Exhibit 99.1
NEWMARKET CORPORATION REPORTS IMPROVED SECOND QUARTER AND SIX MONTH 2004 RESULTS
| • | Formation of NewMarket Corporation completed |
| • | Petroleum additives and TEL second quarter and six month results improve |
| • | New loan agreement completed |
Richmond, VA, July 29, 2004 –NewMarket Corporation (NYSE-NEU) President and Chief Executive Officer, Thomas E. Gottwald, released the following earnings report for the second quarter and six months 2004 and an update of the company’s operations.
Both petroleum additives and tetraethyl lead (TEL) earnings improved in the second quarter and first half of 2004 over the same periods last year. Earnings from continuing operations for the first half of 2004 improved significantly to $17.2 million, or $1.02 per share, compared to earnings on the same basis for the first half of last year of $5.6 million, or $.33 cents per share. First half net income in 2003, including the $14.8 million gain on the sale of our phenolic antioxidant business and a $1.6 million benefit upon adoption of Statement of Accounting Standards No. 143, amounted to $22 million or $1.32 per share. These 2003 items are included in the summary of earnings chart at the end of this earnings release. Net income for the second quarter of this year of $11.4 million, or $.67 per share, was also up significantly from second quarter 2003 net income of $5.7 million, or $.34 per share.
Petroleum additive profits improved 26% for the first half of 2004 and 20% for the second quarter compared with the same periods last year. These results include an increase in net sales of petroleum additives of 23% for the first half and 22% for the second quarter. This performance represents the best first-half petroleum additives earnings since 1999 and includes higher shipments in almost all of our major product lines. Raw material costs were higher in the 2004 periods. Research, development and testing costs were also higher for the first half of 2004 in support of our growth strategies, the requirements of new product specifications and our commitment to supply our customers with additives that help differentiate their products.
TEL earnings also improved for the second quarter and six months compared with the same periods last year. The improvement reflects higher pricing as well as an increase in shipments
compared to the same periods last year. TEL segment results are subject to significant quarterly swings and therefore we do not believe that quarter to quarter comparisons are particularly meaningful.
During the quarter, we also completed the restructuring of our term and bank loans with terms that we believe are more consistent with our improved financial position. This restructured facility consists of a $100 million revolving loan which we believe provides us more financial flexibility as we move forward.
While we are pleased with our first half performance, we expect the second half results to be lower than the first. We have been somewhat successful in raising the selling prices of our petroleum additives products. However, our current price improvements do not cover the increased raw material costs, as the price of oil-based raw materials remains at record high levels, thereby reducing margins. On TEL, we expect the full year 2004 results to be below last year. Given that the first half for TEL was stronger than the first half last year, we expect that the second half will be weaker.
The continuing improvement in earnings is a result of the dedication and efforts of employees of the family of NewMarket companies worldwide. We believe that the new holding company structure enables the management of our operating subsidiaries, Afton Chemical Corporation and Ethyl Corporation, to focus more intensely than ever on the challenges, opportunities and strategies for their respective product lines and markets.
Sincerely, |
Thomas E. Gottwald |
Please review our 10-Q filing for a more thorough discussion of the topics mentioned in this release.
Earnings for the six months 2003 included significant nonrecurring items. The following summary of earnings totaling net income under generally accepted accounting principles is included below as part of the earnings release.
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Summary of earnings for the Second Quarter and Six Months:
Second Quarter Ended June 30 | Six Months Ended June 30 | |||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||
Net income: | ||||||||||||
Earnings excluding discontinued operations and nonrecurring item | $ | 11.4 | $ | 5.7 | $ | 17.2 | $ | 5.6 | ||||
Discontinued operations (2003 gain on sale of phenolic antioxidant business) (1) | — | — | — | 14.8 | ||||||||
Gain upon adoption of SFAS No. 143 (1) | — | — | — | 1.6 | ||||||||
Net income | $ | 11.4 | $ | 5.7 | $ | 17.2 | $ | 22.0 | ||||
Basic earnings per share: (2) | ||||||||||||
Earnings excluding discontinued operations and nonrecurring item | $ | 0.67 | $ | 0.34 | $ | 1.02 | $ | 0.33 | ||||
Discontinued operations (2003 gain on sale of phenolic antioxidant business) (1) | — | — | — | 0.89 | ||||||||
Gain upon adoption of SFAS No. 143 (1) | — | — | — | 0.10 | ||||||||
Net income | $ | 0.67 | $ | 0.34 | $ | 1.02 | $ | 1.32 | ||||
| (1) | Details included in notes to accompanying financial statements. |
| (2) | Information on diluted earnings per share is included in the accompanying Segment Results and Other Financial Information Statement. |
As a reminder, a conference call and Internet web cast is scheduled for 10:00 a.m. EDT on July 30, 2004 to review second quarter 2004 financial results. You can access the conference call live by dialing 800-657-1269 (domestic) or 973-409-9259 (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 atwww.NewMarket.com orwww.vcall.com. A teleconference replay of the call will be available until 8-2-04 by dialing 877-519-4471 (domestic) and 973-341-3080 (international). The replay passcode is 4974751. 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.
