NEWMARKET CORP 10-Q

ITEM 1. Financial Statements NEWMARKET CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in thousands, except per-share amounts) Third Quarter Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net sales $ 724,947 $ 667,150 $ 2,131,911 $ 2,055,069 Cost of goods sold 481,107 465,445 1,453,251 1,459,682 Gross profit 243,840 201,705 678,660 595,387 Selling, general, and administrative expenses 42,124 37,386 129,329 114,671 Research, development, and testing expenses 32,193 31,894 92,056 99,008 Operating profit 169,523 132,425 457,275 381,708 Interest and financing expenses, net 14,157 9,221 45,721 30,249 Other income (expense), net 13,805 11,278 38,304 32,881 Income before income tax expense 169,171 134,482 449,858 384,340 Income tax expense 36,849 23,235 98,184 75,886 Net income $ 132,322 $ 111,247 $ 351,674 $ 308,454 Earnings per share - basic and diluted $ 13.79 $ 11.60 $ 36.66 $ 32.05 Cash dividends declared per share $ 2.50 $ 2.25 $ 7.50 $ 6.60 See accompanying Notes to Condensed Consolidated Financial Statements 4 Table of Contents NEWMARKET CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (in thousands) Third Quarter Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net income $ 132,322 $ 111,247 $ 351,674 $ 308,454 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 $ 0 in third quarter 2024, $( 159 ) in third quarter 2023, $ 0 in nine months 2024, and $( 159 ) in nine months 2023 0 ( 489 ) 0 ( 489 ) Amortization of prior service cost (credit) included in net periodic benefit cost (income), net of income tax expense (benefit) of $( 173 ) in third quarter 2024, $( 141 ) in third quarter 2023, $( 520 ) in nine months 2024, and $( 482 ) in nine months 2023 ( 501 ) ( 454 ) ( 1,505 ) ( 1,547 ) Actuarial net gain (loss) arising during the period, net of income tax expense (benefit) of $( 552 ) in third quarter 2024, $( 239 ) in third quarter 2023, $( 552 ) in nine months 2024, and $( 239 ) in nine months 2023 ( 1,600 ) ( 784 ) ( 1,600 ) ( 784 ) Amortization of actuarial net loss (gain) included in net periodic benefit cost (income), net of income tax expense (benefit) of $( 114 ) in third quarter 2024, $( 105 ) in third quarter 2023, $( 358 ) in nine months 2024, and $( 342 ) in nine months 2023 ( 331 ) ( 332 ) ( 1,046 ) ( 1,081 ) Total pension plans and other postretirement benefits ( 2,432 ) ( 2,059 ) ( 4,151 ) ( 3,901 ) Foreign currency translation adjustments, net of income tax expense (benefit) of $ 137 in third quarter 2024, $( 327 ) in third quarter 2023, $( 951 ) in nine months 2024, and $ 371 in nine months 2023 21,885 ( 9,966 ) 10,578 9,114 Other comprehensive income (loss) 19,453 ( 12,025 ) 6,427 5,213 Comprehensive income $ 151,775 $ 99,222 $ 358,101 $ 313,667 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) September 30, 2024 December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 80,310 $ 111,936 Trade and other accounts receivable, less allowance for credit losses 487,607 432,349 Inventories 534,462 456,234 Prepaid expenses and other current assets 35,250 39,051 Total current assets 1,137,629 1,039,570 Property, plant, and equipment, net 755,409 654,747 Intangibles (net of amortization) and goodwill 757,060 124,642 Prepaid pension cost 390,018 370,882 Operating lease right-of-use assets, net 73,123 70,823 Deferred charges and other assets 53,045 48,207 Total assets $ 3,166,284 $ 2,308,871 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 259,434 $ 231,137 Accrued expenses 82,364 76,546 Dividends payable 21,419 19,212 Income taxes payable 17,011 6,131 Operating lease liabilities 15,683 15,074 Other current liabilities 6,042 16,064 Total current liabilities 401,953 364,164 Long-term debt 1,085,006 643,622 Operating lease liabilities-noncurrent 57,617 55,058 Other noncurrent liabilities 257,422 168,966 Total liabilities 1,801,998 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 - 9,595,011 at September 30, 2024 and 9,590,086 at December 31, 2023) 3,201 2,130 Accumulated other comprehensive loss ( 14,644 ) ( 21,071 ) Retained earnings 1,375,729 1,096,002 Total shareholders’ equity 1,364,286 1,077,061 Total liabilities and shareholders’ equity $ 3,166,284 $ 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 June 30, 2023 9,589,239 $ 0 $ ( 54,757 ) $ 947,497 $ 892,740 Net income 111,247 111,247 Other comprehensive income (loss) ( 12,025 ) ( 12,025 ) Cash dividends ($ 2.25 per share) ( 21,578 ) ( 21,578 ) Tax withholdings related to stock-based compensation ( 76 ) ( 33 ) ( 33 ) Stock-based compensation 988 1,590 2 1,592 Balance at September 30, 2023 9,590,151 $ 1,557 $ ( 66,782 ) $ 1,037,168 $ 971,943 Balance at June 30, 2024 9,594,110 $ 2,052 $ ( 34,097 ) $ 1,267,393 $ 1,235,348 Net income 132,322 132,322 Other comprehensive income (loss) 19,453 19,453 Cash dividends ($ 2.50 per share) ( 23,987 ) ( 23,987 ) Stock-based compensation 901 1,149 1 1,150 Balance at September 30, 2024 9,595,011 $ 3,201 $ ( 14,644 ) $ 1,375,729 $ 1,364,286 Balance at December 31, 2022 9,702,147 $ 0 $ ( 71,995 ) $ 834,402 $ 762,407 Net income 308,454 308,454 Other comprehensive income (loss) 5,213 5,213 Cash dividends ($ 6.60 per share) ( 63,457 ) ( 63,457 ) 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 9,572 3,447 ( 9 ) 3,438 Balance at September 30, 2023 9,590,151 $ 1,557 $ ( 66,782 ) $ 1,037,168 $ 971,943 Balance at December 31, 2023 9,590,086 $ 2,130 $ ( 21,071 ) $ 1,096,002 $ 1,077,061 Net income 351,674 351,674 Other comprehensive income (loss) 6,427 6,427 Cash dividends ($ 7.50 per share) ( 71,959 ) ( 71,959 ) Tax withholdings related to stock-based compensation ( 1,816 ) ( 1,118 ) ( 1,118 ) Stock-based compensation 6,741 2,189 12 2,201 Balance at September 30, 2024 9,595,011 $ 3,201 $ ( 14,644 ) $ 1,375,729 $ 1,364,286 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) Nine Months Ended September 30, 2024 2023 Cash and cash equivalents at beginning of year $ 111,936 $ 68,712 Cash flows from operating activities: Net income 351,674 308,454 Adjustments to reconcile net income to cash provided from operating activities: Depreciation and amortization 84,894 57,665 Deferred income tax benefit ( 10,468 ) ( 16,336 ) Working capital changes ( 81,866 ) 71,900 Cash pension and postretirement contributions ( 8,940 ) ( 7,132 ) Other, net ( 939 ) ( 9,335 ) Cash provided from (used in) operating activities 334,355 405,216 Cash flows from investing activities: Capital expenditures ( 42,700 ) ( 34,793 ) Acquisition of business (net of $ 15,588 of cash acquired) ( 681,479 ) 0 Cash provided from (used in) investing activities ( 724,179 ) ( 34,793 ) Cash flows from financing activities: Net borrowings (repayments) under revolving credit facility 191,000 ( 225,000 ) Proceeds from term loan 250,000 0 Dividends paid ( 71,959 ) ( 63,457 ) Debt issuance costs ( 2,251 ) 0 Repurchases of common stock 0 ( 42,864 ) Other, net ( 9,758 ) ( 4,219 ) Cash provided from (used in) financing activities 357,032 ( 335,540 ) Effect of foreign exchange on cash and cash equivalents 1,166 ( 1,035 ) (Decrease) increase in cash and cash equivalents ( 31,626 ) 33,848 Cash and cash equivalents at end of period $ 80,310 $ 102,560 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 September 30, 2024 and December 31, 2023, our consolidated results of operations, comprehensive income, and changes in shareholders' equity for the third quarter and nine months ended September 30, 2024 and September 30, 2023, and our cash flows for the nine months ended September 30, 2024 and September 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 nine month period ended September 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 September 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 for the nine months ended September 30, 2024. 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 September 30, 2024. The following table presents the financial results in thousands for AMPAC from the date of acquisition through September 30, 2024 and for the third quarter ended September 30, 2024. AMPAC Third Quarter Ended September 30, 2024 January 16 to September 30, 2024 Net sales $ 59,094 $ 114,151 Income before income tax expense 16,274 16,196 The following table presents our estimated unaudited pro forma consolidated results for the third quarter and nine months ended September 30, 2024 and September 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 third quarter and nine months ended September 30, 2024 and September 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 third quarter and nine months ended September 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 third quarter and nine months ended September 30, 2023. 