neu-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-32190

NEWMARKET CORPORATION

(Exact name of registrant as specified in its charter)


Virginia		20-0812170
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

330 South Fourth Street		23219-4350
Richmond,	Virginia
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code - (804) 788-5000

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, with no par value	NEU	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Table of Contents

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No x

Number of shares of common stock, with no par value, outstanding as of September 30, 2023: 9,590,151

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NEWMARKET CORPORATION

INDEX


			Page Number
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited)
Consolidated Statements of Income - T hird Quarter and Nine Months Ended September 30, 2023 and September 30, 2022			4
Consolidated Statements of Comprehensive Income - Third Quarter and Nine Months Ended September 30, 2023 and September 30, 2022			5
Condensed Consolidated Balance Sheets - September 30, 2023 and December 31, 2022			6
Consolidated Statements of Shareholders' Equity - Third Quarter and Nine Months Ended September 30, 2023 and September 30, 2022			7
Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2023 and September 30, 2022			8
Notes to Condensed Consolidated Financial Statements			9
Financial Statement Presentation			9
Net Sales			9
Segment Information			10
Pension Plans and Other Postretirement Benefits			10
Earnings Per Share			11
Inventories			12
Intangibles (Net of Amortization) and Goodwill			12
Long-term Debt			13
Commitments and Contingencies			13
Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss			14
Fair Value Measurements			14
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			16
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk			21
ITEM 4. Controls and Procedures			21
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings			23
ITEM 5. Other Information			23
ITEM 6. Exhibits			23
SIGNATURES			24

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PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

NEWMARKET CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


(in thousands, except per-share amounts)	Third Quarter Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net sales	$	667,150	$	696,049	$	2,055,069	$	2,082,240
Cost of goods sold	465,445		547,742		1,459,682		1,621,294
Gross profit	201,705		148,307		595,387		460,946
Selling, general, and administrative expenses	37,386		35,192		114,671		109,303
Research, development, and testing expenses	31,894		34,388		99,008		106,035
Operating profit	132,425		78,727		381,708		245,608
Interest and financing expenses, net	9,221		8,369		30,249		24,859
Loss on early extinguishment of debt	0		0		0		7,545
Other income (expense), net	11,278		9,971		32,881		26,240
Income before income tax expense	134,482		80,329		384,340		239,444
Income tax expense	23,235		17,103		75,886		50,428
Net income	$	111,247	$	63,226	$	308,454	$	189,016
Earnings per share - basic and diluted	$	11.60	$	6.32	$	32.05	$	18.60
Cash dividends declared per share	$	2.25	$	2.10	$	6.60	$	6.30

See accompanying Notes to Condensed Consolidated Financial Statements

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NEWMARKET CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


(in thousands)	Third Quarter Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net income	$	111,247	$	63,226	$	308,454	$	189,016
Other comprehensive income (loss):
Pension plans and other postretirement benefits:
Prior service credit (cost) arising during the period, net of income tax expense (benefit) of $(159) in third quarter 2023, $0 in third quarter 2022, $(159) in nine months 2023, and $0 in nine months 2022	(489)		0		(489)		0
Amortization of prior service cost (credit) included in net periodic benefit cost (income), net of income tax expense (benefit) of $(141) in third quarter 2023, $(157) in third quarter 2022, $(482) in nine months 2023, and $(470) in nine months 2022	(454)		(500)		(1,547)		(1,494)
Actuarial net gain (loss) arising during the period, net of income tax expense (benefit) of $(239) in third quarter 2023, $583 in third quarter 2022, $(239) in nine months 2023, and $590 in nine months 2022	(784)		1,812		(784)		1,828
Amortization of actuarial net loss (gain) included in net periodic benefit cost (income), net of income tax expense (benefit) of $(105) in third quarter 2023, $145 in third quarter 2022, $(342) in nine months 2023, and $493 in nine months 2022	(332)		445		(1,081)		1,515
Total pension plans and other postretirement benefits	(2,059)		1,757		(3,901)		1,849




