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NewMarket Corporation$406.65$3.17.79%

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 NewMarket Corporation Reports Fourth Quarter and Full Year 2016 Results
   Tuesday, January 31, 2017 5:01:00 PM ET

--Petroleum Additives Fourth Quarter Operating Profit of $75.6 Million; Full Year Operating Profit of $384.9 Million, Up 2.7%

--Petroleum Additives Full Year Shipments Up 1.1%

--Ongoing Investments to Fuel Long-Term Growth

NewMarket Corporation (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 2016.

Net income for the fourth quarter of 2016 was $45.7 million, or $3.86 per share, compared to net income of $53.9 million, or $4.50 per share, for the fourth quarter of 2015. Net income for 2016 was $243.4 million, or $20.54 per share, compared to net income of $238.6 million, or $19.45 per share, for 2015.

Sales for the petroleum additives segment for the fourth quarter of 2016 were $500.0 million, up 4.9% versus the same period last year, due to higher shipments and product mix, partially offset by changes in selling prices. Petroleum additives operating profit for the fourth quarter of 2016 was $75.6 million, about even with fourth quarter operating profit last year of $75.3 million.

For the year, petroleum additives sales were $2.0 billion compared to sales in 2015 of $2.1 billion, a decrease of 4.3%. This decrease was primarily due to changes in selling prices and foreign currency exchange, partially offset by higher shipments and product mix. Operating profit for petroleum additives for 2016 increased 2.7% to $384.9 million, compared to $374.9 million for 2015. The increase was mainly due to higher sales volume, product mix, and lower raw material and conversion costs, partially offset by changes in selling prices and foreign currency exchange.

Petroleum additives shipments for the fourth quarter of 2016 were up from the same period last year. This increase was primarily due to increases in lubricant additives shipments in Europe and Asia Pacific and fuel additives shipments in North America and Latin America. For the year, shipments increased 1.1% versus 2015, primarily due to increases in fuel additives shipments in North America and Asia Pacific that were partially offset by a decrease in Europe. Lubricant additives shipments also increased between the years mainly due to increases in Asia Pacific and Europe which were largely offset by lower shipments in North America and Latin America.

The effective income tax rate for the fourth quarter of 2016 was 28.6%, up from the rate of 20.3% in the same period last year. The effective rate for 2016 was 29.1%, down slightly from the rate in 2015 of 29.6%. 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 U.S. and Europe. The research and development tax credit in the U.S. 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 $75.8 million, funded capital expenditures of $142.9 million, and repurchased 98,867 shares of our common stock for a total of $35.8 million, or an average cost per share of $362.25. In January 2017, we issued $250 million of fixed rate long-term debt in a private placement transaction. The proceeds were used to repay amounts outstanding under our revolving credit facility, with the remainder available for financing working capital needs and general corporate purposes.

We are continuing to use our capital to achieve our long-term growth plans. In December 2016, we announced our intent to acquire Aditivos Mexicanos, S.A. de C.V. ("AMSA"). AMSA is a petroleum additives manufacturing, sales and distribution company based in Mexico City, Mexico. We expect to close the transaction in the first half of 2017, pending a regulatory review in Mexico. In addition, construction continues on phase two of our manufacturing facility in Singapore which is expected to be completed in the second half of 2017, and we are continuing to invest in research and development in order to meet our customers’ ever-changing business needs.

Our investments in 2016 together with our plans for 2017 reinforce our view 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. 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 our stakeholders. As we look forward to 2017 and beyond, we believe the fundamentals of the industry as a whole remain unchanged, with the petroleum additives market growing at 1% to 2% annually for the foreseeable future. We continue to believe that we will exceed that growth rate.

