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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(MARK ONE)

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

FOR THE QUARTERLY PERIOD ENDED March 31, 2024

☐ 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 1-4462

 

STEPAN COMPANY

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

36-1823834

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification Number)

1101 Skokie Boulevard, Suite 500, Northbrook, Illinois 60062

(Address of principal executive offices)

Registrant’s telephone number (847) 446-7500

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

 

Trading symbol(s)

 

Name of each exchange on which registered

Common Stock, $1 par value

 

SCL

 

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ 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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

 

 

 

 

Non-accelerated filer

☐

 

Smaller reporting company

☐

 

 

 

 

 

 

 

Emerging growth company

☐

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class

 

Outstanding at April 26, 2024

Common Stock, $1 par value

 

22,474,910 Shares

 

 

 

Part I FINANCIAL INFORMATION

 

Item 1 - Financial Statements

STEPAN COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Unaudited

(In thousands, except per share amounts)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Net Sales

 

$

551,418

 

 

$

651,436

 

Cost of Sales

 

 

481,137

 

 

 

577,876

 

Gross Profit

 

 

70,281

 

 

 

73,560

 

Operating Expenses:

 

 

 

 

 

 

Selling

 

 

11,388

 

 

 

13,067

 

Administrative

 

 

22,690

 

 

 

22,639

 

Research, development and technical services

 

 

14,256

 

 

 

15,138

 

Deferred compensation expense

 

 

1,778

 

 

 

1,502

 

 

 

 

50,112

 

 

 

52,346

 

Business restructuring expense

 

 

—

 

 

 

157

 

Operating Income

 

 

20,169

 

 

 

21,057

 

Other Income (Expense):

 

 

 

 

 

 

Interest, net

 

 

(3,071

)

 

 

(2,822

)

Other, net (Note 15)

 

 

2,362

 

 

 

1,668

 

 

 

 

(709

)

 

 

(1,154

)

 

 

 

 

 

 

 

Income Before Provision for Income Taxes

 

 

19,460

 

 

 

19,903

 

Provision for Income Taxes

 

 

5,567

 

 

 

3,761

 

Net Income

 

 

13,893

 

 

 

16,142

 

 

 

 

 

 

 

 

Net Income Per Common Share (Note 10):

 

 

 

 

 

 

Basic

 

$

0.61

 

 

$

0.71

 

Diluted

 

$

0.61

 

 

$

0.70

 

 

 

 

 

 

 

 

Shares Used to Compute Net Income Per Common Share (Note 10):

 

 

 

 

 

 

Basic

 

 

22,824

 

 

 

22,757

 

Diluted

 

 

22,948

 

 

 

22,994

 

 

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

2

 

STEPAN COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited

 

(In thousands)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Net Income

 

$

13,893

 

 

$

16,142

 

Other Comprehensive Income:

 

 

 

 

 

 

Foreign currency translation adjustments (Note 11)

 

 

(6,551

)

 

 

18,423

 

Defined benefit pension adjustments, net of tax (Note 11)

 

 

58

 

 

 

58

 

Derivative instrument activity, net of tax (Note 11)

 

 

829

 

 

 

(1,517

)

Total Other Comprehensive Income

 

 

(5,664

)

 

 

16,964

 

Comprehensive Income

 

$

8,229

 

 

$

33,106

 

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

 

3

 

STEPAN COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

 

(Dollars in thousands)

 

March 31, 2024

 

 

December 31, 2023

 

Assets

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

125,775

 

 

$

129,823

 

Receivables, net

 

 

446,569

 

 

 

422,050

 

Inventories (Note 6)

 

 

257,118

 

 

 

265,558

 

Other current assets

 

 

40,344

 

 

 

34,452

 

Total current assets

 

 

869,806

 

 

 

851,883

 

Property, Plant and Equipment:

 

 

 

 

 

 

Cost

 

 

2,605,219

 

 

 

2,585,058

 

Less: Accumulated depreciation

 

 

(1,399,585

)

 

 

(1,378,393

)

Property, plant and equipment, net

 

 

1,205,634

 

 

 

1,206,665

 

Goodwill, net

 

 

96,309

 

 

 

97,442

 

Other intangible assets, net

 

 

50,564

 

 

 

52,571

 

Long-term investments (Note 3)

 

 

23,466

 

 

 

26,804

 

Operating lease assets (Note 7)

 

 

71,483

 

 

 

70,646

 

Other non-current assets

 

 

55,885

 

 

 

57,343

 

Total assets

 

$

2,373,147

 

 

$

2,363,354

 

Liabilities and Equity

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Current maturities of debt (Note 14)

 

$

245,861

 

 

$

252,898

 

Accounts payable

 

 

256,880

 

 

 

233,031

 

Accrued liabilities

 

 

126,112

 

 

 

121,941

 

Total current liabilities

 

 

628,853

 

 

 

607,870

 

Deferred income taxes

 

 

10,257

 

 

 

10,373

 

Long-term debt, less current maturities (Note 14)

 

 

400,121

 

 

 

401,248

 

Non-current operating lease liabilities (Note 7)

 

 

59,063

 

 

 

58,026

 

Other non-current liabilities

 

 

60,331

 

 

 

69,347

 

Commitments and Contingencies (Note 8)

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

Common stock, $1 par value; authorized 60,000,000 shares;
   27,124,666 issued shares in 2024 and 27,005,852 issued shares in 2023

 

 

27,125

 

 

 

27,006

 

Additional paid-in capital

 

 

248,337

 

 

 

247,032

 

Accumulated other comprehensive loss (Note 11)

 

 

(136,266

)

 

 

(130,602

)

Retained earnings

 

 

1,262,937

 

 

 

1,257,466

 

Less: Common treasury stock, at cost, 4,650,882 shares in 2024
   and 4,628,072 shares in 2023

 

 

(187,611

)

 

 

(184,412

)

Total equity

 

 

1,214,522

 

 

 

1,216,490

 

Total liabilities and equity

 

$

2,373,147

 

 

$

2,363,354

 

 

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

4

 

STEPAN COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

 

 

(In thousands)

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Cash Flows From Operating Activities

 

 

 

 

 

 

Net income

 

$

13,893

 

 

$

16,142

 

Adjustments to reconcile net income to net cash
   provided by (used in) operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

27,604

 

 

 

25,542

 

Deferred compensation

 

 

1,778

 

 

 

1,502

 

Realized and unrealized gains on long-term investments

 

 

(2,267

)

 

 

(1,516

)

Stock-based compensation

 

 

1,372

 

 

 

999

 

Deferred income taxes

 

 

2,201

 

 

 

(660

)

Other non-cash items

 

 

650

 

 

 

36

 

Changes in assets and liabilities:

 

 

 

 

 

 

Receivables, net

 

 

(26,043

)

 

 

(40,420

)

Inventories

 

 

3,202

 

 

 

38,265

 

Other current assets

 

 

(5,931

)

 

 

(9,222

)

Accounts payable and accrued liabilities

 

 

25,965

 

 

 

(98,523

)

Pension liabilities

 

 

(502

)

 

 

(531

)

Environmental and legal liabilities

 

 

(56

)

 

 

(3,464

)

Deferred revenues

 

 

(312

)

 

 

(208

)

Net Cash Provided By (Used In) Operating Activities

 

 

41,554

 

 

 

(72,058

)

Cash Flows From Investing Activities

 

 

 

 

 

 

Expenditures for property, plant and equipment

 

 

(30,157

)

 

 

(92,158

)

Other, net

 

 

5,742

 

 

 

1,817

 

Net Cash Used In Investing Activities

 

 

(24,415

)

 

 

(90,341

)

Cash Flows From Financing Activities

 

 

 

 

 

 

Revolving debt and bank overdrafts, net (Note 14)

 

 

(8,415

)

 

 

123,847

 

Dividends paid

 

 

(8,422

)

 

 

(8,160

)

Stock option exercises

 

 

865

 

 

 

1,514

 

Other, net

 

 

(4,012

)

 

 

(3,665

)

Net Cash Provided By (Used In) Financing Activities

 

 

(19,984

)

 

 

113,536

 

Effect of Exchange Rate Changes on Cash

 

 

(1,203

)

 

 

2,069

 

Net Decrease in Cash and Cash Equivalents

 

 

(4,048

)

 

 

(46,794

)

Cash and Cash Equivalents at Beginning of Period

 

 

129,823

 

 

 

173,750

 

Cash and Cash Equivalents at End of Period

 

$

125,775

 

 

$

126,956

 

Supplemental Cash Flow Information

 

 

 

 

 

 

Cash payments of income taxes, net of refunds

 

$

4,818

 

 

$

15,518

 

Cash payments of interest

 

$

7,284

 

 

$

6,007

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

 

5

 

STEPAN COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

Unaudited

 

 

 

1.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The condensed consolidated financial statements included herein have been prepared by Stepan Company (the Company), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate and make the information presented not misleading. In the opinion of management, all adjustments, consisting only of normal recurring accruals, necessary to present fairly the Company’s financial position as of March 31, 2024, its results of operations for the three months ended March 31, 2024 and 2023 and cash flows for the three months ended March 31, 2024 and 2023, have been included. These financial statements and related footnotes should be read in conjunction with the financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (2023 Annual Report on Form 10-K).

 

2.
RECONCILIATIONS OF EQUITY

Below are reconciliations of total equity for the three months ended March 31, 2024 and 2023:

 

(In thousands, except share and per share amounts)

 

Total

 

 

Common
Stock

 

 

Additional
Paid-in
Capital

 

 

Common
Treasury
Stock

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Retained
Earnings

 

Balance, December 31, 2023

 

$

1,216,490

 

 

$

27,006

 

 

$

247,032

 

 

$

(184,412

)

 

$

(130,602

)

 

$

1,257,466

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of 20,668 shares of common
   stock under incentive compensation plan

 

 

865

 

 

 

21

 

 

 

844

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based and deferred compensation

 

 

(2,640

)

 

 

98

 

 

 

461

 

 

 

(3,199

)

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

13,893

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

13,893

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

(5,664

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(5,664

)

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock ($0.375 per share)

 

 

(8,422

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(8,422

)

Balance, March 31, 2024

 

$

1,214,522

 

 

$

27,125

 

 

$

248,337

 

 

$

(187,611

)

 

$

(136,266

)

 

$

1,262,937

 

 

(In thousands, except share and per share amounts)

 

Total

 

 

Common
Stock

 

 

Additional
Paid-in
Capital

 

 

Common
Treasury
Stock

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Retained
Earnings

 

Balance, December 31, 2022

 

$

1,166,065

 

 

$

26,841

 

 

$

237,202

 

 

$

(180,596

)

 

$

(167,512

)

 

$

1,250,130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of 25,981 shares of common
  stock under incentive compensation plan

 

 

1,514

 

 

 

26

 

 

 

1,488

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based and deferred compensation

 

 

(2,612

)

 

 

91

 

 

 

895

 

 

 

(3,598

)

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

16,142

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

16,142

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss)

 

 

16,964

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

16,964

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock ($0.365 per share)

 

 

(8,160

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(8,160

)

Balance, March 31, 2023

 

$

1,189,913

 

 

$

26,958

 

 

$

239,585

 

 

$

(184,194

)

 

$

(150,548

)

 

$

1,258,112

 

 

 

3.
FAIR VALUE MEASUREMENTS

Derivative assets and liabilities include the foreign currency exchange and interest rate swap contracts discussed in Note 4, Derivative Instruments, of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this

6

 

Form 10-Q). Fair value and carrying value were the same because the contracts were recorded at fair value. The fair values of the foreign currency contracts were calculated as the difference between the applicable forward foreign exchange rates at the reporting date and the contracted foreign exchange rates multiplied by the contracted notional amounts. The fair value of the interest rate swap was calculated as the difference between the contracted swap rate and the floating interest rate multiplied by the present value of the notional amount of the contract.

At March 31, 2024, and December 31, 2023, the fair values and related carrying values of debt, including current maturities, were as follows (the fair value and carrying value amounts are presented without regard to unamortized debt issuance costs of $772,000 and $895,000 as of March 31, 2024 and December 31, 2023, respectively):

 

(In thousands)

 

March 31,
2024

 

 

December 31,
2023

 

Fair value

 

$

614,024

 

 

$

627,695

 

Carrying value

 

 

646,754

 

 

 

655,041

 

 

The following tables present financial assets and liabilities, excluding cash and cash equivalents, measured on a recurring basis at fair value as of March 31, 2024, and December 31, 2023, and the level within the fair value hierarchy in which the fair value measurements fall:

 

(In thousands)

 

March 31,
2024

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Mutual fund assets

 

$

23,466

 

 

$

23,466

 

 

$

—

 

 

$

—

 

Derivative assets:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

 

7,014

 

 

 

—

 

 

 

7,014

 

 

 

—

 

Foreign currency contracts

 

 

630

 

 

 

—

 

 

 

630

 

 

 

—

 

Total assets at fair value

 

$

31,110

 

 

$

23,466

 

 

$

7,644

 

 

$

—

 

Derivative liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency contracts

 

$

738

 

 

$

—

 

 

$

738

 

 

$

—

 

 

(In thousands)

 

December 31,
2023

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Mutual fund assets

 

$

26,804

 

 

$

26,804

 

 

$

—

 

 

$

—

 

Derivative assets:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

 

6,183

 

 

 

—

 

 

 

6,183

 

 

 

—

 

Foreign currency contracts

 

 

1,018

 

 

 

—

 

 

 

1,018

 

 

 

—

 

Total assets at fair value

 

$

34,005

 

 

$

26,804

 

 

$

7,201

 

 

$

—

 

Derivative liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency contracts

 

$

928

 

 

$

—

 

 

$

928

 

 

$

—

 

 

4.
DERIVATIVE INSTRUMENTS

At March 31, 2024, and December 31, 2023, the Company had open forward foreign currency exchange contracts to buy or sell foreign currencies with U.S. dollar equivalent amounts of $108,979,000 and $106,561,000, respectively. All forward foreign exchange contracts at March 31, 2024 had durations of one month to three months.

The Company is currently exposed to volatility in short-term interest rates and has mitigated certain portions of that risk by using an interest rate swap. The interest rate swap is recognized on the balance sheet as either an asset or a liability measured at fair value. At March 31, 2024, the Company held an interest rate swap contract with a notional value of $100,000,000 that was designated as a cash flow hedge. Period-to-period changes in the fair value of the interest rate swap are initially recognized as gains or losses in other comprehensive income. As the interest rate swap contract is settled, the corresponding gain or loss is reclassified out of accumulated other comprehensive income (AOCI) into earnings. The maturity date of the current interest swap contract is March 10, 2027, which is closely aligned with the June 24, 2027 maturity of the Company's revolving credit facility.

The fair values of the derivative instruments held by the Company on March 31, 2024, and December 31, 2023, are disclosed in Note 3, Fair Value Measurements, of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q). Derivative instrument gains and losses for the three months ended March 31, 2024 and 2023, were immaterial. For amounts reclassified out of AOCI into earnings for the three months ended March 31, 2024 and 2023, see Note 11, Accumulated Other Comprehensive Income (Loss), of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q).

7

 

5.
STOCK-BASED COMPENSATION

Compensation expense recorded for all stock options, performance shares, time-based restricted stock units (RSUs) and stock appreciation rights (SARs) was as follows:

(In thousands)

 

Three Months Ended
March 31,

 

2024

 

 

2023

 

$

1,372

 

 

$

999

 

Unrecognized compensation costs for stock options, performance shares, RSUs and SARs were as follows:

(In thousands)

 

March 31,
2024

 

 

December 31,
2023

 

Stock options

 

$

211

 

 

$

127

 

Performance shares and RSUs

 

 

10,583

 

 

 

3,761

 

SARs

 

 

5,435

 

 

 

3,648

 

The change in unrecognized compensation costs for stock options, performance shares, RSUs and SARs is due to new grants issued in 2024.

The Company granted the following awards in the first three months of 2024:

 

 

Shares

 

Stock options

 

 

3,356

 

Performance shares (at target) and RSUs

 

 

104,282

 

SARs

 

 

89,073

 

The unrecognized compensation costs at March 31, 2024, are expected to be recognized over weighted-average periods of 2.2 years for stock options, 2.4 years for performance shares and RSUs and 2.1 years for SARs.

6.
INVENTORIES

The composition of inventories at March 31, 2024, and December 31, 2023, was as follows:

 

(In thousands)

 

March 31,
2024

 

 

December 31,
2023

 

Finished goods

 

$

162,398

 

 

$

184,828

 

Raw materials

 

 

94,720

 

 

 

80,730

 

Total inventories

 

$

257,118

 

 

$

265,558

 

 

7.
LEASES

Lease cost is recognized in both the Cost of Sales and Operating Expenses sections of the Condensed Consolidated Statements of Income.

 

(In thousands)

 

Three Months Ended
March 31,

 

 

 

 

2024

 

 

2023

 

 

Lease Cost

 

 

 

 

 

 

 

Operating lease cost

 

$

4,493

 

 

$

4,349

 

 

Short-term lease cost

 

 

2,687

 

 

 

2,779

 

 

Variable lease cost

 

 

443

 

 

 

557

 

 

Total lease cost

 

$

7,623

 

 

$

7,685

 

 

Other Information

 

 

 

 

 

 

 

Cash paid for amounts included in the
   measurement of lease liabilities:

 

 

 

 

 

 

 

Operating cash flow from operating leases

 

$

4,488

 

 

$

4,332

 

 

Right-of-use assets obtained in exchange
   for new operating lease liabilities

 

 

989

 

 

 

6,545

 

 

 

8

 

The following table outlines the maturities of lease liabilities as of March 31, 2024.

 

(In thousands)

 

 

 

Undiscounted Cash Flows:

 

 

 

2024 (excluding the three months ended March 31, 2024)

 

$

12,541

 

2025

 

 

12,911

 

2026

 

 

10,104

 

2027

 

 

7,771

 

2028

 

 

6,827

 

Subsequent to 2028

 

 

35,527

 

Total Undiscounted Cash Flows

 

$

85,681

 

Less: Imputed interest

 

 

(13,080

)

Present value

 

$

72,601

 

Current operating lease liabilities (1)

 

 

13,538

 

Non-current operating lease liabilities

 

 

59,063

 

Total lease liabilities

 

$

72,601

 
(1)
This item is included in the Accrued liabilities line on the Company’s Condensed Consolidated Balance Sheet.

 

Weighted-average remaining lease term-operating leases

 

9 Years

 

Weighted-average discount rate-operating leases

 

 

3.9

%

As of March 31, 2024, the Company had office equipment and automobile leases, valued at approximately $922,000, that had not commenced. These leases will commence during the second and third quarters of 2024 with lease terms ranging from three years to five years.

8.
CONTINGENCIES

There are a variety of legal proceedings pending or threatened against the Company that occur in the normal course of the Company’s business, the majority of which relate to environmental assessment, protection and remediation matters. Some of these proceedings may result in fines, penalties, judgments or costs being assessed against the Company at some future time. The Company’s operations are subject to extensive local, state and federal regulations, including the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) and the Superfund amendments of 1986 (Superfund) as well as comparable regulations applicable to the Company’s foreign locations. Over the years, the Company has received requests for information related to or has been named by government authorities as a potentially responsible party at a number of sites where cleanup costs have been or may be incurred by the Company under CERCLA and similar state statutes. In addition, the Company is from time to time involved in routine legal proceedings incidental to the conduct of its business, including personal injury, property damage, tax, trade and labor matters. The Company believes that it has made adequate provisions for the costs it is likely to incur with respect to these claims.

In determining the appropriate level of environmental reserves, the Company considers several factors such as information obtained from investigatory studies; changes in the scope of remediation; the interpretation, application and enforcement of laws and regulations; changes in the costs of remediation programs; the development of alternative cleanup technologies and methods; and the relative level of the Company’s involvement at various sites for which the Company is allegedly associated. The level of annual expenditures for remedial, monitoring and investigatory activities will change in the future as major components of planned remediation activities are completed and the scope, timing and costs of existing activities are changed. As of March 31, 2024, the Company estimated a range of possible environmental losses and legal losses of $20,792,000 to $49,778,000. Within the range of possible environmental losses and legal losses, management has currently concluded that no single amount is more likely to occur than any other amounts in the range and, thus, has accrued at the lower end of the range. These accruals totaled $20,792,000 at March 31, 2024 and $20,646,000 at December 31, 2023. Although the Company believes that its estimated range of possible environmental losses and legal losses and its reserves are adequate for contingencies, it is possible, due to the uncertainties noted above, that additional reserves could be required in the future. Cash expenditures related to environmental remediation and certain other legal matters approximated $1,585,000 and $3,466,000 for the three months ended March 31, 2024 and 2023, respectively.

9

 

For certain sites, the Company has responded to information requests made by federal, state or local government agencies but has received no response confirming or denying the Company’s stated positions. As such, estimates of the total costs, or range of possible costs, of remediation, if any, or the Company’s share of such costs, if any, cannot be determined with respect to these sites. Consequently, the Company is unable to predict the effect thereof on the Company’s financial position, cash flows and results of operations. Based on the Company’s present knowledge with respect to its involvement at these sites, the possibility of other viable entities’ responsibilities for cleanup, and the extended period over which any costs would be incurred, management believes that the Company has no material liability at these sites and that these matters, individually and in the aggregate, will not have a material effect on the Company’s financial position. However, in the event of one or more adverse determinations with respect to such sites in any annual or interim period, the effect on the Company’s cash flows and results of operations for those periods could be material.

Following are summaries of the Company’s major contingencies at March 31, 2024:

Maywood, New Jersey Site

The Company’s property in Maywood, New Jersey, property formerly owned by the Company adjacent to its current site and other nearby properties (collectively, the Maywood site) were listed on the National Priorities List in September 1993 pursuant to the provisions of CERCLA because of alleged chemical and radiological contamination. Pursuant to (i) a September 21, 1987 Administrative Order on Consent entered into between the U.S. Environmental Protection Agency (USEPA) and the Company for property formerly owned by the Company at the Maywood site and (ii) the issuance of an order on May 2, 1991 by the USEPA to the Company for property currently owned by the Company at the Maywood site, the Company has completed various Remedial Investigation/Feasibility Studies of soil and groundwater at the Maywood site. On September 24, 2014, the USEPA issued its Record of Decision (ROD) for chemically-contaminated soil at the Maywood site. The ROD was amended pursuant to an Explanation of Significant Differences in January 2021. On February 29, 2024, the U.S. District Court for the District of New Jersey entered a consent decree among the Company, the United States, the New Jersey Department of Environmental Protection (NJDEP) and the New Jersey Spill Compensation Fund Administrator that requires the Company to take certain actions and to pay certain past costs of the United States and NJDEP. The USEPA has not yet issued a ROD for chemically-contaminated groundwater at the Maywood site. Based on the most current information available, the Company believes its recorded liability is reasonable having considered the range of estimated costs of remediation for the Maywood site. The estimate of the cost of remediation for the Maywood site could change again as the Company continues to hold discussions with the USEPA, as the design of the remedial action is finalized, if a groundwater ROD is issued or if other potentially responsible parties are identified. The ultimate amount for which the Company is liable could differ materially from the Company’s current recorded liability.

D’Imperio Property Site

During the mid-1970’s, Jerome Lightman and the Lightman Drum Company disposed of hazardous substances generated by the Company at several sites in New Jersey, including the D’Imperio site. The Company was named as a potentially responsible party in an October 2, 1998 lawsuit in the U.S. District Court for the District of New Jersey that involved the D’Imperio Site. The Company is cooperating with other potentially responsible parties to implement the selected remedy. Based on current information, the Company believes that its recorded liability is reasonable having considered the range of estimated cost of remediation for the D’Imperio site. Depending on the ultimate cost of the remediation at this site, the amount for which the Company is liable could differ materially from the Company’s current recorded liability.

Wilmington Site

Property formerly owned and operated by the Company in Wilmington, Massachusetts was listed on the National Priorities List in 2006. The Company, together with the current site owner and another potentially responsible party, entered into an Administrative Order on Consent in July 2007 to undertake a Remedial Investigation and Feasibility Study. A ROD was issued by the USEPA on March 30, 2021. The Company and three other potentially responsible parties entered into a consent decree, dated September 28, 2023, with USEPA and the Commonwealth of Massachusetts that requires the remedial design and remedial action of the remedy selected in the ROD for two operable units and an interim remedy for another operable unit. Remediation at this site is being managed by its current owner, to whom the Company sold the property in 1980. The Company is contractually obligated to contribute up to five percent of the environmental response costs incurred by the current owner, with no limitation on the ultimate amount of contributions. The Company has paid the current owner $3,778,000 for the Company’s portion of environmental response costs at the Wilmington site through March 31, 2024. The Company has recorded a liability for its portion of the estimated remediation costs for the site. Depending on the ultimate cost of the remediation at this site, the amount for which the Company is liable could differ materially from the current recorded liability.

