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Item 7. Management’s Discussion and Analysis

2026-02-12 compared with 2025-02-14 · 137 added, 120 removed, 280 unchanged (48% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) discusses NewMarket's results of operations, general financial condition, and liquidity.

The MD&A should be read in conjunction with Item 1, "Business" and the Consolidated Financial Statements in Item 8, "Financial Statements and Supplementary Data." Specific Note references within this Item are to the Notes to the Consolidated Financial Statements included in Item 8, "Financial Statements and Supplementary Data."

Forward-Looking Statements

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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 market, other trends in the petroleum additives market, our ability to maintain or increase our market share, our future capital expenditure levels, and our future financial results.

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 and our future financial results.

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

When comparing the results of the petroleum additives segment for 2024 with 2023, net sales declined 2.0%, resulting primarily from a decrease in selling prices and a small unfavorable foreign currency impact.

Product shipments were flat.

Petroleum additives operating profit was 15.1% higher when comparing 2024 with 2023, primarily reflecting the favorable impact of lower raw material and operating costs, which were partially offset by the lower selling prices.

The lower operating costs reflect our continued focus on operational efficiency.

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 14 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 2025 with 2024, net sales declined 3.9%, resulting primarily from lower product shipments.

Petroleum additives operating profit decreased 12.1% when comparing the 2025 and 2024 periods, primarily reflecting lower product shipments and selling prices, as well as higher operating costs, which were partially offset by lower raw material costs.

In addition to lower production at our manufacturing plants, the higher operating costs included higher technology investments for research, development and testing during the 2025 period as compared to the 2024 period, as well as one-time charges related to network optimization efforts.

We completed the acquisition of Calca on October 1, 2025 and the acquisition of AMPAC on January 16, 2024, both of which are part of the specialty materials segment.

See Note 2 for further information on the acquisitions.

The 2025 and 2024 periods only include the results of AMPAC and Calca for the periods we owned each company.

The specialty materials segment reported both higher net sales and higher operating profit for 2025 as compared to 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 costs.

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

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

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The discussion and analysis of our results of operations for 2024 compared to 2023 is available in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024.

Our consolidated net sales for 2024 amounted to $2.8 billion, an increase of $88 million, or 3.3%, from 2023.

Our consolidated net sales for 2025 amounted to $2.7 billion, a decrease of $61 million, or 2.2%, from 2024.

No single customer accounted for 10% or more of our total net sales in 2025, 2024, or 2023.

The following table shows net sales by segment and product line for each of the last three years.

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

The net sales in the table below for the specialty materials segment include sales since the acquisitions of Calca on October 1, 2025 and AMPAC on January 16, 2024.

Years Ended December 31,

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In 2025, North America represented approximately 40% of our petroleum additives net sales, while EMEAI contributed approximately 30%, Asia Pacific approximately 20%, and Latin America the remaining amount.

As shown in the table above, lubricant additives net sales and fuel additives net sales compared to total petroleum additives net sales have remained substantially consistent over the past three years.

Petroleum additives net sales for 2024 of $2.6 billion were approximately 2.0% lower than 2023.

The decrease was across all regions.

The North America region represented approximately 35% of the decrease in petroleum additives net sales, EMEAI and Latin America represented approximately 22% each, and the Asia Pacific region represented approximately 21%.

As shown in the table above, the percentage of lubricant additives net sales and fuel additives net sales compared to total petroleum additives net sales have remained substantially consistent over the past three years.

Petroleum additives net sales for 2025 of $2.5 billion were 3.9% lower than 2024.

Decreases in Asia Pacific of 10.3% and North America of 6.2% were partially offset by increases of 2.4% in EMEAI and 0.8% in Latin America.

The approximate components of the petroleum additives decrease in net sales of $102 million when comparing 2025 to 2024 are shown below in millions.

