What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-15 compared with 2021-02-16 · 131 added, 102 removed, 1106 unchanged (17% of the section changed)

3 unchanged sentences

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of NewMarket Corporation and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of income, of comprehensive income, of shareholders' equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of NewMarket Corporation and its subsidiaries (the “Company”) as of December 31, 2021 and December 31, 2020, and the related consolidated statements of income, of comprehensive income, of shareholders’ equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

35 unchanged sentences

These procedures included testing the effectiveness of controls relating to the valuation of the pension benefit obligation, including controls over the Company’s methods, significant assumption, and data.

These procedures also included, among others, testing the completeness, accuracy, and relevance

of underlying data used in the valuation of the pension benefit obligation.

These procedures also included, among others, testing the completeness, accuracy, and relevance of underlying data used in the valuation of the pension benefit obligation.

With the involvement of professionals with specialized skill and knowledge to assist, these procedures also included testing management’s process for determining the pension benefit obligation, evaluating the appropriateness of the methods, and evaluating the reasonableness of the significant assumption, specifically the discount rate.

46 unchanged sentences

Cash and cash equivalents $ 83,304 $ 125,172

Marketable securities 375,918 0

Trade and other accounts receivable, net 391,779 336,395

15 unchanged sentences

Operating lease liabilities 15,709 13,410

Current portion of long-term debt 349,434 0

Other current liabilities 7,654 11,742

24 unchanged sentences

( 81,676 ) ( 81,676 )

Repurchases of common stock ( 603,449 ) ( 2,038 ) ( 229,978 ) ( 232,016 )

Tax withholdings related to stock-based compensation

6 unchanged sentences

( 83,417 ) ( 83,417 )

Repurchases of common stock ( 270,963 ) ( 2,630 ) ( 98,804 ) ( 101,434 )

Tax withholdings related to stock-based compensation

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Repurchases of common stock ( 566,671 ) ( 3,305 ) ( 192,915 ) ( 196,220 )

Tax withholdings related to stock-based compensation

( 1,547 ) ( 641 ) ( 641 )

Stock-based compensation 8,016 2,588 2 2,590

11 unchanged sentences

Deferred income tax expense 1,978 7,554 7,384

Unrealized (gain) loss on marketable securities 7,440 0 0

Gain on sale of land 0 ( 16,483 ) 0

12 unchanged sentences

Capital expenditures ( 78,934 ) ( 93,316 ) ( 59,434 )

Purchases of marketable securities ( 393,434 ) 0 0

Proceeds from sales and maturities of marketable securities 10,957 0 0

Proceeds from sale of land 0 20,000 0

2 unchanged sentences

Cash flows from financing activities:

Net (repayments) borrowings under revolving credit facility ( 44,678 ) ( 123,451 ) 168,129

Net borrowings (repayments) under revolving credit facility 148,000 ( 44,678 ) ( 123,451 )

Issuance of 2.70 % senior notes

Dividends paid ( 85,910 ) ( 83,417 ) ( 81,676 )

Debt issuance costs ( 3,897 ) ( 1,349 ) 0

Repurchases of common stock ( 196,220 ) ( 101,434 ) 0

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We state cash and cash equivalents at cost, which approximates fair value.

Marketable Securities —Our trading and equity securities are recorded at estimated fair value.

Unrealized gains and losses on trading and equity securities are included in net income.

Accounts Receivable —We record our accounts receivable at outstanding principal adjusted for allowances for credit losses.

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Employees, as well as NewMarket, contribute to the plans.

We made contributions of $ 7 million in 2020, and $ 6 million in both 2019 and 2018 related to these plans.

We made contributions of $ 7 million in 2021, $ 7 million in 2020, and $ 6 million in 2019 related to these plans.

Research, Development, and Testing Expenses —NewMarket expenses all research, development, and testing costs as incurred.

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In some cases, variable lease payments are based on a rate or an index.

Fixed lease payments, as well as variable lease payments which are based on a rate or index, are included in the determination of the right-of-use asset and lease liability.

Fixed lease payments, as well as variable lease payments which are based on a rate or index, are included in the determination of the right-of-use asset and lease liability at lease inception.

Variable lease payments that are not based on a rate or index are expensed when incurred.

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These prepayments from customers are recorded as a contract liability to our customer until we recognize the revenue.

Prepayments from our customers totaled $ 1 million in both December 31, 2020 and December 31, 2019.