Foreign currency translation adjustments, net of income tax expense (benefit) of $(327) in third quarter 2023, $(194) in third quarter 2022, $371 in nine months 2023, and $279 in nine months 2022	(9,966)		(35,973)		9,114		(68,251)




Other comprehensive income (loss)	(12,025)		(34,216)		5,213		(66,402)
Comprehensive income	$	99,222	$	29,010	$	313,667	$	122,614

See accompanying Notes to Condensed Consolidated Financial Statements

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NEWMARKET CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(in thousands, except share amounts)	September 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	102,560	$	68,712

Trade and other accounts receivable, less allowance for credit losses	427,764		453,692
Inventories	503,411		631,383
Prepaid expenses and other current assets	31,859		38,338
Total current assets	1,065,594		1,192,125
Property, plant, and equipment, net	649,968		659,998
Intangibles (net of amortization) and goodwill	124,620		126,069
Prepaid pension cost	323,055		302,584
Operating lease right-of-use assets, net	64,272		62,417

Deferred charges and other assets	62,886		63,625
Total assets	$	2,290,395	$	2,406,818
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	215,108	$	273,289
Accrued expenses	72,301		89,508
Dividends payable	18,894		17,850
Income taxes payable	6,058		16,109
Operating lease liabilities	13,963		15,569

Other current liabilities	5,880		11,562
Total current liabilities	332,204		423,887
Long-term debt	779,401		1,003,737
Operating lease liabilities-noncurrent	49,093		46,968
Other noncurrent liabilities	157,754		169,819
Total liabilities	1,318,452		1,644,411
Commitments and contingencies (Note 9)
Shareholders’ equity:
Common stock and paid-in capital (with no par value; authorized shares - 80,000,000; issued and outstanding shares - 9,590,151 at September 30, 2023 and 9,702,147 at December 31, 2022)	1,557		0
Accumulated other comprehensive loss	(66,782)		(71,995)
Retained earnings	1,037,168		834,402
Total shareholders' equity	971,943		762,407
Total liabilities and shareholders’ equity	$	2,290,395	$	2,406,818

See accompanying Notes to Condensed Consolidated Financial Statements

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NEWMARKET CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)


(in thousands, except share and per-share amounts)	Common Stock and Paid-in Capital			Accumulated Other Comprehensive Loss		Retained Earnings		Total Shareholders’ Equity
	Shares	Amount
Balance at June 30, 2022	10,079,643	$	0	$	(114,413)	$	835,748	$	721,335
Net income						63,226		63,226
Other comprehensive income (loss)				(34,216)				(34,216)
Cash dividends ($2.10 per share)						(20,930)		(20,930)
Repurchases of common stock	(209,538)	(298)				(62,042)		(62,340)

Stock-based compensation	1,335	298				3		301
Balance at September 30, 2022	9,871,440	$	0	$	(148,629)	$	816,005	$	667,376

Balance at June 30, 2023	9,589,239	$	0	$	(54,757)	$	947,497	$	892,740
Net income						111,247		111,247
Other comprehensive income (loss)				(12,025)				(12,025)
Cash dividends ($2.25 per share)						(21,578)		(21,578)

Tax withholdings related to stock-based compensation	(76)	(33)						(33)
Stock-based compensation	988	1,590				2		1,592
Balance at September 30, 2023	9,590,151	$	1,557	$	(66,782)	$	1,037,168	$	971,943

Balance at December 31, 2021	10,362,722	$	0	$	(82,227)	$	844,356	$	762,129
Net income						189,016		189,016
Other comprehensive income (loss)				(66,402)				(66,402)
Cash dividends ($6.30 per share)						(63,790)		(63,790)
Repurchases of common stock	(499,275)	(1,573)				(153,612)		(155,185)


Stock-based compensation	7,993	1,573				35		1,608
Balance at September 30, 2022	9,871,440	$	0	$	(148,629)	$	816,005	$	667,376

Balance at December 31, 2022	9,702,147	$	0	$	(71,995)	$	834,402	$	762,407
Net income						308,454		308,454
Other comprehensive income (loss)				5,213				5,213
Cash dividends ($6.60 per share)						(63,457)		(63,457)
Repurchases of common stock	(119,075)	(1,857)				(41,419)		(43,276)

