What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-04-23 compared with 2025-10-31 · 93 added, 107 removed, 122 unchanged (62% 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" of our 2025 Annual Report and the Consolidated Financial Statements in Item 1, "Financial Statements" of this Form 10-Q.

Specific Note references within this Item are to the Notes to the Condensed Consolidated Financial Statements included in Item 1, "Financial Statements" of this Form 10-Q.

Forward-Looking Statements

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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 2025 with the first nine months of 2024, net sales declined 3.1%, resulting primarily from lower product shipments, which were partially offset by favorable product mix.

Petroleum additives operating profit decreased 9.4% when comparing the 2025 and 2024 nine 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 nine months comparisons due to 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.

The specialty materials segment reported both higher net sales and higher operating profit for the first nine 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 nine 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.

When comparing the results of the petroleum additives segment for the first three months of 2026 with the first three months of 2025, net sales declined 5.5%, resulting primarily from lower lubricant additives product shipments.

Operating profit declined 5.0% and was also unfavorably impacted for the three months comparison by lower product shipments.

In addition, favorable raw material costs were partially offset by higher operating costs.

For the three months comparison periods of 2026 and 2025, the specialty materials segment reported higher net sales due to the acquisition of Calca in the fourth quarter of 2025, but lower operating profit primarily due to the impact of product shipment mix at AMPAC.

Specialty materials net sales and operating profit for the first three months of 2025 do not reflect financial results of Calca since the acquisition of Calca occurred on October 1, 2025.

We continue to monitor the uncertain macroeconomic environment in which we operate, particularly the changes in international trade relations and tariffs, as well as the impact of the conflict in the Middle East, and assess the potential impacts to our operations.

These impacts could include supply chain disruptions, customer demand fluctuations, 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.

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

We have sufficient access to capital, if needed, and do not anticipate any issues with meeting the covenants for all our debt agreements for the foreseeable future.

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Results of Operations

Consolidated net sales for the third quarter of 2025 totaled $690.3 million, representing a decrease of $34.6 million, or 4.8%, from the third quarter of 2024.

Consolidated net sales for the first nine months of 2025 totaled $2.1 billion, representing a decrease of $42.1 million, or 2.0%, from the first nine months of 2024.

Consolidated net sales for the first three months of 2026 totaled $669.7 million, representing a decrease of $31.2 million, or 4.5%, from the first three months of 2025.

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

The net sales for the nine months 2024 period 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 in the table below for the specialty materials segment do not include sales from Calca for the 2025 period as the acquisition occurred on October 1, 2025.

Three Months Ended March 31,

(in millions) 2026 2025

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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 2025 with both the same period in 2024, as well as with the full year of 2024.

Petroleum additives net sales for the third quarter of 2025 were $649.1 million compared to $663.0 million for the third quarter of 2024, a decrease of 2.1%.

Decreases in Asia Pacific of 6.6% and North America of 5.2% were partially offset by an increase of 4.6% in EMEAI.

Latin America was substantially unchanged when comparing the two periods.

Petroleum additives net sales for the first nine months of 2025 were $1.9 billion, a decrease of $61.6 million, or 3.1%, compared to the first nine months of 2024.

Decreases in Asia Pacific of 9.1% and North America of 3.7% were partially offset by increases in EMEAI of 1.0% and Latin America of 0.5%.

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

(in millions) Third Quarter Nine Months

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

While there is some fluctuation, the percentage of net sales generated by region remained fairly consistent when comparing the first three months of 2026 with both the same period in 2025 and the full year of 2025.

Petroleum additives net sales for the first three months of 2026 were $609.8 million, a decrease of $35.7 million, or 5.5%, compared to the first three months of 2025.

Decreases in North America of 10.7% and Asia Pacific of 9.4% were partially offset by increases in EMEAI of 1.7% and Latin America of 0.7%.

The following table details the approximate components of the changes in petroleum additives net sales between the first three months of 2026 and 2025.