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Fuel additives shipments (13)

Selling prices (51)

Selling prices, including product mix (6)

Foreign currency impact, net 5

Net sales for the year ended December 31, 2025 $ 2,534

When comparing petroleum additives net sales for 2024 with 2023, the primary driver was lower selling prices along with a small unfavorable foreign currency impact.

Lubricant additives shipments were up slightly while fuel additives shipments were lower by the same amount.

When comparing petroleum additives net sales for 2025 with 2024, the primary driver was lower product shipments in both lubricant additives and fuel additives, along with a smaller unfavorable impact from lower selling prices.

On a worldwide basis, when comparing 2025 with 2024, the volume of product shipments for petroleum additives was 4.9% lower with decreases in both lubricant additives and fuel additives but primarily driven by lower lubricant additives shipments.

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

The Asia Pacific and Latin America regions reported increases in fuel additives shipments, which were more than offset by decreases in the North America and EMEAI regions.

Overall, the decrease in product shipments reflects some softness in the market, as well as our strategic decision to examine and reduce low-margin business.

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

Comparing 2024 and 2023, the United States Dollar strengthened against all of the major currencies in which we transact, except for the Pound and Euro, resulting in the unfavorable impact to net sales for the 2024 and 2023 comparison.

The unfavorable impact 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 flat when comparing 2024 with 2023, with a small increase in lubricant additives offset by a decrease in fuel additives shipments.

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

The EMEAI and Latin America regions reported increases in fuel additives shipments, which were more than offset by decreases in the North America and Asia Pacific regions.

Specialty Materials - The specialty materials segment comprises the operations of AMPAC, which operates predominantly in the North America region.

Total net sales were $141 million for the period that we owned AMPAC during 2024.

Comparing 2025 and 2024, the United States Dollar weakened against the Euro, Pound Sterling, and Yen, while it strengthened against the Renminbi and Rupee, all combined resulting in the favorable impact to net sales.

The favorable dollar impact from foreign currency was primarily from the Euro, which was partially offset by the unfavorable impact from the Renminbi and Rupee.

Specialty Materials - The specialty materials segment comprises the operations of AMPAC and Calca, both of which operate predominantly in the North America region.

Total net sales for the specialty materials segment were $182 million for 2025 and $141 million for 2024.

In addition to the inclusion of Calca in 2025 net sales, the increase between 2025 and 2024 resulted primarily from increased shipment volumes.

All Other - The “All other” category includes the operations of the antiknock compounds business, as well as certain contracted manufacturing and related services associated with Ethyl and did not have a material impact to consolidated net sales when comparing 2025 and 2024.

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The following table reports segment operating profit for the last three years.

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

The amounts for the specialty materials segment include operating profit since the acquisitions of Calca on October 1, 2025 and AMPAC on January 16, 2024.

A reconciliation of segment operating profit to income before income tax expense is in Note 5.

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All other $ (5) $ (2) $ (5)

Petroleum Additives - Petroleum additives segment gross profit increased $69 million, and segment operating profit increased $78 million when comparing 2024 to 2023.

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

Petroleum Additives - Petroleum additives segment gross profit decreased $60 million, and segment operating profit decreased $72 million when comparing 2025 to 2024.

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

Years Ended December 31,

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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 2024 and 2023, the increase in both gross profit and operating profit primarily includes the favorable impacts of lower raw material and operating costs, partially offset by lower selling prices.

As shipment volumes were flat between the two years, the impact of shipments on gross profit and operating profit was negligible.

We are maintaining our focus on managing our operating costs, optimizing inventory levels, and enhancing portfolio profitability while continuing our investment in technology to meet our customers' needs.

Petroleum additives selling, general, and administrative expenses (SG&A) increased by $5 million, or 4.2%, in 2024 compared to 2023.

When comparing 2025 and 2024, the decrease in both gross profit and operating profit primarily includes the unfavorable impacts of lower product shipments and selling prices, as well as higher operating costs.

The increased operating costs result primarily from lower production at our manufacturing plants and an increase in technology investments, as well as one-time charges related to our efforts to become more efficient by optimizing our global manufacturing network.