Tax withholdings related to stock-based compensation	(2,493)	(33)				(803)		(836)
Stock-based compensation	9,572	3,447				(9)		3,438
Balance at September 30, 2023	9,590,151	$	1,557	$	(66,782)	$	1,037,168	$	971,943

See accompanying Notes to Condensed Consolidated Financial Statements

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NEWMARKET CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


(in thousands)	Nine Months Ended September 30,
	2023		2022
Cash and cash equivalents at beginning of year	$	68,712	$	83,304
Cash flows from operating activities:
Net income	308,454		189,016
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization	57,665		62,160
Deferred income tax benefit	(16,336)		(33,685)
Loss on early extinguishment of debt	0		7,545

Working capital changes	71,900		(198,637)
Loss on marketable securities	0		2,977
Cash pension and postretirement contributions	(7,132)		(7,111)
Other, net	(9,335)		(6,303)
Cash provided from (used in) operating activities	405,216		15,962
Cash flows from investing activities:
Capital expenditures	(34,793)		(40,402)
Purchases of marketable securities	0		(787)
Proceeds from sales and maturities of marketable securities	0		372,846

Cash provided from (used in) investing activities	(34,793)		331,657
Cash flows from financing activities:
Net (repayments) borrowings under revolving credit facility	(225,000)		218,000

Dividends paid	(63,457)		(63,790)
Repurchases of common stock	(42,864)		(150,754)
Redemption of 4.10% senior notes	0		(350,000)
Cash costs of 4.10% senior notes redemption	0		(7,099)

Other, net	(4,219)		(2,496)
Cash provided from (used in) financing activities	(335,540)		(356,139)
Effect of foreign exchange on cash and cash equivalents	(1,035)		(2,812)
Increase (decrease) in cash and cash equivalents	33,848		(11,332)
Cash and cash equivalents at end of period	$	102,560	$	71,972

See accompanying Notes to Condensed Consolidated Financial Statements

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NEWMARKET CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Financial Statement Presentation

In the opinion of management, the accompanying consolidated financial statements of NewMarket Corporation and its subsidiaries contain all necessary adjustments for the fair presentation of, in all material respects, our consolidated financial position as of September 30, 2023 and December 31, 2022, and our consolidated results of operations, comprehensive income, and changes in shareholders' equity for the third quarter and nine months ended September 30, 2023 and September 30, 2022, and our cash flows for the nine months ended September 30, 2023 and September 30, 2022. All adjustments are of a normal, recurring nature, unless otherwise disclosed. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the NewMarket Corporation Annual Report on Form 10-K for the year ended December 31, 2022 (2022 Annual Report), as filed with the Securities and Exchange Commission (SEC). The results of operations for the nine month period ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year ending December 31, 2023. The December 31, 2022 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.

Unless the context otherwise indicates, all references to “we,” “us,” “our,” the “company,” and “NewMarket” are to NewMarket Corporation and its consolidated subsidiaries.

We offer our vendors a supplier finance program, which allows our vendors to receive payment from a third-party finance provider earlier than our normal payment terms would provide. NewMarket and its subsidiaries are not a party to the arrangement between our vendor and the finance provider, and there are no assets pledged as security or other forms of guarantees provided by NewMarket to the finance provider. For those vendors who opt to participate in the program, we pay the finance provider the full amount of the invoices on the normal due date. At September 30, 2023, the amount of confirmed invoices under the supplier finance program was not material.

2. Net Sales

Our revenues are primarily derived from the manufacture and sale of petroleum additives products. We sell petroleum additives products across the world to customers located in the North America (the United States and Canada), Latin America (Mexico, Central America, and South America), Asia Pacific, and EMEAI (Europe/Middle East/Africa/India) regions. Our customers primarily consist of global, national, and independent oil companies. Our contracts generally include one performance obligation, which is providing petroleum additives products. The performance obligation is satisfied at a point in time when products are shipped, delivered, or consumed by the customer, depending on the underlying contracts.

