NewMarket Corporation Reports Fourth Quarter and Full Year 2019 Results

  • Full Year Net Income of $254.3 Million and Earnings Per Share of $22.73
  • Petroleum Additives Full Year Operating Profit of $359.2 Million

RICHMOND, Va.–(BUSINESS WIRE)–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 2019.

Profit before income taxes for 2019 was $331.6 million compared to $290.3 million for 2018. Net income for 2019 was $254.3 million, or $22.73 per share compared to net income of $234.7 million, or $20.34 per share, for 2018. Profit before income taxes for the fourth quarter of 2019 was $66.6 million compared to $71.1 million in 2018. Net income for the fourth quarter of 2019 was $50.1 million, or $4.48 per share compared to net income of $62.8 million, or $5.58 per share for the fourth quarter of 2018.

Sales for the petroleum additives segment for the fourth quarter of 2019 were $531.8 million, down 1.0% compared to the same period last year. Petroleum additives operating profit for the fourth quarter of 2019 was $73.6 million, compared to $79.5 million for the fourth quarter of 2018. The decrease was primarily due to changes in selling prices, and foreign currency rates, partially offset by lower raw material costs. Shipments increased 1.4% between periods, with increases in lubricant additives shipments, partially offset by decreases in fuel additives shipments. North America and Europe were the primary drivers for the lubricant additive increases, partially offset by decreases in Asia Pacific. The decrease in fuel additives shipments was primarily driven by Latin America. The increase in shipments between the fourth quarter periods represents the first time since the second quarter 2018 that we have had an increase, with steady improvement reflected in each of the quarters in 2019.

For the year, petroleum additives sales were $2.2 billion compared to sales in 2018 of $2.3 billion. This decrease was due mainly to lower shipments and changes in foreign currency rates, partially offset by increased selling prices. Petroleum additives operating profit for 2019 was $359.2 million compared to $311.0 million for 2018. The increase was mainly due to improved selling prices and lower raw material costs, partially offset by lower shipments. Shipments decreased 5.5% versus 2018 with decreases in both lubricant additives and fuel additives shipments across all regions except North America, which reported an increase in lubricant additives shipments and Asia Pacific, which reported an increase in fuel additives shipments.

In 2019, we began to see a turnaround in the operating performance of petroleum additives as compared to the prior year. In the two years prior to 2019, our operations were affected by a challenging economic environment marked by a sustained increase in raw material costs. While we have seen evidence that this trend improved in 2019, we will continue to make operating margin stability a priority. Petroleum additives operating margin for the rolling four quarters ended December 31, 2019 was 16.5% which is more in line with the historical ranges our shareholders have come to expect.

We are proud of the performance of our petroleum additives business in 2019. As we look forward to 2020 and beyond, we expect continued strength in our operations and the petroleum additives industry as a whole. We will focus our attention on managing our business and operating margins to help ensure a robust future for our company. Our views toward the fundamentals of our industry remain unchanged with the petroleum additives market growing at 1% to 2% for the foreseeable future. We continue to believe that we will exceed that growth rate.

The effective income tax rate for 2019 was 23.3% compared to 19.1% for 2018. While the rate for 2018 was lower due to one-time benefits recorded in 2018 associated with the Tax Reform Act, the rate for 2019 is more consistent with management’s expectations in the post-tax reform environment.

Our business continues to generate strong cash flows. During the year we funded capital expenditures of $59.4 million, paid dividends of $81.7 million, and repaid $123.5 million of borrowings on our revolving credit facility.

We focus our business decisions on promoting the greatest long-term value for our shareholders, customers and employees. This will be evidenced through our ongoing commitment to provide customers with innovative solutions to meet their business needs, investments in our supply capabilities, and technology-driven initiatives. We believe the way 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.

Sincerely,

Thomas E. Gottwald

The petroleum additives segment consists of the North America (the United States and Canada), Latin America (Mexico, Central America, and South America), Asia Pacific, and Europe/Middle East/Africa/India (Europe or EMEAI) regions.

