What changed in this filing

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Item 1. Financial Statements

2025-05-07 compared with 2024-11-06 · 158 added, 232 removed, 409 unchanged (49% of the section changed)

4 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Cost of Sales

2 unchanged sentences

Research, development and technical services

Deferred compensation expense (income)

Business restructuring expense (Note 18)

Deferred compensation (income) expense

Operating Income

11 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Other Comprehensive Income (Loss):

3 unchanged sentences

Total Other Comprehensive Income (Loss)

Comprehensive Income (Loss)

Comprehensive Income

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

2 unchanged sentences

(Dollars in thousands)

September 30, 2024

March 31, 2025

December 31, 2024

37 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash Flows From Operating Activities

3 unchanged sentences

Deferred compensation

Realized and unrealized gains on long-term investments

Realized and unrealized (gains) losses on long-term investments

Stock-based compensation

14 unchanged sentences

Revolving debt and bank overdrafts, net (Note 14)

Other debt repayments (Note 14)

Dividends paid

Stock option exercises

Net Cash Provided By Financing Activities

Net Cash Provided By (Used In) Financing Activities

Effect of Exchange Rate Changes on Cash

8 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

March 31, 2025

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 unchanged sentence

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate and make the information presented not misleading.

In the opinion of management, all adjustments, consisting only of normal recurring accruals, necessary to present fairly the Company’s financial position as of September 30, 2024, its results of operations for the three and nine months ended September 30, 2024 and 2023 and cash flows for the nine months ended September 30, 2024 and 2023, have been included.

In the opinion of management, all adjustments, consisting only of normal recurring accruals, necessary to present fairly the Company’s financial position as of March 31, 2025, its results of operations for the three months ended March 31, 2025 and 2024 and cash flows for the three months ended March 31, 2025 and 2024, have been included.

These financial statements and related footnotes should be read in conjunction with the financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (2024 Annual Report on Form 10-K).

RECONCILIATIONS OF EQUITY

Below are reconciliations of total equity for the three and nine months ended September 30, 2024 and 2023:

(In thousands, except share and per share amounts)

Comprehensive

Income (Loss)

Balance, June 30, 2024

Issuance of 1,037 shares of

common stock under incentive

compensation plan

Stock-based and deferred compensation

Other comprehensive income

Cash dividends paid:

Common stock ($ 0.375 per share)

Balance, September 30, 2024

Below are reconciliations of total equity for the three months ended March 31, 2025 and 2024:

(In thousands, except share and per share amounts)

2 unchanged sentences

Balance, December 31, 2024

Issuance of 24,161 shares of

common stock under incentive

compensation plan

Stock-based and deferred compensation

Other comprehensive (loss)

Cash dividends paid:

Common stock ($ 1.125 per share)

Balance, September 30, 2024

(In thousands, except share and per share amounts)

Comprehensive

Income (Loss)

Balance, June 30, 2023

Issuance of 10,730 shares of

common stock under incentive

compensation plan

Issuance of 1,943 shares of common

stock under incentive compensation

Stock-based and deferred compensation

Other comprehensive (loss)

Other comprehensive income (loss)

Cash dividends paid:

Common stock ($ 0.385 per share)

Balance, September 30, 2023

Balance, March 31, 2025

(In thousands, except share and per share amounts)

2 unchanged sentences

Balance, December 31, 2023

Issuance of 43,502 shares of

common stock under incentive

compensation plan

Issuance of 20,668 shares of common

stock under incentive compensation

Stock-based and deferred compensation

Other comprehensive income

Other comprehensive income (loss)

Cash dividends paid:

Common stock ($ 0.375 per share)

Balance, September 30, 2023

Balance, March 31, 2024

FAIR VALUE MEASUREMENTS

Cash and cash equivalents

Carrying value approximated far value because of the short maturity of the instruments.

Fair value of cash and cash equivalents is a Level 1 measurement.

The Company's cash and cash equivalents included money market funds totaling $ 14,279,000 and $ 12,589,000 at March 31, 2025 and December 31, 2024, respectively.

Derivative assets and liabilities

Derivative assets and liabilities include the foreign currency exchange and interest rate swap contracts discussed in Note 4, Derivative Instruments , of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q).

2 unchanged sentences

The fair value of the interest rate swap was calculated as the difference between the contracted swap rate and the floating interest rate multiplied by the present value of the notional amount of the contract.

