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NewMarket Corporation Reports Record Results For The Year 2012

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 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 2011 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,
  2012     2011     2012     2011  
 
Revenue:
Petroleum additives $ 511.2 $ 499.0 $ 2,200.8 $ 2,126.5
Real estate development 2.8 2.9 11.4 11.4
All other (a)   2.2     3.7     11.1     11.7  
Total $ 516.2   $ 505.6   $ 2,223.3   $ 2,149.6  
 
Segment operating profit:
Petroleum additives
Petroleum additives before gain on legal settlement, net $ 71.6 $ 59.3 $ 372.0 $ 309.6
Gain on legal settlement, net (b)   0.0     0.0     0.0     38.7  
Total petroleum additives 71.6 59.3 372.0 348.3
 
 
Real estate development 1.6 1.7 7.0 7.0
All other (a)   1.2     1.4     6.3     2.9  
 
Segment operating profit 74.4 62.4 385.3 358.2
 
Corporate unallocated expense (4.2 ) (5.2 ) (20.2 ) (16.7 )
Interest and financing expenses (2.3 ) (4.7 ) (10.8 ) (18.8 )
Gain (loss) on an interest rate swap agreement (c) 0.3 (1.4 ) (5.3 ) (17.5 )
Loss on early extinguishment of debt (d) 0.0 0.0 (9.9 ) 0.0
Other (expense) income, net   (0.4 )   (0.4 )   2.3     (1.5 )
 
Income before income tax expense $ 67.8   $ 50.7   $ 341.4   $ 303.7  
 
Net income $ 53.1   $ 33.7   $ 239.6   $ 206.9  
 
Basic earnings per share $ 3.94   $ 2.51   $ 17.85   $ 15.10  
 
Diluted earnings per share $ 3.94   $ 2.51   $ 17.85   $ 15.09  
 
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) 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 was paid in September 2012. The gain is net of expenses related to the settlement of the lawsuit.
 
(c) 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.
 
(d) In March 2012, we entered into a $650 million five-year unsecured revolving credit facility which replaced our previous $300 million unsecured revolving credit facility. In April 2012, we used a portion of this new credit facility to fund the early redemption of all of our outstanding 7.125% senior notes due 2016 (senior notes), representing an aggregate principal amount of $150 million. In May 2012, we used a portion of the new credit facility to repay the outstanding principal amount on the Foundry Park I, LLC mortgage loan agreement (mortgage loan). As a result, we recognized a loss on early extinguishment of debt of $9.9 million during the twelve months ended December 31, 2012 from accelerated amortization of financing fees associated with the prior revolving credit facility, the senior notes, and the mortgage loan, as well as from costs associated with redeeming the senior notes prior to maturity.
       
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,
2012 2011 2012 2011
Revenue:
Net sales - product $ 513,322 $ 502,698 $ 2,211,878 $ 2,138,127
Rental revenue   2,858     2,858     11,431     11,431  
  516,180     505,556     2,223,309     2,149,558  
 
Costs:
Cost of goods sold - product 374,461 379,302 1,581,393 1,586,145
Cost of rental   1,183     1,183     4,386     4,386  
  375,644     380,485     1,585,779     1,590,531  
 
Gross profit 140,536 125,071 637,530 559,027
 
Selling, general, and administrative expenses 39,506 39,784 154,209 151,602
Research, development, and testing expenses 31,276 28,768 117,845 105,496
Gain on legal settlement, net (a)   0     0     0     38,656  
 
Operating profit 69,754 56,519 365,476 340,585
 
Interest and financing expenses 2,317 4,685 10,815 18,820
Loss on early extinguishment of debt (b) 0 0 9,932 0
Other income (expense), net (c)   402     (1,169 )   (3,338 )   (18,048 )
 
Income before income tax expense 67,839 50,665 341,391 303,717
 
Income tax expense   14,776     16,967     101,798     96,810  
 
Net income $ 53,063   $ 33,698   $ 239,593   $ 206,907  
 
Basic earnings per share $ 3.94   $ 2.51   $ 17.85   $ 15.10  
 
Diluted earnings per share $ 3.94   $ 2.51   $ 17.85   $ 15.09  
 
Cash dividends declared per share $ 25.75   $ 0.75   $ 28.00   $ 2.39  
 
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 was paid in September 2012. The gain is net of expenses related to the settlement of the lawsuit.

