What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2024-11-06 · 188 added, 434 removed, 211 unchanged (75% of the section changed)

19 unchanged sentences

• downturns in certain industries and general economic downturns;

• international business risks, including fluctuations in currency exchange rates, legal restrictions and taxes;

• international business risks, including changes in global trade policy, including tariffs, retaliatory measures and countermeasures, currency exchange controls, fluctuations in currency exchange rates, legal restrictions and taxes;

• unfavorable resolution of litigation against the Company;

8 unchanged sentences

• the other factors set forth under “Risk Factors.”

These factors are not necessarily all of the important factors that could cause the Company’s actual financial results, performance, achievements or prospects to differ materially from those expressed in or implied by any of its forward-looking statements.

Other unknown or unpredictable factors could also impact the Company’s results.

5 unchanged sentences

The overall business is comprised of three reportable segments:

Surfactants – Surfactants, which accounted for 69 percent of consolidated net sales for the first nine months of 2024, are principal ingredients in consumer and industrial cleaning and disinfection products such as detergents for washing clothes, dishes, carpets, floors and walls, as well as shampoos and body washes.

Surfactants – Surfactants, which accounted for 72 percent of consolidated net sales for the first three months of 2025, are principal ingredients in consumer and industrial cleaning and disinfection products such as detergents for washing clothes, dishes, carpets, floors and walls, as well as shampoos and body washes.

Other applications include fabric softeners, germicidal quaternary compounds, disinfectants, lubricating ingredients, emulsifiers for spreading agricultural products and industrial applications such as latex systems, plastics and composites.

Surfactants are manufactured at five sites in the United States, two European sites (United Kingdom and France), five Latin American sites (one site in Colombia and two sites in each of Mexico and Brazil) and two Asian sites (Philippines and Singapore).

Polymers – Polymers, which accounted for 28 percent of consolidated net sales for the first nine months of 2024, include polyurethane polyols, polyester resins and phthalic anhydride.

Polymers – Polymers, which accounted for 25 percent of consolidated net sales for the first three months of 2025, include polyurethane polyols, polyester resins and phthalic anhydride.

Polyurethane polyols are used in the manufacture of rigid foam for thermal insulation in the construction industry and are also a base raw material for coatings, adhesives, sealants and elastomers (collectively, CASE products).

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In Asia, polyurethane polyols and specialty polyols are manufactured at the Company’s China plant.

Specialty Products – Specialty products, which accounted for three percent of consolidated net sales for the first nine months of 2024, include flavors, emulsifiers and solubilizers used in food, flavoring, nutritional supplement and pharmaceutical applications.

Specialty Products – Specialty products, which accounted for three percent of consolidated net sales for the first three months of 2025, include flavors, emulsifiers and solubilizers used in food, flavoring, nutritional supplement and pharmaceutical applications.

Specialty products are primarily manufactured at the Company’s Maywood, New Jersey, site.

5 unchanged sentences

For the Three Months

Ended September 30,

Ended March 31,

(In millions)

3 unchanged sentences

Pretax Income Effect

Income (Expense)

For the Nine Months

Ended September 30,

(In millions)

Deferred Compensation (Administrative expenses)

Realized/Unrealized Gains on Investments (Other, net)

Investment Income (Other, net)

Pretax Income Effect

(1) See the Segment Results-Corporate Expenses section of this MD&A for details regarding the period-over-period changes in deferred compensation.

6 unchanged sentences

dollar results).

The following table presents the effects that foreign currency translation had on the period-over-period changes in consolidated net sales and various income statement line items for the three and nine months ended September 30, 2024 and 2023:

For the Three Months

Ended September 30,

(In millions)

Due to Foreign

Operating Income

Pretax Income

For the Nine Months

Ended September 30,

Ended March 31,

(In millions)

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RESULTS OF OPERATIONS

Three Months Ended September 30, 2024 and 2023

Net income in the third quarter of 2024 was $23.6 million, or $1.03 per diluted share, versus $12.6 million, or $0.55 per diluted share, in the third quarter of 2023.

Adjusted net income was $23.7 million, or $1.03 per diluted share, versus $14.7 million, or $0.64 per diluted share in the third quarter of 2023 (see the “Reconciliation of Non-GAAP Adjusted Net Income and Diluted Earnings per Share” section of this MD&A for a reconciliation between reported net income and reported earnings per diluted share and non-GAAP adjusted net income and adjusted earnings per diluted share).

Earnings before interest, taxes, depreciation and amortization (EBITDA) were $53.0 million in the third quarter of 2024, up 18 percent, versus $45.1 million in the third quarter of 2023.

Adjusted EBITDA was $53.1 million, up 11 percent, versus $48.0 million in the third quarter of 2023 (see the "Reconciliation of non-GAAP EBITDA and Adjusted EBITDA" section of this MD&A for a reconciliation between reported operating income and non-GAAP EBITDA and adjusted EBITDA).

Below is a summary discussion of the major factors leading to the changes in net sales, expenses and income in the third quarter of 2024 compared to the third quarter of 2023.

A detailed discussion of segment operating performance for the third quarter of 2024 compared to the third quarter of 2023 follows the summary.

Consolidated net sales decreased $15.4 million, or three percent, versus the prior year quarter.

Lower average selling prices negatively impacted the year-over-year change in net sales by $5.5 million.

The decrease in average selling prices was mainly attributable to the pass-through of lower raw material costs and competitive activity within certain end markets.

Foreign currency translation negatively impacted the year-over-year change in net sales by $5.6 million.

Consolidated sales volume decreased one percent, which negatively impacted the change in net sales by $4.3 million.

Surfactant sales volume increased three percent while Polymer and Specialty Products sales volume decreased 11 percent and five percent, respectively.

Operating income in the third quarter of 2024 increased $4.4 million, or 23 percent, versus operating income in the third quarter of 2023.

Surfactant and Specialty Products operating income increased $10.9 million and $1.3 million, respectively, versus the third quarter of 2023.

Polymer operating income decreased $6.6 million versus the third quarter of 2023.

Corporate expenses, including business restructuring, environmental remediation, deferred compensation and charges associated with a criminal social engineering scheme impacting one the Company's subsidiaries in Asia, increased $1.2 million, or six percent, year-over-year.

See Note 17, Other Matter, and Note 18, Business Restructuring, of the notes to the Company's consolidated financial statements (included in Item 1 of the Form 10-Q) for additional details regarding the criminal social engineering scheme and business restructuring expenses.

Operating expenses (including deferred compensation and business restructuring) were flat year-over-year.

Three Months Ended March 31, 2025 and 2024

Net income in the first quarter of 2025 was $19.7 million, or $0.86 per diluted share, versus $13.9 million, or $0.61 per diluted share, in the first quarter of 2024.

Adjusted net income was $19.3 million, or $0.84 per diluted share, versus $14.7 million, or $0.64 per diluted share in the first quarter of 2024 (see the “Reconciliation of Non-GAAP Adjusted Net Income and Diluted Earnings per Share” section of this MD&A for a reconciliation between reported net income and reported earnings per diluted share and non-GAAP adjusted net income and adjusted earnings per diluted share).

Earnings before interest, taxes, depreciation and amortization (EBITDA) were $58.0 million in the first quarter of 2025, up 16 percent, versus $50.2 million in the first quarter of 2024.

Adjusted EBITDA was $57.5 million, up 12 percent, versus $51.2 million in the first quarter of 2024 (see the "Reconciliation of non-GAAP EBITDA and Adjusted EBITDA" section of this MD&A for a reconciliation between reported operating income and non-GAAP EBITDA and Adjusted EBITDA).

Below is a summary discussion of the major factors leading to the changes in net sales, expenses and income in the first quarter of 2025 compared to the first quarter of 2024.

A detailed discussion of segment operating performance for the first quarter of 2025, compared to the first quarter of 2024, follows the summary.

Consolidated net sales increased $41.8 million, or eight percent, versus the prior year quarter.

Higher average selling prices favorably impacted the year-over-year change in net sales by $40.4 million.

The increase in average selling prices was mainly attributable to the pass-through of higher raw material costs and more favorable product mix.

Consolidated sales volume increased four percent, which favorably impacted the change in net sales by $19.9 million.

Surfactant and Polymer sales volumes increased three and seven percent, respectively, year-over-year.

Specialty Products sales volume decreased 13 percent.

