NEWMARKET CORP 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of NewMarket Corporation 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, 2023 and 2022, 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, 2023, 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, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies 36 Table of Contents and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Valuation of Pension Benefit Obligation As described in Note 17 to the consolidated financial statements, the Company’s consolidated pension benefit obligation, excluding other postretirement benefits, was $502 million as of December 31, 2023. Management develops the actuarial assumptions used by the various US and foreign plans based upon the circumstances of each particular country and pension plan. As disclosed by management, the determination of the pension benefit obligation requires the use of estimates and assumptions. 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. 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. 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. /s/ PricewaterhouseCoopers LLP Richmond, Virginia February 15, 2024 We have served as the Company’s or its predecessor's auditor since 1947. 37 Table of Contents NewMarket Corporation and Subsidiaries Consolidated Statements of Income Years Ended December 31, (in thousands, except per-share amounts) 2023 2022 2021 Net sales $ 2,698,419 $ 2,764,799 $ 2,356,110 Cost of goods sold 1,925,906 2,124,302 1,808,403 Gross profit 772,513 640,497 547,707 Selling, general, and administrative expenses 151,470 145,106 145,973 Research, development, and testing expenses 137,998 140,252 143,952 Operating profit 483,045 355,139 257,782 Interest and financing expenses, net 37,359 35,202 34,218 Loss on early extinguishment of debt 0 7,545 0 Other income (expense), net 43,276 35,342 23,987 Income before income tax expense 488,962 347,734 247,551 Income tax expense 100,098 68,196 56,643 Net income $ 388,864 $ 279,538 $ 190,908 Earnings per share - basic and diluted $ 40.44 $ 27.77 $ 17.71 See accompanying Notes to Consolidated Financial Statements 38 Table of Contents NewMarket Corporation and Subsidiaries Consolidated Statements of Comprehensive Income Years Ended December 31, (in thousands) 2023 2022 2021 Net income $ 388,864 $ 279,538 $ 190,908 Other comprehensive income (loss): Pension plans and other postretirement benefits: Prior service credit (cost) arising during the period, net of income tax expense (benefit) of $( 212 ) in 2023, $( 21 ) in 2022 and $ 8 in 2021 ( 436 ) ( 65 ) 27 Amortization of prior service cost (credit) included in net periodic benefit cost (income), net of income tax expense (benefit) of $( 642 ) in 2023, $( 627 ) in 2022 and $( 628 ) in 2021 ( 2,062 ) ( 1,993 ) ( 1,977 ) Actuarial net gain (loss) arising during the period, net of income tax expense (benefit) of $ 9,879 in 2023, $ 17,552 in 2022 and $ 29,035 in 2021 29,343 53,084 89,167 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 Total pension plans and other postretirement benefits 25,404 53,040 94,293 Foreign currency translation adjustments, net of income tax expense (benefit) of $ 703 in 2023, $ 468 in 2022 and $( 380 ) in 2021 25,520 ( 42,808 ) ( 3,356 ) Other comprehensive income (loss) 50,924 10,232 90,937 Comprehensive income $ 439,788 $ 289,770 $ 281,845 See accompanying Notes to Consolidated Financial Statements 39 Table of Contents NewMarket Corporation and Subsidiaries Consolidated Balance Sheets December 31, (in thousands, except share amounts) 2023 2022 ASSETS Current assets: Cash and cash equivalents $ 111,936 $ 68,712 Trade and other accounts receivable, net 432,349 453,692 Inventories 456,234 631,383 Prepaid expenses and other current assets 39,051 38,338 Total current assets 1,039,570 1,192,125 Property, plant, and equipment, net 654,747 659,998 Intangibles (net of amortization) and goodwill 124,642 126,069 Prepaid pension cost 370,882 302,584 Operating lease right-of-use assets 70,823 62,417 Deferred charges and other assets 48,207 63,625 Total assets $ 2,308,871 $ 2,406,818 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 231,137 $ 273,289 Accrued expenses 76,546 89,508 Dividends payable 19,212 17,850 Income taxes payable 6,131 16,109 Operating lease liabilities 15,074 15,569 Other current liabilities 16,064 11,562 Total current liabilities 364,164 423,887 Long-term debt 643,622 1,003,737 Operating lease liabilities - noncurrent 55,058 46,968 Other noncurrent liabilities 168,966 169,819 Total liabilities 1,231,810 1,644,411 Commitments and contingencies (Note 20) Shareholders’ equity: Common stock and paid-in capital (with no par value; authorized shares - 80,000,000 ; issued and outstanding - 9,590,086 at December 31, 2023 and 9,702,147 at December 31, 2022) 2,130 0 Accumulated other comprehensive loss ( 21,071 ) ( 71,995 ) Retained earnings 1,096,002 834,402 Total shareholders' equity 1,077,061 762,407 Total liabilities and shareholders' equity $ 2,308,871 $ 2,406,818 See accompanying Notes to Consolidated Financial Statements 40 Table of Contents NewMarket Corporation and Subsidiaries Consolidated Statements of Shareholders’ Equity Common Stock and Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings Total Shareholders’ Equity (in thousands, except share and per-share amounts) Shares Amount Balance at December 31, 2020 10,921,377 $ 717 $ ( 173,164 ) $ 932,271 $ 759,824 Net income 190,908 190,908 Other comprehensive income (loss) 90,937 90,937 Cash dividends ($ 8.00 per share) ( 85,910 ) ( 85,910 ) Repurchases of common stock ( 566,671 ) ( 3,305 ) ( 192,915 ) ( 196,220 ) Stock-based compensation 8,016 2,588 2 2,590 Balance at December 31, 2021 10,362,722 0 ( 82,227 ) 844,356 762,129 Net income 279,538 279,538 Other comprehensive income (loss) 10,232 10,232 Cash dividends ($ 8.40 per share) ( 84,263 ) ( 84,263 ) Repurchases of common stock ( 668,553 ) ( 2,205 ) ( 205,265 ) ( 207,470 ) Stock-based compensation 7,978 2,205 36 2,241 Balance at December 31, 2022 9,702,147 0 ( 71,995 ) 834,402 762,407 Net income 388,864 388,864 Other comprehensive income (loss) 50,924 50,924 Cash dividends ($ 8.85 per share) ( 85,034 ) ( 85,034 ) 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 Balance at December 31, 2023 9,590,086 $ 2,130 $ ( 21,071 ) $ 1,096,002 $ 1,077,061 See accompanying Notes to Consolidated Financial Statements 41 Table of Contents NewMarket Corporation and Subsidiaries Consolidated Statements of Cash Flows Years Ended December 31, (in thousands) 2023 2022 2021 Cash and cash equivalents at beginning of year $ 68,712 $ 83,304 $ 125,172 Cash flows from operating activities: Net income 388,864 279,538 190,908 Adjustments to reconcile net income to cash flows from operating activities: Depreciation and amortization 78,010 82,285 84,320 Deferred income tax (benefit) expense ( 14,750 ) ( 42,645 ) 1,978 Loss on early extinguishment of debt 0 7,545 0 Change in assets and liabilities: Trade and other accounts receivable, net 31,594 ( 73,089 ) ( 53,990 ) Inventories 192,470 ( 166,558 ) ( 96,199 ) Prepaid expenses and other current assets 744 2,159 ( 2,691 ) Accounts payable and accrued expenses ( 59,176 ) 35,532 60,407 Operating lease liabilities ( 20,005 ) ( 18,275 ) ( 18,204 ) Other current liabilities ( 1,855 ) 4,009 ( 6,240 ) Income taxes payable ( 9,492 ) 11,586 562 Loss on marketable securities 0 2,977 7,440 Cash pension and postretirement contributions ( 10,219 ) ( 9,748 ) ( 10,342 ) Other, net 638 ( 6,696 ) 7,387 Cash provided from (used in) operating activities 576,823 108,620 165,336 Cash flows from investing activities: Capital expenditures ( 48,293 ) ( 56,169 ) ( 78,934 ) Purchases of marketable securities 0 ( 787 ) ( 393,434 ) Proceeds from sales and maturities of marketable securities 0 372,846 10,957 Cash provided from (used in) investing activities ( 48,293 ) 315,890 ( 461,411 ) Cash flows from financing activities: 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 0 0 395,052 Debt issuance costs 0 0 ( 3,897 ) Other, net 1,304 ( 3,525 ) ( 1,892 ) Cash provided from (used in) financing activities ( 487,594 ) ( 439,357 ) 255,133 Effect of foreign exchange on cash and cash equivalents 2,288 255 ( 926 ) 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 See accompanying Notes