NEWMARKET CORP 10-Q

ITEM 1. Financial Statements NEWMARKET CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in thousands, except per-share amounts) Second Quarter Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net sales $ 710,228 $ 685,130 $ 1,406,964 $ 1,387,919 Cost of goods sold 491,773 489,492 972,144 994,237 Gross profit 218,455 195,638 434,820 393,682 Selling, general, and administrative expenses 42,840 37,438 87,205 77,285 Research, development, and testing expenses 28,663 33,958 59,863 67,114 Operating profit 146,952 124,242 287,752 249,283 Interest and financing expenses, net 15,910 10,255 31,564 21,028 Other income (expense), net 11,952 10,723 24,499 21,603 Income before income tax expense 142,994 124,710 280,687 249,858 Income tax expense 31,374 25,086 61,335 52,651 Net income $ 111,620 $ 99,624 $ 219,352 $ 197,207 Earnings per share - basic and diluted $ 11.63 $ 10.36 $ 22.87 $ 20.45 Cash dividends declared per share $ 2.50 $ 2.25 $ 5.00 $ 4.35 See accompanying Notes to Condensed Consolidated Financial Statements 4 Table of Contents NEWMARKET CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (in thousands) Second Quarter Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net income $ 111,620 $ 99,624 $ 219,352 $ 197,207 Other comprehensive income (loss): Pension plans and other postretirement benefits: Amortization of prior service cost (credit) included in net periodic benefit cost (income), net of income tax expense (benefit) of $( 173 ) in second quarter 2024, $( 170 ) in second quarter 2023, $( 347 ) in six months 2024, and $( 341 ) in six months 2023. ( 502 ) ( 546 ) ( 1,004 ) ( 1,093 ) Amortization of actuarial net loss (gain) included in net periodic benefit cost (income), net of income tax expense (benefit) of $( 122 ) in second quarter 2024, $( 119 ) in second quarter 2023, $( 244 ) in six months 2024, and $( 237 ) in six months 2023. ( 357 ) ( 374 ) ( 715 ) ( 749 ) Total pension plans and other postretirement benefits ( 859 ) ( 920 ) ( 1,719 ) ( 1,842 ) Foreign currency translation adjustments, net of income tax expense (benefit) of $( 850 ) in second quarter 2024, $ 491 in second quarter 2023, $( 1,088 ) in six months 2024, and $ 698 in six months 2023. ( 4,364 ) 7,714 ( 11,307 ) 19,080 Other comprehensive income (loss) ( 5,223 ) 6,794 ( 13,026 ) 17,238 Comprehensive income $ 106,397 $ 106,418 $ 206,326 $ 214,445 See accompanying Notes to Condensed Consolidated Financial Statements 5 Table of Contents NEWMARKET CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands, except share amounts) June 30, 2024 December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 87,632 $ 111,936 Trade and other accounts receivable, less allowance for credit losses 495,516 432,349 Inventories 492,638 456,234 Prepaid expenses and other current assets 39,455 39,051 Total current assets 1,115,241 1,039,570 Property, plant, and equipment, net 759,357 654,747 Intangibles (net of amortization) and goodwill 763,467 124,642 Prepaid pension cost 385,363 370,882 Operating lease right-of-use assets, net 73,867 70,823 Deferred charges and other assets 52,776 48,207 Total assets $ 3,150,071 $ 2,308,871 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 270,789 $ 231,137 Accrued expenses 85,114 76,546 Dividends payable 21,410 19,212 Income taxes payable 15,097 6,131 Operating lease liabilities 14,866 15,074 Other current liabilities 12,240 16,064 Total current liabilities 419,516 364,164 Long-term debt 1,172,732 643,622 Operating lease liabilities-noncurrent 58,009 55,058 Other noncurrent liabilities 264,466 168,966 Total liabilities 1,914,723 1,231,810 Commitments and contingencies (Note 10) Shareholders’ equity: Common stock and paid-in capital (with no par value; authorized shares - 80,000,000 ; issued and outstanding shares - 9,594,110 at June 30, 2024 and 9,590,086 at December 31, 2023) 2,052 2,130 Accumulated other comprehensive loss ( 34,097 ) ( 21,071 ) Retained earnings 1,267,393 1,096,002 Total shareholders' equity 1,235,348 1,077,061 Total liabilities and shareholders’ equity $ 3,150,071 $ 2,308,871 See accompanying Notes to Condensed Consolidated Financial Statements 6 Table of Contents NEWMARKET CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited) (in thousands, except share and per-share amounts) Common Stock and Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings Total Shareholders’ Equity Shares Amount Balance at March 31, 2023 9,625,959 $ 0 $ ( 61,551 ) $ 883,351 $ 821,800 Net income 99,624 99,624 Other comprehensive income (loss) 6,794 6,794 Cash