Q1 2020 Earnings Call

The financial results as a reminder, all phone participants shall remain in listen only mode for today's session. Also today's call is being recorded and with that I am pleased to turn the floor over to our host Vice President and Chief Financial Officer Mr., Brian Paliotti. Please go ahead Sir.

Thank you Jim and thanks, everyone for joining us. This afternoon with me today is Teddy Gottwald, our chairman and CEO.

As a reminder, some of the statements made during this conference call maybe forward looking.

Relevant factors that could cause actual results to differ materially from those forward looking statements are contained in our earnings release and in our SEC filings, including our most recent form 10-K. During this call. We may also discuss non-GAAP financial measures included in our earnings release.

The earnings release, which can be found on our website includes a reconciliation of the non-GAAP financial measure the comparable GAAP financial measure.

We filed our 10-Q. This morning. It contains a significantly more details on the operations and performance of our company. Please take time to review it I will be referring to the due to that was included in last nights earnings release.

Net income was $85.5 million or $7.67, a share compared to net income of $62.2 million or $5.57 a share for the first quarter of last year.

Petroleum additives net sales for the first three months of 2020 were $557.4 million compared to 532.7 million for the same period in 2019 or an increase of 4.6%.

Sales increased about $25 million, mainly due to a 5.9% increase in shipments with increases in lubricant additive shipments, partially offset by a slight decrease in fuel additives shipments.

Europe, North American Latin America, where the drivers for the lubricant additives increases partially offset by decrease in Asia Pacific.

Petroleum additives operating profit for the quarter was $113.7 million.

Higher than the first quarter operating profit last year of $87.9 million.

The increase was primarily due to higher shipments and lower conversion costs with lower raw material costs offset by decreased selling prices.

The operating margin was 17.5% for the rolling four quarters through the first quarter of 2020.

Margin management will continue to be a priority in 2020, as we continue to see volatility in our raw material costs.

The effective income tax rate for the first quarter of 2020 was 22.3% down from the rate of 23% in the same period last year.

Also during the quarter, we funded capital expenditures of $20.1 million pay dividends of $21.2 million and repurchased 252383 shares of our common stock for a total of $94.3 million at an average price of 372 point $370 and 79.

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In March we also entered into a new five year 900 million dollar revolving credit facility that replaced our prior $850 million facility.

We continue to operate with very low leverage with the net debt to EBITDA ending the quarter at 1.2 times.

For 2020, we expect to see the capital expenditures for the corporation in the $75 million to $85 million range.

I will now I'll turn it over to Teddy.

For some comments.

Thanks, Brian.

First and foremost I would like to say, thank you to our 2000 plus team members, who have adjusted to life in the co bid 19 world and who have made the necessary changes. So that we have been able to continue to operate safely around the world.

This has not been easy on anyone in our team is certainly no exception.

Our primary focus besides keeping everyone save has been meeting our customers' needs through this crisis.

Our plants continue to run without interruption.

We have ramped up raw material purchases to make sure our supplies disrupted.

We've worked with our customers to help them fine products when other suppliers had issues.

We've kept our labs running and R&D projects moving forward. So we don't lose time developing new products for future needs.

And we're working with our customers to help manage their inventories through disruption in the worldwide transportation systems.

Helping our customers through these uncertain times, we'll continue to be our focus.

Our business continuity planning process has us well prepared to manage through this challenging task.

We're clearly pleased with our first quarter results and with the breadth of strong performance across all regions.

We're glad to have this quarter and the books because we're certain that we'll see a downturn in the second quarter.

As governments have instituted social distancing and stay at home orders. This is having a significant impact on parts of our business.

The number of miles driven has dropped and many auto companies have suspended production.

We expect to see a significant decline and shipments of products that go into passenger vehicle lubricants and fuels, particularly in Europe in the Americas.

This is a substantial part of our business.

We expect the impact on our products, serving the trucking farming and industrial markets to be less severe.

As most of you know, we don't give earnings guidance and we're not going to change that policy now.

While we don't know how long this downturn will last we're encouraged by the recovery we've seen already in our China business, which saw a hit in the first quarter.

We expect the rest of the world market to bounce back to when government restrictions on People's movement or east.

The rate of recovery will depend heavily on the rate at which these restrictions are lifted.

Modern transportation in machinery can't function without our products.

Knowing this we will continue to manage for the long term and we are well positioned to weather the short term storm.

Hopefully, we'll have a better view on the impact during our next Investor Conference call. After second quarter results are published.

Like many industrial companies, we've gone through our supplies to provide all mass goggles and other protective equipment that we can spare to our local hospitals in fire departments.

The chemical and oil industries, our indispensable and the fight against the Super the spread of the Corona virus with many of our industry's products such as disinfectants test kit materials and disposal PPV being critical on the frontline says a fight against the virus.

In the chemical and oil industry is working together with our OEM partners provide quality lubricants and fuels to ensure low cost reliable transportation systems for delivering essential goods in people and industrial lubricants to keep equipment running no matter how long the fight.

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We're glad to be doing our part and the fight.

And over 30 years in the chemical industry I've never been more proud to be associated with this industry.

Thank you for joining us for the call today, we hope you are all healthy and staying safe.

We appreciate your support.

And so we would like to say, thank you to our employees customers and shareholders for all that you do and while we expect a challenging year, we continue to see a bright future ahead for our company.

Now I'll turn the call back over to Brian. Thanks study, Jim that concludes our planned comments, we are available for questions via email or phone. So if anyone would like to contact us directly. Please do so and we thank you all again and we will talk to you all next quarter.

Gentlemen, thank you for your remarks this afternoon.

Ladies and gentlemen, this does conclude today's meeting. Thank you all for your participation. You may now disconnect your lines have a great day.

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