10 Table of Contents NEWMARKET CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Pro Forma Supplemental Information (unaudited) (in thousands) Third Quarter Ended September 30, Nine Months Ended September 30, Consolidated 2024 2023 2024 2023 Net sales $ 724,947 $ 734,100 $ 2,137,011 $ 2,160,279 Income before income tax expense 172,013 151,040 456,988 370,186 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. 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 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. Third Quarter Ended September 30, Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 Net sales United States $ 305,382 $ 246,462 $ 827,101 $ 745,470 Europe, Middle East, Africa, India 201,538 200,843 612,828 607,913 Asia Pacific 136,691 129,717 441,793 433,905 Other foreign 81,336 90,128 250,189 267,781 Net sales $ 724,947 $ 667,150 $ 2,131,911 $ 2,055,069 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 Third Quarter Ended September 30, Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 Petroleum additives Lubricant additives $ 568,450 $ 562,692 $ 1,715,559 $ 1,753,772 Fuel additives 94,564 101,027 294,545 293,907 Total 663,014 663,719 2,010,104 2,047,679 Specialty materials 59,094 0 114,151 0 All other 2,839 3,431 7,656 7,390 Net sales $ 724,947 $ 667,150 $ 2,131,911 $ 2,055,069 Segment Operating Profit Third Quarter Ended September 30, Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 Petroleum additives $ 157,468 $ 139,820 $ 456,196 $ 404,026 Specialty materials 15,962 0 15,967 0 All other ( 93 ) ( 764 ) ( 1,548 ) ( 2,761 ) Segment operating profit 173,337 139,056 470,615 401,265 Corporate, general, and administrative expenses ( 3,953 ) ( 6,389 ) ( 13,495 ) ( 19,690 ) Interest and financing expenses, net ( 14,157 ) ( 9,221 ) ( 45,721 ) ( 30,249 ) Other income (expense), net 13,944 11,036 38,459 33,014 Income before income tax expense $ 169,171 $ 134,482 $ 449,858 $ 384,340 5. Pension Plans and Other Postretirement Benefits The table below shows cash contributions made during the nine months ended September 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 Nine Months Ended September 30, 2024 Expected Remaining Cash Contributions for Year Ending December 31, 2024 Domestic plans Pension benefits $ 4,121 $ 770 Postretirement benefits 1,025 342 Foreign plans Pension benefits 3,794 1,479 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 Third Quarter Ended September 30, (in thousands) 2024 2023 2024 2023 Service cost $ 3,177 $ 2,482 $ 216 $ 130 Interest cost 5,997 4,587 372 404 Expected return on plan assets ( 14,030 ) ( 11,510 ) ( 191 ) ( 182 ) Amortization of prior service cost (credit) 47 127 ( 757 ) ( 757 ) Amortization of actuarial net (gain) loss ( 367 ) ( 376 ) ( 71 ) ( 55 ) Net periodic benefit cost (income) $ ( 5,176 ) $ ( 4,690 ) $ ( 431 ) $ ( 460 ) Domestic Pension Benefits Postretirement Benefits Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 Service cost $ 9,255 $ 7,799 $ 485 $ 390 Interest cost 17,646 13,659 1,208 1,186 Expected return on plan assets ( 41,295 ) ( 34,529 ) ( 576 ) ( 585 ) Amortization of prior service cost (credit) 140 139 ( 2,271 ) ( 2,271 ) Amortization of actuarial net (gain) loss ( 1,282 ) ( 1,199 ) ( 102 ) ( 206 ) Net periodic benefit cost (income) $ ( 15,536 ) $ ( 14,131 ) $ ( 1,256 ) $ ( 1,486 ) Foreign Pension Benefits Third Quarter Ended September 30, Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 Service cost $ 1,084 $ 1,094 $ 3,246 $ 3,222 Interest cost 1,625 1,615 4,851 4,736 Expected return on plan assets ( 3,371 ) ( 2,973 ) ( 10,020 ) ( 8,713 ) Amortization of prior service cost (credit) 35 36 105 104 Amortization of actuarial net (gain) loss ( 5 ) ( 6 ) ( 18 ) ( 18 ) Net periodic benefit cost (income) $ ( 632 ) $ ( 234 ) $ ( 1,836 ) $ ( 669 ) 6. Earnings Per Share We had 34,474 shares of nonvested restricted stock at September 30, 2024 and 34,071 shares of nonvested restricted stock at September 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) Third Quarter Ended September 30, Nine Months Ended September 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 $ 132,322 $ 111,247 $ 351,674 $ 308,454 Earnings allocated to participating securities ( 474 ) ( 393 ) ( 1,247 ) ( 1,055 ) Net income attributable to common shareholders after allocation of earnings to participating securities $ 131,848 $ 110,854 $ 350,427 $ 307,399 Earnings per share denominator: Weighted-average number of shares of common stock outstanding - basic and diluted 9,561 9,556 9,559 9,592 Earnings per share - basic and diluted $ 13.79 $ 11.60 $ 36.66 $ 32.05 7. Inventories (in thousands) September 30, 