What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-04-24 compared with 2024-10-24 · 98 added, 121 removed, 114 unchanged (66% of the section changed)

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When we use words in this document such as “anticipates,” “intends,” “plans,” “believes,” “estimates,” “projects,” “expects,” “should,” “could,” “may,” “will,” and similar expressions, we do so to identify forward-looking statements.

Examples of forward-looking statements include, but are not limited to, statements we make regarding future prospects of growth in the petroleum additives or specialty materials markets, other trends in these markets, our ability to maintain or increase our market share, and our future capital expenditure levels.

We believe our forward-looking statements are based on reasonable expectations and assumptions, within the bounds of what we know about our business and operations.

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the occurrence or threat of extraordinary events, including natural disasters, terrorist attacks, wars, and health-related epidemics;

risks related to operating outside of the United States;

risks related to operating outside of the United States, including tariffs and trade policy;

political, economic, and regulatory factors concerning our products;

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and other factors detailed from time to time in the reports that NewMarket files with the SEC, including the risk factors in Part I, Item 1A.

“Risk Factors” of our 2023 Annual Report, which is available to shareholders at www.newmarket.com, as well as Part II, Item 1A.

“Risk Factors” of this Quarterly Report on Form 10-Q.

“Risk Factors” of our 2024 Annual Report, which is available to shareholders at www.newmarket.com.

You should keep in mind that any forward-looking statement made by us in this report or elsewhere speaks only as of the date on which we make it.

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In light of these risks and uncertainties, any forward-looking statement made in this report or elsewhere, might not occur.

When comparing the results of the petroleum additives segment for the first nine months of 2024 with the first nine months of 2023, net sales were 1.8% lower, resulting primarily from lower selling prices, which were partially offset by an increase in product shipments.

Petroleum additives operating profit was 12.9% higher when comparing the 2024 and 2023 nine months periods, primarily reflecting the favorable impact of lower raw material and operating costs, as well as higher shipments, which were partially offset by the lower selling prices.

We completed the acquisition of AMPAC for approximately $697 million on January 16, 2024.

See Note 2 for further information on the acquisition.

The operations of AMPAC since the date of acquisition are reflected in the specialty materials segment in the Results of Operations section below.

On January 22, 2024, we entered into a new $900 million revolving credit facility, as well as a $250 million unsecured term loan.

Concurrently with the entry into the new revolving credit facility, we terminated our former revolving credit facility.

See Note 9 for further information on our debt agreements.

We remain challenged by the uncertain global economic environment, but continue to focus on managing our operating costs, our inventory levels, and our portfolio profitability, while continuing our investment in technology.

When comparing the results of the petroleum additives segment for the first three months of 2025 with the first three months of 2024, net sales declined 4.7%, resulting primarily from lower product shipments, which were partially offset by favorable product mix.

Petroleum additives operating profit decreased 5.8% when comparing the 2025 and 2024 three-months periods, primarily reflecting lower product shipments and higher operating costs, which were partially offset by lower raw material costs and favorable product mix.

The specialty materials segment reported both higher net sales and higher operating profit for the first three months of 2025 as compared to the same period in 2024, resulting primarily from higher product volumes, as well as favorable product mix.

Specialty materials sales and operating profit for the first three months of 2024 reflect financial results since the acquisition of AMPAC on January 16, 2024.

We are monitoring the uncertain macroeconomic environment in which we operate, particularly the changes in international trade relations and tariffs, and are assessing the potential impacts to our operations.

These impacts could include supply chain disruptions, lower customer demand, and higher inflation.

Investing in technology to meet customer needs, enhancing our operational efficiency, and improving our portfolio profitability will remain priorities throughout 2025.

Despite the challenging economic environment, our financial position remains strong.

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Results of Operations

Consolidated net sales for the third quarter of 2024 totaled $724.9 million, representing an increase of $57.8 million, or 8.7%, from the third quarter of 2023.

