• Full Year Net Income of $270.6 Million and Earnings Per Share of $24.64
  • Petroleum Additives Full Year Operating Profit of $333.2 Million
  • Focus Remains on Investing in the Long-Term Success of the Company

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 2020.

Net income for the fourth quarter of 2020 was $66.9 million, or $6.12 per share, compared to net income of $50.1 million, or $4.48 per share, for the fourth quarter of 2019. Net income for 2020 was $270.6 million, or $24.64 per share compared to net income of $254.3 million, or $22.73 per share. Net income for the year benefited from a gain of $16.5 million related to the sale of a non-operating parcel of real estate, along with a reduced effective tax rate compared to 2019.

Sales for the petroleum additives segment for the fourth quarter of 2020 were $525.2 million, down 1.2% compared to the same period last year. Petroleum additives operating profit for the fourth quarter of 2020 was $84.3 million, compared to $73.6 million for the fourth quarter of 2019. For the year, petroleum additives sales were $2.0 billion compared to sales in 2019 of $2.2 billion. This decrease was due mainly to lower shipments and decreased selling prices. Petroleum additives operating profit for 2020 was $333.2 million, a 7.2% decrease compared to 2019 operating profit of $359.2 million. This decrease was mainly due to changes in selling prices, lower shipments and higher conversion costs, partially offset by lower raw material costs and selling, general, and administrative costs. Shipments decreased 5.2% between the full-year periods, with decreases in both lubricant additives and fuel additives shipments.

Petroleum additives operating results for 2020 have been marked by economic uncertainty resulting from the ongoing effects of the COVID-19 pandemic and the related restrictions on the movement of people, goods and services. While we have continued to operate throughout the year in each of our regions, we have at various times seen significant changes in some of the key drivers that affect the performance of our business. During the second quarter of 2020, government and business shutdowns in North America and Europe led to a precipitous drop in vehicle miles driven and auto production, with gasoline consumption in the United States dropping to its lowest point in over 50 years. With less travel and fewer miles driven, combined with automobile plant closures, global demand for our products declined substantially, except in our Asia Pacific region where demand remained relatively stable throughout the year. As restrictions eased and economies reopened in the second half of 2020, global production of automobiles began to rebound and gasoline consumption and miles driven showed steady improvement in most countries, including the United States. Late in the fourth quarter, renewed restrictions on travel and work in certain countries had a negative effect on our business. The pace and stability of improvement in demand for our products will continue to depend heavily on economic recovery and the rate at which government restrictions are lifted and remain lifted.

The effective tax rate for 2020 was 18.3% compared to 23.3% for 2019. The decrease in the tax rate in 2020 was mainly the result of finalizing prior year tax filings and releasing certain tax reserves.

Our business continues to generate strong cash flow. During the year we funded capital expenditures of $93.3 million, paid dividends of $83.4 million, and repaid $44.7 million of borrowings on our revolving credit facility. We also repurchased 270,963 shares of our common stock for a cost of $101.4 million.

As we look back at our results for the year, we are extremely proud of the operational performance we achieved given the volatility the COVID-19 pandemic introduced into the global economy. Throughout the economic downturn, the chemical industry and our products have been recognized as essential for the transportation of goods and services, and our facilities have continued to operate and function safely. I want to sincerely thank our employees for their continued determination and commitment to do what is necessary to support our customers and ensure their supply demands are met. I am very proud of them.

