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Item 8. Financial Statements and Supplementary Data

2024-02-15 compared with 2023-02-15 · 148 added, 147 removed, 1071 unchanged (22% of the section changed)

35 unchanged sentences

As disclosed by management, the determination of the pension benefit obligation requires the use of estimates and assumptions.

Management’s assumption in the determination of the pension benefit obligation is the discount rate.

The principal considerations for our determination that performing procedures relating to the valuation of the pension benefit obligation is a critical audit matter are the significant judgment by management to determine the pension benefit obligation.

This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s significant assumption used in the valuation of the pension benefit obligation, specifically the discount rate.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

One of management’s assumptions in the determination of the pension benefit obligation is the discount rate.

The principal considerations for our determination that performing procedures relating to the valuation of the pension benefit obligation is a critical audit matter are (i) the significant judgment by management to determine the pension benefit obligation;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s significant assumption used in the valuation of the pension benefit obligation, specifically the discount rate;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

37 unchanged sentences

29,343 53,084 89,167

Amortization of actuarial net loss (gain) included in net periodic benefit cost (income), net of income tax expense (benefit) of $ 655 in 2022, $ 2,263 in 2021 and $ 1,460 in 2020

Amortization of actuarial net (gain) loss included in net periodic benefit cost (income), net of income tax expense (benefit) of $( 456 ) in 2023, $ 655 in 2022 and $ 2,263 in 2021

( 1,441 ) 2,014 7,076

10 unchanged sentences

Cash and cash equivalents $ 111,936 $ 68,712

Marketable securities 0 375,918

Trade and other accounts receivable, net 432,349 453,692

15 unchanged sentences

Operating lease liabilities 15,074 15,569

Current portion of long-term debt 0 349,434

Other current liabilities 16,064 11,562

25 unchanged sentences

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

12 unchanged sentences

Repurchases of common stock ( 119,075 ) ( 1,857 ) ( 41,419 ) ( 43,276 )

Tax withholdings related to stock-based compensation

( 2,493 ) ( 33 ) ( 803 ) ( 836 )

Stock-based compensation 9,507 4,020 ( 8 ) 4,012

12 unchanged sentences

Loss on early extinguishment of debt 0 7,545 0

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

Change in assets and liabilities:

14 unchanged sentences

Proceeds from sales and maturities of marketable securities 0 372,846 10,957

Proceeds from sale of land 0 0 20,000

Other, net 0 0 ( 927 )

Cash provided from (used in) investing activities ( 48,293 ) 315,890 ( 461,411 )

Cash flows from financing activities:

Redemption of 4.10 % senior notes

( 350,000 ) 0 0

Net borrowings (repayments) under revolving credit facility 213,000 148,000 ( 44,678 )

Issuance of 2.70 % senior notes

Net (repayments) borrowings under revolving credit facility ( 361,000 ) 213,000 148,000

Dividends paid ( 85,034 ) ( 84,263 ) ( 85,910 )

Repurchases of common stock ( 42,864 ) ( 207,470 ) ( 196,220 )

Redemption of 4.10 % senior notes

0 ( 350,000 ) 0

Cash costs of 4.10 % senior notes redemption

0 ( 7,099 ) 0

Issuance of 2.70 % senior notes

Debt issuance costs 0 0 ( 3,897 )

1 unchanged sentence

Cash provided from (used in) financing activities ( 487,594 ) ( 439,357 ) 255,133

See accompanying Notes to Consolidated Financial Statements

Effect of foreign exchange on cash and cash equivalents 2,288 255 ( 926 )

(Decrease) increase in cash and cash equivalents ( 14,592 ) ( 41,868 ) ( 19,225 )

Increase (decrease) in cash and cash equivalents 43,224 ( 14,592 ) ( 41,868 )

Cash and cash equivalents at end of year $ 111,936 $ 68,712 $ 83,304

10 unchanged sentences

NewMarket is also the parent company of NewMarket Services, which provides various administrative services to NewMarket, Afton, Ethyl, and NewMarket Development.

Certain reclassifications have been made to the accompanying consolidated financial statements and/or the related notes to conform to the current presentation.

Foreign Currency Translation - We translate the balance sheets of our foreign subsidiaries into U.S.

2 unchanged sentences

NewMarket includes translation adjustments in the Consolidated Balance Sheets as part of accumulated other comprehensive loss and transaction adjustments in the Consolidated Statements of Income as part of cost of goods sold.

Foreign currency transaction adjustments resulted in a net loss of $ 4 million in 2022, $ 6 million in 2021, and $ 3 million in 2020.

Foreign currency transaction adjustments resulted in a net loss of $ 4 million in both 2023 and 2022 and $ 6 million in 2021.

Revenue Recognition - 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.

4 unchanged sentences

Taxes assessed by a governmental authority concurrent with sales to our customers, including sales, use, value-added, and revenue-related excise taxes, are not included as net sales, but are reflected in accrued expenses until remitted to the appropriate governmental authority.

