STEPAN CO 10-Q

Item 1 - Financial Statements STEPAN COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME Unaudited (In thousands, except per share amounts) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Net Sales $ 594,689 $ 556,405 $ 1,187,944 $ 1,107,823 Cost of Sales 522,804 486,853 1,040,596 967,990 Gross Profit 71,885 69,552 147,348 139,833 Operating Expenses: Selling 14,657 11,828 26,765 23,216 Administrative 22,801 24,569 44,215 47,259 Research, development and technical services 14,701 14,093 29,350 28,349 Deferred compensation expense 1,761 395 765 2,173 53,920 50,885 101,095 100,997 Operating Income 17,965 18,667 46,253 38,836 Other Income (Expense): Interest, net ( 5,485 ) ( 2,661 ) ( 9,611 ) ( 5,732 ) Other, net (Note 15) 1,306 1,200 1,808 3,562 ( 4,179 ) ( 1,461 ) ( 7,803 ) ( 2,170 ) Income Before Provision for Income Taxes 13,786 17,206 38,450 36,666 Provision for Income Taxes 2,445 7,685 7,398 13,252 Net Income 11,341 9,521 31,052 23,414 Net Income Per Common Share (Note 10): Basic $ 0.50 $ 0.42 $ 1.36 $ 1.03 Diluted $ 0.50 $ 0.42 $ 1.36 $ 1.02 Shares Used to Compute Net Income Per Common Share (Note 10): Basic 22,865 22,827 22,866 22,825 Diluted 22,879 22,936 22,885 22,942 The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements. 2 STEPAN COMPANY CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Unaudited (In thousands) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Net Income $ 11,341 $ 9,521 $ 31,052 $ 23,414 Other Comprehensive Income (Loss): Foreign currency translation adjustments (Note 11) 37,084 ( 25,411 ) 58,693 ( 31,962 ) Defined benefit pension adjustments, net of tax (Note 11) 59 57 114 115 Derivative instrument activity, net of tax (Note 11) ( 774 ) ( 280 ) ( 1,888 ) 549 Total Other Comprehensive Income (Loss) 36,369 ( 25,634 ) 56,919 ( 31,298 ) Comprehensive Income (Loss) $ 47,710 $ ( 16,113 ) $ 87,971 $ ( 7,884 ) The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements. 3 STEPAN COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS Unaudited (Dollars in thousands) June 30, 2025 December 31, 2024 Assets Current Assets: Cash and cash equivalents $ 88,904 $ 99,665 Receivables, net 442,151 388,027 Inventories (Note 6) 329,475 288,722 Other current assets 45,576 34,015 Total current assets 906,106 810,429 Assets held for sale (Note 17) 8,663 — Property, Plant and Equipment: Cost 2,709,809 2,645,931 Less: Accumulated depreciation ( 1,496,881 ) ( 1,447,477 ) Property, plant and equipment, net 1,212,928 1,198,454 Goodwill, net 98,871 91,368 Other intangible assets, net 42,620 42,673 Long-term investments (Note 3) 19,761 25,558 Operating lease assets (Note 7) 63,274 71,477 Other non-current assets 63,907 64,689 Total assets $ 2,416,130 $ 2,304,648 Liabilities and Equity Current Liabilities: Current maturities of debt (Note 14) $ 274,791 $ 292,807 Accounts payable 281,751 258,787 Accrued liabilities 116,479 117,440 Total current liabilities 673,021 669,034 Liabilities held for sale (Note 17) 4,813 — Deferred income taxes 10,385 9,612 Long-term debt, less current maturities (Note 14) 383,239 332,632 Non-current operating lease liabilities (Note 7) 50,100 57,392 Other non-current liabilities 52,859 66,044 Commitments and Contingencies (Note 8) Equity: Common stock, $ 1 par value; authorized 60,000,000 shares; 27,290,966 issued shares in 2025 and 27,156,436 issued shares in 2024 27,291 27,156 Additional paid-in capital 256,575 253,779 Accumulated other comprehensive loss (Note 11) ( 139,919 ) ( 196,838 ) Retained earnings 1,287,552 1,273,886 Less: Common treasury stock, at cost, 4,674,573 shares in 2025 and 4,655,798 shares in 2024 ( 189,786 ) ( 188,049 ) Total equity 1,241,713 1,169,934 Total liabilities and equity $ 2,416,130 $ 2,304,648 The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements. 4 STEPAN COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited (In thousands) Six Months Ended June 30, 2025 2024 Cash Flows From Operating Activities Net income $ 31,052 $ 23,414 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 60,559 55,614 Deferred compensation 765 2,173 Realized and unrealized gains on long-term investments ( 1,074 ) ( 2,946 ) Stock-based compensation 3,064 2,930 Deferred income taxes 496 6,393 Other non-cash items 412 977 Changes in assets and liabilities: Receivables, net ( 31,753 ) ( 27,345 ) Inventories ( 30,652 ) ( 9,686 ) Other current assets ( 10,765 ) ( 5,095 ) Accounts payable and accrued liabilities ( 1,570 ) 26,602 Pension liabilities ( 472 ) ( 943 ) Environmental and legal liabilities ( 436 ) 171 Deferred revenues ( 1,491 ) ( 1,203 ) Net Cash Provided By Operating Activities 18,135 71,056 Cash Flows From Investing Activities Expenditures for property, plant and equipment ( 58,346 ) ( 59,867 ) Other, net 6,878 5,831 Net Cash Used In Investing Activities ( 51,468 ) ( 54,036 ) Cash Flows From Financing Activities Revolving debt and bank overdrafts, net (Note 14) ( 18,200 ) 27,379 Other debt borrowings (Note 6) 75,000 — Other debt repayments (Note 6) ( 24,286 ) ( 24,286 ) Dividends paid ( 17,386 ) ( 16,853 ) Stock option exercises 104 966 Other, net ( 1,974 ) ( 3,211 ) Net Cash Provided By (Used In) Financing Activities 13,258 ( 16,005 ) Effect of Exchange Rate Changes on Cash 9,314 ( 6,130 ) Net Decrease in Cash and Cash Equivalents ( 10,761 ) ( 5,115 ) Cash and Cash Equivalents at Beginning of Period 99,665 129,823 Cash and Cash Equivalents at End of Period $ 88,904 $ 124,708 Supplemental Cash Flow Information Cash payments of income taxes, net of refunds $ 4,590 $ 6,022 Cash payments of interest $ 13,628 $ 14,022 The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements. 