Core Viewpoint - Stepan Company has announced the sale of its manufacturing assets in the Philippines to Masurf, Inc., aligning with its strategy to focus on core growth areas and maintain service to its customer base in Southeast Asia [1][2]. Group 1: Transaction Details - The manufacturing assets located in Bauan, Batangas, Philippines will be sold to Masurf, a subsidiary of Musim Mas Holdings Pte. Ltd. [1] - A tolling agreement will be established between Stepan Philippines Quaternaries, Inc. (SPQI) and Masurf to continue serving customers post-transaction [2]. - The terms of the transaction have not been disclosed, and it is subject to normal closing conditions [2]. Group 2: Company Profile - Stepan Company is a major manufacturer of specialty and intermediate chemicals, particularly known for its surfactants used in cleaning, disinfection, and agricultural solutions [3]. - The company also supplies polyurethane polyols for the thermal insulation market and CASE (Coatings, Adhesives, Sealants, and Elastomers) industries [3]. - Headquartered in Northbrook, Illinois, Stepan operates a network of modern production facilities across North and South America, Europe, and Asia [4].

[Part I - FINANCIAL INFORMATION](index=2&type=section&id=Part%20I%20-%20FINANCIAL%20INFORMATION) [Item 1 - Financial Statements](index=2&type=section&id=Item%201%20-%20Financial%20Statements) Presents unaudited condensed consolidated financial statements for Q1 2025 and 2024, detailing financial position and performance [Condensed Consolidated Statements of Income](index=2&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Stepan Company reported increased Q1 2025 net sales to $593.3 million and net income to $19.7 million, reflecting improved operating performance Q1 2025 vs Q1 2024 Income Statement Highlights | Metric (In thousands, except per share) | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $593,255 | $551,418 | +7.6% | | **Gross Profit** | $75,463 | $70,281 | +7.4% | | **Operating Income** | $28,288 | $20,169 | +40.3% | | **Net Income** | $19,711 | $13,893 | +41.9% | | **Diluted EPS** | $0.86 | $0.61 | +41.0% | [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets increased to $2.39 billion, with total equity rising to $1.20 billion, primarily due to retained earnings Balance Sheet Summary | Metric (In thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $897,156 | $810,429 | | **Total Assets** | $2,389,683 | $2,304,648 | | **Total Current Liabilities** | $739,480 | $669,034 | | **Total Liabilities** | $1,189,145 | $1,134,714 | | **Total Equity** | $1,200,538 | $1,169,934 | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities sharply declined to $6.9 million in Q1 2025 from $41.6 million in Q1 2024, primarily due to increased working capital use Q1 2025 vs Q1 2024 Cash Flow Summary | Cash Flow Activity (In thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net Cash Provided By Operating Activities** | $6,942 | $41,554 | | **Net Cash Used In Investing Activities** | ($26,411) | ($24,415) | | **Net Cash Provided By (Used In) Financing Activities** | $22,761 | ($19,984) | | **Net Increase (Decrease) in Cash** | $7,827 | ($4,048) | [Notes to Condensed Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes explain financial statement preparation, segment performance, debt structure, and environmental contingencies, with Surfactants as the dominant segment - The company has three reportable segments: Surfactants, Polymers, and Specialty Products, with **Surfactants accounting for 72% of consolidated net sales** for the first three months of 2025[58](index=58&type=chunk)[83](index=83&type=chunk) - As of March 31, 2025, the company estimated a range of possible environmental and legal losses from **$17.9 million to $42.4 million** and has accrued the minimum amount of **$17.9 million**[37](index=37&type=chunk) - Total debt increased from **$625.4 million** at year-end 2024 to **$659.3 million** as of March 31, 2025, primarily due to higher borrowings under the revolving credit facility[67](index=67&type=chunk)[125](index=125&type=chunk) - North America is the company's largest geographic market, with net sales of **$338.0 million** in Q1 2025, an increase from **$312.6 million** in Q1 2024[66](index=66&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=26&type=section&id=Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20%28MD%26A%29) Management analyzes Q1 2025 financial results, highlighting an 8% sales increase to $593.3 million and