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Form 8-K NEWMARKET CORP For: Oct 26

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October 26, 2015 5:14 PM EDT


 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
  
 
FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 26, 2015
  
 
NEWMARKET CORPORATION
(Exact name of registrant as specified in its charter)
 
 
 Commission File No. 1-32190
Virginia
 
20-0812170
(State or other jurisdiction
of incorporation)
 
(IRS Employer
Identification No.)
 
 
330 South Fourth Street, Richmond, Virginia
 
23219
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (804) 788-5000
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 






Item 2.02.    Results of Operations and Financial Condition
On October 26, 2015, NewMarket Corporation (the “Company”) issued a press release regarding its earnings for the third quarter ended September 30, 2015. A copy of this press release is furnished as Exhibit 99.1 hereto and incorporated herein by reference.
In accordance with General Instruction B.2 of Form 8-K, the information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.


Item 9.01.     Financial Statements and Exhibits
 
(d)Exhibits.
99.1
Press release regarding quarterly earnings issued by the Company on October 26, 2015.






SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: October 26, 2015
 
NEWMARKET CORPORATION
 
 
By:
 
/s/ Brian D. Paliotti
 
 
Brian D. Paliotti
 
 
Vice President and Chief Financial Officer





Exhibit Index
 
Exhibit No.
  
Description
99.1
  
Press release regarding quarterly earnings issued by the Company on October 26, 2015.



EXHIBIT 99.1

NewMarket Corporation Reports Third Quarter and First Nine Months 2015 Results
•
Petroleum Additives Third Quarter Operating Profit Up 6.6% and Year to Date Unchanged
•
Third Quarter Net Income Up 9% and Year to Date Up 1.9%
•
435,400 Shares Repurchased in Third Quarter
Richmond, VA, October 26, 2015 – NewMarket Corporation (NYSE: NEU) Chairman and Chief Executive Officer, Thomas E. Gottwald, released the following earnings report of the Company’s operations for the third quarter and first nine months of 2015.
Net income for the third quarter of 2015 was $62.0 million, or $5.08 per share, compared to net income of $56.9 million, or $4.53 per share, for the third quarter of 2014. For the first nine months of 2015, net income was $184.7 million, or $14.94 per share, compared to net income of $181.2 million, or $14.20 per share, for the first nine months of last year. Net income for all periods included the impact of valuing an interest rate swap at fair value. Excluding this item, third quarter 2015 earnings were $64.1 million, or $5.25 per share, compared to $56.8 million, or $4.52 per share, last year. On the same basis, earnings for the first nine months of this year were $187.4 million, or $15.16 per share, compared to $183.9 million, or $14.41 per share, last year (see Summary of Earnings table below).
Petroleum additives operating profit for the third quarter of 2015 was $100.5 million, a 6.6% increase over the third quarter operating profit last year of $94.3 million. The increase was mainly due to lower raw material costs partially offset by an increase in research and development investments and changes in foreign currency exchange. Sales for the petroleum additives segment for the third quarter of 2015 were $536.2 million, down 8.4% versus the same period last year, due mainly to foreign currency exchange and changes in selling prices and mix. Shipments were essentially flat between the periods, with increases in fuel additives shipments globally offset by declines in lubricant additives, primarily in the North America region.
For the first nine months of the year, operating profit for the petroleum additives segment was $299.6 million, the same as the first nine months of 2014. Sales for the first nine months of this year were $1,648.3 million compared to sales in the first nine months of last year of $1,777.2 million, or a decrease of 7.3%. This decrease was primarily due to foreign currency exchange and changes in selling prices and mix. Shipments remained relatively flat between the periods, with increases in fuel additives shipments, primarily in the North America region, offset by declines in lubricant additives in all regions except for Latin America.
Our business continues to generate strong cash flows. During the year, we paid dividends of $51.6 million, funded capital expenditures of $84.2 million and repurchased 456,483 shares of our common stock for a total of $180.6 million, including 435,400 shares in the third quarter.
Construction continues on our new manufacturing facility on Jurong Island, Singapore. We expect to complete the first phase of this facility in late 2015, with commercial production in early 2016. In August, we announced the second phase of construction, which includes additional component production units that will more than double our investment in the Singapore facility. Phase two is scheduled to be completed in 2017.
Our petroleum additives business continues to perform consistent with our expectations. Our ongoing commitment to provide our customers with innovative solutions to meet their business needs is evidenced by the 15% increase in our research and development investments thus far in 2015 and the construction of our manufacturing facility in Singapore. 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.