These factors were partially offset by lower raw material costs.

The petroleum additives segment's selling, general, and administrative expenses (SG&A) increased by $5 million, or 3.8%, in 2025 compared to 2024.

SG&A as a percentage of net sales was 5.2% in 2025 and 4.8% in 2024.

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While personnel-related costs fluctuate from year to year, there were no significant changes in the drivers of these costs when comparing 2025 and 2024.

Our investment in petroleum additives research, development, and testing (R&D) decreased approximately $13 million when comparing 2024 with 2023.

Our investment in petroleum additives research, development, and testing (R&D) increased approximately $7 million when comparing 2025 with 2024.

As a percentage of net sales, R&D was 5.2% in 2025 and 4.7% in 2024.

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The remaining R&D is attributable to the Asia Pacific and Latin America regions and represents customer technology support services in those regions.

Our R&D is related to the petroleum additives segment.

Specialty Materials - The specialty materials segment reported operating profit of $17 million for the period from the AMPAC acquisition date of January 16, 2024 to December 31, 2024.

The specialty materials results 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 was sold during 2024, generated no margin.

All of our consolidated R&D investment is related to the petroleum additives segment.

Specialty Materials - The specialty materials segment reported operating profit of $47 million for 2025 as compared to $17 million for 2024.

The 2025 and 2024 periods only included the results of AMPAC and Calca for the period we owned each company - since January 16, 2024 for AMPAC and since October 1, 2025 for Calca.

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.

The remaining increase in specialty materials operating profit for the year comparison resulted from the same factors as those outlined in the net sales discussion.

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.

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Interest and financing expenses were $40 million in 2025 and $57 million in 2024.

The increase in interest and financing expense between 2024 and 2023 resulted primarily from both higher average debt outstanding and a higher average interest rate.

The decrease in interest and financing expense between 2025 and 2024 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 $51 million in 2024 and $43 million in 2023.

The amounts for both periods included the components of net periodic benefit cost (income), except for service costs, from defined benefit pension and postretirement plans.

Other income (expense), net reflected income of $57 million in 2025 and $51 million in 2024.

The amounts for both periods included the components of net periodic benefit cost (income), except for service costs, from defined benefit pension and postretirement plans, which also represent most of the difference between the two years.

See Note 18 for further information on total periodic benefit cost (income).

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The effective tax rate was 25.3% in 2025 and 20.8% in 2024.

When comparing 2024 and 2023, income tax expense increased $20 million due to the higher income before income taxes and $2 million from the slightly higher effective tax rate.

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.

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 during the year ended December 31, 2024 related to the enactment of these rules.

When comparing 2025 and 2024, income tax expense increased $25 million due to the higher effective tax rate and decreased $5 million due to lower income before income taxes.

The increase in the effective tax rate was primarily due to a lower foreign derived intangible income deduction and an increase in U.S.

state tax expense in 2025 as compared to 2024.

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

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, including permanently restoring 100 percent bonus depreciation for qualifying property and reinstating the ability for entities to immediately expense domestic research and development expenditures.

These provisions will favorably impact our U.S.

federal cash taxes.

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

We are continuing to assess the impact of the provisions of the OBBBA that are effective in future years.

CASH FLOWS DISCUSSION

We generated cash from operating activities of $569 million in 2025 and $520 million in 2024.

During 2025, we used the $569 million of cash generated from operating activities to acquire Calca for $213 million (net of $6 million cash acquired), pay dividends of $106 million, fund capital expenditures of $78 million, and repurchase shares of our common stock for $77 million.

We also paid off the $250 million term loan and made a principal payment of $50 million on the 3.78% senior notes.

These payments were partially offset by additional net borrowings of $211 million on the revolving credit facility.

Cash flows from operating activities included an increase of $22 million from lower working capital requirements, which is further discussed in the Working Capital section below, and a decrease of $10 million for cash contributions to our pension and postretirement plans.

