[Part I - Financial Information](index=2&type=section&id=Part%20I%20FINANCIAL%20INFORMATION) This section presents the company's financial statements and related disclosures [Item 1 - Financial Statements](index=2&type=section&id=Item%201%20-%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Q1 2024, showing decreased net sales and net income primarily due to lower selling prices Condensed Consolidated Statements of Income (Q1 2024 vs Q1 2023) | (In thousands, except per share amounts) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | **Net Sales** | $551,418 | $651,436 | | **Gross Profit** | $70,281 | $73,560 | | **Operating Income** | $20,169 | $21,057 | | **Net Income** | $13,893 | $16,142 | | **Diluted EPS** | $0.61 | $0.70 | Condensed Consolidated Balance Sheets (As of March 31, 2024) | (Dollars in thousands) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Total current assets** | $869,806 | $851,883 | | **Total assets** | $2,373,147 | $2,363,354 | | **Total current liabilities** | $628,853 | $607,870 | | **Total liabilities** | $1,158,625 | $1,146,864 | | **Total equity** | $1,214,522 | $1,216,490 | Condensed Consolidated Statements of Cash Flows (Q1 2024 vs Q1 2023) | (In thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | **Net Cash Provided By (Used In) Operating Activities** | $41,554 | $(72,058) | | **Net Cash Used In Investing Activities** | $(24,415) | $(90,341) | | **Net Cash Provided By (Used In) Financing Activities** | $(19,984) | $113,536 | - As of March 31, 2024, the company estimated a range of possible environmental and legal losses between **$20.8 million** and **$49.8 million**, accruing for the lower end of this range[37](index=37&type=chunk) [Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202%20-%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2024 financial results, noting a 15% sales decrease and 14% net income drop due to lower prices, alongside improved liquidity and a positive 2024 outlook [Overview](index=30&type=section&id=Overview) The company operates through three main segments: Surfactants, which are key ingredients in cleaning and personal care products; Polymers, used in thermal insulation and specialty coatings; and Specialty Products, which include ingredients for food, nutritional, and pharmaceutical applications - The company's business is divided into three reportable segments: - **Surfactants:** Accounted for **71% of consolidated net sales** in Q1 2024, used in consumer and industrial cleaning products[83](index=83&type=chunk) - **Polymers:** Accounted for **26% of sales**, including polyurethane polyols for insulation and coatings[84](index=84&type=chunk) - **Specialty Products:** Accounted for **3% of sales**, including flavors and emulsifiers for food and pharmaceutical applications[85](index=85&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) For Q1 2024, net income was $13.9 million ($0.61 per diluted share), a decrease from $16.1 million ($0.70 per diluted share) in Q1 2023, with consolidated net sales falling 15% to $551.4 million primarily due to lower average selling prices Q1 2024 vs Q1 2023 Performance Summary | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Net Income | $13.9M | $16.1M | -13.7% | | Diluted EPS | $0.61 | $0.70 | -12.9% | | Adjusted Net Income | $14.7M | $16.4M | -10.4% | | Adjusted Diluted EPS | $0.64 | $0.71 | -9.9% | - The **15% decrease in consolidated net sales** was driven by: - Lower average selling prices: **-$115.5 million** impact[89](index=89&type=chunk) - Increased sales volume (1%): **+$3.7 million** impact[89](index=89&type=chunk) - Favorable foreign currency translation: **+$11.8 million** impact[89](index=89&type=chunk) - The effective tax rate increased to **28.6% in Q1 2024** from 18.9% in Q1 2023, primarily due to the company's intention to elect "Bonus Depreciation" for its new Pasadena, Texas facility, which is expected to reduce the usability of certain tax deductions and credits in 2024[95](index=95&type=chunk) [Segment Results](index=34&type=section&id=Segment%20Results) In Q1 2024, Surfactants operating income decreased 4% to $26.1 million, Polymers operating income fell 16% to $8.4 million, while Specialty Products operating income surged 69% to $4.3 million Operating Income by Segment (Q1 2024 vs Q1 2023) | (In thousands) | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | **Surfactants** | $26,079 | $27,056 | -4% | | **Polymers** | $8,382 | $10,004 | -16% | | **Specialty Products** | $4,268 | $2,530 | +69% | | **Total Segment Operating Income** | $38,729 | $39,590 | -2% | - Surfactant sales in North America decreased **17%** due to lower demand in the agricultural end market from inventory destocking[97](index=97&type=chunk) - Latin American sales volume grew **16%**, driven by demand in consumer products[99](index=99&type=chunk) - Polymer sales in North America fell **14%**, largely due to a **43% volume decline** in commodity phthalic anhydride caused by operational interruptions at the Millsdale, Illinois plant[106](index=106&type=chunk) - Specialty Products' increase in gross profit and operating income was mainly attributable to higher unit margins and sales volume within the medium chain triglycerides (MCT) product line[113](index=113&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity position improved significantly, with operating activities generating $41.6 million in cash in Q1 2024, compared to a $72.1 million use in Q1 2023, primarily due to better working capital management - Cash from operating activities was a source of **$41.6 million in Q1 2024**, a stark contrast to a cash use of **$72.1 million in Q1 2023**, mainly due to improved working capital[116](index=116&type=chunk) - Capital expenditures were **$30.2 million in Q1 2024**, a decrease from **$92.2 million in Q1 2023**[121](index=121&type=chunk) - The full-year 2024 forecast