Cash and Cash Equivalents - Our cash equivalents consist of government obligations and commercial paper with original maturities of 90 days or less.

Cash and Cash Equivalents - Our cash equivalents consist of government obligations and commercial paper with original maturities of less than 90 days.

Throughout the year, we have cash balances in excess of federally insured amounts on deposit with various financial institutions.

2 unchanged sentences

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.

Accounts Receivable - We record our accounts receivable at invoiced amounts adjusted for allowances for credit losses.

The allowance for credit losses represents probable losses to be incurred if our customers do not make required payments.

10 unchanged sentences

Notes to Consolidated Financial Statements

Intangibles (Net of Amortization) and Goodwill - Identifiable intangibles include the cost of acquired contracts, formulas and technology, trademarks and trade names, and customer bases.

We assign a value to identifiable intangibles based on independent third-party appraisals and management's assessment at the time of acquisition.

Intangibles (Net of Amortization) and Goodwill - Identifiable intangibles include acquired contracts, formulas and technology, trademarks and trade names, and customer bases.

We assign a value to acquired identifiable intangibles based on independent third-party appraisals and management's assessment at the time of acquisition.

NewMarket amortizes the cost of the customer bases by an accelerated method and the cost of the remaining identifiable intangibles by the straight-line method over the estimated economic life of the intangible.

4 unchanged sentences

Assets are considered to be impaired if their carrying amount is not recoverable from the estimated undiscounted future cash flows associated with the assets.

If we determine an asset is impaired and its recorded cost is higher than estimated fair market value based on the estimated present value of future cash flows, we adjust the asset to estimated fair market value.

If we determine an asset is impaired and its recorded cost is higher than estimated fair value based on the estimated present value of future cash flows, we adjust the asset to the estimated fair value.

Environmental Costs - NewMarket capitalizes environmental compliance costs if they extend the useful life of the related property or prevent future contamination.

16 unchanged sentences

We typically remove a tax impact from accumulated other comprehensive loss when the underlying circumstance which gave rise to the tax impact no longer exists.

The calculation of income tax liabilities involves uncertainties in the application of complex tax laws and regulations, which are subject to legal interpretation and management judgment.

Our income tax returns are regularly examined by federal, state and foreign tax authorities, and those audits may result in proposed adjustments.

We have evaluated our tax positions under the more likely than not standard of the accounting literature, and a tax position is recognized if it meets this standard.

Such judgments and estimates may change based on audit settlements, court cases, and interpretation of tax laws and regulations.

We recognize accrued interest and penalties associated with uncertain tax positions as part of income tax expense on our Consolidated Statements of Income.

1 unchanged sentence

The right-of-use asset and lease liability are determined at the lease commencement date and are based on the present value of estimated lease payments.

Notes to Consolidated Financial Statements

Our lease agreements contain both fixed and variable lease payments.

3 unchanged sentences

The present value of estimated lease payments is determined utilizing the rate implicit in the lease agreement if that rate can be determined.

If the implicit rate cannot be determined, the present value of estimated lease payments is determined

Notes to Consolidated Financial Statements

utilizing our incremental borrowing rate.

If the implicit rate cannot be determined, the present value of estimated lease payments is determined utilizing our incremental borrowing rate.

The incremental borrowing rate is determined at the lease commencement date and is developed utilizing a readily available market interest rate curve adjusted for our credit quality.

20 unchanged sentences

We recognize stock-based compensation expense for the number of awards expected to vest on a straight-line basis over the requisite service period.

Estimates and Risks Due to Concentration of Business - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

Supplier Finance Programs - We offer our vendors a supplier finance program, which allows our vendors to receive payment from a third-party finance provider earlier than our normal payment terms would provide.

NewMarket and its subsidiaries are not a party to the arrangement between our vendor and the finance provider, and there are no assets pledged as security or other forms of guarantees provided by NewMarket to the finance provider.

For those vendors who opt to participate in the program, we pay the finance provider the full amount of the invoices on the normal due date.

At December 31, 2023, the amount of confirmed invoices under the supplier finance program was not material.

Notes to Consolidated Financial Statements

assumptions that affect the amounts reported in the financial statements and accompanying notes.

Actual results could differ from those estimates.

4 unchanged sentences

• production of several of our products solely at one facility.

Notes to Consolidated Financial Statements

Our revenues are primarily derived from the manufacture and sale of petroleum additives products.

2 unchanged sentences

While some of our customers have payment terms beyond 30 days, we do not provide extended payment terms of a year or more, nor do our contracts include a financing component.

Our allowance for credit losses is immaterial, as are any bad debts we incur.

Our allowance for credit losses is immaterial, as are any bad debts we have incurred.

In limited cases, we collect funds in advance of shipping product to our customers and recognizing the related revenue.

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 at both December 31, 2022 and December 31, 2021.

Revenue recognized from funds collected in advance from customers in an earlier period was $ 1 million in 2022, $ 2 million in 2021, and $ 1 million in 2020.

