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| 8-K - FORM 8-K - NEWMARKET CORP | d811155d8k.htm |
Exhibit 99.1
NEWMARKET CORPORATION REPORTS THIRD QUARTER AND FIRST NINE MONTHS 2014 RESULTS
| • | Petroleum Additives Operation Continues Strong Performance with Comparable Results Between the Third Quarter and Nine Month Periods |
| • | 114,210 Shares Repurchased in Third Quarter |
Richmond, VA, October 29, 2014 – NewMarket Corporation (NYSE:NEU) Chairman and Chief Executive Officer, Thomas E. Gottwald, released the following earnings report of the Company’s operations for the third quarter and first nine months of 2014.
Net income for the third quarter of 2014 was $56.9 million, or $4.53 per share, compared to net income of $78.9 million, or $5.94 per share, for the third quarter of 2013. For the first nine months of 2014, net income was $181.2 million, or $14.20 per share, compared to net income of $210.7 million, or $15.81 per share, for the same period last year. Earnings for last year included the results from operations of a discontinued business and the related gain on the sale of the discontinued business. All periods also included the impact of valuing an interest rate swap at fair value. Excluding these items, earnings between the quarter and nine month periods were comparable, reflecting the continued strong performance of our business. On this basis, third quarter 2014 earnings were $56.8 million, or $4.52 per share, compared to $57.4 million, or $4.32 per share, and earnings for the first nine months of the year were $183.9 million, or $14.41 per share, compared to $185.2 million, or $13.90 per share, last year (see Summary of Earnings table below).
The petroleum additives segment had another solid quarterly performance, as petroleum additives sales for the third quarter of this year were $585.6 million, an improvement of 1.4% over sales for the same period last year of $577.6 million. Shipments were up 3.1%. Sales of petroleum additives for the first nine months of this year were $1,777.2 million, an increase of 3.5% compared to sales in the first nine months of last year of $1,717.3 million. Shipments were up 5.4%. Segment operating profit remained relatively consistent between the third quarter periods, at $94.3 million in the third quarter of 2014 versus $95.5 million in the prior year third quarter. For the first nine months of this year, petroleum additives operating profit was $299.6 million compared to operating profit for the same period last year of $295.3 million.
During the third quarter, we repurchased 114,210 shares of our stock at a cost of $44.7 million. At the end of September, we had 12.5 million shares outstanding and $293.2 million remaining on our stock repurchase authorization.
Our Company continues to perform consistent with our expectations, and our financial position remains strong. We are continuing our investments in research, development and facilities to ensure we meet our customers’ worldwide needs. We believe our business fundamentals, including a long-term view, safety-first culture, customer-focused solutions, technology-driven product offerings, world-class supply chain capability and a regional organizational structure to better understand our customers’ needs, will help us continue our solid operating performance for the remainder of 2014 and beyond.
| Summary of Earnings | ||||||||||||||||
| (In millions, except per-share amounts) | ||||||||||||||||
| Third Quarter Ended | Nine Months Ended | |||||||||||||||
| September 30 | September 30 | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Net Income: |
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| Net income |
$ | 56.9 | $ | 78.9 | $ | 181.2 | $ | 210.7 | ||||||||
| (Income) from operations of discontinued business |
— | — | — | (0.5 | ) | |||||||||||
| (Gain) on sale of discontinued business |
— | (21.9 | ) | — | (21.9 | ) | ||||||||||
| (Gain) loss on interest rate swap agreement |
(0.1 | ) | 0.4 | 2.7 | (3.1 | ) | ||||||||||
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| Income excluding discontinued operations and special items |
$ | 56.8 | $ | 57.4 | $ | 183.9 | $ | 185.2 | ||||||||
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| Diluted Earnings Per Share: |
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| Net income |
$ | 4.53 | $ | 5.94 | $ | 14.20 | $ | 15.81 | ||||||||
| (Income) from operations of discontinued business |
— | — | — | (0.04 | ) | |||||||||||
| (Gain) on sale of discontinued business |
— | (1.65 | ) | — | (1.64 | ) | ||||||||||
| (Gain) loss on interest rate swap agreement |
(0.01 | ) | 0.03 | 0.21 | (0.23 | ) | ||||||||||
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| Income excluding discontinued operations and special items |
$ | 4.52 | $ | 4.32 | $ | 14.41 | $ | 13.90 | ||||||||
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Please read our third quarter Form 10-Q for more details on operations of the Company.
Sincerely,
Thomas E. Gottwald
The results for all periods included the impact of valuing an interest rate swap at fair value, while the prior year periods included the results from operations of a discontinued business and the related gain on the sale of the 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 Segment Results and Other Financial Information table included in this earnings release includes a non-GAAP financial measure, Income from Continuing Operations before Special Items and Income Tax Expense, which is reconciled to a GAAP measure. 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 Thursday, October 30, 2014, to review the financial results for the third quarter and first nine months of 2014. 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 November 6, 2014 at 11:59 p.m. EST by dialing 1-877-660-6853 (domestic) and 1-201-612-7415 (international). The conference ID number is 13592733. 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.