Revenue recognized from funds collected in advance from customers in an earlier period was $ 1 million in both 2020 and 2019 an d $ 3 million in 2018.

Prepayments from our customers totaled $ 1 million at both December 31, 2021 and December 31, 2020.

Revenue recognized from funds collected in advance from customers in an earlier period was $ 2 million in 2021 and $ 1 million in both 2020 and 2019.

We recognize revenue when control of the product is transferred to our customer and for an amount that reflects the consideration we expect to collect from the customer.

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At December 31, 2021, accrued rebates were $ 26 million and accrued business development funds were $ 2 million.

At December 31, 2019, accrued rebates were $ 23 million and accrued business developments funds were $ 2 million.

Notes to Consolidated Financial Statements

At December 31, 2020, accrued rebates were $ 24 million and accrued business development funds were $ 1 million.

The following table provides information on our net sales by geographic area.

Information on net sales by segment is in Note 4.

Notes to Consolidated Financial Statements

Years Ended December 31,

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NewMarket Services departments and other expenses are billed to Afton and Ethyl based on the services provided under the holding company structure.

Depreciation on segment property, plant, and equipment, as well as amortization of segment intangible assets and lease right-of-use assets for 2020 and 2019 are included in segment operating profit.

Depreciation on segment property, plant, and equipment, as well as amortization of segment intangible assets and lease right-of-use assets are included in segment operating profit.

No transfers occurred between the petroleum additives segment and the “All other” category during the periods presented.

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Long-lived assets included in the petroleum additives segment amounts in the table below include property, plant, and equipment (net of depreciation), intangibles (net of amortization) and goodwill, and lease right-of-use assets.

The additions to long-lived assets include property, plant, and equipment for all years and lease right-of-use assets for 2020 and 2019.

The additions to long-lived assets include property, plant, and equipment and lease right-of-use assets.

(in thousands) 2021 2020

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Cash and cash equivalents 83,304 125,172

Marketable securities 375,918 0

Other accounts receivable 11,884 13,566

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Non-cash additions to property, plant, and equipment $ 4,872 $ 5,106 $ 6,025

Marketable Securities

During May 2021, NewMarket invested in both debt and equity marketable securities.

The debt securities are designated as trading.

The marketable securities are recorded on a settlement date basis at estimated fair value and are classified as current assets in the Consolidated Balance Sheets.

Unrealized gains and losses, as well as the investment income attributable to the debt and equity securities, are reported in Other income (expense), net in the Consolidated Statements of Income.

The debt securities have a cost basis of $ 50 million and the equity securities have a cost basis of $ 334 million at December 31, 2021.

The fair value of both the debt and equity securities are shown in the second table below.

The portion of unrealized gains and losses for the period related to both the debt and equity securities still held at the reporting date are as follows:

(in thousands) December 31, 2021

Unrealized gains and (losses) recognized during the reporting period on debt securities still held at the reporting date $ ( 976 )

Unrealized gains and (losses) recognized during the reporting period on equity securities still held at the reporting date $ ( 6,464 )

The following table provides information on the fair value of the marketable securities, as well as the related level within the fair value hierarchy.

The estimated fair value of debt securities is based on reported trades of the debt security adjusted for other observable market data including, but not limited to, benchmark yield curves, market-based quotes of similar assets, and other market-corroborated inputs.

The estimated fair value of equity securities is based on actively quoted market prices.

December 31, 2021

Fair Value Measurements Using

(in thousands) Fair Value Level 1 Level 2 Level 3

Debt securities

Corporate bonds $ 48,727 $ 0 $ 48,727 $ 0

Equity securities

government income mutual fund 327,191 327,191 0 0

Total marketable securities $ 375,918 $ 327,191 $ 48,727 $ 0

Notes to Consolidated Financial Statements

Trade and Other Accounts Receivable, Net

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All of the intangibles relate to the petroleum additives segment.

The change in the gross carrying amount between 2019 and 2020 was due to foreign currency fluctuations, as well as the following:

• A formulas and technology intangible asset became fully amortized in 2020, resulting in a decrease in the gross carrying amount and accumulated amortization.

• In May 2020, we completed the purchase of the remaining outstanding capital stock of Aditivos Mexicanos, S.A.

(AMSA), which we acquired in 2017.

The prior noncontrolling interest represented by the outstanding capital stock of AMSA was not material.

The change in the gross carrying amount between 2020 and 2021 was due to a customer base becoming fully amortized and foreign currency fluctuations.