for capital expenditures is between **$120.0 million and $140.0 million**[122](index=122&type=chunk) - As of March 31, 2024, total debt was **$646.0 million** and net debt was **$520.2 million**[126](index=126&type=chunk) - The company had **$152.8 million available** under its credit agreement[128](index=128&type=chunk) - The company did not purchase any shares on the open market in Q1 2024[125](index=125&type=chunk) - **$125.1 million** remains authorized under its share repurchase program[125](index=125&type=chunk) [Outlook](index=44&type=section&id=Outlook) Management anticipates a gradual improvement in sales volumes, driven by recovery in Rigid Polyols demand and an expected rebound in the agricultural business in the second half of 2024, alongside a focus on achieving $50.0 million in pre-tax savings - Management expects gradual sales volume improvement, with recovery in the agricultural business anticipated in the second half of the year[135](index=135&type=chunk) - The company is focused on delivering **$50.0 million in pre-tax savings** from its cost reduction program to offset inflation and increased expenses from the new Pasadena facility commissioning[135](index=135&type=chunk) - The company believes it is positioned to deliver full-year adjusted EBITDA growth and positive free cash flow in 2024[135](index=135&type=chunk) [Non-GAAP Reconciliations](index=44&type=section&id=Non-GAAP%20Reconciliations) This section provides detailed reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures, which management uses to evaluate core operating performance by excluding certain non-operational items Reconciliation of Non-GAAP Adjusted Net Income (Q1 2024) | (In millions, except per share amounts) | Net Income | Diluted EPS | | :--- | :--- | :--- | | **As Reported** | $13.9 | $0.61 | | Deferred Compensation Income | (0.5) | (0.02) | | Environmental Remediation Expense | 1.5 | 0.06 | | Cumulative Tax Effect | (0.2) | (0.01) | | **Adjusted Net Income** | **$14.7** | **$0.64** | Reconciliation of Non-GAAP Adjusted EBITDA (Q1 2024 vs Q1 2023) | ($ in millions) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | **Operating Income** | $20.2 | $21.1 | | Depreciation and Amortization | 27.6 | 25.5 | | Other, Net Income | 2.4 | 1.7 | | **EBITDA** | **$50.2** | **$48.3** | | Adjustments | 1.0 | 0.4 | | **Adjusted EBITDA** | **$51.2** | **$48.7** | [Item 3 – Quantitative and Qualitative Disclosures about Market Risk](index=47&type=section&id=Item%203%20%E2%80%93%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company reported that there have been no material changes to the market risks described in its 2023 Annual Report on Form 10-K - There have been no material changes to the market risks disclosed in the Company's 2023 Annual Report on Form 10-K[144](index=144&type=chunk) [Item 4 – Controls and Procedures](index=47&type=section&id=Item%204%20%E2%80%93%20Controls%20and%20Procedures) Based on an evaluation as of March 31, 2024, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2024[145](index=145&type=chunk) - No changes occurred during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[145](index=145&type=chunk) [Part II - Other Information](index=47&type=section&id=Part%20II%20OTHER%20INFORMATION) This section covers other important information including legal proceedings, risk factors, and equity transactions [Item 1 – Legal Proceedings](index=47&type=section&id=Item%201%20%E2%80%93%20Legal%20Proceedings) This section provides updates on significant legal matters, including a consent decree entered regarding the Maywood, New Jersey site and a Notice and Finding of Violation from the USEPA concerning the Millsdale facility - A consent decree was entered on February 29, 2024, among the Company, the United States, and NJDEP regarding the Maywood, New Jersey site, requiring certain actions and payment of past costs[147](index=147&type=chunk) - On March 26, 2024, the Company received a Notice and Finding of Violation from the USEPA for its Millsdale facility, alleging violations of air regulations related to operating parameters and emissions[148](index=148&type=chunk) [Item 1A – Risk Factors](index=47&type=section&id=Item%201A%20%E2%80%93%20Risk%20Factors) The company states that there have been no material changes to the risk factors that were disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023 - There have been no material changes to the risk factors disclosed in the Company's 2023 Annual Report on Form 10-K[150](index=150&type=chunk) [Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202%20%E2%80%93%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 2024, the company purchased 46,002 shares, primarily surrendered by employees for tax withholding, with $125.1 million remaining under the share repurchase program Share Purchases in Q1 2024 | Month | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2024 | 1,614 | $94.43 | | February 2024 | 34,904 | $89.99 | | March 2024 | 9,484 | $87.52 | | **Total** | **46,002** | **$89.64** | - The shares purchased were surrendered by employees to settle statutory withholding taxes related to equity awards and were not part of the publicly announced open-market repurchase program[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) - The company has **$125.1 million remaining** under its **$150 million** share repurchase program authorized in October 2021, which has no expiration date[151](index=151&type=chunk)[152](index=152&type=chunk)

Net Income Bridge – Q1 2023 to Q1 2024 $0.71 Adj. EPS $0.64 Adj. EPS Note: All amounts are in millions of U.S. dollars and are reported after-tax. First Quarter 2024 Earnings Results April 30, 2024 Providing innovative chemical solutions for a cleaner, healthier, more energy efficient world. Certain information in this presentation consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Sect ...