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

Prepayments from our customers totaled $ 0.3 million at December 31, 2023 and $ 1 million at December 31, 2022.

Revenue recognized from funds collected in advance from customers in an earlier period was $ 1 million in both 2023 and 2022, and $ 2 million in 2021.

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.

12 unchanged sentences

We regularly review both rebates and business development funds and make adjustments when necessary, recognizing the full amount of any adjustment in the period identified.

We recognized an increase to net sales of $ 2 million for 2022, $ 4 million for 2021, and $ 2 million for 2020 related to adjustments to rebates or business development funds which were recognized in revenue in a prior period.

We recognized an increase to net sales of $ 5 million in 2023, $ 2 million in 2022, and $ 4 million in 2021 related to adjustments to rebates or business development funds which were recognized in revenue in a prior period.

At December 31, 2023, accrued rebates were $ 18 million and accrued business development funds were $ 0.3 million.

36 unchanged sentences

We evaluate the performance of the petroleum additives business based on segment operating profit.

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

NewMarket Services 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 are included in segment operating profit.

30 unchanged sentences

Cash and cash equivalents 111,936 68,712

Marketable securities 0 375,918

Non-segment other accounts receivable 3,083 2,220

52 unchanged sentences

Non-cash additions to property, plant, and equipment $ 1,788 $ 4,087 $ 4,872

Marketable Securities

During 2021, NewMarket invested in both debt, which was designated as trading, and equity marketable securities.

Subsequently, during the first three months of 2022, we sold all of the marketable securities.

While held, the marketable securities were recorded on a settlement date basis at estimated fair value and were classified as current assets in the Consolidated Balance Sheets.

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

At December 31, 2022, the cost basis for all marketable securities was zero .

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 was 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 was 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

Trade and Other Accounts Receivable, Net

4 unchanged sentences

$ 432,349 $ 453,692

Notes to Consolidated Financial Statements

(in thousands)

13 unchanged sentences

$ 39,051 $ 38,338

Notes to Consolidated Financial Statements

Property, Plant, and Equipment, at Cost

14 unchanged sentences

Depreciation expense was $ 56 million in 2023, $ 60 million in 2022, and $ 61 million in 2021.

Notes to Consolidated Financial Statements

Intangibles (Net of Amortization) and Goodwill

13 unchanged sentences

Aggregate amortization expense was $ 2 million in 2021.

All of the intangibles relate to the petroleum additives segment.

All of the intangibles and goodwill relate to the petroleum additives segment.

The change in the gross carrying amount between 2022 and 2023 was due to foreign currency fluctuations.

There is no accumulated goodwill impairment.

Notes to Consolidated Financial Statements

Estimated annual amortization expense related to our intangible assets for the next five years is expected to be (in thousands):

We amortize formulas and technology over 6 years, the contract over 10 years, and the customer base over 20 years.

We amortize the customer base over 20 years.

Deferred Charges and Other Assets

8 unchanged sentences

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 in 2021 and the 2.70 % senior notes in both 2022 and 2021 is reported as components of long-term debt.

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

See Note 13 for further information on our long-term debt.

Notes to Consolidated Financial Statements

Accrued Expenses

2 unchanged sentences

Customer rebates 18,132 27,752

Taxes other than income and payroll 3,715 4,514

Interest on long-term debt 8,026 8,710

Taxes other than income and payroll 4,907 3,715

Other 9,681 12,453

$ 76,546 $ 89,508

Notes to Consolidated Financial Statements

Long-term Debt

4 unchanged sentences

250,000 250,000

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

Revolving credit facility 0 361,000

643,622 1,003,737

Current maturity of 4.10 % senior notes

$ 1,003,737 $ 789,853

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 %.

15 unchanged sentences

We were in compliance with all covenants under the 3.78 % senior notes as of December 31, 2023 and December 31, 2022.

Notes to Consolidated Financial Statements

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 %.

The notes were senior unsecured obligations.

We incurred financing costs totaling approximately $ 5 million related to the 4.10 % senior notes, which were being amortized over the term of the agreement.

Interest was payable semiannually.

The 4.10 % senior notes ranked:

• equal in right of payment with all of our existing and future senior unsecured indebtedness;

• senior in right of payment to any of our future subordinated indebtedness.

The indenture governing the 4.10 % senior notes contained covenants that, among other things, limited our ability and the ability of our subsidiaries to:

• create or permit to exist liens;

• enter into sale-leaseback transactions;

• incur additional guarantees;

• sell all or substantially all of our assets or consolidate or merge with or into other companies.

On March 15, 2022, we redeemed the 4.10 % senior notes at a redemption price of 100 % of the principal amount of $ 350 million plus the accrued and unpaid interest on the notes and the applicable premium as outlined in the Indenture dated December 20, 2012.

The 4.10 % senior notes were due December 2022.

We recognized a loss of $ 7.5 million on the early extinguishment including cash paid of $ 7.1 million for the premium on the early redemption and a write-off of $ 0.4 million of unamortized deferred financing costs.

