- NewMarket Posts Fourth Quarter EPS
of $4.50, Up 7.9%, and Full Year EPS of $19.45 Up 5.8%
- Petroleum Additives Fourth Quarter
Operating Profit of $75.3 Million, Down 11.9%, and Full Year
Operating Profit of $374.9 Million, Down 2.6%
- Continuing Investment in R&D and
Capital Spending to Fuel Long-Term Growth
- 501,261 Shares Repurchased in
2015
NewMarket Corporation (NYSE:NEU) Chairman and Chief Executive
Officer, Thomas E. Gottwald, released the following earnings report
of the Company’s operations for the fourth quarter and full year
2015.
Net income for the fourth quarter of 2015 was $53.9 million, or
$4.50 per share, compared to net income of $52.1 million, or $4.17
per share, for the fourth quarter of 2014. Net income for 2015 was
$238.6 million, or $19.45 per share, compared to net income of
$233.3 million, or $18.38 per share, for 2014. Net income for all
periods included the impact of valuing an interest rate swap at
fair value. Excluding this item, fourth quarter 2015 earnings were
$53.2 million, or $4.44 per share, compared to $53.7 million, or
$4.30 per share, last year. On the same basis, earnings for the
year 2015 were $240.6 million, or $19.61 per share, compared to
$237.6 million, or $18.72 per share, last year (see Summary of
Earnings table below).
Sales for the petroleum additives segment for the fourth quarter
of 2015 were $476.7 million, down 13.0% versus the same period last
year, due to lower shipments, foreign currency exchange and changes
in selling prices and mix. Petroleum additives operating profit for
the fourth quarter of 2015 was $75.3 million, an 11.9% decrease
over fourth quarter operating profit last year of $85.5 million.
The decrease was due to lower sales volume, changes in foreign
currency exchange and increases in research and development
investments, partially offset by lower raw material costs.
For the year, petroleum additives sales were $2,125 million
compared to sales in 2014 of $2,325 million, a decrease of 8.6%.
This decrease was primarily due to foreign currency exchange,
changes in selling prices and mix. Operating profit for petroleum
additives for 2015 declined 2.6% to $374.9 million, compared to
$385.1 million for 2014. Changes in foreign currency overshadowed
strong operating performance in the Americas and, to a lesser
extent, the Asia Pacific region. The decrease in operating profit
was also due to increases in research and development investments
and lower sales volume, partially offset by lower raw material
costs.
Petroleum additives shipments for the fourth quarter of 2015
were down 4.3% from the same period last year. This decline, which
represents the lowest level of quarterly shipments in three years,
was primarily due to decreases in lubricant and fuel additives
shipments in North America. For the year, shipments declined 1.2%
versus 2014, with increases in fuel additives shipments, primarily
in North America, offset by declines in lubricant additives in all
regions except Latin America. Shipments were below our expectations
for both the quarter and full year periods, as demand for lubricant
products trended lower in the face of a continued general weakness
in the global economy. In addition, we believe the rapid decline in
crude oil prices in the fourth quarter may have led some customers
to reduce stock levels in anticipation of lower base oil
prices.
The effective income tax rate for the fourth quarter of 2015 was
20.3%, down from the rate of 28.8% in the same period last year.
The effective rate for 2015 was 29.6%, down slightly from the rate
in 2014 of 31.2%. The rate in the fourth quarter of 2015 was lower
primarily due to decreases in tax rates for certain of our foreign
subsidiaries and an increase in tax benefits associated with our
research and development activities in the US and Europe. The
research and development tax credit in the US was passed during the
fourth quarter of 2015, retroactive to the beginning of the
year.
Our business continues to generate strong cash flows. During the
year, we paid dividends of $70.8 million, funded capital
expenditures of $126.5 million and repurchased 501,261 shares of
our common stock for a total of $197.9 million, including 44,778
shares in the fourth quarter. At the end of 2015, we had $482.8
million remaining on our stock repurchase authorization.
Construction continues on our new manufacturing facility in
Singapore. We expect commercial production to begin by mid-year
2016. In August, we announced the second phase of construction
which will include additional component production units. Phase two
will more than double our investment in the Singapore facility and
is scheduled to be completed in 2017.
Our stated goal is to provide a 10% return per year for our
shareholders over any five year period (defined by EPS growth plus
dividends). We may not necessarily achieve a 10% return each year,
and 2015 was such a year. Unfavorable exchange rates and softer
industry demand have worked against us at a time when we have a
great need to invest in developing products to meet new, upcoming
specifications and pursue specific growth opportunities. Our
increased investments in 2015, evidenced by our more than $125
million of capital expenditures and 14% higher spending in research
and development, reinforces that we are making decisions to promote
the greatest long term value for our shareholders and customers,
and we remain focused on our long term objectives.
