What changed in STEPAN CO's 10-K — 2022 vs 2023
vs
Paragraph-level year-over-year comparison of STEPAN CO's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+416 added−392 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-28)
Top changes in STEPAN CO's 2023 10-K
416 paragraphs added · 392 removed · 305 edited across 1 sections
- Item 7. Management's Discussion & Analysis+416 / −392 · 305 edited
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
305 edited+111 added−87 removed192 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
305 edited+111 added−87 removed192 unchanged
2022 filing
2023 filing
Biggest changeEnvironmental Protection Agency website to identify any additional information relevant to the specific property sites. • We read Board of Directors meeting minutes to identify any additional information relevant to the specific property sites. • We evaluated whether the assumptions related to the nature and extent of contamination and the methods and resulting costs of remediation used by the Company to determine the estimated losses or ranges of losses were reasonable by comparing those assumptions to decisions rendered by state and Federal environmental regulatory agencies, information provided by feasibility studies and remedial action plans developed for the Maywood site. • If the Company’s reasonable estimate of loss for a remediation site is a range, we evaluated whether the amount of the liability recognized by the Company within that range was reasonable based on the facts and circumstances specific to the remediation site. • We evaluated the Company’s environmental contingencies disclosures for consistency with our knowledge of the Company’s environmental matters. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Chicago, Illinois February 28, 2023 We have served as the Company’s auditor since 2002. 37 Stepan Company Consol idated Statements of Income For the years ended December 31, 2022, 2021 and 2020 (In thousands, except per share amounts) 2022 2021 2020 Net Sales (Note 1) $ 2,773,270 $ 2,345,966 $ 1,869,750 Cost of Sales 2,346,201 1,950,156 1,486,137 Gross Profit 427,069 395,810 383,613 Operating Expenses: Selling (Note 1) 59,030 59,186 55,543 Administrative (Note 1) 102,177 92,906 87,362 Research, development and technical services (Note 1) 66,633 62,689 57,986 Deferred compensation (income) expense (Note 12) ( 9,393 ) 6,895 9,988 218,447 221,676 210,879 Goodwill impairment (Note 4) ( 978 ) — — Business restructuring and loss on asset disposition (Note 22) ( 308 ) ( 3,353 ) ( 1,212 ) Operating Income 207,336 170,781 171,522 Other Income (Expense): Interest, net (Note 6) ( 9,809 ) ( 5,753 ) ( 5,409 ) Other, net (Note 8) ( 8,824 ) 7,509 4,954 ( 18,633 ) 1,756 ( 455 ) Income Before Provision for Income Taxes 188,703 172,537 171,067 Provision for Income Taxes (Note 9) \ 41,550 34,642 43,411 Net Income 147,153 137,895 127,656 Net Income Attributable to Noncontrolling Interest (Note 1) — ( 91 ) ( 886 ) Net Income Attributable to Stepan Company $ 147,153 $ 137,804 $ 126,770 Net Income Per Common Share Attributable to Stepan Company (Note 18): Basic $ 6.46 $ 6.01 $ 5.52 Diluted $ 6.38 $ 5.92 $ 5.45 Shares Used to Compute Net Income Per Common Share Attributable to Stepan Company (Note 18): Basic 22,781 22,922 22,949 Diluted 23,064 23,287 23,256 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 38 Stepan Company Cons olidated Statements of Comprehensive Income For the years ended December 31, 2022, 2021 and 2020 (In thousands) 2022 2021 2020 Net Income $ 147,153 $ 137,895 $ 127,656 Other Comprehensive Income: Foreign currency translation adjustments (Note 19) ( 21,567 ) ( 28,154 ) ( 2,973 ) Defined benefit pension plans: Net actuarial gain (loss) arising in period (net of tax benefit of $ 894 , tax expense of $ 2,661 and tax benefit of $ 265 for 2022, 2021 and 2020, respectively) ( 2,857 ) 8,188 ( 996 ) Amortization of prior service cost included in pension expense (net of taxes of $ 3 , $ 4 and $ 3 for 2022, 2021 and 2020, respectively) 6 8 8 Amortization of actuarial loss included in pension expense (net of taxes of $ 599 , $ 1,157 and $ 1,089 for 2022, 2021 and 2020, respectively) 1,794 3,643 3,332 Net defined benefit pension plan activity (Note 19) ( 1,057 ) 11,839 2,344 Cash flow hedges: Cash flow hedge activity 8,357 — — Reclassifications to income in period ( 9 ) ( 9 ) ( 9 ) Net cash flow hedge activity (Note 19) 8,348 ( 9 ) ( 9 ) Other Comprehensive Income ( 14,276 ) ( 16,324 ) ( 638 ) Comprehensive Income 132,877 121,571 127,018 Comprehensive Income Attributable to Noncontrolling Interest — ( 122 ) ( 959 ) Comprehensive Income Attributable to Stepan Company $ 132,877 $ 121,449 $ 126,059 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 39 Stepan Company Co nsolidated Balance Sheets December 31, 2022 and 2021 (Dollars in thousands) 2022 2021 Assets Current Assets: Cash and cash equivalents $ 173,750 $ 159,186 Receivables, less allowances of $ 11,100 in 2022 and $ 10,157 in 2021 436,914 419,542 Inventories (Note 5) 402,531 305,538 Other current assets 31,607 29,102 Total current assets 1,044,802 913,368 Property, Plant and Equipment: Land 50,695 50,675 Buildings and improvements 293,264 260,809 Machinery and equipment 1,640,478 1,541,925 Construction in progress 386,115 237,548 2,370,552 2,090,957 Less: Accumulated depreciation ( 1,297,255 ) ( 1,240,353 ) Property, plant and equipment, net 1,073,297 850,604 Goodwill, net (Note 4) 95,922 97,187 Other intangible assets, net (Note 4) 58,026 60,784 Long-term