dividends ($ 2.25 per share) ( 21,587 ) ( 21,587 ) Repurchases of common stock ( 36,589 ) ( 634 ) ( 13,894 ) ( 14,528 ) Stock-based compensation ( 131 ) 634 3 637 Balance at June 30, 2023 9,589,239 $ 0 $ ( 54,757 ) $ 947,497 $ 892,740 Balance at March 31, 2024 9,594,250 $ 1,406 $ ( 28,874 ) $ 1,179,756 $ 1,152,288 Net income 111,620 111,620 Other comprehensive income (loss) ( 5,223 ) ( 5,223 ) Cash dividends ($ 2.50 per share) ( 23,986 ) ( 23,986 ) Stock-based compensation ( 140 ) 646 3 649 Balance at June 30, 2024 9,594,110 $ 2,052 $ ( 34,097 ) $ 1,267,393 $ 1,235,348 Balance at December 31, 2022 9,702,147 $ 0 $ ( 71,995 ) $ 834,402 $ 762,407 Net income 197,207 197,207 Other comprehensive income (loss) 17,238 17,238 Cash dividends ($ 4.35 per share) ( 41,879 ) ( 41,879 ) Repurchases of common stock ( 119,075 ) ( 1,857 ) ( 41,419 ) ( 43,276 ) Tax withholdings related to stock-based compensation ( 2,417 ) 0 ( 803 ) ( 803 ) Stock-based compensation 8,584 1,857 ( 11 ) 1,846 Balance at June 30, 2023 9,589,239 $ 0 $ ( 54,757 ) $ 947,497 $ 892,740 Balance at December 31, 2023 9,590,086 $ 2,130 $ ( 21,071 ) $ 1,096,002 $ 1,077,061 Net income 219,352 219,352 Other comprehensive income (loss) ( 13,026 ) ( 13,026 ) Cash dividends ($ 5.00 per share) ( 47,972 ) ( 47,972 ) Tax withholdings related to stock-based compensation ( 1,816 ) ( 1,118 ) ( 1,118 ) Stock-based compensation 5,840 1,040 11 1,051 Balance at June 30, 2024 9,594,110 $ 2,052 $ ( 34,097 ) $ 1,267,393 $ 1,235,348 See accompanying Notes to Condensed Consolidated Financial Statements 7 Table of Contents NEWMARKET CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Six Months Ended June 30, 2024 2023 Cash and cash equivalents at beginning of year $ 111,936 $ 68,712 Cash flows from operating activities: Net income 219,352 197,207 Adjustments to reconcile net income to cash provided from operating activities: Depreciation and amortization 55,130 40,558 Deferred income tax benefit ( 7,461 ) ( 11,301 ) Working capital changes ( 40,696 ) 52,494 Cash pension and postretirement contributions ( 5,781 ) ( 5,020 ) Other, net ( 2,741 ) ( 11,548 ) Cash provided from (used in) operating activities 217,803 262,390 Cash flows from investing activities: Capital expenditures ( 28,533 ) ( 26,006 ) Acquisition of business (net of $ 15,588 of cash acquired) ( 681,479 ) 0 Cash provided from (used in) investing activities ( 710,012 ) ( 26,006 ) Cash flows from financing activities: Net borrowings (repayments) under revolving credit facility 279,000 ( 88,000 ) Proceeds from term loan 250,000 0 Dividends paid ( 47,972 ) ( 41,879 ) Debt issuance costs ( 2,251 ) 0 Repurchases of common stock 0 ( 42,864 ) Other, net ( 8,294 ) ( 2,986 ) Cash provided from (used in) financing activities 470,483 ( 175,729 ) Effect of foreign exchange on cash and cash equivalents ( 2,578 ) 1,556 (Decrease) increase in cash and cash equivalents ( 24,304 ) 62,211 Cash and cash equivalents at end of period $ 87,632 $ 130,923 See accompanying Notes to Condensed Consolidated Financial Statements 8 Table of Contents NEWMARKET CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Financial Statement Presentation In the opinion of management, the accompanying consolidated financial statements of NewMarket Corporation and its subsidiaries contain all necessary adjustments for the fair presentation of, in all material respects, our consolidated financial position as of June 30, 2024 and December 31, 2023, our consolidated results of operations, comprehensive income, and changes in shareholders' equity for the second quarter and six months ended June 30, 2024 and June 30, 2023, and our cash flows for the six months ended June 30, 2024 and June 30, 2023. All adjustments are of a normal, recurring nature, unless otherwise disclosed. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the NewMarket Corporation Annual Report on Form 10-K for the year ended December 31, 2023 (2023 Annual Report), as filed with the Securities and Exchange Commission (SEC). The results of operations for the six month period ended June 30, 2024 are not necessarily indicative of the results to be expected for the full year ending December 31, 2024. The December 31, 2023 condensed consolidated balance sheet data was derived from the audited financial statements included in the 2023 Annual Report but does not include all disclosures required by accounting principles generally accepted in the United States of America. Unless the context otherwise indicates, all references to “we,” “us,” “our,” the “company,” and “NewMarket” are to NewMarket Corporation and its consolidated subsidiaries. Supplier Finance Program 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 any arrangement between our vendors 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 both June 30, 2024 and December 31, 2023, the amount of confirmed invoices under the supplier finance program was not material. 