- Petroleum Additives Fourth Quarter
Operating Profit of $79.5 Million, Up 7.2%, and Full Year Operating
Profit of $311.0 Million, Down 9.9%
- Fourth Quarter Net Income of $62.8
Million and Earnings Per Share of $5.58
- Full Year Net Income of $234.7
Million and Earnings Per Share of $20.34
- 603,449 Shares Repurchased in
2018
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
2018.
Profit before income taxes for the fourth quarter of 2018 was
$71.1 million compared to $64.9 million for the fourth quarter of
2017. Net income for the fourth quarter of 2018 was $62.8 million,
or $5.58 per share, compared to net income of $4.1 million, or $.35
per share, for the fourth quarter of 2017. Profit before income
taxes for 2018 was $290.3 million compared to $315.4 million for
2017. Net income for 2018 was $234.7 million, or $20.34 per share,
compared to net income of $190.5 million, or $16.08 per share, for
2017. Net income for all periods included effects of the tax reform
act enacted on December 22, 2017, commonly known as the “Tax Cuts
and Jobs Act” (the “Tax Reform Act”).
Sales for the petroleum additives segment for the fourth quarter
of 2018 were $537.2 million, down 3.5% versus the same period last
year. Petroleum additives operating profit for the fourth quarter
of 2018 was $79.5 million, or 7.2% higher than fourth quarter
operating profit last year of $74.2 million. The increase was
mainly due to changes in selling prices and foreign currency rates,
partially offset by higher raw material costs and lower shipments.
Shipments were down 10.2% from the same period last year with
decreases in both lubricant additives and fuel additives shipments.
All regions except Asia Pacific contributed to the decrease in
lubricant additives shipments, and Latin America was the only
region reporting an increase in fuel additives shipments.
For the year, petroleum additives sales were $2.3 billion
compared to sales in 2017 of $2.2 billion, or an increase of 4.3%.
Petroleum additives operating profit for 2018 was $311.0 million,
or 9.9% lower than last year’s $345.0 million. The decrease was due
mainly to higher raw material and conversion costs, partially
offset by changes in selling prices. Shipments decreased 2.8%
versus 2017 with decreases in both lubricant additives and fuel
additives shipments. The regional drivers for those decreases were
consistent with the drivers in the fourth quarter discussed
above.
Petroleum additives operating margin was 13.6% for 2018 compared
to 15.8% for 2017. Throughout 2018 we continued to see downward
pressure on our operating margin due mainly to the steady increase
in raw material costs over the past two years. While our efforts
have been focused on recovering these cost increases, we have been
experiencing the lag between when price increases go into effect
and when margins start to improve. Margin recovery will be our
number one priority throughout 2019 so that they will again be
consistent with our historical ranges.
Income tax expense was $8.3 million for the fourth quarter of
2018 compared to $60.9 million for the fourth quarter of 2017, and
$55.6 million for 2018 compared to $124.9 million for 2017. The
main driver for the difference between the comparative periods was
additional income tax expense in the fourth quarter of 2017 of
$31.4 million related to the enactment of the Tax Reform Act,
primarily due to a one-time deemed repatriation tax on untaxed
accumulated foreign earnings. In addition, the Tax Reform Act
reduced the U.S. corporate tax rate from 35% to 21% beginning in
2018, reducing the income tax expense in both 2018 periods.
During 2018, we funded capital expenditures of $74.6 million,
and returned $312.4 million to our shareholders through dividends
($80.4 million) and share repurchases (603,449 shares of our common
stock for a total of $232.0 million), through a combination of
borrowing under our revolving credit facility and cash from
operations.
As we look forward to 2019 and beyond, we expect continued
strength in our petroleum additives business and the industry as a
whole. We will continue to make decisions we believe will promote
the greatest long-term value for our shareholders, customers and
employees, and will remain focused on our long-term objectives.
This will be evidenced through our ongoing commitment to provide
customers with innovative solutions to meet their business needs,
investments in our supply capabilities, and technology-driven
initiatives. We believe the fundamentals of how we run our business
- a long-term view, safety-first culture, customer-focused
solutions, technology-driven product offerings, and world-class
supply chain capability - will continue to be beneficial for all of
our stakeholders.
Sincerely,
Thomas E. Gottwald
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 and amortization. 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. EST on Thursday, February 7, 2019, to
review fourth quarter and year-end 2018 financial results. You can
access the conference call live by dialing 1-866-682-6100
(domestic) or 1-862-298-0702 (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 February 14, 2019 at 11:59 p.m. EST by dialing
1-877-481-4010 (domestic) or 1-919-882-2331 (international). The
replay ID number is 42300. The call will also be broadcast via the
Internet and can be accessed through the Company’s website at
www.NewMarket.com or www.investornetwork.com/event/presentation/42300.
