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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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
Incorporated pursuant to the Laws of the Commonwealth of Virginia
Internal Revenue Service Employer Identification No. 20-0812170
330 South Fourth Street
Richmond, Virginia 23219-4350
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
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes      No  
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes      No  
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      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 (§ 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      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 filerAccelerated filer
Non-accelerated filer(Do not check if a smaller reporting company)
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.
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.                                             
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes      No  
Aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2020 (the last business day of the registrant’s most recently completed second fiscal quarter): $3,166,356,273*
Number of shares of Common Stock outstanding as of January 31, 2021: 10,921,342
DOCUMENTS INCORPORATED BY REFERENCE
Portions of NewMarket Corporation’s definitive Proxy Statement for its 2021 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934 are incorporated by reference into Part III of this Annual Report on Form 10-K.
*    In determining this figure, an aggregate of 3,017,596 shares of Common Stock as beneficially owned by Bruce C. Gottwald and members of his immediate family have been excluded and treated as shares held by affiliates. See Item 12. The aggregate market value has been computed on the basis of the closing price on the New York Stock Exchange on June 30, 2020.



Table of Contents
Form 10-K
Table of Contents
 
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.

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PART I

ITEM 1.    BUSINESS
NewMarket Corporation (NewMarket) (NYSE: NEU) is a holding company and is the parent company of Afton Chemical Corporation (Afton), Ethyl Corporation (Ethyl), NewMarket Services Corporation (NewMarket Services), and NewMarket Development Corporation (NewMarket Development).
Each of our subsidiaries manages its own assets and liabilities. Afton manufactures and sells petroleum additives, while Ethyl represents the sale of antiknock compounds in North America, as well as certain contracted manufacturing and services. NewMarket Development manages the real property that we own in Virginia. NewMarket Services provides various administrative services to NewMarket, Afton, Ethyl, and NewMarket Development. NewMarket Services departmental expenses and other expenses are billed to each subsidiary pursuant to services agreements between the companies.
References in this Annual Report on Form 10-K to “we,” “us,” “our,” and “NewMarket” are to NewMarket Corporation and its consolidated subsidiaries, unless the context indicates otherwise.
As a specialty chemicals company, Afton develops and manufactures highly formulated lubricant and fuel additive packages and markets and sells these products worldwide. Afton is one of the largest lubricant and fuel additives companies in the world. Lubricant and fuel additives are necessary products for efficient and reliable operation of vehicles and machinery. From custom-formulated additive packages to market-general additives, we believe Afton provides customers with products and solutions that make engines run smoother, machines last longer, and fuels burn cleaner.
Through an open, flexible, and collaborative style, Afton works closely with its customers to understand their business and help them meet their goals. This style has allowed Afton to develop long-term relationships with its customers in every major region of the world, which Afton serves through our manufacturing facilities across the globe.
We have operations in North America, Europe, Asia, and South America. The economies are generally stable in the countries where we do most of our business, although many of those countries have experienced economic challenges in the past. In countries with more political or economic uncertainty, we generally minimize our risk of loss by utilizing U.S. Dollar-denominated transactions, letters of credit, and prepaid transactions. Further information on our operations in the various geographic areas is in Note 4 of the Notes to Consolidated Financial Statements.
With over 500 employees in research, development, and testing, Afton is dedicated to developing additive formulations that are tailored to our customers’ and the end-users’ specific needs. Afton’s portfolio of technologically-advanced, value-added products allows it to provide a full range of products, services, and solutions to its customers.
Ethyl provides contracted manufacturing and services to Afton and to third parties, and is a marketer of antiknock compounds in North America.
NewMarket Development manages the real property we own in Richmond, Virginia consisting of approximately 54 acres. Our corporate offices are included in this acreage, as well as a research and testing facility, and several acres dedicated to other uses. We are currently exploring various development opportunities for portions of the property as the demand warrants. This effort is ongoing in nature, as we have no specific timeline for any future developments.
We were incorporated in the Commonwealth of Virginia in 2004. Our principal executive offices are located at 330 South Fourth Street, Richmond, Virginia, and our telephone number is (804) 788-5000.
Business Segments
Our business is composed of one segment, petroleum additives, which is primarily represented by Afton. The antiknock compounds business of Ethyl is reflected in the “All other” category. Each of these is discussed below.
Petroleum Additives—Petroleum additives are used in lubricating oils and fuels to enhance their performance in machinery, vehicles, and other equipment. We manufacture chemical components that are selected to perform one or more specific functions and combine those chemicals with other chemicals or components to form additive packages for

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use in specified end-user applications. The petroleum additives market is a global marketplace, with customers ranging from large, integrated oil companies to national, regional, and independent companies.
We believe our success in the petroleum additives market is largely due to our ability to deliver value to our customers through our products and our open, flexible, and collaborative working style. We accomplish this by understanding what our customers value and by applying our technical capabilities, formulation expertise, broadly differentiated product solutions, and global supply capabilities to satisfy the customers' needs. We invest significantly in research and development in order to meet our customers’ needs and to adapt to the rapidly changing environment for new and improved products and services.
We view the petroleum additives marketplace as being comprised of two broad product applications: lubricant additives and fuel additives. Lubricant additives are highly formulated chemical solutions that, when blended with base fluids, improve the efficiency, durability, performance, and functionality of mineral oils, synthetic oils, and biodegradable fluids, thereby enhancing the performance of machinery and engines. Fuel additives are chemical components that help oil refiners meet fuel specifications or formulated packages that improve the performance of gasoline, diesel, biofuels, and other fuels, resulting in lower operating costs, improved vehicle performance, and reduced emissions.
Lubricant Additives
Lubricant additives are essential ingredients for making lubricating oils. Lubricant additives are used in a wide variety of vehicle and industrial applications, including engine oils, transmission fluids, off-road powertrain and hydraulic systems, gear oils, hydraulic oils, and turbine oils, and virtually any other application where metal-to-metal moving parts are utilized. Lubricant additives are organic and synthetic chemical components that enhance wear protection, prevent deposits, and protect against the hostile operating environment of an engine, transmission, axle, hydraulic pump, or industrial machine.
Lubricants are widely used in operating machinery from transportation vehicles to heavy industrial equipment. Lubricants provide a layer of protection between moving mechanical parts. Without this layer of protection, the normal functioning of machinery would not occur. Effective lubricants reduce downtime and increase efficiency. Specifically, lubricants serve the following main functions:
friction reduction—Friction is reduced by maintaining a thin film of lubricant between moving surfaces, preventing them from coming into direct contact with one another and reducing wear on moving machinery, thereby providing longer life and operational efficiency.
heat removalLubricants act as coolants by removing heat resulting either from friction or through contact with other, higher temperature materials.
containment of contaminantsLubricants function by carrying contaminants away from the machinery and neutralizing the harmful impact of the by-products created by combustion.
The functionality of lubricants is created through an exact balance between a base fluid and performance enhancing additives. This balance is the goal of effective formulations achieved by experienced research and development professionals. We offer a full line of lubricant additive packages, each of which is composed of component chemicals specially selected to perform desired functions. We manufacture most of the chemical components and blend these components to create formulated additive packages designed to meet industry and customer specifications. Lubricant additive components are generally classified based upon their intended functionality, including:
detergents, which clean moving parts of engines and machines, suspend oil contaminants and combustion by-products, and absorb acidic combustion products;
dispersants, which serve to inhibit the formation of sludge and particulates;
extreme pressure/antiwear agents, which reduce wear on moving engine and machinery parts;
viscosity index modifiers, which improve the viscosity and temperature characteristics of lubricants and help the lubricant flow evenly to all parts of an engine or machine; and
antioxidants, which prevent oil from degrading over time.

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We are one of the leading global suppliers of specially formulated lubricant additives that combine some or all of the components described above to develop our products. Our products are highly formulated, complex chemical compositions derived from extensive research and testing to ensure all additive components work together to provide the intended results. Our products are engineered to meet specifications prescribed by either the industry or a specific customer. Purchasers of lubricant additives tend to be integrated oil companies or independent compounders/blenders. We make no sales directly to end-users or to original equipment manufacturers (OEMs).
We view our participation in the lubricant marketplace in three primary areas: engine oil additives, driveline additives, and industrial additives. Our view is not necessarily the same way others view the market.
Engine Oil Additives—The largest submarket within the lubricant additives marketplace is engine oil additives which consists of additives designed for passenger cars, motorcycles, on and off-road heavy duty commercial equipment, locomotives, and large engines in ocean-going vessels. We estimate engine oil additives represent approximately 70% of the overall lubricant additives market volume.
The engine oil market’s primary customers include consumers, fleet owners, mining and construction companies, farmers, railroads, shipping companies, service dealers, and OEMs. The primary functions of engine oil additives are to reduce friction, prevent wear, control formation of sludge and oxidation, and prevent rust. Engine oil additives are typically sold to lubricant manufacturers who combine them with a base oil fluid to meet internal, industry, and OEM specifications.
Key drivers of engine oil additives demand are the number of vehicles on the road, total vehicle miles driven, fuel economy, the average age of vehicles on the road, drain intervals, engine and crankcase size, changes in engine design, and temperature and specification changes driven by the OEMs. The extension of drain intervals has generally offset increased demand due to higher vehicle population, new hardware, and more miles driven. Other key drivers include industrial production rates, agricultural output, mining and construction output, environmental regulations, and infrastructure investments of commercial companies. Afton offers products that enhance the performance of mineral, part-synthetic, and fully-synthetic engine oils.
Driveline Additives—The driveline additives submarket is comprised of additives designed for products such as transmission fluids, axle fluids, and off-road powertrain fluids. This submarket shares in the 30% of the market not covered by engine oil additives. Transmission fluids primarily serve as the power transmission and heat transfer medium in the area of the transmission where the torque of the drive shaft is transferred to the gears of the vehicle. Axle fluids lubricate gears and bearings in axles, and powertrain fluids are used in off-highway powertrain and hydraulic systems. Other products in this area include power steering fluids, shock absorber fluids, gear oils, and lubricants for heavy machinery. These products must conform to highly prescribed specifications developed by vehicle OEMs for specific models or designs. These additives are generally sold to oil companies for ultimate sale to vehicle OEMs for new vehicles (factory-fill), service dealers for aftermarket servicing (service-fill), retailers, and distributors.
Key drivers of the driveline additives marketplace are the number of vehicles manufactured, total number of vehicles in operation, drain intervals for transmission fluids and axle fluids, changes in engine and transmission design and temperatures, and specification changes driven by the OEMs.
Industrial Additives—The industrial additives submarket is comprised of additives designed for products for industrial applications such as hydraulic fluids, grease, industrial gear fluids, and industrial specialty applications, such as turbine oils. This submarket also shares in the 30% of the market not covered by engine oil additives. These products must conform to industry specifications, OEM requirements, and/or application and operating environment demands. Industrial additives are generally sold to oil companies, service dealers for after-market servicing, and distributors.
Key drivers of the industrial additives marketplace are gross domestic product levels and industrial production.

