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NEWMARKET CORP - Quarter Report: 2020 September (Form 10-Q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
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 Street23219-4350
Richmond,Virginia 
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code - (804) 788-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, with no par valueNEUNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
Accelerated filer
¨
Non-accelerated filer
¨
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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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 September 30, 2020: 10,921,389

Table of Contents
NEWMARKET CORPORATION

INDEX
 Page
Number
3
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PART I.    FINANCIAL INFORMATION
ITEM 1.     Financial Statements

NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
(in thousands, except per-share amounts)Third Quarter Ended
September 30,		Nine Months Ended
September 30,
 2020201920202019
Net sales$512,869 $555,817 $1,483,150 $1,655,850 
Cost of goods sold346,262 393,090 1,038,898 1,169,421 
Gross profit166,607 162,727 444,252 486,429 
Selling, general, and administrative expenses34,690 38,122 105,837 109,916 
Research, development, and testing expenses33,113 36,387 102,168 106,748 
Operating profit98,804 88,218 236,247 269,765 
Interest and financing expenses, net6,466 6,987 20,575 22,740 
Other income (expense), net25,280 6,227 39,292 17,932 
Income before income tax expense117,618 87,458 254,964 264,957 
Income tax expense21,824 19,653 51,280 60,773 
Net income$95,794 $67,805 $203,684 $204,184 
Earnings per share - basic and diluted$8.77 $6.06 $18.52 $18.26 
Cash dividends declared per share$1.90 $1.90 $5.70 $5.40 
See accompanying Notes to Condensed Consolidated Financial Statements

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NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 (in thousands)Third Quarter Ended
September 30,		Nine Months Ended
September 30,
 2020201920202019
Net income$95,794 $67,805 $203,684 $204,184 
Other comprehensive income (loss):
Pension plans and other postretirement benefits:
Prior service credit (cost) arising during the period, net of income tax expense (benefit) of $(7) in third quarter and nine months 2020
(23)0 (23)0 
Amortization of prior service cost (credit) included in net periodic benefit cost (income), net of income tax expense (benefit) of $(169) in third quarter 2020, $(185) in third quarter 2019, $(510) in nine months 2020, and $(556) in nine months 2019
(528)(600)(1,590)(1,802)
Actuarial net gain (loss) arising during the period, net of income tax expense (benefit) of $977 in third quarter and nine months 2020 and $771 in third quarter and nine months 2019
3,008 2,501 3,008 2,501 
Amortization of actuarial net loss (gain) included in net periodic benefit cost (income), net of income tax expense (benefit) of $297 in third quarter 2020, $169 in third quarter 2019, $1,090 in nine months 2020, and $674 in nine months 2019
941 570 3,468 2,245 
Total pension plans and other postretirement benefits
3,398 2,471 4,863 2,944 
Foreign currency translation adjustments, net of income tax expense (benefit) of $(118) in third quarter 2020, $(324) in third quarter 2019, $(1,110) in nine months 2020, and $(317) in nine months 2019
10,356 (9,819)(5,013)(9,239)
Other comprehensive income (loss)13,754 (7,348)(150)(6,295)
Comprehensive income$109,548 $60,457 $203,534 $197,889 
See accompanying Notes to Condensed Consolidated Financial Statements

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NEWMARKET CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share amounts)September 30,
2020		December 31,
2019
ASSETS
Current assets:
Cash and cash equivalents$117,701 $144,397 
Trade and other accounts receivable, less allowance for credit losses
328,677 335,826 
Inventories370,104 365,938 
Prepaid expenses and other current assets37,880 33,237 
Total current assets854,362 879,398 
Property, plant, and equipment, net648,685 635,439 
Intangibles (net of amortization) and goodwill130,423 131,880 
Prepaid pension cost145,450 133,848 
Operating lease right-of-use assets58,420 60,505 
Deferred charges and other assets42,782 44,062 
Total assets$1,880,122 $1,885,132 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$187,572 $178,773 
Accrued expenses74,797 77,350 
Dividends payable18,444 19,217 
Income taxes payable5,362 10,632 
Operating lease liabilities13,270 14,036 
Other current liabilities9,454 8,887 
Total current liabilities308,899 308,895 
Long-term debt608,702 642,941 
Operating lease liabilities-noncurrent45,004 46,792 
Other noncurrent liabilities193,991 203,406 
Total liabilities1,156,596 1,202,034 
Commitments and contingencies (Note 9)
Shareholders’ equity:
Common stock and paid-in capital (with no par value; authorized shares - 80,000,000; issued and outstanding shares - 10,921,389 at September 30, 2020 and 11,188,549 at December 31, 2019)
287 1,965 
Accumulated other comprehensive loss(162,898)(162,748)
Retained earnings886,137 843,881 
Total shareholders' equity723,526 683,098 
Total liabilities and shareholders’ equity$1,880,122 $1,885,132 
See accompanying Notes to Condensed Consolidated Financial Statements

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NEWMARKET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
(in thousands, except share and per-share amounts)Common Stock and
Paid-in Capital		Accumulated Other Comprehensive LossRetained EarningsTotal
Shareholders’ Equity
SharesAmount
Balance at June 30, 201911,188,126 $949 $(180,263)$768,490 $589,176 
Net income67,805 67,805 
Other comprehensive income (loss)(7,348)(7,348)
Cash dividends ($1.90 per share)
(21,260)(21,260)
Stock-based compensation1,096 965 965 
Balance at September 30, 201911,189,222 $1,914 $(187,611)$815,035 $629,338 
Balance at June 30, 202010,923,999 $281 $(176,652)$811,656 $635,285 
Net income95,794 95,794 
Other comprehensive income (loss)13,754 13,754 
Cash dividends ($1.90 per share)
(20,751)(20,751)
Repurchases of common stock(3,835)(870)(564)(1,434)
Stock-based compensation1,225 876 2 878 
Balance at September 30, 202010,921,389 $287 $(162,898)$886,137 $723,526 
Balance at December 31, 201811,184,482 $0 $(181,316)$671,223 $489,907 
Net income204,184 204,184 
Other comprehensive income (loss)(6,295)(6,295)
Cash dividends ($5.40 per share)
(60,418)(60,418)
Stock-based compensation4,740 1,914 46 1,960 
Balance at September 30, 201911,189,222 $1,914 $(187,611)$815,035 $629,338 
Balance at December 31, 201911,188,549 $1,965 $(162,748)$843,881 $683,098 
Net income203,684 203,684 
Other comprehensive income (loss)(150)(150)
Cash dividends ($5.70 per share)
(62,667)(62,667)
Repurchases of common stock(270,963)(2,630)(98,804)(101,434)
Tax withholdings related to stock-based compensation(1,547)(641)(641)
Stock-based compensation5,350 1,593 43 1,636 
Balance at September 30, 202010,921,389 $287 $(162,898)$886,137 $723,526 
See accompanying Notes to Condensed Consolidated Financial Statements

