NewMarket Corporation Reports First Quarter 2018 Results
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First Quarter Net Income of $60.6 Million and Earnings Per Share of
$5.14 - Record Quarterly Shipments
- Continued Margin Compression Due to Raw Material Costs
RICHMOND, Va.–(BUSINESS WIRE)–NewMarket Corporation (NYSE:NEU) Chairman and Chief Executive Officer,
Thomas E. Gottwald, released the following earnings report of the
CompanyÔÇÖs operations for the first quarter of 2018.
Net income for the first quarter of 2018 was $60.6 million, a decrease
of 5.3% compared to net income of $63.9 million for the first quarter of
2017. Earnings per share declined 4.6% to $5.14 per share from $5.39 per
share in the prior year period.
Sales for the petroleum additives segment for the first quarter of 2018
were $586.9 million, up 8.7% versus the same period last year. Petroleum
additives operating profit for the first quarter of 2018 was $84.1
million, an 11.8% decrease over first quarter operating profit last year
of $95.4 million. The decrease was due mainly to higher raw material and
conversion costs, partially offset by changes in selling prices, and
product and regional mix. During the quarter, we continued to see raw
material prices increase as they have over the past several quarters.
While we have made progress toward adjusting our selling prices to
offset the effects of those higher costs, we have been unable to adjust
often and fast enough to compensate for the pace of cost increases we
have seen.
Petroleum additives saw record shipments in the first quarter of 2018,
with a slight improvement over the same period last year, which was our
prior record for quarterly shipments. The increase was primarily due to
increases in lubricant additives shipments partially offset by decreases
in fuel additives shipments. Latin America and Asia Pacific were the
main regions contributing to higher lubricant additives shipments.
Europe and Asia Pacific were the primary drivers for the decrease in
fuel additives shipments, partially offset by an increase in Latin
America.
During the quarter, we funded capital expenditures of $22.8 million and
paid dividends of $20.6 million through a combination of cash on hand,
cash from operations, and borrowings under our revolving credit facility.
Throughout the rest of 2018, we expect to see solid sales and shipments
in our petroleum additives business. Margin improvement will remain our
top priority throughout the rest of this year, as we are committed to
reversing the effects of the margin compression we have seen over the
past several quarters, primarily due to rising raw material costs. This
will remain a priority until we begin to see raw material prices
stabilize.
We are committed to providing long-term value for our shareholders and
customers, and we remain focused on our long-term objectives. This is
evidenced by our technology-driven initiatives and ongoing investments
in our supply capability, such as our new plants in Singapore and
Mexico. 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 of our stakeholders.
Sincerely,
Thomas E. Gottwald
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 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 CompanyÔÇÖs 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, April 26, 2018, to review first quarter 2018
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 May 3, 2018 at 3:00 p.m. EDT by dialing
1-877-481-4010 (domestic) or 1-919-882-2331 (international). The replay
ID number is 27458. The call will also be broadcast via the Internet and
can be accessed through the CompanyÔÇÖs 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 NewMarketÔÇÖs 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; current and
future governmental regulations; 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. ÔÇ£Risk FactorsÔÇØ of our
2017 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.
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NEWMARKET CORPORATION AND SUBSIDIARIES SEGMENT RESULTS AND OTHER FINANCIAL INFORMATION (In thousands, except per-share amounts, unaudited) |
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| Three Months Ended March 31 | ||||
| 2018 | 2017 | |||
| Revenue: | ||||
| Petroleum additives | $ | 586,908 | $ | 540,033 |
| All other (a) | 2,337 | 2,785 | ||
| Total | $ | 589,245 | $ | 542,818 |
| Segment operating profit: | ||||
| Petroleum additives | $ | 84,140 | $ | 95,413 |
| All other (a) | (77 | ) | 1,035 | |
| Segment operating profit | 84,063 | 96,448 | ||
| Corporate unallocated expense | (5,664 | ) | (6,346 | ) |
| Interest and financing expenses | (5,164 | ) | (5,572 | ) |
| Other income (expense), net | 8,076 | 3,703 | ||
| Income before income tax expense | $ | 81,311 | $ | 88,233 |
| Net income | $ | 60,565 | $ | 63,937 |
| Earnings per share – basic and diluted | $ | 5.14 | $ | 5.39 |
Notes to Segment Results and Other Financial Information
Certain prior year amounts have been reclassified to reflect the
adoption of Accounting Standard Update No. 2017-07,
"Compensation-Retirement Benefits (Topic 715): Improving the
Presentation of Net Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost". There was no impact to income before
income tax expense.
