NewMarket (NEU) - 2023 Q2 - Quarterly Report

FORM 10-Q Cover Page Cover Page Details NewMarket Corporation's Form 10-Q cover page details company identification, stock exchange listing, and filer status for Q2 2023 Form 10-Q Filing Information | Detail | Value | | :----- | :---- | | Filing Type | Quarterly Report (Form 10-Q) | | Period Ended | June 30, 2023 | | Registrant | NEWMARKET CORPORATION | | State of Incorporation | Virginia | | Trading Symbol | NEU | | Exchange | New York Stock Exchange | | Filer Status | Large accelerated filer | | Common Stock Outstanding (June 30, 2023) | 9,589,239 shares | PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements (unaudited) Unaudited condensed consolidated financial statements, including income, comprehensive income, balance sheets, equity, and cash flows, with detailed notes for Q2 2023 and 2022 Consolidated Statements of Income Net income and EPS significantly increased in Q2 and 6M 2023, driven by higher operating profit despite a slight Q2 net sales decrease Consolidated Statements of Income Highlights (in thousands, except per-share amounts) | Metric | Q2 2023 | Q2 2022 | YoY Change (Q2) | 6M 2023 | 6M 2022 | YoY Change (6M) | | :-------------------------------- | :------ | :------ | :-------------- | :-------- | :-------- | :-------------- | | Net sales | $685,130 | $723,639 | -5.32% | $1,387,919 | $1,386,191 | 0.12% | | Gross profit | $195,638 | $157,476 | 24.23% | $393,682 | $312,639 | 25.92% | | Operating profit | $124,242 | $83,591 | 48.63% | $249,283 | $166,881 | 49.38% | | Net income | $99,624 | $66,472 | 49.87% | $197,207 | $125,790 | 56.78% | | Earnings per share - basic and diluted | $10.36 | $6.54 | 58.41% | $20.45 | $12.28 | 66.53% | | Cash dividends declared per share | $2.25 | $2.10 | 7.14% | $4.35 | $4.20 | 3.57% | Consolidated Statements of Comprehensive Income Comprehensive income significantly increased in Q2 and 6M 2023, driven by positive foreign currency translation adjustments and higher net income Consolidated Statements of Comprehensive Income Highlights (in thousands) | Metric | Q2 2023 | Q2 2022 | YoY Change (Q2) | 6M 2023 | 6M 2022 | YoY Change (6M) | | :-------------------------------- | :------ | :------ | :-------------- | :-------- | :-------- | :-------------- | | Net income | $99,624 | $66,472 | 49.87% | $197,207 | $125,790 | 56.78% | | Total pension plans and other postretirement benefits | $(920) | $33 | -2887.88% | $(1,842) | $92 | -2000.00% | | Foreign currency translation adjustments, net | $7,714 | $(29,176) | N/A | $19,080 | $(32,278) | N/A | | Other comprehensive income (loss) | $6,794 | $(29,143) | N/A | $17,238 | $(32,186) | N/A | | Comprehensive income | $106,418 | $37,329 | 185.09% | $214,445 | $93,604 | 129.09% | Condensed Consolidated Balance Sheets Balance sheet as of June 30, 2023, shows increased cash and equity, with decreased total assets and liabilities due to reduced inventories and debt Condensed Consolidated Balance Sheets Highlights (in thousands) | Metric | June 30, 2023 | Dec 31, 2022 | Change | | :-------------------------------- | :------------ | :----------- | :----- | | Cash and cash equivalents | $130,923 | $68,712 | $62,211 | | Inventories | $537,380 | $631,383 | $(94,003) | | Total current assets | $1,140,103 | $1,192,125 | $(52,022) | | Total assets | $2,366,144 | $2,406,818 | $(40,674) | | Total current liabilities | $349,038 | $423,887 | $(74,849) | | Long-term debt | $916,179 | $1,003,737 | $(87,558) | | Total liabilities | $1,473,404 | $1,644,411 | $(171,007) | | Total shareholders' equity | $892,740 | $762,407 | $130,333 | Consolidated Statements of Shareholders' Equity Shareholders' equity significantly increased from Dec 2022 to June 2023, driven by net income and positive other comprehensive income, offset by dividends and repurchases Consolidated Statements of Shareholders' Equity Highlights (in thousands) | Metric | Balance at Dec 31, 2022 | 6M 2023 Activity | Balance at June 30, 2023 | | :-------------------------------- | :---------------------- | :----------------- | :----------------------- | | Accumulated Other Comprehensive