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| 8-K - FORM 8-K - NEWMARKET CORP | d251168d8k.htm |
Exhibit 99.1
NEWMARKET CORPORATION REPORTS IMPROVED THIRD QUARTER AND FIRST NINE MONTHS 2011 RESULTS
| • | Petroleum Additives Operating Profit Before Gain on Legal Settlement Improves 5 Percent for the Third Quarter and 10 Percent for Nine Months 2011 |
| • | Repurchased 442,300 Shares of Common Stock in the Third Quarter |
Richmond, VA, November 1, 2011 – NewMarket Corporation (NYSE – NEU) President 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 2011.
Net income for the third quarter of 2011 improved to $71.4 million, or $5.22 per share, compared to net income of $45.7 million, or $3.18 per share, for the third quarter last year. For the first nine months of this year, net income increased to $173.2 million, or $12.54 per share, compared to net income of $127.7 million, or $8.64 per share for the same period last year.
The earnings for the third quarter and nine month periods of this year include a net gain on a legal settlement. The earnings for the third quarter and nine month periods for both this year and last year include a loss on an interest rate swap. The following Summary of Earnings reflects net income including these two items as well as earnings excluding them and the related per share amounts.
| Summary of Earnings | ||||||||||||||||
| (In millions, except per-share amounts) | ||||||||||||||||
| Third Quarter Ended September 30 |
Nine Months Ended September 30 |
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| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Net Income: |
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| Net income |
$ | 71.4 | $ | 45.7 | $ | 173.2 | $ | 127.7 | ||||||||
| (Gain) on legal settlement, net |
(23.9 | ) | — | (23.9 | ) | — | ||||||||||
| Loss on interest rate swap agreement |
7.9 | 3.3 | 9.9 | 10.7 | ||||||||||||
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| Income excluding (gain) on legal settlement and loss on interest rate swap |
$ | 55.4 | $ | 49.0 | $ | 159.2 | $ | 138.4 | ||||||||
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| Diluted Earnings Per Share: |
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| Net income |
$ | 5.22 | $ | 3.18 | $ | 12.54 | $ | 8.64 | ||||||||
| (Gain) on legal settlement, net |
(1.74 | ) | — | (1.73 | ) | — | ||||||||||
| Loss on interest rate swap agreement |
0.58 | 0.23 | 0.71 | 0.73 | ||||||||||||
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| Income excluding (gain) on legal settlement and loss on interest rate swap |
$ | 4.06 | $ | 3.41 | $ | 11.52 | $ | 9.37 | ||||||||
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Petroleum additives segment operating profit of $122.8 million for the third quarter of 2011, as well as this year’s nine month operating profit of $288.9 million, includes the $38.7 million before tax gain on the legal settlement. Excluding the gain on the legal settlement for the third quarter of this year, operating profit improved to $84.1 million, an increase of 5 percent over operating profit for third quarter 2010 of $80 million. Sales of petroleum additives for the third quarter of this year improved to $552 million, an increase of 19 percent over sales in the third quarter of last year of $465.1 million while shipments in the third quarter of this year were about even with last year’s third quarter.
Petroleum additives operating profit, excluding the gain on the legal settlement, for the first nine months of this year increased to $250.2 million, an improvement of 10 percent over operating profit for the same period last year of $227 million. Sales of petroleum additives for the first nine months of this year reached $1,627.4 million, an improvement of 23 percent over sales for the same period last year of $1,319.4 million. The increase in sales for the first nine months of this year included the benefit of a 9 percent increase on shipments.
The increase in this year’s third quarter petroleum additives earnings reflects improved fuel additives results over the same period last year while the improvement in petroleum additives results for the first nine months of this year continue to reflect strong performance in the lubricant additives product line as well as improved fuel additive results. Both the third quarter and nine months results include improved results in every major region of our operations.
During the third quarter of this year, we repurchased 442,300 shares of our common stock bringing the total repurchases in the first nine months of this year to 659,373 shares at an average cost of $143.71 per share.