2. Acquisition of Business On January 16, 2024, we completed the acquisition of all issued and outstanding ownership units of AMPAC Intermediate Holdings, LLC, the ultimate parent company of American Pacific Corporation (AMPAC), for approximately $ 697 million. Based in Cedar City, Utah, AMPAC has one operating facility from which it manufactures and sells critical specialty materials primarily used in solid rocket motors for space launch and military defense applications. AMPAC is qualified on many NASA and Department of Defense programs and has been serving space launch and national defense programs for more than 60 years. The acquisition of AMPAC expands our presence in mission-critical, resilient sectors. It was funded by cash on hand and borrowings under our then existing revolving credit facility. The purchase consideration was subject to a customary post-closing adjustment for working capital, which was finalized during the second quarter of 2024. The preliminary fair values of the assets acquired and the liabilities assumed in the AMPAC acquisition are as follows (in millions): Cash and cash equivalents $ 16 Trade and other accounts receivable, net 6 Inventories 25 Prepaid expenses and other current assets 3 Property, plant, and equipment, net 111 Intangibles and goodwill 650 Deferred charges and other assets 5 Accounts payable ( 3 ) Accrued expenses ( 5 ) Other noncurrent liabilities ( 111 ) Fair value of net assets acquired $ 697 9 Table of Contents NEWMARKET CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Identified intangible assets acquired consisted of the following (in millions): Fair Value Estimated Useful Lives (in years) Customer base $ 275 17.5 Formulas and technology 60 8 Trademarks and trade names 30 15 Water rights 29 indefinite $ 394 As part of the acquisition, we recorded $ 256 million of goodwill. The goodwill recognized is attributable to increased access to mission-critical, resilient sectors with a role in global safety, security, and space exploration, as well as the value of the skilled assembled workforce of AMPAC. All of the goodwill recognized is part of the specialty materials segment, and none of the goodwill is deductible for income tax purposes. The allocation of the purchase price of AMPAC to the tangible and intangible assets acquired and liabilities assumed was developed using preliminary estimates of fair value and based on information currently available. We are continuing to finalize the valuation of certain assets and liabilities and expect to complete our valuations within one year of the date of acquisition. Acquisition-related charges of $ 1 million consisted primarily of legal and professional fees and are included in selling, general, and administrative expenses in our Consolidated Statements of Income. We are accounting for this acquisition using the acquisition method of accounting for business combinations under the provisions of Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC) Topic 805, Business Combinations (ASC 805) and have included the results of operations of the acquired business in our Consolidated Statement of Income from the date of acquisition, as well as in the specialty materials segment in Note 4. These results include a charge related to the sale of finished goods inventory acquired, which was recorded at fair value on the acquisition date and sold to customers from the date of acquisition through June 30, 2024. The following table presents the financial results in thousands for AMPAC from the date of acquisition through June 30, 2024 and for the second quarter ended June 30, 2024. AMPAC Second Quarter Ended June 30, 2024 January 16 to June 30, 2024 Net sales $ 38,010 $ 55,057 Income (loss) before income taxes 4,923 ( 78 ) The following table presents our estimated unaudited pro forma consolidated results for the second quarter and six months ended June 30, 2024 and June 30, 2023, assuming the acquisition of AMPAC had occurred on January 1, 2023. The unaudited pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been realized if the acquisition had been completed at the beginning of 2023, nor is it indicative of expected results for any future period. In