Consolidated net sales for the first nine months of 2024 totaled $2.1 billion, representing an increase of $76.8 million, or 3.7%, from the first nine months of 2023.

Consolidated net sales for the first three months of 2025 totaled $700.9 million, representing a slight increase of $4.2 million, or 0.6%, from the first three months of 2024.

The following table shows net sales by segment and product line.

The net sales in the table below for the specialty materials segment include sales since the acquisition of AMPAC on January 16, 2024.

Third Quarter Ended September 30, Nine Months Ended September 30,

The net sales for the first three months of 2024 in the table below for the specialty materials segment include sales since the acquisition of AMPAC on January 16, 2024.

Three Months Ended March 31,

(in millions) 2025 2024

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The regions in which we operate include North America, Latin America, Asia Pacific, and EMEAI.

While there is some fluctuation, the percentage of net sales generated by region remained fairly consistent when comparing the first nine months of 2024 with both the same period in 2023, as well as with the full year of 2023.

Petroleum additives net sales for the third quarter of 2024 were $663.0 million compared to $663.7 million for the third quarter of 2023, a negligible decrease of 0.1%.

Regionally for the third quarter comparison, North America was essentially unchanged, while Asia Pacific increased 4.9%.

Latin America decreased 8.6% and EMEAI decreased 0.7% for the third quarter comparison.

Petroleum additives net sales for the first nine months of both 2024 and 2023 were $2.0 billion slightly decreasing 1.8% between the 2024 and 2023 nine months comparison.

Latin America decreased 6.0% and North America decreased 4.1%, while Asia Pacific increased 1.6%, and EMEAI was essentially unchanged.

The following table details the approximate components of the changes in petroleum additives net sales between the third quarter and first nine months of 2024 and 2023.

(in millions) Third Quarter Nine Months

Period ended September 30, 2023 $ 663.7 $ 2,047.7

While there is some fluctuation, the percentage of net sales generated by region remained fairly consistent when comparing the first three months of 2025 with both the same period in 2024, as well as with the full year of 2024.

Petroleum additives net sales for the first three months of 2025 were $645.5 million compared to $677.3 million for the first three months of 2024, a decrease of 4.7% across all regions.

The Asia Pacific region decreased 8.5%, EMEAI decreased 5.9%, North America decreased 2.2%, and Latin America decreased 1.0%.

The following table details the approximate components of the changes in petroleum additives net sales between the first three months of 2025 and 2024.

(in millions) Three Months

Period ended March 31, 2024 $ 677.3

Lubricant additives shipments (19.2)

Fuel additives shipments (21.2)

Selling prices (2.0) (58.6)

Selling prices, including product mix 14.0

Foreign currency impact, net (5.4)

Period ended September 30, 2024 $ 663.0 $ 2,010.1

When comparing the third quarter of 2024 and 2023, the small decrease in petroleum additives net sales was due to lower selling prices, along with a small unfavorable foreign currency impact.

Partially offsetting these factors was an increase to net sales due to the impact of product shipments, including mix of products sold.

When comparing the first nine months of 2024 and 2023, the decrease in petroleum additives net sales was primarily due to lower selling prices, as well as an unfavorable foreign currency impact, which were partially offset by an increase in petroleum additives product shipments.

For the nine months comparison, the volume of product shipments for both lubricant additives and fuel additives increased slightly, but the impact on net sales from fuel additives shipments was unfavorable due to product mix.

The primary currencies in which we transact include the Euro, Pound Sterling, Japanese Yen, Chinese Renminbi, and Indian Rupee.

Comparing the third quarter of 2024 and 2023, the United States Dollar strengthened against all of the major currencies in which we transact, except for the Pound Sterling and Chinese Renminbi, resulting in the unfavorable impact to net sales for the third quarter comparison reflected in the above table.

For the nine months comparison, the United States Dollar strengthened against all of the major currencies in which we transact, except for the Pound Sterling and Euro, resulting in the unfavorable impact to net sales shown above.