Financial Data and Key Metrics Changes - The company generated positive free cash flow of $11.4 million, with capital expenditures returning to historical levels [2] - First quarter adjusted net income was $14.7 million, or $0.64 per diluted share, down from $16.4 million, or $0.71 per diluted share in the same quarter last year, primarily due to a higher effective tax rate [3] - Adjusted EBITDA for the first quarter was $51.2 million, a 5% increase year-over-year [15] Business Line Data and Key Metrics Changes - Surfactants segment net sales were $391 million, a 16% decrease year-over-year, with selling prices down 18% [16] - Polymer net sales were $146 million, a 10% decrease year-over-year, with volume increasing by 1% [18] - Specialty Products net sales were $15 million, a 33% decrease year-over-year, but adjusted EBITDA increased by 49% [19] Market Data and Key Metrics Changes - Global sales volume increased by 1% year-over-year, with strong recovery in volumes across core markets, excluding agricultural and phthalic anhydride [8] - Latin American surfactant volumes grew strong double-digits, with record volumes in Mexico [22] - The agricultural market experienced volume weakness due to continued inventory destocking [8] Company Strategy and Development Direction - The company is on track to deliver a $50 million cost reduction goal for 2024 through supply chain and workforce productivity actions [2] - The focus remains on improving operational performance and diversifying the customer base, particularly in Tier 2 and Tier 3 markets [23][24] - The company is investing in next-generation Rigid Polyol technologies to enhance energy efficiency in insulation products [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength and diversity of the business, anticipating gradual improvement in sales volumes due to recovery in Rigid Polyols and surfactant volumes [32] - The company expects to see a recovery in agricultural volumes in the second half of the year, which should positively impact EBITDA [55] - Management acknowledged ongoing operational issues at the Millsdale site but is focused on addressing these challenges [31] Other Important Information - The company paid $8.5 million in dividends during the first quarter and has $125 million remaining under the share repurchase program [11] - Construction on the new alkoxylation production facility in Pasadena, Texas is approximately 90% complete, with startup expected in Q4 2024 [28] Q&A Session Summary Question: Regarding operating income and surfactants margins - Management noted that adjusted EBITDA for surfactants was slightly up 4% year-over-year, with margin improvements despite agricultural mix headwinds [39] Question: Opportunities for maintenance at Millsdale plant - Management confirmed a long-term infrastructure reinvestment plan is in place for the Millsdale site, focusing on improving power reliability and addressing unexpected maintenance outages [41] Question: Impact of Millsdale outage on Q1 - The Millsdale outage had an estimated impact of $5.8 million on pre-tax income, split evenly between the Polymers and Surfactants segments [48] Question: Price mix number and expectations for stabilization - Management indicated that the majority of the 18% decline in price mix was due to pricing, with expectations for improvement as agricultural recovery occurs [50][52] Question: Customer confidence in agricultural business recovery - Management expressed confidence that agricultural demand will rebound post-destocking, with a 50-50 chance of recovery starting in Q3 or Q4 [53] Question: Outlook for adjusted EBITDA growth - Management suggested that while they do not provide formal guidance, they expect improvement in adjusted EBITDA in the second half of the year due to agricultural recovery [55]

Exhibit 99.1 Stepan Reports First Quarter 2024 Results Northbrook, Illinois, April 30, 2024 -- Stepan Company (NYSE: SCL) today reported: First Quarter 2024 Highlights "We are encouraged by the first quarter volume growth in several of our core end markets. Surfactants experienced double-digit volume growth within the Personal Care and Oil Field end markets and with our Distribution partners. As expected, Latin America Surfactant volumes grew double digits as we recovered Consumer volumes in Mexico. Rigid a ...