Revolving Credit Facility - On March 5, 2020, NewMarket and certain foreign subsidiary borrowers entered into a Credit Agreement (the Credit Agreement) with a term of five years .

The Credit Agreement provides for a $ 900 million, multicurrency revolving credit facility with a $ 500 million sublimit for foreign currency borrowings, a $ 50 million sublimit for letters of credit, and a $ 20 million sublimit for swingline loans.

The Credit Agreement includes an expansion feature which allows us, subject to certain conditions, to request an increase in the aggregate amount of the revolving credit facility or obtain incremental term loans in an amount up to $ 425 million.

NewMarket's obligations under the Credit Agreement are unsecured and the obligations of foreign subsidiary borrowers are fully and unconditionally guaranteed by NewMarket.

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

Borrowings made under the revolving credit facility bear interest at a variable rate determined, at our option, at an annual rate equal to (i) the Alternate Base Rate (ABR), (ii) the Adjusted Term SOFR Rate (SOFR), or (iii) the Adjusted EURIBO Rate (EURIBO), each plus the Applicable Rate and all as defined in the Credit Agreement.

The Applicable Rate is based, at our option, on our Leverage Ratio (as defined in the Credit Agreement) or credit rating.

The Credit Agreement provided for a $ 900 million, multicurrency revolving credit facility with a $ 500 million sublimit for foreign currency borrowings, a $ 50 million sublimit for letters of credit, and a $ 20 million sublimit for swingline loans.

The Credit Agreement included an expansion feature which allowed us, subject to certain conditions, to request an increase in the aggregate amount of the revolving credit facility or obtain incremental term loans in an amount up to $ 425 million.

NewMarket's obligations under the Credit Agreement were unsecured and the obligations of foreign subsidiary borrowers were fully and unconditionally guaranteed by NewMarket.

The revolving credit facility was scheduled to mature on March 5, 2025.

Borrowings made under the revolving credit facility bore interest at a variable rate determined, at our option, at an annual rate equal to (i) the Alternate Base Rate (ABR), (ii) the Adjusted Term SOFR Rate (SOFR), or (iii) the Adjusted EURIBO Rate (EURIBO), each plus the Applicable Rate and all as defined in the Credit Agreement.

The Applicable Rate was based, at our option, on our Leverage Ratio (as defined in the Credit Agreement) or credit rating.

Prior to January 11, 2023, when we amended our revolving credit facility, LIBOR was utilized instead of SOFR as an option to establish interest rates on the revolving credit facility.

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 outstanding borrowings amounting to $ 361 million under the revolving credit facility at December 31, 2022 compared to $ 148 million outstanding borrowings at December 31, 2021.

Outstanding letters of credit amounted to $ 2 million at both December 31, 2022 and December 31, 2021, resulting in the unused portion of the applicable credit facility amounting to $ 537 million at December 31, 2022 and $ 750 million at December 31, 2021.

The average interest rate for borrowings under the credit facilities was 3.5 % during 2022 and 1.6 % during 2021.

The Credit Agreement contains certain customary covenants, including financial covenants that require NewMarket to maintain a consolidated Leverage Ratio (as defined in the Credit Agreement) of no more than 3.75 to 1.00 except during an Increased Leverage Period (as defined in the Credit Agreement).

We were in compliance with all covenants under the revolving credit facility in effect at December 31, 2022 and at December 31, 2021.

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 were amortizing over the term of the Credit Agreement.

Notes to Consolidated Financial Statements

There were no outstanding borrowings under the revolving credit facility at December 31, 2023 compared to $ 361 million outstanding borrowings at December 31, 2022.

Outstanding letters of credit amounted to $ 2 million at both December 31, 2023 and December 31, 2022, resulting in the unused portion of the credit facility amounting to $ 898 million at December 31, 2023 and $ 537 million at December 31, 2022.

The average interest rate for borrowings under the credit facility was 6.2 % during 2023 and 3.5 % during 2022.

The Credit Agreement contained certain customary covenants, including financial covenants that required NewMarket to maintain a consolidated Leverage Ratio (as defined in the Credit Agreement) of no more than 3.75 to 1.00 except during an Increased Leverage Period (as defined in the Credit Agreement).

We were in compliance with all covenants under the revolving credit facility in effect at December 31, 2023 and at December 31, 2022.

Credit Agreements Entered into in 2024 - On January 22, 2024, we entered into a new five -year, $ 900 million revolving credit facility that replaced the facility discussed above and also entered into a new two -year, $ 250 million unsecured term loan.

This term loan gave us additional flexibility to repay borrowings under our revolving credit facility and support our business needs.

See Note 23 for additional information.

Other Noncurrent Liabilities

9 unchanged sentences

Stock-based Compensation

The 2014 Incentive Compensation and Stock Plan (the Plan) was approved on April 24, 2014.

The 2023 Incentive Compensation and Stock Plan (the Plan) was approved on April 27, 2023 and replaced the 2014 Incentive Compensation and Stock Plan (the Prior Plan).

