• Net Income of $85.5 Million and Earnings Per Share of $7.67
  • Petroleum Additives Operating Profit of $113.7 Million
  • Petroleum Additives Shipments Up 5.9%
  • 252,383 Shares Repurchased

NewMarket Corporation (NYSE:NEU) Chairman and Chief Executive Officer, Thomas E. Gottwald, released the following earnings report of the Company’s operations for the first quarter of 2020.

Net income for the first quarter of 2020 was $85.5 million, or $7.67 per share, compared to net income of $62.2 million, or $5.57 per share, for the first quarter of 2019.

Sales for the petroleum additives segment for the first quarter of 2020 were $557.4 million, up 4.6% compared to the same period last year. Petroleum additives operating profit for the first quarter of 2020 was $113.7 million compared to $87.9 million for the first quarter of 2019. The increase was primarily due to higher shipments and lower conversion costs, with lower raw material costs offset by decreased selling prices. Petroleum additives operating margin was 17.5% for the rolling four quarters including the first quarter of 2020 which is in line with the historical ranges for our business. Shipments increased 5.9% between periods, with increases in lubricant additives shipments, partially offset by a slight decrease in fuel additives shipments. Europe, North America and Latin America were the drivers for the lubricant additive increases, partially offset by a decrease in Asia Pacific.

We are very pleased with the strong performance of our petroleum additives business in the first quarter, but we are expecting to see our operations for the remainder of the year impacted by the current economic environment. We are currently experiencing what we believe will be a short-term decrease in demand for lubricant and fuel additives due to the economic downturn resulting from government restrictions on the movement of people, goods and services in response to COVID-19. We expect to see a sizeable decline in shipments in the second quarter of 2020. While we do not know how long this downturn will last, we are encouraged by the recovery we have seen in our China business, which saw a reduction in shipments in the first quarter but has already shown signs of recovery. We expect the rest of the global market will also begin to recover when government restrictions on the movement of people are eased. The rate of recovery will depend heavily on the rate at which these restrictions are lifted. Our global business will see varying effects on demand that will differ by region based on our product portfolio and geographic coverage.

During the quarter, we funded capital expenditures of $20.1 million, paid dividends of $21.2 million, and repurchased 252,383 shares of our common stock for a total of $94.3 million, through a combination of borrowing under our revolving credit facility and cash from operations. In March, we entered into a new five-year, $900 million revolving credit facility that replaced our prior $850 million facility.

As we face the challenging economic environment ahead of us in 2020, we expect all our global operations, manufacturing plants and research and development centers will continue to be operational, and we will stay the course. The chemical industry and our products are recognized as essential for the transportation of goods and services. We are mindful first and foremost of our responsibility to protect the health and safety of our employees and have procedures in place at each of our operating facilities to help ensure their well-being. We are grateful for their hard work and dedication during these difficult times. We are working diligently with our customers to ensure their supply demands are met and will continue to work with them throughout this period as inventory needs will be fluctuating due to demands of the changing environment.

We will continue to focus on our long-term objectives and will remain well-positioned for the future with a strong balance sheet and conservative fiscal policy, even as we navigate the current economic downturn.

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. EDT on Thursday, April 23, 2020, to review first quarter 2020 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 April 30, 2020 at 3:00 p.m. EDT by dialing 1-877-481-4010 (domestic) or 1-919-882-2331 (international). The replay ID number is 33966. 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/2001/33966. 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, 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)

 

 

 

Three Months Ended March 31,

 

 

2020

 

2019

Revenue:

 

 

 

 

Petroleum additives

 

$

557,372

 

 

$

532,679

 

All other

 

2,045

 

 

3,937

 

Total

 

$

559,417

 

 

$

536,616

 

Segment operating profit:

 

 

 

 

Petroleum additives

 

$

113,671

 

 

$

87,863

 

All other

 

335

 

 

511

 

Segment operating profit

 

114,006

 

 

88,374

 

Corporate unallocated expense

 

(4,231

)

 

(5,094

)

Interest and financing expenses

 

(7,104

)

 

(8,012

)

Other income (expense), net

 

7,407

 

 

5,540

 

Income before income tax expense

 

$

110,078

 

 

$

80,808

 

Net income

 

$

85,541

 

 

$

62,205

 

Earnings per share - basic and diluted

 

$

7.67

 

 

$

5.57

 

NEWMARKET CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per-share amounts, unaudited)

 

 

 

Three Months Ended March 31,

 

 

2020

 

2019

Net sales

 

$

559,417

 

 

$

536,616

 

Cost of goods sold

 

378,510

 

 

383,747

 

Gross profit

 

180,907

 

 

152,869

 

Selling, general, and administrative expenses

 

35,715

 

 

36,773

 