There is no accumulated goodwill impairment.

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We amortize the contract over 10 years;

customer bases over 4 years to 20 years;

the customer base over 20 years;

and formulas and technology over 6 years.

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(in thousands)

Deposit on future leased plant and equipment $ 12,958 $ 12,958

Finance lease right-of-use assets $ 39,590 $ 10,774

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Deferred financing costs, net of amortization 1,601 2,106

Deposit on future leased plant and equipment 0 12,958

Other 4,797 5,547

1 unchanged sentence

Deferred financing costs, net of amortization, in the table above include only those costs associated with the revolving credit facility.

The amount of deferred financing costs, net of amortization related to the 4.10 % senior notes is reported as a component of long-term debt.

The amount of deferred financing costs, net of amortization related to the 4.10 % senior notes and the 2.70 % senior notes is reported as components of long-term debt.

See Note 14 for further information on our long-term debt.

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$ 391,853 $ 0

Senior notes - 4.10 % due 2022 (net of related deferred financing costs)

349,434 348,848

Senior notes - 3.78 % due 2029

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1,139,287 598,848

Current maturity of 4.10 % senior notes

$ 789,853 $ 598,848

2.70% Senior Notes - On March 18, 2021, we issued $ 400 million aggregate principal amount of 2.70 % senior notes due 2031 at an issue price of 98.763 %.

The 2.70 % senior notes are general unsecured senior obligations and rank equally with our other unsecured senior indebtedness.

The offer and sale of the notes were registered under the Securities Act of 1933, as amended.

We incurred financing costs in 2021 of approximately $ 4 million related to the 2.70 % senior notes, which are being amortized over the term of the notes.

The indenture governing the 2.70 % senior notes includes certain customary covenants that, among other things and subject to certain qualifications and exceptions, limit our ability and the ability of our subsidiaries to:

• grant liens to secure indebtedness;

• engage in sale and lease back transactions;

• merge or consolidate with, or convey, transfer or lease all or substantially all of our assets to a third party.

We were in compliance with all covenants under the indenture governing the 2.70 % senior notes as of December 31, 2021.

4.10% Senior Notes – In 2012, we issued $ 350 million aggregate principal amount of 4.10 % senior notes due 2022 at an issue price of 99.83 %.

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We were in compliance with all covenants under the indenture governing the 4.10 % senior notes as of December 31, 2021 and December 31, 2020.

In February 2022, we announced the redemption of the entire outstanding principal amount of the 4.10 % senior notes.

See Note 24 for further information.

Notes to Consolidated Financial Statements

3.78% Senior Notes – On January 4, 2017, we issued $ 250 million in senior unsecured notes in a private placement with The Prudential Insurance Company of America and certain other purchasers.

11 unchanged sentences

The revolving credit facility is available on a revolving basis until March 5, 2025.

Concurrent with entering into the Credit Agreement, we terminated our former revolving credit facility that we had entered into in 2017.

Borrowings made under the revolving credit facility bear interest, at our option, at an annual rate equal to (1) the Alternate Base Rate (ABR) plus the Applicable Rate (as defined in the Credit Agreement) solely in the case of loans

Notes to Consolidated Financial Statements

denominated in U.S.

dollars to NewMarket, (2) the Adjusted LIBO Rate plus the Applicable Rate, or (3) the Adjusted EURIBO Rate plus the Applicable Rate.

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We paid financing costs in 2020 of approximately $ 1.3 million related to this revolving credit facility and carried over deferred financing costs from our previous revolving credit facility of approximately $ 1.2 million, resulting in total deferred financing costs of $ 2.5 million, which we are amortizing over the term of the Credit Agreement.

There were no outstanding borrowings under the revolving credit facility at December 31, 2020 compared to $ 45 million in outstanding borrowings at December 31, 2019 under our former facility.

Outstanding letters of credit amounted to $ 2 million at December 31, 2020 and $ 3 million at December 31, 2019 resulting in the unused portion of the applicable credit facility amounting to $ 898 million at December 31, 2020 and $ 803 million at December 31, 2019.

There were outstanding borrowings amounting to $ 148 million under the revolving credit facility at December 31, 2021 compared to no outstanding borrowings at December 31, 2020.

Outstanding letters of credit amounted to $ 2 million at both December 31, 2021 and December 31, 2020 resulting in the unused portion of the applicable credit facility amounting to $ 750 million at December 31, 2021 and $ 898 million at December 31, 2020.