to Consolidated Financial Statements 42 Table of Contents Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies Consolidation - Our consolidated financial statements include the accounts of NewMarket Corporation and its subsidiaries. All intercompany transactions are eliminated upon consolidation. References to "we," "us," "our," the "company," and "NewMarket" are to NewMarket Corporation and its consolidated subsidiaries, unless the context indicates otherwise. NewMarket is the parent company of separate operating companies, each managing its own assets and liabilities. Those companies are Afton, which focuses on petroleum additive products; Ethyl, representing certain contracted manufacturing and related services, as well as the antiknock compounds business; and NewMarket Development, which manages the real property and improvements that we own in Virginia. NewMarket is also the parent company of NewMarket Services, which provides various administrative services to NewMarket, Afton, Ethyl, and NewMarket Development. Foreign Currency Translation - We translate the balance sheets of our foreign subsidiaries into U.S. Dollars based on the current exchange rate at the end of each period. We translate the statements of income using the weighted-average exchange rates for the period. 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 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. Net sales (revenues) are reported at the gross amount billed, including amounts related to shipping that are charged to the customer. Provisions for rebates to customers are recorded in the same period that the related sales are recorded. Freight costs incurred on the delivery of products are included in the Consolidated Statements of Income in cost of goods sold. Our standard terms of delivery are included in our contracts, sales order confirmation documents, and invoices. 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 less than 90 days. Throughout the year, we have cash balances in excess of federally insured amounts on deposit with various financial institutions. 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 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. We determine the adequacy of the allowance by periodically evaluating each customer’s receivable balance, considering their financial condition and credit history, and considering current economic conditions. The allowance for credit losses was not material at December 31, 2023 or December 31, 2022. Inventories - NewMarket values its inventories at the lower of cost or net realizable value. In the United States, petroleum additives inventory cost is determined on the last-in, first-out (LIFO) basis. For all other inventory, we determine cost using a weighted-average method. Inventory cost includes raw materials, direct labor, and manufacturing overhead. Property, Plant, and Equipment - We state property, plant, and equipment at cost less accumulated depreciation and compute depreciation by the straight-line method based on the estimated useful lives of the assets. We capitalize expenditures for significant improvements that extend the useful life of the related property. We expense repairs and maintenance, including plant turnaround costs, as incurred. When property is sold or retired, we remove the cost and accumulated depreciation from the accounts and any related gain or loss is included in earnings. 43 Table of Contents Notes to Consolidated Financial Statements 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. Goodwill arises from the excess of cost over the net assets of businesses acquired. Goodwill represents the residual purchase price after allocation to all identifiable net assets. We test goodwill for impairment each year, as well as whenever a significant event or circumstance occurs which could reduce the fair value of the reporting unit to which the goodwill applies below the carrying amount of the reporting unit. Impairment of Long-Lived Assets - When significant events or circumstances occur that might impair the value of long-lived assets, we evaluate recoverability of the recorded cost of these assets. 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 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. Environmental compliance costs also include maintenance and operation of pollution prevention and control facilities. We expense these compliance costs in cost of goods sold as incurred. Accrued environmental remediation and monitoring costs relate to an existing condition caused by past operations. NewMarket accrues these costs in current operations within cost of goods sold in the Consolidated Statements of Income when it is probable that we have incurred a liability and the amount can be reasonably estimated. These estimates are based on an assessment of the site, available clean-up methods, and prior experience in handling remediation. When we can reliably determine the amount and timing of future cash flows, we discount these liabilities, incorporating an inflation factor. Legal Costs - We expense legal costs in the period incurred. Employee Savings Plan - Most of our full-time salaried and hourly employees may participate in defined contribution savings plans. Employees who are covered by collective bargaining agreements may also participate in a savings plan according to the terms of their bargaining agreements. Employees, as well as NewMarket, contribute to the plans. We made contributions of $ 7 million in each of 2023, 2022, and 2021 related to these plans. Research, Development, and Testing Expenses - NewMarket expenses all research, development, and testing costs as incurred. R&D costs include personnel-related costs, as well as internal and external testing of our products. Income Taxes - We recognize deferred income taxes for temporary differences between the financial reporting basis and the income tax basis of assets and liabilities. We also adjust for changes in tax rates and laws at the time the changes are enacted. A valuation allowance is recorded when it is more likely than not that a deferred tax asset will not be realized. 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. Leases - We determine if an arrangement includes a lease at the inception of the agreement. 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. 44 Table of Contents Notes to Consolidated Financial Statements Our lease agreements contain both fixed and variable lease payments. 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 at lease inception. Variable lease payments that are not based on a rate or index are expensed when incurred. 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 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. Some of our leases include an option to renew that can extend the lease term. For those leases which are reasonably certain to be renewed, we include the renewal in the lease term. We do not recognize leases with terms of 12 months or less on the balance sheet for any lease class, except the railcar lease class. For the short-term leases not recorded on the balance sheet, the lease payments are recognized in the Consolidated Statements of Income on a straight-line basis over the lease term. We account for the lease and nonlease components as a single lease component in determining the right-of-use assets and lease liabilities for all lease classes. Derivative Financial Instruments and Hedging Activities - We are exposed to certain risks arising from both our business operations and economic conditions. We manage our exposures to a wide variety of business and operational risks through management of our core business activities. We manage certain economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of our debt funding, as well as through the use of derivative financial instruments. We sometimes enter into interest rate swaps to manage our exposure to interest rate movements. In addition, our foreign operations expose us to fluctuations of foreign exchange rates. These fluctuations may impact our results of operations, financial position, and cash flows. To manage this exposure, we sometimes enter into foreign currency forward contracts to minimize currency exposure due to cash flows from foreign operations. We record all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. We may enter into derivative contracts that are intended to economically hedge certain of our risks, even though hedge accounting does not apply, or we elect not to apply hedge accounting. We do not enter into derivative instruments for speculative purposes. We had no derivative financial instruments outstanding at December 31, 2023 or December 31, 2022. Stock-based Compensation - We calculate the fair value of restricted stock and restricted stock units based on the closing price of our common stock on the date of grant. If award recipients are entitled to receive dividends during the vesting period, we make no adjustment to the fair value of the award for dividends. If the award does not entitle recipients to dividends during the vesting period, we reduce the grant-date price of our common stock by the present value of the dividends expected to be paid on the underlying shares during the vesting period, discounted at the risk-free interest rate. We recognize stock-based compensation expense for the number of awards expected to vest on a straight-line basis over the requisite service period. 