On July 29, 2022, the Company and other potentially responsible parties were notified of a possible joint claim by federal and state trustees for alleged natural resource damages related to the Wilmington site. The alleged damages may result in a range

10

 

of possible penalties and the Company recorded a liability for this matter during the first quarter of 2024. Depending on the ultimate resolution of this matter, the amount for which the Company is liable could differ materially from the current recorded liability.

Millsdale Site

On March 26, 2024, the Company received a Notice and Finding of Violation from the USEPA alleging violations of air regulations at the Company’s Elwood, Illinois (Millsdale) facility. The notice alleges violations related to operating parameters and air emission requirements. The notice does not state whether the USEPA intends to pursue financial penalties or operational remedies. The alleged violations may result in a range of possible penalties; however, at this stage of the matter, the Company is unable to predict the ultimate outcome or what impact, if any, the outcome might have on the Company’s financial position, results of operations or cash flows.

Other U.S. Sites

Through the regular environmental monitoring of its plant production sites, the Company discovered levels of chemical contamination that were above thresholds allowed by law at its Millsdale and Fieldsboro, New Jersey plants. The Company voluntarily reported its results to the applicable state environmental agencies. As a result, the Company is required to perform self-remediation of the affected areas. Based on current information, the Company believes that its recorded liability for the remediation of the affected areas is appropriate based on an estimate of expected costs. However, actual costs could differ materially from the current recorded liability.

9.
POSTRETIREMENT BENEFIT PLANS

Defined Benefit Pension Plans

The Company sponsors various funded qualified and unfunded non-qualified defined benefit pension plans, the most significant of which cover employees in the U.S. and U.K. locations. The U.S. and U.K. defined benefit pension plans are frozen and service benefits are no longer being accrued.

Components of Net Periodic Benefit Cost

 

 

UNITED STATES

 

(In thousands)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Interest cost

 

$

1,651

 

 

$

1,731

 

Expected return on plan assets

 

 

(2,116

)

 

 

(2,133

)

Amortization of net actuarial loss

 

 

(3

)

 

 

(6

)

Net periodic benefit cost

 

$

(468

)

 

$

(408

)

 

 

 

UNITED KINGDOM

 

(In thousands)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Interest cost

 

$

161

 

 

$

164

 

Expected return on plan assets

 

 

(183

)

 

 

(170

)

Amortization of net actuarial loss

 

 

80

 

 

 

81

 

Net periodic benefit cost

 

$

58

 

 

$

75

 

Employer Contributions

U.S. Plans

As a result of pension funding relief provisions included in the Highway and Transportation Funding Act of 2014, the Company is not required to make contributions to its funded U.S. qualified defined benefit plans. Approximately $316,000 is expected to be paid to the unfunded non-qualified plans in 2024. Of such amount, $129,000 had been paid to the non-qualified plans as of March 31, 2024.

U.K. Plan

The Company’s U.K. subsidiary does not expect to contribute to its defined benefit pension plan in 2024.

11

 

Defined Contribution Plans

The Company sponsors retirement defined contribution plans that cover eligible U.S. and U.K. employees. The Company’s U.S. retirement plans include two qualified plans, one of which is a 401(k) plan and one of which is an employee stock ownership plan (profit sharing plan), and one non-qualified supplemental executive plan. In the three months ended March 31, 2024 and 2023, the Company made contributions into the qualified retirement plans for U.S. employees and for certain non-U.S. employees. Profit sharing contributions were determined using a formula applied to Company earnings. Approximately 85 percent of union and non-union employees are eligible for either the Company's sponsored or statutory profit sharing contributions and 100 percent of U.S. based union and non-union employees are eligible for the Company's sponsored profit sharing contributions. In 2023 and 2024, profit sharing contributions for U.S. employees were made to the employee stock ownership plan. Profit sharing contributions are allocated to participant accounts based on participant base earnings.

Defined contribution plan expenses for the Company’s qualified contribution plans were as follows:

(In thousands)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Retirement savings contributions

 

$

2,125

 

 

$

2,048

 

Profit sharing contributions

 

 

848

 

 

 

707

 

Total defined contribution plan expenses

 

$

2,973

 

 

$

2,755

 

The Company has a rabbi trust to fund the obligations of its non-qualified supplemental executive defined contribution plans (supplemental plans). The trust is comprised of various mutual fund investments selected by the participants of the supplemental plans. In accordance with the accounting guidance for rabbi trust arrangements, the assets of the trust and the obligations of the supplemental plans are reported on the Company’s condensed consolidated balance sheets. The Company elected the fair value option for the mutual fund investment assets so that offsetting changes in the mutual fund values and defined contribution plan obligations would be recorded in earnings in the same period. Therefore, the mutual funds are reported at fair value with any subsequent changes in fair value recorded in the condensed consolidated statements of income. The liabilities related to the supplemental plans increase (i.e., supplemental plan expense is recognized) when the value of the trust assets appreciate and decrease when the value of the trust assets decline (i.e., supplemental plan income is recognized). At March 31, 2024, the balance of the trust assets was $559,000, which equaled the balance of the supplemental plan liabilities. See the long-term investments section in Note 3, Fair Value Measurements, of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q) for further information regarding the Company’s mutual fund assets.

12

 

10.
EARNINGS PER SHARE

Below are the computations of basic and diluted earnings per share for the three months ended March 31, 2024 and 2023:

(In thousands, except per share amounts)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Computation of Basic Earnings per Share

 

 

 

 

 

 

Net income attributable to Stepan Company

 

$

13,893

 

 

$

16,142

 

Weighted-average number of common shares
   outstanding

 

 

22,824

 

 

 

22,757

 

Basic earnings per share

 

$

0.61

 

 

$

0.71

 

 

 

 

 

 

 

 

Computation of Diluted Earnings per Share

 

 

 

 

 

 

Net income attributable to Stepan Company

 

$

13,893

 

 

$

16,142

 

Weighted-average number of shares outstanding

 

 

22,824

 

 

 

22,757

 

Add weighted-average net shares from assumed
   exercise of options (under treasury stock method)(1)

 

 

47

 

 

 

99

 

Add weighted-average net shares related to unvested
   stock awards (under treasury stock method)

 

 

3

 

 

 

1

 

Add weighted-average net shares from assumed
   exercise of SARs (under treasury stock method)(1)

 

 

54

 

 

 

108

 

Add weighted-average contingently issuable net
  shares related to performance stock awards
  (under treasury stock method)

 

 

20

 

 

 

29

 

Weighted-average shares applicable to diluted
   earnings

 

 

22,948

 

 

 

22,994

 

Diluted earnings per share

 

$

0.61

 

 

$

0.70

 

 

(1)
800,025 and 403,711 options/SARs to acquire shares of the Company's common stock were excluded from the computation of dilutive earnings per share for the three months ended March 31, 2024 and 2023, respectively. The options/SARs' exercise prices were greater than the average market price for the Company's common stock and inclusion of the instruments would have had an antidilutive effect on the computations of the earnings per share.
11.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Below is the change in the Company’s accumulated other comprehensive income (loss) (AOCI) balance by component (net of income taxes) for the three months ended March 31, 2024 and 2023:

 

(In thousands)

 

Foreign
Currency
Translation
Adjustments

 

 

Defined
Benefit
Pension Plan
Adjustments

 

 

Cash Flow
Hedge
Adjustments

 

 

Total

 

Balance at December 31, 2022

 

$

(156,835

)

 

$

(19,079

)

 

$

8,402

 

 

$

(167,512

)

Other comprehensive income before
    reclassifications

 

 

18,423

 

 

 

—

 

 

 

(1,514

)

 

 

16,909

 

Amounts reclassified from AOCI

 

 

—

 

 

 

58

 

 

 

(3

)

 

 

55

 

Net current-period other comprehensive income

 

 

18,423

 

 

 

58

 

 

 

(1,517

)

 

 

16,964

 

Balance at March 31, 2023

 

$

(138,412

)

 

$

(19,021

)

 

$

6,885

 

 

$

(150,548

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2023

 

$

(116,412

)

 

$

(20,408

)

 

$

6,218

 

 

$

(130,602

)

Other comprehensive income before
    reclassifications

 

 

(6,551

)

 

 

—

 

 

 

831

 

 

 

(5,720

)

Amounts reclassified from AOCI

 

 

—

 

 

 

58

 

 

 

(2

)

 

 

56

 

Net current-period other comprehensive income

 

 

(6,551

)

 

 

58

 

 

 

829

 

 

 

(5,664

)

Balance at March 31, 2024

 

$

(122,963

)

 

$

(20,350

)

 

$

7,047

 

 

$

(136,266

)

 

13

 

Information regarding the reclassifications out of AOCI for the three months ended March 31, 2024 and 2023, is displayed below:

 

(In thousands)

 

Amount Reclassified from AOCI (1)

 

 

 

AOCI Components

 

Three Months Ended
March 31,

 

 

Affected Line Item in
Condensed Consolidated
Statements of Income

 

 

2024

 

 

2023

 

 

 

Amortization of defined benefit
    pension actuarial losses

 

$

(77

)

 

$

(75

)

 

(2)

 

 

 

19

 

 

 

17

 

 

Tax benefit

 

 

$

(58

)

 

$

(58

)

 

Net of tax

Gains and losses on cash flow
   hedges:

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

 

2

 

 

 

3

 

 

Cost of sales

 

 

 

2

 

 

 

3

 

 

Total before tax

 

 

 

—

 

 

 

—

 

 

Tax benefit

 

 

$

2

 

 

$

3

 

 

Net of tax

Total reclassifications for the period

 

$

(56

)

 

$

(55

)

 

Net of tax

 

(1)
Amounts in parentheses denote expense to the Company’s Condensed Consolidated Statements of Income.
(2)
This component of accumulated other comprehensive income is included in the computation of net periodic benefit cost. See Note 9, Postretirement Benefit Plans, of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q) for additional details.
12.
SEGMENT REPORTING

The Company has three reportable segments: Surfactants, Polymers and Specialty Products. Net sales by segment for the three months ended March 31, 2024 and 2023, were as follows:

 

(In thousands)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Segment Net Sales

 

 

 

 

 

 

Surfactants

 

$

390,820

 

 

$

467,828

 

Polymers

 

 

145,508

 

 

 

161,127

 

Specialty Products

 

 

15,090

 

 

 

22,481

 

      Total

 

$

551,418

 

 

$

651,436

 

 

14

 

Segment operating income and reconciliations of segment operating income to income before provision for income taxes for the three months ended March 31, 2024 and 2023, are summarized below:

 

(In thousands)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Segment Operating Income

 

 

 

 

 

 

Surfactants

 

$

26,079

 

 

$

27,056

 

Polymers

 

 

8,382

 

 

 

10,004

 

Specialty Products

 

 

4,268

 

 

 

2,530

 

      Segment operating income

 

 

38,729

 

 

 

39,590

 

Business restructuring

 

 

—

 

 

 

(157

)

Unallocated corporate expenses (1)

 

 

(18,560

)

 

 

(18,376

)

Total operating income

 

 

20,169

 

 

 

21,057

 

Other Income (Expense)

 

 

 

 

 

 

Interest, net

 

 

(3,071

)

 

 

(2,822

)

Other, net

 

 

2,362

 

 

 

1,668

 

Income before provision for income taxes

 

$

19,460

 

 

$

19,903

 
(1)
Unallocated corporate expenses are primarily comprised of corporate administrative expenses (e.g., corporate finance, legal, human resources, information systems, deferred compensation and environmental remediation) that are not included in segment operating income and are not used to evaluate segment performance.
13.
REVENUE FROM CONTRACTS WITH CUSTOMERS

As of March 31, 2024, the Company had $931,000 of contract liabilities and no contract assets. A contract liability would typically arise when an advance or deposit is received from a customer before the Company recognizes revenue. In practice, this is rare as it would require a customer to make a payment prior to a performance obligation being satisfied. When such situations do arise, the Company maintains a deferred revenue liability until the time a performance obligation has been satisfied. The Company recognized $688,000 of revenue in the first three months of 2024 from pre-existing contract liabilities at December 31, 2023.

In addition, during 2020, the Company recorded $10,709,000 of long-term deferred revenue associated with a payment received to defray the cost of capital expenditures necessary to service a customer’s future product needs. At March 31, 2024, $6,093,000 was classified as long-term and $2,216,000 was classified as short-term. This deferred revenue is being recognized over the period of the contract and $2,400,000 of revenue has been recognized from the beginning of the contract term through March 31, 2024.

The tables below provide a geographic disaggregation of net sales for the three months ended March 31, 2024 and 2023. The Company’s business disaggregation by geographic region most effectively captures the nature and economic characteristics of the Company’s revenue streams impacted by economic factors.

 

(In thousands)

 

For the Three Months Ended March 31, 2024

 

Geographic Market

 

Surfactants

 

 

Polymers

 

 

Specialty

 

 

Total

 

North America

 

$

229,590

 

 

$

69,809

 

 

$

13,246

 

 

$

312,645

 

Europe

 

 

70,778

 

 

 

63,877

 

 

 

1,835

 

 

 

136,490

 

Latin America

 

 

77,868

 

 

 

417

 

 

 

9

 

 

 

78,294

 

Asia

 

 

12,584

 

 

 

11,405

 

 

 

—

 

 

 

23,989

 

       Total

 

$

390,820

 

 

$

145,508

 

 

$

15,090

 

 

$

551,418

 

 

(In thousands)

 

For the Three Months Ended March 31, 2023

 

Geographic Market

 

Surfactants

 

 

Polymers

 

 

Specialty

 

 

Total

 

North America

 

$

277,140

 

 

$

81,169

 

 

$

17,599

 

 

$

375,908

 

Europe

 

 

91,120

 

 

 

69,057

 

 

 

4,872

 

 

 

165,048

 

Latin America

 

 

81,099

 

 

 

785

 

 

 

10

 

 

 

81,894

 

Asia

 

 

18,470

 

 

 

10,116

 

 

 

—

 

 

 

28,586

 

       Total

 

$

467,828

 

 

$

161,127

 

 

$

22,481

 

 

$

651,436

 

 

15

 

14.
DEBT

At March 31, 2024 and December 31, 2023, debt was comprised of the following:

 

(In thousands)

 

Maturity
Dates

 

March 31,
2024

 

 

December 31,
2023

 

Senior unsecured notes

 

 

 

 

 

 

 

 

3.95% (net of unamortized debt issuance cost
   of $168 and $191 for 2024 and 2023, respectively)

 

2024-2027

 

$

56,975

 

 

$

56,952

 

3.86% (net of unamortized debt issuance cost
   of $81 and $105 for 2024 and 2023, respectively)

 

2024-2025

 

 

28,490

 

 

 

28,466

 

2.30% (net of unamortized debt issuance cost
   of $126 and $142 for 2024 and 2023, respectively)

 

2024-2028

 

 

49,874

 

 

 

49,858

 

2.37% (net of unamortized debt issuance cost
   of $132 and $148 for 2024 and 2023, respectively)

 

2024-2028

 

 

49,868

 

 

 

49,852

 

2.73% (net of unamortized debt issuance cost
   of $149 and $175 for 2024 and 2023, respectively)

 

2025-2031

 

 

99,851

 

 

 

99,825

 

2.83% (net of unamortized debt issuance cost
   of $116 and $134 for 2024 and 2023, respectively)

 

2026-2032

 

 

74,884

 

 

 

74,866

 

Revolving credit facility and term loan borrowing

 

2024

 

 

280,000

 

 

 

283,000

 

Debt of foreign subsidiaries

 

 

 

 

 

 

 

 

Unsecured bank debt, foreign currency

 

2024

 

 

6,040

 

 

 

11,327

 

Total debt

 

 

 

$

645,982

 

 

$

654,146

 

Less current maturities

 

 

 

 

245,861

 

 

 

252,898

 

Long-term debt

 

 

 

$

400,121

 

 

$

401,248

 

The Company's long-term debt financing is comprised of certain senior unsecured notes issued to insurance companies in private placement transactions pursuant to note purchase agreements (the “Note Purchase Agreements”), totaling $359,942,000 as of March 31, 2024. These notes are denominated in U.S. dollars and have fixed interest rates ranging from 2.30 percent to 3.95 percent. The notes had original maturities of seven to 12 years with mandatory principal payments beginning four, five and six years after issuance. The Company will be required to make principal payments on the currently outstanding notes from 2024 to 2032.

The Company's credit agreement (the "Credit Agreement") with a syndicate of banks provides for credit facilities in an initial aggregate principal amount of $450,000,000, consisting of (a) a $350,000,000 multi-currency revolving credit facility and (b) a $100,000,000 delayed draw term loan credit facility, each of which matures on June 24, 2027. The Company maintains import letters of credit, and standby letters of credit under its workers’ compensation insurance agreements and for other purposes, as needed from time to time, which are issued under the revolving credit agreement. As of March 31, 2024, the Company had outstanding letters of credit totaling $10,979,000 and $280,000,000 of outstanding borrowings under the credit agreement, inclusive of a $93,750,000 delayed draw term loan ($6,250,000 of the term loan principal has been permanently repaid as scheduled). There was $152,771,000 available under the credit agreement as of March 31, 2024.

The Company’s material debt agreements contain provisions which, among other covenants, require maintenance of certain financial ratios and place limitations on additional debt, investments and payment of dividends. Based on the loan agreement provisions that place limitations on dividend payments, unrestricted retained earnings (i.e., retained earnings available for dividend distribution) were $240,735,000 and $234,399,000 at March 31, 2024 and December 31, 2023, respectively.

15.
OTHER, NET

Other, net in the condensed consolidated statements of income included the following:

 

(In thousands)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Foreign exchange losses

 

$

(375

)

 

$

(324

)

Investment income

 

 

60

 

 

 

143

 

Realized and unrealized gains on investments

 

 

2,267

 

 

 

1,516

 

Net periodic benefit cost

 

 

410

 

 

 

333

 

Other, net

 

$

2,362

 

 

$

1,668

 

 

16

 

16.
NONCASH INVESTING AND FINANCING ACTIVITIES

Noncash investing activities included liabilities (accounts payable) incurred for property, plant and equipment expenditures of approximately $13,004,000 and $27,061,000 that were unpaid at March 31, 2024 and 2023, respectively. Noncash financing activities included the issuance of 98,146 shares of the Company’s common stock (valued at $8,808,000) and 88,497 shares of the Company’s common stock (valued at $9,607,000) under the Company’s equity incentive compensation plan during the three months ended March 31, 2024 and 2023, respectively.

17.
RECENT ACCOUNTING PRONOUNCEMENTS

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effect of Reference Rate Reform on Financial Reporting. This update provides optional guidance for a limited period of time to ease the burden of implementing the usage of new reference rates. The amendments apply to contract modifications that replace a reference rate affected by reference rate reform and contemporaneous modifications of other contract terms related to the replacement of the reference rate. If elected, the optional expedients to contract modifications must be applied consistently for all eligible contracts or eligible transactions. The original timeframe for electing optional expedients to contract modifications was between March 12, 2020 and December 31, 2022. In December 2022, the FASB issued ASU No. 2022-06 deferring the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The guidance should be applied prospectively. Other than electing select expedients associated with an interest rate swap, the Company has not currently utilized any of the optional expedients of exceptions available under this ASU. The Company will continue to assess whether this ASU is applicable throughout the effective period.

In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements, Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. The amendments in this update represent changes to clarify or improve disclosures and presentation requirements of a variety of topics, including Statement of Cash Flows-Overall (disclosures in annual periods where cash flows associated with derivative instruments and their related gains and losses are presented), Earnings Per Share-Overall (disclosures of the methods used in the diluted earnings-per-share computation for each dilutive security), and Debt-Overall (disclosures of amounts and terms of unused lines of credit and unfunded commitments and the weighted-average interest rate on outstanding short-term borrowings). The amendments in this update are effective two years after the SEC removes related disclosure requirements from Regulation S-X or Regulation S-K. The implementation of ASU No. 2023-06 will not have an impact on the Company’s financial position, results of operations and cash flow, but will impact the Company’s interim and annual disclosures related to the relevant subtopics in this update.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures. This update requires more enhanced and detailed interim and annual disclosures regarding significant segment expenses and other segment items that are regularly provided to the chief operating decision maker. These items include the difference between segment revenue less the segment expenses that have been already disclosed under the significant expense principle and each reported measure of segment profit and loss. These requirements are in addition to the disclosures that are currently required by Topic 280, Segment reporting. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 and should be applied retrospectively to all periods presented in the financial statements. The implementation of ASU No. 2023-07 will not have an impact on the Company’s financial position, results of operations and cash flow but will impact the Company’s interim and annual segment reporting disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income taxes (Topic 740) Improvement to Income Tax Disclosures. This update requires that public entities on an annual basis disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, the amendments in this update require the disclosure on an annual basis of the amount of income taxes paid (net of refund received) disaggregated by federal, state and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid is equal or greater than five percent of total income taxes paid (net of refunds received). This update requires all entities to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. The amendments in this update are effective for annual periods beginning after December 15, 2024 and should be applied on a prospective basis. The implementation of ASU No. 2023-09 will not have an impact on the Company’s financial position, results of operations and cash flow but will impact the Company’s annual income tax disclosures.

The Organisation for Economic Co-operation and Development (OECD) proposed a global minimum tax of 15 percent on reported profits (entitled “Pillar Two”) that has been agreed upon in principle by over 100 countries. During 2023, many countries took steps to incorporate Pillar Two into their domestic laws. Although the OECD’s model provides a framework for applying the minimum tax, countries may enact Pillar Two rules that vary slightly from the model, can adopt a different timeline, and may

17

 

adjust local tax incentives in response to Pillar Two. While it is uncertain whether the U.S. will enact legislation to adopt Pillar Two, certain countries in which the Company operates have enacted such legislation, and other countries are in the process of introducing legislation to implement Pillar Two. The Company does not expect Pillar Two to have a material impact on its financial position, results of operations, cash flow and effective tax rate.

18

 

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is management’s discussion and analysis (MD&A) of certain significant factors that have affected the Company’s financial condition and results of operations during the interim periods included in the accompanying condensed consolidated financial statements.

Certain statements in this Quarterly Report on Form 10-Q, other than purely historical information, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). These statements include statements about Stepan Company’s and its subsidiaries’ (the Company) plans, objectives, strategies, financial performance and outlook, trends, the amount and timing of future cash distributions, prospects or future events and involve known and unknown risks that are difficult to predict. As a result, the Company’s actual financial results, performance, achievements or prospects may differ materially from those expressed or implied by these forward-looking statements. In some cases, forward-looking statements can be identified by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “guidance,” “predict,” “potential,” “continue,” “likely,” “will,” “would,” “should,” “illustrative” and variations of these terms and similar expressions, or the negative of these terms or similar expressions. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by the Company and its management based on their knowledge and understanding of the business and industry, are inherently uncertain. These statements are not guarantees of future performance, and stockholders should not place undue reliance on forward-looking statements. There are a number of risks, uncertainties and other important factors, many of which are beyond the Company’s control, that could cause the Company’s actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q.

Such risks, uncertainties and other important factors, include, among others, the risks, uncertainties and factors set forth under “Part II-Item IA - Risk Factors” of this Quarterly Report on Form 10-Q and under “Part I-Item IA. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, including the risks and uncertainties related to the following:

•
accidents, unplanned production shutdowns or disruptions in any of the Company’s manufacturing facilities;
•
reduced demand for Company products due to customer product reformulations or new technologies;
•
the Company’s inability to successfully develop or introduce new products;
•
compliance with environmental, health and safety, product registration and anti-corruption laws;
•
the Company’s ability to make acquisitions of suitable candidates and successfully integrate acquisitions;
•
global competition and the Company’s ability to successfully compete;
•
volatility of raw material, natural gas and electricity costs as well as any disruption in their supply;
•
disruptions in transportation or significant changes in transportation costs;
•
downturns in certain industries and general economic downturns;
•
international business risks, including fluctuations in currency exchange rates, legal restrictions and taxes;
•
unfavorable resolution of litigation against the Company;
•
the Company’s ability to keep and protect its intellectual property rights;
•
potentially adverse tax consequences due to the international scope of the Company’s operations;
•
downgrades to the Company’s credit ratings or disruptions to the Company’s ability to access well-functioning capital markets;
•
conflicts, military actions, terrorist attacks and general instability, particularly in certain energy-producing nations, along with increased security regulations;
•
cost overruns, delays and miscalculations in capacity needs with respect to the Company’s expansion or other capital projects;
•
interruption of, damage to or compromise of the Company’s IT systems and failure to maintain the integrity of customer, colleague or Company data;
•
the Company’s ability to retain its executive management and other key personnel;
•
the Company’s ability to operate within the limitations of debt covenants; and
•
the other factors set forth under “Risk Factors.”