Foreign currency translation negatively impacted the year-over-year change in net sales by $18.5 million, primarily due to a stronger U.S.

dollar against the Brazilian real and Mexican peso.

Operating income in the first quarter of 2025 increased $8.1 million, or 40 percent, versus operating income in the first quarter of 2024.

Surfactant and Specialty Products operating income increased $2.9 million and $1.2 million, respectively, year-over-year.

Polymer operating income decreased $0.3 million versus the first quarter of 2024.

Corporate expenses, including environmental remediation and deferred compensation expenses decreased $4.4 million, or 24 percent, year-over-year.

Corporate expenses, excluding environmental remediation and deferred compensation expenses decreased $0.2 million, or one percent, year-over-year.

Foreign currency translation had a $1.8 million unfavorable impact on operating income year-over-year.

Operating expenses (including deferred compensation) decreased $2.9 million, or six percent, year-over-year.

Changes in the individual income statement line items that comprise the Company’s operating expenses were as follows:

• Selling expenses decreased $0.4 million, or four percent, year-over-year.

• Administrative expenses increased $3.4 million, or 15 percent year-over-year, primarily due to a $3.3 million pre-tax charge recognized as a result of the criminal social engineering scheme impacting one of the Company's subsidiaries in Asia.

• Research, development and technical service (R&D) expenses decreased $0.9 million, or seven percent, between quarters, primarily due to lower salary expenses resulting from productivity measures implemented in late 2023.

• Deferred compensation was a $0.6 million of expense in the third quarter of 2024 versus $3.1 million of income in the prior year quarter.

The $3.7 million increase in deferred compensation expense was primarily due to a smaller decrease in the market price of the Company's common stock held for the plans during the third quarter of 2024 versus the third quarter of 2023.

Additionally, the market value of mutual fund investment assets held for the plans appreciated during the third quarter of 2024 versus declining in value during the third quarter of 2023.

• Selling expenses increased $0.7 million, or six percent, primarily due to higher bad debt provision expenses in 2025.

• Administrative expenses decreased $1.3 million, or six percent, year-over-year primarily due to lower environmental reserve expenses.

• Research, development and technical service (R&D) expenses increased $0.4 million, or three percent.

• Deferred compensation was $1.0 million of income in the first quarter of 2025 versus $1.8 million of expense in the prior year quarter.

The $2.8 million year-over-year decrease in deferred compensation expense reflects a decline in the market value of mutual fund investment assets during the first quarter of 2025 versus an increase during the first quarter of 2024.

Additionally, the market price of the Company's common stock decreased $9.66 per share in the first quarter of 2025 versus a $4.51 per share decrease in the first quarter of 2024.

See the Overview and Segment Results-Corporate Expenses section of this MD&A for further details.

Net interest expense for the third quarter of 2024 increased $0.6 million, or 21 percent, versus the third quarter of 2023.

This increase was primarily attributable to higher outstanding debt balances and higher interest rates on borrowings under the Company's revolving credit facility in 2024 versus 2023.

Other, net was $1.0 million of income in the third quarter of 2024 versus $0.7 million of expense in the third quarter of 2023.

The Company recognized $1.0 million of investment income (including realized and unrealized gains and losses) for the Company’s deferred compensation and supplemental defined contribution mutual fund assets in the third quarter of 2024 compared to $0.4 million of investment losses in the third quarter of 2023.

In addition, the Company reported $0.5 million of foreign exchange losses in the third quarter of 2024 versus $0.6 million of foreign exchange losses in the third quarter of 2023.

The Company's net periodic pension income was $0.4 million in the third quarter of 2024 versus $0.3 million of income in the third quarter of 2023.

The Company’s effective tax rate was a negative 10.7 percent in the third quarter of 2024 versus 20.6 percent in the third quarter of 2023.

The decrease was primarily attributable to the Company’s intention to make an election under the US GILTI tax regime to exclude certain high taxed entities from the GILTI computation and thereby reduce the Company’s GILTI tax impact.

The Company continues

to expect to elect “Bonus Depreciation” for its new alkoxylation facility that is being built in Pasadena, Texas and is expected to start up in December 2024.

In addition, the Company’s research and development tax credit is forecasted to increase throughout the rest of the year.

Finally, the Company recorded a favorable provision-to-return adjustment for its 2023 tax return in the third quarter of 2024.

The Organisation for Economic Co-operation and Development (OECD) has proposed a global minimum tax of 15 percent on reported profits (entitled "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.

Net interest expense for the first quarter of 2025 increased $1.1 million, or 34 percent, versus the first quarter of 2024.

This increase was primarily attributable to lower U.S.

capitalized interest income recognized in 2025 as the Company's new specialty alkoxylation facility in Pasadena, Texas neared completion.

Following the quarter end, in early April, the Company started production at the new facility.

Other, net was $0.5 million of income in the first quarter of 2025 versus $2.4 million of income in the first quarter of 2024.

The Company recognized $0.4 million of investment losses (including realized and unrealized gains and losses) for the Company’s deferred compensation and supplemental defined contribution mutual fund assets in the first quarter of 2025 compared to $2.3 million of investment gains in the first quarter of 2024.

In addition, the Company reported $0.6 million of foreign exchange gains in the first quarter of 2025 versus $0.4 million of foreign exchange losses in the first quarter of 2024.

The Company's net periodic pension income was $0.3 million in the first quarter of 2025 versus $0.4 million of income in the first quarter of 2024.

The Company’s effective tax rate was 20.1 percent in the first quarter of 2025 versus 28.6 percent in the first quarter of 2024.

The decrease was primarily attributable to the Company effectively settling an audit in one jurisdiction combined with the non-recurrence of an unfavorable event, related to GILTI, in the first quarter of 2024.

These items were partially offset by the expected tax impact of certain cash repatriations to the US.

Segment Results

1 unchanged sentence

For the Three Months

Ended September 30,

Ended March 31,

Specialty Products

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For the Three Months

Ended September 30,

Ended March 31,

Operating Income

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and Restructuring

Deferred Compensation Expense (Income)

Business Restructuring

Deferred Compensation Expense

Total Operating Income

Surfactant net sales for the third quarter of 2024 increased $8.9 million versus net sales for the third quarter of 2023.

Sales volume increased three percent year-over-year and positively impacted the change in net sales by $12.0 million.

Surfactant net sales for the first quarter of 2025 increased $39.5 million versus net sales for the first quarter of 2024.

Higher average selling prices favorably impacted the change in net sales by $47.0 million.

The higher average selling prices were mainly attributable to a more favorable product and customer mix.

The higher average selling prices were mainly attributable to the pass through of higher raw material costs and a more favorable product mix.

Sales volume increased three percent and had a $10.6 million favorable impact on the change in net sales.

Foreign currency translation had an $18.1 million unfavorable impact on the year-over-year change in net sales.

2 unchanged sentences

For the Three Months

Ended September 30,

Ended March 31,

North America

1 unchanged sentence

Total Surfactants Segment

Net sales for North American operations decreased $6.1 million, or three percent, year-over-year.

Sales volume declined two percent and negatively impacted the change in net sales by $3.7 million.

The lower sales volume was primarily due to lower demand for products sold into the industrial cleaning and personal care end markets.

Higher demand for products sold into the construction and industrial, oil field and agricultural end markets and to our distribution partners, partially offset the above.

Lower average selling prices had a $2.2 million unfavorable impact on the change in net sales and were primarily due to the pass-through of lower raw material costs, partially offset by favorable product and customer mix.

Net sales for North American operations increased $22.1 million, or 10 percent, year-over-year.

Higher average selling prices had a $14.8 million favorable impact on the change in net sales and were primarily due to the pass-through of higher raw material costs and more favorable product mix.

Sales volume increased three percent and positively impacted the change in net sales by $8.0 million.

The higher sales volume was primarily due to higher demand for products sold into the agricultural end markets and to our distribution partners.

Foreign currency translation negatively impacted the change in net sales by $0.7 million.

Net sales for European operations increased $6.3 million, or 10 percent, primarily due to a 12 percent increase in sales volume that positively impacted the change in net sales by $7.2 million.

The higher sales volume was primarily due to higher demand for products sold into the industrial cleaning, personal care and agricultural end markets and to our distribution partners.

Lower average selling prices negatively impacted the change in net sales by $2.1 million and were primarily due to the pass-through of lower raw material costs, partially offset by more favorable product and customer mix.