5 STEPAN COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2025 Unaudited 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The condensed consolidated financial statements included herein have been prepared by Stepan Company (the Company), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). 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 June 30, 2025, its results of operations for the three and six months ended June 30, 2025 and 2024 and cash flows for the six months ended June 30, 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). 2. RECONCILIATIONS OF EQUITY Below are reconciliations of total equity for the three and six months ended June 30, 2025 and 2024: (In thousands, except share and per share amounts) Total Common Stock Additional Paid-in Capital Common Treasury Stock Accumulated Other Comprehensive Income (Loss) Retained Earnings Balance, March 31, 2025 $ 1,200,538 $ 27,253 $ 254,366 $ ( 189,706 ) $ ( 176,288 ) $ 1,284,913 Issuance of 530 shares of common stock under incentive compensation plan 22 — 22 — — — Stock-based and deferred compensation 2,145 38 2,187 ( 80 ) — — Net income 11,341 — — — — 11,341 Other comprehensive income 36,369 — — — 36,369 — Cash dividends paid: Common stock ($ 0.385 per share) ( 8,702 ) — — — — ( 8,702 ) Balance, June 30, 2025 $ 1,241,713 $ 27,291 $ 256,575 $ ( 189,786 ) $ ( 139,919 ) $ 1,287,552 (In thousands, except share and per share amounts) Total Common Stock Additional Paid-in Capital Common Treasury Stock Accumulated Other Comprehensive Income (Loss) Retained Earnings Balance, December 31, 2024 $ 1,169,934 $ 27,156 $ 253,779 $ ( 188,049 ) $ ( 196,838 ) $ 1,273,886 Issuance of 2,473 shares of common stock under incentive compensation plan 104 2 102 — — — Stock-based and deferred compensation 1,090 133 2,694 ( 1,737 ) — — Net income 31,052 — — — — 31,052 Other comprehensive income 56,919 — — — 56,919 — Cash dividends paid: Common stock ($ 0.770 per share) ( 17,386 ) — — — — ( 17,386 ) Balance, June 30, 2025 $ 1,241,713 $ 27,291 $ 256,575 $ ( 189,786 ) $ ( 139,919 ) $ 1,287,552 6 (In thousands, except share and per share amounts) Total Common Stock Additional Paid-in Capital Common Treasury Stock Accumulated Other Comprehensive Income (Loss) Retained Earnings Balance, March 31, 2024 $ 1,214,522 $ 27,125 $ 248,337 $ ( 187,611 ) $ ( 136,266 ) $ 1,262,937 Issuance of 2,456 shares of common stock under incentive compensation plan 101 2 99 — — — Stock-based and deferred compensation 2,357 15 2,509 ( 167 ) — — Net income 9,521 — — — — 9,521 Other comprehensive (loss) ( 25,634 ) — — — ( 25,634 ) — Cash dividends paid: Common stock ($ 0.375 per share) ( 8,431 ) — — — — ( 8,431 ) Balance, June 30, 2024 $ 1,192,436 $ 27,142 $ 250,945 $ ( 187,778 ) $ ( 161,900 ) $ 1,264,027 (In thousands, except share and per share amounts) Total Common Stock Additional Paid-in Capital Common Treasury Stock Accumulated Other Comprehensive Income (Loss) Retained Earnings Balance, December 31, 2023 $ 1,216,490 $ 27,006 $ 247,032 $ ( 184,412 ) $ ( 130,602 ) $ 1,257,466 Issuance of 23,124 shares of common stock under incentive compensation plan 966 23 943 — — — Stock-based and deferred compensation ( 283 ) 113 2,970 ( 3,366 ) — — Net income 23,414 — — — — 23,414 Other comprehensive (loss) ( 31,298 ) — — — ( 31,298 ) — Cash dividends paid: Common stock ($ 0.750 per share) ( 16,853 ) — — — — ( 16,853 ) Balance, June 30, 2024 $ 1,192,436 $ 27,142 $ 250,945 $ ( 187,778 ) $ ( 161,900 ) $ 1,264,027 3. 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 $ 6,622,000 and $ 12,589,000 at June 30, 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). Fair value and carrying value were the same because the contracts were recorded at fair value. The fair values of the foreign currency contracts were calculated as the difference between the applicable forward foreign exchange rates at the reporting date and the contracted foreign exchange rates multiplied by the contracted notional amounts. 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 June 30, 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 $ 333,000 and $ 404,000 as of June 30, 2025 and December 31, 2024, respectively): (In thousands) June 30, 2025 December 31, 2024 Fair value $ 641,989 $ 598,864 Carrying value 658,363 625,843 7 The following tables present financial assets and liabilities, excluding cash and cash equivalents, measured on a recurring basis at fair value as of June 30, 2025, and December 31, 2024, and the level within the fair value hierarchy in which the fair value measurements fall: (In thousands) June 30, 2025 Level 1 Level 2 Level 3 Mutual fund assets $ 19,761 $ 19,761 $ — $ — Derivative assets: Interest rate contracts 3,051 — 3,051 — Foreign currency contracts 1,058 — 1,058 — Total assets at fair value $ 23,870 $ 19,761 $ 4,109 $ — Derivative liabilities: Foreign currency contracts $ 1,188 $ — $ 1,188 $ — (In thousands) December 31, 2024 Level 1 Level 2 Level 3 Mutual fund assets $ 25,558 $ 25,558 $ — $ — Derivative assets: Interest rate contracts 4,934 — 4,934 — Foreign currency contracts 1,386 — 1,386 — Total assets at fair value $ 31,878 $ 25,558 $ 6,320 $ — Derivative liabilities: Foreign currency contracts $ 752 $ — $ 752 $ — 4. DERIVATIVE INSTRUMENTS At June 30, 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 $ 58,273,000 and $ 149,571,000 , respectively. All forward foreign exchange contracts at June 30, 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 June 30, 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. As the interest rate swap contract is settled, the corresponding gain or loss is reclassified out of accumulated other comprehensive income (AOCI) into earnings. 