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. 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 45 Table of Contents 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. In addition, our financial results can be influenced by certain risk factors. Some of our significant concentrations of risk include the following: • reliance on a small number of significant customers; • customers concentrated in the fuel and lubricant industries; and • production of several of our products solely at one facility. 2. Net Sales Our revenues are primarily derived from the manufacture and sale of petroleum additives products. We sell petroleum additives products across the world including to customers located in our North America, Latin America, Asia Pacific, and EMEAI regions. Our customers primarily consist of global, national, and independent oil companies. 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 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 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. Control is generally transferred to the customer when title transfers (which may include physical possession by the customer), we have a right to payment from the customer, the customer has accepted the product, and the customer has assumed the risks and rewards of ownership. We have supplier managed inventory arrangements with some of our customers to facilitate on-demand product availability. In some cases, the inventory resides at a customer site, although title has not transferred, we are not entitled to payment, and we have not invoiced for the product. We have evaluated the contract terms under these arrangements and have determined that control transfers when the customer uses the product, at which time revenue is recognized. Our contracts generally include one performance obligation, which is providing petroleum additives products. The performance obligation is satisfied at a point in time when products are shipped, delivered, or consumed by the customer, depending on the underlying contracts. Taxes assessed by a governmental authority which are concurrent with sales to our customers, including sales, use, value-added, and revenue-related excise taxes, are collected by us from the customer and are not included in net sales, but are reflected in accrued expenses until remitted to the appropriate governmental authority. When we are responsible for shipping and handling costs after title has transferred, we account for those as fulfillment costs and include them in cost of goods sold. Some of our contracts include variable consideration in the form of rebates or business development funds. We record rebates at the point of sale as contra-revenue when we can reasonably estimate the amount of the rebate. The estimates are based on our best judgment at the time of sale, which includes anticipated as well as historical performance. Depending upon the specific terms of a business development fund, amounts are accrued as contra-revenue at the point of sale or are expensed when costs are incurred by us. 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 $ 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. At December 31, 2022, accrued rebates were $ 28 million and accrued business development funds were $ 0.4 million. 46 Table of Contents Notes to Consolidated Financial Statements The following table provides information on our net sales by geographic area. Information on net sales by segment is in Note 4. Years Ended December 31, (in thousands) 2023 2022 2021 Net sales United States $ 972,954 $ 974,963 $ 780,278 China 186,181 181,283 255,219 Europe, Middle East, Africa, India 791,744 807,782 708,675 Asia Pacific, except China 396,790 435,684 325,621 Other foreign 350,750 365,087 286,317 Net sales $ 2,698,419 $ 2,764,799 $ 2,356,110 3 . Earnings Per Share We had 34,006 shares in 2023, 33,055 shares in 2022, and 26,572 shares in 2021 of nonvested restricted stock that were excluded from the calculation of diluted earnings per share, as their effect on earnings per share would be anti-dilutive. The nonvested restricted stock is considered a participating security since the restricted stock contains nonforfeitable rights to dividends. As such, we use the two-class method to compute basic and diluted earnings per share for all periods presented since this method yields the most dilutive result. The following table illustrates the earnings allocation method utilized in the calculation of basic and diluted earnings per share. Years Ended December 31, (in thousands, except per-share amounts) 2023 2022 2021 Earnings per share numerator: Net income attributable to common shareholders before allocation of earnings to participating securities $ 388,864 $ 279,538 $ 190,908 Earnings allocated to participating securities ( 1,339 ) ( 876 ) ( 462 ) Net income attributable to common shareholders after allocation of earnings to participating securities $ 387,525 $ 278,662 $ 190,446 Earnings per share denominator: Weighted-average number of shares of common stock outstanding - basic and diluted 9,583 10,035 10,756 Earnings per share - basic and diluted $ 40.44 $ 27.77 $ 17.71 4. Segment and Geographic Area Information Segment Information - The tables below show our consolidated segment results. The “All other” category includes the operations of the antiknock compounds business, as well as certain contracted manufacturing and related services associated with Ethyl. The segment accounting policies are the same as those described in Note 1. We evaluate the performance of the petroleum additives business based on segment operating profit. 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. No transfers occurred between the petroleum additives segment and the “All other” category during the periods presented. The table below reports net sales and operating profit by segment, as well as a reconciliation to income before income tax expense, for the last three years. 47 Table of Contents Notes to Consolidated Financial Statements Years Ended December 31, (in thousands) 2023 2022 2021 Net sales Petroleum additives Lubricant additives $ 2,295,440 $ 2,342,622 $ 1,998,772 Fuel additives 394,269 411,688 345,170 Total 2,689,709 2,754,310 2,343,942 All other 8,710 10,489 12,168 Net sales (a) $ 2,698,419 $ 2,764,799 $ 2,356,110 Segment operating profit Petroleum additives $ 514,428 $ 378,244 $ 281,055 All other ( 4,986 ) ( 1,782 ) ( 1,525 ) Segment operating profit 509,442 376,462 279,530 Corporate, general, and administrative expenses ( 26,147 ) ( 21,579 ) ( 21,214 ) Interest and financing expenses, net ( 37,359 ) ( 35,202 ) ( 34,218 ) Loss on early extinguishment of debt 0 ( 7,545 ) 0 Other income (expense), net 43,026 35,598 23,453 Income before income tax expense $ 488,962 $ 347,734 $ 247,551 (a) No single customer accounted for 10% or more of our total net sales in 2023, 2022, or 2021. The following tables show asset information by segment and the reconciliation to consolidated assets. Segment assets consist of accounts receivable, inventory, and long-lived assets. 