19

 

These factors are not necessarily all of the important factors that could cause the Company’s actual financial results, performance, achievements or prospects to differ materially from those expressed in or implied by any of its forward-looking statements. Other unknown or unpredictable factors could also impact the Company’s results. All forward-looking statements attributable to the Company or persons acting on the Company’s behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date they are made, and the Company does not undertake or assume any obligation to update publicly any of these forward-looking statements to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements, except to the extent required by applicable laws. If the Company updates one or more forward-looking statements, no inference should be drawn that the Company will make additional updates with respect to those or other forward-looking statements.

The “Company,” “we,” “our” or “us” means Stepan Company and one or more of its subsidiaries only.

Overview

The Company produces and sells intermediate chemicals that are used in a wide variety of applications worldwide. The overall business is comprised of three reportable segments:

Surfactants – Surfactants, which accounted for 71 percent of consolidated net sales for the first three months of 2024, are principal ingredients in consumer and industrial cleaning and disinfection products such as detergents for washing clothes, dishes, carpets, floors and walls, as well as shampoos and body washes. Other applications include fabric softeners, germicidal quaternary compounds, disinfectants, lubricating ingredients, emulsifiers for spreading agricultural products and industrial applications such as latex systems, plastics and composites. Surfactants are manufactured at five sites in the United States, two European sites (United Kingdom and France), five Latin American sites (one site in Colombia and two sites in each of Mexico and Brazil) and two Asian sites (Philippines and Singapore).

Polymers – Polymers, which accounted for 26 percent of consolidated net sales for the first three months of 2024, include polyurethane polyols, polyester resins and phthalic anhydride. Polyurethane polyols are used in the manufacture of rigid foam for thermal insulation in the construction industry and are also a base raw material for coatings, adhesives, sealants and elastomers (collectively, CASE products). Powdered polyester resins are used in coating applications. CASE and powdered polyester resins are collectively referred to as specialty polyols. Phthalic anhydride is used in unsaturated polyester resins, alkyd resins and plasticizers for applications in construction materials and components of automotive, boating and other consumer products. In addition, the Company uses phthalic anhydride internally in the production of polyols. In the United States, polyurethane polyols are manufactured at the Company’s Elwood, Illinois (Millsdale) and Wilmington, North Carolina sites. Phthalic anhydride is manufactured at the Company’s Millsdale site and specialty polyols are manufactured at the Company’s Columbus, Georgia, site. In Europe, polyurethane polyols are manufactured at the Company’s plants in Germany and the Netherlands and specialty polyols are manufactured at the Company’s Poland site. In Asia, polyurethane polyols and specialty polyols are manufactured at the Company’s China plant.

Specialty Products – Specialty products, which accounted for three percent of consolidated net sales for the first three months of 2024, include flavors, emulsifiers and solubilizers used in food, flavoring, nutritional supplement and pharmaceutical applications. Specialty products are primarily manufactured at the Company’s Maywood, New Jersey, site and, in some instances, by third-party contractors.

Deferred Compensation Plans

The accounting for the Company’s deferred compensation plans can cause period-to-period fluctuations in Company income and expenses. Compensation expense is recognized when the value of the Company's common stock and mutual fund investment assets held for the plans increase, and compensation income is recognized when the value of the Company's common stock and mutual fund investment assets decline. The pretax effect of all deferred compensation-related activities (including realized and unrealized gains and losses on the mutual fund assets held to fund the deferred compensation obligations) and the income statement line items in which the effects of the activities were recorded are displayed in the following table:

 

 

 

Income (Expense)

 

 

 

 

 

 

 

For the Three Months
Ended March 31,

 

 

 

 

 

(In millions)

 

2024

 

 

2023

 

 

Change

 

 

Deferred Compensation (Administrative expenses)

 

$

(1.8

)

 

$

(1.5

)

 

$

(0.3

)

(1)

Realized/Unrealized Gains on Investments (Other, net)

 

 

2.2

 

 

 

1.5

 

 

 

0.7

 

 

Investment Income (Other, net)

 

 

0.1

 

 

 

0.1

 

 

 

—

 

 

Pretax Income Effect

 

$

0.5

 

 

$

0.1

 

 

$

0.4

 

 

 

(1)
See the Segment Results-Corporate Expenses section of this MD&A for details regarding the period-over-period changes in deferred compensation.

20

 

Effects of Foreign Currency Translation

The Company’s foreign subsidiaries transact business and report financial results in their respective local currencies. As a result, foreign subsidiary income statements are translated into U.S. dollars at average foreign exchange rates appropriate for the reporting period. Because foreign exchange rates fluctuate against the U.S. dollar over time, foreign currency translation affects period-to-period comparisons of financial statement items (i.e., because foreign exchange rates fluctuate, similar period-to-period local currency results for a foreign subsidiary may translate into different U.S. dollar results). The following table presents the effects that foreign currency translation had on the period-over-period changes in consolidated net sales and various income statement line items for the three months ended March 31, 2024 and 2023:

 

 

 

For the Three Months
Ended March 31,

 

 

 

 

 

 

 

(In millions)

 

2024

 

 

2023

 

 

Decrease

 

 

Increase
Due to Foreign
Translation

 

Net Sales

 

$

551.4

 

 

$

651.4

 

 

$

(100.0

)

 

$

11.8

 

Gross Profit

 

 

70.3

 

 

 

73.6

 

 

 

(3.3

)

 

 

1.3

 

Operating Income

 

 

20.2

 

 

 

21.1

 

 

 

(0.9

)

 

 

0.7

 

Pretax Income

 

 

19.5

 

 

 

19.9

 

 

 

(0.4

)

 

 

0.6

 

RESULTS OF OPERATIONS

Three Months Ended March 31, 2024 and 2023

Summary

Net income in the first quarter of 2024 was $13.9 million, or $0.61 per diluted share, versus $16.1 million, or $0.70 per diluted share, in the first quarter of 2023. Adjusted net income was $14.7 million, or $0.64 per diluted share, versus $16.4 million, or $0.71 per diluted share in the first quarter of 2023 (see the “Reconciliation of Non-GAAP Adjusted Net Income and Diluted Earnings per Share” section of this MD&A for a reconciliation between reported net income and reported earnings per diluted share and non-GAAP adjusted net income and adjusted earnings per diluted share). Earnings before interest, taxes, depreciation and amortization (EBITDA) was $50.2 million in the first quarter of 2024 versus $48.3 million in the first quarter of 2023. Adjusted EBITDA was $51.2 million, up five percent, versus $48.7 million in the first quarter of 2023 (see the "Reconciliation of non-GAAP EBITDA and Adjusted EBITDA" section of this MD&A for a reconciliation between reported operating income and non-GAAP EBITDA and adjusted EBITDA). Below is a summary discussion of the major factors leading to the changes in net sales, expenses and income in the first quarter of 2024 compared to the first quarter of 2023. A detailed discussion of segment operating performance for the first quarter of 2024 compared to the first quarter of 2023 follows the summary.

Consolidated net sales decreased $100.0 million, or 15 percent, versus the prior year quarter. Lower average selling prices negatively impacted the year-over-year change in net sales by $115.5 million. The decrease in average selling prices was mainly attributable to the pass-through of lower raw material costs, less favorable product mix and increased competitive activity primarily within the European and Latin American end-markets. Consolidated sales volume increased one percent, which favorably impacted the change in net sales by $3.7 million. Surfactant sales volume was flat year-over-year while sales volume in the Polymer and Specialty Products segments increased one percent and 11 percent, respectively. Foreign currency translation favorably impacted the year-over-year change in net sales by $11.8 million due to a weaker U.S. dollar against most currencies in foreign locations where the Company has operations.

Operating income in the first quarter of 2024 decreased $0.9 million, or four percent, versus operating income in the first quarter of 2023. Surfactant and Polymer operating income decreased $1.0 million and $1.6 million, respectively, versus the first quarter of 2023. Specialty Products operating income increased $1.7 million versus the first quarter of 2023. Corporate expenses, including business restructuring, environmental remediation and deferred compensation expenses were flat year-over-year. Corporate expenses, excluding business restructuring, environmental remediation and deferred compensation expenses, decreased $1.2 million, or seven percent year-over-year. Foreign currency translation had a $0.7 million favorable impact on operating income in the first quarter of 2024 versus the prior year.

Operating expenses (including deferred compensation and business restructuring) decreased $2.4 million, or five percent, versus the prior year quarter. Changes in the individual income statement line items that comprise the Company’s operating expenses were as follows:

•
Selling expenses decreased $1.7 million, or 13 percent, primarily due to lower salaries, travel-related and bad debt expenses.
•
Administrative expenses were flat year-over-year. Lower salaries and hiring-related expenses were offset by higher environmental reserve expenses. The higher environmental expense reflects a reserve adjustment for environmental costs related to property formerly owned and operated by the Company in Wilmington, Massachusetts.

21

 

•
Research, development and technical service (R&D) expenses decreased $0.9 million, or six percent, primarily due to lower salaries.
•
Deferred compensation was $1.8 million of expense in the first quarter of 2024 versus $1.5 million of expense in the prior year quarter. The $0.3 million increase in deferred compensation expense was primarily due to a larger increase in the market value of mutual fund investment assets held for the plans during the first quarter of 2024 versus the first quarter of 2023. See the Overview and Segment Results-Corporate Expenses section of this MD&A for further details.

Net interest expense for the first quarter of 2024 increased $0.2 million, or nine percent, versus the first quarter of 2023. This increase was primarily attributable to higher interest rates on borrowings under the Company's revolving credit facility during the first quarter of 2024 versus 2023, partially offset by higher capitalized interest and non-U.S. interest income.

Other, net was $2.4 million of income in the first quarter of 2024 versus $1.7 million of income in the first quarter of 2023. The Company recognized $2.3 million of investment income (including realized and unrealized gains and losses) for the Company’s deferred compensation and supplemental defined contribution mutual fund assets in the first quarter of 2024 compared to $1.7 million of investment income in the first quarter of 2023. The Company's net periodic pension income was $0.4 million in the first quarter of 2024 versus $0.3 million of income in the first quarter of 2023. In addition, the Company reported $0.4 million of foreign exchange losses in the first quarter of 2024 versus $0.3 million of foreign exchange losses in the first quarter of 2023.

The Company’s effective tax rate was 28.6 percent in the first quarter of 2024 versus 18.9 percent in the first quarter of 2023. The increase was primarily attributable to the Company’s intention to elect “Bonus Depreciation” for its new alkoxylation facility that is being built in Pasadena, Texas and expected to start up in the fourth quarter of 2024. As a result of this election, the Company is expected to lose its ability to use its global intangible low-taxed income (GILTI) deduction and related GILTI foreign tax credits for 2024, resulting in a higher effective tax rate. The Organisation for Economic Co-operation and Development (OECD) has proposed a global minimum tax of 15 percent on reported profits (entitled "Pillar Two"). The Company does not expect Pillar Two to have a material impact on its financial position, results of operations, cash flow and effective tax rate.

Segment Results

 

(Dollars in thousands)

 

For the Three Months
Ended March 31,

 

 

 

 

 

 

 

Net Sales

 

2024

 

 

2023

 

 

Decrease

 

 

Percent
Change

 

Surfactants

 

$

390,820

 

 

$

467,828

 

 

$

(77,008

)

 

 

-16

 

Polymers

 

 

145,508

 

 

 

161,127

 

 

 

(15,619

)

 

 

-10

 

Specialty Products

 

 

15,090

 

 

 

22,481

 

 

 

(7,391

)

 

 

-33

 

Total Net Sales

 

$

551,418

 

 

$

651,436

 

 

$

(100,018

)

 

 

-15

 

 

(Dollars in thousands)

 

For the Three Months
Ended March 31,

 

 

 

 

 

 

 

Operating Income

 

2024

 

 

2023

 

 

Increase
(Decrease)

 

 

Percent
Change

 

Surfactants

 

$

26,079

 

 

$

27,056

 

 

$

(977

)

 

 

-4

 

Polymers

 

 

8,382

 

 

 

10,004

 

 

 

(1,622

)

 

 

-16

 

Specialty Products

 

 

4,268

 

 

 

2,530

 

 

 

1,738

 

 

 

69

 

  Segment Operating Income

 

$

38,729

 

 

$

39,590

 

 

$

(861

)

 

 

-2

 

Corporate Expenses, Excluding Deferred Compensation
  and Restructuring

 

$

16,782

 

 

$

16,874

 

 

$

(92

)

 

 

-1

 

Deferred Compensation Expense

 

 

1,778

 

 

 

1,502

 

 

 

276

 

 

 

18

 

Business Restructuring

 

 

-

 

 

 

157

 

 

 

(157

)

 

 

-100

 

Total Operating Income

 

$

20,169

 

 

$

21,057

 

 

$

(888

)

 

 

-4

 

 

22

 

Surfactants

Surfactant net sales for the first quarter of 2024 decreased $77.0 million versus net sales for the first quarter of 2023. Lower average selling prices negatively impacted the change in net sales by $85.6 million. The lower average selling prices were mainly attributable to declining raw material costs, less favorable product mix and increased competitive activity within the European and Latin American end-markets. Sales volume was relatively flat year-over-year and positively impacted the change in net sales by $0.9 million. Foreign currency translation had a $7.7 million favorable impact on the year-over-year change in net sales. A comparison of net sales by region follows:

 

(Dollars in thousands)

 

For the Three Months
Ended March 31,

 

 

 

 

 

 

 

Net Sales

 

2024

 

 

2023

 

 

Decrease

 

 

Percent
Change

 

North America

 

$

229,590

 

 

$

277,139

 

 

$

(47,549

)

 

 

-17

 

Europe

 

 

70,778

 

 

 

91,120

 

 

 

(20,342

)

 

 

-22

 

Latin America

 

 

77,868

 

 

 

81,099

 

 

 

(3,231

)

 

 

-4

 

Asia

 

 

12,584

 

 

 

18,470

 

 

 

(5,886

)

 

 

-32

 

Total Surfactants Segment

 

$

390,820

 

 

$

467,828

 

 

$

(77,008

)

 

 

-16

 

Net sales for North American operations decreased $47.5 million, or 17 percent, year-over-year. Lower average selling prices had a $32.5 million unfavorable impact on the change in net sales and were primarily due to the pass-through of lower raw material costs and less favorable product mix. Sales volume declined five percent and negatively impacted the change in net sales by $15.0 million. The lower sales volume was primarily due to lower demand for products sold into the agricultural end market due to continued customer and channel inventory destocking. Higher demand for products sold into the personal care end markets, driven by prior year investments in low 1,4 dioxane, along with higher demand in the industrial cleaning and oil field end markets partially offset the lower agricultural demand.

Net sales for European operations decreased $20.3 million, or 22 percent, primarily due to lower average selling prices that negatively impacted the change in net sales by $22.2 million. The lower average selling prices were primarily due to the pass-through of lower raw material costs, less favorable product mix and increased competitive activity within certain end-use markets. Foreign currency translation positively impacted the change in net sales by $1.5 million. A weaker U.S. dollar relative to the European euro and British pound sterling led to the favorable foreign currency translation effect. Sales volume was up slightly year-over-year and positively impacted the change in net sales by $0.4 million. Higher demand for products sold to our distribution partners and into the industrial cleaning and personal care end markets was mostly offset by lower demand for products sold into the agricultural and the laundry and cleaning end markets.

Net sales for Latin American operations decreased $3.2 million, or four percent, primarily due to lower average selling prices that negatively impacted the change in net sales by $22.9 million. The lower average selling prices primarily reflect less favorable product mix, the pass-through of lower raw material costs and increased competitive pressures from imports. Sales volume increased 16 percent and positively impacted the change in net sales by $13.3 million. The sales volume improvement was primarily due to higher demand for products sold into the consumer products end markets and to our distribution customers, partially offset by lower demand for products sold into the agricultural and industrial cleaning end markets. A weaker U.S. dollar relative to all currencies within the region led to an $6.4 million positive foreign currency translation effect.

Net sales for Asian operations decreased $5.9 million, or 32 percent, versus the prior year quarter. A 17 percent decline in sales volume and lower average selling prices negatively impacted the change in net sales by $3.1 million and $2.6 million, respectively. Foreign currency translation negatively impacted the change in net sales by $0.2 million.

23

 

Surfactant operating income for the first quarter of 2024 decreased $1.0 million, or four percent, versus operating income for the first quarter of 2023. Gross profit decreased $2.4 million, or five percent, and operating expenses decreased $1.5 million, or six percent. Comparisons of gross profit by region and total segment operating expenses and operating income follow:

 

(Dollars in thousands)

 

For the Three Months
Ended March 31,

 

 

 

 

 

 

 

Gross Profit and Operating Income

 

2024

 

 

2023

 

 

Increase
(Decrease)

 

 

Percent
Change

 

North America

 

$

31,368

 

 

$

35,213

 

 

$

(3,845

)

 

 

-11

 

Europe

 

 

8,322

 

 

 

10,220

 

 

 

(1,898

)

 

 

-19

 

Latin America

 

 

8,766

 

 

 

7,172

 

 

 

1,594

 

 

 

22

 

Asia

 

 

1,986

 

 

 

283

 

 

 

1,703

 

 

NM

 

Surfactants Segment Gross Profit

 

$

50,442

 

 

$

52,888

 

 

$

(2,446

)

 

 

-5

 

Operating Expenses

 

 

24,363

 

 

 

25,832

 

 

 

(1,469

)

 

 

-6

 

Surfactants Segment Operating Income

 

$

26,079

 

 

$

27,056

 

 

$

(977

)

 

 

-4

 

Gross profit for North American operations decreased $3.8 million, or 11 percent, versus the prior year primarily due to lower average unit margins and a five percent decline in sales volume. These items negatively impacted the year-over-year change in gross profit by $1.9 million each. The lower average unit margins were primarily attributable to less favorable product mix, higher pre-operating expenses associated with the alkoxylation production facility that is being built in Pasadena, Texas and higher expenses incurred at the Company's Millsdale, Illinois plant site, inclusive of waste water disposal costs, due to operational interruptions during the first quarter of 2024.

Gross profit for European operations decreased $1.9 million, or 19 percent, primarily due to lower average unit margins that negatively impacted the year-over-year change in gross profit by $2.0 million. The lower average unit margins primarily reflect less favorable product mix and increased competitive activity within certain end-use markets. Foreign currency translation positively impacted the change in gross profit by $0.1 million.

Gross profit for Latin American operations increased $1.6 million, or 22 percent, primarily due to the 16 percent increase in sales volume and the favorable impact of foreign currency translation. These items positively impacted the year-over-year change in gross profit by $1.2 million and $0.7 million, respectively. Lower average unit margins negatively impacted the change in gross profit by $0.3 million and primarily reflect a less favorable product mix and competitive pricing pressures from imports.

Gross profit for Asia operations increased $1.7 million year-over-year due to higher average unit margins. The higher average unit margins reflect a more favorable product mix and lower overhead costs due to the timing of production runs.

Operating expenses for the Surfactants segment decreased $1.5 million, or six percent, in the first quarter of 2024 versus the first quarter of 2023. This decrease was mostly attributable to lower salaries, travel-related and bad debt expenses.

Polymers

Polymers net sales for the first quarter of 2024 decreased $15.6 million, or 10 percent, versus net sales for the same period of 2023. Lower average selling prices negatively impacted the change in net sales by $22.0 million. Foreign currency translation and a one percent increase in sales volume positively impacted the change in net sales by $4.1 million and $2.3 million, respectively. A comparison of net sales by region follows:

(Dollars in thousands)

 

For the Three Months
Ended March 31,

 

 

 

 

 

 

 

Net Sales

 

2024

 

 

2023

 

 

Increase
(Decrease)

 

 

Percent
Change

 

North America

 

$

69,809

 

 

$

81,169

 

 

$

(11,360

)

 

 

-14

 

Europe

 

 

63,877

 

 

 

69,057

 

 

 

(5,180

)

 

 

-8

 

Asia and Other

 

 

11,822

 

 

 

10,901

 

 

 

921

 

 

 

8

 

Total Polymers Segment

 

$

145,508

 

 

$

161,127

 

 

$

(15,619

)

 

 

-10

 

Net sales for North American operations decreased $11.4 million, or 14 percent, due to lower average selling prices and a five percent decrease in sales volume. These items negatively impacted the year-over-year change in net sales by $7.6 million and $3.8 million, respectively. The lower average selling prices primarily reflect the pass-through of lower raw material costs. Sales volume of polyols used in rigid foam applications increased five percent year-over-year but was more than offset by a 43 percent decline within the commodity phthalic anhydride business due largely to operational interruptions at the Millsdale, Illinois plant during the first quarter of 2024.

24

 

Net sales for European operations decreased $5.2 million, or eight percent, versus the first three months of 2023. This decrease was primarily due to lower average selling prices that negatively impacted the year-over-year change in net sales by $12.8 million. The lower average selling prices were primarily due to the pass-through of lower raw material costs and increased competitive activity. Foreign currency translation and a four percent increase in sales volume positively impacted the change in net sales by $4.7 million and $2.9 million, respectively. A weaker U.S. dollar relative to the Polish zloty and British pound sterling led to the favorable foreign currency translation effect.

Net sales for Asia and Other operations increased $0.9 million, or eight percent, primarily due to a 16 percent increase in sales volume which positively impacted the year-over-year change in net sales by $1.7 million. The higher sales volume was largely driven by the non-recurrence of COVID lock downs and restrictions that were in place in China during the first quarter of 2023 and higher demand in specialty polyols resulting from the Company's product diversification efforts. The unfavorable impact of foreign currency translation and lower average selling prices negatively impacted the year-over-year change in net sales by $0.6 million and $0.2 million, respectively.

Polymer operating income in the first quarter of 2024 decreased $1.6 million, or 16 percent, versus operating income in the first quarter of 2023. Gross profit decreased $2.2 million, or 13 percent and operating expenses decreased $0.6 million or nine percent between years. Comparisons of gross profit by region and total segment operating expenses and operating income follow:

 

(Dollars in thousands)

 

For the Three Months
Ended March 31,

 

 

 

 

 

 

 

Gross Profit and Operating Income

 

2024

 

 

2023

 

 

Increase
(Decrease)

 

 

Percent
Change

 

North America

 

$

4,643

 

 

$

6,144

 

 

$

(1,501

)

 

 

-24

 

Europe

 

 

9,022

 

 

 

10,312

 

 

 

(1,290

)

 

 

-13

 

Asia and Other

 

 

1,411

 

 

 

867

 

 

 

544

 

 

 

63

 

Polymers Segment Gross Profit

 

$

15,076

 

 

$

17,323

 

 

$

(2,247

)

 

 

-13

 

Operating Expenses

 

 

6,694

 

 

 

7,319

 

 

 

(625

)

 

 

-9

 

Polymers Segment Operating Income

 

$

8,382

 

 

$

10,004

 

 

$

(1,622

)

 

 

-16

 

 

Gross profit for North American operations decreased $1.5 million, or 24 percent, due to lower average unit margins and the five percent decline in sales volume. These items negatively impacted the change in gross profit by $1.2 million and $0.3 million, respectively. The lower average unit margins largely reflect higher maintenance, tolling fees and waste water disposal costs incurred at the Company's Millsdale, Illinois plant site due to operational interruptions during the first quarter of 2024.

Gross profit for European operations decreased $1.3 million, or 13 percent, versus the first quarter of 2023. The decrease was primarily due to lower average unit margins that negatively impacted the change in gross profit by $2.2 million. Foreign currency translation and a four percent increase in sales volume positively impacted the year-over-year change in gross profit by $0.5 million and $0.4 million, respectively.

Gross profit for Asia and Other operations increased $0.5 million, or 63 percent, primarily due to higher average unit margins and a 16 percent increase in sales volume. These items positively impacted the change in gross profit by $0.5 million and $0.1 million, respectively. The unfavorable impact of foreign currency translation negatively impacted the year-over-year change in gross profit by $0.1 million.

Operating expenses for the Polymer segment decreased $0.6 million, or nine percent, in the first quarter of 2024 versus the first quarter of 2023. This decrease was mainly attributable to lower salary expenses.

Specialty Products

Specialty Products net sales for the first quarter of 2024 decreased $7.4 million, or 33 percent, versus net sales for the first quarter of 2023. The decrease was due to lower average selling prices that more than offset an 11 percent increase in sales volume. Gross profit and operating income increased by $1.6 million and $1.7 million, respectively, year-over-year. The year-over-year increases in gross profit and operating income were mostly attributable to higher unit margins and sales volume within the medium chain triglycerides (MCT) product line.

25

 

Corporate Expenses

Corporate expenses, which include deferred compensation, business restructuring and other operating expenses that are not allocated to the reportable segments, were relatively flat year-over-year. Corporate expenses were $18.6 million in the first quarter of 2024 versus $18.5 million in the first quarter of 2023. Deferred compensation and environmental reserve expenses were up $0.3 million and $1.1 million, respectively, year-over-year. The higher environmental reserve expense reflects a reserve adjustment for environmental costs related to property formerly owned and operated by the Company in Wilmington, Massachusetts. These higher expenses were mostly offset by lower salaries and hiring-related expenses due to productivity efforts implemented in late 2023.