At September 30, 2024, and December 31, 2023 , the fair values and related carrying values of debt, including current maturities, were as follows (the fair value and carrying value amounts are presented without regard to unamortized debt issuance costs of $ 527,000 and $ 895,000 as of September 30, 2024 and December 31, 2023, respectively):

At March 31, 2025, and December 31, 2024 , the fair values and related carrying values of debt, including current maturities, were as follows (the fair value and carrying value amounts are presented without regard to unamortized debt issuance costs of $ 362,000 and $ 404,000 as of March 31, 2025 and December 31, 2024, respectively):

(In thousands)

September 30,

Carrying value

The following tables present financial assets and liabilities, excluding cash and cash equivalents, measured on a recurring basis at fair value as of September 30, 2024, and December 31, 2023, and the level within the fair value hierarchy in which the fair value measurements fall:

The following tables present financial assets and liabilities, excluding cash and cash equivalents, measured on a recurring basis at fair value as of March 31, 2025, and December 31, 2024, and the level within the fair value hierarchy in which the fair value measurements fall:

(In thousands)

September 30,

Mutual fund assets

14 unchanged sentences

DERIVATIVE INSTRUMENTS

At September 30, 2024, and December 31, 2023 , the Company had open forward foreign currency exchange contracts to buy or sell foreign currencies with U.S.

At March 31, 2025, and December 31, 2024 , the Company had open forward foreign currency exchange contracts to buy or sell foreign currencies with U.S.

dollar equivalent amounts of $ 61,022,000 and $ 149,571,000 , respectively.

All forward foreign exchange contracts at September 30, 2024 , had durations of one month to three months .

All forward foreign exchange contracts at March 31, 2025 had durations of one month to three months .

The Company is currently exposed to volatility in short-term interest rates and has mitigated certain portions of that risk by using an interest rate swap.

The interest rate swap is recognized on the balance sheet as either an asset or a liability measured at fair value.

At September 30, 2024 , the Company held an interest rate swap contract with a notional value of $ 100,000,000 that was designated as a cash flow hedge.

At March 31, 2025 , 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.

1 unchanged sentence

The maturity date of the current interest swap contract is March 10, 2027 , which is closely aligned with the June 24, 2027 maturity of the Company's revolving credit facility.

The fair values of the derivative instruments held by the Company on September 30, 2024, and December 31, 2023, are disclosed in Note 3, Fair Value Measurements , of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q).

Derivative instrument gains and losses for the three and nine months ended September 30, 2024 and 2023, were immaterial.

For amounts reclassified out of AOCI into earnings for the three and nine months ended September 30, 2024 and 2023, see Note 11, Accumulated Other Comprehensive Income (Loss) , of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q).

The fair values of the derivative instruments held by the Company on March 31, 2025, and December 31, 2024, are disclosed in Note 3, Fair Value Measurements , of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q).

Derivative instrument gains and losses for the three months ended March 31, 2025 and 2024, were immaterial.

For amounts reclassified out of AOCI into earnings for the three months ended March 31, 2025 and 2024, see Note 11, Accumulated Other Comprehensive Income (Loss) , of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q).

STOCK-BASED COMPENSATION

2 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

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

(In thousands)

September 30,

Stock options

1 unchanged sentence

The change in unrecognized compensation costs for stock options, performance shares, RSUs and SARs is due to new grants issued in 2025.

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

The Company granted the following awards in the first three months of 2025:

Stock options

Performance shares (at target) and RSUs

The unrecognized compensation costs at September 30, 2024 , are expected to be recognized over weighted-average periods of 1.9 years for stock options, performance shares and RSUs and 1.8 years for SARs.

The composition of inventories at September 30, 2024, and December 31, 2023, was as follows:

The unrecognized compensation costs at March 31, 2025 , are expected to be recognized over weighted-average periods of 2.0 years for stock options, 2.5 years for performance shares and RSUs and 2.3 years for SARs.

The composition of inventories at March 31, 2025, and December 31, 2024, was as follows:

(In thousands)

September 30,

Finished goods

4 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Operating lease cost

8 unchanged sentences

for new operating lease liabilities

The following table outlines the maturities of lease liabilities as of September 30, 2024.

The following table outlines the maturities of lease liabilities as of March 31, 2025.

(In thousands)

Undiscounted Cash Flows:

2024 (excluding the nine months ended September 30, 2024)

2025 (excluding the three months ended March 31, 2025)

Subsequent to 2029

8 unchanged sentences

Weighted-average discount rate-operating leases

As of September 30, 2024 , the Company had a railcar lease, valued at approximately $ 370,000 , that had not commenced.