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 June 30, 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 and six months ended June 30, 2025 and 2024, were immaterial. For amounts reclassified out of AOCI into earnings for the three and six months ended June 30, 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). 5. STOCK-BASED COMPENSATION Compensation expense recorded for all stock options, performance shares, time-based restricted stock units (RSUs) and stock appreciation rights (SARs) was as follows: (In thousands) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 $ 1,682 $ 1,558 $ 3,064 $ 2,930 Unrecognized compensation costs for stock options, performance shares, RSUs and SARs were as follows: 8 (In thousands) June 30, 2025 December 31, 2024 Stock options $ 112 $ 119 Performance shares and RSUs 9,130 4,645 SARs 3,456 2,438 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 six months of 2025: Shares Stock options 1,887 Performance shares (at target) and RSUs 130,394 SARs 114,162 The unrecognized compensation costs at June 30, 2025 , are expected to be recognized over weighted-average periods of 1.8 years for stock options, 2.3 years for performance shares and RSUs and 2.1 years for SARs. 6. INVENTORIES The composition of inventories at June 30, 2025, and December 31, 2024, was as follows: (In thousands) June 30, 2025 December 31, 2024 Finished goods $ 227,695 $ 201,684 Raw materials 101,780 87,038 Total inventories $ 329,475 $ 288,722 7. LEASES Lease cost is recognized in both the Cost of Sales and Operating Expenses sections of the Condensed Consolidated Statements of Income. (In thousands) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Lease Cost Operating lease cost $ 4,801 $ 4,468 $ 9,563 $ 8,961 Short-term lease cost 2,796 3,249 5,314 5,936 Variable lease cost 393 422 768 865 Total lease cost $ 7,990 $ 8,139 $ 15,645 $ 15,762 Other Information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow from operating leases $ 4,801 $ 4,477 $ 9,577 $ 8,965 Right-of-use assets obtained in exchange for new operating lease liabilities 38 559 260 1,548 9 The following table outlines the maturities of lease liabilities as of June 30, 2025. (In thousands) Undiscounted Cash Flows: 2025 (excluding the six months ended June 30, 2025) $ 9,289 2026 14,248 2027 10,599 2028 8,301 2029 7,670 Subsequent to 2029 30,257 Total Undiscounted Cash Flows $ 80,364 Less: Imputed interest ( 11,216 ) Present value $ 69,148 Current operating lease liabilities (1) 14,487 Non-current operating lease liabilities 54,661 Total lease liabilities $ 69,148 (1) This item is included in the Accrued liabilities line on the Company’s Condensed Consolidated Balance Sheet. Weighted-average remaining lease term-operating leases 8 Years Weighted-average discount rate-operating leases 4.0 % As of June 30, 2025 , the Company had no leases that had not already commenced. 8. CONTINGENCIES There are a variety of legal proceedings pending or threatened against the Company that occur in the normal course of the Company’s business, the majority of which relate to environmental assessment, protection and remediation matters. Some of these proceedings may result in fines, penalties, judgments or costs being assessed against the Company at some future time. The Company’s operations are subject to extensive local, state and federal regulations, including the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) and the Superfund amendments of 1986 (Superfund) as well as comparable regulations applicable to the Company’s foreign locations. Over the years, the Company has received requests for information related to or has been named by government authorities as a potentially responsible party at a number of sites where cleanup costs have been or may be incurred by the Company under CERCLA and similar state statutes. In addition, the Company is from time to time involved in routine legal proceedings incidental to the conduct of its business, including personal injury, property damage, tax, trade and labor matters. The Company believes that it has made adequate provisions for the costs it is likely to incur with respect to these claims. In determining the appropriate level of environmental reserves, the Company considers several factors such as information obtained from investigatory studies; changes in the scope of remediation; the interpretation, application and enforcement of laws and regulations; changes in the costs of remediation programs; the development of alternative cleanup technologies and methods; and the relative level of the Company’s involvement at various sites for which the Company is allegedly associated. 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 June 30, 2025 , the Company estimated a range of possible environmental losses and legal losses of $ 19,516,000 to $ 44,903,000 . 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 $ 19,516,000 at June 30, 2025 and $ 19,952,000 at December 31, 2024 . In the second quarter of 2025, the Company accrued an additional $ 1,754,000 for remediation expenses at the Company's Elwood, Illinois (Millsdale) facility due to a change in the scope of planned remediation activities. 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 $ 3,402,000 and $ 1,982,000 for the six months ended June 30, 2025 and 2024, respectively. 