Business Wire | Feb 3, 2021 05:01PM EST

NewMarket Corporation Reports Fourth Quarter and Full Year 2020 Results

Feb. 03, 2021

RICHMOND, Va.--(BUSINESS WIRE)--Feb. 03, 2021--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 2020.

Net income for the fourth quarter of 2020 was $66.9 million, or $6.12 per share, compared to net income of $50.1 million, or $4.48 per share, for the fourth quarter of 2019. Net income for 2020 was $270.6 million, or $24.64 per share compared to net income of $254.3 million, or $22.73 per share. Net income for the year benefited from a gain of $16.5 million related to the sale of a non-operating parcel of real estate, along with a reduced effective tax rate compared to 2019.

Sales for the petroleum additives segment for the fourth quarter of 2020 were $525.2 million, down 1.2% compared to the same period last year. Petroleum additives operating profit for the fourth quarter of 2020 was $84.3 million, compared to $73.6 million for the fourth quarter of 2019. For the year, petroleum additives sales were $2.0 billion compared to sales in 2019 of $2.2 billion. This decrease was due mainly to lower shipments and decreased selling prices. Petroleum additives operating profit for 2020 was $333.2 million, a 7.2% decrease compared to 2019 operating profit of $359.2 million. This decrease was mainly due to changes in selling prices, lower shipments and higher conversion costs, partially offset by lower raw material costs and selling, general, and administrative costs. Shipments decreased 5.2% between the full-year periods, with decreases in both lubricant additives and fuel additives shipments.

Petroleum additives operating results for 2020 have been marked by economic uncertainty resulting from the ongoing effects of the COVID-19 pandemic and the related restrictions on the movement of people, goods and services. While we have continued to operate throughout the year in each of our regions, we have at various times seen significant changes in some of the key drivers that affect the performance of our business. During the second quarter of 2020, government and business shutdowns in North America and Europe led to a precipitous drop in vehicle miles driven and auto production, with gasoline consumption in the United States dropping to its lowest point in over 50 years. With less travel and fewer miles driven, combined with automobile plant closures, global demand for our products declined substantially, except in our Asia Pacific region where demand remained relatively stable throughout the year. As restrictions eased and economies reopened in the second half of 2020, global production of automobiles began to rebound and gasoline consumption and miles driven showed steady improvement in most countries, including the United States. Late in the fourth quarter, renewed restrictions on travel and work in certain countries had a negative effect on our business. The pace and stability of improvement in demand for our products will continue to depend heavily on economic recovery and the rate at which government restrictions are lifted and remain lifted.

The effective tax rate for 2020 was 18.3% compared to 23.3% for 2019. The decrease in the tax rate in 2020 was mainly the result of finalizing prior year tax filings and releasing certain tax reserves.

Our business continues to generate strong cash flow. During the year we funded capital expenditures of $93.3 million, paid dividends of $83.4 million, and repaid $44.7 million of borrowings on our revolving credit facility. We also repurchased 270,963 shares of our common stock for a cost of $101.4 million.

As we look back at our results for the year, we are extremely proud of the operational performance we achieved given the volatility the COVID-19 pandemic introduced into the global economy. Throughout the economic downturn, the chemical industry and our products have been recognized as essential for the transportation of goods and services, and our facilities have continued to operate and function safely. I want to sincerely thank our employees for their continued determination and commitment to do what is necessary to support our customers and ensure their supply demands are met. I am very proud of them.

As we look forward to 2021, we will continue to monitor government restrictions on the movement of people, goods and services as well as the status of vaccination programs that are being implemented globally. We are hopeful the vaccinations will help provide more stability in the global economy in 2021. Our business decisions will continue to be focused on the long-term success of our company, including emphasis on satisfying customer needs, generating solid operating results, and promoting the greatest long-term value for our shareholders, customers and employees. We believe the fundamentals of how we run our business - a long-term view, safety and people first culture, customer-focused solutions, technology-driven product offerings, and a world-class supply chain capability - will continue to be beneficial for all our stakeholders.

Sincerely,

Thomas E. Gottwald

The petroleum additives segment consists of the North America (the United States and Canada), Latin America (Mexico, Central America, and South America), Asia Pacific, and Europe/Middle East/Africa/India (Europe or EMEAI) regions.

