Audit Committee Charter
The Board of Directors (the “Board”) of NewMarket Corporation (the “Company”) has constituted a standing committee of the Board of Directors to be known as the audit committee (the “Audit Committee”).
This Charter sets out the specific responsibilities delegated by the Board to the Audit Committee and details the manner in which the Audit Committee shall operate.
Statement of Purpose
The primary function of the Audit Committee shall be to assist the Board in discharging its oversight responsibilities relating to the accounting, reporting, and financial practices of the Company and its subsidiaries by monitoring:
Audit Committee Objectives
The Audit Committee’s primary objectives are:
The Audit Committee shall have the sole authority to appoint, retain, compensate, evaluate, oversee and terminate the independent auditor (subject, if applicable, to shareholder ratification) and shall approve all audit and permissible non-audit engagements, including fees and terms, with the independent auditor. The independent auditor shall be accountable to the Board through the Audit Committee. The Audit Committee shall consult with management in fulfilling its responsibilities.
The Audit Committee shall prepare the report of the Audit Committee required by the rules of the Securities and Exchange Commission (the “SEC”) to be included in the Company’s annual proxy statement.
The Audit Committee may form subcommittees and delegate authority to subcommittees.
The Audit Committee shall have the authority, to the extent it deems necessary or appropriate, to retain special legal, accounting or other consultants to advise the Audit Committee. The Audit Committee shall have the authority to retain and compensate such advisors without seeking further approval and shall receive appropriate funding, as determined by the Audit Committee, from the Company to compensate such advisors. The Audit Committee shall have the authority to conduct or authorize investigations into any matters within its scope of responsibilities and shall have the authority to retain outside advisors to assist the Audit Committee in the conduct of any investigation.
The Audit Committee shall make regular reports to the Board, and shall review with the Board any issues that arise with respect to the quality or integrity of the Company’s financial statements, the Company’s compliance with legal or regulatory requirements, the performance and independence of the Company’s independent auditors or the performance of the internal audit function.
The Audit Committee shall review and reassess the adequacy of this Charter, at least annually, and shall recommend any proposed changes to the Board for approval. The Audit Committee shall annually review its own performance.
The Audit Committee shall:
Financial Statement and Disclosure Matters
1. Review and discuss with management and the independent auditor accounting policies and financial reporting issues and judgments that may be viewed as critical; review and discuss analyses prepared by management and/or the independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of financial statements, including analyses of the effects of alternative GAAP methods on the financial statements; consider and approve, when appropriate, any significant changes in the Company’s accounting and auditing policies; review and discuss any accounting and financial reporting proposals that may have a significant impact on the Company’s financial reports; review and discuss major issues as to the adequacy of the Company’s internal controls and any special audit steps adopted in light of material control deficiencies;
2. Review and discuss with management and the independent auditor the annual audited financial statements, including disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and recommend to the Board whether the audited financial statements should be included in the Company’s Annual Report on Form 10-K;
3. Review and discuss with management and the independent auditor the Company’s quarterly financial statements, including the results of the independent auditor’s reviews of the quarterly financial statements, prior to the filing of its Form 10-Q;
4. Review and discuss with management and the independent auditor: (a) any material financial or non-financial arrangements of the Company which do not appear on the financial statements of the Company; and (b) any transactions or courses of dealing with parties related to the Company which transactions are significant in size or involve terms or other aspects that differ from those that would likely be negotiated with independent parties and that are relevant to an understanding of the Company’s financial statements;
5. Review and discuss with management its policies and practices regarding earnings press releases, as well as financial information and earnings guidance given to analysts and ratings agencies, giving attention to any use of “pro forma”, “adjusted” or “non-GAAP financial measures” or information;
6. Discuss with management the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies;
7. Discuss with management and the independent auditor the effect of regulatory and accounting initiatives, as well as off-balance sheet structures on the Company’s financial statements;
Oversight of the Company’s Relationship with the Independent Auditor
8. Obtain and review a formal written report by the independent auditor, at least annually, which report shall include descriptions of:
o the independent auditor’s internal quality-control procedures;
o any material issues raised by the most recent internal quality control review, or peer review, or by any inquiry or investigation by governmental or professional authorities in the preceding five years respecting one or more independent audits carried out by the firm;
o any steps taken to deal with such issues;
o all relationships between the independent auditor and the Company; and
o any other relationships that may adversely affect the independence of the auditor.
The Audit Committee should assess the independence of the independent auditor, including that of the independent auditor’s lead partner, based on a review of the written report and recommend to the Board that it take appropriate action in response to the report to satisfy the independence requirements.
