EX-99.1 2 d670123dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

NEWMARKET CORPORATION REPORTS RESULTS FOR THE FOURTH QUARTER AND FULL YEAR 2013

 

•   Record Fourth Quarter Net Income and Earnings per Share

 

•   Record Petroleum Additives Operating Profit for the Year 2013

 

•   327,600 Shares Repurchased in 2013

Richmond, VA, January 30, 2014 – NewMarket Corporation (NYSE:NEU) President and Chief Executive Officer, Thomas E. Gottwald, released the following earnings report of the Company’s operations for the fourth quarter and full year 2013.

We are very pleased to report that we recorded record fourth quarter net income of $54.0 million and earnings per share of $4.08. These results reflect record operating performance by our Petroleum additives segment. Net income for the fourth quarter of 2012 was $53.1 million and earnings per share were $3.94. We also had solid operating performance for the full year. Net income for 2013 increased to $264.7 million, or $19.90 per share, compared to net income of $239.6 million, or $17.85 per share for the year 2012.

In 2013, we sold the assets of our Foundry Park I real estate development segment and recorded the gain in discontinued operations. As a result of the sale, we reclassified the results of operations of the segment in current and prior year periods to discontinued operations. The effects on net income of these and certain other special items are presented in the Summary of Earnings table below.

 

     Summary of Earnings  
     (In millions, except per-share amounts)  
     Fourth Quarter Ended     Year Ended  
     December 31     December 31  
     2013     2012     2013     2012  

Net Income:

         

Net income

    $ 54.0     $ 53.1     $ 264.7     $ 239.6  

(Income) from operations of discontinued business

      —         (0.8 )      (0.5 )      (2.3 ) 

(Gain) on sale of discontinued business

      —         —         (21.9 )      —    

(Gain) Loss on interest rate swap agreement

      (1.0 )      (0.2 )      (4.1 )      3.3  

Tax (benefit) of special dividend

      —         (6.2 )      —         (6.2 ) 

Loss on early extinguishment of debt

      —         —         —         5.6  
  

 

 

    

 

 

    

 

 

    

 

 

  

Income excluding the above special items

    $ 53.0     $ 45.9     $ 238.2     $ 240.0  
  

 

 

    

 

 

    

 

 

    

 

 

  

Diluted Earnings Per Share:

         

Net income

    $ 4.08     $ 3.94     $ 19.90     $ 17.85  

(Income) from operations of discontinued business

      —         (0.06 )      (0.04 )      (0.17 ) 

(Gain) on sale of discontinued business

      —         —         (1.65 )      —    

(Gain) Loss on interest rate swap agreement

      (0.07 )      (0.01 )      (0.31 )      0.24  

Tax (benefit) of special dividend

      —         (0.46 )      —         (0.46 ) 

Loss on early extinguishment of debt

      —         —         —         0.41  
  

 

 

    

 

 

    

 

 

    

 

 

  

Income excluding the above special items

    $ 4.01     $ 3.41     $ 17.90     $ 17.87  
  

 

 

    

 

 

    

 

 

    

 

 

  

Excluding these special items from all periods, earnings for this year’s fourth quarter would have been $53.0 million, or $4.01 per share, an increase of 15 percent compared to net income of $45.9 million, or $3.41 per share for the same period last year. On this same basis, earnings for the year 2013 would have been $238.2 million, or $17.90 per share, compared to last year’s results of $240.0 million, or $17.87 per share.

Petroleum additives achieved record operating profit of $375.3 million in 2013 compared to last year’s operating profit of $372.0 million. Petroleum additives sales for the year were $2.3 billion, slightly higher than last year’s sales of $2.2 billion. Shipments were up almost 4 percent. Petroleum additives operating profit for the fourth quarter of 2013 was $80.0 million, an improvement of 12 percent over fourth quarter operating profit last year of $71.6 million. Sales for the fourth quarter of 2013 increased 8 percent to $554.0 million, compared to sales for the same period last year of $511.2 million, reflecting the benefit of 8 percent higher shipments. Our petroleum additives business continues to deliver excellent results. We believe the fundamentals of how we run the business, including a safety-first culture, customer-focused solutions, technology driven product offerings, world-class supply chain and regional organizational structure to better serve our customers’ needs, are the core to this success. Our ability to continue to provide our customers with innovative products and solutions to meet their business needs is evidenced by the 16% increase in our research and development expenses in 2013.