Loss | $(71,995) | $17,238 | $(54,757) | | Retained Earnings | $834,402 | $153,114 | $947,497 | | Total Shareholders' Equity | $762,407 | $130,333 | $892,740 | | Net income (6M 2023) | N/A | $197,207 | N/A | | Cash dividends (6M 2023) | N/A | $(41,879) | N/A | | Repurchases of common stock (6M 2023) | N/A | $(43,276) | N/A | Condensed Consolidated Statements of Cash Flows Cash and cash equivalents significantly increased in 6M 2023, primarily from strong operating cash flows offsetting investing and financing uses Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | 6M 2023 | 6M 2022 | Change | | :-------------------------------- | :------ | :------ | :----- | | Cash and cash equivalents at beginning of year | $68,712 | $83,304 | $(14,592) | | Cash provided from (used in) operating activities | $262,390 | $24,366 | $238,024 | | Cash provided from (used in) investing activities | $(26,006) | $344,252 | $(370,258) | | Cash provided from (used in) financing activities | $(175,729) | $(371,696) | $195,967 | | Increase (decrease) in cash and cash equivalents | $62,211 | $(3,813) | $66,024 | | Cash and cash equivalents at end of period | $130,923 | $79,491 | $51,432 | Notes to Condensed Consolidated Financial Statements Detailed notes explain accounting policies, revenue, segment performance, benefits, EPS, inventories, intangibles, debt, contingencies, OCI, and fair value measurements Financial Statement Presentation (Note 1) Unaudited financial statements include necessary adjustments and should be read with the 2022 Annual Report, noting a supplier finance program - The financial statements are unaudited and include normal, recurring adjustments for fair presentation[20] - NewMarket offers a supplier finance program, but is not a party to the vendor-finance provider arrangement, and confirmed invoices under the program were not material at June 30, 2023[22] Net Sales (Note 2) Net sales from global petroleum additives are recognized at a point in time, with Q2 2023 showing a slight decrease but 6M 2023 remaining stable - Revenues are primarily from the manufacture and sale of petroleum additives products globally, with a single performance obligation satisfied at a point in time[23] Net Sales by Geographic Area (in thousands) | Region | Q2 2023 | Q2 2022 | YoY Change (Q2) | 6M 2023 | 6M 2022 | YoY Change (6M) | | :------------------------ | :------ | :------ | :-------------- | :-------- | :-------- | :-------------- | | United States | $242,610 | $249,594 | -2.79% | $499,008 | $474,282 | 5.21% | | Europe, Middle East, Africa, India | $202,860 | $203,343 | -0.24% | $407,070 | $399,330 | 1.94% | | Asia Pacific | $152,239 | $175,725 | -13.36% | $304,188 | $333,269 | -8.73% | | Other foreign | $87,421 | $94,977 | -7.96% | $177,653 | $179,310 | -0.92% | | Total Net Sales | $685,130 | $723,639 | -5.32% | $1,387,919 | $1,386,191 | 0.12% | Segment Information (Note 3) Petroleum additives segment dominates net sales and operating profit, while the 'All other' category, including antiknock compounds, reported a net loss Net Sales by Segment (in thousands) | Segment | Q2 2023 | Q2 2022 | YoY Change (Q2) | 6M 2023 | 6M 2022 | YoY Change (6M) | | :---------------- | :------ | :------ | :-------------- | :-------- | :-------- | :-------------- | | Lubricant additives | $588,506 | $622,973 | -5.53% | $1,191,080 | $1,193,015 | -0.16% | | Fuel additives | $95,463 | $98,048 | -2.64% | $192,880 | $188,310 | 2.43% | | Total Petroleum additives | $683,969 | $721,021 | -5.14% | $1,383,960 | $1,381,325 | 0.19% | | All other | $1,161 | $2,618 | -55.65% | $3,959 | $4,866 | -18.65% | | Total Net Sales | $685,130 | $723,639 | -5.32% | $1,387,919 | $1,386,191 | 0.12% | Segment Operating Profit (in thousands) | Segment | Q2 2023 | Q2 2022 | YoY Change (Q2) | 6M 2023 | 6M 2022 | YoY Change (6M) | | :---------------- | :------ | :------ | :-------------- | :-------- | :-------- | :-------------- | | Petroleum additives | $132,138 | $91,185 | 44.91% | $264,206 | $178,107 | 48.34% | | All other | $(1,022) | $(262) | -289.92% | $(1,997) | $(164) | -1117.68% | | Segment operating profit | $131,116 | $90,923 | 44.20% | $262,209 | $177,943 | 47.36% | Pension Plans and Other Postretirement Benefits (Note 4) Cash contributions made to pension and postretirement plans, with varying net periodic benefit cost (income) across domestic and foreign plans for 6M 2023 Cash Contributions for Pension and Postretirement Benefits (in thousands) | Plan Type | Actual Cash Contributions (6M 2023) | Expected Remaining Cash Contributions (FY 2023) | | :------------------------ | :---------------------------------- | :------------------------------------------ | | Domestic Pension benefits | $1,198 | $1,198 | | Domestic Postretirement benefits | $612 | $612 | | Foreign Pension benefits | $3,210 | $3,463 | Net Periodic Benefit Cost (Income) (in thousands) | Plan Type | 6M 2023 | 6M 2022 | Change | | :------------------------ | :------ | :------ | :----- | | Domestic Pension Benefits | $(9,441) | $(4,183) | $(5,258) | | Domestic Postretirement Benefits | $(1,026) | $(806) | $(220) | | Foreign Pension Benefits | $(435) | $2,019 | $(2,454) | Earnings Per Share (Note 5) Basic and diluted EPS significantly increased in Q2 and 6M 2023, calculated using the two-class method due to nonvested restricted stock Earnings Per Share (in thousands, except per-share amounts) | Metric | Q2 2023 | Q2 2022 | YoY Change (Q2) | 6M 2023 | 6M 2022 | YoY Change (6M) | | :-------------------------------- | :------ | :------ | :-------------- | :-------- | :-------- | :-------------- | | Net income attributable to common shareholders after allocation | $99,268 | $66,279 | 49.79% | $196,545 | $125,422 | 56.79% | | Weighted-average shares outstanding | 9,577 | 10,136 | -5.52% | 9,610 | 10,213 | -5.90% | | Earnings per share - basic and diluted | $10.36 | $6.54 | 58.41% | $20.45 | $12.28 | 66.53% | - Nonvested restricted stock (34,448 shares at June 30, 2023) is considered a participating security, leading to the use of the two-class method for EPS calculation[37] Inventories (Note 6) Total inventories decreased by $94 million from Dec 2022 to June 2023, mainly due to reductions in finished goods, work-in-process, and raw materials Inventories (in thousands) | Category | June 30, 2023 | Dec 31, 2022 | Change | | :------------------------ | :------------ | :----------- | :----- | | Finished goods and work-in-process | $427,228 | $497,652 | $(70,424) | | Raw materials | $89,136 | $113,484 | $(24,348) | | Stores, supplies, and other | $21,016 | $20,247 | $769 | | Total Inventories | $537,380 | $631,383 | $(94,003) | Intangibles (Net of Amortization) and Goodwill (Note 7) Net carrying amount of intangibles and goodwill remained stable at $125 million at June 30, 2023, with goodwill slightly increasing due to foreign currency fluctuation Intangibles and Goodwill (in thousands) | Category | June 30, 2023 (Net Carrying Amount) | Dec 31, 2022 (Net Carrying Amount) | Change | | :-------------------------------- | :---------------------------------- | :---------------------------------- | :----- | | Intangibles (net of amortization) and goodwill | $125,424 | $126,069 | $(645) | - The change in goodwill's gross carrying amount is due to foreign currency fluctuation, with no accumulated goodwill impairment[42] - All intangibles relate to the petroleum additives segment[42] Estimated Amortization Expense (in thousands) | Year | Estimated Annual Amortization Expense | | :--- | :------------------------------------ | | 2023 (remainder) | $196 | | 2024 | $390 | | 2025 | $390 | | 2026 | $390 | | 2027 | $190 | | 2028 | $140 | Long-term Debt (Note 8) Total long-term debt decreased to $916.2 million at June 30, 2023, from $1.0 billion at Dec 2022, primarily due to revolving credit facility repayments, with covenant compliance maintained Long-term Debt (in thousands) | Debt Type | June 30, 2023 | Dec 31, 2022 | Change | | :-------------------------------- | :------------ | :----------- | :----- | | Senior notes - 2.70% due 2031 | $393,179 | $392,737 | $442 | | Senior notes - 3.78% due 2029 | $250,000 | $250,000 | $0 | | Revolving credit facility | $273,000 | $361,000 | $(88,000) | | Total Long-term Debt | $916,179 | $1,003,737 | $(87,558) | - NewMarket was in compliance with all covenants under its senior notes and revolving credit facility as of June 30, 2023 and December 31, 2022[48][49] - The revolving credit facility has a borrowing capacity of $900 million, with $625 million unused at June 30, 2023[49] - The average interest rate for borrowings was 6.0% for the first six months of 2023, up from 3.5% in 2022[50] Commitments and Contingencies (Note 9) Legal and environmental proceedings are not expected to materially impact financial results, with environmental accruals stable at $10 million at June 30, 2023 - The company is involved in legal and environmental proceedings, but believes the outcome will not result in a material adverse effect on consolidated results of operations, financial condition, or cash flows[51][52] Environmental Accruals (in thousands) | Metric | June 30, 2023 | Dec 31, 2022 | | :-------------------------------- | :------------ | :----------- | | Total accruals for environmental remediation, dismantling, and decontamination | $10,000 | $10,000 | | Accrued for Louisiana and Houston sites (discounted) | $7,000 | $8,000 | | Accrued for Louisiana and Houston sites (undiscounted) | $10,000 | $10,000 | Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss (Note 10) Accumulated other comprehensive loss significantly decreased from Dec 2022 to June 2023, driven by positive foreign currency translation adjustments, partially offset by benefit reclassifications Accumulated Other Comprehensive Loss Components (in thousands) | Component | Balance at Dec 31, 2022 | Other Comprehensive Income (Loss) (6M 2023) | Balance at June 30, 2023 | | :-------------------------------- | :---------------------- | :------------------------------------------ | :----------------------- | | Pension Plans and Other Postretirement Benefits | $54,562 | $(1,842) | $52,720 | | Foreign Currency Translation Adjustments | $(126,557) | $19,080 | $(107,477) | | Accumulated Other Comprehensive Loss | $(71,995) | $17,238 | $(54,757) | Fair Value Measurements (Note 11) Fair value of cash and cash equivalents was $131 million (Level 1), while long-term debt's fair value was $820 million (Level 2), lower than its $916 million carrying amount Fair Value of Financial Instruments (in thousands) | Instrument | June 30, 2023 (Carrying Amount) | June 30, 2023 (Fair Value) | Fair Value Hierarchy Level | Dec 31, 2022 (Carrying Amount) | Dec 31, 2022 (Fair Value) | | :---------------- | :-------------------------------- | :------------------------- | :------------------------- | :-------------------------------- | :------------------------- | | Cash and cash equivalents | $130,923 | $130,923 | Level 1 | $68,712 | $68,712 | | Long-term debt | $916,179 | $819,808 | Level 2 | $1,003,737 | $906,891 | ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, condition, and liquidity, highlighting increased petroleum additives operating profit despite lower shipments, inflation impacts, strategic investments, and outlook Forward-Looking Statements Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from current expectations - Forward-looking statements are based on current expectations but actual results may differ materially due to difficult-to-predict uncertainties and factors beyond control[64][65] - Key risk factors include raw material availability and prices, production disruptions, technological changes, intellectual property protection, competition, governmental regulations, customer loss, workforce retention, IT failures, extraordinary events, international operations risks, indebtedness, foreign exchange fluctuations, environmental liabilities, insurance coverage, acquisition integration, and pension asset underperformance[66] Overview Petroleum additives segment saw stable net sales but significantly higher operating profit in 6M 2023, driven by pricing, with the company maintaining a strong financial position amid inflation and investing in growth - Petroleum additives net sales were substantially unchanged for the first six months of 2023 vs 2022, with higher selling prices offsetting decreased product shipments