addition, no effect is given to any future synergistic benefits that could result from the integration of AMPAC into NewMarket. Unaudited pro forma information for the second quarter and six months ended June 30, 2024 and June 30, 2023 includes adjustments to depreciation and amortization based upon the fair value allocation of the purchase price to AMPAC's tangible and intangible assets acquired and liabilities assumed as though the acquisition had occurred on January 1, 2023, as well as adjustments for debt-related costs and management fees. The acquisition-related costs and the charge related to the fair value adjustment to acquisition-date inventory were recognized in actual results during the second quarter and six months ended June 30, 2024, but for the presentation below, these costs are excluded from 2024 unaudited pro forma income before income taxes and are instead reflected in 2023 pro forma income before income taxes as though they were incurred during the second quarter and six months ended June 30, 2023. 10 Table of Contents NEWMARKET CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Pro Forma Supplemental Information (unaudited) (in thousands) Second Quarter Ended June 30, Six Months Ended June 30, Consolidated 2024 2023 2024 2023 Net sales $ 710,228 $ 707,196 $ 1,412,064 $ 1,426,179 Income before income taxes 144,971 113,162 284,975 219,146 3. Net Sales Our revenues are predominantly derived from the manufacture and sale of petroleum additives products. We sell petroleum additives products across the world to customers located in the North America (the United States and Canada), Latin America (Mexico, Central America, and South America), Asia Pacific, and EMEAI (Europe/Middle East/Africa/India) regions. Our petroleum additives customers primarily consist of global, national, and independent oil companies. Our petroleum additives contracts generally include one performance obligation, which is satisfied at a point in time when products are shipped, delivered, or consumed by the customer, depending on the underlying contracts. Additionally, we have revenue from the manufacture and sale of critical specialty materials products used primarily in solid rocket motors for space launch and military defense applications. The sale of specialty materials products is predominantly to customers located in the United States, with limited amounts to customers in other countries. Our specialty materials customers are primarily contractors or subcontractors of the U.S. government. Specialty materials contracts generally include one performance obligation, which is typically satisfied at a point in time when the products are shipped from the plant site. 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 $ 6.5 million at June 30, 2024, primarily from specialty materials segment customers, and $ 0.3 million at December 31, 2023. Some of our contracts also include variable consideration in the form of rebates, tiered pricing, and/or business development funds. We regularly review these and make adjustments to estimated amounts when necessary, recognizing the full amount of any adjustment in the period identified. The following table provides information on our net sales by geographic area. Information on net sales by segment is presented in Note 4. Second Quarter Ended June 30, Six Months Ended June 30, (in thousands) 2024 2023 2024 2023 Net sales United States $ 273,483 $ 242,610 $ 521,719 $ 499,008 Europe, Middle East, Africa, India 202,351 202,860 411,290 407,070 Asia Pacific 149,003 152,239 305,102 304,188 Other foreign 85,391 87,421 168,853 177,653 Net sales $ 710,228 $ 685,130 $ 1,406,964 $ 1,387,919 11 Table of Contents NEWMARKET CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 4. 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 Corporation (Ethyl). Net Sales by Segment Second Quarter Ended June 30, Six Months Ended June 30, (in thousands) 2024 2023 2024 2023 Petroleum additives Lubricant additives $ 575,194 $ 588,506 $ 1,147,109 $ 1,191,080 Fuel additives 94,632 95,463 199,981 192,880 Total 669,826 683,969 1,347,090 1,383,960 Specialty materials 38,010 0 55,057 0 All other 2,392 1,161 4,817 3,959 Net sales $ 710,228 $ 685,130 $ 1,406,964 $ 1,387,919 Segment Operating Profit Second Quarter Ended June 30, Six Months Ended June 30, (in thousands) 2024 2023 2024 2023 Petroleum additives $ 147,819 $ 132,138 $ 298,728 $ 264,206 Specialty materials 4,972 0 5 0 All other ( 1,374 ) ( 1,022 ) ( 1,455 ) ( 1,997 ) Segment operating profit 151,417 131,116 297,278 262,209 