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NEWMARKET CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 (in thousands)Nine Months Ended
September 30,
 20202019
Cash and cash equivalents at beginning of year$144,397 $73,040 
Cash flows from operating activities:
Net income203,684 204,184 
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization63,045 65,500 
Deferred income tax expense5,405 3,982 
Gain on sale of land(16,483)0 
Working capital changes(33,493)(35,997)
Cash pension and postretirement contributions(7,717)(7,308)
Other, net1,879 2,886 
Cash provided from (used in) operating activities216,320 233,247 
Cash flows from investing activities:
Capital expenditures(60,133)(37,132)
Proceeds from sale of land20,000 0 
Other, net(927)0 
Cash provided from (used in) investing activities(41,060)(37,132)
Cash flows from financing activities:
Net repayments under revolving credit facility(34,678)(126,262)
Dividends paid(62,667)(60,418)
Repurchases of common stock(101,434)0 
Other, net(1,431)(1,899)
Cash provided from (used in) financing activities(200,210)(188,579)
Effect of foreign exchange on cash and cash equivalents(1,746)(605)
(Decrease) increase in cash and cash equivalents(26,696)6,931 
Cash and cash equivalents at end of period$117,701 $79,971 
See accompanying Notes to Condensed Consolidated Financial Statements

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NEWMARKET CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


1.    Financial Statement Presentation
In the opinion of management, the accompanying consolidated financial statements of NewMarket Corporation and its subsidiaries contain all necessary adjustments for the fair presentation of, in all material respects, our consolidated financial position as of September 30, 2020 and December 31, 2019, and our consolidated results of operations, comprehensive income, and changes in shareholders' equity for the third quarter and nine months ended September 30, 2020 and September 30, 2019, and our cash flows for the nine months ended September 30, 2020 and September 30, 2019. 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, 2019 (2019 Annual Report), as filed with the Securities and Exchange Commission (SEC). The results of operations for the nine month period ended September 30, 2020 are not necessarily indicative of the results to be expected for the full year ending December 31, 2020. The December 31, 2019 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.
Unless the context otherwise indicates, all references to “we,” “us,” “our,” the “company,” and “NewMarket” are to NewMarket Corporation and its consolidated subsidiaries.
We adopted Accounting Standard Update No. 2016-13, "Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments" (ASU 2016-13) on January 1, 2020. ASU 2016-13 mandates a methodology be utilized that determines expected credit losses on financial instruments instead of the former methodology that delayed recognition until a probable loss had been incurred.
We record our accounts receivable at amortized cost and at the net amount expected to be collected. Our accounts receivable are predominantly trade receivables and are derived through the sale of petroleum additives products. Our customers primarily consist of global, national, and independent oil companies. We maintain an allowance for credit losses for expected losses resulting from our customers not making required payments. We determine the adequacy of the allowance by periodically evaluating each customer’s receivable balance, considering their financial condition and credit history, and considering current and forecasted economic conditions. The allowance for credit losses was not material at September 30, 2020 or December 31, 2019.

2.    Net Sales

Our revenues are primarily derived from the manufacture and sale of petroleum additives products. We sell petroleum additives products across the world to customers located in the North America, Latin America, Asia Pacific, and Europe/Middle East/Africa/India regions. Our customers primarily consist of global, national, and independent oil companies. Our contracts generally include one performance obligation, which is providing petroleum additives products. The performance obligation is satisfied at a point in time when products are shipped, delivered, or consumed by the customer, depending on the underlying contracts.
In limited cases, we collect funds in advance of shipping product to our customers and recognizing the related revenue. These prepayments from customers are recorded as a contract liability to our customer until we recognize the revenue. Some of our contracts include variable consideration in the form of rebates or business development funds. We regularly review both rebates and business development funds and make adjustments when necessary, recognizing the full amount of any adjustment in the period identified.

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NEWMARKET CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following table provides information on our net sales by geographic area. Information on net sales by segment is in Note 3.
Third Quarter Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2020201920202019
Net sales
United States$175,086 $191,830 $476,858 $551,875 
China56,531 49,219 159,771 170,627 
Europe, Middle East, Africa, India161,484 179,685 483,051 526,597 
Asia Pacific, except China64,498 77,823 210,670 240,653 
Other foreign55,270 57,260 152,800 166,098 
Net sales $512,869 $555,817 $1,483,150 $1,655,850 
3. Segment Information
The tables below show our consolidated segment results. The “All other” category includes the operations of the antiknock compounds business, as well as certain contracted manufacturing and services associated with Ethyl Corporation (Ethyl).
Net Sales by Segment
Third Quarter Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2020201920202019
Petroleum additives
     Lubricant additives$432,938 $448,629 $1,240,042 $1,348,508 
     Fuel additives77,342 101,997 236,313 295,621 
          Total510,280 550,626 1,476,355 1,644,129 
All other2,589 5,191 6,795 11,721 
Net sales$512,869 $555,817 $1,483,150 $1,655,850 

Segment Operating Profit
Third Quarter Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2020201920202019
Petroleum additives$102,186 $94,765 $248,918 $285,620 
All other2,015 (77)1,951 92 
Segment operating profit104,201 94,688 250,869 285,712 
Corporate, general, and administrative expenses(5,565)(6,473)(15,263)(15,842)
Interest and financing expenses, net(6,466)(6,987)(20,575)(22,740)
Other income (expense), net25,448 6,230 39,933 17,827 
Income before income tax expense
$117,618 $87,458 $254,964 $264,957 
 
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NEWMARKET CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