and unfavorable foreign currency impact[68] - Petroleum additives operating profit increased by 48.3% for the first six months of 2023 compared to 2022, reflecting higher selling prices partially offset by lower shipments and increased operating and raw material costs[68] - The company continues to face an inflationary environment and high costs but maintains a strong financial position with sufficient capital access and compliance with debt covenants[69] - Investments are focused on organizational talent, technology development, processes, and global infrastructure to support long-term business growth and customer success[70] Results of Operations Financial performance details net sales, segment operating profit, interest, other income, and income tax expense, highlighting drivers for Q2 and 6M 2023 changes Net Sales Consolidated net sales decreased 5.3% in Q2 2023 but remained stable for 6M 2023, with lower petroleum additives shipments offset by higher selling prices Consolidated Net Sales by Segment (in millions) | Segment | Q2 2023 | Q2 2022 | YoY Change (Q2) | 6M 2023 | 6M 2022 | YoY Change (6M) | | :---------------- | :------ | :------ | :-------------- | :-------- | :-------- | :-------------- | | Petroleum additives | $684.0 | $721.0 | -5.13% | $1,384.0 | $1,381.3 | 0.20% | | All other | $1.1 | $2.6 | -57.69% | $3.9 | $4.9 | -20.41% | | Total Net Sales | $685.1 | $723.6 | -5.32% | $1,387.9 | $1,386.2 | 0.12% | Components of Petroleum Additives Net Sales Change (in millions) | Component | Q2 Change (2023 vs 2022) | 6M Change (2023 vs 2022) | | :------------------------ | :----------------------- | :----------------------- | | Lubricant additives shipments | $(110.5) | $(192.9) | | Fuel additives shipments | $(8.9) | $(18.7) | | Selling prices | $87.0 | $228.7 | | Foreign currency impact, net | $(4.6) | $(14.4) | - Worldwide petroleum additives product shipments decreased by 16.7% when comparing the two second quarter periods and 16.1% when comparing the first six months of 2023 and 2022, with decreases across both lubricant and fuel additives in all regions[79][80] Segment Operating Profit Petroleum additives operating profit significantly increased by 44.9% in Q2 and 48.3% in 6M 2023, driven by higher selling prices, with margins improving to 19.3% and 19.1% respectively Segment Operating Profit (in millions) | Segment | Q2 2023 | Q2 2022 | YoY Change (Q2) | 6M 2023 | 6M 2022 | YoY Change (6M) | | :---------------- | :------ | :------ | :-------------- | :-------- | :-------- | :-------------- | | Petroleum additives | $132.1 | $91.2 | 44.85% | $264.2 | $178.1 | 48.34% | | All other | $(1.0) | $(0.3) | -233.33% | $(2.0) | $(0.2) | -900.00% | Petroleum Additives Operating Metrics | Metric | Q2 2023 | Q2 2022 | 6M 2023 | 6M 2022 | | :-------------------------------- | :------ | :------ | :------ | :------ | | Cost of goods sold as a percentage of net sales | 71.3% | 78.2% | 71.5% | 77.4% | | Operating profit margin | 19.3% | 12.7% | 19.1% | 12.9% | - Gross profit and operating profit benefited from significantly higher selling prices, partially offset by lower shipments and increased operating and raw material costs[88] - Raw material costs stabilized in 2023, but inflationary pressures persist[89] - Research, development, and testing (R&D) expenses decreased approximately $1.4 million in Q2 2023 and $4.5 million for the first six months of 2023, reflecting purposeful spending to support product development and future customer programs[91] Interest and Financing Expenses, Net Interest and financing expenses increased in Q2 and 6M 2023, primarily due to a higher average interest rate despite slightly lower average debt Interest and Financing Expenses, Net (in millions) | Period | 2023 | 2022 | Change | | :----- | :--- | :--- | :----- | | Q2 | $10.3 | $7.1 | $3.2 | | 6M | $21.0 | $16.5 | $4.5 | - The increase was primarily driven by a higher average interest rate, partially offset by lower amortization and fees, and higher capitalized interest[94] Other Income (Expense), Net Other income (expense), net, increased in Q2 and 6M 2023, primarily reflecting