No new awards may be granted under the Prior Plan, but the terms of the Prior Plan continue to govern awards that were issued under the Prior Plan and remain outstanding.

Awards outstanding under the Prior Plan will remain in effect until vested or forfeited under their terms.

Any employee of our company or an affiliate or a person who is a member of our Board of Directors or the board of directors of an affiliate is eligible to participate in the Plan if the Compensation Committee of the Board of Directors (the Administrator), in its sole discretion, determines that such person has contributed or can be expected to contribute to the profits or growth of our company or its affiliates (each, a participant).

5 unchanged sentences

For purposes of this limitation and the individual limitation on the grant of options, an option and corresponding SAR are treated as a single award.

No participant may receive, in a single calendar year, an incentive award cash payment under the Plan exceeding $ 2,000,000 .

A non-employee director may not be granted an incentive award and may not be granted more than 1,000 shares of common stock in a calendar year.

Notes to Consolidated Financial Statements

The maximum aggregate number of shares of our common stock that may be issued under the Plan is 250,000 .

10 unchanged sentences

The fair value of shares vested was $ 3 million in 2023.

No shares vested in 2021.

We recognized compensation expense of $ 2 million in each of 2022, 2021, and 2020 related to stock awards.

No shares vested in 2022 and 2021.

We recognized compensation expense of $ 4 million in 2023, and $ 2 million in both 2022 and 2021 related to stock awards.

At December 31, 2023, total unrecognized compensation expense related to stock awards was $ 5 million, which is expected to be recognized over a period of 2.5 years.

Notes to Consolidated Financial Statements

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

12 unchanged sentences

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.

Notes to Consolidated Financial Statements

Supplemental balance sheet information related to leases was as follows:

10 unchanged sentences

$ 22,598 $ 25,139

Notes to Consolidated Financial Statements

2023 2022 2021

5 unchanged sentences

Finance leases 2.92 % 2.72 % 2.74 %

Notes to Consolidated Financial Statements

Supplemental cash flow information related to leases was as follows:

20 unchanged sentences

Operating lease payments in the table above include approximately $ 16 million related to options to extend lease terms that are reasonably certain of being exercised.

At December 31, 2022, we have entered into leases that have not yet commenced but provide for right-of-use assets of approximately $ 30 million with remaining related lease obligations of approximately $ 18 million, which 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.

At December 31, 2023, we had commitments of approximately $ 0.2 million related to railcar leases that have not yet commenced and are not included in the above table.

These leases are expected to commence in 2024.

Notes to Consolidated Financial Statements

Pension Plans and Other Postretirement Benefits

12 unchanged sentences

• NewMarket retirement income plan for union employees in Houston, Texas (the Houston plan);

Notes to Consolidated Financial Statements

• Afton Chemical Additives pension plan for union employees in Port Arthur, Texas (the Port Arthur plan).

62 unchanged sentences

Notes to Consolidated Financial Statements

The table below shows selected information on domestic pension and postretirement benefit plans.

The table below shows selected information on domestic defined benefit pension and postretirement plans.

(in thousands) 2023 2022

31 unchanged sentences

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 maintained the expected long-term rate of return to 4.0 % for the year beginning January 1, 2023.

As a result of that evaluation, we have maintained the expected long-term rate of return at 4.0 % for the year beginning January 1, 2024.

Notes to Consolidated Financial Statements

28 unchanged sentences

27,108 27,108 0 0 29,838 29,838 0 0

International equities—mutual fund

0 0 0 0 21,020 21,020 0 0

Equities—mutual fund 74,099 74,099 0 0 0 0 0 0

Common collective trusts measured at net asset value

$ 625,259 $ 625,259 $ 0 $ 0 $ 545,540 $ 485,526 $ 0 $ 0

$ 545,540 $ 485,526 $ 0 $ 0 $ 663,193 $ 562,353 $ 0 $ 0

Postretirement Plans

Insurance contract $ 20,375 $ 0 $ 20,375 $ 0 $ 20,734 $ 0 $ 20,734 $ 0

The valuation methodologies used to develop the fair value measurements for the investments in the table above are outlined below.

The valuation methodologies used to develop the fair value measurements for the investments in the previous table are outlined below.

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

1 unchanged sentence

• Cash and cash equivalents are valued at cost.

Notes to Consolidated Financial Statements

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

Notes to Consolidated Financial Statements

• 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.

1 unchanged sentence

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

In 2021, there was a third common collective trust that invested primarily in a diversified portfolio of equity securities of companies located outside of the United States and Canada, as determined by a company's jurisdiction of incorporation.

We could make withdrawals from this trust on the first business day of each month with notice of at least 10 days.

We sold our interest in this trust during 2022.

We sold our interest in these trusts during 2023.

• 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.

Cash Flows - For U.S.

plans, NewMarket expects to contribute $ 3 million to our pension plans and $ 2 million to our postretirement benefit plan in 2023.

plans, NewMarket expects to contribute $ 3 million to our defined benefit pension plans and $ 1 million to our postretirement benefit plan in 2024.

