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NEWMARKET CORP - Quarter Report: 2012 March (Form 10-Q)

Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

 

 

FORM 10-Q

 

 

 

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

For the quarterly period ended March 31, 2012

OR

 

¨ 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

RICHMOND, VIRGINIA

  23219-4350
(Address of principal executive offices)   (Zip Code)

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

 

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

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

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨    Smaller reporting company   ¨

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, without par value, outstanding as of April 30, 2012: 13,404,831.

 

 

 


Table of Contents

NEWMARKET CORPORATION

I N D E X

 

     Page
Number
 

PART I. FINANCIAL INFORMATION

  

ITEM 1. Financial Statements (unaudited)

  

Consolidated Statements of Income – Three Months Ended March 31, 2012 and March 31, 2011

     3   

Consolidated Statements of Comprehensive Income – Three Months Ended March  31, 2012 and March 31, 2011

     4   

Consolidated Balance Sheets – March 31, 2012 and December 31, 2011

     5   

Consolidated Statements of Shareholders’ Equity – Three Months Ended March  31, 2012 and Year Ended December 31, 2011

     6   

Consolidated Statements of Cash Flows – Three Months Ended March 31, 2012 and March 31, 2011

     7   

Notes to Consolidated Financial Statements

     8 - 31   

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

     32 - 40   

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

     41   

ITEM 4. Controls and Procedures

     41   

PART II. OTHER INFORMATION

  

ITEM 1. Legal Proceedings

     42   

ITEM 6. Exhibits

     43   

SIGNATURES

     44   

 

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Table of Contents
PART I. FINANCIAL INFORMATION

 

ITEM 1. Financial Statements

NEWMARKET CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per-share amounts)

(Unaudited)

 

     Three Months Ended
March 31
 
     2012      2011  

Revenue:

     

Net sales - product

   $ 559,821       $ 505,225   

Rental revenue

     2,858         2,858   
  

 

 

    

 

 

 
     562,679         508,083   
  

 

 

    

 

 

 

Costs:

     

Cost of goods sold - product

     392,075         366,051   

Cost of rental

     1,068         1,068   
  

 

 

    

 

 

 
     393,143         367,119   
  

 

 

    

 

 

 

Gross profit

     169,536         140,964   

Selling, general, and administrative expenses

     36,908         38,424   

Research, development, and testing expenses

     27,895         24,461   
  

 

 

    

 

 

 

Operating profit

     104,733         78,079   

Interest and financing expenses, net

     4,482         4,645   

Loss on early extinguishment of debt

     3,221         0   

Other income (expense), net

     1,773         (67
  

 

 

    

 

 

 

Income before income tax expense

     98,803         73,367   

Income tax expense

     32,256         23,778   
  

 

 

    

 

 

 

Net income

   $ 66,547       $ 49,589   
  

 

 

    

 

 

 

Basic earnings per share

   $ 4.96       $ 3.57   
  

 

 

    

 

 

 

Diluted earnings per share

   $ 4.96       $ 3.57   
  

 

 

    

 

 

 

Shares used to compute basic earnings per share

     13,405         13,890   
  

 

 

    

 

 

 

Shares used to compute diluted earnings per share

     13,405         13,906   
  

 

 

    

 

 

 

Cash dividends declared per common share

   $ 0.75       $ 0.44   
  

 

 

    

 

 

 

See accompanying Notes to the Consolidated Financial Statements.

 

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Table of Contents

NEWMARKET CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

     Three Months Ended
March 31
 
     2012     2011  

Net income

   $ 66,547      $ 49,589   
  

 

 

   

 

 

 

Other comprehensive income:

    

Pension plans and other postretirement benefits:

    

Amortization of prior service cost included in net periodic benefit cost, net of income tax expense of $10 in 2012 and $35 in 2011

     5        65   

Amortization of actuarial net loss included in net periodic benefit cost, net of income tax expense of $545 in 2012 and $358 in 2011

     1,031        650   

Amortization of transition obligation included in net periodic benefit cost, net of income tax expense of $3 in 2012 and $3 in 2011

     10        10   
  

 

 

   

 

 

 

Total pension plans and other postretirement benefits

     1,046        725   

Derivative instruments:

    

Unrealized (loss) gain on derivative instruments, net of income tax (benefit) expense of $(89) in 2012 and $68 in 2011

     (139     110   

Reclassification adjustments for losses on derivative instruments included in net income, net of income tax expense of $155 in 2012 and $161 in 2011

     244        252   
  

 

 

   

 

 

 

Total derivative instruments

     105        362   

Foreign currency translation adjustments, net of income tax expense of $472 in 2012 and $1,097 in 2011

     6,669        8,662   

Unrealized gain on marketable securities, net of income tax expense of $164 in 2012

     265        0   
  

 

 

   

 

 

 

Other comprehensive income

     8,085        9,749   
  

 

 

   

 

 

 

Comprehensive income

   $ 74,632      $ 59,338   
  

 

 

   

 

 

 

See accompanying Notes to Consolidated Financial Statements.

 

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Table of Contents

NEWMARKET CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)

 

     March 31
2012
    December 31
2011
 
ASSETS     

Current assets:

    

Cash and cash equivalents

   $ 72,746      $ 50,370   

Trade and other accounts receivable, less allowance for doubtful accounts ($518 in 2012 and $516 in 2011)

     311,888        278,332   

Inventories:

    

Finished goods and work-in-process

     260,484        249,826   

Raw materials

     47,854        50,037   

Stores, supplies, and other

     6,763        6,922   
  

 

 

   

 

 

 
     315,101        306,785   
  

 

 

   

 

 

 

Deferred income taxes

     5,334        7,261   

Prepaid expenses and other current assets

     39,932        36,983   
  

 

 

   

 

 

 

Total current assets

     745,001        679,731   
  

 

 

   

 

 

 

Property, plant, and equipment, at cost

     1,046,349        1,034,472   

Less accumulated depreciation and amortization

     692,524        681,506   
  

 

 

   

 

 

 

Net property, plant, and equipment

     353,825        352,966   
  

 

 

   

 

 

 

Prepaid pension cost

     12,596        11,494   

Deferred income taxes

     34,242        35,805   

Other assets and deferred charges

     71,478        73,619   

Intangibles (net of amortization) and goodwill

     36,355        38,047   
  

 

 

   

 

 

 

Total assets

   $ 1,253,497      $ 1,191,662   
  

 

 

   

 

 

 
LIABILITIES AND SHAREHOLDERS’ EQUITY     

Current liabilities:

    

Accounts payable

   $ 119,608      $ 103,217   

Accrued expenses

     65,383        78,546   

Dividends payable

     8,521        8,529   

Book overdraft

     7,712        1,680   

Long-term debt, current portion

     10,798        10,966   

Income taxes payable

     28,931        13,086   
  

 

 

   

 

 

 

Total current liabilities

     240,953        216,024   
  

 

 

   

 

 

 

Long-term debt

     209,831        232,601   

Other noncurrent liabilities

     188,542        193,444   

Commitments and contingencies (Note 8)

    

Shareholders’ equity:

    

Common stock and paid-in capital (without par value; authorized shares - 80,000,000; issued and outstanding shares - 13,404,831 at March 31, 2012 and December 31, 2011

     64        64   

Accumulated other comprehensive loss

     (90,647     (98,732

Retained earnings

     704,754        648,261   
  

 

 

   

 

 

 
     614,171        549,593   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 1,253,497      $ 1,191,662   
  

 

 

   

 

 

 

See accompanying Notes to Consolidated Financial Statements.

 

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Table of Contents

NEWMARKET CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands, except share and per-share amounts)

(Unaudited)

 

                 Accumulated              
     Common Stock and     Other           Total  
     Paid in-Capital     Comprehensive     Retained     Shareholders’  
     Shares     Amount     Loss     Earnings     Equity  

Balance at December 31, 2010

     14,034,884      $ 0      $ (73,820   $ 565,460      $ 491,640   

Net income

           206,907        206,907   

Other comprehensive loss

         (24,912       (24,912

Cash dividends ($2.39 per share)

           (32,588     (32,588

Repurchases of common stock

     (659,373     (3,237       (91,518     (94,755

Stock options exercised

     16,000        70            70   

Stock option tax benefit

       1,102            1,102   

Issuance of stock

     13,320        2,129            2,129   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2011

     13,404,831        64        (98,732     648,261        549,593   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

           66,547        66,547   

Other comprehensive income

         8,085          8,085   

Cash dividends ($0.75 per share)

           (10,054     (10,054
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2012

     13,404,831      $ 64      $ (90,647   $ 704,754      $ 614,171   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying Notes to Consolidated Financial Statements.

 

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NEWMARKET CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

     Three Months Ended
March 31
 
     2012     2011  

Cash and cash equivalents at beginning of year

   $ 50,370      $ 49,192   
  

 

 

   

 

 

 

Cash flows from operating activities:

    

Net income

     66,547        49,589   

Adjustments to reconcile net income to cash flows from operating activities:

    

Depreciation and other amortization

     10,065        10,167   

Amortization of deferred financing costs

     417        379   

Noncash environmental remediation and dismantling

     251        187   

Noncash pension benefits expense

     3,792        3,167   

Noncash postretirement benefits expense

     993        799   

Noncash foreign exchange (gain) loss

     1,215        1,296   

Deferred income tax expense

     3,077        3,243   

Loss on early extinguishment of debt

     3,221        0   

Unrealized loss (gain) on derivative instruments, net

     (4,208     (3,369

Working capital changes

     (22,877     (45,598

Realized loss (gain) on derivative instruments, net

     2,474        2,503   

Cash pension benefits contributions

     (7,355     (7,253

Cash postretirement benefits contributions

     (628     (458

Change in book overdraft

     6,032        1,849   

Other, net

     74        (305
  

 

 

   

 

 

 

Cash provided from (used in) operating activities

     63,090        16,196   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Capital expenditures

     (7,432     (24,151

Deposits for interest rate swap

     (5,079     (11,408

Return of deposits for interest rate swap

     8,340        14,480   

Payments on settlement of interest rate swap

     (2,574     (2,574

Receipts from settlement of interest rate swap

     100        71   

Proceeds from sale of short-term investment

     0        300   
  

 

 

   

 

 

 

Cash provided from (used in) investing activities

     (6,645     (23,282
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Net (repayments) borrowings under revolving credit agreements

     (22,000     37,000   

Repayment on Foundry Park I mortgage loan

     (715     (664

Net (repayments) borowings under lines of credit

     (223     71   

Repurchases of common stock

     0        (27,427

Dividends paid

     (10,054     (903

Debt issuance costs

     (2,351     (2,233

Proceeds from exercise of stock options

     0        4   

Payments on the capital lease

     0        (144
  

 

 

   

 

 

 

Cash provided from (used in) financing activities

     (35,343     5,704   
  

 

 

   

 

 

 

Effect of foreign exchange on cash and cash equivalents

     1,274        1,993   
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     22,376        611   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 72,746      $ 49,803   
  

 

 

   

 

 

 

See accompanying Notes to Consolidated Financial Statements.