The lease will commence during the fourth quarter of 2024 with a lease term of five years .

As of March 31, 2025 , the Company had no leases that had not already commenced.

CONTINGENCIES

8 unchanged sentences

changes in the scope of remediation;

the interpretation, application and enforcement of laws and regulations;

the interpretation, application and enforcement of laws

and regulations;

changes in the costs of remediation programs;

2 unchanged sentences

The level of annual expenditures for remedial, monitoring and investigatory activities will change in the future as major components of planned remediation activities are completed and the scope, timing and costs of existing activities are changed.

As of September 30, 2024 , the Company estimated a range of possible environmental losses and legal losses of $ 21,463,000 to $ 48,894,000 .

As of March 31, 2025 , the Company estimated a range of possible environmental losses and legal losses of $ 17,875,000 to $ 42,409,000 .

Within the range of possible environmental losses and legal losses, management has currently concluded that no single amount is more likely to occur than any other amounts in the range and, thus, has accrued at the lower end of the range.

These accruals totaled $ 21,463,000 at September 30, 2024 , and $ 20,646,000 at December 31, 2023.

A lthough the Company believes that its estimated range of possible environmental losses and legal losses and its reserves are adequate for contingencies, it is possible, due to uncertainties including those noted above, that additional reserves could be required in the future.

Cash expenditures related to environmental remediation and certain other legal matters approximated $ 2,243,000 and $ 11,384,000 for the nine months ended September 30, 2024 and 2023, respectively.

These accruals totaled $ 17,875,000 at March 31, 2025 and $ 19,952,000 at December 31, 2024.

A lthough the Company believes that its estimated range of possible environmental losses and legal losses and its reserves are adequate for contingencies, it is possible, due to the uncertainties including those noted above, that additional reserves could be required in the future.

Cash expenditures related to environmental remediation and certain other legal matters approximated $ 2,576,000 and $ 1,585,000 for the three months ended March 31, 2025 and 2024, respectively.

For certain sites, the Company has responded to information requests made by federal, state or local government agencies but has received no response confirming or denying the Company’s stated positions.

3 unchanged sentences

However, in the event of one or more adverse determinations with respect to such sites in any annual or interim period, the effect on the Company’s cash flows and results of operations for those periods could be material.

Following are summaries of the Company’s major contingencies at September 30, 2024:

Following are summaries of the Company’s major contingencies at March 31, 2025:

Maywood, New Jersey Site

24 unchanged sentences

The Company is contractually obligated to contribute up to five percent of the environmental response costs incurred by the current owner, with no limitation on the ultimate amount of contributions.

The Company has paid the current owner $ 3,914,000 for the Company’s portion of environmental response costs at the Wilmington site through September 30, 2024.

The Company has paid the current owner $ 4,085,000 for the Company’s portion of environmental response costs at the Wilmington site through March 31, 2025.

The Company has recorded a liability for its portion of the estimated remediation costs for the site.

14 unchanged sentences

However, actual costs could differ materially from the current recorded liability.

Brazil Tax Rescission Action

In March 2017, the Brazil Supreme Court ruled that ICMS (State VAT) does not represent a Company’s revenue and should not be included in the calculation basis of certain indirect taxes (PIS/COFINS).

Based on the Supreme Court’s decision, the Company’s Brazilian subsidiary filed a lawsuit on March 23, 2017 to recover PIS/COFINS overpayments.

The Company’s recovery case was successful and became final in November 2018.

In May 2021, the Brazil Supreme Court modulated its original decision so that only taxpayers that had filed lawsuits before March 15, 2017, should recover prior PIS/COFINS overpayments.

On June 12, 2023, the Brazil National Treasury filed a rescission action against the Company’s Brazilian subsidiary to rescind its use of the PIS/COFINS tax credits for the period from March 23, 2012, to March 15, 2017.

In September and October 2024, the Brazil Superior Court and Supreme Court, respectively, ruled that the generally held two-year “res judicata” principle would start from the May 2021 ruling and not the final ruling in prior taxpayer cases (e.g., November 30, 2018, for the Company’s case).

Based on current information, the Company believes that its recorded liability is reasonable;

however, depending on the ultimate resolution of this matter, the amount for which the Company is liable could differ materially from the current recorded liability.

Other Matters

On March 19, 2025, the Company received a pre-filing notice from the USEPA for alleged violations of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) associated with certain of the Company’s biocide products sold by a licensed distributor.

The notice informed the Company of the USEPA’s intent to seek a potential penalty from the Company.