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Fuel Additives
Fuel additives are chemical compounds that are used to improve both the oil refining process and the performance of gasoline, diesel, biofuels, and other fuels. Benefits of fuel additives in the oil refining process include reduced use of crude oil, lower processing costs, and improved fuel storage properties. Fuel performance additives enhance fuel economy, improve ignition and combustion efficiency, reduce emission particulates, maintain engine cleanliness, and protect against deposits in fuel injectors, intake valves, and the combustion chamber. Our fuel additives are extensively tested and designed to meet stringent industry, government, OEM, and individual customer requirements.
Many different types of additives are used in fuels. Their use is generally determined by customer, industry, OEM, and government specifications, and often differs from country to country. The types of fuel additives we offer include:
gasoline performance additives, which clean and maintain key elements of the fuel delivery systems, including fuel injectors and intake valves, in gasoline engines;
diesel fuel performance additives, which perform similar cleaning functions in diesel engines;
cetane improvers, which increase the cetane number (ignition quality) in diesel fuel by reducing the delay between injection and ignition;
stabilizers, which reduce or eliminate oxidation in fuel;
corrosion inhibitors, which minimize the corrosive effects of combustion by-products and prevent rust;
lubricity additives, which restore lubricating properties lost in the refining process;
cold flow improvers, which improve the pumping and flow of distillate and diesel fuels in cold temperatures;
octane enhancers, which increase octane ratings and decrease emissions; and
static dissipating additives.
We offer a broad line of fuel additives worldwide and sell our products to major fuel marketers and refiners, as well as independent terminals and other fuel blenders.
Key drivers in the fuel additive marketplace include total vehicle miles driven, fuel economy, the introduction of new engine designs, regulations on emissions (both gasoline and diesel), quality of the crude oil slate and performance standards, and marketing programs of major oil companies.
Competition
We believe we are one of the four largest manufacturers and suppliers in the petroleum additives marketplace.
In the lubricant additives submarket, our major competitors are The Lubrizol Corporation (a wholly-owned subsidiary of Berkshire Hathaway Inc.), Infineum (a joint venture between ExxonMobil Chemical and Royal Dutch Shell plc), and Chevron Oronite Company LLC. There are several other suppliers in the worldwide market who are competitors in their particular product areas.
The fuel additives submarket is characterized by more competitors. While we participate in many facets of the fuel additives market, our competitors tend to be more narrowly focused. In the gasoline detergent market, we compete mainly against BASF, Chevron Oronite Company LLC, and The Lubrizol Corporation. In the diesel and refinery markets, we compete mainly against The Lubrizol Corporation, Infineum, BASF, Clariant Ltd., Dorf Ketal, and Innospec Inc. We also compete against other regional companies in the fuel additives marketplace.
The competition among the participants in these industries is characterized by the need to provide customers with cost effective, technologically-capable products that meet or exceed industry specifications. The need to continually increase technology performance and lower cost through formulation technology and cost improvement programs is vital for success in this environment.

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All Other—The “All other” category includes the operations of the antiknock compounds business (primarily sales of antiknock compounds in North America), as well as certain contracted manufacturing and services performed by Ethyl. The Ethyl facility is located in Houston, Texas and is substantially dedicated to terminal operations related to antiknock compounds and other fuel additives. The financial results of the petroleum additives activities by Ethyl are reflected in the petroleum additives segment results. The “All other” category financial results include a service fee charged by Ethyl for its production services to Afton.
Human Capital
Our Values are the foundation of our company and support the inclusive and respectful culture we have established in all of our locations around the world. Our Values include:
unquestioned integrity,
respect for people,
safety and environmental responsibility,
partners with customers and suppliers,
continuously improving quality,
citizenship, and
economic viability.
We place the highest level of commitment on safety and strive to operate our business every day focused on its importance. Keeping our employees safe is a management priority, and 2020 was a particularly challenging year in that regard because of the COVID-19 pandemic. While many of our employees were required to work from home due to government mandates, all of our facilities continued to be operational throughout 2020 since the chemical industry and our products are considered essential for the transportation of goods and services. For employees working onsite at our facilities, management invested significant time and effort to ensure the safety of our employees, above and beyond local government requirements and guidance, and to help mitigate the potential for transmission of COVID-19 onsite.
We have a diverse workforce, representative of the geographic regions in which we do business. We place a high value on diverse thoughts, skills, perspectives, cultures and knowledge because we believe that such diversity results in better business decision making. We employed 2,105 people at the end of 2020. Approximately 1,100 were located in the United States, 500 were in the Europe/Middle East/Africa/India region, 300 were in the Asia Pacific region, and 200 were in the Latin America region. Approximately 21% of our workforce is represented by unions.
When we hire new employees, our goal is that they stay with our company for the remainder of their career. Hiring the right people for the long-term and developing them for key roles is something we focus on. In order to be successful, we must attract and retain a highly qualified and technically competent workforce, including key employees in leadership positions. As technology changes in the petroleum additives industry are ongoing, the success of our business is very dependent upon our ability to attract and retain highly qualified scientific and technical personnel. In addition to utilizing our internal network, contacts, and specialized recruiters to identify and attract qualified personnel, we have established relationships with a number of universities globally and have intern and co-op programs in many of our locations.
Globally, approximately 18% of our employees have 20 years or more of service, and over the three year period from 2018 to 2020, our resignation rate was approximately 3%. We believe these measures demonstrate our success in hiring the right employees for the long-term and establishing a culture where respect for people is an everyday value.

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Raw Materials and Product Supply
We use a variety of raw materials and chemicals in our manufacturing and blending processes and believe the sources of these are adequate for our current operations. The primary raw materials for Afton are base oil, polyisobutylene, antioxidants, alcohols, solvents, sulfonates, friction modifiers, olefins, and copolymers.
As the performance requirements of our products become more complex, we often work with highly specialized suppliers. In some cases, we source from a single supplier. In cases where we decide to source from a single supplier, we manage our risk by maintaining safety stock of the raw material or qualifying alternate suppliers. The backup position could take additional time to implement, but we are confident we can ensure continued supply for our customers. We continuously monitor our raw material supply situation and adjust our procurement strategies as conditions require.
Research, Development, and Testing
Research, development, and testing (R&D) provides Afton with new performance-based solutions for our customers in the petroleum additives market. We develop products through a combination of chemical synthesis, formulation development, engineering design, and performance testing. In addition to developing new products, R&D provides our customers and OEMs with data to substantiate product differentiation and technical support to assure total customer satisfaction.
We are committed to providing the most advanced products, comprehensive testing programs, and superior technical solutions tailored to the needs of our customers and OEMs worldwide. Afton continues to successfully implement techniques to drive efficiency in technology discovery and development, while expanding our internal testing, research, and customer support capabilities around the world in support of our goals of providing market-driven technical leadership and performance-based differentiation. In 2020, we continued to invest in and progress our technology plan while successfully managing safety during the COVID-19 pandemic.
Afton continues to develop new products and technology to meet evolving OEM requirements, including specific demands of hybrid and electric vehicles, industry specifications, and environmental regulations, and to keep our customers well-positioned for the future. A significant portion of our R&D investment is dedicated to the development of products that are differentiated by their ability to deliver improved fuel efficiency in addition to robust performance in a wide range of new vehicle and industrial equipment designs. Afton’s state-of-the art testing capabilities enable customized research in all areas of performance needed by both OEMs and tier one suppliers. Our leading-edge capabilities and fundamental understanding in the areas of combustion, friction control, energy efficiency, and wear prevention are used to set the stage for next-generation products in all areas.
In 2020, we successfully launched new technologies across all of our lubricant additive and fuel additive product areas. We developed new engine oil products for passenger cars and commercial trucks in support of our customers in all the major regions of the world in which we operate, including engine oil technology designed for the latest fuel efficient commercial vehicles, as well as targeted solutions for the Asia Pacific region.
We continued to develop new products in multiple application areas in the industrial additive sector, including hydraulic, industrial gear, turbine, slideway, and grease additives. Research is focused on the development of technologies that will provide differentiation to our customers in multiple performance areas including equipment life, reliability, and energy efficiency.
Research continued in our transmission fluid, axle oil, and tractor fluid product lines. This included the development of new OEM-specific additives used in factory-fill fluids installed during automotive component and vehicle assembly in the United States, Germany, Japan, India, and China. We launched first intent technology for battery electric vehicles and developed new products for the service-fill sector to provide our customers with the latest additive technology available, including some first-to-market capability enabling our customers to differentiate their offerings to the retail market.
We continue to provide leading technology in the fuel additives area. In 2020, we developed and launched new products in all product lines including gasoline performance additives and diesel performance additives, as well as additives used in the distribution of fuels. Many of these products use new technology specifically designed to perform well in new, modern engine designs and changing fuel properties, as well as addressing the growing need for increased fuel economy

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and emissions reduction. In addition, we continue to maintain close interactions with regulatory, industry, and OEM leaders to guide our development of future fuel additive technologies based on well-defined market needs.
Intellectual Property
Our intellectual property, including our patents, licenses, and trademarks, is an important component of our business. We actively protect our inventions, new technologies, and product developments by filing patent applications and maintaining trade secrets. We currently own approximately 1,400 issued or pending United States and foreign patents. In addition, we have acquired the rights under patents and inventions of others through licenses or otherwise. We take care to respect the intellectual property rights of others and we believe our products do not infringe upon those rights. We vigorously participate in patent opposition proceedings around the world, where necessary, to secure a technology base free of infringement. We believe our patent position is strong, aggressively managed, and sufficient for the conduct of our business.
We also have several hundred trademark registrations throughout the world for our marks, including NewMarket®, Afton Chemical®, Ethyl®, mmt®, HiTEC®, GREENBURN®, Passion for Solutions®, CleanStart®, Microbotz®, DriveMore® and Axcel®.
Commitment to Environmental and Safety Excellence
Our commitment to the environment and safety excellence applies to every employee, contractor, and visitor every day, at every site. Safety and environmental responsibility are a way of life at NewMarket - enhancing operations, the way we work, and the relationships we maintain with our employees, customers, supply chain partners, and the communities in which we operate. Our objective is to establish a culture where our employees understand that good environmental and safety performance is good business and understand that environmental compliance and safety are individual responsibilities. Every employee at NewMarket is responsible for ensuring that our high standards in the area of health, safety (including process safety), environmental protection, and security are upheld at all times.
Our Global Responsible Care Policy Statement includes a commitment to conduct operations in a manner that protects our employees, communities, and the environment, to comply with all applicable laws and regulations, and to reduce our environmental impacts. Additionally, in pursuit of our vision of zero incidents, we work with our employees and other key stakeholders to establish appropriate goals, objectives, and targets. "Responsible Care" is a registered service mark of the American Chemistry Council (ACC).
Both Afton and Ethyl have implemented Responsible Care® Management Systems (RC14001®) at U.S. facilities. Our Responsible Care® management systems are certified by an independent third-party auditing process. Additionally, Afton’s Feluy, Belgium; Suzhou, China; Tsukuba, Japan; Rio de Janeiro, Brazil; Bracknell, England; and Singapore facilities are all certified to the environmental standard ISO 14001. Suzhou is also certified to OHSAS 18001, a global occupational health and safety standard. Our Singapore site recently transitioned their OHSAS 45001 certification to the latest ISO 45001. Afton’s Sauget, Illinois plant continues to be an OSHA VPP (Voluntary Protection Program) “Star” worksite. In 2021, our San Juan del Rio, Mexico site expects to be formally certified to RC 14001.
In 2020, we continued to enhance our “Actively Caring” safety program, where people look out for the safety and welfare of others with courage and compassion, enabling the achievement of an injury-free environment. Excluding the impacts from the COVID-19 pandemic on the recordable rate, both Afton and Ethyl were top performers among their industry peers with our worldwide injury/illness recordable rate (which is the number of injuries per 200,000 hours worked) in 2020 at 0.7. Additionally, during 2020 we had zero serious injuries across all global sites, as well as zero recordable injuries at our Houston, San Juan del Rio, Port Arthur, Rio de Janeiro, and Tsukuba facilities. The safety performance affirmed our Vision of Zero Improvement plans and actions across the sites, as well as the importance placed on our safety-first culture. We continue to leverage site-level Safety Improvement plans at key sites, and emphasize reporting "good catches" and "near misses" to help reduce risk and drive improved performance. We are committed to achieving our aspiration of zero injuries and incidents.