Foreign currency translation positively impacted the change in net sales by $1.2 million.

Net sales for Latin American operations increased $8.1 million, or 11 percent, primarily due to higher average selling prices and a seven percent increase in sales volume.

These items positively impacted the year-over-year change in net sales by $12.3 million and $5.3 million, respectively.

The sales volume improvement was primarily due to higher demand for products sold into the agricultural and laundry and cleaning end markets, and to our distribution partners.

The higher average selling prices reflect more favorable product and customer mix.

Net sales for European operations increased $10.8 million, or 15 percent, primarily due to higher average selling prices and a five percent increase in sales volume.

These items positively impacted the change in net sales by $9.3 million and $3.4 million, respectively.

The higher average selling prices were primarily due to the pass-through of higher raw material costs and more favorable product mix.

The higher sales volume was primarily due to higher demand for products sold into the agricultural end markets and to our distribution partners.

Foreign currency translation negatively impacted the change in net sales by $1.9 million.

A stronger U.S.

dollar relative to all currencies in the region led to the unfavorable foreign currency translation effect.

Net sales for Asian operations increased $0.6 million, or four percent, versus the prior year quarter.

A six percent increase in sales volume positively impacted the change in net sales by $0.9 million.

The sales volume improvement was mainly due to higher demand for products sold to our distribution partners and into the functional products end markets.

Foreign currency translation negatively impacted the change in net sales by $0.3 million.

Surfactant operating income for the third quarter of 2024 increased $10.9 million, or 71 percent, versus operating income for the third quarter of 2023.

Gross profit increased $9.9 million, or 25 percent, and operating expenses decreased $1.0 million, or four percent.

dollar relative to the European euro and British pound sterling led to the unfavorable foreign currency translation effect.

Net sales for Latin American operations increased $4.9 million, or six percent, primarily due to higher average selling prices that positively impacted the change in net sales by $21.3 million.

The higher average selling prices primarily reflect more favorable product mix and the pass-through of higher raw material costs.

Sales volume decreased two percent and negatively impacted the change in net sales by $1.3 million.

The decrease in sales volume was primarily due to lower demand for products sold into the commodity consumer end markets.

A stronger U.S.

dollar relative to all currencies within the region led to a $15.1 million unfavorable foreign currency translation effect.

Net sales for Asian operations increased $1.7 million, or 13 percent, versus the prior year quarter.

A 14 percent increase in sales volume and higher average selling prices favorably impacted the change in net sales by $1.7 million and $0.4 million, respectively.

The sales volume growth primarily reflects higher demand for products sold into the commodity laundry and cleaning end markets.

Foreign currency translation negatively impacted the year-over-year change in net sales by $0.4 million.

Surfactant operating income for the first quarter of 2025 increased $2.9 million, or 11 percent, versus operating income for the first quarter of 2024.

Gross profit increased $3.2 million, or six percent, and operating expenses increased $0.4 million, or two percent.

Comparisons of gross profit by region and total segment operating expenses and operating income follow:

1 unchanged sentence

For the Three Months

Ended September 30,

Ended March 31,

Gross Profit and Operating Income

4 unchanged sentences

Surfactants Segment Operating Income

Gross profit for North American operations increased $0.2 million, or one percent.

Higher average unit margins positively impacted the change in gross profit by $0.6 million.

A two percent decline in sales volume negatively impacted the change in gross profit by $0.4 million.

Gross profit for European operations increased $3.0 million, or 51 percent, primarily due to higher average unit margins and a 12 percent increase in sales volume.

These items positively impacted the change in net sales by $2.2 million and $0.7 million, respectively.

The higher average unit margins were largely due to a more favorable product and customer mix.

Foreign currency translation positively impacted the change in gross profit by $0.1 million.

Gross profit for Latin American operations increased $6.0 million, or 108%, primarily due to improved average unit margins and a seven percent increase in sales volume.

These items positively impacted the change in gross profit by $7.0 million and $0.4 million, respectively.

The higher average unit margins were primarily due to a more favorable product and customer mix.

Foreign currency translation negatively impacted the change in gross profit by $1.4 million.

Gross profit for Asia operations increased $0.7 million, or 25 percent, year-over-year primarily due to higher average unit margins and a six percent increase in sales volume.

Gross profit for North American operations decreased $5.0 million, or 16 percent, versus the prior year primarily due to lower average unit margins.

The lower average unit margins negatively impacted the year-over-year change in gross profit by $6.1 million

and were primarily attributable to higher expenses associated with the Company's new alkoxylation facility in Pasadena, Texas.

The three percent increase in sales volume positively impacted the year-over-year change in gross profit by $1.1 million.

Gross profit for European operations increased $2.4 million, or 29 percent, primarily due to higher average unit margins and a five percent increase in sales volume.

These items positively impacted the year-over-year change in gross profit by $2.3 million and $0.4 million, respectively.

The higher average unit margins reflect a more favorable product and customer mix along with lower overhead costs due to the timing of production runs.

Operating expenses for the Surfactants segment decreased $1.0 million, or four percent, in the third quarter of 2024 versus the third quarter of 2023.

The decrease was mainly attributable to lower salary expenses.

Polymer net sales for the third quarter of 2024 decreased $19.8 million, or 12 percent, versus net sales for the same period of 2023.

An 11 percent decrease in sales volume and lower average selling prices negatively impacted the change in net sales by $19.2 million and $3.7 million, respectively.

Foreign currency translation positively impacted the change in net sales by $3.1 million.

The higher average unit margins primarily reflect more favorable product mix.

Foreign currency translation negatively impacted the year-over-year change in gross profit by $0.3 million.

Gross profit for Latin American operations increased $2.9 million, or 33 percent, primarily due to higher average unit margins.

The higher average unit margins positively impacted the year-over-year change in gross profit by $5.2 million and primarily reflect a more favorable product mix.

The two percent decrease in sales volume negatively impacted the change in gross profit by $0.1 million.

A stronger U.S.

dollar relative to all currencies within the region led to a $2.2 million negative foreign currency translation effect.

Gross profit for Asia operations increased $3.0 million year-over-year primarily due to higher average unit margins and a 14 percent increase in sales volume.

These items positively impacted the year-over-year change in gross profit by $2.7 million and $0.3 million, respectively.

The higher average unit margins largely reflect lower overhead costs due to the timing of production runs.

Operating expenses for the Surfactants segment increased $0.4 million, or two percent, in the first quarter of 2025 versus the first quarter of 2024.

Polymers net sales for the first quarter of 2025 increased $0.6 million versus net sales for the same period of 2024.

A seven percent increase in sales volume positively impacted the change in net sales by $10.1 million.

Lower average selling prices and the unfavorable impact of foreign currency translation negatively impacted the year-over-year change in net sales by $9.2 million and $0.3 million, respectively.

A comparison of net sales by region follows:

1 unchanged sentence

For the Three Months

Ended September 30,

Ended March 31,

North America

1 unchanged sentence

Total Polymers Segment

Net sales for North American operations decreased $16.5 million, or 18 percent, due to a 14 percent decline in sales volume and lower average selling prices.

These items negatively impacted the year-over-year change in net sales by $13.1 million and $3.4 million, respectively.

Sales volume of polyols used in rigid foam applications declined 17 percent due to soft demand and competitive pressures.

Sales volume of commodity phthalic anhydride declined 27 percent while sales volume of specialty polyols increased six percent year-over year.

The lower average selling prices primarily reflect the pass-through of lower raw material costs.

Net sales for European operations decreased $3.1 million, or five percent, versus the third quarter of 2023.

This decrease was primarily due to a nine percent decline in sales volume which negatively impacted the year-over-year change in net sales by $6.1 million.

The decline in sales volume was primarily due to soft demand and competitive pressures.

Foreign currency translation positively impacted the change in net sales by $3.0 million.

A weaker U.S.

dollar relative to the Polish zloty and British pound sterling led to the favorable foreign currency translation effect.

Net sales for Asia and Other operations decreased $0.1 million, or one percent, primarily due to a six percent decrease in sales volume which negatively impacted the year-over-year change in net sales by $0.8 million.

Higher average selling prices and the favorable impact of foreign currency translation positively impacted the year-over-year change in net sales by $0.6 million and a $0.1 million, respectively.

Polymer operating income in the third quarter of 2024 decreased $6.6 million, or 30 percent, versus operating income in the third quarter of 2023.