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 (on property, plant and equipment) and amortization (on intangibles and lease right-of-use assets). 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 4, 2021, to review fourth quarter and full year 2020 financial results. You can access the conference call live by dialing 1-888-506-0062 (domestic) or 1-973-528-0011 (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 March 4, 2021 at 3:00 p.m. EST by dialing 1-877-481-4010 (domestic) or 1-919-882-2331 (international). The replay passcode number is 39452. The call will also be broadcast via the Internet and can be accessed through the Company's website at www.NewMarket.com or www.webcaster4.com/Webcast/Page/2001/39452. 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 production facilities, including single-sourced facilities; hazards common to chemical businesses; the ability to respond effectively to technological changes in our industry; failure to protect our intellectual property rights; sudden or sharp raw material price increases; competition from other manufacturers; current and future governmental regulations; the gain or loss of significant customers; failure to attract and retain a highly-qualified workforce; an information technology system failure or security breach; the occurrence or threat of extraordinary events, including natural disasters; terrorist attacks and health-related epidemics such as the COVID-19 pandemic; risks related to operating outside of the United States; political, economic, and regulatory factors concerning our products; the impact of substantial indebtedness on our operational and financial flexibility; the impact of fluctuations in foreign exchange rates; resolution of environmental liabilities or legal proceedings; limitation of our insurance coverage; 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; the underperformance of our pension assets resulting in additional cash contributions to our pension plans; 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 2019 Annual Report on Form 10-K and Part II. Item 1A. "Risk Factors" of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020, which are 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,

2020 2019 2020 2019

Revenue:

Petroleum additives $ 525,212 $ 531,775 $ 2,001,567 $ 2,175,904

All other 2,569 2,670 9,364 14,391

Total $ 527,781 $ 534,445 $ 2,010,931 $ 2,190,295

Segment operating profit:

Petroleum additives $ 84,323 $ 73,608 $ 333,241 $ 359,228

All other (2,051 ) (1,654 ) (100 ) (1,562 )

Segment operating 82,272 71,954 333,141 357,666 profit

Corporate (6,481 ) (4,503 ) (21,744 ) (20,345 )unallocated expense

Interest and (5,753 ) (6,501 ) (26,328 ) (29,241 )financing expenses

Other income 6,285 5,683 46,218 23,510 (expense), net

Income before $ 76,323 $ 66,633 $ 331,287 $ 331,590 income tax expense

Net income $ 66,884 $ 50,102 $ 270,568 $ 254,286

Earnings per share $ 6.12 $ 4.48 $ 24.64 $ 22.73 - basic and diluted

NEWMARKET CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per-share amounts, unaudited)

Fourth Quarter EndedDecember 31,

Twelve Months EndedDecember 31,

2020

2019

2020

2019

Net sales

$

527,781

$

534,445

$

2,010,931

$

2,190,295

Cost of goods sold

377,001

391,005

1,415,899

1,560,426

Gross profit

150,780

143,440

595,032

629,869

Selling, general, and administrative expenses

37,026

38,167

142,863

148,083

Research, development, and testing expenses

38,199

37,717

140,367

144,465

Operating profit

75,555

67,556

311,802

337,321

Interest and financing expenses, net

5,753

6,501

26,328

29,241

Other income (expense), net

6,521

5,578

45,813

23,510

Income before income tax expense

76,323

66,633

331,287

331,590

Income tax expense

9,439

16,531

60,719

77,304

Net income

$

66,884

$

50,102

$

270,568

$

254,286

Earnings per share - basic and diluted

$

6.12

$

4.48

$

24.64

$

22.73

Cash dividends declared per share

$

1.90

$

1.90

$

7.60

$

7.30

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,

2020 2019 2020 2019

Net sales $ 527,781 $ 534,445 $ 2,010,931 $ 2,190,295

Cost of goods sold 377,001 391,005 1,415,899 1,560,426

Gross profit 150,780 143,440 595,032 629,869

Selling, general,and administrative 37,026 38,167 142,863 148,083 expenses

Research,development, and 38,199 37,717 140,367 144,465 testing expenses

Operating profit 75,555 67,556 311,802 337,321

Interest andfinancing expenses, 5,753 6,501 26,328 29,241 net

Other income 6,521 5,578 45,813 23,510 (expense), net

Income before 76,323 66,633 331,287 331,590 income tax expense

Income tax expense 9,439 16,531 60,719 77,304

Net income $ 66,884 $ 50,102 $ 270,568 $ 254,286

Earnings per share $ 6.12 $ 4.48 $ 24.64 $ 22.73 - basic and diluted

Cash dividends $ 1.90 $ 1.90 $ 7.60 $ 7.30 declared per share

NEWMARKET CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands except share amounts, unaudited)

December 31,2020

December 31,2019

ASSETS

Current assets:

Cash and cash equivalents

$

125,172

$

144,397

Trade and other accounts receivable, less allowance for credit losses

336,395

335,826

Inventories

401,031

365,938

Prepaid expenses and other current assets

35,480

33,237

Total current assets

898,078

879,398

Property, plant, and equipment, net

665,147

635,439

Intangibles (net of amortization) and goodwill

129,944

131,880

Prepaid pension cost

137,069

133,848

Operating lease right-of-use assets

61,329

60,505

Deferred charges and other assets

42,308

44,062

Total assets

$

1,933,875

$

1,885,132

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

189,937

$

178,773

Accrued expenses

78,422

77,350

Dividends payable

15,184

19,217

Income taxes payable

3,760

10,632

Operating lease liabilities

13,410

14,036

Other current liabilities

11,742

8,887

Total current liabilities

312,455

308,895

Long-term debt

598,848

642,941

Operating lease liabilities - noncurrent

48,324

46,792

Other noncurrent liabilities

214,424

203,406

Total liabilities

1,174,051

1,202,034

Shareholders' equity:

Common stock and paid-in capital (with no par value; issued and outstanding shares - 10,921,377 at December 31, 2020 and 11,188,549 at December 31, 2019)

717

1,965

Accumulated other comprehensive loss

(173,164

)

(162,748

)

Retained earnings

932,271

843,881

Total shareholders' equity

759,824

683,098

Total liabilities and shareholders' equity

$

1,933,875

$

1,885,132

NEWMARKET CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands except share amounts, unaudited)

December 31, December 31, 2020 2019

ASSETS

Current assets:

Cash and cash equivalents $ 125,172 $ 144,397

Trade and other accounts receivable, less 336,395 335,826 allowance for credit losses

Inventories 401,031 365,938

Prepaid expenses and other current assets 35,480 33,237

Total current assets 898,078 879,398

Property, plant, and equipment, net 665,147 635,439

Intangibles (net of amortization) and goodwill 129,944 131,880

Prepaid pension cost 137,069 133,848

Operating lease right-of-use assets 61,329 60,505

Deferred charges and other assets 42,308 44,062

Total assets $ 1,933,875 $ 1,885,132

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 189,937 $ 178,773

Accrued expenses 78,422 77,350

Dividends payable 15,184 19,217

Income taxes payable 3,760 10,632

Operating lease liabilities 13,410 14,036

Other current liabilities 11,742 8,887

Total current liabilities 312,455 308,895

Long-term debt 598,848 642,941

Operating lease liabilities - noncurrent 48,324 46,792

Other noncurrent liabilities 214,424 203,406

Total liabilities 1,174,051 1,202,034

Shareholders' equity:

Common stock and paid-in capital (with no parvalue; issued and outstanding shares - 717 1,965 10,921,377 at December 31, 2020 and 11,188,549at December 31, 2019)

Accumulated other comprehensive loss (173,164 ) (162,748 )

Retained earnings 932,271 843,881

Total shareholders' equity 759,824 683,098

Total liabilities and shareholders' equity $ 1,933,875 $ 1,885,132

NEWMARKET CORPORATION AND SUBSIDIARIES

SELECTED CONSOLIDATED CASH FLOW DATA

(In thousands, unaudited)

Twelve Months EndedDecember 31,

2020

2019

Net income

$

270,568

$

254,286

Depreciation and amortization

84,002

87,560

Cash pension and postretirement contributions

(10,655

)

(9,932

)

Working capital changes

(54,089

)

4,763

Deferred income tax expense

7,554

7,384

Capital expenditures

(93,316

)

(59,434

)

Net repayments under revolving credit facility

(44,678

)

(123,451

)

Repurchases of common stock

(101,434

)

0

Dividends paid

(83,417

)

(81,676

)

Proceeds from sale of land

20,000

0

Gain on sale of land

(16,483

)

0

All other

2,723

(8,143

)

(Decrease) increase in cash and cash equivalents

$

(19,225

)

$

71,357

NEWMARKET CORPORATION AND SUBSIDIARIES

SELECTED CONSOLIDATED CASH FLOW DATA

(In thousands, unaudited)

Twelve Months Ended December 31,

2020 2019

Net income $ 270,568 $ 254,286

Depreciation and amortization 84,002 87,560

Cash pension and postretirement contributions (10,655 ) (9,932 )

Working capital changes (54,089 ) 4,763

Deferred income tax expense 7,554 7,384

Capital expenditures (93,316 ) (59,434 )

Net repayments under revolving credit facility (44,678 ) (123,451 )

Repurchases of common stock (101,434 ) 0

Dividends paid (83,417 ) (81,676 )

Proceeds from sale of land 20,000 0

Gain on sale of land (16,483 ) 0

All other 2,723 (8,143 )

(Decrease) increase in cash and cash equivalents $ (19,225 ) $ 71,357

NEWMARKET CORPORATION AND SUBSIDIARIES

NON-GAAP FINANCIAL INFORMATION

(In thousands, unaudited)

Fourth Quarter EndedDecember 31,

Twelve Months EndedDecember 31,

2020

2019

2020

2019

Net Income

$

66,884

$

50,102

$

270,568

$

254,286

Add:

Interest and financing expenses, net

5,753

6,501

26,328

29,241

Income tax expense

9,439

16,531

60,719

77,304

Depreciation and amortization

20,684

21,775

82,666

86,421

EBITDA

$

102,760

$

94,909

$

440,281

$

447,252

View source version on businesswire.com: https://www.businesswire.com/news/home/20210203005723/en/

CONTACT: FOR INVESTOR INFORMATION CONTACT: Brian D. Paliotti Investor Relations Phone: 804.788.5555 Fax: 804.788.5688 Email: investorrelations@newmarket.com