Negotiations related to this matter are ongoing with the USEPA.

The alleged damages may result in a range of possible penalties and the Company believes it is probable that it will have exposure for this matter.

At this stage, the Company is unable to predict the

ultimate outcome of this matter, or what impact, if any, the outcome might have on the Company's financial position, results of operations or cash flows.

The Company believes it has recourse to any such penalties and the Company expects to pursue indemnification claims against the licensed distributor with respect to this matter.

POSTRETIREMENT BENEFIT PLANS

6 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Interest cost

Expected return on plan assets

Amortization of net actuarial (gain)

Amortization of net actuarial loss

Net periodic benefit cost

2 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Interest cost

6 unchanged sentences

Approximately $ 171,000 is expected to be paid to the unfunded non-qualified plans in 2025 .

Of such amount, $ 210,000 had been paid to the non-qualified plans as of September 30, 2024.

Of such amount, $ 83,000 had been paid to the non-qualified plans as of March 31, 2025.

The Company’s U.K.

4 unchanged sentences

retirement plans include two qualified plans, one of which is a 401(k) plan and one of which is an employee stock ownership plan (profit sharing plan), and one non-qualified supplemental executive plan.

In the nine months ended September 30, 2024 and 2023 , the Company made contributions into the qualified retirement plans for U.S.

In the three months ended March 31, 2025 and 2024 , the Company made contributions into the qualified retirement plans for U.S.

employees and for certain non-U.S.

8 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Retirement savings contributions

5 unchanged sentences

The Company elected the fair value option for the mutual fund investment assets so that offsetting changes in the mutual fund values and defined contribution plan obligations would be recorded in earnings in the same period.

Therefore, the mutual funds are reported at fair value with any subsequent changes in fair value recorded in the condensed consolidated statements of income.

The liabilities related to the supplemental plans increase (i.e., supplemental plan expense is recognized) when the value of the trust assets appreciate and decrease when the value of the trust assets decline (i.e., supplemental plan income is recognized).

At September 30, 2024 , the balance of the trust assets was $ 479,000 , which equaled the balance of the supplemental plan liabilities.

Therefore, the mutual funds are reported at fair value with any subsequent changes in fair value recorded in the statements of income.

The supplemental plan liabilities increase (i.e., supplemental plan expense is recognized) when the value of the trust assets appreciate and decrease when the value of the trust assets decline (i.e., supplemental plan income is recognized).

At March 31, 2025 , the balance of the trust assets was $ 605,000 which equaled the balance of the supplemental plan liabilities.

See the long-term investments section in Note 3, Fair Value Measurements , of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q) for further information regarding the Company’s mutual fund assets.

EARNINGS PER SHARE

Below are the computations of basic and diluted earnings per share for the three and nine months ended September 30, 2024 and 2023:

Below are the computations of basic and diluted earnings per share for the three months ended March 31, 2025 and 2024:

(In thousands, except per share amounts)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Computation of Basic Earnings per Share

Net income attributable to Stepan Company

Weighted-average number of common shares

1 unchanged sentence

Computation of Diluted Earnings per Share

Net income attributable to Stepan Company

Weighted-average number of shares outstanding

10 unchanged sentences

Diluted earnings per share

(1) 883,188 and 860,788 options/SARs to acquire shares of the Company's common stock were excluded from the computation of dilutive earnings per share for the three and nine months ended September 30, 2024 , respectively.

(1) Options/SARs to acquire 1,213,923 and 800,025 shares of the Company's common stock were excluded from the computation of dilutive earnings per share for the three months ended March 31, 2025 and 2024 , respectively.

The options/SARs' exercise prices were greater than the average market price for the Company's common stock and inclusion of the instruments would have had an antidilutive effect on the computations of the earnings per share.

822,271 and 623,648 options/SARs to acquire shares of the Company's common stock were excluded from the computation of dilutive earnings per share for the three and nine months ended September 30, 2023 , respectively.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Below is the change in the Company’s accumulated other comprehensive income (loss) (AOCI) balance by component (net of income taxes) for the three and nine months ended September 30, 2024 and 2023:

Below is the change in the Company’s accumulated other comprehensive income (loss) (AOCI) balance by component (net of income taxes) for the three months ended March 31, 2025 and 2024:

(In thousands)

Balance at June 30, 2023

Other comprehensive income (loss) before

reclassifications

Amounts reclassified from AOCI

Net current-period other comprehensive income (loss)