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Factors that could cause actual results to differ materially from expectations include, but are not limited to: timing of sales orders; gain or loss of significant customers; competition from other manufacturers; resolution of environmental liabilities; changes in the demand for our products; significant changes in new product introduction; increases in product cost; the impact of fluctuations in foreign exchange rates on reported results of operations; changes in various markets; geopolitical risks in certain of the countries in which we conduct business; the impact of consolidation of the petroleum additives industry; 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 7A, “Quantitative and Qualitative Disclosures About Market Risk” of our 2003 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.
To the extent that this press release contains non-GAAP financial measures, it also presents both the most directly comparable financial measures calculated and presented in accordance with GAAP and a quantitative reconciliation of the difference between any such non-GAAP measures and such comparable GAAP financial measures. For management’s statement concerning the reasons why management believes that presentation of non-GAAP measures provides useful information to investors concerning NewMarket’s financial condition and results of operations, see the Form 8-K furnished to the Securities and Exchange Commission on July 29, 2004.
FOR INVESTOR INFORMATION CONTACT:
David A. Fiorenza
Investor Relations
Phone: 804.788.5555
Fax: 804.788.5688
Email: investorrelations@newmarket.com
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NEWMARKET CORPORATION AND SUBSIDIARIES
SEGMENT RESULTS AND OTHER FINANCIAL INFORMATION
(In millions except per share amounts, unaudited)
| Second Quarter | Six Months | |||||||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||||||
Net sales: | ||||||||||||||||
Petroleum additives | $ | 218.1 | $ | 178.8 | $ | 432.8 | $ | 350.6 | ||||||||
Tetraethyl lead | 3.4 | 1.8 | 5.5 | 3.4 | ||||||||||||
Total | $ | 221.5 | $ | 180.6 | $ | 438.3 | $ | 354.0 | ||||||||
Segment operating profit: | ||||||||||||||||
Petroleum additives before nonrecurring item | $ | 19.3 | $ | 16.0 | $ | 34.2 | $ | 27.2 | ||||||||
Nonrecurring item (a) | — | — | — | 0.1 | ||||||||||||
Total petroleum additives | 19.3 | 16.0 | 34.2 | 27.3 | ||||||||||||
Tetraethyl lead | 10.1 | 6.4 | 17.4 | 7.8 | ||||||||||||
Nonrecurring item (a) | — | — | — | 2.4 | ||||||||||||
Total tetraethyl lead | 10.1 | 6.4 | 17.4 | 10.2 | ||||||||||||
Segment operating profit | 29.4 | 22.4 | 51.6 | 37.5 | ||||||||||||
Deduct nonrecurring item to reconcile | ||||||||||||||||
Segment Reporting to Consolidated Statements of Income (b) | — | — | — | (2.5 | ) | |||||||||||
Corporate unallocated expense | (5.4 | ) | (4.5 | ) | (10.7 | ) | (9.3 | ) | ||||||||
Interest expense | (4.5 | ) | (6.4 | ) | (9.7 | ) | (11.2 | ) | ||||||||
Other expense, net | (2.5 | ) | (2.8 | ) | (5.2 | ) | (6.1 | ) | ||||||||
Income from continuing operations before income taxes | $ | 17.0 | $ | 8.7 | $ | 26.0 | $ | 8.4 | ||||||||
Net income: | ||||||||||||||||
Earnings excluding discontinued operations and nonrecurring item | $ | 11.4 | $ | 5.7 | $ | 17.2 | $ | 5.6 | ||||||||
Discontinued operations (c) | — | — | — | 14.8 | ||||||||||||
Nonrecurring item (a) | — | — | — | 1.6 | ||||||||||||
Net income | $ | 11.4 | $ | 5.7 | $ | 17.2 | $ | 22.0 | ||||||||
Basic earnings per share: | ||||||||||||||||
Earnings excluding discontinued operations and nonrecurring item | $ | 0.67 | $ | 0.34 | $ | 1.02 | $ | 0.33 | ||||||||
Discontinued operations (c) | — | — | — | 0.89 | ||||||||||||
Nonrecurring item (a) | — | — | — | 0.10 | ||||||||||||
Net income | $ | 0.67 | $ | 0.34 | $ | 1.02 | $ | 1.32 | ||||||||
Diluted earnings per share: | ||||||||||||||||
Earnings excluding discontinued operations and nonrecurring item | $ | 0.66 | $ | 0.34 | $ | 1.00 | $ | 0.33 | ||||||||
Discontinued operations (c) | — | — | — | 0.88 | ||||||||||||
Nonrecurring item (a) | — | — | — | 0.10 | ||||||||||||
Net income | $ | 0.66 | $ | 0.34 | $ | 1.00 | $ | 1.31 | ||||||||
Notes to Segment Results and Other Financial Information
Prior periods have been reclassified to conform to the current presentation.