As we look forward to 2021, we will continue to monitor government restrictions on the movement of people, goods and services as well as the status of vaccination programs that are being implemented globally. We are hopeful the vaccinations will help provide more stability in the global economy in 2021. Our business decisions will continue to be focused on the long-term success of our company, including emphasis on satisfying customer needs, generating solid operating results, and promoting the greatest long-term value for our shareholders, customers and employees. We believe the fundamentals of how we run our business – a long-term view, safety and people first culture, customer-focused solutions, technology-driven product offerings, and a 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 Thursday, February 4, 2021, to review fourth quarter and full year 2020 financial results. You can access the conference call live by dialing 1-888-506-0062 (domestic) or 1-973-528-0011 (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 March 4, 2021 at 3:00 p.m. EST by dialing 1-877-481-4010 (domestic) or 1-919-882-2331 (international). The replay passcode number is 39452. 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/2001/39452. 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; current and future governmental regulations; the gain or loss of significant customers; failure to attract and retain a highly-qualified workforce; an information technology system failure or security breach; the occurrence or threat of extraordinary events, including natural disasters; terrorist attacks and health-related epidemics such as the COVID-19 pandemic; risks related to operating outside of the United States; political, economic, and regulatory factors concerning our products; the impact of substantial indebtedness on our operational and financial flexibility; the impact of fluctuations in foreign exchange rates; resolution of environmental liabilities or legal proceedings; 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 2019 Annual Report on Form 10-K and Part II. Item 1A. “Risk Factors” of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020, which are 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,

 

2020

2019

2020

2019

Revenue:

 

 

 

 

 

 

 

 

Petroleum additives

 

$

525,212

 

 

$

531,775

 

 

$

2,001,567

 

 

$

2,175,904

 

All other

 

2,569

 

 

2,670

 

 

9,364

 

 

 

14,391

 

Total

 

$

527,781

 

 

$

534,445

 

 

$

2,010,931

 

 

$

2,190,295

 

Segment operating profit:

 

 

 

 

 

 

 

 

Petroleum additives

 

$

84,323

 

 

$

73,608

 

 

$

333,241

 

 

$

359,228

 

All other

 

(2,051

)

 

(1,654

)

 

(100

)

 

 

(1,562

)

Segment operating profit

 

82,272

 

 

71,954

 

 

333,141

 

 

 

357,666

 

Corporate unallocated expense

 

(6,481

)

 

(4,503

)

 

(21,744

)

 

 

(20,345

)

Interest and financing expenses

 

(5,753

)

 

(6,501

)

 

(26,328

)

 

 

(29,241

)

Other income (expense), net

 

6,285

 

 

5,683

 

 

46,218

 

 

 

23,510

 

Income before income tax expense

 

$

76,323

 

 

$

66,633

 

 

$

331,287

 

 

$

331,590

 

Net income

 

$

66,884

 

 

$

50,102

 

 

$

270,568

 

 

$

254,286

 

Earnings per share - basic and diluted

 

$

6.12

 

 

$

4.48

 

 

$

24.64

 

 

$

22.73

 

   

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,

 

2020

2019

 

2020

2019

Net sales

 

$

527,781

 

 

$

534,445

 

$

2,010,931

 

 

$

2,190,295

 

Cost of goods sold

 

377,001

 

 

391,005

 

1,415,899

 

 

 

1,560,426

 

Gross profit

 

150,780

 

 

143,440

 

595,032

 

 

 

629,869

 

Selling, general, and administrative expenses

 

37,026

 

 

38,167

 

142,863

 

 

 

148,083

 

Research, development, and testing expenses

 

38,199

 

 

37,717

 

140,367

 

 

 

144,465

 

Operating profit

 

75,555

 

 

67,556

 

311,802

 

 

 

337,321

 

Interest and financing expenses, net

 

5,753

 

 

6,501

 

26,328

 

 

 

29,241

 

Other income (expense), net

 

6,521

 

 

5,578

 

45,813

 

 

 

23,510

 

Income before income tax expense

 

76,323

 

 

66,633

 

331,287

 

 

 

331,590

 

Income tax expense

 

9,439

 

 

16,531

 

60,719

 

 

 

77,304

 

Net income

 

$

66,884

 

 

$

50,102

 

$

270,568

 

 

$

254,286

 

Earnings per share - basic and diluted

 

$

6.12

 

 

$

4.48

 

$

24.64

 

 

$

22.73

 

Cash dividends declared per share

 

$

1.90

 

 

$

1.90

 

$

7.60

 

 

$

7.30

 

   

NEWMARKET CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands except share amounts, unaudited)

 

 

December 31, 2020

December 31, 2019

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

 

