What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-07-31 compared with 2025-04-24 · 88 added, 73 removed, 139 unchanged (54% of the section changed)

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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 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.

When comparing the results of the petroleum additives segment for the first six months of 2025 with the first six months of 2024, net sales declined 3.5%, resulting primarily from lower product shipments, which were partially offset by favorable product mix.

Petroleum additives operating profit decreased 5.6% when comparing the 2025 and 2024 six months periods, primarily reflecting lower product shipments and higher operating costs, which were partially offset by lower raw material costs and favorable product mix.

Operating profit was also unfavorably impacted for the six months comparisons due to higher technology investments for research, development and testing during the 2025 period as compared to the 2024 period.

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

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

We continue to monitor the uncertain macroeconomic environment in which we operate, particularly the changes in international trade relations and tariffs, and assess the potential impacts to our operations.

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

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Results of Operations

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.

Consolidated net sales for the second quarter of 2025 totaled $698.5 million, representing a decrease of $11.7 million, or 1.7%, from the second quarter of 2024.

Consolidated net sales for the first six months of 2025 totaled $1.4 billion, representing a slight decrease of $7.5 million, or 0.5%, from the first six months of 2024.

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

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,

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

Second Quarter Ended June 30, Six Months Ended June 30,

(in millions) 2025 2024 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 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

While there is some fluctuation, the percentage of net sales generated by region remained fairly consistent when comparing the first six 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 second quarter of 2025 were $653.9 million compared to $669.8 million for the second quarter of 2024, a decrease of 2.4%.

Decreases in Asia Pacific of 11.9% and North America of 3.5% were partially offset by increases of 4.5% in EMEAI and 2.5% in Latin America.

Petroleum additives net sales for the first six months of 2025 were $1.3 billion, a decrease of $47.7 million, or 3.5%, compared to the first six months of 2024.

Asia Pacific decreased 10.2%, North America decreased 2.9%, EMEAI decreased 0.8%, and Latin America increased 0.8%.

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

(in millions) Second Quarter Six Months

Period ended June 30, 2024 $ 669.8 $ 1,347.1

Lubricant additives shipments (21.0) (40.3)

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Foreign currency impact, net 2.5 (3.0)

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.

Period ended June 30, 2025 $ 653.9 $ 1,299.4

When comparing the second quarters of 2025 and 2024, lower lubricant additives shipments drove the decrease in petroleum additives net sales.

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

Partially offsetting these factors for the six months comparison 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.

Comparing the second quarters of 2025 and 2024, the United States Dollar strengthened against the Rupee and Renminbi and weakened against the Euro, Yen, and Pound Sterling, resulting in the small favorable impact to net sales in the table above.

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

On a worldwide basis, the volume of product shipments for petroleum additives decreased 2.5% when comparing the second quarter periods and 4.9% when comparing the six months periods.

For the second quarter comparison, the decrease was in lubricant additives shipments, which was partially offset by a small increase in fuel additives shipments.

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

For the fuel additives second quarter comparison, both the Asia Pacific and Latin America regions reported increases in product shipments, which were partially offset by decreases in the EMEAI and North America regions.

For the six months comparison, lubricant additives product shipments were lower in the Asia Pacific and North America regions, which were partially offset by increases in the EMEAI and Latin American regions.

For the fuel additives six months comparison, both the EMEAI and North America regions reported decreases in product shipments, which were partially offset by increases in the Asia Pacific and Latin America regions.

Specialty Materials Segment

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.

Total net sales for the specialty materials segment were $42.0 million for the second quarter of 2025 and $38.0 for the second quarter of 2024.

For the six months comparison, net sales were $95.8 million for 2025 and $55.1 million for the period that we owned AMPAC during 2024.

The increase in net sales for the second quarter and six months comparisons was primarily the result of higher product volumes.

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 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.

The following table reports segment operating profit for the second quarter and six months ended June 30, 2025 and June 30, 2024.

The amount reported for specialty materials for the six months ended June 30, 2024 is for the period from January 16, 2024 to June 30, 2024.

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

Three Months Ended March 31,

Second Quarter Ended June 30, Six Months Ended June 30,

(in millions) 2025 2024 2025 2024

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Petroleum Additives Segment

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.

Petroleum additives segment gross profit decreased $2.8 million and operating profit decreased $8.0 million when comparing the second quarter of 2025 to the second quarter of 2024.

For the first six months of 2025 compared to the first six months of 2024, petroleum additives segment gross profit decreased $9.3 million and operating profit decreased $16.8 million.

The decrease in both gross profit and operating profit for both the second quarter and six months comparisons 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.

Operating profit was also unfavorably impacted by higher technology investments for research, development and testing during both the 2025 second quarter and six months periods than during the same 2024 periods.

