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NewMarket Corporation Reports Record Results For The Year 2011

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)
 
 
    Fourth Quarter Ended     Twelve Months Ended
December 31 December 31
2011     2010 2011     2010
 
Revenue:
Petroleum additives $ 499.0 $ 455.0 $ 2,126.5 $ 1,774.4
Real estate development 2.9 2.7 11.4 11.3
All other (a)   3.7     2.9     11.7     11.7  
Total $ 505.6   $ 460.6   $ 2,149.6   $ 1,797.4  
 
Segment operating profit:
Petroleum additives
Petroleum additives before gain on legal settlement, net $ 59.3 $ 72.0 $ 309.6 $ 299.1
Gain on legal settlement, net (b)   0.0     0.0     38.7     0.0  
Total petroleum additives 59.3 72.0 348.3 299.1
 
Real estate development 1.7 1.7 7.0 7.0
All other (a)   1.4     (0.7 )   2.9     2.4  
 
Segment operating profit 62.4 73.0 358.2 308.5
 
Corporate unallocated expense (5.2 ) (5.8 ) (16.7 ) (20.3 )
Interest and financing expenses (4.7 ) (4.5 ) (18.8 ) (17.3 )
(Loss) gain on an interest rate swap agreement (c) (1.4 ) 7.2 (17.5 ) (10.3 )
Other (expense), net   (0.4 )   (0.4 )   (1.5 )   (0.6 )
 
Income before income tax expense $ 50.7   $ 69.5   $ 303.7   $ 260.0  
 
Net income $ 33.7   $ 49.4   $ 206.9   $ 177.1  
 
Basic earnings per share $ 2.51   $ 3.48   $ 15.10   $ 12.12  
 
Diluted earnings per share $ 2.51   $ 3.47   $ 15.09   $ 12.09  
 
 
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) On September 13, 2011 we signed a settlement agreement with Innospec Inc. and its subsidiaries Alcor Chemie Vertriebs GmbH and Innospec Ltd. (collectively, Innospec) which provided for mutual releases of the parties and dismissal of the actions with prejudice. Under the settlement agreement, Innospec will pay NewMarket an aggregate amount of approximately $45 million in a combination of cash, a promissory note, and stock, of which $25 million was paid in cash on September 20, 2011 and $5 million was paid in the form of 195,313 shares of unregistered Innospec Inc. common stock. Fifteen million dollars is payable in three equal annual installments of $5 million under the promissory note, which bears simple interest at 1% per year. The first installment is due on September 10, 2012. The gain is net of expenses related to the settlement of the lawsuit.
 
(c) The (loss) gain on an interest rate swap 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 fair value is immediately recognized in earnings.
 
 
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
2011     2010 2011     2010
Revenue:
Net sales - product $ 502,698 $ 457,906 $ 2,138,127 $ 1,786,076
Rental revenue   2,858     2,742   11,431     11,316  
  505,556     460,648   2,149,558     1,797,392  
 
Costs:
Cost of goods sold - product 379,302 332,537 1,586,145 1,277,505
Cost of rental   1,183     1,183   4,386     4,428  
  380,485     333,720   1,590,531     1,281,933  
 
Gross profit 125,071 126,928 559,027 515,459
 
Selling, general, and administrative expenses 39,784 34,489 151,602 136,967
Research, development, and testing expenses 28,768 25,322 105,496 91,188
Gain on legal settlement, net (a)   -     -   38,656     -  
 
Operating profit 56,519 67,117 340,585 287,304
 
Interest and financing expenses 4,685 4,533 18,820 17,261
Other (expense) income, net (b)   (1,169 )   6,927   (18,048 )   (10,047 )
 
Income before income tax expense 50,665 69,511 303,717 259,996
 
Income tax expense   16,967     20,099   96,810     82,871  
 
Net income $ 33,698   $ 49,412 $ 206,907   $ 177,125  
 
 
 
Basic earnings per share $ 2.51   $ 3.48 $ 15.10   $ 12.12  
 
Diluted earnings per share $ 2.51   $ 3.47 $ 15.09   $ 12.09  
 
Shares used to compute basic earnings per share   13,405     14,209   13,707     14,619  
 
Shares used to compute diluted earnings per share   13,405     14,235   13,712     14,650  
 
Cash dividends declared per share $ 0.75   $ 0.44 $ 2.39   $ 1.565  
 
 
Notes to Consolidated Statements of Income
 
(a) On September 13, 2011, we signed a settlement agreement with Innospec Inc. and its subsidiaries Alcor Chemie Vertriebs GmbH and Innospec Ltd. (collectively, Innospec) which provided for mutual releases of the parties and dismissal of the actions with prejudice. Under the settlement agreement, Innospec will pay NewMarket an aggregate amount of approximately $45 million in a combination of cash, a promissory note, and stock, of which $25 million was paid in cash on September 20, 2011 and $5 million was paid in the form of 195,313 shares of unregistered Innospec Inc. common stock. Fifteen million dollars is payable in three equal annual installments of $5 million under the promissory note, which bears simple interest at 1% per year. The first installment is due on September 10, 2012. The gain is net of expenses related to the settlement of the lawsuit.
 