2024 December 31, 2023 Finished goods and work-in-process $ 424,609 $ 351,746 Raw materials 85,100 82,441 Stores, supplies, and other 24,753 22,047 $ 534,462 $ 456,234 8. Intangibles (Net of Amortization) and Goodwill The net carrying amount of intangibles and goodwill was $ 757 million at September 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. September 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 $ 5,345 $ 6,200 $ 6,200 Contract 0 0 2,000 2,000 Customer bases 280,440 15,880 5,440 4,539 Trademarks and trade names 30,000 1,425 0 0 Water rights 29,392 0 Goodwill 379,878 123,741 $ 779,710 $ 22,650 $ 137,381 $ 12,739 Of the total intangibles (net of amortization) and goodwill, $ 125 million is attributable to the petroleum additives segment and $ 632 million is attributable to the specialty materials segment. The change in the gross carrying amount between December 31, 2023 and September 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): Third quarter ended September 30, 2024 $ 6,351 Nine months ended September 30, 2024 18,111 Third quarter ended September 30, 2023 748 Nine months ended September 30, 2023 1,459 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 $ 6,343 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) September 30, 2024 December 31, 2023 Senior notes - 2.70 % due 2031 (net of related deferred financing costs) $ 394,285 $ 393,622 Senior notes - 3.78 % due 2029 250,000 250,000 Term loan (net of related deferred financing costs) 249,721 0 Revolving credit facility 191,000 0 $ 1,085,006 $ 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 September 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. 15 Table of Contents NEWMARKET CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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 September 30, 2024. 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 September 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 gross deferred financing costs of $ 2.2 million as of September 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 nine months of 2024 and 6.2 % during the year ended December 31, 2023. Outstanding borrowings under the applicable revolving credit facility amounted to $ 191 million at September 30, 2024 and none at December 31, 2023. Outstanding letters of credit amounted to approximately $ 2 million at both September 30, 2024 and December 31, 2023. The unused portion of the applicable revolving credit facility amounted to $ 707 million at September 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. 16 Table of Contents NEWMARKET CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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 September 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 . Our more significant environmental sites include a former plant site in Baton Rouge, 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 September 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 September 30, 2024 and December 31, 2023. Leases At September 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 ( 1,273 ) 9,114 7,841 Amounts reclassified from accumulated other comprehensive loss (a) ( 2,628 ) 0 ( 2,628 ) Other comprehensive income (loss) ( 3,901 ) 9,114 5,213 Balance at September 30, 2023 $ 50,661 $ ( 117,443 ) $ ( 66,782 ) Balance at December 31, 2023 $ 79,966 $ ( 101,037 ) $ ( 21,071 ) Other comprehensive income (loss) before reclassifications ( 1,600 ) 10,578 8,978 Amounts reclassified from accumulated other comprehensive loss (a) ( 2,551 ) 0 ( 2,551 ) Other comprehensive income (loss) ( 4,151 ) 10,578 6,427 Balance at September 30, 2024 $ 75,815 $ ( 90,459 ) $ ( 14,644 ) (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 $ 80 million at September 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 nine months ended September 30, 2024 requiring adjustment to the recognized balances of assets or liabilities which are recorded at fair value on a nonrecurring basis. 17 Table of Contents NEWMARKET CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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 September 30, 2024. The fair value of our debt instruments is classified as Level 2 in the fair value hierarchy. September 30, 2024 December 31, 2023 (in thousands) Carrying Amount Fair Value Carrying Amount Fair Value Long-term debt $ 1,085,006 $ 1,028,603 $ 643,622 $ 572,983 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