The $0.3 million increase in deferred compensation expense was primarily due to a larger increase in the market value of mutual fund investment assets held for the plans in the first quarter of 2024 versus the first quarter of 2023. This increase was partially offset by a $4.51 per share decrease in the market price of the Company's common stock in the first quarter of 2024 compared to a $3.43 per share decrease in the first quarter of 2023. The following table presents the quarter-end Company common stock market prices used in the computation of deferred compensation income/expense for the three months ended March 31, 2024 and 2023:

 

 

 

2024

 

 

2023

 

 

2022

 

 

 

March 31

 

 

December 31

 

 

March 31

 

 

December 31

 

Company Common Stock Price

 

$

90.04

 

 

$

94.55

 

 

$

103.03

 

 

$

106.46

 

 

LIQUIDITY AND CAPITAL RESOURCES

Overview

For the three months ended March 31, 2024, operating activities were a cash source of $41.6 million versus a cash use of $72.1 million for the comparable period in 2023. For the first three months of 2024, investing cash outflows totaled $24.4 million versus cash outflows of $90.3 million in the prior year period. Financing activities were a cash use of $20.0 million versus a cash source of $113.5 million in the prior year period.

Cash and cash equivalents decreased $4.0 million compared to December 31, 2023, inclusive of a $1.2 million unfavorable foreign exchange rate impact. On March 31, 2024, the Company's cash and cash equivalents totaled $125.8 million. Cash in U.S. demand deposit accounts totaled $2.7 million. The Company’s non-U.S. subsidiaries held $123.1 million of cash as of March 31, 2024.

Operating Activities

Net income during the first three months of 2024 decreased $2.2 million versus the comparable period in 2023. Working capital was a cash use of $2.8 million during the first three months of 2024 versus a cash use of $109.9 million in the comparable period in 2023.

Accounts receivable were a cash use of $26.0 million during the first three months of 2024 compared to a cash use of $40.4 million for the comparable period in 2023. Inventories were a cash source of $3.2 million in 2024 versus a cash source of $38.3 million in 2023. Accounts payable and accrued liabilities were a cash source of $26.0 million in 2024 compared to a cash use of $98.5 million for the same period in 2023.

Working capital requirements were lower in the first three months of 2024 compared to 2023 primarily due to the changes noted above. The change in accounts receivable working capital primarily reflects lower selling prices due to the pass through of lower raw material costs. The change in inventories reflects unit costs dropping less significantly during the first quarter of 2024 versus 2023. The change in accounts payable and accrued liabilities was due in large part to lower first quarter 2024 cash outlays required to meet lower incentive-based compensation, tax and other year-end obligations closely linked to lower 2023 earnings. It is management’s opinion that the Company’s liquidity is sufficient to provide for potential increases in working capital requirements during 2024.

Investing Activities

Cash used for investing activities decreased $65.9 million year-over-year. Cash used for capital expenditures was $30.2 million in the first three months of 2024 versus $92.2 million in the same period of 2023. The lower capital spending in 2024 was largely attributable to reduced spending required to complete construction of the alkoxylation plant the Company is building at its Pasadena, Texas site.

For 2024, the Company estimates that total capital expenditures will be in the range of $120.0 million to $140.0 million. This full year projected spending includes completion of the new alkoxylation plant that is being built in Pasadena, Texas, along with growth initiatives, infrastructure and optimization initiatives.

Financing Activities

Cash flow from financing activities was a use of $20.0 million in 2024 versus a source of $113.5 million in 2023. The year-over-year change was primarily due to a lower level of borrowings against the Company's revolving credit facility.

26

 

The Company purchases shares of its common stock in the open market or from its benefit plans from time to time to fund its own benefit plans and to mitigate the dilutive effect of new shares issued under its compensation plans. The Company may, from time to time, seek to purchase additional amounts of its outstanding equity and/or retire debt securities through cash purchases and/or exchanges for other securities, in open market purchases, privately negotiated transactions or otherwise, including pursuant to plans meeting the requirements of Rule 10b5-1 promulgated by the SEC. Such repurchases or exchanges, if any, will depend on prevailing market conditions, the Company’s liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. The Company did not purchase any shares of its common stock on the open market during the three months ended March 31, 2024. At March 31, 2024, the Company had $125.1 million remaining under the share repurchase program authorized by its Board of Directors.

Debt and Credit Facilities

Consolidated balance sheet debt decreased from $654.1 million on December 31, 2023 to $646.0 million on March 31, 2024, primarily due to lower domestic borrowings from the Company’s revolving credit facility and lower foreign credit line borrowings. Net debt (which is defined as total debt minus cash – see the “Reconciliation of Non-GAAP Net Debt” section of this MD&A) decreased $4.1 million, from $524.3 million at December 31, 2023 to $520.2 million at March 31, 2024. This change reflects a debt decrease of $8.1 million and a cash decrease of $4.0 million.

As of March 31, 2024, the ratio of net debt to net debt plus shareholders’ equity was 30.0 percent versus 30.1 percent at December 31, 2023 (see the “Reconciliation of Non-GAAP Net Debt” section in this MD&A for further details). On March 31, 2024, the Company’s debt included $359.9 million of unsecured notes, with maturities ranging from 2024 through 2032, that were issued to insurance companies in private placement transactions pursuant to note purchase agreements (the “Note Purchase Agreements”), a $93.8 million delayed draw term loan borrowed pursuant to the Company's credit agreement, $186.2 million of short term loans borrowed under the Company's revolving credit facility and $6.0 million of foreign credit line borrowings. The proceeds from the note issuances have been the Company’s primary source of long-term debt financing and are supplemented by borrowings under bank credit facilities to meet short and medium-term liquidity needs.

The Company's credit agreement with a syndicate of banks provides for credit facilities in an initial aggregate principal amount of $450.0 million, consisting of (a) a $350.0 million multi-currency revolving credit facility and (b) a $100.0 million delayed draw term loan credit facility, each of which matures on June 24, 2027. The Company maintains import letters of credit, and standby letters of credit under its workers’ compensation insurance agreements and for other purposes, as needed from time to time, which are issued under the revolving credit agreement. As of March 31, 2024, the Company had outstanding loans totaling $280.0 million, inclusive of a $93.8 million delayed draw term loan, and letters of credit totaling $11.0 million under the credit agreement, with $152.8 million remaining available.

The Company anticipates that cash from operations, committed credit facilities and cash on hand will be sufficient to fund anticipated capital expenditures, working capital, dividends and other planned financial commitments for the foreseeable future.

Certain foreign subsidiaries of the Company maintain short-term bank lines of credit in their respective local currencies to meet working capital requirements as well as to fund capital expenditures and acquisitions. At March 31, 2024, the Company’s foreign subsidiaries had $6.0 million of outstanding debt.

The Company is subject to covenants under its material debt agreements that require the maintenance of minimum interest coverage and minimum net worth. These debt covenants also limit the incurrence of additional debt as well as the payment of dividends and repurchase of shares. Under the most restrictive of these debt covenants:

1.

The Company is required to maintain a minimum interest coverage ratio, as defined within the agreements, of 3.50 to 1.00, for the preceding four calendar quarters.

2.

The Company is required to maintain an existing maximum net leverage ratio, as defined within the agreements, not to exceed 4.00 to 1.00.

3.

The Company is required to maintain net worth of at least $750.0 million.

 

4.

The Company is permitted to pay dividends and purchase treasury shares after June 24, 2022, in amounts of up to $100.0 million plus 100 percent of net income and cash proceeds of stock option exercises, measured cumulatively beginning January 1, 2022. The maximum amount of dividends that could have been paid within this limitation is disclosed as unrestricted retained earnings in Note 14, Debt, of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q).

The Company believes it was in compliance with the covenants under its material debt agreements as of March 31, 2024.

27

 

ENVIRONMENTAL AND LEGAL MATTERS

The Company’s operations are subject to extensive federal, state and local environmental laws and regulations and similar laws in the other countries in which the Company does business. Although the Company's environmental policies and practices are designed to ensure compliance with these laws and regulations, future developments and increasingly stringent environmental regulation may require the Company to make additional unforeseen environmental expenditures. The Company will continue to invest in the equipment and facilities necessary to comply with existing and future regulations. During the first three months of 2024 and 2023, the Company’s expenditures for capital projects related to environmental matters were $1.5 million for both years. These projects are capitalized and depreciated over their estimated useful lives, which are typically 10 years. Recurring costs associated with the operation and maintenance of facilities for waste treatment and disposal and managing environmental compliance in ongoing operations at the Company’s manufacturing locations were $10.8 million and $8.9 million for the three months ended March 31, 2024 and 2023, respectively.

Over the years, the Company has received requests for information related to or has been named by the government as a potentially responsible party at a number of waste disposal sites where cleanup costs have been or may be incurred under CERCLA and similar state or foreign statutes. In addition, the Company is from time to time involved in routine legal proceedings incidental to the conduct of its business, including personal injury, property damage, tax, trade and labor matters. The Company believes that it has made adequate provisions for the costs it is likely to incur with respect to these claims. It is the Company’s accounting policy to record liabilities when environmental assessments, remediation expenses or legal proceeding losses are probable, and the cost or range of possible costs can be reasonably estimated. When no amount within the range is a better estimate than any other amount, the minimum is accrued. Estimating the possible costs of environmental remediation requires making assumptions related to the nature and extent of contamination and the methods and resulting costs of remediation. Some of the factors on which the Company bases its estimates include information provided by decisions rendered by State and Federal environmental regulatory agencies, information provided by feasibility studies, and remedial action plans developed. After partial remediation payments at certain sites, the Company has estimated a range of possible environmental and legal losses of $20.8 million to $49.8 million at March 31, 2024 and $20.6 million to $49.4 million at December 31, 2023. Within the range of possible environmental and legal losses, management has currently concluded that no single amount is more likely to occur than any other amounts in the range and, thus, has accrued at the lower end of the range. The Company's environmental and legal accruals totaled $20.8 million at March 31, 2024 and $20.6 million at December 31, 2023. Because the liabilities accrued are estimates, actual amounts could differ materially from the amounts reported. Cash expenditures related to environmental remediation and certain other legal matters approximated $1.6 million for the three months ended March 31, 2024, compared to $3.5 million for the same period in 2023.

For certain sites, the Company has responded to information requests made by federal, state or local government agencies but has received no response confirming or denying the Company’s stated positions. As such, estimates of the total costs, or range of possible costs, of remediation, if any, or the Company’s share of such costs, if any, cannot be determined with respect to these sites. Consequently, the Company is unable to predict the effect thereof on the Company’s financial position, cash flows and results of operations. Based on the Company’s present knowledge with respect to its involvement at these sites, the possibility of other viable entities’ responsibilities for cleanup, and the extended period over which any costs would be incurred, management believes that the Company has no material liability at these sites and that these matters, individually and in the aggregate, will not have a material effect on the Company’s financial position. Certain of these matters are discussed in Item 1, Part 2, of the Company’s Annual Report on Form 10-K, Legal Proceedings, in this report and in other filings of the Company with the SEC, which are available upon request from the Company. See also Note 8, Contingencies, in the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q) for a summary of the significant environmental proceedings related to certain environmental sites.

28

 

OUTLOOK

Management believes sales volumes will continue to gradually improve due to ongoing recovery in Rigid Polyols demand and growth in Surfactant sales volumes, inclusive of the expected recovery of the agricultural business in the second half of the year. Management remains focused on delivering $50.0 million in pre-tax savings from its previously shared cost reduction program to help offset inflationary pressures, increased expenses associated with the commissioning of the Company's new Pasadena, Texas alkoxylation assets, higher incentive-based compensation expenses and expenses associated with operational issues at the Company's Millsdale site. Management believes free cash flow should continue to improve versus prior year as the Company finishes construction on its Pasadena investment and benefits from higher anticipated agricultural sales volumes in the second half of the year. Management believes continued gradual sales volume growth, improved operational performance and its continued focus on cost reduction should position the Company to deliver full year adjusted EBITDA growth and positive free cash flow in 2024. Management remains confident in the Company's long-term growth and innovation initiatives.

CRITICAL ACCOUNTING POLICIES

There have been no material changes to the critical accounting policies disclosed in the Company’s 2023 Annual Report on Form 10-K.

NON-GAAP RECONCILIATIONS

The Company believes that certain non-GAAP measures, when presented in conjunction with comparable GAAP measures, are useful for evaluating the Company’s performance and financial condition. Internally, the Company uses this non-GAAP information as an indicator of business performance and evaluates management’s effectiveness with specific reference to these indicators. Management uses these non-GAAP financial measures to assist in analyzing what management views as the Company’s core operating performance for purposes of business decision making. Management believes that presenting these non-GAAP financial measures provides investors with useful supplemental information because they (i) provide meaningful supplemental information regarding financial performance by excluding items affective comparability between periods, (ii) permit investors to view performance using the same tools that management uses to budget, make operating and strategic decisions and evaluate the Company’s core operating performance across periods, and (iii) otherwise provide supplemental information that may be useful to investors in evaluating the Company’s financial results. In addition, the Company believes that the presentation of these non-GAAP financial measures, when considered together with the most directly comparable GAAP financial measures and the reconciliations to those GAAP financial measures, provides investors with additional tools to understand the factors and trends affective the Company’s underlying business than could be obtained absent these disclosures. These measures should be considered in addition to, not as substitutes for or superior to, measures of financial performance prepared in accordance with GAAP and there are limitations to using non-GAAP financial measures. For example, the non-GAAP financial measures presented in this Form 10-Q may differ from similarly titled non-GAAP financial measures presented by other companies and other companies may not define these non-GAAP financial measures the same way as the Company does.

Reconciliation of Non-GAAP Adjusted Net Income and Earnings Per Share

Management uses the non-GAAP adjusted net income metrics to evaluate the Company’s operating performance. Management excludes the items listed in the table below because they are non-operational items. The cumulative tax effect was calculated using the statutory tax rates for the jurisdictions in which the noted transactions occurred.

 

 

 

Three Months Ended

 

(In millions, except per share amounts)

 

March 31, 2024

 

 

March 31, 2023

 

 

 

Net Income

 

 

Diluted EPS

 

 

Net Income

 

 

Diluted EPS

 

Net Income Attributable to the Company as Reported

 

$

13.9

 

 

$

0.61

 

 

$

16.1

 

 

$

0.70

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred Compensation Income (including
   related investment activity)

 

 

(0.5

)

 

 

(0.02

)

 

 

(0.1

)

 

 

—

 

Business Restructuring Expense

 

 

—

 

 

 

—

 

 

 

0.1

 

 

 

—

 

Environmental Remediation Expense

 

 

1.5

 

 

 

0.06

 

 

 

0.4

 

 

 

0.01

 

Cumulative Tax Effect on Above Adjustment Items

 

 

(0.2

)

 

 

(0.01

)

 

 

(0.1

)

 

 

—

 

Adjusted Net Income

 

$

14.7

 

 

$

0.64

 

 

$

16.4

 

 

$

0.71

 

 

29

 

Reconciliation of Non-GAAP EBITDA and Adjusted EBITDA

Management uses the non-GAAP EBITDA and adjusted EBITDA metrics to evaluate the Company's operating performance. Management excludes the items listed in the table below to arrive at adjusted EBITDA because they are non-operational items.

 

 

 

Three Months Ended
March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

 

Surfactants

 

 

Polymers

 

 

Specialty
Products

 

 

Unallocated
Corporate

 

 

Consolidated

 

Operating Income

 

$

26.1

 

 

$

8.4

 

 

$

4.3

 

 

$

(18.6

)

 

$

20.2

 

   Depreciation and Amortization

 

 

17.7

 

 

 

8.0

 

 

 

1.5

 

 

 

0.4

 

 

 

27.6

 

   Other, Net Income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2.4

 

 

 

2.4

 

EBITDA

 

$

43.8

 

 

$

16.4

 

 

$

5.8

 

 

$

(15.8

)

 

$

50.2

 

   Deferred Compensation

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(0.5

)

 

 

(0.5

)

   Environmental Remediation

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1.5

 

 

 

1.5

 

Adjusted EBITDA

 

$

43.8

 

 

$

16.4

 

 

$

5.8

 

 

$

(14.8

)

 

$

51.2

 

 

 

 

Three Months Ended
March 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

 

Surfactants

 

 

Polymers

 

 

Specialty
Products

 

 

Unallocated
Corporate

 

 

Consolidated

 

Operating Income

 

$

27.1

 

 

$

10.0

 

 

$

2.5

 

 

$

(18.5

)

 

$

21.1

 

   Depreciation and Amortization

 

 

15.3

 

 

 

8.3

 

 

 

1.4

 

 

 

0.5

 

 

 

25.5

 

   Other, Net Income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1.7

 

 

 

1.7

 

EBITDA

 

$

42.4

 

 

$

18.3

 

 

$

3.9

 

 

$

(16.3

)

 

$

48.3

 

   Deferred Compensation

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(0.1

)

 

 

(0.1

)

   Cash Settled SARs

 

 

(0.1

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(0.1

)

   Business Restructuring

 

 

—

 

 

 

—

 

 

 

—

 

 

 

0.2

 

 

 

0.2

 

   Environmental Remediation

 

 

—

 

 

 

—

 

 

 

—

 

 

 

0.4

 

 

 

0.4

 

Adjusted EBITDA

 

$

42.3

 

 

$

18.3

 

 

$

3.9

 

 

$

(15.8

)

 

$

48.7

 

Reconciliation of Non-GAAP Net Debt

Management uses the non-GAAP net debt metric to gain a more complete picture of the Company’s overall liquidity, financial flexibility and leverage level.

 

(In millions)

 

March 31,
2024

 

 

December 31,
2023

 

Current Maturities of Long-Term Debt as Reported

 

$

245.9

 

 

$

252.9

 

Long-Term Debt as Reported

 

 

400.1

 

 

 

401.2

 

Total Debt as Reported

 

 

646.0

 

 

 

654.1

 

Less Cash and Cash Equivalents as Reported

 

 

(125.8

)

 

 

(129.8

)

Net Debt

 

$

520.2

 

 

$

524.3

 

Equity

 

$

1,214.5

 

 

$

1,216.5

 

Net Debt plus Equity

 

$

1,734.7

 

 

$

1,740.8

 

Net Debt/Net Debt plus Equity

 

 

30

%

 

 

30

%

 

30

 

Item 3 – Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes to the market risks described in the Company’s 2023 Annual Report on Form 10-K.

Item 4 – Controls and Procedures

a.
Evaluation of Disclosure Controls and Procedures

We have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of March 31, 2024. Based on this evaluation of our disclosure controls and procedures, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of March 31, 2024, such that the information required to be disclosed in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act and is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

b.
Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II OTHER INFORMATION

Item 1 – Legal Proceedings

SEC regulations require the Company to disclose certain information about administrative or judicial proceedings involving certain environmental matters to which a governmental authority is a party if the Company reasonably believes that such proceedings may result in monetary sanctions above a specified threshold. Pursuant to SEC regulations, the Company has adopted a threshold of $1.0 million for purposes of determining whether disclosure of any such proceedings is required. The Company believes that this threshold is reasonably designed to result in disclosure of any such proceedings that are material to its business or financial condition.

Developments in the Company’s legal proceedings are described below:

Maywood, New Jersey Site

The Company’s property in Maywood, New Jersey, property formerly owned by the Company adjacent to its current site and other nearby properties (collectively, the Maywood site) were listed on the National Priorities List in September 1993 pursuant to the provisions of CERCLA because of alleged chemical and radiological contamination. On September 24, 2014, the USEPA issued its Record of Decision (ROD) for chemically-contaminated soil at the Maywood site. The ROD was amended pursuant to an Explanation of Significant Differences in January 2021. On February 29, 2024, the U.S. District Court for the District of New Jersey entered a consent decree among the Company, the United States, the New Jersey Department of Environmental Protection (NJDEP) and the New Jersey Spill Compensation Fund Administrator that requires the Company to take certain actions and to pay certain past costs of the United States and NJDEP.

Millsdale Site

On March 26, 2024, the Company received a Notice and Finding of Violation from the USEPA alleging violations of air regulations at the Company’s Millsdale facility. The notice alleges violations related to operating parameters and air emission requirements. The notice does not state whether the USEPA intends to pursue financial penalties or operational remedies. The alleged violations may result in a range of possible penalties; however, at this stage of the matter, the Company is unable to predict the ultimate outcome or what impact, if any, the outcome might have on the Company’s results of operations or cash flows.

There have been no other material changes to the legal proceedings disclosed in the Company’s 2023 Annual Report on Form 10-K.

Item 1A – Risk Factors

There have been no material changes to the risk factors disclosed in the Company’s 2023 Annual Report on Form 10-K.

31

 

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

Below is a summary by month of share purchase by the Company during the first quarter of 2024:

 

Month

 

Total Number
of Shares Purchased

 

 

 

Average Price
Paid per Share

 

 

Total Number of
 Shares Purchased
 as Part of Publicly
 Announced Plans
 or Programs (1)

 

 

Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs (1)

 

January 2024

 

 

1,614

 

(2)

 

$

94.43

 

 

 

—

 

 

$

125,050,905

 

February 2024

 

 

34,904

 

(3)

 

$

89.99

 

 

 

—

 

 

$

125,050,905

 

March 2024

 

 

9,484

 

(4)

 

$

87.52

 

 

 

—

 

 

$

125,050,905

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

46,002

 

 

 

$

89.64

 

 

 

—

 

 

$

125,050,905

 

 

(1)
On October 20, 2021, the Company announced that its Board of Directors had authorized the Company to repurchase up to $150,000,000 of its outstanding common stock. Under this program, which does not have an expiration date, repurchases may be made from time to time through open market transactions, privately negotiated transactions or a combination of the foregoing, subject to applicable laws.
(2)
Includes 1,266 and 348 shares of the Company's common stock surrendered by employees to settle statutory withholding taxes related to the distribution of restricted stock units and the exercise of stock appreciation rights, respectively.
(3)
Includes 9,576, 21,992, 2,599 and 737 shares of the Company's common stock surrendered by employees to settle statutory withholding taxes related to the distribution of deferred management incentive compensation, the distribution of deferred performance shares, the distribution of restricted stock units and the exercise of stock appreciation rights, respectively.
(4)
Includes 9,307, 106 and 71 shares of the Company's common stock surrendered by employees to settle statutory withholding taxes related to the distribution of performance shares, the distribution of restricted stock units and the exercise of stock appreciation rights, respectively.

Item 3 – Defaults Upon Senior Securities

None

Item 4 – Mine Safety Disclosures

Not applicable

Item 5 – Other Information

During the three months ended March 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Item 6 – Exhibits

Exhibit No.