Sincerely,

Thomas E. Gottwald

The Company has 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 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 10:00 a.m. EST on Wednesday, February 1, 2017 to review fourth quarter and year-end 2016 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. A teleconference replay of the call will be available until February 8, 2017 at 11:59 p.m. EST by dialing 1-877-481-4010 (domestic) or 1-919-882-2331 (international). The replay ID number is 10200. 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 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 (including the additional risks and uncertainties introduced by the recent referendum on the United Kingdom’s membership in the European Union); 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; our inability to consummate a proposed acquisition transaction due to a lack of regulatory approval or the failure of one or more parties to satisfy conditions to closing; our inability to realize expected benefits from investment in our infrastructure or future acquisitions or our inability to 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 2015 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,
                                                                  ------------------------------------------------------------------------------------------------------------------                            ----------------------------------------------------------------------------------------------------------------------
                                                                                         2016                                                2015                                                                    2016                                                  2015
                                                                  --------------------------------------------------                     --------------------------------------------------                     ----------------------------------------------------                     ----------------------------------------------------
Revenue:
   Petroleum additives                                                               $ 499,985                                                              $ 476,683                                                              $ 2,034,645                                                              $ 2,124,995
   All other (a)                                                      1,642                            2,939                             14,806                             15,835  
                                                                  -------------------- ------- --------------------                      -------------------- ------- --------------------                      -------------------- --------- --------------------                      -------------------- --------- --------------------
      Total                                                                          $ 501,627                                           $ 479,622                                           $ 2,049,451                                           $ 2,140,830  
                                                                  ==================== ======= ====================                      ==================== ======= ====================                      ==================== ========= ====================                      ==================== ========= ====================
Segment operating profit:
   Petroleum additives                                                               $  75,601                                                              $  75,342                                                              $   384,906                                                              $   374,934
   All other (a)                                                     (1,434 )                                               850                                530                              4,372  
                                                                  -------------------- ------- --------------------                      -------------------- ------- --------------------                      -------------------- --------- --------------------                      -------------------- --------- --------------------
      Segment operating profit                                                          74,167                                                                 76,192                                                                  385,436                                                                  379,306
   Corporate unallocated expense                                                        (5,387 )                                                               (6,028 )                                                                (21,783 )                                                                (22,779 )
   Interest and financing expenses                                                      (4,323 )                                                               (3,716 )                                                                (16,785 )                                                                (14,652 )
   Other income (expense), net                                         (483 )                                             1,164                             (3,660 )                                              (2,904 )
                                                                  -------------------- ------- --------------------                      -------------------- ------- --------------------                      -------------------- --------- --------------------                      -------------------- --------- --------------------
      Income before income tax expense                                               $  63,974                                           $  67,612                                           $   343,208                                           $   338,971  
                                                                  ==================== ======= ====================                      ==================== ======= ====================                      ==================== ========= ====================                      ==================== ========= ====================
      Net income                                                                     $  45,672                                           $  53,914                                           $   243,441                                           $   238,603  
                                                                  ==================== ======= ====================                      ==================== ======= ====================                      ==================== ========= ====================                      ==================== ========= ====================
      Earnings per share - basic and diluted                                         $    3.86                                           $    4.50                                           $     20.54                                           $     19.45  
                                                                  ==================== ======= ====================                      ==================== ======= ====================                      ==================== ========= ====================                      ==================== ========= ====================
                                                                                                                                                                                                                                                                                                                         
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.
                                         
