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Foreign currency exchange rate risk
−Removed: We have foreign-based operations, primarily in Europe, South America and Asia, which accounted for approximately 27 percent of our net sales in the first three months of 2025.
+Added: We have foreign-based operations, primarily in Europe, South America and Asia, which accounted for approximately 24 percent of our net sales in the first six months of 2025.
We have designated the local currency as the functional currency of our significant operations outside of the U.S.
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A hypothetical 10 percent adverse change, excluding the impact of any hedging instruments, in the average Brazilian real, Chinese renminbi and euro to U.S.
−Removed: dollar exchange rates during the three months ended March 31, 2025, would have decreased our net sales and income before income taxes by approximately $3.5 million or one percent, and $1.0 million or four percent, respectively.
+Added: dollar exchange rates during the six months ended June 30, 2025, would have decreased our net sales and income before income taxes by approximately $7.8 million or one percent, and $2.7 million or two percent, respectively.
Comparatively, a hypothetical 10 percent adverse change, excluding the impact of any hedging instruments, in the average Brazilian real, Chinese renminbi and euro to U.S.
−Removed: dollar exchange rates during the three months ended March 31, 2024, would have decreased our net sales and income before income taxes by approximately $4.0 million or one percent, and $1.2 million or two percent, respectively.
+Added: dollar exchange rates during the six months ended June 30, 2024, would have decreased our net sales and income before income taxes by approximately $8.4 million or one percent, and $2.9 million or one percent, respectively.
Interest rate risk
−Removed: During the third quarter of 2024, we entered into a floating-to-fixed interest rate swap with a notional amount of $200.0 million to manage the variability of cash flows in the interest rate payments associated with our existing SOFR-based interest payments, effectively converting $200.0 million of our floating rate debt to a fixed rate.
+Added: During the third quarter of 2024, we entered into a floating-to-fixed interest rate swap to convert a notional amount of $200.0 million of the variable, Secured Overnight Financing Rate ("SOFR") based interest component of our debt to a fixed rate.
In accordance with the terms of this instrument, we receive floating rate interest payments based upon one-month U.S.
−Removed: dollar SOFR and in return are obligated to pay interest at a fixed rate of 3.84 percent until August 2026.
−Removed: The fair value of the interest rate swap was an asset (liability) of $(0.1) million and $0.6 million at March 31, 2025 and December 31, 2024, respectively.
−Removed: As of March 31, 2025, approximately $547 million of our borrowings, adjusted for our $200.0 million floating-to-fixed interest rate swap, included a variable interest rate component.
−Removed: The weighted average interest rate associated with our variable interest rate borrowings was 5.80 percent for the period ended March 31, 2025.
−Removed: A hypothetical 100 basis point increase in the variable interest rate component of our borrowings for the three months ended March 31, 2025, would have increased our annual interest expense by approximately $5.5 million or eight percent.
−Removed: Comparatively, a 100 basis point increase in the variable interest rate component of our borrowings for the three months ended March 31, 2024, would have increased our interest expense by approximately $8.5 million or 10 percent.
+Added: dollar SOFR, which was 4.32 percent as of June 30, 2025, and in return are obligated to pay interest at a fixed rate of 3.84 percent until August 2026.
+Added: The fair value of the interest rate swap was an asset (liability) of $(0.2) million and $0.6 million at June 30, 2025 and December 31, 2024, respectively.
+Added: As of June 30, 2025, approximately $485 million of our borrowings, adjusted for our $200.0 million floating-to-fixed interest rate swap, included a variable interest rate component.
+Added: The weighted average interest rate associated with our variable interest rate borrowings was 5.69 percent for the period ended June 30, 2025.
+Added: A hypothetical 100 basis point increase in the variable interest rate component of our borrowings for the six months ended June 30, 2025, would have increased our annual interest expense by approximately $4.8 million or seven percent.
+Added: Comparatively, a 100 basis point increase in the variable interest rate component of our borrowings for the six months ended June 30, 2024, would have increased our annual interest expense by approximately $8.5 million or 10 percent.
Commodity price risk
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Crude tall oil price risk
−Removed: Our results of operations are directly affected by the cost of our raw materials, particularly CTO, which, excluding CTO resales, represented 8 percent and 16 percent of our condensed consolidated cost of sales for the three months ended March 31, 2025 and 2024, respectively.
−Removed: Raw material CTO spend was approximately $10 million during the three months ended March 31, 2025.
−Removed: Comparatively, total raw material CTO spend was approximately $56 million during the three months ended March 31, 2024.