 

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Table of Contents

NEWMARKET CORPORATION AND SUBSIDIARIES

NOTES TO 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 statement of, in all material respects, our consolidated financial position as of March 31, 2012 and December 31, 2011, the change in our shareholders’ equity for the three months ended March 31, 2012 and the year ended December 31, 2011, and our consolidated results of operations, comprehensive income, and cash flows for the three months ended March 31, 2012 and March 31, 2011. 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, 2011 (2011 Annual Report), as filed with the Securities and Exchange Commission (SEC). The results of operations for the three month period ended March 31, 2012 are not necessarily indicative of the results to be expected for the full year ending December 31, 2012. The December 31, 2011 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.

At both March 31, 2012 and December 31, 2011, we had a book overdraft for some of our disbursement cash accounts. A book overdraft represents disbursements that have not cleared the bank accounts at the end of the reporting period. There are no agreements with the same banks to offset the presented balance. We transfer cash on an as-needed basis to fund these items as they clear the bank in subsequent periods.

Cash dividends for the three months ended March 31, 2012 and March 31, 2011 were declared and paid as shown in the table below.

 

Year

   Date Declared      Date Paid      Per Share
Amount
 

2012

     February 23, 2012         April 2, 2012         75.0 cents   

2011

     February 17, 2011         April 1, 2011         44.0 cents   

 

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2. Asset Retirement Obligations

Our asset retirement obligations are related primarily to our tetraethyl lead (TEL) operations. The following table illustrates the activity associated with our asset retirement obligations for the three months ended March 31, 2012 and March 31, 2011.

 

     2012     2011  
     (in thousands)  

Asset retirement obligations, January 1

   $ 3,297      $ 2,975   

Accretion expense

     43        37   

Liabilities settled

     (128     0   

Changes in expected cash flows and timing

     98        0   
  

 

 

   

 

 

 

Asset retirement obligations, March 31

   $ 3,310      $ 3,012   
  

 

 

   

 

 

 

 

3. Segment Information

The tables below show our consolidated segment results. The “All other” category includes the operations of the TEL business, as well as certain contract manufacturing performed by Ethyl Corporation (Ethyl).

Consolidated Revenue by Segment

(in millions)

 

     Three Months Ended
March 31
 
     2012      2011  

Petroleum additives

   $ 557.7       $ 502.7   

Real estate development

     2.9         2.9   

All other

     2.1         2.5   
  

 

 

    

 

 

 

Consolidated revenue

   $ 562.7       $ 508.1   
  

 

 

    

 

 

 

 

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Segment Operating Profit

(in millions)

 

     Three Months Ended
March 31
 
     2012     2011  

Petroleum additives

   $ 107.2      $ 80.6   

Real estate development

     1.8        1.8   

All other

     0.5        0.2   
  

 

 

   

 

 

 

Segment operating profit

     109.5        82.6   

Corporate, general, and administrative expenses

     (5.5     (4.1

Interest and financing expenses, net

     (4.5     (4.6

Gain on interest rate swap agreement (a)

     1.7        0.9   

Loss on early extinguishment of debt (b)

     (3.2     0.0   

Other income (expense), net

     0.8        (1.4
  

 

 

   

 

 

 

Income before income tax expense

   $ 98.8      $ 73.4   
  

 

 

   

 

 

 

 

(a) The gain on interest rate swap represents the change, since the beginning of the reporting period, in the fair value of an interest rate swap which we entered into on June 25, 2009. We are not using hedge accounting to record the interest rate swap, and accordingly, any change in the fair value is immediately recognized in earnings.
(b) In March 2012, we entered into a $650 million five-year unsecured revolving credit facility which replaced our previous $300 million unsecured revolving credit facility. In April 2012, we used a portion of this larger credit facility to fund the early redemption of all of our outstanding 7.125% senior notes (senior notes) due 2016, representing an aggregate principal amount of $150 million. In May 2012, we intend to use this credit facility to repay the outstanding balance on the mortgage loan secured by the Foundry Park I office building. As a result, during the three months ended March 31, 2012, we recognized a loss on early extinguishment of debt of $3.2 million from accelerated amortization of financing fees associated with the prior revolving credit facility and costs associated with redeeming the senior notes prior to maturity.

Segment Depreciation and Amortization

(in millions)

 

     Three Months Ended
March 31
 
     2012      2011  

Petroleum additives

   $ 8.8       $ 8.9   

Real estate development

     1.0         0.9   

All other and corporate

     0.7         0.7   
  

 

 

    

 

 

 

Total depreciation and amortization

   $ 10.5       $ 10.5   
  

 

 

    

 

 

 

 

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4. Pension and Postretirement Benefit Plans

The table below shows cash contributions made during the three months ended March 31, 2012, as well as expected remaining contributions for the year ending December 31, 2012, for both our domestic and foreign pension plans and postretirement benefit plans.

 

     Actual Cash
Contributions for
Three Months Ended
March 31, 2012
     Expected Remaining
Cash Contributions
for Year Ending
December 31, 2012
 
     (in thousands)  

Domestic plans

     

Pension benefits

   $ 5,644       $ 16,932   

Postretirement benefits

     577         1,730   

Foreign plans

     

Pension benefits

     1,711         4,898   

Postretirement benefits

     51         152   

 

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The tables below present information on net periodic benefit cost for our pension and postretirement benefit plans.

 

00000000 00000000 00000000 00000000
     Domestic  
     Pension Benefits     Postretirement Benefits  
     Three Months Ended March 31  
     2012     2011     2012     2011  
           (in thousands)        

Service cost

   $ 2,157      $ 1,691      $ 522      $ 353   

Interest cost

     2,359        2,247        787        843   

Expected return on plan assets

     (3,301     (2,837     (373     (399

Amortization of prior service cost

     53        76        2        2   

Amortization of actuarial net loss (gain)

     1,292        798        0        (74
  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic benefit cost

   $ 2,560      $ 1,975      $ 938      $ 725   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

00000000 00000000 00000000 00000000
     Foreign  
     Pension Benefits     Postretirement Benefits  
     Three Months Ended March 31  
     2012     2011     2012      2011  
           (in thousands)         

Service cost

   $ 1,167      $ 1,033      $ 7       $ 8   

Interest cost

     1,333        1,449        27         38   

Expected return on plan assets

     (1,506     (1,576     0         0   

Amortization of prior service (credit) cost

     (38     21        0         0   

Amortization of transition obligation

     0        0        13         13   

Amortization of actuarial net loss (gain)

     276        265        8         15   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net periodic benefit cost

   $ 1,232      $ 1,192      $ 55       $ 74   
  

 

 

   

 

 

   

 

 

    

 

 

 

 

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5. Earnings Per Share

Basic and diluted earnings per share are calculated as shown in the table below. Options are not included in the computation of diluted earnings per share when the option exercise price exceeds the average market price of the underlying common share, as the impact on earnings per share would be anti-dilutive. We had no anti-dilutive options that were excluded from the calculation of earnings per share for any period presented.

 

     Three Months Ended
March 31
 
     2012      2011  
    

(in thousands, except per-

share amounts)

 

Basic earnings per share

     

Numerator:

     

Net income

   $ 66,547       $ 49,589   
  

 

 

    

 

 

 

Denominator:

     

Weighted-average number of shares of common stock outstanding

     13,405         13,890   
  

 

 

    

 

 

 

Basic earnings per share

   $ 4.96       $ 3.57   
  

 

 

    

 

 

 

Diluted earnings per share

     

Numerator:

     

Net income

   $ 66,547       $ 49,589   
  

 

 

    

 

 

 

Denominator:

     

Weighted-average number of shares of common stock outstanding

     13,405         13,890   

Shares issuable upon exercise of stock options

     0         16   
  

 

 

    

 

 

 

Total shares

     13,405         13,906   
  

 

 

    

 

 

 

Diluted earnings per share

   $ 4.96       $ 3.57   
  

 

 

    

 

 

 

 

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6. Intangibles (Net of Amortization) and Goodwill

The following table provides certain information related to our intangible assets. All of the intangibles relate to the petroleum additives segment. The change in the goodwill amount between 2011 and 2012 is due to foreign currency fluctuations.

 

     Identifiable Intangibles  
     March 31
2012
     December 31
2011
 
     Gross
Carrying
Amount
     Accumulated
Amortization
     Gross
Carrying
Amount
     Accumulated
Amortization
 
     (in thousands)  

Amortizing intangible assets

           

Formulas and technology

   $ 91,630       $ 70,731       $ 91,552       $ 69,387   

Contracts

     16,380         12,484         16,380         12,139   

Customer bases

     7,062         1,985         7,050         1,855   

Trademarks and trade names

     1,621         335         1,609         295   

Goodwill

     5,197            5,132      
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 121,890       $ 85,535       $ 121,723       $ 83,676   
  

 

 

    

 

 

    

 

 

    

 

 

 

Amortization expense was (in millions):

 

• Three months ended March 31, 2012

   $ 1.9   

• Three months ended March 31, 2011

   $ 2.2   

Estimated amortization expense for the remainder of 2012, as well as annual amortization expense related to our intangible assets for the next five years is expected to be (in millions):

 

• 2012

   $ 5.6   

• 2013

     7.1   

• 2014

     6.2   

• 2015

     5.8   

• 2016

     1.9   

• 2017

     0.7   

Generally, we amortize the cost of the customer base intangibles by an accelerated method and the cost of the remaining intangible assets by the straight-line method over their estimated economic lives. We generally amortize contracts over 1.5 to 10 years; customer bases over 20 years; and formulas and technology over 5 to 20 years. Trademarks and trade names are amortized over 10 years.

 

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7. Long-term Debt

Long-term debt consisted of:

 

     March 31
2012
    December 31
2011
 
     (in thousands)  

Senior notes - 7.125% due 2016

   $ 150,000      $ 150,000   

Foundry Park I mortgage loan - due 2015

     62,829        63,544   

Revolving credit facilities

     0        22,000   

Lines of credit

     7,800        8,023   
  

 

 

   

 

 

 
     220,629        243,567   

Current maturities of long-term debt

     (10,798     (10,966
  

 

 

   

 

 

 
   $ 209,831      $ 232,601   
  

 

 

   

 

 

 

Revolving Credit Facility – On March 14, 2012, we entered into a new Credit Agreement (Credit Agreement) with a term of five years, which replaced our previous $300 million revolving credit facility. The Credit Agreement provides for a $650 million, multicurrency revolving credit facility, with a $100 million sublimit for multicurrency borrowings, a $100 million sublimit for letters of credit, and a $20 million sublimit for swingline loans. The Credit Agreement includes an expansion feature, which allows us, subject to certain conditions, to request an increase to the aggregate amount of the revolving credit facility or obtain incremental term loans in an amount up to $150 million.