(b) On June 25, 2009 we entered into an interest rate swap. The loss on the interest rate swap was $1.4 million for the fourth quarter ended December 31, 2011 and $17.5 million for the twelve months ended December 31, 2011. The gain on the interest rate swap was $7.2 million for the fourth quarter ended December 31, 2010 and the loss was $10.3 million for the twelve months ended December 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)
 
 
    December 31     December 31
2011 2010
ASSETS
 
Current assets:
Cash and cash equivalents $ 50,370 $ 49,192
Short-term investments 0 300

Trade and other accounts receivable, less allowance for doubtful accounts ($516 - 2011; $733 - 2010)

278,332 257,748
Inventories 306,785 273,215
Deferred income taxes 7,261 6,876
Prepaid expenses and other current assets   36,983     15,444  
Total current assets   679,731     602,775  
 
Property, plant and equipment, at cost 1,034,472 988,180
Less accumulated depreciation and amortization   681,506     654,204  
Net property, plant and equipment   352,966     333,976  
 
Prepaid pension cost 11,494 8,597
Deferred income taxes 35,805 21,974
Other assets and deferred charges 73,619 48,893
Intangibles (net of amortization) and goodwill   38,047     46,526  
Total assets $ 1,191,662   $ 1,062,741  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 103,217 $ 109,250
Accrued expenses 78,546 71,558
Dividends payable 8,529 5,304
Book overdraft 1,680 1,063
Long-term debt, current portion 10,966 4,369
Income taxes payable   13,086     14,843  
Total current liabilities   216,024     206,387  
 
Long-term debt 232,601 217,544
Other noncurrent liabilities 193,444 147,170
 
Shareholders' equity

Common stock and paid in capital (without par value) Issued and Outstanding - 13,404,831 in 2011 and 14,034,884 in 2010

64 -
Accumulated other comprehensive loss (98,732 ) (73,820 )
Retained earnings   648,261     565,460  
  549,593     491,640  
Total liabilities and shareholders' equity $ 1,191,662   $ 1,062,741  
 
 
NEWMARKET CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands, unaudited)
 
 
    Twelve Months Ended
December 31
2011     2010
 
Net income $ 206,907 $ 177,125
Depreciation and amortization 41,749 37,667
Cash pension and postretirement contributions (31,376 ) (22,168 )
Noncash pension and postretirement expense 16,499 16,743
Gain on legal settlement, net (38,656 ) -
Proceeds from legal settlement 25,000 -
Working capital changes (62,011 ) (62,997 )
Capital expenditures (53,515 ) (36,406 )
Net borrowings under revolving credit agreement 18,000 4,000
Repurchases of common stock (98,093 ) (121,517 )
Dividends paid (32,588 ) (22,608 )
Repayment of Foundry Park I construction loan - (99,102 )
Borrowing under Foundry Park I mortgage loan - 68,400
Acquisition of business - (41,300 )
All other   9,262     (476 )
 
Increase (decrease) in cash and cash equivalents $ 1,178   $ (102,639 )
 
 
NEWMARKET CORPORATION AND SUBSIDIARIES
NON-GAAP FINANCIAL INFORMATION
(In thousands, unaudited)
 
 
    Fourth Quarter Ended     Twelve Months Ended
December 31 December 31
2011     2010 2011     2010
 
Net Income $ 33,698 $ 49,412 $ 206,907 $ 177,125
 
Add:
Interest and financing expenses 4,685 4,533 18,820 17,261
Income tax expense 16,967 20,099 96,810 82,871
Depreciation and amortization   10,600   9,836     41,749     37,667
 
EBITDA 65,950 83,880 364,286 314,924
 
Less: Gain on legal settlement - - (38,656 ) -
Plus Loss/Less Gain: Interest rate swap agreement   1,363   (7,232 )   17,516     10,324
 
EBITDA, as adjusted   67,313   76,648     343,146     325,248
 




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