(in millions) Three Months

Period ended March 31, 2025 $ 645.5

Lubricant additives shipments (38.9)

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Foreign currency impact, net 10.0

Period ended September 30, 2025 $ 649.1 $ 1,948.5

When comparing the third quarters of 2025 and 2024, lower lubricant additives shipments drove the decrease in petroleum additives net sales, partially offset by an increase in fuel additives shipments.

Selling prices for the third quarter comparison had a net unfavorable impact resulting primarily from an unfavorable product mix.

When comparing the first nine months of 2025 and 2024, the decrease in petroleum additives net sales was due to lower product shipments in both lubricant additives and fuel additives.

Partially offsetting these factors for the nine months comparison was favorable product mix.

Period ended March 31, 2026 $ 609.8

When comparing the first three months of 2026 and 2025, lower lubricant additives shipments, partially offset by an increase in fuel additives shipments, resulted in the decrease in petroleum additives net sales.

Including the impact of foreign currency, selling prices were effectively unchanged between the comparison periods.

On a worldwide basis, the volume of product shipments for petroleum additives decreased 6.9% in the first three months of 2026 compared with the same period in 2025, reflecting lower lubricant additives shipments partially offset by a modest increase in fuel additives shipments.

For the first three months comparison, lubricant additives product shipments were lower across all regions except for the Latin America region, which was substantially unchanged.

For the fuel additives first three

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

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

Comparing both the third quarter and nine months periods 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 favorable impacts to net sales shown in the table above.

On a worldwide basis, the volume of product shipments for petroleum additives decreased 4.1% when comparing the third quarter periods and 4.6% when comparing the nine months periods.

For the third 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, along with a small decrease in the Latin America region.

The EMEAI region reported a small increase in lubricant additives shipments.

For the fuel additives third quarter comparison, the EMEAI, Latin America, and North America regions reported small increases in product shipments, while the Asia Pacific region was substantially unchanged.

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

For the fuel additives nine 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.

Comparing the first three months periods of 2026 and 2025, the United States Dollar strengthened against the Rupee and Yen and weakened against the Euro, Renminbi, and Pound Sterling, resulting in the favorable impacts to net sales shown in the table above.

Specialty Materials Segment

Total net sales for the specialty materials segment were $38.2 million for the third quarter of 2025 and $59.1 for the third quarter of 2024.

For the nine months comparison, net sales were $134.0 million for 2025 and $114.2 million for the period that we owned AMPAC during 2024.

The decrease in the third quarter comparison was primarily the result of timing of shipments when comparing the 2025 and 2024 periods, while the increase in net sales for the nine months comparison 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.

Total net sales for the specialty materials segment were $58.1 million for the first three months of 2026, compared to $53.7 for the first three months of 2025.

The increase in net sales primarily reflects the inclusion of Calca's net sales following its acquisition on October 1, 2025, as there were no Calca net sales in the prior year period.

This increase was partially offset by the impact of product shipment mix at AMPAC.

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

Segment Operating Profit

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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, 2025 and September 30, 2024.

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

The following table presents reporting segment operating profit for the three months ended March 31, 2026 and March 31, 2025 for the petroleum additives and specialty materials segments, as well as the operating loss for the "All other" businesses.

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

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

Three Months Ended March 31,

(in millions) 2026 2025

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Petroleum Additives Segment

Petroleum additives segment gross profit decreased $21.9 million and operating profit decreased $26.2 million when comparing the third quarter of 2025 to the third quarter of 2024.

For the first nine months of 2025 compared to the first nine months of 2024, petroleum additives segment gross profit decreased $31.3 million and operating profit decreased $43.0 million.

The decrease in both gross profit and operating profit for the third quarter comparison included the unfavorable impacts of higher operating costs, product mix, and lower product shipments, reflecting some softening in the market, as well as our portfolio profitability management and one-time charges related to network optimization efforts.

These were partially offset by lower raw materials costs.