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As members of the ACC, Afton and Ethyl provide data on twelve metrics used to track environmental impact, safety, energy use, community outreach and emergency preparedness, greenhouse gas intensity, and product stewardship performance of the ACC member companies. These can be viewed at http://responsiblecare.americanchemistry.com/Performance-Results. The information on this website is not, and shall not be deemed to be, a part of this Annual Report on Form 10-K or incorporated by reference in this Annual Report on Form 10-K or any other filings we make with the Securities and Exchange Commission (SEC).
Governmental and Environmental Regulations
As a chemical company, we are subject to regulation by local, state, federal, and foreign governmental authorities specific to the production, distribution, management, and stewardship of chemicals.
In addition, in the United States and under similar foreign and state laws, we are subject to a variety of environmental laws and regulations, as well as environmental liabilities associated with the investigation and cleanup of hazardous substances. These liabilities may include personal injury, property damage, or natural resource damages arising from the release of, or exposure to, hazardous substances. They may be imposed on us in a range of situations without regard to violation of law or regulations. They may also be imposed jointly and severally, where one party may be held liable for a disproportionate share of the damages, up to and including the entire loss. These liabilities may include entities with any possible connection to the hazardous substances, including, for example, entities that formerly owned or operated a property or entities that arranged for disposal of hazardous substances from a property.
We believe we comply, in all material respects, with laws, regulations, statutes, and ordinances, including, but not limited to, those protecting the environment, as well as those related to the management and stewardship of chemicals. We have policies and procedures in place that establish regular reviews of our regulatory and environmental compliance and product stewardship, and actively monitor any significant existing or potential regulatory changes or environmental issues that could materially affect the company.
Our total accruals for environmental remediation, dismantling, and decontamination were approximately $10 million at December 31, 2020 and $11 million December 31, 2019. As new technology becomes available, it may be possible to reduce accrued amounts. While we believe that we are currently fully accrued for known environmental issues, it is possible that unexpected future costs could have a significant financial impact on our financial position, results of operations, and cash flows.
The costs of complying with existing environmental, health, and safety laws and regulations as they pertain to our products and operations, including remediation, closure, and postclosure costs, are primarily included in cost of goods sold. We spent approximately $29 million in both 2020 and 2019, and $30 million in 2018 for ongoing environmental operating and clean-up costs, excluding depreciation of previously capitalized expenditures.
In addition to the ongoing environmental compliance costs and the costs to remediate contaminated sites, worldwide capital expenditures for pollution prevention and safety projects were $17 million in 2020, $8 million in 2019, and $10 million in 2018. The increase in 2020 resulted primarily from a planned modernization project at one of our manufacturing facilities. We expect expenditures will return to more historical levels for 2021.
The costs of complying with governmental pollution prevention and safety regulations are subject to:
potential changes in applicable statutes and regulations (or their enforcement and interpretation);
uncertainty as to the success of anticipated solutions to pollution problems;
uncertainty as to whether additional expense may prove necessary; and
potential for emerging technology to affect remediation methods and reduce associated costs.

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Availability of Reports Filed with the Securities and Exchange Commission and Corporate Governance Documents
Our internet website address is www.newmarket.com. We make available, free of charge through our website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (Exchange Act), as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the SEC. In addition, our Corporate Governance Guidelines, Code of Conduct, and the charters of our Audit, Compensation, and Nominating and Corporate Governance Committees are available on our website and are available in print, without charge, to any shareholder upon request by contacting our Corporate Secretary at NewMarket Corporation, 330 South Fourth Street, Richmond, Virginia 23219. The information on our website is not, and shall not be deemed to be, a part of this Annual Report on Form 10-K or incorporated by reference in this Annual Report on Form 10-K or any other filings we make with the SEC. We file our annual, quarterly and current reports, proxy statements, and other information with the SEC. Our SEC filings are available to the public on the SEC's website at www.sec.gov.
Information about our Executive Officers
The names and ages of all executive officers as of February 16, 2021 follow.
NameAgePositions
Thomas E. Gottwald60Chairman of the Board, President, and Chief Executive Officer (Principal Executive Officer)
Brian D. Paliotti44Chief Financial Officer and Vice President (Principal Financial Officer)
Bruce R. Hazelgrove, III60Executive Vice President and Chief Administrative Officer
Bryce D. Jewett, III46Vice President and General Counsel
William J. Skrobacz61Controller (Principal Accounting Officer)
Cameron D. Warner, Jr.62Treasurer
M. Rudolph West67Vice President, Special Counsel
Regina A. Harm56President, Afton Chemical Corporation
Our officers, at the discretion of the Board of Directors, hold office until the meeting of the Board of Directors following the next annual shareholders’ meeting. Mr. Gottwald, Mr. Paliotti, Mr. Hazelgrove, Mr. Skrobacz, and Mr. Warner have served in their capacity for at least the last five years. Mr. Jewett, Mr. West, and Mrs. Harm have served in their capacities for less than five years.
Mr. Jewett joined NewMarket Corporation on July 16, 2020 as Vice President and General Counsel. Prior to his employment at NewMarket, he was a partner at McGuireWoods LLP. Mr. West was named Vice President, Special Counsel effective July 16, 2020. Prior to that date, Mr. West served as Vice President, General Counsel, and Secretary since January 1, 2016. Mrs. Harm has been employed by Afton since 2007. Prior to being named President of Afton Chemical Corporation in May 2018, Mrs. Harm was Senior Vice President and Chief Operating Officer of Afton since October 2015.
ITEM 1A.    RISK FACTORS
Our business is subject to many factors that could have a material adverse effect on our future performance, results of operations, financial condition, or cash flows and could cause our actual results to differ materially from those expressed or implied by forward-looking statements made in this Annual Report on Form 10-K. Those risk factors are outlined below.


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Market and Supply Chain Risks
Lack of availability of raw materials, including sourcing from some single suppliers, could negatively impact our ability to meet customer demand.
The chemical industry can experience limited supply of certain materials. In addition, in some cases, we choose to source from a single supplier. Any significant disruption in supply, for any reason, could adversely affect our ability to obtain raw materials, which in turn could adversely affect our ability to ensure continued supply for our customers and to meet customer demand.
Sudden or sharp changes in the prices of and/or demand for raw materials may adversely affect our profit margins.
We utilize a variety of raw materials in the manufacture of our products, including base oil, polyisobutylene, antioxidants, alcohols, solvents, sulfonates, friction modifiers, olefins, and copolymers. We may also enter into contracts which commit us to purchase some of our more critical raw materials based on anticipated demand. Our profitability is sensitive to changes in the quantities of raw materials we may need and the costs of those materials which may be caused by changes in supply, demand or other market conditions, over which we have little or no control. Political and economic conditions globally have caused, and may continue to cause, our demand for and the cost of our raw materials to fluctuate. War, armed hostilities, terrorist acts, civil unrest, or other incidents may also cause a sudden or sharp change in our demand for and the cost of our raw materials. We cannot assure that we will be able to pass on to our customers any future increases in raw material costs in the form of price increases for our products. If our demand for raw materials were to decline such that we would not have need for the quantities required to be purchased under commitment agreements, we could incur additional charges that would affect our profitability.
Competitive pressures could adversely affect our margins and profitability.
We face significant competition in all of the product lines and markets in which we compete. We expect that our competitors will develop and introduce new and enhanced products, which could cause a decline in the market acceptance of certain products we manufacture. In addition, as a result of price competition, we may be compelled to reduce the prices for some of our products, which could adversely affect our margins and profitability. Some of our competitors may also have greater financial, technological, and other resources than we have and may be able to maintain greater operating and financial flexibility than we are able to maintain. As a result, these competitors may be able to better withstand changes in conditions within our industry, changes in the prices for raw materials, and changes in general economic conditions.
We rely on a small number of significant customers concentrated in the lubricant and fuel industries. The loss of sales to any of these customers could significantly reduce our revenues and negatively affect our profitability.
Our principal customers are multinational oil companies in the lubricant and fuel industries. These industries are characterized by the concentration of a few large participants. This concentration of customers affects our overall risk profile, since our customers will be similarly affected by changes in economic, geopolitical, and industry conditions. Many factors affect the level of our customers’ spending on our products, including, among others, general business conditions, changes in technology, interest rates, oil prices, and consumer confidence in future economic conditions. A sudden or protracted downturn in these industries could adversely affect the buying power of, and purchases by, our customers. The loss of a significant customer or a material reduction in purchases by a significant customer could reduce our revenues and negatively affect our profitability.


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Operational Risks
A disruption in the availability or capacity of distribution systems could negatively impact our ability to meet our customers’ needs and affect our competitive position.
We rely on a variety of modes of transportation to deliver products to our customers, including rail cars, cargo ships, and trucks. We depend upon the availability of a distribution infrastructure to deliver our products in a safe and timely manner. Any disruptions in this infrastructure network, whether caused by human error, accidents, deliberate acts of violence, limitations on capacity, repairs and improvements to infrastructure components, earthquakes, storms, or other natural disasters, could adversely affect our ability to meet customer demand.
A significant disruption or disaster at one of our production facilities, including those facilities which are sole producers of certain of our products, could result in our inability to meet production requirements and projected customer demand. This could potentially result in us incurring significant liabilities.
We are dependent upon the continued safe operation of our production facilities. Several of the products we sell are produced only in one location. A prolonged disruption or disaster at one of our facilities could result in our inability to meet production requirements.
Our production facilities are subject to various hazards associated with the manufacturing, handling, storage, and transportation of chemical materials and products, including some that are reactive, explosive, and flammable. Such hazards could include leaks, ruptures, chemical spills, explosions, or fires which result in the discharge or release of toxic or hazardous substances or gases; mechanical failures; unscheduled downtime; and environmental hazards. These sites may also experience significant disruptions in operations due to inclement weather, natural disasters, flooding, and levee breaches. Many of these hazards could cause a disruption in the production of our products and may diminish our ability to meet output goals. We cannot assure that our facilities will not experience these types of hazards and disruptions in the future or that these incidents will not result in production delays and affect our ability to meet production requirements. Any such disruptions or disasters at our facilities could result in us losing revenue or not being able to maintain our relationships with our customers.
Additionally, some of the hazards mentioned above could result in significant liabilities related to personal injury and loss of life; severe damage to, or destruction of, property and equipment; and environmental contamination.
Our research and development efforts are costly and may not succeed, which could impair our ability to meet our customers’ needs, affect our competitive position, and result in a loss of market share.
The petroleum additives industry is subject to periodic technological change, changes in performance standards, and ongoing product improvements. Further, technological changes in some or all of our customers’ products or processes may make our products obsolete. As a result, the life cycle of our products is often hard to predict. In order to maintain our profits and remain competitive, we must effectively respond to technological changes in our industry and successfully develop, manufacture, and market new or improved products in a cost-effective and timely manner. As a result, we must commit substantial resources each year to research and development to maintain and enhance our technological capabilities and meet our customers’ changing needs. Ongoing investments in research and development for future products could result in higher costs without a proportional increase in profits. Additionally, for any new product program, there is a risk of technical or market failure in which case we may not be able to develop the new commercial products needed to maintain and enhance our competitive position, or we may need to commit additional resources to new product development programs. Moreover, new products may have lower margins than the products they replace.

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Our failure to protect our intellectual property rights could harm our competitive position and could adversely affect our future performance and growth.
Protection of our proprietary processes, methods, compounds, and other technologies is important to our business. We depend upon our ability to develop and protect our intellectual property rights to distinguish our products from those of our competitors. Failure to protect our existing intellectual property rights may result in the loss of valuable technologies or having to pay other companies for infringing on their intellectual property rights. The inability to continue using certain of our trademarks or service marks could result in the loss of brand recognition, and could require us to devote additional resources to advertise, rebrand our products, and market our brands. See Item 1, “Business-Intellectual Property.”
We rely on a combination of patent, trade secret, trademark, and copyright laws, as well as judicial enforcement, to protect our intellectual property and technologies. We cannot assure that the measures taken by us to protect these assets and rights will provide meaningful protection or that adequate remedies will be available in the event of an unauthorized use or disclosure of our trade secrets or manufacturing expertise. We cannot assure that any of our intellectual property rights will not be challenged, invalidated, circumvented, or rendered unenforceable. In addition, we have manufacturing operations in countries where we may not have the same strength of intellectual property protection and enforcement as in North America or Europe, resulting in a greater risk of a third party appropriating our intellectual property.
Furthermore, we cannot assure that any pending patent application filed by us will result in an issued patent, or if patents are issued to us, that those patents will provide meaningful protection against competitors or against competitive technologies. We could face patent infringement claims from our competitors or others alleging that our processes or products infringe on their proprietary technologies. If we were found to be infringing on the proprietary technology of others, we may be liable for damages, and we may be required to change our processes, redesign our products partially or completely, pay to use the technology of others, or stop using certain technologies or producing the infringing product entirely. Even if we ultimately prevail in an infringement suit, the existence of the suit could prompt customers to switch to products that are not the subject of infringement suits. We may not prevail in any intellectual property litigation and such litigation may result in significant legal costs or otherwise impede our ability to produce and distribute key products.
We also rely on unpatented proprietary manufacturing expertise, continuing technological innovation and other trade secrets to develop and maintain our competitive position. While we generally enter into confidentiality agreements with our employees and third parties to protect our intellectual property, we cannot assure that our confidentiality agreements will not be breached, that they will provide meaningful protection for our trade secrets and proprietary manufacturing expertise, or that adequate remedies will be available in the event of an unauthorized use or disclosure of our trade secrets or manufacturing expertise.
In addition, our trade secrets and know-how may be improperly obtained by other means, such as a breach of our information technology security systems or direct theft. Any unauthorized disclosure of our material know-how or trade secrets could adversely affect our business and results of operations.
In order to be successful, we must attract and retain a highly qualified workforce, including key employees in leadership positions.
The success of our business is highly dependent on our ability to attract and retain highly qualified personnel to support our research and development efforts and our agility in effectively responding to technological changes in our industry. To the extent that the demand for skilled personnel exceeds supply, we could experience higher labor, recruiting, or training costs in order to attract and retain such a work force. We compete with other companies, both within and outside of our industry, for qualified technical and scientific personnel such as chemical, mechanical, and industrial engineers. To the extent that we lose experienced personnel through wage competition, normal attrition (including retirement), or other means, we must be able to attract qualified candidates to fill those positions and successfully manage the transfer of critical knowledge from those individuals leaving our company. Our inability to maintain a highly qualified technical workforce could adversely affect our competitive position and result in a loss of market share.