The unfavorable impact for the third quarter comparison was primarily from the Japanese Yen and Euro.

The unfavorable impact for the nine months comparison was primarily from the Japanese Yen and Chinese Renminbi, which was partially offset by a favorable impact from the Euro.

On a worldwide basis, the volume of product shipments for petroleum additives was essentially unchanged when comparing the two third quarter periods and increased 1.8% when comparing the first nine months of 2024 and 2023.

For the third quarter comparison, a slight increase in lubricant additives shipments was offset by a similar decrease in fuel additives shipments.

Both the North America and EMEAI regions experienced increases in lubricant additives shipments and decreases in fuel additives shipments for the third quarter comparison, while the Latin America region experienced a decrease in lubricant additives shipments and an increase in fuel additives shipments.

The Asia Pacific region reported increases in both lubricant additives and fuel additives shipments.

For the nine months comparison, the increase was in both lubricant additives and fuels additives.

Both the North America and Asia Pacific regions reported increases in lubricant additives shipments, which were partially offset by decreases in the EMEAI and Latin America regions.

The EMEAI and Latin America regions reported increases in fuel additives shipments, which were partially offset by a decrease in the North America region.

Fuel additives shipments in the Asia Pacific region were unchanged when comparing the first nine months of 2024 and the first nine months of 2023.

Period ended March 31, 2025 $ 645.5

When comparing the first three months of 2025 and 2024, the decrease in petroleum additives net sales was due to lower product shipments, along with a small unfavorable foreign currency impact.

Partially offsetting these factors was an increase to net sales driven by favorable product mix.

The primary foreign currencies in which we transact include the Euro, Pound Sterling, Japanese Yen, Chinese Renminbi, and Indian Rupee.

Comparing the first three months of 2025 and 2024, the United States Dollar strengthened against all of the major currencies in which we transact, resulting in the unfavorable impact to net sales for the first three months comparison reflected in the above table.

The unfavorable impact was predominantly from the change in the exchange rate of the Euro.

On a worldwide basis, the volume of product shipments for petroleum additives decreased 7.2% when comparing the first three months periods with decreases in both lubricant and fuel additives.

Both the North America and Asia Pacific regions experienced decreases in lubricant additives shipments, while the EMEAI and Latin America regions reported small increases in lubricant additives shipments.

All regions except Asia Pacific experienced decreases in fuel additives shipments for the first three months comparison.

Specialty Materials Segment

The specialty materials segment includes the operations of AMPAC, which operates predominantly in the North America region.

Total net sales were $59.1 million for the third quarter 2024 and $114.2 million for the period that we owned AMPAC during the first nine months of 2024.

Total net sales were $53.7 million for the first three months of 2025 and $17.0 million for the period that we owned AMPAC during the first three months of 2024.

The increase in net sales was the result of significantly higher product volume, along with higher selling prices, including favorable product mix.

The “All other” category includes the operations of the antiknock compounds business, as well as certain contracted manufacturing and related services associated with Ethyl.

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

The following table reports segment operating profit for the third quarter and nine months ended September 30, 2024 and September 30, 2023.

The amount reported for specialty materials is for the period from January 16, 2024 to September 30, 2024.

Third Quarter Ended September 30, Nine Months Ended September 30,

The following table reports segment operating profit for the three months ended March 31, 2025 and March 31, 2024.

The amount reported for specialty materials is for the period from January 16, 2024 to March 31, 2024.

A reconciliation of segment operating profit to income before income tax expense is in Note 4.

Three Months Ended March 31,

(in millions) 2025 2024

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Petroleum Additives Segment

Petroleum additives segment gross profit increased $19.3 million and operating profit increased $17.7 million when comparing the third quarter of 2024 to the third quarter of 2023.

For the first nine months of 2024 compared to the first nine months of 2023, petroleum additives segment gross profit increased $47.7 million and operating profit increased $52.2 million.

