Transcription of 2017 ANNUAL REPORT - newmarket.com
1 2017 ANNUAL REPORT . Building for the future FINANCIAL HIGHLIGHTS. 2017 2016. in thousands, except share and per-share amounts OPERATIONS: Net sales .. $2,198,404 $2,049,451. Petroleum additives operating profit .. $ 359,832 $ 384,906. Net income .. $ 190,509 $ 243,441. Basic and diluted earnings per share .. $ $ FINANCIAL POSITION AND OTHER DATA: Cash and cash equivalents .. $ 84,166 $ 192,154. Long-term debt .. $ 602,900 $ 507,275. Shareholders' equity .. $ 601,649 $ 483,251. Shares repurchased during year .. 70,689 98,867. Net Sales by Geographic Area Petroleum Additives Operating Profit 2,500 390.
2 2,000 380. $ (millions). 1,500. $ (millions). 370. 1,000. 360. 500. 350. 0. 2013 2014 2015 2016 2017 340. United States Europe/Middle East/Africa/India 2013 2014 2015 2016 2017. Asia Pacific Other Foreign Dividends Per Share Cash Flows from Operating Activities 400. 350. 300. $ (per share). $ (millions). 250. 200. 150. 100. 50. 0. 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017. [THIS PAGE INTENTIONALLY LEFT BLANK]. To Our Shareholders: 2017 was a rewarding yet challenging year for our company. We had our best year ever from a safety performance standpoint and set a number of new safety records, thanks to added focus from everyone in the company.
3 We grew petroleum additives shipments by more than eight percent to a record level, with increases coming from most regions. We maintained good cost control and saw some efficiency gains across the company. We made significant quality improvements in certain areas of manufacturing. We greatly expanded our global supply capability. And, we saw significant revenue growth. Unfortunately, 2017 also saw rising raw material costs throughout much of the year, and this led to margin compression which overshadowed much of our progress. 2017 was a year of heavy investment in our future.
4 In line with our long term strategy and focus on petroleum additives, we used a substantial portion of our strong cash flow to make some major investments in our business - investments that position us well to better serve our customers around the world and to provide room for future growth. Capital expenditures in 2017 were a record $149 million in support of our long range plans to expand worldwide manufacturing and technical capabilities. This included Phase 2 of our new Singapore plant, which is mechanically complete and will be making commercial shipments in 2018.
5 This expanded capacity is an expression of our full commitment to better serve our Asia Pacific customers. We also completed the $185 million acquisition of Aditivos Mexicanos, , or AMSA our largest acquisition in more than twenty years. AMSA is a petroleum additives manufacturing, sales and distribution company based in Mexico City, Mexico, with a manufacturing facility in San Juan del Rio, Mexico. This expands our manufacturing footprint and technological capability and strengthens our presence, not only in Latin America, but also in all regions. The AMSA acquisition, combined with the new Singapore plant, puts us in a great position to serve our customers and provide increased shareholder return.
6 Along with our substantial investments in petroleum additives during the year, we returned $111 million to our shareholders through dividends of $83 million and stock repurchases of $28 million. We also strengthened our long term financing with the completion of a private placement of $250 million in new debt at a fixed rate of and the refinancing of our revolving credit facility that was enlarged to $850 million and extended to 2022. With record capital expenditures, the AMSA acquisition, and modest share repurchases, we still ended the year with a very healthy balance sheet, and with net debt to EBITDA at Our business continues to generate significant amounts of cash, and our priorities for the use of cash remain the same: reinvest in the business for growth, pursue acquisitions that can strengthen our competitive position in petroleum additives, and reward our shareholders by paying a healthy dividend and, when appropriate, repurchasing stock.
7 Our long-stated goal is to provide a 10% compounded return per year to our shareholders over any five-year period (defined by EPS growth plus dividends). We're well aware that we didn't achieve this goal in 2017, and we remain very committed to provide this level of return for our investors. We operate in a mature, highly competitive yet strong industry. It is one characterized by the need for significant investment in technology to meet the increased demands of our customers, heavy capital investment, and large economies of scale. We believe there are no fundamental changes to our industry dynamics, and it will continue to grow at 1%-2% per year for the foreseeable future, despite the introduction of new transportation technologies.
8 With our strategy of providing high value-added products and services to our customers to help them lower costs and increase sales, and with a focus on efficiency and being the best at meeting our customers' needs, we believe we can exceed the industry's growth rate by a couple of percentage points and improve margins further through technological advancement and scale. Our strategy will continue to be executed by growing our product lines and geographic expansion. We come to work every day knowing that our products help our customers make the world a better place.
9 Through collaboration with customers and OEMs and through heavy investment in R&D, our products help improve fuel economy, reduce emissions, and extend the useful lives of machinery and the fluids that make them run. This is very important to us, and it fits well with the strong values that are at the core of our company. Our success depends always on the dedication and support of employees, customers, suppliers, and our valued shareholders. Once again, I say Thank you for another successful year and many more to come. We appreciate your support! Sincerely, Thomas E.
10 Gottwald Chairman and CEO. [THIS PAGE INTENTIONALLY LEFT BLANK]. UNITED STATES. SECURITIES AND EXCHANGE COMMISSION. Washington, 20549. FORM 10-K. ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT. OF 1934. For the fiscal year ended December 31, 2017. or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE. ACT OF 1934. For the transition period from to Commission file number 1-32190. NEWMARKET CORPORATION. Incorporated pursuant to the Laws of the Commonwealth of Virginia Internal Revenue Service Employer Identification No.