During 2024, we used the $520 million of cash generated from operating activities, along with proceeds from the term loan and net borrowings of $77 million on the revolving credit facility to acquire AMPAC for $681 million (net of $16 million cash acquired), pay dividends of $96 million, fund capital expenditures of $57 million, and repurchase shares of our common stock for $32 million.

Cash flows from operating activities included a decrease of $23 million from higher working capital requirements, which is further discussed in the Working Capital section below, and a decrease of $12 million for cash contributions to our pension and postretirement plans.

During 2023, we used the $577 million of cash generated from operating activities to make net payments of $361 million on our revolving credit facility, pay dividends of $85 million, fund capital expenditures of $48 million, and repurchase shares of our common stock for $43 million.

Cash flows from operating activities included an increase of $134 million from lower working capital requirements and a decrease of $10 million for cash contributions to our pension and postretirement plans.

Cash flows from operating activities included a decrease of $23 million from higher working capital requirements and a decrease of $12 million for cash contributions to our pension and postretirement plans.

FINANCIAL POSITION AND LIQUIDITY

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These notes bear interest at 3.78% with interest payable semiannually.

We made the first principal payment of $50 million on January 4, 2025 and have four remaining principal payments of $50 million due January 4 of each year through 2029.

We have made two principal payments of $50 million each on January 4, 2025 and January 5, 2026.

We have three remaining principal payments of $50 million due January 4 of each year through 2029.

We have the right to make optional prepayments on the notes at any time, subject to certain limitations.

We were in compliance with all covenants under the 3.78% senior notes as of December 31, 2025 and December 31, 2024.

Term Loan - On January 22, 2024, we entered into a credit agreement for an unsecured $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.

We are 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, without penalty, 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 us.

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).

At December 31, 2024, the Leverage Ratio was 1.33.

We were in compliance with all covenants under the term loan as of December 31, 2024.

Term Loan - On January 22, 2024, we entered into a credit agreement for an unsecured $250 million term loan (the Term Loan Credit Agreement), which had a maturity date of 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 were amortized over the term that principal was outstanding under the agreement.

Under the agreement, we were required to repay the principal amount borrowed under the term loan in full at maturity.

Subject to the conditions set forth in the Term Loan Credit Agreement, we had the option to prepay, without penalty, amounts borrowed under the term loan, together with any accrued and unpaid interest, prior to maturity.

Any amounts prepaid prior to maturity were not available for additional borrowings by us.

We repaid the Term Loan Credit Agreement in full during 2025.

The Term Loan Credit Agreement contained certain customary covenants, including financial covenants, which required 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 at the time we repaid it in 2025 and as of December 31, 2024.

Revolving Credit Facilit y - On January 22, 2024, we entered into a credit agreement for a $900 million revolving credit facility (the Revolving Credit Agreement).

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Upon termination, we repaid the amount then outstanding under the former revolving credit facility, plus accrued and unpaid interest.

Outstanding borrowings under the revolving credit facility amounted to $77 million at December 31, 2024.

There were no outstanding borrowings under the former revolving credit facility at December 31, 2023.

Outstanding letters of credit under the applicable revolving credit facility amounted to approximately $4 million at December 31, 2024 and $2 million at December 31, 2023.

The unused portion of the applicable revolving credit facility amounted to $819 million at December 31, 2024 and $898 million at December 31, 2023.

The average interest rate for borrowings under the applicable credit facility was 6.5% during 2024 and 6.2% during 2023.

Outstanding borrowings under the revolving credit facility amounted to $288 million at December 31, 2025 and $77 million at December 31, 2024.

Outstanding letters of credit under the revolving credit facility amounted to approximately $4 million at both December 31, 2025 and December 31, 2024.

The unused portion of the revolving credit facility amounted to $608 million at December 31, 2025 and $819 million at December 31, 2024.

The average interest rate for borrowings under the revolving credit facility was 5.3% during 2025 and 6.5% during 2024.