Corporate, general, and administrative expenses ( 3,985 ) ( 6,810 ) ( 9,542 ) ( 13,301 ) Interest and financing expenses, net ( 15,910 ) ( 10,255 ) ( 31,564 ) ( 21,028 ) Other income (expense), net 11,472 10,659 24,515 21,978 Income before income tax expense $ 142,994 $ 124,710 $ 280,687 $ 249,858 5. Pension Plans and Other Postretirement Benefits The table below shows cash contributions made during the six months ended June 30, 2024, as well as the remaining cash contributions we expect to make during the year ending December 31, 2024, for our domestic and foreign pension plans and domestic postretirement benefit plan. (in thousands) Actual Cash Contributions for Six Months Ended June 30, 2024 Expected Remaining Cash Contributions for Year Ending December 31, 2024 Domestic plans Pension benefits $ 2,373 $ 1,992 Postretirement benefits 790 790 Foreign plans Pension benefits 2,618 2,375 12 Table of Contents NEWMARKET CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The tables below present information on net periodic benefit cost (income) for our domestic and foreign pension plans and domestic postretirement benefit plan. The service cost component of net periodic benefit cost (income) is reflected in cost of goods sold; selling, general, and administrative expenses; or research, development, and testing expenses, according to 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. Domestic Pension Benefits Postretirement Benefits Second Quarter Ended June 30, (in thousands) 2024 2023 2024 2023 Service cost $ 3,062 $ 2,659 $ 134 $ 130 Interest cost 5,927 4,536 418 391 Expected return on plan assets ( 13,724 ) ( 11,510 ) ( 193 ) ( 201 ) Amortization of prior service cost (credit) 46 6 ( 757 ) ( 757 ) Amortization of actuarial net (gain) loss ( 458 ) ( 412 ) ( 15 ) ( 75 ) Net periodic benefit cost (income) $ ( 5,147 ) $ ( 4,721 ) $ ( 413 ) $ ( 512 ) Domestic Pension Benefits Postretirement Benefits Six Months Ended June 30, (in thousands) 2024 2023 2024 2023 Service cost $ 6,078 $ 5,317 $ 269 $ 260 Interest cost 11,649 9,072 836 782 Expected return on plan assets ( 27,265 ) ( 23,019 ) ( 385 ) ( 403 ) Amortization of prior service cost (credit) 93 12 ( 1,514 ) ( 1,514 ) Amortization of actuarial net (gain) loss ( 915 ) ( 823 ) ( 31 ) ( 151 ) Net periodic benefit cost (income) $ ( 10,360 ) $ ( 9,441 ) $ ( 825 ) $ ( 1,026 ) Foreign Pension Benefits Second Quarter Ended June 30, Six Months Ended June 30, (in thousands) 2024 2023 2024 2023 Service cost $ 1,075 $ 1,074 $ 2,162 $ 2,128 Interest cost 1,608 1,577 3,226 3,121 Expected return on plan assets ( 3,316 ) ( 2,899 ) ( 6,649 ) ( 5,740 ) Amortization of prior service cost (credit) 35 34 70 68 Amortization of actuarial net (gain) loss ( 6 ) ( 6 ) ( 13 ) ( 12 ) Net periodic benefit cost (income) $ ( 604 ) $ ( 220 ) $ ( 1,204 ) $ ( 435 ) 6. Earnings Per Share We had 34,538 shares of nonvested restricted stock at June 30, 2024 and 34,448 shares of nonvested restricted stock at June 30, 2023 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. 13 Table of Contents NEWMARKET CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Second Quarter Ended June 30, Six Months Ended June 30, (in thousands, except per-share amounts) 2024 2023 2024 2023 Earnings per share numerator: Net income attributable to common shareholders before allocation of earnings to participating securities $ 111,620 $ 99,624 $ 219,352 $ 197,207 Earnings allocated to participating securities ( 400 ) ( 356 ) ( 773 ) ( 662 ) Net income attributable to common shareholders after allocation of earnings to participating securities $ 111,220 $ 99,268 $ 218,579 $ 196,545 Earnings per share denominator: Weighted-average number of shares of common stock outstanding - basic and diluted 9,560 9,577 9,559 9,610 Earnings per share - basic and diluted $ 11.63 $ 10.36 $ 22.87 $ 20.45 7. Inventories (in thousands) June 30, 2024 December 31, 2023 Finished goods and work-in-process $ 375,987 $ 351,746 Raw materials 91,370 82,441 Stores, supplies, and other 25,281 22,047 $ 492,638 $ 456,234 8. Intangibles (Net of Amortization) and Goodwill The net carrying amount of intangibles and goodwill was $ 763 million at June 30, 2024 and $ 125 million at December 31, 2023. The gross carrying amount and accumulated amortization of each type of intangible asset and goodwill are presented in the table below. June 30, 2024 December 31, 2023 (in thousands) Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Amortizing intangible assets Formulas and technology $ 60,000 $ 3,470 $ 6,200 $ 6,200 Contract 0 0 2,000 