The average interest rate for borrowings under the credit facilities was 1.6 % during 2021 and 1.4 % during 2020.

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We were in compliance with all covenants under the revolving credit facility in effect at December 31, 2021 and at December 31, 2020.

Notes to Consolidated Financial Statements

Other Noncurrent Liabilities

(in thousands)

Employee benefits $ 115,780 $ 92,711

Deferred income tax liabilities $ 89,438 $ 60,041

Employee benefits 86,542 115,780

Finance lease liabilities 25,044 10,077

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Under the terms of the Plan, we may grant participants stock awards, incentive awards, stock units, or options (which may be either incentive stock options or nonqualified stock options), or stock appreciation rights (SARs), which may be granted with a related option.

Stock options entitle the participant to

Notes to Consolidated Financial Statements

purchase a specified number of shares of our common stock at a price that is fixed by the Administrator at the time the option is granted;

Stock options entitle the participant to purchase a specified number of shares of our common stock at a price that is fixed by the Administrator at the time the option is granted;

provided, however, that the price cannot be less than the shares’ fair market value on the date of grant.

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The weighted average grant-date fair value was $ 414.33 for stock awards granted in 2020 and $ 440.42 for stock awards granted in 2019.

The fair value of shares vested was $ 2 million in 2020, $ 1 million in 2019, and $ 3 million in 2018.

We recognized compensation expense of $ 2 million in 2020, $ 2 million in 2019, and $ 2 million in 2018 related to stock awards.

The fair value of shares vested was $ 2 million in 2020 and $ 1 million in 2019.

We recognized compensation expense of $ 2 million in 2021, 2020, and 2019 related to stock awards.

At December 31, 2021, total unrecognized compensation expense related to stock awards was $ 6 million, which is expected to be recognized over a period of 2.6 years.

Notes to Consolidated Financial Statements

Our leases are for land, real estate, railcars, vehicles, pipelines, plant equipment, and office equipment.

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Variable lease costs also include leases that do not have a right-of-use asset or lease liability, but are capitalized as part of inventory.

Rental expense was $ 23 million in 2018 under the authoritative accounting guidance in effect during that year.

Notes to Consolidated Financial Statements

Supplemental balance sheet information related to leases was as follows:

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$ 27,872 $ 12,219

Notes to Consolidated Financial Statements

2021 2020 2019

Weighted average remaining lease term (in years)

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Finance leases 31,612 982 10,555

Notes to Consolidated Financial Statements

Maturities of lease liabilities as of December 31, 2020 were as follows:

Maturities of lease liabilities at December 31, 2021 were as follows:

(in thousands) Operating Leases Finance Leases

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Operating lease payments in the table above include approximately $ 15 million related to options to extend lease terms that are reasonably certain of being exercised.

At December 31, 2020, we have entered into leases that have not yet commenced, but provide for right-of-use assets of approximately $ 38 million with remaining related lease obligations of $ 25 million, which are not included in the above table.

At December 31, 2021, we had commitments of approximately $ 8 million related to leases that have not yet commenced and are not included in the above table.

Most of the commitments relate to plant and equipment that is being constructed or procured by the future lessors.

These leases are expected to commence in 2022.

Notes to Consolidated Financial Statements

Pension Plans and Other Postretirement Benefits

NewMarket uses a December 31 measurement date for all of our plans.

The service cost component of net periodic benefit cost (income) is included in cost of goods sold;

selling, general, and administrative expenses;

or research, development, and testing expenses, to reflect where other compensation costs arising from services rendered by the pertinent employee are recorded on the Consolidated Statements of Income.

The remaining components of net periodic benefit cost (income) are recorded in other income (expense), net on the Consolidated Statements of Income.

Retirement Plans

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We also provide postretirement health care benefits and life insurance to eligible retired employees.

The service cost component of net periodic benefit cost (income) is included in cost of goods sold;

selling, general, and administrative expenses;

The remaining components of net periodic benefit cost (income) are recorded in other income (expense), net on the Consolidated Statements of Income.

Notes to Consolidated Financial Statements

The components of net periodic pension and postretirement benefit cost (income), as well as other amounts recognized in other comprehensive income (loss), are shown below.

84 unchanged sentences

3.50 % 3.50 % 3.50 %

Notes to Consolidated Financial Statements

For pension plans, we base the assumed expected long-term rate of return for plan assets on an analysis of our actual investments, including our asset allocation, as well as an analysis of expected returns.