 

Description

 

 

 

31.1

–

Certification of President and Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a)/15d-14(a)

 

 

 

31.2

–

Certification of Vice President and Chief Financial Officer pursuant to Exchange Act Rule 13a- 14(a)/15d-14(a)

 

 

 

32

–

Certification pursuant to 18 U.S.C. Section 1350

 

 

 

101.INS

–

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

 

 

 

101.SCH

–

Inline XBRL Taxonomy Extension Schema with Embedded Linkbases Document

 

 

 

104

–

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

 

 

 

32

 

SIGNATURES

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

 

STEPAN COMPANY

Date: May 8, 2024

 

/s/ Luis E. Rojo

Luis E. Rojo

Vice President and Chief Financial Officer

 

33

 

Exhibit 31.1

CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER

PURSUANT TO EXCHANGE ACT RULE 13a-14(a)/15d-14(a)

I, Scott R. Behrens, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Stepan Company;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's independent registered public accounting firm and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 8, 2024

/s/ Scott R. Behrens

Scott R. Behrens

President and Chief Executive Officer

 

 

Exhibit 31.2

CERTIFICATION OF VICE PRESIDENT AND CHIEF FINANCIAL OFFICER

PURSUANT TO EXCHANGE ACT RULE 13a-14(a)/15d-14(a)

I, Luis E. Rojo, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Stepan Company;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's independent registered public accounting firm and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 8, 2024

/s/ Luis E. Rojo

Luis E. Rojo

Vice President and Chief Financial Officer

 

 

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

In connection with the Quarterly Report of Stepan Company (the “Company”) on Form 10-Q for the period ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:

(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 8, 2024

 

/s/ Scott R. Behrens

Name: Scott R. Behrens

Title: President and Chief Executive Officer

 

/s/ Luis E. Rojo

Name: Luis E. Rojo

Title: Vice President and Chief Financial Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

 

v3.24.1.u1
Document and Entity Information - shares
 3 Months Ended
Mar. 31, 2024
Apr. 26, 2024
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2024  
Document Fiscal Year Focus 2024  
Document Fiscal Period Focus Q1  
Trading Symbol SCL  
Entity Registrant Name STEPAN COMPANY  
Entity Current Reporting Status Yes  
Entity Central Index Key 0000094049  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Shell Company false  
Entity Emerging Growth Company false  
Entity Common Stock, Shares Outstanding   22,474,910
Entity Tax Identification Number 36-1823834  
Entity File Number 1-4462  
Entity Incorporation, State or Country Code DE  
Entity Address, Address Line One 1101 Skokie Boulevard  
Entity Address, Address Line Two Suite 500  
Entity Address, City or Town Northbrook  
Entity Address, State or Province IL  
Entity Address, Postal Zip Code 60062  
City Area Code 847  
Local Phone Number 446-7500  
Security Exchange Name NYSE  
Title of 12(b) Security Common Stock, $1 par value  
Document Quarterly Report true  
Document Transition Report false  
Entity Interactive Data Current Yes  
v3.24.1.u1
Condensed Consolidated Statements of Income - USD ($)
shares in Thousands, $ in Thousands
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Income Statement [Abstract]    
Net Sales $ 551,418 $ 651,436
Cost of Sales 481,137 577,876
Gross Profit 70,281 73,560
Operating Expenses:    
Selling 11,388 13,067
Administrative 22,690 22,639
Research, development and technical services 14,256 15,138
Deferred compensation expense 1,778 1,502
Total Operating expenses 50,112 52,346
Business restructuring expense   157
Operating Income 20,169 21,057
Other Income (Expense):    
Interest, net (3,071) (2,822)
Other, net (Note 15) 2,362 1,668
Nonoperating Income (Expense), Total (709) (1,154)
Income Before Provision for Income Taxes 19,460 19,903
Provision for Income Taxes 5,567 3,761
Net Income $ 13,893 $ 16,142
Net Income Per Common Share (Note 10):    
Basic $ 0.61 $ 0.71
Diluted $ 0.61 $ 0.7
Shares Used to Compute Net Income Per Common Share (Note 10):    
Basic 22,824 22,757
Diluted 22,948 22,994
v3.24.1.u1
Condensed Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Statement of Comprehensive Income [Abstract]    
Net income $ 13,893 $ 16,142
Other Comprehensive Income:    
Foreign currency translation adjustments (Note 11) (6,551) 18,423
Defined benefit pension adjustments, net of tax (Note 11) 58 58
Derivative instrument activity, net of tax (Note 11) 829 (1,517)
Total Other Comprehensive Income (5,664) 16,964
Comprehensive Income $ 8,229 $ 33,106
v3.24.1.u1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Current Assets:    
Cash and cash equivalents $ 125,775 $ 129,823
Receivables, net 446,569 422,050
Inventories (Note 6) 257,118 265,558
Other current assets 40,344 34,452
Total current assets 869,806 851,883
Property, Plant and Equipment:    
Cost 2,605,219 2,585,058
Less: Accumulated depreciation (1,399,585) (1,378,393)
Property, plant and equipment, net 1,205,634 1,206,665
Goodwill, net 96,309 97,442
Other intangible assets, net 50,564 52,571
Long-term investments (Note 3) 23,466 26,804
Operating lease assets (Note 7) 71,483 70,646
Other non-current assets 55,885 57,343
Total assets 2,373,147 2,363,354
Current Liabilities:    
Current maturities of debt (Note 14) 245,861 252,898
Accounts payable 256,880 233,031
Accrued liabilities 126,112 121,941
Total current liabilities 628,853 607,870
Deferred income taxes 10,257 10,373
Long-term debt, less current maturities (Note 14) 400,121 401,248
Non-current operating lease liabilities (Note 7) 59,063 58,026
Other non-current liabilities 60,331 69,347
Commitments and Contingencies (Note 8)
Equity:    
Common stock, $1 par value; authorized 60,000,000 shares; 27,124,666 issued shares in 2024 and 27,005,852 issued shares in 2023 27,125 27,006
Additional paid-in capital 248,337 247,032
Accumulated other comprehensive loss (Note 11) (136,266) (130,602)
Retained earnings 1,262,937 1,257,466
Less: Common treasury stock, at cost, 4,650,882 shares in 2024 and 4,628,072 shares in 2023 (187,611) (184,412)
Total Stepan Company stockholders’ equity 1,214,522 1,216,490
Total liabilities and equity $ 2,373,147 $ 2,363,354
v3.24.1.u1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Mar. 31, 2024
Dec. 31, 2023
Statement of Financial Position [Abstract]    
Common stock, par value $ 1 $ 1
Common stock, shares authorized 60,000,000 60,000,000
Common stock, shares issued 27,124,666 27,005,852
Treasury stock, shares 4,650,882 4,628,072
v3.24.1.u1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Cash Flows From Operating Activities    
Net income $ 13,893 $ 16,142
Adjustments to reconcile net income to net cash provided by (used in) operating activities:    
Depreciation and amortization 27,604 25,542
Deferred compensation 1,778 1,502
Realized and unrealized gains on long-term investments (2,267) (1,516)
Stock-based compensation 1,372 999
Deferred income taxes 2,201 (660)
Other non-cash items 650 36
Changes in assets and liabilities:    
Receivables, net (26,043) (40,420)
Inventories 3,202 38,265
Other current assets (5,931) (9,222)
Accounts payable and accrued liabilities 25,965 (98,523)
Pension liabilities (502) (531)
Environmental and legal liabilities (56) (3,464)
Deferred revenues (312) (208)
Net Cash Provided By (Used In) Operating Activities 41,554 (72,058)
Cash Flows From Investing Activities    
Expenditures for property, plant and equipment (30,157) (92,158)
Other, net 5,742 1,817
Net Cash Used In Investing Activities (24,415) (90,341)
Cash Flows From Financing Activities    
Revolving debt and bank overdrafts, net (Note 14) (8,415) 123,847
Dividends paid (8,422) (8,160)
Stock option exercises 865 1,514
Other, net (4,012) (3,665)
Net Cash Provided By (Used In) Financing Activities (19,984) 113,536
Effect of Exchange Rate Changes on Cash (1,203) 2,069
Net Decrease in Cash and Cash Equivalents (4,048) (46,794)
Cash and Cash Equivalents at Beginning of Period 129,823 173,750
Cash and Cash Equivalents at End of Period 125,775 126,956
Supplemental Cash Flow Information    
Cash payments of income taxes, net of refunds 4,818 15,518
Cash payments of interest $ 7,284 $ 6,007
v3.24.1.u1
Pay vs Performance Disclosure - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Pay vs Performance Disclosure    
Net Income (Loss) $ 13,893 $ 16,142
v3.24.1.u1
Insider Trading Arrangements
 3 Months Ended
Mar. 31, 2024
Trading Arrangements, by Individual  
Rule 10b5-1 Arrangement Adopted false
Non-Rule 10b5-1 Arrangement Adopted false
Rule 10b5-1 Arrangement Terminated false
Non-Rule 10b5-1 Arrangement Terminated false
v3.24.1.u1
Condensed Consolidated Financial Statements
 3 Months Ended
Mar. 31, 2024
Accounting Policies [Abstract]  
Condensed Consolidated Financial Statements
1.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The condensed consolidated financial statements included herein have been prepared by Stepan Company (the Company), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate and make the information presented not misleading. In the opinion of management, all adjustments, consisting only of normal recurring accruals, necessary to present fairly the Company’s financial position as of March 31, 2024, its results of operations for the three months ended March 31, 2024 and 2023 and cash flows for the three months ended March 31, 2024 and 2023, have been included. These financial statements and related footnotes should be read in conjunction with the financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (2023 Annual Report on Form 10-K).
v3.24.1.u1
Reconciliations of Equity
 3 Months Ended
Mar. 31, 2024
Equity [Abstract]  
Reconciliations of Equity
2.
RECONCILIATIONS OF EQUITY

Below are reconciliations of total equity for the three months ended March 31, 2024 and 2023:

 

(In thousands, except share and per share amounts)

 

Total

 

 

Common
Stock

 

 

Additional
Paid-in
Capital

 

 

Common
Treasury
Stock

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Retained
Earnings

 

Balance, December 31, 2023

 

$

1,216,490

 

 

$

27,006

 

 

$

247,032

 

 

$

(184,412

)

 

$

(130,602

)

 

$

1,257,466

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of 20,668 shares of common
   stock under incentive compensation plan

 

 

865

 

 

 

21

 

 

 

844

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based and deferred compensation

 

 

(2,640

)

 

 

98

 

 

 

461

 

 

 

(3,199

)

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

13,893

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

13,893

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

(5,664

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(5,664

)

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock ($0.375 per share)

 

 

(8,422

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(8,422

)

Balance, March 31, 2024

 

$

1,214,522

 

 

$

27,125

 

 

$

248,337

 

 

$

(187,611

)

 

$

(136,266

)

 

$

1,262,937

 

 

(In thousands, except share and per share amounts)

 

Total

 

 

Common
Stock

 

 

Additional
Paid-in
Capital

 

 

Common
Treasury
Stock

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Retained
Earnings

 

Balance, December 31, 2022

 

$

1,166,065

 

 

$

26,841

 

 

$

237,202

 

 

$

(180,596

)

 

$

(167,512

)

 

$

1,250,130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of 25,981 shares of common
  stock under incentive compensation plan

 

 

1,514

 

 

 

26

 

 

 

1,488

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based and deferred compensation

 

 

(2,612

)

 

 

91

 

 

 

895

 

 

 

(3,598

)

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

16,142

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

16,142

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss)

 

 

16,964

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

16,964

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock ($0.365 per share)

 

 

(8,160

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(8,160

)

Balance, March 31, 2023

 

$

1,189,913

 

 

$

26,958

 

 

$

239,585

 

 

$

(184,194

)

 

$

(150,548

)

 

$

1,258,112

 
v3.24.1.u1
Fair Value Measurements
 3 Months Ended
Mar. 31, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurements
3.
FAIR VALUE MEASUREMENTS

Derivative assets and liabilities include the foreign currency exchange and interest rate swap contracts discussed in Note 4, Derivative Instruments, of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this

Form 10-Q). Fair value and carrying value were the same because the contracts were recorded at fair value. The fair values of the foreign currency contracts were calculated as the difference between the applicable forward foreign exchange rates at the reporting date and the contracted foreign exchange rates multiplied by the contracted notional amounts. The fair value of the interest rate swap was calculated as the difference between the contracted swap rate and the floating interest rate multiplied by the present value of the notional amount of the contract.

At March 31, 2024, and December 31, 2023, the fair values and related carrying values of debt, including current maturities, were as follows (the fair value and carrying value amounts are presented without regard to unamortized debt issuance costs of $772,000 and $895,000 as of March 31, 2024 and December 31, 2023, respectively):

 

(In thousands)

 

March 31,
2024

 

 

December 31,
2023

 

Fair value

 

$

614,024

 

 

$

627,695

 

Carrying value

 

 

646,754

 

 

 

655,041

 

 

The following tables present financial assets and liabilities, excluding cash and cash equivalents, measured on a recurring basis at fair value as of March 31, 2024, and December 31, 2023, and the level within the fair value hierarchy in which the fair value measurements fall:

 

(In thousands)

 

March 31,
2024

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Mutual fund assets

 

$

23,466

 

 

$

23,466

 

 

$

—

 

 

$

—

 

Derivative assets:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

 

7,014

 

 

 

—

 

 

 

7,014

 

 

 

—

 

Foreign currency contracts

 

 

630

 

 

 

—

 

 

 

630

 

 

 

—

 

Total assets at fair value

 

$

31,110

 

 

$

23,466

 

 

$

7,644

 

 

$

—

 

Derivative liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency contracts

 

$

738

 

 

$

—

 

 

$

738

 

 

$

—

 

 

(In thousands)

 

December 31,
2023

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Mutual fund assets

 

$

26,804

 

 

$

26,804

 

 

$

—

 

 

$

—

 

Derivative assets:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

 

6,183

 

 

 

—

 

 

 

6,183

 

 

 

—

 

Foreign currency contracts

 

 

1,018

 

 

 

—

 

 

 

1,018

 

 

 

—

 

Total assets at fair value

 

$

34,005

 

 

$

26,804

 

 

$

7,201

 

 

$

—

 

Derivative liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency contracts

 

$

928

 

 

$

—

 

 

$

928

 

 

$

—

 
v3.24.1.u1
Derivative Instruments
 3 Months Ended
Mar. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments
4.
DERIVATIVE INSTRUMENTS

At March 31, 2024, and December 31, 2023, the Company had open forward foreign currency exchange contracts to buy or sell foreign currencies with U.S. dollar equivalent amounts of $108,979,000 and $106,561,000, respectively. All forward foreign exchange contracts at March 31, 2024 had durations of one month to three months.

The Company is currently exposed to volatility in short-term interest rates and has mitigated certain portions of that risk by using an interest rate swap. The interest rate swap is recognized on the balance sheet as either an asset or a liability measured at fair value. At March 31, 2024, the Company held an interest rate swap contract with a notional value of $100,000,000 that was designated as a cash flow hedge. Period-to-period changes in the fair value of the interest rate swap are initially recognized as gains or losses in other comprehensive income. As the interest rate swap contract is settled, the corresponding gain or loss is reclassified out of accumulated other comprehensive income (AOCI) into earnings. The maturity date of the current interest swap contract is March 10, 2027, which is closely aligned with the June 24, 2027 maturity of the Company's revolving credit facility.

The fair values of the derivative instruments held by the Company on March 31, 2024, and December 31, 2023, are disclosed in Note 3, Fair Value Measurements, of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q). Derivative instrument gains and losses for the three months ended March 31, 2024 and 2023, were immaterial. For amounts reclassified out of AOCI into earnings for the three months ended March 31, 2024 and 2023, see Note 11, Accumulated Other Comprehensive Income (Loss), of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q).
v3.24.1.u1
Stock-based Compensation
 3 Months Ended
Mar. 31, 2024
Share-Based Payment Arrangement [Abstract]  
Stock-based Compensation
5.
STOCK-BASED COMPENSATION

Compensation expense recorded for all stock options, performance shares, time-based restricted stock units (RSUs) and stock appreciation rights (SARs) was as follows:

(In thousands)

 

Three Months Ended
March 31,

 

2024

 

 

2023

 

$

1,372

 

 

$

999

 

Unrecognized compensation costs for stock options, performance shares, RSUs and SARs were as follows:

(In thousands)

 

March 31,
2024

 

 

December 31,
2023

 

Stock options

 

$

211

 

 

$

127

 

Performance shares and RSUs

 

 

10,583

 

 

 

3,761

 

SARs

 

 

5,435

 

 

 

3,648

 

The change in unrecognized compensation costs for stock options, performance shares, RSUs and SARs is due to new grants issued in 2024.

The Company granted the following awards in the first three months of 2024:

 

 

Shares

 

Stock options

 

 

3,356

 

Performance shares (at target) and RSUs

 

 

104,282

 

SARs

 

 

89,073

 

The unrecognized compensation costs at March 31, 2024, are expected to be recognized over weighted-average periods of 2.2 years for stock options, 2.4 years for performance shares and RSUs and 2.1 years for SARs.
v3.24.1.u1
Inventories
 3 Months Ended
Mar. 31, 2024
Inventory Disclosure [Abstract]  
Inventories
6.
INVENTORIES

The composition of inventories at March 31, 2024, and December 31, 2023, was as follows:

 

(In thousands)

 

March 31,
2024

 

 

December 31,
2023

 

Finished goods

 

$

162,398

 

 

$

184,828

 

Raw materials

 

 

94,720

 

 

 

80,730

 

Total inventories

 

$

257,118

 

 

$

265,558

 
v3.24.1.u1
Leases
 3 Months Ended
Mar. 31, 2024
Leases [Abstract]  
Leases
7.
LEASES

Lease cost is recognized in both the Cost of Sales and Operating Expenses sections of the Condensed Consolidated Statements of Income.

 

(In thousands)

 

Three Months Ended
March 31,

 

 

 

 

2024

 

 

2023

 

 

Lease Cost

 

 

 

 

 

 

 

Operating lease cost

 

$

4,493

 

 

$

4,349

 

 

Short-term lease cost

 

 

2,687

 

 

 

2,779

 

 

Variable lease cost

 

 

443

 

 

 

557

 

 

Total lease cost

 

$

7,623

 

 

$

7,685

 

 

Other Information

 

 

 

 

 

 

 

Cash paid for amounts included in the
   measurement of lease liabilities:

 

 

 

 

 

 

 

Operating cash flow from operating leases

 

$

4,488

 

 

$

4,332

 

 

Right-of-use assets obtained in exchange
   for new operating lease liabilities

 

 

989

 

 

 

6,545

 

 

 

The following table outlines the maturities of lease liabilities as of March 31, 2024.

 

(In thousands)

 

 

 

Undiscounted Cash Flows:

 

 

 

2024 (excluding the three months ended March 31, 2024)

 

$

12,541

 

2025

 

 

12,911

 

2026

 

 

10,104

 

2027

 

 

7,771

 

2028

 

 

6,827

 

Subsequent to 2028

 

 

35,527

 

Total Undiscounted Cash Flows

 

$

85,681

 

Less: Imputed interest

 

 

(13,080

)

Present value

 

$

72,601

 

Current operating lease liabilities (1)

 

 

13,538

 

Non-current operating lease liabilities

 

 

59,063

 

Total lease liabilities

 

$

72,601

 
(1)
This item is included in the Accrued liabilities line on the Company’s Condensed Consolidated Balance Sheet.

 

Weighted-average remaining lease term-operating leases

 

9 Years

 

Weighted-average discount rate-operating leases

 

 

3.9

%

As of March 31, 2024, the Company had office equipment and automobile leases, valued at approximately $922,000, that had not commenced. These leases will commence during the second and third quarters of 2024 with lease terms ranging from three years to five years.
v3.24.1.u1
Contingencies
 3 Months Ended
Mar. 31, 2024
Commitments and Contingencies Disclosure [Abstract]  
Contingencies
8.
CONTINGENCIES

There are a variety of legal proceedings pending or threatened against the Company that occur in the normal course of the Company’s business, the majority of which relate to environmental assessment, protection and remediation matters. Some of these proceedings may result in fines, penalties, judgments or costs being assessed against the Company at some future time. The Company’s operations are subject to extensive local, state and federal regulations, including the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) and the Superfund amendments of 1986 (Superfund) as well as comparable regulations applicable to the Company’s foreign locations. Over the years, the Company has received requests for information related to or has been named by government authorities as a potentially responsible party at a number of sites where cleanup costs have been or may be incurred by the Company under CERCLA and similar state statutes. In addition, the Company is from time to time involved in routine legal proceedings incidental to the conduct of its business, including personal injury, property damage, tax, trade and labor matters. The Company believes that it has made adequate provisions for the costs it is likely to incur with respect to these claims.

In determining the appropriate level of environmental reserves, the Company considers several factors such as information obtained from investigatory studies; changes in the scope of remediation; the interpretation, application and enforcement of laws and regulations; changes in the costs of remediation programs; the development of alternative cleanup technologies and methods; and the relative level of the Company’s involvement at various sites for which the Company is allegedly associated. The level of annual expenditures for remedial, monitoring and investigatory activities will change in the future as major components of planned remediation activities are completed and the scope, timing and costs of existing activities are changed. As of March 31, 2024, the Company estimated a range of possible environmental losses and legal losses of $20,792,000 to $49,778,000. Within the range of possible environmental losses and legal losses, management has currently concluded that no single amount is more likely to occur than any other amounts in the range and, thus, has accrued at the lower end of the range. These accruals totaled $20,792,000 at March 31, 2024 and $20,646,000 at December 31, 2023. Although the Company believes that its estimated range of possible environmental losses and legal losses and its reserves are adequate for contingencies, it is possible, due to the uncertainties noted above, that additional reserves could be required in the future. Cash expenditures related to environmental remediation and certain other legal matters approximated $1,585,000 and $3,466,000 for the three months ended March 31, 2024 and 2023, respectively.

For certain sites, the Company has responded to information requests made by federal, state or local government agencies but has received no response confirming or denying the Company’s stated positions. As such, estimates of the total costs, or range of possible costs, of remediation, if any, or the Company’s share of such costs, if any, cannot be determined with respect to these sites. Consequently, the Company is unable to predict the effect thereof on the Company’s financial position, cash flows and results of operations. Based on the Company’s present knowledge with respect to its involvement at these sites, the possibility of other viable entities’ responsibilities for cleanup, and the extended period over which any costs would be incurred, management believes that the Company has no material liability at these sites and that these matters, individually and in the aggregate, will not have a material effect on the Company’s financial position. However, in the event of one or more adverse determinations with respect to such sites in any annual or interim period, the effect on the Company’s cash flows and results of operations for those periods could be material.

Following are summaries of the Company’s major contingencies at March 31, 2024:

Maywood, New Jersey Site

The Company’s property in Maywood, New Jersey, property formerly owned by the Company adjacent to its current site and other nearby properties (collectively, the Maywood site) were listed on the National Priorities List in September 1993 pursuant to the provisions of CERCLA because of alleged chemical and radiological contamination. Pursuant to (i) a September 21, 1987 Administrative Order on Consent entered into between the U.S. Environmental Protection Agency (USEPA) and the Company for property formerly owned by the Company at the Maywood site and (ii) the issuance of an order on May 2, 1991 by the USEPA to the Company for property currently owned by the Company at the Maywood site, the Company has completed various Remedial Investigation/Feasibility Studies of soil and groundwater at the Maywood site. On September 24, 2014, the USEPA issued its Record of Decision (ROD) for chemically-contaminated soil at the Maywood site. The ROD was amended pursuant to an Explanation of Significant Differences in January 2021. On February 29, 2024, the U.S. District Court for the District of New Jersey entered a consent decree among the Company, the United States, the New Jersey Department of Environmental Protection (NJDEP) and the New Jersey Spill Compensation Fund Administrator that requires the Company to take certain actions and to pay certain past costs of the United States and NJDEP. The USEPA has not yet issued a ROD for chemically-contaminated groundwater at the Maywood site. Based on the most current information available, the Company believes its recorded liability is reasonable having considered the range of estimated costs of remediation for the Maywood site. The estimate of the cost of remediation for the Maywood site could change again as the Company continues to hold discussions with the USEPA, as the design of the remedial action is finalized, if a groundwater ROD is issued or if other potentially responsible parties are identified. The ultimate amount for which the Company is liable could differ materially from the Company’s current recorded liability.

D’Imperio Property Site

During the mid-1970’s, Jerome Lightman and the Lightman Drum Company disposed of hazardous substances generated by the Company at several sites in New Jersey, including the D’Imperio site. The Company was named as a potentially responsible party in an October 2, 1998 lawsuit in the U.S. District Court for the District of New Jersey that involved the D’Imperio Site. The Company is cooperating with other potentially responsible parties to implement the selected remedy. Based on current information, the Company believes that its recorded liability is reasonable having considered the range of estimated cost of remediation for the D’Imperio site. Depending on the ultimate cost of the remediation at this site, the amount for which the Company is liable could differ materially from the Company’s current recorded liability.

Wilmington Site

Property formerly owned and operated by the Company in Wilmington, Massachusetts was listed on the National Priorities List in 2006. The Company, together with the current site owner and another potentially responsible party, entered into an Administrative Order on Consent in July 2007 to undertake a Remedial Investigation and Feasibility Study. A ROD was issued by the USEPA on March 30, 2021. The Company and three other potentially responsible parties entered into a consent decree, dated September 28, 2023, with USEPA and the Commonwealth of Massachusetts that requires the remedial design and remedial action of the remedy selected in the ROD for two operable units and an interim remedy for another operable unit. Remediation at this site is being managed by its current owner, to whom the Company sold the property in 1980. The Company is contractually obligated to contribute up to five percent of the environmental response costs incurred by the current owner, with no limitation on the ultimate amount of contributions. The Company has paid the current owner $3,778,000 for the Company’s portion of environmental response costs at the Wilmington site through March 31, 2024. The Company has recorded a liability for its portion of the estimated remediation costs for the site. Depending on the ultimate cost of the remediation at this site, the amount for which the Company is liable could differ materially from the current recorded liability.

On July 29, 2022, the Company and other potentially responsible parties were notified of a possible joint claim by federal and state trustees for alleged natural resource damages related to the Wilmington site. The alleged damages may result in a range

of possible penalties and the Company recorded a liability for this matter during the first quarter of 2024. Depending on the ultimate resolution of this matter, the amount for which the Company is liable could differ materially from the current recorded liability.

Millsdale Site

On March 26, 2024, the Company received a Notice and Finding of Violation from the USEPA alleging violations of air regulations at the Company’s Elwood, Illinois (Millsdale) facility. The notice alleges violations related to operating parameters and air emission requirements. The notice does not state whether the USEPA intends to pursue financial penalties or operational remedies. The alleged violations may result in a range of possible penalties; however, at this stage of the matter, the Company is unable to predict the ultimate outcome or what impact, if any, the outcome might have on the Company’s financial position, results of operations or cash flows.

