To Our Shareholders:
It is my pleasure to once again tell you that last year was another successful year for our company. Our petroleum additives business, managed by Afton Chemical Corporation, experienced record sales and profits. Our strategy to deliver the goods and services our customers need to succeed in their marketplace is working and showing good results. Our increasing investment in research and development continues to provide new technologies and technical support to our customers and to global OEMs. Our team delivered new technologies and cost effective formulations, as well as marketing ideas and materials to help our customers differentiate their offering in their markets. These customer focused efforts have made it easier to recover the rising cost of raw materials. While no one likes higher prices, our customers give us price relief because they know we are dedicated to providing them with a competitive market advantage and they recognize we work hard to mitigate rising cost through our cost control programs.
As we have previously communicated, we intend to leverage our financial strength to increase shareholder value by growing the business, with acquisitions being an area of primary interest. Our primary focus in the acquisition area remains on the petroleum additives industry. It is our view that this industry will provide the greatest opportunity for a good return on our investment while minimizing risk. In the past, we have grown the business through strategic acquisitions such as Amoco Petroleum Additives Company and Texaco Additives Company. We remain focused on this strategy and will evaluate any future opportunities. Nonetheless, we are patient in this pursuit and intend to make the right acquisition for our company when the opportunity arises. Meanwhile, we believe we have many internal opportunities for growth in the near term, from both geographical and product line extensions.
One of the companies within the NewMarket group is NewMarket Development Corporation. This company owns and manages all of our property holdings in Richmond, Virginia. We own approximately 64 acres of real estate in downtown Richmond, Virginia, adjacent to our principal executive offices. We have accumulated this land over many decades as the property became available. In January 2007, we entered into an agreement with MeadWestvaco Corporation under which it will lease an office building which we will construct on approximately three acres. We intend to build the office to their specifications, as they will be the sole tenant of the facility. The construction phase of this effort will last until late 2009, at which time MeadWestvaco will occupy the building and use it as their corporate headquarters. We are excited about this project and the value it will bring to our shareholders, to MeadWestvaco, and to the community.
Last year marked a significant event in our long history of marketing tetraethyl lead (TEL). On June 15, 2007, Ethyl and Innospec agreed to terminate the marketing agreements between the companies which governed the sale and distribution of TEL outside of North America. We received a fair value for our interest in the agreements. At the same time we resolved all pending arbitration actions between the two companies. We will continue to sell TEL in North America primarily into the aviation gas market, but the major earnings days for TEL are behind us.
Even though acquisitions are an area of primary interest, we did return a good portion of the earnings of the last few years directly to you. During the year, we repurchased 1.7 million shares of our stock for $83 million. This represents the retirement of approximately 10% of the stock that was outstanding prior to these repurchase
activities. Our Board also voted to increase the dividend to 20 cents per quarter beginning with the payment made in January 2008. We remain committed to evaluating all alternative uses for our excess cash to enhance shareholder value.
We enter 2008 in a position of much strength. Our business is performing well and our balance sheet is strong. We have an excellent team and leadership within the company. Our senior management has, on average, over 22 years of experience at our company. This knowledge and experience provides the leadership we need to continue to succeed in this industry. The gains of the past several years have been made possible by the entire team of dedicated employees at NewMarket, the majority of whom are also shareholders. To them I say “Thank You” for another successful year.
Sincerely,
Thomas E. Gottwald
President and CEO