a 40% operating income rise, driven by higher prices and volume [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Q1 2025 net income rose to $19.7 million, driven by an 8% increase in consolidated net sales from higher prices and 4% volume growth, and reduced corporate expenses - Consolidated net sales increased by **$41.8 million (8%)** year-over-year, primarily due to higher average selling prices and a **4% increase in sales volume**[89](index=89&type=chunk) - Operating income increased by **$8.1 million (40%)** year-over-year, driven by higher income in the Surfactants and Specialty Products segments and a **24% decrease in corporate expenses**[90](index=90&type=chunk) - The effective tax rate decreased to **20.1%** in Q1 2025 from **28.6%** in Q1 2024, mainly due to the settlement of an audit in one jurisdiction[94](index=94&type=chunk) [Segment Results](index=32&type=section&id=Segment%20Results) Segment performance shows Surfactants leading with sales and operating income growth, Polymers with flat sales and declining income, and Specialty Products with increased sales and operating income Q1 2025 vs Q1 2024 Segment Operating Income | Segment (In thousands) | Q1 2025 Operating Income | Q1 2024 Operating Income | % Change | | :--- | :--- | :--- | :--- | | **Surfactants** | $28,930 | $26,079 | +11% | | **Polymers** | $8,018 | $8,382 | -4% | | **Specialty Products** | $5,508 | $4,268 | +29% | | **Total Segment** | $42,456 | $38,729 | +10% | - Surfactant sales volume grew **3%**, with strong demand in agricultural end markets, though North American gross profit decreased **16%** due to higher expenses at the new Pasadena facility, offset by strong performance in other regions[96](index=96&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) - Polymer sales volume increased **7%**, but operating income fell **4%** due to lower average selling prices and reduced margins, particularly in Europe[106](index=106&type=chunk)[109](index=109&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity remains solid despite Q1 2025 operating cash flow decreasing to $6.9 million due to higher working capital, with total debt increasing and 2025 capital expenditures projected at $125-135 million - Cash from operating activities decreased from **$41.6 million** in Q1 2024 to **$6.9 million** in Q1 2025, primarily due to a **$40.9 million** use of cash for working capital[117](index=117&type=chunk)[119](index=119&type=chunk) - The company estimates total capital expenditures for 2025 will be in the range of **$125.0 million to $135.0 million**[122](index=122&type=chunk) - Net debt (Total Debt minus Cash) increased to **$551.8 million** on March 31, 2025, from **$525.7 million** at December 31, 2024[125](index=125&type=chunk)[146](index=146&type=chunk) [Non-GAAP Reconciliations](index=41&type=section&id=Non-GAAP%20Reconciliations) This section reconciles GAAP figures to non-GAAP measures, showing Q1 2025 Adjusted Net Income of $19.3 million and Adjusted EBITDA of $57.5 million, up 12% YoY Reconciliation of GAAP to Non-GAAP Adjusted Net Income | (In millions, except per share) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net Income (GAAP)** | $19.7 | $13.9 | | **Adjusted Net Income (Non-GAAP)** | $19.3 | $14.7 | | **Diluted EPS (GAAP)** | $0.86 | $0.61 | | **Adjusted Diluted EPS (Non-GAAP)** | $0.84 | $0.64 | Reconciliation of Operating Income to Adjusted EBITDA | ($ in millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Operating Income** | $28.2 | $20.2 | | **EBITDA** | $58.0 | $50.2 | | **Adjusted EBITDA** | $57.5 | $51.2 | [Quantitative and Qualitative Disclosures about Market Risk](index=43&type=section&id=Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) No material changes to market risks were reported compared to the 2024 Annual Report on Form 10-K - There have been no material changes to the market risks disclosed in the Company's 2024 Annual Report on Form 10-K[147](index=147&type=chunk) [Controls and Procedures](index=43&type=section&id=Controls%20and%20Procedures) Disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[148](index=148&type=chunk) - No changes occurred during Q1 2025 that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[148](index=148&type=chunk) [Part II - OTHER INFORMATION](index=43&type=section&id=Part%20II%20-%20OTHER%20INFORMATION) [Legal Proceedings](index=43&type=section&id=Item%201%20-%20Legal%20Proceedings) The company received a USEPA pre-filing notice regarding alleged FIFRA violations and intends