Our business continues to generate strong cash flows, and this was supplemented in 2013 by $140.0 million in proceeds from the sale of assets of our Foundry Park I real estate development segment. During 2013, we paid dividends of $50.4 million, funded capital expenditures of $58.5 million, reduced our long-term debt by $75.0 million and repurchased 327,600 shares of our stock at a cost of $96.0 million, including 169,800 shares repurchased in the fourth quarter. At the end of 2013, we had $154.0 million remaining on our stock repurchase authorization.

The excellent results reflect the outstanding performance and dedication of NewMarket employees around the world. Our strong financial position enhances our capability for future growth and improving shareholder value.

Sincerely,

Thomas E. Gottwald

Net income for 2013 included a gain in discontinued operations from the sale of the assets of our real estate segment. As a result of the sale, current and prior year periods reflect the results of operations of the segment as discontinued operations. All periods included the impact of valuing an interest rate swap at fair value. Prior periods included the tax benefit of a special dividend, while last year’s results included the loss on early extinguishment of debt. The Company is reporting net income including these items, as well as net income excluding them, along with the related per share amounts, in the Summary of Earnings table included in the earnings release. The Segment Results and Other Financial Information table included in this earnings release also 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. 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. EST on Friday, January 31, 2014, to review fourth quarter and full year 2013 financial results. 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 February 7, 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 13574413. 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 chemical blends to market-general additive components, the NewMarket family of companies provides the world with the technology to make fuels burn cleaner, engines run smoother and machines last longer.

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 2012 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the third quarter of 2013, 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 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 millions, except per-share amounts, unaudited)

 

     Fourth Quarter Ended     Twelve Months Ended  
     December 31,     December 31,  
     2013     2012     2013     2012  

Revenue:

         

Petroleum additives

    $ 554.0      $ 511.2      $ 2,271.3      $ 2,200.8   

All other (a)

      2.4        2.1        9.1        11.1   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total

    $ 556.4      $ 513.3      $ 2,280.4      $ 2,211.9   
  

 

 

    

 

 

    

 

 

    

 

 

  

Segment operating profit:

         

Petroleum additives

    $ 80.0      $ 71.6      $ 375.3      $ 372.0   

All other (a)

      0.6        1.1        (1.2 )      6.2   
  

 

 

    

 

 

    

 

 

    

 

 

  

Segment operating profit

      80.6        72.7        374.1        378.2   

Corporate unallocated expense

      (5.2 )      (4.2 )      (22.5 )      (20.2 ) 

Interest and financing expenses

      (4.2 )      (2.0 )      (17.8 )      (8.4 ) 

Other (expense) income, net

      —          (0.3 )      0.8        2.4   
  

 

 

    

 

 

    

 

 

    

 

 

  

Income from continuing operations before special items and income tax expense

      71.2        66.2        334.6        352.0   

Gain (loss) on an interest rate swap agreement (b)

      1.6        0.3        6.7        (5.3 ) 

Loss on early extinguishment of debt (c)

      —          —          —          (9.1 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income from continuing operations before income tax expense

    $ 72.8      $ 66.5      $ 341.3      $ 337.6   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income:

         

Income from continuing operations

    $ 54.0      $ 52.3      $ 242.3      $ 237.3   

Gain on sale of discontinued business (d)

      —          —          21.9        0.0   

Income from operations of discontinued business (d)

      —          0.8        0.5        2.3   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income

    $ 54.0      $ 53.1      $ 264.7      $ 239.6   
  

 

 

    

 

 

    

 

 

    

 

 

  

Basic and diluted earnings per share:

         

Income from continuing operations

    $ 4.08      $ 3.88      $ 18.21      $ 17.68   

Discontinued operations (d)

      —          0.06        1.69        0.17   
  

 

 

    

 

 

    

 

 

    

 

 

  

Basic and diluted earnings per share

    $ 4.08      $ 3.94      $ 19.90      $ 17.85   
  

 

 

    

 

 

    

 

 

    

 

 

  

Notes to Segment Results and Other Financial Information

Prior periods have been reclassified to reflect the discontinued operations of the real estate development segment resulting from the July 2, 2013 sale of the building constructed by Foundry Park I and leased to MeadWestvaco Corporation.