We paid financing costs in the first three months 2012 of approximately $2.4 million related to this revolving credit facility and carried over deferred financing costs from our previous revolving credit facility of approximately $1.8 million, resulting in total deferred financing costs of $4.2 million, which we are amortizing over the term of the Credit Agreement.

The obligations under the Credit Agreement are unsecured and are fully guaranteed by NewMarket and the subsidiary guarantors. The revolving credit facility matures on March 14, 2017.

Borrowings made under the revolving credit facility bear interest at an annual rate equal to, at our election, either (1) the ABR plus the Applicable Rate (solely in the case of loans denominated in U.S. dollars to NewMarket) or (2) the Adjusted LIBO Rate plus the Applicable Rate. ABR is the greatest of (i) the rate of interest publicly announced by the Administrative Agent as its prime rate, (ii) the federal funds effective rate plus 0.5%, or (iii) the Adjusted LIBO Rate for a one month interest period plus 1%. The Adjusted LIBO Rate means the rate at which Eurocurrency deposits in the London interbank market for certain periods (as selected by NewMarket) are quoted, as adjusted for statutory reserve requirements for Eurocurrency liabilities and other applicable mandatory costs. Depending on our consolidated Leverage Ratio, the Applicable Rate ranges from 0.50% to 1.00% for loans bearing interest based on the ABR and from 1.50% to 2.00% for loans bearing interest based on the Adjusted LIBO Rate. At March 31, 2012, the Applicable Rate was 0.50% for loans bearing interest based on the ABR and 1.50% for loans bearing interest based on the Adjusted LIBO Rate.

The Credit Agreement contains financial covenants that require NewMarket to maintain a consolidated Leverage Ratio (as defined in the Credit Agreement) of no more than 3.00 to 1.00 and a consolidated Interest Coverage Ratio (as defined in the Credit Agreement) of no less than 3.00 to 1.00, calculated on a rolling four quarter basis, as of the end of each fiscal quarter ending on and after March 31, 2012.

 

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We were in compliance with all covenants under our debt agreements at March 31, 2012 and at December 31, 2011.

The following table provides information related to the unused portion of our revolving credit facility in effect at March 31, 2012 and December 31, 2011:

 

     March 31
2012
     December 31
2011
 
     (in millions)  

Maximum borrowing capacity under the revolving credit facility

   $ 650.0       $ 300.0   

Outstanding borrowings under the revolving credit facility

     0.0         22.0   

Outstanding letters of credit

     6.1         6.1   
  

 

 

    

 

 

 

Unused portion of revolving credit facility

   $ 643.9       $ 271.9   
  

 

 

    

 

 

 

For further information on the outstanding letters of credit, see Note 8. The average interest rate for borrowings under our revolving credit facility was 3.29% during the first three months of 2012 and 2.90% during 2011.

Senior Notes – On March 15, 2012, at our request, Wells Fargo Bank, N.A., as trustee, issued a notice of redemption for all of our outstanding 7.125% senior notes due 2016, representing an aggregate principal amount of $150 million. Under the indenture governing the senior notes, the redemption price is 103.563% of the outstanding aggregate principal amount, plus accrued and unpaid interest to the redemption date. Subsequently, on April 16, 2012, all of the senior notes were redeemed. We used borrowings under our revolving credit facility to finance the redemption. Through redemption, we will recognize total expenses of approximately $8.5 million ($2.7 million during the first quarter 2012 and $5.8 million during the second quarter 2012) related to the prepayment premium and unamortized financing costs on the senior notes.

Foundry Park I Mortgage Loan – Also, in early May 2012, we intend to pay in full the outstanding principal amount on the Foundry Park I, LLC mortgage loan agreement (mortgage loan). There will be no prepayment penalty incurred. We expect to utilize borrowings under our revolving credit facility to finance the payment. Concurrently with the payoff of the mortgage loan agreement, the interest rate swap associated with the mortgage loan will also terminate. See Note 9 for information on the interest rate swap. Upon the payoff of the mortgage loan, we will recognize expense of approximately $0.8 million related to the unamortized financing costs on the loan.

 

8. Contractual Commitments and Contingencies

The information below provides information on certain contractual commitments and contingencies.

Litigation

We are involved in legal proceedings that are incidental to our business and include administrative or judicial actions seeking remediation under environmental laws, such as Superfund. Some of these legal proceedings relate to environmental matters and involve governmental authorities. 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 financial condition, results of operations, or cash flows.

 

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As we previously disclosed, the United States Department of Justice has advised us that it is conducting a review of certain of our foreign business activities in relation to compliance with relevant U.S. economic sanctions programs and anti-corruption laws, as well as certain historical conduct in the domestic U.S. market, and has requested certain information in connection with such review. We are cooperating with the investigation. In connection with such cooperation, we have voluntarily agreed to provide certain information and are conducting an internal review for that purpose.

Environmental

During 2000, the U.S. Environmental Protection Agency (EPA) named us as a potentially responsible party (PRP) under Superfund law for the clean-up of soil and groundwater contamination at the five grouped disposal sites known as “Sauget Area 2 Sites” in Sauget, Illinois. Without admitting any fact, responsibility, fault, or liability in connection with this site, we are participating with other PRPs in site investigations and feasibility studies. The Sauget Area 2 Sites PRPs received notice of approval from the EPA of their October 2009 Human Health Risk Assessment and approval of the Remedial Investigation report on February 27, 2009. The PRPs expect to submit their revised Feasibility Study (FS) to the EPA later this year. We have accrued our estimated proportional share of the expenses for the FS, as well as our best estimate of our proportional share of the remediation liability proposed in our ongoing discussions and submissions with the agencies involved. We do not believe there is any additional information available as a basis for revision of the liability that we have established. The amount accrued for this site is not material.

The accruals for environmental remediation, dismantling, and decontamination at our most significant environmental remediation sites are shown below. At the former TEL plant site shown in the table below, we have completed significant environmental remediation, although we will be monitoring and treating the site for an extended period. The accruals below have been discounted to present value, and include an inflation factor in the estimate. The remaining environmental liabilities not shown separately below are not discounted.

 

     March 31, 2012     December 31, 2011  
     Former TEL
Plant Site,
Louisiana
    Houston,
Texas Plant
Site
    Superfund
Site,
Louisiana
    Former TEL
Plant Site,
Louisiana
    Houston,
Texas Plant
Site
    Superfund
Site,
Louisiana
 
                 (in millions)              

Accrual, discounted

   $ 5.9      $ 7.3      $ 3.1      $ 6.1      $ 7.4      $ 3.1   

Accrual, undiscounted

     7.5        10.0        4.1        7.7        10.2        4.0   

Discount rate for accrual

     3     3     3     3     3     3

Expected future payments:

            

2012

   $ 0.5      $ 1.0      $ 0.0         

2013

     0.6        0.5        0.0         

2014

     0.6        1.6        0.3         

2015

     0.6        0.2        0.3         

2016

     0.6        0.2        0.3         

Thereafter

     4.6        6.5        3.2         

Of the total accrual at the Houston, Texas plant site, $7.0 million at both March 31, 2012 and December 31, 2011 relates to remediation. Of the total remediation, $6.5 million at both March 31, 2012 and December 31, 2011 relates to remediation of groundwater and soil.

 

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Table of Contents

We accrue for environmental remediation and monitoring activities for which costs can be reasonably estimated and are probable. These estimates are based on an assessment of the site, available clean-up methods, and prior experience in handling remediation. While we believe we are currently fully accrued for known environmental issues, it is possible that unexpected future costs could have a significant impact on our financial position, results of operations, and cash flows.

Our total accruals for environmental remediation were approximately $21.6 million at March 31, 2012 and $21.7 million at December 31, 2011. In addition to the accruals for environmental remediation, we also have accruals for dismantling and decommissioning costs of $600 thousand at both March 31, 2012 and December 31, 2011.

Letters of Credit and Guarantees

We have outstanding guarantees with several financial institutions in the amount of $59.8 million at March 31, 2012. The guarantees are secured by letters of credit, as well as cash collateral. A portion of these guarantees is unsecured. The outstanding letters of credit amounted to $6.1 million at March 31, 2012, all of which were issued under the letter of credit sub-facility of our revolving credit facility. The letters of credit primarily relate to insurance and performance guarantees. The remaining amounts represent additional performance, lease, custom, and excise tax guarantees, as well as a cash deposit of $32.8 million related to the Goldman Sachs Bank USA (Goldman Sachs) interest rate swap. The cash deposit is recorded in “Other assets and deferred charges” on the Consolidated Balance Sheets. Expiration dates of the letters of credit and certain guarantees range from 2012 to 2014. Some of the guarantees have no expiration date. We renew letters of credit as necessary.

We cannot estimate the maximum amount of potential liability under the guarantees. However, we accrue for potential liabilities when a future payment is probable and the range of loss can be reasonably estimated.

 

9. Derivatives and Hedging Activities

We are exposed to certain risks arising from both our business operations and economic conditions. We primarily manage our exposures to a wide variety of business and operational risks through management of our core business activities.

We manage certain economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of our debt funding, as well as through the use of derivative financial instruments. Specifically, we have entered into interest rate swaps to manage our exposure to interest rate movements.

Our foreign operations expose us to fluctuations of foreign exchange rates. These fluctuations may impact the value of our cash receipts and payments as compared to our reporting currency, the U.S. Dollar. To manage this exposure, we sometimes enter into foreign currency forward contracts to minimize currency exposure due to cash flows from foreign operations.

Cash Flow Hedge of Interest Rate Risk

In January 2010, we entered into an interest rate swap to manage our exposure to interest rate movements on the mortgage loan and to reduce variability in interest expense. Further information on the mortgage loan is in Note 12 in our 2011 Annual Report. We also had an interest rate swap to manage our exposure to interest rate movements on the Foundry Park I

 

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Table of Contents

construction loan and add stability to capitalized interest expense. The Foundry Park I construction loan interest rate swap matured on January 1, 2010. Both interest rate swaps are designated and qualify as a cash flow hedge. As such, the effective portion of changes in the fair value of the swaps is recorded in accumulated other comprehensive loss and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Any ineffective portion of changes in the fair value of the swap is recognized immediately in earnings. We assess the effectiveness of the mortgage loan interest rate swap quarterly by comparing the changes in the fair value of the derivative hedging instrument with the change in present value of the expected future cash flows of the hedged transaction.