The Revolving Credit Agreement contains certain customary covenants, including financial covenants, which require us 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).

At December 31, 2024, the Leverage Ratio was 1.33.

We were in compliance with all covenants under the applicable revolving credit facility as of December 31, 2024 and December 31, 2023.

The Leverage Ratio was 1.27 at December 31, 2025 and 1.33 at December 31, 2024.

We were in compliance with all covenants under the revolving credit facility as of December 31, 2025 and December 31, 2024.

Other Borrowings - Two of our subsidiaries, one in Singapore and one China, have access to separate short-term lines of credit of $10 million each.

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We had long-term debt of $883 million at December 31, 2025 and $971 million at December 31, 2024.

As a percentage of total capitalization (total long-term debt and shareholders’ equity), our total long-term debt percentage increased from 37.4% at the end of 2023 to 39.9% at the end of 2024.

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

The increase in shareholders' equity primarily reflects our earnings and an increase in the funded position of our retirement plans, partially offset by dividend payments, repurchases of shares of our common stock, and an unfavorable change in the impact from foreign currency translation adjustments.

As a percentage of total capitalization (total long-term debt and shareholders’ equity), our total long-term debt percentage decreased from 39.9% at the end of 2024 to 33.2% at the end of 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, favorable impact from foreign currency translation adjustments, and an increase in the funded position of our retirement plans 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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Our working capital at December 31, 2024 on the same basis was $655 million, resulting in a current ratio of 2.75 to 1.

The working capital of AMPAC is included in our consolidated balance sheet at December 31, 2024.

Other than the impact of AMPAC working capital, the most significant change in working capital since December 31, 2023 included a decrease in trade and other accounts receivable offset by an increase in inventories.

In addition to these items, cash and cash equivalents decreased as outlined in the cash flows discussion above.

The decrease in trade and other accounts receivable primarily represents lower sales levels along with the collection of value added taxes at one of our foreign subsidiaries.

The increase in inventories reflects planned increased production to allow for normal maintenance outages and changes in production units as compared to our planned inventory rationalization that took place in 2023.

The working capital of Calca is included in our consolidated balance sheet at December 31, 2025.

Excluding the impact of Calca working capital, the most significant change in working capital since December 31, 2024 included increases in both trade and other accounts receivable and accrued expenses.

The increase in trade and other accounts receivable primarily represents a short-term income tax receivable as a result of the enactment of the OBBBA in July 2025.

The OBBBA provided for immediate expensing of domestic research and development expenditures and 100 percent bonus depreciation on qualifying property, with retroactive application to January 2025.

The increase in accrued expenses is primarily the result of customer contract liabilities.

Capital Expenditures

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We estimate capital expenditures in 2026 will be in the range of $100 million to $150 million as we anticipate spending on several improvements to our manufacturing and R&D infrastructure around the world.

Included in the expected capital expenditures for 2026 is a capital investment to expand AMPAC's ammonium perchlorate production capabilities in support of growing solid rocket motor demand.

The project of up to $100 million, which began in 2025, is currently scheduled to be completed towards the end of 2026 and includes the construction of an additional production line, increasing capacity by more than 50%.

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

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

allies in these critical areas.

We expect to continue to finance capital spending through cash provided from operations, as well as with borrowing available under our revolving credit facility.

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We spent approximately $44 million in 2025 and $37 million in 2024 for ongoing environmental operating and clean-up costs, excluding depreciation of previously capitalized expenditures.

These environmental operating and clean-up expenses are included in cost of goods sold.

These environmental operating and clean-up expenses are primarily included in cost of goods sold.

We expect to continue to fund these costs through cash provided by operations.

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The maturity dates and interest rates, as well as information on the repayment of the principal on our long-term debt is detailed above in the Debt section, as well as in Note 14.

At December 31, 2024, all of our long-term debt was at fixed rates, except for the revolving credit facility and the term loan agreement.

At December 31, 2025, all of our long-term debt was at fixed rates, except for the revolving credit facility.