 
 
Summary of Earnings
(In millions, except per-share amounts)
 
 
Third Quarter Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2015
 
2014
 
2015
 
2014
Net Income:
 
 
 
 
 
 
 
 
Net income
 
$
62.0

 
$
56.9

 
$
184.7

 
$
181.2

Loss (gain) on interest rate swap agreement
 
2.1

 
(0.1
)
 
2.7

 
2.7

Income excluding the above special item
 
$
64.1

 
$
56.8

 
$
187.4

 
$
183.9

Diluted Earnings Per Share:
 
 
 
 
 
 
 
 
Net income
 
$
5.08

 
$
4.53

 
$
14.94

 
$
14.20

Loss (gain) on interest rate swap agreement
 
0.17

 
(0.01
)
 
0.22

 
0.21

Income excluding the above special item
 
$
5.25

 
$
4.52

 
$
15.16

 
$
14.41


Please read our third quarter Form 10-Q for more details on operations of the Company.

Sincerely,
Thomas E. Gottwald
The results for this year and last year include the impact of valuing an interest rate swap at fair value. The Company is reporting net income and related per share amounts including this item, as well as excluding it, in the Summary of Earnings table included in the earnings release. The Segment Results and Other Financial Information table included in this earnings release includes a non-GAAP financial measure, Income before Special Items and Income Tax Expense, which is reconciled to a GAAP measure. The Company has also 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. EBITDA is shown on the schedule both including and excluding the interest rate swap agreement. The Company believes that even though these items are not required by or presented in accordance with United States generally accepted accounting principles (GAAP), these additional measures enhance understanding of the Company’s performance and period to period comparability. The Company believes that these items 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. EDT on Tuesday, October 27, 2015 to review third quarter and first nine months 2015 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 November 3, 2015 at 11:59 p.m. EST by dialing 1-877-660-6853 (domestic) and 1-201-612-7415 (international). The conference ID number is 13621568. 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, availability of raw materials and distribution systems; disruptions at manufacturing facilities, including single-sourced facilities; 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; gain or loss of significant customers; 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; political, economic, and regulatory factors concerning our products; future governmental regulation; resolution of environmental liabilities or legal proceedings; and inability to complete future acquisitions or 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 2014 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.

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







NEWMARKET CORPORATION AND SUBSIDIARIES
SEGMENT RESULTS AND OTHER FINANCIAL INFORMATION
(In thousands, except per-share amounts, unaudited)

 
 
Third Quarter Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2015
 
2014
 
2015
 
2014
Revenue:
 
 
 
 
 
 
 
 
Petroleum additives
 
$
536,184

 
$
585,618

 
$
1,648,312

 
$
1,777,168

All other (a)
 
4,749

 
4,049

 
12,896

 
9,359

Total
 
$
540,933

 
$
589,667

 
$
1,661,208

 
$
1,786,527

Segment operating profit:
 
 
 
 
 
 
 
 
Petroleum additives
 
$
100,515

 
$
94,310

 
$
299,592

 
$
299,578

All other (a)
 
1,207

 
399

 
3,522

 
1,792

Segment operating profit
 
101,722

 
94,709

 
303,114

 
301,370

Corporate unallocated expense
 
(4,196
)
 
(6,320
)
 
(16,751
)
 
(18,448
)
Interest and financing expenses
 
(3,538
)
 
(4,168
)
 
(10,936
)
 
(12,678
)
Other income (expense), net
 
177

 
(73
)
 
297

 
119

Income before special items and income tax expense
 
94,165

 
84,148

 
275,724

 
270,363

Gain (loss) on an interest rate swap agreement (b)
 
(3,479
)
 
113

 
(4,365
)
 
(4,390
)
Income before income tax expense
 
$
90,686

 
$
84,261

 
$
271,359

 
$
265,973

Net income
 
$
62,009

 
$
56,913

 
$
184,689

 
$
181,200

Earnings per share - basic and diluted
 
$
5.08

 
$
4.53

 
$
14.94

 
$
14.20


Notes to Segment Results and Other Financial Information
(a) "All other" includes the results of our tetraethyl lead (TEL) business, as well as certain contract manufacturing performed by 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 changes to fair value of 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)

 
 
Third Quarter Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2015
 
2014
 
2015
 
2014
Net sales
 
$
540,933

 
$
589,667

 
$
1,661,208

 
$
1,786,527

Cost of goods sold
 
366,162

 
424,448

 
1,135,457

 
1,278,632

Gross profit
 
174,771

 
165,219

 
525,751

 
507,895

Selling, general, and administrative expenses
 
38,298

 
41,376

 
120,762

 
121,837

Research, development, and testing expenses
 
38,849

 
35,799

 
118,652

 
103,373

Operating profit
 
97,624

 
88,044

 
286,337

 
282,685

Interest and financing expenses, net
 
3,538

 
4,168

 
10,936

 
12,678

Other income (expense), net (a)
 