In limited cases, we collect funds in advance of shipping product to our customers and recognizing the related revenue. These prepayments from customers are recorded as a contract liability until we ship the product and recognize the revenue. Some of our contracts include variable consideration in the form of rebates or business development funds. We regularly review both rebates and business development funds and make adjustments to estimated amounts when necessary, recognizing the full amount of any adjustment in the period identified.

The following table provides information on our net sales by geographic area. Information on net sales by segment is presented in Note 3.


	Third Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Net sales
United States	$	246,462	$	242,631	$	745,470	$	716,913
Europe, Middle East, Africa, India	200,843		217,108		607,913		616,438
Asia Pacific	129,717		150,144		433,905		483,413
Other foreign	90,128		86,166		267,781		265,476
Net sales	$	667,150	$	696,049	$	2,055,069	$	2,082,240

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NEWMARKET CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

3. Segment Information

The tables below show our consolidated segment results. The “All other” category includes the operations of the antiknock compounds business, as well as certain contracted manufacturing and related services associated with Ethyl Corporation (Ethyl).

Net Sales by Segment


	Third Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Petroleum additives
Lubricant additives	$	562,692	$	582,559	$	1,753,772	$	1,775,574
Fuel additives	101,027		110,134		293,907		298,444
Total	663,719		692,693		2,047,679		2,074,018
All other	3,431		3,356		7,390		8,222
Net sales	$	667,150	$	696,049	$	2,055,069	$	2,082,240

Segment Operating Profit


	Third Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Petroleum additives	$	139,820	$	83,023	$	404,026	$	261,130
All other	(764)		(41)		(2,761)		(205)
Segment operating profit	139,056		82,982		401,265		260,925
Corporate, general, and administrative expenses	(6,389)		(4,167)		(19,690)		(15,389)
Interest and financing expenses, net	(9,221)		(8,369)		(30,249)		(24,859)

Loss on early extinguishment of debt	0		0		0		(7,545)
Other income (expense), net	11,036		9,883		33,014		26,312
Income before income tax expense	$	134,482	$	80,329	$	384,340	$	239,444

4. Pension Plans and Other Postretirement Benefits

The table below shows cash contributions made during the nine months ended September 30, 2023, as well as the remaining cash contributions we expect to make during the year ending December 31, 2023, for our domestic and foreign pension plans and domestic postretirement benefit plan.


(in thousands)	Actual Cash Contributions for Nine Months Ended September 30, 2023		Expected Remaining Cash Contributions for Year Ending December 31, 2023
Domestic plans
Pension benefits	$	1,793	$	598
Postretirement benefits	831		277
Foreign plans
Pension benefits	4,508		2,234

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NEWMARKET CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The tables below present information on net periodic benefit cost (income) for our domestic and foreign pension plans and domestic postretirement benefit plan. The service cost component of net periodic benefit cost (income) is reflected in cost of goods sold; selling, general, and administrative expenses; or research, development, and testing expenses, according to where other compensation costs arising from services rendered by the pertinent employee are recorded on the Consolidated Statements of Income. The remaining components of net periodic benefit cost (income) are recorded in other income (expense), net on the Consolidated Statements of Income.


	Domestic
	Pension Benefits				Postretirement Benefits
	Third Quarter Ended September 30,
(in thousands)	2023		2022		2023		2022
Service cost	$	2,482	$	4,490	$	130	$	299
Interest cost	4,587		3,332		404		294
Expected return on plan assets	(11,510)		(10,945)		(182)		(185)
Amortization of prior service cost (credit)	127		68		(757)		(757)
Amortization of actuarial net (gain) loss	(376)		419		(55)		22
Net periodic benefit cost (income)	$	(4,690)	$	(2,636)	$	(460)	$	(327)


	Domestic
	Pension Benefits				Postretirement Benefits
	Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Service cost	$	7,799	$	14,202	$	390	$	820
Interest cost	13,659		10,109		1,186		872
Expected return on plan assets	(34,529)		(32,825)		(585)		(593)
Amortization of prior service cost (credit)	139		204		(2,271)		(2,271)
Amortization of actuarial net (gain) loss	(1,199)		1,491		(206)		39
Net periodic benefit cost (income)	$	(14,131)	$	(6,819)	$	(1,486)	$	(1,133)