 
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,
                                                                   --------------------------------------------------------------------------                          ----------------------------------------------------------------------------------------------------------------------
                                                                               2016                           2015                                                          2016                                                  2015
                                                                   -----------------------------                     -----------------------------                     ----------------------------------------------------                     ----------------------------------------------------
Net sales                                                                             $ 501,627                                         $ 479,622                                         $ 2,049,451                                                              $ 2,140,830
Cost of goods sold                                                   352,217                        326,317                        1,368,690                          1,461,774  
                                                                   -------------------- -------                      -------------------- -------                      -------------------- --------- --------------------                      -------------------- --------- --------------------
   Gross profit                                                                         149,410                                           153,305                                             680,761                                                                  679,056
Selling, general, and administrative expenses                                            40,936                                            43,320                                             161,112                                                                  164,082
Research, development, and testing expenses                           40,308                         39,602                          156,959                            158,254  
                                                                   -------------------- -------                      -------------------- -------                      -------------------- --------- --------------------                      -------------------- --------- --------------------
   Operating profit                                                                      68,166                                            70,383                                             362,690                                                                  356,720
Interest and financing expenses, net                                                      4,323                                             3,716                                              16,785                                                                   14,652
Other income (expense), net                                              131                            945                           (2,697 )                                              (3,097 )
                                                                   -------------------- -------                      -------------------- -------                      -------------------- --------- --------------------                      -------------------- --------- --------------------
Income before income tax expense                                                         63,974                                            67,612                                             343,208                                                                  338,971
Income tax expense                                                    18,302                         13,698                           99,767                            100,368  
                                                                   -------------------- -------                      -------------------- -------                      -------------------- --------- --------------------                      -------------------- --------- --------------------
Net income                                                                            $  45,672                                         $  53,914                                         $   243,441                                           $   238,603  
                                                                   ==================== =======                      ==================== =======                      ==================== ========= ====================                      ==================== ========= ====================
Earnings per share - basic and diluted                                                $    3.86                                         $    4.50                                         $     20.54                                           $     19.45  
                                                                   ==================== =======                      ==================== =======                      ==================== ========= ====================                      ==================== ========= ====================
Cash dividends declared per share                                                     $    1.60                                         $    1.60                                         $      6.40                                           $      5.80  
                                                                   ==================== =======                      ==================== =======                      ==================== ========= ====================                      ==================== ========= ====================
                                                                                                                                                                                                                                                                                
 
NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts, unaudited)
 
                                                                                          December 31,                                          December 31,
                                                                                                                 2016                                                                     2015
                                                                                         -------------------------------------------------                        -------------------------------------------------
ASSETS
Current assets:
   Cash and cash equivalents                                                                                $   192,154                                                              $    93,424
   Trade and other accounts receivable, less allowance for doubtful                                             306,916                                                                  287,967
   accounts ($710 - 2016; $487 - 2015)
   Inventories                                                                                                  311,512                                                                  351,631
   Prepaid expenses and other current assets                                                  26,301                             35,370  
                                                                                         -------------------- --------- --------------------                      -------------------- --------- --------------------
      Total current assets                                                                   836,883                            768,392  
                                                                                         -------------------- --------- --------------------                      -------------------- --------- --------------------
Property, plant, and equipment, at cost                                                                       1,264,957                                                                1,128,989
   Less accumulated depreciation and amortization                                            761,212                            726,543  
                                                                                         -------------------- --------- --------------------                      -------------------- --------- --------------------
      Net property, plant, and equipment                                                     503,745                            402,446  
                                                                                         -------------------- --------- --------------------                      -------------------- --------- --------------------
Prepaid pension cost                                                                                             25,800                                                                   20,430
Deferred income taxes                                                                                            29,063                                                                   44,729
Intangibles (net of amortization) and goodwill                                                                   10,436                                                                   10,907
Deferred charges and other assets                                                             10,509                             39,345  
                                                                                         -------------------- --------- --------------------                      -------------------- --------- --------------------
Total assets                                                                                                $ 1,416,436                                           $ 1,286,249  
                                                                                         ==================== ========= ====================                      ==================== ========= ====================
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
   Accounts payable                                                                                         $   141,869                                                              $   128,745
   Accrued expenses                                                                                             104,082                                                                   99,511
   Dividends payable                                                                                             17,478                                                                   17,594
   Income taxes payable                                                                                          17,573                                                                   12,773
   Other current liabilities                                                                  13,588                              5,057  
                                                                                         -------------------- --------- --------------------                      -------------------- --------- --------------------
      Total current liabilities                                                              294,590                            263,680  
                                                                                         -------------------- --------- --------------------                      -------------------- --------- --------------------
Long-term debt                                                                                                  507,275                                                                  490,920
Other noncurrent liabilities                                                                 131,320                            144,085  
                                                                                         -------------------- --------- --------------------                      -------------------- --------- --------------------
Total liabilities                                                                            933,185                            898,685  
                                                                                         -------------------- --------- --------------------                      -------------------- --------- --------------------
Shareholders’ equity:
   Common stock and paid-in capital (without par value); issued and                                               1,603                                                                        0
   outstanding shares - 11,845,972 in 2016 and 11,948,446 in 2015
   Accumulated other comprehensive loss                                                                        (182,510 )                                                               (144,526 )
   Retained earnings                                                                         664,158                            532,090  
                                                                                         -------------------- --------- --------------------                      -------------------- --------- --------------------
Total shareholders’ equity                                                                   483,251                            387,564  
                                                                                         -------------------- --------- --------------------                      -------------------- --------- --------------------
Total liabilities and shareholders’ equity                                                                  $ 1,416,436                                           $ 1,286,249  
                                                                                         ==================== ========= ====================                      ==================== ========= ====================
                                                                                                                                                                                                  