components of net periodic benefit cost (income) from pension and postretirement plans Other Income (Expense), Net (in millions) | Period | 2023 | 2022 | Change | | :----- | :--- | :--- | :----- | | Q2 | $10.7 | $9.1 | $1.6 | | 6M | $21.6 | $16.3 | $5.3 | - The amounts primarily reflect components of net periodic benefit cost (income) from defined benefit pension and postretirement plans[95] - The first six months of 2022 also included a $3.0 million loss on marketable securities[95] Income Tax Expense Income tax expense increased in Q2 and 6M 2023 due to higher pre-tax income, with the effective tax rate decreasing in Q2 but slightly increasing for 6M Income Tax Expense and Effective Tax Rate | Metric | Q2 2023 | Q2 2022 | 6M 2023 | 6M 2022 | | :---------------- | :------ | :------ | :------ | :------ | | Income tax expense | $25.1M | $19.1M | $52.7M | $33.3M | | Effective tax rate | 20.1% | 22.4% | 21.1% | 20.9% | - The decrease in Q2 effective tax rate was primarily due to a tax benefit applicable to prior years[98] - The slight increase in the six-month effective tax rate was due to increased U.S. tax on foreign earnings and reduced foreign-derived intangible tax benefit, partially offset by a prior-year tax benefit[98] - The company is monitoring the adoption of a 15% global minimum tax by several jurisdictions, with planned effective dates in 2024 or 2025, which could impact future tax rates[99] Cash Flows, Financial Condition, and Liquidity Cash and cash equivalents significantly increased due to strong operating cash flows and reduced working capital, maintaining a healthy liquidity position for operations and capital expenditures Cash Flows – Operating Activities Operating cash flows surged to $262.4 million in 6M 2023, primarily due to lower working capital requirements from reduced receivables, inventories, and accounts payable Cash Provided from Operating Activities (in millions) | Period | 2023 | 2022 | Change | | :----- | :--- | :--- | :----- | | 6M | $262.4 | $24.4 | $238.0 | - The increase in operating cash flows included $52.5 million reflecting lower working capital requirements, driven by decreases in trade and other accounts receivable (due to VAT refunds), inventories (due to planned destocking and lower demand), and accounts payable (due to destocking and lower production)[104][105] Working Capital and Current Ratio | Metric | June 30, 2023 | Dec 31, 2022 | | :---------------- | :------------ | :----------- | | Total working capital | $791.1M | $768.2M | | Current ratio | 3.27 | 2.81 | Cash Flows – Investing Activities Cash used in investing activities totaled $26.0 million in 6M 2023 for capital expenditures, with $50 million to $60 million expected for full-year 2023, focused on infrastructure improvements Cash Used in Investing Activities (in millions) | Period | 2023 | 2022 | Change | | :----- | :--- | :--- | :----- | | 6M | $(26.0) | $344.3 | $(370.3) | - Capital expenditures for the first six months of 2023 were $26.0 million[107] - Expected total capital spending for 2023 is $50 million to $60 million, primarily for manufacturing and R&D infrastructure improvements[107] Cash Flows – Financing Activities Cash used in financing activities decreased to $175.7 million in 6M 2023, primarily due to revolving credit facility repayments, stock repurchases, and dividend payments Cash Used in Financing Activities (in millions) | Period | 2023 | 2022 | Change | | :----- | :--- | :--- | :----- | | 6M | $(175.7) | $(371.7) | $196.0 | - Financing activities included net payments of $88.0 million on the revolving credit facility, $42.9 million for repurchases of 119,075 shares of common stock, and $41.9 million in cash dividends[108] Debt Long-term debt decreased to $916.2 million at June 30, 2023, from $1.0 billion at Dec 2022, with a Leverage Ratio of 1.70 and debt as 50.6% of total capitalization Long-term Debt and Capitalization | Metric | June 30, 2023 | Dec 31, 2022 | Change | | :-------------------------------- | :------------ | :----------- | :----- | | Long-term debt | $916.2M | $1,003.7M | $(87.5M) | | Leverage Ratio | 1.70 | N/A | N/A | | Long-term