+Added: Our results of operations are directly affected by the cost of our raw materials, particularly CTO, which, excluding CTO resales, represented 7 percent and 16 percent of our condensed consolidated cost of sales for the six months ended June 30, 2025 and 2024, respectively.
+Added: Raw material CTO spend was approximately $8 million and $18 million during the three and six months ended June 30, 2025.
+Added: Comparatively, total raw material CTO spend was approximately $55 million and $111 million during the three and six months ended June 30, 2024.
Pricing for CTO is driven by the limited supply of the product and competing demands for its use, both of which drive pressure on its price.
Our gross profit and margins have been and could continue to be adversely affected by increases in the cost of CTO if we are unable to pass the increases on to our customers.
−Removed: Based on average pricing during the three months ended March 31, 2025, a hypothetical unhedged, unfavorable 10 percent increase in the market price for CTO would have increased our cost of sales by approximately $1.0 million or one percent, which we may not have been able to pass on to our customers.
−Removed: Comparatively, based on average pricing during the three months ended March 31, 2024, a hypothetical unhedged, unfavorable 10 percent increase in the market price for CTO would have increased our cost of sales by approximately $5.6 million or two percent.
+Added: Based on average pricing during the three and six months ended June 30, 2025, a hypothetical unhedged, unfavorable 10 percent increase in the market price for CTO would have increased our cost of sales by approximately $0.8 million (zero percent) and $1.8 million (zero percent), respectively, which we may not have been able to pass on to our customers.
+Added: Comparatively, based on average pricing during the three and six months ended June 30, 2024, a hypothetical unhedged, unfavorable 10 percent increase in the market price for CTO would have increased our cost of sales by approximately $5.5 (two percent) and $11.1 million (two percent), respectively.
The repositioning of the Performance Chemicals reportable segment and the termination of the long-term CTO supply contract have significantly reduced the company's volume requirements and exposure to CTO beginning in 2025.
Natural gas price risk
−Removed: Natural gas, both direct and indirect, is our largest form of energy costs constituting approximately five percent of our cost of goods sold for the three months ended March 31, 2025.
+Added: Natural gas, both direct and indirect, is our largest form of energy costs constituting approximately four percent of our cost of goods sold for the six months ended June 30, 2025.
Increases in natural gas costs, unless passed on to our customers, would adversely affect our results of operations.
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Refer to Note 8 for more information on our natural gas price risk hedging program.
−Removed: For the three months ended March 31, 2025, a hypothetical, unhedged 10 percent increase in natural gas pricing would have resulted in an increase to cost of sales of approximately $0.9 million or 54 basis points.
−Removed: Comparatively, for the three months ended March 31, 2024, a hypothetical, unhedged 10 percent increase in natural gas pricing would have resulted in an increase to cost of sales of approximately $1.0 million or 40 basis points.
−Removed: As of March 31, 2025, we had 1.8 million mmBTUS (millions of British Thermal Units) in open natural gas derivative contracts, designated as cash flow hedges.
−Removed: As of March 31, 2025, open natural gas derivative contracts hedge a portion of forecasted transactions until June 2026.
−Removed: The fair value of the open natural gas derivative contracts was a net asset (liability) of $1.0 million and $0.3 million as of March 31, 2025 and December 31, 2024, respectively.
+Added: For the three and six months ended June 30, 2025, a hypothetical, unhedged 10 percent increase in natural gas pricing would have resulted in an increase to cost of sales of approximately $0.7 million (28 basis points) and $1.6 million (39 basis points).
+Added: Comparatively, for the three and six months ended June 30, 2024, a hypothetical, unhedged 10 percent increase in natural gas pricing would have resulted in an increase to cost of sales of approximately $0.9 million (33 basis points) and $1.9 million (36 basis points).
+Added: As of June 30, 2025, we had 1.8 million mmBTUS (millions of British Thermal Units) in open natural gas derivative contracts, designated as cash flow hedges.
+Added: As of June 30, 2025, open natural gas derivative contracts hedge a portion of forecasted transactions until September 2026.
+Added: The fair value of the open natural gas derivative contracts was a net asset (liability) of $(0.5) million and $0.3 million as of June 30, 2025 and December 31, 2024, respectively.
Other market risks
−Removed: Information about our other remaining market risks for the period ended March 31, 2025, does not differ materially from that discussed under Part II, Item 7A.
+Added: Information about our other remaining market risks for the period ended June 30, 2025, does not differ materially from that discussed under Part II, Item 7A.
Quantitative and Qualitative Disclosures About Market Risk of our 2024 Annual Report.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.