As we look forward to 2016 and beyond, we believe the
fundamentals of the industry remain unchanged with the petroleum
additives market growing at 1% to 2% for the foreseeable future,
and we expect to exceed that growth rate. We are making investments
to position ourselves for the future. Our capital spending is
creating the capacity we need to grow and support our customers
worldwide; our research and development investments are positioning
us well to provide added value to our customers; and our stock
repurchases and dividend policy have been effective ways to use
cash flow and modest leverage to improve shareholder return.
Summary of Earnings (In millions, except per-share
amounts) Fourth Quarter Ended Twelve Months
Ended December 31, December 31, 2015
2014 2015 2014 Net
Income: Net income $ 53.9 $ 52.1 $ 238.6 $ 233.3 Loss (gain) on
interest rate swap agreement (0.7 ) 1.6 2.0 4.3
Income excluding the above special item $ 53.2 $ 53.7
$ 240.6 $ 237.6
Diluted Earnings Per Share: Net
income $ 4.50 $ 4.17 $ 19.45 $ 18.38 Loss (gain) on interest rate
swap agreement (0.06 ) 0.13 0.16 0.34 Income
excluding the above special item $ 4.44 $ 4.30 $
19.61 $ 18.72
Sincerely,
Thomas E. Gottwald
The results for this year and last year include the impact of
valuing an interest rate swap at fair value. The Company is
reporting net income and related per share amounts including this
item, as well as excluding it, in the Summary of Earnings table
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 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. EST on Tuesday, February 2, 2016 to review
fourth quarter and year-end 2015 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 9, 2016 at 11:59 p.m.
EST by dialing 1-877-660-6853 (domestic) and 1-201-612-7415
(international). The conference ID number is 13628106. 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 distribution systems; disruptions at
manufacturing facilities, including single-sourced facilities; the
ability to respond effectively to technological changes in our
industry; failure to protect our intellectual property rights; the
failure to attract and retain a highly-qualified workforce; hazards
common to chemical businesses; competition from other
manufacturers; sudden or sharp raw material price increases; gains
or losses of significant customers; the occurrence or threat of
extraordinary events, including natural disasters and terrorist
attacks; risks related to operating outside of the United States;
the impact of fluctuations in foreign exchange rates; an
information technology system failure; political, economic, and
regulatory factors concerning our products; future governmental
regulation; resolution of environmental liabilities or legal
proceedings; and the 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 2014
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.
NEWMARKET CORPORATION AND SUBSIDIARIES SEGMENT
RESULTS AND OTHER FINANCIAL INFORMATION
(In thousands, except per-share amounts,
unaudited)
Fourth Quarter Ended Twelve Months
Ended December 31, December 31, 2015
2014 2015 2014 Revenue:
Petroleum additives $ 476,683 $ 547,915 $ 2,124,995 $ 2,325,082 All
other (a) 2,939 963 15,835 10,323
Total $ 479,622 $ 548,878
$ 2,140,830 $ 2,335,405
Segment operating profit: Petroleum additives $
75,342 $ 85,506 $ 374,934 $ 385,084 All other (a) 850 (513 )
4,372 1,279
Segment operating profit
76,192 84,993 379,306 386,363 Corporate
unallocated expense (6,028 ) (4,949 ) (22,779 ) (23,397 ) Interest
and financing expenses (3,716 ) (3,889 ) (14,652 ) (16,567 ) Other
income (expense), net 20 (294 ) 317 (175 )
Income
before special items and income tax expense 66,468
75,861 342,192 346,224 Gain (loss) on an
interest rate swap agreement (b) 1,144 (2,735 ) (3,221 )
(7,125 )
Income before income tax expense $
67,612 $ 73,126 $
338,971 $ 339,099 Net
income $ 53,914 $ 52,055
$ 238,603 $ 233,255
Earnings per share - basic and diluted $
4.50 $ 4.17 $
19.45 $ 18.38
Notes to Segment Results and Other
Financial Information
(a) "All other" includes the results of our
tetraethyl lead (TEL) business, as well as certain contracted
manufacturing and services associated with 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.