investments (Note 2) 23,294 34,495 Operating lease assets (Note 7) 62,540 69,612 Other non-current assets 75,291 39,562 Total Assets $ 2,433,172 $ 2,065,612 Liabilities and Equity Current Liabilities: Current maturities of long-term debt (Note 6) $ 132,111 $ 40,718 Accounts payable 375,726 323,362 Accrued liabilities (Note 14) 162,812 136,396 Total current liabilities 670,649 500,476 Deferred income taxes (Note 9) 10,179 12,491 Long-term debt, less current maturities (Note 6) 455,029 322,862 Non-current operating lease liability (Note 7) 50,559 56,668 Other non-current liabilities (Note 15) 80,691 98,922 Commitments and Contingencies (Note 16) Equity (Note 10): Common stock, $ 1 par value; 60,000,000 authorized shares; 26,840,843 issued shares in 2022 and 26,760,714 issued shares in 2021 26,841 26,761 Additional paid-in capital 237,202 220,820 Accumulated other comprehensive loss (Note 19) ( 167,512 ) ( 153,236 ) Retained earnings 1,250,130 1,133,550 Less: Common treasury stock, at cost, 4,605,858 shares in 2022 and 4,340,729 shares in 2021 ( 180,596 ) ( 153,702 ) Total Stepan Company stockholders’ equity 1,166,065 1,074,193 Total Liabilities and Equity $ 2,433,172 $ 2,065,612 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 40 Stepan Company Con solidated Statements of Cash Flows For the years ended December 31, 2022, 2021 and 2020 (In thousands) 2022 2021 2020 Cash Flows From Operating Activities Net income $ 147,153 $ 137,895 $ 127,656 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 94,650 90,876 81,860 Deferred compensation ( 9,393 ) 6,895 9,988 Realized and unrealized (gains) losses on long-term investments 8,188 ( 2,289 ) ( 3,143 ) Stock-based compensation 13,851 11,716 10,080 Deferred income taxes ( 27,452 ) ( 33,605 ) ( 4,506 ) Goodwill impairment (Note 4) 978 — — Other non-cash items 1,752 2,158 3,068 Changes in assets and liabilities, excluding effects of acquisitions: Receivables, net ( 26,153 ) ( 104,231 ) ( 23,417 ) Inventories ( 99,394 ) ( 79,258 ) ( 15,358 ) Other current assets ( 4,354 ) ( 1,434 ) ( 13,927 ) Accounts payable and accrued liabilities 54,173 44,414 55,739 Pension liabilities ( 1,821 ) ( 1,729 ) ( 612 ) Environmental and legal liabilities 9,547 450 ( 3,021 ) Deferred revenues ( 962 ) 277 10,809 Net Cash Provided By Operating Activities 160,763 72,135 235,216 Cash Flows From Investing Activities Expenditures for property, plant and equipment ( 301,553 ) ( 194,482 ) ( 125,792 ) Proceeds from asset disposition — 4,149 — Asset acquisition (Note 20) — ( 3,503 ) ( 2,040 ) Business acquisitions, net of cash acquired (Note 20) ( 9,693 ) ( 184,473 ) ( 13,519 ) Other, net 3,156 1,480 2,317 Net Cash Used In Investing Activities ( 308,090 ) ( 376,829 ) ( 139,034 ) Cash Flows From Financing Activities Revolving debt and bank overdrafts, net (Note 6) 186,551 2,861 — Other debt borrowings (Note 6) 75,000 200,000 — Other debt repayments (Note 6) ( 37,857 ) ( 37,858 ) ( 23,571 ) Dividends paid ( 30,573 ) ( 28,083 ) ( 25,405 ) Company stock repurchased ( 24,949 ) ( 16,969 ) ( 15,253 ) Stock option exercises 782 1,369 2,926 Other, net ( 2,745 ) ( 3,987 ) ( 3,631 ) Net Cash Provided By (Used In) Financing Activities 166,209 117,333 ( 64,934 ) Effect of Exchange Rate Changes on Cash ( 4,318 ) ( 3,391 ) 3,307 Net Increase (Decrease) in Cash and Cash Equivalents 14,564 ( 190,752 ) 34,555 Cash and Cash Equivalents at Beginning of Year 159,186 349,938 315,383 Cash and Cash Equivalents at End of Year $ 173,750 $ 159,186 $ 349,938 Supplemental Cash Flow Information Cash payments of income taxes, net of refunds/payments $ 41,617 $ 92,867 $ 39,017 Cash payments of interest $ 16,526 $ 9,542 $ 9,329 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 41 Stepan Company C onsolidated Statements of Equity For the year ended December 31, 2020 STEPAN COMPANY STOCKHOLDERS (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 Noncontrolling Interest Balance, December 31, 2019 $ 892,496 $ 26,493 $ 193,135 $ ( 114,139 ) $ ( 136,170 ) $ 922,464 $ 713 Issuance of 48,389 shares of common stock under stock option plan 2,926 48 2,878 — — — — Purchase of 173,956 shares of common stock ( 15,253 ) — — ( 15,253 ) — — — Stock-based and deferred compensation 6,583 117 10,703 ( 4,237 ) — — — Net income 127,656 — — — — 126,770 886 Other comprehensive income ( 638 ) — — — ( 711 ) — 73 Cash dividends paid: Common stock ($ 1.130 per share) ( 25,405 ) — — — — ( 25,405 ) — Balance, December 31, 2020 $ 988,365 $ 26,658 $ 206,716 $ ( 133,629 ) $ ( 136,881 ) $ 1,023,829 $ 1,672 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 42 Stepan Company Consolidated Statements of Equity For the year ended December 31, 2021 STEPAN COMPANY STOCKHOLDERS (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 Noncontrolling Interest Balance, December 31, 2020 $ 988,365 $ 26,658 $ 206,716 $ ( 133,629 ) $ ( 136,881 ) $ 1,023,829 $ 1,672 Issuance of 20,435 shares of common stock under stock option plan 1,369 20 1,349 — — — — Purchase of 135,103 shares of common stock ( 16,969 ) — — ( 16,969 ) — — — Stock-based and deferred compensation 9,734 83 12,755 ( 3,104 ) — — — Net income 137,895 — — — — 137,804 91 Other comprehensive income ( 16,324 ) — — — ( 16,355 ) — 31 Cash dividends paid: Common stock ($ 1.250 per share) ( 28,083 ) — — — — ( 28,083 ) — Other (1) ( 1,794 ) ( 1,794 ) Balance, December 31, 2021 $ 1,074,193 $ 26,761 $ 220,820 $ ( 153,702 ) $ ( 153,236 ) $ 1,133,550 $ — (1) Reflects the derecognition of noncontrolling interest due to the dissolution of the China joint venture.