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 and lease right-of-use assets. December 31, (in thousands) 2023 2022 Segment assets Petroleum additives $ 1,728,397 $ 1,929,340 All other 10,098 18,738 1,738,495 1,948,078 Cash and cash equivalents 111,936 68,712 Non-segment other accounts receivable 3,083 2,220 Prepaid expenses and other current assets 39,051 38,338 Non-segment property, plant, and equipment, net 31,983 32,191 Prepaid pension cost 370,882 302,584 Non-segment lease right-of-use assets 5 26 Non-segment deferred charges and other assets 13,436 14,669 Total assets $ 2,308,871 $ 2,406,818 48 Table of Contents Notes to Consolidated Financial Statements Years Ended December 31, (in thousands) 2023 2022 2021 Additions to long-lived assets Petroleum additives $ 72,038 $ 64,456 $ 134,873 All other 1 147 22 Corporate 2,018 3,983 686 Total additions to long-lived assets $ 74,057 $ 68,586 $ 135,581 Depreciation and amortization Petroleum additives $ 74,471 $ 78,744 $ 80,495 All other 45 51 51 Corporate 3,494 3,490 3,774 Total depreciation and amortization $ 78,010 $ 82,285 $ 84,320 Geographic Area Information - We have operations in the North America, Latin America, Asia Pacific, and EMEAI regions. Our foreign customers consist primarily of global, national, and independent oil companies. The tables below report net sales, total assets, and long-lived assets by geographic area, as well as by country for those countries with significant net sales or long-lived assets. Since our foreign operations are significant to our overall business, we are also presenting net sales in the table below by the major regions in which we operate. NewMarket assigns net sales to geographic areas based on the location to which the product was shipped to a third party. Long-lived assets in the table below include property, plant, and equipment, net of depreciation, and lease right-of-use assets. Years Ended December 31, (in thousands) 2023 2022 2021 Net sales United States $ 972,954 $ 974,963 $ 780,278 China 186,181 181,283 255,219 Europe, Middle East, Africa, India 791,744 807,782 708,675 Asia Pacific, except China 396,790 435,684 325,621 Other foreign 350,750 365,087 286,317 Net sales $ 2,698,419 $ 2,764,799 $ 2,356,110 December 31, (in thousands) 2023 2022 Total assets United States $ 1,016,449 $ 990,037 Foreign 1,292,422 1,416,781 Total assets $ 2,308,871 $ 2,406,818 Long-lived assets United States $ 376,421 $ 363,211 Singapore 234,484 247,218 Other foreign 149,436 148,879 Total long-lived assets $ 760,341 $ 759,308 49 Table of Contents Notes to Consolidated Financial Statements 5. Supplemental Cash Flow Information Years Ended December 31, (in thousands) 2023 2022 2021 Cash paid during the year for Interest and financing expenses (net of capitalization) $ 36,644 $ 40,531 $ 30,465 Income taxes 132,928 88,866 67,917 Supplemental disclosure of non-cash transactions Non-cash additions to property, plant, and equipment $ 1,788 $ 4,087 $ 4,872 6. Trade and Other Accounts Receivable, Net December 31, (in thousands) 2023 2022 Trade receivables $ 368,240 $ 384,636 Income and other tax receivables 59,190 60,745 Other 4,919 8,311 $ 432,349 $ 453,692 7. Inventories December 31, (in thousands) 2023 2022 Finished goods and work-in-process $ 351,746 $ 497,652 Raw materials 82,441 113,484 Stores, supplies, and other 22,047 20,247 $ 456,234 $ 631,383 Our U.S. petroleum additives finished goods, work-in-process, and raw materials inventories, which are stated on the LIFO basis, amounted to $ 123 million at December 31, 2023 and were below replacement cost by approximately $ 94 million. At December 31, 2022, LIFO basis inventories were $ 165 million, which was approximately $ 114 million below replacement cost. Our foreign inventories amounted to $ 313 million at December 31, 2023 and $ 451 million at December 31, 2022. Reserves for obsolete and slow-moving inventory included in the table above were not material at December 31, 2023 or December 31, 2022. 8. Prepaid Expenses and Other Current Assets December 31, (in thousands) 2023 2022 Dividend funding $ 19,212 $ 17,850 Income taxes on intercompany profit 7,054 6,925 Other 12,785 13,563 $ 39,051 $ 38,338 50 Table of Contents Notes to Consolidated Financial Statements 9. Property, Plant, and Equipment, at Cost December 31, (in thousands) 2023 2022 Land $ 37,225 $ 37,088 Land improvements 65,064 64,061 Leasehold improvements 1,842 1,832 Buildings 185,537 183,030 Machinery and equipment 1,328,808 1,279,425 Construction in progress 27,563 30,916 1,646,039 1,596,352 Less: accumulated depreciation and amortization 991,292 936,354 Net property, plant, and equipment $ 654,747 $ 659,998 We depreciate the cost of property, plant, and equipment by the straight-line method over the following estimated useful lives: Land improvements 3 - 40 years Buildings 5 - 46 years Machinery and equipment 1 - 30 years Depreciation expense was $ 56 million in 2023, $ 60 million in 2022, and $ 61 million in 2021. 10. Intangibles (Net of Amortization) and Goodwill The net carrying amount of intangibles and goodwill was $ 125 million at December 31, 2023 and $ 126 million at December 31, 2022. The gross carrying amount and accumulated amortization of each type of intangible asset and goodwill are presented in the table below. December 31, 2023 2022 (in thousands) Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Amortizing intangible assets Formulas and technology $ 6,200 $ 6,200 $ 6,200 $ 5,683 Contract 2,000 2,000 2,000 1,200 Customer base 5,440 4,539 5,440 4,350 Goodwill 123,741 123,662 $ 137,381 $ 12,739 $ 137,302 $ 11,233 Aggregate amortization expense $ 1,506 $ 1,423 Aggregate amortization expense was $ 2 million in 2021. 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. 51 Table of Contents 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): 2024 $ 190 2025 190 2026 190 2027 190 2028 141 We amortize the customer base over 20 years. 11. Deferred Charges and Other Assets December 31, (in thousands) 2023 2022 Finance lease right-of-use assets $ 34,771 $ 36,893 Deferred income tax assets 2,726 3,575 Asbestos insurance receivables 2,883 2,994 Deferred financing costs, net of amortization 611 1,095 Deposit on future leased plant and equipment 0 12,063 Other 7,216 7,005 $ 48,207 $ 63,625 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 2.70 % senior notes is reported as a component of long-term debt. See Note 13 for further information on our long-term debt. 12. Accrued Expenses December 31, (in thousands) 2023 2022 Employee benefits, payroll, and related taxes $ 35,800 $ 36,878 Customer rebates 18,132 27,752 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 52 Table of Contents Notes to Consolidated Financial Statements 13. Long-term Debt December 31, (in thousands) 2023 2022 Senior notes - 2.70 % due 2031 (net of related deferred financing costs) $ 393,622 $ 392,737 Senior notes - 3.78 % due 2029 250,000 250,000 Revolving credit facility 0 361,000 643,622 1,003,737 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, 2023 and December 31, 2022. 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. These notes bear interest at 3.78 % and mature on January 4, 2029. Interest is payable semiannually. Principal payments of $ 50 million are payable annually beginning on January 4, 2025. We have the right to make optional prepayments on the notes at any time, subject to certain limitations. The note purchase agreement contains representations, warranties, terms, and conditions customary for transactions of this type. These include negative covenants, certain financial covenants, and events of default which are substantially similar to the covenants and events of default in our revolving credit facility. We were in compliance with all covenants under the 3.78 % senior notes as of December 31, 2023 and December 31, 2022. 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 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 were amortizing over the term of the Credit Agreement. 53 Table of Contents 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. 14. Other Noncurrent Liabilities December 31, (in thousands) 2023 2022 Deferred income tax liabilities $ 58,657 $ 61,993 Employee benefits 61,656 58,974 Finance lease liabilities 19,844 22,433 Environmental remediation 9,601 9,454 Asbestos litigation reserve 5,193 5,354 Deemed repatriation of earnings 2,956 2,956 Other 11,059 8,655 $ 168,966 $ 169,819 15. Stock-based Compensation 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). 