Petroleum additives segment gross profit decreased $6.5 million and operating profit decreased $8.8 million when comparing the first three months of 2025 to the first three months of 2024.

The decrease in both gross profit and operating profit included the unfavorable impacts of lower product shipments and higher operating costs, which were partially offset by favorable product mix and lower raw material costs.

The following table presents petroleum additives cost of goods sold as a percentage of net sales and the operating profit margin.

Third Quarter Ended September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Three Months Ended March 31,

Cost of goods sold as a percentage of net sales 67.8 % 68.4 %

Operating profit margin 22.0 % 22.3 %

For the rolling four quarters ended September 30, 2024, the operating profit margin for petroleum additives was 21.4%, which is within our historical range of operating profit margin.

For the rolling four quarters ended March 31, 2025, the operating profit margin for petroleum additives was 22.4%, which is within our historical range of operating profit margin.

While operating margins will fluctuate from quarter to quarter due to multiple factors, we believe the fundamentals of our business and industry as a whole are unchanged.

When comparing both the third quarter and first nine months of 2024 and 2023, the increase in both gross profit and operating profit primarily included the favorable impacts of lower raw material and operating costs, as well as a favorable impact from shipments, which were partially offset by lower selling prices.

The favorable impact from shipments includes the effect of product mix as discussed in the Net Sales section above.

Cost control and margin management remain high priorities for us.

Petroleum additives selling, general, and administrative (SG&A) expenses for the third quarter of 2024 were $1.4 million higher than the third quarter of 2023.

SG&A expenses for the first nine months of 2024 were $2.7 million higher than the first nine months of 2023.

SG&A expenses as a percentage of net sales were 4.8% for both the third quarter and first nine months of 2024, 4.6% for the third quarter of 2023, and 4.5% for the first nine months of 2023.

Petroleum additives selling, general, and administrative (SG&A) expenses for the first three months of 2025 were $0.3 million higher than the first three months of 2024.

SG&A expenses as a percentage of net sales were 5.0% for the first three months of 2025 and 4.8% for the first three months of 2024.

Our SG&A costs are primarily personnel-related and include salaries, benefits, and other costs associated with our workforce, including travel-related expenses.

While personnel-related costs fluctuate from period to period, there were no significant changes in the drivers of these costs when comparing the periods.

Our investment in petroleum additives research, development, and testing (R&D) increased $0.3 million when comparing the third quarter periods of 2024 and 2023 and decreased $7.0 million when comparing the first nine months periods of 2024 and 2023.

As a percentage of net sales, our R&D investment was 4.9% for the third quarter of 2024, 4.6% for the first nine months of 2024, and 4.8% for both the third quarter and first nine months of 2023.

Our investment in petroleum additives research, development, and testing (R&D) increased $2.0 million when comparing the first three months periods of 2025 and 2024.

As a percentage of net sales, our R&D investment was 5.1% for the first three months of 2025 and 4.6% for the first three months of 2024.

Our R&D investments reflect our efforts to support the development of solutions that meet our customers' needs, meet new and evolving standards, and support our expansion into new product areas.

Our approach to R&D investments, as it is with SG&A costs, is one of purposeful spending on programs to support our current product base and to ensure that we develop products to support our customers' programs in the future.

Our approach to R&D investments, as it is with SG&A costs, is one of purposeful spending on programs to

support our current product base and to ensure that we develop products to support our customers' programs in the future.

R&D investments include personnel-related costs, as well as costs for internal and external testing of our products.

Specialty Materials Segment

The specialty materials segment reported operating profit of $16.0 million for third quarter of 2024, resulting in operating profit of $16.0 million for the period from the AMPAC acquisition date of January 16, 2024 to September 30, 2024.

The specialty materials results for the third quarter and first nine months of 2024 include the sale of AMPAC finished goods inventory that we acquired at closing.