For the nine months comparison, the drivers of the decrease in gross profit and operating profit were consistent with those of the third quarter comparison with the exception of a favorable product mix for the nine months comparison.

Operating profit for both the third quarter and nine months comparison periods was also unfavorably impacted by higher technology investments for research, development and testing.

Petroleum additives segment gross profit decreased $7.4 million and operating profit decreased $7.1 million when comparing the first three months of 2026 to the first three months of 2025.

The decrease in both gross profit and operating profit primarily included the unfavorable impacts of lower product shipments, reflecting some softening in the market, as well as our portfolio profitability management efforts.

In addition, favorable raw material costs were partially offset by higher operating 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,

2025 2024 2025 2024

Three Months Ended March 31,

Cost of goods sold as a percentage of net sales 67.1 % 67.8 %

Operating profit margin 22.1 % 22.0 %

For the rolling four quarters ended September 30, 2025, the operating profit margin for petroleum additives was 21.3%, which is within our historical range of operating profit margin.

For the rolling four quarters ended March 31, 2026, the operating profit margin for petroleum additives was 20.5%, 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 third quarter of 2025 were $1.4 million higher than the third quarter of 2024 and $3.2 million higher for the first nine months of 2025 than the first nine months of 2024.

SG&A expenses as a percentage of net sales were 5.1% for both the third quarter and nine months of 2025 and 4.8% for both the third quarter and nine months of 2024.

Petroleum additives selling, general, and administrative (SG&A) expenses for the first three months of 2026 were $1.2 million higher than the first three months of 2025.

SG&A expenses as a percentage of net sales were 5.5% for the first three months of

2026 and 5.0% for the first three months of 2025.

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 investments in petroleum additives research, development, and testing (R&D) increased $2.8 million when comparing the third quarters of 2025 and 2024 and $8.5 million when comparing the first nine months periods of 2025 and 2024.

As a percentage of net sales, our R&D investment was 5.4% for the third quarter of 2025, 4.9% for the third quarter of 2024, 5.2% for the first nine months of 2025, and 4.6% for the first nine months of 2024.

Our investments in petroleum additives research, development, and testing (R&D) decreased $1.5 million when comparing the first three months of 2026 and 2025.

As a percentage of net sales, our R&D investment was 5.2% for the first three months of 2026, and 5.1% for the first three months of 2025.

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.

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Specialty Materials Segment

The specialty materials segment reported operating profit of $6.0 million for the third quarter of 2025 as compared to $16.0 million for the third quarter of 2024.

For the first nine months of 2025, operating profit was $39.7 million as compared to operating profit of $16.0 million for the period from the AMPAC acquisition date of January 16, 2024 to September 30, 2024.

The decrease in specialty materials operating profit for the third quarter comparison was primarily the result of timing of shipments, while the increase in specialty materials operating profit for the nine months comparison 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.

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 specialty materials segment reported operating profit of $12.4 million for the first three months of 2026 as compared to $23.2 million for the first three months of 2025.

The decrease in specialty materials operating profit was primarily the result of a shift in quarterly product shipment mix at AMPAC.

The 2025 period excludes Calca's results as the acquisition was completed on October 1, 2025.

We may experience substantial variation in quarterly results for the specialty materials segment 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 $8.4 million for the third quarter of 2025, $14.2 million for the third quarter of 2024, $29.8 million for the first nine months of 2025, and $45.7 million for the first nine months of 2024.

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

Interest and financing expenses were $8.8 million for the first three months of 2026 and $10.7 million for the first three months of 2025.

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 $13.3 million for the third quarter of 2025, $13.8 million for the third quarter of 2024, $43.5 million for the first nine months of 2025, and $38.3 million for the first nine months of 2024.

The amounts for both the 2025 and 2024 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 $17.2 million for the first three months of 2026 and $14.9 million for the first three months of 2025.