The mortgage loan interest rate swap involves the receipt of variable-rate amounts based on LIBOR in exchange for fixed-rate payments over the life of the agreement without exchange of the underlying notional amount. The fixed-rate payments are at a rate of 2.642% for the mortgage loan interest rate swap. The notional amount of the mortgage loan interest rate swap was $68.4 million at origination and approximately $62.8 million at March 31, 2012. The notional amount of the mortgage loan interest rate swap amortizes to approximately $54 million over the term of the swap. The amortizing notional amount is necessary to maintain the swap notional at an amount that matches the declining mortgage loan principal balance over the loan term. The mortgage loan interest swap matures on January 29, 2015. We expect that the mortgage loan interest rate swap will be terminated in early May 2012 upon the payment in full of the mortgage loan. See Note 7 for additional information.

The unrealized loss, net of tax, related to the fair value of the mortgage loan interest rate swap is recorded in accumulated other comprehensive loss in shareholders’ equity on the Consolidated Balance Sheets, and amounted to approximately $2.1 million at March 31, 2012 and $2.2 million at December 31, 2011. Also recorded as a component of accumulated other comprehensive loss in shareholders’ equity on the Consolidated Balance Sheets is the accumulated losses related to the construction loan interest rate swap of approximately $2.5 million, net of tax, at March 31, 2012 and $2.6 million at December 31, 2011. The amount remaining in accumulated other comprehensive loss related to the construction loan interest rate swap is being recognized in the Consolidated Statements of Income over the depreciable life of the office building beginning in January 2010. Approximately $900 thousand, net of tax, currently recognized in accumulated other comprehensive loss related to both the construction loan interest rate swap and the mortgage loan interest rate swap is expected to be reclassified into earnings over the next twelve months.

Non-designated Hedges

On June 25, 2009, we entered into an interest rate swap with Goldman Sachs in the notional amount of $97 million and with a maturity date of January 19, 2022 (Goldman Sachs interest rate swap). NewMarket entered into the Goldman Sachs interest rate swap in connection with the termination of a loan application and related rate lock agreement between Foundry Park I and Principal Commercial Funding II, LLC (Principal). When the rate lock agreement was originally executed in 2007, Principal simultaneously entered into an interest rate swap with a third party to hedge Principal’s exposure to fluctuation in the ten-year United States Treasury Bond rate. Upon the termination on June 25, 2009 of the rate lock agreement, Goldman Sachs both assumed Principal’s position with the third party and entered into an offsetting interest rate swap with NewMarket. Under the terms of this interest rate swap, NewMarket is making fixed rate payments at 5.3075% and Goldman Sachs makes variable rate payments based on three-month LIBOR. We have collateralized this exposure through cash deposits posted with Goldman Sachs amounting to $32.8 million at March 31, 2012. This transaction effectively preserves the impact of the original rate lock agreement for the possible application to a future loan of a similar structure.

 

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Table of Contents

We do not use hedge accounting for the Goldman Sachs interest rate swap, and therefore, immediately recognize any change in the fair value of this derivative financial instrument directly in earnings.

*****

The table below presents the fair value of our derivative financial instruments, as well as their classification on the Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011.

Fair Value of Derivative Instruments

(in thousands)

 

     Asset Derivatives      Liability Derivatives  
     March 31, 2012      December 31, 2011      March 31, 2012      December 31, 2011  
     Balance
Sheet
Location
   Fair Value      Balance
Sheet
Location
   Fair Value      Balance
Sheet
Location
   Fair Value      Balance
Sheet
Location
   Fair Value  

Derivatives Designated as Hedging Instruments

                                               

Mortgage loan interest rate swap

      $ 0          $ 0       Accrued
expenses
and Other
noncurrent
liabilities
   $ 3,542       Accrued
expenses
and Other
noncurrent
liabilities
   $ 3,692   
     

 

 

       

 

 

       

 

 

       

 

 

 

Derivatives Not Designated as Hedging
Instruments

                                               

Goldman Sachs interest rate swap

      $ 0          $ 0       Accrued
expenses
and Other
noncurrent
liabilities
   $ 27,889       Accrued
expenses
and Other
noncurrent
liabilities
   $ 32,098   
     

 

 

       

 

 

       

 

 

       

 

 

 

The total fair value reflected in the table above includes amounts recorded in accrued expenses of approximately $130 thousand at both March 31, 2012 and December 31, 2011 for the mortgage loan interest rate swap and approximately $0.9 million at March 31, 2012 and $2.2 million at December 31, 2011 for the Goldman Sachs interest rate swap.

 

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Table of Contents

The tables below present the effect of our derivative financial instruments on the Consolidated Statements of Income.

Effect of Derivative Instruments on the Consolidated Statements of Income

Designated Cash Flow Hedges

(in thousands)

 

Derivatives in Cash Flow
Hedging Relationship

  Amount of Gain (Loss)
Recognized in OCI on
Derivative  (Effective
Portion)
    Location of
Gain (Loss)
Reclassified

from
Accumulated
OCI into
Income
(Effective
Portion)
  Amount of Gain (Loss)
Reclassified from
Accumulated OCI into
Income (Effective
Portion)
    Location of
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective

Portion and
Amount
Excluded from
Effectiveness
Testing)
  Amount of Gain  (Loss)
Recognized in Income
on Derivative
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)
 
    Three Months Ended
March 31
        Three Months Ended
March 31
        Three Months Ended March 31  
    2012     2011         2012     2011         2012     2011  

Mortgage loan interest rate swap

  $ (228   $ 178      Interest and
financing expenses
  $ (378   $ (392     $ 0      $ 0   
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

 

Construction loan interest rate swap

  $ 0      $ 0      Cost of rental   $ (21   $ (21     $ 0      $ 0   
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

 

Effect of Derivative Instruments on the Consolidated Statements of Income

Not Designated Derivatives

(in thousands)

 

Derivatives Not Designated as Hedging Instruments

 

Location of Gain (Loss)
Recognized in Income on

Derivatives

  Amount of Gain (Loss)
Recognized in Income  on
Derivatives
 
        Three Months Ended
March 31
 
        2012     2011  

Goldman Sachs interest rate swap

  Other income (expense), net   $ 1,735      $ 866   
   

 

 

   

 

 

 

Credit-risk-related Contingent Features

We have agreements with both of our current derivative counterparties that contain a provision where we could be declared in default on our derivative obligations if repayment of indebtedness is accelerated by our lender(s) due to our default on the indebtedness.

As of March 31, 2012, the fair value of derivatives in a net liability position related to these agreements, which includes accrued interest but excludes any adjustment for nonperformance risk, was $31.0 million. We have minimum collateral posting thresholds with one of our derivative counterparties and have posted cash collateral of $32.8 million as of March 31, 2012. If required, we could have settled our obligations under the agreements at their termination value of $31.0 million at March 31, 2012.

 

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Table of Contents
10. Comprehensive Income 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:

 

     Pension Plans
and Other
Postretirement
Benefits
    Derivative
Instruments
    Foreign
Currency
Translation
Adjustments
    Unrealized
Gain on
Marketable
Securities
     Accumulated
Other
Comprehensive
Loss
 
     (in thousands)  

Balance at January 1, 2011

   $ (51,562   $ (4,151   $ (18,107   $ 0       $ (73,820

Other comprehensive income (loss)

     (24,854     (585     163        364         (24,912
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance at December 31, 2011

     (76,416     (4,736     (17,944     364         (98,732

Other comprehensive income (loss)

     1,046        105        6,669        265         8,085   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance at March 31, 2012

   $ (75,370   $ (4,631   $ (11,275   $ 629       $ (90,647
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

11. Fair Value Measurements

The following table provides information on assets and liabilities measured at fair value on a recurring basis. No events occurred during the three months ended March 31, 2012 requiring adjustment to the recognized balances of assets or liabilities which are recorded at fair value on a nonrecurring basis.

 

     Carrying
Amount in
Consolidated
            Fair Value Measurements Using  
     Balance Sheets      Fair Value      Level 1      Level 2      Level 3  
     March 31, 2012  
            (in thousands)                

Cash and cash equivalents

   $ 72,746       $ 72,746       $ 72,746       $ 0       $ 0   

Marketable securities

     5,637         5,637         0         5,637         0   

Interest rate swaps liability

     31,431         31,431         0         31,431         0   
     December 31, 2011  
    

(in thousands)

 

Cash and cash equivalents

   $ 50,370       $ 50,370       $ 50,370       $ 0       $ 0   

Marketable securities

     5,208         5,208         0         5,208         0   

Interest rate swaps liability

     35,790         35,790         0         35,790         0   

We determine the fair value of the derivative instruments shown in the table above by using widely-accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each instrument. The analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs.

The fair value of the interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash

 

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payments. The variable cash payments are based on an expectation of future interest rates derived

from observable market interest rate curves. In determining the fair value measurements, we incorporate credit valuation adjustments to appropriately reflect both our nonperformance risk and the counterparties’ nonperformance risk.

Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustment associated with the derivatives utilizes Level 3 inputs. These Level 3 inputs include estimates of current credit spreads to evaluate the likelihood of default by both us and the counterparties to the derivatives. As of March 31, 2012 and December 31, 2011, we have assessed the significance of the impact of the credit valuation adjustment on the overall valuation of our derivatives and have determined that the credit valuation adjustment is not significant to the overall valuation of the derivatives. Accordingly, we have determined that our derivative valuations should be classified in Level 2 of the fair value hierarchy.

In conjunction with the Financial Accounting Standards Board guidance on fair value measurement, we have made an accounting policy election to measure credit risk of any derivative financial instruments subject to master netting agreements on a net basis by counterparty portfolio.

The marketable securities in the table above represent the 195,313 shares of unregistered Innospec Inc. common stock that we own. See Note 18 in the 2011 Annual Report for further information. The fair value of the common stock is determined using the closing market price of Innospec Inc. common stock at March 31, 2012, discounted for transfer restrictions on the shares. While the Innospec Inc. common stock is traded on a national exchange and the market price is a Level 1 input in the fair value hierarchy, the discount factor utilizes Level 3 inputs. We have assessed the significance of the impact of the discount factor adjustment on the overall valuation of the marketable securities and have determined that it is not significant to the overall valuation of the marketable securities. Accordingly, we have determined that our marketable securities valuation should be classified in Level 2 of the fair value hierarchy as the valuation relies on quoted prices for similar assets in an active market.

Long-term Debt – We record the value of our long-term debt at historical cost. 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 is determined by the market standard practice of modeling the contractual cash flows required under the debt instrument and discounting the cash flows back to present value at the appropriate credit-risk adjusted market interest rates. For floating rate debt obligations, we use forward rates, derived from observable market yield curves, to project the expected cash flows we will be required to make under the debt instrument. We then discount those cash flows back to present value at the appropriate credit-risk adjusted market interest rates. The fair value is categorized as Level 2.