Balance at September 30, 2023

Balance at June 30, 2024

Balance at December 31, 2023

Other comprehensive income (loss) before

2 unchanged sentences

Net current-period other comprehensive income (loss)

Balance at September 30, 2024

Balance at December 31, 2022

Other comprehensive income before

reclassifications

Amounts reclassified from AOCI

Net current-period other comprehensive income

Balance at September 30, 2023

Balance at March 31, 2024

Balance at December 31, 2024

3 unchanged sentences

Net current-period other comprehensive income (loss)

Balance at September 30, 2024

Information regarding the reclassifications out of AOCI for the three and nine months ended September 30, 2024 and 2023, is displayed below:

Balance at March 31, 2025

Information regarding the reclassifications out of AOCI for the three months ended March 31, 2025 and 2024, is displayed below:

(In thousands)

2 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Affected Line Item in

2 unchanged sentences

Amortization of defined benefit

pension actuarial (gains)

pension actuarial losses

Gains and losses on cash flow

9 unchanged sentences

Surfactants, Polymers and Specialty Products.

Net sales by segment for the three and nine months ended September 30, 2024 and 2023, were as follows:

The Company’s Chief Operating Decision Maker (CODM) is the President and Chief Executive Officer.

The accounting policies of the reportable segments are the same as those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 .

The following

is segment data for the three months ended March 31, 2025 and 2024, and reconciliations of segment data to the condensed consolidated financial statements:

For the Three Months Ended March 31, 2025

(In thousands)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Segment Net Sales

Specialty Products

Segment operating income and reconciliations of segment operating income to income before provision for income taxes for the three and nine months ended September 30, 2024 and 2023, are summarized below:

Cost of Sales (1)

Operating Expenses (2)

Operating Income

Unallocated Corporate Expenses (3)

Consolidated Operating Income

Segment Capital Expenditures

Unallocated Capital Expenditures (4)

Consolidated Capital Expenditures

Segment Depreciation and Amortization

Unallocated Depreciation and Amortization (5)

Consolidated Depreciation and Amortization

For the Three Months Ended March 31, 2024

(In thousands)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Segment Operating Income

Specialty Products

Segment operating income

Business restructuring expense

Cost of Sales (1)

Operating Expenses (2)

Operating Income

Unallocated Corporate Expenses (3)

Total operating income

Other Income (Expense)

Interest, net

Income before provision for income taxes

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

Unallocated corporate expenses for the three and nine month periods ended September 30, 2024 also include expenses related to a criminal social engineering scheme that impacted one of the Company's subsidiaries in Asia.

The social engineering expenses recognized for the three and nine month periods ended September 30, 2024 were $ 3,300,000 and $ 6,800,000 , respectively.

See Note 17, Other Matter , below for detailed information about the charge.

Consolidated Operating Income

Segment Capital Expenditures

Unallocated Capital Expenditures (4)

Consolidated Capital Expenditures

Segment Depreciation and Amortization

Unallocated Depreciation and Amortization (5)

Consolidated Depreciation and Amortization

The following is segment assets at March 31, 2025 and December 31, 2024, and reconciliations of segment assets to the condensed consolidated financial statements.

As of March 31, 2025

(In thousands)

Segment Assets

Unallocated Assets (6)

Consolidated Assets

As of December 31, 2024

(In thousands)

Segment Assets

Unallocated Assets (6)

Consolidated Assets

(1) Cost of sales is comprised of raw material costs (including freight and shipping/handling expenses to deliver the raw materials), manufacturing plant labor expenses and other manufacturing overhead expenses, such as utilities, maintenance, depreciation, etc.

that can be allocated to reportable segments.

(2) Operating expenses allocated to reportable segments are comprised of selling, administrative and research and development expenses.

The CODM uses operating expenses in aggregate to analyze the performance of each reportable segment.

(3) Unallocated corporate expenses are primarily comprised of corporate administrative expenses (e.g., corporate finance, legal, human resources, information technology and environmental remediation expenses), deferred compensation and business restructuring and assets impairment expenses that are not included in segment operating income and not used to evaluate segment performance.

(4) Unallocated capital expenditures primarily include capital expenditures related to the Company’s Northfield, Illinois location.

(5) Unallocated depreciation and amortization primarily includes depreciation related to the Company’s Northfield, Illinois location.

(6) Unallocated assets primarily include assets in the Company’s Northfield, Illinois location.

REVENUE FROM CONTRACTS WITH CUSTOMERS

As of September 30, 2024 , the Company had $ 271,000 of contract liabilities and no contract assets.