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We also must manage leadership development and succession planning throughout our business. To the extent that we are unable to attract, develop, and retain leadership talent successfully, we could experience business disruptions that adversely affect our ability to grow our business.
An information technology system failure may adversely affect our business.
We rely on information technology systems, some of which are managed by third parties, to transact our business. An information technology system failure due to computer viruses, internal or external security breaches, cybersecurity attacks, power interruptions, hardware failures, fire, natural disasters, human error or other causes could disrupt our operations, lead to loss of confidential information (such as the personally identifiable information of individuals, including our employees) or intellectual property, and/or prevent us from being able to process transactions with our customers, operate our manufacturing facilities, and properly report transactions in a timely manner. Cybersecurity threats, in particular, continue to increase in sophistication. We have security processes and disaster recovery plans in place to mitigate these threats. Nonetheless, these may not be sufficient to identify a threat in a timely manner or protect our operations from such a threat, potentially resulting in financial, legal, business, or reputational damage to our company.
A significant, protracted information technology system failure may adversely affect our results of operations, financial condition, or cash flows.
Furthermore, we are subject both to changing cybersecurity rules and evolving data privacy rules and regulations, such as the European Union's General Data Protection Regulation, in countries, states, and jurisdictions where we conduct business. The failure to comply with these rules and regulations could result in significant financial penalties or increase our cost of doing business.
The occurrence or threat of extraordinary events, including domestic or international terrorist attacks, hostilities, or health-related epidemics, may disrupt our operations, decrease demand for our products, and increase our expenses.
Chemical-related assets may be at greater risk of future terrorist attacks than other possible targets in the United States and throughout the world. Federal legislation has imposed significant site security requirements, specifically on chemical manufacturing facilities. Federal regulations have also been enacted to increase the security of the transportation of hazardous chemicals in the United States. The enactment of further federal regulations to increase the security of the transportation of hazardous chemicals in the United States could result in additional costs.
The occurrence of extraordinary events, including future terrorist attacks, the outbreak or escalation of hostilities, or a health-related epidemic cannot be predicted, but their occurrence can be expected to negatively affect the economy in general, as well as the markets for our products, and can result in production downtime. In addition, the damage from a direct attack on our assets or assets used by us could include loss of life or property damage, and available insurance coverage may not be sufficient to cover all of the damage incurred or, if available, may be prohibitively expensive.
The COVID-19 pandemic has had an impact on our financial results and could have a material adverse effect on our results of operations, financial position, and cash flows in the future.
The COVID-19 pandemic has created significant uncertainty and economic disruption. The extent to which it will continue to impact our business, results of operations, financial position, and cash flows is difficult to predict and dependent upon many factors over which we have no control. These factors include, but are not limited to, the duration and severity of the pandemic; the effectiveness, acceptance, and speed of application of the recently developed vaccines; government restrictions on businesses and individuals; the impact of the pandemic on our customers’ businesses and the resulting demand for our products; the impact on our suppliers and supply chain network; the impact on U.S. and global economies and the timing and rate of economic recovery; and potential adverse effects on the financial markets.

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We face risks related to our foreign operations that may negatively affect our business.
In 2020, sales to customers outside of the United States accounted for over 65% of consolidated net sales. We do business in all major regions of the world, some of which do not have stable economies or governments. In particular, we sell and market products in countries experiencing political and/or economic instability in the Middle East, Asia Pacific, Latin America, and Europe. Our international operations are subject to international business risks, including unsettled political conditions, expropriation, import and export restrictions, trade policies, increases in royalties, exchange controls, national and regional labor strikes, taxes, government royalties, inflationary or unstable economies, currency exchange rate fluctuations, and changes in laws and policies governing operations of foreign-based companies (such as restrictions on repatriation of earnings or proceeds from liquidated assets of foreign subsidiaries). The occurrence of any one or a combination of these factors may increase our costs or have other adverse effects on our business.
The United Kingdom’s June 2016 referendum decision to withdraw from the European Union (EU) effective January 31, 2020, commonly known as Brexit, has resulted in uncertainty for our European operations regarding the extent to which our operations and financial performance will be affected immediately and in the longer term. On December 24, 2020, in advance of the transition period ending on December 31, 2020, the United Kingdom (U.K.) and the EU reached an agreement on the future relationship. The agreement is complex, addressing a wide-range of matters, but notably trade on goods between the U.K. and EU will continue tariff-free.  Our key manufacturing facilities in the EU are not in the U.K.  Therefore, goods movements continue to be predominantly within the EU post-Brexit which means that existing key trade agreements will continue to apply. However, Brexit has brought new ways of working and uncertainty for U.K. business, logistics providers, and customs brokers for international business when the U.K. is involved in the supply chain. While this has resulted in some disruption to our operations in the U.K., no material additional risks have become apparent. We are continuing to monitor and evaluate changes in legislation and trading practices in order to mitigate any potential risks to our operations.
The insurance we maintain may not fully cover all potential exposures.
We maintain property, business interruption, and casualty insurance, but such insurance may not cover all risks associated with the hazards of our business and is subject to limitations, including deductibles and maximum liabilities covered. We may incur losses beyond the limits, or outside the coverage, of our insurance policies, including liabilities for environmental remediation. In the future, we may not be able to obtain coverage at current levels, and our premiums may increase significantly on coverage that we maintain.
Legislative and Regulatory Risks
Our business could be adversely affected by current and future governmental regulation.
We are subject to regulation by local, state, federal, and foreign governmental authorities. In some circumstances, before we may sell certain products, these authorities must approve these products, our manufacturing processes, and our facilities. We are also subject to ongoing reviews of our products, manufacturing processes, and facilities by governmental authorities. Any delay in obtaining or failure to obtain or maintain these approvals would adversely affect our ability to introduce new products and generate sales from those products.
New laws and regulations, including climate change regulations, may be introduced in the future and could result in additional compliance costs, which could prevent or inhibit the development, distribution, and sale of our products. If we fail to comply with applicable laws and regulations, we may be subject to civil remedies, including fines, injunctions, recalls, or seizures.
We are subject to the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar anti-bribery laws in other jurisdictions which generally prohibit companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business. We are also subject to export and import laws and regulations which restrict trading with embargoed or sanctioned countries and certain individuals. Although we have policies and procedures designed to facilitate compliance with these laws and regulations, our employees, contractors and agents may take actions in violation of our policies. Any such violation, even if prohibited by our policies, could adversely affect our business and/or our reputation.

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Legal proceedings and other claims could impose substantial costs on us.
We are involved in numerous administrative and legal proceedings that result from, and are incidental to, the conduct of our business. From time to time, these proceedings involve environmental, product liability, tetraethyl lead, premises asbestos liability, and other matters. See Item 3, “Legal Proceedings.” There is no assurance that our available insurance will cover these claims, that our insurers will not challenge coverage for certain claims, or that final damage awards will not exceed our available insurance coverage.
At any given time, we are involved in claims, litigation, administrative proceedings, and investigations of various types in a number of jurisdictions involving potential environmental liabilities, including clean-up costs associated with waste disposal sites, natural resource damages, property damage, and personal injury. We cannot assure that the resolution of these environmental matters will not have an adverse effect on our results of operations, financial condition, or cash flows.
Environmental matters could have a substantial negative impact on our business.
As a manufacturer and distributor of chemical products, we are generally subject to extensive local, state, federal, and foreign environmental, safety, and health laws and regulations concerning, among other things, emissions to the air; discharges to land and water; the generation, handling, treatment, and disposal of hazardous waste and other materials; and remediation of contaminated soil, as well as surface and ground water. Our operations entail the risk of violations of those laws and regulations, many of which provide for substantial fines and criminal sanctions for violations. We believe that we comply in all material respects with laws, regulations, statutes, and ordinances protecting the environment, including those related to the discharge of materials. However, we cannot assure that we have been or will be at all times in compliance with all of these requirements.
In addition, these requirements, and the enforcement or interpretation of these requirements, may become more stringent in the future. Although we cannot predict the ultimate cost of compliance with any such requirements, the costs could be material. Noncompliance could subject us to material liabilities, such as government fines, damages arising from third-party lawsuits, or the suspension and potential cessation of non-compliant operations. We may also be required to make significant site or operational modifications at substantial cost. Future developments could also restrict or eliminate the use of or require us to make modifications to our products.
There may be environmental problems associated with our properties of which we are unaware. The discovery of environmental liabilities attached to our properties could have an adverse effect on our business even if we did not create or cause the problem.
We may also face liability arising from current or future claims alleging personal injury, product liability, or property damage due to exposure to chemicals or other hazardous substances, such as premises asbestos, at or from our facilities. We may also face liability for personal injury, product liability, property damage, natural resource damage, or clean-up costs for the alleged migration of contaminants or hazardous substances from our facilities or for future accidents or spills.
In some cases, we have been identified, and in the future may be identified, as a potentially responsible party (PRP) in connection with state and federal laws regarding environmental clean-up projects. As a PRP, we may be liable for a share of the costs associated with cleaning up hazardous waste sites, such as a landfill to which we may have sent waste.
The ultimate costs and timing of environmental liabilities are difficult to predict. Liability under environmental laws relating to contaminated sites can be imposed retroactively and on a joint and several basis. A liable party could be held responsible for all costs at a site, whether currently or formerly owned or operated, regardless of fault, knowledge, timing of the contamination, cause of the contamination, percentage of contribution to the contamination, or the legality of the original disposal. We could incur significant costs, including clean-up costs, natural resource damages, civil or criminal fines and sanctions, and third-party claims, as a result of past or future violations of, or liabilities under, environmental laws.


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Financial and Economic Risks
A substantial amount of indebtedness could adversely impact our business and limit our operational and financial flexibility.
We have incurred, and may in the future incur, significant amounts of indebtedness to support our operations. Our indebtedness could, among other things, require us to dedicate a substantial portion of our cash flow to repaying our indebtedness, thus reducing the amount of funds available for other general corporate purposes; limit our ability to borrow additional funds necessary for working capital, capital expenditures or other general corporate purposes; and limit our flexibility in planning for, or reacting to, changes in our business.
Our ability to make payments on or refinance our indebtedness will depend on our ability to generate cash from operations in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond our control.
We cannot guarantee that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under our credit facilities in an amount sufficient to enable us to repay our debt, service our indebtedness, or to fund other liquidity needs. Furthermore, substantially all of our business is conducted through our subsidiaries, and we cannot guarantee that our subsidiaries will be able to distribute funds to us for these purposes.
We may need to refinance all or a portion of our indebtedness on or before maturity. We cannot guarantee that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.
Additionally, our debt instruments contain restrictive covenants. These covenants may constrain our activities and limit our operational and financial flexibility. The failure to comply with these covenants could result in an event of default.
Our revolving credit facility utilizes the London Interbank Offered Rates (LIBOR) in establishing interest rates on the facility. LIBOR is the subject of recent proposals for reform, which may cause LIBOR to disappear entirely or perform differently than in the past. The consequences of these developments cannot be entirely predicted at this time, but could result in an increase in the cost of borrowings under the revolving credit facility.
We are exposed to fluctuations in foreign exchange rates, which may adversely affect our results of operations.
We conduct our business in the local currency of many of the countries in which we operate. The financial condition and results of operations of our foreign operating subsidiaries are reported in the relevant local currency and then translated to U.S. Dollars at the applicable currency exchange rate for inclusion in our consolidated financial statements. Changes in exchange rates between these foreign currencies and the U.S. Dollar will affect the recorded amounts of our assets and liabilities, as well as our revenues, costs, and operating margins. The primary foreign currencies in which we have exchange rate fluctuation exposure are the European Union Euro, British Pound Sterling, Japanese Yen, Chinese Renminbi, Indian Rupee, Singapore Dollar, Mexican Peso, Australian Dollar, and Canadian Dollar. Exchange rates between these currencies and the U.S. Dollar have fluctuated significantly in recent years and may do so in the future.
We could be required to make additional contributions to our pension plans, which may be underfunded due to any underperformance of equity markets.
Our pension plan asset allocation is predominantly weighted towards equities. Cash contribution requirements to our pension plans are sensitive to changes in our plans’ actual return on assets. Reductions in our plans’ return on assets due to poor performance of equity markets could cause our pension plans to be underfunded and require us to make additional cash contributions.