The expected benefit payments for the next ten years are as follows.

13 unchanged sentences

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.

11 unchanged sentences

Actuarial net (gain) loss ( 5,143 ) ( 41,108 ) ( 38,259 )

Prior service cost (credit) 0 0 0

Amortization of actuarial net gain (loss) 24 ( 630 ) ( 3,595 )

13 unchanged sentences

Benefits paid ( 5,560 ) ( 5,403 )

Settlements ( 2,510 ) 0

Foreign currency translation 7,399 ( 20,412 )

6 unchanged sentences

Benefits paid ( 5,560 ) ( 5,403 )

Settlements ( 2,510 ) 0

Foreign currency translation 10,048 ( 22,364 )

10 unchanged sentences

$ ( 3,019 ) $ 2,238

The settlements in the table above are the result of a number of long-tenured employees in our Belgium plan retiring in 2023 with lump sum distributions.

The accumulated benefit obligation for all foreign defined benefit pension plans was $ 134 million at December 31, 2023 and $ 122 million at December 31, 2022.

Notes to Consolidated Financial Statements

The fair market value of plan assets exceeded both the accumulated benefit obligation and projected benefit obligation for the Canada and U.K.

5 unchanged sentences

As the Germany plan is unfunded, a portion of the accrued benefit cost is included in current liabilities at year-end 2023 and 2022, reflecting the expected benefit payments related to the plan for the following year.

Notes to Consolidated Financial Statements

The table below shows selected information on foreign pension plans.

The table below shows selected information on foreign defined benefit pension plans.

(in thousands) 2023 2022

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Rate of projected compensation increase 3.52 % 3.55 % 4.07 %

The actuarial assumptions used by the various foreign locations are based upon the circumstances of each particular country and pension plan.

The actuarial assumptions used to measure the foreign defined benefit pension plans are based upon the circumstances of each particular country and pension plan.

The factors impacting the determination of the long-term rate of return for a particular foreign pension plan include the market conditions within a particular country, as well as the investment strategy and asset allocation of the specific plan.

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Assets are held and distributed by trusts and, depending upon the foreign location and plan, consist primarily of pooled equity funds, pooled debt securities funds, pooled diversified funds, equity securities, debt securities, cash, and insurance contracts.

The combined weighted-average target allocation of our foreign pension plans is 38 % in equities (including pooled funds), 36 % in debt securities (including pooled funds), 7 % in insurance contracts, and 19 % in pooled diversified funds.

The combined weighted-average target allocation of our foreign defined benefit pension plans is 39 % in equities (including pooled funds), 37 % in debt securities (including pooled funds), 5 % in insurance contracts, and 19 % in pooled diversified funds.

While the pension obligation is long-term in nature for each of our foreign plans, the investment strategies followed by each plan vary to some degree based upon the laws of a particular country, as well as the provisions of the specific pension trust.

and Canada plans are invested predominantly in equity securities funds, diversified funds, and debt securities funds.

and Canada plans are invested predominantly in equity securities funds, diversified funds, and

Notes to Consolidated Financial Statements

debt securities funds.

The funds of these plans are managed by various trustees and investment companies whose performance is reviewed throughout the year.

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There are no significant concentrations of risk within plan assets, nor do the equity securities include any NewMarket common stock for any year presented.

Notes to Consolidated Financial Statements

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

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

Investments that are measured at fair value using net asset value per share (or its equivalent) have not been classified by level in the fair value hierarchy.

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Pooled investment funds (measured at net asset value):

Equity securities—U.S.

Equity securities—international companies

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The Canadian equity fund invests in a diversification (sector and industry) of equities listed on a recognized Canadian exchange.

The diversified fund invests in a diversified mix of equities, fixed income securities, cash, and cash equivalent securities.

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

The diversified fund invests in a diversified mix of equities, fixed income securities, cash,

Notes to Consolidated Financial Statements

Cash Flows - For foreign pension plans, NewMarket expects to contribute $ 6 million to the plans in 2023.

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

and cash equivalent securities.

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

Cash Flows - For foreign defined benefit pension plans, NewMarket expects to contribute $ 7 million to the plans in 2024.

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

(in thousands) Expected Pension

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Foreign-derived intangible tax benefit ( 2.0 ) ( 3.0 ) ( 0.7 )

Uncertain tax positions 0.3 ( 0.1 ) ( 1.7 )

Taxes applicable to prior years ( 1.4 ) ( 0.1 ) ( 0.4 )

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The operating loss carryforwards expire in 2028 through 2041 and certain tax credits expire in 2026 through 2027.

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 $ 13 million of the aforementioned operating loss, capital loss, and tax credit carryforwards.

Therefore, as of December 31, 2022, we have recorded an offsetting valuation allowance in this amount.

During 2021, we released the valuation allowance on a negligible amount of net operating losses that we utilized during the year.

