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NewMarket Corporation$383.99$7.972.12%

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 NewMarket Corporation Reports Fourth Quarter and Full Year 2017 Results
   Tuesday, February 06, 2018 5:01:00 PM ET

--Petroleum Additives Fourth Quarter Shipments Up 8.0%, and Full Year Shipments Up 8.2%

--$31.4 Million Tax Charge in Fourth Quarter Related to U.S. Tax Reform Legislation

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 2017.

Profit before income taxes for the fourth quarter of 2017 was $64.9 million compared to $64.0 million for the fourth quarter of 2016. Net income for the fourth quarter of 2017 was $4.1 million, or $.35 per share, compared to net income of $45.7 million, or $3.86 per share, for the fourth quarter of 2016. Profit before income taxes for 2017 was $315.4 million compared to $343.2 million for 2016. Net income for 2017 was $190.5 million, or $16.08 per share, compared to net income of $243.4 million, or $20.54 per share, for 2016. Net income for both 2017 periods included the estimated impact 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 2017 were $556.9 million, up 11.4% versus the same period last year. Petroleum additives operating profit for the fourth quarter of 2017 was $77.9 million, 3.0% higher than fourth quarter operating profit last year of $75.6 million. The increase was mainly due to increased shipments, changes in selling prices and product mix, partially offset by higher raw material and conversion costs. Shipments were up 8.0% from the same period last year with increases in both lubricant additives and fuel additives shipments. All regions contributed to the increase in lubricant additives shipments, and Europe was the primary driver of the increase in fuel additives shipments.

For the year, petroleum additives sales were $2.2 billion compared to sales in 2016 of $2.0 billion, or an increase of 7.5%. Petroleum additives operating profit for 2017 was $359.8 million, 6.5% lower than last year’s $384.9 million. The decrease was due mainly to higher raw material and conversion costs, and changes in selling prices and product mix, partially offset by increased shipments. Throughout much of 2017, we faced headwinds with raw material costs rising, and our margins suffered as we were unable to adjust often and fast enough to compensate for the cost increases. Our efforts to recover these cost increases are continuing. Shipments increased 8.2% versus 2016 with increases in both lubricant additives and fuel additives shipments. Europe, Asia Pacific and Latin America were the regions contributing to the increase in lubricant additives shipments, and Europe was the primary driver of the increase in fuel additives shipments.

Income tax expense was $60.9 million for the fourth quarter of 2017 compared to $18.3 million for the fourth quarter of 2016, and $124.9 million for 2017 compared to $99.8 million for 2016. The primary driver for the increase in income tax expense in both comparative periods was a one-time deemed repatriation tax on untaxed accumulated foreign earnings as a result of the Tax Reform Act. We recorded $31.4 million in additional income tax expense in the fourth quarter of 2017 related to our estimate of the total effects of the Tax Reform Act, and will continue to assess the impact of the new law. In addition, the fourth quarter included the impact of recording certain deferred tax liabilities associated with our Singapore plant.

During the year, we strengthened our ability to serve our customers worldwide by completing the construction of Phase 2 of our Singapore manufacturing facility and our acquisition of Aditivos Mexicanos, S.A. de C.V., a petroleum additives manufacturing, sales and distribution company based in Mexico City, Mexico. These investments along with other capital expenditures, totaled $332.6 million, and they position us well for future growth. We also returned $110.7 million to our shareholders through dividends ($82.9 million) and share repurchases (70,689 shares of our common stock for a total of $27.8 million). We issued $250 million of fixed rate long-term debt in a private placement transaction and repaid $156.0 million under our revolving credit facility.

As we look forward to 2018 and beyond, we expect continued strength in our petroleum additives sales and shipments. Our views toward the fundamentals of our 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. Our ongoing focus in 2018 will be to recover our margins so that they continue to be within the historical ranges our stakeholders have come to expect.