Biggest changeWe also evaluated whether the estimated future cash flows were consistent with evidence obtained in other areas of the audit. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Chicago, Illinois February 29, 2024 We have served as the Company’s auditor since 2002. 40 Stepan Company Consol idated Statements of Income For the years ended December 31, 2023, 2022 and 2021 (In thousands, except per share amounts) 2023 2022 2021 Net Sales (Note 1) $ 2,325,768 $ 2,773,270 $ 2,345,966 Cost of Sales 2,048,170 2,346,201 1,950,156 Gross Profit 277,598 427,069 395,810 Operating Expenses: Selling (Note 1) 48,367 59,030 59,186 Administrative (Note 1) 93,202 102,177 92,906 Research, development and technical services (Note 1) 59,039 66,633 62,689 Deferred compensation (income) expense (Note 12) 4,371 ( 9,393 ) 6,895 204,979 218,447 221,676 Goodwill and other intangibles impairment (Note 4) 2,038 978 — Business restructuring, assets impairment and loss on asset disposition (Note 22) 11,968 308 3,353 Operating Income 58,613 207,336 170,781 Other Income (Expense): Interest, net (Note 6) ( 12,103 ) ( 9,809 ) ( 5,753 ) Other, net (Note 8) 1,881 ( 8,824 ) 7,509 ( 10,222 ) ( 18,633 ) 1,756 Income Before Provision for Income Taxes 48,391 188,703 172,537 Provision for Income Taxes (Note 9) \ 8,187 41,550 34,642 Net Income 40,204 147,153 137,895 Net Income Attributable to Noncontrolling Interest (Note 1) — — ( 91 ) Net Income Attributable to Stepan Company $ 40,204 $ 147,153 $ 137,804 Net Income Per Common Share Attributable to Stepan Company (Note 18): Basic $ 1.77 $ 6.46 $ 6.01 Diluted $ 1.75 $ 6.38 $ 5.92 Shares Used to Compute Net Income Per Common Share Attributable to Stepan Company (Note 18): Basic 22,777 22,781 22,922 Diluted 22,946 23,064 23,287 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 41 Stepan Company Cons olidated Statements of Comprehensive Income For the years ended December 31, 2023, 2022 and 2021 (In thousands) 2023 2022 2021 Net Income $ 40,204 $ 147,153 $ 137,895 Other Comprehensive Income: Foreign currency translation adjustments (Note 19) 40,423 ( 21,567 ) ( 28,154 ) Defined benefit pension plans: Net actuarial gain (loss) arising in period (net of tax benefit of $ 508 , tax benefit of $ 894 and tax expense of $ 2,661 for 2023, 2022 and 2021, respectively) ( 1,630 ) ( 2,857 ) 8,188 Amortization of prior service cost included in pension expense (net of tax expense of $ 2 , $ 3 and $ 4 for 2023, 2022 and 2021, respectively) 8 6 8 Amortization of actuarial loss included in pension expense (net of tax expense of $ 99 , $ 599 and $ 1,157 for 2023, 2022 and 2021, respectively) 293 1,794 3,643 Net defined benefit pension plan activity (Note 19) ( 1,329 ) ( 1,057 ) 11,839 Cash flow hedges: Cash flow hedge activity ( 2,174 ) 8,357 — Reclassifications to income in period ( 10 ) ( 9 ) ( 9 ) Net cash flow hedge activity (Note 19) ( 2,184 ) 8,348 ( 9 ) Other Comprehensive Income 36,910 ( 14,276 ) ( 16,324 ) Comprehensive Income 77,114 132,877 121,571 Comprehensive Income Attributable to Noncontrolling Interest — — ( 122 ) Comprehensive Income Attributable to Stepan Company $ 77,114 $ 132,877 $ 121,449 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 42 Stepan Company Co nsolidated Balance Sheets December 31, 2023 and 2022 (Dollars in thousands) 2023 2022 Assets Current Assets: Cash and cash equivalents $ 129,823 $ 173,750 Receivables, less allowances of $ 11,143 in 2023 and $ 11,100 in 2022 422,050 436,914 Inventories (Note 5) 265,558 402,531 Other current assets 34,452 31,607 Total current assets 851,883 1,044,802 Property, Plant and Equipment: Land 52,842 50,695 Buildings and improvements 335,033 293,264 Machinery and equipment 1,796,820 1,640,478 Construction in progress 400,363 386,115 2,585,058 2,370,552 Less: Accumulated depreciation ( 1,378,393 ) ( 1,297,255 ) Property, plant and equipment, net 1,206,665 1,073,297 Goodwill, net (Note 4) 97,442 95,922 Other intangible assets, net (Note 4) 52,571 58,026 Long-term investments (Note 2) 26,804 23,294 Operating lease assets (Note 7) 70,646 62,540 Other non-current assets 57,343 75,291 Total Assets $ 2,363,354 $ 2,433,172 Liabilities and Equity Current Liabilities: Current maturities of debt (Note 6) $ 252,898 $ 132,111 Accounts payable 233,031 375,726 Accrued liabilities (Note 14) 121,941 162,812 Total current liabilities 607,870 670,649 Deferred income taxes (Note 9) 10,373 10,179 Long-term debt, less current maturities (Note 6) 401,248 455,029 Non-current operating lease liability (Note 7) 58,026 50,559 Other non-current liabilities (Note 15) 69,347 80,691 Commitments and Contingencies (Note 16) Equity (Note 10): Common stock, $ 1 par value; 60,000,000 authorized shares; 27,005,852 issued shares in 2023 and 26,840,843 issued shares in 2022 27,006 26,841 Additional paid-in capital 247,032 237,202 Accumulated other comprehensive loss (Note 19) ( 130,602 ) ( 167,512 ) Retained earnings 1,257,466 1,250,130 Less: Common treasury stock, at cost, 4,628,072 shares in 2023 and 4,605,858 shares in 2022 ( 184,412 ) ( 180,596 ) Total Stepan Company stockholders’ equity 1,216,490 1,166,065 Total Liabilities and Equity $ 2,363,354 $ 2,433,172 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 43 Stepan Company Con solidated Statements of Cash Flows For the years ended December 31, 2023, 2022 and 2021 (In thousands) 2023 2022 2021 Cash Flows From Operating Activities Net income $ 40,204 $ 147,153 $ 137,895 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 105,338 94,650 90,876 Deferred compensation 4,371 ( 9,393 ) 6,895 Realized and unrealized (gains) losses on long-term investments ( 4,314 ) 8,188 ( 2,289 ) Stock-based compensation 5,741 13,851 11,716 Deferred income taxes 18,303 ( 27,452 ) ( 33,605 ) Goodwill and other intangibles impairment (Note 4) 2,038 978 — Other non-cash items 5,123 1,752 2,158 Changes in assets and liabilities, excluding effects of acquisitions: Receivables, net 32,007 ( 26,153 ) ( 104,231 ) Inventories 144,846 ( 99,394 ) ( 79,258 ) Other current assets ( 4,528 ) ( 4,354 ) ( 1,434 ) Accounts payable and accrued liabilities ( 158,924 ) 54,173 44,414 Pension liabilities ( 1,204 ) ( 1,821 ) ( 1,729 ) Environmental and legal liabilities ( 11,985 ) 9,547 450 Deferred revenues ( 2,140 ) ( 962 ) 277 Net Cash Provided By Operating Activities 174,876 160,763 72,135 Cash Flows From Investing Activities Expenditures for property, plant and equipment ( 260,335 ) ( 301,553 ) ( 194,482 ) Proceeds from asset disposition — — 4,149 Asset acquisition (Note 20) — — ( 3,503 ) Business acquisitions, net of cash acquired (Note 20) — ( 9,693 ) ( 184,473 ) Other, net 1,669 3,156 1,480 Net Cash Used In Investing Activities ( 258,666 ) ( 308,090 ) ( 376,829 ) Cash Flows From Financing Activities Revolving debt and bank overdrafts, net (Note 6) 104,717 186,551 2,861 Other debt borrowings (Note 6) — 75,000 200,000 Other debt repayments (Note 6) ( 37,858 ) ( 37,857 ) ( 37,858 ) Dividends paid ( 32,868 ) ( 30,573 ) ( 28,083 ) Company stock repurchased — ( 24,949 ) ( 16,969 ) Stock option exercises 2,795 782 1,369 Other, net ( 3,502 ) ( 2,745 ) ( 3,987 ) Net Cash Provided By Financing Activities 33,284 166,209 117,333 Effect of Exchange Rate Changes on Cash 6,579 ( 4,318 ) ( 3,391 ) Net Increase (Decrease) in Cash and Cash Equivalents ( 43,927 ) 14,564 ( 190,752 ) Cash and Cash Equivalents at Beginning of Year 173,750 159,186 349,938 Cash and Cash Equivalents at End of Year $ 129,823 $ 173,750 $ 159,186 Supplemental Cash Flow Information Cash payments of income taxes, net of refunds $ 29,558 $ 41,617 $ 92,867 Cash payments of interest $ 27,951 $ 16,526 $ 9,542 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 44 Stepan Company C onsolidated Statements of Equity For the year ended December 31, 2021 STEPAN COMPANY STOCKHOLDERS (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 Noncontrolling Interest Balance, December 31, 2020 $ 988,365 $ 26,658 $ 206,716 $ ( 133,629 ) $ ( 136,881 ) $ 1,023,829 $ 1,672 Issuance of 20,435 shares of common stock under stock option plan 1,369 20 1,349 — — — — Purchase of 135,103 shares of common stock ( 16,969 ) — — ( 16,969 ) — — — Stock-based and deferred compensation 9,734 83 12,755 ( 3,104 ) — — — Net income 137,895 — — — — 137,804 91 Other comprehensive income ( 16,324 ) — — — ( 16,355 ) — 31 Cash dividends paid: Common stock ($ 1.250 per share) ( 28,083 ) — — — — ( 28,083 ) — Other (1) ( 1,794 ) — — — — — ( 1,794 ) Balance, December 31, 2021 $ 1,074,193 $ 26,761 $ 220,820 $ ( 153,702 ) $ ( 153,236 ) $ 1,133,550 $ — (1) Reflects the derecognition of noncontrolling interest due to the dissolution of the China joint venture.