Our petroleum additives business continues its strong performance by delivering new and differentiated products and services to our customers that strengthens their position in the marketplace as we continue increasing our investment in research and development. Our financial position remains strong enhancing our capacity for future growth and our ability to improve shareholder value.
Please read our third quarter Form 10-Q for more details on the operations of the company.
Sincerely,
Thomas E. Gottwald
Both the third quarter and nine months 2011 included a net gain on a legal settlement. Also, the current year and prior year third quarter and nine months periods include a loss on an interest rate swap related to financing on Foundry Park resulting from the Company valuing the swap agreement at fair value at the end of each reporting period. 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 Company believes that even though income excluding these items is not required by or presented in accordance with generally accepted accounting principles (GAAP) accepted in the United States, this additional measure enhances understanding of the Company’s performance. The Company believes presenting our earnings excluding these items enhances period to period comparability. The Company believes that income, excluding those 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 11:00 a.m. EDT on Wednesday, November 2, 2011, to review third quarter 2011 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 November 9, 2011 at 11:59 p.m. EDT by dialing 1-877-660-6853 (domestic) and 1-201-612-7415 (international). The account number is 286. The conference ID number is 381053. 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 recent or future acquisitions or successfully integrate recent or 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 2010 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 millions except per share amounts, unaudited)
| Third Quarter Ended September 30 |
Nine Months Ended September 30 |
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| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Revenue: |
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| Petroleum additives |
$ | 552.0 | $ | 465.1 | $ | 1,627.4 | $ | 1,319.4 | ||||||||
| Real estate development |
2.8 | 2.9 | 8.6 | 8.6 | ||||||||||||
| All other (a) |
2.6 | 3.8 | 8.0 | 8.7 | ||||||||||||
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| Total |
$ | 557.4 | $ | 471.8 | $ | 1,644.0 | $ | 1,336.7 | ||||||||
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| Segment operating profit: |
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| Petroleum additives |
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| Petroleum additives before gain on legal settlement, net |
$ | 84.1 | $ | 80.0 | $ | 250.2 | $ | 227.0 | ||||||||
| Gain on legal settlement, net (b) |
38.7 | 0.0 | 38.7 | 0.0 | ||||||||||||
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| Total petroleum additives |
122.8 | 80.0 | 288.9 | 227.0 | ||||||||||||
| Real estate development |
1.8 | 1.8 | 5.4 | 5.3 | ||||||||||||
| All other (a) |
0.1 | 1.2 | 1.5 | 3.2 | ||||||||||||
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| Segment operating profit |
124.7 | 83.0 | 295.8 | 235.5 | ||||||||||||
| Corporate unallocated expense |
(3.8 | ) | (5.6 | ) | (11.5 | ) | (14.5 | ) | ||||||||
| Interest and financing expenses |
(4.8 | ) | (4.5 | ) | (14.1 | ) | (12.7 | ) | ||||||||
| Loss on an interest rate swap agreement (c) |
(13.0 | ) | (5.5 | ) | (16.2 | ) | (17.6 | ) | ||||||||
| Other income (expense), net |
0.2 | 0.2 | (0.9 | ) | (0.2 | ) | ||||||||||
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| Income before income tax expense |
$ | 103.3 | $ | 67.6 | $ | 253.1 | $ | 190.5 | ||||||||
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| Net income |
$ | 71.4 | $ | 45.7 | $ | 173.2 | $ | 127.7 | ||||||||
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| Basic earnings per share |
$ | 5.22 | $ | 3.19 | $ | 12.54 | $ | 8.66 | ||||||||
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| Diluted earnings per share |
$ | 5.22 | $ | 3.18 | $ | 12.54 | $ | 8.64 | ||||||||
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Notes to Segment Results and Other Financial Information
| (a) | “All other” includes the results of our TEL business, as well as certain contract manufacturing of Ethyl Corporation. |