| (a) | The nonrecurring item after income taxes amounts to $1.6 million and results from the 2003 gain on the implementation of Statement of Financial Accounting Standards (SFAS) No. 143. This nonrecurring item is included in segment operating profit. |
| (b) | For segment reporting, the 2003 gain on the implementation of SFAS No. 143 is shown in operating profit as a nonrecurring item. In the Consolidated Statements of Income, this item is shown as a cumulative effect of accounting change. |
| (c) | Discontinued operations reflect the gain ($23.2 million before tax) on the disposal of the phenolic antioxidant business, which was sold in January 2003. |
Attachment 1 of 4
NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts, unaudited)
Three Months Ended June 30 | Six Months Ended June 30 | ||||||||||||
| 2004 | 2003 | 2004 | 2003 | ||||||||||
Net sales | $ | 221,510 | $ | 180,574 | $ | 438,280 | $ | 354,040 | |||||
Cost of goods sold | 170,978 | 136,576 | 341,887 | 273,982 | |||||||||
Gross profit | 50,532 | 43,998 | 96,393 | 80,058 | |||||||||
TEL marketing agreements services | 10,763 | 7,931 | 18,075 | 10,932 | |||||||||
Selling, general, and administrative expenses | 24,910 | 21,904 | 48,428 | 42,492 | |||||||||
Research, development, and testing expenses | 15,098 | 15,021 | 30,847 | 28,703 | |||||||||
Operating profit | 21,287 | 15,004 | 35,193 | 19,795 | |||||||||
Interest and financing expenses | 4,527 | 6,402 | 9,683 | 11,204 | |||||||||
Other income (expense), net | 283 | 56 | 449 | (142 | ) | ||||||||
Income from continuing operations before income taxes | 17,043 | 8,658 | 25,959 | 8,449 | |||||||||
Income tax expense | 5,689 | 2,913 | 8,787 | 2,841 | |||||||||
Income from continuing operations | 11,354 | 5,745 | 17,172 | 5,608 | |||||||||
Discontinued operations (a) | |||||||||||||
Gain on disposal of business (net of tax) | — | — | — | 14,805 | |||||||||
Income before cumulative effect of accounting change | 11,354 | 5,745 | 17,172 | 20,413 | |||||||||
Cumulative effect of accounting change (net of tax) (b) | — | — | — | 1,624 | |||||||||
Net income | $ | 11,354 | $ | 5,745 | $ | 17,172 | $ | 22,037 | |||||
Basic earnings per share: | |||||||||||||
Earnings from continuing operations | $ | 0.67 | $ | 0.34 | $ | 1.02 | $ | 0.33 | |||||
Discontinued operations (net of tax) (a) | — | — | — | 0.89 | |||||||||
Cumulative effect of accounting change (net of tax) (b) | — | — | — | 0.10 | |||||||||
| $ | 0.67 | $ | 0.34 | $ | 1.02 | $ | 1.32 | ||||||
Diluted earnings per share: | |||||||||||||
Earnings from continuing operations | $ | 0.66 | $ | 0.34 | $ | 1.00 | $ | 0.33 | |||||
Discontinued operations (net of tax) (a) | — | — | — | 0.88 | |||||||||
Cumulative effect of accounting change (net of tax) (b) | — | — | — | 0.10 | |||||||||
| $ | 0.66 | $ | 0.34 | $ | 1.00 | $ | 1.31 | ||||||
Shares used to compute basic earnings per share | 16,904 | 16,724 | 16,859 | 16,706 | |||||||||
Shares used to compute diluted earnings per share | 17,168 | 16,969 | 17,144 | 16,829 | |||||||||
Notes to Consolidated Statements of Income
| (a) | Discontinued operations reflect the phenolic antioxidant business, which was sold in January 2003. The gain on the disposal of this business was $23.2 million ($14.8 million after tax or $.89 per share). |
| (b) | The cumulative effect of accounting change for six months 2003 reflects the gain of $2.5 million ($1.6 million after tax or $.10 per share) recognized upon the adoption of Statement of Financial Accounting Standard (SFAS) No. 143 on January 1, 2003. |
Attachment 2 of 4
NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
| June 30 2004 (unaudited) | December 31 2003 | |||||||
| ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 21,958 | $ | 29,052 | ||||
Restricted cash | 1,715 | 1,903 | ||||||