to seek indemnification from the licensed distributor - The company received a pre-filing notice from the USEPA on March 19, 2025, for alleged violations of FIFRA related to biocide products sold by a licensed distributor[149](index=149&type=chunk) - The company expects to pursue indemnification claims against the licensed distributor in this matter[149](index=149&type=chunk) [Risk Factors](index=43&type=section&id=Item%201A%20-%20Risk%20Factors) No material changes to the risk factors disclosed in the 2024 Annual Report on Form 10-K were reported - There have been no material changes to the risk factors disclosed in the Company's 2024 Annual Report on Form 10-K[152](index=152&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202%20-%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No shares were repurchased under the public program in Q1 2025, with $125.1 million remaining authorized for future repurchases - No shares were purchased as part of the publicly announced repurchase program during Q1 2025[154](index=154&type=chunk) - As of March 31, 2025, the company had **$125.1 million** remaining under its authorized share repurchase program[124](index=124&type=chunk)[154](index=154&type=chunk)

Financial Data and Key Metrics Changes - The company reported first quarter adjusted EBITDA of $57.5 million, up 12% year over year [5][11] - Adjusted net income was $19.3 million, a 32% increase compared to $14.7 million in the prior year [7][10] - The effective tax rate decreased to 20% from the normal range of 24% to 26% due to favorable discrete items [11][12] - Free cash flow was negative at $25.8 million, down $37.2 million year over year [17] Business Line Data and Key Metrics Changes - Surfactants segment net sales were $430.3 million, a 10% increase year over year, with a 3% growth in sales volume [13][14] - Polymers segment net sales were flat at $146.1 million, with a 7% increase in sales volume but a 7% decrease in selling prices [15][16] - Specialty products net sales increased by 11% to $16.8 million, driven by higher selling prices [16] Market Data and Key Metrics Changes - Volume growth was broad-based, with agricultural and oilfield end markets experiencing double-digit growth [6][20] - North American and European rigid polyol volume grew in low single digits, while specialty polyols and commodity PA businesses showed strong growth [6][15] Company Strategy and Development Direction - The company focuses on customer acquisition, particularly in Tier two and Tier three markets, with over 400 new customers added in Q1 [18][19] - The company aims to develop next-generation rigid polyol technologies to enhance energy efficiency [21] - The new Pasadena, Texas site is operational, with expectations for full contribution in the second half of 2025 [22][24] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for 2025, expecting adjusted EBITDA and net income growth despite market uncertainties [24] - The company is monitoring the impact of tariffs and is working on pricing strategies to mitigate potential effects [63][64] - There is a belief that pent-up demand exists in the construction market, which could lead to growth as economic conditions improve [81][82] Other Important Information - The company paid $8.7 million in dividends during the first quarter and has increased its dividend for 57 consecutive years [7][8] - The company is investing in capital expenditures and anticipates positive free cash flow for the full year 2025 [17][24] Q&A Session Summary Question: About the Pasadena alkoxylation startup and product qualification - Management confirmed that the Pasadena facility is producing six products currently, with plans to produce over 60 products, and full contribution expected in 2026 [30][32] Question: Earnings contribution from Pasadena facility - Management indicated that Q2 will still be negative but better than Q1, with positive contributions expected in Q3 and Q4 [33] Question: Decline in commodity consumer products - Management clarified that the decline is not intentional and is due to sluggish demand from consumer product customers [35][36] Question: Polymer business and inventory costs - Management stated that high-cost inventory is being cleared out, and margins should improve in Q2 [38] Question: Down channel inventory levels - Management reported no significant overstocking in Q1 and noted strong demand continuing into April [44] Question: Customer mix and growth - Management confirmed that growth is coming from