10 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. As such, estimates of the total costs, or range of possible costs, of remediation, if any, or the Company’s share of such costs, if any, cannot be determined with respect to these sites. Consequently, the Company is unable to predict the effect thereof on the Company’s financial position, cash flows and results of operations. Based on the Company’s present knowledge with respect to its involvement at these sites, the possibility of other viable entities’ responsibilities for cleanup, and the extended period over which any costs would be incurred, management believes that the Company has no material liability at these sites and that these matters, individually and in the aggregate, will not have a material effect on the Company’s financial position. 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 June 30, 2025: Maywood, New Jersey Site The Company’s property in Maywood, New Jersey, property formerly owned by the Company adjacent to its current site and other nearby properties (collectively, the Maywood site) were listed on the National Priorities List in September 1993 pursuant to the provisions of CERCLA because of alleged chemical and radiological contamination. Pursuant to (i) a September 21, 1987 Administrative Order on Consent entered into between the U.S. Environmental Protection Agency (USEPA) and the Company for property formerly owned by the Company at the Maywood site and (ii) the issuance of an order on May 2, 1991 by the USEPA to the Company for property currently owned by the Company at the Maywood site, the Company has completed various Remedial Investigation/Feasibility Studies of soil and groundwater at the Maywood site. On September 24, 2014, the USEPA issued its Record of Decision (ROD) for chemically-contaminated soil at the Maywood site. The ROD was amended pursuant to an Explanation of Significant Differences in January 2021. On February 29, 2024, the U.S. District Court for the District of New Jersey entered a consent decree among the Company, the United States, the New Jersey Department of Environmental Protection (NJDEP) and the New Jersey Spill Compensation Fund Administrator that requires the Company to take certain actions and to pay certain past costs of the United States and NJDEP. The USEPA has not yet issued a ROD for chemically-contaminated groundwater at the Maywood site. Based on the most current information available, the Company believes its recorded liability is reasonable having considered the range of estimated costs of remediation for the Maywood site. The estimate of the cost of remediation for the Maywood site could change again as the Company continues to hold discussions with the USEPA, as the design of the remedial action is finalized, if a groundwater ROD is issued or if other potentially responsible parties are identified. The ultimate amount for which the Company is liable could differ materially from the Company’s current recorded liability. D’Imperio Property Site During the mid-1970’s, Jerome Lightman and the Lightman Drum Company disposed of hazardous substances generated by the Company at several sites in New Jersey, including the D’Imperio site. The Company was named as a potentially responsible party in an October 2, 1998 lawsuit in the U.S. District Court for the District of New Jersey that involved the D’Imperio Site. The Company is cooperating with other potentially responsible parties to implement the selected remedy. Based on current information, the Company believes that its recorded liability is reasonable having considered the range of estimated cost of remediation for the D’Imperio site. Depending on the ultimate cost of the remediation at this site, the amount for which the Company is liable could differ materially from the Company’s current recorded liability. Wilmington Site Property formerly owned and operated by the Company in Wilmington, Massachusetts was listed on the National Priorities List in 2006. The Company, together with the current site owner and another potentially responsible party, entered into an Administrative Order on Consent in July 2007 to undertake a Remedial Investigation and Feasibility Study. A ROD was issued by the USEPA on March 30, 2021. The Company and three other potentially responsible parties entered into a consent decree, dated September 28, 2023, with USEPA and the Commonwealth of Massachusetts that requires the remedial design and remedial action of the remedy selected in the ROD for two operable units and an interim remedy for another operable unit. Remediation at this site is being managed by its current owner, to whom the Company sold the property in 1980. 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 had paid the current owner $ 4,122,000 for the Company’s portion of environmental response costs at the Wilmington site through June 30, 2025. The Company has recorded a liability for its portion of the estimated remediation costs for the site. Depending on the ultimate cost of the remediation at this site, the amount for which the Company is liable could differ materially from the current recorded liability. 