9. Evaluate the qualifications, experience, performance and independence of the senior members of the independent auditor team, including that of the independent auditor’s lead and concurring partners; present its conclusions with respect to such evaluations to the full Board;
10. Set clear hiring policies and procedures for employees or former employees of the independent auditors in accordance with applicable laws;
11. Discuss with the independent auditor its ultimate accountability to the Board through the Audit Committee;
12. Pre-approve all audit and permissible non-audit services to be provided by the independent auditor or establish policies and procedures for the pre-approval of such audit and permissible non-audit services. Any policies and procedures adopted by the Audit Committee must be detailed as to the particular service in question and must not delegate any Audit Committee responsibilities to management. Moreover, the Audit Committee must be informed of each service. Consider whether the independent auditor’s performance of permissible non-audit services is compatible with the auditor’s independence.;
13. Assure the regular rotation of the lead and concurring audit partners as required by law, and consider whether there should be regular rotation of the independent auditing firm itself;
14. Establish regular and separate systems of reporting to the Audit Committee by the Company’s management, the independent auditor and the internal auditor regarding any significant judgments made in management’s preparation of the financial statements, and the view of each as to the appropriateness of such judgments;
15. Review and discuss with the independent auditor the audit planning and procedures, including the scope, fees, staffing and timing of the audit; review and discuss the results of the audit exam and management letters, and any reports of the independent auditor with respect to any interim period;
16. Review with the Company’s internal auditor and the independent auditor the coordination of their audit efforts to assure completeness of coverage, reduction of redundant efforts and effective use of audit resources;
17. Review separately with the Company’s management, the independent auditor and the internal auditor, following completion of the Company’s annual audit, any significant difficulties encountered during the course of the audit, including: (a) difficulties with management’s response; (b) any restrictions on the scope of work or access to required information; and (c) the nature and extent of any significant changes in accounting principles or the application therein;
18. Review and resolve any significant disagreement among the Company’s management and its independent auditor or the internal auditor in connection with the preparation of the Company’s financial statements;
19. Review with the independent auditor any audit problems or difficulties and management’s response (Such review shall include any accounting adjustments that were noted or proposed by the auditor but were “passed” (as immaterial or otherwise); review any “management” or “internal control” letters issued, or proposed to be issued, by the audit firm to the Company and any discussions with the independent auditor’s national office respecting auditing or accounting issues presented by the engagement);
20. Review with the Company’s independent auditor, the internal auditor and management the extent to which changes or improvements in financial or accounting practices and standards, as approved by the Audit Committee, have been implemented, with such review to be conducted at an appropriate amount of time subsequent to implementation of any changes or improvements thereto, as decided by the Audit Committee in its sole discretion;
Oversight of the Company’s Internal Audit Function
21. Review the appointment, replacement or dismissal of the internal audit staff;
22. Review the regular internal reports to management prepared by the internal auditor and management’s responses;
23. Discuss with the independent auditor the internal auditor’s responsibilities, budget and staffing, and any recommended changes in the planned scope of the internal audit;
Compliance Oversight Responsibilities
24. Obtain from the independent auditor assurance that Section 10A of the Securities Exchange Act of 1934 has not been implicated;
25. Obtain reports from management, the Company’s internal auditor and the independent auditor that the Company and its subsidiary/foreign affiliated entities are in conformity with applicable legal requirements and the Company’s Code of Business Conduct and Ethics; review reports and disclosures of insider and affiliated party transactions; advise the Board with respect to the Company’s policies and procedures regarding compliance with applicable laws and regulations and with the Company’s Code of Business Conduct and Ethics;
26. Discuss with management and the independent auditor any correspondence with regulators or governmental agencies and any employee complaints or published reports which raise material issues regarding the Company’s financial statements or accounting policies;
27. Review any material pending legal proceedings involving the Company and other contingent liabilities; discuss with the Company’s General Counsel legal matters that may have a material impact on the financial statements or the Company’s compliance policies; and
28. Establish procedures for:
o the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and
o the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
Composition of the Audit Committee
The Audit Committee shall consist of no fewer than three directors. The members of the Audit Committee shall meet the independence and experience requirements of the SEC and the New York Stock Exchange (the “NYSE”) as then in effect.
All members of the Audit Committee shall have a requisite working familiarity with basic finance and accounting practices in compliance with the rules of the NYSE. At least one member of the Audit Committee must be an “audit committee financial expert,” as such term is defined by the SEC or have accounting or related financial management expertise, as the Board interprets such qualification in its business judgment.
No member of the Audit Committee may be an affiliated person (as defined by the SEC) of the Company or any of its subsidiaries.
No member of the Audit Committee may accept, directly or indirectly, any consulting, advisory or other compensatory fee from the Company or any of its subsidiaries other than fees for Board or committee service. Unless the rules of the NYSE provide otherwise, the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service (provided that such compensation is not contingent upon continued service) does not preclude Audit Committee service.
No member of the Audit Committee may serve on the audit committees of more than three public companies unless approved by the Board. If an Audit Committee member requests to simultaneously serve on the audit committee of more than three public companies, the Board must determine that such simultaneous service would not impair the ability of such member to effectively serve on the Company’s Audit Committee and disclose such determination in the annual proxy statement.
The members of the Audit Committee shall be appointed by the Board, at the Board’s annual meeting, on the recommendation of the Nominating and Corporate Governance Committee, and may be removed by the Board. The members of the Audit Committee shall serve for one year or until their successors are duly elected and qualified. Unless a Chairman is elected by the full Board, the members of the Audit Committee shall designate a Chairman by majority vote of the full Audit Committee membership.
The duties and responsibilities of Audit Committee members contained herein shall be in addition to those duties otherwise required for members of the Board.
Administration of the Audit Committee
Regular meetings of the Audit Committee shall be held at least as often as deemed necessary or appropriate in its judgment, but at least quarterly. The Secretary of the Audit Committee shall be the Corporate Secretary or such other person as is nominated by the Board. The proceedings of all Audit Committee meetings shall be documented in minutes.
As part of its oversight responsibilities, the Audit Committee or the Chairman shall conduct private meetings separately, in person or by telephone, at least quarterly with (1) the Company’s independent auditor, (2) the Company’s principal financial officer and (3) the Company’s General Counsel. Such meetings shall include a review of the Company’s financial statements.
The Audit Committee shall have available to it such support personnel, including management staff, independent auditors, attorneys and consultants, as it deems necessary to discharge its responsibilities. The Audit Committee shall have sole authority to agree to fees and other terms of engagement of any such attorneys or consultants.
Limitation of Audit Committee’s Rule
Although the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits, to certify the Company’s financial statements or to guarantee the auditor’s report.
This Audit Committee Charter was duly approved and adopted by the Board of the Company on the 27th day of May, 2004.
M. Rudolph West, Secretary