$

125,172

 

$

144,397

 

Trade and other accounts receivable, less allowance for credit losses

 

336,395

 

 

335,826

 

Inventories

 

401,031

 

 

365,938

 

Prepaid expenses and other current assets

 

35,480

 

 

33,237

 

Total current assets

 

898,078

 

 

879,398

 

Property, plant, and equipment, net

 

665,147

 

 

635,439

 

Intangibles (net of amortization) and goodwill

 

129,944

 

 

131,880

 

Prepaid pension cost

 

137,069

 

 

133,848

 

Operating lease right-of-use assets

 

61,329

 

 

60,505

 

Deferred charges and other assets

 

42,308

 

 

44,062

 

Total assets

 

$

1,933,875

 

$

1,885,132

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

 

$

189,937

 

$

178,773

 

Accrued expenses

 

78,422

 

 

77,350

 

Dividends payable

 

15,184

 

 

19,217

 

Income taxes payable

 

3,760

 

 

10,632

 

Operating lease liabilities

 

13,410

 

 

14,036

 

Other current liabilities

 

11,742

 

 

8,887

 

Total current liabilities

 

312,455

 

 

308,895

 

Long-term debt

 

598,848

 

 

642,941

 

Operating lease liabilities - noncurrent

 

48,324

 

 

46,792

 

Other noncurrent liabilities

 

214,424

 

 

203,406

 

Total liabilities

 

1,174,051

 

 

1,202,034

 

Shareholders' equity:

 

 

 

Common stock and paid-in capital (with no par value; issued and outstanding shares - 10,921,377 at December 31, 2020 and 11,188,549 at December 31, 2019)

 

717

 

 

1,965

 

Accumulated other comprehensive loss

 

(173,164

)

 

(162,748

)

Retained earnings

 

932,271

 

 

843,881

 

Total shareholders' equity

 

759,824

 

 

683,098

 

Total liabilities and shareholders' equity

 

$

1,933,875

 

$

1,885,132

 

   

NEWMARKET CORPORATION AND SUBSIDIARIES

SELECTED CONSOLIDATED CASH FLOW DATA

(In thousands, unaudited)

 

 

Twelve Months Ended December 31,

 

2020

2019

Net income

 

$

270,568

 

 

$

254,286

 

Depreciation and amortization

 

84,002

 

 

 

87,560

 

Cash pension and postretirement contributions

 

(10,655

)

 

 

(9,932

)

Working capital changes

 

(54,089

)

 

 

4,763

 

Deferred income tax expense

 

7,554

 

 

 

7,384

 

Capital expenditures

 

(93,316

)

 

 

(59,434

)

Net repayments under revolving credit facility

 

(44,678

)

 

 

(123,451

)

Repurchases of common stock

 

(101,434

)

 

 

0

 

Dividends paid

 

(83,417

)

 

 

(81,676

)

Proceeds from sale of land

 

20,000

 

 

 

0

 

Gain on sale of land

 

(16,483

)

 

 

0

 

All other

 

2,723

 

 

 

(8,143

)

(Decrease) increase in cash and cash equivalents

 

$

(19,225

)

 

$

71,357

 

   

NEWMARKET CORPORATION AND SUBSIDIARIES

NON-GAAP FINANCIAL INFORMATION

(In thousands, unaudited)

 

 

Fourth Quarter Ended December 31,

Twelve Months Ended December 31,

 

2020

2019

2020

2019

Net Income

 

$

66,884

 

 

$

50,102

 

 

$

270,568

 

 

$

254,286

 

Add:

 

 

 

 

 

 

 

 

Interest and financing expenses, net

 

5,753

 

 

6,501

 

 

26,328

 

 

 

29,241

 

Income tax expense

 

9,439

 

 

16,531

 

 

60,719

 

 

 

77,304

 

Depreciation and amortization

 

20,684

 

 

21,775

 

 

82,666

 

 

 

86,421

 

EBITDA

 

$

102,760

 

 

$

94,909

 

 

$

440,281

 

 

$

447,252

 

 

 

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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