As of March 31, 2025 and December 31, 2024, the Company had $ 503,000 and $ 689,000 of contract liabilities and no contract assets, respectively.

A contract liability would typically arise when an advance or deposit is received from a customer before the Company recognizes revenue.

1 unchanged sentence

When such situations do arise, the Company maintains a deferred revenue liability until the time a performance obligation has been satisfied.

The Company recognized $ 688,000 of revenue in the first nine months of 2024 from pre-existing contract liabilities at December 31, 2023.

The Company recognized $ 689,000 of revenue in the first three months of 2025 from pre-existing contract liabilities at December 31, 2024.

In addition, during 2020, the Company recorded $ 10,709,000 of long-term deferred revenue associated with a payment received to defray the cost of capital expenditures necessary to service a customer’s future product needs.

At September 30, 2024 , $ 4,985,000 was classified as long-term and $ 2,216,000 was classified as short-term.

This deferred revenue is being recognized over the period of the contract and $ 3,508,000 of revenue has been recognized from the beginning of the contract term through September 30, 2024.

The tables below provide a geographic disaggregation of net sales for the three and nine months ended September 30, 2024 and 2023.

The Company’s business disaggregation by geographic region most effectively captures the nature and economic characteristics of the Company’s revenue streams impacted by economic factors.

(In thousands)

For the Three Months Ended September 30, 2024

Geographic Market

North America

Latin America

(In thousands)

For the Three Months Ended September 30, 2023

Geographic Market

North America

Latin America

At March 31, 2025 , $ 3,877,000 was classified as long-term and $ 2,216,000 was classified as short-term.

This deferred revenue is being recognized over the period of the contract and $ 4,616,000 of revenue has been recognized from the beginning of the contract term through March 31, 2025.

The tables below provide a geographic disaggregation of net sales for the three months ended March 31, 2025 and 2024.

The Company’s business segmentation by geographic region most effectively captures the nature and economic characteristics of the Company’s revenue streams impacted by economic factors.

(In thousands)

For the Nine Months Ended September 30, 2024

For the Three Months Ended March 31, 2025

Geographic Market

2 unchanged sentences

(In thousands)

For the Nine Months Ended September 30, 2023

For the Three Months Ended March 31, 2024

Geographic Market

1 unchanged sentence

Latin America

At September 30, 2024 and December 31, 2023, debt was comprised of the following:

At March 31, 2025 and December 31, 2024, debt was comprised of the following:

(In thousands)

September 30,

Senior unsecured notes

16 unchanged sentences

Long-term debt

The Company's long-term debt financing is comprised of certain senior unsecured notes issued to insurance companies in private placement transactions pursuant to note purchase agreements (the Note Purchase Agreements), totaling $ 311,616,000 as of September 30, 2024 .

The Company's long-term debt financing is comprised of certain senior unsecured notes issued to insurance companies in private placement transactions pursuant to note purchase agreements (the “Note Purchase Agreements”), totaling $ 311,781,000 as of March 31, 2025 .

These notes are denominated in U.S.

4 unchanged sentences

The Company’s credit agreement (the Credit Agreement) with a syndicate of banks provides for credit facilities in an initial aggregate principal amount of $ 450,000,000 , consisting of (a) a $ 350,000,000 multi-currency revolving credit facility and (b) a $ 100,000,000 delayed draw term loan credit facility, each of which matures on June 24, 2027 .

The Company's credit agreement with Credit Industriel et Commercial NY (the CIC Credit Agreement) provides for a credit facility in an aggregate principal amount of $ 8,700,000 .

The Company's credit agreement with Credit Industriel et Commercial NY (the

CIC Credit Agreement) provides for a credit facility in an aggregate principal amount of $ 8,700,000 .

The facility is for the sole purpose of the issuance of standby letters of credit.

As of March 31, 2025 , the Company had an outstanding letter of credit of $ 8,694,000 under the CIC Credit Agreement.

The Company maintains import and export letters of credit, and standby letters of credit under its workers’ compensation insurance agreements and for other purposes, as needed from time to time, which are issued under the Credit Agreement and under the CIC Credit Agreement.

As of September 30, 2024 , the Company had outstanding letters of credit totaling $ 11,375,000 and $ 370,000,000 of outstanding borrowings under the Credit Agreement, inclusive of a $ 91,250,000 delayed draw term loan ($ 8,750,000 of the term loan principal has been permanently repaid as scheduled).

There was $ 59,875,000 available under the Credit Agreement as of September 30, 2024.