both Tier two and Tier three customers, as well as end market diversification [48] Question: Agricultural and oilfield surfactants growth - Management confirmed that the majority of growth is driven by the agricultural side, with no significant inventory buildup expected [56][57] Question: Tariff impacts and sourcing strategy - Management is monitoring both direct and indirect impacts of tariffs and is adjusting sourcing strategies accordingly [63][64] Question: Raw material pricing environment - Management indicated that raw material prices have stabilized, but tariffs may introduce new dynamics [76] Question: Construction market outlook - Management believes there is pent-up demand in the construction market, with expectations for growth as economic conditions improve [81][82]

Financial Performance Highlights - Reported net income increased by 42% year-over-year to $197 million[8] - Adjusted net income rose by 32% year-over-year to $193 million, driven by volume growth in Surfactants, Polymers, and MCT business[8] - EBITDA increased by 16% year-over-year to $580 million, while Adjusted EBITDA increased by 12% year-over-year to $575 million[9] - Global sales volume grew by 4% year-over-year, with Surfactants up 3%, Polymers up 7%, and MCT up 4%[10] - Free cash flow was negative $258 million, compared to positive $114 million in the prior year, due to higher working capital[11] Segment Performance - Surfactants net sales increased from $3908 million to $4303 million, with volume up 3%[20,24] - Polymers volume increased by 7%, but price/mix was impacted by lower raw material costs and competitive pressures[29] - Specialty Products saw increased results due to margin recovery and 4% volume growth in the MCT product line[19] Strategic Initiatives - The Pasadena, Texas site is now operational and will be critical to grow the specialty alkoxylation business[12] - The company has invested $265 million in capital expenditures for the new alkoxylation capacity in Pasadena, Texas, with an annual capacity of 75KTA[40]

Core Insights - Stepan Co. reported revenue of $593.26 million for Q1 2025, a 7.6% year-over-year increase, with an EPS of $0.84 compared to $0.64 a year ago [1] - The revenue exceeded the Zacks Consensus Estimate of $558.6 million by 6.20%, and the EPS surpassed the consensus estimate of $0.51 by 64.71% [1] Financial Performance Metrics - Specialty Products net sales were $16.80 million, exceeding the estimated $16.50 million, reflecting an 11.4% increase year-over-year [4] - Polymers net sales reached $146.12 million, slightly above the estimated $138.70 million, with a year-over-year increase of 0.4% [4] - Surfactants net sales amounted to $430.34 million, surpassing the estimated $403.45 million, marking a 10.1% year-over-year increase [4] - Operating income for Surfactants was $28.93 million, exceeding the average estimate of $25.90 million [4] - Operating income for Specialty Products was $5.51 million, above the average estimate of $3.70 million [4] - Operating income for Polymers was $8.02 million, below the average estimate of $11.25 million [4] Stock Performance - Stepan Co. shares have returned -12.5% over the past month, compared to a -0.8% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 5 (Strong Sell), indicating potential underperformance relative to the broader market in the near term [3]

Group 1: Earnings Performance - Stepan Co. reported quarterly earnings of $0.84 per share, exceeding the Zacks Consensus Estimate of $0.51 per share, and up from $0.64 per share a year ago, representing an earnings surprise of 64.71% [1] - The company posted revenues of $593.26 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 6.20%, compared to year-ago revenues of $551.42 million [2] Group 2: Stock Performance and Outlook - Stepan Co. shares have declined approximately 25.5% since the beginning of the year, while the S&P 500 has decreased by 6% [3] - The current consensus EPS estimate for the upcoming quarter is $0.84 on revenues of $586.4 million, and for the current fiscal year, it is $2.99 on revenues of $2.31 billion [7] Group 3: Industry Context - The Chemical - Diversified industry, to which Stepan Co. belongs, is currently ranked in the bottom 15% of over 250 Zacks industries, indicating potential challenges for stock performance [8]