We continue to make decisions to promote long-term value for our shareholders and customers, and we remain focused on our long-term objectives. This is evidenced by our ongoing investments in supply capability and our 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 9:00 a.m. EST on Wednesday, February 7, 2018, to review fourth quarter and year-end 2017 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 14, 2018 at 11:59 p.m. EST by dialing 1-877-481-4010 (domestic) or 1-919-882-2331 (international). The replay ID number is 23857. 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; 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 2016 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 Ended                                                                                                                                 Twelve Months Ended
                                                                                                                                                            December 31,                                                                                                                                                                              December 31,
                                                                                           --------------------------------------------------------------------------------------------------------------------------------------                                                  ------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                  2017                                                  2016                                                                                         2017                                                    2016
                                                                                           --------------------------------------------------                                          --------------------------------------------------                                          ----------------------------------------------------                                          ----------------------------------------------------
Revenue:
     Petroleum additives                                                                                      $ 556,938                                                                                   $ 499,985                                                                                   $ 2,187,283                                                                                   $ 2,034,645
     All other (a)                                                                             3,044                                                 1,642                                                  11,121                                                  14,806  
                                                                                           -------------------- ------- --------------------                                           -------------------- ------- --------------------                                           -------------------- --------- --------------------                                           -------------------- --------- --------------------
          Total                                                                                               $ 559,982                                                                $ 501,627                                                                $ 2,198,404                                                                $ 2,049,451  
                                                                                           ==================== ======= ====================                                           ==================== ======= ====================                                           ==================== ========= ====================                                           ==================== ========= ====================
Segment operating profit:
     Petroleum additives                                                                                      $  77,897                                                                                   $  75,601                                                                                   $   359,832                                                                                   $   384,906
     All other (a)                                                                             1,237                                                (1,434 )                                                                    4,318                                                     530  
                                                                                           -------------------- ------- --------------------                                           -------------------- ------- --------------------                                           -------------------- --------- --------------------                                           -------------------- --------- --------------------
          Segment operating profit                                                                               79,134                                                                                      74,167                                                                                       364,150                                                                                       385,436
     Corporate unallocated expense                                                                               (9,320 )                                                                                    (5,387 )                                                                                     (27,604 )                                                                                     (21,783 )
     Interest and financing expenses                                                                             (5,360 )                                                                                    (4,323 )                                                                                     (21,856 )                                                                                     (16,785 )
     Other income (expense), net                                                                 488                                                  (483 )                                                                      752                                                  (3,660 )
                                                                                           -------------------- ------- --------------------                                           -------------------- ------- --------------------                                           -------------------- --------- --------------------                                           -------------------- --------- --------------------
          Income before income tax expense                                                                    $  64,942                                                                $  63,974                                                                $   315,442                                                                $   343,208  
                                                                                           ==================== ======= ====================                                           ==================== ======= ====================                                           ==================== ========= ====================                                           ==================== ========= ====================
          Net income                                                                                          $   4,072                                                                $  45,672                                                                $   190,509                                                                $   243,441  
                                                                                           ==================== ======= ====================                                           ==================== ======= ====================                                           ==================== ========= ====================                                           ==================== ========= ====================
          Earnings per share - basic and diluted                                                              $    0.35                                                                $    3.86                                                                $     16.08                                                                $     20.54  
                                                                                           ==================== ======= ====================                                           ==================== ======= ====================                                           ==================== ========= ====================                                           ==================== ========= ====================
                                                                                                                                                                                                                                                                                                                                                                                                                 