As of September 30, 2024 , the Company had an outstanding letter of credit of $ 8,694,000 under the CIC Credit Agreement.

As of March 31, 2025 , the Company had outstanding letters of credit totaling $ 5,318,000 and $ 346,500,000 of outstanding borrowings under the Credit Agreement, inclusive of an $ 88,750,000 delayed-draw term loan ($ 11,250,000 of the term loan principal has been permanently repaid as scheduled).

There was $ 86,932,000 available under the Credit Agreement as of March 31, 2025.

The Company's foreign subsidiaries had $ 1,002,000 of debt outstanding at March 31, 2025.

The Company’s material debt agreements contain provisions which, among other covenants, require maintenance of certain financial ratios and place limitations on additional debt, investments and payment of dividends.

Based on the loan agreement provisions that place limitations on dividend payments, unrestricted retained earnings (i.e., retained earnings available for dividend distribution) were $ 257,153,000 and $ 234,399,000 at September 30, 2024, and December 31, 2023 , respectively.

Based on the loan agreement provisions that place limitations on dividend payments, unrestricted retained earnings (i.e., retained earnings available for dividend distribution) were $ 263,063,000 and $ 251,953,000 at March 31, 2025 and December 31, 2024 , respectively.

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

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Three Months Ended

September 30,

Nine Months Ended

September 30,

Foreign exchange gains (losses)

Foreign exchange gain (loss)

Investment income

Realized and unrealized gains (losses) on investments

Realized and unrealized gain (loss) on investments

Net periodic benefit cost

NONCASH INVESTING AND FINANCING ACTIVITIES

Noncash investing activities included liabilities (accounts payable) incurred for property, plant and equipment expenditures of approximately $ 12,877,000 and $ 15,715,000 that were unpaid at September 30, 2024 and 2023 , respectively.

Noncash financing activities included the issuance of 118,627 shares of the Company’s common stock (valued at $ 10,617,000 ) and 97,774 shares of the Company’s common stock (valued at $ 10,480,000 ) under the Company’s equity incentive compensation plan during the period ended September 30, 2024 and 2023 , respectively.

On July 18, 2024, the Company determined that one of its subsidiaries in Asia had been the victim of a criminal social engineering scheme which resulted in fraudulently induced outbound payments.

The Company immediately launched an investigation, led by outside counsel, to determine the full extent of the fraud scheme and related potential exposure.

The Company initiated contact with its banks and law enforcement authorities in an effort to, among other things, recover the transferred funds.

To date, the Company has not found any evidence of additional fraudulent activity.

The investigation is now closed and the Company has confirmed this was an isolated and contained event.

This incident did not result in any unauthorized access to the Company's information systems or any confidential customer information or other data that the Company maintains.

The Company recognized pre-tax charges of $ 3,300,000 for the three months ended September 30, 2024 and $ 6,800,000 for the nine months ended September 30, 2024.

The charges were recorded on the Administrative Expenses line on the Condensed Consolidated Statements of Income for the three months periods ended June 30, 2024 and September 30, 2024, respectively.

These charges were not allocated to any of the Company's three reportable segments.

This incident did not have a material impact on the Company's business, financial position, results of operations and cash flow.

BUSINESS RESTRUCTURING

2023 Restructuring

During the third quarter of 2023, the Company recorded a $ 5,530,000 restructuring expense associated with a voluntary early retirement program.

The program was offered to eligible employees, primarily located at the Company's corporate headquarters, to reduce costs.

The remainder of the business restructuring expenses incurred during the three and nine months ended September 30, 2023, were not material, and relate to ongoing decommissioning expenses associated with the Company's 2016 Canadian plant closure.

Noncash investing activities included liabilities (accounts payable) incurred for property, plant and equipment expenditures of approximately $ 8,132,000 and $ 13,004,000 that were unpaid at March 31, 2025 and 2024 , respectively.

Noncash financing activities included the issuance of 94,314 shares of the Company’s common stock (valued at $ 5,712,000 ) and 98,146 shares of the Company’s common stock (valued at $ 8,808,000 ) under the Company’s equity incentive compensation plan during the three months ended March 31, 2025 and 2024 , respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effect of Reference Rate Reform on Financial Reporting.

This update provides optional guidance for a limited period of time to ease the burden of implementing the usage of new reference rates.

The amendments apply to contract modifications that replace a reference rate affected by reference rate reform and contemporaneous modifications of other contract terms related to the replacement of the reference rate.

If elected, the optional expedients to contract modifications must be applied consistently for all eligible contracts or eligible transactions.