Trade and other accounts receivable, less allowance for doubtful accounts ($3,316 - 2004; $2,382 - 2003) | 146,067 | 132,542 | ||||||
Receivable - TEL marketing agreements services | 2,006 | 2,456 | ||||||
Inventories | 128,147 | 124,428 | ||||||
Prepaid expenses | 7,417 | 3,810 | ||||||
Deferred income taxes | 10,719 | 11,296 | ||||||
Total current assets | 318,029 | 305,487 | ||||||
Property, plant and equipment, at cost | 754,280 | 751,919 | ||||||
Less accumulated depreciation and amortization | 588,859 | 577,686 | ||||||
Net property, plant and equipment | 165,421 | 174,233 | ||||||
Prepaid pension cost | 21,858 | 21,829 | ||||||
Deferred income taxes | 6,770 | 5,471 | ||||||
Other assets and deferred charges | 72,996 | 75,564 | ||||||
Intangibles, net of amortization | 59,613 | 62,849 | ||||||
Total assets | $ | 644,687 | $ | 645,433 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 56,392 | $ | 53,589 | ||||
Accrued expenses | 40,487 | 50,691 | ||||||
Long-term debt, current portion | 582 | 6,978 | ||||||
Income taxes payable | 9,092 | 10,055 | ||||||
Total current liabilities | 106,553 | 121,313 | ||||||
Long-term debt | 204,147 | 201,839 | ||||||
Other noncurrent liabilities | 118,476 | 122,598 | ||||||
Shareholders’ equity | ||||||||
Common stock ($1 par value) | ||||||||
Issued - 16,963,759 in 2004 and 16,786,009 in 2003 | 16,964 | 16,786 | ||||||
Additional paid in capital | 67,686 | 67,091 | ||||||
Accumulated other comprehensive loss | (22,281 | ) | (20,164 | ) | ||||
Retained earnings | 153,142 | 135,970 | ||||||
| 215,511 | 199,683 | |||||||
Total liabilities and shareholders’ equity | $ | 644,687 | $ | 645,433 | ||||
Attachment 3 of 4
NEWMARKET CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
Six Months Ended June 30 | ||||||||
| 2004 | 2003 | |||||||
Cash and cash equivalents at beginning of year | $ | 29,052 | $ | 15,478 | ||||
Cash flows from operating activities: | ||||||||
Net income | 17,172 | 22,037 | ||||||
Adjustments to reconcile net income to cash flows from operating activities: | ||||||||
Depreciation and amortization | 21,682 | 23,285 | ||||||
Amortization of deferred financing costs | 1,636 | 3,228 | ||||||
Cumulative effect of accounting changes | — | (2,549 | ) | |||||
Gain on sale of phenolic antioxidant business | — | (23,196 | ) | |||||
Noncash pension expense | 5,158 | 4,633 | ||||||
Deferred income tax (benefit) expense | (2,169 | ) | 118 | |||||
Working capital changes | (31,457 | ) | (6,071 | ) | ||||
Cash pension contributions | (7,022 | ) | (3,135 | ) | ||||
TEL working capital advance | 114 | 1,300 | ||||||
Proceeds from legal settlement | — | 4,825 | ||||||
Other, net | 614 | (82 | ) | |||||
Cash provided from operating activities | 5,728 | 24,393 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (6,047 | ) | (4,104 | ) | ||||
Proceeds from sale of phenolic antioxidant business | — | 27,770 | ||||||
Proceeds from sale of certain assets | — | 12,576 | ||||||
Prepayment for TEL marketing agreements services | — | (3,200 | ) | |||||
Other, net | 11 | 13 | ||||||
Cash (used in) provided from investing activities | (6,036 | ) | 33,055 | |||||
Cash flows from financing activities: | ||||||||
Repayment of term loan | (53,807 | ) | (14,490 | ) | ||||
Repayment of debt - previous agreements | — | (284,519 | ) | |||||
Issuance of revolving credit agreement | 50,000 | — | ||||||
Issuance of senior notes and term loan | — | 265,000 | ||||||
Debt issuance costs | (1,089 | ) | (13,094 | ) | ||||
Proceeds from exercise of stock options | 773 | 195 | ||||||
Other, net | (281 | ) | (239 | ) | ||||
Cash used in financing activities | (4,404 | ) | (47,147 | ) | ||||
Effect of foreign exchange on cash and cash equivalents | (2,382 | ) | 1,077 | |||||
(Decrease) increase in cash and cash equivalents | (7,094 | ) | 11,378 | |||||
Cash and cash equivalents at end of period | $ | 21,958 | $ | 26,856 | ||||
Attachment 4 of 4