NewMarket Corporation Reports First Quarter 2011 Results 
4/20/2011 
 
  • Net Income Increases 18 Percent
  • Earnings Per Share Increases 28 Percent
  • Petroleum Additives Operating Profit Improves 14 Percent
  • Repurchased 190,573 Shares of Common Stock During First Quarter

President and Chief Executive Officer, Thomas E. Gottwald, released the following earnings report of the Company’s operations for the first quarter of 2011.

Net income for the first quarter 2011 increased to $49.6 million, or $3.57 per share, an improvement of 18 percent over net income for the first quarter of 2010 of $42.1 million, or $2.78 per share. The percentage increase in earnings per share for the first quarter was 28 percent reflecting the additional benefit of the Company’s stock repurchasing activities.

The petroleum additives operation had excellent performance in the first quarter with operating profit improving to $80.6 million. This represents an improvement of 14 percent over operating profit for the first quarter of last year of $70.4 million. Sales of petroleum additives for this year’s first quarter of $502.7 million reflect an increase of 29 percent over sales for the first quarter of last year of $389.3 million. The increase in sales includes the benefit of a 17 percent increase in shipments during this period. This strong performance is the result of our continued efforts and commitment to supply our customers with first class solutions to meet their needs. We do this by providing differentiating top quality products and innovative technology driven marketing solutions as evidenced by our continued increasing investment in research and development. Our business continues to experience the adverse effects of increasing raw material costs. We continue work to recover those increases in the marketplace.

During the first quarter of this year, we repurchased 190,573 shares of our common stock at an average cost of $126.40 per share. We ended this first quarter with $41 million outstanding on our revolving credit agreement.

We are very pleased with our performance and the earnings results in the first quarter of this year. We believe the strategy we are executing to deliver innovative products and services that bring value to our customers is one that will continue to produce good results for our business and our shareholders

Sincerely,

Thomas E. Gottwald

Summary of Earnings for the 2011 and 2010 First Quarter

Net income for the first quarter of 2011 included an income benefit, while the first quarter 2010 included a charge on an interest rate swap agreement related to financing on Foundry Park. These amounts result from the Company valuing the swap agreement at its fair value.

The Company is reporting net income including these amounts, as well as income excluding them, and related per share amounts in this Summary of Earnings. The Company believes that even though income, excluding these amounts, is not required by or presented in accordance with generally accepted accounting principles (GAAP) accepted in the United States, this additional measure enhances understanding of the Company’s performance. The Company believes earnings, excluding this item, enhance period to period comparability. The Company believes that income, excluding this item, should not be considered an alternative to net income determined under GAAP. The following table is a reconciliation of net income under GAAP to net income excluding the gains and losses on the interest rate swap agreement.

Summary of Earnings
(In millions, except per-share amounts)
First Quarter Ended
March 31
2011 2010
Net Income
Net income $ 49.6 $ 42.1
(Gain) loss on interest rate swap agreement (0.5 ) 1.4
Income excluding (gain) loss on interest rate swap $ 49.1 $ 43.5
Diluted Earnings Per Share:
Net income $ 3.57 $ 2.78
(Gain) loss on interest rate swap agreement (0.04 ) 0.09
Income excluding (gain) loss on interest rate swap $ 3.53 $ 2.87

As a reminder, a conference call and Internet webcast is scheduled for 3:00 p.m. EDT on Thursday, April 21, 2011, to review first quarter 2011 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. 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 teleconference replay of the call will be available until April 28, 2011 at 11:59 p.m. EDT by dialing 1-877-660-6853 (domestic) and 1-201-612-7415 (international). The account number is 286. The conference ID number is 370546. 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 chemical blends to market-general additive components, the NewMarket family of companies provides the world with the technology to make fuels burn cleaner, engines run smoother and machines last longer.