FOR INVESTOR INFORMATION CONTACT:
David A. Fiorenza
Investor Relations
Phone: 804.788.5555
Fax: 804.788.5688
Email: investorrelations@newmarket.com
NEWMARKET CORPORATION AND SUBSIDIARIES
SEGMENT RESULTS AND OTHER FINANCIAL INFORMATION
(In thousands, except per-share amounts, unaudited)
| Third Quarter Ended September 30, |
Nine Months Ended September 30, |
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| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Revenue: |
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| Petroleum additives |
$ | 585,618 | $ | 577,596 | $ | 1,777,167 | $ | 1,717,335 | ||||||||
| All other (a) |
4,049 | 2,859 | 9,360 | 6,649 | ||||||||||||
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| Total |
$ | 589,667 | $ | 580,455 | $ | 1,786,527 | $ | 1,723,984 | ||||||||
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| Segment operating profit: |
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| Petroleum additives |
$ | 94,310 | $ | 95,491 | $ | 299,578 | $ | 295,309 | ||||||||
| All other (a) |
399 | (1,614 | ) | 1,792 | (1,832 | ) | ||||||||||
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| Segment operating profit |
94,709 | 93,877 | 301,370 | 293,477 | ||||||||||||
| Corporate unallocated expense |
(6,320 | ) | (6,850 | ) | (18,448 | ) | (17,255 | ) | ||||||||
| Interest and financing expenses |
(4,168 | ) | (4,259 | ) | (12,678 | ) | (13,614 | ) | ||||||||
| Other (expense) income, net |
(73 | ) | 91 | 119 | 765 | |||||||||||
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| Income from continuing operations before special items and income tax expense |
84,148 | 82,859 | 270,363 | 263,373 | ||||||||||||
| Gain (loss) on an interest rate swap agreement (b) |
113 | (659 | ) | (4,390 | ) | 5,116 | ||||||||||
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| Income from continuing operations before income tax expense |
$ | 84,261 | $ | 82,200 | $ | 265,973 | $ | 268,489 | ||||||||
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| Net income: |
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| Income from continuing operations |
$ | 56,913 | $ | 57,021 | $ | 181,200 | $ | 188,346 | ||||||||
| Gain on sale of discontinued business (c) |
— | 21,855 | — | 21,855 | ||||||||||||
| Income from operations of discontinued operations (c) |
— | 20 | — | 540 | ||||||||||||
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| Net income |
$ | 56,913 | $ | 78,896 | $ | 181,200 | $ | 210,741 | ||||||||
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| Basic and diluted earnings per share: |
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| Income from continuing operations |
$ | 4.53 | $ | 4.29 | $ | 14.20 | $ | 14.13 | ||||||||
| Discontinued operations (c) |
— | 1.65 | — | 1.68 | ||||||||||||
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| Basic and diluted earnings per share |
$ | 4.53 | $ | 5.94 | $ | 14.20 | $ | 15.81 | ||||||||
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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 gain (loss) 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)
| Third Quarter Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Net sales |
$ | 589,667 | $ | 580,455 | $ | 1,786,527 | $ | 1,723,984 | ||||||||
| Cost of goods sold |
424,448 | 416,632 | 1,278,632 | 1,222,326 | ||||||||||||
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| Gross profit |
165,219 | 163,823 | 507,895 | 501,658 | ||||||||||||
| Selling, general, and administrative expenses |
41,376 | 40,886 | 121,837 | 121,748 | ||||||||||||
| Research, development, and testing expenses |
35,799 | 35,865 | 103,373 | 103,315 | ||||||||||||
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| Operating profit |
88,044 | 87,072 | 282,685 | 276,595 | ||||||||||||
| Interest and financing expenses |
4,168 | 4,259 | 12,678 | 13,614 | ||||||||||||
| Other income (expense), net (a) |
385 | (613 | ) | (4,034 | ) | 5,508 | ||||||||||
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| Income from continuing operations before income tax expense |
84,261 | 82,200 | 265,973 | 268,489 | ||||||||||||
| Income tax expense |
27,348 | 25,179 | 84,773 | 80,143 | ||||||||||||
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| Income from continuing operations |
56,913 | 57,021 | 181,200 | 188,346 | ||||||||||||
| Discontinued operations: |
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| Gain on sale of discontinued business (net of tax) (b) |
— | 21,855 | — | 21,855 | ||||||||||||
| Income from operations of discontinued business (net of tax) (b) |
— | 20 | — | 540 | ||||||||||||
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| Net income |
$ | 56,913 | $ | 78,896 | $ | 181,200 | $ | 210,741 | ||||||||
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| Basic and diluted earnings per share: |
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| Income from continuing operations |
$ | 4.53 | $ | 4.29 | $ | 14.20 | $ | 14.13 | ||||||||
| Discontinued operations (b) |
— | 1.65 | — | 1.68 | ||||||||||||
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| Basic and diluted earnings per share |
$ | 4.53 | $ | 5.94 | $ | 14.20 | $ | 15.81 | ||||||||
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| Cash dividends declared per share |
$ | 1.10 | $ | 0.90 | $ | 3.30 | $ | 2.70 | ||||||||
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Notes to Consolidated Statements of Income