 
(b) In March 2012, we entered into a $650 million five-year unsecured revolving credit facility which replaced our previous $300 million unsecured revolving credit facility. In April 2012, we used a portion of this new credit facility to fund the early redemption of all of our outstanding 7.125% senior notes due 2016 (senior notes), representing an aggregate principal amount of $150 million. In May 2012, we used a portion of the new credit facility to repay the outstanding principal amount on the Foundry Park I, LLC mortgage loan agreement (mortgage loan). As a result, we recognized a loss on early extinguishment of debt of $9.9 million during the twelve months ended December 31, 2012 from accelerated amortization of financing fees associated with the prior revolving credit facility, the senior notes, and the mortgage loan, as well as from costs associated with redeeming the senior notes prior to maturity.
 
(c) On June 25, 2009 we entered into an interest rate swap. The gain on the interest rate swap was $0.3 million for the fourth quarter ended December 31, 2012 and the loss on the interest rate swap was $5.3 million for the twelve months ended December 31, 2012. 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. 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,
  2012     2011  
ASSETS
 
Current assets:
Cash and cash equivalents $ 89,129 $ 50,370

Trade and other accounts receivable, less allowance for doubtful accounts ($319 - 2012; $516 - 2011)

297,055 278,332
Inventories 322,674 306,785
Deferred income taxes 8,452 7,261
Prepaid expenses and other current assets   18,185     36,983  
Total current assets   735,495     679,731  
 
Property, plant, and equipment, at cost 1,070,967 1,034,472
Less accumulated depreciation and amortization   712,596     681,506  
Net property, plant, and equipment   358,371     352,966  
 
Prepaid pension cost 12,710 11,494
Deferred income taxes 48,385 35,805
Other assets and deferred charges 72,007 73,619
Intangibles (net of amortization) and goodwill   30,542     38,047  
Total assets $ 1,257,510   $ 1,191,662  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 119,298 $ 103,217
Accrued expenses 79,061 78,546
Dividends payable - 8,529
Book overdraft 3,906 1,680
Long-term debt, current portion 4,382 10,966
Income taxes payable   10,024     13,086  
Total current liabilities   216,671     216,024  
 
Long-term debt 424,407 232,601
Other noncurrent liabilities 214,227 193,444
 
Shareholders' equity

Common stock and paid-in capital (without par value); issued and outstanding shares - 13,417,877 in 2012 and 13,404,831 in 2011

721 64
Accumulated other comprehensive loss (110,689 ) (98,732 )
Retained earnings   512,173     648,261  
  402,205     549,593  
Total liabilities and shareholders' equity $ 1,257,510   $ 1,191,662  
   
NEWMARKET CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED CASH FLOW DATA
(In thousands, unaudited)
 
 
 
Twelve Months Ended
December 31,
  2012     2011  
 
Net income $ 239,593 $ 206,907
Depreciation and amortization 43,389 43,352
Loss on early extinguishment of debt 9,932 0
Cash payment for 7.125% senior notes redemption (5,345 ) 0

Cash pension and postretirement contributions

(32,431 ) (31,376 )

Noncash pension and postretirement expense

18,855 16,499
Gain on legal settlement, net 0 (38,656 )
Proceeds from legal settlements 5,050 25,000
Proceeds from sale of equity securities 6,303 0
Working capital changes (14,243 ) (62,011 )
Capital expenditures (38,753 ) (53,515 )
Issuance of 4.10% senior notes 349,405 0
Repayment of 7.125% senior notes and mortgage loan (213,544 ) (2,731 )
Net borrowings under revolving credit facility 53,000 18,000
Repurchases of common stock 0 (98,093 )
Dividends paid (375,681 ) (32,588 )
All other   (6,771 )   10,390  
 
Increase in cash and cash equivalents $ 38,759   $ 1,178  
         
NEWMARKET CORPORATION AND SUBSIDIARIES
NON-GAAP FINANCIAL INFORMATION
(In thousands, unaudited)
 
 
 
Fourth Quarter Ended Twelve Months Ended
December 31, December 31,
  2012     2011     2012     2011  
 
Net Income $ 53,063 $ 33,698 $ 239,593 $ 206,907
 
Add:
Interest and financing expenses 2,317 4,685 10,815 18,820
Income tax expense 14,776 16,967 101,798 96,810
Depreciation and amortization   10,364     10,600     41,314     41,749  
 
EBITDA 80,520 65,950 393,520 364,286
 
Less: gain on legal settlement 0 0 0 (38,656 )
Less gain / plus loss: interest rate swap agreement (304 ) 1,363 5,346 17,516
Plus: loss on early extinguishment of debt   0     0     9,932     0  
 
EBITDA, as adjusted $ 80,216   $ 67,313   $ 408,798   $ 343,146  




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