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Acquisition and Investment Risks
We may be unable to consummate a proposed acquisition transaction due to a lack of regulatory approval or the failure of one or more parties to satisfy conditions to close. In addition, we may not be able to realize the expected benefits from recent or future acquisitions or from investments in our infrastructure, or it may take longer to realize those benefits than originally planned. The inability to achieve our objectives related to these activities could result in unanticipated expenses and losses.
As part of our business growth strategy, we intend to continue pursuing acquisitions and investing in our infrastructure. Our ability to implement these components of our growth strategy will be limited by our ability to identify appropriate acquisition or joint venture candidates; our ability to consummate proposed transactions due to a lack of regulatory approval or the failure of one of the parties to a transaction to satisfy conditions required for closing; and the availability of financial resources, including cash and borrowing capacity. When we acquire new businesses or invest in infrastructure improvements (for example, building new plant facilities), we consider the benefits we expect to realize and time frames over which we will realize those benefits. The expenses incurred in completing these types of activities, the time it takes to integrate the activities into our ongoing business, or our failure to realize the expected benefits from the activities in the planned time frames could result in unanticipated expenses and losses. The process of integrating acquired operations into our existing operations may result in unforeseen operating difficulties and may require significant financial resources that would otherwise be available for the ongoing development or expansion of existing operations.

ITEM 1B.    UNRESOLVED STAFF COMMENTS
None.

ITEM 2.    PROPERTIES
Our principal operating properties are shown below. Unless indicated, we own the research, development, and testing facilities, as well as the manufacturing and distribution properties, which primarily support the petroleum additives business segment.
Research, Development, and TestingRichmond, Virginia
Bracknell, England
Tsukuba, Japan
Ashland, Virginia
Suzhou, China
Manufacturing and Distribution
Feluy, Belgium (lubricant additives)
Houston, Texas (lubricant and fuel additives; also storage and distribution)
Jurong Island, Singapore (lubricant additives; leased land)
Orangeburg, South Carolina (fuel additives; manufacturing equipment only)
Port Arthur, Texas (lubricant additives)
Rio de Janeiro, Brazil (petroleum additives storage and distribution; manufacturing equipment only)
San Juan del Rio, Mexico (lubricant additives)
Sauget, Illinois (lubricant and fuel additives)
Suzhou, China (lubricant additives)
We own our corporate headquarters located in Richmond, Virginia, and generally lease our regional and sales offices located in a number of areas worldwide.
NewMarket Development manages the real property we own in Richmond, Virginia consisting of approximately 54 acres. Our corporate offices are included in this acreage, as well as a research and testing facility and several acres dedicated to other uses. We are currently exploring various development opportunities for portions of the property as the demand warrants. This effort is ongoing in nature, and we have no specific timeline for any future developments.

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Production Capacity
We believe our plants and supply agreements are sufficient to meet expected sales levels. Operating rates of the plants vary with product mix and normal sales swings. We believe that our facilities are well maintained and in good operating condition.

ITEM 3.    LEGAL PROCEEDINGS
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 the Environmental section in Note 20.
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.

ITEM 4.    MINE SAFETY DISCLOSURES
Not applicable.


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PART II

ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock, with no par value, has traded on the New York Stock Exchange (NYSE) under the symbol “NEU” since June 21, 2004 when we became the parent holding company of Ethyl, Afton, NewMarket Services, NewMarket Development, and their subsidiaries. We had 1,891 shareholders of record at January 31, 2021.
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 repurchase 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 December 31, 2020, approximately $399 million remained available under the 2018 authorization. There were no purchases during the fourth quarter of 2020 under this authorization.
Cash dividends declared and paid totaled $7.60 per share for the year ended December 31, 2020 and $7.30 per share for the year ended December 31, 2019. The declaration and payment of dividends is subject to the discretion of our Board of Directors. Future dividends will depend on various factors, including our financial condition, earnings, cash requirements, legal requirements, restrictions in agreements governing our outstanding indebtedness, and other factors deemed relevant by our Board of Directors.


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The performance graph showing the five-year cumulative total return on our common stock as compared to chemical companies in the S&P 1500 Specialty Chemicals Index and the S&P 500 is shown below. The graph assumes $100 invested on the last day of December 2015, and the reinvestment of all dividends. The graph is based on historical data, and is not intended to be a forecast or indication of future performance of our common stock. 
Performance Graph
Comparison of Five-Year Cumulative Total Return
Performance Through December 31, 2020
neu-20201231_g1.jpg
December 31,
201520162017201820192020
NewMarket Corporation$100.00 $113.09 $107.79 $113.74 $136.51 $114.02 
S&P 1500 Specialty Chemicals Index100.00 112.78 143.83 123.18 141.89 166.21 
S&P 500100.00 111.96 136.40 130.42 171.49 203.04 
The graph and table above are not deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor are they incorporated by reference into other filings made by us with the SEC.  


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ITEM 6.     SELECTED FINANCIAL DATA
NewMarket Corporation and Subsidiaries
Five Year Summary
 Years Ended December 31,
(in thousands, except per-share amounts and percentages)20202019201820172016
Results of operations
Net sales$2,010,931 $2,190,295 $2,289,675 $2,198,404 $2,049,451 
Costs and expenses 1,699,129 1,852,974 1,997,001 1,875,670 1,694,692 
Operating profit 311,802 337,321 292,674 322,734 354,759 
Interest and financing expenses, net26,328 29,241 26,723 21,856 16,785 
Other income (expense), net (1) 45,813 23,510 24,334 14,564 5,234 
Income before income tax expense331,287 331,590 290,285 315,442 343,208 
Income tax expense (2)60,719 77,304 55,551 124,933 99,767 
Net income$270,568 $254,286 $234,734 $190,509 $243,441 
Financial position and other data
Total assets$1,933,875 $1,885,132 $1,697,274 $1,712,154 $1,416,436 
Operations:
Working capital$585,623 $570,503 $542,119 $516,861 $542,293 
Current ratio2.87 to 12.85 to 13.00 to 12.63 to 12.84 to 1
Depreciation and amortization$84,002 $87,560 $71,759 $55,340 $44,893 
Capital expenditures$93,316 $59,434 $74,638 $148,713 $142,874 
Gross profit as a % of net sales 29.6 %28.8 %25.6 %28.9 %33.0 %
Research, development, and testing expenses $140,367 $144,465 $140,289 $146,002 $160,788 
Total long-term debt$598,848 $642,941 $770,999 $602,900 $507,275 
Common stock and other shareholders’ equity
$759,824 $683,098 $489,907 $601,649 $483,251 
Total long-term debt as a % of total capitalization (debt plus equity)
44.1 %48.5 %61.1 %50.1 %51.2 %
Common stock
Basic and diluted earnings per share$24.64 $22.73 $20.34 $16.08 $20.54 
Equity per share$69.57 $61.05 $43.80 $51.07 $40.79 
Cash dividends declared per share$7.60 $7.30 $7.00 $7.00 $6.40 
Notes to the Five Year Summary
(1)Other income (expense), net for each year included the components of net periodic benefit cost (income), except for service costs, amounting to income of $26 million in 2020, $23 million in 2019, $19 million in 2018, $14 million in 2017 and $8 million in 2016. The amount for 2020 also included a gain of $16 million related to the sale of a non-operating parcel of real estate. In addition, 2016 included a loss on the Goldman Sachs interest rate swap, as well as several other small items. The loss on the interest rate swap was $5 million for 2016. We terminated the interest rate swap on September 7, 2016. We did not use hedge accounting to record the interest rate swap, and accordingly, any change in the fair value was immediately recognized in earnings.
(2)On December 22, 2017, the United States enacted tax legislation commonly known as the Tax Cuts and Jobs Act, which required a one-time tax in 2017 on the deemed repatriation of previously deferred foreign earnings and reduced the U.S. corporate tax rate from 35% to 21% beginning in 2018. We recorded a net tax expense of $31 million in 2017 as a result.


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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
The following discussion, as well as other discussions in this Annual Report on Form 10-K, 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; and the underperformance of our pension assets resulting in additional cash contributions to our pension plans. Risk factors are discussed in Item 1A. “Risk Factors.”
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
When comparing the results of the petroleum additives segment for 2020 with 2019, both net sales and operating profit decreased primarily as a result of the economic disruption from the COVID-19 pandemic. Net sales for 2020 decreased 8.0% primarily due to lower lubricant additives and fuel additives product shipments, as well as decreased selling prices. Petroleum additives operating profit for 2020 was 7.2% lower reflecting lower product shipments and changes in 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 our business for the long-term with the goal of helping our customers succeed in their marketplaces. Our investments continue to be in organizational talent, technology development and processes, and global infrastructure, consisting of technical centers, production capability, and geographic expansion.
IMPACT OF THE COVID-19 PANDEMIC AND CURRENT ECONOMIC ENVIRONMENT
Petroleum additives operating results for 2020 have been marked by economic uncertainty resulting from the ongoing effects of the COVID-19 pandemic and the related restrictions on the movement of people, goods and services. While

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we have continued to operate throughout the year in each of our regions, we have at various times experienced significant changes in some of the key drivers that affect the performance of our business. During the second quarter of 2020, government and business shutdowns in North America and Europe led to a precipitous drop in vehicle miles driven and auto production, with gasoline consumption in the United States dropping to its lowest point in over 50 years. With less travel and fewer miles driven, combined with automobile plant closures, global demand for our products declined substantially, except in our Asia Pacific region where demand remained relatively stable throughout the year. As restrictions eased and economies reopened in the second half of 2020, global production of automobiles began to rebound and gasoline consumption and miles driven showed steady improvement in most countries, including the United States. Late in the fourth quarter, renewed restrictions on travel and work in certain countries had a negative effect on our business. The pace and stability of improvement in demand for our products will continue to 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 and without interruption during the pandemic, 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 coming months. 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 additional capital if needed, including our new $900 million revolving credit facility we entered into in March 2020, and we do not anticipate any issues with meeting the covenants in 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 the 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
Management's discussion and analysis of our results of operations is presented below for the comparative periods of 2020 versus 2019. The discussion and analysis of our results of operations for 2019 compared to 2018 is available in Item 7 of our 2019 Annual Report on Form 10-K.
Net Sales
Our consolidated net sales for 2020 amounted to $2.0 billion, a decrease of $179 million, or 8.2% from 2019.
No single customer accounted for 10% or more of our total net sales in 2020, 2019, or 2018.
The following table shows net sales by segment and product line for each of the last three years.
Years Ended December 31,
(in millions)202020192018
Petroleum additives
     Lubricant additives$1,687 $1,779 $1,871 
     Fuel additives315 397 410 
          Total2,002 2,176 2,281 
All other14 
Net sales$2,011 $2,190 $2,290 
Petroleum Additives - 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 Europe/Middle East/Africa/India (EMEAI) region. The percentage of net sales being generated in the regions has remained fairly consistent over the past