During 2022, we did not release any valuation allowances.

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 certain of the aforementioned operating loss, capital loss, and tax credit carryforwards.

Therefore, as of December 31, 2023, we have recorded a valuation allowance of $ 13 million.

During 2022 and 2023, we did not release any valuation allowances.

Notes to Consolidated Financial Statements

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or meet the requirements for a dividends received deduction.

However, at December 31, 2021, we had a $ 2 million deferred tax liability for the currency impact and for the withholding taxes that will not be creditable upon distribution.

As of December 31, 2022, we have an immaterial deferred tax liability for withholding taxes that will not be creditable upon distribution.

As of December 31, 2022 and December 31, 2023, we have an immaterial deferred tax liability for withholding taxes that will not be creditable upon distribution.

We have not provided a deferred tax liability on approximately $ 74 million of temporary differences related to investments in foreign subsidiaries that are essentially permanent in duration, as these earnings are considered to be indefinitely reinvested.

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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 outstanding senior notes included in long-term debt in the table below is based on the last quoted price closest to December 31 of each year.

The estimated fair value of our publicly traded outstanding senior notes included in long-term debt in the following table is based on the last quoted price closest to December 31 of each year.

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

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Value Carrying

Long-term debt, including current maturities $ 1,003,737 $ 906,891 $ 1,139,287 $ 1,178,066

Long-term debt $ 643,622 $ 572,983 $ 1,003,737 $ 906,891

Commitments and Contingencies

Contractual Commitments - We have non-lease contractual obligations for the construction of assets, as well as purchases of property and equipment, of approximately $ 13 million at December 31, 2023, all of which are due within five years .

We also have commitments for leases which have not yet commenced.

See Note 17 for further information.

From time to time, we also have commitments for leases which have not yet commenced.

Purchase Obligations - We have purchase obligations for goods or services that are enforceable, legally binding, and specify all significant terms, including:

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This factor influences both the number of claims settled against us and the indemnity cost associated with such resolutions.

• The estimated percent of claimants in each case that, after discovery, will actually make a claim against us, out of the total number of claimants in a case, is based on a level consistent with past experience and current trends.

• The estimated percent of claimants that, after discovery, will actually pursue a claim against us, out of the total number of claimants, is based on a level consistent with past experience and current trends.

• We utilize average comparable plaintiff cost history as the basis for estimating pending premises asbestos-related claims.

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• The estimated recoveries from insurance and Albemarle Corporation (a former operation of our company) for these cases are based on, and are consistent with, the 2005 settlement agreements with The Travelers Indemnity Company.

Based on the above assumptions, we have provided an undiscounted liability related to premises asbestos claims of $ 7 million at December 31, 2022 and $ 8 million at December 31, 2021.

Based on the above assumptions, we have provided an undiscounted liability related to premises asbestos claims of $ 7 million at both December 31, 2023 and December 31, 2022.

The liabilities related to premises asbestos claims are included in accrued expenses (current portion) and other noncurrent liabilities on the Consolidated Balance Sheets.

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Our more significant environmental sites include a former plant site in Louisiana (the Louisiana site) and a Houston, Texas plant site (the Texas site).

Together, the amounts accrued on a discounted basis related to these sites represented approximately $ 8 million of the total accrual at both December 31, 2022 and December 31, 2021, using discount rates ranging from 3 % to 9 %.

The aggregate undiscounted amount for these sites was $ 10 million at both December 31, 2022 and December 31, 2021.

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 both December 31, 2022 and December 31, 2021.

Together, the amounts accrued on a discounted basis related to these sites represented approximately $ 9 million of the total accrual at December 31, 2023 and $ 8 million at December 31, 2022, using discount rates ranging from 3 % to 9 %.

The aggregate undiscounted amount for these sites was $ 11 million at December 31, 2023 and $ 10 million at December 31, 2022.

Of the total accrued for these two sites, the amount related to remediation of groundwater and soil was $ 4 million for each of the Louisiana site and Texas site at December 31, 2023 and $ 3 million for the Louisiana site and $ 4 million for the Texas site at December 31, 2022.

Notes to Consolidated Financial Statements

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Amounts reclassified from accumulated other comprehensive loss (a)

5,099 0 5,099

Other comprehensive income (loss) 53,040 ( 42,808 ) 10,232

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Amounts reclassified from accumulated other comprehensive loss (a)

( 3,503 ) 0 ( 3,503 )

Other comprehensive income (loss) 25,404 25,520 50,924

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Recent Accounting Pronouncements

In September 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No.

2022-04, "Liabilities - Supplier Finance Programs - Disclosure of Supplier Finance Program Obligations" (ASU 2022-04).

FASB issued ASU 2022-04 to enhance the transparency of supplier finance programs by requiring disclosures surrounding the programs be included in the financial statements.

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No.

2023-07, "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures" (ASU 2023-07).

ASU 2023-07 requires expanded disclosures about reportable segments including additional information on segment expenses, expanded interim period disclosures, and an explanation of how the chief operating decision maker utilizes segment information in evaluating segment performance.