A discussion of interest rate sensitivity is in Item 7A.

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In addition to these costs, there are expected cash flows for dismantling and decontamination of environmental sites.

At December 31, 2024, these costs were estimated at approximately $1 million in each of 2025 through 2029 and $9 million thereafter.

At December 31, 2025, these costs were estimated at approximately $1.0 million to $1.5 million in each of 2026 through 2029 and $9 million thereafter.

We expect that cash from operations, together with borrowing available under our credit facilities, will continue to be sufficient for our operating needs and planned capital expenditures for both a short-term and long-term horizon.

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Pension and Postretirement Benefit Plans —The average remaining service period of active participants for our U.S.

plans is 13.1 years, while the average remaining life expectancy of inactive participants is 22.3 years.

plans is approximately 13 years, while the average remaining life expectancy of inactive participants is approximately 22 years.

We utilize the sex distinct Pri-2012 table with separate rates for annuitants, non-annuitants, and contingent annuitants, projected generationally using Scale MP-2021 in determining the impact of mortality on the U.S.

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Investment gains and losses are recognized in earnings on an amortized basis over a period of 5 years.

The amortization of the actuarial net gain is expected to be approximately $4 million in 2025 resulting primarily from the actuarial gain related to the investment gains on plan assets and the actuarial gains associated with the increase in the discount rate.

We expect that there will be continued volatility in net periodic benefit cost (income) for our pension plans as actual investment returns vary from the expected return, but we continue to believe the potential long-term benefits justify the risk premium for equity investments.

The amortization of the actuarial net gain is expected to be approximately $5 million in 2026 resulting primarily from the actuarial gain related to the investment gains on plan assets.

We expect that there will be continued volatility in net periodic benefit cost

(income) for our pension plans as actual investment returns vary from the expected return, but we continue to believe the potential long-term benefits justify the risk premium for equity investments.

At December 31, 2025, our expected long-term rate of return on our postretirement plans was 4.0%.

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We expect to have net periodic benefit income for our pension and postretirement plans during 2026, as the expected return on assets and amortization is higher than the offsetting benefit costs.

Net periodic benefit cost (income) for the pension and the life insurance portion of postretirement plans are sensitive to changes in the expected return on assets.

Net periodic benefit cost (income) for the pension and the life insurance portion of postretirement plans is sensitive to changes in the expected return on assets.

For example, decreasing the expected rate of return by 100 basis points to 7.0% for pension assets and 3.0% for postretirement benefit assets (while holding other assumptions constant) would reduce the forecasted 2026 income for our U.S.

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Similarly, a 100 basis point increase in the expected rate of return to 9.0% for pension assets and 5.0% for postretirement benefit assets (while holding other assumptions constant) would increase forecasted 2026 pension and postretirement income by $8 million.

Discount Rate Assumption - We develop the discount rate assumption by determining the single effective discount rate for a unique hypothetical portfolio constructed from investment-grade bonds that, in the aggregate, match the projected cash flows of each of our retirement plans.

The discount rate is developed based on the hypothetical portfolio on the last day of December.

Discount Rate Assumption - We develop the discount rate assumption by determining the single effective discount rate for a unique hypothetical bond portfolio constructed from investment-grade bonds that, in the aggregate, match the projected cash flows of each of our retirement plans.

The discount rate is developed based on the hypothetical bond portfolio on the last day of December.

The discount rate at December 31, 2025 was 5.875% for all plans.

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While we do not expect to make a cash contribution to our U.S.

qualified pension plans, we expect our aggregate cash contributions to the U.S.

qualified pension plans, we expect our aggregate cash contributions to all U.S.

pension plans will be approximately $4 million in 2026.