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The range of returns relies both on forecasts and on broad-market historical benchmarks for expected return, correlation, and volatility for each asset class.

Our asset allocation is predominantly weighted toward equities.

Through our ongoing monitoring of our investments and review of market data, we have determined that we should reduce the expected long-term rate of return for our U.S.

plans to 8.0 % for the year beginning January 1, 2021.

Our asset allocation is predominantly weighted towards equities.

Through ongoing monitoring of our investments and review of market data, we have determined that we should maintain the expected long-term rate of return for our U.S.

plans at 8.0 % for the year beginning January 1, 2022.

For the postretirement plan, we based the assumed expected long-term rate of return for plan assets on an evaluation of projected interest rates, as well as the guaranteed interest rate for our insurance contract.

As a result of that evaluation, we have reduced the expected long-term rate of return to 4.0 % for the year beginning January 1, 2022.

Plan Assets —Pension plan assets are held and distributed by trusts and consist principally of equity securities and investment-grade fixed income securities.

We invest directly in equity securities, as well as in funds which primarily

Notes to Consolidated Financial Statements

hold equity and debt securities.

We invest directly in equity securities, as well as in funds which primarily hold equity and debt securities.

Our target allocation is 90 % to 97 % in equities, 3 % to 10 % in debt securities and 1 % to 5 % in cash.

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Each investment company’s performance is reviewed quarterly.

A small portion of the funds is in investments such as cash or short-term bonds, which historically has been less vulnerable to short-term market swings.

A small portion of the funds is in investments such as cash and cash equivalents or short-term bonds, which historically has been less vulnerable to short-term market swings.

These funds are used to provide the cash needed to meet our monthly obligations.

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No NewMarket common stock is included in these assets.

Notes to Consolidated Financial Statements

The following table provides information on the fair value of our pension and postretirement benefit plans assets, as well as the related level within the fair value hierarchy.

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19,762 19,762 0 0 21,313 21,313 0 0

Money market instruments

6,771 6,771 0 0 17,618 17,618 0 0

Cash and cash equivalents 12,451 12,451 0 0 6,841 6,841 0 0

Pooled investment funds:

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100,840 89,275

Cash 70 70 0 0 0 0 0 0

Insurance contract 0 0 0 0 1,680 0 1,680 0

$ 663,193 $ 562,353 $ 0 $ 0 $ 553,171 $ 463,896 $ 0 $ 0

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There have been no changes in the valuation techniques used to value the investments.

• Equity securities, including common stock and real estate investment trusts, are valued at the closing price reported on a national exchange.

Notes to Consolidated Financial Statements

• Money market instruments are valued at cost, which approximates fair value.

• Pooled investment funds—Mutual funds are valued at the closing price reported on a national exchange.

• Equity securities are valued at the closing price reported on a national exchange.

• Cash and cash equivalents are valued at cost.

• The mutual funds in pooled investment funds are valued at the closing price reported on a national exchange.

• The common collective trusts (the trusts) are valued at the net asset value of units held based on the quoted market value of the underlying investments held by the funds.

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There are no restrictions on redemption for the index trusts and there were no unfunded commitments.

• Cash and cash equivalents are valued at cost.

• The insurance contracts are unallocated funds deposited with an insurance company and are stated at an amount equal to the sum of all amounts deposited less the sum of all amounts withdrawn, adjusted for investment return.

Notes to Consolidated Financial Statements

Cash Flows —For U.S.

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NewMarket generally contributes to investment trusts and insurance accounts to provide for these plans.

Notes to Consolidated Financial Statements

The components of net periodic pension cost (income), as well as other amounts recognized in other comprehensive income (loss), for these foreign defined benefit pension plans are shown below.

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The fair market value of plan assets for the U.K.

plan exceeded the accumulated benefit obligation but not the projected benefit obligation at yearend 2020.

For yearend 2019, the fair market value of plan assets of the U.K.

plan exceeded both the accumulated benefit obligation and projected benefit obligation.

The accrued benefit cost of the U.K.

plan is included in other noncurrent liabilities on the Consolidated Balance Sheets at December 31, 2020 and the net asset position is included in prepaid pension cost on the Consolidated Balance Sheets at December 31, 2019.