Part I [Item 1. Business](index=7&type=section&id=Item%201.%20Business) Stepan Company produces specialty and intermediate chemicals across three segments, competing on performance, price, and capacity - The Company operates through **three reportable segments**: Surfactants, Polymers, and Specialty Products, producing specialty and intermediate chemicals for various end products[18](index=18&type=chunk) - Competition is based on **product performance, price, technical assistance, and capacity**, competing with large global producers and internal divisions of customers[22](index=22&type=chunk) - The company's employee count **decreased from 2,453 in 2022 to 2,389** at the end of 2023[29](index=29&type=chunk) [Revenue-Generating Products](index=7&type=section&id=Revenue-Generating%20Products) The company's revenue is generated from three main product categories: Surfactants, Polymers, and Specialty Products - Surfactants serve as **basic cleaning agents** in detergents, personal care products, and various commercial and industrial applications[19](index=19&type=chunk) - Polymers, including polyurethane polyols and polyester resins, are primarily used in **rigid foam for thermal insulation** and CASE applications[20](index=20&type=chunk) - Specialty Products are chemicals utilized in **food, flavoring, nutritional supplement, and pharmaceutical sectors**[21](index=21&type=chunk) [Compliance with Government Regulations](index=7&type=section&id=Compliance%20with%20Government%20Regulations) The company is subject to extensive environmental, health, and safety regulations, with significant compliance costs 2023 Environmental Compliance Costs | Cost Category | Amount (USD) | | :--- | :--- | | Capital Expenditures | $8.5M | | Recurring Operating & Maintenance Costs | $38.3M | - The company has made **capital investments to modify its manufacturing process** to reduce 1,4 dioxane content in ethoxylated surfactants in response to recent regulations[28](index=28&type=chunk) [Information About our Executive Officers](index=11&type=section&id=Information%20About%20our%20Executive%20Officers) The company's executive officers are elected annually by the Board of Directors, with key roles in various functions Executive Officers (as of Feb 29, 2024) | Name | Age | Title | | :--- | :--- | :--- | | Scott R. Behrens | 54 | President and Chief Executive Officer | | Sean T. Moriarty | 54 | Vice President and General Manager – Surfactants | | Luis E. Rojo | 51 | Vice President and Chief Financial Officer | | Jason S. Keiper | 50 | Vice President and Chief Technology and Sustainability Officer | | David G. Kabbes | 61 | Vice President, General Counsel and Secretary | | Richard F. Stepan | 47 | Vice President and General Manager – Polymers | | Robert J. Haire | 51 | Executive Vice President, Supply Chain | | Sharon N. Purnell | 46 | Vice President and Chief Human Resources Officer | [Item 1A. Risk Factors](index=14&type=section&id=Item%201A.%20Risk%20Factors) The company identifies significant risks across business, market, regulatory, international, and financial operations - Business and operational risks include **hazardous chemical manufacturing**, which can lead to accidents and production shutdowns, and **volatility in raw material and energy costs**[46](index=46&type=chunk)[49](index=49&type=chunk) - Market risks stem from **customer product reformulations**, such as reducing 1,4 dioxane, which can lessen demand for existing products, and **intense global competition**[56](index=56&type=chunk)[57](index=57&type=chunk)[61](index=61&type=chunk) - The company is subject to **extensive environmental regulations** (e.g., TSCA, REACH, ethylene oxide rules) that could require costly product reformulations or process changes[68](index=68&type=chunk)[71](index=71&type=chunk)[73](index=73&type=chunk) - International operations, which constituted **44% of net sales in 2023**, expose the company to risks from **currency fluctuations, foreign laws, and adverse tax consequences**[85](index=85&type=chunk) - Financial risks include **potential credit rating downgrades** and the constraints of **significant indebtedness, which was $654.1 million as of year-end 2023**[91](index=91&type=chunk)[93](index=93&type=chunk)[175](index=175&type=chunk) [Item 1C. Cybersecurity](index=32&type=section&id=Item%201C.%20Cybersecurity) Stepan manages cybersecurity risks through its ERM program, following COSO and NIST guidelines, with Board oversight - The company's cybersecurity risk management is based on its **ERM program, the COSO framework, and NIST guidelines**[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk) - The Audit Committee of the Board of Directors oversees cybersecurity risk management, with the **Vice President of Information Technology** in charge of assessment and management[110](index=110&type=chunk) - As of the filing date, the company is not aware of any cybersecurity incidents since the beginning of 2023 that have **materially affected its business, operations, or financial condition**[109](index=109&type=chunk) [Item 2. Properties](index=34&type=section&id=Item%202.