The acquired inventory, which was recorded at fair value on the acquisition date and has been sold during the first nine months of 2024, generated no margin.

While we may experience substantial variation in quarterly results for AMPAC on an ongoing basis due to the nature of its business, we anticipate full year 2024 results to be consistent with our pre-acquisition expectations.

The specialty materials segment reported operating profit of $23.2 million for the first three months of 2025 as compared to an operating loss of $5.0 million for the period from the AMPAC acquisition date of January 16, 2024 to March 31, 2024.

The increase in specialty materials operating profit was primarily the result of the same factors discussed in the Net Sales section above.

The specialty materials results for the 2024 period include the sale of AMPAC finished goods inventory that we acquired at closing.

The acquired inventory was recorded at fair value on the acquisition date and sold during 2024, generating no margin.

We may experience substantial variation in quarterly results for the specialty materials segment on an ongoing basis due to the nature of its business.

The following discussion references certain captions on the Consolidated Statements of Income.

Interest and Financing Expenses, Net

Interest and financing expenses were $14.2 million for the third quarter of 2024, $9.2 million for the third quarter of 2023, $45.7 million for the first nine months of 2024, and $30.2 million for the first nine months of 2023.

The increase for both the third quarter and nine months comparisons resulted primarily from both higher average debt outstanding and a higher average interest rate.

Interest and financing expenses were $10.7 million for the first three months of 2025 and $15.7 million for the first three months of 2024.

The decrease for the three months comparisons resulted primarily from both lower average debt outstanding and a lower average interest rate.

Other Income (Expense), Net

Other income (expense), net was income of $13.8 million for the third quarter of 2024, $11.3 million for the third quarter of 2023, $38.3 million for the first nine months of 2024 and $32.9 million for the first nine months of 2023.

The amounts for both the 2024 and 2023 third quarter and nine months periods primarily reflect the components of net periodic benefit cost (income), except for service cost, from defined benefit pension and postretirement plans.

Other income (expense), net was income of $14.9 million for the first three months of 2025 and $12.5 million for the first three months of 2024.

The amounts for both the 2025 and 2024 three months periods primarily reflect the components of net periodic benefit cost (income), except for service cost, from defined benefit pension and postretirement plans.

See Note 5 for further information on total periodic benefit cost (income).

Income Tax Expense

Income tax expense was $36.8 million for the third quarter of 2024 and $23.2 million for the third quarter of 2023.

The effective tax rate was 21.8% for the third quarter of 2024 and 17.3% for the third quarter of 2023.

Income tax expense increased $6.0 million due to higher income before income tax expense and $7.6 million due to the higher effective tax rate.

Income tax expense was $98.2 million for the first nine months of 2024 and $75.9 million for the first nine months of 2023.

The effective tax rate was 21.8% for the first nine months of 2024 and 19.7% for the first nine months of 2023.

Income tax expense was $38.2 million for the first three months of 2025 and $30.0 million for the first three months of 2024.

The effective tax rate was 23.3% for the first three months of 2025 and 21.8% for the first three months of 2024.

Income tax expense increased $5.7 million due to higher income before income tax expense and $2.5 million due to the higher effective tax rate.

The increase in the effective tax rate for both the third quarter and nine months comparisons was primarily caused by more foreign income being taxed at U.S.

On October 8, 2021, almost all members of the Organisation for Economic Co-operation and Development (OECD) reached an agreement on a two-pillar approach to international tax reform, including the establishment of a 15% global minimum tax for large multinational entities.

Several jurisdictions in which we operate have adopted or are in the process of adopting this global minimum tax, with effective dates in 2024 or 2025.

We are continuing to monitor the legislation in these jurisdictions and have recognized an immaterial impact to our effective tax rate and income tax liabilities related to the enactment of these rules for the first nine months of 2024.

The increase in the effective tax rate for the first three months comparison was primarily caused by prior year tax items.