	Foreign
	Pension Benefits
	Third Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Service cost	$	1,094	$	2,123	$	3,222	$	6,735
Interest cost	1,615		993		4,736		3,141
Expected return on plan assets	(2,973)		(2,362)		(8,713)		(7,506)
Amortization of prior service cost (credit)	36		33		104		105
Amortization of actuarial net (gain) loss	(6)		152		(18)		483
Net periodic benefit cost (income)	$	(234)	$	939	$	(669)	$	2,958

5. Earnings Per Share

We had 34,071 shares of nonvested restricted stock at September 30, 2023 and 33,070 shares of nonvested restricted stock at September 30, 2022 that were excluded from the calculation of diluted earnings per share. The nonvested restricted stock is considered a participating security since the restricted stock contains nonforfeitable rights to dividends. As such, we use the two-class method to compute basic and diluted earnings per share for all periods presented since this method yields the most dilutive result. The following table illustrates the earnings allocation method utilized in the calculation of basic and diluted earnings per share.

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NEWMARKET CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	Third Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands, except per-share amounts)	2023		2022		2023		2022
Earnings per share numerator:
Net income attributable to common shareholders before allocation of earnings to participating securities	$	111,247	$	63,226	$	308,454	$	189,016
Earnings allocated to participating securities	(393)		(207)		(1,055)		(575)
Net income attributable to common shareholders after allocation of earnings to participating securities	$	110,854	$	63,019	$	307,399	$	188,441
Earnings per share denominator:
Weighted-average number of shares of common stock outstanding - basic and diluted	9,556		9,965		9,592		10,130


Earnings per share - basic and diluted	$	11.60	$	6.32	$	32.05	$	18.60

6. Inventories


(in thousands)	September 30, 2023		December 31, 2022
Finished goods and work-in-process	$	399,647	$	497,652
Raw materials	82,696		113,484
Stores, supplies, and other	21,068		20,247
	$	503,411	$	631,383

7. Intangibles (Net of Amortization) and Goodwill

The net carrying amount of intangibles and goodwill was $125 million at September 30, 2023 and $126 million at December 31, 2022. The gross carrying amount and accumulated amortization of each type of intangible asset and goodwill are presented in the table below.


	September 30, 2023				December 31, 2022
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortizing intangible assets
Formulas and technology	$	6,200	$	6,200	$	6,200	$	5,683
Contract	2,000		2,000		2,000		1,200
Customer base	5,440		4,492		5,440		4,350

Goodwill	123,672				123,662
	$	137,312	$	12,692	$	137,302	$	11,233

All of the intangibles relate to the petroleum additives segment. The change in the gross carrying amount of goodwill between December 31, 2022 and September 30, 2023 is due to foreign currency fluctuation. There is no accumulated goodwill impairment.

Amortization expense was (in thousands):


Third quarter ended September 30, 2023	$	748
Nine months ended September 30, 2023	1,459
Third quarter ended September 30, 2022	356
Nine months ended September 30, 2022	1,067

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NEWMARKET CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Estimated amortization expense for the remainder of 2023, as well as estimated annual amortization expense related to our intangible assets for the next five years, is expected to be (in thousands):


2023	$	48
2024	190
2025	190
2026	190
2027	190
2028	140

We amortize the customer base over 20 years.

8. Long-term Debt


(in thousands)	September 30, 2023		December 31, 2022
Senior notes - 2.70% due 2031 (net of related deferred financing costs)	$	393,401	$	392,737
Senior notes - 3.78% due 2029	250,000		250,000
Revolving credit facility	136,000		361,000
	$	779,401	$	1,003,737

Senior Notes - The 2.70% senior notes, which were issued in 2021, are unsecured with an aggregate principal amount of $400 million. The offer and sale of the notes were registered under the Securities Act of 1933, as amended.