 

     March 31, 2012      December 31, 2011  
            (in thousands)         
     Carrying
Amount
     Fair
Value
     Carrying
Amount
     Fair
Value
 

Long-term debt, including current maturities

   $ 220,629       $ 232,716       $ 243,567       $ 252,557   

 

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Table of Contents
12. Consolidating Financial Information

The senior notes are guaranteed by certain of our subsidiaries (Guarantor Subsidiaries) on a joint and several unsecured senior basis. The senior notes include a provision which allows for a Guarantor Subsidiary to be released of any obligation under the subsidiary guarantee under certain conditions. Those conditions include the sale or other disposition of all or substantially all of the Guarantor Subsidiary’s assets. The Guarantor Subsidiaries include all of our existing and future 100% owned domestic restricted subsidiaries. The Guarantor Subsidiaries and the subsidiaries that do not guarantee the senior notes (the Non-Guarantor Subsidiaries) are 100% owned by NewMarket Corporation (the Parent Company). The Guarantor Subsidiaries consist of the following:

 

Ethyl Corporation

  Afton Chemical Corporation

Ethyl Asia Pacific LLC

  Afton Chemical Asia Pacific LLC

Ethyl Canada Holdings, Inc.

  Afton Chemical Canada Holdings, Inc.

Ethyl Export Corporation

  Afton Chemical Japan Holdings, Inc.

Ethyl Interamerica Corporation

  Afton Chemical Additives Corporation

Ethyl Ventures, Inc.

  NewMarket Services Corporation

Interamerica Terminals Corporation

  The Edwin Cooper Corporation

Afton Chemical Intangibles LLC

  Old Town LLC

NewMarket Investment Company

  NewMarket Development Corporation

Foundry Park I, LLC

  Foundry Park II, LLC

Gamble’s Hill, LLC

  Gamble’s Hill Lab, LLC

Gamble’s Hill Landing, LLC

  Gamble’s Hill Third Street, LLC

Gamble’s Hill Tredegar, LLC

 

We conduct all of our business and derive essentially all of our income from our subsidiaries. Therefore, our ability to make payments on the senior notes or other obligations is dependent on the earnings and the distribution of funds from our subsidiaries. There are no restrictions on the ability of any of our domestic subsidiaries to transfer funds to the Parent Company.

The following sets forth the Consolidating Statements of Income and Comprehensive Income for the three months ended March 31, 2012 and March 31, 2011; Consolidating Balance Sheets as of March 31, 2012 and December 31, 2011; and Condensed Consolidating Statements of Cash Flows for the three months ended March 31, 2012 and March 31, 2011 for the Parent Company, the Guarantor Subsidiaries, and Non-Guarantor Subsidiaries. The financial information is based on our understanding of the SEC’s interpretation and application of Rule 3-10 of the SEC Regulation S-X.

The financial information may not necessarily be indicative of results of operations or financial positions had the Guarantor Subsidiaries or Non-Guarantor Subsidiaries operated as independent entities. The Parent Company accounts for investments in these subsidiaries using the equity method.

During 2011, we made an adjustment to the presentation of previously reported amounts for intercompany activity on the Condensed Consolidating Statements of Cash Flows. This adjustment did not have an impact on the reported consolidated financial statements for the period ended March 31, 2011.

On April 16, 2012, we redeemed all of the outstanding senior notes, representing an aggregate principal amount of $150 million. See Note 7 for further information.

 

24


Table of Contents

NewMarket Corporation and Subsidiaries

Consolidating Statements of Income and Comprehensive Income

Three Months Ended March 31, 2012

(in thousands)

 

     Parent     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
     Total
Consolidating
Adjustments
    Consolidated  

Revenue:

           

Net sales - product

   $ 0      $ 225,709      $ 334,112       $ 0      $ 559,821   

Rental revenue

     0        2,858        0         0        2,858   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
     0        228,567        334,112         0        562,679   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Costs:

           

Cost of goods sold - product

     0        99,176        292,899         0        392,075   

Cost of rental

     0        1,068        0         0        1,068   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
     0        100,244        292,899         0        393,143   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Gross profit

     0        128,323        41,213         0        169,536   

Selling, general, and administrative expenses

     1,450        27,819        7,639         0        36,908   

Research, development, and testing expenses

     0        21,120        6,775         0        27,895   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Operating profit (loss)

     (1,450     79,384        26,799         0        104,733   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Interest and financing expenses, net

     3,377        87        1,018         0        4,482   

Loss on early extinguishment of debt

     3,221        0        0         0        3,221   

Other income (expense), net

     1,744        (31     60         0        1,773   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

(Loss) income before income taxes and equity income of subsidiaries

     (6,304     79,266        25,841         0        98,803   

Income tax (benefit) expense

     (2,584     29,124        5,716         0        32,256   

Equity income of subsidiaries

     70,267        0        0         (70,267     0   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net income

   $ 66,547      $ 50,142      $ 20,125       $ (70,267   $ 66,547   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Comprehensive income

   $ 67,124      $ 52,920      $ 24,855       $ (70,267   $ 74,632   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

25


Table of Contents

NewMarket Corporation and Subsidiaries

Consolidating Statements of Income and Comprehensive Income

Three Months Ended March 31, 2011

(in thousands)

 

     Parent     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
     Total
Consolidating
Adjustments
    Consolidated  

Revenue:

           

Net sales - product

   $ 0      $ 192,951      $ 312,274       $ 0      $ 505,225   

Rental revenue

     0        2,858        0         0        2,858   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
     0        195,809        312,274         0        508,083   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Costs:

           

Cost of goods sold - product

     0        129,173        236,878         0        366,051   

Cost of rental

     0        1,068        0         0        1,068   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
     0        130,241        236,878         0        367,119   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Gross profit

     0        65,568        75,396         0        140,964   

Selling, general, and administrative expenses

     1,171        26,822        10,431         0        38,424   

Research, development, and testing expenses

     0        18,928        5,533         0        24,461   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Operating profit (loss)

     (1,171     19,818        59,432         0        78,079   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Interest and financing expenses, net

     3,547        286        812         0        4,645   

Other income (expense), net

     (109     (27     69         0        (67
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

(Loss) income before income taxes and equity income of subsidiaries

     (4,827     19,505        58,689         0        73,367   

Income tax (benefit) expense

     (2,112     10,157        15,733         0        23,778   

Equity income of subsidiaries

     52,304        0        0         (52,304     0   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net income

   $ 49,589      $ 9,348      $ 42,956       $ (52,304   $ 49,589   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Comprehensive income

   $ 49,880      $ 11,200      $ 50,562       $ (52,304   $ 59,338   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

26


Table of Contents

NewMarket Corporation and Subsidiaries

Consolidating Balance Sheets

March 31, 2012

(in thousands)

 

     Parent     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Total
Consolidating
Adjustments
    Consolidated  

ASSETS

          

Cash and cash equivalents

   $ 17      $ 27,295      $ 45,434      $ 0      $ 72,746   

Trade and other accounts receivable, net

     0        117,028        194,860        0        311,888   

Amounts due from affiliated companies

     809,603        1,198,067        26,449        (2,034,119     0   

Inventories

     0        113,187        201,914        0        315,101   

Deferred income taxes

     2,240        2,249        845        0        5,334   

Prepaid expenses and other current assets

     8,847        28,478        2,607        0        39,932   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     820,707        1,486,304        472,109        (2,034,119     745,001   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Amounts due from affiliated companies

     0        113,716        0        (113,716     0   

Property, plant, and equipment, at cost

     0        820,405        225,944        0        1,046,349   

Less accumulated depreciation and amortization

     0        563,910        128,614        0        692,524   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net property, plant, and equipment

     0        256,495        97,330        0        353,825   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Investment in consolidated subsidiaries

     1,066,775        0        0        (1,066,775     0   

Prepaid pension cost

     0        0        12,596        0        12,596   

Deferred income taxes

     40,784        0        0        (6,542     34,242   

Other assets and deferred charges

     40,130        29,158        2,190        0        71,478   

Intangibles (net of amortization) and goodwill

     0        29,015        7,340        0        36,355   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 1,968,396      $ 1,914,688      $ 591,565      $ (3,221,152   $ 1,253,497   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

          

Accounts payable

   $ 20      $ 73,439      $ 46,149      $ 0      $ 119,608   

Accrued expenses

     11,791        36,086        17,506        0        65,383   

Dividends payable

     8,521        0        0        0        8,521   

Book overdraft

     0        7,712        0        0        7,712   

Amounts due to affiliated companies

     1,059,400        916,379        58,340        (2,034,119     0   

Long-term debt, current portion

     0        2,998        7,800        0        10,798   

Income taxes payable

     7,190        12,226        9,515        0        28,931   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     1,086,922        1,048,840        139,310        (2,034,119     240,953   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Long-term debt

     150,000        59,831        0        0        209,831   

Amounts due to affiliated companies

     0        8,025        105,691        (113,716     0   

Other noncurrent liabilities

     117,303        51,759        26,022        (6,542     188,542   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     1,354,225        1,168,455        271,023        (2,154,377     639,326   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shareholders’ equity:

          

Common stock and paid-in capital

     64        388,281        71,322        (459,603     64   

Accumulated other comprehensive loss

     (90,647     (17,577     (29,824     47,401        (90,647

Retained earnings

     704,754        375,529        279,044        (654,573     704,754   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     614,171        746,233        320,542        (1,066,775     614,171   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 1,968,396      $ 1,914,688      $ 591,565      $ (3,221,152   $ 1,253,497   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

27


Table of Contents

NewMarket Corporation and Subsidiaries

Consolidating Balance Sheets

December 31, 2011

(in thousands)

 

     Parent
Company
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Total
Consolidating
Adjustments
    Consolidated  

ASSETS

          

Cash and cash equivalents

   $ 17      $ 9,653      $ 40,700      $ 0      $ 50,370   

Trade and other accounts receivable, net

     0        122,812        164,432        (8,912     278,332   

Amounts due from affiliated companies

     732,392        1,057,075        17,132        (1,806,599     0   

Inventories

     0        106,278        200,507        0        306,785   

Deferred income taxes

     2,790        3,836        635        0        7,261   

Prepaid expenses and other current assets

     8,629        25,967        2,387        0        36,983   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     743,828        1,325,621        425,793        (1,815,511     679,731   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Amounts due from affiliated companies

     0        110,444        0        (110,444     0   

Property, plant, and equipment, at cost

     0        815,209        219,263        0        1,034,472   

Less accumulated depreciation and amortization

     0        558,177        123,329        0        681,506   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net property, plant, and equipment

     0        257,032        95,934        0        352,966   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Investment in consolidated subsidiaries

     989,039        0        0        (989,039     0   

Prepaid pension cost

     0        0        11,494        0        11,494   

Deferred income taxes

     43,053        0        0        (7,248     35,805   

Other assets and deferred charges

     42,219        29,166        2,234        0        73,619   

Intangibles (net of amortization) and goodwill

     0        30,758        7,289        0        38,047   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 1,818,139      $ 1,753,021      $ 542,744      $ (2,922,242   $ 1,191,662   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

