Brian Paliotti - Vice President and Chief Financial Officer Thomas Gottwald - Chairman and Chief Executive Officer.

Kevin Bennett - Davenport Asset Management Dmitry Silversteyn - Longbow Research.

Greetings and welcome to the NewMarket Corporation’s First Quarter 2017 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Brian Paliotti, Chief Financial Officer. Thank you. You may begin..

Thank you, Audrey, and thanks to 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 may be 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 measure included in our earnings release.

The earnings release, which can be found on our website, includes a reconciliation of the non-GAAP financial measure to the comparable GAAP financial measure. We filed our 10-Q morning that will contain significantly more details on the operation and performance of the Company.

Please take time to review it and I’ll be referring to the data that was included in last night's release in the following. Net income was $64 million or $5.39 a share, compared to net income of $62 million or $5.22 a share for the first quarter of last year.

This is an earnings increase of 3% and an earnings per share increase of 3% from last year performance. Petroleum additives operating profit for the quarter was $99 million, which is 1 million or 1.3% lower than last year. Consolidate sales for the quarter increased 6.5% to $543 million compared to sales for the same period last year of $510 million.

The increase in revenue of petroleum additives in the quarterly comparison was driven mainly by higher volumes. Petroleum additive shipments for the first quarter of 2017 were up 13.9% for the same period last year.

Lubricant additive shipments increased across all the regions except North America while fuel additives shipment increases were driven by North America and Europe partially offset by decreases in Latin America. Of the $33 million increase in revenue shipments were the predominant driver partially offset by selling prices.

Operating margins at 18.3% remained within our typical range. The effective income tax rate for the first quarter of 2017 was 27.5%, down from our rate of 30.4% in the same period last year. The rate in the first quarter of 2017 was primarily lower due to an increase in earnings in foreign jurisdictions with lower tax rates.

On the cash flow for the quarter items don’t include funding our dividends of $21 million and using more cash to fund the no variations in working capital. We continue to operate with very little leverage with net debt to EBITDA remaining below one times.

In 2017, we expect to see an increase in the level of our capital expenditure to a higher level than 2016 which includes the anticipated spending on our Phase II Singapore investment as well as a number of improvements to our manufacturing - research and development infrastructure around the world.

In Q1 of 2017 we ramped up that capital spending to $46 million. We announced also our intent to acquire Aditivos Mexicanos, or AMSA, which is a petroleum additives manufacturing, sales and distribution company based in Mexico City. We still expect to close the transaction in the first half of 2017 pending on regulatory review in Mexico.

Over the past several years, we have made significant investments to expand our capabilities around the world.

These investments have been in people, technology, technical centers and production capacity and we intend to use those new capabilities along with new investments mentioned to improve our ability to deliver goods and services that our customers value and to grow shareholder value.

Audrey That concludes our planned comments, we would like to open up the lines for any questions, please..

Thank you, ladies and gentlemen, at this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Kevin Bennett with Davenport Asset Management. Please state your question..

Hey guys good afternoon and thanks for taking the question.

First one Teddy, this is now the eighth straight quarter of year-over-year selling price declines and I was just wondering if you could give some color on that and if that's kind of just the new normal or if you guys expect that to reverse at some point?.

Happy to answer that. We don’t talk a lot about pricing, but I do want to point out that we do get impacted by the relative prices of crude oil and oil has been down for some period, and while our costs and our prices don’t track crude oil exactly. Directionally they tend to move in the same direction.

So if crude oil is down long enough, eventually it rose through to our cost and our prices. So that's what you are seeing..

Okay, that certainly makes sense. And then in terms of shipments, I guess it looks like we have two more quarters of benefit from the - what I assume is the benefit from new capacity in Singapore, the Phase 1, before we lap that.

First of am I thinking about that right and then secondly I don’t know if you guys can kind of give us what shipments would have been without that new capacity if it’s kind of the typical.

I know you talk about 1% to 2% industry growth and you guys exceeding that a little bit?.

Yes. We didn’t see any shipment increase as a direct result of opening Singapore plan..

So can you then I guess talk about what is driving the 13.9% increase in volume shipped, I don’t think we have seen a number like that in really long time..

Yes, and it’s certainly not indicative of the industry volume. I just wouldn’t read too much into any one quarter or even two quarters back-to-back in this case. We talk about the industry growth rate at 1% to 2% and our plans to exceed that growth by a few percentage points and when we look at the last 12 months growing that’s about where we are..

Okay cool.

And then one more, I guess moving to the margin in petroleum additives, pretty steep drop year-over-year, I know I guess thinking a full-year 2016 that 18.9 was a record, but what is the likelihood you guys can continue to expand on that number or should we expect some kind of - a little bit of pull back this year on the petroleum additives operation.