The amounts for both the 2026 and 2025 three-month periods primarily reflect the non-service cost components of net periodic benefit cost (income) 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 $35.3 million for the third quarter of 2025 and $36.8 million for the third quarter of 2024.

The effective tax rate was 26.1% for the third quarter of 2025 and 21.8% for the third quarter of 2024.

Income tax expense decreased $7.3 million due to lower income, which was partially offset by an increase of $5.8 million resulting from the higher effective tax rate.

Income tax expense was $109.9 million for the first nine months of 2025 and $98.2 million for the first nine months of 2024.

The effective tax rate was 24.6% for the first nine months of 2025 and 21.8% for the first nine months of 2024.

Income tax expense increased $12.3 million due to the higher effective tax rate, which was slightly offset by lower income.

The increase in the tax rate for both periods was primarily driven by changes in estimates related to prior year taxes and income and withholding taxes on our foreign earnings.

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

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

The 2025 impacts of the OBBBA have been recorded in the income tax provision for the third quarter and nine months ended September 30, 2025.

These impacts were not material.

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

Income tax expense was $33.6 million for the first three months of 2026 and $38.2 million for the first three months of 2025.

The effective tax rate was 22.2% for the first three months of 2026 and 23.3% for the first three months of 2025.

Income tax expense decreased $2.9 million due to lower income and $1.7 million resulting from the lower effective tax rate.

The decrease in the effective tax rate was primarily driven by lower taxes on foreign earnings.

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% bonus depreciation for qualifying property and reinstating the ability for entities to immediately expense domestic research and development expenditures.

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

The 2026 impacts of the OBBBA have been reflected in the income tax provision for the three months ended March 31, 2026.

These impacts were not material to our consolidated financial statements.

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

Cash Flows, Financial Condition, and Liquidity

Cash and cash equivalents at September 30, 2025 were $102.5 million, an increase of $25.0 million since December 31, 2024.

Cash and cash equivalents held by our foreign subsidiaries amounted to $96.2 million at September 30, 2025 and $71.3 million at December 31, 2024.

Cash and cash equivalents at March 31, 2026 were $73.2 million, a decrease of $4.4 million since December 31, 2025.

Cash and cash equivalents held by our foreign subsidiaries amounted to $54.3 million at March 31, 2026 and $68.3 million at December 31, 2025.

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

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A portion of our foreign cash balances is associated with earnings that we have asserted are indefinitely reinvested.

We plan to use these indefinitely reinvested earnings to support growth outside of the United States through funding of operating expenses, research and development expenses, capital expenditures, and other cash needs of our foreign subsidiaries.

We plan to use these indefinitely reinvested earnings to support growth outside of the United States through funding of operating expenses, R&D expenses, capital expenditures, and other cash needs of our foreign subsidiaries.

We expect that cash from operations, together with borrowing available under our revolving credit facility, will continue to be sufficient to cover our operating needs including planned short-term and long-term capital expenditures.

Cash Flows – Operating Activities

Cash provided from operating activities for the first nine months of 2025 was $423.8 million, including $4.5 million of lower working capital requirements.

The $4.5 million excluded an unfavorable foreign currency impact to the components of working capital on the balance sheet.

When comparing the September 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 third quarter of 2025 compared to the fourth quarter of 2024.

The increase in accounts payable is primarily the result of increased purchases during the third 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 $690.7 million at September 30, 2025 and $655.1 million at December 31, 2024.

The current ratio was 2.68 at September 30, 2025 and 2.75 at December 31, 2024.

Cash provided from operating activities for the first three months of 2026 was $124.0 million, including $19.6 million of higher working capital requirements.

The $19.6 million excluded a favorable foreign currency impact to the components of working capital on the balance sheet.

When comparing the March 31, 2026 balances with those at December 31, 2025, the most significant changes in working capital included increases in trade and other accounts receivable and accounts payable, along with a decrease in accrued expenses.

