other (a)   2,934     2,441     5,311     3,791  
Total $ 620,438   $ 583,779   $ 1,196,860   $ 1,143,529  
 
Segment operating profit:
Petroleum additives $ 109,089 $ 97,790 $ 205,268 $ 199,818
All other (a)   858     183     1,393     (218 )
 
Segment operating profit 109,947 97,973 206,661 199,600
 
Corporate unallocated expense (5,575 ) (5,189 ) (12,128 ) (10,405 )
Interest and financing expenses (4,346 ) (4,573 ) (8,510 ) (9,355 )
Other income, net   161     570     192     674  

Income from continuing operations before special items and income tax expense

100,187 88,781 186,215 180,514
 
(Loss) gain on an interest rate swap agreement (b)   (2,270 )   5,098     (4,503 )   5,775  

Income from continuing operations before income tax expense

$ 97,917   $ 93,879   $ 181,712   $ 186,289  
 
Net income:
Income from continuing operations $ 66,764 $ 64,384 $ 124,287 $ 131,325
Discontinued operations (c)   -     (374 )   -     520  
Net income $ 66,764   $ 64,010   $ 124,287   $ 131,845  
 
Basic and diluted earnings per share:
Income from continuing operations $ 5.24 $ 4.84 $ 9.66 $ 9.84
Discontinued operations (c)   -     (0.03 )   -     0.04  
Basic and diluted earnings per share $ 5.24   $ 4.81   $ 9.66   $ 9.88  
 
 
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)
 
 
 
Second Quarter Ended Six Months Ended
June 30, June 30,
2014 2013 2014 2013
 
Net sales $ 620,438 $ 583,779 $ 1,196,860 $ 1,143,529
Cost of goods sold   439,692     414,351     854,184     805,694
 
Gross profit 180,746 169,428 342,676 337,835
 
Selling, general, and administrative expenses 40,913 39,921 80,461 80,862
Research, development, and testing expenses   35,367     36,429     67,574     67,450
 
Operating profit 104,466 93,078 194,641 189,523
 
Interest and financing expenses 4,346 4,573 8,510 9,355
Other (expense) income, net (a)   (2,203 )   5,374     (4,419 )   6,121

 

Income from continuing operations before income tax expense

97,917 93,879 181,712 186,289
Income tax expense   31,153     29,495     57,425     54,964
 
Income from continuing operations 66,764 64,384 124,287 131,325
 

Income from operations of discontinued business (net of tax) (b)

  -     (374 )   -     520
 
Net income $ 66,764   $ 64,010   $ 124,287   $ 131,845
 
Basic and diluted earnings per share:
Income from continuing operations $ 5.24 $ 4.84 $ 9.66 $ 9.84
Discontinued operations (b)   -     (0.03 )   -     0.04
Basic and diluted earnings per share $ 5.24   $ 4.81   $ 9.66   $ 9.88
 
Cash dividends declared per share $ 1.10   $ 0.90   $ 2.20   $ 1.80
 
   
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 $2.3 million for the quarter ended June 30, 2014 and $4.5 million for the six months ended June 30, 2014. The gain on the interest rate swap was $5.1 million for the quarter ended June 30, 2013 and $5.8 million for the six months ended June 30, 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)
 
 
 
June 30, December 31,
2014 2013
ASSETS
 
Current assets:
Cash and cash equivalents $ 113,644 $ 238,703

Trade and other accounts receivable, less allowance for doubtful accounts ($508 - 2014; $564 - 2013)

347,630 309,847
Inventories 329,383 307,518
Deferred income taxes 6,346 8,267
Prepaid expenses and other current assets   36,029     32,984  
Total current assets   833,032     897,319  
 
Property, plant, and equipment, at cost 1,003,519 985,196
Less accumulated depreciation and amortization   713,072     700,160  
Net property, plant, and equipment   290,447     285,036  
 
Prepaid pension cost 61,882 55,087
Deferred income taxes 21,730 22,961
Intangibles (net of amortization) and goodwill 20,338 23,319
Deferred charges and other assets   44,921     43,552  
Total assets $ 1,272,350   $ 1,327,274  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 137,479 $ 134,132
Accrued expenses 73,006 77,992
Dividends payable 12,578 12,996
Income taxes payable 11,972 11,419
Other current liabilities   11,023     11,075  
Total current liabilities   246,058     247,614  
 
Long-term debt 353,497 349,467
Other noncurrent liabilities 159,298 157,745
 
Shareholders' equity

Common stock and paid-in capital (without par value); issued and outstanding - 12,644,790 in 2014 and 13,099,356 in 2013

- -
Accumulated other comprehensive loss (48,807 ) (60,086 )
Retained earnings   562,304     632,534  
  513,497     572,448  
Total liabilities and shareholders' equity $ 1,272,350   $ 1,327,274  
 
       
NEWMARKET CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands, unaudited)
 
 
 
Six Months Ended
June 30,
2014 2013
 
Net income $ 124,287 $ 131,845
Depreciation and amortization 20,719 25,884
Cash pension and postretirement contributions (10,407 ) (16,557 )
Noncash pension and postretirement expense 7,183 11,064
Working capital changes (65,654 ) (35,496 )
Capital expenditures (20,654 ) (31,849 )
Net borrowings (repayments) under revolving credit agreement 4,000 (60,000 )
Repurchases of common stock (162,867 ) (26,798 )
Dividends paid (28,155 ) (23,980 )
All other   6,489     10,303  
 
Decrease in cash and cash equivalents $ (125,059 ) $ (15,584 )
 
               
NEWMARKET CORPORATION AND SUBSIDIARIES
NON-GAAP FINANCIAL INFORMATION
(In thousands, unaudited)
 
 
 
Second Quarter Ended Six Months Ended
June 30, June 30,
2014 2013 2014 2013
 
Income from continuing operations $ 66,764 $ 64,384 $ 124,287 $ 131,325
 
Add:
Interest and financing expenses 4,346 4,573 8,510 9,355
Income tax expense 31,153 29,495 57,425 54,964
Depreciation and amortization   10,106   10,364     20,009   20,509  
 
EBITDA from continuing operations 112,369 108,816 210,231 216,153
 
Plus (less): loss (gain) on interest rate swap agreement   2,270   (5,098 )   4,503   (5,775 )
 
EBITDA from continuing operations, as adjusted $ 114,639 $ 103,718   $ 214,734 $ 210,378  
 

Contacts

NewMarket Corporation
David A. Fiorenza
Investor Relations
Phone: 804-788-5555
Fax: 804-788-5688
Email: investorrelations@newmarket.com

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Contacts

NewMarket Corporation
David A. Fiorenza
Investor Relations
Phone: 804-788-5555
Fax: 804-788-5688
Email: investorrelations@newmarket.com