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In determining the impact of mortality on the U.K.

pension plan in our financial statements, we utilize the S3PxA mortality tables weighted by 92% for males and 100% for females and allow for future projected improvements in life expectancy in line with the CMI 2023 model with the core smoothing parameter, an initial addition to mortality improvements of 0.3% per year, and an experience weighting of 0% on both 2020 and 2021 data and 20% on both 2022 and 2023 data, with a long-term rate of improvement of 1.65% per year for males and 1.15% per year for females based on the membership of the plan.

pension plan in our financial statements, we utilize the S4PxA mortality tables weighted by 99% for male members and 88% for female members and S4DxA mortality tables weighted by 106% for male dependents and 107% for female dependents.

Future projected improvements in life expectancy are allowed for in line with the CMI 2024 model with an initial addition to mortality improvements of 0.2% and a half-life parameter of 1 year with a long-term rate of improvement of 1.65% per year for males and 1.25% per year for females based on the membership of the plan.

Investment Return Assumptions and Asset Allocation - We periodically review our assumptions for the long-term expected return on the U.K.

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is 40% in pooled equities funds, 40% in pooled government bonds, and 20% in pooled diversified growth funds.

The actual allocation at the end of 2024 was 51% in pooled equities funds, 27% in pooled government bonds, 21% in pooled diversified growth funds, and 1% in cash.

The actual allocation at the end of 2025 was 53% in pooled equities funds, 25% in pooled government bonds, and 22% in pooled diversified growth funds.

Based on the actual asset allocation and the expected yields available in the U.K.

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An actuarial gain on the assets occurred during both 2025 and 2024 as the actual investment return exceeded the expected investment return by approximately $6 million in 2025 and $1 million in 2024.

An actuarial gain of $16 million occurred during 2024 and an actuarial loss of $3 million occurred during 2023 on plan liabilities primarily due to changes in the assumptions.

Actuarial gains of $6 million occurred during 2025 and $16 million during 2024 on plan liabilities primarily due to changes in the assumptions.

Investment and liability gains and losses are recognized in earnings on an amortized basis over a period of years.

The combined gains result in an expected amortization of net gain of $0.8 million in 2025.

The combined net gains result in an expected amortization of $1 million in 2026.

We expect that there will be continued volatility in the net periodic benefit cost (income) for our U.K.

pension plan as actual

investment returns vary from the expected return, but we continue to believe the potential benefits justify the risk premium for the target asset allocation.

pension plan as actual investment returns vary from the expected return, but we continue to believe the potential benefits justify the risk premium for the target asset allocation.

We expect to have pension income during 2026 related to our U.K.

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Liquidity - Cash contribution requirements to the U.K.

pension plan are sensitive to changes in assumed interest rates and investment gains or losses.

pension plan are assessed every three years by a formal actuarial valuation, which will be completed in 2026.

Contributions are sensitive to the assumptions adopted and market conditions at each assessment date.

We expect our aggregate U.K.

cash contributions will be approximately $3 million in 2026.

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.

We believe the fundamentals of how we run our business - a long-term view, safety-first culture, customer-focused solutions, technology-driven product offerings, and world-class supply chain capability - will continue to be beneficial for all of our stakeholders over the long term.

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

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%.

We plan to exceed that growth rate in our petroleum additives segment.

We expect our petroleum additives segment will continue to experience impacts to its operating performance during 2026 due to market softness and the uncertain global economic environment in which we operate.

Nonetheless, we anticipate continued solid results from this segment in 2026.

We will continue to focus on investing in technology for our customers, cost control, and operating profit margin management, while advancing our initiatives to build a global manufacturing network that will enable more efficient product delivery to our customers in the years ahead.

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, focused on operational efficiencies, organizational talent, technology development and processes, as well as global infrastructure, including technical centers, production capabilities, 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.

In addition to the ongoing investments we make in our petroleum additives business, we have, since 2024, completed the acquisition of two companies - AMPAC and Calca - which constitute our specialty materials segment.

Through these

acquisitions and our investments in expanding capacity at both operations, we have committed approximately $1 billion to this resilient, high-technology segment.

We continue to focus on the integration of these companies into our business, and we anticipate solid results from both companies.