Financial Data and Key Metrics Changes - The company reported first quarter adjusted EBITDA of $57.5 million, up 12% year over year [5][10] - Adjusted net income for the quarter was $19.3 million, or $0.84 per diluted share, representing a 32% increase compared to $14.7 million, or $0.64 per diluted share, in the prior year [7][9] - Cash from operations was $6.9 million, while free cash flow was negative at $25.8 million, down $37.2 million year over year [10][16] Business Line Data and Key Metrics Changes - Surfactants and specialty products delivered double-digit adjusted EBITDA growth, while polymers adjusted EBITDA decreased slightly year over year [6][12] - Surfactant net sales were $430.3 million for the quarter, a 10% increase year over year, with sales volume growing 3% [12][13] - Polymer net sales were flat at $146.1 million, with a 7% increase in sales volume but a 7% decrease in selling prices [14][15] - Specialty product net sales increased by 11% to $16.8 million, primarily due to higher selling prices [15] Market Data and Key Metrics Changes - The company experienced double-digit volume growth in agricultural and oilfield end markets, while North American and European rigid polyol volume grew in low single digits [6][19] - Foreign currency translation negatively impacted net sales by 5% [13] Company Strategy and Development Direction - The company remains focused on customer acquisition, particularly in Tier two and Tier three markets, with over 400 new customers added in the first quarter [18][19] - The company is committed to developing next-generation rigid polyol technologies to enhance energy efficiency and cost performance [20] - The new Pasadena, Texas site is now operational, with expectations for full contribution in the second half of 2025 [21][23] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about delivering adjusted EBITDA and adjusted net income growth, as well as positive free cash flow in 2025 despite market uncertainties [22][23] - The company noted that the high interest rate environment continues to restrain growth in rigid polyol markets [6][19] Other Important Information - The effective tax rate was 20%, lower than the normal range of 24% to 26%, primarily due to favorable discrete items from a tax audit settlement [10][11] - The company paid $8.7 million in dividends during the first quarter and has increased its dividend for 57 consecutive years [8] Q&A Session Summary Question: Contribution of Pasadena facility - Management confirmed that the Pasadena facility is currently producing six products, with plans to produce over 60 products, and full contribution expected in 2026 [27][28] Question: Earnings contribution from Pasadena - Management indicated that Q2 is expected to show improvement but will still be negative, with positive contributions anticipated in Q3 and Q4 [32] Question: Decline in commodity consumer products - Management clarified that the decline is not due to intentional shifts but rather sluggish demand from consumer product customers [34][35] Question: Polymer business inventory costs - Management stated that high inventory costs were a drag on margins but are expected to improve in Q2 as those costs are cleared [36][37] Question: Down channel inventory levels - Management reported no significant overstocking in Q1 and noted strong volume growth continuing into April [43][44] Question: Customer mix and growth - Management confirmed that growth is coming from both Tier two and Tier three customers, as well as end market diversification [47][48] Question: Tariff impacts - Management indicated that while tariffs are a concern, most products are sourced and sold within regions, mitigating direct impacts [65][66] Question: Collaboration with customers - Management affirmed that collaborative work with customers continues without significant changes due to tariff announcements [68][70]

Core Insights - The company reported strong earnings and volume growth in Q1 2025, with adjusted EBITDA growing double digits, driven by the Surfactant and Specialty Product businesses [2][6][9] - Net sales increased by 8% year-over-year, reflecting a 4% increase in sales volume and higher selling prices, despite a negative impact from foreign currency translation [4][6] - The company is optimistic about continued growth in key strategic end markets and expects to improve free cash flow generation in 2025 [9] Financial Performance - Net Sales for Q1 2025 were $593.3 million, up from $551.4 million in Q1 2024, marking an 8% increase [3][19] - Operating Income rose to $28.3 million, a 40% increase from $20.2 million in the previous year [3][19] - Net Income was reported at $19.7 million, a 