          

Accounts payable

   $ 11      $ 61,778      $ 41,428      $ 0      $ 103,217   

Accrued expenses

     8,093        50,827        19,626        0        78,546   

Dividends payable

     8,529        0        0        0        8,529   

Book overdraft

     0        1,680        0        0        1,680   

Amounts due to affiliated companies

     944,282        818,452        43,865        (1,806,599     0   

Long-term debt, current portion

     0        2,943        8,023        0        10,966   

Income taxes payable

     12,229        0        9,769        (8,912     13,086   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     973,144        935,680        122,711        (1,815,511     216,024   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Long-term debt

     172,000        60,601        0        0        232,601   

Amounts due to affiliated companies

     0        8,025        102,419        (110,444     0   

Other noncurrent liabilities

     123,402        51,663        25,627        (7,248     193,444   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     1,268,546        1,055,969        250,757        (1,933,203     642,069   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shareholders’ equity:

          

Common stock and paid in capital

     64        388,282        71,322        (459,604     64   

Accumulated other comprehensive loss

     (98,732     (20,355     (34,554     54,909        (98,732

Retained earnings

     648,261        329,125        255,219        (584,344     648,261   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     549,593        697,052        291,987        (989,039     549,593   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 1,818,139      $ 1,753,021      $ 542,744      $ (2,922,242   $ 1,191,662   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

28


Table of Contents

NewMarket Corporation and Subsidiaries

Condensed Consolidating Statements of Cash Flows

Three Months Ended March 31, 2012

(in thousands)

 

     Parent     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Total
Consolidating
Adjustments
    Consolidated  

Cash provided from (used in) operating activities

   $ (19,533   $ 70,140      $ 12,483      $ 0      $ 63,090   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

          

Capital expenditures

     0        (5,044     (2,388     0        (7,432

Deposits for interest rate swap

     (5,079     0        0        0        (5,079

Return of deposits for interest rate swap

     8,340        0        0        0        8,340   

Payments on settlement of interest rate swap

     (2,574     0        0        0        (2,574

Receipts from settlement of interest rate swap

     100        0        0        0        100   

Cash dividends from subsidiaries

     38        5,857        0        (5,895     0   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash provided from (used in) investing activities

     825        813        (2,388     (5,895     (6,645
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

          

Net (repayments) borrowings under revolving credit agreements

     (22,000     0        0        0        (22,000

Repayment on Foundry Park I mortgage loan

     0        (715     0        0        (715

Net (repayments) borrowings under lines of credit

     0        0        (223     0        (223

Dividends paid

     (10,054     (38     (5,857     5,895        (10,054

Debt issuance costs

     (2,351     0        0        0        (2,351

Financing from affiliated companies

     53,113        (53,113     0        0        0   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash provided from (used in) financing activities

     18,708        (53,866     (6,080     5,895        (35,343
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effect of foreign exchange on cash and cash equivalents

     0        555        719        0        1,274   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     0        17,642        4,734        0        22,376   

Cash and cash equivalents at beginning of year

     17        9,653        40,700        0        50,370   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 17      $ 27,295      $ 45,434      $ 0      $ 72,746   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

29


Table of Contents

NewMarket Corporation and Subsidiaries

Condensed Consolidating Statements of Cash Flows

Three Months Ended March 31, 2011

(in thousands)

 

     Parent     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Total
Consolidating
Adjustments
    Consolidated  

Cash provided from (used in) operating activities

   $ (154,320   $ 130,173      $ 40,343      $ 0      $ 16,196   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

          

Capital expenditures

     0        (4,562     (19,589     0        (24,151

Deposits for interest rate swap

     (11,408     0        0        0        (11,408

Return of deposits for interest rate swap

     14,480        0        0        0        14,480   

Payments on settlement of interest rate swap

     (2,574     0        0        0        (2,574

Receipts from settlement of interest rate swap

     71        0        0        0        71   

Proceeds from sale of short-term investment

     300        0        0        0        300   

Cash dividends from subsidiaries

     0        2,727        0        (2,727     0   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash provided from (used in) investing activities

     869        (1,835     (19,589     (2,727     (23,282
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

          

Net (repayments) borrowings under revolving credit agreements

     37,000        0        0        0        37,000   

Repayment on Foundry Park I mortgage loan

     0        (664     0        0        (664

Net (repayments) borrowings under lines of credit

     0        0        71        0        71   

Repurchases of common stock

     (27,427     0        0        0        (27,427

Dividends paid

     (903     0        (2,727     2,727        (903

Debt issuance costs

     (2,233     0        0        0        (2,233

Proceeds from exercise of stock options

     4        0        0        0        4   

Payments on the capital lease

     0        (144     0        0        (144

Financing from affiliated companies

     147,010        (128,015     (18,995     0        0   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash provided from (used in) financing activities

     153,451        (128,823     (21,651     2,727        5,704   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effect of foreign exchange on cash and cash equivalents

     0        900        1,093        0        1,993   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     0        415        196        0        611   

Cash and cash equivalents at beginning of year

     17        7,717        41,458        0        49,192   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 17      $ 8,132      $ 41,654      $ 0      $ 49,803   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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13. Subsequent Events

On April 26, 2012, our Board of Directors declared a quarterly dividend in the amount of 75 cents per share on our common stock. The dividend is payable July 2, 2012 to shareholders of record at the close of business on June 15, 2012.

 

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

Forward-Looking Statements

The following discussion 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, availability of raw materials and transportation systems; supply disruptions at single-sourced facilities; ability to respond effectively to technological changes in our industry; failure to protect our intellectual property rights; hazards common to chemical businesses; occurrence or threat of extraordinary events, including natural disasters and terrorist attacks; competition from other manufacturers; sudden or sharp raw materials price increases; gain or loss of significant customers; risks related to operating outside of the United States; the impact of fluctuations in foreign exchange rates; political, economic, and regulatory factors concerning our products; future governmental regulation; resolution of environmental liabilities or legal proceedings; inability to complete future acquisitions or successfully integrate recent or future acquisitions into our business; and other factors detailed from time to time in the reports that NewMarket files with the Securities and Exchange Commission, including the risk factors in Item 1A, “Risk Factors” of our 2011 Annual Report, which is available to shareholders upon request.

You should keep in mind that any forward-looking statement made by us in this discussion 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 discussion or elsewhere, might not occur.

Overview

The first three months of 2012 generated very strong results, but within a range of expected results in the petroleum additives business. Revenue and operating profit increased from the first three months of 2011. In addition, product shipments rebounded from the lower levels of the fourth quarter of last year.

Our cash flow from operations remained strong during the three months 2012, allowing us to pay off the outstanding revolving credit facility balance from the end of 2011 and ending the 2012 period with an additional $22.4 million in cash. Our working capital position also improved from last year.

 

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During 2012, we made some significant changes to our debt structure. We entered into a new $650 million five-year, unsecured revolving credit facility, which replaced our previous $300 million unsecured revolving credit facility. The new credit facility provides us with significantly lower cost of borrowing and increased operating flexibility to execute our long-term business plan. In April 2012, we used funds available under the $650 million revolving credit facility to redeem all of our outstanding 7.125% senior notes in the aggregate principal amount of $150 million. In early May, we intend to pay off the outstanding balance of the Foundry Park I mortgage loan agreement. During three months 2012, we recorded $3.2 million for the loss on the early extinguishment of debt.

Results of Operation

Revenue

Our consolidated revenue for the three months 2012 amounted to $562.7 million, representing an increase of approximately 10.7% from the 2011 three months level of $508.1 million. The table below shows our revenue by segment.

Consolidated Revenue by Segment

(in millions)

 

     Three Months Ended
March  31
 
     2012      2011  

Petroleum additives

   $ 557.7       $ 502.7   

Real estate development

     2.9         2.9   

All other

     2.1         2.5   
  

 

 

    

 

 

 

Consolidated revenue

   $ 562.7       $ 508.1   
  

 

 

    

 

 

 

Petroleum Additives Segment

Petroleum additives net sales for the first three months 2012 of $557.7 million increased $55.0 million, or approximately 10.9%, from $502.7 million for the first three months 2011. The increase in sales when comparing the two first quarter periods primarily resulted from higher selling prices, partially offset by an unfavorable impact from foreign currency and product shipments. When comparing the two periods, the U.S. Dollar strengthened against the major currencies in which we conduct business, including the Euro and Pound Sterling, resulting in an unfavorable foreign currency impact on revenue from sales. Total product shipments between the first quarter 2012 and first quarter 2011 were substantially unchanged, decreasing 1%.

 

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The table below details the approximate components, in millions, of the increase between the first three months of the 2012 and 2011 periods.

 

     Three
Months
 
     (in millions)  

Period ended March 31, 2011

   $ 502.7   

Decrease in shipments, including changes in product mix

     (4.4

Increase in selling prices, including changes in customer mix

     61.4   

Decrease due to foreign currency

     (2.0
  

 

 

 

Period ended March 31, 2012

   $ 557.7   
  

 

 

 

Real Estate Development Segment

The revenue reflected in the table above for both three months 2012 and 2011 for the real estate development segment represents the rental of an office building, which was constructed by Foundry Park I.

All Other

The “All other” category includes the operations of the TEL business and certain contract manufacturing performed by Ethyl.

Segment Operating Profit

NewMarket evaluates the performance of the petroleum additives business and the real estate development business based on segment operating profit. NewMarket Services Corporation (NewMarket Services) expenses are charged to NewMarket and each subsidiary pursuant to service agreements between the companies. Depreciation on segment property, plant, and equipment, as well as amortization of segment intangible assets is included in segment operating profit.

The table below reports segment operating profit for three months ended March 31, 2012 and March 31, 2011.

Segment Operating Profit

(in millions)

 

     Three Months Ended
March  31
 
     2012      2011  

Petroleum additives

   $ 107.2       $ 80.6   
  

 

 

    

 

 

 

Real estate development

   $ 1.8       $ 1.8   
  

 

 

    

 

 

 

All other

   $ 0.5       $ 0.2   
  

 

 

    

 

 

 

 

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Petroleum Additives Segment

The petroleum additives operating profit increased $26.6 million when comparing three months 2012 to three months 2011. When compared to 2011 operating profit levels for the first three months, results were higher across all major product lines, and in most major geographic regions in which we operate. Our operating profit margin increased to 19.2% for the three months 2012, as compared to 16.0% for three months 2011. The operating profit margin for the rolling four quarters ended March 31, 2012 was 15.4%, which is within our expectations of the performance of our business over the long-term. While operating profit margins will fluctuate from quarter to quarter due to multiple factors, we do not operate our business differently from quarter to quarter, as we believe the fundamentals of our business are unchanged. We continue to focus on developing and delivering innovative, technology-driven goods and services to our customers.