| (b) | On September 13, 2011 we signed a settlement agreement with Innospec Inc. and its subsidiaries Alcor Chemie Vertriebs GmbH and Innospec Ltd. (collectively, Innospec) which provided for mutual releases of the parties and dismissal of the actions with prejudice. Under the settlement agreement, Innospec will pay NewMarket an aggregate amount of approximately $45 million in a combination of cash, a promissory note, and stock, of which $25 million was paid in cash on September 20, 2011 and $5 million was paid in the form of 195,313 shares of unregistered Innospec Inc. common stock. Fifteen million dollars is payable in three equal annual installments of $5 million under the promissory note, which bears simple interest at 1% per year. The first installment is due on September 10, 2012. The gain is net of expenses related to the settlement of the lawsuit. |
| (c) | The loss on an interest rate swap 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 interest rate swap and, accordingly, any change in fair value is immediately recognized in earnings. |
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 |
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| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Revenue: |
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| Net sales - product |
$ | 554,539 | $ | 468,919 | $ | 1,635,429 | $ | 1,328,170 | ||||||||
| Rental revenue |
2,857 | 2,858 | 8,573 | 8,574 | ||||||||||||
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| 557,396 | 471,777 | 1,644,002 | 1,336,744 | |||||||||||||
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| Costs: |
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| Cost of goods sold - product |
411,133 | 334,766 | 1,206,843 | 944,968 | ||||||||||||
| Cost of rental |
1,067 | 1,089 | 3,203 | 3,245 | ||||||||||||
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| 412,200 | 335,855 | 1,210,046 | 948,213 | |||||||||||||
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| Gross profit |
145,196 | 135,922 | 433,956 | 388,531 | ||||||||||||
| Selling, general, and administrative expenses |
36,075 | 35,711 | 111,818 | 102,478 | ||||||||||||
| Research, development, and testing expenses |
26,888 | 22,719 | 76,728 | 65,866 | ||||||||||||
| Gain on legal settlement, net (a) |
38,656 | — | 38,656 | — | ||||||||||||
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| Operating profit |
120,889 | 77,492 | 284,066 | 220,187 | ||||||||||||
| Interest and financing expenses |
4,797 | 4,465 | 14,135 | 12,728 | ||||||||||||
| Other expenses, net (b) |
12,825 | 5,453 | 16,879 | 16,974 | ||||||||||||
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| Income before income tax expense |
103,267 | 67,574 | 253,052 | 190,485 | ||||||||||||
| Income tax expense |
31,906 | 21,855 | 79,843 | 62,772 | ||||||||||||
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| Net income |
$ | 71,361 | $ | 45,719 | $ | 173,209 | $ | 127,713 | ||||||||
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| Basic earnings per share |
$ | 5.22 | $ | 3.19 | $ | 12.54 | $ | 8.66 | ||||||||
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| Diluted earnings per share |
$ | 5.22 | $ | 3.18 | $ | 12.54 | $ | 8.64 | ||||||||
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| Shares used to compute basic earnings per share |
13,680 | 14,353 | 13,807 | 14,756 | ||||||||||||
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| Shares used to compute diluted earnings per share |
13,680 | 14,383 | 13,814 | 14,788 | ||||||||||||
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| Cash dividends declared per share |
$ | 0.600 | $ | 0.375 | $ | 1.64 | $ | 1.125 | ||||||||
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Notes to Consolidated Statements of Income
| (a) | On September 13, 2011, we signed a settlement agreement with Innospec Inc. and its subsidiaries Alcor Chemie Vertriebs GmbH and Innospec Ltd. (collectively, Innospec) which provided for mutual releases of the parties and dismissal of the actions with prejudice. Under the settlement agreement, Innospec will pay NewMarket an aggregate amount of approximately $45 million in a combination of cash, a promissory note, and stock, of which $25 million was paid in cash on September 20, 2011 and $5 million was paid in the form of 195,313 shares of unregistered Innospec Inc. common stock. Fifteen million dollars is payable in three equal annual installments of $5 million under the promissory note, which bears simple interest at 1% per year. The first installment is due on September 10, 2012. The gain is net of expenses related to the settlement of the lawsuit. |