Well I’m not talking about the next quarter, I’m just thinking more of longer term and for the year?.

Yes, we talk about a range in the high teens in terms of percent and that’s where we are and that where we expect to be. We just can’t be any more specific than that..

Fair enough. And then last one from me quickly on the AMSA acquisition.

I’m sure, I probably missed it in some filing, but could you guys just remind me what their I guess annual sales are?.

Yes, you didn’t miss it that in the filing, we haven’t discussed or disclosed anything around the specifics on the financials around the AMSA business..

Are you guys going to do that I guess once it closes?.

The business will be integrated into our operation and we don’t plan to break it out separately as far as financial segment or financial information..

Okay.

And then I guess last one, can you just - are there margins similar to where you guys’ are?.

They are in the petroleum additives business and we expect them to perform inside of our operation as the other operations that we have [due] (ph)..

Okay. Thank you..

You are welcome..

Thank you. Our next question comes from the line of Dmitry Silversteyn with Longbow Research. Please state your question..

Good morning, gentlemen or good afternoon I should say. [Indiscernible] then this morning. A couple of questions to follow-up, perhaps on the first line of question to put a little bit differently. Companies in the finished good space, talk about premium mix and kind of the 5w20s cans, synthetics and semi synthetics.

If you had to think about your business that way, how much of your lube additives would you say are going into these kind of a premium growing portions of the lube market versus perhaps older technologies, you know the 10w40 oil is the stuff that’s still fairly widely spread in emerging markets and places outside of North America..

Dmitry, I don’t have a specific answer for you on that, because I just don’t know that data, but I’ll tell you, we participate in the full range of the market in developed as well as developing parts of the world, so we are in all of it..

I would imagine that being one of the top four players in the industry, I was just wondering if there was a way for us to think about. Well maybe my second question will [indiscernible] with that. You mention that a significant part of lube additive growth you saw was in Asia-Pacific and Latin America and areas outside of North America.

Was there a detrimental margin impact from the growth of those technologies or additives going into those markets or is your margin really irrelevant in the products you are supplying..

Dmitry if you look at new car sales across the world and the technology in those new cars, the technology from additive perspective is the same whether it’s the cars is sold in North America or it’s sold in different part of the world in Asia. So from that perspective, there is no discernible difference..

Okay. Fair enough. The tax rate you put out the 27.5% is a little bit lower than kind of the high 20s, 29% or so you guys have been averaging.

Is that the right tax rate for us to think about the year? Do you have any guidance for your tax expectations for the year?.

I would say that you would take a look at last year’s full-year tax rate, it’s probably a good indication, again don’t read anything into one quarter and that’s probably equivalent to what we think it is going forward..

Okay.

So 29% or so I think you did last year?.

Yes, we did 29.1%..

Okay. Your share count has gone up obviously with the share price, it doesn’t look like you have done any share repurchases looking at your 10-Q.

Are there share repurchase plans in place, is it opportunistic, is it some kind of a regular program, how should we think about the growth in fully diluted share count?.

We have an authorization, its good through the end of next year. I guess you should think of it if there is a choice between opportunistic and regular, it would be characterized as opportunistic. We make the decision based on relative prices of stock and other uses of cash at the time..

Okay Teddy, that’s helpful. Two more questions if you don’t mind. If I look at the sort of revenue growth versus profit growth in your additive business, it looks like you guys got a 60% contribution margin on the revenue, your revenue is were up a little bit over $40 million you are your operating profit was up about $25 million.

How did you do that?.

Sorry, what period are you looking at?.

So I’m looking at the first quarter sequentially versus the fourth quarter basically. I’m looking at sequential movements in revenues if you look at the first quarter versus fourth quarter you are up about $41 million but if you look in the profit line you are up about $25 million..

Yes, Dmitry, I can send you that explanation offline?.

Okay. And then final question, as the first caller asked your pricing has been down for product [indiscernible] I understand why, but the finished good guys are talking about same price increases not just based on oil but also in additives. So does that mean that you are pricing actually sequentially starting to move up.

It just hasn’t sort of lapped the declines, but at some point this year we are going to start seeing pricing up year-over-year..

Yes..

Okay, fair enough.

Any idea when this year?.

This calendar year..

This calendar year. Alright Brian thank you. That’s all the questions I had..

Thanks..

Thank you..

Thank you. That does conclude our question-and-answer session. At this time, I’ll turn it back to Mr. Brian Paliotti for closing comments..

Alright, thank you everyone for calling and we will talk to you next quarter. Take care..

This concludes today’s conference. Thank you for your participation. You may disconnect your lines at this time..