4.    Pension Plans and Other Postretirement Benefits
The table below shows cash contributions made during the nine months ended September 30, 2020, as well as the remaining cash contributions we expect to make during the year ending December 31, 2020, for our domestic and foreign pension plans and domestic postretirement benefit plan.
(in thousands)Actual Cash Contributions for Nine Months Ended September 30, 2020Expected Remaining Cash Contributions for Year Ending December 31, 2020
Domestic plans
Pension benefits$2,169 $723 
Postretirement benefits1,372 457 
Foreign plans
Pension benefits4,176 1,646 
The tables below present information on net periodic benefit cost (income) for our domestic and foreign pension plans and domestic postretirement benefit plan. The service cost component of net periodic benefit cost (income) is reflected in cost of goods sold; selling, general, and administrative expenses; or research, development, and testing expenses, to reflect where other compensation costs arising from services rendered by the pertinent employee are recorded on the Consolidated Statements of Income. The remaining components of net periodic benefit cost (income) are recorded in other income (expense), net on the Consolidated Statements of Income.
 Domestic
 Pension BenefitsPostretirement Benefits
Third Quarter Ended September 30,
(in thousands)2020201920202019
Service cost$4,012 $2,809 $250 $150 
Interest cost3,311 3,478 314 358 
Expected return on plan assets(9,309)(8,661)(222)(223)
Amortization of prior service cost (credit)70 (19)(757)(757)
Amortization of actuarial net (gain) loss874 507 0 0 
Net periodic benefit cost (income)$(1,042)$(1,886)$(415)$(472)

 Domestic
 Pension BenefitsPostretirement Benefits
Nine Months Ended September 30,
(in thousands)2020201920202019
Service cost$12,407 $10,056 $684 $538 
Interest cost10,328 10,849 1,005 1,136 
Expected return on plan assets(27,920)(25,975)(704)(711)
Amortization of prior service cost (credit)203 (57)(2,271)(2,271)
Amortization of actuarial net (gain) loss3,506 2,214 0 0 
Net periodic benefit cost (income)$(1,476)$(2,913)$(1,286)$(1,308)
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NEWMARKET CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

 Foreign
 Pension Benefits
Third Quarter Ended September 30,Nine Months Ended September 30,
(in thousands)2020201920202019
Service cost$2,153 $1,575 $6,360 $4,833 
Interest cost967 1,166 2,880 3,593 
Expected return on plan assets(2,426)(2,238)(7,221)(6,918)
Amortization of prior service cost (credit)(12)(11)(33)(32)
Amortization of actuarial net (gain) loss355 230 1,047 704 
Net periodic benefit cost (income)$1,037 $722 $3,033 $2,180 
5.    Earnings Per Share
We had 19,963 shares of nonvested restricted stock at September 30, 2020 and 22,512 shares of nonvested restricted stock at September 30, 2019 that were excluded from the calculation of diluted earnings per share, as their effect on earnings per share would be anti-dilutive.
The nonvested restricted stock is considered a participating security since the restricted stock contains nonforfeitable rights to dividends. As such, we use the two-class method to compute basic and diluted earnings per share for all periods presented since this method yields the most dilutive result. The following table illustrates the earnings allocation method utilized in the calculation of basic and diluted earnings per share.
Third Quarter Ended
September 30,		Nine Months Ended
September 30,
(in thousands, except per-share amounts)2020201920202019
Earnings per share numerator:
Net income attributable to common shareholders before allocation of earnings to participating securities
$95,794 $67,805 $203,684 $204,184 
Earnings allocated to participating securities
172 137 326 348 
Net income attributable to common shareholders after allocation of earnings to participating securities
$95,622 $67,668 $203,358 $203,836 
Earnings per share denominator:
Weighted-average number of shares of common stock outstanding - basic and diluted
10,903 11,167 10,981 11,166 
Earnings per share - basic and diluted$8.77 $6.06 $18.52 $18.26 
6.        Inventories
 September 30,December 31,
(in thousands)
20202019
Finished goods and work-in-process$302,756 $295,997 
Raw materials51,892 55,702 
Stores, supplies, and other15,456 14,239 
$370,104 $365,938 
7.    Intangibles (Net of Amortization) and Goodwill

The net carrying amount of intangibles and goodwill was $130 million at September 30, 2020 and $132 million at December 31, 2019. The gross carrying amount and accumulated amortization of each type of intangible asset and goodwill are presented in the table below.
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NEWMARKET CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

 September 30, 2020December 31, 2019
(in thousands)Gross
Carrying
Amount		Accumulated
Amortization		Gross
Carrying
Amount		Accumulated
Amortization
Amortizing intangible assets
Formulas and technology$9,600 $6,758 $9,600 $5,416 
Contract2,000 750 2,000 600 
Customer bases14,240 11,761 14,240 10,931 
Goodwill123,852 122,987 
$149,692 $19,269 $148,827 $16,947 
All of the intangibles relate to the petroleum additives segment. The change in the gross carrying amount between December 31, 2019 and September 30, 2020 is due to foreign currency fluctuation, as well as the completion in May 2020 of the purchase of the remaining outstanding capital stock of Aditivos Mexicanos, S.A. de C.V. (AMSA), which we acquired in 2017. The prior noncontrolling interest represented by the outstanding capital stock of AMSA was not material. There is no accumulated goodwill impairment.
Amortization expense was (in thousands):
Third quarter ended September 30, 2020$586 
Nine months ended September 30, 20202,322 
Third quarter ended September 30, 20191,051 
Nine months ended September 30, 20193,154 
Estimated amortization expense for the remainder of 2020, as well as estimated annual amortization expense related to our intangible assets for the next five years, is expected to be (in thousands):
2020$585 
20212,156 
20221,423 
2023907 
2024390 
2025390 
We amortize the contract over 10 years; customer bases over 4 to 20 years; and formulas and technology over 3 to 6 years.
8.    Long-term Debt
(in thousands)September 30,
2020		December 31,
2019
Senior notes - 4.10% due 2022 (net of related deferred financing costs)
$348,702 $348,263 
Senior notes - 3.78% due 2029
250,000 250,000 
Revolving credit facility10,000 44,678 
$608,702 $642,941 
Senior Notes - The outstanding 4.10% senior notes are unsecured, with an aggregate principal amount of $350 million and are registered under the Securities Act of 1933, as amended (Securities Act). The outstanding 3.78% senior notes are unsecured and were issued in a 2017 private placement with The Prudential Insurance Company of America and certain other purchasers. The 3.78% senior notes agreement was amended in March 2020 to conform the covenants under the agreement with those in the 2020 revolving credit facility. We were in compliance with all covenants under both issuances of the senior notes as of September 30, 2020 and December 31, 2019.
Revolving Credit Facility - On March 5, 2020, we entered into a Credit Agreement (the Credit Agreement) with a term of five years. The Credit Agreement provides for a $900 million, multicurrency revolving credit facility, with a $500 million sublimit
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NEWMARKET CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

