- Net Income of $95.8 Million and Earnings Per Share of $8.77
for the Third Quarter
- Strong Market Recovery in Petroleum Additives
- Third Quarter Net Income Includes $16.5 Million for Sale of
Non-Operating Real Estate
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 2020.
Net income for the third quarter of 2020 was $95.8 million, or
$8.77 per share, compared to net income of $67.8 million, or $6.06
per share, for the third quarter of 2019. Third quarter net income
includes a gain of $16.5 million related to the sale of a
non-operating parcel of real estate. For the first nine months of
2020, net income was $203.7 million, or $18.52 per share, compared
to net income of $204.2 million or $18.26 per share, for the first
nine months of last year.
Petroleum additives operating profit for the third quarter of
2020 was $102.2 million, compared to $94.8 million for the same
period last year. The increase was due to lower raw material costs,
selling, general, and administrative costs, and research and
development costs, partially offset by changes in selling prices,
higher conversion costs, and lower shipments. Petroleum additives
operating profit for the first nine months of the year was $248.9
million compared to $285.6 million for the first nine months of
2019. The decrease was due to lower shipments, higher conversion
costs, and changes in selling prices, partially offset by lower raw
material costs, selling, general, and administrative costs, and
research and development costs.
Sales for the petroleum additives segment for the third quarter
of 2020 were $510.3 million, down from $550.6 million in the third
quarter of 2019. The decrease was due mainly to lower shipments and
selling prices. Shipments decreased 3.2% between periods, mainly
driven by decreases in fuel additives shipments. Petroleum
additives sales for the first nine months of the year were $1.5
billion compared to sales in the first nine months of last year of
$1.6 billion. The decrease was due mainly to lower shipments and
selling prices. Shipments decreased 7.5% between periods, with
decreases in both lubricant additives and fuel additives
shipments.
Our third quarter 2020 operating results reflected continued
improvement in some of the key drivers that affect the performance
of our business, consistent with what we began to see near the end
of the second quarter. With gasoline consumption and miles driven
continuing to show improvement and industrial production beginning
to rebound, specifically related to automobile plants reopening and
producing vehicles, demand for both our lubricant and fuel
additives has increased steadily throughout the quarter. While our
second quarter results were significantly impacted by the economic
disruption due to the COVID-19 pandemic and the related government
restrictions, these improvements in the third quarter of 2020
helped to drive an increase in shipments compared to the second
quarter of over 25%. The pace and stability of improvement will
depend heavily on economic recovery and the rate at which
government restrictions are lifted and remain lifted.
During the first nine months of 2020, we funded capital
expenditures of $60.1 million, paid dividends of $62.7 million, and
repurchased 270,963 shares of our common stock for a total of
$101.4 million.
Throughout the economic downturn associated with the COVID-19
pandemic, the chemical industry and our products have been
recognized as essential for the transportation of goods and
services. Our operating facilities have continued to function
safely during 2020. We have procedures in place at each of our
facilities to help ensure the well-being of our employees, as we
see our responsibility to protect their health and safety as a top
priority. Because of the commitment and dedication of our employees
and our ability to remain operational throughout 2020, we have been
able to work closely with our customers to ensure their supply
demands are met throughout this unusual period.
As we navigate the current economic downturn, 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.
