NewMarket (NEU) - 2022 Q4 - Annual Report

Financial Performance - Consolidated net sales for 2022 amounted to $2.8 billion, an increase of $409 million, or 17.3% from 2021[146] - Net sales for 2022 reached $2,764.8 million, a 17.3% increase from $2,356.1 million in 2021[251] - Petroleum additives net sales for 2022 were $2.754 billion, approximately 17.5% higher than 2021 levels, with North America contributing about 54% of the increase[149] - Gross profit for 2022 was $640.5 million, up from $547.7 million in 2021, reflecting a gross margin improvement[251] - Operating profit increased to $355.1 million in 2022, compared to $257.8 million in 2021, marking a 37.8% growth[251] - Net income for 2022 was $279.5 million, a 46.5% increase from $190.9 million in 2021[251] - Earnings per share (EPS) for 2022 were $27.77, up from $17.71 in 2021, representing a 56.8% increase[251] Operating Segments - Operating profit for the petroleum additives segment increased by $97 million to $378 million in 2022, with an operating profit margin of 13.7%[156][157] - The petroleum additives operating profit was 34.6% higher in 2022 compared to 2021, reflecting higher selling prices[137] - Segment operating profit for petroleum additives was $378.2 million in 2022, compared to $281.1 million in 2021, representing a 34.5% increase[311] Cash Flow and Capital Management - Cash generated from operating activities was $109 million in 2022, down from $165 million in 2021, reflecting a decrease of 34%[166] - The company redeemed $350 million of 4.10% senior notes and repurchased $207 million of common stock in 2022, utilizing cash from operations and proceeds from marketable securities[167] - Cash and cash equivalents decreased to $69 million at December 31, 2022, compared to $83 million at the end of 2021[169] - The company repurchased 668,553 shares of common stock for a total of $207 million during 2022[139] - Cash dividends paid in 2022 were $84,263,000, slightly down from $85,910,000 in 2021[260] Debt and Equity - Long-term debt decreased from $1.1 billion at December 31, 2021, to $1.0 billion at December 31, 2022, primarily due to the redemption of senior notes[181] - Total long-term debt at December 31, 2022, was $1 billion, with $361 million in variable rate debt under the revolving credit facility[231] - The total long-term debt as a percentage of total capitalization decreased from 59.9% at the end of 2021 to 56.8% at the end of 2022[182] - The company's pension benefit obligation was $466 million as of December 31, 2022[246] Investments and Expenditures - Research and development (R&D) investment decreased by approximately $4 million, representing 5.1% of net sales in 2022 compared to 6.1% in 2021[162] - Capital expenditures were $56 million in 2022, with an estimated range of $70 million to $80 million for 2023, focusing on manufacturing and R&D improvements[186] - Corporate additions to long-lived assets were $3,983 thousand in 2022, significantly higher than $686 thousand in 2021[315] Market Outlook and Challenges - The company anticipates challenges in 2023 due to ongoing inflationary pressures and supply chain issues[141] - The petroleum additives market is expected to grow at a rate of 1% to 2% annually, with the company planning to exceed this growth rate in the long term[213] Pension and Retirement Plans - An actuarial loss of $149 million was recorded in 2022 due to actual investment returns being less than expected for U.S. qualified pension plans[197] - The expected aggregate cash contributions to the U.S. pension plans are approximately $3 million, and to the postretirement benefit plans are approximately $2 million in 2023[203] - The expected long-term rate of return for the U.K. pension plan was 6.7% at December 31, 2022, based on the actual asset allocation and expected yields[206] - The company expects aggregate U.K. cash contributions to be approximately $4 million in 2023[211] Financial Position - Total assets decreased to $2,406.8 million in 2022 from $2,558.4 million in 2021, a decline of 5.9%[256] - Total shareholders' equity remained relatively stable at $762.4 million in 2022 compared to $762.1 million in 2021[256] - The company maintained effective internal control over financial reporting as of December 31, 2022, according to the independent auditor's opinion[238]