%20Properties) The company's principal physical properties include manufacturing facilities and technology centers globally Principal Physical Properties | Facility Name | Location | Segment | | :--- | :--- | :--- | | Millsdale | Elwood, Illinois | Surfactants/Polymers | | Winder | Winder, Georgia | Surfactants | | Maywood | Maywood, New Jersey | Surfactants / Specialty Products | | Pasadena | Pasadena, Texas | Surfactants | | Stepan France | Voreppe, France | Surfactants | | Stepan Ecatepec | Ecatepec, Mexico | Surfactants | | Stepan China | Nanjing, China | Polymers | | Stepan Brazil | Vespasiano, Brazil | Surfactants | | Global Technology Center | Northfield, Illinois | N/A | | Company Headquarters | Northbrook, Illinois | N/A (leased) | [Item 3. Legal Proceedings](index=36&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings, primarily environmental remediation under CERCLA - The company is a potentially responsible party at the Maywood, New Jersey Superfund site for chemical and radiological contamination and is conducting **remediation studies under USEPA orders**[115](index=115&type=chunk) - At the Wilmington, Massachusetts site, the company is contractually obligated to contribute **up to 5% of environmental response costs** incurred by the current owner, with no ultimate limit on contributions[117](index=117&type=chunk) - The company is also performing **self-remediation for chemical contamination** discovered at its Elwood, Illinois (Millsdale) and Fieldsboro, New Jersey plants[119](index=119&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=39&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Stepan Company's common stock trades on the NYSE, with a share repurchase program and underperforming stock returns - The company's common stock trades on the NYSE under the symbol **SCL**[123](index=123&type=chunk) - A share repurchase program authorized for **up to $150 million** has approximately **$125.1 million remaining** for future repurchases as of Q4 2023[124](index=124&type=chunk) Stock Performance Comparison (Cumulative Value of $100 Invested on 12/31/2018) | Year | Stepan Company (USD) | Dow Jones Chemical Industry Index (USD) | Russell 2000 Index (USD) | | :--- | :--- | :--- | :--- | | 2018 | $100.00 | $100.00 | $100.00 | | 2019 | $138.43 | $119.10 | $125.52 | | 2020 | $164.76 | $138.54 | $150.58 | | 2021 | $172.94 | $171.15 | $172.90 | | 2022 | $149.56 | $155.30 | $137.56 | | 2023 | $134.98 | $169.84 | $160.85 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2023, Stepan Company experienced a significant downturn with net income falling 73% due to decreased sales and volumes 2023 vs 2022 Financial Highlights | Metric | 2023 (USD) | 2022 (USD) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $2,325.8M | $2,773.3M | -16% | | Operating Income | $58.6M | $207.3M | -72% | | Net Income | $40.2M | $147.2M | -73% | | Diluted EPS | $1.75 | $6.38 | -73% | | Adjusted Net Income | $50.7M | $153.5M | -67% | | Adjusted Diluted EPS | $2.21 | $6.65 | -67% | - The decrease in 2023 net sales was driven by an **11% decline in consolidated sales volume** and lower average selling prices, reflecting a slowdown in demand and significant customer and channel inventory destocking[140](index=140&type=chunk)[146](index=146&type=chunk) - For 2024, management anticipates **sales volume and margin improvements** and is implementing cost reduction activities to deliver **$50 million in pre-tax savings**[195](index=195&type=chunk) [Segment Results](index=46&type=section&id=Segment%20Results) In 2023, all segments reported lower operating income due to volume declines and margin pressures Operating Income by Segment (in thousands USD) | Segment | 2023 (USD) | 2022 (USD) | % Change | | :--- | :--- | :--- | :--- | | Surfactants | $72.4M | $162.7M | -56% | | Polymers | $60.8M | $82.9M | -27% | | Specialty Products | $11.5M | $29.9M | -62% | | **Total Segment Operating Income** | **$144.6M** | **$275.5M** | **-48%** | - Surfactant sales volume **declined 9%**, primarily due to demand slowdown and inventory destocking across most end markets[146](index=146&type=chunk) - Polymer sales volume **decreased 15%**, reflecting customer destocking and reduced construction-related activities[155](index=155&type=chunk) [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is supported by cash from operations, with increased debt and significant capital expenditures Cash Flow Summary (in millions USD) | Activity | 2023 (USD) | 2022 (USD) | | :--- | :--- | :--- | | Net Cash Provided By Operating Activities | $174.9M | $160.8M | | Net Cash Used In Investing Activities | ($258.7M) | ($308.1M) | | Net Cash Provided By Financing Activities | $33.3M | $166.2M | Net Debt Position (in millions USD) | Metric | Dec 31, 2023 (USD) | Dec 31, 2022 (USD) | | :--- | :--- | :--- | | Total Debt | $654.1M | $587.1M | | Less: Cash & Cash Equivalents | ($129.8M) | ($173.8M) | | **Net Debt** | **$524.3M** | **$413.3M** | | Net Debt/Net Debt plus Equity Ratio | 30.1% | 26.2% | - Capital expenditures for 2024 are estimated to be in the range of **$120.0 million to $140.0 million**[172](index=172&type=chunk) [Critical Accounting Estimates and Policies](index=59&type=section&id=Critical%20Accounting%20Estimates%20and%20Policies) Critical accounting estimates involve significant judgment for environmental liabilities and goodwill impairment - Environmental liabilities are estimated based on factors like the nature of contamination and remediation costs. The company has accrued the **low end of its estimated loss range**[198](index=198&type=chunk)[192](index=192&type=chunk) - Goodwill impairment testing uses market and income approaches, relying on estimates of EBITDA, growth rates, and discount rates. The Mexico reporting unit's goodwill of **$6.7 million** was tested in Q4 2023 due to declining earnings, and its fair value was **not substantially above its carrying value**[200](index=200&type=chunk)[202](index=202&type=chunk)[323](index=323&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=64&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from foreign currency, interest rates, and commodity prices, using hedging strategies - The company uses forward contracts to hedge foreign currency exposure, with an aggregate notional amount of **$106.6 million** at December 31, 2023. A hypothetical **10% adverse change** in exchange rates would result in an **$8.4 million reduction in earnings**[212](index=212&type=chunk) - As of December 31, 2023, debt consisted of **$360.7 million in fixed-rate** and **$283.0 million in variable-rate borrowings**[213](index=213&type=chunk) - The company uses forward contracts to manage natural gas costs, with open contracts for **0.7 million dekatherms** at a cost of **$3.4 million** at year-end 2023[215](index=215&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=65&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements for 2021-2023 with an unqualified auditor's report - The independent auditor, Deloitte & Touche LLP, issued an **unqualified opinion** on the financial statements and identified two Critical Audit Matters: environmental contingencies for the Maywood site and the goodwill valuation for the Mexico reporting unit[219](index=219&type=chunk)[224](index=224&type=chunk)[226](index=226&type=chunk) Consolidated Statement of Income Highlights (in thousands USD) | Line Item | 2023 (USD) | 2022 (USD) | 2021 (USD) | | :--- | :--- | :--- | :--- | | Net Sales | $2,325.8M | $2,773.3M | $2,346.0M | | Gross Profit | $277.6M | $427.1M | $395.8M | | Operating Income | $58.6M | $207.3M | $170.8M | | Net Income Attributable to Stepan | $40.2M | $147.2M | $137.8M | | Diluted EPS | $1.75 | $6.38 | $5.92 | Consolidated Balance Sheet Highlights (in thousands USD) | Line Item | Dec 31, 2023 (USD) | Dec 31, 2022 (USD) | | :--- | :--- | :--- | | Total Current Assets | $851.9M | $1,044.8M | | Total Assets | $2,363.4M | $2,433.2M | | Total Current Liabilities | $607.9M | $670.6M | | Total Liabilities | $1,146.9M | $1,267.1M | | Total Stepan Company Stockholders' Equity | $1,216.5M | $1,166.1M | [Notes to Consolidated Financial Statements](index=78&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on goodwill impairment, total debt, tax rates, and environmental contingencies - In 2023, the company recorded **goodwill and other intangible impairment charges of $2.0 million** related to its Specialty Products (Lipid Nutrition) and Surfactants (Colombia) segments[322](index=322&type=chunk)[327](index=327&type=chunk)[233](index=233&type=chunk) - Total debt was **$654.1 million** as of Dec 31, 2023, comprised of senior unsecured notes, revolving credit facility borrowings, and foreign subsidiary debt[330](index=330&type=chunk) - The company recorded **$11.6 million in restructuring and asset impairment charges** in 2023, including **$5.5 million for a voluntary early retirement program** and **$2.9 million for workforce productivity measures**[441](index=441&type=chunk)[233](index=233&type=chunk) [Item 9A. Controls and Procedures](index=137&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2023 - The CEO and CFO concluded that **disclosure controls and procedures were effective** as of December 31, 2023[447](index=447&type=chunk) - Management's assessment, based on the COSO 2013 framework, concluded that **internal control over financial reporting was effective**[449](index=449&type=chunk) - The independent auditor, Deloitte & Touche LLP, issued an **unqualified opinion** on the company's internal control over financial reporting[450](index=450&type=chunk) Part III [Items 10-14](index=139&type=section&id=Items%2010-14) Information for Items 10 through 14 is incorporated by