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,
                                                                                        ----------------------------------------------------------------------------------------------                                                ----------------------------------------------------------------------------------------------------------------------
                                                                                                    2017                             2016                                                                    2017                                          2016
                                                                                        -----------------------------                                          -----------------------------                                          -------------------------------                                          ----------------------------------------------------
Net sales                                                                                                  $ 559,982                                                              $ 501,627                                                              $ 2,198,404                                                              $ 2,049,451
Cost of goods sold                                                                        413,390                                             352,217                                             1,556,386                                             1,368,690  
                                                                                        -------------------- -------                                           -------------------- -------                                           -------------------- ---------                                           -------------------- --------- --------------------
     Gross profit                                                                                            146,592                                                                149,410                                                                  642,018                                                                  680,761
Selling, general, and administrative expenses                                                                 43,505                                                                 40,936                                                                  165,056                                                                  161,112
Research, development, and testing expenses                                                32,837                                              40,308                                               140,193                                               156,959  
                                                                                        -------------------- -------                                           -------------------- -------                                           -------------------- ---------                                           -------------------- --------- --------------------
     Operating profit                                                                                         70,250                                                                 68,166                                                                  336,769                                                                  362,690
Interest and financing expenses, net                                                                           5,360                                                                  4,323                                                                   21,856                                                                   16,785
Other income (expense), net                                                                    52                                                 131                                                   529                                                (2,697 )
                                                                                        -------------------- -------                                           -------------------- -------                                           -------------------- ---------                                           -------------------- --------- --------------------
Income before income tax expense                                                                              64,942                                                                 63,974                                                                  315,442                                                                  343,208
Income tax expense                                                                         60,870                                              18,302                                               124,933                                                99,767  
                                                                                        -------------------- -------                                           -------------------- -------                                           -------------------- ---------                                           -------------------- --------- --------------------
Net income                                                                                                 $   4,072                                                              $  45,672                                                              $   190,509                                                              $   243,441  
                                                                                        ==================== =======                                           ==================== =======                                           ==================== =========                                           ==================== ========= ====================
Earnings per share - basic and diluted                                                                     $    0.35                                                              $    3.86                                                              $     16.08                                                              $     20.54  
                                                                                        ==================== =======                                           ==================== =======                                           ==================== =========                                           ==================== ========= ====================
Cash dividends declared per share                                                                          $    1.75                                                              $    1.60                                                              $      7.00                                                              $      6.40  
                                                                                        ==================== =======                                           ==================== =======                                           ==================== =========                                           ==================== ========= ====================
                                                                                                                                                                                                                                                                                                                                               
 
NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts, unaudited)
 
 
                                                                                                 December 31,                                            December 31,
                                                                                                                                           2017                                                                                          2016
                                                                                                                   -------------------------------------------------                                             -------------------------------------------------
                                 ASSETS
Current assets:
     Cash and cash equivalents                                                                                                        $    84,166                                                                                   $   192,154
     Trade and other accounts receivable, less allowance for doubtful                                                                     335,317                                                                                       306,916
     accounts ($215 - 2017; $710 - 2016)
     Inventories                                                                                                                          383,097                                                                                       311,512
     Prepaid expenses and other current assets                                                                          31,074                                                  26,301  
                                                                                                                   -------------------- --------- --------------------                                           -------------------- --------- --------------------
          Total current assets                                                                                         833,654                                                 836,883  
                                                                                                                   -------------------- --------- --------------------                                           -------------------- --------- --------------------
Property, plant, and equipment, at cost                                                                                                 1,474,962                                                                                     1,264,957
     Less accumulated depreciation and amortization                                                                    822,681                                                 761,212  
                                                                                                                   -------------------- --------- --------------------                                           -------------------- --------- --------------------
          Net property, plant, and equipment                                                                           652,281                                                 503,745  
                                                                                                                   -------------------- --------- --------------------                                           -------------------- --------- --------------------
Intangibles (net of amortization) and goodwill                                                                                            144,337                                                                                        10,436
Prepaid pension cost                                                                                                                       66,495                                                                                        25,800
Deferred income taxes                                                                                                                       4,349                                                                                        29,063
Deferred charges and other assets                                                                                       11,038                                                  10,509  
                                                                                                                   -------------------- --------- --------------------                                           -------------------- --------- --------------------
Total assets                                                                                                                          $ 1,712,154                                                                $ 1,416,436  
                                                                                                                   ==================== ========= ====================                                           ==================== ========= ====================
                  LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
     Accounts payable                                                                                                                 $   159,408                                                                                   $   141,869
     Accrued expenses                                                                                                                     107,999                                                                                       104,082
     Dividends payable                                                                                                                     19,055                                                                                        17,478
     Income taxes payable                                                                                                                  16,340                                                                                        17,573
     Other current liabilities                                                                                          13,991                                                  13,588  
                                                                                                                   -------------------- --------- --------------------                                           -------------------- --------- --------------------
          Total current liabilities                                                                                    316,793                                                 294,590  
                                                                                                                   -------------------- --------- --------------------                                           -------------------- --------- --------------------
Long-term debt                                                                                                                            602,900                                                                                       507,275
Other noncurrent liabilities                                                                                           190,812                                                 131,320  
                                                                                                                   -------------------- --------- --------------------                                           -------------------- --------- --------------------
Total liabilities                                                                                                    1,110,505                                                 933,185  
                                                                                                                   -------------------- --------- --------------------                                           -------------------- --------- --------------------
Shareholders’ equity:
     Common stock and paid-in capital (without par value; issued and                                                                            0                                                                                         1,603
     outstanding shares - 11,779,978 at December 31, 2017 and 11,845,972
     at December 31, 2016)
     Accumulated other comprehensive loss                                                                                                (145,994 )                                                                                    (182,510 )
     Retained earnings                                                                                                 747,643                                                 664,158  
                                                                                                                   -------------------- --------- --------------------                                           -------------------- --------- --------------------
Total shareholders’ equity                                                                                             601,649                                                 483,251  
                                                                                                                   -------------------- --------- --------------------                                           -------------------- --------- --------------------
Total liabilities and shareholders’ equity                                                                                            $ 1,712,154                                                                $ 1,416,436  
                                                                                                                   ==================== ========= ====================                                           ==================== ========= ====================
                                                                                                                                                                                                                                                 