Gross profit decreased $6.8 million, or 24 percent and operating expenses decreased $0.2 million or four percent between years.

Net sales for North American operations increased $3.0 million, or four percent, primarily due to a 13 percent increase in sales volume that positively impacted the year-over-year change in net sales by $9.0 million.

Sales volume of polyols used in rigid foam applications and within the commodity phthalic anhydride business increased two percent and 136 percent, respectively.

The higher phthalic anhydride volume is mainly attributable to the non-recurrence of operational interruptions at the Millsdale, Illinois plant during the first quarter of 2024 and market share gain in 2025.

Specialty Polyols sales volume declined five percent during the quarter.

Lower average selling prices negatively impacted the year-over-year change in net sales by $6.0 million.

The lower average selling prices primarily reflect the pass-through of lower raw material costs and less favorable product mix.

Net sales for European operations decreased $2.7 million, or four percent, year-over-year.

This decrease was mainly due to lower average selling prices that negatively impacted the year-over-year change in net sales by $4.3 million.

The lower average selling prices were primarily due to the pass-through of lower raw material costs and increased competitive activity.

Foreign currency translation negatively impacted the change in net sales by $0.1 million.

A three percent increase in sales volume, driven by a four percent increase in rigid polyols, positively impacted the change in net sales by $1.7 million.

Net sales for Asia and Other operations increased $0.4 million, or three percent, primarily due to a three percent increase in average selling prices and a two percent increase in sales volume.

These items positively impacted the year-over-year change in net sales by $0.3 million each.

The higher sales volume reflects higher demand for specialty polyols resulting from the Company's product diversification efforts.

Foreign currency translation negatively impacted the year-over-year change in net sales by $0.2 million.

Polymer operating income in the first quarter of 2025 decreased $0.4 million, or four percent, versus operating income in the first quarter of 2024.

Gross profit increased $0.1 million, or one percent and operating expenses increased $0.5 million or eight percent year-over-year.

Comparisons of gross profit by region and total segment operating expenses and operating income follow:

1 unchanged sentence

For the Three Months

Ended September 30,

Gross Profit and Operating Income

North America

Asia and Other

Polymers Segment Gross Profit

Operating Expenses

Polymers Segment Operating Income

Gross profit for North American operations decreased $4.7 million, or 29 percent, due to lower average unit margins and a 14 percent decline in sales volume.

These items negatively impacted the change in gross profit by $2.4 million and $2.3 million, respectively.

The lower average unit margins were primarily due to less favorable product mix.

Gross profit for European operations decreased $2.4 million, or 22 percent, versus the third quarter of 2023.

This decrease was primarily due to lower average unit margins and a nine percent decline in sales volume that negatively impacted the change in gross profit by $1.7 million and $1.0 million, respectively.

Foreign currency translation positively impacted the year-over-year change in gross profit by $0.3 million.

Gross profit for Asia and Other operations increased $0.3 million, or 14 percent, primarily due to higher average unit margins.

These higher average unit margins positively impacted the change in net sales by $0.4 million and partially reflect the Company's product diversification efforts in China.

A six percent decline in sales volume negatively impacted the change in net sales by $0.1 million.

Foreign currency translation was negligible year-over-year.

Operating expenses for the Polymer segment decreased $0.3 million, or four percent, in the third quarter of 2024 compared to the third quarter of 2023.

Specialty Products

Specialty Products net sales for the third quarter of 2024 decreased $4.5 million, or 24 percent, versus net sales for the third quarter of 2023.

The decrease was due to lower average selling prices and a five percent decrease in sales volume.

Gross profit and operating income increased $1.1 million and $1.3 million, respectively, year-over-year.

The year-over-year increases in gross profit and operating income were mostly attributable to higher average unit margins within the medium chain triglycerides (MCT) product line.

The higher unit margins reflect the non-recurrence of high-cost inventory carryover experienced in the prior year.

Corporate Expenses

Corporate expenses, which include deferred compensation, business restructuring and other operating expenses that are not allocated to the reportable segments, increased $1.3 million, or six percent, year-over-year.

Corporate expenses were $21.3 million in the third quarter of 2024 versus $20.1 million in the third quarter of 2023.

This increase was primarily due to $0.6 million of deferred compensation expense in the third quarter of 2024 versus $3.1 million of deferred compensation income in the third quarter of 2023.

The Company also recorded a $3.3 million expense in the third quarter of 2024 related to a criminal social engineering scheme that impacted one of the Company's subsidiaries in Asia.

Partially offsetting these items was a $5.6 million business restructuring charge in the third quarter of 2023 that did not recur in 2024.

See Note 17, Other Matter, and Note 18 , Business Restructuring, of the notes to the Company's consolidated financial statements for additional details regarding the criminal social engineering scheme and business restructuring expenses.

Additionally, the market value of mutual fund investment assets held for the plans appreciated during the third quarter of 2024 versus declining in value during the third quarter of 2023.

The following table presents the quarter-end Company common stock market prices used in the computation of deferred compensation income/expense for the three months ended September 30, 2024 and 2023:

Company Common Stock Price

Nine Months Ended September 30, 2024 and 2023

Net income in the first nine months of 2024 was $47.0 million, or $2.05 per diluted share, versus $41.4 million, or $1.80 per diluted share, in the first nine months of 2023.

Adjusted net income was $47.7 million, or $2.08 per diluted share, versus $43.2 million, or $1.88 per diluted share in the prior year (see the “Reconciliation of Non-GAAP Adjusted Net Income and Diluted Earnings per Share” section of this MD&A for a reconciliation between reported net income and reported earnings per diluted share and non-GAAP adjusted net income and adjusted earnings per diluted share).

Earnings before interest, taxes, depreciation and amortization (EBITDA) were $151.0 million, up eight percent, in the first nine months of 2024 versus $140.1 million in the first nine months of 2023.

Adjusted EBITDA was $151.9 million, up seven percent, versus $142.5 million in the first nine months of 2023 (see the "Reconciliation of non-GAAP EBITDA and Adjusted EBITDA" section of this MD&A for a reconciliation between reported operating income and non-GAAP EBITDA and adjusted EBITDA).

Below is a summary discussion of the major factors leading to the year-over-year changes in net sales, expenses and income in the first nine months of 2024 compared to the first nine months of 2023.

A detailed discussion of segment operating performance for the first nine months of 2024 compared to the first nine months of 2023 follows the summary.

Operating income for the first nine months of 2024 was $62.8 million, an eight percent increase versus operating income of $58.4 million for the first nine months of 2023.

Surfactant and Specialty Products operating income increased $11.9 million and $6.6 million, respectively, versus the first nine months of 2023.

Polymer operating income decreased $10.9 million year-over-year.

Corporate expenses, including business restructuring, environmental remediation, deferred compensation and expenses associated with a criminal social engineering scheme at one of the Company's subsidiaries in Asia, increased $3.2 million, or six percent, year-over-year.

See Note 17, Other Matter , and Note 18, Business Restructuring , of the notes to the Company's consolidated financial statements (included in Item 1 of the Form 10-Q) for additional details regarding the criminal social engineering scheme charges and business restructuring expenses.

Foreign currency translation had a $0.2 million favorable impact on operating income in the first nine months of 2024 versus the first nine months of 2023.

Operating expenses (including deferred compensation and business restructuring expenses) were flat between years.

Changes in the individual income statement line items that comprise the Company’s operating expenses were as follows:

• Selling expenses decreased $1.4 million, or four percent, year-over-year primarily due to lower salary expenses resulting from productivity measures implemented in late 2023.

• Administrative expenses increased $5.4 million, or eight percent, year-over-year.

The increase was primarily driven by a $6.8 million expense recognized for a criminal social engineering scheme impacting one of the Company's subsidiaries in Asia and higher environmental reserve expenses.

The higher environmental expense is primarily due to a reserve adjustment for environmental costs related to property formerly owned and operated by the Company in Wilmington, Massachusetts.

Lower salary expenses, resulting from productivity measures implemented in late 2023, partially offset the above.

• R&D expenses decreased $1.8 million, or four percent, year-over-year primarily due to lower salary expenses resulting from productivity measure implemented in late 2023.

• Deferred compensation was a $2.7 million expense for the first nine months of 2024 versus $0.9 million of income during the first nine months of 2023.