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 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. The maximum period in which an option may be exercised is fixed by the Administrator at the time the option is granted but, in the case of an incentive stock option, cannot exceed 10 years. No participant may be granted or awarded, in any calendar year, shares, options, SARs, or stock units covering more than 10,000 shares of our common stock in the aggregate. 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. 54 Table of Contents 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 . At December 31, 2023, 248,885 shares were available for grant. During 2023, we granted 1,115 shares to five of our non-employee directors, which vested immediately. A summary of activity during 2023 related to NewMarket’s restricted stock and restricted stock units (stock awards) is presented below in whole shares: Number of Shares Weighted Average Grant-Date Fair Value Unvested stock awards at January 1, 2023 34,412 $ 390.02 Granted in 2023 10,115 341.93 Vested in 2023 ( 7,441 ) 416.24 Forfeited in 2023 ( 1,668 ) 394.62 Unvested stock awards at December 31, 2023 35,418 370.56 The weighted average grant-date fair value was $ 312.49 for stock awards granted in 2022 and $ 392.63 for stock awards granted in 2021. The fair value of shares vested was $ 3 million in 2023. 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. 16. Leases Our leases are for land, real estate, railcars, vehicles, pipelines, plant equipment, and office equipment. We have leases with remaining terms ranging from less than one year to 47 years. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The components of lease cost were as follows: Years Ended December 31, (in thousands) 2023 2022 2021 Operating lease cost $ 19,242 $ 18,573 $ 18,343 Finance lease cost: Amortization of assets 2,547 2,771 2,795 Interest on lease liabilities 657 712 517 Short-term lease cost 2,463 6,246 6,607 Variable lease cost 5,539 8,152 6,364 Total lease cost $ 30,448 $ 36,454 $ 34,626 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. 55 Table of Contents Notes to Consolidated Financial Statements Supplemental balance sheet information related to leases was as follows: December 31, (in thousands) Balance Sheet Classification 2023 2022 Operating leases Right-of-use assets Operating lease right-of-use assets $ 70,823 $ 62,417 Current liability Operating lease liabilities $ 15,074 $ 15,569 Noncurrent liability Operating lease liabilities-noncurrent 55,058 46,968 $ 70,132 $ 62,537 Finance leases Right-of-use assets Deferred charges and other assets $ 34,771 $ 36,893 Current liability Other current liabilities $ 2,754 $ 2,706 Noncurrent liability Other noncurrent liabilities 19,844 22,433 $ 22,598 $ 25,139 December 31, 2023 2022 2021 Weighted average remaining lease term (in years) Operating leases 12 12 12 Finance leases 14 15 16 Weighted average incremental borrowing rate Operating leases 4.07 % 3.21 % 3.02 % Finance leases 2.92 % 2.72 % 2.74 % 56 Table of Contents Notes to Consolidated Financial Statements Supplemental cash flow information related to leases was as follows: Years Ended December 31, (in thousands) 2023 2022 2021 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 19,929 $ 18,632 $ 18,296 Operating cash flows from finance leases 656 712 517 Financing cash flows from finance leases 3,087 2,834 2,841 Right-of-use assets obtained in exchange for new lease obligations Operating leases $ 25,339 $ 12,333 $ 25,035 Finance leases 425 84 31,612 Maturities of lease liabilities at December 31, 2023 were as follows: (in thousands) Operating Leases Finance Leases 2024 $ 17,525 $ 3,366 2025 15,356 3,333 2026 11,273 3,304 2027 7,720 3,285 2028 5,653 3,270 Thereafter 33,591 8,635 Total lease payments 91,118 25,193 Less: imputed interest 20,986 2,595 Total lease obligations $ 70,132 $ 22,598 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, 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. 17. 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. U.S. Retirement Plans NewMarket sponsors four pension plans for all full-time U.S. employees that offer a benefit based primarily on years of service and compensation. Employees do not contribute to these pension plans. The plans are as follows: • Salaried employees pension plan; • Afton pension plan for union employees (the Sauget plan); • NewMarket retirement income plan for union employees in Houston, Texas (the Houston plan); and 57 Table of Contents Notes to Consolidated Financial Statements • Afton Chemical Additives pension plan for union employees in Port Arthur, Texas (the Port Arthur plan). In addition, we offer an unfunded, nonqualified supplemental pension plan. This plan restores the pension benefits from our regular pension plans that would have been payable to designated participants if it were not for limitations imposed by U.S. federal income tax regulations. We also provide postretirement health care benefits and life insurance to eligible retired employees. 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. Years Ended December 31, Pension Benefits Postretirement Benefits (in thousands) 2023 2022 2021 2023 2022 2021 Net periodic benefit cost (income) Service cost $ 10,399 $ 18,935 $ 19,316 $ 520 $ 1,093 $ 1,079 Interest cost 18,212 13,478 13,018 1,582 1,163 1,158 Expected return on plan assets ( 46,039 ) ( 43,765 ) ( 38,675 ) ( 781 ) ( 790 ) ( 907 ) Amortization of prior service cost (credit) 186 271 271 ( 3,028 ) ( 3,028 ) ( 3,028 ) Amortization of actuarial net (gain) loss ( 1,598 ) 1,988 5,708 ( 275 ) 51 36 Net periodic benefit cost (income) ( 18,840 ) ( 9,093 ) ( 362 ) ( 1,982 ) ( 1,511 ) ( 1,662 ) Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) Actuarial net (gain) loss ( 34,997 ) ( 17,083 ) ( 79,688 ) 918 ( 12,445 ) ( 257 ) Prior service cost (credit) 648 86 ( 35 ) 0 0 0 Amortization of actuarial net gain (loss) 1,598 ( 1,988 ) ( 5,708 ) 275 ( 51 ) ( 36 ) Amortization of prior service (cost) credit ( 186 ) ( 271 ) ( 271 ) 3,028 3,028 3,028 Total recognized in other comprehensive income (loss) ( 32,937 ) ( 19,256 ) ( 85,702 ) 4,221 ( 9,468 ) 2,735 Total recognized in net periodic benefit cost (income) and other comprehensive income (loss) $ ( 51,777 ) $ ( 28,349 ) $ ( 86,064 ) $ 2,239 $ ( 10,979 ) $ 1,073 58 Table of Contents Notes to Consolidated Financial Statements Changes in the plans’ benefit obligations and assets follow. December 31, Pension Benefits Postretirement Benefits (in thousands) 2023 2022 2023 2022 Change in benefit obligation Benefit obligation at beginning of year $ 330,372 $ 478,809 $ 28,914 $ 41,348 Service cost 10,399 18,935 520 1,093 Interest cost 18,212 13,478 1,582 1,163 Actuarial net (gain) loss 12,039 ( 166,409 ) 1,204 ( 12,064 ) Plan amendment 648 86 0 0 Benefits paid ( 15,757 ) ( 14,527 ) ( 2,388 ) ( 2,626 ) Benefit obligation at end of year 355,913 330,372 29,832 28,914 Change in plan assets Fair value of plan assets at beginning of year 545,540 663,193 20,734 20,972 Actual return on plan assets 93,075 ( 105,560 ) 1,067 1,171 Employer contributions 2,401 2,434 962 1,217 Benefits paid ( 15,757 ) ( 14,527 ) ( 2,388 ) ( 2,626 ) Fair value of plan assets at end of year 625,259 545,540 20,375 20,734 Funded status $ 269,346 $ 215,168 $ ( 9,457 ) $ ( 8,180 ) Amounts recognized in the Consolidated Balance Sheets Noncurrent assets $ 298,925 $ 244,210 $ 0 $ 0 Current liabilities ( 2,865 ) ( 2,834 ) ( 1,109 ) ( 1,086 ) Noncurrent liabilities ( 26,714 ) ( 26,208 ) ( 8,348 ) ( 7,094 ) $ 269,346 $ 215,168 $ ( 9,457 ) $ ( 8,180 ) Amounts recognized in accumulated other comprehensive loss Actuarial net (gain) loss $ ( 74,212 ) $ ( 40,813 ) $ ( 6,618 ) $ ( 7,811 ) Prior service cost (credit) 607 145 ( 10,533 ) ( 13,561 ) $ ( 73,605 ) $ ( 40,668 ) $ ( 17,151 ) $ ( 21,372 ) The accumulated benefit obligation for all domestic defined benefit pension plans was $ 320 million at December 31, 2023 and $ 296 million at December 31, 2022. The fair market value of plan assets exceeded both the accumulated benefit obligation and projected benefit obligation for all domestic plans, except the nonqualified plan, at December 31, 2023 