The original timeframe for electing optional expedients to contract modifications was between March 12, 2020 and December 31, 2022.

In December 2023, the FASB issued ASU No.

2022-06 deferring the sunset date of Topic 848 from December 31, 2022, to December 31, 2024.

The guidance should be applied prospectively.

Other than electing select expedients associated with an interest rate swap, the Company has not currently utilized any of the optional expedients of exceptions available under this ASU.

The Company will continue to assess whether this ASU is applicable throughout the effective period.

In October 2023, the FASB issued ASU No.

2023-06, Disclosure Improvements, Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative .

The amendments in this update represent changes to clarify or improve disclosures and presentation requirements of a variety of topics, including Statement of Cash Flows-Overall (disclosures in annual periods where cash flows associated with derivative instruments and their related gains and losses are presented), Earnings Per Share-Overall (disclosures of the methods used in the diluted earnings-per-share computation for each dilutive security), and Debt-Overall (disclosures of amounts and terms of unused lines of credit and unfunded commitments and the weighted-average interest rate on outstanding short-term borrowings).

The amendments in this update are effective two years after the SEC removes related disclosure requirements from Regulation S-X or Regulation S-K.

The implementation of ASU No.

2023-06 will not have an impact on the Company’s financial position, results of operations and cash flow, but will impact the Company’s interim and annual disclosures related to the relevant subtopics in this update.

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures .

This update requires more enhanced and detailed interim and annual disclosures regarding significant segment expenses and other segment items that are regularly provided to the chief operating decision maker (CODM).

These items include the difference between segment revenue less the segment expenses that have been already disclosed under the significant expense principle and each reported measure of segment profit and loss.

Also, this update requires additional disclosures about significant segments' expenses regularly provided to CODM, disclosures of the CODM's title and position as well as an explanation of how the CODM uses the reported measures in assessing segment performance and deciding how to allocate resources.

These requirements are in addition to the disclosures that are currently required by Topic 280, Segment reporting .

The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 and should be applied retrospectively to all periods presented in the financial statements.

The implementation of ASU No.

2023-07 will not have an impact on the Company’s financial position, results of operations and cash flow, but will impact the Company’s interim and annual segment reporting disclosures.

In December 2023, the FASB issued ASU No.

2023-09, Income taxes (Topic 740) Improvement to Income Tax Disclosures .

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2023-09 will not have an impact on the Company’s financial position, results of operations and cash flow but will impact the Company’s annual income tax disclosures.

The Organisation for Economic Co-operation and Development (OECD) proposed a global minimum tax of 15 percent on reported profits (entitled “Pillar Two”) that has been agreed upon in principle by over 100 countries.

During 2023, many countries took steps to incorporate Pillar Two into their domestic laws.

Although the OECD’s model provides a framework for applying the minimum tax, countries may enact Pillar Two rules that vary slightly from the model, can adopt a different timeline, and may adjust local tax incentives in response to Pillar Two.

While it is uncertain whether the U.S.

will enact legislation to adopt Pillar Two, certain countries in which the Company operates have enacted such legislation, and other countries are in the process of

introducing legislation to implement Pillar Two.

The Company does not expect Pillar Two to have a material impact on its financial position, results of operations, cash flow and effective tax rate.

In November 2024, the FASB issued ASU No.

2024-03, Income Statement - Reporting Comprehensive income - Expense Disaggregation Disclosures (Subtopic 220-40) .

This update requires that public entities on an interim and annual basis disclose, in the notes to financial statements, specified information about certain costs and expenses.

2024-03 requires a footnote disclosure in tabular form of each expense caption on the face of the income statement that includes any of the following natural expenses:

(1) purchases of inventory, (2) employee compensation, (3) depreciation, and (4) intangible asset amortization.

The disclosure would also include a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively and disclosure of the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses.

This ASU does not change or remove existing expense disclosure requirements;

however, it may affect where that information appears in the footnotes to the financial statements.

In January 2025, the FASB issued ASU

2025-01, Income Statement - Reporting Comprehensive income - Expense Disaggregation Disclosures (Subtopic 220-40), Clarifying the effective date.

The amendments in ASU No.

2024-03 are effective for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027.

The amendments in this update should be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements.

The implementation of ASU No.

2024-03 will not have an impact on the Company’s financial position, results of operations and cash flow but will impact the Company’s interim and annual disclosures related to the relevant subtopics in this update.

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.

What changed 10-Q

Item 1. Financial Statements