                                                               
NEWMARKET CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands, unaudited)
                                                                                                       
                                                                                                       
                                                                                                                                                            Twelve Months Ended
                                                                                                                                                               December 31,
                                                                                                      -----------------------------------------------------------------------------------------------------------------------
                                                                                                                     2017                                          2016
                                                                                                      ----------------------------------                                          ---------------------------------------------------
Net income                                                                                                               $  190,509                                                                  $  243,441
Depreciation and amortization                                                                                                55,340                                                                      44,893
Cash pension and postretirement contributions                                                                               (26,264 )                                                                   (25,898 )
Noncash pension and postretirement expense                                                                                    7,959                                                                      12,829
Working capital changes                                                                                                     (36,326 )                                                                    20,815
Deferred income tax expense (benefit)                                                                                        27,375                                                                      19,185
Tax Reform Act expense                                                                                                       31,375                                                                           0
Capital expenditures                                                                                                       (148,713 )                                                                  (142,874 )
Acquisition of business (net of $1,131 cash acquired)                                                                      (183,930 )                                                                         0
Net (repayments) borrowings under revolving credit facility                                                                (156,000 )                                                                    11,000
Issuance of 3.78% senior notes                                                                                              250,000                                                                           0
Repurchases of common stock                                                                                                 (25,998 )                                                                   (35,815 )
Dividends paid                                                                                                              (82,885 )                                                                   (75,829 )
All other                                                                                                (10,430 )                                                 26,983  
                                                                                                      -------------------- -------- ---                                           -------------------- -------- --------------------
(Decrease) increase in cash and cash equivalents                                                                         $ (107,988 )                                                                $   98,730  
                                                                                                      ==================== ======== ===                                           ==================== ======== ====================
                                                                                                                                                                                                                 
                                                                                                                                                        
NEWMARKET CORPORATION AND SUBSIDIARIES
NON-GAAP FINANCIAL INFORMATION
(In thousands, unaudited)
                                                                                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                                                                                  
                                                                                                                                Fourth Quarter Ended                                                                                                                                Twelve Months Ended
                                                                                                                                    December 31,                                                                                                                                       December 31,
                                                                                         --------------------------------------------------------------------------------------------                                                -----------------------------------------------------------------------------------------------------------
                                                                                                     2017                            2016                                                                  2017                                    2016
                                                                                         ----------------------------                                          ----------------------------                                          -----------------------------                                          ------------------------------------------
Net Income                                                                                                  $  4,072                                                              $ 45,672                                                              $ 190,509                                                              $              243,441
     Add:
          Interest and financing expenses, net                                                                 5,360                                                                 4,323                                                                 21,856                                                                              16,785
          Income tax expense                                                                                  60,870                                                                18,302                                                                124,933                                                                              99,767
          Depreciation and amortization                                                    15,860                                             11,884                                              54,240                                                           43,808
                                                                                         -------------------- ------                                           -------------------- ------                                           -------------------- -------                                           -------------------- --------------------
EBITDA                                                                                                      $ 86,162                                                              $ 80,181                                                              $ 391,538                                                              $              403,801
                                                                                         ==================== ======                                           ==================== ======                                           ==================== =======                                           ==================== ====================
                                                                                                                                                                                                                                                                                                                                  

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20180206006275r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20180206006275/en/

SOURCE: NewMarket Corporation

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


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