Based on the Company’s present knowledge with respect to its involvement at these sites and 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.
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.
Quantitative and Qualitative Disclosures About Market Risk Foreign Currency Exchange Risk Because Company operates globally, its cash flows and operating results are subject to movements in foreign currency exchange rates. Except for the financial transactions, balances and forward contracts referred to below, most of the Company’s foreign subsidiaries’ financial instruments are denominated in their respective functional currencies.
Quantitative and Qualitative Disclosures About Market Risk Foreign Currency Exchange Risk Because the Company operates globally, its cash flows and operating results are subject to movements in foreign currency exchange rates. Except for the financial transactions, balances and forward contracts referred to below, most of the Company’s foreign subsidiaries’ financial instruments are denominated in their respective functional currencies.
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.
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.
The Company believes this plant complements the rhamnolipid-based bio-surfactant technology the Company acquired from Logos Technologies in March 2020. Fermentation is a new platform technology for the Company and the Company is focusing efforts to further develop, integrate, produce and commercialize these unique surfactants moving forward.
The Company believes this plant complements the rhamnolipid-based bio-surfactant technology the Company acquired from Logos Technologies in March 2020. Fermentation is a new platform technology for the Company and the Company is focusing efforts to further develop, integrate, produce and commercialize these unique surfactants moving forward.
The redemption yield at the measurement date on U.K. government fixed interest bonds and the yield on corporate bonds are used as proxies for the return on the debt portfolio. The returns for equities and property are estimated as a premium of 3.0 percent added to the risk-free rate. Cash is assumed to have a long-term return of 3.5 percent.
The redemption yield at the measurement date on U.K. government fixed interest bonds and the yield on corporate bonds are used as proxies for the return on the debt portfolio. The returns for equities and property are estimated as a premium of 3.0 percent added to the risk-free rate. Cash is assumed to have a long-term return of 5.25 percent.
The fair value of performance stock awards equals the grant-date market price of the Company’s common stock, discounted for the estimated amount of dividends that would not be received during the measurement period. Compensation expense is recorded each reporting period based on the probable number of awards that will ultimately vest given the projected level of financial performance.
The fair value of performance shares equals the grant-date market price of the Company’s common stock, discounted for the estimated amount of dividends that would not be received during the measurement period. Compensation expense is recorded each reporting period based on the probable number of awards that will ultimately vest given the projected level of financial performance.
The Company may choose from two interest rate options: (1) Adjusted Term Secured Overnight Financing 55 Rate (SOFR) applicable to USD loans and relevant benchmark rates applicable to EUR, GBP and CAD loans plus spreads ranging from 1.125 percent to 1.750 percent, depending on the Company’s net leverage ratio, or (2) the prime rate plus 0.125 percent to 0.750 percent, depending on the Company’s net leverage ratio.
The Company may choose from two interest rate options: (1) Adjusted Term Secured Overnight Financing Rate (SOFR) applicable to USD loans and relevant benchmark rates applicable to EUR, GBP and CAD loans plus spreads ranging from 1.125 percent to 1.750 percent, depending on the Company’s net leverage ratio, or (2) the prime rate plus 0.125 percent to 0.750 percent, depending on the Company’s net leverage ratio.
Currently, the first in, first out (FIFO) method is used to determine the cost of the Company’s inventory. Property, Plant and Equipment Depreciation of property, plant and equipment is provided on a straight-line basis over the estimated useful lives of the assets. Lives used for calculating depreciation are generally 30 years for buildings and 15 years for building improvements.
The first in, first out (FIFO) method is used to determine the cost of the Company’s inventory. Property, Plant and Equipment Depreciation of property, plant and equipment is provided on a straight-line basis over the estimated useful lives of the assets. Lives used for calculating depreciation are generally 30 years for buildings and 15 years for building improvements.
The overall investment return forecast reflects the target allocations and the capital markets forecasts for each asset category, plus a premium for active asset management expected over the long-term. 67 U.K. Plan The overall expected long-term return on plan assets is a weighted-average of the expected long-term returns for equity securities, debt securities and other assets.
The overall investment return forecast reflects the target allocations and the capital markets forecasts for each asset category, plus a premium for active asset management expected over the long term. U.K. Plan The overall expected long-term return on plan assets is a weighted-average of the expected long-term returns for equity securities, debt securities and other assets.
Over the years, the Company has received requests for information related to or has been named by government authorities as a potentially responsible party (PRP) at a number of sites where cleanup costs have been or may be incurred by the Company under CERCLA and similar state statutes.
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.
Preparation of financial statements in accordance with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets, 32 liabilities, income and expenses at the date of the financial statements and to provide disclosures of contingent assets, liabilities and related amounts of revenues and expenses during the reporting period.
Preparation of financial statements in accordance with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses at the date of the financial statements and to provide disclosures of contingent assets, liabilities and related amounts of revenues and expenses during the reporting period.
For deferred compensation obligations that may be settled in cash or shares of Company’s 62 common stock at the option of the participant, the Company must record appreciation in the market values of the investment choices made by participants as additional compensation expense. Conversely, declines in the market values of the investment choices reduce compensation expense.
For deferred compensation obligations that may be settled in cash or shares of Company’s common stock at the option of the participant, the Company must record appreciation in the market values of the investment choices made by participants as additional compensation expense. Conversely, declines in the market values of the investment choices reduce compensation expense.
This acquisition is also expected to deliver additional baseload volumes for the Company’s Pasadena, Texas alkoxylation facility that is expected to start up in the first half of 2024. The purchase price of the acquisition was $ 9,693,000 and was paid for with 74 cash on hand.