The $3.6 million increase in deferred compensation expense was primarily due to a smaller decrease in the market price of the Company's common stock held for the plans during the first nine months of 2024 versus the first nine months of 2023.

Additionally, the market value of mutual fund investment assets held for the plans appreciated by a greater amount in 2024 versus the prior year.

See the Overview and Segment Results-Corporate Expenses section of this MD&A for further details.

Net interest expense for the first nine months of 2024 decreased $0.3 million, or three percent, versus the first nine months of 2023.

This decrease was primarily attributable to higher non-U.S.

interest income recognition and higher capitalized interest income, partially offset by higher U.S.

interest expense.

Other, net was $4.6 million of income for the first nine months of 2024 compared to $3.3 million of income for the first nine months of 2023.

The Company recognized $4.2 million of investment income (including realized and unrealized gains and losses) for the Company’s deferred compensation and supplemental defined contribution mutual fund assets in the first nine months of 2024 compared to $2.9 million of investment income in the first nine months of 2023.

In addition, the Company reported foreign exchange losses of $0.9 million in the first nine months of 2024 versus $0.6 million of foreign exchange losses in the first nine months of 2023.

The Company also reported $0.2 million of higher net periodic pension income in the first nine months of 2024 versus the first nine months of 2023.

The Company’s effective tax rate was 18.9 percent for the first nine months of 2024 versus 20.5 percent for the first nine months of 2023.

This is primarily due to the Company's increased research & development tax credit for 2024.

The Organisation for Economic Co-operation and Development (OECD) has proposed a global minimum tax of 15 percent on reported profits (entitled "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 thousands)

For the Nine Months

Ended September 30,

Specialty Products

Total Net Sales

(In thousands)

For the Nine Months

Ended September 30,

Operating Income

Specialty Products

Segment Operating Income

Corporate Expenses, Excluding Deferred Compensation

and Restructuring

Deferred Compensation Expense (Income)

Business Restructuring

Total Operating Income

Segment Results

Surfactants net sales for the first nine months of 2024 decreased $80.0 million, or six percent, versus net sales for the first nine months of 2023.

Lower average selling prices negatively impacted the change in net sales by $113.3 million.

The lower average selling prices were mainly due to declining raw material costs, less favorable product mix and increased competitive activity within the European and Latin American end-markets.

Sales volume increased three percent and positively impacted the change in net sales by $35.2 million.

Foreign currency translation had a $1.9 million unfavorable impact on the year-over-year change in net sales.

A year-over-year comparison of net sales by region follows:

(In thousands)

For the Nine Months

Ended September 30,

North America

Latin America

Total Surfactants Segment

Net sales for North American operations decreased $64.6 million, or nine percent, year-over-year.

Lower average selling prices had a $40.9 million unfavorable impact on the change in net sales and were primarily attributable to the pass-through of lower raw material costs and less favorable product mix.

Sales volume decreased three percent and negatively impacted the change in net sales by $23.4 million.

The decrease in sales volume primarily reflects lower demand for products sold into the agricultural end markets due to customer and channel inventory destocking during the first half of 2024.

In addition, sales volume into the personal care end markets was negatively impacted by operational issues, partially related to a flood event at the Elwood, Illinois (Millsdale) site, during the first half of 2024.

Higher demand for products sold into the oil field, construction and industrial solutions, and to our distribution partners partially offset the aforementioned decline.

Foreign currency translation negatively impacted the year-over-year change in net sales by $0.3 million.

Net sales for European operations decreased $19.4 million, or nine percent, primarily due to lower average selling prices that negatively impacted the change in net sales by $40.5 million.

The lower average selling prices were primarily due to the pass-through of lower raw material costs, less favorable product mix and increased competitive activity within certain end-use markets.

Sales volume was up nine percent and positively impacted the change in net sales by $18.7 million.

The higher sales volume was primarily due to higher demand for products sold into the consumer products and construction and industrial solutions end markets and to our distribution partners.

Foreign currency translation positively impacted the change in net sales by $2.4 million.

A weaker U.S.

dollar relative to the European euro and British pound sterling led to the favorable foreign currency translation effect.

Net sales for Latin American operations increased $10.3 million, or four percent, primarily due to a 13 percent increase in sales volume which positively impacted the year-over-year change in net sales by $29.6 million.

The higher sales volume was primarily due to higher demand for products sold into the agricultural and the laundry and cleaning end markets combined with higher demand from our distribution partners.

Lower average selling prices negatively impacted the change in net sales by $16.3 million and primarily reflect lower raw material costs and increased competitive activity within certain end-use markets.

A stronger U.S.

dollar relative to the Brazilian real primarily led to a $3.0 million unfavorable foreign currency translation effect.

Net sales for Asian operations decreased $6.3 million, or 14 percent, year-over-year.

Lower average selling prices, the unfavorable impact of foreign currency translation and a two percent decline in sales volume, negatively impacted the year-over-year change in net sales by $4.6 million, $1.0 million and $0.7 million, respectively.

The decline in average selling prices primarily reflects the pass-through of lower raw material costs.

The decline in volume primarily reflects less demand for products sold into the commodity laundry and cleaning end markets, partially offset by higher demand for products sold into the personal care end markets and to our distribution partners.

Surfactant operating income for the first nine months of 2024 increased $11.9 million, or 21 percent, versus operating income for the first nine months of 2023.

Gross profit increased $9.8 million, or seven percent, and operating expenses decreased $2.1 million, or three percent.

Year-over-year comparisons of gross profit by region and total segment operating expenses and operating income follow:

(In thousands)

For the Nine Months

Ended September 30,

Gross Profit and Operating Income

North America

Latin America

Surfactants Segment Gross Profit

Operating Expenses

Surfactants Segment Operating Income

Gross profit for North American operations decreased $7.5 million, or nine percent, versus the prior year due to lower average unit margins and a three percent decline in sales volume.

These items negatively impacted the year-over-year change in gross profit by $4.8 million and $2.7 million, respectively.

The lower average unit margins were mostly attributable to less favorable product mix, higher pre-operating expenses associated with the alkoxylation production facility that is being built in Pasadena, Texas and higher expenses incurred at the Company's Millsdale plant site due to operational issues, partially related to a flood event, during the first half of 2024.

Gross profit for European operations increased $2.5 million, or 12 percent, due to a nine percent increase in sales volume, higher average unit margins and the favorable impact of the foreign currency translation.

These items positively impacted the year-over-year change in gross profit by $1.8 million, $0.5 million and $0.2 million, respectively.

Gross profit for Latin American operations increased $11.5 million, or 58 percent, due to improved average unit margins and a 13 percent increase in sales volume.

These items positively impacted the year-over-year change in gross profit by $9.9 million and $2.5 million, respectively.

The higher average unit margins were primarily due to a more favorable product and customer mix.

Foreign currency translation had a $0.9 million unfavorable impact on the change in gross profit.

Gross profit for Asian operations increased $3.3 million, or 64 percent, primarily due to higher average unit margins that positively impacted the year-over-year change in gross profit by $3.4 million.

The higher average unit margins were primarily due to lower overhead costs due to the timing of production runs.

A two percent decline in sales volume negatively impacted the year-over-year change in gross profit by $0.1 million.

Operating expenses for the Surfactant segment decreased $2.1 million, or three percent, year-over-year.

This decrease was mainly attributable to lower salary expenses and bad debt provision expenses.

Polymer net sales for the first nine months of 2024 decreased $40.1 million, or eight percent, versus net sales for the same period of 2023.

Lower average selling prices and a three percent decrease in sales volume negatively impacted the change in net sales by $34.6 million and $14.4 million, respectively.

Foreign currency translation had an $8.9 million favorable impact on the change in net sales year-over-year.

A year-over-year comparison of net sales by region follows:

(In thousands)

For the Nine Months

Ended September 30,

North America

Asia and Other

Total Polymers Segment

Net sales for North American operations decreased $36.2 million, or 14 percent, due to an eight percent decrease in sales volume and lower average selling prices.

These items negatively impacted the year-over-year change in net sales by $20.4 million and $15.8 million, respectively.

The lower average selling prices primarily reflect the pass-through of lower raw material costs.

Sales volume within the commodity phthalic anhydride business declined 41 percent primarily due to operational issues at the Millsdale plant during

the first half of 2024.