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three years, with some limited fluctuation due to various factors, including the impact of regional economic trends. North America and EMEAI both represent around 35% of our petroleum additives net sales, while Asia Pacific contributes about 25% and Latin America represents the remaining amount. As shown in the table above, lubricant additives net sales and fuel additives net sales compared to total petroleum additives net sales has remained substantially consistent over the past three years.
Petroleum additives net sales for 2020 of $2.0 billion were approximately 8.0% lower than 2019 levels. The decrease was across all regions except the Latin America region, which was substantially even with 2019 levels. The North America region represented nearly 50% of the petroleum additives decrease in net sales, while the Asia Pacific and EMEAI regions represented about 25% each. The decrease in petroleum additives net sales was predominantly the result of the economic disruption due to the COVID-19 pandemic, including lower demand for petroleum additives products reflecting the restrictions across the world on the movement of people, goods, and services.
The approximate components of the petroleum additives decrease in net sales of $174 million when comparing 2020 to 2019 are shown below in millions.
Net sales for year ended December 31, 2019$2,176 
Lubricant additives shipments(46)
Fuel additives shipments(46)
Selling prices(86)
Foreign currency impact, net
Net sales for year ended December 31, 2020$2,002 
Petroleum additives shipments accounted for a $92 million decrease in net sales between 2019 and 2020. Lower selling prices, partially offset by a favorable foreign currency impact, resulted in a decrease in net sales of $82 million when comparing the two years. The United States Dollar weakened against the Euro when comparing 2020 and 2019, which resulted in most of the favorable foreign currency impact to net sales in 2020.
On a worldwide basis, the volume of product shipments for petroleum additives decreased 5.2% when comparing 2020 with 2019. The decreases in shipments were in both lubricant additives and fuel additives. Most of the decrease in lubricant additives was in the Asia Pacific region, with small decreases in the North America and EMEAI regions offset by a small increase in the Latin America region. The North America and EMEAI regions represented most of the decrease in fuel additive product shipments. We believe the decrease in product shipments during 2020 substantially resulted 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 performed by Ethyl.
Segment Operating Profit
NewMarket evaluates the performance of the petroleum additives business based on segment operating profit. NewMarket Services expenses are charged to 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 table below reports segment operating profit for the last three years. A reconciliation of segment operating profit to income before income tax expense is in Note 4.
Years Ended December 31,
(in millions)202020192018
Petroleum additives$333 $359 $311 
All other$$(2)$(3)

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Petroleum Additives - Petroleum additives segment operating profit decreased $26 million when comparing 2020 to 2019. Both periods included the impact of the same factors that affected gross profit (see discussion below) including an unfavorable foreign currency translation impact.
The operating profit margin was 16.7% in 2020 and 16.5% in 2019. Despite the economic disruption from the COVID-19 pandemic during 2020 resulting in lower product shipment volumes and reduced net sales compared to 2019, the operating profit margin is slightly improved from 2019 levels. 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 are unchanged.
Petroleum additives gross profit decreased $37 million when comparing 2020 and 2019. Cost of goods sold as a percentage of net sales was 70.4% in 2020 and 71.1% in 2019.
When comparing 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, which together contributed over 100% of the change between 2020 and 2019. These unfavorable factors were partially offset by lower raw material costs.
Petroleum additives selling, general, and administrative expenses (SG&A) were $7 million, or 5.7% lower in 2020 compared to 2019. SG&A as a percentage of net sales was 5.9% in 2020 and 5.8% in 2019. Our SG&A costs are primarily personnel-related and include salaries, benefits and other costs associated with our workforce, including travel-related expenses. While personnel-related costs fluctuate from year to year, there were no significant changes in the drivers of these costs when comparing 2020 and 2019 other than reduced travel-related expenses due to the impact of the COVID-19 pandemic.
Our investment in petroleum additives research, development, and testing (R&D) decreased approximately $4 million when comparing 2020 with 2019. As a percentage of net sales, R&D was 7.0% in 2020 and 6.6% in 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. Substantially all investments in new product development are incurred in the United States and the U.K., with approximately 70% of total R&D being attributable to the North America and EMEAI regions. The remaining R&D is attributable to the Asia Pacific and Latin America regions and represents customer technology support services in those regions. All of our R&D is related to the petroleum additives segment.
The following discussion references certain captions on the Consolidated Statements of Income.
Interest and Financing Expenses
Interest and financing expenses were $26 million in 2020 and $29 million in 2019. The decrease in interest and financing expense between 2020 and 2019 resulted primarily from a lower average interest rate during 2020.
Other Income (Expense), Net
Other income (expense), net was income of $46 million in 2020 and $24 million in 2019. The amount for 2020 included a gain of $16 million related to the sale of a non-operating parcel of real estate. The amounts for both periods also included the components of net periodic benefit cost (income), except for service costs. See Note 17 for further information on total periodic benefit cost (income).

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Income Tax Expense
Income tax expense was $61 million in 2020 and $77 million in 2019. The effective tax rate was 18.3% in 2020 and 23.3% in 2019. When comparing 2020 and 2019, income tax decreased $16 million due to the lower effective tax rate. The decrease in the effective tax rate was primarily the result of finalizing prior year tax filings and releasing certain tax reserves.
CASH FLOWS DISCUSSION
We generated cash from operating activities of $284 million in 2020 and $337 million in 2019.
During 2020, we used the $284 million of cash generated from operations along with $19 million of cash on hand to repurchase $101 million of our common stock, pay $83 million of dividends on our common stock, repay $45 million on our revolving credit facility, and fund $93 million for capital expenditures. Cash flows from operating activities included a decrease of $54 million from higher working capital requirements, cash contributions of $11 million to our pension and postretirement plans, and a gain of $16 million related to the sale of a parcel of non-operating real estate.
During 2019, we used the $337 million cash generated from operations to repay $123 million on our revolving credit facility, pay $82 million of dividends on our common stock, and fund capital expenditures of $59 million. Cash flows from operating activities included an increase of $5 million from lower working capital requirements, as well as cash contributions of $10 million to our pension and postretirement plans.
FINANCIAL POSITION AND LIQUIDITY
Cash
At December 31, 2020, we had cash and cash equivalents of $125 million as compared to $144 million at the end of 2019.
Cash and cash equivalents held by our foreign subsidiaries amounted to approximately $97 million at December 31, 2020 and $99 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 of 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, research and development expenses, capital expenditures, and other cash needs of our foreign subsidiaries.
Debt
A summary of our debt instruments follows. A full discussion is in Note 13.
4.10% Senior Notes - At both December 31, 2020 and December 31, 2019, we had $350 million of 4.10% senior notes due 2022 with interest payable semiannually and which are senior unsecured obligations. We were in compliance with all covenants under the indenture governing the 4.10% senior notes as of December 31, 2020 and December 31, 2019.
3.78% Senior Notes - On January 4, 2017, we issued $250 million in senior unsecured notes in a private placement with The Prudential Insurance Company of America and certain other purchasers. These notes bear interest at 3.78% and mature on January 4, 2029. Interest is payable semiannually. Principal payments of $50 million are payable annually beginning on January 4, 2025. We have the right to make optional prepayments on the notes at any time, subject to certain limitations. We were in compliance with all covenants under the 3.78% senior notes as of December 31, 2020 and December 31, 2019.

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Revolving Credit Facility – On March 5, 2020, NewMarket and certain foreign subsidiary borrowers 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 for foreign currency 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. NewMarket's obligations under the Credit Agreement are unsecured and the obligations of foreign subsidiary borrowers are fully and unconditionally guaranteed by NewMarket. The revolving credit facility is available on a revolving basis until March 5, 2025.
There were no outstanding borrowings under the revolving credit facility at December 31, 2020 compared to $45 million in outstanding borrowings at December 31, 2019 under our former facility. Outstanding letters of credit amounted to $2 million at December 31, 2020 and $3 million at December 31, 2019 resulting in the unused portion of the applicable credit facility amounting to $898 million at December 31, 2020 and $803 million at December 31, 2019.
The average interest rate for borrowings under the credit facilities was 1.4% during 2020 and 3.0% during 2019.
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). At December 31, 2020, the Leverage Ratio was 1.45. We were in compliance with all covenants under the revolving credit facility in effect at December 31, 2020 and at December 31, 2019.
Other Borrowings - Two of our subsidiaries in Singapore and China each have access to separate short-term lines of credit of $10 million. One of our subsidiaries in the U.K. has access to a short-term line of credit of 10 million Euro. There was no activity on these lines of credit in 2020, nor was there an outstanding balance on any of these lines of credit at December 31, 2019.
***
We had long-term debt of $599 million at December 31, 2020 and $643 million at December 31, 2019. The decrease in debt resulted from repaying borrowings outstanding under the revolving credit facility during 2020.
As a percentage of total capitalization (total long-term debt and shareholders’ equity), our total long-term debt decreased from 48.5% at the end of 2019 to 44.1% at the end of 2020. The change in the percentage was primarily the result of the decrease in long-term debt, as well as the increase in shareholders' equity. The change in shareholders’ equity primarily reflects our earnings and the impact of the foreign currency translation adjustment offset by stock repurchases, dividend payments, and a decrease in the funded position of our defined benefit plans. Normally, we repay any outstanding long-term debt with cash from operations or refinancing activities.
Working Capital
Including cash and cash equivalents and the impact of foreign currency on the balance sheet, at December 31, 2020, we had working capital of $586 million, resulting in a current ratio of 2.87 to 1. Our working capital at December 31, 2019 on the same basis was $571 million, resulting in a current ratio of 2.85 to 1.
Other than the decrease in cash and cash equivalents, the most significant changes in working capital since December 31, 2019 resulted from an increase in inventory, which was partially offset by an increase in accounts payable. The increase in inventories was primarily due to a reduction in an inventory reserve, as well as planning for first quarter 2021 sales forecasts. The increase in accounts payable reflected normal fluctuations across the regions.
Capital Expenditures
Capital expenditures were $93 million for 2020 and $59 million for 2019. We currently estimate capital expenditures in 2021 will be in the range of $75 million to $85 million as we anticipate spending on 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.

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Environmental Expenses
We spent approximately $29 million in both 2020 and in 2019 for ongoing environmental operating and clean-up costs, excluding depreciation of previously capitalized expenditures. These environmental operating and clean-up expenses are included in cost of goods sold. We expect to continue to fund these costs through cash provided by operations.
Liquidity and Contractual Obligations
We have both current and long-term obligations that have known payment streams and are discussed throughout this Report on Form 10-K. The more material of these include debt-related obligations, lease obligations, purchase commitments, including those for property, plant, and equipment, contributions to pension and postretirement benefit plans, and environmental dismantling and decontamination.
The debt-related contractual obligations include both principle payments on outstanding long-term debt and the related interest payments. The maturity dates and interest rates, as well as information on the repayment of the principle on our long-term debt is detailed above in the Debt section, as well as in Note 13. At December 31, 2020, all of our long-term debt was at fixed rates. Interest is paid semi-annually on both of our fixed rate long-term debt agreements.
Note 16 provides information by year on our lease obligations which have commenced. We also have obligations for leases that have not yet commenced of $5 million in 2021, $3 million in 2022, $3 million in 2023, $2 million in 2024, $2 million in 2025, and $10 million thereafter. Note 17 includes information on contributions to pension and postretirement benefit plans. Benefit payments under these plans are included in Note 17 are predominantly paid from assets held in trust. Further information on purchase commitments, including those for purchases of property, plant, and equipment are in Note 20.
The annual operating expenses and capital expenditures associated with compliance with environmental, health, and safety regulations are included in Item 1, Governmental and Environmental Regulations. In addition to these costs, there are expected cash flows for dismantling and decontamination of environmental sites. At December 31, 2020, these costs were estimated at $1 million in each of 2021 through 2025, and $8 million thereafter.
We expect that cash from operations, together with borrowing available under our credit facilities, will continue to be sufficient for our operating needs and planned capital expenditures for both a current and long-term horizon.
The table below shows our contractual obligations at December 31, 2020 by year due.
 Payments Due by Period
(in millions)TotalLess than
1 Year
1 - 3
Years
3 - 5
Years
More than
5 Years
Debt obligations (a)$600 $$350 $50 $200 
Interest payable on long-term debt 85 24 33 17 11 
Letters of credit (b)
Finance lease obligations (c)14 
Operating lease obligations (c)81 15 22 11 33 
Leases not yet commenced25 10 
Property, plant, and equipment purchase obligations38 38 
Purchase obligations (d)361 151 193 12 
Other long-term liabilities (e)28 13 
Reserves for uncertain tax positions
Total$1,241 $249 $611 $100 $281 
(a)Amounts represent contractual payments due on the 4.10% senior notes and the Prudential senior unsecured notes as of December 31, 2020. See Note 13 for more information on long-term debt obligations.
(b)We intend to renew letters of credit when necessary as they mature; therefore, the maturity date is the same as the revolving credit facility under which the letters of credit are issued.