Those decisions include investing in capital improvements and
research and development in support of our customers, using cash
prudently to provide shareholder value, including dividends and
repurchases of common stock, and ensuring we are well-positioned to
stay the course with a strong balance sheet, conservative fiscal
policies, and a dedicated team. 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. EDT on Thursday, October 29, 2020, to
review third 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 November 5, 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 38031. 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/2001/38031. 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)
Third Quarter Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
Revenue:
Petroleum additives
$
510,280
$
550,626
$
1,476,355
$
1,644,129
All other
2,589
5,191
6,795
11,721
Total
$
512,869
$
555,817
$
1,483,150
$
1,655,850
Segment operating profit:
Petroleum additives
$
102,186
$
94,765
$
248,918
$
285,620
All other
2,015
(77
)
1,951
92
Segment operating profit
104,201
94,688
250,869
285,712
Corporate unallocated expense
(5,565
)
(6,473
)
(15,263
)
(15,842
)
Interest and financing expenses
(6,466
)
(6,987
)
(20,575
)
(22,740
)
Other income (expense), net
25,448
6,230
39,933
17,827
Income before income tax
expense
$
117,618
$
87,458
$
254,964
$
264,957
Net income
$
95,794
$
67,805
$
203,684
$
204,184
Earnings per share - basic and
diluted
$
8.77
$
6.06
$
18.52
$
18.26
NEWMARKET CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
INCOME
(In thousands, except per-share amounts,
unaudited)
Third Quarter Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
Net sales
$
512,869
$
555,817
$
1,483,150
$
1,655,850
Cost of goods sold
346,262
393,090
1,038,898
1,169,421
Gross profit
166,607
162,727
444,252
486,429
Selling, general, and administrative
expenses
34,690
38,122
105,837
109,916
Research, development, and testing
expenses
33,113
36,387
102,168
106,748
Operating profit
98,804
88,218
236,247
269,765
Interest and financing expenses, net
6,466
6,987
20,575
22,740
Other income (expense), net
25,280
6,227
39,292
17,932
Income before income tax
expense
117,618
87,458
254,964
264,957
Income tax expense
21,824
19,653
51,280
60,773
Net income
$
95,794
$
67,805
$
203,684
$
204,184
Earnings per share - basic and
diluted
$
8.77
$
6.06
$
18.52
$
18.26
Cash dividends declared per
share
$
1.90
$
1.90
$
5.70
$
5.40
NEWMARKET CORPORATION AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts,
unaudited)
September 30,
2020
December 31,
2019
ASSETS
Current assets:
Cash and cash equivalents
$
117,701
$
144,397
Trade and other accounts receivable, less
allowance for credit losses
328,677
335,826
Inventories
370,104
365,938
Prepaid expenses and other current
assets
37,880
33,237
Total current assets
854,362
879,398
Property, plant, and equipment, net
648,685
635,439
Intangibles (net of amortization) and
goodwill
130,423
131,880
Prepaid pension cost
145,450
133,848
Operating lease right-of-use assets
58,420
60,505
Deferred charges and other assets
42,782
44,062
Total assets
$
1,880,122
$
1,885,132
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
187,572
$
178,773
Accrued expenses
74,797
77,350
Dividends payable
18,444
19,217
Income taxes payable
5,362
10,632
Operating lease liabilities
13,270
14,036
Other current liabilities
9,454
8,887
Total current liabilities
308,899
308,895
Long-term debt
608,702
642,941
Operating lease liabilities -
noncurrent
45,004
46,792
Other noncurrent liabilities
193,991
203,406
Total liabilities
1,156,596
1,202,034
Shareholders' equity:
Common stock and paid-in capital (with no
par value; issued and outstanding shares - 10,921,389 at September
30, 2020 and 11,188,549 at December 31, 2019)
287
1,965
Accumulated other comprehensive loss
(162,898
)
(162,748
)
Retained earnings
886,137
843,881
Total shareholders' equity
723,526
683,098
Total liabilities and shareholders'
equity
$
1,880,122
$
1,885,132
NEWMARKET CORPORATION AND
SUBSIDIARIES
SELECTED CONSOLIDATED CASH FLOW
DATA
(In thousands, unaudited)
Nine Months Ended
September 30,
2020
2019
Net income
$
203,684
$
204,184
Depreciation and amortization
63,045
65,500
Cash pension and postretirement
contributions
(7,717
)
(7,308
)
Working capital changes
(33,493
)
(35,997
)
Deferred income tax expense
5,405
3,982
Capital expenditures
(60,133
)
(37,132
)
Net repayments under revolving credit
facility
(34,678
)
(126,262
)
Repurchases of common stock
(101,434
)
0
Dividends paid
(62,667
)
(60,418
)
Proceeds from sale of land
20,000
0
Gain on sale of land
(16,483
)
0
All other
(2,225
)
382
(Decrease) increase in cash and cash
equivalents
$
(26,696
)
$
6,931
NEWMARKET CORPORATION AND
SUBSIDIARIES
NON-GAAP FINANCIAL INFORMATION
(In thousands, unaudited)
Third Quarter Ended
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
Net Income
$
95,794
$
67,805
$
203,684
$
204,184
Add:
Interest and financing expenses, net
6,466
6,987
20,575
22,740
Income tax expense
21,824
19,653
51,280
60,773
Depreciation and amortization
20,414
21,500
61,982
64,646
EBITDA
$
144,498
$
115,945
$
337,521
$
352,343
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201028005767/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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