 
NEWMARKET CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands, unaudited)
 
                                                                                                       Twelve Months Ended
                                                                                                                             December 31,
                                                                      --------------------------------------------------------------------------------------------------------------------
                                                                                             2016                                                 2015
                                                                      ---------------------------------------------------                     ---------------------------------------------------
Net income                                                                               $  243,441                                                              $  238,603
Depreciation and amortization                                                                44,893                                                                  42,265
Cash pension and postretirement contributions                                               (25,898 )                                                               (26,813 )
Noncash pension and postretirement expense                                                   12,829                                                                  22,037
Working capital changes                                                                      22,815                                                                 (23,262 )
Deferred income tax expense                                                                  19,185                                                                     150
Capital expenditures                                                                       (142,874 )                                                              (126,499 )
Net borrowings under revolving credit facility                                               11,000                                                                 131,000
Repurchases of common stock                                                                 (35,815 )                                                              (194,924 )
Dividends paid                                                                              (75,829 )                                                               (70,763 )
All other                                                                 24,983                            (1,373 )
                                                                      -------------------- -------- --------------------                      -------------------- -------- --------------------
Increase (decrease) in cash and cash equivalents                                         $   98,730                                           $   (9,579 )
                                                                      ==================== ======== ====================                      ==================== ======== ====================
                                                                                                                                                                             
 
NEWMARKET CORPORATION AND SUBSIDIARIES
NON-GAAP FINANCIAL INFORMATION
(In thousands, unaudited)
 
                                                                         Fourth Quarter Ended                                                                    Twelve Months Ended
                                                                                                December 31,                                                                                              December 31,
                                                                ------------------------------------------------------------------------                          ---------------------------------------------------------------------------------------
                                                                            2016                          2015                                             2016                                  2015
                                                                ----------------------------                     ----------------------------                     -----------------------------                     ------------------------------------------
Net Income                                                                         $ 45,672                                         $ 53,914                                         $ 243,441                                         $              238,603
   Add:
      Interest and financing expenses, net                                            4,323                                            3,716                                            16,785                                                         14,652
      Income tax expense                                                             18,302                                           13,698                                            99,767                                                        100,368
      Depreciation and amortization                               11,884                        10,615                         43,808                                      41,178
                                                                -------------------- ------                      -------------------- ------                      -------------------- -------                      -------------------- --------------------
EBITDA                                                                             $ 80,181                                         $ 81,943                                         $ 403,801                                         $              394,801
                                                                ==================== ======                      ==================== ======                      ==================== =======                      ==================== ====================
                                                                                                                                                                                                                                          

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170131006257r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20170131006257/en/

SOURCE: NewMarket Corporation

NewMarket Corporation 
Brian D. Paliotti 
Investor Relations 
804-788-5555 
Fax: 804-788-5688 
investorrelations@newmarket.com


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