The accumulated benefit obligation and projected benefit obligation exceeded the fair market value of plan assets for the Germany, Belgium, and the two Mexico plans at December 31, 2020 and December 31, 2019.

plan exceeded both the accumulated benefit obligation and the projected benefit obligation at year-end 2021.

For year-end 2020, the fair market value of plan assets of the U.K.

plan exceeded the accumulated benefit obligation but not the projected benefit obligation.

The net asset position of the U.K.

plan is included in prepaid pension cost on the Consolidated Balance Sheets at December 31, 2021 and the accrued benefit cost is included in other noncurrent liabilities on the Consolidated Balance Sheets at December 31, 2020.

The accumulated benefit obligation and projected benefit obligation exceeded the fair market value of plan assets for the Germany, Belgium, and Mexico plans at December 31, 2021 and December 31, 2020.

The accrued benefit cost of these plans is included in other noncurrent liabilities on the Consolidated Balance Sheets for both years.

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Fair market value of plan assets 13,110 207,131

Assumptions — The information in the table below provides the weighted-average assumptions used to calculate the results of our foreign defined benefit pension plans.

Assumptions —We used the following weighted-average assumptions to calculate the results of our foreign defined benefit pension plans.

2021 2020 2019

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• Debt securities are valued by quoted market prices or valued based on yields currently available on comparable securities of issuers with similar credit ratings.

• Pooled investment funds that are mutual funds are valued at the closing price reported on a national exchange.

• Pooled investment mutual funds are valued at the closing price reported on a national exchange.

• Cash and cash equivalents are valued at cost.

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There are no redemption restrictions on the pooled Canadian funds and there were no unfunded commitments.

Cash Flows —For foreign pension plans, NewMarket expects to contribute $ 7 million to the plans in 2021.

The expected benefit payments for the next ten years for our foreign pension plans are shown in the table below.

Notes to Consolidated Financial Statements

Cash Flows —For foreign pension plans, NewMarket expects to contribute $ 6 million to the plans in 2022.

The expected benefit payments for the next ten years for our foreign pension plans are shown in the following table.

(in thousands) Expected Pension

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$ 56,643 $ 60,719 $ 77,304

The classification of domestic and foreign income before income tax expense in the table above has been adjusted from the previous presentation by $ 54 million in 2020 and $ 2 million in 2019.

The adjustments did not impact the amount of total income before income tax expense presented in the Consolidated Statements of Income.

Notes to Consolidated Financial Statements

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Taxes applicable to prior years ( 0.4 ) ( 1.4 ) ( 0.3 )

Change in U.S.

tax rate 0.0 0.0 ( 2.0 )

Other items and adjustments 0.0 ( 0.4 ) 0.5

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Deferred income tax assets

Capitalized research expenses $ 15,708 $ 0

Leasing liabilities 12,775 12,563

Operating loss and credit carryforwards 12,746 14,965

1 unchanged sentence

Foreign currency translation adjustments 4,054 3,728

Environmental reserves 2,617 2,526

Other 4,902 3,658

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Future employee benefits 32,253 1,670

Leasing assets 12,790 12,773

Other 4,145 6,329

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Deferred income tax liabilities are included in other noncurrent liabilities.

Notes to Consolidated Financial Statements

Our deferred taxes are in a net liability position at December 31, 2021.

Our deferred tax assets include $ 15 million of foreign operating loss carryforwards, foreign capital loss carryforwards, and foreign and state tax credits.

Our deferred tax assets include $ 13 million of foreign operating loss carryforwards, foreign capital loss carryforwards, foreign non-trading deficit carryforwards, and foreign and state tax credits.

The operating loss carryforwards expire in 2034 through 2039 and certain tax credits expire in 2026 through 2027.

The largest change during 2020 on the carryforward items related to an increase in foreign tax credit carryforwards generated in 2019.

The largest change during 2021 on the carryforward items related to the usage of foreign tax credit carryforwards generated in 2019.

Based on current forecasted operating plans and historical profitability, we believe that we will recover the full benefit of our deferred tax assets with the exception of $ 12 million of the aforementioned operating loss, capital loss, and tax credit carryforwards.

Therefore, as of December 31, 2020, we have recorded an offsetting valuation allowance against these items.

Therefore, as of December 31, 2021, we have recorded an offsetting valuation allowance in this amount.

During 2020, we released the valuation allowance on $ 1 million of net operating losses that we utilized during the year.

Notes to Consolidated Financial Statements

As a result of the Tax Reform Act, we do not expect to distribute earnings from our foreign subsidiaries in a manner that would result in significant U.S.