11 On July 29, 2022, the Company and other potentially responsible parties were notified of a possible joint claim by federal and state trustees for alleged natural resource damages related to the Wilmington site. The alleged damages may result in a range of possible penalties and the Company recorded a liability for this matter during the first quarter of 2024. Depending on the ultimate resolution of this matter, the amount for which the Company is liable could differ materially from the current recorded liability. Millsdale Site On March 26, 2024, the Company received a Notice and Finding of Violation from the USEPA alleging violations of air regulations at the Company’s Elwood, Illinois (Millsdale) facility. The notice alleges violations related to operating parameters and air emission requirements. The notice does not state whether the USEPA intends to pursue financial penalties or operational remedies. The alleged violations may result in a range of possible penalties; however, at this stage of the matter, the Company is unable to predict the ultimate outcome or what impact, if any, the outcome might have on the Company’s financial position, results of operations or cash flows. Other U.S. Sites Through the regular environmental monitoring of its plant production sites, the Company discovered levels of chemical contamination that were above thresholds allowed by law at its Millsdale and Fieldsboro, New Jersey plants. The Company voluntarily reported its results to the applicable state environmental agencies. As a result, the Company is required to perform self-remediation of the affected areas. Based on current information, the Company believes that its recorded liability for the remediation of the affected areas is appropriate based on an estimate of expected costs. 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 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. USEPA assessed a civil penalty of $ 1,126,000 , which the Company paid on July 2, 2025. The Company is pursuing indemnification claims against two third parties to recover the cost of the penalty. 9. POSTRETIREMENT BENEFIT PLANS Defined Benefit Pension Plans The Company sponsors various funded qualified and unfunded non-qualified defined benefit pension plans, the most significant of which cover employees in the U.S. and U.K. locations. The U.S. and U.K. defined benefit pension plans are frozen and service benefits are no longer being accrued. 12 Components of Net Periodic Benefit Cost UNITED STATES (In thousands) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Interest cost $ 1,700 $ 1,652 $ 3,400 $ 3,303 Expected return on plan assets ( 2,003 ) ( 2,124 ) ( 4,005 ) ( 4,240 ) Amortization of net actuarial loss ( 19 ) ( 3 ) ( 38 ) ( 6 ) Net periodic benefit cost $ ( 322 ) $ ( 475 ) $ ( 643 ) $ ( 943 ) UNITED KINGDOM (In thousands) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Interest cost $ 178 $ 160 $ 346 $ 321 Expected return on plan assets ( 206 ) ( 182 ) ( 400 ) ( 365 ) Amortization of net actuarial loss 97 80 189 160 Net periodic benefit cost $ 69 $ 58 $ 135 $ 116 Employer Contributions U.S. Plans As a result of pension funding relief provisions included in the Highway and Transportation Funding Act of 2014, the Company is not required to make contributions to its funded U.S. qualified defined benefit plans. Approximately $ 171,000 is expected to be paid to the unfunded non-qualified plans in 2025 . Of such amount, $ 112,000 had been paid to the non-qualified plans as of June 30, 2025. U.K. Plan The Company’s U.K. subsidiary does not expect to contribute to its defined benefit pension plan in 2025. Defined Contribution Plans The Company sponsors retirement defined contribution plans that cover eligible U.S. and U.K. employees. The Company’s U.S. 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 six months ended June 30, 2025 and 2024 , the Company made contributions into the qualified retirement plans for U.S. employees and for certain non-U.S. employees. Profit sharing contributions were determined using a formula applied to Company earnings. Approximately 85 percent of union and non-union employees are eligible for either the Company's sponsored or statutory profit sharing contributions and 100 percent of U.S. based union and non-union employees are eligible for the Company's sponsored profit sharing contributions. In 2024 and 2025, profit sharing contributions for U.S. employees were made to the employee stock ownership plan. Profit sharing contributions are allocated to participant accounts based on participant base earnings. Defined contribution plan expenses for the Company’s qualified contribution plans were as follows: (In thousands) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Retirement savings contributions $ 2,344 $ 2,295 $ 4,559 $ 4,420 Profit sharing contributions 495 684 1,605 1,532 Total defined contribution plan expenses $ 2,839 $ 2,979 $ 6,164 $ 5,952 The Company has a rabbi trust to fund the obligations of its non-qualified supplemental executive defined contribution plans (supplemental plans). The trust is comprised of various mutual fund investments selected by the participants of the supplemental plans. In accordance with the accounting guidance for rabbi trust arrangements, the assets of the trust and the obligations of the supplemental plans are reported on the Company’s condensed consolidated balance sheets. 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 statements of income. The supplemental plan liabilities increase (i.e., 13 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 June 30, 2025 , the balance of the trust assets was $ 254,000 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. 