| (a) |
"All other" includes the results of our tetraethyl lead (TEL) business, as well as certain contracted manufacturing and services associated with Ethyl Corporation. |
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NEWMARKET CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per-share amounts, unaudited) |
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| Three Months Ended March 31 | ||||
| 2018 | 2017 | |||
| Net sales | $ | 589,245 | $ | 542,818 |
| Cost of goods sold | 432,462 | 374,007 | ||
| Gross profit | 156,783 | 168,811 | ||
| Selling, general, and administrative expenses | 40,913 | 40,449 | ||
| Research, development, and testing expenses | 34,295 | 38,130 | ||
| Operating profit | 81,575 | 90,232 | ||
| Interest and financing expenses, net | 5,164 | 5,572 | ||
| Other income (expense), net | 4,900 | 3,573 | ||
| Income before income tax expense | 81,311 | 88,233 | ||
| Income tax expense | 20,746 | 24,296 | ||
| Net income | $ | 60,565 | $ | 63,937 |
| Earnings per share – basic and diluted | $ | 5.14 | $ | 5.39 |
| Cash dividends declared per share | $ | 1.75 | $ | 1.75 |
Notes to Consolidated Statements of Income
Certain prior year amounts have been reclassified to reflect the
adoption of Accounting Standard Update No. 2017-07,
"Compensation-Retirement Benefits (Topic 715): Improving the
Presentation of Net Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost". There was no impact to net income.
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NEWMARKET CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands except share amounts, unaudited) |
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|
March 31, 2018 |
December 31, 2017 |
|||
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 72,830 | $ | 84,166 |
|
Trade and other accounts receivable, less allowance for doubtful accounts ($209 – 2018; $215 – 2017) |
378,442 | 335,317 | ||
| Inventories | 402,817 | 383,097 | ||
| Prepaid expenses and other current assets | 32,401 | 31,074 | ||
| Total current assets | 886,490 | 833,654 | ||
| Property, plant, and equipment, at cost | 1,502,591 | 1,474,962 | ||
| Less accumulated depreciation and amortization | 840,122 | 822,681 | ||
| Net property, plant, and equipment | 662,469 | 652,281 | ||
| Intangibles (net of amortization) and goodwill | 142,137 | 144,337 | ||
| Prepaid pension cost | 73,241 | 66,495 | ||
| Deferred income taxes | 4,316 | 4,349 | ||
| Deferred charges and other assets | 10,812 | 11,038 | ||
| Total assets | $ | 1,779,465 | $ | 1,712,154 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 162,651 | $ | 159,408 |
| Accrued expenses | 91,457 | 107,999 | ||
| Dividends payable | 18,997 | 19,055 | ||
| Income taxes payable | 17,207 | 16,340 | ||
| Other current liabilities | 12,715 | 13,991 | ||
| Total current liabilities | 303,027 | 316,793 | ||
| Long-term debt | 624,894 | 602,900 | ||
| Other noncurrent liabilities | 196,759 | 190,812 | ||
| Total liabilities | 1,124,680 | 1,110,505 | ||
| Shareholders' equity: | ||||
|
Common stock and paid-in capital (without par value; issued and outstanding shares – 11,787,054 at March 31, 2018 and 11,779,978 at December 31, 2017) |
36 | 0 | ||
| Accumulated other comprehensive loss | (132,691 | ) | (145,994 | ) |
| Retained earnings | 787,440 | 747,643 | ||
| Total shareholders' equity | 654,785 | 601,649 | ||
| Total liabilities and shareholders' equity | $ | 1,779,465 | $ | 1,712,154 |
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NEWMARKET CORPORATION AND SUBSIDIARIES SELECTED CONSOLIDATED CASH FLOW DATA (In thousands, unaudited) |
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| Three Months Ended March 31 | |||||
| 2018 | 2017 | ||||
| Net income | $ | 60,565 | $ | 63,937 | |
| Depreciation and amortization | 17,665 | 12,306 | |||
| Cash pension and postretirement contributions | (6,713 | ) | (6,326 | ) | |
| Noncash pension and postretirement expense | 1,618 | 2,007 | |||
| Working capital changes | (63,655 | ) | (39,836 | ) | |
| Capital expenditures | (22,797 | ) | (46,346 | ) | |
| Net borrowings (repayments) under revolving credit facility | 22,000 | (156,000 | ) | ||
| Issuance of 3.78% senior notes | 0 | 250,000 | |||
| Repurchases of common stock | (632 | ) | 0 | ||
| Dividends paid | (20,629 | ) | (20,741 | ) | |
| All other | 1,242 | 89 | |||
| (Decrease) increase in cash and cash equivalents | $ | (11,336 | ) | $ | 59,090 |
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NEWMARKET CORPORATION AND SUBSIDIARIES NON-GAAP FINANCIAL INFORMATION (In thousands, unaudited) |
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| Three Months Ended March 31 | ||||
| 2018 | 2017 | |||
| Net Income | $ | 60,565 | $ | 63,937 |
| Add: | ||||
| Interest and financing expenses, net | 5,164 | 5,572 | ||
| Income tax expense | 20,746 | 24,296 | ||
| Depreciation and amortization | 17,379 | 12,034 | ||
| EBITDA | $ | 103,854 | $ | 105,839 |
Contacts
NewMarket Corporation
Brian D. Paliotti
Investor
Relations
Phone: 804-788-5555
Fax: 804-788-5688
[email protected]