Higher selling prices, as discussed in the Revenue section above, was the predominant factor resulting in increased operating profit for three months 2012 as compared to the same 2011 period. Partially offsetting the impact of higher selling prices was an unfavorable impact from increased raw material costs when comparing three months 2012 and three months 2011. These 2012 results reflect pricing actions taken during 2011 and we believe, also reflect a continual upgrade in the value provided by our products. The operating profit results for three months 2012 were also impacted by some decrease in raw material costs from fourth quarter 2011 levels, but costs are now increasing. We continue to believe that we will be able to recover raw material cost changes in the marketplace, although recovery of costs will lag somewhat behind the increase in costs. While three months 2012 product shipments were down slightly compared to three months 2011, demand has rebounded from the lower levels of fourth quarter 2011 reflecting levels which are more in-line with normal quarterly industry consumption on average. Over the past several years, we have experienced fluctuations in quarterly demand, and we expect this will continue into future quarters and years. Partially offsetting the favorable factors on operating profit, were slightly unfavorable effects from planned spending in combined selling, general, and administrative expenses (SG&A) and research, development, and testing expenses (R&D).

In 2012, SG&A decreased approximately $1.8 million, or 5.5%, over 2011 levels reflecting lower professional fees in 2012. R&D increased approximately $3.4 million, or 14.0%, for three months 2012 when compared to the same 2011 period. We continue to invest in SG&A and R&D to support our customers’ programs and to develop the technology required to remain a leader in this industry.

The following discussion references the Consolidated Financial Statements beginning on page 3 of this Quarterly Report on Form 10-Q.

Interest and Financing Expenses

Interest and financing expenses were $4.5 million for three months 2012 and $4.6 million for three months 2011. The decrease in interest and financing expenses between the two periods of 2012 and 2011 primarily related to lower average outstanding debt on the revolving credit facility during 2012, partially offset by a higher average interest rate as compared to the 2011 period.

Loss on Early Extinguishment of Debt

We recorded a $3.2 million loss on the early extinguishment of debt related to the recognition of $0.5 million of unamortized deferred financing costs on our previous revolving credit facility, as well as $2.7 million from a portion of the early redemption premium on the senior notes. During the second quarter, we expect to recognize an additional loss on early extinguishment of debt of $6.7 million comprising the remaining $2.7 million early redemption premium on the senior notes, $3.2 million of unamortized deferred financing costs on the senior notes, and $0.8 million from unamortized deferred financing costs on the mortgage loan. Of the total expected loss of $9.9 million on the early extinguishment of debt, approximately $5.4 million will be a cash payment in the second quarter 2012. The remaining amounts will be a non-cash charge.

 

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Other Income (Expense), Net

Other income, net for three months 2012 was $1.8 million, while other expense, net for three months 2011 was $67 thousand. Three months 2011 includes $1.0 million expense related to the consent we obtained in January 2011 from the holders of the senior notes to modify the formula for calculating the capacity under the senior notes to make certain restricted payments. The remaining amounts for both 2012 and 2011 primarily reflect the gain on a derivative instrument representing an interest rate swap recorded at fair value through profit and loss. See Note 9 for additional information on the interest rate swap.

Income Tax Expense

Income tax expense was $32.3 million for three months 2012 and $23.8 million for three months 2011. The effective tax rate was 32.6% for three months 2012, while three months 2011 was 32.4%. The increase in income before income tax expense resulted in an increase of $8.3 million in income taxes, while the higher effective tax rate in 2012 as compared to 2011 resulted in an increase of $0.2 million in income tax expense when comparing the three months 2012 and 2011 periods. The effective tax rate for the 2012 period reflects the benefit of a favorable impact from earnings in foreign locations with lower tax rates when compared to the 2011 period. This benefit was offset by a higher state income tax rate and the absence of a research and development credit for three months 2012 as compared to three months 2011.

Cash Flows, Financial Condition, and Liquidity

Cash and cash equivalents at March 31, 2012 were $72.7 million, which was an increase of $22.4 million since December 31, 2011 and included a $1.3 million favorable impact from foreign currency translation.

Our cash and cash equivalents held by our foreign subsidiaries amounted to approximately $48.9 million at March 31, 2012 and $45.3 million at December 31, 2011. A significant amount, but not all, of these foreign cash balances are 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. Periodically, we repatriate cash from our foreign subsidiaries to the United States through intercompany dividends. These intercompany dividends are paid only by subsidiaries whose earnings we have not asserted are indefinitely reinvested or whose earnings qualify as previously taxed income, as defined by the Internal Revenue Code. If circumstances were to change that would cause these indefinitely reinvested earnings to be repatriated, an incremental U.S. tax liability would be incurred. As part of our foreign subsidiary repatriation activities, we received cash dividends of $5.9 million for the three months ended March 31, 2012 and $2.7 million for the three months ended March 31, 2011.

We expect that cash from operations, together with borrowing available under our revolving credit facility, will continue to be sufficient to cover our operating expenses for the foreseeable future.

Cash Flows – Operating Activities

Cash flows provided from operating activities for the three months 2012 were $63.1 million and included a decrease of $22.9 million due to higher working capital levels, including higher accounts receivable and lower accrued expenses, which were partially offset by higher accounts payable and income taxes payable. The increase in accounts receivable is primarily due to higher sales levels when comparing the 2012 period with the fourth quarter 2011. The decrease in

 

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accrued expenses primarily reflects payments related to customer rebates made during the three months 2012. The fluctuation in accounts payable is from normal differences in timing of payments, while the increase in income taxes payable reflects taxes due on earnings, which will be paid during the second quarter. Cash flows from operations also include a non-cash charge of $3.2 million for a loss on the early extinguishment of debt. See Note 7 for additional information on our debt structure.

Including cash and the current portion of long-term debt, we had working capital of $504.0 million at March 31, 2012 and $463.7 million at December 31, 2011. The current ratio was 3.09 to 1 at March 31, 2012 and 3.15 to 1 at December 31, 2011.

Cash Flows – Investing Activities

Cash used in investing activities was $6.6 million during three months 2012 and included $7.4 million for capital expenditures. Also included in investing activities was a net return of deposit of $3.3 million and a net settlement payment of $2.5 million related to the Goldman Sachs interest rate swap. Further information on the interest rate swap is discussed in Note 9. We estimate our total capital spending during 2012 will be approximately $50 million. We expect to continue to finance capital spending through cash on hand and cash provided from operations, together with borrowing available under our $650 million revolving credit facility.

Cash Flows – Financing Activities

Cash used in financing activities during three months 2012 amounted to $35.3 million. We repaid $22.0 million under our revolving credit facility during the three months 2012. We also incurred $2.4 million of debt issuance costs related to the $650 million revolving credit facility, and we paid $10.1 million to fund dividends during three months 2012.

We had total long-term debt, including the current portion, of $220.6 million at March 31, 2012, representing a decrease of approximately $22.9 million in our total debt since December 31, 2011. The decrease resulted primarily from the payment of $22.0 million under the revolving credit facility.

At March 31, 2012, in addition to the short-term lines of credit, the revolving credit facility and the mortgage loan, which are discussed below, we had outstanding senior notes in the aggregate principal amount of $150 million that bear interest at a fixed rate of 7.125% and are due in 2016. On March 15, 2012, at our request, Wells Fargo Bank, N.A., as trustee, issued a notice of redemption for all of our outstanding 7.125% senior notes. Under the indenture governing the senior notes, the redemption price is 103.563% of the outstanding aggregate principal amount, plus accrued and unpaid interest to the redemption date. Subsequently, on April 16, 2012, all of the senior notes were redeemed. We used borrowings under our revolving credit facility to finance the redemption. Through redemption, we will recognize total expenses of approximately $8.5 million ($2.7 million during the first quarter 2012 and $5.8 million during the second quarter 2012) related to the prepayment premium and unamortized financing costs on the senior notes.

Two of our subsidiaries also have short-term lines of credit for working capital purposes. The line of credit for one of our subsidiaries in India is for 110 million Rupees and has an outstanding balance of 100 million Rupees or $1.9 million at March 31, 2012. The line of credit for one of our subsidiaries in China is for $10 million with an outstanding balance of $5.9 million at March 31, 2012.

On March 14, 2012, we entered into a new Credit Agreement with a term of five years, which replaces our previous $300 million revolving credit facility. The Credit Agreement provides for a $650 million, multicurrency

 

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revolving credit facility, with a $100 million sublimit for multicurrency borrowings, a $100 million sublimit for letters of credit, and a $20 million sublimit for swingline loans. The Credit Agreement includes an expansion feature, which allows us, subject to certain conditions, to request an increase to the aggregate amount of the revolving credit facility or obtain incremental term loans in an amount up to $150 million. Borrowings bear interest at variable rates. The revolving credit facility matures on March 14, 2017. Additional information on the $650 million revolving credit facility is in Note 7. We used a portion of this revolving credit facility to fund the early redemption of all of the outstanding principal of our senior notes on April 16, 2012, and we intend to use additional borrowings in early May to repay the mortgage loan, discussed below.

The following table provides information related to the unused portion of our revolving credit facility:

 

     March 31
2012
     December 31
2011
 
     (in millions)  

Maximum borrowing capacity under the revolving credit facility

   $ 650.0       $ 300.0   

Outstanding borrowings under the revolving credit facility

     0.0         22.0   

Outstanding letters of credit

     6.1         6.1   
  

 

 

    

 

 

 

Unused portion of revolving credit facility

   $ 643.9       $ 271.9   
  

 

 

    

 

 

 

Both the senior notes and each of the revolving credit facilities contain covenants, representations, and events of default that management considers typical of credit agreements of this nature. We were in compliance with all covenants under the senior notes as of both March 31, 2012 and December 31, 2011, as well as the $650 million revolving credit facility at March 31, 2012 and the $300 million revolving credit facility at December 31, 2011.

The more restrictive and significant of the covenants under the senior notes include a minimum fixed charge coverage ratio of 2.00, as well as a limitation on restricted payments, as defined in the agreement. Our fixed charge coverage ratio was 22.05 at March 31, 2012 and 20.46 at December 31, 2011 under the senior notes. In addition, we would have been permitted to make additional restricted payments in the amount of approximately $150 million at March 31, 2012 and $126 million at December 31, 2011 under the senior notes.

The more restrictive and significant financial covenants under both the previous and new revolving credit facility include:

 

   

A leverage ratio of no more than 3.00 to 1.00; and

 

   

An interest coverage ratio of no less than 3.00 to 1.00.

At March 31, 2012, the leverage ratio was 0.59 and the interest coverage ratio was 19.37, while at December 31, 2011 the leverage ratio was 0.69 and the interest coverage ratio was 17.90.