2,000 Customer bases 280,440 11,904 5,440 4,539 Trademarks and trade names 30,000 925 0 0 Water rights 29,392 0 Goodwill 379,934 123,741 $ 779,766 $ 16,299 $ 137,381 $ 12,739 Of the total intangibles and goodwill, $ 124 million is attributable to the petroleum additives segment and $ 639 million is attributable to the specialty materials segment. The change in the gross carrying amount between December 31, 2023 and June 30, 2024 is due to the identifiable intangible assets and goodwill from the acquisition of AMPAC, as well as the write-off of fully amortized identifiable intangible assets and the foreign currency fluctuation on goodwill in the petroleum additives segment. See Note 2 for further information on the intangibles and goodwill obtained with the AMPAC acquisition. There is no accumulated goodwill impairment. 14 Table of Contents NEWMARKET CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Amortization expense was (in thousands): Second quarter ended June 30, 2024 $ 6,388 Six months ended June 30, 2024 11,760 Second quarter ended June 30, 2023 355 Six months ended June 30, 2023 711 Estimated amortization expense for the remainder of 2024, as well as estimated annual amortization expense related to our intangible assets for the next five years, is expected to be (in thousands): 2024 $ 12,694 2025 25,404 2026 25,404 2027 25,404 2028 25,355 2029 25,214 We amortize the formulas and technology over 8 years, the customer bases over 17.5 to 20 years, and the trademarks and trade names over 15 years. 9. Long-term Debt (in thousands) June 30, 2024 December 31, 2023 Senior notes - 2.70 % due 2031 (net of related deferred financing costs) $ 394,064 $ 393,622 Senior notes - 3.78 % due 2029 250,000 250,000 Term loan (net of related deferred financing costs) 249,668 0 Revolving credit facility 279,000 0 $ 1,172,732 $ 643,622 Senior Notes - The 2.70 % senior notes, which were issued in 2021, are unsecured with an aggregate principal amount of $ 400 million. The offer and sale of the notes were registered under the Securities Act of 1933, as amended. The 3.78 % senior notes are unsecured and were issued in a 2017 private placement with The Prudential Insurance Company of America and certain other purchasers. We were in compliance with all covenants under all issuances of senior notes as of June 30, 2024 and December 31, 2023. Term Loan - On January 22, 2024, NewMarket entered into an unsecured credit agreement for a $ 250 million term loan (the Term Loan Credit Agreement), which matures on January 22, 2026. We borrowed the entire $ 250 million available under the Term Loan Credit Agreement and paid financing costs of $ 0.4 million, which are being amortized over the term of the agreement. 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. 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 Term Loan Credit Agreement contains certain customary covenants, including financial covenants, which require NewMarket to maintain a consolidated Leverage Ratio (as defined in the Term Loan Credit Agreement) of no more than 3.75 to 1.00 except during an Increased Leverage Period (as defined in the Term Loan Credit Agreement). We were in compliance with all covenants under the term loan as of June 30, 2024. 15 Table of Contents NEWMARKET CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Revolving Credit Facility - On January 22, 2024, NewMarket 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. Certain of NewMarket's foreign subsidiaries may, from time to time, become borrowers under the Revolving Credit Agreement. The obligations under the Revolving Credit Agreement are unsecured and are fully and unconditionally guaranteed by NewMarket. Concurrently with entering into the Revolving Credit Agreement, we terminated our former revolving credit facility dated as of March 5, 2020. Upon termination, we repaid the amount then outstanding under the former revolving credit facility, plus accrued and unpaid interest. 