42% increase compared to $13.9 million in Q1 2024 [3][19] Segment Performance - Surfactants segment net sales increased by 10% to $430.3 million, driven by a 12% increase in selling prices and a 3% increase in sales volume [7][14] - Polymers segment net sales remained flat at $146.1 million, with a 7% increase in sales volume offset by a 7% decrease in selling prices [14] - Specialty Products segment net sales grew by 11% to $16.8 million, primarily due to higher selling prices [14] Cash Flow and Working Capital - Cash from operations was $6.9 million, while free cash flow was negative at $25.8 million due to higher working capital requirements [6][11] - The company’s total debt increased by $33.9 million, with net debt rising by $26.1 million compared to the end of 2024 [32][33] Tax and Corporate Expenses - The effective tax rate decreased to 20.1% in Q1 2025 from 28.6% in Q1 2024, attributed to favorable discrete items from a tax audit settlement [8] - Total corporate expenses decreased by 24% to $14.2 million, with adjusted corporate expenses down by 1% [29]

Group 1 - The article emphasizes that markets are not efficient in the short run, highlighting the impact of human emotions on market behavior [1] - Crude Value Insights provides an investment service focused on oil and natural gas, concentrating on cash flow and companies that generate it, which leads to potential value and growth [1] - Subscribers have access to a stock model account with over 50 stocks, detailed cash flow analyses of exploration and production (E&P) firms, and live discussions about the sector [2] Group 2 - A two-week free trial is offered for new subscribers, promoting engagement with the oil and gas sector [3]

Environmental Compliance and Expenditures - The Company reported a capital expenditure of $12.0 million for environmental compliance in 2024, representing approximately 10% of total capital expenditures for the year[23]. - Recurring costs for waste treatment and environmental compliance were approximately $51.3 million in 2024[23]. - The Company made capital investments to reduce 1,4 dioxane content in ethoxylated surfactants to comply with recent regulations, positioning itself for new market opportunities[23]. - The Company has recorded a liability for environmental remediation costs, with potential changes based on ongoing discussions with regulatory agencies[108]. - The Company has paid $4.0 million for environmental response costs at the Wilmington site through December 31, 2024, with potential liabilities subject to change[110]. - Environmental expenditures for capital projects were $12.0 million in 2024, with recurring costs of $51.3 million for environmental compliance[187]. - Environmental remediation expenses for 2024 were reported at $2.6 million, compared to $1.0 million in 2023[203]. Competition and Market Position - The Company is one of the leading merchant producers of surfactants globally, competing with several large global and regional producers[18]. - The company is subject to significant competition, with some competitors having greater financial resources and internal manufacturing capabilities, leading to potential loss of business[56]. - The company lost sales volume from a customer in 2022 who invested in internal production capabilities for low-1,4 dioxane products[56]. - The company is focused on developing new products to replace declining sales, but success in achieving growth expectations is uncertain[51]. Financial Performance - The company's net income in 2024 increased by $10.2 million, or 25%, to $50.4 million, equating to $2.20 per diluted share, compared to $40.2 million, or $1.75 per diluted share in 2023[134]. - Adjusted EBITDA for 2024 was $187.0 million, up 4% from $180.0 million in 2023, while EBITDA increased by 13% to $186.8 million[135]. - Consolidated net sales decreased by $145.5 million, or 6%, primarily due to lower average selling prices, which negatively impacted sales by $160.3 million[136]. - Operating income in 2024 rose by $11.9 million, or 20%, with surfactant and specialty products operating income increasing by $13.2 million and $9.4 million, respectively[137]. - The company's effective tax rate slightly decreased to 16.7% in 2024 from 16.9% in 2023[141]. - The Company recognized $4.6 million in investment gains for deferred compensation assets in 2024, compared to $5.2 million in 2023, alongside a decrease in foreign exchange losses from $3.7 million in 2023 to $1.4 million in 2024[140]. - Cash generated