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(c)Amounts represent the undiscounted obligation for lease payments for leases having an initial lease term of at least one year.
(d)Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancelable without penalty. Purchase orders made in the ordinary course of business are excluded from the above table. Any amounts for which we are liable under purchase orders are reflected in our Consolidated Balance Sheets as accounts payable or accrued expenses.
(e)These represent other long-term liability amounts reflected in our Consolidated Balance Sheets that have known payment streams. Amounts include environmental liabilities, contributions associated with pension and postretirement benefit plans, and tax payments related to the deemed repatriation of foreign earnings resulting from the Tax Reform Act. Amounts accrued for potential exposure with respect to litigation, claims, and assessments are not included in the table above.
Pension and Postretirement Benefit Plans
Our U.S. and foreign benefit plans are discussed separately below. The information applies to all of our U.S. benefit plans. Our foreign plans are quite diverse, and the actuarial assumptions used by the various foreign plans are based upon the circumstances of each particular country and retirement plan. We use a December 31 measurement date to determine our pension and postretirement expenses and related financial disclosure information. Additional information on our pension and postretirement plans is in Note 17.
U.S. Pension and Postretirement Benefit Plans—The average remaining service period of active participants for our U.S. plans is 13 years, while the average remaining life expectancy of inactive participants is 23 years. We utilize the sex distinct Pri-2012 table with separate rates for annuitants, non-annuitants, and contingent annuitants, projected generationally using Scale MP-2020 in determining the impact of the U.S. benefit plans on our financial statements.
Investment Return Assumptions and Asset Allocation—We periodically review our assumptions for the long-term expected return on pension plan assets. As part of the review and to develop expected rates of return, we considered an analysis of expected returns based on the U.S. plans’ asset allocation as of both January 1, 2021 and January 1, 2020. This analysis reflects our expected long-term rates of return for each significant asset class or economic indicator. The range of returns developed relies both on forecasts and on broad-market historical benchmarks for expected return, correlation, and volatility for each asset class. While the asset allocation for our U.S. pension plans is predominantly weighted toward equities, through the ongoing monitoring of our investments and review of market data, we have determined that we should reduce the expected long-term rate of return for our U.S. pension plans from 8.5% to 8.0% at December 31, 2020.
An actuarial gain on the assets occurred during both 2020 and 2019 as the actual investment return for all of our U.S. pension plans exceeded the expected return by approximately $43 million in 2020 and $75 million in 2019. Investment gains and losses are recognized in earnings on an amortized basis over a period of years. The amortization of the actuarial net loss is expected to be approximately $6 million in 2021 resulting primarily from the actuarial loss on the plan liabilities which has only partially been offset by the investment gains on plan assets. We expect that there will be continued volatility in pension expense as actual investment returns vary from the expected return, but we continue to believe the potential long-term benefits justify the risk premium for equity investments.
At December 31, 2020, our expected long-term rate of return on our postretirement plans was 4.5%. This rate varies from the pension rate of 8.0% primarily because of the difference in investment of assets. The assets of the postretirement plan are held in an insurance contract, which results in a lower assumed rate of investment return.
Pension expense and the life insurance portion of postretirement expense are sensitive to changes in the expected return on assets. For example, decreasing the expected rate of return by 100 basis points to 7.0% for pension assets and 3.5% for postretirement benefit assets (while holding other assumptions constant) would increase the forecasted 2021 expense for our U.S. pension and postretirement plans by approximately $5 million. Similarly, a 100 basis point increase in the expected rate of return to 9.0% for pension assets and 5.5% for postretirement benefit assets (while holding other assumptions constant) would reduce forecasted 2021 pension and postretirement expense by $5 million.

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Discount Rate Assumption—We develop the discount rate assumption by determining the single effective discount rate for a unique hypothetical portfolio constructed from investment-grade bonds that, in the aggregate, match the projected cash flows of each of our retirement plans. The discount rate is developed based on the hypothetical portfolio on the last day of December. The discount rate at December 31, 2020 was 2.875% for all plans.
Pension and postretirement benefit expense is also sensitive to changes in the discount rate. For example, decreasing the discount rate by 100 basis points to 1.875% (while holding other assumptions constant) would increase the forecasted 2021 expense for our U.S. pension and postretirement benefit plans by approximately $9 million. A 100 basis point increase in the discount rate to 3.875% would reduce forecasted 2021 pension and postretirement benefit expense by $7 million.
Rate of Projected Compensation Increase—We have maintained our rate of projected compensation increase at December 31, 2020 at 3.5%. The rate assumption was based on an analysis of our projected compensation increases for the foreseeable future.
LiquidityCash contribution requirements to the pension plan are sensitive to changes in assumed interest rates and investment gains or losses in the same manner as pension expense. We expect our aggregate cash contributions to the U.S. pension plans will be approximately $3 million in 2021. We expect our contributions to the postretirement benefit plans will be approximately $2 million in 2021.
Foreign Pension Benefit Plans—Our foreign pension plans are quite diverse. The following information applies only to our U.K. pension plan, which represents the majority of the amounts recorded in our financial statements for our foreign pension plans. The average remaining service period of active participants for our U.K. plan is 16 years, while the average remaining life expectancy of inactive participants is 26 years. In determining the impact of the U.K. pension plans on our financial statements, we utilize the S3P (Light) mortality tables and allow for future projected improvements in life expectancy in line with the CMI 2019 model (with the core smoothing parameter and an initial addition to mortality improvements of 0.4% per year) with a long-term rate of improvement of 1% per year based on the membership of the plan.
Investment Return Assumptions and Asset AllocationWe periodically review our assumptions for the long-term expected return on the U.K. pension plan assets. The expected long-term rate of return is based on both the asset allocation, as well as yields available in the U.K. markets.
The target asset allocation in the U.K. is to be invested 40% in pooled equities funds, 40% in pooled government bonds, and 20% in pooled diversified growth funds. The actual allocation at the end of 2020 was 40% in pooled equities funds, 40% in pooled government bonds, and 20% in pooled diversified growth funds. Based on the actual asset allocation and the expected yields available in the U.K. markets, the expected long-term rate of return for the U.K. pension plan was 5.0% at December 31, 2020.
Actuarial gains on the assets occurred during both 2020 and 2019 as the actual investment return exceeded the expected investment return by approximately $4 million in 2020 and $10 million in 2019. Investment gains and losses are recognized in earnings on an amortized basis over a period of years. The amortization of the actuarial net loss is expected to be approximately $3 million in 2021 resulting primarily from the actuarial loss on the plan liabilities, which has only partially been offset by investment gains on the plan assets. We expect that there will be continued volatility in pension expense as actual investment returns vary from the expected return, but we continue to believe the potential benefits justify the risk premium for the target asset allocation.
Pension expense is sensitive to changes in the expected return on assets. For example, decreasing the expected rate of return by 100 basis points to 4% (while holding other assumptions constant) would increase the forecasted 2021 expense for our U.K. pension plan by approximately $2 million. Similarly, a 100 basis point increase in the expected rate of return to 6% (while holding other assumptions constant) would reduce forecasted 2021 pension expense by approximately $2 million.
Discount Rate Assumption—We utilize a yield curve based on AA-rated corporate bond yields in developing a discount rate assumption. The yield appropriate to the duration of the U.K. plan liabilities is then used. The discount rate at December 31, 2020 was 1.3%.

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Pension expense is also sensitive to changes in the discount rate. For example, decreasing the discount rate by 100 basis points to 0.3% (while holding other assumptions constant) would increase the forecasted 2021 expense for our U.K. pension plans by approximately $2 million. A 100 basis point increase in the discount rate to 2.3% would reduce forecasted 2021 pension expense by approximately $1 million.
Rate of Projected Compensation Increase—Our rate of projected compensation increase at December 31, 2020 is 4.1%. The rate assumption was based on an analysis of our projected compensation increases for the foreseeable future.
LiquidityCash contribution requirements to the U.K. pension plan are sensitive to changes in assumed interest rates and investment gains or losses. We expect our aggregate U.K. cash contributions will be approximately $5 million in 2021.
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 implemented as a result of the COVID-19 pandemic are lifted, 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. 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.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The following discussion highlights some of the more critical areas where a significant change in facts and circumstances in our operating and financial environment could cause a change in future reported financial results.
Income Taxes
We file United States, foreign, state, and local income tax returns. Significant judgment is required in determining our worldwide provision for income taxes and recording the related tax assets and liabilities. Any significant impact as a result of changes in underlying facts, law, tax rates, or tax audits could lead to adjustments to our income tax expense, effective tax rate, financial position, or cash flow.

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Deferred income taxes are provided for the estimated income tax effect of temporary differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities, as well as for net operating losses and tax credit carryforwards. When recording these deferred tax assets and liabilities, we must estimate the tax rates we expect will apply to taxable income in the periods in which the deferred tax liability or asset is expected to be settled or realized. In addition, we may record valuation allowances to reduce deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized. Judgment is required as we consider the scheduled reversal of deferred tax assets and liabilities, projected future taxable income, and tax planning strategies in making this assessment. If our estimates and assumptions change from those used when we recorded deferred tax assets and liabilities, the effect on our results of operations and financial position could be material.
The income tax returns for our entities in the United States and in foreign jurisdictions are open for examination by tax authorities. We assess our income tax positions and record a liability for all years open for examination based upon our evaluation of the facts, circumstances, and information available at the reporting date. The economic benefit associated with a tax position will be recognized only if we determine it is more likely than not to be upheld on audit. Although we believe our estimates and judgments are reasonable, actual results could differ, resulting in gains or losses that may be material to our results of operations and financial position.
At each interim reporting period, we estimate an effective income tax rate that is expected to be applicable for the full year. Our provision for income taxes is impacted by the income tax rates of the countries where we operate. A change in the geographical source of our income can affect the effective tax rate. Significant judgment is involved regarding the application of global income tax laws and regulations when projecting the jurisdictional mix of income. Additionally, interpretations of tax laws, court decisions, or other guidance provided by taxing authorities influence our estimate of the effective income tax rate. As a result, our actual effective income tax rate and related income tax liabilities may differ materially from our estimated effective tax rate and related income tax liabilities.
Intangibles (net of amortization) and Goodwill
We have certain identifiable intangibles amounting to $6 million and goodwill amounting to $124 million at December 31, 2020 that are discussed in Note 10. These intangibles and goodwill relate to our petroleum additives business. The intangibles are being amortized over periods with up to approximately 8 years of remaining life. We continue to assess the market related to the intangibles and goodwill, as well as their specific values and evaluate the intangibles and goodwill for any potential impairment when significant events or circumstances occur that might impair the value of these assets. We have concluded the values are appropriate, as are the amortization periods for the intangibles. However, if conditions were to substantially deteriorate in the petroleum additives market, it could possibly cause a decrease in the estimated useful lives of the intangible assets or result in a noncash write-off of all or a portion of the intangibles and goodwill carrying amounts. A reduction in the amortization period of the intangibles would have no effect on cash flows. We do not anticipate such a change in the market conditions in the near term.
Pension Plans and Other Postretirement Benefits
We use assumptions to record the impact of the pension and postretirement benefit plans in the financial statements. These assumptions include the discount rate and the expected long-term rate of return on plan assets. A change in any of these assumptions could cause different results for the plans and therefore, impact our results of operations, cash flows, and financial condition. We develop these assumptions after considering available information that we deem relevant. Information is provided on the pension and postretirement plans in Note 17. In addition, further disclosure of the effect of changes in these assumptions is provided in the “Financial Position and Liquidity” section of Item 7.
Environmental and Legal Proceedings
We have disclosed our environmental matters in Item 1 of this Annual Report on Form 10-K, as well as in Note 20. Our estimates for costs that will be incurred to satisfy our obligations related to environmental matters are affected by many variables, including our judgment regarding the extent of remediation that will be required, future changes in and enforcement and interpretation of laws and regulations, current and future technology available, and timing of remediation activities. 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.