Other U.S. Sites

Through the regular environmental monitoring of its plant production sites, the Company discovered levels of chemical contamination that were above thresholds allowed by law at its Millsdale and Fieldsboro, New Jersey plants. The Company voluntarily reported its results to the applicable state environmental agencies. As a result, the Company is required to perform self-remediation of the affected areas. Based on current information, the Company believes that its recorded liability for the remediation of the affected areas is appropriate based on an estimate of expected costs. However, actual costs could differ materially from the current recorded liability.
v3.24.1.u1
Postretirement Benefit Plans
 3 Months Ended
Mar. 31, 2024
Retirement Benefits [Abstract]  
Postretirement Benefit Plans
9.
POSTRETIREMENT BENEFIT PLANS

Defined Benefit Pension Plans

The Company sponsors various funded qualified and unfunded non-qualified defined benefit pension plans, the most significant of which cover employees in the U.S. and U.K. locations. The U.S. and U.K. defined benefit pension plans are frozen and service benefits are no longer being accrued.

Components of Net Periodic Benefit Cost

 

 

UNITED STATES

 

(In thousands)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Interest cost

 

$

1,651

 

 

$

1,731

 

Expected return on plan assets

 

 

(2,116

)

 

 

(2,133

)

Amortization of net actuarial loss

 

 

(3

)

 

 

(6

)

Net periodic benefit cost

 

$

(468

)

 

$

(408

)

 

 

 

UNITED KINGDOM

 

(In thousands)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Interest cost

 

$

161

 

 

$

164

 

Expected return on plan assets

 

 

(183

)

 

 

(170

)

Amortization of net actuarial loss

 

 

80

 

 

 

81

 

Net periodic benefit cost

 

$

58

 

 

$

75

 

Employer Contributions

U.S. Plans

As a result of pension funding relief provisions included in the Highway and Transportation Funding Act of 2014, the Company is not required to make contributions to its funded U.S. qualified defined benefit plans. Approximately $316,000 is expected to be paid to the unfunded non-qualified plans in 2024. Of such amount, $129,000 had been paid to the non-qualified plans as of March 31, 2024.

U.K. Plan

The Company’s U.K. subsidiary does not expect to contribute to its defined benefit pension plan in 2024.

Defined Contribution Plans

The Company sponsors retirement defined contribution plans that cover eligible U.S. and U.K. employees. The Company’s U.S. retirement plans include two qualified plans, one of which is a 401(k) plan and one of which is an employee stock ownership plan (profit sharing plan), and one non-qualified supplemental executive plan. In the three months ended March 31, 2024 and 2023, the Company made contributions into the qualified retirement plans for U.S. employees and for certain non-U.S. employees. Profit sharing contributions were determined using a formula applied to Company earnings. Approximately 85 percent of union and non-union employees are eligible for either the Company's sponsored or statutory profit sharing contributions and 100 percent of U.S. based union and non-union employees are eligible for the Company's sponsored profit sharing contributions. In 2023 and 2024, profit sharing contributions for U.S. employees were made to the employee stock ownership plan. Profit sharing contributions are allocated to participant accounts based on participant base earnings.

Defined contribution plan expenses for the Company’s qualified contribution plans were as follows:

(In thousands)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Retirement savings contributions

 

$

2,125

 

 

$

2,048

 

Profit sharing contributions

 

 

848

 

 

 

707

 

Total defined contribution plan expenses

 

$

2,973

 

 

$

2,755

 

The Company has a rabbi trust to fund the obligations of its non-qualified supplemental executive defined contribution plans (supplemental plans). The trust is comprised of various mutual fund investments selected by the participants of the supplemental plans. In accordance with the accounting guidance for rabbi trust arrangements, the assets of the trust and the obligations of the supplemental plans are reported on the Company’s condensed consolidated balance sheets. The Company elected the fair value option for the mutual fund investment assets so that offsetting changes in the mutual fund values and defined contribution plan obligations would be recorded in earnings in the same period. Therefore, the mutual funds are reported at fair value with any subsequent changes in fair value recorded in the condensed consolidated statements of income. The liabilities related to the supplemental plans increase (i.e., supplemental plan expense is recognized) when the value of the trust assets appreciate and decrease when the value of the trust assets decline (i.e., supplemental plan income is recognized). At March 31, 2024, the balance of the trust assets was $559,000, which equaled the balance of the supplemental plan liabilities. See the long-term investments section in Note 3, Fair Value Measurements, of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q) for further information regarding the Company’s mutual fund assets.
v3.24.1.u1
Earnings Per Share
 3 Months Ended
Mar. 31, 2024
Earnings Per Share [Abstract]  
Earnings Per Share
10.
EARNINGS PER SHARE

Below are the computations of basic and diluted earnings per share for the three months ended March 31, 2024 and 2023:

(In thousands, except per share amounts)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Computation of Basic Earnings per Share

 

 

 

 

 

 

Net income attributable to Stepan Company

 

$

13,893

 

 

$

16,142

 

Weighted-average number of common shares
   outstanding

 

 

22,824

 

 

 

22,757

 

Basic earnings per share

 

$

0.61

 

 

$

0.71

 

 

 

 

 

 

 

 

Computation of Diluted Earnings per Share

 

 

 

 

 

 

Net income attributable to Stepan Company

 

$

13,893

 

 

$

16,142

 

Weighted-average number of shares outstanding

 

 

22,824

 

 

 

22,757

 

Add weighted-average net shares from assumed
   exercise of options (under treasury stock method)(1)

 

 

47

 

 

 

99

 

Add weighted-average net shares related to unvested
   stock awards (under treasury stock method)

 

 

3

 

 

 

1

 

Add weighted-average net shares from assumed
   exercise of SARs (under treasury stock method)(1)

 

 

54

 

 

 

108

 

Add weighted-average contingently issuable net
  shares related to performance stock awards
  (under treasury stock method)

 

 

20

 

 

 

29

 

Weighted-average shares applicable to diluted
   earnings

 

 

22,948

 

 

 

22,994

 

Diluted earnings per share

 

$

0.61

 

 

$

0.70

 

 

(1)
800,025 and 403,711 options/SARs to acquire shares of the Company's common stock were excluded from the computation of dilutive earnings per share for the three months ended March 31, 2024 and 2023, respectively. The options/SARs' exercise prices were greater than the average market price for the Company's common stock and inclusion of the instruments would have had an antidilutive effect on the computations of the earnings per share.
v3.24.1.u1
Accumulated Other Comprehensive Income (Loss)
 3 Months Ended
Mar. 31, 2024
Equity [Abstract]  
Accumulated Other Comprehensive Income (Loss)
11.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Below is the change in the Company’s accumulated other comprehensive income (loss) (AOCI) balance by component (net of income taxes) for the three months ended March 31, 2024 and 2023:

 

(In thousands)

 

Foreign
Currency
Translation
Adjustments

 

 

Defined
Benefit
Pension Plan
Adjustments

 

 

Cash Flow
Hedge
Adjustments

 

 

Total

 

Balance at December 31, 2022

 

$

(156,835

)

 

$

(19,079

)

 

$

8,402

 

 

$

(167,512

)

Other comprehensive income before
    reclassifications

 

 

18,423

 

 

 

—

 

 

 

(1,514

)

 

 

16,909

 

Amounts reclassified from AOCI

 

 

—

 

 

 

58

 

 

 

(3

)

 

 

55

 

Net current-period other comprehensive income

 

 

18,423

 

 

 

58

 

 

 

(1,517

)

 

 

16,964

 

Balance at March 31, 2023

 

$

(138,412

)

 

$

(19,021

)

 

$

6,885

 

 

$

(150,548

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2023

 

$

(116,412

)

 

$

(20,408

)

 

$

6,218

 

 

$

(130,602

)

Other comprehensive income before
    reclassifications

 

 

(6,551

)

 

 

—

 

 

 

831

 

 

 

(5,720

)

Amounts reclassified from AOCI

 

 

—

 

 

 

58

 

 

 

(2

)

 

 

56

 

Net current-period other comprehensive income

 

 

(6,551

)

 

 

58

 

 

 

829

 

 

 

(5,664

)

Balance at March 31, 2024

 

$

(122,963

)

 

$

(20,350

)

 

$

7,047

 

 

$

(136,266

)

 

Information regarding the reclassifications out of AOCI for the three months ended March 31, 2024 and 2023, is displayed below:

 

(In thousands)

 

Amount Reclassified from AOCI (1)

 

 

 

AOCI Components

 

Three Months Ended
March 31,

 

 

Affected Line Item in
Condensed Consolidated
Statements of Income

 

 

2024

 

 

2023

 

 

 

Amortization of defined benefit
    pension actuarial losses

 

$

(77

)

 

$

(75

)

 

(2)

 

 

 

19

 

 

 

17

 

 

Tax benefit

 

 

$

(58

)

 

$

(58

)

 

Net of tax

Gains and losses on cash flow
   hedges:

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

 

2

 

 

 

3

 

 

Cost of sales

 

 

 

2

 

 

 

3

 

 

Total before tax

 

 

 

—

 

 

 

—

 

 

Tax benefit

 

 

$

2

 

 

$

3

 

 

Net of tax

Total reclassifications for the period

 

$

(56

)

 

$

(55

)

 

Net of tax

 

(1)
Amounts in parentheses denote expense to the Company’s Condensed Consolidated Statements of Income.
(2)
This component of accumulated other comprehensive income is included in the computation of net periodic benefit cost. See Note 9, Postretirement Benefit Plans, of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q) for additional details.
v3.24.1.u1
Segment Reporting
 3 Months Ended
Mar. 31, 2024
Segment Reporting [Abstract]  
Segment Reporting
12.
SEGMENT REPORTING

The Company has three reportable segments: Surfactants, Polymers and Specialty Products. Net sales by segment for the three months ended March 31, 2024 and 2023, were as follows:

 

(In thousands)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Segment Net Sales

 

 

 

 

 

 

Surfactants

 

$

390,820

 

 

$

467,828

 

Polymers

 

 

145,508

 

 

 

161,127

 

Specialty Products

 

 

15,090

 

 

 

22,481

 

      Total

 

$

551,418

 

 

$

651,436

 

 

Segment operating income and reconciliations of segment operating income to income before provision for income taxes for the three months ended March 31, 2024 and 2023, are summarized below:

 

(In thousands)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Segment Operating Income

 

 

 

 

 

 

Surfactants

 

$

26,079

 

 

$

27,056

 

Polymers

 

 

8,382

 

 

 

10,004

 

Specialty Products

 

 

4,268

 

 

 

2,530

 

      Segment operating income

 

 

38,729

 

 

 

39,590

 

Business restructuring

 

 

—

 

 

 

(157

)

Unallocated corporate expenses (1)

 

 

(18,560

)

 

 

(18,376

)

Total operating income

 

 

20,169

 

 

 

21,057

 

Other Income (Expense)

 

 

 

 

 

 

Interest, net

 

 

(3,071

)

 

 

(2,822

)

Other, net

 

 

2,362

 

 

 

1,668

 

Income before provision for income taxes

 

$

19,460

 

 

$

19,903

 
(1)
Unallocated corporate expenses are primarily comprised of corporate administrative expenses (e.g., corporate finance, legal, human resources, information systems, deferred compensation and environmental remediation) that are not included in segment operating income and are not used to evaluate segment performance.
v3.24.1.u1
Revenue from Contracts with Customers
 3 Months Ended
Mar. 31, 2024
Revenue from Contract with Customer [Abstract]  
Revenue from Contracts with Customers
13.
REVENUE FROM CONTRACTS WITH CUSTOMERS

As of March 31, 2024, the Company had $931,000 of contract liabilities and no contract assets. A contract liability would typically arise when an advance or deposit is received from a customer before the Company recognizes revenue. In practice, this is rare as it would require a customer to make a payment prior to a performance obligation being satisfied. When such situations do arise, the Company maintains a deferred revenue liability until the time a performance obligation has been satisfied. The Company recognized $688,000 of revenue in the first three months of 2024 from pre-existing contract liabilities at December 31, 2023.

In addition, during 2020, the Company recorded $10,709,000 of long-term deferred revenue associated with a payment received to defray the cost of capital expenditures necessary to service a customer’s future product needs. At March 31, 2024, $6,093,000 was classified as long-term and $2,216,000 was classified as short-term. This deferred revenue is being recognized over the period of the contract and $2,400,000 of revenue has been recognized from the beginning of the contract term through March 31, 2024.

The tables below provide a geographic disaggregation of net sales for the three months ended March 31, 2024 and 2023. The Company’s business disaggregation by geographic region most effectively captures the nature and economic characteristics of the Company’s revenue streams impacted by economic factors.

 

(In thousands)

 

For the Three Months Ended March 31, 2024

 

Geographic Market

 

Surfactants

 

 

Polymers

 

 

Specialty

 

 

Total

 

North America

 

$

229,590

 

 

$

69,809

 

 

$

13,246

 

 

$

312,645

 

Europe

 

 

70,778

 

 

 

63,877

 

 

 

1,835

 

 

 

136,490

 

Latin America

 

 

77,868

 

 

 

417

 

 

 

9

 

 

 

78,294

 

Asia

 

 

12,584

 

 

 

11,405

 

 

 

—

 

 

 

23,989

 

       Total

 

$

390,820

 

 

$

145,508

 

 

$

15,090

 

 

$

551,418

 

 

(In thousands)

 

For the Three Months Ended March 31, 2023

 

Geographic Market

 

Surfactants

 

 

Polymers

 

 

Specialty

 

 

Total

 

North America

 

$

277,140

 

 

$

81,169

 

 

$

17,599

 

 

$

375,908

 

Europe

 

 

91,120

 

 

 

69,057

 

 

 

4,872

 

 

 

165,048

 

Latin America

 

 

81,099

 

 

 

785

 

 

 

10

 

 

 

81,894

 

Asia

 

 

18,470

 

 

 

10,116

 

 

 

—

 

 

 

28,586

 

       Total

 

$

467,828

 

 

$

161,127

 

 

$

22,481

 

 

$

651,436

 
v3.24.1.u1
Debt
 3 Months Ended
Mar. 31, 2024
Debt Disclosure [Abstract]  
Debt
14.
DEBT

At March 31, 2024 and December 31, 2023, debt was comprised of the following:

 

(In thousands)

 

Maturity
Dates

 

March 31,
2024

 

 

December 31,
2023

 

Senior unsecured notes

 

 

 

 

 

 

 

 

3.95% (net of unamortized debt issuance cost
   of $168 and $191 for 2024 and 2023, respectively)

 

2024-2027

 

$

56,975

 

 

$

56,952

 

3.86% (net of unamortized debt issuance cost
   of $81 and $105 for 2024 and 2023, respectively)

 

2024-2025

 

 

28,490

 

 

 

28,466

 

2.30% (net of unamortized debt issuance cost
   of $126 and $142 for 2024 and 2023, respectively)

 

2024-2028

 

 

49,874

 

 

 

49,858

 

2.37% (net of unamortized debt issuance cost
   of $132 and $148 for 2024 and 2023, respectively)

 

2024-2028

 

 

49,868

 

 

 

49,852

 

2.73% (net of unamortized debt issuance cost
   of $149 and $175 for 2024 and 2023, respectively)

 

2025-2031

 

 

99,851

 

 

 

99,825

 

2.83% (net of unamortized debt issuance cost
   of $116 and $134 for 2024 and 2023, respectively)

 

2026-2032

 

 

74,884

 

 

 

74,866

 

Revolving credit facility and term loan borrowing

 

2024

 

 

280,000

 

 

 

283,000

 

Debt of foreign subsidiaries

 

 

 

 

 

 

 

 

Unsecured bank debt, foreign currency

 

2024

 

 

6,040

 

 

 

11,327

 

Total debt

 

 

 

$

645,982

 

 

$

654,146

 

Less current maturities

 

 

 

 

245,861

 

 

 

252,898

 

Long-term debt

 

 

 

$

400,121

 

 

$

401,248

 

The Company's long-term debt financing is comprised of certain senior unsecured notes issued to insurance companies in private placement transactions pursuant to note purchase agreements (the “Note Purchase Agreements”), totaling $359,942,000 as of March 31, 2024. These notes are denominated in U.S. dollars and have fixed interest rates ranging from 2.30 percent to 3.95 percent. The notes had original maturities of seven to 12 years with mandatory principal payments beginning four, five and six years after issuance. The Company will be required to make principal payments on the currently outstanding notes from 2024 to 2032.

The Company's credit agreement (the "Credit Agreement") with a syndicate of banks provides for credit facilities in an initial aggregate principal amount of $450,000,000, consisting of (a) a $350,000,000 multi-currency revolving credit facility and (b) a $100,000,000 delayed draw term loan credit facility, each of which matures on June 24, 2027. The Company maintains import letters of credit, and standby letters of credit under its workers’ compensation insurance agreements and for other purposes, as needed from time to time, which are issued under the revolving credit agreement. As of March 31, 2024, the Company had outstanding letters of credit totaling $10,979,000 and $280,000,000 of outstanding borrowings under the credit agreement, inclusive of a $93,750,000 delayed draw term loan ($6,250,000 of the term loan principal has been permanently repaid as scheduled). There was $152,771,000 available under the credit agreement as of March 31, 2024.

The Company’s material debt agreements contain provisions which, among other covenants, require maintenance of certain financial ratios and place limitations on additional debt, investments and payment of dividends. Based on the loan agreement provisions that place limitations on dividend payments, unrestricted retained earnings (i.e., retained earnings available for dividend distribution) were $240,735,000 and $234,399,000 at March 31, 2024 and December 31, 2023, respectively.
v3.24.1.u1
Other, Net
 3 Months Ended
Mar. 31, 2024
Other Income and Expenses [Abstract]  
Other, Net
15.
OTHER, NET

Other, net in the condensed consolidated statements of income included the following:

 

(In thousands)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Foreign exchange losses

 

$

(375

)

 

$

(324

)

Investment income

 

 

60

 

 

 

143

 

Realized and unrealized gains on investments

 

 

2,267

 

 

 

1,516

 

Net periodic benefit cost

 

 

410

 

 

 

333

 

Other, net

 

$

2,362

 

 

$

1,668

 
v3.24.1.u1
Noncash Investing and Financing Activities
 3 Months Ended
Mar. 31, 2024
Supplemental Cash Flow Elements [Abstract]  
Noncash Investing and Financing Activities
16.
NONCASH INVESTING AND FINANCING ACTIVITIES

Noncash investing activities included liabilities (accounts payable) incurred for property, plant and equipment expenditures of approximately $13,004,000 and $27,061,000 that were unpaid at March 31, 2024 and 2023, respectively. Noncash financing activities included the issuance of 98,146 shares of the Company’s common stock (valued at $8,808,000) and 88,497 shares of the Company’s common stock (valued at $9,607,000) under the Company’s equity incentive compensation plan during the three months ended March 31, 2024 and 2023, respectively.
v3.24.1.u1
Recent Accounting Pronouncements
 3 Months Ended
Mar. 31, 2024
Accounting Changes and Error Corrections [Abstract]  
Recent Accounting Pronouncements
17.
RECENT ACCOUNTING PRONOUNCEMENTS

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effect of Reference Rate Reform on Financial Reporting. This update provides optional guidance for a limited period of time to ease the burden of implementing the usage of new reference rates. The amendments apply to contract modifications that replace a reference rate affected by reference rate reform and contemporaneous modifications of other contract terms related to the replacement of the reference rate. If elected, the optional expedients to contract modifications must be applied consistently for all eligible contracts or eligible transactions. The original timeframe for electing optional expedients to contract modifications was between March 12, 2020 and December 31, 2022. In December 2022, the FASB issued ASU No. 2022-06 deferring the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The guidance should be applied prospectively. Other than electing select expedients associated with an interest rate swap, the Company has not currently utilized any of the optional expedients of exceptions available under this ASU. The Company will continue to assess whether this ASU is applicable throughout the effective period.

In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements, Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. The amendments in this update represent changes to clarify or improve disclosures and presentation requirements of a variety of topics, including Statement of Cash Flows-Overall (disclosures in annual periods where cash flows associated with derivative instruments and their related gains and losses are presented), Earnings Per Share-Overall (disclosures of the methods used in the diluted earnings-per-share computation for each dilutive security), and Debt-Overall (disclosures of amounts and terms of unused lines of credit and unfunded commitments and the weighted-average interest rate on outstanding short-term borrowings). The amendments in this update are effective two years after the SEC removes related disclosure requirements from Regulation S-X or Regulation S-K. The implementation of ASU No. 2023-06 will not have an impact on the Company’s financial position, results of operations and cash flow, but will impact the Company’s interim and annual disclosures related to the relevant subtopics in this update.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures. This update requires more enhanced and detailed interim and annual disclosures regarding significant segment expenses and other segment items that are regularly provided to the chief operating decision maker. These items include the difference between segment revenue less the segment expenses that have been already disclosed under the significant expense principle and each reported measure of segment profit and loss. These requirements are in addition to the disclosures that are currently required by Topic 280, Segment reporting. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 and should be applied retrospectively to all periods presented in the financial statements. The implementation of ASU No. 2023-07 will not have an impact on the Company’s financial position, results of operations and cash flow but will impact the Company’s interim and annual segment reporting disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income taxes (Topic 740) Improvement to Income Tax Disclosures. This update requires that public entities on an annual basis disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, the amendments in this update require the disclosure on an annual basis of the amount of income taxes paid (net of refund received) disaggregated by federal, state and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid is equal or greater than five percent of total income taxes paid (net of refunds received). This update requires all entities to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. The amendments in this update are effective for annual periods beginning after December 15, 2024 and should be applied on a prospective basis. The implementation of ASU No. 2023-09 will not have an impact on the Company’s financial position, results of operations and cash flow but will impact the Company’s annual income tax disclosures.

The Organisation for Economic Co-operation and Development (OECD) proposed a global minimum tax of 15 percent on reported profits (entitled “Pillar Two”) that has been agreed upon in principle by over 100 countries. During 2023, many countries took steps to incorporate Pillar Two into their domestic laws. Although the OECD’s model provides a framework for applying the minimum tax, countries may enact Pillar Two rules that vary slightly from the model, can adopt a different timeline, and may

adjust local tax incentives in response to Pillar Two. While it is uncertain whether the U.S. will enact legislation to adopt Pillar Two, certain countries in which the Company operates have enacted such legislation, and other countries are in the process of introducing legislation to implement Pillar Two. The Company does not expect Pillar Two to have a material impact on its financial position, results of operations, cash flow and effective tax rate.
v3.24.1.u1
Recent Accounting Pronouncements (Policies)
 3 Months Ended
Mar. 31, 2024
Accounting Changes and Error Corrections [Abstract]  
Recent Accounting Pronouncements

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effect of Reference Rate Reform on Financial Reporting. This update provides optional guidance for a limited period of time to ease the burden of implementing the usage of new reference rates. The amendments apply to contract modifications that replace a reference rate affected by reference rate reform and contemporaneous modifications of other contract terms related to the replacement of the reference rate. If elected, the optional expedients to contract modifications must be applied consistently for all eligible contracts or eligible transactions. The original timeframe for electing optional expedients to contract modifications was between March 12, 2020 and December 31, 2022. In December 2022, the FASB issued ASU No. 2022-06 deferring the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The guidance should be applied prospectively. Other than electing select expedients associated with an interest rate swap, the Company has not currently utilized any of the optional expedients of exceptions available under this ASU. The Company will continue to assess whether this ASU is applicable throughout the effective period.

In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements, Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. The amendments in this update represent changes to clarify or improve disclosures and presentation requirements of a variety of topics, including Statement of Cash Flows-Overall (disclosures in annual periods where cash flows associated with derivative instruments and their related gains and losses are presented), Earnings Per Share-Overall (disclosures of the methods used in the diluted earnings-per-share computation for each dilutive security), and Debt-Overall (disclosures of amounts and terms of unused lines of credit and unfunded commitments and the weighted-average interest rate on outstanding short-term borrowings). The amendments in this update are effective two years after the SEC removes related disclosure requirements from Regulation S-X or Regulation S-K. The implementation of ASU No. 2023-06 will not have an impact on the Company’s financial position, results of operations and cash flow, but will impact the Company’s interim and annual disclosures related to the relevant subtopics in this update.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures. This update requires more enhanced and detailed interim and annual disclosures regarding significant segment expenses and other segment items that are regularly provided to the chief operating decision maker. These items include the difference between segment revenue less the segment expenses that have been already disclosed under the significant expense principle and each reported measure of segment profit and loss. These requirements are in addition to the disclosures that are currently required by Topic 280, Segment reporting. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 and should be applied retrospectively to all periods presented in the financial statements. The implementation of ASU No. 2023-07 will not have an impact on the Company’s financial position, results of operations and cash flow but will impact the Company’s interim and annual segment reporting disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income taxes (Topic 740) Improvement to Income Tax Disclosures. This update requires that public entities on an annual basis disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, the amendments in this update require the disclosure on an annual basis of the amount of income taxes paid (net of refund received) disaggregated by federal, state and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid is equal or greater than five percent of total income taxes paid (net of refunds received). This update requires all entities to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. The amendments in this update are effective for annual periods beginning after December 15, 2024 and should be applied on a prospective basis. The implementation of ASU No. 2023-09 will not have an impact on the Company’s financial position, results of operations and cash flow but will impact the Company’s annual income tax disclosures.