for multicurrency borrowings, a $50 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 in the aggregate amount of the revolving credit facility or obtain incremental term loans in an amount up to $425 million. Concurrent with entering into the Credit Agreement, we terminated our former revolving credit facility that we had entered into in 2017.
The obligations under the Credit Agreement are unsecured and are fully and unconditionally guaranteed by NewMarket. The revolving credit facility is available on a revolving basis until March 5, 2025.
Borrowings made under the revolving credit facility bear interest, at our option, at an annual rate equal to (1) the Alternate Base Rate (ABR) plus the Applicable Rate (as defined in the Credit Agreement) solely in the case of loans denominated in U.S. dollars to NewMarket, (2) the Adjusted LIBO Rate plus the Applicable Rate, or (3) the Adjusted EURIBO 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 NYFRB Rate (as defined in the Credit Agreement) from time to time plus 0.5%, and (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. The Adjusted EURIBO Rate means the rate at which Eurocurrency deposits denominated in euro in the euro interbank markets for certain periods (as selected by NewMarket) are quoted, as adjusted for statutory reserve requirements for Eurocurrency liabilities and other mandatory costs. The Applicable Rate ranges from 0.000% to 0.375% (depending on our Leverage Ratio or Credit Ratings) for loans bearing interest based on the ABR. The Applicable Rate ranges from 0.875% to 1.375% (depending on our Leverage Ratio or Credit Ratings) for loans bearing interest based on the Adjusted LIBO Rate or the Adjusted EURIBO rate. The Credit Agreement contains the Administrative Agent's customary LIBOR successor rate provisions, which apply in the event LIBOR is no longer generally adopted as the benchmark rate for syndicated loans.
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 3.75 to 1.00 except during an Increased Leverage Period (as defined in the Credit Agreement). We were in compliance with all covenants under the revolving credit facility in effect at September 30, 2020 and at December 31, 2019.
We paid financing costs in 2020 of approximately $1.3 million related to this revolving credit facility and carried over deferred financing costs from our previous revolving credit facility of approximately $1.2 million, resulting in total deferred financing costs of $2.5 million as of September 30, 2020, which we are amortizing over the term of the Credit Agreement.
The average interest rate for borrowings under the credit agreements was 1.4% during the first nine months of 2020 and 3.0% during the full year of 2019.
The outstanding borrowings under the revolving credit facilities amounted to $10 million at September 30, 2020 and $45 million at December 31, 2019. Outstanding letters of credit amounted to $2 million at September 30, 2020 and $3 million at December 31, 2019 resulting in the unused portion of the credit facility in effect amounting to $888 million at September 30, 2020 and $803 million at December 31, 2019.
9.    Commitments and Contingencies
Legal Matters
We are involved in legal proceedings that are incidental to our business and may include administrative or judicial actions. Some of these legal proceedings involve governmental authorities and relate to environmental matters. For further information, see Environmental below.
While it is not possible to predict or determine with certainty the outcome of any legal proceeding, we believe the outcome of any of these proceedings, or all of them combined, will not result in a material adverse effect on our consolidated results of operations, financial condition, or cash flows.
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NEWMARKET CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Environmental
We are involved in environmental proceedings and potential proceedings relating to soil and groundwater contamination, disposal of hazardous waste, and other environmental matters at several of our current or former facilities, or at third-party sites where we have been designated as a potentially responsible party (PRP). While we believe we are currently adequately accrued for known environmental issues, it is possible that unexpected future costs could have a significant impact on our consolidated financial position, results of operations, and cash flows. Our total accruals for environmental remediation, dismantling, and decontamination were approximately $10 million at September 30, 2020 and $11 million at December 31, 2019. Of the total accrual, the current portion is included in accrued expenses and the noncurrent portion is included in other noncurrent liabilities on the Condensed Consolidated Balance Sheets.
Our more significant environmental sites include a former plant site in Louisiana (the Louisiana site) and a Houston, Texas plant site (the Texas site). Together, the amounts accrued on a discounted basis related to these sites represented approximately $7 million of the total accrual above at September 30, 2020 and $8 million at December 31, 2019, using discount rates ranging from 3% to 9% for both periods. The aggregate undiscounted amount for these sites was $9 million at September 30, 2020 and $10 million at December 31, 2019. Of the total accrued for these two sites, the amount related to remediation of groundwater and soil for the Louisiana site was $3 million at September 30, 2020 and $4 million at December 31, 2019. The amount related to remediation of groundwater and soil for the Texas site was $3 million at both September 30, 2020 and December 31, 2019.
10.    Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss
The balances of, and changes in, the components of accumulated other comprehensive loss, net of tax, consist of the following:
(in thousands)Pension Plans
and Other Postretirement Benefits		Foreign Currency Translation AdjustmentsAccumulated Other
Comprehensive (Loss) Income
Balance at December 31, 2018$(86,555)$(94,761)$(181,316)
Other comprehensive income (loss) before reclassifications
2,501 (9,239)(6,738)
Amounts reclassified from accumulated other comprehensive loss (a)
443 0 443 
Other comprehensive income (loss)
2,944 (9,239)(6,295)
Balance at September 30, 2019$(83,611)$(104,000)$(187,611)
Balance at December 31, 2019$(69,795)$(92,953)$(162,748)
Other comprehensive income (loss) before reclassifications
2,985 (5,013)(2,028)
Amounts reclassified from accumulated other comprehensive loss (a)
1,878 0 1,878 
Other comprehensive income (loss)
4,863 (5,013)(150)
Balance at September 30, 2020$(64,932)$(97,966)$(162,898)
(a) The pension plan and other postretirement benefit components of accumulated other comprehensive loss are included in the computation of net periodic benefit cost (income). See Note 4 in this Quarterly Report on Form 10-Q and Note 17 in our 2019 Annual Report for further information.
11.    Fair Value Measurements
The carrying amount of cash and cash equivalents in the Condensed Consolidated Balance Sheets, as well as the fair value, was $118 million at September 30, 2020 and $144 million at December 31, 2019. The fair value is categorized in Level 1 of the fair value hierarchy.
No material events occurred during the nine months ended September 30, 2020 requiring adjustment to the recognized balances of assets or liabilities which are recorded at fair value on a nonrecurring basis.
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NEWMARKET CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Long-term debt – We record the carrying amount of our long-term debt at historical cost, less deferred financing costs related to the 4.10% senior notes. The estimated fair value of our long-term debt is shown in the table below and is based primarily on estimated current rates available to us for debt of the same remaining duration and adjusted for nonperformance risk and credit risk. The estimated fair value of our publicly-traded 4.10% senior notes included in long-term debt in the table below is based on the last quoted price closest to September 30, 2020. The fair value of our debt instruments is categorized as Level 2.
September 30, 2020December 31, 2019
(in thousands)Carrying
Amount		Fair
Value		Carrying
Amount		Fair
Value
Long-term debt $608,702 $662,784 $642,941 $677,253 
12.    Recent Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" (ASU 2020-04), which provides guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying generally accepted accounting principles to contracts, hedging relationships, and other transactions impacted by reference rate reform. The provisions of ASU 2020-04 apply only to those transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. Adoption of the provisions of ASU 2020-04 are optional and are effective from March 12, 2020 through December 31, 2022. We continue to evaluate the impact of ASU 2020-04 on our consolidated financial statements, but do not currently expect a significant impact.