 

(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) In March 2012, we entered into a $650 million five-year unsecured revolving credit facility which replaced our previous $300 million unsecured revolving credit facility. During 2012, we used a portion of the $650 million revolving credit facility to fund the early redemption of all of our then outstanding 7.125% senior notes (senior notes), as well as to repay the outstanding principal amount on the Foundry Park I, LLC mortgage loan (mortgage loan). As a result, we recognized a loss on early extinguishment of debt of $9.9 million during 2012 from accelerated amortization of financing fees associated with the prior revolving credit facility, the senior notes, and the mortgage loan, as well as costs associated with redeeming the senior notes prior to maturity. Of the loss on early extinguishment of debt, $0.8 million is included as a component of discontinued operations.
(d) 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)

 

     Fourth Quarter Ended      Twelve Months Ended  
     December 31,      December 31,  
     2013      2012      2013      2012  

Net sales

    $ 556,371       $ 513,322       $ 2,280,355       $ 2,211,878   

Cost of goods sold

      404,733         374,461         1,627,059         1,581,393   
  

 

 

     

 

 

     

 

 

     

 

 

  

Gross profit

      151,638         138,861         653,296         630,485   

Selling, general, and administrative expenses

      43,130         39,506         164,878         154,207   

Research, development, and testing expenses

      33,258         31,276         136,573         117,845   
  

 

 

     

 

 

     

 

 

     

 

 

  

Operating profit

      75,250         68,079         351,845         358,433   

Interest and financing expenses

      4,182         1,990         17,796         8,435   

Loss on early extinguishment of debt (a)

      —           —           —           9,092   

Other income (expense), net (b)

      1,754         402         7,262         (3,338 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

Income from continuing operations before income tax expense

      72,822         66,491         341,311         337,568   

Income tax expense

      18,821         14,252         98,964         100,296   
  

 

 

     

 

 

     

 

 

     

 

 

  

Income from continuing operations

      54,001         52,239         242,347         237,272   

Discontinued operations:

            

Gain on sale of discontinued business (net of tax) (c)

      —           —           21,855         —     

Income from operations of discontinued business (net of tax) (c)

      —           824         540         2,321   
  

 

 

     

 

 

     

 

 

     

 

 

  

Net income

    $ 54,001       $ 53,063       $ 264,742       $ 239,593   
  

 

 

     

 

 

     

 

 

     

 

 

  

Basic and diluted earnings per share:

            

Income from continuing operations

    $ 4.08       $ 3.88       $ 18.21       $ 17.68   

Discontinued operations (c)

      —           0.06         1.69         0.17   
  

 

 

     

 

 

     

 

 

     

 

 

  

Basic and diluted earnings per share

    $ 4.08       $ 3.94       $ 19.90       $ 17.85   
  

 

 

     

 

 

     

 

 

     

 

 

  

Cash dividends declared per share

    $ 1.10       $ 25.75       $ 3.80       $ 28.00   
  

 

 

     

 

 

     

 

 

     

 

 

  

Notes to Consolidated Statements of Income

Prior periods have been reclassified to reflect the discontinued operations of the real estate development segment resulting from the July 2, 2013 sale of the building constructed by Foundry Park I and leased to MeadWestvaco Corporation.

 

(a) In March 2012, we entered into a $650 million five-year unsecured revolving credit facility which replaced our previous $300 million unsecured revolving credit facility. During 2012, we used a portion of the $650 million revolving credit facility to fund the early redemption of all of our then outstanding 7.125% senior notes, as well as to repay the outstanding principal amount on the Foundry Park I, LLC mortgage loan. As a result, we recognized a loss on early extinguishment of debt of $9.9 million during 2012 from accelerated amortization of financing fees associated with the prior revolving credit facility, the senior notes, and the mortgage loan, as well as costs associated with redeeming the senior notes prior to maturity. Of the loss on early extinguishment of debt, $0.8 million is included as a component of income from operations of discontinued business.
(b) On June 25, 2009, we entered into an interest rate swap. The gain on the interest rate swap was $1.6 million for the quarter ended December 31, 2013 and $6.7 million for the twelve months ended December 31, 2013. The gain on the interest rate swap was $0.3 million for the quarter ended December 31, 2012 and the loss on the interest rate swap was $5.3 million for the twelve months ended December 31, 2012. 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. The income from operations for the 2013 and 2012 periods represent the after tax earnings of the discontinued business.