This acquisition is also expected to deliver additional baseload volumes for the Company’s Pasadena, Texas alkoxylation facility that is expected to start up in the first half of 2024. The purchase price of the acquisition was $ 9,693,000 and was paid for with cash on hand.
Although the Company’s environmental policies and practices are designed to ensure compliance with these 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.
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.
Because the 50 Company anticipates taking delivery of the natural gas for use in its operations, the forward contracts qualify for the normal purchase exception provided under U.S. GAAP for derivative instruments. The Company has elected the exception for such contracts. As a result, the forward contracts are not accounted for as derivative instruments.
Because the Company anticipates taking delivery of the natural gas for use in its operations, the forward contracts qualify for the normal purchase exception provided under U.S. GAAP for derivative instruments. The Company has elected the exception for such contracts. As a result, the forward contracts are not accounted for as derivative instruments.
The maximum amount of dividends that could have been paid within this limitation is disclosed as unrestricted retained earnings in Note 6, Debt , of the notes to the consolidated financial statements (included in Item 8 of this Form 10-K).
The maximum amount of dividends that could have been paid within this limitation is disclosed as unrestricted retained earnings in Note 6, Debt , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K).
The Company files income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company is not subject to U.S. federal income tax examinations by tax authorities for years before 2016. Some foreign jurisdictions and various U.S. states jurisdictions may be subject to examination back to 2015.
The Company files income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company is not subject to U.S. federal income tax examinations by tax authorities for years before 2016. Some foreign jurisdictions and various U.S. states jurisdictions may be subject to examination back to 2016.
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the environmental loss contingencies included the following, among others: • We tested the effectiveness of internal controls related to the Company’s development of the estimated environmental loss contingencies, including the assumptions related to the nature and extent of contamination and the methods and resulting costs of remediation. • We inquired of Company legal counsel and external legal counsel to understand developments in environmental matters. • We evaluated written responses received from external legal counsel as it relates to the environmental loss contingencies. • We inquired of the Company’s third-party environmental specialists to understand developments in the Maywood environmental matters. • We searched data on the U.S.
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the environmental loss contingencies at the Maywood site included the following, among others: • We tested the effectiveness of internal controls related to the Company’s development of the estimated environmental loss contingencies, including the assumptions related to the nature and extent of contamination and the methods and resulting costs of remediation. • We inquired of Company legal counsel and external legal counsel to understand developments in environmental matters. • We evaluated written responses received from Company legal counsel and external legal counsel as it relates to the environmental loss contingencies. • We inquired of the Company’s third-party environmental specialists to understand developments in environmental matters. • We searched data on the U.S.
In China, polyurethane polyols and specialty polyols are manufactured at the Company’s Nanjing, China, plant. Recent significant events include: • In January 2021, the Company completed the purchase of INVISTA’s aromatic polyester polyol business and associated assets.
In Asia, polyurethane polyols and specialty polyols are manufactured at the Company’s Nanjing, China, plant. Recent significant events include: • In January 2021, the Company completed the purchase of INVISTA’s aromatic polyester polyol business and associated assets.
Prior to 2018, the Company made profit sharing contributions into the qualified retirement plans for its U.S. employees and starting in 2018 made profit sharing 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.
Prior to 2018, the Company made profit sharing contributions into the qualified retirement plans for its U.S. employees and starting in 2018 made profit sharing contributions into the qualified retirement plans for U.S. employees and for certain non-U.S. employees. Profit sharing contributions were determined using 72 a formula applied to Company earnings.
In all Company locations, 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 contribution. 68 14.
In all Company locations, 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 contribution. 14.
For derivative instruments designated as hedging instruments, depending on the nature of the hedge, changes in the fair values of the derivative instruments are either offset in earnings against changes in the fair values of the hedged items or recognized in AOCI until the hedged transaction is recognized in earnings.
For derivative instruments designated as hedging instruments, depending on the nature of the hedge, changes in the fair values of the derivative instruments are either offset in earnings against changes in the fair values of the hedged items 53 or recognized in AOCI until the hedged transaction is recognized in earnings.
The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying Consolidated Statements of Income. Accrued interest and penalties are included within the related tax liability line in the Consolidated Balance Sheet.
The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying Consolidated Statements of Income. Accrued interest and penalties are included within the related tax liability line in 52 the Consolidated Balance Sheet.
Based upon 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 69 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.
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.
The Company believes that the available spare capacity, combined with 21 debottlenecking opportunities in both plants, allows Stepan to support future market growth in a capital efficient way. See Note 20, Acquisitions, of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) for additional details.
The Company believes that available spare capacity, combined with 22 debottlenecking opportunities in both plants, allows Stepan to support future market growth in a capital efficient way. See Note 20, Acquisitions, of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) for additional details.
Bad debt charges and any depreciation expenses related to marketing assets (e.g., computers) are also classified as selling expenses. Administrative expenses are comprised of salaries and related fringe benefit expenses and operating costs for the Company’s various administrative functions, which include information services, finance, legal, and human resources. The majority of environmental remediation expenses are also classified as administrative expense.
Bad debt charges and any depreciation expenses related to marketing assets (e.g., computers) are also classified as selling expenses. Administrative expenses are comprised of salaries and related fringe benefit expenses and operating costs for the Company’s various administrative functions, which include information technology, finance, legal, and human resources. The majority of environmental remediation expenses are also classified as administrative expense.
IBR was used for all other countries as the leases in these countries are not material. The total value of leases that reside in the five countries identified above represents approximately 97 percent of the Company’s consolidated ROU asset balance. Lease cost is recognized in both the Cost of Sales and Operating Expenses sections of the Consolidated Statements of Income.
IBR was used for all other countries as the leases in these countries are not material. The total value of leases that reside in the five countries identified above represents approximately 98 percent of the Company’s consolidated ROU asset balance. Lease cost is recognized in both the Cost of Sales and Operating Expenses sections of the Consolidated Statements of Income.
The cost of property retired or sold, and the related accumulated depreciation, are removed from the accounts and any resulting gain or loss is reflected in income. Long-lived assets are reviewed for impairment when conditions exist that indicate the carrying amount of the assets may not be fully 46 recoverable.
The cost of property retired or 49 sold, and the related accumulated depreciation, are removed from the accounts and any resulting gain or loss is reflected in income. Long-lived assets are reviewed for impairment when conditions exist that indicate the carrying amount of the assets may not be fully recoverable.
Diluted earnings per share amounts are based on the weighted-average number of common shares outstanding plus the weighted-average of net common shares (under the treasury stock method) that would be outstanding assuming the exercise of outstanding stock options and stock-settled SARs, the vesting of unvested stock awards that have no performance or market condition and the issuance of contingent performance stock awards.
Diluted earnings per share amounts are based on the weighted-average number of common shares outstanding plus the weighted-average of net common shares (under the treasury stock method) that would be outstanding assuming the exercise of outstanding stock options and stock-settled SARs, the vesting of unvested RSUs that have no performance or market condition and the issuance of contingent performance shares.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
See Note 20, Acquisitions , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) for additional details. Polymers - Polymers, which accounted for 28 percent of consolidated net sales in 2022, include polyurethane polyols, polyester resins and phthalic anhydride.