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ITEM 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This report contains forward-looking statements about future events and expectations within the meaning of the Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations and projections about future results. When we use words in this document such as “anticipates,” “intends,” “plans,” “believes,” “estimates,” “projects,” “expects,” “should,” “could,” “may,” “will,” and similar expressions, we do so to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements we make regarding future prospects of growth in the petroleum additives market, other trends in the petroleum additives market, our ability to maintain or increase our market share, and our future capital expenditure levels.
We believe our forward-looking statements are based on reasonable expectations and assumptions, within the bounds of what we know about our business and operations. However, we offer no assurance that actual results will not differ materially from our expectations due to uncertainties and factors that are difficult to predict and beyond our control.
Factors that could cause actual results to differ materially from expectations include, but are not limited to, the availability of raw materials and distribution systems; disruptions at production facilities, including single-sourced facilities; hazards common to chemical businesses; the ability to respond effectively to technological changes in our industry; failure to protect our intellectual property rights; sudden or sharp raw material price increases; competition from other manufacturers; current and future governmental regulations; the gain or loss of significant customers; failure to attract and retain a highly-qualified workforce; an information technology system failure or security breach; the occurrence or threat of extraordinary events, including natural disasters, terrorist attacks, and health-related epidemics such as the COVID-19 pandemic; risks related to operating outside of the United States; political, economic, and regulatory factors concerning our products; the impact of substantial indebtedness on our operational and financial flexibility; the impact of fluctuations in foreign exchange rates; resolution of environmental liabilities or legal proceedings; limitation of our insurance coverage; our inability to realize expected benefits from investment in our infrastructure or from recent or future acquisitions, or our inability to successfully integrate recent or future acquisitions into our business; the underperformance of our pension assets resulting in additional cash contributions to our pension plans; and other factors detailed from time to time in the reports that NewMarket files with the SEC, including the risk factors in Item 1A. “Risk Factors” of our 2019 Annual Report and Part II. Item 1A. "Risk Factors" of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020, which are available to shareholders upon request.
You should keep in mind that any forward-looking statement made by us in this report or elsewhere speaks only as of the date on which we make it. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements in this discussion after the date hereof, except as may be required by law. In light of these risks and uncertainties, any forward-looking statement made in this report or elsewhere, might not occur.

Overview
When comparing the results of the petroleum additives segment for the first nine months of 2020 with the first nine months of 2019, both net sales and operating profit decreased primarily resulting from the economic disruption from COVID-19. Net sales for the nine months comparative period decreased 10.2% primarily due to both lower lubricant additives and fuel additives product shipments, along with decreased selling prices and an unfavorable foreign currency impact. While there was improvement in petroleum additives operating profit for the third quarter comparative periods, for the nine months comparative periods, operating profit was 12.9% lower reflecting lower product shipments and selling prices, as well as higher conversion costs, partially offset by improved raw material costs.
Our operations generate cash that is in excess of the needs of the business. We continue to invest in and manage the business for the long-term with the goal of helping our customers succeed in their marketplaces. Our investments continue to be in organizational talent, technology development and processes, and global infrastructure, consisting of technical centers, production capability, and geographic expansion.
Impact of COVID-19 Pandemic and Current Economic Environment
The results for the first nine months of 2020 reflect a significant impact from the COVID-19 pandemic and the resulting government restrictions on the movement of people, goods, and services to combat the spread of the virus. With dramatically less travel and miles driven, and with less industrial production, specifically with automobile plant closures, global demand for both lubricant and fuel additives declined when comparing the first nine months of 2020 and the first nine months of 2019 as reflected by a 7.5% decrease in shipment volumes.
Our third quarter 2020 operating results reflected improvement in some of the key drivers that affect the performance of our business, consistent with what we began to experience near the end of the second quarter of 2020. With gasoline consumption
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and miles driven continuing to show improvement and industrial production beginning to rebound, specifically related to automobile plants reopening and producing vehicles, demand for both our lubricant and fuel additives increased steadily throughout the third quarter. These improvements helped to drive an increase in shipments to customers in the third quarter of 2020 of over 25% from the second quarter of 2020. The pace and stability of improvement will depend heavily on economic recovery and the rate at which government restrictions are lifted and remain lifted.
With only a very few government-ordered, short-term exceptions, all of our locations around the world, including our manufacturing and research and development facilities, have continued to operate safely without interruption, and we expect them to continue to do so. Raw material sourcing has not been significantly impacted and we do not expect that to change over the remaining months of the year. The transportation industry continues to operate and our products are currently being delivered to our customers.
Our financial position remains strong. We have sufficient access to capital if needed, including our new $900 million revolving credit facility we entered into in March 2020, and do not anticipate any issues with meeting the covenants for all our debt agreements. Our major capital projects are continuing to progress substantially as planned.
The chemical industry and our products are recognized as essential for transportation of goods and services. Our business continuity planning process focuses our efforts on managing through this challenging time and helping our customers do the same. As we are a global company and can leverage the knowledge and experience of our personnel in facilities across the world, we do not expect to experience negative impacts related to short-term travel and border restrictions. As we operate in the chemical industry, we continue to be focused on protecting the health and safety of our employees and have procedures in place at each of our operating facilities to help ensure their well-being.