Research, development, and testing expenses

 

35,506

 

 

33,224

 

Operating profit

 

109,686

 

 

82,872

 

Interest and financing expenses, net

 

7,104

 

 

8,012

 

Other income (expense), net

 

7,496

 

 

5,948

 

Income before income tax expense

 

110,078

 

 

80,808

 

Income tax expense

 

24,537

 

 

18,603

 

Net income

 

$

85,541

 

 

$

62,205

 

Earnings per share - basic and diluted

 

$

7.67

 

 

$

5.57

 

Cash dividends declared per share

 

$

1.90

 

 

$

1.75

 

NEWMARKET CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands except share amounts, unaudited)

 

 

 

March 31, 2020

 

December 31, 2019

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

178,662

 

 

$

144,397

 

Trade and other accounts receivable, less allowance for credit losses

 

347,155

 

 

335,826

 

Inventories

 

371,002

 

 

365,938

 

Prepaid expenses and other current assets

 

34,115

 

 

33,237

 

Total current assets

 

930,934

 

 

879,398

 

Property, plant, and equipment, net

 

633,873

 

 

635,439

 

Intangibles (net of amortization) and goodwill

 

131,012

 

 

131,880

 

Prepaid pension cost

 

136,346

 

 

133,848

 

Operating lease right-of-use assets

 

57,437

 

 

60,505

 

Deferred charges and other assets

 

44,083

 

 

44,062

 

Total assets

 

$

1,933,685

 

 

$

1,885,132

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

178,457

 

 

$

178,773

 

Accrued expenses

 

89,819

 

 

77,350

 

Dividends payable

 

19,020

 

 

19,217

 

Income taxes payable

 

7,460

 

 

10,632

 

Operating lease liabilities

 

13,060

 

 

14,036

 

Other current liabilities

 

5,096

 

 

8,887

 

Total current liabilities

 

312,912

 

 

308,895

 

Long-term debt

 

740,511

 

 

642,941

 

Operating lease liabilities - noncurrent

 

43,585

 

 

46,792

 

Other noncurrent liabilities

 

197,428

 

 

203,406

 

Total liabilities

 

1,294,436

 

 

1,202,034

 

Shareholders' equity:

 

 

 

 

Common stock and paid-in capital (without par value; issued and outstanding shares - 10,938,744 at March 31, 2020 and 11,188,549 at December 31, 2019)

 

0

 

 

1,965

 

Accumulated other comprehensive loss

 

(176,343

)

 

(162,748

)

Retained earnings

 

815,592

 

 

843,881

 

Total shareholders' equity

 

639,249

 

 

683,098

 

Total liabilities and shareholders' equity

 

$

1,933,685

 

 

$

1,885,132

 

NEWMARKET CORPORATION AND SUBSIDIARIES SELECTED CONSOLIDATED CASH FLOW DATA (In thousands, unaudited)

 

 

 

Three Months Ended March 31,

 

 

2020

 

2019

Net income

 

$

85,541

 

 

$

62,205

 

Depreciation and amortization

 

21,369

 

 

21,939

 

Cash pension and postretirement contributions

 

(2,557

)

 

(2,425

)

Working capital changes

 

(42,058

)

 

(63,426

)

Deferred income tax expense

 

3,379

 

 

2,156

 

Capital expenditures

 

(20,106

)

 

(10,353

)

Net borrowings under revolving credit facility

 

97,424

 

 

16,072

 

Repurchases of common stock

 

(79,473

)

 

0

 

Dividends paid

 

(21,160

)

 

(19,579

)

All other

 

(8,094

)

 

(1,382

)

Increase in cash and cash equivalents

 

$

34,265

 

 

$

5,207

 

NEWMARKET CORPORATION AND SUBSIDIARIES NON-GAAP FINANCIAL INFORMATION (In thousands, unaudited)

 

 

 

Three Months Ended March 31,

 

 

2020

 

2019

Net Income

 

$

85,541

 

 

$

62,205

 

Add:

 

 

 

 

Interest and financing expenses, net

 

7,104

 

 

8,012

 

Income tax expense

 

24,537

 

 

18,603

 

Depreciation and amortization

 

20,859

 

 

21,654

 

EBITDA

 

$

138,041

 

 

$

110,474

 

 

FOR INVESTOR INFORMATION CONTACT: Brian D. Paliotti Investor Relations Phone: 804.788.5555 Fax: 804.788.5688 Email: investorrelations@newmarket.com

NewMarket (NYSE:NEU)
Historical Stock Chart
From Jun 2020 to Jul 2020 Click Here for more NewMarket Charts.
NewMarket (NYSE:NEU)
Historical Stock Chart
From Jul 2019 to Jul 2020 Click Here for more NewMarket Charts.