See Note 20, Acquisitions , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) for additional details. Polymers - Polymers, which accounted for 28 percent of consolidated net sales in 2023, include polyurethane polyols, polyester resins and phthalic anhydride.
The pretax effect of all deferred compensation-related activities (including realized and unrealized gains and losses on the mutual fund assets held to fund deferred compensation obligations) and the income statement line items in which the effects of the activities were recorded are displayed in the following tables: Income (Expense) For the Year Ended December 31, (In millions) 2022 2021 Change Deferred Compensation (Administrative expenses) $ 9.4 $ (6.9 ) $ 16.3 (1) Investment Income (Other, net) 1.7 2.8 (1.1 ) Realized/Unrealized Gains (Losses) on Investments (Other, net) (8.0 ) 2.1 (10.1 ) Pretax Income Effect $ 3.1 $ (2.0 ) $ 5.1 Income (Expense) For the Year Ended December 31, (In millions) 2021 2020 Change Deferred Compensation (Administrative expenses) $ (6.9 ) $ (10.0 ) $ 3.1 (1) Investment Income (Other, net) 2.8 1.6 1.2 Realized/Unrealized Gains on Investments (Other, net) 2.1 3.1 (1.0 ) Pretax Income Effect $ (2.0 ) $ (5.3 ) $ 3.3 (1) See the Segment Results – Corporate Expenses sections of this MD&A for details regarding the period-over-period changes in deferred compensation.
The pretax effect of all deferred compensation-related activities (including realized and unrealized gains and losses on the mutual fund assets held to fund deferred compensation obligations) and the income statement line items in which the effects of the activities were recorded are displayed in the following tables: Income (Expense) For the Year Ended December 31, (In millions) 2023 2022 Change Deferred Compensation (Administrative expenses) $ (4.4 ) $ 9.4 $ (13.8 ) (1) Investment Income (Other, net) 0.8 1.7 (0.9 ) Realized/Unrealized Gains (Losses) on Investments (Other, net) 4.3 (8.0 ) 12.3 Pretax Income Effect $ 0.7 $ 3.1 $ (2.4 ) Income (Expense) For the Year Ended December 31, (In millions) 2022 2021 Change Deferred Compensation (Administrative expenses) $ 9.4 $ (6.9 ) $ 16.3 (1) Investment Income (Other, net) 1.7 2.8 (1.1 ) Realized/Unrealized Gains on Investments (Other, net) (8.0 ) 2.1 (10.1 ) Pretax Income Effect $ 3.1 $ (2.0 ) $ 5.1 (1) See the Segment Results – Corporate Expenses sections of this MD&A for details regarding the period-over-period changes in deferred compensation.
(2) Interest payments on debt obligations represent interest on all Company debt at December 31, 2022. Future interest rates may change, and, therefore, actual interest payments could differ from those disclosed in the above table. (3) The majority of operating lease obligations consist of railcar and real estate leases.
(2) Interest payments on debt obligations represent interest on all Company debt at December 31, 2023. Future interest rates may change, and, therefore, actual interest payments could differ from those disclosed in the above table. (3) The majority of operating lease obligations consist of railcar and real estate leases.
Fair Value Measurements The following were the financial instruments held by the Company at December 31, 2022 and 2021, and the methods and assumptions used to estimate the instruments’ fair values: Cash and cash equivalents Carrying value approximated fair value because of the short maturity of the instruments. Fair value of cash and cash equivalents is a Level 1 measurement.
Fair Value Measurements The following were the financial instruments held by the Company at December 31, 2023 and 2022, and the methods and assumptions used to estimate the instruments’ fair values: Cash and cash equivalents Carrying value approximated fair value because of the short maturity of the instruments. Fair value of cash and cash equivalents is a Level 1 measurement.
As a result of pension funding relief included in the Highway and Transportation Funding Act of 2014, the Company has no 2023 contribution requirement to the U.S. qualified defined benefit plans. The company expects to contribute $0.3 million in 2023 to the unfunded non-qualified U.S. pension plans.
As a result of pension funding relief included in the Highway and Transportation Funding Act of 2014, the Company has no 2024 contribution requirement to the U.S. qualified defined benefit plans. The company expects to contribute $0.3 million in 2024 to the unfunded non-qualified U.S. pension plans.
The fair values of the derivative instruments held by the Company on December 31, 2022, and December 31, 2021, are disclosed in Note 2, Fair Value Measurements , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K).
The fair values of the derivative instruments held by the Company on December 31, 2023, and December 31, 2022, are disclosed in Note 2, Fair Value Measurements , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K).
A distribution from any of these subsidiaries should not result in any significant foreign taxes to the extent of the distribution limitations discussed above and therefore, the Company has not recognized a deferred tax liability for these undistributed earnings as of December 31, 2022.
A distribution from any of these subsidiaries should not result in any significant foreign taxes to the extent of the distribution limitations discussed above and therefore, the Company has not recognized a deferred tax liability for these undistributed earnings as of December 31, 2023.
Starting in 2017, stock options have a three-year graded vesting feature, with one-third of the awards vesting each year. The Company has elected the straight-line method of expense attribution for the stock options with graded vesting feature. These options have a 10 -year contractual term.
Starting in 2017, stock options have a three-year graded vesting feature, with one-third of the award vesting each year. The Company has elected the straight-line method of expense attribution for the stock options with graded vesting feature. These options have a 10 -year contractual term.
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 earnings per share. 73 19.
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 earnings per share. 78 19.
The Company maintains sufficient shares of treasury stock to cover the equivalent number of shares that result from participants elections of the Company common stock investment option. As a result, the Company periodically purchases shares of its common stock in the open market or in private transactions.
The Company maintains sufficient shares of treasury stock to cover the equivalent number of shares that result from participants’ elections of the Company common stock investment option. As a result, the Company periodically purchases shares of its common stock in the open market or in private transactions.
Following are summaries of the Company’s major contingencies at December 31, 2022: 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 contamination.
Following are summaries of the Company’s major contingencies at December 31, 2023: 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.
Interest charges on borrowings applicable to major construction projects are capitalized. Deferred Compensation The Company sponsors deferred compensation plans that allow management employees to defer receipt of their annual cash incentive compensation and performance shares and outside directors to defer receipt of their fees and stock awards until retirement, departure from the Company or as elected by the participant.
Interest charges on borrowings applicable to major construction projects are capitalized. Deferred Compensation The Company sponsors deferred compensation plans that allow management employees to defer receipt of their annual cash incentive compensation and performance shares and non-employee directors to defer receipt of their fees and stock awards until retirement, departure from the Company or as elected by the participant.
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.
Some of the factors on which the Company bases its estimates include information provided by discussions with and decisions rendered by State and Federal environmental regulatory agencies, information provided by feasibility studies, and remedial action plans developed.
Any resulting translation adjustments are included in the consolidated balance sheets in the accumulated other comprehensive loss line of stockholders’ equity. Gains or losses on foreign currency transactions are reflected in the other, net caption 49 of the consolidated statements of income. The Company has four foreign subsidiaries whose functional currencies are the U.S. dollar.