The Organisation for Economic Co-operation and Development (OECD) proposed a global minimum tax of 15 percent on reported profits (entitled “Pillar Two”) that has been agreed upon in principle by over 100 countries. During 2023, many countries took steps to incorporate Pillar Two into their domestic laws. Although the OECD’s model provides a framework for applying the minimum tax, countries may enact Pillar Two rules that vary slightly from the model, can adopt a different timeline, and may

adjust local tax incentives in response to Pillar Two. While it is uncertain whether the U.S. will enact legislation to adopt Pillar Two, certain countries in which the Company operates have enacted such legislation, and other countries are in the process of introducing legislation to implement Pillar Two. The Company does not expect Pillar Two to have a material impact on its financial position, results of operations, cash flow and effective tax rate.
v3.24.1.u1
Reconciliations of Equity (Tables)
 3 Months Ended
Mar. 31, 2024
Equity [Abstract]  
Reconciliations of Total Equity

Below are reconciliations of total equity for the three months ended March 31, 2024 and 2023:

 

(In thousands, except share and per share amounts)

 

Total

 

 

Common
Stock

 

 

Additional
Paid-in
Capital

 

 

Common
Treasury
Stock

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Retained
Earnings

 

Balance, December 31, 2023

 

$

1,216,490

 

 

$

27,006

 

 

$

247,032

 

 

$

(184,412

)

 

$

(130,602

)

 

$

1,257,466

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of 20,668 shares of common
   stock under incentive compensation plan

 

 

865

 

 

 

21

 

 

 

844

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based and deferred compensation

 

 

(2,640

)

 

 

98

 

 

 

461

 

 

 

(3,199

)

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

13,893

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

13,893

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

(5,664

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(5,664

)

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock ($0.375 per share)

 

 

(8,422

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(8,422

)

Balance, March 31, 2024

 

$

1,214,522

 

 

$

27,125

 

 

$

248,337

 

 

$

(187,611

)

 

$

(136,266

)

 

$

1,262,937

 

 

(In thousands, except share and per share amounts)

 

Total

 

 

Common
Stock

 

 

Additional
Paid-in
Capital

 

 

Common
Treasury
Stock

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Retained
Earnings

 

Balance, December 31, 2022

 

$

1,166,065

 

 

$

26,841

 

 

$

237,202

 

 

$

(180,596

)

 

$

(167,512

)

 

$

1,250,130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of 25,981 shares of common
  stock under incentive compensation plan

 

 

1,514

 

 

 

26

 

 

 

1,488

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based and deferred compensation

 

 

(2,612

)

 

 

91

 

 

 

895

 

 

 

(3,598

)

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

16,142

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

16,142

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss)

 

 

16,964

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

16,964

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock ($0.365 per share)

 

 

(8,160

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(8,160

)

Balance, March 31, 2023

 

$

1,189,913

 

 

$

26,958

 

 

$

239,585

 

 

$

(184,194

)

 

$

(150,548

)

 

$

1,258,112

 
v3.24.1.u1
Fair Value Measurements (Tables)
 3 Months Ended
Mar. 31, 2024
Fair Value Disclosures [Abstract]  
Fair Values and Related Carrying Values of Debt

At March 31, 2024, and December 31, 2023, the fair values and related carrying values of debt, including current maturities, were as follows (the fair value and carrying value amounts are presented without regard to unamortized debt issuance costs of $772,000 and $895,000 as of March 31, 2024 and December 31, 2023, respectively):

 

(In thousands)

 

March 31,
2024

 

 

December 31,
2023

 

Fair value

 

$

614,024

 

 

$

627,695

 

Carrying value

 

 

646,754

 

 

 

655,041

 
Financial Assets and Liabilities, Excluding Cash and Cash Equivalents, Measured on a Recurring Basis at Fair Value

The following tables present financial assets and liabilities, excluding cash and cash equivalents, measured on a recurring basis at fair value as of March 31, 2024, and December 31, 2023, and the level within the fair value hierarchy in which the fair value measurements fall:

 

(In thousands)

 

March 31,
2024

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Mutual fund assets

 

$

23,466

 

 

$

23,466

 

 

$

—

 

 

$

—

 

Derivative assets:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

 

7,014

 

 

 

—

 

 

 

7,014

 

 

 

—

 

Foreign currency contracts

 

 

630

 

 

 

—

 

 

 

630

 

 

 

—

 

Total assets at fair value

 

$

31,110

 

 

$

23,466

 

 

$

7,644

 

 

$

—

 

Derivative liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency contracts

 

$

738

 

 

$

—

 

 

$

738

 

 

$

—

 

 

(In thousands)

 

December 31,
2023

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Mutual fund assets

 

$

26,804

 

 

$

26,804

 

 

$

—

 

 

$

—

 

Derivative assets:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

 

6,183

 

 

 

—

 

 

 

6,183

 

 

 

—

 

Foreign currency contracts

 

 

1,018

 

 

 

—

 

 

 

1,018

 

 

 

—

 

Total assets at fair value

 

$

34,005

 

 

$

26,804

 

 

$

7,201

 

 

$

—

 

Derivative liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency contracts

 

$

928

 

 

$

—

 

 

$

928

 

 

$

—

 
v3.24.1.u1
Stock-based Compensation (Tables)
 3 Months Ended
Mar. 31, 2024
Share-Based Payment Arrangement [Abstract]  
Compensation Expense Recorded for All Stock Options, Stock Awards and Stock Appreciation Rights (SARs)

Compensation expense recorded for all stock options, performance shares, time-based restricted stock units (RSUs) and stock appreciation rights (SARs) was as follows:

(In thousands)

 

Three Months Ended
March 31,

 

2024

 

 

2023

 

$

1,372

 

 

$

999

 
Unrecognized Compensation Costs for Stock Options, Stock Awards and SARs

Unrecognized compensation costs for stock options, performance shares, RSUs and SARs were as follows:

(In thousands)

 

March 31,
2024

 

 

December 31,
2023

 

Stock options

 

$

211

 

 

$

127

 

Performance shares and RSUs

 

 

10,583

 

 

 

3,761

 

SARs

 

 

5,435

 

 

 

3,648

 
Share Based Payment Awards Granted in Period

The change in unrecognized compensation costs for stock options, performance shares, RSUs and SARs is due to new grants issued in 2024.

The Company granted the following awards in the first three months of 2024:

 

 

Shares

 

Stock options

 

 

3,356

 

Performance shares (at target) and RSUs

 

 

104,282

 

SARs

 

 

89,073

 
v3.24.1.u1
Inventories (Tables)
 3 Months Ended
Mar. 31, 2024
Inventory Disclosure [Abstract]  
Composition of Inventories

The composition of inventories at March 31, 2024, and December 31, 2023, was as follows:

 

(In thousands)

 

March 31,
2024

 

 

December 31,
2023

 

Finished goods

 

$

162,398

 

 

$

184,828

 

Raw materials

 

 

94,720

 

 

 

80,730

 

Total inventories

 

$

257,118

 

 

$

265,558

 
v3.24.1.u1
Leases (Tables)
 3 Months Ended
Mar. 31, 2024
Leases [Abstract]  
Schedule of Lease Cost Recognized in both Cost of Sale and Operating Expenses

Lease cost is recognized in both the Cost of Sales and Operating Expenses sections of the Condensed Consolidated Statements of Income.

 

(In thousands)

 

Three Months Ended
March 31,

 

 

 

 

2024

 

 

2023

 

 

Lease Cost

 

 

 

 

 

 

 

Operating lease cost

 

$

4,493

 

 

$

4,349

 

 

Short-term lease cost

 

 

2,687

 

 

 

2,779

 

 

Variable lease cost

 

 

443

 

 

 

557

 

 

Total lease cost

 

$

7,623

 

 

$

7,685

 

 

Other Information

 

 

 

 

 

 

 

Cash paid for amounts included in the
   measurement of lease liabilities:

 

 

 

 

 

 

 

Operating cash flow from operating leases

 

$

4,488

 

 

$

4,332

 

 

Right-of-use assets obtained in exchange
   for new operating lease liabilities

 

 

989

 

 

 

6,545

 

 

 
Schedule of Maturities of Lease Liabilities

The following table outlines the maturities of lease liabilities as of March 31, 2024.

 

(In thousands)

 

 

 

Undiscounted Cash Flows:

 

 

 

2024 (excluding the three months ended March 31, 2024)

 

$

12,541

 

2025

 

 

12,911

 

2026

 

 

10,104

 

2027

 

 

7,771

 

2028

 

 

6,827

 

Subsequent to 2028

 

 

35,527

 

Total Undiscounted Cash Flows

 

$

85,681

 

Less: Imputed interest

 

 

(13,080

)

Present value

 

$

72,601

 

Current operating lease liabilities (1)

 

 

13,538

 

Non-current operating lease liabilities

 

 

59,063

 

Total lease liabilities

 

$

72,601

 
(1)
This item is included in the Accrued liabilities line on the Company’s Condensed Consolidated Balance Sheet.
Schedule of Operating Leases Weighted Average, Remaining Lease Term and Discount Rate

Weighted-average remaining lease term-operating leases

 

9 Years

 

Weighted-average discount rate-operating leases

 

 

3.9

%
v3.24.1.u1
Postretirement Benefit Plans (Tables)
 3 Months Ended
Mar. 31, 2024
Retirement Benefits [Abstract]  
Components of Net Periodic Benefit Cost

Components of Net Periodic Benefit Cost

 

 

UNITED STATES

 

(In thousands)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Interest cost

 

$

1,651

 

 

$

1,731

 

Expected return on plan assets

 

 

(2,116

)

 

 

(2,133

)

Amortization of net actuarial loss

 

 

(3

)

 

 

(6

)

Net periodic benefit cost

 

$

(468

)

 

$

(408

)

 

 

 

UNITED KINGDOM

 

(In thousands)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Interest cost

 

$

161

 

 

$

164

 

Expected return on plan assets

 

 

(183

)

 

 

(170

)

Amortization of net actuarial loss

 

 

80

 

 

 

81

 

Net periodic benefit cost

 

$

58

 

 

$

75

 
Defined Contribution Plan Expenses for Company's Qualified Contribution Plans

Defined contribution plan expenses for the Company’s qualified contribution plans were as follows:

(In thousands)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Retirement savings contributions

 

$

2,125

 

 

$

2,048

 

Profit sharing contributions

 

 

848

 

 

 

707

 

Total defined contribution plan expenses

 

$

2,973

 

 

$

2,755

 
v3.24.1.u1
Earnings Per Share (Tables)
 3 Months Ended
Mar. 31, 2024
Earnings Per Share [Abstract]  
Computations of Basic and Diluted Earnings Per Share

Below are the computations of basic and diluted earnings per share for the three months ended March 31, 2024 and 2023:

(In thousands, except per share amounts)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Computation of Basic Earnings per Share

 

 

 

 

 

 

Net income attributable to Stepan Company

 

$

13,893

 

 

$

16,142

 

Weighted-average number of common shares
   outstanding

 

 

22,824

 

 

 

22,757

 

Basic earnings per share

 

$

0.61

 

 

$

0.71

 

 

 

 

 

 

 

 

Computation of Diluted Earnings per Share

 

 

 

 

 

 

Net income attributable to Stepan Company

 

$

13,893

 

 

$

16,142

 

Weighted-average number of shares outstanding

 

 

22,824

 

 

 

22,757

 

Add weighted-average net shares from assumed
   exercise of options (under treasury stock method)(1)

 

 

47

 

 

 

99

 

Add weighted-average net shares related to unvested
   stock awards (under treasury stock method)

 

 

3

 

 

 

1

 

Add weighted-average net shares from assumed
   exercise of SARs (under treasury stock method)(1)

 

 

54

 

 

 

108

 

Add weighted-average contingently issuable net
  shares related to performance stock awards
  (under treasury stock method)

 

 

20

 

 

 

29

 

Weighted-average shares applicable to diluted
   earnings

 

 

22,948

 

 

 

22,994

 

Diluted earnings per share

 

$

0.61

 

 

$

0.70

 

 

(1)
800,025 and 403,711 options/SARs to acquire shares of the Company's common stock were excluded from the computation of dilutive earnings per share for the three months ended March 31, 2024 and 2023, respectively. The options/SARs' exercise prices were greater than the average market price for the Company's common stock and inclusion of the instruments would have had an antidilutive effect on the computations of the earnings per share.
v3.24.1.u1
Accumulated Other Comprehensive Income (Loss) (Tables)
 3 Months Ended
Mar. 31, 2024
Equity [Abstract]  
Summary of Changes in Accumulated Other Comprehensive Income (Loss)

Below is the change in the Company’s accumulated other comprehensive income (loss) (AOCI) balance by component (net of income taxes) for the three months ended March 31, 2024 and 2023:

 

(In thousands)

 

Foreign
Currency
Translation
Adjustments

 

 

Defined
Benefit
Pension Plan
Adjustments

 

 

Cash Flow
Hedge
Adjustments

 

 

Total

 

Balance at December 31, 2022

 

$

(156,835

)

 

$

(19,079

)

 

$

8,402

 

 

$

(167,512

)

Other comprehensive income before
    reclassifications

 

 

18,423

 

 

 

—

 

 

 

(1,514

)

 

 

16,909

 

Amounts reclassified from AOCI

 

 

—

 

 

 

58

 

 

 

(3

)

 

 

55

 

Net current-period other comprehensive income

 

 

18,423

 

 

 

58

 

 

 

(1,517

)

 

 

16,964

 

Balance at March 31, 2023

 

$

(138,412

)

 

$

(19,021

)

 

$

6,885

 

 

$

(150,548

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2023

 

$

(116,412

)

 

$

(20,408

)

 

$

6,218

 

 

$

(130,602

)

Other comprehensive income before
    reclassifications

 

 

(6,551

)

 

 

—

 

 

 

831

 

 

 

(5,720

)

Amounts reclassified from AOCI

 

 

—

 

 

 

58

 

 

 

(2

)

 

 

56

 

Net current-period other comprehensive income

 

 

(6,551

)

 

 

58

 

 

 

829

 

 

 

(5,664

)

Balance at March 31, 2024

 

$

(122,963

)

 

$

(20,350

)

 

$

7,047

 

 

$

(136,266

)
Summary of Amounts Reclassifications Out of Accumulated Other Comprehensive Income

Information regarding the reclassifications out of AOCI for the three months ended March 31, 2024 and 2023, is displayed below:

 

(In thousands)

 

Amount Reclassified from AOCI (1)

 

 

 

AOCI Components

 

Three Months Ended
March 31,

 

 

Affected Line Item in
Condensed Consolidated
Statements of Income

 

 

2024

 

 

2023

 

 

 

Amortization of defined benefit
    pension actuarial losses

 

$

(77

)

 

$

(75

)

 

(2)

 

 

 

19

 

 

 

17

 

 

Tax benefit

 

 

$

(58

)

 

$

(58

)

 

Net of tax

Gains and losses on cash flow
   hedges:

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

 

2

 

 

 

3

 

 

Cost of sales

 

 

 

2

 

 

 

3

 

 

Total before tax

 

 

 

—

 

 

 

—

 

 

Tax benefit

 

 

$

2

 

 

$

3

 

 

Net of tax

Total reclassifications for the period

 

$

(56

)

 

$

(55

)

 

Net of tax

 

(1)
Amounts in parentheses denote expense to the Company’s Condensed Consolidated Statements of Income.
(2)
This component of accumulated other comprehensive income is included in the computation of net periodic benefit cost. See Note 9, Postretirement Benefit Plans, of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q) for additional details.
v3.24.1.u1
Segment Reporting (Tables)
 3 Months Ended
Mar. 31, 2024
Segment Reporting [Abstract]  
Operating Segment

The Company has three reportable segments: Surfactants, Polymers and Specialty Products. Net sales by segment for the three months ended March 31, 2024 and 2023, were as follows:

 

(In thousands)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Segment Net Sales

 

 

 

 

 

 

Surfactants

 

$

390,820

 

 

$

467,828

 

Polymers

 

 

145,508

 

 

 

161,127

 

Specialty Products

 

 

15,090

 

 

 

22,481

 

      Total

 

$

551,418

 

 

$

651,436

 

 
Reconciliation of Segment Information to Income Before Provision for Income Taxes

Segment operating income and reconciliations of segment operating income to income before provision for income taxes for the three months ended March 31, 2024 and 2023, are summarized below:

 

(In thousands)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Segment Operating Income

 

 

 

 

 

 

Surfactants

 

$

26,079

 

 

$

27,056

 

Polymers

 

 

8,382

 

 

 

10,004

 

Specialty Products

 

 

4,268

 

 

 

2,530

 

      Segment operating income

 

 

38,729

 

 

 

39,590

 

Business restructuring

 

 

—

 

 

 

(157

)

Unallocated corporate expenses (1)

 

 

(18,560

)

 

 

(18,376

)

Total operating income

 

 

20,169

 

 

 

21,057

 

Other Income (Expense)

 

 

 

 

 

 

Interest, net

 

 

(3,071

)

 

 

(2,822

)

Other, net

 

 

2,362

 

 

 

1,668

 

Income before provision for income taxes

 

$

19,460

 

 

$

19,903

 
(1)
Unallocated corporate expenses are primarily comprised of corporate administrative expenses (e.g., corporate finance, legal, human resources, information systems, deferred compensation and environmental remediation) that are not included in segment operating income and are not used to evaluate segment performance.
v3.24.1.u1
Revenue from Contracts with Customers (Tables)
 3 Months Ended
Mar. 31, 2024
Revenue from Contract with Customer [Abstract]  
Geographic Disaggregation of Net Sales

The tables below provide a geographic disaggregation of net sales for the three months ended March 31, 2024 and 2023. The Company’s business disaggregation by geographic region most effectively captures the nature and economic characteristics of the Company’s revenue streams impacted by economic factors.

 

(In thousands)

 

For the Three Months Ended March 31, 2024

 

Geographic Market

 

Surfactants

 

 

Polymers

 

 

Specialty

 

 

Total

 

North America

 

$

229,590

 

 

$

69,809

 

 

$

13,246

 

 

$

312,645

 

Europe

 

 

70,778

 

 

 

63,877

 

 

 

1,835

 

 

 

136,490

 

Latin America

 

 

77,868

 

 

 

417

 

 

 

9

 

 

 

78,294

 

Asia

 

 

12,584

 

 

 

11,405

 

 

 

—

 

 

 

23,989

 

       Total

 

$

390,820

 

 

$

145,508

 

 

$

15,090

 

 

$

551,418

 

 

(In thousands)

 

For the Three Months Ended March 31, 2023

 

Geographic Market

 

Surfactants

 

 

Polymers

 

 

Specialty

 

 

Total

 

North America

 

$

277,140

 

 

$

81,169

 

 

$

17,599

 

 

$

375,908

 

Europe

 

 

91,120

 

 

 

69,057

 

 

 

4,872

 

 

 

165,048

 

Latin America

 

 

81,099

 

 

 

785

 

 

 

10

 

 

 

81,894

 

Asia

 

 

18,470

 

 

 

10,116

 

 

 

—

 

 

 

28,586

 

       Total

 

$

467,828

 

 

$

161,127

 

 

$

22,481

 

 

$

651,436

 
v3.24.1.u1
Debt (Tables)
 3 Months Ended
Mar. 31, 2024
Debt Disclosure [Abstract]  
Debt

At March 31, 2024 and December 31, 2023, debt was comprised of the following:

 

(In thousands)

 

Maturity
Dates

 

March 31,
2024

 

 

December 31,
2023

 

Senior unsecured notes

 

 

 

 

 

 

 

 

3.95% (net of unamortized debt issuance cost
   of $168 and $191 for 2024 and 2023, respectively)

 

2024-2027

 

$

56,975

 

 

$

56,952

 

3.86% (net of unamortized debt issuance cost
   of $81 and $105 for 2024 and 2023, respectively)

 

2024-2025

 

 

28,490

 

 

 

28,466

 

2.30% (net of unamortized debt issuance cost
   of $126 and $142 for 2024 and 2023, respectively)

 

2024-2028

 

 

49,874

 

 

 

49,858

 

2.37% (net of unamortized debt issuance cost
   of $132 and $148 for 2024 and 2023, respectively)

 

2024-2028

 

 

49,868

 

 

 

49,852

 

2.73% (net of unamortized debt issuance cost
   of $149 and $175 for 2024 and 2023, respectively)

 

2025-2031

 

 

99,851

 

 

 

99,825

 

2.83% (net of unamortized debt issuance cost
   of $116 and $134 for 2024 and 2023, respectively)

 

2026-2032

 

 

74,884

 

 

 

74,866

 

Revolving credit facility and term loan borrowing

 

2024

 

 

280,000

 

 

 

283,000

 

Debt of foreign subsidiaries

 

 

 

 

 

 

 

 

Unsecured bank debt, foreign currency

 

2024

 

 

6,040

 

 

 

11,327

 

Total debt

 

 

 

$

645,982

 

 

$

654,146

 

Less current maturities

 

 

 

 

245,861

 

 

 

252,898

 

Long-term debt

 

 

 

$

400,121

 

 

$

401,248

 
v3.24.1.u1
Other, Net (Tables)
 3 Months Ended
Mar. 31, 2024
Other Income and Expenses [Abstract]  
Other Net in Condensed Consolidated Statements of Income

Other, net in the condensed consolidated statements of income included the following:

 

(In thousands)

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Foreign exchange losses

 

$

(375

)

 

$

(324

)

Investment income

 

 

60

 

 

 

143

 

Realized and unrealized gains on investments

 

 

2,267

 

 

 

1,516

 

Net periodic benefit cost

 

 

410

 

 

 

333

 

Other, net

 

$

2,362

 

 