reference from the company's definitive Proxy Statement - Information for Items 10, 11, 12, 13, and 14 is **incorporated by reference** from the 2024 Proxy Statement[460](index=460&type=chunk)[462](index=462&type=chunk)[463](index=463&type=chunk)[464](index=464&type=chunk)[465](index=465&type=chunk) Part IV [Item 15. Exhibits, Financial Statement Schedules](index=139&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists exhibits filed as part of the Form 10-K report, including governance and material contracts - This section contains a list of all exhibits filed with the Form 10-K, including **governance documents, material contracts, and required certifications**[467](index=467&type=chunk)[468](index=468&type=chunk)[469](index=469&type=chunk)[470](index=470&type=chunk) [Item 16. Form 10-K Summary](index=147&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has indicated that there is no summary provided for this item - No summary is provided under this item[471](index=471&type=chunk)

Financial Data and Key Metrics Changes - For the full year, adjusted net income was $50.7 million, a 67% decrease from $153.5 million in the prior year, primarily due to an 11% decline in volume driven by demand slowdown and inventory de-stocking [12][35] - Adjusted EBITDA for 2023 was $180 million, a decrease of 40% compared to a record year in 2022, largely due to volume reduction and lower overhead absorption [36] - Cash flow from operations increased to $175 million, representing a 9% growth compared to the previous year [13][39] Business Line Data and Key Metrics Changes - Surfactants segment reported net sales of $370 million, a 19% decrease year-over-year, with selling prices down 22% due to lower raw material costs and competitive pressures [22] - Polymers segment net sales were $147 million, a 1% decrease, but volume increased by 10% driven by a 12% increase in global rigid polyols [24] - Specialty products operating income decreased by 62% compared to the prior year, driven by lower volumes and margin contraction due to competitive dynamics [37] Market Data and Key Metrics Changes - Latin American surfactants volume grew strong double digits, recovering the business despite continued customer and channel de-stocking in the agricultural end market [15][23] - The agricultural business is expected to recover in the second half of 2024, following ongoing de-stocking in the first half [43][84] Company Strategy and Development Direction - The company is focused on cost reduction activities expected to deliver $50 million in pre-tax savings in 2024, which will help offset future inflation and increased expenses [28][44] - Strategic investments in new production facilities, particularly in Pasadena, are anticipated to enhance capacity and support growth in surfactants and polymers [50][51] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength and diversity of the business, anticipating improved volumes and margins in 2024 due to recovery in rigid polyols demand and lower raw material costs [43][45] - The company expects to generate positive free cash flow in 2024 as it approaches the end of its heavy investment phase [49][84] Other Important Information - The board declared a quarterly cash dividend increase of $0.01 per share, marking the 56th consecutive year of dividend increases [5] - The company has $125.1 million remaining under the share repurchase program authorized by the board [19] Q&A Session Summary Question: Insights on surfactants volume growth related to low 1,4 dioxane investment - Management confirmed that new contracted low 1,4 dioxane volumes have started shipping and are expected to grow as full capacity is reached [51][66] Question: Update on Millsdale facility and power disruptions - Management acknowledged operational interruptions due to power disruptions but noted improvements in resiliency from past investments [52][72] Question: Confidence in agricultural business recovery - Management indicated that destocking in agriculture is expected to continue in the first half, with a recovery anticipated in the second half of 2024 [73][84] Question: Context on Latin American business and competitive pressures - Management reported recovering market share and improving margins in Latin America, despite challenges from competitive imports [68][87] Question: Clarification on debt structure and interest costs - The company reported $654 million in gross debt, with 65%-70% being fixed at attractive rates [95] Question: Details on workplace productivity programs - Management highlighted that 70% of the $50 million cost reduction comes from operational improvements, with the remainder from workforce productivity [97][105]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (MARK ONE) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 1-4462 STEPAN COMPANY (Exact name of registrant as specified in its charter) | Delaware | | --- | (State or other jurisdiction of i ...