The 3.78% senior notes are unsecured and were issued in a 2017 private placement with The Prudential Insurance Company of America and certain other purchasers.

We were in compliance with all covenants under all issuances of senior notes as of September 30, 2023 and December 31, 2022.

Revolving Credit Facility - The revolving credit facility has a borrowing capacity of $900 million, a term of five years, and matures on March 5, 2025. The obligations under the revolving credit facility are unsecured. The average interest rate for borrowings under the credit agreement was 6.1% during the first nine months of 2023 and 3.5% during the year ended December 31, 2022.

We were in compliance with all covenants under the revolving credit facility as of September 30, 2023 and December 31, 2022.

Outstanding borrowings under the revolving credit facility amounted to $136 million at September 30, 2023 and $361 million at December 31, 2022. Outstanding letters of credit amounted to approximately $2 million at both September 30, 2023 and December 31, 2022. The unused portion of the credit facility amounted to $762 million at September 30, 2023 and $537 million at December 31, 2022.

9. Commitments and Contingencies

Legal Matters

We are involved in legal proceedings that are incidental to our business and may include administrative or judicial actions. Some of these legal proceedings involve governmental authorities and relate to environmental matters. For further information, see Environmental below.

While it is not possible to predict or determine with certainty the outcome of any legal proceeding, we believe the outcome of any of these proceedings, or all of them combined, will not result in a material adverse effect on our consolidated results of operations, financial condition, or cash flows.

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NEWMARKET CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Environmental

We are involved in environmental proceedings and potential proceedings relating to soil and groundwater contamination, disposal of hazardous waste, and other environmental matters at several of our current or former facilities, or at third-party sites where we have been designated as a potentially responsible party. While we believe we are currently adequately accrued for known environmental issues, it is possible that unexpected future costs could have a significant impact on our consolidated financial position, results of operations, and cash flows. Our total accruals for environmental remediation, dismantling, and decontamination were approximately $10 million at both September 30, 2023 and December 31, 2022. Of the total accrual, the current portion is included in accrued expenses and the noncurrent portion is included in other noncurrent liabilities on the Condensed Consolidated Balance Sheets.

Our more significant environmental sites include a former plant site in Louisiana and a Houston, Texas plant site. Together, the amounts accrued on a discounted basis related to these sites represented approximately $8 million of the total accrual above at both September 30, 2023 and December 31, 2022, using discount rates ranging from 3% to 9% for both periods. The aggregate undiscounted amount for these sites was $10 million at both September 30, 2023 and December 31, 2022.

10. Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss

The balances of, and changes in, the components of accumulated other comprehensive loss, net of tax, consist of the following:


(in thousands)	Pension Plans and Other Postretirement Benefits		Foreign Currency Translation Adjustments		Accumulated Other Comprehensive (Loss) Income
Balance at December 31, 2021	$	1,522	$	(83,749)	$	(82,227)
Other comprehensive income (loss) before reclassifications	1,828		(68,251)		(66,423)
Amounts reclassified from accumulated other comprehensive loss (a)	21		0		21
Other comprehensive income (loss)	1,849		(68,251)		(66,402)
Balance at September 30, 2022	$	3,371	$	(152,000)	$	(148,629)

Balance at December 31, 2022	$	54,562	$	(126,557)	$	(71,995)
Other comprehensive income (loss) before reclassifications	(1,273)		9,114		7,841
Amounts reclassified from accumulated other comprehensive loss (a)	(2,628)		0		(2,628)
Other comprehensive income (loss)	(3,901)		9,114		5,213
Balance at September 30, 2023	$	50,661	$	(117,443)	$	(66,782)

(a) The pension plan and other postretirement benefit components of accumulated other comprehensive loss are included in the computation of net periodic benefit cost (income). See Note 4 in this Quarterly Report on Form 10-Q and Note 18 in our 2022 Annual Report for further information.

11. Fair Value Measurements

The carrying amount of cash and cash equivalents in the Consolidated Balance Sheets, as well as the fair value, was $103 million at September 30, 2023 and $69 million at December 31, 2022. The fair value is classified as Level 1 in the fair value hierarchy.