$

1,668

 
v3.24.1.u1
Reconciliations of Equity - Reconciliations of Total Equity (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Reconciliations of total equity    
Beginning Balance $ 1,216,490 $ 1,166,065
Issuance of common stock under incentive compensation plan 865 1,514
Stock-based and deferred compensation (2,640) (2,612)
Net income 13,893 16,142
Other comprehensive income (loss) (5,664) 16,964
Cash dividends paid:    
Common stock (8,422) (8,160)
Ending Balance 1,214,522 1,189,913
Common Stock [Member]    
Reconciliations of total equity    
Beginning Balance 27,006 26,841
Issuance of common stock under incentive compensation plan 21 26
Stock-based and deferred compensation 98 91
Cash dividends paid:    
Ending Balance 27,125 26,958
Additional Paid-in Capital [Member]    
Reconciliations of total equity    
Beginning Balance 247,032 237,202
Issuance of common stock under incentive compensation plan 844 1,488
Stock-based and deferred compensation 461 895
Cash dividends paid:    
Ending Balance 248,337 239,585
Common Treasury Stock [Member]    
Reconciliations of total equity    
Beginning Balance (184,412) (180,596)
Stock-based and deferred compensation (3,199) (3,598)
Cash dividends paid:    
Ending Balance (187,611) (184,194)
Accumulated Other Comprehensive Income (Loss) [Member]    
Reconciliations of total equity    
Beginning Balance (130,602) (167,512)
Other comprehensive income (loss) (5,664) 16,964
Cash dividends paid:    
Ending Balance (136,266) (150,548)
Retained Earnings [Member]    
Reconciliations of total equity    
Beginning Balance 1,257,466 1,250,130
Net income 13,893 16,142
Cash dividends paid:    
Common stock (8,422) (8,160)
Ending Balance $ 1,262,937 $ 1,258,112
v3.24.1.u1
Reconciliations of Equity - Reconciliations of Total Equity (Parenthetical) (Detail) - $ / shares
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Number of shares of common stock issued under incentive compensation plan 20,668 25,981
Common stock $ 0.375 $ 0.365
Common Stock [Member]    
Number of shares of common stock issued under incentive compensation plan   25,981
Additional Paid-in Capital [Member]    
Number of shares of common stock issued under incentive compensation plan   25,981
Retained Earnings [Member]    
Common stock   $ 0.365
v3.24.1.u1
Fair Value Measurements - Additional Information (Detail) - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Fair Value Disclosures [Abstract]    
Unamortized debt issuance cost $ 772,000 $ 895,000
v3.24.1.u1
Fair Value Measurements - Fair Values and Related Carrying Values of Debt (Detail) - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Carrying value $ 646,754 $ 655,041
Level 2 [Member]    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Fair value $ 614,024 $ 627,695
v3.24.1.u1
Fair Value Measurements - Financial Assets and Liabilities, Excluding Cash and Cash Equivalents, Measured on a Recurring Basis at Fair Value (Detail) - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Mutual fund assets $ 23,466 $ 26,804
Derivative assets:    
Interest rate contracts 7,014 6,183
Foreign currency contracts 630 1,018
Total assets at fair value 31,110 34,005
Derivative liabilities:    
Foreign currency contracts 738 928
Level 1 [Member]    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Mutual fund assets 23,466 26,804
Derivative assets:    
Total assets at fair value 23,466 26,804
Level 2 [Member]    
Derivative assets:    
Interest rate contracts 7,014 6,183
Foreign currency contracts 630 1,018
Total assets at fair value 7,644 7,201
Derivative liabilities:    
Foreign currency contracts $ 738 $ 928
v3.24.1.u1
Derivative Instruments - Additional Information (Detail) - USD ($)
 3 Months Ended
Mar. 31, 2024
Dec. 31, 2023
Derivative Instruments And Hedging Activities Disclosures [Line Items]    
Derivative notional amount $ 108,979,000 $ 106,561,000
Revolving Credit Facility [Member]    
Derivative Instruments And Hedging Activities Disclosures [Line Items]    
Debt Instrument, Maturity Date Jun. 24, 2027  
Cash Flow Hedging [Member]    
Derivative Instruments And Hedging Activities Disclosures [Line Items]    
Derivative notional amount $ 100,000,000  
Maturity date of current interest swap contract Mar. 10, 2027  
Minimum [Member]    
Derivative Instruments And Hedging Activities Disclosures [Line Items]    
Derivative foreign currency exchange contracts durations 1 month  
Maximum [Member]    
Derivative Instruments And Hedging Activities Disclosures [Line Items]    
Derivative foreign currency exchange contracts durations 3 months  
v3.24.1.u1
Stock-based Compensation - Additional Information (Detail)
 3 Months Ended
Mar. 31, 2024
Employee Stock Option  
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Weighted average period for amortization of unrecognized compensation cost 2 years 2 months 12 days
Performance Shares and RSUs [Member]  
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Weighted average period for amortization of unrecognized compensation cost 2 years 4 months 24 days
Stock Appreciation Rights (SARs)  
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Weighted average period for amortization of unrecognized compensation cost 2 years 1 month 6 days
v3.24.1.u1
Stock-based Compensation - Compensation Expense Recorded for All Stock Options, Stock Appreciation Rights (SARs) (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Share-Based Payment Arrangement [Abstract]    
Compensation expense $ 1,372 $ 999
v3.24.1.u1
Stock-based Compensation - Unrecognized Compensation Costs for Stock Options, Stock Awards and SARs (Detail) - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Employee Stock Option    
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]    
Unrecognized compensation costs for stock options, stock awards and SARs $ 211 $ 127
Performance Shares and RSUs [Member]    
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]    
Unrecognized compensation costs for stock options, stock awards and SARs 10,583 3,761
Stock Appreciation Rights (SARs)    
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]    
Unrecognized compensation costs for stock options, stock awards and SARs $ 5,435 $ 3,648
v3.24.1.u1
Stock-based Compensation - Share Based Payment Awards Granted in Period (Detail)
 3 Months Ended
Mar. 31, 2024
shares
Employee Stock Option  
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Stock options granted in period 3,356
Performance Shares (at target) and RSUs [Member]  
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Awards granted in period 104,282
Stock Appreciation Rights (SARs)  
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Awards granted in period 89,073
v3.24.1.u1
Inventories - Composition of Inventories (Detail) - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Inventory Disclosure [Abstract]    
Finished goods $ 162,398 $ 184,828
Raw materials 94,720 80,730
Total inventories $ 257,118 $ 265,558
v3.24.1.u1
Leases - Schedule of Lease Cost Recognized in both Cost of Sale and Operating Expenses (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Lease Cost    
Operating lease cost $ 4,493 $ 4,349
Short-term lease cost 2,687 2,779
Variable lease cost 443 557
Total lease cost 7,623 7,685
Cash paid for amounts included in the measurement of lease liabilities:    
Operating cash flow from operating leases 4,488 4,332
Right-of-use assets obtained in exchange for new operating lease liabilities $ 989 $ 6,545
v3.24.1.u1
Leases - Schedule of Lease Liability Payments (Detail) - USD ($)
$ in Thousands
Mar. 31, 2024
Dec. 31, 2023
Leases [Abstract]    
2024 (excluding the three months ended March 31, 2024) $ 12,541  
2025 12,911  
2026 10,104  
2027 7,771  
2028 6,827  
Subsequent to 2028 35,527  
Total Undiscounted Cash Flows 85,681  
Less: Imputed interest (13,080)  
Present value 72,601  
Current operating lease liabilities $ 13,538  
Operating Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration] Accrued Liabilities, Current  
Non-current operating lease liabilities $ 59,063 $ 58,026
Total lease liabilities $ 72,601  
v3.24.1.u1
Leases - Schedule of Operating Leases Weighted Average, Remaining Lease Term and Discount Rate (Detail)
Mar. 31, 2024
Leases [Abstract]  
Weighted-average remaining lease term-operating leases 9 years
Weighted-average discount rate-operating leases 3.90%
v3.24.1.u1
Leases - Additional Information (Detail) - Equipment and Automobile [Member] - USD ($)
Jun. 30, 2024
Mar. 31, 2024
Lessee, Lease, Description [Line Items]    
Leases not yet commenced   $ 922,000
Forecast [Member] | Maximum [Member]    
Lessee, Lease, Description [Line Items]    
Lessee, operating lease, term of contract 5 years  
Forecast [Member] | Minimum [Member]    
Lessee, Lease, Description [Line Items]    
Lessee, operating lease, term of contract 3 years  
v3.24.1.u1
Contingencies - Additional Information (Detail) - USD ($)
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Dec. 31, 2023
Site Contingency [Line Items]      
Environmental losses accrual $ 20,792,000   $ 20,646,000
Cash expenditures related to legal and environmental matters $ 1,585,000 $ 3,466,000  
Contribution for future response costs 5.00%    
Wilmington Site [Member]      
Site Contingency [Line Items]      
Payment of environmental response costs $ 3,778,000    
Minimum [Member]      
Site Contingency [Line Items]      
Environmental losses and legal losses 20,792,000    
Maximum [Member]      
Site Contingency [Line Items]      
Environmental losses and legal losses $ 49,778,000    
v3.24.1.u1
Postretirement Benefit Plans - Components of Net Periodic Benefit Cost (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Defined Benefit Plan Disclosure [Line Items]    
Net periodic benefit cost (income) $ (410) $ (333)
United States [Member]    
Defined Benefit Plan Disclosure [Line Items]    
Interest cost 1,651 1,731
Expected return on plan assets (2,116) (2,133)
Amortization of net actuarial (gain) loss (3) (6)
Net periodic benefit cost (income) (468) (408)
United Kingdom [Member]    
Defined Benefit Plan Disclosure [Line Items]    
Interest cost 161 164
Expected return on plan assets (183) (170)
Amortization of net actuarial (gain) loss 80 81
Net periodic benefit cost (income) $ 58 $ 75
v3.24.1.u1
Postretirement Benefit Plans - Defined Benefit Pension Plans - Additional Information (Detail)
 3 Months Ended
Mar. 31, 2024
USD ($)
Defined Benefit Plan Disclosure [Line Items]  
Percentage of union and non-union employees eligible for either statutory or Company's sponsored profit sharing contributions 85.00%
Percentage of us based union and non-union employees eligible for either statutory or Company's sponsored profit sharing contributions 100.00%
Defined Contribution Plans [Member]  
Defined Benefit Plan Disclosure [Line Items]  
Balance of trust assets $ 559,000
United States [Member] | Unfunded Plan [Member] | Non-qualified Plans [Member]  
Defined Benefit Plan Disclosure [Line Items]  
Expected contributions or payments to defined benefit plans 316,000
Employer contributions or payments $ 129,000
v3.24.1.u1
Postretirement Benefit Plans - Defined Contribution Plan Expenses for Company's Qualified Contribution Plans (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Defined Contribution Plan Disclosure [Line Items]    
Total defined contribution plan expenses $ 2,973 $ 2,755
Retirement Savings Contributions [Member]    
Defined Contribution Plan Disclosure [Line Items]    
Total defined contribution plan expenses 2,125 2,048
Profit Sharing Contributions [Member]    
Defined Contribution Plan Disclosure [Line Items]    
Total defined contribution plan expenses $ 848 $ 707
v3.24.1.u1
Earnings Per Share - Computations of Basic and Diluted Earnings Per Share (Detail) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Computation of Basic Earnings per Share    
Net income attributable to Stepan Company $ 13,893 $ 16,142
Weighted-average number of common shares outstanding 22,824 22,757
Basic earnings per share $ 0.61 $ 0.71
Computation of Diluted Earnings per Share    
Net income attributable to Stepan Company $ 13,893 $ 16,142
Weighted-average number of common shares outstanding 22,824 22,757
Add weighted-average net shares related to unvested stock awards (under treasury stock method) 3 1
Weighted-average shares applicable to diluted earnings 22,948 22,994
Diluted earnings per share $ 0.61 $ 0.7
Stock Option [Member]    
Computation of Diluted Earnings per Share    
Add weighted-average net shares from assumed exercise of options (under treasury stock method) [1] 47 99
Stock Appreciation Rights (SARs) [Member]    
Computation of Diluted Earnings per Share    
Add weighted-average net shares from assumed exercise of options (under treasury stock method) [1] 54 108
Performance Stock Award [Member]    
Computation of Diluted Earnings per Share    
Add weighted-average net shares from assumed exercise of options (under treasury stock method) 20 29
[1] 800,025 and 403,711 options/SARs to acquire shares of the Company's common stock were excluded from the computation of dilutive earnings per share for the three months ended March 31, 2024 and 2023, respectively. The options/SARs' exercise prices were greater than the average market price for the Company's common stock and inclusion of the instruments would have had an antidilutive effect on the computations of the earnings per share.
v3.24.1.u1
Earnings Per Share - Computations of Basic and Diluted Earnings Per Share (Parenthetical) (Detail) - shares
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Options and Stock Appreciation Rights (SARs) [Member]    
Earnings Per Share Basic [Line Items]    
Options/SARs to purchase shares of common stock were excluded from the computations of diluted earnings per share 800,025 403,711
v3.24.1.u1
Accumulated Other Comprehensive Income (Loss) - Summary of Changes in Accumulated Other Comprehensive Income (Loss) (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Accumulated Other Comprehensive Income Loss [Line Items]    
Beginning Balance $ 1,216,490  
Ending Balance 1,214,522  
Foreign Currency Translation Adjustments [Member]    
Accumulated Other Comprehensive Income Loss [Line Items]    
Beginning Balance (116,412) $ (156,835)
Other comprehensive income before reclassifications (6,551) 18,423
Amounts reclassified from AOCI 0  
Net current-period other comprehensive income (6,551) 18,423
Ending Balance (122,963) (138,412)
Defined Benefit Pension Plan Adjustments [Member]    
Accumulated Other Comprehensive Income Loss [Line Items]    
Beginning Balance (20,408) (19,079)
Other comprehensive income before reclassifications 0  
Amounts reclassified from AOCI 58 58
Net current-period other comprehensive income 58 58
Ending Balance (20,350) (19,021)
Cash Flow Hedge Adjustments [Member]    
Accumulated Other Comprehensive Income Loss [Line Items]    
Beginning Balance 6,218 8,402
Other comprehensive income before reclassifications 831 (1,514)
Amounts reclassified from AOCI (2) (3)
Net current-period other comprehensive income 829 (1,517)
Ending Balance 7,047 6,885
AOCI Attributable to Parent [Member]    
Accumulated Other Comprehensive Income Loss [Line Items]    
Beginning Balance (130,602) (167,512)
Other comprehensive income before reclassifications (5,720) 16,909
Amounts reclassified from AOCI 56 55
Net current-period other comprehensive income (5,664) 16,964
Ending Balance $ (136,266) $ (150,548)
v3.24.1.u1
Accumulated Other Comprehensive Income (Loss) - Summary of Amounts Reclassifications Out of Accumulated Other Comprehensive Income (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]    
Income Before Provision for Income Taxes $ 19,460 $ 19,903
Tax benefit (5,567) (3,761)
Cost of Sales 481,137 577,876
Defined Benefit Pension Plan Adjustments [Member] | Amounts Reclassified From Accumulated Other Comprehensive Income [Member]    
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]    
Amortization of defined benefit pension actuarial losses [1],[2] (77) (75)
Tax benefit [1] 19 17
Income applicable to common stock [1] (58) (58)
Cash Flow Hedge Adjustments [Member] | Amounts Reclassified From Accumulated Other Comprehensive Income [Member]    
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]    
Income Before Provision for Income Taxes [1] 2 3
Income applicable to common stock [1] 2 3
Cash Flow Hedge Adjustments [Member] | Foreign exchange contracts [Member] | Amounts Reclassified From Accumulated Other Comprehensive Income [Member]    
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]    
Cost of Sales [1] 2 3
Accumulated Other Comprehensive Income (Loss) [Member] | Amounts Reclassified From Accumulated Other Comprehensive Income [Member]    
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]    
Income applicable to common stock [1] $ (56) $ (55)
[1] Amounts in parentheses denote expense to the Company’s Condensed Consolidated Statements of Income.
[2] This component of accumulated other comprehensive income is included in the computation of net periodic benefit cost. See Note 9, Postretirement Benefit Plans, of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q) for additional details.
v3.24.1.u1
Segment Reporting - Additional Information (Detail)
 3 Months Ended
Mar. 31, 2024
Segment
Segment Reporting [Abstract]  
Number of reportable segments 3
v3.24.1.u1
Segment Reporting - Operating Segment (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Segment Reporting Information [Line Items]    
Net sales $ 551,418 $ 651,436
Surfactants [Member]    
Segment Reporting Information [Line Items]    
Net sales 390,820 467,828
Polymers [Member]    
Segment Reporting Information [Line Items]    
Net sales 145,508 161,127
Specialty Products [Member]    
Segment Reporting Information [Line Items]    
Net sales $ 15,090 $ 22,481
v3.24.1.u1
Segment Reporting - Reconciliation of Segment Information to Income Before Provision for Income Taxes (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Segment Reporting Information [Line Items]    
Operating Income $ 20,169 $ 21,057
Business restructuring   (157)
Other Income (Expense)    
Interest, net (3,071) (2,822)
Other, net 2,362 1,668
Income before provision for income taxes 19,460 19,903
Operating Segments [Member]    
Segment Reporting Information [Line Items]    
Operating Income 38,729 39,590
Operating Segments [Member] | Surfactants [Member]    
Segment Reporting Information [Line Items]    
Operating Income 26,079 27,056
Operating Segments [Member] | Polymers [Member]    
Segment Reporting Information [Line Items]    
Operating Income 8,382 10,004
Operating Segments [Member] | Specialty Products [Member]    
Segment Reporting Information [Line Items]    
Operating Income 4,268 2,530
Segment Reconciling Items [Member]    
Segment Reporting Information [Line Items]    
Unallocated corporate expenses [1] $ (18,560) $ (18,376)
[1] Unallocated corporate expenses are primarily comprised of corporate administrative expenses (e.g., corporate finance, legal, human resources, information systems, deferred compensation and environmental remediation) that are not included in segment operating income and are not used to evaluate segment performance.
v3.24.1.u1
Revenue from Contracts with Customers - Additional Information (Detail) - USD ($)
 3 Months Ended
Mar. 31, 2024
Dec. 31, 2020
Disaggregation Of Revenue [Line Items]    
Contract assets $ 0  
Contract liabilities 931,000  
Contract liabilities revenue recorded 2,400,000  
Long term deferred revenue   $ 10,709,000
Pre-existing Contract Liabilities [Member]    
Disaggregation Of Revenue [Line Items]    
Contract liabilities revenue recorded 688,000  
Long-Term [Member]    
Disaggregation Of Revenue [Line Items]    
Long term deferred revenue 6,093,000  
Short-Term [Member]    
Disaggregation Of Revenue [Line Items]    
Short-term defferred revenue $ 2,216,000  
v3.24.1.u1
Revenue from Contracts with Customers - Summary of Geographic Disaggregation of Net Sales (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Disaggregation Of Revenue [Line Items]    
Net sales $ 551,418 $ 651,436
Surfactants [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales 390,820 467,828
Polymers [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales 145,508 161,127
Specialty Products [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales 15,090 22,481
North America [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales 312,645 375,908
North America [Member] | Surfactants [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales 229,590 277,140
North America [Member] | Polymers [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales 69,809 81,169
North America [Member] | Specialty Products [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales 13,246 17,599
Europe [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales 136,490 165,048
Europe [Member] | Surfactants [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales 70,778 91,120
Europe [Member] | Polymers [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales 63,877 69,057
Europe [Member] | Specialty Products [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales 1,835 4,872
Latin America [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales 78,294 81,894
Latin America [Member] | Surfactants [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales 77,868 81,099
Latin America [Member] | Polymers [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales 417 785
Latin America [Member] | Specialty Products [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales 9 10
Asia [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales 23,989 28,586
Asia [Member] | Surfactants [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales 12,584 18,470
Asia [Member] | Polymers [Member]    
Disaggregation Of Revenue [Line Items]    
Net sales $ 11,405 $ 10,116
v3.24.1.u1
Debt - Debt (Detail) - USD ($)
$ in Thousands
 3 Months Ended 12 Months Ended
Mar. 31, 2024
Dec. 31, 2023
Debt Instrument [Line Items]    
Total debt $ 645,982 $ 654,146
Less current maturities 245,861 252,898
Long-term debt 400,121 401,248
Senior unsecured 3.95% note [Member]    
Debt Instrument [Line Items]    
Total debt $ 56,975 $ 56,952
Debt instrument interest rate percentage 3.95% 3.95%
Senior unsecured 3.95% note [Member] | Minimum [Member]    
Debt Instrument [Line Items]    
Maturity Dates 2024 2024
Senior unsecured 3.95% note [Member] | Maximum [Member]    
Debt Instrument [Line Items]    
Maturity Dates 2027 2027
Senior unsecured 3.86% note [Member]    
Debt Instrument [Line Items]    
Total debt $ 28,490 $ 28,466
Debt instrument interest rate percentage 3.86% 3.86%
Senior unsecured 3.86% note [Member] | Minimum [Member]    
Debt Instrument [Line Items]    
Maturity Dates 2024 2024
Senior unsecured 3.86% note [Member] | Maximum [Member]    
Debt Instrument [Line Items]    
Maturity Dates 2025 2025
Senior unsecured 2.30% note [Member]    
Debt Instrument [Line Items]    
Total debt $ 49,874 $ 49,858
Debt instrument interest rate percentage 2.30% 2.30%
Senior unsecured 2.30% note [Member] | Minimum [Member]    
Debt Instrument [Line Items]    
Maturity Dates 2024 2024
Senior unsecured 2.30% note [Member] | Maximum [Member]    
Debt Instrument [Line Items]    
Maturity Dates 2028 2028
Senior unsecured 2.37% note [Member]    
Debt Instrument [Line Items]    
Total debt $ 49,868 $ 49,852
Debt instrument interest rate percentage 2.37% 2.37%
Senior unsecured 2.37% note [Member] | Minimum [Member]    
Debt Instrument [Line Items]    
Maturity Dates 2024 2024
Senior unsecured 2.37% note [Member] | Maximum [Member]    
Debt Instrument [Line Items]    
Maturity Dates 2028 2028
Senior unsecured 2.73% note [Member]    
Debt Instrument [Line Items]    
Total debt $ 99,851 $ 99,825
Debt instrument interest rate percentage 2.73% 2.73%
Senior unsecured 2.73% note [Member] | Minimum [Member]    
Debt Instrument [Line Items]    
Maturity Dates 2025 2025
Senior unsecured 2.73% note [Member] | Maximum [Member]    
Debt Instrument [Line Items]    
Maturity Dates 2031 2031
Senior unsecured 2.83% note [Member]    
Debt Instrument [Line Items]    
Total debt $ 74,884 $ 74,866
Debt instrument interest rate percentage 2.83% 2.83%
Senior unsecured 2.83% note [Member] | Minimum [Member]    
Debt Instrument [Line Items]    
Maturity Dates 2026 2026
Senior unsecured 2.83% note [Member] | Maximum [Member]    
Debt Instrument [Line Items]    
Maturity Dates 2032 2032
Debt of foreign subsidiaries Unsecured bank debt, foreign currency [Member]    
Debt Instrument [Line Items]    
Total debt $ 6,040 $ 11,327
Maturity Dates 2024 2024
Revolving credit facility and term loan borrowing [Member]    
Debt Instrument [Line Items]    
Total debt $ 280,000 $ 283,000
Revolving credit facility and term loan borrowing [Member] | Minimum [Member]    
Debt Instrument [Line Items]    
Maturity Dates 2024 2024
v3.24.1.u1
Debt - Debt (Parenthetical) (Detail) - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Debt Instrument [Line Items]    
Unamortized debt issuance cost $ 772,000 $ 895,000
Senior unsecured 3.95% note [Member]    
Debt Instrument [Line Items]    
Unamortized debt issuance cost 168,000 191,000
Senior unsecured 3.86% note [Member]    
Debt Instrument [Line Items]    
Unamortized debt issuance cost 81,000 105,000
Senior unsecured 2.30% note [Member]    
Debt Instrument [Line Items]    
Unamortized debt issuance cost 126,000 142,000
Senior unsecured 2.37% note [Member]    
Debt Instrument [Line Items]    
Unamortized debt issuance cost 132,000 148,000
Senior unsecured 2.73% note [Member]    
Debt Instrument [Line Items]    
Unamortized debt issuance cost 149,000 175,000
Senior unsecured 2.83% note [Member]    
Debt Instrument [Line Items]    
Unamortized debt issuance cost $ 116,000 $ 134,000
v3.24.1.u1
Debt - Additional Information (Detail) - USD ($)
 3 Months Ended
Jun. 24, 2022
Mar. 31, 2024
Dec. 31, 2023
Debt Instrument [Line Items]      
Total debt   $ 645,982,000 $ 654,146,000
Debt instrument maturity dates description   The notes had original maturities of seven to 12 years with mandatory principal payments beginning four, five and six years after issuance  
Multi-Currency Credit Facility with Syndicate of Banks [Member]      
Debt Instrument [Line Items]      
Borrowing capacity $ 450,000,000    
Committed multi-currency credit facility, maturity date Jun. 24, 2027    
Multi-Currency Revolving Credit Facility [Member] | Multi-Currency Credit Facility with Syndicate of Banks [Member]      
Debt Instrument [Line Items]      
Borrowing capacity $ 350,000,000    
Delayed Draw Term Loan Credit Facility [Member]      
Debt Instrument [Line Items]      
Borrowing capacity   $ 93,750,000  
Term loan principal repaid   6,250,000  
Delayed Draw Term Loan Credit Facility [Member] | Multi-Currency Credit Facility with Syndicate of Banks [Member]      
Debt Instrument [Line Items]      
Borrowing capacity $ 100,000,000    
Multi Currency Revolving Credit Agreement [Member]      
Debt Instrument [Line Items]      
Outstanding borrowings, including term loan   280,000,000  
Letters of Credit Outstanding   10,979,000  
Unused Revolving credit   152,771,000  
Unrestricted retained earnings   240,735,000 $ 234,399,000
Unsecured Private Placement Notes [Member]      
Debt Instrument [Line Items]      
Total debt   $ 359,942,000  
Unsecured Private Placement Notes [Member] | Minimum [Member]      
Debt Instrument [Line Items]      
Debt instrument interest rate percentage   2.30%  
Maturity Dates   7 years  
Unsecured Private Placement Notes [Member] | Maximum [Member]      
Debt Instrument [Line Items]      
Debt instrument interest rate percentage   3.95%  
Maturity Dates   12 years  
v3.24.1.u1
Other, Net - Other Net in Condensed Consolidated Statements of Income (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Other Nonoperating Income (Expense) [Abstract]    
Foreign exchange losses $ (375) $ (324)
Investment income 60 143
Realized and unrealized gains on investments 2,267 1,516
Net periodic pension benefit income 410 333
Other, net $ 2,362 $ 1,668
v3.24.1.u1
Noncash Investing and Financing Activities - Additional Information (Detail) - USD ($)
 3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Supplemental Cash Flow Elements [Line Items]    
Noncash investing activities, payables incurred for property, plant and equipment expenditures, unpaid $ 13,004,000 $ 27,061,000
Common Stock [Member] | Stock Award Plan [Member]    
Supplemental Cash Flow Elements [Line Items]    
Noncash financing activities shares issued 98,146 88,497
Noncash financing activities issued value $ 8,808,000 $ 9,607,000
v3.24.1.u1
Recent Accounting Pronouncements - Additional Information (Details)
 3 Months Ended
Mar. 31, 2024
Country
Accounting Changes and Error Corrections [Abstract]  
Percentage of global minimum tax on reported profits 15.00%
Number of countries 100
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