| (b) | On June 25, 2009 we entered into an interest rate swap. The loss on the interest rate swap was $13.0 million for the third quarter ended September 30, 2011 and $16.2 million for the nine months ended September 30, 2011. The loss on the interest rate swap was $5.5 million for the third quarter ended September 30, 2010 and $17.6 million for the nine months ended September 30, 2010. We are not using hedge accounting to record the interest rate swap, and accordingly, any change in the fair value is immediately recognized in earnings. |
NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
| September 30 | December 31 | |||||||
| 2011 | 2010 | |||||||
| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
$ | 54,462 | $ | 49,192 | ||||
| Short-term investments |
0 | 300 | ||||||
| Trade and other accounts receivable, less allowance for doubtful accounts ($680 - 2011; $733 - 2010) |
307,702 | 257,748 | ||||||
| Inventories |
314,191 | 273,215 | ||||||
| Deferred income taxes |
5,237 | 6,876 | ||||||
| Prepaid expenses and other current assets |
35,578 | 15,444 | ||||||
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| Total current assets |
717,170 | 602,775 | ||||||
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| Property, plant and equipment, at cost |
1,029,559 | 988,180 | ||||||
| Less accumulated depreciation and amortization |
677,256 | 654,204 | ||||||
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| Net property, plant and equipment |
352,303 | 333,976 | ||||||
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| Prepaid pension cost |
14,410 | 8,597 | ||||||
| Deferred income taxes |
17,891 | 21,974 | ||||||
| Other assets and deferred charges |
70,769 | 48,893 | ||||||
| Intangibles (net of amortization) and goodwill |
40,291 | 46,526 | ||||||
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| Total assets |
$ | 1,212,834 | $ | 1,062,741 | ||||
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| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| Current liabilities: |
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| Accounts payable |
$ | 97,065 | $ | 109,250 | ||||
| Accrued expenses |
89,143 | 71,558 | ||||||
| Dividends payable |
6,903 | 5,304 | ||||||
| Book overdraft |
6,182 | 1,063 | ||||||
| Long-term debt, current portion |
9,690 | 4,369 | ||||||
| Income taxes payable |
29,429 | 14,843 | ||||||
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| Total current liabilities |
238,412 | 206,387 | ||||||
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| Long-term debt |
266,358 | 217,544 | ||||||
| Other noncurrent liabilities |
151,497 | 147,170 | ||||||
| Shareholders’ equity |
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| Common stock and paid in capital (without par value) Issued and Outstanding - 13,404,831 in 2011 and 14,034,884 in 2010 |
— | — | ||||||
| Accumulated other comprehensive loss |
(68,050 | ) | (73,820 | ) | ||||
| Retained earnings |
624,617 | 565,460 | ||||||
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| 556,567 | 491,640 | |||||||
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| Total liabilities and shareholders’ equity |
$ | 1,212,834 | $ | 1,062,741 | ||||
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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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| 2011 | 2010 | |||||||
| Net income |
$ | 173,209 | $ | 127,713 | ||||
| Depreciation and amortization |
31,149 | 27,831 | ||||||
| Cash pension and postretirement contributions |
(23,479 | ) | (15,556 | ) | ||||
| Noncash pension and postretirement expense |
11,907 | 12,358 | ||||||
| Gain on legal settlement, net |
(38,656 | ) | — | |||||
| Net proceeds from legal settlement |
25,000 | — | ||||||
| Working capital changes |
(88,411 | ) | (61,212 | ) | ||||
| Capital expenditures |
(42,771 | ) | (25,143 | ) | ||||
| Acquisition of business |
— | (41,300 | ) | |||||
| Net borrowings under revolving credit agreement |
51,000 | 20,000 | ||||||
| Repayment of Foundry Park I construction loan |
— | (99,102 | ) | |||||
| Borrowing under Foundry Park I mortgage loan |
— | 68,400 | ||||||
| Repurchases of common stock |
(85,892 | ) | (88,969 | ) | ||||
| Dividends paid |
(22,534 | ) | (16,396 | ) | ||||
| All other |
14,748 | (10,172 | ) | |||||
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| Increase (decrease) in cash and cash equivalents |
$ | 5,270 | $ | (101,548 | ) | |||
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