Sales volume of polyols used in rigid foam applications decreased five percent year-over-year due to soft demand during the third quarter of 2024, which offset higher sales volume recognized during the first half of 2024.

Sales volume of specialty polyols increased eight percent year-over-year.

Net sales for European operations decreased $6.8 million, or three percent, year-over-year.

Lower average selling prices and a one percent decline in sales volume negatively impacted the year-over-year change in net sales by $15.0 million and $1.6 million, respectively.

The lower average selling prices were primarily due to the pass-through of lower raw material costs and increased competitive activity.

Foreign currency translation positively impacted the change in net sales by $9.8 million.

A weaker U.S.

dollar relative to the Polish zloty and British pound sterling led to the favorable foreign currency translation effect.

Net sales for Asia and Other operations increased $2.9 million, or eight percent, due to an 11 percent increase in sales volume which positively impacted the year-over-year change in net sales by $3.7 million.

The higher sales volume was driven by the non-recurrence of COVID lock downs and restrictions that were in place in China during the first half of 2023 and higher demand for specialty polyols resulting from the Company's product diversification efforts.

Foreign currency translation negatively impacted the year-over-year change in net sales by $0.8 million.

Polymer operating income for the first nine months of 2024 decreased $10.9 million, or 23 percent, versus operating income for the first nine months of 2023.

Gross profit decreased $11.3 million, or 16 percent, and operating expenses decreased $0.4 million, or two percent.

Year-over-year comparisons of gross profit by region and total segment operating expenses and operating income follow:

(In thousands)

For the Nine Months

Ended September 30,

Ended March 31,

Gross Profit and Operating Income

4 unchanged sentences

Polymers Segment Operating Income

Gross profit for North American operations decreased $7.3 million, or 21 percent, due to lower average unit margins and an eight percent decline in sales volume.

These items negatively impacted the change in gross profit by $4.6 million and $2.7 million, respectively.

The lower average unit margins largely reflect a phthalic anhydride related catalyst write-off ($2.1 million) during the second quarter of 2024 and higher expenses incurred at the Company's Millsdale plant due to operational issues during the first half of 2024.

Gross profit for European operations decreased $6.0 million, or 19 percent, versus the first nine months of 2023.

This decrease was largely due to lower average unit margins and a one percent decline in sales volume that negatively impacted the change in gross profit by $6.7 million and $0.2 million, respectively.

The lower average unit margins primarily reflect increased competitive activity.

Foreign currency translation had a $0.9 million favorable impact on the change in gross profit.

Gross profit for Asia and Other operations increased $2.1 million, primarily due to higher average unit margins and an 11 percent increase in sales volume, driven largely by the Company's diversification efforts in China.

These items positively impacted the change in gross profit by $1.8 million and $0.4 million, respectively.

Foreign currency translation had a $0.1 million unfavorable impact on the change in gross profit year-over-year.

Operating expenses for the Polymers segment decreased $0.4 million, or two percent, year-over-year.

Gross profit for North American operations was flat year-over-year.

The 13 percent increase in sales volume positively impacted the year-over-year change in gross profit by $0.6 million.

Lower average unit margins negatively impacted the change in gross profit by $0.6 million.

The lower average unit margins largely reflected less favorable product mix and high cost inventory carryover.

Gross profit for European operations decreased $1.0 million, or 12 percent, versus the first quarter of 2024.

The decrease was primarily due to lower average unit margins that negatively impacted the year-over-year change in gross profit by $1.2 million.

The three percent increase in sales volume positively impacted the change in gross profit by $0.2 million.

Gross profit for Asia and Other operations increased $1.2 million, or 84 percent, primarily due to higher average unit margins that positively impacted the change in gross profit by $1.2 million.

The higher average unit margins mostly reflect better product mix resulting from the Company's diversification efforts.

Operating expenses for the Polymer segment increased $0.5 million, or eight percent, in the first quarter of 2025 versus the first quarter of 2024.

The increase was attributable to numerous small items.

Specialty Products

Specialty Products net sales for the first nine months of 2024 decreased $18.8 million, or 29 percent, versus net sales for the first nine months of 2023.

This decrease was primarily due to lower average selling prices that were partially offset by a one percent increase in sales volume.

Specialty Products net sales for the first quarter of 2025 increased $1.7 million, or 11 percent, versus net sales for the first quarter of 2024.

The increase was primarily due to higher average selling prices.

Gross profit and operating income increased $1.3 million and $1.2 million, respectively, year-over-year.

The year-over-year increases in gross profit and operating income were mostly attributable to higher average unit margins within the medium chain triglycerides (MCT) product line.

The higher average unit margins reflect the non-recurrence of high-cost inventory carryover experienced in the prior year.

The year-over-year increases in gross profit and operating income were mostly attributable to margin recovery within the medium chain triglycerides (MCT) product line.

Corporate Expenses

Corporate expenses, which include deferred compensation, business restructuring, and other operating expenses that are not allocated to the reportable segments, increased $3.2 million, or six percent, between years.

The year-over-year increase was primarily attributable to $6.8 million of pre-tax charges associated with a criminal social engineering scheme impacting one of the Company's subsidiaries in

Asia (see Note 17, Other Matter, of the notes to the Company's consolidated financial statements for additional details regarding the criminal social engineering scheme) and higher deferred compensation and environmental reserve expenses.

The higher environmental reserve expenses in 2024 were primarily driven by a reserve adjustment for environmental costs related to property formerly owned and operated by the Company in Wilmington, Massachusetts.

These increases were partially offset by the non-recurrence of $5.8 million of business restructuring expenses incurred in 2023 (see Note 18, Business Restructuring , of the notes to the Company's consolidated financial statements for additional details) and lower 2024 salary expenses related to productivity measures implemented in late 2023.

Deferred compensation expense was $2.7 million in the first nine months of 2024 versus $0.9 million of income during the same period of 2023.

The $3.6 million increase in deferred compensation expense was attributable to a smaller decrease in the market price of the Company's common stock held for the plans during the first nine months of 2024 versus the first nine months of 2023.

The market price of Company common stock decreased $17.30 per share during the first nine months of 2024 versus a $31.49 per share decrease in the first nine months of 2023.

Additionally, the market value of mutual fund investment assets held for the plans appreciated by a greater amount in 2024 versus the prior year.

The following table presents the period-end Company common stock market prices used in the computation of deferred compensation expense/income for the nine months ended September 30, 2024 and 2023:

Corporate expenses, which include deferred compensation and other operating expenses that are not allocated to the reportable segments, decreased $4.4 million, or 24 percent, year-over-year.

Corporate expenses were $14.2 million in the first quarter of 2025 versus $18.6 million in the first quarter of 2024.

Deferred Compensation and environmental reserve expenses were down $2.8 million and $1.4 million, respectively, year-over-year.

The lower environmental reserve expenses are due to the non-recurrence of an environmental reserve adjustment made in the first quarter of 2024 related to property formerly owned and operated by the Company in Wilmington, Massachusetts.

The $2.8 million decrease in deferred compensation expense was primarily due to a decline in the market value of mutual fund investment assets during the first quarter of 2025 versus an increase during the first quarter of 2024.

In addition, the market price of the Company's common stock decreased $9.66 per share in the first quarter of 2025 versus a $4.51 per share decrease in the first quarter of 2024.

The following table presents the quarter-end Company common stock market prices used in the computation of deferred compensation income/expense for the three months ended March 31, 2025 and 2024:

Company Common Stock Price

LIQUIDITY AND CAPITAL RESOURCES

For the nine months ended September 30, 2024, operating activities were a cash source of $93.8 million versus a cash source of $105.9 million for the comparable period in 2023.

For the first nine months of 2024, investing cash outflows totaled $80.7 million versus cash outflows of $211.9 million in the prior year period.

Financing activities were a cash source of $6.9 million versus a cash source of $36.6 million in the prior year period.

Cash and cash equivalents increased $17.5 million compared to December 31, 2023, inclusive of a $2.5 million unfavorable foreign exchange rate impact.

On September 30, 2024, the Company's cash and cash equivalents totaled $147.3 million including $27.2 million in money market funds, which were rated AAAm by Standard and Poor’s and Aaa-mf by Moody’s.

demand deposit accounts totaled $6.7 million, and cash and cash equivalents of the Company’s non-U.S.

subsidiaries totaled $134.9 million (including UK money market funds of $21.5 million) as of September 30, 2024.