(3,400
)
 
385

 
(4,042
)
 
(4,034
)
Income before income tax expense
 
90,686

 
84,261

 
271,359

 
265,973

Income tax expense
 
28,677

 
27,348

 
86,670

 
84,773

Net income
 
$
62,009

 
$
56,913

 
$
184,689

 
$
181,200

Earnings per share - basic and diluted
 
$
5.08

 
$
4.53

 
$
14.94

 
$
14.20

Cash dividends declared per share
 
$
1.40

 
$
1.10

 
$
4.20

 
$
3.30


Notes to Consolidated Statements of Income

(a)
On June 25, 2009, we entered into an interest rate swap. Other income (expense), net includes a loss on the interest rate swap of $3.5 million for the third quarter ended September 30, 2015 and a gain of $0.1 million for the third quarter ended September 30, 2014. The loss on the interest rate swap was $4.4 million for both the nine months ended September 30, 2015 and September 30, 2014. We are not using hedge accounting to record the changes to fair value of 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 except share amounts, unaudited)

 
 
September 30,
2015
 
December 31,
2014
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
110,327

 
$
103,003

Trade and other accounts receivable, less allowance for doubtful accounts ($487 - 2015; $443 - 2014)
 
311,087

 
302,803

Inventories
 
340,494

 
348,420

Deferred income taxes
 
6,897

 
7,837

Prepaid expenses and other current assets
 
35,236

 
35,128

Total current assets
 
804,041

 
797,191

Property, plant, and equipment, at cost
 
1,090,986

 
1,016,868

Less accumulated depreciation and amortization
 
720,555

 
709,009

Net property, plant, and equipment
 
370,431

 
307,859

Prepaid pension cost
 
21,009

 
16,082

Deferred income taxes
 
37,394

 
48,499

Intangibles (net of amortization) and goodwill
 
12,411

 
16,859

Deferred charges and other assets
 
43,694

 
45,435

Total assets
 
$
1,288,980

 
$
1,231,925

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
126,266

 
$
137,688

Accrued expenses
 
94,082

 
86,539

Dividends payable
 
15,396

 
15,721

Income taxes payable
 
11,553

 
6,462

Other current liabilities
 
10,460

 
13,264

Total current liabilities
 
257,757

 
259,674

Long-term debt
 
507,571

 
363,526

Other noncurrent liabilities
 
147,471

 
187,684

Total liabilities
 
912,799

 
810,884

Shareholders' equity:
 
 
 
 
Common stock and paid-in capital (without par value); issued and outstanding shares - 11,986,215 in 2015 and 12,446,365 in 2014
 
—

 
—

Accumulated other comprehensive loss
 
(137,866
)
 
(139,160
)
Retained earnings
 
514,047

 
560,201

Total shareholders' equity
 
376,181

 
421,041

Total liabilities and shareholders' equity
 
$
1,288,980

 
$
1,231,925







NEWMARKET CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands, unaudited)

 
 
Nine Months Ended
September 30,
 
 
2015
 
2014
Net income
 
$
184,689

 
$
181,200

Depreciation and amortization
 
31,378

 
31,244

Cash pension and postretirement contributions
 
(20,007
)
 
(17,449
)
Noncash pension and postretirement expense
 
16,946

 
12,607

Working capital changes
 
(27,858
)
 
(58,699
)
Capital expenditures
 
(84,206
)
 
(38,949
)
Net borrowings under revolving credit facility
 
144,000

 
35,000

Repurchases of common stock
 
(180,609
)
 
(209,336
)
Dividends paid
 
(51,605
)
 
(41,962
)
Proceeds from legal settlement
 
—

 
5,150

All other
 
(5,404
)
 
4,027

Increase (decrease) in cash and cash equivalents
 
$
7,324

 
$
(97,167
)





NEWMARKET CORPORATION AND SUBSIDIARIES
NON-GAAP FINANCIAL INFORMATION
(In thousands, unaudited)

 
 
Third Quarter Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2015
 
2014
 
2015
 
2014
Net Income
 
$
62,009

 
$
56,913

 
$
184,689

 
$
181,200

Add:
 
 
 
 
 
 
 
 
Interest and financing expenses, net
 
3,538

 
4,168

 
10,936

 
12,678

Income tax expense
 
28,677

 
27,348

 
86,670

 
84,773

Depreciation and amortization
 
10,540

 
10,169

 
30,563

 
30,178

EBITDA
 
104,764

 
98,598

 
312,858

 
308,829

(Less) plus: (gain) loss on interest rate swap agreement
 
3,479

 
(113
)
 
4,365

 
4,390

EBITDA, as adjusted
 
$
108,243

 
$
98,485

 
$
317,223

 
$
313,219









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