Results of Operations
Net Sales
Consolidated net sales for the third quarter of 2020 totaled $512.9 million, representing a decrease of $42.9 million, or 7.7%, from the third quarter of 2019. Consolidated net sales for the first nine months of 2020 totaled $1.5 billion, representing a decrease of $172.7 million, or 10.4%, from the first nine months of 2019. The following table shows net sales by segment and product line.
Third Quarter Ended
September 30,		Nine Months Ended
September 30,
(in millions)2020201920202019
Petroleum additives
Lubricant additives$432.9 $448.6 $1,240.1 $1,348.5 
Fuel additives77.4 102.0 236.3 295.6 
Total510.3 550.6 1,476.4 1,644.1 
All other2.6 5.2 6.8 11.8 
Net sales$512.9 $555.8 $1,483.2 $1,655.9 
Petroleum Additives Segment
The regions in which we operate include North America (the United States and Canada), Latin America (Mexico, Central America, and South America), Asia Pacific, and the EMEAI region. While there is some fluctuation, the percentage of net sales generated in the regions remained fairly consistent when comparing the first nine months of 2020 with the same period in 2019, as well as with the full year in 2019.
Petroleum additives net sales for the third quarter of 2020 were $510.3 million compared to $550.6 million for the third quarter of 2019, a decrease of 7.3%. Petroleum additives net sales for the first nine months of 2020 were $1.5 billion compared to $1.6 billion for the first nine months of 2019, a decrease of 10.2%. For the third quarter comparative period, the decrease was across all regions except for the Latin America region which experienced a slight increase in petroleum additives net sales. The decrease for the nine months comparative period was across all regions. The North America region represented approximately 40% of the petroleum additives decrease for the third quarter period and nearly half of the decrease for the nine month period. Also during the third quarter, the EMEAI region represented approximately 45% of the petroleum additives decrease in net sales, with Asia Pacific representing approximately 15% decrease and Latin America experiencing a small increase. For the nine months comparative periods, EMEAI and Asia Pacific each represented approximately 25% of the decrease in petroleum additives net sales, with the Latin America region contributing a small reduction. The reductions for the third quarter and nine months periods were predominantly the result of the economic disruption due to the COVID-19 pandemic, including lower
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demand for petroleum additives products reflecting the restrictions across the world on the movement of people, goods, and services.
The following table details the approximate components of the decrease in petroleum additives net sales between the third quarter and first nine months of 2020 and 2019.
(in millions)Third QuarterNine Months
Period ended September 30, 2019$550.6 $1,644.1 
Lubricant additives shipments(1.2)(75.2)
Fuel additives shipments(12.3)(35.5)
Selling prices(29.3)(53.2)
Foreign currency impact, net2.5 (3.8)
Period ended September 30, 2020$510.3 $1,476.4 
When comparing both the third quarter and the nine months periods of 2020 and 2019, petroleum additives shipments accounted for a $13.5 million decrease in net sales for the third quarter comparison and a $110.7 million decrease in net sales for the nine months comparison. Lower selling prices, along with an unfavorable foreign currency impact for the nine months comparison and a partially offsetting favorable foreign currency impact for the third quarter comparison, also contributed to the decrease in net sales for both the third quarter and nine month comparative periods. The United States Dollar weakened against the Euro when comparing the third quarter of 2020 and the third quarter of 2019 resulting in a favorable impact to petroleum additives net sales during the third quarter of 2020. The United States Dollar strengthened against the Euro, Chinese Renminbi, and Indian Rupee, resulting in an unfavorable impact to net sales for the nine months comparative periods.
On a worldwide basis, the volume of product shipments for petroleum additives decreased 3.2% when comparing the two third quarter periods and 7.5% when comparing the first nine months of 2020 and 2019. Shipments of lubricant additives decreased in the Asia Pacific and EMEAI regions for both the third quarter and nine months comparative periods. Lubricant additives shipments increased in the North America and Latin America regions for the third quarter comparative periods, but decreased in North America for the nine month comparative periods. Lubricant additives shipments in the Latin America region were substantially unchanged for the nine month comparative periods. Fuel additives shipment volumes decreased for both the third quarter and nine months comparative periods. The decrease in fuel additives shipments was predominantly in the North America and EMEAI regions, substantially resulting from the impact of the COVID-19 pandemic.

All Other
The “All other” category includes the operations of the antiknock compounds business and certain contracted manufacturing and services.

Segment Operating Profit
NewMarket evaluates the performance of the petroleum additives business based on segment operating profit. NewMarket Services Corporation expenses are charged to NewMarket and each subsidiary pursuant to services agreements between the companies. Depreciation on segment property, plant, and equipment, as well as amortization of segment intangible assets and lease right-of-use assets, is included in segment operating profit.
The following table reports segment operating profit for the third quarter and nine months ended September 30, 2020 and September 30, 2019.
Third Quarter Ended
September 30,		Nine Months Ended
September 30,
(in millions)2020201920202019
Petroleum additives$102.2 $94.8 $248.9 $285.6 
All other$2.0 $(0.1)$2.0 $0.1 
Petroleum Additives Segment
The petroleum additives segment operating profit increased $7.4 million when comparing the third quarter of 2020 to the third quarter of 2019 and decreased $36.7 million when comparing the first nine months of 2020 to the first nine months of 2019. Both comparative periods included the impact of the same factors that affected gross profit (see discussion below) including an unfavorable foreign currency translation impact.
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The operating profit margin was 20.0% for the third quarter of 2020 as compared to 17.2% for the third quarter of 2019 and was 16.9% for the first nine months of 2020 as compared to 17.4% for the first nine months of 2019. For the rolling four quarters ended September 30, 2020, the operating profit margin for petroleum additives was 16.1%. While we have experienced some recovery during the third quarter of 2020, the economic disruption from COVID-19 during the first nine months of 2020 resulted in lower shipment volumes and reduced net sales. Together, these factors, along with others discussed below, had an unfavorable impact on our nine months 2020 operating profit margin from historical margins. Operating profit margins remain a priority, and while they will fluctuate from quarter to quarter due to multiple factors, we believe the fundamentals of our business and industry as a whole are unchanged.
Petroleum additives gross profit increased $1.4 million when comparing the two third quarter periods, but decreased $45.1 million when comparing the first nine months of 2020 and 2019. Cost of goods sold as a percentage of net sales was 67.9% for the third quarter of 2020, down from 70.5% for the third quarter of 2019, and 70.2% for the first nine months of 2020, down slightly from 70.5% for the first nine months of 2019.
When comparing the third quarters of 2020 and 2019, the slight improvement in gross profit resulted from a favorable impact from raw material costs, which was substantially offset by unfavorable impacts from product shipments and lower selling prices (both as discussed in the Net Sales section above), as well as unfavorable conversion costs. When comparing the first nine months of 2020 and 2019, the decrease in gross profit resulted from unfavorable impacts from product shipments and lower selling prices (both as discussed in the Net Sales section above), as well as unfavorable conversion costs, including an unfavorable foreign currency translation impact, which together contributed over 100% of the change in the nine months comparative period. These unfavorable factors for the nine months comparison were partially offset by lower raw material costs.
Petroleum additives selling, general, and administrative expenses (SG&A) for the third quarter of 2020 were $2.7 million, or 8.6%, lower as compared to the third quarter of 2019, and $4.0 million, or 4.3%, lower for the first nine months of 2020 as compared to the same 2019 period. SG&A as a percentage of net sales was 5.6% for the third quarter of 2020, 5.7% for the third quarter of 2019, 6.0% for the first nine months of 2020 and 5.6% for the first nine months of 2019. Our SG&A costs are primarily personnel-related and include salaries, benefits, and other costs associated with our workforce, including travel expenses. While personnel-related costs fluctuate from period to period, there were no significant changes in the drivers of these costs when comparing the periods other than reduced travel expenses due to the impact of COVID-19.
Our investment in petroleum additives research, development, and testing (R&D) decreased $3.3 million when comparing the third quarter of 2020 with the third quarter of 2019 and decreased $4.6 million when comparing the first nine months periods of 2020 and 2019. As a percentage of net sales, R&D was 6.5% for third quarter of 2020, 6.6% for the third quarter of 2019, 6.9% for the first nine months of 2020, and 6.5% for the first nine months of 2019. Our R&D investments reflect our efforts to support the development of solutions that meet our customers' needs, meet new and evolving standards, and support our expansion into new product areas. Our approach to R&D investment, as it is with SG&A, is one of purposeful spending on programs to support our current product base and to ensure that we develop products to support our customers' programs in the future. R&D investments include personnel-related costs, as well as costs for internal and external testing of our products.