The Company has disclosed the non-GAAP financial measure EBITDA and the related calculation in the schedules included with this earnings release. EBITDA is defined as income from continuing operations before the deduction of interest and financing expenses, income taxes, depreciation (on property, plant and equipment) and amortization (on intangibles and lease right of use assets). 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. EST on Tuesday, February 4, 2020, to review fourth quarter and year-end 2019 financial results. You can access the conference call live by dialing 1-844-407-9500 (domestic) or 1-862-298-0850 (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 February 11, 2020 at 3:00 p.m. EST by dialing 1-877-481-4010 (domestic) or 1-919-882-2331 (international). The replay ID number is 57414. The call will also be broadcast via the Internet and can be accessed through the Company’s website at www.NewMarket.com or www.webcaster4.com/Webcast/Page/2001/32843. 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 production facilities, including single-sourced facilities; hazards common to chemical businesses; the ability to respond effectively to technological changes in our industry; failure to protect our intellectual property rights; sudden or sharp raw material price increases; competition from other manufacturers; the gain or loss of significant customers; current and future governmental regulations; failure to attract and retain a highly-qualified workforce; 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 substantial indebtedness on our operational and financial flexibility; the impact of fluctuations in foreign exchange rates; an information technology system failure or security breach; resolution of environmental liabilities or legal proceedings; political, economic, and regulatory factors concerning our products; limitation of our insurance coverage; 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; the underperformance of our pension assets resulting in additional cash contributions to our pension plans; 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 2018 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.

NEWMARKET CORPORATION AND SUBSIDIARIES

SEGMENT RESULTS AND OTHER FINANCIAL INFORMATION

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

 

 

 

Fourth Quarter Ended

December 31,

 

Twelve Months Ended

December 31,

 

 

2019

 

2018

 

2019

 

2018

Revenue:

 

 

 

 

 

 

 

 

Petroleum additives

 

$

531,775

 

 

$

537,171

 

 

$

2,175,904

 

 

$

2,280,803

 

All other

 

2,670

 

 

1,141

 

 

14,391

 

 

8,872

 

Total

 

$

534,445

 

 

$

538,312

 

 

$

2,190,295

 

 

$

2,289,675

 

Segment operating profit:

 

 

 

 

 

 

 

 

Petroleum additives

 

$

73,608

 

 

$

79,525

 

 

$

359,228

 

 

$

311,019

 

All other

 

(1,654

)

 

(1,290

)

 

(1,562

)

 

(3,256

)

Segment operating profit

 

71,954

 

 

78,235

 

 

357,666

 

 

307,763

 

Corporate unallocated expense

 

(4,503

)

 

(3,618

)

 

(20,345

)

 

(19,651

)

Interest and financing expenses

 

(6,501

)

 

(8,187

)

 

(29,241

)

 

(26,723

)

Other income (expense), net

 

5,683

 

 

4,665

 

 

23,510

 

 

28,896

 

Income before income tax expense

 

$

66,633

 

 

$

71,095

 

 

$

331,590

 

 

$

290,285

 

Net income

 

$

50,102

 

 

$

62,803

 

 

$

254,286

 

 

$

234,734

 

Earnings per share – basic and diluted

 

$

4.48

 

 

$

5.58

 

 

$

22.73

 

 

$

20.34

 

NEWMARKET CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

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

 

 

 

Fourth Quarter Ended

December 31,

 

Twelve Months Ended

December 31,

 

 

2019

 

2018

 

2019

 

2018

Net sales

 

$

534,445

 

 

$

538,312

 

 

$

2,190,295

 

 

$

2,289,675

 

Cost of goods sold

 

391,005

 

 

396,474

 

 

1,560,426

 

 

1,704,312

 

Gross profit

 

143,440

 

 

141,838

 

 

629,869

 

 

585,363

 

Selling, general, and administrative expenses

 

38,167

 

 

31,747

 

 

148,083

 

 

152,400

 

Research, development, and testing expenses

 

37,717

 

 

34,271

 

 

144,465

 

 

140,289

 

Operating profit

 

67,556

 

 

75,820

 

 

337,321

 

 

292,674

 

Interest and financing expenses, net

 

6,501

 

 

8,187

 

 

29,241

 

 

26,723

 

Other income (expense), net

 

5,578

 

 

3,462

 

 

23,510

 

 

24,334

 

Income before income tax expense

 

66,633

 

 

71,095

 

 

331,590

 

 

290,285

 

Income tax expense

 

16,531

 

 

8,292

 

 

77,304

 

 

55,551

 

Net income

 

$

50,102

 

 

$

62,803

 

 

$

254,286

 

 

$

234,734

 

Earnings per share – basic and diluted

 

$

4.48

 

 

$

5.58

 

 

$

22.73

 

 

$

20.34

 

Cash dividends declared per share

 