Cash Flows, Financial Condition, and Liquidity

Cash and cash equivalents at September 30, 2024 were $80.3 million, a decrease of $31.6 million since December 31, 2023.

Cash and cash equivalents held by our foreign subsidiaries amounted to $72.0 million at September 30, 2024 and $86.5 million at December 31, 2023.

Cash and cash equivalents at March 31, 2025 were $118.3 million, an increase of $40.8 million since December 31, 2024.

Cash and cash equivalents held by our foreign subsidiaries amounted to $114.3 million at March 31, 2025 and $71.3 million at December 31, 2024.

Periodically, we repatriate cash from our foreign subsidiaries to the United States through intercompany dividends and loans.

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Cash Flows – Operating Activities

Cash provided from operating activities for the first nine months of 2024 was $334.4 million, including $81.9 million of higher working capital requirements.

The $81.9 million excluded a small unfavorable foreign currency impact to the components of working capital on the balance sheet.

The working capital of AMPAC is included in our consolidated balance sheet at September 30, 2024.

Excluding the impact of AMPAC working capital, when comparing the September 30, 2024 balances with those at December 31, 2023, the most significant changes in working capital included increases in trade and other accounts receivable, inventory, accounts payable, and income taxes payable.

The increase in trade and other accounts receivable primarily reflects higher sales during the third quarter of 2024 compared to the fourth quarter of 2023.

The increase in inventory reflects planned increased production during the third quarter of 2024 to allow for customer demand, normal maintenance outages, and potential future weather impacts as compared to our planned inventory rationalization that took place in 2023.

The increase in accounts payable is primarily the result of increased purchases during the third quarter of 2024 and normal invoice payment timing.

The increase in income taxes payable is due to the timing and amount of income tax payments.

Including cash and cash equivalents, as well as the impact of changes in foreign currency exchange rates on the balance sheet, we had total working capital of $735.7 million at September 30, 2024 and $675.4 million at December 31, 2023.

The current ratio was 2.83 at September 30, 2024 and 2.85 at December 31, 2023.

Cash provided from operating activities for the first three months of 2025 was $120.3 million, including $26.6 million of higher working capital requirements.

The $26.6 million excluded an unfavorable foreign currency impact to the components of working capital on the balance sheet.

When comparing the March 31, 2025 balances with those at December 31, 2024, the most significant changes in working capital included increases in trade and other accounts receivable, accounts payable, and income taxes payable, along with decreases in inventories and accrued expenses.

The increase in trade and other accounts receivable primarily reflects higher

sales during the first quarter of 2025 compared to the fourth quarter of 2024.

The increase in accounts payable is primarily the result of increased purchases during the first quarter of 2025 and normal invoice payment timing.

The increase in income taxes payable is due to the timing of U.S.

income tax payments.

The decrease in inventory reflects lower production to allow for customer demand, as well as the planned use of inventory built up during the end of 2024 to provide for normal maintenance outages.

The decrease in accrued expenses is primarily the result of normal payments related to customer rebates, interest payments on our long-term debt, and personnel-related payments.

Including cash and cash equivalents, as well as the impact of changes in foreign currency exchange rates on the balance sheet, we had total working capital of $727.5 million at March 31, 2025 and $655.1 million at December 31, 2024.

The current ratio was 2.84 at March 31, 2025 and 2.75 at December 31, 2024.

Cash Flows – Investing Activities

Cash used in investing activities totaled $724.2 million during the first nine months of 2024, comprised of the acquisition of AMPAC for $681.5 million (net of cash acquired) and capital expenditures of $42.7 million.

We expect that our total capital spending during 2024 will be in the $50 million to $70 million range and will include several improvements to our manufacturing and R&D infrastructure around the world.

Cash used in investing activities totaled $13.0 million during the first three months of 2025, comprised of capital expenditures.

We expect that our total capital spending during 2025 will be in the $70 million to $100 million range and will include improvements to our manufacturing and R&D infrastructure around the world.