NEWMARKET CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, unaudited)

 

     December 31     December 31  
     2013     2012  

ASSETS

     

Current assets:

     

Cash and cash equivalents

    $ 238,703      $ 89,129   

Trade and other accounts receivable, less allowance for doubtful accounts ($564 - 2013; $319 - 2012)

      309,847        297,055   

Inventories

      307,518        322,674   

Deferred income taxes

      8,267        8,452   

Prepaid expenses and other current assets

      32,984        18,185   
  

 

 

    

 

 

  

Total current assets

      897,319        735,495   
  

 

 

    

 

 

  

Property, plant, and equipment, at cost

      985,196        1,070,967   

Less accumulated depreciation and amortization

      700,160        712,596   
  

 

 

    

 

 

  

Net property, plant, and equipment

      285,036        358,371   
  

 

 

    

 

 

  

Prepaid pension cost

      55,087        12,710   

Deferred income taxes

      22,961        55,123   

Intangibles (net of amortization) and goodwill

      23,319        30,542   

Deferred charges and other assets

      43,552        72,007   
  

 

 

    

 

 

  

Total assets

    $ 1,327,274      $ 1,264,248   
  

 

 

    

 

 

  

LIABILITIES AND SHAREHOLDERS’ EQUITY

     

Current liabilities:

     

Accounts payable

    $ 134,132      $ 119,298   

Accrued expenses

      77,992        79,061   

Dividends payable

      12,996        —     

Income taxes payable

      11,419        10,024   

Other current liabilities

      11,075        8,288   
  

 

 

    

 

 

  

Total current liabilities

      247,614        216,671   
  

 

 

    

 

 

  

Long-term debt

      349,467        424,407   

Other noncurrent liabilities

      157,745        220,965   

Shareholders’ equity

     

Common stock and paid-in capital (without par value); issued and outstanding - 13,099,356 in 2013 and 13,417,877 in 2012

      —          721   

Accumulated other comprehensive loss

      (60,086 )      (110,689 ) 

Retained earnings

      632,534        512,173   
  

 

 

    

 

 

  
     572,448        402,205   
  

 

 

    

 

 

  

Total liabilities and shareholders’ equity

    $ 1,327,274      $ 1,264,248   
  

 

 

    

 

 

  

NEWMARKET CORPORATION AND SUBSIDIARIES

SELECTED CONSOLIDATED CASH FLOW DATA

(In thousands, unaudited)

 

     Twelve Months Ended  
     December 31  
     2013     2012  

Net income

    $ 264,742      $ 239,593   

Depreciation and amortization

      46,144        43,389   

Cash pension and postretirement contributions

      (32,483 )      (32,431 ) 

Noncash pension and postretirement expense

      23,083        18,855   

Proceeds from sale of discontinued business

      140,011        —     

Gain on sale of discontinued business

      (35,770 )      —     

Working capital changes

      (189 )      (14,243 ) 

Capital expenditures

      (58,476 )      (38,753 ) 

Net (repayments) borrowings under revolvingcredit agreements

      (75,000 )      53,000   

Repurchases of common stock

      (92,195 )      —     

Dividends paid

      (50,368 )      (375,681 ) 

Proceeds from legal settlement

      5,100        5,050   

Issuance of 4.10% senior notes

      —          349,405   

Repayment of 7.125% senior notes and mortgage loan

      —          (213,544 ) 

Loss on early extinguishment of debt

      —          9,932   

All other

      14,975        (5,813 ) 
  

 

 

    

 

 

  

Increase in cash and cash equivalents

    $ 149,574      $ 38,759   
  

 

 

    

 

 

  

NEWMARKET CORPORATION AND SUBSIDIARIES

NON-GAAP FINANCIAL INFORMATION

(In thousands, unaudited)

 

     Fourth Quarter Ended     Twelve Months Ended  
     December 31,     December 31,  
     2013     2012     2013     2012  

Income from continuing operations

    $ 54,001      $ 52,239      $ 242,347      $ 237,272   

Add:

         

Interest and financing expenses

      4,182        1,990        17,796        8,435   

Income tax expense

      18,821        14,252        98,964        100,296   

Depreciation and amortization

      9,863        9,417        40,061        37,527   
  

 

 

    

 

 

    

 

 

    

 

 

  

EBITDA from continuing operations

      86,867        77,898        399,168        383,530   

Plus (less): loss (gain) on interest rate swap agreement

      (1,574 )      (304 )      (6,690 )      5,346   

Plus: loss on early extinguishment of debt

      —          —          —          9,092   
  

 

 

    

 

 

    

 

 

    

 

 

  

EBITDA from continuing operations, as adjusted

    $ 85,293      $ 77,594      $ 392,478      $ 397,968