and December 31, 2022. The net asset position for plans in which assets exceeded the projected benefit obligation is included in prepaid pension cost on the Consolidated Balance Sheets. The net liability position of plans in which the projected benefit obligation exceeded assets is included in other noncurrent liabilities on the Consolidated Balance Sheets. A portion of the accrued benefit cost for the nonqualified plan is included in current liabilities at both December 31, 2023 and December 31, 2022. As the nonqualified plan is unfunded, the amount reflected in current liabilities represents the expected benefit payments related to the nonqualified plan during the following year. 59 Table of Contents Notes to Consolidated Financial Statements The table below shows selected information on domestic defined benefit pension and postretirement plans. December 31, (in thousands) 2023 2022 Pension plans with the accumulated benefit obligation in excess of the fair market value of plan assets Accumulated benefit obligation $ 29,407 $ 28,838 Fair market value of plan assets 0 0 Pension plans with the projected benefit obligation in excess of the fair market value of plan assets Projected benefit obligation 29,579 29,042 Fair market value of plan assets 0 0 Postretirement benefit plans with the accumulated postretirement benefit obligation in excess of the fair market value of plan assets Accumulated postretirement benefit obligation 18,372 17,782 Fair market value of plan assets 0 0 There are no assets held by the trustee for the retired beneficiaries of the nonqualified plan. Payments to retired beneficiaries of the nonqualified plan are made with cash from operations. The postretirement healthcare benefits are also unfunded and paid with cash from operations. The benefits from the postretirement life insurance plan are funded through an insurance contract. Assumptions - We used the following assumptions to calculate the results of our retirement plans: Pension Benefits Postretirement Benefits 2023 2022 2021 2023 2022 2021 Weighted-average assumptions used to determine net periodic benefit cost (income) for years ended December 31, Discount rate 5.625 % 2.875 % 2.875 % 5.625 % 2.875 % 2.875 % Expected long-term rate of return on plan assets 8.00 % 8.00 % 8.00 % 4.00 % 4.00 % 4.50 % Rate of projected compensation increase 3.50 % 3.50 % 3.50 % Weighted-average assumptions used to determine benefit obligations at December 31, Discount rate 5.375 % 5.625 % 2.875 % 5.375 % 5.625 % 2.875 % Rate of projected compensation increase 3.50 % 3.50 % 3.50 % 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. This analysis reflects the expected long-term rates of return for each significant asset class and economic indicator. 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 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, 2024. 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 at 4.0 % for the year beginning January 1, 2024. 60 Table of Contents Notes to Consolidated Financial Statements 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 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. The pension obligation is long-term in nature and the investment philosophy followed by the Pension Investment Committee is likewise long-term in its approach. The majority of the pension funds are invested in equity securities as, historically, equity securities have outperformed debt securities and cash investments, resulting in a higher investment return over the long-term. While in the short-term, equity securities may underperform other investment classes, we are less concerned with short-term results and more concerned with long-term improvement. The pension funds are managed by several different investment companies who predominantly invest in U.S. and international equities. Each investment company’s performance is reviewed quarterly. 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. There are no significant concentrations of risk within plan assets, nor do the equity securities include any NewMarket common stock for any year presented. The assets of the postretirement benefit plan are invested completely in an insurance contract. No NewMarket common stock is included in these assets. 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. Investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified by level in the fair value hierarchy. December 31, 2023 December 31, 2022 Fair Value Measurements Using Fair Value Measurements Using (in thousands) Fair Value Level 1 Level 2 Level 3 Fair Value Level 1 Level 2 Level 3 Pension Plans Equity securities: U. S. companies $ 493,126 $ 493,126 $ 0 $ 0 $ 417,687 $ 417,687 $ 0 $ 0 International companies 20,970 20,970 0 0 19,022 19,022 0 0 Cash and cash equivalents 9,956 9,956 0 0 18,979 18,979 0 0 Pooled investment funds: Fixed income securities—mutual funds 27,108 27,108 0 0 29,838 29,838 0 0 Equities—mutual fund 74,099 74,099 0 0 0 0 0 0 Common collective trusts measured at net asset value 0 60,014 $ 625,259 $ 625,259 $ 0 $ 0 $ 545,540 $ 485,526 $ 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 previous table are outlined below. There have been no changes in the valuation techniques used to value the investments. • 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. 61 Table of Contents 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. One of the trusts invests primarily in a diversified portfolio of equity securities included in the S&P 500 index and the other trust invests primarily in a diversified portfolio of equity securities included in the Russell 1000 Value index. There are no restrictions on redemption for the index trusts and there were no unfunded commitments. 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 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. (in thousands) Expected Pension Benefit Payments Expected Postretirement Benefit Payments 2024 $ 16,760 $ 2,284 2025 17,749 2,143 2026 18,631 2,032 2027 19,599 1,938 2028 20,583 1,871 2029 through 2033 117,705 9,181 Foreign Retirement Plans For most employees of our foreign subsidiaries, NewMarket has defined benefit pension plans that offer benefits based primarily on years of service and compensation. These defined benefit plans provide benefits for employees of our foreign subsidiaries located in Belgium, the U.K., Germany, Canada, and Mexico. NewMarket generally contributes to investment trusts and insurance accounts to provide for these plans. 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. Years Ended December 31, (in thousands) 2023 2022 2021 Net periodic benefit cost (income) Service cost $ 4,185 $ 8,546 $ 10,260 Interest cost 6,298 4,105 3,305 Expected return on plan assets ( 11,841 ) ( 9,827 ) ( 10,659 ) Amortization of prior service cost (credit) 138 137 152 Amortization of actuarial net (gain) loss ( 24 ) 630 3,595 Net periodic benefit cost (income) ( 1,244 ) 3,591 6,653 Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) Actuarial net (gain) loss ( 5,143 ) ( 41,108 ) ( 38,259 ) Amortization of actuarial net gain (loss) 24 ( 630 ) ( 3,595 ) Amortization of prior service (cost) credit ( 138 ) ( 137 ) ( 152 ) Total recognized in other comprehensive income (loss) ( 5,257 ) ( 41,875 ) ( 42,006 ) Total recognized in net periodic benefit cost (income) and other comprehensive income (loss) $ ( 6,501 ) $ ( 38,284 ) $ ( 35,353 ) 62 Table of Contents Notes to Consolidated Financial Statements Changes in the benefit obligations and assets of the foreign defined benefit pension plans follow. December 31, (in thousands) 2023 2022 Change in benefit obligation Benefit obligation at beginning of year $ 135,800 $ 235,347 Service cost 4,185 8,546 Interest cost 6,298 4,105 Employee contributions 673 693 Actuarial net (gain) loss ( 577 ) ( 87,076 ) Benefits paid ( 5,560 ) ( 5,403 ) Settlements ( 2,510 ) 0 Foreign currency translation 7,399 ( 20,412 ) Benefit obligation at end of year 145,708 135,800 Change in plan assets Fair value of plan assets at beginning of year 174,548 230,389 Actual return on plan assets 16,326 ( 34,748 ) Employer contributions 6,778 5,981 Employee contributions 673 693 Benefits paid ( 5,560 ) ( 5,403 ) Settlements ( 2,510 ) 0 Foreign currency translation 10,048 ( 22,364 ) Fair value of plan assets at end of year 200,303 174,548 Funded status $ 54,595 $ 38,748 Amounts recognized in the Consolidated Balance Sheets Noncurrent assets $ 71,957 $ 58,374 Current liabilities ( 354 ) ( 321 ) Noncurrent liabilities ( 17,008 ) ( 19,305 ) $ 54,595 $ 38,748 Amounts recognized in accumulated other comprehensive loss Actuarial net (gain) loss $ ( 3,413 ) $ 1,706 Prior service cost (credit) 394 532 $ ( 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. 