Included in the expected capital expenditures for 2025 is a capital investment of up to $100 million to expand AMPAC's ammonium perchlorate production capabilities in support of growing solid rocket motor demand.

This anticipated investment, which has been approved by the AMPAC board of directors, will include the construction of an additional production line, increasing capacity by more than 50%.

The increased capacity will allow AMPAC to meet the demand of U.S.

military and space launch programs, while also addressing the needs of U.S.

allies in these critical areas.

The project remains subject to approval by NewMarket’s board of directors and is currently scheduled to be completed during 2026.

We expect to continue to finance capital spending through cash on hand and cash provided from operations, together with borrowing available under our revolving credit facility.

Cash Flows – Financing Activities

Cash provided from financing activities during the first nine months of 2024 amounted to $357.0 million.

These cash flows primarily included net borrowings of $191.0 million on the revolving credit facility and proceeds of $250 million from the term loan, partially offset by cash dividends of $72.0 million.

Our long-term debt was $1.1 billion at September 30, 2024 compared to $643.6 million at December 31, 2023.

On January 22, 2024, we entered into a new $900 million revolving credit facility, as well as a $250 million unsecured term loan.

Concurrently with the entry into the new revolving credit facility, we terminated our former revolving credit facility.

Cash used in financing activities during the first three months of 2025 amounted to $68.5 million.

These cash flows included repurchases of our common stock of $57.1 million, a principal payment of $50.0 million on the 3.78% senior notes, and cash dividends of $26.1 million, which were partially offset by net borrowings of $69 million on the revolving credit facility.

Our long-term debt was $990.6 million at March 31, 2025 compared to $971.3 million at December 31, 2024.

See Note 9 for additional information on the 2.70% senior notes, 3.78% senior notes, term loan, and revolving credit facility, including the unused portion of our revolving credit facility.

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The revolving credit facility contains financial covenants that require NewMarket to maintain a consolidated Leverage Ratio (as defined in the agreement) of no more than 3.75 to 1.00, except during an Increased Leverage Period (as defined in the agreement) at the end of each quarter.

At September 30, 2024, the Leverage Ratio was 1.55 under the revolving credit facility.

At September 30, 2024, we were in compliance with all covenants under the 3.78% senior notes, 2.70% senior notes, term loan, and revolving credit facility.

As a percentage of total capitalization (total long-term debt and shareholders’ equity), our total long-term debt increased from 37.4% at December 31, 2023 to 44.3% at September 30, 2024.

The change resulted primarily from the increase in outstanding revolving credit facility and term loan borrowings, partially offset by the increase in shareholders’ equity.

The increase in shareholders’ equity primarily reflects our earnings and favorable impact from foreign currency translation adjustments, partially offset by dividend payments.

At March 31, 2025, the Leverage Ratio was 1.31 under the revolving credit facility.

At March 31, 2025, we were in compliance with all covenants under the 3.78% senior notes, 2.70% senior notes, term loan, and revolving credit facility.

As a percentage of total capitalization (total long-term debt and shareholders’ equity), our total long-term debt decreased from 39.9% at December 31, 2024 to 39.5% at March 31, 2025.

The change resulted from the increase in shareholders' equity partially offset by a net increase in outstanding long-term debt.

The increase in shareholders’ equity primarily reflects our earnings and favorable impact from foreign currency translation adjustments, partially offset by dividend payments and repurchases of shares of our common stock.

Generally, we repay any outstanding long-term debt with cash from operations or refinancing activities.

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We also provided a discussion of Critical Accounting Policies and Estimates in our 2024 Annual Report.

The following provides an update to the information related to intangibles, net of amortization, and goodwill provided in the Critical Accounting Policies and Estimates section of our 2023 Annual Report.

We have certain identifiable intangibles amounting to $377 million and goodwill amounting to $380 million at September 30, 2024 that are discussed in Note 8.