During 2021, this amount was negligible.

We do not expect to distribute earnings from our foreign subsidiaries in a manner that would result in significant U.S.

tax, as these earnings have been previously taxed in the U.S.

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No material events occurred during 2021 requiring adjustment to the recognized balances of assets or liabilities which are recorded at fair value on a nonrecurring basis.

Long-term debt - We record the carrying amount of our long-term debt at historical cost, less deferred financing costs related to the 4.10 % senior notes.

Long-term debt - We record the carrying amount of our long-term debt at historical cost, less deferred financing costs related to the 2.70 % and 4.10 % senior notes.

The estimated fair value of our long-term debt is shown in the table below and is based primarily on estimated current rates available to us for debt of the same remaining duration and adjusted for nonperformance risk and credit risk.

The estimated fair value of our publicly traded 4.10 % senior notes included in long-term debt in the table below is based on the last quoted price closest to December 31, 2020.

The estimated fair value of our publicly traded 2.70 % and 4.10 % senior notes included in long-term debt in the table below is based on the last quoted price closest to December 31, 2021.

The fair value of our debt instruments is categorized as Level 2.

2 unchanged sentences

Value Carrying

Long-term debt $ 598,848 $ 648,671 $ 642,941 $ 677,253

Long-term debt, including current maturities $ 1,139,287 $ 1,178,066 $ 598,848 $ 648,671

Commitments and Contingencies

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The aggregate undiscounted amount for these sites was $ 10 million at December 31, 2021 and $ 9 million at December 31, 2020.

Of the total accrued for these two sites, the amount related to remediation of groundwater and soil was $ 4 million for both the Louisiana site and for the Texas site at December 31, 2020 and $ 4 million for the Louisiana site and $ 3 million for the Texas site at December 31, 2019.

Of the total accrued for these two sites, the amount related to remediation of groundwater and soil was $ 3 million for the Louisiana site and $ 4 million for the Texas site at December 31, 2021 and $ 4 million for both the Louisiana and Texas sites at December 31, 2020.

Notes to Consolidated Financial Statements

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Amounts reclassified from accumulated other comprehensive loss (a)

1,992 0 1,992

Other comprehensive income (loss) 16,760 1,808 18,568

3 unchanged sentences

Amounts reclassified from accumulated other comprehensive loss (a)

2,514 0 2,514

Other comprehensive income (loss) ( 22,976 ) 12,560 ( 10,416 )

8 unchanged sentences

See Note 18 for further information.

Selected Quarterly Consolidated Financial Data (unaudited)

(in thousands, except per-share amounts) First

Quarter Second

Quarter Third

Quarter Fourth

Net sales $ 559,417 $ 410,864 $ 512,869 $ 527,781

Gross profit 180,907 96,738 166,607 150,780

Net income 85,541 22,349 95,794 66,884

Earnings per share - basic and diluted 7.67 2.05 8.77 6.12

Quarter Second

Quarter Third

Quarter Fourth

Net sales $ 536,616 $ 563,417 $ 555,817 $ 534,445

Gross profit 152,869 170,833 162,727 143,440

Net income 62,205 74,174 67,805 50,102

Earnings per share - basic and diluted 5.57 6.63 6.06 4.48

Notes to Consolidated Financial Statements

Recent Accounting Pronouncements

3 unchanged sentences

The provisions of ASU 2020-04 apply only to those transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform.

Adoption of the provisions of ASU 2020-04 is optional and is effective from March 12, 2020 through December 31, 2022.

Adoption of the provisions of ASU 2020-04 is optional and is currently effective through December 31, 2022.

We continue to evaluate the impact of ASU 2020-04 on our consolidated financial statements, but do not currently expect a significant impact.

Subsequent Event

In February 2022, we announced the redemption of the entire outstanding principal amount of our 4.10 % senior notes due 2022.

The redemption date is March 15, 2022.

The aggregate principal amount of the 4.10 % senior notes outstanding is $ 350 million.

The redemption price will include 100% of the principal amount outstanding, accrued and unpaid interest on the notes, and the applicable premium as outlined in the Indenture dated December 20, 2012.

The accrued and unpaid interest, as well as the applicable premium, will be calculated up to, but not including, the redemption date.

We intend to use the net proceeds from the issuance of the 2.70 % senior notes to fund the redemption of the 4.10 % notes.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data