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. The Revolving Credit Agreement contains certain customary covenants, including financial covenants, which require NewMarket to maintain a consolidated Leverage Ratio (as defined in the Revolving Credit Agreement) of no more than 3.75 to 1.00 except during an Increased Leverage Period (as defined in the Revolving Credit Agreement). We were in compliance with all covenants under the revolving credit facility in effect as of June 30, 2024 and December 31, 2023. We paid financing costs in 2024 of approximately $ 1.8 million related to this revolving credit facility and carried over deferred financing costs from the former revolving credit facility of approximately $ 0.4 million, resulting in total deferred financing costs of $ 2.2 million as of June 30, 2024, which we are amortizing over the term of the Revolving Credit Agreement. The average interest rate for borrowings under the revolving credit agreements in place during a given period was 6.6 % during the first six months of 2024 and 6.2 % during the full year of 2023. Outstanding borrowings under the applicable revolving credit facility amounted to $ 279 million at June 30, 2024 and none at December 31, 2023. Outstanding letters of credit amounted to approximately $ 2 million at both June 30, 2024 and December 31, 2023. The unused portion of the applicable revolving credit facility amounted to $ 619 million at June 30, 2024 and $ 898 million at December 31, 2023. 10. Commitments and Contingencies Legal Matters 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. 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 adverse effect on our consolidated results of operations, financial condition, or cash flows. 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 potentially responsible party. 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 consolidated financial position, results of operations, and cash flows. Our total accruals for environmental remediation, dismantling, and decontamination were approximately $ 11 million at both June 30, 2024 and December 31, 2023. Of the total accrual, the current portion is included in accrued expenses and the noncurrent portion is included in other noncurrent liabilities on the Condensed Consolidated Balance Sheets . 16 Table of Contents NEWMARKET CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Our more significant environmental sites include a former plant site in Louisiana and a Houston, Texas plant site. Together, the amounts accrued on a discounted basis related to these sites represented approximately $ 9 million of the total accrual above at both June 30, 2024 and December 31, 2023, using discount rates ranging from 3 % to 9 % for both periods. The aggregate undiscounted amount for these sites was $ 11 million at both June 30, 2024 and December 31, 2023. Leases At June 30, 2024, we had commitments of approximately $ 3 million for leases that have not yet commenced. 11. 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, 2022 $ 54,562 $ ( 126,557 ) $ ( 71,995 ) Other comprehensive income (loss) before reclassifications 0 19,080 19,080 Amounts reclassified from accumulated other comprehensive loss (a) ( 1,842 ) 0 ( 1,842 ) Other comprehensive income (loss) ( 1,842 ) 19,080 17,238 Balance at June 30, 2023 $ 52,720 $ ( 107,477 ) $ ( 54,757 ) Balance at December 31, 2023 $ 79,966 $ ( 101,037 ) $ ( 21,071 ) Other comprehensive income (loss) before reclassifications 0 ( 11,307 ) ( 11,307 ) Amounts reclassified from accumulated other comprehensive loss (a) ( 1,719 ) 0 ( 1,719 ) Other comprehensive income (loss) ( 1,719 ) ( 11,307 ) ( 13,026 ) Balance at June 30, 2024 $ 78,247 $ ( 112,344 ) $ ( 34,097 ) (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 5 in this Quarterly Report on Form 10-Q and Note 17 in our 2023 Annual Report for further information. 12. Fair Value Measurements The carrying amount of cash and cash equivalents in the Condensed Consolidated Balance Sheets, as well as the fair value, was $ 88 million at June 30, 2024 and $ 112 million at December 31, 2023. The fair value is classified as Level 1 in the fair value hierarchy. No material events occurred during the six months ended June 30, 2024 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 and term loan. 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 the table below is based on the last quoted price closest to June 30, 2024. The fair value of our debt instruments is classified as Level 2. June 30, 2024 December 31, 2023 (in thousands) Carrying Amount Fair Value Carrying Amount Fair Value Long-term debt $ 1,172,732 $ 1,092,910 $ 643,622 $ 572,983 17 13. 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 was effective for our reporting period beginning January 1, 2024 with the interim period requirements effective for our reporting period beginning January 1, 2025. ASU 2023-07 only currently impacts the disclosures in our annual consolidated financial statements, which will be included in our Annual Report on Form 10-K for the year ending December 31, 2024. 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. 18 Table of Contents