The following discussion references certain captions on the Consolidated Statements of Income.

Interest and Financing Expenses
Interest and financing expenses were $6.5 million for the third quarter of 2020, $7.0 million for the third quarter of 2019, $20.6 million for the first nine months of 2020 and $22.7 million for the first nine months of 2019. The decrease for both the third quarter and nine months comparison resulted primarily from a lower average interest rate during the 2020 periods.

Other Income (Expense), Net
Other income (expense), net was income of $25.3 million for the third quarter of 2020, $6.2 million for the third quarter of 2019, $39.3 million for the first nine months of 2020, and $17.9 million for the first nine months of 2019. Both the third quarter and nine month periods of 2020 included a gain of $16.5 million related to the sale of a non-operating parcel of real estate. The amounts for both the 2020 and 2019 periods also include the components of net periodic benefit cost (income), except for service cost, from defined benefit pension and postretirement plans. See Note 4 for further information on total periodic benefit cost (income).

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Income Tax Expense
Income tax expense was $21.8 million for the third quarter of 2020 and $19.7 million for the third quarter of 2019. The effective tax rate was 18.6% for the third quarter of 2020 and 22.5% for the third quarter of 2019. Income tax expense increased $6.8 million due to the higher income before income tax expense. The lower effective income tax rate resulted in a $4.7 million decrease in income tax.
Income tax expense was $51.3 million for the first nine months of 2020 and $60.8 million for the first nine months of 2019. The effective tax rate was 20.1% for the first nine months of 2020 and 22.9% for the first nine months of 2019. Income tax expense decreased $2.3 million due to the lower income before income tax expense. The lower effective tax rate resulted in a $7.2 million decrease in income tax.
The decrease in the effective tax rates for both the third quarter and nine months is primarily a result of finalizing certain 2019 tax filings.

Cash Flows, Financial Condition, and Liquidity
Cash and cash equivalents at September 30, 2020 were $117.7 million, which was a decrease of $26.7 million since December 31, 2019.
Cash and cash equivalents held by our foreign subsidiaries amounted to $90.3 million at September 30, 2020 and $99.5 million at December 31, 2019. Periodically, we repatriate cash from our foreign subsidiaries to the United States through intercompany dividends and loans. We do not anticipate significant tax consequences from future distributions of foreign earnings.
A portion of our foreign cash balances is associated with earnings that we have asserted are indefinitely reinvested. We plan to use these indefinitely reinvested earnings to support growth outside of the United States through funding of operating expenses, capital expenditures, and other cash needs of our foreign subsidiaries.
We expect that cash from operations, together with borrowing available under our revolving credit facility, will continue to be sufficient to cover our operating needs and planned capital expenditures for at least the next twelve months.
Cash Flows – Operating Activities
Cash flows provided from operating activities for the first nine months of 2020 were $216.3 million, adjusted for the use of $33.5 million to fund higher working capital requirements, as well as a gain of $16.5 million related to the sale of a parcel of non-operating real estate. The $33.5 million used for working capital excluded an unfavorable foreign currency impact to the components of working capital on the balance sheet.
The most significant changes in working capital included a decrease in accounts receivable, as well as an increase in accounts payable. The decrease in accounts receivable balances when comparing September 30, 2020 with the end of 2019 was primarily the result of lower sales, as well as slower customer payment due to the impacts of COVID-19. The increase in accounts payable reflected normal fluctuations across the regions.
Including cash and cash equivalents, as well as the impact of foreign currency on the balance sheet, we had total working capital of $545.5 million at September 30, 2020 and $570.5 million at December 31, 2019. The current ratio was 2.77 to 1 at September 30, 2020 and 2.85 to 1 at December 31, 2019.
Cash Flows – Investing Activities
Cash used in investing activities totaled $41.1 million during the first nine months of 2020 and primarily represented capital expenditures, partially offset by the proceeds from the sale of the parcel of non-operating real estate. We currently expect that our total capital spending during 2020 will be in the $75 million to $85 million range and will include several improvements to our manufacturing and R&D infrastructure around the world. We expect to continue to finance capital spending through cash on hand and cash provided from operations, together with borrowing available under our $900 million revolving credit facility.
Cash Flows – Financing Activities
Cash used in financing activities during the first nine months of 2020 amounted to $200.2 million. We repurchased $101.4 million of our common stock, paid dividends of $62.7 million, and repaid $34.7 million under our revolving credit facility.
Debt
Our long-term debt was $608.7 million at September 30, 2020 compared to $642.9 million at December 31, 2019.
On March 5, 2020, we entered into a $900 million revolving credit facility with a term of five years. Concurrently, we terminated our previous $850 million revolving credit facility. See Note 8 for additional information on the 4.10% senior notes, 3.78% senior notes, and revolving credit facility, including the unused portion of our revolving credit facility.
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The 4.10% senior notes, 3.78% senior notes, and the revolving credit facility contain covenants, representations, and events of default that management considers typical of credit arrangements of this nature. The covenants under the 3.78% senior notes include negative covenants, certain financial covenants, and events of default which are substantially similar to the covenants and events of default in our revolving credit facility. The 3.78% senior notes agreement was amended in March 2020 to conform the covenants under the agreement with those in the 2020 revolving credit facility.
The revolving credit facility contains financial covenants that require NewMarket to maintain a consolidated Leverage Ratio (as defined in the agreement) of no more than 3.75 to 1.00, except during an Increased Leverage Period (as defined in the agreement) at the end of each quarter.
At September 30, 2020, the Leverage Ratio was 1.5 under the revolving credit facility. We were in compliance with all covenants under the 4.10% senior notes, the 3.78% senior notes, and the revolving credit facility in effect at September 30, 2020 and December 31, 2019.
As a percentage of total capitalization (total long-term debt and shareholders’ equity), our total long-term debt percentage decreased from 48.5% at December 31, 2019 to 45.7% at September 30, 2020. The change in the percentage resulted from the increase in shareholders' equity along with the decrease in long-term debt. The change in shareholders’ equity reflects our earnings offset by stock repurchases, dividend payments, and the impact of foreign currency translation adjustments. Generally, we repay any outstanding long-term debt with cash from operations or refinancing activities.