No material events occurred during the nine months ended September 30, 2023 requiring adjustment to the recognized balances of assets or liabilities which are recorded at fair value on a nonrecurring basis.

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NEWMARKET CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Long-term debt – We record the carrying amount of our long-term debt at historical cost, less deferred financing costs related to our 2.70% senior notes. The estimated fair value of our long-term debt is shown in the table below and is based primarily on estimated current rates available to us for debt of the same remaining duration and adjusted for nonperformance risk and credit risk. The estimated fair value of our 2.70% senior notes included in the table below is based on the last quoted price closest to September 30, 2023. The fair value of our debt instruments is classified as Level 2.


	September 30, 2023				December 31, 2022
(in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt	$	779,401	$	669,526	$	1,003,737	$	906,891

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report contains forward-looking statements about future events and expectations within the meaning of the Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations and projections about future results. 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, and our future capital expenditure levels.

We believe our forward-looking statements are based on reasonable expectations and assumptions, within the bounds of what we know about our business and operations. However, we offer no assurance that actual results will not differ materially from our expectations due to uncertainties and factors that are difficult to predict and beyond our control.

Factors that could cause actual results to differ materially from expectations include, but are not limited to, the availability of raw materials and distribution systems; disruptions at production facilities, including single-sourced facilities; hazards common to chemical businesses; the ability to respond effectively to technological changes in our industry; failure to protect our intellectual property rights; sudden, sharp, or prolonged raw material price increases; competition from other manufacturers; current and future governmental regulations; the loss of significant customers; failure to attract and retain a highly-qualified workforce; an information technology system failure or security breach; the occurrence or threat of extraordinary events, including natural disasters, terrorist attacks, wars, and health-related epidemics such as the COVID-19 pandemic; risks related to operating outside of the United States; political, economic, and regulatory factors concerning our products; the impact of substantial indebtedness on our operational and financial flexibility; the impact of fluctuations in foreign exchange rates; resolution of environmental liabilities or legal proceedings; limitation of our insurance coverage; our inability to realize expected benefits from investment in our infrastructure or from future acquisitions, or our inability to successfully integrate future acquisitions into our business; the underperformance of our pension assets resulting in additional cash contributions to our pension plans; and other factors detailed from time to time in the reports that NewMarket files with the SEC, including the risk factors in Item 1A. “Risk Factors” of our 2022 Annual Report, which is available to shareholders upon request.

You should keep in mind that any forward-looking statement made by us in this report or elsewhere speaks only as of the date on which we make it. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements in this discussion after the date hereof, except as may be required by law. In light of these risks and uncertainties, any forward-looking statement made in this report or elsewhere, might not occur.

Overview

When comparing the results of the petroleum additives segment for the first nine months of 2023 with the first nine months of 2022, net sales were 1.3% lower resulting from a decrease in product shipments and an unfavorable foreign currency impact, which was partially offset by higher selling prices, including favorable mix. Petroleum additives operating profit was 54.7% higher when comparing the first nine months of 2023 with the first nine months of 2022, reflecting the selling prices, including favorable mix, partially offset by lower product shipments and higher operating costs. Raw material costs were stable when comparing the two nine months periods. Our shipments have been impacted over the last several quarters by the overall global economic weakness and inventory rationalization that is affecting the chemical industry.

While we have experienced improvement in the supply chain disruptions which impacted the petrochemicals industry over the past several years, we continue to be challenged by the ongoing inflationary environment impacting us, including raw material and operating costs. During this period, we have remained focused on controlling operating costs, continuing our investment in technology, and managing our inventory levels, as well as our customer portfolio.

Despite the challenging economic 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.

Our operations generate cash that is in excess of the needs of the business. We continue to invest in and manage our business for the long-term with the goal of helping our customers succeed in their marketplaces. Our investments continue to be in organizational talent, technology development and processes, and global infrastructure.

The chemical industry and our products are essential for transportation of people, goods and services. Our business continuity planning process focuses our efforts on managing through this challenging time and helping our customers do the same.