10. EARNINGS PER SHARE Below are the computations of basic and diluted earnings per share for the three and six months ended June 30, 2025 and 2024: (In thousands, except per share amounts) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Computation of Basic Earnings per Share Net income $ 11,341 $ 9,521 $ 31,052 $ 23,414 Weighted-average number of common shares outstanding 22,865 22,827 22,866 22,825 Basic earnings per share $ 0.50 $ 0.42 $ 1.36 $ 1.03 Computation of Diluted Earnings per Share Net income $ 11,341 $ 9,521 $ 31,052 $ 23,414 Weighted-average number of shares outstanding 22,865 22,827 22,866 22,825 Add weighted-average net shares from assumed exercise of options (under treasury stock method) (1) 7 34 10 41 Add weighted-average net shares related to unvested stock awards (under treasury stock method) 2 8 2 6 Add weighted-average net shares from assumed exercise of SARs (under treasury stock method) (1) 5 45 7 49 Add weighted-average contingently issuable net shares related to performance stock awards (under treasury stock method) — 22 — 21 Weighted-average shares applicable to diluted earnings 22,879 22,936 22,885 22,942 Diluted earnings per share $ 0.50 $ 0.42 $ 1.36 $ 1.02 (1) Options/SARs to acquire 1,205,183 and 1,209,553 shares of the Company's common stock were excluded from the computation of dilutive earnings per share for the three and six months ended June 30, 2025 , 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. 899,151 and 849,588 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 six months ended June 30, 2024 , respectively. 14 11. 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 six months ended June 30, 2025 and 2024: (In thousands) Foreign Currency Translation Adjustments Defined Benefit Pension Plan Adjustments Cash Flow Hedge Adjustments Total Balance at March 31, 2024 $ ( 122,963 ) $ ( 20,350 ) $ 7,047 $ ( 136,266 ) Other comprehensive (loss) before reclassifications ( 25,411 ) — ( 278 ) ( 25,689 ) Amounts reclassified from AOCI — 57 ( 2 ) 55 Net current-period other comprehensive income (loss) ( 25,411 ) 57 ( 280 ) ( 25,634 ) Balance at June 30, 2024 $ ( 148,374 ) $ ( 20,293 ) $ 6,767 $ ( 161,900 ) Balance at March 31, 2025 $ ( 154,193 ) $ ( 25,941 ) $ 3,846 $ ( 176,288 ) Other comprehensive income (loss) before reclassifications 37,084 — ( 771 ) 36,313 Amounts reclassified from AOCI — 59 ( 3 ) 56 Net current-period other comprehensive income (loss) 37,084 59 ( 774 ) 36,369 Balance at June 30, 2025 $ ( 117,109 ) $ ( 25,882 ) $ 3,072 $ ( 139,919 ) Balance at December 31, 2023 $ ( 116,412 ) $ ( 20,408 ) $ 6,218 $ ( 130,602 ) Other comprehensive income ( loss) before reclassifications ( 31,962 ) — 553 ( 31,409 ) Amounts reclassified from AOCI — 115 ( 4 ) 111 Net current-period other comprehensive income (loss) ( 31,962 ) 115 549 ( 31,298 ) Balance at June 30, 2024 $ ( 148,374 ) $ ( 20,293 ) $ 6,767 $ ( 161,900 ) Balance at December 31, 2024 $ ( 175,802 ) $ ( 25,996 ) $ 4,960 $ ( 196,838 ) Other comprehensive income (loss) before reclassifications 58,693 — ( 1,883 ) 56,810 Amounts reclassified from AOCI — 114 ( 5 ) 109 Net current-period other comprehensive income (loss) 58,693 114 ( 1,888 ) 56,919 Balance at June 30, 2025 $ ( 117,109 ) $ ( 25,882 ) $ 3,072 $ ( 139,919 ) 15 Information regarding the reclassifications out of AOCI for the three and six months ended June 30, 2025 and 2024, is displayed below: (In thousands) Amount Reclassified from AOCI (1) AOCI Components Three Months Ended June 30, Six Months Ended June 30, Affected Line Item in Condensed Consolidated Statements of Income 2025 2024 2025 2024 Amortization of defined benefit pension actuarial losses $ ( 78 ) $ ( 77 ) $ ( 151 ) $ ( 154 ) (2) 19 20 37 39 Tax benefit $ ( 59 ) $ ( 57 ) $ ( 114 ) $ ( 115 ) Net of tax Gains and losses on cash flow hedges: Foreign exchange contracts 3 2 5 4 Cost of sales 3 2 5 4 Total before tax — — — — Tax benefit $ 3 $ 2 $ 5 $ 4 Net of tax Total reclassifications for the period $ ( 56 ) $ ( 55 ) $ ( 109 ) $ ( 111 ) Net of tax (1) A mounts in parentheses denote expense to the Company’s Condensed Consolidated Statements of Income. (2) This component of accumulated other comprehensive income is included in the computation of net periodic benefit cost. See Note 9, Postretirement Benefit Plans , of the notes to the Company’s condensed consolidated financial statements (included in Item 1 of this Form 10-Q) for additional details. 12. SEGMENT REPORTING The Company has three reportable segments: Surfactants, Polymers and Specialty Products. 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 and six months ended June 30, 2025 and 2024, and reconciliations of segment data to the condensed consolidated financial statements: For the Three Months Ended June 30, 2025 (In thousands) Surfactants Polymers Specialty Products Total Net Sales $ 411,456 $ 162,751 $ 20,482 $ 594,689 Cost of Sales (1) 370,660 138,124 14,293 523,077 Operating Expenses (2) 27,429 7,468 931 35,828 Operating Income $ 13,367 $ 17,159 $ 5,258 $ 35,784 Unallocated Corporate Expenses (3) — — — ( 17,819 ) Consolidated Operating Income $ 17,965 Segment Capital Expenditures $ 19,675 $ 4,581 $ 866 $ 25,122 Unallocated Capital Expenditures (4) — — — 476 Consolidated Capital Expenditures $ 25,598 Segment Depreciation and Amortization $ 21,137 $ 8,352 $ 1,472 $ 30,961 Unallocated Depreciation and Amortization (5) — — — 328 Consolidated Depreciation and Amortization $ 31,289 16 For the Six Months Ended June 30, 2025 (In thousands) Surfactants Polymers Specialty Products Total Net Sales $ 841,793 $ 308,867 $ 37,284 $ 1,187,944 Cost of Sales (1) 747,326 269,020 24,690 1,041,036 Operating Expenses (2) 52,170 14,670 1,828 68,668 Operating Income $ 42,297 $ 25,177 $ 10,766 $ 78,240 Unallocated Corporate Expenses (3) — — — ( 31,987 ) Consolidated Operating Income $ 46,253 Segment Capital Expenditures $ 43,679 $ 11,652 $ 1,946 $ 57,277 Unallocated Capital Expenditures (4) — — — 1,069 Consolidated Capital Expenditures $ 58,346 Segment Depreciation and Amortization $ 40,567 $ 16,413 $ 2,961 $ 59,941 Unallocated Depreciation and Amortization (5) — — — 618 Consolidated Depreciation and Amortization $ 60,559 For the Three Months Ended June 30, 2024 (In thousands) Surfactants Polymers Specialty Products Total Net Sales $ 379,795 $ 159,757 $ 16,853 $ 556,405 Cost of Sales (1) 338,908 139,111 8,775 486,794 Operating Expenses (2) 23,825 7,049 759 31,633 Operating Income $ 17,062 $ 13,597 $ 7,319 $ 37,978 Unallocated Corporate Expenses (3) — — — ( 19,311 ) Consolidated Operating Income $ 18,667 Segment Capital Expenditures $ 26,036 $ 2,616 $ 1,058 $ 29,710 Unallocated Capital Expenditures (4) — — — — Consolidated Capital Expenditures $ 29,710 Segment Depreciation and Amortization $ 17,863 $ 8,192 $ 1,497 $ 27,552 Unallocated Depreciation and Amortization (5) — — — 458 Consolidated Depreciation and Amortization $ 28,010 17 For the Six Months Ended June 30, 2024 (In thousands) Surfactants Polymers Specialty Products Total Net Sales $ 770,615 $ 305,265 $ 31,943 $ 1,107,823 Cost of Sales (1) 679,286 269,543 18,796 967,625 Operating Expenses (2) 48,187 13,743 1,560 63,490 Operating Income $ 43,142 $ 21,979 $ 11,587 $ 76,708 Unallocated Corporate Expenses (3) — — — ( 37,872 ) Consolidated Operating Income $ 38,836 Segment Capital Expenditures $ 52,620 $ 5,121 $ 2,126 $ 59,867 Unallocated Capital Expenditures (4) — — — — Consolidated Capital Expenditures $ 59,867 Segment Depreciation and Amortization $ 35,529 $ 16,235 $ 2,974 $ 54,738 Unallocated Depreciation and Amortization (5) — — — 876 Consolidated Depreciation and Amortization $ 55,614 T he following is segment assets at June 30, 2025 and December 31, 2024, and reconciliations of segment assets to the condensed consolidated financial statements. As of June 30, 2025 (In thousands) Surfactants Polymers Specialty Products Total Segment Assets $ 1,654,136 $ 552,106 $ 81,600 $ 2,287,842 Unallocated Assets (6) — — — 128,288 Consolidated Assets $ 2,416,130 As of December 31, 2024 (In thousands) Surfactants Polymers Specialty Products Total Segment Assets $ 1,578,689 $ 523,192 $ 70,898 $ 2,172,779 Unallocated Assets (6) — — — 131,869 Consolidated Assets $ 2,304,648 (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. 18 13. REVENUE FROM CONTRACTS WITH CUSTOMERS As of June 30, 2025 and December 31, 2024 , the Company had $ 307,000 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. In practice, this is rare as it would require a customer to make a payment prior to a performance obligation being satisfied. When such situations do arise, the Company maintains a deferred revenue liability until the time a performance obligation has been satisfied. The Company recognized $ 689,000 of revenue in the first six 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 June 30, 2025 , $ 3,323,000 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 $ 5,170,000 of revenue has been recognized from the beginning of the contract term through June 30, 2025. The tables below provide a geographic disaggregation of net sales for the three and six months ended June 30, 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 Three Months Ended June 30, 2025 Geographic Market Surfactants Polymers Specialty Total North America $ 234,364 $ 88,251 $ 16,833 $ 339,448 Europe 74,605 63,296 3,514 141,415 Latin America 90,527 204 135 90,866 Asia 11,960 11,000 — 22,960 Total $ 411,456 $ 162,751 $ 20,482 $ 594,689 (In thousands) For the Six Months Ended June 30, 2025 Geographic Market Surfactants Polymers Specialty Total North America $ 486,099 $ 161,044 $ 30,297 $ 677,440 Europe 156,203 124,438 6,781 287,422 Latin America 173,291 500 206 173,997 Asia 26,200 22,885 — 49,085 Total $ 841,793 $ 308,867 $ 37,284 $ 1,187,944 (In thousands) For the Three Months Ended June 30, 2024 Geographic Market Surfactants Polymers Specialty Total North America $ 220,520 $ 79,828 $ 15,395 $ 315,743 Europe 63,460 67,401 1,322 132,183 Latin America 83,569 326 136 84,031 Asia 12,246 12,202 — 24,448 Total $ 379,795 $ 159,757 $ 16,853 $ 556,405 (In thousands) For the Six Months Ended June 30, 2024 Geographic Market Surfactants Polymers Specialty Total North America $ 450,110 $ 149,637 $ 28,641 $ 628,388 Europe 134,238 131,278 3,157 268,672 Latin America 161,437 743 145 162,325 Asia 24,830 23,607 — 48,437 Total $ 770,615 $ 305,265 $ 31,943 $ 1,107,823 19 14. DEBT At June 30, 2025 and December 31, 2024, debt was comprised of the following: (In thousands) Maturity Dates June 30, 2025 December 31, 2024 Senior unsecured notes 3.95 % (net of unamortized debt issuance cost of $ 78 and $ 99 for 2025 and 2024, respectively) 2025 - 2027 $ 42,778 $ 42,759 3.86 % (net of unamortized debt issuance cost of $ 0 and $ 15 for 2025 and 2024, respectively) 2025 — 14,270 2.30 % (net of unamortized debt issuance cost of $ 66 and $ 77 for 2025 and 2024, respectively) 2025 - 2028 29,934 39,923 2.37 % (net of unamortized debt issuance cost of $ 71 and $ 83 for 2025 and 2024, respectively) 2025 - 2028 39,929 39,917 2.73 % (net of unamortized debt issuance cost of $ 62 and $ 70 for 2025 and 2024, respectively) 2025 - 2031 99,939 99,930 2.83 % (net of unamortized debt issuance cost of $ 56 and $ 60 for 2025 and 2024, respectively) 2026 - 2032 74,944 74,940 6.17 % (net of unamortized debt issuance cost of $ 0 and $ 0 for 2025 and 2024, respectively) 2029 - 2033 75,000 — Revolving credit facility and term loan borrowing 2025 293,000 313,700 Debt of foreign subsidiaries Unsecured bank debt, foreign currency 2025 2,506 — Total debt $ 658,030 $ 625,439 Less current maturities 274,791 292,807 Long-term debt $ 383,239 $ 332,632 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 $ 362,524,000 as of June 30, 2025 . These notes are denominated in U.S. dollars and have fixed interest rates ranging from 2.30 percent to 6.17 percent. The notes had original maturities of seven to 12 years with mandatory principal payments beginning