As a percentage of total capitalization (total debt and shareholders’ equity), our total debt percentage decreased from 30.7% at the end of 2011 to 26.4% at March 31, 2012. The change in the percentage was the result of the decrease in debt, as well as an increase in shareholders’ equity. The increase in shareholders’ equity reflects our earnings, partially offset by the impact of dividend payments. Normally, we repay any outstanding long-term debt with cash from operations or refinancing activities.

 

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Foundry Park I Mortgage Loan Agreement and Interest Rate Swap

On January 28, 2010, Foundry Park I entered into a mortgage loan agreement in the amount of $68.4 million. The loan, which is collateralized by the Foundry Park I office building, is for a period of five years, with two thirteen-month extension options. NewMarket Corporation is fully guaranteeing the loan. The mortgage loan bears interest at a variable rate of LIBOR plus a margin of 400 basis points. Concurrently with the closing of the mortgage loan, Foundry Park I obtained an interest rate swap to effectively convert the variable interest rate of the loan to a fixed interest rate by setting LIBOR at 2.642% for five years. The interest rate swap is discussed in Note 9. Principal payments on the loan are being made monthly based on a 15-year amortization schedule, with all remaining amounts due in January 2015, unless we exercise the extension option.

In early May 2012, we intend to pay in full the outstanding principal amount on the Foundry Park I mortgage loan agreement. There will be no prepayment penalty incurred. We expect to utilize borrowings under our revolving credit facility to finance the payment. Concurrently with the payoff of the mortgage loan agreement, the interest rate swap associated with the mortgage loan will also terminate. See Note 9 for information on the interest rate swap. Upon the payoff of the mortgage loan, we will recognize expense of approximately $0.8 million related to the unamortized financing costs on the loan.

Critical Accounting Policies and Estimates

This report, as well as the 2011 Annual Report on Form 10-K, includes a discussion of our accounting principles, as well as methods and estimates used in the preparation of our financial statements. We believe these discussions and financial statements fairly represent the financial position and operating results of our company in all material respects. The purpose of this portion of our discussion is to further emphasize some of the more critical areas where a significant change in facts and circumstances in our operating and financial environment might cause a change in reported financial results.

Intangibles (Net of Amortization) and Goodwill

We have certain identifiable intangibles, as well as goodwill, amounting to $36.4 million at March 31, 2012. These intangibles relate to our petroleum additives business and, except for the goodwill, are being amortized over periods with up to approximately 18 years of remaining life. We continue to assess the market related to these intangibles, as well as their specific values, and have concluded the values and amortization periods are appropriate. We also evaluate these intangibles for any potential impairment when significant events or circumstances occur that might impair the value of these assets. These evaluations continue to support the value at which these identifiable intangibles are carried on our financial statements. However, if conditions were to substantially deteriorate in the petroleum additives market, it could possibly cause a reduction in the periods of the amortization charge or result in a noncash write-off of a portion of the intangibles’ carrying value. A reduction in the amortization period would have no effect on cash flows. We do not anticipate such a change in the market conditions in the near term.

Environmental and Legal Proceedings

We believe our environmental accruals are appropriate for the exposures and regulatory guidelines under which we currently operate. While we currently do not anticipate significant changes to the many factors that could impact our environmental requirements, we continue to keep our accruals consistent with these requirements as they change.

While it is not possible to predict or determine with certainty the outcome of any legal proceeding, it is our opinion, based on our current knowledge, that we will not experience any material adverse effects on our results of operations, financial condition, or cash flows as a result of any pending or threatened proceeding.

 

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Pension Plans and Other Postretirement Benefits

We use assumptions to record the impact of the pension and postretirement plans in the financial statements. These assumptions include the discount rate, expected long-term rate of return on plan assets, rate of compensation increase, and health-care cost trend rate. A change in any one of these assumptions could result in different results for the plans. We develop these assumptions after considering available information that we deem relevant. Information is provided on the pension and postretirement plans in Note 19 of the 2011 Annual Report. In addition, further disclosure on the effect of changes in these assumptions is provided in the “Financial Position and Liquidity” section of Part II, Item 7 of the 2011 Annual Report.

Income Taxes

We file consolidated U.S. federal income and both consolidated and individual state income tax returns, as well as individual foreign income tax returns, under which assumptions may be made to determine the deductibility of certain costs. We make estimates related to the impact of tax positions taken on our financial statements when we believe the tax position is more likely than not to be upheld on audit. In addition, we make certain assumptions in the determination of the estimated future recovery of deferred tax assets.

Outlook

We have begun 2012 with very good results. We believe the fundamentals of how we run our business – a long-term view, safety-first culture, customer-focused solutions, technology-driven product offerings, world-class supply chain capability, and a regional organizational structure to better understand our customers’ needs – continue to pay dividends to all of our stakeholders.

We expect 2012 to be a more profitable year than 2011, as we project an increase in volume, revenue and net income. Nonetheless, we do not expect all four quarters in 2012 to be as profitable as the first three months of 2012. There has been no significant change in the fundamentals of the petroleum additives business, and we expect the industry demand to continue to grow at a rate of 1% - 2%. We plan to exceed that rate by focusing on areas of the world where we are under-represented and delivering products that specifically meet the needs of those areas. Over the past several years, we have made significant investments to expand our capabilities around the world. These investments have been in people, research centers, and production capacity. We intend to use these new capabilities to improve our ability to deliver the goods and service that our customers value and to expand our business and profits. In summary, we expect the business practices that have produced the outstanding results of the past several years will continue in 2012.

Our business continues to generate significant amounts of cash beyond what is necessary for the expansion and growth of our current product lines. We regularly review the many internal opportunities which we have to utilize this cash, both from a geographical and product line point of view. We continue our efforts in investigating potential acquisitions as both a use for this cash and to generate shareholder value. As we have stated previously, our primary focus in the acquisition area remains on the petroleum additives industry. It is our view that this industry will provide the greatest opportunity for a good return on our investment while minimizing risk. We remain focused on this strategy and will evaluate any future opportunities. Nonetheless, we are patient in this pursuit and intend to make the right acquisition when the opportunity arises. Until an acquisition materializes, we will build cash on our balance sheet and will continue to evaluate all alternative uses of that cash to enhance shareholder value, including stock repurchases and dividends.

 

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

At March 31, 2012, there had been no significant changes in our market risk from the information provided in the 2011 Annual Report.

 

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain a system of internal control over financial reporting to provide reasonable, but not absolute, assurance of the reliability of the financial records and the protection of assets. Our controls and procedures include written policies and procedures, careful selection and training of qualified personnel, and an internal audit program. We use a third-party firm, separate from our independent registered public accounting firm, to assist with internal audit services.

We work closely with the business groups, operations personnel, and information technology to ensure transactions are recorded properly. Environmental and legal staff are consulted to determine the appropriateness of our environmental and legal liabilities for each reporting period. We regularly review the regulations and rule changes that affect our financial disclosures.

Our disclosure control procedures include signed representation letters from our regional officers, as well as senior management.

We have formed a Financial Disclosure Committee (the committee), which is made up of the president of Afton Chemical Corporation, the general counsel of NewMarket, and the controller of NewMarket. The committee, as well as regional management, makes representations with regard to the financial statements that, to the best of their knowledge, the report does not contain any misstatement of a material fact or omit a material fact that is necessary to make the statements not misleading with respect to the periods covered by the report.

The committee and the regional management also represent, to the best of their knowledge, that the financial statements and other financial information included in the report fairly present, in all material respects, the financial condition, results of operations, and cash flows of the company as of and for the periods presented in the report.

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the Exchange Act), we carried out an evaluation, with the participation of our management, including our principal executive officer and our principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e)) under the Exchange Act as of the end of the period covered by this report. Based upon that evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures are effective.

Changes in Internal Controls Over Financial Reporting

There has been no change in our internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act, during the quarter ended March 31, 2012, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II – OTHER INFORMATION

 

ITEM 1. Legal Proceedings

We are involved in legal proceedings that are incidental to our business and include administrative or judicial actions seeking remediation under environmental laws, such as Superfund. Some of these legal proceedings relate to environmental matters and involve governmental authorities. For further information, see “Environmental” in Note 8.

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 financial condition, results of operations, or cash flows.

As we previously disclosed, the United States Department of Justice has advised us that it is conducting a review of certain of our foreign business activities in relation to compliance with relevant U.S. economic sanctions programs and anti-corruption laws, as well as certain historical conduct in the domestic U.S. market, and has requested certain information in connection with such review. We are cooperating with the investigation. In connection with such cooperation, we have voluntarily agreed to provide certain information and are conducting an internal review for that purpose.

 

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ITEM 6. Exhibits

 

Exhibit 3.1   Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Form 10-K (File No. 1-32190) filed March 14, 2005)
Exhibit 3.2   NewMarket Corporation Bylaws Amended and Restated effective April 23, 2009 (incorporated by reference to Exhibit 3.1 to Form 8-K (File No. 1- 32190) filed February 23, 2009)
Exhibit 10.1   Credit Agreement, dated as of March 14, 2012, by and among the Company and the Foreign Subsidiary Borrowers party thereto; the Lenders party thereto: JPMorgan Chase Bank, N.A. as Administrative Agent; Citizens Bank of Pennsylvania as Syndication Agent: and Bank of America, N.A. and PNC Bank, National Association as Co-Documentation Agents (incorporated by reference to Exhibit 10.1 to Form 8-K (File No. 1-32190) filed March 16, 2012)
Exhibit 31(a)   Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Thomas E. Gottwald
Exhibit 31(b)   Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by David A. Fiorenza
Exhibit 32(a)   Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Thomas E. Gottwald
Exhibit 32(b)   Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by David A. Fiorenza
Exhibit 99.1   Notice of Full Redemption dated March 15, 2012, relating to the redemption of all of the Company’s outstanding 7.125% Senior Notes (incorporated by reference to Exhibit 10.1 to Form 8-K (File No. 1-32190) filed March 16, 2012)
Exhibit 101   XBRL Instance Document and Related Items

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  NEWMARKET CORPORATION
      (Registrant)
Date: May 2, 2012  

By: /s/ D. A. Fiorenza

  David A. Fiorenza
  Vice President and
  Chief Financial Officer
  (Principal Financial Officer)
Date: May 2, 2012  

By: /s/ Wayne C. Drinkwater

  Wayne C. Drinkwater
  Controller
  (Principal Accounting Officer)

 

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EXHIBIT INDEX

 

Exhibit 31(a)   Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Thomas E. Gottwald
Exhibit 31(b)   Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by David A. Fiorenza
Exhibit 32(a)   Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Thomas E. Gottwald
Exhibit 32(b)   Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by David A. Fiorenza
Exhibit 101   XBRL Instance Document and Related Items

 

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