$

1.90

 

 

$

1.75

 

 

$

7.30

 

 

$

7.00

 

NEWMARKET CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands except share amounts, unaudited)

 

 

 

December 31,

2019

 

December 31,

2018

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

144,397

 

 

$

73,040

 

Trade and other accounts receivable, less allowance for doubtful accounts

 

335,826

 

 

314,860

 

Inventories

 

365,938

 

 

396,341

 

Prepaid expenses and other current assets

 

33,237

 

 

29,179

 

Total current assets

 

879,398

 

 

813,420

 

Property, plant, and equipment, net

 

635,439

 

 

644,138

 

Intangibles (net of amortization) and goodwill

 

131,880

 

 

136,039

 

Prepaid pension cost

 

133,848

 

 

88,705

 

Operating lease right-of-use assets

 

60,505

 

 

0

 

Deferred income taxes

 

6,327

 

 

5,094

 

Deferred charges and other assets

 

37,735

 

 

9,878

 

Total assets

 

$

1,885,132

 

 

$

1,697,274

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

178,773

 

 

$

151,631

 

Accrued expenses

 

77,350

 

 

91,202

 

Dividends payable

 

19,217

 

 

17,923

 

Income taxes payable

 

10,632

 

 

6,431

 

Operating lease liabilities

 

14,036

 

 

0

 

Other current liabilities

 

8,887

 

 

4,114

 

Total current liabilities

 

308,895

 

 

271,301

 

Long-term debt

 

642,941

 

 

770,999

 

Operating lease liabilities – noncurrent

 

46,792

 

 

0

 

Other noncurrent liabilities

 

203,406

 

 

165,067

 

Total liabilities

 

1,202,034

 

 

1,207,367

 

Shareholders’ equity:

 

 

 

 

Common stock and paid-in capital (without par value; issued and outstanding shares – 11,188,549 at December 31, 2019 and 11,184,482 at December 31, 2018)

 

1,965

 

 

0

 

Accumulated other comprehensive loss

 

(162,748

)

 

(181,316

)

Retained earnings

 

843,881

 

 

671,223

 

Total shareholders’ equity

 

683,098

 

 

489,907

 

Total liabilities and shareholders’ equity

 

$

1,885,132

 

 

$

1,697,274

 

NEWMARKET CORPORATION AND SUBSIDIARIES

SELECTED CONSOLIDATED CASH FLOW DATA

(In thousands, unaudited)

 

 

 

Twelve Months Ended

December 31,

 

 

2019

 

2018

Net income

 

$

254,286

 

 

$

234,734

 

Depreciation and amortization

 

87,560

 

 

71,759

 

Cash pension and postretirement contributions

 

(9,932

)

 

(64,756

)

Working capital changes

 

4,763

 

 

(54,412

)

Deferred income tax expense

 

7,384

 

 

14,527

 

Capital expenditures

 

(59,434

)

 

(74,638

)

Net (repayments) borrowings under revolving credit facility

 

(123,451

)

 

168,129

 

Repurchases of common stock

 

0

 

 

(232,016

)

Dividends paid

 

(81,676

)

 

(80,448

)

All other

 

(8,143

)

 

5,995

 

Increase (decrease) in cash and cash equivalents

 

$

71,357

 

 

$

(11,126

)

NEWMARKET CORPORATION AND SUBSIDIARIES

NON-GAAP FINANCIAL INFORMATION

(In thousands, unaudited)

 

 

 

Fourth Quarter Ended

December 31,

 

Twelve Months Ended

December 31,

 

 

2019

 

2018

 

2019

 

2018

Net Income

 

$

50,102

 

 

$

62,803

 

 

$

254,286

 

 

$

234,734

 

Add:

 

 

 

 

 

 

 

 

Interest and financing expenses, net

 

6,501

 

 

8,187

 

 

29,241

 

 

26,723

 

Income tax expense

 

16,531

 

 

8,292

 

 

77,304

 

 

55,551

 

Depreciation and amortization

 

21,775

 

 

18,011

 

 

86,421

 

 

70,618

 

EBITDA

 

$

94,909

 

 

$

97,293

 

 

$

447,252

 

 

$

387,626

 

 

Contacts

FOR INVESTOR INFORMATION CONTACT:

Brian D. Paliotti

Investor Relations

Phone: 804.788.5555

Fax: 804.788.5688

Email: investorrelations@newmarket.com
 

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