Any resulting translation adjustments are included within the consolidated balance sheets on the accumulated other comprehensive loss line of stockholders’ equity. Gains or losses on foreign currency transactions are reflected in the other, net line of the consolidated statements of income. The Company has four foreign subsidiaries whose functional currencies are the U.S. dollar.
At December 31, 2022 , 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 52 comprehensive income.
At December 31, 2023 , 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.
For amounts reclassified out of AOCI into earnings for the years ended December 31, 2022, 2021 and 2020, see Note 19, Accumulated Other Comprehensive Income (Loss ), of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K). 4.
For amounts reclassified out of AOCI into earnings for the years ended December 31, 2023, 2022 and 2021, see Note 19, Accumulated Other Comprehensive Income (Loss ), of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K). 56 4.
In 2020, 2021 and 2022, profit sharing contributions for U.S. employees were made to the ESOP trust. Profit sharing contributions are allocated to participant accounts on the basis of participant base earnings.
In 2021, 2022 and 2023, profit sharing contributions for U.S. employees were made to the ESOP trust. Profit sharing contributions are allocated to participant accounts on the basis of participant base earnings.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2023, expressed an unqualified opinion on the Company’s internal control over financial reporting.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 29, 2024, expressed an unqualified opinion on the Company’s internal control over financial reporting.
As of December 31, 2022, the Company had a total of $10.9 million of outstanding standby letters of credit. 31 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.
As of December 31, 2023, the Company had a total of $10.9 million of outstanding standby letters of credit. 32 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.
A small percentage of the fixed income assets may be in debt securities that are below investment grade. The target allocation for fixed income is 63 percent. The fixed income portfolio has a duration similar to the plan’s liability stream and is designed to perform consistent with the movement of the plan’s liabilities.
A small percentage of the fixed income assets may be in debt securities that are below investment grade. The target allocation for fixed income 69 is 78 percent. The fixed income portfolio has a duration similar to the plan’s liability stream and is designed to perform consistent with the movement of the plan’s liabilities.
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 Elwood, Illinois (Millsdale) and Fieldsboro, New Jersey plants. The Company voluntarily reported its results to the applicable state environmental agencies.
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 Elwood, Illinois (Millsdale) and Fieldsboro, New Jersey plants. The Company voluntarily reported its results to the applicable state environmental agencies.
Cash in U.S. demand deposit accounts 45 and certificates of deposit totaled $ 11,811,000 and cash of the Company’s non-U.S. subsidiaries held outside the U.S. totaled $ 97,088,000 as of December 31, 2022.
Cash in U.S. demand deposit accounts totaled $ 11,811,000 and cash of the Company’s non-U.S. subsidiaries held outside the U.S. totaled $ 97,088,000 as of December 31, 2022 .
No single customer comprised more than 10 percent of the Company’s consolidated net sales in 2022, 2021 or 2020. The Company maintains allowances for potential credit losses.
No single customer comprised more than 10 percent of the Company’s consolidated net sales in 2023, 2022 or 2021. The Company maintains allowances for potential credit losses.
Presentation of Information The discussion that follows includes a comparison of the Company’s results of operations and liquidity and capital resources for the fiscal years ended December 31, 2021 and 2022.
Presentation of Information The discussion that follows includes a comparison of the Company’s results of operations and liquidity and capital resources for the fiscal years ended December 31, 2022 and 2023.
The Company estimates the fair value of each of its reporting units based on the average of market and income-based computations. The Philippines impairment primarily resulted from lost market share at one major customer combined with higher unit overhead costs.
The Company estimates the fair value of each of its reporting units based on the average of market and income-based computations. The impairment relating to the Company’s Philippines reporting unit primarily resulted from lost market share at one major customer combined with higher unit overhead costs.
Critical Accounting Policies The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (generally accepted accounting principles or GAAP).
Critical Accounting Estimates and Policies The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (generally accepted accounting principles or GAAP).
Leases The Company’s operating leases are primarily comprised of real estate, railcar, storage tank, warehouse, auto, trailer and manufacturing/office equipment leases. Real estate and railcars comprise approximately 62 percent and 24 percent, respectively, of the Company’s consolidated right of use (ROU) asset balance. Except for real estate, typical lease terms range from one to ten years .
Leases The Company’s operating leases are primarily comprised of real estate, railcar, storage tank, warehouse, auto, trailer and manufacturing/office equipment leases. Real estate and railcars comprise approximately 52 percent and 33 percent, respectively, of the Company’s consolidated right of use (ROU) asset balance. Except for real estate, typical lease terms range from one to ten years .
The overall business is comprised of three reportable segments: Surfactants - Surfactants, which accounted for 68 percent of the Company’s consolidated net sales in 2022, 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.
The overall business is comprised of three reportable segments: Surfactants - Surfactants, which accounted for 69 percent of the Company’s consolidated net sales in 2023, 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.
These models include factors such as the interest rate on the coupon, maturity, rating, cash flow projections and other factors. 66 Level 3 – no investments held during 2022 or 2021 were categorized as Level 3. U.K.
These models include factors such as the interest rate on the coupon, maturity, rating, cash flow projections and other factors. Level 3 – no investments held during 2023 or 2022 were categorized as Level 3. U.K.
Because the Company has agreed to fixed prices for the noted quantity of natural gas, a hypothetical 10 percent fluctuation in the price of natural gas would cause the Company’s actual natural gas cost to be $0.9 million higher or lower than the cost at market price. 35 It em 8.
Because the Company has agreed to fixed prices for the noted quantity of natural gas, a hypothetical 10 percent fluctuation in the price of natural gas would cause the Company’s actual natural gas cost to be $0.3 million higher or lower than the cost at market price. 37 It em 8.
Cash Flows As a result of pension funding relief included in the Highway and Transportation Funding Act of 2014, the Company does no t expect to make any 2023 contributions to the funded U.S. qualified defined benefit plans. The Company expects to contribute $ 278,000 in 2023 to the unfunded non-qualified U.S. pension plans.
Cash Flows As a result of pension funding relief included in the Highway and Transportation Funding Act of 2014, the Company does no t expect to make any 2024 contributions to the funded U.S. qualified defined benefit plans. The Company expects to contribute $ 308,000 in 2024 to the unfunded non-qualified U.S. pension plans.
Plans The overall expected long-term rate of return on assets of 5.50 percent that was used to develop the 2022 pension expense is based on plan asset allocation, capital markets forecasts and expected benefits of active investment management. For fixed income, the expected return is 4.05 percent. This assumption includes the yield on the five-year zero-coupon U.S.
Plans The overall expected long-term rate of return on assets of 5.50 percent that was used to develop the 2023 pension expense is based on plan asset allocation, capital markets forecasts and expected benefits of active investment management. For fixed income, the expected return is 5.35 percent. This assumption includes the yield on the five-year zero-coupon U.S.
For a discussion of changes from the fiscal year ended December 31, 2020 to the fiscal year ended December 31, 2021, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (filed February 25, 2022).