63 Table of Contents 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. plans at both year-end 2023 and 2022. The net asset position of the Canada and U.K. plans are included in prepaid pension cost on the Consolidated Balance Sheets at December 31, 2023 and December 31, 2022. 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, 2023 and December 31, 2022. The accrued benefit cost of these plans is included in other noncurrent liabilities on the Consolidated Balance Sheets for both years. 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. The table below shows selected information on foreign defined benefit pension plans. December 31, (in thousands) 2023 2022 Pension plans with the accumulated benefit obligation in excess of the fair market value of plan assets Accumulated benefit obligation $ 22,762 $ 22,625 Fair market value of plan assets 13,420 13,072 Pension plans with the projected benefit obligation in excess of the fair market value of plan assets Projected benefit obligation 30,783 32,699 Fair market value of plan assets 13,420 13,072 Assumptions - We used the following weighted-average assumptions to calculate the results of our foreign defined benefit pension plans. 2023 2022 2021 Weighted-average assumptions used to determine net periodic benefit cost (income) for the years ended December 31, Discount rate 4.61 % 1.91 % 1.14 % Expected long-term rate of return on plan assets 6.47 % 4.59 % 4.95 % Rate of projected compensation increase 3.55 % 4.07 % 3.94 % Weighted-average assumptions used to determine benefit obligations at December 31, Discount rate 4.60 % 4.61 % 1.91 % Rate of projected compensation increase 3.52 % 3.55 % 4.07 % 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. Plan Assets - Pension plan assets vary by foreign location and plan. 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 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. The U.K. and Canada plans are invested predominantly in equity securities funds, diversified funds, and 64 Table of Contents 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. The Belgium plan is invested in an insurance contract. The Mexico plans are invested in mutual funds, equities, and debt securities. The Germany plan has no assets. There are no significant concentrations of risk within plan assets, nor do the equity securities include any NewMarket common stock for any year presented. 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. December 31, 2023 December 31, 2022 Fair Value Measurements Using Fair Value Measurements Using (in thousands) Fair Value Level 1 Level 2 Level 3 Fair Value Level 1 Level 2 Level 3 Insurance contract $ 10,956 $ 0 $ 10,956 $ 0 $ 11,199 $ 0 $ 11,199 $ 0 Equity securities—international companies 45 45 0 0 492 492 0 0 Debt securities 273 273 0 0 734 734 0 0 Pooled investment funds—mutual funds 1,763 1,763 0 0 647 647 0 0 Cash and cash equivalents 1,187 1,187 0 0 384 384 0 0 Pooled investment funds (measured at net asset value): Equity securities—international companies 92,853 76,177 Debt securities 52,682 49,494 Diversified growth funds 40,544 35,421 $ 200,303 $ 3,268 $ 10,956 $ 0 $ 174,548 $ 2,257 $ 11,199 $ 0 The valuation methodologies used to develop the fair value measurements for the investments in the table above are outlined below. There have been no changes in the valuation techniques used to value the investments. • The insurance contract represents funds deposited with an insurance company and is stated at an amount equal to the sum of all amounts deposited less the sum of all amounts withdrawn, adjusted for investment return. • Equity securities are valued at the closing price reported on a national exchange. • 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 mutual funds are valued at the closing price reported on a national exchange. • Cash and cash equivalents are valued at cost. • The pooled investment funds are valued at the net asset value of units held by the plans based on the quoted market value of the underlying investments held by the fund. The U.K. pension plan is invested in units of life insurance policies that are linked to equity securities funds, government bond funds, and diversified growth funds. The underlying assets of the equity funds, bond funds, and diversified growth funds are traded on a national exchange and are based on tracking various indices of the London Stock Exchange. There are no redemption restrictions on these funds. There were no unfunded commitments for the U.K. pension plan funds. The Canada pension plan is invested in a pooled Canadian equity fund and a pooled diversified fund. 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, 65 Table of Contents Notes to Consolidated Financial Statements 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 Benefit Payments 2024 $ 7,117 2025 5,593 2026 6,013 2027 6,640 2028 7,732 2029 through 2033 41,544 18. Income Taxes Our income before income tax expense, as well as our provision for income taxes is shown in the table below. Years Ended December 31, (in thousands) 2023 2022 2021 Income before income tax expense Domestic $ 301,152 $ 170,785 $ 97,245 Foreign 187,810 176,949 150,306 $ 488,962 $ 347,734 $ 247,551 Income tax expense Current income taxes Federal $ 61,693 $ 57,778 $ 13,166 State 16,616 12,515 7,639 Foreign 36,539 40,548 33,860 114,848 110,841 54,665 Deferred income taxes Federal ( 16,384 ) ( 34,088 ) 1,232 State ( 697 ) ( 8,491 ) 38 Foreign 2,331 ( 66 ) 708 ( 14,750 ) ( 42,645 ) 1,978 Total income tax expense $ 100,098 $ 68,196 $ 56,643 66 Table of Contents Notes to Consolidated Financial Statements The reconciliation of the U.S. federal statutory rate to the effective income tax rate follows. % of Income Before Income Tax Expense 2023 2022 2021 Federal statutory rate 21.0 % 21.0 % 21.0 % State taxes, net of federal tax 2.6 0.9 2.4 Foreign operations 0.5 1.4 2.4 Research tax credit ( 1.4 ) ( 1.6 ) ( 2.2 ) Foreign-derived intangible tax benefit ( 2.0 ) ( 3.0 ) ( 0.7 ) Taxes applicable to prior years ( 1.4 ) ( 0.1 ) ( 0.4 ) Other items and adjustments 1.2 1.0 0.4 Effective income tax rate 20.5 % 19.6 % 22.9 % Our deferred income tax assets and liabilities follow. December 31, (in thousands) 2023 2022 Deferred income tax assets Capitalized research expenses $ 81,730 $ 53,249 Lease liabilities 14,511 11,868 Operating loss and credit carryforwards 15,952 15,336 Foreign currency translation adjustments 4,567 5,261 Other 12,100 14,159 Gross deferred income tax assets 128,860 99,873 Valuation allowance ( 13,437 ) ( 13,012 ) Total deferred income tax assets 115,423 86,861 Deferred income tax liabilities Depreciation and amortization 81,767 78,058 Future employee benefits 71,822 52,446 Lease assets 14,965 12,174 Other 2,800 2,601 Total deferred income tax liabilities 171,354 145,279 Net deferred income tax (liabilities) assets $ ( 55,931 ) $ ( 58,418 ) Net deferred income tax (liabilities) assets in the table above are reflected in the Consolidated Balance Sheets on a net jurisdictional basis. Deferred income tax assets are included in deferred charges and other assets. See Note 11. Deferred income tax liabilities are included in other noncurrent liabilities. See Note 14. Our deferred taxes are in a net liability position at December 31, 2023. Our deferred tax assets include $ 16 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 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 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. 67 Table of Contents Notes to Consolidated Financial Statements 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. or meet the requirements for a dividends received deduction. 