We may experience substantial variation in quarterly results for the specialty materials segment on an ongoing basis due to the nature of the business, including any impact from shutdowns of the U.S.

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 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 recent acquisitions of AMPAC and Calca were outside of our core petroleum additives business, we believe both 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.

It is our view that the petroleum additives industry will provide the greatest opportunity for solid returns on our investments while minimizing risk.

We remain focused on this strategy and will

evaluate any future opportunities.

We remain focused on this strategy and will evaluate any future opportunities.

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

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Significant judgment is required in determining our worldwide provision for income taxes and recording the related tax assets and liabilities.

Any significant impact as a result of changes in underlying facts, law, tax rates, or tax audits could lead to adjustments to our income tax expense, effective tax rate, financial position, or cash flow.

Any significant impact as a result of changes in underlying facts, laws, tax rates, or tax audits could lead to adjustments to our income tax expense, effective tax rate, financial position, or cash flow.

Deferred income taxes are provided for the estimated income tax effect of temporary differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities, as well as for net operating losses and tax credit carryforwards.

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Intangibles (net of amortization) and Goodwill

We have certain identifiable intangibles amounting to $371 million and goodwill amounting to $379 million at December 31, 2024 that are discussed in Note 11.

We have certain intangibles amounting to $517 million and goodwill amounting to $424 million at December 31, 2025 that are discussed in Note 11.

Of these intangibles and goodwill, $124 million is attributable to the petroleum additives segment and $817 million to the specialty materials segment.

The identifiable intangibles are being amortized over periods with up to approximately 17 years of remaining life.

The water rights are indefinite-lived and non-amortizing.

We estimate fair value for these identifiable intangibles using an income valuation approach for customer bases, formulas and technology, and trademarks and trade names.

The cash flow projections included significant judgments and assumptions relating to revenue growth rates;

The finite-lived intangible assets are being amortized over remaining useful lives up to approximately 20 years.

Water rights are indefinite-lived and non-amortizing.

We estimate fair value for these identifiable intangibles using an income valuation approach for customer bases, backlog, formulas and technology, and trademarks and trade names.

The cash flow projections include significant judgments and assumptions relating to revenue growth rates;

earnings before interest, taxes, depreciation, and amortization;

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contributory asset charges;

and customer attrition rate for customer bases and revenue growth rates;

royalty rates;

and discount rate for formulas and technology and trademarks and trade names.

We use a market valuation approach for estimating water rights and our significant judgements and assumptions included comparable sales data.

We continue to assess the market 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.

customer attrition rate;

and royalty rates, as applicable.

We use a market valuation approach for estimating water rights and our significant judgments and assumptions included comparable sales data.

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 material 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.

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 or write-off of the intangibles would have no effect on cash flows.

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A change in any of these assumptions could cause different results for the plans and therefore, impact our results of operations, cash flows, and financial condition.

We develop these assumptions after considering available information that we deem relevant.

Information is provided on the pension and postretirement plans in Note 18.

In addition, further disclosure of the effect of changes in these assumptions is provided in the Financial Position and Liquidity section of Item 7.

Further discussion on how we develop these assumptions and the effect of changes in these assumptions on our financial results is provided in the Financial Position and Liquidity section of Item 7.

In addition, information is provided on the pension and postretirement plans in Note 18.

Environmental and Legal Proceedings

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Also, as noted in the discussion of Legal Proceedings in Item 3 of this Annual Report on Form 10-K, while it is not possible to predict or determine with certainty the outcome of any legal proceeding, it is our opinion, based on our current knowledge, that we will not experience any material adverse effects on our results of operations, cash flows, or financial condition as a result of any pending or threatened proceeding.

RECENTLY ISSUED ACCOUNTING STANDARDS

For a full discussion of the more significant recently issued accounting standards, see Note 23.

RECENT ACCOUNTING PRONOUNCEMENTS

For a discussion of recently issued accounting standards, see Note 23.

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-K

Item 7. Management’s Discussion and Analysis