Critical Accounting Policies and Estimates
This Form 10-Q and our 2019 Annual Report include discussions of our accounting policies, as well as methods and estimates used in the preparation of our financial statements. We also provided a discussion of Critical Accounting Policies and Estimates in our 2019 Annual Report.
There have been no significant changes in our critical accounting policies and estimates from those reported in our 2019 Annual Report.

Recent Accounting Pronouncements
For a full discussion of the significant recent accounting pronouncements which may impact our financial statements, see Note 12.

Outlook
Our stated goal is to provide a 10% compounded return per year for our shareholders over any five-year period (defined by earnings per share growth plus dividend yield), although we may not necessarily achieve a 10% return each year. We continue to have confidence in our customer-focused strategy and approach to the market. We believe the fundamentals of how we run our business - a long-term view, safety-first culture, customer-focused solutions, technology-driven product offerings, and world-class supply chain capability - will continue to be beneficial for all of our stakeholders over the long term.
We expect our petroleum additives segment will continue to experience impacts to its operating performance due to the current economic environment. Our global business will see varying effects on demand that will differ by region based on our product portfolio and geographic coverage. The global market should stabilize when government restrictions on the movement of people, goods, and services normalize, as modern transportation and machinery cannot function without our products. We expect that the petroleum additives market will grow in the 1% to 2% range annually for the foreseeable future with 2020 being an exception. We plan to exceed that growth rate over the long-term.
In the past several years we have made significant investments in our business as the industry fundamentals remain positive. These investments have been and will continue to be in organizational talent, technology development and processes, and global infrastructure, consisting of technical centers, production capability and geographic expansion. We intend to utilize these investments to improve our ability to deliver the solutions that our customers value, expand our global reach, and enhance our operating results. We will continue to invest in our capabilities to provide even better value, service, technology, and customer solutions.
Typically, our business generates significant amounts of cash beyond what is necessary for the expansion and growth of our current offerings. We regularly review our many internal opportunities to utilize excess cash from technological, geographic, production capability, and product line perspectives. We believe our capital spending is creating the capability we need to grow and support our customers worldwide, and our research and development investments are positioning us well to provide added value to our customers. Our primary focus in the acquisition area remains on the petroleum additives industry. It is our view that this industry segment will provide the greatest opportunity for solid returns on our investments while minimizing risk. We remain focused on this strategy and will evaluate any future opportunities. We will continue to evaluate all alternative uses of cash to enhance shareholder value, including stock repurchases and dividends.
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ITEM 3.     Quantitative and Qualitative Disclosures About Market Risk
At September 30, 2020, there were no material changes in our market risk from the information provided in the 2019 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. Under Rule 13a-15(b) of 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 such term is defined in Rule 13a-15(e) of 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 were effective at the reasonable assurance level.
There has been no change in our internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act, that occurred during the quarter ended September 30, 2020 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
There have been no material changes to our legal proceedings as disclosed in "Legal Proceedings" in Item 3 of Part I of the 2019 Annual Report.

ITEM 1A.     Risk Factors
There were no material changes during the nine months ended September 30, 2020 to the risk factors disclosed in Item 1A - Risk Factors in our 2019 Annual Report and updated in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

ITEM 2.     Unregistered Sales of Equity Securities and Use of Proceeds

On December 13, 2018, our Board of Directors approved a share repurchase program authorizing management to repurchase up to $500 million of NewMarket's outstanding common stock effective January 1, 2019 until December 31, 2021, as market conditions warrant and covenants under our existing debt agreements permit. We may conduct the share repurchases in the open market, in privately negotiated transactions, through block trades or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934. The repurchase program does not require NewMarket to acquire any specific number of shares and may be terminated or suspended at any time. At September 30, 2020, approximately $399 million remained available under the 2018 authorization. The following table outlines the purchases during the third quarter of 2020 under this authorization.

Issuer Purchases of Equity Securities
PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsApproximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
July 1 to July 313,835$373.88 3,835$398,566,341 
August 1 to August 3100.00 0398,566,341 
September 1 to September 3000.00 0398,566,341 
Total3,835$373.88 3,835$398,566,341 
ITEM 6.     Exhibits
 
Articles of Incorporation Amended and Restated effective April 27, 2012 (incorporated by reference to Exhibit 3.1 to Form 8-K (File No. 1-32190) filed April 30, 2012)
NewMarket Corporation Bylaws Amended and Restated effective August 6, 2015 (incorporated by reference to Exhibit 3.1 to Form 8-K (File No. 1- 32190) filed August 6, 2015)
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
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 Brian D. Paliotti
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
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Brian D. Paliotti
Exhibit 101Inline XBRL Instance Document and Related Items (the instance document does not appear in the Interactive Data File because its Inline XBRL tags are embedded within the Inline XBRL document)
Exhibit 104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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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: October 29, 2020By: /s/ Brian D. Paliotti
Brian D. Paliotti
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: October 29, 2020By: /s/ William J. Skrobacz
William J. Skrobacz
Controller
(Principal Accounting Officer)


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