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

Three Months Ended March 31,

Second Quarter Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Cost of goods sold as a percentage of net sales 68.6 % 68.9 % 68.2 % 68.6 %

Operating profit margin 21.4 % 22.1 % 21.7 % 22.2 %

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.

For the rolling four quarters ended June 30, 2025, the operating profit margin for petroleum additives was 22.2%, 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.

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.

Petroleum additives selling, general, and administrative (SG&A) expenses for the second quarter of 2025 were $1.5 million higher than the second quarter of 2024 and $1.8 million higher for the first six months of 2025 than the first six months of 2024.

SG&A expenses as a percentage of net sales were 5.1% for the second quarter of 2025, 4.7% for the second quarter of 2024, 5.1% for the first six months of 2025, and 4.7% for the first six 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 $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 investment in petroleum additives research, development, and testing (R&D) increased $3.7 million when comparing the second quarters of 2025 and 2024 and $5.7 million when comparing the first six months periods of 2025 and 2024.

As a percentage of net sales, our R&D investment was 5.0% for the second quarter of 2025, 4.3% for the second quarter of 2024, 5.0% for the first six months of 2025, and 4.4% for the first six 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 $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 specialty materials segment reported operating profit of $10.5 million for the second quarter of 2025 as compared to $5.0 million for the second quarter of 2024.

For the first six months of 2025, operating profit was $33.7 million as compared to operating profit of $5 thousand for the period from the AMPAC acquisition date of January 16, 2024 to June 30, 2024.

The increase in specialty materials operating profit was primarily the result of higher product volumes.

The specialty materials results for the 2024 periods 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.

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Interest and Financing Expenses, Net

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.

Interest and financing expenses were $10.7 million for the second quarter of 2025, $15.9 million for the second quarter of 2024, $21.4 million for the first six months of 2025, and $31.6 million for the first six months of 2024.

The decrease for both the second quarter and six months comparisons resulted primarily from lower average debt outstanding, along with a lower average interest rate.

Other Income (Expense), Net

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.

Other income (expense), net was income of $15.3 million for the second quarter of 2025, $12.0 million for the second quarter of 2024, $30.2 million for the first six months of 2025, and $24.5 million for the first six months of 2024.

The amounts for both the 2025 and 2024 second quarter and six 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 $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 was $36.4 million for the second quarter of 2025 and $31.4 million for the second quarter of 2024.

The effective tax rate was 24.7% for the second quarter of 2025 and 21.9% for the second quarter of 2024.

Income tax expense increased $4.0 million due to the higher effective tax rate and $1.0 million due to higher income before income tax expense.

Income tax expense was $74.6 million for the first six months of 2025 and $61.3 million for the first six months of 2024.

The effective tax rate was 23.9% for the first six months of 2025 and 21.9% for the first six months of 2024.

Income tax expense increased $6.8 million due to higher income before income tax expense and $6.5 million due to the higher effective tax rate.

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

The increase in the tax rate for both periods was primarily driven by income from our foreign operations.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted in the United States.

The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions.

The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027.

We are currently assessing the impact of the OBBBA on our consolidated financial statements.

Cash Flows, Financial Condition, and Liquidity

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.

Cash and cash equivalents at June 30, 2025 were $70.3 million, a decrease of $7.2 million since December 31, 2024.

Cash and cash equivalents held by our foreign subsidiaries amounted to $66.3 million at June 30, 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 three months of 2025 was $120.3 million, including $26.6 million of higher working capital requirements.

Cash provided from operating activities for the first six months of 2025 was $281.4 million, including $0.8 million of higher working capital requirements.

The $0.8 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.

When comparing the June 30, 2025 balances with those at December 31, 2024, the most significant changes in working capital included increases in trade and other accounts receivable and accounts payable.

The increase in trade and other accounts receivable primarily reflects higher sales during the second quarter of 2025 compared to the fourth quarter of 2024.

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

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 $665.7 million at June 30, 2025 and $655.1 million at December 31, 2024.

The current ratio was 2.66 at June 30, 2025 and 2.75 at December 31, 2024.

Cash Flows – Investing Activities

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

Cash used in investing activities totaled $29.3 million during the first six 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%.

This investment 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.

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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.

The project 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 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.

Cash used in financing activities during the first six months of 2025 amounted to $264.2 million.

These cash flows included repurchases of our common stock of $77.2 million, cash dividends of $51.9 million, principal payments of $50.0 million each on the 3.78% senior notes and term loan, and net repayments of $30 million on the revolving credit facility.

Our long-term debt was $841.8 million at June 30, 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 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.

At June 30, 2025, the Leverage Ratio was 1.13 under the revolving credit facility.

At June 30, 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 34.3% at June 30, 2025.

The change resulted from the increase in shareholders' equity along with a net decrease 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 repurchases of shares of our common stock and dividend payments.

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

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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 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.

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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.

At June 30, 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