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: availability of raw materials and transportation systems; supply disruptions at single sourced facilities; ability to respond effectively to technological changes in our industry; failure to protect our intellectual property rights; hazards common to chemical businesses; occurrence or threat of extraordinary events, including natural disasters and terrorist attacks; competition from other manufacturers; sudden or sharp raw materials price increases; gain or loss of significant customers; risks related to operating outside of the United States; the impact of fluctuations in foreign exchange rates; political, economic, and regulatory factors concerning our products; future governmental regulation; resolution of environmental liabilities or legal proceedings; inability to complete recent or future acquisitions or 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 2010 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 millions except per share amounts, unaudited)
Three Months Ended
March 31
2011 2010
Revenue:
Petroleum additives $ 502.7 $ 389.3
Real estate development 2.9 2.9
All other (a) 2.5 2.9
Total $ 508.1 $ 395.1
Segment operating profit:
Petroleum additives $ 80.6 $ 70.4
Real estate development 1.8 1.8
All other (a) 0.2 0.9
Segment operating profit 82.6 73.1
Corporate unallocated expense (4.1 ) (4.2 )
Interest and financing expenses (4.6 ) (3.9 )
Gain (loss) on an interest rate swap agreement (b) 0.9 (2.4 )
Other (expense), net (1.4 ) (0.1 )
Income before income tax expense $ 73.4 $ 62.5
Net income $ 49.6 $ 42.1
Basic earnings per share $ 3.57 $ 2.79
Diluted earnings per share $ 3.57 $ 2.78
Notes to Segment Results and Other Financial Information
(a) "All other" includes the results of our TEL business, as well as certain contract manufacturing of Ethyl Corporation.
(b) The gain (loss) on an interest rate swap agreement represents the change, since the beginning of the reporting period, in the fair value of an interest rate swap which we entered into on June 25, 2009. We are not using hedge accounting to record the interest rate swap and, accordingly, any change in the fair value is immediately recognized in earnings.
NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts, unaudited)
Three Months Ended
March 31
2011 2010
Revenue:
Net sales - product $ 505,225 $ 392,265
Rental revenue 2,858 2,861
508,083 395,126
Costs:
Cost of goods sold - product 366,051 273,628
Cost of rental 1,068 1,090
367,119 274,718
Gross profit 140,964 120,408
Selling, general, and administrative expenses 38,424 30,574
Research, development, and testing expenses 24,461 21,083
Operating profit 78,079 68,751
Interest and financing expenses 4,645 3,949
Other expense, net (a) 67 2,311
Income before income tax expense 73,367 62,491
Income tax expense 23,778 20,353
Net income $ 49,589 $ 42,138
Basic earnings per share $ 3.57 $ 2.79
Diluted earnings per share $ 3.57 $ 2.78
Shares used to compute basic earnings per share 13,890 15,118
Shares used to compute diluted earnings per share 13,906 15,154
Cash dividends declared per share $ 0.440 $ 0.375
Notes to Consolidated Statements of Income
(a) On June 25, 2009 we entered into an interest rate swap. The gain on the interest rate swap was $0.9 million for the three months ended March 31, 2011, and the loss on the interest rate swap was $2.4 million for the three months ended March 31, 2010. We are not using hedge accounting to record the interest rate swap, and accordingly, any change in the fair value is immediately recognized in earnings.
NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
March 31 December 31
2011 2010
ASSETS
Current assets:
Cash and cash equivalents $ 49,803 $ 49,192
Short-term investments - 300

Trade and other accounts receivable, less allowance for doubtful accounts ($956 - 2011; $733 - 2010)

292,513 257,748
Inventories 295,468 273,215
Deferred income taxes 4,625 6,876
Prepaid expenses and other current assets 15,202 15,444
Total current assets 657,611 602,775
Property, plant and equipment, at cost 1,019,474 988,180
Less accumulated depreciation and amortization 667,394 654,204
Net property, plant and equipment 352,080 333,976
Prepaid pension cost 10,734 8,597
Deferred income taxes 19,318 21,974
Other assets and deferred charges 47,566 48,893
Intangibles (net of amortization) and goodwill 44,358 46,526
Total assets $ 1,131,667 $ 1,062,741
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 116,279 $ 109,250
Accrued expenses 60,045 71,558
Dividends payable 5,189 5,304
Book overdraft 2,912 1,063
Long-term debt, current portion 4,347 4,369
Income taxes payable 26,500 14,843
Total current liabilities 215,272 206,387
Long-term debt 253,829 217,544
Other noncurrent liabilities 141,764 147,170
Shareholders' equity

Common stock and paid in capital (without par value) Issued and Outstanding - 13,845,311 in 2011 and 14,034,884 in 2010

4 -
Accumulated other comprehensive loss (64,071 ) (73,820 )
Retained earnings 584,869 565,460
520,802 491,640
Total liabilities and shareholders' equity $ 1,131,667 $ 1,062,741
NEWMARKET CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands, unaudited)
Three Months Ended
March 31
2011 2010

Net income

$ 49,589 $ 42,138

Depreciation and amortization 10,167 8,779
Working capital changes (45,598 ) (10,903 )
Capital expenditures (24,151 ) (6,677 )
Acquisition of business 0 (43,748 )
Net borrowings under revolving credit agreement 37,000 0
Repayment of Foundry Park I construction loan 0 (99,102 )
Borrowing under Foundry Park I mortgage loan 0 68,400
Repurchases of common stock (27,427 ) (14,276 )
Dividends paid (903 ) (5,641 )
All other 1,934 (2,830 )

Increase (decrease) in cash and cash equivalents

$ 611 $ (63,860 )

 

FOR INVESTOR INFORMATION CONTACT:
 David A. Fiorenza
 Investor Relations
 Phone: 804.788.5555
 Fax:  804.788.5688
 Email:  investorrelations@newmarket.com

Additional Financial Information (PDF)