ASU 2023-07 is effective for our reporting period beginning January 1, 2024 with the interim period requirements effective for our reporting period beginning January 1, 2025.

We are currently assessing the impact that the adoption of ASU 2023-07 will have on the disclosures in our consolidated financial statements.

In December 2023, the FASB issued Accounting Standards Update No.

2023-09, "Income Taxes (Topic 740):

Improvements to Income Tax Disclosures" (ASU 2023-09).

The FASB issued ASU 2023-09 to enhance the transparency and decision-making usefulness of income tax disclosures by requiring additional information on an entity's tax rate reconciliation, as well as income taxes paid.

ASU 2023-09 is effective for our reporting period beginning January 1, 2025.

We continue to evaluate the impact of ASU 2022-04 on our consolidated financial statements, but do not currently expect a significant impact.

We are currently assessing the impact that the adoption of ASU 2023-09 will have on the disclosures in our consolidated financial statements.

Notes to Consolidated Financial Statements

Subsequent Events

AMPAC Acquisition

On January 16, 2024, we completed the acquisition of AMPAC Intermediate Holdings, LLC, the ultimate parent company of American Pacific Corporation (AMPAC), for approximately $ 700 million.

AMPAC manufactures and sells critical performance additives used in solid rocket motors for space launch and military defense applications.

AMPAC also manufactures and sells Halotron BrX, a fire extinguishing agent that replaces legacy high ozone-depleting fire extinguishing agents.

The acquisition was funded by cash on hand and borrowings under our revolving credit facility.

A preliminary purchase price allocation and any required pro forma financial disclosures required by Accounting Standards Codification 805 - Business Combinations will be included in the Quarterly Report on Form 10-Q for the quarter ending March 31, 2024.

Debt Agreements

On January 22, 2024, NewMarket and certain foreign subsidiary borrowers entered into a credit agreement for a new $ 900 million revolving credit facility (the Revolving Credit Agreement).

The revolving credit facility matures on January 22, 2029 and includes a $ 500 million sublimit for multicurrency borrowings, an initial letter of credit sublimit of $ 25 million and a $ 20 million sublimit for swingline loans.

The Revolving Credit Agreement includes an expansion feature allowing us, subject to certain conditions, to request an increase in the aggregate amount of the revolving credit facility or obtain incremental term loans in an amount up to $ 450 million.

We may also request an extension of the maturity date as provided for in the Revolving Credit Agreement.

Borrowings made under the revolving credit facility bear interest at a variable rate determined, at our option, at an annual rate equal to (i) the Base Rate, (ii) Term SOFR, (iii) the Weekly Adjusted Term SOFR, (iv) the Alternative Currency Term Rate, or (v) the Alternative Currency Daily Rate, each plus the Applicable Rate and all as defined in the Revolving Credit Agreement.

The Applicable Rate is based, at our option, on either our Leverage Ratio or Ratings Level.

All capitalized terms are as defined in the Revolving Credit Agreement.

Also on January 22, 2024, NewMarket entered into a credit agreement for a $ 250 million term loan (the Term Loan Credit Agreement).

The term loan matures on January 22, 2026.

NewMarket is required to repay the principal amount borrowed under the term loan in full at maturity.

We may, in our sole discretion and subject to the conditions set forth in the Term Loan Credit Agreement, prepay amounts borrowed under the term loan, together with any accrued and unpaid interest, prior to maturity.

Any amounts prepaid prior to maturity are not available for additional borrowings by NewMarket.

The principal amount borrowed under the term loan initially bears interest at a variable rate equal to Term SOFR plus the Applicable Rate.

We may, at our option, elect for outstanding portions of the principal amount to instead bear interest at a variable rate equal to the Base Rate or Weekly Adjusted Term SOFR, plus, in each case, the Applicable Rate, subject to the conditions set forth in the Term Loan Credit Agreement.

Similar to the revolving credit facility, the Applicable Rate is based, at our option, on either our Leverage Ratio or Ratings Level.

All capitalized terms are as defined in the Term Loan Credit Agreement.

The obligations under the revolving credit facility and the term loan are unsecured and the obligations under the revolving credit facility are fully and unconditionally guaranteed by NewMarket.

Both the revolving credit facility and the term loan contain certain customary covenants, including financial covenants that require NewMarket to maintain a consolidated Leverage Ratio (as defined in each of the agreements) of no more than 3.75 to 1.00 except during an Increased Leverage Period (as defined in each of the agreements).

Concurrently with our entry into the Revolving Credit Agreement and the Term Loan Credit Agreement, we terminated our former revolving credit facility dated as of March 5, 2020.

Upon termination, we repaid the amount outstanding under the former revolving credit facility, plus accrued and unpaid interest.

NewMarket borrowed the entire $ 250 million available under the Term Loan Credit Agreement and approximately $ 465 million under the Revolving Credit Agreement to repay the amounts outstanding under the former revolving credit facility.

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