debt as % of total capitalization | 50.6% | 56.8% | -6.2% | - The decrease in long-term debt and its percentage of total capitalization was primarily due to reduced outstanding revolving credit facility borrowings and an increase in shareholders' equity[112] Critical Accounting Policies and Estimates No significant changes occurred in critical accounting policies and estimates from the 2022 Annual Report - No significant changes in critical accounting policies and estimates from the 2022 Annual Report[113] Recent Accounting Pronouncements No recent accounting pronouncements are expected to significantly impact the company's financial statements upon adoption - No recent accounting pronouncements are expected to have a significant impact on financial statements[114] Outlook NewMarket targets 10% compounded annual shareholder return, anticipating continued inflation challenges in 2023, but expects 1-2% long-term market growth, utilizing excess cash for internal opportunities, repurchases, and dividends - Stated goal is to provide a 10% compounded return per year for shareholders over any five-year period (EPS growth + dividend yield)[115] - Expects petroleum additives segment to face challenges from inflation and raw material prices in 2023, focusing on cost control and margin recovery[116] - Long-term, the petroleum additives market is expected to grow 1% to 2% annually, and the company plans to exceed this growth rate[116] - Continued investments in organizational talent, technology development, processes, and global infrastructure (technical centers, production capability, geographic expansion) are planned[117] - Excess cash will be utilized for internal opportunities, with a primary focus on acquisitions in the petroleum additives industry, as well as stock repurchases and dividends to enhance shareholder value[118] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk occurred from the 2022 Annual Report disclosures as of June 30, 2023 - No material changes in market risk from the 2022 Annual Report[119] ITEM 4. Controls and Procedures Disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2023, with no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2023[120] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2023[121] PART II. OTHER INFORMATION ITEM 1. Legal Proceedings No material changes to legal proceedings have occurred since the disclosures in the 2022 Annual Report - No material changes to legal proceedings as disclosed in the 2022 Annual Report[123] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds Board approved a $500 million share repurchase program until Dec 2024; 36,589 shares were repurchased for $14.4 million in Q2 2023, with $231 million remaining - Board approved a $500 million share repurchase program until December 31, 2024[124] Issuer Purchases of Equity Securities (Q2 2023) | Period | Total Shares Purchased | Average Price Paid per Share | Approximate Dollar Value Remaining | | :---------------- | :--------------------- | :--------------------------- | :--------------------------------- | | April 1 to April 30 | 3,237 | $360.51 | $244,698,960 | | May 1 to May 31 | 21,776 | $395.55 | $236,085,402 | | June 1 to June 30 | 11,576 | $397.76 | $231,480,913 | | Total (Q2) | 36,589 | $393.15 | $231,480,913 | ITEM 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2023 - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2023[128] ITEM 6. Exhibits Exhibits filed with Form 10-Q include corporate governance documents, incentive compensation plan, officer certifications, and Inline XBRL documents - The exhibits include corporate governance documents (Articles of Incorporation, Bylaws), the 2023 Incentive Compensation and Stock Plan, certifications by principal officers (Rule 13a-14(a) and 18 U.S.C. Section 1350), and Inline XBRL documents[129] SIGNATURES Report Signatures Official signatures of NewMarket Corporation's authorized representatives certify the report filing on July 27, 2023 - The report was signed by William J. Skrobacz (Vice President and Chief Financial Officer) and Gail C. Ridgeway (Controller) on July 27, 2023[131]