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. If we were to repatriate these earnings, we could be subject to income taxes and withholding taxes in various countries. Determination of the amount of unrecognized deferred income tax liability is not practicable due to the complexity associated with the hypothetical calculation. A reconciliation of the beginning and ending balances of the unrecognized tax benefits from uncertain positions is as follows: December 31, (in thousands) 2023 2022 2021 Balance at beginning of year $ 7,879 $ 6,374 $ 6,905 Increases for tax positions of prior years 1,374 1,677 0 Increases for tax positions of the current year 1,543 809 698 Settlements ( 1,078 ) 0 ( 247 ) Lapses of statutes ( 1,337 ) ( 981 ) ( 982 ) Balance at end of year $ 8,381 $ 7,879 $ 6,374 At December 31, 2023, all of the amount of unrecognized tax benefits, if recognized, would affect our effective tax rate. We expect the amount of unrecognized tax benefits to change in the next twelve months; however, we do not expect the change to have a material impact on our financial statements. Our U.S. subsidiaries file a U.S. federal consolidated income tax return. We are currently under examination by various U.S. state and foreign jurisdictions and remain subject to examination until the statute of limitations expires for the respective tax jurisdiction. We are no longer subject to U.S. federal income examination for years before 2020, with the exception of 2017. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from 3 years to 5 years. Years still open to examination by foreign tax authorities in major jurisdictions include: the U.K. (2020 and forward); Singapore (2019 and forward); Belgium (2019 and forward); and Mexico (2018 and forward). 19. Fair Value Measurements The carrying amount of cash and cash equivalents in the Consolidated Balance Sheets, as well as the fair value, was $ 112 million at December 31, 2023 and $ 69 million at December 31, 2022. The fair value is categorized in Level 1 of the fair value hierarchy. No material events occurred during 2023 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 our outstanding 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 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. 68 Table of Contents Notes to Consolidated Financial Statements December 31, 2023 December 31, 2022 (in thousands) Carrying Amount Fair Value Carrying Amount Fair Value Long-term debt $ 643,622 $ 572,983 $ 1,003,737 $ 906,891 20. 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 . From time to time, we also have commitments for leases which have not yet commenced. See Note 16. Purchase Obligations - We have purchase obligations for goods or services that are enforceable, legally binding, and specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancelable without penalty. Purchase orders made in the ordinary course of business are excluded from this amount. Any amounts for which we are liable under purchase orders are reflected in our Consolidated Balance Sheets as accounts payable or accrued expenses. Future payments for purchase obligations as of December 31, 2023 are (in thousands): 2024 $ 12,535 2025 12,045 2026 10,662 2027 10,620 2028 2,589 After 2028 4,507 Litigation - We are involved in legal proceedings that are incidental to our business and may include administrative or judicial actions. Some of these legal proceedings involve governmental authorities and relate to environmental matters. For further information, see Environmental below and Item 1 of this Form 10-K. While it is not possible to predict or determine with certainty the outcome of any legal proceeding, we believe the outcome of any of these proceedings, or all of them combined, will not result in a material effect on our financial statements. Asbestos We are a defendant in personal injury lawsuits involving exposure to asbestos. These cases involve exposure to asbestos in premises owned or operated, or formerly owned or operated, by subsidiaries of NewMarket. We have never manufactured, sold, or distributed products that contain asbestos. Nearly all of these cases are pending in Texas, Louisiana, or Illinois and involve multiple defendants. We maintain an accrual for these proceedings, as well as a receivable for expected insurance recoveries. The accrual for our premises asbestos liability related to currently asserted claims is based on the following assumptions and factors: • We are often one of many defendants. This factor influences both the number of claims settled against us and the indemnity cost associated with such resolutions. • 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. These claims are filed by both former contractors and former employees who worked at past and present company locations. We also include an estimated inflation factor in the calculation. 69 Table of Contents Notes to Consolidated Financial Statements • No estimate is made for unasserted claims. • 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 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. Certain of these costs are recoverable through the settlement agreements with The Travelers Indemnity Company and with Albemarle Corporation. The receivable for these recoveries related to premises asbestos liabilities was $ 4 million at both December 31, 2023 and December 31, 2022. These receivables are included in trade and other accounts receivable, net on the Consolidated Balance Sheets for the current portion. The noncurrent portion is included in deferred charges and other assets. Environmental - We are involved in environmental proceedings and potential proceedings relating to soil and groundwater contamination, disposal of hazardous waste, and other environmental matters at several of our current or former facilities, or at third-party sites where we have been designated as a PRP. While we believe we are currently adequately accrued for known environmental issues, it is possible that unexpected future costs could have a significant impact on our financial statements. Our total accruals for environmental remediation, dismantling, and decontamination were approximately $ 11 million at December 31, 2023 and $ 10 million at December 31, 2022. Of the total accrual, the current portion is included in accrued expenses and the noncurrent portion is included in other noncurrent liabilities on the Consolidated Balance Sheets . 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 $ 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. 70 Table of Contents Notes to Consolidated Financial Statements 21. Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss The balances of, and changes in, the components of accumulated other comprehensive loss, net of tax, consist of the following: (in thousands) Pension Plans and Other Postretirement Benefits Foreign Currency Translation Adjustments Accumulated Other Comprehensive (Loss) Income Balance at December 31, 2020 $ ( 92,771 ) $ ( 80,393 ) $ ( 173,164 ) Other comprehensive income (loss) before reclassifications 89,194 ( 3,356 ) 85,838 Amounts reclassified from accumulated other comprehensive loss (a) 5,099 0 5,099 Other comprehensive income (loss) 94,293 ( 3,356 ) 90,937 Balance at December 31, 2021 1,522 ( 83,749 ) ( 82,227 ) Other comprehensive income (loss) before reclassifications 53,019 ( 42,808 ) 10,211 Amounts reclassified from accumulated other comprehensive loss (a) 21 0 21 Other comprehensive income (loss) 53,040 ( 42,808 ) 10,232 Balance at December 31, 2022 54,562 ( 126,557 ) ( 71,995 ) Other comprehensive income (loss) before reclassifications 28,907 25,520 54,427 Amounts reclassified from accumulated other comprehensive loss (a) ( 3,503 ) 0 ( 3,503 ) Other comprehensive income (loss) 25,404 25,520 50,924 Balance at December 31, 2023 $ 79,966 $ ( 101,037 ) $ ( 21,071 ) (a) The pension plan and other postretirement benefit components of accumulated other comprehensive loss are included in the computation of net periodic benefit cost (income). See Note 17 for further information. 22. Recent Accounting Pronouncements 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 are currently assessing the impact that the adoption of ASU 2023-09 will have on the disclosures in our consolidated financial statements. 71 Table of Contents Notes to Consolidated Financial Statements 23. 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. See Note 13. 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. 72 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.