Financial Data and Key Metrics - Adjusted net income for Q3 2023 was $14.7 million, a significant decline from $46.3 million in the prior year [23][29] - Adjusted EBITDA for Q3 2023 was $48 million, down from $85 million in the prior year, primarily due to a 9% decline in sales volume [23][26] - Surfactant operating income was $15.4 million, down from $39 million in the prior year, driven by a 7% decline in global sales volume and lower unit margins in Latin America [26] - Polymer operating income was $21.8 million, down from $31.9 million in the prior year, with a 12% decline in global sales volume, particularly in Rigid Polyols [27] - Specialty Product operating income was $2.4 million, down from $9.7 million in the prior year, due to lower sales volume and unit margins within the MCT product line [30] Business Line Data and Key Metrics - Surfactant volumes grew by 2% sequentially, driven by double-digit growth in personal care and mid-single-digit growth in laundry and cleaning [41] - Polymer volumes increased 6% sequentially, with high single-digit growth in global Rigid Polyols, partially offset by a 25% decline in commodity PA business [37] - Specialty Product volumes were impacted by order timing differences, leading to a sequential decline in operating income [37] Market Data and Key Metrics - Latin America saw high-single-digit volume growth in Surfactants, but margins were pressured by competitive imports [24][26] - China's Polymer business showed strong double-digit growth in Q3, driven by market diversification efforts [61] - Agricultural end-market demand remained low due to continued destocking, impacting Surfactant earnings [33][64] Company Strategy and Industry Competition - The company is focusing on cost reduction, targeting $50 million in pre-tax savings in 2024 through workforce productivity and operational improvements [52] - Investments in low 1,4 dioxane production capacity and the Pasadena alkoxylation facility are expected to drive future growth, with the latter set to be operational by mid-2024 [25][55] - The company is diversifying its Polymer business in China, moving beyond traditional construction markets [7] Management Commentary on Operating Environment and Future Outlook - Management expects continued destocking in the agricultural market through Q4 2023, with recovery anticipated in 2024 [43][76] - Raw material costs are stabilizing, and the company expects improved margins in Q4 2023, except for the MCT business, which is still impacted by high-cost inventory [99] - The company anticipates a recovery in Rigid Polyols demand and growth in Surfactant volumes driven by new contracted business in 2024 [44] Other Important Information - The company paid $8.2 million in dividends in Q3 2023 and has $125 million remaining under its share repurchase program [28] - Inventory levels were reduced by $55 million in Q3 2023, with plans to further reduce inventories by $25 million in Q4 [25][48] - The company declared a quarterly cash dividend of $0.375 per share, marking a 3% increase and the 56th consecutive year of dividend payments [31] Q&A Session Summary Question: Customer acquisition trends across Tier 1, Tier 2, and Tier 3 customers - The company continues to see robust growth in Tier 2 and Tier 3 customer acquisition, though market demand and destocking in 2023 have offset some of this momentum [2] Question: Polyols segment margins and China's construction market - Polymer unit margins have stabilized, with sequential volume growth observed from Q1 to Q3 2023 [6] - The company has diversified its Polymer business in China, leading to strong growth in non-traditional markets [7] Question: Opportunities in spray foam and PA production - The company is actively pursuing new customer approvals in the spray foam market, despite overall market conditions [9] - There are no plans to produce PA at the INVISTA assets, as Millsdale remains the sole PA production site [9][10] Question: $50 million cost savings plan for 2024 - The savings will come from operational efficiencies, including logistics, procurement, and inventory management, with additional workforce productivity activities planned for Q4 2023 [13] Question: Impact of Pasadena plant startup costs - The Pasadena plant is expected to incur $7 million to $10 million in additional costs in 2024, with benefits from savings and productivity improvements expected in the second half of the year [62][63] Question: Agricultural destocking and its impact on Surfactants - Agricultural destocking has lagged other markets, with a double-digit decline in volumes impacting Surfactant earnings in Q3 2023 [64][79] Question: Long-term outlook for the Surfactants industry - The Surfactants industry has experienced unprecedented volatility due to supply chain constraints and inventory reconciliation, but the company remains confident in its long-term growth prospects [68][93] Question: Gross margin trends and raw material costs - The company expects gross margins to stabilize in Q4 2023, with raw material costs now aligned with market prices, except for the MCT business [99] Question: Cash flow and CapEx outlook for 2024 - The company expects CapEx to return to historical levels in 2024, with depreciation estimated between $130 million to $132 million [82]

Stepan S Cautionary Statement Earnings Call Presentation Second Quarter 2023 July 26, 2023 Certain information in this presentation consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include statements about Stepan Company's plans, objectives, strategies, financial performance and outlook, trends, the amoun ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (MARK ONE) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 1-4462 STEPAN COMPANY (Exact name of registrant as specified in its charter) | Delaware | | --- | (State or other jurisdiction of incorp ...