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Also, as noted in the discussion of “Legal Proceedings” in Item 3 of this Annual Report on Form 10-K, 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, cash flows, or financial condition as a result of any pending or threatened proceeding.
RECENTLY ISSUED ACCOUNTING STANDARDS
For a full discussion of the more significant recently issued accounting standards, see Note 23.
ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to many market risk factors, including fluctuations in interest and foreign currency rates, as well as changes in the cost of raw materials. These risk factors may affect our results of operations, cash flows, and financial position.
We manage these risks through regular operating and financing methods, including the use of derivative financial instruments. When we have derivative instruments, they are with major financial institutions and are not for speculative or trading purposes. Also, as part of our financial risk management, we regularly review significant contracts for embedded derivatives and, if identified, would record them in accordance with accounting principles generally accepted in the United States.
The following analysis presents the effect on our results of operations, cash flows, and financial position as if the hypothetical changes in market risk factors occurred at December 31, 2020. We analyzed only the potential impacts of our hypothetical assumptions. This analysis does not consider other possible effects that could impact our business.
Interest Rate Risk
At December 31, 2020, we had total long-term debt of $599 million. All of the long-term debt is at fixed rates. There was no interest rate risk at the end of the year associated with the fixed rate debt.
At December 31, 2020, we had no outstanding variable rate debt under our revolving credit facility. Therefore, we had no interest rate risk at the end of the year associated with the variable rate debt.
A hypothetical 100 basis point decrease in interest rates, holding all other variables constant, would have resulted in a change of $22 million in fair value of our debt at December 31, 2020.
Foreign Currency Risk
We sell to customers in foreign markets through our foreign subsidiaries, as well as through export sales from the United States. These transactions are often denominated in currencies other than the U.S. Dollar. Our primary currency exposures are the European Union Euro, British Pound Sterling, Japanese Yen, Chinese Renminbi, Indian Rupee, Singapore Dollar, Mexican Peso, Australian Dollar, and Canadian Dollar. We may enter into forward contracts as hedges to minimize the fluctuation of intercompany accounts receivable denominated in foreign currencies. At December 31, 2020, we had no outstanding forward contracts.
Raw Material Price Risk
We utilize a variety of raw materials in the manufacture of our products, including base oil, polyisobutylene, antioxidants, alcohols, solvents, sulfonates, friction modifiers, olefins, and copolymers. We may also enter into contracts which commit us to purchase some of our more critical raw materials based on anticipated demand. Our profitability is sensitive to changes in the quantities of raw materials we may need and the costs of those materials which may be caused by changes in supply, demand or other market conditions, over which we have little or no control. In addition, political and economic conditions in certain regions of the world in which we operate have caused, and may continue to cause, our demand for and the cost of our raw materials to fluctuate. War, armed hostilities, terrorist acts, civil unrest, or other incidents may also cause a sudden or sharp change in our demand for and the cost of our raw materials. If we experience such increases in the cost of our raw materials, we may not be able to pass them along to our customers in the form of price increases for our products. The inability to do so would have a negative impact on our operating profit. In

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addition, if our demand for raw materials were to decline such that we would not have need for the quantities required to be purchased under commitment agreements, we could incur additional charges that would affect our profitability.


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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of NewMarket Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of NewMarket Corporation and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of income, of comprehensive income, of shareholders' equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies

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and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of Pension Benefit Obligation
As described in Note 17 to the consolidated financial statements, the Company’s consolidated pension benefit obligation, excluding other postretirement benefits, was $720 million as of December 31, 2020. Management develops the actuarial assumptions used by the various US and foreign plans based upon the circumstances of each particular country and pension plan. As disclosed by management, the determination of the pension benefit obligation requires the use of estimates and assumptions. Management’s assumption in the determination of the pension benefit obligation is the discount rate.
The principal considerations for our determination that performing procedures relating to the valuation of the pension benefit obligation is a critical audit matter are the significant judgment by management to determine the pension benefit obligation. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s significant assumption used in the valuation of the pension benefit obligation, specifically the discount rate. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of the pension benefit obligation, including controls over the Company’s methods, significant assumption, and data. These procedures also included, among others, testing the completeness, accuracy, and relevance
of underlying data used in the valuation of the pension benefit obligation. With the involvement of professionals with specialized skill and knowledge to assist, these procedures also included testing management’s process for determining the pension benefit obligation, evaluating the appropriateness of the methods, and evaluating the reasonableness of the significant assumption, specifically the discount rate.
 
 
 /s/ PricewaterhouseCoopers LLP

Richmond, Virginia
February 16, 2021
We have served as the Company’s or its predecessor’s auditor since 1947.


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NewMarket Corporation and Subsidiaries
Consolidated Statements of Income
 Years Ended December 31,
(in thousands, except per-share amounts)202020192018
Net sales$2,010,931 $2,190,295 $2,289,675 
Cost of goods sold1,415,899 1,560,426 1,704,312 
Gross profit595,032 629,869 585,363 
Selling, general, and administrative expenses142,863 148,083 152,400 
Research, development, and testing expenses140,367 144,465 140,289 
Operating profit311,802 337,321 292,674 
Interest and financing expenses, net26,328 29,241 26,723 
Other income (expense), net45,813 23,510 24,334 
Income before income tax expense331,287 331,590 290,285 
Income tax expense60,719 77,304 55,551 
Net income$270,568 $254,286 $234,734 
Earnings per share - basic and diluted$24.64 $22.73 $20.34 
See accompanying Notes to Consolidated Financial Statements
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NewMarket Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
 Years Ended December 31,
(in thousands)202020192018
Net income$270,568 $254,286 $234,734 
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 $(16) in 2020, $(257) in 2019 and $(91) in 2018
(49)(756)(446)
Amortization of prior service cost (credit) included in net periodic benefit cost (income), net of income tax expense (benefit) of $(680) in 2020, $(681) in 2019 and $(720) in 2018
(2,120)(2,211)(2,363)
Actuarial net gain (loss) arising during the period, net of income tax expense (benefit) of $(5,852) in 2020, $5,952 in 2019 and $(6,976) in 2018
(25,441)16,739 (24,581)
Amortization of actuarial net loss (gain) included in net periodic benefit cost (income), net of income tax expense (benefit) of $1,460 in 2020, $901 in 2019 and $1,381 in 2018
4,634 2,988 4,355 
Total pension plans and other postretirement benefits(22,976)16,760 (23,035)
Foreign currency translation adjustments, net of income tax expense (benefit) of $(636) in 2020, $(181) in 2019 and $(535) in 2018
12,560 1,808 (12,287)
Other comprehensive income (loss)(10,416)18,568 (35,322)
Comprehensive income$260,152 $272,854 $199,412 
See accompanying Notes to Consolidated Financial Statements
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NewMarket Corporation and Subsidiaries
Consolidated Balance Sheets
 December 31,
(in thousands, except share amounts)20202019
ASSETS
Current assets:
Cash and cash equivalents$125,172 $144,397 
Trade and other accounts receivable, net336,395 335,826 
Inventories401,031 365,938 
Prepaid expenses and other current assets35,480 33,237 
Total current assets898,078 879,398 
Property, plant, and equipment, net665,147 635,439 
Intangibles (net of amortization) and goodwill129,944 131,880 
Prepaid pension cost137,069 133,848 
Operating lease right-of-use assets61,329 60,505 
Deferred charges and other assets42,308 44,062 
Total assets$1,933,875 $1,885,132 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$189,937 $178,773 
Accrued expenses78,422 77,350 
Dividends payable15,184 19,217 
Income taxes payable3,760 10,632 
Operating lease liabilities 13,410 14,036 
Other current liabilities11,742 8,887 
Total current liabilities312,455 308,895 
Long-term debt598,848 642,941 
Operating lease liabilities - noncurrent48,324 46,792 
Other noncurrent liabilities214,424 203,406 
Total liabilities1,174,051 1,202,034 
Commitments and contingencies (Note 20)
Shareholders’ equity:
Common stock and paid-in capital (with no par value; authorized shares - 80,000,000; issued and outstanding - 10,921,377 at December 31, 2020 and 11,188,549 at December 31, 2019)
717 1,965 
Accumulated other comprehensive loss(173,164)(162,748)
Retained earnings932,271 843,881 
Total shareholders' equity759,824 683,098 
Total liabilities and shareholders' equity$1,933,875 $1,885,132 
See accompanying Notes to Consolidated Financial Statements
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NewMarket Corporation and Subsidiaries
Consolidated Statements of Shareholders’ Equity
Common Stock and
Paid-in Capital
Accumulated Other Comprehensive LossRetained EarningsTotal Shareholders’ Equity
(in thousands, except share and per-share amounts)SharesAmount
Balance at December 31, 201711,779,978 $0 $(145,994)$747,643 $601,649 
Net income234,734 234,734 
Other comprehensive income (loss)(35,322)(35,322)
Cash dividends ($7.00 per share)
(80,448)(80,448)
Repurchases of common stock(603,449)(2,038)(229,978)(232,016)
Tax withholdings related to stock-based compensation
(2,055)(740)(740)
Stock-based compensation10,008 2,038 12 2,050 
Balance at December 31, 201811,184,482 0 (181,316)671,223 489,907 
Net income254,286 254,286 
Other comprehensive income (loss)18,568 18,568 
Cash dividends ($7.30 per share)
(81,676)(81,676)
Tax withholdings related to stock-based compensation
(603)(304)(304)
Stock-based compensation4,670 2,269 48 2,317 
Balance at December 31, 201911,188,549 1,965 (162,748)843,881 683,098 
Net income270,568 270,568 
Other comprehensive income (loss)(10,416)(10,416)
Cash dividends ($7.60 per share)
(83,417)(83,417)
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 compensation5,338 2,023 43 2,066 
Balance at December 31, 202010,921,377 $717 $(173,164)$932,271 $759,824 
See accompanying Notes to Consolidated Financial Statements
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NewMarket Corporation and Subsidiaries
Consolidated Statements of Cash Flows
 Years Ended December 31,
(in thousands)202020192018
Cash and cash equivalents at beginning of year$144,397 $73,040 $84,166 
Cash flows from operating activities:
Net income270,568 254,286 234,734 
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization84,002 87,560 71,759 
Deferred income tax expense7,554 7,384 14,527 
Gain on sale of land(16,483)0 0 
Change in assets and liabilities:
Trade and other accounts receivable, net2,591 (22,587)14,096 
Inventories(33,111)31,884 (29,672)
Prepaid expenses and other current assets(6,138)(2,742)702 
Accounts payable and accrued expenses7,077 8,859 (19,638)
Operating lease liabilities(17,801)(16,496)0 
Other current liabilities228 1,866 (10,169)
Income taxes payable(6,935)3,979 (9,731)
Cash pension and postretirement contributions(10,655)(9,932)(64,756)
Other, net3,257 (6,849)(3,941)
Cash provided from (used in) operating activities284,154 337,212 197,911 
Cash flows from investing activities:
Capital expenditures(93,316)(59,434)(74,638)
Proceeds from sale of land20,000 0 0 
Other, net(927)0 14,607 
Cash provided from (used in) investing activities(74,243)(59,434)(60,031)
Cash flows from financing activities:
Net (repayments) borrowings under revolving credit facility(44,678)(123,451)168,129 
Dividends paid(83,417)(81,676)(80,448)
Repurchases of common stock(101,434)0 (232,016)
Other, net(1,934)(2,952)(1,092)
Cash provided from (used in) financing activities(231,463)(208,079)(145,427)
Effect of foreign exchange on cash and cash equivalents2,327 1,658 (3,579)
(Decrease) increase in cash and cash equivalents(19,225)71,357 (11,126)
Cash and cash equivalents at end of year$125,172 $144,397 $73,040 
See accompanying Notes to Consolidated Financial Statements
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Notes to Consolidated Financial Statements


1.    Summary of Significant Accounting Policies
Consolidation—Our consolidated financial statements include the accounts of NewMarket Corporation and its subsidiaries. All intercompany transactions are eliminated upon consolidation. References to "we," "us," "our," the "company," and "NewMarket" are to NewMarket Corporation and its consolidated subsidiaries, unless the context indicates otherwise.
NewMarket is the parent company of separate operating companies, each managing its own assets and liabilities. Those companies are Afton, which focuses on petroleum additive products; Ethyl, representing certain contracted manufacturing and services, as well as the antiknock compounds business; and NewMarket Development, which manages the real property and improvements that we own in Virginia. NewMarket is also the parent company of NewMarket Services, which provides various administrative services to NewMarket, Afton, Ethyl, and NewMarket Development.
Certain reclassifications have been made to the accompanying consolidated financial statements and the related notes to conform to the current presentation.
Foreign Currency Translation—We translate the balance sheets of our foreign subsidiaries into U.S. Dollars based on the current exchange rate at the end of each period. We translate the statements of income using the weighted-average exchange rates for the period. NewMarket includes translation adjustments in the Consolidated Balance Sheets as part of accumulated other comprehensive loss and transaction adjustments in the Consolidated Statements of Income as part of cost of goods sold. Foreign currency transaction adjustments resulted in a net loss of $3 million in 2020, $4 million in 2019, and $8 million 2018.
Revenue Recognition—We recognize revenue when control of the product is transferred to our customer and for an amount that reflects the consideration we expect to collect from the customer. Net sales (revenues) are reported at the gross amount billed, including amounts related to shipping that are charged to the customer. Pr