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, 2015
2014 2015 2014 Net sales $
479,622 $ 548,878 $ 2,140,830 $ 2,335,405 Cost of goods sold
326,317 391,350 1,461,774 1,669,982
Gross profit 153,305 157,528 679,056 665,423 Selling, general, and
administrative expenses 43,320 41,683 164,082 163,520 Research,
development, and testing expenses 39,602 35,810
158,254 139,183 Operating profit 70,383 80,035
356,720 362,720 Interest and financing expenses, net 3,716 3,889
14,652 16,567 Other income (expense), net (a) 945 (3,020 )
(3,097 ) (7,054 )
Income before income tax expense
67,612 73,126 338,971 339,099 Income
tax expense 13,698 21,071 100,368 105,844
Net income $ 53,914 $
52,055 $ 238,603 $
233,255 Earnings per share - basic and diluted
$ 4.50 $ 4.17 $
19.45 $ 18.38 Cash dividends
declared per share $ 1.60 $
1.40 $ 5.80 $ 4.70
Notes to Consolidated Statements of
Income
(a) On June 25, 2009, we entered into an interest
rate swap. Other income (expense), net includes a gain on the
interest rate swap of $1.1 million for the fourth quarter ended
December 31, 2015 and a loss of $2.7 million for the fourth quarter
ended December 31, 2014. The loss on the interest rate swap was
$3.2 million for the twelve months ended December 31, 2015 and $7.1
million for the twelve months ended December 31, 2014. 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.
NEWMARKET
CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts,
unaudited)
December 31, December 31,
2015 2014 ASSETS Current assets: Cash and cash
equivalents $ 93,424 $ 103,003 Trade and other accounts receivable,
less allowance for doubtful accounts ($487 - 2015; $443 - 2014)
287,967 302,803 Inventories 351,631 348,420 Deferred income taxes
6,375 7,837 Prepaid expenses and other current assets 35,370
35,128
Total current assets 774,767
797,191 Property, plant, and equipment, at cost
1,128,989 1,016,868 Less accumulated depreciation and amortization
726,543 709,009
Net property, plant, and
equipment 402,446 307,859 Prepaid
pension cost 20,430 16,082 Deferred income taxes 38,354 48,499
Intangibles (net of amortization) and goodwill 10,907 16,859
Deferred charges and other assets 43,011 45,435
Total assets $ 1,289,915 $
1,231,925 LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities: Accounts payable $ 128,745 $ 137,688 Accrued
expenses 99,511 86,539 Dividends payable 17,594 15,721 Income taxes
payable 12,773 6,462 Other current liabilities 5,057 13,264
Total current liabilities 263,680
259,674 Long-term debt 494,586 363,526 Other
noncurrent liabilities 144,085 187,684
Total
liabilities 902,351 810,884
Shareholders' equity: Common stock and paid-in capital (without par
value); issued and outstanding shares - 11,948,446 in 2015 and
12,446,365 in 2014 — — Accumulated other comprehensive loss
(144,526 ) (139,160 ) Retained earnings 532,090 560,201
Total shareholders' equity 387,564
421,041 Total liabilities and shareholders'
equity $ 1,289,915 $
1,231,925 NEWMARKET CORPORATION AND
SUBSIDIARIES SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands, unaudited)
Twelve Months Ended December 31,
2015 2014 Net income $ 238,603 $ 233,255
Depreciation and amortization 42,265 41,538 Cash pension and
postretirement contributions (26,813 ) (26,505 ) Noncash pension
and postretirement expense 22,037 16,751 Working capital changes
(15,021 ) (54,982 ) Capital expenditures (126,499 ) (59,716 ) Net
borrowings under revolving credit facility 131,000 14,000
Repurchases of common stock (194,924 ) (248,509 ) Dividends paid
(70,763 ) (59,400 ) Proceeds from legal settlement — 5,150 All
other (9,464 ) 2,718 Decrease in cash and cash equivalents
$ (9,579 ) $ (135,700 )
NEWMARKET CORPORATION AND SUBSIDIARIES NON-GAAP
FINANCIAL INFORMATION
(In thousands, unaudited)
Fourth Quarter Ended Twelve Months
Ended December 31, December 31, 2015
2014 2015 2014 Net Income
$ 53,914 $ 52,055 $
238,603 $ 233,255 Add: Interest and financing
expenses, net 3,716 3,889 14,652 16,567 Income tax expense 13,698
21,071 100,368 105,844 Depreciation and amortization 10,615
9,999 41,178 40,177
EBITDA 81,943
87,014 394,801 395,843 (Less) plus: (Gain)
loss on interest rate swap agreement (1,144 ) 2,735 3,221
7,125
EBITDA, as adjusted $ 80,799
$ 89,749 $ 398,022
$ 402,968
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160201006181/en/
NewMarket CorporationBrian D. PaliottiInvestor
Relations804-788-5555Fax:
804-788-5688investorrelations@newmarket.com
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