The increase in trade and other accounts receivable primarily reflects higher sales during the first quarter of 2026 compared to the fourth quarter of 2025, partially offset by a reduction in a short-term income tax receivable.

The increase in accounts payable is primarily the result of increased purchasing during the first three months of 2026 and normal invoice payment timing.

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 $647.5 million at March 31, 2026 and $640.4 million at December 31, 2025.

The current ratio was 2.55 at March 31, 2026 and 2.53 at December 31, 2025.

Cash Flows – Investing Activities

Cash used in investing activities totaled $49.6 million during the first nine months of 2025, comprised of capital expenditures.

Cash used in investing activities totaled $23.2 million during the first three months of 2026, comprised primarily of capital expenditures.

We expect that our total capital spending during 2026 will be in the $100 million to $150 million range and will include 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 is currently scheduled to be completed during 2026 and includes the construction of an additional production line, increasing capacity by more than 50%.

The project of up to $100 million, which began in 2025 and is currently expected to be completed towards the end of 2026, 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.

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Cash Flows – Financing Activities

Cash used in financing activities during the first nine months of 2025 amounted to $350.1 million.

These cash flows included principal payments of $150.0 million on the term loan and $50 million on the 3.78% senior notes, cash dividends of $77.7 million, and repurchases of our common stock of $77.2 million, which were partially offset by net borrowings of $11.0 million on the revolving credit facility.

Our long-term debt was $783.1 million at September 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.

All of our senior notes, the term loan, and the revolving credit facility contain covenants, representations, and events of default that management considers typical of credit arrangements of this nature.

The covenants under the 3.78% senior notes, as well as the term loan, include negative covenants, certain financial covenants, and events of default which are substantially similar to the covenants and events of default in our revolving credit facility.

Cash used in financing activities during the first three months of 2026 amounted to $100.9 million.

These cash flows included repurchases of our common stock of $125.6 million, principal payments of $50.0 million on the 3.78% senior notes, and cash dividends of $28.0 million, which were partially offset by net borrowings of $106.0 million on the revolving credit facility.

Our long-term debt was $939.6 million at March 31, 2026 compared to $883.4 million at December 31, 2025.

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

Our senior notes and the revolving credit facility contain covenants, representations, and events of default that management considers typical of credit arrangements of this nature.

The covenants under the 3.78% senior notes include negative covenants, certain financial covenants, and events of default which are substantially similar to the covenants and events of default in our revolving credit facility.

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, 2025, the Leverage Ratio was 1.10 under the revolving credit facility.

At September 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 31.7% at September 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.

At March 31, 2026, the Leverage Ratio was 1.36 under the revolving credit facility.

At March 31, 2026, we were in compliance with all covenants under the 3.78% senior notes, 2.70% senior notes, and revolving credit facility.

As a percentage of total capitalization (total long-term debt and shareholders’ equity), our total long-term debt percentage increased from 33.2% at December 31, 2025 to 35.2% at March 31, 2026.

The change resulted from a net increase in outstanding long-term debt along with a decrease in shareholders' equity.

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

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

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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.

We expect our petroleum additives segment will continue to experience impacts to its operating performance during the remainder of 2025 due to market softness and the uncertain global economic environment in which we operate.

Nonetheless, we anticipate continued solid results from this segment in 2025.

We will continue to focus on 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.

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

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

We will continue to invest in technology to serve our customers, focus on cost control and margin management, and advance 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.

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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.

In addition to the ongoing investments we make in our petroleum additives business, we have committed approximately $1 billion to our specialty materials business since 2024, including the acquisitions of AMPAC and Calca, as well as investments expanding capacity at both operations.

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.

We may experience substantial variation in quarterly results for this resilient, high-technology specialty materials segment 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 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.

While our most 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.

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Quantitative and Qualitative Disclosures About Market Risk

At September 30, 2025, there were no material changes in our market risk from the information provided in the 2024 Annual Report.

At March 31, 2026, there were no material changes in our market risk from the information provided in the 2025 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