For the three months ended March 31, 2025, operating activities were a cash source of $6.9 million versus a cash source of $41.6 million for the comparable period in 2024.

For the first three months of 2025, investing cash outflows totaled $26.4 million versus cash outflows of $24.4 million in the prior year period.

Financing activities were a cash source of $22.8 million versus a cash use of $20.0 million in the prior year period.

Cash and cash equivalents increased $7.8 million compared to December 31, 2024, inclusive of a $4.5 million favorable foreign exchange rate impact.

On March 31, 2025, the Company's cash and cash equivalents totaled $107.5 million.

money market funds, which were rated AAAm by Standard and Poor’s, and Aaa-mf by Moody’s, totaled $1.9 million and cash in U.S.

demand deposit accounts totaled $2.2 million.

The Company’s non-U.S.

subsidiaries held $103.4 million of cash and cash equivalents as of March 31, 2025.

Operating Activities

Net income during the first nine months of 2024 increased $5.6 million versus the comparable period in 2023.

Working capital was a cash use of $39.2 million during the first nine months of 2024 versus a cash use of $13.8 million in the comparable period in 2023.

Accounts receivable was a cash use of $21.7 million during the first nine months of 2024 compared to a cash source of $25.8 million for the comparable period in 2023.

Net income during the first three months of 2025 increased $5.8 million versus the comparable period in 2024.

Working capital was a cash use of $40.9 million during the first three months of 2025 versus a cash use of $2.8 million in the comparable period in 2024.

Accounts receivable were a cash use of $40.3 million during the first three months of 2025 compared to a cash use of $26.0 million for the comparable period in 2024.

Inventories were a cash use of $16.9 million in 2025 versus a cash source of $3.2 million in 2024.

Accounts payable and accrued liabilities were a cash source of $27.5 million in 2024 compared to a cash use of $152.1 million for the same period in 2023.

Working capital requirements were lower in the first nine months of 2024 compared to 2023 primarily due to the changes noted above.

The change in inventories working capital primarily reflects the extensive efforts to reduce inventory levels in 2023 (source of cash) versus targeted inventory builds in 2024 in advance of two Polymer plant maintenance turnarounds and a third quarter 2024 inventory build in preparation for the hurricane season (use of cash).

The change in accounts payable and accrued liabilities was due in large part to lower 2024 cash outlays required to meet lower incentive-based compensation, tax and other year-end obligations closely linked to lower 2023 earnings.

Accounts payable and accrued liabilities were a cash source of $27.4 million in 2025 compared to a cash source of $26.0 million for the same period in 2024.

Working capital requirements were higher in the first three months of 2025 compared to 2024 primarily due to the changes noted above.

The change in accounts receivable working capital primarily reflects higher sales volume and higher selling prices due to the pass through of higher raw material costs.

The change in inventories primarily reflects higher quantities, primarily to support business growth and in anticipation of tariffs, and higher unit costs during the first quarter of 2025 versus a year ago.

It is management’s opinion that the Company’s liquidity is sufficient to provide for potential increases in working capital requirements during 2025.

Investing Activities

Cash used for investing activities decreased $131.2 million year-over-year.

Cash used for capital expenditures was $86.6 million in the first nine months of 2024 versus $213.6 million in the same period of 2023.

The lower capital spending in 2024 was largely attributable to reduced spending required to complete construction of the alkoxylation plant the Company is building at its Pasadena, Texas site.

Cash used for investing activities increased slightly year-over-year.

Cash used for capital expenditures was $32.7 million in the first three months of 2025 versus $30.2 million in the same period of 2024.

For 2025, the Company estimates that total capital expenditures will be in the range of $125.0 million to $135.0 million.

This full year projected spending includes completion of the new alkoxylation plant that is being built in Pasadena, Texas, along with growth initiatives, infrastructure and optimization initiatives.

Financing Activities

Cash flow from financing activities was a source of $6.9 million in 2024 versus a source of $36.6 million in 2023.

The year-over-year change was primarily due to a lower level of borrowings against the Company's revolving credit facility and higher scheduled debt repayments in 2024 versus the comparable period in 2023.

Cash flow from financing activities was a source of $22.8 million in 2024 versus a use of $20.0 million in 2024.

The year-over-year change was primarily due to a higher level of borrowings against the Company's revolving credit facility during the first quarter of 2025.

The Company purchases shares of its common stock in the open market or from its benefit plans from time to time to fund its own benefit plans and to mitigate the dilutive effect of new shares issued under its compensation plans.

2 unchanged sentences

The amounts involved may be material.

The Company did not purchase any shares of its common stock on the open market during the nine months ended September 30, 2024.

At September 30, 2024, the Company had $125.1 million remaining under the share repurchase program authorized by its Board of Directors.

The Company did not purchase any shares of its common stock on the open market during the three months ended March 31, 2025.

At March 31, 2025, the Company had $125.1 million remaining under the share repurchase program authorized by its Board of Directors.

Debt and Credit Facilities

Consolidated balance sheet debt increased from $654.1 million on December 31, 2023 to $688.5 million on September 30, 2024, primarily due to domestic borrowings from the Company’s revolving credit facility partially offset by scheduled debt repayments.

Net debt (which is defined as total debt minus cash – see the “Reconciliation of Non-GAAP Net Debt” section of this MD&A) increased $16.9 million, from $524.3 million at December 31, 2023 to $541.2 million at September 30, 2024.

This change reflects a cash increase of $17.5 million and a total debt increase of $34.4 million.

As of September 30, 2024, the ratio of net debt to net debt plus shareholders’ equity was 30.7 percent versus 30.0 percent at December 31, 2023 (see the “Reconciliation of Non-GAAP Net Debt” section in this MD&A for further details).

On September 30, 2024, the Company’s debt included $311.6 million of unsecured notes, with maturities ranging from 2024 through 2032, that were issued to insurance companies in private placement transactions pursuant to note purchase agreements (the Note Purchase Agreements), a $91.3 million delayed draw term loan borrowed pursuant to the Company's credit agreement, $278.7 million of short term loans borrowed under the Company's revolving credit facility and $6.9 million of foreign credit line borrowings.

Consolidated balance sheet debt increased $33.9 million, from $625.4 million on December 31, 2024 to $659.3 million on March 31, 2025, primarily due to higher domestic borrowings from the Company's revolving credit facility.

Net debt (which is defined as total debt minus cash – see the “Reconciliation of Non-GAAP Net Debt” section of this MD&A) was $551.8 million on March 31, 2025 versus $525.7 million at December 31, 2024.

As of March 31, 2025, the ratio of net debt to net debt plus shareholders’ equity was 31.5 percent versus 31.0 percent at December 31, 2024 (see the “Reconciliation of Non-GAAP Net Debt” section in this MD&A for further details).

On March 31, 2025, the Company’s debt included $311.8 million of unsecured notes, with maturities ranging from 2025 through 2032, that were issued to insurance companies in private placement transactions pursuant to note purchase agreements (the “Note Purchase Agreements”), a $88.7 million delayed-draw term loan borrowed pursuant to the Company’s credit agreement, $257.8 million of short-term loans borrowed under the Company’s revolving credit facility and $1.0 million of foreign credit line borrowings.

As of March 31, 2025, the Company

had outstanding letters of credit of $14.0 million, inclusive of $5.3 million issued under the Company’s revolving credit facility.

The proceeds from the note issuances have been the Company’s primary source of long-term debt financing and are supplemented by borrowings under bank credit facilities to meet short and medium-term liquidity needs.

On August 27, 2024, the Company entered into amendments to two of its note purchase agreements to increase the available facility amounts and extend the end date of the issuance period to August 27, 2027.

The Company's credit agreement (the Credit Agreement) with a syndicate of banks provides for credit facilities in an initial aggregate principal amount of $450.0 million, consisting of (a) a $350.0 million multi-currency revolving credit facility and (b) a $100.0 million delayed draw term loan credit facility, each of which matures on June 24, 2027.

The Company’s credit agreement (the Credit Agreement) with a syndicate of banks provides for credit facilities in an initial aggregate principal amount of $450.0 million, consisting of (a) a $350.0 million multi-currency revolving credit facility and (b) a $100.0 million delayed draw term loan credit facility ($11.3 million of the term loan principal has been permanently repaid as scheduled), 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 $8.7 million.