from operating activities was $162.1 million in 2024, down from $174.9 million in 2023[164]. - Total net sales for 2024 were $2,180.3 million, a decrease of $145.5 million (6%) compared to 2023, with surfactants sales down by $70.7 million (4%) and polymers down by $57.6 million (9%) year-over-year[142]. Debt and Financial Obligations - As of December 31, 2024, the Company had $311.7 million of debt on its balance sheet, with additional borrowings of $313.7 million under a credit agreement[86]. - The Company had $125.1 million remaining for future share repurchases under its authorized program as of December 31, 2024[172]. - Consolidated balance sheet debt decreased by $28.7 million to $625.4 million as of December 31, 2024, primarily due to scheduled debt repayments[173]. - The Company's total debt obligations amounted to $625.8 million, with $292.8 million due within one year[180]. - The ratio of net debt to net debt plus shareholders' equity was 31.0% as of December 31, 2024, compared to 30.0% as of December 31, 2023[175]. - The Company amended two note purchase agreements to increase available facility amounts and extend the issuance period to August 27, 2027, with a total credit facility of $450.0 million[175]. Operational Challenges - The Company’s manufacturing plants primarily operate on electricity and interruptible natural gas, with temporary shutdowns occurring during peak heating demand periods[19]. - The company experienced unplanned production disruptions in 2022 due to weather-related issues, impacting operations at the Elwood, Illinois facility[40]. - In 2024, the Millsdale facility operations were negatively affected by a flood event, highlighting vulnerability to natural disasters[40]. - The company faced increased raw material prices in 2022 due to supply chain disruptions and inflationary pressures, which may not be passed on to customers[45]. - The company relies heavily on third-party transportation, and disruptions in this area could materially affect operations and costs[46]. - Conflicts and instability in energy-producing nations have led to increased energy prices, impacting the company's operations and supply chain[47]. Regulatory and Compliance Risks - Compliance with environmental, health, and safety laws may require the Company to incur additional costs or reformulate certain products, potentially affecting its financial results[61]. - The REACH regulations impose substantial compliance costs that are expected to increase as product sales rise, impacting the Company's ability to sell certain products[64]. - The Company may face increased regulatory scrutiny regarding the use of ethylene oxide, which could require material changes to its manufacturing operations[66]. - Environmental regulations may restrict the Company's ability to expand facilities or require costly modifications, impacting operational capabilities[67]. - The evolving nature of environmental laws may impose greater compliance costs and risks, potentially restricting the sale of existing or new products[73]. - The Company may incur significant legal expenses defending against environmental litigation, which could adversely affect its financial position[72]. Human Resources and Management - The Company employed 2,396 persons as of December 31, 2024, a slight increase from 2,389 employees in 2023[25]. - The Company’s executive team includes a new Chief Human Resources Officer appointed in September 2023 and an Interim Chief Financial Officer appointed in October 2024[36][37]. - The Company's future success significantly depends on the skills and experience of its executive management and key personnel, with potential adverse effects on financial position if unable to retain talent[97]. International Operations and Risks - The Company generated approximately 45% of its net sales from international operations in the year ended December 31, 2024[76]. - The Company is subject to various international business risks, including fluctuations in currency exchange rates, which may adversely affect profitability[76]. - The Company faces risks related to political, economic, and market conditions in foreign operations, which may be unstable[77]. - Fluctuations in foreign currency exchange rates could materially affect the Company's financial results, especially during a strengthening U.S. dollar[80]. - The company had forward contracts with an aggregated notional amount of $149.6 million to mitigate foreign currency exchange risk as of December 31, 2024[207].