- 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
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
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200203005512/en/
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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