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

The Company also 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 borrowings totaling $370.0 million, inclusive of a $91.3 million delayed draw term loan, and letters of credit totaling $11.4 million under the Credit Agreement, with $59.9 million remaining available.

As of September 30, 2024, the Company also had an outstanding letter of credit of $8.7 million under the CIC Credit Agreement.

As of March 31, 2025, the Company had outstanding letters of credit totaling $8.7 million under the CIC Credit Agreement.

The Company also 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.

These outstanding letters of credit totaled $5.3 million at March 31, 2025.

The Company anticipates that cash from operations, committed credit facilities and cash on hand will be sufficient to fund anticipated capital expenditures, working capital, dividends and other planned financial commitments for the foreseeable future.

Certain foreign subsidiaries of the Company maintain short-term bank lines of credit in their respective local currencies to meet working capital requirements as well as to fund capital expenditures and acquisitions.

At September 30, 2024, the Company’s foreign subsidiaries had $6.9 million of outstanding debt.

At March 31, 2025, the Company’s foreign subsidiaries had $1.0 million of outstanding debt.

The Company is subject to covenants under its material debt agreements that require the maintenance of minimum interest coverage and minimum net worth.

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The maximum amount of dividends that could have been paid within this limitation is disclosed as unrestricted retained earnings in Note 14, Debt , of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q).

The Company believes it was in compliance with the covenants under its material debt agreements as of September 30, 2024.

The Company believes it was in compliance with the covenants under its material debt agreements as of March 31, 2025.

ENVIRONMENTAL AND LEGAL MATTERS

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The Company will continue to invest in the equipment and facilities necessary to comply with existing and future regulations.

During the first nine months of 2024 and 2023, the Company’s expenditures for capital projects related to environmental matters were $7.0 million and $7.1 million, respectively.

During the first three months of 2025 and 2024, the Company’s expenditures for capital projects related to environmental matters were $2.4 million and $1.5 million, respectively.

These projects are capitalized and depreciated over their estimated useful lives, which are typically 10 years.

Recurring costs associated with the operation and maintenance of facilities for waste treatment and disposal and managing environmental compliance in ongoing operations at the Company’s manufacturing locations were $40.0 million and $27.1 million for the nine months ended September 30, 2024 and 2023, respectively.

Recurring costs associated with the operation and maintenance of facilities for waste treatment and disposal and managing environmental compliance in ongoing operations at the Company’s manufacturing locations were $10.0 million and $10.8 million for the three months ended March 31, 2025 and 2024, respectively.

Over the years, the Company has received requests for information related to or has been named by the government as a potentially responsible party at a number of waste disposal sites where cleanup costs have been or may be incurred under CERCLA and similar state or foreign statutes.

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The Company believes that it has made adequate provisions for the costs it is likely to incur with respect to these claims.

It is the Company’s accounting policy to record liabilities when environmental assessments, remediation expenses or legal proceeding losses are probable, and the cost or range of possible costs can be reasonably estimated.

reasonably estimated.

When no amount within the range is a better estimate than any other amount, the minimum is accrued.

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Some of the factors on which the Company bases its estimates include information provided by decisions rendered by State and Federal environmental regulatory agencies, information provided by feasibility studies, and remedial action plans developed.

After partial remediation payments at certain sites, the Company has estimated a range of possible environmental and legal losses of $21.5 million to $48.9 million at September 30, 2024 and $20.6 million to $49.4 million at December 31, 2023.

After partial remediation payments at certain sites, the Company has estimated a range of possible environmental and legal losses of $17.9 million to $42.4 million at March 31, 2025 and $20.0 million to $44.5 million at December 31, 2024.

Within the range of possible environmental 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.

The Company's environmental and legal accruals totaled $21.5 million at September 30, 2024 and $20.6 million at December 31, 2023.

The Company's environmental and legal accruals totaled $17.9 million at March 31, 2025 and $20.0 million at December 31, 2024.

Because the liabilities accrued are estimates, actual amounts could differ materially from the amounts reported.

Cash expenditures related to environmental remediation and certain other legal matters approximated $2.2 million for the nine months ended September 30, 2024, compared to $11.4 million for the same period in 2023.

Cash expenditures related to environmental remediation and certain other legal matters approximated $2.6 million for the three months ended March 31, 2025, compared to $1.6 million for the same period in 2024.

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.

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See also Note 8, Contingencies , in the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q) for a summary of the significant environmental proceedings related to certain sites.

Management is pleased that several of its Surfactant businesses delivered strong volume growth in the quarter.

Agricultural sales volumes grew double-digits in the third quarter, which aligns with the Company's expectations for a second half 2024 recovery.

Rigid Polyols demand should increase as the market gets more macro-economic clarity and the interest rate environment improves.

Free cash flow should continue to improve driven by the completion of the Company's Pasadena investment, growth in market volumes, and the

Company's continued focus on cost reduction.

Management believes the Company is positioned to deliver full year Adjusted EBIDTA growth and positive free cash flow.

For explanations of non-GAAP measures (EBITDA, Adjusted EBITDA and Free Cash Flow), see NON-GAAP reconciliations discussion below.

CRITICAL ACCOUNTING POLICIES

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For example, the non-GAAP financial measures presented in this Form 10-Q may differ from similarly titled non-GAAP financial measures presented by other companies and other companies may not define these non-GAAP financial measures the same way as the Company does.

Reconciliation of Non-GAAP Adjusted Net Income and Earnings Per Share

Management uses the non-GAAP adjusted net income metrics to evaluate the Company’s operating performance.

Reconciliations of Non-GAAP Adjusted Net Income and Diluted Earnings per Share

Management uses the non-GAAP adjusted net income metric to evaluate the Company’s operating performance.

Management excludes the items listed in the table below because they are non-operational items.

The cumulative tax effect was calculated using the statutory tax rates for the jurisdictions in which the noted transactions occurred.

The cumulative tax effect was calculated using the statutory tax rates for the jurisdictions in which the transactions occurred.

Three Months Ended

(In millions, except per share amounts)

September 30, 2024

September 30, 2023

Net Income Attributable to the Company as Reported

Deferred Compensation Income (including

related investment activity)

Business Restructuring Expense

Cash Settled Stock Appreciation Rights (Income)

Environmental Remediation Expense

Cumulative Tax Effect on Above Adjustment Items

Adjusted Net Income

Nine Months Ended

(In millions, except per share amounts)

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

Net Income Attributable to the Company as Reported

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related investment activity)

Business Restructuring Expense

Cash Settled Stock Appreciation Rights (Income)

Environmental Remediation Expense

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Adjusted Net Income

Reconciliation of Non-GAAP EBITDA and Adjusted EBITDA

Management uses the non-GAAP EBITDA and adjusted EBITDA metrics to evaluate the Company's operating performance.

Reconciliations of Non-GAAP EBITDA and Adjusted EBITDA

Management uses the non-GAAP EBITDA and adjusted EBITDA metric to evaluate the Company's operating performance.

Management excludes the items listed in the table below because they are non-operational items.

Refer to the Company's Condensed Consolidated Statements of Income for a bridge between Operating Income and Net Income.

Three Months Ended

September 30, 2024

($ in millions)

Operating Income

Depreciation and Amortization

Other, Net Income

Deferred Compensation

Environmental Remediation

Adjusted EBITDA

Three Months Ended

September 30, 2023

($ in millions)

Operating Income

Depreciation and Amortization

Other, Net Income

Deferred Compensation

Cash Settled SARs

Business Restructuring

Environmental Remediation

Adjusted EBITDA

Nine Months Ended

September 30, 2024

($ in millions)

Operating Income

Depreciation and Amortization

Other, Net Income

Deferred Compensation

Environmental Remediation

Adjusted EBITDA

Nine Months Ended

September 30, 2023

For the Three Months

Ended March 31,

($ in millions)

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Deferred Compensation

Cash Settled SARs

Business Restructuring

Environmental Remediation

Adjusted EBITDA

Reconciliation of Non-GAAP Net Debt

Management uses the non-GAAP net debt metric to gain a more complete picture of the Company’s overall liquidity, financial flexibility and leverage level.

Reconciliations of Non-GAAP Net Debt

Management uses the non-GAAP net debt metric to show a more complete picture of the Company’s overall liquidity, financial flexibility and leverage level.

(In millions)

September 30,

Current Maturities of Long-Term Debt as Reported

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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 2. Management’s Discussion and Analysis