For a discussion of changes from the fiscal year ended December 31, 2021 to the fiscal year ended December 31, 2022, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (filed February 28, 2023).
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 $ 1,376,000 of revenue in 2022 from pre-existing contract liabilities at December 31, 2021.
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 $ 739,000 of revenue in 2023 from pre-existing contract liabilities at December 31, 2022.
The Company’s capital loss carryforwards do not expire. As of December 31, 2022, and 2021, the Company had valuation allowances of $ 836,000 and $ 862,000 , respectively, which were attributable to deferred tax assets in Canada, India, the Philippines and Singapore.
The Company’s capital loss carryforwards do not expire. As of December 31, 2023 and 2022, the Company had valuation allowances of $ 853,000 and $ 836,000 , respectively, which were attributable to deferred tax assets in Canada, India, the Philippines and Singapore.
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 PRPs are identified.
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 overfunded status (pretax) of the Company’s U.S and U.K. defined benefit pension plans was $8.2 million at December 31, 2022, versus overfunded status (pretax) of $7.9 million at December 31, 2021. See Note 13, Postretirement Benefit Plans , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) for additional details.
The overfunded status (pretax) of the Company’s U.S and U.K. defined benefit pension plans was $8.5 million at December 31, 2023, versus overfunded status (pretax) of $8.2 million at December 31, 2022. See Note 13, Postretirement Benefit Plans , of the notes to the Company’s consolidated financial statements (included in Item 8 of this Form 10-K) for additional details.
In general, it is the Company’s policy to issue new shares of its common stock upon the exercise of stock options and stock-settled SARs or the vesting of stock awards. 12.
In general, it is the Company’s policy to issue new shares of its common stock upon the exercise of stock options and stock-settled SARs or the vesting of performance shares and RSUs. 12.
The following table presents the period-end Company common stock prices used in the computation of deferred compensation income/expense in 2022 and 2021: December 31 2022 2021 2020 2019 Company Stock Price $ 106.46 $ 124.29 $ 119.32 $ 102.44 Liquidity and Capital Resources Overview Historically, the Company’s principal sources of liquidity have included cash flows from operating activities, available cash and cash equivalents and the proceeds from debt issuance and borrowings under credit facilities.
The following table presents the period-end Company common stock market prices used in the computation of deferred compensation income/expense in 2023, 2022 and 2021: December 31 2023 2022 2021 2020 Company Stock Price $ 94.55 $ 106.46 $ 124.29 $ 119.32 Liquidity and Capital Resources Overview Historically, the Company’s principal sources of liquidity have included cash flows from operating activities, available cash and cash equivalents and the proceeds from debt issuance and borrowings under credit facilities.
(5) The “Other” category comprises deferred revenues that represent commitments to deliver products, expected 2023 required contributions to the Company’s funded defined benefit pension plans, estimated payments related to the Company’s unfunded defined benefit supplemental executive and outside director pension plans, estimated payments (undiscounted) related to the Company’s asset retirement obligations, environmental remediation payments for which amounts and periods can be reasonably estimated and income tax liabilities for which payments and periods can be reasonably estimated.
(5) The “Other” category comprises deferred revenues that represent commitments to deliver products, expected 2024 required contributions to the Company’s funded defined benefit pension plans, estimated payments related to the Company’s unfunded defined benefit supplemental executive and outside director pension plans, estimated payments (undiscounted) related to the Company’s asset retirement obligations, environmental remediation payments for which amounts and periods can be reasonably estimated and income tax liabilities for which payments and periods can be reasonably estimated, payments related to the Company’s voluntary early retirement plan and involuntary retirement plan.
Goodwill and Other Intangible Assets The Company’s intangible assets include patents, agreements not to compete, trademarks, customer lists and relationships, technological and manufacturing know-how, supply contracts and goodwill, all of which were acquired as part of business or product line acquisitions. Intangible assets other than goodwill are determined to have either finite or indefinite useful lives.
Goodwill and Other Intangible Assets The Company’s intangible assets include patents, trademarks, customer lists and relationships, technological and manufacturing know-how and goodwill, all of which were acquired as part of business or product line acquisitions. Intangible assets other than goodwill are determined to have either finite or indefinite useful lives.
These notes are denominated in U.S. dollars and have fixed interest rates ranging from 2.30 percent to 4.86 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 2023 to 2032.
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.
Total research and development expenses were $ 40,902,000 , $ 38,778,000 , and $ 35,999,000 in 2022, 2021 and 2020, respectively. The remainder of research, development and technical service expenses reflected on the consolidated statements of income relate to technical services, which include routine product testing, quality control and sales service support.
Total research and development expenses were $ 35,732,000 , $ 40,902,000 , and $ 38,778,000 in 2023, 2022 and 2021, respectively. The remainder of research, development and technical service expenses reflected 51 on the consolidated statements of income relate to technical services, which include routine product testing, quality control and sales service support.
That cost is expected to be recognized over a weighted-average period of 1.2 years. Cash received from stock option exercises under the Company’s stock option plans for the years ended December 31, 2022, 2021, and 2020 was $ 782,000 , $ 1,369,000 , and $ 2,926,000 , respectively.
That cost is expected to be recognized over a weighted-average period of 1.7 years. Cash received from stock option exercises under the Company’s stock option plans for the years ended December 31, 2023, 2022, and 2021 was $ 2,795,000 , $ 782,000 , and $ 1,369,000 , respectively.
Derivative instrument gains and losses for the years ended December 31, 2022, 2021 and 2020, were immaterial.
Derivative instrument gains and losses for the years ended December 31, 2023, 2022 and 2021, were immaterial.
As of December 31, 2022 , the Company had $ 739,000 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.
As of December 31, 2023 , the Company had $ 688,000 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.
The following describes the hierarchy levels: Level 1 - quoted prices in active markets for identical assets and liabilities. 47 Level 2 - inputs other than quoted prices included within Level 1 that are directly or indirectly observable for the asset or liability, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 2 - inputs other than quoted prices included within Level 1 that are directly or indirectly observable for the asset or liability, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
The Company uses forward contracts to mitigate the exposure of certain foreign currency transactions and balances to fluctuating exchange rates. At December 31, 2022, the Company had forward contracts with an aggregated notional amount of $56.7 million. Except for the Company’s subsidiaries in Argentina, Brazil, China and Colombia, foreign currency exposures are substantially hedged by forward contracts.
The Company uses forward contracts to mitigate the exposure of certain foreign currency transactions and balances to fluctuating exchange rates. At December 31, 2023, the Company had forward contracts with an aggregated notional amount of $106.6 million. Except for the Company’s subsidiaries in Argentina, Brazil, China and Colombia, foreign currency exposures are substantially hedged by forward contracts.
Currently, the useful lives for the Company’s finite-lived intangible assets are as follows: patents – 15 years; non-compete agreements – three years ; trademarks – eight to 11 years ; customer relationships – ten to 20 years and know-how – seven to 20 years .
Currently, the useful lives for the Company’s finite-lived intangible assets are as follows: patents – 15 years; trademarks – eight to 11 years ; customer relationships – ten to 20 years and know-how – seven to 20 years .
… 423 more changes not shown on this page.