| (a) | On June 25, 2009, we entered into an interest rate swap. The gain on the interest rate swap was $100 thousand for the quarter ended September 30, 2014 and loss on the interest rate swap was $4.4 million for the nine months ended September 30, 2014. The loss on the interest rate swap was $0.7 million for the quarter ended September 30, 2013 and the gain on the interest rate swap was $5.1 million for the nine months ended September 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)
| September 30, 2014 |
December 31, 2013 |
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| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
$ | 141,536 | $ | 238,703 | ||||
| Trade and other accounts receivable, less allowance for doubtful accounts ($517 - 2014; $564 - 2013) |
327,641 | 309,847 | ||||||
| Inventories |
333,596 | 307,518 | ||||||
| Deferred income taxes |
6,498 | 8,267 | ||||||
| Prepaid expenses and other current assets |
34,871 | 32,984 | ||||||
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| Total current assets |
844,142 | 897,319 | ||||||
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| Property, plant, and equipment, at cost |
1,003,510 | 985,196 | ||||||
| Less accumulated depreciation and amortization |
706,063 | 700,160 | ||||||
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| Net property, plant, and equipment |
297,447 | 285,036 | ||||||
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| Prepaid pension cost |
65,812 | 55,087 | ||||||
| Deferred income taxes |
20,913 | 22,961 | ||||||
| Intangibles (net of amortization) and goodwill |
18,538 | 23,319 | ||||||
| Deferred charges and other assets |
41,466 | 43,552 | ||||||
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| Total assets |
$ | 1,288,318 | $ | 1,327,274 | ||||
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| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| Current liabilities: |
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| Accounts payable |
$ | 128,834 | $ | 134,132 | ||||
| Accrued expenses |
87,865 | 77,992 | ||||||
| Dividends payable |
12,446 | 12,996 | ||||||
| Income taxes payable |
8,339 | 11,419 | ||||||
| Other current liabilities |
13,097 | 11,075 | ||||||
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| Total current liabilities |
250,581 | 247,614 | ||||||
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| Long-term debt |
384,512 | 349,467 | ||||||
| Other noncurrent liabilities |
158,708 | 157,745 | ||||||
| Shareholders’ equity |
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| Common stock and paid-in capital (without par value); issued and outstanding - 12,531,045 in 2014 and 13,099,356 in 2013 |
— | — | ||||||
| Accumulated other comprehensive loss |
(66,932 | ) | (60,086 | ) | ||||
| Retained earnings |
561,449 | 632,534 | ||||||
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| 494,517 | 572,448 | |||||||
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| Total liabilities and shareholders’ equity |
$ | 1,288,318 | $ | 1,327,274 | ||||
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NEWMARKET CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands, unaudited)
| Nine Months Ended September 30, |
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| 2014 | 2013 | |||||||
| Net income |
$ | 181,200 | $ | 210,741 | ||||
| Depreciation and amortization |
31,244 | 35,926 | ||||||
| Cash pension and postretirement contributions |
(17,449 | ) | (25,447 | ) | ||||
| Noncash pension and postretirement expense |
12,607 | 16,388 | ||||||
| Working capital changes |
(58,699 | ) | (988 | ) | ||||
| Capital expenditures |
(38,949 | ) | (47,163 | ) | ||||
| Net borrowings (repayments) under revolving credit agreement |
35,000 | (75,000 | ) | |||||
| Repurchases of common stock |
(209,336 | ) | (41,156 | ) | ||||
| Dividends paid |
(41,962 | ) | (35,914 | ) | ||||
| Proceeds from legal settlement |
5,150 | 5,100 | ||||||
| Proceeds from sale of discontinued business |
— | 140,011 | ||||||
| Gain on sale of discontinued business |
— | (35,770 | ) | |||||
| All other |
4,027 | 11,408 | ||||||
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| (Decrease) increase in cash and cash equivalents |
$ | (97,167 | ) | $ | 158,136 | |||
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NEWMARKET CORPORATION AND SUBSIDIARIES
NON-GAAP FINANCIAL INFORMATION
(In thousands, unaudited)
| Third Quarter Ended September 30, |
Nine Months Ended September 30, |
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| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Income from continuing operations |
$ | 56,913 | $ | 57,021 | $ | 181,200 | $ | 188,346 | ||||||||
| Add: |
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| Interest and financing expenses |
4,168 | 4,259 | 12,678 | 13,614 | ||||||||||||
| Income tax expense |
27,348 | 25,179 | 84,773 | 80,143 | ||||||||||||
| Depreciation and amortization |
10,169 | 9,689 | 30,178 | 30,198 | ||||||||||||
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| EBITDA from continuing operations |
98,598 | 96,148 | 308,829 | 312,301 | ||||||||||||
| (Less) plus: (gain) loss on interest rate swap agreement |
(113 | ) | 659 | 4,390 | (5,116 | ) | ||||||||||
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| EBITDA from continuing operations, as adjusted |
$ | 98,485 | $ | 96,807 | $ | 313,219 | $ | 307,185 | ||||||||
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