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
manufacturing facilities, including single-sourced facilities; the
ability to respond effectively to technological changes in our
industry; failure to protect our intellectual property rights;
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; the
gain or loss 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 or security breach;
political, economic, and regulatory factors concerning our
products; current and future governmental regulations; resolution
of environmental liabilities or legal proceedings; 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; 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 2017 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)
Fourth Quarter EndedDecember 31, Twelve
Months EndedDecember 31, 2018 2017
2018 2017 Revenue: Petroleum additives
$ 537,171 $ 556,938 $ 2,280,803 $ 2,187,283 All other 1,141
3,044 8,872 11,121
Total $
538,312 $ 559,982 $
2,289,675 $ 2,198,404 Segment
operating profit: Petroleum additives $ 79,525 $ 74,176 $
311,019 $ 345,017 All other (1,290 ) 1,192 (3,256 ) 4,135
Segment operating profit 78,235 75,368
307,763 349,152 Corporate unallocated expense (3,618
) (9,080 ) (19,651 ) (26,641 ) Interest and financing expenses
(8,187 ) (5,360 ) (26,723 ) (21,856 ) Other income (expense), net
4,665 4,014 28,896 14,787
Income
before income tax expense $ 71,095
$ 64,942 $ 290,285
$ 315,442 Net income $
62,803 $ 4,072 $
234,734 $ 190,509 Earnings
per share - basic and diluted $ 5.58
$ 0.35 $ 20.34 $
16.08
Notes to Segment Results and Other Financial
Information
Certain prior year amounts have been reclassified to reflect the
adoption of Accounting Standard Update No. 2017-07,
"Compensation-Retirement Benefits (Topic 715): Improving the
Presentation of Net Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost". There was no impact to income before
income tax expense.
NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per-share amounts,
unaudited)
Fourth Quarter EndedDecember 31, Twelve
Months EndedDecember 31, 2018 2017
2018 2017 Net sales $ 538,312 $ 559,982 $
2,289,675 $ 2,198,404 Cost of goods sold 396,474 414,785
1,704,312 1,562,017 Gross profit 141,838
145,197 585,363 636,387 Selling, general, and administrative
expenses 31,747 44,165 152,400 167,651 Research, development, and
testing expenses 34,271 34,308 140,289 146,002
Operating profit 75,820 66,724 292,674 322,734 Interest and
financing expenses, net 8,187 5,360 26,723 21,856 Other income
(expense), net 3,462 3,578 24,334 14,564
Income before income tax expense 71,095
64,942 290,285 315,442 Income tax expense
8,292 60,870 55,551 124,933
Net
income $ 62,803 $ 4,072
$ 234,734 $ 190,509
Earnings per share - basic and diluted $
5.58 $ 0.35 $
20.34 $ 16.08 Cash dividends
declared per share $ 1.75 $
1.75 $ 7.00 $ 7.00
Notes to Consolidated Statements of Income
Certain prior year amounts have been reclassified to reflect the
adoption of Accounting Standard Update No. 2017-07,
"Compensation-Retirement Benefits (Topic 715): Improving the
Presentation of Net Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost". There was no impact to net
income.
NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts,
unaudited)
December 31, December 31, 2018
2017 ASSETS Current assets: Cash and cash equivalents
$ 73,040 $ 84,166 Trade and other accounts receivable, less
allowance for doubtful accounts ($178 - 2018; $215 - 2017) 314,860
335,317 Inventories 396,341 383,097 Prepaid expenses and other
current assets 29,179 31,074
Total current
assets 813,420 833,654 Net
property, plant, and equipment 644,138 652,281 Intangibles (net of
amortization) and goodwill 136,039 144,337 Prepaid pension cost
88,705 66,495 Deferred income taxes 5,094 4,349 Deferred charges
and other assets 9,878 11,038
Total assets
$ 1,697,274 $ 1,712,154
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Accounts payable $ 151,631 $ 159,408 Accrued expenses 91,202
107,999 Dividends payable 17,923 19,055 Income taxes payable 6,431
16,340 Other current liabilities 4,114 13,991
Total current liabilities 271,301
316,793 Long-term debt 770,999 602,900 Other
noncurrent liabilities 165,067 190,812
Total
liabilities 1,207,367 1,110,505
Shareholders' equity: Common stock and paid-in capital (without par
value; issued and outstanding shares - 11,184,482 at December 31,
2018 and 11,779,978 at December 31, 2017) 0 0 Accumulated other
comprehensive loss (181,316 ) (145,994 ) Retained earnings 671,223
747,643
Total shareholders' equity
489,907 601,649 Total liabilities
and shareholders' equity $ 1,697,274
$ 1,712,154 NEWMARKET CORPORATION
AND SUBSIDIARIES SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands, unaudited)
Twelve Months EndedDecember 31, 2018
2017 Net income $ 234,734 $ 190,509 Depreciation and
amortization 71,759 55,340 Cash pension and postretirement
contributions (64,756 ) (26,264 ) Noncash pension and
postretirement expense 4,903 7,959 Working capital changes (54,412
) (36,326 ) Deferred income tax expense 14,527 27,375 Tax Reform
Act expense 0 31,375 Capital expenditures (74,638 ) (148,713 )
Acquisition of business (net of $1,131 cash acquired) 0 (183,930 )
Net borrowings (repayments) under revolving credit facility 168,129
(156,000 ) Issuance of 3.78% senior notes 0 250,000 Repurchases of
common stock (232,016 ) (25,998 ) Dividends paid (80,448 ) (82,885
) All other 1,092 (10,430 ) Increase (decrease) in cash and
cash equivalents
$ (11,126 ) $
(107,988 ) NEWMARKET CORPORATION AND
SUBSIDIARIES NON-GAAP FINANCIAL INFORMATION
(In thousands, unaudited)
Fourth Quarter EndedDecember 31, Twelve
Months EndedDecember 31, 2018 2017
2018 2017 Net Income $
62,803 $ 4,072 $ 234,734
$ 190,509 Add: Interest and financing expenses, net
8,187 5,360 26,723 21,856 Income tax expense 8,292 60,870 55,551
124,933 Depreciation and amortization 18,011 15,860
70,618 54,240
EBITDA $ 97,293
$ 86,162 $ 387,626
$ 391,538
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190206005680/en/
For Investor Information Contact:Brian D.
PaliottiInvestor RelationsPhone:
804.788.5555Fax: 804.788.5688Email:
investorrelations@newmarket.com
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