four, five and six years after issuance . The Company will be required to make principal payments on the currently outstanding notes from 2025 to 2033. On May 21, 2025, pursuant to a note purchase and private shelf agreement dated as of June 10, 2021, Stepan issued and sold $ 37,500,000 in aggregate principal amount of its 6.17 % Senior Notes, Series 2025-A, due May 21, 2033 (the Series 2025-A Notes). On May 21, 2025, pursuant to a note purchase and master note agreement dated as of June 10, 2021, Stepan issued and sold $ 37,500,000 in aggregate principal amount of its 6.17 % Senior Notes, Series 2025-B, due May 21, 2033 (together with the Series 2025-A Notes, the Notes). The Notes will bear interest at a fixed rate of 6.17 % with interest to be paid semi-annually. Principal amortization for the Notes is contractually scheduled with equal annual payments beginning on May 21, 2029 and on each May 21 thereafter to and including May 21, 2032, with the final outstanding principal balance due at maturity on May 21, 2033 . 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 facility is for the sole purpose of the issuance of standby letters of credit. As of June 30, 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 June 30, 2025 , the Company had outstanding letters of credit totaling $ 4,884,000 and $ 293,000,000 of outstanding borrowings under the Credit Agreement, inclusive of an $ 87,500,000 delayed-draw term loan ($ 12,500,000 of the term loan principal has been permanently repaid as scheduled). There was $ 139,616,000 available under the Credit Agreement as of June 30, 2025. The Company's foreign subsidiaries had $ 2,506,000 of debt outstanding at June 30, 2025. 20 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 $ 265,723,000 and $ 251,953,000 at June 30, 2025 and December 31, 2024 , respectively. 15. OTHER, NET Other, net in the condensed consolidated statements of income included the following: (In thousands) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Foreign exchange (loss) $ ( 639 ) $ ( 27 ) $ ( 20 ) $ ( 402 ) Investment income 125 131 246 191 Realized and unrealized gain on investments 1,567 679 1,074 2,946 Net periodic benefit cost 253 417 508 827 Other, net $ 1,306 $ 1,200 $ 1,808 $ 3,562 16. NONCASH INVESTING AND FINANCING ACTIVITIES Noncash investing activities included liabilities (accounts payable) incurred for property, plant and equipment expenditures of approximately $ 10,593,000 and $ 9,003,000 that were unpaid at June 30, 2025 and 2024 , respectively. Noncash financing activities included the issuance of 132,057 shares of the Company’s common stock (valued at $ 7,811,000 ) and 113,184 shares of the Company’s common stock (valued at $ 10,132,000 ) under the Company’s equity incentive compensation plan during the period ended June 30, 2025 and 2024 , respectively. 17. ASSETS AND LIABILITIES HELD FOR SALE On May 27, 2025 Stepan Company announced that its subsidiary, Stepan Philippines Quaternaries, Inc. (SPQI), had entered into an agreement to sell SPQI's manufacturing assets located in Bauan, Batangas, Philippines to Masurf, Inc., a subsidiary of Musim Mas Holdings Pte. Ltd. The Company plans to close the sale during the second half of 2025. The asset disposal group includes $ 8,663,000 of assets and $ 4,813,000 of liabilities. The assets are comprised of $ 3,820,000 in property, plant and equipment (net) and $ 4,843,000 in right-of use assets (operating leases) that will be assigned at the time of closing. The liabilities held for sale reflect $ 4,813,000 in operating lease liabilities. These assets and liabilities all relate to the Surfactant reportable segment. 18. SUBSEQUENT EVENT A U.S. tax act (H.R.1) was signed into law on July 4, 2025 (the 2025 U.S. tax act). Under U.S. GAAP, the effects of changes in tax laws or rates should be recognized in the financial statements as of the enactment date. As a result, the impact of the new tax act has not been reflected in the Company’s financial statements as of June 30, 2025. The Company is evaluating the impact of the 2025 U.S. tax act and anticipates that its provisions that will have the most relevance to the Company are bonus depreciation, the immediate expensing of domestic research and development costs, and the increased limitation on the deduction for interest expense. Based on Company’s current understanding, the Company does not believe the new provisions of the 2025 U.S. tax act will have a material impact on the Company’s financial results, financial position, liquidity, or cash flows for 2025. 19. RECENT ACCOUNTING PRONOUNCEMENTS In December 2023, the FASB issued ASU No. 2023-09, Income taxes (Topic 740) Improvement to Income Tax Disclosures . This update requires that public entities on an annual basis disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, the amendments in this update require the disclosure on an annual basis of the amount of income taxes paid (net of refund received) disaggregated by federal, state and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid is equal or greater than five percent of total income taxes paid (net of refunds received). This update requires all entities to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. The amendments in this update are effective for annual periods beginning after December 15, 2024 and should be applied on a prospective basis. The implementation of ASU No. 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. 21 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. ASU No. 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 No. 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. 22