Of these identifiable intangibles and goodwill, $125 million relate to our petroleum additives business and $632 million relate to the specialty materials business.

The amortizable identifiable intangibles have remaining lives of up to approximately 17 years.

We continue to assess the markets related to the intangibles and goodwill, as well as their specific values and evaluate the intangibles and goodwill for any potential impairment when significant events or circumstances occur that might impair the value of these assets.

We have concluded the values are appropriate, as are the amortization periods for the intangibles.

However, if conditions were to substantially deteriorate in the petroleum additives or specialty materials markets, it could possibly cause a decrease in the estimated useful lives of the intangible assets or result in a noncash write-off of all or a portion of the intangibles and goodwill carrying amounts.

A reduction in the amortization period of the intangibles would have no effect on cash flows.

We do not anticipate such a change in market conditions in the near term.

There have been no significant changes in our critical accounting policies and estimates from those reported in our 2024 Annual Report.

Recent Accounting Pronouncements

For a full discussion of the more significant recently issued accounting standards, see Note 13.

Our goal is to provide a 10% compounded return per year for our shareholders over any ten-year period (defined by earnings per share growth plus dividend yield), although we may not necessarily achieve a 10% return each year.

Our goal is to provide a 10% compounded return per year for our shareholders over any ten-year period (defined as earnings per share growth plus dividend yield), although we may not necessarily achieve a 10% return each year.

We continue to have confidence in our customer-focused strategy and approach to the market.

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Our petroleum additives segment may experience impacts to its operating performance during 2025 due to the uncertain global economic environment in which we operate;

As a result, we will continue to focus on cost control and operating profit margin recovery throughout the year.

however, we anticipate continued strength from this segment.

As a result, we will continue to focus on cost control and operating profit margin management throughout the year.

We expect over the long-term that the petroleum additives market will grow annually up to 2%.

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Over the past several years we have made significant investments in our petroleum additives business as the industry fundamentals remain positive.

These investments have been and will continue to be in organizational talent, technology development and processes, and global infrastructure, consisting of technical centers, production capability and geographic expansion.

These investments have been, and will continue to be, focused on operational efficiencies, organizational talent, and technology development and processes, as well as global infrastructure, including technical centers, production capabilities and geographic expansion.

We intend to utilize these investments to improve our ability to deliver the solutions that our customers value, expand our global reach, and enhance our operating results.

We will continue to invest in our capabilities to provide even better value, service, technology, and customer solutions.

We anticipate continued strength in our petroleum additives segment in 2024 and also look forward to the ongoing integration of AMPAC into our business during the year.

While we may experience substantial variation in quarterly results for AMPAC on an ongoing basis due to the nature of its business, we anticipate full year results to be consistent with our pre-acquisition expectations.

We continue to focus on the ongoing integration of AMPAC into our business.

While we may experience substantial variation in quarterly results for specialty materials on an ongoing basis due to the nature of its business, we anticipate full year results to be consistent with our pre-acquisition expectations.

Our planned investment to expand capacity at AMPAC is aligned with anticipated future industry demand.

Our business typically generates significant amounts of cash beyond its operational needs.

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We believe our capital spending is creating the capability we need to grow and support our customers worldwide, and our research and development investments are positioning us well to provide added value to our customers.

While our recent AMPAC acquisition is outside of our core petroleum additives business, we believe it is an excellent opportunity to provide long-term value for our shareholders.

While our AMPAC acquisition was outside of our core petroleum additives business, we believe it presented an excellent opportunity to provide long-term value for our shareholders.

Nonetheless, our primary focus in the acquisition area remains on the petroleum additives industry.

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We will continue to evaluate all alternative uses of cash to enhance shareholder value, including stock repurchases and dividends.

Quantitative and Qualitative Disclosures About Market Risk

At March 31, 2025, there were no material changes in our market risk from the information provided in the 2024 Annual Report.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis